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Financial report summary
?Competition
Greenlane Holdings Inc - Ordinary SharesRisks
- The COVID-19 pandemic has caused severe disruptions in the U.S. and global economies and financial markets and could potentially create widespread business continuity issues of an as yet unknown magnitude and duration.
- If we do not successfully generate additional products and services, or if such products and services are developed but not successfully commercialized, we could lose revenue opportunities. Our future success depends on our ability to grow and expand our customer base. Our failure to achieve such growth or expansion could materially harm our business.
- Our suppliers could fail to fulfill our orders for parts used to assemble our products, which would disrupt our business, increase our costs, harm our reputation, and potentially cause us to lose our market.
- If significant tariffs or other restrictions are placed on our goods imported into the United States or Canada from China or any related counter-measures are taken by China, or if such tariffs are increased, our revenue, financial condition, and results of operations may be materially harmed.
- Our inability to effectively protect our intellectual property would adversely affect our ability to compete effectively, our revenue, our financial condition, and our results of operations.
- We could incur substantial liabilities from any product liability lawsuits successfully brought against us.
- There is uncertainty regarding the regulation of vaporization products and certain other consumption accessories. Increased regulatory compliance burdens and recent temporary bans on the sales of certain cannabis vaporization products could have a material adverse impact on our business development efforts and our operations.
- The scientific community has not yet extensively studied the long-term health effects of the use of vaporizer products.
- Our inability to effectively manage our growth could harm our business and materially and adversely affect our operating results and financial condition.
- We face risks associated with strategic acquisitions.
- We are subject to cyber-security risks, including those related to customer, employee, vendor or other company data and including in connection with integration of acquired businesses and operations.
- If we fail to retain key personnel and hire, train and retain qualified employees, we may not be able to compete effectively, which could result in reduced revenue or increased costs.
- Our operating results, including net sales, gross margin and net income (loss), as well as our stock price have fluctuated in the past, and our future operating results will continue to be subject to quarterly and annual fluctuations based upon numerous factors, including those discussed in this Item 1A and throughout this report. Our stock price will continue to be subject to daily fluctuations as well. Our future operating results and stock price may not follow any past trends or meet our guidance and expectations.
- We may need additional capital in the future, and we may be unable to secure additional funding in the future or to obtain such funding on favorable terms.
- The Financing Agreement for the Monroe Revolving Credit Facility and New Senior Note with HB each contains financial and operating covenants that may restrict our business and financing activities.
- If we default on our obligations to HB Sub Fund, HB Sub Fund could accelerate our obligations under the Senior Note and exercise remedies including their right to collect on our outstanding obligations, which would harm our business, financial condition, and results of operations, and could require us to reduce or cease operations.
- Increases in interest rates would increase the cost of servicing our debt and could reduce our profitability.
- Uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR after 2021 may adversely affect the market value of our current or future debt obligations, including under the Monroe Revolving Credit Facility.
- Charges to earnings resulting from the application of the acquisition method of accounting to our various acquisitions may adversely affect our results of operations. If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings and our ability to borrow under our asset-based Monroe Revolving Credit Facility may be significantly impaired.
- Cannabis remains illegal under U.S. federal law, and therefore, strict enforcement of U.S. federal laws regarding cannabis would likely result in our inability and the inability of our customers to execute our respective business plans.
- States that have not approved any legal sale of marijuana may seek to overturn laws legalizing cannabis use in neighboring states, which if successful, could result in legal action against such neighboring states and have a significant negative effect on our business.
- We and our customers may have difficulty accessing the service of banks, which may make it difficult to sell our products and services.
- We are subject to certain federal regulations relating to cash reporting.
- The federal and state regulatory landscape regarding products containing CBD is uncertain and evolving, and new or changing laws or regulations relating to industrial hemp and industrial hemp-derived products could have a material adverse effect on our business, financial condition and results of operations.
- FDA regulation regarding the sale or distribution of products containing CBD could make it difficult for our customers to operate their business, increase their operating costs, and pose additional operational, logistical and security challenges, which in turn could have a material adverse effect on our business, financial condition and results of operations.
- If commercial cultivation of industrial hemp is deemed to be a violation of federal law, we may be subject to federal enforcement actions, which could adversely affect our business and harm our reputation and brand.
- If we fail to establish or maintain effective internal controls over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our common stock may, therefore, be adversely impacted.
- Our restatement of previously issued consolidated financial statements has resulted in significant legal and accounting expenditures to us and could result in further expenses, a loss of investor confidence, a negative impact on our stock price, and other risks.
- We are remediating certain internal controls and procedures, which, if not successful, could result in additional misstatements in our financial statements negatively affecting our results of operations.
- The trading market for our common stock is limited.
- Since our securities are currently quoted on the OTCQX, our stockholders may face significant restrictions on the resale of our securities due to state “Blue Sky” laws.
- The application of the “penny stock” rules could adversely affect the market price of our common shares and increase your transaction costs to sell those shares.
- Your percentage ownership will be diluted in the future.
- Substantial sales of common stock have and may continue to occur, or may be anticipated, which have and could continue to cause our stock price to decline.
- Our principal stockholders, executive officers, and directors own a significant percentage of our common stock and will be able to exert a significant control over matters submitted to the stockholders for approval.
- We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
Management Discussion
- Total revenues decreased to $113.8 million for the fiscal year ended August 31, 2020 compared to $149.0 million for the fiscal year ended August 31, 2019, a decrease of $35.1 million or (23.6)%. The decrease was primarily attributed to the illicit market vape crisis, the adoption and implementation of our 2020 Plan, and restrictions due to the COVID-19 pandemic. The adverse state-specific regulatory actions taken in response to the illicit market vape crisis led customer purchasing patterns to recede, resulting in lower vape and natural products sales. Additionally, the adoption and implementation of our 2020 Plan to align with larger and more creditworthy MSOs, LPs and leading brands resulted in a reduction in credit risk with tighter credit terms for our smaller customers. While lower revenue was partially offset by higher shipping and tariff revenues and an increase in product sales from our larger and more creditworthy customers, the COVID-19 pandemic precipitated regulatory restrictions and shipping capacity constraints from China.