Reborn Coffee, Inc. (REBN) - 10-Q Summary for Period Ended September 30, 2025
Business Context and Reporting Period
This is a Quarterly Report on Form 10-Q for Reborn Coffee, Inc., a specialty coffee roaster and retailer operating primarily in California with international locations in South Korea and Malaysia. The reporting period covers the three and nine months ended September 30, 2025. The Company is classified as a smaller reporting company and a non-accelerated filer. As of November 19, 2025, there were 5,976,322 shares of common stock outstanding.
Key Financial Metrics
| Metric | Three Months Ended Sept 30, 2025 | Nine Months Ended Sept 30, 2025 |
|---|---|---|
| Total Net Revenues | $1,356,609 | $4,884,662 |
| Net Loss | $(3,449,693) | $(10,980,889) |
| Loss Per Share (Basic & Diluted) | $(0.68) | $(2.16) |
| Cash and Cash Equivalents | $44,045 | $44,045 (Ending Balance) |
| Net Cash Used in Operating Activities | N/A | $(4,794,712) |
| Total Assets | $6,198,248 | $6,198,248 |
| Total Liabilities | $9,620,143 | $9,620,143 |
| Stockholders' Equity (Deficit) | $(3,421,895) | $(3,421,895) |
Debt and Liquidity: The Company holds significant debt obligations, including $1,253,086 in convertible debt (net of discount), $449,027 in loans payable to others, and $500,000 in EIDL loans. A derivative liability of $3,768,692 is recorded on the balance sheet related to convertible notes. Cash on hand is critically low at $44,045.
Material Changes vs. Prior Period
- Revenue Growth: Total net revenues increased 7.8% for the three months and 17.7% for the nine months compared to the prior year periods. This growth was primarily driven by new license income of $100,000 per quarter, which was $0 in the prior year.
- Expense Surge: Operating costs and expenses increased significantly. For the nine months ended Sept 30, 2025, total operating expenses rose 98.4% to $14.0 million compared to $7.1 million in the prior year. This was largely due to $3.99 million in stock compensation expense (non-existent in the prior year) and a 101.5% increase in professional fees.
- Widening Losses: Net loss for the nine months ended Sept 30, 2025, was $10.98 million, a 262.8% increase compared to the $3.03 million loss in the same period in 2024. The loss was exacerbated by interest expense (including amortization of debt discount) totaling $1.42 million and a $434,475 asset impairment loss.
- Balance Sheet Deterioration: The Company moved from positive stockholders' equity of $2.6 million at year-end 2024 to a deficit of $3.4 million as of September 30, 2025.
Guidance, Outlook, Risks, and Unusual Items
- Going Concern Warning: Management has expressed substantial doubt about the Company's ability to continue as a going concern due to recurring losses, negative cash flows, and an accumulated deficit of $32.5 million. The financial statements do not include adjustments that might result from the outcome of this uncertainty.
- Capital Raising: The Company intends to raise additional funds through equity and/or debt offerings. Subsequent to the reporting period, the Company entered into agreements to sell approximately 4.6 million shares of common stock for a total of $7.0 million in gross proceeds (October and November 2025).
- Convertible Debt: In early 2025, the Company issued $3.75 million in principal amount of 10% OID secured convertible debentures. These instruments created a significant derivative liability ($3.77 million) due to conversion features with no explicit share limit.
- Internal Controls: Management concluded that disclosure controls and procedures were ineffective as of September 30, 2025, citing material weaknesses related to inadequate accounting resources and lack of segregation of duties.
- Unusual Items: The period included a $434,475 asset impairment loss and a $200,333 loss on debt extinguishment.
Investor Verification Checklist
- Liquidity Runway: Verify the status of the $7.0 million in subsequent equity subscriptions and whether funds have been received to cover the $44,045 cash balance and immediate debt obligations.
- Derivative Liability Impact: Assess the volatility risk associated with the $3.77 million derivative liability and its potential to further erode equity if stock prices fluctuate.
- Debt Covenants: Review the terms of the $3.75 million convertible debentures and other loans for potential default triggers given the current loss position.
- Revenue Quality: Analyze the sustainability of the new $100,000 quarterly license revenue stream versus the decline in wholesale/online revenue.
- Internal Control Remediation: Evaluate the plan to address the material weaknesses in internal controls over financial reporting.