gnln-20200930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2020

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

For the transition period from to

001-38875

(Commission file number)

Greenlane Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware						83-0806637
State or other jurisdiction of incorporation or organization						(I.R.S. Employer Identification No.)


1095 Broken Sound Parkway,	Suite 300
Boca Raton,	FL	33487
(Address of principal executive offices)		(Zip Code)

(877) 292-7660

Registrant’s telephone number, including area code

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.01 par value per share

GNLN

Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

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


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

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

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

As of November 13, 2020, Greenlane Holdings, Inc. had 13,072,416 shares of Class A common stock outstanding, 3,590,909 shares of Class B common stock outstanding and 76,489,218 shares of Class C common stock outstanding.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)			1
CONDENSED CONSOLIDATED BALANCE SHEETS			1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS			2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY			3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS			5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			35
ITEM 4. CONTROLS AND PROCEDURES			36
PART II. OTHER INFORMATION			37
ITEM 1. LEGAL PROCEEDINGS			37
ITEM 1A. RISK FACTORS			37
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			37
ITEM 6. EXHIBITS			38
SIGNATURES			39

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

GREENLANE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value per share amounts)


	September 30, 2020		December 31, 2019
Assets	(Unaudited)
Current assets
Cash	$	39,993	$	47,773
Accounts receivable, net of allowance of $1,324 and $936 at September 30, 2020 and December 31, 2019, respectively	6,438		8,091
Inventories, net	36,919		43,060
Vendor deposits	8,775		11,120
Assets held for sale	1,177		—
Other current assets	8,924		4,924
Total current assets	102,226		114,968

Property and equipment, net	12,392		13,165
Intangible assets, net	5,930		6,301
Goodwill	3,128		11,982
Operating lease right-of-use assets	3,085		4,695
Other assets	2,053		2,091
Total assets	$	128,814	$	153,202

Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	17,963	$	11,310
Accrued expenses and other current liabilities	15,956		10,600
Customer deposits	2,593		3,152
Current portion of operating leases	725		1,084
Current portion of finance leases	208		116
Total current liabilities	37,445		26,262

Notes payable, less current portion and debt issuance costs, net	7,886		8,018
Operating leases, less current portion	2,708		3,844
Finance leases, less current portion	277		194
Other liabilities	1,038		620
Total long-term liabilities	11,909		12,676
Total liabilities	49,354		38,938

Commitments and contingencies (Note 6)

Stockholders’ Equity
Preferred stock, $0.0001 par value, 10,000 shares authorized, none issued and outstanding	—		—
Class A common stock, $0.01 par value per share, 125,000 shares authorized; 13,072 shares issued and outstanding as of September 30, 2020; 9,999 shares issued and 9,812 shares outstanding as of December 31, 2019	131		98
Class B common stock, $0.0001 par value per share, 10,000 shares authorized; 3,591 and 5,975 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	1		1
Class C Common stock, $0.0001 par value per share, 100,000 shares authorized; 76,489 and 77,791 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	8		8
Additional paid-in capital	39,194		32,108
Accumulated deficit	(20,732)		(9,727)
Accumulated other comprehensive loss	(154)		(72)
Total stockholders’ equity attributable to Greenlane Holdings, Inc.	18,448		22,416
Non-controlling interest	61,012		91,848
Total stockholders’ equity	79,460		114,264
Total liabilities and stockholders’ equity	$	128,814	$	153,202

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

GREENLANE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(in thousands, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net sales	$	35,764	$	44,886	$	102,032	$	147,770
Cost of sales	33,297		38,448		85,419		123,194
Gross profit	2,467		6,438		16,613		24,576
Operating expenses:
Salaries, benefits and payroll taxes	5,010		6,562		17,745		21,673
General and administrative	10,673		4,751		25,758		15,549
Goodwill impairment charge	—		—		8,996		—
Depreciation and amortization	599		650		1,959		1,980
Total operating expenses	16,282		11,963		54,458		39,202
Loss from operations	(13,815)		(5,525)		(37,845)		(14,626)
Other income (expense), net:
Change in fair value of convertible notes	—		—		—		(12,063)
Interest expense	(115)		(119)		(335)		(862)
Other income, net	357		7,746		1,483		8,670
Total other income (expense), net	242		7,627		1,148		(4,255)
(Loss) income before income taxes	(13,573)		2,102		(36,697)		(18,881)
Provision for income taxes	220		11,063		147		10,966
Net loss	(13,793)		(8,961)		(36,844)		(29,847)
Less: Net loss attributable to non-controlling interest	(9,300)		(2,563)		(25,839)		(4,016)
Net loss attributable to Greenlane Holdings, Inc.	$	(4,493)	$	(6,398)	$	(11,005)	$	(25,831)

