Business Context and Reporting Period
Company: Reborn Coffee, Inc. (REBN)
Filing Type: Form 8-K (Current Report)
Date of Report: February 12, 2024
Reporting Period: Event-based report for agreements entered into on February 12, 2024.
Key Financial Metrics and Agreements
This filing details two material financing agreements entered into on February 12, 2024:
- Pre-Paid Advance Agreement (PPA):
- Investor: EF Hutton YA Fund, LP.
- Advance Amount: $1,100,000 (purchased at 90% of face value).
- Interest Rate: 0% (increases to 18% upon default).
- Maturity: One year.
- Conversion Price: Lower of 100% of the prior day's VWAP or 87% of the lowest VWAP of the preceding five trading days, subject to a Floor Price of $0.46.
- Exchange Cap: 414,693 shares (19.99% of outstanding stock).
- Fees: $15,000 non-refundable due diligence fee deducted from proceeds.
- Standby Equity Purchase Agreement (SEPA):
- Investor: YA II PN, Ltd. (Yorkville).
- Commitment Amount: Up to $5,000,000.
- Term: 36 months from the Effective Date.
- Pricing: 95% of Market Price (Option 1) or 96% of lowest VWAP over three days (Option 2).
- Commitment Fee: $150,000 paid via issuance of shares ("Commitment Shares").
- Volume Limitations: Issuances subject to daily volume thresholds and a 4.99% beneficial ownership limit per transaction.
Liquidity and Debt: The filing does not provide current cash balances, total debt, or liquidity ratios. The PPA provides immediate liquidity of $1,100,000, while the SEPA provides a potential future liquidity facility of up to $5,000,000.
Material Changes Versus Prior Period
This is a current report regarding specific corporate events and does not contain comparative financial statements (e.g., revenue, profit, or cash flow) for a prior period. The material change is the establishment of new financing facilities and the incurrence of potential dilution obligations.
Guidance, Outlook, Risks, and Contingencies
- Redemption Triggers (PPA): The Company must repay $500,000 plus a 10% premium if an "Amortization Event" occurs. This includes:
- Daily VWAP falling below the $0.46 Floor Price for 5 of 7 consecutive trading days.
- Issuance of over 99% of the Exchange Cap shares.
- Inability to use the Registration Statement for 10 consecutive trading days.
- Voluntary Redemption (PPA): The Company may redeem the PPA in cash with a 10% prepayment premium if the VWAP is lower than the Fixed Price.
- Registration Requirements: The Company must file a registration statement (Form S-1 or S-3) for shares issuable under the SEPA before any sales can occur. Shares under the PPA are covered by an existing S-3 shelf registration.
- Forward-Looking Statements: The filing includes standard disclaimers regarding uncertainties in future share issuances and proceeds.
- Restrictions: The Investor in the PPA is prohibited from short selling or hedging while the advance is outstanding. The Company is prohibited from entering into Variable Rate Transactions while the PPA is outstanding.
Investor Verification Checklist
- Verify the current trading volume and VWAP of REBN stock to assess the likelihood of triggering the PPA Amortization Event (Floor Price $0.46).
- Confirm the status of the Registration Statement (File No. 333-275070) and the effectiveness of the new registration required for the SEPA shares.
- Review the Company's latest 10-K or 10-Q to determine current cash positions and whether the $1,100,000 PPA proceeds are critical for immediate operations.
- Calculate the potential dilution impact of the PPA Exchange Cap (414,693 shares) and the SEPA Commitment Fee shares ($150,000 value).
- Monitor for any future 8-K filings regarding the actual issuance of shares under the SEPA or PPA.