Greenlane Holdings, Inc.

Good morning, and welcome to today's call to discuss Green Lane Holdings' second quarter 2022 financial results. A press release detailing the financial results for the quarter ended June 30, 2022, was distributed earlier this morning, and is available on the Investor Relations section of the Green Lane website at investor.gnln.com. As a reminder, today's conference is being recorded. A replay of this call, as well as a copy of the supplemental earnings slides, will be archived on the company's IR website at investor.gnln.com. On the call today are Nick Kovacevic, Chief Executive Officer, Darsh Daya, Chief Accounting Officer, and Craig Snyder, President. Before we begin, Green Lane would like to remind listeners that today's prepared remarks may contain forward-looking statements and management may make additional forward-looking statements in response to the questions received. These statements do not guarantee future performance and, therefore, undue reliance should not be placed upon them. These statements are based on current expectations of the company's management and involve inherent risks and uncertainties and other factors discussed in today's press release. This call also contains time-sensitive information that speaks only as of the date of this live broadcast August 16, 2022. Factors that could cause Green Lane's results to differ materially are set forth in today's press release and in Green Lane's annual report on Form 10-K for the year ended December 31, 2021, and quarterly report on Form 10-Q for the three months ended June 30, 2022, previously filed with the SEC. Any forward-looking statements made today on this call are based on assumptions as of today, and Green Lane assumes no obligation to update these statements as a result of new information or future events. During today's call, Green Lane management may discuss non-GAAP financial measures included adjusted gross margin, adjusted SG&A, and adjusted EBITDA. GreenLane has included a reconciliation of these non-GAAP measures in today's press release, which is available in the Investor Relations section of the company's website at investor.gnln.com. I would now like to turn the call over to Mr. Nick Kovacevic, Chief Executive Officer of GreenLane. Please go ahead, Nick.

Hello, everyone, and thank you for attending our second quarter 2022 earnings call. We've been extremely busy here at Greenlane over the past several months. Our team has done a tremendous job executing on key initiatives while navigating a challenging macro environment on multiple fronts, including the continued global supply chain headwinds, record inflation, cannabis marketplace pricing compression, and negative sentiment in both the cannabis and broader capital markets. In order to best position Greenlane to meet these challenges and thrive when these headwinds finally subside, we have taken action to properly fund the company and reduce costs considerably, while accelerating our timetable to shift the business into much higher margin and higher value segments. The recent accomplishments include raising $5.4 million through a registered direct offering in June and selling our interest in Vibes for $5.3 million in July, which in turn allowed us to repay $8 million in short-term debt, Shortly after doing so, we were able to secure an asset-based loan for $15 million from an institutional lender, which will provide the company with non-dilutive financing to help support our working capital needs as we make progress on our overall plan to become the premier house of brands business in the ancillary cannabis marketplace. While properly funding the company was our priority over the last several months, we remain committed to reducing our overall operating costs to sustainable levels. Once again, our team made great progress on several key cost cutting initiatives, including exiting and eliminating ongoing expenses associated with six of our operating facilities in the United States and Europe. Here, we streamlined our operating and retail footprint, which allows us to achieve over $900,000 of annualized cost savings. Furthermore, We also restructured a longstanding arrangement with one of our key vendors to free up meaningful working capital and eliminate approximately $500,000 of annual expenses. We also continue to make progress on discontinuing selling and distributing lower margin third-party brands and turning previously reserved inventory back into cash. In fact, we have sold over $2 million of previously reserved inventory since we announced our plan to do so back in March. We also completed our strategic SKU rationalization project and created our new Go Forward combined product catalog, which is available online at greenlane.com. Another notable accomplishment in recent months includes the implementation of our compliant B2B PACT Act shipping program through USPS, where we remain one of the only companies to our knowledge in the cannabis industry to actually receive this exemption. It isn't easy to be compliant, and there are hefty costs to do things the right way, but we believe this will be a huge advantage for GreenLane in the future as enforcement of regulations will eventually catch up to competition operating in violation of PACT Act rules. While we are proud of the accomplishments thus far, we remain focused on transforming GreenLane into a highly profitable and highly valuable consumer house of brands business. our longtime stated goal. In order to efficiently complete this transition and properly capitalize the future business, we have made the strategic decision to try to further monetize our existing packaging business by listing this portion of business for sale. Our packaging business is a great business, but not necessarily aligned to our future house of brands strategy. In addition, given our current market capitalization, we believe there exists a unique opportunity to unlock more value with a strategic transaction and bring in substantial cash through a disposition of this segment that currently isn't represented in our public share price. Exiting the packaging business will not only allow us to focus on our consumer business, further capitalize our growth plan, but also will allow for further warehouse consolidation, resulting in estimated savings in excess of $5 million annually. I have a personal interest in this process. Having co-founded Kush Bottles in 2010, we painstakingly developed a world-class packaging operation and closely partnered with top-tier operators over the years. I will lead the sales process, which should provide a unique value proposition for current players in the cannabis space looking to expand their market share or for traditional packaging companies looking to establish a foothold in the growing cannabis industry. As I mentioned before, we have made significant strides in capitalizing the business and reducing costs, and we believe we have identified the remaining initiatives required to complete our full transition to a much leaner, more lucrative consumer business model. Accordingly, we are also realigning the C-suite to support our strategic initiatives. Effective immediately, Craig Snyder has been promoted from chief commercial officer to president and will take over day-to-day operations of the business. We believe this decision will strengthen our ability to utilize an experienced senior leader with extensive experience in both cannabis and consumer businesses to execute on becoming the premier house of brands business in the ancillary cannabis marketplace. In addition, Mr. Snyder's promotion will also allows us to further streamline our organization and recognize additional cost savings. Before I welcome Craig onto the earnings call, I want to say a sincere thank you to our Chief Operating Officer, Mr. Rodrigo de Oliveira, who will be stepping down as COO at the end of September. Rodrigo was essential to restructuring Cushco Holdings in 2020 when the company adjusted its business model and cut costs to move from losing over $5 million of adjusted EBITDA per quarter to achieving our goal of positive quarterly adjusted EBITDA several quarters later. Also, during his time at GreenLane following the merger with Cushco, Rodrigo has applied a similar strategy to reduce costs, consolidate operations, streamline the organization, and ultimately put the business in a position to be a profitable house of brands. With our future model now in sight, the time has come for Rodrigo to step down and provide further reductions in overhead. Once again, I want to sincerely thank Rodrigo for all of his unwavering passion, work ethic, and leadership over the years. Thank you. And with that, I'd like to pass the call to Craig Snyder, our new president, to talk about the future vision of GreenLane as a consumer business. Welcome, Craig. Thank you.

Thanks, Nick. First off, I'm honored and excited to accept the role of president of this organization at this exciting and critical time in GreenLane's transformation. One of the key principles I have emphasized since joining GreenLane in March is the need to make the company a more scalable, leverageable, and durable business. I believe we are making progress toward these goals. We have focused this year in solidifying our foundation into one that can be leveraged as we grow and scale. First, GreenLane will lead and innovate with our brands and our products. We have a world-class product team that has developed a vision for our house-owned brands and an exciting product pipeline with innovative products starting to launch in the second half of this year. Second, we are focused on utilizing technology to increase efficiency and performance of sales. We are in the final phase of beta testing on our new B2B portal, set to officially launch nationwide in the coming weeks. Finally, we are focusing our sales to more scalable customer channels. We are enhancing our e-commerce footprint, launching relevant products in a global way, utilizing these highly scalable channels. In addition, we are focusing our enterprise sales efforts on the largest channels in the marketplace, including vertically integrated MSOs, several with over 100 retail locations, and traditional C-stores, including franchises with hundreds, if not thousands, of physical locations. There is much work still ahead, but the milestones we have achieved to date, combined with the early successes we are seeing in key areas, make me feel very confident for the future of this company.