Greenlane Holdings, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm Marcum LLP PCAOB ID: 688 F-1 Consolidated Balance Sheets F-2 Consolidated Statements of Operations and Comprehensive Loss F-3 Consolidated Statements of Stockholders’ Equity F-4 Consolidated Statements of Cash Flows F-5 Notes to Consolidated Financial Statements F-6 57 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Greenlane Holdings, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Greenlane Holdings, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America . Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor since 2021. Costa Mesa, CA July 18, 2024 F- 1 GREENLANE HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except par value per share amounts) December 31, 2023 December 31, 2022 ASSETS Current assets Cash $ 463 $ 6,458 Restricted cash — 5,718 Accounts receivable, net of allowance of $ 2,209 and $ 4,826 at December 31, 2023 and 2022, respectively 1,693 6,468 Inventories, net 20,529 40,643 Vendor deposits 3,765 6,296 Other current assets (Note 8) 3,319 11,120 Total current assets 29,769 76,703 Property and equipment, net 2,476 3,962 Operating lease right-of-use assets 1,936 3,442 Other assets 3,912 5,578 Total assets $ 38,093 $ 89,685 LIABILITIES Current liabilities Accounts payable $ 12,103 $ 14,953 Accrued expenses and other current liabilities (Note 8) 3,056 11,882 Customer deposits 2,775 3,983 Current portion of notes payable 7,283 3,185 Current portion of operating leases 866 1,528 Current portion of finance leases 7 128 Total current liabilities 26,090 35,659 Notes payable, less current portion and debt issuance costs, net — 13,040 Operating leases, less current portion 1,010 1,887 Finance leases, less current portion — 29 Other liabilities 1 79 Total long-term liabilities 1,011 15,035 Total liabilities 27,101 50,694 Commitments and contingencies (Note 7) - STOCKHOLDERS’ EQUITY* Preferred stock, $ 0.0001 par value, 10,000 shares authorized, none issued and outstanding — — Class A common stock, $ 0.01 par value per share, 600,000 shares authorized, 3,726 shares issued and outstanding as of December 31, 2023; 600,000 shares authorized, and 1,599 shares issued and outstanding as of December 31, 2022 * 36 15 Class B common stock, $ 0.0001 par value per share, 30,000 shares authorized, and 0 shares issued and outstanding as of December 31, 2023; 30,000 shares authorized, and 0 shares issued and outstanding as of December 31, 2022 * — — Common stock, value — — Additional paid-in capital * 268,132 264,017 Accumulated deficit ( 257,289 ) ( 225,114 ) Accumulated other comprehensive income 245 55 Total stockholders’ equity attributable to Greenlane Holdings, Inc. 11,124 38,973 Non-controlling interest ( 132 ) 18 Total stockholders’ equity 10,992 38,991 Total liabilities and stockholders’ equity $ 38,093 $ 89,685 * After giving effect to the Reverse Stock Splits - See Note 9 - Stockholders’ Equity. The accompanying notes are an integral part of these consolidated financial statements. F- 2 GREENLANE HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except per share amounts) For the for the year ended December 31, 2023 2022 Net sales $ 65,373 $ 137,085 Cost of sales 47,547 112,102 Gross profit 17,826 24,983 Operating expenses: Salaries, benefits and payroll taxes 17,454 31,290 General and administrative 24,213 41,000 Goodwill and indefinite-lived intangibles impairment charge — 71,360 Definite-lived intangibles impairment charge — 50,694 Property and equipment impairment charge — 7,336 Depreciation and amortization 2,243 7,405 Total operating expenses 43,910 209,085 Loss from operations ( 26,084 ) ( 184,102 ) Other (expense) income, net: Interest expense ( 5,450 ) ( 2,450 ) Employee retention credits — 4,854 Other expense, net ( 791 ) ( 541 ) Total other (expense) income, net ( 6,241 ) 1,863 Loss before income taxes ( 32,325 ) ( 182,239 ) Provision for (benefit from) income taxes — ( 13 ) Net loss ( 32,325 ) ( 182,226 ) Less: Net loss attributable to non-controlling interest ( 150 ) ( 12,717 ) Net loss attributable to Greenlane Holdings, Inc. $ ( 32,175 ) $ ( 169,509 ) Net loss attributable to Class A common stock per share - basic and diluted (Note 9)* $ ( 8.16 ) $ ( 22.51 ) Weighted-average shares of Class A common stock outstanding - basic and diluted (Note 9)* 3,993 753 Other comprehensive income (loss): Foreign currency translation adjustments 190 ( 211 ) Unrealized gain (loss) on derivative instrument — 26 Comprehensive loss ( 32,135 ) ( 182,411 ) Less: comprehensive loss attributable to non-controlling interest ( 150 ) ( 12,633 ) Comprehensive loss attributable to Greenlane Holdings, Inc. $ ( 31,985 ) $ ( 169,778 ) * After giving effect to the Reverse Stock Splits - See Note 9 - Stockholders’ Equity. The accompanying notes are an integral part of these consolidated financial statements. F- 3 GREENLANE HOLDINGS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) * * * Class A Common Stock Class B Common Stock Additional Paid-In Accumulated Accumulated Other Comprehensive Non- Controlling Total Stockholders’ Shares* Amount* Shares* Amount* Capital* Deficit Income (Loss) Interest Equity Balance December 31, 2021 426 $ 4 109 $ — $ 229,744 $ ( 55,544 ) $ 324 $ 21,836 $ 196,364 Net loss — — — — — ( 169,509 ) — ( 12,717 ) ( 182,226 ) Equity-based compensation 11 — — — 1,411 — — 259 1,670 Issuance of Class A shares, net of costs - ATM Program 85 1 — — 9,024 — — — 9,025 Issuance of Class A shares - contingent consideration 19 — — — 3,486 — — — 3,486 Issuance of Class A shares, net of costs - June 2022 Offering 59 1 — — 5,039 — — — 5,040 Issuance of Class A shares, net of costs - October 2022 Offering 833 8 — — 7,002 — — — 7,010 Issuance of Class A shares - Amended Eyce APA (Note 3) 7 — — — 657 — — — 657 Issuance of Class A common stock and pre-funded warrants, net of costs 50 — — — — — — — — Reclassification adjustment for gain included in net loss (Note 4) — — — — — — ( 332 ) — ( 332 ) VIBES disposition / deconsolidation (Note 3) — — — — — — — ( 1,789 ) ( 1,789 ) Exchanges of noncontrolling interest for Class A common stock 109 1 ( 109 ) — 7,654 — — ( 7,655 ) — Other comprehensive income — — — — — — 63 84 147 Other — — — — — ( 61 ) — — ( 61 ) Balance December 31, 2022 1,599 $ 15 — $ — $ 264,017 $ ( 225,114 ) $ 55 $ 18 $ 38,991 Balance 1,599 $ 15 — $ — $ 264,017 $ ( 225,114 ) $ 55 $ 18 $ 38,991 Net loss — — — — — ( 32,175 ) — ( 150 ) ( 32,325 ) Equity-based compensation ( 1 ) — — — 60 — — — 60 Issuance of Class A shares - Amended Eyce APA (Note 3) — — — — 225 — — — 225 Issuance of Class A shares (Note 9) 2,128 22 — — 3,831 — — — 3,852 Issuance of Class A shares, net of costs 2,128 22 - - 3,831 - - - 3,852 Other comprehensive income — — — — — — 190 — 190 Balance December 31, 2023 3,726 $ 36 — $ — $ 268,132 $ ( 257,289 ) $ 245 $ ( 132 ) $ 10,992 Balance 3,726 $ 36 — $ — $ 268,132 $ ( 257,289 ) $ 245 $ ( 132 ) $ 10,992 * After giving effect to the Reverse Stock Splits - See Note 9 - Stockholders’ Equity. The accompanying notes are an integral part of these consolidated financial statements. F- 4 GREENLANE HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the year ended December 31, 2023 2022 Cash flows from operating activities: Net loss (including amounts attributable to non-controlling interest) $ ( 32,325 ) $ ( 182,226 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 2,243 7,405 Equity-based compensation expense 284 2,298 Goodwill and indefinite lived intangibles impairment charge — 71,360 Definite-lived intangibles impairment charge — 50,694 Property and equipment impairment charge — 7,336 Change in fair value of contingent consideration 262 509 Write-off of Eyce 2022 Contingent Payment in conjunction with the Amended Eyce APA — ( 267 ) Change in provision for credit losses 188 3,311 Gain related to indemnification asset — ( 2,018 ) Loss on disposal of fixed assets 118 1,398 Gain on disposal of held-for-sale assets — ( 705 ) Gain related to VIBES disposition / deconsolidation (Note 3) — ( 2,062 ) Unrealized loss on equity investments 629 1,214 Realized gain on interest rate swap contract — ( 408 ) Amortization of deferred financing costs and debt discount 2,820 644 Other — ( 124 ) Changes in operating assets and liabilities, net of the effects of acquisitions: Decrease in accounts receivable 4,586 4,910 Decrease in inventories 20,113 26,345 Decrease in vendor deposits 2,531 7,899 Decrease (increase) in other current assets 7,769 ( 2,595 ) Decrease in accounts payable ( 2,770 ) ( 6,459 ) Decrease in accrued expenses and other liabilities ( 7,032 ) ( 10,944 ) Decrease in customer deposits ( 1,208 ) ( 3,941 ) Net cash provided by (used in) operating activities ( 1,793 ) ( 26,426 ) Cash flows from investing activities: Proceeds from VIBES disposition (Note 3) — 4,567 Purchase of property and equipment, net ( 1,007 ) ( 2,784 ) Proceeds from sale of assets held for sale — 9,593 Proceeds from sale of equity investments 1,037 649 Net cash provided by investing activities 30 12,025 Cash flows from financing activities: Proceeds from issuance of Class A common stock, net of issuance costs 3,852 21,075 Proceeds from (repayment of) Asset-Based Loan ( 15,000 ) 14,550 Proceeds from Secured Bridge Loan, net of costs 2,090 — Debt issuance costs ( 751 ) ( 1,472 ) Repayment of loan against future accounts receivable ( 1,721 ) — Proceeds from future receivables financing 3,894 — Payments on Eyce and DaVinci promissory notes ( 2,133 ) ( 3,407 ) Payments on Real Estate Note — ( 7,958 ) Repayment of Bridge Loan — ( 8,000 ) Proceeds from termination of interest rate swap — 145 Purchase consideration paid for Eyce and DaVinci acquisition ( 350 ) ( 875 ) Other ( 21 ) ( 128 ) Net cash (used in) provided by financing activities ( 10,140 ) 13,930 Effects of exchange rate changes on cash 190 ( 210 ) Net decrease in cash and cash equivalents ( 11,713 ) ( 681 ) Cash and cash equivalents, as of beginning of the year 12,176 12,857 Cash and cash equivalents, as of end of year $ 463 $ 12,176 The accompanying notes are an integral part of these consolidated financial statements. F- 5 GREENLANE HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (in thousands) Reconciliation of cash and restricted cash to condensed consolidated balance sheets: For the year ended December 31, 2023 2022 Beginning of the period Cash $ 6,458 $ 12,857 Restricted cash 5,718 — Total cash and restricted cash, beginning of period $ 12,176 $ 12,857 End of the period Cash $ 463 $ 6,458 Restricted cash — 5,718 Total cash and restricted cash, end of period $ 463 $ 12,176 Supplemental disclosures of cash flow information Cash paid during the period for interest $ 4,495 $ 2,251 Cash paid during the period for income taxes $ — $ 76 Cash paid for amounts included in the measurement of lease liabilities $ 1,353 $ 2,659 Non-cash investing activities and financing activities: Issuance of Class A common stock, warrants, and stock options for business acquisitions $ — $ 3,486 Non-cash purchases of property and equipment $ 133 $ 909 Decrease in non-controlling interest as a result of exchanges for Class A common stock $ — $ ( 7,655 ) Decrease in non-controlling interest as a result of VIBES disposition $ — $ ( 1,789 ) Transfer from contingent consideration to notes payable $ 1,650 $ — Transfer from accrued expenses to notes payable $ 437 $ — The accompanying notes are an integral part of these consolidated financial statements. F- 6 GREENLANE HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BUSINESS OPERATIONS AND ORGANIZATION Organization Greenlane Holdings, Inc. (“Greenlane” and, collectively with the Operating Company (as defined below) and its consolidated subsidiaries, the “Company”, “we”, “us”, and “our”) was formed as a Delaware corporation on May 2, 2018. We are a holding company that was formed for the purpose of completing an underwritten initial public offering (“IPO”) of shares of our Class A common stock, $ 0.01 par value per share (“Class A common stock”), in order to carry on the business of Greenlane Holdings, LLC (the “Operating Company”). The Operating Company was organized under the laws of the state of Delaware on September 1, 2015, and is based in Boca Raton, Florida. Unless the context otherwise requires, references to the “Company” refer to us, and our consolidated subsidiaries, including the Operating Company. We merchandise premium cannabis accessories, child-resistant packaging, specialty vaporization solutions and lifestyle products in the United States, Canada, Europe and Latin America, serving a diverse and expansive customer base with thousands of retail locations, licensed cannabis dispensaries, smoke shops, multi-state operators (“MSOs”), specialty retailers, and retail consumers through both our e-commerce platforms and our flagship Higher Standards store in New York City’s famed Chelsea Market. We have been developing a portfolio of our own proprietary brands (the “Greenlane Brands”) that we believe will, over time, deliver higher margins and create long-term value for our customers and shareholders. Our wholly-owned Greenlane Brands includes Groove – our recently launched more affordable product line and Higher Standards – our premium smoke shop and ancillary product brand, and our award winning Vapor.com website and brand. We also have category exclusive licenses for the premium Marley Natural branded products, as well as the K.Haring branded products. We are the sole manager of the Operating Company and our principal asset is Common Units of the Operating Company (“Common Units”). As the sole manager of the Operating Company, we operate and control all of the business and affairs of the Operating Company, and we conduct our business through the Operating Company and its subsidiaries. We have a board of directors and executive officers, but no employees. All of our assets are held and all of the employees are employed by wholly owned subsidiaries of the Operating Company. We have the sole voting interest in, and control the management of, the Operating Company, and we have the obligation to absorb losses of, and receive benefits from, the Operating Company, that could be significant. We determined that the Operating Company is a variable interest entity (“VIE”) and that we are the primary beneficiary of the Operating Company. Accordingly, pursuant to the VIE accounting model, beginning in the fiscal quarter ended June 30, 2019, we consolidated the Operating Company in our consolidated financial statements and reported a non-controlling interest related to the Common Units held by the members of the Operating Company (other than the Common Units held by us) on our consolidated financial statements. On August 31, 2021, we completed our previously announced merger with KushCo Holdings, Inc. (“KushCo”) and have included the results of operations of KushCo in our consolidated statements of operations and comprehensive loss from that date forward. In connection with the merger with KushCo, the Greenlane Certificate of Incorporation was amended and restated (the “A&R Charter”) in order to (i) increase the number of authorized shares of Greenlane Class B common stock, $ 0.0001 par value per share (the “Class B Common stock”), from 10 million shares to 30 million shares in order to effect the conversion of each outstanding share of Class C common stock, $ 0.0001 par value per share (the “Class C common stock”), into one-third of one share of Class B common stock, (ii) increase the number of authorized shares of Class A common stock from 125 million shares to 600 million shares, and (iii) eliminate references to the Class C common stock. Pursuant to the terms of an Agreement and Plan of Merger, dated as of March 31, 2021 (the “Merger Agreement”) with KushCo, immediately prior to the consummation of the business combination, holders of Class C common stock received one-third of one share of Class B common stock for each share of Class C common stock held immediately prior to the closing of the merger. Our corporate structure is commonly referred to as an “Up-C” structure. The Up-C structure allows the Operating Company to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity. One of these benefits is that future taxable income of the Operating Company that is allocated to its members will be taxed on a flow-through basis and therefore will not be subject to corporate taxes at the Operating Company entity level. Additionally, because a member may redeem their Common Units for shares of Class A common stock on a one -for-one basis or, at our option, for cash, the Up-C structure also provides the member with potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded. F- 7 In connection with the IPO, we entered into a Tax Receivable Agreement (the “TRA”) with the Operating Company and the Operating Company’s members and a Registration Rights Agreement (the “Registration Rights Agreement”) with the Operating Company’s members. The TRA provides for the payment by us to the Operating Company’s member(s) of 85.0 % of the amount of tax benefits, if any, that we may actually realize (or in some cases, are deemed to realize) as a result of (i) the step-up in tax basis in our share of the Operating Company’s assets resulting from the redemption of Common Units under the mechanism described above and (ii) certain other tax benefits attributable to payments made under the TRA. Pursuant to the Registration Rights Agreement, we have agreed to register the resale of shares of Class A common stock that are issuable to the Operating Company’s members upon redemption or exchange of their Common Units. The A&R Charter and the Fourth Amended and Restated Operating Agreement of the Operating Company (the “Operating Agreement”) require that (a) we at all times maintain a ratio of one Common Unit owned by us for each share of our Class A common stock issued by us (subject to certain exceptions), and (b) the Operating Company at all times maintains (i) a one -to-one ratio between the number of shares of our Class A common stock issued by us and the number of Common Units owned by us, and (ii) a one -to-one ratio between the number of shares of our Class B common stock owned by the non-founder members of the Operating Company and the number of Common Units owned by the non-founder members of the Operating Company. As of December 31, 2022, all Common Units of the Operating Company and Class B common stock had been exchanged for Class A common stock, and we owned 100 % of the voting and economic interests in Greenlane through the holders’ ownership of Class A common stock. See “Note 9 - Stockholder’s Equity.” Reverse Stock Splits On August 4, 2022, we filed a Certificate of Amendment (the “Certificate of Amendment”) to the A&R Charter with the Secretary of State of the State for Delaware (the “SSSD”), which effected a one-for-twenty reverse stock split (the “2022 Reverse Stock Split”) of our issued and outstanding shares of Class A common stock and Class B common stock (collectively, the “Common Stock”) at 5:01 PM Eastern Time on August 9, 2022. As a result of the 2022 Reverse Stock Split, every 20 shares of Common Stock issued and outstanding were converted into one share of Common Stock. We paid cash in lieu of fractional shares, and accordingly, no fractional shares were issued in connection with the 2022 Reverse Stock Split. On June 2, 2023, we filed a Certificate of Amendment to the A&R Charter with the SSSD, which effected a one-for-ten reverse stock split (the “2023 Reverse Stock Split” and together with the 2022 Reverse Stock Split, the “Reverse Stock Splits”) of our issued and outstanding shares of Common Stock at 5:01 PM Eastern Time on June 5, 2023. As a result of the 2023 Reverse Stock Split, every ten shares of common stock issued and outstanding were converted into one share of common stock. We paid cash in lieu of fractional shares, and accordingly, no fractional shares were issued in connection with the 2023 Reverse Stock Split. The Reverse Stock Splits did not change the par value of the Common Stock or the authorized number of shares of Common Stock. All outstanding options, restricted stock awards, warrants and other securities entitling their holders to purchase or otherwise receive shares of our Common Stock have been adjusted as a result of the Reverse Stock Splits, as required by the terms of each security. The number of shares available to be awarded under our Amended and Restated 2019 Equity Incentive Plan have also been appropriately adjusted. See “Note 10 — Compensation Plans” for more information. All share and per share amounts in these consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Splits, including reclassifying an amount equal to the reduction in par value of Common Stock to additional paid-in capital. Liquidity and Going Concern Pursuant to ASC 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”), management must evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these condensed consolidated financial statements are issued. In accordance with ASC 205-40, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern. Our primary requirements for liquidity and capital are working capital, debt service related to recent acquisitions and general corporate needs. Our primary sources of liquidity are our cash on hand and the cash flow that we generate from our operations, as well as proceeds from equity issuances, such as our June 2022, October 2022, and July 2023 offerings, each as described and defined below. F- 8 ATM Program and Shelf Registration Statement We formerly used a shelf registration statement on Form S-3 (the “Shelf Registr ation Statement”) to conduct securities offerings from time to time in order to meet our liquidity needs. In August 2021, we filed a prospectus supplement and established an “at-the-market” equity offering program (the “ATM Program”) that provided for the sale of shares of our Class A common stock having an aggregate offering price of up to $50 million, from time to time. Since the launch of the ATM program in August 2021 and through December 31, 2022, we sold shares of our Class A common stock which generated gross proceeds of approximately $ 12.7 million and we paid fees to the sales agent of approximately $ 0.4 million. Due to the untimely filing of certain of our Quarterly and Annual Reports 3, we are unable to issue additional shares of Class A common stock pursuant to the ATM Program or otherwise use the Shelf Registration Statement, which will limit our liquidity options in the capital markets Common Stock and Warrant Offerings. On June 27, 2022, we entered into a securities purchase agreement with an accredited investor, pursuant to which we agreed to issue and sell an aggregate of 585,000 shares of our Class A common stock, pre-funded warrants to purchase up to 495,000 shares of our Class A common stock (the “June 2022 Pre-Funded Warrants”) and warrants to purchase up to 1,080,000 shares of our Class A common stock (the “June 2022 Standard Warrants” and, together with the June 2022 Pre-Funded Warrants, the “June 2022 Warrants”), in a registered direct offering (the “June 2022 Offering”). The June 2022 Offering generated gross proceeds of approximately $ 5.4 million and net proceeds to the Company of approximately $ 5.0 million. All June 2022 Pre-Funded Warrants were exercised in July 2022, for de minimis net proceeds. On October 27, 2022, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an aggregate of 695,555 shares of our Class A common stock, pre-funded warrants to purchase up to 137,778 shares of our Class A Common Stock (the “October 2022 Pre-Funded Warrants”) and warrants to purchase up to 1,666,667 shares of our Class A common stock (the “October 2022 Standard Warrants”). The October 2022 units were offered pursuant to a Registration Statement on Form S-1 (the “October 2022 Offering”). The October 2022 Offering generated gross proceeds of approximately $ 7.5 million and net proceeds to the Company of approximately $ 6.8 million. On June 29, 2023, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an aggregate of 560,476 shares of our Class A common stock, pre-funded warrants to purchase up to 3,487,143 shares of our Class A Common Stock (the “July 2023 Pre-Funded Warrants”) and warrants to purchase up to 8,095,238 shares of our Class A common stock (the “July 2023 Standard Warrants”). The July 2023 units were offered pursuant to a Registration Statement on Form S-1 (the “July 2023 Offering”). The July 2023 Offering generated gross proceeds of approximately $ 4.3 million and net proceeds to the Company of approximately $ 3.8 million and closed on July 3, 2023. Asset-Based Loan On August 9, 2022, we entered into an asset-based loan agreement dated as of August 8, 2022 (the “Loan Agreement”), which made available to the Company a term loan of up to $ 15.0 million. On February 9, 2023, we entered into Amendment No. 2 to the Loan Agreement, in which we agreed to, among other things, voluntarily prepay approximately $ 6.6 million (inclusive of early termination fees and expenses) under the terms provided for under the Loan Agreement and the lenders under the Loan Agreement agreed to release $ 5.7 million in funds held in a blocked account pursuant to the terms of the Loan Agreement. On August 7, 2023, we repaid the approximately $ 4.3 million in aggregate principal amount (the “Loan Repayment”) which remained outstanding under the terms of the Loan Agreement. As a result of the Loan Repayment, the Company has been released from its obligations under the Loan Agreement, in accordance with the terms of the Loan Agreement. See “Note 6 - Long Term Debt” for more information. F- 9 ERC Sale On February 16, 2023, two of our wholly owned subsidiaries, Warehouse Goods LLC and Kim International LLC, entered into an agreement with a third-party institutional investor pursuant to which the investor purchased, for approximately $ 4.9 million in cash, an economic participation interest, at a discount, in our rights to payment from the United States Internal Revenue Service for certain periods with respect to the employee retention credits filed by us under the Employee Retention Credit program. Future Receivables Financing In July, August, October, and November 2023, the Company received an aggregate of approximately $ 3.9 million in cash pursuant to the terms of future receivables financings (collectively, the “Future Receivables Financings”) entered into with two private lenders. See “Note 6 - Long Term Debt” for more information. Management Initiatives We have completed several initiatives to optimize our working capital requirements. We launched Groove, a new, innovative Greenlane Brands product line, and we also rationalized and improved our third-party brands product offering, which enabled us to reduce inventory carrying costs and working capital requirements while increasing our offerings. In April 2023, we entered into two strategic partnership. First, we entered into a strategic partnership (the “MJ Packaging Partnership”) with A&A Global Imports d/b/a MarijuanaPackaging.com (“MJ Pack”), a leading provider of packaging solutions to the cannabis industry. Second, we entered into a strategic partnership with an affiliate of one of our existing vape suppliers (“Vape Partner”) to service certain key customers with vaporizer goods and services (the “Vape Partnership”). As part of the Vape Partnership, we will introduce our Vape Partner to certain key customers, assist with the promotion and the sale of certain vaporizer goods and services, and help coordinate the logistics, storage and distribution of such vaporizer products. If our Vape Partner and key customer(s) enter into a direct relationship, the customers would directly purchase vaporizer goods and services, which we currently sell them, directly from our Vape Partner and we would no longer need to purchase such vape inventory on behalf of such key customer(s). In exchange we would earn quarterly and annual commission payments from our strategic partners. While the strategic partnerships may result in a decrease in top line revenue for these packaging and vape products, these partnerships combined with some of our other restructuring initiatives should allow us to reduce our overall cost-structure and enhance our margins, thereby improving our balance sheet. We have successfully renegotiated supplier partnership terms and are continuing to improve working capital arrangements with suppliers. We have made progress consolidating and streamlining our office, warehouse, and distribution operations footprint. We have reduced our workforce significantly to reduce costs and align with our revenue projections. The Company has incurred net losses of $ 32.3 million and $ 182.2 million for the years ended December 31, 2023 and 2022, respectively. For the years ended December 31, 2023 and 2022, cash used in operating activities were $ 1.8 million and $ 26.4 million, respectively. The recent macroeconomic environment has caused weaker demand than contemplated under the Company’s business plan, resulting in a reduction in projected revenue and cash flows for the twelve-month period included in the going concern evaluation. As a result of our losses and our projected cash needs, combined with our current liquidity level, substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next twelve months to improve the Company’s liquidity and profitability, which includes, without limitation: ■Further reducing operating costs expense by taking additional restructuring actions to align cost with revenue to achieve profitability. ■Increasing revenue by introducing new products and acquiring new customers. ■Execute on strategic partnerships accretive to margins and operating cash ■Seeking additional capital through the issuance of debt or equity securities. The consolidated financial statements do not include any adjustments that may result from the outcome of this going concern uncertainty. F- 10 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Our audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with the instructions to Form 10-K and Article 8 of Regulation S-X. Principles of Consolidation Our consolidated financial statements include our accounts, the accounts of the Operating Company, and the accounts of the Operating Company’s consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates Conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts in our consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. U.S. GAAP requires us to make estimates and judgments in several areas. Such areas include, but are not limited to the following: the collectability of accounts receivable; the allowance f or slow-moving or obsolete inventory; the realizability of deferred tax assets; the fair value of contingent consideration arrangements; the useful lives property and equipment; the calculation of our VAT taxes receivable and VAT taxes, fines, and penalties payable; our loss contingencies, including our TRA liability; and the valuation and assumptions underlying equity-based compensation. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. The actual results could differ materially from those estimates. Segment Reporting We manage our global business operations through our operating and reportable business segments. As of December 31, 2023, we had two reportable operating business segments: Industrial Goods and Consumer Goods. Our reportable segments have been identified based on how our chief operating decision maker (“CODM”), which is a committee comprised of our Chief Executive Officer (“CEO”) and our Chief Financial and Legal Officer (“CFO”), manages our business, makes resource allocation and evaluates operating decisions, and evaluate operating performance. See “Note 12—Segment Reporting.” Business Combinations Our business combinations are accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations (“ASC 805”). Under the acquisition method, we recognize 100% of the assets we acquire and liabilities we assume, regardless of the percentage we own, at their estimated fair values as of the date of acquisition. Any excess of the purchase price over the fair value of the net assets and other identifiable intangible assets we acquire is recorded as goodwill. To the extent the fair value of the net assets we acquire, including other identifiable assets, exceeds the purchase price, a bargain purchase gain is recognized. The assets we acquire, and liabilities we assume from contingencies, are recognized at fair value if we can readily determine the fair value during the measurement period. The operating results of businesses we acquire are included in our consolidated statement of operations from the date of acquisition. Acquisition-related costs are expensed as incurred. See “Note 3— Business Acquisitions.” Equity-Based Compensation We account for equity-based compensation grants of equity awards to employees in accordance with ASC Topic 718, Compensation — Stock Compensation. This standard requires us to measure compensation expense based on the estimated fair value of share-based awards on the grant date and recognize as expense over the requisite service period, which is generally the vesting period. We estimate the fair value of stock options using the Black-Scholes model on the grant date. The Black-Scholes model requires us to use several variables to estimate the grant-date fair value of our equity-based compensation awards including expected term, expected volatility and risk-free interest rates. Our equity-based compensation costs are recognized using a graded vesting schedule. For liability-classified awards, we record fair value adjustments up to and including the settlement date. Changes in the fair value of our equity-based compensation liability that occur during the requisite service period are recognized as compensation cost over the vesting period. Changes in the fair value of the equity-based compensation liability that occur after the end of the requisite service period but before settlement, are recognized as compensation cost of the period in which the change occurs. We account for forfeitures as they occur. See “Note 10—Compensation Plans.” F- 11 Loss Contingencies Certain conditions may exist which may result in a loss to us, but which will only be resolved when one or more future events occur or fail to occur. Management assesses such contingent liabilities and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us, or unasserted claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability is estimable, the liability would be accrued in our consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed. Unasserted claims that are not considered probable of being asserted and those for which an unfavorable outcome is not reasonably possible have not been disclosed. Fair Value Measurements We apply the provisions of ASC Topic 820, Fair Value Measurements , which defines fair value, establishes a framework for its measurement and expands disclosures about fair value measurements. Fair value is defined as the exchange price we would receive for an asset or an exit price we would pay to transfer a liability in the principal, or most advantageous, market for our asset or liability in an orderly transaction with a market participant on the measurement date. We determine the fair market values of our financial instruments based on the fair value hierarchy, which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following three levels of inputs may be used to measure fair value: Level 1 — Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amounts of our financial instruments, including cash, accounts receivable, accounts payable, accrued expenses and short-term debt, are carried at historical cost basis, which approximates their fair values because of their short-term nature. The fair value of our long-term debt is the estimated amount we would have to pay to repurchase the debt, inclusive of any premium or discount attributable to the difference between the stated interest rate and market rate of interest at each balance sheet date. On a recurring basis, we measure and record contingent consideration using fair value measurements in the accompanying consolidated financial statements. See “Note 4—Fair Value of Financial Instruments.” We also own equity securities of private entities, which do not have readily determinable fair values. We elected to measure these equity securities at cost minus impairment, if any. At each reporting period, we make a qualitative assessment considering impairment indicators to evaluate whether our investment is impaired. The equity securities are adjusted to fair value when an observable price change can be identified. See “Note 4—Fair Value of Financial Instruments.” Cash For purposes of reporting cash flows, we consider cash on hand, checking accounts, and savings accounts to be cash. We also consider all highly-liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. We place our cash with high credit quality financial institutions, which provide insurance through the Federal Deposit Insurance Company. At times, the balance in our accounts may exceed federally insured limits. We perform periodic evaluations of the relative credit standing of these institutions and do not expect any losses related to such concentrations. As of December 31, 2023, and 2022, approximately $ 0.1 million and $ 0.8 million, respectively, of our cash balances were in foreign bank accounts and uninsured. As of December 31, 2023, and 2022, we had no cash equivalents. Restricted Cash Restricted cash represents principally cash reserves that are maintained pursuant to the governing agreement of the Asset-Based Loan discussed in “Note 6 - Debt.” F- 12 Accounts Receivable, net Accounts receivable represent amounts due from customers for merchandise sales and are recorded when revenue is earned and are carried at the original invoiced amount less an allowance for any expected credit loss. An account is considered past due when payment has not been rendered by its due date based upon the terms of the sale. Generally, accounts receivable are due thirty days after the billing date. We maintain an allowance for credit losses to reserve for potentially uncollectible receivable amounts. In evaluating our ability to collect outstanding receivable balances, we consider various factors including the age of the balance, the creditworthiness of the customer, the customer’s current financial condition, current economic conditions, and other factors that may affect our ability to collect from customers. We write off accounts as uncollectible on a case-by-case basis. We pledge accounts receivable as collateral for our long-term debt, see “Note 6—Debt.” Inventories, net Inventories consist of finished goods that we value at the lower of cost or net realizable value on a weighted average cost basis for the majority of the inventory. We established an allowance for slow-moving or obsolete inventory based upon assumptions about future demands and market conditions. At December 31, 2023, and 2022, the reserve for obsolescence was approximately $ 9.5 million and $ 21.4 million, respectively. We pledge inventory as collateral for our long-term debt, see “Note 6— Debt.” Vendor Deposits Vendor deposits represent prepayments we make to vendors for inventory purchases. A significant number of vendors require us to prepay for inventory purchases. Customs Bonds The Company is required to obtain customs bonds to import goods into the United States to provide security for payment of duties, taxes and other fees incurred as a result of importing goods. Customs bonds are included in “Other current assets” in our consolidated balance sheets, see “Note 8 - Supplemental Financial Statement Information.” Assets Held for Sale We generally consider assets to be held for sale when (i) we commit to a plan to sell the assets, (ii) the assets are available for immediate sale in their present condition, (iii) we have initiated an active program to locate a buyer and other actions required to complete the plan to sell the assets, (iv) consummation of the planned sale transaction is probable, (v) the assets are being actively marketed for sale at a price that is reasonable in relation to their current fair value, (vi) the transaction is expected to qualify for recognition as a completed sale, within one year, and (vii) significant changes to or withdrawal of the plan is unlikely. Following the classification of any depreciable assets within a disposal group as held for sale, we discontinue depreciating the asset and write down the asset to the lower of carrying value or fair market value less cost to sell, if needed. Property and Equipment, net We state property and equipment at cost or, if acquired through a business combination, fair value at the date of acquisition. We calculate depreciation and amortization using the straight-line method over the estimated useful lives of the assets, except for our leasehold improvements, which are depreciated over the shorter of their estimated useful lives or their related lease term. Upon the sale or retirement of assets, the cost and related accumulated depreciation are removed from our accounts and the resulting gain or loss is credited or charged to income. We expense costs for repairs and maintenance when incurred. Property and equipment includes assets recorded under finance leases, see “Note 5—Leases.” We pledge property and equipment as collateral for our long-term debt, see “Note 6—Long Term Debt.” Impairment of Long-Lived Assets We assess the recoverability of the carrying amount of our long lived-assets, including property and equipment and finite-lived intangibles, whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be assessed when estimated undiscounted future cash flows from the operation and disposition of the asset group are less than the carrying amount of the asset group. Asset groups have identifiable cash flows and are largely independent of other asset groups. Measurement of an impairment loss is based on the excess of the carrying amount of the asset group over its fair value. Changes in our future operations and business lines could affect the estimated undiscounted future cash flows from the operation of certain long-lived assets, such as customer relationships, and may give rise to impairment losses in future periods. Investments in Equity Securities Our investments in equity securities without readily determinable fair value consist of ownership interests in Airgraft Inc., Sun Grown Packaging, LLC (“Sun Grown”) and Vapor Dosing Technologies, Inc. (“VIVA”). We determined that our ownership interests do not provide us with significant influence over the operations of these investments. Accordingly, we account for our investments in these entities as equity securities. Airgraft Inc., Sun Grown, and VIVA are private entities and their equity securities do not have a readily determinable fair value. We elected to measure these securities under the measurement alternative election at cost minus impairment, if any, with adjustments through earnings for observable price changes in orderly transactions for the identical or similar investment of the same issuer. Investments in equity securities are included within “Other assets” in our consolidated balance sheets. See “Note 4—Fair Value of Financial Instruments.” F- 13 Vendor Incentives and Rebates Sales incentives we receive in the form of payments from vendors solely to reimburse us for acting as the vendors’ agent in redeeming a sales incentive that is between our vendor and our customers and end consumers are included in net sales in the consolidated statements of operations and comprehensive loss. We also have agreements with certain vendors to receive volume rebates which are dependent upon reaching minimum purchase thresholds. When volume rebates can be reasonably estimated and it is probable that minimum purchase thresholds will be met, we record a portion of the rebate when or as we make progress towards the purchase threshold. Amounts received from vendors relating to volume rebates are considered a reduction of the carrying value of our inventory and, therefore, such amounts are ultimately recorded as a reduction of cost of goods sold in the consolidated statements of operations and comprehensive loss. Foreign Currency Translation Our consolidated financial statements are presented in United States (U.S.) dollars. The functional currency of one of the Operating Company’s wholly-owned, Canada-based, subsidiaries is the Canadian dollar. The functional currency of the Operating Company’s wholly-owned, Netherlands-based subsidiary is the Euro. The assets and liabilities of these subsidiaries are translated into U.S. dollars at current exchange rate at each balance sheet date for assets and liabilities and an appropriate average exchange rate for each applicable period within our consolidated statements of operations and comprehensive loss. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The foreign currency translation adjustments are included in accumulated other comprehensive loss, a separate component of stockholders’ deficit in our consolidated balance sheets. Other exchange gains and losses are reported within our consolidated statements of operations and comprehensive loss. Comprehensive (Loss) Income Comprehensive (loss) income includes net (loss) income as currently reported by us, adjusted for other comprehensive items. Other comprehensive items consist of foreign currency translation gains and losses and unrealized gains and losses on derivative financial instruments that qualify as hedges. Advertising We expense advertising costs as incurred and include them in general and administrative expenses in our consolidated statements of operations and comprehensive loss. Advertising costs were approximately $ 1.2 million and $ 2.8 million for the years ended December 31, 2023, and 2022, respectively. Income Taxes We are a corporation subject to income taxes in the United States. Certain subsidiaries of the Operating Company are taxable separately from us. Our proportional share of the Operating Company’s subsidiaries’ provisions are included in our consolidated financial statements. As of December 31, 2023 and 2022, we hold all the outstanding Common Units in the Operating Company and are the sole member. As a result, starting in 2023, 100% of the Operating Company’s US and state income and expenses will be included in our US and state tax returns. Our deferred income tax assets and liabilities are computed for differences between the tax basis and financial statement amounts that will result in taxable or deductible amounts in the future. We compute deferred balances based on enacted tax laws and applicable rates for the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized for deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine we would be able to realize our deferred tax assets for which a valuation allowance had been recorded, then we would adjust the deferred tax asset valuation allowance, which would reduce our provision for income taxes. We evaluate the tax positions taken on income tax returns that remain open and positions expected to be taken on the current year tax returns to identify uncertain tax positions. Unrecognized tax benefits on uncertain tax positions are recorded on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is more than 50 percent likely to be realized is recognized. Interest and penalties related to unrecognized tax benefits are recorded in income tax benefit. We have no uncertain tax positions that qualify for inclusion in our consolidated financial statements. See “Note 11—Income Taxes.” F- 14 Tax Receivable Agreement (TRA) We entered into the TRA with the Operating Company and each of the members of the Operating Company that provides for the payment by the Operating Company to the members of 85% of the amount of tax benefits, if any, that we may actually realize (or in some circumstances are deemed to realize) as a result of (i) increases in tax basis resulting from any future redemptions that are funded by us or exchanges of Common Units as described above in “Note 1—Business Operations and Organization” and (ii) certain other tax benefits attributable to payments made under the TRA. We compute annual tax benefits by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits. The Operating Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. The TRA payments are not conditioned upon any continued ownership interest in the Operating Company. The rights of each noncontrolling interest holder under the TRA are assignable to transferees of its interest in the Operating Company. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Operating Company generates each year and the applicable tax rate. We periodically evaluate the realizability of the deferred tax assets resulting from the exchange of Common Units for our Class A common stock. If the deferred tax assets are determined to be realizable, we then assess whether payment of amounts under the TRA have become probable. If so, we record a TRA liability equal to 85% of such deferred tax assets. In subsequent periods, we assess the realizability of all of deferred tax assets subject to the TRA. If we determine that a deferred tax asset with a valuation allowance is realizable in a subsequent period, the related valuation allowance will be released and consideration of a corresponding TRA liability will be assessed. The realizability of deferred tax assets, including those subject to the TRA, is dependent upon the generation of future taxable income during the periods in which those deferred tax assets become deductible and consideration of prudent and feasible tax-planning strategies. The measurement of the TRA is accounted for as a contingent liability. Therefore, once we determine that a payment to a member of the Operating Company has become probable and can be estimated, the estimated payment will be accrued. See “Note 11—Income Taxes.” Revenue Recognition Revenue is recognized when customers obtain control of goods and services promised by us. Revenue is measured based on the amount of consideration that we expect to receive 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. We generate revenue primarily from the sale of finished products to customers, whereby each product unit represents a single performance obligation. We recognize revenue 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 such as child-resistant packaging, closed-system vaporization solutions and custom-branded retail products, 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, 2023 and 2022. We estimate product returns based on historical experience and record them as a refund liability that reduces the net sales for the period. We analyze actual historical returns, current economic trends and changes in order volume when evaluating the adequacy of our sales returns allowance in any reporting period. Our liability for returns, which is included within “Accrued expenses and other current liabilities” in our consolidated balance sheets, was approximately $ 0.1 million and $ 0.3 million as of December 31, 2023 and 2022, respectively. 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. F- 15 The Company transitioned to a commission revenue model for the majority of the sales for the Industrial segment. 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. One customer represented approximately 21 % and 22 % of our net sales for the years ended December 31, 2023 and 2022, respectively . 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 . As of December 31, 2022, the Company had three customers who individually represented approximately 31 % , 17 % and 15 % of accounts receivable, respectively. Value Added Taxes During the third quarter of 2020, as part of a global tax strategy review, we determined that our European subsidiaries based in the Netherlands, which we acquired on September 30, 2019, had historically collected and remitted value added tax (“VAT”) payments, which related to direct-to-consumer sales to other European Union (“EU”) member states, directly to the Dutch tax authorities. In connection with our subsidiaries’ payment of VAT to Dutch tax authorities rather than other EU member states, we may become subject to civil or criminal enforcement actions in certain EU jurisdictions, which could result in penalties. We performed an analysis of the VAT overpayments to the Dutch tax authorities, which we expected to be refunded to us, and VAT payable to other EU member states, including potential fines and penalties. Based on this analysis, we recorded VAT payable of approximately $ 0.4 million and $ 0.4 million relating to this matter within “Accrued expenses and other current liabilities” in our consolidated balance sheet as of December 31, 2023 and 2022, respectively. Pursuant to the purchase and sale agreement by which we acquired our European subsidiaries, the sellers are required to indemnify us against certain specified matters and losses, including any and all liabilities, claims, penalties and costs incurred or sustained by us in connection with non-compliance with tax laws in relation to activities of the sellers. The indemnity (or indemnification receivable) is limited to an amount equal to the purchase price under the purchase and sale agreement. During the year ended December 31, 2022, we recognized a gain of approximately $ 2.0 million, respectively, within “general and administrative expenses” in our consolidated statements of operations and comprehensive loss, which represented the partial reversal of a charge previously recognized based on the difference between the VAT payable and the VAT receivable and indemnification asset, as the indemnification asset became probable of recovery based on the reduction in our previously estimated VAT liability for penalties and interest based on our voluntary disclosure to, and ongoing settlement with, the relevant tax authorities in the EU member states. As noted above, we have voluntarily disclosed VAT owed to several relevant tax authorities in the EU member states, and believe in doing so we will reduce our liability for penalties and interest. Nonetheless, we may incur expenses in future periods related to such matters, including litigation costs and other expenses to defend our position. The outcome of such matters is inherently unpredictable and subject to significant uncertainties. Refer to “Note 7—Commitments and Contingencies” for additional discussion regarding our contingencies. Net Loss Per Share Basic net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements. See “Note 9—Stockholders’ Equity - Net Loss Per Share.” Recently Issued Accounting Guidance In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses . The standard requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale securities and requires estimated credit losses to be recorded as allowances rather than as reductions to the amortized cost of the securities. This standard was effective for fiscal years, and interim periods within those years, beginning after December 15, 2022 for filers that are eligible to be smaller reporting companies under the SEC’s definition, with early adoption permitted. We adopted this standard beginning January 1, 2023. Adoption of this standard did not have a material impact on our consolidated financial statements. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if it had originated the contracts. Prior to this ASU, an acquirer generally recognizes contract assets acquired and contract liabilities assumed that arose from contracts with customers at fair value on the acquisition date. The ASU was effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The ASU is to be applied prospectively to business combinations occurring on or after the effective date of the amendment (or if adopted early as of an interim period, as of the beginning of the fiscal year that includes the interim period of early application). We adopted this new standard beginning January 1, 2023. Adoption of this standard did not impact our consolidated financial statements, as we did not complete any transactions to which this standard was applicable during the current reporting period. F- 16 Recently Issued Accounting Guidance Not Yet Adopted In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , which clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security’s unit of account. This standard is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard. In November 2023, the FASB issued ASU No. 2023-07 , Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update require public companies to disclose on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. In addition, the amendment requires that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required in interim periods and require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statements and related disclosures. This amendment will go into effect for the fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) : Improvements To Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this Update require that entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). In addition, public business entities are required to provide certain qualitative disclosure about the rate reconciliation. The amendments in this Update require that all entities disclose on an annual basis the amount of income taxes paid (net of refunds received) disaggregated (1) by federal (national), state, and foreign taxes and (2) by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). This Update also includes certain other amendments to improve the effectiveness of income tax disclosures, such as requiring that all entities disclose the following information: 1. Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign. 2. Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The amendments in this ASU require a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets) as of the beginning of the annual reporting period in which an entity adopts the amendments. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures. This amendment will go into effect for annual periods beginning after December 15, 2024. NOTE 3. BUSINESS ACQUISITIONS AND DISPOSITIONS Amended Eyce APA On April 7, 2022, we entered into an amendment to that certain Asset Purchase Agreement dated March 2, 2021 (the “Amended Eyce APA”), by and between Eyce and Warehouse Goods to accelerate the issuance of shares of Class A common stock issuable to Eyce under the agreement upon the attainment of certain EBITDA and revenue benchmarks (the “Amended 2022 Contingent Payment”), in an amount equal to $ 0.9 million. We issued 71,721 shares of Class A common stock to Eyce under the Amended 2022 Contingent Payment, which vest ratably in seven quarterly tranches starting on July 1, 2022, such that on January 1, 2024 (the “Vesting Date”), all shares issued to Eyce under the Amended 2022 Contingent Payment will have vested. The shares of Class A common stock issued under the Amended 2022 Contingent Payment are subject to certain forfeiture restrictions tied to the continued employment of certain Eyce personnel with the Company through the Vesting Date. The Amended Eyce APA also provided for the payment of $ 0.9 million in cash in four equal installments on April 1, 2023, July 1, 2023, October 1, 2023 and January 1, 2024, contingent on the achievement of certain deliverables outlined in the Amended Eyce APA and the continued employment of certain Eyce personnel. The transaction was accounted for separately from acquisition accounting for the Eyce business combination. Specifically, we recorded a gain of approximately $ 0.3 million, respectively, within “other income (expense), net” in our consolidated statement of operations and comprehensive income for the year ended December 31, 2022 to write-off the balance of the Eyce 2022 Contingent Payment. Also, we recorded approximately $ 1.3 million in compensation expense related to the Amended 2022 Contingent Payment within “salaries, benefits and payroll taxes” in our consolidated statement of operations and comprehensive income for the year ended December 31, 2022. The April 2, 2023 and July 1, 2023 payments were paid timely, the remaining payments which were not paid timely have rolled into the Synergy Imports, LLC Bridge Loan and is included in the additionally deferred amounts under that Loan. VIBES Sale On July 19, 2022, Warehouse Goods entered into the Sale Agreement with Portofino to sell the Company’s 50 % stake in VIBES Holdings LLC for total consideration of $ 4.6 million in cash. The transactions contemplated by the Sale Agreement were completed on July 19, 2022, immediately following the signing of the Sale Agreement. In conjunction with and as a result of the disposition of and deconsolidation of our interest in VIBES Holdings LLC, we recorded a gain of $ 2.0 million for the year ended December 31, 2022, which is included as an offset in “general and administrative expenses” in our consolidated statements of operations and comprehensive loss, as well as a reduction to non-controlling interest on our consolidated balance sheet as of December 31, 2022 of $ 1.8 million. In conjunction with the Sale Agreement, we returned inventory to VIBES with a carrying value of approximately $ 2.4 million. F- 17 NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS Assets and Liabilities that are Measured at Fair Value on a Recurring Basis The carrying amounts for certain of our financial instruments, including cash, accounts receivable, accounts payable and certain accrued expenses and other assets and liabilities, approximate fair value due to the short-term nature of these instruments. As of December 31, 2023 and 2022, we had contingent consideration that is required to be measured at fair value on a recurring basis. SCHEDULE OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS Our financial instruments measured at fair value on a recurring basis were as follows at the dates indicated: Consolidated Balance Sheet Fair Value at December 31, 2023 (in thousands) Caption Level 1 Level 2 Level 3 Total Liabilities: Contingent consideration - current Accrued expenses and other current liabilities $ — $ — $ 1,000 $ 1,000 Total Liabilities $ — $ — $ 1,000 $ 1,000 Consolidated Balance Sheet Fair Value at December 31, 2022 (in thousands) Caption Level 1 Level 2 Level 3 Total Liabilities: Contingent consideration - current Accrued expenses and other current liabilities $ — $ — $ 2,738 $ 2,738 Total Liabilities $ — $ — $ 2,738 $ 2,738 There were no transfers between Level 1 and Level 2 and no transfers to or from Level 3 of the fair value hierarchy during the years ended December 31, 2023 and 2022. Derivative Instrument and Hedging Activity On July 11, 2019, we entered into an interest rate swap contract to manage our risk associated with the interest rate fluctuations on the Company’s floating rate Real Estate Note described in “ Note 6 - Debt. ” The counterparty to this instrument was a reputable financial institution. Our interest rate swap contract was designated as a cash flow hedge at the inception date, and was previously reflected at its fair value in our consolidated balance sheets. The fair value of our interest rate swap liability was determined based on the present value of expected future cash flows. Since our interest rate swap value was based on the LIBOR forward curve and credit default swap rates, which were observable at commonly quoted intervals for the full term of the swap, it was considered a Level 2 measurement. Beginning with the second quarter of 2022, we discontinued hedge accounting for the interest rate swap contract. During the year ended December 31, 2022, we recorded a gain of approximately $ 0.1 million based on the change in fair value of the interest rate swap contract within “ interest expense ” in our consolidated statement of income and comprehensive loss. During the second quarter of 2022, we also reclassified the related accumulated other comprehensive income balance of $ 0.3 million to “interest expense” in our consolidated statement of income and comprehensive loss. Refer to “ Note 8 - Supplemental Financial Information ” for further details on the components of accumulated other comprehensive income (loss) for the year ended December 31, 2022, respectively. The unrealized loss on the derivative instrument prior to the discontinuation of hedge accounting was included within “ Other comprehensive income (loss) ” in our consolidated statement of operations and comprehensive loss. There was no measure of hedge ineffectiveness and no reclassifications from other comprehensive loss into interest expense for the year ended December 31, 2022, respectively. In August 2022, we terminated the interest swap contract. Contingent Consideration Each period we revalue our contingent consideration obligations associated with business acquisitions to their fair value. The estimate of the fair value of contingent consideration is determined by applying a risk-neutral framework using a Monte Carlo Simulation, which includes inputs not observable in the market, such as the risk-free rate, risk-adjusted discount rate, the volatility of the underlying financial metrics and projected financial forecast of the acquired business over the earn-out period, and therefore represents a Level 3 measurement. Significant increases or decreases in these inputs could result in a significantly lower or higher fair value measurement of the contingent consideration liability. Changes in the fair value of contingent consideration are included within “Other income (expense), net” in our consolidated statements of operations and comprehensive loss. F- 18 A reconciliation of our liabilities that are measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2023 and 2022 is as follows: SCHEDULE OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS, UNOBSERVABLE INPUT RECONCILIATION (in thousands) Contingent Consideration Balance, December 31, 2021 $ 6,857 Eyce 2021 Contingent Payment settlement in Class A common stock ( 875 ) Eyce 2021 Contingent Payment settlement in cash ( 875 ) DaVinci 2021 Contingent Payment settlement in Class A common stock ( 2,611 ) Write-off of Eyce 2022 Contingent Payment in conjunction with the Amended Eyce APA ( 267 ) Loss from fair value adjustments included in results of operations 509 Balance, December 31, 2022 $ 2,738 Cash payments for earn contingent consideration ( 350 ) Transfer to notes payable ( 1,650 ) Loss from fair value adjustments included in results of operations 262 Balance, December 31, 2023 $ 1,000 Equity Securities Without a Readily Determinable Fair Value Our investment in equity securities without readily determinable fair value consist of ownership interests in Airgraft Inc., Sun Grown Packaging, LLC (“Sun Grown”) and VIVA. We determined that our ownership interests do not provide us with significant influence over the operations of these investments. Accordingly, we account for our investments in these entities as equity securities. Airgraft Inc., Sun Grown, and VIVA are private entities and their equity securities do not have a readily determinable fair value. We elected to measure these security under the measurement alternative election at cost minus impairment, if any, with adjustments through earnings for observable price changes in orderly transactions for the identical or similar investment of the same issuer. We acquired our investments in Sun Grown and VIVA as part of our merger with KushCo, which we completed in August 2021. We did not identify any fair value adjustments related to these equity securities during the years ended December 31, 2023 and 2022. As of December 31, 2023 and 2022, the carrying value of our investment in equity securities without a readily determinable fair value was approximately $ 1.9 million, included within “Other assets” in our consolidated balance sheets. The carrying value included a fair value adjustment of $ 1.5 million based on an observable price change recognized during the year ended December 31, 2019. NOTE 5. LEASES Greenlane as a Lessee As of December 31, 2023, we had facilities financed under operating leases consisting of warehouses, offices, and a retail store, with lease term expirations between 2023 and 2027. Lease terms are generally three to seven years for warehouses, office space and our retail store location. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. During the year ended December 31, 2022, we took steps to reduce our operational footprint and we continue to optimize our distribution network, transitioning to a more streamlined network with fewer, centrally-located, highly automated facilities. We successfully transferred, subleased or terminated our office leases for our Cypress, CA, Hermosa Beach, CA, France and China locations. We also successfully transferred, subleased or terminated our retail leases for our Amsterdam, Netherlands, Barcelona, Spain, and Malibu, California locations. On November 3, 2022, we entered into that certain Lease Termination Agreement, dated as of October 31, 2022 solely for reference purposes (the “Lease Termination Agreement”), by and between us and Warland Investments Company (the “Landlord”), which provided for the termination of our lease at 6261 Katella Avenue in Cypress, California (collectively, the “Lease Termination”). Pursuant to the terms of the Lease Termination Agreement, we agreed to pay a fee of approximately $ 0.5 million as an early termination fee in consideration for the Landlord agreeing to terminate all of our remaining obligations under the Cypress lease. F- 19 The following table provides details of our future minimum lease payments under operating lease liabilities recorded in our consolidated balance sheet as of December 31, 2023. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown. SCHEDULE OF LESSEE OPERATING LEASE LIABILITY MATURITY (in thousands) Operating Leases 2024 $ 914 2025 942 2026 81 2027 — 2028 and thereafter — Total minimum lease payments $ 1,937 Less: imputed interest 61 Present value of minimum lease payments 1,876 Less: current portion 866 Long-term portion $ 1,010 Rent expense under operating leases was approximately $ 1.4 million and $ 3.6 million for the years ended December 31, 2023 and 2022, respectively. The following expenses related to our operating leases were included in “general and administrative expenses” within our consolidated statements of operations and comprehensive loss: SCHEDULE OF LEASE COST (in thousands) 2023 2022 For the year ended December 31, (in thousands) 2023 2022 Operating lease cost $ 1,613 $ 2,735 Variable lease cost 461 837 Total lease cost $ 2,074 $ 3,572 The table below presents the terms and discount rates of the Company’s operating leases as of December 31: 2023 2022 Weighted average remaining lease terms 1.9 years 2.5 years Weighted average discount rate 2.2 % 2.2 % NOTE 6. DEBT Our debt balance, excluding operating lease liabilities and finance lease liabilities, consisted of the following amounts at the dates indicated: SCHEDULE OF DEBT (in thousands) 2023 2022 As of December 31, (in thousands) 2023 2022 Asset-Based Loan $ — $ 15,000 DaVinci Promissory Note — 2,538 Eyce Promissory Note — 647 Future Receivables Financing 2,174 — Secured Bridge Loan 5,109 — Long-term debt, gross 5,109 — Total long term debt 7,283 18,185 Less unamortized debt issuance costs — ( 1,960 ) Less current portion of debt ( 7,283 ) ( 3,185 ) Debt, net, excluding operating and finance leases and liabilities $ — $ 13,040 F- 20 Bridge Loan In December 2021, we entered into a Secured Promissory Note with Aaron LoCascio, our co-founder, former Chief Executive Officer and President, and a current director of the Company, in which Mr. LoCascio provided us with a bridge loan in the principal amount of $ 8.0 million (the “December 2021 Note”). The December 2021 Note accrued interest at a rate of 15.0 % is due monthly, and the principal amount was originally due in full on June 30, 2022. We incurred $ 0.3 million of debt issuance costs related to the December 2021 Note, which were recorded as a direct deduction from the carrying amount of the December 2021 Note, and which were amortized over the term of the December 2021 Note through interest expense. The December 2021 Note was secured by a continuing security interest in all of our assets and properties whether then or thereafter existing or required, including our inventory and receivables (as defined under the Universal Commercial Code) and included negative covenants restricting our ability to incur further indebtedness and engage in certain asset dispositions until the earlier of the maturity date or the December 2021 Note being fully repaid. On June 30, 2022, we entered into the First Amendment to the December 2021 Note (the “First Amendment”), which extended the maturity date of the December 2021 Note to July 14, 2022. On July 14, 2022, we entered into the Second Amendment to the December 2021 Note (the “Second Amendment” and together with the December 2021 Note, the “Bridge Loan”), which provided for the extension of the maturity date of the Bridge Loan from July 14, 2022 to July 19, 2022. In connection with the entry into the Second Amendment, we repaid $ 4.0 million of the aggregate principal amount due under the Bridge Loan on July 14, 2022, with the remainder due at maturity. On July 19, 2022, we repaid the remaining balance on the Bridge Loan in full, and, as a result, all obligations under the Bridge Loan have been satisfied. Real Estate Note On October 1, 2018, one of the Operating Company’s wholly-owned subsidiaries financed the purchase of a building, which served as our corporate headquarters, through a real estate term note (the “Real Estate Note”) in the principal amount of $ 8.5 million. Our obligations under the Real Estate Note were secured by a mortgage on the property. On August 8, 2022, we entered into a note, mortgage and loan modification agreement (the “Real Estate Note Amendment”), which amended the maturity date of the Real Estate Note to reflect a maturity date of December 1, 2022, whereupon all principal and accrued interest were to become due and payable, in full. In September 2022, 1095 Broken Sound consummated the previously disclosed transactions contemplated by that certain Purchase and Sale Agreement, dated as of August 16, 2022, by and between 1095 Broken Sound and ACS 1095 LLC (“the HQ Purchaser”) whereby 1095 Broken Sound agreed to sell a certain parcel of real estate including the our headquarters building to the HQ Purchaser for total proceeds of $ 9.6 million in cash. On the Closing Date, the Company used a portion of the proceeds from the HQ Transaction to repay the remainder of the Real Estate Note in full. There was no remaining balance related to the Real Estate Note on our consolidated balance sheet as of December 31, 2023 or 2022. Asset-Based Loan On August 9, 2022, we entered into an asset-based loan pursuant to that certain Loan and Security Agreement (the “Asset-Based Loan Agreement”), dated as of August 8, 2022, by and among the Company, certain subsidiaries of the Company (the “Guarantors”), the parties thereto from time to time as lenders (the “Lenders”), and WhiteHawk Capital Partners LP, as the agent for the Lenders (the “Asset Based Loan” or “Line of Credit”). Pursuant to the Asset-Based Loan Agreement, the Lenders agreed to make available to us a term loan of up to $ 15.0 million on the terms and conditions set forth therein and the other Financing Agreements (as defined therein). As of December 31, 2022, of the total term loan amount, $ 5.7 million was located in a blocked account, which was classified as “restricted cash” on our consolidated balance sheet, and which released the funds when permitted by the borrowing base certificate. Subject to certain exceptions described in the Asset-Based Loan Agreement, the Company and the Guarantors agreed to pledge all of their assets as collateral. The maturity date of the Asset-Based Loan is the third anniversary of the Closing Date (the “Maturity Date”). We incurred $ 1.5 million of debt issuance costs related to the Asset-Based Loan, as well as an original issue discount of $ 0.5 million, which were recorded as a direct deduction from the carrying amount of the Asset-Based Loan, and which were amortized through interest expense over the term of the Asset-Based Loan. The Asset-Based Loan contained customary covenants and restrictions, including, without limitation, covenants that required us to comply with applicable laws, restrictions on our ability to incur additional indebtedness, and various customary remedies for the lender following an event of default, including the acceleration of repayment of outstanding amounts under the Asset-Based Loan and execution upon the collateral securing obligations under the Asset-Based Loan. The Asset-Based Loan accrued interest at the prime rate plus 8.0 %, and interest payments were due monthly. Based on the original terms, beginning with the fiscal quarter ending September 30, 2023, and for each fiscal quarter thereafter until the Maturity Date, quarterly payments of $ 0.3 million would be due, with a final payment of all remaining outstanding principal and accrued interest due on the Maturity Date. On February 9, 2023, we entered into Amendment No. 2 to the Asset-Based Loan Agreement, pursuant to which we agreed to, among other things, to voluntarily prepay approximately $ 6.6 million (inclusive of early termination fees and expenses) under the terms provided for under the Asset-Based Loan Agreement and the lenders under the Asset-Based Loan Agreement agreed to release $ 5.7 million in funds held in a blocked account pursuant to the terms of the Asset-Based Loan Agreement. Amendment No.2 to the Asset-Based Loan Agreement also provided that we would make additional prepayments upon the occurrence of certain specified asset sales by the Company. F- 21 On August 7, 2023, we repaid the approximately $ 4.3 million in aggregate principal amount (the “Loan Repayment”) which remained outstanding under the terms of the Asset-Based Loan Agreement. As a result of the Loan Repayment, the Company has been released from its obligations under the Asset-Based Loan Agreement, in accordance with the terms of the Asset-Based Loan Agreement. DaVinci Promissory Note In November 2021, one of the Operating Company’s wholly-owned subsidiaries financed the acquisition of DaVinci through the issuance of an unsecured promissory note (the “DaVinci Promissory Note”) in the principal amount of $ 5.0 million. Principal payments plus accrued interest at a rate of 4.0 % were due quarterly through October 2023. Eyce Promissory Note In March 2021, one of the Operating Company’s wholly-owned subsidiaries financed a portion of the consideration of the acquisition of Eyce through the issuance of an unsecured promissory note (the “Eyce Promissory Note”) in the principal amount of $ 2.5 million. Principal payments plus accrued interest at a rate of 4.5 % are due quarterly through April 2023. As of December 31, 2023, the Eyce Promissory Note was repaid in full, and there was no remaining balance on our condensed consolidated balance sheet. Future Receivables Financings On July 31, 2023 and August 3, 2023, the Company received an aggregate of approximately $ 3.0 million in cash pursuant to the terms of future receivables financings (collectively, the “Future Receivables Financings”) entered into with two private lenders. The Company will make weekly payments under the Future Receivables Financings and is scheduled to repay the amounts due under the Future Receivables Financings in full in approximately six to eight months . The total amount to be repaid under the initial Future Receivables Financings was approximately $ 4.5 million. In connection with the Future Receivables Financings, the Company granted the lenders security interests in Company’s accounts receivable equal to the amounts due thereunder, and in connection with any event of default, the lenders may file financing statements evidencing the security interests. Secured Bridge Loan On September 22, 2023, the Company entered into a secured loan pursuant to a Loan and Security Agreement (the “September 2023 Loan Agreement”), dated as of September 22, 2023 with Synergy Imports, LLC (the “Secured Bridge Loan Lender”). Pursuant to the September 2023 Loan Agreement, the Secured Bridge Loan Lender agreed to make available to the Company a six -month bridge loan of $ 2.2 million in new funds. Additionally, the Secured Bridge Loan Lender agreed to defer payments totaling $ 2,028,604 already owed by the Company under existing payment obligations and potentially defer up to an additional $ 2,655,778 which may become due pursuant to existing agreements during the term of the September 2023 Loan Agreement. Subject to certain exceptions, the Company agreed to pledge all of its assets, with the exception of deposit accounts and accounts receivable, as collateral. Additionally, the Company agreed to transfer one US patent and two related foreign patents and a related trademark in exchange for an exclusive license back of such assets in the area of smoking products and accessories in connection with the September 2023 Loan Agreement. Future Minimum Principal Payments The following table summarizes future scheduled minimum principal payments of debt at December 31, 2023. Future debt principal payments are presented based upon the stated maturity dates in the respective debt agreement. SCHEDULE OF MATURITIES OF LONG-TERM DEBT (in thousands) 2024 2025 2026 2027 2028 Total Year Ending December 31, (in thousands) 2024 2025 2026 2027 2028 Total Asset-Based Loan $ — $ — $ — $ — $ — $ — DaVinci Promissory Note — — — — — — Eyce Promissory Note — — — — — — Future Receivables Financing 2,174 — — — — 2,174 Secured Bridge Loan 5,109 — — — — 5,109 Total $ 7,283 $ — $ — $ — $ — $ 7,283 NOTE 7. COMMITMENTS AND CONTINGENCIES Legal Proceedings In the ordinary course of business, we are involved in various legal proceedings involving a variety of matters. We do not believe there are any pending legal proceedings that will have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. We have not taken any reserves for litigation for the year ended December 31, 2023. F- 22 Other Contingencies We are potentially subject to claims related to various non-income taxes (such as sales, value added, consumption, and similar taxes) from various tax authorities, including in jurisdictions in which we already collect and remit such taxes. If the relevant taxing authorities were successfully to pursue these claims, we could be subject to significant additional tax liabilities.] See “Note 5—Leases” for details of our future minimum lease payments under operating lease liabilities. See “Note 11—Incomes Taxes” for information regarding income tax contingencies. NOTE 8. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION ERC Sale As of December 31, 2022, we had recorded an Employee Retention Credit (“ERC”) receivable of $ 4.9 million within “Other current assets” on our consolidated balance sheets, and a corresponding amount was included in “Other income (expense), net” in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2022. On February 16, 2023, two of Greenlane Holdings, Inc.’s subsidiaries, Warehouse Goods LLC and Kim International LLC (collectively, the “Company”), entered into an agreement with a third-party institutional investor pursuant to which the investor purchased, for approximately $ 4.9 million in cash, an economic participation interest, at a discount, in all of the Company’s rights to payment from the United States Internal Revenue Service with respect to the employee retention credits filed by the Company under the ERC program. Property and Equipment, net The following is a summary of our property and equipment, at costs less accumulated depreciation and amortization : SCHEDULE OF PROPERTY PLANT AND EQUIPMENT LESS DEPRECIATION AND AMORTIZATION As of December 31, (in thousands) Estimated useful life 2023 2022 Furniture, equipment and software 3 - 7 years $ 8,570 $ 7,492 Personal property 5 years — — Leasehold improvements Lesser of lease term or 5 years 51 104 Building 39 years — — Land — — Land improvements 15 years — — Work in process 411 679 Property and equipment, gross 9,032 8,275 Less: accumulated depreciation 6,556 4,313 Property and equipment, net $ 2,476 $ 3,962 Depreciation expense for property and equipment for the years ended December 31, 2023 and 2022 was approximately $ 2.2 million and $ 3.3 million, respectively. F- 23 Intangible Assets, Net Identified intangible assets consisted of the following at the dates indicated below: SCHEDULE OF IDENTIFIED INTANGIBLE ASSETS As of December 31, 2022 Gross carrying amount Accumulated amortization Impairment Charge Carrying value Estimated useful life (in thousands) Design libraries $ 8,710 $ ( 1,010 ) $ ( 7,700 ) $ — 7 - 15 years Trademarks and tradenames 6,915 ( 3,361 ) ( 3,554 ) — 5 - 15 years Customer relationships 43,628 ( 4,666 ) ( 38,962 ) — 5 - 15 years Other intangibles 753 ( 275 ) ( 478 ) — 5 - 15 years Total finite-lived intangibles 60,006 ( 9,312 ) ( 50,694 ) — Trademarks 29,500 — ( 29,500 ) — Indefinite Total indefinite-lived intangibles 29,500 — ( 29,500 ) — $ 89,506 $ ( 9,312 ) $ ( 80,194 ) $ — We evaluated goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each year and at interim dates if indicators of impairment exist. Due to declines in the Company’s stock price as well as changes to our estimates and assumptions of the expected future cash flows, management concluded that a triggering event occurred in the third quarter of 2022, based upon which we recorded an impairment charge related to our indefinite-lived intangible assets of $ 24.9 million. During the fourth quarter of 2022, we further concluded that the remaining $ 4.6 million balance of indefinite-lived intangibles was impaired. Based upon these assessments, we recorded a total impairment charge related to indefinite-lived intangibles of $ 29.5 million for the year ended December 31, 2022. We also recorded an impairment charge related to our goodwill balance, as described further below. We did not acquire any additional intangible assets during the years ended December 31, 2023 and 2022. . Amortization expense for intangible assets was approximately $ 0 million and $ 4.4 million for the years ended December 31, 2023 and 2022, respectively. Goodwill We evaluated goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each year and at interim dates if indicators of impairment exist. Goodwill was assessed for impairment at the reporting unit level. Due to declines in the Company’s stock price as well as changes to our estimates and assumptions of the expected future cash flows of our Consumer Goods and Industrial Goods reporting units, management concluded that a triggering event occurred in the third quarter of 2022, requiring a quantitative impairment test of our goodwill for both of our reporting units. Based on this assessment, we concluded that the fair value of each of our two reporting units was below their respective carrying value, and goodwill was fully impaired for both reporting units during the year ended December 31, 2022. Other Current Assets The following table summarizes the composition of other current assets as of the dates indicated: SCHEDULE OF OTHER CURRENT ASSETS As of December 31, (in thousands) 2023 2022 Other current assets: Employee retention credit (ERC) receivable $ — $ 4,854 VAT refund receivable (Note 2) 78 143 Prepaid expenses 1,207 1,293 Indemnification receivable, net 7 736 Customs bonds 1,229 1,378 Other 798 2,716 Other current assets $ 3,319 $ 11,120 F- 24 Accrued Expenses and Other Current Liabilities The following table summarizes the composition of accrued expenses and other current liabilities as of the dates indicated: SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES As of December 31, (in thousands) 2023 2022 Accrued expenses and other current liabilities: VAT payable (including amounts related to VAT matter described in Note 2) $ 313 $ 2,809 Contingent consideration 1,000 2,738 Accrued employee compensation 861 3,812 Amended Eyce APA — 430 Accrued expenses 499 818 Refund liability (including accounts receivable credit balances) 68 329 Accrued construction in progress (ERP) — 170 Sales tax payable 315 578 Other — 198 Accrued expenses and other current liabilities $ 3,056 $ 11,882 Customer Deposits 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 orders related to customer deposits 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 order completion timeline can vary by product type and terms of sale with each customer. Changes in our customer deposits liability balance during the year ended December 31, 2023 and 2022, respectively, were as follows: SCHEDULE OF CHANGES IN CUSTOMER DEPOSIT LIABILITY (in thousands) Customer Deposits Balance as of December 31, 2021 $ 7,924 Increases due to deposits received, net of other adjustments 12,016 Revenue recognized ( 15,957 ) Balance as of December 31, 2022 $ 3,983 Increases due to deposits received, net of other adjustments 4,191 Customer Overpayments 220 Revenue recognized ( 5,619 ) Balance as of December 31, 2023 $ 2,775 Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss) for the periods presented were as follows: SCHEDULE OF COMPONENTS OF ACCUMULATED COMPREHENSIVE INCOME LOSS (in thousands) Foreign Currency Translation Unrealized Gain or (Loss) on Derivative Instrument Total Balance at December 31, 2021 $ 282 $ 42 $ 324 Other comprehensive income (loss) ( 211 ) 358 147 Less: Reclassification adjustment for (gain) loss included in net loss (Note 4) — ( 332 ) ( 332 ) Less: Other comprehensive (income) loss attributable to non-controlling interest ( 16 ) ( 68 ) 139 Balance at December 31, 2022 $ 55 $ — $ 55 Other comprehensive income (loss) 190 — 190 Less: Other comprehensive (income) loss attributable to non-controlling interest — — — Balance at December 31, 2023 $ 245 $ — $ 245 Supplier Concentration Our four largest vendors accounted for an aggregate of approximately 25.3 % and 57.4 % of our total purchases for the years ended December 31, 2023 and 2022, respectively We expect to maintain our relationships with these vendors. F- 25 Related Party Transactions Nicholas Kovacevich, our former Chief Corporate Development Officer owns capital stock of Blum Holdings Inc. (“Blum”) and serves on the Blum board of directors. Net sales to Blum totaled approximately $ 0.4 million for the ended December 31, 2022. Total accounts receivable due from Blum were approximately $ 0.4 million as of December 31, 2023 and 2022, respectively. On February 8, 2023, we filed a lawsuit against Blum in Superior Court of California, Orange County, seeking to compel the repayment of Blum’s open balance due to us. As of the date of these financial statements were available to be issued, there has been a judgement received in favor of the Company. Three individuals who were employees of the Company at the time are principals in Synergy Imports, LLC the Lender on the Secured Bridge Loan taken out on September 22, 2023, however, none are executive officers or directors of the Company. Adam Schoenfeld, co-founder and a former director of the Company, has a significant ownership interest in one of our customers, Universal Growing. Net sales to Universal Growing were approximately less than $ 0.1 million for the year ended December 31, 2022. Total gross accounts receivable due from Universal Growing as of December 31, 2023 and 2022 were de minimis. In December 2021, we entered into a Secured Promissory Note with Aaron LoCascio, our co-founder, former Chief Executive Officer and President, and a current director of the Company, with respect to the $ 8.0 million Bridge Loan. On June 30, 2022, we entered into the First Amendment to the Secured Promissory Note, which provided for the extension of the maturity date of the Secured Promissory Note from June 30, 2022 to July 14, 2022. On July 19, 2022, we fully repaid the Bridge Loan and as a result, all obligations under the Bridge Loan have been satisfied. On July 19, 2022, Warehouse Goods entered into a Membership Interest Purchase Agreement and supporting documents (collectively, the “Sale Agreement”) with Portofino Partners LLC (“Portofino”) to sell the Company’s 50 % stake in VIBES Holdings LLC for total consideration of $ 4.6 million in cash. The transactions contemplated by the Sale Agreement were completed on July 19, 2022, immediately following the signing of the Sale Agreement. Portofino is an entity partially controlled by Adam Schoenfeld. The Sale Agreement was approved by the affirmative vote of a majority of the disinterested members of the Board and the audit committee of the Board in accordance with the Company’s related party transactions policy. In addition, $ 2.4 million was transferred to Portofino. Renah Persofsky, a director of the Company, is a member of the board of directors of Tilray Brands, Inc. (“Tilray”). Net sales to Tilray totaled approximately $ 2.2 million, for the year ended December 31, 2022, respectively. NOTE 9. STOCKHOLDERS’ EQUITY Shares of our Class A common stock have both voting interests and economic interests (i.e., the right to receive distributions or dividends, whether cash or stock, and proceeds upon dissolution, winding up or liquidation), while shares of our Class B common stock have voting interests but no economic interests. Each share of our Class A common stock and Class B common stock entitles the record holder thereof to one vote on all matters on which stockholders generally are entitled to vote, and except as otherwise required in the A&R Charter, the holders of Common Stock will vote together as a single class on all matters (or, if any holders of our preferred stock are entitled to vote together with the holders of Common Stock, as a single class with such holders of preferred stock). Effective August 9, 2022, we completed a one-for-twenty reverse stock split (the “2022 Reverse Stock Split”) of our issued and outstanding shares of Class A common stock and Class B common stock (collectively, the “Common Stock”), as further described in “Note 2 - Summary of Significant Accounting Policies.” As a result of the 2022 Reverse Stock Split, every 20 shares of Common Stock issued and outstanding were converted into one share of Common Stock. We paid cash in lieu of fractional shares, and accordingly, no fractional shares were issued in connection with the 2022 Reverse Stock Split. Effective June 5, 2023, we completed a one-for-10 reverse stock split (the “2023 Reverse Stock Split” and together with the 2022 Reverse Stock Split, the “Reverse Stock Splits”) of our issued and outstanding shares of Common Stock, as further described in “Note 2 - Summary of Significant Accounting Policies.” As a result of the 2023 Reverse Stock Split, every 10 shares of Common Stock issued and outstanding were converted into one share of Common Stock. We paid cash in lieu of fractional shares, and accordingly, no fractional shares were issued in connection with the 2023 Reverse Stock Split. The Reverse Stock Splits did not change the par value of the Common Stock or the authorized number of shares of Common Stock. All share and per share amounts in these unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of Common Stock to additional paid-in capital. F- 26 Non-Controlling Interest As discussed in “Note 1—Business Operations and Organization,” we consolidate the financial results of the Operating Company in our consolidated financial statements and report a non-controlling interest related to the Common Units held by non-controlling interest holders. As of December 31, 2022, all Common Units of the Operating Company and Class B common stock had been exchanged for Class A common stock, and we owned 100.0 % of the economic interests in the Operating Company. The non-controlling interest in the accompanying consolidated statements of operations and comprehensive loss represents the portion of the net loss attributable to the economic interest in the Operating Company previously held by the non-controlling holders of Common Units calculated based on the weighted average non-controlling interests’ ownership during the periods presented. At-the-Market Equity Offering In August 2021, we established an “at-the-market” equity offering program (the “ATM Program”) that provided for the sale of shares of our Class A common stock having an aggregate offering price of up to $50 million, from time to time, through Cowen and Company, LLC (“Cowen”), as the sales agent. Sales of our Class A common stock under the ATM Program were made by means of transactions that are deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act, including sales made directly on the Nasdaq Capital Market or sales made to or through a market maker or through an electronic communications network. Shares of our Class A common stock were issued pursuant to our shelf registration statement on Form S-3 (File No. 333-257654), and a prospectus supplement relating to the Class A common stock that was filed with the Securities and Exchange Commission on April 18, 2022. On April 18, 2022, we entered into Amendment No. 1 (the “ATM Amendment”) to the sales agreement dated August 2, 2022 with Cowen. The purpose of the Amendment was to add the limitations imposed on the ATM Program by Instruction I.B.6 to the sales agreement. At the time of our entry into the ATM Amendment, approximately $37.3 million in shares remained available for issuance under the ATM Program. Due to the untimely filing of certain of our Quarterly and Annual Reports, we are unable to issue additional shares of Class A common stock pursuant to the ATM Program or otherwise use the Shelf Registration Statement, which will limit our liquidity options in the capital markets. The table below summarizes sales of our Class A common stock under the ATM program: SUMMARIZES SALES OF OUR CLASS A COMMON STOCK ($ in thousands) August 2021 (Inception) through December 31, 2023 Class A shares sold * 97,262 Gross proceeds $ 12,684 Fees paid to sales agent $ 381 Net proceeds $ 12,303 * After giving effect to the Reverse Stock Splits. Common Stock and Warrant Offerings June 2022 Offering On June 27, 2022, we entered into a securities purchase agreement with an accredited investor, pursuant to which we agreed to issue and sell an aggregate of 585,000 shares of our Class A common stock, pre-funded warrants to purchase up to 495,000 shares of our Class A common stock (the “June 2022 Pre-Funded Warrants”) and warrants to purchase up to 1,080,000 shares of our Class A common stock (the “June 2022 Standard Warrants” and, together with the June 2022 Pre-Funded Warrants, the “June 2022 Warrants”), in a registered direct offering (the “June 2022 Offering”). The shares of Class A common stock and June 2022 Warrants were sold in Units (the “June 2022 Units”), with each unit consisting of one share of Class A common stock or a June 2022 Pre-Funded Warrant and a June 2022 Standard Warrant to purchase one share of our Class A common stock. The June 2022 Units were offered pursuant to the Shelf Registration Statement. The June 2022 Standard Warrants are exercisable six months from the date of issuance at an exercise price equal to $ 5.00 per share of Class A common stock for a period of five years . Each June 2022 Pre-Funded Warrant was exercisable immediately with no expiration date for one share of Class A common stock at an exercise price of $ 0.002 . The June 2022 Offering generated gross proceeds of approximately $ 5.4 million and net proceeds to the Company of approximately $ 5.0 million. F- 27 All June 2022 Pre-Funded Warrants were exercised in July 2022, based upon which we issued an additional 495,000 shares of our Class A common stock, for de minimis net proceeds. October 2022 Offering On October 27, 2022, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an aggregate of 695,555 shares of our Class A common stock, pre-funded warrants to purchase up to 137,778 shares of our Class A common stock (the “October 2022 Pre-Funded Warrants”) and warrants to purchase up to 1,666,667 shares of our Class A common stock (the “October 2022 Standard Warrants”). The October 2022 units each consisted of one share of Class A common stock or a October 2022 Pre-Funded Warrant and two October 2022 Standard Warrants to purchase one share of our Class A common stock. The October 2022 units were offered pursuant to the S-1 Registration Statement. The October 2022 Standard Warrants are exercisable immediately at an exercise price equal to $ 0.90 per share of Class A common stock for a period of seven years . Each October 2022 Pre-Funded Warrant is exercisable immediately with no expiration date for one share of Class A common stock at an exercise price of $ 0.0001 . The October 2022 Offering generated gross proceeds of approximately $ 7.5 million and net proceeds to the Company of approximately $ 6.8 million. All October 2022 Pre-Funded Warrants were exercised in November 2022, based upon which we issued an additional 137,778 shares of our Class A common stock, for de minimis net proceeds. July 2023 Offering On June 29, 2023, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an aggregate of 560,476 shares of our Class A common stock, pre-funded warrants to purchase up to 3,487,143 shares of our Class A common stock (the “July 2023 Pre-Funded Warrants”) and warrants to purchase up to 8,095,238 shares of our Class A common stock (the “July 2023 Standard Warrants”). The July 2023 units each consisted of one share of Class A common stock or a July 2023 Pre-Funded Warrant and two July 2023 Standard Warrants to purchase one share of our Class A common stock. The July 2023 units were offered pursuant to an effective Registration Statement on Form S-1. The July 2023 Standard Warrants are exercisable immediately at an exercise price equal to $ 1.05 per share of Class A common stock for a period of five years . Each July 2023 Pre-Funded Warrant is exercisable immediately with no expiration date for one share of Class A common stock at an exercise price of $ 0.0001 . The July 2023 Offering generated gross proceeds of approximately $ 4.3 million and net proceeds to the Company of approximately $ 3.9 million. As of the date of this Annual Report on Form 10-K, all July 2023 Pre-Funded Warrants have been exercised, based upon which we issued an additional 1,911,000 shares of our Class A common stock subsequent to year end, for de minimis net proceeds. In connection with the July 2023 Offering, the Company entered into privately negotiated agreements with holders participating in the offering to amend existing outstanding warrants to purchase up to 1,344,367 shares of Class A common stock that were previously issued in connection with the June 2022 and October 2022 Offerings at exercise prices per share of $ 50.00 and $ 9.00 , respectively, and expire on December 29, 2027 and November 1, 2029, respectively (collectively, the “Prior Warrants”), effective upon the closing of the July 2023 Offering to reduce the exercise price of the Prior Warrants to $ 1.05 , the exercise price of the warrants to purchase shares of Class A common stock offered in the July 2023 Offering. All other terms of the Prior Warrants remained unchanged. Net Loss Per Share Basic net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements. F- 28 A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share of our Class A common stock is as follows (in thousands, except per share amounts): SCHEDULE OF EARNINGS PER SHARE BASIC AND DILUTED For the year ended December 31, (in thousands, except per share data) 2023 2022 Numerator: Net loss $ ( 32,325 ) $ ( 182,226 ) Less: Net loss attributable to non-controlling interests 150 ( 12,717 ) Plus: Deemed Dividend on “October 2022 Standard Warrants” ( 388 ) - Net loss attributable to Class A common stockholders $ ( 32,563 ) $ ( 169,509 ) Denominator: Weighted average shares of Class A common stock outstanding * 3,993 753 Net loss per share of Class A common stock - basic and diluted* $ ( 8.16 ) $ ( 22.51 ) * After giving effect to the Reverse Stock Splits. The July 2023 Pre-Funded Warrants were included in the weighted-average in the computation of basic net loss per share of Class A common stock for the year ended December 31, 2023, beginning with their issuance date, as their stated exercise price of $ 0.001 was non-substantive and their exercise was virtually assured. On June 29, 2023 in connection with the July 2023 Offering, the Company entered into agreements with holders participating in the offering to amend existing outstanding warrants to purchase up to 1,344,367 shares of Class A common stock that were previously issued in November 2022 at an exercise price per share of $ 9.00 . The warrants expire on November 1, 2029. In connection with the amendment, the exercise price of the warrants was reduced to $ 1.05 . The impact of the amendment resulted in a deemed dividend in the amount of $ 0.4 million. The deemed dividend was calculated by the change in fair value. For the years ended December 31, 2023 and 2022, respectively, shares of Class B common stock and stock options and warrants to purchase Class A common stock were excluded from the weighted-average in the computation of diluted net loss per share of Class A common stock because the effect would have been anti-dilutive. Shares of our Class B common stock do not share in our earnings or losses and are therefore not participating securities. As such, separate calculations of basic and diluted net loss per share for each of our Class B common stock under the two-class method have not been presented for the years ended December 31, 2023 and 2022, all Common Units of the Operating Company and Class B common stock had been exchanged for Class A common stock, and we owned 100.0 % of the economic interests in the Operating Company as of December 31, 2023 and 2022. NOTE 10. COMPENSATION PLANS Amended and Restated 2019 Equity Incentive Plan In April 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”). In August 2021, we adopted, and our shareholders approved, the Amended and Restated 2019 Equity Incentive Plan (the “Amended 2019 Plan”), which amends and restates the 2019 Plan in its entirety. At our 2022 Annual Meeting of Stockholders on August 4, 2022, stockholders approved the Second Amended and Restated 2019 Equity Incentive Plan (the “Second Amended 2019 Plan”) which, among other things, increased the number of shares of Class A common stock authorized for issuance under the Amended 2019 Plan. Following the effect of the Reverse Stock Splits, the total number of shares of Class A common stock authorized for issuance is 110,000 shares as of December 31, 2023. The Second Amended 2019 Plan provides eligible participants with compensation opportunities in the form of cash and equity incentive awards. The Second Amended 2019 Plan is designed to enhance our ability to attract, retain and motivate our employees, directors, and executive officers, and incentivizes them to increase our long-term growth and equity value in alignment with the interests of our stockholders. On June 2, 2023, the Company’s stockholders approved a third amendment and restatement of the 2019 Plan (the “Third Amended Plan”). The Third Amended Plan, among other things, increases the number of shares of Class A common stock authorized for issuance under the Second Amended 2019 Plan by 209,862 shares to an aggregate of 319,862 shares. As of the date of this Annual Report on Form 10-K, we have not filed a Registration Statement on Form S-8 with the Securities and Exchange Commission to register the additional shares authorized under the Third Amended Plan. F- 29 Equity-Based Compensation Expense Equity-based compensation expense is included within “salaries, benefits and payroll taxes” in our consolidated statements of operations and comprehensive loss. We recognized equity-based compensation expense as follows: SCHEDULE OF EQUITY BASED COMPENSATION EXPENSE For the year ended December 31, (in thousands) 2023 2022 Stock options - Class A common stock $ 36 $ 1,098 Restricted shares - Class A common stock 37 517 Restricted stock units (RSUs) - Class A common stock — 11 Total equity-based compensation expense $ 73 $ 1,626 During the year ended December 31, 2022, we granted an aggregate of 129,106 options to our directors and certain employees. The stock options were granted with exercise prices ranging from $ 2.52 per share to $ 20.00 per share, and vesting periods ranging from three months to four years . There were no options granted during the year ended December 31, 2023. Total remaining unrecognized compensation expense as of December 31, 2023 was as follows: SCHEDULE OF EQUITY BASED UNRECOGNIZED COMPENSATION EXPENSE Remaining Unrecognized Compensation Expense December 31, 2023 Weighted Average Period over which Remaining Unrecognized Compensation Expense is Expected to be Recognized (in thousands) (in years) Stock options - Class A common stock $ — 0 Restricted shares - Class A common stock 19 0.85 Total remaining unrecognized compensation expense $ 19 The fair value of the stock option awards granted during the year ended December 31, 2022 was determined on the grant date using the Black-Scholes valuation model based on the following ranges of weighted-average assumptions: SCHEDULE OF STOCK OPTION AWARD GRANT DATE VALUATION MODEL Expected volatility (1) 100 % - 100 % Expected dividend yield (2) — Expected term (3) 5.88 - 6.05 years Risk-free interest rate (4) 1.62 % - 3.31 % (1) Expected volatility is based on the historical volatility of a selected peer group over a period equivalent to the expected term. (2) We assumed a dividend yield of zero as management has no plans to declare dividends in the foreseeable future. (3) Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method. (4) The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term. A summary of stock option activity for the years ended December 31, 2023 and 2022 is as follows: SUMMARY OF STOCK OPTION ACTIVITY Stock Options Number of Options Weighted-Average Exercise Price Outstanding as of December 31, 2021 265,947 $ 71.80 Granted 129,106 9.34 Exercised — — Forfeited ( 167,201 ) 17.59 Outstanding as of December 31, 2022 227,852 $ 58.88 Granted — — Exercised — — Forfeited ( 83,044 ) — Outstanding as of December 31, 2023 144,808 $ 57.64 The weighted-average grant date fair value of options granted for the year ended December 31, 2022 was $ 9.34 . The total fair value of stock options vested during the years ended December 31, 2023 and 2022 was approximately $ 0.1 million and $ 2.1 million, respectively. F- 30 401(k) Plan Our 401(k) Plan is