10-Q: Reborn Coffee Reports Wider Losses, Going Concern Doubt

Sentiment:

Quarterly Report 19 November 2025 4:56 PM

Reborn Coffee, Inc. reported a significant increase in net loss for the nine months ended September 30, 2025, despite revenue growth, raising substantial doubt about its ability to continue as a going concern.

Capital raiseEntered into a Securities Purchase Agreement on February 6, 2025, for up to $10,000,000 in 10% original issue discount secured convertible debentures. As of September 30, 2025, $3,750,000 in principal amount of debentures and 1,041,667 warrants were issued.On October 20, 2025, an accredited investor subscribed to purchase 1,500,000 shares of common stock for $3,000,000 at $2.00 per share, with payments received in October and November 2025.On November 14, 2025, an accredited investor subscribed to purchase 1,100,000 shares of common stock for $2,000,000 at $1.818 per share, with payments scheduled through January 2026.On November 14, 2025, another accredited investor subscribed to purchase 1,000,000 shares of common stock for $2,000,000 at $2.00 per share, with payments scheduled through April 2026.These subsequent common stock subscriptions total $7,000,000 in gross proceeds.

Worse than expectedNet loss for the nine months ended September 30, 2025, significantly widened to $10,980,889 from $3,026,904 in the prior year.The company reported an accumulated deficit of $32,543,761 and a substantial doubt about its ability to continue as a going concern.Cash and cash equivalents decreased to $44,045 from $158,215 at the end of the previous fiscal year.Operating costs and expenses nearly doubled, driven by new stock compensation expense and increased professional fees.Gross margin slightly decreased despite revenue growth, indicating higher product costs.Total liabilities significantly increased due to new convertible debt and derivative liabilities.

Summary

Net loss for the nine months ended September 30, 2025, widened significantly to $10,980,889, compared to $3,026,904 for the same period in 2024.
Total net revenues increased by 17.7% to $4,884,662 for the nine months ended September 30, 2025, primarily driven by a 22.0% increase in store revenue and new license income.
Gross margin slightly decreased by 0.9% to $2,892,757 for the nine months, due to a 61.7% increase in product, food, and drink costs.
Operating costs and expenses surged by 98.4% to $14,037,701 for the nine months, largely due to $3,995,609 in stock compensation expense and a 101.5% increase in professional fees.
The company reported a substantial doubt about its ability to continue as a going concern due to recurring net losses and an accumulated deficit of $32,543,761 as of September 30, 2025.
Cash and cash equivalents decreased to $44,045 as of September 30, 2025, from $158,215 at December 31, 2024.
Total liabilities significantly increased to $9,620,143 from $5,186,381, primarily due to new convertible debt of $1,253,086 and a derivative liability of $3,768,692.
Subsequent to the reporting period, the company secured $7,000,000 in gross proceeds from common stock subscriptions.

Sentiment

Score: 2

Explanation: The company faces severe financial challenges, including a substantial net loss, accumulated deficit, and a going concern warning. While revenue is growing and recent capital raises provide some short-term relief, the underlying profitability issues and control weaknesses are significant concerns.

Positives

Total net revenues increased by 17.7% for the nine months ended September 30, 2025, reaching $4,884,662.
Store revenue, the primary revenue stream, grew by 22.0% to $4,615,853 for the nine months.
Successfully introduced a new license revenue stream, contributing $100,000 for the nine months ended September 30, 2025.
Shifted from cash used in investing activities ($641,059 in 2024) to cash provided by investing activities ($189,501 in 2025), partly due to a $75,000 gain on sale of property.
Secured significant capital post-period end, with $7,000,000 in gross proceeds from common stock subscriptions in October and November 2025.
Management believes the financial statements for the quarter ended September 30, 2025, are fairly stated in all material respects, despite identified material weaknesses in internal controls.

Negatives

Net loss significantly widened to $10,980,889 for the nine months ended September 30, 2025, compared to $3,026,904 in the prior year.
Accumulated deficit reached $32,543,761 as of September 30, 2025, indicating a history of unprofitability.
Cash and cash equivalents declined sharply to $44,045 as of September 30, 2025, from $158,215 at December 31, 2024.
Total current liabilities more than doubled to $7,954,708 from $2,783,374, driven by new convertible debt and derivative liabilities.
Gross margin decreased by 0.9% for the nine months, primarily due to a 61.7% increase in product, food, and drink costs.
Operating costs and expenses increased by 98.4% for the nine months, largely due to $3,995,609 in stock compensation expense and a 101.5% increase in professional fees.
Wholesale and online revenue decreased by 53.8% for the nine months ended September 30, 2025.
Reported an asset impairment loss of $434,475 for the nine months ended September 30, 2025.
Substantial doubt exists about the company's ability to continue as a going concern.
Disclosure controls and procedures were deemed ineffective as of September 30, 2025, due to inadequate accounting resources, lack of segregation of duties, and a need for a stronger internal control environment.

