Debra Borchardt
Greenlane Holdings, Inc. (NASDAQ: GNLN) announced the pricing of its “reasonable best efforts” public offering of 8,333,335 units at a public offering price of $0.90 per unit to raise $7.5 million. The company said in its filing that it needs the money to meet near-term needs. The reasonable best efforts mean that the banker isn’t obligated to buy any of the shares and if Greenlane can’t sell all the shares it might not have the money it needs to operate and could be forced into another offering, which could potentially be unsuccessful.
The filing stated, “We estimate that we had cash available as of September 30, 2022, of $7.9 million. In addition, we expect our revenue for the quarter ended September 30, 2022 was down significantly from prior quarters. As a result, we do not have the cash on hand that we need to meet our immediate liquidity needs.”
The offering is expected to close on November 1.
Third Quarter Results
Greenlane quietly released its preliminary third-quarter unaudited results on October 25. Greenlane noted that its net revenue was between $27.7 million and $29.7 million. The company is taking a writedown of between $65.7 million and $67.7 million. The filing stated, “We have significant amounts of goodwill and intangible assets, such as trade names acquired in connection with the KushCo merger that we expect to be nearly completely impaired.” Greenlane also said that its total cash balance as of the end of September was just $10 million, but $2 million is restricted.
This is a big drop from Greenlane’s second-quarter revenue of $39 million which was reported a couple of months ago. Since that time, Greenlane announced that its CEO Nick Kovacevich was stepping down from the CEO position, but remaining on the Board. Craig Snyder, who has served as the President since August 2022, assumed the position of Chief Executive Officer. The company has also had a fire sale of excess and obsolete products in order to reduce inventory. The company said it hopes this can bring in another $10 million.
Dilution
Greenlane also warned in its offering, “Assuming a public offering price of $1.64 per Unit, which is the last reported sales price of our shares of Class A common stock on Nasdaq on October 24, 2022, if you purchase shares of Class A common stock in this offering, you will suffer immediate and substantial dilution of approximately $4.39 per share in the net tangible book value of the shares of Class A common stock as of June 30, 2022. In addition, if previously issued options or warrants to acquire shares of Class A common stock are exercised at prices below the offering price, you will experience further dilution.”
Offering Details
Each unit consists of one share of Class A common stock (or a prefunded warrant in lieu thereof) and two common warrants each exercisable for one share of Class A common stock at an exercise price of $0.90 per share. The common warrants will be immediately exercisable and expire seven years from the date of issuance. The pre-funded warrants and accompanying common warrants are identical to the units, except that each pre-funded warrant is immediately exercisable for one share of Class A common stock at an exercise price of $0.0001, the purchase price for a pre-funded warrant and accompanying common warrants is $0.8999 and the pre-funded warrants do not expire until exercised. Gross proceeds from the offering, before deducting the placement agent’s fees and other offering expenses, are expected to be approximately $7.5 million.
