What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-01-09 compared with 2023-08-14 · 157 added, 153 removed, 267 unchanged (54% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes of Greenlane Holdings, Inc.

and its consolidated subsidiaries (“Greenlane” and, collectively with the Operating Company and its consolidated subsidiaries, the “Company”, "we", "us" and "our") for the quarterly period ended June 30, 2023 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and related notes of Greenlane Holdings, Inc.

for the year ended December 31, 2022, which are included in our Annual Report on Form 10-K.

and its consolidated subsidiaries (“Greenlane” and, collectively with the Operating Company and its consolidated subsidiaries, the “Company”, "we", "us" and "our") for the quarterly period ended September 30, 2023 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and related notes of Greenlane Holdings, Inc.

for the year ended December 31, 2022, which are included in Amendment No.

1 to our Annual Report on Form 10-K/A.

Note Regarding Forward-Looking Statements

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Forward-looking statements are based on information available at the time those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.

Factors that might cause such a difference include those discussed in our filings with the SEC, under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the "2022 Annual Report") and in other documents that we file from time to time with the Securities and Exchange Commission (the "SEC").

Factors that might cause such a difference include those discussed in our filings with the SEC, under the heading "Risk Factors" in Amendment No.

1 to our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2022 (the "2022 Annual Report") and in other documents that we file from time to time with the Securities and Exchange Commission (the "SEC").

Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances, or achievements expressed or implied by the forward-looking statements.

These risks include, but are not limited to, those listed below and those discussed in greater detail in Part I, Item 1A of the 2022 Annual Report under the heading “Risk Factors."

• the potential delisting of our Class A common stock from the Nasdaq;

• the potential delisting of our Class A common stock from Nasdaq;

• our expectations about our ability to fully execute actions and steps that would be probable of mitigating the existence of substantial doubt regarding our ability to continue as a going concern;

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Consequently, you should not place undue reliance on forward-looking statements.

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

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

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

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

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

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

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

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

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

PuffItUp.com, HigherStandards.com, EyceMolds.com and MarleyNaturalShop.com.

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

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

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

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

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

We have made tremendous progress consolidating and streamlining our warehouse and distribution operations in 2022 and 2023.

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

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

Grenco Science, PAX, Cookies, and more.

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

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

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

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

In 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 facilities consolidation initiatives while also servicing and providing solutions to our customers.

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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 reduced our salaries, benefits and payroll taxes expenses by approximately 44.3%, for the six months ended June 30, 2023, compared to the same period for 2022 to reduce costs.

We reduced our salaries, benefits and payroll taxes expenses by approximately $11.3 million, for the nine months ended September 30, 2023, compared to the same period for 2022 to reduce costs.

We are actively selling our excess & obsolete (“E&O”) inventory of lower-margin, non-strategic products, along with reducing our overall level of inventory on hand.

In May 2022, we commenced our official E&O sales program internally and have been aggressively liquidating E&O inventory into cash.

Management believes that our various strategic initiatives will reduce costs, help accelerate the our path to profitability, help support the growth of the business, and allow us to reinvest capital into our highest margin product lines, such as our Greenlane Brands, launch new products such as our Groove product line, and improve our e-commerce and B2B technological platforms.

Notwithstanding the liquidity plans discussed above, we were required to obtain additional capital through the sale of Class A common stock and warrants in a public offering that closed in July 2023 and future receivables financings entered into in July and August 2023 (the "Future Receivables Financings").

The July 2023 Offering was completed and the Future

Receivables Financings were entered into in order to meet short term funding needs, and we are still seeking to execute our strategic and other liquidity initiatives.

In addition to the strategic initiatives discussed above, we obtained additional capital through the sale of Class A common stock and warrants in a public offering that closed in July 2023 and future receivables financings arrangements entered into in July and August 2023 (the "Future Receivables Financings").

The July 2023 Offering was completed and the Future Receivables Financings were entered into in order to meet short term funding needs, and we are still seeking to execute our strategic and other liquidity initiatives.

USPS PACT Act Exemption

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

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

Nasdaq Deficiency Letter

On August 3, 2023, we received a letter from the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it no longer is in compliance with Nasdaq Listing Rule 5450(b)(1)(C) because the market value of the publicly held shares of Class A common stock has fallen below the $5.0 million minimum required for continued listing on the Nasdaq Global Market for a period of at least 30 consecutive business days.

Nasdaq Deficiency Letters

On August 3, 2023, we received a letter from the Nasdaq Listing Qualifications Department (the "Staff") of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it no longer is in compliance with Nasdaq Listing Rule 5450(b)(1)(C) because the market value of the publicly held shares of Class A common stock has fallen below the $5.0 million minimum required for continued listing on the Nasdaq Global Market for a period of at least 30 consecutive business days.

Nasdaq calculates publicly held shares by subtracting from the total shares of Class A common stock outstanding any shares held by officers, directors or any person who beneficially owns more than 10% of the total shares of Class A common stock outstanding.

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In the event that we receive a notice of delisting, Nasdaq rules permit us to appeal the delisting determination to a Nasdaq Hearings Panel.

Alternatively, we may apply to transfer the listing of the Class A common stock to The Nasdaq Capital Market (the “Capital Market”) if it satisfies the continued listing criteria for the Capital Market.

We currently are considering all available options to resolve the deficiency and regain compliance with Nasdaq’s minimum requirements for the market value of publicly held shares of Class A common stock.

Alternatively, we may apply to transfer the listing of the Class A common stock to The Nasdaq Capital Market (the “Capital Market”) if we satisfy the continued listing criteria for the Capital Market.

On August 21, 2023, we received a deficiency letter from the Staff of Nasdaq notifying us that, for the last 30 consecutive business days, the closing bid price for our Class A common stock had been below the minimum $1.00 per share required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(a)(1).

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been given 180 calendar days, or until February 20, 2024, to regain compliance with Rule 5450(a)(1).

If we choose to implement a reverse stock split, we must complete the split no later than ten business days prior to February 20, 2024, to regain compliance.

If at any time before February 20, 2024, the bid price of the Class A common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, the Staff will provide written confirmation that we have regained compliance.

If we do not regain compliance with Rule 5450(a)(1) by February 20, 2024, we may be afforded a second 180 calendar day period to regain compliance.

To qualify, we would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, except for the minimum bid price requirement.

In addition, we would be required to notify Nasdaq of our intent to cure the deficiency during the second compliance period.

On November 22, 2023, we received a written notice from the Staff of Nasdaq indicating that we were not in compliance with Nasdaq’s continued listing standards because we did not timely file our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.

We had 60 calendar days (or until January 22, 2024) to submit a plan to regain

We regained compliance with this continued listing standard by filing this Quarterly Report with the Securities and Exchange Commission.

We currently are considering all available options to resolve these deficiencies and regain compliance with Nasdaq’s minimum requirements for the market value of publicly held shares, and closing bid price, of our Class A common stock .

Results of Operations

The following table presents operating results for the three and six months ended June 30, 2023 and 2022:

The following table presents operating results for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

% of Net sales Change % of Net sales Change

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General and administrative 5,433 8,547 46.0 % 29.8 % (3,114) (36.4) % 20,209 30,850 36.5 % 26.8 % (10,641) (34.5) %

Goodwill and indefinite-lived intangibles impairment charge — 66,760 — % 232.8 % (66,760) (100.0) % — 66,760 — % 58.0 % (66,760) (100.0) %

Definite-lived intangibles impairment charge — 50,694 — % 176.8 % (50,694) (100.0) % — 50,694 — % 44.0 % (50,694) (100.0) %

Property and equipment impairment charge

— 7,336 — % 25.6 % (7,336) (100.0) % — 7,336 — % 6.4 % (7,336) (100.0) %

Depreciation and amortization 524 2,124 4.4 % 7.4 % (1,600) (75.3) % 1,492 6,876 2.7 % 6.0 % (5,384) (78.3) %

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Net loss (10,098) (137,245) (85.5) % (478.6) % 127,147 (92.6) % (27,869) (170,475) (50.3) % (148.2) % 142,606 (83.7) %

Net income (loss) attributable to non-controlling interest 8 (2,357) — % (5.9) % 2,365 (100.3) % (46) (5,774) (0.2) % (6.7) % 5,728 (99.2) %

Net loss attributable to non-controlling interest 19 (6,742) 0.2 % (23.5) % 6,761 (100.3) % (27) (12,516) (0.2) % (10.9) % 12,489 (99.8) %

Net loss attributable to Greenlane Holdings, Inc.

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Consolidated Results of Operations

For the three months ended June 30, 2023, net sales were approximately $19.6 million, compared to approximately $39.9 million for the same period in 2022, representing a decrease of $20.3 million, or 50.8%.

Industrial segment decreased 43.3% and Consumer segment decreased $9.9 million or 62.1%.

The Consumer segment decrease was attributable principally to our shift in strategy to focus on in-house brands that carry a higher margin profile while decreasing third-party brand offerings, which generated top line revenue with lower margins and in some cases higher working capital needs.

Consumer segment sales were also affected by the sale of the Company's minority interest in the Vibes brand during 2022.

The Industrial segment decrease was largely associated with the introduction of two strategic partnerships which resulted in a decrease in top line revenue for packaging and vape products but allow us to reduce our overall working capital needs and cost-structure and enhance our margins.

The Company continues to invest in technology and product development to increase the adoption of its consumer brands.

For the six months ended June 30, 2023, net sales were approximately $43.6 million, compared to approximately $86.5 million for the same period in 2022, representing an decrease of $42.9 million or 49.6%.

Industrial segment decreased 44.3% and Consumer segment decreased 58.1%.

The Consumer segment decrease was attributable principally to our shift in strategy

to focus on in-house brands that carry a higher margin profile while decreasing third-party brand offerings, which generated top line revenue with lower margins and in some cases higher working capital needs.

Consumer segment sales were also affected by the sale of the Company's minority interest in the Vibes brand during 2022.

The Company continues to invest in technology and product development to increase the adoption of its consumer brands.

For the three months ended September 30, 2023, net sales were approximately $11.8 million, compared to approximately $28.7 million for the same period in 2022, representing a decrease of $16.9 million, or 58.9%.

The Industrial segment was down $14.3 million or 71.1%, and the Consumer segment was down $2.6 million or 30.1%.

The Industrial segment decrease was related to transitioning to a commission revenue model of approximately $0.3 million recorded related to

$7.8 million of gross revenue previously recorded for the largest vaporizer product customers and discontinuing the packaging products business for the three months ended September 30, 2023.

The Consumer segment sales decreased due to declining business globally and the company focusing on profitability revenue versus top-line revenue.

The Company is focused on selling in-house brands with higher margins and moving away from third-party brands with lower margins.

For the nine months ended September 30, 2023, net sales were approximately $55.4 million, compared to approximately $115.1 million for the same period in 2022, representing a decrease of $59.7 million or 51.9%.

The Industrial segment decreased $38.0 million or 51.6% and the Consumer segment decreased $21.8 million or 52.4%.

The Industrial segment decrease was related to transitioning to a commission revenue model of approximately $0.3 million recorded related to $7.8 million of gross revenue previously recorded for the largest vaporizer product customers and discontinuing the packaging products business for the nine months ended September 30, 2023.

The Consumer segment sales decreased due to declining business globally and the company focusing on profitability revenue versus top-line revenue.

The Company is focused on selling in-house brands with higher margins and moving away from third-party brands with lower margins.

Cost of Sales and Gross Margin

For the three months ended June 30, 2023, cost of sales decreased by $16.8 million, or 52.7%, as compared to the same period in 2022.

The decrease is a result of the decline in sales of 50.8% for the three months ended June 30, 2023 compared to the same period in 2022.

Gross margin increased to 23.3% for the three months ended June 30, 2023, compared to gross margin of 20.3% for the same period in 2022.

The increase in margin is related to $2.4 million of inventory write offs recording during the three months ended June 30, 2022 versus $0.0 million of inventory write-offs during the three months ended June 30, 2023.

For the six months ended June 30, 2023 cost of sales decreased by $38.9 million, or 53.7%, as compared to the same period in 2022.

The decrease is a result of the decline in sales of 49.6% for the six months ended June 30, 2023 compared to the same period in 2022.

Gross margin increased to 23.2% for the six months ended June 30, 2023, compared to gross margin of 16.3% for the same period in 2022.

The increase in margin is related to $7.6 million of write offs during the six months ended June 30, 2022 versus $0.6 million of inventory write-offs during the six months ended June 30, 2023.

For the three months ended September 30, 2023, cost of sales decreased by $15.0 million, or 63.4%, as compared to the same period in 2022.

The decrease in cost of sales was attributable to a decrease in revenue.

Gross margin increased to 26.5% for the three months ended September 30, 2023, compared to gross margin of 17.3% for the same period in 2022.

The 9.2% increase in gross margin is related to transitioning to a commission revenue model for the majority of the vaporizer sales with 100% margin versus gross revenue with lower margins.

Also contributing to the increase in margin is the Company's continued focus on consumer in-house brands with higher margins and moving away from third-party brands with lower margins.

For the nine months ended September 30, 2023 cost of sales decreased by $53.9 million, or 56.1%, as compared to the same period in 2022.

The decrease in cost of sales was attributable to a decrease in revenue.

Gross margin increased to 23.9% for the nine months ended September 30, 2023, compared to gross margin of 16.5% for the same period in 2022.

Excluding inventory write-offs of damaged and obsolete inventory for the nine months ended September 30, 2023 and 2022, respectively, of $0.1 million and $7.8 million respectively, gross margins increased 1% to 24% for the nine months ended September 30, 2023, compared to 23% for the same period in 2022.

Salaries, Benefits and Payroll Taxes

Salaries, benefits and payroll taxes expenses decreased by approximately $3.7 million, or 41.6%, to $5.2 million for the three months ended June 30, 2023, compared to $8.8 million for the same period in 2022, The decrease is related to a reduction in workforce to right-size the business to align cost with revenue and focus on profitability.

As we continue to closely monitor the evolving business landscape, we remain focused on identifying cost-saving opportunities while delivering on our strategy to recruit, train, promote and retain the most talented and success-driven personnel in the industry.

Salaries, benefits and payroll taxes expenses decreased by approximately $8.4 million or44.3% , to $10.5 million for the six months ended June 30, 2023, compared to $18.9 million for the same period in 2022, The decrease is related to a reduction in workforce to right-size the business to align cost with revenue and focus on profitability.

Salaries, benefits and payroll taxes expenses decreased by approximately $2.9 million, or 42.0%, to $4.1 million for the three months ended September 30, 2023, compared to $7.0 million for the same period in 2022.

The decrease is related to a major restructuring effort by the company to reduce headcount and cost to align with revenue.

Salaries, benefits and payroll taxes expenses decreased by approximately $11.3 million or 43.7% , to $14.6 million for the nine months ended September 30, 2023, compared to $25.9 million for the same period in 2022.

The decrease is related to a major restructuring effort by the company to reduce headcount and cost to align with revenue.

General and Administrative Expenses

General and administrative expenses decreased by approximately $3.6 million or 34.2% to$7.0 million , for the three months ended June 30, 2023, compared to $10.6 million for the same period in 2022.

The decrease is related to a major restructuring effort by the Company to reduce cost and right-size the business.

The Company experienced the following decreases compared to 2nd quarter 2022, outbound freight by $0.9 million, facility expenses by $0.8 million, general insurance by $0.5 million, allowance for doubtful accounts by $0.6 million, merchant fees by $0.2 million, dues & subscriptions by $0.2 million and other G&A by $0.3 million.

General and administrative expenses decreased by approximately $7.5 million or 33.7%, to $14.8 million for the six months ended June 30, 2023, compared to $22.3 million for the same period in 2022.

The Company experienced the following expense decreases compared to prior year, facility by $2.2 million, professional & outside services by $2.3 million, outbound freight by $1.6 million, general insurance by $0.7 million, marketing by $0.3 million, dues & subscriptions by $0.3 million, taxes & licenses by $0.3 million, merchant fees by $0.3 million, other G&A by $0.6 million offset by an increase in R&D expense of $0.2 million and bad debt expense of $0.9 million related to a reversal of $1.8 million VAT liability reserve due to an indemnification receivable recorded during the three months ended March 31, 2022.

Depreciation and amortization expense decreased $0.4 million, or 15.8% to $2.0 million, for the three months ended June 30, 2023, compared to $2.3 million for the same period in 2022.

The decrease is related to a major restructuring effort to reduce cost and right-size the business resulting in the sale and disposal of assets related to reducing our warehousing and office footprint.

Depreciation and amortization expense decreased $0.8 million, or 16.5% to $4.0 million, for the six months ended June 30, 2023, compared to $4.8 million for the same period in 2022.

The decrease is related to a major restructuring effort to

reduce cost and right-size the business resulting in the sale and disposal of assets related to reducing our warehousing and office footprint.

General and administrative expenses decreased by approximately $3.1 million, or 36.4%, for the three months ended September 30, 2023, compared to the same period in 2022.

This decrease was primarily due to decreases of approximately $1.7 million for professional services, $1.7 million for bad debt, $0.6 million for outbound freight, $0.5 million for facility, $0.4 million for merchant fees, and $0.3 million for general insurance, partially offset by a gain on fixed assets of $2.0 million.

General and administrative expenses decreased by approximately $10.6 million or 34.5%, for the nine months ended September 30, 2023, compared to the same period in 2022.

This decrease was primarily due to decreases of approximately $4.2 million for professional services, $2.6 million for facility, $2.3 million for outbound freight, $1.1 million for general insurance, $0.8 million for bad debt, $0.7 million for merchant fees, $0.4 million for dues and subscriptions, $0.3 for marketing, and $0.5 million for other expenses, partially offset by a gain on fixed assets of $2.0 million.

Impairment Charges - Goodwill, Indefinite-lived intangibles, and Definite-lived Intangibles

We incurred a goodwill and indefinite-lived intangibles impairment charge of approximately $66.8 million and a definite-lived intangibles impairment charge of approximately $50.7 million during the three months ended September 30, 2022, compared to no such impairment charge for the comparable period in 2023.

We incurred a impairment charge of approximately $7.3 million to fixed assets related to the ERP system during the three months ended September 30, 2022,

compared to no such impairment charge for the comparable period in 2023.

The impairment charges were due to declining business and declining enterprise value.

We incurred a goodwill and indefinite-lived intangibles impairment charge of approximately $66.8 million and a definite-lived intangibles impairment charge of approximately $50.7 million during the nine months ended September 30, 2022, compared to no such impairment charge for the comparable period in 2023.

We incurred a impairment charge of approximately $7.3 million to fixed assets related to the ERP system during the nine months ended September 30, 2022, compared to no such impairment charge fore the comparable period in 2023.This impairment charges were due to declining business and declining enterprise value.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased $1.6 million , or 75.3%, for the three months ended September 30, 2023, compared to the same period in 2022.

The decrease is primarily related to the intangible and fixed asset impairments incurred in the three months ended September 30 2022, reducing amortization expense.

Depreciation and amortization expense decreased $5.4 million, or 78.3%, for the nine months ended September 30, 2023, compared to the same period in 2022.

The decrease is primarily related to the intangible and fixed asset impairments recorded as of September 30 2022, reducing amortization expense.

Other Income (Expense), Net

Interest expense.

Interest expense increased approximately $0.7 million or 245.1% to $0.9 million, during the three months ended June 30, 2023 compared to $0.3 million for the same period in 2022.

The increase is primarily related to the new Asset-Based Loan the Company closed during Q3 2022.

Interest expense increased approximately $1.1 million or 157.9% to $1.7 million, during the six months ended June 30, 2023 compared to $0.7 million for the same period in 2022.

The increase is primarily related to the new Asset-Based Loan the Company closed during Q3 2022.

Interest expense increased approximately $2.5 million during the three months ended September 30, 2023.

The increase is primarily related to the exiting ABL facility which accelerated deferred interest expense as well as the promissory notes for the Eyce and DaVinci acquisition.

Interest expense increased approximately $3.6 million during the nine months ended September 30, 2023.

The increase is primarily related to the exiting ABL facility which accelerated deferred interest expense as well as the promissory notes for the Eyce and DaVinci acquisition.

Other expense, net.

Other expense, net, decreased by approximately $0.5 million or 84.7% to $0.1 million for the three months ended June 30, 2023, compared to $0.6 million other expense, net, for the same period in 2022.

The change is primarily due a loss related to the change in fair value of equity investment of $0.6 million recorded during the three months ended June 30, 2022.

Other expense, net, decreased by approximately $0.7 million or 121.9% to $0.1 million other income, net, for the six months ended June 30, 2023, compared to $0.6 million other expense, net, for the same period in 2022.

The change is primarily due a loss related to the change in fair value of equity investment of $0.9 million recorded during the six months ended June 30, 2022.

Other income (expense), net, expense decreased by approximately $1.0 million for the three months ended September 30, 2023, compared to the same period in 2022.

The change is primarily due to a gain related to the change in fair value of contingent consideration of $1.0 million related to the DaVinci acquisition during the three months ended September 30, 2023.

Other income (expense), net, expense decreased by approximately $0.2 million for the nine months ended September 30, 2023, compared to the same period in 2022.

The change is primarily due to a gain related to the change in fair value of contingent consideration of $1.0 million related to the DaVinci acquisition.

Provision for (Benefit from) Income Taxes

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

For the three and six months ended June 30, 2023 and 2022, respectively, the effective tax rate differed from the U.S.

For the three and nine months ended September 30, 2023 and 2022, respectively, the effective tax rate differed from the U.S.

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

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The Industrial Goods segment focuses on serving the premier MSOs 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.

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

The following table sets forth information by reportable segment for the three and six months ended June 30, 2023 and 2022, respectively:

Our chief operating decision maker ("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, 2023 and 2022, respectively:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

% of Total Net sales Change % of Total Net sales Change

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Consumer Goods

For the three months ended June 30, 2023, our Consumer Goods operating segment reported net sales of approximate ly $6.0 million compared to approximately $15.9 million for the same period in 2022, representing a decrease of $9.9 million or 62.1%.

The year-over-year decrease in net sales was due to a major restructuring effort and a shift in strategy to focus on in-house brands that carry a higher margin profile while rationalizing out third-party brand offerings, which generated top line revenue with lower margins.

Net sales were also affected by the sale of the Company's minority interest in the Vibes brand during 2022.

The Company is focused on profitable revenue and as a result top line revenue has significantly been reduced.

For the six months ended June 30, 2023 our Consumer Goods operating segment reported net sales of approximately $13.8 million compared to approximately $33.1 million for the same period in 2022, representing a decrease of $19.2 million or 58.1%.

The y ear-over-year decrease in net sales was due to a major restructuring effort and a shift in strategy to focus on in-house brands that carry a higher margin profile while rationalizing out third-party brand offerings, which generated top line revenue with lower margins.

Net sales were also affected by the sale of the Company's minority interest in the Vibes brand during 2022.

The Company is focused on profitable revenue and as a result top line revenue has significantly been reduced.

For the three months ended June 30, 2023, cost of sales decreased by $8.6 million, or 67.1%, as compared to the same period in 2022.

For the three months ended September 30, 2023, our Consumer Goods operating segment reported net sales of approximately $6.0 million compared to approximately $8.6 million for the same period in 2022, representing a decrease of $2.6 million or 30.1%.

The Consumer segment sales decreased due to declining business globally and the company focusing on profitability revenue versus top-line revenue.

The company is focused on selling in-house brands with higher margins and moving away from 3rd Party brands with lower margins.

For the nine months ended September 30, 2023, our Consumer Goods operating segment reported net sales of approximately $19.8 million compared to approximately $41.6 million for the same period in 2022, representing a decrease of $21.8 million or 52.4%.

The Consumer segment year over year sales decreased due to declining business globally and the company focusing on profitability revenue versus top-line revenue.

The Company is focused on selling in-house brands with higher margins and moving away from third-party brands with lower margins.

For the three months ended September 30, 2023, cost of sales decreased by $3.7 million, or 47.1%, as compared to the same period in 2022 .

The decrease in cost of sales was primarily due to the $2.6 million aforementioned sales decrease of 30.1%.

For the six months ended June 30, 2023, cost of sales decreased by $17.4 million or 64.1% , as compared to the same period in 2022.

The decrease in cost of sales was primarily due to a $19.2 million or 58.1% decrease in sales.

Gross margin increased to 29.9% for the three months ended June 30, 2023, compared to gross margin of approximately 19.3% for the same period in 2022.

The increase is related to $1.8 million inventory write off recorded during the three months ended June 30, 2022 versus $0.1 million for the three months ended June 30, 2022..

Gross margin increased to 29.6% for the six months ended June 30, 2023, compared to gross margin of approximately 17.8% for the same period in 2022.

The increase is related to $3.2 million inventory write off recorded during the three months ended June 30, 2022 versus $0.6 million for the three months ended June 30, 2022..

For the nine months ended September 30, 2023, cost of sales decreased by $21.2 million or 60.3% , as compared to the same period in 2022.

The decrease in cost of sales was primarily due to a $21.8 million or 52.4% decrease in sales compared to the same period in 2022.

Gross margin increased 22.6% to 29.9% for the three months ended September 30, 2023, compared to gross margin of approximately 7.3% for the same period in 2022.

The increase in gross margin is related to focusing on selling in-house brands that carry a higher margin profile and a reduction in excess and obsolete expense for the prior year.

Gross margin increased 14.0% to 29.7% for the nine months ended September 30, 2023, compared to gross margin of approximately 15.6% for the same period in 2022.

The increase in gross margin is related to focusing on selling in-house brands that carry a higher margin profile and a reduction in excess and obsolete expense for the prior year.

Industrial Goods

For the three months ended June 30, 2023, our Industrial Goods operating segment reported net sales of approximately $13.6 million compared to approximately $24.0 million for the same period in 2022, representing a decrease of $10.4 million or 43.3%.

The y ear-over-year decrease in net sales was due to a major restructuring effort and a shift in strategy to focus on in-house brands that carry a higher margin profile while rationalizing out third-party brand offerings, which generated top line revenue with lower margins.

The company transition out of the Industry packaging business, which impacted sales and required significant working capital and produced low margins.

The company entered into a strategic partnership with an affiliate of one 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 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 will 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.

The Company is focused on profitable revenue and as a result top line revenue has significantly been reduced.

For the six months ended June 30, 2023, our Industrial Goods operating segment reported net sales of approximately $29.7 million compared to approximately $53.4 million for the same period in 2022, representing an decrease of $23.6 million or 44.3%.

T he year-over-year decrease in net sales was due to a major restructuring effort and a shift in strategy to focus on in-house brands that carry a higher margin profile while rationalizing out third-party brand offerings, which generated top line revenue with lower margins.

The company transition out of the Industry packaging business, which impacted sales and required significant working capital and produced low margins.

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

The Company is focused on profitable revenue and as a result top line revenue has significantly been reduced.

For the three months ended June 30, 2023, cost of sales decreased by $8.1 million, or 42.9%, as compared to the same period in 2022, due to the 43.3% decrease in sales.

For the six months ended June 30, 2023 cost of sales decreased by 21.5 million or 47.5%, as compared to the same period in 2022, due to the 44.3% decrease in sales year-over-year.

Gross margin was approximately 20.4% for the three months ended June 30, 2023, compared to gross margin of approximately 21.0% for the same period in 2022.

Gross margin was approximately 20.2% for the six months ended June 30, 2023, compared to gross margin of approximately 15.3% for the same period in 2022, representing a 4.9% year-over-year increase.

The increase is related to inventory write offs of $4.4 million recorded during the six months ended June 30, 2022, compared to $0.0 million recorded during the six months ended June 30, 2023.

For the three months ended September 30, 2023, our Industrial Goods operating segment reported net sales of approximately $5.8 million compared to approximately $20.1 million for the same period in 2022, representing an decrease of $14.3 million or 71.1%.

For the nine months ended September 30, 2023, our Industrial Goods operating segment reported net sales of approximately $35.6 million compared to approximately $73.5 million for the same period in 2022, representing an decrease of $38.0 million or 51.6%.

For the three months ended September 30, 2023, cost of sales decreased by $11.3 million, or 71.6%, as compared to the same period in 2022, due to the decrease in sales.

For the nine months ended September 30, 2023, cost of sales increased by $32.8 million or 53.7%, as compared to the same period in 2022, due to the decrease in sales year-over-year.

Gross margin was approximately 23.0% for the three months ended September 30, 2023, compared to gross margin of approximately 21.6% for the same period in 2022.

The slight increase is related to a commission revenue model versus gross revenue model for the largest vaporizer product customers and discontinuing the lower margin packaging products business.

Gross margin was approximately 20.6% million for the nine months ended September 30, 2023, compared to gross margin of approximately 17.0% for the same period in 2022.

The slight increase is related to a commission revenue model versus gross revenue model for the largest vaporizer product customers and discontinuing the lower margin packaging products business.

Net Sales by Geographic Regions

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

% of Net sales Change % of Net sales Change

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United States

For the three months ended June 30, 2023, our United States net sales were approximately $18.6 million, compared to approximately $37.6 million for the same period in 2022, representing an decrease of $19.0 million, or 50.6%.

For the three months ended September 30, 2023, our United States net sales were approximately $10.2 million, compared to approximately $25.8 million for the same period in 2022, representing a decrease of $15.6 million, or 60.5%.

The year-over-year decrease in net sales was due to a major restructuring effort and a shift in strategy to focus on in-house brands

that carry a higher margin profile while rationalizing out third-party brand offerings, which generated top line revenue with lower margins.

Net sales were also affected by the sale of the Company's minority interest in the Vibes brand during 2022.

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The Company is focused on profitable revenue and as a result top line revenue has significantly been reduced.

For the six months ended June 30, 2023, out United States net sales were approximately $41.0 million, compared to approximately $80.6 million for the same period in 2022, representing an decrease of $39.6 million, or 49.2%.

For the nine months ended September 30, 2023, our U.S.

net sales were approximately $51.2 million, compared to approximately $106.4 million for the same period in 2022, representing an increase of $(55.3) million, or 51.9%.

The year over-year decrease in net sales was due to a major restructuring effort and a shift in strategy to focus on in-house brands that carry a higher margin profile while rationalizing out third-party brand offerings, which generated top line revenue with lower margins.

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The Company is focused on profitable revenue and as a result top line revenue has significantly been reduced.

For the three months ended June 30, 2023, our Canadian net sales were approximately $0.1 million, compared to approximately $0.9 million for the same period in 2022, representing a decrease of $0.8 million, or 86.4% .

For the three months ended September 30, 2023, our Canadian net sales were approximately $0.3 million, compared to approximately $1.5 million for the same period in 2022, representing a decrease of $1.3 million, or 82.8%.

The decrease is related to a reduction in sales and marketing spend.

The company is currently evaluating distribution and sales channels into Canada.

For the six months ended June 30, 2023, our Canadian net sales were approximately $0.4 million, compared to approximately $2.7 million for the same period in 2022, representing a decrease of $2.3 million, or 84.4%.

For the nine months ended September 30, 2023, our Canadian net sales were approximately $0.7 million, compared to approximately $4.3 million for the same period in 2022, representing a decrease of $3.6 million, or 83.9%.

The decrease is related to a reduction in sales and marketing spend.

The company is currently evaluating distribution and sales channels into Canada.

For the three months ended June 30, 2023, our European net sales were approximately $0.9 million, compared to approximately $1.4 million for the same period in 2022, representing a decrease of $0.5 million or 34.4%.

For the three months ended September 30, 2023, our European net sales were approximately $1.3 million, compared to approximately $1.3 million for the same period in 2022, representing a decrease of $0.0 million or 0.0%.

The decrease in net sales was due primarily to major restructuring efforts to improve the profitability of our European operations.

For the six months ended June 30, 2023, our European net sales were approximately $2.2 million, compared to approximately $3.1 million for the same period in 2022, representing a decrease of $0.9 million, or 29.5%.

For the nine months ended September 30, 2023, our European net sales were approximately $3.5 million, compared to approximately $4.5 million for the same period in 2022, representing a decrease of $0.9 million, or 20.6%.

The decrease in net sales was due primarily to major restructuring efforts to improve the profitability of our European operations.

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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, October 2022 and July 2023 Offerings, and our ATM program, each as described and defined further in Note 2 of our unaudited condensed consolidated financial statements included in Item 1, Part 1 of this Form 10-Q.

As of June 30, 2023, we had approximately $4.7 million of cash, of which $0.3 million was held in foreign bank accounts, and approximately $20.6 million of working capital, which is calculated as total current assets minus total current liabilities, as compared to approximately $6.5 million of cash, of which $0.8 million was held in foreign bank accounts, and approximately $41.0 million of working capital as of December 31, 2022.

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, October 2022 and July 2023 offerings, the Future Receivables Financings, and our ATM program, each as described and defined further in Note 2 of our unaudited condensed

consolidated financial statements included in Item 1, Part 1 of this Form 10-Q.

As of September 30, 2023, we had approximately $2.4 million of cash, of which $0.2 million was held in foreign bank accounts, and approximately $6.4 million of working capital, which is calculated as total current assets minus total current liabilities, as compared to approximately $6.5 million of cash, of which $0.8 million was held in foreign bank accounts, and approximately $41.0 million of working capital as of December 31, 2022.

The repatriation of cash balances from our foreign subsidiaries could have adverse tax impacts or be subject to capital controls;

however, these balances are generally available to fund the ordinary business operations of our foreign subsidiaries without legal or other restrictions.

Based on our cash on hand and working capital at September 30, 2023, we may have insufficient cash to fund planned operations into the first quarter of 2024.

ATM Program and Shelf Registration Statement

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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.

Due to the untimely filing of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 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 12 months, which will limit our liquidity options in the capital markets.

In addition, due to the untimely filing of our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 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 12 full calendar months from the date when this Quarterly Report on Form 10-Q was required to be filed, which will limit our liquidity options in the capital markets.

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 58,500 shares of our Class A common stock, pre-funded warrants to purchase up to 49,500 shares of our Class A common stock (the “June 2022 Pre-Funded Warrants”) and warrants to purchase up to 108,000 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.

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

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

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As a result of the Loan Repayment, the Company has been released from its obligations under the Loan Agreement, in accordance with the terms of the Loan Agreement.

See "Note 13 - Subsequent Events" for more information.

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.

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The Company will make weekly payments under the Future Receivables Financings and is scheduled to repay the amounts due under the Future Receivables Financings in full in approximately six to eight months.

See "Note 13 - Subsequent Events" for more information.

The total amount to be repaid under the initial Future Receivables Financings was approximately $4.5 million.

In connection with the Future Receivables Financings, the Company granted the lenders security interests in Company's accounts receivable equal to the amounts due thereunder, and in connection with any event of default, the lenders may file financing statements evidencing the security interests.

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.

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

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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.

The Company has incurred net losses of $20.8 million and $125.9 million for the six months ended June 30, 2023 and the year ended December 31, 2022, respectively.

For the six months ended June 30, 2023, cash provided by operating activities was $4.7 million, which included $4.85 million of cash from the ERC sale discussed above, and cash used in operating activities for the year ended December 31, 2023 was $26.4 million.

The recent macroeconomic environment has caused weaker demand than contemplated under the Company's business plan, resulting in a reduction in projected revenue and cash flows for the twelve-month period included in the going concern evaluation.

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

The Company has incurred net losses of $27.8 million and $158.0 million for the nine months ended September 30, 2023 and the prior year comparable period, respectively.

For the nine months ended September 30, 2023, cash used by operating activities was $1.2 million, and cash used in operating activities for the year ended December 31, 2022 was $26.5 million.

The recent macroeconomic environment has caused weaker demand than contemplated under the Company's business

plan, resulting in a reduction in projected revenue and cash flows for the twelve-month period included in the going concern evaluation .

As a result of our losses and our projected cash needs, combined with our current liquidity level, substantial doubt exists about the Company’s ability to continue as a going concern.

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• Execute on strategic partnerships accretive to margins and operating cash

▪ Seeking additional capital through the issuance of debt or equity securities.

• Seeking additional capital through the issuance of equity securities or debt financing.

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.

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 Amendment No.

1 to our Annual Report on Form 10-K/A 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.

As a result of our losses and our projected cash needs, combined with our current liquidity level, substantial doubt exists about the Company’s ability to continue as a going concern over the next twelve months from the date of this Form 10-Q.

The Company’s ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next twelve months to improve the Company’s liquidity and profitability, which includes, without limitation:

▪ Further reducing operating costs expense by taking additional restructuring actions to align cost with revenue to achieve profitability.

▪ Increasing revenue by introducing new products and acquiring new customers.

▪ Execute on strategic partnerships accretive to margins and operating cash

▪ Seeking additional capital through the issuance of debt or equity securities.

The consolidated financial statements do not include any adjustments that may result from the outcome of this going concern uncertainty.

As of June 30, 2023, we did not have any off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

As of September 30, 2023, we did not have any off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

The following summary of cash flows for the periods indicated has been derived from our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2023 2022

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Net cash provided by (used in) investing activities (580) 12,500

Net cash provided (used in) by financing activities (12,133) 11,115

Net Cash Provided by (Used in) Operating Activities

During the six months ended June 30, 2023, net cash provided by operating activities of approximately $4.7 million consisted of (i) net loss of $20.8 million, offset by non-cash adjustments to net loss of approximately $4.8 million, including depreciation and amortization of expense of approximately $4.0 million, equity-based compensation expense of approximately $0.3 million, change in the fair value of contingent consideration of approximately $0.1 million, and other expenses of approximately $0.5 million, and (ii) a $20.6 million decrease in working capital primarily driven by decreases in accounts

receivable, inventories, vendor deposits and other current assets of approximately $19.7 million, increases in accounts payable of approximately $1.9 million, offset by decreases in customer deposits of approximately $1.0 million.

During the six months ended June 30, 2022, net cash used in operating activities of approximately $13.7 million consisted of (i) net loss of $33.2 million, offset by non-cash adjustments to net loss of approximately $6.8 million, including depreciation and amortization expense of approximately $4.8 million, equity-based compensation expense of approximately $1.6 million, and an offsetting reversal on the allowance of an indemnification receivable of approximately $1.8 million, and (ii) a $12.7 million decrease in working capital primarily driven by increases in accounts payable, accrued expenses and customer deposits of approximately $2.1 million, offset by increases in accounts receivable, inventories, vendor deposits and other current assets of approximately $10.6 million.

Net cash provided by financing activities (10,528) 7,535

Net Cash Provide by (Used in) Operating Activities

During the nine months ended September 30, 2023, net cash used in operating activities of approximately $1.2 million consisted of (i) net loss of $27.9 million, offset by non-cash adjustments to net loss of approximately $4.4 million, and (ii) a $24.7 million decrease in working capital primarily driven by increases in accounts payable, accrued expenses and customer deposits of approximately $4.9 million, offset by increases in accounts receivable, inventories, vendor deposits and other current assets of approximately $29.6 million.

During the nine months ended September 30, 2022, net cash used in operating activities of approximately $22.5 million consisted of (i) net loss of $170.5 million, offset by non-cash adjustments to net loss of approximately $132.3 million, and (ii) a $15.7 million decrease in working capital primarily driven by increases in accounts payable, accrued expenses and customer deposits of approximately $9.9 million, offset by increases in accounts receivable, inventories, vendor deposits and other current assets of approximately $25.6 million.

Net Cash Provided by (Used in) Investing Activities

During the six months ended June 30, 2023 and 2022, respectively, net cash used in investing activities of approximately $0.3 million and $1.2 million largely consisted of capital expenditures, including development costs for our new enterprise resource planning (ERP) system.

Net Cash Provided by (Used in) Financing Activities

During the six months ended June 30, 2023, net cash used in financing activities of approximately $12.1 million largely consisted of debt service payments of approximately $11.8 million, including $10.2 million related to the Asset-Based Loan and $1.6 million for the Eyce and DaVinci promissory notes, and $0.3 million in payments of contingent consideration related to the DaVinci acquisition.

During the six months ended June 30, 2022, net cash provided by financing activities of approximately $11.1 million primarily consisted of cash proceeds of approximately $14.1 million from the issuance of Class A common stock through our ATM Program and the June 2022 Offering, offset primarily by approximately $2.0 million in payments on notes payable, finance lease obligations and other long-term liabilities, and approximately $0.9 million in payments of contingent consideration related to the Eyce LLC acquisition.

During the nine months ended September 30, 2023, net cash provided by investing activities of approximately $0.6 million , offset by cash used for development costs for our new enterprise resource planning (ERP) system of $0.6 million..

Net Cash Provided by Financing Activities

During the nine months ended September 30, 2023, net cash provided by financing activities of approximately $10.5 million primarily consisted of cash proceeds of approximately $3.9 million from the issuance of Class A common stock through our ATM Program and the June 2022 Offering, offset primarily by approximately $2.5 million in payments on notes payable,

finance lease obligations and other long-term liabilities, and approximately $0.3 million in payments of contingent consideration related to the Eyce LLC acquisition.

Critical Accounting Policies and Estimates

See Part II, Item 7, "Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2022.

See Note 2, “Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and Part II, Item 7, "Critical Accounting Policies and Estimates" in Amendment No.

1 to our Annual Report on Form 10-K/A for the year ended December 31, 2022 for descriptions of the significant accounting policies and methods used in the preparation of our Condensed Consolidated Financial Statements.

There have been no material changes to the Company’s critical accounting estimates since the Form 10-K/A for the year ended December 31, 2022.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis