What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 293 added, 192 removed, 632 unchanged (43% of the section changed)

3 unchanged sentences

(in thousands, except par value per share amounts)

September 30,

2022 December 31,

2 unchanged sentences

Cash $ 8,039 $ 12,857

Accounts receivable, net of allowance of $ 2,318 and $ 1,285 at June 30, 2022 and December 31, 2021, respectively

Restricted cash 2,155 —

Accounts receivable, net of allowance of $ 4,275 and $ 1,285 at September 30, 2022 and December 31, 2021, respectively

11,805 14,690

1 unchanged sentence

Vendor deposits 9,167 18,475

Assets held for sale 8,813 75

Other current assets (Note 8) 7,360 11,733

10 unchanged sentences

Customer deposits 4,523 7,924

Current portion of notes payable, including $ 8,000 owed to related party

11,445 11,615

Current portion of liabilities held for sale 198 —

Current portion of notes payable, including $ 0 and $ 8,000 owed to related party as of September 30, 2022 and December 31, 2021, respectively (Note 6)

Current portion of operating leases 2,462 3,091

Total current liabilities 47,115 70,968

Notes payable, less current portion and debt issuance costs, net 1,284 10,607

Long-term liabilities held for sale 7,582 —

Notes payable, less current portion and debt issuance costs, net (Note 6) 13,488 10,607

Operating leases, less current portion 3,027 6,142

6 unchanged sentences

Class A common stock, $ 0.01 par value per share, 600,000 shares authorized;

6,079 shares issued and outstanding as of June 30, 2022;

7,470 shares issued and outstanding as of September 30, 2022;

4,260 shares issued and outstanding as of December 31, 2021*

Class B common stock, $ 0.0001 par value per share, 30,000 shares authorized;

1,059 shares issued and outstanding as of June 30, 2022;

148 shares issued and outstanding as of September 30, 2022;

1,087 shares issued and outstanding as of December 31, 2021*

Class C Common stock, $ 0.0001 par value per share, no shares authorized, issued and outstanding as of June 30, 2022 and December 31, 2021

Class C Common stock, $ 0.0001 par value per share, no shares authorized, issued and outstanding as of September 30, 2022 and December 31, 2021

Additional paid-in capital* 259,314 229,705

11 unchanged sentences

(in thousands, except per share amounts)

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

5 unchanged sentences

General and administrative 8,547 16,795 30,850 34,774

Goodwill and indefinite-lived intangibles impairment 66,760 — 66,760 —

Depreciation and amortization 2,124 1,199 6,876 2,385

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Balance June 30, 2022 6,079 62 1,059 — — — 249,191 ( 83,000 ) 291 15,851 182,395

Net loss — — — — — — — ( 75,109 ) — ( 4,106 ) ( 79,215 )

Equity-based compensation ( 15 ) ( 3 ) — — — — 178 — — 10 185

Issuance of Class A shares - Amended Eyce APA (Note 3) — — — — — — 206 — — — 206

Issuance of Class A shares - Prefunded warrants exercise (Note 9) 495 — — — — — — — — — —

Exchanges of noncontrolling interest for Class A common stock 911 9 ( 911 ) — — — 9,739 — — ( 9,748 ) —

VIBES disposition / deconsolidation (Note 3) — — — — — — — — — ( 1,789 ) ( 1,789 )

Other comprehensive income (loss) — — — — — — — — ( 238 ) — ( 238 )

Balance September 30, 2022 7,470 $ 68 148 $ — — $ — $ 259,314 $ ( 158,109 ) $ 53 $ 218 $ 101,544

* After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.

The accompanying notes are an integral part of these consolidated financial statements.

Common Stock Class B

23 unchanged sentences

Balance June 30, 2021 847 $ 8 123 $ — 70,301 $ 7 $ 49,117 $ ( 32,347 ) $ 143 $ 41,897 $ 58,825

Net loss — — — — — — — ( 16,281 ) — ( 12,434 ) ( 28,715 )

Equity-based compensation — — — — — — 2,036 — — 1,772 3,808

Exchanges of noncontrolling interest for Class A common stock 201 2 ( 201 ) — — — 5,368 — — ( 5,370 ) —

Exercise of Class A common stock options and warrants 299 3 — — — — 153 — — — 156

Conversion of Class C common stock — — 1,172 — ( 70,301 ) ( 7 ) 7 — — — —

Issuance of Class A common stock, net of costs 2,644 26 — — — — 166,187 — — — 166,213

Other comprehensive loss — — — — — — — — ( 51 ) ( 44 ) ( 95 )

Balance September 30, 2021 3,991 $ 39 1,094 $ — — $ — $ 222,868 $ ( 48,628 ) $ 92 $ 25,821 $ 200,192

* After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.

3 unchanged sentences

(in thousands)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

3 unchanged sentences

Equity-based compensation expense 2,020 4,762

Goodwill and indefinite-lived intangibles impairment charge 66,760 —

Change in fair value of contingent consideration ( 1,197 ) 755

1 unchanged sentence

Gain related to indemnification asset ( 2,018 ) ( 1,692 )

(Gain) loss on disposal of fixed assets 820 109

(Gain) loss on disposal of held-for-sale assets ( 780 ) 97

Gain related to VIBES disposition / deconsolidation (Note 3) ( 2,062 ) —

Unrealized loss on equity investments 1,214 305

Unrealized gain on interest rate swap contract ( 449 ) —

Realized (gain) loss on interest rate swap contract ( 408 ) —

Amortization of deferred financing costs and debt discount 446 15

Other ( 17 ) 7

10 unchanged sentences

Purchase consideration paid for acquisitions, net of cash acquired — ( 12,284 )

Proceeds from VIBES disposition (Note 3) 4,567 —

Purchases of property and equipment, net ( 1,660 ) ( 2,327 )

1 unchanged sentence

Purchase of intangible assets, net — ( 320 )

Net cash used in investing activities ( 1,197 ) ( 3,590 )

Net cash provided by (used in) investing activities 12,500 ( 14,256 )

Cash flows from financing activities:

Member distributions — ( 200 )

Proceeds from issuance of Class A common stock, net of costs 14,064 29,539

Payments on notes payable ( 1,974 ) —

Proceeds from exercise of stock options and warrants — 268

Proceeds from Asset-Based Loan 14,550 —

Debt issuance costs ( 1,472 ) ( 100 )

Payments on Eyce and DaVinci promissory notes ( 2,791 ) ( 294 )

Payments on Real Estate Note ( 7,958 ) ( 120 )

Repayment of Bridge Loan ( 8,000 ) —

Proceeds from termination of interest rate swap 145 —

Purchase consideration paid for Eyce LLC acquisition ( 875 ) —

Member distributions — ( 200 )

Other ( 128 ) ( 222 )

Net cash provided by (used in) financing activities 11,115 ( 292 )

Effects of exchange rate changes on cash 85 237

Net (decrease) in cash ( 3,727 ) ( 18,803 )

Cash, as of beginning of the period 12,857 30,435

Cash, as of end of the period $ 9,130 $ 11,632

Net cash provided by financing activities 7,535 28,871

Effects of exchange rate changes on cash and restricted cash ( 210 ) 193

Net (decrease) in cash and restricted cash ( 2,663 ) ( 17,220 )

Cash and restricted cash, as of beginning of the period 12,857 30,435

Cash and restricted cash, as of end of the period $ 10,194 $ 13,215

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GREENLANE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)

Reconciliation of cash and restricted cash to condensed consolidated balance sheets

Nine months ended September 30,

Beginning of the period

Cash $ 12,857 $ 30,435

Restricted cash — —

Total cash and restricted cash, beginning of period $ 12,857 $ 30,435

End of the period

Cash $ 8,039 $ 13,215

Restricted cash 2,155 —

Total cash and restricted cash, end of period $ 10,194 $ 13,215

Supplemental disclosures of cash flow information

2 unchanged sentences

Non-cash investing and financing activities:

Issuance of Class A common stock for business acquisitions $ 3,486 $ 2,005

Non-cash purchases of property and equipment $ 1,617 $ 381

Issuance of Class A common stock for business acquisitions $ 3,486 $ 125,496

Issuance of warrants and stock options for acquisition $ — $ 13,182

Issuance of promissory note for business acquisition $ — $ 2,503

1 unchanged sentence

Decrease in non-controlling interest as a result of exchanges for Class A common stock $ ( 10,291 ) $ ( 12,150 )

Decrease in non-controlling interest as a result of VIBES disposition $ ( 1,789 ) $ —

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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("KushCo") and have included the results of operations of KushCo in our consolidated statements of operations and comprehensive loss from that date forward.

