Reborn Coffee, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report; it does not provide standalone fourth-quarter results. Reborn operates specialty-coffee retail stores and sells wholesale and online products. Its 14 company-operated locations at year-end were all in California; it had no franchisees.
Financial performance and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $5.954 million | $3.241 million |
| Operating loss | $3.878 million | $3.541 million |
| Net loss | $3.998 million | $3.555 million |
| Net loss per share | $0.30 | $0.29 |
| Cash used in operating activities | $2.791 million | $3.297 million |
| Cash used in investing activities | $1.019 million | $0.682 million |
| Cash provided by financing activities | $1.468 million | $6.093 million |
- Stores generated $5.713 million of revenue; wholesale and online sales contributed $241,356. Retail is the dominant channel.
- Operating margin was -65.1%; net loss margin was approximately -67.1%. Adjusted EBITDA, a non-GAAP measure, was a loss of $3.633 million, or -61.0% of revenue.
- Cash and cash equivalents fell to $676,448 from $3.019 million. Total assets were $9.000 million; total liabilities were $7.427 million and stockholders’ equity was $1.574 million. Current liabilities exceeded current assets by approximately $1.349 million.
- Year-end borrowings included $1.127 million of loans payable to financial institutions, $500,000 of EIDL debt, $97,273 of PPP debt and a $300,000 short-term private-party loan. Operating lease liabilities totaled $4.405 million. The risk discussion also refers to $100,000 of shareholder borrowing; its balance-sheet presentation is unclear.
Changes versus FY2022
- Revenue increased by $2.713 million. The filing states growth of 45.6%, but the reported revenue totals imply growth of approximately 83.7%; the discrepancy should be checked.
- Store product, food and drink costs increased 37.9% to $1.758 million; general and administrative expenses increased 28.9% to $7.968 million, with higher occupancy and labor costs cited as drivers.
- Net loss widened by approximately $443,000, while operating cash use declined by approximately $506,000. Cash nevertheless declined substantially, and financing cash inflows were far below 2022, when the IPO generated most financing proceeds.
Outlook, risks and unusual items
- Management described plans to begin franchise sales in 2024 and targeted more than 20 company-operated locations and 10 franchised locations by year-end 2024. There were no franchisees at December 31, 2023. These are plans, not reported results or assurances.
- The auditor’s report includes a going-concern uncertainty paragraph. Recurring losses, $2.791 million of operating cash outflow and a $16.029 million accumulated deficit raise substantial doubt about the company’s ability to continue as a going concern. Management says additional capital is needed; anticipated debt financing had no agreement or committed amount disclosed.
- Liquidity and financing risks include low cash, loan-renewal uncertainty and debt obligations. The filing also describes a February 2024 $1.1 million pre-paid advance sold at 90% of face value, with variable-price share issuance and potential dilution; specified amortization events could require a $500,000 cash payment plus interest and a 10% redemption premium.
- Nasdaq compliance was at risk for bid-price, stockholders’ equity and annual-meeting requirements. The company reported completing a 1-for-8 reverse split in January 2024 and receiving a conditional listing extension through March 29, 2024; continued compliance was not assured.
- Subsequent events disclosed include March 2024 closures of stores in Irvine, Cabazon and San Francisco. The filing identifies California concentration, coffee and other input costs, labor, competition, leases, growth execution and cybersecurity as material risks.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end, citing inadequate accounting resources and lack of segregation of duties. The auditor did not express an opinion on control effectiveness.
- The filing reports no legal proceeding expected to have a material adverse effect. It reports a $16,955 gain on sale of a building and $285,000 of stock-based compensation for services.
Investor facts to verify
- Reconcile the stated 45.6% revenue growth with the reported revenue figures, which imply approximately 83.7%.
- Confirm the complete and current debt schedule, especially the shareholder borrowing referenced in the risk discussion, and the terms and share issuance mechanics of the 2024 pre-paid advance.
- Check subsequent cash, financing, store openings and closures, franchise sales, and progress toward management’s 2024 expansion targets.
- Verify current Nasdaq listing status and remediation of the identified internal-control weaknesses.
- Note that the filing’s risk discussion cites a $15.3 million accumulated deficit, while the audited balance sheet and notes report $16.029 million at December 31, 2023.