美國
證券交易委員會
華盛頓，特區。20549
表格
(馬克 一)
截至季度結束
或者
過渡期從到
（佣金 文檔編號）
（公司章程中指定的準確公司名稱）
註冊地或其他管轄區 公司所在地或組織機構 |
（美國國稅局僱主號碼） (主要 執行人員之地址) |
| (主要 執行人員之地址) | (郵政 編 碼) |
註冊人的電話號碼，包括區號
根據法案第12(b)節註冊的證券:
| 每一類別的名稱 | 交易符號 | 在每個交易所註冊的名稱 | ||
請勾選是否註冊人（1）在過去12個月內（或註冊人被要求提交此類報告的較短期間）已提交所有根據1934年證券交易法第13條或15(d)條款需提交的報告，並且（2）在過去90天內是否受到此類提交要求的約束。是 ☐
請通過勾選來指示註冊人是否在過去12個月（或註冊人被要求提交此類文件的較短期間內）電子提交了根據規則405的S-t條例所需提交的每個互動數據文件。
是 ☐
指示 勾選註冊人是否爲大型加速申報人、加速申報人、非加速申報人、小型申報公司， 或者一家新興的成長型公司。請參閱 「大型加速文件管理器」、「加速文件管理器」、「較小文件管理器」 的定義 《交易法》第12b-2條中的 「申報公司」 和 「新興成長型公司」。
| 大型加速文件提交人 | ☐ | 加速文件提交人 | ☐ |
| ☒ | 小型報告公司 | ||
| 新興成長公司 |
如果是新興成長公司，請勾選，如果註冊人已選擇不使用根據交易所法案第13(a)條提供的任何新的或修改的財務會計準則的延長過渡期，請勾選。
請勾選適用的圓圈，表示註冊登記者是否是空殼公司(根據交易所法案第12b-2條的定義)。是 ☐ 否
截至2024年11月14日，Greenlane Holdings, Inc.擁有 股A類普通股。
Greenlane Holdings，Inc。
表格 10-Q
截至2024年9月30日季度結束
目錄
| 頁面 | ||
| 第一部分 | 財務信息 | |
| 項目 1. | 基本報表(未經審計) | 3 |
| 彙編的綜合資產負債表 | 3 | |
| 聯合綜合收益及損失簡明合併報表 | 4 | |
| 股東權益的簡化合並報表 | 5 | |
| 簡明的綜合現金流量表 | 6 | |
| 簡明合併財務報表附註 | 8 | |
| 項目 2. | 分銷計劃 | 26 |
| 項目 3. | 有關市場風險的定量和定性披露 | 37 |
| 項目 4. | 控制和程序 | 37 |
| 第二部分 | 其他信息 | |
| 項目 1. | 法律訴訟 | 38 |
| Interest expense, net | 風險因素 | 38 |
| 項目 2. | 未註冊的股權證券銷售及所得用途，及發行人對股權證券的購買 | 40 |
| 項目5。 | 其他信息 | 40 |
| 項目 6. | 展示資料 | 40 |
| 簽名 | 41 | |
| 2 |
股份註冊聲明中的規定 I
項目 1. 基本報表（未經審計）
greenlane控股有限公司。
彙編簡明資產負債表
(以千爲單位，除每股金額面值外)
| 2024年9月 30日 | 2023年12月31日 | |||||||
| (未經審計) | ||||||||
| 資產 | ||||||||
| 流動資產 | ||||||||
| 現金 | $ | $ | ||||||
| 應收賬款，減除$的準備金 | ||||||||
| 存貨淨額 | ||||||||
| 供應商 存款 | ||||||||
| 其他 流動資產（注8） | ||||||||
| 總計 當前資產 | ||||||||
| 不動產、機器及設備，淨值 | ||||||||
| 營業租賃負債-流動部分 | ||||||||
| 其他資產 | ||||||||
| 總資產 | $ | $ | ||||||
| 負債 | ||||||||
| 流動負債 | ||||||||
| 應付賬款 | $ | $ | ||||||
| 應計費用 和其他流動負債（注8） | ||||||||
| 客戶存款 | ||||||||
| 應付票據 減債務折扣 | ||||||||
| 經營租賃 當前部分 | ||||||||
| 融資租賃 當前部分 | ||||||||
| 流動負債合計 | ||||||||
| 經營租賃 減去當前部分 | ||||||||
| 其他負債 | ||||||||
| 總長期負債 | ||||||||
| 總負債 | ||||||||
| 承諾 和或有事項（注7） | ||||||||
| 股東權益 | ||||||||
| 優先股，$ 面值， 授權股份， 已發行並流通 | ||||||||
| A類普通股，$0.0005股，截至2024年4月30日和2024年1月31日，授權股票0.0005股；每股面值， 授權股份數, 股票於2024年9月30日發行和流通； 授權股票數， 股票於2023年12月31日發行和流通* | ||||||||
| B類普通股，$0.00003每股面值， 授權股票數，並 股票於2024年9月30日和2023年12月31日的已發行和流通* | ||||||||
| 額外 資本* | ||||||||
| 累計虧損 | ( | ) | ( | ) | ||||
| 累計 其他綜合收益 | ||||||||
| 總 歸屬greenlane控股公司的股東權益 | ||||||||
| 非控股 權益 | ( | ) | ( | ) | ||||
| 總股東權益 | ||||||||
| 負債和股東權益總計 | $ | $ | ||||||
| * |
附註是這些未經審計的簡明綜合財務報表的組成部分。
| 3 |
greenlane控股有限公司。
壓縮合並損益表和綜合損失表
(未經審計)
(單位：千美元，每股金額除外)
| 截至9月30日的三個月 | 截至9月30日的九個月 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 淨銷售額 | $ | $ | $ | $ | ||||||||||||
| 銷售成本 | ||||||||||||||||
| 毛利潤 | ||||||||||||||||
| 營業費用： | ||||||||||||||||
| 薪資、福利和工資稅 | ||||||||||||||||
| 一般及行政費用 | ||||||||||||||||
| 折舊和攤銷 | ||||||||||||||||
| 總營業費用 | ||||||||||||||||
| 經營虧損 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他收益（費用），淨: | ||||||||||||||||
| 利息費用 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 可換履行條件公允價值變動 | ||||||||||||||||
| 償還債務所獲利潤 | ||||||||||||||||
| 其他收入（費用），淨額 | ( | ) | ||||||||||||||
| 其他總收益（費用），淨額 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 稅前虧損 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 所得稅的準備金（福利） | ( | ) | ||||||||||||||
| 淨虧損 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 淨利潤歸非控股權益人的淨收益（損失） | ( | ) | ( | ) | ||||||||||||
| 歸屬於Greenlane Holdings，Inc.的淨虧損 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 每股淨損失歸屬於A類普通股 - 基本和攤薄（注9）* | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| A類普通股的加權平均在外流通股數 - 基本和攤薄（注9）* | ||||||||||||||||
| 其他全面收益（損失）： | ||||||||||||||||
| 外幣轉換調整 | ||||||||||||||||
| 全面損失 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 扣除歸屬於非控制權益的綜合損失 | ( | ) | ( | ) | ||||||||||||
| 歸屬於greenlane控股公司的綜合虧損。 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| * |
附註是這些未經審計的簡明綜合財務報表的組成部分。
| 4 |
greenlane控股有限公司。
簡明的股東權益合併財務報表
(未經審計)
(以千爲單位)
| A類普通股 | 股本所對應的賬面超額支付 | 累積 | 累計其他綜合 | 非控制權 | 股東總數 | |||||||||||||||||||||||
| 股份* | 金額* | Capital* | 赤字 | 收入（虧損） | 利息 | 股本 | ||||||||||||||||||||||
| 2023年12月31日餘額 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| 淨虧損 | — | ( | ) | ( | ) | |||||||||||||||||||||||
| 基於股權的補償 | ||||||||||||||||||||||||||||
| 發行A類股份 -（註釋9） | ( | ) | ||||||||||||||||||||||||||
| 其他綜合收益 | — | |||||||||||||||||||||||||||
| 2024年3月31日餘額 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| 淨損失 | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| 發行A類股份-(附註9) | ( | ) | ||||||||||||||||||||||||||
| 其他綜合收益 | — | ( | ) | ( | ) | |||||||||||||||||||||||
| 2024年6月30日結餘 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| 淨損失 | — | ( | ) | ( | ) | |||||||||||||||||||||||
| 發行A類股份和認股權證-(附註9) | ||||||||||||||||||||||||||||
| 其他綜合收益 | — | |||||||||||||||||||||||||||
| 2024年9月30日的餘額 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| * |
| A類 普通股 | B類普通股 | 附加 實收資本 | 累積 | 累計 其他綜合收益 | 非控制 | 股東總數 | ||||||||||||||||||||||||||||||
| 股份* | 金額* | 股份* | 金額* | Capital* | 赤字 | 收入（損失） | 利息 | 股本 | ||||||||||||||||||||||||||||
| 2022年12月31日餘額 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| 淨虧損 | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| 基於股權的補償 | — | — | ||||||||||||||||||||||||||||||||||
| 發行A類股股份 - 修訂Eyce APA（附註3） | — | — | ||||||||||||||||||||||||||||||||||
| 其他綜合收益 | — | — | ||||||||||||||||||||||||||||||||||
| 2023年3月31日餘額 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| 淨虧損 | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| 基於股權的補償沒收，淨額 | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| A類股份發行-修訂Eyce APA（注3） | — | — | ||||||||||||||||||||||||||||||||||
| 其他全面收入（損失） | — | — | ||||||||||||||||||||||||||||||||||
| 2023年6月30日餘額 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| 淨虧損 | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| 基於股權的補償 | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| 發行A類股份-修訂版Eyce APA（注3） | ||||||||||||||||||||||||||||||||||||
| 發行A類股份（注9） | ||||||||||||||||||||||||||||||||||||
| 其他全面收入（損失） | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| 2023年9月30日餘額 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| * |
附註是這些未經審計的簡明綜合財務報表的組成部分。
| 5 |
greenlane控股有限公司。
簡明綜合現金流量表
(未經審計)
(以千爲單位)
| 截至九月三十日止九個月。 | ||||||||
| 2024 | 2023 | |||||||
| 經營活動現金流量： | ||||||||
| 淨虧損（包括歸屬於非控股權益的金額） | $ | ( | ) | $ | ( | ) | ||
| 調整爲淨損失到經營活動現金流量淨使用： | ||||||||
| 折舊和攤銷 | ||||||||
| 基於股權的薪酬費用 | ||||||||
| 壞賬準備變動 | ( | ) | ||||||
| 可換履行條件公允價值變動 | ( | ) | ||||||
| 債務折價和遞延融資費用攤銷 | ||||||||
| 償還債務所獲利潤 | ( | ) | ||||||
| 其他 | ( | ) | ||||||
| 運營資產和負債變動，除收購影響外淨值： | ||||||||
| 應收賬款的增加（減少） | ( | ) | ||||||
| 預付款項及其他流動資產減少 | ||||||||
| 供應商存款減少 | ||||||||
| 其他流動資產減少 | ||||||||
| 應付賬款的增加(減少) | ( | ) | ( | ) | ||||
| 應計費用及其他負債增加(減少) | ( | ) | ||||||
| 客戶存款減少 | ( | ) | ( | ) | ||||
| 經營活動中提供的淨現金流量（流出） | ( | ) | ||||||
| 投資活動現金流量： | ||||||||
| 不動產和設備的購買淨額 | ( | ) | ( | ) | ||||
| 出售股權投資的收益 | ||||||||
| 投資活動所使用的淨現金 | ( | ) | ( | ) | ||||
| 籌集資金的現金流量： | ||||||||
| Eyce和DaVinci的承諾票據支付 | ( | ) | ||||||
| Eyce LLC和DaVinci收購的購買對價 | ( | ) | ||||||
| 資產基礎貸款的償還 | ( | ) | ||||||
