REBN filing — read by section

UNITED STATES
 
 SECURITIES AND EXCHANGE COMMISSION
 
 Washington, D.C. 20549
 
 FORM 10-Q 
 
 (Mark One)
 
 ☒ QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the quarterly period ended September 30,
 2022 
 
 ☐ TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the transition period from 
 to 
 
 Commission File Number: 001-41479 
 
 REBORN COFFEE, INC. 
 (Exact name of Registrant as specified in its charter) 
 
 Delaware 47-4752305 
 (State or other jurisdiction of 
 incorporation or organization) 
 (I.R.S. Employer 
 Identification Number) 
 
 580 N. Berry Street , Brea , CA 92821 
 
 (714) 784-6369 
 
 (Address, including zip code, and telephone
number, including 
 
 area code, of Registrant’s principal executive
offices) 
 
 N/A 
 
 (Former name, former address and former fiscal
year, if changed since last report)
 
 Securities registered pursuant to Section 12(b)
of the Act:
 
 Title of each class Trading Symbol(s) Name of each exchange on which registered 
 Common Stock, $0.0001 par value per share REBN The Nasdaq Stock Market LLC (Nasdaq Capital Market) 
 
 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
 Yes ☐ No
 
 Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
 
 Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
 
 Large accelerated filer ☐ Accelerated filer ☐ 
 Non-accelerated filer ☒ Smaller reporting company ☒ 
 Emerging growth company ☒ 
 
 If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 
 
 Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
 
 The registrant has 13,119,523 shares of common stock outstanding
as of September 30, 2022.
 
 TABLE OF CONTENTS 
 
 PART I 
 FINANCIAL INFORMATION 
 
 1 

 Item 1 
 Consolidated
 Financial Statements (unaudited) 
 
 1 

 Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021 
 
 1 

 Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021 
 
 2 

 Consolidated Statements of Stockholders’ Equity (Deficit) (unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021 
 
 3 

 Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2022 and 2021 
 
 4 

 Notes to Consolidated Financial Statements 
 
 5 

 Item 2 
 Management’s Discussion and Analysis of Financial Condition and Results of Operations 
 
 19 

 Item 3 
 Quantitative and Qualitative Disclosures About Market Risk 
 
 28 

 Item 4 
 Controls and Procedures 
 
 28 

 PART II 
 OTHER INFORMATION 
 
 29 

 Item 1 
 Legal Proceedings 
 
 29 

 Item 1A 
 Risk Factors 
 
 29 

 Item 2 
 Unregistered Sales of Equity Securities and Use of Proceeds 
 
 29 

 Item 6 
 Exhibits 
 
 30 

 Signature 
 
 31 

 i 

 NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
 This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the
Securities Exchange Act of 1934, as amended, (the “Exchange Act”) that are based on our management’s beliefs and assumptions
and on information currently available to management, and which statements involve substantial risk and uncertainties. All statements
contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating
results and financial position, our business strategy and plans, market growth and trends, and objectives for future operations are forward-looking
statements. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases,
you can identify forward-looking statements because they contain words such as “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “could,” “intends,” “target,”
“projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,”
or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy,
plans or intentions.
 
 These risks and uncertainties include, among other things, risks related
to our expectations regarding the impact of the coronavirus pandemic (the “COVID-19 pandemic”), including the easing of related
regulations and measures as the pandemic and its related effects begin to abate or have abated, on our business, results of operations,
financial condition, and future profitability and growth; our expectations regarding the impact of the evolving COVID-19 pandemic on the
businesses of our customers, partners and suppliers, and the economy, as well as the macro- and micro-effects of the pandemic and differing
levels of demand for our products as our customers’ priorities, resources, financial conditions and economic outlook change; global
macro-economic conditions, including the effects of inflation, rising interest rates and market volatility on the global economy; our
ability to estimate the size of our total addressable market, and the development of the market for our products, which is new and evolving;
our ability to effectively sustain and manage our growth and future expenses, achieve and maintain future profitability, attract new customers
and maintain and expand our existing customer base; our ability to scale and update our platform to respond to customers’ needs
and rapid technological change; the effects of increased competition in our market and our ability to compete effectively; our ability
to expand use cases within existing customers and vertical solutions; our ability to expand our operations and increase adoption of our
platform internationally; our ability to strengthen and foster our relationships with developers; our ability to expand our direct sales
force, customer success team and strategic partnerships around the world; the impact of any data breaches, cyberattacks or other malicious
activity on our technology systems; our ability to identify targets for and execute potential acquisitions; our ability to successfully
integrate the operations of businesses we may acquire, and to realize the anticipated benefits of such acquisitions; our ability to maintain,
protect and enhance our brand; the sufficiency of our cash, cash equivalents and capital resources to satisfy our liquidity needs; limitations
on us due to obligations we have under our credit facility or other indebtedness; our failure or the failure of our software to comply
with applicable industry standards, laws and regulations; our ability to maintain, protect and enhance our intellectual property; our
ability to successfully defend litigation against us; our ability to attract large organizations as users; our ability to maintain our
corporate culture; our ability to offer high-quality customer support; our ability to hire, retain and motivate qualified personnel, including
executive level management; our ability to successfully manage and integrate executive management transitions; our ability to estimate
the size and potential growth of our target market; uncertainties regarding the impact of general economic and market conditions, including
as a result of regional and global conflicts or related government sanctions; our ability to successfully implement and maintain new and
existing information technology systems, including our ERP system; and our ability to maintain proper and effective internal controls.
 
 You should not rely upon forward-looking statements as predictions
of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current
expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations,
and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors
described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. We undertake no obligation
to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform such statements to actual
results or revised expectations, except as required by law.
 
 ii 

 PART I—FINANCIAL INFORMATION 
 
 Item 1. Consolidated Financial Statements. 
 
 Unaudited Condensed Consolidated Balance Sheets 
 
 As of 
 September 30,
 2022 
 December 31, 
 2021 

 ASSETS 
 
 Current assets: 
 
 Cash and cash equivalents 
 $ 4,730,097 
 $ 905,051 

 Accounts receivable, net of allowance for doubtful accounts of $ 0 and $ 0 , respectively 
 350 
 -
 
 Inventories, net 
 102,981 
 88,877 

 Prepaid expense and other current assets 
 256,192 
 191,838 

 Total current assets 
 5,089,620 
 1,185,766 

 Property and equipment, net 
 1,297,574 
 1,110,890 

 Operating lease right-of-use asset 
 2,764,258 
 2,466,873 

 Total assets 
 $ 9,151,452 
 $ 4,763,529 

 LIABILITIES AND STOCKHOLDERS’ EQUITY 
 
 Current liabilities: 
 
 Accounts payable 
 $ 20,977 
 $ 45,748 

 Accrued expenses and current liabilities 
 254,586 
 124,535 

 Loans payable to financial institutions – current portion 
 74,810 
 98,475 

 Loan payable, emergency injury disaster loan (EIDL) – current portion 
 10,861 
 7,957 

 Loan payable, payroll protection program (PPP) – current portion 
 39,267 
 42,345 

 Equipment loan payable – current portion 
 1,515 
 15,989 

 Operating lease liabilities – current portion 
 654,145 
 578,419 

 Total current liabilities 
 1,056,161 
 913,468 

 Loans payable to financial institutions – net of current portion 
 14,172 
 23,228 

 Loan payable, emergency injury disaster loan (EIDL), net of current portion 
 489,139 
 492,043 

 Loan payable, payroll protection program (PPP), net of current portion 
 127,871 
 124,793 

 Operating lease liabilities, net of current portion 
 2,261,004 
 2,011,702 

 Total liabilities 
 3,948,347 
 3,565,234 

 Commitments and Contingencies 
 
 Stockholders’ equity 
 
 Common Stock, $ 0.0001 par value, 40,000,000 shares authorized; 13,119,523 and 11,634,523 shares issued and outstanding at September 30, 2022 and December 31, 2021 
 1,312 
 1,163 

 Preferred Stock, $ 0.0001 par value, 1,000,000 shares authorized; no shares issued and outstanding at September 30, 2022 and December 31, 2021 
 -
 
 -
 
 Additional paid-in capital 
 16,101,017 
 9,674,036 

 Accumulated deficit 
 ( 10,899,224 ) 
 ( 8,476,904 ) 

 Total stockholders’ equity 
 5,203,105 
 1,198,295 

 Total liabilities and stockholders’ equity 
 $ 9,151,452 
 $ 4,763,529 

 See accompanying notes to unaudited condensed
consolidated financial statements. 
 
 1 

 Unaudited Condensed Consolidated Statements
of Operations 
 
 Nine Months Ended 
 September 30, 
 Three Months Ended 
 September 30, 

 2022 
 2021 
 2022 
 2021 

 Net revenues: 
 
 Stores 
 $ 2,339,284 
 $ 1,519,969 
 $ 827,332 
 $ 668,184 

 Wholesale and online 
 40,587 
 47,966 
 10,913 
 19,630 

 Total net revenues 
 2,379,871 
 1,567,935 
 838,245 
 687,814 

 Operating costs and expenses: 
 
 Product, food and drink costs—stores 
 806,453 
 565,156 
 242,547 
 295,008 

 Cost of sales—wholesale and online 
 17,777 
 21,011 
 4,780 
 8,599 

 General and administrative 
 3,954,997 
 2,679,037 
 1,486,550 
 1,452,086 

 Total operating costs and expenses 
 4,779,227 
 3,265,204 
 1,733,877 
 1,755,693 

 Loss from operations 
 ( 2,399,356 ) 
 ( 1,697,269 ) 
 ( 895,632 ) 
 ( 1,067,879 ) 

 Other income (expense): 
 
 Other income 
 16,440 
 -
 
 -
 
 -
 
 PPP grant income 
 -
 
 115,000 
 -
 
 115,000 

 Interest expense 
 ( 39,404 ) 
 ( 11,484 ) 
 ( 24,428 ) 
 ( 5,711 ) 

 Loss on extinguishment of debt 
 -
 
 ( 982,383 ) 
 -
 
 ( 982,383 ) 

 Total other income (expense), net 
 ( 22,964 ) 
 ( 878,867 ) 
 ( 24,428 ) 
 ( 873,094 ) 

 Loss before income taxes 
 ( 2,422,320 ) 
 ( 2,576,136 ) 
 ( 920,060 ) 
 ( 1,940,973 ) 

 Provision for income taxes 
 -
 
 -
 
 - 
 - 

 Net loss 
 $ ( 2,422,320 ) 
 $ ( 2,576,136 ) 
 $ ( 920,060 ) 
 $ ( 1,940,973 ) 

 Loss per share: 
 
 Basic and diluted
 
 $ ( 0.20 ) 
 ( 0.25 ) 
 ( 0.08 ) 
 ( 0.18 ) 

 Weighted average number of common shares outstanding: 
 
 Basic and diluted
 
 11,844,900 
 10,437,239 
 11,679,523 
 10,842,264 

 See accompanying notes to unaudited condensed
consolidated financial statements. 
 
