Greenlane Holdings, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes of Greenlane Holdings, Inc. and its consolidated subsidiaries (“Greenlane” and, collectively with the Operating Company and its consolidated subsidiaries, the “Company”, “we”, “us” and “our”) for the quarterly period ended September 30, 2025 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. for the year ended December 31, 2024, which are included in our Annual Report on Form 10-K. Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, , including statements regarding the gradual strategic alternative from the legacy distribution business, the digital-asset treasury strategy, expected proceeds, fair-value measurement of crypto assets, liquidity, and anticipated costs and timing. Forward-looking statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including those described under “Risk Factors” and elsewhere in this report. The Company undertakes no obligation to update forward-looking statements except as required by law. Many of the forward-looking statements are located in Part I, Item 2 of this Form 10-Q under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could” and similar expressions. Examples of forward-looking statements include, without limitation: ● statements regarding our growth and other strategies, results of operations or liquidity; ● statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance; ● statements regarding our industry; ● statements of management’s goals and objectives; ● statements regarding laws, regulations, and policies relevant to our business; ● projections of revenue, earnings, capital structure and other financial items; ● assumptions underlying statements regarding us or our business; and ● other similar expressions concerning matters that are not historical facts. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. 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, 2024 (the “2024 Annual Report”) and in other documents that we file from time to time with the Securities and Exchange Commission (the “SEC”). Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances, or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to, those listed below and those discussed in greater detail in Part I, Item 1A of the 2024 Annual Report under the heading “Risk Factors.” ● our strategy, outlook, and growth prospects; ● general economic trends, trends in the industry, and the competitive markets in which we operate; ● our ability to generate adequate cash from our existing business to support our growth; ● our ability to raise capital on favorable terms, or at all, to support the continued growth of the business, including high inflation and increasing interest rates; ● our dependence on, and our ability to establish and maintain business relationships with third-party suppliers and service suppliers, including vulnerability to third-party transportation risks; ● our ability to accurately estimate demand for our products and maintain appropriate levels of inventory; ● our ability to maintain or improve our operating margins and meet sales expectations; ● our ability to adapt to changes in consumer spending and general economic conditions; ● our ability to maintain consumer brand recognition and loyalty of our products; ● our ability to protect our intellectual property rights and use or license certain trademarks; ● our ability to successfully identify and complete strategic acquisitions and/or dispositions; ● our ability to address product defects and contamination of, or damage to, our products; ● our exposure to potential various claims, lawsuits, and administrative proceedings; ● our and our customers’ ability to establish or maintain banking relationships; ● the impact of governmental laws and regulations and the outcomes of regulatory or agency proceedings; ● fluctuations in U.S. federal, state, local, and foreign tax obligations and changes in tariffs; ● any unfavorable scientific studies on the long-term health risks of vaporizers, electronic cigarettes, or cannabis and hemp-derived products, including cannabidiol (“CBD”); ● failure of our information technology systems to support our current and growing business; ● our ability to prevent and recover from Internet security breaches; ● our sensitivity to global economic conditions and international trade issues; ● the onset of an economic recession in the United States or other countries, including the impact of the ongoing wars, and their impact on the economy generally; ● natural disasters, adverse weather conditions, operating hazards, environmental incidents and labor disputes; ● public health crises; ● the potential delisting of our Class A common stock from Nasdaq; ● increased costs as a result of being a public company; and ● our failure to maintain adequate internal controls over financial reporting. 