| 資產基礎貸款的修改成本 | ( | ) | ||||||
| 發行A類普通股和warrants的收益，扣除成本 | ||||||||
| 行使股票期權的收益，扣除成本 | ||||||||
| 擔保過橋貸款的收益，扣除成本 | ||||||||
| 還款應付票據 | ( | ) | ||||||
| 票據應收款的收入 | ||||||||
| 未來應收款融資的收益 | ||||||||
| 針對未來應收賬款的貸款還款 | ( | ) | ( | ) | ||||
| 其他 | ( | ) | ( | ) | ||||
| 籌集資金的淨現金流量 | ( | ) | ||||||
| 匯率變動對現金的影響 | ||||||||
| 現金淨減少額 | ( | ) | ||||||
| 期初的現金和受限現金 | ||||||||
| 期末的現金和受限現金 | $ | $ | ||||||
附註是這些未經審計的簡明綜合財務報表的組成部分。
| 6 |
greenlane控股有限公司。
精簡綜合現金流量表（續）
(未經審計)
(以千爲單位)
現金與受限現金的調節 以合併資產負債表爲準
| 截至九月三十日止九個月。 | ||||||||
| 2024 | 2023 | |||||||
| 期初 | ||||||||
| 現金 | $ | $ | ||||||
| 受限現金 | ||||||||
| 期初現金及受限現金總額 | $ | $ | ||||||
| 期末 | ||||||||
| 現金 | $ | $ | ||||||
| 受限現金 | ||||||||
| 期末總現金和限制現金 | $ | $ | ||||||
| 現金流補充資料披露 | ||||||||
| 支付的利息現金 | $ | $ | ||||||
| 用於計量租賃負債的現金支付 | $ | $ | ||||||
| 非現金融資活動： | ||||||||
| 非現金購買固定資產和設備 | $ | $ | ||||||
| 與協同資產購買協議相關的債務解除 | $ | $ | ||||||
| 從或有對價轉入應付票據 | $ | $ | ||||||
| 從應計費用轉至應付票據 | $ | $ | ||||||
附註是這些未經審計的簡明綜合財務報表的組成部分。
| 7 |
greenlane控股有限公司。
簡明合併財務報表附註
(未經審計)
註釋1。業務運營與組織
組織
greenlane 控股公司（「greenlane」，以及與運營公司（如下所定義）及其合併子公司統稱爲「公司」、「我們」、「我們」和「我們的」）於2018年5月2日在特拉華州成立。我們是一家控股公司，成立的目的是完成股份的承銷首次公開募股（「IPO」），即我們的A類普通股，每股面值$0.01（「A類普通股」），以便開展greenlane Holdings, LLC（「運營公司」的業務）。運營公司於2015年9月1日在特拉華州成立，總部位於佛羅里達州博卡拉頓。除非上下文另有要求，提及「公司」時均指我們及我們的合併子公司，包括運營公司。
我們在美國、加拿大、歐洲和拉丁美洲銷售優質的大麻配件、防兒童打開包裝、專業的蒸發解決方案和生活用品，爲廣泛的多樣化客戶群提供服務，擁有數千個零售店、持牌大麻零售店、煙店、跨州經營者（「MSOs」）、專業零售商和零售消費者。
我們 一直在開發自己的專有品牌組合（「greenlane品牌」），我們相信這些品牌隨着時間的推移， 能夠提供更高的利潤併爲我們的客戶和股東創造長期價值。我們全資擁有的greenlane品牌包括Groove – 我們的更實惠產品系列，以及Higher Standards – 我們的高端菸草商店和輔助產品品牌，還有我們的獲獎 網站和品牌Vapor.com。我們還有針對高端Marley Natural品牌產品的類別獨家許可，以及k.Haring品牌產品的許可。
我們 是運營公司的唯一管理者，我們的主要資產是運營公司的普通單位（「普通單位」）。 作爲運營公司的唯一管理者，我們負責運營和控制運營公司的所有業務和事務，我們通過運營公司及其子公司進行業務。我們有董事會和高管，但沒有員工。所有的資產都由運營公司的全資子公司持有，所有員工都在這些全資子公司工作。
我們 擁有萬億.e運營公司的唯一投票權益，並且控制其管理，我們有義務承擔運營公司的損失，並從中獲得收益，損失可能是相當顯著的。我們確定運營公司是一個變量 利益實體（「VIE」），我們是運營公司的主要受益者。因此，按照VIE會計模型，從2019年6月30日結束的財政季度開始，我們將運營公司合併到我們的綜合基本報表中，並在我們的綜合基本報表中報告與運營公司的成員（除了我們持有的普通單位）持有的普通單位相關的非控制性權益。
在2021年8月31日，我們完成了與KushCo Holdings, Inc.（「KushCo」）的合併，並已從該日期起將KushCo的經營結果納入我們的合併經營報表和綜合損失中。爲了與KushCo的合併相關，greenlane的公司章程被修訂和重述（「A&R章程」），以（i）增加greenlane B類普通股的授權股份數量，$ 每股面值爲的普通股（「B類普通股」），從 百萬股。 百萬股，以使每一股已發行的C類普通股，$每股面值爲的普通股（「C類普通股」）轉換爲三分之一的B類普通股，（ii）將A類普通股的授權股份數量從 百萬股增加至 百萬股，以及（iii）刪除對C類普通股的引用。根據與KushCo於2021年3月31日簽訂的合併協議的條款（「合併協議」），在業務合併完成之前，C類普通股的持有者在合併結束前立即收到每持有一股C類普通股可獲得三分之一的B類普通股。
我們的公司結構通常被稱爲「Up-C」結構。 Up-C結構允許運營公司繼續實現持有被視爲合作伙伴關係或「透支」的實體利益所關聯的稅收優惠。其中之一的好處是，分配給其成員的運營公司未來應稅收入將根據流程進行徵稅，因此不會在運營公司實體級別上受到公司稅的影響。此外，由於成員可以按一比一的比例換回他們的普通單位以換取A級普通股或根據我們的選擇換取現金，Up-C結構還爲成員提供了非公開交易有限責任公司的持有人通常不提供的潛在流動性。
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關於首次公開發行（IPO），我們與經營公司及經營公司成員簽訂了稅務索取協議（「TRA」）和註冊權協議（「註冊權協議」）。TRA規定我們向經營公司成員支付稅務收益的%i（如果有的話），這是由於上述機制下普通單位的贖回導致我們對經營公司資產的稅基調高，以及根據TRA支付的其他某些稅務收益。根據註冊權協議，我們同意登記發行A類普通股的股份，這些股份可在經營公司成員根據普通單位的贖回或交換而應享有。
根據《經營公司的A&R憲章》和《經營公司修正與重訂的第四份營運協議》（「經營協議」）的要求，（a）我們必須始終保持我們擁有的每股普通單位與我們發行的A類普通股之間的比例爲一比一（適用於某些例外情況），以及（b）經營公司必須始終保持（i）我們發行的A類普通股與我們擁有的普通單位數量之間的一比一比例，以及（ii）經營公司非創始成員擁有的B類普通股與非創始成員擁有的普通單位數量之間的一比一比例。
截至2022年12月31日，所有運營公司的普通股和B類普通股均已交換爲A類普通股，我們擁有
拆股並股
在2023年6月2日，我們向特拉華州國務卿（"SSSD"）提交了《修正證書》， 該證書實施了一次十股合一的反向拆股（"2023年反向拆股"，與2022年反向拆股共同稱爲"拆股並股"）， 自2023年6月5日下午5:01（東部時間）生效。因此，所有已發行的普通股每十股轉換爲一股普通股。 我們以現金支付碎股的補償，因此， 在2023年反向拆股中沒有發行任何碎股。
2024年7月23日，董事會批准以1比11的比例進行反向拆股，並已向特拉華州國務卿提交修正案，該修正案於2024年8月5日東部時間凌晨12:01生效，在納斯達克開盤之前。
拆股並股並未改變普通股的面值或普通股的授權股數。所有未行使期權、受限股票獎勵、權證和其他證券以購買或以其他方式獲取我們普通股的持有人，均因拆股並股而進行了調整，根據每種證券的條款要求。根據修改和重訂的2019年股權激勵計劃，可授予的股份數量也已適當調整。有關更多信息，請參閱「注10-薪酬計劃」.
這些合併財務報表和相關附註中的所有股份和每股股份金額都已經爲所有報告期進行了反向拆股並股的調整，其中包括將普通股的面額減少的金額重新分類爲其他股本。
流動性和繼續經營
根據ASC 205-40《基本報表呈現——行將發生事項》（「ASC 205-40」），管理層必須評估是否有條件和事件，在總體上考慮，對公司在這些簡明綜合財務報表發放之後的一年內能否作爲一個持續經營點提出重大疑義。根據ASC 205-40的規定，管理層的分析只可以包括對管理層計劃潛在緩解影響的部分，前提是（a）有潛力使管理層計劃在及時的基礎上得到有效實施，且（b）當計劃得到實施時，將減輕提出對公司持續經營提出重大疑義的相關條件或事件。
我們對流動性和資本的主要需求是運營資金、最近收購相關的債務償還以及公司的一般需求。我們的主要流動性來源是手頭現金和來自經營活動產生的現金流，以及其他股權發行的收入。
我們 相信我們的現金和我們從運營中產生的現金流將不足以資助我們的流動資金 和資本支出需求，以及與我們現有運營相關的債務償還和其他流動性需求， 在接下來的12個月內。根據我們截至2024年9月30日的現金和流動資金，我們可能沒有足夠的現金來資助計劃的 運營進入2024年第四季度。這從我們持續努力籌集資本和利用外部資金 來滿足我們的資本需求中顯而易見。
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自動取款機 計劃和架子註冊聲明
以前我們使用Form S-3表格上的架構註冊聲明（「架構註冊聲明」）不時進行證券發行，以滿足我們的流動性需求。爲了滿足我們的流動性需求，我們曾經使用註冊聲明來進行有價證券發行。2021年8月，我們提交了招股說明書，並設立了「按市場價格」股權發行計劃（「ATM計劃」），該計劃允許不時出售我們的A類普通股，總髮行價高達$
自2021年8月啓動ATm計劃至2022年12月31日，我們出售了我
們的A類普通股，獲得了約$的總收益。
普通股票和認股權發行。
在2023年6月29日，我們與某些投資者簽署了證券購買協議，約定我們將發行並賣出合計 股的A類普通股、預先資金的認股權證，最多可購買
2024年8月12日，公司與一家機構投資者簽訂了一份證券購買協議，總計籌集的現金淨額爲$
基於資產的貸款
2022年8月9日，我們簽訂了截至2022年8月8日的基於資產的貸款協議（「貸款協議」），爲公司提供了最多$的一筆年限貸款。
在2023年8月7日，我們償還了約$
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ERC 銷售
2023年2月16日，我們全資擁有的子公司Warehouse Goods LLC和Kim International LLC與第三方機構投資者達成協議，根據該協議，投資者以現金約xx百萬美元購買了我們通過僱員留任信用計劃申報所享有的針對特定時期由美國國內稅務局支付的權益的經濟參與權利，該權益享有折扣。
未來 應收賬款融資
在2023年7月、8月、10月和11月，公司根據與兩傢俬人貸方達成的未來應收款融資的條款，總共收到約$
擔保 橋貸
2023年9月22日，公司根據《貸款和安全協議》（以下簡稱「2023年9月貸款協議」）與Synergy Imports，LLC（以下簡稱「擔保橋樑貸款貸款人」）達成了一項有擔保的貸款。
根據2023年9月貸款協議，擔保橋樑貸款放款人同意向公司提供 -個月橋樑貸款
新資金$
在某些例外情況下，公司同意以所有資產（不包括存入資金帳戶和應收賬款）作爲抵押。此外，公司同意轉讓一項美國專利、兩項相關的外國專利以及一項相關商標，以換取在2023年9月貸款協議中與吸菸產品及配件相關的這些資產的獨家許可。
2024年5月，公司修改了與協同能源的債務協議，以減少到期的本金餘額$
注意 應付款
開啓
2024年6月7日，公司與Cobra Alternative Capital Strategies, LLC簽訂了認購協議。截至9月30日
2024 年，該公司已獲得貸款 $
管理 倡議
由於無法公平地進入資本市場，並且庫存缺貨和高速庫存短缺，我們已經完成了幾項舉措，優化了我們的營運資本需求。2022年第四季度，我們推出了Groove，一個新穎的greenlane品牌產品線，同時我們還對第三方品牌產品進行了合理化和改進，在增加我們的產品種類的同時，減少了庫存資金成本和營運資本需求。
2023年4月，我們進入了戰略伙伴關係。 兩 首先，我們與A&A Global Imports（也稱爲MarijuanaPackaging.com）達成了戰略合作關係（「MJ包裝合作關係」），後者是大麻行業包裝解決方案的主要供應商。於2024年8月8日，公司終止了與MJ包裝的戰略合作關係，並恢復了作爲大麻行業包裝解決方案的直接提供商的業務。然而，MJ包裝仍然是公司的分銷客戶。
其次，我們與我們現有煙霧供應商的一個附屬公司（「煙霧合作伙伴」）建立了戰略合作伙伴關係， 爲某些關鍵客戶提供蒸發器商品和服務（「煙霧合作關係」）。作爲煙霧合作關係的一部分， 我們將向我們的煙霧合作伙伴介紹某些關鍵客戶，協助推廣和出售某些蒸發器商品和服務， 並幫助協調物流、存儲和配送這些蒸發器產品。如果我們的煙霧合作伙伴與關鍵客戶之間建立直接關係， 客戶將直接從我們的煙霧合作伙伴那裏購買我們目前出售給他們的蒸發器商品和服務， 我們將不再需要代表這些關鍵客戶購買這些煙霧庫存。作爲交換，我們將從我們的戰略合作伙伴那裏獲得季度和年度佣金。 雖然戰略合作伙伴關係可能會導致這些煙霧產品的營業收入下降， 但此合作關係結合我們的其他重組措施應該能夠幫助我們降低整體成本結構，提高我們的利潤，從而改善我們的資產負債表。
我們 已經成功地重新談判了許多供應商和合作夥伴的合作條款，並繼續改善與供應商和合作夥伴的營運資金安排。 我們在整合和簡化我們的辦公室、倉庫和配送運營佈局方面取得了進展。 我們大幅減少了員工數量，以降低成本並與我們的營業收入預測保持一致。
公司在截至2024年9月30日和2023年9月30日的九個月裏已經產生了淨虧損$
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由於我們的虧損以及我們預期的現金需求，再加上我們當前的流動性水平，關於公司能否作爲持續經營實體的疑慮是存在的。公司作爲持續經營實體的能力取決於成功執行管理層未來十二個月計劃，以改善公司的流動性和盈利能力，其中包括但不限於：
| ■ | 進一步通過採取額外的重組措施來降低運營成本，以使成本與營業收入相匹配，實現盈利。 | |
| ■ | 通過引入新產品、獲取新客戶和增強我們的銷售隊伍來增加營業收入。 | |
| ■ | 執行與利潤率和運營現金流有利的戰略伙伴關係。 | |
| ■ | 通過發行債務或股票證券尋求額外的資本。 |
未經審計的簡明綜合財務報表不包括可能由於這一持續經營不確定性結果而引發的任何調整。有關我們舉措的更完整描述，請參閱管理層討論與分析。
備註2。重要會計政策摘要
表述基礎
Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2023. The condensed consolidated results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024, or any other future annual or interim period. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments necessary for a fair statement of the Company’s financial position and operating results. Certain reclassifications have been made to prior year amounts or balances to conform to the presentation adopted in the current year.