 2 

 Unaudited Condensed Consolidated Stockholders’
Equity (Deficit) 
 
 Common Stock 
 Preferred Stock 
 Additional
 Paid-in 
 Subscription

of Common 
 Accumulated 
 Total Shareholders’

Equity 

 Shares 
 Amount 
 Shares 
 Amount 
 Capital 
 Stock 
 Deficit 
 (Deficit) 

 Balance as of December 31, 2021 
 11,634,523 
 $ 1,163 
 -
 
 $ -
 
 $ 9,674,036 
 $ -
 
 $ ( 8,476,904 ) 
 $ 1,198,295 

 Net loss 
 - 
 -
 
 - 
 -
 
 -
 
 -
 
 ( 565,112 ) 
 ( 565,112 ) 

 Balance as of March 31, 2022 
 11,634,523 
 $ 1,163 
 -
 
 $ -
 
 $ 9,674,036 
 $ -
 
 $ ( 9,042,016 ) 
 $ 633,183 

 Stock compensation 
 45,000 
 5 
 -
 
 -
 
 224,995 
 -
 
 -
 
 225,000 

 Net loss 
 - 
 -
 
 - 
 -
 
 -
 
 -
 
 ( 937,148 ) 
 ( 937,148 ) 

 Balance as of June 30, 2022 
 11,679,523 
 $ 1,168 
 -
 
 $ -
 
 $ 9,899,031 
 $ -
 
 $ ( 9,979,164 ) 
 $ ( 78,965 ) 

 Issuance of common stock 
 1,440,000 
 144 
 - 
 -
 
 7,199,856 
 -
 
 -
 
 7,200,000 

 Offering costs associated with issuance of common stock 
 - 
 -
 
 - 
 -
 
 ( 997,870 ) 
 -
 
 -
 
 ( 997,870 ) 

 Net loss 
 - 
 -
 
 - 
 -
 
 -
 
 -
 
 ( 920,060 ) 
 ( 920,060 ) 

 Balance as of September 30, 2022 
 13,119,523 
 $ 1,312 
 -
 
 $ -
 
 $ 16,101,017 
 $ -
 
 $ ( 10,899,224 ) 
 $ 5,203,105 

 Common Stock 
 Preferred Stock 
 Additional Paid-in 
 Subscription

of Common 
 Accumulated 
 Total Shareholders’
Equity 

 Shares 
 Amount 
 Shares 
 Amount 
 Capital 
 Stock 
 Deficit 
 (Deficit) 

 Balance as of December 31, 2020 
 10,443,721 
 $ 1,045 
 -
 
 $ -
 
 $ 4,733,063 
 $ ( 450,000 ) 
 $ ( 5,036,504 ) 
 $ ( 752,396 ) 

 Net loss 
 - 
 -
 
 - 
 -
 
 -
 
 -
 
 ( 327,479 ) 
 ( 327,479 ) 

 Payments received for prior year subscription 
 - 
 -
 
 - 
 -
 
 -
 
 450,000 
 -
 
 450,000 

 Stock issued for store acquisition 
 232,558 
 23 
 -
 
 -
 
 149,977 
 -
 
 -
 
 150,000 

 Balance as of March 31, 2021 
 10,676,279 
 $ 1,068 
 -
 
 $ -
 
 $ 4,883,040 
 $ -
 
 $ ( 5,363,983 ) 
 $ ( 479,875 ) 

 Net loss 
 - 
 -
 
 - 
 -
 
 -
 
 -
 
 ( 307,684 ) 
 ( 307,684 ) 

 Stock subscription 
 30,950 
 3 
 -
 
 -
 
 154,747 
 ( 154,750 ) 
 -
 
 -
 
 Payments received for prior year subscription 
 - 
 -
 
 - 
 -
 
 -
 
 103,500 
 -
 
 103,500 

 Balance as of June 30, 2021 
 10,707,229 
 $ 1,071 
 -
 
 $ -
 
 $ 5,037,787 
 $ ( 51,250 ) 
 $ ( 5,671,667 ) 
 $ ( 684,059 ) 

 Net loss 
 - 
 -
 
 - 
 -
 
 -
 
 -
 
 ( 1,940,973 
 ( 1,940,973 ) 

 Stock subscription 
 200,400 
 20 
 - 
 -
 
 1,001,980 
 ( 1,002,000 ) 
 -
 
 -
 
 Stock compensation 
 115,000 
 11 
 - 
 -
 
 574,989 
 -
 
 -
 
 575,000 

 Common stock issued 
 186,126 
 19 
 - 
 -
 
 930,611 
 -
 
 -
 
 930,630 

 Stock issued for debt conversion 
 402,953 
 40 
 - 
 -
 
 2,014,727 
 -
 
 -
 
 2,014,767 

 Payments received from prior year subscription 
 - 
 -
 
 - 
 -
 
 -
 
 51,250 
 -
 
 51,250 

 Balance as of September 30, 2021 
 11,611,708 
 $ 1,161 
 - 
 $ -
 
 $ 9,560,094 
 $ ( 1,002,000 ) 
 $ ( 7,612,640 ) 
 $ 946,615 

 See accompanying notes to unaudited condensed
consolidated financial statements. 
 
 3 

 Unaudited Consolidated Statements of Cash Flows 
 
 For the Nine Months Ended September 30, 
 2022 
 2021 

 Cash flows from operating activities: 
 
 Net loss 
 $ ( 2,422,320 ) 
 $ ( 2,576,136 ) 

 Adjustments to reconcile net loss to net cash used in operating activities: 
 
 Stock compensation 
 225,000 
 575,000 

 Forgiveness of PPP loan 
 -
 
 ( 115,000 ) 

 Operating lease 
 27,643 
 45,620 

 Depreciation 
 146,505 
 129,575 

 Changes in operating assets and liabilities: 
 
 Accounts receivable 
 ( 350 ) 
 ( 4,418 ) 

 Inventories 
 ( 14,104 ) 
 ( 7,024 ) 

 Prepaid expense and other current assets 
 ( 64,354 ) 
 ( 97,104 ) 

 Accounts payable 
 ( 24,771 ) 
 ( 44,455 ) 

 Accrued expenses and current liabilities 
 130,051 
 23,468 

 Net cash used in operating activities 
 ( 1,996,700 ) 
 ( 2,070,474 ) 

 Cash flows from investing activities: 
 
 Purchases of property and equipment 
 ( 333,189 ) 
 ( 262,673 ) 

 Reacquisition of lease and leasehold improvements 
 -
 
 ( 150,000 ) 

 Net cash used in investing activities 
 ( 333,189 ) 
 ( 412,673 ) 

 Cash flows from financing activities: 
 
 Proceeds from issuance of common stock 
 7,200,000 
 2,517,763 

 Payment of IPO stock issuance 
 ( 997,870 ) 
 -
 
 Proceeds from line of credit 
 685,961 
 -
 
 Repayment of line of credit 
 ( 685,961 ) 
 -
 
 Proceeds from loans 
 238,982 
 1,028,026 

 Repayment of loans 
 ( 271,703 ) 
 ( 302,004 ) 

 Repayment of equipment loan payable 
 ( 14,474 ) 
 ( 14,390 ) 

 Net cash provided by financing activities 
 6,154,935 
 3,229,395 

 Net increase in cash 
 3,825,046 
 746,248 

 Cash at beginning of period 
 905,051 
 128,568 

 Cash at end of period 
 $ 4,730,097 
 $ 874,816 

 Supplemental disclosures of non-cash financing activities: 
 
 Issuance of common shares for repurchase of lease and leasehold improvements 
 $ -
 
 $ 150,000 

 Converting debt to equity 
 $ -
 
 $ 1,032,383 

 Forgiveness of PPP loan 
 $ -
 
 $ 115,000 

 Supplemental disclosure of cash flow information: 
 
 Cash paid during the years for: 
 
 Interest 
 $ 8,578 
 11,484 

 Income taxes 
 $ -
 
 $ -
 
 See accompanying notes to unaudited condensed
consolidated financial statements. 
 
 4 

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS 
 
 1. NATURE OF OPERATIONS 
 
 Reborn Coffee, Inc. (“Reborn”) was incorporated
in the State of Florida in January 2018. In July 2022, Reborn was migrated from Florida to Delaware, and filed a certificate of incorporation
with the Secretary of State of the State of Delaware having the same capitalization structure as the Florida predecessor entity. Reborn
has the following wholly owned subsidiaries:
 
 ● Reborn
Global Holdings, Inc. (“Reborn Holdings”), a California Corporation incorporated in November 2014. Reborn Holdings
is engaged in the operation of wholesale distribution and retail coffee stores in California to sell a variety of coffee, tea, Reborn
brand name water and other beverages along with bakery and dessert products. 

 ● Reborn
Coffee Franchise, LLC (the “Reborn Coffee Franchise”), a California limited liability corporation formed in December
2020, is a franchisor providing premier roaster specialty coffee to franchisees or customers. Reborn Coffee Franchise continues to develop
the Reborn Coffee system for the establishment and operation of Reborn Coffee stores using one or more Reborn Coffee marks. Reborn Coffee
Franchise does not have any franchisee as of September 30, 2022. 

 Reborn Coffee, Inc., Reborn Global Holdings, Inc., and Reborn
Coffee Franchise, LLC will be collectively referred as the “Company”. 
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
 
 Reporting 
 
 The unaudited condensed consolidated financial statements
include Reborn Coffee, Inc. and its wholly owned subsidiaries as of September 30, 2022 and December 31, 2021 and for the three and nine
month periods ended September 30, 2022 and 2021.
 
 Basis of Presentation and Consolidation 
 
 The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated in the United
States of America. The consolidated financial statements include Reborn Coffee, Inc. and its wholly owned subsidiary. All intercompany
accounts, transactions, and profits have been eliminated upon consolidation.
 
 Reverse Stock Split 
 
 In June 2022, the Company approved (a) the conversion of
all Class B Common Stock into Class A Common Stock, (b) a 1 for 100 reverse stock split , and (c) an amendment to Articles of Incorporation
to eliminate Class B Common Stock and to change “Class A Common Stock” to simply “common stock”. All share and
earnings per share information have been retroactively adjusted to reflect the stock split and the incremental par value of the newly
issued shares was recorded with the offset to additional paid-in capital.
 
 Initial Public Offering 
 
 In August 2022, the Company consummated its initial public
offering (the “IPO”) of 1,440,000 shares of its common stock at a public offering price of $ 5.00 per share, generating gross
proceeds of $ 7,200,000 . Net proceeds from the IPO was approximately $ 6.2 million after deducting underwriting discounts and commissions
and other offering expenses of approximately $ 998,000 .
 
 The Company had granted the underwriters a 45-day option
to purchase up to 216,000 additional shares (equal to 15% of the shares of common stock sold in the offering) to cover over-allotments.
In addition, the Company had agreed to issue to the representative of the several underwriters warrants to purchase the number of shares
of common stock in the aggregate equal to five percent (5%) of the shares of common stock to be issued and sold in the IPO. The warrants
are exercisable for a price per share equal to 125% of the public offering price. No over-allotment option or representative’s warrants
have been exercised .
 
 On August 12, 2022, the Company’s stock began trading
on Nasdaq under the symbol “REBN”.
 
 5 

 Deferred Offering Costs 
 
 Deferred offering costs were expenses directly related to
the IPO. These costs consisted of legal, accounting, printing, and filing fees. The deferred offering costs were offset against the IPO
proceeds in August 2022 and were recorded to additional paid-in capital upon completion of the IPO.
 
 Use of Estimates 
 
 The preparation of consolidated financial statements in conformity
with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in our consolidated financial statements
and the accompanying notes. Such estimates include accounts receivables, accrued liabilities, income taxes, long-lived assets, and deferred
tax valuation allowances. These estimates generally involve complex issues and require management to make judgments, involve analysis
of historical and future trends that can require extended periods of time to resolve, and are subject to change from period to period.
In all cases, actual results could differ materially from estimates.
 
 Revenue Recognition 
 
 The Company recognizes revenue in accordance with Accounting
Standards Codification (“ASC”) 606, Revenue from Contracts with Customers . The Company’s net revenue primarily
consists of revenues from its retail stores and wholesale and online store. Accordingly, the Company recognizes revenue as follows:
 
 ● Retail
Store Revenue 

 Retail store revenues are recognized when payment is tendered
at the point of sale. Retail store revenues are reported net of sales, use or other transaction taxes that are collected from customers
and remitted to taxing authorities. Sales taxes that are payable are recorded as accrued as other current liabilities. Retail store revenue
makes up approximately 98 % of the Company’s total revenue.
 
 ● 
 Wholesale and Online Revenue 

 Wholesale and online revenues are recognized when the products
are delivered, and title passes to the customers or to the wholesale distributors. When customers pick up products at the Company’s
warehouse, or distributed to the wholesale distributors, the title passes, and revenue is recognized. Wholesale revenues make up approximately
 2 % of the Company’s total revenue.
 
 Shipping and Handling Costs 
 
 The Company incurred freight out cost and is included in
the Company’s cost of sales—wholesale and online.
 
 General and Administrative Expense 
 
 General and administrative expense includes store-related
expense as well as the Company’s corporate headquarters’ expenses.
 
 Advertising Expense 
 
 Advertising costs are expensed as incurred. Advertising expenses
amounted to $ 27,110 and $ 72,619 for the nine-month periods ended September 30, 2022 and 2021, respectively, and are recorded under general
and administrative expenses in the accompanying condensed consolidated statements of operations.
 
 6 

 Pre-opening Costs 
 
 Pre-opening costs for new stores, consist primarily of store
and leasehold improvements, and are capitalized and depreciated over the shorter of the useful life of the improvement or the lease term,
including renewal periods that are reasonably assured.
 
 Accounts Receivable 
 
 Accounts receivables are stated net of allowance for doubtful
accounts. The allowance for doubtful accounts is determined primarily on the basis of past collection experience and general economic
conditions. The Company determines terms and conditions for its customers based on volume transacted by the customer, customer creditworthiness
and past transaction history. At September 30, 2022 and December 31, 2021, allowance for doubtful accounts were zero , respectively. The
Company does not have any off-balance sheet exposure related to its customers.
 
 Inventories 
 
 Inventories consisted primarily of coffee beans, drink products,
and supplies which are recorded at cost or at net realizable value.
 
 Property and Equipment 
 
 Property and equipment are recorded at cost. Maintenance
and repairs are charged to expense as incurred. Depreciation and amortization are provided using both the straight-line and declining
balance methods over the following estimated useful lives:
 
 Furniture and fixtures 
 5 - 7 Years 

 Store construction 
 Lesser of the lease term or the estimated useful lives of the improvements, generally 6 years 

 Leasehold improvement 
 Lesser of the lease term or the estimated useful lives of the improvements, generally 6 years 

 When assets are retired or disposed of, the cost and accumulated
depreciation thereon are removed, and any resulting gains or losses are included in the consolidated statements of operations. Leasehold
improvements are amortized using the straight-line method over the estimated life of the asset, not to exceed the length of the lease.
Repair and maintenance costs are expensed as incurred.
 
 Operating Leases 
 
 The Company adopted Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”), Topic 842, Leases (“ASC 842”) which requires the
recognition of the right-of-use assets and relating operating and finance lease liabilities on the balance sheet. Under ASC 842, all leases
are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification
affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance
lease charges are split, where amortization of the right-of-use asset is recorded in operating expenses and an implied interest component
is recorded in interest expense.
 
 Earnings Per Share 
 
 FASB ASC Topic 260, Earnings Per Share, requires a reconciliation
of the numerator and denominator of the basic and diluted earnings (loss) per share computations.
 
 Basic earnings (loss) per share are computed by dividing
net earnings available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings
(loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were
dilutive. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents,
because their inclusion would be anti-dilutive.
 
 The Company had 72,000 and 0 potentially dilutive warrants outstanding
related to IPO for the three and nine month periods ended September 30, 2022 and 2021, respectively. See note 2.
 
 7 

 Segment Reporting 
 
 FASB ASC Topic 280, Segment Reporting, requires public companies
to report financial and descriptive information about their reportable operating segments. The Company’s management identifies operating
segments based on how the Company’s management internally evaluate separate financial information, business activities and management
responsibility. At the current time, the Company has only one reportable segment, consisting of both the wholesale and retail sales of
coffee, water, and other beverages. The Company’s franchisor subsidiary was not material as of and for the three and nine month
periods ended September 30, 2022 and 2021.
 
 Long-lived Assets 
 
 In accordance with FASB ASC Topic 360, Property, Plant, and
Equipment, the Company reviews for impairment of long-lived assets and certain identifiable intangibles whenever events or circumstances
indicate that the carrying amount of assets may not be recoverable. The Company considers the carrying value of assets may not be recoverable
based upon our review of the following events or changes in circumstances: the asset’s ability to continue to generate income from
operations and positive cash flow in future periods; loss of legal ownership or title to the assets; significant changes in our strategic
business objectives and utilization of the asset; or significant negative industry or economic trends. An impairment loss would be recognized
when estimated future cash flows expected to result from the use of the asset are less than its carrying amount. As of September 30, 2022
and December 31, 2021, the Company was not aware of any events or changes in circumstances that would indicate that the long-lived assets
are impaired.
 
 Fair Value of Financial Instruments 
 
 The Company records its financial assets and liabilities
at fair value, which is defined under the applicable accounting standards as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measure date. The Company uses valuation techniques to measure fair value, maximizing the use of observable
outputs and minimizing the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs,
of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
 
 Level 1 – Quoted prices in active markets for identical
assets or liabilities.
 
 Level 2 – Inputs other than Level 1 that are observable,
either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or
liabilities.
 
 Level 3 – Inputs include management’s best estimate
of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market
and significant to the instrument’s valuation.
 
 As of September 30, 2022 and December 31, 2021, the Company
believes that the carrying value of accounts receivable, accounts payable, accrued expenses, and other current assets and liabilities
approximate fair value due to the short maturity of theses financial instruments. The financial statements do not include any financial
instruments at fair value on a recurring or non-recurring basis.
 
 8 

 Income Taxes 
 
 Income taxes are provided for the tax effects of transactions
reported in the financial statements and consisted of taxes currently due and deferred taxes. Deferred taxes are recognized for the differences
between the basis of assets and liabilities for financial statement and income tax purposes.
 
 The Company follows FASB ASC Topic 740, Income Taxes, which
requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ASC 740-10-25 provides
criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit
from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from
such a position are measured based on the largest benefit that has a greater than 50 % likelihood of being realized upon ultimate resolution.
The Company did not recognize additional liabilities for uncertain tax positions pursuant to ASC 740-10-25 for the three and nine month
periods ended September 30, 2022 and 2021.
 
 Concentration of Credit Risk 
 
 Financial instruments that potentially subject the Company
to concentrations of credit risk are accounts receivable arising from its normal business activities. The Company performs ongoing credit
evaluations to its customers and establishes allowances when appropriate.
 
 Company purchases from various vendors for its operations.
For the three and nine month periods ended September 30, 2022 and 2021, no purchases from any vendors accounted for a significant amount
of the Company’s bean coffee purchases.
 
 Related Parties 
 
 Related parties are any entities or individuals that, through
employment, ownership, or other means, possess the ability to direct or cause the direction of management and policies of the Company.
 
 Significant Recent Developments Regarding COVID-19 
 
 The novel coronavirus, known as the global pandemic COVID-19,
was first identified in December 2019. During March 2020, a global pandemic was declared by the World Health Organization related to the
rapidly spreading outbreak of a novel strain of coronavirus designated COVID-19. The pandemic has significantly impacted economic conditions
in the United States. The outbreak of the virus impacted our company-owned retail locations in Southern California.
 
 The Company first began to experience impacts from COVID-19
around the middle of March 2020 as federal, state and local governments began to react to the public health crisis by encouraging or requiring
social distancing, instituting stay-at-home orders, and requiring, in varying degrees, restaurant dine-in limitations, capacity limitations
or other restrictions that largely limited restaurants to take-out, drive-thru and delivery sales. Although we have experienced some recovery
from the initial impact of COVID-19, the long-term impact of COVID-19 on the economy and on our business remains uncertain, the duration
and scope of which cannot currently be predicted.
 
 9 

 Recent Accounting Pronouncement 
 
 In June 2016, the FASB issued Accounting Standards Update
(“ASU”) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13
revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally,
ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with
early adoption permitted. In November 2019, FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives
and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the effective date of ASU 2016-13 for public companies that are
considered smaller reporting companies as defined by the Securities and Exchange Commission (the “SEC”) to fiscal years beginning
after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first
quarter of fiscal 2023.The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its
consolidated financial statements, particularly its recognition of allowances for accounts receivable. 
 
 Other recently issued accounting updates are not expected
to have a material impact on the Company’s consolidated financial statements.
 
 3. PROPERTY AND EQUIPMENT 
 
 Property and equipment consisted of the following:
 
 September 30,
 2022 
 December 31,
 2021 

 Furniture and equipment 
 $ 852,817 
 $ 779,650 

 Leasehold improvement 
 639,602 
 639,602 

 Store construction 
 312,183 
 52,161 

 Store 
 300,000 
 300,000 

 Total property and equipment 
 2,104,602 
 1,771,413 

 Less accumulated depreciation 
 ( 807,028 ) 
 ( 660,523 ) 

 Total property and equipment, net 
 $ 1,297,574 
 $ 1,110,890 

 In February 2021, the Company repurchased its retail location
in Corona Del Mar. The purchase price was $ 300,000 , comprised of $ 150,000 in cash and 232,558 shares of the Company’s common stock.
The Company recorded the assumption of the ongoing lease for the store, which included a right of use asset of $ 180,577 and a lease liability
of $ 170,853 .
 
