Business Context and Reporting Period
Company: Reborn Coffee, Inc. (REBN)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: Reborn Coffee operates specialty coffee retail locations and kiosks, primarily in Southern California, with one international location in Malaysia. The company differentiates itself through a proprietary "Reborn Wash Process" using magnetized water. In 2025, the company expanded into logistics services via a 51% owned subsidiary, Reborn Logistics, Inc., and recognized license income. As of December 31, 2025, the company operated 10 locations (9 in California, 1 in Malaysia).
Key Financial Metrics
| Metric | 2025 | 2024 |
|---|---|---|
| Total Net Revenues | $8,094,628 | $5,928,533 |
| Net Loss | $(9,007,091) | $(4,805,948) |
| Loss Per Share (Basic & Diluted) | $(1.73) | $(1.66) |
| Cash and Cash Equivalents (Year End) | $2,594,716 | $158,215 |
| Net Cash Used in Operating Activities | $(6,505,426) | $(3,452,224) |
| Accumulated Deficit | $(30,704,112) | $(21,562,872) |
| Total Debt (Convertible & Other) | ~$4.1M (Convertible) + $0.5M (Other) | ~$0.6M (Other) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 36.5% to $8.1 million, driven by the launch of Reborn Logistics (Service Income: $929k) and new License Income ($1.1M). However, Wholesale and Online revenue declined 68.0% to $114k.
- Operating Expenses: Total operating costs rose 31.7% to $13.9 million. Professional fees increased 134.5% to $1.6 million due to legal and accounting services related to convertible debt and equity activities. Stock compensation expense increased 88.6% to $1.5 million.
- Non-Operating Items: Significant non-cash charges impacted the bottom line, including a $1.6 million asset impairment loss (primarily related to Korea and Malaysia subsidiaries), $1.1 million in debt discount amortization, and a $723k loss on debt extinguishment.
- Liquidity: Cash balances improved significantly from $158k to $2.6 million, primarily due to $11.9 million in financing activities (issuance of common stock and convertible debt).
Guidance, Outlook, Risks, and Contingencies
- Going Concern: The independent auditor has included a "going concern" explanatory paragraph due to recurring losses and an accumulated deficit of $30.7 million. Management plans to mitigate this through debt restructuring, equity financing, and an Equity Line of Credit (ELOC).
- Debt Restructuring: Subsequent to year-end (March/April 2026), the company entered into a Forbearance Agreement with convertible debenture holders (Arena Investors) to establish a repayment plan through September 30, 2026, alleviating immediate default risk.
- Capital Resources: The company has an ELOC agreement allowing for up to $50 million in equity sales, though no drawdowns had occurred as of the filing date. Additional financing is required to fund operations.
- Internal Controls: Management concluded that disclosure controls and internal controls over financial reporting were ineffective as of December 31, 2025, citing inadequate accounting resources and lack of segregation of duties.
- Franchising: The company plans to begin franchise sales in 2026 but currently has no franchisees.
Investor Verification Checklist
- Going Concern Status: Verify the company's ability to secure additional funding beyond the current ELOC and forbearance agreements to sustain operations.
- Debt Obligations: Review the terms of the Forbearance Agreement with Arena Investors and the repayment schedule for the $4.1 million in convertible debentures.
- Internal Control Remediation: Assess the timeline and cost for remedying the material weaknesses in internal controls over financial reporting.
- Asset Impairment: Confirm the valuation and future viability of the Korea and Malaysia subsidiaries following the $1.6 million impairment charge.
- Revenue Concentration: Monitor the sustainability of the new Logistics and License revenue streams, as core Wholesale/Online revenue declined significantly.