Risks

Substantial doubt exists about the company's ability to continue as a going concern due to recurring net losses and an accumulated deficit.
Inadequate accounting resources, lack of segregation of duties, and a need for a stronger internal control environment led to ineffective disclosure controls and procedures.
The company's ability to raise additional operating funds through equity and/or debt offerings is not assured.
Global macro-economic conditions, including inflation, rising interest rates, and market volatility, could negatively impact the global economy and the company's business.
The company faces risks related to its ability to effectively sustain and manage growth, achieve and maintain future profitability, and attract new customers.
Increased competition in the coffee market could negatively affect the company's ability to compete effectively.
The company's ability to expand operations and increase adoption of its platform internationally is subject to uncertainties.
Potential data breaches, cyberattacks, or other malicious activity could impact technology systems.
The company may face limitations due to obligations under its credit facility or other indebtedness.
Uncertainties exist regarding the impact of general economic and market conditions, including regional and global conflicts or related government sanctions.

Future Outlook

The company intends to raise additional operating funds through equity and/or debt offerings to support its existing and planned business model. However, there is no assurance that this financing can be obtained or that the company can continue as a going concern. Management expects to increase the number of employees as the company grows to implement adequate segregation of duties within the internal control framework.

Management Comments

Management intends to raise additional operating funds through equity and/or debt offerings.
We believe Reborn differentiates itself from other coffee roasters through its innovative techniques, including sourcing, washing, roasting, and brewing our coffee beans with a balance of precision and craft.
We believe that we are the leading pioneers of the emerging Fourth Wave movement and that our business is redefining specialty coffee as an experience that demands much more than premium quality.
Our continuous Research and Development is essential to developing new parameters in the production of new blends.
Management believes that despite our material weaknesses, our financial statements for the quarter ended September 30, 2025, are fairly stated, in all material respects, in accordance with GAAP.

Industry Context

Reborn Coffee operates in the U.S. retail coffee market, which is projected to be $74.3 billion in 2025 and is expected to grow due to a shift in consumer preferences towards premium coffee, specialized blends, espresso-based beverages, and cold brew options. The company positions itself as a leader in the "Fourth Wave" coffee movement, emphasizing innovation in bean processing, design concepts, and new consumption methods like pour-over packs. Its B2B sales growth with hotels for these packs indicates a potential alignment with market demand for convenience and quality. However, the company's significant losses and going concern doubt contrast with the overall market growth, suggesting internal operational or financial challenges despite its innovative claims.

Comparison to Industry Standards

The filing does not provide specific comparable companies, projects, or results to assess against global benchmarks.
The company highlights its first-place wins in "Americas Best Cold Brew" competition by Coffee Fest in 2017 (Portland) and 2018 (Los Angeles) as a testament to its quality and innovation, suggesting a competitive edge in product quality within the specialty coffee segment.
The company's claim of being a "leading pioneer of the emerging Fourth Wave movement" suggests an ambition to set new industry standards in coffee experience, but specific metrics for this leadership are not provided for direct comparison.
The company's financial performance, particularly the significant net losses and going concern warning, falls short of typical industry standards for sustainable growth and profitability, especially for a publicly traded company in a growing market.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Internal Control Weaknesses	Disclosure controls and procedures were ineffective due to inadequate accounting resources, lack of segregation of duties, and need for a stronger internal control environment.	2025-09-30	Could result in misstatement of account balances; management relies on direct oversight and external professionals to mitigate risks.

Stakeholder Impact

Shareholders: Significant dilution risk from convertible debt and recent stock subscriptions. Share value is under pressure due to substantial losses and going concern doubt.
Employees: Potential for increased hiring as the company grows, but current accounting staff is limited, leading to control weaknesses.
Creditors: Increased debt load (convertible debentures) and derivative liabilities, coupled with going concern doubt, increase credit risk.
Customers: Continued expansion of retail locations and focus on "Fourth Wave" experience aims to benefit customers with more access and innovative products.

Next Steps

Management intends to raise additional operating funds through equity and/or debt offerings.
The company expects to increase its number of employees to implement adequate segregation of duties within the internal control framework as it grows.
Continue to make monthly payments on EIDL loans.
Apply for forgiveness on the remainder of the PPP loan.
Receive scheduled payments for common stock subscriptions through April 2026.

Key Dates

Date	Description
2014-11-01	Reborn Global Holdings, Inc. incorporated in California.
2015-01-01	Reborn Coffee founded by Jay Kim.
2016-07-25	Operating facility lease for La Floresta store entered.
2017-05-01	Operating facility lease for La Crescenta store entered.
2017-01-01	Won first place traditional still in Americas Best Cold Brew competition by Coffee Fest in Portland.
2018-01-01	Won first place traditional still in Americas Best Cold Brew competition by Coffee Fest in Los Angeles.
2018-01-01	Reborn Coffee, Inc. incorporated in Florida.
2020-05-16	Executed EIDL Loan from SBA for $150,000.
2020-12-01	Reborn Coffee Franchise, LLC formed in California.
2020-12-22	Operating facility lease for San Francisco store entered.
2021-02-04	Operating facility lease for Riverside store entered.
2021-02-12	Operating facility lease for Laguna Woods store entered.
2021-06-28	Executed EIDL Loan from SBA for $350,000.
2022-03-01	Operating facility lease for Manhattan Village store entered.
2022-07-01	Reborn Coffee migrated from Florida to Delaware.
2022-08-01	Consummated Initial Public Offering (IPO).
2022-10-01	Entered into percentage-based lease agreement for Intersect in Irvine store.
2023-01-18	Renewed retail store lease in Corona Del Mar.
2023-03-01	Reborn Realty, LLC formed in California.
2023-03-03	Operating facility lease for Anaheim store entered.
2023-03-20	Operating facility lease for Diamond Bar store entered.
2023-06-28	Operating facility lease for Brea corporate office entered.
2023-10-01	Reborn Coffee Korea, Inc. formed in South Korea.
2023-10-01	Reborn Malaysia, Inc. formed in Malaysia.
2024-01-12	Filed Certificate of Amendment for 1-for-8 reverse stock split.
2024-01-22	Common stock began trading on Nasdaq Capital Market on a Reverse Stock Split-adjusted basis.
2024-12-01	Entered into operating lease agreement for Pasadena store.
2025-02-06	Entered into Securities Purchase Agreement for up to $10,000,000 in convertible debentures.
2025-02-10	First tranche of convertible debentures issued.
2025-02-27	Second tranche of convertible debentures issued.
2025-03-28	Third tranche of convertible debentures issued.
2025-08-01	Fourth tranche of convertible debentures issued.
2025-09-30	End of the quarterly reporting period.
2025-10-20	Entered into Securities Subscription Agreement for 1,500,000 common shares for $3,000,000.
2025-10-20	Received $1,000,000 payment for common stock subscription.
2025-10-30	Received $1,000,000 payment for common stock subscription.
2025-11-14	Received $1,000,000 payment for common stock subscription.
2025-11-14	Entered into Securities Subscription Agreement for 1,100,000 common shares for $2,000,000.
2025-11-14	Entered into Securities Subscription Agreement for 1,000,000 common shares for $2,000,000.
2025-11-15	First payment of $250,000 due for a common stock subscription.
2025-11-19	Date of filing of this Quarterly Report on Form 10-Q.
2025-11-20	First payment of $250,000 due for a common stock subscription.
2025-12-15	Payment of $250,000 due for a common stock subscription.
2025-12-20	Payment of $750,000 due for a common stock subscription.
2026-01-15	Payment of $250,000 due for a common stock subscription.
2026-01-20	Payment of $1,000,000 due for a common stock subscription.
2026-02-15	Payment of $250,000 due for a common stock subscription.
2026-03-15	Payment of $250,000 due for a common stock subscription.
2026-04-15	Final payment of $750,000 due for a common stock subscription.

Recommendation

strong sell

The company is in a precarious financial position, evidenced by a substantial net loss, a rapidly increasing accumulated deficit, and a formal "going concern" warning. While revenue growth is present, it's overshadowed by soaring operating costs, particularly stock compensation and professional fees, and a significant increase in interest expense. The cash balance is critically low, and total liabilities have surged. Although recent capital raises provide some liquidity, they come with significant dilution and do not address the fundamental profitability issues. Furthermore, identified material weaknesses in internal controls raise concerns about financial reporting reliability. Given these severe financial and operational challenges, the stock represents a high-risk investment with significant downside potential.

Keywords

Specialty coffee, Coffee retail, SEC filing, 10-Q, Financial results, Net loss, Revenue growth, Going concern, Capital raise, Convertible debt, Internal controls, REBN, Quarterly report, Coffee shop, Franchise, Fourth Wave coffee

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