 Depreciation expense on property and
equipment amounted to approximately $ 146,505 and $ 129,575 for the nine-month periods ended and $ 48,583 and $ 47,649 for the three-month
periods ended September 30, 2022 and 2021, respectively.
 
 4. LOANS PAYABLE TO FINANCIAL INSTITUTIONS 
 
 Loans payable to financial institutions consist of the following:
 
 September 30,
 2022 
 December 31,
 2021 

 July 2021 - Loan agreement with principal amount of $ 90,000 and repayment rate of 19 % for a total of $ 101,700 . The loan payable matures on January 31, 2023 . 
 $ - 
 $ 52,819 

 August 2021 - Loan agreement with principal amount of $72,500 and repayment rate of 18.5 % for a total of $ 81,925 . The loan payable matures on February 10, 2023 . 
 - 
 36,502 

 August 2021 - Loan agreement with principal amount of $ 67,500 and repayment rate of 18.5 % for a total of $ 76,275 . The loan payable matures on February 11, 2023 . 
 - 
 32,382 

 August 2022 - Loan agreement with principal amount of $ 100,000 and repayment rate of 20.5 % for a total of $ 112,215 . The loan payable matures on February 2, 2024 . 
 88,982 
 32,382 

 Total loan payable 
 $ 88,982 
 $ 121,703 

 Less: current portion 
 ( 74,810 ) 
 ( 98,475 ) 

 Total loan payable, net of current 
 $ 14,172 
 $ 23,228 

 10 

 July 2021 - $ 101,700 loan payable 
 
 In July 2021, the Company entered into a loan agreement with
Square Capital in the principal amount of $ 90,000 with loan cost $ 11,700 . The loan payable has a maturity date on January 31, 2023 . As
of September 30, 2022 and December 31, 2021, there was a balance outstanding of $ 0 and $ 52,819 , respectively.
 
 August 2021 - $ 81,925 loan payable 
 
 In August 2021, the Company entered into a loan agreement
with Square Capital in the principal amount of $ 72,500 with loan cost $ 9,425 . The loan payable has a maturity date on February 10, 2023 .
As of September 30, 2022 and December 31, 2021, there was a balance outstanding of $ 0 and $ 36,502 , respectively.
 
 August 2021 - $ 76,275 loan payable 
 
 In August 2021, the Company entered into a loan agreement
with Square Capital in the principal amount of $ 67,500 with loan cost $ 8,775 . The loan payable has a maturity date on February 11, 2023 .
As of September 30, 2022 and December 31, 2021, there was a balance outstanding of $ 0 and $ 32,382 , respectively.
 
 August 2022 - $ 88,982 loan payable 
 
 In August 2022, the Company entered into a loan agreement
with Square Capital in the principal amount of $ 100,000 with loan cost $ 12,215 . The loan payable has a maturity date on February 2, 2024 .
As of September 30, 2022 and December 31, 2021, there was a balance outstanding of $ 88,982 and $ 0 , respectively.
 
 5. LOAN PAYABLES, EMERGENCY INJURY DISASTER LOAN (EIDL) 
 
 September 30,
 2022 
 December 31,
 2021 

 May 16, 2020 ($ 150,000 ) - Loan agreement with principal amount of $150,000 with an interest rate of 3.75 % and maturity date on May 16, 2050 
 $ 150,000 
 $ 150,000 

 June 28, 2021 ($ 350,000 ) – Loan agreement with principal amount of $350,000 with an interest rate of 3.75 % and maturity date on May 18, 2050 
 350,000 
 350,000 

 Total long-term loan payable, emergency injury disaster loan (EIDL) 
 500,000 
 500,000 

 Less - current portion 
 ( 10,861 ) 
 ( 7,957 ) 

 Total loan payable, emergency injury disaster loan (EIDL), less current portion 
 $ 489,139 
 $ 492,043 

 The following table provides future minimum payments:
 
 For the years ended December 31, 
 Amount 

 2022 (remaining three months) 
 5,330 

 2023 
 10,964 

 2024 
 11,382 

 2025 
 11,816 

 2026 
 12,267 

 Thereafter 
 448,241 

 Total 
 $ 500,000 

 11 

 May 16, 2020 – $ 150,000 
 
 On May 16, 2020, the Company executed the standard loan documents
required for securing a loan (the “EIDL Loan”) from the U.S. Small Business Administration (the “SBA”) under its
Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the TNB’s
business. As of September 30, 2022, the loan payable, EIDL noted above is not in default.
 
 Pursuant to that certain Loan Authorization and Agreement (the
“SBA Loan Agreement”), the Company borrowed an aggregate principal amount of the EIDL Loan of $ 150,000 , with proceeds to be
used for working capital purposes. Interest accrues at the rate of 3.75 % per annum and will accrue only on funds actually advanced from
the date of each advance. Installment payments, including principal and interest, are due monthly beginning November 16, 2022 (thirty
months from the date of the SBA Loan Agreement) in the amount of $ 731 . The balance of principal and interest is payable thirty years from
the date of the SBA Loan Agreement.
 
 In connection therewith, the Company executed (i) a loan
for the benefit of the SBA (the “SBA Loan”), which contains customary events of default and (ii) a Security Agreement, granting
the SBA a security interest in all tangible and intangible personal property of the Company, which also contains customary events of default
(the “SBA Security Agreement”).
 
 June 28, 2021 – $ 350,000 
 
 On June 28, 2021, the Company executed the EIDL Loan from
the SBA under its EIDL assistance program in light of the impact of the COVID-19 pandemic on the TNB’s business. As of September
30, 2022, the loan payable, EIDL Loan noted above is not in default.
 
 Pursuant to the “SBA Loan Agreement”), the Company
borrowed an aggregate principal amount of the EIDL Loan of $ 500,000 , with proceeds to be used for working capital purposes. Interest accrues
at the rate of 3.75 % per annum and will accrue only on funds actually advanced from the date of each advance. Installment payments, including
principal and interest, are due monthly beginning October 16, 2022 (thirty months from the original date of the SBA Loan Agreement)
in the amount of $ 2,505 . The balance of principal and interest is payable thirty years from the original date of the SBA Loan Agreement.
 
 6. LOAN PAYABLE, PAYROLL PROTECTION LOAN PROGRAM (PPP) 
 
 September 30,
 2022 
 December 31,
 2021 

 Loan payable, payroll protection program (PPP) – February 10, 2021 
 $ 167,138 
 $ 167,138 

 Total long-term loan payable, payroll protection program (PPP) 
 167,138 
 167,138 

 Less - current portion 
 ( 39,267 ) 
 ( 42,345 ) 

 Total loan payable, payroll protection program (PPP), less current portion 
 $ 127,871 
 $ 124,793 

 The Paycheck Protection Program (“PPP”) Loan
(the “PPP Loan”) is administered by the SBA.. The interest rate of the loan is 1.00 % per annum and accrues on the unpaid principal
balance computed on the basis of the actual number of days elapsed in a year of 360 days. Commencing seven months after the effective
date of the PPP Loan, the Company is required to pay the Lender equal monthly payments of principal and interest as required to fully
amortize any unforgiven principal balance of the loan by the two-year anniversary of the effective date of the PPP Loan (the “Maturity
Date”). The PPP Loan contains customary events of default relating to, among other things, payment defaults, making materially false
or misleading representations to the SBA or the Lender, or breaching the terms of the PPP Loan. The occurrence of an event of default
may result in the repayment of all amounts outstanding under the PPP Loan, collection of all amounts owing from the Company, or filing
suit and obtaining judgment against the Company. Under the terms of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES
Act”), PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such
forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments
of mortgage interest, rent, and utilities. Recent modifications to the PPP by the U.S. Treasury and Congress have extended the time period
for loan forgiveness beyond the original eight-week period, making it possible for the Company to apply for forgiveness of its PPP loan.
 
 12 

 7. EQUIPMENT LOAN PAYABLE 
 
 Equipment loan payable consist of the following:
 
 September 30,
 2022 
 December 31,
 2021 

 October 2017 - Loan agreement with principal amount of $ 82,011 with an interest rate of 6.40 % and maturity date on October 1, 2022 
 
 $ 1,515 
 $ 15,989 

 Total long-term equipment loan payable 
 1,515 
 15,989 

 Less – current portion 
 ( 1,515 ) 
 ( 15,989 ) 

 Total long-term debt, net of current portion 
 $ -
 
 $ -
 
 For the year ended December 31, 
 Amount 

 2022 (remaining three months) 
 $ 1,515 

 Total long-term equipment loan payable 
 $ 1,515 

 October 2017 - $ 82,011 equipment loan payable 
 
 In October 2017, the Company entered into equipment finance
loan agreement with US Bank Equipment Finance in the amount of $ 82,011 with an interest rate of 6.40 % and maturity date on October 1,
2022, payable in 60 payments. All principal, together with interest cost is due and payable on October 1, 2022. As of September 30, 2022
and December 31, 2021, there was a balance outstanding of $ 1,515 and $ 15,989 , respectively.
 
 8. INCOME TAX 
 
 Total income tax (benefit) expense consists of the following:
 
 For the Nine-Month Periods Ended September 30, 
 2022 
 2021 

 Current provision (benefit): 
 
 Federal 
 $ -
 
 $ -
 
 State 
 -
 
 -
 
 Total current provision (benefit) 
 -
 
 -
 
 Deferred provision (benefit): 
 
 Federal 
 -
 
 -
 
 State 
 -
 
 -
 
 Total deferred provision (benefit) 
 -
 
 -
 
 Total tax provision (benefit) 
 $ -
 
 $ -
 
 13 

 A reconciliation of the Company’s effective tax rate to
the statutory federal rate for the nine months ended September 30, 2022 and 2021 is as follows:
 
 Description 
 September 30, 2022 
 September 30, 2021 

 Statutory federal rate 
 21.00 % 
 21.00 % 

 State income taxes net of federal income tax benefit and others 
 6.98 % 
 6.98 % 

 Permanent differences for tax purposes and others 
 0.00 % 
 0.00 % 

 Change in valuation allowance 
 - 27.98 % 
 - 27.98 % 

 Effective tax rate 
 0 % 
 0 % 

 The income tax benefit differs from the amount computed
by applying the U.S. federal statutory tax rate of 21 % due to California state income taxes of 8.84 % and changes in the valuation allowance.
 
 Deferred income taxes reflect the temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The components of deferred tax assets and liabilities are as follows:
 
 Deferred tax assets 
 September 30,

 2022 
 December 31,

 2021 

 Deferred tax assets: 
 
 Net operating loss 
 $ 2,961,949 
 $ 2,513,674 

 Other temporary differences 
 -
 
 -
 
 Total deferred tax assets 
 2,961,949 
 2,513,674 

 Less - valuation allowance 
 ( 2,961,949 ) 
 ( 2,513,674 ) 

 Total deferred tax assets, net of valuation allowance 
 $ -
 
 $ -
 
 As of December 31, 2021, the Company had available net operating
loss carryovers of approximately $ 8,423,841 . Per the Tax Cuts and Jobs Act (“TCJA”) implemented in 2018, the two-year carryback
provision was removed and now allows for an indefinite carryforward period. The carryforwards are limited to 80 % of each subsequent year’s
net income. As a result, net operating loss may be applied against future taxable income and expires at various dates subject to certain
limitations. The Company has a deferred tax asset arising substantially from the benefits of such net operating loss deduction and has
recorded a valuation allowance for the full amount of this deferred tax asset since it is more likely than not that some or all of the
deferred tax asset may not be realized.
 
