Reborn Coffee, Inc. (REBN) - Q1 2025 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 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 May 12, 2025, there were 5,303,306 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q1 2025 | Q1 2024 |
|---|---|---|
| Total Net Revenues | $1,693,261 | $1,518,062 |
| Net Loss | $(2,191,144) | $(990,544) |
| Loss Per Share (Basic & Diluted) | $(0.47) | $(0.60) |
| Cash and Cash Equivalents | $777,117 | $158,215 (Dec 31, 2024) |
| Net Cash Provided by Operating Activities | $464,606 | $(1,933,908) |
| Total Assets | $8,064,577 | $7,789,123 |
| Total Liabilities | $7,648,995 | $5,186,381 |
| Stockholders' Equity | $415,582 | $2,602,742 |
Material Changes vs. Prior Period
- Revenue Growth: Total net revenues increased by 11.5% ($175,198) year-over-year, driven primarily by a 14.1% increase in store revenues ($1.68M vs $1.47M). Conversely, wholesale and online revenues declined 69.1%.
- Widening Losses: Net loss more than doubled to $2.19M from $0.99M. This was driven by a 96.6% increase in operating loss and significant non-operating expenses.
- Cost Structure: Product, food, and drink costs surged 201.8% to $924,364. General and administrative expenses rose 23.3% to $2.47M due to hiring, professional fees, and new store openings.
- Derivative Liability: A new Derivative Liability of $3.08M was recorded in Q1 2025 (zero in Q1 2024) related to convertible debentures, resulting in a $395,807 derivative expense.
- Debt Financing: The company issued $3.33M in principal amount of convertible debentures in three tranches during Q1 2025. Total current liabilities increased significantly to $5.62M from $2.78M.
Guidance, Outlook, Risks, and Unusual Items
- Going Concern Warning: Management explicitly states there is substantial doubt about the company's ability to continue as a going concern. The company has an accumulated deficit of $23.75M and relies on raising additional equity or debt to fund operations.
- Capital Raising: The company entered a Securities Purchase Agreement for up to $10M in convertible debentures. As of March 31, 2025, $3.33M had been issued. Proceeds were used to fund operations.
- Internal Controls: Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, citing material weaknesses due to inadequate accounting resources and lack of segregation of duties.
- Unusual Items: The significant increase in net loss is largely attributable to non-cash charges, including $395,807 in derivative expense and $122,336 in debt discount expense.
- Outlook: The company plans to continue expanding retail locations and marketing efforts but faces risks related to liquidity, competition, and the ability to secure future financing.
Investor Verification Checklist
- Liquidity Runway: Verify the sufficiency of the $777k cash balance against the $5.6M in current liabilities and the timeline for the next tranche of the $10M debenture offering.
- Derivative Liability Impact: Assess the volatility of the $3.08M derivative liability and its potential to further erode equity if stock price fluctuations occur.
- Cost of Goods Sold (COGS): Investigate the 201% spike in product costs to determine if this is a one-time inventory adjustment or a structural margin compression issue.
- Internal Control Remediation: Review the company's plan to address the material weaknesses in internal controls identified in Item 4.
- Debt Covenants: Examine the terms of the new convertible debentures and existing loans (EIDL, PPP, private loans) for potential default triggers given the current loss position.