Reborn Coffee, Inc. 10-K

Item 9A. 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of December 31, 2024. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2024, our disclosure controls and procedures were ineffective 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 Securities and Exchange Commission (“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. 47 Management has identified control deficiencies regarding inadequate accounting resources, the lack of segregation of duties and the need for a stronger internal control environment. Our management believes that these material weaknesses are due to the small size of our accounting staff. The small size of our accounting outsourced staff may prevent adequate controls in the future due to the cost/benefit of such remediation. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework. These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our financial statements may not be prevented or detected on a timely basis. In light of this material weakness, we performed additional analyses and procedures in order to conclude that our financial statements for the year ended December 31, 2024 included in this Annual Report on Form 10-K were fairly stated in accordance with GAAP. Accordingly, management believes that despite our material weaknesses, our financial statements for the quarter ended December 31, 2024 are fairly stated, in all material respects, in accordance with GAAP. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Securities Exchange Act of 1934 Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: ● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; ● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the 2013 Treadway Commission (“COSO”) in Internal Control-Integrated Framework . Based upon this assessment, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2024 our internal controls over financial reporting were ineffective. Changes in Internal Control Over Financial Reporting There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Limitations on Effectiveness of Controls and Procedures In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Item 9B. Other Information Trading Plans During the three months ended December 31, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 48 Part III Item 10. Directors, Executive Officers and Corporate Governance Current Directors and Executive Officers The following table provides information regarding our executive officers and members of our board of directors as of the date of this Annual Report on Form 10-K: Name Age Position Executive Officers Jay Kim 63 Chief Executive Officer and Director Stephan Kim 49 Chief Financial Officer Non-Employee Directors Farooq M. Arjomand 67 Chairman of the Board of Directors and Independent Director Dennis R. Egidi 75 Director Sehan Kim 70 Independent Director Andy Nasim 44 Independent Director Jennifer Tan 57 Independent Director Background of Executive Officers and Directors Jay Kim, age 63, Chief Executive Officer and Director Mr. Kim has served as our Chief Executive Officer since inception in 2014. On July 1, 2007, Mr. Kim previously founded Wellspring Industry, Inc., which created the yogurt distribution company “Tutti Frutti” and the bakery-café franchise “O’My Buns.” Tutti Frutti grew to approximately 700 agents worldwide that offered self-serve frozen yogurt. Mr. Kim sold the majority ownership of Wellspring to group of investors in 2017 to focus his efforts on Reborn Coffee. Prior to beginning Wellspring Mr. Kim was the owner of Coffee Roasters in Riverside, California from 2002 to 2007. Mr. Kim worked as the project manager for JES Inc., based in Brea, CA from 1997 to 2002 where he coordinated and managed environmental engineering projects. Mr. Kim worked as a Senior Process Engineer for Allied Signal Environment Catalyst in Tulsa, Oklahoma, from 1992 to 1997 where he coordinated and implemented projects related to plant productivity. He also acted as the leader in start-up plant to be based in Mexico for Allied Signal. From 1988 to 1992 Mr. Kim worked as the plant start-up engineer for Toyota Auto Body Inc. Mr. Kim has a B.S, in Chemical Engineering from California State University at Long Beach and followed a Chemical office basic at US Army Chemical School in 1988. He was commissioned 1st. LT. of the US Army in 1986 and retired from the US Army in 1988. Stephan Kim, age 49, Chief Financial Officer Mr. Kim has served as our full-time Chief Financial Officer since June 26, 2022. Prior to joining Reborn Coffee, Mr. Kim provided professional accounting and tax consulting services for nearly 20 years to various clients in the consumer retail, healthcare, industrial manufacturing, and technology industries. Throughout his career as a public accountant, controller and banker in the US and South Korea, Mr. Kim has obtained broad and in-depth expertise on international accounting, finance, taxes and Sarbanes-Oxley 404 compliance. Mr. Kim graduated from Sogang University in South Korea with a B.A. in Sociology and Business in 2002 and earned a Master’s degree in Professional Accountancy from Indiana University in 2005. Mr. Kim began his career in 2002 as a banker with Shinhan Bank in South Korea. From 2005 to 2010, Mr. Kim was an Audit Manager at KPMG, Los Angeles office. 49 Non-Employee Directors Farooq M. Arjomand, age 67, Chairman of the Board of Directors Farooq Arjomand has served as the Chairman of the Board of Directors of Reborn Global since January 2015, and took over as the Chairman of the Board of Reborn Coffee Inc. on May 7, 2018. In 1984, he started his career as a banker with HSBC and gained experience across all departments—namely, private banking, corporate finance, trade services, and investment banking. During his stint with HSBC, he also became the founding member of Amlak Finance & Emmar Properties in 1997. Mr. Arjomand founded the Arjomand Group of companies in 2000 and has served as chief executive officer since that company’s inception. Based in Dubai, the Arjomand Group conducts various activities including real estate, manufacturing, trades, financial activities and aviation across the GCC, Asia, Europe and the US. Mr. Arjomand has also served as the Chairman of DAMAC Properties, a leading developer in the Middle East and as a board member of Al Ahlia Insurance Company BSC, Bahrain. Mr. Arjomand also serves as Managing Partner of Barakat Group. Barakat Group has been involved in the manufacturing of juices and food stuffs for the past 30 years. Mr. Arjomand is a citizen of the United Arab Emirates. He graduated with a Business Management degree from Seattle Pacific University in Seattle, Washington. Dennis R. Egidi, age 75, Director Mr. Egidi is a licensed real estate broker in the State of Illinois. Additionally, Mr. Egidi was awarded the CPM® designation through the Institute of Real Estate Management. He holds a bachelor’s degree in civil engineering and attended graduate school in Civil Engineering at the University of Detroit. Mr. Egidi joined our Board as a Director and the Vice Chairman of the Board in June of 2020. Mr. Egidi formed DRE, Inc., an Illinois real estate development company in 1993, developing over 30 affordable housing projects in Illinois, Ohio, Indiana, Iowa, and California, totaling approximately 5,000 units. Today, he continues to serve as President of DRE, Inc., and acts as Managing General Partner of 15 limited partnerships, of which 5 have been redeveloped over the past 5 years. In addition, Mr. Egidi served as President and Chairman of the board of Promex Midwest, a real estate property management firm. He has been involved in all phases of management in the commercial, residential and industrial building fields in the Midwest. Mr. Egidi has extensive knowledge and experience in the construction industry, having served as Executive Vice President and Chief Estimator for Corbetta Construction Company of Illinois, and then for Contractors and Engineers, Inc. During his 25 years of experience in the construction industry, he was involved in all types of projects ranging from multifamily housing, historical rehabs, high-rise office buildings and shopping centers. Mr. Egidi and DRE also have experience in the food service industry having developed fast food pizza stores in central Illinois under the Rocky Rococo brand in the 1980s. He was also a principal partner in Cookie Associates of Houston, Texas. Cookie Associates owned and operated 34 “Great American Cookie” stores and kiosks in the Houston market. Most recently, Mr. Egidi, as a principal of TF Investors LLC, was a franchisor of eight Tutti Frutti Frozen Yogurt franchises located in France and England. Sehan Kim, age 70, Director Sehan Kim has been a Director of Reborn Global since January 2015 and became a member of the Board of Reborn Coffee in 2018. Sehan Kim joined Magitech Incorporation in 2013 as Vice President of Operations. He oversees operations and management in water, and beverage businesses at Magitech Corporation. He led the major projects at Magitech to install the ERP system and the cold brewed coffee extraction systems. 