Company Overview
We are a wholesale specialty coffee roasting and manufacturing company based in the Fruitvale District of Oakland, CA. We build relationships with farmers producing some of the highest quality coffee in the world, roast it in Oakland, and sell it to retail outlets such as restaurants, grocery markets, and offices. We also have a social mission of providing job training and employment opportunities to members of marginalized communities such as the formerly incarcerated, disabled, and people of color.

The composition of the company’s revenue is as follows:
Wholesale coffee sales: 93.8%

Retail coffee sales: 0.4%

Catering/ Special Events: 5.8%


Our Primary revenue streams are described as:
Wholesale coffee: We buy coffee from an importer that supplies the initial product, we then roast and produce the coffee. We then sell the coffee to various cafes, retail markets and office buildings at a discounted (wholesale) price. These companies then sell the coffee at a retail price.


Retail coffee: We buy the initial coffee (green coffee), roast and produce the finished product, then sell directly to the consumer via our website or various other retail locations.


Catering/ Special Events: We cater events, conferences and parties. In addition, we rent portions of our warehouse space for events, conferences or parties.


Milestones:

Our company was originally founded in August 2013 with the purpose of roasting and wholesaling coffee. As we have grown in that time we have accomplished the following milestones:

We have moved our location from a basement in a house to a warehouse in the fruitvale district.

We have partnered with such companies like: Uber, Salesforce, Twitter, IDEO and have established a permanent position in their coffee supplier rotation.

We have successfully opened a retail location in downtown oakland which employs an employee profit sharing model, where the parent company deploys all profits after expenses to the employees who work at the retail location.





General trends:

As we have expanded our capacity, availability and capabilities, particularly our wholesale capacity, our growth has gradually accelerated. Our total revenue for 2015 was $460,217.53. As of 6/24/16 our current revenue for the year is $322,668.77. Our cost of goods expense has decreased from 49% of sales in 2015 to 40% of sales in 2016.

Expectations for the near future:

Our company is expected to grow in the near future. Since January 2016, our sales have increased from $35,000.00 per month to $70,000.00 per month in May 2016. We expect to continue to grow our business. Although there is no guarantee that our historical results or cash flows (as described below and in our financial statements) will continue to develop in the same way as they have in the past few years, we expect to continue our growth in the coming years. Nonetheless, it may be years before Investors see a return on their investment, if they do at all.

Trends and uncertainties that could affect the company’s financial condition:

The following trends or uncertainties could affect our financial condition, including the liquidity, cash flow and capital resources described below:

As we have witnessed already, some larger clients have accounts payable departments that are harder to contact and produce a payment from. For a small business such as ours, accounts receivables is a major part of our cash flow and can have a much more dramatic effect when it is not received in a timely manner. Luckily, our vendors are committed to working with us and supporting our growth in such times.

The price and availability of our raw product (coffee), can vary pretty significantly over time and region. This risk is mitigated by multiple relationships with coffee farmers and diversified product lines. We currently feature 13 different coffee’s (single origin and blends) and are always working to produce more.

Our business is comprised of over 50 accounts but 5 of those accounts represent more than 50% of current sales. Should we lose any of those accounts our company would experience a significant loss in sales and cash flow. We work tirelessly to improve and expand our account management to reduce the risk of losing such accounts. In addition, a part of our sales strategy is to diversify the types of accounts, as well increasing the number of accounts to produce a more even revenue distribution.

We anticipate using the proceeds from this funding for our working capital needs until we reach profitability. Based on current sales and cash flow growth trends, we are forecasting profitability no later than December 2016.


Trends over time in cash flow:

From January 2015 - May 2015 our average cash inflow was $23,803.54 per month and average sales per month were $26,893.61. From January 2016 - May 2016 our average cash inflow was $45,415.25 per month and average sales per month were $53,241.62. While our cash inflow is steadily increasing on an annual basis the relative percentage of cash inflow to sales has decreased from 88.5% to 85.3%. This can be explained by the increasing difficulty of collecting on accounts receivables, thus providing a need for additional working capital.

Significant components of the company’s cash flow:

Our operations are financed through various sources:
Revenue and corresponding receivables

Capital advances through Point of Sale processing companies

Senior Loans

Convertible Notes

Revolving Credit lines


The proceeds of this offering will enable the business to continue to pursue its main activities and are necessary to our viability.

Description of those components:

Revenue and corresponding receivables: Sales attained by the company.

Capital advances: Square, a point of sale processing company, has provided numerous capital advances. These advances are assessed a fixed interest rate and recouped through a percentage of our credit card receivables. The amount of time to return the money is determined solely through the amount of credit card receivables.

Both Fund Good Jobs and Pacific Community Ventures have contributed $200,000.00 each in a senior loan. Both loans are assessed an 8% interest payable over 30 months beginning November 2015.

A number of investors have invested in convertible notes ranging between $25,000 and $100,000.



Net cash provided by operating activities was $361,397.29 for the year ended 6/25/16, which was driven by Net Income made with the following adjustments: Accounts Receivables, Loans to other organizations, Container used for retail location, Accounts Payable, Capital advance, Intuit Line of credit, Home Depot line of credit Paypal Credit, payroll liabilities.

Net cash provided by operating activities was $205,069.24 for the year ended 12/31/15, which was driven by Net Income made with the following adjustments:Accounts Receivables, Loans to other organizations, Container used for retail location, Accounts Payable, Capital advance, Intuit Line of credit, Home Depot line of credit Paypal Credit, payroll liabilities, loan fees, Delivery bike, Warehouse security deposit, Interest payable, Current liabilities.

Capital Resources. We have financed our operations through issuances of convertible debt and other debt securities, internally generated positive cash flow, borrowings under asset-based lines of credit, short- and/or long-term notes payable.

Asset-based senior credit facility. We have a revolving loan facility with Intuit, which we refer to herein as our senior credit facility, under which we are permitted to borrow up to 60,000. Often, we are required to pay our vendors faster than we collect those amounts from customers. As a result, during periods of increasing transaction volume, our cash used in the operations from those solutions exceeds our cash flows from those operations.

The senior credit facility expires in 11/23/16. Interest on borrowings under the senior credit facility accrues at 5 percent. As of June 24, 2016 the amount of available borrowings based on our eligible receivables was $60,000 of which $50,000 was outstanding.

The senior credit facility contains customary conditions to borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness, grant liens, make distributions to holders of our equity interests or make investments. We were in compliance with such covenants as of June 24, 2016.

Senior Debt/Convertible Debt. We have senior debt from Fund Good Jobs and Pacific Community Ventures which we refer to herein as our senior debt, under which we have borrowed $400,000.00.

The senior debt for both organizations expires in 11/01/20. Interest on borrowings under the senior credit facility accrues at 8 percent.

The senior debt contains customary conditions to borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness, grant liens, make distributions to holders of our equity interests or make investments. We were in compliance with such covenants as of June 24, 2016.

We have Convertible debt from Fund Good Jobs, Akonadi foundation, Mike Ghielmetti, Delaney Jordan Investments and Coffee and Company which we refer to herein as our convertible debt, under which we have borrowed $375,000.00

The convertible debt expires 11/1/17 for Fund Good Jobs, 11/17/20 for Akonadi Foundation, 9/24/17 for Delaney Jordan Investments, 5/4/18 for Mike Ghielmetti, 12/30/17 for Coffee and Company. Interest on the borrowings under the convertible debt for Fund Good Jobs accrues at 10 percent.

The convertible debt contains customary conditions to borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness, grant liens, make distributions to holders of our equity interests or make investments. We were in compliance with such covenants as of June 24, 2016.

Historical Results of Operations. Our total revenue increased by $200,236.80, or 116%, from the prior year-to-date ending 6/25/15 to $372,668.77 in the year-to-date ending 6/25/16. This increase was primarily driven by wholesale coffee sales, which increased by 75.6% from the prior year.

We expect our revenue to grow at increasing rates in the current fiscal year and in the coming few fiscal years, due to an increase in sales staff concentrating on wholesale accounts which comprise more than 90% of all revenue.

Red Bay Coffee has experienced significant amounts of growth over the years. A comparison of January 2015 - May 2015 versus January 2016 - May 2016 will show an increase in sales by 116%. The relative Cost of Goods for each section of referenced revenue has decreased from 49% of sales in 2015 to 40% of sales in 2016 year-to-date. Our expenses have increased dramatically as a result of initial funding we received September-November 2015 of $625,000.00. This funding allowed us to attain a roasting facility, roasting equipment and open a retail location. We have also more than doubled our payroll to cope with production demands and a growing need for more sales and account managing focus. Since April 2016, our sales have increased by more than $10,000.00 per month. We are currently experiencing a net loss per month which is decreasing every month with increasing sales. This net loss is in large part due to the number of capital expenditures we’ve had to make in our pursuit of growth. The large influx of sales from 2015 to 2016 is directly representative of increasing our staff in the sales and account managing departments and that is a direction we will continue to grow in. We offer very competitive wages, which makes payroll our largest expense. Until our sales and subsequent cash flow have caught up with our expenses, we are seeking additional revenue for the purposes of working capital. While 116% is an exorbitant amount of growth, we do feel that it’s indicative of our company’s general direction.