gnln-20220930

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, 2022

☐ 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

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act. Yes ☐ No ☒

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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 10, 2022, Greenlane Holdings, Inc. had 15,803,512 shares of Class A common stock outstanding and 147,989 shares of Class B common stock outstanding.

Greenlane Holdings, Inc.

Form 10-Q

For the Quarterly Period Ended September 30, 2022

TABLE OF CONTENTS


		Page
PART I	Financial Information
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43

PART II	Other Information
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 5.	Other Information	36
Item 6.	Exhibits	45
Signatures		46

PART I

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

GREENLANE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value per share amounts)


	September 30, 2022		December 31, 2021
ASSETS	(Unaudited)
Current assets
Cash	$	8,039	$	12,857
Restricted cash	2,155		—
Accounts receivable, net of allowance of $4,275 and $1,285 at September 30, 2022 and December 31, 2021, respectively	11,805		14,690
Inventories, net	47,945		66,982
Vendor deposits	9,167		18,475

Other current assets (Note 8)	7,360		11,733
Total current assets	86,471		124,737

Property and equipment, net	11,838		20,851
Intangible assets, net	55,294		84,710
Goodwill	—		41,860
Operating lease right-of-use assets	5,498		9,128
Other assets	6,227		4,541
Total assets	$	165,328	$	285,827

LIABILITIES
Current liabilities
Accounts payable	$	16,295	$	23,041
Accrued expenses and other current liabilities (Note 8)	20,679		25,297
Customer deposits	4,523		7,924
Current portion of notes payable, including $0 and $8,000 owed to related party as of September 30, 2022 and December 31, 2021, respectively (Note 6)	3,156		11,615

Current portion of operating leases	2,462		3,091

Total current liabilities	47,115		70,968

Notes payable, less current portion and debt issuance costs, net (Note 6)	13,488		10,607

Operating leases, less current portion	3,027		6,142

Other liabilities	154		1,746
Total long-term liabilities	16,669		18,495
Total liabilities	63,784		89,463

Commitments and contingencies (Note 7)

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, 600,000 shares authorized; 7,470 shares issued and outstanding as of September 30, 2022; 4,260 shares issued and outstanding as of December 31, 2021*	68		43
Class B common stock, $0.0001 par value per share, 30,000 shares authorized; 148 shares issued and outstanding as of September 30, 2022; 1,087 shares issued and outstanding as of December 31, 2021*	—		—
Class C Common stock, $0.0001 par value per share, no shares authorized, issued and outstanding as of September 30, 2022 and December 31, 2021	—		—
Additional paid-in capital*	259,314		229,705
Accumulated deficit	(158,109)		(55,544)
Accumulated other comprehensive income	53		324
Total stockholders’ equity attributable to Greenlane Holdings, Inc.	101,326		174,528
Non-controlling interest	218		21,836
Total stockholders’ equity	101,544		196,364
Total liabilities and stockholders’ equity	$	165,328	$	285,827

*After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.

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,
	2022		2021		2022		2021
Net sales	$	28,680	$	41,314	$	115,130	$	110,038
Cost of sales	23,711		39,827		96,094		90,943
Gross profit	4,969		1,487		19,036		19,095

Operating expenses:
Salaries, benefits and payroll taxes	7,000		11,192		25,897		23,158
General and administrative	8,547		16,795		30,850		34,774
Goodwill and indefinite-lived intangibles impairment	66,760		—		66,760		—
Depreciation and amortization	2,124		1,199		6,876		2,385
Total operating expenses	84,431		29,186		130,383		60,317
Loss from operations	(79,462)		(27,699)		(111,347)		(41,222)

Other income (expense), net:
Interest expense	(926)		(119)		(1,598)		(368)
Other income (expense), net	1,173		(894)		562		(690)
Total other income (expense), net	247		(1,013)		(1,036)		(1,058)
Loss before income taxes	(79,215)		(28,712)		(112,383)		(42,280)
Provision for (benefit from) income taxes	—		3		62		(11)
Net loss	(79,215)		(28,715)		(112,445)		(42,269)
Less: Net loss attributable to non-controlling interest	(4,106)		(12,434)		(9,880)		(18,689)
Net loss attributable to Greenlane Holdings, Inc.	$	(75,109)	$	(16,281)	$	(102,565)	$	(23,580)