As such, KushCo financial information is included in our condensed consolidated financial statements for the three and six months ended June 30, 2022, and is excluded from the comparative period in 2021.

As such, the KushCo financial information included in our condensed consolidated financial statements for the three and nine months ended September 30, 2021 is for the period commencing on August 31, 2021 (the date of the closing of the merger) through September 30, 2021.

Also, KushCo financial information is included in our condensed consolidated financial statements for the three and nine months ended September 30, 2022.

Immediately following the merger with KushCo, stockholders that held Class A common stock prior to the completion of the merger owned 51.9 % and former KushCo stockholders owned 48.1 % of the equity of the combined company on a fully diluted basis.

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Additionally, because the members 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 members with potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded.

In connection with our initial public offering, we entered into a Tax Receivable Agreement (the “TRA”) with the Operating Company and the Operating Company’s members (other than Greenlane Holdings, Inc.) and a Registration Rights (the “Registration Rights Agreement”) with the Operating Company’s members.

The TRA provides for the payment by us to the Operating Company’s members 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.

“Registration Rights Agreement”) with the Operating Company’s members.

The TRA provides for the payment by us to the Operating Company’s members 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.

The following table sets forth the economic and voting interests of our common stock holders as of June 30, 2022:

The following table sets forth the economic and voting interests of our common stock holders as of September 30, 2022:

Class of Common Stock (ownership) Total Shares (1)*

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*After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.

(1) Represents the total number of outstanding shares for each class of common stock as of June 30, 2022.

(1) Represents the total number of outstanding shares for each class of common stock as of September 30, 2022.

(2) Represents the number of shares of Class A common stock that would be outstanding assuming the exchange of all outstanding shares of Class B common stock upon redemption of all related Common Units.

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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, 2021.

The condensed consolidated results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or any other future annual or interim period.

The condensed consolidated results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or any other future annual or interim period.

Certain reclassifications have been made to prior year amounts or balances to conform to the presentation adopted in the current year.

2 unchanged sentences

All significant intercompany balances and transactions have been eliminated in consolidation.

Restricted Cash

Restricted cash represents principally cash reserves that are maintained pursuant to the governing agreement of the Asset-Based Loan discussed in "Note 6 - Debt."

Reverse Stock Split

7 unchanged sentences

All share and per share amounts in these unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of Common Stock to additional paid-in capital.

Our principal sources of liquidity at June 30, 2022 consisted of cash on hand, future cash anticipated to be generated from operations, the June 2022 Offering described in Note 9, and our ATM Program described below.

Our principal sources of liquidity at September 30, 2022 consisted of cash on hand, future cash anticipated to be generated from operations, the June 2022 Offering described in Note 9, the October 2022 Offering described in Note 13, and our ATM Program, each as described below.

We have an effective shelf registration statement on Form S-3 (the "Shelf Registration Statement") and may opportunistically conduct securities offerings from time to time in order to meet our liquidity needs.

2 unchanged sentences

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.

Since the launch of the ATM program in August 2021 and through June 30, 2022, we sold 972,624 shares of our Class A common stock under the ATM Program, which generated gross proceeds of approximately $ 12.7 million and paid fees to the sales agent of approximately $ 0.4 million.

Since the launch of the ATM program in August 2021 and through September 30, 2022, we sold 972,624 shares of our Class A common stock under the ATM Program, which generated gross proceeds of approximately $ 12.7 million and paid fees to the sales agent of approximately $ 0.4 million.

In connection with the filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Annual Report”) with the SEC on March 31, 2022, the ATM Program became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3 ("Instruction I.B.6") because our public float was less than $75 million.

2 unchanged sentences

The June 2022 Offering generated gross proceeds of approximately $ 5.4 million and net proceeds to the Company of approximately $ 5.0 million.

Following the completion of the June 2022 Offering, 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 time due to the requirements of Section 5635 of the rules of the Nasdaq Stock Market LLC (the "Nasdaq Exchange Cap"), which requires that stockholder approval be obtained before listed companies issue in excess of 20% of their outstanding common stock in certain transactions, which will limit our liquidity options in the capital markets.

Following the completion of the June 2022 Offering, 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 time due to the restrictions under Instruction I.B.6 to Form S-3, which will limit our liquidity options in the capital markets.

As described in "Note 6 - Debt," in December 2021, we entered into a Secured Promissory Note (the "December 2021 Note") which was subsequently amended on June 30, 2022 (the “First Amendment”) and on July 14, 2022 (the "Second Amendment" and together with the December 2021 Note and the First Amendment, the "Bridge Loan"), with Aaron LoCascio, the Company’s former President and co-founder and a member of the Board, which provided for a loan of $ 8.0 million originally maturing on June 30, 2022.

1 unchanged sentence

As a result, all obligations under the Bridge Loan have been satisfied.

We are in the process of establishing a payment plan (the “Payment Plan”) for the repayment of approximately $ 6.0 million in liabilities due to a third-party vendor (the “Vendor”) relating to previously purchased inventory.

In connection with our ongoing discussions with the Vendor, on July 18, 2022, we paid $ 1.0 million of the approximate $ 6.0 million balance due to the Vendor in cash and, during the period of July 26, 2022 through July 31, 2022, we returned approximately $ 1.3 million in inventory to the Vendor, which was accepted by the Vendor and will be credited against the remaining outstanding balance owed by us to the Vendor once the Vendor has confirmed the value of the returned inventory.

Currently, we expect to owe the Vendor approximately $ 3.5 million in remaining liabilities pending the Vendor’s confirmation of the value of the inventory returned to it.

We expect to enter into the Payment Plan to repay the remainder of the amount due to the Vendor in the amount of $ 200,000 in cash each week until the remainder of the liabilities due to the Vendor are repaid in full.

However, we can provide no assurances as to the timing of our entry into the Payment Plan, the final terms of the Payment Plan or that we will enter into the Payment Plan at all.

As described in "Note 13 - Subsequent Events," on July 19, 2022, Warehouse Goods LLC ("Warehouse Goods"), a wholly owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement and supporting documents (collectively, the “Sale Agreement”), to sell the Company’s 50 % stake in VIBES Holdings LLC for total consideration of $ 5.3 million in cash.

Also as described in "Note 13 - Subsequent Events," on August 9, 2022, we entered into an asset-based loan agreement dated as of August 8, 2022 (the “Loan Agreement”), which makes available to the Company a term loan of up to $ 15.0 million.

On July 19, 2022, Warehouse Goods LLC ("Warehouse Goods"), a wholly owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement and supporting documents (collectively, the “Sale Agreement”), to sell the Company’s 50 % stake in VIBES Holdings LLC for total consideration of $ 4.6 million in cash and on August 9, 2022, we entered into an asset-based loan agreement dated as of August 8, 2022 (the “Loan Agreement”), which makes available to the Company a term loan of up to $ 15.0 million.

On September 22, 2022 (the “Closing Date”), 1095 Broken Sound Pwky LLC (“1095 Broken Sound”), our wholly owned subsidiary, consummated the previously disclosed transactions contemplated by that certain Purchase and Sale Agreement, dated as of August 16, 2022, by and between 1095 Broken Sound and ASC Capital LLC (the “HQ Purchaser”) whereby 1095 Broken Sound agreed to sell a certain parcel of real estate including the our headquarters building to the HQ Purchaser for total consideration of $ 9.6 million in cash (collectively, the “HQ Transaction”).

On the Closing Date, the Company used the proceeds from the HQ Transaction to repay the remainder of the mortgage on the headquarters building in full.

The remaining proceeds will be used for general corporate purposes.

For more information on the HQ Transaction, see "Note 6 - Debt."

On October 13, 2022, we entered into a Settlement Agreement (the “Settlement Agreement”) with a third-party vendor (the “Vendor”) for the repayment of approximately $ 1.8 million in liabilities (collectively, the “Remaining Liabilities”) due to the Vendor relating to previously purchased inventory.

As previously disclosed and in connection with the our ongoing discussions with the Vendor, on July 18, 2022, we paid $ 1.0 million of the approximately $ 6.0 million balance due to the Vendor in cash and during the period of July 26, 2022 through July 31, 2022, returned approximately $ 1.1 million in inventory to the Vendor, which was accepted by the Vendor and was credited against the remaining outstanding balance owed by us to the Vendor.