Principles of Consolidation
Our condensed consolidated financial statements include our accounts, the accounts of the Operating Company, and the accounts of the Operating Company’s consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
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Use of Estimates
Conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts in our consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. U.S. GAAP requires us to make estimates and judgments in several areas. Such areas include, but are not limited to the following: the collectability of accounts receivable; the allowance for slow-moving or obsolete inventory; the realizability of deferred tax assets; the fair value of contingent consideration arrangements; the useful lives property and equipment; the calculation of our VAT taxes receivable and VAT taxes, fines, and penalties payable; our loss contingencies, including our TRA liability; and the valuation and assumptions underlying equity-based compensation. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. The actual results could differ materially from those estimates.
Segment Reporting
We manage our global business operations through our operating and reportable business segments. As of September 30, 2024, we determined that we have one remaining and reportable operating business segment. Our reportable segment has been identified based on how our chief operating decision maker (“CODM”), which is a committee comprised of our Chief Executive Officer (“CEO”) and our Chief Financial and Legal Officer (“CFO”), manages our business, makes resource allocation and operating decisions, and evaluates operating performance.
Revenue Recognition
Revenue is recognized when customers obtain control of goods and services promised by us. Revenue is measured based on the amount of consideration that we expect to receive in exchange for those goods or services, reduced by promotional discounts and estimates for return allowances and refunds. Taxes collected from customers for remittance to governmental authorities are excluded from net sales.
We
generate revenue primarily from the sale of finished products to customers, whereby each product unit represents a single performance
obligation. We recognize revenue from product sales when the customer has obtained control of the products, which is either at point
of sale or delivery to the customer, depending upon the specific terms and conditions of the arrangement, or at the point of sale for
our retail store sales. We provide no warranty on products sold. Product warranty is provided by the manufacturers. For certain product
offerings such as child-resistant packaging, closed-system vaporization solutions and custom-branded retail products, we may receive
a deposit from the customer (generally
We
estimate product returns based on historical experience and record them as a refund liability that reduces the net sales for the period.
We analyze actual historical returns, current economic trends and changes in order volume when evaluating the adequacy of our sales returns
allowance in any reporting period. Our liability for returns, which is included within “Accrued expenses and other current liabilities”
in our consolidated balance sheet, was approximately $
We elected to account for shipping and handling expenses that occur after the customer has obtained control of products as a fulfillment activity in cost of sales. Shipping and handling fees charged to customers are included in net sales upon completion of our performance obligations. We apply the practical expedient provided for by the applicable revenue recognition guidance by not adjusting the transaction price for significant financing components for periods less than one year. We also apply the practical expedient provided by the applicable revenue recognition guidance based upon which we generally expense sales commissions when incurred because the amortization period is one year or less. Sales commissions are recorded within “Salaries, benefits and payroll tax expenses” in the consolidated statements of operations and comprehensive loss.
The Company transitioned to a commission revenue model for the majority of the sales for the Industrial segment. The company operates as a sales agent servicing vape customers and receives a commission for these services. The company was previously working directly with these customers and recognizing gross revenue versus straight commission revenue. The Company recognizes this fee on a periodic basis when the products have been shipped for the end consumer. In working with their partner, the Company is not responsible for fulfilling a promise to provide the specified goods, does not establish the pricing with its partners customers, and does not have control over the goods that will be shipped. As such, the Company is an agent and recognizes its revenue on a net basis for its service. The partner company pays Greenlane a negotiated percentage-based fee on a quarterly basis.
Two
customers represented approximately
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Value Added Taxes
During the third quarter of 2020, as part of a global tax strategy review, we determined that our European subsidiaries based in the Netherlands, which we acquired on September 30, 2019, had historically collected and remitted value added tax (“VAT”) payments, which related to direct-to-consumer sales to other European Union (“EU”) member states, directly to the Dutch tax authorities. In connection with our subsidiaries’ payment of VAT to Dutch tax authorities rather than other EU member states, we may become subject to civil or criminal enforcement actions in certain EU jurisdictions, which could result in penalties.
We
performed an analysis of the VAT overpayments to the Dutch tax authorities, which we expected to be refunded to us, and VAT payable to
other EU member states, including potential fines and penalties. Based on this analysis, we recorded VAT payable of approximately $
Pursuant to the purchase and sale agreement by which we acquired our European subsidiaries, the sellers are required to indemnify us against certain specified matters and losses, including any and all liabilities, claims, penalties and costs incurred or sustained by us in connection with non-compliance with tax laws in relation to activities of the sellers. The indemnity (or indemnification receivable) is limited to an amount equal to the purchase price under the purchase and sale agreement.
As noted above, we have voluntarily disclosed VAT owed to several relevant tax authorities in the EU member states and believe in doing so we will reduce our liability for penalties and interest. Nonetheless, we may incur expenses in future periods related to such matters, including litigation costs and other expenses to defend our position. The outcome of such matters is inherently unpredictable and subject to significant uncertainties. Refer to “Note 7—Commitments and Contingencies” for additional discussion regarding our contingencies.
Recently Issued Accounting Guidance Not Yet Adopted
In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security’s unit of account. This standard is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update require public companies to disclose on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. In addition, the amendment requires that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required in interim periods and require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statements and related disclosures. This amendment will go into effect for the fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements To Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.
| 14 |
本更新中的修訂要求實體每年（1）披露費用和（2）提供附加信息以對賬目進行調和，這些賬目達到定量門檻（如果這些調和賬目的影響等於或超過按適用法定所得稅率乘以稅前收入（或損失）計算的金額的5%）。此外，要求上市公司提供有關費用和的某些定性披露。
本次更新中的修正要求所有實體每年披露支付的所得稅金額（扣除已收回的退款）， 按（1）聯邦（國家）、州和外國稅及（2）支付的所得稅（扣除已收回的退款）等於或大於總所得稅（扣除已收回的退款）5%的各個司法管轄區進行細分。
此更新還包括一些其他修改，以提高所得稅披露的有效性，例如要求所有實體披露以下信息：
| 1. | 持續經營的收入 （或損失）在所得稅費用（或收益）之前，分爲國內和國外。 | |
| 2. | 持續經營的所得稅費用（或收益）按聯邦（國家）、州和國外分列。 |
這項ASU中的修訂要求對實體在採納修訂的年度報告期初的留存收益的期初餘額（或其他適當的資本和淨資產的元件）進行累積影響調整。允許提前採納。公司目前正在評估ASU 2023-09對其合併基本報表和相關披露的影響。本修訂將於2024年12月15日之後開始的年度期間生效。
首次公開發行業務收購與處置
歐盟 子公司購買協議
2024年5月，公司與一組個人達成協議，出售其全部擁有的子公司Shavita b.V.的股權和ARI物流b.V.的幾乎所有資產。
注意事項 4．金融工具的公允價值
在重複基礎上計量的資產和負債
某些財務工具的賬面金額，包括現金、應收賬款、應付賬款、某些應計費用和其他資產以及負債，由於這些工具的短期性質，其近似公允價值。
截至2023年12月31日，我們有需定期按公允價值計量的或有對價。
我們持有的金融工具按公允價值計量並在重複出現的基礎上進行以下日期指示：
| 彙總的合併財務報表 資產負債表說明 | 年末公正價值爲 2023年12月31日 | |||||||||||||||||
| （以千爲單位） | 第1級 | 第2級 | 第3級 | 總計 | ||||||||||||||
| 負債: | ||||||||||||||||||
| 未來對價 - 當前 | 應計費用和其他流動負債 | $ | $ | |||||||||||||||
| 總負債 | $ | $ | $ | $ | ||||||||||||||
在過去三個月和九個月內，在公允價值層次結構的一級和二級之間沒有轉移，在一級和二級之間也沒有與一級之間的轉移。 9月30日，分別是2024年和2023年。
| 15 |
Contingent Consideration
Each period we revalue our contingent consideration obligations associated with business acquisitions to their fair value. We estimate the fair value of the Product Launch Contingent Payments using a form of the scenario-based method, which includes significant unobservable inputs such as management’s identification of probability-weighted outcomes and a risk-adjusted discount rate over the earn-out period. Significant increases or decreases in these inputs could result in a significantly lower or higher fair value measurement of the contingent consideration liability. Changes in the fair value of contingent consideration are included within “Other income (expense), net” in our condensed consolidated statements of operations and comprehensive loss.
A reconciliation of our liabilities that are measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows:
| (in thousands) | Nine Months Ended September 30, 2024 | |||
| Balance at December 31, 2023 | $ | |||
| Cash payments for earned contingent consideration | ||||
| Transfer to notes payable | ||||
| Gain from fair value adjustments included in results of operations | ( | ) | ||
| Balance September 30, 2024 | $ | |||
| (in thousands) | Nine Months Ended September 30, 2023 | |||
| Balance at December 31, 2022 | $ | |||
| Cash payments for earned contingent consideration | ( | ) | ||
| Transfer to notes payable | ( | ) | ||
| Loss (gain) from fair value adjustments included in results of operations | ||||
| Balance at September 30, 2023 | $ | |||
Equity Securities Without a Readily Determinable Fair Value
Our investment in equity securities without readily determinable fair value consist of ownership interests in Airgraft Inc., Sun Grown Packaging, LLC (“Sun Grown”) and Vapor Dosing Technologies, Inc. (“VIVA”). We determined that our ownership interests do not provide us with significant influence over the operations of these investments. Accordingly, we account for our investments in these entities as equity securities.
| 16 |
Airgraft Inc., Sun Grown, and VIVA are private entities and their equity securities do not have a readily determinable fair value. We elected to measure these securities under the measurement alternative election at cost minus impairment, if any, with adjustments through earnings for observable price changes in orderly transactions for the identical or similar investment of the same issuer. We acquired our investments in Sun Grown and VIVA as part of our merger with KushCo, which we completed in August 2021. We did not identify any fair value adjustments related to these equity securities during the three and nine months ended September 30, 2024 and 2023, respectively.
As
of September 30, 2024 and December 31, 2023, the carrying value of our investment in equity
securities without a readily determinable fair value was approximately $
NOTE 5. LEASES
Greenlane as a Lessee
As of September 30, 2024, we had facilities financed under operating leases consisting of warehouses and offices with lease term expirations between 2023 and 2027. Lease terms are generally three to seven years for warehouses and office space. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table provides details of our future minimum lease payments under operating lease liabilities recorded in our condensed consolidated balance sheet as of September 30, 2024. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.
| (in thousands) | Operating Leases | |||
| Remainder of 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 and thereafter | ||||
| Total minimum lease payments | $ | |||
| Less: imputed interest | ||||
| Present value of minimum lease payments | $ | |||
| Less: current portion | ||||
| Long-term portion | $ | |||
Rent
expense under operating leases was approximately $
The following expenses related to our operating leases were included in “general and administrative” expenses within our condensed consolidated statements of operations and comprehensive loss:
| For the nine months ended September 30, | ||||||||
| (in thousands) | 2024 | 2023 | ||||||
| Operating lease cost | ||||||||
| Variable lease cost | ||||||||
| Total lease cost | $ | $ | ||||||
The table below presents lease-related terms and discount rates as of September 30, 2024:
| Operating Leases | ||||
| Weighted average remaining lease terms | ||||
| Weighted average discount rate | % | |||
| 17 |
NOTE 6. DEBT
Our debt balance, excluding operating lease liabilities and finance lease liabilities, consisted of the following amounts at the dates indicated:
| As of | ||||||||
| (in thousands) | September 30, 2024 | December 31, 2023 | ||||||
| Future Receivables Financing | $ | $ | ||||||
| Note payable | ||||||||
| Secured Bridge Loan | ||||||||
| Less unamortized debt issuance costs | ||||||||
| Less current portion of debt | ( | ) | ( | ) | ||||
| Debt, net, excluding operating and finance leases and liabilities | $ | $ | ||||||
Future Receivables Financings
In
July, August, October, and November 2023, the Company received an aggregate of approximately $
Note Payable
On
June 7, 2024, the Company entered into a subscription agreement for a note payable with Cobra Alternative Capital Strategies, LLC. As
of September 30, 2024, the Company had been loaned $
Secured Bridge Loan
On September 22, 2023, the Company entered into a secured loan pursuant to a Loan and Security Agreement (the “September 2023 Loan Agreement”), dated as of September 22, 2023 with Synergy Imports, LLC (the “Secured Bridge Loan Lender” or “Synergy”).
Pursuant
to the September 2023 Loan Agreement, the Secured Bridge Loan Lender agreed to make available to the Company a six-month bridge loan
of $
Subject to certain exceptions, the Company agreed to pledge all of its assets, with the exception of deposit accounts and accounts receivable, as collateral. Additionally, the Company agreed to transfer one US patent and two related foreign patents and a related trademark in exchange for an exclusive license back of such assets in the area of smoking products and accessories in connection with the September 2023 Loan Agreement.
On
May 6, 2024, the Company, Warehouse Goods and Synergy entered into an asset purchase agreement, dated May 1, 2024 (the “Asset Purchase
Agreement”) pursuant to which Synergy purchased all of the intellectual property, a specified amount of inventory, and other assets
related to the Eyce and DaVinci brands. In consideration for the acquisition, all parties entered into a loan modification agreement,
effective May 1, 2024 (the “Loan Modification Agreement”) and an amended and restated secured promissory note, effective
May 1, 2024 (the “Amended and Restated Secured Promissory Note”), an amendment to the original Eyce and Davinci Asset Purchase
Agreements, a distribution agreement, the termination of a license granted by Eyce, and the termination of certain consulting and employment
agreements. As part of the overall modification, the principal balance with Synergy decreased by $
Future Minimum Principal Payments
The following table summarizes future scheduled minimum principal payments of debt at September 30, 2024. Future debt principal payments are presented based upon the stated maturity dates in the respective debt agreement.
| Year Ending December 31, | ||||||||||||||||||||||||
| (in thousands) | Remainder 2024 | 2025 | 2026 | 2027 | 2028 | Total | ||||||||||||||||||
| Future Receivables Financing | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Note payable | ||||||||||||||||||||||||
| Secured Bridge Loan | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 18 |
NOTE 7. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
In the ordinary course of business, we are involved in various legal proceedings involving a variety of matters. We do not believe there are any pending legal proceedings that will have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. We have not taken any reserves for litigation for the nine months ended September 30, 2024 and 2023, respectively.
Other Contingencies
We are potentially subject to claims related to various non-income taxes (such as sales, value added, consumption, and similar taxes) from various tax authorities, including in jurisdictions in which we already collect and remit such taxes. If the relevant taxing authorities were successfully to pursue these claims, we could be subject to significant additional tax liabilities.
See “Note 5—Leases” for details of our future minimum lease payments under operating lease liabilities. See “Note 11—Incomes Taxes” for information regarding income tax contingencies.
NOTE 8. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
ERC Sale
As
of December 31, 2022, we had recorded an Employee Retention Credit (“ERC”) receivable of $
Other Current Assets
The following table summarizes the composition of other current assets as of the dates indicated:
| As of | ||||||||
| (in thousands) | September 30, 2024 | December 31, 2023 | ||||||
| Other current assets: | ||||||||
| VAT refund receivable (Note 2) | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Indemnification receivable, net | ||||||||
| Customs bonds | ||||||||
| Other | ||||||||
| $ | $ | |||||||
| 19 |
Accrued Expenses and Other Current Liabilities
The following table summarizes the composition of accrued expenses and other current liabilities as of the dates indicated:
| As of | ||||||||
| (in thousands) | September 30, 2024 | December 31, 2023 | ||||||
| Accrued expenses and other current liabilities: | ||||||||
| VAT payable (including amounts related to VAT matter described in Note 2) | $ | $ | ||||||
| Contingent consideration | ||||||||
| Accrued employee compensation | ||||||||
| Accrued professional fees and other expenses | ||||||||
| Refund liability (including accounts receivable credit balances) | ||||||||
| Sales tax payable | ||||||||
| $ | $ | |||||||
Customer Deposits
For
certain product offerings we may receive a deposit from the customer (generally
| (in thousands) | Customer Deposits | |||
| Balance as of December 31, 2023 | $ | |||
| Increases due to deposits received, net of other adjustments | ||||
| Customer Overpayments | ||||
| Revenue recognized | ( | ) | ||
| Balance as of September 30, 2024 | $ | |||
Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income for the periods presented were as follows:
| (in thousands) | Foreign Currency Translation | Unrealized Gain or (Loss) on Derivative Instrument | Total | |||||||||
| Balance at December 31, 2023 | $ | | $ | $ | ||||||||
| Other comprehensive income | ||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | |||||||||
| (in thousands) | Foreign Currency Translation | Unrealized Gain or (Loss) on Derivative Instrument | Total | |||||||||
| Balance at December 31, 2022 | $ | | $ | $ | ||||||||
| Other comprehensive income (loss) | ||||||||||||
| Less: Other comprehensive (income) loss attributable to non-controlling interest | ||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | |||||||||
Supplier Concentration
Our
four largest vendors accounted for an aggregate of approximately
| 20 |
Related Party Transactions
Nicholas
Kovacevich, our former Chief Corporate Development Officer owns capital stock of Blum Holdings Inc. (“Blum”). Net sales
to Blum totaled approximately $
Three individuals who were employees of the Company at the time are principals in Synergy Imports, LLC the Lender on the Secured Bridge Loan taken out on September 22, 2023, however, none were executive officers or directors of the Company
NOTE 9. STOCKHOLDERS’ EQUITY
Shares of our Class A common stock have both voting interests and economic interests (i.e., the right to receive distributions or dividends, whether cash or stock, and proceeds upon dissolution, winding up or liquidation), while shares of our Class B common stock have voting interests but no economic interests. Each share of our Class A common stock, and except as otherwise required in the A&R Charter, the holders of Common Stock will vote together as a single class on all matters (or, if any holders of our preferred stock are entitled to vote together with the holders of Common Stock, as a single class with such holders of preferred stock).
Effective
June 5, 2023,
On June 18, 2024, the Board unanimously approved and declared advisable, and recommended that our stockholders approve at a Special Meeting that took place on July 29, 2024, the adoption of the 2024 Amendment to effect a reverse stock split of our Common Stock at any whole number between, and inclusive of, one-for-two to one-for-twenty. Approval of the Proposed 2024 Reverse Stock Split at the 2024 Special Meeting granted the Board the authority, but not the obligation, to file the 2024 Amendment to effect the Proposed 2024 Reverse Stock Split no later than August 5, 2024, with the exact ratio and timing of the Proposed 2024 Reverse Stock Split to be determined at the discretion of the Board. On July 23, 2024, the Board approved the reverse split at a ratio of one-for-11 and the Amendment has been filed with the Secretary of State of the State of Delaware, that became effective on August 5, 2024 at 12:01 AM Eastern Time, before the opening of trading on the Nasdaq. For additional information about the July 29, 2024 Special Meeting and the 2024 Reverse Stock Split, see the Company’s Definitive Proxy Statement filed with the SEC on June 28, 2024 and Form 8-K filed with the SEC on July 31, 2024.
The Reverse Stock Splits did not change the par value of the Common Stock or the authorized number of shares of Common Stock. All share and per share amounts in these unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Splits, including reclassifying an amount equal to the reduction in par value of Common Stock to additional paid-in capital.
Non-Controlling Interest
As
discussed in “Note 1—Business Operations and Organization”, we consolidate the financial results of the Operating Company
in our consolidated financial statements and report a non-controlling interest related to the Common Units held by non-controlling interest
holders. As of December 31, 2022, all Common Units of the Operating Company and Class B common stock had been exchanged for Class A common
stock, and we owned
At-the-Market Equity Offering
In
August 2021, we established an “at-the-market” equity offering program (the “ATM Program”) that provides for
the sale of shares of our Class A common stock having an aggregate offering price of up to $
Sales of our Class A common stock under the ATM Program may be made by means of transactions that are deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act, including sales made directly on the Nasdaq Capital Market or sales made to or through a market maker or through an electronic communications network. We are under no obligation to offer and sell shares of our Class A common stock under the ATM Program.
| 21 |
Shares
of our Class A common stock will be issued pursuant to our effective shelf registration statement on Form S-3 (File No. 333-257654),
and a prospectus supplement relating to the Class A common stock that was filed with the Securities and Exchange Commission on April
18, 2022. Pursuant to Instruction I.B.6, in no event will the Company sell Class A common stock through the ATM Program with a value
exceeding more than one-third of the Company’s “public float” (the market value of the Company’s Class A common
stock and any other equity securities that it issues in the future that are held by non-affiliates) in any twelve-month period so long
as the Company’s public float remains below $
On April 18, 2022, we entered into Amendment No. 1 (the “ATM Amendment”) to the sales agreement dated August 2, 2022 with Cowen. The purpose of the Amendment was to add the limitations imposed on the ATM Program by Instruction I.B.6 to the sales agreement. At the time of our entry into the ATM Amendment, approximately $ million in shares remained available for issuance under the ATM Program.
Due to the untimely filing of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 we are unable to issue additional shares of Class A common stock pursuant to the ATM Program or otherwise use the Shelf Registration Statement for a period of 12 months, which will limit our liquidity options in the capital markets.
The table below summarizes sales of our Class A common stock under the ATM program:
| ($ in thousands) | August 2021 (Inception) through September 30, 2024 | |||
| Class A shares sold | ||||
| Gross proceeds | $ | |||
| Fees paid to sales agent | $ | |||
| Net proceeds | $ | |||
Common Stock and Warrant Offerings
July 2023 Offering
On
June 29, 2023, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an
aggregate of shares of our Class A common stock, pre-funded warrants to purchase up to
As of the date of this Quarterly Report on Form 10-Q, all July 2023 Pre-Funded Warrants have been exercised, based upon which we issued additional shares of our Class A common stock, for de minimis net proceeds.
In
connection with the July 2023 Offering, the Company entered into privately negotiated agreements with holders participating in the offering
to amend existing outstanding warrants to purchase up to
August 2024 Private Placement
On
August 12, 2024, the Company entered into a securities purchase agreement with a single institutional investor pursuant to which we agreed to issue and sell an aggregate of shares
of our Class A common stock, pre-funded warrants to purchase up to shares of our Class A common stock (the “August 2024
Pre-Funded Warrants”) and warrants to purchase up to shares of our Class A common stock (the “August 2024 Standard
Warrants”). for aggregate gross cash
proceeds of $
As
of September 30, 2024, there were
Net Loss Per Share
Basic net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive instruments.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| (in thousands, except per share data) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Numerator: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Less: Net income (loss) attributable to non-controlling interests | ( | ) | ( | ) | ||||||||||||
| Plus: Deemed Dividend on “October 2022 Standard Warrants” | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to Class A common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted average shares of Class A common stock outstanding | ||||||||||||||||
| Net loss per share of Class A common stock - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| 22 |
As
of September 30, 2024, there were
For the three and nine months ended September 30, 2024 and 2023, respectively, stock options and warrants to purchase Class A common stock were excluded from the weighted-average in the computation of diluted net loss per share of Class A common stock because the effect would have been anti-dilutive.
NOTE 10. COMPENSATION PLANS
Amended and Restated 2019 Equity Incentive Plan
In April 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”). In August 2021, we adopted, and our shareholders approved, the Amended and Restated 2019 Equity Incentive Plan (the “Amended 2019 Plan”), which amends and restates the 2019 Plan in its entirety. At our 2022 Annual Meeting of Stockholders on August 4, 2022, stockholders approved the Second Amended and Restated 2019 Equity Incentive Plan (the “Second Amended 2019 Plan”) which, among other things, increased the number of shares of Class A common stock authorized for issuance under the Amended 2019 Plan. Following the effect of the Reverse Stock Splits, the total number of shares of Class A common stock authorized for issuance is shares.
The Second Amended 2019 Plan provides eligible participants with compensation opportunities in the form of cash and equity incentive awards. The Second Amended 2019 Plan is designed to enhance our ability to attract, retain and motivate our employees, directors, and executive officers, and incentivizes them to increase our long-term growth and equity value in alignment with the interests of our stockholders.
On June 2, 2023, the Company’s stockholders approved a third amendment and restatement of the 2019 Plan (the “Third Amended Plan”). The Third Amended Plan, among other things, increases the number of shares of Class A common stock authorized for issuance under the Second Amended 2019 Plan by shares to an aggregate of shares. As of the date of this Quarterly Report on Form 10-Q, we have not filed a Registration Statement on Form S-8 with the Securities and Exchange Commission to register the additional shares authorized under the Third Amended Plan.
