What changed in this filing

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Item 1. Business

2023-03-31 compared with 2022-03-31 · 128 added, 116 removed, 173 unchanged (59% of the section changed)

Founded in 2005, Greenlane is the premier global platform for the development and distribution of premium cannabis accessories, child-resistant packaging, vape solutions, and lifestyle products.

In August 2021, we completed our transformational merger with KushCo Holdings, Inc.

("KushCo"), creating the leading ancillary cannabis company and house of brands.

The combined company serves a diverse and expansive customer base with more than 8,500 retail locations, which includes many of the leading multi-state-operators ("MSOs") and licensed producers ("LPs"), the top smoke shops in the United States, and millions of consumers globally.

In addition to enhancing our financial size and scale, along with creating an optimized platform with significant potential revenue and cost saving synergies, the merger strengthened our best-in-class proprietary owned brands and exclusive third-party brand offerings.

Founded in 2005, Greenlane is a premier global platform for the development and distribution of premium cannabis accessories, vape devices, and lifestyle products.

In 2021, we completed several transformative acquisitions, including the acquisition of two proprietary house brands, EYCE (“Eyce”) and DaVinci (“DaVinci”), along with a larger merger with KushCo Holdings, adding a significant industrial line of business to the Greenlane platform.

These acquisitions strengthened our leading position as a consumer ancillary products house-of-brands business by adding two established brands to our portfolio (Eyce and DaVinci), and significantly expanded our customer network, bringing strategic relationships with leading cannabis multi-state-operators (“MSOs”), cannabis single-state operators (“SSOs”), and Canadian licensed-producers (“LPs”).

Greenlane provides a wide array of consumer ancillary products and industrial ancillary products to thousands of cannabis producers, processors, brands, and retailers (“Cannabis Operators”), in addition to specialty retailers, smoke shops, head shops, convenience stores, and consumers directly through our own proprietary web stores and large online marketplaces such as Amazon.

We have been developing a world-class portfolio of our own proprietary brands (the "Greenlane Brands") that we believe will, over time, deliver higher margins and create long-term value for our customers and shareholders.

Our Greenlane Brands are comprised of child-resistant packaging innovator Pollen Gear;

EYCE silicone pipes;

DaVinci vaporizers;

VIBES rolling papers;

the Marley Natural accessory line;

the K.Haring Glass Collection accessory line;

Aerospaced & Groove grinders;

and Higher Standards, which is both an upscale product line and an innovative retail experience with flagship stores at New York City’s famed Chelsea Market and the iconic Malibu Village in California.

We also own and operate several industry-leading e-commerce platforms, including Vapor.com, Higherstandards.com, Aerospaced.com, DaVincivaporizer.com, Harringglass.com, Eycemolds.com, Canada.Vapor.com, Vaposhop.com, and recently-acquired Puffitup.com.

These e-commerce platforms offer convenient, flexible shopping solutions directly to consumers.

During 2021, we took significant strides to grow our Greenlane Brands portfolio including with the March acquisition of substantially all of the assets of Eyce LLC ("Eyce") and more recently, in November 2021, the acquisition of substantially all of the assets of Organicix, LLC (d/b/a and hereinafter referred to as "DaVinci").

Furthermore, as a pioneer in the ancillary cannabis space, Greenlane is the partner of choice for many of the industry's leading MSOs, LPs, and brands, including PAX Labs, Grenco Science, Storz & Bickel, Firefly, Santa Cruz Shredder, Cookies, and CCELL.

We merchandise vaporizers, packaging, and other products in the United States, Canada and Europe and we distribute to retailers through wholesale operations and to consumers through e-commerce activities and our retail stores.

We operate distribution centers in the United States, Canada, and Europe.

With the completion of the distribution center consolidation and the merger with KushCo, we have established a lean and scalable distribution network that leverages a mix of leased warehoused spaces in California and Massachusetts along with third-party logistics ("3PL") locations in the United States, Canada, and Europe.

Following the successful completion of the KushCo merger, we have been reorganizing our business into two different, but complementary, business segments.

The first is the Consumer Goods segment, which focuses on serving consumers across wholesale, retail and e-commerce operations—through both our proprietary 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.

Our wholly-owned Greenlane Brands includes our recently launched more affordable product line – Groove, our innovative silicone pipes and accessories line – Eyce, our best-in-class premium vaporizer brand – DaVinci, our premium smoke shop and ancillary product brand – Higher Standards, and our child-resistant packaging brand - Pollen Gear.

We also have category exclusive licenses for the premium Marley Natural branded products, as well as the Keith Haring branded products.

The Greenlane Brands, along with a curated set of third-party products, are offered to customers through our proprietary, owned and operated e-commerce platforms which include Vapor.com, Vaposhop.com, DaVinciVaporizer.com, PuffItUp.com, HigherStandards.com, EyceMolds.com, and MarleyNaturalShop.com.

These platforms allow us to reach customers directly with helpful resources and a seamless purchasing experience.

We merchandise vaporizers, packaging, and other ancillary products in the United States, Canada, Europe and Latin America.

We distribute products to retailers through wholesale operations and distribute products to consumers through e-commerce activities and our flagship Higher Standards store in New York City's famed Chelsea Market.

We operate our own distribution centers in the United States, while also utilizing third-party logistics ("3PL") locations in the United States, Canada, and Europe.

We have made tremendous progress consolidating and streamlining our warehouse and distribution operations following our acquisitions in 2021, and we look forward to further optimization of our footprint in 2023.

We manage our business in two different, but complementary, business segments.

The first is the Consumer Goods segment, which focuses on serving consumers across wholesale, retail, and e-commerce operations—offering both our Greenlane Brands, as well as ancillary products and accessories, from select leading third-party brands, such as Storz and Bickel, Grenco Science, PAX, Cookies and more.

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

In addition to our Consumer Goods segment, we have our Industrial Goods segment, which focuses on serving the premier brands, operators, and retailers through our wholesale operations by providing ancillary products essential to their growth, such as customizable packaging and vaporization solutions, including our Greenlane Brand Pollen Gear.

In addition to our Consumer Goods segment, we have our Industrial Goods segment, which focuses on serving Cannabis Operators by providing ancillary products essential to their daily operations and growth, such as packaging and vaporization solutions, including our Greenlane Brand Pollen Gear.

Refer to "Note 11— Segment Reporting" within Item 8 to this Annual Report on Form 10-K for additional information on our reportable segments.

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the long-term impacts of which remain uncertain as of the date of this Form 10-K.

While we do not cultivate, distribute or dispense marijuana as that term is defined by the Controlled Substances Act, several of the products we distribute, such as vaporizers, pipes, rolling papers and storage solutions, can be used with marijuana or marijuana derivatives, as well as several other legal substances.

While we do not cultivate, distribute or dispense marijuana as that term is defined by the Controlled Substances Act, several of the products we distribute, such as vaporizers, pipes, rolling papers, and packaging solutions, can be used with marijuana or marijuana derivatives, as well as several other legal substances.

We believe the global cannabis industry is experiencing a transformation from a state of prohibition toward a state of legalization.

We expect the number of states, countries and other jurisdictions legalizing cannabis for medical and adult use will continue to increase, which will create numerous and sizable opportunities for market participants, including us.

We expect the number of states, countries, and other jurisdictions legalizing cannabis for medical and adult use will continue to increase, which will create numerous opportunities for market participants, including us.

Cannabis Landscape

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legal cannabis market was approximately $18.9 billion in 2020 and reached approximately $25.3 billion in 2021, representing growth of approximately 33.9%.

The report projects that by 2030,

spending in the U.S.

The report projects that by 2030, spending in the U.S.

legal cannabis market will reach $64.9 billion, representing a compounded annual growth rate of approximately 11% over the nine-year period from 2021.

Our experience and awareness of the markets in which we operate lead us to believe that demand for the types of products we distribute will grow in tandem with the industry.

Our experience and awareness of the markets in which we operate lead us to believe that demand for the types of products we sell should grow in tandem with the industry.

The North American Cannabis Landscape

United States and Territories.

Eighteen states, and the District of Columbia, have legalized cannabis for non-medical adult use with additional states, such as Oklahoma and Pennsylvania, actively considering the legalization of cannabis for non-medical adult use.

An additional twenty-six states have legalized medical cannabis in some form, with certain of those states permitting only low tetrahydrocannabinol ("THC") oils for a limited class of patients.

Only six states continue to prohibit cannabis entirely.

Notwithstanding the continued trend toward further state legalization, cannabis continues to be categorized as a Schedule I controlled substance under the Federal Controlled Substances Act (the “CSA”) and, accordingly, the cultivation, processing, distribution, sale and possession of cannabis violate federal law in the United States as discussed further in Item 1A under the heading "Risk Factors." Our business depends partly on continued purchases by businesses and individuals selling or using cannabis pursuant to state laws in the United States or Canadian and provincial laws.

We believe support for cannabis legalization in the United States is gaining momentum.

According to a November 2021 poll by Gallup, public support for the legalization of cannabis in the United States has increased from approximately 12% in 1969 to approximately 68% in 2021.

In 2020, five states passed ballot initiatives legalizing either adult use or medical cannabis.

In 2021, Connecticut, New Mexico and Virginia legalized adult use cannabis, in addition to several more states legalizing medical cannabis, further evidencing the continued momentum of state legalization initiatives, as well as the public's support for cannabis legalization.

The following map from the National Cannabis Industry Association illustrates the states that have fully legalized adult-use cannabis (for medical and recreational purposes), states that have partially legalized cannabis (for medical purposes only), and states that have legalized cannabis use in a limited capacity (as of February 17, 2022).

Twenty-one states, and the District of Columbia, have legalized cannabis for non-medical adult use with additional states, such as Ohio, actively considering the legalization of cannabis for non-medical adult use.

A n additional eighteen states have legalized medical cannabis in some form, with cer tain of those states permitting only low tetrahydrocannabinol ("THC") oils for a limited class of patients.

Notwithstanding the continued trend toward further state legalization, cannabis continues to be categorized as a Schedule I controlled substance under the Federal Controlled Substances Act (the “CSA”) and, accordingly, the cultivation, processing, distribution, sale, and possession of cannabis violate federal law in the United States as discussed further in Item 1A under the heading "Risk Factors." However, President Biden announced on October 6 th , 2022, that he has asked the Secretary of Health and Human Services, along with the Attorney General, to initiate the administrative process to expeditiously review how cannabis is scheduled under Federal law which, combined with other statements, suggests cannabis’ current Schedule 1 status pursuant to the CSA may be set to improve in the not-too-distant future.

Our business depends partly on continued purchases by businesses and individuals selling or using cannabis and cannabis ancillary products pursuant to state laws in the United States.

Legal access to dried cannabis for medical purposes was first allowed in Canada in 1999.

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On June 21, 2018, the Government of Canada announced that Bill C-45 received Royal Assent.

On July 11, 2018, the Government of Canada published the Cannabis Regulations under the Cannabis Act.

The Cannabis Regulations provide more detail on the medical and recreational regulatory regimes for cannabis, including regarding licensing, security clearances and physical security requirements, product practices, outdoor growing, packaging and labelling, cannabis-containing drugs, document retention requirements, reporting and disclosure requirements, the new access to cannabis for medical purposes regime and industrial hemp.

On July 11, 2018, the Government of Canada published the Cannabis Regulations under the Cannabis Act, which has been subsequently amended.

medical purposes regime and industrial hemp.

The majority of the Cannabis Act and the Cannabis Regulations came into force on October 17, 2018, with additional Cannabis regulations coming into effect on October 17, 2019.

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The governments of every Canadian province and territory have implemented regulatory regimes for the distribution and sale of cannabis for recreational purposes.

Most provinces and territories have announced a minimum age of 19 years old, except for Québec and Alberta, where the minimum age will be 18.

Most provinces and territories have announced a minimum age of 19 years old, except for Alberta, where the minimum age will be 18.

Certain provinces, such as Ontario, have legislation in place that restricts the packaging of vapor products and the manner in which vapor products are displayed or promoted in stores.

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and Canadian markets combined, suggesting the potential of a very significant market.

The changes in regulations for cannabis products across Europe are expected to result in a market growth of approximately $37.0 billion in annual sales by 2027, a significant growth from approximately $3.5 billion in 2020.

Currently, Germany, Italy, Austria, Czech Republic, Finland, Portugal, Spain, the Netherlands, Denmark, Greece, Croatia, North Macedonia, Poland, Turkey, Malta, Romania, Belgium, Estonia, Lithuania, Moldova, Norway, San Marino, Sweden, Switzerland, Luxembourg, Cyprus, France, the U.K and Ireland allow limited cannabis use for medicinal purposes, with some of those countries operating pilot programs.

The changes in regulations for cannabis products across Europe are expected to result in a market growth.

for medical cannabis, of approximately $13.37 billion in annual sales by 2027, a significant growth from approximately $4.96 billion in 2022.

Many European Union countries allow limited cannabis use for medicinal purposes, with some of those countries operating pilot programs.

It has been widely reported that other countries are considering following suit.

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As the world of cannabis and its respective aesthetic continues to expand, we strive to keep our product mix relevant, popular, and innovative;

offering an array of products from vaporizers, grinders, to rolling papers and apparel lines.

As our product offerings continue to develop and expand, we expect our revenue by categories to increase accordingly.

offering an array of products from vaporizers, grinders, pipes and other inhalation devices to storage solutions, to rolling papers and even apparel lines.

As our product offerings continue to develop, we expect our revenue by categories to increase accordingly.

Inhalation Delivery Methods

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The Science and Popularity of Vaporization

Vaporizers have elements that are designed to quickly heat material, causing vaporization to occur without the carbon dioxide that is typically generated through any combustion.

Vaporizers continue to increase in popularity and as a preferred method of consumption among a variety of demographics of consumers.

They have elements that are designed to quickly heat material, causing vaporization to occur without the carbon dioxide that is typically generated through combustion.

The vapor byproduct is then immediately inhaled through the mouthpiece on the device itself, or through a hose or an inflatable bag.

Vaporizers can heat a variety of dry materials, viscous liquids and waxes, and provide a convenient way for users to consume the active ingredients.

Common ingredients used in vaporizers include tobacco, nicotine extracts, legal herbs, hemp-derived CBD, aromatherapy oils, cannabis and propylene glycol and glycerin blends.

Vaporizers can heat a variety of dry materials, viscous liquids and waxes, and provide a convenient way for users to consume the active ingredient such as tobacco, nicotine extracts, legal herbs, hemp-derived CBD, aromatherapy oils, cannabis, and propylene glycol and glycerin blends.

Vaporization Technology.

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desktop and portable vaporizers.

Our vaporizer offering spans over 230 distinct products across 30 brands.

Our vaporizer portfolio spans just shy of 200 distinct products across 12 brands.

Desktop Vaporizers.

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With the development of lithium batteries, vaporizers have now become portable.

Technological advances are resulting in lighter, sleeker and more visually-appealing units that are capable of quickly heating the material to the user’s desired temperature setting.

Portable vaporizers, of which pens are a sub-set, are differentiated by many features, including output, battery life, recharge time, material, capacity and design.

Technological advances are resulting in lighter, sleeker, and more visually-appealing units that are capable of quickly heating material to the user’s desired temperature setting.

Portable vaporizers, of which vape pens are a sub-set, are differentiated by many features, including output, battery life, recharge time, material, capacity, and design.

Other Methods of Consumption.

In addition to vaporizers, consumers have a wide array of methods of consumption at their disposal, including, among others, hand pipes, water pipes, rolling papers, and oral and topical delivery methods.

In addition to vaporizers, consumers have a wide array of methods of consumption at their disposal, including, hand pipes, water pipes, rolling papers, and oral and topical delivery methods.

Hand and Water Pipes.

We offer a diverse portfolio of over 200 hand and water pipes across 27 brands, including our own proprietary Higher Standards, Marley Natural and K.

Haring Glass brands.

We offer a diverse portfolio of over 200 hand and water pipes across five brands, including products within our Greenlane Brands.

Many display iconic, licensed logos and artwork, as pipes have grown into an artistic expression and are available in countless creative forms and functionality.

Hand pipes are small, portable and simple to use, and function by trapping the smoke produced from burning materials, which is then inhaled by the user.

Water pipes include large table-top models, bubblers and rigs, and are more complex because they incorporate the cooling effects of water to the burning materials before inhalation.

Hand pipes are small, portable and simple to use, and function by trapping the smoke produced from burning materials.

Water pipes include large table-top models, bubblers and rigs, and incorporate the cooling effects of water to the burning materials before inhalation.

Rolling Papers.

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These include papers, cones and wraps.

Our rolling papers category is comprised of over 100 products across 17 brands, inclusive of Greenlane Brand's own Vibes Rolling Papers brand, not including accessories such as rolling trays or tips.

Our rolling papers category is comprised of over 100 products across two unique brands, not including accessories such as rolling trays or tips.

Our Competitive Strengths

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A Clear Market Leader in an Attractive Industry.

We are a leading global platform for the development and distribution of premium cannabis accessories, packaging, vape solutions, and lifestyle products, reaching over 8,500 retail locations, including, licensed cannabis dispensaries, smoke shops, and specialty retailers.

We also own and operate one of the industry’s most visited North American direct-to-consumer e-commerce websites, Vapor.com, as well as several industry-leading e-commerce platforms, including Higherstandards.com, Aerospaced.com, DaVincivaporizer.com, Vaposhop.com, and Eycemolds.com.

We are a leading global platform for the development and distribution of premium cannabis accessories, packaging, vape solutions, and lifestyle products, reaching thousands of retail locations, including, licensed cannabis dispensaries, smoke shops, head shops, and specialty retailers.

We also own and operate one of the industry’s most visited North American direct-to-consumer e-commerce websites, Vapor.com, as well as PuffItUp.com, and Vaposhop which serves the European market.

We also sell our proprietary products direct to consumers via DaVincivaporizer.com, Higherstandards.com, Eycemolds.com, and MarleyNaturalShop.com.

Market Knowledge and Understanding.

Because of our experience and our extensive, long-term industry relationships, we believe we have a deep understanding of customer needs and desires in our Industrial Goods and Consumer Goods business segments.

Because of our experience and our extensive, long-term industry relationships, we believe we have a deep understanding of customer needs and desires in our Consumer Goods and Industrial Goods business segments.

This allows us to influence customer demand and the pipeline between product manufacturers, suppliers, advertisers and the marketplace.

We have also established strong relationships with a wide array of industry participants including leading MSOs, SSOs, retailers, and third party ancillary product producers.

Comprehensive and Best-in-Class Product Offering.

We offer a curated portfolio of products and accessories across all major categories with diverse, best-in-class offerings that cater to our customers' needs.

We offer a curated portfolio of products and accessories across many major categories with diverse, best-in-class offerings that cater to our customers' needs.

This comprehensive and best-in-class product offering creates a “one-stop shop" for many of our customers and positively distinguishes us from our competitors.

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We believe our entrepreneurial, results-driven culture fosters highly-dedicated employees who provide our customers with superior service.

We invest in our talent by providing every sales representative with an extensive and ongoing education, and have successfully developed programs that provide comprehensive product knowledge and the tools needed to have a unique understanding of our customers’ personalities and decision-making processes.

We invest in our talent by providing ongoing training and have successfully developed programs that provide comprehensive product knowledge and tools needed to have a unique understanding of our customers’ goals and decision-making processes.

We believe we offer superior services and solutions due to our comprehensive product offering, proprietary industry data and analytics, product expertise and quality of service.

We deliver products to our customers in a precise, safe and timely manner with complementary support from our dedicated sales and service teams.

Our industry knowledge, market reach and resources allow us to establish trusted professional relationships with many of our product suppliers.

We generate substantially all of our net sales from products manufactured by others.

We have strong relationships with many large, well-established suppliers, and seek to establish distribution relationships with smaller or more recently established manufacturers in our industry.

While we purchase our products from over 300 suppliers, a significant percentage of our net sales is dependent on sales of products from a small number of key suppliers.

We believe there is a trend of suppliers in our industry to consolidate their relationships to do more business with fewer distributors.

We believe our ability to help maximize the value and extend the distribution of our suppliers’ products has allowed us to benefit from this trend.

The efforts of our senior management team have been integral to our relationships with our suppliers.

We provide our employees with an entrepreneurial culture, a safe work environment, financial incentives and career development opportunities.

In 2022, we launched our new business to business ("B2B") customer portal at Wholesale.Greenlane.com which provides our business customers seamless access to our catalog of products for purchase 24-hours a day, 365 days a year.

Consumers can access our products easily by purchasing from our e-commerce properties or access many of our products via large marketplaces such Amazon.

Our industry knowledge, market reach, and resources allow us to establish trusted relationships with many industry suppliers.

Our senior management team makes tremendous efforts to establish and build these key relationships to help ensure Greenlane has a strong supply chain established for in-demand products at favorable pricing.

Our suppliers can be categorized into two buckets, factories that produce our Greenlane Brand’s products, as well as some generic products, and other third party branded products (who either manufacture themselves or outsource production) that Greenlane will, in essence, resell.

While we purchase our products from over 150 suppliers, a significant percentage of our net sales is dependent on sales

of products from a small number of key suppliers, which is why strong relationships are essential to our future success.

An important reason we have elected to focus on our Greenlane Brands is, since we own the brand itself (or license it), we can control which factory produces our products.

Generally, there are a variety of capable factory partners and we are able to leverage our Greenlane Brands to negotiate better pricing and service.

When reselling an established third-party brand’s products, we are somewhat beholden to the one supplier who owns or distributes that brand.

However, we do believe there is a trend of third-party branded suppliers in our industry to consolidate their relationships to do more business with fewer distribution partners.

We believe our established track record, historical relationships, ability to be value-added, and overall size and scale position us to benefit from this trend.

We aim to recruit best-in-class talent to join our Greenlane team.

We provide our employees with an entrepreneurial culture, a safe, fun and fast-paced work environment, financial incentives and career development opportunities.

Experienced and Proven Management Team Driving Organic and Acquisition Growth.

We believe our management team is among the most experienced in the industry.

Our senior management team brings experience in cannabis, accounting, mergers and acquisitions, financial services, consumer-packaged goods, retail operations, third-party logistics, information technology, product development and specialty retail, and an understanding of the cultural nuances of the industry that we serve.

We recently revamped our management team to directly align with our strategic goals and initiatives.

Our management team features vast relevant experience in consumer-packaged goods, product development, brand building, and e-commerce.

In addition, our management team has expertise in accounting and finance, mergers and acquisitions, supply chain, information technology, and operations.

Most importantly, our senior team has vast experience in the cannabis industry and other industries we serve, along with an understanding and appreciation for the historical and cultural nuances, including the social justice components.

Our Operating Strategies

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Plan to Accelerate Path to Profitability and Capitalize the Business

In March 2022, we implemented a new strategic plan (the "2022 Plan") to accelerate our path to profitability and capitalize the business in a non-dilutive manner by reducing our headcount and facility footprint, selling the Company's headquarters, disposing non-core assets, discontinuing and selling lower-margin third-party brands, and securing an asset based loan to support the Company's long-term working capital needs.

Management believes that the 2022 Plan will significantly reduce costs, help accelerate the Company's path to profitability, support the growth of the business in a non-dilutive manner, and allow the Company to reinvest capital into its highest margin and highest growth potential product lines, such as its Greenlane Brands.

In today’s economic environment, not to mention the environment of the cannabis industry itself, the key focus for many companies is profitability.

At Greenlane, we are hyper focused on getting our business profitable and well-capitalized for long-term sustainability.

On March 10, 2022, we announced our strategic plan (the “2022 Plan”) to reduce our cost structure, increase liquidity and accelerate our path to profitability.

The 2022 Plan included multiple reductions in force, reduction of facility footprints worldwide, a sale leaseback of our headquarters building, disposition of non-core assets, discontinuation of lower-margin third-party brands, increase of prices on select products, and securing an asset-based loan (with respect to the sale of the Company’s headquarters building, discontinuation and disposition of non-core and lower-margin inventory and securing an asset-backed loan, the “Liquidity Initiatives”).

We have been working hard to right-size our business, focus on core areas, and reduce our overall cost structure while improving our margins in an effort to be profitable in 2023.

On June 22, 2022, we provided an update on the Liquidity Initiatives.

The Liquidity Initiatives generated more than $30.0 million of liquidity on a non-dilutive basis by the end of 2022.

On July 19, 2022, Warehouse Goods entered into that certain Membership Interest Purchase Agreement and supporting documents to sell our 50% stake in VIBES Holdings LLC for total consideration of $4.6 million in cash.

Additionally, 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 as guarantors, the parties thereto from time to time as lenders (the “Lenders”), and WhiteHawk Capital Partners LP, as the agent for the Lenders.

As described in 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).

Subsequently, on August 16, 2022, 1095 Broken Sound Pwky entered into a Purchase and Sale Agreement with a third-party whereby 1095 Broken Sound agreed to sell a certain parcel of real estate including our headquarters building in Boca Raton, Florida for total consideration of $9.95 million, and on September 22, 2022 we closed on the sale.

In 2022, we announced our plans to divest our packaging division.

The divestiture should allow us to further consolidate our warehouse footprint into one U.S.

warehouse for our Consumer Goods and remaining Industrial Goods.

This initiative, combined with restructuring some of our other initiatives, should allow us to reduce our overall cost-structure, and in combination, convert millions of dollars of inventory back into working capital, thereby significantly improving our balance sheet.

Finally, we are working to sell our excess & obsolete (“E&O”) inventory of lower-margin, non-strategic products, along with reducing our overall level of inventory on hand.

In May 2022, we commenced our official E&O sales program internally and have since sold more than $4.1 million of previously reserved E&O inventory.

Our management anticipates that the proceeds from these E&O sales, combined with a general sell-down of other non-core third-party brand inventory, will generate more than $10.0 million in liquidity.

Management believes that our strategic initiatives will significantly reduce costs, help accelerate the Company’s path to profitability, support the growth of the business in a non-dilutive manner, and allow the Company to reinvest capital into its highest margin and highest growth potential product lines, such as its Greenlane Brands.

Notwithstanding the 2022 Plan and Liquidity Initiatives, we were required to obtain additional capital through the sale of common stock and warrants in a public offering that closed in October 2022 and filed a Registration Statement on Form S-1 with the Securities and Exchange Commission in February 2023 seeking to register the offering of up to $8 million in units, which has not yet become effective.

See Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.

The October 2022 offering was completed and the February 2023 Form S-1 was filed, in order to meet short term funding needs, and we are still seeking to execute our strategic and other liquidity initiatives.

Developing A World-Class Portfolio of Proprietary Brands.

We intend to continue to develop a portfolio of our own proprietary brands, which over time has helped to improve our blended margins and create long-term value.

We intend to continue to develop a portfolio of our own proprietary brands (Greenlane Brands), which over time will help to increase our blended margins and create increased long-term value.

Our brand development is based upon our proprietary industry intelligence that allows us to identify market opportunities for new brands and products.

We leverage our distribution infrastructure and customer relationships to penetrate the market quickly with our proprietary brands and to gain placement in thousands of stores.

We leverage our distribution infrastructure and customer relationships to penetrate the market quickly with our proprietary brands and to gain placement in thousands of retail stores.

Currently, we sell such products directly to consumers through our brand websites and our e-commerce properties.

Our existing proprietary Greenlane Bands include VIBES Rolling Papers, Eyce silicone pipes, DaVinci vaporizers, Pollen Gear, the Marley Natural accessory line, Aerospaced & Groove grinders, Marley Natural, K.

Haring Glass Collections, and Higher Standards.

In creating, acquiring, and expanding our proprietary brands, we intend to stay mindful of our key supplier relationships and to identify opportunities within our product portfolio and in the market where we can introduce or acquire compelling products that do not directly compete with the products of our core suppliers.

Over time, we expect an increasing percentage of our overall sales to be from our Greenlane Brands, which in turn should allow our gross margin to trend upwards and should allow for lasting brand value to be built in the marketplace.

USPS PACT Act Exemption

On January 11, 2022, we announced via press release that the United States Postal Service (the “USPS”) had approved our application for a business and regulatory exemption to the PACT Act (with respect to the business and regulatory exemption granted by the USPS, the “PACT Act Exemption”), allowing us to ship vaporizers and accessories classified as electronic nicotine delivery systems (“ENDS”) products to other compliant businesses.

With this approval, over 97% of our total annual sales became eligible for shipment by freight, USPS and other major parcel carriers.

The PACT Act Exemption also enables us to partner with other businesses that ship ENDS products and had their supply chains disrupted by PACT Act compliance.

On June 24, 2022, we provided via press release an update on the progress of the PACT Act Exemption, following our successful implementation of the controls, processes and systems required by the USPS in connection with the shipment of ENDS products.

We expect the ability to fulfill ENDS orders with the USPS to allow us to reduce shipping costs, decrease fulfillment times and enhance the overall customer experience for approved wholesale customers.

Enhance Our Operating Margins.

We expect to enhance our operating margins as our business expands through a combination of additional product purchasing discounts, reduced inbound and outbound shipping and handling rates, reduced transaction processing fees, increased operating efficiencies and realization of benefits through leveraging our existing assets and distribution facilities.

Additionally, we expect that our operating margins will increase as our product mix continues to evolve to include a greater portion of our proprietary branded products.

We are committed to supporting our proprietary brands, such as DaVinci, Eyce, Higher Standards, VIBES and Pollen Gear, which offer significantly higher gross margins than supplier-branded products.

We expect to enhance our operating margins as our business expands through a combination of additional product purchasing discounts, reduced inbound and outbound shipping and handling rates, reduced transaction processing fees, increased operating efficiencies, and realization of benefits through leveraging our existing assets and consolidated distribution facilities.

Additionally, we expect that our operating margins will increase as our product mix continues to evolve to include a greater portion of our Greenlane Brands, which generally offer significantly higher gross margins than third-party branded products.

Lastly, we are focused on converting more of our overall sales to be completed through technology platforms such as our e-commerce consumer sites, large marketplace sites like Amazon, and our proprietary B2B ordering portal at Wholesale.Greenlane.com.

Transacting a higher percentage of our sales through automated technological platforms, versus the manual phone and email efforts in play today, should improve our overall operating margins.

Build Upon Strong Customer and Supplier Relationships to Expand Organically.

Our North American footprint and broad supplier relationships, combined with our regular interaction with our large and diverse customer base, provides us key insights and positions us to be a critical link in the supply chain for premium vaporization products and consumption accessories.

Our suppliers benefit from access to more than 8,500 brick and mortar retail locations as we are a single point of contact for improved production, planning and efficiency.

Our customers, in turn, benefit from our market leadership, talented sales associates, broad product offerings, high inventory availability, timely delivery and exceptional customer services.

Our suppliers benefit from access to thousands of brick and mortar retail locations as we are a single point of contact for improved production, planning and efficiency.

Our customers, in turn, benefit from our market leadership, talented sales force, broad product offerings, high inventory availability, timely delivery and exceptional customer service.

We believe our strong customer and supplier relationships will enable us to expand and broaden our market share in the premium vaporization products and consumption accessories marketplace and expand into new categories.

Execute on Identified Operational Initiatives.

We continue to evaluate operational initiatives to improve our profitability, enhance our supply chain efficiency, strengthen our pricing and category management capabilities, streamline and refine our marketing process and invest in more sophisticated information technology systems and data analytics.

In addition, we continue to further automate our distribution facilities and improve our logistical capabilities.

We are also taking steps to transition to a more centralized model with fewer, larger, highly automated facilities.

Prior to our merger with KushCo, KushCo made significant progress in 2021 towards this goal through closing two 3PL facilities and five self- managed warehouses (Washington, Michigan, and California), as well as consolidating into our new Moreno Valley, single-site California warehouse, which will streamline processes and further reduce operational costs going forward.

We believe we will continue to benefit from these and other operational improvements.

Pursue Value-Enhancing Strategic Acquisitions.

Through our acquisitions of VaporNation (Better Life Holdings, LLC), Pollen Gear LLC, and Conscious Wholesale, we have added new markets within the United States and Europe, new product lines, talented employees and operational best

On March 2, 2021, we acquired substantially all the assets of Eyce, which further diversified our Greenlane Brand offerings through the integration of Eyce premium silicon smoking products and accessories.

Effective November 30, 2021, we acquired DaVinci, which expanded our Greenlane Brands portfolio and intellectual property pipeline through the integration of DaVinci premium portable vaporizers.

On March 2021, we acquired substantially all of the assets of Eyce, which further diversified our Greenlane Brand offerings through the integration of Eyce premium silicone smoking products and accessories.

On November 30, 2021, we acquired DaVinci, which expanded our Greenlane Brands portfolio and intellectual property pipeline of premium portable vaporizers.

Given our current stock price level, we have decided to temporarily pause our acquisition activity.

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We believe our employees are the key drivers of our success, and we aim to recruit, train, promote and retain the most talented and success-driven personnel in the industry.

Our size and scale enable us to offer structured training and career path opportunities for our employees, while in our sales and marketing teams, we have built a vibrant and entrepreneurial culture that rewards performance.

Our size and scale enable us to offer structured training and career path opportunities for our employees, and within our sales and marketing teams, we have built an entrepreneurial culture that rewards performance.

We are committed to being the employer of choice in our industry.

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As of March 28, 2023, we had 145 full-time employees.

Approximately 200 were employed in the U.S., 2 were employed in Canada, and 54 were employed in Europe.

Approximately 127 were employed in the U.S., and 18 were employed in Europe.

None of our employees are represented by a labor union.

We have never experienced a labor-related work stoppage.

As part of our 2022 Plan, we completed a reduction in force in March 2022, which we expect to result in approximately $8.0 million in annualized cash compensation cost savings.

As part of our 2022 Plan, we completed a series of reductions in force during 2022, which we expect to result in approximately $8.0 million in annualized cash compensation cost savings.

We believe our current headcount and resources are sufficient to execute our plan of achieving profitability in the near-term, while remaining flexible to scale our hiring as industry demand and our sales grow.

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never settle, never follow, and never disrespect.

Employee Health and Safety during COVID-19

The health and safety of our employees is a top priority for us.

During COVID-19, we were deemed an essential industry and as a result, we were very active in monitoring and tracking all relevant data, including guidance from local, national, and international health agencies.

Our actions included:

• Allowing employees to work remotely where feasible;

• Implemented enhanced safety measures including mandatory face coverings, physical distance requirements, temperature checks, deep cleaning and disinfectant protocols, and hand sanitizing stations for employees continuing critical on-site work at all locations;

• Provide employee-wide training on COVID-19 safety measures;

• Restrict company travel to essential business travel that requires prior multi-level approvals.

Our Human Resources and Safety teams are continuing to communicate to our employees as more information is available and continues to evaluate our operations considering federal, state, and local guidance.

Culture and Engagement

We exist to elevate all elements of the consumption experience.

We are the driving force behind broadening accessibility to best-in-class ancillary products.

We cultivate a passionate culture that empowers our team to thrive within our rapidly evolving industry.

Our values are to:

never settle, never follow, and never disrespect.

We envision a world where humanity is free to enjoy mother nature’s magic, and we pledge that each of our employees will play an integral role in helping us make our vision a reality.

Everything we do is powered by our vision and core values and our culture reflects that.

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By being open, honest, and transparent, our employees feel more actively engaged in our success.

Total Rewards and Pay Equity

Total Rewards, Pay Equity and Retention

We strive to attract and retain diverse, high caliber employees who raise the talent bar by offering competitive compensation and benefit packages, regardless of their gender, race, or other personal characteristics.

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We provide employee salaries that are competitive and consider factors such as an employee’s role and experience, the location of their job and their performance.

In addition to our competitive salaries, to enhance our employees’ sense of participation in the company and to further align their interests with those of our stockholders, we offer equity packages to all employees.

Development and Retention

We strive to hire, develop, and retain talent that continuously raises the performance bar.

We encourage, support, and compensate our employees based on our philosophy of recognizing and rewarding exceptional performance.

We also encourage, support, and compensate our employees based on our philosophy of

recognizing and rewarding exceptional performance.

We believe that performance and development is an ongoing process in which all employees should be active participants.

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Although it is difficult to find reliable independent research, we believe there is a vast number of potential B2B customers in North America comprised of licensed cannabis dispensaries, smoke shops, and specialty retailers.

We currently serve over 8,500 of these retail locations.

Our B2B customers compete primarily on the basis of the breadth, style, quality, pricing and availability of merchandise, the level of customer service, brand recognition and loyalty.

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We believe there are only a select few wholesale distributors carrying a complete line of premium vaporization products and consumption accessories.

Also, in 2022 we launched our new enhanced wholesale shopping business through our business ("B2B") customer portal at Wholesale.Greenlane.com which provides our business customers seamless access to our catalog of products for purchase 24-hours a day, 365 days a year.

The wholesale website gives customers an improved user experience that features an easy-to-use layout to streamline processes and allows customers to interact with us at their convenience.

Business-to-Consumer .

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Further, we provide fulfillment services to the owners of some of these websites as they do not carry their own inventory, are not able to ship as efficiently as we do and are unable to meet certain regulatory requirements, such as sales tax collection.

Our competitors’ websites rank in many search categories below our primary e-commerce website, Vapor.com, which has its own dedicated design, social media and search engine optimization ("SEO") teams.

Our primary e-commerce website, Vapor.com, ranks above many of our competitors' websites in various search engine categories.

We believe our market knowledge, large product selection, relationships with vaporizer brands, in-house search engine optimization teams, social media focus and distribution facilities will enable us to remain a market leader in e-commerce.

We own a number of registered trademarks and service marks, including without limitation, trademarks in the relevant classes of goods for Greenlane, Higher Standards, VIBES, Aerospaced, Groove, Pollen GearTM, Eyce, and most recently DaVinci.

We also license certain trademarks and other intellectual property, most notably those associated with our Marley Natural and K.

Haring Glass Collection brands.

We own a number of registered trademarks and service marks, including without limitation, trademarks in the relevant classes of goods for Greenlane, Higher Standards, Aerospaced, Groove, Pollen Gear, Eyce, and most recently DaVinci.

We also license certain trademarks and other intellectual property, most notably those associated with our Marley Natural and Keith Haring brands.

Solely for convenience, trademarks and trade names referred to in this Form 10-K may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names.

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In 2021, Connecticut and Virginia passed measures legalizing adult-use cannabis.

In 2022, Maryland and Missouri passed legislation legalizing adult-use cannabis.

Other states appear likely to legalize either medical or adult-use cannabis in 2023 and beyond.

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The ultimate impact of these policy developments will depend upon, among other things, the types and quantities of products we sell that are encompassed by each ban, the success of legal challenges to the bans, our suppliers' actions to adapt to actual and potential regulatory changes, and our ability to provide alternative products.

In addition, 27 states and the District of Columbia have recently adopted laws imposing taxes on liquid nicotine.

Additionally, at least eleven states have adopted laws imposing taxes on vaporizers.

In addition, 30 states and the District of Columbia have recently adopted laws imposing taxes on vaping products.

Additionally, as of 2022, at least 31 states have adopted laws imposing taxes on vaporizers.

These taxes will result in increased prices to end consumers, which may adversely impact the demand for our products.

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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-K

Item 1. Business