Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 12, 2019 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 001-38875 | |
Entity Registrant Name | Greenlane Holdings, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 83-0806637 | |
Entity Address, Address Line One | 1095 Broken Sound Parkway, | |
Entity Address, Address Line Two | Suite 300 | |
Entity Address, City or Town | Boca Raton, | |
Entity Address, State or Province | FL | |
Entity Address, Postal Zip Code | 33487 | |
City Area Code | 877 | |
Local Phone Number | 292-7660 | |
Title of 12(b) Security | Class A Common Stock, $0.01 par value per share | |
Trading Symbol | GNLN | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | No | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Amendment Flag | false | |
Entity Central Index Key | 0001743745 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2019 | |
Current Fiscal Year End Date | --12-31 | |
Class A common stock | ||
Entity Common Stock, Shares Outstanding | 9,997,776 | |
Class B common stock | ||
Entity Common Stock, Shares Outstanding | 5,988,485 | |
Class C common stock | ||
Entity Common Stock, Shares Outstanding | 77,791,218 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash | $ 52,540,000 | $ 7,341,000 |
Accounts receivable, net of allowance of $655 and $657 at September 30, 2019 and December 31, 2018, respectively | 7,591,000 | 8,218,000 |
Inventories, net | 47,086,000 | 29,502,000 |
Vendor deposits | 10,395,000 | 7,917,000 |
Other current assets | 4,635,000 | 4,127,000 |
Total current assets | 122,247,000 | 57,105,000 |
Property and equipment, net | 12,830,000 | 11,641,000 |
Intangible assets, net | 6,501,000 | 3,662,000 |
Goodwill | 11,259,000 | 5,446,000 |
Operating lease right-of-use assets | 2,280,000 | 0 |
Other assets | 2,105,000 | 167,000 |
Total assets | 157,222,000 | 78,021,000 |
Current liabilities | ||
Accounts payable | 11,569,000 | 20,226,000 |
Accrued expenses and other current liabilities | 9,696,000 | 9,945,000 |
Current portion of notes payable | 175,000 | 168,000 |
Current portion of operating leases | 684,000 | 0 |
Current portion of finance leases | 115,000 | 95,000 |
Total current liabilities | 22,239,000 | 30,434,000 |
Convertible notes | 0 | 40,200,000 |
Notes payable, less current portion and debt issuance costs, net | 8,059,000 | 8,176,000 |
Operating leases, less current portion | 1,816,000 | 0 |
Finance leases, less current portion | 223,000 | 237,000 |
Other liabilities | 2,322,000 | 0 |
Total long-term liabilities | 12,420,000 | 48,613,000 |
Total liabilities | 34,659,000 | 79,047,000 |
Commitments and contingencies (Note 8) | ||
REDEEMABLE CLASS B UNITS | 0 | 10,033,000 |
STOCKHOLDERS’ EQUITY/MEMBERS’ DEFICIT | ||
Members’ deficit | 0 | (10,773,000) |
Preferred stock, $0.0001 par value, 10,000 shares authorized, none issued and outstanding as of September 30, 2019 | 0 | 0 |
Class A common stock, $0.01 par value per share, 125,000 shares authorized; 9,998 shares issued and outstanding as of September 30, 2019 | 100,000 | 0 |
Class B common stock, $0.0001 par value per share, 10,000 shares authorized; 5,988 shares issued and outstanding as of September 30, 2019 | 1,000 | 0 |
Class C Common stock, $0.0001 par value per share, 100,000 shares authorized; 77,791 shares issued and outstanding as of September 30, 2019 | 8,000 | 0 |
Additional paid-in capital | 32,129,000 | 0 |
Accumulated deficit | (6,741,000) | 0 |
Accumulated other comprehensive loss | (133,000) | (286,000) |
Total stockholders’ equity attributable to Greenlane Holdings, Inc./members’ deficit | 25,364,000 | (11,059,000) |
Non-controlling interest | 97,199,000 | 0 |
Total stockholders’ equity/members’ deficit | 122,563,000 | (11,059,000) |
Total liabilities, redeemable Class B units and stockholders’ equity/members’ deficit | $ 157,222,000 | $ 78,021,000 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Accounts receivable, net of allowance | $ 655 | $ 657 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | |
Preferred Stock, authorized (shares) | 10,000,000 | |
Preferred Stock, issued (in shares) | ||
Preferred stock, outstanding (in shares) | ||
Common stock, par value (in dollars per share) | $ 0.01 | |
Class A common stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | |
Common stock, authorized (in shares) | 125,000,000 | |
Common stock, issued (in shares) | 9,998,000 | |
Common stock, outstanding (in shares) | 9,998,000 | |
Class B common stock | ||
Common stock, par value (in dollars per share) | $ 0.0001 | |
Common stock, authorized (in shares) | 10,000,000 | |
Common stock, issued (in shares) | 5,988,000 | |
Common stock, outstanding (in shares) | 5,988,000 | |
Class C common stock | ||
Common stock, par value (in dollars per share) | $ 0.0001 | |
Common stock, authorized (in shares) | 100,000,000 | |
Common stock, issued (in shares) | 77,791,000 | |
Common stock, outstanding (in shares) | 77,791,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | ||
Income Statement [Abstract] | |||||
Net sales | $ 44,886 | $ 43,561 | $ 147,770 | $ 127,379 | |
Cost of sales | 38,448 | 34,695 | 123,194 | 101,048 | |
Gross profit | 6,438 | 8,866 | 24,576 | 26,331 | |
Operating expenses: | |||||
Salaries, benefits and payroll taxes | 6,562 | 3,882 | 21,673 | 10,439 | |
General and administrative | 4,751 | 4,247 | 15,549 | 11,868 | |
Depreciation and amortization | 650 | 402 | 1,980 | 1,013 | |
Total operating expenses | 11,963 | 8,531 | 39,202 | 23,320 | |
(Loss) income from operations | (5,525) | 335 | (14,626) | 3,011 | |
Other income (expense), net: | |||||
Change in fair value of convertible notes | 0 | 0 | (12,063) | 0 | |
Interest expense | (119) | (136) | (862) | (296) | |
Other income (expense), net | 7,746 | (141) | 8,670 | 18 | |
Total other income (expense), net | 7,627 | (277) | (4,255) | (278) | |
Income (loss) before income taxes | 2,102 | 58 | (18,881) | 2,733 | |
Provision for income taxes | 11,063 | 193 | 10,966 | 342 | |
Net (loss) income | (8,961) | (135) | (29,847) | 2,391 | |
Less: Net loss attributable to non-controlling interest | (2,563) | 0 | (4,016) | 0 | |
Net (loss) income attributable to Greenlane Holdings, Inc. | $ (6,398) | (135) | $ (25,831) | 2,391 | |
Net loss attributable to Class A common stock per share - basic and diluted (in dollars per share) | [1] | $ (0.64) | $ (0.67) | ||
Weighted-average shares of Class A common stock outstanding - basic and diluted (in shares) | [1] | 9,998 | 9,998 | ||
Other comprehensive (loss) income: | |||||
Foreign currency translation adjustments | $ (13) | 13 | $ 38 | (20) | |
Unrealized loss on derivative instrument | (310) | 0 | (310) | 0 | |
Comprehensive (loss) income | (9,284) | (122) | (30,119) | 2,371 | |
Less: comprehensive loss attributable to non-controlling interest | (2,809) | 0 | (4,238) | 0 | |
Comprehensive (loss) income attributable to Greenlane Holdings, Inc. | $ (6,475) | $ (122) | $ (25,881) | $ 2,371 | |
[1] | Basic and diluted net loss per Class A common stock is presented only for the period after the Company’s organizational transactions. See Note 1 for a description of the organizational transactions. See Note 3 for the calculation of net loss per share. |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Redeemable Class B Units and Stockholders' Equity / Members' Deficit - USD ($) shares in Thousands, $ in Thousands | Total | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Noncontrolling Interest | Redeemable Class B Units | Members' Deficit | Common Class A | Common Class B | Class C common stock |
Balance, beginning of period at Dec. 31, 2017 | $ 9,396 | $ (209) | $ 0 | $ 9,605 | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Issuance of redeemable Class B units | 8,890 | |||||||||
Net income (loss) | 2,222 | 77 | 2,222 | |||||||
Member distributions | (1,007) | (1,007) | ||||||||
Other comprehensive income (loss) | (20) | (20) | ||||||||
Balance, end of period at Mar. 31, 2018 | 10,591 | (229) | 8,967 | 10,820 | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Net income (loss) | 207 | 23 | 207 | |||||||
Other comprehensive income (loss) | (13) | (13) | ||||||||
Balance, end of period at Jun. 30, 2018 | 10,785 | (242) | 8,990 | 11,027 | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Net income (loss) | (122) | (13) | (122) | |||||||
Other comprehensive income (loss) | 13 | 13 | ||||||||
Balance, end of period at Sep. 30, 2018 | 10,676 | (229) | 8,977 | 10,905 | ||||||
Balance, beginning of period at Dec. 31, 2018 | (11,059) | (286) | 10,033 | (10,773) | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Issuance of redeemable Class B units | 6,514 | |||||||||
Redemption of Class A and Class B membership units | (2,602) | (416) | (2,602) | |||||||
Equity-based compensation | 191 | 2,304 | 191 | |||||||
Net income (loss) | (14,619) | (3,045) | (14,619) | |||||||
Member distributions | (21) | (21) | ||||||||
Other comprehensive income (loss) | 28 | 28 | ||||||||
Balance, end of period at Mar. 31, 2019 | (28,082) | (258) | $ 15,390 | $ (27,824) | ||||||
Balance, beginning of period at Jun. 30, 2019 | 130,339 | $ 31,472 | $ (343) | (56) | $ 99,157 | $ 100 | $ 1 | $ 8 | ||
Balance, Shares at Jun. 30, 2019 | 9,998 | 5,988 | 77,791 | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Equity-based compensation | 1,508 | 360 | 1,148 | |||||||
Net income (loss) | (8,961) | (6,398) | (2,563) | |||||||
Other comprehensive income (loss) | (323) | (77) | (246) | |||||||
Effects of the organizational transactions | 297 | (297) | ||||||||
Balance, end of period at Sep. 30, 2019 | $ 122,563 | $ 32,129 | $ (6,741) | $ (133) | $ 97,199 | $ 100 | $ 1 | $ 8 | ||
Balance, Shares at Sep. 30, 2019 | 9,998 | 5,988 | 77,791 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities: | ||
Net (loss) income (including amounts attributable to non-controlling interests) | $ (29,847) | $ 2,391 |
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||
Depreciation and amortization | 1,980 | 1,013 |
Reversal of tax receivable agreement liability | (5,721) | 0 |
Change in deferred tax asset, net | 10,879 | 0 |
Unrealized gain on equity investment | (1,537) | 0 |
Equity-based compensation expense | 6,083 | 0 |
Change in fair value of convertible notes | 12,063 | 0 |
Provision for doubtful accounts | 91 | 228 |
Provision for slow moving or obsolete inventory | 6 | (20) |
Loss (income) from equity method investments in associated entities | 0 | 66 |
Other | 37 | 3 |
Changes in operating assets and liabilities, net of the effects of acquisitions: | ||
Accounts receivable, net | 1,396 | (4,347) |
Vendor deposits | (778) | (4,115) |
Inventories | (15,770) | (13,295) |
Deferred offering costs | 2,284 | 0 |
Other current assets | (1,720) | (2,845) |
Accounts payable | (13,182) | 12,143 |
Accrued expenses | 740 | 3,693 |
Payments of operating leases | (547) | 0 |
Net cash used in operating activities | (33,543) | (5,085) |
Cash flows from investing activities: | ||
Acquisitions, net of cash acquired | (1,283) | 785 |
Purchases of property and equipment, net | (1,268) | (532) |
Purchase of intangible assets, net | (58) | (71) |
Investment in equity securities | (500) | 0 |
Net cash (used in) provided by investing activities | (3,109) | 182 |
Cash flows from financing activities: | ||
Proceeds from issuance of convertible notes | 8,050 | 0 |
Proceeds from issuance of Class A common stock sold in initial public offering, net of underwriting costs | 83,003 | 0 |
Payment of debt issuance costs - convertible notes | (1,734) | 0 |
Payments of debt issuance costs | 0 | (166) |
Payments on long-term debt | 0 | (565) |
Proceeds from notes payable | 0 | 52 |
Payments on notes payable | (125) | 0 |
Proceeds from - line of credit, net | 0 | 7,716 |
Payments of finance lease obligations | (62) | (72) |
Deferred offering costs paid | (3,523) | 0 |
Redemption of Class A and Class B units of Greenlane Holdings, LLC | (3,019) | 0 |
Member distributions | (897) | (1,007) |
Net cash provided by financing activities | 81,693 | 5,958 |
Effects of exchange rate changes on cash | 158 | (20) |
Net increase in cash | 45,199 | 1,035 |
Cash, as of beginning of the period | 7,341 | 2,080 |
Cash, as of end of the period | 52,540 | 3,115 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Cash paid during the period for interest | 862 | 296 |
Cash paid during the period for income taxes | 401 | 328 |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows for operating leases | 547 | 687 |
Operating cash flows for finance leases | 18 | 2 |
Financing cash flows for finance leases | 62 | 72 |
Non-cash investing activities and financing activities: | ||
Conversion of convertible notes to Class A common stock | 60,313 | 0 |
Redeemable Class B Units issued for acquisition of a subsidiary | 6,664 | 8,890 |
Deferred offering costs included in accounts payable and accrued expenses | 0 | 1,141 |
Leased assets obtained in exchange for new finance lease liabilities | 88 | 244 |
Leased assets obtained in exchange for new operating lease liabilities | $ 2,973 | $ 0 |
Business Operations and Organiz
Business Operations and Organization | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Operations and Organization | BUSINESS OPERATIONS AND ORGANIZATION Organization Greenlane Holdings, Inc. (“Greenlane” and, collectively with the Operating Company (as defined below) and its consolidated subsidiaries, the “Company”) 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 initial public offering (“IPO”) of shares of its Class A common stock (as defined below) and other related Transactions (as defined below) in order to carry on the business of Greenlane Holdings, LLC (the “Operating Company”), the predecessor of Greenlane for financial reporting purposes. The Operating Company was organized under the laws of the state of Delaware on October 28, 2015, and is based in Boca Raton, Florida. As the sole manager of the Operating Company, Greenlane operates and controls all the business and affairs of the Operating Company, and through the Operating Company and its consolidated subsidiaries, conducts its business. Unless the context otherwise requires, references to the “Company” refer to Greenlane Holdings, Inc., and its consolidated subsidiaries, including the Operating Company. The authorized shares of Greenlane consist of (i) Class A common stock, par value $0.01 per share (the “Class A common stock”); (ii) shares of Class B common stock, par value $0.0001 per share (the “Class B common stock); (iii) shares of Class C common stock, par value $0.0001 per share (the “Class C common stock,” and together with the Class A common stock and the Class B common stock, the “Common Stock”); and (iv) shares of preferred stock, par value $0.0001 per share. See “Initial Public Offering and Organizational Transactions,” below for the description of the IPO and the Transactions (as defined below) completed in April 2019. The Operating Company has been determined to be the predecessor for accounting purposes and, accordingly, the condensed consolidated financial statements for periods prior to the IPO and the related Transactions have been adjusted to combine the previously separate entities for presentation purposes. Amounts for the period from January 1, 2018 through September 30, 2018 and from January 1, 2019 through April 22, 2019 presented in the condensed consolidated financial statements and notes to the condensed financial statements herein represent the historical operations of the Operating Company. The amounts as of September 30, 2019 and for the period from April 23, 2019 through September 30, 2019 reflect the consolidated operations of the Company. The Company, through its ownership of the Operating Company, holds investments in several companies that merchandise vaporizers and other products in the United States and Canada. Through its operating subsidiaries, the Company distributes to retailers through its wholesale operations and to consumers through its e-commerce activities. The Company operates four distribution centers in the United States and two distribution centers in Canada. Initial Public Offering and Organizational Transactions 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 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 paid by Greenlane, of approximately $79.5 million. Greenlane contributed all of the net proceeds to the Operating Company in exchange for a number of common units of the Operating Company (“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, Mr. Schoenfeld and Jacoby & Co. Inc, an affiliated entity of Mr. Schoenfeld and Aaron LoCascio, 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. As a result of the IPO and the Transactions, Greenlane became the sole manager of the Operating Company and its principal asset is Common Units of the Operating Company. As the sole manager of the Operating Company, Greenlane operates and controls all of the business and affairs of the Operating Company, and through the Operating Company and its subsidiaries, conducts its business. Although Greenlane has a minority economic interest in the Operating Company, Greenlane has the sole voting interest in, and controls the management of, the Operating Company, and has the obligation to absorb losses of, and receive benefits from, the Operating Company, that could be significant. Greenlane has determined that, as a result of the Transactions, the Operating Company is a variable interest entity (“VIE”) and that Greenlane is the primary beneficiary of the Operating Company. Accordingly, pursuant to the VIE accounting model, beginning in the fiscal quarter ended June 30, 2019, Greenlane consolidated the Operating Company in its consolidated financial statements and reports a non-controlling interest related to the Common Units held by the members of the Operating Company (other than the Common Units held by Greenlane) on its consolidated financial statements. Greenlane has a board of directors and executive officers but has no employees. All of the Company’s assets are held by, and all of its operations are conducted through, the Operating Company. All of the Company’s employees are employed by the Operating Company. In connection with the closing of the IPO, Greenlane and the Operating Company consummated the following organizational transactions (collectively, the “Transactions”): ● The Operating Company adopted and approved the Third Amended and Restated Operating Agreement of the Operating Company (the “Operating Agreement”), which converted each member’s existing membership interests in the Operating Company into Common Units, including unvested membership interests and profits interests into unvested Common Units, and appointed Greenlane as the sole manager of the Operating Company; ● Greenlane amended and restated its certificate of incorporation to, among other things, provide for Class A common stock, Class B common stock and Class C common stock; ● Greenlane issued, for nominal consideration, one share of Class B common stock to its non-founder members for each Common Unit they owned and issued, for nominal consideration, three shares of Class C common stock to its founder members for each Common Unit they owned; ● Greenlane issued and sold 3,547,776 shares of Class A common stock upon conversion of the convertible notes at a settlement price equal to 80% of the IPO price; ● Greenlane issued and sold 1,200,000 shares of its Class A common stock to its members upon exchange of an equal number of Common Units, which shares were sold by the members