Financial Performance - Reborn Coffee's stock price increased by 13% [1] Strategic Initiatives - Reborn Coffee is conducting a strategic review to potentially add Bitcoin, Ethereum, and other digital assets to its treasury [1]

Core Viewpoint - Reborn Coffee Inc. is exploring the potential use of regulated digital asset strategies to enhance its treasury management and support its global expansion plans [1][2][3]. Group 1: Strategic Review and Financial Stewardship - The company has initiated a strategic review to assess the use of blockchain-based assets as part of its treasury management framework [1][2]. - This review aligns with Reborn Coffee's commitment to sound financial stewardship and capital optimization, aiming to enhance treasury efficiency and diversify non-operating capital reserves [2][3]. Group 2: Commitment to Quality and Innovation - Reborn Coffee remains dedicated to delivering high-quality specialty coffee experiences while adapting to market changes [3][4]. - The company emphasizes that the initiative is exploratory, with no agreements made regarding the acquisition or use of digital assets, and any future decisions will require Board approval [3]. Group 3: Company Overview - Reborn Coffee, Inc. is a California-based specialty coffee retailer focused on high-quality, handcrafted coffee experiences and innovation [4]. - The company is redefining the coffeehouse model through premium products and technology-forward initiatives [4].

PART I – FINANCIAL INFORMATION [Item 1. Unaudited Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Consolidated%20Financial%20Statements) This section presents Reborn Coffee, Inc.'s unaudited consolidated financial statements for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, debt instruments, and other financial commitments [Unaudited Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) The company's total assets decreased by 18.1% to $6.38 million at June 30, 2025, from $7.79 million at December 31, 2024, while total liabilities significantly increased by 59.7% to $8.28 million, primarily due to new convertible debt and derivative liabilities, resulting in a shift from positive stockholders' equity to a deficit of $(1.91) million Consolidated Balance Sheet Highlights | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :---------------- | :--------- | :--------- | | Total Assets | $6,378,910 | $7,789,123 | $(1,410,213) | -18.1% | | Total Liabilities | $8,283,932 | $5,186,381 | $3,097,551 | 59.7% | | Total Stockholders' Equity (Deficit) | $(1,905,022) | $2,602,742 | $(4,507,764) | -173.2% | - Key liability changes include the introduction of **$740,741 in convertible debt** (net of discount) and **$2,994,579 in derivative liability**, which were zero at December 31, 2024[16](index=16&type=chunk) [Unaudited Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) For the six months ended June 30, 2025, total net revenues increased by 22.0% year-over-year, primarily driven by store revenue growth, but operating costs and expenses surged by 89.2%, largely due to significant stock compensation expenses and increased professional fees, leading to a substantial increase in net loss to $(7.53) million from $(2.31) million in the prior year Statements of Operations Highlights (Six Months Ended June 30) | Metric | 2025 Amount | 2024 Amount | Change ($) | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | :--------- | | Total Net Revenues | $3,528,053 | $2,890,963 | $637,090 | 22.0% | | Stores Revenue | $3,489,102 | $2,666,206 | $822,896 | 30.9% | | Wholesale and Online Revenue | $38,951 | $224,757 | $(185,806) | -82.7% | | Total Operating Costs and Expenses | $9,633,181 | $5,092,136 | $4,541,045 | 89.2% | | Stock Compensation Expenses | $2,665,485 | $0 | $2,665,485 | N/A | | Professional Fees | $1,347,546 | $573,738 | $773,808 | 134.9% | | Loss from Operations | $(6,105,128) | $(2,201,173) | $(3,903,955) | 177.4% | | Net Loss | $(7,531,196) | $(2,307,156) | $(5,224,040) | 226.4% | | Basic and Diluted Loss per Share | $(1.60) | $(1.05) | $(0.55) | 52.4% | Statements of Operations Highlights (Three Months Ended June 30) | Metric | 2025 Amount | 2024 Amount | Change ($) | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | :--------- | | Total Net Revenues | $1,834,792 | $1,372,901 | $461,891 | 33.6% | | Stores Revenue | $1,810,167 | $1,194,552 | $615,615 | 51.5% | | Wholesale and Online Revenue | $24,625 | $178,349 | $(153,724) | -86.2% | | Total Operating Costs and Expenses | $6,242,563 | $2,710,502 | $3,532,061 | 130.3% | | Stock Compensation Expenses | $2,665,485 | $0 | $2,665,485 | N/A | | Professional Fees | $697,587 | $328,302 | $369,285 | 112.5% | | Loss from Operations | $(4,407,771) | $(1,337,601) | $(3,070,170) | 229.5% | | Net Loss | $(5,340,052) | $(1,316,612) | $(4,023,440) | 305.6% | | Basic and Diluted Loss per Share | $(1.15) | $(0.48) | $(0.67) | 139.6% | [Unaudited Consolidated Statements of Stockholders' Equity (Deficit)](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) The company's total stockholders' equity shifted from a positive balance of $2.60 million at December 31, 2024, to a deficit of $(1.91) million by June 30, 2025, primarily driven by a net loss of $(7.53) million for the six months ended June 30, 2025, partially offset by $2.67 million in stock compensation expense and other common stock issuances Stockholders' Equity (Deficit) Summary | Metric | June 30, 2025 | December 31, 2024 | Change ($) | | :-------------------------------- | :-------------- | :---------------- | :--------- | | Total Shareholders' Equity (Deficit) | $(1,905,022) | $2,602,742 | $(4,507,764) | | Net Loss (6 months ended June 30, 2025) | $(7,531,196) | N/A | N/A | | Stock Compensation Expense (6 months ended June 30, 2025) | $2,665,485 | N/A | N/A | - Common shares issued during the six months ended June 30, 2025, totaled **1,112,621 shares**[22](index=22&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, the company continued to use significant cash in operating activities, totaling $(3.17) million, an increase from $(2.90) million in the prior year, while investing activities provided $0.19 million and financing activities provided $2.90 million, primarily from convertible notes, resulting in an overall cash decrease of $(80,349) to $77,866 Cash Flow Summary (Six Months Ended June 30) | Metric | 2025 Amount | 2024 Amount | Change ($) | | :-------------------------------- | :---------- | :---------- | :--------- | | Net cash used in operating activities | $(3,173,328) | $(2,895,711) | $(277,617) | | Net cash provided by (used in) investing activities | $189,501 | $(641,060) | $830,561 | | Net cash provided by (used in) financing activities | $2,903,478 | $3,989,521 | $(1,086,043) | | Net increase (decrease) in cash | $(80,349) | $452,750 | $(533,099) | | Cash at end of year | $77,866 | $617,051 | $(539,185) | - Operating cash flow adjustments for 2025 included **$2.67 million for stock compensation**, **$0.74 million for debt discount expense**, **$0.19 million for derivative expense**, and **$0.42 million for asset impairment loss**[25](index=25&type=chunk) - Financing activities in 2025 were primarily driven by **$2.75 million in borrowings from convertible notes payable**[25](index=25&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed disclosures for the unaudited consolidated financial statements, covering the company's nature of operations, significant accounting policies, specific asset and liability breakdowns, and commitments and contingencies [1. NATURE OF OPERATIONS](index=9&type=section&id=1.%20NATURE%20OF%20OPERATIONS) Reborn Coffee, Inc. was incorporated in Florida in 2018, migrated to Delaware in 2022, and operates retail coffee stores and wholesale distribution in California, South Korea, and Malaysia through its subsidiaries, facing substantial doubt about its ability to continue as a going concern due to recurring net comprehensive losses and accumulated deficit, relying on future equity and/or debt offerings - Reborn Coffee, Inc. was incorporated in Florida in January 2018 and migrated to Delaware in July 2022[26](index=26&type=chunk) - The company operates through subsidiaries including Reborn Global Holdings, Inc. (CA), Reborn Coffee Franchise, LLC (CA), Reborn Realty, LLC (CA), Reborn Coffee Korea, Inc. (Korea), and Reborn Malaysia, Inc. (Malaysia, 60% owned)[32](index=32&type=chunk) - The company incurred a **net comprehensive loss of $7,531,196** and has an **accumulated deficit of $29.0 million** as of June 30, 2025, leading to substantial doubt about its ability to continue as a going concern[28](index=28&type=chunk)[31](index=31&type=chunk) - Management intends to raise additional operating funds through equity and/or debt offerings, but there is no assurance of success[29](index=29&type=chunk)[30](index=30&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The company's interim financial statements are prepared in accordance with GAAP and Form 10-Q requirements, consolidating Reborn Coffee, Inc. and its wholly-owned subsidiaries, with minority interest in Reborn Malaysia not material for the period, and key policies include revenue recognition (point of sale for retail, delivery for wholesale/online), expensing advertising and repair costs, and recording operating leases on the balance sheet, following a 1-for-8 reverse stock split effected on January 12, 2024 - The company's unaudited condensed consolidated financial statements include Reborn Coffee, Inc. and its wholly-owned subsidiaries, with all intercompany accounts and transactions eliminated[35](index=35&type=chunk)[36](index=36&type=chunk) - Reborn owns **60% of Reborn Malaysia**; the minority interest was not material for the three-month period ended June 30, 2025[37](index=37&type=chunk) - A **1-for-8 reverse stock split** of common stock was effected on January 12, 2024, with trading on a split-adjusted basis commencing January 22, 2024[38](index=38&type=chunk) - The company has one reportable segment: wholesale and retail sales of coffee, water, and other beverages[39](index=39&type=chunk) - Revenue recognition policies: retail store revenues are recognized at the point of sale, and wholesale/online revenues are recognized upon product delivery and title transfer[43](index=43&type=chunk)[44](index=44&type=chunk) - Advertising costs are expensed as incurred, amounting to **$8,398 for the six months ended June 30, 2025**, a significant decrease from $74,011 in the prior year[49](index=49&type=chunk) - The company adopted ASC 842, requiring the recognition of right-of-use assets and related operating and finance lease liabilities on the balance sheet[54](index=54&type=chunk) [3. PROPERTY AND EQUIPMENT](index=15&type=section&id=3.%20PROPERTY%20AND%20EQUIPMENT) Total net property and equipment decreased from $4.08 million at December 31, 2024, to $3.20 million at June 30, 2025, with depreciation expense for the six months ended June 30, 2025, being $144,341, a decrease from $172,710 in the prior year Property and Equipment, Net | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :---------------- | :--------- | :--------- | | Total property and equipment, net | $3,200,578 | $4,080,004 | $(879,426) | -21.6% | Depreciation Expense (Six Months Ended June 30) | Metric | 2025 Amount | 2024 Amount | Change ($) | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | :--------- | | Depreciation expense | $144,341 | $172,710 | $(28,369) | -16.4% | [4. LOANS PAYABLE TO FINANCIAL INSTITUTIONS](index=15&type=section&id=4.%20LOANS%20PAYABLE%20TO%20FINANCIAL%20INSTITUTIONS) Loans payable to financial institutions increased from $111,300 at December 31, 2024, to $269,119 at June 30, 2025, with all amounts classified as current and maturing in 2025, carrying interest rates from 14.75% to 20.0% Loans Payable to Financial Institutions | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :---------------- | :--------- | :--------- | | Total loan payable (current) | $269,119 | $111,300 | $157,819 | 141.8% | - Loans carry repayment rates of **14.75% to 20.0%** and mature on various dates in 2025[70](index=70&type=chunk) [5. LOAN PAYABLE TO OTHER](index=15&type=section&id=5.%20LOAN%20PAYABLE%20TO%20OTHER) Loans payable to others decreased from $427,073 at December 31, 2024, to $334,508 at June 30, 2025, with all amounts classified as current, including a $100,000 loan from April 2025 with no interest, due on demand Loans Payable to Others | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :---------------- | :--------- | :--------- | | Total loan payable to others (current) | $334,508 | $427,073 | $(92,565) | -21.7% | - A new loan of **$100,000** was issued in April 2025 with no interest, due upon demand[71](index=71&type=chunk) [6. LOAN PAYABLE, EMERGENCY INJURY DISASTER LOAN (EIDL)](index=16&type=section&id=6.%20LOAN%20PAYABLE%2C%20EMERGENCY%20INJURY%20DISASTER%20LOAN%20(EIDL)) The company has two EIDL loans totaling $500,000, with interest rates of 3.75% and maturity dates in May 2050, both not in default as of June 30, 2025, with payments deferred to commence in May 2022 - Total EIDL loan payable is **$500,000**, with a current portion of **$30,060**[72](index=72&type=chunk) - The loans carry an interest rate of **3.75% per annum** and mature on May 16, 2050, and May 18, 2050, respectively[72](index=72&type=chunk)[74](index=74&type=chunk)[77](index=77&type=chunk) - As of June 30, 2025, both EIDL loans are not in default[73](index=73&type=chunk)[76](index=76&type=chunk) [7. LOAN PAYABLE, PAYROLL PROTECTION LOAN PROGRAM (PPP)](index=17&type=section&id=7.%20LOAN%20PAYABLE%2C%20PAYROLL%20PROTECTION%20LOAN%20PROGRAM%20(PPP)) The company has a PPP loan with an outstanding balance of $97,273 as of June 30, 2025, carrying a 1.00% interest rate, and expects forgiveness on the remainder after being granted forgiveness for an initial PPP loan - Total PPP loan payable is **$97,273**, with a current portion of **$25,718**[78](index=78&type=chunk) - The loan has an interest rate of **1.00% per annum**[78](index=78&type=chunk) - The company was granted forgiveness for the initial PPP Loan and expects to be granted forgiveness on the remainder[78](index=78&type=chunk) [8. CONVERTIBLE NOTES PAYABLE NET OF DEBT DISCOUNT](index=17&type=section&id=8.%20CONVERTIBLE%20NOTES%20PAYABLE%20NET%20OF%20DEBT%20DISCOUNT) As of June 30, 2025, the company had $740,741 in convertible notes payable, net of a $2.59 million debt discount, with these debentures, issued in three tranches in February and March 2025, having an aggregate principal amount of $3,333,333, accruing 10% interest (paid in kind), and being convertible at 92.5% of the lowest daily VWAP, with warrants also issued in connection with these debentures Convertible Notes Payable (June 30, 2025) | Metric | Amount | | :-------------------------------- | :---------- | | Total Convertible Debt (Principal) | $3,333,333 | | Less: Debt Discount | $(2,592,592) | | Total Convertible Notes Payable, net | $740,741 | - Debentures accrue interest at **10% per annum**, paid in kind, and are convertible at **92.5% of the lowest daily VWAP**[79](index=79&type=chunk) - **201,282 common stock purchase warrants** were issued in connection with the debentures[81](index=81&type=chunk) [9. DERIVATIVE LIABILITY](index=19&type=section&id=9.%20DERIVATIVE%20LIABILITY) The company recognized a derivative liability of $2,994,579 as of June 30, 2025, primarily from the embedded conversion feature of the debentures and warrants, which is fair valued using the Black-Scholes model, with an expense of $189,701 recorded for the six months ended June 30, 2025, due to changes in fair value Derivative Liability (June 30, 2025) | Metric | Amount | | :-------------------------------- | :---------- | | Initial Recognition on Convertible Debt | $2,251,926 | | Initial Recognition on Warrants | $552,953 | | Change during the period | $189,701 | | Total Derivative Liability | $2,994,579 | - The embedded conversion feature of the debentures is classified as a liability and fair valued using the Black-Scholes pricing model[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) - Key Black-Scholes inputs as of June 30, 2025, include a **risk-free interest rate of 4.03%**, an **expected term of 1.37 years**, and **expected volatility of 170.46%**[87](index=87&type=chunk) [10. COMMITMENTS AND CONTINGENCIES](index=19&type=section&id=10.%20COMMITMENTS%20AND%20CONTINGENCIES) The company has various operating lease commitments for its corporate office and thirteen retail store locations, with total undiscounted cash flows for operating lease liabilities as of June 30, 2025, at $2.90 million, a weighted-average remaining lease term of 4.5 years, and a discount rate of 9.8%, and is not currently party to any legal proceedings expected to have a material adverse effect - The company has operating leases for its corporate office in Brea, California, and 12 retail stores in California, plus international locations in Daejeon, Korea, and Kuala Lumpur, Malaysia[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) Operating Lease Liabilities (June 30, 2025) | Metric | Amount | | :-------------------------------- | :---------- | | Total undiscounted cash flows | $2,901,929 | | Weighted-average remaining lease terms | 4.5 years | | Weighted-average discount rate | 9.8% | | Lease liabilities—current | $850,591 | | Lease liabilities—long-term | $1,324,067 | | Lease liabilities—total (present value) | $2,174,658 | Operating Lease Expense (Six Months Ended June 30) | Metric | 2025 Amount | 2024 Amount | | :-------------------------------- | :---------- | :---------- | | Operating lease expense | $515,956 | $704,678 | - The company is not currently party to any legal proceedings or threatened legal proceedings that would have a material adverse effect on its business, financial condition, and results of operations[104](index=104&type=chunk) [11. SHAREHOLDERS' EQUITY](index=22&type=section&id=11.