26 Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Consequently, you should not place undue reliance on forward-looking statements. Overview Founded in 2005, Greenlane is a premier global platform for the development and distribution of premium cannabis accessories, vape devices, and lifestyle products. In addition, it serves specialty retailers, smoke shops, head shops, convenience stores, and consumers directly through its own proprietary web stores and large online marketplaces such as Amazon. Our Greenlane Brands include our more affordable product line – Groove, our premium smoke shop and ancillary product brand – Higher Standards, and our child-resistant packaging brand - Pollen Gear (the “Greenlane Brands”). In collaboration with our partner brands, Greenlane is strategically positioned to serve as a comprehensive one-stop shop for all buyers. We also have category-exclusive licenses for the premium Marley Natural branded products. The Greenlane Brands, along with a curated set of third-party products, are offered to customers through our proprietary, owned and operated e-commerce platforms which include Wholesale.Greenlane.com, Vapor.com, PuffItUp.com, HigherStandards.com, and MarleyNaturalShop.com. Additionally, our presence on popular e-commerce platforms such as Amazon, Etsy, and eBay enable us to reach customers directly, providing them with valuable resources and a seamless purchasing experience. We merchandise vaporizers, packaging, and other ancillary products in the United States, Canada, Europe, and Latin America. We distribute products to retailers through wholesale operations and distribute products to consumers through constantly evolving e-commerce activities. We operate our own distribution center in the United States, while also utilizing third-party logistics (“3PL”) locations in Canada. We made tremendous progress consolidating and streamlining our warehouse and distribution in 2023 and 2024, including the consolidations of our warehouse in Worcester, MA and 3PL location in Hebron, KY to our owned facility in Moreno Valley, California in 2023. Greenlane offers a full spectrum of products, positioning us to meet all our customers’ growing demands. We focus on serving consumers across wholesale, retail, and e-commerce operations—offering all of our Greenlane Brands, as well as ancillary products and accessories from select leading third-party brands such as Storz and Bickel, Grenco Science, PAX, Cookies, and more. Our direct-to-consumer channels form a central part of our growth strategy, especially as it relates to scaling our own portfolio of higher-margin proprietary owned brands. In addition we serve Cannabis Operators by providing ancillary products essential to their daily operations and growth, such as packaging and vaporization solutions, including our Greenlane Brand Pollen Gear. We have historically experienced only moderate seasonality in the direct-to-consumer side of our business, particularly during the fourth quarter. This coincides with Cyber Monday (the first Monday after Thanksgiving, when online retailers typically offer holiday discounts), and as our customers build up their inventories in anticipation of the holiday season. We also have related promotional marketing campaigns during this period. 27 Restructuring Activities The Company remains committed to minimizing losses and working capital needs by reducing or eliminating unprofitable activities. At Greenlane, we are intensely focused on making our business profitable and well-capitalized for long-term sustainability. Our key initiatives include: 1. Technology Enhancements: We remain fully committed to improving our technology, particularly our B2B and e-commerce platforms, to provide a seamless shopping experience for our wholesale and retail customers. 2. Facility Footprint Rationalization: In 2023 and 2024, we optimized our facilities footprint by reducing warehouse and office space while increasing operational efficiency and improving fulfillment practices. The Company continues to evaluate new opportunities. 3. Headcount Reduction: We have significantly reduced our headcount and associated salary expenses, focusing on maintaining a core group of key employees as we collectively right-size the business. 4. Inventory Management: In 2024, we implemented a new inventory management and lifecycle strategy that is focused on a quarterly turn and a regular review of inventory to avoid future write-offs. 5. Sales Force Upgrade: The Company recently initiated and recently completed a restructuring of its sales organization to better align people and responsibilities with the Company’s omnichannel sales strategy, including the addition of new and highly experienced leadership across the board to foster a return to growth and increased customer success at Greenlane. The new structure is designed to accelerate sales, improve customer experience, and increase efficiency throughout the sales process. 6. Product Innovation: We recently added several new product lines, including pet & wellness product lines, such as the Green Gruff, Safety Strips, and Swabtek lines. 7. Capital Investment: We continue to seek opportunities for securing investment capital to leverage our platform, increase availability and reduce stockouts of our high demand third-party brands, invest in marketing and sales, and improve our product offerings. Management believes that these initiatives will significantly reduce costs, help accelerate the Company’s path to profitability, support business growth, and allow the Company to reinvest capital into its highest demand and highest potential product lines. During 2024 and 2025, the Company received capital from various sources permitting it to right-size the business and position the company for growth. Such sources are described in greater detail in the Liquidity and Capital Resources Section of this report. 28 Recent Developments Private placement and liquidity On October 23, 2025, the Company closed a $110 million private placement consisting of cash subscriptions and crypto-denominated subscriptions in support of a Bera-focused treasury strategy. The closing delivered approximately $24.3 million of net cash proceeds and approximately $19.0 million of stablecoin proceeds, and resulted in holdings of approximately 54.2 million BERA as of October 23, 2025. These proceeds strengthen near-term liquidity while the Company pursues strategic alternatives for its legacy distribution business. The private placement included pre-funded warrants funded in cash and in crypto; the crypto-funded pre-funded warrants are exercisable into shares following stockholder approval. These post-quarter developments do not affect third-quarter results. For the full description of terms and instruments, see Note 13, “Subsequent Events,” and the Company’s Current Report on Form 8-K filed October 20, 2025. Digital asset treasury strategy and Bera treasury policy On October 23, 2025, the Board approved a treasury policy that designates Bera, the native digital asset of the Berachain network, as the principal asset in the Company’s corporate treasury reserve. The Board formed a Digital Assets Committee, chaired by Bruce Linton and including director Billy Levy, to oversee this policy, and appointed Benjamin Isenberg as Chief Investment Officer to manage the Bera strategy and related controls. The Company intends to accumulate and hold Bera as its principal digital asset; near-term plans do not include allocating treasury assets to other digital assets, which increases concentration risk. Governance and controls include a two-tier custody model (cold reserve with a small operational wallet), policy-based approvals with two-person release, allowlists, limits, recovery procedures, and expanded reporting aligned to public-company controls. The Audit Committee oversees related-party considerations and reviews policy compliance. The Digital Assets Committee charter authorizes, among other things: (i) review and approval of digital-asset strategy (including staking, validator, and limited decentralized-finance participation); (ii) monitoring of market and protocol developments; (iii) evaluation of partnerships and protocol changes; (iv) review of related-party matters; (v) oversight of internal controls and reporting for digital assets; (vi) risk oversight for market volatility, cybersecurity, and compliance; (vii) approval of wallet-access, segregation-of-duties, and operational thresholds; and (viii) validation of valuation methods and fair-value classifications. To manage price risk, the Company may selectively use hedging instruments such as options, swaps, or futures with institutional-grade counterparties, subject to availability and cost. The Company may engage in on-chain activities in a controlled manner, including staking, limited validator operations, and measured decentralized-finance participation, subject to legal, compliance, and control requirements. Beginning in the fourth quarter of 2025, in-scope crypto assets are measured at fair value with changes recognized in earnings under Accounting Standards Update 2023-08. Fair value measurement follows Accounting Standards Codification Topic 820, including principal-market determinations, pricing controls, and fair-value hierarchy disclosures. These requirements may introduce earnings volatility. A more detailed description of risks related to pricing volatility, custody, valuation, and regulation appears in Part II, Item 1A “Risk Factors.” Additional information about post-quarter activity and policy governance is provided in Note 13, “Subsequent Events,” and in the Company’s Current Report on Form 8-K filed October 20, 2025. Risk considerations Key risks include volatility in BERA prices, custody and operational risks, counterparty risk for stablecoins and protocols, regulatory changes, and potential dilution from warrant exercises associated with the offering. We have implemented controls to mitigate these risks; however, market conditions may cause results to differ from expectations. See Part II, Item 1A “Risk Factors”. Related-party considerations The Chief Investment Officer’s background and outside digital asset activities have been disclosed. Management has implemented segregation of duties, dual-authorization controls, and oversight through the Digital Assets Committee. The Company will monitor and disclose any material related-party transactions in future filings. Critical Accounting Estimates We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience, outside advice from parties believed to be experts in such matters, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. See “Note 2—Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for a description the significant accounting policies and methods used in the preparation of our consolidated financial statements. In December 2023, the FASB issued ASU 2023-08 (ASC 350-60) requiring in-scope crypto assets to be measured at fair value with changes in net income and presented separately, with enhanced disclosures under ASC 820. The standard is effective for fiscal years beginning after December 15, 2024, including interim periods. We adopted the standard effective January 1, 2025. The Company did not hold crypto assets as of September 30, 2025; therefore no crypto-related balances or results are recorded in Q3. Beginning in Q4 2025, we expect earnings volatility from fair-value changes and will provide ASC 820 hierarchy, valuation, and sensitivity disclosures, together with custody and pricing-control updates. Inventories Inventories, consisting of finished products, are primarily accounted for using the weighted-average method, and are valued at the lower of cost and net realizable value. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to customers or liquidations. Assumptions about the future disposition of inventory are inherently uncertain and changes in our estimates and assumptions may cause us to realize material write-downs in the future. 29 Income Taxes and TRA Liability We are a corporation subject to income taxes in the United States. Certain subsidiaries of the Operating Company are taxable separately from us. Our proportional share of the Operating Company’s subsidiaries’ provisions are included in our consolidated financial statements. As of December 31, 2022, we held all the outstanding Common Units in the Operating Company and are the sole member. As a result, in 2023, 100% of the Operating Company’s US and state income and expenses are now included in our US and state tax returns. Our deferred income tax assets and liabilities are computed for differences between the tax basis and financial statement amounts that will result in taxable or deductible amounts in the future. We compute deferred balances based on enacted tax laws and applicable rates for the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized for deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine we would be able to realize our deferred tax assets for which a valuation allowance had been recorded, then we would adjust the deferred tax asset valuation allowance, which would reduce our provision for income taxes. We evaluate the tax positions taken on income tax returns that remain open and positions expected to be taken on the current year tax returns to identify uncertain tax positions. Unrecognized tax benefits on uncertain tax positions are recorded on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is more than 50 percent likely to be realized is recognized. Interest and penalties related to unrecognized tax benefits are recorded in income tax benefit. We have no uncertain tax positions that qualify for inclusion in our consolidated financial statements. In addition to tax expenses, we may incur expenses related to our operations and may be required to make payments under the Tax Receivable Agreement (the “TRA”), which could be significant. Pursuant to the Greenlane Operating Agreement, Greenlane Holdings, LLC will generally make pro rata tax distributions to its members in an amount sufficient to fund all or part of their tax obligations with respect to the taxable income of Greenlane Holdings, LLC that is allocated to them and possibly in excess of such amount. Legal Contingencies In the ordinary course of business, we are involved in legal proceedings involving a variety of matters. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We evaluate the associated developments on a regular basis and accrue a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated. If we determine there is a reasonable possibility that we may incur a loss and the loss or range of loss can be estimated, we disclose the possible loss in the accompanying notes to the consolidated financial statements to the extent material. We review the developments in our contingencies that could affect the amount of the provisions that have been previously recorded, and the matters and related reasonably possible losses disclosed. We make adjustments to our provisions and changes to our disclosures accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. Significant judgment is required to determine both the probability of loss and the estimated amount of loss. The outcome of these matters is inherently uncertain. Therefore, if one or more legal proceedings were resolved against us for amounts in excess of management’s expectations, our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable, could be materially adversely affected. See “Note 7—Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for additional information regarding these contingencies. 30 Fair value measurement of crypto assets Beginning in Q4 2025, crypto assets within the scope of ASU 2023-08 are measured at fair value with changes recognized in earnings. Significant judgments include identification of the principal market, selection of pricing sources, fair value hierarchy classification, and controls over period-end pricing. The Company obtains observable prices from principal markets when available and uses alternative sources if principal market data are temporarily unavailable. The Company also prepares a roll-forward of significant crypto assets and performs daily to monthly reconciliations between wallet activity and the general ledger. Because crypto markets can be volatile and fragmented, different assumptions or market conditions could materially affect reported results. Recent Accounting Pronouncements See “Note 2—Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of our Form 10-K filed on March 21, 2025. Results of Operations The following table presents operating results for the three months ended September 30, 2025 and 2024: Three Months Ended September 30, % of Net sales Change 2025 2024 2025 2024 $ % Net sales $ 737 4,038 100 % 100 % $ (3,301 ) (82 )% Cost of sales 5,840 1,011 792 % 25 % 4,829 478 % Gross profit (loss) (5,103 ) 3,027 (692 )% 75 % (8,130 ) (269 )% Operating expenses: Salaries, benefits and payroll taxes 1,462 1,609 198 % 40 % (147 ) (9 )% General and administrative 1,956 1,771 265 % 44 % 185 10 % Restructuring expenses 492 — 67 % — % 492 100 % Depreciation and amortization 87 185 12 % 5 % (98 ) (53 )% Total operating expenses 3,997 3,565 542 % 88 % 432 (12 )% Loss from operations (9,100 ) (538 ) (1,235 )% (13 )% (8,562 ) (1,592 )% Other income (expense), net: Interest expense (2 ) (3,219 ) — % (80 )% 3,217 (100 )% Other income, net 169 — (23 )% — % 169 100 % Total other income (expense), net 167 ) (3,219 ) (23 )% (80 )% 3,386 (105 )% Loss before income taxes (8,933 ) (3,757 ) (1,212 )% (93 )% (5,176 ) (138 )% Provision for income taxes — — — % — % — — % Net loss (8,933 ) (3,757 ) (1,212 )% (93 )% (5,176 ) (138 )% 31 Consolidated Results of Operations Net Sales For the three months ended September 30, 2025, net sales were approximately $0.7 million, compared to approximately $4.0 million for the same period in 2024, representing a decrease of $3.3 million, or 82%. The recent reorganization of the sales team and the challenges of recruiting a stronger sales team in 2025 negatively impacted sales in the first half of the year. Cost of Sales and Gross Margin For the three months ended September 30, 2025, cost of sales increased by $4.8 million, or 478%, as compared to the same period in 2024. Management completed a comprehensive review of inventory aging and realizability in connection with the Company’s transition under the Bera initiative toward a capital-light, IP-driven operating model. As a result, the Company recorded a $5.0 million non-cash inventory reserve to reflect expected recoveries from legacy product lines. Gross margins decreased by 269% to (692)% for the three months ended September 30, 2025, compared to 75% for the same period in 2024. The decrease in gross margins can be attributed to write-offs of slow moving inventory. Salaries, Benefits and Payroll Taxes Salaries, benefits and payroll taxes expenses were approximately $1.5 million for the three months ended September 30, 2025, compared to $1.6 million for the same period in 2024. The decrease is related to the reduction in workforce to right-size the business and focus on profitability. As we continue to closely monitor the evolving business landscape, we remain focused on identifying cost-saving opportunities while delivering on our strategy to recruit, train, promote and retain the most talented and success-driven personnel in the industry. General and Administrative Expenses General and administrative expenses were approximately $2.0 million for the three months ended September 30, 2025, compared to $1.8 million for the same period in 2024. The increase is related increases in professional and outside services, facility expenses, outbound freight, other general and administrative, marketing and general insurance. Restructuring Expenses Restructuring and transformation costs were $0.5 million for the three months ended September 30, 2025, primarily related to personnel actions under the Company’s cost reduction strategy and the strategic transition to a crypto treasury model. Depreciation and Amortization Expense Depreciation and amortization expense were approximately $0.1 million for the three months ended September 30, 2025, compared to $0.2 million for the same period in 2024. Depreciation remained relatively constant as additions and deletions were insignificant. Other Income (Expense), Net Interest expense Interest expense decreased approximately $3.2 million for the three months ended September 30, 2025 compared to the same period in 2024. The decrease is primarily related to reduction in overall debt as all of the Company’s debt was repaid in February 2025. Other expense, net. Other income, net, increased by approximately $0.2 million for the three months ended September 30, 2025, compared to the same period in 2024. The change is primarily due miscellaneous income in the current year. Provision for (Benefit from) Income Taxes For the three months ended September 30, 2025 and 2024, respectively, the effective tax rate differed from the U.S. federal statutory tax rate of 21% primarily due to the Operating Company’s pass-through structure for U.S. income tax purposes, the relative mix in earnings and losses in the U.S. versus foreign tax jurisdictions, and the full valuation allowance against the deferred tax asset. 32 Consolidated Results of Operations Nine Months Ended September 30, % of Net sales Change 2025 2024 2025 2024 $ % Net sales $ 2,994 11,616 100 % 100 % $ (8,622 ) (74 )% Cost of sales 7,374 6,066 246 % 52 % 1,308 22 % Gross profit (loss) (4,380 ) 5,550 (146 )% 48 % (9,930 ) (179 )% Operating expenses: Salaries, benefits and payroll taxes 3,848 6,066 129 % 52 % (2,218 ) (37 )% General and administrative 6,550 6,864 219 % 59 % (314 ) (3 )% Restructuring expenses 492 — 16 % — 492 100 % Depreciation and amortization 394 635 13 % 65 % (241 ) (38 )% Total operating expenses 11,284 13,565 377 % 117 % (2,281 ) (17 )% Loss from operations (15,664 ) (8,015 ) (523 )% (69 )% (7,649 ) (95 )% Other income (expense), net: Interest expense (393 ) (4,030 ) (13 )% (35 )% 3,637 90 % Change in fair value of contingent consideration — 1,000 — % 9 % (1,000 ) 100 % Gain on extinguishment of debt — 2,166 — % 19 % (2,166 ) 100 % Other income, net 41 (3 ) 1 % (1 )% 45 1,500 % Total other income (expense), net (351 ) (867 ) (12 )% (7 )% 516 (60 )% Loss before income taxes (16,015 ) (8,882 ) (535 )% (76 )% (7,133 ) (80 )% Provision for income taxes — 17 — % — % (17 ) (100 )% Net loss (16,015 ) (8,865 ) (535 )% (76 )% (7,150 ) (81 )% Net Sales For the nine months ended September 30, 2025, net sales were approximately $3.0 million, compared to approximately $11.6 million for the same period in 2024, representing a decrease of $8.6 million, or 74%. The recent reorganization of the sales team and the challenges of recruiting a stronger sales team in 2025 negatively impacted sales in the first half of the year. Cost of Sales and Gross Margin For the nine months ended September 30, 2025, cost of sales increased by $1.3 million, or 22%, as compared to the same period in 2024. The increase was driven by the increase of supplier chain costs and the $5.0 million increase in inventory reserves. Management completed a comprehensive review of inventory aging and realizability in connection with the Company’s transition under the Bera initiative toward a capital-light, IP-driven operating model. As a result, the Company recorded a $5.0 million non-cash inventory reserve to reflect expected recoveries from legacy product lines. Gross margin declined from 48% to (146)%, a decrease of 194 percentage points, primarily due to the $5.0 million non-cash inventory reserve noted above. Salaries, Benefits and Payroll Taxes Salaries, benefits and payroll taxes expenses were approximately $3.8 million for the nine months ended September 30, 2025, compared to $6.1 million for the same period in 2024. The decrease is related to the reduction in workforce to right-size the business and focus on profitability. As we continue to closely monitor the evolving business landscape, we remain focused on identifying cost-saving opportunities while delivering on our strategy to recruit, train, promote and retain the most talented and success-driven personnel in the industry. General and Administrative Expenses General and administrative expenses were approximately $6.6 million for the nine months ended September 30, 2025, compared to $6.9 million for the same period in 2024. The decrease is related increases in professional and outside services, facility expenses, outbound freight, other general and administrative, marketing and general insurance. Restructuring Expenses Restructuring and transformation costs were $0.5 million for the nine months ended September 30, 2025, primarily related to personnel actions under the Company’s cost reduction strategy and the strategic transition to a crypto treasury model. Depreciation and Amortization Expense Depreciation and amortization expense were approximately $0.4 million for the nine months ended September 30, 2025, compared to $0.6 million for the same period in 2024. Depreciation remained relatively constant as additions and deletions were insignificant. Other Income (Expense), Net Interest expense Interest expense decreased approximately $3.6 million for the nine months ended September 30, 2025 compared to the same period in 2024. The decrease is primarily related to reduction in overall debt as all of the Company’s debt was repaid in February 2025. 33 Change in fair value of contingent consideration There was a change in fair value of contingent consideration of approximately none for the nine months ended September 30, 2025 compared to $1.0 million for the same period in 2024. the Company recorded a fair value change of $1.0 million associated with a reduction in earn outs for Eyce and DaVinci products. Gain on debt extinguishment There was a decrease in gain on debt extinguishment of approximately none for the nine months ended September 30, 2025, compared to $2.2 million for the same periods in 2024. 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. Other expense, net Other income, net, increased by approximately $0.1 million for the nine months ended September 30, 2025, compared to the same period in 2024. The change is primarily due miscellaneous income in the current year. Provision for (Benefit from) Income Taxes For the three months ended September 30, 2025 and 2024, respectively, the effective tax rate differed from the U.S. federal statutory tax rate of 21% primarily due to the Operating Company’s pass-through structure for U.S. income tax purposes, the relative mix in earnings and losses in the U.S. versus foreign tax jurisdictions, and the full valuation allowance against the deferred tax asset. Liquidity, Capital Resources and Going Concern Our primary requirements for liquidity and capital are working capital and general corporate needs. Our primary sources of liquidity are our cash on hand and the cash flow that we generate from our operations, as well as proceeds from equity issuances such as our July 2023, August 2024, and February 2025 Offerings, each as described and defined below. Liquidity overview At September 30, 2025, we had cash and cash equivalents of $1.8 million and no borrowings outstanding. After quarter end, we closed a private placement described in the Current Report on Form 8-K filed October 20, 2025. Net proceeds increased liquidity in cash and digital assets. See “Subsequent events” in Note 13 of this Form 10-Q and the Current Report on Form 8-K filed October 20, 2025 for offering terms and use of proceeds. We expect fair-value accounting for crypto assets to introduce variability beginning in Q4 2025; controls to manage liquidity include qualified custody, two-person approvals, and daily monitoring. Near-term priorities are executing the inventory monetization project, maintaining core capabilities that support the Board’s evaluation of strategic alternatives for the legacy distribution business and related assets, and advancing the Company’s digital-asset strategy and treasury operations. 34 ATM Program and Shelf Registration Statement We maintained a shelf registration on Form S-3 and an at-the-market equity program from August 2021 through December 31, 2022, under which we sold $12.7 million of Class A common stock and paid $0.4 million in agent fees. We made no at-the-market sales in 2024 or 2025. The prior shelf is not currently available; any future at-the-market activity would require a new Form S-3. This historical activity affects the prior-period liquidity discussion only and does not affect third-quarter 2025 results. Common Stock and Warrant Offerings On August 12, 2024, the Company entered into a securities purchase agreement with three different funds of a single institutional investor for aggregate gross cash proceeds of $6.5 million. In connection with the private placement, the Company issued an aggregate of 3,152 units and pre-funded units. The pre-funded units were sold at the same purchase price as the units, less the pre-funded warrant exercise price of $0.001. Each unit and pre-funded unit consisted 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 $1,875 per share. The common warrant was exercisable on the initial exercise date described in the common warrant and will expire 5.0 years from such date. 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 was convertible at the option of the holder at $2,378 per share. In connection with the Exchange, the Company issued an aggregate of 1,683 five-year warrants with an exercise price of $2,280 per share (the “Exchange Warrants”). The Exchange Note was repaid out of the proceeds of the February 2025 Offering. 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 $2,280, 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 $1.875 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 ninety-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. As part of the February 2025 Offering, the exercise price of these warrants was adjusted to $892.50 per share. 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. The Cobra Note was repaid out of the February 2025 Offering. On February 18, 2025, the Company entered into definitive agreements with institutional investors for the purchase and sale of approximately $25.0 million of shares of the Company’s Class A common stock (“Common Stock” and investor warrants at a price of $892.50 per Common Unit. The entire transaction was priced at the market under Nasdaq rules. 35 The offering consisted of the sale of Common Units (or Pre-Funded Units), each consisting of (i) one (1) share of Common Stock or one (1) Pre-Funded Warrant, (ii) one (1) Series A PIPE Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $1,115.63 (“Series A Warrant”) and (iii) one (1) Series B PIPE Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $2,231.25 (“Series B Warrant” and together with the Series A Warrant, the “Warrants”). The initial exercise price of each Series A Warrant is $1,115.63 per share of Common Stock. The Series A Warrants are exercisable following stockholder approval and expire five (5) years thereafter. The number of securities issuable under the Series A Warrant is subject to adjustment as described in more detail in the Series A Warrant. The initial exercise price of each Series B Warrant is $2,231.25 per share of Common Stock or pursuant to an alternative cashless exercise option. The Series B Warrants are exercisable following stockholder approval and expire two and one-half (2.5) years thereafter. The number of securities issuable under the Series B Warrant is subject to adjustment as described in the Series B Warrant. Also, on February 18, 2025, the Company entered into an Exchange Agreement with certain holders (the “Holders”) of three tranches of warrants to purchase Common Stock previously issued by the Company in August 2024 and October 2024. Under such Exchange Agreement, such Holders agreed to exchange with the Company such existing warrants for approximately 8,172 new warrants to purchase common stock, substantially in the form of the Series B Warrants. Accounts Receivable and Collectability Accounts receivable remained broadly consistent with December 31, 2024 despite reduced sales activity in the quarter. We monitor credit risk through weekly aging reviews; during periods of limited sales activity we perform targeted collectability assessments by customer and aging bucket, and we adjust the allowance for credit losses when facts and circumstances indicate heightened loss risk. We will update the allowance prospectively if the aging profile deteriorates or if specific collectability concerns arise. Notes Payable On June 7, 2024, the Company entered into a subscription agreement with Cobra Alternative Capital Strategies, LLC. As of December 31, 2024, the Company has been loaned $3.1 million with net cash proceeds of $2.6 million. On October 29, 2024, the Company entered into the First Amendment to Amended and Restated Secured Promissory Note (the “Note Amendment”) with Cobra Alternative Capital Strategies LLC (“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 $2,377.50 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 667 five-year warrants with an exercise price of $2,280 per share which are identical to the Exchange Warrants. The Note Amendment was repaid out of the February 2025 Private Placement. 36 Management Initiatives In an effort to minimize losses and working-capital needs, management is focusing on cost controls, simplifying operations, and monetizing legacy assets while the Board considers strategic alternatives for the legacy distribution business. Liquidity actions after quarter-end On October 23, 2025, the Company closed a private placement that provided approximately $24.3 million of net cash, approximately $19.0 million of stablecoin proceeds, and resulted in holdings of approximately 54.2 million BERA. These proceeds strengthen near-term liquidity and support the Company’s digital-asset treasury strategy. See “Subsequent events.” Inventory monetization and working-capital discipline Management is executing a structured monetization program to convert legacy inventory to cash, informed by recent recovery experience and market pricing. In the third quarter, the Company increased its inventory reserve by $5.0 million to reflect lower expected recovery on certain aged and discontinued items. Purchasing remains tightly controlled, and vendor terms and returns/allowances are being actively renegotiated to accelerate cash conversion. Operating cost reductions and footprint simplification Since mid-year, the Company has consolidated facilities, streamlined its e-commerce platforms, resized the sales organization, and reduced third-party spend. Additional reductions are underway to align the cost base with the smaller legacy footprint and the go-forward operating model. Commercial focus and brand support The Company launched on the Mainstem B2B marketplace and engaged Cannabis Creative Group to drive targeted acquisition and re-engagement of wholesale customers. During 2025, the Company also entered distribution arrangements with Greentank Technologies and ALD Group Limited and renewed focus on selective partner brands, including Green Gruff. Governance and controls for the digital-asset treasury In October 2025, the Board formed a Digital Assets Committee and approved a treasury policy that prioritizes BERA as the principal digital asset. Management is implementing two-tier custody, dual-authorization wallet controls, and expanded reporting to support public-company requirements. See “Risk Factors” and “Controls and Procedures.” Ongoing vendor and systems rationalization The Company continues to renegotiate supplier terms, consolidate technology tools, and evaluate a lower-cost finance system appropriate for a public company without warehouse operations, with the goal of reducing recurring systems expense and complexity. Results context We incurred net losses of $9.0 million and $16.1 million for the three and nine months ended September 30, 2025, respectively. Cash used in operating activities for the nine months ended September 30, 2025 was $11.8 million. The recent macroeconomic environment has pressured demand versus plan, reducing projected revenue and cash flows used in the going-concern evaluation. Outlook and plan Based on cash on hand (including the October 2025 private placement proceeds), expected cash generation from the inventory monetization program, and the cost-reduction initiatives described above, management currently believes the Company has sufficient liquidity to fund working-capital needs, capital expenditures, and scheduled obligations for at least the next 12 months. Execution risks remain, and the Company may seek additional capital depending on timing of monetization receipts, market conditions, and strategic opportunities. Planned actions over the next twelve months include, without limitation: ● further operating-expense reductions to align costs with the smaller legacy footprint; ● continued monetization of legacy inventory and improvements in vendor terms; ● focused commercial activity on profitable customers and products; ● disciplined execution of the digital-asset treasury policy with appropriate controls; and ● opportunistic capital raising if warranted by liquidity or strategy. Our opinions concerning liquidity are based on currently available information. To the extent this information proves to be inaccurate, or if circumstances change, future availability of trade credit or other sources of financing may be reduced and our liquidity could be adversely affected. Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section titled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024. Depending on the severity and direct impact of these factors on us, we may be unable to secure additional financing to meet our operating requirements on terms favorable to us, or at all. As of September 30, 2025, 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. 37 Cash Flows The following summary of cash flows for the periods indicated has been derived from our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q: Nine Months Ended September 30, (in thousands) 2025 2024 Net cash used in operating activities $ (11,802 ) $ (5,232 ) Net cash used in investing activities $ (75 ) $ (173 ) Net cash provided by financing activities $ 12,788 $ 7,248 Net Cash Used in Operating Activities During the nine months ended September 30, 2025, net cash used in operating activities of approximately $11.8 million consisted of (i) net loss of $16.0 million, offset by non-cash adjustments to net loss of approximately $1.4 million, and (ii) a $2.8 million overall decrease in working capital primarily driven by increases in accounts receivable offset by decreases in inventory, vendor deposits, other current assets, accounts payable and accrued expenses and customer deposits. During 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. Net Cash Used in Investing Activities During the nine months ended September 30, 2025, net cash used in investing activities of approximately $0.1 million consisted primarily of capital expenditures. During the nine months ended September 30, 2024, net cash used in investing activities of approximately $0.2 million consisted primarily of capital expenditures. Net Cash Provided by Financing Activities During the nine months ended September 30, 2025, net cash provided by financing activities of approximately $12.8 million primarily consisted of approximately $20.7 million in proceeds from our February 2025 private placement offset by $8.0 million in payments on our debt. 38 During 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. Critical Accounting Policies and Estimates See Note 2, “Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and Part II, Item 7, “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024 for descriptions of the significant accounting policies and methods used in the preparation of our Condensed Consolidated Financial Statements. There have been no material changes to the Company’s critical accounting estimates since the Form 10-K for the year ended December 31, 2024.