Net loss attributable to Class A common stock per share - basic and diluted (Note 8)	$	(0.35)	$	(0.64)	$	(0.95)	$	(0.67)
Weighted-average shares of Class A common stock outstanding - basic and diluted (Note 8)	12,798		9,998		11,559		9,998

Other comprehensive income (loss):
Foreign currency translation adjustments	285		(13)		130		38
Unrealized gain (loss) on derivative instrument	35		(310)		(525)		(310)
Comprehensive loss	(13,473)		(9,284)		(37,239)		(30,119)
Less: Comprehensive loss attributable to non-controlling interest	(9,066)		(2,809)		(26,152)		(4,238)
Comprehensive loss attributable to Greenlane Holdings, Inc.	$	(4,407)	$	(6,475)	$	(11,087)	$	(25,881)

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

GREENLANE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands)


	Class A Common Stock			Class B Common Stock			Class C Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Non- Controlling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
Balance, December 31, 2019	9,812	$	98	5,975	$	1	77,791	$	8	$	32,108	$	(9,727)	$	(72)	$	91,848	$	114,264
Net loss	—	—		—	—		—	—		—		(4,461)		—		(12,278)		(16,739)
Equity-based compensation	—	—		—	—		—	—		64		—		—		206		270
Issuance of Class A common stock for the acquisition of Conscious Wholesale	480	5		—	—		—	—		1,496		—		—		—		1,501
Cancellation of Class B common stock due to equity-based compensation award forfeitures	—	—		(105)	—		—	—		223		—		—		(223)		—
Joint venture consolidation	—	—		—	—		—	—		—		—		—		189		189
Other comprehensive loss	—	—		—	—		—	—		—		—		(267)		(853)		(1,120)
Balance, March 31, 2020	10,292	103		5,870	1		77,791	8		33,891		(14,188)		(339)		78,889		98,365
Net loss	—	—		—	—		—	—		—		(2,051)		—		(4,261)		(6,312)
Equity-based compensation	—	—		—	—		—	—		220		—		—		672		892
Issuance of Class A common stock for the acquisition of Conscious Wholesale	171	2		—	—		—	—		485		—		—		—		487
Cancellation of Class B common stock due to equity-based compensation award forfeitures	—	—		(6)	—		—	—		9		—		—		(9)		—
Exchanges of non-controlling interest for Class A common stock	2,140	21		(2,140)	—		—	—		3,896		—		—		(3,917)		—
Other comprehensive income	—	—		—	—		—	—		—		—		99		306		405
Balance, June 30, 2020	12,603	$	126	3,724	$	1	77,791	$	8	$	38,501	$	(16,239)	$	(240)	$	71,680	$	93,837
Net loss	—	—		—	—		—	—		—		(4,493)		—		(9,300)		(13,793)
Equity-based compensation	—	—		—	—		—	—		(298)		—		—		(682)		(980)
Issuance of Class A common stock	35	1		—	—		—	—		75		—		—		—		76
Cancellation of Class B common stock due to equity-based compensation award forfeitures	—	—		(133)	—		—	—		221		—		—		(221)		—
Exchanges of non-controlling interest for Class A common stock	434	4		—	—		(1,302)	—		695		—		—		(699)		—
Other comprehensive income	—	—		—	—		—	—		—		—		86		234		320
Balance, September 30, 2020	13,072	$	131	3,591	$	1	76,489	$	8	$	39,194	$	(20,732)	$	(154)	$	61,012	$	79,460

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

GREENLANE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands)


	Redeemable Class B Units		Members’ Deficit		Class A Common Stock			Class B Common Stock			Class C Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Non- Controlling Interest		Total Stockholders’ Equity
					Shares	Amount		Shares	Amount		Shares	Amount