Net loss attributable to Class A common stock per share - basic and diluted (Note 9)*	$	(11.43)	$	(8.19)	$	(18.01)	$	(19.60)
Weighted-average shares of Class A common stock outstanding - basic and diluted (Note 9)*	6,574		1,987		5,694		1,203

Other comprehensive income (loss):
Foreign currency translation adjustments	(238)		(147)		(212)		(59)
Unrealized gain (loss) on derivative instrument	—		52		358		256
Comprehensive loss	(79,453)		(28,810)		(112,299)		(42,072)
Less: Comprehensive loss attributable to non-controlling interest	(4,106)		(12,479)		(9,794)		(18,556)
Comprehensive loss attributable to Greenlane Holdings, Inc.	$	(75,347)	$	(16,331)	$	(102,505)	$	(23,516)

*After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.

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 Income (Loss)		Non- Controlling Interest		Total Stockholders’ Equity
	Shares*	Amount*		Shares*	Amount*		Shares	Amount
Balance December 31, 2021	4,260	$	43	1,087	$	—	—	$	—	$	229,705	$	(55,544)	$	324	$	21,836	$	196,364
Net loss	—	—		—	—		—	—		—		(15,332)		—		(3,417)		(18,749)
Equity-based compensation	94	1		—	—		—	—		729		—		—		172		902
Issuance of Class A shares, net of costs - ATM Program	557	6		—	—		—	—		6,795		—		—		—		6,801
Issuance of Class A shares - contingent consideration	191	2		—	—		—	—		3,484		—		—		—		3,486
Exchanges of noncontrolling interest for Class A common stock	28	—		(28)	—		—	—		543		—		—		(543)		—
Other comprehensive income	—	—		—	—		—	—		—		—		361		85		446
Balance March 31, 2022	5,130	52		1,059	—		—	—		241,256		(70,876)		685		18,133		189,250
Net loss	—	—		—	—		—	—		—		(12,124)		—		(2,357)		(14,481)
Equity-based compensation	(4)	—		—	—		—	—		371		—		—		75		446
Issuance of Class A shares, net of costs - ATM Program	296	3		—	—		—	—		2,221		—		—		—		2,224
Issuance of Class A shares, net of costs - June 2022 Offering	585	6		—	—		—	—		5,034		—		—		—		5,040
Issuance of Class A shares - Amended Eyce APA (Note 3)	72	1		—	—		—	—		309		—		—		—		310
Reclassification adjustment for gain included in net loss (Note 4)	—	—		—	—		—	—		—		—		(332)		—		(332)
Other comprehensive income (loss)	—	—		—	—		—	—		—		—		(62)		—		(62)
Balance June 30, 2022	6,079	62		1,059	—		—	—		249,191		(83,000)		291		15,851		182,395
Net loss	—	—		—	—		—	—		—		(75,109)		—		(4,106)		(79,215)
Equity-based compensation	(15)	(3)		—	—		—	—		178		—		—		10		185
Issuance of Class A shares - Amended Eyce APA (Note 3)	—	—		—	—		—	—		206		—		—		—		206
Issuance of Class A shares - Prefunded warrants exercise (Note 9)	495	—		—	—		—	—		—		—		—		—		—
Exchanges of noncontrolling interest for Class A common stock	911	9		(911)	—		—	—		9,739		—		—		(9,748)		—
VIBES disposition / deconsolidation (Note 3)	—	—		—	—		—	—		—		—		—		(1,789)		(1,789)
Other comprehensive income (loss)	—	—		—	—		—	—		—		—		(238)		—		(238)
Balance September 30, 2022	7,470	$	68	148	$	—	—	$	—	$	259,314	$	(158,109)	$	53	$	218	$	101,544

*After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.

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


	Class A Common Stock			Class B Common Stock			Class C Common Stock			Additional Paid-In Capital*		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Non- Controlling Interest		Total Stockholders’ Equity
	Shares*	Amount*		Shares*	Amount*		Shares	Amount
Balance December 31, 2020	666	$	7	175	$	—	76,039	$	8	$	39,869	$	(24,848)	$	29	$	54,192	$	69,257
Net loss	—	—		—	—		—	—		—		(4,256)		—		(3,458)		(7,714)
Equity-based compensation	11	—		—	—		—	—		182		—		—		324		506
Other comprehensive income	—	—		—	—		—	—		—		—		18		31		49
Issuance of Class A common stock	21	—		—	—		—	—		2,005		—		—		—		2,005
Exchanges of noncontrolling interest for Class A common stock	118	1		(52)	—		(3,975)	(1)		5,797		—		—		(5,797)		—
Cancellation of Class B common stock due to forfeitures	—	—		—	—		—	—		8		—		—		(8)		—
Balance March 31, 2021	816	8		123	—		72,064	7		47,861		(29,104)		47		45,284		64,103
Net loss	—	—		—	—		—	—		—		(3,043)		—		(2,797)		(5,840)
Equity-based compensation	(1)	—		—	—		—	—		161		—		—		246		407
Exchanges of noncontrolling interest for Class A common stock	30	—		—	—		(1,763)	—		983		—		—		(983)		—
Exercise of Class A common stock options	2	—								112		—		—		—		112
Member distributions	—	—		—	—		—	—		—		(200)		—		—		(200)
Other comprehensive income	—	—		—	—		—	—		—		—		96		147		243
Balance June 30, 2021	847	$	8	123	$	—	70,301	$	7	$	49,117	$	(32,347)	$	143	$	41,897	$	58,825
Net loss	—	—		—	—		—	—		—		(16,281)		—		(12,434)		(28,715)
Equity-based compensation	—	—		—	—		—	—		2,036		—		—		1,772		3,808
Exchanges of noncontrolling interest for Class A common stock	201	2		(201)	—		—	—		5,368		—		—		(5,370)		—
Exercise of Class A common stock options and warrants	299	3		—	—		—	—		153		—		—		—		156
Conversion of Class C common stock	—	—		1,172	—		(70,301)	(7)		7		—		—		—		—
Issuance of Class A common stock, net of costs	2,644	26		—	—		—	—		166,187		—		—		—		166,213
Other comprehensive loss	—	—		—	—		—	—		—		—		(51)		(44)		(95)
Balance September 30, 2021	3,991	$	39	1,094	$	—	—	$	—	$	222,868	$	(48,628)	$	92	$	25,821	$	200,192

*After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.

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,
	2022		2021
Cash flows from operating activities:
Net loss (including amounts attributable to non-controlling interest)	$	(112,445)	$	(42,269)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	6,876		2,385
Equity-based compensation expense	2,020		4,762
Goodwill and indefinite-lived intangibles impairment charge	66,760		—
Change in fair value of contingent consideration	(1,197)		755
Change in provision for doubtful accounts	2,637		318
Gain related to indemnification asset	(2,018)		(1,692)
(Gain) loss on disposal of fixed assets	820		109
(Gain) loss on disposal of held-for-sale assets	(780)		97
Gain related to VIBES disposition / deconsolidation (Note 3)	(2,062)		—
Unrealized loss on equity investments	1,214		305
Realized (gain) loss on interest rate swap contract	(408)		—
Amortization of deferred financing costs and debt discount	446		15
Other	(17)		7
Changes in operating assets and liabilities, net of the effects of acquisitions:
Decrease (increase) in accounts receivable	247		(2,092)
Decrease (increase) in inventories	19,044		9,723
Decrease (increase) in vendor deposits	5,027		(661)
Decrease (increase) in other current assets	1,257		9,985
(Decrease) increase in accounts payable	(5,384)		(7,673)
(Decrease) Increase in accrued expenses and other liabilities	(1,124)		(5,957)
(Decrease) increase in customer deposits	(3,401)		(145)
Net cash used in operating activities	(22,488)		(32,028)
Cash flows from investing activities:
Purchase consideration paid for acquisitions, net of cash acquired	—		(12,284)
Proceeds from VIBES disposition (Note 3)	4,567		—
Purchases of property and equipment, net	(1,660)		(2,327)
Proceeds from sale of assets held for sale	9,593		675
Purchase of intangible assets, net	—		(320)
Net cash provided by (used in) investing activities	12,500		(14,256)
Cash flows from financing activities:
Proceeds from issuance of Class A common stock, net of costs	14,064		29,539
Proceeds from exercise of stock options and warrants	—		268
Proceeds from Asset-Based Loan	14,550		—
Debt issuance costs	(1,472)		(100)
Payments on Eyce and DaVinci promissory notes	(2,791)		(294)
Payments on Real Estate Note	(7,958)		(120)
Repayment of Bridge Loan	(8,000)		—
Proceeds from termination of interest rate swap	145		—
Purchase consideration paid for Eyce LLC acquisition	(875)		—
Member distributions	—		(200)
Other	(128)		(222)
Net cash provided by financing activities	7,535		28,871
Effects of exchange rate changes on cash and restricted cash	(210)		193
Net (decrease) in cash and restricted cash	(2,663)		(17,220)
Cash and restricted cash, as of beginning of the period	12,857		30,435
Cash and restricted cash, as of end of the period	$	10,194	$	13,215

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

GREENLANE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

(in thousands)


Reconciliation of cash and restricted cash to condensed consolidated balance sheets
	Nine months ended September 30,
	2022		2021
Beginning of the period
Cash	$	12,857	$	30,435
Restricted cash	—		—
Total cash and restricted cash, beginning of period	$	12,857	$	30,435

End of the period
Cash	$	8,039	$	13,215
Restricted cash	2,155		—
Total cash and restricted cash, end of period	$	10,194	$	13,215


Supplemental disclosures of cash flow information


Cash paid for amounts included in the measurement of lease liabilities	$	2,120	$	1,093
Lease liabilities arising from obtaining finance lease assets	$	—	$	119


Non-cash investing and financing activities:
Non-cash purchases of property and equipment	$	1,617	$	381
Issuance of Class A common stock for business acquisitions	$	3,486	$	125,496
Issuance of warrants and stock options for acquisition	$	—	$	13,182
Issuance of promissory note for business acquisition	$	—	$	2,503
Issuance of contingent consideration for acquisition	$	—	$	1,828
Decrease in non-controlling interest as a result of exchanges for Class A common stock	$	(10,291)	$	(12,150)
Decrease in non-controlling interest as a result of VIBES disposition	$	(1,789)	$	—

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, $0.01 par value per share (“Class A common stock”), 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.

We are 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 and its subsidiaries.

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 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.

On August 31, 2021, we completed our previously announced merger with KushCo Holdings, Inc. ("KushCo") and have included the results of operations of KushCo in our consolidated statements of operations and comprehensive loss from that date forward. As such, the KushCo financial information included in our condensed consolidated financial statements for the three and nine months ended September 30, 2021 is for the period commencing on August 31, 2021 (the date of the closing of the merger) through September 30, 2021. Also, KushCo financial information is included in our condensed consolidated financial statements for the three and nine months ended September 30, 2022. Immediately following the merger with KushCo, stockholders that held Class A common stock prior to the completion of the merger owned 51.9% and former KushCo stockholders owned 48.1% of the equity of the combined company on a fully diluted basis. In connection with the merger with KushCo, the Greenlane Certificate of Incorporation was amended and restated (the “A&R Charter”) in order to (i) increase the number of authorized shares of Greenlane Class B common stock, $0.0001 par value per share (the “Class B Common stock”), from