Reborn Coffee, Inc. (REBN) - Q2 2025 10-Q Summary
Business Context and Reporting Period
This summary covers the quarterly period ended June 30, 2025. Reborn Coffee, Inc. operates specialty coffee retail stores, wholesale distribution, and online sales, with locations in California, South Korea, and Malaysia. The company is classified as a smaller reporting company and a non-accelerated filer. As of August 11, 2025, there were 5,409,716 shares of common stock outstanding.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 |
|---|---|---|
| Total Net Revenues | $3,528,053 | $2,890,963 |
| Net Loss | $(7,531,196) | $(2,307,156) |
| Loss Per Share (Basic & Diluted) | $(1.60) | $(1.05) |
| Cash and Cash Equivalents (End of Period) | $77,866 | $617,051 |
| Net Cash Used in Operating Activities | $(3,173,328) | $(2,895,711) |
| Total Liabilities | $8,283,932 | $5,186,381 |
| Stockholders' Equity (Deficit) | $(1,905,022) | $2,602,742 |
Material Changes vs. Prior Period
- Revenue Growth: Total net revenues increased by 22.0% ($637,090) year-over-year, driven primarily by a 30.9% increase in store revenues. However, wholesale and online revenues declined by 82.7%.
- Expense Surge: Operating costs and expenses rose 89.2% to $9.6 million. This was largely due to a new $2.67 million stock compensation expense (non-cash) and a 134.9% increase in professional fees related to Form S-1 filings.
- Non-Operating Items: Significant non-operating expenses included $850,710 in interest expense, $421,969 in asset impairment loss, and $189,701 in derivative expense. A $75,000 gain on the sale of property partially offset these costs.
- Liquidity Deterioration: Cash balances dropped from $158,215 at year-end 2024 to $77,866 at June 30, 2025. The company moved from a positive equity position to a deficit of approximately $1.9 million.
- Debt Structure: The company issued $3.33 million in principal amount of convertible debentures during the period, resulting in a $2.99 million derivative liability on the balance sheet.
Guidance, Outlook, and Risks
- Going Concern Warning: Management has expressed substantial doubt about the company's ability to continue as a going concern due to recurring losses, an accumulated deficit of $29.1 million, and negative cash flows. Continued operations depend on raising additional capital through equity or debt offerings.
- Financing Activity: The company entered into a Securities Purchase Agreement for up to $10 million in convertible debentures. Three tranches totaling $3.33 million were closed by June 30, 2025. A fourth tranche of $833,333 was closed on July 31, 2025 (subsequent event).
- Internal Controls: Management concluded that disclosure controls and procedures were ineffective as of June 30, 2025, citing material weaknesses due to inadequate accounting resources and a lack of segregation of duties.
- Risk Factors: Key risks include the inability to secure additional financing, the impact of the convertible debt derivative liability on net income, and the competitive nature of the specialty coffee market.
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the $77,866 cash balance against monthly burn rates and upcoming debt maturities.
- Convertible Debt Terms: Review the specific conversion rates and dilution impact of the $4.16 million total principal in convertible debentures (including the subsequent July closing).
- Derivative Liability Volatility: Assess the sensitivity of the $2.99 million derivative liability to changes in the company's stock price, as this directly impacts reported net loss.
- Internal Control Remediation: Monitor plans to address the material weaknesses in internal controls over financial reporting.
- Wholesale Channel Decline: Investigate the 82.7% drop in wholesale and online revenue to determine if this trend is structural or temporary.