%20SHAREHOLDERS'%20EQUITY) The company is authorized to issue 40,000,000 shares of common stock ($0.0001 par value) and 1,000,000 shares of preferred stock ($0.0001 par value), with no preferred shares issued, and as of June 30, 2025, 5,387,129 common shares were issued and outstanding, following its IPO in August 2022 which generated $6.2 million net proceeds, with no dividends declared for the periods presented - Authorized common stock: **40,000,000 shares** ($0.0001 par value); **5,387,129 shares issued and outstanding** as of June 30, 2025[16](index=16&type=chunk)[22](index=22&type=chunk)[105](index=105&type=chunk) - Authorized preferred stock: **1,000,000 shares** ($0.0001 par value); no shares issued and outstanding[106](index=106&type=chunk) - Initial Public Offering (August 2022): **1,440,000 common shares sold at $5.00 per share**, generating approximately **$6.2 million in net proceeds**[108](index=108&type=chunk) - No dividends were declared for the three and six months ended June 30, 2025 and 2024[110](index=110&type=chunk) [12. EARNINGS PER SHARE](index=23&type=section&id=12.%20EARNINGS%20PER%20SHARE) Basic and diluted earnings per share are calculated based on net earnings available to common shareholders and weighted-average common shares outstanding, with common stock equivalents excluded from diluted EPS calculations in periods of loss as they would be anti-dilutive, and no dilutive or potentially dilutive shares were outstanding for the six months ended June 30, 2025 and 2024 - Basic EPS is computed using the weighted-average number of common shares outstanding; diluted EPS includes potential common shares if dilutive[111](index=111&type=chunk) - Common stock equivalents are excluded from diluted EPS calculations in periods of loss because their inclusion would be anti-dilutive[111](index=111&type=chunk) - The company did not have any dilutive, or potentially dilutive, shares outstanding for the six months ended June 30, 2025 and 2024[112](index=112&type=chunk) [13. SUBSEQUENT EVENTS](index=23&type=section&id=13.%20SUBSEQUENT%20EVENTS) On July 31, 2025, the company completed the fourth tranche of its Securities Purchase Agreement with Arena Investors, issuing an additional $833,333 in debentures and 136,483 warrants, which also included the issuance of Incentive Shares equal to $175,000 divided by the lowest daily VWAP - On July 31, 2025, the company completed the fourth closing of its Securities Purchase Agreement with Arena Investors[114](index=114&type=chunk)[115](index=115&type=chunk) - The fourth closing involved the issuance of **$833,333 in debentures** and **136,483 warrants**[115](index=115&type=chunk) - The company also agreed to issue Incentive Shares equal to **$175,000 divided by the lowest daily VWAP** of common stock[114](index=114&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and operational results for the three and six months ended June 30, 2025, compared to the prior year, detailing revenue drivers, cost increases, liquidity challenges, and the impact of recent financing activities, while also outlining business strategy and critical accounting policies [Business](index=24&type=section&id=Business) Reborn Coffee, Inc. is an innovative specialty coffee company founded in 2015, focused on high-quality, specialty-roasted coffee through retail locations, kiosks, and cafes, differentiating itself through unique sourcing, washing (magnetized water), roasting, and brewing techniques, leading the 'Fourth Wave' coffee movement by merging convenience and quality (e.g., Pour Over Packs), operating 13 retail locations in California, South Korea, and Malaysia, and aiming to capture a growing share of the expanding US retail coffee market, projected at $74.3 billion in 2025 - Reborn Coffee, Inc. focuses on serving high-quality, specialty-roasted coffee at retail locations, kiosks, and cafes, differentiating itself through innovative techniques like washing green coffee beans with magnetized water[117](index=117&type=chunk)[123](index=123&type=chunk) - The company considers itself a leader in the 'Fourth Wave' coffee movement, developing new bean processing methods and reinventing coffee consumption, exemplified by its Pour Over Packs[120](index=120&type=chunk) - Reborn operates **13 retail store locations** across California, South Korea, and Malaysia[118](index=118&type=chunk)[129](index=129&type=chunk) - The US retail coffee market is projected to be **$74.3 billion in 2025**, with growth driven by a shift to premium coffee, which Reborn aims to capture[124](index=124&type=chunk) [Plan of Operation](index=25&type=section&id=Plan%20of%20Operation) Reborn Coffee operates a production and distribution center at its headquarters for wholesale and retail coffee processing and roasting, and currently has thirteen retail coffee locations across California, South Korea, and Malaysia - The company has a production and distribution center at its headquarters for processing and roasting coffee for wholesale and retail distribution[125](index=125&type=chunk) - Currently operates **thirteen retail coffee locations**, including 11 in California, one in Daejeon, Korea, and one in Kuala Lumpur, Malaysia[126](index=126&type=chunk)[129](index=129&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=25&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) The company's critical accounting policies include revenue recognition for retail (point of sale) and wholesale/online (delivery and title transfer), and the treatment of royalty fees (5% of gross sales, recognized as sales occur), with no royalty revenue recorded for the periods presented - Retail store revenues are recognized when payment is tendered at the point of sale[126](index=126&type=chunk) - Wholesale and online revenues are recognized when products are delivered and title passes to customers or distributors[127](index=127&type=chunk) - Franchise royalty fees are **5% of a franchisee's weekly gross sales revenue**, recognized as sales occur; no revenue from royalties or other fees for the three months ended June 30, 2025 and 2024[128](index=128&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) For the six months ended June 30, 2025, total net revenues increased by 22.0% to $3.53 million, driven by a 30.9% increase in store revenues, while wholesale and online revenues declined significantly, and operating costs and expenses surged by 89.2% to $9.63 million, primarily due to $2.67 million in stock compensation expense and a 134.9% increase in professional fees, resulting in a net loss of $(7.53) million, a 226.4% increase from the prior year Results of Operations Highlights (Six Months Ended June 30) | Metric | 2025 Amount | 2024 Amount | Change ($) | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | :--------- | | Total Net Revenues | $3,528,053 | $2,890,963 | $637,090 | 22.0% | | Stores Revenue | $3,489,102 | $2,666,206 | $822,896 | 30.9% | | Wholesale and Online Revenue | $38,951 | $224,757 | $(185,806) | -82.7% | | Total Operating Costs and Expenses | $9,633,181 | $5,092,136 | $4,541,045 | 89.2% | | Stock Compensation Expense | $2,665,485 | $0 | $2,665,485 | N/A | | Professional Fees | $1,347,546 | $573,738 | $773,808 | 134.9% | | Net Loss | $(7,531,196) | $(2,307,156) | $(5,224,040) | 226.4% | Results of Operations Highlights (Three Months Ended June 30) | Metric | 2025 Amount | 2024 Amount | Change ($) | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | :--------- | | Total Net Revenues | $1,834,792 | $1,372,901 | $461,891 | 33.6% | | Stores Revenue | $1,810,167 | $1,194,552 | $615,615 | 51.5% | | Wholesale and Online Revenue | $24,625 | $178,349 | $(153,724) | -86.2% | | Total Operating Costs and Expenses | $6,242,563 | $2,710,502 | $3,532,061 | 130.3% | | Stock Compensation Expense | $2,665,485 | $0 | $2,665,485 | N/A | | Professional Fees | $697,587 | $328,302 | $369,285 | 112.5% | | Net Loss | $(5,340,052) | $(1,316,612) | $(4,023,440) | 305.6% | - Gross margin increased by **14% to $2.1 million** for the six months ended June 30, 2025, and by **75.6% to $1.4 million** for the three months ended June 30, 2025, driven by increased sales and cost control efforts[134](index=134&type=chunk) - General and administrative expenses increased primarily due to higher payroll expenses, while professional fees rose due to legal and accounting services for Form S-1 filings[135](index=135&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company has a history of operating losses and negative cash flow, with net losses of $7.5 million and cash used in operations of $3.2 million for the six months ended June 30, 2025, and to fund future operations, the company needs to raise additional capital, having recently secured $3.33 million in convertible debentures and warrants through three tranches by June 30, 2025, with a fourth tranche completed in July 2025, but there is no assurance that future financing will be obtained or that the company can continue as a going concern - The company incurred **net losses of $7.5 million** and used **$3.2 million in cash for operating activities** for the six months ended June 30, 2025[136](index=136&type=chunk) - As of June 30, 2025, the cash balance was approximately **$78,000**[144](index=144&type=chunk) - The company issued **$3,333,333 in convertible debentures** and **201,282 warrants** through three tranches by June 30, 2025, and completed a fourth closing for **$833,333 in debentures** and **136,483 warrants** on July 31, 2025[138](index=138&type=chunk) - Additional capital is needed to fund future operations, and there is no assurance that such financing can be obtained or that the company can continue as a going concern[137](index=137&type=chunk)[139](index=139&type=chunk) [Credit Facilities](index=30&type=section&id=Credit%20Facilities) The company has two Economic Injury Disaster Loans (EIDL) totaling $500,000 from the SBA, with a 3.75% interest rate, used for working capital, and not in default, and also secured two Paycheck Protection Program (PPP) loans totaling approximately $282,000, with a 1.00% interest rate, with the initial loan forgiven and forgiveness expected for the remainder - The company has EIDL loans from the SBA totaling **$500,000**, with a **3.75% interest rate**, used for working capital, and not in default as of June 30, 2025[145](index=145&type=chunk)[146](index=146&type=chunk) - Two PPP loans were secured for **$115,000** (May 2020) and approximately **$167,000** (February 2021), with a **1.00% interest rate**[148](index=148&type=chunk) - The initial PPP loan was forgiven, and the company expects forgiveness on the remainder[148](index=148&type=chunk) [Leases](index=30&type=section&id=Leases) The company leases all its company-owned retail locations, with operating leases typically featuring escalating rentals and optional renewal periods, where rent expense is recognized on a straight-line basis, and tenant incentives for leasehold improvements are amortized as rent expense reductions - All company-owned retail locations are leased under operating lease agreements[149](index=149&type=chunk) - Operating leases typically include escalating rentals and optional renewal periods, with rent expense recognized on a straight-line basis[149](index=149&type=chunk) - Tenant incentives used for leasehold improvements are recorded as deferred rent and amortized as reductions to rent expense[149](index=149&type=chunk) [Off Balance Sheet Arrangements](index=30&type=section&id=Off%20Balance%20Sheet%20Arrangements) The company does not have any off-balance sheet arrangements requiring disclosure, beyond ordinary course operating lease and purchase commitments recognized in financial statements in accordance with GAAP - The company does not have any off-balance sheet arrangements that require disclosure[150](index=150&type=chunk) - Ordinary course operating lease commitments and purchase commitments are recognized in the financial statements in accordance with GAAP[150](index=150&type=chunk) [Critical Accounting Estimates and Policies](index=30&type=section&id=Critical%20Accounting%20Estimates%20and%20Policies) Management relies on estimates and judgments for financial statement preparation, including those affecting assets, liabilities, revenues, and expenses, which are continuously evaluated, and actual results may differ, with key policies summarized in Note 2 - The preparation of financial statements requires management to utilize estimates and make judgments that affect reported amounts[151](index=151&type=chunk) - Estimates are based on historical experience and assumptions, evaluated on an ongoing basis, and actual results may differ materially[151](index=151&type=chunk) - Critical accounting policies affecting financial reporting are summarized in Note 2 to the financial statements[151](index=151&type=chunk) [Recent Accounting Pronouncements](index=31&type=section&id=Recent%20Accounting%20Pronouncements) The company has reviewed all recently issued but not yet effective accounting pronouncements and determined that their future adoption is not expected to have a material impact on its financial statements - The company does not expect the future adoption of any recently issued, but not yet effective, accounting pronouncements to have a material impact on its financial statements[152](index=152&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Reborn Coffee, Inc. is not required to provide information under this item - The company is a smaller reporting company and is not required to provide information under this item[153](index=153&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2025, the company's disclosure controls and procedures were deemed ineffective due to material weaknesses, including inadequate accounting resources, lack of segregation of duties, and a weak internal control environment, primarily attributed to the small accounting staff, with management relying on direct oversight and external professionals to mitigate these issues and performing additional analyses to ensure financial statements are fairly stated - As of June 30, 2025, the company's disclosure controls and procedures were ineffective[154](index=154&type=chunk) - Material weaknesses identified include inadequate accounting resources, lack of segregation of duties, and a weak internal control environment, primarily due to the small size of the accounting staff[155](index=155&type=chunk) - Management mitigates these issues by relying on direct oversight and external legal and accounting professionals[156](index=156&type=chunk) - Despite material weaknesses, management believes the financial statements for the quarter ended June 30, 2025, are fairly stated in accordance with GAAP, following additional analyses and procedures[157](index=157&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect it[158](index=158&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any litigation or threatened legal proceedings that are expected to have a materially adverse effect on its financial condition or results of operations as of June 30, 2025 - As of June 30, 2025, the company is not involved in any legal proceedings or threatened legal proceedings that are expected to have a materially adverse effect on its financial condition or results of operations[161](index=161&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) As a "smaller reporting company," Reborn Coffee, Inc. is not required to provide information regarding risk factors in this report - The company is a "smaller reporting company" and is not required to provide information regarding risk factors in this item[162](index=162&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - There were no unregistered sales of equity securities and use of proceeds to report[163](index=163&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - This item is not applicable[164](index=164&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[165](index=165&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) During the three months ended June 30, 2025, none of the company's directors or officers adopted, modified, or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" - None of the company's directors or officers adopted, modified, or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[166](index=166&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certificates of incorporation, bylaws, specimen stock certificates, warrants, securities purchase agreements, and certifications under the Sarbanes-Oxley Act - Exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), stock-related documents (Specimen Common Stock Certificate, Warrants), and agreements (Securities Purchase Agreement, Amendment, Side Letter with Arena Investors)[169](index=169&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are also included[169](index=169&type=chunk) SIGNATURES [Signatures](index=34&type=section&id=Signatures) The report is duly signed on behalf of the registrant by Jay Kim, Chief Executive Officer, and Stephan Kim, Chief Financial Officer, on August 14, 2025 - The report was signed by Jay Kim, Chief Executive Officer, and Stephan Kim, Chief Financial Officer, on August 14, 2025[172](index=172&type=chunk)

Core Insights - Reborn Coffee Inc. has signed a $1 million exclusive licensing agreement with Reborn Korea Co., Ltd. to develop and operate retail locations in South Korea [1][2] - The partnership aims to introduce Reborn Coffee's specialty offerings, including cold brew and café menu, while adapting to local consumer preferences [2][4] - South Korea is the third-largest coffee-consuming country per capita, making it a strategic market for Reborn Coffee's premium products [4] Company Expansion - The flagship store will be located in the Seoul Metropolitan center, enhancing brand visibility and access to high foot traffic [5] - Reborn Korea plans to open additional stores in Gwangjin, Nami Island, and Bundang, with further expansion into major provincial cities within the year [7] - This agreement is part of Reborn Coffee's broader global expansion strategy, following successful licensing deals in various regions including the Middle East and China [8] New Headquarters - Reborn Coffee's new three-story headquarters will open in front of Gwanghwamun, featuring a café, roasting lab, education center, and office space [6] - The flagship store will offer a unique experience with a café and bakery on the first floor, a roasting research lab on the second, and training rooms on the third [6][7] - The location is designed to become a landmark for premium coffee and bakery experiences in Seoul [7] Market Position - Reborn Coffee is focused on delivering high-quality, handcrafted coffee experiences and is redefining the coffeehouse model through innovation [9] - The company's expansion into South Korea aligns with its strategy to build a high-quality coffee experience in key international markets [4][8]

Core Insights - Reborn Coffee Inc. has signed a $1.3 million exclusive master licensing agreement with Reborn Health Goods (Shenzhen) Co., Ltd. to expand its presence in mainland China [1][2] - The agreement allows Reborn Health Goods to oversee national operations, including direct store developments and regional sublicensing partnerships [2][3] - The partnership aims to unify brand execution across China, with plans to establish over 300 global locations within the next two years [3][4] Company Overview - Reborn Coffee, Inc. is a California-based specialty coffee retailer focused on high-quality, handcrafted coffee experiences [5] - The company is dedicated to innovation and is redefining the coffeehouse model through premium products and technology-forward initiatives [5] Market Strategy - The strategic partnership supports Reborn Coffee's broader international vision and strengthens its presence in the Asia-Pacific region, where demand for premium specialty coffee is rising [4]

Core Insights - Reborn Coffee Inc. has signed a strategic licensing agreement with The Arjomand Group and IG International to expand into Georgia and Armenia, reflecting its international growth strategy [1][2] - The partnership aims to leverage the growing consumer demand in these emerging markets, aligning with European economic standards [2][3] - The agreement allows IG International exclusive rights to develop Reborn Coffee-branded locations, indicating a focus on local adaptation while maintaining brand standards [2][5] Regional Business Environment - Rising business confidence in Georgia is highlighted by the Prime Minister's reaffirmation of the country's European integration process, which is expected to attract foreign investment [3] - Both Georgia and Armenia are positioned as economic gateways between Europe and Asia, with pro-business environments and a growing café culture [4] Operational Strategy - IG International will oversee the rollout of Reborn Coffee stores in key metropolitan areas, including Tbilisi, Batumi, and Yerevan, adapting offerings to local preferences [5] - The licensing model includes an initial fee and a milestone-based payment schedule, promoting alignment and facilitating rapid expansion without significant capital investment from Reborn [6] Growth Validation - This licensing agreement further validates Reborn's international growth model, which is expanding across the Middle East, Asia, and Europe through similar agreements [7]

Core Insights - Reborn Coffee Inc. has entered a master licensing agreement valued at $1.7 million with the Arjomand Group, marking a strategic entry into the MENA and European markets [1][2] - The agreement will facilitate the development of Reborn Coffee-branded retail locations and product lines in high-growth markets, supporting the company's global expansion strategy [2][3] - A milestone-based payment structure is included in the agreement, reflecting a long-term partnership commitment [3] Market Expansion - Reborn Coffee is finalizing a flagship drive-thru store at the Abu Dhabi Group's headquarters, which is a key component of its entry into the Gulf region [4] - The partnership will extend distribution to 17 hotels and several thousand corporate employees, enhancing brand visibility in the UAE [4] Company Overview - Reborn Coffee, Inc. is a California-based specialty coffee retailer focused on high-quality, handcrafted coffee experiences [5] - The company aims to redefine the coffeehouse model through premium products and technology-driven initiatives [5]

Core Insights - Reborn Coffee Inc. has reported a significant 32% increase in store-level sales for Q2 2025 compared to the same period last year, driven by strong customer demand and improved operational efficiency [2] - The company is executing a multi-channel expansion strategy, including international market entry, product innovation, and franchise infrastructure development [2] Sales Performance - The average sales increase of approximately 32% in company-operated stores reflects effective product mix and operational improvements [2] Product Development - The Ready-to-Drink (RTD) Cold Brew program is nearing completion, with a direct sourcing agreement established for premium Colombian green coffee beans [3] - A collaboration with Okayama Bakery aims to enhance in-store offerings and increase average ticket size [4] Training and Development - The Reborn Coffee Academy is being developed to elevate the skills of baristas and franchise partners, with potential collaboration with the Specialty Coffee Association [5][7] Infrastructure and Expansion - New branded store interiors are in final production stages, aiming to create a unified global aesthetic and reduce buildout time [8] - Reborn Coffee is launching operations in Turkey, aligning with peak summer demand and leveraging local partnerships [9]

Financial Performance - Total net revenues for Q1 2025 were $1,693,261, an increase of 11.5% compared to $1,518,062 in Q1 2024[18] - The company reported a net loss of $2,191,144 for Q1 2025, compared to a net loss of $990,544 in Q1 2024, reflecting a 121.5% increase in losses year-over-year[18] - For the three months ended March 31, 2025, total net sales were $1,693,261, an increase of 12% compared to $1,518,062 for the same period in 2024[39] - The company reported a net loss of $2.2 million for the three months ended March 31, 2025, compared to a net loss of $990,544 for the same period in 2024, representing an increase in loss of 121.2%[132] - Operating costs and expenses for Q1 2025 were $3,390,618, a significant increase from $2,381,634 in Q1 2024, indicating rising operational challenges[18] - Operating costs and expenses increased by 42.4% to approximately $3.4 million for the three months ended March 31, 2025, compared to $2.4 million for the same period in 2024[132] - General and administrative expenses rose by 23.3% to approximately $2.5 million for the three months ended March 31, 2025, compared to $2.0 million for the same period in 2024[135] Assets and Liabilities - Cash and cash equivalents increased significantly to $777,117 as of March 31, 2025, up from $158,215 at the end of 2024[16] - Total current assets rose to $1,556,963, a substantial increase from $862,752 at the end of 2024, indicating improved liquidity[16] - Total liabilities increased to $7,648,995 as of March 31, 2025, compared to $5,186,381 at the end of 2024, highlighting rising financial obligations[16] - The company has an accumulated deficit of $23,754,016 as of March 31, 2025, up from $21,562,872 at the end of 2024[16] - As of March 31, 2025, total long-lived assets were $4,017,002, a slight decrease from $4,080,004 as of December 31, 2024[39] - Total property and equipment as of March 31, 2025, amounted to $5,493,905, a decrease from $5,581,398 as of December 31, 2024, reflecting a reduction of approximately 1.56%[69] Financing and Capital Structure - The company plans to raise additional operating funds through equity and/or debt offerings to support its working capital requirements[28] - The weighted average number of common shares outstanding increased to 4,616,591 in Q1 2025 from 1,653,826 in Q1 2024, reflecting potential dilution[18] - The Company issued convertible notes payable totaling $3,333,333 as of March 31, 2025, with a debt discount of $3,142,146, resulting in a net amount of $191,187[80] - The Company entered into a short-term borrowing agreement for $300,000 at an interest rate of 5.5% per annum, maturing in February 2024[72] - The Company has a total of $500,000 in Emergency Injury Disaster Loans (EIDL) with a maturity date extending to May 16, 2050, and an interest rate of 3.75%[73] - The company secured a Paycheck Protection Program (PPP) loan totaling $115,000 and a second loan of approximately $167,000, with the first loan forgiven prior to December 31, 2021[148] Operational Insights - North America generated net sales of $1,693,261, while Asia reported no sales for the period, down from $153,200 in 2024[39] - Reborn Malaysia, which opened in November 2023, operated at limited capacity, contributing immaterial revenue for the three-month period ended March 31, 2025[36] - The company recognized retail store revenue, which constitutes approximately 99% of total revenue, at the point of sale[43] - Advertising expenses for the three months ended March 31, 2025, were $5,709, down from $10,891 in 2024[49] - The company has not recorded any royalty revenue from franchise operations for the three months ended March 31, 2025, and 2024[45] - The company operates 13 retail locations, with a significant focus on expanding its presence in California and internationally in South Korea and Malaysia[118] Market and Strategic Initiatives - The retail coffee market in the U.S. is projected to reach $74.3 billion by 2025, driven by a shift towards premium coffee products[124] - The company aims to capture a growing portion of the market through innovative products like Reborn Coffee Pour Over Packs, which have seen increased B2B sales[121] - Management identified control deficiencies due to inadequate accounting resources and a lack of segregation of duties, which may affect the accuracy of financial reporting[155] Tax and Regulatory Matters - The effective tax rate for the three months ended March 31, 2025, was 0%, primarily due to California state income taxes and changes in the valuation allowance[88] - The company reported total deferred tax assets of $11,652,321 as of March 31, 2025, with a valuation allowance of the same amount, indicating that it is unlikely to realize these assets[89] - The company has cumulative net operating loss carryforwards for federal tax purposes of approximately $1.16 million and state tax net operating loss carryforwards of approximately $3,715,000 as of March 31, 2025[91] Corporate Governance and Compliance - The company has incorporated various agreements and certifications in compliance with the Sarbanes-Oxley Act, ensuring regulatory adherence[167] - The company has filed a Certificate of Amendment to its Certificate of Incorporation on January 12, 2024, reflecting corporate governance changes[166] - The company’s Chief Executive Officer, Jay Kim, and Chief Financial Officer, Stephan Kim, signed the report on May 20, 2025, affirming its accuracy[170]

Core Insights - Reborn Coffee Inc. has signed a Memorandum of Understanding (MOU) with Tori AI to enhance operational efficiency and customer interactions through AI technology [1][4] - The partnership aims to implement smart retail solutions, including drive-thru automation and personalized customer experiences [2][4] - Reborn Coffee is positioning itself as a leader in café innovation by integrating advanced technology into its operations [5] Company Overview - Reborn Coffee, Inc. is a California-based specialty coffee retailer focused on high-quality, handcrafted coffee experiences [7] - The company is dedicated to innovation and is redefining the coffeehouse model through technology-forward initiatives [7] Technology and Implementation - Tori AI provides plug-and-play systems that will help Reborn Coffee reduce labor costs and enhance upselling through real-time data [2] - The technology includes dynamic ordering prompts, inventory automation, and personalized menu suggestions to improve customer journeys and backend decision-making [2][4] - The first AI-enhanced drive-thru location is set to launch at 5050 W Russell Rd. in Las Vegas, NV [4] Strategic Positioning - This MOU positions Reborn Coffee as a forward-thinking leader in the café industry, with plans for additional initiatives and experiential rollouts [5] - Tori AI's expertise in smart automation and environment optimization will support Reborn Coffee's goals of enhancing operational efficiency and customer engagement [6]