50 Prior to this position, Sehan Kim from 2005 to 2011, was Senior Vice President at Korean Air Co., Ltd. (“Korean Air”). He was the Head of the Aerospace Division at Korean Air. Prior to that, Sehan Kim was vice president and general manager of the Commercial Aerostructure Businesses at Korean Air from 2001 to 2005, which supplied various aircraft structural components to major commercial airplane manufacturers, including Airbus, Boeing and Embraer. From January 1994 to February 1997 Mr. Kim worked as a Korean Air representative at Boeing in Seattle, Washington, and had on the job training in configuration management at Northrop Aircraft company in Los Angeles, for the Korean Fighter Coproduction Program in 1981. He joined Korean Air in August 1979 as an Aerospace structural engineer. Mr. Sehan Kim studied Aerospace Engineering at Seoul National University in 1973 through 1977 and holds a master’s Degree in business management from Busan National University. Andy Nasim, age 44, Director Andy Nasim has served as a Director on our Board since July 2023. Mr. Nasim graduated with a Bachelor of Science in Business with Information Technology from Staffordshire University, United Kingdom. He commenced his career in 2002 as a business development manager with Kenanga Capital Sdn Bhd, the stockbroking lending division of Kenanga Investment Bank Berhad where he drove the credit business of corporate banking, equity financing and development of financing solutions through various structured financing products and Islamic trade financing. He then became Head of Kenanga Private Equity division in 2010 where he was involved in strategic offshore merger and acquisition for the group. He obtained extensive experience in the capital markets and financial services operations. From January 2017 to present, Mr. Nasim has served as CEO / Executive Director of the Wellspring Group; a company which owns the global trademark of world-renowned dessert brand. He oversees strategic planning and international brand expansion for the Group. Jennifer Tan, age 57, Director Jennifer Tan has served as a Director on our Board since October 2023. Ms. Tan has over 30 years’ experience as a global entrepreneur in diversified businesses in the U.S., Europe and Asia. Since 2020, she has served as Chief Executive Officer of Hawaii Volcano Tea LP, a tea farm with multiple locations in the Volcano area of Hawaii Island. From 2009 to 2019, Ms. Tan served as Managing Director of Tutti Frutti (China) Limited, developing and executing marketing plans for Tutti Frutti Frozen Yogurt stores on both corporate-owned and franchise retail stores in China, Hong Kong and Macau. From 1997 to 2001, she served as the Managing Director of International Golf & Yacht Club (Hong Kong) Limited and Mass Star Development Limited. Family Relationships There are no family relationships among any of our executive officers or directors. Board Composition Our business and affairs are managed under the direction of our board of directors, a majority of which are independent (i.e., Farooq M. Arjomand, Sehan Kim, Andy Nasim, and Jennifer Tan). We have six directors with no vacancies. Our current directors will continue to serve as directors until their resignation, removal or successor is duly elected. Our certificate of incorporation and our bylaws permit our board of directors to establish the authorized number of directors from time to time by resolution. Each director serves until the expiration of the term for which such director was elected or appointed, or until such director’s earlier death, resignation or removal. 51 Involvement in Certain Legal Proceedings As of the filing of this Annual Report on Form 10-K, there are no legal proceedings, and during the past ten years there have been no legal proceedings, that are material to an evaluation of the ability or integrity of any of our directors, director nominees or executive officers. Committees of Our Board of Directors Our board of directors has established a compensation committee and an audit committee. The composition and responsibilities of each of the committees of our board of directors are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors. Our board of directors may establish other committees as it deems necessary or appropriate from time to time. Audit Committee As of the date of this filing, our audit committee consists of Farooq M. Arjomand, Sehan Kim, and Andy Nasim. Each member of our audit committee can read and understand fundamental financial statements in accordance with applicable requirements. The chair of our audit committee is Farooq M. Arjomand, who our board of directors has determined is an “audit committee financial expert” within the meaning of SEC regulations. In arriving at these determinations, our board of directors has examined each audit committee member’s scope of experience and the nature of their employment in the corporate finance sector. The principal duties and responsibilities of our audit committee include, among other things: ● hiring and selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements; ● helping to ensure the independence and performance of the independent registered public accounting firm; ● helping to maintain and foster an open avenue of communication between management and the independent registered public accounting firm; ● discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent registered public accounting firm, our interim and year-end operating results; ● developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters; ● reviewing our policies on risk assessment and risk management; ● reviewing related party transactions; ● obtaining and reviewing a report by the independent registered public accounting firm at least annually, that describes its internal quality-control procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law; and ● approving (or, as permitted, pre-approving) all audit and all permissible non-audit services to be performed by the independent registered public accounting firm. Our audit committee operates under a written charter that satisfies the applicable listing standards of the Nasdaq Capital Market. Compensation Committee Our compensation committee consists of Farooq M. Arjomand, Sehan Kim, and Andy Nasim. The chair of our compensation committee is Andy Nasim. The principal duties and responsibilities of our compensation committee include, among other things: ● approving the retention of compensation consultants and outside service providers and advisors; ● reviewing and approving, or recommending that our board of directors approve, the compensation, individual and corporate performance goals and objectives and other terms of employment of our executive officers, including evaluating the performance of our chief executive officer and, with his assistance, that of our other executive officers; 52 ● reviewing and recommending to our board of directors the compensation of our directors; ● administering our equity and non-equity incentive plans; ● reviewing our practices and policies of employee compensation as they relate to alignment of incentives; ● reviewing and evaluating succession plans for the executive officers; ● reviewing and approving, or recommending that our board of directors approve, incentive compensation and equity plans; and ● reviewing and establishing general policies relating to compensation and benefits of our employees and reviewing our overall compensation philosophy. Our compensation committee operates under a written charter that satisfies the applicable listing standards of the Nasdaq Capital Market. Compensation Committee Interlocks None of the members of the compensation committee are currently, or have been at any time, one of our executive officers or employees. None of our executive officers currently serve, or have served during the last year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. Director Nominations We do not have a standing nominating committee. In accordance with the Nasdaq corporate governance standards, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. As there is no standing nominating committee, we do not have a nominating committee charter in place. The board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our bylaws. We expect to expand our board of directors in the future to include additional independent directors. In adding additional members to our board of directors, we will consider each candidate’s independence, skills and expertise based on a variety of factors, including the person’s experience or background in management, finance, regulatory matters and corporate governance. Further, when identifying nominees to serve as a director, we expect that our board of directors will seek to create a board of directors that is strong in its collective knowledge and has a diversity of skills and experience with respect to accounting and finance, management and leadership, vision and strategy, business operations, business judgment, industry knowledge and corporate governance. Code of Business Conduct and Ethics In 2017, we adopted a Code of Business Conduct and Ethics that applies to all our employees, officers and directors. This includes our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. The full text of our Code of Business Conduct and Ethics is posted on our website at www.reborncoffee.com. We intend to disclose on our website any future amendments of our Code of Business Conduct and Ethics or waivers that exempt any principal executive officer, principal financial officer, principal accounting officer or controller, persons performing similar functions or our directors from provisions in the Code of Business Conduct and Ethics. Information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider information on our website to be part of this Annual Report on Form 10-K. 53 Insider Trading Policy Our Code of Business Conduct and Ethics contains an insider trading policy that governs the purchase, sale, and other disposition of our securities by our directors, officers, employees and other individuals associated with us, as well as by the Company itself, that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to us. A copy of our Code of Business Conduct and Ethics is filed as Exhibit 19.1 to this Annual Report on Form 10-K. Risk and Compensation Policies We have analyzed our compensation programs and policies