VPR Brands LP : Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Published: 2026-05-18 06:05:16 ET VPRB

Published on 05/18/2026 at 06:05 am EDT

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of operations of VPR Brands, LP ("VPRB" or the "Company") should be read in conjunction with our unaudited condensed financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. References in this Management's Discussion and Analysis of Financial Condition and Results of Operations to "us," "we," "our," and similar terms refer to the Company. This Quarterly Report on Form 10-Q includes forward-looking statements, as that term is defined in the federal securities laws, based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Words such as "anticipate," "estimate," "plan," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and similar expressions are used to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Reference is made to the "Risk Factors" section of the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the "SEC") on March 31, 2026, as the same may be updated from time to time.

Overview

We are a company engaged in the electronic cigarette, electronic cigar, personal vaporizer and pocket lighter industry. We own a portfolio of electronic cigarette, personal vaporizer and pocket lighter patents, and several trademarks, which intellectual property forms the basis for our efforts to:

Recent Developments

Effective March 2026, Greg Pan ceased to be a member of the General Partner. Accordingly, Kevin Frija, our Chief Executive Officer, is now the sole member of the General Partner.

On April 28, 2026, Soleil Capital Management LLC, the Company's general partner (the "General Partner") executed the Third Amendment (the "Third Amendment") to the Company's Limited Partnership Agreement, as amended (the "Partnership Agreement"), in order to amend the terms of the Company's Class A preferred units.

The designation, powers, preferences and rights of the Class A preferred units and the qualifications, limitations and restrictions thereof are summarized as follows:

Number and Stated Value. The number of authorized Class A preferred units is 250,000,000. Each Class A preferred unit will have a stated value of $1.00 (the "Stated Value").

The Third Amendment had the effect of increasing the number of authorized Class A preferred units from 1,000,000 to 250,000,000, and decreasing the stated value from $2.00 to $1.00 per unit.

Rights. Except as set forth in the Third Amendment, each Class A preferred unit has all of the rights, preferences and obligations of the common units as set forth in the Partnership Agreement and will be treated as a common unit for all other purposes of the Partnership Agreement.

Dividends. The Class A preferred units have no mandatory dividend or distribution rights, and any distributions on or with respect to the Class A preferred units will be at the sole discretion of the Company.

The Third Amendment had the effect of eliminating an annual dividend.

Voting. The Class A preferred units have no voting rights other than as required by applicable law, and, for the avoidance of doubt, the Class A preferred units have no management rights or other governance participation of any kind.

Liquidation. The Class A preferred units have no preferential rights on any liquidation or dissolution of the Company, and rank pari passu with the Company's common units on any liquidation or dissolution of the Company.

The Third Amendment had the effect of eliminating preferential rights of the Class A preferred units upon liquidation or dissolution of the Company equal to any accrued by unpaid dividends.

Non-transferable. The Class A preferred units are not transferable without the prior written consent of the Company, to be given or withheld in the sole discretion of the Company.

Conversion Rights. Each Class A preferred unit is convertible into common units of the Company at any time following the date on which the closing price of the common units for the preceding 20 consecutive trading days has equaled or exceeded $1.15 (the "Conversion Commencement Date"), subject to adjustment as set forth in the Third Amendment (the "Conversion Price"); provided, however, that if the Conversion Commencement Date has not occurred on or before July 31, 2030, the Class A preferred units will not be convertible into common units. Each Class A preferred unit is convertible into a number of conversion units equal to (x) the Stated Value, divided by the Conversion Price, subject to a 4.99% equity blocker, which may be waived by the Class A preferred unit holder upon not less than 61 days' prior notice to the Company.

The Third Amendment had the effect of revising the conversion rights of the Class A preferred units. Prior to adopting the Third Amendment, the Class A preferred units were convertible, at the option of the holder thereof, into a number of common units equal to (x) the then-stated value of $2.00 plus any accrued and unpaid dividends, divided by (y) the conversion price, equal to 85% of the 5-trading day VWAP, subject to a 4.99% equity blocker that could be waived by the Class A preferred unit holder upon not less than 61 days' prior notice to the Company.

Financial Condition

For the three months ended March 31, 2026 and 2025, we generated revenue of $580,071 and $885,283, respectively, reported net income (loss) before taxes of $2,590,821 and $(290,864), respectively, and net cash provided by (used in) operating activities of $2,574,493 and $(333,358) at March 31, 2026 and 2025, respectively. As noted in our accompanying unaudited condensed financial statements, we reported an accumulated deficit of $6,850,017 and $8,790,579 as of March 31, 2026 and December 31, 2025, respectively.

Results of Operations

Three Months Ended March 31, 2026, Compared to Three Months Ended March 31, 2025

Revenue

Our revenue from product sales for the three months ended March 31, 2026 and 2025 was $580,071 and $885,283, respectively. Royalty revenue for the three months ended March 31, 2026, and 2025 was $0 and $48,045, respectively. The decrease in product and royalty revenue was a result of the business trend experienced since 2024 of declining customer sales and licensing of intellectual property.

Cost of Sales

Cost of sales for the three months ended March 31, 2026, and 2025 was $441,497 and $712,386, respectively. Gross margins stabilized at 24% for the three months ended March 31, 2026, and 2025.

Operating Expenses

Operating expenses for the three months ended March 31, 2026, were $603,041, as compared to $496,459 for the three months ended March 31, 2025. The increase of $106,580 was a result of increases in professional fees and trade show costs, offset by reduction in marketing expense.

Other Income (Expense)

Other income for the three months ended March 31, 2026, was $3,055,288, compared to other expense of $(15,347) for the three months ended March 31, 2025, representing an increase of $3,070,635, due to the cash received in January 2026 from the EBL settlement.

Net Income (Loss)

Net income for the three months ended March 31, 2026, was $1,940,561, compared to net (loss) of $(290,864) for the three months ended March 31, 2025. The increase in net income was due to the EBL settlement.

Liquidity and Capital Resources

The following table sets forth a summary of our net cash flows for the periods indicated:

Cash provided by operating activities was $2,574,493 for the three months ended March 31, 2026, compared to cash used in operating activities of $333,358 for the three months ended March 31, 2025. The increase in cash provided by operating activities was primarily attributable to net income of $1,940,561 during the three months ended March 31, 2026, as compared to a net loss of $290,864 during the corresponding prior-year period. The increase was further driven by favorable changes in working capital, including decreases in accounts receivable and inventory, as well as an increase in tax liabilities. These increases were partially offset by decreases in accounts payable and accrued expenses and vendor deposits.

Net cash used in financing activities was $12,891 for the three months ended March 31, 2026, compared to $75,792 for the three months ended March 31, 2025. The decrease in cash used in financing activities was primarily due to lower repayments of convertible notes and notes payable during the current period.

Assets

At March 31, 2026, and December 31, 2025, we had total assets of $4,067,822 and $1,593,684, respectively. Assets primarily consisted of the cash accounts held by the Company, inventory, vendor deposits, accounts receivable and a right-of-use asset. During the three months ended March 31, 2026, the Company's accounts receivable decreased by $60,945, and inventory decreased by $82,499, as compared to December 31, 2025.

Liabilities

On March 31, 2026, and December 31, 2025, we had total liabilities of $2,449,905 and $1,904,637, respectively. The increase in liabilities was mainly due to the income tax provision of $650,260 recorded for the period ended March 31,2026.

Availability of Additional Funds

Our capital requirements going forward will consist of financing our operations until we are able to reach a level of revenue and gross margins adequate to equal or exceed our ongoing operating expenses. We do not have any credit agreement or source of liquidity immediately available to us.

Since inception, our operations have primarily been funded through proceeds from equity and debt financing. At March 31, 2026, we had $2,686,947 of cash on hand. Although we believe that we have access to capital resources, there are no commitments in place for new financing as of the filing date of this Quarterly Report on Form 10-Q and there can be no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. We expect to have ongoing needs for working capital in order to (a) fund operations; plus (b) fund strategic acquisitions. To that end, we may be required to raise additional funds through equity or debt financing. However, there can be no assurance that we will be successful in securing additional capital. If we are unsuccessful, we may need to (a) initiate cost reductions; (b) forego business development opportunities; (c) seek extensions of time to fund its liabilities, or (d) seek protection from creditors.

In addition, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our unitholders or that result in our unitholders losing all of their investment in our Company.

If we are able to raise additional capital, we do not know what the terms of any such capital raising would be. In addition, any future sale of our equity securities would dilute the ownership and control of your units and could be at prices substantially below prices at which our units currently trade. Our inability to raise capital could require us to significantly curtail or terminate our operations. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our unitholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties.

Our unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"), which contemplate our continuation as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the unaudited condensed financial statements do not necessarily purport to represent realizable or settlement values. The unaudited condensed financial statements do not include any adjustment that might result from the outcome of this uncertainty.

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, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. Our significant accounting policies are described in notes accompanying the financial statements. The preparation of the financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. Estimates are based on information available as of the date of the financial statements, and accordingly, actual results in future periods could differ from these estimates. Significant judgments and estimates used in the preparation of the financial statements apply critical accounting policies described in the notes to our financial statements.

We consider the recognition and related assumptions used in determining the collectability of accounts receivable and the realizability of the deferred tax assets and liabilities to be most critical in understanding the judgments that are involved in the preparation of our financial statements.

Together with our critical accounting policies set out below, our significant accounting policies are summarized in Note 2 to our unaudited condensed financial statements as of and for the three months ended March 31, 2026.

Accounts Receivable

We recognize an allowance for expected credit losses in accordance with Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses, issued by the Financial Accounting Standards Board ("FASB"). This ASU establishes a current expected credit loss model, which requires us to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

To estimate expected credit losses, we segregated our receivables into four risk-based categories, each reflecting distinct credit risk characteristics. A loss rate was then applied to each category based on historical experience and anticipated losses given the associated risk factors.

An allowance for credit losses is recorded through a provision for bad debts charged to earnings. The evaluation of expected credit losses is inherently subjective and requires management to make estimates that may be subject to significant revision as additional information becomes available.

As of March 31, 2026, and December 31, 2025, the Company had an allowance for an expected credit loss of $101,602 and $105,792, respectively.

Income Taxes

The Company has recorded income taxes in accordance with ASC 740, "Income Taxes," which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Additionally, the Company follows the provisions of FASB ASC 740-10, "Uncertainty in Income Taxes," which establishes recognition thresholds for tax positions. Under this standard, an entity may only recognize tax positions that meet a "more-likely-than-not" threshold. As of March 31, 2026 and December 31, 2025, the Company does not believe it has any uncertain tax positions that would require recognition or disclosure in the accompanying unaudited condensed financial statements.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that may have an impact on the Company's accounting and reporting.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This update aims to enhance transparency for users of financial statements by requiring public business entities to disaggregate specific expense categories. The update mandates disclosures in the notes to financial statements, detailing the composition and trends of key expense categories within major income statement captions. These enhanced disclosures are expected to help investors more effectively assess the entity's performance, understand its cost structure, and make more accurate forecasts of future cash flow. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the potential impact of ASU 2024-03 on its financial reporting and disclosures.

In January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), which revises the effective date of ASU 2024-03 (on disclosures about disaggregation of income statement expenses) "to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027." Entities within the ASU's scope are permitted to early adopt the ASU. The Company is currently evaluating the potential impact of ASU 2024-03 on its financial reporting and disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instrument-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This ASU affects entities that apply the practical expedient and accounting policy election (if applicable) when estimating expected credit losses on current accounts receivable and/or current contract assets arising from transactions under Topic 606, including those assets acquired in a transaction accounted for under Topic 805, Business Combinations. The amendments will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the potential impact of ASU 2025-05 on its financial reporting and disclosures.

Disclaimer

VPR Brands LP published this content on May 18, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 18, 2026 at 10:04 UTC.