Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-54545

VPR Brands, LP

(Exact name of registrant as specified in its charter)

Delaware		45-1740641
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1141 Sawgrass Corporate Parkway, Sunrise, FL

33323

(Address of principal executive offices) (zip code)

(954) 715-7001

(Registrant's telephone number, including area code)

3001 Griffin Road, Fort Lauderdale, FL 33312

Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of units outstanding of each of the registrant's classes of common units as of the latest practicable date.

Class		Outstanding at November 14, 2024:
Common Units, No par value		91,746 806 Units

TABLE OF CONTENTS

	Page No
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements.
Condensed Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023	1
Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)	2
Condensed Statements of Changes in Partners' Capital Surplus for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)	3
Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (unaudited)	4
Notes to Unaudited Condensed Financial Statements	5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	31
Item 4. Controls and Procedures.	31
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.	33
Item 1A. Risk Factors.	33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	33
Item 3. Defaults Upon Senior Securities.	33
Item 4. Mine Safety Disclosures.	33
Item 5. Other Information.	33
Item 6. Exhibits.	34

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "likely," "aim," "will," "would," "could," and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs.

You should read thoroughly this report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements including those made in this report, in Part I. Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended December 31, 2023 and our other filings with the Securities and Exchange Commission.

Other sections of this report include additional factors which could adversely impact our business and financial performance. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

OTHER PERTINENT INFORMATION

Unless specifically set forth to the contrary, when used in this report the terms "VPR Brands" the "Company," "we," "our," "us," and similar terms refer to VPR Brands, LP, a Delaware limited partnership.

The information which appears on our website (www.vprbrands.com) is not part of this report.

PART I - FINANCIAL INFORMATION

VPR BRANDS, LP

CONDENSED BALANCE SHEETS

		September 30,			December 31,
		2024			2023
		(Unaudited)
ASSETS
Current Assets:
Cash		$	1,523,599			$	1,767,260
Accounts receivable, net			589,543				337,774
Royalty receivable			90,463				88,286
Inventory, net			848,551				563,503
Vendor deposits			133,660				270,593
Other current assets			17,258				15,558
Total current assets			3,203,074				3,042,974
Right to use asset			97,143				118,439
Intangible assets			28,333				29,833
Total assets		$	3,328,550			$	3,191,246
LIABILITIES AND PARTNERS' SURPLUS
Current Liabilities:
Accounts payable and accrued expenses		$	517,220			$	207,560
Accounts payable - related party			28,027				47,047
Customer deposits			9,489				66,035
Lease liabilities, current portion			32,672				27,903
Notes payable, current portion			271,797				21,797
Note payable-related parties			-				165,810
Refund liability			182,545				186,485
Convertible notes payable			186,478				481,190
Income tax payable			808,390				879,803
Total current liabilities			2,036,618				2,083,630
Notes payable, less current portion			147,237				397,237
Lease liabilities, net of current portion			70,965				96,069
Total liabilities			2,254,820				2,576,936
Partners' Surplus
Series A preferred units - 1,000,000 units authorized; 0 units issued and outstanding as of September 30, 2024 and December 31, 2023.			-				-
Common units - 100,000,000 units authorized; 91,746,806 and 88,804,035 units issued and outstanding as of September 30, 2024 and December 31, 2023, respectively			8,312,674				8,065,481
Common units to be issued; 578,723 units			34,723				34,723
Accumulated deficit			(7,273,667	)			(7,485,894	)
Total Partners' surplus			1,073,730				614,310
Total liabilities and Partners' surplus		$	3,328,550			$	3,191,246

The accompanying notes are an integral part of these unaudited condensed interim financial statements.

VPR BRANDS, LP

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

		Three Months Ended			Nine Months Ended
		September 30,			September 30,
		2024			2023			2024			2023
Revenues
Product sales		$	1,326,199			$	805,185			$	4,121,090			$	5,041,344
Royalty revenue			116,764				2,735,224				609,765				3,489,615
Total revenues			1,442,963				3,540,409				4,730,855				8,530,959
Cost of Sales			1,008,960				569,508				3,368,527				3,941,293
Gross profit			434,003				2,970,901				1,362,328				4,589,666
Operating Expenses:
Selling, general and administrative			611,028				533,700				1,938,659				1,391,264
Unit-based compensation			247,193				-				247,193				-
Total operating expenses			858,221				533,700				2,185,852				1,391,264
Net Operating (Loss) Income			(424,218	)			2,437,201				(823,524	)			3,198,402
Other Income (Expense):
Settlement income, net			511,823				571,876				1,502,854				936,642
Other Income			5,644				-				5,644				-
Loan forgiveness			-				10,931				-				10,931
Interest income			601				372				2,102				372
Interest expense			(245,402	)			(65,003	)			(328,306	)			(213,431	)
Interest expense- related parties			-				(4,161	)			(2,504	)			(28,064	)
Total other income (expense), net			272,666				514,015				1,179,790				706,450
Net Income (Loss) before Provision for Income Tax			(151,552	)			2,951,216				356,266				3,904,852
Provision for Income Taxes			15,332				-				144,039				-
Net Income (Loss)		$	(166,884	)		$	2,951,216			$	212,227			$	3,904,852
Net Income (Loss) Per Common Unit - Basic		$	(0.00	)		$	0.03			$	0.00			$	0.04
Net Income (Loss) Per Common Unit - Diluted		$	(0.00	)		$	0.03			$	0.00			$	0.04
Weighted-Average Common Units Outstanding - Basic			89,935,870				88,804,035				89,179,936				88,804,035
Weighted-Average Common Units Outstanding - Diluted			89,935,870				94,694,205				89,179,936				94,694,205

The accompanying notes are an integral part of these unaudited condensed interim financial statements.

VPR BRANDS, LP

CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL SURPLUS

(Unaudited)

																	Total
								Common Units						Partners'
		Common Units			to be Issued			Accumulated			Capital
		Number			Amount			Number			Amount			Deficit			Surplus
Nine Months Ended September 30, 2023
Balance at December 31, 2022			88,804,035			$	8,065,481				578,723			$	34,723			$	(10,418,696	)		$	(2,318,492	)
Net Income			-				-				-				-				25,314				25,314
Balance at March 31, 2023			88,804,035				8,065,481				578,723				34,723				(10,393,382	)			(2,293,178	)
Net Income			-				-				-				-				928,322				928,322
Balance at June 30, 2023			88,804,035				8,065,481				578,723				34,723				(9,465,060	)			(1,364,856	)
Net Income			-				-				-				-				2,951,216				2,951,216
Balance at September 30, 2023			88,804,035				8,065,481				578,723				34,723				(6,513,844	)			1,586,360
Nine Months Ended September 30, 2024
Balance at December 31, 2023			88,804,035			$	8,065,481				578,723			$	34,723			$	(7,485,894	)		$	614,310
Net Income			-				-				-				-				203,059				203,059
Balance at March 31, 2024			88,804,035			$	8,065,481				578,723			$	34,723				(7,282,835	)			817,369
Net Income			-				-				-				-				176,052				176,052
Balance at June 30, 2024			88,804,035			$	8,065,481				578,723			$	34,723				(7,106,783	)			993,421
Units issued for Compensation			2,942,771				247,193				-				-				-				247,193
Net Loss			-				-				-				-				(166,884	)			(166,884	)
Balance at September 30, 2024			91,746,806			$	8,312,674				578,723			$	34,723				(7,273,667	)			1,073,730

The accompanying notes are an integral part of these unaudited condensed interim financial statements.

VPR BRANDS, LP

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

		Nine Months Ended
		September 30,
		2024			2023
Cash Flows from Operating Activities:
Net income		$	212,227			$	3,904,852
Adjustments to reconcile net income to cash provided by operating activities:
Amortization of right of use asset			21,296				20,957
Amortization of intangible			1,500				-
Provision for inventory obsolescence			29,979				-
Interest on lease liability			12,107				16,157
Loan forgiveness			-				(10,931	)
Allowance for expected credit losses expense			14,494				-
Bad debt expense			8,177				-
Unit based compensation			247,193				-
Changes in operating assets and liabilities:
Royalty receivable			(2,177	)			(106,113	)
Inventory			(315,027	)			(58,254	)
Vendor deposits			136,933				367,398
Accounts receivable			(274,440	)			(223,181	)
Customer deposits			(56,546	)			(523,702	)
Other current assets			(1,700	)			(3,426	)
Refund liability			(3,940	)			-
Accounts payable related party			(19,020	)			-
Accounts payable and accrued expenses			309,660				(319,241	)
Income tax payable			(71,413	)			-
Net cash provided by operating activities			249,303				3,064,516
Cash Flows from Financing Activities:
Payments of notes payable			-				(370,072	)
Payments of convertible notes payable			(294,712	)			(221,609	)
Payments of notes payable, related parties			(165,810	)			(627,639	)
Payments on lease liability			(32,442	)			(34,423	)
Net cash used in financing activities			(492,964	)			(1,253,743	)
Change in Cash			(243,661	)			1,810,773
Cash - Beginning of the Year			1,767,260				22,421
Cash - End of the Year		$	1,523,599			$	1,833,194
Supplemental Cash Flow Information:
Income tax paid in cash		$	215,452				-
Interest paid in cash		$	146,928			$	217,592
Schedule of Non-Cash Investing and Financing Activities:
Loan forgiveness		$	-			$	10,931

The accompanying notes are an integral part of these unaudited condensed interim financial statements.