 The Company files income tax returns in the U.S. federal
jurisdiction and California and is subject to income tax examinations by federal tax authorities for tax year ended 2017 and later and
subject to California authorities for tax year ended 2016 and later. The Company currently is not under examination by any tax authority.
The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of September 30, 2022
and December 31, 2021, the Company has no accrued interest or penalties related to uncertain tax positions.
 
 14 

 As of September 30, 2022, the Company had cumulative net
operating loss carryforwards for federal tax purposes of approximately $ 9,926,101 . In addition, the Company had state tax net operating
loss carryforwards of approximately $ 9,926,101 . The carryforwards may be applied against future taxable income and expires at various
dates subject to certain limitations.
 
 9. COMMITMENTS AND CONTINGENCIES 
 
 Operating Leases 
 
 The Company entered into the following operating facility
leases 
 
 ● 
 La Floresta - On July 25, 2016, the Company entered into an operating facility lease for its store located at La Floresta Shopping Village in Brea, California with 60 months term with option to extend. The lease started on July 2016 and expires on November 2024. 

 ● La Crescenta - On May 2017, the Company entered into an operating facility lease for its store located in La Crescenta, California with 120 months term with option to extend. The lease started on May 2017 and expires in May 2027. The Company entered into non-cancellable lease agreement for a coffee shop approximately 1,607 square feet located in La Crescenta, California commencing in May 2017 and expiring in April 2027. The monthly lease payment under the lease agreement approximately $ 6,026 . 
 
 ● 
 Brea - On September 1, 2018, the Company entered into an operating facility lease for its corporate office located in Brea, California with 72 months term with option to extend. The lease starts on September 2018 and expires on August 2024. 

 ● 
 Glendale – On October 27, 2020, The Company entered a 7-year operating facility lease for its store located at the Glendale Galleria in Glendale, California. The lease starts on November 2020 and expires in October 2027. 

 ● 
 San Francisco - On December 22, 2020, the Company entered into an operating facility lease for its store located at Stonestown Galleria in San Francisco, California with 84 months term with option to extend. The lease starts in June 2021 and expires in April 2028. 

 ● 
 
 Santa Anita - On December 22, 2020, the Company
entered into an operating facility lease for its store located at Arcadia, California with 36 months term with option to extend. The
lease starts in February 2021 and expires in January 2024. 
 
 ● 
 Riverside - On February 4, 2021, the Company entered into an operating facility lease for its store located at Galleria at Tyler in Riverside, California with 84 months term with option to extend. The lease starts in April 2021 and expires in March 2028. 

 15 

 ● 
 Corona Del Mar - On February 5, 2021, the Company repurchased its retail store in Corona Del Mar, California. As part of that repurchase, the Company assumed the original operating lease on the facility, with 66 months term with an option to extend. The lease expires in December 2022. 

 ● 
 Laguna Woods - On February 12, 2021, the Company entered into an operating facility lease for its store located at Home Depot Center in Laguna Woods, California with 60 months term with option to extend. The lease starts in June 2021 and expires in May 2026. 

 ● 
 Huntington Beach - On November 1, 2021, the Company entered into an operating facility lease for its store located at Huntington Beach, California with 124 months term with option to extend. The lease starts in November 2021 and expires in February 2032. 

 ● 
 Manhattan Village - On March 1, 2022, the Company entered into an operating facility lease for its store located at Manhattan Beach, California with 60 months term with option to extend. The lease starts in March 2022 and expires in February 2027. 

 The Company adopted ASC 842 as of January 2018 (date of
formation). The Company has operating leases for the Company’s corporate office and stores and accounts for these leases in
accordance with ASC 842, which resulted in right-of-use assets and operating lease liabilities of $ 2,764,258 and $ 2,915,149 ,
respectively, as of September 30, 2022. Certain of the leases for the Company’s retail store facilities provide for variable
payments for property taxes, insurance and common area maintenance payments related to rental payments based on future sales volumes
at the leased location, which are not measurable at the inception of the lease, or rental payments that are adjusted periodically
for inflation.
 
 For the new lease and adjustments,
the Company recorded an additional non-cash increase of $297,385 to ROU assets and $325,028 to operational lease liabilities for the nine-month
period ended September 30, 2022.
 
 In accordance with ASC 842, the components of lease expense
were as follows:
 
 For the nine-month period ended September 30, 
 2022 
 2021 

 Operating lease expense 
 $ 691,341 
 $ 477,950 

 Total lease expense 
 $ 691,341 
 $ 477,950 

 In accordance with ASC 842, other information related to leases
was as follows:
 
 For the nine-month period ended September 30, 
 2022 
 2021 

 Operating cash flows from operating leases 
 $ 669,265 
 $ 383,440 

 Cash paid for amounts included in the measurement of lease liabilities 
 $ 669,265 
 $ 383,440 

 Weighted-average remaining lease term—operating leases 
 
 3.8 Years 

 Weighted-average discount rate—operating leases 
 
 8.9 % 

 16 

 In accordance with ASC 842, maturities of operating lease
liabilities as of September 30, 2022 were as follows:
 
 Operating 

 For the years ended December 31, 
 Lease 

 2022 (remaining three months) 
 $ 234,129 

 2023 
 864,887 

 2024 
 785,267 

 2025 
 642,387 

 2026 
 574,150 

 Thereafter 
 456,435 

 Total undiscounted cash flows 
 $ 3,557,255 

 Reconciliation of lease liabilities: 
 
 Weighted-average remaining lease terms 
 3.8 Years 

 Weighted-average discount rate 
 8.9 % 

 Present values 
 $ 2,915,149 

 Lease liabilities—current 
 654,145 

 Lease liabilities—long-term 
 2,261,004 

 Lease liabilities—total 
 $ 2,915,149 

 Difference between undiscounted and discounted cash flows 
 $ 642,106 

 Contingencies 
 
 The Company is subject to various legal
proceedings from time to time as part of its business. As of September 30, 2022, the Company was not currently party to any legal proceedings
or threatened legal proceedings, the adverse outcome of which, individually or in the aggregate, it believes would have a material adverse
effect on its business, financial condition, and results of operations.
 
 10. SHAREHOLDERS’ EQUITY 
 
 Common Stock 
 
 The Company has authorization to issue
and have outstanding at any one time 40,000,000 share of common stock with a par value of $ 0.0001 per share. The shareholders of common
stock shall be entitled to one vote per share and dividends declared by the Company’s Board of Directors. 
 
 Preferred Stock 
 
 The Company has authorization to issue
and have outstanding at any one time 1,000,000 share of preferred stock with a par value of $ 0.0001 per share, in one or more classes
or series within a class as may be determined by our board of directors, who establish, from time to time, the number of shares to be
included in each class or series, fix the designation, powers, preferences and rights of the shares of each such class or series and any
qualifications, limitations or restrictions thereof. Any preferred stock so issued is senior to other existing classes of common stock
with respect to the payment of dividends or amounts upon liquidation or dissolution. As of September 30, 2022 and December 31, 2021, no
shares of our preferred stock had been designated any rights and we had no shares of preferred stock issued and outstanding.
 
 Subscription of Common Stock Receivables 
 
 The Company issued 1,569,768 shares
of common stock to several individuals in March 2020 and in December 2020 for total proceeds of $ 1,350,000 , of which $ 553,500 was received
in January, February, and June 2021.
 
 17 

 Issuance of Common Stock in Settlement
of Antidilution Provisions 
 
 In May 2018, the Company had entered
into a share exchange agreement wherein Capax, Inc., the predecessor entity of Reborn Coffee, Inc. (“Capax”) effectively merged
with Reborn Global Holdings, Inc. to form the Company. In this share exchange agreement, the preexisting shareholder of Capax were provided
covenants that for a period of one year following the date upon which the Company is approved for quotation or trading on a public exchange,
the percentage of ownership of the prior shareholders of Capax would not be less than the 5% of the total number of shares of voting common
stock outstanding of the Company that they owned following the share exchange. In the event the ownership of the pre-merger shareholders
of Capax fell below 5%, the Company was obligated to issue that number of shares of common stock to those shareholders which would increase
the ownership of all of the Pre-Merger Shareholders to five percent (5%) of the total outstanding voting common shares of the Company. 
During the year ended December 31, 2021, the Company issued 325,495 shares of common stock under these provisions.
 
 On January 25, 2022, the Company modified
this agreement with the preexisting shareholders to effectively end the antidilution protection at the time of a successful public offering,
eliminating the one-year period following an the public offering as provided under the original agreement. The shareholders would be entitled
to additional protection through the IPO date should the Company issue any additional shares between December 31, 2021 and the IPO date.
The Company has not issued any additional shares subsequent to December 31, 2021 and the shareholders do not have such antidilution protection
rights since the Company’s IPO date.
 
 Dividend policy 
 
 Dividends are paid at the discretion
of the Board of Directors. There were no dividends declared for the nine-month periods ended September 30, 2022 and 2021.
 
 11. EARNINGS PER SHARE 
 
 The Company calculates earnings per
share in accordance with FASB ASC 260, Earnings Per Share, which requires a dual presentation of basic and diluted earnings per share.
Basic earnings per share are computed using the weighted average number of shares outstanding during the fiscal year. Potentially dilutive
common shares consist of stock options outstanding (using the treasury method).
 
 The following table sets forth the
computation of basic and diluted net income per common share:
 
 Nine-Month Period 
 Three-Month Period 

 Ended September 30, 
 Ended September 30, 

 2022 
 2021 
 2022 
 2021 

 Net Loss 
 $ ( 2,422,320 ) 
 $ ( 2,576,136 ) 
 $ ( 920,060 ) 
 $ ( 1,940,973 ) 

 Weighted Average Shares of Common Stock Outstanding 
 
 Basic 
 11,844,900 
 10,437,239 
 11,679,523 
 10,842,264 

 Diluted 
 11,844,900 
 10,437,239 
 11,679,523 
 10,842,264 

 Earnings Per Share - Basic 
 
 Net Loss Per Share 
 ( 0.20 ) 
 ( 0.25 ) 
 ( 0.08 ) 
 ( 0.18 ) 

 Earnings Per Share - Diluted 
 
 Net Loss Per Share 
 ( 0.20 ) 
 ( 0.25 ) 
 ( 0.08 ) 
 ( 0.18 ) 

 12. SUBSEQUENT EVENTS 
 
 The Company evaluated all events or transactions that occurred
after September 30, 2022 up through the filing date of this Form 10-Q with SEC. During this period, the Company did not have any material
recognizable subsequent events required to be disclosed as of and for the nine-month period ended September 30, 2022, except for the following.
 
 18 

 Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations. 
 
 You should read the following discussion and analysis
of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes
and other financial information included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements
included in our Registration Statement on Form S-1 (File No: 333-261937), as amended (the “Registration Statement”). As discussed
in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking
statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause
our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute
to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors”
in our Registration Statement.
 
 Business 
 
 Reborn Coffee is focused on serving high quality,
specialty-roasted coffee at retail locations, kiosks and cafes. We are an innovative company that strives for constant improvement in
the coffee experience through exploration of new technology and premier service, guided by traditional brewing techniques. We believe
Reborn differentiates itself from other coffee roasters through its innovative techniques, including sourcing, washing, roasting, and
brewing our coffee beans with a balance of precision and craft.
 
 Founded in 2015 by Jay Kim, our Chief Executive
Officer, Mr. Kim and his team launched Reborn Coffee with the vision of using the finest pure ingredients and pristine water. We currently
serve customers through our retail store locations in California: Brea, La Crescenta, Glendale, Corona Del Mar, Arcadia, Laguna Woods,
Riverside, San Francisco and Manhattan Beach, with four other locations in development.
 
 We expect to continue to develop additional retail
locations up to 20 by the end of 2023. Considering the estimated average development cost of approximately $150,000 to open one retail
location, we estimate to use approximately $3,000,000 of the net proceeds from the recent IPO to open the additional 20 stores in 2023.
 
 Reborn Coffee continues to elevate the high-end
coffee experience and we received first place traditional still in “America’s Best Cold Brew” competition by Coffee
Fest in 2017 in Portland and 2018 in Los Angeles.
 
 The Experience, Reborn 
 
 As leading pioneers of the emerging “Fourth
Wave” movement, Reborn Coffee is redefining specialty coffee as an experience that demands much more than premium quality. We consider
ourselves leaders of the “fourth wave” coffee movement because we are constantly developing our bean processing methods, researching
design concepts, and reinventing new ways of drinking coffee. For instance, the current transition from the K-Cup trend to the pour over
drip concept allowed us to reinvent the way people consume coffee, by merging convenience and quality. We took the pour over drip concept
and made it available and affordable to the public through our Reborn Coffee Pour Over packs. Our Pour Over Packs allow our consumers
to consume our specialty coffee outdoors and on-the-go.
 
 Our success in innovating within the “fourth
wave” coffee movement is measured by our success in B2B sales with our introduction of Reborn Coffee Pour Over Packs to hotels.
With the introduction of our Pour Over Packs to major hotels (including one hotel company with 7 locations), our B2B sales increased as
these companies recognized the convenience and functionality our Pour Over Packs serve to their customers.
 
 Reborn Coffee’s continuous Research and
Development is essential to developing new parameters in the production of new blends. Our first place position in “America’s
Best Cold Brew” competition by Coffee Fest in 2017 in Portland and 2018 in Los Angeles is a testament to the way we believe we lead
the “fourth wave” movement by example.
 
 Centered around its core values of service, trust,
and well-being, Reborn Coffee delivers an appreciation of coffee as both a science and an art. Developing innovative processes such as
washing green coffee beans with magnetized water, we challenge traditional preparation methods by focusing on the relationship between
water chemistry, health, and flavor profile. Leading research studies, testing brewing equipment, and refining roasting/brewing methods
to a specific, Reborn Coffee proactively distinguishes exceptional quality from good quality by starting at the foundation and paying
attention to the details. Our mission places an equal emphasis on humanizing the coffee experience, delivering a fresh take on “farm-to-table”
by sourcing internationally. In this way, Reborn Coffee creates opportunities to develop transparency by paying homage to origin stories
and spark new conversations by building cross-cultural communities united by a passion for the finest coffee.
 
 19 

 Through a broad product offering, Reborn Coffee
provides customers with a wide variety of beverages and coffee options. As a result, we believe we can capture share of any experience
where customers seek to consume great beverages whether in our inviting store atmospheres which are designed for comfort, or on the go
through our pour over packs, or at home with our whole bean ground coffee bags. We believe that the retail coffee market in the US is
large and growing. According to IBIS, in 2021, the retail market for coffee in the United States is expected to be $46.2 billion. This
is expected to grow due to a shift in consumer preferences to premium coffee, including specialized blends, espresso-based beverages,
and cold brew options. Reborn aims to capture a growing portion of the market as we expand and increase consumer awareness of our brand.
 
 Plan of Operation 
 
 We have a production and distribution center at
our headquarters that we use to process and roast coffee for wholesale and retail distribution.
 
 Currently, we have the following nine retail coffee
locations, and four locations in development (i.e., Cabazon, Huntington Beach and 2 in Irvine, California):
 
 ● 
 La Floresta Shopping Village in Brea, California; 

 ● 
 La Crescenta, California; 

 ● 
 Glendale Galleria in Glendale, California; 

 ● 
 Galleria at Tyler in Riverside, California; 

 ● 
 Home Depot Center in Laguna Woods, California; 

 ● 
 Stonestown Galleria in San Francisco, California (opened in first quarter of 2022); 

 ● 
 Corona Del Mar, California; 

 ● 
 Santa Anita Westfield Mall in Arcadia, California; and 

 ● 
 Manhattan Village at Manhattan Beach, California. 

 Impact of COVID-19 
 
 The COVID-19 pandemic and resulting disruptions
including, without limitation, governmental lockdown mandates and restrictions, made 2020 a challenging year for businesses, particularly
in the foodservice and restaurant industries. Reborn Coffee took immediate action to protect the health and safety of our employees and
customers including the implementation of all operating protocols dictated by state and local guidelines and instituting strict health
and safety practices. Fortunately, we did not experience any significant disruptions in our supply chain operations.
 
 Despite efforts to ensure a safe consumer experience,
we did experience repressed customer flow through periods when malls and shopping centers were restricted or closed entirely due to governmental
lockdown mandates and restrictions. Our current retail locations are within popular shopping areas with anticipated regular customer traffic.
Such closures or limitations and restrictions were at times mandated the government, and at other times due to natural customer uncertainties
regarding the status of COVID-19. Such restrictions and uncertainties not only impacted anticipated revenues from current locations, but
added additional risk to us related to the opening of new locations. Thus, the uncertainty regarding the scope and longevity of such restrictions
modified our plans as to how quickly we could enact our expansion plans.
 
 20 

 More specifically, COVID-19 has challenged our
performance at our kiosk locations, though our cafe locations have improved in performance. Shopping mall restrictions and mandates during
the pandemic made it difficult for our kiosks to operate at maximum performance, as indoor restrictions of shopping malls affected the
way we had to operate business. For instance, we had to offer only to-go/pickup operations to operate while meeting regulations. We have
learned how to move forward aggressively despite such regulations and mandates, doing what we can to serve the coffee we are so proud
to serve, whether this means offering to-go orders only or working with delivery services.
 
 In May 2020, the Company availed itself of a loan
under the PPP administered by the SBA in the amount of $115,000, and $500,000 under the SBA’s Economic Injury Disaster Loan assistance
program, all of which is currently outstanding as of December 31, 2021, provided however that repayment was deferred to commence in May
2022. In February 2021, the Company secured a second PPP loan under this program in the amount of approximately $167,000. The Company
was granted forgiveness for the initial PPP Loan prior to December 31, 2021 and expects to be granted forgiveness on the remainder subsequently.
 
 In January 2022 we announced a price increase
of our whole roasted beans by 15% on our website which we attribute to increases due to inflation in the cost of raw green coffee beans,
the cost of shipping and supplies, and nationwide increases in labor costs—factors that may or may not be attributable to the pandemic
and/or the governmental policies and mandates that were implemented during and in the wake of COVID-19. As of the date hereof and in January
2022 at the time of our price increase, inflation has not had a material effect on our results of operations since we have been able to
offset such increased costs by increasing the price of our whole roasted beans by 15% in January 2022, through increased sales and growth
in opening 2 new company-owned retail locations, better lease terms on such new company-owned retail locations, more efficient purchasing
practices (e.g., volume purchase discounts), productivity improvements and greater economies of scale. Severe increases in inflation,
however, could affect the global and U.S. economies and could have a materially adverse impact on our business, financial condition or
results of operations.
 
 We do not expect COVID-19 to affect our future
operating results significantly, as we are confident that coffee is an essential product that people rely on and will always drink. We
intend to meet all governmental business operation regulations and improve sales by whatever means necessary, utilizing resources such
as food delivery services and to-go/pickup orders. However, the impact of COVID-19 continues to evolve, and we cannot easily predict the
future potential impacts of the pandemic on our business or operations or on the United States or global economy in general. This may
include any recurrence of the disease, actions taken in response to the evolving pandemic, any ongoing effects on consumer demand and
spending patterns or other impacts of the pandemic. Whether these or other currently unanticipated consequences of the pandemic are reasonably
likely to materially affect our results of operations, cash flows or financial condition is yet to be determined. For additional details
regarding the impact of COVID-19 on our business, see “Risk Factors-Risks Related to Our Business-Pandemics or disease outbreaks
such as the COVID-19 have had, and may continue to have, an effect on our business and results of operations” in the Registration
Statement.
 
 Components of Our Results of Operations 
 
 Revenue 
 
 The Company recognizes revenue in accordance with
ASC 606, Revenue from Contracts with Customers. The Company’s net revenue primarily consists of revenues from its retail locations
and wholesale and online store. Accordingly, the Company recognizes revenue as follows:
 
 ● 
 Retail Store Revenue 

 Retail store revenues are recognized when payment is tendered at the point of sale. Retail store revenues are reported net of sales, use or other transaction taxes that are collected from customers and remitted to taxing authorities. Sales taxes that are payable are recorded as accrued as other current liabilities. Retail store revenue makes up approximately 98% of the Company’s total revenue. 

 21 

 ● 
 Wholesale and Online Revenue 

 Wholesale and online revenues are recognized when the products are delivered, and title passes to customers or to the wholesale distributors. When customers pick up products at the Company’s warehouse, or distributed to the wholesale distributors, the title passes, and revenue is recognized. Wholesale revenues make up approximately 2% of the Company’s total revenue. 

 ● 
 Royalties and Other Fees 

 Franchise revenues consist of royalty fee and other franchise fees. Royalty fee is based on a percentage of franchisee’s weekly gross sales revenue at 5%. The Company recognizes the fee as the underlying sales occur. The Company recorded revenue from royalty of $0 for the three and nine month periods ended September 30, 2022 and 2021. Other fees are earned as incurred and the Company did not have any other fee revenue for the three and nine month periods ended September 30, 2022 and 2021. 

 Cost of Sales 
 
 Cost of sales includes costs associated with generating
revenue within our company-owned retail locations, and franchising operations (of which, as of September 30, 2022, we had none).
 