The Settlement Agreement provides for a payment plan pursuant to which the we have agreed to repay the Remaining Liabilities in weekly installments commencing on October 14, 2022.

Pursuant to the terms of the Settlement Agreement, the Remaining Liabilities will be repaid in full on December 9, 2022.

On October 24, 2022, Warehouse Goods sold 38,839 shares of common stock of High Tide Inc.

("High Tide") (Nasdaq:

HITI) for total consideration of approximately $ 0.05 million.

On October 27, 2022, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an aggregate of 6,955,555 shares of our Class A common stock, pre-funded warrants to purchase up to 1,377,780 shares of our Class A common stock (the “October 2022 Pre-Funded Warrants”) and warrants to purchase up to 16,666,670 shares of our Class A common stock (the “October 2022 Standard Warrants” and, together with the October 2022 Pre-Funded Warrants, the “October 2022 Warrants”), in a public offering (the “October 2022 Offering”).

The shares of Class A common stock and October 2022 Warrants were sold in Units (the “October 2022 Units”), with each unit consisting of one share of Class A common stock or a October 2022 Pre-Funded Warrant and two October 2022 Standard Warrants to purchase one share of our Class A common stock.

The October 2022 Units were offered pursuant to our registration statement on Form S-1, which was declared effective by the Securities and Exchange Commission on October 27, 2022 (the "S-1 Registration Statement").

The October 2022 Standard Warrants are exercisable immediately at an exercise price equal to $ 0.90 per share of Class A common stock for a period of seven years .

Each October 2022 Pre-Funded Warrant is exercisable immediately with no expiration date for one share of Class A common stock at an exercise price of $ 0.0001 .

The October 2022 Offering generated gross proceeds of approximately $ 7.5 million and net proceeds to the Company of approximately $ 6.8 million.

For more information regarding the October 2022 Offering, please see "Note 13 - Subsequent Events."

On November 3, 2022, Merger Sub Gotham 2, LLC ("Merger Sub Gotham"), our wholly owned subsidiary, sold its interest in XS Financial Inc.

("XS Financial") to certain purchasers for total consideration of approximately $ 0.65 million, minus certain fees.

On the same day, we also entered into that certain Lease Termination Agreement, dated as of October 31, 2022 solely for reference purposes (the "Lease Termination Agreement"), by and between us and Warland Investments Company (the "Landlord"), which provided for the termination of our lease at 6261 Katella Avenue in Cypress, California (collectively, the "Lease Termination").

Pursuant to the terms of the Lease Termination Agreement, we agreed to pay a fee of approximately $ 0.46 million as an early termination fee in consideration for the Landlord agreeing to terminate all of our remaining obligations under the Cypress lease.

We expect the Lease Termination to result in approximately $ 1.7 million in savings, although we can provide no assurances as to the total amount of savings ultimately realized from the Lease Termination.

We believe that our cash on hand will 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 at least the next 12 months.

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We expect uncertainties around our key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic, including the possible resurgence of new strains.

Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our condensed consolidated financial statements.

Our estimates may change as new

events occur and additional information emerges, and such changes are recognized or disclosed in our condensed consolidated financial statements.

Valuation of Goodwill and Indefinite-Lived Intangible Assets

We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill to reporting units based on the expected benefit from the business combination.

Such valuations require management to make significant estimates and assumptions.

During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

We evaluate goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each year and at interim dates if indicators of impairment exist.

Goodwill is assessed for impairment at the reporting unit level.

Due to declines in the Company's stock price as well as changes to our estimates and assumptions of the expected future cash flows of our Consumer Goods and Industrial Goods reporting units, management concluded that a triggering event occurred in the third quarter of 2022, requiring a quantitative impairment test of our goodwill for both of our reporting units.

Based on this assessment, we concluded that the fair value of each of our two reporting units was below their respective carrying value.

Furthermore, we recorded an impairment charge related to our indefinite-lived intangible assets.

The following table presents impairment charges to goodwill and indefinite lived intangibles recognized during the three months ended September 30, 2022 based on the analysis described:

(in thousands) Industrial Goods Consumer Goods

Goodwill Indefinite-Lived Intangibles Goodwill Indefinite-Lived Intangibles

At December 31, 2021 $ 24,332 $ 29,500 $ 17,528 $ —

Impairment charge $ ( 24,332 ) $ ( 24,900 ) $ ( 17,528 ) $ —

As of September 30, 2022 $ — $ 4,600 $ — $ —

Voluntary Change in Accounting Principle

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GAAP, the change has been reflected in the condensed consolidated statements of operations and comprehensive loss through retrospective application as follows:

For the three months ended June 30, 2021 For the six months ended June 30, 2021

For the three months ended September 30, 2021 For the nine months ended September 30, 2021

(in thousands) Prior to Change Effect of Change As Adjusted Prior to Change Effect of Change As Adjusted

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

Our reportable segments have been identified based on how our chief operating decision maker ("CODM"), manages our business, makes resource allocation and operating decisions, and evaluates operating performance.

Our reportable segments have been identified based on how our chief operating decision maker ("CODM"), manages our business, makes resource allocation and operating

decisions, and evaluates operating performance.

Our CODM is our Chief Executive Officer ("CEO").

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Revenue Recognition

Revenue under bill-and-hold arrangements was $ 0 for the three and six months ended June 30, 2022, respectively, and $ 0.1 and $ 0.3 million for the three and six months ended June 30, 2021, respectively.

Revenue under bill-and-hold arrangements was $ 0 for the three and nine months ended September 30, 2022, respectively, and $ 0.2 million and $ 0.5 million for the three and nine months ended September 30, 2021, respectively.

Storage fees charged to customers for bill-and-hold arrangements are recognized as invoiced.

Such fees were not significant for the three and six months ended June 30, 2022 and 2021.

Our liability for returns, which is included within "Accrued expenses and other current liabilities" in our condensed consolidated balance sheets, was approximately $ 1.0 million as of June 30, 2022 and December 31, 2021, respectively.

The recoverable cost of merchandise estimated to be returned by customers, which is included within "Other current assets" in our condensed consolidated balance sheets, was approximately $ 0.2 million as of June 30, 2022 and December 31, 2021, respectively.

For the three and six months ended June 30, 2022, one customer represented approximately 21 % and 19 % of our net sales.

No single customer represented more than 3 % of our net sales for the three and six months ended June 30, 2021.

As of June 30, 2022, two customers represented approximately 23 %, and 12 % of accounts receivable, respectively.

Such fees were not significant for the three and nine months ended September 30, 2022 and 2021.

Our liability for returns, which is included within "Accrued expenses and other current liabilities" in our condensed consolidated balance sheets, was approximately $ 0.6 million and $ 1.0 million as of September 30, 2022 and December 31, 2021, respectively.

For the three and nine months ended September 30, 2022, one customer represented approximately 24 % and 20 % of our net sales.

No single customer represented more than 6 % of our net sales for the three and nine months ended September 30, 2021.

As of September 30, 2022, two customers represented approximately 21 %, and 10 % of accounts receivable, respectively.

As of December 31, 2021, two customers represented approximately 13 % and 11 % of accounts receivable, respectively.

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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 $ 0.9 million and $ 2.5 million relating to this matter within "Accrued expenses and other current liabilities" in our condensed consolidated balance sheet as of June 30, 2022 and December 31, 2021, respectively.

Based on this analysis, we recorded VAT payable of approximately $ 0.4 million and $ 2.5 million relating to this matter within "Accrued expenses and other current liabilities" in our condensed consolidated balance sheet as of September 30, 2022 and December 31, 2021, respectively.

Pursuant to the purchase and sale agreement by which we acquired our European subsidiaries, the sellers are required to indemnify us against certain specified matters and losses, including any and all liabilities, claims, penalties and costs incurred or sustained by us in connection with non-compliance with tax laws in relation to activities of the sellers.

The indemnity (or indemnification receivable) is limited to an amount equal to the purchase price under the purchase and sale agreement.

During the three and six months ended June 30, 2022, we recognized a gain of approximately $ 0 and $ 1.8 million, respectively, within "general and administrative expenses" in our condensed consolidated statements of operations and comprehensive loss, which represented the partial reversal of a charge previously recognized based on the difference between the VAT payable and the VAT receivable and indemnification asset, as the indemnification asset became probable of recovery based on the reduction in our previously estimated VAT liability for penalties and interest based on our voluntary disclosure to, and ongoing settlement with, the relevant tax authorities in the EU member states.