VPR BRANDS, LP

NOTES TO CONDENSED FINANCIAL STATEMENTS

For the three AND Nine months ended September 30, 2024 AND 2023

(Unaudited)

NOTE 1. ORGANIZATION

VPR Brands, LP (the "Company", "we", "our") was incorporated in New York on July 19, 2004, as Jobsinsite.com, Inc. On August 5, 2004, we changed our name to Jobsinsite, Inc. On June 18, 2009, we merged with a Delaware corporation and became Jobsinsite, Inc. On July 1, 2009, we filed articles of conversion with the secretary of state of Delaware and became Soleil Capital L.P., a Delaware limited partnership. On September 2, 2015, we changed our name to VPR Brands, LP. We are managed by Soleil Capital Management LLC, a Delaware limited liability company.

The Company is engaged in various monetization strategies of a U.S. patent that the Company owns covering electronic cigarette, electronic cigar and personal vaporizer patents, as well as a patent for an inverted pocket lighter. The Company also has several trademarks (ELF, PHANTOM, HRB, VPOD, VAPOR X, and RIPPER) for which it is also engaged in licensing and various monetization strategies. The Company also designs, develops, markets and distributes products (the HoneyStick brand of vaporizers and the Goldline CBD products) oriented toward the cannabis markets. This allows us to capitalize on the rapidly growing expansion within the cannabis markets. The Company is also identifying electronic cigarette companies that may be infringing our patents and trademarks and exploring options to license and/or enforce our patents. The Company is now also selling DISSIM brand pocket lighters for which it holds a U.S. patent and patents pending. The Company also has patents pending in the cigar accessory space and sells these proprietary accessories.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed financial statements are prepared in accordance with instructions for Form 10-Q, include all adjustments (consisting only of normal recurring accruals) which we considered as necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission. The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for future periods or the full year.

Use of Estimates

GAAP requires the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, the reported amounts of revenues and expenses, cash flows and the related footnote disclosures during the period. On an on-going basis, the Company reviews and evaluates its estimates and assumptions. Actual results could differ from these estimates.

Financial Condition

As reflected in the financial statements, the Company generated cash flows from operations of $249,303 for the nine months ended September 30, 2024 and had positive working capital of $ 1,166,456 and had cash of $1,523,599 as of September 30, 2024. These factors serve to mitigate the conditions that historically raised substantial doubt about the Company's ability to continue as a going concern. The Company believes that the Company has sufficient cash and positive cash flows to meet its obligations for a minimum of twelve months from the date of issuance of these financial statements.

Cash

Cash is carried at cost and represents cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. The Company had no cash equivalents on September 30, 2024 and December 31, 2023. The Company's cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation ("FDIC") limit. To date, the Company has not experienced any losses on its invested cash. On September 30, 2024 and December 31, 2023, the Company had approximately $702,902 and $947,184, respectively, of cash in excess of FDIC limits of $250,000. Any loss incurred or a lack of access to such funds above the FDIC limit could have a significant adverse impact on the Company's financial condition, results of operations and cash flows.

Accounts Receivable and Royalty Receivable

The Company recognizes an allowance for expected credit losses in accordance with the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, "Financial Instruments - Credit Losses." This ASU sets forth a current expected credit loss model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. An allowance for credit losses is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. This evaluation is inherently subjective and requires estimates that are susceptible to significant revisions as more information becomes available.

As of September 30, 2024 and December 31, 2023, the Company had an allowance for expected credit loss of $25,419 and $ 10,925, respectively.

Inventory

Inventory consisting of finished products is stated at the lower of cost or net realizable value. At each balance sheet date, the Company evaluates its ending inventories for excess quantities and obsolescence. This evaluation primarily includes an analysis of forecasted demand in relation to the inventory on hand, among consideration of other factors. The physical condition (e.g., age and quality) of the inventories is also considered in establishing its valuation. Based upon the evaluation, provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the respective inventories. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from the amounts that the Company may ultimately realize upon the disposition of inventories if future economic conditions, customer inventory levels, product discontinuances, sales return levels or competitive conditions differ from the Company's estimates and expectations. As of September 30, 2024 and December 31, 2023, the provision for potential inventory obsolescence was $ 29,979 and $ 0, respectively.

Leases

The Company applied the FASB's Accounting Standards Codification ("ASC") Topic 842, Leases (Topic 842) to arrangements with lease terms of 12 months or more. Operating lease right of use assets ("ROU") represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the statements of operations.

The Company has an operating lease principally for warehouse and office space. Management evaluates each lease independently to determine the purpose, necessity to its future operations in addition to other appropriate facts and circumstances.

Revenue Recognition

The Company recognizes revenue when the risk gets transferred to the customer which occurs at a point in time, typically upon shipment of promised goods. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

Revenues from product sales are recognized when the risk got transferred to the customer which occurred at a point in time, typically upon shipment of promised goods to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial.

Royalty revenues consist of license and sublicense agreements to use the Company's intellectual property in exchange for a sales-based royalty. Royalty revenue is recognized over time as the performance obligations are satisfied by licensees and sublicensees through sales of licensed products.

The Company records contract liabilities when cash payments are received or due in advance of satisfaction of performance obligations by licensees and sublicensees. During the year ended December 31, 2023, the Company received cash payments totaling $3,000,000 for the prepayment of royalties pursuant to a license agreement executed on January 2, 2023. The license agreement provides for monthly royalties to the Company totaling 5% of gross sales of licensed products by licensee and provides the licensee exclusive use of certain trademark and patent assets for an initial term of six months commencing March 2023 and expiring in September 2023. The Company recognized the prepaid royalties over the initial term of exclusivity. The license agreement required a monthly minimum royalty payments of $500,000 to maintain exclusivity on a month-to-month basis beyond September 2023. The minimum royalty payments were not met, so the agreement continued on a non-exclusive basis, with monthly royalties to the Company totaling 5% of gross sales of licensed products by the licensee and provides the licensee with non-exclusive use of certain trademark and patent assets.

The sublicense agreement executed in March 2023 provided for monthly royalties to the Company totaling 5% of gross sales of licensed products by sublicensee and provides the sublicensee exclusive use of certain trademark and patent assets in exchange for minimum monthly royalty payments totaling $250,000 beginning June 2023.

During the year ended December 31, 2023, the sublicensee, licensee, and Company agreed that the Company would not require the minimum monthly royalty payments. Instead, sublicensee would continue to pay 5% of gross sales as royalty, and the licensee would match this royalty payment if their calculated royalty would have been less than what the sublicensee paid. The Company recognizes sublicense royalty revenue on the basis of royalty statements for the period.

Voluntary Recall

In February 2024, the Company initiated a voluntary recall of approximately 62,200 lighters due to a missing child safety feature. Under ASC 606, these products are not eligible for revenue recognition, as revenue cannot be recognized for amounts that are not expected to be entitled. Consequently, the Company recorded this as a refund liability. For the year ended December 31, 2023, the total impact of the recall, amounting to $198,068, has been recognized against revenues and receivables for potential credits associated with the recalled products.

During the nine months ended September 30, 2024, $473 was refunded to retail consumers in cash, and $79,670 in credits was issued to wholesale and distributor customers. Only $3,467 of the credits were utilized during the nine months ended September 30, 2024, the remaining unutilized credits are still included in the refund liability. The Company anticipates issuing refunds related to the recall throughout the year and will continue to evaluate potential losses.

As of September 30, 2024, and December 31, 2023, the refund liability was $182,545 and $ 186,485, respectively.

The following table provides information about accounts receivable, royalty receivable from contracts with customers and the refund liability as of September 30, 2024 and December 31, 2023:

		Accounts			Royalty			Refund
		Receivable			Receivable			Liability
December 31, 2023		$	337,774			$	88,286			$	186,485
September 30, 2024		$	589,543			$	90,463			$	182,545

Unit-Based Compensation

The Company may issue restricted units to consultants for various services. Costs for these transactions will be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is to be measured at the earlier of: (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached, or (ii) the date at which the counterparty's performance is complete. The Company may issue units as compensation in future periods for services associated with the registration of the common units.

Unit-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair value, in accordance with ASC Topic 718. This expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (typically the vesting period).

For the three and nine months ended September 30, 2024, the Company recognized $247,193 in unit-based compensation for the issuance of 2,942,771 common units to three employees, including the Chief Executive Officer and Chief Operating Officer in exchange for services provided. The expense was recognized at the grant date as the units were fully vested and issued as additional compensation for services already performed.

Convertible Instruments

The Company accounts for convertible instruments in accordance with ASU 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." This update significantly simplifies the accounting for convertible instruments by eliminating the requirement to bifurcate embedded conversion options from their host instruments, unless the conversion feature independently meets the definition of a derivative under ASC 815, Derivatives and Hedging Activities. Under ASC 815, a conversion feature is treated as a derivative only if its economic characteristics and risks are not clearly and closely related to those of the host contract, and other specific conditions are met.

When it is determined that the embedded conversion options do not require bifurcation, the entire convertible instrument is accounted for as a single liability at amortized cost. Discounts or premiums on convertible instruments are recognized based on the difference between the proceeds received and the principal amount and are amortized over the life of the instrument using the effective interest method.

In the rare instances where a conversion option is bifurcated and accounted for as a derivative, the Company would apply the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the units issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.

Fair Value

The carrying values of the Company's notes payables, convertible notes, and accounts payable and accrued expenses approximate their fair values because of the short-term nature of these instruments.

Basic and Diluted Net Income (Loss) Per Unit

The Company computes net income per unit in accordance with FASB ASC 260, "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the statement of operations. Basic EPS is computed by dividing net income/(loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible notes, using the if-converted method. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.

For the three- and nine-month periods ending September 30, 2023, 5,890,170 units underlying convertible debt were dilutive and were included in the earnings per share calculation.

For the three- and nine-month periods ending September 30, 2024, 1,864,780 units underlying convertible debt were antidilutive and excluded from the dilutive earnings per share calculation.

The following summarizes the calculation of basic and diluted income per unit for the three and nine months ended September 30, 2024 and September 30, 2023:

		For the Three Months Ended September 30,			For the Nine Months Ended September 30,
		2024			2023			2024			2023
Net income (loss) per common unit - basic:
Net income (loss) allocated to common unit holders		$	(166,884	)		$	2,951,216			$	212,227			$	3,904,852
Weighted average common units outstanding - basic			89,935,870				88,804,035				89,179,936				88,804,035
Net income (loss) per common unit - basic		$	(0.00	)		$	0.03			$	0.00			$	0.04
Net income (loss) per common unit - diluted:
Net income (loss) allocated to common unit holders - basic		$	(166,884	)		$	2,951,216			$	212,227			$	3,904,852
Add: tax adjusted interest convertible debt			-				34,420				-				133,571
Net income (loss) allocated to common unit holders -diluted		$	(166,884	)		$	2,985,636			$	212,227			$	4,038,423
Weighted average common units outstanding - basic			89,935,870				88,804,035				89,179,936				88,804,035
Add: diluted units related to convertible debt			-				5,890,170				-				5,890,170
Weighted average common units outstanding - diluted			89,935,870				94,694,205				89,179,936				94,694,205
Net income (loss) per common unit - diluted		$	(0.00	)		$	0.03			$	0.00			$	0.04

Provision for Income Taxes

The Company has recorded income taxes in accordance with ASC 740, "Income Taxes." This standard necessitates 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.

The Company follows the provisions of FASB ASC 740-10, "Uncertainty in Income Taxes". Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a "more-likely-than-not" threshold. The Company does not believe it has any uncertain tax positions as of September 30, 2024 and December 31, 2023 that would require either recognition or disclosure in the accompanying unaudited financial statements.

During the three and nine months ended September 30, 2023, the Company had minimal net income and a history of losses, and did not anticipate having a tax liability, so no provision for income tax was recorded.

During the three and nine months ended September 30, 2024, the Company made tax payments totaling $215,452. The Company recorded provisions for income tax expense of $15,332 and $144,039 were recorded for the three- and nine-month periods, respectively

The Company's tax liability decreased from $879,803 as of December 31, 2023, to $808,390 as of September 30, 2024, primarily due to the impact of these provisions and payments.

The Company's 2023 tax return included the use of net operating loss (NOL) carryforwards to reduce taxable income. Due to uncertainty regarding the acceptance of these NOLs and the judgment that the NOLs do not meet the "more-likely-than-not" threshold of acceptance, the Company has recorded an estimated liability of $212,050 for potential penalties and interest associated with a possible disallowance of these NOLs. This amount has been included in accounts payable and accrued expenses and classified as interest expense on the Statement of Operations.

The items accounting for the difference between income taxes at the effective Federal statutory rate and the provision for income taxes for the three and nine months ended September 30, 2024 were as follows:

		Three Months Ended September 30, 2024			Nine Months Ended September 30, 2024
Income tax expense at U.S. statutory rate		$	12,704			$	119,346
State income taxes, net of federal benefit			2,628				24,693
Valuation allowance							-
Provision for income tax expense		$	15,332			$	144,039

The provision for income taxes, effective tax rate, statutory federal income tax rate, and rate reconciliation for the three and nine months ended September 30, 2024, and 2023 were as follows:

		Three Months Ended September 30,			Nine Months Ended September 30,
		2024			2023			2024			2023
Provision for Income Taxes Expenses		$	15,332			$	-			$	144,039			$	-
Statutory Federal Income Tax Rate			21.00	%			21.00	%			21.00	%			21.00	%
State Income taxes, net of federal benefit			4.35	%			4.35	%			4.35	%			4.35	%
Valuation Allowance			-				(25.35	)%			-				(25.35	)%
Effective Tax Rate			25.35	%			-				25.35	%			-

The Company's effective tax rate for the three and nine months ended September 30, 2024 was higher than the statutory federal income tax rate, primarily due to state income taxes. Additionally, the effective tax rate for the three- and nine-months September 30, 2024 was higher compared to the period in 2023 because the Company had losses to offset income, which were fully utilized during 2023.

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. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flow when implemented.

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 flows. 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.

On March 21, 2024, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2024-01 ("ASU 2024-01"), which clarifies how an entity determines whether a profits interest or similar award is (1) within the scope of ASC 718 or (2) not a share-based payment arrangement and therefore within the scope of other guidance. The guidance in ASU 2024-01 applies to all entities that issue profits interest awards as compensation to employees or nonemployees in exchange for goods or services. ASU 2024-01 is effective for public business entities for annual periods beginning after December 15, 2024, including interim periods within those periods. The Company is currently evaluating the impact of the adoption of ASU 2024-01 on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes-Improvements to Income Tax Disclosures. This guidance enhances the transparency and decision usefulness of income tax disclosures. More specifically, the amendments relate to the income tax rate reconciliation and income taxes paid disclosures and require 1) consistent categories and greater disaggregation of information in the rate reconciliation and 2) income taxes paid disaggregated by jurisdiction. This guidance is effective for fiscal years beginning after December 15, 2024.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 47020) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 81540): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which is intended to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. The guidance allows for either full retrospective adoption or modified retrospective adoption. The guidance became effective for the Company as of January 1, 2024. The adoption of this standard did not have a material impact on our financial statements, as our existing convertible instruments issued prior to January 1, 2024, did not have bifurcated conversion features and were past due by the effective date. Future issuances of convertible instruments will comply with the new standard, which may simplify both measurement and disclosure of these instruments.

NOTE 3: INTELLECTUAL PROPERTY

On November 16, 2023, the Company entered into a Bill of Sale and Assignment and Assumption Agreement with CartDub LLC, a Florida corporation ("Seller"), to purchase certain intangible assets for a total purchase price of $30,000.

The Company has allocated the purchase price among the acquired intangible assets based on their fair values at the acquisition date. These intangible assets are considered to have definite lives and will be amortized on a straight-line basis over their estimated useful lives, which are as follows:

Purchased Asset		Purchase Price			Useful Life
Intellectual Property		$	15,000			15 years
Trademarks			10,000			15 years
Trade name			5,000			15 Years
Total Intangible Assets		$	30,000

Amortization expense related to these intangible assets is recognized in the general and administrative expenses income statement line item and is included in the Company's financial statements for the three and nine months ended September 30, 2024.

For the three months ended September 30, 2024, the amortization expense for intangible assets was $500, and for the nine months ended September 30, 2024, it was $1,500. There was noamortization of intangible assets expense for the three and nine months ended September 30, 2023.

The following table presents the future amortization expense related to the acquired intangible assets:

For the fiscal year ending December 31,		Amortization Expense
2024 (remaining)		$	500
2025			2,000
2026			2,000
2027			2,000
2028			2,000
Thereafter			19,833
		$	28,333

NOTE 4: NOTES PAYABLE

On September 6, 2018, the Company issued the Amended and Restated Secured Promissory Note in the principal amount of $582,260 (the "A&R Note"). The principal amount of the A&R Note represents (i) $500,000 which Healthier Choices Management Corp. (HCMC) loaned to the Company on September 6, 2018, and (ii) $82,260, which represents the aggregate amount owed by the Company under the Original Notes as of September 6, 2018. The A&R Note, which has a maturity date of September 6, 2021, had the effect of amending and restating the Note and bears interest at the rate of 7% per annum. Pursuant to the terms of the A&R Note, the Company agreed to pay HCMC 155 weekly payments of $4,141, commencing on September 14, 2018 and ending on September 14, 2021, and a balloon payment for all remaining accrued interest and principal in the 156th week. The Company at its option has the right, by giving 15 business days' advance notice to HCMC, to prepay a portion or all amounts outstanding under the A&R Note without penalty or premium. The balance of the note as of December 31, 2022 was $189,225, which was repaid during the year ended December 31, 2023.