 Shipping and Handling Costs 
 
 The Company incurred freight out cost and is included
in the Company’s cost of sale.
 
 General and Administrative Expense 
 
 General and administrative expense includes store-related
expense as well as the Company’s corporate headquarters’ expenses.
 
 Advertising Expense 
 
 Advertising expenses are expensed as incurred.
Advertising expenses amounted to $27,110 and $72,619 for the nine month periods ended September 30, 2022 and 2021, respectively, and are
recorded under general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.
 
 Pre-opening Costs 
 
 Pre-opening costs for new stores, which are not material, consist primarily
of payroll and recruiting expense, training, marketing, rent, travel, and supplies, and are expensed as incurred depreciated over the
shorter of the useful life of the improvement or the lease term, including renewal periods that are reasonably assured.
 
 Results of Operations 
 
 Three and nine months ended September 30,
2022 compared to three and nine months ended September 30, 2021 
 
 The following table presents selected comparative
results of operations from our unaudited financial statements for the three and nine months ended September 30, 2022 compared to three
and nine months ended September 30, 2021. Our financial results for these periods are not necessarily indicative of the financial results
that we will achieve in future periods. Certain totals for the table below may not sum to 100% due to rounding.
 
 22 

 Nine Months Ended
 September 30, 
 Increase / (Decrease) 

 2022 
 2021 
 Dollars 
 Percentage 

 Net revenues: 
 
 Stores 
 $ 2,339,284 
 $ 1,519,969 
 $ 819,315 
 53.9 % 

 Wholesale and online 
 40,587 
 47,966 
 (7,379 ) 
 -15.4 % 

 Total net revenues 
 2,379,871 
 1,567,935 
 811,936 
 51.8 % 

 Operating costs and expenses: 
 
 Product, food and drink costs—stores 
 806,453 
 565,156 
 241,297 
 42.7 % 

 Cost of sales—wholesale and online 
 17,777 
 21,011 
 (3,234 ) 
 -15.4 % 

 General and administrative 
 3,954,997 
 2,679,037 
 1,275,960 
 47.6 % 

 Loss from operations 
 (2,399,356 ) 
 (1,697,269 ) 
 (702,087 ) 
 41.4 % 

 Other income 
 16,440 
 - 
 16,440 
 N/A % 

 PPP grant income 
 - 
 115,000 
 (115,000 ) 
 -100.0 % 

 Interest expense 
 (39,404 ) 
 (11,484 ) 
 (27,920 ) 
 243.1 % 

 Loss on extinguishment of debt 
 - 
 (982,383 ) 
 982,383 
 -100.0 % 

 Loss before income taxes 
 (2,422,320 ) 
 (2,576,136 ) 
 153,816 
 -6.0 % 

 Provision for income taxes 
 - 
 - 
 - 
 0.0 % 

 Net loss 
 $ (2,422,320 ) 
 $ (2,576,136 ) 
 $ 153,816 
 -6.0 % 

 Three Months Ended
 September 30, 
 Increase / (Decrease) 

 2022 
 2021 
 Dollars 
 Percentage 

 Net revenues: 
 
 Stores 
 $ 827,332 
 $ 668,184 
 $ 159,148 
 23.8 % 

 Wholesale and online 
 10,913 
 19,630 
 (8,717 ) 
 -44.4 % 

 Total net revenues 
 838,245 
 687,814 
 150,431 
 21.9 % 

 Operating costs and expenses: 
 
 Product, food and drink costs—stores 
 242,547 
 295,008 
 (52,461 ) 
 -17.8 % 

 Cost of sales—wholesale and online 
 4,780 
 8,599 
 (3,819 ) 
 -44.4 % 

 General and administrative 
 1,486,550 
 1,452,086 
 34,464 
 2.4 % 

 Loss from operations 
 (895,632 ) 
 (1,067,879 ) 
 172,247 
 -16.1 % 

 PPP grant income 
 - 
 115,000 
 (115,000 ) 
 -100.0 % 

 Interest expense 
 (24,428 ) 
 (5,711 ) 
 (18,717 ) 
 327.7 % 

 Loss on extinguishment of debt 
 - 
 (982,383 ) 
 982,383 
 -100.0 % 

 Loss before income taxes 
 (920,060 ) 
 (1,940,973 ) 
 1,020,913 
 -52.6 % 

 Provision for income taxes 
 - 
 - 
 - 
 0.0 % 

 Net loss 
 $ (920,060 ) 
 $ (1,940,973 ) 
 $ 1,020,913 
 -52.6 % 

 23 

 Nine months ended 
 September 30, 
 Three months ended 
 September 30, 

 2022 
 2021 
 2022 
 2021 

 Net revenues: 
 
 Stores 
 98.3 % 
 96.9 % 
 98.7 % 
 97.1 % 

 Wholesale and online 
 1.7 % 
 3.1 % 
 1.3 % 
 2.9 % 

 Total net revenues 
 100.0 % 
 100.0 % 
 100.0 % 
 100.0 % 

 Operating costs and expenses: 
 
 Product, food and drink costs—stores 
 33.9 % 
 36.0 % 
 28.9 % 
 42.9 % 

 Cost of sales—wholesale and online 
 0.7 % 
 1.3 % 
 0.6 % 
 1.3 % 

 General and administrative 
 166.2 % 
 170.9 % 
 177.3 % 
 211.1 % 

 Loss from operations 
 -100.8 % 
 -108.2 % 
 -106.8 % 
 -155.3 % 

 Other income 
 0.7 % 
 0.0 % 
 0.0 % 
 0.0 % 

 PPP grant income 
 0.0 % 
 7.3 % 
 0.0 % 
 16.7 % 

 Interest expense 
 -1.7 % 
 -0.7 % 
 -2.9 % 
 -0.8 % 

 Loss on extinguishment of debt 
 0.0 % 
 -62.7 % 
 0.0 % 
 -142.8 % 

 Loss before income taxes 
 -101.8 % 
 -164.3 % 
 -109.8 % 
 -282.2 % 

 Provision for income taxes 
 0.0 % 
 0.0 % 
 0.0 % 
 0.0 % 

 Net loss 
 -101.8 % 
 -164.3 % 
 -109.8 % 
 -282.2 % 

 Revenues. Revenues were approximately $2.4
million for the nine-month period ended September 30, 2022, compared to $1.6 million for the comparable period in 2021, representing an
increase of approximately $812,000, or 51.8%. Revenues were approximately $838,000 for the three-month period ended September 30, 2022,
compared to $688,000 for the comparable period in 2021, representing an increase of approximately $150,000, or 21.9%. The increase in
sales for the periods was primarily driven by the opening of new locations, and to the continued focus on marketing efforts to grow brand
recognition.
 
 Gross margin. Gross margin was approximately
$1.6 million for the nine-month period ended September 30, 2022, compared to $1.0 million for the comparable period in 2021, representing
an increase of approximately $574,000, or 58.5%. Gross margin was approximately $591,000 for the three-month period ended September 30,
2022, compared to $384,000 for the comparable period in 2021, representing an increase of approximately $207,000, or 53.8%. The increase
in gross margin for the periods was primarily driven by increase in sales.
 
 Product, food and drink costs. Product,
food and drink costs were approximately $806,000 for the nine-month period ended September 30, 2022 compared to $565,000 for the comparable
period in 2021, representing an increase of approximately $241,000, or 42.7%, and were approximately $243,000 for the three-month period
ended September 30, 2022 compared to $295,000 for the comparable period in the prior year, representing an decrease of $52,000, or -17.8%.
The increase in costs for the nine-month period ended September 30, 2022 as compared to the comparable period in 2021 was partially driven
by the opening of new locations and the overall increase in sales for the period.
 
 General and administrative expenses. General
and administrative expenses were approximately $4.0 million for the nine-month period ended September 30, 2022 compared to $2.7 million
for the comparable period in the prior year, representing an increase of approximately $1.3 million, or 47.6%, and were approximately
$1.49 million for the three-month period ended September 30, 2022 compared to $1.45 million for the comparable period in 2021, representing
an increase of approximately $34,000, or 2.4%.
 
 This increase in general and administrative expenses
for the nine-month period ended September 30, 2022 compared to the comparable period in the prior year was primarily due to the hiring
of additional administrative employees, increases in professional services and corporate-level costs to support growth plans, the opening
of new restaurants, as well as costs associated with outside administrative, legal and professional fees and other general corporate expenses
associated with preparing to become a public company.
 
 Liquidity and Capital Resources 
 
 We have a history of operating losses and negative
cash flow in operating activities. We have incurred recurring net losses, including net losses from operations before income taxes of
$2.4 million and $2.6 million for the nine-month periods ended September 30, 2022 and 2021, respectively. We used $2.0 million and $2.1
million of cash for operating activities for the nine-month periods ended September 30, 2022 and 2021, respectively.
 
 Our cash needs will depend on numerous factors,
including our revenues, completion of our product development activities, customer and market acceptance of our product, and our ability
to reduce and control costs. We expect to devote substantial capital resources to, among other things, fund operations and continue development
plans. For example, we estimate that the average development cost of a company-owned retail location is approximately $150,000 and we
plan to open additional 20 company-owned retail locations by the end of 2023.
 
 24 

 In August 2022, the Company consummated the IPO
of 1,440,000 shares of its common stock at a public offering price of $5.00 per share, generating gross proceeds of $7,200,000. Net proceeds
from the IPO were approximately $6.2 million after deducting underwriting discounts and commissions and other offering expenses of approximately
$998,000.
 
 We believe that expected cash flow from operations,
the establishment of a credit facility and the proceeds from the IPO will be adequate to fund operating lease obligations, capital expenditures
and working capital obligations for at least the next 12 months and thereafter.
 
 Nine Months Ended 
 September 30, 

 2022 
 2021 

 Statement of Cash Flow Data: 
 
 Net cash used in operating activities 
 (1,996,700 ) 
 (2,070,474 ) 

 Net cash used in investing activities 
 (333,189 ) 
 (412,673 ) 

 Net cash provided by financing activities 
 6,154,935 
 3,229,395 

 Cash Flows Used in Operating Activities 
 
 Net cash used in operating activities during the
nine-month period ended September 30, 2022 was approximately $2.0 million, which resulted from net loss of $2.4 million, non-cash charges
of $225,000 for stock compensation and $147,000 for depreciation and net cash outflows of $100,000 from changes in operating assets and
liabilities. The net cash outflows from changes in operating assets and liabilities were primarily the result of increases in inventory
of $14,000, prepaid and other assets of $64,000 and a decrease in accounts payable of $25,000, partially offset by increase of $130,000
in accrued liabilities. The increase in accrued liabilities was primarily due to the timing of cash payments for sales tax and payroll.
 
 Net cash used in operating activities during the
nine-month period ended September 30, 2021 was approximately $2.1 million, which resulted from net loss of $2.6 million, non-cash charges
of $575,000 for stock compensation and $130,000 for depreciation, and net cash outflows of $84,000 from changes in operating assets and
liabilities. The net cash outflows from changes in operating assets and liabilities were primarily the result of increases in inventories
of $7,000, prepaids and other assets of $97,000 and a decrease in accounts payable of $44,000, partially offset by increases of $23,000
in accrued liabilities.
 
