What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-07-25 · 264 added, 152 removed, 438 unchanged (49% of the section changed)

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and, collectively with the Operating Company and its consolidated subsidiaries, the “Company”, “we”, “us”

and “our”) for the quarterly period ended March 31, 2024 included in Part I, Item 1 of this Quarterly Report on Form 10-Q,

and “our”) for the quarterly period ended June 30, 2024 included in Part I, Item 1 of this Quarterly Report on Form 10-Q,

and the audited consolidated financial statements and related notes of Greenlane Holdings, Inc.

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Consequently, you should not place undue reliance on forward-looking statements.

in 2005, Greenlane is the premier global platform for the development and distribution of premium cannabis accessories, vape

devices, and lifestyle products.

In 2021, we completed several acquisitions along with a transformative merger with KushCo Holdings,

adding a significant industrial line of business to the Greenlane platform.

These acquisitions strengthened our leading position as

a consumer ancillary products business and significantly expanded our customer network, bringing strategic relationships with

leading cannabis multi-state-operators (“MSOs”), cannabis single-state operators (“SSOs”), and Canadian

licensed-producers (“LPs”).

Greenlane is a leading ancillary cannabis company, providing a wide array of consumer

ancillary products and industrial ancillary products to thousands of cannabis producers, processors, brands, and retailers

(“related Cannabis Operators”), in addition to specialty retailers, smoke shops and head shops, convenience stores, and

consumers directly through our own proprietary web stores and large online marketplaces such as Amazon.

in 2005, Greenlane is the premier global platform for the development and distribution of premium cannabis accessories, vape devices,

and lifestyle products.

In 2021, we completed several acquisitions along with a transformative merger with KushCo Holdings, adding a

significant industrial line of business to the Greenlane platform.

These acquisitions strengthened our leading position as a consumer

ancillary products business and significantly expanded our customer network, bringing strategic relationships with leading cannabis multi-state-operators

(“MSOs”), cannabis single-state operators (“SSOs”), and Canadian licensed-producers (“LPs”).

is a leading ancillary cannabis company, providing a wide array of consumer ancillary products and industrial ancillary products to thousands

of cannabis producers, processors, brands, and retailers (“related Cannabis Operators”), in addition to specialty retailers,

smoke shops and head shops, convenience stores, and consumers directly through our own proprietary web stores and large online marketplaces

such as Amazon.

have been developing a world-class portfolio of our own proprietary brands (the “Greenlane Brands”) and carefully curated

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We also have category exclusive licenses for the premium

Marley Natural branded products, as well as the K.Haring Glass Collection.

Marley Natural branded products, as well as the K.

Haring Glass Collection.

the end of 2021, the Company has invested significantly in technology, including its e-commerce platforms, internal ERP systems, and

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should allow us to reduce our overall cost-structure and enhance our margins, thereby improving our balance sheet.

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.

On May 6, 2024, the Company, Warehouse Goods and 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.

As part of the overall modification, the principal balance

with Synergy decreased by $2.7 million from $5.1 million.

Synergy acquired certain assets from the Company in exchange for the reduction

in overall principal owed and as part of the transaction, the Company recognized a gain on the debt modification of $2.2 million.

amount is included in the accompanying financial statements within the statement of operations for the three and six months ended June

30, 2024 within other income (expense).

At June 30, 2024, $2.5 million of such financing remained outstanding.

The updated date of maturity

will be through August 2024.

PACT Act Exemption

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10 — Compensation Plans” for more information.

On June 18, 2024, the Board unanimously approved and declared advisable, and recommended that our stockholders approve

at a Special Meeting to take place on July 29, 2024, the adoption of the 2024 Amendment to effect a reverse stock split of our Common

Stock at any whole number between, and inclusive of, one-for-two to one-for-twenty.

Approval of the Proposed 2024 Reverse Stock Split

at the 2024 Annual Meeting will grant the Board the authority, but not the obligation, to file the 2024 Amendment to effect the Proposed

2024 Reverse Stock Split no later than August 5, 2024, with the exact ratio and timing of the Proposed 2024 Reverse Stock Split to be

determined at the discretion of the Board.