On September 24, 2019, the Company entered into a working capital account agreement with Paypal Working Capital ("Paypal Note"), pursuant to which the Company borrowed $37,000, requiring repayment in amounts equal to 30% of sales collections processed through Paypal, but no less than $4,143, every 90 days, until the total amount of payments equals $41,430. The balance of the loan as of September 30, 2024 and December 31, 2023 was $21,797.

In October 2022, the Company entered into a purchase and sale agreement with BRMS, LLC ("BRMS Note 2"), pursuant to which the Company received proceeds of $250,000, to be remitted to BRMS, LLC in 52 weekly amounts totaling $1,140 bearing interest at 18.56% per annum. The balance of the note as of December 31, 2022 was $224,038, which was repaid during the year ended December 31, 2023.

Economic Injury Disaster Loan

On July 9, 2020 and June 24, 2020, the Company received an Economic Injury Disaster Loan ("EIDL") in the aggregate amount of $159,900, payable in monthly instalments of principal and interest totaling $731 over 30 years beginning in June 2021. The note accrues interest at an annual rate of 3.75%. The loan is secured by all tangible and intangible property. The balance on this EIDL was $147,237 and $147,237 as of September 30, 2024 and December 31, 2023, respectively, and have been classified as a long-term liability in notes payable, less current portion on the accompanying balance sheets.

Daiagi Note

On May 18, 2022, the Company issued a promissory note in the principal amount of $250,000 (the "Daiagi Note") to Mike Daiagi. The principal amount due under the Daiagi Note bears interest at the rate of 18% per annum payable monthly. The principal amount and accrued but unpaid interest are due and payable on the third anniversary of the issue date. The Daiagi Note and the amounts payable thereunder are unsecured obligations of the Company and shall be senior in right of payment and otherwise to all indebtedness, as provided in the Daiagi Note. The balance of the Daiagi Note was as of September 30, 2024 and December 31, 2023 was $250,000.

The following is a summary of notes payable activity for the nine months ended September 30, 2024:

Balance at December 31, 2023		$	419,034
Repayments of notes payable			-
Balance at September 30, 2024		$	419,034
Current portion			(271,797	)
Notes payable, less current portion		$	147,237

NOTE 5: NOTES AND ACCOUNTS PAYABLE - RELATED PARTIES

During the nine months ended September 30, 2024 and year ended December 31, 2023, the company repaid multiple unsecured promissory notes to Kevin Frija, who serves as its Chief Executive Officer, President, principal financial officer, principal accounting officer, Chairman of the Board, and a significant unitholder. These notes carried an interest rate of 24% per annum and permitted Mr. Frija to make one ACH payment withdrawal of $500, which increased to $1,500 per day for notes still outstanding in October of 2023, from the company's bank account per business day until the principal and accrued interest were fully repaid. The notes were issued on various dates between April 2021 and September 2022. All were due within a year of their respective issuance dates.

As of December 31, 2023 the outstanding balance of the remaining notes was $165,810. As of September 30, 2024 there is nooutstanding balance related to these notes.

During the year ended December 31, 2023 the Company repaid the notes amounting to $948,608 and during the nine month ended September 30, 2024 company has repaid the remaining notes amounting to $ 165,810.

The following is a summary of notes payable - related parties activity for the nine months ended September 30, 2024:

Balance at December 31, 2023		$	165,810
Repayments of principal			(165,810	)
Balance at September 30, 2024		$	-

NOTE 6: CONVERTIBLE NOTES PAYABLE

Brikor Note

On February 15, 2019, the Company issued a senior convertible promissory note in the principal amount of $200,000 to Brikor LLC. The principal amount due under the Brikor Note bears interest at the rate of 18% per annum. The principal amount and accrued but unpaid interest (to the extent not converted in accordance with the terms of the Brikor Note) is due and payable on the third anniversary of the issue date. The Brikor Note and the amounts payable thereunder are unsecured obligations of the Company and is senior in right of payment and otherwise to all indebtedness, as provided in the Brikor Note.

At any time after the first anniversary of the issue date, the holder may require the Company, upon at least 30 business days' written notice, to redeem all or any portion of the Brikor Note. The portion of the Brikor Note subject to redemption will be redeemed by the Company in cash.

The Brikor Note is convertible into common units of the Company. Pursuant to the terms of the Brikor Note, Brikor has the right, at its option, to convert any portion of the outstanding and unpaid Conversion Amount (as hereinafter defined) into common units in accordance with the provisions of the Brikor Note at the Conversion Rate (as hereinafter defined). The number of common units issuable upon conversion of any Conversion Amount will be determined by dividing (x) such Conversion Amount by (y) $0.10 (subject to adjustment as set forth in the Brikor Note) (such result, the "Conversion Rate"). "Conversion Amount" means the sum of (A) the portion of the principal balance of the Brikor Note to be converted with respect to which the determination is being made, (B) accrued and unpaid interest with respect to such principal balance, if any, and (C) the Default Balance (other than any amount thereof within the purview of foregoing clauses (A) or (B)), if any. In March 2022, the Company began making monthly payments of principal and interest of $1,860 at the default annual interest rate of 26.4%. The balance of the Brikor Note as of September 30, 2024 and December 31, 2023 was $36,951 and $95,965, respectively.

Daiagi and Daiagi Note

On February 15, 2019, the Company issued a senior convertible promissory note in the principal amount of $200,000 (the "Daiagi and Daiagi Note") to Mike Daiagi and Mathew Daiagi jointly (the "Daiagis"). The principal amount due under the Daiagi and Daiagi Note bears interest at the rate of 18% per annum. The principal amount and accrued but unpaid interest (to the extent not converted in accordance with the terms of the Daiagi and Daiagi Note) is due and payable on the third anniversary of the issue date. The Daiagi and Daiagi Note and the amounts payable thereunder are unsecured obligations of the Company and shall be senior in right of payment and otherwise to all indebtedness, as provided in the Daiagi and Daiagi Note.

At any time after the first anniversary of the issue date, the holder may require the Company, upon at least 30 business days' written notice, to redeem all or any portion of the Daiagi and Daiagi Note. The portion of the Daiagi and Daiagi Note subject to redemption will be redeemed by the Company in cash.

The Daiagi and Daiagi Note is convertible into common units of the Company. Pursuant to the terms of the Daiagi and Daiagi Note, the Daiagis have the right, at their option, to convert any portion of the outstanding and unpaid Conversion Amount into common units in accordance with the provisions of the Daiagi and Daiagi Note at the Conversion Rate. The number of common units issuable upon conversion of any Conversion Amount will be determined by dividing (x) such Conversion Amount by (y) $0.10 (subject to adjustment as set forth in the Daiagi and Daiagi Note). In March 2022, the Company began making monthly payments of principal and interest of $1,860 at the default annual interest rate of 26.4%. The balance of the Daiagi and Daiagi Note as of September 30, 2024 and December 31, 2023 was $36,951 and $95,965, respectively.

Amber Investments Note

On February 15, 2019, the Company issued a senior convertible promissory note in the principal amount of $200,000 (the "Amber Investments Note") to Amber Investments LLC ("Amber Investments"). The principal amount due under the Amber Investments Note bears interest at the rate of 18% per annum. The principal amount and accrued but unpaid interest (to the extent not converted in accordance with the terms of the Amber Investments Note) is due and payable on the third anniversary of the issue date. The Amber Investments Note and the amounts payable thereunder are unsecured obligations of the Company and shall be senior in right of payment and otherwise to all indebtedness, as provided in the Amber Investments Note.

At any time after the first anniversary of the issue date, the holder may require the Company, upon at least 30 business days' written notice, to redeem all or any portion of the Amber Investments Note. The portion of the Amber Investments Note subject to redemption will be redeemed by the Company in cash.

The Amber Investments Note is convertible into common units of the Company. Pursuant to the terms of the Amber Investments Note, Amber Investments has the right, at its option, to convert any portion of the outstanding and unpaid Conversion Amount into common units in accordance with the provisions of the Amber Investments Note at the Conversion Rate. The number of common units issuable upon conversion of any Conversion Amount will be determined by dividing (x) such Conversion Amount by (y) $0.10 (subject to adjustment as set forth in the Amber Investments Note). In March 2022, the Company began making monthly payments of principal and interest of $1,860 at the default annual interest rate of 26.4%. The balance of the Amber Investments Note as of September 30, 2024 and December 31, 2023 was $36,976 and $95,965, respectively.

K& S Pride Note

On February 19, 2019, the Company issued a senior convertible promissory note in the principal amount of $200,000 (the "K & S Pride Note") to K & S Pride Inc. ("K & S Pride"). The principal amount due under the K & S Pride Note bears interest at the rate of 18% per annum. The principal amount and accrued but unpaid interest (to the extent not converted in accordance with the terms of the K & S Pride Note) is due and payable on the third anniversary of the issue date. The K & S Pride Note and the amounts payable thereunder are unsecured obligations of the Company and shall be senior in right of payment and otherwise to all indebtedness, as provided in the K & S Pride Note.