During the three and nine months ended September 30, 2022, we recognized a gain of approximately $ 0.2 million and $ 2.0 million, respectively, within "general and administrative expenses" in our condensed consolidated statements of operations and comprehensive loss, which represented the partial reversal of a charge previously recognized based on the difference between the VAT payable and the VAT receivable and indemnification asset, as the indemnification asset became probable of recovery based on the reduction in our previously estimated VAT liability for penalties and interest based on our voluntary disclosure to, and ongoing settlement with, the relevant tax authorities in the EU member states.

Management intends to pursue recovery of all additional losses from the sellers to the full extent of the indemnification provisions of the purchase and sale agreement, however, the collectability of such additional indemnification amounts may be subject to litigation and may be affected by the credit risk of indemnifying parties, and are therefore subject to significant uncertainties as to the amount and timing of recovery.

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The standard also amends the impairment model for available-for-sale securities and requires estimated credit losses to be recorded as allowances rather than as reductions to the amortized cost of the securities.

This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2022 for filers that are eligible to be smaller reporting companies under the SEC's definition.

This standard is effective for fiscal years, and interim periods within those years, beginning after

December 15, 2022 for filers that are eligible to be smaller reporting companies under the SEC's definition.

Early adoption is permitted.

We do not believe the adoption of this new guidance will have a material impact on our consolidated financial statements and disclosures.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform.

These amendments are not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022.

In January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848):

Scope , which clarified the scope and application of the original guidance.

2020-04 and ASU No.

2021-01 are effective as of March 12, 2020 through December 31, 2022 and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020.

We are still evaluating the impact these standards will have on our consolidated financial statements and related disclosures.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

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We are still assessing this standard’s impact on our consolidated financial statements.

BUSINESS ACQUISITIONS

BUSINESS ACQUISITIONS AND DISPOSITIONS

Supplemental Unaudited Pro Forma Financial Information

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On November 29, 2021, we acquired substantially all the assets of Organicix, LLC (d/b/a and hereinafter referred to as “DaVinci”), a leading developer and manufacturer of premium portable vaporizers.

The following table presents pro forma results for the three and six months ended June 30, 2022 and 2021 as if our acquisition of Eyce and DaVinci, along with the closing of the merger with KushCo, had occurred on January 1, 2021, and Eyce, DaVinci, and KushCo's results had been included in our consolidated results beginning on that date (in thousands):

For the three months ended June 30, For the six months ended June 30,

The following table presents pro forma results for the three and nine months ended September 30, 2022 and 2021 as if our acquisition of Eyce and DaVinci, along with the closing of the merger with KushCo, had occurred on January 1, 2021, and Eyce, DaVinci, and KushCo's results had been included in our consolidated results beginning on that date (in thousands):

For the three months ended September 30, For the nine months ended September 30,

2022 2021 2022 2021

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The transaction was accounted for separately from acquisition accounting for the Eyce business combination.

Specifically, we recorded a gain of approximately $ 0.3 million within "other income (expense), net" in our condensed consolidated statement of operations and comprehensive income for the three and six months ended June 30, 2022 to write-off the balance of the Eyce 2022 Contingent Payment.

Also, we recorded approximately $ 0.5 million in compensation expense related to the Amended 2022 Contingent Payment within "salaries, benefits and payroll taxes" in our condensed consolidated statement of operations and comprehensive income for the three and six months ended June 30, 2022.

Specifically, we recorded a gain of approximately $ 0 and $ 0.3 million, respectively, within "other income (expense), net" in our condensed consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2022 to write-off the balance of the Eyce 2022 Contingent Payment.

Also, we recorded approximately $ 0.4 million and $ 0.9 million, respectively, in compensation expense related to the Amended 2022 Contingent Payment within "salaries, benefits and payroll taxes" in our condensed consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2022.

On July 19, 2022, Warehouse Goods entered into the Sale Agreement with Portofino to sell the Company’s 50 % stake in VIBES Holdings LLC for total consideration of $ 4.6 million in cash.

The transactions contemplated by the Sale Agreement were completed on July 19, 2022, immediately following the signing of the Sale Agreement.

In conjunction with and as a result of the disposition of and deconsolidation of our interest in VIBES Holdings LLC, we recorded a gain of $ 2.0 million for the three months ended September 30, 2022, which is included as an offset in "general and administrative expenses" in our condensed consolidated statements of operations and comprehensive loss, as well as a reduction to non-controlling interest on our condensed consolidated balance sheet as of September 30, 2022 of $ 1.8 million.

In conjunction with the Sale Agreement, we agreed to return inventory to VIBES with a carrying value of approximately $ 2.4 million.

This obligation is recorded within "accrued expenses and other current liabilities" in our condensed consolidated balance sheet as of September 30, 2022, see "Note 8- Supplemental Financial Statement Information."

FAIR VALUE OF FINANCIAL INSTRUMENTS

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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 June 30, 2022, we had equity securities, an interest rate swap contract and contingent consideration that are required to be measured at fair value on a recurring basis.

Our equity securities that are required to be measured at fair value on a recurring basis consist of investments in XS Financial Inc.

and High Tide Inc.

We have determined that our ownership does not provide us with significant influence over the operations of these entities.

As of September 30, 2022, we had equity securities and contingent consideration that are required to be measured at fair value on a recurring basis.

Our equity securities that are required to be measured at fair value on a recurring basis consist of investments in XS Financial and High Tide We have determined that our ownership does not provide us with significant influence over the operations of these entities.

Accordingly, we account for our investment in these entities as equity securities, and we record changes in the fair value of these investments in "other income (expense), net" in our condensed consolidated statements of operations and comprehensive loss.

Subsequent to September 30, 2022, Merger Sub Gotham 2 and Warehouse Goods sold their interests in XS Financial and High Tide for total consideration of approximately $ 0.7 million.

See "Note 13 - Subsequent Events" for additional details.

Our financial instruments measured at fair value on a recurring basis were as follows at the dates indicated:

Condensed Consolidated

Balance Sheet Caption Fair Value at June 30, 2022

Balance Sheet Caption Fair Value at September 30, 2022

(in thousands) Level 1 Level 2 Level 3 Total

Equity securities Other assets $ 705 $ — — 705

Interest rate swap contract Other assets — 186 — 186

Total Assets $ 705 $ — $ — $ 705

Contingent consideration - current Accrued expenses and other current liabilities $ — $ — 1,300 1,300

Contingent consideration - long-term Other long-term liabilities — — 269 269

Total Liabilities $ — $ — $ 1,300 $ 1,300

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The estimated fair values of our financial instruments have been determined using available market information and what we believe to be appropriate valuation methodologies.

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 six months ended June 30, 2022 and 2021, respectively.

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, 2022 and 2021, respectively.

Derivative Instrument and Hedging Activity

On July 11, 2019, we entered into an interest rate swap contract to manage our risk associated with the interest rate fluctuations on the Company's floating rate Real Estate Note described in "Note 6 - Debt."

The counterparty to this instrument is a reputable financial institution.

Our interest rate swap contract was designated as a cash flow hedge at the inception date, and is reflected at its fair value in our condensed consolidated balance sheets.

The fair value of our interest rate swap liability is determined based on the present value of expected future cash flows.

Since our interest rate swap value is based on the LIBOR forward curve and credit default swap rates, which are observable at commonly quoted intervals for the full term of the swap, it is considered a Level 2 measurement.

Details of the outstanding swap contract as of June 30, 2022 are as follows:

Swap Maturity Notional Value

(in thousands) Pay Fixed Rate Receive Floating Rate Floating Rate

October 1, 2025 $ 7,864 2.0775 % One-Month LIBOR Monthly

Our obligations under the Real Estate Note are secured by a mortgage on our corporate headquarters building.

As discussed in "Note 8 - Supplemental Financial Information," our corporate headquarters building is classified within "assets held for sale" on our condensed consolidated balance sheet as of June 30, 2022.

The current and long-term portions of the Real Estate Note are included within "current portion of liabilities held for sale" and "long-term liabilities held for sale," respectively, on our condensed consolidated balance sheet as of June 30, 2022.

Our interest rate swap contract was designated as a cash flow hedge at the inception date, and was previously reflected at its fair value in our condensed consolidated balance sheets.

The fair value of our interest rate swap liability was determined based on the present value of expected future cash flows.

Since our interest rate swap value was based on the LIBOR forward curve and credit default swap rates, which were observable at commonly quoted intervals for the full term of the swap, it was considered a Level 2 measurement.

Beginning with the second quarter of 2022, we discontinued hedge accounting for the interest rate swap contract.

During the three and six months ended June 30, 2022, we recorded a gain of approximately $ 0.1 million based on the change in fair value of the interest rate swap contract within "interest expense" in our condensed consolidated statement of income and comprehensive loss.

During the three and six months ended June 30, 2022, we also reclassified the related accumulated other comprehensive income balance of $ 0.3 million from to "interest expense" in our condensed consolidated statement of income and comprehensive loss.

Refer to "Note 8 - Supplemental Financial Information" for further details on the components of accumulated other comprehensive income (loss) for the six months ended June 30, 2022 and 2021, respectively.

During the three and nine months ended September 30, 2022, we recorded a gain of approximately $ 0.1 million based on the change in fair value of the interest rate swap contract within "interest expense" in our condensed consolidated statement of income and comprehensive loss.

During the second quarter of 2022, we also reclassified the related accumulated other comprehensive income balance of $ 0.3 million to "interest expense" in our condensed consolidated statement of income and comprehensive loss.

Refer to "Note 8 - Supplemental Financial Information" for further details on the components of accumulated other comprehensive income (loss) for the nine months ended September 30, 2022 and 2021, respectively.

The unrealized loss on the derivative instrument prior to the discontinuation of hedge accounting was included within "Other comprehensive income (loss)" in our condensed consolidated statement of operations and comprehensive loss.

There was no measure of hedge ineffectiveness and no reclassifications from other comprehensive loss into interest expense for the three and six months ended June 30, 2021.

As discussed further in "Note 13 - Subsequent Events", in August 2022, we terminated the interest swap contract.

There was no measure of hedge ineffectiveness and no reclassifications from other comprehensive loss into interest expense for the three and nine months ended September 30, 2021.

In August 2022, we terminated the interest swap contract.

Contingent Consideration

Each period we revalue our contingent consideration obligations associated with business acquisitions to their fair value.

The estimate of the fair value of contingent consideration is determined by applying a risk-neutral framework using a Monte Carlo

Simulation, which includes inputs not observable in the market, such as the risk-free rate, risk-adjusted discount rate, the volatility of the underlying financial metrics and projected financial forecast of the acquired business over the earn-out period, and therefore represents a Level 3 measurement.

The estimate of the fair value of contingent consideration is determined by applying a risk-neutral framework using a Monte Carlo Simulation, which includes inputs not observable in the market, such as the risk-free rate, risk-adjusted discount rate, the volatility of the underlying financial metrics and projected financial forecast of the acquired business over the earn-out period, and therefore represents a Level 3 measurement.

Significant increases or decreases in these inputs could result in a significantly lower or higher fair value measurement of the contingent consideration liability.

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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:

(in thousands) Six Months Ended

June 30, 2022

(in thousands) Nine Months Ended

September 30, 2022

Balance at December 31, 2021 $ 6,857

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Write-off of Eyce 2022 Contingent Payment in conjunction with the Amended Eyce APA ( 267 )

Loss from fair value adjustments included in results of operations 359

Balance June 30, 2022 $ 2,588

(in thousands) Six Months Ended

June 30, 2021

Gain from fair value adjustments included in results of operations ( 929 )

Balance September 30, 2022 $ 1,300

(in thousands) Nine Months Ended

September 30, 2021

Balance at December 31, 2020 $ —

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Loss from fair value adjustments included in results of operations $ 755

Balance at June 30, 2021 $ 1,951

Balance at September 30, 2021 $ 2,583

Equity Securities Without a Readily Determinable Fair Value

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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 six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022 and December 31, 2021, the carrying value of our investment in equity securities without a readily determinable fair value was approximately $ 2.5 million, respectively, included within "Other assets" in our condensed consolidated balance sheets.

We did not identify any fair value adjustments related to these equity securities during the three and nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, the carrying value of our investment in equity securities without a readily determinable fair value was approximately $ 2.5 million, respectively, included within "Other assets" in our condensed consolidated balance sheets.

The carrying value included a fair value adjustment of $ 1.5 million based on an observable price change recognized during the year ended December 31, 2019.

Greenlane as a Lessee

As of June 30, 2022, we had facilities financed under operating leases consisting of warehouses, offices, and retail stores, with lease term expirations between 2022 and 2027.

As of September 30, 2022, we had facilities financed under operating leases consisting of warehouses, offices, and retail stores, with lease term expirations between 2023 and 2027.

Lease terms are generally three to seven years for warehouses, office space and retail store locations.

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 finance and operating lease liabilities recorded in our condensed consolidated balance sheet as of June 30, 2022.

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, 2022.

The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.

(in thousands) Operating Leases

Thereafter 14

Total minimum lease payments $ 5,708

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Long-term portion $ 3,027

Rent expense under operating leases was approximately $ 0.7 million and $ 1.4 million for three and six months ended June 30, 2022, respectively, and approximately $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2021, respectively.

Rent expense under operating leases was approximately $ 0.6 million and $ 2.1 million for three and nine months ended September 30, 2022, respectively, and approximately $ 0.5 million and $ 1.2 million for the three and nine months ended September 30, 2021, 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:

For the six months ended

For the nine months ended

September 30,

(in thousands) 2022 2021

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Total lease cost $ 2,816 $ 1,405

The table below presents lease-related terms and discount rates as of June 30, 2022:

June 30, 2022

The table below presents lease-related terms and discount rates as of September 30, 2022:

September 30, 2022

Weighted average remaining lease terms

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Greenlane as a Lessor

We have four operating leases for office space leased to third-party tenants in our corporate headquarters building in Boca Raton, Florida, which is included in assets held for sale as of June 30, 2022, and one sublease in California.

The following table represents the maturity analysis of undiscounted cash flows related to lease payments, which we expect to receive from our existing operating lease agreements related to our sublease in California:

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2024 and thereafter —

Total $ 530,350

Our debt balance, excluding operating lease liabilities and finance lease liabilities, consisted of the following amounts at the dates indicated:

(in thousands) June 30, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Real Estate Note $ — $ 7,958

Bridge Loan — 8,000

Asset-Based Loan 15,000 —

DaVinci Promissory Note 3,155 5,000

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Less current portion of debt ( 3,156 ) ( 11,615 )

Less current portion of liabilities held for sale ( 198 ) —

Less long-term liabilities held for sale ( 7,582 ) —

Debt, net, excluding operating and finance leases and liabilities held for sale $ 13,488 $ 10,607

Real Estate Note

On October 1, 2018, one of the Operating Company’s wholly-owned subsidiaries financed the purchase of a building which serves as our corporate headquarters through a real estate term note (the “Real Estate Note”) in the principal amount of $ 8.5 million.

Principal payments plus accrued interest at a rate of one-month LIBOR plus 2.39 % are due monthly, with a final payment of all remaining outstanding principal and accrued interest due in October 2025.

Our obligations under the Real Estate Note are secured by a mortgage on the property.

The Real Estate Note contains customary covenants and restrictions, including, without limitation, covenants that require us to comply with laws, restrictions on our ability to incur additional indebtedness, and various customary remedies for the lender following an event of default, including the acceleration of repayment of outstanding amounts under the Real Estate Note and execution upon the collateral securing obligations under the Real Estate Note.

As of June 30, 2022, we were in compliance with the Real Estate Note covenants.

On October 1, 2018, one of the Operating Company’s wholly-owned subsidiaries financed the purchase of a building, which served as our corporate headquarters, through a real estate term note (the “Real Estate Note”) in the principal amount of $ 8.5 million.

Our obligations under the Real Estate Note were secured by a mortgage on the property.

On August 8, 2022, we entered into a note, mortgage and loan modification agreement (the "Real Estate Note Amendment"), which amended the maturity date of the Real Estate Note to reflect a maturity date of December 1, 2022, whereupon all principal and accrued interest were to become due and payable, in full.

In September 2022, 1095 Broken Sound consummated the previously disclosed transactions contemplated by that certain Purchase and Sale Agreement, dated as of August 16, 2022, by and between 1095 Broken Sound and the HQ Purchaser whereby 1095 Broken Sound agreed to sell a certain parcel of real estate including the our headquarters building to the HQ Purchaser for total proceeds of $ 9.6 million in cash.