a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, participating U.S. employees may defer a portion of their pre-tax earnings, up to the U.S. Internal Revenue Service annual contribution limit ($23,000 for calendar year 2023). Participants are eligible to receive a matching contribution from us of 100% of the first 3% and 50% of the next 2% of contributions. Matching contributions, other than safe-harbor contributions, vest 33% per year and are 100% vested after three years of service. Safe-harbor matching contributions are 100% vested as of the date of the contribution . NOTE 11. INCOME TAXES As a result of the IPO and the related transactions completed in April 2019, we owned a portion of the Common Units of the Operating Company, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, the Operating Company was generally not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by the Operating Company was passed through to and included in the taxable income or loss of its members, including Greenlane, on a pro-rata basis, in accordance with the terms of the Operating Agreement. The Operating Company was also subject to taxes in foreign jurisdictions. We are a corporation subject to U.S. federal income taxes, in addition to state and local income taxes, based on our share of the Operating Company’s pass-through taxable income. Effective on December 31, 2022, the Operating Company became wholly owned by us. As a result, the Operating Company’s tax status was converted from a partnership to a disregarded entity. Starting in 2023, 100% of the Operating Company’s U.S. income and expenses will be included in our US and state tax returns. The Company’s United States and foreign operations components of income (loss) from continuing operations before income taxes are as follows: SCHEDULE OF INCOME BEFORE INCOME TAX, DOMESTIC AND FOREIGN For the year ended December 31, (in thousands) 2023 2022 United States $ ( 30,325 ) $ ( 172,997 ) Foreign $ ( 2,000 ) $ ( 9,242 ) Total $ ( 32,325 ) $ ( 182,239 ) Income Tax Expense The income tax (benefit) expense for the years ended December 31, 2023 and 2022 consisted of the following: SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE (BENEFIT) (in thousands) Federal Foreign State Total Federal Foreign State Total For the year ended December 31, 2023 For the year ended December 31, 2022 (in thousands) Federal Foreign State Total Federal Foreign State Total Current tax (benefit) expense Current year $ — $ — $ — $ — $ — $ ( 13 ) $ — $ ( 13 ) Total current year — — — — — ( 13 ) — ( 13 ) Deferred tax (benefit) expense Current year ( 5,991 ) ( 500 ) ( 1,798 ) ( 8,289 ) ( 31,475 ) ( 2,311 ) ( 10,368 ) ( 44,154 ) Change in valuation allowance 5,743 500 1,219 7,462 36,867 2,311 13,523 52,701 Change in tax rate — — 780 780 72 — ( 344 ) ( 272 ) Tax conversion of Operating Company — — — — 2,990 — 1,022 4,012 Up-C consolidation — — — — ( 10,097 ) — ( 3,440 ) ( 13,537 ) KushCo merger or true ups 248 — ( 201 ) 47 1,643 — ( 393 ) 1,250 Total deferred tax (benefit) expense — — — — — — — — Income tax (benefit) expense $ — $ — $ — $ — $ — $ ( 13 ) $ — $ ( 13 ) F- 31 A reconciliation of the income tax (benefit) expense computed at the U.S. federal statutory income tax rate to the income tax expense recognized is as follows: SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION For the year ended December 31, (in thousands) 2023 2022 Expected federal income tax (benefit) expense at statutory rate $ ( 6,788 ) $ ( 38,270 ) State tax expense, net of federal benefit ( 1,605 ) ( 8,688 ) Loss attributable to non-controlling interests 4 2,121 Change in valuation allowance 7,462 52,701 Tax conversion of Operating Company — 4,012 Up-C consolidation — ( 13,537 ) KushCo merger — 1,250 Change in tax rates — Prior year true-ups 227 — Other, net 700 398 Income tax (benefit) expense $ — $ ( 13 ) Deferred Tax Assets and Liabilities The components of deferred tax assets and liabilities were as follows: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES As of December 31, (in thousands) 2023 2022 Deferred tax assets: Goodwill and other intangible assets $ 36,018 $ 36,841 Fixed assets 943 1,590 Inventory 2,854 5,858 Allowance for doubtful accounts 833 833 Operating lease liability 164 862 Equity-based compensation 2,576 2,576 Business interest carryforward 6,897 5,342 Net operating loss carryforwards 67,667 57,136 Other 411 576 Total deferred tax assets 118,363 111,614 Valuation allowance ( 118,262 ) ( 110,799 ) Net deferred tax assets 101 815 Deferred tax liability: Right of use assets ( 101 ) ( 815 ) Basis difference in investment in the Operating Company — — Total deferred tax liabilities ( 101 ) ( 815 ) Net deferred tax assets and liabilities $ — $ — We had approximately $ 240.2 million of Federal net operating loss carryforwards, of which approximately $ 9.8 million expire in 2038, and the remainder are not subject to expiration. Their utilization is limited to 80% of our future taxable income. We also had approximately $ 235.0 of State net operating loss carryforwards that begin expiring in 2038, $ 14.9 million of Dutch net operating loss carryforwards that begin expiring in 2029, and $ 0.2 million Canadian net operating loss carryforwards that begin expiring in 2026. Their utilization is limited to our future taxable income. We have not completed our evaluation of NOL utilization limitations under Internal Revenue Code, as amended (the “Code”) Section 382, change in ownership rules. Due to the fact that there is a full valuation allowance and losses being generated in the current year, any limitation based on the code would not have a material impact on the net deferred tax asset balance. In addition, the deduction for business interest is limited to 30 percent of taxable income (the “Section 163(j) limitation”). The interest that is not deductible due this limitation is carried forward to subsequent years and subject to the next years Section 163(j) limitation. At December 31, 2023 we had $ 26.2 million of business interest carryforwards, which includes $ 17.6 million from the KushCo merger. The utilization of the business interest carryforward from the KushCo merger may be further limited by the application of the Section 382 rules. F- 32 During the years ended December 31, 2023 and 2022, respectively, management performed an assessment of the realizability of our deferred tax assets based upon which management determined that it is not more likely than not that the results of operations will generate sufficient taxable income to realize portions of the net operating loss benefits. Consequently, we established a full valuation allowance against our deferred tax assets and reflected a carrying balance of $ 0 as of December 31, 2023 and 2022, respectively. In the event that management determines that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, an adjustment to the valuation allowance will be made, which would reduce the provision for income taxes. We do not record U.S. income taxes on the undistributed earnings of our foreign subsidiaries, except for the Canadian subsidiary, based upon our intention to permanently reinvest undistributed earnings into working capital and further expansion of existing operations outside the United States. In the event we are required to repatriate funds from outside of the United States, such repatriation would be subject to local laws, customs, and tax consequences. Uncertain Tax Positions For the year ended December 31, 2023 and 2022, we did no t have any unrecognized tax benefits as a result of tax positions taken during a prior period or during the current period. No interest or penalties have been recorded as a result of tax uncertainties. The Company is subject to audit examination for federal and state purposes for the years 2019 – 2023. As of the date these financial statements were issued, there were not any ongoing income tax audits. Tax Receivable Agreement (TRA) We entered into the TRA with the Operating Company and each of the members that provides for the payment by the Operating Company to the members of 85 % of the amount of tax benefits, if any, that we may actually realize (or in some circumstances are deemed to realize) as a result of (i) increases in tax basis resulting from any future redemptions of Common Units as described in “Note 1—Business Operations and Organization” and (ii) certain other tax benefits attributable to payments made under the TRA. The annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits. The Operating Company expects to benefit from the remaining 15 % of any tax benefits that it may actually realize. The TRA payments are not conditioned upon any continued ownership interest in the Operating Company. The rights of each noncontrolling interest holder under the TRA are assignable to transferees of its interest in the Operating Company. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Operating Company generates each year and the applicable tax rate. As noted above, we evaluated the realizability of the deferred tax assets resulting from the IPO and the related transactions completed in April 2019 and established a full valuation allowance against those benefits. As a result, we determined that the amount or timing of payments to noncontrolling interest holders under the TRA are no longer probable or reasonably estimable. Based on this assessment, our TRA liability was $ 0 as of December 31, 2023 and 2022. If utilization of the deferred tax assets subject to the TRA becomes more likely than not in the future, we will record a liability related to the TRA, which would be recognized as expense within our consolidated statements of operations and comprehensive (loss) income. During the years ended December 31, 2023 and 2022, we did not make any payments, inclusive of interest, to members of the Operating Company pursuant to the TRA. NOTE 12. SEGMENT REPORTING We define our segments as those operations whose results are regularly reviewed by our CODM to analyze performance and allocate resources. Therefore, segment information is prepared on the same basis that management reviews financial information for operational decision-making purposes. Our CODM is a committee comprised of our CEO and our CFO. We determined we had two operating segments as of December 31, 2023, which are the same as our reportable segments: (1) Consumer Goods, and (2) Industrial Goods. These operating segments align with how we manage our business as of the fourth quarter of 2023. The accounting policies of the reportable segments are the same as those described in “Note 2 - Summary of Significant Accounting Policies.” The Consumer Goods segment focuses on serving consumers across wholesale, retail and e-commerce operations—through both our proprietary Greenlane Brands, including Eyce, DaVinci, Groove, Marley Natural, Keith Haring, and Higher Standards, as well as lifestyle products and accessories from leading brands, such as Storz and Bickel, PAX, and many more. The Consumer Goods segment forms a central part of our growth strategy, especially as it relates to scaling our own portfolio of higher-margin Greenlane Brands. The Industrial Goods segment focuses on serving the premier brands, operators, and retailers through our wholesale operations by providing ancillary products essential to their growth, such as customizable packaging and supply products, which includes our vaporization solutions offering including CCELL branded products. F- 33 Our CODM allocates resources to and assesses the performance of our two operating segments based on the operating segments’ net sales and gross profit. The following table sets forth information by reportable segment for the years ended December 31, 2023 and 2022. There were no material intersegment sales during the years ended December 31, 2023 and 2022. SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT (in thousands) Consumer Goods Industrial Goods Total Consumer Goods Industrial Goods Total For the Year Ended December 31, 2023 For the Year Ended December 31, 2022 (in thousands) Consumer Goods Industrial Goods Total Consumer Goods Industrial Goods Total Net sales $ 28,737 $ 36,636 $ 65,373 $ 48,134 $ 88,951 $ 137,085 Cost of sales 18,754 28,793 47,547 38,531 73,571 112,102 Gross profit $ 9,983 $ 7,843 $ 17,826 $ 9,603 $ 15,380 $ 24,983 The following table sets forth specific asset categories which are reviewed by our CODM in the evaluation of operating segments: (in thousands) Consumer Goods Industrial Goods Total Consumer Goods Industrial Goods Total As of December 31, 2023 As of December 31, 2022 (in thousands) Consumer Goods Industrial Goods Total Consumer Goods Industrial Goods Total Accounts receivable, net $ 642 $ 1,051 $ 1,693 $ 967 $ 5,501 $ 6,468 Inventories, net $ 8,881 $ 11,648 $ 20,529 $ 19,259 $ 21,384 $ 40,643 Vendor deposits $ 1,958 $ 1,807 $ 3,765 $ 3,269 $ 3,027 $ 6,296 The following table sets forth our net sales by major product category: SCHEDULE OF NET SALES BY MAJOR PRODUCT CATEGORY (in thousands) 2023 2022 For the year ended December 31, (in thousands) 2023 2022 Industrial Vape Products $ 26,803 $ 53,664 Other Industrial Products 8,733 35,287 Consumer Products - Greenlane Brands 5,072 15,063 Consumer Products - 3rd Party Brands 24,765 33,071 Total net sales $ 65,373 $ 137,085 The following table sets forth net sales disaggregated by geography: SCHEDULE OF NET SALES DISAGGREGATED BY GEOGRAPHY (in thousands) 2023 2022 For the year ended December 31, (in thousands) 2023 2022 United States $ 58,539 $ 126,333 Canada 1,291 5,810 Europe 5,543 4,942 Total net sales $ 65,373 $ 137,085 The following table sets forth our long-lived assets by geographic area, which consist of property and equipment, net, and operating lease right-of-use assets: SCHEDULE OF LONG-LIVED ASSETS BY GEOGRAPHIC AREA (in thousands) 2023 2022 As of December 31, (in thousands) 2023 2022 United States $ 4,255 $ 7,077 Canada 4 48 Europe 153 279 Total long-lived assets $ 4,412 $ 7,404 See “Note 8—Supplemental Financial Statement Information” for goodwill by reportable segment. NOTE 13. SUBSEQUENT EVENTS On May 6, 2024, the Company, Warehouse Goods and Synergy Imports LLC (“Synergy”) entered into an asset purchase agreement, dated May 1, 2024 (the “Asset Purchase Agreement”) pursuant to which Synergy purchased all of the intellectual property, a specified amount of inventory, and other assets related to the Eyce and DaVinci brands. In consideration for the acquisition, all parties entered into a loan modification agreement, effective May 1, 2024 (the “Loan Modification Agreement”) and an amended and restated secured promissory note, effective May 1, 2024 (the Amended and Restated Secured Promissory Note”), an amendment to the original Eyce and Davinci Asset Purchase Agreements, a distribution agreement, the termination of a license granted by Eyce, and the termination of certain consulting and employment agreements. The updated date of maturity will be through July 2024. From January 1, 2024 through July 18, 2024, the Company issued 1,911,000 shares of Class A common shares in connection with the exercise of the remaining penny warrants as discussed in Note 9 of these consolidated financial statements. On January 16, 2024, the Company issued 184,000 shares of Class A common shares in connection with a consulting agreement which had a market value of approximately $ 88,000 on the date of issuance. In May 2024, the Company entered into an agreement with a group of individuals to sell 100 % equity interests of one of the Company’s wholly-owned subsidiaries, Shavita B.V. and substantially all of the assets of ARI Logistics B.V. As of the date that these financial statements were available to be issued, the transaction was not officially closed as there was pending consideration to be transferred to the Company. F- 34 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.