Equity-Based Compensation Expense
Equity-based compensation expense is included within “salaries, benefits and payroll taxes” in our condensed consolidated statements of operations and comprehensive loss. We recognized equity-based compensation expense as follows:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| (in thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Stock options - Class A common stock | $ | $ | ( | ) | $ | $ | ||||||||||
| Restricted shares - Class A common stock | ||||||||||||||||
| Total equity-based compensation expense | $ | $ | ( | ) | $ | $ | ||||||||||
As of September 30, 2024, there was no remaining unrecognized compensation expense.
| 23 |
NOTE 11. INCOME TAXES
As a result of the IPO and the related transactions completed in April 2019, we owned a portion of the Common Units of the Operating Company, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, the Operating Company was generally not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by the Operating Company was passed through to and included in the taxable income or loss of its members, including Greenlane, on a pro-rata basis, in accordance with the terms of the Operating Agreement. The Operating Company was also subject to taxes in foreign jurisdictions. We are a corporation subject to U.S. federal income taxes, in addition to state and local income taxes, based on our share of the Operating Company’s pass-through taxable income.
Effective on December 31, 2022, the Operating Company became wholly owned by us. As a result, the Operating Company’s tax status was converted from a partnership to a disregarded entity. Starting in 2023, 100% of the Operating Company’s U.S. income and expenses is included in our US and state tax returns.
During
the three and nine months ended September 30, 2024 and 2023, respectively, management performed an assessment of the realizability of
our deferred tax assets based upon which management determined that it is not more likely than not that the results of operations will
generate sufficient taxable income to realize portions of the net operating loss benefits. Consequently, we established a full valuation
allowance against our deferred tax assets and reflected a carrying balance of $
Uncertain Tax Positions
For
the three and nine months ended September 30, 2024 and 2023, respectively, we did
Tax Receivable Agreement (TRA)
We
entered into the TRA with the Operating Company and each of the members (other than Greenlane Holdings, Inc.) that provides for the payment
by the Operating Company to the members of
The
annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such
benefits. The Operating Company expects to benefit from the remaining
As
noted above, we evaluated the realizability of the deferred tax assets resulting from the IPO and the related transactions completed
in April 2019 and established a full valuation allowance against those benefits. As a result, we determined that the amount or timing
of payments to noncontrolling interest holders under the TRA are no longer probable or reasonably estimable. Based on this assessment,
our TRA liability was $
If utilization of the deferred tax assets subject to the TRA becomes more likely than not in the future, we will record a liability related to the TRA, which would be recognized as expense within our condensed consolidated statements of operations and comprehensive (loss) income.
During the three and nine months ended September 30, 2024 and 2023, respectively, we did not make any payments, inclusive of interest, to members of the Operating Company pursuant to the TRA.
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NOTE 12. SUBSEQUENT EVENTS
On
October 29, 2024, the Company entered into an Exchange Agreement with its Senior Subordinated Lender, whereby the Company agreed to exchange
an aggregate of $
In
addition, pursuant to the terms of the Exchange Agreement, the Company agreed to issue warrants to the Holders, with an initial exercise
price of $
Also,
pursuant to the Exchange Agreement, the Senior Subordinated Lender agreed that it will exercise its Existing Warrants for cash prior
to exercising any of its outstanding pre-funded warrants, contingent on the market price of the common stock being above $ per share
and certain other conditions. The above agreement will terminate upon the Company receiving certain cash proceeds and prepaying at least
$
On
October 29, 2024, the Company entered into the First Amendment to Amended and Restated Secured Promissory Note (the “Note Amendment”)
with Cobra. Pursuant to the Note Amendment, Cobra agreed to extend the Maturity Date of its senior promissory note dated May 1, 2024,
which is currently due. The new Maturity Date will be
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes of Greenlane Holdings, Inc. and its consolidated subsidiaries (“Greenlane” and, collectively with the Operating Company and its consolidated subsidiaries, the “Company”, “we”, “us” and “our”) for the quarterly period ended September 30, 2024 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and related notes of Greenlane Holdings, Inc. for the year ended December 31, 2023, which are included in our Annual Report on Form 10-K.
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Many of the forward-looking statements are located in Part I, Item 2 of this Form 10-Q under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could” and similar expressions. Examples of forward-looking statements include, without limitation:
| ● | statements regarding our growth and other strategies, results of operations or liquidity; | |
| ● | statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance; | |
| ● | statements regarding our industry; | |
| ● | statements of management’s goals and objectives; | |
| ● | statements regarding laws, regulations, and policies relevant to our business; | |
| ● | projections of revenue, earnings, capital structure and other financial items; | |
| ● | assumptions underlying statements regarding us or our business; and | |
| ● | other similar expressions concerning matters that are not historical facts. |
Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Factors that might cause such a difference include those discussed in our filings with the SEC, under the heading “Risk Factors” in our Annual Report on Form 10-KA for the fiscal year ended December 31, 2023 (the “2023 Annual Report”) and in other documents that we file from time to time with the Securities and Exchange Commission (the “SEC”).
Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances, or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to, those listed below and those discussed in greater detail in Part I, Item 1A of the 2023 Annual Report under the heading “Risk Factors.”
| ● | the potential delisting of our Class A common stock from Nasdaq; | |
| ● | our expectations about our ability to fully execute actions and steps that would be probable of mitigating the existence of substantial doubt regarding our ability to continue as a going concern; | |
| ● | our strategy, outlook and growth prospects; | |
| ● | general economic trends and trends in the industry and markets in which we operate; | |
| ● | our dependence on, and our ability to establish and maintain business relationships with, third-party suppliers and service suppliers; | |
| ● | our ability to access capital; | |
| ● | the competitive environment in which we operate; | |
| ● | our vulnerability to third-party transportation risks; | |
| ● | the impact of governmental laws and regulations and the outcomes of regulatory or agency proceedings; | |
| ● | our ability to accurately estimate demand for our products and maintain appropriate levels of inventory; | |
| ● | our ability to maintain or improve our operating margins and meet sales expectations; | |
| ● | our ability to adapt to changes in consumer spending and general economic conditions, including the current inflationary environment; | |
| ● | our ability to use or license certain trademarks; | |
| ● | our ability to maintain consumer brand recognition and loyalty of our products; | |
| ● | our and our customers’ ability to establish or maintain banking relationships; | |
| ● | fluctuations in U.S. federal, state, local and foreign tax obligation and changes in tariffs; | |
| ● | our ability to address product defects; | |
| ● | our exposure to potential various claims, lawsuits and administrative proceedings; | |
| ● | contamination of, or damage to, our products; |
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| ● | any unfavorable scientific studies on the long-term health risks of vaporizers, electronic cigarettes, or cannabis or hemp-derived products, including CBD; | |
| ● | failure of our information technology systems to support our current and growing business; | |
| ● | our ability to prevent and recover from internet security breaches; | |
| ● | our ability to generate adequate cash from our existing business to support our growth; | |
| ● | our ability to raise capital on favorable terms, or at all, to support the continued growth of the business; | |
| ● | our ability to protect our intellectual property rights; | |
| ● | our dependence on continued market acceptance of our products by consumers; | |
| ● | our sensitivity to global economic conditions and international trade issues; | |
| ● | our ability to comply with certain environmental, health and safety regulations; | |
| ● | our ability to successfully identify and complete strategic acquisitions; | |
| ● | natural disasters, adverse weather conditions, operating hazards, environmental incidents and labor disputes; | |
| ● | increased costs as a result of being a public company; and | |
| ● | our failure to maintain adequate internal controls over financial reporting. |
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.
The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor 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. Consequently, you should not place undue reliance on forward-looking statements.
Overview
Founded in 2005, Greenlane is the premier global platform for the development and distribution of premium cannabis accessories, vape devices, and lifestyle products. In 2021, we completed several acquisitions along with a transformative merger with KushCo Holdings, adding a significant industrial line of business to the Greenlane platform. These acquisitions strengthened our leading position as a consumer ancillary products business and significantly expanded our customer network, bringing strategic relationships with leading cannabis multi-state-operators (“MSOs”), cannabis single-state operators (“SSOs”), and Canadian licensed-producers (“LPs”). Greenlane is a leading ancillary cannabis company, providing a wide array of consumer ancillary products and industrial ancillary products to thousands of cannabis producers, processors, brands, and retailers (“related Cannabis Operators”), in addition to specialty retailers, smoke shops and head shops, convenience stores, and consumers directly through our own proprietary web stores and large online marketplaces such as Amazon.
We have been developing a world-class portfolio of our own proprietary brands (the “Greenlane Brands”) and carefully curated third-party products that we believe will, over time, deliver higher margins and create long-term value for our customers and shareholders. Our wholly-owned Greenlane Brands includes our recently launched more affordable product line – Groove, innovative silicone pipes and accessories and premium ancillary product brand – Higher Standards. We also have category exclusive licenses for the premium Marley Natural branded products, as well as the K. Haring Glass Collection.
Since the end of 2021, the Company has invested significantly in technology, including its e-commerce platforms, internal ERP systems, and B2B capabilities. Our world-class product portfolio is offered to customers through our proprietary, owned and operated e-commerce platforms which include Vapor.com, PuffItUp.com, HigherStandards.com, MarleyNaturalShop.com and Wholesale.Greenlane.com. These platforms allow us to reach customers directly with helpful resources and a seamless purchasing experience.
We merchandise vaporizers, packaging, and other ancillary products in the United States, Canada, Europe and Latin America. We distribute products to retailers through wholesale operations and distribute products to consumers through our e-commerce platforms We operate our own distribution centers in the United States, while also utilizing third-party logistics (“3PL”) locations in Canada. We have made tremendous progress consolidating and streamlining our warehouse and distribution operations over the last two years.
We manage our business in two different, but complementary, business segments. The first is the Consumer Goods segment, which focuses on serving consumers across wholesale, retail, and e-commerce operations—offering both our Greenlane Brands as well as ancillary products and accessories from select leading third-party brands, such as Storz and Bickel, Grenco Science, PAX, Arizer and more. The Consumer Goods segment forms a central part of our growth strategy, especially as it relates to scaling our own portfolio of higher-margin proprietary owned brands. In addition to our Consumer Goods segment, we have our Industrial Goods segment, which focuses on serving Cannabis Operators by providing ancillary products essential to their daily operations and growth, such as packaging and vaporization solutions, including our Greenlane Brand Pollen Gear. Refer to “Note 12— Segment Reporting” within this Form 10-Q for additional information on our reportable segments.
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Plan to Accelerate Path to Profitability and Capitalize the Business
In today’s economic landscape, particularly within the cannabis industry, achieving profitability and preserving working capital are paramount. At Greenlane, we are intensely focused on making our business profitable and well-capitalized for long-term sustainability. Our key initiatives include:
| 1. | Technology Enhancements: We remain fully committed to improving our technology, particularly our B2B and e-commerce platforms, to provide a seamless shopping experience for our wholesale and retail customers. | |
| 2. | Facility Footprint Rationalization: In 2023 and 2024, we optimized our facilities footprint by reducing warehouse and office space while increasing operational efficiency and improving fulfillment practices. The full benefit of those efforts are expected to be realized in 2024. | |
| 3. | Headcount Reduction: We have significantly reduced our headcount and associated salary expenses, focusing on maintaining a core group of key employees as we collectively right-size the business. | |
| 4. | Cost Structure Optimization: We continue to reduce our overall cost structure while improving margins. In April 2023, we formed two strategic partnerships (described below in greater detail) to increase margins and significantly reduce working capital requirements in our Industrial Goods segment. Similarly, our Consumer Goods segment restructured arrangements with several third-party brands in 2022 and 2023 to reduce our working capital needs. | |
| 5. | Inventory Management: In 2023, we implemented a new inventory management and lifecycle strategy that is focused on a quarterly turn and a regular review of inventory to avoid future write-offs. | |
| 6. | Sales Force Upgrade: We have upgraded and will continue to upgrade our sales force from a solely account management centric team to a skilled and driven sales team to acquire new customers while maintaining excellent service with our existing customers | |
| 7. | Product Innovation: We launched Groove, an innovative new product line with a value-based price point and in 2024 we have begun to expand our product offering to further enhance our assortment available to our customers. | |
| 8. | Capital Investment: We continue to seek opportunities for securing investment capital to leverage our platform, increase availability and reduce stockouts of our high demand third-party brands, invest in marketing and sales, and improve our product offerings. |
Management believes that these initiatives will significantly reduce costs, help accelerate the Company’s path to profitability, support business growth, and allow the Company to reinvest capital into its highest demand and highest potential product lines.
During 2023 and 2024, the Company received capital from various sources permitting it to right-size the business and position the company for growth. Such sources are described in greater detail in the Liquidity and Capital Resources Section of this report.
During 2023 and 2024, the Company also entered into certain arrangements to reduce working capital requirements and improve its balance sheet.
In April 2023, we entered into two strategic partnerships. First, we entered into a strategic partnership (the “MJ Packaging Partnership”) with A&A Global Imports d/b/a MarijuanaPackaging.com (“MJ Pack”), a leading provider of packaging solutions to the cannabis industry. On August 8, 2024 the Company terminated its strategic partnership with MJ Packaging and is resuming its business as a direct provider of packaging solutions to the cannabis industry. MJ Packaging however, remains a distribution customer of the Company. Second, we entered into a strategic partnership with an affiliate of one of our existing vape suppliers (“Vape Partner”) to service certain key customers with vaporizer goods and services (the “Vape Partnership”). As part of the Vape Partnership, we will introduce our Vape Partner to certain key customers, assist with the promotion and the sale of certain vaporizer goods and services, and help coordinate the logistics, storage and distribution of such vaporizer products. If our Vape Partner and key customer(s) enter into a direct relationship, the customers would directly purchase vaporizer goods and services, which we currently sell them, directly from our Vape Partner and we would no longer need to purchase such vape inventory on behalf of such key customer(s). In exchange we would earn quarterly and annual commission payments from our strategic partner. While the strategic partnership may result in a decrease in top line revenue for these vape products, this partnership combined with some of our other restructuring initiatives should allow us to reduce our overall cost-structure and enhance our margins, thereby improving our balance sheet.
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On May 6, 2024, the Company, Warehouse Goods and Synergy entered into an asset purchase agreement, dated May 1, 2024 (the “Asset Purchase Agreement”) pursuant to which Synergy purchased all of the intellectual property, a specified amount of inventory, and other assets related to the Eyce and DaVinci brands. In consideration for the acquisition, all parties entered into a loan modification agreement, effective May 1, 2024 (the “Loan Modification Agreement”) and an amended and restated secured promissory note, effective May 1, 2024 (the “Amended and Restated Secured Promissory Note”), an amendment to the original Eyce and Davinci Asset Purchase Agreements, a distribution agreement, the termination of a license granted by Eyce, and the termination of certain consulting and employment agreements. As part of the overall modification, the principal balance with Synergy decreased by $2.7 million from $5.1 million. Synergy acquired certain assets from the Company in exchange for the reduction in overall principal owed and as part of the transaction, the Company recognized a gain on the debt modification of $2.2 million. This amount is included in the accompanying financial statements within the statement of operations for the three and nine months ended September 30, 2024 within other income (expense). At September 30, 2024, $2.7 million of such financing remained outstanding. As of the filing date of this statement and as a result of restructuring efforts, the maturity of this note is October 2025.
USPS PACT Act Exemption
On January 11, 2022, we announced via press release that the United States Postal Service (the “USPS”) had approved our application for a business and regulatory exemption to the PACT Act (with respect to the business and regulatory exemption granted by the USPS, the “PACT Act Exemption”), allowing us to ship vaporizers and accessories classified as electronic nicotine delivery systems (“ENDS”) products to other compliant businesses. With this approval, over 97% of our total annual sales became eligible for shipment by freight, USPS and other major parcel carriers. The PACT Act Exemption also enables us to partner with other businesses that ship ENDS products and had their supply chains disrupted by PACT Act compliance.
On June 24, 2022, we provided via press release an update on the progress of the PACT Act Exemption, following our successful implementation of the controls, processes and systems required by the USPS in connection with the shipment of ENDS products. We expect the ability to fulfill ENDS orders with the USPS to allow us to reduce shipping costs, decrease fulfillment times and enhance the overall customer experience for approved wholesale customers.
Reverse Stock Split
On June 2, 2023, we filed a Certificate of Amendment to the A&R Charter with the SSSD, which effected a one-for-10 reverse stock split (the “2023 Reverse Stock Split” and together with the 2022 Reverse Stock Split, the “Reverse Stock Splits”) of our issued and outstanding shares of Common Stock at 5:01 PM Eastern Time on June 5, 2023. As a result of the 2023 Reverse Stock Split, every 10 shares of common stock issued and outstanding were converted into one share of common stock. We paid cash in lieu of fractional shares, and accordingly, no fractional shares were issued in connection with the 2023 Reverse Stock Split.
The Reverse Stock Split did not change the par value of the Common Stock or the authorized number of shares of Common Stock. All outstanding options, restricted stock awards, warrants and other securities entitling their holders to purchase or otherwise receive shares of our Common Stock have been adjusted as a result of the Reverse Stock Split, as required by the terms of each security. The number of shares available to be awarded under our Second Amended and Restated 2019 Equity Incentive Plan have also been appropriately adjusted. See “Note 10 — Compensation Plans” for more information.
On July 23, 2024, the Board approved the reverse split at a ratio of one-for-11 and the Amendment has been filed with the Secretary of State of the State of Delaware, which became effective on August 5, 2024 at 12:01 AM Eastern Time, before the opening of trading on the Nasdaq.
All share and per share amounts were retroactively adjusted for all periods presented to give effect to the Reverse Stock Split.
Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience, outside advice from parties believed to be experts in such matters, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. See “Note 2—Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for a description the significant accounting policies and methods used in the preparation of our consolidated financial statements.
Inventories
Inventories, consisting of finished products, are primarily accounted for using the weighted-average method, and are valued at the lower of cost and net realizable value. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to customers or liquidations. Assumptions about the future disposition of inventory are inherently uncertain and changes in our estimates and assumptions may cause us to realize material write-downs in the future.
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Income Taxes and TRA Liability
We are a corporation subject to income taxes in the United States. Certain subsidiaries of the Operating Company are taxable separately from us. Our proportional share of the Operating Company’s subsidiaries’ provisions are included in our consolidated financial statements.
As of December 31, 2022, we held all the outstanding Common Units in the Operating Company and are the sole member. As a result, in 2023, 100% of the Operating Company’s US and state income and expenses are now included in our US and state tax returns.
Our deferred income tax assets and liabilities are computed for differences between the tax basis and financial statement amounts that will result in taxable or deductible amounts in the future. We compute deferred balances based on enacted tax laws and applicable rates for the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized for deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine we would be able to realize our deferred tax assets for which a valuation allowance had been recorded, then we would adjust the deferred tax asset valuation allowance, which would reduce our provision for income taxes.
We evaluate the tax positions taken on income tax returns that remain open and positions expected to be taken on the current year tax returns to identify uncertain tax positions. Unrecognized tax benefits on uncertain tax positions are recorded on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is more than 50 percent likely to be realized is recognized. Interest and penalties related to unrecognized tax benefits are recorded in income tax benefit. We have no uncertain tax positions that qualify for inclusion in our consolidated financial statements.
In addition to tax expenses, we may incur expenses related to our operations and may be required to make payments under the Tax Receivable Agreement (the “TRA”), which could be significant. Pursuant to the Greenlane Operating Agreement, Greenlane Holdings, LLC will generally make pro rata tax distributions to its members in an amount sufficient to fund all or part of their tax obligations with respect to the taxable income of Greenlane Holdings, LLC that is allocated to them and possibly in excess of such amount.
Recent Accounting Pronouncements
See “Note 2—Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of our Form 10-K filed on July 19, 2024.
Results of Operations
The following table presents operating results for the three and nine months ended September 30, 2024 and 2023:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||
| % of Net sales | Change | % of Net sales | Change | |||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | $ | % | 2024 | 2023 | 2024 | 2023 | $ | % | |||||||||||||||||||||||||||||||||||||
| Net sales | 4,038 | 11,800 | 100.0 | % | 100.0 | % | $ | (7,762 | ) | (65.8 | )% | 11,616 | 55,384 | 100.0 | % | 100.0 | % | $ | (43,768 | ) | (79.0 | )% | ||||||||||||||||||||||||||
| Cost of sales | 1,011 | 8,671 | 25.0 | % | 73.5 | % | (7,660 | ) | (88.3 | )% | 6,066 | 42,162 | 52.2 | % | 76.1 | % | (36,096 | ) | (85.6 | )% | ||||||||||||||||||||||||||||
| Gross profit | 3,027 | 3,129 | 75.0 | % | 26.5 | % | (102 | ) | (3.3 | )% | 5,550 | 13,222 | 47.8 | % | 23.9 | % | (7,672 | ) | (58.0 | )% | ||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Salaries, benefits and payroll taxes | 1,609 | 4,059 | 39.8 | % | 34.4 | % | (2,450 | ) | (60.4 | )% | 6,066 | 14,586 | 52.2 | % | 26.3 | % | (8,520 | ) | (58.4 | )% | ||||||||||||||||||||||||||||
| General and administrative | 1,771 | 5,433 | 43.9 | % | 46.0 | % | (3,662 | ) | (67.4 | )% | 6,864 | 20,209 | 59.1 | % | 36.5 | % | (13,345 | ) | (66.0 | )% | ||||||||||||||||||||||||||||
| Depreciation and amortization | 185 | 524 | 4.6 | % | 7.4 | % | (339 | ) | (64.7 | )% | 635 | 1,492 | 5.5 | % | 2.7 | % | (857 | ) | (57.4 | )% | ||||||||||||||||||||||||||||
| Total operating expenses | 3,565 | 10,016 | 88.3 | % | 84.8 | % | (6,451 | ) | (64.4 | )% | 13,565 | 36,287 | 116.8 | % | 65.5 | % | (22,722 | ) | (62.6 | )% | ||||||||||||||||||||||||||||
| Loss from operations | (538 | ) | (6,887 | ) | (13.3 | )% | (58.3 | )% | 6,349 | (92.2 | )% | (8,015 | ) | (23,065 | ) | (69.0 | )% | (41.6 | )% | 15,050 | (65.3 | )% | ||||||||||||||||||||||||||
| Other income (expense), net: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | (3,219 | ) | (3,415 | ) | (79.7 | )% | (28.9 | )% | 196 | (5.7 | )% | (4,030 | ) | (5,148 | ) | (34.7 | )% | (9.3 | )% | 1,118 | (21.7 | )% | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration | - | - | - | - | - | - | % | 1,000 | - | 8.6 | % | - | 1,000 | 100.0 | % | |||||||||||||||||||||||||||||||||
| Gain on extinguishment of debt | - | - | - | - | - | - | % | 2,166 | - | 18.6 | % | - | 2,166 | 100.0 | % | |||||||||||||||||||||||||||||||||
| Other income (expense), net | - | 204 | - | 1.7 | % | (204 | ) | (100 | )% | (3 | ) | 338 | - | % | 0.6 | % | (341 | ) | (100.9 | )% | ||||||||||||||||||||||||||||
| Total other expense, net | (3,219 | ) | (3,211 | ) | (79.7 | )% | (27.2 | )% | (8 | ) | 0.2 | % | (867 | ) | (4,810 | ) | (7.5 | )% | (8.7 | ) | 3,943 | (82.0 | ) | |||||||||||||||||||||||||
| Loss before income taxes | (3,757 | ) | (10,098 | ) | (93.0 | )% | (85.5 | )% | 6,341 | (62.8 | )% | (8,882 | ) | (27,875 | ) | (76.5 | )% | (50.3 | )% | 18,993 | (68.1 | )% | ||||||||||||||||||||||||||
| Provision for (benefit from) income taxes | - | - | - | % | — | % | - | - | % | - | (6 | ) | - | % | — | % | 6 | (100.0 | )% | |||||||||||||||||||||||||||||
| Net loss | (3,757 | ) | (10,098 | ) | (93.0 | )% | (85.5 | )% | 6,341 | (62.8 | )% | (8,882 | ) | (27,869 | ) | (76.5 | )% | (50.3 | )% | 18,987 | (68.1 | )% | ||||||||||||||||||||||||||
| Net income (loss) attributable to non-controlling interest | - | 19 | - | 0.2 | % | (19 | ) | (100.0 | )% | (17 | ) | (27 | ) | (0.1 | )% | (0.2 | )% | 10 | (37.0 | )% | ||||||||||||||||||||||||||||
| Net loss attributable to Greenlane Holdings, Inc. | $ | (3,757 | ) | $ | (10,117 | ) | (93.0 | )% | (85.7 | )% | $ | 6,360 | (62.9 | )% | $ | (8,865 | ) | $ | (27,842 | ) | (76.4 | )% | (50.1 | )% | 18,977 | (68.2 | )% | |||||||||||||||||||||
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Consolidated Results of Operations
Net Sales
For the three months ended September 30, 2024, net sales were approximately $4.0 million, compared to approximately $11.8 million for the same period in 2024, representing a decrease of $7.8 million, or 65.8%. The year-over-year decrease in net sales was due to a major restructuring of our Industrial Group in April of 2023, involving our packaging and industrial vaping product lines; transitioning much of this business from a gross sales to a commission structure to preserve working capital. Revenues decreased in the Consumer Brands Group due, in part, to restructuring efforts and shift in strategy to focus on in-house brands that carry a higher margin profile while rationalizing third-party brand offerings, which generated top line revenue with lower margins. The consumer products were affected by the inability to access capital markets on equitable terms, resulting in stock-outs and shortages of higher velocity inventory. The Company is continuing to focus on profitable revenue and as a result top line revenue has significantly been reduced. Concurrently, the Company has continued its focus on right-sizing the business during the fiscal year ended December 31, 2023 and through present, in an effort to reduce sales and marketing costs and reduce or eliminate certain administrative functions.
For the nine months ended September 30, 2024, net sales were approximately $11.6 million, compared to approximately $55.4 million for the same period in 2024, representing a decrease of $43.8 million, or 79.0%. The year-over-year decrease in net sales was due to a major restructuring of our Industrial Group in April of 2023, involving our packaging and industrial vaping product lines; transitioning much of this business from a gross sales to a commission structure to preserve working capital. Revenues decreased in the Consumer Brands Group due, in part, to restructuring efforts and shift in strategy to focus on in-house brands that carry a higher margin profile while rationalizing third-party brand offerings, which generated top line revenue with lower margins. The consumer products were affected by the inability to access capital markets on equitable terms, resulting in stock-outs and shortages of higher velocity inventory. The Company is continuing to focus on profitable revenue and as a result top line revenue has significantly been reduced. Concurrently, the Company has continued its focus on right-sizing the business during the fiscal year ended December 31, 2023 and through present, in an effort to reduce sales and marketing costs and reduce or eliminate certain administrative functions.
Cost of Sales and Gross Margin
For the three months ended September 30, 2024, cost of sales decreased by $7.7 million, or 88.3%, as compared to the same period in 2023. The decrease in the cost of sales is driven by the 65.8% decrease in revenue in addition to a decrease in damaged and obsolete inventory write-offs.
For the nine months ended September 30, 2024, cost of sales decreased by $36.1 million, or 85.6%, as compared to the same period in 2023. The decrease in the cost of sales is driven by the 79.0% decrease in revenue in addition to a decrease in damaged and obsolete inventory write-offs.
Gross margin percentage increased 48.4% to 75.0% for the three months ended September 30, 2024, compared to 26.5% for the same period in 2023.
Gross margin percentage increased 23.9% to 47.8% for the nine months ended September 30, 2024, compared to 23.9% for the same period in 2023.
Salaries, Benefits and Payroll Taxes
Salaries, benefits and payroll taxes expenses decreased by approximately $2.5 million, or 60.4%, to $1.6 million for the three months ended September 30, 2024, compared to $4.1 million for the same period in 2023. The decrease is related to the reduction in workforce to right-size the business and focus on profitability.
Salaries, benefits and payroll taxes expenses decreased by approximately $8.5 million, or 58.4%, to $6.1 million for the nine months ended September 30, 2024, compared to $14.6 million for the same period in 2023. The decrease is related to the reduction in workforce to right-size the business and focus on profitability.
As we continue to closely monitor the evolving business landscape, we remain focused on identifying cost-saving opportunities while delivering on our strategy to recruit, train, promote and retain the most talented and success-driven personnel in the industry.
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General and Administrative Expenses
General and administrative expenses decreased by approximately $3.7 million, or 67.4%, for the three months ended September 30, 2024, compared to the same period in 2023. The decrease is related to major restructuring effort by the Company to reduce cost and right-size the business. Compared with the first quarter of 2023, the Company focused on reduction across the board in general and administrative expenses and saw large decreases in professional and outside services, facility expenses, outbound freight, other general and administrative, marketing, taxes and licenses, and general insurance.
General and administrative expenses decreased by approximately $13.3 million, or 66.0%, for the nine months ended September 30, 2024, compared to the same period in 2023. The decrease is related to major restructuring effort by the Company to reduce cost and right-size the business. Compared with the first quarter of 2023, the Company focused on reduction across the board in general and administrative expenses and saw large decreases in professional and outside services, facility expenses, outbound freight, other general and administrative, marketing, taxes and licenses, and general insurance.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased $0.3 million, or 64.7%, for the three months ended September 30, 2024, compared to the same period in 2023. The decrease is related to a major restructuring effort to reduce cost and right-size the business resulting in the sale and disposal of assets related to reducing our warehousing and office footprint.
Depreciation and amortization expense decreased $0.9 million, or 57.4%, for the nine months ended September 30, 2024, compared to the same period in 2023. The decrease is related to a major restructuring effort to reduce cost and right-size the business resulting in the sale and disposal of assets related to reducing our warehousing and office footprint.
Other Income (Expense), Net
Interest expense.
Interest expense decreased approximately $0.2 million for the three months ended September 30, 2024 compared to the same period in 2023. The decrease is primarily related to reduction in overall debt financing and refinancing debt for more favorable terms.
Interest expense decreased approximately $1.1 million for the nine months ended September 30, 2024 compared to the same period in 2023. The decrease is primarily related to reduction in overall debt financing and refinancing debt for more favorable terms.
Change in fair value of contingent consideration
There was a change in fair value of contingent consideration of approximately $1.0 million for the nine months ended September 30, 2024 compared to the same period in 2023. The change is primarily related to known reductions in earnouts related to Davinci and Eyce products.
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Gain on debt extinguishment
There was an increase in gain on debt extinguishment of approximately $2.2 million for the nine months ended September 30, 2024, compared to the same period in 2023. The change is primarily related to a difference in the reduction in overall debt modification with Synergy, offset by the carrying value of the Davinci and Eyce assets acquired by Synergy. For further information, see Note 6, “Debt” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.
Provision for (Benefit from) Income Taxes
For the three and nine months ended September 30, 2024 and 2023, respectively, the effective tax rate differed from the U.S. federal statutory tax rate of 21% primarily due to the Operating Company’s pass-through structure for U.S. income tax purposes (through December 31, 2022), the relative mix in earnings and losses in the U.S. versus foreign tax jurisdictions, and the valuation allowance against the deferred tax asset.
Liquidity, Capital Resources and Going Concern
Our primary requirements for liquidity and capital are working capital, debt service related to recent acquisitions and general corporate needs. Our primary sources of liquidity are our cash on hand and the cash flow that we generate from our operations, as well as proceeds other equity issuances. As of September 30, 2024, we had approximately $2.3 million of cash, of which none was restricted and $0.1 million was held in foreign bank accounts, and approximately $2.5 million of negative working capital, which is calculated as total current assets minus total current liabilities, as compared to approximately $0.5 million of cash, of which $0.1 million was held in foreign bank accounts, and approximately $3.7 million of working capital as of December 31, 2023. The repatriation of cash balances from our foreign subsidiaries could have adverse tax impacts or be subject to capital controls; however, these balances are generally available to fund the ordinary business operations of our foreign subsidiaries without legal or other restrictions.
We believe that our cash on hand and the cash flow that we generate from our operations will not be sufficient to fund our working capital and capital expenditure requirements, as well as our debt repayments and other liquidity requirements associated with our existing operations, for the next 12 months. Based on our cash on hand and working capital at September 30, 2024, we may have insufficient cash to fund planned operations into the fourth quarter of 2024. This is evident from our continued efforts to raise capital and leverage external funding to fulfil our capital needs as highlighted below.
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ATM Program and Shelf Registration Statement
We formerly used a shelf registration statement on Form S-3 (the “Shelf Registration Statement”) to conduct securities offerings. In August 2021, we filed a prospectus supplement and established an “at-the-market” equity offering program (the “ATM Program”) that provided for the sale of shares of our Class A common stock having an aggregate offering price of up to $50 million, from time to time.
Since the launch of the ATM program in August 2021 and through December 31, 2022, we sold shares of our Class A common stock which generated gross proceeds of approximately $12.7 million and we paid fees to the sales agent of approximately $0.4 million. Due to the untimely filing of certain of our Quarterly and Annual Reports, we are unable to issue additional shares of Class A common stock pursuant to the ATM Program or otherwise use the Shelf Registration Statement.
Common Stock and Warrant Offerings
On June 29, 2023, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an aggregate of 50,952 shares of our Class A common stock, pre-funded warrants to purchase up to 317,013 shares of our Class A Common Stock (the “July 2023 Pre-Funded Warrants”) and warrants to purchase up to 735,931 shares of our Class A common stock (the “July 2023 Standard Warrants”). The July 2023 units were offered pursuant to a Registration Statement on Form S-1 (the “July 2023 Offering”). The July 2023 Offering generated gross proceeds of approximately $4.3 million and net proceeds to the Company of approximately $3.8 million and closed on July 3, 2023.
On August 12, 2024, the Company entered into a securities purchase agreement with a single institutional investor for aggregate gross cash proceeds of $6.5 million. In connection with the private placement, the Company will issue an aggregate of 2,363,637 units and pre-funded units. The pre-funded units will be sold at the same purchase price as the units, less the pre-funded warrant exercise price of $0.00001. Each unit and pre-funded unit will consist of one share of common stock (or one pre-funded warrant) and two common warrants, each exercisable for one share of common stock at an exercise price of $2.50 per share. The common warrant will be exercisable on the initial exercise date described in the common warrant and will expire 5.0 years from such date.
Asset-Based Loan
On August 9, 2022, we entered into an asset-based loan agreement dated as of August 8, 2022 (the “Loan Agreement”), which made available to the Company a term loan of up to $15.0 million. On February 9, 2023, we entered into Amendment No. 2 to the Loan Agreement, in which we agreed to, among other things, voluntarily prepay approximately $6.6 million (inclusive of early termination fees and expenses) under the terms provided for under the Loan Agreement and the lenders under the Loan Agreement agreed to release $5.7 million in funds held in a blocked account pursuant to the terms of the Loan Agreement.
On August 7, 2023, we repaid the approximately $4.3 million in aggregate principal amount (the “Loan Repayment”) which remained outstanding under the terms of the Loan Agreement. As a result of the Loan Repayment, the Company has been released from its obligations under the Loan Agreement, in accordance with the terms of the Loan Agreement. See “Note 6 - Long Term Debt” for more information.
ERC Sale
On February 16, 2023, two of our wholly owned subsidiaries, Warehouse Goods LLC and KIM International LLC, entered into an agreement with a third-party institutional investor pursuant to which the investor purchased, for approximately $4.9 million in cash, an economic participation interest, at a discount, in our rights to payment from the United States Internal Revenue Service for certain periods with respect to the employee retention credits filed by us under the Employee Retention Credit program.
Future Receivables Financings
In July, August, October, and November 2023, the Company received an aggregate of approximately $3.9 million in cash pursuant to the terms of future receivables financings (collectively, the “Future Receivables Financings”) entered into with two private lenders. See “Note 6 - Long Term Debt” for more information.
Notes Payable
On June 7, 2024, the Company entered into a subscription agreement with Cobra Alternative Capital Strategies, LLC. As of September 30, 2024, the Company has been loaned $3.1 million with net cash proceeds of $2.6 million with a remaining balance of $1.0 million. The note was issued with a 20% original issue discount and is due in full on December 7, 2024. See “Note 6 - Long Term Debt” for more information.
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Management Initiatives
We have completed several initiatives to optimize our working capital requirements. We launched Groove, a new, innovative Greenlane Brands product line, and we also rationalized our third-party brands product offering, which enables us to reduce inventory carrying costs and working capital requirements.
In April 2023, we entered into two strategic partnerships. First, we entered into a strategic partnership (the “MJ Packaging Partnership”) with A&A Global Imports d/b/a MarijuanaPackaging.com (“MJ Pack”), a provider of packaging solutions to the cannabis industry. On August 8, 2024 the Company terminated its strategic partnership with MJ Packaging and is resuming its business as a direct provider of packaging solutions to the cannabis industry. MJ Packaging however, remains a distribution customer of the Company. Second, we entered into a strategic partnership with an affiliate of one of our existing vape suppliers (“Vape Partner”) to service certain key customers with vaporizer goods and services (the “Vape Partnership”). As part of the Vape Partnership, we will introduce our Vape Partner to certain key customers, assist with the promotion and the sale of certain vaporizer goods and services, and help coordinate the logistics, storage and distribution of such vaporizer products. If our Vape Partner and key customer(s) enter into a direct relationship, the customers would directly purchase vaporizer goods and services, which we currently sell them, directly from our Vape Partner and we would no longer need to purchase such vape inventory on behalf of such key customer(s). In exchange we would earn quarterly and annual commission payments from our strategic partners. While the strategic partnership may result in a decrease in top line revenue for these vape products, this partnership combined with some of our other restructuring initiatives should allow us to reduce our overall cost-structure and enhance our margins, thereby improving our balance sheet.
We have successfully renegotiated supplier partnership terms and are continuing to improve working capital arrangements with suppliers. We have made progress consolidating and streamlining our office, warehouse, and distribution operations footprint. We have reduced our workforce by approximately 49% throughout fiscal year 2023 to reduce costs and align with our revenue projections.
We have incurred net losses of $8.9 million and $27.8 million for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024, cash used in operating activities was $5.2 million and cash used in operating activities for the year ended December 31, 2023 was $1.8 million. The recent macroeconomic environment has caused weaker demand than contemplated under our business plan, resulting in a reduction in projected revenue and cash flows for the twelve-month period included in the going concern evaluation.
As a result of our losses and our projected cash needs, combined with our current liquidity level, substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next twelve months to improve the Company’s liquidity and profitability, which includes, without limitation:
| ■ | Further reducing operating costs expense by taking additional restructuring actions to align cost with revenue to achieve profitability. | |
| ■ | Increasing revenue by introducing new products and acquiring new customers. | |
| ■ | Execute on strategic partnerships accretive to margins and operating cash | |
| ■ | Seeking additional capital through the issuance of debt or equity securities. |
Our opinions concerning liquidity are based on currently available information. To the extent this information proves to be inaccurate, or if circumstances change, future availability of trade credit or other sources of financing may be reduced and our liquidity could be adversely affected. Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section titled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023. Depending on the severity and direct impact of these factors on us, we may be unable to secure additional financing to meet our operating requirements on terms favorable to us, or at all.
As of September 30, 2024, we did not have any off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
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Cash Flows
The following summary of cash flows for the periods indicated has been derived from our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q:
| Nine Months Ended September 30, | ||||||||
| (in thousands) | 2024 | 2023 | ||||||
| Net cash (used in) provided by operating activities | $ | (5,232 | ) | $ | 4,656 | |||
| Net cash used in investing activities | (173 | ) | (253 | ) | ||||
| Net cash provided by (used in) financing activities | 7,248 | (12,133 | ) | |||||
Net Cash (Used in) Provided by Operating Activities
During the nine months ended September 30, 2024, net cash used in operating activities of $5.2 million consisted of a net loss of $8.8 million, offset partially by non-cash adjustments to the net loss of $1.0 million and a $1.2 million decrease in working capital driven by decreases in inventories of $4.2 million and decreases in accrued expenses of $0.5 million reduced by a decrease in customer deposits of $1.5 million and an increase in accounts receivable of $0.7 million.
During the nine months ended September 30, 2023, net cash “provided” by operating activities of approximately $1.2 million consisted of a net loss of $27.9 million offset by non-cash adjustments to net loss of approximately $4.4 million and a $24.7 million increase in working capital driven by an $18 million decrease in inventory, a $4.7 million decrease in accounts receivable, and a $4.0 million decrease in other assets reduced by a $3.1 million decrease in accounts payable.
Net Cash Used in Investing Activities
During the nine months ended September 30, 2024, net cash used in investing activities of approximately $0.2 million consisted primarily of capital expenditures.
During the nine months ended September 30, 2023, net cash provided by investing activities of approximately $0.6 million , offset by cash used for development costs for our new enterprise resource planning (ERP) system of $0.6 million.
Net Cash Provided bv (Used in) Financing Activities
During the nine months ended September 30, 2024, net cash provided by financing activities of approximately $7.2 million primarily consisted of approximately $0.9 million in payments on loans against future accounts receivable, approximately $0.2 million in proceeds from future receivables financing, approximately $2.1 million in proceeds from notes payable, $3.0 in repayments on notes payable, and $5.6 million in net proceeds from the issuance of common stock.
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During the nine months ended September 30, 2023, net cash provided by financing activities of approximately $10.5 million primarily consisted of cash proceeds of approximately $3.9 million from the issuance of Class A common stock through our ATM Program and the June 2022 Offering, offset primarily by approximately $2.5 million in payments on notes payable, finance lease obligations and other long-term liabilities, and approximately $0.3 million in payments of contingent consideration related to the Eyce LLC acquisition.
Cybersecurity
Risk Management and Strategy
We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data.
Managing Material Risks & Integrated Overall Risk Management
We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our management team continuously evaluates and addresses cybersecurity risks in alignment with our business objectives and operational needs.
Oversee Third-party Risk
Because we are aware of the risks associated with third-party service providers, we have implemented stringent processes to oversee and manage these risks. We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards. The monitoring includes annual assessments of the SOC reports of our providers and implementing complementary controls. This approach is designed to mitigate risks related to data breaches or other security incidents originating from third-parties.
Risks from Cybersecurity Threats
We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow for timely decisions regarding disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. Based upon their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of September 30, 2024, our disclosure controls and procedures were not effective because of the material weaknesses in our internal control over financial reporting described in Item 9A of Part II of our Annual Report on Form 10-K for the year ended December 31, 2023, which have not yet been remediated as of September 30, 2024.
Material Weaknesses Remediation Plan and Status
As previously described in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2021, we began implementing a remediation plan to address the material weaknesses identified in the prior year, and our management continues to be actively engaged in the remediation efforts.
As previously disclosed, in 2020, we began a multi-year implementation of a new ERP system, which will replace our existing core financial systems, and which was completed in 2023. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures, based upon which, management focused its allocation of organizational resources to ensure the successful implementation of the new ERP system during 2023, and is continuing to add additional processes for the design and implementation of effective control activities. Conversely, management noted limited efforts related to re-designing user access roles and permissions in the legacy ERP system. Based on these considerations, and subject to management’s ongoing assessment, we do not expect that the previously reported material weaknesses related to ineffective user access controls will be considered remediated until our new ERP system has been fully utilize to its potential and we have properly set controls in place. Additionally, to remediate the identified material weaknesses, we are continuing to take the following remediation actions:
| ● | implement enhancements to company-wide risk assessment processes and to process and control documentation; | |
| ● | enhance the Company’s review and sign-off procedures for IT implementations; | |
| ● | implement additional review procedures designed to enhance the control owner’s execution of control activities, including entity level controls, through the implementation of improved documentation standards evidencing execution of these controls, oversight, and training; | |
| ● | improve control activities and procedures associated with certain accounting areas, including proper segregation of duties and assigning personnel with the appropriate experience as preparers and reviewers over analyses relating to such accounting areas; | |
| ● | educate and train control owners regarding internal control processes to mitigate identified risks and maintain adequate documentation to evidence the effective design and operation of such processes; | |
| ● | and implement enhanced controls to monitor the effectiveness of the underlying business process controls that are dependent on the data and financial reports generated from the relevant information systems. |
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We are also continuing to evaluate additional controls and procedures that may be required to remediate the identified material weaknesses. We cannot provide assurances that the previously reported material weaknesses will be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control Over Financial Reporting
As discussed above, in 2020 we began a multi-year implementation of a new ERP system which fully replaced our legacy financial systems in 2023. The ERP system is designed to accurately maintain the Company’s financial records, enhance the flow of financial information, improve data management and provide timely information to our management team. Subsequent to implementation of the new ERP system, we are continuing to change certain processes and procedures which, in turn, are expected to result in changes to our internal control over financial reporting. As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting.
There were no other changes to our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of our material pending legal proceedings, see Note 7 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on July 19, 2024, except as set forth below.
There is substantial doubt about our ability to continue as a going concern through the next 12 months from the date of the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
The Company has incurred net losses of $8.9 million and $27.8 million for the nine months ended September 30, 2024 and the prior year comparable period, respectively. For the nine months ended September 30, 2024, cash used in operating activities was $5.2 million, and cash used in operating activities for the year ended December 31, 2023 was $1.8 million. Based on our cash on hand and working capital at September 30, 2024, we may have insufficient cash to fund planned operations into the fourth quarter of 2024. As a result of our losses and our projected cash needs, combined with our current liquidity level, substantial doubt exists about the Company’s ability to continue as a going concern over the next 12 months. The recent macroeconomic environment has caused weaker demand than contemplated under the Company’s business plan, resulting in a reduction in projected revenue and cash flows for the twelve-month period included in the going concern evaluation.
Our ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next twelve months to improve the our liquidity and profitability, which includes, without limitation:
| ■ | Further reducing operating costs expense by taking additional restructuring actions to align cost with revenue | |
| ■ | Increasing revenue by introducing new products and acquiring new customers. | |
| ■ | Execute on strategic partnerships accretive to margins and operating cash | |
| ■ | Seeking additional capital through the issuance of equity securities or obtaining debt financing. |
There can be no assurance that any such measures will be successful. If we are not successful in improving our liquidity position and the profitability of our operations, we may need to consider all strategic alternatives, including seeking additional debt or equity capital, reducing or delaying our business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including receivership or, to the extent available, bankruptcy protection. In addition, the perception that we may not be able to continue as a going concern may cause vendors and customers to choose not to do business with us due to concerns about our ability to meet our contractual obligations. If we seek additional financing to fund our operations and there remains substantial doubt about our ability to continue as a going concern, our financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all. The consolidated financial statements do not include any adjustments that may result from the outcome of this going concern uncertainty. Such adjustments could be material.
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We have failed, and may continue to fail, to meet the listing standards of Nasdaq, and as a result our Class A common stock may become delisted, which could have a material adverse effect on the liquidity of our Class A common stock.
If we fail to continue to satisfy the continued listing requirements of Nasdaq, such as the corporate governance or public float requirements, or the minimum closing bid price requirement, Nasdaq will take steps to de-list our Class A common stock. As a result of several factors, including but not limited to our financial performance, market sentiment about the cannabis industry, volatility in the financial markets generally due to the tightening of monetary policy by the Board of Governors of the United States Federal Reserve Bank (the “Federal Reserve”) and other geopolitical events, events such as the ongoing wars around the world, the per share price of our Class A common stock has declined below the minimum bid price threshold required for continued listing. Such a de-listing would likely have a negative effect on the price of our Class A common stock and would impair your ability to sell or purchase our Class A common stock when you wish to do so, as well as adversely affect our ability to issue additional securities and obtain additional financing in the future.
On August 21, 2023, we received a letter from the staff of Nasdaq indicating that we were not in compliance with Nasdaq Listing Rule 5450(a)(1) because the closing bid price per share for our Class A common stock had closed below $1.00 for the previous 30 consecutive business days (the “Minimum Bid Price Requirement”). We were given 180 days, or until February 20, 2024 to regain compliance with the Minimum Bid Price Requirement. We also filed an application to transfer the listing of our Class A common stock from the Nasdaq Global Market to the Nasdaq Capital Market, which transfer was approved and occurred on February 9, 2024. As a result of the transfer, we became eligible to request an additional an additional 180-day compliance period.
On February 21, 2024, Nasdaq notified us in writing that while we had not regained compliance with the Minimum Bid Price Requirement, we were eligible for an additional 180-day compliance period, or until August 19, 2024, to regain compliance with the Minimum Bid Price Requirement. Nasdaq’s determination was based on us having met the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and on our written notice to Nasdaq of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
If we do not regain compliance during the second 180-day period, then Nasdaq will notify us of its determination to delist our Class A common stock, at which point we would have an opportunity to appeal the delisting determination to a hearings panel. We would remain listed on Nasdaq pending the hearings panel’s decision. There can be no assurance that, if we do appeal the delisting determination by Nasdaq to the hearings panel, that such appeal would be successful.
On January 24, 2024, Gina Collins gave notice of her resignation from our Board of Directors and from each committee of the Board, effective immediately. Ms. Collins was an independent director, and as a result of her resignation, we no longer comply with the majority independent board requirement of Nasdaq as set forth in Nasdaq Listing Rule 5605(b)(1) because independent directors do not comprise a majority of the Board of Directors, and Nasdaq’s audit committee requirements as set forth in Nasdaq Listing Rule 5605(c)(2)(A) because the Audit Committee of the Board of Directors is not comprised of at least three independent directors.
On January 29, 2024, in accordance with Nasdaq Listing Rules, we notified Nasdaq of Ms. Collins’ resignation and the resulting non-compliance. On January 30, 2024, we received a notice from Nasdaq acknowledging the fact that we do not meet the requirements of such rules. In accordance with Nasdaq Listing Rules 5605(b)(1)(A) and 5605(c)(4), to regain compliance with the Nasdaq Listing Rules, we have until the earlier of our next annual stockholders meeting or January 24, 2025.
On April 18, 2024, we received a notice from Nasdaq stating that because we had not yet filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, we were no longer in compliance with Nasdaq Listing Rule 5250(c)(1). Nasdaq Listing Rule 5250(c)(1) requires listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission.
On May 21, 2024, we received a notice from Nasdaq stating that because we had not yet filed our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024, we were no longer in compliance with Nasdaq Listing Rule 5250(c)(1).
The Company had 60 calendar days from April 18, 2024, or until June 17, 2024, to regain compliance by filing the Form 10-K and the Form 10-Q or to submit to Nasdaq a plan to regain compliance with the Nasdaq Listing Rules. We timely submitted the plan to regain compliance to Nasdaq and Nasdaq granted us additional time to file the Form 10K and 10Q. As of the date of this filing we have filed both the 10K and 10Q within the additional time period granted.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
* Filed herewith.
**Schedules and exhibits have been omitted from this exhibit pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the U.S. Securities and Exchange Commission.
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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.
| GREENLANE HOLDINGS, INC. | ||
| Date: August 14, 2024 | By: | /s/ Barbara Sher |
| Barbara
Sher Chief Executive Officer (Principal Executive Officer) | ||
| GREENLANE HOLDINGS, INC. | ||
| Date: August 14, 2024 | By: | /s/ Lana Reeve |
| Lana
Reeve Chief Financial and Legal Officer (Principal Financial and Accounting Officer) | ||
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