What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-14 · 205 added, 314 removed, 388 unchanged (57% 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 June 30, 2024 included in Part I, Item 1 of this Quarterly Report on Form 10-Q,

and “our”) for the quarterly period ended September 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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Factors that might cause such a difference include those discussed in our filings with the SEC, under

the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023

the heading “Risk Factors” in our Annual Report on Form 10-KA for the fiscal year ended December 31, 2023 (the “2023

Annual Report”) and in other documents that we file from time to time with the Securities and Exchange Commission (the “SEC”).

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2023 and 2024, the Company also entered into certain arrangements to reduce working capital requirements and improve its balance sheet.

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

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.

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.

April 2023, we entered into two strategic partnerships.

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.

On August 8, 2024 the Company terminated its strategic partnership with MJ Packaging

and is resuming its business as a direct provider of packaging solutions to the cannabis industry.

MJ Packaging however,

remains a distribution customer of the Company.

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 partner.

While the strategic partnership may result in a decrease in top line revenue for

these vape products, this partnership 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.

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

As part of the overall modification, the principal balance with Synergy decreased by $2.7 million from $5.1 million.

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.

This amount is included in the accompanying financial statements

within the statement of operations for the three and nine months ended September 30, 2024 within other income (expense).

At September 30, 2024,

$2.7 million of such financing remained outstanding.

As of the filing date of this statement and as a result of restructuring

efforts, the maturity of this note is October 2025.

PACT Act Exemption

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of Operations

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

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

% of Net sales

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Provision for (benefit from) income taxes

Net income (loss) attributable to non-controlling

Net income (loss) attributable to non-controlling interest

Net loss attributable to Greenlane Holdings, Inc.

Results of Operations

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

the three months ended September 30, 2024, net sales were approximately

$4.0 million, compared to approximately $11.8 million for the same period in 2024, representing a decrease of $7.8 million, or 65.8%.

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 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

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

The consumer products were 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

the nine months ended September 30, 2024, net sales were approximately $11.6 million, compared to approximately $55.4 million for the

same period in 2024, representing a decrease of $43.8 million, or 79.0%.

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.

The consumer products were affected by

the inability to access capital markets on equitable terms, resulting in stock-outs and shortages of higher velocity inventory.

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 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

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.

the three months ended September 30, 2024, cost of sales decreased by $7.7

million, or 88.3%, as compared to the same period in 2023.

The decrease in the cost of sales is driven by the 65.8% decrease in revenue

in addition to a decrease in damaged and obsolete inventory write-offs.

For the nine months ended September

30, 2024, cost of sales decreased by $36.1 million, or 85.6%, as compared to the same period in 2023.

The decrease in the cost of sales

is driven by the 79.0% decrease in revenue in addition to a decrease in damaged and obsolete inventory write-offs.

margin percentage increased 48.4% to 75.0% for the three months ended September

30, 2024, compared to 26.5% for the same period in 2023.

margin percentage increased 23.9% to 47.8% for the nine months ended September

30, 2024, compared to 23.9% for the same period in 2023.

Benefits and Payroll Taxes

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.

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

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.

benefits and payroll taxes expenses decreased by approximately $2.5 million,

or 60.4%, to $1.6 million for the three months ended September 30, 2024, compared to $4.1 million for the same period in 2023.

is related to the reduction in workforce to right-size the business and focus on profitability.

benefits and payroll taxes expenses decreased by approximately $8.5 million,

or 58.4%, to $6.1 million for the nine months ended September 30, 2024, compared to $14.6 million for the same period in 2023.

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 $4.2 million, or 59.8%, for the three months ended June 30, 2024, compared to

and administrative expenses decreased by approximately $3.7 million, or 67.4%, for the three months ended September 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

and administrative expenses decreased by approximately $13.3 million, or 66.0%, for the nine months ended September 30, 2024, compared to the

same period in 2023.

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and Amortization Expense

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.

and amortization expense decreased $0.3 million, or 64.7%, for the three months ended September 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.

and amortization expense decreased $0.9 million, or 57.4%, for the nine months ended September 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

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Income (Expense), Net

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.

expense decreased approximately $0.2 million for the three months ended

September 30, 2024 compared to the same period in 2023.

The decrease is primarily related to reduction in overall debt financing and refinancing

debt for more favorable terms.

expense decreased approximately $1.1 million for the nine months ended September

30, 2024 compared to the same period in 2023.

The decrease 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.

was a change in fair value of contingent consideration of approximately

$1.0 million for the nine months ended September 30, 2024 compared to the same period 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, 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.

was an increase in gain on debt extinguishment of approximately $2.2 million

for the nine months ended September 30, 2024, compared to the same period 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.

for (Benefit from) Income Taxes

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

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

federal statutory

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the deferred tax asset.

Operating Performance

the completion of the KushCo merger in late August 2021, we reassessed our operating segments based on our new organizational structure.

Based on this assessment, we determined we had two operating segments as of December 31, 2021, which are the same as our reportable segments:

(1) Consumer Goods, which largely comprises Greenlane’s legacy operations across the United States, Canada, and Europe, and (2)

Industrial Goods, which largely comprises KushCo’s legacy operations.

These changes in operating segments align with how we manage

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

brands, including, Marley Natural, Keith Haring, Groove and Higher Standards, as well as lifestyle products and accessories from leading

brands, like Storz and Bickel, Pax, Davinci, Eyce, Grenco Science, 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 proprietary owned brands.

Industrial Goods segment focuses on serving the premier cannabis 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 Greenlane

Brand Pollen Gear and vaporization solutions offering, which includes CCELL branded products.

chief operating decision maker (“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 three and six months ended June 30, 2024 and 2023:

Three Months Ended

Six Months Ended

% of Total Net sales

Consumer Goods

Industrial Goods

Total net sales

% of Segment Net sales

Cost of sales:

Consumer Goods

Industrial Goods

Total cost of sales

Gross profit:

Consumer Goods

Industrial Goods

Total gross profit

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%.

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 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.

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.

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

Six Months Ended

% of Net sales

United States

Total net sales

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%.

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 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

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 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 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%.

The decrease in net sales was due primarily to major restructuring

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

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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

As of September 30, 2024, we had approximately $2.3 million of cash, of which none was restricted and $0.1 million

was held in foreign bank accounts, and approximately $2.5 million of negative working capital, which is calculated as total current assets

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for the next 12 months.

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

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

operations into the fourth quarter of 2024.

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Stock and Warrant Offerings

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.

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

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 12, 2024, the Company entered into a securities purchase agreement with a single institutional investor for aggregate gross cash

proceeds of $6.5 million.

In connection with the private placement, the Company will issue an aggregate of 2,363,637 units and pre-funded

The pre-funded units will be sold at the same purchase price as the units, less the pre-funded warrant exercise price of $0.00001.

Each unit and pre-funded unit will consist of one share of common stock (or one pre-funded warrant) and two common warrants, each exercisable

for one share of common stock at an exercise price of $2.50 per share.

The common warrant will be exercisable on the initial exercise

date described in the common warrant and will expire 5.0 years from such date.

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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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.

As of September 30, 2024,

the Company has been loaned $3.1 million with net cash proceeds of $2.6 million with a remaining balance of $1.0 million.

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

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working capital requirements.

April 2023, we entered into two strategic.

First, we entered into a strategic partnership (the “MJ Packaging Partnership”)

with A&A Global Imports d/b/a MarijuanaPackaging.com (“MJ Pack”), a 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.

April 2023, we entered into two strategic partnerships.

First, we entered into a strategic partnership (the “MJ Packaging

Partnership”) with A&A Global Imports d/b/a MarijuanaPackaging.com (“MJ Pack”), a provider of packaging

solutions to the cannabis industry.

On August 8, 2024 the Company terminated its strategic partnership with MJ Packaging and is

resuming its business as a direct provider of packaging solutions to the cannabis industry.

MJ Packaging however, remains a

distribution customer of the Company.

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 partnership may result in a decrease in top line revenue for these vape

products, this partnership 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.

have successfully renegotiated supplier partnership terms and are continuing to improve working capital arrangements with suppliers.

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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 $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.

have incurred net losses of $8.9 million and $27.8 million for the nine

months ended September 30, 2024 and 2023, respectively.

For the nine months ended September 30, 2024, cash used in operating activities

was $5.2 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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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

of September 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.

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elsewhere in this Quarterly Report on Form 10-Q:

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Cash (Used in) Provided by Operating Activities

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.

the nine months ended September 30, 2024, net cash used in operating activities of $5.2 million consisted of a net loss of $8.8 million,

offset partially by non-cash adjustments to the net loss of $1.0 million and a $1.2 million decrease in working capital driven by decreases

in inventories of $4.2 million and decreases in accrued expenses of $0.5 million reduced by a decrease in customer deposits of $1.5 million

and an increase in accounts receivable of $0.7 million.

the nine months ended September 30, 2023, net cash “provided” by operating activities of approximately $1.2 million consisted

of a net loss of $27.9 million offset by non-cash adjustments to net loss of approximately $4.4 million and a $24.7 million increase

in working capital driven by an $18 million decrease in inventory, a $4.7 million decrease in accounts receivable, and a $4.0 million

decrease in other assets reduced by a $3.1 million decrease in accounts payable.

Cash Used in Investing Activities

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

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

expenditures.

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.

During the nine months ended September 30, 2023, net cash provided

by investing activities of approximately $0.6 million , offset by cash used for development costs for our new enterprise resource planning

(ERP) system of $0.6 million.

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.

the nine months ended September 30, 2024, net cash provided by financing

activities of approximately $7.2 million primarily consisted of approximately $0.9 million in payments on loans against future accounts

receivable, approximately $0.2 million in proceeds from future receivables financing, approximately $2.1 million in proceeds from notes

payable, $3.0 in repayments on notes payable, and $5.6 million in net proceeds from the issuance of common stock.

the nine months ended September 30, 2023, net cash provided by financing activities of approximately $10.5 million primarily consisted

of cash proceeds of approximately $3.9 million from the issuance of Class A common stock through our ATM Program and the June 2022 Offering,

offset primarily by approximately $2.5 million in payments on notes payable, finance lease obligations and other long-term liabilities,

and approximately $0.3 million in payments of contingent consideration related to the Eyce LLC acquisition.

Cybersecurity

Management and Strategy

recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information

systems and protect the confidentiality, integrity, and availability of our data.

Material Risks & Integrated Overall Risk Management

have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture

of cybersecurity risk management.

This integration ensures that cybersecurity considerations are an integral part of our decision-making

processes at every level.

Our management team continuously evaluates and addresses cybersecurity risks in alignment with our business

objectives and operational needs.

Third-party Risk

we are aware of the risks associated with third-party service providers, we have implemented stringent processes to oversee and manage

We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring

to ensure compliance with our cybersecurity standards.

The monitoring includes annual assessments of the SOC reports of our providers

and implementing complementary controls.

This approach is designed to mitigate risks related to data breaches or other security incidents

originating from third-parties.

from Cybersecurity Threats

have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis