Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 09, 2019 | |
Entity Registrant Name | Greenlane Holdings, Inc. | |
Entity Central Index Key | 0001743745 | |
Trading Symbol | GNLN | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Ex Transition Period | true | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Class A common stock | ||
Entity Common Stock, Shares Outstanding | 9,997,776 | |
Class B common stock | ||
Entity Common Stock, Shares Outstanding | 5,988,485 | |
Class C common stock | ||
Entity Common Stock, Shares Outstanding | 77,791,218 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash | $ 2,776,775 | $ 7,341,485 |
Accounts receivable, net of allowance of $602,711 and $657,513 at March 31, 2019 and December 31, 2018, respectively | 10,808,716 | 8,217,787 |
Inventories, net | 36,073,121 | 29,502,074 |
Vendor deposits | 7,958,256 | 7,917,148 |
Deferred offering costs | 2,904,342 | 2,284,423 |
Other current assets | 2,623,986 | 1,842,253 |
Total current assets | 63,145,196 | 57,105,170 |
Property and equipment, net | 12,727,827 | 11,640,824 |
Intangible assets, net | 5,984,327 | 3,662,409 |
Goodwill | 8,995,597 | 5,445,691 |
Operating lease right-of-use assets | 2,239,906 | |
Investments | 575,000 | 75,000 |
Deferred financing costs, net | 78,926 | 92,080 |
Total assets | 93,746,779 | 78,021,174 |
Current liabilities | ||
Accounts payable | 24,399,095 | 20,226,696 |
Accrued expenses and other current liabilities | 9,800,899 | 9,945,156 |
Current portion of notes payable | 171,117 | 168,273 |
Current portion of operating leases | 641,596 | |
Current portion of finance leases | 100,831 | 94,667 |
Total current liabilities | 35,113,538 | 30,434,792 |
Convertible notes | 60,312,500 | 40,200,000 |
Note payable, less current portion and debt issuance costs, net | 8,136,898 | 8,176,343 |
Operating leases, less current portion | 1,760,163 | |
Finance leases, less current portion | 236,899 | 236,709 |
Line of credit and other liabilities | 881,033 | |
Total long-term liabilities | 71,327,493 | 48,613,052 |
Total liabilities | 106,441,031 | 79,047,844 |
Commitments and contingencies (Note 9) | ||
REDEEMABLE CLASS B UNITS | 15,388,970 | 10,032,509 |
MEMBERS' DEFICIT | ||
Class A units | (27,824,783) | (10,773,187) |
Accumulated other comprehensive loss | (258,439) | (285,992) |
Total members' deficit | (28,083,222) | (11,059,179) |
Total liabilities, redeemable Class B units and members' deficit | $ 93,746,779 | $ 78,021,174 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, net of allowance | $ 602,711 | $ 657,513 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
Net sales | $ 49,897,604 | $ 43,257,643 |
Cost of sales | 40,910,819 | 34,204,549 |
Gross profit | 8,986,785 | 9,053,094 |
Operating expenses: | ||
Salaries, benefits and payroll taxes | 8,082,124 | 2,947,006 |
General and administrative | 5,384,125 | 3,534,389 |
Depreciation and amortization | 684,077 | 242,409 |
Total operating expenses | 14,150,326 | 6,723,804 |
(Loss) income from operations | (5,163,541) | 2,329,290 |
Other (expense) income, net: | ||
Change in fair value of convertible notes | (12,062,500) | |
Interest expense | (601,880) | (42,259) |
Other income, net | 175,237 | 93,515 |
Total other (expense) income, net | (12,489,143) | 51,256 |
(Loss) income before income taxes | (17,652,684) | 2,380,546 |
Provision for income taxes | 11,665 | 81,817 |
Net (loss) income | $ (17,664,349) | $ 2,298,729 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive (loss) Income (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Statement of Comprehensive Income [Abstract] | ||
Net (loss) income | $ (17,664,349) | $ 2,298,729 |
Other comprehensive income (loss): | ||
Foreign currency translation adjustments | 27,553 | (19,925) |
Total comprehensive (loss) income | $ (17,636,796) | $ 2,278,804 |
Condensed Consolidated Statem_3
Condensed Consolidated Statement of Changes in Redeemable Class B Units and Members' Deficit (Unaudited) - USD ($) | Redeemable Class B Units | Class A Units | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total |
Balance at Dec. 31, 2017 | $ 6,449,921 | $ 3,154,623 | $ (208,711) | $ 9,395,833 | |
Reclassification of retained earnings to Class A units capital account | 3,154,623 | (3,154,623) | |||
Issuance of redeemable Class B membership units | 8,890,000 | ||||
Net income (loss) | 76,624 | 2,222,105 | 2,222,105 | ||
Member distributions | (1,007,175) | (1,007,175) | |||
Effects of foreign currency exchange | (19,925) | (19,925) | |||
Balance at Mar. 31, 2018 | 8,966,624 | 10,819,474 | (228,636) | 10,590,838 | |
Balance at Dec. 31, 2018 | 10,032,509 | (10,773,187) | (285,992) | (11,059,179) | |
Issuance of redeemable Class B membership units | 6,514,325 | ||||
Redemption of Class A and redeemable Class B (Note 10) | (416,318) | (2,602,431) | (2,602,431) | ||
Equity-based compensation (Note 13) | 2,303,693 | 190,504 | 190,504 | ||
Net income (loss) | (3,045,239) | (14,619,110) | (14,619,110) | ||
Member distributions | (20,559) | (20,559) | |||
Effects of foreign currency exchange | 27,553 | 27,553 | |||
Balance at Mar. 31, 2019 | $ 15,388,970 | $ (27,824,783) | $ (258,439) | $ (28,083,222) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities: | ||
Net (loss) income | $ (17,664,349) | $ 2,298,729 |
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||
Depreciation and amortization | 684,077 | 242,409 |
Amortization of deferred financing costs | 18,257 | 3,308 |
Debt issuance costs on convertible notes | 422,383 | |
Equity-based compensation expense | 2,850,879 | |
Deferred IPO offering costs | (581,973) | |
Change in fair value of convertible notes | 12,062,500 | |
Provision for doubtful accounts | 602,711 | 266,831 |
Provision for slow moving or obsolete inventory | 81,123 | 32,510 |
Income from equity method investments in associated entities | (27,015) | |
Other | (5,904) | |
Changes in operating assets and liabilities, net of the effects of acquisitions: | ||
Accounts receivable, net | (2,647,033) | (2,098,100) |
Vendor deposits | 1,658,532 | (3,002,803) |
Inventories | (6,652,170) | (10,949,803) |
Other current assets | (719,512) | (716,273) |
Accounts payable | 1,962,634 | 10,778,643 |
Accrued expenses | 844,260 | 335,142 |
Payments of operating leases | (178,083) | |
Net cash used in operating activities | (7,261,668) | (2,836,422) |
Cash flows from investing activities: | ||
Acquisition of a subsidiary, net of cash acquired | 90,685 | 785,081 |
Purchase of property and equipment, net | (509,110) | (218,254) |
Purchase of intangible assets, net | (54,003) | (19,480) |
Investments | (500,000) | |
Net cash (used in) provided by investing activities | (972,428) | 547,347 |
Cash flows from financing activities: | ||
Proceeds from issuance of convertible notes | 8,050,000 | |
Payment of debt issuance costs | (1,589,500) | |
Payments on long-term debt | (29,204) | |
Proceeds from notes payable | 167,922 | |
Payments on notes payable | (41,704) | |
Proceeds from related parties - line of credit, net | 4,079,456 | |
Proceeds from line of credit, net | 325,000 | |
Increase in finance lease obligations | 135,963 | |
Payments of finance lease obligations | (24,710) | (19,283) |
Deferred offering costs paid | (37,946) | |
Redemption of Class A and Class B units | (3,018,748) | |
Member distributions | (20,559) | (1,007,175) |
Net cash provided by financing activities | 3,641,833 | 3,327,679 |
Effects of exchange rate changes on cash | 27,553 | (19,925) |
Net (decrease) increase in cash | (4,564,710) | 1,018,679 |
Cash, as of beginning of the period | 7,341,485 | 2,080,397 |
Cash, as of end of period | 2,776,775 | 3,099,076 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Cash paid during the period for interest | 601,880 | 38,951 |
Cash paid during the period for income taxes | 79,939 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows for operating leases | 178,083 | |
Operating cash flows for finance leases | 6,139 | 4,134 |
Financing cash flows for finance leases | 24,710 | 26,344 |
Non-cash investing activities and financing activities: | ||
Redeemable Class B Units issued for acquisition of a subsidiary | 6,664,000 | 8,890,000 |
Deferred offering costs included in accounts payable and accrued expenses | 2,067,554 | |
Leased assets obtained in exchange for new finance lease liabilities | 36,968 | 138,562 |
Leased assets obtained in exchange for new operating lease liabilities | $ 2,411,348 |
Business Operations
Business Operations | 3 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BUSINESS OPERATIONS | NOTE 1. BUSINESS OPERATIONS Greenlane Holdings, LLC (formerly known as Jacoby Holdings LLC) (“the Operating Company”) is a company with investments in several companies that merchandise vaporizers and other products in the United States and Canada. Through its operating subsidiaries, the Operating Company distributes to retailers through its wholesale operations and to consumers through its e-commerce activities. The Operating Company operates four distribution centers in the United States and two distribution centers in Canada. The Operating Company was organized under the laws of the state of Delaware on October 28, 2015, and is based in Boca Raton, Florida. Greenlane Holdings, Inc. (“Greenlane”) was formed as a Delaware corporation on May 2, 2018. Greenlane is a holding company that was formed for the purpose of completing an underwritten IPO of shares of its Class A common stock and other related Transactions in order to carry on the business of the Operating Company and its subsidiaries. On April 23, 2019, Greenlane completed its IPO of 6,000,000 shares of Class A common stock, which was comprised of 5,250,000 shares of Class A common stock sold by Greenlane and 750,000 shares sold by certain selling stockholders (comprised of Aaron LoCascio, Greenlane’s Chief Executive Officer, Adam Schoenfeld, Greenlane’s Chief Strategy Officer, and an affiliated entity of Messrs. LoCascio and Schoenfeld), in each case at a public offering price of $17.00 per share. On April 29, 2019, the underwriters purchased an additional 450,000 shares of Class A common stock from the selling stockholders pursuant to the partial exercise of their option to purchase additional shares in the IPO. Greenlane did not receive any proceeds from the sale of Class A common stock by the selling stockholders. The sale of shares of Class A common stock by Greenlane generated aggregate net proceeds to Greenlane, after deducting the underwriting discounts and commissions and offering expenses payable by the Operating Company, of approximately $80.4 million. Greenlane 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 Class A common stock sold by Greenlane 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, Greenlane owned approximately 23.9% of the Operating Company’s outstanding Common Units. As a result of the IPO, Greenlane is the sole manager of the Operating Company and, as a result, Greenlane operates and controls all of the business and affairs of the Operating Company, and through the Operating Company and its subsidiaries, continues to conduct the business now conducted by these subsidiaries. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying 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 with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for fair financial statement presentation have been made. Certain reclassifications have been made to prior year amounts or balances to conform to the presentation adopted in the current year. The consolidated results of operations for the three-months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019, or any other future annual or interim period. These condensed consolidated financial statements should be read in conjunction with the Operating Company's audited consolidated financial statements and related notes for the year ended December 31, 2018, which are included in Greenlane's final prospectus, dated April 17, 2019, filed with the SEC on April 22, 2019 pursuant to Rule 424(b) of the Securities Act of 1933, as amended. Principles of Consolidation The condensed consolidated financial statements include the accounts of the Operating Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates that affect certain reported amounts and disclosures. These estimates are based on management's knowledge and experience. Significant items subject to such estimates include the accounts receivable allowance for doubtful accounts, the allowance for slow-moving or obsolete inventory, assumptions used in the calculation of equity-based compensation, and the convertible notes valuation. Accordingly, actual results could differ from those estimates. Segment Reporting The Operating Company's chief operating decision maker ("CODM") is Aaron LoCascio, Greenlane's Chief Executive Officer. The CODM reviews operating results and operating plans and makes resource allocation decisions on an entity-wide or aggregate basis. The Operating Company has two distinct operating segments, which are comprised of the United States operations and Canadian operations. The Canadian operating segment consists of the Operating Company's wholly-owned, Canada-based, subsidiary. The United States operating segment is comprised of all other operating subsidiaries. Beginning with the quarter ended March 31, 2019, the Operating Company had a change in reportable segments as the Canadian operating segment no longer met the quantitative criteria to be aggregated with the United States operating segment as one reportable segment. The United States and Canada reportable segments have been identified based on how the CODM manages the business, makes operating decisions and evaluates operating performance. See "Note 15—Segment Reporting." Business Combinations Business combinations are accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations Equity-Based Compensation The Operating Company granted incentive awards in the form of Class B redeemable units and profits interest units to certain executives and other employees of the Operating Company. The Operating Company accounts for these grants of equity awards to employees in accordance with ASC Topic 718, Compensation - Stock Compensation Fair Value Measurements The Operating Company applies the provisions of ASC Topic 820, Fair Value Measurements Level 1 Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amounts of the Operating Company's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and short-term debt, are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The fair value of long-term debt is the estimated amount the Operating Company would have to pay to repurchase the debt, including any premium or discount attributable to the difference between the stated interest rate and market rate of interest at each balance sheet date. As of March 31, 2019 and 2018, the carrying amount of the Operating Company's long-term debt approximated its fair value. The Operating Company has no Level 1 or Level 2 financial instruments. There were no transfers between Level 1, 2 or 3 for the period presented. Level 3 liabilities consist of the convertible notes. See "Note 6—Long Term Debt" for further discussion regarding the convertible notes. Cash For purposes of reporting cash flows, the Operating Company considers cash on hand, checking accounts, and savings accounts to be cash. The Operating Company considers all highly-liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. The Operating Company places its cash with high credit quality financial institutions, which provide insurance through the Federal Deposit Insurance Corporation. At times, the balance in these accounts may exceed federal insured limits. The Operating Company performs periodic evaluations of the relative credit standing of these institutions and does not expect any losses related to such concentrations. As of March 31, 2019 and December 31, 2018, approximately $170,000 and $204,000, respectively, of the Operating Company's cash balances were in foreign bank accounts and uninsured. As of March 31, 2019 and December 31, 2018, the Operating Company had no cash equivalents. Accounts Receivable, net Accounts receivable represent amounts due from customers for merchandise sales and are recorded when product has shipped. An account is considered past due when payment has not been rendered by its due date based upon the terms of the sale. Generally, accounts receivable are due 30 days after the billing date. The Operating Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based on a history of collections as well as current credit conditions. Accounts are written off as uncollectible on a case-by-case basis. Accounts receivable were reported net of the allowance for doubtful accounts of $603,000 and $658,000 at March 31, 2019 and December 31, 2018, respectively. Accounts receivable are pledged as collateral for the line of credit. See "Note 6—Long Term Debt." Inventories, net Inventories consist principally of finished goods that are valued at the lower of cost or net realizable value on a weighted average cost basis. The Operating Company has established an allowance for slow-moving or obsolete inventory based upon assumptions about future demands and market conditions. At March 31, 2019 and December 31, 2018, the reserve for obsolescence was approximately $293,000 and $212,000, respectively. Inventory is pledged as collateral for the line of credit. See "Note 6—Long Term Debt." Deferred Financing Costs Costs incurred in obtaining certain debt financing are deferred and amortized over the respective terms of the related debt instruments using the interest method for term debt and the straight-line method for revolving debt. The debt issuance costs related to the revolving line of credit are presented as an asset on the condensed consolidated balance sheets while the debt issuance costs related to the real estate note are presented net against the long-term debt in the condensed consolidated balance sheets. As of March 31, 2019 and December 31, 2018, the Operating Company had deferred debt issuance costs totaling approximately $79,000 and $92,000, respectively, in connection with the issuance of long-term debt. The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $18,000 and $3,000 during the three months ended March 31, 2019 and 2018, respectively. The Operating Company accounts for the cost of issuing equity instruments to effect business combinations as a reduction of the otherwise determined fair value of the equity instruments issued. The Operating Company expenses any fees not associated with arranging equity or debt financing as incurred. Property and Equipment, net Property and equipment are stated at cost or, if acquired through a business acquisition, fair value at the date of acquisition. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the asset, except for leasehold improvements, which are depreciated over the shorter of the estimated useful lives of the assets or the lease term. Upon the sale or retirement of assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is credited or charged to income. Expenditures for repairs and maintenance are expensed when incurred. Impairment of Long-Lived Assets The Operating Company assesses the recoverability of the carrying amount of its long lived-assets, including property and equipment and finite-lived intangibles, whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be assessed when estimated undiscounted future cash flows from the operation and disposition of the asset group are less than the carrying amount of the asset group. Asset groups have identifiable cash flows and are largely independent of other asset groups. Measurement of an impairment loss is based on the excess of the carrying amount of the asset group over its fair value. There was no impairment loss for long-lived assets for the three months ended March 31, 2019 and 2018. See "Note 3—Property and Equipment." Intangible Assets, net Intangible assets consist of domain names, intellectual property, distribution agreements, proprietary technology, trademarks and tradenames, and other rights. Intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis. The straight-line method of amortization represents the Operating Company's best estimate of the distribution of the economic value of the identifiable intangible assets. Intangible assets are carried at cost less accumulated amortization. The Operating Company assesses the recoverability of finite-lived intangible assets in the same manner as for property and equipment, as described above. There were no impairment charges for the three months ended March 31, 2019 and 2018. See "Note 4—Goodwill and Intangible Assets." Goodwill In accordance with ASC Topic 350, Intangibles — Investments Equity method investments Investee companies that are not consolidated, but over which the Operating Company exercises significant influence, are accounted for under the equity method of accounting. Under the equity method of accounting, an investee company's accounts are not reflected within the Operating Company's condensed consolidated balance sheets and statements of operations; however, the Operating Company's share of the earnings or losses of the investee company is reflected in the caption "Other income, net'' in the condensed consolidated statements of operations. The Operating Company's carrying value in an equity method investee company is reflected in the caption "Investments" in the Operating Company's condensed consolidated balance sheets. When the Operating Company's carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Operating Company's consolidated financial statements unless the Operating Company has guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Operating Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. The Operating Company's investments that are accounted for on the equity method of accounting consist of a 50% interest in two separate joint venture entities. The aggregate investment in the two joint venture entities amounted to approximately $75,000 at March 31, 2019 and December 31, 2018. The operating activity related to the joint ventures was immaterial for the three months ended March 31, 2019 and 2018. Equity securities The Operating Company's equity securities consist of an investment in an unaffiliated entity (ownership 1.71%). The Operating Company has determined that its ownership does not provide it with significant influence over the operations of this investee. Accordingly, the Operating Company accounts for its investment in this entity as equity securities. The investee is a private entity and its equity securities do not have a readily determinable fair value. Equity securities without a readily determinable fair value are measured at cost minus impairment, if any, and are adjusted to fair value when an observable price change can be identified. Vendor Deposits Vendor deposits represent prepayments made to vendors for inventory purchases. A significant number of vendors require prepayment for inventory purchases made by the Operating Company. Deferred Offering Costs The Operating Company capitalized certain legal, accounting, and other third-party fees that were directly attributable to Greenlane's IPO. After consummation of the IPO, these costs will be recorded in equity as a reduction from the proceeds of the IPO. Foreign Currency Translation The accompanying condensed consolidated financial statements are presented in United States (U.S.) dollars. The functional currency of one of the Operating Company's wholly-owned, Canada-based subsidiaries is the Canadian dollar. The assets and liabilities of this subsidiary are translated into U.S. dollars at current exchange rates and revenue and expenses are translated at average exchange rates for the year. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The foreign currency translation adjustments are included in accumulated other comprehensive loss, a separate component of members' deficit in the condensed consolidated balance sheets. Other exchange gains and losses are reported in the condensed consolidated statements of operations. Comprehensive (Loss) Income Comprehensive (loss) income includes net (loss) income as currently reported by the Operating Company, adjusted for other comprehensive items. Other comprehensive items for the Operating Company consist of foreign currency translation gains and losses. Advertising Advertising costs are expensed as incurred and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations. Advertising costs totaled approximately $1,282,000 and $841,000 for the three months ended March 31, 2019 and 2018, respectively. Income Taxes The Operating Company is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, taxable income or loss is passed through to and included in the taxable income of the Operating Company's members, including Greenlane. Accordingly, the consolidated financial statements do not include a provision for federal income taxes. The Operating Company is liable for various other state and local taxes and is subject to taxes in foreign jurisdictions. Therefore, the provision for income taxes includes only income taxes on income from the Operating Company's Canadian subsidiary and state income tax, if any, in the consolidated financial statements. Income tax amounts reflected in the accompanying financial statements relate primarily to income generated by the Operating Company's Canadian subsidiary and are based upon an estimated annual effective tax rate of approximately 26.5%. The Operating Company utilizes a two-step approach for recognizing and measuring uncertain tax positions accounted for in accordance with the asset and liability method. The first step is to evaluate the tax position for recognition by determining whether evidence indicates that it is more likely than not that a position will be sustained if examined by a taxing authority. The second step is to measure the tax benefit as the largest amount that is 50% likely of being realized upon settlement with a taxing authority. There were no amounts required to be recorded at March 31, 2019 and December 31, 2018 related to uncertain tax positions. Revenue Recognition The Operating Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers The Operating Company generates revenue primarily from the sale of finished products to customers, whereby each product unit represents a single performance obligation. The performance obligation is satisfied when the customer obtains control of the product, which typically occurs at the time of shipping. Upon shipping, the customer has legal title of the product and bears the significant risks and rewards of ownership, including the right to sell or redirect the product. As such, customer orders are recorded as revenue once the order is shipped from one of the Operating Company's distribution centers. The Operating Company's performance obligations for services are satisfied when the services are rendered within the arranged service period. Total service revenue is not material and accounted for less than 0.5% of revenues for the three months ended March 31, 2019 and 2018. The Operating Company provides no warranty on products sold. Product warranty is provided by the manufacturers. The Operating Company 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 the Operating Company's performance obligations. Revenue is presented net of sales taxes, discounts and expected refunds. Product revenues are recorded net of estimated rebates or sales incentives as well as estimated product returns as elements of variable consideration. The actual amounts of consideration ultimately received may differ from the Operating Company's estimates. If actual results in the future vary from the Operating Company's estimates, the Operating Company will adjust these estimates, which would affect net revenue from products in the period such variances become known. The Operating Company estimates product returns based on historical experience and records them on a gross basis as a refund liability that reduces the net sales for the period. The Operating Company analyzes actual historical returns, current economic trends and changes in order volume when evaluating the adequacy of the sales returns allowance in any accounting period. The liability for returns is included in accrued expenses on the Operating Company's condensed consolidated balance sheets and was approximately $464,000 and $460,000 at March 31, 2019 and December 31, 2018, respectively. Included in other current assets is an asset totaling approximately $285,000 as of March 31, 2019 and December 31, 2018, relating to the recoverable cost of merchandise estimated to be returned by customers. The Operating Company has an established a supply chain for premium, patented, child-resistant packaging, closed-system vaporization solutions and custom-branded retail products. For these product offerings, the Operating Company generally receives a deposit from the customer (generally 50% of the total order cost, but the amount can vary by customer contract), when an order is placed by a customer. These orders are typically completed within six weeks to three months from the date of order, depending on the complexity of the customization and the size of the order. Customer deposits, which represent deferred revenue, are included in accrued expenses on the Operating Company's condensed consolidated balance sheets and were approximately $2.7 million and $3.2 million at March 31, 2019 and December 31, 2018, respectively. See "Note 5—Composition of Certain Financial Statement Captions." The Operating Company holds several exclusive distribution agreements with its manufacturers that are evaluated against the criteria outlined in ASC 606-10-55, Principal versus Agent Considerations The Operating Company applies the practical expedient provided for by ASC 606 by not adjusting the transaction price for significant financing components for periods less than one year. The Operating Company also applies the practical expedient provided for by ASC 606 based upon which the Operating Company generally expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within salaries, benefits and payroll tax expenses in the condensed consolidated statements of operations. Furthermore, the Operating Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Earnings per Unit Prior to the amendment and restatement of the LLC Agreement on April 17, 2019, in connection with the IPO the Operating Company's membership interests were defined as percentage interests in the LLC Agreement, as the LLC Agreement did not define a number of membership units outstanding or authorized. As a result, a calculation of basic and diluted earnings (loss) per unit is not presented in the accompanying financial statements, as a denominator to the calculation could not be determined. No potentially dilutive securities existed for the three months ended March 31, 2019 and 2018. See "Note 10—Members' Deficit." Recently Adopted Accounting Guidance In February 2016, the Financial Accounting ("FASB") issued Accounting Standard Update ("ASU") No. 2016-02, Leases (Topic 842) In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting Recently Issued Accounting Guidance Not Yet Adopted In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement, Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820), In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 3. PROPERTY AND EQUIPMENT The following is a summary of property and equipment, at costs less accumulated depreciation and amortization: March 31, 2019 December 31, Estimated useful life Furniture, equipment and software $ 2,724,793 $ 2,094,911 3 - 7 years Personal property 1,095,360 1,090,282 5 years Leasehold improvements 990,447 341,672 Lesser of lease term or 5 years Land improvements 601,370 601,370 15 years Building 7,911,703 7,772,987 39 years Land 690,705 690,705 14,014,378 12,591,927 Less: accumulated depreciation 1,286,551 951,103 Property and equipment, net $ 12,727,827 $ 11,640,824 Property and equipment include assets recorded under finance leases. See "Note 7—Leases." Property and equipment are pledged as collateral for the Operating Company line of credit. See "Note 6—Long Term Debt." Depreciation expense for property and equipment (excluding assets recorded under finance leases) for the three months ended March 31, 2019 and 2018 was approximately $357,000 and $54,000, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | NOTE 4. GOODWILL AND INTANGIBLE ASSETS Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business combinations. Goodwill is not amortized but is tested for impairment at least annually. When evaluating whether goodwill is impaired, the Operating Company performs a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Operating Company would then recognize an impairment charge for the amount by which carrying amount exceeds the reporting unit's estimated fair value; however, goodwill would not be reduced below zero. The Operating Company tests for impairment of goodwill annually in the fourth quarter or when management of the Operating Company deems that a triggering event has occurred. There were no impairments to goodwill during the three months ended March 31, 2019 and 2018. For three months ended March 31, 2019, the Operating Company recognized approximately $3.5 million in goodwill related to a business acquisition. The goodwill generated from the business acquisition is primarily related to the value placed on the expected business synergies. See "Note 12—Business Acquisition." Identified intangible assets consisted of the following at the dates indicated below: March 31, 2019 Gross carrying amount Accumulated amortization Carrying value Estimated useful life Domain Names $ 134,993 $ (58,607 ) $ 76,386 15 years Design Libraries 1,677,000 (23,292 ) 1,653,708 15 years Distribution Agreements 650,000 (451,389 ) 198,611 5 years Proprietary Technology 1,040,000 (710,667 ) 329,333 5 years Trademarks and Tradenames 3,219,539 (572,667 ) 2,646,872 5-15 years Customer Relationships 1,196,000 (259,133 ) 936,867 5 years Non-competition Agreements 218,000 (118,083 ) 99,917 2 years Other Intangibles 47,547 (1,507 ) 46,040 5-15 years $ 8,188,261 $ (2,204,934 ) $ 5,984,327 December 31, 2018 Gross carrying amount Accumulated amortization Carrying value Estimated useful life Domain Names $ 131,000 $ (59,744 ) $ 71,256 15 years Distribution Agreements 650,000 (397,222 ) 252,778 5 years Proprietary Technology 1,040,000 (658,667 ) 381,333 5 years Trademarks and Tradenames 2,284,886 (458,638 ) 1,826,248 5-10 years Customer Relationships 1,196,000 (199,333 ) 996,667 5 years Non-competition Agreements 218,000 (90,833 ) 127,167 2 years Other Intangibles 22,003 (15,043 ) 6,960 5 years $ 5,541,889 $ (1,879,480 ) $ 3,662,409 Amortization expense for the three months ended March 31, 2019 and 2018 was approximately $327,000 and $187,000, respectively. |
Composition of Certain Financia
Composition of Certain Financial Statement Captions | 3 Months Ended |
Mar. 31, 2019 | |
Payables and Accruals [Abstract] | |
COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS | NOTE 5. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS The following table summarizes the composition of accrued expenses and other current liabilities as of March 31, 2019 and December 31, 2018: March 31, December 31, Accrued expenses and other current liabilities: Customer deposits $ 2,684,570 $ 3,226,479 Accrued offering costs 2,067,553 1,499,930 Refund liability 464,395 459,416 Payroll related including bonus 2,182,480 1,313,695 Accrued taxes, state and income 320,299 664,659 Accrued marketing fees and royalties 312,262 804,370 Other 1,769,340 1,976,607 Total $ 9,800,899 $ 9,945,156 |
Long Term Debt
Long Term Debt | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
LONG TERM DEBT | NOTE 6. LONG TERM DEBT The Operating Company’s long-term debt, excluding operating lease liabilities and finance lease liabilities, consisted of the following amounts at the dates indicated: March 31, December 31, 3.0% note payable to a lender in relation to a four-year vehicle loan for the purchase of a truck used in operations. $ 16,654 $ 24,275 Revolving credit note with a lender for a $15,000,000 credit loan with a maturity date of August 23, 2020. Interest on the principal balance outstanding on the Note is due monthly at a rate of LIBOR plus 3.50% per annum. 325,000 - Credit note with a lender for the purchase of the Company’s corporate headquarters building with a maturity date of October 1, 2025. Interest on the principal balance outstanding on the note is due monthly at a rate of LIBOR plus 2.39% per annum. 8,425,717 8,459,800 Convertible notes issued in December 2018 and in January 2019 60,312,500 40,200,000 69,079,871 48,684,075 Less unamortized debt issuance costs (134,356 ) (139,459 ) Less current portion of long-term debt (171,117 ) (168,273 ) Long-term debt, net, excluding operating leases and finance leases $ 68,774,398 $ 48,376,343 Line of Credit On October 1, 2018, the Operating Company, as the borrower, entered into an amended and restated revolving credit note (the “line of credit”) with Fifth Third Bank, for a $15,000,000 revolving credit loan with a maturity date of August 23, 2020. Interest on the principal balance outstanding on the line of credit is due monthly at a rate of LIBOR plus 3.50% per annum provided that no default has occurred. The Operating Company’s obligations under the line of credit are guaranteed by Jacoby & Co. Inc., all of the Operating Company’s operating subsidiaries, and personally by each of Greenlane’s Chief Executive Officer and Chief Strategy Officer, and are collateralized by the Operating Company’s accounts receivable, inventory, property and equipment, deposit accounts, intangibles and other assets, and an assignment of member life insurance policies. The line of credit borrowing base is 80% of eligible accounts receivable plus 50% of eligible inventory. The line of credit covenants require a fixed charge coverage ratio of no less than 1.25, to be calculated on a quarterly basis on the last day of each calendar quarter. The Operating Company was in compliance with its covenants as of March 31, 2019. Real Estate Note On October 1, 2018, one of the Operating Company’s wholly-owned subsidiaries closed on the purchase of a building for $10,000,000, which serves as the Company’s corporate headquarters. The purchase was financed through a real estate term note (the “Real Estate Note”) in the principal amount of $8,500,000, with one of the Operating Company’s wholly-owned subsidiaries as the borrower and Fifth Third Bank as the lender. Principal amounts plus any accrued interest at a rate of LIBOR plus 2.39% are due monthly. The Operating Company’s obligations under the Real Estate Note are secured by a mortgage on the property. Convertible Notes On December 21, 2018, the Operating Company issued an aggregate of $40.2 million in convertible promissory notes (the “convertible notes”) and incurred related debt issuance costs of approximately $2.6 million. Approximately $15.1 million of the net cash proceeds received from the issuance of the convertible notes were used to redeem equity interests of existing members of the Operating Company. On January 4, 2019, the Operating Company issued an additional $8.1 million in convertible notes and incurred related debt issuance costs of approximately $0.4 million. Approximately $3.0 million of the net cash proceeds received from the issuance of the convertible notes were used to redeem equity interests of existing members of the Operating Company. The balance of the net proceeds has been or will be used for general corporate purposes. The convertible notes did not accrue interest. On April 23, 2019, in connection with the closing of the IPO, Greenlane issued 3,547,776 shares of its Class A common stock to the holders of the convertible notes upon conversion of the convertible notes of the Operating Company at a settlement price equal to 80% of the IPO price per share; see “Note 16—Subsequent Events.” The convertible notes also contained other settlement provisions if an IPO did not occur within 18 months of their issuance date. If an IPO did not occur within 18 months of the convertible notes’ issuance, the holders of the convertible notes had the option to extend the initial maturity date by an additional 18 month period, in which case the convertible notes would have converted automatically into Class A common stock at a settlement price equity to 75% of the IPO price per share upon closing of an IPO. Furthermore, if the IPO did not occur prior to mandatory conversion date (that is, prior 18 or 36 months from issuance), the convertible notes (plus accrued interest) would have converted into shares of the Operating Company’s newly designated Class A preferred stock at a settlement price per share that would be determined based on a stipulated valuation cap of the Operating Company and its fully diluted capitalization as of immediately prior to the conversion of the convertible notes. The convertible notes also contained additional redemption features contingent upon the occurrence of certain future events. On issuance, the Operating Company elected to account for the convertible notes at fair value with any changes in the fair value recognized through the statements of operations until the conversion of the convertible notes. On issuance, the fair value of the convertible notes issued in January 2019 was determined to be equal to the $8.1 million principal amount of the convertible notes. Total debt issuance costs of approximately $0.4 million, incurred in connection with the issuance of the convertible notes in January 2019 and approximately $1.2 million incurred in January 2019 associated with the issuance of convertible notes in December 2018, were expensed and recognized as interest expense in the condensed consolidated statements of operations for the three months ended March 31, 2019. There were no related costs for the three months ended March 31, 2018. For the three months ended March 31, 2019, the Operating Company recognized a change in fair value of the convertible notes of $12.1 million in the accompanying condensed consolidated statements of operations. The Operating Company determined the fair value of the convertible notes as of March 31, 2019 by determining the present value of the convertible notes if they were to settle either in shares of common stock upon closing of an IPO or in shares of preferred stock three years after issuance. Key valuation assumptions were as follows: March 31, 2019 IPO Scenarios Class A Preferred Stock Scenario Expected term (years) 0.1 2.8 Cost of equity 11.5 % 12.5 % Discount for lack of marketability -- 20 % Weighting 99 % 1 % The Operating Company determined the fair value of the convertible notes (including both the convertible notes issued in December 2018 and January 2019) as of March 31, 2019 to be $60.3 million. See “Note 16—Subsequent Events”. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