 Cash Flows Used in Investing Activities 
 
 Net cash used in investing activities during the
nine-month periods ended September 30, 2022 and 2021 was $333,000 and $413,000, respectively, These expenditures in each period are primarily
related to purchases of property and equipment in connection with current and future location openings and maintaining our existing locations.
 
 Cash Flows Provided by Financing Activities
 
 Net cash provided by financing activities during
the nine-month period ended September 30, 2022 was $6.2 million, which was primarily a proceeds from the IPO, net of offering expenses
of approximately $998,000.
 
 Net cash provided by financing activities during
the nine-month period ended September 30, 2021 was $3.2 million, primarily due to approximately $2.5 million received from the common
stock issuance and $1.0 million from the loans, offset by approximately $316,000 of repayments of borrowings.
 
 As of September 30, 2022, the Company had
total assets of approximately $9.2 million. Our cash balance as of September 30, 2022 was approximately $4.7 million.
 
 25 

 Credit Facilities 
 
 Loan with Fora Financial 
 
 In October 2019, the Company entered into a loan
agreement with Fora Financial in the principal amount of $138,600 and remaining principal amount of $48,510. The loan payable has a maturity
date on October 11, 2019. The loan was due on demand. As of September 30, 2022 and December 31, 2021, there was a balance outstanding
of $0.
 
 Loans with Square Capital 
 
 In August 2022, the Company entered into loan
agreements with Square Capital in the aggregate principal amount of $100,000 with loan costs of $12,215. The loan payable has a maturity
date on February 2, 2024. As of September 30, 2022 and December 31, 2021, there was a balance outstanding of $88,982 and $0, respectively.
 
 Economic Injury Disaster
Loan 
 
 On May 16, 2020, the Company executed the EIDL
Loan from the SBA under its EIDL assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. As
of September 30, 2022, the loan payable, EIDL Loan noted above is not in default.
 
 Pursuant to the SBA Loan Agreement, the Company
borrowed an aggregate principal amount of the EIDL Loan of $500,000, with proceeds to be used for working capital purposes. Interest accrues
at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date of each advance. Installment payments, including
principal and interest, are due monthly beginning May 16, 2021 (twelve months from the date of the SBA Loan Agreement) in the amount of
$731. The balance of principal and interest is payable thirty years from the date of the SBA Loan. In connection therewith, the Company
also received a $10,000 grant, which does not have to be repaid. During the year ended December 31, 2020, $10,000 was recorded in Economy
injury disaster loan (EIDL) grant income in the Statements of Operations. The schedule of payments on this loan was later deferred to
commence 24 months from the date of loan, and therefore, the full amount of the loan is outstanding as of September 30, 2022 and payments
shall commence starting in May 2022.
 
 In connection therewith, the Company executed
(i) a loan for the benefit of the SBA, which contains customary events of default and (ii) a Security Agreement, granting the SBA a security
interest in all tangible and intangible personal property of the Company, which also contains customary events of default (the “SBA
Security Agreement”).
 
 Paycheck Protection Program
Loan 
 
 In May 2020, the Company secured a loan under
the PPP administered by the SBA in the amount of $115,000. In February 2021, the Company secured a second loan under this program in the
amount of approximately $167,000. The interest rate of the loan is 1.00% per annum and accrues on the unpaid principal balance computed
on the basis of the actual number of days elapsed in a year of 360 days. Commencing seven months after the effective date of each PPP
Loan, the Company is required to pay the Lender equal monthly payments of principal and interest as required to fully amortize any unforgiven
principal balance of the loan by the two-year anniversary of the effective date of the loan. The PPP Loan contains customary events of
default relating to, among other things, payment defaults, making materially false or misleading representations to the SBA or the Lender,
or breaching the terms of the PPP Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding under
the PPP Loan, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. Under the terms
of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP.
Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments
of mortgage interest, rent, and utilities. Recent modifications to the PPP by the U.S. Treasury and Congress have extended the time period
for loan forgiveness beyond the original eight-week period, making it possible for the Company to apply for forgiveness of its PPP loan.
The Company was granted forgiveness for the initial PPP Loan prior to December 31, 2021 and expects to be granted forgiveness on the remainder
subsequently.
 
 26 

 Leases 
 
 Operating Leases 
 
 We currently lease all company-owned retail locations.
Operating leases typically contain escalating rentals over the lease term, as well as optional renewal periods. Rent expense for operating
leases is recorded on a straight-line basis over the lease term and begins when Reborn has the right to use the property. The difference
between rent expense and cash payment is recorded as deferred rent on the accompanying consolidated balance sheets. Pre-opening rent is
included in selling, general and administrative expenses on the accompanying consolidated statements of income. Tenant incentives used
to fund leasehold improvements are recorded in deferred rent and amortized as reductions to rent expense over the term of the lease.
 
 Income Taxes 
 
 Reborn files income tax returns in the U.S. federal
and California state jurisdictions.
 
 Upon the closing of this offering, we will be
taxed at the prevailing U.S. corporate tax rates. We will be treated as a U.S. corporation and a regarded entity for U.S. federal, state
and local income taxes. Accordingly, a provision will be recorded for the anticipated tax consequences of our reported results of operations
for U.S. federal, state and foreign income taxes.
 
 JOBS Act Accounting Election 
 
 We are an “emerging growth company,”
as defined in the JOBS Act, and may take advantage of certain exemptions from various public company reporting requirements for up to
five years or until we are no longer an emerging growth company, whichever is earlier. The JOBS Act provides that an “emerging growth
company” can delay adopting new or revised accounting standards until those standards apply to private companies. We have elected
to use this extended transition period under the JOBS Act. Accordingly, our financial statements may not be comparable to the financial
statements of public companies that comply with such new or revised accounting standards.
 
 Off Balance Sheet Arrangements 
 
 We do not have any off-balance sheet arrangements
that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments,
purchase commitments and other contractual obligations. These transactions are recognized in our financial statements in accordance with
GAAP.
 
 Critical Accounting Estimates and Policies 
 
 The preparation of financial statements requires
management to utilize estimates and make judgments that affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions
that management believes to be reasonable under the circumstances. The estimates are evaluated by management on an ongoing basis, and
the results of these evaluations form a basis for making decisions about the carrying value of assets and liabilities that are not readily
apparent from other sources. Although actual results may differ from these estimates under different assumptions or conditions, management
believes that the estimates used in the preparation of our financial statements are reasonable. The critical accounting policies affecting
our financial reporting are summarized in Note 2 to the financial statements included elsewhere in this Quarterly Report on Form 10-Q
 
 27 

 Recent Accounting Pronouncements 
 
 We have determined that all other issued, but
not yet effective accounting pronouncements are inapplicable or insignificant to us and once adopted are not expected to have a material
impact on our financial position.
 
 Item 3. Quantitative and Qualitative Disclosures
About Market Risk. 
 
 We are a smaller reporting company as defined
by 17 C.F.R. 229 (10)(f)(i) and are not required to provide information under this item. 
 
 Item 4. Controls and Procedures. 
 
 Evaluation of Disclosure Controls and Procedures 
 
 Our management has evaluated the effectiveness
of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of September 30, 2022.
Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2022, our disclosure
controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified by
SEC rules and forms and (b) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding any required disclosure.
 
 Changes in Internal Control Over Financial
Reporting 
 
 Due to a transition period established by SEC
rules applicable to newly public companies, our management is not required to evaluate the effectiveness of our internal control over
financial reporting until after the filing of our Annual Report on Form 10-K for the year ending December 31, 2022. As a result, this
Quarterly Report does not address whether there have been any changes in our internal control over financial reporting.
 
 28 

 PART II—OTHER INFORMATION 
 
 Item 1. Legal Proceedings. 
 
 In the future, the Company may be subject to various
legal proceedings from time to time as part of its business. We are currently not involved in litigation that we believe will have a materially
adverse effect on our financial condition or results of operations. As of September 30, 2022, there is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency, self- regulatory organization or body pending or, to the knowledge
of the executive officers of our company or any of our subsidiaries threatened against or affecting our company, our common stock, any
of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as
such, in which an adverse decision is expected to have a material adverse effect.
 
 Item 1A. Risk Factors. 
 
 As a “smaller reporting company” as defined by Item 10
of Regulation S-K, we are not required to provide information required by this item.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 
 
 None.
 
 Item 3. Defaults Upon Senior Securities 
 
 Not applicable. 
 
 Item 4. Mine Safety Disclosures 
 
 Not applicable. 
 
 Item 5. Other Information 
 
 Not applicable. 
 
 29 

 Item 6. Exhibits. 
 
 The following exhibits are included herein or incorporated herein by
reference:
 
 3.1 
 
 Certificate of Incorporation (Delaware), dated July 27, 2022 (incorporated by reference to Exhibit 3.1 to Amendment No. 5 to our Registration Statement on Form S-1 filed on August 2, 2022) 

 3.2 
 
 Bylaws of Registrant (Delaware) (incorporated by reference to Exhibit 3.2 to Amendment No. 5 to our Registration Statement on Form S-1 filed on August 2, 2022) 

 4.1 
 
 Specimen Common Stock Certificate (Delaware) (incorporated by reference to Exhibit 4.1 to Amendment No. 5 to our Registration Statement on Form S-1 filed on August 2, 2022) 

 4.2 
 
 Form of Representative’s Warrant (incorporated by reference to Exhibit 4.5 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 

 31.1* 
 
 Certification of Jay Kim pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 

 31.2* 
 
 Certification of Stephan Kim pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 

 32.1** 
 
 Certification of Jay Kim pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

 32.2** 
 
 Certification of Stephan Kim pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

 101.INS 
 
 Inline XBRL Instance Document. 

 101.SCH 
 
 Inline XBRL Taxonomy Extension Schema Document. 

 101.CAL 
 
 Inline XBRL Taxonomy Extension Calculation Linkbase Document. 

 101.DEF 
 
 Inline XBRL Taxonomy Extension Definition Linkbase Document. 

 101.LAB 
 
 Inline XBRL Taxonomy Extension Label Linkbase Document. 

 101.PRE 
 
 Inline XBRL Taxonomy Extension Presentation Linkbase Document. 

 104 
 
 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). 

 * Filed
herewith. 

 ** Furnished
herewith. 

 30 

 SIGNATURES 
 
 Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
 
 Signature 
 
 Title 
 
 Date 

 /s/ Jay Kim 
 
 Chief Executive Officer 
 
 November 14, 2022 

 Jay Kim 
 
 ( Principal Executive Officer ) 
 
 /s/ Stephan Kim 
 
 Chief Financial Officer 
 
 Stephan Kim 
 
 ( Principal Financial and Accounting Officer ) 
 
 November 14, 2022 

 31
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
Reborn Coffee, Inc. 10-Q
