What changed in this filing

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Item 1. Financial Statements

2023-05-15 compared with 2022-11-14 · 274 added, 476 removed, 449 unchanged (63% of the section changed)

3 unchanged sentences

(in thousands, except par value per share amounts)

September 30,

2023 December 31,

3 unchanged sentences

Restricted cash — 5,718

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

11,805 14,690

Accounts receivable, net of allowance of $ 4,767 and $ 4,826 at March 31, 2023 and December 31, 2022, respectively

Inventories, net 37,043 40,643

4 unchanged sentences

Intangible assets, net 47,949 49,268

Goodwill — 41,860

Operating lease right-of-use assets 2,936 3,442

5 unchanged sentences

Customer deposits 3,224 3,983

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

Current portion of notes payable 2,699 3,185

Current portion of operating leases 1,179 1,528

Current portion of finance leases 128 128

Total current liabilities 37,113 35,659

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

Notes payable, less current portion and debt issuance costs, net 5,535 13,040

Operating leases, less current portion 1,730 1,887

Finance leases, less current portion 29 29

Other liabilities 80 79

5 unchanged sentences

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

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

15,985 shares issued and outstanding as of March 31, 2023;

15,985 shares issued and outstanding as of December 31, 2022

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

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

0 shares issued and outstanding as of March 31, 2023;

0 shares issued and outstanding as of December 31, 2022

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

Additional paid-in capital 266,721 266,516

Accumulated deficit ( 181,559 ) ( 171,365 )

Accumulated other comprehensive income 53 324

Accumulated other comprehensive income (loss) 233 55

Total stockholders’ equity attributable to Greenlane Holdings, Inc.

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Total liabilities and stockholders’ equity $ 129,981 $ 146,053

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

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

GREENLANE HOLDINGS, INC.

1 unchanged sentence

(in thousands, except per share amounts)

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

2022 2021 2022 2021

Three months ended March 31,

Net sales $ 23,959 $ 46,534

4 unchanged sentences

General and administrative 7,677 11,715

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

Depreciation and amortization 1,992 2,403

8 unchanged sentences

Net loss ( 10,248 ) ( 18,749 )

Net loss attributable to non-controlling

Net loss attributable to non-controlling interest

( 54 ) ( 3,417 )

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

6,574 1,987 5,694 1,203

Other comprehensive income (loss):

Other comprehensive income:

Foreign currency translation adjustments 178 88

Unrealized gain (loss) on derivative instrument — 52 358 256

Unrealized gain on derivative instrument — 358

Comprehensive loss

1 unchanged sentence

Comprehensive loss attributable to non-controlling interest

( 4,106 ) ( 12,479 ) ( 9,794 ) ( 18,556 )

Comprehensive loss attributable to Greenlane Holdings, Inc.

6 unchanged sentences

Common Stock Class B

Common Stock Class C

Common Stock Additional

5 unchanged sentences

Stockholders’

Shares* Amount* Shares* Amount* Shares Amount

Shares Amount Shares Amount

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

1 unchanged sentence

Equity-based compensation — — — — 110 — — 110

Issuance of Class A shares, net of costs - ATM Program 557 6 — — — — 6,795 — — — 6,801

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

Exchanges of noncontrolling interest for Class A common stock 28 — ( 28 ) — — — 543 — — ( 543 ) —

Issuance of Class A shares - Amended Eyce APA (Note 3) — — — — 95 — — — 95

Other comprehensive income — — — — — — 178 — 178

Balance March 31, 2023 15,985 $ 152 — $ — $ 266,721 $ ( 181,559 ) $ 233 $ ( 53 ) $ 85,494

Net loss — — — — — — — ( 12,124 ) — ( 2,357 ) ( 14,481 )

Equity-based compensation ( 4 ) — — — — — 371 — — 75 446

Issuance of Class A shares, net of costs - ATM Program 296 3 — — — — 2,221 — — — 2,224

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

Issuance of Class A shares - Amended Eyce APA (Note 3) 72 1 — — — — 309 — — — 310

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

Other comprehensive income (loss) — — — — — — — — ( 62 ) — ( 62 )

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

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

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

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

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

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

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

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

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

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

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

Common Stock Class B

Common Stock Class C

Common Stock Additional

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Stockholders’

Shares* Amount* Shares* Amount* Shares Amount

Shares* Amount* Shares* Amount*

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

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Equity-based compensation 94 1 — — 729 — — 172 902

Other comprehensive income — — — — — — — — 18 31 49

Issuance of Class A common stock 21 — — — — — 2,005 — — — 2,005

Exchanges of noncontrolling interest for Class A common stock 118 1 ( 52 ) — ( 3,975 ) ( 1 ) 5,797 — — ( 5,797 ) —

Cancellation of Class B common stock due to forfeitures — — — — — — 8 — — ( 8 ) —

Balance March 31, 2021 816 8 123 — 72,064 7 47,861 ( 29,104 ) 47 45,284 64,103

Net loss — — — — — — — ( 3,043 ) — ( 2,797 ) ( 5,840 )

Equity-based compensation ( 1 ) — — — — — 161 — — 246 407

Issuance of Class A shares, net of costs - ATM Program 557 6 — — 6,795 — — — 6,801

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

Exchanges of noncontrolling interest for Class A common stock 28 — ( 28 ) — 543 — — ( 543 ) —

Exercise of Class A common stock options 2 — 112 — — — 112

Member distributions — — — — — — — ( 200 ) — — ( 200 )

Other comprehensive income — — — — — — 361 85 446

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

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

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

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

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

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

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

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

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

Balance March 31, 2022 5,130 $ 52 1,059 $ — $ 241,256 $ ( 70,876 ) $ 685 $ 18,133 $ 189,250

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

3 unchanged sentences

(in thousands)

Nine months ended September 30,

For the three months ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Equity-based compensation expense 205 874

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

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

Change in provision for doubtful accounts — 227

Gain related to indemnification asset — ( 1,798 )

(Gain) loss on disposal of fixed assets 820 109

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

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

Unrealized loss on equity investments 1,214 305

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

Amortization of deferred financing costs and debt discount 446 15

Unrealized (gain) loss on equity investments — 302

Other 222 ( 183 )

7 unchanged sentences

(Decrease) increase in customer deposits ( 759 ) ( 1,087 )

Net cash used in operating activities ( 22,488 ) ( 32,028 )

Net cash provided by (used in) operating activities 1,883 ( 12,023 )

Cash flows from investing activities:

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

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

Purchases of property and equipment, net ( 176 ) ( 784 )

Proceeds from sale of assets held for sale — 75

Purchase of intangible assets, net — ( 320 )

Net cash provided by (used in) investing activities ( 176 ) ( 709 )

1 unchanged sentence

Proceeds from issuance of Class A common stock, net of costs — 6,801

Proceeds from exercise of stock options and warrants — 268

Proceeds from Asset-Based Loan 14,550 —

Debt issuance costs ( 1,472 ) ( 100 )

Payments on Eyce and DaVinci promissory notes ( 945 ) ( 992 )

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

Repayment of Bridge Loan ( 8,000 ) —

Proceeds from termination of interest rate swap 145 —

Purchase consideration paid for Eyce LLC acquisition ( 875 ) —

Member distributions — ( 200 )

Repayments of Asset-Based Loan ( 6,493 ) —

Modification costs of Asset-Based Loan ( 751 ) —

Other — ( 135 )

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

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

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

Net cash provided by (used in) financing activities ( 8,189 ) 5,674

Effects of exchange rate changes on cash 178 145

Net (decrease) in cash ( 6,304 ) ( 6,913 )

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

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GREENLANE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)

Reconciliation of cash and restricted cash to condensed consolidated balance sheets

Nine months ended September 30,

Reconciliation of cash and restricted cash to consolidated balance sheets

For the three months ended March 31,

Beginning of the period

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Cash paid for amounts included in the measurement of lease liabilities $ 563 $ 802

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

Non-cash investing and financing activities:

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

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

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

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

Issuance of contingent consideration for acquisition $ — $ 1,828

Non-cash purchases of property and equipment $ 143 $ 1,663

Decrease in non-controlling interest as a result of exchanges for Class A common stock $ — $ ( 543 )

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

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

4 unchanged sentences

(“Greenlane” and, collectively with the Operating Company (as defined below) and its consolidated subsidiaries, the “Company,” “we,” “us,” and “our” ) was formed as a Delaware corporation on May 2, 2018.

We are a holding company that was formed for the purpose of completing an underwritten initial public offering (“IPO”) of shares of our Class A common stock, $ 0.01 par value per share (“Class A common stock”), in order to carry on the business of Greenlane Holdings, LLC (the “Operating Company”).

We are a holding company that was formed for the purpose of completing an underwritten initial public offering (“IPO”) of shares of our Class A common stock, $ 0.01 par value per share (the “Class A common stock”), in order to carry on the business of Greenlane Holdings, LLC (the “Operating Company”).

The Operating Company was organized under the laws of the state of Delaware on September 1, 2015, and is based in Boca Raton, Florida.

Unless the context otherwise requires, references to the “Company” refer to us, and our consolidated subsidiaries, including the Operating Company.

We merchandise premium cannabis accessories, child-resistant packaging, specialty vaporization solutions and lifestyle products in the United States, Canada Europe and Latin America, serving a diverse and expansive customer base with thousands of retail locations, licensed cannabis dispensaries, smoke shops, multi-state operators (“MSOs”), specialty retailers, and retail consumers through both our e-commerce platforms and our flagship Higher Standards store in New York City’s famed Chelsea Market.

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

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

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

We are the sole manager of the Operating Company and our principal asset is Common Units of the Operating Company (“Common Units”).

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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 and its subsidiaries.

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.

3 unchanged sentences

("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 condensed consolidated financial statements for the three and nine months ended September 30, 2021 is for the period commencing on August 31, 2021 (the date of the closing of the merger) through September 30, 2021.

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

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

In connection with the merger with KushCo, the Greenlane Certificate of Incorporation was amended and restated (the “A&R Charter”) in order to (i) increase the number of authorized shares of Greenlane Class B common stock, $ 0.0001 par value per share (the “Class B common stock”), from 10 million shares to 30 million shares in order to effect the conversion of each outstanding share of Class C common stock, $ 0.0001 par value per share (the “Class C common stock”), into one-third of one share of Class B common stock, (ii) increase the number of authorized shares of Class A common stock from 125 million shares to 600 million shares, and (iii) eliminate references to the Class C common stock.

Pursuant to the terms of an Agreement and Plan of Merger, dated as of March 31, 2021 (the "Merger Agreement") with KushCo, immediately prior to the consummation of the business combination, holders of Class C common stock received one-third of one share of Class B common stock for each share of Class C common stock held immediately prior to the closing of the merger.

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 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.

Our corporate structure is commonly referred to as an “Up-C” structure.

The Up-C structure allows the members of the Operating Company to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity.

The Up-C structure allows the Operating Company to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity.

One of these benefits is that future taxable income of the Operating Company that is allocated to its members will be taxed on a flow-through basis and therefore will not be subject to corporate taxes at the Operating Company entity level.

Additionally, because the members may redeem their Common Units for shares of Class A common stock on a one -for-one basis or, at our option, for cash, the Up-C structure also provides the members with potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded.

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

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

The TRA provides for the payment by us to the Operating Company’s members of 85.0 % of the amount of tax benefits, if any, that we may actually realize (or in some cases, are deemed to realize) as a result of (i) the step-up in tax basis in our share of the Operating Company's assets resulting from the redemption of Common Units under the mechanism described above and (ii) certain other tax benefits attributable to payments made under the TRA.

Additionally, because a member may redeem their Common Units for shares of Class A common stock on a one -for-one basis or, at our option, for cash, the Up-C structure also provides the member with potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded.

In connection with the IPO, we entered into a Tax Receivable Agreement (the “TRA”) with the Operating Company and the Operating Company’s members and a Registration Rights (the “Registration Rights Agreement”) with the Operating Company’s members.

The TRA provides for the payment by us to the Operating Company’s member(s) of 85.0 % of the amount of tax benefits, if any, that we may actually realize (or in some cases, are deemed to realize) as a result of (i) the step-up in tax basis in our share of the Operating Company's assets resulting from the redemption of Common Units under the mechanism described above and (ii) certain other tax benefits attributable to payments made under the TRA.

Pursuant to the Registration Rights Agreement, we have agreed to register the resale of shares of Class A common stock that are issuable to the Operating Company’s members upon redemption or exchange of their Common Units.

The A&R Charter and the Fourth Amended and Restated Operating Agreement of the Operating Company (the “Operating Agreement”) require that (a) we at all times maintain a ratio of one Common Unit owned by us for each share of our Class A common stock issued by us (subject to certain exceptions), and (b) the Operating Company at all times maintains (i) a one -to-one ratio between the number of shares of our Class A common stock issued by us and the number of Common Units owned by us, and (ii) a one -to-one ratio between the number of shares of our Class B common stock owned by the non-founder members of the Operating Company and the number of Common Units owned by the non-founder members of the Operating Company.

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

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

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 7,470,005 7,470,005 98.1 % 98.1 % 100.0 %

Class B 148,161 148,161 1.9 % 1.9 % — %

Total 7,618,166 7,618,166 100.0 % 100.0 % 100.0 %

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

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

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

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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As such, the information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022.

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

The condensed consolidated results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, or any other future annual or interim period.

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

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

Restricted Cash

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

2022 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.

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 “2022 Reverse Stock Split”) of our issued and outstanding shares of Class A common stock and Class B common stock (the "Common Stock") at 5:01 PM Eastern Time on August 9, 2022.

As a result of the 2022 Reverse Stock Split, every 20 shares of Common Stock issued and outstanding were converted into one share of Common Stock.

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The 2022 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.

All outstanding options, restricted stock awards, warrants and other securities entitling their holders to purchase or otherwise receive shares of our Common Stock were adjusted as a result of the 2022 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 were appropriately adjusted.

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

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

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

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

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

As described in further detail in "Note 9 - Stockholders' Equity," 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 for working capital and general corporate purposes.

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

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

For so long as our public float is less than $75 million, the aggregate market value of the shares of Class A common stock sold by us pursuant to Instruction I.B.6 during any twelve consecutive months may not exceed one-third of our public float.

Also as described in further detail in "Note 9 - Stockholders' Equity," 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.

Following the completion of the June 2022 Offering, we are unable to issue additional shares of Class A common stock pursuant to the ATM Program or otherwise use the Shelf Registration Statement for a period of time due to the restrictions under Instruction I.B.6 to Form S-3, which will limit our liquidity options in the capital markets.

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

On July 14, 2022, we repaid $ 4.0 million of the aggregate principal amount due under the Bridge Loan, and on July 19, 2022, we repaid the remaining balance on the Bridge Loan in full.

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

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

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

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

The remaining proceeds will be used for general corporate purposes.

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

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

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

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

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

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

("High Tide") (Nasdaq:

HITI) for total consideration of approximately $ 0.05 million.

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

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

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

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

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

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 2022 Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of Common Stock to additional paid-in capital.

Proposed 2023 Reverse Stock Split and Series A Preferred Stock Issuance

On April 11 , 2023, our board of directors (the "Board") unanimously approved and declared advisable, and recommended that our stockholders (including holders of Series A Preferred Stock, as discussed below) approve at our annual meeting of shareholders the adoption of, an amendment (the “2023 Amendment”) to our A&R Charter to effect a reverse stock split of our Common Stock (the “Proposed 2023 Reverse Stock Split”) at any whole number between, and inclusive of, one-for-five to one-for-fifteen.

Approval of the proposal at our annual meeting, which is scheduled to occur on May 26, 2023 (the "2023 Annual Meeting"), will grant the Board the authority, but not the obligation, to file the 2023 Amendment to effect the Proposed 2023 Reverse Stock Split no later than November 20, 2023, with the exact ratio and timing of the Proposed 2023 Reverse Stock Split to be determined at the discretion of the Board.

The exact split ratio selected by the Board will be publicly announced prior to the effectiveness of the Proposed 2023 Reverse Stock Split.

In connection with the Proposed 2023 Reverse Stock Split, on April 26, 2023, the Board declared a dividend of one one-thousandth (1/1,000 th ) of a share of Series A Preferred Stock, par value $ 0.0001 per share (the “Series A Preferred Stock”), for each outstanding share of Class A common stock to holders of record of Class A common stock as of 5:00 p.m.

Eastern Time on April 26, 2023.

The holders of Series A Preferred Stock have 1,000,000 votes per whole share of Series A Preferred Stock (i.e., 1,000 votes per one one-thousandth of a share of Series A Preferred Stock held) and are entitled to vote with the holders of Class A common stock, together as a single class, on the proposal to approve the 2023 Amendment in connection with the Proposed 2023 Reverse Split Proposal and to vote on a proposal to adjourn the annual meeting under certain circumstances, but holders of Series A Preferred Stock are otherwise not entitled to vote on the other proposals being presented at the annual meeting of stockholders.

Holders of Series A Preferred Stock are not entitled to receive dividends of any kind and such shares are subject to redemption no later than the time the Proposed 2023 Reverse Stock Split is approved by our stockholders.

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 and defined below.

ATM Program and Shelf Registration Statement

While we have an effective shelf registration statement on Form S-3 (the "Shelf Registr ation Statement") to conduct securities offerings from time to time, for so long as our public float is less than $75 million, our ability to utilize the Shelf Registration Statement to raise capital is limited, as further described below.

The Shelf Registration Statement registers the offer and sale of 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.

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

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 12 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 sold $ 2.2 million in securities pursuant to Instruction I.B.6 in the 12 calendar months preceding the date of filing of this Quarterly Report on Form 10-Q.

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.

Common Stock and Warrant Offerings

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

The October 2022 units were offered pursuant to a Registration Statement on Form S-1 (the "October 2022 Offering").

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

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

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

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

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

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

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

We believe that our cash on hand will be sufficient to fund our working capital and capital expenditure requirements, as well as our debt repayments and other liquidity requirements associated with our existing operations, for at least the next 12 months.

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 (each comprised of one share of Class A common stock and two warrants to purchase Class A common stock), 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 Quarterly Report on Form 10-Q.

Entry into Asset-Based Loan

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

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

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

On 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 our rights to payment from the United States Internal Revenue Service for certain periods with respect to the employee retention credits filed by us under the Employee Retention Credit program.

Management Initiatives

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.

In April 2023, we successfully entered into two strategic partnerships which management believes will help significantly reduce our overall cost structure, enhance our margins and further support our faciliti es consolidation initiatives while also servicing and providing solutions to our customers.

First, we entered into a strategic partnership (the “MJ Packaging Partnership”) with A&A Global Imports d/b/a MarijuanaPackaging.com (“MJ Pack”), a leading provider of packaging solutions to the cannabis industry.

As part of the MJ Packaging Partnership, we will no longer purchase additional packaging inventory and MJ Pack will become our strategic partner to continue providing and enhancing packaging solutions for our customers.

As a result of the MJ Packaging Partnership, we are no longer seeking a purchaser for our packaging division.

Second, we entered into a strategic partnership with an affiliate of one of our existing vape suppliers (“Vape Partner”) to service certain key customers with vaporizer goods and services (the “Vape Partnership”).

As part of the Vape Partnership, we will introduce our Vape Partner to certain key customers, assist with the promotion and the sale of certain vaporizer goods and services, and help coordinate the logistics, storage and distribution of such vaporizer products.

If our Vape Partner and key customer(s) enter into a direct relationship, the customers would directly purchase vaporizer goods and services, which we currently sell them, directly from our Vape Partner and we would no longer need to purchase such vape inventory on behalf of such key customer(s).

In exchange we would earn quarterly and annual commission payments from our strategic partners.

While the strategic partnerships may result in a decrease in top line revenue for these packaging and vape products, these partnerships combined with some of our other restructuring initiatives should allow us to reduce our overall cost-structure and enhance our margins and convert millions of dollars of existing inventory back into cash, thereby improving our balance sheet.

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 our 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

Conformity with U.S.

GAAP requires the use of estimates and judgments that affect the reported amounts in our condensed consolidated financial statements and accompanying notes.

GAAP requires the use of estimates and judgments that affect the reported amounts in our consolidated financial statements and accompanying notes.

These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources.

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GAAP requires us to make estimates and judgments in several areas.

Such areas include, but are not limited to:

Such areas include, but are not limited to the following:

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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These estimates are based on management's knowledge about current events and expectations about actions we may undertake in the future.

Actual results could differ materially from those estimates.

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") a global pandemic.

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

Our estimates may change as new

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

Valuation of Goodwill and Indefinite-Lived Intangible Assets

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

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

Such valuations require management to make significant estimates and assumptions.

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

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

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

Goodwill is assessed for impairment at the reporting unit level.

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

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

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

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

(in thousands) Industrial Goods Consumer Goods

Goodwill Indefinite-Lived Intangibles Goodwill Indefinite-Lived Intangibles

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

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

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

Voluntary Change in Accounting Principle

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 condensed consolidated statements of operations and comprehensive loss.

These costs were previously recorded as a component of "cost of sales" within our condensed 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 condensed consolidated statements of operations and comprehensive loss through retrospective application as follows:

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

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

Cost of sales $ 41,192 $ ( 1,365 ) $ 39,827 $ 94,832 $ ( 3,889 ) $ 90,943

Gross profit $ 122 $ 1,365 $ 1,487 $ 15,206 $ 3,889 $ 19,095

General and administrative $ 15,430 $ 1,365 $ 16,795 $ 30,885 $ 3,889 $ 34,774

Total operating expenses $ 27,821 $ 1,365 $ 29,186 $ 56,428 $ 3,889 $ 60,317

The actual results could differ materially from those estimates.

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, beginning with the fourth quarter of 2021, we determined we had following two reportable operating business segments:

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

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

decisions, and evaluates operating performance.

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

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

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

As of March 31, 2023, 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, manages our business, makes resource allocation and operating decisions, and evaluates operating performance.

See “Note 12—Segment Reporting.”

Revenue Recognition

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

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

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

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

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

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

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

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

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

Our liability for returns, which is included within "Accrued expenses and other current liabilities" in our condensed consolidated balance sheets, was approximately $ 0.3 million and $ 0.3 million as of March 31, 2023 and December 31, 2022.

One customer represented approximately 26 % of our net sales for the three months ended March 31, 2023.

For the three months ended March 31, 2022, one customer represented approximately 17 % of our net sales.

As of March 31, 2023, two customers represented approximately 21 % and 15 % of accounts receivable, respectively.

As of December 31, 2022, the Company had three customers who individually represented approximately 31 %, 17 % and 15 % of accounts receivable, respectively.

Value Added Taxes

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

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

Based on this analysis, we recorded VAT payable of approximately $ 0.4 million relating to this matter within "Accrued expenses and other current liabilities” in our condensed consolidated balance sheet as of March 31, 2023 and December 31, 2022.

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

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

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

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

During the three months ended March 31, 2022, we recognized a gain of approximately $ 1.8 million within "general and administrative expenses" in our condensed consolidated statements of operations and comprehensive loss, which represented the partial reversal of a charge previously recognized based on the difference between the VAT payable and the VAT receivable and indemnification asset, as the indemnification asset became probable of recovery based on the reduction in our previously estimated VAT liability for penalties and interest based on our voluntary disclosure to, and ongoing settlement with, the relevant tax authorities in the EU member states.

As noted above, we have voluntarily disclosed VAT owed to several relevant tax authorities in the EU member states and believe in doing so we will reduce our liability for penalties and interest.

Nonetheless, we may incur expenses in future periods related to such matters, including litigation costs and other expenses to defend our position.

The outcome of such matters is inherently unpredictable and subject to significant uncertainties.

The outcome of such matters is

inherently unpredictable and subject to significant uncertainties.

Refer to "Note 7—Commitments and Contingencies" for additional discussion regarding our contingencies.

Recently Issued Accounting Guidance Not Yet Adopted

Recently Adopted Accounting Guidance

In June 2016, the FASB issued ASU No.

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

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

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

Early adoption is permitted.

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

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

We adopted this standard beginning January 1, 2023.

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

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

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Prior to this ASU, an acquirer generally recognizes contract assets acquired and contract liabilities assumed that arose from contracts with customers at fair value on the acquisition date.

The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted.

The ASU was effective for fiscal years beginning after December 15, 2022, with early adoption permitted.

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.

BUSINESS ACQUISITIONS AND DISPOSITIONS

Supplemental Unaudited Pro Forma Financial Information

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

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

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

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

2022 2021 2022 2021

(unaudited) (unaudited)

Net sales $ 28,680 $ 61,431 $ 115,130 $ 191,516

Cost of sales 23,711 71,286 96,094 171,809

Gross profit 4,969 ( 9,855 ) 19,036 19,707

Net loss $ ( 79,215 ) $ ( 60,251 ) $ ( 112,445 ) $ ( 90,256 )

The pro forma amounts have been calculated after applying our accounting policies to the financial statements of Eyce and KushCo and adjusting the combined results of Greenlane, Eyce, DaVinci and KushCo (a) to remove Eyce and DaVinci product sales to us and to remove the cost incurred by us related to products purchased from Eyce and DaVinci prior to the acquisition, and (b) to reflect the increased amortization expense that would have been charged assuming intangible assets identified in the acquisitions of Eyce, DaVinci, and KushCo had been recorded on January 1, 2021.

The impact of the Eyce and DaVinci acquisition and the KushCo merger on the actual results reported by us in subsequent periods may differ significantly from that reflected in this pro forma information for a number of reasons, including but not limited to, non-achievement of the expected synergies from these combinations and changes in the regulatory environment.

As a result, the pro forma information is not necessarily indicative of what our financial condition or results of operations would have been had the acquisitions been completed on the applicable date of this pro forma financial information.

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

We adopted this new standard beginning January 1, 2023.

Adoption of this standard did not impact our condensed consolidated financial statements, as we did not complete any transactions to which this standard was applicable during the current reporting period.

BUSINESS ACQUISITIONS

Amended Eyce APA

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

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

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

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

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

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

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

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

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The carrying amounts for certain of our financial instruments, including cash, accounts receivable, accounts payable and certain accrued expenses and other assets and liabilities, approximate fair value due to the short-term nature of these instruments.

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

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

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

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

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

As of March 31, 2023 and December 31, 2022, we had contingent consideration that is required to be measured at fair value on a recurring basis.

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

Condensed Consolidated

Balance Sheet Caption Fair Value at September 30, 2022

Balance Sheet Caption Fair Value at March 31, 2023

(in thousands) Level 1 Level 2 Level 3 Total

Equity securities Other assets $ 705 $ — — 705

Total Assets $ 705 $ — $ — $ 705

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

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

Condensed Consolidated

Balance Sheet Caption Fair Value at December 31, 2022

(in thousands) Level 1 Level 2 Level 3 Total

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

Total Assets $ 1,919 $ — $ — $ 1,919

Interest rate swap contract Other liabilities $ — $ 288 $ — $ 288

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

Contingent consideration - long-term Other long-term liabilities — — 1,216 1,216

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

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

There were no transfers between Level 1 and Level 2 and no transfers to or from Level 3 of the fair value hierarchy during the three and nine months ended September 30, 2022 and 2021, respectively.

There were no transfers between Level 1 and Level 2 and no transfers to or from Level 3 of the fair value hierarchy during the three months ended March 31, 2023 and 2022.

Derivative Instrument and Hedging Activity

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

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.

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

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

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

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

Refer to “ Note 8 — Supplemental Financial Information ” for further details on the components of accumulated other comprehensive income (loss) for the three months ended March 31, 2023 and 2022 .

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

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

There was no measure of hedge ineffectiveness and no reclassifications from other comprehensive loss into interest expense for the three months ended March 31, 2023 and 2022 .

In August 2022, we terminated the interest swap contract.

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

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

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

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

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A reconciliation of our liabilities that are measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows:

(in thousands) Nine Months Ended

September 30, 2022

(in thousands) Three months ended

March 31, 2023

Balance at December 31, 2022 $ 2,738

Loss (gain) from fair value adjustments included in results of operations —

Balance March 31, 2023 $ 2,738

(in thousands) Three months ended

March 31, 2022

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 )

Gain from fair value adjustments included in results of operations ( 5 )

Balance September 30, 2022 $ 1,300

(in thousands) Nine Months Ended

September 30, 2021

Balance at December 31, 2020 $ —

Contingent consideration issued for Eyce acquisition 1,828

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

Balance at September 30, 2021 $ 2,583

Balance March 31, 2022 $ 3,366

Equity Securities Without a Readily Determinable Fair Value

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Airgraft Inc., Sun Grown, and VIVA are private entities and their equity securities do not have a readily determinable fair value.

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

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

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

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

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

We did not identify any fair value adjustments related to these equity securities during the three months ended March 31, 2023 and 2022.

As of March 31, 2023 and December 31, 2022, the carrying value of our investment in equity securities without a readily determinable fair value was approximately $ 2.5 million, respectively, included within "Other assets" in our condensed consolidated balance sheets.

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

Greenlane as a Lessee

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

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

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

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

The following table provides details of our future minimum lease payments under operating lease liabilities recorded in our condensed consolidated balance sheet as of September 30, 2022.

The following table provides details of our future minimum lease payments under finance and operating lease liabilities recorded in our condensed consolidated balance sheet as of March 31, 2023.

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

(in thousands) Operating Leases

Thereafter 14

Remainder of 2023 $ 1,078

2027 and thereafter —

Total minimum lease payments 3,015

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Long-term portion $ 1,730

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

The following expenses related to our operating leases were included in "general and administrative" expenses within our condensed consolidated statements of operations and comprehensive loss:

For the nine months ended

September 30,

For the three months ended

(in thousands) 2023 2022

Operating lease costs

Operating lease cost

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Total lease cost $ 765 $ 801

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

September 30, 2022

Weighted average remaining lease terms

The table below presents lease-related terms and discount rates as of March 31, 2023:

Operating Leases

Operating leases 2.4 years

Weighted average discount rate

Operating leases 2.3 %

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2024 and thereafter $ —

Total $ 530,350

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

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

Real Estate Note $ — $ 7,958

Bridge Loan — 8,000

Asset-Based Loan 15,000 —

(in thousands) March 31, 2023 December 31, 2022

Line of Credit 8,507 15,000

DaVinci Promissory Note 1,874 2,538

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Less current portion of debt ( 2,699 ) ( 3,185 )

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

Debt, net, excluding operating leases and finance leases $ 5,535 $ 13,040

Real Estate Note

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

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

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

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

In September 2022, one of the Operating Company's wholly-owned subsidiaries, 1095 Broken Sound Pkwy LLC ("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 a third-party (the "HQ Purchaser") whereby 1095 Broken Sound agreed to sell a certain parcel of real estate including our headquarters building to the purchaser of our former headquarters for total proceeds of $ 9.6 million in cash.

On the closing date, the Company used a portion of the proceeds from the 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 March 31, 2023 or December 31, 2022.

Eyce Promissory Note

In March 2021, one of the Operating Company's wholly-owned subsidiaries financed a portion of the consideration of the acquisition of Eyce through the issuance of an unsecured promissory note (the "Eyce Promissory Note") in the principal amount of $ 2.5 million.

Principal payments plus accrued interest at a rate of 4.5 % are due quarterly through April 2023.

In March 2021, one of the Operating Company's wholly-owned subsidiaries financed the acquisition of Eyce through the issuance of an unsecured promissory note (the “Eyce Promissory Note”) in the principal amount of $ 2.5 million.

Principal payments plus accrued interest at a rate of 4.5 % were due quarterly through April 2023.

DaVinci Promissory Note

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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 originally due in full on June 30, 2022.

The December 2021 Note accrued interest at a rate of 15.0 % 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.

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 Uniform 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.

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

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

Asset-Based Loan

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

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

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

As of December 31, 2022, of the total term loan amount, $ 5.7 million was located in a blocked account, which was classified as “restricted cash” on our consolidated balance sheet, and which released the funds when permitted by the borrowing base certificate.

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

The maturity date of the Asset-Based Loan is the third anniversary of the closing date (the “Maturity Date”).

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

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

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

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

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

The Asset-Based Loan contains customary covenants and restrictions, including, without limitation, covenants that require us to comply with applicable 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.

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, pursuant to which we agreed to, among other things, to 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.

As of March 31, 2023, we were in compliance with the Loan Agreement covenants.

COMMITMENTS AND CONTINGENCIES

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However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties.

Other Commitments and Contingencies

We have not taken any reserves for litigation for the three months ended March 31, 2023 and 2022.

Other Contingencies

We are potentially subject to claims related to various non-income taxes (such as sales, value added, consumption, and similar taxes) from various tax authorities, including in jurisdictions in which we already collect and remit such taxes.

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

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

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

SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION

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

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

Accrued Expenses and Other Current Liabilities

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

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

(in thousands) March 31, 2023 December 31, 2022

VAT payable (including amounts related to VAT matter described in Note 2) $ 2,980 $ 2,809

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Accrued employee compensation 3,423 3,812

Amended Eyce APA 656 430

Accrued professional fees 679 818

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Sales tax payable 640 578

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

Other 1,370 198

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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 nine months ended September 30, 2022 were as follows:

Changes in our customer deposits liability balance during the three months ended March 31, 2023 were as follows:

(in thousands) Customer Deposits

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Revenue recognized ( 2,389 )

Balance as of September 30, 2022 $ 4,523

Balance as of March 31, 2023 $ 3,224

Accumulated Other Comprehensive Income (Loss)

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Other comprehensive income (loss) 178 — 178

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

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

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

Balance at March 31, 2023 $ 233 $ — $ 233

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

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

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

Balance at March 31, 2022 $ 353 $ 332 $ 685

Supplier Concentration

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

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

Our four largest vendors accounted for an aggregate of approximately 79.7 % and 67.0 % of our total purchases for the three months ended March 31, 2023 and 2022, respectively.

We expect to maintain our relationships with these vendors.

Related Party Transactions

Nicholas Kovacevich, our Chief Executive Officer, and Dallas Imbimbo, who served on our Board prior to his resignation on April 8, 2022, own capital stock of Unrivaled Brands Inc.

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

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

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

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

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

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

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

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 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.

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.

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 for the three months ended March 31, 2023 and 2022 were $ 0 and approximately $ 0.2 million, respectively.

Total accounts receivable due from Unrivaled were $ 0.4 million as of March 31, 2023 and December 31, 2022, 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, our co-founder and a former director who resigned from the Board on January 6, 2023, has a significant ownership interest in one of our customers, Universal Growing.

There were no net sales to Universal Growing for the three months ended March 31, 2023 and 2022.

Total accounts receivable due from Universal Growing as of March 31, 2023 and December 31, 2022 were de minimis.

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).

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 “2022 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 2022 Reverse Stock Split, every 20 shares of Common Stock issued and outstanding were converted into one share of Common Stock.

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The 2022 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 2022 Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of Common Stock to additional paid-in capital.

Refer to "Note 13 — Subsequent Events" for additional details regarding the issuance of Preferred Series A Stock and the Proposed 2023 Reverse Stock Split.

Non-Controlling Interest

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

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

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

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

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

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

At-the-Market Equity Offering

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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.

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 12-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.

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

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

At the time of our entry into the Amendment, approximately $ 38.7 million in shares remained available for issuance under the ATM Program.

At the time of our entry into the ATM 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) Three Months Ended

September 30, 2022 Nine Months Ended

September 30, 2022 August 2021 (Inception) through

September 30, 2022

($ in thousands) August 2021 (Inception) through

March 31, 2023

Class A shares sold* 972,624

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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.

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

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 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 .

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").

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 business understanding between us and the investors in the June 2022 Offering with respect to the exercisability 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

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

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.

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

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

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

Class C Common Stock Conversion

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.

February 2023 Form S-1

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 as of the date of this Quarterly Report on Form 10-Q.

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 Quarterly Report on Form 10-Q.

Net Loss Per Share

Basic net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding during the period.

Diluted net loss per share of Class A common stock is computed by dividing net loss attributable to Greenlane by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive instruments.

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share of our Class A common stock is as follows (in thousands, except per share amounts):

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

Three months ended March 31,

(in thousands, except per share data) 2023 2022

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

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

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

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

As such, separate calculations of basic and diluted net loss per share for each of our Class B common stock and Class C common stock under the two-class method have not been presented.

For the three months ended March 31, 2023 and 2022, respectively, shares of Class B 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 do not share in our earnings or losses and are therefore not participating securities.

As such, separate calculations of basic and diluted net loss per share for each of our Class B common stock under the two-class method have not been presented for the three months ended March 31, 2022.

COMPENSATION PLANS

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In April 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”).

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.

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.

Following the effect of the -one-for-20 Reverse Stock Split, the total number of shares of Class A common stock authorized for issuance is 1,100,000 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.

KushCo Equity Plan

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

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

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

Rule 10b5-1 Trading Plans

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

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

On April 26, 2023, the Board, subject to stockholder approval at the 2023 Annual Meeting, approved a third amendment and restatement of the 2019 Plan (the "Third Amended Plan").

If approved at the 2023 Annual Meeting, the Third Amended Plan would, among other things, increase the number of shares of Class A common stock authorized for issuance under the Second Amended 2019 Plan by 2,098,627 shares to an aggregate of 3,198,627 shares.

For additional information about the Third Amended Plan, please see the Company's Definitive Proxy Statement filed with the SEC on April 27, 2023.

Equity-Based Compensation Expense

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For the three months ended

September 30, For the nine months ended

September 30,

(in thousands) 2023 2022

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Restricted stock units (RSUs) - Class A common stock — 11

Common units of the Operating Company — 376 — 449

Total equity-based compensation expense $ 205 $ 873

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

Total remaining unrecognized compensation expense as of March 31, 2023 was as follows:

Remaining Unrecognized Compensation Expense

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

March 31, 2023 Weighted Average Period over which Remaining Unrecognized Compensation Expense is Expected to be Recognized

(in thousands) (in years)

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Total remaining unrecognized compensation expense $ 276

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.

As a partnership, the Operating Company is generally not subject to U.S.

federal and certain state and local income taxes, however, certain states in which the Operating Company does business impose state composite and/or withholding income taxes.

federal and certain state and local income taxes.

Any taxable income or loss generated by the Operating Company is passed through to and included in the taxable income or loss of its members, including Greenlane, on a pro-rata basis, in accordance with the terms of the Operating Agreement.

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We are a corporation subject to U.S.

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

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.

As of September 30, 2022 and December 31, 2021, management performed an assessment of the realizability of our deferred tax assets based upon which management determined that it is not more likely than not that the results of operations will generate sufficient taxable income to realize portions of the net operating loss benefits.

Consequently, we established a full valuation allowance against our deferred tax assets, and reflected a carrying balance of $ 0 as of September 30, 2022 and December 31, 2021, respectively.

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

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

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

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

During the three months ended March 31, 2023 and 2022, 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 March 31, 2023 and December 31, 2022, respectively.

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

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

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

federal statutory tax rate of 21% primarily due to the Operating Company's pass-through structure for U.S.

income tax purposes, the relative mix in earnings and losses in the U.S.

versus foreign tax jurisdictions, and the valuation allowance against the deferred tax asset.

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

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

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 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.

Uncertain Tax Positions

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

For the three months ended March 31, 2023 and 2022, we did no t have any unrecognized tax benefits as a result of tax positions taken during a prior period or during the current period.

No interest or penalties have been recorded as a result of tax uncertainties.

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Tax Receivable Agreement (TRA)

We entered into the TRA with the Operating Company and each of the members (other than Greenlane Holdings, Inc.) that provides for the payment by the Operating Company to the members of 85 % of the amount of tax benefits, if any, that we may actually realize (or in some circumstances are deemed to realize) as a result of (i) increases in tax basis resulting from any future redemptions of Common Units as described in “Note 1—Business Operations and Organization” and (ii) certain other tax benefits attributable to payments made under the TRA.

We entered into the TRA with the Operating Company and each of the members that provides for the payment by the Operating Company to the members of 85 % of the amount of tax benefits, if any, that we may actually realize (or in some circumstances are deemed to realize) as a result of (i) increases in tax basis resulting from any future redemptions of Common Units as described in “Note 1—Business Operations and Organization” and (ii) certain other tax benefits attributable to payments made under the TRA.

The annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits.

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As a result, we determined that the amount or timing of payments to noncontrolling interest holders under the TRA are no longer probable or reasonably estimable.

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

If utilization of the deferred tax assets subject to the TRA becomes more likely than not in the future, we will record a liability related to the TRA, which would be recognized as expense within our condensed consolidated statements of operations and comprehensive (loss) income.

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

Based on this assessment, our TRA liability was $ 0 as of March 31, 2023 and December 31, 2022, respectively.

If utilization of the deferred tax assets subject to the TRA becomes more likely than not in the future, we will record a liability related to the TRA, which would be recognized as expense within our consolidated statements of operations and comprehensive (loss) income.

During the three months ended March 31, 2023 and 2022, we did not make any payments, inclusive of interest, to members of the Operating Company pursuant to the TRA.

SEGMENT REPORTING

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Therefore, segment information is prepared on the same basis that management reviews financial information for operational decision-making purposes.

Our CODM is our CEO.

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

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

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

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

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, Marley Natural, Keith Haring, and Higher Standards, as well as lifestyle products and accessories from leading brands, like PAX, Storz and Bickel, Grenco Science, VIBES and many more.

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

We determined we had two operating segments as of March 31, 2023, 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 first quarter of 2023.

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, such as 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 MSOs, operators, and retailers through our wholesale operations by providing ancillary products essential to their growth, such as customizable packaging and supply products 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.

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

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

The following table sets forth information by reportable segment for the three months ended March 31, 2023 and 2022, respectively.

There were no material intersegment sales during the three months ended March 31, 2023 and 2022.

For the three months ended

September 30, 2022 For the three months ended

September 30, 2021

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

Net sales $ 8,565 $ 20,115 $ 28,680 $ 24,724 $ 16,590 $ 41,314

Cost of sales 7,937 15,774 23,711 23,213 16,614 39,827

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

For the nine months ended

September 30, 2022 For the nine months ended

September 30, 2021

March 31, 2023 For the three months ended

March 31, 2022

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

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

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

As of March 31, 2023 As of December 31, 2022

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

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SUBSEQUENT EVENTS

Chief Executive Officer Transition

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

Board Refreshment

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

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

Entry into Amended and Restated Employment Agreement with Nicholas Kovacevich

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

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

Kovacevich’s prior employment agreement with us was terminated.

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

Vendor Payment Plan

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

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

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

High Tide and XS Financial Sales

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

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

October 2022 Offering

The October 2022 Units 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.

Katella Lease Termination

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

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

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

Amendment to Second Amended and Restated Bylaws

On April 11, 2023, the Board approved an amendment (the “Bylaw Amendment”) to the Second Amended and Restated Bylaws of the Company (the “Bylaws”), effective as of April 11, 2023.

The Bylaw Amendment amended and restated Article I, Section 1.6 of the Bylaws in their entirety to lower the number of holders of the shares entitled to vote at a meeting of stockholders constituting a quorum, in person or by proxy, from a majority to one-third.

Additional information about the Bylaw Amendment can be found in the Company's Current Report on Form 8-K filed with the SEC on April 12, 2023.

Proposed 2023 Reverse Stock Split

On April 11 , 2023, the Board unanimously approved and declared advisable, and recommended that our stockholders (including holders of Series A Preferred Stock, as discussed below) approve at our annual meeting of stockholders the adoption of the 2023 Amendment to effect a reverse stock split of our Common Stock at any whole number between, and inclusive of, one-for-five to one-for-fifteen.

Approval of the Proposed 2023 Reverse Stock Split at the 2023 Annual Meeting will grant the Board the authority, but not the obligation, to file the 2023 Amendment to effect the Proposed 2023 Reverse Stock Split no later than November 20, 2023, with the exact ratio and timing of the Proposed 2023 Reverse Stock Split to be determined at the discretion of the Board.

The exact split ratio selected by the Board will be publicly announced prior to the effectiveness of the Proposed 2023 Reserve Stock Split.

For additional information about the 2023 Annual Meeting and the Proposed 2023 Reverse Stock Split, please see the Company's Definitive Proxy Statement filed with the SEC on April 27, 2023.

Issuance of Series A Preferred Stock

In connection with the Proposed 2023 Reverse Stock Split, on April 26, 2023, the Board declared a dividend of one one-thousandth (1/1,000 th ) of a share of Series A Preferred Stock for each outstanding share of Class A common stock to holders of record of Class A common stock as of 5:00 p.m.

Eastern Time on April 26, 2023.

The holders of Series A Preferred Stock have 1,000,000 votes per whole share of Series A Preferred Stock (i.e., 1,000 votes per one one-thousandth of a share of Series A Preferred Stock) and are entitled to vote with the holders of Class A common stock, together as a single class, on the proposal to approve the 2023 Amendment in connection with the Proposed 2023 Reverse Split Proposal and to vote on a proposal to adjourn the annual meeting under certain circumstances, but holders of Series A Preferred Stock are otherwise not entitled to vote on the other proposals being presented at 2023 Annual Meeting.

For additional information about the Series A Preferred Stock and the 2023 Annual Meeting, please see the Company's Form 8-A filed with the SEC on April 26, 2023 and the Company's Definitive Proxy Statement filed with the SEC on April 27, 2023.

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

What changed 10-Q

Item 1. Financial Statements