LEASES | NOTE 7. LEASES Lessee The Operating Company leases warehouses, retail stores, regional offices, and machinery and equipment. Lease terms are generally three years to seven years for warehouses, office space and retail store locations, and up to seven years for other leased equipment and property. The Operating Company adopted ASC Topic 842, Leases Right-of-use assets represent the Operating Company's right to use an underlying asset for the lease term and lease liabilities represent the Operating Company's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When available, the Operating Company uses the rate implicit in the lease to discount lease payments to present value. However, the Operating Company does have leases that do not provide a readily determinable implicit rate. For such leases, the Operating Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The Operating Company uses instruments with similar characteristics when calculating its incremental borrowing rates. The Operating Company lease agreements do not contain any residual value guarantees. The Operating Company has elected to not separate non-lease components from the associated lease component for all underlying classes of assets with lease and non-lease components. As of March 31, 2019, the Operating Company had 10 facilities financed under operating leases (consisting of warehouses, regional offices, and retail stores), with lease term expirations between 2019 and 2026. Rent expense consists of monthly lease rents for warehouses, regional offices, and retail stores under the terms of the Operating Company's lease agreements recognized on a straight-line basis. The following table provides details of the Operating Company's future minimum lease payments under finance lease liabilities and operating lease liabilities recorded on the Operating Company's condensed consolidated balance sheets as of March 31, 2019. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown. Finance Operating Total Finance and Remainder of 2019 $ 107,880 $ 546,946 $ 654,826 2020 110,162 706,111 816,273 2021 87,174 418,540 505,714 2022 29,321 420,551 449,872 2023 3,193 371,085 374,278 Thereafter - 222,021 222,021 Total minimum lease payments $ 337,730 $ 2,685,254 $ 3,022,984 Less amount representing interest 36,257 283,495 319,752 Present value of minimum lease payments $ 301,473 $ 2,401,759 $ 2,703,232 Less current portion 100,831 641,596 742,427 Long-term portion $ 200,642 $ 1,760,163 $ 1,960,805 The majority of the Operating Company's finance lease obligations relate to leased warehouse equipment. Payments under the Operating Company's finance lease agreements are fixed for terms ranging from three to five years. Accounting for finance leases is substantially unchanged under Topic 842. Finance lease assets are recorded within property and equipment and the related liabilities are recorded as current portion of finance leases and in finance leases, less current portion, in the Operating Company's condensed consolidated balance sheets. The table below presents information related to the Operating Company's finance and operating leases: Three Months Ended Finance lease cost Amortization of leased assets $ 28,613 Interest of lease liabilities 6,139 Operating lease costs Operating lease cost (a) 114,307 Variance lease cost (a) 65,077 Total lease cost $ 214,136 (a) Expenses are classified within general and administrative expenses within the Operating Company's condensed consolidated statement of operations. The table below presents lease-related terms and discount rates as of March 31, 2019: March 31, Weighted average remaining lease terms Operating leases 3.4 years Finance leases 3.4 years Weighted average discount rate Operating leases 4.9 % Finance leases 7.8 % Lessor The Operating Company has five operating leases for office space leased to third-party tenants in its corporate headquarters building in Boca Raton, Florida (acquired in October 2018). For the three months ended March 31, 2019, the Operating Company had approximately $193,000 in rental income related to these operating leases, which is included in the "Other income, net" line item in the condensed consolidated statement of operations. The Operating Company did not have any rental income for the three months ended March 31, 2018. The following table represents the maturity analysis of undiscounted cash flows related to lease payments which the Operating Company expects to receive from its existing operating lease agreements with tenants: Rental Income Remainder of 2019 $ 491,322 2020 619,432 2021 585,319 2022 75,883 2023 - Thereafter - Total $ 1,771,956 |
Supplier Concentration
Supplier Concentration | 3 Months Ended |
Mar. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
SUPPLIER CONCENTRATION | NOTE 8. SUPPLIER CONCENTRATION During the three months ended March 31, 2019 and 2018, the Operating Company's purchases of inventory for resale from two major vendors amounted to approximately 39.8% and 64.1%, respectively, of the Operating Company's total inventory purchases. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 9. COMMITMENTS AND CONTINGENCIES In the ordinary course of its business, the Operating Company is involved in various legal proceedings involving a variety of matters. the Operating Company does not believe there are any pending legal proceedings that will have a material adverse effect on its 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. See "Note 7 — |
Members' Deficit
Members' Deficit | 3 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
MEMBERS' DEFICIT | NOTE 10. MEMBERS' DEFICIT Effective February 20, 2018, the Operating Company amended and restated its limited liability company operating agreement (the "LLC Agreement") and reclassified all Common membership units to Class A common units and created redeemable Class B units in conjunction with the Operating Company's acquisition of a 100% interest in Better Life Holdings, LLC. As a result of the issuance of a second class of membership units, the beginning balance of retained earnings as of January 1, 2018 was reclassified to the Class A units capital account and net loss and other distributions occurring during 2018 and onward have been allocated to the Class A and redeemable Class B units capital accounts. The Class A common units have voting rights and participate in the residual equity of the Operating Company pro-rata with the redeemable Class B units, which have no voting rights. See "Note 11—Redeemable Class B Units." Each member's percentage interest in the Operating Company was as follows at March 31, 2019: Member Class of Units Percentage Interest Jacoby & Co. Inc. Class A units 70.35 % Adam Schoenfeld Class A units 12.41 % Better Life Products Investment Group, Inc. Class B redeemable units 7.59 % Rochester Vapor Group, LLC Class B redeemable units 2.01 % Pollen Gear LLC Class B redeemable units 4.00 % Executive Management Team Class B redeemable units 3.64 % 100.00 % The LLC Agreement does not provide a number of authorized membership units. Pursuant to the Stock Redemption Settlement Agreement executed on December 21, 2018, the Operating Company used a portion of the net proceeds received from the sale of the convertible notes, which are discussed further in "Note 6—Long Term Debt," to redeem membership units from the Operating Company's members, substantially on a pro rata basis to the members' ownership interest percentage in the Operating Company; that is, the amount disbursed to Class A and redeemable Class B unit holders was determined by multiplying the total ownership interest percentage of each member by the total amount disbursed. On January 7, 2019, an aggregate of approximately $3.0 million was disbursed, of which approximately $2.6 million was disbursed to Class A unit holders and approximately $416,000 was disbursed to redeemable Class B unit holders. The redemption was settled in connection with Greenlane's IPO, which was completed on April 23, 2019. In consideration for such portion of the redemption amount paid to each member, each member delivered to the Operating Company a number of Common Units (as defined in "Note 16— Subsequent Events") equal to the amount of the redemption amount paid to such member, divided by the price per share at which the Class A common stock of Greenlane was sold in the IPO. No further payments were due to the members upon such settlement. See "Note 16—Subsequent Events." |
Redeemable Class B Units
Redeemable Class B Units | 3 Months Ended |
Mar. 31, 2019 | |
Redeemable Class B Units | |
REDEEMABLE CLASS B UNITS | NOTE 11. REDEEMABLE CLASS B UNITS The Operating Company issued Class B units as consideration for its recent business acquisitions, as well as in form of equity-based compensation to certain of the Operating Company's executive employees. The Operating Company's Class B units are non-voting and contained a put right whereby, at any time after the third anniversary of February 20, 2018 (in each case prior to an effective IPO or Capital Event), each of the holders of Class B units had the right to require that the Operating Company purchase all, but not less than all, of its Class B units at an aggregate price equal to the fair market value of the Class B units as of the date of the put notice (as defined), in the form of a cash payment. The Class B units did not contain any mandatory redemption provisions. The Operating Company classified the Class B units outside of members' deficit as of March 31, 2019 and December 31, 2018 as the units contained contingent redemption features that were not solely within the Operating Company's control. The initial carrying value of the amount classified in temporary equity for the Class B units issued as consideration for business acquisitions was based on the issuance date fair value of the redeemable Class B units, net of issuance costs. See "Note 13 – Equity-Based Compensation" for further discussion of the accounting for Class B units issued as equity-based compensation. As of March 31, 2019, the Operating Company determined that the Class B units were not probable of becoming redeemable as management believed the IPO to be probable to occur before the third anniversary of the LLC Agreement; accordingly, the carrying value of the Class B units was not adjusted. As discussed in "Note 16—Subsequent Events," Greenlane completed its IPO of 6,000,000 shares of Class A common stock at a public offering price of $17.00 per share on April 23, 2019 and became the sole manager of the Operating Company. As part of the Transactions, the Class B units were converted to Common Units of the Operating Company and the put right was eliminated. |
Business Acquisition
Business Acquisition | 3 Months Ended |
Mar. 31, 2019 | |
Business Combinations [Abstract] | |
BUSINESS ACQUISITION | NOTE 12. BUSINESS ACQUISITION Effective January 14, 2019, the Operating Company acquired a 100% interest in Pollen Gear LLC ("Pollen Gear") in exchange for an aggregate four percent (4.0%) equity interest in the Operating Company. As consideration for the transaction, the Operating Company issued its Class B units, which, as described above in "Note 11—Redeemable Class B Units," were contingently redeemable by the holder. Pollen Gear has been consolidated in the Operating Company's consolidated financial statements commencing on January 14, 2019, the date of acquisition. The Pollen Gear acquisition was accounted for as a business combination under the acquisition method under ASC Topic 805, Business Combinations Pollen Gear LLC Cash $ 90,685 Accounts receivable 546,606 Vendor deposits 1,699,640 Other deposits 18,377 Property and equipment, net 341,884 Trade name 918,000 Design libraries 1,677,000 Goodwill 3,549,906 Net liabilities (2,178,098 ) Total purchase price $ 6,664,000 At January 14, 2019, the Operating Company had accounts payable to Pollen Gear of approximately $550,000 and Pollen Gear had accounts receivable for the corresponding amount from the Operating Company. Furthermore, at the date of acquisition, the Operating Company had vendor deposits with Pollen Gear of approximately $1.7 million, and Pollen Gear had customer deposits for the corresponding amount due to the Operating Company. Both the vendor deposits and accounts payable recorded by the Operating Company and the corresponding customer deposits and accounts receivable recorded by Pollen Gear approximated fair value. As a result of the business acquisition, the preexisting relationship between the Operating Company and Pollen Gear was effectively settled. No gain or loss was recognized on this settlement. The following unaudited pro forma financial information represents the combined results for the Operating Company and Pollen Gear for the three months ended March 31, 2019 and 2018 as if Pollen Gear had been acquired on January 1, 2018 and its results had been included in the consolidated results of the Operating Company beginning on that date: Three months ended 2019 2018 Net Sales $ 49,897,604 $ 43,257,643 Net (Loss) Income $ (17,982,036 ) $ 2,405,968 The pro forma amounts have been calculated after applying the Operating Company's accounting policies to the financial statements of Pollen Gear and adjusting the combined results of the Operating Company and Pollen Gear (a) to remove Pollen Gear product sales to the Operating Company and to remove the cost incurred by the Operating Company related to products purchased from Pollen Gear, (b) to reflect the increased amortization expense that would have been charged assuming intangible assets identified in the acquisition of Pollen Gear had been recorded on January 1, 2018. The impact of the Pollen Gear acquisition on the actual results reported by the combined entity in periods following the acquisition may differ significantly from that reflected in this pro forma information for a number of reasons. As a result, the pro forma information is not necessarily indicative of what the combined entity's financial condition or results of operations would have been had the acquisition been completed on the applicable dates of this pro forma financial information. In addition, the pro forma financial information does not purport to project the future financial condition and results of operations of the combined entity. |
Equity-Based Compensation
Equity-Based Compensation | 3 Months Ended |
Mar. 31, 2019 | |
Compensation Related Costs [Abstract] | |
EQUITY-BASED COMPENSATION | NOTE 13. EQUITY-BASED COMPENSATION Profits Interests In January and February 2019, the Operating Company entered into profits interest award agreements with several executives and employees of the Operating Company. The profits interests vest over a period of four to five years, as applicable to each holder. Any unvested portion of the profits interest would have vested upon the consummation of a capital event that was also a change in control (as defined in the LLC Agreement) of the Operating Company. The agreements specified that the award entitles the grantee to only participate in certain net profits and net proceeds in excess of a threshold amount (as defined) from a capital event that was also a change in control of the Operating Company, allocated and distributed to the profits interest from and after the grant date, and does not entitle the grantee to any other profits of the Operating Company, and as such was intended to constitute a profits interest under the LLC Agreement. The Operating Company determined that these awards represent equity instruments and such awards were accounted for under ASC Topic 718, Stock Compensation See "Note 16—Subsequent Events." Redeemable Class B Units The Operating Company determined that a portion of the redeemable Class B units granted as equity-based compensation met the criteria for liability classification under ASC 718. One-half of each holder's award was deemed vested on the modification date, whereas the other half contained a service condition spanning from two to three years. For the liability-classified portion of the awards, the Operating Company will remeasure the fair value of the awards each reporting period until the awards are settled, and true up compensation cost each reporting period for changes in fair value pro-rated for the portion of the requisite service period rendered. During the three months ended March 31, 2019, the Operating Company recorded compensation expense of approximately $2.6 million resulting from the incremental vesting and modification of one of the redeemable Class B units awards, which is included in salaries, benefits and payroll taxes in the condensed consolidated statement of operations. The Operating Company recorded an equity-based compensation liability of approximately $357,000 and $21,000 within accrued expenses in the accompanying condensed consolidated balance sheets at March 31, 2019 and December 31, 2018, respectively. As of March 31, 2019, there was approximately $2.9 million of unrecognized compensation costs related to unvested redeemable Class B units granted as equity-based compensation. This amount is expected to be recognized over a weighted-average period of 1.9 years. In order to determine the fair value of the Operating Company's redeemable Class B units, which were granted as equity-based compensation, the Operating Company used Greenlane's IPO price per share of $17.00. See "Note 16—Subsequent Events." |
Employee Benefit Plan
Employee Benefit Plan | 3 Months Ended |
Mar. 31, 2019 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFIT PLAN | NOTE 14. EMPLOYEE BENEFIT PLAN The Operating Company has a 401(k)-retirement savings plan. Eligible employees must be at least 18 years of age and have completed six months of service. Participants are eligible to receive a matching contribution from the Operating Company of up to the first 3% of compensation plus 50% of participant contributions between 3% and 5% of compensation. Matching contributions, other than safe harbor contributions, vest 33% per year and are 100% vested after three years of service. Safe harbor matching contributions are 100% vested as of the date of the contribution. The Operating Company's safe harbor matching contributions to the plan totaled approximately $62,000 and $53,000 for the three months ended March 31, 2019 and 2018, respectively. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2019 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | NOTE 15. SEGMENT REPORTING Segment information is prepared on the same basis that management reviews financial information for operational decision-making purposes. Beginning with the quarter ended March 31, 2019, the Operating Company had a change in reportable segments due to Canadian operations becoming a significant part of the business. As of March 31, 2019, the Operating Company had two operating segments, which also represented our reportable segments: (1) U.S. and (2) Canada. The U.S. reporting segment is comprised of Greenlane's U.S. operations while the Canadian reportable segment is comprised of Greenlane's Canadian operations. "Corporate and other" is comprised of unallocated corporate overhead expenses. The reportable segments identified above are the business activities of the Operating Company for which discrete financial information is available and for which operating results are regularly reviewed by the Operating Company's chief operating decision maker to allocate resources and assess performance. At March 31, 2019, the Operating Company's chief operating decision maker was the Chief Executive Officer of the Operating Company. Upon completion of the IPO and as a result of Greenlane's control of the Operating Company's business and operations as the sole manager of the Operating Company, the Operating Company's chief operating decision maker is Greenlane's Chief Executive Officer. Concurrent with the change in reportable segments, the Operating Company revised its prior period financial information to reflect comparable financial information for the new segment structure. Historical financial information presented herein reflects this change. The table below provides information on revenues from external customers, intersegment revenues, and segment income for the reportable segments. Intersegment revenues are eliminated in consolidation. Three Months Ended Three Months Ended March 31, 2019 March 31, 2018 United States Canada United States Canada Revenues from external customers $ 43,131,546 $ 6,766,058 $ 41,432,320 $ 1,825,323 Intercompany revenues 608,870 40,628 1,736,306 91,860 Segment (loss) income (1) (1,181,530 ) 133,946 2,391,880 110,661 (1) Segment (loss) income represents segment operating (loss) income. The following is a reconciliation of total loss for the reportable segments to consolidated (loss) income from continuing operations before income taxes. Three Months Ended March 31, 2019 2018 Total segment (loss) income for reportable segments $ (1,047,584 ) $ 2,502,041 Corporate and other loss (4,115,957 ) (172,751 ) Interest expense (601,880 ) (42,259 ) Change in fair value of convertible notes (12,062,500 ) - Other income, net 175,237 93,515 (Loss) income from continuing operations before income taxes $ (17,652,684 ) $ 2,380,546 No single customer represented more than 10% of the Operating Company's total consolidated revenue for the three months ended March 31, 2019 and 2018. As of March 31, 2019 and December 31, 2018, no single customer represented more than 10% of the Operating Company's accounts receivable balance. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 16. SUBSEQUENT EVENTS Subsequent events have been evaluated through May 9, 2019, which is the date the financial statements were available to be issued. Line of Credit On April 5, 2019, the Operating Company entered into a second amendment (“Amendment No. 2 to Amended and Restated Credit Agreement,” or “Second Amendment”) to its first amended and restated credit agreement, dated October 1, 2018. The Second Amendment amends and restates the definition of the guarantor under the terms of the agreement, wherein both the Chief Executive Officer of Greenlane and the Chief Strategy Officer of Greenlane were released from all obligations under the Amended and Restated Guaranty to the Credit Agreement dated October 1, 2018. All other terms of the agreement remain unchanged. Greenlane Holdings, Inc. Initial Public Offering On April 23, 2019, Greenlane completed its IPO of 6,000,000 shares of Class A common stock, which was comprised of 5,250,000 shares of Class A common stock sold by Greenlane and 750,000 shares sold by certain selling stockholders (comprised of Aaron LoCascio, Greenlane’s Chief Executive Officer, Adam Schoenfeld, Greenlane’s Chief Strategy Officer, and an affiliated entity of Messrs. LoCascio and Schoenfeld), in each case at a public offering price of $17.00 per share. In addition, Greenlane issued 3,547,776 shares of Class A common stock to the holders of convertible notes upon conversion of such convertible notes at a settlement price equal to 80% of the IPO price. On April 29, 2019, the underwriters purchased an additional 450,000 shares of Class A common stock from selling stockholders pursuant to the partial exercise of their option to purchase additional shares in the IPO. Greenlane did not receive any proceeds from the sale of Class A common stock by the selling stockholders. The sale of shares of Class A common stock by Greenlane generated aggregate net proceeds to Greenlane, after deducting the underwriting discounts and commissions and offering expenses payable by Greenlane, of approximately $80.4 million. Greenlane 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 Class A common stock sold by Greenlane 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 and the use of the net proceeds from the IPO Greenlane owns approximately 23.9% of the Operating Company’s outstanding Common Units. As a result of the IPO, Adam Schoenfeld, Greenlane’s Chief Strategy Officer, and Jacoby & Co. Inc, an affiliated entity of Mr. Schoenfeld and Aaron LoCascio, Greenlane’s Chief Executive Officer, collectively control approximately 83.0% of the combined voting power of Greenlane’s common stock as a result of their ownership of Greenlane’s Class C common stock, which are issued on a three-to-one basis with the number of Common Units owned and each share of common stock is entitled to one vote all matters submitted to a vote of Greenlane’s stockholders. Greenlane is a holding company, with its principal asset being Common Units of the Operating Company. Immediately following the completion of the IPO, Greenlane became the sole manager of the Operating Company and its subsidiaries. All of the Company’s assets will continue to be held through, and its operations conducted by, the Operating Company. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying 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 with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for fair financial statement presentation have been made. Certain reclassifications have been made to prior year amounts or balances to conform to the presentation adopted in the current year. The consolidated results of operations for the three-months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019, or any other future annual or interim period. These condensed consolidated financial statements should be read in conjunction with the Operating Company's audited consolidated financial statements and related notes for the year ended December 31, 2018, which are included in Greenlane's final prospectus, dated April 17, 2019, filed with the SEC on April 22, 2019 pursuant to Rule 424(b) of the Securities Act of 1933, as amended. |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of the Operating Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates that affect certain reported amounts and disclosures. These estimates are based on management's knowledge and experience. Significant items subject to such estimates include the accounts receivable allowance for doubtful accounts, the allowance for slow-moving or obsolete inventory, assumptions used in the calculation of equity-based compensation, and the convertible notes valuation. Accordingly, actual results could differ from those estimates. |
Segment Reporting | Segment Reporting The Operating Company's chief operating decision maker ("CODM") is Aaron LoCascio, Greenlane's Chief Executive Officer. The CODM reviews operating results and operating plans and makes resource allocation decisions on an entity-wide or aggregate basis. The Operating Company has two distinct operating segments, which are comprised of the United States operations and Canadian operations. The Canadian operating segment consists of the Operating Company's wholly-owned, Canada-based, subsidiary. The United States operating segment is comprised of all other operating subsidiaries. Beginning with the quarter ended March 31, 2019, the Operating Company had a change in reportable segments as the Canadian operating segment no longer met the quantitative criteria to be aggregated with the United States operating segment as one reportable segment. The United States and Canada reportable segments have been identified based on how the CODM manages the business, makes operating decisions and evaluates operating performance. See "Note 15—Segment Reporting." |
Business Combinations | Business Combinations Business combinations are accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations |
Equity-Based Compensation | Equity-Based Compensation The Operating Company granted incentive awards in the form of Class B redeemable units and profits interest units to certain executives and other employees of the Operating Company. The Operating Company accounts for these grants of equity awards to employees in accordance with ASC Topic 718, Compensation - Stock Compensation |
Fair Value Measurements | Fair Value Measurements The Operating Company applies the provisions of ASC Topic 820, Fair Value Measurements Level 1 Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amounts of the Operating Company's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and short-term debt, are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The fair value of long-term debt is the estimated amount the Operating Company would have to pay to repurchase the debt, including any premium or discount attributable to the difference between the stated interest rate and market rate of interest at each balance sheet date. As of March 31, 2019 and 2018, the carrying amount of the Operating Company's long-term debt approximated its fair value. The Operating Company has no Level 1 or Level 2 financial instruments. There were no transfers between Level 1, 2 or 3 for the period presented. Level 3 liabilities consist of the convertible notes. See "Note 6—Long Term Debt" for further discussion regarding the convertible notes. |
Cash | Cash For purposes of reporting cash flows, the Operating Company considers cash on hand, checking accounts, and savings accounts to be cash. The Operating Company considers all highly-liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. The Operating Company places its cash with high credit quality financial institutions, which provide insurance through the Federal Deposit Insurance Corporation. At times, the balance in these accounts may exceed federal insured limits. The Operating Company performs periodic evaluations of the relative credit standing of these institutions and does not expect any losses related to such concentrations. As of March 31, 2019 and December 31, 2018, approximately $170,000 and $204,000, respectively, of the Operating Company's cash balances were in foreign bank accounts and uninsured. As of March 31, 2019 and December 31, 2018, the Operating Company had no cash equivalents. |
Accounts Receivable, net | Accounts Receivable, net Accounts receivable represent amounts due from customers for merchandise sales and are recorded when product has shipped. An account is considered past due when payment has not been rendered by its due date based upon the terms of the sale. Generally, accounts receivable are due 30 days after the billing date. The Operating Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based on a history of collections as well as current credit conditions. Accounts are written off as uncollectible on a case-by-case basis. Accounts receivable were reported net of the allowance for doubtful accounts of $603,000 and $658,000 at March 31, 2019 and December 31, 2018, respectively. Accounts receivable are pledged as collateral for the line of credit. See "Note 6—Long Term Debt." |
Inventories, net | Inventories, net Inventories consist principally of finished goods that are valued at the lower of cost or net realizable value on a weighted average cost basis. The Operating Company has established an allowance for slow-moving or obsolete inventory based upon assumptions about future demands and market conditions. At March 31, 2019 and December 31, 2018, the reserve for obsolescence was approximately $293,000 and $212,000, respectively. Inventory is pledged as collateral for the line of credit. See "Note 6—Long Term Debt." |
Deferred Financing Costs | Deferred Financing Costs Costs incurred in obtaining certain debt financing are deferred and amortized over the respective terms of the related debt instruments using the interest method for term debt and the straight-line method for revolving debt. The debt issuance costs related to the revolving line of credit are presented as an asset on the condensed consolidated balance sheets while the debt issuance costs related to the real estate note are presented net against the long-term debt in the condensed consolidated balance sheets. As of March 31, 2019 and December 31, 2018, the Operating Company had deferred debt issuance costs totaling approximately $79,000 and $92,000, respectively, in connection with the issuance of long-term debt. The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $18,000 and $3,000 during the three months ended March 31, 2019 and 2018, respectively. The Operating Company accounts for the cost of issuing equity instruments to effect business combinations as a reduction of the otherwise determined fair value of the equity instruments issued. The Operating Company expenses any fees not associated with arranging equity or debt financing as incurred. |
Property and Equipment, net | Property and Equipment, net Property and equipment are stated at cost or, if acquired through a business acquisition, fair value at the date of acquisition. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the asset, except for leasehold improvements, which are depreciated over the shorter of the estimated useful lives of the assets or the lease term. Upon the sale or retirement of assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is credited or charged to income. Expenditures for repairs and maintenance are expensed when incurred. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Operating Company assesses the recoverability of the carrying amount of its long lived-assets, including property and equipment and finite-lived intangibles, whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be assessed when estimated undiscounted future cash flows from the operation and disposition of the asset group are less than the carrying amount of the asset group. Asset groups have identifiable cash flows and are largely independent of other asset groups. Measurement of an impairment loss is based on the excess of the carrying amount of the asset group over its fair value. There was no impairment loss for long-lived assets for the three months ended March 31, 2019 and 2018. See "Note 3—Property and Equipment." |
Intangible Assets, net | Intangible Assets, net Intangible assets consist of domain names, intellectual property, distribution agreements, proprietary technology, trademarks and tradenames, and other rights. Intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis. The straight-line method of amortization represents the Operating Company's best estimate of the distribution of the economic value of the identifiable intangible assets. Intangible assets are carried at cost less accumulated amortization. The Operating Company assesses the recoverability of finite-lived intangible assets in the same manner as for property and equipment, as described above. There were no impairment charges for the three months ended March 31, 2019 and 2018. See "Note 4—Goodwill and Intangible Assets." |
Goodwill | Goodwill In accordance with ASC Topic 350, Intangibles — |
Investments | Investments Equity method investments Investee companies that are not consolidated, but over which the Operating Company exercises significant influence, are accounted for under the equity method of accounting. Under the equity method of accounting, an investee company's accounts are not reflected within the Operating Company's condensed consolidated balance sheets and statements of operations; however, the Operating Company's share of the earnings or losses of the investee company is reflected in the caption "Other income, net'' in the condensed consolidated statements of operations. The Operating Company's carrying value in an equity method investee company is reflected in the caption "Investments" in the Operating Company's condensed consolidated balance sheets. When the Operating Company's carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Operating Company's consolidated financial statements unless the Operating Company has guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Operating Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. The Operating Company's investments that are accounted for on the equity method of accounting consist of a 50% interest in two separate joint venture entities. The aggregate investment in the two joint venture entities amounted to approximately $75,000 at March 31, 2019 and December 31, 2018. The operating activity related to the joint ventures was immaterial for the three months ended March 31, 2019 and 2018. Equity securities The Operating Company's equity securities consist of an investment in an unaffiliated entity (ownership 1.71%). The Operating Company has determined that its ownership does not provide it with significant influence over the operations of this investee. Accordingly, the Operating Company accounts for its investment in this entity as equity securities. The investee is a private entity and its equity securities do not have a readily determinable fair value. Equity securities without a readily determinable fair value are measured at cost minus impairment, if any, and are adjusted to fair value when an observable price change can be identified. |
Vendor Deposits | Vendor Deposits Vendor deposits represent prepayments made to vendors for inventory purchases. A significant number of vendors require prepayment for inventory purchases made by the Operating Company. |
Deferred Offering Costs | Deferred Offering Costs The Operating Company capitalized certain legal, accounting, and other third-party fees that were directly attributable to Greenlane's IPO. After consummation of the IPO, these costs will be recorded in equity as a reduction from the proceeds of the IPO. |
Foreign Currency Translation | Foreign Currency Translation The accompanying condensed consolidated financial statements are presented in United States (U.S.) dollars. The functional currency of one of the Operating Company's wholly-owned, Canada-based subsidiaries is the Canadian dollar. The assets and liabilities of this subsidiary are translated into U.S. dollars at current exchange rates and revenue and expenses are translated at average exchange rates for the year. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The foreign currency translation adjustments are included in accumulated other comprehensive loss, a separate component of members' deficit in the condensed consolidated balance sheets. Other exchange gains and losses are reported in the condensed consolidated statements of operations. |
Comprehensive (Loss) Income | Comprehensive (Loss) Income Comprehensive (loss) income includes net (loss) income as currently reported by the Operating Company, adjusted for other comprehensive items. Other comprehensive items for the Operating Company consist of foreign currency translation gains and losses. |
Advertising | Advertising Advertising costs are expensed as incurred and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations. Advertising costs totaled approximately $1,282,000 and $841,000 for the three months ended March 31, 2019 and 2018, respectively. |
Income Taxes | Income Taxes The Operating Company is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, taxable income or loss is passed through to and included in the taxable income of the Operating Company's members, including Greenlane. Accordingly, the consolidated financial statements do not include a provision for federal income taxes. The Operating Company is liable for various other state and local taxes and is subject to taxes in foreign jurisdictions. Therefore, the provision for income taxes includes only income taxes on income from the Operating Company's Canadian subsidiary and state income tax, if any, in the consolidated financial statements. Income tax amounts reflected in the accompanying financial statements relate primarily to income generated by the Operating Company's Canadian subsidiary and are based upon an estimated annual effective tax rate of approximately 26.5%. The Operating Company utilizes a two-step approach for recognizing and measuring uncertain tax positions accounted for in accordance with the asset and liability method. The first step is to evaluate the tax position for recognition by determining whether evidence indicates that it is more likely than not that a position will be sustained if examined by a taxing authority. The second step is to measure the tax benefit as the largest amount that is 50% likely of being realized upon settlement with a taxing authority. There were no amounts required to be recorded at March 31, 2019 and December 31, 2018 related to uncertain tax positions. |
Revenue Recognition | Revenue Recognition The Operating Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers The Operating Company generates revenue primarily from the sale of finished products to customers, whereby each product unit represents a single performance obligation. The performance obligation is satisfied when the customer obtains control of the product, which typically occurs at the time of shipping. Upon shipping, the customer has legal title of the product and bears the significant risks and rewards of ownership, including the right to sell or redirect the product. As such, customer orders are recorded as revenue once the order is shipped from one of the Operating Company's distribution centers. The Operating Company's performance obligations for services are satisfied when the services are rendered within the arranged service period. Total service revenue is not material and accounted for less than 0.5% of revenues for the three months ended March 31, 2019 and 2018. The Operating Company provides no warranty on products sold. Product warranty is provided by the manufacturers. The Operating Company 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 the Operating Company's performance obligations. Revenue is presented net of sales taxes, discounts and expected refunds. Product revenues are recorded net of estimated rebates or sales incentives as well as estimated product returns as elements of variable consideration. The actual amounts of consideration ultimately received may differ from the Operating Company's estimates. If actual results in the future vary from the Operating Company's estimates, the Operating Company will adjust these estimates, which would affect net revenue from products in the period such variances become known. The Operating Company estimates product returns based on historical experience and records them on a gross basis as a refund liability that reduces the net sales for the period. The Operating Company analyzes actual historical returns, current economic trends and changes in order volume when evaluating the adequacy of the sales returns allowance in any accounting period. The liability for returns is included in accrued expenses on the Operating Company's condensed consolidated balance sheets and was approximately $464,000 and $460,000 at March 31, 2019 and December 31, 2018, respectively. Included in other current assets is an asset totaling approximately $285,000 as of March 31, 2019 and December 31, 2018, relating to the recoverable cost of merchandise estimated to be returned by customers. The Operating Company has an established a supply chain for premium, patented, child-resistant packaging, closed-system vaporization solutions and custom-branded retail products. For these product offerings, the Operating Company generally receives a deposit from the customer (generally 50% of the total order cost, but the amount can vary by customer contract), when an order is placed by a customer. These orders are typically completed within six weeks to three months from the date of order, depending on the complexity of the customization and the size of the order. Customer deposits, which represent deferred revenue, are included in accrued expenses on the Operating Company's condensed consolidated balance sheets and were approximately $2.7 million and $3.2 million at March 31, 2019 and December 31, 2018, respectively. See "Note 5—Composition of Certain Financial Statement Captions." The Operating Company holds several exclusive distribution agreements with its manufacturers that are evaluated against the criteria outlined in ASC 606-10-55, Principal versus Agent Considerations The Operating Company applies the practical expedient provided for by ASC 606 by not adjusting the transaction price for significant financing components for periods less than one year. The Operating Company also applies the practical expedient provided for by ASC 606 based upon which the Operating Company generally expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within salaries, benefits and payroll tax expenses in the condensed consolidated statements of operations. Furthermore, the Operating Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. |
Earnings per Unit | Earnings per Unit Prior to the amendment and restatement of the LLC Agreement on April 17, 2019, in connection with the IPO the Operating Company's membership interests were defined as percentage interests in the LLC Agreement, as the LLC Agreement did not define a number of membership units outstanding or authorized. As a result, a calculation of basic and diluted earnings (loss) per unit is not presented in the accompanying financial statements, as a denominator to the calculation could not be determined. No potentially dilutive securities existed for the three months ended March 31, 2019 and 2018. See "Note 10—Members' Deficit." |
Recently Adopted Accounting Guidance | Recently Adopted Accounting Guidance In February 2016, the Financial Accounting ("FASB") issued Accounting Standard Update ("ASU") No. 2016-02, Leases (Topic 842) In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting |
Recently Issued Accounting Guidance Not Yet Adopted | Recently Issued Accounting Guidance Not Yet Adopted In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement, Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820), In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of of property and equipment | March 31, 2019 December 31, Estimated useful life Furniture, equipment and software $ 2,724,793 $ 2,094,911 3 - 7 years Personal property 1,095,360 1,090,282 5 years Leasehold improvements 990,447 341,672 Lesser of lease term or 5 years Land improvements 601,370 601,370 15 years Building 7,911,703 7,772,987 39 years Land 690,705 690,705 14,014,378 12,591,927 Less: accumulated depreciation 1,286,551 951,103 Property and equipment, net $ 12,727,827 $ 11,640,824 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of identified intangible assets | March 31, 2019 Gross carrying amount Accumulated amortization Carrying value Estimated useful life Domain Names $ 134,993 $ (58,607 ) $ 76,386 15 years Design Libraries 1,677,000 (23,292 ) 1,653,708 15 years Distribution Agreements 650,000 (451,389 ) 198,611 5 years Proprietary Technology 1,040,000 (710,667 ) 329,333 5 years Trademarks and Tradenames 3,219,539 (572,667 ) 2,646,872 5-15 years Customer Relationships 1,196,000 (259,133 ) 936,867 5 years Non-competition Agreements 218,000 (118,083 ) 99,917 2 years Other Intangibles 47,547 (1,507 ) 46,040 5-15 years $ 8,188,261 $ (2,204,934 ) $ 5,984,327 December 31, 2018 Gross carrying amount Accumulated amortization Carrying value Estimated useful life Domain Names $ 131,000 $ (59,744 ) $ 71,256 15 years Distribution Agreements 650,000 (397,222 ) 252,778 5 years Proprietary Technology 1,040,000 (658,667 ) 381,333 5 years Trademarks and Tradenames 2,284,886 (458,638 ) 1,826,248 5-10 years Customer Relationships 1,196,000 (199,333 ) 996,667 5 years Non-competition Agreements 218,000 (90,833 ) 127,167 2 years Other Intangibles 22,003 (15,043 ) 6,960 5 years $ 5,541,889 $ (1,879,480 ) $ 3,662,409 |
Composition of Certain Financ_2
Composition of Certain Financial Statement Captions (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Payables and Accruals [Abstract] | |
Schedule of accrued expenses and other current liabilities | March 31, December 31, Accrued expenses and other current liabilities: Customer deposits $ 2,684,570 $ 3,226,479 Accrued offering costs 2,067,553 1,499,930 Refund liability 464,395 459,416 Payroll related including bonus 2,182,480 1,313,695 Accrued taxes, state and income 320,299 664,659 Accrued marketing fees and royalties 312,262 804,370 Other 1,769,340 1,976,607 Total $ 9,800,899 $ 9,945,156 |
Long Term Debt (Tables)
Long Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | March 31, December 31, 3.0% note payable to a lender in relation to a four-year vehicle loan for the purchase of a truck used in operations. $ 16,654 $ 24,275 Revolving credit note with a lender for a $15,000,000 credit loan with a maturity date of August 23, 2020. Interest on the principal balance outstanding on the Note is due monthly at a rate of LIBOR plus 3.50% per annum. 325,000 - Credit note with a lender for the purchase of the Company’s corporate headquarters building with a maturity date of October 1, 2025. Interest on the principal balance outstanding on the note is due monthly at a rate of LIBOR plus 2.39% per annum. 8,425,717 8,459,800 Convertible notes issued in December 2018 and in January 2019 60,312,500 40,200,000 69,079,871 48,684,075 Less unamortized debt issuance costs (134,356 ) (139,459 ) Less current portion of long-term debt (171,117 ) (168,273 ) Long-term debt, net, excluding operating leases and finance leases $ 68,774,398 $ 48,376,343 |
Schedule of key valuation assumptions | March 31, 2019 IPO Scenarios Class A Preferred Stock Scenario Expected term (years) 0.1 2.8 Cost of equity 11.5 % 12.5 % Discount for lack of marketability -- 20 % Weighting 99 % 1 % |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Schedule of maturities of lease liabilities | Finance Operating Total Finance and Remainder of 2019 $ 107,880 $ 546,946 $ 654,826 2020 110,162 706,111 816,273 2021 87,174 418,540 505,714 2022 29,321 420,551 449,872 2023 3,193 371,085 374,278 Thereafter - 222,021 222,021 Total minimum lease payments $ 337,730 $ 2,685,254 $ 3,022,984 Less amount representing interest 36,257 283,495 319,752 Present value of minimum lease payments $ 301,473 $ 2,401,759 $ 2,703,232 Less current portion 100,831 641,596 742,427 Long-term portion $ 200,642 $ 1,760,163 $ 1,960,805 |
Schedule of components of finance and operating leases | Three Months Ended Finance lease cost Amortization of leased assets $ 28,613 Interest of lease liabilities 6,139 Operating lease costs Operating lease cost (a) 114,307 Variance lease cost (a) 65,077 Total lease cost $ 214,136 |
Schedule of lease related terms and discount rates | March 31, Weighted average remaining lease terms Operating leases 3.4 years Finance leases 3.4 years Weighted average discount rate Operating leases 4.9 % Finance leases 7.8 % |
Schedule of rental income | Rental Income Remainder of 2019 $ 491,322 2020 619,432 2021 585,319 2022 75,883 2023 - Thereafter - Total $ 1,771,956 |
Members' Deficit (Tables)
Members' Deficit (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
Schedule of member's percentage interest | Member Class of Units Percentage Interest Jacoby & Co. Inc. Class A units 70.35 % Adam Schoenfeld Class A units 12.41 % Better Life Products Investment Group, Inc. Class B redeemable units 7.59 % Rochester Vapor Group, LLC Class B redeemable units 2.01 % Pollen Gear LLC Class B redeemable units 4.00 % Executive Management Team Class B redeemable units 3.64 % 100.00 % |
Business Acquisition (Tables)
Business Acquisition (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Business Combinations [Abstract] | |
Schedule of fair value analysis of the acquired assets and liabilities | Pollen Gear LLC Cash $ 90,685 Accounts receivable 546,606 Vendor deposits 1,699,640 Other deposits 18,377 Property and equipment, net 341,884 Trade name 918,000 Design libraries 1,677,000 Goodwill 3,549,906 Net liabilities (2,178,098 ) Total purchase price $ 6,664,000 |
Schedule of unaudited pro forma financial information | Three months ended 2019 2018 Net Sales $ 49,897,604 $ 43,257,643 Net (Loss) Income $ (17,982,036 ) $ 2,405,968 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Segment Reporting [Abstract] | |
Schedule revenues are eliminated in consolidation | Three Months Ended Three Months Ended March 31, 2019 March 31, 2018 United States Canada United States Canada Revenues from external customers $ 43,131,546 $ 6,766,058 $ 41,432,320 $ 1,825,323 Intercompany revenues 608,870 40,628 1,736,306 91,860 Segment (loss) income (1) (1,181,530 ) 133,946 2,391,880 110,661 (1) Segment (loss) income represents segment operating (loss) income. |
Schedule of consolidated (loss) income from continuing operations before income taxes | Three Months Ended March 31, 2019 2018 Total segment (loss) income for reportable segments $ (1,047,584 ) $ 2,502,041 Corporate and other loss (4,115,957 ) (172,751 ) Interest expense (601,880 ) (42,259 ) Change in fair value of convertible notes (12,062,500 ) - Other income, net 175,237 93,515 (Loss) income from continuing operations before income taxes $ (17,652,684 ) $ 2,380,546 |
Business Operations (Details)
Business Operations (Details) - Class A common stock - Subsequent Event [Member] - USD ($) | 1 Months Ended | |
Apr. 29, 2019 | Apr. 23, 2019 | |
Business Operations (Textual) | ||
Shares of common stock | 5,250,000 | |
Public offering price of per share | $ 17 | |
Underwriters purchased an additional shares of common stock from the selling stockholders | 450,000 | |
Aggregate net proceeds | $ 80,400,000 | |
Percentage of outstanding common units | 23.90% | |
IPO [Member] | ||
Business Operations (Textual) | ||
Shares of common stock | 6,000,000 | |
Shares sold by certain selling stockholders | 750,000 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Summary of Significant Accounting Policies (Textual) | |||
Percentage of acquired assets and assumed liabilities | 100.00% | ||
Cash balances were in foreign bank accounts and uninsured | $ 170,000 | $ 204,000 | |
Allowance for doubtful accounts | 603,000 | 658,000 | |
Inventory reserve for obsolescence | 293,000 | 212,000 | |
Deferred debt issuance costs totaling | 78,926 | 92,080 | |
Amortization of deferred debt issuance costs | $ 18,257 | $ 3,308 | |
Equity method interest, percentage | 50.00% | ||
Aggregate investment in two joint venture entities | $ 75,000 | 75,000 | |
Advertising costs | $ 1,282,000 | $ 841,000 | |
Estimated annual effective tax rate | 26.50% | ||
Tax benefit amount realized upon settlement, percentage | 50.00% | ||
Revenue percentage | 0.50% | 0.50% | |
Liability for returns included in accrued expenses | $ 464,000 | 460,000 | |
Other current assets | $ 285,000 | 285,000 | |
Total order cost, percentage | 50.00% | ||
Customer deposits | $ 2,700,000 | $ 3,200,000 | |
Airgraft Inc. [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Equity method interest, percentage | 1.71% |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Property and equipment, gross | $ 14,014,378 | $ 12,591,927 |
Less: accumulated depreciation | 1,286,551 | 951,103 |
Property and equipment, net | 12,727,827 | 11,640,824 |
Furniture, equipment and software [Member] | ||
Property and equipment, gross | $ 2,724,793 | 2,094,911 |
Estimated useful life | 3 - 7 years | |
Personal property [Member] | ||
Property and equipment, gross | $ 1,095,360 | 1,090,282 |
Estimated useful life | 5 years | |
Leasehold improvements [Member] | ||
Property and equipment, gross | $ 990,447 | 341,672 |
Estimated useful life | Lesser of lease term or 5 years | |
Land improvements [Member] | ||
Property and equipment, gross | $ 601,370 | 601,370 |
Estimated useful life | 15 years | |
Building [Member] | ||
Property and equipment, gross | $ 7,911,703 | 7,772,987 |
Estimated useful life | 39 years | |
Land [Member] | ||
Property and equipment, gross | $ 690,705 | $ 690,705 |
Property and Equipment (Detai_2
Property and Equipment (Details Textual) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Property and Equipment (Textual) | ||
Depreciation expense | $ 357,000 | $ 54,000 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Details) - USD ($) | 1 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Gross carrying amount | $ 8,188,261 | $ 5,541,889 |
Accumulated amortization | (2,204,934) | (1,879,480) |
Carrying value | 5,984,327 | 3,662,409 |
Domain Names [Member] | ||
Gross carrying amount | 134,993 | 131,000 |
Accumulated amortization | (58,607) | (59,744) |
Carrying value | $ 76,386 | $ 71,256 |
Estimated useful life | 15 years | 15 years |
Design Libraries [Member] | ||
Gross carrying amount | $ 1,677,000 | |
Accumulated amortization | (23,292) | |
Carrying value | $ 1,653,708 | |
Estimated useful life | 15 years | |
Distribution Agreements [Member] | ||
Gross carrying amount | $ 650,000 | $ 650,000 |
Accumulated amortization | (451,389) | (397,222) |
Carrying value | $ 198,611 | $ 252,778 |
Estimated useful life | 5 years | 5 years |
Proprietary Technology [Member] | ||
Gross carrying amount | $ 1,040,000 | $ 1,040,000 |
Accumulated amortization | (710,667) | (658,667) |
Carrying value | $ 329,333 | $ 381,333 |
Estimated useful life | 5 years | 5 years |
Trademarks and Tradenames [Member] | ||
Gross carrying amount | $ 3,219,539 | $ 2,284,886 |
Accumulated amortization | (572,667) | (458,638) |
Carrying value | $ 2,646,872 | $ 1,826,248 |
Trademarks and Tradenames [Member] | Minimum [Member] | ||
Estimated useful life | 5 years | 5 years |
Trademarks and Tradenames [Member] | Maximum [Member] | ||
Estimated useful life | 15 years | 10 years |
Customer Relationships [Member] | ||
Gross carrying amount | $ 1,196,000 | $ 1,196,000 |
Accumulated amortization | (259,133) | (199,333) |
Carrying value | $ 936,867 | $ 996,667 |
Estimated useful life | 5 years | 5 years |
Non-competition Agreements [Member] | ||
Gross carrying amount | $ 218,000 | $ 218,000 |
Accumulated amortization | (118,083) | (90,833) |
Carrying value | $ 99,917 | $ 127,167 |
Estimated useful life | 2 years | 2 years |
Other Intangibles [Member] | ||
Gross carrying amount | $ 47,547 | $ 22,003 |
Accumulated amortization | (1,507) | (15,043) |
Carrying value | $ 46,040 | $ 6,960 |
Estimated useful life | 5 years | |
Other Intangibles [Member] | Minimum [Member] | ||
Estimated useful life | 5 years | |
Other Intangibles [Member] | Maximum [Member] | ||
Estimated useful life | 15 years |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets (Details Textual) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Goodwill and Intangible Assets (Textual) | ||
Amortization expense | $ 327,000 | $ 187,000 |
Composition of Certain Financ_3
Composition of Certain Financial Statement Captions (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Accrued expenses and other current liabilities: | ||
Customer deposits | $ 2,684,570 | $ 3,226,479 |
Accrued offering costs | 2,067,553 | 1,499,930 |
Refund liability | 464,395 | 459,416 |
Payroll related including bonus | 2,182,480 | 1,313,695 |
Accrued taxes, state and income | 320,299 | 664,659 |
Accrued marketing fees and royalties | 312,262 | 804,370 |
Other | 1,769,340 | 1,976,607 |
Total | $ 9,800,899 | $ 9,945,156 |
Long Term Debt (Details)
Long Term Debt (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Long-term debt, gross | $ 69,079,871 | $ 48,684,075 |
Less unamortized debt issuance costs | (134,356) | (139,459) |
Less current portion of long-term debt | (171,117) | (168,273) |
Long-term debt, net, excluding operating leases and finance leases | 68,774,398 | 48,376,343 |
Revolving credit note [Member] | ||
Long-term debt, gross | 325,000 | |
Credit note [Member] | ||
Long-term debt, gross | 8,425,717 | 8,459,800 |
3.0% note payable [Member] | ||
Long-term debt, gross | 16,654 | 24,275 |
Convertible notes [Member] | ||
Long-term debt, gross | $ 60,312,500 | $ 40,200,000 |
Long Term Debt (Details 1)
Long Term Debt (Details 1) | 3 Months Ended |
Mar. 31, 2019 | |
Preferred Class A [Member] | |
Expected term (years) | 2 years 9 months 18 days |
Cost of equity | 12.50% |
Discount for lack of marketability | 20.00% |
Weighting | 1.00% |
IPO Scenarios [Member] | |
Expected term (years) | 1 month 6 days |
Cost of equity | 11.50% |
Discount for lack of marketability | |
Weighting | 99.00% |
Long Term Debt (Details Textual
Long Term Debt (Details Textual) - USD ($) | Jan. 04, 2019 | Oct. 01, 2018 | Apr. 23, 2019 | Jan. 31, 2019 | Dec. 21, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 |
Long Term Debt (Textual) | ||||||||
Interest rate, Description | 3.0% note payable to a lender in relation to a four year vehicle loan for the purchase of a truck used in operations. | |||||||
Convertible notes | $ 60,312,500 | $ 40,200,000 | ||||||
Net cash proceeds | 8,050,000 | |||||||
Debt issuance costs | 422,383 | |||||||
Change in fair value of convertible notes | (12,062,500) | |||||||
Convertible Debt [Member] | ||||||||
Long Term Debt (Textual) | ||||||||
Principal amount | $ 8,100,000 | |||||||
Convertible notes | $ 8,100,000 | 1,200,000 | $ 40,200,000 | |||||
Net cash proceeds | 2,600,000 | |||||||
Net cash proceeds from issuance of convertible notes | $ 15,100,000 | 3,000,000 | ||||||
Debt issuance costs | $ 400,000 | $ 400,000 | ||||||
Change in fair value of convertible notes | 12,100,000 | |||||||
Convertible Debt [Member] | IPO [Member] | ||||||||
Long Term Debt (Textual) | ||||||||
Change in fair value of convertible notes | $ 60,300,000 | |||||||
Convertible Debt [Member] | IPO [Member] | Subsequent Event [Member] | ||||||||
Long Term Debt (Textual) | ||||||||
Description of convertible debt | The convertible notes also contained other settlement provisions if an IPO did not occur within 18 months of their issuance date. If an IPO did not occur within 18 months of the convertible notes’ issuance, the holders of the convertible notes had the option to extend the initial maturity date by an additional 18 month period, in which case the convertible notes would have converted automatically into Class A common stock at a settlement price equity to 75% of the IPO price per share upon closing of an IPO. | |||||||
Convertible Debt [Member] | Class A common stock | Subsequent Event [Member] | ||||||||
Long Term Debt (Textual) | ||||||||
Convertible notes upon conversion, Shares | 3,547,776 | |||||||
Description of convertible debt | The Operating Company at a settlement price equal to 80% of the IPO price per share. | |||||||
Real Estate Note [Member] | ||||||||
Long Term Debt (Textual) | ||||||||
Maturity date | Oct. 1, 2025 | |||||||
Purchase of building amount | $ 10,000,000 | |||||||
Principal amount | $ 8,500,000 | |||||||
Interest rate, Description | LIBOR plus 2.39% are due monthly. | |||||||
Line of Credit [Member] | ||||||||
Long Term Debt (Textual) | ||||||||
Revolving credit loan | $ 15,000,000 | |||||||
Maturity date | Aug. 23, 2020 | |||||||
Description of Line of credit | The line of credit borrowing base is 80% of eligible accounts receivable plus 50% of eligible inventory. | |||||||
Description of covenant terms | The Operating Company was in compliance with its covenants as of March 31, 2019. | |||||||
Interest rate, Description | LIBOR plus 3.50% per annum. |
Leases (Details)
Leases (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Maturities of lease liabilities | ||
Operating Leases, The remainder of 2019 | $ 546,946 | |
Operating Leases, 2020 | 706,111 | |
Operating Leases, 2021 | 418,540 | |
Operating Leases, 2022 | 420,551 | |
Operating Leases, 2023 | 371,085 | |
Operating Leases, Thereafter | 222,021 | |
Total minimum lease payments | 2,685,254 | |
Less amount representing interest | 283,495 | |
Operating Leases, Present value of lease liabilities | 2,401,759 | |
Operating leases, less current portion | 641,596 | |
Operating leases, less long - term portion | 1,760,163 | |
Finance Leases, The remainder of 2019 | 107,880 | |
Finance Leases, 2020 | 110,162 | |
Finance Leases, 2021 | 87,174 | |
Finance Leases, 2022 | 29,321 | |
Finance Leases, 2023 | 3,193 | |
Finance Leases, Thereafter | ||
Total minimum lease payments | 337,730 | |
Less amount representing interest | 36,257 | |
Present value of minimum lease payments | 301,473 | |
Finance leases, less current portion | 100,831 | 94,667 |
Finance leases, less long - term portion | 236,899 | $ 236,709 |
Finance and Operating Lease Obligations,Remainder of 2019 | 654,826 | |
Finance and Operating Lease Obligations, 2020 | 816,273 | |
Finance and Operating Lease Obligations, 2021 | 505,714 | |
Finance and Operating Lease Obligations, 2022 | 449,872 | |
Finance and Operating Lease Obligations, 2023 | 374,278 | |
Finance and Operating Lease Obligations, Thereafter | 222,021 | |
Total minimum lease payments | 3,022,984 | |
Less amount representing interest | 319,752 | |
Present value of minimum lease payments | 2,703,232 | |
Less current portion | 742,427 | |
Long-term portion | $ 1,960,805 |
Leases (Details 1)
Leases (Details 1) | 3 Months Ended | |
Mar. 31, 2019USD ($) | ||
Finance lease cost | ||
Amortization of leased assets | $ 28,613 | |
Interest of lease liabilities | 6,139 | |
Operating lease costs | ||
Operating lease cost (a) | 114,307 | [1] |
Variance lease cost (a) | 65,077 | [1] |
Total lease cost | $ 214,136 | |
[1] | Expenses are classified within general and administrative expenses within the Operating Company's condensed consolidated statement of operations. |
Leases (Details 2)
Leases (Details 2) | Mar. 31, 2019 |
Weighted average remaining lease terms and discount rate [Abstract] | |
Weighted average remaining lease terms, Operating leases | 3 years 4 months 24 days |
Weighted average remaining lease terms, Finance leases | 3 years 4 months 24 days |
Weighted average discount rate, Operating leases | 4.90% |
Weighted average discount rate, Finance leases | 7.80% |
Leases (Details 3)
Leases (Details 3) | Mar. 31, 2019USD ($) |
Leases [Abstract] | |
Remainder of 2019 | $ 491,322 |
2020 | 619,432 |
2021 | 585,319 |
2022 | 75,883 |
2023 | |
Thereafter | |
Total | $ 1,771,956 |
Leases (Details Textual)
Leases (Details Textual) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Leases [Abstract] | |
Lease term, Description | Lease terms are generally three years to seven years for warehouses, office space and retail store locations, and up to seven years for other leased equipment and property. |
Description of Operating finance lease agreements | the Operating Company's finance lease agreements are fixed for terms ranging from three to five years. |
Rental income | $ 193,000 |
Supplier Concentration (Details
Supplier Concentration (Details) - Supplier Concentration Risk [Member] - Vendors | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Number of vendors | 2 | 2 |
Purchases from vendors | 39.80% | 64.10% |
Members' Deficit (Details)
Members' Deficit (Details) | 3 Months Ended |
Mar. 31, 2019 | |
Percentage Interest | 100.00% |
Jacoby & Co. Inc. [Member] | |
Percentage Interest | 70.35% |
Class of Units | Class A units |
Adam Schoenfeld [Member] | |
Percentage Interest | 12.41% |
Class of Units | Class A units |
Better Life Products Investment Group, Inc. [Member] | |
Percentage Interest | 7.59% |
Class of Units | Class B redeemable units |
Rochester Vapor Group, LLC [Member] | |
Percentage Interest | 2.01% |
Class of Units | Class B redeemable units |
Pollen Gear LLC [Member] | |
Percentage Interest | 4.00% |
Class of Units | Class B redeemable units |
Executive Management Team [Member] | |
Percentage Interest | 3.64% |
Class of Units | Class B redeemable units |
Members' Deficit (Details Textu
Members' Deficit (Details Textual) - USD ($) | Jan. 07, 2019 | Feb. 20, 2018 |
Members' Deficit (Textual) | ||
Aggregate of disbursed amount | $ 3,000,000 | |
Better Life Holdings, LLC [Member] | ||
Members' Deficit (Textual) | ||
Operating company's acquisition interest | 100.00% | |
Class A unit holders [Member] | ||
Members' Deficit (Textual) | ||
Aggregate of disbursed amount | 2,600,000 | |
Class B unit holders [Member] | ||
Members' Deficit (Textual) | ||
Aggregate of disbursed amount | $ 416,000 |
Redeemable Class B Units (Detai
Redeemable Class B Units (Details) - Class A common stock [Member] - Subsequent Event [Member] | 1 Months Ended |
Apr. 23, 2019USD ($)$ / shares | |
Redeemable Class B Units (Textual) | |
Shares issued public offering | $ | $ 6,000,000 |
Public offering price | $ / shares | $ 17 |
Business Acquisition (Details)
Business Acquisition (Details) - Pollen Gear LLC [Member] | Jan. 14, 2019USD ($) |
Cash | $ 90,685 |
Accounts receivable | 546,606 |
Vendor deposits | 1,699,640 |
Other deposits | 18,377 |
Property and equipment, net | 341,884 |
Trade name | 918,000 |
Design libraries | 1,677,000 |
Goodwill | 3,549,906 |
Net liabilities | (2,178,098) |
Total purchase price | $ 6,664,000 |
Business Acquisition (Details 1
Business Acquisition (Details 1) - Pollen Gear LLC [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Net Sales | $ 49,897,604 | $ 43,257,643 |
Net (Loss) Income | $ (17,982,036) | $ 2,405,968 |
Business Acquisition (Details T
Business Acquisition (Details Textual) - USD ($) | Mar. 31, 2019 | Jan. 14, 2019 |
Business Acquisition (Textual) | ||
Aggregate equity interest percentage | 100.00% | |
Pollen Gear LLC [Member] | ||
Business Acquisition (Textual) | ||
Operating company acquired percentage | 100.00% | |
Aggregate equity interest percentage | 4.00% | |
Accounts receivable | $ 550,000 | |
Vendor deposits | $ 1,700,000 |
Equity-Based Compensation (Deta
Equity-Based Compensation (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Equity-Based Compensation (Textual) | ||
Compensation expense | $ 230,000 | |
Unrecognized compensation costs | $ 4,600,000 | |
Recognized over a weighted-average period | 2 years 10 months 25 days | |
Equity-based compensation liability | $ 357,000 | $ 21,000 |
Redeemable Class B Units [Member] | ||
Equity-Based Compensation (Textual) | ||
Compensation expense | 2,600,000 | |
Unrecognized compensation costs | $ 2,900,000 | |
Recognized over a weighted-average period | 1 year 10 months 25 days | |
Initial public offering price | $ 17 | |
January and February 2019 [Member] | ||
Equity-Based Compensation (Textual) | ||
The grant date fair value of awards | $ 4,800,000 |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Employee Benefit Plan (Textual) | ||
Retirement savings plan description | The Operating Company has a 401(k)-retirement savings plan. Eligible employees must be at least 18 years of age and have completed six months of service. Participants are eligible to receive a matching contribution from the Operating Company of up to the first 3% of compensation plus 50% of participant contributions between 3% and 5% of compensation. Matching contributions, other than safe harbor contributions, vest 33% per year and are 100% vested after three years of service. Safe harbor matching contributions are 100% vested as of the date of the contribution. | |
Contributions plan total | $ 62,000 | $ 53,000 |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Revenues are eliminated in consolidation | |||
Segment (loss) income | $ (14,619,110) | $ 2,222,105 | |
United States [Member] | |||
Revenues are eliminated in consolidation | |||
Revenues from external customers | 43,131,546 | 41,432,320 | |
Intercompany revenues | 608,870 | 1,736,306 | |
Segment (loss) income | [1] | (1,181,530) | 2,391,880 |
Canada [Member] | |||
Revenues are eliminated in consolidation | |||
Revenues from external customers | 6,766,058 | 1,825,323 | |
Intercompany revenues | 40,628 | 91,860 | |
Segment (loss) income | [1] | $ 133,946 | $ 110,661 |
[1] | Segment (loss) income represents segment operating (loss) income. |
Segment Reporting (Details 1)
Segment Reporting (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Total segment (loss) income for reportable segments | $ (14,619,110) | $ 2,222,105 |
Interest expense | (601,880) | (42,259) |
(Loss) income from continuing operations before income taxes | (17,652,684) | 2,380,546 |
Reportable Segments [Member] | ||
Total segment (loss) income for reportable segments | (1,047,584) | 2,502,041 |
Corporate and other loss | (4,115,957) | (172,751) |
Interest expense | (601,880) | (42,259) |
Change in fair value of convertible notes | (12,062,500) | |
Other income, net | 175,237 | 93,515 |
(Loss) income from continuing operations before income taxes | $ (17,652,684) | $ 2,380,546 |
Segment Reporting (Details Text
Segment Reporting (Details Textual) - Segments | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Segment Reporting (Textual) | ||
Number of operating segments | 2 | |
Accounts Receivable [Member] | ||
Segment Reporting (Textual) | ||
Segment revenue percentage | 10.00% | 10.00% |
Consolidated Revenue [Member] | ||
Segment Reporting (Textual) | ||
Segment revenue percentage | 10.00% | 10.00% |
Subsequent Events (Details)
Subsequent Events (Details) | 1 Months Ended |
Apr. 23, 2019 | |
Subsequent Event [Member] | |
Subsequent Events (Textual) | |
Description of initial public offering | Greenlane completed its IPO of 6,000,000 shares of Class A common stock, which was comprised of 5,250,000 shares of Class A common stock sold by Greenlane and 750,000 shares sold by certain selling stockholders (comprised of Aaron LoCascio, Greenlane’s Chief Executive Officer, Adam Schoenfeld, Greenlane’s Chief Strategy Officer, and an affiliated entity of Messrs. LoCascio and Schoenfeld), in each case at a public offering price of $17.00 per share. In addition, Greenlane issued 3,547,776 shares of Class A common stock to the holders of convertible notes upon conversion of such convertible notes at a settlement price equal to 80% of the IPO price. On April 29, 2019, the underwriters purchased an additional 450,000 shares of Class A common stock from selling stockholders pursuant to the partial exercise of their option to purchase additional shares in the IPO. Greenlane did not receive any proceeds from the sale of Class A common stock by the selling stockholders. The sale of shares of Class A common stock by Greenlane generated aggregate net proceeds to Greenlane, after deducting the underwriting discounts and commissions and offering expenses payable by Greenlane, of approximately $80.4 million. Greenlane 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 Class A common stock sold by Greenlane 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 and the use of the net proceeds from the IPO Greenlane owns approximately 23.9% of the Operating Company’s outstanding Common Units. As a result of the IPO, Adam Schoenfeld, Greenlane’s Chief Strategy Officer, and Jacoby & Co. Inc, an affiliated entity of Mr. Schoenfeld and Aaron LoCascio, Greenlane’s Chief Executive Officer, collectively control approximately 83.0% of the combined voting power of Greenlane’s common stock as a result of their ownership of Greenlane’s Class C common stock, which are issued on a three-to-one basis with the number of Common Units owned and each share of common stock is entitled to one vote all matters submitted to a vote of Greenlane’s stockholders. |