Balance, December 31, 2018	$	10,033	$	(10,773)	—	$	—	—	$	—	—	$	—	$	—	$	—	$	(286)	$	—	$	(11,059)
Activity prior to the initial public offering and related organizational transactions (Note 1):
Issuance of redeemable Class B units, net of issuance costs	6,514		—		—	—		—	—		—	—		—		—		—		—		—
Redemption of Class A and Class B units	(416)		(2,602)		—	—		—	—		—	—		—		—		—		—		(2,602)
Equity-based compensation	2,304		191		—	—		—	—		—	—		—		—		—		—		191
Net loss	(3,045)		(14,619)		—	—		—	—		—	—		—		—		—		—		(14,619)
Member distributions	—		(21)		—	—		—	—		—	—		—		—		—		—		(21)
Other comprehensive income	—		—		—	—		—	—		—	—		—		—		28		—		28
Balance, March 31, 2019	15,390		(27,824)		—	—		—	—		—	—		—		—		(258)		—		(28,082)
Net loss	(246)		(1,179)		—	—		—	—		—	—		—		—		—		—		(1,179)
Equity-based compensation	113		137		—	—		—	—		—	—		—		—		—		—		137
Member distributions	(76)		(801)		—	—		—	—		—	—		—		—		—		—		(801)
Other comprehensive income	—		—		—	—		—	—		—	—		—		—		(8)		—		(8)
Effects of the initial public offering and related organizational transactions (Note 1):
Effects of the organizational transactions	(15,181)		29,667		—	—		—	—		—	—		(114,094)		—		203		99,404		15,180
Issuance of Class A common stock in the IPO, net of underwriting discount	—		—		5,250	53		—	—		—	—		82,950		—		—		—		83,003
Issuance of Class A common stock to convertible notes holders	—		—		3,548	35		—	—		—	—		60,277		—		—		—		60,312
Issuance of Class A common to stock selling stockholders	—		—		750	8		(106)	—		(1,935)	—		(7)		—		—		—		1
Issuance of Class A common stock to underwriter upon exercise of overallotment option	—		—		450	4		(63)	—		(1,161)	—		(4)		—		—		—		—
Issuance of Class B common stock	—		—		—	—		6,157	1		—	—		(1)		—		—		—		—
Issuance of Class C common stock	—		—		—	—		—	—		80,887	8		(8)		—		—		—		—
Capitalization of initial public offering costs	—		—		—	—		—	—		—	—		(3,523)		—		—		—		(3,523)
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis	—		—		—	—		—	—		—	—		5,173		—		—		—		5,173
Joint venture consolidation	—		—		—	—		—	—		—	—		—		—		—		60		60
Activity subsequent to the initial public offering and related organizational transactions (Note 1):
Net loss	—		—		—	—		—	—		—	—		—		(343)		—		(1,453)		(1,796)
Equity-based compensation	—		—		—	—		—	—		—	—		709		—		—		1,122		1,831
Other comprehensive income	—		—		—	—		—	—		—	—		—		—		7		24		31
Balance June 30, 2019	—		—		9,998	100		5,988	1		77,791	8		31,472		(343)		(56)		99,157		130,339
Net loss	—		—		—	—		—	—		—	—		—		(6,398)		—		(2,563)		(8,961)
Equity-based compensation	—		—		—	—		—	—		—	—		360		—		—		1,148		1,508
Other comprehensive loss	—		—		—	—		—	—		—	—		—		—		(77)		(246)		(323)
Effects of the organizational transactions	—		—		—	—		—	—		—	—		297		—		—		(297)		—
Balance September 30, 2019	$	—	$	—	9,998	$	100	5,988	$	1	77,791	$	8	$	32,129	$	(6,741)	$	(133)	$	97,199	$	122,563

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

GREENLANE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net loss (including amounts attributable to non-controlling interest)	$	(36,844)	$	(29,847)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,959		1,980
Reversal of tax receivable agreement liability	—		(5,721)
Change in deferred tax asset, net	—		10,879
Equity-based compensation expense	182		6,083
Unrealized gain on equity investment	—		(1,537)
Goodwill impairment charge	8,996		—
Change in fair value of contingent consideration	(719)		—
Change in fair value of convertible notes	—		12,063
Change in provision for doubtful accounts	766		91
Loss on disposal of assets	569		—
Loss related to indemnification asset not probable of recovery	2,200		—
Other	242		37
Changes in operating assets and liabilities, net of the effects of acquisitions:
Decrease in accounts receivable	886		1,396
Decrease (increase) in inventories	6,140		(15,764)
Decrease (increase) in vendor deposits	2,543		(778)
Decrease (increase) in deferred offering costs	—		2,284
(Increase) in other current assets	(6,217)		(1,720)
Increase (decrease) in accounts payable	6,653		(13,182)
Increase in accrued expenses	9,558		465
(Decrease) in customer deposits	(670)		(272)
Net cash used in operating activities	(3,756)		(33,543)
Cash flows from investing activities:
Purchase consideration paid for acquisitions, net of cash acquired	(1,841)		(1,283)
Purchases of property and equipment, net	(1,438)		(1,268)
Purchase of intangible assets	(300)		(58)
Investment in equity securities	—		(500)
Net cash used in investing activities	(3,579)		(3,109)
Cash flows from financing activities:
Proceeds from issuance of convertible notes	—		8,050
Proceeds from issuance of Class A common stock sold in initial public offering, net of underwriting costs	—		83,003
Payment of debt issuance costs - convertible notes	—		(1,734)
Deferred offering costs paid	—		(3,523)
Redemption of Class A and Class B units of Greenlane Holdings, LLC	—		(3,019)
Member distributions	—		(897)
Other	(310)		(187)
Net cash (used in) provided by financing activities	(310)		81,693
Effects of exchange rate changes on cash	(135)		158
Net (decrease) increase in cash	(7,780)		45,199
Cash, as of beginning of the period	47,773		7,341
Cash, as of end of the period	$	39,993	$	52,540

Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	1,193	$	547
Lease liabilities arising from obtaining finance lease assets	$	272	$	88
Lease liabilities arising from obtaining operating lease right-of-use assets	$	331	$	2,973
Non-cash investing and financing activities:
Conversion of convertible debt to Class A common stock	$	—	$	60,313
Redeemable Class B Units issued for acquisition of a subsidiary, net of issuance costs	$	—	$	6,664
Shares of Class A common stock issued for acquisition of Conscious Wholesale	$	1,988	$	—
Exchanges of non-controlling interest for Class A common stock	$	(4,616)	$	—

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

GREENLANE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BUSINESS OPERATIONS AND ORGANIZATION

Organization

Greenlane Holdings, Inc. (“Greenlane” and, collectively with the Operating Company (as defined below) and its consolidated subsidiaries, the “Company”, "we", "us", and "our") was formed as a Delaware corporation on May 2, 2018. We are a holding company that was formed for the purpose of completing an underwritten initial public offering (“IPO”) of shares of our Class A common stock (as defined below) and other related Transactions (as defined below) in order to carry on the business of Greenlane Holdings, LLC (the “Operating Company”). The Operating Company was organized under the laws of the state of Delaware on September 1, 2015, and is based in Boca Raton, Florida. Unless the context otherwise requires, references to the “Company” refer to us, and our consolidated subsidiaries, including the Operating Company.

As a result of the IPO and the Transactions described below, we became the sole manager of the Operating Company and our principal asset is Common Units of the Operating Company (“Common Units”). As the sole manager of the Operating Company, we operate and control all of the business and affairs of the Operating Company, and we conduct our business through the Operating Company and its subsidiaries. We have a board of directors and executive officers, but no employees. All of our assets are held and all of the employees are employed by the Operating Company.

We merchandise vaporizers and other products in the United States, Canada and Europe and we distribute to retailers through wholesale operations and to consumers through e-commerce activities and our retail stores.

Although we have a minority economic interest in the Operating Company, we have the sole voting interest in, and control the management of, the Operating Company, and we have the obligation to absorb losses of, and receive benefits from, the Operating Company, that could be significant. We determined that, as a result of the Transactions described below, the Operating Company is a variable interest entity (“VIE”) and that we are the primary beneficiary of the Operating Company. Accordingly, pursuant to the VIE accounting model, beginning in the fiscal quarter ended June 30, 2019, we consolidated the Operating Company in our consolidated financial statements and reported a non-controlling interest related to the Common Units held by the members of the Operating Company (other than the Common Units held by us) on our consolidated financial statements.

The Operating Company has been determined to be our predecessor for accounting purposes and, accordingly, the consolidated financial statements for periods prior to the IPO and the related Transactions have been adjusted to combine the previously separate entities for presentation purposes. Amounts for the period from January 1, 2019 through April 22, 2019 presented in the condensed consolidated financial statements and notes to the condensed financial statements herein represent the historical operations of the Operating Company, and amounts for the period from April 23, 2019 through September 30, 2020 reflect our consolidated operations.

Initial Public Offering and Organizational Transactions

On April 23, 2019, we completed our IPO of shares of Class A common stock at a public offering price of $17.00 per share. Our sale of Class A common stock generated aggregate net proceeds of approximately $79.5 million, after deducting the underwriting discounts and commissions and offering expenses paid by us.

In connection with the closing of the IPO, Greenlane and the Operating Company consummated the following organizational transactions (collectively, the “Transactions”):

● The Operating Company adopted and approved the Third Amended and Restated Operating Agreement of the Operating Company (the “Operating Agreement”), which converted each member’s existing membership interests in the Operating Company into Common Units, including unvested profits interests into unvested Common Units, and appointed us as the sole manager of the Operating Company;

● We amended and restated our certificate of incorporation to, among other things, provide for Class A common stock, Class B common stock and Class C common stock;

● We issued, for nominal consideration, one share of our Class B common stock to our non-founder members for each Common Unit they owned, and issued, for nominal consideration, three shares of Class C common stock to our founder members for each Common Unit they owned;

● We issued 3,547,776 shares of our Class A common stock upon conversion of the convertible notes at a settlement price equal to 80% of the IPO price;

● We issued 1,200,000 shares of our Class A common stock to our members upon exchange of an equal number of Common Units, which shares were sold by the members as selling stockholders in the IPO, including 450,000 shares issued pursuant to the partial exercise of the underwriters’ option to purchase additional shares;

● We issued and sold 5,250,000 shares of our Class A common stock to the purchasers in the IPO, and we contributed all of the net proceeds to the Operating Company in exchange for a number of Common Units equal to the number of shares of our Class A common stock sold by us in the IPO at a price per Common Unit equal to the IPO price per share of Class A common stock. After giving effect to the IPO and the related Transactions, we owned approximately 23.9% of the Operating Company’s outstanding Common Units;

● The members of the Operating Company continue to own their Common Units not exchanged for the shares of our Class A common stock sold by them as selling stockholders in the IPO. Common Units are redeemable, subject to contractual restrictions, at the election of such members for newly-issued shares of our Class A common stock on a one-to-one basis (and their shares of our Class B common stock or our Class C common stock, as the case may be, will be canceled on a one-to-one basis in the case of our Class B common stock or three-to-one basis in the case of our Class C common stock upon any such issuance). We also have the option to instead make a cash payment equal to a volume weighted average market price of one share of our Class A common stock for each Common Unit redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications) in accordance with the terms of the Operating Agreement. Our decision to make a cash payment upon a member’s redemption election will be made by our independent directors (within the meaning of the Nasdaq Marketplace Rules) who are disinterested in such proposed redemption; and

● We entered into (i) a Tax Receivable Agreement (the “TRA”) with the Operating Company and the Operating Company’s members and (ii) a Registration Rights (the “Registration Rights Agreement”) with the Operating Company’s members.

Our corporate structure following the IPO, as described above, is commonly referred to as an “Up-C” structure, which is often used by partnerships and limited liability companies when they undertake an IPO. The Up-C structure allows the members of the Operating Company to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity, for income tax purposes following the IPO. One of these benefits is that future taxable income of the Operating Company that is allocated to its members will be taxed on a flow-through basis and therefore will not be subject to corporate taxes at the Operating Company entity level. Additionally, because the members may redeem their Common Units for shares of our Class A common stock on a one-for-one basis, or at our option, for cash, the Up-C structure also provides the members with potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded.

We entered into the TRA with the Operating Company and each of the Operating Company’s members, which provides for the payment by us to the Operating Company’s members of 85.0% of the amount of tax benefits, if any, that we may actually realize (or in some cases, are deemed to realize) as a result of (i) the step-up in tax basis in our share of the Operating Company's assets resulting from the redemption of Common Units under the mechanism described above and (ii) certain other tax benefits attributable to payments made under the TRA.

As a result of the completion of the Transactions, including the IPO, our amended and restated certificate of incorporation and the Operating Agreement require that (i) we at all times maintain a ratio of one Common Unit owned by us for each share of our Class A common stock issued by us (subject to certain exceptions), and (ii) the Operating Company at all times maintains (x) a one-to-one ratio between the number of shares of our Class A common stock issued by us and the number of Common Units owned by us, (y) a one-to-one ratio between the number of shares of our Class B common stock owned by the non-founder members of the Operating Company and the number of Common Units owned by the non-founder members of the Operating Company, and (z) a three-to-one ratio between the number of shares of our Class C common stock owned by the founder members of the Operating Company and their affiliates and the number of Common Units owned by the founder members of the Operating Company and their affiliates.

The following table sets forth the economic and voting interests of our common stock holders as of September 30, 2020:


Class of Common Stock (ownership)	Total Shares (1)	Class A Shares (as converted) (2)	Economic Ownership in the Operating Company (3)		Voting Interest in Greenlane (4)		Economic Interest in Greenlane (5)
Class A	13,072,416	13,072,416	31.0	%	14.0	%	100.0	%
Class B (non-founder members)	3,590,909	3,590,909	8.5	%	3.9	%	—	%
Class C (founder members)	76,489,218	25,496,406	60.5	%	82.1	%	—