Greenlane Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) GREENLANE HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value per share amounts) September 30, 2024 December 31, 2023 (unaudited) ASSETS Current assets Cash $ 2,309 $ 463 Accounts receivable, net of allowance of $ 2,251 and $ 2,209 at September 30, 2024 and December 31, 2023, respectively 2,313 1,693 Inventories, net 16,013 20,529 Vendor deposits 3,725 3,765 Other current assets (Note 8) 2,279 3,319 Total current assets 26,639 29,769 Property and equipment, net 2,015 2,476 Operating lease right-of-use assets 1,271 1,936 Other assets 3,894 3,912 Total assets $ 33,819 $ 38,093 LIABILITIES Current liabilities Accounts payable $ 10,885 $ 12,103 Accrued expenses and other current liabilities (Note 8) 2,521 3,056 Customer deposits 1,255 2,775 Notes payable, net of debt discount 8,626 7,283 Current portion of operating leases 886 866 Current portion of finance leases — 7 Total current liabilities 24,173 26,090 Operating leases, less current portion 326 1,010 Other liabilities — 1 Total long-term liabilities 326 1,011 Total liabilities 24,499 27,101 Commitments and contingencies (Note 7) - - STOCKHOLDERS’ EQUITY Preferred stock, $ 0.0001 par value, 10,000 shares authorized, none issued and outstanding — — Class A common stock, $ 0.01 par value per share, 600,000 shares authorized, 972 shares issued and outstanding as of September 30, 2024; 600,000 shares authorized, 339 shares issued and outstanding as of December 31, 2023 * 8 3 Class B common stock, $ 0.0001 par value per share, 30,000 shares authorized, and 0 shares issued and outstanding as of September 30, 2024 and December 31, 2023 * — — Common stock, value — — Additional paid-in capital * 275,365 268,165 Accumulated deficit ( 266,152 ) ( 257,289 ) Accumulated other comprehensive income 248 245 Total stockholders’ equity attributable to Greenlane Holdings, Inc. 9,469 11,124 Non-controlling interest ( 149 ) ( 132 ) Total stockholders’ equity 9,320 10,992 Total liabilities and stockholders’ equity $ 33,819 $ 38,093 * After giving effect to the Reverse Stock Splits - See Note 9 - Stockholders’ Equity. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 GREENLANE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (in thousands, except per share amounts) 2024 2023 2024 2023 Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Net sales $ 4,038 $ 11,800 $ 11,616 $ 55,384 Cost of sales 1,011 8,671 6,066 42,162 Gross profit 3,027 3,129 5,550 13,222 Operating expenses: Salaries, benefits and payroll taxes 1,609 4,059 6,066 14,586 General and administrative 1,771 5,433 6,864 20,209 Depreciation and amortization 185 524 635 1,492 Total operating expenses 3,565 10,016 13,565 36,287 (Loss) from operations ( 538 ) ( 6,887 ) ( 8,015 ) ( 23,065 ) Other income (expense), net: Interest expense ( 3,219 ) ( 3,415 ) ( 4,030 ) ( 5,148 ) Change in fair value of contingent consideration — — 1,000 — Gain on extinguishment of debt — — 2,166 — Other income (expense), net — 204 ( 3 ) 338 Total other income (expense), net ( 3,219 ) ( 3,211 ) ( 867 ) ( 4,810 ) Loss before income taxes ( 3,757 ) ( 10,098 ) ( 8,882 ) ( 27,875 ) Provision for (benefit from) income taxes — — — ( 6 ) Net loss ( 3,757 ) ( 10,098 ) ( 8,882 ) ( 27,869 ) Less: Net income (loss) attributable to non-controlling interest — 19 ( 17 ) ( 27 ) Net loss attributable to Greenlane Holdings, Inc. $ ( 3,757 ) $ ( 10,117 ) $ ( 8,865 ) $ ( 27,842 ) Net loss attributable to Class A common stock per share - basic and diluted (Note 9)* $ ( 2.28 ) $ ( 1.91 ) $ ( 12.20 ) $ ( 9.67 ) Weighted-average shares of Class A common stock outstanding - basic and diluted (Note 9)* 1,647 5,513 727 2,918 Other comprehensive income (loss): Foreign currency translation adjustments 4 24 3 181 Comprehensive loss ( 3,753 ) ( 10,122 ) ( 8,879 ) ( 27,688 ) Less: Comprehensive loss attributable to non-controlling interest — — ( 17 ) ( 8 ) Comprehensive loss attributable to Greenlane Holdings, Inc. $ ( 3,753 ) $ ( 10,122 ) $ ( 8,862 ) $ ( 27,680 ) * After giving effect to the Reverse Stock Splits - See Note 9 - Stockholders’ Equity. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 GREENLANE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (in thousands) Shares* Amount * Capital * Deficit Income (Loss) Interest Equity Class A Common Stock Additional Paid-In Accumulated Accumulated Other Comprehensive Non- Controlling Total Stockholders’ Shares* Amount* Capital* Deficit Income (Loss) Interest Equity Balance December 31, 2023 339 $ 3 $ 268,165 $ ( 257,289 ) $ 245 $ ( 132 ) $ 10,992 Net loss — — — ( 4,491 ) — — ( 4,491 ) Equity-based compensation 17 — 86 — — — 86 Issuance of Class A shares - (Note 9) 38 1 ( 1 ) — — — — Other comprehensive income — — — — 2 — 2 Balance March 31, 2024 394 $ 4 $ 268,250 $ ( 261,780 ) $ 247 $ ( 132 ) $ 6,589 Net loss — — — ( 615 ) — ( 17 ) ( 632 ) Issuance of Class A shares - (Note 9) 135 1 ( 1 ) — — — — Other comprehensive income — — — — ( 3 ) — ( 3 ) Balance June 30, 2024 529 $ 5 $ 268,249 $ ( 262,395 ) $ 244 $ ( 149 ) $ 5,954 Net loss — — — ( 3,757 ) — — ( 3,757 ) Issuance of Class A shares and warrants - (Note 9) 443 3 7,116 — — — 7,119 Other comprehensive income — — — — 4 — 4 Balance September 30, 2024 972 $ 8 $ 275,365 $ ( 266,152 ) $ 248 $ ( 149 ) $ 9,320 * After giving effect to the Reverse Stock Splits - See Note 9 - Stockholders’ Equity. Shares* Amount * Shares* Amount * Capital * Deficit Income (Loss) Interest Equity Class A Common Stock Class B Common Stock Additional Paid-In Accumulated Accumulated Other Comprehensive Non- Controlling Total Stockholders’ Shares* Amount* Shares* Amount* Capital* Deficit Income (Loss) Interest Equity Balance 12/31/2022 145 $ 1 — $ — $ 264,031 $ ( 225,114 ) $ 55 $ 18 $ 38,991 Net loss — — — — — ( 8,693 ) — ( 54 ) ( 8,747 ) Equity-based compensation — — — — 110 — — — 110 Issuance of Class A shares - Amended Eyce APA (Note 3) — — — — 95 — — — 95 Other comprehensive income — — — — — — 178 — 178 Balance 3/31/2023 145 1 — — 264,236 ( 233,807 ) 233 ( 36 ) 30,627 Net loss — — — — — ( 9,032 ) — 8 ( 9,024 ) Equity-based compensation forfeiture, net — — — — ( 11 ) — — — ( 11 ) Issuance of Class A shares - Amended Eyce APA (Note 3) — — — — 65 — — — 65 Other comprehensive income (loss) — — — — — — 27 — 27 Balance 6/30/2023 145 $ 1 — $ — $ 264,290 $ ( 242,839 ) $ 260 $ ( 28 ) $ 21,684 Balance 145 $ 1 — $ — $ 264,290 $ ( 242,839 ) $ 260 $ ( 28 ) $ 21,684 Net loss — — — — — ( 10,117 ) — 19 ( 10,098 ) Equity-based compensation — — — — ( 70 ) — — — ( 70 ) Issuance of Class A shares - Amended Eyce APA (Note 3) 65 Issuance of Class A shares (Note 9) 168 2 3,850 3,852 Other comprehensive income (loss) — — — — — — ( 22 ) — ( 22 ) Balance 9/30/2023 313 $ 3 — $ — $ 268,105 $ ( 252,956 ) $ 238 $ ( 9 ) $ 15,411 Balance 313 $ 3 — $ — $ 268,105 $ ( 252,956 ) $ 238 $ ( 9 ) $ 15,411 * After giving effect to the Reverse Stock Splits - See Note 9 - Stockholders’ Equity. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 GREENLANE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) 2024 2023 For the nine months ended September 30, 2024 2023 Cash flows from operating activities: Net loss (including amounts attributable to non-controlling interest) $ ( 8,882 ) $ ( 27,869 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 635 1,492 Equity-based compensation expense 86 255 Change in provision for doubtful accounts 41 ( 154 ) Change in fair value of contingent consideration ( 1,000 ) 103 Amortization of debt discount and deferred financing fees 3,373 2,711 Gain on extinguishment of debt ( 2,166 ) — Other — ( 17 ) Changes in operating assets and liabilities, net of the effects of acquisitions: Increase (decrease) in accounts receivable ( 660 ) 4,697 Decrease in inventories 4,516 18,005 Decrease in vendor deposits 40 2,945 Decrease in other current assets 1,058 3,968 Increase (decrease) in accounts payable ( 1,221 ) ( 3,121 ) Increase (decrease) in accrued expenses and other liabilities 468 ( 250 ) Decrease in customer deposits ( 1,520 ) ( 1,573 ) Net cash (used in) provided by operating activities ( 5,232 ) 1,192 Cash flows from investing activities: Purchases of property and equipment, net ( 173 ) ( 633 ) Proceeds from sale of equity investments — 53 Net cash used in investing activities ( 173 ) ( 580 ) Cash flows from financing activities: Payments on Eyce and DaVinci promissory notes — ( 2,539 ) Purchase consideration paid for Eyce LLC and DaVinci acquisitions ( 300 ) Repayments of Asset-Based Loan — ( 15,000 ) Modification costs of Asset-Based Loan — ( 751 ) Proceeds from issuance of Class A common stock and warrants, net of costs 5,640 3,852 Proceeds from exercise of stock options, net of costs 1,477 — Proceeds from Secured Bridge Loan, net of costs — 2,090 Repayments of notes payable ( 2,100 ) — Proceeds from notes payable 2,950 — Proceeds from future receivables financing 225 3,000 Repayments of loan against future accounts receivable ( 939 ) ( 851 ) Other ( 5 ) ( 29 ) Net cash provided by (used in) financing activities 7,248 ( 10,528 ) Effects of exchange rate changes on cash 3 183 Net decrease in cash 1,846 ( 9,733 ) Cash and restricted cash, as of beginning of the period 463 12,176 Cash and restricted cash, as of end of the period $ 2,309 $ 2,443 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 GREENLANE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (Unaudited) (in thousands) Reconciliation of cash and restricted cash to consolidated balance sheets For the nine months