Greenlane Holdings, Inc. Revenue Disclosure

Revenue Recognition

 

Revenues from the sale of our merchandise are recognized at a point in time when control of merchandise is transferred to the customer. Revenue is measured based on the amount of consideration expected to be received in exchange for those goods or services, reduced by promotional discounts and estimates for return allowances and refunds. Taxes collected from customers for remittance to governmental authorities are excluded from net sales.

 

Revenue is generated primarily from the sale of finished products to customers, whereby each product unit represents a single performance obligation. Revenue is recognized from product sales when the customer has obtained control of the products, which is either at point of sale or delivery to the customer, depending upon the specific terms and conditions of the arrangement, or at the point of sale for our retail store sales. We provide no warranty on products sold. Product warranty is provided by the manufacturers. For certain product offerings we may receive a deposit from the customer (generally 25% - 50% of the total order cost, but the amount can vary by customer contract) when an order is placed by a customer. We typically complete these orders within one to six months from the date of order, depending on the complexity of the customization and the size of the order, but the completion timeline can vary by product type and terms of sales with each customer. See “Note 8—Supplemental Financial Statement Information” for a summary of changes to our customer deposits liability balance during the years ended December 31, 2024 and 2023.

 

Product returns are estimated based on historical experience and recorded as a refund liability that reduces the net sales for the period. Actual historical returns, current economic trends and changes in order volume are analyzed when evaluating the adequacy of sales returns allowances in any reporting period. Liability for returns, which is included within “Accrued expenses and other current liabilities” in the consolidated balance sheets, was approximately $0.1 million and $0.1 million as of December 31, 2024 and 2023, respectively. There were no liabilities related to refunds as of December 31, 2024.

 

We 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 our performance obligations. We apply the practical expedient provided for by the applicable revenue recognition guidance by not adjusting the transaction price for significant financing components for periods less than one year. We also apply the practical expedient provided by the applicable revenue recognition guidance based upon which we generally expense sales commissions when incurred because the amortization period is one year or less. Sales commissions are recorded within “Salaries, benefits and payroll tax expenses” in the consolidated statements of operations and comprehensive loss.

 

 

The Company transitioned to a commission revenue model for the majority of the sales of industrial vaporizers and packaging products. The company operates as a sales agent servicing vape customers and receives a commission for these services. The company was previously working directly with these customers and recognizing gross revenue versus straight commission revenue. The Company recognizes this fee on a periodic basis when the products have been shipped for the end consumer. In working with their partner, the Company is not responsible for fulfilling a promise to provide the specified goods, does not establish the pricing with its partners customers, and does not have control over the goods that will be shipped. As such, the Company is an agent and recognizes its revenue on a net basis for its service. The partner company pays Greenlane a negotiated percentage-based fee on a quarterly basis.

 

Two customers represented approximately 32% our net sales for the year ended December 31, 2024. One customer represented approximately 21% of our net sales for the year ended December 31, 2023. As of December 31, 2024 the Company had no customers make up more than 5% of its accounts receivable balance. As of December 31, 2023 the Company has a concentration of credit risk with its accounts receivable balance as one customer represented approximately 11% of accounts receivable.