At any time after the first anniversary of the issue date, the holder may require the Company, upon at least 30 business days' written notice, to redeem all or any portion of the K & S Pride Note. The portion of the K & S Pride Note subject to redemption will be redeemed by the Company in cash.

The K & S Pride Note is convertible into common units of the Company. Pursuant to the terms of the K & S Pride Note, K & S Pride has the right, at its option, to convert any portion of the outstanding and unpaid Conversion Amount into common units in accordance with the provisions of the K & S Pride Note at the Conversion Rate. The number of common units issuable upon conversion of any Conversion Amount will be determined by dividing (x) such Conversion Amount by (y) $0.10 (subject to adjustment as set forth in the K & S Pride Note). In March 2022, the Company began making monthly payments of principal and interest of $1,860 at the default annual interest rate of 26.4%. The balance of the K & S Pride Note as of September 30, 2024 and December 31, 2023 was $38,615 and $97,330, respectively.

Surplus Depot Note

On February 20, 2019, the Company issued a senior convertible promissory note in the principal amount of $200,000 (the "Surplus Depot Note") to Surplus Depot Inc. ("Surplus Depot"). The principal amount due under the K & S Pride Note bears interest at the rate of 18% per annum. The principal amount and accrued but unpaid interest (to the extent not converted in accordance with the terms of the Surplus Depot Note) is due and payable on the third anniversary of the issue date. The Surplus Depot Note and the amounts payable thereunder are unsecured obligations of the Company and shall be senior in right of payment and otherwise to all indebtedness, as provided in the Surplus Depot Note.

At any time after the first anniversary of the issue date, the holder may require the Company, upon at least 30 business days' written notice, to redeem all or any portion of the Surplus Depot Note. The portion of the Surplus Depot Note subject to redemption will be redeemed by the Company in cash.

The Surplus Depot Note is convertible into common units of the Company. Pursuant to the terms of the Surplus Depot Note, Surplus Depot has the right, at its option, to convert any portion of the outstanding and unpaid Conversion Amount into common units in accordance with the provisions of the Surplus Depot Note at the Conversion Rate. The number of common units issuable upon conversion of any Conversion Amount will be determined by dividing (x) such Conversion Amount by (y) $0.10 (subject to adjustment as set forth in the Surplus Depot Note). In March 2022, the Company began making monthly payments of principal and interest of $1,860 at the default annual interest rate of 26.4%. The balance of the Surplus Depot Note as of September 30, 2024 and December 31, 2023 was $36,985 and $95,965, respectively.

NOTE 7: PARTNERS' CAPITAL SURPLUS

The Company is authorized to issue 100,000,000 common units with nopar value. As of September 30, 2024, and December 31, 2023, the Company had outstanding 91,746,806 and 88,804,035 common units issued, respectively

As of September 30, 2024 and December 31, 2023 the Company had 578,723 common units issuable pursuant to convertible debt conversions in 2020 yet to be issued.

For the three and nine months ended September 30, 2024, the Company recognized $247,193 in unit-based compensation for the issuance of 2,942,771 common units to three employees including, the Chief Executive Officer and Chief Operating Officer in exchange for services provided. The expense was recognized at the grant date as the units were fully vested and issued as additional compensation for services already performed.

Amendment to Partnership Agreement

On January 23, 2020, the Company executed the Second Amendment (the "Second Amendment") to Limited Partnership Agreement (the "Agreement") in order to create a new class of Company securities titled Class A preferred units.

Pursuant to Section 5.6 of the Agreement, Soleil Capital Management LLC, the Company's general partner (the "General Partner") may, without the approval of the Company's limited partners, issue additional Company securities for any Company purpose at any time and from time to time for such consideration and on such terms and conditions as the General Partner shall determine in its sole discretion, all without the approval of any limited partners, and that each additional Company interest authorized to be issued by the Company may be issued in one or more classes, or one of more series of any such classes, with such designations, preferences, rights, powers and duties as shall be fixed by the General Partner in its sole discretion. Pursuant to Section 13.1 of the Agreement, the General Partner may, without the approval of any partner, any unitholder or any other person, amend any provision of the Agreement to reflect any amendment expressly permitted in the Agreement to be made by the General Partner acting along, therefore including the creation of a new class of Company securities.

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

Number and Stated Value. The number of authorized Class A preferred units is 1,000,000. Each Class A preferred unit will have a stated value of $2.00 (the "Stated Value").

Rights. Except as set forth in the Second Amendment, each Class A preferred unit has all of the rights, preferences and obligations of the Company's common units as set forth in the Agreement and shall be treated as a common unit for all other purposes of the Agreement.

Dividends.

Rate. Each Class A preferred unit is entitled to receive an annual dividend at a rate of 8% per annum on the Stated Value., which shall accrue on a monthly basis at the rate of 0.6666% per month, non-compounding, and shall be payable in cash within 30 days of each calendar year for which the dividend is payable.

Liquidation. In the event of a liquidation, dissolution or winding up of the Company, a merger or consolidation of the Company wherein the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company, each Class A unit will be entitled to receive, prior an in preference to any distribution of any of the assets or surplus funds of the Company to the holders of common units or any other Company securities ranking junior to the Class A preferred units, or to the General Partner, an amount per Class A preferred unit equal to any accrued but unpaid dividends. If, upon such an event and after the payment of preferential amounts required to be paid to holders of any Company securities having a ranking upon liquidation senior to the Class A preferred units, the assets of the Company available for distribution to the partners of the Company are insufficient to provide for both the payment of the full Class A liquidation preference and the preferential amounts (if any) required to be paid to holders of any other Company securities having a ranking upon liquidation pari passu with the Class A preferred units, such assets as are so available shall be distributed among the Class A preferred units and the holders of any other series of Company securities having a ranking upon liquidation pari passu with the Class A preferred units in proportion to the relative aggregate preferential amount each such holder is otherwise entitled to receive.

Conversion Rights.

Conversion. Upon notice, a holder of Class A preferred units has the right, at its option, to convert all or a portion of the Class A preferred units held into fully paid and nonassessable Company common units.

Conversion Price. Each Class A preferred unit is convertible into a number of common units equal to (x) the Stated Value plus any accrued and unpaid dividends, divided by (y) the Conversion Price (as hereinafter defined). The "Conversion Price" means 85% multiplied by the VWAP (as defined in the Second Amendment), representing a discount rate of 15%.

Conversion Limitation. In no event shall a holder of Class A preferred units be entitled to convert any of the Class A preferred units in excess of that number of Class A preferred units upon conversion of which the sum of (1) the number of common units beneficially owned by such holder and its affiliates (other than common units which may be deemed beneficially owned through the ownership of the unconverted Class A preferred units or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained herein), and (2) the number of common units issuable upon the conversion of all Class A preferred units held by such holder would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the outstanding common units.

NOTE 8: COMMITMENTS AND CONTINGENCIES

Lease Agreements

Warehouse and Office Space

On May 19, 2022, the Company entered into a 5-year of approximately 3,100 square feet of warehouse and office space. The lease requires base monthly rent of $3,358 per month for the first year and provides for 5% increase in base rent on each anniversary date. At inception of the lease, the Company recorded a right to use asset and obligation of $157,363, equal to the present value of remaining payments of minimum required lease payments.

As of September 30, 2024 and December 31, 2023, right-of-use assets ("ROU") are summarized as follows:

		September 30,			December 31,
		2024			2023
Warehouse and office lease right-of-use assets		$	157,363			$	157,363
Less: accumulated amortization			(60,220	)			(38,924	)
Right-of-use assets, net		$	97,143			$	118,439

As of September 30, 2024 and December 31, 2023, operating lease liabilities related to the ROU assets are summarized as follows:

		September 30,			December 31,
		2024			2023
Lease liabilities related to warehouse and office lease right-of-use assets		$	103,637			$	123,972
Less: current portion of lease liabilities			(32,672	)			(27,903	)
Lease liabilities, net of current portion		$	70,965			$	96,069

As of September 30, 2024, the weighted average lease term remaining is 2.58 years and the imputed interest rate is 14%.

The following table presents the maturity of the Company's operating lease liabilities as of September 30, 2024:

Twelve Months Ended September 30,		Amount
2025		$	45,171
2026			47,430
2027			32,657
Remaining			-
Total minimum non-cancelable operating lease payments			125,258
Less: discount to fair value			(21,621	)
Total lease liability as of September 30, 2024		$	103,637

The Company amortized $21,296 and $20,957 of the right to use asset during the nine months ended September 30, 2024 and 2023, respectively.

Rent expense for the three months ended September 30, 2024 and 2023 totaled $15,775 and $17,097, respectively.

Rent expense for the nine months ended September 30, 2024 and 2023 totaled $49,235 and $50,330, respectively.

Legal Matters

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. There are no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations and there are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

On April 20, 2023, the Company entered into a Litigation Resolution Agreement (the "Agreement") with Safa Goods, LLC regarding trademark and patent infringements of Company branded products. Pursuant to the terms of the Agreement, the Company is to receive cash payments $5,300,197 over 18-months which will be recognized as settlement income when received due to uncertainty in timing and amount to be received. The Company received cash payments under the Agreement totaling $511,823, net of settlement legal fees during the three months ended September 30, 2024 and are included in net settlement income in the accompanying statements of operations.