The exact split ratio selected by the Board will be publicly announced prior to the effectiveness

of the Proposed 2024 Reserve Stock Split.

For additional information about the July 29, 2024 Special Meeting and the Proposed 2024 Reverse

Stock Split, please see the Company’s Definitive Proxy Statement filed with the SEC on June 28, 2024.

July 23, 2024, the Board approved the reverse split at a ratio of one-for-11 and the Amendment has been filed with the Secretary of State

of the State of Delaware, which became effective on August 5, 2024 at 12:01 AM Eastern Time, before the opening of trading on the Nasdaq.

share and per share amounts were retroactively adjusted for all periods presented to give effect to the Reverse Stock Split.

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of Operations

following table presents operating results for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

following table presents operating results for the three and six months ended June 30, 2024 and 2023:

Three Months Ended

Six Months Ended

% of Net sales

Cost of sales

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Interest expense

Other income, net

Change in fair value of contingent consideration

Gain on extinguishment of debt

Other income (expense), net

Total other expense, net

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Provision for (benefit from) income taxes

Net loss attributable to non-controlling interest

Net income (loss) attributable to non-controlling

Net loss attributable to Greenlane Holdings, Inc.

Results of Operations

the three months ended March 31, 2024, net sales were approximately $4.9 million, compared to approximately $23.9 million for the

same period in 2023, representing a decrease of $19.0 million, or 79.4%.

The year-over-year decrease in net sales was due to a major

restructuring of our Industrial Group in April of 2023, involving our packaging and industrial vaping product lines;

transitioning

much of this business from a gross sales to a commission structure to preserve working capital.

Revenues decreased in the

Consumer Brands Group due, in part, to restructuring efforts and shift in strategy to focus on in-house brands that carry a higher

margin profile while rationalizing third-party brand offerings, which generated top line revenue with lower margins.

Our Industrial Goods operating segment reported net sales of approximately $2.7 million compared to approximately

$16.1 million for the same period in 2023, representing a decrease of $13.5 million or 83.9%.

consumer business also was affected by the inability to access capital markets on equitable terms, resulting in stock-outs and

shortages of higher velocity inventory.

The Company is continuing to focus on profitable revenue and as a result top line revenue

has significantly been reduced.

Concurrently, the Company has continued its focus on right-sizing the business during the fiscal

year ended December 31, 2023 and through present, in an effort to reduce sales and marketing costs and reduce or eliminate certain

administrative functions.

the three months ended June 30, 2024, net sales were approximately $2.6 million, compared to approximately $19.6 million for the same

period in 2024, representing a decrease of $17.0 million, or 86.5%.

The year-over-year decrease in net sales was due to a major restructuring

of our Industrial Group in April of 2023, involving our packaging and industrial vaping product lines;

transitioning much of this business

from a gross sales to a commission structure to preserve working capital.

Revenues decreased in the Consumer Brands Group due, in part,

to restructuring efforts and shift in strategy to focus on in-house brands that carry a higher margin profile while rationalizing third-party

brand offerings, which generated top line revenue with lower margins.

Our Industrial Goods operating segment reported net sales of approximately

$1.7 million compared to approximately $13.6 million for the same period in 2023, representing a decrease of $11.9 million or 87.5%.

The consumer business also was affected by the inability to access capital markets on equitable terms, resulting in stock-outs and shortages

of higher velocity inventory.

The Company is continuing to focus on profitable revenue and as a result top line revenue has significantly

been reduced.

Concurrently, the Company has continued its focus on right-sizing the business during the fiscal year ended December 31,

2023 and through present, in an effort to reduce sales and marketing costs and reduce or eliminate certain administrative functions.

the six months ended June 30, 2024, net sales were approximately $7.6 million, compared to approximately $43.6 million for the same period

in 2024, representing a decrease of $36.0 million, or 82.6%.

