10-Q: Cannaisseur Group Reports Zero Revenue, Mounting Losses in Q3

The Cannaisseur Group, Inc. reported a 100% decline in revenue to $0 for the third quarter of 2025, alongside a substantial increase in net loss and a going concern warning.

Summary

• Revenue for the three and nine months ended September 30, 2025, was $0, a 100% decrease from $285 and $700 in the respective prior periods, primarily due to the closure of its retail store.
• Net loss for the three months ended September 30, 2025, significantly increased to $(778,824) from $(22,962) in the prior year.
• Net loss for the nine months ended September 30, 2025, increased to $(1,706,736) from $(1,181,918) in the prior year.
• Selling, general, and administrative expenses surged by 3,194.1% to $690,209 for the three months ended September 30, 2025, mainly due to increased share-based compensation and salaries.
• The company has a cumulative net loss since inception of $3,387,458 and a working capital deficit of $128,441 as of September 30, 2025.
• Management has concluded there is substantial doubt about the company's ability to continue as a going concern.
• Cash and cash equivalents decreased to $143 as of September 30, 2025, from $563 at December 31, 2024.
• The company entered into an asset purchase agreement with Sense Technologies, Inc. on August 28, 2025, to acquire real estate, equipment, and IP related to soy processing, human nutrition, agricultural manufacturing, and sensor systems, with the transaction not yet closed.

Sentiment

Score: 1

Explanation: The company reported zero revenue, massive net losses, a critically low cash balance, a significant working capital deficit, and a going concern warning. Management also stated that disclosure controls are not effective. While there's a planned acquisition, the current financial state is dire.

Positives

• Total liabilities decreased significantly to $153,861 as of September 30, 2025, from $305,576 at December 31, 2024, primarily due to the conversion of related party convertible notes and mezzanine equity into common stock.
• The short-term loan payable to a related party (CFO Xavier Carter) in the amount of $1,500 was paid in full on January 23, 2025.
• Cash provided by financing activities increased to $107,150 for the nine months ended September 30, 2025, from $60,300 in the prior year, indicating continued ability to raise capital.
• The company recognized gains on the conversion of some related party debt and settlement of accounts payable.

Negatives

• Revenue declined by 100% to $0 for both the three and nine months ended September 30, 2025, due to the closure of its retail store.
• Net loss significantly widened for both the three-month period (to $(778,824) from $(22,962)) and the nine-month period (to $(1,706,736) from $(1,181,918)).
• Selling, general, and administrative expenses increased dramatically by 3,194.1% for the three-month period and 37.4% for the nine-month period, largely due to share-based compensation.
• Cash and total assets experienced significant declines, with cash at $143 and total assets at $453 as of September 30, 2025.
• The company has a cumulative net loss of $3,387,458 and a working capital deficit of $128,441, raising substantial doubt about its ability to continue as a going concern.
• Disclosure controls and procedures were deemed "not effective" by management.
• The company incurred losses on the conversion of certain related party debt and mezzanine equity to common stock.

Risks

• Substantial doubt about the ability to continue as a going concern due to cumulative net losses, working capital deficit, and reliance on external capital.
• Inability to generate positive cash flows from operations or secure additional financing from shareholders, related parties, or third parties.
• Potential for significant dilution to existing shareholders from future equity or debt security sales.
• Future debt securities or preferred stock could have rights senior to common stock and contain restrictive covenants.
• Adverse effects on business, financial condition, and results of operations if unable to obtain additional financing, leading to reduced, delayed, or eliminated planned activities.
• Exposure to macro-economic factors such as inflationary pressures, Federal Reserve interest rate hikes, and recessionary fears.
• Challenges posed by complex industries, including rapid and unpredictable technological change, regulatory burdens, and intense competition.
• Limited operating history and revenue.
• The effectiveness of disclosure controls and procedures was deemed "not effective."
• The company refers to its Form S-1 for additional risk factors, including geopolitical conflicts (Israel, Ukraine) and a potential downturn in economic activity.

Future Outlook

The company is restructuring its website to conduct business online and may reopen physical stores if advantageous. It plans to raise additional capital through equity sales, equity-linked, or debt-financing arrangements to meet future capital requirements and fund operations, including possible future acquisitions. Management expects to raise funds through private investors and investment firms and is seeking a $50,000 non-recourse loan for working capital and operating expenses, with plans for larger investments long-term. The company is transitioning its focus from CBD hemp products to a broader health and wellness product offering.

Management Comments

• "The Company is in the process of restructuring its website and plans to conduct business online."
• "The Company may reopen a physical store or stores in the future if it is advantageous to its operations."
• "Management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the accompanying financial statements are issued."
• "TCRG expects to raise funds through private investors and investment firms and is looking to secure a non-recourse loan for work capital and operating expenses."
• "We intend to continue offering smaller investment opportunities. Long term, we plan to seek larger amounts of investment to expand our operations."
• "Our disclosure controls and procedures are not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner."

Industry Context

The company's transition from a CBD-focused retailer to a broader health and wellness company with an online-only presence reflects a common trend in the evolving cannabis and wellness industries. Many smaller players struggle with retail overhead and intense competition, leading to shifts towards e-commerce and diversification. The negative gross profit margins, even with reduced cost of revenue, indicate significant pricing pressure and/or inventory management issues, which are prevalent in competitive markets. The planned acquisition of Sense Technologies, Inc. suggests a strategic pivot into agricultural manufacturing, human nutrition, and sensor systems, moving beyond its original CBD niche, potentially seeking more stable or higher-growth markets.

Comparison to Industry Standards

• A 100% revenue decline to $0 is highly unusual and significantly worse than industry standards, where even struggling companies typically maintain some level of sales. This indicates a complete cessation of primary sales operations.
• The substantial increase in net loss (e.g., from $(22,962) to $(778,824) in Q3) is far below industry benchmarks for profitable or even stable growth companies.
• The explicit "going concern" warning is a critical indicator of financial distress, common among early-stage or severely underperforming companies, but a red flag compared to established industry players.
• A cash balance of $143 is extremely low for a publicly traded company, indicating severe liquidity issues and significantly below operational requirements for most businesses.
• The admission that disclosure controls are "not effective" is a serious corporate governance deficiency, falling well below SEC and industry best practices for public companies.
• The massive increase in SG&A driven by share-based compensation, while revenue is zero, suggests a disconnect between executive compensation practices and operational performance, which is not typical for well-managed companies.
• The proposed acquisition of Sense Technologies, Inc. represents a significant and abrupt strategic shift, which, while potentially offering new avenues, also introduces substantial integration and execution risks, especially for a company in severe financial distress. This contrasts with more gradual, organic growth or acquisition strategies seen in healthier companies.

Management Changes

Corporate Governance

Legal Proceedings

• The company was involved in a civil action initiated by its former landlord (AP 1039 Grant St., LLC v. Inno Medicinals LLC, a/k/a InnoMedicals Atlanta CBD, Inc., Xavier Carter, and Floretta Gogo, State Court of DeKalb County, Georgia, Case No. 23A03681) for failing to pay lease amounts.
• The matter was settled on October 18, 2023, through a Lease Termination and Settlement Agreement, where the company surrendered the premises, forfeited $9,084 in deposits, and settled an outstanding balance of $47,511 for $18,000, payable in monthly installments.
• As of September 30, 2025, $9,501 remains due under the settlement payable.

Related Party Transactions

• Short-term loan of $1,500 from CFO Xavier Carter, repaid in full on January 23, 2025.
• Convertible notes payable to Ridolfo R. Brown (totaling $51,000 principal) and The National Legacy Foundation (totaling $40,000 principal) were converted into common stock during the period.
• Issued 2,000,000 shares of common stock (fair value $280,000) to CEO Floretta Gogo and 2,000,000 shares (fair value $280,000) to CFO Xavier Carter as compensation on February 4, 2025.
• Issued 1,000,000 shares of common stock (fair value $140,000) to its Corporate Secretary as compensation on February 4, 2025.
• Issued 766,667 shares of common stock to CEO Floretta Gogo for conversion of $115,000 accrued salaries on July 14, 2025.
• Issued 643,333 shares of common stock to CFO Xavier Carter for conversion of $96,000 accrued salaries on July 14, 2025.
• Issued 1,000,000 shares of common stock (fair value $140,000) to CEO Floretta Gogo and 1,000,000 shares (fair value $140,000) to CFO Xavier Carter as compensation on July 25, 2025.
• Issued 1,500,000 shares of common stock (fair value $210,000) to one director and 500,000 shares (fair value $70,000) to another director as compensation on July 25, 2025.
• Received capital contributions from related parties totaling $18,650 during the nine months ended September 30, 2025.
• Mezzanine equity (totaling $37,875) held by investors in Atlanta CBD was converted into 757,500 shares of common stock on August 14, 2025, resulting in a loss on conversion of $68,175. These investors were entitled to profit distributions and the transaction terms suggest a close relationship.

Stakeholder Impact

• Shareholders: Significant dilution from the issuance of over 16 million new shares for compensation, debt conversion, and mezzanine equity conversion, with potential for further dilution from future capital raises. The going concern warning poses a severe risk to their investment.
• Employees: Management (CEO, CFO, Corporate Secretary) received substantial share-based compensation and converted accrued salaries into stock, indicating a reliance on equity for compensation amidst financial difficulties.
• Creditors: Convertible notes payable to related parties were converted into equity, reducing debt obligations but potentially increasing equity risk. The remaining settlement payable of $9,501 indicates ongoing obligations.
• Customers: The closure of the physical retail store and transition to online-only operations may impact customer access and experience, though the company aims to serve them via a restructured website.
• Suppliers: The company's severe financial distress and going concern warning could impact its ability to pay suppliers, potentially leading to strained relationships or difficulty securing new supplies.

Next Steps

• Restructure the company's website to conduct business online.
• Potentially reopen physical retail stores in the future if advantageous.
• Raise additional capital through equity sales, equity-linked, or debt-financing arrangements.
• Secure a non-recourse loan of $50,000 for working capital and operating expenses.
• Seek larger amounts of investment long-term to expand operations.
• Close the asset purchase agreement with Sense Technologies, Inc.

Key Dates

Recommendation

The company reported zero revenue, a massive increase in net losses, and a critically low cash balance of $143. Management explicitly stated substantial doubt about the company's ability to continue as a going concern and that disclosure controls are not effective. While a strategic acquisition is planned, the current financial state is unsustainable, and significant dilution has already occurred with more expected. These factors present an extremely high risk profile with no clear path to profitability or operational stability in the near term.

Keywords

Cannaisseur Group, TCRG, SEC Filing, 10-Q, Quarterly Report, Financial Results, Net Loss, Revenue Decline, Going Concern, CBD Products, Health and Wellness, Share-based Compensation, Related Party Transactions, Asset Acquisition, Sense Technologies, Disclosure Controls, Cannabis Industry, Small Cap, OTC Markets