ended September 30, 2024 2023 Beginning of the period Cash $ 463 $ 6,458 Restricted cash — 5,718 Total cash and restricted cash, beginning of period $ 463 $ 12,176 End of the period Cash $ 2,309 $ 2,443 Restricted cash — — Total cash and restricted cash, end of period $ 2,309 $ 2,443 Supplemental disclosures of cash flow information Cash paid for interest $ 778 $ 4,495 Cash paid for amounts included in the measurement of lease liabilities $ — $ 1,353 Non-cash financing activities: Non-cash purchases of property and equipment $ — $ 133 Extinguishment of debt in connection with Synergy asset purchase agreement $ 2,658 $ — Transfer from contingent consideration to notes payable $ — $ 1,150 Transfer from accrued expenses to notes payable $ — $ 437 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 7 GREENLANE HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. BUSINESS OPERATIONS AND ORGANIZATION Organization Greenlane Holdings, Inc. (“Greenlane” and, collectively with the Operating Company (as defined below) and its consolidated subsidiaries, the “Company”, “we”, “us”, and “our”) was formed as a Delaware corporation on May 2, 2018. We are a holding company that was formed for the purpose of completing an underwritten initial public offering (“IPO”) of shares of our Class A common stock, $0.01 par value per share (“Class A common stock”), in order to carry on the business of Greenlane Holdings, LLC (the “Operating Company”). The Operating Company was organized under the laws of the state of Delaware on September 1, 2015, and is based in Boca Raton, Florida. Unless the context otherwise requires, references to the “Company” refer to us, and our consolidated subsidiaries, including the Operating Company. We merchandise premium cannabis accessories, child-resistant packaging, specialty vaporization solutions and lifestyle products in the United States, Canada, Europe and Latin America, serving a diverse and expansive customer base with thousands of retail locations, licensed cannabis dispensaries, smoke shops, multi-state operators (“MSOs”), specialty retailers, and retail consumers. We have been developing a portfolio of our own proprietary brands (the “Greenlane Brands”) that we believe will, over time, deliver higher margins and create long-term value for our customers and shareholders. Our wholly-owned Greenlane Brands includes Groove – our more affordable product line and Higher Standards – our premium smoke shop and ancillary product brand, and our award winning Vapor.com website and brand. We also have category exclusive licenses for the premium Marley Natural branded products, as well as the K.Haring branded products. We are the sole manager of the Operating Company and our principal asset is Common Units of the Operating Company (“Common Units”). As the sole manager of the Operating Company, we operate and control all of the business and affairs of the Operating Company, and we conduct our business through the Operating Company and its subsidiaries. We have a board of directors and executive officers, but no employees. All of our assets are held and all of the employees are employed by wholly owned subsidiaries of the Operating Company. We have the sole voting interest in, and control the management of, the Operating Company, and we have the obligation to absorb losses of, and receive benefits from, the Operating Company, that could be significant. We determined that the Operating Company is a variable interest entity (“VIE”) and that we are the primary beneficiary of the Operating Company. Accordingly, pursuant to the VIE accounting model, beginning in the fiscal quarter ended June 30, 2019, we consolidated the Operating Company in our consolidated financial statements and reported a non-controlling interest related to the Common Units held by the members of the Operating Company (other than the Common Units held by us) on our consolidated financial statements. On August 31, 2021, we completed our merger with KushCo Holdings, Inc. (“KushCo”) and have included the results of operations of KushCo in our consolidated statements of operations and comprehensive loss from that date forward. In connection with the merger with KushCo, the Greenlane Certificate of Incorporation was amended and restated (the “A&R Charter”) in order to (i) increase the number of authorized shares of Greenlane Class B common stock, $ 0.0001 par value per share (the “Class B Common stock”), from 10 million shares to 30 million shares in order to effect the conversion of each outstanding share of Class C common stock, $ 0.0001 par value per share (the “Class C common stock”), into one-third of one share of Class B common stock, (ii) increase the number of authorized shares of Class A common stock from 125 million shares to 600 million shares, and (iii) eliminate references to the Class C common stock. Pursuant to the terms of an Agreement and Plan of Merger, dated as of March 31, 2021 (the “Merger Agreement”) with KushCo, immediately prior to the consummation of the business combination, holders of Class C common stock received one-third of one share of Class B common stock for each share of Class C common stock held immediately prior to the closing of the merger. Our corporate structure is commonly referred to as an “Up-C” structure. The Up-C structure allows the Operating Company to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity. One of these benefits is that future taxable income of the Operating Company that is allocated to its members will be taxed on a flow-through basis and therefore will not be subject to corporate taxes at the Operating Company entity level. Additionally, because a member may redeem their Common Units for shares of Class A common stock on a one-for-one basis or, at our option, for cash, the Up-C structure also provides the member with potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded. 8 In connection with the IPO, we entered into a Tax Receivable Agreement (the “TRA”) with the Operating Company and the Operating Company’s members and a Registration Rights Agreement (the “Registration Rights Agreement”) with the Operating Company’s members. The TRA provides for the payment by us to the Operating Company’s member(s) of 85.0 % of the amount of tax benefits, if any, that we may actually realize (or in some cases, are deemed to realize) as a result of (i) the step-up in tax basis in our share of the Operating Company’s assets resulting from the redemption of Common Units under the mechanism described above and (ii) certain other tax benefits attributable to payments made under the TRA. Pursuant to the Registration Rights Agreement, we have agreed to register the resale of shares of Class A common stock that are issuable to the Operating Company’s members upon redemption or exchange of their Common Units. The A&R Charter and the Fourth Amended and Restated Operating Agreement of the Operating Company (the “Operating Agreement”) require that (a) we at all times maintain a ratio of one Common Unit owned by us for each share of our Class A common stock issued by us (subject to certain exceptions), and (b) the Operating Company at all times maintains (i) a one-to-one ratio between the number of shares of our Class A common stock issued by us and the number of Common Units owned by us, and (ii) a one-to-one ratio between the number of shares of our Class B common stock owned by the non-founder members of the Operating Company and the number of Common Units owned by the non-founder members of the Operating Company. As of December 31, 2022, all Common Units of the Operating Company and Class B common stock had been exchanged for Class A common stock, and we owned 100 % of the voting and economic interests in Greenlane through the holders’ ownership of Class A common stock. See “Note 9 - Stockholder’s Equity.” Reverse Stock Splits On June 2, 2023, we filed a Certificate of Amendment to the A&R Charter with the Secretary of State for the State of Delaware (“SSSD”), which effected a one-for-ten reverse stock split (the “2023 Reverse Stock Split” and together with the 2022 Reverse Stock Split, the “Reverse Stock Splits”) of our issued and outstanding shares of Common Stock at 5:01 PM Eastern Time on June 5, 2023. As a result of the 2023 Reverse Stock Split, every ten shares of common stock issued and outstanding were converted into one share of common stock. We paid cash in lieu of fractional shares, and accordingly, no fractional shares were issued in connection with the 2023 Reverse Stock Split. On 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. The Reverse Stock Splits did not change the par value of the Common Stock or the authorized number of shares of Common Stock. All outstanding options, restricted stock awards, warrants and other securities entitling their holders to purchase or otherwise receive shares of our Common Stock have been adjusted as a result of the Reverse Stock Splits, as required by the terms of each security. The number of shares available to be awarded under our Amended and Restated 2019 Equity Incentive Plan have also been appropriately adjusted. See “Note 10 — Compensation Plans” for more information. All share and per share amounts in these consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Splits, including reclassifying an amount equal to the reduction in par value of Common Stock to additional paid-in capital. Liquidity and Going Concern Pursuant to ASC 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”), management must evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these condensed consolidated financial statements are issued. In accordance with ASC 205-40, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern. Our primary requirements for liquidity and capital are working capital, debt service related to recent acquisitions and general corporate needs. Our primary sources of liquidity are our cash on hand and the cash flow that we generate from our operations, as well as proceeds from other equity issuances. We 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 and capital expenditure requirements, as well as our debt repayments and other liquidity requirements associated with our existing operations, for the next 12 months. 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. This is evident from our continued efforts to raise capital and leverage external funding to fulfil our capital needs. 9 ATM Program and Shelf Registration Statement We formerly used a shelf registration statement on Form S-3 (the “Shelf Registr ation Statement”) to conduct securities offerings from time to time in order to meet our liquidity needs. In August 2021, we filed a prospectus supplement and established an “at-the-market” equity offering program (the “ATM Program”) that provided for the sale of shares of our Class A common stock having an aggregate offering price of up to $ 50 million, from time to time. Since the launch of the ATM program in August 2021 and through December 31, 2022, we sold shares of our Class A common stock which generated gross proceeds of approximately $ 12.7 million and we paid fees to the sales agent of approximately $ 0.4 million. Due to the untimely filing of certain of our Quarterly and Annual Reports, we are unable to issue additional shares of Class A common stock pursuant to the ATM Program or otherwise use the Shelf Registration Statement, which will limit our liquidity options in the capital markets. Common Stock and Warrant Offerings. On June 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. See “Note 9 – Stockholders’ Equity” for further information. On 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 units. 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. Asset-Based Loan On August 9, 2022, we entered into an asset-based loan agreement dated as of August 8, 2022 (the “Loan Agreement”), which made available to the Company a term loan of up to $ 15.0 million. On February 9, 2023, we entered into Amendment No. 2 to the Loan Agreement, in which we agreed to, among other things, voluntarily prepay approximately $ 6.6 million (inclusive of early termination fees and expenses) under the terms provided for under the Loan Agreement and the lenders under the Loan Agreement agreed to release $ 5.7 million in funds held in a blocked account pursuant to the terms of the Loan Agreement. On August 7, 2023, we repaid the approximately $ 4.3 million in aggregate principal amount (the “Loan Repayment”) which remained outstanding under the terms of the Loan Agreement. As a result of the Loan Repayment, the Company has been released from its obligations under the Loan Agreement, in accordance with the terms of the Loan Agreement. See “Note 6 - Long Term Debt” for more information. 10 ERC Sale On February 16, 2023, two of our wholly owned subsidiaries, Warehouse Goods LLC and Kim International LLC, entered into an agreement with a third-party institutional investor pursuant to which the investor purchased, for approximately $ 4.9 million in cash, an economic participation interest, at a discount, in our rights to payment from the United States Internal Revenue Service for certain periods with respect to the employee retention credits filed by us under the Employee Retention Credit program. Future Receivables Financing In July, August, October, and November 2023, the Company received an aggregate of approximately $ 3.9 million in cash pursuant to the terms of future receivables financings (collectively, the “Future Receivables Financings”) entered into with two private lenders. At September 30, 2024, $ 4.6 million of such financing remained outstanding. See “Note 6 - Long Term Debt” for more information. Secured Bridge Loan On September 22, 2023, the Company entered into a secured loan pursuant to a Loan and Security Agreement (the “September 2023 Loan Agreement”), dated as of September 22, 2023 with Synergy Imports, LLC (the “Secured Bridge Loan Lender”). Pursuant to the September 2023 Loan Agreement, the Secured Bridge Loan Lender agreed to make available to the Company a six -month bridge loan of $ 2.2 million in new funds. Additionally, the Secured Bridge Loan Lender agreed to defer payments totaling $ 2,028,604 already owed by the Company under existing payment obligations and potentially defer up to an additional $ 2,655,778 which may become due pursuant to existing agreements during the term of the September 2023 Loan Agreement. Subject to certain exceptions, the Company agreed to pledge all of its assets, with the exception of deposit accounts and accounts receivable, as collateral. Additionally, the Company agreed to transfer one US patent and two related foreign patents and a related trademark in exchange for an exclusive license back of such assets in the area of smoking products and accessories in connection with the September 2023 Loan Agreement. In May 2024, the Company modified its debt agreement with Synergy to reduce the principal balance due by $ 2.7 million from $ 5.1 million as part of the Loan Modification Agreement concurrent with the Asset Purchase Agreement. Synergy acquired certain assets from the Company in exchange for the reduction in overall principal owed. At September 30, 2024, $ 2.7 million of such financing remained outstanding. See “Note 6 - Long Term Debt” for more information. Note Payable On June 7, 2024, the Company entered into a subscription agreement with Cobra Alternative Capital Strategies, LLC. As of September 30, 2024, the Company has been loaned $ 3.1 million with net cash proceeds of $ 2.6 million. 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. During the three months ended September 30, 2024, the Company repaid $ 2.1 million and the remaining outstanding balance was approximately $ 1.0 million. The Company has elected to measure these notes using the fair value option under ASC 825, Financial Instruments. Given the short-term duration of the notes, the carrying value of the notes at September 30, 2024 approximate the fair value and as such no fair value adjustment was recorded in the statement of operations. Management Initiatives We have completed several initiatives to optimize our working capital requirements due to our inability to access capital markets on equitable terms and stock-outs and shortages of higher velocity inventory. In the fourth quarter of 2022, we launched Groove, a new, innovative Greenlane Brands product line, and we also rationalized and improved our third-party brands product offering, which enabled us to reduce inventory carrying costs and working capital requirements while increasing our offerings. In April 2023, we entered into two strategic 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. We have successfully renegotiated many of our vendor and supplier partnership terms and are continuing to improve working capital arrangements with our vendors and suppliers. We have made progress consolidating and streamlining our office, warehouse, and distribution operations footprint. We have reduced our workforce significantly to reduce costs and align with our revenue projections. The Company has incurred net losses of $ 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 and 2023, cash (used in) provided by operating activities were $ ( 5.2 ) million and $ 1.2 million, respectively. The recent macroeconomic environment has caused weaker demand than contemplated under the Company’s business plan, resulting in a reduction in projected revenue and cash flows for the twelve-month period included in the going concern evaluation. 11 As a result of our losses and our projected cash needs, combined with our current liquidity level, substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next twelve months to improve the Company’s liquidity and profitability, which includes, without limitation: ■ Further reducing operating costs expense by taking additional restructuring actions to align cost with revenue to achieve profitability. ■ Increasing revenue by introducing new products, acquiring new customers, and enhancing our sales force ■ Execute on strategic partnerships accretive to margins and operating cash ■ Seeking additional capital through the issuance of debt or equity securities. The unaudited condensed consolidated financial statements do not include any adjustments that may result from the outcome of this going concern uncertainty. For a more complete description of our initiatives, see the Management Discussion and Analysis. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2023. The condensed consolidated results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024, or any other future annual or interim period. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments necessary for a fair statement of the Company’s financial position and operating results. Certain reclassifications have been made to prior year amounts or balances to conform to the presentation adopted in the current year. Principles of Consolidation Our condensed consolidated financial statements include our accounts, the accounts of the Operating Company, and the accounts of the Operating Company’s consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 12 Use of Estimates Conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts in our consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. U.S. GAAP requires us to make estimates and judgments in several areas. Such areas include, but are not limited to the following: the collectability of accounts receivable; the allowance for slow-moving or obsolete inventory; the realizability of deferred tax assets; the fair value of contingent consideration arrangements; the useful lives property and equipment; the calculation of our VAT taxes receivable and VAT taxes, fines, and penalties payable; our loss contingencies, including our TRA liability; and the valuation and assumptions underlying equity-based compensation. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. The actual results could differ materially from those estimates. Segment Reporting We manage our global business operations through our operating and reportable business segments. As of September 30, 2024, we determined that we have one remaining and reportable operating business segment. Our reportable segment has been identified based on how our chief operating decision maker (“CODM”), which is a committee comprised of our Chief Executive Officer (“CEO”) and our Chief Financial and Legal Officer (“CFO”), manages our business, makes resource allocation and operating decisions, and evaluates operating performance. Revenue Recognition Revenue is recognized when customers obtain control of goods and services promised by us. Revenue is measured based on the amount of consideration that we expect to receive in exchange for those goods or services, reduced by promotional discounts and estimates for return allowances and refunds. Taxes collected from customers for remittance to governmental authorities are excluded from net sales. We generate revenue primarily from the sale of finished products to customers, whereby each product unit represents a single performance obligation. We recognize revenue from product sales when the customer has obtained control of the products, which is either at point of sale or delivery to the customer, depending upon the specific terms and conditions of the arrangement, or at the point of sale for our retail store sales. We provide no warranty on products sold. Product warranty is provided by the manufacturers. For certain product offerings such as child-resistant packaging, closed-system vaporization solutions and custom-branded retail products, we may receive a deposit from the customer (generally 25 % - 50 % of the total order cost, but the amount can vary by customer contract) when an order is placed by a customer. We typically complete these orders within one to six months from the date of order, depending on the complexity of the customization and the size of the order, but the completion timeline can vary by product type and terms of sales with each customer. See “Note 8—Supplemental Financial Statement Information” for a summary of changes to our customer deposits liability balance during the nine months ended September 30, 2024 and the year ended December 31, 2023. We estimate product returns based on historical experience and record them as a refund liability that reduces the net sales for the period. We analyze actual historical returns, current economic trends and changes in order volume when evaluating the adequacy of our sales returns allowance in any reporting period. Our liability for returns, which is included within “Accrued expenses and other current liabilities” in our consolidated balance sheet, was approximately $ 0.1 million December 31, 2023. There were no liabilities related to refunds as of September 30, 2024. We elected to account for shipping and handling expenses that occur after the customer has obtained control of products as a fulfillment activity in cost of sales. Shipping and handling fees charged to customers are included in net sales upon completion of our performance obligations. We apply the practical expedient provided for by the applicable revenue recognition guidance by not adjusting the transaction price for significant financing components for periods less than one year. We also apply the practical expedient provided by the applicable revenue recognition guidance based upon which we generally expense sales commissions when incurred because the amortization period is one year or less. Sales commissions are recorded within “Salaries, benefits and payroll tax expenses” in the consolidated statements of operations and comprehensive loss. The Company transitioned to a commission revenue model for the majority of the sales for the Industrial segment. The company operates as a sales agent servicing vape customers and receives a commission for these services. The company was previously working directly with these customers and recognizing gross revenue versus straight commission revenue. The Company recognizes this fee on a periodic basis when the products have been shipped for the end consumer. In working with their partner, the Company is not responsible for fulfilling a promise to provide the specified goods, does not establish the pricing with its partners customers, and does not have control over the goods that will be shipped. As such, the Company is an agent and recognizes its revenue on a net basis for its service. The partner company pays Greenlane a negotiated percentage-based fee on a quarterly basis. Two customer s represented approximately 36 % and 27 % , respectively, of net sales for the three months ended September 30, 2024. Two customers represented approximately 16 % and 16 %, respectively, of net sales for the nine months ended September 30, 2024. For the three and nine months ended September 30, 2023, one customer represented approximately 13 % and 28 % of net sales. As of September 30, 2024 and December 31, 2023, the Company has a concentration of credit risk with its accounts receivable balance as one customer represented approximately 15 % and 31 %, respectively, of accounts receivable. 13 Value Added Taxes During the third quarter of 2020, as part of a global tax strategy review, we determined that our European subsidiaries based in the Netherlands, which we acquired on September 30, 2019, had historically collected and remitted value added tax (“VAT”) payments, which related to direct-to-consumer sales to other European Union (“EU”) member states, directly to the Dutch tax authorities. In connection with our subsidiaries’ payment of VAT to Dutch tax authorities rather than other EU member states, we may become subject to civil or criminal enforcement actions in certain EU jurisdictions, which could result in penalties. We performed an analysis of the VAT overpayments to the Dutch tax authorities, which we expected to be refunded to us, and VAT payable to other EU member states, including potential fines and penalties. Based on this analysis, we recorded VAT payable of approximately $ 0.6 and $ 0.4 million, respectively, relating to this matter within “Accrued expenses and other current liabilities” in our condensed consolidated balance sheets as of September 30 , 2024 and December 31, 2023. Pursuant to the purchase and sale agreement by which we acquired our European subsidiaries, the sellers are required to indemnify us against certain specified matters and losses, including any and all liabilities, claims, penalties and costs incurred or sustained by us in connection with non-compliance with tax laws in relation to activities of the sellers. The indemnity (or indemnification receivable) is limited to an amount equal to the purchase price under the purchase and sale agreement. As noted above, we have voluntarily disclosed VAT owed to several relevant tax authorities in the EU member states and believe in doing so we will reduce our liability for penalties and interest. Nonetheless, we may incur expenses in future periods related to such matters, including litigation costs and other expenses to defend our position. The outcome of such matters is inherently unpredictable and subject to significant uncertainties. Refer to “Note 7—Commitments and Contingencies” for additional discussion regarding our contingencies. Recently Issued Accounting Guidance Not Yet Adopted In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , which clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security’s unit of account. This standard is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard. In November 2023, the FASB issued ASU No. 2023-07 , Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update require public companies to disclose on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. In addition, the amendment requires that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required in interim periods and require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statements and related disclosures. This amendment will go into effect for the fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) : Improvements To Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. 14 The amendments in this Update require that entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). In addition, public business entities are required to provide certain qualitative disclosure about the rate reconciliation. The amendments in this Update require that all entities disclose on an annual basis the amount of income taxes paid (net of refunds received) disaggregated (1) by federal (national), state, and foreign taxes and (2) by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). This Update also includes certain other amendments to improve the effectiveness of income tax disclosures, such as requiring that all entities disclose the following information: 1. Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign. 2. Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The amendments in this ASU require a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets) as of the beginning of the annual reporting period in which an entity adopts the amendments. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures. This amendment will go into effect for annual periods beginning after December 15, 2024. NOTE 3. BUSINESS ACQUISITIONS AND DISPOSITIONS EU Subsidiary Purchase Agreement In May 2024, the Company entered into an agreement with a group of individuals to sell 100 % equity interests of one of the Company’s wholly-owned subsidiaries, Shavita B.V. and substantially all of the assets of ARI Logistics B.V. As of the date that these financial statements were available to be issued, the close of the transaction is in dispute as there was pending consideration obligations due to be transferred to the Company not met, as well as other monetary obligations of the purchasers that remain unsatisfied. The Company intends to vigorously pursue its claims against Shavita and the purchaser group. The Company does not believe any circumstances arising from the ARI and Shavita transactions will have a material adverse effect on the Company, its financial condition or results of operations. NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS Assets and Liabilities that are Measured at Fair Value on a Recurring Basis The carrying amounts for certain of our financial instruments, including cash, accounts receivable, accounts payable and certain accrued expenses and other assets and liabilities, approximate fair value due to the short-term nature of these instruments. As of December 31, 2023, we had contingent consideration that is required to be measured at fair value on a recurring basis. SCHEDULE OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS Our financial instruments measured at fair value on a recurring basis were as follows at the dates indicated: (in thousands) Level 1 Level 2 Level 3 Total Condensed Consolidated Balance Sheet Caption Fair Value at December 31, 2023 (in thousands) Level 1 Level 2 Level 3 Total Liabilities: Contingent consideration - current Accrued expenses and other current liabilities $ — $ — 1,500 1,500 Total Liabilities $ — $ — $ 1,500 $ 1,500 There were no transfers between Level 1 and Level 2 and no transfers to or from Level 3 of the fair value hierarchy during the three and nine months ended September 30 , 2024 and 2023, respectively. 15 Contingent Consideration Each period we revalue our contingent consideration obligations associated with business acquisitions to their fair value. We estimate the fair value of the Product Launch Contingent Payments using a form of the scenario-based method, which includes significant unobservable inputs such as management’s identification of probability-weighted outcomes and a risk-adjusted discount rate over the earn-out period. Significant increases or decreases in these inputs could result in a significantly lower or higher fair value measurement of the contingent consideration liability. Changes in the fair value of contingent consideration are included within “Other income (expense), net” in our condensed consolidated statements of operations and comprehensive loss. A reconciliation of our liabilities that are measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows: SCHEDULE OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS, UNOBSERVABLE INPUT RECONCILIATION (in thousands) Nine Months Ended September 30, 2024 Balance at December 31, 2023 $ 1,000 Cash payments for earned contingent consideration — Transfer to notes payable — Gain from fair value adjustments included in results of operations ( 1,000 ) Balance September 30, 2024 $ — (in thousands) Nine Months Ended September 30, 2023 Balance at December 31, 2022 $ 2,738 Beginning balance $ 2,738 Cash payments for earned contingent consideration ( 350 ) Transfer to notes payable ( 1,150 ) Loss (gain) from fair value adjustments included in results of operations 262 Balance at September 30, 2023 $ 1,500 Ending balance $ 1,500 Equity Securities Without a Readily Determinable Fair Value Our investment in equity securities without readily determinable fair value consist of ownership interests in Airgraft Inc., Sun Grown Packaging, LLC (“Sun Grown”) and Vapor Dosing Technologies, Inc. (“VIVA”). We determined that our ownership interests do not provide us with significant influence over the operations of these investments. Accordingly, we account for our investments in these entities as equity securities. 16 Airgraft Inc., Sun Grown, and VIVA are private entities and their equity securities do not have a readily determinable fair value. We elected to measure these securities under the measurement alternative election at cost minus impairment, if any, with adjustments through earnings for observable price changes in orderly transactions for the identical or similar investment of the same issuer. We acquired our investments in Sun Grown and VIVA as part of our merger with KushCo, which we completed in August 2021. We did not identify any fair value adjustments related to these equity securities during the three and nine months ended September 30 , 2024 and 2023, respectively. As of September 30 , 2024 and December 31, 2023, the carrying value of our investment in equity securities without a readily determinable fair value was approximately $ 1.9 million, respectively, included within “Other assets” in our condensed consolidated balance sheets. NOTE 5. LEASES Greenlane as a Lessee As of September 30 , 2024, we had facilities financed under operating leases consisting of warehouses and offices with lease term expirations between 2023 and 2027. Lease terms are generally three to seven years for warehouses and office space. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The following table provides details of our future minimum lease payments under operating lease liabilities recorded in our condensed consolidated balance sheet as of September 30 , 2024. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown. SCHEDULE OF LESSEE OPERATING LEASE LIABILITY MATURITY (in thousands) Operating Leases Remainder of 2024 $ 230 2025 942 2026 81 2027 — 2028 and thereafter — Total minimum lease payments $ 1,253 Less: imputed interest 41 Present value of minimum lease payments $ 1,212 Less: current portion 886 Long-term portion $ 326 Rent expense under operating leases was approximately $ 0.3 million and $ 0.8 million for the three and nine months ended September 30, 2024, respectively, and approximately $ 0.4 million and $ 1.5 million for the three and nine months ended September 30, 2023, respectively. The following expenses related to our operating leases were included in “general and administrative” expenses within our condensed consolidated statements of operations and comprehensive loss: SCHEDULE OF LEASE COST (in thousands) 2024 2023 For the nine months ended September 30, (in thousands) 2024 2023 Operating lease cost 685 1,474 Variable lease cost — 461 Total lease cost $ 685 $ 1,935 The table below presents lease-related terms and discount rates as of September 30 , 2024: Operating Leases Weighted average remaining lease terms 1.3 years Weighted average discount rate 2.3 % 17 NOTE 6. DEBT Our debt balance, excluding operating lease liabilities and finance lease liabilities, consisted of the following amounts at the dates indicated: SCHEDULE OF DEBT (in thousands) September 30, 2024 December 31, 2023 As of (in thousands) September 30, 2024 December 31, 2023 Future Receivables Financing $ 4,617 $ 2,174 Note payable 1,353 — Secured Bridge Loan 2,656 5,109 Total long term debt 8,626 7,283 Less unamortized debt issuance costs — — Less current portion of debt ( 8,626 ) ( 7,283 ) Debt, net, excluding operating and finance leases and liabilities $ — $ — Future Receivables Financings In July, August, October, and November 2023, the Company received an aggregate of approximately $ 3.9 million in cash pursuant to the terms of future receivables financings (collectively, the “Future Receivables Financings”) entered into with two private lenders. The Company will make weekly payments under the Future Receivables Financings and is scheduled to repay the amounts due under the Future Receivables Financings in full in approximately six to eight months . The total amount to be repaid under the initial Future Receivables Financings was approximately $ 4.5 million. In connection with the Future Receivables Financings, the Company granted the lenders security interests in Company’s accounts receivable equal to the amounts due thereunder, and in connection with any event of default, the lenders may file financing statements evidencing the security interests. During the nine months ended September 30, 2024, the Company’s financings were in a series of transactions refinanced as they were not able to make the proscribed monthly payments for the repayment of cash advances. As such the refinancings restructured the payment schedule and the total balance increased to $ 4.6 million which included deferred financing fees of approximately $ 2.8 million. Note Payable On June 7, 2024, the Company entered into a subscription agreement for a note payable with Cobra Alternative Capital Strategies, LLC. As of September 30, 2024, the Company had been loaned $ 3.1 million with net cash proceeds of $ 2.6 million, with an remaining balance due of $ 1.0 million. The note was issued with a 20 % original issue discount and is due in full on December 7, 2024 . Upon default, the note can be converted at a variable price equal to 30 % discount to the average daily volume weighted average price (“VWAP”) for the 20 trading days preceding the date of conversion. As of September 30, 2024, the note is not considered convertible. Secured Bridge Loan On September 22, 2023, the Company entered into a secured loan pursuant to a Loan and Security Agreement (the “September 2023 Loan Agreement”), dated as of September 22, 2023 with Synergy Imports, LLC (the “Secured Bridge Loan Lender” or “Synergy”). Pursuant to the September 2023 Loan Agreement, the Secured Bridge Loan Lender agreed to make available to the Company a six-month bridge loan of $ 2.2 million in new funds. Additionally, the Secured Bridge Loan Lender agreed to defer payments totaling $ 2,028,604 already owed by the Company under existing payment obligations and potentially defer up to an additional $ 2,655,778 which may become due pursuant to existing agreements during the term of the September 2023 Loan Agreement. Subject to certain exceptions, the Company agreed to pledge all of its assets, with the exception of deposit accounts and accounts receivable, as collateral. Additionally, the Company agreed to transfer one US patent and two related foreign patents and a related trademark in exchange for an exclusive license back of such assets in the area of smoking products and accessories in connection with the September 2023 Loan Agreement. 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. 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, $ 2.5 million of such financing remained outstanding. The updated date of maturity will be through the end of 2024. Future Minimum Principal Payments The following table summarizes future scheduled minimum principal payments of debt at September 30, 2024. Future debt principal payments are presented based upon the stated maturity dates in the respective debt agreement. SCHEDULE OF MATURITIES OF LONG-TERM DEBT (in thousands) Remainder 2024 2025 2026 2027 2028 Total Year Ending December 31, (in thousands) Remainder 2024 2025 2026 2027 2028 Total Future Receivables Financing $ 4,617 $ — $ — $ — $ — $ 4,617 Note payable 1,353 — — — — 1,353 Secured Bridge Loan 2,656 — — — — 2,656 Total $ 8,626 $ — $ — $ — $ — $ 8,626 18 NOTE 7. COMMITMENTS AND CONTINGENCIES Legal Proceedings In the ordinary course of business, we are involved in various legal proceedings involving a variety of matters. We do not believe there are any pending legal proceedings that will have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. We have not taken any reserves for litigation for the nine months ended September 30, 2024 and 2023, respectively. Other Contingencies We are potentially subject to claims related to various non-income taxes (such as sales, value added, consumption, and similar taxes) from various tax authorities, including in jurisdictions in which we already collect and remit such taxes. If the relevant taxing authorities were successfully to pursue these claims, we could be subject to significant additional tax liabilities. See “Note 5—Leases” for details of our future minimum lease payments under operating lease liabilities. See “Note 11—Incomes Taxes” for information regarding income tax contingencies. NOTE 8. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION ERC Sale As of December 31, 2022, we had recorded an Employee Retention Credit (“ERC”) receivable of $ 4.9 million within “Other current assets” on our consolidated balance sheets, and a corresponding amount was included in “Other income (expense), net” in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2022. On February 16, 2023, two of Greenlane Holdings, Inc.’s subsidiaries, Warehouse Goods LLC and KIM International LLC (collectively, the “Company”), entered into an agreement with a third-party institutional investor pursuant to which the investor purchased, for approximately $ 4.9 million in cash, an economic participation interest, at a discount, in all of the Company’s rights to payment from the United States Internal Revenue Service with respect to the employee retention credits filed by the Company under the ERC program. Other Current Assets The following table summarizes the composition of other current assets as of the dates indicated: SCHEDULE OF OTHER CURRENT ASSETS (in thousands) September 30, 2024 December 31, 2023 As of (in thousands) September 30, 2024 December 31, 2023 Other current assets: VAT refund receivable (Note 2) $ 224 $ 78 Prepaid expenses 109 1,207 Indemnification receivable, net 7 7 Customs bonds 1,122 1,229 Other 817 798 Other current assets $ 2,279 $ 3,319 19 Accrued Expenses and Other Current Liabilities The following table summarizes the composition of accrued expenses and other current liabilities as of the dates indicated: SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (in thousands) September 30, 2024 December 31, 2023 As of (in thousands) September 30, 2024 December 31, 2023 Accrued expenses and other current liabilities: VAT payable (including amounts related to VAT matter described in Note 2) $ 629 $ 313 Contingent consideration — 1,000 Accrued employee compensation 1,122 861 Accrued professional fees and other expenses 267 499 Refund liability (including accounts receivable credit balances) — 68 Sales tax payable 507 315 Accrued expenses and other current liabilities $ 2,525 $ 3,056 Customer Deposits For certain product offerings we may receive a deposit from the customer (generally 25 % - 50 % of the total order cost, but the amount can vary by customer contract), when an order is placed by a customer. We typically complete orders related to customer deposits within one to six months from the date of order, depending on the complexity of the customization and the size of the order, but the order completion timeline can vary by product type and terms of sale with each customer. Changes in our customer deposits liability balance during the nine months ended September 30, 2024 were as follows: SCHEDULE OF CHANGES IN CUSTOMER DEPOSIT LIABILITY (in thousands) Customer Deposits Balance as of December 31, 2023 $ 2,775 Increases due to deposits received, net of other adjustments — Customer Overpayments — Revenue recognized ( 1,520 ) Balance as of September 30, 2024 $ 1,255 Accumulated Other Comprehensive Income The components of accumulated other comprehensive income for the periods presented were as follows: SCHEDULE OF COMPONENTS OF ACCUMULATED COMPREHENSIVE INCOME LOSS (in thousands) Foreign Currency Translation Unrealized Gain or (Loss) on Derivative Instrument Total Balance at December 31, 2023 $ 245 $ — $ 245 Other comprehensive income 3 — 3 Less: Other comprehensive (income) loss attributable to non-controlling interest Balance at September 30, 2024 $ 248 $ — $ 248 (in thousands) Foreign Currency Translation Unrealized Gain or (Loss) on Derivative Instrument Total Balance at December 31, 2022 $ 55 $ — $ 55 Other comprehensive income (loss) 183 — 183 Less: Other comprehensive (income) loss attributable to non-controlling interest — — — Balance at September 30, 2023 $ 238 $ — $ 238 Supplier Concentration Our four largest vendors accounted for an aggregate of approximately 43.8 % and 18.2 % of our total purchases for the three and nine months ended September 30, 2024, respectively, and an aggregate of approximately 89.9 % and 82.2 % of our total purchases for the three and nine months ended September 30, 2023, respectively. 20 Related Party Transactions Nicholas Kovacevich, our former Chief Corporate Development Officer owns capital stock of Blum Holdings Inc. (“Blum”). Net sales to Blum totaled approximately $ 0.4 million for the year ended December 31, 2022. Total accounts receivable due from Blum were approximately $ 0.4 million as of September 30, 2024 and December 31, 2023, respectively. On February 8, 2023, we filed a lawsuit against Blum in Superior Court of California, Orange County, seeking to compel the repayment of Blum’s open balance due to us. As of the date of these financial statements were available to be issued, there has been a judgement received in favor of the Company. Three individuals who were employees of the Company at the time are principals in Synergy Imports, LLC the Lender on the Secured Bridge Loan taken out on September 22, 2023, however, none were executive officers or directors of the Company NOTE 9. STOCKHOLDERS’ EQUITY Shares of our Class A common stock have both voting interests and economic interests (i.e., the right to receive distributions or dividends, whether cash or stock, and proceeds upon dissolution, winding up or liquidation), while shares of our Class B common stock have voting interests but no economic interests. Each share of our Class A common stock, and except as otherwise required in the A&R Charter, the holders of Common Stock will vote together as a single class on all matters (or, if any holders of our preferred stock are entitled to vote together with the holders of Common Stock, as a single class with such holders of preferred stock). Effective June 5, 2023, we completed a one-for-10 reverse stock split (the “2023 Reverse Stock Split” and together with the 2022 Reverse Stock Split, the “Reverse Stock Splits”) of our issued and outstanding shares of Common Stock, as further described in “Note 2 - Summary of Significant Accounting Policies.” As a result of the 2023 Reverse Stock Split, every 10 shares of Common Stock issued and outstanding were converted into one share of Common Stock. We paid cash in lieu of fractional shares, and accordingly, no fractional shares were issued in connection with the 2023 Reverse Stock Split. On June 18, 2024, the Board unanimously approved and declared advisable, and recommended that our stockholders approve at a Special Meeting that took 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 Special Meeting granted 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. On 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, that became effective on August 5, 2024 at 12:01 AM Eastern Time, before the opening of trading on the Nasdaq. For additional information about the July 29, 2024 Special Meeting and the 2024 Reverse Stock Split, see the Company’s Definitive Proxy Statement filed with the SEC on June 28, 2024 and Form 8-K filed with the SEC on July 31, 2024. The Reverse Stock Splits did not change the par value of the Common Stock or the authorized number of shares of Common Stock. All share and per share amounts in these unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Splits, including reclassifying an amount equal to the reduction in par value of Common Stock to additional paid-in capital. Non-Controlling Interest As discussed in “Note 1—Business Operations and Organization”, we consolidate the financial results of the Operating Company in our consolidated financial statements and report a non-controlling interest related to the Common Units held by non-controlling interest holders. As of December 31, 2022, all Common Units of the Operating Company and Class B common stock had been exchanged for Class A common stock, and we owned 100.0 % of the economic interests in the Operating Company. The non-controlling interest in the accompanying consolidated statements of operations and comprehensive loss represents the portion of the net loss attributable to the economic interest in the Operating Company previously held by the non-controlling holders of Common Units calculated based on the weighted average non-controlling interests’ ownership during the periods presented. At-the-Market Equity Offering In August 2021, we established an “at-the-market” equity offering program (the “ATM Program”) that provides for the sale of shares of our Class A common stock having an aggregate offering price of up to $ 50 million, from time to time, through Cowen and Company, LLC (“Cowen”), as the sales agent. Net proceeds from sales of our shares of Class A common stock under the ATM Program are expected to be used for working capital and general corporate purposes. Sales of our Class A common stock under the ATM Program may be made by means of transactions that are deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act, including sales made directly on the Nasdaq Capital Market or sales made to or through a market maker or through an electronic communications network. We are under no obligation to offer and sell shares of our Class A common stock under the ATM Program. 21 Shares of our Class A common stock will be issued pursuant to our effective shelf registration statement on Form S-3 (File No. 333-257654), and a prospectus supplement relating to the Class A common stock that was filed with the Securities and Exchange Commission on April 18, 2022. Pursuant to Instruction I.B.6, in no event will the Company sell Class A common stock through the ATM Program with a value exceeding more than one-third of the Company’s “public float” (the market value of the Company’s Class A common stock and any other equity securities that it issues in the future that are held by non-affiliates) in any twelve-month period so long as the Company’s public float remains below $ 75.0 million. On April 18, 2022, we entered into Amendment No. 1 (the “ATM Amendment”) to the sales agreement dated August 2, 2022 with Cowen. The purpose of the Amendment was to add the limitations imposed on the ATM Program by Instruction I.B.6 to the sales agreement. At the time of our entry into the ATM Amendment, approximately $ 37.3 million in shares remained available for issuance under the ATM Program. Due to the untimely filing of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 we are unable to issue additional shares of Class A common stock pursuant to the ATM Program or otherwise use the Shelf Registration Statement for a period of 12 months, which will limit our liquidity options in the capital markets. The table below summarizes sales of our Class A common stock under the ATM program: SUMMARIZES SALES OF OUR CLASS A COMMON STOCK ($ in thousands) August 2021 (Inception) through September 30, 2024 Class A shares sold 8,842 Gross proceeds $ 12,684 Fees paid to sales agent $ 381 Net proceeds $ 12,303 Common Stock and Warrant Offerings July 2023 Offering On June 29, 2023, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an aggregate of 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 each consisted of one share of Class A common stock or a July 2023 Pre-Funded Warrant and two July 2023 Standard Warrants to purchase one share of our Class A common stock. The July 2023 units were offered pursuant to an effective Registration Statement on Form S-1. The July 2023 Standard Warrants are exercisable immediately at an exercise price equal to $ 1.05 per share of Class A common stock for a period of five years . Each July 2023 Pre-Funded Warrant is exercisable immediately with no expiration date for one share of Class A common stock at an exercise price of $ 0.0001 . The July 2023 Offering generated gross proceeds of approximately $ 4.3 million and net proceeds to the Company of approximately $ 3.8 million. As of the date of this Quarterly Report on Form 10-Q, all July 2023 Pre-Funded Warrants have been exercised, based upon which we issued additional shares of our Class A common stock, for de minimis net proceeds. In connection with the July 2023 Offering, the Company entered into privately negotiated agreements with holders participating in the offering to amend existing outstanding warrants to purchase up to 122,215 shares of Class A common stock that were previously issued in connection with the June 2022 and October 2022 Offerings at exercise prices per share of $ 50.00 and $ 9.00 , respectively, and expire on December 29, 2027 and November 1, 2029 , respectively (collectively, the “Prior Warrants”), effective upon the closing of the July 2023 Offering to reduce the exercise price of the Prior Warrants to $ 1.05 , the exercise price of the warrants to purchase shares of Class A common stock offered in the July 2023 Offering. All other terms of the Prior Warrants remained unchanged. August 2024 Private Placement On August 12, 2024, the Company entered into a securities purchase agreement with a single institutional investor pursuant to which we agreed to issue and sell an aggregate of 58,000 shares of our Class A common stock, pre-funded warrants to purchase up to 2,305,637 shares of our Class A common stock (the “August 2024 Pre-Funded Warrants”) and warrants to purchase up to 4,727,274 shares of our Class A common stock (the “August 2024 Standard Warrants”). 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 units. 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. As of September 30, 2024, there were 2,176,647 warrants that remained unexercised. Net Loss Per Share Basic net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive instruments. A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share of our Class A common stock is as follows (in thousands, except per share amounts): SCHEDULE OF EARNINGS PER SHARE BASIC AND DILUTED Three months ended September 30, Nine months ended September 30, (in thousands, except per share data) 2024 2023 2024 2023 Numerator: Net loss $ ( 3,757 ) $ ( 10,098 ) $ ( 8,882 ) $ ( 27,869 ) Less: Net income (loss) attributable to non-controlling interests — 19 ( 17 ) ( 27 ) Plus: Deemed Dividend on “October 2022 Standard Warrants” — ( 388 ) — ( 388 ) Net loss attributable to Class A common stockholders $ ( 3,757 ) $ ( 10,467 ) $ ( 8,899 ) $ ( 28,284 ) Denominator: Weighted average shares of Class A common stock outstanding 1,647 501 726 265 Net loss per share of Class A common stock - basic and diluted $ ( 2.28 ) $ ( 20.89 ) $ ( 12.26 ) $ ( 106.73 ) 22 As of September 30, 2024, there were 2,245,629 warrants that remained unexercised which we used in determining the weighted average shares outstanding. For the three and nine months ended September 30, 2024 and 2023, respectively, stock options and warrants to purchase Class A common stock were excluded from the weighted-average in the computation of diluted net loss per share of Class A common stock because the effect would have been anti-dilutive. NOTE 10. COMPENSATION PLANS Amended and Restated 2019 Equity Incentive Plan In April 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”). In August 2021, we adopted, and our shareholders approved, the Amended and Restated 2019 Equity Incentive Plan (the “Amended 2019 Plan”), which amends and restates the 2019 Plan in its entirety. At our 2022 Annual Meeting of Stockholders on August 4, 2022, stockholders approved the Second Amended and Restated 2019 Equity Incentive Plan (the “Second Amended 2019 Plan”) which, among other things, increased the number of shares of Class A common stock authorized for issuance under the Amended 2019 Plan. Following the effect of the Reverse Stock Splits, the total number of shares of Class A common stock authorized for issuance is 10,000 shares. The Second Amended 2019 Plan provides eligible participants with compensation opportunities in the form of cash and equity incentive awards. The Second Amended 2019 Plan is designed to enhance our ability to attract, retain and motivate our employees, directors, and executive officers, and incentivizes them to increase our long-term growth and equity value in alignment with the interests of our stockholders. On June 2, 2023, the Company’s stockholders approved a third amendment and restatement of the 2019 Plan (the “Third Amended Plan”). The Third Amended Plan, among other things, increases the number of shares of Class A common stock authorized for issuance under the Second Amended 2019 Plan by 19,078 shares to an aggregate of 29,078 shares. As of the date of this Quarterly Report on Form 10-Q, we have not filed a Registration Statement on Form S-8 with the Securities and Exchange Commission to register the additional shares authorized under the Third Amended Plan. Equity-Based Compensation Expense Equity-based compensation expense is included within “salaries, benefits and payroll taxes” in our condensed consolidated statements of operations and comprehensive loss. We recognized equity-based compensation expense as follows: SCHEDULE OF EQUITY BASED COMPENSATION EXPENSE (in thousands) 2024 2023 2024 2023 For the three months ended September 30, For the nine months ended September 30, (in thousands) 2024 2023 2024 2023 Stock options - Class A common stock $ — $ ( 77 ) $ — $ 2 Restricted shares - Class A common stock — 8 86 29 Total equity-based compensation expense $ — $ ( 69 ) $ 86 $ 31 As of September 30, 2024, there was no remaining unrecognized compensation expense. 23 NOTE 11. INCOME TAXES As a result of the IPO and the related transactions completed in April 2019, we owned a portion of the Common Units of the Operating Company, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, the Operating Company was generally not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by the Operating Company was passed through to and included in the taxable income or loss of its members, including Greenlane, on a pro-rata basis, in accordance with the terms of the Operating Agreement. The Operating Company was also subject to taxes in foreign jurisdictions. We are a corporation subject to U.S. federal income taxes, in addition to state and local income taxes, based on our share of the Operating Company’s pass-through taxable income. Effective on December 31, 2022, the Operating Company became wholly owned by us. As a result, the Operating Company’s tax status was converted from a partnership to a disregarded entity. Starting in 2023, 100% of the Operating Company’s U.S. income and expenses is included in our US and state tax returns. During the three and nine months ended September 30, 2024 and 2023, respectively, management performed an assessment of the realizability of our deferred tax assets based upon which management determined that it is not more likely than not that the results of operations will generate sufficient taxable income to realize portions of the net operating loss benefits. Consequently, we established a full valuation allowance against our deferred tax assets and reflected a carrying balance of $ 0 as of September 30, 2024 and December 31, 2023, respectively. In the event that management determines that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, an adjustment to the valuation allowance will be made, which would reduce December the provision for income taxes. Uncertain Tax Positions For the three and nine months ended September 30, 2024 and 2023, respectively, we did no t have any unrecognized tax benefits as a result of tax positions taken during a prior period or during the current period. No interest or penalties have been recorded as a result of tax uncertainties. The Company is subject to audit examination for federal and state purposes for the years 2019 – 2023. As of the date these financial statements were issued, there were not any ongoing income tax audits. Tax Receivable Agreement (TRA) We entered into the TRA with the Operating Company and each of the members (other than Greenlane Holdings, Inc.) that provides for the payment by the Operating Company to the members of 85 % of the amount of tax benefits, if any, that we may actually realize (or in some circumstances are deemed to realize) as a result of (i) increases in tax basis resulting from any future redemptions of Common Units as described in “Note 1—Business Operations and Organization” and (ii) certain other tax benefits attributable to payments made under the TRA. The annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits. The Operating Company expects to benefit from the remaining 15 % of any tax benefits that it may actually realize. The TRA payments are not conditioned upon any continued ownership interest in the Operating Company. The rights of each noncontrolling interest holder under the TRA are assignable to transferees of its interest in the Operating Company. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Operating Company generates each year and the applicable tax rate. As noted above, we evaluated the realizability of the deferred tax assets resulting from the IPO and the related transactions completed in April 2019 and established a full valuation allowance against those benefits. As a result, we determined that the amount or timing of payments to noncontrolling interest holders under the TRA are no longer probable or reasonably estimable. Based on this assessment, our TRA liability was $ 0 as of September 30, 2024 and December 31, 2023. If utilization of the deferred tax assets subject to the TRA becomes more likely than not in the future, we will record a liability related to the TRA, which would be recognized as expense within our condensed consolidated statements of operations and comprehensive (loss) income. During the three and nine months ended September 30, 2024 and 2023, respectively, we did not make any payments, inclusive of interest, to members of the Operating Company pursuant to the TRA. 24 NOTE 12. SUBSEQUENT EVENTS On October 29, 2024, the Company entered into an Exchange Agreement with its Senior Subordinated Lender, whereby the Company agreed to exchange an aggregate of $ 4,617,307 of debt originally owed to Agile Capital Funding LLC and Cedar Advance LLC in a 3(a)(9) exchange for new Senior Subordinated Notes in the principal amount of $ 4,000,000 due one year from issuance (the “Exchange Note”), reducing outstanding indebtedness by approximately $ 617,000 . The Exchange Note is convertible at the option of the holder at $ 3.17 per share. In connection with the Exchange, the Company issued an aggregate of 1,261,830 five year warrants with an exercise price of $ 3.04 per share (the “Exchange Warrants”). In addition, pursuant to the terms of the Exchange Agreement, the Company agreed to issue warrants to the Holders, with an initial exercise price of $ 3.04 , exercisable 180 days after issuance (the “Exchange Inducement Warrants”). The Exchange Inducement Warrants were issued to incentivize the holders to exercise some or all of their existing warrants originally issued on August 13, 2024 (the “Existing Warrants”) for cash, which existing warrants have an exercise price of $ 2.50 per share. The Exchange Inducement Warrants are initially exercisable for zero shares, but to the extent that the Holders exercise any of such Existing Warrants during the one-hundred sixty day inducement period, the Exchange Inducement Warrants will become exercisable on April 30, 2025 for 200 % of the number of Existing Warrants exercised for cash during such inducement period. Also, pursuant to the Exchange Agreement, the Senior Subordinated Lender agreed that it will exercise its Existing Warrants for cash prior to exercising any of its outstanding pre-funded warrants, contingent on the market price of the common stock being above $ 2.50 per share and certain other conditions. The above agreement will terminate upon the Company receiving certain cash proceeds and prepaying at least $ 2,250,000 of Cobra Alternative Capital Strategies LLC (“Cobra”) Notes. On October 29, 2024, the Company entered into the First Amendment to Amended and Restated Secured Promissory Note (the “Note Amendment”) with Cobra. Pursuant to the Note Amendment, Cobra agreed to extend the Maturity Date of its senior promissory note dated May 1, 2024, which is currently due. The new Maturity Date will be October 29, 2025 . In consideration for the extension, the Company (i) agreed to make such Notes convertible at the option of Cobra with a conversion price of $ 3.17 per share, (ii) agreed to prepay Cobra’s debt with 50 % of any money raised by the Company from warrant exercise proceeds and from capital raise transactions, and (iii) issued Cobra an aggregate of 500,000 five year warrants with an exercise price of $ 3.04 per share which are identical to the Exchange Warrants. 25