to determine whether those programs and policies are reasonably likely to have a material adverse effect on us. Item 11. Executive Compensation Compensation Philosophy Our compensation philosophy includes: ● pay for performance; ● fair compensation that is competitive with market standards; ● compensation mix according to growth stage of our company as well as job level; and ● incentivizing employees to work for long-term sustainable and profitable growth of our company. Objective of Executive Compensation Program The objective of our compensation program is to provide a fair and competitive compensation package in the industry to each named executive officer (“NEO”) that will enable us to: ● attract and hire outstanding individuals to achieve our mid-term and long-term visions; ● motivate, develop and retain employees; and ● align the financial interests of each named executive officer with the interests of our stakeholders including stockholders and encourage each named executive officer to contribute to enhance value of the Company. Our named executive officers for the year 2024, which consist of our principal executive officer and our two highest compensated executive officers, were: ● Jay Kim, President and Chief Executive Officer; and ● Stephan Kim, Chief Financial Officer. Administration Our Compensation Committee oversees our executive compensation program and is responsible for approving the nature and amount of the compensation paid to our NEOs. The committee also administers our equity compensation plan and awards. 54 Elements of Compensation Our compensation program for NEOs consists of the following elements of compensation, each described in greater depth below: ● base salaries; ● performance-based bonuses; ● equity-based incentive compensation; and ● general benefits. Base Salary Base salaries are an annual fixed level of cash compensation to reflect each NEO’s performance, role and responsibilities, and retention considerations. Equity Compensation We may pay equity-based compensation to our NEOs in order to link our long-term results achieved for our stockholders and the rewards provided to NEOs, thereby ensuring that such NEOs have a continuing stake in our long-term success. General Benefits Our NEOs are provided with other fringe benefits that we believe are commonly provided to similarly situated executives. Summary Compensation Table – Officers The following table sets forth information concerning the compensation of our named executive officers for the years ended December 31, 2024 and December 31, 2023. Salary Bonus Stock Awards Option Awards Non-equity Incentive plan compensation Change in Pension Value and Nonqualified deferred compensation All other Compensation Total Name and principal position Year ($) ($) ($) ($) ($) ($) ($) ($) Jay Kim Chief Executive Officer 2024 $ 162,000 -0- -0- -0- -0- -0- -0- $ 162,000 Stephan Kim Chief Financial Officer 2024 $ 124,000 -0- -0- -0- -0- -0- -0- $ 124,000 Jay Kim Chief Executive Officer 2023 $ 150,000 -0- -0- -0- -0- -0- -0- $ 150,000 Stephan Kim Chief Financial Officer 2023 $ 144,000 -0- -0- -0- -0- -0- -0- $ 144,000 55 Employment Agreements Effective July 27, 2022, we executed an employment agreement with Stephan Kim for Mr. Kim to serve as our full time Chief Financial Officer, effective immediately. Mr. Kim shall receive a monthly payment of $12,000 ($144,000 annually) as compensation for his services, and we granted $56,000 worth of restricted stock units (RSUs), which vested 3 months after employment and can be sold after one year. The employment agreement is an at-will agreement and is terminable by either party at any time. Except as set forth above we do not currently have employment agreements with any of our NEOs . Timing of Option Awards We provide the following discussion of the timing of option awards in relation to the disclosure of material nonpublic information, as required by Item 402(x) of Regulation S-K. We have no policy or practice regarding option grant timing because we do not grant, and have not granted, options to our NEOs. We have not timed the disclosure of material nonpublic information to affect the value of executive compensation. During 2024, we did not grant any stock options to the NEOs during any period beginning four business days before the filing of a periodic report on Form 10-Q or Form 10-K or the filing or furnishing of a current report on Form 8-K disclosing material non-public information (other than a current report on Form 8-K disclosing a material new stock option award under Item 5.02(e) of such Form 8-K), and ending one business day after the filing or furnishing of such report with the SEC. Outstanding Equity Awards at Fiscal Year-End As of December 31, 2024, there were no outstanding equity awards for each of the NEOs. Director Compensation No compensation was paid to our non-employee directors for services rendered during the years ended December 31, 2024 and 2023. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth, as of March 15, 2025, information regarding beneficial ownership of our capital stock by: ● each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock; ● each of our directors; ● each of our NEOs; and ● all of our current executive officers, directors and director nominees as a group. In the table below, percentage ownership is based on 4,568,508 shares of our Common Stock issued and outstanding as of March 31, 2025. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all ordinary shares beneficially owned by them. The following table does not reflect record or beneficial ownership of the private placement warrants or rights as these warrants and rights are not exercisable or convertible within 60 days of the date of this Report. 56 Except as otherwise noted below, the address for each person or entity listed in the table is c/o Reborn Coffee Inc., 580 N. Berry St. Brea, CA 92821. Number of Shares Percentage of Shares Name of Beneficial Owner Beneficially Owned Beneficially Owned 5% or Greater Stockholders Directors and Named Executive Officers Jay Kim, Chief Executive Officer and Director 410,834 9.0 % Stephan Kim, Chief Financial Officer 87,190 1.9 % Farooq M. Arjomand, Chairman of the Board 456,082 10.0 % Dennis R. Egidi, Director 155,350 3.4 % Sehan Kim, Director 47,786 1.0 % Andy Nasim, Director - - Jennifer Tan, Director - - All directors, directors nominees and executive officers as a group (7 persons): 1,157,242 25.3 % Securities Authorized for Issuance under Equity Compensation Plans None. Changes in Control None. Item 13. Certain Relationships and Related Transactions, and Director Independence Policies and Procedures for Related Person Transactions Our board of directors has adopted a written-related person transaction policy, which sets forth the policies and procedures for the review and approval or ratification of related party transactions. This policy is administrated by our Audit Committee. These policies provide that, in determining whether or not to recommend the initial approval or ratification of a related party transaction, the relevant facts and circumstances available shall be considered, including, among other factors it deems appropriate, whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction. Director Independence Nasdaq rules require that a majority of the board of directors of a company listed on Nasdaq be composed of “independent directors,” which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. In addition, the director must not be precluded from qualifying as independent under the per se bars set forth by the Nasdaq rules. Our Board has undertaken a review of its composition, the composition of its committees and the independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our Board of Directors has determined that each of the directors on our Board, other than Jay Kim and Dennis R. Egidi are independent directors under the Nasdaq listing rules. Our independent directors have regularly scheduled meetings at which only independent directors are present. Indemnification Agreements We have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us to indemnify each director and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, penalties, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer. Our certificate of incorporation contains provisions that limit the liability of our current and former directors for monetary damages to the fullest extent permitted by Delaware law. Additionally, a director is not personally liable for monetary damages for breach of fiduciary duty as a director (i) for any breach of his or her duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derives an improper personal benefit. 57 Our certificate of incorporation authorizes us to indemnify our directors, officers, employees and other agents to the fullest extent permitted by Delaware law. Our bylaws provide that we are required to indemnify our directors and officers to the fullest extent permitted by Delaware law and may indemnify our other employees and agents. Our bylaws also provide that, on satisfaction of certain conditions, we will advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by our board of directors. With certain exceptions, these agreements provide for indemnification for related expenses including attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe these provisions in our certificate of incorporation and bylaws and these indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain customary directors’ and officers’ liability insurance. The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors, executive officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Item 14. Principal Accountant Fees and Services We have appointed BCRG Group (“BCRG”) to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2024. BCRG has served as our independent registered public accounting firm since 2024. Fees Billed to the Company in fiscal year 2024 The following table sets forth the fees billed to us by our auditor, BCRG, for professional services rendered during the fiscal years ended December 31, 2024: December 31, 2024 Audit fees (1) $ 125,000 Audit related fees (2) - Tax fees (3) - $ 125,000 (1) Audit Fees — Audit fees consist of fees billed for the audit of our annual financial statements and the review of the interim consolidated financial statements. (2) Audit-Related Fees — These consisted principally of the aggregate fees related to audits that are not included Audit Fees. (3) Tax Fees — Tax fees consist of aggregate fees for tax compliance and tax advice, including the review and preparation of our various jurisdictions’ income tax returns. Pre-Approval Policies and Procedures The Audit Committee has the authority to appoint or replace our independent registered public accounting firm (subject, if applicable, to stockholder ratification). The Audit Committee is also responsible for the compensation and oversight of the work of the independent registered public accounting firm (including resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent registered public accounting firm was engaged by, and reports directly to, the Audit Committee. The Audit Committee pre-approves all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for us by our independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act and Rule 2-01(c)(7)(i)(C) of Regulation S-X, provided that all such excepted services are subsequently approved prior to the completion of the audit. We have complied with the procedures set forth above, and the Audit Committee has otherwise complied with the provisions of its charter. 58 PART IV Item 15. Exhibits, Financial Statement Schedule (a) The following documents are filed as part of this Report: (1) Financial Statements Page Report of Independent Registered Public Accounting Firm F-1 Balance Sheets F-2 Statements of Operations F-3 Statements of Changes in Shareholders’ Deficit F-4 Statements of Cash Flows F-5 Notes to Financial Statements F-6 (2) Financial Statements Schedule All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes beginning on F-1 on this Report. (b) Exhibits EXHIBIT INDEX 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) 3.3 Certificate of Amendment to Certificate of Incorporation filed with the Secretary of State of the State of Delaware on January 12, 2024 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on January 16, 2024) 4.1 Description of Registrant’s Securities (incorporated by reference to Exhibit 4.3 to our Annual Report on Form 10-K filed on March 28, 2024) 4.2 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) 4.3 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) 4.4 Warrant to Purchase Common Shares issued May 20, 2024, by Reborn Coffee Inc. to EFF HUTTON YA FUND, LP (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on May 23, 2024) 4.5 Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on February 12, 2025) 10.1 Share Exchange Agreement, dated May 7, 2018 by and among Capax, Reborn and each of the RB shareholders (incorporated by reference to Exhibit 10.1 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 10.2 Form of Letter Agreement (Lockup) by and among Registrant, officers and directors of Registrant and EF Hutton (incorporated by reference to Exhibit 10.2 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 10.3+ Form of Director and Officer Indemnity Agreement (incorporated by reference to Exhibit 10.3 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 10.4 Shopping Center Lease by and between Reborn Global Holdings, Inc. and La Floresta Regency, LLC, effective July 25, 2016 (incorporated by reference to Exhibit 10.4 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 10.5 Standard Industrial/ Commercial Multi-Tenant Lease, as amended, by and between Reborn Global Holdings, Inc. and Foothill Crescenta, LLC, effective December 6, 2016 (incorporated by reference to Exhibit 10.5 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 10.6 Shopping Center Lease by and between Reborn Global Holdings, Inc. and Sibling Associates, LLC, effective July 12, 2017 (incorporated by reference to Exhibit 10.6 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 10.7 Standard Lease by and between Reborn Global Holdings, Inc. and El Toro, LP, effective February 12, 2021 (incorporated by reference to Exhibit 10.7 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 10.8 Long Term Kiosk License Agreement by and between Reborn Global Holdings, Inc. and Tyler Mall Limited Partnership, effective February 4, 2021 (incorporated by reference to Exhibit 10.8 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 10.9 Long Term Kiosk License Agreement by and between Reborn Global Holdings, Inc. and Stonestown Shopping Center, LP, effective December 22, 2020 (incorporated by reference to Exhibit 10.9 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 10.10 Long Term Kiosk License Agreement by and between Reborn Global Holdings, Inc. and Glendale I Mall Associates, LP, effective October 27, 2020 (incorporated by reference to Exhibit 10.10 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 59 10.11 Form of Subscription Agreement (Regulation A+ Offering) (incorporated by reference to Exhibit 10.11 to Amendment No. 2 to our Registration Statement on Form S-1 filed on April 18, 2022) 10.12 Amendment to Share Exchange Agreement, dated January 25, 2022, by and among Reborn Coffee Inc., Andrew Weeraratne and each of the former shareholders of Reborn Global Holdings, Inc., a California corporation (incorporated by reference to Exhibit 10.10 to Amendment No. 5 to our Registration Statement on Form S-1 filed on August 2, 2022) 10.13+ Offer of Employment by and between the Company and Stephan Kim, dated July 27, 2022 (incorporated by reference to Exhibit 10.11 to Amendment No. 5 to our Registration Statement on Form S-1 filed on August 2, 2022) 10.14 Line of Credit Note issued by Reborn Global Holdings, Inc. on June 1, 2023 in the name of DRE, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 24, 2023) 10.15 Exchange Agreement by and between Reborn Coffee, Inc. and DRE, Inc. dated November 28, 2023 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 29, 2023) 10.16 Securities Subscription Agreement by and between Reborn Coffee, Inc. and Farooq M. Arjomand, dated January 10, 2024 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on January 16, 2024) 10.17 Securities Subscription Agreement by and between Reborn Coffee, Inc. and Scott Lee, dated February 29, 2024 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 29, 2024) 10.18 Form of Securities Subscription Agreement entered into between Reborn Coffee, Inc. and three investors between May 28, 2024 and June 21, 2024 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on August 29, 2024) 10.19 Convertible Promissory Note issued August 29, 2024, by Reborn Coffee, Inc. to Quen Inno Tech Co., Ltd. (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on August 29, 2024) 10.20 Securities Purchase Agreement by and between Reborn Coffee, Inc. and 1800 Diagonal Lending LLC dated January 6, 2025 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on January 10, 2025) 10.21† Promissory Note dated January 6, 2025 issued by Reborn Coffee, Inc. to 1800 Diagonal Lending LLC (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on January 10, 2025) 10.22† Form of Securities Purchase Agreement by and between Reborn Coffee, Inc. and the Debenture Investors dated February 6, 2025 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 12, 2025) 10.23 Form of 10% Original Issue Discount Secured Convertible Debenture (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on February 12, 2025) 10.24† Form of Security Agreement between Reborn Coffee, Inc., its subsidiaries and the Debenture Investors dated February 10, 2025 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on February 12, 2025) 10.25 Form of Guarantee Agreement between the subsidiaries of Reborn Coffee, Inc. and the Debenture Investors dated February 10, 2025 (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on February 12, 2025) 10.26 Form of Registration Rights Agreement between Reborn Coffee, Inc. and the Debenture Investors dated February 10, 2025 (incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed on February 12, 2025) 10.27† Purchase Agreement between Reborn Coffee, Inc. and Arena Business Solutions Global SPC II, Ltd, dated as of February 10, 2025 (incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed on February 12, 2025) 19.1* Code of Business Conduct and Ethics (Insider Trading Policy) 21.1 Subsidiaries of Registrant (incorporated by reference to Exhibit 21.1 to our Annual Report on Form 10-K filed on March 28, 2024) 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal Executive Officer 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 Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97.1 Reborn Coffee, Inc. Clawback Policy (incorporated by reference to Exhibit 97.1 to our Annual Report on Form 10-K filed on March 28, 2024) 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 ** Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing. + Denotes a management contract or compensatory plan or arrangement. † Schedules and exhibits to this Exhibit omitted pursuant to Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. Item 16. Form 10-K Summary Not applicable. 60 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Reborn Coffee, Inc. and Subsidiaries Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Reborn Coffee, Inc. and Subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related statement of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. ● Going Concern – As discussed in Note 2 to the consolidated financial statements, the Company has a going concern due to negative working capital and losses from operations which raises substantial doubt about its ability to continue as a going concern. Auditing management’s evaluation of a going concern can be a significant judgment given the fact that the Company uses management estimates on future revenues and expenses, which are difficult to substantiate. To evaluate the appropriateness of the going concern, we examined and evaluated the financial information along with management’s plans to mitigate the going concern and management’s disclosure on going concern. /s/ BCRG Group BCRG Group (PCAOB ID 7158 ) We have served as the Company’s auditor since 2024. Irvine, CA March 31, 2025 F- 1 REBORN COFFEE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 158,215 $ 164,301 Accounts receivable, net of allowance for doubtful accounts of $ 0 and $ 0 , respectively 67,309 56,938 Inventories, net 169,615 185,061 Prepaid expense and other current assets 467,613 359,124 Total current assets 862,752 765,424 Property and equipment, net 4,080,004 3,494,050 Operating lease right-of-use asset 2,653,179 4,566,968 Other assets 193,188 425,712 Total assets $ 7,789,123 $ 9,252,154 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 558,444 $ 632,753 Accrued expenses and current liabilities 774,826 611,290 Loans payable to financial institutions, current 111,300 791,352 Loans payable to others 427,073 609,027 Loans payable to shareholders - 100,000 Loan payable, emergency injury disaster loan (EIDL), current 30,060 30,060 Loan payable, payroll protection program (PPP), current 37,494 45,678 Operating lease liabilities, current 844,177 1,003,753 Total current liabilities 2,783,374 3,823,913 Loans payable to financial institutions, net of current - 335,147 Loan payable, emergency injury disaster loan (EIDL), net of current 469,940 469,940 Loan payable, payroll protection program (PPP), net of current 26,307 51,595 Operating lease liabilities, net of current 1,906,760 3,725,153 Total liabilities 5,186,381 8,405,748 Commitments and Contingencies Stockholders’ equity Common Stock, $ 0.0001 par value, 40,000,000 shares authorized; 4,274,508 and 1,866,174 shares issued and outstanding at December 31, 2024 and 2023, respectively 428 187 Common stock issuable, $ 0.0001 par value, 294,000 shares issuable at $ 5.00 per share 1,470,000 - Preferred Stock, $ 0.0001 par value, 1,000,000 shares authorized; no shares issued and outstanding at December 31, 2024 and 2023, respectively - - Additional paid-in capital 22,674,095 17,603,143 Accumulated deficit ( 21,562,872 ) ( 16,756,924 ) Accumulated other comprehensive income (loss) 21,091 - Total stockholders’ equity 2,602,742 846,406 Total liabilities and stockholders’ equity $ 7,789,123 $ 9,252,154 See accompanying notes to consolidated financial statements. F- 2 REBORN COFFEE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2024 2023 Net revenues: Stores 5,573,247 5,266,783 Wholesale and online 355,286 241,356 Total net revenues 5,928,533 5,508,139 Operating costs and expenses: Product, food and drink costs - stores 2,062,460 1,782,681 Cost of sales—wholesale and online 142,114 105,714 General and administrative 8,343,505 8,162,523 Total operating costs and expenses 10,548,079 10,050,918 Loss from operations ( 4,619,546 ) ( 4,542,779 ) Other income (expense): Other income (expense) 55,140 ( 8,942 ) Asset impairment loss ( 25,602 ) - Loss on the sale of building - ( 36,094 ) Interest expense ( 215,140 ) ( 129,480 ) Total other expense, net ( 185,602 ) ( 174,516 ) Loss before income taxes ( 4,805,148 ) ( 4,717,295 ) Provision for income taxes 800 7,828 Net loss $ ( 4,805,948 ) $ ( 4,725,123 ) Loss per share: Basic and diluted $ ( 1.66 ) $ ( 2.86 ) Weighted average number of common shares outstanding: Basic and diluted 2,896,960 1,652,034 See accompanying notes to consolidated financial statements. F- 3 REBORN COFFEE, INC. AND SUBSIDIARIES CONSOLIDATED SHAREHOLDERS’ EQUITY Common Stock Common Stock Issuable Preferred Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Total Shareholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Income (loss) Equity (Deficit) Balance as of December 31, 2022 1,645,340 $ 165 - $ - - $ - $ 16,318,165 $ ( 12,031,801 ) $ - $ 4,286,529 Net loss - - - - - - - ( 4,725,123 ) - ( 4,725,123 ) Stock compensation - issuance for services 12,500 1 - - - - 284,999 - - 285,000 Common stock issued – conversion from the credit line 208,333 21 - - - - 999,979 - - 1,000,000 Balance as of December 31, 2023 1,866,174 $ 187 - $ - - $ - $ 17,603,143 $ ( 16,756,924 ) $ - $ 846,406 Net loss - - - - - - - ( 4,805,948 ) - ( 4,805,948 ) Stock compensation - issuance for services 57,512 6 - - - - 187,146 - - 187,152 Stock compensation - issuances to employees 267,370 27 - - - - 600,034 - - 600,061 Issuances of common stock 2,083,452 208 - - - - 4,283,772 - - 4,283,980 Common stock issuable - - 294,000 1,470,000 - - - - - 1,470,000 Foreign currency translation - - - - - - 21,091 21,091 Balance as of December 31, 2024 4,274,508 $ 428 294,000 $ 1,470,000 - $ - $ 22,674,095 $ ( 21,562,872 ) $ 21,091 $ 2,602,742 See accompanying notes to consolidated financial statements. F- 4 REBORN COFFEE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 4,805,948 ) $ ( 4,725,123 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Stock compensation 600,061 285,000 Stock issued for services 187,152 - Operating lease ( 64,180 ) 256,618 Depreciation 391,263 262,019 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable ( 10,371 ) ( 56,158 ) Decrease (increase) in inventories 15,446 ( 52,718 ) Decrease (increase) in other assets, net 124,035 ( 71,822 ) Increase (decrease) in accounts payable ( 53,218 ) 544,944 Increase (decrease) in accrued liabilities, net 163,536 378,237 Net cash used in operating activities ( 3,452,224 ) ( 3,179,003 ) Cash flows from investing activities: Acquisition of property and equipment ( 1,109,374 ) ( 2,413,257 ) Proceeds from disposal of assets 132,157 - Net cash used in investing activities ( 977,217 ) ( 2,413,257 ) Cash flows from financing activities: Proceeds from issuance of common stock 4,283,980 - Proceeds from common stock issuable 1,470,000 Repayent of borrowings from shareholder ( 100,000 ) - Proceeds frm loan payable to others ( 181,954 ) - Proceeds frm line of credit - 1,000,000 Repayent of loan payable, PPP ( 33,472 ) - Proceeds from loan payable to financial institutions - 1,784,628 Repayments of loan payable to financial institutions ( 1,015,199 ) ( 47,102 ) Net cash provided by financing activities 4,423,355 2,737,526 Net increase (decrease) in cash ( 6,086 ) ( 2,854,734 ) Cash at beginning of year 164,301 3,019,035 Cash at end of year $ 158,215 $ 164,301 Supplemental disclosures of non-cash investing and financing activities: Conversion of credit line to common stock issuances $ - $ 1,000,000 Supplemental disclosure of cash flow information: Cash paid during the years for: Interest $ 215,000 $ 129,000 Income taxes $ 800 $ 800 See accompanying notes to consolidated financial statements. F- 5 REBORN COFFEE, INC. AND SUBSIDIARIES NOTES TO 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 December 31, 2024. ● Reborn Realty, LLC (the “Reborn Realty”), a California limited liability corporation formed in March 2023, is an entity which acquired a real property located at 596 Apollo Street, Brea, California. ● Reborn Coffee Korea, Inc. (the “Reborn Korea”) – a Korea corporation located in Daejeon, South Korea formed in October 2023, is a wholly owned subsidiary of Reborn with one retail coffee store under the brand name of Reborn Coffee. ● Reborn Malaysia, Inc. (the “Reborn Malaysia”) – a Malaysian corporation located in Kuala Lumpur, Malaysia formed in October 2023, is majority owned subsidiary, with 60 % ownership, of Reborn with one retail coffee store under the brand name of Reborn Coffee. Reborn Coffee, Inc., Reborn Global Holdings, Inc., Reborn Coffee Franchise, LLC, Reborn Realty, LLC, Reborn Korea and Reborn Malaysia will be collectively referred as the “Company”. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Going Concern The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $ 21.6 million at December 31, 2024, and had a net loss of $ 4.8 million for the year ended December 31, 2024 and net cash used in operating activities of $ 3.5 million for the year ended December 31, 2024. These matters raise substantial doubt about the Company’s ability to continue as a going concern. To support its existing and planned business model, the Company needs to raise additional capital to fund our future operations. The Company has not experienced any difficulty in raising funds through loans, and has not experienced any liquidity problems in settling payables in the normal course of business and repaying loans when they fall due. Successful renewal of our loans, however, is subject to numerous risks and uncertainties. In addition, the increasingly competitive industry conditions under which we operate may negatively impacted our results of operations and cash flows. Additional financing is anticipated to fund the Company’s operations in near future. However, other than the ELOC Agreement and the Arena Debenture Transaction (as defined in Note 15 – Subsequent Events), there are no current agreements or understandings with regard to the form, time or amount of such financing and there is no assurance that any of this financing can be obtained or that the Company can continue as a going concern. F- 6 Reporting The consolidated financial statements include Reborn Coffee, Inc. and its wholly owned subsidiaries as of and for the years ended December 31, 2024 and 2023. Basis of Presentation and Consolidation The accompanying 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 subsidiaries. All intercompany accounts, transactions, and profits have been eliminated upon consolidation. Minority Interest Reborn owns 60 % of Reborn Malaysia located in Kuala Lumpur with one retail coffee store under the brand name of Reborn Coffee. For the year ended December 31, 2024, the minority interest was not material as the store in Malaysia opened in November 2023. Reverse Stock Split On January 12, 2024, the Company filed a Certificate of Amendment (the “Certificate of Amendment”) to the Company’s Certificate of Incorporation to effect a reverse stock split of its issued Common Stock in the ratio of 1-for-8 (the “Reverse Stock Split”). The Common Stock began trading on the Nasdaq Capital Market on a Reverse Stock Split-adjusted basis at the market open on Monday, January 22, 2024. As a result of the Reverse Stock Split, the total number of shares of common stock held by each shareholder was converted automatically into the number of whole shares of common stock equal to (i) the number of shares of common stock held by such shareholder immediately prior to the Reverse Split, divided by (ii) 8, and then rounded up to the nearest whole number. No fractional shares were issued, and no cash or other consideration was paid to any shareholder. Instead, the Company issued one whole share of the post-Reverse Stock Split common stock to any shareholder who otherwise would have received a fractional share as a result of the Reverse Stock Split. Except for the Company’s historical financial statements and unless otherwise stated, all option, share, and per share information gives effect to the Reverse Stock Split. 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 years ended December 31, 2024 and 2023. F- 7 The Company generates revenues from two geographic areas, consisting of North America and Asia. The following enterprise-wide disclosure is prepared on a basis consistent with the preparation of the consolidated financial statements. The following table contains certain financial information by geographic area: Years Ended December 31, 2024 2023 Net Sales: North America $ 5,668,402 $ 5,422,149 Asia 260,131 85,990 Total net sales $ 5,928,533 $ 5,508,139 December 31, 2024 2023 Long-lived asset, net: North America $ 3,352,911 $ 2,162,263 Asia 727,093 1,331,787 Total long-lived asset, net $ 4,080,004 $ 3,494,050 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. Foreign Currency Translations The Company has wholly owned subsidiaries in foreign countries, South Korea and Malaysia. Fluctuations in foreign currency impact the amount of total assets, liabilities, earnings and cash flows that the Company report for foreign subsidiaries upon the translation of these amounts into U.S. Dollars for, and as of the end of, each reporting period. In particular, the strengthening of the U.S. Dollar generally will reduce the reported amount of our foreign-denominated cash, cash equivalents, total revenues and total expense that we translate into U.S. Dollars and report in the Company’s consolidated financial statements for, and as of the end of, each reporting period. However, a majority of the Company’s consolidated revenue is denominated in U.S. Dollars, and therefore, the Company’s revenue is not directly subject to foreign currency risk. In accordance with FASB ASC 830, “Foreign Currency Matters”, when an operation has transactions denominated in a currency other than its functional currency, they are measured in the functional currency. Changes in the expected functional currency cash flows caused by changes in exchange rates are included in net income for the period. 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 96 % of the Company’s total revenue. F- 8 ● 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 4 % of the Company’s total revenue. ● Royalties and Other Fees Franchise revenues consists 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. Revenues from royalties and other fees were not material for the years ended December 31, 2024 and 2023. Cost of Sales Product, food and drink costs – stores and cost of sales – wholesale and online primarily include the costs of ingredients of food and beverage sold and related supplies used in customer service. The wholesale and online sales also include costs of packaging and shipping. Shipping and Handling Costs The Company incurred freight out costs, which are primarily included in the Company’s cost of sales – wholesale and online. Freight in costs, when attached to a specific purchase, are included as a component of the cost of the purchased goods and materials items and allocated to accounts in accordance with the nature of the goods. When the freight in costs are not allocable to an individual purchase or are more significant, they are recorded to a freight and shipping account within cost of sales. General and Administrative Expense General and administrative expense includes store-related expense as well as the Company’s corporate headquarters’ expenses. These include rent and utilities, payroll and benefits, and depreciation expenses. Advertising Expense Advertising costs are expensed as incurred. Advertising expenses amounted to $ 173,577 and $ 71,072 for the years ended December 31, 2024 and 2023, respectively, and is recorded under general and administrative expenses in the accompanying consolidated statements of operations. Pre-opening Costs Pre-opening costs for new stores consist primarily of payroll and recruiting expense, training, marketing, rent, travel, and supplies, and are expensed as incurred. 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 December 31, 2024 and 2023, allowance for doubtful accounts was zero . The Company does not have any off-balance sheet exposure related to its customers. F- 9 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 FASB Accounting Standards Codification, or 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 Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share (EPS) 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 did not have any dilutive shares for the years ended December 31, 2024 and 2023. 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 December 31, 2024 and 2023, the Company was not aware of any events or changes in circumstances that would indicate that the long-lived assets are impaired. F- 10 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 December 31, 2024 and 2023, 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. 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. The Company purchases from various vendors for its operations. For the years ended December 31, 2024 and 2023, 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 (“COVID-19”) pandemic has significantly impacted health and economic conditions throughout the United States and globally, as public concern about becoming ill with the virus has led to the issuance of recommendations and/or mandates from federal, state and local authorities to practice social distancing or self-quarantine. The Company is continually monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on operations, financial position, cash flows, inventory, supply chains, purchasing trends, customer payments, and the industry in general, in addition to the impact on its employees. We have experienced significant disruptions to our business due to the COVID-19 pandemic and related suggested and mandated social distancing and shelter-in-place orders. F- 11 Recent Accounting Pronouncement In June 2016, the FASB issued Accounting Standards Update 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 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 evaluated and concluded that no material effects of adopting the provisions of ASU No. 2016-13 on its consolidated financial statements. 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: December 31, 2024 2023 Furniture and equipment $ 1,365,937 $ 1,354,766 Leasehold improvement 632,516 622,516 Store construction 487,729 440,700 Store 2,991,571 2,082,554 Vehicle 103,645 103,645 Total property and equipment 5,581,398 4,604,181 Less accumulated depreciation ( 1,501,394 ) ( 1,110,131 ) Total property and equipment, net $ 4,080,004 $ 3,494,050 Depreciation expense on property and equipment amounted to approximately $ 391,263 and $ 262,000 for the years ended December 31, 2024 and 2023, respectively. F- 12 4. LOANS PAYABLE TO FINANCIAL INSITUTIONS Loans payable to financial institutions consisted of the following: December 31, 2024 2023 Loan agreements with principal amount of $ 960,777 and repayment rate of 14.75 % to 20.0 % for a total of $ 845,484 . The loans payable mature on various dates in 2025. $ 111,300 1,005,442 Loan agreement with principal amount of $ 140,954 with an interest rate of 30.0 % per annum with a maturity date on May 31, 2024 - 121,058 Total loan payable 111,300 1,126,499 Less: current portion ( 111,300 ) ( 791,352 ) Total loan payable, net of current $ - $ 335,147 5. LOAN PAYABLE TO OTHER Loans payable to others consisted of the following: December 31, 2024 2023 December 2023 - Loan agreement with principal amount of $ 300,000 and repayment rate of 5.5 % per annum. The loan payable matures in February 2024 $ - $ 300,000 June 2023 – Loan agreements with principal amount of $ 500,000 and repayment rate of 12.0 % per annum. The loans payable mature on various dates in 2025 234,509 309,027 April 2024 ($ 275,000 ) - Loan amount of $275,000 with total payback of $ 365,750 with monthly payment of $ 9,144 until fully paid 63,998 - November 2024 ($ 140,000 ) - Loan amount of $140,000 with total payback of $ 175,932 with monthly payment of $ 6,767 until fully paid 128,566 - Total loan payable to others 427,073 609,027 Less: current portion ( 427,073 ) ( 609,027 ) Total loan payable to others, net of current $ - $ - December 2023 - $ 300,000 On December 27, 2023, the Company entered into a short-term borrowing agreement with a private party for a principal amount of $ 300,000 with interest rate at 5.5 % per annum. The loan payable matures on February 2024 . 6. LOAN PAYABLE TO SHAREHOLDER Loans payable to shareholders consisted of the following: December 31, 2024 2023 Borrowings from shareholder and chairman of the Company, Farooq Arjomand, bearing no interest and due upon demand. $ - $ 100,000 Total loan payable - 100,000 Less: current portion - ( 100,000 ) Total loan payable, net of current $ - $ - In October 2023, the Company borrowed $ 100,000 from a shareholder and Chairman of the Company, Farooq M. Arjomand. The amount is due upon demand and bears no interest. F- 13 7. LOAN PAYABLE, EMERGENCY INJURY DISASTER LOAN (EIDL) Loans payable, Emergency Injury Disaster Loan (EIDL) consisted of the following: December 31, 2024 2023 May 16, 2020 ($ 150,000 ) - Loan agreement with principal amount of $150,00 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 ( 30,060 ) ( 30,060 ) Total loan payable, emergency injury disaster loan (EIDL), less current portion $ 469,940 $ 469,940 The following table provides future minimum payments: For the years ended December 31, Amount 2025 $ 30,060 2026 30,060 2027 30,060 2028 30,060 2029 30,060 Thereafter 349,700 Total $ 500,000 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 SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. As of December 31, 2022, the loan payable, Emergency Injury Disaster Loan 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 May 16, 2021 (twelve months from the date of the SBA Loan) 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, which was May 2022. 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”). F- 14 June 28, 2021 – $ 350,000 On June 28, 2021, the Company executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. As of December 31, 2022, the loan payable, Emergency Injury Disaster Loan noted above is not in default. Pursuant to that certain Amended Loan Authorization and Agreement (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 April 16, 2022 (twenty four months from the original date of the SBA Loan) in the amount of $ 2,505 . The balance of principal and interest is payable thirty years from the original date of the SBA Loan. 8. LOAN PAYABLE, PAYROLL PROTECTION LOAN PROGRAM (PPP) Loans payable, Payroll Protection Loan Program (PPP) consisted of the following: December 31, 2024 2023 Loan payable from Payroll protection program (PPP) $ 63,801 $ 97,273 Less - current portion ( 37,494 ) ( 45,678 ) Total loan payable, payroll protection program (PPP), less current portion $ 26,307 $ 51,595 The Paycheck Protection Program Loan (the “PPP Loan”) is administered by the U.S. Small Business Administration (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 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. F- 15 9. INCOME TAX Total income tax (benefit) expense consists of the following: For the Years Ended December 31, 2024 2023 Current provision (benefit): Federal $ - $ - State 800 7,828 Total current provision (benefit) 800 7,828 Deferred provision (benefit): Federal - - State - - Total deferred provision (benefit) - - Total tax provision (benefit) $ 800 $ 7,828 A reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows: December 31, 2024 2023 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 % and California state income taxes of 6.98 % due to the change in the valuation allowance. December 31, 2024 2023 Deferred tax assets: Net operating loss $ 9,461,884 $ 3,507,307 Other temporary differences - - Total deferred tax assets 9,461,884 3,507,307 Less – valuation allowance ( 9,461,884 ) ( 3,507,307 ) Total deferred tax assets, net of 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: As of December 31, 2024, the Company had available net operating loss carryovers of approximately $ 9.5 million. 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. F- 16 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 2018 and later and subject to California authorities for tax year ended 2017 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 December 31, 2024 and December 31, 2023, the Company has no accrued interest or penalties related to uncertain tax positions. As of December 31, 2024, the Company had cumulative net operating loss carryforwards for federal tax purposes of approximately $ 9.5 million. In addition, the Company had state tax net operating loss carryforwards of the same amount. The carryforwards may be applied against future taxable income and expires at various dates subject to certain limitations. 10. COMMITMENTS AND CONTINGENCIES Operating Leases The Company entered into the following operating facility leases: Brea (Corporate office) – On June 28, 2023, the Company entered into an operating facility lease for its corporate office located in Brea, California with term of 36 months at $ 21,500 per month. The lease started on July 2023 and expires in June 2029 . La Floresta – On July 25, 2016, the Company entered into an operating lease agreement for its store located at La Floresta Shopping Village in Brea, California, with a term of 60 months and an option to extend. The lease commenced in July 2016 and was initially set to expire in November 2024 . The lease has since been extended through November 30, 2029. 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 . Corona Del Mar - On January 18, 2023, the Company renewed its retail store in Corona Del Mar, 1California. As part of that lease renewal, the Company renewed the original operating lease with 60 months term with an option to extend. The lease expires in January 2028 . The monthly lease payment under the renewed lease agreement is approximately $ 5,001 . 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 a term of 60 months and an option to extend. The lease started in June 2021 and expires in May 2026. 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 started in March 2022 and expires in February 2027 . Huntington Beach - On October 7, 2022, the Company entered into an operating facility lease for its store located at Huntington Beach, California with a 124 months term with option to extend. The lease started in November 2021 and expires in February 2032 . 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 a term of 84 months and an option to extend. The lease started in April 2021 and expires in March 2028 . F- 17 Intersect in Irvine - On October 1, 2022 the Company entered into a percentage base lease agreement for the store located in Irvine, California with 9 months term with option to extend. The lease started in October 2022 and expires on December 31, 2023 with an execution of extension. The rate to be used is 10 % and it’s based on monthly gross sales. Diamond Bar – On March 20, 2023, the Company entered into an operating facility lease for its store located at Diamond Bar, California which matures on March 31, 2027 . The monthly lease payment under the lease agreement is approximately $ 5,900 . Anaheim - On March 3, 2023, the Company entered into an operating facility lease for its store located at Anaheim, California with 120 months term with option to extend. The lease started in March 2023 and expires in February 2033 . Pasadena – On December 1, 2024, the Company entered into an operating lease agreement for its store located in Pasadena, California. The lease has a term of 120 months ( 10 years), with an option to extend. The lease commenced on December 1, 2024 and is set to expire in December 2034 . Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives. Our variable lease payments primarily consist of maintenance and other operating expenses from our real estate leases. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components. The Company has elected to account for these lease and non-lease components as a single lease component. In accordance with ASC 842, the components of lease expense were as follows: Years ended December 31, 2024 2023 Operating lease expense $ 1,156,809 $ 1,315,541 Total lease expense $ 1,156,809 $ 1,315,541 In accordance with ASC 842, other information related to leases was as follows: Years ended December 31, 2024 2023 Operating cash flows from operating leases $ 1,102,901 $ 1,300,280 Cash paid for amounts included in the measurement of lease liabilities $ 1,102,901 $ 1,300,280 Weighted-average remaining lease term—operating leases Weighted-average discount rate—operating leases F- 18 In accordance with ASC 842, maturities of operating lease liabilities as of December 31, 2024 were as follows: Operating For the years ended December 31, Lease 2025 $ 1,076,410 2026 880,438 2027 411,647 2028 215,295 2029 207,623 Thereafter 911,122 Total undiscounted cash flows $ 3,702,536 Reconciliation of lease liabilities: Weighted-average remaining lease terms 5.1 years Weighted-average discount rate 9.8 % Present values $ 2,750,937 Lease liabilities—current 844,177 Lease liabilities—long-term 1,906,760 Lease liabilities—total $ 2,750,937 Difference between undiscounted and discounted cash flows $ 951,599 Contingencies The Company is subject to various legal proceedings from time to time as part of its business. As of December 31, 2024, 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. 11. 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 December 31, 2024 and 2023, no shares of our preferred stock had been designated any rights and we had no shares of preferred stock issued and outstanding. Issuance of Common Stock in Settlement of Antidilution Provisions In May 2018, the Company 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 (“IPO”), 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. F- 19 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 IPO, eliminating the one-year period following an IPO 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. Stock Compensation The Company issued a total of 100,000 shares of common stock to employees and consultants for compensation during 2023. These shares were valued at $ 2.85 per share for total stock-based compensation expense of $ 285,000 . These shares were fully vested at issuance and as such the related stock-based compensation was recognized immediately. The Company issued 57,512 shares of common stock to consultants for services during 2024. These shares were valued at trading value at the time of services completed and at the time of issuance and recorded as stock-based compensation of $ 187,152 for the year ended December 31, 2024. These shares were fully vested at issuance and as such the related stock-based compensation was recognized immediately. The Company issued 267,370 shares of common stock to employees for compensation during 2024. These shares were valued at trading value at the time of issuance and recorded as stock-based compensation of $ 600,061 for the year ended December 31, 2024. These shares were fully vested at issuance and as such the related stock-based compensation was recognized immediately. Common Stock Issuable The Company received $ 1,470,000 from three non-accredited investors who subscribed to 294,000 of common shares at the end of 2024 under the subscription agreement. These shares have not been registered and is recorded as common stock issuable as of December 31, 2024. Dividend policy Dividends are paid at the discretion of the Board of Directors. There were no dividends declared for the years ended December 31, 2024 and 2023, respectively. 12. 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: Years Ended December 31, 2024 2023 Net Loss $ ( 4,805,948 ) $ ( 4,725,123 ) Weighted Average Shares of Common Stock Outstanding Basic 2,896,960 1,652,034 Diluted 2,896,960 1,652,034 Earnings Per Share - Basic Basic $ ( 1.66 ) $ ( 2.86 ) Diluted $ ( 1.66 ) $ ( 2.86 ) 13. RELATED PARTY TRANSACTIONS The Company had the following related party transactions: ● In October 2023, the Company borrowed $ 100,000 from a shareholder and Chairman of the Company, Farooq M. Arjomand. The amount is due upon demand and bears no interest. ● In June 2023, the Company entered into a facility lease agreement for corporate office located in Brea, California with DRE, Inc., a company owned by the Board of Director of the Company. The lease has 60 months term and expires in June 2029 . F- 20 ● On January 10, 2024, the Company entered into a securities subscription agreement with Farooq M. Arjomand, the Chairman of the Company’s Board of Directors. Pursuant to the securities subscription agreement, the Company offered and sold to Mr. Arjomand a total of 1,666,667 shares of the Company’s common stock at a purchase price of $ 0.60 per share, for aggregate gross proceeds of approximately $ 1 million. 14. SUBSEQUENT EVENTS The Company evaluated all events or transactions that occurred after December 31, 2024 up through the date the consolidated financial statements were available to be issued. Based upon the evaluation, except as disclosed below or within the footnotes, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements as of and for the year ended December 31, 2024 except as follows: ● On January 6, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”), pursuant to which the Company issued and sold to the Investor a promissory note (the “Note”) in the original principal amount of $ 121,900 . The Investor paid a purchase price of $ 106,000 to the Company for the Note. The Note incurred a one-time interest charge of 14 %, applied on the date of issuance to the principal amount; provided, however, that the Note will also bear interest at a rate of 22 % per annum if any amount thereunder is not paid when due. Beginning on July 15, 2025, the Company is required to make a payment of $ 69,483 on the Note, and continuing on the same day of each successive calendar month thereafter, the Company is required to make installment payments on the Note of $ 17,370.75 until it is fully repaid or the Investor has converted the outstanding balance into shares of the Company’s common stock. At any time after the occurrence of an event of default, subject to certain ownership limitations, the Investor may convert any portion of the outstanding and unpaid principal, interest, or other amounts outstanding under the Note into common stock at a price equal to 75 % of the lowest trading price of the common stock on Nasdaq during the ten trading days prior to the conversion. ● On February 6, 2025, Reborn Coffee, Inc. (the “Company”) entered into a Securities Purchase Agreement (“Securities Purchase Agreement”) with the purchasers named therein (the “Arena Investors”). Under the Securities Purchase Agreement, the Company will issue 10 % original issue discount secured convertible debentures (“Debentures”) in a principal amount of up to $ 10,000,000 , divided into up to four separate tranches that are each subject to certain closing conditions (the “Offering”). The conversion price per share of each Debenture, subject to adjustment as provided therein, is equal to 92.5 % of the lowest daily VWAP (as defined in the Debentures) of the Company’s shares of common stock, par value $ 0.0001 per share (“Common Stock”) during the five trading day period ending on the trading day immediately prior to delivery or deemed delivery of the applicable Conversion Notice (as defined in the Debentures). The Debentures accrue interest at a rate of 10 % per annum paid in kind, unless there is an event of default in which case the Debentures will accrue interest at a default rate. Upon the consummation of the closing of each tranche, the Company will also issue common stock purchase warrants (“Warrants”) to each Arena Investor who participates in such closing. The Warrants will: (i) provide for the purchase by the applicable Arena Investor of a number of shares of Common Stock equal to 20 % of the total principal amount of the related Debenture purchased by the Arena Investor on the applicable closing date divided by 92.5 % of the lowest daily VWAP of Common Stock for the five consecutive trading day period ended on the last trading day immediately preceding such closing date and (ii) be exercisable at an exercise price equal to 92.5 % of the average of the lowest daily VWAP of the Common Stock over the consecutive trading days immediately preceding the delivery of the applicable Notice of Exercise (as defined in the Warrants). The closing of the first tranche was consummated on February 11, 2025 (the “First Closing”) and the Company issued to the Arena Investors Debentures in an aggregate principal amount of $ 555,555 (the “First Closing Debentures”). The First Closing Debentures were sold to the Arena Investors for a purchase price of $ 500,000 , representing an original issue discount of ten percent ( 10 %). The Company also issued to the Arena Investors 111,111 Warrants in connection with the First Closing (the “First Closing Warrants’). The closing of the second tranche was consummated on February 26, 2025 (the “Second Closing”) and the Company issued to the Arena Investors Debentures in an aggregate principal amount of $ 1,111,111 (the “Second Closing Debentures”). The Second Closing Debentures were sold to the Arena Investors for a purchase price of $ 1,000,000 , representing an original issue discount of ten percent ( 10 %). The Company also issued to the Arena Investors 52,283 Warrants in connection with the Second Closing (the “Second Closing Warrants’). The closing of the third tranche was consummated on March 28, 2025 (the “Third Closing”) and the Company issued to the Arena Investors Debentures in an aggregate principal amount of $ 1,666,667 (the “Third Closing Debentures”). The Third Closing Debentures were sold to the Arena Investors for a purchase price of $ 1,500,000 , representing an original issue discount of ten percent ( 10 %). The Company also issued to the Arena Investors 91,076 Warrants in connection with the Third Closing (the “Third Closing Warrants’). ● On March 14, 2025, Reborn Coffee, Inc., (the “Company”) and Bbang Ssaem Co. Ltd. (d/b/a Bbang Ssaem Bakery Café Korea) (“Bakery”) reached an agreement to rescind (the “Recission”) that certain share purchase (the “Agreement”) dated November 6, 2024. The material terms of such Agreement were disclosed in the current report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 2, 2025. As a result of such Recission, the Agreement is deemed void from the beginning. F- 21 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities 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 March 31, 2025 Jay Kim ( Principal Executive Officer ) /s/ Stephan Kim Chief Financial Officer March 31, 2025 Stephan Kim ( Principal Financial and Accounting Officer ) Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Jay Kim Chief Executive Officer March 31, 2025 Jay Kim (Principal Executive Officer) /s/ Stephan Kim Chief Financial Officer March 31, 2025 Stephan Kim (Principal Financial and Accounting Officer) /s/ Farooq M. Arjomand Chairman of the Board of Directors March 31, 2025 Farooq M. Arjomand /s/ Dennis R. Egidi Director March 31, 2025 Dennis R. Egidi /s/ Sehan Kim Director March 31, 2025 Sehan Kim /s/ Andy Nasim Director March 31, 2025 Andy Nasim /s/ Jennifer Tan Director March 31, 2025 Jennifer Tan 61