as selling stockholders in the IPO, including 450,000 shares issued pursuant to the partial exercise of the underwriters’ option to purchase additional shares; ● Greenlane issued and sold 5,250,000 shares of its Class A common stock to the purchasers in the IPO, and used all of the net proceeds received from the IPO to acquire Common Units from the Operating Company at a purchase price per Common Unit equal to the IPO price per share of Class A common stock, less underwriting discounts and commissions, which Common Units, when added to the Common Units received from the selling stockholders, collectively represented approximately 15.4% of the Operating Company’s outstanding Common Units after the IPO; ● The members of the Operating Company continue to own their Common Units not exchanged for the shares of Class A common stock sold by them as selling stockholders in the IPO; ● Greenlane entered into (i) a Tax Receivable Agreement (the “TRA”) with the Operating Company and the Operating Company’s members and (ii) a Registration Rights (the “Registration Rights Agreement”) with the Operating Company’s members who, assuming that all of the Common Units of such members are redeemed or exchanged for newly-issued shares of Class A common stock on a one-to-one basis, will own an aggregate of 31,918,891 shares of Class A common stock, representing approximately 89.4% of the combined voting power of all of Greenlane’s Common Stock. Although the actual timing and amount of any payments that Greenlane will make to the Operating Company’s members under the TRA will vary, Greenlane expects those payments may be significant. Common Units are redeemable, subject to contractual restrictions, at the election of such members for newly-issued shares of Class A common stock on a one-to-one basis (and their shares of Class B common stock or Class C common stock, as the case may be, will be canceled on a one-to-one basis in the case of Class B common stock or three-to-one basis in the case of Class C common stock upon any such issuance). Greenlane has the option to instead make a cash payment equal to a volume weighted average market price of one share of Class A common stock for each Common Unit redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications) in accordance with the terms of the Operating Agreement. Greenlane’s decision to make a cash payment upon a member’s redemption election will be made by its independent directors (within the meaning of the Nasdaq Marketplace Rules) who are disinterested in such proposed redemption. Greenlane’s corporate structure following the IPO, as described above, is commonly referred to as an “Up-C” structure, which is often used by partnerships and limited liability companies when they undertake an initial public offering of their business. The Up-C structure allows the members of the Operating Company to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity, for income tax purposes following the IPO. One of these benefits is that future taxable income of the Operating Company that is allocated to its members will be taxed on a flow-through basis and therefore will not be subject to corporate taxes at the Operating Company entity level. Additionally, because the members may redeem their Common Units for shares of Greenlane's Class A common stock on a one-for-one basis, or at Greenlane’s option, for cash, the Up-C structure also provides the members with potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded. Greenlane will receive the same benefits as its members because of its ownership of Common Units in an entity treated as a partnership, or “pass-through” entity, for income tax purposes. As Greenlane redeems additional Common Units from the Operating Company’s members under the mechanism described above, Greenlane will obtain a step-up in tax basis in Greenlane’s share of the Operating Company’s assets. This step-up in tax basis will provide Greenlane with certain tax benefits, such as future depreciation and amortization deductions that can reduce the taxable income allocable to Greenlane. Greenlane entered into the TRA with the Operating Company and each of the Operating Company’s members, which provides for the payment by Greenlane to the Operating Company’s members of 85% of the amount of tax benefits, if any, that Greenlane actually realizes (or in some cases, is deemed to realize) as a result of (i) increases in tax basis resulting from the redemption of Common Units and (ii) certain other tax benefits attributable to payments made under the TRA. As a result of the completion of the Transactions, including the IPO: ● Greenlane is a holding company and its principal asset is the Common Units it holds in the Operating Company; ● Greenlane is the sole manager of the Operating Company and controls the business and affairs of the Operating Company and its subsidiaries; ● Greenlane’s amended and restated certificate of incorporation and the Operating Agreement require that (i) Greenlane at all times maintains a ratio of one Common Unit owned by Greenlane for each share of Class A common stock issued by Greenlane (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities), and (ii) the Operating Company at all times maintains (x) a one-to-one ratio between the number of shares of Class A common stock issued by Greenlane and the number of Common Units owned by Greenlane, (y) a one-to-one ratio between the number of shares of Class B common stock owned by the non-founder members of the Operating Company and the number of Common Units owned by the non-founder members of the Operating Company, and (z) a three-to-one ratio between the number of shares of Class C common stock owned by the founder members of the Operating Company and their affiliates and the number of Common Units owned by the founder members of the Operating Company and their affiliates; ● Greenlane owns 9,997,776 Common Units, representing approximately 23.9% of the economic interests in the Operating Company; ● The purchasers in the IPO (i) own 6,450,000 shares of Class A common stock, representing approximately 6.9% of the combined voting power of all of Greenlane’s Common Stock, (ii) own approximately 64.5% of the economic interest in Greenlane, and (iii) through Greenlane’s ownership of Common Units, indirectly hold approximately 15.4% of the economic interests in the Operating Company; ● The non-founder members of the Operating Company own (i) 5,988,485 Common Units, representing 14.3% of the economic interests in the Operating Company, and (ii) through their ownership of Class B common stock, approximately 6.4% of the voting power in Greenlane; ● The founder members of the Operating Company own (i) 25,930,406 Common Units, representing 61.9% of the economic interests in the Operating Company, and (ii) through their ownership of Class C common stock, approximately 83.0% of the voting power in Greenlane; ● The members of the Operating Company collectively (i) own Class B common stock and Class C common stock representing approximately 89.4% of the combined voting power of all of Greenlane’s common stock, and (ii) own 76.2% of the economic interests in the Operating Company, representing a direct interest through the members’ ownership of Common Units. The following table sets forth the economic and voting interests of holders of Greenlane’s Common Stock as of the date of this Quarterly Report on Form 10-Q: Class of Common Stock (ownership) Total Shares (1) Class A Shares (as converted) (2) Economic Ownership in the Operating Company (3) Voting Interest in Greenlane (4) Economic Interest in Greenlane (5) Class A (purchasers in the IPO) 6,450,000 6,450,000 15.4 % 6.9 % 64.5 % Class A (former convertible note holders) (5) 3,547,776 3,547,776 8.5 % 3.8 % 35.5 % Class B (non-founder members) 5,988,485 5,988,485 14.3 % 6.4 % — % Class C (founder members) 77,791,218 25,930,406 61.9 % 83.0 % — % Total 93,777,479 41,916,667 100.0% 100.0% 100.0 % (1) Represents the total number of shares of a particular class of Greenlane's Common Stock held as of the date of this Quarterly Report on Form 10-Q. (2) Represents the number of shares of Greenlane's Class A common stock that will be held outstanding assuming the exchange of all outstanding shares of Class B common stock and Class C common stock upon redemption of Common Units. Shares of Class B common stock and Class C common stock, as the case may be, will be canceled, without consideration, on a one-to-one basis in the case of the Class B common stock pursuant to the terms of the Operating Agreement. (3) Represents the indirect economic interest in the Operating Company through the holders' ownership of Common Stock. (4) Represents the aggregate voting interest in Greenlane through the holders' ownership of Common Stock. Each share of Class A common stock, Class B common stock and Class C common stock entitles its holder to one vote per share on all matters submitted to a vote of Greenlane's stockholders. (5) Represents shares of Class A common stock issued to the prior holders of convertible notes upon conversion of such convertible notes at a settlement price equal to 80% of the IPO price. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary Of Significant Accounting Policies | 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 and nine months ended September 30, 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 unaudited condensed consolidated financial statements include the accounts of the Company, the Operating Company, and the Operating Company's consolidated 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 management to make estimates and assumptions. These estimates and underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenue and expenses. Such estimates include the accounts receivable allowance for doubtful accounts, the allowance for slow-moving or obsolete inventory, the valuation of deferred tax assets, goodwill, intangibles and other long-lived assets, contingent consideration, the tax receivable agreement (TRA) liability, and the valuation and assumptions underlying equity-based compensation. Accordingly, actual results could differ from those estimates. Segment Reporting The Company’s chief operating decision maker (“CODM”) is Aaron LoCascio, Greenlane’s Chief Executive Officer. The Company has two distinct operating segments, which include 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 Company had a change in reportable segments as the Canadian operating segment met certain quantitative thresholds based upon which its separate disclosure was required. The United States and Canada reportable segments have been identified based on how the CODM manages the business, makes resource allocation and operating decisions, and evaluates operating performance. The Company completed its acquisition of ARI Logistics B.V. and Shavita B.V. (collectively, "Conscious Wholesale"), based in Amsterdam, the Netherlands, on September 30, 2019. The initial accounting for this business combination is incomplete and thus the amounts recognized in the financial statements for the business combination have been determined only provisionally. The assignment of goodwill recognized from this business combination to reporting units has also not yet been completed as of the date of these financial statements. The Company expects to make a determination relating to the application of the segment reporting disclosure requirements applicable to Conscious Wholesale during the fourth quarter of 2019. See "Note 9—Business Acquisitions," and “Note 12—Segment Reporting.” Business Combinations Business combinations are accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations (“ASC 805”). Under the acquisition method, the acquiring entity in a business combination recognizes 100% of the acquired assets and assumed liabilities, regardless of the percentage owned, at their estimated fair values as of the date of acquisition. Any excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired is recorded as goodwill. To the extent the fair value of the net assets acquired, including other identifiable assets, exceeds the purchase price, a bargain purchase gain is recognized. Assets acquired, and liabilities assumed from contingencies, are recognized at fair value if the fair value can be determined during the measurement period. Results of operations of an acquired business are included in the condensed consolidated statement of operations from the date of acquisition. Acquisition-related costs are expensed as incurred. See “Note 9— Business Acquisitions.” Equity-Based Compensation The Company accounts for equity-based compensation grants of equity awards to employees in accordance with ASC Topic 718, Compensation Stock Compensation . This standard requires compensation expense to be measured based on the estimated fair value of share-based awards on the date of grant and recognized as expense over the requisite service period, which is generally the vesting period. The Company estimates the fair value of stock options using the Black-Scholes model on the date of grant. The Black-Scholes model requires the use of several variables to estimate the grant-date fair value of the Company’s equity-based compensation awards including expected term, expected volatility and risk-free interest rates. Equity-based compensation costs are recognized using a graded vesting schedule. For liability-classified awards, the Company records fair value adjustments up to and including the settlement date. Changes in the fair value of the equity-based compensation liability that occur during the requisite service period are recognized as compensation cost over the vesting period. Changes in the fair value of the equity-based compensation liability that occur after the end of the requisite service period but before settlement, are compensation cost of the period in which the change occurs. The Company accounts for forfeitures as they occur. See “Note 11—Equity-Based Compensation.” Fair Value Measurements The Company applies the provisions of ASC Topic 820, Fair Value Measurements , which defines fair value, establishes a framework for its measurement and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company determines the fair market values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following three levels of inputs may be used to measure fair value: 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 Company’s financial instruments, including cash, 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 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 September 30, 2019 and 2018, the carrying amount of the Company’s long-term debt approximated its fair value. See “Note 17—Fair Value of Financial Instruments.” Cash For purposes of reporting cash flows, the Company considers cash on hand, checking accounts, and savings accounts to be cash. The Company considers all highly-liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. The Company places its cash with high credit quality financial institutions, which provide insurance through the Federal Deposit Insurance Company. At times, the balance in these accounts may exceed federal insured limits. The Company performs periodic evaluations of the relative credit standing of these institutions and does not expect any losses related to such concentrations. As of September 30, 2019, and December 31, 2018, approximately $1.0 million and $1.1 million, respectively, of the Company’s cash balances were in foreign bank accounts and uninsured. As of September 30, 2019, and December 31, 2018, the Company had no cash equivalents. Accounts Receivable, net Accounts receivable represent amounts due from customers for merchandise sales and are recorded when revenue is earned. 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 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 are pledged as collateral for the line of credit. See “Note 5—Long Term Debt.” Inventories, net Inventories consist of finished goods that are valued at the lower of cost or net realizable value on a weighted average cost basis. The Company has established an allowance for slow-moving or obsolete inventory based upon assumptions about future demands and market conditions. At September 30, 2019 and December 31, 2018, the reserve for obsolescence was approximately $0.2 million and $0.2 million, respectively. Inventory is pledged as collateral for the line of credit. See “Note 5—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. The 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 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 combination, 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. Depreciation expense for property and equipment (excluding assets recorded under finance leases) for the three months ended September 30, 2019 and 2018 was approximately $0.3 million and $0.1 million, respectively, and approximately $1.0 million and $0.2 million, for the nine months ended September 30, 2019 and 2018, respectively. Impairment of Long-Lived Assets The 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. No impairment charges for long-lived assets were recognized during the nine months ended September 30, 2019 and 2018. Intangible Assets, net Intangible assets consist of domain names, intellectual property, distribution agreements, proprietary technology, trademarks and tradenames, customer relationships, 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 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 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 nine months ended September 30, 2019 and 2018. Amortization expense for intangible assets amounted to $0.3 million and $1.0 million during the three and nine months ended September 30, 2019, respectively, and approximately $0.3 million and $0.8 million during the three and nine months ended September 30, 2018, respectively. Goodwill Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in business combinations. In accordance with ASC Topic 350, Intangibles — Goodwill and Other , the Company tests goodwill for impairment for each reporting unit on an annual basis, using either a qualitative or quantitative approach, or when events or circumstances indicate the fair value of a reporting unit is below its carrying value. Judgment is involved in determining if an indicator or change in circumstances relating to impairment has occurred. Such changes may include, among others, a significant decline in expected future cash flows, a significant adverse change in the business climate, and unforeseen competition. No goodwill impairment charges were recognized during the nine months ended September 30, 2019 and 2018. Investments Equity method investments Investee companies that are not consolidated, but over which the 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 Company’s condensed consolidated balance sheets and statements of operations and comprehensive (loss) income; however, the 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 and comprehensive (loss) income. The Company’s carrying value in an equity method investee company is reflected in the caption “Investments” in the Company’s condensed consolidated balance sheets. When the carrying value in an equity method investee is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company has guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. The Company’s investment that is accounted for on the equity method of accounting consists of a 50% interest in a joint venture entity. The investment in this joint venture entity was not significant at September 30, 2019 and December 31, 2018. In the second quarter of 2019, the Company consolidated a former joint venture, which was previously accounted for as an equity investment. During the three and nine months ended September 30, 2019, the operating activity related to this joint venture was not material. These investments were not established until the first quarter of 2019. The Company had no income from its equity method investment for the three and nine months ended September 30, 2019, respectively. Equity securities The Company’s equity securities consist of an investment in Airgraft Inc. (ownership 1.49%). The Company has determined that its ownership does not provide it with significant influence over the operations of this investee. Accordingly, the Company accounts for its investment in this entity as equity securities. Airgraft Inc. is a private entity and its equity securities do not have a readily determinable fair value. The Company has elected to measure this security at cost minus impairment, if any. The security is adjusted to fair value when an observable price change can be identified. At September 30, 2019, the carrying value of this investment was approximately $2.0 million, which included an upward adjustment of $1.5 million based on an observable price change recognized during the three months ended September 30, 2019.. The adjustment was determined based on Airgraft Inc.'s price per share sold in connection with a new financing round during the third quarter of 2019, for shares which which were determined to the similar to the equity securities held by the Company. This adjustment in the carrying value of the Company's investment in equity securities was recorded as an unrealized gain of approximately $1.5 million within Other income (expense), net, in the accompanying condensed consolidated statements of operations for the three months ended September 30, 2019. 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 Company. Deferred Offering Costs The Company capitalized certain legal, accounting, and other third-party fees that were directly attributable to Greenlane’s IPO. Following the successful consummation of the IPO in April 2019, deferred offering costs of approximately $3.5 million were recorded in the Company’s stockholders’ equity as a reduction of additional paid-in capital. 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 functional currency of the Operating Company's wholly-owned, Netherlands-based, subsidiary is the Euro. The assets and liabilities of these subsidiaries are translated into U.S. dollars at current exchange rate at each balance sheet date for assets and liabilities and an appropriate average exchange rate for each applicable period within the condensed consolidated statements of operations and comprehensive (loss) income. 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’/stockholders' deficit in the condensed consolidated balance sheets. Other exchange gains and losses are reported in the condensed consolidated statements of operations and comprehensive (loss) income. Comprehensive (Loss) Income Comprehensive (loss) income includes net (loss) income as currently reported by the Company, adjusted for other comprehensive items. Other comprehensive items for the Company consist of foreign currency translation gains and losses and unrealized gains and losses on derivative financial instruments that qualify as hedges. Advertising Advertising costs are expensed as incurred and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive (loss) income. Advertising costs totaled approximately $1.0 million and $0.9 million for the three months ended September 30, 2019 and 2018, respectively, and $3.3 million and $2.7 million for the nine months ended September 30, 2019 and 2018, respectively. Income Taxes The Company is a corporation subject to income taxes in the United States. Certain subsidiaries of the Operating Company are taxable separately from the Company. The Company's proportional share of the Operating Company's subsidiaries' provisions are included in the Company's consolidated financial statements. The Company’s deferred income tax assets and liabilities are computed for differences between the tax basis and financial statement amounts that will result in taxable or deductible amounts in the future. The computed deferred balances are based on enacted tax laws and applicable rates for the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized for deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In making such a determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines it would be able to realize its deferred tax assets for which a valuation allowance had been recorded, then an adjustment would be made to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company evaluates the tax positions taken on income tax returns that remain open and positions expected to be taken on the current year tax returns to identify uncertain tax positions. Unrecognized tax benefits on uncertain tax positions are recorded on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is more than 50 percent likely to be realized is recognized. Interest and penalties related to unrecognized tax benefits are recorded in income tax benefit. See “Note 10—Income Taxes.” Tax Receivable Agreement (TRA) The Company entered into the TRA with the Operating Company and each of the members of the Operating Company that provides for the payment by the Operating Company to the members of 85% of the amount of tax benefits, if any, that the Company may actually realize (or in some circumstances are deemed to realize) as a result of (i) increases in tax basis resulting from any future redemptions that are funded by the Company or exchanges of Common Units as described above in “Note 1—Business Operations and Organization” and (ii) certain other tax benefits attributable to payments made under the TRA. The annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits. The Operating Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. The TRA payments are not conditioned upon any continued ownership interest in the Operating Company. The rights of each noncontrolling interest holder under the TRA are assignable to transferees of its interest in the Operating Company. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Operating Company generates each year and the applicable tax rate. The Company periodically evaluates the realizability of the deferred tax assets resulting from the exchange of Common Units for Class A common stock. If the deferred tax assets are determined to be realizable, the Company then assesses whether payment of amounts under the TRA have become probable. If so, the Company records a TRA liability equal to 85% of such deferred tax assets. In subsequent periods, the Company assesses the realizability of all of deferred tax assets subject to the TRA. If the Company determines that a deferred tax asset with a valuation allowance is realizable in a subsequent period, the related valuation allowance will be released and consideration of a corresponding TRA liability will be assessed. The realizability of deferred tax assets, including those subject to the TRA, is dependent upon the generation of future taxable income during the periods in which those deferred tax assets become deductible and consideration of prudent and feasible tax-planning strategies. The measurement of the TRA is accounted for as a contingent liability. Therefore, once the Company determines that a payment to a member of the Operating Company has become probable and can be estimated, the estimate of payment will be accrued. See “Note 10—Income Taxes.” Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when a customer obtains control of the promised goods or services. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods or services, net of any variable consideration (e.g., rights to return product, sales incentives, others) and any taxes collected from customers and subsequently remitted to governmental authorities. The Company uses a best estimate approach to measure variable consideration which approximates the expected value method. The Company applies the following five-step model in order to determine this amount: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services the Company transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, management reviews the contract to determine which performance obligations must be delivered and which of these performance obligations are distinct. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. The 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 Company’s distribution centers. The 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 September 30, 2019 and 2018, and less than 0.5% of revenues for the nine months ended September 30, 2019 and 2018. The Company provides no warranty on products sold. Product warranty is provided by the manufacturers. The 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 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 Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net revenue from products in the period such variances become known. The 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 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 and other current liabilities on the Company’s condensed consolidated balance sheets and was approximately $0.7 million and $0.5 million at September 30, 2019 and December 31, 2018, respectively. Included in other current assets is an asset totaling approximately $0.3 million as of September 30, 2019 and December 31, 2018, respectively, relating to the recoverable cost of merchandise estimated to be returned by customers. The Company established a supply chain for premium, patented, child-resistant packaging, closed-system vaporization solutions and custom-branded retail products. For these product offerings, the 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 and other current liabilities on the Company’s condensed consolidated balance sheets and were approximately $3.0 million and $3.2 million at September 30, 2019 and December 31, 2018, respectively. See “Note 4—Composition of Certain Financial Statement Captions.” The 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 , in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned. In all arrangements, the Company determined that it acts as the principal in the transaction, controlling the good or service before it is transferred to the customer. As such, the Company records gross revenue for such arrangements. The 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 Company also applies the practical expedient provided for by ASC 606 based upon which the 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 and comprehensive (loss) income. Furthermore, the Company does not disclose the value of unsa |
Net Loss Per Share
Net Loss Per Share | 9 Months Ended |
Sep. 30, 2019 | |
Earnings Per Share [Abstract] | |
Net Loss Per Share | NET LOSS PER SHARE Basic net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements. Diluted net loss per share for all periods for which loss per share is presented is the same as basic net loss per share as the inclusion of potentially issuable shares would be antidilutive. Prior to the amendment and restatement of the Operating Company’s LLC Agreement on April 17, 2019 in connection with the IPO, the Operating Company’s membership interests were defined solely as percentage interests 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 per unit for the three and nine months ended September 30, 2018 was not presented in the accompanying condensed consolidated financial statements, as a denominator to the calculation could not be determined. The basic and diluted net loss per share for the nine months ended September 30, 2019 represents only the period from the IPO closing on April 23 through September 30, 2019. A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share of Class A common stock is as follows: Three months ended September 30, 2019 Nine months ended September 30, 2019 (in thousands, except per share amounts) Numerator: Net loss $ (8,961) $ (10,757) Less: Net loss attributable to non-controlling interests (2,563) (4,016) Net loss attributable to Class A common stockholders $ (6,398) $ (6,741) Denominator: Weighted average shares of Class A common stock outstanding 9,998 9,998 Net loss per share of Class A common stock - basic and diluted $ (0.64) $ (0.67) For the three and nine months ended September 30, 2019, 5,988,485 shares of Class B common stock, 77,791,218 shares of Class C common stock and 632,847 stock options were excluded from the weighted-average in the computation of diluted net loss per share of Class A common stock because the effect would have been anti-dilutive. Shares of Class B common stock and Class C common stock do not share in the earnings or losses of Greenlane and are therefore not participating securities. As such, separate calculations of basic and diluted net loss per share for each of Class B common stock and Class C common stock under the two-class method have not been presented. |
Composition of Certain Financia
Composition of Certain Financial Statement Captions | 9 Months Ended |
Sep. 30, 2019 | |
Payables and Accruals [Abstract] | |
Composition of Certain Financial Statement Captions | COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS The following table summarizes the composition of accrued expenses and other current liabilities as of September 30, 2019 and December 31, 2018: September 30, 2019 December 31, 2018 (in thousands) Accrued expenses and other current liabilities: Customer deposits $ 2,954 $ 3,226 Accrued offering costs — 1,500 Refund liability 670 459 Payroll related including bonus 1,499 1,314 Accrued taxes, state and income 1,222 665 Accrued marketing fees and royalties 361 804 Accrued purchase price consideration for business acquisition 1,438 — Other 1,552 1,977 $ 9,696 $ 9,945 |
Long Term Debt
Long Term Debt | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Long Term Debt | LONG TERM DEBT The Company’s long-term debt, excluding operating lease liabilities and finance lease liabilities, consisted of the following amounts at the dates indicated: September 30, 2019 December 31, (in thousands) 3.0% note payable to a lender in relation to a four-year vehicle loan for the purchase of a truck used in operations. $ 20 $ 24 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. 8,339 8,460 Convertible notes issued in December 2018 and in January 2019. — 40,200 8,359 48,684 Less unamortized debt issuance costs (125) (140) Less current portion of long-term debt (175) (168) Long-term debt, net, excluding operating leases and finance leases $ 8,059 $ 48,376 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 million 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 Company’s operating subsidiaries, and, until the agreement was amended in connection with the IPO as described below, personally by each of Greenlane’s Chief Executive Officer and Chief Strategy Officer, and are collateralized by the 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 requires 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. On April 5, 2019, Greenlane 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. This second amendment amends and restates the definition of the guarantor under the terms of the agreement, wherein both the Chief Executive Officer and the Chief Strategy Office 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. There were no borrowings outstanding on the line of credit at September 30, 2019 and December 31, 2018. 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 million, 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 $8.5 million, 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 Company’s obligations under the Real Estate Note are secured by a mortgage on the property. LIBOR is expected to be discontinued and replaced after 2021 and the credit facility has a maturity date beyond that time. There can be no assurances as to what the alternative base rate will be in the event that LIBOR is discontinued, and the Company can provide no assurances whether that base rate will be more or less favorable than LIBOR. The Company intends to monitor the developments with respect to the phasing out of LIBOR after 2021 and work with its lenders to ensure that any transition away from LIBOR will have minimal impact on its financial condition but can provide no assurances regarding the impact of LIBOR discontinuation. Convertible Notes On December 21, 2018, the Operating Company issued an aggregate of $40.2 million in convertible promissory notes (the “convertible notes”) and received net cash proceeds of $38.9 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 received net cash proceeds of $6.5 million after approximately $0.4 million of debt issuance costs related to the January 2019 note issuance, and approximately $1.2 million of costs paid in January 2019 related to the issuance of the December 2018 convertible notes. 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. Total debt issuance costs of $1.7 million associated with the issuance of convertible notes were expensed and recognized as interest expense in the condensed consolidated statements of operations and comprehensive (loss) income for the nine months ended September 30, 2019. For the nine months ended September 30, 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 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 1—Business Operations and Organization.” The convertible notes also contained other settlement provisions if an IPO did not occur within one year of their issuance date. There were no convertible notes outstanding at September 30, 2019. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Leases | LEASES Lessee The 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 Company adopted ASC Topic 842, Leases (“ASC 842”) utilizing the modified retrospective adoption method with an effective date of January 1, 2019. The Company made the election to not apply the recognition requirements in Topic 842 to short-term leases (i.e., leases of 12 months or less). Instead, a lessee may recognize the lease payments in profit or loss on a straight-line basis over the lease term. The Company elected this accounting policy for all classes of underlying assets. In addition, in accordance with Topic 842, variable lease payments in the period in which the obligation for those payments is incurred are not included in the recognition of a lease liability or right-of-use (ROU) asset. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU 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 Company uses the rate implicit in the lease to discount lease payments to present value. However, the Company does have leases that do not provide a readily determinable implicit rate. For such leases, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The Company lease agreements do not contain any residual value guarantees. The 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 September 30, 2019, the Company had 15 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 Company’s lease agreements recognized on a straight-line basis. The following table provides details of the Company’s future minimum lease payments under finance lease liabilities and operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of September 30, 2019. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown. Finance Operating Leases Total Finance and Operating Lease Obligations (in thousands) Remainder of 2019 $ 34 $ 196 $ 230 2020 133 772 905 2021 121 484 605 2022 58 489 547 2023 19 448 467 Thereafter 8 416 424 Total minimum lease payments $ 373 $ 2,805 $ 3,178 Less: imputed interest 35 305 340 Present value of minimum lease payments $ 338 $ 2,500 $ 2,838 Less: current portion 115 684 799 Long-term portion $ 223 $ 1,816 $ 2,039 The majority of the Company’s finance lease obligations relate to leased warehouse equipment. Payments under the 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 Company’s condensed consolidated balance sheets. The table below presents information related to the Company’s finance and operating leases: September 30, (in thousands) Finance lease cost Amortization of leased assets $ 96 Interest of lease liabilities 36 Operating lease costs Operating lease cost (a) 604 Variable lease cost (a) 280 Total lease cost $ 1,016 (a) Expenses are classified within general and administrative expenses within the Company’s condensed consolidated statement of operations and comprehensive (loss) income. The table below presents lease-related terms and discount rates as of September 30, 2019: September 30, Weighted average remaining lease terms Operating leases 3.6 years Finance leases 3.1 years Weighted average discount rate Operating leases 4.9 % Finance leases 6.7 % Lessor The Company has five operating leases for office space leased to third-party tenants in its corporate headquarters building in Boca Raton, Florida. For the three and nine months ended September 30, 2019, the Company had approximately $0.1 million and $0.5 million, respectively, in rental income related to these operating leases, which is included in “Other income, net” line item in the condensed consolidated statement of operations. The Company did not have any rental income for the three and nine months ended September 30, 2018. The following table represents the maturity analysis of undiscounted cash flows related to lease payments which the Company expects to receive from its existing operating lease agreements with tenants: Rental Income (in thousands) Remainder of 2019 $ 157 2020 619 2021 585 2022 76 Thereafter — Total $ 1,437 |
