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MarketScreener Homepage  >  Equities  >  OTC Bulletin Board - Other OTC  >  VPR Brands LP    

VPR BRANDS LP

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VPR BRANDS LP : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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08/13/2019 | 04:09pm EDT

You should read the following Management's Discussion and Analysis together with our financial statements and notes to those financial statements included elsewhere in this report. This discussion contains forward-looking statements that are based on our management's current expectations, estimates and projections about our business and operations. Our actual results may differ from those currently anticipated and expressed in such forward-looking statements.




Overview


We are managed by Soleil Capital Management LLC, a Delaware limited liability company.

We are a company engaged in the electronic cigarette and personal vaporizer industry. We own a portfolio of electronic cigarette and personal vaporizer patents (the "Patents") which are the basis for our efforts to:



  • Design, market and distribute a line of e liquids under the "HELIUM" brand;

  • Design, market and distribute a line vaporizers for essential oils,
    concentrates, and dry herbs under the "HONEYSTICK" brand;

  • Design, market and distribute a line of cannabidiol ("CBD") products under
    the "GOLD LINE" brand;

  • Design, market and distribute electronic cigarettes and popular vaporizers;




  • Prosecute and enforce our patent rights;




  • License our intellectual property; and




  • Develop private label manufacturing programs.



Results of Operations for the Three Months Ended June 30, 2019 Compared to the Three Months Ended June 30, 2018



Revenues


Our revenue for the three months ended June 30, 2019 and 2018 was $1,581,246 and $1,214,786, respectively. The increase is a result of increased marketing and advertising efforts.



Cost of Sales


Cost of sales for the three months ended June 30, 2019 and 2018 was $1,025,023 and $607,738, respectively. The increase is a result of the increased sales during the current year. Gross margin decreased from 50% to 35% due to a higher mix of private label and distributor orders sales.

Operating Expenses

Operating expenses for the three months ended June 30, 2019 were $594,732 as compared to $486,618 for the three months ended June 30, 2018. The increase in expenses is primarily due to increased marketing and advertising efforts.

Other Income (Expense)

Net other expenses decreased to $150,344 for the three months ended June 30, 2019 as compared to $152,317 for the three months ended June 30, 2018. Interest expense increased from $115,380 in 2018 to $150,344 in 2019 due to increased debt, offset by derivative expense of $47,342 in 2018 and a loss on extinguishment of debt of $84,279 incurred in 2018.

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Net Loss

Net loss for the three months ended June 30, 2019 was $188,853 compared to a net loss of $31,527 for the three months ended June 30, 2018.

Results of Operations for the Six Months Ended June 30, 2019 Compared to the Six Months Ended June 30, 2018



Revenues


Our revenue for the six months ended June 30, 2019 and 2018 was $2,899,295 and $2,215,948, respectively. The increase was is a result of increased marketing and advertising efforts.



Cost of Sales


Cost of sales for the six months ended June 30, 2019 and 2018 was $1,804,050 and $1,141,835, respectively. The increase is a result of the increased sales during the current year. Gross margin decreased from 48% to 38% due to a higher mix of private label and distributor orders sales.

Operating Expenses

Operating expenses for the six months ended June 30, 2019 were $1,159,337 as compared to $940,499 for the six months ended June 30, 2018. The increase in expenses is primarily due to increased marketing and advertising efforts.

Other Income (Expense)

Net other expenses increased to $263,445 for the six months ended June 30, 2019 as compared to $314,561 for the six months ended June 30, 2018. Interest expense increased from $180,611 in 2018 to $263,445 in 2019 due to increased debt, offset by derivative income of $195,163 in 2018 and a loss on extinguishment of debt of $329,113 incurred in 2018.

Net Loss

Net loss for the six months ended June 30, 2019 was $327,537 compared to a net loss of $180,947 for the six months ended June 30, 2018.

Liquidity and Capital Resources

The Company used cash in operating activities of $769,198 for the six months ended June 30, 2019 as compared to $179,138 used in six months ended June 30, 2018. The increased use of cash is primarily the result of an increase in net loss of $146,590, an increase in accounts receivable of $82,208, an increase in inventory of $150,288, an increase in vendor deposits of $75,596, and a decrease in accounts payable of $152,487, offset by non-cash expense for stock compensation of $34,723 and depreciation of $10,932.

During the six months ended June 30, 2019, the Company received $1,000,000 of proceeds from the issuance of convertible debt, received $200,000 from the issuance of notes payable, and repaid $489,125 of principal on notes payable. During the six months ended June 30, 2018, the Company received $600,005 of proceeds from the issuance of notes payable, and repaid $470,165 of principal on notes payable.



Assets


At June 30, 2019 and December 31, 2018, we had total assets of $1,067,644 and $767,209, respectively. Assets primarily consist of the cash accounts held by the Company, inventory, vendor deposits, accounts receivable and a right-to-use asset. In 2019 the Company's inventory was increased by approximately $150,000 as a result of additional purchases for new products, accounts receivable increased by approximately $82,000 from increased sales, vendor deposits increased by $75,596, and we recorded a right-to-use asset of $39,598 as a result of implementing new lease accounting guidance effective January 1, 2019.



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Liabilities


At June 30, 2019 and December 31, 2018, we had total liabilities of $1,943,951 and $1,350,702, respectively. The increase was primarily due to the issuance of convertible debt and notes payable in 2019, offset by the repayment of existing notes payable and decrease in accounts payable, offset by the right to use obligation of $31,312.

The Company plans to pursue equity funding to expand its brand. Through equity funding and the current operations, including the acquisition of the Vapor line of business, the Company expects to meet its current capital needs. There can be no assurance that additional capital will be available to us, or that, if available, it will be on terms satisfactory to us. Any additional financing may involve dilution to our shareholders. In the alternative, additional funds may be provided from cash flow in excess of that needed to finance our day-to-day operations, although we may never generate this excess cash flow. If we do not raise additional capital or generate additional funds, implementation of our plans for expansion will be delayed. If necessary, we may withdraw from certain growth strategies to conserve cash for continued operations.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

© Edgar Online, source Glimpses

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Managers
NameTitle
Kevin Frija Chairman, President & Chief Executive Officer
Daniel Hoff Chief Operating Officer
Guo Cheng Pan Director
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