On the Closing Date, the Company used a portion of the proceeds from the HQ Transaction to repay the remainder of the Real Estate Note in full.

There was no remaining balance related to the Real Estate Note on our consolidated balance sheet as of September 30, 2022.

Eyce Promissory Note

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On July 14, 2022, we entered into the Second Amendment to the December 2021 Note (the “Second Amendment” and together with the December 2021 Note, the "Bridge Loan"), which provided for the extension of the maturity date of the Bridge Loan from July 14, 2022 to July 19, 2022.

In connection with the

entry into the Second Amendment, we repaid $ 4.0 million of the aggregate principal amount due under the Bridge Loan on July 14, 2022, with the remainder due at maturity.

In connection with the entry into the Second Amendment, we repaid $ 4.0 million of the aggregate principal amount due under the Bridge Loan on July

14, 2022, with the remainder due at maturity.

On July 19, 2022, we repaid the remaining balance on the Bridge Loan in full, and, as a result, all obligations under the Bridge Loan have been satisfied.

Asset-Based Loan

On August 9, 2022, we entered into an asset-based loan pursuant to that certain Loan and Security Agreement, dated as of August 8, 2022 (the “Loan Agreement”), by and among the Company, certain subsidiaries of the Company (the “Guarantors”), the parties thereto from time to time as lenders (the “Lenders”), and WhiteHawk Capital Partners LP, as the agent for the Lenders.

Pursuant to the Loan Agreement, the Lenders agreed to make available to us a term loan of up to $ 15.0 million on the terms and conditions set forth therein and the other Financing Agreements (as defined therein).

As of September 30, 2022, of the total term loan amount, $ 2 million is located in a blocked account, which is classified as "restricted cash" on our condensed consolidated balance sheet as of September 30, 2022, and which will release the funds when permitted by the borrowing base certificate.

Subject to certain exceptions described in the Loan Agreement, the Company and the Guarantors agreed to pledge all of their assets as collateral.

The maturity date of the Asset-Based Loan is the third anniversary of the Closing Date (the "Maturity Date").

The Asset-Based Loan accrues interest at the prime rate plus 8.0 %, and interest payments are due monthly.

Beginning with the fiscal quarter ending September 30, 2023, and for each fiscal quarter thereafter until the Maturity Date, quarterly payments of $ 0.3 million are due, with a final payment of all remaining outstanding principal and accrued interest due on the Maturity Date.

We incurred $ 1.5 million of debt issuance costs related to the Asset-Based Loan, as well as an original issue discount of $ 0.5 million, which were recorded as a direct deduction from the carrying amount of the Asset-Based Loan, and which are amortized over the term of the Asset-Based Loan through interest expense.

The Asset-Based Loan contains customary covenants and restrictions, including, without limitation, covenants that require us to comply with laws, restrictions on our ability to incur additional indebtedness, and various customary remedies for the lender following an event of default, including the acceleration of repayment of outstanding amounts under the Asset-Based Loan and execution upon the collateral securing obligations under the Asset-Based Loan.

As of September 30, 2022, we were in compliance with the Asset-Based Loan covenants.

COMMITMENTS AND CONTINGENCIES

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SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION

Assets Held for Sale

We generally consider assets to be held for sale when (i) we commit to a plan to sell the assets, (ii) the assets are available for immediate sale in their present condition, (iii) we have initiated an active program to locate a buyer and other actions required to complete the plan to sell the assets, (iv) consummation of the planned sale transaction is probable, (v) the assets are being actively marketed for sale at a price that is reasonable in relation to their current fair value, (vi) the transaction is expected to qualify for recognition as a completed sale, within one year, and (vii) significant changes to or withdrawal of the plan is unlikely.

Following the classification of any depreciable assets within a disposal group as held for sale, we discontinue depreciating the asset and write down the asset to the lower of carrying value or fair market value less cost to sell, if needed.

Our assets held for sale recorded on our condensed consolidated balance sheet as of June 30, 2022 are comprised of our corporate headquarters building located in Boca Raton, Florida, along with the related land, land improvements and property and equipment.

We are actively seeking a buyer for these assets and expect to complete the sale within one year from June 30, 2022.

The current and long-term portion of the related Real Estate Note, with represents the mortgage on the corporate headquarters building, is classified within "current portion of liabilities held for sale" and "long-term portion of liabilities held for sale" on our condensed consolidated balance sheet as of June 30, 2022, as described further in Note 6.

We recognized no impairment charges during the three and six months ended June 30, 2022 or 2021.

Accrued Expenses and Other Current Liabilities

The following table summarizes the composition of accrued expenses and other current liabilities as of the dates indicated:

(in thousands) June 30, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

VAT payable (including amounts related to VAT matter described in Note 2) $ 2,745 $ 4,393

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Sales tax payable 647 1,034

VIBES - assets pending distribution (Note 3) 2,432 —

Other 6,483 3,932

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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 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 six months ended June 30, 2022 were as follows:

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, 2022 were as follows:

(in thousands) Customer Deposits

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Revenue recognized ( 13,639 )

Balance as of June 30, 2022 $ 5,163

Balance as of September 30, 2022 $ 4,523

Accumulated Other Comprehensive Income (Loss)

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Other comprehensive (income) loss attributable to non-controlling interest ( 17 ) ( 68 ) ( 85 )

Balance at June 30, 2022 $ 291 $ — $ 291

Balance at September 30, 2022 $ 53 $ — $ 53

(in thousands) Foreign Currency Translation Unrealized Gain or (Loss) on Derivative Instrument Total

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Other comprehensive (income) loss attributable to non-controlling interest 20 ( 154 ) ( 134 )

Balance at June 30, 2021 $ 223 $ ( 80 ) $ 143

Balance at September 30, 2021 $ 144 $ ( 52 ) $ 92

Supplier Concentration

Our four largest vendors accounted for an aggregate of approximately 64.1 % and 53.6 % of our total net sales and 83.3 % and 74.0 % of our total purchases for the three and six months ended June 30, 2022, respectively, and an aggregate of approximately 37.7 % and 38.8 % of our total net sales and 46.8 % and 44.4 %.

of our total purchases for the three and six months ended June 30, 2021, respectively.

Our four largest vendors accounted for an aggregate of approximately 51.9 % and 53.2 % of our total net sales and 66.9 % and 72.6 % of our total purchases for the three and nine months ended September 30, 2022, respectively, and an aggregate of approximately 29.2 % and 22.8 % of our total net sales and 53.2 % and 84.0 %.

of our total purchases for the three and nine months ended September 30, 2021, respectively.

We expect to maintain our relationships with these vendors.

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(“Unrivaled”) and serve on the Unrivaled board of directors.

Net sales to Unrivaled totaled approximately $ 0 and $ 0.7 million for the three and six months ended June 30, 2022, respectively, and $ 0 both for the three and six months ended June 30, 2021.

Total accounts receivable due from Unrivaled were approximately $ 0.5 million and $ 0.4 million as of June 30, 2022 and December 31, 2021, respectively.

Net sales to Unrivaled totaled approximately $ 0 and $ 0.4 million for the three and nine months ended September 30, 2022, respectively, and $ 0 both for the three and nine months ended September 30, 2021.

Total gross accounts receivable due from Unrivaled were approximately $ 0.4 million and $ 0.4 million as of September 30, 2022 and December 31, 2021, respectively.

Adam Schoenfeld, co-founder and a current director of the Company, has a significant ownership interest in one of our customers, Universal Growing.

Net sales to Universal Growing totaled approximately $ 0.0 million and $ 0.2 million for the three and six months ended June 30, 2022, respectively, and $ 0.2 million and $ 0.3 million for the three and six months ended June 30, 2021, respectively.

Total accounts receivable due from Universal Growing as of June 30, 2022 and December 31, 2021 were de minimis.

Net sales to Universal Growing totaled approximately $ 0.0 million and $ 0.2 million for the three and nine months ended September 30, 2022, respectively, and $ 0.1 million and $ 0.3 million for the three and nine months ended September 30, 2021, respectively.

Total gross accounts receivable due from Universal Growing as of September 30, 2022 and December 31, 2021 were de minimis.

In December 2021, we entered into a Secured Promissory Note with Aaron LoCascio, our co-founder, former Chief Executive Officer and President, and a current director of the Company, with respect to the $ 8.0 million Bridge Loan described under Note 6 above.

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The transactions contemplated by the Sale Agreement were completed on July 19, 2022, immediately following the signing of the Sale Agreement.