The Company received cash payments under the Agreement totaling $1,502,854, net of settlement legal fees during the nine months ended September 30, 2024 and are included in net settlement income in the accompanying statements of operations.

Voluntary Recall

In February 2024, the Company initiated a voluntary recall of approximately 62,200 lighters due to a missing child safety feature. Under ASC 606, these products are not eligible for revenue recognition, as revenue cannot be recognized for amounts that are not expected to be entitled. Consequently, the Company recorded this as a refund liability. For the year ended December 31, 2023, the total impact of the recall, amounting to $198,068, has been recognized against revenues and receivables for potential credits associated with the recalled products.

During the nine months ended September 30, 2024, $473 was refunded to retail consumers in cash, and $79,670 in credits was issued to wholesale and distributor customers. Only $3,467 of the credits were utilized during the nine months ended September 30, 2024, the remaining unutilized credits are still included in the refund liability. The Company anticipates issuing refunds related to the recall throughout the year and will continue to evaluate potential losses.

As of September 30, 2024, and December 31, 2023, the refund liability was $182,545 and $186,485, respectively.

Customer Concentration

During the three and nine months ended September 30, 2024, 55% and 60% of the Company's net revenues were generated from six customers. Accounts receivable and royalty receivable due from these customers as of September 30, 2024 and December 31, 2023 totaled $376,334 and $173,133, respectively

During the three and nine months ended September 30, 2023, 86% and 82%, respectively, of the Company's net revenues were generated from four customers.

NOTE 9: SUBSEQUENT EVENTS

No events occurred subsequent to the date of the Company's financial statements that would require adjustments to, or disclosure in, the aforementioned financial statements. The Company evaluated subsequent events through the date the financial statements are issued.

ITEM 2. 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 April 19, 2024.

Overview

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

●

Design, market, license, and distribute a line of vaporizers under the "ELF" brand;

●

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

●

Design, market and distribute a line of 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 under the KRAVE brand;

●

Prosecute and enforce our patent and trademark rights;

●

License our intellectual property; and

●

Develop private label manufacturing programs.

Results of Operations for the Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

Revenues

Our revenues from product sales for the three months ended September 30, 2024 and 2023 were $ 1,326,199 and $805,185 respectively. Royalty revenues for the three months ended September 30, 2024 and 2023 were $116,764 and $ 2,735,224, respectively. The decrease in total revenue for the three months ended September 30, 2024, compared to September 30, 2023, was primarily due to the initial fee from the royalty agreement entered into in March 2023, which was still being amortized during the three months ended September 30, 2023. This decrease was partially offset by an increase in product sales from expanded operations during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Cost of Sales

Cost of sales for the three months ended September 30, 2024 and 2023 was $ 1,008,960 and $ 569,508, respectively. Gross margins decreased to 30% for the three months ended September 30, 2024 compared to 84% for the three months ended September 30, 2023. This decline was primarily due to a significant decrease in royalty revenue, which has minimal corresponding impact on cost of sales.

Operating Expenses

Operating expenses for the three months ended September 30, 2024 were $ 858,221 as compared to $ 533,700 for the three months ended September 30, 2023. The increase in operating expenses for the three months ended September 30, 2024 compared to the same period in 2023, was primarily attributed to higher marketing, payroll, and professional fees as the company continues to expand. Additionally, the company issued 2,942,771 units, resulting in unit-based compensation of $247,193 for the three months ended September 30, 2024. There was no unit-based compensation for the three months ended September 30, 2023.

Other Income

Net other income for the three months ended September 30, 2024 was $ 272,666 compared to net other income of $514,015 for the three months ended September 30, 2023. The decrease in other income for the three months ended September 30, 2024 compared to the same period in 2023, was primarily due to decrease in settlement income and increased interest expenses as loans are being paid off and also includes $212,050 of estimated interest and penalties related to unpaid taxes.

Income Tax

For the three months ended September 30, 2024, the company had a provision for income taxes expense of $15,332. The company did not have a provision for income taxes for the same three-month period ending September 30, 2023, as it had a history of losses to income.

Net Income (Loss)

As a result of the factors mentioned above, net income decreased by $3,118,100 from $2,951,216 for the three months ended September 30, 2023, to $(166,884), for the three months ended September 30, 2024.

Results of Operations for the Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Revenues

Our revenues from product sales for the nine months ended September 30, 2024 and 2023 were $ 4,121,090 and $ 5,041,344, respectively. Royalty revenues for the nine months ended September 30, 2024 and 2023 were $ 609,765 and $ 3,489,615, respectively. The decrease in total revenue for the nine months ended September 30, 2024, compared to the same period in 2023, was primarily due to the initial fee from the royalty agreement entered into in March 2023, which was still being amortized during the nine months ended September 30, 2023, as well as a large distribution sales order in the first quarter of 2023.

Cost of Sales

Cost of sales for the nine months ended September 30, 2024 and 2023 was $ 3,368,527 and $ 3,941,293, respectively. Gross margins decreased to 29% for the nine months ended September 30, 2024 compared to 54% for the nine months ended September 30, 2023. This decline was primarily due to a significant decrease in royalty revenue, which has minimal corresponding impact on cost of sales.

Operating Expenses

Operating expenses for the nine months ended September 30, 2024 were $ 2,185,852 as compared to $ 1,391,264 for the nine months ended September 30, 2023. The increase in operating expenses for the nine months ended September 30, 2024 compared to the same period in 2023, was primarily attributed to higher marketing, payroll, and professional fees as the company continues to increase its operations. Additionally, the company issued 2,942,771units, resulting in unit-based compensation of $247,193 for the nine months ended September 30, 2024. There was no unit-based compensation for the nine months ended September 30, 2023.

Other Income

Net other income for the nine months ended September 30, 2024 was $ 1,179,790 compared to net other income of $ 706,450 for the nine months ended September 30, 2023. The increase in other income for the nine months ended September 30, 2024 compared to the same period in 2023, was primarily due to higher settlement payments received. This increase was partially offset by higher interest expenses as loans are being paid off and also includes $212,050 estimated interest and penalties related to unpaid taxes.

Income Tax

For the nine months ended September 30, 2024, the company had a provision for income taxes expense of $ 144,039. The company did not have a provision for income taxes for the same nine-month period ending September 30, 2023, as it had a history of losses to income.

Net Income

As a result of the factors mentioned above, net income decreased by $3,692,625, from $3,904,852 for the nine months ended September 30, 2023, to $212,227 for the nine months ended September 30, 2024.

Liquidity and Capital Resources

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

		For the Nine Months Ended September 30,
		2024			2023
Net cash flows provided by operating activities		$	249,303			$	3,064,516
Net cash flows used in financing activities		$	(492,964	)		$	(1,253,743	)
Net cash used in investing activities		$	-				-

Cash flow provided by operations was $ 249,303 for nine months ended September 30, 2024 as compared to cash flow provided by operations of $ 3,064,516 in nine months ended September 30, 2023.

During the nine months ended September 30, 2024, the Company repaid $294,712 of principal on convertible notes payable, repaid $165,810 of principal on notes payable to related parties and repaid $ 32,442 of lease liability principal.

During the nine months ended September 30, 2023, the Company repaid $ 370,072 of notes principal, repaid $ 221,609 of principal on convertible notes payable, repaid $627,639 of principal on notes payable to related parties and repaid $34,423 of lease liability principal.

Assets

At September 30, 2024 and December 31, 2023, we had total assets of $3,328,550 and $3,191,246, respectively. Assets primarily consist of the cash accounts held by the Company, inventory, vendor deposits, accounts receivable, royalty receivable and a right-to-use asset. During the nine months ended September 30, 2024. the Company's cash decreased by $243,661 accounts receivable increased by $251,769, royalty receivable increased by $2,177, inventory increased by $285,048, net of obsolesce and vendor deposits increased by $136,933.

Liabilities

At September 30, 2024 and December 31, 2023, we had total liabilities of $2,254,820 and $2,576,936, respectively. These liabilities primarily consist of notes payable, convertible notes payable, tax liabilities, refund liabilities, customer deposits, and accounts payable and accrued expenses. Between September 30, 2024, and December 31, 2023, customer deposits, accounts payable, and accrued expenses (both to unrelated and related parties) increased by a total of $234,094. Convertible notes and notes payable to unrelated and related parties also decreased by a total of $460,522. Additionally, the right-of-use obligation decreased by $20,335, and the refund liability decreased by $3,940, while the tax liability decreased by $71,413.

Availability of Additional Funds

Our capital requirements going forward will consist of financing our operations until we are able to reach a level of revenues 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 September 30, 2024, we had $ 1,523,599 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 financial statements do not necessarily purport to represent realizable or settlement values. The 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, changes in financial condition, revenues 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, revenues, 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 our recognition of revenues, accounting for intangible assets and related impairment analyses, the allowance for doubtful accounts and accounting for equity transactions, 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 of our unaudited condensed financial statements as of and for the nine months ended September 30, 2024.

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed financial statements are prepared in accordance with instructions for Form 10-Q, include all adjustments (consisting only of normal recurring accruals) which we considered as necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission. The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for future periods or the full year.

Use of Estimates

GAAP requires the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, the reported amounts of revenues and expenses, cash flows and the related footnote disclosures during the period. On an on-going basis, the Company reviews and evaluates its estimates and assumptions. Actual results could differ from these estimates.

Financial Condition

As reflected in the financial statements, the Company generated cash flows from operations of $249,303 for the nine months ended September 30, 2024 and had positive working capital of $ 1,166,456 and had cash of $1,523,599 as of September 30, 2024. These factors serve to mitigate the conditions that historically raised substantial doubt about the Company's ability to continue as a going concern. The Company believes that the Company has sufficient cash and positive cash flows to meet its obligations for a minimum of twelve months from the date of issuance of these financial statements.

Cash

Cash is carried at cost and represents cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. The Company had no cash equivalents on September 30, 2024 and December 31, 2023. The Company's cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation ("FDIC") limit. To date, the Company has not experienced any losses on its invested cash. On September 30, 2024 and December 31, 2023, the Company had approximately $702,902 and $947,184, respectively, of cash in excess of FDIC limits of $250,000. Any loss incurred or a lack of access to such funds above the FDIC limit could have a significant adverse impact on the Company's financial condition, results of operations and cash flows.

Accounts Receivable and Royalty Receivable

The Company recognizes an allowance for expected credit losses in accordance with the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, "Financial Instruments - Credit Losses." This ASU sets forth a current expected credit loss model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. An allowance for credit losses is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. This evaluation is inherently subjective and requires estimates that are susceptible to significant revisions as more information becomes available.

As of September 30, 2024 and December 31, 2023, the Company had an allowance for expected credit loss of $25,419 and $ 10,925, respectively.

Inventory

Inventory consisting of finished products is stated at the lower of cost or net realizable value. At each balance sheet date, the Company evaluates its ending inventories for excess quantities and obsolescence. This evaluation primarily includes an analysis of forecasted demand in relation to the inventory on hand, among consideration of other factors. The physical condition (e.g., age and quality) of the inventories is also considered in establishing its valuation. Based upon the evaluation, provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the respective inventories. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from the amounts that the Company may ultimately realize upon the disposition of inventories if future economic conditions, customer inventory levels, product discontinuances, sales return levels or competitive conditions differ from the Company's estimates and expectations. As of September 30, 2024 and December 31, 2023, the provision for potential inventory obsolescence was $ 29,979 and $ 0, respectively.

Leases

The Company applied the FASB's Accounting Standards Codification ("ASC") Topic 842, Leases (Topic 842) to arrangements with lease terms of 12 months or more. Operating lease right of use assets ("ROU") represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the statements of operations.

The Company has an operating lease principally for warehouse and office space. Management evaluates each lease independently to determine the purpose, necessity to its future operations in addition to other appropriate facts and circumstances.

Revenue Recognition

The Company recognizes revenue when the risk gets transferred to the customer which occurs at a point in time, typically upon shipment of promised goods. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

Revenues from product sales are recognized when the risk got transferred to the customer which occurred at a point in time, typically upon shipment of promised goods to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial.

Royalty revenues consist of license and sublicense agreements to use the Company's intellectual property in exchange for a sales-based royalty. Royalty revenue is recognized over time as the performance obligations are satisfied by licensees and sublicensees through sales of licensed products.

The Company records contract liabilities when cash payments are received or due in advance of satisfaction of performance obligations by licensees and sublicensees. During the year ended December 31, 2023, the Company received cash payments totaling $3,000,000 for the prepayment of royalties pursuant to a license agreement executed on January 2, 2023. The license agreement provides for monthly royalties to the Company totaling 5% of gross sales of licensed products by licensee and provides the licensee exclusive use of certain trademark and patent assets for an initial term of six months commencing March 2023 and expiring in September 2023. The Company recognized the prepaid royalties over the initial term of exclusivity. The license agreement required a monthly minimum royalty payments of $500,000 to maintain exclusivity on a month-to-month basis beyond September 2023. The minimum royalty payments were not met, so the agreement continued on a non-exclusive basis, with monthly royalties to the Company totaling 5% of gross sales of licensed products by the licensee and provides the licensee with non-exclusive use of certain trademark and patent assets.

The sublicense agreement executed in March 2023 provided for monthly royalties to the Company totaling 5% of gross sales of licensed products by sublicensee and provides the sublicensee exclusive use of certain trademark and patent assets in exchange for minimum monthly royalty payments totaling $250,000 beginning June 2023.

During the year ended December 31, 2023, the sublicensee, licensee, and Company agreed that the Company would not require the minimum monthly royalty payments. Instead, sublicensee would continue to pay 5% of gross sales as royalty, and the licensee would match this royalty payment if their calculated royalty would have been less than what the sublicensee paid. The Company recognizes sublicense royalty revenue on the basis of royalty statements for the period.

Voluntary Recall

In February 2024, the Company initiated a voluntary recall of approximately 62,200 lighters due to a missing child safety feature. Under ASC 606, these products are not eligible for revenue recognition, as revenue cannot be recognized for amounts that are not expected to be entitled. Consequently, the Company recorded this as a refund liability. For the year ended December 31, 2023, the total impact of the recall, amounting to $198,068, has been recognized against revenues and receivables for potential credits associated with the recalled products.

During the nine months ended September 30, 2024, $473 was refunded to retail consumers in cash, and $79,670 in credits was issued to wholesale and distributor customers. Only $3,467 of the credits were utilized during the nine months ended September 30, 2024, the remaining unutilized credits are still included in the refund liability. The Company anticipates issuing refunds related to the recall throughout the year and will continue to evaluate potential losses.

As of September 30, 2024, and December 31, 2023, the refund liability was $182,545 and $186,485, respectively.

The following table provides information about accounts receivable, royalty receivable from contracts with customers and the refund liability as of September 30, 2024 and December 31, 2023:

		Accounts			Royalty			Refund
		Receivable			Receivable			Liability
December 31, 2023		$	337,774			$	88,286			$	186,485
September 30, 2024		$	589,543			$	90,463			$	182,545

Unit-Based Compensation

The Company may issue restricted units to consultants for various services. Costs for these transactions will be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is to be measured at the earlier of: (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached, or (ii) the date at which the counterparty's performance is complete. The Company may issue units as compensation in future periods for services associated with the registration of the common units.

Unit-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair value, in accordance with ASC Topic 718. This expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (typically the vesting period).

For the three and nine months ended September 30, 2024, the Company recognized $247,193 in unit-based compensation for the issuance of 2,942,771 common units to three employees, including the Chief Executive Officer and Chief Operating Officer in exchange for services provided. The expense was recognized at the grant date as the units were fully vested and issued as additional compensation for services already performed.

Convertible Instruments

The Company accounts for convertible instruments in accordance with ASU 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." This update significantly simplifies the accounting for convertible instruments by eliminating the requirement to bifurcate embedded conversion options from their host instruments, unless the conversion feature independently meets the definition of a derivative under ASC 815, Derivatives and Hedging Activities. Under ASC 815, a conversion feature is treated as a derivative only if its economic characteristics and risks are not clearly and closely related to those of the host contract, and other specific conditions are met.

When it is determined that the embedded conversion options do not require bifurcation, the entire convertible instrument is accounted for as a single liability at amortized cost. Discounts or premiums on convertible instruments are recognized based on the difference between the proceeds received and the principal amount and are amortized over the life of the instrument using the effective interest method.

In the rare instances where a conversion option is bifurcated and accounted for as a derivative, the Company would apply the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the units issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.

Fair Value

The carrying values of the Company's notes payables, convertible notes, and accounts payable and accrued expenses approximate their fair values because of the short-term nature of these instruments.

Basic and Diluted Net Income (Loss) Per Unit

The Company computes net income per unit in accordance with FASB ASC 260, "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the statement of operations. Basic EPS is computed by dividing net income/(loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible notes, using the if-converted method. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.

For the three and nine month periods ending September 30, 2023, 5,890,170 units underlying convertible debt were dilutive and were included in the earnings per share calculation.

For the three and nine month periods ending September 30, 2024, 1,864,780 units underlying convertible debt were antidilutive and excluded from the dilutive earnings per share calculation.

The following summarizes the calculation of basic and diluted income per unit for the three and nine months ended September 30, 2024 and September 30, 2023:

		For the Three Months Ended September 30,			For the Nine Months Ended September 30,
		2024			2023			2024			2023
Net income (loss) per common unit - basic:
Net income (loss) allocated to common unit holders		$	(166,884	)		$	2,951,216			$	212,227			$	3,904,852
Weighted average common units outstanding - basic			89,935,870				88,804,035				89,179,936				88,804,035
Net income (loss) per common unit - basic		$	(0.00	)		$	0.03			$	0.00			$	0.04
Net income (loss) per common unit - diluted:
Net income (loss) allocated to common unit holders - basic		$	(166,884	)		$	2,951,216			$	212,227			$	3,904,852
Add: tax adjusted interest convertible debt			-				34,420				-				133,571
Net income (loss) allocated to common unit holders -diluted		$	(166,884	)		$	2,985,636			$	212,227			$	4,038,423
Weighted average common units outstanding - basic			89,935,870				88,804,035				89,179,936				88,804,035
Add: diluted units related to convertible debt			-				5,890,170				-				5,890,170
Weighted average common units outstanding - diluted			89,935,870				94,694,205				89,179,936				94,694,205
Net income (loss) per common unit - diluted		$	(0.00	)		$	0.03			$	0.00			$	0.04

Provision for Income Taxes

The Company has recorded income taxes in accordance with ASC 740, "Income Taxes." This standard necessitates 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.

The Company follows the provisions of FASB ASC 740-10, "Uncertainty in Income Taxes". Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a "more-likely-than-not" threshold. The Company does not believe it has any uncertain tax positions as of September 30, 2024 and December 31, 2023 that would require either recognition or disclosure in the accompanying unaudited financial statements.

During the three and nine months ended September 30, 2023, the Company had minimal net income and a history of losses, and did not anticipate having a tax liability, so no provision for income tax was recorded.

During the three and nine months ended September 30, 2024, the Company made tax payments totaling $215,452. The Company recorded provisions for income tax expense of $15,332 and $144,039 were recorded for the three and nine month periods, respectively

The Company's tax liability decreased from $879,803 as of December 31, 2023, to $808,390 as of September 30, 2024, primarily due to the impact of these provisions and payments.

The Company's 2023 tax return included the use of net operating loss (NOL) carryforwards to reduce taxable income. Due to uncertainty regarding the acceptance of these NOLs and the judgment that the NOLs do not meet the "more-likely-than-not" threshold of acceptance, the Company has recorded an estimated liability of $212,050 for potential penalties and interest associated with a possible disallowance of these NOLs. This amount has been included in accounts payable and accrued expenses and classified as interest expense on the Statement of Operations.

The items accounting for the difference between income taxes at the effective Federal statutory rate and the provision for income taxes for the three and nine months ended September 30, 2024 were as follows:

		Three Months Ended September 30, 2024			Nine Months Ended September 30, 2024
Income tax expense at U.S. statutory rate		$	12,704			$	119,346
State income taxes, net of federal benefit			2,628				24,693
Valuation allowance
Provision for income tax expense		$	15,332			$	144,039

The provision for income taxes, effective tax rate, statutory federal income tax rate, and rate reconciliation for the three and nine months ended September 30, 2024, and 2023 were as follows:

		Three Months Ended September 30,			Nine Months Ended September 30,
		2024			2023			2024			2023
Provision for Income Taxes Expenses		$	15,332			$	-			$	144,039			$	-
Statutory Federal Income Tax Rate			21.00	%			21.00	%			21.00	%			21.00	%
State Income taxes, net of federal benefit			4.35	%			4.35	%			4.35	%			4.35	%
Valuation Allowance			-				(25.35	)%			-				(25.35	)%
Effective Tax Rate			25.35	%			-				25.35	%			-

The Company's effective tax rate for the three and nine months ended September 30, 2024 was higher than the statutory federal income tax rate, primarily due to state income taxes. Additionally, the effective tax rate for the three and nine months September 30, 2024 was higher compared to the period in 2023 because the Company had losses to offset income, which were fully utilized during 2023.

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. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flow when implemented.

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 flows. 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.

On March 21, 2024, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2024-01 ("ASU 2024-01"), which clarifies how an entity determines whether a profits interest or similar award is (1) within the scope of ASC 718 or (2) not a share-based payment arrangement and therefore within the scope of other guidance. The guidance in ASU 2024-01 applies to all entities that issue profits interest awards as compensation to employees or nonemployees in exchange for goods or services. ASU 2024-01 is effective for public business entities for annual periods beginning after December 15, 2024, including interim periods within those periods. The Company is currently evaluating the impact of the adoption of ASU 2024-01 on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes-Improvements to Income Tax Disclosures. This guidance enhances the transparency and decision usefulness of income tax disclosures. More specifically, the amendments relate to the income tax rate reconciliation and income taxes paid disclosures and require 1) consistent categories and greater disaggregation of information in the rate reconciliation and 2) income taxes paid disaggregated by jurisdiction. This guidance is effective for fiscal years beginning after December 15, 2024.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 47020) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 81540): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which is intended to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. The guidance allows for either full retrospective adoption or modified retrospective adoption. The guidance became effective for the Company as of January 1, 2024. The adoption of this standard did not have a material impact on our financial statements, as our existing convertible instruments issued prior to January 1, 2024, did not have bifurcated conversion features and were past due by the effective date. Future issuances of convertible instruments will comply with the new standard, which may simplify both measurement and disclosure of these instruments.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, we are not required to include disclosure under this item.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has reviewed and evaluated the effectiveness of the Company's disclosure controls and procedures as of September 30, 2024. Based on such review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2024, the disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, (a) is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (b) is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure, because of a continued material weakness in our internal control over financial reporting, as described below.

The Company did not maintain an effective financial reporting process to prepare financial statements in accordance with generally accepted accounting principles in the United States. Specifically, our process lacked timely and complete financial statement reviews and procedures to ensure all required disclosures were made in our financial statements. Also, the Company lacked documented procedures including documentation related to testing of internal controls and entity-level controls, disclosure review, and other analytics. Furthermore, the Company lacked sufficient personnel to properly segregate duties.

A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness; yet important enough to merit attention by those responsible for oversight of the Company's financial reporting.

Remedial Efforts Related to the Material Weakness in Internal Control

In an effort to address the material weakness, we have implemented, or are in the process of implementing, the following remedial steps:

●

We intend to establish an audit committee of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls.

●

We intend to establish an internal audit function and engage a public accounting firm to perform internal audit services under an outsourcing arrangement. We intend for the internal audit service provider to review the policies, procedures and systems to address the material weakness.

●

In addition to supervising all financial aspects of the Company, our Chief Financial Officer is also supervising our Information Technology ("IT") functions to better facilitate the coordination and development of improved systems to support our financial reporting process.

●

In furtherance of timely and complete financial statement reviews and procedures to ensure all required disclosures are made in our financial statements and promoting the segregation of duties, we have (i) hired experienced accounting personnel and expect to hire additional experienced accounting personnel, (ii) hired staff to handle the increased workload associated with the reporting structure in place and continue to recruit additional staff in key areas including financial reporting and tax accounting as well as we have engaged temporary staff and (iii) hired consultants to assist in achieving accurate and timely reporting, including hiring additional consultants to assist in the development and enhancement of IT infrastructure systems to support accounting.

●

We have provided and will continue to provide training to our finance and accounting personnel for timely and accurate preparation and management review of documentation to support our financial reporting and period-end close procedures including documentation related to testing of internal controls and entity-level controls, disclosure review, and other analytics.

●

We have been conducting and continue to conduct the assessment and review of our accounting general ledger system to further identify changes that can be made to improve our overall control environment with respect to journal entries. We are continuing to implement more formal procedures related to the review and approval of journal entries.

●

We have been formalizing the periodic account reconciliation process for all significant balance sheet accounts. We are continuing to implement more formal review of these reconciliations by our accounting management and we will increase the number of supervisory personnel to ensure that reviews are performed.

We believe these additional internal controls will be effective in remediating the material weakness described above; however, we may determine to modify the remediation plan described above by adding remedial steps to or modifying or no longer pursuing (if determined to be unnecessary in remediating the material weakness) the remedial steps set forth above. Until the remediation steps set forth above are fully implemented, the material weakness described above will continue to exist. Notwithstanding, through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.

The Company's disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, the Company's management, including its CEO and CFO, does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

There are no current, pending or threatened legal proceedings against the Company.

ITEM 1A. RISK FACTORS

Risk factors describing the major risks to our business can be found under Item 1A, "Risk Factors", in our Annual Report on Form 10-K for the year ended December 31, 2023. There has been no material change in our risk factors from those previously discussed in the Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to our operations.

ITEM 5. OTHER INFORMATION

(a) None.

(b) There have been no material changes to the procedures by which security holders may recommend nominees to the Company's Board of Directors since the Company last provided disclosure in response to the requirements of Item 407(c)(3) of Regulation S-K.

(c) During the quarter ended September 30, 2024, no director or officer of the Company adopted or terminated a contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) and/or a non-Rule 10b5-1 trading arrangement.

ITEM 6. EXHIBITS

Exhibit Number		Description
10.1		Exclusive Distribution Agreement between the Registrant and Turning Point Brands Canada, dated December 13, 2023 (incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed with the Commission on January 4, 2024)
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act
32.1**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document *
101.SCH		Inline XBRL Taxonomy Extension Schema Document *
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document *
104		Cover Page Interactive Data File (embedded within the Inline XBRL document) *

*	Filed herewith

**	Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VPR BRANDS, LP
Dated: November 14, 2024	By:	/s/ Kevin Frija
		Chief Executive Officer
		(principal executive officer,
		principal financial officer and
		principal accounting officer)

34

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