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Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2022-03-31 · 471 added, 449 removed, 938 unchanged (50% of the section changed)

1 unchanged sentence

Index to Consolidated Financial Statements Page

Report of Independent Registered Public Accounting Fir m Marcum LLP PC AOB ID:

Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP PCAOB ID:

Report of Independent Registered Public Accounting Firm Marcum LLP PCAOB ID:

Consolidated Balance Sheets

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Greenlane Holdings, Inc.

(the “Company”) as of December 31, 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited the adjustments to the 2020 financial statements to retrospectively apply the change in segment reporting, as described in Note 12 of the financial statements.

In our opinion, such adjustments are appropriate and have been properly applied.

We were not engaged to audit, review, or apply any procedures to the 2020 financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2020 financial statements taken as a whole.

We have audited the accompanying consolidated balance sheets of Greenlane Holdings, Inc.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle – Outbound Shipping and Handling Costs

As discussed in Note 2 to the financial statements, the Company has elected to retrospectively change its method of accounting for outbound shipping and handling costs effective January 1, 2021.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum LLP

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March 31, 2023

Report of Independent Registered Public Accounting Firm

To the shareholders and the Board of Directors of Greenlane Holdings, Inc.

Opinion on the Financial Statements

We have audited, before the effects of the retrospective adjustments to the disclosures for a change in the composition of reportable segments discussed in Note 12 to the consolidated financial statements, the consolidated balance sheet of Greenlane Holdings, Inc.

and subsidiaries (the "Company") as of December 31, 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the "financial statements") (the 2020 consolidated financial statements before the effects of the adjustments discussed in Note 12 to the financial statements are not presented herein).

In our opinion, the 2020 financial statements, before the effects of the retrospective adjustments to the disclosures for a change in the composition of reportable segments discussed in Note 12 to the financial statements, present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to the retrospective adjustments to the disclosures for a change in the composition of reportable segments discussed in Note 12 to the consolidated financial statements, and accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied.

Those retrospective adjustments were audited by other auditors.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Boca Raton, Florida

March 31, 2021

We began serving as the Company’s auditor in 2019.

In 2021, we became the predecessor auditor.

GREENLANE HOLDINGS, INC.

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Cash $ 6,458 $ 12,857

Restricted cash 5,718 —

Accounts receivable, net of allowance of $ 4,826 and $ 1,285 at December 31, 2022 and 2021, respectively

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Customer deposits 3,983 7,924

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

Current portion of notes payable, including $ 0 and $ 8,000 owed to related party at December 31, 2022 and 2021, respectively

Current portion of operating leases 1,528 3,091

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Accumulated deficit ( 171,365 ) ( 55,544 )

Accumulated other comprehensive income (loss) 324 29

Accumulated other comprehensive income 55 324

Total stockholders’ equity attributable to Greenlane Holdings, Inc.

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Total liabilities and stockholders’ equity $ 146,053 $ 285,827

* 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.

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General and administrative 41,000 47,874

Goodwill impairment charge — 8,996

Goodwill and indefinite-lived intangibles impairment charge 71,360 —

Depreciation and amortization 9,067 4,689

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Interest expense ( 2,450 ) ( 574 )

Other income (expense), net ( 117 ) 1,902

Employee retention credits 4,854 —

Other expense, net ( 541 ) ( 117 )

Total other income (expense), net 1,863 ( 691 )

Loss before income taxes ( 125,871 ) ( 53,413 )

Provision for income taxes 10 194

(Benefit from) provision for income taxes ( 13 ) 10

Net loss ( 125,858 ) ( 53,423 )

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Weighted-average shares of Class A common stock outstanding - basic and diluted (Note 9)*

38,595 11,947

Other comprehensive income (loss):

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$ ( 116,029 ) $ ( 30,288 )

*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.

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Equity-based compensation 9 — — — — — 3,131 — — 2,543 5,674

Other comprehensive income — — — — — — — — 101 95 196

Member distribution — — — — — — — ( 604 ) — — ( 604 )

Joint venture consolidation — — — — — — — — — 189 189

Issuance of Class A common stock 686 7 — — — — 2,056 — — — 2,063

Exchanges of noncontrolling interest for Class A common stock 354 4 ( 260 ) — ( 5,738 ) ( 1 ) 12,244 — — ( 12,247 ) —

Cancellation of Class B common stock due to forfeitures — — ( 244 ) — — — 452 — — ( 452 ) —

Balance December 31, 2020 13,322 133 3,491 1 76,039 8 39,742 ( 24,848 ) 29 54,192 69,257

Net loss — — — — — — — ( 30,583 ) — ( 22,840 ) ( 53,423 )

Equity-based compensation 187 2 — — — — 3,129 — — 2,543 5,674

Exchanges of noncontrolling interest for Class A common stock 7,088 71 ( 5,175 ) ( 1 ) ( 5,738 ) ( 1 ) 12,178 — — ( 12,247 ) —

Exercise of Class A common stock options and warrants 301 3 — — — — 304 — — — 307

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Balance December 31, 2021 4,260 43 1,087 — — — 229,705 ( 55,544 ) 324 21,836 196,364

Net loss — — — — — — — ( 115,760 ) — ( 10,098 ) ( 125,858 )

Equity-based compensation 109 ( 2 ) — — — — 1,413 — — 259 1,670

Issuance of Class A shares, net of costs - ATM Program 853 9 — — — — 9,016 — — — 9,025

Issuance of Class A shares - contingent consideration 191 2 — — — — 3,484 — — — 3,486

Issuance of Class A shares, net of costs - June 2022 Offering 585 6 — — — — 5,034 — — — 5,040

Issuance of Class A shares, net of costs - October 2022 Offering 8,333 84 — — — — 6,926 — — — 7,010

Issuance of Class A shares - Amended Eyce APA (Note 3) 72 1 — — — — 656 — — — 657

Issuance of Class A common stock and pre-funded warrants, net of costs 495 — — — — — — — — — —

Reclassification adjustment for gain included in net loss (Note 4) — — — — — — — — ( 332 ) — ( 332 )

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

Exchanges of noncontrolling interest for Class A common stock 1,087 9 ( 1,087 ) — — — 10,282 — — ( 10,291 ) —

Other comprehensive income — — — — — — — — 63 84 147

Other — — — — — — — ( 61 ) — — ( 61 )

Balance December 31, 2022 15,985 $ 152 — $ — — $ — $ 266,516 $ ( 171,365 ) $ 55 $ 1 $ 95,359

* 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.

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Equity-based compensation expense 2,298 5,715

Goodwill impairment charge — 8,996

Goodwill and indefinite-lived intangibles impairment charge 71,360 —

Change in fair value of contingent consideration 509 189

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

Change in provision for doubtful accounts 3,311 236

(Gain) loss related to indemnification asset ( 1,692 ) 4,464

Loss on disposal of assets 109 579

Impairment of held-for-sale assets 97 376

Unrealized loss on equity investments 171 —

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

(Gain) loss on disposal of fixed assets 1,398 109

(Gain) loss on disposal of held-for-sale assets ( 705 ) 97

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

Realized and unrealized loss on equity investments 1,214 171

Realized (gain) loss on interest rate swap contract (Note 4) ( 408 ) —

Amortization of deferred financing costs and debt discount 644 23

Other ( 124 ) 63

Changes in operating assets and liabilities, net of the effects of acquisitions:

Decrease (increase) in accounts receivable 4,910 ( 1,393 )

Decrease in inventories 5,730 6,996

Decrease (increase) in inventories 26,345 5,730

Decrease (increase) in vendor deposits 7,899 ( 43 )

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Purchase consideration paid for acquisitions, net of cash acquired — ( 15,646 )

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

Purchases of property and equipment, net ( 2,784 ) ( 4,400 )

Proceeds from sale of assets held for sale 9,593 675

Proceeds from sale of equity investments 649 —

Purchase of intangible assets, net — ( 320 )

Net cash used in investing activities ( 19,691 ) ( 4,144 )

Net cash provided by (used in) investing activities 12,025 ( 19,691 )

Cash flows from financing activities:

Member distributions ( 200 ) ( 604 )

Proceeds from issuance of Class A common stock and pre-funded warrants, net of costs 32,643 —

Proceeds from issuance of Class A common stock, net of costs 21,075 32,643

Proceeds from exercise of stock options and warrants — 307

Proceeds from issuance of note payable to related party, net of costs 7,868 —

Repayments of notes payable ( 1,075 ) ( 190 )

Proceeds from issuance of note payable to related party, net — 7,868

Proceeds from Asset-Based Loan 14,550 —

Debt issuance costs ( 1,472 ) ( 220 )

Payments on Eyce and DaVinci promissory notes ( 3,407 ) ( 908 )

Payments on Real Estate Note ( 7,958 ) ( 167 )

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 ) ( 360 )

Net cash provided by (used in) financing activities 38,963 ( 1,063 )

Net cash provided by financing activities 13,930 38,963

Effects of exchange rate changes on cash ( 210 ) 480

Net (decrease) in cash ( 17,578 ) ( 17,338 )

Cash, as of beginning of the period 30,435 47,773

Cash, as of end of the period $ 12,857 $ 30,435

Net (decrease) in cash and restricted cash ( 681 ) ( 17,578 )

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

Cash and restricted cash, as of end of the period $ 12,176 $ 12,857

GREENLANE HOLDINGS, INC.

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

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)

Reconciliation of cash and restricted cash to consolidated balance sheets

For the year ended December 31

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 $ 6,458 $ 12,857

Restricted cash 5,718 —

Total cash and restricted cash, end of period $ 12,176 $ 12,857

Supplemental disclosures of cash flow information

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Lease liabilities arising from obtaining finance lease assets $ — $ 119

Lease liabilities arising from obtaining operating lease right-of-use assets, net of the effect of acquisitions $ — $ 793

Non-cash investing and financing activities:

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Decrease in non-controlling interest as a result of exchanges for Class A common stock $ ( 10,291 ) $ ( 12,247 )

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

Unpaid contingent purchase consideration $ — $ 6,857

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We have a board of directors and executive officers, but no employees.

All of our assets are held and all of the employees are employed by the Operating Company.

All of our assets are held and all of the employees are employed by a wholly owned subsidiary of the Operating Company.

We have the sole voting interest in, and control the management of, the Operating Company, and we have the obligation to absorb losses of, and receive benefits from, the Operating Company, that could be significant.

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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, the KushCo financial information included in our consolidated financial statements for year ended December 31, 2021 is for the period commencing on August 31, 2021 (the date of the closing of the merger) through December 31, 2021.

As such, the KushCo financial information included in our consolidated financial statements for the year ended December 31, 2021 is for the period commencing on August 31, 2021 (the date of the closing of the merger) through December 31, 2021.

Also, KushCo financial information is included in our consolidated financial statements for the year ended December 31, 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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For further information about the merger with KushCo, see "Note 3 - Business Acquisitions."

We merchandise premium cannabis accessories, child-resistant packaging, specialty vaporization solutions and lifestyle products in the United States, Canada and Europe, serving a diverse and expansive customer base with more than 8,500 retail locations, including licensed cannabis dispensaries, smoke shops, and specialty retailers.

We merchandise premium cannabis accessories, child-resistant packaging, specialty vaporization solutions and lifestyle products in the United States, Canada and Europe, serving a diverse and expansive customer base with thousands of retail locations, including licensed cannabis dispensaries, smoke shops, and specialty retailers.

We distribute to multi-state operators ("MSOs"), licensed producers ("LPs"), other retailers and brands through wholesale operations under our Industrial Goods business segment, and to consumers through both wholesale operations as well as e-commerce activities and our retail stores under our Consumer Goods business segment.

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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 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.

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 December 31, 2021:

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

Class A Shares (as converted) (2)

Economic Ownership in the Operating Company (3)

Voting Interest in Greenlane (4)

Economic Interest in Greenlane (5)

Class A 85,209,651 85,209,651 79.7 % 79.7 % 100.0 %

Class B 21,744,500 21,744,500 20.3 % 20.3 % — %

Total 106,954,151 106,954,151 100.0 % 100.0 % 100.0 %

(1) Represents the total number of outstanding shares for each class of common stock as of December 31, 2021.

(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.

Shares of Class B common stock would be canceled, without consideration, on a one-to-one basis pursuant to the terms and subject to the conditions of the Operating Agreement.

(3) Represents the indirect economic interest in the Operating Company through the holders' ownership of common stock.

(4) Represents the aggregate voting interest in us through the holders' ownership of Common Stock.

Each share of Class A common stock and Class B common stock entitles its holder to one vote per share on all matters submitted to a vote of our stockholders.

(5) Represents the aggregate economic interest in us through the holders' ownership of Class A common stock.

As of December 31, 2022, all Common Units of the Operating Company and Class B common stock had been exchanged for Class A common stock, and we owned 100 % of the voting and economic interests in Greenlane through the holders' ownership of Class A common stock.

See "Note 9 - Stockholder's Equity."

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Our principal sources of liquidity at December, 31 2021 consisted of cash on hand, future cash anticipated to be generated from operations, and our ATM Program described below.

In August 2021, we established an "at-the-market" equity offering program (the "ATM Program") that provides for the sale of shares of our Class A common stock having an aggregate offering price of up to $ 50 million, from time to time.

Net proceeds from sales of our shares of Class A common stock under the ATM Program are expected to be used to fund potential business acquisitions and for working capital and general corporate purposes.

Since the launch of the ATM program and through March 28, 2022, we sold 11,685,970 shares of our Class A common stock under the ATM Program, which generated gross proceeds of approximately $ 9.4 million.

In December 2021, we entered into the Bridge Loan with Aaron LoCascio, our co-founder, former Chief Executive Officer and President, and a current director of the Company, in which Mr.

LoCascio provided us with a loan in the principal amount of $ 8.0 million.

Accrued interest at a rate of 15.0 % is due monthly, and principal amount is due in full in June 2022.

covenants restricting our ability to incur further indebtedness and engage in certain asset dispositions until the earlier of June 30, 2022 or the Bridge Loan has been fully repaid.

We also have an effective shelf registration statement on Form S-3 and may opportunistically conduct securities offerings from time to time in order to meet our liquidity needs.

Reverse Stock Split

On August 4, 2022, we filed a Certificate of Amendment (the "Certificate of Amendment") to the A&R Charter with the Secretary of State of the State of Delaware, which effected a one-for-20 reverse stock split (the “Reverse Stock Split”) of our issued and outstanding shares of Class A common stock and Class B common stock (collectively, the "Common Stock") at 5:01 PM Eastern Time on August 9, 2022.

As a result of the Reverse Stock Split, every 20 shares of Common Stock issued and outstanding were converted into one share of Common Stock.

We paid cash in lieu of fractional shares, and accordingly, no fractional shares were issued in connection with the Reverse Stock Split.

The Reverse Stock Split did not change the par value of the Common Stock or the authorized number of shares of Common Stock.

All outstanding options, restricted stock awards, warrants and other securities entitling their holders to purchase or otherwise receive shares of our Common Stock have been adjusted as a result of the Reverse Stock Split, as required by the terms of each security.

The number of shares available to be awarded under our Amended and Restated 2019 Equity Incentive Plan have also been appropriately adjusted.

See "Note 10 — Compensation Plans" for more information.

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

Our primary requirements for liquidity and capital are working capital, debt service related to recent acquisitions and general corporate needs.

Our primary sources of liquidity are our cash on hand and the cash flow that we generate from our operations, as well as proceeds from equity issuances, such as our June 2022 and October 2022 offerings, and our ATM program, each as described below.

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

For so long as our public float is less than $75 million, our ability to utilize the Shelf Registration to raise capital is limited, as further described below.

The Shelf Registration Statement registers shares of our Class A common stock, preferred stock, $ 0.0001 par value per share (the "preferred stock"), depository shares representing our preferred stock, warrants to purchase shares of our Class A common stock, preferred stock or depository shares, and rights to purchase shares of our Class A common stock or preferred stock that may be issued by us in a maximum aggregate amount of up to $ 200 million.

In August 2021, we filed a prospectus supplement and established an "at-the-market" equity offering program (the "ATM Program") that provides for the sale of shares of our Class A common stock having an aggregate offering price of up to $ 50 million, from time to time.

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.

However, we may be unable to access the capital markets because of current market volatility and the performance of our stock price.

We are in the process of securing an asset backed loan to assist us with working capital needs.

However, we can provide no assurances as to the timing of our entry into this loan or that we will enter into it at all.

We believe that our cash on hand, combined with our ability to access the capital markets, 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.

On March 31, 2022, the date on which our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the "2021 Annual Report") was filed with the SEC, the Shelf Registration Statement became subject to the offering limits set forth in Instruction I.B.6 because our public float was less than $75 million.

For so long as our public float is less than $75 million, the aggregate market value of securities sold by us under the Shelf Registration Statement (including our ATM Program) pursuant to Instruction I.B.6 during any twelve consecutive months may not exceed one-third of our public float.

Since the launch of the ATM program in August 2021 and through December 31, 2022, we sold shares of our Class A common stock which generated gross proceeds of approximately $ 12.7 million and we paid fees to the sales agent of approximately $ 0.4 million.

In light of our low cash position, we have been forced to sell stock under our ATM program at prices that may not otherwise be attractive and are dilutive.

We have offered $ 2.2 million in securities pursuant to Instruction I.B.6 in the twelve calendar months preceding the date of filing of this Annual Report on Form 10-K.

Following the completion of the June 2022 Offering (as defined below) 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 for a period of time.

On June 27, 2022, we entered into a securities purchase agreement with an accredited investor, pursuant to which we agreed to issue and sell an aggregate of 585,000 shares of our Class A common stock, pre-funded warrants to purchase up to 495,000 shares of our Class A common stock (the “June 2022 Pre-Funded Warrants”) and warrants to purchase up to 1,080,000 shares of our Class A common stock (the “June 2022 Standard Warrants” and, together with the June 2022 Pre-Funded Warrants, the “June 2022 Warrants”), in a registered direct offering (the “June 2022 Offering”).

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

All June 2022 Pre-Funded Warrants were exercised in July 2022, for de minimis net proceeds.

On August 9, 2022, we entered into an asset-based loan agreement dated as of August 8, 2022 (the “Loan Agreement”), which made available to the Company a term loan of up to $ 15.0 million.

On February 9, 2023, we entered into Amendment No.

2 to the Loan Agreement, in which we agreed to, among other things, voluntarily prepay approximately $ 6.6 million (inclusive of early termination fees and expenses) under the terms provided for under the Loan Agreement and the lenders under the Loan Agreement agreed to release $ 5.7 million in funds held in a blocked account pursuant to the terms of the Loan Agreement.

On 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, 1,377,780 October 2022 Pre-Funded Warrants and 16,666,670 October 2022 Standard Warrants.

The October 2022 Units were offered pursuant to a Registration Statement on Form S-1.

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

On February 3, 2023, we filed a Registration Statement on Form S-1 (the "February 2023 S-1") seeking to register the public offering of up to $ 8.0 million in units, which has not yet become effective.

We can provide no assurances as to whether the February 2023 S-1 will become effective, or whether we will undertake this public offering following the filing of this Annual Report on Form 10-K.

On February 16, 2023, two of our wholly owned subsidiaries, Warehouse Goods and Kim International LLC, entered into an agreement with a third-party institutional investor pursuant to which the investor purchased, for approximately $ 4.85 million in cash, an economic participation interest, at a discount, in all of our rights to payment from the United States Internal Revenue Service with respect to the employee retention credits filed by us under the Employee Retention Credit program.

We have completed several initiatives to optimize our working capital requirements.

We launched Groove, a new, innovative Greenlane Brands product line, which is accretive to gross profit, and we also rationalized our third-party brands product offering, which enables us to reduce inventory carrying costs and working capital requirements.

We are in the process of divesting the packaging product line, which is expected to provide liquidity and allow for ongoing substantial cost reductions.

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

We have made progress consolidating and streamlining our office, warehouse, and distribution operations footprint.

We have reduced our workforce by approximately 49 % throughout fiscal year 2022 to reduce costs and align with our revenue projections.

We believe tha t our cash on hand and cash flow from operating activities 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.

Our opinions concerning liquidity are based on currently available information.

To the extent this information proves to be inaccurate, or if circumstances change, future availability of trade credit or other sources of financing may be reduced and our liquidity could be adversely affected.

Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section titled “Risk Factors” in Item 1A of this Annual Report on Form 10-K for the year ended December 31, 2022.

Depending on the severity and direct impact of these factors on us, we may be unable to secure additional financing to meet our operating requirements on terms favorable to us, or at all.

Use of Estimates

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the collectability of accounts receivable;

the allowance for slow-moving or obsolete inventory;

the allowance f or slow-moving or obsolete inventory;

the realizability of deferred tax assets;

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

Voluntary Change in Accounting Principle

During the first quarter of 2022, we made a voluntary change in accounting principle to classify outbound shipping and handling costs associated with the distribution of products to our customers as a component of "general and administrative" costs within our consolidated statements of operations and comprehensive loss.

These costs were previously recorded as a component of "cost of sales" within our consolidated statements of operations and comprehensive loss.

We made the voluntary change in accounting principle because we believe the classification of outbound shipping and handling costs within "general and administrative" costs better reflects the selling effort and enhances the comparability of our financial statements with many of our industry peers.

In accordance with U.S.

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

For the year ended December 31, 2021

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

Cost of sales $ 138,381 $ ( 6,174 ) $ 132,207

Gross profit $ 27,679 $ 6,174 $ 33,853

General and administrative $ 41,700 $ 6,174 $ 47,874

Total operating expenses $ 80,401 $ 6,174 $ 86,575

Segment Reporting

We manage our global business operations through our operating and reportable business segments.

Due to our recent merger with KushCo, we reassessed and updated our operating segments.

Therefore, as of December 31, 2021, we had two reportable operating business segments:

Industrial Goods, which largely comprises KushCo's legacy operations, and 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"), which is a committee comprised of our Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), manage our business, make resource allocation and operating decisions, and evaluate operating performance.

These changes in operating segments align with how we manage our business as of the fourth quarter of 2021.

Segment disclosures within this Form 10-K have been retrospectively restated to reflect the change in segments.

As of December 31, 2022, we had two reportable operating business segments:

Industrial Goods and Consumer Goods.

Our reportable segments have been identified based on how our chief operating decision maker ("CODM"), which is a committee comprised of our Chief Executive Officer ("CEO") and our Chief Financial and Legal Officer, manage our business, make resource allocation and operating decisions, and evaluate operating performance.

See “Note 12—Segment Reporting.”

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We estimate the fair value of stock options using the Black-Scholes model on the grant date.

The Black-Scholes model requires us to use several variables to estimate the grant-date fair value of our equity-based compensation

awards including expected term, expected volatility and risk-free interest rates.

The Black-Scholes model requires us to use several variables to estimate the grant-date fair value of our equity-based compensation awards including expected term, expected volatility and risk-free interest rates.

Our equity-based compensation costs are recognized using a graded vesting schedule.

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As of December 31, 2022 and 2021, the carrying amount of our long-term debt approximated its fair value.

On a recurring basis, we measure and record contingent consideration and our interest-rate swap arrangement using fair value measurements in the accompanying consolidated financial statements.

On a recurring basis, we measure and record contingent consideration using fair value measurements in the accompanying consolidated financial statements.

See “Note 4—Fair Value of Financial Instruments.”

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We place our cash with high credit quality financial institutions, which provide insurance through the Federal Deposit Insurance Company.

At times, the balance in our accounts may exceed federal insured limits.

We perform periodic

evaluations of the relative credit standing of these institutions and do not expect any losses related to such concentrations.

At times, the balance in our accounts may exceed federally insured limits.

We perform periodic evaluations of the relative credit standing of these institutions and do not expect any losses related to such concentrations.

As of December 31, 2022, and 2021, approximately $ 0.8 million and $ 0.7 million, respectively, of our cash balances were in foreign bank accounts and uninsured.

As of December 31, 2022 and 2021, we had no cash equivalents.

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."

Accounts Receivable, net

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We write off accounts as uncollectible on a case-by-case basis.

We pledge accounts receivable as collateral for our Bridge Loan, see “Note 6—Debt.”

We pledge accounts receivable as collateral for our long-term debt, see “Note 6—Debt.”

Inventories, net

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At December 31, 2022 and 2021, the reserve for obsolescence was approximately $ 21.4 million and $ 21.3 million, respectively.

We pledge inventory as collateral for our Bridge Loan, see “Note 6— Debt.”

We pledge inventory as collateral for our long-term debt, see “Note 6— Debt.”

Vendor Deposits

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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.

We completed the sale of approximately $ 0.7 million of machinery included in "Assets held for sale" during the second quarter of 2021, and we completed the sale of the remaining balance as of December 31, 2021 of $ 0.1 million in "Assets held for sale" during the first quarter of 2022.

We recognized approximately $ 0.1 million and $ 0.4 million in impairment charges during the years ended December 31, 2021 and 2020, respectively.

Property and Equipment, net

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We expense costs for repairs and maintenance when incurred.

Property and equipment includes assets recorded under finance leases, see “Note 5—Leases.” We pledge property and equipment as collateral for our Bridge Loan, see “Note 6—Long Term Debt.”

and equipment includes assets recorded under finance leases, see “Note 5—Leases.” We pledge property and equipment as collateral for our long-term debt, see “Note 6—Long Term Debt.”

Impairment of Long-Lived Assets

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An impairment loss would be assessed when estimated undiscounted future cash flows from the operation and disposition of the asset group are less than the carrying amount of the asset group.

Asset groups have identifiable cash flows

and are largely independent of other asset groups.

Asset groups have identifiable cash flows and are largely independent of other asset groups.

Measurement of an impairment loss is based on the excess of the carrying amount of the asset group over its fair value.

Other than the impairment charge recognized on our assets held for sale as noted above, we did not recognize any other impairment charges for long-lived assets during the years ended December 31, 2021 and 2020.

Changes in our future operations and business lines could affect the estimated undiscounted future cash flows from the operation of certain long-lived assets, such as customer relationships, and may give rise to impairment losses in future periods.

Intangible Assets, net

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Impairments, if any, are based on the excess of the carrying amount over the fair value of the asset.

We recognized no impairment charges for intangible assets during the years ended December 31, 2021 and 2020.

For additional information about intangible assets, see "Note 3—Business Acquisitions" and "Note 8—Supplemental Financial Statement Information."

Investments in Equity Securities

Our investments in equity securities 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.

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 consolidated statements of operations and comprehensive loss.

Our investments in equity securities without readily determinable fair value consist of ownership interests in Airgraft Inc., Sun Grown Packaging, LLC ("Sun Grown") and Vapor Dosing Technologies, Inc.

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We elected to measure these securities under the measurement alternative election at cost minus impairment, if any, with adjustments through earnings for observable price changes in orderly transactions for the identical or similar investment of the same issuer.

We acquired our investments in Sun Grown and VIVA as part of our merger with KushCo, which we completed in August 2021.

We did not identify any fair value adjustments related to these equity securities during the years ended December 31, 2021 and 2020.

Investments in equity securities are included within "Other assets" in our consolidated balance sheets.

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dollars at current exchange rate at each balance sheet date for assets and liabilities and an appropriate average exchange rate for each applicable period within our consolidated statements of operations and comprehensive loss.

Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

The foreign currency translation adjustments are included in accumulated other comprehensive loss, a separate component of members’/stockholders’ deficit in our consolidated balance sheets.

Capital accounts ar e translated at their historical exchange rates when the capital transactions occurred.

The foreign currency translation adjustments are included in accumulated other comprehensive loss, a separate component of stockholders’ deficit in our consolidated balance sheets.

Other exchange gains and losses are reported within our consolidated statements of operations and comprehensive loss.

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Our proportional share of the Operating Company’s subsidiaries’ provisions are included in our consolidated financial statements.

As of December 31, 2022, we hold all the outstanding Common Units in the Operating Company and are the sole member.

As a result, starting in 2023, 100% of the Operating Company’s US and state income and expenses will be included in our US and state tax returns.

Our deferred income tax assets and liabilities are computed for differences between the tax basis and financial statement amounts that will result in taxable or deductible amounts in the future.

We compute deferred balances based on enacted tax laws and applicable rates for the periods in which the differences are expected to affect taxable income.

We compute deferred balances based on enacted tax laws

and applicable rates for the periods in which the differences are expected to affect taxable income.

A valuation allowance is recognized for deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent

If we determine we would be able to realize our deferred tax assets for which a valuation allowance had been recorded, then we would adjust the deferred tax asset valuation allowance, which would reduce our provision for income taxes.

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We provide no warranty on products sold.

Product warranty is provided by the manufacturers.

Our performance obligations for services are satisfied when the services are rendered within the arranged service period.

Total service revenue is not material and accounted for less than 0.1 % of revenues for the years ended December 31, 2021 and 2020.

Beginning with the first quarter of 2020, we entered into a limited number of bill-and-hold arrangements.

Each bill-and-hold arrangement is reviewed and revenue is recognized only when certain criteria have been met:

(i) the customer has requested delayed delivery and storage of the products by us, in exchange for a storage fee, because they want to secure a supply of the products but lack storage space, (ii) the risk of ownership has passed to the customer, (iii) the products are segregated from our other inventory items held for sale, (iv) the products are ready for shipment to the customer, and (v) the products are customized and thus we do not have the ability to use the products or direct them to another customer.

Revenue under bill-and-hold arrangements was $ 0.5 million and $ 1.7 million for the years ended December 2021 and 2020, respectively.

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

Such fees were not significant for the years ended December 31, 2021 and 2020.

We act as the principal in relation to our contracts with customers and recognize revenue on a gross basis as we (i) are the primary entity responsible for fulfilling the promise to provide the specified products in the arrangement with the customer and we provide the primary customer service for all products sold, (ii) have discretion in establishing the price for the specified products sold and selecting our suppliers, as applicable, and (iii) we maintain inventory risk upon accepting returns.

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.

Product warranty is provided by the manufacturers.For certain product offerings such as child-resistant packaging, closed-system vaporization solutions and custom-branded retail products, we may receive a deposit from the customer (generally 25 % - 50 % of the total order cost, but the amount can vary by customer contract) when an order is placed by a customer.

We typically complete these orders within one to six months from the date of order, depending on the complexity of the customization and the size of the order, but the completion timeline can vary by product type and terms of sales with each customer.

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Our liability for returns, which is included within “Accrued expenses and other current liabilities” in our consolidated balance sheets, was approximately $ 0.3 million and $ 1.0 million as of December 31, 2022 and 2021, respectively.

The recoverable cost of merchandise estimated to be returned by customers, which is included within "Other current assets" in our consolidated balance sheets, was approximately $ 0.2 million as of December 31, 2021 and 2020.

We elected to account for shipping and handling expenses that occur after the customer has obtained control of products as a fulfillment activity in cost of sales.

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Sales commissions are recorded within “Salaries, benefits and payroll tax expenses” in the consolidated statements of operations and comprehensive loss.

No single customer represented more than 10% of our net sales for the years ended December 31, 2021 and 2020, respectively.

One customer represented approximately 22 % of our net sales for the year ended December 31, 2022.

No customer represented more than 10% of our net sales for the year ended December 31, 2021.

As of December 31, 2022, the Company has a concentration of credit risk with its accounts receivable balance as three customers represented approximately 31 %, 17 % and 15 % of accounts receivable, respectively.

As of December 31, 2021, the Company has a concentration of credit risk with its accounts receivable balance as two customers represented approximately 13 % and 11 % of accounts receivable, respectively.

As of December 31, 2020, no single customer represented more than 10% of our accounts receivable balance.

Value Added Taxes

During the third quarter of 2020, as part of a global tax strategy review, we determined that our European subsidiaries based in the Netherlands, which we acquired on September 30, 2019, had historically collected and remitted value added tax (“VAT”) payments, which related to direct-to-consumer sales to other European Union (“EU”) member states, directly to the Dutch tax authorities.

In connection with our subsidiaries' payment of VAT to Dutch tax authorities rather than other EU member states, the German government has commenced a criminal investigation, which could result in penalties;

other jurisdictions could commence such investigations as well.

In connection with our subsidiaries' payment of VAT to Dutch tax authorities rather than other EU member states, we may become subject to civil or criminal enforcement actions in certain EU jurisdictions, which could result in penalties.

We performed an analysis of the VAT overpayments to the Dutch tax authorities, which we expected to be refunded to us, and VAT payable to other EU member states, including potential fines and penalties.

Based on this analysis, we recorded VAT payable of approximately $ 2.5 million and $ 9.9 million within "Accrued expenses and other current liabilities" and VAT receivable of approximately $ 0.1 million and $ 4.4 million within "Other current assets" in our consolidated balance sheet as of December 31, 2021 and 2020, respectively.

We established VAT receivables in jurisdictions where VAT paid exceeds VAT collected and are recoverable through the filing of refund claims.

Our VAT receivable balance as of December 31, 2021 and 2020 relates to refund claims with the Dutch tax authorities.

In April 2021, we received a refund from the Dutch tax authorities of approximately $ 4.1 million.

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 consolidated balance sheet as of December 31, 2022 and 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.

As of December 31, 2021 and 2020, we recognized an indemnification asset of approximately $ 0.1 million and $ 0.9 million within "Other current assets" using the loss recovery model.

We were beneficiaries of a bank guarantee in the amount of approximately $ 0.9 million for claims for which we are entitled to indemnification under the purchase and sale agreement, which we collected in April 2021.

In April 2021, we entered into a settlement agreement with the sellers of Conscious Wholesale requiring the transfer of approximately $ 0.8 million in cash from the sellers' bank accounts, which we also collected

in April 2021.

In May 2021, we entered into another settlement with the sellers to place 650,604 shares of our Class A common stock owned by the sellers in escrow, which requires that those securities be sold as necessary to pay additional liabilities of the seller to us under the purchase and sale agreement.

During the year ended December 31, 2020, we recognized a charge of approximately $ 4.5 million within "general and administrative" expenses in our consolidated statements of operations and comprehensive loss, which represented the difference between the VAT payable and the VAT receivable and indemnification asset recorded as of December 31, 2020.

During the year ended December 31, 2021, we recognized a gain of approximately $ 1.7 million within "general and administrative expenses" in our consolidated statements of operations and comprehensive loss, which represented the partial reversal of the previously recognized charge, as the indemnification asset became probable of recovery based on the settlement agreements with the sellers and the related amounts collected from the sellers, and a 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 year ended December 31, 2022 and 2021, we recognized a gain of approximately $ 2.0 million and $ 1.7 million, respectively, within "general and administrative expenses" in our 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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See “Note 9—Stockholders' Equity - Net Loss Per Share.”

Recently Adopted Accounting Guidance

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement , which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

We adopted this standard prospectively beginning January 1, 2020.

Adoption of this standard did not have a material impact on our consolidated financial statements.

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This update was effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted.

We adopted this standard beginning January 1, 2021.

Adoption of this standard did not have a material impact on our consolidated financial statements.

In January 2020, the FASB issued ASU No.

2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) , which clarifies the interaction of accounting for equity securities under Topic 321, the accounting for equity investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815.

We adopted this guidance beginning January 1, 2021.

Adoption of this standard did not have a material impact on our consolidated financial statements.

In August 2020, the FASB issued ASU No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06) , which addresses the measurement and disclosure requirements for convertible instruments and contracts in an entity's own equity.

The new standard simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity's own equity.

This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021.

We elected to early adopt the new standard beginning January 1, 2021, on a modified retrospective basis.

Adoption of this standard did not impact our consolidated financial statements, as we did not hold any instruments to which this standard was applicable during the current reporting period nor in earlier reporting periods.

Recently Issued Accounting Guidance Not Yet Adopted

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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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The ASU is to be applied prospectively to business combinations occurring on or after the effective date of the amendment (or if adopted early as of an interim period, as of the beginning of the fiscal year that includes the interim period of early application).

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

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

BUSINESS ACQUISITIONS

On March 2, 2021, we acquired substantially all the assets of Eyce LLC ("Eyce"), a designer and manufacturer of silicon pipes, bubblers, rigs, and other smoking and vaporization-related accessories and merchandise.

On March 2, 2021, we acquired substantially all the assets of Eyce LLC (“Eyce”), a designer and manufacturer of silicone pipes, bubblers, rigs, and other smoking and vaporization-related accessories and merchandise.

We acquired Eyce to take advantage of expected synergies, which include increased margins from the direct integration of one of our top-selling product lines into our offerings of Greenlane Brand products (as defined below) and the enlistment of key talent in Eyce’s founding owners.

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During the year ended December 31, 2021, we recognized approximately $ 0.3 million in Eyce acquisition-related costs, which were included within "general and administrative" expenses in our consolidated statement of operations and comprehensive loss.

The Eyce contingent consideration arrangement requires us to make contingent payments based on the achievement of certain revenue and EBITDA performance targets for the year ended December 31, 2021 (the "2021 Contingent Payment"), as well as the year ending December 31, 2022 (the "2022 Contingent Payment"), as set forth in the acquisition agreement.

We estimated the fair value of the contingent consideration by using a Monte Carlo simulation that includes significant unobservable inputs 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.

The Eyce contingent consideration arrangement required us to make contingent payments based on the achievement of certain revenue and EBITDA performance targets for the year ended December 31, 2021 (the “2021 Contingent Payment”), as well as the year ending December 31, 2022 (the “2022 Contingent Payment”), as set forth in the acquisition agreement.

We estimated the fair value of the contingent consideration by using a Monte Carlo simulation th at included significant unobservable inputs 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.

The 2021 Contingent Payment was earned as of December 31, 2021, and the related liability of $ 1.8 million was included within “Accrued expenses and other current liabilities” on our consolidated balance sheet.

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Total purchase consideration $ 8,129 $ 610 $ 8,739

Goodwill generated from the Eyce acquisition is primarily related to the value we placed on expected business synergies.

We anticipate that the goodwill recognized will be deductible for income tax purposes.

Goodwill generated from the Eyce acquisition was primarily related to the value we placed on expected business synergies.

For additional information about goodwill, see "Note 8—Supplemental Financial Statement Information.

Amended Eyce APA

On April 7, 2022, we entered into an amendment to that certain Asset Purchase Agreement dated March 2, 2021 (the “Amended Eyce APA”), by and between Eyce and Warehouse Goods to accelerate the issuance of shares of Class A common stock issuable to Eyce under the agreement upon the attainment of certain EBITDA and revenue benchmarks (the “Amended 2022 Contingent Payment”), in an amount equal to $ 0.9 million.

We issued 71,721 shares of Class A common stock to Eyce under the Amended 2022 Contingent Payment, which vest ratably in seven quarterly tranches starting on July 1, 2022, such that on January 1, 2024 (the “Vesting Date”), all shares issued to Eyce under the Amended 2022 Contingent Payment will have vested.

The shares of Class A common stock issued under the Amended 2022 Contingent Payment are subject to certain forfeiture restrictions tied to the continued employment of certain Eyce personnel with the Company through the Vesting Date.

The Amended Eyce APA also provided for the payment of $ 0.9 million in cash in four equal installments on April 1, 2023, July 1, 2023, October 1, 2023 and January 1, 2024, contingent on the achievement of certain deliverables outlined in the Amended Eyce APA and the continued employment of certain Eyce personnel.

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

Specifically, we recorded a gain of approximately $ 0.3 million, respectively, within "other income (expense), net" in our consolidated statement of operations and comprehensive income for the year ended December 31, 2022 to write-off the balance of the Eyce 2022 Contingent Payment.

Also, we recorded approximately $ 1.3 million in compensation expense related to the Amended 2022 Contingent Payment within "salaries, benefits and payroll taxes" in our consolidated statement of operations and comprehensive income for the year ended December 31, 2022.

Merger with KushCo

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Pursuant to the Merger Agreement, Merger Sub Gotham 1, LLC, our wholly owned subsidiary (“Merger Sub 1”), merged with KushCo (the “Initial Surviving Corporation”) (“Merger 1”) and then the Initial Surviving Corporation was merged with and into Merger Sub Gotham 2, LLC, our wholly owned subsidiary (“Merger Sub 2”), with Merger Sub 2 as the surviving limited liability company and a wholly owned subsidiary of Greenlane (“Merger 2,” and together with Merger 1, the “Mergers”).

At the effective time of the Mergers, each KushCo stockholder received 0.3016 shares of Class A common stock, as determined pursuant to the exchange ratio formula set forth in the Merger Agreement (the “Exchange Ratio”), for each share of KushCo’s common stock, $ 0.001 par value per share (“KushCo common stock”), issued and outstanding immediately prior to the effective time of the Mergers, with cash paid for any fractional shares that a KushCo stockholder would have otherwise been entitled to receive.

At the effective time of the Mergers, each KushCo stockholder received 0.3016 shares of Class A common stock (excluding the effect of the Reverse Stock Split), as determined pursuant to the exchange ratio formula set forth in the Merger Agreement (the “Exchange Ratio”), for each share of KushCo’s common stock, $ 0.001 par value per share (“KushCo common stock”), issued and outstanding immediately prior to the effective time of the Mergers, with cash paid for any fractional shares that a KushCo stockholder would have otherwise been entitled to receive.

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

Pursuant to the Merger Agreement, immediately prior to the consummation of the Mergers, holders of Class C common stock received one-third of one share of Class B common stock for each share of Class C common stock held immediately prior to the closing of the Mergers, and Greenlane adopted the A&R Charter, which eliminated Class C common stock as a class of Greenlane’s capital stock.

closing of the Mergers, and Greenlane adopted the A&R Charter, which eliminated Class C common stock as a class of Greenlane’s capital stock.

Treatment of KushCo Equity Awards

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and (iii) the per share exercise price under each such Assumed Warrant was adjusted by dividing the per share exercise price under such Assumed Warrant by the Exchange Ratio and rounding up to the nearest cent.

Estimated Purchase Consideration and Preliminary Purchase Price Allocation

Estimated Purchase Consideration and Purchase Price Allocation

We accounted for the KushCo acquisition as a business combination under the acquisition method under ASC Topic 805, Business Combinations .

KushCo has been consolidated in our consolidated financial statements commencing on August 31, 2021, the date of acquisition.

The initial accounting for the acquisition, including the purchase price allocation, is preliminary pending completion of the fair value analyses of the replacement warrants and replaced equity compensation awards, as well as pending completion of the fair value analyses of assets acquired and liabilities assumed.

We allocated the purchase price to the net identifiable tangible and intangible assets acquired and liabilities assumed based on their preliminary estimated fair values as of the date of acquisition.

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We determined the preliminary estimated fair values after review and consideration of relevant information as of the acquisition date, including discounted cash flows, quoted market prices and estimates made by management.

The fair values assigned to tangible and intangible assets acquired and liabilities assumed are preliminary based on management's estimates and assumptions and may be subject to change as additional information is received.

We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

The fair values assigned to tangible and intangible assets acquired and liabilities assumed were based on management's estimates and assumptions.

The total estimated purchase consideration for the KushCo acquisition consisted of the following:

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Total estimated purchase price and consideration transferred in the merger $ 148,856 $ — $ 148,856

Goodwill generated from the KushCo acquisition is primarily related to the value we placed on expected business synergies.

We anticipate that the goodwill recognized will not be deductible for income tax purposes.

Goodwill generated from the KushCo acquisition was primarily related to the value we placed on expected business synergies.

For additional information about goodwill, see "Note 8—Supplemental Financial Statement Information.

During the year ended December 31, 2021, we recognized transaction costs of approximately $ 7.8 million in connection with the Mergers, consisting primarily of advisory, legal, valuation and accounting fees, which were recorded in “general and administrative expenses” in the accompanying consolidated statement of operations and comprehensive loss.

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DaVinci has been consolidated in our consolidated financial statements commencing on November 29, 2021, the date of acquisition.

The initial accounting for the acquisition, including the purchase price allocation, is preliminary pending completion of the fair value analyses of contingent consideration, as well as pending completion of the fair value analyses of assets acquired and liabilities assumed.

We allocated the purchase price to the net identifiable tangible and intangible assets acquired and liabilities assumed based on their preliminary estimated fair values as of the date of acquisition.

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The fair values assigned to tangible and intangible assets acquired and liabilities assumed are preliminary based on management's estimates and assumptions and may be subject to change as additional

information is received.

We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

The fair values assigned to tangible and intangible assets acquired and liabilities assumed were based on management's estimates and assumptions.

The total purchase consideration for the DaVinci acquisition consisted of the following:

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During the year ended December 31, 2021, we recognized approximately $ 0.3 million in DaVinci acquisition-related costs, which were included within “general and administrative” expenses in our consolidated statement of operations and comprehensive loss.

The DaVinci contingent consideration arrangement requires us to make contingent payments, including:

(1) the 2021 Contingent Payment, which is based on the achievement of certain financial benchmarks measured during the period January 1, 2021 and December 31, 2021, and is payable in shares of our Class A common stock, and (2) Product Launch Contingent Payments, which are payable in cash and shares of our Class A common stock.

The DaVinci contingent consideration arrangement included:

(1) the 2021 Contingent Payment, which was based on the achievement of certain financial benchmarks measured during the period January 1, 2021 and December 31, 2021, and was payable in shares of our Class A common stock, and (2) Product Launch Contingent Payments, which are payable in cash and shares of our Class A common stock.

The 2021 DaVinci Contingent Payment was earned as of December 31, 2021, based upon which the we issued 151,515 shares of Class A Common Stock on February 25, 2022 to DaVinci and certain of its affiliates.

The estimated fair value of the 2021 DaVinci Contingent Payment as of the acquisition date reflects a discount for lack of marketability, as the Class A common stock issued to the sellers has a restriction period.

The estimated fair value of the 2021 DaVinci Contingent Payment as of the acquisition date reflected a discount for lack of marketability, as the Class A common stock issued to the sellers has a restriction period.

We estimated the fair value of the Product Launch Contingent Payments using a form of the scenario-based method, which includes significant unobservable inputs such management’s identification of probability-weighted outcomes and a risk-adjusted discount rate over the earn-out period.

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Total estimated purchase price and consideration transferred $ 16,485

Goodwill generated from the DaVinci acquisition is primarily related to the value we placed on expected business synergies.

We anticipate that the goodwill recognized will be deductible for income tax purposes.

Goodwill generated from the DaVinci acquisition was primarily related to the value we placed on expected business synergies.

For additional information about goodwill, see "Note 8—Supplemental Financial Statement Information.

Supplemental Unaudited Pro Forma Financial Information

The following table presents pro forma results for the year ended December 31, 2021 as if our acquisition of Eyce and DaVinci, along with the closing of the merger with KushCo, had occurred on January 1, 2020, and Eyce, DaVinci, and KushCo’s results had been included in our consolidated results beginning on that date (in thousands):

For the year ended

For the year ended December 31, 2021

Net sales $ 248,691

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In addition, the pro forma financial information does not purport to project our future financial condition and results of operations.

Supplemental Information of Operating Results

"Net sales" in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2021 includes approximately $ 5.2 million, $ 0.7 million, and $ 43.5 million of net sales contributed by Eyce, DaVinci and KushCo, respectively, since the date of the acquisition.

Eyce, DaVinci, and KushCo's operating activities have been integrated with other existing subsidiaries of the Operating Company, and as such, the identification of post-acquisition "net loss" is impracticable for the year ended December 31, 2021.

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 year ended December 31, 2022, which is included as an offset in "general and administrative expenses" in our consolidated statements of operations and comprehensive loss, as well as a reduction to non-controlling interest on our consolidated balance sheet as of December 31, 2022 of $ 1.8 million.

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

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 December 31, 2021, 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 consist of investments in XS Financial Inc.

As of December 31, 2022, we had contingent consideration that is required to be measured at fair value on a recurring basis.

As of December 31, 2021, our equity securities that were required to be measured at fair value on a recurring basis consisted 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.

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

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

During the year ended 2022, we sold our interests in XS Financial Inc.

and High Tide Inc.

for total proceeds of approximately 0.6 million.

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

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(in thousands) Level 1 Level 2 Level 3 Total

Contingent consideration - current Accrued expenses and other current liabilities $ — $ — $ 2,738 $ 2,738

Total Liabilities $ — $ — $ 2,738 $ 2,738

Balance Sheet Caption Fair Value at December 31, 2021

(in thousands) Level 1 Level 2 Level 3 Total

Equity securities Other assets $ 1,919 $ — $ — $ 1,919

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Total Liabilities $ — $ 288 $ 6,857 $ 7,145

Balance Sheet Caption Fair Value at December 31, 2020

(in thousands) Level 1 Level 2 Level 3 Total

Interest rate swap contract Other long-term liabilities $ — $ 665 $ — $ 665

Total Liabilities $ — $ 665 $ — $ 665

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 years ended December 31, 2022 and 2021.

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.

The counterparty to this instrument is a reputable financial institution.

The interest rate swap contract is entered into for periods consistent with the related underlying exposure and does not constitute a position independent of this exposure.

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 consolidated balance sheet.

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 December 31, 2021, which is a pay fixed and receive floating contract, is as follows:

Swap Maturity Notional Value

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

October 1, 2025 $ 7,958 2.0775 % One-Month LIBOR Monthly

We performed an initial qualitative assessment of hedge effectiveness using the hypothetical derivative method in the period in which the hedging transaction was entered, as the critical terms of the hypothetical derivative and the hedging instrument were the same.

On a quarterly basis, we perform a qualitative analysis for quarterly prospective and retrospective assessments of hedge effectiveness.

The unrealized loss on the derivative instrument is included within "Other comprehensive income (loss)" in our 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 years ended December 31, 2021 and 2020.

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 was a reputable financial institution.

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 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 year ended December 31, 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 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 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 year ended December 31, 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 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 year ended December 31, 2022 and 2021, respectively.

In August 2022, we terminated the interest swap contract.

Contingent Consideration

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Balance at December 31, 2020 $ —

Foreign currency translation adjustments ( 14 )

Payment of contingent consideration ( 835 )

Gain from fair value adjustments included in results of operations ( 719 )

Balance at December 31, 2020 —

Contingent consideration issued for Eyce acquisition 1,828

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Balance at December 31, 2021 6,857

Eyce 2021 Contingent Payment settlement in Class A common stock ( 875 )

Eyce 2021 Contingent Payment settlement in cash ( 875 )

DaVinci 2021 Contingent Payment settlement in Class A common stock ( 2,611 )

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 509

Balance at December 31, 2022 $ 2,738

Equity Securities Without a Readily Determinable Fair Value

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We did not identify any fair value adjustments related to these equity securities during the years ended December 31, 2022 and 2021.

As of December 31, 2021 and 2020, the carrying value of our investment in equity securities without a readily determinable fair value was approximately $ 2.5 million and $ 2.0 million, respectively, included within "Other assets" in our consolidated balance sheets.

As of December 31, 2022 and 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 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 December 31, 2021, we had facilities financed under operating leases consisting of warehouses, offices, and retail stores, with lease term expirations between 2022 and 2027.

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

As of December 31, 2022, we had facilities financed under operating leases consisting of warehouses, offices, and a retail store, with lease term expirations between 2023 and 2027.

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

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

During the year ended December 31, 2020, we took steps to optimize our distribution network, transitioning to a more streamlined network with fewer, centrally-located, highly automated facilities.

Accordingly, we entered into service agreements with third-party logistics ("3PL") companies in the United States and Canada to handle the bulk of the North American supply chain needs, and entered into an agreement for a California-based facility.

As of December 31, 2020, we have successfully transferred, subleased or terminated leases for our Jacksonville, FL, Torrance, CA, Visalia, CA, and B.C Canada distribution centers.

With regard to our retail locations, we entered into a new operating lease agreement for a new retail store location in Barcelona, Spain, and we permanently closed our Ponce City Market retail location.

During the year ended December 31, 2020, we recorded approximately $ 1.7 million in charges related to the closures above, comprised of $ 1.3 million related to right-of-use asset impairments, $ 0.1 million related to impairments of leasehold improvements, and a lease cancellation fee of approximately $ 0.3 million.

These charges were offset by the derecognition of the associated operating lease liabilities of approximately $ 1.4 million, recorded within "general and administrative expenses" in our consolidated statement of operations and comprehensive loss.

The following table provides details of our future minimum lease payments under finance and operating lease liabilities recorded in our consolidated balance sheet as of December 31, 2021.

The table below does not include commitments that are

contingent on events or other factors that are currently uncertain or unknown.

(in thousands) Finance

Leases Operating Leases Total

2022 $ 127 $ 3,330 $ 3,457

2023 107 2,816 2,923

2024 19 1,994 2,013

2025 — 1,382 1,382

2026 — 155 155

Thereafter — 4 4

During the year ended December 31, 2022, we took steps to reduce our operational footprint and we continue to optimize our distribution network, transitioning to a more streamlined network with fewer, centrally-located, highly automated facilities.

We successfully transferred, subleased or terminated our office leases for our Cypress, CA, Hermosa Beach, CA, France and China locations.

We also successfully transferred, subleased or terminated our retail leases for our Amsterdam, Netherlands location, Barcelona, Spain, and Malibu, California locations.

On November 3, 2022, we 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 $ 0.5 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.

The following table provides details of our future minimum lease payments under our operating lease liabilities recorded in our consolidated balance sheet as of December 31, 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

Total minimum lease payments 3,542

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Rent expense under operating leases was approximately $ 3.6 million and $ 1.6 million for the years ended December 31, 2022 and 2021, respectively.

The majority of our finance lease obligations relate to leased warehouse equipment.

Payments under our finance lease agreements are fixed for terms ranging from three to five years .

We recorded approximately $ 0.4 million of finance lease assets, net within " property and equipment, net " as of December 31, 2021 and 2020, respectively, and the related liabilities within "current portion of finance leases" and "finance leases, less current portion" in our consolidated balance sheets.

The following expenses related to our finance and operating leases were included in "general and administrative expenses" within our consolidated statements of operations and comprehensive loss for the years ended December 31, 2021 and 2020:

(in thousands) December 31,

2021 December 31, 2020

Finance lease cost

Amortization of leased assets $ 74 $ 142

Interest of lease liabilities 12 18

Operating lease costs

The following expenses related to our operating leases were included in “general and administrative expenses” within our consolidated statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021:

For the year ended December 31,

(in thousands) 2022 2021

Operating lease cost

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Total lease cost $ 3,572 $ 1,638

The table below presents lease-related terms and discount rates as of December 31, 2021:

Weighted average remaining lease terms

Operating leases 3.3 years

Finance leases 1.9 years

Weighted average discount rate

The table below presents operating lease-related terms and discount rates as of December 31, 2022:

Operating Leases

Finance leases 3.9 %

Weighted average remaining lease terms 2.5 years

Weighted average discount rate 2.2 %

Greenlane as a Lessor

We have five operating leases for office space leased to third-party tenants in our corporate headquarters building in Boca Raton, Florida and one sublease in California.

For the years ended December 31, 2021 and 2020, respectively, we recorded approximately $ 0.8 million and $ 0.6 million in rental income related to these operating leases, which we included within “Other income, net” in our consolidated statements of operations and comprehensive loss.

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 with tenants:

Rental Income (in thousands)

Total $ 1,319

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

(in thousands) December 31, 2021 December 31, 2020

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:

(in thousands) Rental Income

2024 and thereafter —

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

As of December 31,

(in thousands) 2022 2021

Real Estate Note $ — $ 7,958

Bridge Loan — 8,000

Line of Credit 15,000 —

DaVinci Promissory Note 2,538 5,000

Eyce Promissory Note 647 1,592

18,185 22,550

Less unamortized debt issuance costs ( 1,960 ) ( 328 )

Less current portion of debt ( 3,185 ) ( 11,615 )

Debt, net, excluding operating leases and finance leases $ 10,607 $ 7,844

Debt, net, excluding operating leases $ 13,040 $ 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 December 31, 2021, we were in compliance with the Real Estate Note covenants.

Our Real Estate Note is subject to an interest rate swap contract, see “Note 4—Fair Value of Financial Instruments.”

One-month LIBOR is expected to be discontinued and replaced after June 2023 and the credit facility has a maturity date beyond that time.

There can be no assurances as to what the alternative base rate will be once one-month LIBOR is discontinued, and we can provide no assurances whether that base rate will be more or less favorable than LIBOR.

We intend to monitor the developments with respect to the phasing out of one-month LIBOR and work with our lenders to ensure that any transition away from one-month LIBOR will have minimal impact on our financial condition but can provide no assurances regarding the impact of LIBOR discontinuation.

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 December 31, 2022.

Eyce Promissory Note

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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, in which Mr.

LoCascio provided us with a bridge loan in the

principal amount of $ 8.0 million (the “Bridge Loan”).

Accrued interest at a rate of 15.0 % is due monthly, and principal amount is due in full in June 2022.

We incurred $ 0.3 million of debt issuance costs related to the Bridge Loan, which are recorded as a direct deduction from the carrying amount of the Bridge Loan, and which will continue to be amortized over the term of the Bridge Loan through interest expense.

The Bridge Loan is secured by a continuing security interest in all of our assets and properties whether then or thereafter existing or required, including our inventory and receivables (as defined under the Universal Commercial Code) and includes negative covenants restricting our ability to incur further indebtedness and engage in certain asset dispositions until the earlier of June 30, 2022 or the Bridge Loan has been fully repaid.

LoCascio provided us with a bridge loan in the principal amount of $ 8.0 million (the “December 2021 Note”).

The December 2021 Note accrued interest at a rate of 15.0 % is due monthly, and the principal amount was due in full on June 30, 2022.

We incurred $ 0.3 million of debt issuance costs related to the December 2021 Note, which were recorded as a direct deduction from the carrying amount of the December 2021 Note, and which were amortized over the term of the December 2021 Note through interest expense.

The December 2021 Note was secured by a continuing security interest in all of our assets and properties whether then or thereafter existing or required, including our inventory and receivables (as defined under the Universal Commercial Code) and included negative covenants restricting our ability to incur further indebtedness and engage in certain asset dispositions until the earlier of the maturity date or the December 2021 Note being fully repaid.

On June 30, 2022, we entered into the First Amendment to the December 2021 Note (the “First Amendment”), which extended the maturity date of the December 2021 Note to July 14, 2022.

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.

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 December 31, 2022, of the total term loan amount, $ 5.7 million is located in a blocked account, which is classified as “restricted cash” on our consolidated balance sheet, 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”).

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 December 31, 2022, we were in compliance with the Asset-Based Loan covenants.

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

Based on the original terms, 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.

On February 9, 2023, we entered into Amendment No.

2 to the Loan Agreement, in which we agreed to, among other things, voluntarily prepay approximately $ 6.6 million (inclusive of early termination fees and expenses) under the terms provided for under the Loan Agreement and the lenders under the Loan Agreement agreed to release 5.7 million in funds held in a blocked account pursuant to the terms of the Loan Agreement.

Amendment No.2 to the Loan Agreement also provides that we will make additional prepayments upon the occurrence of certain specified asset sales by the Company.

Future Minimum Principal Payments

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Bridge Loan — — — — — —

Asset Based Line of Credit — 1,250 13,750 — — 15,000

DaVinci Promissory Note 2,538 — — — — 2,538

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If the relevant taxing authorities were successfully to pursue these claims, we could be subject to significant additional tax liabilities.

See "Note 5—Leases" for details of our future minimum lease payments under finance lease liabilities and operating lease liabilities.

See “Note 5—Leases” for details of our future minimum lease payments under operating lease liabilities.

See “Note 11—Incomes Taxes” for information regarding income tax contingencies.

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The following table summarizes the composition of other current assets as of the dates indicated:

(in thousands) December 31, 2021 December 31, 2020

As of December 31,

(in thousands) 2022 2021

Other current assets:

VAT refund receivable $ 143 $ 4,391

Employee retention credit (ERC) receivable $ 4,854 $ —

VAT refund receivable (Note 2) $ 143 $ 143

Prepaid expenses 1,293 2,726

3 unchanged sentences

$ 11,120 $ 11,658

As of December 31, 2022, we had recorded an ERC receivable of $ 4.9 million within "Other current assets" on our consolidated balance sheets, and a corresponding amount was included in "Other income (expense), net" in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2022.

On February 16, 2023, two of Greenlane Holdings, Inc.’s subsidiaries, Warehouse Goods LLC and Kim International LLC (collectively, the “Company”), entered into an agreement with a third-party institutional investor pursuant to which the investor purchased, for approximately $ 4.9 million in cash, an economic participation interest, at a discount, in all of the Company’s rights to payment from the United States Internal Revenue Service with respect to the employee retention credits filed by the Company under the Employee Retention Credit (“ERC”) program.

Property and Equipment, Net

The following is a summary of our property and equipment, at costs less accumulated depreciation and amortization:

As of December 31, Estimated useful life

(in thousands) 2021 2020

Furniture, equipment and software (includes $ 0.4 million and $ 0.6 million under finance leases as of December 31, 2021 and 2020, respectively)

$ 8,478 $ 2,978 3 - 7 years

As of December 31,

(in thousands) Estimated useful life 2022 2021

Furniture, equipment and software 3 - 7 years

$ 15,360 $ 8,478

Personal property 5 years 1,130

4 unchanged sentences

16,143 25,461

accumulated depreciation (includes $ 0.1 million under finance leases as of December 31, 2021 and 2020)

accumulated depreciation 5,081 4,610

Property and equipment, net $ 11,062 $ 20,851

Depreciation expense for property and equipment (excluding assets recorded under finance leases) for the years ended December 31, 2021 and 2020 was approximately $ 2.1 million and $ 1.1 million, respectively.

Depreciation expense for property and equipment for the years ended December 31, 2022 and 2021 was approximately $ 3.3 million and $ 2.1 million, respectively.

Intangible Assets, Net

Identified intangible assets consisted of the following at the dates indicated below:

December 31, 2021

As of December 31, 2022

(in thousands) Gross carrying

amount Accumulated

amortization Carrying value Estimated useful life

amortization Impairment Charge Carrying value Estimated useful life

Design libraries $ 8,710 $ ( 1,227 ) $ — $ 7,483 7 - 15 years

6 unchanged sentences

Total intangible assets, net $ 89,506 $ ( 10,738 ) $ ( 29,500 ) $ 49,268

December 31, 2020

As of December 31, 2021

(in thousands) Gross carrying

amount Accumulated

amortization Carrying value Estimated useful life

amortization Impairment Charge Carrying value Estimated useful life

Design libraries $ 8,710 $ ( 573 ) $ — $ 8,137 15 years

2 unchanged sentences

Other intangibles 1,086 ( 193 ) — 893 5 - 15 years

Total finite-lived intangibles 60,479 ( 5,269 ) — 55,210

Trademarks 29,500 — — 29,500 Indefinite

Total indefinite-lived intangibles 29,500 — — 29,500

Total intangible assets, net $ 89,979 $ ( 5,269 ) $ — $ 84,710

The change in the gross carrying amounts of our trademarks and tradenames, customer relationships, and other intangibles is primarily driven by our business acquisitions during the year ended December 31, 2021.

The weighted-average amortization period for intangible assets we acquired during the year ended December 31, 2021 was approximately 11.6 years.

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.

Due to declines in the Company's stock price as well as changes to our estimates and assumptions of the expected future cash flows, management concluded that a triggering event occurred in the third quarter of 2022, based upon which we recorded an impairment charge related to our indefinite-lived intangible assets of $ 24.9 million.

During the fourth quarter of 2022, we further concluded that the remaining $ 4.6 million balance of indefinite-lived intangibles was impaired.

Based upon these assessments, we recorded a total impairment charge related to indefinite-lived intangibles of $ 29.5 million for the year ended December 31, 2022.

We also recorded an impairment charge related to our goodwill balance, as described further below.

We did not acquire any additional intangible assets during the year ended December 31, 2022.

The weighted-average amortization period for intangible assets we acquired during the year ended December 31, 2021 was approximately 11.6 years.

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Total estimated amortization expense for our intangible assets for the years 2023 through 2027 is as follows:

Amortization Expense (in thousands)

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 two operating segments as of December 31, 2021, which are the same as our reportable segments and reporting units:

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

These changes in operating segments align with how we manage our business as of the fourth quarter of 2021.

Goodwill allocated to our Industrial Goods reporting unit is comprised of goodwill generated from our merger with KushCo, which was completed on August 31, 2021.

Goodwill allocated to our Consumer Goods reporting unit is comprised of goodwill generated from (1) our Eyce business acquisition, which was completed in March 2021, (2) our DaVinci business acquisition, which was completed in November 2021, and (3) our acquisition of Conscious Wholesale, our wholly owned subsidiary based in the Netherlands, in September 2019, which was previously included in our former European reporting unit, prior to our change in reporting units during the fourth quarter of 2021.

As a result of the change in reporting units, we performed a quantitative assessment of potential goodwill impairment for the former European reporting unit immediately prior to the change, and determined that goodwill was not impaired.

We also performed a separate qualitative assessment of potential goodwill impairment for our Consumer Goods and Industrial Goods reporting units, we determined that goodwill was not impaired as of December 31, 2021.

During the first quarter of 2020, due to market conditions and the adverse impacts from the COVID-19 pandemic, management had concluded that a triggering event had occurred, requiring a quantitative impairment test of our goodwill for our former United States and Europe reporting units.

Based on this assessment, the estimated fair value of the United States reporting unit was determined to be below its carrying value, which resulted in a $ 9.0 million goodwill impairment charge.

The impairment charge resulted from the impacts of COVID-19 on our current and forecasted wholesale revenues and the restrictions on certain products we sell imposed by the Federal Drug Administration's Enforcement Priorities for Electronic Nicotine Delivery Systems and Other Deemed products on the Market Without Premarket Authorization, which resulted in changes to our estimates and assumptions of the expected future cash flows of the United States reporting unit.

During the fourth quarter of 2020, we performed a quantitative assessment for our former European reporting unit.

Based on this assessment, we concluded that the fair value of our Europe reporting unit exceeded its carrying value and no impairment charge was required.

The estimated fair value of our reporting units is highly sensitive to changes in the underlying projections and assumptions;

therefore, in some instances, changes in these assumptions could potentially lead to impairment.

Specifically, conditions brought on by the COVID-19 pandemic may have material impacts on the assumptions used in determining the fair value of our reporting unit.

Should the business environment worsen from impacts of the COVID-19 pandemic, the fair value of our reporting unit may decrease below its carrying value and result in an impairment charge to goodwill in future periods.

Changes in the carrying amount of goodwill by reportable segment for the year ended December 31, 2021 were as follows:

(in thousands) Amortization Expense

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.

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.

The table below presents changes in the carrying amount of goodwill by reportable segment for the year ended December 31, 2022:

(in thousands) Industrial Goods Consumer Goods Total

Balance at December 31, 2021 $ 24,332 $ 17,528 $ 41,860

Eyce acquisition (Note 3) 5,450 5,450

KushCo merger (Note 3) 24,332 — 24,332

DaVinci acquisition (Note 3) 9,052 9,052

Foreign currency translation adjustment — ( 254 ) ( 254 )

Goodwill impairment charge ( 24,332 ) $ ( 17,528 ) $ ( 41,860 )

Balance at December 31, 2022 $ — $ — $ —

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

(in thousands) December 31, 2021 December 31, 2020

As of December 31,

(in thousands) 2022 2021

Accrued expenses and other current liabilities:

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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 year ended December 31, 2021 were as follows:

Changes in our customer deposits liability balance during the year ended December 31, 2022 and 2021, respectively, were as follows:

(in thousands) Customer Deposits

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Balance as of December 31, 2021 7,924

We typically complete orders related to customer deposits within six weeks to three months from the date of order, depending on the complexity of the customization and the size of the order.

Increases due to deposits received, net of other adjustments 12,016

Revenue recognized ( 15,957 )

Balance as of December 31, 2022 $ 3,983

Accumulated Other Comprehensive Loss

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Other comprehensive income (loss) ( 211 ) 358 147

Reclassification adjustment for (gain) loss included in net loss (Note 4) — ( 332 ) ( 332 )

Other comprehensive (income) loss attributable to non-controlling interest ( 16 ) ( 68 ) ( 84 )

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Supplier Concentration

Our four largest vendors accounted for an aggregate of approximately 32.5 % and 49.5 % of our total net sales and 51.8 % and 41.6 % of our total purchases for the years ended December 31, 2021 and 2020, respectively.

Our four largest vendors accounted for an aggregate of approximately 57.4 % and 51.8 % of our total purchases for the years ended December 31, 2022 and 2021, respectively.

We expect to maintain our relationships with these vendors.

Related Party Transactions

Nicholas Kovacevich, our Chief Executive Officer and Dallas Imbimbo, who serves on our Board, own capital stock of Unrivaled Brands Inc.

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

Net sales to Unrivaled for the years ended December 31, 2021 and 2020 totaled $ 0.1 million and $ 0 , respectively.

Total accounts receivable due from Unrivaled were $ 0.4 million and $ 0 as of December 31, 2021 and 2020, respectively.

Adam Schoenfeld, our Chief Marketing Officer and Board Director, has a significant ownership interest in one of our customers, Universal Growing.

Net sales to Universal Growing for the years ended December 31, 2021 and 2020 totaled $ 0.2 million and $ 0.1 million, respectively.

Total accounts receivable due from Universal Growing as of December 31, 2021 and 2020 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, in which Mr.

LoCascio provided us with a bridge loan in the principal amount of $ 8.0 million (the “Bridge Loan”).

Accrued interest at a rate of 15.0 % is due monthly, and principal amount is due in full in June 2022.

Nicholas Kovacevich, our Chief Corporate Development Officer owns capital stock of Unrivaled Brands Inc.

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

Net sales to Unrivaled totaled approximately $ 0.4 million and $ 0.1 million for the years ended December 31, 2022 and 2021, respectively.

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

On February 8, 2023, we filed a lawsuit against Unrivaled in Superior Court of California, Orange County, seeking to compel the repayment of Unrivaled's open balance due to us.

We can provide no assurances that we will be successful in this lawsuit, or that the amounts due to us, or any portion thereof, will be recovered.

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

Net sales to Universal Growing were less than approximately $ 0.1 million for the year ended December 31, 2022, and approximately $ 0.2 million for the year ended December 31, 2021.

Total gross accounts receivable due from Universal Growing as of December 31, 2021 and 2022 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.

On June 30, 2022, we entered into the First Amendment to the Secured Promissory Note, which provided for the extension of the maturity date of the Secured Promissory Note from June 30, 2022 to July 14, 2022.

On July 19, 2022, we fully repaid the Bridge Loan and as a result, all obligations under the Bridge Loan have been satisfied.

On July 19, 2022, Warehouse Goods entered into a Membership Interest Purchase Agreement and supporting documents (collectively, the “Sale Agreement”) with Portofino Partners LLC (“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.

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.

Renah Persofsky, a current director of the Company, is a member of the board of directors of Tilray Brands, Inc.

Net sales to Tilray totaled approximately $ 2.2 million for the year ended December 31, 2022.

Persofsky's indirect interest in this transaction related solely to being a director of Tilray, pursuant to Item 404 of SEC Regulation S-K, Ms.

Persofsky's indirect interest in this transaction is deemed not material because it arises solely because she is a director of Tilray.

STOCKHOLDERS’ EQUITY

Shares of our Class A common stock have both voting interests and economic interests (i.e., the right to receive distributions or dividends, whether cash or stock, and proceeds upon dissolution, winding up or liquidation), while shares of our Class B common stock have voting interests but no economic interests.

Each share of our Class A common stock and Class B common stock entitles the record holder thereof to one vote on all matters on which stockholders generally are entitled to vote, and except as otherwise required in the A&R Charter, the holders of Common Stock will vote together as a single class on all matters (or, if any holders of our preferred stock are entitled to vote together with the holders of Common Stock, as a single class with such holders of preferred stock).

Class A Common Stock Repurchase Program

In November 2019, our Board of Directors approved a stock repurchase program authorizing up to $ 5.0 million in repurchases of our outstanding shares of Class A common stock.

Under the program, we may repurchase shares in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

We may periodically repurchase shares in open market transactions, directly or indirectly, in block purchases and in privately negotiated transactions or otherwise.

The timing, pricing, and amount of any repurchases under the share repurchase program will be determined by management at its discretion based on a variety of factors, including, but not limited to, trading volume and market price of our Class A common stock, corporate considerations, our working capital and investment requirements, general market and economic conditions, and legal requirements.

The share repurchase program does not obligate us to repurchase any common stock and may be modified, discontinued, or suspended at any time.

Shares of Class A common stock repurchased under the program are subsequently retired.

There were no share repurchases under the program during the years ended December 31, 2021 or 2020.

Our Class A common stock entitles the record holder thereof to one vote on all matters on which stockholders generally are entitled to vote, and except as otherwise required in the A&R Charter, the holders of Common Stock will vote together as a single class on all matters (or, if any holders of our preferred stock are entitled to vote together with the holders of Common Stock, as a single class with such holders of preferred stock).

Effective August 9, 2022, we completed a one-for-20 reverse stock split (the “Reverse Stock Split”) of our issued and outstanding shares of Class A common stock and Class B common stock (collectively, the "Common Stock"), as further described in "Note 2 - Summary of Significant Accounting Policies." As a result of the Reverse Stock Split, every 20 shares of Common Stock issued and outstanding were converted into one share of Common Stock.

We paid cash in lieu of fractional shares, and accordingly, no fractional shares were issued in connection with the Reverse Stock Split.

The Reverse Stock Split did not change the par value of the Common Stock or the authorized number of shares of Common Stock.

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

Non-Controlling Interest

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

As of December 31, 2021, we owned 79.7 % of the economic interests in the Operating Company, with the remaining 20.3 % of the economic interests owned by non-controlling interest holders.

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

As of December 31, 2022, all Common Units of the Operating Company and Class B common stock had been exchanged for Class A common stock, and we owned 100.0 % of the economic interests in the Operating Company.

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

At-the-Market Equity Offering

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.

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We are under no obligation to offer and sell shares of our Class A common stock under the ATM Program.

Since the launch of the ATM program in August 2021 and through December 31, 2021, we sold 2,401,255 shares of our Class A common stock under the

ATM Program, which generated gross proceeds of approximately $ 3.4 million and paid fees to the sales agent of approximately $ 0.1 million.

Common Stock and Warrant Offering

On August 9, 2021, we entered into securities purchase agreements with certain accredited investors, pursuant to which we agreed to issue and sell an aggregate of 4,200,000 shares of our Class A common stock, pre-funded warrants to purchase up to 5,926,583 shares of our Class A common stock (the “Pre-Funded Warrants”) and warrants to purchase up to 6,075,950 shares of our Class A common stock (the “Standard Warrants” and, together with the Pre-Funded Warrants, the “Warrants”), in a registered direct offering (the “Offering”).

The shares of Class A common stock and Warrants were sold in Units (the “Units”), with each unit consisting of one share of Class A common stock or a Pre-Funded Warrant and a Standard Warrant to purchase 0.6 of a share of our Class A common stock.

Shares of our Class A common stock will be issued pursuant to our effective shelf registration statement on Form S-3 (File No.

333-257654), and a prospectus supplement relating to the Class A common stock that was filed with the Securities and Exchange Commission on April 18, 2022.

Pursuant to Instruction I.B.6, in no event will the Company sell Class A common stock through the ATM Program with a value exceeding more than one-third of the Company’s “public float” (the market value of the Company’s Class A common stock and any other equity securities that it issues in the future that are held by non-affiliates) in any twelve-month period so long as the Company’s public float remains below $75.0 million.

On April 18, 2022, we entered into Amendment No.

1 (the “Amendment”) to the sales agreement dated August 2, 2022 with Cowen.

The purpose of the Amendment was to add the limitations imposed on the ATM Program by Instruction I.B.6 to the sales agreement.

At the time of our entry into the Amendment, approximately $ 37.3 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 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) Year Ended

December 31, 2022 August 2021 (Inception) through

December 31, 2022

Class A shares sold* 852,562 972,624

Gross proceeds $ 9,303 $ 12,684

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.

Common Stock and Warrant Offerings

August 2021 Offering

On August 9, 2021, we entered into securities purchase agreements with certain accredited investors, pursuant to which we agreed to issue and sell an aggregate of 210,000 shares of our Class A common stock, pre-funded warrants to purchase up to 296,329 shares of our Class A common stock (the “August 2021 Pre-Funded Warrants”) and warrants to purchase up to 303,797 shares of our Class A common stock (the “August 2021 Standard Warrants” and, together with the August 2021 Pre-Funded Warrants, the “August 2021 Warrants”), in a registered direct offering (the “August 2021 Offering”).

The shares of Class A common stock and August 2021 Warrants were sold in Units (the “August 2021 Units”), with each unit consisting of one share of Class A common stock or an August 2021 Pre-Funded Warrant and an August 2021 Standard Warrant to purchase 0.6 of a share of our Class A common stock.

The Units were offered pursuant to our existing shelf registration statement on Form S-3.

Subject to certain ownership limitations, the Standard Warrants were immediately exercisable at an exercise price equal to $ 3.55 per share of Class A common stock.

The Standard Warrants are exercisable for five years from the date of issuance.

Each Pre-Funded Warrant was exercisable with no expiration date for one Share of Class A common stock at an exercise price of $ 0.01 .

The Offering generated gross proceeds of approximately $ 31.9 million and net proceeds to the Company of approximately $ 29.9 million.

All Pre-Funded Warrants were exercised prior to December 31, 2021, based upon which we issued an additional 5,926,583 shares of our Class A common stock, for net proceeds of approximately $ 0.1 million.

The August 2021 Standard Warrants were immediately exercisable at an exercise price equal to $ 71.00 per share of Class A common stock.

The August 2021 Standard Warrants are exercisable for five years from the date of issuance.

Each August 2021 Pre-Funded Warrant was exercisable with no expiration date for one Share of Class A common stock at an exercise price of $ 0.20 .

The August 2021 Offering generated gross proceeds of approximately $ 31.9 million and net proceeds to the Company of approximately $ 29.9 million.

All August 2021 Pre-Funded Warrants were exercised in August and September 2021, based upon which we issued an additional 296,329 shares of our Class A common stock, for net proceeds of approximately $ 0.1 million.

June 2022 Offering

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

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 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.

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.

February 2023 Offering

We can provide no assurances as to whether the February 2023 S-1 will become effective, or whether we will undertake this public offering following the filing of this Annual Report on Form 10-K.

Class C Common Stock Conversion

On August 31, 2021, we completed our merger with KushCo.

Pursuant to the Merger Agreement, immediately prior to the consummation of the Mergers, holders of Class C common stock, $ 0.0001 par value per share, received one-third of one share of Class B common stock, for each share of Class C common stock held, and Greenlane adopted the A&R Charter which eliminated Class C common stock as a class of Greenlane’s capital stock.

See "Note 3—Business Acquisitions" for additional details regarding our acquisition of KushCo, which was completed on August 31, 2021.

Net Loss Per Share

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Net loss per share of Class A common stock - basic and diluted* $ ( 15.37 ) $ ( 15.85 )

As noted above, all Pre-Funded Warrants were exercised prior to December 31, 2021.

The 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 year ended December 31, 2021 beginning with their issuance date, as their stated exercise price of $ 0.01 was non-substantive and their exercise was virtually assured.

For the years ended December 31, 2021 and 2020, 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.

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

The June 2022 Pre-Funded Warrants and the October 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 year ended December 31, 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 year ended December 31, 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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In April 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”).

We previously registered 5,000,000 shares of Class A common stock that are or may become issuable under the 2019 Plan as stock options and other equity-based awards to employees, directors and executive officers.

Excluding the effect of the one-for-20 Reverse Stock Split, we previously registered 5,000,000 shares of Class A common stock that are or may become issuable under the 2019 Plan as stock options and other equity-based awards to employees, directors and executive officers.

In August 2021, we adopted, and our shareholders approved, the Amended and Restated 2019 Equity Incentive Plan (the "Amended 2019 Plan"), which amends and restates the 2019 Plan in its entirety.

The Amended 2019 Plan, among other things, increases the number of shares of Class A common stock available for issuance under the 2019 Plan by 2,860,367 .

The Amended 2019 Plan provides eligible participants with compensation opportunities in the form of cash and equity incentive awards.

The 2019 Plan is designed to enhance our ability to attract, retain and motivate our employees, directors, and executive officers, and incentivizes them to increase our long-term growth and equity value in alignment with the interests of our stockholders.

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

Excluding the effect of the one-for-20 Reverse Stock Split, the Amended 2019 Plan, among other things, increases the number of shares of Class A common stock available for issuance under the 2019 Plan by 2,860,367 .

At our 2022 Annual Meeting of Stockholders on August 4, 2022, stockholders approved the Second Amended and Restated 2019 Equity Incentive Plan (the "Second Amended 2019 Plan") which, among other things, increased the number of shares of Class A common stock authorized for issuance under the Amended 2019 Plan by 785,000 shares.

The Second Amended 2019 Plan provides eligible participants with compensation opportunities in the form of cash and equity incentive awards.

The Second Amended 2019 Plan is designed to enhance our ability to attract, retain and motivate our employees, directors, and executive officers, and incentivizes them to increase our long-term growth and equity value in alignment with the interests of our stockholders.

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

See "Note 3 - Business Acquisitions" for additional details.

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We do not intend to make future grants under the KushCo Equity Plan.

Rule 10b5-1 Trading Plans

During the year ended December 31, 2021, Section 16 officers Aaron LoCascio and Adam Schoenfeld had equity trading plans in place in accordance with Rule 10b5-1(c)(1) under the Exchange Act.

An equity trading plan is a written document that preestablishes 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.

Equity-Based Compensation Expense

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We recognized equity-based compensation expense as follows:

For the year ended

For the year ended December 31,

(in thousands) 2022 2021

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During the year ended December 31, 2022, we granted an aggregate of 129,106 options to our directors and certain employees.

The stock options were granted with exercise prices ranging from $ 1.00 per share to $ 6.20 per share, and vesting periods ranging from six months to four years .

The stock options were granted with exercise prices ranging from $ 2.52 per share to $ 20.00 per share, and vesting periods ranging from three months to four years .

During the year ended December 31, 2021, we granted an aggregate of 83,817 options to our directors and certain employees.

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Restricted shares - Class A common stock 201 1.4

Restricted stock units (RSUs) - Class A common stock 28 3.1

Common units of the Operating Company — 0

Total remaining unrecognized compensation expense $ 407

The fair value of the stock option awards granted during the years ended December 31, 2022 and 2021 was determined on the grant date using the Black-Scholes valuation model based on the following ranges of weighted-average assumptions:

December 31, 2021 December 31, 2020

For the year ended December 31,

Expected volatility (1)

100 % - 100 %

100 % - 107 %

Expected dividend yield (2)

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Common Units of the Operating Company Granted as Equity-Based Compensation

In connection with the closing of the IPO, we consummated certain organizational transactions with the Operating Company, as described in further detail in "Note 1—Business Operations and Organization," among which, the Operating Company

reclassified unvested Class B membership interests and profits interests which had been granted as equity-based compensation into Common Units of the Operating Company.

In connection with the closing of the IPO in April 2019, we consummated certain organizational transactions with the Operating Company, as described in further detail in "Note 1—Business Operations and Organization," among which, the Operating Company reclassified unvested Class B membership interests and profits interests which had been granted as equity-based compensation into Common Units of the Operating Company.

The following table provides a summary of the unvested Common Units outstanding and related transactions:

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Unvested Common Units as of December 31, 2021 —

Vested ( 198,758 )

Forfeited ( 5,146 )

Unvested Common Units as of December 31, 2021 —

Our 401(k) Plan is a deferred salary arrangement under Section 401(k) of the Internal Revenue Code.

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Safe-harbor matching contributions are 100 % vested as of the date of the contribution.

As a result of the IPO and the related transactions completed in April 2019, we own a portion of the Common Units of the Operating Company, which is treated as a partnership for U.S.

As a result of the IPO and the related transactions completed in April 2019, we owned a portion of the Common Units of the Operating Company, which is treated as a partnership for U.S.

federal and most applicable state and local income tax purposes.

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federal income taxes, in additional to state and local income taxes, based on our share of the Operating Company’s pass-through taxable income.

The Company's United States and foreign operations components of income (loss) before continuing operations before income taxes are as follows:

Effective on December 31, 2022, the Operating Company became wholly owned by us.

As a result, the Operating Company’s tax status was converted from a partnership to a disregarded entity.

Starting in 2023, 100% of the Operating Company’s US income and expenses will be included in our US and state tax returns.

The Company's United States and foreign operations components of income (loss) from continuing operations before income taxes are as follows:

For the year ended December 31,

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Income Tax Expense

The income tax expense for the years ended December 31, 2021 and 2020 consisted of the following:

The income tax (benefit) expense for the years ended December 31, 2022 and 2021 consisted of the following:

For the year ended December 31, 2022 For the year ended December 31, 2021

(in thousands) Federal Foreign State Total Federal Foreign State Total

Current tax expense

Current tax (benefit) expense

Current year $ — $ ( 13 ) $ — $ ( 13 ) $ — $ ( 10 ) $ 20 $ 10

Total current year — ( 13 ) — ( 13 ) — ( 10 ) 20 10

Deferred tax expense

Deferred tax (benefit) expense

Current year ( 20,552 ) ( 2,029 ) ( 6,816 ) ( 29,397 ) ( 6,624 ) ( 636 ) ( 2,211 ) ( 9,471 )

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Change in tax rate 72 — ( 344 ) ( 272 ) 101 — ( 479 ) ( 378 )

Tax conversion of Operating Company 2,990 — 1,022 4,012 — — — —

Up-C consolidation ( 10,097 ) — ( 3,440 ) ( 13,537 ) ( 5,733 ) — ( 1,901 ) ( 7,634 )

KushCo merger 1,643 — ( 393 ) 1,250 ( 17,999 ) — ( 7,504 ) ( 25,503 )

Total deferred — — — — — — — —

Income tax expense $ — $ ( 10 ) $ 20 $ 10 $ 6 $ 188 $ — $ 194

A reconciliation of the income tax expense computed at the U.S.

Total deferred tax (benefit) expense — — — — — — — —

Income tax (benefit) expense $ — $ ( 13 ) $ — $ ( 13 ) $ — $ ( 10 ) $ 20 $ 10

A reconciliation of the income tax (benefit) expense computed at the U.S.

federal statutory income tax rate to the income tax expense recognized is as follows:

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Loss attributable to non-controlling interests 2,121 3,475

Valuation allowance 10,293 5,290

Change in valuation allowance 37,944 42,986

Tax conversion of Operating Company 4,012 —

Up-C consolidation ( 13,537 ) ( 7,634 )

KushCo merger 1,250 ( 25,503 )

Other, net 443 27

Income tax expense $ 10 $ 194

Income tax (benefit) expense $ ( 13 ) $ 10

Deferred Tax Assets and Liabilities

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Deferred tax assets:

Intangible assets $ 16,285 $ 9,197

Basis difference in investment in the Operating Company — 742

Goodwill and other intangible assets $ 23,901 $ 16,285

Inventory 5,858 —

Allowance for doubtful accounts 833 —

Operating lease liability 862 —

Equity-based compensation 2,576 —

Business interest carryforward 5,342 —

Net operating loss carryforwards 57,136 44,424

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Deferred tax liability:

Fixed assets ( 227 ) —

Right of use assets ( 815 ) —

Basis difference in investment in the Operating Company — ( 6,962 )

Total deferred tax liabilities ( 1,042 ) ( 6,962 )

Net deferred tax assets and liabilities $ — $ —

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Their utilization is limited to 80% of our future taxable income.

We also had approximately $ 149.9 million of State net operating loss carryforwards that begin expiring in 2038 and $ 10.1 million of Dutch net operating loss carryforwards that begin expiring in 2026.

We also had approximately $ 197.9 million of State net operating loss carryforwards that begin expiring in 2038 and $ 15.5 million of Dutch and Canadian net operating loss carryforwards that begin expiring in 2026.

Their utilization is limited to our future taxable income.

We have not completed our evaluation of NOL utilization limitations under Internal Revenue Code, as amended (the “Code”) Section 382, change in ownership rules, but intend to complete this evaluation prior to the filing of our tax returns.

We have not completed our evaluation of NOL utilization limitations under Internal Revenue Code, as amended (the “Code”) Section 382, change in ownership rules.

Due to the fact that there is a full valuation allowance and losses being generated in the current year, any limitation based on the code would not have a material impact on the net deferred tax asset balance.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was enacted on March 27, 2020, made tax law changes to provide financial relief to companies as a result of the business impacts of COVID-19.

Key income tax provisions of the CARES Act include changes in net operating loss carryback and carryforward rules, acceleration of alternative minimum tax credit recovery, increase in the net interest expense deduction limit and charitable contribution limit, and immediate write-off of qualified improvement property.

The changes are not expected to have a significant impact on us.

The Consolidation Appropriations Act of 2021, enacted on December 27, 2020, extended and enhanced COVID relief provisions of the CARES Act.

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.

During the years ended December 31, 2021 and December 31, 2020, 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.

In addition, the deduction for business interest is limited to 30 percent of taxable income (the “Section 163(j) limitation”).

The interest that is not deductible due this limitation is carried forward to subsequent years and subject to the next years Section 163(j) limitation.

At December 31, 2022 we had $ 20.3 million of business interest carryforwards, which includes $ 17.6 million from the KushCo merger.

The utilization of the business interest carryforward from the KushCo merger may be further limited by the application of the Section 382 rules.

During the years ended December 31, 2022 and 2021, respectively, management performed an assessment of the realizability of our deferred tax assets based upon which management determined that it is not more likely than not that the results of operations will generate sufficient taxable income to realize portions of the net operating loss benefits.

Consequently, we established a full valuation allowance against our deferred tax assets and reflected a carrying balance of $ 0 as of December 31, 2022 and 2021, respectively.

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We do not record U.S.

income taxes on the undistributed earnings of our foreign subsidiaries, except for the Canadian subsidiary, 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, except for the Canadian subsidiary, based upon our intention to permanently reinvest undistributed earnings into 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.

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Our CODM is a committee comprised of our CEO and our CFO.

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 two operating segments as of December 31, 2021, which are the same as our reportable segments:

(1) Consumer Goods, which largely comprises Greenlane's legacy operations

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

These changes in operating segments align with how we manage our business as of the fourth quarter of 2021.

The accounting policies of the reportable segments are the same as those described in "Note 2 - Summary of Significant Accounting Policies." 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.

We determined we had two operating segments as of December 31, 2022, which are the same as our reportable segments:

(1) Consumer Goods, and (2) Industrial Goods.

These operating segments align with how we manage our business as of the fourth quarter of 2022.

The accounting policies of the reportable segments are the same as those described in "Note 2 - Summary of Significant Accounting Policies."

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

The Industrial Goods segment 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 supply products, which includes our Greenlane Brand Pollen Gear and vaporization solutions offering which includes CCELL branded products.

The Industrial Goods segment 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 supply products, which includes our vaporization solutions offering including CCELL branded products.

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

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Industrial Vape Products 53,664 25,312

Packaging, Paper & Supplies 25,897 16,118

Other Industrial Products 35,287 30,643

8 unchanged sentences

Europe 4,942 10,337

Other 1,852 2,717

Total net sales $ 137,085 $ 166,060

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SUBSEQUENT EVENTS

On March 10, 2022, we announced certain corporate plans to reduce our cost structure and increase liquidity.

We completed a reduction in force, which we expect will result in approximately $ 8.0 million in annualized cash compensation cost savings.

The reduction in force encompassed a broad spectrum of divisions both domestically and abroad.

Additional strategic measures that we announced we are pursuing or intend to pursue in order to capitalize the business in a non-dilutive manner, include:

• Conducting a sale leaseback of our headquarter building;

• Disposing of non-core assets;

• Discontinuing sales of lower-margin 3rd-party brands and selling existing inventory;

• Raising prices on select products;

• Securing an asset based loan that will support working capital needs.

Subsequent to December 31, 2021 and through March 28, 2022, we issued approximately 15,269,897 additional shares of Class A common stock, including 9,284,715 shares of Class A common stock sold under our ATM program, 1,599,774 shares of Class A common stock related to restricted stock awards, 559,581 shares of Class A common stock related to redemptions of Common Units of the Operating Company, and 3,825,827 shares of Class A common stock related to our contingent consideration arrangements for the Eyce and DaVinci business acquisitions (see Note 3 - Business Acquisitions for additional details).

Asset-Based Loan Amendment

On February 9, 2023, we entered into Amendment No.

2 to the Loan Agreement, in which we agreed to, among other things, voluntarily prepay approximately $ 6.6 million (inclusive of early termination fees and expenses) under the terms provided for under the Loan Agreement and the lenders under the Loan Agreement agreed to release 5.7 million in funds held in a blocked account pursuant to the terms of the Loan Agreement.

Amendment No.2 to the Loan Agreement also provides that we will make additional prepayments upon the occurrence of certain specified asset sales by the Company.

cash, an economic participation interest, at a discount, in all of the Company’s rights to payment from the United States Internal Revenue Service with respect to the employee retention credits filed by the Company under the Employee Retention Credit (“ERC”) program.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data