Portofino is an entity partially

controlled by Adam Schoenfeld.

Portofino is an entity partially controlled by Adam Schoenfeld.

The Sale Agreement was approved by the affirmative vote of a majority of the disinterested members of the Board and the audit committee of the Board in accordance with the Company’s related party transactions policy.

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As discussed in “Note 1—Business Operations and Organization,” we consolidate the financial results of the Operating Company in our condensed consolidated financial statements and report a non-controlling interest related to the Common Units held by non-controlling interest holders.

As of June 30, 2022, we owned 85.2 % of the economic interests in the Operating Company, with the remaining 14.8 % of the economic interests owned by non-controlling interest holders.

As of September 30, 2022, we owned 98.1 % of the economic interests in the Operating Company, with the remaining 1.9 % of the economic interests owned by non-controlling interest holders.

The non-controlling interest in the accompanying condensed consolidated statements of operations and comprehensive loss represents the portion of the net loss attributable to the economic interest in the Operating Company held by the non-controlling holders of Common Units calculated based on the weighted average non-controlling interests’ ownership during the periods presented.

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1 (the “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 General Instruction I.B.6 of Form S-3 (“Instruction I.B.6”) to the sales agreement.

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 Amendment, approximately $ 38.7 million in shares remained available for issuance under the ATM Program.

Following the completion of the June 2022 Offering 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 time due to the Nasdaq Exchange Cap restrictions, which will limit our liquidity options in the capital markets.

Following the completion of the June 2022 Offering 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 time due to the restrictions under Instruction I.B.6 to Form S-3, 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:

($ in thousands) Three Months Ended

June 30, 2022 Six Months Ended

June 30, 2022 August 2021 (Inception) through

June 30, 2022

September 30, 2022 Nine Months Ended

September 30, 2022 August 2021 (Inception) through

September 30, 2022

Class A shares sold* — 852,562 972,624

Gross proceeds $ — $ 9,303 $ 12,684

Fees paid to sales agent $ 69 $ 279 $ 381

Net proceeds $ — $ 9,024 $ 12,303

Fees paid to sales agent $ — $ 279 $ 381

*After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.

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The June 2022 Units were offered pursuant to the Shelf Registration Statement.

The June 2022 Standard Warrants are exercisable six months from the date of issuance at an exercise price equal to $ 5.00 per share of Class A common stock for a period of five years .

Each June 2022 Pre-Funded Warrant is exercisable immediately with no expiration date for one share of Class A common stock at an exercise price of $ 0.002 .

The June 2022 Standard Warrants are

exercisable six months from the date of issuance at an exercise price equal to $ 5.00 per share of Class A common stock for a period of five years .

Each June 2022 Pre-Funded Warrant was exercisable six months from the date of issuance (as modified by the June 2022 Pre-Funded Warrant Waiver discussed below) with no expiration date for one share of Class A common stock at an exercise price of $ 0.002 .

The June 2022 Offering generated gross proceeds of approximately $ 5.4 million and net proceeds to the Company of approximately $ 5.0 million.

On July 27, 2022, pursuant to Section 9 of the June 2022 Pre-Funded Warrants, we waived the Initial Exercise Date (as defined in the June 2022 Pre-Funded Warrants and permitted the June 2022 Pre-Funded Warrants to be exercisable immediately to reflect the businss understanding between us and the investors in the June 2022 Offering with respect to the exerciseabilty of the June 2022 Pre-Funded Warrants (the "June 2022 Pre-Funded Warrant Waiver").

All June 2022 Pre-Funded Warrants were exercised in July 2022, based upon which we issued an additional 495,000 shares of our Class A common stock, for de minimis net proceeds.

October 2022 Offering

The October 2022 Units each consisted of one share of Class A common stock or a October 2022 Pre-Funded Warrant and two October 2022 Standard Warrants to purchase one share of our Class A common stock.

The October 2022 Units were offered pursuant to the S-1 Registration Statement.

The October 2022 Standard Warrants are exercisable immediately at an exercise price equal to $ 0.90 per share of Class A common stock for a period of seven years .

Each October 2022 Pre-Funded Warrant is exercisable immediately with no expiration date for one share of Class A common stock at an exercise price of $ 0.0001 .

The October 2022 Offering generated gross proceeds of approximately $ 7.5 million and net proceeds to the Company of approximately $ 6.8 million.

For more information regarding the October 2022 Offering, please see "Note 13 - Subsequent Events."

All October 2022 Pre-Funded Warrants were exercised in November 2022, based upon which we issued an additional 1,377,780 shares of our Class A common stock, for de minimis net proceeds.

Class C Common Stock Conversion

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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):

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands, except per share data) 2022 2021 2022 2021

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*After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.

The June 2022 Pre-Funded Warrants were included in the weighted-average in the computation of basic net loss per share of Class A common stock for the three and six months ended June 30, 2022 and 2021, respectively, beginning with their issuance date, as their stated exercise price of $ 0.002 was non-substantive and their exercise was virtually assured.

For the three and six months ended June 30, 2022 and 2021, respectively, shares of Class B common stock, shares of Class C common stock and stock options and warrants to purchase Class A common stock were excluded from the weighted-average in the computation of diluted net loss per share of Class A common stock because the effect would have been anti-dilutive.

The June 2022 Pre-Funded Warrants were included in the weighted-average in the computation of basic net loss per share of Class A common stock for the three and nine months ended September 30, 2022 and 2021, respectively, beginning with their issuance date, as their stated exercise price of $ 0.002 was non-substantive and their exercise was virtually assured.

For the three and nine months ended September 30, 2022 and 2021, respectively, shares of Class B common stock, shares of Class C common stock and stock options and warrants to purchase Class A common stock were excluded from the weighted-average in the computation of diluted net loss per share of Class A common stock because the effect would have been anti-dilutive.

Shares of our Class B common stock and Class C common stock do not share in our earnings or losses and are therefore not participating securities.

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KushCo Equity Plan

On August 31, 2021, we completed our previously announced merger with KushCo pursuant to the Merger Agreement dated as of March, 31, 2021.

On August 31, 2021, we completed our merger with KushCo pursuant to the Merger Agreement dated as of March, 31, 2021.

In connection with the completion of our merger with KushCo, we assumed the sponsorship of the KushCo Equity Plan.

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Rule 10b5-1 Trading Plans

During the three and six months ended June 30, 2022, Section 16 officer Adam Schoenfeld had an equity trading plan in place in accordance with Rule 10b5-1(c)(1) under the Exchange Act.

Section 16 officer Adam Schoenfeld had an equity trading plan in place in accordance with Rule 10b5-1(c)(1) under the Exchange Act, which was cancelled as of May 20, 2022.

An equity trading plan is a written document that pre-establishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of our Class A common stock, including shares acquired under our equity plans.

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For the three months ended

June 30, For the six months ended

September 30, For the nine months ended

September 30,

(in thousands) 2022 2021 2022 2021

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Total equity-based compensation expense $ 187 $ 3,811 $ 1,491 $ 4,762

Total remaining unrecognized compensation expense as of June 30, 2022 was as follows:

Total remaining unrecognized compensation expense as of September 30, 2022 was as follows:

Remaining Unrecognized Compensation Expense

June 30, 2022 Weighted Average Period over which Remaining Unrecognized Compensation Expense is Expected to be Recognized

September 30, 2022 Weighted Average Period over which Remaining Unrecognized Compensation Expense is Expected to be Recognized

(in thousands) (in years)

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The Company has evaluated the impact of the Consolidated Appropriation Act and determined that its impact is not material to the Company’s financial statements.

As of June 30, 2022 and December 31, 2021, 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 June 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, respectively.

In the event that management determines that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, an adjustment to the valuation allowance will be made, which would reduce the provision for income taxes.

The provision for and benefit from income taxes for the three and six months ended June 30, 2022 and 2021, respectively, relates to taxes in foreign jurisdictions, including Canada and the Netherlands.

For the three and six months ended June 30, 2022 and 2021, respectively, the effective tax rate differed from the U.S.

The provision for and benefit from income taxes for the three and nine months ended September 30, 2022 and 2021, respectively, relates to taxes in foreign jurisdictions, including Canada and the Netherlands.

For the three and nine months ended September 30, 2022 and 2021, 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.

