10-K/A: Reborn Coffee Files Amended 10-K After Accounting Firm Change, Cites Immaterial Adjustments

Reborn Coffee, Inc. has filed an amended 10-K report to reflect immaterial changes to its financial statements and a change in its independent auditor.

Summary

• Reborn Coffee, Inc. filed an amendment to its annual report on Form 10-K to correct immaterial errors in its 2023 and 2022 financial statements.
• The amendment also replaces the audit report from BF Borgers CPA PC with one from BCRG Group.
• The company's principal executive and financial officers have provided new certifications in connection with this amendment.
• Reborn Coffee reported a revenue of approximately $5.5 million in 2023, compared to $3.2 million in 2022.
• The company's net loss was approximately $4.7 million in 2023 and $3.6 million in 2022.
• Adjusted EBITDA was approximately -$4.3 million in 2023 and -$3.3 million in 2022.
• The company had 14 company-operated locations as of December 31, 2023, with an average unit volume (AUV) of approximately $458,000.
• Reborn Coffee plans to expand to over 20 corporate-owned and 20 franchised locations by the end of 2024.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While revenue is growing, the company is still experiencing significant losses and has a going concern warning. The change in auditors and Nasdaq non-compliance notice add to the negative sentiment. The potential for future growth is present, but the current financial situation is concerning.

Positives

• The company experienced a significant increase in revenue from $3.2 million in 2022 to $5.5 million in 2023.
• Reborn Coffee is actively expanding its retail footprint with plans to open more locations.
• The company is developing a franchise program to further accelerate growth.
• Reborn Coffee is innovating in the coffee industry with unique processes and products.

Negatives

• The company incurred a net loss of $4.7 million in 2023.
• The company's adjusted EBITDA was negative at -$4.3 million in 2023.
• The company has a history of operating losses and negative cash flow.
• The report includes a going concern uncertainty explanatory paragraph from the independent auditor.

Risks

• The company has incurred recurring losses and may not be profitable in the future.
• Evolving consumer preferences and tastes may adversely affect the business.
• The company faces intense competition from other coffee locations and delivery options.
• Failure to manage growth effectively could harm the business.
• The company is dependent on information technology and is vulnerable to cyber security breaches.
• Pandemics or disease outbreaks such as COVID-19 may continue to affect the business.
• The company is not in compliance with Nasdaq continued listing requirements.
• The company's stock price may be volatile.

Future Outlook

Reborn Coffee plans to expand to over 20 corporate-owned and 20 franchised locations by the end of 2024. The company also aims to grow its B2B sales and explore partnerships with grocery operators and foodservice providers.

Management Comments

• Jay Kim, CEO, launched Reborn Coffee with the vision to provide the best coffee using the purest ingredients.
• Jay Kim is focused on the expansion of Reborn and has surrounded himself with leaders with direct experience in beverage and retail.

Industry Context

The document notes that the retail coffee market in the US is large and growing, with an expected value of $48.7 billion in 2023. This growth is driven by a shift in consumer preferences to premium coffee, including specialized blends, espresso-based beverages, and cold brew options. Reborn aims to capture a growing portion of this market.

Comparison to Industry Standards

• The document mentions IBIS data indicating a $48.7 billion retail coffee market in the US in 2023, suggesting Reborn is operating in a large and growing sector.
• The company's AUV of $458,000 is a key metric, but the document does not provide specific comparisons to industry benchmarks for similar specialty coffee chains.
• The document highlights Reborn's focus on the 'Fourth Wave' of coffee, emphasizing innovation and quality, which is a differentiator from more traditional coffee chains.
• The company's negative EBITDA and net loss margins indicate that it is not yet operating at a profitable level, which is not uncommon for a high-growth company in its early stages.

Related Party Transactions

• The company borrowed $100,000 from the shareholder and Chairman of the Company, Farooq M. Arjomand.
• The company entered into a facility lease agreement with DRE, Inc., a company owned by a Board of Director of the Company.

Stakeholder Impact

• Shareholders face the risk of further dilution due to potential capital raises.
• Employees may be affected by the company's financial instability and potential restructuring.
• Customers may be impacted by store closures and changes in service.
• Suppliers and creditors may face increased risk due to the company's financial challenges.

Next Steps

• The company plans to expand to over 20 corporate-owned and 20 franchised locations by the end of 2024.
• Reborn Coffee aims to grow its B2B marketing and sales strategy.
• The company is exploring partnerships with grocery operators and foodservice providers.
• The company is working to resolve the Nasdaq non-compliance issue.

Key Dates

Keywords

Reborn Coffee, Financial Results, Retail Expansion, Franchise Operations, Specialty Coffee, Auditor Change, Going Concern, EBITDA, Revenue Growth, Net Loss