SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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Former name, former address and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Act:
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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.
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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).
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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”, “non-accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
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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 shares outstanding of each of the registrant’s classes of common units as of the latest practicable date.
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TABLE OF CONTENTS
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, 2020 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 corporation.
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
(Unaudited)
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September 30, |
December 31, | |||||||
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2021 |
2020 | |||||||
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ASSETS | ||||||||
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Current Assets: | ||||||||
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Cash |
$ |
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$ |
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Accounts receivable, net |
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Inventory, net |
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Vendor deposits |
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Deposits |
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Total current assets |
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Right to Use Asset |
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Total assets |
$ |
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$ |
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LIABILITIES AND PARTNERS' DEFICIT | ||||||||
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Current Liabilities: | ||||||||
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Accounts payable and accrued expenses |
$ |
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$ |
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Accounts payable - related party |
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Customer deposits |
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Right to use obligation, current portion |
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Notes payable |
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Note payable-related parties |
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Convertible notes payable |
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Total current liabilities and total liabilities |
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Payroll Protection Program Loans |
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Economic Injury Disaster Loan |
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Right to Use Obligation, net of current portion |
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Total liabilitites |
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Partners' Deficit: | ||||||||
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Common units - | ||||||||
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issued and outstanding |
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Common units to be issued; |
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Accumulated deficit |
( |
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( |
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Total partners' deficit |
( |
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( |
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Total liabilities and partners' deficit |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed interim financial statements.
4
VPR BRANDS, LP
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
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Three Months Ended |
Nine Months Ended | |||||||||||||||
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September 30, |
September 30, | |||||||||||||||
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2021 |
2020 |
2021 |
2020 | |||||||||||||
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Revenues |
$ |
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$ |
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$ |
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$ |
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Cost of Sales |
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Gross profit |
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Operating Expenses: | ||||||||||||||||
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Selling, general and administrative |
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Total operating expenses |
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Net Operating Income (Loss) |
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( |
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Other Expense: | ||||||||||||||||
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Interest expense |
( |
) |
( |
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( |
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( |
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Interest expense- related parties |
( |
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( |
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( |
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( |
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Total other expense |
( |
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( |
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( |
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( |
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Net (Loss) Income |
$ |
( |
) |
$ |
( |
) |
$ |
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$ |
( |
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Net (Loss) Income Per Common Unit - Basic |
$ |
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$ |
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$ |
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$ |
( |
) | |||||
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Net (Loss) Income Per Common Unit - Diluted |
$ |
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$ |
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$ |
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$ |
( |
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Weighted-Average Common Units Outstanding - Basic |
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Weighted-Average Common Units Outstanding - Diluted |
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The accompanying notes are an integral part of these unaudited condensed interim financial statements.
5
VPR BRANDS, LP
CONDENSED STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT
(Unaudited)
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Common Units to be |
Total | |||||||||||||||||||||||
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Common Units |
Issued |
Accumulated |
Partners' | |||||||||||||||||||||
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Number |
Amount |
Number |
Amount |
Deficit |
Deficit | |||||||||||||||||||
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Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||
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Balance at December 31, 2019 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Net loss |
- |
- |
- |
- |
( |
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( |
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Balance at March 31, 2020 |
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( |
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( |
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Net loss |
- |
- |
- |
- |
( |
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( |
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Balance at June 30, 2020 |
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( |
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( |
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Net loss |
- |
- |
- |
- |
( |
) |
( |
) | ||||||||||||||||
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Balance at September 30, 2020 |
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$ |
( |
) |
$ |
( |
) | ||||||||||||||
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Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
) | ||||||||||||
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Net loss |
- |
- |
- |
- |
( |
) |
( |
) | ||||||||||||||||
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Balance at March 31, 2021 |
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( |
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( |
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Net income |
- |
- |
- |
- |
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Balance at June 30, 2021 |
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( |
) |
( |
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Net loss |
- |
- |
- |
- |
( |
) |
( |
) | ||||||||||||||||
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Balance at September 30, 2021 |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed interim financial statements.
6
VPR BRANDS, LP
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine Months Ended | ||||||||
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September 30, | ||||||||
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2021 |
2020 | |||||||
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Cash Flows from Operating Activities: | ||||||||
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Net income (loss) |
$ |
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$ |
( |
) | |||
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Changes in operating assets and liabilities: | ||||||||
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Inventory |
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Vendor deposits |
( |
) |
( |
) | ||||
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Accounts receivable |
( |
) |
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Customer deposits |
( |
) |
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Right to use asset and obligation |
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Accounts payable and accrued expenses |
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Net cash used in operating activities |
( |
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( |
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Cash Flows from Financing Activities: | ||||||||
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Proceeds from payroll protection program |
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Proceeds from notes payable |
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Payments of notes payable |
( |
) |
( |
) | ||||
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Proceeds from notes payable, related parties |
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Payments of notes payable, related parties |
( |
) |
( |
) | ||||
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Net cash provided by financing activities |
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Change in Cash |
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( |
) | |||||
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Cash - Beginning of the Period |
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Cash - End of the Period |
$ |
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$ |
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Supplemental Cash Flow Information: | ||||||||
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Interest paid in cash |
$ |
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$ |
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Income taxes paid in cash |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed interim financial statements.
7
VPR BRANDS, LP
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2021
(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 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 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.
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 unaudited condensed financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for future periods or the full year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Cash
Cash includes all cash deposits and highly liquid financial instruments with an original maturity of three months or less.
8
Accounts Receivable
The Company analyzes the collectability of accounts receivable from continuing operations each accounting period and adjusts its allowance for doubtful accounts accordingly. A considerable amount of judgment is required in assessing the realization of accounts receivables, including the creditworthiness of each customer, current and historical collection history and the related aging of past due balances. The Company evaluates specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy or other factors affecting the ability to render payment. As of September 30, 2021 and December 31, 2020, the allowance for bad debt was $
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, 2021 and December 31, 2020, the Company had recorded a provision for obsolescence of $
Leases
Effective January 1, 2019, the Company adopted the provisions of the new standard. The Company decided to use the practical expedients available upon adoption of Topic 842 to aid the transition from current accounting to provisions of Topic 842. The package of expedients will effectively allow the Company to run off existing leases, as initially classified as operating and classify new leases after implementation under the new standard as the business evolves.
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 revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes
9
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 customer obtains control of the Company's product, which occurs at a point in time, typically upon delivery 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. 100% of the Company’s revenues for the nine months ended September 30, 2021 and 2020, were recognized when the customer obtained control of the Company’s product, which occurred at a point in time, typically upon delivery to the customer.
Unit-Based Compensation
Unit-based payments to employees, including grants of employee stock options are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB Accounting Standards Codification (“ASC”) Topic 718. That 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 (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented. The Company may issue units as compensation in future periods for employee services.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts
10
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 short-term notes payables, convertible notes, and accounts payable and accrued expenses approximates their fair values because of the short-term nature of these instruments. The Company's long-term liabilities approximate fair value because their terms reflect market rates.
Basic and Diluted Net Loss Per Unit
The Company computes net loss 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 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. Approximately
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Nine Months Ended September 30, 2021 |
Weighted Average Shares |
Net Income | ||||||
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Basic |
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$ |
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Convertible Debt |
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Diluted |
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$ |
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Income Taxes
The Company is considered a partnership for income tax purposes. Accordingly, the partners report the Partnership's taxable income or loss on their individual tax returns.
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.
NOTE 3: GOING CONCERN
The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has an accumulated deficit of $
11
the continued financial support from its common unit holders, the ability of the Company to obtain necessary equity or debt financing, and the attainment of profitable operations. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. There is no assurance that the Company will be able to generate sufficient revenues in the future. These financial statements do not give any effect to any adjustments that would be necessary should the Company be unable to continue as a going concern.
In March 2020, the World Health Organization declared the novel coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. The spread of COVID-19 has affected segments of the global economy and may affect our operations, including the potential interruption of our supply chain. We are monitoring this situation closely, and although operations have not been materially affected by the COVID-19 outbreak to date, the ultimate duration and severity of the outbreak and its impact on the economic environment and our business is uncertain.
The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products. In addition, we may take temporary precautionary measures intended to help minimize the risk of the virus to our employees, including temporarily requiring all employees to work remotely, suspending all non-essential travel worldwide for our employees, and discouraging employee attendance at industry events and in-person work-related meetings, which could negatively affect our business.
The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of COVID-19 and the actions to contain the coronavirus or treat its impact, among others. In particular, the continued spread of the coronavirus globally could adversely impact our operations, including among others, our manufacturing and supply chain, sales and marketing and could have an adverse impact on our business and our financial results. The COVID-19 outbreak is a widespread health crisis that has adversely affected the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and likely impact our operating results.
The Company expects its operations and the impact from COVID to return fully to pre-COVID function by the end of 2021 and expect demand for its product to return as well. This depends on the success of the vaccine distribution and its efficacy during the rest of the year which is uncertain. The Company has implemented work from home procedures and increased its online sales capabilities to be able to offset impact from such outbreaks in the future.
The Company plans to pursue equity funding to expand its brand. Through equity funding and the current operations, including the acquisition of the Vapor line of business, the Company expects to meet its current capital needs. There can be no assurance that the Company will be able raise sufficient working capital. If the Company is unable to raise the necessary working capital through the equity funding it will be forced to continue relying on cash from operations in order to satisfy its current working capital needs.
NOTE 4: NOTES PAYABLE
Notes Payable- Unrelated Parties
On September 6, 2018, the Company issued the Amended and Restated Secured Promissory Note in the principal amount of $
On July 22, 2019, the Company issued a promissory note in the principal amount of $
On September 17, 2019, the Company issued a promissory note in the principal amount of $
On September 24, 2019,
In August 2021, the Company entered into a purchase and sale agreement with BRMS, LLC (“BMRS Note”), pursuant to which the Company received proceeds of $
Payroll Protection Program Loan
The Company’s long-term debt is comprised of promissory notes pursuant to the Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loan (“EIDL”) (see below), under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) enacted on March 27, 2020 and revised under the provisions of the PayCheck Protection Flexibility Act of 2020 on June 5, 2020 and administered by the United States Small Business Administration (“SBA”).
12
In April 2020, the Company received a loan (the “April 2020 PPP Loan”) in the amount of $
In March 2021, the Company received a loan (the “March 2021 PPP Loan” and together with April 2020 PPP Loan, the “PPP Loans”) in the amount of $
Under the terms of the PPP Loans, a portion or all of the PPP Loans are forgivable to the extent the loan proceeds are used to fund qualifying payroll, rent and utilities during a designated twenty-four week period. Payments are deferred until the SBA determines the amount to be forgiven. The Company intends to utilize the proceeds of the PPP Loans in a manner which will enable qualification as a forgivable loan. However, no assurance can be provided
13
that all or any portion of the PPP Loans will be forgiven. The balance on the PPP Loans totaled $
Economic Injury Disaster Loan
On July 9, 2020 and June 24, 2020, the Company received an EIDL in the aggregate amount of $
The following is a summary of notes payable activity for the nine months ended September 30, 2021:
|
Balance at December 31, 2020 |
$ |
|
|
Proceeds from notes payable plus accrued interest of $ |
| |
|
Repayments of notes payable |
( | |
|
Balance at September 30, 2021 |
$ |
|
|
Current portion |
| |
|
Notes payable, less current portion |
$ |
|
NOTE 5: NOTES PAYABLE – RELATED PARTIES
On July 5, 2019, the Company issued a Note in the principal amount of $
On October 7, 2019, the Company issued a Note in the principal amount of $
On November 8, 2019, the Company issued a Note in the principal amount of $
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and any accrued interest is due in . The July 2019 Frija Note is unsecured. The balance of the note as of December 31, 2020 of $
On November 15, 2019, the Company issued a Note in the principal amount of $
On December 9, 2019, the Company issued a Note in the principal amount of $
On December 16, 2019, the Company issued a Note in the principal amount of $
On January 10, 2020, the Company issued a promissory note in the principal amount of $
On February 18, 2020, the Company issued a promissory note in the principal amount of $
On April 6, 2020, the Company issued a promissory note in the principal amount of $
On June 22, 2020, the Company a promissory note in the principal amount of $
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On August 19, 2020, the Company issued a promissory note in the principal amount of $
On September 22, 2020, the Company issued a promissory note in the principal amount of $
On November 2, 2020, the Company issued a promissory note in the principal amount of $
On December 1, 2020, the Company issued a promissory note in the principal amount of $
On December 17, 2020, the Company received $
On February 25, 2021, the Company issued a promissory note in the principal amount of $
On February 25, 2021, the Company received $
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financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. An additional amount of $
From May and June 2021, the Company received $
From June through September 2021, the Company received a $
In September 2021, the Company received a $
The following is a summary of notes payable – related parties activity for the nine months ended September 30, 2021:
|
Balance at December 31, 2020 |
$ |
|
|
New borrowings |
| |
|
Repayments of principal |
( | |
|
Balance at September 30, 2021 |
$ |
|
NOTE 6: CONVERTIBLE NOTES PAYABLE
Acquisition Note
In connection to the business acquisition there was a $
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7 trading days ending on the last complete trading day prior to the date of the conversion. In addition, in the event that the Company enters into certain transactions with other parties that provide for a conversion price at a larger discount (than 35%) to the trading price of the Company’s common stock, or provides for a longer look-back period, then the conversion price and look-back period under the Note will be adjusted to be such lower conversion price and longer look-back period, as applicable. As of September 30, 2021, and December 31, 2020 the balance outstanding was $
Brikor Note
On February 15, 2019, the Company issued a senior convertible promissory note in the principal amount of $
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).
Daiagi and Daiagi Note
On February 15, 2019, the Company issued a senior convertible promissory note in the principal amount of $
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.
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and Daiagi Note). The balance of the note as of September 30, 2021 and December 31, 2020 was $
Amber Investments Note
On February 15, 2019, the Company issued a senior convertible promissory note in the principal amount of $
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.
K & S Pride Note
On February 19, 2019, the Company issued a senior convertible promissory note in the principal amount of $
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.
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Surplus Depot Note
On February 20, 2019, the Company issued a senior convertible promissory note in the principal amount of $
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.
NOTE 7: PARTNERS’ DEFICIT
Amendment to Partnership Agreement
On January 23, 2020, 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
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.
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Dividends.
Rate. Each Class A preferred unit is entitled to receive an annual dividend at a rate of
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
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.
Equity Purchase Agreement
On February 19, 2020 (the “Execution Date”), the Company entered into an Equity Purchase Agreement (the “Equity Purchase Agreement”) with DiamondRock, LLC (the “Investor”) pursuant to which, upon the terms and subject to the conditions thereof, the Investor committed to purchase shares of the Company’s common units (the “Put Shares”) at an aggregate purchase price of up to $
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Pursuant to the terms of the Equity Purchase Agreement, the commitment period will commence upon the initial effective date of a Form S-1 Registration Statement planned to be filed to register the Put Shares in accordance with the Registration Rights Agreement as further described below and will end on the earlier of (i) the date on which the Investor has purchased Put Shares from the Company pursuant to the Equity Purchase Agreement equal to the Maximum Commitment Amount, (ii) the date on which there is no longer an effective registration statement for the Put Shares, (iii) 24 months after the initial effectiveness of the Registration Statement planned to be filed to register the Put Shares in accordance with the Registration Rights Agreement as further described below, or (iv) written notice of termination by the Company to the Investor (which will not occur at any time that the Investor holds any of the Put Shares).
From time to time over the term of the Equity Purchase Agreement, commencing on the date on which a registration statement registering the Put Shares (the “Registration Statement”) becomes effective, the Company may, in its sole discretion, provide the Investor with a put notice (each a “Put Notice”) to purchase a specified number of the Put Shares (each a “Put Amount Requested”) subject to the limitations discussed below and contained in the Equity Purchase Agreement. Within two (2) trading days of the date that the Put Notice is deemed delivered (“Put Date”) pursuant to terms of the Equity Purchase Agreement, the Company shall deliver, or cause to be delivered, to the Investor, the estimated amount of Put Shares equal to the investment amount (“Investment Amount”) indicated in the Put Notice divided by the “Initial Pricing” per share, as such term is defined in the Equity Purchase Agreement (the “Estimated Put Shares”) as DWAC Shares. Within two (2) trading days following the Put Date, the Investor shall pay the Investment Amount to the Company by wire transfer of immediately available funds.
At the end of the five (5) trading days following the clearing date associated with the applicable Put Notice (“Valuation Period”), the purchase price (the “Purchase Price”) shall be computed as
The Put Amount Requested pursuant to any single Put Notice must have an aggregate value of at least $
In order to deliver a Put Notice, certain conditions set forth in the Equity Purchase Agreement must be met, as provided therein. In addition, the Company is prohibited from delivering a Put Notice if: (i) the sale of Put Shares pursuant to such Put Notice would cause the Company to issue and sell to the Investor, or the Investor to acquire or purchase, a number of shares of the Company’s common units that, when aggregated with all shares of common units purchased by the Investor pursuant to all prior Put Notices issued under the Equity Purchase Agreement, would exceed the Maximum Commitment Amount; or (ii) the issuance of the Put Shares would cause the Company to issue and sell to Investor, or the Investor to acquire or purchase, an aggregate number of shares of common units that would result in the Investor beneficially owning more than 4.99% of the issued and outstanding shares of the Company’s common units (the “Beneficial Ownership Limitation”).
If the value of the Put Shares based on the Purchase Price determined for a particular put would cause the Company to exceed the Maximum Commitment Amount, then within two (2) trading days following the end of the
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Valuation Period the Investor shall return to the Company the surplus amount of Put Shares associated with such put. If the number of the Put Shares (Investment Amount divided by Purchase Price) determined for a particular put exceeds the Beneficial Ownership Limitation, then within two (2) trading days following the end of the Valuation Period the Investor shall return to the Company the surplus amount of Put Shares associated with such put. Concurrently, the Company shall return within two (2) trading days following the end of the respective Valuation Period to the Investor, by wire transfer of immediately available funds, the portion of the Investment Amount related to the portion of Put Shares exceeding the Beneficial Ownership Limitation.
Further pursuant to the Equity Purchase Agreement, the Company agreed that if the Securities and Exchange Commission (the “SEC”) declares the Registration Statement for the Put Shares effective, then during the 12 month period immediately following the date the SEC declares the Registration Statement for the Put Shares effective, upon any issuance by the Company or any of its subsidiaries of common units or common units equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), the Investor shall have the right to participate in up to an amount of the Subsequent Financing (that is not an “Exempt Issuance” as such term is defined in the Equity Purchase Agreement), equal to 50% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided for in such Subsequent Financing; provided, however, where (i) the person or persons through or with whom such Subsequent Financing is proposed to be effected will not agree to such participation by the Investor and (ii) the Investor will not agree to finance the total amount of such Subsequent Financing in lieu of the person or persons through or with whom such Subsequent Financing is proposed to be effected, the Investor shall have no right to participate in such Subsequent Financing.
Further pursuant to the Equity Purchase Agreement, the Company agreed to reserve a sufficient number of shares of its common units for the Investor pursuant to the Equity Purchase Agreement and all other contracts between the Company and the Investor.
The Equity Purchase Agreement contains customary representations, warranties, covenants and conditions for a transaction of this type for the benefit of the parties.
Registration Rights Agreement
On the Execution Date, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investor pursuant to which the Company is obligated to file the Registration Statement to register the resale of the Put Shares. Pursuant to the Registration Rights Agreement, the Company must (i) file the Registration Statement within 45 calendar days from the Execution Date, (ii) use reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”), within 90 calendar days after the filing thereof, and (iii) use its reasonable best efforts to keep such Registration Statement continuously effective under the Securities Act until all of the Put Shares have been sold thereunder or pursuant to Rule 144.
Pursuant to the Registration Rights Agreement, the Company agreed to pay all reasonable expenses, other than sales or brokerage commissions, incurred in connection with registrations, filings or qualifications pursuant to the Registration Rights Agreement, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company.
NOTE 8: COMMITMENTS AND CONTINGENCIES
Lease Agreement
In October 2019, the Company entered into a
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monthly rent of $
|
Years Ending December 31, | ||
|
2021 (Remainder) |
$ |
|
|
2022 |
| |
|
2023 |
| |
|
2024 |
| |
|
Total |
$ |
|
At inception of the lease, the Company recorded a right to use asset and obligation of $
The Company amortized $
Rent expense for the nine months ended September 30, 2021 and 2020 was $
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.
NOTE 9: SUBSEQUENT EVENTS
On October 8, 2021, the Company issued a promissory note in the principal amount of $
On November 10, 2021, the Company issued a promissory note in the principal amount of $
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 15, 2021.
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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 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 rights; |
| • | License our intellectual property; and |
| • | Develop private label manufacturing programs. |
Results of Operations for the Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020
Revenues
Our revenues for the three months ended September 30, 2021 and 2020 were $1,651,215 and $993,509, respectively. The increase was a result of an industry-wide health-related crisis that hampered sales significantly in 2020.
Cost of Sales
Cost of sales for the three months ended September 30, 2021 and 2020 was $1,114,202 and $562,057, respectively. Gross margins decreased to 33% in 2021 compared to 43% in 2020 due to an increase in wholesale and private label sales in 2021 compared to the same period in 2020 offset by increases in both raw materials and shipping costs as compared to the same period in 2020.
Operating Expenses
Operating expenses for the three months ended September 30, 2021 were $489,061 as compared to $393,196 for the three months ended September 30, 2020. The increase in expenses is primarily due to increased sales activity in 2021.
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Other Expense
Interest expense decreased to $96,366 for the three months ended September 30, 2021 as compared to $140,908 for the three months ended September 30, 2020 due to less interest expense recognized on related party loans in 2021. During 2020, there were more active loans accruing interest than in 2020.
Net Loss
Net loss for the three months ended September 30, 2021 was $48,414 compared to a net loss of $102,652 for the three months ended September 30, 2020.
Results of Operations for the Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
Revenues
Our revenues for the nine months ended September 30, 2021 and 2020 were $4,612,992 and $2,797,512, respectively. The increase was a result of an industry-wide health-related crisis that hampered sales significantly in 2020.
Cost of Sales
Cost of sales for the nine months ended September 30, 2021 and 2020 was $2,740,518 and $1,699,876, respectively. Gross margins increased to 41% in 2021 compared to 39% in 2020, due to pricing pressures from the decreased demand related to the industry crisis in 2020.
Operating Expenses
Operating expenses for the nine months ended September 30, 2021 were $1,484,859 as compared to $1,242,671 for the nine months ended September 30, 2020. The increase in expenses is primarily due to increased sales activity in 2021.
Other Expense
Interest expense decreased to $272,894 for the nine months ended September 30, 2021 as compared to $429,561 for the nine months ended September 30, 2020 due to more active loans in 2020.
Net Loss
Net income for the nine months ended September 30, 2021 was $114,721 compared to a net loss of $574,596 for the nine months ended September 30, 2020.
Liquidity and Capital Resources
The Company used cash in operating activities of $238,952 for nine months ended September 30, 2021 as compared to $87,781 of cash used in nine months ended September 30, 2020. Cash used in operations in 2021 resulted from the Company’s net income of approximately $114,000, reduced by increases in accounts receivable and vendor deposits, offset by a decrease in inventory and increase in accounts payable. Cash used in operations in 2020 related to the Company’s net loss of approximately $575,000, offset by decreases in inventory and accounts receivable levels as well as increase in accounts payable.
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During the nine months ended September 30, 2021, the Company received $475,004 from the issuance of notes payable to related parties, repaid $534,689 of principal on notes payable to related parties, received $250,000 from the sale of future receivable, repaid $133,562 of principal on notes payable, and received $190,057 of notes payable proceeds under the Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loan (“EIDL”) program. Both the PPP and EIDL are financial programs under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) signed into law by the U.S. President on March 27, 2020 to provide economic relief to small businesses adversely impacted by COVID-19.
During the nine months ended September 30, 2020, the Company received $655,002 of proceeds from the issuance of notes payable to related parties, received $363,562 of proceeds from notes payable, repaid $661,924 of principal on notes payable to related parties, and repaid $280,055 of principal on notes payable.
Assets
At September 30, 2021 and December 31, 2020, we had total assets of $1,232,609 and $908,345, respectively. Assets primarily consist of the cash accounts held by the Company, inventory, vendor deposits, accounts receivable and a right-to-use asset. In 2021, the Company’s vendor deposits increased by $130,012 and accounts receivable increased by $257,454.
Liabilities
At September 30, 2021 and December 31, 2020, we had total liabilities of $3,359,857 and $3,150,314, respectively.
The Company plans to pursue equity funding to expand its brand. Through equity funding and the current operations, including the acquisition of the Vapor line of business, the Company expects to meet its current capital needs. There can be no assurance that additional capital will be available to us, or that, if available, it will be on terms satisfactory to us. Any additional financing may involve dilution to our shareholders. In the alternative, additional funds may be provided from cash flow in excess of that needed to finance our day-to-day operations, although we may never generate this excess cash flow. If we do not raise additional capital or generate additional funds, implementation of our plans for expansion will be delayed. If necessary we may withdraw from certain growth strategies to conserve cash for continued operations.
Going Concern
The Company had an accumulated deficit of $10,227,452 and negative working capital of $1,582,128 as of September 30, 2021. As of September 30, 2021, the Company had approximately $7,858 in cash and cash equivalents, which will not be sufficient to fund the operations and strategic objectives of the Company over the next twelve months from the date of issuance of these financial statements. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
The Company will be required to obtain additional financing and capital and expects to satisfy its cash needs primarily from the additional issuance of equity securities or indebtedness in order to sustain operations until it can achieve profitability and positive cash flows, if ever. There can be no assurances, however, that adequate additional funding will be available on favorable terms, or at all. If such funds are not available in the future, the Company may be required to delay, significantly modify or terminate its operations, all of which could have a material adverse effect on the Company.
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COVID-19
In March 2020, the World Health Organization declared the novel coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. The spread of COVID-19 has affected segments of the global economy and may affect our operations, including the potential interruption of our supply chain. We are monitoring this situation closely, and although operations have not been materially affected by the COVID-19 outbreak to date, the ultimate duration and severity of the outbreak and its impact on the economic environment and our business is uncertain.
The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products. In addition, we may take temporary precautionary measures intended to help minimize the risk of the virus to our employees, including temporarily requiring all employees to work remotely, suspending all non-essential travel worldwide for our employees, and discouraging employee attendance at industry events and in-person work-related meetings, which could negatively affect our business.
The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of COVID-19 and the actions to contain the coronavirus or treat its impact, among others. In particular, the continued spread of the coronavirus globally could adversely impact our operations, including among others, our manufacturing and supply chain, sales and marketing and could have an adverse impact on our business and our financial results. The COVID-19 outbreak is a widespread health crisis that has adversely affected the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and likely impact our operating results.
The Company expects its operations and the impact from COVID to return fully to pre-COVID function by the end of 2021 and expect demand for its product to return as well. This depends on the success of the vaccine distribution and its efficacy during the rest of the year which is uncertain. The Company has implemented work from home procedures and increased its online sales capabilities to be able to offset impact from such outbreaks in the future.
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.
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, 2021. Based on such review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2021, 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
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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 |
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| 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, 2021 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, 2020. 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
30
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our operations.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
31
| 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.
32
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 | |
| By: /s/ Kevin Frija | |
| Chief Executive Officer | |
| (principal executive officer, principal financial officer and principal accounting officer) | |
| Dated: November 15, 2021 |
33
Exhibit 31.1
CERTIFICATIONS
I, Kevin Frija, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2021 of VPR Brands, LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant) and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial data information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
| Date: November 15, 2021 | /s/Kevin Frija |
| Kevin Frija | |
| Chief Executive Officer (principal executive officer) |
34
Exhibit 31.2
CERTIFICATIONS
I, Kevin Frija, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2021 of VPR Brands, LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant) and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial data information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
| Date: November 15, 2021 | /s/ Kevin Frija |
|
Kevin Frija Chief Executive Officer (principal financial officer) | |
35
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of VPR Brands, LP (the “Company”) on Form 10-Q for the quarter ended September 30, 2021 as filed with the Securities and Exchange Commission (the “Report”), I, Kevin Frija, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| /s/ Kevin Frija | |
| Kevin Frija, Chief Executive Officer (principal executive officer and principal financial officer) | |
| Date: November 15, 2021 |
36
CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - shares |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Partners' Equity, common units authorized | 100,000,000 | 100,000,000 |
| Partners' Equity, common units issued | 85,975,911 | 85,975,911 |
| Partners' Equity, common units outstanding | 85,975,911 | 85,975,911 |
| Common units to be issued | 1,680,721 | 1,680,721 |
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Income Statement [Abstract] | ||||
| Revenues | $ 1,651,215 | $ 993,509 | $ 4,612,992 | $ 2,797,512 |
| Cost of Sales | 1,114,202 | 562,057 | 2,740,518 | 1,699,876 |
| Gross profit | 537,013 | 431,452 | 1,872,474 | 1,097,636 |
| Operating Expenses: | ||||
| Selling, General and Administrative | 489,061 | 393,196 | 1,484,859 | 1,242,671 |
| Total operating expenses | 489,061 | 393,196 | 1,484,859 | 1,242,671 |
| Net Operating Income (Loss) | 47,952 | 38,256 | 387,615 | (145,035) |
| Other Expense: | ||||
| Interest expense | (45,238) | (76,404) | (176,120) | (215,441) |
| Interest expense- related parties | (51,128) | (64,504) | (96,774) | (214,120) |
| Total other expense | (96,366) | (140,908) | (272,894) | (429,561) |
| Net (Loss) Income | $ (48,414) | $ (102,652) | $ 114,721 | $ (574,596) |
| Net (Loss) Income Per Common Unit - Basic | $ (0.01) | |||
| Net (Loss) Income Per Common Unit - Diluted | $ (0.01) | |||
| Weighted-Average Common Units Outstanding - Basic | 85,975,911 | 85,975,911 | 85,975,911 | 85,975,911 |
| Weighted-Average Common Units Outstanding - Diluted | 85,975,911 | 85,975,911 | 86,349,293 | 85,975,911 |
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT (Unaudited) - USD ($) |
Common Units [Member] |
Common Units to be Issued [Member] |
Accumulated Deficit [Member] |
Total |
|---|---|---|---|---|
| Balance at Dec. 31, 2019 | $ 8,015,891 | $ 84,313 | $ (9,778,394) | $ (1,678,190) |
| Balance, shares at Dec. 31, 2019 | 85,975,911 | 1,680,721 | ||
| Net loss | (421,590) | (421,590) | ||
| Balance at Mar. 31, 2020 | $ 8,015,891 | $ 84,313 | (10,199,984) | (2,099,780) |
| Balance,shares at Mar. 31, 2020 | 85,975,911 | 1,680,721 | ||
| Balance at Dec. 31, 2019 | $ 8,015,891 | $ 84,313 | (9,778,394) | (1,678,190) |
| Balance, shares at Dec. 31, 2019 | 85,975,911 | 1,680,721 | ||
| Net loss | (574,596) | |||
| Balance at Sep. 30, 2020 | $ 8,015,891 | $ 84,313 | (10,352,990) | (2,252,786) |
| Balance,shares at Sep. 30, 2020 | 85,975,911 | 1,680,721 | ||
| Balance at Mar. 31, 2020 | $ 8,015,891 | $ 84,313 | (10,199,984) | (2,099,780) |
| Balance, shares at Mar. 31, 2020 | 85,975,911 | 1,680,721 | ||
| Net loss | (50,354) | (50,354) | ||
| Balance at Jun. 30, 2020 | $ 8,015,891 | $ 84,313 | (10,250,338) | (2,150,134) |
| Balance,shares at Jun. 30, 2020 | 85,975,911 | 1,680,721 | ||
| Net loss | (102,652) | (102,652) | ||
| Balance at Sep. 30, 2020 | $ 8,015,891 | $ 84,313 | (10,352,990) | (2,252,786) |
| Balance,shares at Sep. 30, 2020 | 85,975,911 | 1,680,721 | ||
| Balance at Dec. 31, 2020 | $ 8,015,891 | $ 84,313 | (10,342,173) | (2,241,969) |
| Balance, shares at Dec. 31, 2020 | 85,975,911 | 1,680,721 | ||
| Net loss | (101,651) | (101,651) | ||
| Balance at Mar. 31, 2021 | $ 8,015,891 | $ 84,313 | (10,443,824) | (2,343,620) |
| Balance,shares at Mar. 31, 2021 | 85,975,911 | 1,680,721 | ||
| Balance at Dec. 31, 2020 | $ 8,015,891 | $ 84,313 | (10,342,173) | (2,241,969) |
| Balance, shares at Dec. 31, 2020 | 85,975,911 | 1,680,721 | ||
| Net loss | 114,721 | |||
| Balance at Sep. 30, 2021 | $ 8,015,891 | $ 84,313 | (10,227,452) | (2,127,248) |
| Balance,shares at Sep. 30, 2021 | 85,975,911 | 1,680,721 | ||
| Balance at Mar. 31, 2021 | $ 8,015,891 | $ 84,313 | (10,443,824) | (2,343,620) |
| Balance, shares at Mar. 31, 2021 | 85,975,911 | 1,680,721 | ||
| Net loss | 264,786 | 264,786 | ||
| Balance at Jun. 30, 2021 | $ 8,015,891 | $ 84,313 | (10,179,038) | (2,078,834) |
| Balance,shares at Jun. 30, 2021 | 85,975,911 | 1,680,721 | ||
| Net loss | (48,414) | (48,414) | ||
| Balance at Sep. 30, 2021 | $ 8,015,891 | $ 84,313 | $ (10,227,452) | $ (2,127,248) |
| Balance,shares at Sep. 30, 2021 | 85,975,911 | 1,680,721 |
ORGANIZATION |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| ORGANIZATION |
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 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 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. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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 unaudited condensed financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for future periods or the full year. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash Cash includes all cash deposits and highly liquid financial instruments with an original maturity of three months or less. 8 Accounts Receivable The Company analyzes the collectability of accounts receivable from continuing operations each accounting period and adjusts its allowance for doubtful accounts accordingly. A considerable amount of judgment is required in assessing the realization of accounts receivables, including the creditworthiness of each customer, current and historical collection history and the related aging of past due balances. The Company evaluates specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy or other factors affecting the ability to render payment. As of September 30, 2021 and December 31, 2020, the allowance for bad debt was $0 and $112,017, 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, 2021 and December 31, 2020, the Company had recorded a provision for obsolescence of $78,246 and $73,350, respectively. Leases Effective January 1, 2019, the Company adopted the provisions of the new standard. The Company decided to use the practical expedients available upon adoption of Topic 842 to aid the transition from current accounting to provisions of Topic 842. The package of expedients will effectively allow the Company to run off existing leases, as initially classified as operating and classify new leases after implementation under the new standard as the business evolves. 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 revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes 9 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 customer obtains control of the Company's product, which occurs at a point in time, typically upon delivery 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. 100% of the Company’s revenues for the nine months ended September 30, 2021 and 2020, were recognized when the customer obtained control of the Company’s product, which occurred at a point in time, typically upon delivery to the customer. Unit-Based Compensation Unit-based payments to employees, including grants of employee stock options are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB Accounting Standards Codification (“ASC”) Topic 718. That 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 (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented. The Company may issue units as compensation in future periods for employee services. Convertible Instruments The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities. Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts 10 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 short-term notes payables, convertible notes, and accounts payable and accrued expenses approximates their fair values because of the short-term nature of these instruments. The Company's long-term liabilities approximate fair value because their terms reflect market rates. Basic and Diluted Net Loss Per Unit The Company computes net loss 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 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. Approximately 10,542,704 shares underlying convertible notes were excluded from the calculation of diluted loss per share for the three months ended September 30, 2021 and the three and nine months September 30, 2020 because their effect was antidilutive. 373,382 shares underlying convertible debt were dilutive for the nine months ended September 30, 2021, and were included in the calculation of dilute income per share for the nine months ended September 30, 2021 as follows:
Income Taxes The Company is considered a partnership for income tax purposes. Accordingly, the partners report the Partnership's taxable income or loss on their individual tax returns. 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. |
||||||||||||||||||||||||||||||||||||
GOING CONCERN |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| GOING CONCERN |
NOTE 3: GOING CONCERN The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has an accumulated deficit of $10,227,452 and a working capital deficit of $1,582,128 at September 30, 2021. The continuation of the Company as a going concern is dependent upon, among other things, 11 the continued financial support from its common unit holders, the ability of the Company to obtain necessary equity or debt financing, and the attainment of profitable operations. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. There is no assurance that the Company will be able to generate sufficient revenues in the future. These financial statements do not give any effect to any adjustments that would be necessary should the Company be unable to continue as a going concern. In March 2020, the World Health Organization declared the novel coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. The spread of COVID-19 has affected segments of the global economy and may affect our operations, including the potential interruption of our supply chain. We are monitoring this situation closely, and although operations have not been materially affected by the COVID-19 outbreak to date, the ultimate duration and severity of the outbreak and its impact on the economic environment and our business is uncertain. The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products. In addition, we may take temporary precautionary measures intended to help minimize the risk of the virus to our employees, including temporarily requiring all employees to work remotely, suspending all non-essential travel worldwide for our employees, and discouraging employee attendance at industry events and in-person work-related meetings, which could negatively affect our business. The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of COVID-19 and the actions to contain the coronavirus or treat its impact, among others. In particular, the continued spread of the coronavirus globally could adversely impact our operations, including among others, our manufacturing and supply chain, sales and marketing and could have an adverse impact on our business and our financial results. The COVID-19 outbreak is a widespread health crisis that has adversely affected the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and likely impact our operating results. The Company expects its operations and the impact from COVID to return fully to pre-COVID function by the end of 2021 and expect demand for its product to return as well. This depends on the success of the vaccine distribution and its efficacy during the rest of the year which is uncertain. The Company has implemented work from home procedures and increased its online sales capabilities to be able to offset impact from such outbreaks in the future. The Company plans to pursue equity funding to expand its brand. Through equity funding and the current operations, including the acquisition of the Vapor line of business, the Company expects to meet its current capital needs. There can be no assurance that the Company will be able raise sufficient working capital. If the Company is unable to raise the necessary working capital through the equity funding it will be forced to continue relying on cash from operations in order to satisfy its current working capital needs. |
NOTES PAYABLE |
9 Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||
| NOTES PAYABLE |
NOTE 4: NOTES PAYABLE Notes Payable- Unrelated Parties 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 September 30, 2021 was $261,080. On July 22, 2019, the Company issued a promissory note in the principal amount of $250,000 (the “Lendistry Note”) to Lendistry, LLC. The principal amount due under the Lendistry Note bears interest at the rate of 24% per annum, and permits Lendistry, LLC to deduct weekly ACH payments from the Company’s bank account in the amount of $1,240 plus up to 11% of Credit Card Sales until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on July 25, 2025. The Lendistry Note is unsecured. The balance of the note was repaid during the nine months ended September 30, 2021. On September 17, 2019, the Company issued a promissory note in the principal amount of $100,000 (the “Kabbage Note”) to Kabbage, Inc. The principal amount due under the Kabbage Note bears interest at an annual rate of 37%, and requires monthly payments of principal and interest of $10,083 through maturity in . The Kabbage Note is unsecured. The balance of the note as of September 30, 2021 was $26,081. 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 $41,435. The balance of the note was repaid during the nine months ended September 30, 2021. In August 2021, the Company entered into a purchase and sale agreement with BRMS, LLC (“BMRS Note”), pursuant to which the Company received proceeds of $250,000 for the sale of future receivables totaling $308,750, to be remitted to BMRS, LLC in 52 weekly amounts totaling $5,913. The balance of the note as of September 30, 2021 was $230,769. Payroll Protection Program Loan The Company’s long-term debt is comprised of promissory notes pursuant to the Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loan (“EIDL”) (see below), under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) enacted on March 27, 2020 and revised under the provisions of the PayCheck Protection Flexibility Act of 2020 on June 5, 2020 and administered by the United States Small Business Administration (“SBA”). 12 In April 2020, the Company received a loan (the “April 2020 PPP Loan”) in the amount of $203,662 under the “PPP. The April 2020 PPP Loan accrues interest at a rate of 1% and has an original maturity date of two years which can be extended to five years 2 by mutual agreement of the Company and the SBA. The April 2020 PPP Loan contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. In March 2021, the Company received a loan (the “March 2021 PPP Loan” and together with April 2020 PPP Loan, the “PPP Loans”) in the amount of $190,057 under the PPP. The March 2021 PPP Loan accrues interest at a rate of 1% and has an original maturity date of two years which can be extended to five years 2 by mutual agreement of the Company and SBA. The March 2021 PPP Loan contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. Under the terms of the PPP Loans, a portion or all of the PPP Loans are forgivable to the extent the loan proceeds are used to fund qualifying payroll, rent and utilities during a designated twenty-four week period. Payments are deferred until the SBA determines the amount to be forgiven. The Company intends to utilize the proceeds of the PPP Loans in a manner which will enable qualification as a forgivable loan. However, no assurance can be provided 13 that all or any portion of the PPP Loans will be forgiven. The balance on the PPP Loans totaled $393,719 as of September 30, 2021 and have been classified as a long-term liability in notes payable, less current portion on the accompanying balance sheets. Economic Injury Disaster Loan On July 9, 2020 and June 24, 2020, the Company received an EIDL in the aggregate amount of $ 159,900 , payable in monthly installments 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 EIDL is secured by all tangible and intangible property. The balance on this EIDL was $159,900 as of September 30, 2021 and has been classified as a long-term liability in notes payable, less current portion on the accompanying balance sheets. The following is a summary of notes payable activity for the nine months ended September 30, 2021:
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NOTES PAYABLE - RELATED PARTIES |
9 Months Ended | ||||||||||||
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Sep. 30, 2021 | |||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||
| NOTES PAYABLE - RELATED PARTIES |
NOTE 5: NOTES PAYABLE – RELATED PARTIES On July 5, 2019, the Company issued a Note in the principal amount of $100,001 (“July 2019 Frija Note”) to Kevin Frija, the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the July 2019 Frija Note bears interest at the rate of 24% per annum, and permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due in . The July 2019 Frija Note is unsecured. The balance of the note as of December 31, 2020 of $7,356 was repaid during the nine months ended September 30, 2021. On October 7, 2019, the Company issued a Note in the principal amount of $100,001 (“July 2019 Frija Note”) to Kevin Frija, the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the July 2019 Frija Note bears interest at the rate of 24% per annum, and permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due in . The July 2019 Frija Note is unsecured. The balance of the note as of December 31, 2020 of $2,476 was repaid during the nine months ended September 30, 2021. On November 8, 2019, the Company issued a Note in the principal amount of $100,001 (“July 2019 Frija Note”) to Kevin Frija, the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the July 2019 Frija Note bears interest at the rate of 24% per annum, and permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount 14 and any accrued interest is due in . The July 2019 Frija Note is unsecured. The balance of the note as of December 31, 2020 of $2,476 was repaid during the nine months ended September 30, 2021. On November 15, 2019, the Company issued a Note in the principal amount of $100,001 (“July 2019 Frija Note”) to Kevin Frija, the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the July 2019 Frija Note bears interest at the rate of 24% per annum, and permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due in . The July 2019 Frija Note is unsecured. The balance of the note as of December 31, 2020 of $956 was repaid during the nine months ended September 30, 2021. On December 9, 2019, the Company issued a Note in the principal amount of $100,001 (“July 2019 Frija Note”) to Kevin Frija, the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the July 2019 Frija Note bears interest at the rate of 24% per annum, and permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due in . The July 2019 Frija Note is unsecured. The balance of the note as of December 31, 2020 of $1,510 was repaid during the nine months ended September 30, 2021. On December 16, 2019, the Company issued a Note in the principal amount of $100,001 (“July 2019 Frija Note”) to Kevin Frija, the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the July 2019 Frija Note bears interest at the rate of 24% per annum, and permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due in . The July 2019 Frija Note is unsecured. The balance of the note as of December 31, 2020 of $4,084 was repaid during the nine months ended September 30, 2021. On January 10, 2020, the Company issued a promissory note in the principal amount of $100,001 (“January 2020 Frija Note”) to Kevin Frija, who is the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the Note bears interest at the rate of 24% per annum, and the January 2020 Frija Note permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on January 10, 2021. The Note is unsecured. The Note is unsecured. The balance of the January 2020 Frija Note as of December 31, 2020 of $9,671 was repaid during the nine months ended September 30, 2021. On February 18, 2020, the Company issued a promissory note in the principal amount of $100,001 (“February 2020 Frija Note”) to Kevin Frija, who is the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the February 2020 Frija Note bears interest at the rate of 24% per annum, and the February 2020 Frija Note permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on February 18, 2021. The balance as of December 31, 2020 of $21,963 was repaid during the nine months ended September 30, 2021. On April 6, 2020, the Company issued a promissory note in the principal amount of $100,001 (the “April 2020 Note”) to Mr. Frija, who is the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant stockholder of the Company. The principal amount due under the April 2020 Note bears interest at the rate of 24% per annum, and the April 2020 Note permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on April 6, 2021. The April 2020 Note is unsecured. The balance of the April 2020 Note as of December 31, 2020 of $38,071 was repaid during the nine months ended September 30, 2021. On June 22, 2020, the Company a promissory note in the principal amount of $100,000 (the “June 2020 Note”) to Mr. Frija, who is the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the June 2020 Note bears interest at the rate of 24% per annum, and the June 2020 Note permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on June 22, 2021. During August 2020, there was an additional $70,000 issuance to the June 2020 Note. The balance of the June 2020 Note as of December 31, 2020 of $53,243 was repaid during the nine months ended September 30, 2021. 15 On August 19, 2020, the Company issued a promissory note in the principal amount of $100,001 (the “August 2020 Note”) to Kevin Frija, who is the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant stockholder of the Company. The principal amount due under the August 2020 Note bears interest at the rate of 24% per annum, and the August 2020 Note permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on August 19, 2021. The August 2020 Note is unsecured. The balance of the August 2020 Note of $80,782 as of December 31, 2020 was repaid during the nine months ended September 30, 2021. On September 22, 2020, the Company issued a promissory note in the principal amount of $100,001 (the “September 22, 2020 Note”) to Mr. Frija, who is the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant stockholder of the Company. The principal amount due under the September 22, 2020 Note bears interest at the rate of 24% per annum, and the September 22, 2020 Note permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on September 22, 2021. The September 22, 2020 Note is unsecured. The balance of the September 22, 2020 Note as of December 31, 2020 of $94,157 was repaid during the nine months ended September 30, 2021. On November 2, 2020, the Company issued a promissory note in the principal amount of $100,000 (the “November 2020 Kevin and Dan Note”) to Kevin Frija, the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the November 2020 Kevin and Dan Note bears interest at the rate of 24% per annum, and permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on November 2, 2021. The November 2020 Kevin and Dan Note is unsecured. The balance of the November 2020 Kevin and Dan Note as of September 30, 2021 and December 31, 2020 was $13,308 and $96,173, respectively. On December 1, 2020, the Company issued a promissory note in the principal amount of $100,001 (the “December 1, 2020 Note”) to Kevin Frija, who is the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant stockholder of the Company. The principal amount due under the December 1, 2020 Note bears interest at the rate of 24% per annum, and the December 1, 2020 Note permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on December 1, 2021. The December 1, 2020 Note is unsecured. The balance of the December 1, 2020 Note as of September 30, 2021 and December 31, 2020 was $27,421 and $100,000, respectively. On December 17, 2020, the Company received $95,000 pursuant to a promissory note in the principal amount of $100,000 issued on January 14, 2021, to Kevin Frija (“January 14, 2021 Frija Note”), the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. An additional amount of $5,000 was received in January 2021. The principal amount due under the January 14, 2021 Frija Note bears interest at the rate of 24% per annum, and permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on January 14, 2022. The December 17, 2020 Frija Note is unsecured. The balance of the January 14, 2021 Frija Note as of September 30, 2021 and December 31, 2020 was $37,501 and $95,000, respectively. On February 25, 2021, the Company issued a promissory note in the principal amount of $100,001 (the “February 25, 2021 Note”) to Kevin Frija, who is the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant stockholder of the Company. The principal amount due under the January 14, 2021 Note bears interest at the rate of 24% per annum, and the February 25, 2021 Note permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on February 25, 2022. The January 14, 2021 Note is unsecured. The balance of the February 25, 2021 Note as of September 30, 2021 was $100,001. On February 25, 2021, the Company received $75,000 pursuant to a promissory note in the principal amount of $100,000 issued in April 2021, to Kevin Frija (“April 2021 Frija Note”), the Company’s Chief Executive Officer, President, principal 16 financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. An additional amount of $5,000 was received in January 2021. The principal amount due under the April 2021 Frija Note bears interest at the rate of 24% per annum, and permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due in . The April 2021 Frija Note is unsecured. The balance of the April 2021 Frija Note as of September 30, 2021 was $100,001. From May and June 2021, the Company received $100,001 pursuant to a promissory note in the principal amount of $100,000 issued in June 2021, to Kevin Frija (“June 2021 Frija Note”), the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the June 2021 Frija Note bears interest at the rate of 24% per annum, and permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due in . The June 2021 Frija Note is unsecured. The balance of the June 2021 Frija Note as of September 30, 2021 was $100,001. From June through September 2021, the Company received a $100,001 pursuant to a promissory note in the principal amount of $100,000 issued in September 2021, to Kevin Frija (“September 2021 Frija Note”), the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant unitholder of the Company. The principal amount due under the September 2021 Frija Note bears interest at the rate of 24% per annum, and permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due in . The June 2021 Frija Note is unsecured. The balance of the September 2021 Frija Note as of September 30, 2021 was $100,001. In September 2021, the Company received a $70,000 advance against a promissory note issued in November 2021. See Note 9. The following is a summary of notes payable – related parties activity for the nine months ended September 30, 2021:
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CONVERTIBE NOTES PAYABLE |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Debt Disclosure [Abstract] | |
| CONVERTIBE NOTES PAYABLE |
NOTE 6: CONVERTIBLE NOTES PAYABLE Acquisition Note In connection to the business acquisition there was a $500,000 loan from Vapor to the Company, a secured, 36-month promissory note from the Company to Vapor in the principal amount of $500,000 (the “Secured Promissory Note”; together with the Acquisition Note, are referred to herein as the “Notes”) bearing an interest rate of prime plus 2% (which rate resets annually on July 29th), which payments thereunder are $14,000 per month, with such payments deferred and commencing on January 26, 2017, with subsequent installments payable on the same day of each month thereafter and in the 37th month (on July 29, 2019), a balloon payment for all remaining accrued interest and principal. In March 2017 this note holder sold the Acquisition Note to DiamondRock, LLC. DiamondRock has the right to convert the outstanding and unpaid principal amount and accrued and unpaid interest of the respective tranche of the Note into units of common stock of the Company, subject to the limitation that DiamondRock may not complete a conversion if doing so would cause DiamondRock to own in excess of 4.99% of the Company’s outstanding shares of common stock, provided that DiamondRock may waive that limitation and increase the ownership cap to up to 9.99%. The conversion price for any conversion under the Note is equal to the lesser of (i) $0.50 and (ii) 65% of the volume weighted average trading price of the Company’s common over the 17 7 trading days ending on the last complete trading day prior to the date of the conversion. In addition, in the event that the Company enters into certain transactions with other parties that provide for a conversion price at a larger discount (than 35%) to the trading price of the Company’s common stock, or provides for a longer look-back period, then the conversion price and look-back period under the Note will be adjusted to be such lower conversion price and longer look-back period, as applicable. As of September 30, 2021, and December 31, 2020 the balance outstanding was $25,000. 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. The balance of the Brikor Note as of September 30, 2021 and December 31, 2020 was $200,000. Interest expense for nine months ended September 30, 2021 totaled $27,000, of which $4,266 is included in accounts payable and accrued expenses as of September 30, 2021. 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 18 and Daiagi Note). The balance of the note as of September 30, 2021 and December 31, 2020 was $200,000. Interest expense for nine months ended September 30, 2021 totaled approximately $27,000, of which $1,400 is included in accounts payable and accrued as of September 30, 2021. 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). The balance of the note as of September 30, 2021 and December 31, 2020 was $200,000. Interest expense for nine months ended September 30, 2021 totaled approximately $27,000, of which $4,266 is included in accounts payable and accrued as of September 30, 2021. 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). The balance of the note as of September 30, 2021 and December 31, 20120 was $200,000. Interest expense for nine months ended September 30, 2021 totaled approximately $27,000, of which $3,500 is included in accounts payable and accrued as of September 30, 2021. 19 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). The balance of the Surplus Depot Note as of September 30, 2021 and December 31, 2020 was $200,000. Interest expense for nine months ended September 30, 2021 totaled approximately $27,000, of which $3,500 is included in accounts payable and accrued as of September 30, 2021. |
PARTNERS' DEFICIT |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Equity [Abstract] | |
| PARTNERS' DEFICIT |
NOTE 7: PARTNERS’ DEFICIT Amendment to Partnership Agreement On January 23, 2020, 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. 20 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. Equity Purchase Agreement On February 19, 2020 (the “Execution Date”), the Company entered into an Equity Purchase Agreement (the “Equity Purchase Agreement”) with DiamondRock, LLC (the “Investor”) pursuant to which, upon the terms and subject to the conditions thereof, the Investor committed to purchase shares of the Company’s common units (the “Put Shares”) at an aggregate purchase price of up to $5,000,000 (the “Maximum Commitment Amount”) over the course of the commitment period. 21 Pursuant to the terms of the Equity Purchase Agreement, the commitment period will commence upon the initial effective date of a Form S-1 Registration Statement planned to be filed to register the Put Shares in accordance with the Registration Rights Agreement as further described below and will end on the earlier of (i) the date on which the Investor has purchased Put Shares from the Company pursuant to the Equity Purchase Agreement equal to the Maximum Commitment Amount, (ii) the date on which there is no longer an effective registration statement for the Put Shares, (iii) 24 months after the initial effectiveness of the Registration Statement planned to be filed to register the Put Shares in accordance with the Registration Rights Agreement as further described below, or (iv) written notice of termination by the Company to the Investor (which will not occur at any time that the Investor holds any of the Put Shares). From time to time over the term of the Equity Purchase Agreement, commencing on the date on which a registration statement registering the Put Shares (the “Registration Statement”) becomes effective, the Company may, in its sole discretion, provide the Investor with a put notice (each a “Put Notice”) to purchase a specified number of the Put Shares (each a “Put Amount Requested”) subject to the limitations discussed below and contained in the Equity Purchase Agreement. Within two (2) trading days of the date that the Put Notice is deemed delivered (“Put Date”) pursuant to terms of the Equity Purchase Agreement, the Company shall deliver, or cause to be delivered, to the Investor, the estimated amount of Put Shares equal to the investment amount (“Investment Amount”) indicated in the Put Notice divided by the “Initial Pricing” per share, as such term is defined in the Equity Purchase Agreement (the “Estimated Put Shares”) as DWAC Shares. Within two (2) trading days following the Put Date, the Investor shall pay the Investment Amount to the Company by wire transfer of immediately available funds. At the end of the five (5) trading days following the clearing date associated with the applicable Put Notice (“Valuation Period”), the purchase price (the “Purchase Price”) shall be computed as 85% of the average daily volume weighted average price of the Company’s common units during the Valuation Period and the number of Put Shares shall be determined for a particular put as the Investment Amount divided by the Purchase Price. If the number of Estimated Put Shares (Investment Amount divided by Initial Pricing) initially delivered to the Investor is greater than the number of Put Shares (Investment Amount divided by Purchase Price) purchased by the Investor pursuant to such Put, then, within two (2) trading days following the end of the Valuation Period, the Investor shall deliver to the Company any excess Estimated Put Shares associated with such put. If the number of Estimated Put Shares (Investment Amount divided by Initial Pricing) delivered to the Investor is less than the Put Shares purchased by the Investor pursuant to a put, then within two (2) trading days following the end of the Valuation Period the Company shall deliver to the Investor by wire transfer of immediately available funds equal to the difference between the Estimated Put Shares and the Put Shares issuable pursuant to such put. The Put Amount Requested pursuant to any single Put Notice must have an aggregate value of at least $25,000, and cannot exceed the lesser of (i) $250,000, or (ii) 150% of the average daily trading value of the common units in the five trading days immediately preceding the Put Notice. In order to deliver a Put Notice, certain conditions set forth in the Equity Purchase Agreement must be met, as provided therein. In addition, the Company is prohibited from delivering a Put Notice if: (i) the sale of Put Shares pursuant to such Put Notice would cause the Company to issue and sell to the Investor, or the Investor to acquire or purchase, a number of shares of the Company’s common units that, when aggregated with all shares of common units purchased by the Investor pursuant to all prior Put Notices issued under the Equity Purchase Agreement, would exceed the Maximum Commitment Amount; or (ii) the issuance of the Put Shares would cause the Company to issue and sell to Investor, or the Investor to acquire or purchase, an aggregate number of shares of common units that would result in the Investor beneficially owning more than 4.99% of the issued and outstanding shares of the Company’s common units (the “Beneficial Ownership Limitation”). If the value of the Put Shares based on the Purchase Price determined for a particular put would cause the Company to exceed the Maximum Commitment Amount, then within two (2) trading days following the end of the 22 Valuation Period the Investor shall return to the Company the surplus amount of Put Shares associated with such put. If the number of the Put Shares (Investment Amount divided by Purchase Price) determined for a particular put exceeds the Beneficial Ownership Limitation, then within two (2) trading days following the end of the Valuation Period the Investor shall return to the Company the surplus amount of Put Shares associated with such put. Concurrently, the Company shall return within two (2) trading days following the end of the respective Valuation Period to the Investor, by wire transfer of immediately available funds, the portion of the Investment Amount related to the portion of Put Shares exceeding the Beneficial Ownership Limitation. Further pursuant to the Equity Purchase Agreement, the Company agreed that if the Securities and Exchange Commission (the “SEC”) declares the Registration Statement for the Put Shares effective, then during the 12 month period immediately following the date the SEC declares the Registration Statement for the Put Shares effective, upon any issuance by the Company or any of its subsidiaries of common units or common units equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), the Investor shall have the right to participate in up to an amount of the Subsequent Financing (that is not an “Exempt Issuance” as such term is defined in the Equity Purchase Agreement), equal to 50% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided for in such Subsequent Financing; provided, however, where (i) the person or persons through or with whom such Subsequent Financing is proposed to be effected will not agree to such participation by the Investor and (ii) the Investor will not agree to finance the total amount of such Subsequent Financing in lieu of the person or persons through or with whom such Subsequent Financing is proposed to be effected, the Investor shall have no right to participate in such Subsequent Financing. Further pursuant to the Equity Purchase Agreement, the Company agreed to reserve a sufficient number of shares of its common units for the Investor pursuant to the Equity Purchase Agreement and all other contracts between the Company and the Investor. The Equity Purchase Agreement contains customary representations, warranties, covenants and conditions for a transaction of this type for the benefit of the parties. Registration Rights Agreement On the Execution Date, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investor pursuant to which the Company is obligated to file the Registration Statement to register the resale of the Put Shares. Pursuant to the Registration Rights Agreement, the Company must (i) file the Registration Statement within 45 calendar days from the Execution Date, (ii) use reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”), within 90 calendar days after the filing thereof, and (iii) use its reasonable best efforts to keep such Registration Statement continuously effective under the Securities Act until all of the Put Shares have been sold thereunder or pursuant to Rule 144. Pursuant to the Registration Rights Agreement, the Company agreed to pay all reasonable expenses, other than sales or brokerage commissions, incurred in connection with registrations, filings or qualifications pursuant to the Registration Rights Agreement, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company. |
COMMITMENTS AND CONTINGENCIES |
9 Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES |
NOTE 8: COMMITMENTS AND CONTINGENCIES Lease Agreement In October 2019, the Company entered into a 5-year lease of approximately 99,819 square feet of warehouse store and office space with an entity of which the Company’s chief executive officer is an owner. The lease requires base 23 monthly rent of $11,100. The Company has annual options to extend for one-year, during which period rent will increase 3% annually. Future minimum payment on the lease are as follows:
At inception of the lease, the Company recorded a right to use asset and obligation of $378,426, equal to the present value of remaining payments of minimum required lease payments. The Company amortized $55,400 of the right to use asset during the nine months ended September 30, 2021. Rent expense for the nine months ended September 30, 2021 and 2020 was $99,447 and $126,831, 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. |
SUBSEQUENT EVENTS |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS |
NOTE 9: SUBSEQUENT EVENTS On October 8, 2021, the Company issued a promissory note in the principal amount of $100,001 (the “October 2021 Note”) to Kevin Frija, who is the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant stockholder of the Company. The principal amount due under the October 2021 Note bears interest at the rate of 24% per annum, and the October 2021 Note permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on October 8, 2022. The October 2021 Note is unsecured. On November 10, 2021, the Company issued a promissory note in the principal amount of $100,001 (the “November 2021 Note”) to Kevin Frija, who is the Company’s Chief Executive Officer, President, principal financial officer, principal accounting officer and Chairman of the Board, and a significant stockholder of the Company. The principal amount due under the November 2021 Note bears interest at the rate of 24% per annum, and the November 2021 Note permits Mr. Frija to deduct one ACH payment from the Company’s bank account in the amount of $500 per business day until the principal amount due and accrued interest is repaid. Any unpaid principal amount and any accrued interest is due on November 10, 2022. The November 2021 Note is unsecured. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
| Basis of Presentation |
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 unaudited condensed financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for future periods or the full year. |
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| Use of Estimates |
Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. |
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| Cash |
Cash Cash includes all cash deposits and highly liquid financial instruments with an original maturity of three months or less. |
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| Accounts Receivable |
Accounts Receivable The Company analyzes the collectability of accounts receivable from continuing operations each accounting period and adjusts its allowance for doubtful accounts accordingly. A considerable amount of judgment is required in assessing the realization of accounts receivables, including the creditworthiness of each customer, current and historical collection history and the related aging of past due balances. The Company evaluates specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy or other factors affecting the ability to render payment. As of September 30, 2021 and December 31, 2020, the allowance for bad debt was $0 and $112,017, respectively. |
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| Inventory |
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, 2021 and December 31, 2020, the Company had recorded a provision for obsolescence of $78,246 and $73,350, respectively. |
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| Leases |
Leases Effective January 1, 2019, the Company adopted the provisions of the new standard. The Company decided to use the practical expedients available upon adoption of Topic 842 to aid the transition from current accounting to provisions of Topic 842. The package of expedients will effectively allow the Company to run off existing leases, as initially classified as operating and classify new leases after implementation under the new standard as the business evolves. 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. |
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| Revenue Recognition |
Revenue Recognition The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes 9 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 customer obtains control of the Company's product, which occurs at a point in time, typically upon delivery 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. 100% of the Company’s revenues for the nine months ended September 30, 2021 and 2020, were recognized when the customer obtained control of the Company’s product, which occurred at a point in time, typically upon delivery to the customer. |
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| Unit-Based Compensation |
Unit-Based Compensation Unit-based payments to employees, including grants of employee stock options are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB Accounting Standards Codification (“ASC”) Topic 718. That 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 (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented. The Company may issue units as compensation in future periods for employee services. |
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| Convertible Instruments |
Convertible Instruments The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities. Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts 10 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. |
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| Fair Value |
Fair Value The carrying values of the Company’s short-term notes payables, convertible notes, and accounts payable and accrued expenses approximates their fair values because of the short-term nature of these instruments. The Company's long-term liabilities approximate fair value because their terms reflect market rates. |
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| Basic and Diluted Net Loss Per Unit |
Basic and Diluted Net Loss Per Unit The Company computes net loss 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 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. Approximately 10,542,704 shares underlying convertible notes were excluded from the calculation of diluted loss per share for the three months ended September 30, 2021 and the three and nine months September 30, 2020 because their effect was antidilutive. 373,382 shares underlying convertible debt were dilutive for the nine months ended September 30, 2021, and were included in the calculation of dilute income per share for the nine months ended September 30, 2021 as follows:
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| Income Taxes |
Income Taxes The Company is considered a partnership for income tax purposes. Accordingly, the partners report the Partnership's taxable income or loss on their individual tax returns. |
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| Recent Accounting Pronouncements |
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. |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share, Basic and Diluted |
Basic and Diluted Net Loss Per Unit The Company computes net loss 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 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. Approximately 10,542,704 shares underlying convertible notes were excluded from the calculation of diluted loss per share for the three months ended September 30, 2021 and the three and nine months September 30, 2020 because their effect was antidilutive. 373,382 shares underlying convertible debt were dilutive for the nine months ended September 30, 2021, and were included in the calculation of dilute income per share for the nine months ended September 30, 2021 as follows:
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NOTES PAYABLE (Tables) |
9 Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||
| Schedule of Notes Payable Activity |
The following is a summary of notes payable activity for the nine months ended September 30, 2021:
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NOTES PAYABLE - RELATED PARTIES (Tables) |
9 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||
| Schedule of Notes Payable - Related Parties Activity |
The following is a summary of notes payable – related parties activity for the nine months ended September 30, 2021:
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COMMITMENTS AND CONTINGENCIES (Tables) |
9 Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||
| Summary of Lease Payments |
In October 2019, the Company entered into a 5-year lease of approximately 99,819 square feet of warehouse store and office space with an entity of which the Company’s chief executive officer is an owner. The lease requires base 23 monthly rent of $11,100. The Company has annual options to extend for one-year, during which period rent will increase 3% annually. Future minimum payment on the lease are as follows:
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
| Accounting Policies [Abstract] | |||||
| Allowance for bad debt | $ 0 | $ 0 | $ 112,017 | ||
| Provision for obsolescence | $ 78,246 | $ 73,350 | |||
| Weighted Average Shares - Convertible Debt | 373,382 | ||||
| Anti-dilutive potential common shares | 10,542,704 | 10,542,704 | 10,542,704 | 10,542,704 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of dilute income per share) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Accounting Policies [Abstract] | ||||
| Weighted Average Shares - Basic | 85,975,911 | 85,975,911 | 85,975,911 | 85,975,911 |
| Weighted Average Shares - Convertible Debt | 373,382 | |||
| Weighted Average Shares - Diluted | 85,975,911 | 85,975,911 | 86,349,293 | 85,975,911 |
| Net Income - Basic | $ 114,721 | |||
| Net Income - Convertible Debt | 1,125 | |||
| Net Income - Diluted | $ 115,846 | |||
GOING CONCERN (Details Narrative) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Accumulated deficit | $ 10,227,452 | $ 10,342,173 |
| Working capital deficit | $ 1,582,128 |
NOTES PAYABLE (Details Narrative) - USD ($) |
1 Months Ended | 9 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Jul. 09, 2020 |
Sep. 17, 2019 |
Jul. 22, 2019 |
Sep. 06, 2018 |
Aug. 31, 2021 |
Mar. 31, 2021 |
Jun. 24, 2020 |
Apr. 30, 2020 |
Sep. 30, 2021 |
Dec. 31, 2020 |
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| Notes payable | $ 517,930 | $ 401,493 | ||||||||
| Accrued interest payable | 359 | |||||||||
| Note payable, less current portion | 553,619 | |||||||||
| BMRS Note [Member] | ||||||||||
| Notes payable | 230,769 | |||||||||
| Proceeds from future receivables | $ 250,000 | |||||||||
| Payment for future receivables remittance | 308,750 | |||||||||
| Weekly amounts | $ 5,913 | |||||||||
| A&R Note [Member] | ||||||||||
| Debt principal amount | $ 582,260 | |||||||||
| Debt bears interest rate | 7.00% | |||||||||
| Debt due date | Sep. 06, 2021 | |||||||||
| Notes payable | $ 82,260 | $ 261,080 | ||||||||
| Debt description | 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. | |||||||||
| A&R Note [Member] | Healthier Choices Management Corp [Member] | ||||||||||
| Loan amount | $ 500,000 | |||||||||
| Lendistry Note [Member] | Lendistry, LLC [Member] | ||||||||||
| Debt principal amount | $ 250,000 | |||||||||
| Debt bears interest rate | 24.00% | |||||||||
| Repayments of principal amount with accrued interest | $ 1,240 | |||||||||
| Debt due date | Jul. 25, 2025 | |||||||||
| Cedit card sales percentage | 11.00% | |||||||||
| Kabbage Note [Member] | Kabbage, Inc [Member] | ||||||||||
| Debt principal amount | $ 100,000 | |||||||||
| Debt bears interest rate | 37.00% | |||||||||
| Repayments of principal amount with accrued interest | $ 10,083 | |||||||||
| Debt due date | Sep. 30, 2020 | |||||||||
| Notes payable | $ 26,081 | |||||||||
| PPP loan [Member] | ||||||||||
| Debt bears interest rate | 1.00% | 1.00% | ||||||||
| Loan amount | $ 190,057 | $ 203,662 | ||||||||
| Extended debt maturity period | 5 years | 5 years | ||||||||
| Note payable, less current portion | 393,719 | |||||||||
| Economic Injury Disaster Loan [Member] | ||||||||||
| Loan amount | $ 159,900 | $ 159,900 | ||||||||
| Note payable, less current portion | $ 159,900 | |||||||||
| Accrues interest | 3.75% | 3.75% | ||||||||
| Installment amount of loan | $ 731 | $ 731 | ||||||||
| Paypal Note [Member] | ||||||||||
| Agreement transaction description | 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 $41,435 | |||||||||
NOTES PAYABLE (Schedule of Notes Payable Activity) (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Debt Disclosure [Abstract] | ||
| Balance at December 31, 2020 | $ 764,695 | |
| Proceeds from notes payable plus accrued interest of $359 | 440,416 | |
| Repayments of notes payable | (133,562) | $ (280,055) |
| Balance at September 30, 2021 | 1,071,549 | |
| Current portion | 517,930 | |
| Note payable, less current portion | $ 553,619 | |
NOTES PAYABLE - RELATED PARTIES (Schedule of Notes Payable - Related Parties Activity) (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Related Party Transactions [Abstract] | ||
| Balance at December 31, 2020 | $ 607,919 | |
| New borrowings | 475,004 | $ 655,002 |
| Repayments of principal | (534,689) | $ (661,924) |
| Balance at September 30, 2021 | $ 548,234 | |
CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
Feb. 20, 2019 |
Feb. 19, 2019 |
Feb. 15, 2019 |
|
| Convertible balance outstanding | $ 1,025,000 | $ 1,025,000 | $ 1,025,000 | |||||
| Interest expense | 45,238 | $ 76,404 | 176,120 | $ 215,441 | ||||
| Accrued interest | 359 | 359 | ||||||
| Acquisition Note [Member] | ||||||||
| Acquisition of loan amount | 500,000 | |||||||
| Debt principal amount | $ 500,000 | $ 500,000 | ||||||
| Debt interest rate | 2.00% | 2.00% | ||||||
| Debt payment per month | $ 14,000 | |||||||
| Debt conversion description | DiamondRock has the right to convert the outstanding and unpaid principal amount and accrued and unpaid interest of the respective tranche of the Note into units of common stock of the Company, subject to the limitation that DiamondRock may not complete a conversion if doing so would cause DiamondRock to own in excess of 4.99% of the Company’s outstanding shares of common stock, provided that DiamondRock may waive that limitation and increase the ownership cap to up to 9.99%. The conversion price for any conversion under the Note is equal to the lesser of (i) $0.50 and (ii) 65% of the volume weighted average trading price of the Company’s common over the | |||||||
| Convertible balance outstanding | $ 25,000 | $ 25,000 | 25,000 | |||||
| Brikor Note [Member] | ||||||||
| Debt principal amount | $ 200,000 | |||||||
| Debt interest rate | 18.00% | |||||||
| Debt conversion description | 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. | |||||||
| Convertible balance outstanding | 200,000 | $ 200,000 | 200,000 | |||||
| Interest expense | 27,000 | |||||||
| Accrued interest | 4,266 | $ 4,266 | ||||||
| Daiagi and Daiagi Note [Member] | ||||||||
| Debt principal amount | $ 200,000 | |||||||
| Debt interest rate | 18.00% | |||||||
| Debt conversion description | 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 | |||||||
| Convertible balance outstanding | 200,000 | $ 200,000 | 200,000 | |||||
| Interest expense | 27,000 | |||||||
| Accrued interest | 1,400 | $ 1,400 | ||||||
| Amber Investments Note [Member] | ||||||||
| Debt principal amount | $ 200,000 | |||||||
| Debt interest rate | 18.00% | |||||||
| Debt conversion description | 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). | |||||||
| Convertible balance outstanding | 200,000 | $ 200,000 | 200,000 | |||||
| Interest expense | 27,000 | |||||||
| Accrued interest | 4,266 | $ 4,266 | ||||||
| K & S Pride Note [Member] | ||||||||
| Debt principal amount | $ 200,000 | |||||||
| Debt interest rate | 18.00% | |||||||
| Debt conversion description | 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). | |||||||
| Convertible balance outstanding | 200,000 | $ 200,000 | 200,000 | |||||
| Interest expense | 27,000 | |||||||
| Accrued interest | 3,500 | $ 3,500 | ||||||
| Surplus Depot Note [Member] | ||||||||
| Debt principal amount | $ 200,000 | |||||||
| Debt interest rate | 18.00% | |||||||
| Debt conversion description | 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). | |||||||
| Convertible balance outstanding | 200,000 | $ 200,000 | $ 200,000 | |||||
| Interest expense | 27,000 | |||||||
| Accrued interest | $ 3,500 | $ 3,500 | ||||||
PARTNERS' DEFICIT (Details Narrative) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Feb. 19, 2020 |
|
| Equity Purchase Agreement [Member] | ||
| Class of Stock [Line Items] | ||
| Put notice aggregarte value | $ 25,000 | |
| Aggregate purchase price | 5,000,000 | |
| Maximum [Member] | Equity Purchase Agreement [Member] | ||
| Class of Stock [Line Items] | ||
| Put notice aggregarte value | $ 250,000 | |
| Percentage of average daily trading value | 150.00% | |
| Class A preferred [Member] | ||
| Class of Stock [Line Items] | ||
| Preferred stock shares authorized | 1,000,000 | |
| Value per share | $ 2.00 | |
| Annual dividend at a rate | 8.00% | |
| Monthly basis rate | 0.6666% | |
| Conversion Price | 85.00% | |
| Discount rate | 15.00% |
COMMITMENTS AND CONTINGENCIES (Details Narrative) |
1 Months Ended | 9 Months Ended | |
|---|---|---|---|
|
Oct. 31, 2019
USD ($)
ft²
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
|
| Operating Leased Assets [Line Items] | |||
| Right to use asset | $ 378,426 | ||
| Amortized right to use asset | 55,400 | ||
| Rent expense | $ 99,447 | $ 126,831 | |
| Warehouse Store and Office Space [Member] | |||
| Operating Leased Assets [Line Items] | |||
| Monthly lease payments | $ 11,100 | ||
| Lease term | 5 years | ||
| Warehouse store and office space | ft² | 99,819 | ||
| Percentage of rent increase annually | 3.00% | ||
COMMITMENTS AND CONTINGENCIES (Schedule of Lease Payments) (Details) |
Dec. 31, 2019
USD ($)
|
|---|---|
| Commitments and Contingencies Disclosure [Abstract] | |
| 2021 (Remainder) | $ 33,300 |
| 2022 | 133,200 |
| 2023 | 133,200 |
| 2024 | 122,100 |
| Total | $ 421,800 |
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - Kevin Frija [Member] - USD ($) |
Nov. 10, 2021 |
Oct. 08, 2021 |
|---|---|---|
| October 2021 Note [Member] | ||
| Subsequent Event [Line Items] | ||
| Debt principal amount | $ 100,001 | |
| Debt due date | Oct. 08, 2022 | |
| Debt bears interest rate | 24.00% | |
| Repayments of principal amount with accrued interest | $ 500 | |
| November 2021 Note [Member] | ||
| Subsequent Event [Line Items] | ||
| Debt principal amount | $ 100,001 | |
| Debt due date | Nov. 10, 2022 | |
| Debt bears interest rate | 24.00% | |
| Repayments of principal amount with accrued interest | $ 500 |
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