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Excerpt for the Canadian subsidiary, we do not record U.S.

income taxes on the undistributed earnings of our foreign subsidiaries, based upon our intention to permanently reinvest undistributed earnings to ensure sufficient working capital and

further expansion of existing operations outside the United States.

income taxes on the undistributed earnings of our foreign subsidiaries, based upon our intention to permanently reinvest undistributed earnings to ensure sufficient working capital and further expansion of existing operations outside the United States.

In the event we are required to repatriate funds from outside of the United States, such repatriation would be subject to local laws, customs, and tax consequences.

Uncertain Tax Positions

For the three and six months ended June 30, 2022 and 2021, respectively, we did not have any unrecognized tax benefits as a result of tax positions taken during a prior period or during the current period.

For the three and nine months ended September 30, 2022 and 2021, respectively, we did not 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.

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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 June 30, 2022 and December 31, 2021.

Based on this assessment, our TRA liability was $ 0 as of September 30, 2022 and December 31, 2021.

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 six months ended June 30, 2022 and 2021, respectively, we did not make any payments, inclusive of interest, to members of the Operating Company pursuant to the TRA.

During the three and nine months ended September 30, 2022 and 2021, respectively, we did not make any payments, inclusive of interest, to members of the Operating Company pursuant to the TRA.

SEGMENT REPORTING

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

Based on this assessment, we determined we had the following two operating segments as of June 30, 2022 and December 31, 2021, which are the same as our reportable segments:

Based on this assessment, we determined we had the following two operating segments as of September 30, 2022 and December 31, 2021, which are the same as our reportable segments:

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

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The segment disclosures below have been retrospectively restated to reflect the change in segments.

The Consumer Goods segment focuses on serving consumers across wholesale, retail and e-commerce operations—through both our proprietary Greenlane Brands, including Eyce, DaVinci, VIBES, Marley Natural, Keith Haring, and Higher Standards, as well as lifestyle products and accessories from leading brands, like PAX, Storz and Bickel, Grenco Science, and many more.

The Consumer Goods segment focuses on serving consumers across wholesale, retail and e-commerce operations—through both our proprietary Greenlane Brands, including Eyce, DaVinci, Marley Natural, Keith Haring, and Higher Standards, as well as lifestyle products and accessories from leading brands, like PAX, Storz and Bickel, Grenco Science, VIBES and many more.

The Consumer Goods segment forms a central part of our growth strategy, especially as it relates to scaling our own portfolio of higher-margin Greenlane Brands.

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Our CODM allocates resources to and assesses the performance of our two operating segments based on the operating segments' net sales and gross profit.

The following table sets forth information by reportable segment for the three and six

months ended June 30, 2022 and 2021, respectively.

There were no material intersegment sales during the three and six months ended June 30, 2022 and 2021, respectively.

The following table sets forth information by reportable segment for the three and nine months ended September 30, 2022 and 2021, respectively.

There were no material intersegment sales during the three and nine months ended September 30, 2022, and 2021, respectively.

For the three months ended

June 30, 2022 For the three months ended

June 30, 2021

September 30, 2022 For the three months ended

September 30, 2021

(in thousands) Consumer Goods Industrial Goods Total Consumer Goods Industrial Goods Total

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Gross profit $ 628 $ 4,341 $ 4,969 $ 1,511 $ ( 24 ) $ 1,487

For the six months ended

June 30, 2022 For the six months ended

June 30, 2021

For the nine months ended

September 30, 2022 For the nine months ended

September 30, 2021

(in thousands) Consumer Goods Industrial Goods Total Consumer Goods Industrial Goods Total

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The following table sets forth specific asset categories which are reviewed by our CODM in the evaluation of operating segments:

As of June 30, 2022 As of December 31, 2021

As of September 30, 2022 As of December 31, 2021

(in thousands) Consumer Goods Industrial Goods Total Consumer Goods Industrial Goods Total

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SUBSEQUENT EVENTS

On July 19, 2022, Warehouse Goods entered into the Sale Agreement with Portofino to sell the Company’s 50 % stake in VIBES Holdings LLC for total consideration of $ 5.3 million in cash.

The transactions contemplated by the Sale Agreement were completed on July 19, 2022, immediately following the signing of the Sale Agreement.

Entry into Asset-Backed Term Loan

On August 9, 2022, we entered into the Loan Agreement, by and among the Company, the Guarantors, the Lenders and WhiteHawk.

As described in the Loan Agreement, the Lenders agreed to make available to the Company a term loan of up to $ 15.0 million on the terms and conditions set forth therein and the other Financing Agreements (as defined therein).

Of the total term loan amount, $ 1.0 million is currently located in a blocked account, which will release the funds when permitted by the borrowing base certificate.

Subject to certain exceptions described in the Loan Agreement, the Company and the Guarantors agreed to pledge all of their assets as collateral.

Real Estate Note Amendment

On August 8, 2022, we entered into a note, mortgage and loan modification agreement (the "Real Estate Note Amendment"), which amended the maturity date of the Real Estate Note (discussed in Note 6) to reflect a maturity date of December 1, 2022, whereupon all principal and accrued interest will be due and payable, in full.

We expect to utilize a portion of the proceeds from the sale of the assets held for sale described in Note 8 for the repayment of the Real Estate Note.

Chief Executive Officer Transition

On October 7, 2022, we announced that Nicholas Kovacevich, our Chief Executive Officer, will step down as Chief Executive Officer on December 31, 2022 and transition into a new role within the Company as Chief Corporate Development Officer effective January 1, 2023 (the “Transition Date”).

Board Refreshment

In addition to the Chief Executive Officer transition announced on October 7, 2022, we also announced that we are exploring changes to the composition of the Board.

The Nominating and Corporate Governance Committee of the Board is conducting an ongoing search with an emphasis on candidates identified as providing specific skill sets in areas such as consumer packaged goods, technology and innovation as the we pursue the previously disclosed changes to our business model.

Entry into Amended and Restated Employment Agreement with Nicholas Kovacevich

On October 6, 2022, in connection with the Chief Executive Officer transition described above, we entered into an amended and restated employment agreement (the “Amended Employment Agreement”) with Mr.

In connection with his entry into the Amended Employment Agreement, Mr.

Kovacevich’s prior employment agreement with us was terminated.

Additional information about the Amended Employment Agreement can be found in our Current Report on Form 8-K, filed with the SEC on October 7, 2022.

Vendor Payment Plan

On October 13, 2022, we entered into the Settlement Agreement with the Vendor for the repayment of the Remaining Liabilities due to the Vendor relating to previously purchased inventory.

The Settlement Agreement provides for a payment plan pursuant to which the we have agreed to repay the Remaining Liabilities in weekly installments commencing on October 14, 2022.

Pursuant to the terms of the Settlement Agreement, the Remaining Liabilities will be repaid in full on December 9, 2022.

High Tide and XS Financial Sales

On October 24, 2022, Warehouse Goods sold 38,839 shares of High Tide common stock for total consideration of approximately $ 0.05 million.

On November 3, 2022, Merger Sub Gotham 2, LLC, our wholly owned subsidiary, sold its interest in XS Financial to certain purchasers for total consideration of approximately $ 0.65 million, minus certain fees.

October 2022 Offering

The October 2022 Units were offered pursuant to the S-1 Registration Statement.

The October 2022 Standard Warrants are exercisable immediately at an exercise price equal to $ 0.90 per share of Class A common stock for a period of seven years .

Each October 2022 Pre-Funded Warrant is exercisable immediately with no expiration date for one share of Class A common stock at an exercise price of $ 0.0001 .

The October 2022 Offering generated gross proceeds of approximately $ 7.5 million and net proceeds to the Company of approximately $ 6.8 million.

All October 2022 Pre-Funded Warrants were exercised in November 2022, based upon which we issued an additional 1,377,780 shares of our Class A common stock, for de minimis net proceeds.

Katella Lease Termination

On November 3, 2022, we also entered into that certain Lease Termination Agreement, dated as of October 31, 2022 solely for reference purposes (the "Lease Termination Agreement"), by and between us and Warland Investments Company (the "Landlord"), which provided for the termination of our lease at 6261 Katella Avenue in Cypress, California (Collectively, the "Lease Termination").

Pursuant to the terms of the Lease Termination Agreement, we agreed to pay a fee of approximately $ 0.46 million as an early termination fee in consideration for the Landlord's agreement to terminate all of our remaining obligations under the Cypress lease.

We expect the Lease Termination to result in approximately $ 1.7 million in savings, although we can provide no assurances as to the total amount of savings realized from the Lease Termination.

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

What changed 10-Q

Item 1. Financial Statements