Leases | LEASES Lessee The 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 Company adopted ASC Topic 842, Leases (“ASC 842”) utilizing the modified retrospective adoption method with an effective date of January 1, 2019. The Company made the election to not apply the recognition requirements in Topic 842 to short-term leases (i.e., leases of 12 months or less). Instead, a lessee may recognize the lease payments in profit or loss on a straight-line basis over the lease term. The Company elected this accounting policy for all classes of underlying assets. In addition, in accordance with Topic 842, variable lease payments in the period in which the obligation for those payments is incurred are not included in the recognition of a lease liability or right-of-use (ROU) asset. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU 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 Company uses the rate implicit in the lease to discount lease payments to present value. However, the Company does have leases that do not provide a readily determinable implicit rate. For such leases, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The Company lease agreements do not contain any residual value guarantees. The 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 September 30, 2019, the Company had 15 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 Company’s lease agreements recognized on a straight-line basis. The following table provides details of the Company’s future minimum lease payments under finance lease liabilities and operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of September 30, 2019. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown. Finance Operating Leases Total Finance and Operating Lease Obligations (in thousands) Remainder of 2019 $ 34 $ 196 $ 230 2020 133 772 905 2021 121 484 605 2022 58 489 547 2023 19 448 467 Thereafter 8 416 424 Total minimum lease payments $ 373 $ 2,805 $ 3,178 Less: imputed interest 35 305 340 Present value of minimum lease payments $ 338 $ 2,500 $ 2,838 Less: current portion 115 684 799 Long-term portion $ 223 $ 1,816 $ 2,039 The majority of the Company’s finance lease obligations relate to leased warehouse equipment. Payments under the 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 Company’s condensed consolidated balance sheets. The table below presents information related to the Company’s finance and operating leases: September 30, (in thousands) Finance lease cost Amortization of leased assets $ 96 Interest of lease liabilities 36 Operating lease costs Operating lease cost (a) 604 Variable lease cost (a) 280 Total lease cost $ 1,016 (a) Expenses are classified within general and administrative expenses within the Company’s condensed consolidated statement of operations and comprehensive (loss) income. The table below presents lease-related terms and discount rates as of September 30, 2019: September 30, Weighted average remaining lease terms Operating leases 3.6 years Finance leases 3.1 years Weighted average discount rate Operating leases 4.9 % Finance leases 6.7 % Lessor The Company has five operating leases for office space leased to third-party tenants in its corporate headquarters building in Boca Raton, Florida. For the three and nine months ended September 30, 2019, the Company had approximately $0.1 million and $0.5 million, respectively, in rental income related to these operating leases, which is included in “Other income, net” line item in the condensed consolidated statement of operations. The Company did not have any rental income for the three and nine months ended September 30, 2018. The following table represents the maturity analysis of undiscounted cash flows related to lease payments which the Company expects to receive from its existing operating lease agreements with tenants: Rental Income (in thousands) Remainder of 2019 $ 157 2020 619 2021 585 2022 76 Thereafter — Total $ 1,437 |
Supplier Concentration
Supplier Concentration | 9 Months Ended |
Sep. 30, 2019 | |
Risks and Uncertainties [Abstract] | |
Supplier Concentration | SUPPLIER CONCENTRATIONDuring the nine months ended September 30, 2019 and 2018, the Company’s purchases of inventory for resale from two major vendors amounted to approximately 54.5% and 63.2%, respectively, of the Company’s total inventory purchases. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES In the ordinary course of its business, the Company is involved in various legal proceedings involving a variety of matters. The 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. On August 2, 2019, in an action entitled Tyrell v. Greenlane Holdings, Inc. et al ., a purported stockholder of the Company filed a purported class action lawsuit in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida, against the Company, officers and directors of the Company, and the underwriters related to the Company’s initial public offering. The complaint alleges, among other things, that the Company’s registration statement related to its initial public offering contained untrue statements of material fact and, or omitted to state material facts necessary to make the statements in the registration statement not misleading, in violation of Sections 11, 12 and 15 of the Securities Act of 1933, as amended. Since August 2, four additional purported class action lawsuits have been filed making substantially similar allegations; two of these additional lawsuits were filed in the same court as the Tyrell action and two were filed in the United States District Court for the Southern District of Florida. The lawsuits in federal court are entitled Hammond v. Greenlane Holdings, Inc. et al. and Mayer v. Greenlane Holdings Inc. et al. At this time, a class has not been certified in either state or federal court in any of the actions referenced above and the Company cannot estimate the amount of damages (if any) being sought by the plaintiffs. The Company can provide no assurances as to the outcome of these lawsuits or as to the costs associated with them. However, the Company believes the claims are without merit and intends to vigorously defend itself. See “Note 6 — Leases” for details of the Company’s future minimum lease payments under finance lease liabilities and operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of September 30, 2019. |
Business Acquisitions
Business Acquisitions | 9 Months Ended |
Sep. 30, 2019 | |
Business Combinations [Abstract] | |
Business Acquisitions | BUSINESS ACQUISITIONS Pollen Gear LLC Effective January 14, 2019, the Company acquired a 100% interest in Pollen Gear LLC (“Pollen Gear”) in exchange for an aggregate four percent (4.0%) equity interest in the Company. As consideration for the transaction, the Company issued its Class B units, which, as described below in “Note 14—Stockholders’ Equity / Members’ Deficit,” were contingently redeemable by the holder. Pollen Gear has been consolidated in the 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 . The following table summarizes the purchase price allocation and the estimated fair value of the net assets acquired and liabilities assumed at the date of acquisition. Pollen Gear LLC (in thousands) Cash $ 91 Accounts receivable 546 Vendor deposits 1,700 Other deposits 18 Property and equipment, net 342 Trade name 918 Design libraries 1,677 Goodwill 3,550 Net liabilities (2,178) Total purchase price $ 6,664 At January 14, 2019, the Operating Company had accounts payable to Pollen Gear of approximately $0.6 million and Pollen Gear had accounts receivable for the corresponding amount from the Operating Company. Furthermore, at the date of acquisition, the 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 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. Conscious Wholesale Effective September 30, 2019, the Company acquired a 100% interest in Conscious Wholesale, a leading European wholesaler and retailer of consumption accessories, vaporizers, and other high-quality products. As consideration for the transaction, t he Company expects to pay $5,867, which consists of $2,876 in cash, $1,438 in Class A common stock, and $1,553 of contingent consideration, payable in a combination of cash and Class A common stock. The contingent consideration arrangement requires the Company to make contingent payments based on the achievement of certain operational and financial performance targets for the year ending December 31, 2020, as set forth in the acquisition agreement. The Company estimated the fair value of the contingent consideration by using a Monte Carlo simulation that includes significant unobservable inputs such as the risk-free rate, risk-adjusted discount rate, the volatility of the underlying financial metrics and projected financial forecast of the acquired business over the earn-out period. The Conscious Wholesale acquisition was accounted for as a business combination under the acquisition method under ASC Topic 805, Business Combinations . The following table summarizes the preliminary purchase price allocation and the estimated fair value of the net assets acquired and liabilities assumed at the date of acquisition. The purchase price allocation for Conscious Wholesale is preliminary pending completion of the fair value analysis of the acquired assets and liabilities: Conscious Wholesale (in thousands) Cash $ 812 Accounts receivable 313 Inventory, net 1,820 Other current assets 955 Trade names 153 Customer relationships 1,044 Goodwill 2,264 Net liabilities (1,494) Total purchase price $ 5,867 The initial accounting for this business combination is incomplete and thus the amounts recognized in the financial statements for the business combination have been determined only provisionally. The initial accounting is incomplete primarily due to the timing of the closing of the acquisition relative to the timing of the issuance of our financial statements for the third quarter of 2019. The assignment of goodwill recognized from this business combination to reporting units has also not yet been completed as of the date of these financial statements. Pro Forma Financial Information The following unaudited pro forma financial information represents the combined results for the Company, Pollen Gear, and Conscious Wholesale for the three and nine months ended September 30, 2019 and 2018 as if Pollen Gear and Conscious Wholesale had been acquired on January 1, 2018, and their results had been included in the consolidated results of the Company beginning on that date: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 (in thousands) Net Sales $ 47,247 $ 46,352 $ 156,114 $ 136,507 Cost of Goods Sold 39,673 35,082 128,480 103,200 Gross Profit 7,574 11,270 27,634 33,307 Net Loss $ (7,943) $ (339) $ (29,782) $ (2,619) The pro forma amounts have been calculated after applying the Company’s accounting policies to the financial statements of Pollen Gear and Conscious Wholesale and adjusting the combined results of the Company, Pollen Gear, and Conscious Wholesale (a) to remove Pollen Gear and Conscious Wholesale product sales to the Company and to remove the cost incurred by the Company related to products purchased from Pollen Gear and Conscious Wholesale prior to the acquisition, (b) to reflect the increased amortization expense that would have been charged assuming intangible assets identified in the acquisition of Pollen Gear and Conscious Wholesale had been recorded on January 1, 2018, and (c) to remove the transaction costs incurred by the Company related to the acquisition of Conscious Wholesale. The impact of the Pollen Gear and Conscious Wholesale acquisitions on the actual results reported by the company in subsequent periods may differ significantly from that reflected in this pro forma information for a number of reasons, including but not limited to, non-achievement of the expected synergies from these combinations and changes in the regulatory environment. As a result, the pro forma information is not necessarily indicative of what the Company's financial condition or results of operations would have been had the acquisitions 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 Company. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES As a result of the IPO and the Transactions, Greenlane owns a portion of the Common Units of the Operating Company, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, the Operating Company is generally not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by the Operating Company is passed through to and included in the taxable income or loss of its members in accordance with the terms of the Operating Agreement. The Operating Company is subject to taxes in foreign jurisdictions. Greenlane is subject to U.S. federal, state and local income taxes based on its share of the Operating Company’s pass-through taxable income. The effective tax rate differs from the statutory tax rate primarily due to the Operating Company’s pass-through structure for U.S. income tax purposes and the valuation allowance against the deferred tax asset. The Company assessed the realizability of its deferred tax assets as of September 30, 2019 and management believes that it is not more likely than not that the results of operations will generate sufficient taxable income to realize portions of the net operating loss benefits. Consequently, the Company established a full valuation allowance against its deferred tax assets as of September 30, 2019, thus reducing the carrying balance to $0, and recognized a corresponding increase to the income tax provision of $11.0 million in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2019. For the nine months ended September 30, 2019, the Company did not have any unrecognized tax benefits as a result of tax positions taken during a prior period or during the current period. No interest or penalties have been recorded as a result of tax uncertainties. Tax Receivable Agreement (TRA) The Company entered into the TRA, with the Operating Company and each of the Members that provides for the payment by the Operating Company to the Members of 85% of the amount of tax benefits, if any, that the Company may actually realize (or in some circumstances are deemed to realize) as a result of (i) increases in tax basis resulting from any future redemptions that are funded by the Company or exchanges of Common Units described above in “Note 1—Business Operations and Organization” and (ii) certain other tax benefits attributable to payments made under the TRA. The annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits. The Operating Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. The TRA payments are not conditioned upon any continued ownership interest in the Operating Company. The rights of each noncontrolling interest holder under the TRA are assignable to transferees of its interest in the Operating Company. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Operating Company generates each year and the applicable tax rate. As noted above, the Company evaluated the realizability of the deferred tax assets resulting from the IPO and the Transactions completed in April 2019 and established a full valuation allowance against those benefits as of September 30, 2019. As a result, the Company determined that payments to noncontrolling interest holders under the TRA are no longer probable and estimable. Based on this assessment, the Company reduced its TRA liability as of September 30, 2019 to $0, and recognized a gain of $5.7 million within Other income (expense), net, in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company did not make any payments, inclusive of interest, to members of the Operating Company pursuant to the TRA. |
Equity-Based Compensation
Equity-Based Compensation | 9 Months Ended |
Sep. 30, 2019 | |
Compensation Related Costs [Abstract] | |
Equity-Based Compensation | EQUITY-BASED COMPENSATION On April 17, 2019, Greenlane adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides eligible participants with compensation opportunities in the form of cash and equity incentive awards. The 2019 Plan is designed to enhance the Company’s ability to attract, retain and motivate its executive officers and other key management and incentivizes executives to increase the Company’s long-term growth and equity value in alignment with the interests of Greenlane’s stockholders. Under the 2019 Plan, Greenlane may grant up to 5,000,000 stock options and other equity-based awards to employees, directors and officers. Equity-based compensation cost is measured at the grant date for all equity-based awards made to employees based on the fair value of the awards and is attributed on a straight-line basis for awards with service conditions and on an accelerated attribution basis for awards with performance conditions over the requisite service period, which is generally the vesting period. The Company accounts for grants of equity awards to employees in accordance with ASC 718, Compensation-Stock Compensation . This standard requires compensation expense to be measured based on the estimated fair value of the share-based awards on the date of grant and recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company uses the Black-Scholes option-pricing model to determine the fair value of the stock option awards. The Company estimates the expected volatility by using a weighted average of the historical volatility of its common stock and the historical volatilities of a peer group comprised of publicly-traded companies in the same industry. The risk-free interest rate is based on United States Treasury zero-coupon issues with remaining terms similar to the expected term of the stock option awards. The expected term for stock options granted is estimated using the “simplified” method, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the stock option due to the Company’s lack of sufficient historical data. In connection with the closing of the IPO, Greenlane and the Operating Company consummated certain organizational transactions, as described in further detail in “Note 1—Business Operations and Organization,”, among which, the Operating Company reclassified unvested Class B membership interests and profits interests which had been granted as equity-based compensation into Common Units of the Operating Company. During the three and nine months ended September 30, 2019, the Company recorded compensation expense of approximately $1.5 million and $6.1 million, respectively, related to equity-based compensation awards, which is included in salaries, benefits and payroll taxes in the condensed consolidated statement of operations and comprehensive (loss) income. The Company did not incur any equity-based compensation expense during the three and nine months ended September 30, 2018. As of September 30, 2019, total unrecognized compensation expense related to unvested Common Units granted as equity-based compensation was approximately $6.4 million, which is expected to be recognized over a weighted-average period of 2.2 years. As of September 30, 2019, total unrecognized compensation expense related to unvested stock options granted as equity-based compensation was approximately $1.2 million, which is expected to be recognized over a weighted-average period of 3.9 years. In connection with the IPO, the Company granted an aggregate of 176,784 options to its directors and certain employees, less forfeitures. The stock options were granted with an exercise price of $17.00 per share and vest ratably over a zero to four-year period. Additionally, the Company granted an aggregate of 477,500 options to certain employees on August 20, 2019. The stock options were granted with an exercise price of $6.42 per share and vest ratably over a five to ten-year period. The fair value of the stock option awards during the nine months ended September 30, 2019 was determined on the grant dates using the Black-Scholes valuation model based on the following ranges of weighted-average assumptions: September 30, 2019 Expected volatility (1) 85% Expected dividend yield (2) — Expected term (3) 2.50 - 3.75 years Risk-free interest rate (4) 1.44% - 2.40% (1) Expected volatility is based on the historical volatility of a selected peer group over a period equivalent to the expected term. (2) The Company has assumed a dividend yield of zero as management has no plans to declare dividends in the foreseeable future. (3) Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method. (4) The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term. A summary of stock option activity for the nine months ended September 30, 2019 is as follows: Stock Options Outstanding at beginning of period — Granted 654,284 Exercised — Forfeited (21,437) Outstanding at end of period 632,847 |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Segment Reporting | 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 the Canadian operations becoming a significant part of the business. As of September 30, 2019, the Company had two reportable segments: (1) U.S. and (2) Canada. The U.S. operating segment is comprised of the Company’s U.S. operations while the Canadian operating segment is comprised of the Company’s Canadian operations. The reportable segments identified are the business activities of the Company for which discrete financial information is available and for which operating results are regularly reviewed by the Company’s chief operating decision maker to allocate resources and assess performance. Concurrent with the change in reportable operating segments, the Company recast 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 for the three and nine months ended September 30, 2019 and 2018. Intersegment revenues are eliminated in consolidation. Three Months Ended Three Months Ended United States Canada Total United States Canada Total (in thousands) (in thousands) Revenues from external customers $ 38,597 $ 6,289 $ 44,886 $ 40,576 $ 2,985 $ 43,561 Intercompany revenues 1,392 23 1,415 898 62 960 Segment operating (loss) income (2,827) 200 (2,627) 504 188 692 Nine Months Ended Nine Months Ended United States Canada Total United States Canada Total (in thousands) (in thousands) Revenues from external customers $ 129,017 $ 18,753 $ 147,770 $ 120,665 $ 6,714 $ 127,379 Intercompany revenues 2,910 105 3,015 2,742 149 2,891 Segment operating (loss) income (5,077) (38) (5,115) 3,798 288 4,086 The following is a reconciliation of total loss for the reportable segments to consolidated income (loss) from continuing operations before income taxes. “Corporate and other income (loss)” is comprised of unallocated corporate overhead expenses. Three Months Ended Nine Months Ended 2019 2018 2019 2018 (in thousands) Total segment (loss) income for reportable segments $ (2,627) $ 692 $ (5,115) $ 4,086 Corporate and other loss (2,898) (357) (9,511) (1,075) Interest expense (119) (136) (862) (296) Change in fair value of convertible notes payable — — (12,063) — Other income (expense), net 7,746 (141) 8,670 18 Income (loss) from continuing operations before income taxes $ 2,102 $ 58 $ (18,881) $ 2,733 No single customer represented more than 10% of the Company’s net sales for the three months ended September 30, 2019 and September 30, 2018, and for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, one customer represented approximately 18.2% of the Company’s accounts receivable balances. No other single customers represented more than 10% of the accounts receivable balance as of September 30, 2019. As of December 31, 2018, no single customer represented more than 10% of the Company’s accounts receivable balance. |
Non-Controlling Interest
Non-Controlling Interest | 9 Months Ended |
Sep. 30, 2019 | |
Noncontrolling Interest [Abstract] | |
Non-Controlling Interest | NON-CONTROLLING INTEREST As discussed in “Note 1—Business Operations and Organization,” Greenlane consolidates the financial results of the Operating Company and reports a non-controlling interest related to the Common Units held by non-controlling interest holders on its consolidated financial statements. As of September 30, 2019, Greenlane owned 23.9% of the economic interests in the Operating Company, with the remaining 76.1% of the economic interests owned by non-controlling interest holders. The non-controlling interests on the accompanying condensed consolidated statements of operations and comprehensive (loss) income represents the portion of the loss attributable to the economic interest in the Operating Company held by the non-controlling holders of Common Units calculated based on the weighted average non-controlling interests’ ownership during the periods presented. |
Stockholders' Equity _ Members'
Stockholders' Equity / Members' Deficit | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Stockholders' Equity/ Members' Deficit | STOCKHOLDERS’ EQUITY / MEMBERS’ DEFICIT On April 17, 2019, in connection with the IPO and the Transactions, Greenlane amended and restated its certificate of incorporation. After giving effect to the amendment and restatement of Greenlane’s certificate of incorporation, the total number of shares of all classes of stock that Greenlane is authorized to issue is two hundred forty-five million (245,000,000), consisting of (i) one hundred twenty-five million (125,000,000) shares of Class A common stock; (ii) ten million (10,000,000) shares of Class B common stock; and (iii) one hundred million (100,000,000) shares of Class C common stock; and (iv) ten million (10,000,000) shares of preferred stock, par value $0.0001 per share. Pursuant to the amended and restated certificate of incorporation, the two hundred (200) shares of common stock, par value $0.01 per share, of Greenlane issued and outstanding prior to the effective time were canceled without further action by, or consideration to, the holders thereof. Shares of Class A common stock have both voting interests and economic interests (i.e., the right to receive distributions or dividends, whether cash or stock, and proceeds upon dissolution, winding up or liquidation), while shares of Class B common stock and Class C common stock have voting interests but no economic interests. Each share of Class A common stock, Class B common stock and Class C common stock entitles the record holder thereof to one vote on all matters on which stockholders generally are entitled to vote, and except as otherwise required in the amended and restated certificate of incorporation, the holders of Common Stock will vote together as a single class on all matters (or, if any holders of preferred stock of Greenlane are entitled to vote together with the holders of Common Stock, as a single class with such holders of preferred stock). 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 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. As discussed in “Note 1—Business Operations and Organization,” 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 of Class A common stock sold by certain selling stockholders, comprised of Messrs. LoCascio and Schoenfeld and an affiliated entity of Messrs. LoCascio and Schoenfeld) 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. There were no redeemable Class B units outstanding at September 30, 2019. |
Derivative Instruments and Hedg
Derivative Instruments and Hedging Activity | 9 Months Ended |
Sep. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives Instrument and Hedging Activity | DERIVATIVE INSTRUMENT AND HEDGING ACTIVITY On July 11, 2019, the Company entered into an interest rate swap contract to mitigate its exposure to changes in market interest rates as part of its overall strategy to manage its Real Estate Note to achieve an overall desired position of notional debt amounts subject to fixed and floating interest rates. The interest rate swap contract is entered into for periods consistent with the related underlying exposure and does not constitute a position independent of this exposure. The Company's interest rate swap contract is designated as a cash flow hedge at the inception date, and is reflected at its fair value in the condensed consolidated balance sheet. Refer to "Note 17—Fair Value Measurements of Financial Instruments" for further information on the fair value and classification of the interest rate swap contract. Details of the outstanding swap contract as of September 30, 2019, which is a pay fixed and receive floating contract, is as follows: Swap Maturity Notional Value Pay Fixed Rate Receive Floating Rate Floating Rate October 1, 2025 $ 8,339 2.07750 % One-Month LIBOR Monthly The Company performed an initial qualitative assessment of hedge effectiveness using the hypothetical derivative method in the period in which the hedging transaction was entered, as the critical terms of the hypothetical derivative and the hedging instrument are the same. In future reporting periods, the Company will perform a qualitative analysis for quarterly prospective and retrospective assessments of hedge effectiveness. The Company also monitors the risk of counterparty default on an ongoing basis and noted that the counterparty is a reputable financial institution. The unrealized loss on the derivative instrument was initially reported within other comprehensive loss in the condensed consolidated statement of operations and comprehensive (loss) for the three months ended September 30, 2019, and will be subsequently reclassified to earnings in interest expense, net in the consolidated statements of operations when the hedged transaction affects earnings. There were no reclassifications from other comprehensive loss into interest expense for the three months September 30, 2019. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Loss | ACCUMULATED OTHER COMPREHENSIVE LOSS For the nine months ended September 30, 2019, changes in accumulated other comprehensive loss were as follows: (in thousands) Foreign Currency Translation Unrealized Total Balance at December 31, 2018 $ (286) $ — $ (286) Other comprehensive income (loss) 38 (310) (272) Effects of the reorganization transactions 203 — 203 Other comprehensive (income) loss attributable to (14) 236 222 Balance at September 30, 2019 $ (59) $ (74) $ (133) For the nine months ended September 30, 2018, changes in accumulated other comprehensive loss were as follows: (in thousands) Foreign Currency Translation Unrealized Total Balance at December 31, 2017 $ (209) $ — $ (209) Other comprehensive loss (20) — (20) Balance at September 30, 2018 $ (229) $ — $ (229) |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts for certain of the Company's financial instruments including cash, accounts receivable, accounts payable and certain accrued expenses and other assets and liabilities approximate fair value due to the short-term nature of these instruments. The Company's financial liabilities measured at fair value on a recurring basis are as following at September 30, 2019: Condensed Consolidated Fair Value at September 30, 2019 (in thousands) Level 1 Level 2 Level 3 Total Liabilities: Interest rate swap contract Other long-term liabilities $ — $ 310 $ — $ 310 Contingent consideration Other long-term liabilities — — 1,553 1,553 Total Liabilities $ — $ 310 $ 1,553 $ 1,863 Interest Rate Swap Contracts The fair value of the Company's interest rate swap liability is determined based on the present value of expected future cash flows. Since the Company's interest rate swap values are based on the LIBOR forward curve and credit default swap rates, which are observable at commonly quoted intervals for the full term of the swap, it is considered a Level 2 measurement. Contingent Consideration For the Conscious Wholesale acquisition, additional purchase price payments ranging from $0 to $3.3 million are contingent upon the achievement of certain operational and financial targets measured through December 31, 2020. At the date of acquisition, the Company estimated the preliminary fair value of the contingent consideration to be approximately $1.6 million as discussed in "Note 9—Business Acquisitions". The estimate of the fair value of contingent consideration was determined by applying a risk-neutral framework using a Monte Carlo Simulation, which includes inputs not observable in the market, and therefore represents a Level 3 measurement. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTSOn November 8, 2019, the Company's Board of Directors approved a stock repurchase program authorizing up to $5.0 million in share repurchases of the Company’s outstanding shares of Class A common stock. Under the program, the Company may repurchase shares in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The Company may periodically repurchase shares in open market transactions, directly or indirectly, in block purchases and in privately negotiated transactions or otherwise. The timing, pricing, and amount of any repurchases under the share repurchase program will be determined by the Company’s management at its discretion based on a variety of factors, including, but not limited to, trading volume and market price of the Company’s Class A common stock, corporate considerations, the Company’s working capital and investment requirements, general market and economic conditions, and legal requirements. The share repurchase program does not obligate the Company to repurchase any common stock and may be modified, discontinued, or suspended at any time. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 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 and nine months ended September 30, 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 unaudited condensed consolidated financial statements include the accounts of the Company, the Operating Company, and the Operating Company's consolidated 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 management to make estimates and assumptions. These estimates and underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenue and expenses. Such estimates include the accounts receivable allowance for doubtful accounts, the allowance for slow-moving or obsolete inventory, the valuation of deferred tax assets, goodwill, intangibles and other long-lived assets, contingent consideration, the tax receivable agreement (TRA) liability, and the valuation and assumptions underlying equity-based compensation. Accordingly, actual results could differ from those estimates. |
Segment Reporting | Segment ReportingThe Company’s chief operating decision maker (“CODM”) is Aaron LoCascio, Greenlane’s Chief Executive Officer. The Company has two distinct operating segments, which include 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 Company had a change in reportable segments as the Canadian operating segment met certain quantitative thresholds based upon which its separate disclosure was required. The United States and Canada reportable segments have been identified based on how the CODM manages the business, makes resource allocation and operating decisions, and evaluates operating performance. |
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 Company accounts for equity-based compensation grants of equity awards to employees in accordance with ASC Topic 718, Compensation Stock Compensation |
Fair Value Measurements | Fair Value Measurements The Company applies the provisions of ASC Topic 820, Fair Value Measurements , which defines fair value, establishes a framework for its measurement and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company determines the fair market values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following three levels of inputs may be used to measure fair value: 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. |
Cash | CashFor purposes of reporting cash flows, the Company considers cash on hand, checking accounts, and savings accounts to be cash. The Company considers all highly-liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. The Company places its cash with high credit quality financial institutions, which provide insurance through the Federal Deposit Insurance Company. At times, the balance in these accounts may exceed federal insured limits. The Company performs periodic evaluations of the relative credit standing of these institutions and does not expect any losses related to such concentrations. |
Accounts Receivable, net | Accounts Receivable, netAccounts receivable represent amounts due from customers for merchandise sales and are recorded when revenue is earned. 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 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 are pledged as collateral for the line of credit. |
Inventories, net | Inventories, netInventories consist of finished goods that are valued at the lower of cost or net realizable value on a weighted average cost basis. The Company has established an allowance for slow-moving or obsolete inventory based upon assumptions about future demands and market conditions. At September 30, 2019 and December 31, 2018, the reserve for obsolescence was approximately $0.2 million and $0.2 million, respectively. Inventory is pledged as collateral for the line of credit. |
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. The 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 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 combination, 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 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. No impairment charges for long-lived assets were recognized during the nine months ended September 30, 2019 and 2018. |
Intangible Assets, net | Intangible Assets, netIntangible assets consist of domain names, intellectual property, distribution agreements, proprietary technology, trademarks and tradenames, customer relationships, 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 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 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 nine months ended September 30, 2019 and 2018. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in business combinations. In accordance with ASC Topic 350, Intangibles — Goodwill and Other |
Investments | Investments Equity method investments Investee companies that are not consolidated, but over which the 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 Company’s condensed consolidated balance sheets and statements of operations and comprehensive (loss) income; however, the 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 and comprehensive (loss) income. The Company’s carrying value in an equity method investee company is reflected in the caption “Investments” in the Company’s condensed consolidated balance sheets. When the carrying value in an equity method investee is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company has guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. The Company’s investment that is accounted for on the equity method of accounting consists of a 50% interest in a joint venture entity. The investment in this joint venture entity was not significant at September 30, 2019 and December 31, 2018. In the second quarter of 2019, the Company consolidated a former joint venture, which was previously accounted for as an equity investment. During the three and nine months ended September 30, 2019, the operating activity related to this joint venture was not material. These investments were not established until the first quarter of 2019. The Company had no income from its equity method investment for the three and nine months ended September 30, 2019, respectively. Equity securities |
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 Company. |
Deferred Offering Costs | Deferred Offering CostsThe Company capitalized certain legal, accounting, and other third-party fees that were directly attributable to Greenlane’s 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 functional currency of the Operating Company's wholly-owned, Netherlands-based, subsidiary is the Euro. The assets and liabilities of these subsidiaries are translated into U.S. dollars at current exchange rate at each balance sheet date for assets and liabilities and an appropriate average exchange rate for each applicable period within the condensed consolidated statements of operations and comprehensive (loss) income. 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’/stockholders' deficit in the condensed consolidated balance sheets. Other exchange gains and losses are reported in the condensed consolidated statements of operations and comprehensive (loss) income. |
Comprehensive (Loss) Income | Comprehensive (Loss) Income Comprehensive (loss) income includes net (loss) income as currently reported by the Company, adjusted for other comprehensive items. Other comprehensive items for the Company consist of foreign currency translation gains and losses and unrealized gains and losses on derivative financial instruments that qualify as hedges. |
Advertising | AdvertisingAdvertising costs are expensed as incurred and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive (loss) income. |
Income Taxes | Income Taxes The Company is a corporation subject to income taxes in the United States. Certain subsidiaries of the Operating Company are taxable separately from the Company. The Company's proportional share of the Operating Company's subsidiaries' provisions are included in the Company's consolidated financial statements. The Company’s deferred income tax assets and liabilities are computed for differences between the tax basis and financial statement amounts that will result in taxable or deductible amounts in the future. The computed deferred balances are based on enacted tax laws and applicable rates for the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized for deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In making such a determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines it would be able to realize its deferred tax assets for which a valuation allowance had been recorded, then an adjustment would be made to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company evaluates the tax positions taken on income tax returns that remain open and positions expected to be taken on the current year tax returns to identify uncertain tax positions. Unrecognized tax benefits on uncertain tax positions are recorded on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is more than 50 percent likely to be realized is recognized. Interest and penalties related to unrecognized tax benefits are recorded in income tax benefit. See “Note 10—Income Taxes.” Tax Receivable Agreement (TRA) The Company entered into the TRA with the Operating Company and each of the members of the Operating Company that provides for the payment by the Operating Company to the members of 85% of the amount of tax benefits, if any, that the Company may actually realize (or in some circumstances are deemed to realize) as a result of (i) increases in tax basis resulting from any future redemptions that are funded by the Company or exchanges of Common Units as described above in “Note 1—Business Operations and Organization” and (ii) certain other tax benefits attributable to payments made under the TRA. The annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits. The Operating Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. The TRA payments are not conditioned upon any continued ownership interest in the Operating Company. The rights of each noncontrolling interest holder under the TRA are assignable to transferees of its interest in the Operating Company. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Operating Company generates each year and the applicable tax rate. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when a customer obtains control of the promised goods or services. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods or services, net of any variable consideration (e.g., rights to return product, sales incentives, others) and any taxes collected from customers and subsequently remitted to governmental authorities. The Company uses a best estimate approach to measure variable consideration which approximates the expected value method. The Company applies the following five-step model in order to determine this amount: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services the Company transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, management reviews the contract to determine which performance obligations must be delivered and which of these performance obligations are distinct. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. The 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 Company’s distribution centers. The 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 September 30, 2019 and 2018, and less than 0.5% of revenues for the nine months ended September 30, 2019 and 2018. The Company provides no warranty on products sold. Product warranty is provided by the manufacturers. The 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 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 Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net revenue from products in the period such variances become known. The 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 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 and other current liabilities on the Company’s condensed consolidated balance sheets and was approximately $0.7 million and $0.5 million at September 30, 2019 and December 31, 2018, respectively. Included in other current assets is an asset totaling approximately $0.3 million as of September 30, 2019 and December 31, 2018, respectively, relating to the recoverable cost of merchandise estimated to be returned by customers. The Company established a supply chain for premium, patented, child-resistant packaging, closed-system vaporization solutions and custom-branded retail products. For these product offerings, the 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 and other current liabilities on the Company’s condensed consolidated balance sheets and were approximately $3.0 million and $3.2 million at September 30, 2019 and December 31, 2018, respectively. See “Note 4—Composition of Certain Financial Statement Captions.” The 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 , in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned. In all arrangements, the Company determined that it acts as the principal in the transaction, controlling the good or service before it is transferred to the customer. As such, the Company records gross revenue for such arrangements. The 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 Company also applies the practical expedient provided for by ASC 606 based upon which the 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 and comprehensive (loss) income. Furthermore, the Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. |
Net Income (Loss) Per Share | Net Income (Loss) Per ShareBasic net income (loss) per share is computed by dividing net income (loss) attributable to the Company by the weighted average number of shares outstanding during the period. Diluted net income (loss) per share is computed by giving effect to all potential weighted average dilutive shares including stock options, restricted stock units, dividend equivalent units, restricted stock awards, and Common Units exchangeable for shares of Class A common stock for the periods after the closing of the IPO. The dilutive effect of outstanding awards, if any, is reflected in diluted earnings per share by application of the treasury stock method or if-converted method, as applicable. |
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) , which, among other things, requires lessees to recognize substantially all leases on their balance sheets and disclose key information about leasing arrangements. The new standard establishes a right of use (“ROU”) model that requires a lessee to recognize a ROU asset and liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The new standard became effective for the Company on January 1, 2019. The Company adopted this standard beginning January 1, 2019 using the modified retrospective transition approach. See “Note 6—Leases” for further discussion regarding the Company’s adoption of the new standard. In September 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation: Improvements to Nonemployee Share Based Payment Accounting . ASU 2018-7 provides guidance on accounting for equity-based awards issued to nonemployees. The standard was effective for annual and interim periods beginning after December 15, 2018. The Company adopted this standard beginning January 1, 2019. Adoption of the new standard did not have a material impact on the Company’s financial statements. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities |
Recently Issued Accounting Guidance Not Yet Adopted | Recently Issued Accounting Guidance Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses . The standard requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale securities and requires estimated credit losses to be recorded as allowances rather than as reductions to the amortized cost of the securities. This standard is effective for the Company for fiscal years, and interim periods within those years, beginning January 1, 2020, with early adoption permitted. The Company is currently evaluating the potential impact the new guidance may have on the Company's financial statements. 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), which eliminates, adds and modifies certain disclosure requirements for fair value measurements. For example, entities will no longer have to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those years. Entities are permitted to early adopt the entire standard or only the provisions that eliminate or modify the requirements. The Company is currently evaluating the new guidance but does not expect it to have a material impact on its financial statements. |
Business Operations and Organ_2
Business Operations and Organization (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Stockholders Equity | The following table sets forth the economic and voting interests of holders of Greenlane’s Common Stock as of the date of this Quarterly Report on Form 10-Q: Class of Common Stock (ownership) Total Shares (1) Class A Shares (as converted) (2) Economic Ownership in the Operating Company (3) Voting Interest in Greenlane (4) Economic Interest in Greenlane (5) Class A (purchasers in the IPO) 6,450,000 6,450,000 15.4 % 6.9 % 64.5 % Class A (former convertible note holders) (5) 3,547,776 3,547,776 8.5 % 3.8 % 35.5 % Class B (non-founder members) 5,988,485 5,988,485 14.3 % 6.4 % — % Class C (founder members) 77,791,218 25,930,406 61.9 % 83.0 % — % Total 93,777,479 41,916,667 100.0% 100.0% 100.0 % (1) Represents the total number of shares of a particular class of Greenlane's Common Stock held as of the date of this Quarterly Report on Form 10-Q. (2) Represents the number of shares of Greenlane's Class A common stock that will be held outstanding assuming the exchange of all outstanding shares of Class B common stock and Class C common stock upon redemption of Common Units. Shares of Class B common stock and Class C common stock, as the case may be, will be canceled, without consideration, on a one-to-one basis in the case of the Class B common stock pursuant to the terms of the Operating Agreement. (3) Represents the indirect economic interest in the Operating Company through the holders' ownership of Common Stock. (4) Represents the aggregate voting interest in Greenlane through the holders' ownership of Common Stock. Each share of Class A common stock, Class B common stock and Class C common stock entitles its holder to one vote per share on all matters submitted to a vote of Greenlane's stockholders. (5) Represents shares of Class A common stock issued to the prior holders of convertible notes upon conversion of such convertible notes at a settlement price equal to 80% of the IPO price. |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share of Class A common stock is as follows: Three months ended September 30, 2019 Nine months ended September 30, 2019 (in thousands, except per share amounts) Numerator: Net loss $ (8,961) $ (10,757) Less: Net loss attributable to non-controlling interests (2,563) (4,016) Net loss attributable to Class A common stockholders $ (6,398) $ (6,741) Denominator: Weighted average shares of Class A common stock outstanding 9,998 9,998 Net loss per share of Class A common stock - basic and diluted $ (0.64) $ (0.67) |
Composition of Certain Financ_2
Composition of Certain Financial Statement Captions (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Payables and Accruals [Abstract] | |
Schedule of Other Assets | The following table summarizes the composition of accrued expenses and other current liabilities as of September 30, 2019 and December 31, 2018: September 30, 2019 December 31, 2018 (in thousands) Accrued expenses and other current liabilities: Customer deposits $ 2,954 $ 3,226 Accrued offering costs — 1,500 Refund liability 670 459 Payroll related including bonus 1,499 1,314 Accrued taxes, state and income 1,222 665 Accrued marketing fees and royalties 361 804 Accrued purchase price consideration for business acquisition 1,438 — Other 1,552 1,977 $ 9,696 $ 9,945 |
Long Term Debt (Tables)
Long Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | The Company’s long-term debt, excluding operating lease liabilities and finance lease liabilities, consisted of the following amounts at the dates indicated: September 30, 2019 December 31, (in thousands) 3.0% note payable to a lender in relation to a four-year vehicle loan for the purchase of a truck used in operations. $ 20 $ 24 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. 8,339 8,460 Convertible notes issued in December 2018 and in January 2019. — 40,200 8,359 48,684 Less unamortized debt issuance costs (125) (140) Less current portion of long-term debt (175) (168) Long-term debt, net, excluding operating leases and finance leases $ 8,059 $ 48,376 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Lease, Cost | The table below presents information related to the Company’s finance and operating leases: September 30, (in thousands) Finance lease cost Amortization of leased assets $ 96 Interest of lease liabilities 36 Operating lease costs Operating lease cost (a) 604 Variable lease cost (a) 280 Total lease cost $ 1,016 (a) Expenses are classified within general and administrative expenses within the Company’s condensed consolidated statement of operations and comprehensive (loss) income. The table below presents lease-related terms and discount rates as of September 30, 2019: September 30, Weighted average remaining lease terms Operating leases 3.6 years Finance leases 3.1 years Weighted average discount rate Operating leases 4.9 % Finance leases 6.7 % |
Lessee, Operating Lease, Liability, Maturity | The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown. Finance Operating Leases Total Finance and Operating Lease Obligations (in thousands) Remainder of 2019 $ 34 $ 196 $ 230 2020 133 772 905 2021 121 484 605 2022 58 489 547 2023 19 448 467 Thereafter 8 416 424 Total minimum lease payments $ 373 $ 2,805 $ 3,178 Less: imputed interest 35 305 340 Present value of minimum lease payments $ 338 $ 2,500 $ 2,838 Less: current portion 115 684 799 Long-term portion $ 223 $ 1,816 $ 2,039 |
Finance Lease, Liability, Maturity | The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown. Finance Operating Leases Total Finance and Operating Lease Obligations (in thousands) Remainder of 2019 $ 34 $ 196 $ 230 2020 133 772 905 2021 121 484 605 2022 58 489 547 2023 19 448 467 Thereafter 8 416 424 Total minimum lease payments $ 373 $ 2,805 $ 3,178 Less: imputed interest 35 305 340 Present value of minimum lease payments $ 338 $ 2,500 $ 2,838 Less: current portion 115 684 799 Long-term portion $ 223 $ 1,816 $ 2,039 |
Lessor, Operating Lease, Payments to be Received, Maturity | The following table represents the maturity analysis of undiscounted cash flows related to lease payments which the Company expects to receive from its existing operating lease agreements with tenants: Rental Income (in thousands) Remainder of 2019 $ 157 2020 619 2021 585 2022 76 Thereafter — Total $ 1,437 |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Business Combinations [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the purchase price allocation and the estimated fair value of the net assets acquired and liabilities assumed at the date of acquisition. Pollen Gear LLC (in thousands) Cash $ 91 Accounts receivable 546 Vendor deposits 1,700 Other deposits 18 Property and equipment, net 342 Trade name 918 Design libraries 1,677 Goodwill 3,550 Net liabilities (2,178) Total purchase price $ 6,664 |
Schedule Of Recognized Identified Assets Acquired And Liabilities Assumed 1 | The following table summarizes the preliminary purchase price allocation and the estimated fair value of the net assets acquired and liabilities assumed at the date of acquisition. The purchase price allocation for Conscious Wholesale is preliminary pending completion of the fair value analysis of the acquired assets and liabilities: Conscious Wholesale (in thousands) Cash $ 812 Accounts receivable 313 Inventory, net 1,820 Other current assets 955 Trade names 153 Customer relationships 1,044 Goodwill 2,264 Net liabilities (1,494) Total purchase price $ 5,867 |
Business Acquisition, Pro Forma Information | The following unaudited pro forma financial information represents the combined results for the Company, Pollen Gear, and Conscious Wholesale for the three and nine months ended September 30, 2019 and 2018 as if Pollen Gear and Conscious Wholesale had been acquired on January 1, 2018, and their results had been included in the consolidated results of the Company beginning on that date: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 (in thousands) Net Sales $ 47,247 $ 46,352 $ 156,114 $ 136,507 Cost of Goods Sold 39,673 35,082 128,480 103,200 Gross Profit 7,574 11,270 27,634 33,307 Net Loss $ (7,943) $ (339) $ (29,782) $ (2,619) |
Equity-Based Compensation (Tabl
Equity-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Compensation Related Costs [Abstract] | |
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award | The fair value of the stock option awards during the nine months ended September 30, 2019 was determined on the grant dates using the Black-Scholes valuation model based on the following ranges of weighted-average assumptions: September 30, 2019 Expected volatility (1) 85% Expected dividend yield (2) — Expected term (3) 2.50 - 3.75 years Risk-free interest rate (4) 1.44% - 2.40% (1) Expected volatility is based on the historical volatility of a selected peer group over a period equivalent to the expected term. (2) The Company has assumed a dividend yield of zero as management has no plans to declare dividends in the foreseeable future. (3) Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method. (4) The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term. |
Schedule of stock option activity | A summary of stock option activity for the nine months ended September 30, 2019 is as follows: Stock Options Outstanding at beginning of period — Granted 654,284 Exercised — Forfeited (21,437) Outstanding at end of period 632,847 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | The table below provides information on revenues from external customers, intersegment revenues, and segment income for the reportable segments for the three and nine months ended September 30, 2019 and 2018. Intersegment revenues are eliminated in consolidation. Three Months Ended Three Months Ended United States Canada Total United States Canada Total (in thousands) (in thousands) Revenues from external customers $ 38,597 $ 6,289 $ 44,886 $ 40,576 $ 2,985 $ 43,561 Intercompany revenues 1,392 23 1,415 898 62 960 Segment operating (loss) income (2,827) 200 (2,627) 504 188 692 Nine Months Ended Nine Months Ended United States Canada Total United States Canada Total (in thousands) (in thousands) Revenues from external customers $ 129,017 $ 18,753 $ 147,770 $ 120,665 $ 6,714 $ 127,379 Intercompany revenues 2,910 105 3,015 2,742 149 2,891 Segment operating (loss) income (5,077) (38) (5,115) 3,798 288 4,086 |
Reconciliation of Operating Profit (Loss) from Segments to Consolidated | The following is a reconciliation of total loss for the reportable segments to consolidated income (loss) from continuing operations before income taxes. “Corporate and other income (loss)” is comprised of unallocated corporate overhead expenses. Three Months Ended Nine Months Ended 2019 2018 2019 2018 (in thousands) Total segment (loss) income for reportable segments $ (2,627) $ 692 $ (5,115) $ 4,086 Corporate and other loss (2,898) (357) (9,511) (1,075) Interest expense (119) (136) (862) (296) Change in fair value of convertible notes payable — — (12,063) — Other income (expense), net 7,746 (141) 8,670 18 Income (loss) from continuing operations before income taxes $ 2,102 $ 58 $ (18,881) $ 2,733 |
Derivative Instruments and He_2
Derivative Instruments and Hedging Activity (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Interest Rate Derivatives | Details of the outstanding swap contract as of September 30, 2019, which is a pay fixed and receive floating contract, is as follows: Swap Maturity Notional Value Pay Fixed Rate Receive Floating Rate Floating Rate October 1, 2025 $ 8,339 2.07750 % One-Month LIBOR Monthly |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Schedule of Accumulated Other Comprehensive Income (Loss) | For the nine months ended September 30, 2019, changes in accumulated other comprehensive loss were as follows: (in thousands) Foreign Currency Translation Unrealized Total Balance at December 31, 2018 $ (286) $ — $ (286) Other comprehensive income (loss) 38 (310) (272) Effects of the reorganization transactions 203 — 203 Other comprehensive (income) loss attributable to (14) 236 222 Balance at September 30, 2019 $ (59) $ (74) $ (133) For the nine months ended September 30, 2018, changes in accumulated other comprehensive loss were as follows: (in thousands) Foreign Currency Translation Unrealized Total Balance at December 31, 2017 $ (209) $ — $ (209) Other comprehensive loss (20) — (20) Balance at September 30, 2018 $ (229) $ — $ (229) |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Liabilities Measured on Recurring Basis | Condensed Consolidated Fair Value at September 30, 2019 (in thousands) Level 1 Level 2 Level 3 Total Liabilities: Interest rate swap contract Other long-term liabilities $ — $ 310 $ — $ 310 Contingent consideration Other long-term liabilities — — 1,553 1,553 Total Liabilities $ — $ 310 $ 1,553 $ 1,863 |
Business Operations and Organ_3
Business Operations and Organization (Details) - USD ($) | Apr. 29, 2019 | Apr. 23, 2019 | Apr. 23, 2019 | Sep. 30, 2019 | Sep. 30, 2018 |
Business Operations and Organization (Textual) | |||||
New shares issued (in shares) | 93,777,479 | ||||
New shares issued, as converted (in shares) | 41,916,667 | ||||
Shares issued in transaction (in shares) | 1,200,000 | ||||
Underwriters purchased an additional shares of common stock from the selling stockholders (in shares) | 450,000 | ||||
Aggregate net proceeds | $ 83,003,000 | $ 0 | |||
Voting power percentage | 10000.00% | ||||
Percentage of ownership | 10000.00% | ||||
Percentage of ownership in successor | 100.00% | ||||
Intraperiod tax allocation | $ 0.85 | ||||
Class A common stock | |||||
Business Operations and Organization (Textual) | |||||
New shares issued (in shares) | 3,547,776 | ||||
Price per share (in dollars per share) | $ 17 | $ 17 | |||
Settlement price percentage | 80.00% | ||||
Underwriters purchased an additional shares of common stock from the selling stockholders (in shares) | 450,000 | ||||
Aggregate net proceeds | $ 79,500,000 | ||||
Percentage of outstanding common units | 23.90% | ||||
Voting power percentage | 83.00% | ||||
Tax Receivable Agreement | |||||
Business Operations and Organization (Textual) | |||||
New shares issued (in shares) | 31,918,891 | ||||
Voting power percentage | 89.40% | ||||
IPO | Class A common stock | |||||
Business Operations and Organization (Textual) | |||||
New shares issued (in shares) | 6,000,000 | 6,000,000 | |||
Shares issued in transaction (in shares) | 750,000 | 750,000 | |||
IPO | Class A common stock | |||||
Business Operations and Organization (Textual) | |||||
New shares issued (in shares) | 5,250,000 | 5,250,000 | |||
Price per share (in dollars per share) | $ 17 | $ 17 | |||
Greenlane Holding Company | |||||
Business Operations and Organization (Textual) | |||||
New shares issued (in shares) | 9,997,776 | ||||
Percentage of ownership | 23.90% | ||||
Public Purchasers | |||||
Business Operations and Organization (Textual) | |||||
New shares issued (in shares) | 6,450,000 | ||||
New shares issued, as converted (in shares) | 6,450,000 | ||||
Voting power percentage | 6.90% | ||||
Percentage of ownership | 15.40% | ||||
Percentage of ownership in successor | 64.50% | ||||
Former Convertible Note Holders | |||||
Business Operations and Organization (Textual) | |||||
New shares issued (in shares) | 3,547,776 | ||||
New shares issued, as converted (in shares) | 3,547,776 | ||||
Voting power percentage | 3.80% | ||||
Percentage of ownership | 8.50% | ||||
Percentage of ownership in successor | 35.50% | ||||
Non-Founder Members | |||||
Business Operations and Organization (Textual) | |||||
New shares issued (in shares) | 5,988,485 | ||||
New shares issued, as converted (in shares) | 5,988,485 | ||||
Voting power percentage | 6.40% | ||||
Percentage of ownership | 14.30% | ||||
Percentage of ownership in successor | 0.00% | ||||
Founder Members | |||||
Business Operations and Organization (Textual) | |||||
New shares issued (in shares) | 77,791,218 | ||||
New shares issued, as converted (in shares) | 25,930,406 | ||||
Voting power percentage | 83.00% | ||||
Percentage of ownership | 61.90% | ||||
Percentage of ownership in successor | 0.00% | ||||
Members | |||||
Business Operations and Organization (Textual) | |||||
Voting power percentage | 89.40% | ||||
Percentage of ownership | 76.20% |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Apr. 30, 2019 | Dec. 31, 2018 | |
Summary of Significant Accounting Policies (Textual) | ||||||
Aggregate equity interest percentage | 100.00% | 100.00% | ||||
Cash, uninsured amount | $ 1,000,000 | $ 1,000,000 | $ 1,100,000 | |||
Inventory valuation reserves | 200,000 | 200,000 | 200,000 | |||
Depreciation | 300,000 | $ 100,000 | 1,000,000 | $ 200,000 | ||
Amortization | $ 300,000 | $ 1,000,000 | 300,000 | 800,000 | ||
Goodwill impairment | $ 0 | 0 | ||||
Equity method investment, ownership percentage | 50.00% | 50.00% | ||||
Income from equity method investment | $ 0 | $ 0 | ||||
Equity method investments | 2,000,000 | 2,000,000 | ||||
Equity method investments, upward price adjustment | $ 1,500,000 | 1,500,000 | ||||
Deferred offering costs | $ 3,500,000 | |||||
Advertising expense | 3,300,000 | $ 2,700,000 | ||||
Intraperiod tax allocation | $ 0.85 | |||||
Intraperiod tax allocation remaining after distribution | 15.00% | |||||
Intraperiod tax allocation payable | 85.00% | 85.00% | ||||
Revenue percentage | 0.50% | 0.50% | 0.50% | 0.50% | ||
Customer deposits | $ 3,000,000 | $ 3,000,000 | 3,200,000 | |||
Airgraft Inc. | ||||||
Summary of Significant Accounting Policies (Textual) | ||||||
Equity method investment, ownership percentage | 1.49% | 1.49% | ||||
Advertising expense | $ 1,000,000 | |||||
Airgraft Inc. | IPO | ||||||
Summary of Significant Accounting Policies (Textual) | ||||||
Advertising expense | $ 900,000 | |||||
Liability for returns included in accrued expenses | 700,000 | $ 700,000 | 500,000 | |||
Other current assets | $ 300,000 | $ 300,000 | $ 300,000 | |||
Total order cost, percentage | 50.00% |
Net Loss Per Share - Calculatio
Net Loss Per Share - Calculation of Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 5 Months Ended | 9 Months Ended | ||||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |||
Numerator | |||||||
Net loss | $ (8,961) | $ (135) | $ (10,757) | $ (29,847) | $ 2,391 | ||
Less: Net loss attributable to non-controlling interest | (2,563) | 0 | (4,016) | (4,016) | 0 | ||
Net (loss) income attributable to Greenlane Holdings, Inc. | $ (6,398) | $ (135) | $ (6,741) | $ (25,831) | $ 2,391 | ||
Denominator | |||||||
Weighted average shares of Class A common stock outstanding (in shares) | 9,998 | [1] | 9,998 | 9,998 | [1] | ||
Net loss per share of Class A common stock - basic and diluted (in dollars per share) | $ (0.64) | [1] | $ (0.67) | $ (0.67) | [1] | ||
[1] | Basic and diluted net loss per Class A common stock is presented only for the period after the Company’s organizational transactions. See Note 1 for a description of the organizational transactions. See Note 3 for the calculation of net loss per share. |
Net Loss Per Share - Narrative
Net Loss Per Share - Narrative (Details) - shares | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Common Class B | ||
Net Loss Per Share (Textual) | ||
Antidilutive securities (in shares) | 5,988,485 | 5,988,485 |
Class C Common Stock | ||
Net Loss Per Share (Textual) | ||
Antidilutive securities (in shares) | 77,791,218 | 77,791,218 |
Stock Options | ||
Net Loss Per Share (Textual) | ||
Antidilutive securities (in shares) | 632,847 | 632,847 |
Composition of Certain Financ_3
Composition of Certain Financial Statement Captions (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Accrued expenses and other current liabilities: | ||
Customer deposits | $ 2,954 | $ 3,226 |
Accrued offering costs | 0 | 1,500 |
Refund liability | 670 | 459 |
Payroll related including bonus | 1,499 | 1,314 |
Accrued taxes, state and income | 1,222 | 665 |
Accrued marketing fees and royalties | 361 | 804 |
Accrued purchase price consideration for business acquisition | 1,438 | 0 |
Other | 1,552 | 1,977 |
Accounts Payable and Accrued Liabilities, Current, Total | $ 9,696 | $ 9,945 |
Long Term Debt - Excluding Oper
Long Term Debt - Excluding Operating and Finance Leases (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Long-term debt | $ 8,359 | $ 48,684 |
Less unamortized debt issuance costs | (125) | (140) |
Less current portion of long-term debt | (175) | (168) |
Long-term debt, net, excluding operating leases and finance leases | 8,059 | 48,376 |
Credit note | ||
Long-term debt | 8,339 | 8,460 |
3.0% note payable | ||
Long-term debt | 20 | 24 |
Convertible notes | ||
Long-term debt | $ 0 | $ 40,200 |
Long Term Debt - Narrative (Det
Long Term Debt - Narrative (Details) - USD ($) | Apr. 23, 2019 | Jan. 04, 2019 | Dec. 21, 2018 | Oct. 01, 2018 | Jan. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 |
Long Term Debt (Textual) | ||||||||
Convertible notes | $ 0 | $ 40,200,000 | ||||||
Net cash proceeds | 8,050,000 | $ 0 | ||||||
Convertible Debt | ||||||||
Long Term Debt (Textual) | ||||||||
Convertible notes | $ 8,100,000 | $ 40,200,000 | ||||||
Net cash proceeds | 6,500,000 | 38,900,000 | ||||||
Proceeds from issuance of long-term debt | $ 15,100,000 | 3,000,000 | ||||||
Debt issuance costs | $ 400,000 | |||||||
Debt issuance costs paid | $ 1,200,000 | 1,700,000 | ||||||
Change in fair value for period | 12,100,000 | |||||||
Convertible Debt | Common Class A | ||||||||
Long Term Debt (Textual) | ||||||||
Debt conversion, shares issued | 3,547,776 | |||||||
Real Estate Note | ||||||||
Long Term Debt (Textual) | ||||||||
Revolving credit loan, stated percentage | 2.39% | |||||||
Debt instrument, face amount | $ 10,000,000 | |||||||
Annual principal payment | 8,500,000 | |||||||
Line of Credit | ||||||||
Long Term Debt (Textual) | ||||||||
Revolving credit loan | $ 15,000,000 | $ 150,000 | ||||||
Revolving credit loan, stated percentage | 3.50% |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Lessee, Lease, Description [Line Items] | ||||
Rental income | $ 100,000 | $ 0 | $ 500,000 | $ 0 |
Minimum | ||||
Lessee, Lease, Description [Line Items] | ||||
Finance lease, term | 3 years | 3 years | ||
Maximum | ||||
Lessee, Lease, Description [Line Items] | ||||
Finance lease, term | 5 years | 5 years | ||
Building | Minimum | ||||
Lessee, Lease, Description [Line Items] | ||||
Operating lease, term | 3 years | 3 years | ||
Building | Maximum | ||||
Lessee, Lease, Description [Line Items] | ||||
Operating lease, term | 7 years | 7 years | ||
Equipment | Minimum | ||||
Lessee, Lease, Description [Line Items] | ||||
Operating lease, term | 0 years | 0 years | ||
Equipment | Maximum | ||||
Lessee, Lease, Description [Line Items] | ||||
Operating lease, term | 7 years | 7 years |
Leases - Future Minimum Lease P
Leases - Future Minimum Lease Payments (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Finance Leases | ||
Remainder of 2019 | $ 34 | |
2020 | 133 | |
2021 | 121 | |
2022 | 58 | |
2023 | 19 | |
Thereafter | 8 | |
Total minimum lease payments | 373 | |
Less: imputed interest | 35 | |
Present value of minimum lease payments | 338 | |
Less: current portion | 115 | $ 95 |
Long-term portion | 223 | 237 |
Operating Leases | ||
Remainder of 2019 | 196 | |
2020 | 772 | |
2021 | 484 | |
2022 | 489 | |
2023 | 448 | |
Thereafter | 416 | |
Total minimum lease payments | 2,805 | |
Less: imputed interest | 305 | |
Present value of minimum lease payments | 2,500 | |
Less: current portion | 684 | 0 |
Long-term portion | 1,816 | $ 0 |
Finance and operating lease obligations, remainder of 2019 | 230 | |
Finance and operating lease obligations, 2020 | 905 | |
Finance and operating lease obligations, 2021 | 605 | |
Finance and operating lease obligations, 2022 | 547 | |
Finance and operating lease obligations, 2023 | 467 | |
Finance and operating lease obligations, thereafter | 424 | |
Total minimum lease payments | 3,178 | |
Less: imputed interest | 340 | |
Present value of minimum lease payments | 2,838 | |
Less: current portion | 799 | |
Long-term portion | $ 2,039 |
Leases - Total Lease Cost (Deta
Leases - Total Lease Cost (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Finance lease cost | |
Amortization of leased assets | $ 96 |
Interest of lease liabilities | 36 |
Operating lease costs | |
Operating lease cost | 604 |
Variable lease cost | 280 |
Total lease cost | $ 1,016 |
Leases - Lease Terms and Discou
Leases - Lease Terms and Discount Rates (Details) | Sep. 30, 2019 |
Weighted average remaining lease terms | |
Operating leases | 3 years 7 months 6 days |
Finance leases | 3 years 1 month 6 days |
Weighted average discount rate | |
Operating leases | 6.70% |
Finance leases | 4.90% |
Leases - Lease Maturities (Deta
Leases - Lease Maturities (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Leases [Abstract] | |
Remainder of 2019 | $ 157 |
2020 | 619 |
2021 | 585 |
2022 | 76 |
Thereafter | 0 |
Total | $ 1,437 |
Supplier Concentration (Details
Supplier Concentration (Details) - Supplier Concentration Risk - Vendors | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Supplier Concentration (Textual) | ||
Number of vendors | 2 | 2 |
Purchases from vendors | 54.50% | 63.20% |
Business Acquisitions - Narrati
Business Acquisitions - Narrative (Details) - USD ($) shares in Thousands, $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Jan. 14, 2019 | |
Business Acquisition (Textual) | ||
Aggregate equity interest percentage | 100.00% | |
Contingent consideration | $ 1,553 | |
Pollen Gear LLC | ||
Business Acquisition (Textual) | ||
Equity interest in acquiree, percentage | 100.00% | |
Aggregate equity interest percentage | 4.00% | |
Accounts receivable | $ 600 | |
Vendor deposits | $ 1,700 | |
Conscious Wholesale | ||
Business Acquisition (Textual) | ||
Equity interest in acquiree, percentage | 100.00% | |
Business combination, consideration | $ 5,867 | |
Cash paid to acquire businesses | $ 2,876 | |
Common stock issued (in shares) | 1,438 | |
Contingent consideration | $ 1,553 |
Business Acquisitions - Purchas
Business Acquisitions - Purchase Price Allocation (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jan. 14, 2019 |
Pollen Gear LLC | ||
Business Acquisition [Line Items] | ||
Cash | $ 91 | |
Accounts receivable | 546 | |
Vendor deposits | 1,700 | |
Other deposits | 18 | |
Property and equipment, net | 342 | |
Trade name | 918 | |
Design libraries | 1,677 | |
Goodwill | 3,550 | |
Net liabilities | (2,178) | |
Total purchase price | $ 6,664 | |
Conscious Wholesale | ||
Business Acquisition [Line Items] | ||
Cash | $ 812 | |
Accounts receivable | 313 | |
Inventory, net | 1,820 | |
Other current assets | 955 | |
Trade name | 153 | |
Customer relationships | 1,044 | |
Goodwill | 2,264 | |
Net liabilities | (1,494) | |
Total purchase price | $ 5,867 |
Business Acquisitions - Pro For
Business Acquisitions - Pro Forma Results (Details) - Pollen Gear LLC - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Business Acquisition [Line Items] | ||||
Net Sales | $ 47,247 | $ 46,352 | $ 156,114 | $ 136,507 |
Cost of Goods Sold | 39,673 | 35,082 | 128,480 | 103,200 |
Gross Profit | 7,574 | 11,270 | 27,634 | 33,307 |
Net Loss | $ (7,943) | $ (339) | $ (29,782) | $ (2,619) |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Taxes (Textual) | ||||
Deferred tax assets | $ 0 | $ 0 | ||
Provision for income taxes | 11,063,000 | $ 193,000 | 10,966,000 | $ 342,000 |
Penalties for tax uncertainties | 0 | 0 | ||
Intraperiod tax allocation | $ 0.85 | |||
Intraperiod tax allocation remaining after distribution | 15.00% | |||
Projected obligation liability | 0 | $ 0 | ||
Gain from release of obligation | $ 5,700,000 | $ 5,700,000 |
Equity-Based Compensation (Deta
Equity-Based Compensation (Details) - USD ($) | Aug. 20, 2019 | Apr. 23, 2019 | May 02, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 |
Equity-Based Compensation (Textual) | |||||||
Compensation expense related to equity-based compensation awards | $ 1,500,000 | $ 0 | $ 6,100,000 | $ 0 | |||
Unrecognized compensation expense related to unvested common units | $ 6,400,000 | ||||||
Unrecognized compensation expense related to unvested common units weighted-average period | 2 years 2 months 12 days | ||||||
Unrecognized compensation expense related to unvested stock options | $ 1,200,000 | ||||||
Unrecognized compensation expense related to unvested stock options weighted-average period | 3 years 10 months 24 days | ||||||
Exercise price (in dollars per share) | $ 6.42 | ||||||
Options granted (in shares) | 477,500 | ||||||
Expected volatility | 85.00% | ||||||
Minimum | |||||||
Equity-Based Compensation (Textual) | |||||||
Expected dividend yield | 0.00% | ||||||
Vesting period | 5 years | 0 years | |||||
Maximum | |||||||
Equity-Based Compensation (Textual) | |||||||
Expected dividend yield | 0.00% | ||||||
Vesting period | 10 years | 4 years | |||||
IPO | |||||||
Equity-Based Compensation (Textual) | |||||||
Options granted, net (in shares) | 176,784 | ||||||
Exercise price (in dollars per share) | $ 17 | ||||||
Equity Incentive Plan | |||||||
Equity-Based Compensation (Textual) | |||||||
Number of shares authorized (in shares) | 5,000,000 | 5,000,000 |
Equity-Based Compensation - Val
Equity-Based Compensation - Valuation Assumptions (Details) | 9 Months Ended |
Sep. 30, 2019 | |
Risk-free interest rate, minimum | 1.44% |
Risk-free interest rate, maximum | 2.40% |
Minimum | |
Expected dividend yield | 0.00% |
Expected term | 2 years 6 months |
Maximum | |
Expected dividend yield | 0.00% |
Expected term | 3 years 9 months |
Equity-Based Compensation - Sum
Equity-Based Compensation - Summary of Stock Option Activity (Details) - shares | Aug. 20, 2019 | Sep. 30, 2019 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Granted (in shares) | 477,500 | |
Stock option | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding at beginning of period (in shares) | 0 | |
Granted (in shares) | 654,284 | |
Exercised (in shares) | 0 | |
Forfeited (in shares) | (21,437) | |
Outstanding at end of period (in shares) | 632,847 |
Segment Reporting - Narrative (
Segment Reporting - Narrative (Details) | 9 Months Ended |
Sep. 30, 2019Segments | |
Segment Reporting Information [Line Items] | |
Number of operating segments | 2 |
Accounts Receivable | |
Segment Reporting Information [Line Items] | |
Concentration risk, percentage | 18.20% |
Segment Reporting - Revenues Fr
Segment Reporting - Revenues From External Customers (Details) - USD ($) $ in Thousands | 3 Months Ended | 5 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | |||||
Revenues from external customers | $ 44,886 | $ 43,561 | $ 147,770 | $ 127,379 | |
Segment operating (loss) income | (8,961) | (135) | $ (10,757) | (29,847) | 2,391 |
Reportable Geographical Components | |||||
Segment Reporting Information [Line Items] | |||||
Revenues from external customers | 44,886 | 43,561 | 147,770 | 127,379 | |
Intercompany revenues | 1,415 | 960 | 3,015 | 2,891 | |
Segment operating (loss) income | (2,627) | 692 | (5,115) | 4,086 | |
United States | Reportable Geographical Components | |||||
Segment Reporting Information [Line Items] | |||||
Revenues from external customers | 38,597 | 40,576 | 129,017 | 120,665 | |
Intercompany revenues | 1,392 | 898 | 2,910 | 2,742 | |
Segment operating (loss) income | (2,827) | 504 | (5,077) | 3,798 | |
Canada | Reportable Geographical Components | |||||
Segment Reporting Information [Line Items] | |||||
Revenues from external customers | 6,289 | 2,985 | 18,753 | 6,714 | |
Intercompany revenues | 23 | 62 | 105 | 149 | |
Segment operating (loss) income | $ 200 | $ 188 | $ (38) | $ 288 |
Segment Reporting - Reconciliat
Segment Reporting - Reconciliation of Segment Income (Loss) (Details) - USD ($) $ in Thousands | 3 Months Ended | 5 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | |||||
Segment operating (loss) income | $ (8,961) | $ (135) | $ (10,757) | $ (29,847) | $ 2,391 |
Interest expense | (119) | (136) | (862) | (296) | |
Income (loss) before income taxes | 2,102 | 58 | (18,881) | 2,733 | |
Reportable Geographical Components | |||||
Segment Reporting Information [Line Items] | |||||
Segment operating (loss) income | (2,627) | 692 | (5,115) | 4,086 | |
Corporate and other loss | (2,898) | (357) | (9,511) | (1,075) | |
Interest expense | (119) | (136) | (862) | (296) | |
Change in fair value of convertible notes payable | 0 | 0 | (12,063) | 0 | |
Other income (expense), net | 7,746 | (141) | 8,670 | 18 | |
Income (loss) before income taxes | $ 2,102 | $ 58 | $ (18,881) | $ 2,733 |
Non-Controlling Interest (Detai
Non-Controlling Interest (Details) | 9 Months Ended |
Sep. 30, 2019 | |
Noncontrolling Interest [Line Items] | |
Economic interest percentage | 23.90% |
Non-controlling interest holders | |
Noncontrolling Interest [Line Items] | |
Economic interest percentage | 76.10% |
Stockholders' Equity _ Member_2
Stockholders' Equity / Members' Deficit (Details) - $ / shares | Apr. 23, 2019 | Apr. 17, 2019 | Apr. 23, 2019 | Sep. 30, 2019 |
Class of Stock [Line Items] | ||||
Common stock, authorized (in shares) | 245,000,000 | |||
Common stock, shares authorized | 245,000,000 | |||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | |||
Shares cancelled (in shares) | 200 | |||
Common stock, par value (in dollars per share) | $ 0.01 | |||
New shares issued (in shares) | 93,777,479 | |||
Shares issued in transaction (in shares) | 1,200,000 | |||
Common Class A | ||||
Class of Stock [Line Items] | ||||
Common stock, authorized (in shares) | 125,000,000 | 125,000,000 | ||
Common stock, shares authorized | 125,000,000 | 125,000,000 | ||
Common stock, par value (in dollars per share) | $ 0.01 | |||
Common Class A | IPO | ||||
Class of Stock [Line Items] | ||||
New shares issued (in shares) | 6,000,000 | 6,000,000 | ||
Shares issued in transaction (in shares) | 750,000 | 750,000 | ||
Common Class B | ||||
Class of Stock [Line Items] | ||||
Common stock, authorized (in shares) | 10,000,000 | 10,000,000 | ||
Common stock, shares authorized | 10,000,000 | 10,000,000 | ||
Common stock, par value (in dollars per share) | $ 0.0001 | |||
Common Class C | ||||
Class of Stock [Line Items] | ||||
Common stock, authorized (in shares) | 100,000,000 | 100,000,000 | ||
Common stock, shares authorized | 100,000,000 | 100,000,000 | ||
Common stock, par value (in dollars per share) | $ 0.0001 | |||
Class A common stock | ||||
Class of Stock [Line Items] | ||||
New shares issued (in shares) | 3,547,776 | |||
Price per share (in dollars per share) | $ 17 | $ 17 | ||
Class A common stock | IPO | ||||
Class of Stock [Line Items] | ||||
New shares issued (in shares) | 5,250,000 | 5,250,000 | ||
Price per share (in dollars per share) | $ 17 | $ 17 |
Derivative Instruments and He_3
Derivative Instruments and Hedging Activity (Details) - Interest Rate Swap $ in Thousands | Sep. 30, 2019USD ($) |
Derivative [Line Items] | |
Notional value | $ 8,339 |
Fixed interest rate | 2.0775% |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Balance, beginning of period | $ (11,059) | $ 9,396 |
Other comprehensive income (loss) | (272) | (20) |
Effects of the reorganization transactions | 203 | |
Other comprehensive (income) loss attributable to noncontrolling interest | 222 | |
Balance, end of period | 122,563 | 10,676 |
Foreign Currency Translation | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Balance, beginning of period | (286) | (209) |
Other comprehensive income (loss) | 38 | (20) |
Effects of the reorganization transactions | 203 | |
Other comprehensive (income) loss attributable to noncontrolling interest | (14) | |
Balance, end of period | (59) | (229) |
Unrealized Gain/Loss on Derivative Instrument | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Balance, beginning of period | 0 | 0 |
Other comprehensive income (loss) | (310) | 0 |
Effects of the reorganization transactions | 0 | |
Other comprehensive (income) loss attributable to noncontrolling interest | 236 | |
Balance, end of period | (74) | 0 |
Total | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Balance, beginning of period | (286) | (209) |
Balance, end of period | $ (133) | $ (229) |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Interest rate swap contract | $ 310,000 |
Contingent consideration | 1,553,000 |
Total Liabilities | 1,863,000 |
Fair Value, Inputs, Level 1 | |
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Interest rate swap contract | 0 |
Contingent consideration | 0 |
Total Liabilities | 0 |
Fair Value, Inputs, Level 2 | |
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Interest rate swap contract | 310,000 |
Contingent consideration | 0 |
Total Liabilities | 310,000 |
Fair Value, Inputs, Level 3 | |
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Interest rate swap contract | 0 |
Contingent consideration | 1,553,000 |
Total Liabilities | 1,553,000 |
Conscious Wholesale | |
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Contingent consideration | 1,553,000 |
Business combination, consideration | 5,867,000 |
Minimum | Conscious Wholesale | |
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Business combination, consideration | 0 |
Maximum | Conscious Wholesale | |
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Business combination, consideration | $ 3,300,000 |
Subsequent Events (Details)
Subsequent Events (Details) | Nov. 08, 2019USD ($) |
Subsequent Event | |
Subsequent Event [Line Items] | |
Stock repurchase program, authorized amount | $ 5,000,000 |
Uncategorized Items - gnln-2019
Label | Element | Value |
Issuance of Class A common units to underwriter upon exercise of overallotment option | gnln_StockIssuedDuringPeriodValueIssuanceOfClassACommonStockToUnderwriter | $ 0 |
Net Income (Loss) Available to Common Stockholders, Basic | us-gaap_NetIncomeLossAvailableToCommonStockholdersBasic | (1,796,000) |
Other Comprehensive Income (Loss), Net of Tax | us-gaap_OtherComprehensiveIncomeLossNetOfTax | (8,000) |
Other Comprehensive Income (Loss), Net of Tax | us-gaap_OtherComprehensiveIncomeLossNetOfTax | 31,000 |
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture | us-gaap_StockIssuedDuringPeriodValueShareBasedCompensation | 1,831,000 |
Issuance of Class A common to stock selling stockholders | gnln_StockIssuedDuringPeriodValueClassACommonStockSellingStockholder | 1,000 |
Net loss prior to the organizational transactions | gnln_NetLossPriorToTheReorganizationTransactions | (1,179,000) |
Adjustment To Additional Paid In Capital Liabilities Under Tax Receivable | gnln_AdjustmentToAdditionalPaidInCapitalLiabilitiesUnderTaxReceivable | 5,173,000 |
Adjustments to Additional Paid in Capital, Other | us-gaap_AdjustmentsToAdditionalPaidInCapitalOther | (3,523,000) |
Dividends | us-gaap_Dividends | 801,000 |
Equity-Based Compensation Recognized Prior To The Organizational Transactions | gnln_EquityBasedCompensationRecognizedPriorToTheOrganizationalTransactions | (137,000) |
Issuance of Class A common stock in the IPO, net of underwriting discount | gnln_StockIssuedDuringPeriodValueIssuanceOfClassACommonStock | 83,003,000 |
Effects of the organizational transactions | gnln_EffectsOfTheReorganizationTransactions | 15,180,000 |
Joint venture consolidation | gnln_JointVentureConsolidation | (60,000) |
Stock Issued During Period, Value, Conversion of Units | us-gaap_StockIssuedDuringPeriodValueConversionOfUnits | 60,312,000 |
Noncontrolling Interest [Member] | ||
Net Income (Loss) Available to Common Stockholders, Basic | us-gaap_NetIncomeLossAvailableToCommonStockholdersBasic | (1,453,000) |
Other Comprehensive Income (Loss), Net of Tax | us-gaap_OtherComprehensiveIncomeLossNetOfTax | 24,000 |
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture | us-gaap_StockIssuedDuringPeriodValueShareBasedCompensation | 1,122,000 |
Effects of the organizational transactions | gnln_EffectsOfTheReorganizationTransactions | 99,404,000 |
Joint venture consolidation | gnln_JointVentureConsolidation | (60,000) |
Additional Paid-in Capital [Member] | ||
Issuance of Class A common units to underwriter upon exercise of overallotment option | gnln_StockIssuedDuringPeriodValueIssuanceOfClassACommonStockToUnderwriter | (4,000) |
Issuance of Class B common stock | gnln_StockIssuedDuringPeriodValueClassBCommonStock | (1,000) |
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture | us-gaap_StockIssuedDuringPeriodValueShareBasedCompensation | 709,000 |
Issuance of Class A common to stock selling stockholders | gnln_StockIssuedDuringPeriodValueClassACommonStockSellingStockholder | (7,000) |
Adjustment To Additional Paid In Capital Liabilities Under Tax Receivable | gnln_AdjustmentToAdditionalPaidInCapitalLiabilitiesUnderTaxReceivable | 5,173,000 |
Adjustments to Additional Paid in Capital, Other | us-gaap_AdjustmentsToAdditionalPaidInCapitalOther | (3,523,000) |
Issuance of Class C common stock | gnln_StockIssuedDuringPeriodValueClassCCommonStock | (8,000) |
Issuance of Class A common stock in the IPO, net of underwriting discount | gnln_StockIssuedDuringPeriodValueIssuanceOfClassACommonStock | 82,950,000 |
Effects of the organizational transactions | gnln_EffectsOfTheReorganizationTransactions | (114,094,000) |
Stock Issued During Period, Value, Conversion of Units | us-gaap_StockIssuedDuringPeriodValueConversionOfUnits | 60,277,000 |
Retained Earnings [Member] | ||
Net Income (Loss) Available to Common Stockholders, Basic | us-gaap_NetIncomeLossAvailableToCommonStockholdersBasic | (343,000) |
AOCI Attributable to Parent [Member] | ||
Other Comprehensive Income (Loss), Net of Tax | us-gaap_OtherComprehensiveIncomeLossNetOfTax | (8,000) |
Other Comprehensive Income (Loss), Net of Tax | us-gaap_OtherComprehensiveIncomeLossNetOfTax | 7,000 |
Effects of the organizational transactions | gnln_EffectsOfTheReorganizationTransactions | 203,000 |
Common Class A [Member] | ||
Issuance of Class A common units to underwriter upon exercise of overallotment option | gnln_StockIssuedDuringPeriodValueIssuanceOfClassACommonStockToUnderwriter | $ 4,000 |
Issuance of Class A common to stock selling stockholders, Shares | gnln_StockIssuedDuringPeriodSharesClassACommonStockSellingStockholder | 750,000 |
Stock Issued During Period, Shares, Conversion of Units | us-gaap_StockIssuedDuringPeriodSharesConversionOfUnits | 3,548,000 |
Issuance of Class A common to stock selling stockholders | gnln_StockIssuedDuringPeriodValueClassACommonStockSellingStockholder | $ 8,000 |
Issuance of Class A common stock in the IPO, net of underwriting discount, Shares | gnln_StockIssuedDuringPeriodSharesIssuanceOfClassACommonStock | 5,250,000 |
Issuance of Class A common stock in the IPO, net of underwriting discount | gnln_StockIssuedDuringPeriodValueIssuanceOfClassACommonStock | $ 53,000 |
Issuance of Class A common units to underwriter upon exercise of overallotment option, Shares | gnln_StockIssuedDuringPeriodSharesssuanceOfClassACommonStockToUnderwriter | 450,000 |
Stock Issued During Period, Value, Conversion of Units | us-gaap_StockIssuedDuringPeriodValueConversionOfUnits | $ 35,000 |
Redeemable Class B Units [Member] | ||
Net loss prior to the organizational transactions | gnln_NetLossPriorToTheReorganizationTransactions | (246,000) |
Dividends | us-gaap_Dividends | 76,000 |
Equity-Based Compensation Recognized Prior To The Organizational Transactions | gnln_EquityBasedCompensationRecognizedPriorToTheOrganizationalTransactions | (113,000) |
Effects of the organizational transactions | gnln_EffectsOfTheReorganizationTransactions | (15,181,000) |
MembersEquity/Deficit | ||
Net loss prior to the organizational transactions | gnln_NetLossPriorToTheReorganizationTransactions | (1,179,000) |
Dividends | us-gaap_Dividends | 801,000 |
Equity-Based Compensation Recognized Prior To The Organizational Transactions | gnln_EquityBasedCompensationRecognizedPriorToTheOrganizationalTransactions | (137,000) |
Effects of the organizational transactions | gnln_EffectsOfTheReorganizationTransactions | $ 29,667,000 |
Common Class B [Member] | ||
Issuance of Class A common to stock selling stockholders, Shares | gnln_StockIssuedDuringPeriodSharesClassACommonStockSellingStockholder | (106,000) |
Issuance of Class B common stock | gnln_StockIssuedDuringPeriodValueClassBCommonStock | $ 1,000 |
Issuance of Class B common stock, Shares | gnln_StockIssuedDuringPeriodSharesClassBCommonStock | 6,157,000 |
Issuance of Class A common units to underwriter upon exercise of overallotment option, Shares | gnln_StockIssuedDuringPeriodSharesssuanceOfClassACommonStockToUnderwriter | (63,000) |
Common Class C [Member] | ||
Issuance of Class A common to stock selling stockholders, Shares | gnln_StockIssuedDuringPeriodSharesClassACommonStockSellingStockholder | (1,935,000) |
Issuance of Class C common stock | gnln_StockIssuedDuringPeriodValueClassCCommonStock | $ 8,000 |
Issuance of Class A common units to underwriter upon exercise of overallotment option, Shares | gnln_StockIssuedDuringPeriodSharesssuanceOfClassACommonStockToUnderwriter | (1,161,000) |
Issuance of Class C common stock, Shares | gnln_StockIssuedDuringPeriodSharesClassCCommonStock | 80,887,000 |