VPR Brands, LP. (VPRB)·Q2 2018 Earnings Summary

Executive Summary

• Q2 2018 revenue grew year-over-year to $1.21M, with operating income turning positive; however, the financial statements show a small net loss of $(31,527) while MD&A states net profit of $31,527, indicating a discrepancy to note and monitor .
• Six-month revenue rose to $2.22M with higher gross profit and lower SG&A vs prior year; derivative liabilities and total liabilities declined materially, improving leverage profile .
• No formal guidance and no earnings call transcript available; management highlighted improved gross margins, operational efficiency, and momentum from new product lines and expanded distribution/e-commerce .
• Estimates from S&P Global were unavailable; relative performance assessment focuses on year-over-year and sequential comparisons using company filings and press release data.

What Went Well and What Went Wrong

What Went Well

• “We have been able to increase our sales at a healthy rate while also increasing our gross profit margins, which has made the Company operationally profitable” — CEO Kevin Frija .
• COO highlighted momentum from “add[ing] innovative products,” expanding distribution networks, and “greater e-commerce presence” .
• Liabilities decreased sharply vs year-end 2017, driven by reduction in derivative liabilities; balance sheet quality improved .

What Went Wrong

• Continued reliance on high-cost, short-term borrowing (multiple 24% notes and ACH-deducted repayments) introduces financing risk and cash flow pressure .
• Internal control weaknesses persisted; disclosure controls and procedures were not effective, with remediation still in process .
• Reporting discrepancy: Q2 2018 MD&A states net profit, but the financial statements show a net loss for the quarter; investors should assume the statements are authoritative and seek clarification .

Financial Results

Notes:

• MD&A states “Net profit … $31,527” for Q2 2018; the Statements of Operations show “NET LOSS $(31,527)” — discrepancy likely typographical in MD&A; we rely on the financial statements .
• Q1 2018 gross profit and EPS were not disclosed in primary sources found; leave as n/a.

Six-Month Year-to-Date Comparison

Balance Sheet KPIs

Discrepancies versus press release totals (assets/liabilities) exist; the 10-Q is authoritative for GAAP balances .

Segment Breakdown

• Sales are “not segregated by brand or product category”; primary revenue source is vaporizers for cannabis oils/concentrates; no segment reporting available .

Guidance Changes

Earnings Call Themes & Trends

No Q2 2018 earnings call transcript found. Management commentary sourced from press release and 10-Q.

Management Commentary

• CEO: “We have been able to increase our sales at a healthy rate while also increasing our gross profit margins, which has made the Company operationally profitable. We believe that we now have the foundation set for positive growth” — Kevin Frija .
• COO: “Our second quarter results show that VPR Brands is gaining more momentum as our team continues to add innovative products… expand our distribution networks… [and] greater e-commerce presence” — Dan Hoff .
• MD&A: Six-month and three-month revenue increases attributed to “introduction of new product lines”; SG&A reduced due to “lower payroll and professional fees” .

Q&A Highlights

• No earnings call/Q&A transcript available for Q2 2018 in the sources reviewed.

Estimates Context

• Wall Street consensus (S&P Global) for Q2 2018 EPS/Revenue/EBITDA was unavailable despite attempted retrieval via S&P Global tools; company appears thinly covered. Without consensus, we cannot assess beats/misses for this quarter.

Key Takeaways for Investors

• Revenue growth and positive operating income mark operational progress; focus on sustainability given the small absolute scale and financing constraints .
• Balance sheet improved with lower total liabilities and derivative liability; nonetheless, cash is low and reliance on 24% short-term notes is a key risk to liquidity and dilution (ongoing conversions) .
• Cost discipline (lower SG&A) and margin gains underpin improved operating results; continued execution on product expansion and distribution should support momentum .
• Internal control weaknesses remain; remediation progress should be monitored as it affects reporting reliability and timeliness .
• No formal guidance and no call transcript limit forward visibility; trade the name on reported momentum in vaporizers/CBD and upcoming quarter updates rather than consensus-revision catalysts .
• Discrepancies between press release and 10-Q figures (six-month totals, quarterly net result) warrant caution; anchor on the 10-Q and seek management clarification in subsequent disclosures .

Sources: Q2 2018 10-Q and the Q2 2018 earnings press release (8-K Exhibit 99.1), plus Q1 2019 press release for Q1 2018 prior-quarter comparatives.
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