CASH 39.9M REVENUE 35.7M NET (4.49M) PER SHARE (0.35)
Overview
We are one of the largest global sellers of premium cannabis accessories and liquid nicotine products in the world. We operate as a powerful house of brands, third-party brand accelerator and distribution platform for consumption devices and lifestyle brands serving the global cannabis and liquid nicotine markets with an expansive customer base of more than 7,000 retail locations, including licensed cannabis dispensaries, and smoke and vape shops. We merchandise vaporizers and other products in the United States, Canada and Europe and we distribute to retailers through wholesale operations and to consumers through e-commerce activities and our retail stores.
We provide value-added customer support to complement our product offerings and help our customers operate and grow their businesses. We believe our market leadership, wide distribution network, broad product selection and extensive technical expertise provide us with significant competitive advantages and create a compelling value proposition for our customers and our suppliers. In addition, our premium product lines, broad product portfolio and strategically-located distribution centers position us well to meet the needs of our customers and ensure timely delivery of products.
We are the partner of choice for many of the industry’s leading players including PAX Labs, Grenco Science, Firefly, DaVinci, Eyce, Santa Cruz Shredder, Cookies, and dozens of others. Wehave also set out to develop a world-class portfolio of our own proprietary brands (the "Greenlane Brands") that we believe will, over time, deliver higher margins and create long-term value.
Our Greenlane Brands are comprised of child-resistant packaging innovator Pollen Gear; VIBES rolling papers; the Marley Natural accessory line; the Keith Haring accessory line; Aerospaced & Groove grinders; and Higher Standards, which is both an upscale product line and an innovative retail experience with flagship stores at New York City’s famed Chelsea Market and a new location opened in January 2020 in the iconic Malibu Village in California. In May 2020, we opened a new Cookies branded retail store located in Barcelona, Spain. We also own and operate several industry-leading ecommerce platforms, including Vapor.com, Higherstandards.com, Aerospaced.com, Azarius.net and Vaposhop.com. These e-commerce platforms offer convenient, flexible shopping solutions directly to consumers.
We continue to be well-funded to execute upon our business transformation plans, with $40.0 million in cash as of September 30, 2020, compared to $47.8 million in cash as of December 31, 2019.
We operate distribution centers in the United States, Canada, and Europe. Starting in the first quarter of 2020, we began taking steps to optimize our distribution network, by consolidating several of our U.S.based distribution centers to a more centralized model with fewer, larger, highly-automated facilities, which will help us reduce costs and improve service levels going forward. This consolidated distribution center model requires fewer distribution center employees and, we expect it will enable us to drive business improvement in multiple areas, including inventory management, sales operations, and customer experience. We closed our distribution centers in Schenectady, New York and Delta, B.C., Canada in May 2020. In June 2020, we terminated the lease agreements for our Torrance, California distribution center and Toronto, Canada office location.
In August 2020, closed our Jacksonville distribution center. During the second quarter of 2020, we entered into service agreements with two 3PL facilities located in Hebron, Kentucky and Delta, B.C., Canada, both of which serve as replacement facilities to the distribution centers we have closed.
During the third quarter of 2020, we closed our Jacksonville distribution center, and performed an analysis of inventory on hand at each distribution center to be transferred to our Hebron, Kentucky 3PL facility. From this analysis, we recorded approximately $3.2 million in inventory write-offs and adjustments to lower of cost or net realizable value related to slow-selling products.
These reductions in slow-selling inventory are consistent with the goals of our transformation initiative, as the warehouse space saved from liquidating these products will be allocated to products with higher margin opportunities and higher marketability. Additionally, the adjustments of inventory to lower of cost or net realizable value are expected to improve inventory turnover and lead to positive cash flows in 2021.
We have three distinct operating segments, which include our United States operations, our Canadian operations, and our European operations. These operating segments also represent our reportable segments. Refer to "Note 11— Segment Reporting", for more discussion regarding our segment reporting. See "Result of Operations" below for a breakdown of our net sales by operating segment. We expect revenue for our Europe operating segment to increase over the next reporting periods as we continue to expand our foothold in Europe.
We market and sell our products in the business to business (“B2B”), business to consumer (“B2C”) and supply and packaging (“S&P”) areas of the marketplace. We have a diverse base of customers, and our top ten customers accounted for only 14.1% and 11.1% of our net sales for the three and nine months ended September 30, 2020, respectively, with no single customer accounting for more than 3.1% and 2.1% of our net sales for the three and nine months ended September 30, 2020, respectively. While we distribute products to several large national and regional retailers in Canada, our typical B2B customer is an independent retailer operating in a single market.
Our sales teams interact regularly with customers as most of them have frequent restocking needs. We believe our hightouch customer service model strengthens relationships, builds loyalty and drives repeat business. During the third quarter of 2020, our B2B, B2C and S&P revenues represented approximately 63.2%, 24 12.6% and 11.5% of net sales, respectively, compared to 80.6%, 3.2%, and 9.8% of net sales, respectively, during the same period in 2019. Channel and drop-ship revenues derived from the sales and shipment of our products to the customers of third-party website operators and providing other services to our customers represented approximately 12.6% of our net sales during the third quarter of 2020, compared to 6.4% during the same period in 2019.
For the three and nine months ended September 30, 2020, our net sales were lower than for the same period in 2019 largely due to the FDA's restriction on the sale of certain products, primarily mint-flavored JUUL products, and our deliberate decision to proactively move away from low margin sales, which historically included JUUL product discounts. We reduced our sales of JUUL products to $3.3 million, or 9.2% of net sales for the third quarter of 2020, compared to $20.2 million, or 45% of net sales for the third quarter of 2019.
As we look ahead to the key drivers of growth in our business, we continue to be focused on the higher margin parts of the business that will better position us for the long-term, through continued investment in growing our Greenlane Brands, the supply and packaging revenue stream, and our direct-to-consumer businesses. Our portfolio of Greenlane Brands accounted for $5.6 million, or 15.5%, of net sales for the third quarter of 2020, compared to $3.4 million, or 7.5%, for the third quarter in 2019 . Our Greenlane Brand sales for the third quarter of 2020 were largely driven by sales of our Pollen Gear and Vibes Greenlane Brands, which amounted to $2.7 million and $1.3 million, respectively. In December 2019, a novel strain of coronavirus known as COVID-19 was reported in Wuhan, China. In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic.
In response to the COVID-19 pandemic, many state and local governments throughout the United States began issuing "stay at home" orders directing the closure of non-essential businesses and directing citizens to remain home unless they are conducting essential business or other prescribed activities. Similar orders have proliferated in Canada and Europe.
Prior to the impact of the COVID-19 pandemic, we had anticipated returning to cash-flow positive operations by the fourth quarter of 2020. While we are continuing to work towards this goal, the timing of this goal has shifted to 2021, and may continue to shift depending on how long the current environment remains.
Based on our role as a supplier to essential businesses, including licensed cannabis businesses and an e-commerce distributor, our distribution centers have not had significant impacts to their operations resulting from the COVID-19 pandemic. While certain distribution centers in the United States were permanently closed as part of our transformation plan, these closures were planned prior to the COVID-19 pandemic to migrate to a more centralized model.
We implemented protective measures for our distribution center employees, including social distancing measures, which limited the number of employees present during work shifts. To compensate for the reduced number of employees present during work shifts, we extended distribution center operating hours in order to sustain timely fulfillment of sales orders. With respect to our corporate offices, we have implemented several measures in response to the COVID-19 pandemic, including encouraging remote work for our employees in our U.S. and European offices.
We are also in the process of evaluating modifications to our "work from home" policy and are considering moving certain limited positions to permanent "work from home" arrangements to reduce the capacity of our offices and to enable required distancing guidelines. With states reopening across the country, our B2B revenue has begun to normalize from the decreases we experienced at the beginning of the second quarter due to the pandemic. Specifically, our September 2020 B2B revenues were approximately $7.8 million compared to approximately $4.2 million for April 2020, representing an increase of approximately 85.6% in monthly revenue.
From the standpoint of our B2C revenue stream, we resumed operations of our Higher Standards store at Malibu Village in California on July 11, 2020 and our Higher Standards store at Chelsea Market in New York on July 14, 2020, both in a limited capacity, as permitted by local regulations and public health guidelines. Our Amsterdam retail location has remained open, in a limited capacity, since the onset of the pandemic in March 2020. While we have not experienced notable difficulties in collecting our outstanding accounts receivable due to COVID-19, we are continuing to monitor the impact of the pandemic on our customers, including their ability to remain in business and to make payments to us in the ordinary course of business. Our e-commerce revenue for the nine months ended September 30, 2020 increased by $8.3 million, or 160%, compared to the same period in the prior year.
The addition of the Azarius and Vaposhop domains through the Conscious Wholesale acquisition prior to the COVID-19 pandemic, combined with our well-established Vapor.com domain, allowed us to mitigate the reduction in sales through our other revenue channels with e-commerce revenues. Online channels accounted for approximately $4.3 million and $13.4 million in net sales for the three and nine months ended September 30, 2020, respectively, and we expect to continue to capitalize on newly acquired e-commerce customers in future periods.
With respect to our purchasing activities, our Greenlane Brands revenue channel continues to experience supply chain challenges, which were expected given the pressure that the COVID-19 pandemic has placed on our operations.
We have not experienced notable impacts to our other supply channels as a whole since the outbreak of the COVID-19 pandemic, including as it relates to our overseas vendors and suppliers. However, we are continuing to monitor the pandemic's effect on our vendors and our ability to source our inventory, and are continuously evaluating adjustments to our purchasing to meet any anticipated changes in demand and product availability.