The year-over-year decrease in net sales was due to a major restructuring

of our Industrial Group in April of 2023, involving our packaging and industrial vaping product lines;

transitioning much of this business

from a gross sales to a commission structure to preserve working capital.

Revenues decreased in the Consumer Brands Group due, in part,

to restructuring efforts and shift in strategy to focus on in-house brands that carry a higher margin profile while rationalizing third-party

brand offerings, which generated top line revenue with lower margins.

Our Industrial Goods operating segment reported net sales of approximately

$4.4 million compared to approximately $29.7 million for the same period in 2023, representing a decrease of $25.3 million or 85.2%.

The consumer business also was affected by the inability to access capital markets on equitable terms, resulting in stock-outs and shortages

of higher velocity inventory.

The Company is continuing to focus on profitable revenue and as a result top line revenue has significantly

been reduced.

Concurrently, the Company has continued its focus on right-sizing the business during the fiscal year ended December 31,

2023 and through present, in an effort to reduce sales and marketing costs and reduce or eliminate certain administrative functions.

of Sales and Gross Margin

the three months ended March 31, 2024, cost of sales decreased by $15.0 million, or 81.5%, as compared to the same period in 2023.

the three months ended June 30, 2024, cost of sales decreased by $13.4 million, or 89.1%, as compared to the same period in 2023.

decrease in the cost of sales is driven by the 86.5% decrease in revenue in addition to a decrease in damaged and obsolete inventory

margins increased 7.7% to 30.7% for the three months ended March 31, 2024, compared to 23.0% for the same period in 2023.

the six months ended June 30, 2024, cost of sales decreased by $28.4 million, or 84.9%, as compared to the same period in 2023.

in the cost of sales is driven by the 82.6% decrease in revenue in addition to a decrease in damaged and obsolete inventory write-offs.

margin percentage increased 14.8% to 38.1% for the three months ended June 30, 2024, compared to 23.3% for the same period in 2023.

margin percentage increased 10.1% to 33.3% for the six months ended June 30, 2024, compared to 23.2% for the same period in 2023.

Benefits and Payroll Taxes

benefits and payroll taxes expenses decreased by approximately $2.4 million, or 45.1%, to $2.9 million for the three months ended March

benefits and payroll taxes expenses decreased by approximately $3.6 million, or 70.7%, to $1.5 million for the three months ended June

30, 2024, compared to $5.2 million for the same period in 2023.

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business and focus on profitability.

benefits and payroll taxes expenses decreased by approximately $6.1 million, or 57.7%, to $4.5 million for the six months ended June

30, 2024, compared to $10.5 million for the same period in 2023.

The decrease is related to the reduction in workforce to right-size

the business and focus on profitability.

we continue to closely monitor the evolving business landscape, we remain focused on identifying cost-saving opportunities while delivering

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and Administrative Expenses

and administrative expenses decreased by approximately $5.4 million, or 70.1%, for the three months ended March 31, 2024, compared to

and administrative expenses decreased by approximately $4.2 million, or 59.8%, for the three months ended June 30, 2024, compared to

the same period in 2023.

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taxes and licenses, and general insurance.

and administrative expenses decreased by approximately $9.7 million, or 65.5%, for the six months ended June 30, 2024, compared to the

same period in 2023.

The decrease is related to major restructuring effort by the Company to reduce cost and right-size the business.

Compared with the first quarter of 2023, the Company focused on reduction across the board in general and administrative expenses and

saw large decreases in professional and outside services, facility expenses, outbound freight, other general and administrative, marketing,

taxes and licenses, and general insurance.

and Amortization Expense

and amortization expense decreased $0.2 million, or 48.3%, for the three months ended March 31, 2024, compared to the same period in

and amortization expense decreased $0.3 million, or 58.9%, for the three months ended June 30, 2024, compared to the same period in 2023.

The decrease is related to a major restructuring effort to reduce cost and right-size the business resulting in the sale and disposal

of assets related to reducing our warehousing and office footprint.

and amortization expense decreased $0.5 million, or 53.5%, for the six months ended June 30, 2024, compared to the same period in 2023.

The decrease is related to a major restructuring effort to reduce cost and right-size the business resulting in the sale and disposal

of assets related to reducing our warehousing and office footprint.

Income (Expense), Net

expense decreased approximately $0.3 million for the three months ended March 31, 2024 compared to the same period in 2023.

expense decreased approximately $0.6 million for the three months ended June 30, 2024 compared to the same period in 2023.

is primarily related to reduction in overall debt financing and refinancing debt for more favorable terms.

expense decreased approximately $0.9 million for the six months ended June 30, 2024 compared to the same period in 2023.

is primarily related to reduction in overall debt financing and refinancing debt for more favorable terms.

in fair value of contingent consideration

was a change in fair value of contingent consideration of approximately $1.0 million for the three and six months ended June 30, 2024

compared to the same periods in 2023.

The change is primarily related to known reductions in earnouts related to Davinci and Eyce products.

on debt extinguishment

was an increase in gain on debt extinguishment of approximately $2.2 million for the three and six months ended June 30, 2024,

compared to the same periods in 2023.

The change is primarily related to a difference in the reduction in overall debt modification

with Synergy, offset by the carrying value of the Davinci and Eyce assets acquired by Synergy.

For further information, see Note 6,

“Debt” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

expense, net.

income, net, decrease by approximately $0.1 million for the three months ended March 31, 2024, compared to the same period in 2023.

change is primarily due previously recognized change in fair value of equity investments recorded during the three months ended March

income, net, decreased by approximately $0.1 million for the three and six months ended June 30, 2024, compared to the same period in

The change is primarily due previously recognized change in fair value of equity investments recorded during the three and six

months ended June 30, 2023.

for (Benefit from) Income Taxes

the three months ended March 31, 2024 and 2023, respectively, the effective tax rate differed from the U.S.

federal statutory tax rate

of 21% primarily due to the Operating Company’s pass-through structure for U.S.

the three and six months ended June 30, 2024 and 2023, respectively, the effective tax rate differed from the U.S.

federal statutory

tax rate of 21% primarily due to the Operating Company’s pass-through structure for U.S.

income tax purposes (through December

31, 2022), the relative mix in earnings and losses in the U.S.

versus foreign tax jurisdictions, and the valuation allowance against the deferred

versus foreign tax jurisdictions, and the valuation allowance against

the deferred tax asset.

Operating Performance

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These changes in operating segments align with how we manage

our business as of the first quarter of 2024.

our business as of the second quarter of 2024.

Consumer Goods segment focuses on serving consumers across wholesale, retail and e-commerce operations—through both our proprietary

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The following table sets forth information by reportable segment for

the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

% of Total Net sales or % of Segmented Sales

the three and six months ended June 30, 2024 and 2023:

Three Months Ended

Six Months Ended

% of Total Net sales

Consumer Goods

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Total net sales

% of Segment Net sales

Cost of sales:

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Total gross profit

the three months ended March 31, 2024, our Consumer Goods operating segment reported net sales of approximately $2.3 million compared

Consumer Goods

the three months ended June 30, 2024, our Consumer Goods operating segment reported net sales of approximately $0.9 million compared

to approximately $6.0 million for the same period in 2023, representing a decrease of $5.1 million or 85.1%.

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to align with gross profit, sale of certain Company brands and a major shift in strategy to focus on in-house brands that have a higher

margin profile and rationalized third-party brand offering generating top line revenue with lower margins as well as some stockouts of key items.

the three months ended March 31, 2024, the cost of sales decreased by $3.9 million, or 71.5%, as compared to the same period in 2023.

margin profile and rationalized third-party brand offering generating top line revenue with lower margins as well as some stockouts of

In addition, the consumer business also was affected by the inability to access capital markets on equitable terms,

resulting in stock-outs and shortages of higher velocity inventory.

the six months ended June 30, 2024, our Consumer Goods operating segment reported net sales of approximately $3.2 million compared to

approximately $13.8 million for the same period in 2023, representing a decrease of $10.7 million or 77.1%.

The year-over-year decrease

was due to a major restructuring and continued effort by the company to right-size the business and to reduce sales and marketing costs

to align with gross profit, sale of certain Company brands and a major shift in strategy to focus on in-house brands that have a higher

margin profile and rationalized third-party brand offering generating top line revenue with lower margins as well as some stockouts of

In addition, the consumer business also was affected by the inability to access capital markets on equitable terms,

resulting in stock-outs and shortages of higher velocity inventory.

the three months ended June 30, 2024, the cost of sales decreased by $3.5 million, or 82.1%, as compared to the same period in 2023.

The decrease in the cost of sales was primarily due to the decrease in the net sales of Consumer Goods.

gross margin increased to 30.7% for the three months ended March 31, 2024, compared to a gross margin of approximately 29.3% for the

same period in 2023.

the three months ended March 31, 2024, our Industrial Goods operating segment reported net sales of approximately $2.6 million

compared to approximately $16.1 million for the same period in 2023, representing a decrease of $13.5 million or 83.6%.

year-over-year decrease was due to a major restructuring from gross to net revenue recognition and continued effort by the company

to right size the business and reduce sales and marketing costs to align with the gross profit and the announcement to sell the

Company’s packaging business interrupting sales.

the three months ended March 31, 2024, the cost of sales decreased by $11.1 million, or 85.8%, as compared to the same period in 2023.

the six months ended June 30, 2024, the cost of sales decreased by $7.4 million, or 76.1%, as compared to the same period in 2023.

decrease in the cost of sales was primarily due to the decrease in the net sales of Consumer Goods.

gross margin decreased to 15.9% for the three months ended June 30, 2024, compared to a gross margin of approximately 29.9% for the same

period in 2023.

gross margin decreased to 26.5% for the six months ended June 30, 2024, compared to a gross margin of approximately 29.6% for the same

period in 2023.

the three months ended June 30, 2024, our Industrial Goods operating segment reported net sales of approximately $1.8 million compared

to approximately $13.6 million for the same period in 2023, representing a decrease of $11.8 million or 87.1%.

The year-over-year decrease

was due to a major restructuring from gross to net revenue recognition and continued effort by the company to right size the business

and reduce sales and marketing costs to align with the gross profit and the announcement to sell the Company’s packaging business

interrupting sales.

the six months ended June 30, 2024, our Industrial Goods operating segment reported net sales of approximately $4.4 million compared

to approximately $29.7 million for the same period in 2023, representing a decrease of $25.3 million or 85.2%.

The year-over-year decrease

was due to a major restructuring from gross to net revenue recognition and continued effort by the company to right size the business

and reduce sales and marketing costs to align with the gross profit and the announcement to sell the Company’s packaging business

interrupting sales.

the three months ended June 30, 2024, the cost of sales decreased by $9.9 million, or 91.8%, as compared to the same period in 2023.

The decrease in the cost of sales was primarily due to the 87.1% decrease in the net sales of the Industrial Goods.

gross margin was approximately 30.6% for the three months ended March 31, 2024, compared to a gross margin of approximately 20.0% for

the six months ended June 30, 2024, the cost of sales decreased by $21.0 million, or 88.5%, as compared to the same period in 2023.

decrease in the cost of sales was primarily due to the 85.2% decrease in the net sales of the Industrial Goods.

gross margin was approximately 49.6% for the three months ended June 30, 2024, compared to a gross margin of approximately 20.4% for

the same period in 2023.

Margins increased as the Company moved to a commission-based revenue model.

gross margin was approximately 38.2% for the six months ended June 30, 2024, compared to a gross margin of approximately 20.2% for the

same period in 2023.

Margins increased as the Company moved to a commission-based revenue model.

Sales by Geographic Regions

Three Months Ended March 31,

Three Months Ended

Six Months Ended

% of Net sales

United States

Total net sales

the three months ended March 31, 2024, our United States net sales were approximately $3.8 million, compared to approximately $22.4 million

the three months ended June 30, 2024, our United States net sales were approximately $1.7 million, compared to approximately $18.6 million

for the same period in 2023, representing a decrease of $16.8 million, or 90.6%.

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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 will 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, and convert millions of dollars of existing inventory back into cash, thereby improving

our balance sheet.

The Company is focused on profitable revenue and as a result top line revenue has significantly been reduced.

the six months ended June 30, 2024, our United States net sales were approximately $5.5 million, compared to approximately $40.9 million

for the same period in 2023, representing a decrease of $35.4 million, or 86.5%.

The year-over-year decrease in net sales was due to

a major restructuring effort and a shift in strategy to focus on in-house brands that carry a higher margin profile while rationalizing

out third-party brand offerings, which generated top line revenue with lower margins.

The Company’s transition out of the Industry

packaging business, which impacted sales and required significant working capital and produced low margins.

The company entered into

a strategic partnership with an affiliate of one 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 to certain key customers, assist with the promotion and the sale of certain vaporizer goods and services, and help coordinate the

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The Company is focused on profitable revenue and as a result top line revenue has significantly been reduced.

the three months ended March 31, 2024, our Canadian net sales were approximately $0.4 million, compared to approximately $0.3 million

for the same period in 2023, representing a slight increase of $0.1 million, or 22.0%.

the three months ended June 30, 2024, our Canadian net sales were approximately $0.3 million, compared to approximately $0.1 million

for the same period in 2023, representing a slight increase of $0.2 million.

The company is currently evaluating distribution

and sales channels into Canada.

the three months ended March 31, 2024, our European net sales were approximately $0.8 million, compared to approximately $1.3 million

the six months ended June 30, 2024, our Canadian net sales were approximately $0.7 million, compared to approximately $0.4 million for

the same period in 2023, representing a slight increase of $0.3 million.

The company is currently evaluating distribution and

sales channels into Canada.

the three months ended June 30, 2024, our European net sales were approximately $0.6 million, compared to approximately $0.9 million

for the same period in 2023, representing a decrease of $0.4 million or 39.3%.

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efforts to improve the profitability of our European operations.

the six months ended June 30, 2024, our European net sales were approximately $1.3 million, compared to approximately $2.2 million for

the same period in 2023, representing a decrease of $0.9 million or 39.7%.

The decrease in net sales was due primarily to major restructuring

efforts to improve the profitability of our European operations.

Capital Resources and Going Concern

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 other equity issuances.

As of March 31, 2024, we had approximately $0.2 million of cash, of which none was

restricted and $0.1 million was held in foreign bank accounts, and approximately $ 0.8

million of negative working capital, which is calculated as total current assets minus

total current liabilities, as compared to approximately $0.5 million of cash, of which $0.1 million was held in foreign bank

accounts, and approximately $ 3.7 million of working capital as of December 31, 2023.

The repatriation of cash balances from our

foreign subsidiaries could have adverse tax impacts or be subject to capital controls;

however, these balances are generally

available to fund the ordinary business operations of our foreign subsidiaries without legal or other restrictions.

primary requirements for liquidity and capital are working capital, debt service related to recent acquisitions and general corporate

Our primary sources of liquidity are our cash on hand and the cash flow that we generate from our operations, as well as proceeds

other equity issuances.

As of June 30, 2024, we had approximately $0.2 million of cash, of which none was restricted and $0.1 million

was held in foreign bank accounts, and approximately $1.1 million of negative working capital, which is calculated as total current assets

minus total current liabilities, as compared to approximately $0.5 million of cash, of which $0.1 million was held in foreign bank accounts,

and approximately $3.7 million of working capital as of December 31, 2023.

The repatriation of cash balances from our foreign subsidiaries

could have adverse tax impacts or be subject to capital controls;

however, these balances are generally available to fund the ordinary

business operations of our foreign subsidiaries without legal or other restrictions.

believe that our cash on hand and the cash flow that we generate from our operations will not be sufficient to fund our working capital

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for the next 12 months.

Based on our cash on hand and working capital at March 31, 2024 , we may have insufficient cash to fund planned

operations into the third quarter of 2024 .

Based on our cash on hand and working capital at June 30, 2024, we may have insufficient cash to fund planned

operations into the fourth quarter of 2024.

This is evident from our continued efforts to raise capital and leverage external funding

to fulfill our capital needs as highlighted below.

to fulfil our capital needs as highlighted below.

Program and Shelf Registration Statement

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Stock and Warrant Offerings

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.

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 50,952 shares of our Class A common stock, pre-funded warrants

to purchase up to 317,013 shares of our Class A Common Stock (the “July 2023 Pre-Funded Warrants”) and warrants to purchase

up to 735,931 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.

August 9, 2022, we entered into an asset-based loan agreement dated as of August 8, 2022 (the “Loan Agreement”), which made

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See “Note 6 - Long Term Debt” for more information.

June 7, 2024, the Company entered into a subscription agreement with Cobra Alternative Capital Strategies, LLC.

As of June 30, 2024,

the Company has been loaned $793,700 with net cash proceeds of $634,960.

The note was issued with a 20% original issue discount and is

due in full on December 7, 2024.

See “Note 6 - Long Term Debt” for more information.

have completed several initiatives to optimize our working capital requirements.

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workforce by approximately 49% throughout fiscal year 2023 to reduce costs and align with our revenue projections.

have incurred net losses of $4.5 million and $8.7 million for the three months ended March 31, 2024 and 2023, respectively.

For the three

months ended March 31, 2024, cash used in operating activities was $0.1

million and cash used in operating activities for the year ended December 31, 2023 was $1.8 million.

The recent macroeconomic

environment has caused weaker demand than contemplated under our business plan, resulting in a reduction in projected revenue and cash

flows for the twelve-month period included in the going concern evaluation.

have incurred net losses of $5.1 million and $17.8 million for the six months ended June 30, 2024 and 2023, respectively.

months ended June 30, 2024, cash used in operating activities was $0.4 million and cash used in operating activities for the year ended

December 31, 2023 was $1.8 million.

The recent macroeconomic environment has caused weaker demand than contemplated under our business

plan, resulting in a reduction in projected revenue and cash flows for the twelve-month period included in the going concern evaluation.

a result of our losses and our projected cash needs, combined with our current liquidity level, substantial doubt exists about the Company’s

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described in the section titled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31,

Depending on the severity and direct impact of these factors on us, we may be unable

to secure additional financing to meet our operating requirements on terms favorable to us, or at all.

of March 31, 2024 ,

we did not have any off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial

condition, results of operations, liquidity, capital expenditures, or capital resources.

Depending on the severity and direct impact of these factors on us, we may be unable to secure additional financing to meet our

operating requirements on terms favorable to us, or at all.

of June 30, 2024, we did not have any off-balance sheet arrangements that are reasonably likely to have a material current or future

effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

following summary of cash flows for the periods indicated has been derived from our condensed consolidated financial statements included

elsewhere in this Quarterly Report on Form 10-Q:

Three Months Ended

Six Months Ended

(in thousands)

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Net cash used in investing activities

Net cash used in financing activities

Net cash provided by (used in) financing activities

Cash (Used in) Provided by Operating Activities

the three months ended March 31, 2024, net cash used in operating activities of approximately $0.1 million consisted of (i) net

loss of $4.5 million, offset by non-cash adjustments to net loss of approximately $0.3 million, and (ii) a $4.1 million increase in

working capital primarily driven by increases in accounts payable, accrued expenses of approximately $1.7 million and decreases in

inventories and other current assets of approximately $2.7 million.

the three months ended March 31, 2023, net cash provided by operating activities of approximately $1.9 million consisted of (i) net loss

of $8.7 million, offset by non-cash adjustments to net loss of approximately $0.9 million, including depreciation and amortization expense

of approximately $0.5 million and stock based compensation expense of $0.2 million, and (ii) a $9.7 million decrease in working capital

primarily driven by decreases in inventories, vendor deposits and other current assets of approximately $9.0 million, including cash

collections of approximately $4.9 million related to ERC sales, and increases in accounts payable and accrued expenses of approximately

$2.9 million, offset partially by a $1.4 million increase in accounts receivable and a $0.8 million decrease in customer deposits.

the six months ended June 30, 2024, net cash used in operating activities of approximately $0.4 million consisted of (i) net loss of

$5.1 million, offset by non-cash adjustments to net loss of approximately $2.6 million, and (ii) a $7.3 million increase in working capital

primarily driven by increases in accounts payable, accrued expenses of approximately $3.7 million and decreases in inventories and other

current assets of approximately $3.8 million.

the six months ended June 30, 2023, net cash provided by operating activities of approximately $4.7 million consisted of (i) net loss

of $17.8 million, offset by non-cash adjustments to net loss of approximately $1.8 million, including depreciation and amortization of

expense of approximately $1.0 million, equity-based compensation expense of approximately $0.3 million, change in the fair value of contingent

consideration of approximately $0.1 million, and other expenses of approximately $0.5 million, and (ii) a $20.6 million decrease in working

capital primarily driven by decreases in accounts receivable, inventories, vendor deposits and other current assets of approximately

$19.7 million, increases in accounts payable of approximately $1.9 million, offset by decreases in customer deposits of approximately

$1.0 million.

Cash Used in Investing Activities

the three months ended March 31, 2024, net cash used in investing activities of approximately $0.2 million consisted primarily of capital

expenditures.

the three months ended March 31, 2023, net cash used in investing activities of approximately $0.2 million consisted primarily of capital

the six months ended June 30, 2024, net cash used in investing activities of approximately $0.2 million consisted primarily of capital

expenditures.

Cash Used in Financing Activities

the three months ended March 31, 2024, net cash used in financing activities of approximately $0.1 million primarily consisted of approximately

$0.3 million in payments on loans against future accounts receivable and approximately $0.2 million in proceeds from future receivables financing.

the three months ended March 31, 2023, net cash used in financing activities of approximately $8.2 million consisted of repayments of

the Asset-Based Loan of approximately $6.5 million, payments on the Eyce and DaVinci promissory notes of approximately $0.9 million,

and Asset-Based Loan costs incurred of approximately $0.8 million.

Accounting Policies and Estimates

Note 2, “Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements in Part

I, Item 1 of this Form 10-Q and Part II, Item 7, “Critical Accounting Policies and Estimates” in our Annual Report on Form

10-K for the year ended December 31, 2023 for descriptions of the significant accounting policies and methods used in the preparation

of our Condensed Consolidated Financial Statements.

There have been no material changes to the Company’s critical accounting estimates

since the Form 10-K for the year ended December 31, 2023.

the six months ended June 30, 2023, net cash used in investing activities of approximately $0.3 million largely consisted of capital

expenditures, including development costs for our new enterprise resource planning (“ERP”) system.

Cash Provided bv (Used in) Financing Activities

the six months ended June 30, 2024, net provided by financing activities of approximately $0.2 million primarily consisted of approximately

$0.6 million in payments on loans against future accounts receivable, approximately $0.2 million in proceeds from future receivables

financing, and approximately $0.6 million in proceeds from notes payable.

the six months ended June 30, 2023, net cash used in financing activities of approximately $12.1 million largely consisted of debt service

payments of approximately $11.8 million, including $10.2 million related to the Asset-Based Loan and $1.6 million for the Eyce and DaVinci

promissory notes, and $0.3 million in payments of contingent consideration related to the DaVinci acquisition.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis