Greenlane

 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2024
 
OR
 
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____ to _____
 
001-38875
(Commission file number)
 
Greenlane Holdings, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
83-0806637
State or other jurisdiction of
incorporation or organization
 
(I.R.S. Employer
Identification No.)
 
1095 Broken Sound Parkway, Suite 100
 
 
Boca Raton, FL
 
33487
(Address of principal executive offices)
 
(Zip Code)
 
(877) 292-7660
Registrant’s telephone number, including area code
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share
 
GNLN
 
Nasdaq Capital Market
 
Securities registered pursuant to Section 12 (g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes ☐ No ☒
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☐ No ☒
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
 
 
Emerging growth company
☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
 
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
 
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
 

The aggregate market value of the common equity held by non-affiliates of the registrant as of June 30, 2024, the last business day of the registrant’s most recently completed
second fiscal quarter, was approximately [$1.0 million] based upon the closing price reported for such date on the Nasdaq Capital Market.
 
As of March 19, 2025, Greenlane Holdings, Inc. had 8,336,953 shares of Class A common stock outstanding.
 
 
 
 

 
 
Greenlane Holdings, Inc.
Form 10-K
For the Fiscal Year Ended December 31, 2024
 
TABLE OF CONTENTS
 
 
 
 
Page
Note About Forward-Looking Statements
 
1
 
 
 
 
PART I
 
 
 
Item 1.
Business
 
3
Item 1A.
Risk Factors
 
13
Item 1B.
Unresolved Staff Comments
 
46
Item 1C.
Cybersecurity
 
46
Item 2.
Properties
 
47
Item 3.
Legal Proceedings
 
47
Item 4.
Mine Safety Disclosures
 
47
 
 
 
 
PART II
 
 
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
48
Item 6.
[Reserved]
 
48
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
48
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
 
60
Item 8.
Financial Statements and Supplementary Data
 
61
Item 9.
Changes in Disagreements with Accountants on Accounting and Financial Disclosure
 
62
Item 9A.
Controls and Procedures
 
62
Item 9B.
Other Information
 
64
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
 
64
 
 
 
 
PART III
 
 
 
Item 10.
Directors, Executive Officers and Corporate Governance
 
65
Item 11.
Executive Compensation
 
66
Item 12.
Security Ownership of Certain Beneficial Owners and Related Stockholder Matters
 
70
Item 13.
Certain Relationships and Related Transactions, and Director Independence
 
71
Item 14.
Principal Accounting Fees and Services
 
75
 
 
 
 
PART IV
 
 
 
Item 15.
Exhibits, Financial Statement Schedules
 
76
Item 16.
Form 10-K Summary
 
78
Signatures
 
79
 
 

 
 
NOTE ABOUT FORWARD-LOOKING STATEMENTS
 
This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995,
that involve risks and uncertainties. Many of the forward-looking statements are located in Part, Item 7 of this Form 10-K under the heading “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include
any statement that does not directly relate to any historical or current fact. In some cases, you can identify forward-looking statements by terminology such as “anticipate,”
“estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could” and similar expressions. Examples of forward-looking
statements include, without limitation:
 
 
●
statements regarding our growth and other strategies, results of operations or liquidity;
 
●
statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic
performance;
 
●
statements regarding our industry;
 
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statements of management’s goals and objectives;
 
●
statements regarding laws, regulations, and policies relevant to our business;
 
●
projections of revenue, earnings, capital structure and other financial items;
 
●
assumptions underlying statements regarding us or our business; and
 
●
other similar expressions concerning matters that are not historical facts.
 
Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, by
which such performance or results will be achieved. 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. Important factors that could cause such differences include, but are not limited to, those discussed in Part I,
Item 1A of this Form 10-K under the heading “Risk Factors” 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 this Form 10-K under the heading “Risk Factors.”
 
 
●
our strategy, outlook, and growth prospects;
 
●
general economic trends, trends in the industry, and the competitive markets in which we operate;
 
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our ability to generate adequate cash from our existing business to support our growth;
 
●
our ability to raise capital on favorable terms, or at all, to support the continued growth of the business, including high inflation and increasing interest rates;
 
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our dependence on, and our ability to establish and maintain business relationships with third-party suppliers and service suppliers, including vulnerability to third-
party transportation risks;
 
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our ability to accurately estimate demand for our products and maintain appropriate levels of inventory;
 
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our ability to maintain or improve our operating margins and meet sales expectations;
 
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our ability to adapt to changes in consumer spending and general economic conditions;
 
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our ability to maintain consumer brand recognition and loyalty of our products;
 
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our ability to protect our intellectual property rights and use or license certain trademarks;
 
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our ability to successfully identify and complete strategic acquisitions and/or dispositions;
 
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our ability to address product defects and contamination of, or damage to, our products;
 
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our exposure to potential various claims, lawsuits, and administrative proceedings;
 
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our and our customers’ ability to establish or maintain banking relationships;
 
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the impact of governmental laws and regulations and the outcomes of regulatory or agency proceedings;
 
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fluctuations in U.S. federal, state, local, and foreign tax obligations and changes in tariffs;
 
●
any unfavorable scientific studies on the long-term health risks of vaporizers, electronic cigarettes, or cannabis and hemp-derived products, including cannabidiol
(“CBD”);
 
●
failure of our information technology systems to support our current and growing business;
 
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our ability to prevent and recover from Internet security breaches;
 
●
our sensitivity to global economic conditions and international trade issues;
 
1

 
 
 
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the onset of an economic recession in the United States or other countries, including the impact of the ongoing wars, and their impact on the economy generally;
 
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natural disasters, adverse weather conditions, operating hazards, environmental incidents and labor disputes;
 
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public health crises;
 
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the potential delisting of our Class A common stock from Nasdaq;
 
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increased costs as a result of being a public company; and
 
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our failure to maintain adequate internal controls over financial reporting.
 
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial
condition or operating results.
 
The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-
looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot
assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained
in any forward-looking statements. Consequently, you should not place undue reliance on forward-looking statements.
 
Summary Risk Factors
 
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may materially and adversely affect our
business, financial condition, results of operations, cash flows and prospects. These risks are discussed more fully in Item 1A. Risk Factors herein. These risks include, but are
not limited to, the following:
 
 
●
Global economic conditions, including inflation and supply chain disruptions, could materially and adversely our business, prospects, results of operations, financial
condition or cash flows.
 
●
A significant percentage of our revenue is dependent on sales of products from a relatively small number of key suppliers, and a decline in sales of products from these
suppliers could materially harm our business.
 
●
We do not have long-term agreements or guaranteed price or delivery arrangements with most of our suppliers. The loss of a significant supplier would require us to
rely more heavily on our other existing suppliers or to develop relationships with new suppliers. Such a loss may have an adverse effect on our product offerings and
our business.
 
●
We are vulnerable to third-party transportation risks, including governmental laws and common carriers’ policies that prevent the shipment of the types of products we
sell.
 
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If we are unable to successfully execute on our liquidity and strategic initiatives, we may have significant cash constraints, which would have a material and adverse
impact on our business and results of operations and ability to pay our debts as they come due.
 
●
Complications and disruptions associated with the design and implementation of our new ERP system have occurred and could adversely impact our business and
operations in the future.
 
●
We may be required to seek additional financing sources, which may not be available to us on attractive terms if at all and could restrict our ability to engage in
important business activities.
 
●
While we believe that our business and sales do not violate the Federal Paraphernalia Law, legal proceedings alleging violations of such law or changes in such law or
interpretations thereof could materially and adversely affect our business, financial condition, or results of operations.
 
●
Officials of the U.S. Customs and Border Protection agency (“CBP”) have broad discretion regarding products imported into the United States, and the CBP has on
occasion seized imported products, and seizures of the products we sell could have a material adverse effect on our business operations or our results of operations.
 
●
Our business depends partly on continued purchases by businesses and individuals selling or using cannabis and cannabis ancillary products pursuant to federal and
state laws in the United States and laws in Canada, the European Union, United Kingdom, Mexico, and Latin America. Because our business is dependent, in part,
upon continued market acceptance of cannabis by consumers, any negative trends could materially and adversely affect our business, financial conditions or results of
operations. Additionally, we are subject to legislative uncertainty that could slow or halt the legalization and use of cannabis, which could negatively affect our
business.
 
●
The market for vaporizer products and related items is a niche market, subject to a great deal of uncertainty and is still evolving, including uncertainty related to the
regulation of vaporization products and certain other consumption accessories. Increased regulatory compliance burdens, no matter how they arise, could have a
material adverse impact on our business development efforts and our operations.
 
●
Recently adopted laws prohibit the mailing of certain vaporizer products through the United States Postal Service (“USPS”) and place certain regulatory requirements
on shipment of those products through other carriers. Additionally, carriers including UPS and FedEx have imposed policies restricting the shipment of vaporizers. If a
significant volume of the products we carry cannot be shipped by the USPS or private carriers, or we must comply with burdensome policies and regulations, our
shipping costs could increase materially and we could lose our ability to deliver products to customers in a timely and economical matter.
 
2

 
 
 
●
The FDA has expressed growing concern about the popularity among youth of certain vaporization products, including electronic nicotine delivery systems (“ENDS”)
and has imposed significant regulation on ENDS products. Additional regulatory actions may further impact our ability to sell these products, as well as other
vaporization products, in the United States or online.
 
●
Our narrow margins may magnify the impact of variations in operating costs and of adverse or unforeseen events on operating results.
 
●
Management and employee turnover creates uncertainties and could harm our business.
 
●
We and our customers may have difficulty accessing the services of banks, which may make it difficult for us and for them to sell our products.
 
●
We have failed, and may continue to fail, to meet the listing standards of Nasdaq, and as a result our Class A common stock may become delisted, which could have a
material adverse effect on the liquidity of our Class A common stock.
 
●
The market price of our Class A common stock has been volatile and has declined significantly since our initial public offering and may face more volatility and price
declines in the future. As a result, you may not be able to resell your shares at or above the price at which you have acquired or will acquire shares of our Class A
common stock.
 
●
Substantial sales and issuances of our Class A common stock have occurred and may continue to occur, or may be anticipated, which have caused and could continue
to cause our stock price to decline and your percentage ownership may be diluted in the future.
 
PART I
 
ITEM 1. BUSINESS
 
General
 
Founded in 2005, Greenlane is a premier global platform for the development and distribution of premium cannabis accessories, vape devices, and lifestyle products.
With three different mergers in 2021, Greenlane was able to strengthen its leading position as a consumer ancillary products house-of-brands business, significantly expanding
its customer network, bringing strategic relationships with leading cannabis multi-state operators (“MSOs”), cannabis single-state operators (“SSOs”), and Canadian licensed
producers (“LPs”). Greenlane provides a wide array of consumer ancillary products and industrial ancillary products to thousands of cannabis producers, processors, brands,
and retailers (“Cannabis Operators”). In addition, it serves specialty retailers, smoke shops, head shops, convenience stores, and consumers directly through its own proprietary
web stores and large online marketplaces such as Amazon.
 
We have been developing a world-class portfolio of both our own proprietary brands (the “Greenlane Brands”) along with close partner brands that we believe will,
over time, deliver higher margins and create long-term value for our customers and shareholders. Our Greenlane Brands include our more affordable product line – Groove, our
premium smoke shop and ancillary product brand – Higher Standards, and our child-resistant packaging brand - Pollen Gear. In collaboration with our partner brands, including
the innovative silicone pipes and accessories line, Eyce, and the premium vaporizer brand, DaVinci, Greenlane is strategically positioned to serve as a comprehensive one-stop
shop for all buyers. We also have category exclusive licenses for the premium Marley Natural branded products, as well as the Keith Haring branded products.
 
The Greenlane Brands, along with a curated set of third-party products, are offered to customers through our proprietary, owned and operated e-commerce platforms
which include Wholesale.Greenlane.com, Vapor.com, PuffItUp.com, HigherStandards.com, and MarleyNaturalShop.com. Additionally, our presence on popular e-commerce
platforms such as Amazon, Etsy, and eBay enable us to reach customers directly, providing them with valuable resources and a seamless purchasing experience.
 
We merchandise vaporizers, packaging, and other ancillary products in the United States, Canada, Europe, and Latin America. We distribute products to retailers
through wholesale operations and distribute products to consumers through constantly evolving e-commerce activities. We operate our own distribution center in the United
States, while also utilizing third-party logistics (“3PL”) locations in Canada. We made tremendous progress consolidating and streamlining our warehouse and distribution in
2023 and 2024, including the consolidations of our warehouse in Worcester, MA and 3PL location in Hebron, KY to our owned facility in Moreno Valley, California in 2023.
 
Greenlane offers a full spectrum of products, positioning us to meet all our customers’ growing demands. We focus on serving consumers across wholesale, retail, and
e-commerce operations—offering all of 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. Our direct to consumer channels form a central part of our growth strategy, especially as it relates to scaling our own portfolio of
higher-margin proprietary owned brands. In addition we serve Cannabis Operators by providing ancillary products essential to their daily operations and growth, such as
packaging and vaporization solutions, including our Greenlane Brand Pollen Gear.
 
We have historically experienced only moderate seasonality in the direct to consumer side of our business, particularly during the fourth quarter. This coincides with
Cyber Monday (the first Monday after Thanksgiving, when online retailers typically offer holiday discounts), and as our customers build up their inventories in anticipation of
the holiday season. We also have related promotional marketing campaigns during this period.
 
3

 
 
Organization
 
Greenlane Holdings, Inc. (“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 on April 23, 2019 and other related transactions 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. Refer to
“Note 1—Business Operations and Organization” within Item 8 for further information on the Company’s organization and the IPO and related transactions. We are the sole
manager of the Operating Company and, as of December 31, 2023, owned a 100% interest in the Operating Company.
 
Our Business Relating to the Cannabis Industry
 
While we do not cultivate, distribute or dispense marijuana as that term is defined by the Controlled Substances Act, several of the products we distribute, such as
vaporizers, pipes, rolling papers, and packaging solutions, can be used with marijuana or marijuana derivatives, as well as several other legal substances.
 
We believe the global cannabis industry is experiencing a transformation from a state of prohibition toward a state of legalization. We expect the number of states,
countries, and other jurisdictions legalizing cannabis for medical and adult use will continue to increase, which will create numerous opportunities for market participants,
including us.
 
The North American Cannabis Landscape
 
United States and Territories.
 
Twenty-four states, and the District of Columbia, have legalized cannabis for non-medical adult use with additional states, such as New Hampshire, actively
considering the legalization of cannabis for non-medical adult use. An additional seventeen states have legalized medical cannabis in some form, with certain of those states
permitting only low tetrahydrocannabinol (“THC”) oils for a limited class of patients. Notwithstanding the continued trend toward further state legalization, cannabis continues
to be categorized as a Schedule I controlled substance under the Federal Controlled Substances Act (the “CSA”) and, accordingly, the cultivation, processing, distribution, sale,
and possession of cannabis violate federal law in the United States as discussed further in Item 1A under the heading “Risk Factors.” However, after President Biden first
directed federal agencies in October 2022 to review how cannabis is scheduled, the Department of Health and Human Services reviewed and made recommendations in August
2023 to reschedule cannabis from a Schedule I to Schedule III controlled substance. On May 16, 2024, the U.S. Drug Enforcement Administration (the “DEA”) issued a
proposed rule to reclassify marijuana from its current classification as a Schedule I drug to a Schedule III drug. Schedule III classification represents a moderate to low potential
for physical and psychological dependence and reclassification of marijuana from a Schedule I to a Schedule III drug would thereby loosen DEA restrictions. Nonetheless, the
DEA has made clear that if reclassification were to take place, the “regulatory controls applicable to Schedule III controlled substances would apply” which includes controls
related to the manufacture, distribution, dispensing, and possession of marijuana. Our business depends partly on continued purchases by businesses and individuals selling or
using cannabis and cannabis ancillary products pursuant to state laws in the United States.
 
In the United States, the legal cannabis market generated $26.5 billion in 2022, which increased to $31.4 billion in 2023, reflecting an 18.5% growth (XYZ Cannabis
Market Report 2023). The number of U.S. states with legalized cannabis increased from 18 in 2022 to 23 in 2023, a 27.8% rise in state participation (National Cannabis
Industry Association Reports). The cannabis consumers base for legal cannabis has expanded notably across all regions. In the United States, the number of users grew from 47
million in 2023 to 52.5 million in 2024, an 11.7% increase (Cannabis Facts and Stats | Cannabis and Public Health | CDC)
 
Canada.
 
Legal access to dried cannabis for medical purposes was first allowed in Canada in 1999. The Cannabis Act (the “Cannabis Act”) currently governs the production,
sale and distribution of medical cannabis and related oil extracts in Canada.
 
4

 
 
On April 13, 2017, the Government of Canada introduced Bill C-45, which proposed the enactment of the Cannabis Act to legalize and regulate access to cannabis.
The Cannabis Act proposed a strict legal framework for controlling the production, distribution, sale and possession of medical and recreational adult-use cannabis in Canada.
On June 21, 2018, the Government of Canada announced that Bill C-45 received Royal Assent. On July 11, 2018, the Government of Canada published the Cannabis
Regulations under the Cannabis Act, which has been subsequently amended. The Cannabis Regulations provide more detail on the medical and recreational regulatory regimes
for cannabis, including regarding licensing, security clearances and physical security requirements, product practices, outdoor growing, packaging and labelling, cannabis-
containing drugs, document retention requirements, reporting and disclosure requirements, the new access to cannabis for medical purposes regime and industrial hemp. The
majority of the Cannabis Act and the Cannabis Regulations came into force on October 17, 2018, with additional Cannabis regulations coming into effect on October 17, 2019.
 
While the Cannabis Act provides for the regulation by the federal government of, among other things, the commercial cultivation and processing of cannabis for
recreational purposes, it provides the provinces and territories of Canada with the authority to regulate in respect of the other aspects of recreational cannabis, such as
distribution, sale, minimum age requirements, places where cannabis can be consumed, and a range of other matters.
 
The governments of every Canadian province and territory have implemented regulatory regimes for the distribution and sale of cannabis for recreational purposes.
Most provinces and territories have announced a minimum age of 19 years old, except for Alberta, where the minimum age will be 18. Certain provinces, such as Ontario, have
legislation in place that restricts the packaging of vapor products and the manner in which vapor products are displayed or promoted in stores.
 
The Canadian market declined from CAD 5.5 billion in 2023 to CAD 5.3 billion in 2024, marking a 3.27% decrease (Government of Canada, Cannabis Market
Reports). Despite this decline, the Canadian cannabis market is expected to grow at a CAGR of 10.1% between 2024 and 2030. In Canada, all ten provinces and three territories
have legalized cannabis, with significant improvements in regulatory frameworks and retail infrastructure between 2022 and 2023, particularly in Ontario and British Columbia
(Health Canada Reports).
 
The European Cannabis Landscape
 
Europe’s population is larger than that of the U.S. and Canadian markets combined, suggesting the potential of a very significant market. The changes in regulations
for cannabis products across Europe are expected to result in a market growth of approximately $6.2 billion in annual sales in 2024, a significant growth from approximately
$3.7 billion in 2023.
 
Many European Union countries allow limited cannabis use for medicinal purposes, with some of those countries operating pilot programs. It has been widely reported
that other countries are considering following suit. Additionally, certain countries in Europe, including Germany, which approved a plan to legalize some recreational cannabis
use in August 2023, are considering the adoption of laws that would legalize cannabis for adult use.
 
Other Drivers for the Legal Cannabis Industry
 
Several factors have driven the growth of the legal cannabis industry. Legislative changes have been pivotal, with ongoing legalization efforts in various regions
contributing to market expansion. For instance, recent legislation in Germany is set to make it the largest cannabis market in Europe. Medical advancements have also played a
crucial role, with increasing acceptance of cannabis for medical purposes driven by research and positive patient outcomes, particularly in Europe where medical cannabis
programs are rapidly expanding. Consumer trends towards wellness and natural products have boosted demand for cannabis-based products such as CBD oils, edibles, and
topicals. Economic benefits have been significant, with governments recognizing the potential for job creation, tax revenues, and reduced law enforcement and incarceration
costs related to cannabis offenses. Additionally, technological innovations in cultivation techniques, product development, and delivery methods have enhanced product quality
and consumer experience, further driving market growth.
 
5

 
 
Product Information
 
Consumers of cannabis, herbs, flavored compounds, aromatherapy oils, and nicotine require the types of products we distribute, including vaporizers, pipes, rolling
papers and packaging. Producers of cannabis products are able to source compliant packaging, vape hardware, and other products needed in the manufacturing and distribution
stages of the supply chain. We believe we distribute the “picks & shovels” for these rapidly growing industries and producers. As the world of cannabis and its respective
aesthetic continues to expand, we strive to keep our product mix relevant, popular, and innovative; offering an array of products from vaporizers, grinders, pipes and other
inhalation devices to storage solutions, to rolling papers and even apparel lines. As our product offerings continue to develop, we expect our revenue by categories to increase
accordingly.
 
Inhalation Delivery Methods
 
There are two prevalent types of inhalation methods for cannabis and nicotine: combustion and vaporization. Vaporizers are devices that heat materials to temperatures
below the point of combustion, extracting the flavors, aromas and effects of dry herbs and concentrates in the form of vapor. Measured by revenue, vaporizers are our largest
product category.
 
The Science and Popularity of Vaporization
 
Vaporizers continue to increase in popularity and as a preferred method of consumption among a variety of demographics of consumers. They have elements that are
designed to quickly heat material, causing vaporization to occur without the carbon dioxide that is typically generated through combustion. The vapor byproduct is then
immediately inhaled through the mouthpiece on the device itself, or through a hose or an inflatable bag. Vaporizers can heat a variety of dry materials, viscous liquids and
waxes, and provide a convenient way for users to consume the active ingredient such as tobacco, nicotine extracts, legal herbs, hemp-derived CBD, aromatherapy oils,
cannabis, and propylene glycol and glycerin blends.
 
Vaporization Technology. Consumers have a wide array of vaporization devices at their disposal, which can be broadly categorized into two primary categories:
desktop and portable vaporizers. Our vaporizer portfolio spans just shy of 200 distinct products across 12 brands.
 
Desktop Vaporizers. Vaporizers were first developed as desktop models that were powered through traditional electric power sources. Desktop vaporizers are capable
of heating the material to a more precise temperature choice determined by the consumer or as advised by a health practitioner.
 
Portable Vaporizers. With the development of lithium batteries, vaporizers have now become portable. Technological advances are resulting in lighter, sleeker, and
more visually appealing units that are capable of quickly heating material to the user’s desired temperature setting. Portable vaporizers, of which vape pens are a sub-set, are
differentiated by many features, including output, battery life, recharge time, material, capacity, and design.
 
Other Methods of Consumption. In addition to vaporizers, consumers have a wide array of methods of consumption at their disposal, including hand pipes, water
pipes, rolling papers, and oral and topical delivery methods.
 
Hand and Water Pipes. We offer a diverse portfolio of over 200 hand and water pipes across five brands, including products within our Greenlane Brands. Many
display iconic, licensed logos and artwork, as pipes have grown into an artistic expression and are available in countless creative forms and functionality. Hand pipes are small,
portable and simple to use, and function by trapping the smoke produced from burning materials. Water pipes include large table-top models, bubblers and rigs, and incorporate
the cooling effects of water to the burning materials before inhalation.
 
Rolling Papers. Rolling papers are a traditional consumption method used to smoke dried plant material in a “roll-your-own” application. These include papers, cones
and wraps. Our rolling papers category is comprised of over 100 products across two unique brands, not including accessories such as rolling trays or tips.
 
6

 
 
Our Competitive Strengths
 
We attribute our success to the following competitive strengths:
 
A Clear Market Leader in an Attractive Industry.
 
We are a global platform for the development and distribution of premium cannabis accessories, packaging, vape solutions, and lifestyle products, reaching thousands
of retail locations, including, licensed cannabis dispensaries, smoke shops, head shops, and specialty retailers. We also own and operate one of the industry’s most visited North
American direct-to-consumer e-commerce websites, Vapor.com, as well as PuffItUp.com.. We also sell our proprietary products direct to consumers via Higherstandards.com,
and MarleyNaturalShop.com. We operate storefronts on Amazon, Ebay, Etsy, and other online high traffic marketplaces.
 
Market Knowledge and Understanding.
 
Because of our experience and our extensive, long-term industry relationships, we believe we have a deep understanding of customer needs and desires in our business
channels. This allows us to influence customer demand and the pipeline between product manufacturers, suppliers, advertisers and the marketplace. We have also established
strong relationships with a wide array of industry participants including leading MSOs, SSOs, retailers, and third party ancillary product producers.
 
Comprehensive and Best-in-Class Product Offering.
 
We offer a curated portfolio of products and accessories across many major categories with diverse, best-in-class offerings that cater to our customers’ needs. This
comprehensive and best-in-class product offering creates a “one-stop shop” for many of our customers and positively distinguishes us from our competitors. In addition, we
have carefully cultivated a portfolio of well-known brands and premium products and have helped many of the brands we distribute to become established names in the
industry.
 
Entrepreneurial Culture.
 
We believe our entrepreneurial, results-driven culture fosters highly dedicated employees who provide our customers with superior service. We invest in our talent by
providing ongoing training and have successfully developed programs that provide comprehensive product knowledge and tools needed to have a unique understanding of our
customers’ goals and decision-making processes.
 
Customers. We believe we offer superior services and solutions due to our comprehensive product offering, proprietary industry data and analytics, product expertise
and quality of service. We deliver products to our customers in a precise, safe and timely manner with complementary support from our dedicated sales and service teams. In
2022, we launched our new business to business (“B2B”) customer portal at Wholesale.Greenlane.com which provides our business customers seamless access to our catalog of
products for purchase 24-hours a day, 365 days a year. Consumers can access our products easily by purchasing from our e-commerce properties or access many of our
products via large marketplaces such Amazon.
 
Suppliers. Our industry knowledge, market reach, and resources allow us to establish trusted relationships with many industry suppliers. Our senior management team
makes tremendous efforts to establish and build these key relationships to help ensure Greenlane has a strong supply chain established for in-demand products at favorable
pricing. Our suppliers can be categorized into two buckets, factories that produce our Greenlane Brand’s products, as well as some generic products, and other third party
branded products (who either manufacture themselves or outsource production) that Greenlane will, in essence, resell. While we purchase our products from over 150 suppliers,
a significant percentage of our net sales is dependent on sales of products from a small number of key suppliers, which is why strong relationships are essential to our future
success. An important reason we have elected to focus on our Greenlane Brands is, since we own the brand itself (or license it), we can control which factory produces our
products. Generally, there are a variety of capable factory partners and we are able to leverage our Greenlane Brands to negotiate better pricing and service. When reselling an
established third-party brand’s products, we are somewhat beholden to the one supplier who owns or distributes that brand. However, we do believe there is a trend of third-
party branded suppliers in our industry to consolidate their relationships to do more business with fewer distribution partners. We believe our established track record, historical
relationships, ability to be value-added, and overall size and scale position us to benefit from this trend.
 
Employees. We aim to recruit best-in-class talent to join our Greenlane team. We provide our employees with an entrepreneurial culture, a safe, fun and fast-paced
work environment, financial incentives and career development opportunities.
 
Experienced and Proven Management Team Driving Organic and Acquisition Growth.
 
We recently revamped our management team to directly align with our strategic goals and initiatives. Our management team features vast relevant experience in
consumer-packaged goods, brand building, and e-commerce. In addition, our management team has expertise in accounting and finance, mergers and acquisitions, supply
chain, information technology, marketing and operations.
 
7

 
 
Our Operating Strategies
 
We intend to leverage our competitive strengths to increase shareholder value through the following core strategies:
 
Plan to Accelerate Path to Profitability and Capitalize the Business
 
In today’s economic landscape, particularly within the cannabis industry, achieving profitability and preserving working capital are paramount. At Greenlane, we are
intensely focused on making our business profitable and well-capitalized for long-term sustainability. Our key initiatives include:
 
 
1.
Technology Enhancements: We remain fully committed to improving our technology, particularly our B2B and e-commerce platforms, to provide a seamless shopping
experience for our wholesale and retail customers.
 
2.
Facility Footprint Rationalization: In 2023 and 2024, we optimized our facilities footprint by reducing warehouse and office space while increasing operational
efficiency and improving fulfillment practices.
 
3.
Headcount Reduction: We have significantly reduced our headcount and associated salary expenses, focusing on maintaining a core group of key employees as we
collectively right-size the business.
 
4.
Cost Structure Optimization: We continue to reduce our overall cost structure while improving margins. In April 2023, we formed two strategic partnerships (described
below in greater detail) to increase margins and significantly reduce working capital requirements. Similarly, we restructured arrangements with several third-party
brands to reduce our working capital needs.
 
5.
Inventory Management: In 2024, we continued to refine and improve our inventory management and lifecycle strategy that is focused on a quarterly turn and a regular
review of inventory to avoid future write-offs.
 
6.
Sales Force Upgrade: We have upgraded and will continue to upgrade our sales force from a solely account management centric team to a skilled and driven sales team
to acquire new customers while maintaining excellent service with our existing customers.
 
7.
Product Innovation: In 2024, we expanded our product offering to further enhance our assortment available to our customers to include the most up to date technology
available and launched our health and safety product line promoting safe and responsible consumption.
 
8.
Capital Investment: We continue to seek opportunities for securing investment capital to leverage our platform, increase availability and reduce stockouts of our high
demand third-party brands, invest in marketing and sales, and improve our product offerings.
 
Management believes that these initiatives will significantly reduce costs, help accelerate the Company’s path to profitability, support business growth, and allow the
Company to reinvest capital into its highest demand and highest potential product lines.
 
During 2023, 2024 and 2025, the Company received capital from various sources permitting it to right-size the business and position the company for growth. Such
sources are described in greater detail in the Liquidity and Capital Resources Section of this report.
 
During 2023, 2024 and 2025, the Company also entered into certain arrangements to reduce working capital requirements and improve its balance sheet.
 
In 2023 and 2024 we completed several initiatives to optimize our working capital requirements due to our inability to access capital markets on equitable terms and
stock-outs and shortages of higher velocity inventory.
 
In April 2023, we entered into two strategic partnerships. 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. On August 8, 2024 the Company terminated its strategic
partnership with MJ Packaging and is resuming its business as a direct provider of packaging solutions to the cannabis industry. MJ Packaging however, remains a distribution
customer of the Company.
 
8

 
 
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 partner.
While the strategic partnership may result in a decrease in top line revenue for these vape products, this partnership combined with some of our other restructuring initiatives
should allow us to reduce our overall cost-structure and enhance our margins, thereby improving our balance sheet.
 
We have successfully renegotiated many of our vendor and supplier partnership terms and are continuing to improve working capital arrangements with our vendors
and suppliers. We have made progress consolidating and streamlining our office, warehouse, and distribution operations footprint. We have reduced our workforce significantly
to reduce costs and align with our revenue projections.
 
On May 6, 2024, the Company, Warehouse Goods and Synergy Imports LLC (“Synergy”) entered into an asset purchase agreement, dated May 1, 2024 (the “Asset
Purchase Agreement”) pursuant to which Synergy purchased all of the intellectual property, a specified amount of inventory, and other assets related to the Eyce and DaVinci
brands. In consideration for the acquisition, all parties entered into a loan modification agreement, effective May 1, 2024 (the “Loan Modification Agreement”) and an amended
and restated secured promissory note, effective May 1, 2024 (the Amended and Restated Secured Promissory Note”), an amendment to the original Eyce and Davinci Asset
Purchase Agreements, a distribution agreement, the termination of a license granted by Eyce, and the termination of certain consulting and employment agreements.
 
On February 19, 2025, Greenlane Holdings, Inc. (the “Company”) consummated a private placement (the “Private Placement”) pursuant to a securities purchase
agreement (“Purchase Agreement”) with institutional investors (the “Purchasers”) for the purchase and sale of approximately $25.0 million of shares of the Company’s Class A
common stock (the “Common Stock”) and investor warrants at a price of $1.19 per Common Unit. The entire transaction was priced at the market under Nasdaq rules. The
offering consisted of the sale of Common Units (or Pre-Funded Units), each consisting of (i) one (1) share of Common Stock or one (1) Pre-Funded Warrant, (ii) one (1) Series
A PIPE Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $1.4875 (the “Series A Warrant”) and (iii) one (1) Series B PIPE
Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $2.975 (the “Series B Warrant” and together with the Series A Warrant, the
“Warrants”).
 
The initial exercise price of each Series A Warrant is $1.4875 per share of Common Stock. The Series A Warrants are exercisable following stockholder approval and
expire five (5) years thereafter. The number of securities issuable under the Series A Warrant is subject to adjustment as described in more detail in the Series A Warrant. The
initial exercise price of each Series B Warrant is $2.975 per share of Common Stock or pursuant to an alternative cashless exercise option. The Series B Warrants are
exercisable following stockholder approval and expire two and one-half (2.5) years thereafter. The number of securities issuable under the Series B Warrant is subject to
adjustment as described in the Series B Warrant.
 
In connection with the Private Placement, the Company entered into a registration rights agreement with the Purchasers on February 18, 2025 (the “Registration Rights
Agreement”), pursuant to which the Company is required to file a registration statement covering the resale of the Securities within 30 calendar days of the closing of the
offering.
 
Developing A World-Class Portfolio of Products.
 
We intend to continue to develop a portfolio of brands that includes our Greenlane Brands, exclusively licensed brands and third party brand products, which over time
will help to increase our blended margins and create increased long-term value. Our brand development is based upon our proprietary industry intelligence that allows us to
identify market opportunities for new brands and products. We leverage our distribution infrastructure and customer relationships to penetrate the market quickly with our
proprietary brands and to gain placement in thousands of retail stores. Currently, we sell such products directly to consumers through our brand websites and our e-commerce
properties. Over time, we expect an increasing percentage of our overall sales to be from our Greenlane Brands, which in turn should allow our gross margin to trend upwards
and should allow for lasting brand value to be built in the marketplace.
 
9

 
 
USPS PACT Act Exemption
 
On January 11, 2022, we announced via press release that the United States Postal Service (the “USPS”) had approved our application for a business and regulatory
exemption to the PACT Act (with respect to the business and regulatory exemption granted by the USPS, the “PACT Act Exemption”), allowing us to ship vaporizers and
accessories classified as electronic nicotine delivery systems (“ENDS”) products to other compliant businesses. With this approval, over 97% of our total annual sales became
eligible for shipment by freight, USPS and other major parcel carriers. The PACT Act Exemption also enables us to partner with other businesses that ship ENDS products and
had their supply chains disrupted by PACT Act compliance.
 
On June 24, 2022, we provided via press release an update on the progress of the PACT Act Exemption, following our successful implementation of the controls,
processes and systems required by the USPS in connection with the shipment of ENDS products. We currently have the ability to fulfill ENDS orders with the USPS which
allows us to reduce shipping costs, decrease fulfillment times and enhance the overall customer experience for approved wholesale customers.
 
Enhance Our Operating Margins.
 
We expect to enhance our operating margins as our business expands through a combination of additional product purchasing discounts, reduced inbound and
outbound shipping and handling rates, reduced transaction processing fees, increased operating efficiencies, and realization of benefits through leveraging our platform, existing
assets and consolidated distribution facilities. We are focused on converting more of our overall sales to be completed through technology platforms such as our e-commerce
consumer sites, large marketplace sites like Amazon, and our proprietary B2B ordering portal at Wholesale.Greenlane.com. Transacting a higher percentage of our sales
through automated technological platforms, versus the manual phone and email efforts in play today, should improve our overall operating margins.
 
Build Upon Strong Customer and Supplier Relationships to Expand Organically.
 
Our North American footprint and broad supplier relationships, combined with our regular interaction with our large and diverse customer base, provides us key
insights and positions us to be a critical link in the supply chain for premium vaporization products and consumption accessories. Our suppliers benefit from access to
thousands of brick and mortar retail locations as we are a single point of contact for improved production, planning and efficiency. Our customers, in turn, benefit from our
market leadership, talented sales force, broad product offerings, high inventory availability, timely delivery and exceptional customer service. We believe our strong customer
and supplier relationships will enable us to expand and broaden our market share in the premium vaporization products and consumption accessories marketplace and expand
into new categories.
 
Be the Employer of Choice.
 
When it comes to attracting and retaining top talent, Greenlane strives to be the employer of choice. At Greenlane we are committed to creating valuable career
opportunities for our employees, supporting them and fostering a culture that invites and encourages diverse opinions and ideas. This work is grounded in the belief that we are
at our best when we create inclusive, supportive and welcoming environments, where we uplift one another with dignity, respect and kindness. We are focused on ensuring our
employees see Greenlane as a home of possibility with good jobs, a sense of belonging, and a bright future.
 
10

 
 
Business Seasonality
 
We have historically experienced only moderate seasonality in our direct to consumer business, particularly during the fourth quarter, which coincides with Cyber
Monday (the first Monday after Thanksgiving, when online retailers typically offer holiday discounts), and as our customers build up their inventories in anticipation of the
holiday season and for which we have related promotional marketing campaigns.
 
Human Capital Resources
 
As of March 17,2025, we had 49 full-time employees. Approximately 47 were employed in the U.S., and two were employed in Canada. None of our employees are
represented by a labor union. We have never experienced a labor-related work stoppage.
 
During 2023 and 2024, we completed a series of reductions in force, which resulted in approximately $10.1 million in annualized cash compensation cost savings. We
believe our current headcount and resources are sufficient to execute our plan of achieving profitability in the near term, while remaining flexible to scale our hiring as industry
demand and our sales grow.
 
As we mention in our core operating strategies, we aim to be the employer of choice, as our employees are the key drivers of our success. We aim to recruit, train,
promote and retain the most talented and success-driven personnel in the industry. Our industry knowledge and scale provide opportunities for our employees to obtain
structured training and career path opportunities across all departments and positions. We are a company that operates with three core values: never settle, never follow, and
never disrespect.
 
Culture and Engagement
 
We exist to elevate all elements of the consumption experience. We are the driving force behind broadening accessibility to best-in-class ancillary products. We
cultivate a passionate culture that empowers our team to thrive within our rapidly evolving industry. Our values are to: never settle, never follow, and never disrespect. We
envision a world where humanity is free to enjoy mother nature’s magic, and we pledge that each of our employees will play an integral role in helping us make our vision a
reality.
 
Everything we do is powered by our vision and core values and our culture reflects that. As a result, we enjoy a highly motivated and skilled workforce committed to
our company. We send out regular employee engagement surveys, and in consultation with our employees we have addressed several opportunities to further improve our
culture. By being open, honest, and transparent, our employees feel more actively engaged in our success.
 
Total Rewards, Pay Equity and Retention
 
We strive to attract and retain diverse, high caliber employees who raise the talent bar by offering competitive compensation and benefit packages, regardless of their
gender, race, or other personal characteristics. We regularly review and survey our compensation and benefit programs against the market to ensure we remain competitive in
our hiring practices. We provide employee salaries that are competitive and consider factors such as an employee’s role and experience, the location of their job and their
performance. We also encourage, support, and compensate our employees based on our philosophy of recognizing and rewarding exceptional performance. We believe that
performance and development is an ongoing process in which all employees should be active participants. Individual and company key performance goals are linked to
employee compensation, and we have begun work on a Greenlane Learning and Development curriculum that will include a blended approach to both in person and virtual
learning.
 
Competition
 
Business-to-Business. We operate in an evolving industry in which the market and its participants remain highly fragmented. Although it is difficult to find reliable
independent research, we believe there is a vast number of potential B2B customers in North America comprised of licensed cannabis dispensaries, smoke shops, and specialty
retailers. Our B2B customers compete primarily on the basis of breadth, style, quality, pricing and availability of merchandise, the level of customer service, brand recognition
and loyalty. We successfully reach our B2B customers through our direct sales force and other marketing initiatives and provide them with our strategically curated mix of
brands and products, merchandise planning strategies and exceptional customer service. Among vaporizer product distributors, we compete against both suppliers and other
distributors. A number of suppliers choose to distribute directly in some sales channels and may also operate their own e-commerce platforms. We face competition from many
small privately-owned regional distributors that carry a narrow range of products. We believe there are only a select few wholesale distributors carrying a complete line of
premium vaporization products and consumption accessories. This has led to our emphasis on our wholesale business through our business-to-business (B2B) customer portal
at Greenlane.Wholesale.com. This platform provides our business customers with seamless access to our catalog of products for purchase 24 hours a day, 365 days a year. The
wholesale website offers customers an improved user experience with an easy-to-use layout that streamlines processes and allows customers to interact with us at their
convenience.
 
Business-to-Consumer. A number of suppliers of vaporizers and specialized consumption products and accessories operate their own e-commerce websites through
which they sell their items directly to end consumers. Additionally, there are hundreds of websites that sell products similar to those we offer in North America, Europe,
Australia and other parts of the world. We believe we compete effectively with other e-commerce websites. Further, we provide fulfillment services to the owners of some of
these websites as they do not carry their own inventory, are not able to ship as efficiently as we do and are unable to meet certain regulatory requirements, such as sales tax
collection. Our primary e-commerce website, Vapor.com, ranks above many of our competitors’ websites in various search engine categories. We believe our market
knowledge, large product selection, relationships with vaporizer brands, in-house search engine optimization teams, social media focus and distribution facilities will enable us
to remain a market leader in e-commerce.
 
11

 
 
Trademarks
 
We own a number of registered trademarks and service marks, including without limitation, trademarks in the relevant classes of goods for Greenlane, Higher
Standards, Aerospaced, Groove, and Pollen Gear. We also license certain trademarks and other intellectual property, most notably those associated with our Marley Natural and
Keith Haring brands. Solely for convenience, trademarks and trade names referred to in this Form 10-K may appear without the ® or TM symbols, but such references are not
intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade
names. In addition, this Form 10-K contains trade names, trademarks and service marks of other companies that we do not own. We do not intend our use or display of other
companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies. We believe our largest
trademarks are widely recognized throughout the world and have considerable value. The duration of trademark registrations varies from country to country. However,
trademarks are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained.
 
Recent Developments
 
On February 19, 2025, Greenlane Holdings, Inc. (the “Company”) consummated a private placement (the “Private Placement”) pursuant to a securities purchase
agreement (“Purchase Agreement”) with institutional investors (the “Purchasers”) for the purchase and sale of approximately $25.0 million of shares of the Company’s Class A
common stock (the “Common Stock”) and investor warrants at a price of $1.19 per Common Unit. The entire transaction was priced at the market under Nasdaq rules. The
offering consisted of the sale of Common Units (or Pre-Funded Units), each consisting of (i) on e (1) share of Common Stock or one (1) Pre-Funded Warrant, (ii) one (1) Series
A PIPE Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $1.4875 (the “Series A Warrant”) and (iii) one (1) Series B PIPE
Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $2.975 (the “Series B Warrant” and together with the Series A Warrant, the
“Warrants”).
 
The initial exercise price of each Series A Warrant is $1.4875 per share of Common Stock. The Series A Warrants are exercisable following stockholder approval and
expire five (5) years thereafter. The number of securities issuable under the Series A Warrant is subject to adjustment as described in more detail in the Series A Warrant. The
initial exercise price of each Series B Warrant is $2.975 per share of Common Stock or pursuant to an alternative cashless exercise option. The Series B Warrants are
exercisable following stockholder approval and expire two and one-half (2.5) years thereafter. The number of securities issuable under the Series B Warrant is subject to
adjustment as described in the Series B Warrant.
 
In connection with the Private Placement, the Company entered into a registration rights agreement with the Purchasers on February 18, 2025 (the “Registration Rights
Agreement”), pursuant to which the Company is required to file a registration statement covering the resale of the Securities within 30 calendar days of the closing of the
offering.
 
Regulatory Developments
 
Our operating results and prospects will be impacted, directly and indirectly, by regulatory developments at the local, state, and federal levels. Certain changes in local,
state, national, and international laws and regulations, such as increased legalization of cannabis, create significant opportunities for our business. However, other changes to
laws and regulations result in restrictions on which products we are permitted to sell and the manner in which we market our products, increased taxation of our products, and
negative changes to the public perceptions of our products, among other effects.
 
We believe the ongoing trend of states legalizing medicinal and adult-use cannabis will likely drive increased demand for many of our products. In the 2020 election,
voters approved initiatives for adult-use cannabis in New Jersey, Arizona, Montana, and South Dakota, as well as medical marijuana in Mississippi and South Dakota.
Subsequent years saw Connecticut and Virginia (2021), Maryland and Missouri (2022), and Delaware, Minnesota, and Ohio (2023) legalizing adult-use cannabis. Although we
cannot guarantee that state-level legalization will continue, the Department of Justice’s proposal to reclassify cannabis from Schedule I to Schedule III of the Controlled
Substances Act is a significant indicator of potential regulatory changes. This reclassification could have a profound impact on nationwide regulation, boosting market
confidence.
 
In addition, 30 states and the District of Columbia have recently adopted laws imposing taxes on vaping products. Additionally, as of 2022, at least 31 states have
adopted laws imposing taxes on vaporizers. These taxes will result in increased prices to end consumers, which may adversely impact the demand for our products. We expect
these taxes would impact our competitors similarly, assuming their compliance with applicable laws.
 
12

 
 
The Consolidated Appropriations Act, 2021, which was signed into law on December 27, 2020, contains provisions that prohibit the mailing of electronic nicotine
delivery systems (“ENDS”) through the United States Postal Service (“USPS”) and place certain regulatory requirements on shipment of ENDS through other carriers. Certain
private carriers, including UPS and FedEx, also have policies restricting or prohibiting the shipment of many vaporization products we sell. On December 30, 2021, the USPS
granted us an exception that permits Greenlane to continue shipping ENDS business to business via the USPS. This exception, combined with our use of alternative carriers,
permits us to continue shipping almost all of our products to the vast majority of our customers, provided that we continue to meet all regulatory requirements. While we
currently retain our ability to ship products to customers, additional legal or policy changes concerning the shipment of vaporizers could increase our costs materially and
deprive us of our ability to timely deliver certain products to certain types of customers.
 
Corporate Information
 
Our executive offices are located at 1095 Broken Sound Parkway, Suite 100, Boca Raton, Florida 33487. Our telephone number at our executive offices is (877) 292-
7660.
 
Available Information
 
The Company’s Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the SEC. We are subject to the informational requirements of the Exchange Act and file
or furnish reports, proxy statements and other information with the SEC. Such reports and other information filed by us with the SEC are available free of charge at
investor.gnln.com/financial-information/sec-filings when such reports are available on the SEC’s website. The SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. We periodically provide other information for investors on
our corporate website, www.gnln.com, and our investor relations website, investor.gnln.com. This includes press releases and other information about financial performance,
information on corporate governance and details related to our annual meeting of shareholders. The information contained on the websites referenced in this Form 10-K is not
incorporated by reference into this filing. Further, our references to website URLs are intended to be inactive textual references only.
 
ITEM 1A. RISK FACTORS
 
Our operations and financial results are subject to various risks and uncertainties, including but not limited to those described below, which could harm our business,
reputation, financial condition, and operating results. The following is a description of what we consider the key challenges and material risks to our business and an investment
in our Class A common stock.
 
Risks Related to Our Business and Industry
 
Global economic conditions, including inflation and supply chain disruptions, could materially and adversely our business, prospects, results of operations, financial
condition, or cash flows.
 
Our business and operations are sensitive to global economic conditions. General global economic downturns and macroeconomic trends, including heightened
inflation, volatility in the capital markets, interest rate and currency rate fluctuations, the ongoing war in Ukraine, and economic slowdown or recession, may result in
unfavorable conditions that could negatively affect demand for our products and exacerbate some of the other risks that affect our business, financial condition and results of
operations. Both domestic and international markets experienced significant inflationary pressures in 2023 and 2024 and inflation rates in the U.S. are currently expected to
continue at elevated levels for the near-term. In addition, the Federal Reserve has raised, and is expected to continue to raise, interest rates in response to concerns about
inflation, which, coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening
these risks. Interest rate increases or other government actions taken to reduce inflation could also result in an economic recession.
 
A material decline in the economic conditions affecting consumers, which results in a reduction in disposable income for the average consumer, may change
consumption patterns, and may result in a reduction in spending on vaporization products and consumption accessories or a switch to cheaper products or products obtained
through illicit channels. Many of our products are relatively new to the market and may be regarded by consumers as a novelty item and expendable. As such, demand for our
vaporizer products may be particularly sensitive to economic conditions such as inflation, recession, high energy costs, unemployment, changes in interest rates and money
supply, changes in the political environment and other factors beyond our control, any combination of which could result in a material adverse effect on our business, results of
operations and financial condition.
 
13

 
 
If we are required to seek additional financing sources, they may not be available to us on attractive terms if at all and could restrict our ability to engage in certain
business activities.
 
Due to limited access to the debt markets, we have been required to issue equity at prices that are dilutive to stockholders. We may be forced to continue to seek equity
capital at dilutive prices through other means if other financing is not available to us to fund our working capital needs. In the past, because of the nature of our industry, we
have had difficulties establishing relationships with certain financial institutions and may continue to face such difficulties. As a result, indebtedness or other forms of financing
may not be available to us on attractive terms or at all. Furthermore, we may have to seek financing from non-traditional sources such as private equity and hedge funds, which
may require us to give up significant governance or other rights or agree to economic and other terms that are not favorable.
 
In addition, future financing agreements we may enter into in the future may contain customary negative covenants and other financial and operating covenants that,
among other things:
 
 
●
restrict our ability to incur additional indebtedness;
 
●
restrict our ability to incur additional liens;
 
●
restrict our ability to make certain investments (including capital expenditures);
 
●
restrict our ability to merge with another company;
 
●
restrict our ability to sell or dispose of assets;
 
●
restrict our ability to make distributions to stockholders; and
 
●
require us to satisfy minimum financial coverage ratios, minimum net worth requirements, maximum leverage ratios, or other financial covenants.
 
We had cash available as of December 31, 2024, of $0.9 million. In addition, our revenue for the year ended December 31, 2024, was down from prior years and has
declined in recent quarters. If we are unable to access additional liquidity through successful execution of our cost cutting strategic initiatives and revenue goals, we may have
significant cash constraints, which would have a material adverse impact on our business, results of operations and ability to pay our debts as they come due.
 
We have failed in the past, and fail in the future to meet the listing standards of Nasdaq, and as a result our Class A common stock could become delisted, which could have
a material adverse effect on the liquidity of our Class A common stock.
 
If we fail to continue to satisfy the continued listing requirements of Nasdaq, such as the corporate governance or public float requirements, or the minimum closing
bid price requirement, Nasdaq will take steps to de-list our Class A common stock. Such a de-listing would likely have a negative effect on the price of our Class A common
stock and would impair your ability to sell or purchase our Class A common stock when you wish to do so, as well as adversely affect our ability to issue additional securities
and obtain additional financing in the future.
 
14

 
 
On August 21, 2023, we received a letter from the staff of Nasdaq indicating that we were not in compliance with Nasdaq Listing Rule 5450(a)(1) because the closing
bid price per share for our Class A common stock had closed below $1.00 for the previous 30 consecutive business days (the “Minimum Bid Price Requirement”). We were
given 180 days, or until February 20, 2024 to regain compliance with the Minimum Bid Price Requirement. We also filed an application to transfer the listing of our Class A
common stock from the Nasdaq Global Market to the Nasdaq Capital Market, which transfer was approved and occurred on February 9, 2024. As a result of the transfer, we
became eligible to request an additional 180-day compliance period.
 
On February 21, 2024, Nasdaq notified us in writing that while we had not regained compliance with the Minimum Bid Price Requirement, we were eligible for an
additional 180-day compliance period, or until August 19, 2024, to regain compliance with the Minimum Bid Price Requirement. Nasdaq’s determination was based on us
having met the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The Nasdaq Capital Market,
with the exception of the Minimum Bid Price Requirement, and on our written notice to Nasdaq of our intention to cure the deficiency during the second compliance period by
effecting a reverse stock split, if necessary.
  
On January 24, 2024, Gina Collins gave notice of her resignation from our Board of Directors and from each committee of the Board, effective immediately. Ms.
Collins was an independent director, and as a result of her resignation, we no longer comply with the majority independent board requirement of Nasdaq as set forth in Nasdaq
Listing Rule 5605(b)(1) because independent directors do not comprise a majority of the Board of Directors, and Nasdaq’s audit committee requirements as set forth in Nasdaq
Listing Rule 5605(c)(2)(A) because the Audit Committee of the Board of Directors is not comprised of at least three independent directors.
 
On January 29, 2024, in accordance with Nasdaq Listing Rules, we notified Nasdaq of Ms. Collins’ resignation and the resulting non-compliance. On January 30,
2024, we received a notice from Nasdaq acknowledging the fact that we do not meet the requirements of such rules. In accordance with Nasdaq Listing Rules 5605(b)(1)(A)
and 5605(c)(4), to regain compliance with the Nasdaq Listing Rules. With the resignation of Mr. Snyder, we were notified on July 26, 2024 that we had regained compliance
with the Independent Director Rule. We regained compliance with the requirement that the Audit Committee of the Board of Directors be comprised of three independent
directors on December 31, 2024 with the addition of Mr. Howe to the Audit Committee.
 
On April 18, 2024, we received a notice from Nasdaq stating that because we had not yet filed our Annual Report on Form 10-K for the fiscal year ended December
31, 2023, we were no longer in compliance with Nasdaq Listing Rule 5250(c)(1). Nasdaq Listing Rule 5250(c)(1) requires listed companies to timely file all required periodic
financial reports with the Securities and Exchange Commission. We were notified by Nasdaq that we had regained compliance on July 26, 2024.
 
On May 21, 2024, we received a notice from Nasdaq stating that because we had not yet filed our Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2024, we were no longer in compliance with Nasdaq Listing Rule 5250(c)(1). We were notified by Nasdaq that we had regained compliance on July 26, 2024.
 
The Company had 60 calendar days from April 18, 2024, or until June 17, 2024, to regain compliance by filing the Form 10-K and the Form 10-Q or to submit to
Nasdaq a plan to regain compliance with the Nasdaq Listing Rules. We timely submitted the plan to regain compliance to Nasdaq and Nasdaq granted us additional time to file
the Form 10K and 10Q.
 
On June 26, 2024, we were notified by Nasdaq that a filing extension was granted through July 31, 2024, for our Annual Report on Form 10-K and Quarterly Report
on Form 10-Q.
 
On July 26, 2024, we received a notification by Nasdaq that we had regained compliance with the Independent Director Rule, and due to the filing of our Annual
Report on Form 10-K and Quarterly Report on Form 10-Q was back in compliance with the Nasdaq Filing Rule.
 
On August 26, 2024, we received a notice from Nasdaq stating that we had met the minimum bid requirements as of August 23, 2024, and were back in compliance
with Nasdaq minimum bid requirements.
 
15

 
 
Our narrow margins may magnify the impact of variations in operating costs and of adverse or unforeseen events on operating results.
 
We are subject to intense price competition. As a result of this and other factors, our gross and operating margins have historically been narrow. Narrow margins
magnify the impact of variations in operating costs and of gross margin and of unforeseen adverse events on operating results. Continued increases in costs, such as the cost of
merchandise, wage levels, shipping rates, import duties and fuel costs, may negatively impact our margins and profitability. We are not always able to raise the sales price to
offset cost increases or to effect increased operating efficiencies in response to increasing costs. If we are unable to maintain our margins in the future, it could have a material
adverse effect on our business, results of operations and financial condition. If we become subject to increased price competition in the future, we cannot assure you that we
will not lose market share, that we will not be forced to reduce our prices and further reduce our margins, or that we will be able to compete effectively.
 
Additionally, promotional activities can significantly increase net sales in the periods in which they are initiated and net sales can be adversely impacted in the periods
after a promotion. Accordingly, based upon the timing of our marketing and promotional initiatives, we have and may continue to experience significant variability in our
month-to-month results, which could affect our ability to formulate strategies that allow us to maintain our market presence across volatile months. If our monthly sales
fluctuations obscure our ability to track important trends in our key markets, it may have a material adverse effect on our business, results of operations and financial condition.
 
If we fail to manage our business and growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges
adequately.
 
Our success will depend, in part, on our ability to manage our business and its growth, both domestically and internationally. Any growth in, expansion of, or shift in
the focus of our business, is likely to continue to place a strain on our management and administrative resources, infrastructure and systems. As with other businesses, we
expect that we will need to further refine and expand our business development capabilities, our systems and processes and our access to financing sources. We will also need to
hire, train, supervise, and manage new employees. These processes are time consuming and expensive and will increase management responsibilities and divert management
attention. We cannot assure that we will be able to:
 
 
●
optimize our product offerings effectively or efficiently or in a timely manner, if at all;
 
●
achieve expected synergies or other anticipated benefits;
 
●
allocate our human resources optimally;
 
●
meet our capital needs;
 
●
identify and hire qualified employees or retain valued employees;
 
●
effectively incorporate the components of any business or product line that we may acquire in our effort to achieve growth; or
 
●
continue to grow our business.
 
Our inability or failure to manage our business and its growth effectively could harm our business and materially adversely affect our operating results and financial
condition. In addition, we believe that an important contributor to our success has been and will continue to be our corporate culture, which we believe fosters innovation,
teamwork and a passion for our products and customers. As a result of our rapid growth, we may find it difficult to build and maintain our strong corporate culture, which could
limit our ability to innovate and operate effectively. Any failure to preserve our culture could also negatively affect our ability to retain current and recruit new personnel,
continue to perform at current levels or execute on our business strategy.
 
Management and employee turnover creates uncertainties and could harm our business.
 
We have experienced significant turnover in our executive leadership in recent years. Changes to strategic or operating goals, which oftentimes occur with the
appointment of new executives and board members, can create uncertainty, may negatively impact our ability to execute quickly and effectively, and may ultimately be
unsuccessful. In addition, executive leadership transition periods are often difficult as the new executives gain detailed knowledge of our operations, and friction can result from
changes in strategy and management style. Management turnover inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution.
Until we integrate new personnel, and unless they are able to succeed in their positions, we may be unable to successfully manage and grow our business, and our financial
condition and profitability may suffer.
 
Further, to the extent we experience additional management turnover, competition for top management is high and it may take months to find a candidate that meets
our requirements. If we are unable to attract and retain qualified management personnel, our business could suffer. Our future success will also depend on our ability to identify,
recruit and retain additional qualified technical and managerial personnel. We operate in several geographic locations where labor markets are particularly competitive, where
demand for personnel with these skills is extremely high and is likely to remain high. As a result, competition for qualified personnel is intense, particularly in the areas of
general management, finance, engineering and science, and the process of hiring suitably qualified personnel is often lengthy and expensive and may become more expensive
in the future. If we are unable to hire and retain a sufficient number of qualified employees, our ability to conduct and expand our business could be seriously reduced.
 
16

 
 
The market for vaporizer products and related items is a niche market, subject to a great deal of uncertainty and is still evolving.
 
Vaporizer products comprise a significant portion of our product portfolio. Many of these products have only recently been introduced to the market and are at an early
stage of development. These products represent core components of a niche market that is evolving rapidly, is characterized by a number of market participants and is subject to
regulatory oversight and a potentially fluctuating regulatory framework. Rapid growth in the use of, and interest in, vaporizer products is recent and may not continue on a
lasting basis. The demand and market acceptance for these products is subject to a high level of uncertainty, including, but not limited to, changes in governmental regulation,
developments in product technology, perceived safety and efficacy of our products, perceived advantages of competing products and sale and use of materials that can be
vaporized, including in the expanding legal state cannabis markets. Therefore, we are subject to many of the business risks associated with a new enterprise in a niche market.
Continued technical evolution, market uncertainty, evolving regulation and the resulting risk of failure of our new and existing product offerings in this market could have a
material adverse effect on our ability to build and maintain market share and on our business, results of operations and financial condition. Further, there can be no assurance
that we will be able to continue to compete effectively in this marketplace.
 
We depend on third-party suppliers for our products and may experience supply shortages which could have a material adverse effect on our business.
 
We depend on third-party suppliers for our vaporization products and consumption accessories product offerings. Our customers associate certain characteristics of our
products, including the weight, feel, draw, flavor, packaging and other unique attributes, to the brands we market, distribute and sell. In the future, we may have difficulty
obtaining the products we need from our suppliers as a result of unexpected demand or production difficulties that might extended lead times, as well as due to constraints
relating to our low cash position. Also, products may not be available to us in quantities sufficient to meet our customer demand. Any interruption in supply and/or consistency
of these products may adversely impact our ability to deliver products to our customers, may harm our relationships and reputation with our customers, and may have a material
adverse effect on our business, results of operations and financial condition. Interruptions in supply or consistency of products could arise for a number of reasons, including
but not limited to economic and civil unrest, public health crises, embargoes, and sanctions.
 
We may enter into new markets or lines of business that offer new products and services, or may expand existing lines of business, which may subject us to additional risks.
 
From time to time, we may enter into new markets or lines of business that entail offering new products and services, or may expand existing lines of business. For
example, our merger with KushCo significantly expanded our exposure to the leading MSOs and LPs, as well as a presence on the west coast. Our historical experience in these
markets does not ensure that we will be able to successfully operate expended lines of business or will be successful in launching new products or entering new markets. In
addition, external factors, such as competitive alternatives, potential conflicts of interest, either real or perceived, and shifting market preferences, in addition to our lack of
experience with or knowledge of new lines of business or markets may impact our implementation, expansion and operation of new and existing lines of business. Other related
risks include:
 
 
●
the potential diversion of management’s attention, available cash, and other resources from our existing businesses;
 
●
unanticipated liabilities or contingencies;
 
●
compliance with additional regulatory burdens;
 
●
potential damage to existing customer relationships, lack of customer acceptance or an inability to attract new customers; and
 
●
the inability to compete effectively in the new line or expanded line of business or in a new market.
 
Failure to successfully manage these risks in the implementation, expansion or operation of new and existing lines of business and markets or the offering of new
products or services could have a material adverse effect on our reputation, business, results of operations and financial condition.
 
17

 
 
There is uncertainty related to the regulation of vaporization products and certain other consumption accessories. Increased regulatory compliance burdens, no matter
how they arise, could have a material adverse impact on our business development efforts and our operations.
 
United States
 
There is uncertainty regarding whether, in what circumstances, how and when the FDA will seek to enforce the tobacco-related provisions of the Federal Food, Drug,
and Cosmetic Act (“FFDCA”) relative to vaporizer hardware and accessories that can be used to vaporize cannabis and other material, including electronic cigarettes, rolling
papers and glassware, in light of the potential for dual use with tobacco.
 
Through amendments to the FFDCA, the Tobacco Control Act established, by statute, that the FDA has oversight over specific types of tobacco products (cigarettes,
cigarette tobacco, roll-your-own (“RYO”) tobacco, and smokeless tobacco) and granted the FDA the authority to “deem” other types of tobacco products as subject to the
statutory requirements. In addition to establishing authority, defining key terminology, and setting adulteration and misbranding standards, the Tobacco Control Act established
FDA’s authority over tobacco products in a number of areas such as: submission of health information to the FDA; registration with the FDA; premarket authorization
requirements; good manufacturing practice requirements; tobacco product standards; notification, recall, corrections, and removals; records and reports; marketing
considerations and restrictions; post-market surveillance and studies; labeling and warnings; and recordkeeping and tracking. Although the vast majority of our vaporizer
products are not subject to these regulations because they are not intended for use with tobacco or nicotine, changes in law, regulation, or policy that subject a greater portion of
our products to these regulations could occur.
 
In a final rule effective August 8, 2016 (“Deeming Rule”), the FDA deemed all products that meet the Tobacco Control Act’s definition of “tobacco product,” including
components and parts but excluding accessories, to be subject to the tobacco control requirements of the FFDCA and the FDA’s implementing regulations. Accordingly, as of
the Deeming Rule’s effective date, deemed tobacco products that are “new” (i.e., those that were not commercially marketed in the United States as of February 15, 2007) are
subject to the premarket authorization requirements. Deemed new tobacco products that remain on the market without authorization are marketed unlawfully.
 
Deemed new tobacco products include, among other things: products such as electronic cigarettes, electronic cigars, electronic hookahs, vape pens, certain vaporizers
and e-liquids and their components or parts (such as tanks, coils and batteries) (“ENDS”). The FDA’s interpretation of components and parts of a tobacco product includes any
assembly of materials intended or reasonably expected to be used with or for the human consumption of a tobacco product. In a 2017 decision of the D.C. Circuit court, the
court upheld the FDA’s authority to regulate ENDS even though they do not actually contain tobacco, and even if the products could be used with nicotine-free e-liquids.
 
The Tobacco Control Act and FDA’s implementation of regulations require regulatory approvals before certain products may be sold and restrict the way tobacco
product manufacturers, retailers, and distributors can advertise and promote tobacco products, including a prohibition against free samples or the use of vending machines,
requirements for presentation of warning information, and age verification of purchasers.
 
Newly-deemed tobacco products are also subject to the other requirements of the Tobacco Control Act, such as that they not be adulterated or misbranded. The FDA
has been directed under the Tobacco Control Act to establish specific good manufacturing practice (“GMP”) regulations for tobacco products, and could do so in the future,
which could have a material adverse impact on the ability of some of our suppliers to manufacture, and the cost to manufacture, certain of our products. Even in the absence of
specific GMP regulations, a facility’s failure to maintain sanitary conditions or to prevent contamination of products could result in the FDA deeming the products produced
there adulterated.
 
The FDA has announced its intention to take enforcement measures related to ENDS products offered for sale after September 9, 2020, for which the manufacturers
had not submitted a PMTA. Following that date, the FDA did in fact take actions against certain manufacturers of ENDS products for which a PMTA had not been submitted.
Accordingly, and in light of the laws noted above, premarket authorizations will be necessary for us to continue our distribution of any vaporizer hardware and accessories that
meet the FDA’s definition of ENDS. While we do not believe vaporizers intended for use with non-tobacco substances meet the FDA’s definition of ENDS, it is possible that
the FDA could require premarket authorization for such products.
 
18

 
 
Our suppliers who make vaporizers that are currently, or in the future become, subject to FDA regulation must timely file applications for the appropriate
authorizations so that we may continue selling their products in the United States. We have no control over the content of those applications, and we have no assurances that the
outcome of the FDA’s review will result in authorization of the marketing of these products. If the FDA establishes or applies review standards or processes that our suppliers
are unable or unwilling to comply with, our business, results of operations, financial condition and prospects would be adversely affected.
 
The anticipated costs to our suppliers of complying with future FDA regulations will be dependent on the rules issued by the FDA, the timing and clarity of any new
rules or guidance documents accompanying these rules, the reliability and simplicity (or complexity) of the electronic systems utilized by the FDA for information and reports
to be submitted, and the details required by the FDA for such information and reports with respect to each regulated product. Any failure to comply with existing or new FDA
regulatory requirements could result in significant financial penalties to us or our suppliers, which could ultimately have a material adverse effect on our business, results of
operations, financial condition and ability to market and sell our products. Compliance and related costs could be substantial and could significantly increase the costs of
operating in the vaporization products and certain other consumption accessories markets.
 
In addition, failure to comply with the Tobacco Control Act and with FDA regulatory requirements could result in litigation, criminal convictions or significant
financial penalties and could impair our ability to market and sell some of our vaporizer products. At present, we are not able to predict whether the Tobacco Control Act will
impact our business to a greater degree than competitors in the industry, thus affecting our competitive position.
 
As discussed elsewhere in these Risk Factors and under the heading Regulatory Developments, a number of states and cities have implemented bans or restrictions on
the sale of vaporizers and accessories, as well as flavored tobacco products, including vaping liquids and menthol cigarettes. There may, in the future, also be increased
regulation of additives in smokeless products and internet sales of vaporization products and certain other consumption accessories. The application of either or both of current
federal, state, and local, laws, and of any new laws or regulations which may be adopted in the future at the federal, state, or local level, to vaporization products, consumption
accessories or such additives could result in additional expenses and require us to change our advertising and labeling, and methods of marketing and distribution of our
products, any of which could have a material adverse effect on our business, results of operations and financial condition.
 
Canada
 
On May 23, 2018, the Tobacco and Vaping Products Act (“TVPA”) became effective, and now governs the manufacture, sale, labeling and promotion of vaping
products sold in Canada. The TVPA replaced the former Tobacco Act (Canada) and established a legislative framework that applies to vaping products, whether or not they
contain nicotine. The TVPA prescribes high-level requirements in relation to vaping products, with regulations governing specific topics such as nicotine concentration and the
promotion of vaping products. Other regulations remain forthcoming and there remains a high degree of uncertainty with respect to the compliance landscape for vaping
products. As such, there can be no assurance that we will initially be in total compliance, remain competitive, or financially able to meet future requirements administered
pursuant to the TVPA. Prior to the TVPA becoming effective, Health Canada had taken the position that electronic smoking products (i.e., electronic products for the
vaporization and administration of inhaled doses of nicotine, including electronic cigarettes, cigars, cigarillos and pipes, as well as cartridges of nicotine solutions and related
products) fell within the scope of the Food and Drugs Act (Canada) (“Food and Drugs Act”). Vaping products with therapeutic or health-related claims are subject to the Food
and Drugs Act and related regulations. Finally, the TVPA provides the authority to make regulations to collect information from industry about vaping products, their emissions
and any research and development (e.g., sales data and information on market research, product composition, ingredients, materials, health effects, hazardous properties and
brand elements). Health Canada is currently developing proposed regulations in this area.
 
On December 21, 2019, Health Canada issued a Regulatory Impact Analysis Statement titled “Vaping Products Promotion Regulations.” The Impact Analysis
addressed two proposed new regulations that would place stricter limits on the advertising and promotion of nicotine vaping products and make health warnings on nicotine
vaping products mandatory (the “Proposed Regulations”). The Proposed Regulations would: (1) prohibit the promotion of nicotine vaping products and nicotine vaping
product-related brand elements by means of advertising that is done in a manner that can be seen or heard by youth, including the display of nicotine vaping products a points
of sale where can be seen by youth; and (2) require that all nicotine vaping advertising convey a health warning about the health hazards of nicotine vaping product use.
 
On July 1, 2020, Health Canada’s “Vaping Products Labeling and Packaging Regulations” (the “VPLPR”) came into effect; requiring (1) all vaping products
containing nicotine to display a standardized nicotine concentration statement and health warning about the addictiveness of nicotine; (2) products containing nicotine to be
packaged in child-resistant containers and display a toxicity warning and first aid treatment statement; and (3) the display of a list of ingredients contained in the vaping
substances, regardless of nicotine content. On July 14, 2020, Health Canada issued a guidance document on vaping products titled, “Industry Guide to vaping products subject
to the Canada Consumer Product Safety Act” (the “CCPA Guidance”). The CCPA Guidance provided clarity on requirements under the Canada Consumer Product Safety Act
(“CCPSA”) for vaping products that are manufactured, imported, advertised, or sold in Canada. The CCPA Guidance provided clarity on the requirements of the VPLPR and
the authority of the CCPSA to address safety issues posed by a vaping product not marketed for therapeutic use or by a cannabis accessory (such as a vaporizer represented to
be used in the consumption of cannabis) not marketed for a therapeutic use.
 
19

 
 
In addition to federal regulations, several provinces, including Alberta, British Columbia, Nova Scotia, Ontario, Prince Edward Island (“PEI”), Quebec, and
Saskatchewan, have passed regulations fully restricting or limiting the advertising and sales of certain types of nicotine vaping products. Many provinces have focused their
tobacco and vaping control efforts on retail access and have taken action to go beyond the minimum requirements in the TVPA. For example, Nova Scotia, Newfoundland and
Labrador, and the Northwest Territories, have increased the minimum age of sale to 19. Notably, in Prince Edward Island, as of March 1, 2020, the minimum age for purchasing
nicotine products increased to age 21. In 2019. British Columbia, Saskatchewan, and Ontario limited the sales of flavored vaping products with exceptions for some flavors to
specialty stores, whereas some provinces have banned flavored vaping products, with the exception of tobacco flavor (Nova Scotia and Prince Edward Island). By way of
example, on August 11, 2020, PEI adopted a regulation to ban the sale of all flavored vaping products, effective March 1, 2021. Quebec is currently considering a ban on
flavored products and effective as of March 25, 2022, the sale of flavored vapor products was banned in the Northwest Territories.
 
Moreover, certain provinces (British Columbia, Newfoundland and Labrador, Saskatchewan, Quebec, Nova Scotia) have implemented an e-cigarette retail licensing
system or have guidelines for retailers in order to prevent sales to minors (Alberta, British Columbia, Newfoundland and Labrador, Prince Edward Island, Saskatchewan).
 
Finally, with respect to the taxation of vaping products, the Canadian government introduced amendments to the Excise Act, 2001 to implement a new excise duty
framework on vaping products. These amendments became law on June 23, 2022. The new framework applies to vaping products that are manufactured in Canada or imported,
and that are intended for use in a vaping device in Canada. Manufacturers of vaping products are required to get a vaping product license from the Canada Revenue Agency
(“CRA”). Importers are required to apply for registration from the CRA. Manufacturers and importers are also required to register for the vaping stamping regime. All vaping
products entering the Canadian duty-paid market are required to be packaged with an excise stamp affixed to the product. The excise stamps shows that duties have been paid.
 
These developments, together with the passed and proposed federal and provincial regulations may have a material adverse effect on our business, results of
operations, and financial condition.
 
We may be unable to identify or contract with new suppliers in the event of a disruption to our supply.
 
In the event of a disruption to our supply of products, we would have to identify new suppliers that can meet our needs. Only a limited number of suppliers may have
the ability to produce certain products we sell at the volumes we need, and it could be costly or time-consuming to locate and approve such alternative sources. Moreover, it
may be difficult or costly to find suppliers to produce small volumes of products in the event we are looking only to supplement our current supply as suppliers may impose
minimum order requirements. In addition, we may be unable to negotiate pricing or other terms with our existing or new suppliers as favorable as those we currently enjoy. We
cannot guarantee that a failure to adequately replace or supplement our existing suppliers would not have a material adverse effect on our business, results of operations and
financial condition.
 
Demand for the products we distribute could decrease if the trend of our suppliers selling products directly to consumers or retailers continues or accelerates.
 
Retailers and consumers of vaporization products and consumption accessories have historically purchased certain amounts of these products directly from suppliers.
Recently, direct to consumer sales of vaporization products and consumption accessories have accelerated, consistent with broader sales trends. If our customers were to
increase their purchases of products directly from suppliers, or if suppliers further increase their efforts to sell such products directly to consumers or retailers, we could
experience a significant decrease in our business, results of operations and financial condition. These, or other developments that remove us from, or limit our role in, the
distribution chain, may harm our competitive position in the marketplace and reduce our sales and earnings and adversely affect our business.
 
20

 
 
We are vulnerable to third-party transportation risks, including governmental laws and common carriers’ policies that prevent the shipment of the types of products we sell.
 
We depend on fast and efficient shipping services to distribute our products. Any prolonged disruption of these services may have a material adverse effect on our
business, financial condition and results of operations. Rising costs associated with transportation services used by us to receive or deliver our products, including tariffs, as
well as delays as a results of factors outside of our control have had and may continue to have a material adverse effect on our business, financial condition and results of
operations.
 
The Consolidated Appropriations Act, 2021, which was signed into law on December 27, 2020, contains provisions that prohibit the mailing of ENDS through the
United States Postal Service (“USPS”) and place certain regulatory requirements on shipment of ENDS through other carriers. Certain private carriers, including UPS and
FedEx, also have policies restricting or prohibiting the shipment of certain vaporization products we sell, requiring us to occasionally rely upon smaller carriers that are more
expensive and serve fewer geographic areas. Although we received USPS approval in December 2021 for a business and regulatory exception to the PACT Act (the “PACT Act
Exception”) permitting us to ship ENDS to other PACT Act compliant businesses, there can be no assurances that we will be able to maintain the PACT Act Exception or that
the USPS will not elect to rescind the PACT Act Exception. Additional legal or policy changes concerning the shipment of vaporizers could increase our costs materially and
deprive us of our ability to timely deliver certain products to certain types of customers. Additionally, rising costs associated with transportation services used by us to receive
or deliver our products (including tariffs) and prohibitions on the use of certain shipping services for specified products, may have a material adverse effect on our business,
financial condition and results of operations.
 
We do not have long-term agreements or guaranteed price or delivery arrangements with most of our suppliers. The loss of a significant supplier would require us to rely
more heavily on our other existing suppliers or to develop relationships with new suppliers. Such a loss may have an adverse effect on our product offerings and our
business.
 
While we have long-term distribution agreements with certain of our suppliers, consistent with industry practice, we do not have guaranteed price or delivery
arrangements with most of our suppliers. We generally make our purchases through purchase orders. As a result, we have experienced and may in the future experience
inventory shortages or price increases on certain products. Furthermore, our industry occasionally experiences significant product supply shortages, and we sometimes
experience customer order backlogs due to the inability of certain suppliers to make available to us certain products as needed. We cannot provide assurances that suppliers will
maintain an adequate inventory of products to fulfill our orders on a timely basis, or at all, or that we will be able to obtain particular products on favorable terms, or at all.
Additionally, we cannot provide assurances that product lines currently offered by suppliers will continue to be available to us. A decline in the supply or continued availability
of the products of our suppliers, or a significant increase in the price of those products, could reduce our sales and negatively affect our operating results.
 
In addition, some of our suppliers have the ability to terminate their relationships with us at any time, or to decide to sell, or increase their sales of, their products
through other resellers or channels. Although we believe there are numerous suppliers with the capacity to supply the products we distribute, the loss of one or more of our
major suppliers could have an adverse effect on our product offerings and our business. Such a loss would require us to rely more heavily on our other existing suppliers,
develop relationships with new suppliers or undertake our own manufacturing, which may cause us to pay higher prices for products due to, among other things, a loss of
volume discount benefits currently obtained from our major suppliers. Any termination, interruption or adverse modification of our relationship with a key supplier or a
significant number of other suppliers would likely adversely affect our operating income, cash flow and future prospects.
 
If we fail to maintain proper inventory levels, our business could be harmed.
 
We often purchase key products from suppliers prior to the time we receive purchase orders from customers. We do this to minimize purchasing costs, the time
necessary to fill customer orders, and the risk of non-delivery. However, we may be unable to sell the products we have purchased in advance. Inventory levels in excess of
customer demand have previously and may in the future, result in inventory write-downs, and the sale of excess inventory at discounted prices could significantly impair our
brand image and have a material adverse effect on our business, results of operations and financial condition. Conversely, if we underestimate demand for our products or if we
fail to acquire the products that we require at the time we need them, we may experience inventory shortages. Inventory shortages might delay shipments to customers, reduce
revenue, negatively impact customer relationships and diminish brand loyalty, which in turn could have a material adverse effect on our business, results of operations and
financial condition.
 
21

 
 
Our success is dependent in part upon our ability to distribute popular products from new suppliers, as well as the ability of our existing suppliers to develop and market
products that meet changes in market demand or regulatory requirements.
 
Many of the products we sell are generally subject to rapid changes in marketplace demand and regulatory requirements. For example, recent laws and regulations
have prohibited the sale of certain types of ENDS products that we previously sold. Our success is dependent, in part, upon the ability of our suppliers to develop and market
products that meet these changes. Our success is also dependent on our ability to develop relationships with and sell products from new suppliers that address these changes in
market demand or regulatory requirements. To the extent products that address recent changes are not available to us, or are not available to us in sufficient quantities or on
acceptable terms, we could encounter increased competition, which would likely adversely affect our business, results of operations and financial condition.
 
We do not have long-term contracts with many of our customers. The agreements that we do have generally do not commit our customers to any minimum purchase
volume. The loss of a significant customer may have a material adverse effect on us.
 
Our customers generally place orders on an as-needed basis. Consistent with industry practice, we do not have long-term contracts with most of our customers, other
than certain retail chains or distributors in Canada and abroad and certain state-licensed cannabis businesses in the United States. In addition, our agreements generally do not
commit our customers to any minimum purchase volume. Accordingly, we are exposed to risks from potential adverse financial conditions in the vaporization products and
consumption accessories industry, a potentially shifting legal landscape, the general economy, a competitive landscape, a changing technological landscape or changing
customer needs or any other change that may affect the demand for our products. We cannot assure you that our customers will continue to place orders with us in similar
volumes, on the same terms, or at all. Our customers may terminate their relationships with us or reduce their purchasing volume at any time. Our ten largest customers, in the
aggregate, represented approximately 51.1 and 39.0% of our net sales for the years ended December 31, 2024 and 2023, respectively. The loss of a significant number of
customers, or a substantial decrease in a significant customer’s orders, may have an adverse effect on our revenue.
 
Changes in our customer, product or competition mix could cause our product margin and results of operations to fluctuate.
 
From time to time, we may experience changes in our customer mix, our product mix or our competition mix. Changes in our customer mix may result from
geographic expansion or contractions, mergers and acquisitions among our customer base, legislative, regulatory or enforcement priority changes affecting the products we
distribute, selling activities within current geographic markets and targeted selling activities to new customer sectors. For example, our merger with Kushco has shifted our
customer mix to include a greater concentration of customers who engage in the cultivation, processing, and/or sale of cannabis. Changes in our product mix may result from
marketing activities to existing customers, the needs of existing and prospective customers and from regulatory and legislative changes. Changes in our competition mix may
result from new competitors entering into our business segment or existing competitors growing their operations. If customer demand for lower-margin products increases and
demand for higher-margin products decreases, our business, results of operations and financial condition may suffer.
 
22

 
 
Because a material portion of our revenues are derived from sales to consumers indirectly through third-party retailers who operate traditional brick-and-mortar locations,
the shift of sales to more online retail business could harm our market share and our revenues in certain sectors.
 
Our current model for consumer goods includes selling our products through third-party retailers. These third-party retailers operate physical brick-and-mortar
locations to sell our product to consumers. The current shift in purchasing demographics due to many factors and the changing preferences of consumers who are moving from
in-store purchases to online purchases creates the additional risks of our current revenue streams being impacted negatively and an overall decrease of market share.
 
We have experienced and may continue to experience difficulty collecting receivables.
 
If our customers begin or continue to experience financial challenges, they may not have sufficient funds to pay all amounts owed to us. Additionally, laws in some
jurisdictions in which we operate make collection of receivables difficult, time consuming or expensive. We generally do not require collateral in support of our trade
receivables. While we maintain reserves for expected credit losses, we cannot assure these reserves will be sufficient to meet write-offs of uncollectible receivables or that our
losses from such receivables will be consistent with our historical performance. Significant write-offs may affect our business, results of operations and financial condition. As
we begin selling our products indirectly through large retailers, customer credit risks will expand.
 
Our ability to distribute certain licensed brands and to use or license certain trademarks may be terminated or not renewed.
 
We are reliant upon brand recognition in the markets in which we compete, as the industry is characterized by a high degree of brand loyalty and a reluctance of
consumers to switch to substitute or unrecognizable brands. Some of the brands we distribute and the trademarks under which products are sold are licensed for a fixed period
of time with regard to specified markets.
 
In the event that the licenses to use the brand names and trademarks for the products we distribute are terminated or are not renewed after the end of the term, there is
no guarantee we or our suppliers will be able to find suitable replacement brands or trademarks, or that if a replacement is found, that it will be on favorable terms. Any loss in
brand-name appeal to our existing customers as a result of the lapse or termination of our licenses or the licenses of our suppliers could have a material adverse effect on our
business, results of operations and financial condition.
 
We may not be successful in maintaining the consumer brand recognition and loyalty of our products.
 
We compete in a market that relies on innovation and the ability to react to evolving consumer preferences. The vaporization products and consumption accessories
industry is subject to changing consumer trends, demands and preferences. Therefore, products once favored may, over time, become disfavored by consumers or no longer
perceived as the best option. Consumers in the vaporizer market have demonstrated a degree of brand loyalty, but suppliers must continue to adapt their products in order to
maintain their status among customers as the market evolves. Our continued success depends in part on our ability and our supplier’s ability to continue to differentiate the
brand names we represent, own or license and maintain similarly high levels of recognition with target consumers. Trends within the vaporization products and consumption
accessories industry change often and our failure to anticipate, identify or react to changes in these trends could, among other things, lead to reduced demand for our products.
Factors that have previously and may continue to affect consumer perception of our products include health trends and attention to health concerns associated with herbs, oils,
cannabis or other materials used with vaporizers, price-sensitivity in the presence of competitors’ products or substitute products and trends in favor of new vaporization
products or technology consumption accessories products that are currently being researched and produced by participants in our industry. For example, in recent years, we
have witnessed a shift in consumer purchases from vaporizers designed for dry herbs to those designed for liquids or wax type concentrates. A failure to react to similar trends
in the future could enable our competitors to grow or establish their brands’ market share in these categories before we have a chance to respond.
 
Regulations have recently been and are likely to continue to be enacted in the future that would make it more difficult to appeal to consumers or to leverage the brands
that we distribute, own or license. Furthermore, even if we are able to continue to distinguish our products, there can be no assurance that the sales, marketing and distribution
efforts of our competitors will not be successful in persuading consumers of our products to switch to their products. Some of our competitors have greater access to resources
than we do, which better positions them to conduct market research in relation to branding strategies or costly marketing campaigns. Any loss of consumer brand loyalty to our
products or in our ability to effectively brand our products in a recognizable way will have a material effect on our ability to continue to sell our products and maintain our
market share, which could have a material adverse effect on our business, results of operations and financial condition.
 
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We may not be able to establish sustainable relationships with large retailers or regional or national chains.
 
In connection with efforts to enter new sales channels, including large retailers and chains, we may not be able to develop these relationships or continue to maintain
relationships with these large retailers or national chains. Our inability to develop and sustain relationships with large retailers and chains may impede our ability to develop
brand and product recognition and increase sales volume and, ultimately, require us to continue to rely on local and more fragmented sales channels, which may have a material
adverse effect on our business, results of operations and financial condition. In addition, if we are unable to develop or maintain relationships with large retailers and national
chains and such large retailers or chains take market share from the smaller local and more fragmented sales channels, our business, results of operations and financial condition
will be adversely impacted.
 
New products face intense media attention and public pressure.
 
Many of our vaporizers and other products are new to the marketplace. Since their introduction, certain members of the media, politicians, government regulators and
advocacy groups, including independent doctors, have called for and driven the adoption of stringent regulation of the sale of certain products and in some cases, an outright
ban of such products pending increased regulatory review and a further demonstration of safety. For example, local and state governments have banned certain types of
vaporization products, such as those containing flavored liquid nicotine and flavored hemp-derived CBD. Additional bans of this type would likely have the effect of
terminating our sales and marketing efforts of certain products in jurisdictions in which we may currently market or have plans to market such products. Such bans would also
likely cause public confusion as to which products are the subject of bans, which confusion could also have a material adverse effect on our business, results of operations and
financial condition.
 
Our success depends, in part, on the quality and safety of our products, as well as the perception of quality and safety in the vaporization products and consumption
accessories industry generally.
 
Our success depends, in part, on the quality and safety of the products we sell, including manufacturing issues, health concerns about the substances consumed using
the products we sell, and unforeseen product misuse. Even a single incident of product defect or misuse, whether relating to products sold by us or just to our industry generally,
could result in significant harm to our reputation. For example, incidents of EVALI have, by some metrics, negatively impacted demand for vaporizers. If any of our products
are found to be, or are perceived to be, defective or unsafe, or if they otherwise fail to meet our customers’ standards, our relationship with our customers could suffer, our
reputation or the appeal of our brands could be diminished, and we could lose market share and/or become subject to liability claims, any of which could result in a material
adverse effect on our business, results of operations and financial condition.
 
Damage to our reputation, or that of any of our key suppliers or their brands, could affect our business performance.
 
The success of our business depends in part upon the positive image that consumers have of the third-party brands we distribute. Incidents, publicity or events arising
accidentally or through deliberate third-party action that harm the integrity or consumer support of the products we sell could affect the demand for those products. Unfavorable
media, whether accurate or not, related to our industry, to us, to our customers, or to the products we sell could negatively affect our corporate reputation, stock price, ability to
attract high-quality talent, or the performance of our business. Additional negative publicity or commentary on social media outlets also could cause consumers to react rapidly
by avoiding our products and brands or by choosing brands offered by our competitors, which could have a material adverse effect on our business, results of operations and
financial condition.
 
We are subject to substantial and increasing regulation regarding the vaporization industry.
 
In addition to the FDA regulations concerning vaporizer products discussed elsewhere in this Annual Report on Form 10-K, we are subject to regulation by numerous
other federal agencies, including the Federal Trade Commission, the Alcohol and Tobacco Tax and Trade Bureau, the Federal Communications Commission, the U.S.
Environmental Protection Agency, the U.S. Department of Agriculture, U.S. Customs and Border Protection and the U.S. Center for Disease Control and Prevention’s Office on
Smoking and Health. There have also been adverse legislative and political decisions and other unfavorable developments concerning cigarette smoking and the tobacco
industry, which have received widespread public attention. There can be no assurance as to the ultimate content, timing or effect of any regulation of vaporizer products by
governmental bodies, nor can there be any assurance that potential corresponding declines in demand resulting from negative media attention would not have a material adverse
effect on our business, results of operations and financial condition.
 
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Significant increases in state and local regulation of our vaporizer products have been proposed and enacted, and are likely to continue to be proposed and enacted in
numerous jurisdictions.
 
As discussed under the heading “Regulatory Developments” above, there has been increasing activity on the state, provincial and local levels with respect to scrutiny
of vaporizer products. State and local governmental bodies across the United States have indicated that vaporization products and certain other consumption accessories may
become subject to new laws and regulations at the state and local levels. For example, in January 2015, the California Department of Health declared electronic cigarettes and
certain other vaporizer products a health threat that should be strictly regulated like tobacco products. Further, many states and cities have enacted regulations that require
retailers to obtain a tobacco retail license in order to sell electronic cigarettes and vaporizer products. Many states, provinces and some cities have passed laws restricting the
sale of electronic cigarettes and certain other vaporizer products. In March 2023, new federal legislation granted the FDA regulatory authority over synthetic nicotine, making
all synthetic nicotine products without a marketing order from the FDA illegal as of July 13th, 2022. If one or more states or provinces from which we generate or anticipate
generating significant sales of vaporizer products bring actions that prevent us from selling certain or all of our vaporizer products, we would be required to cease sales and
distribution of certain products to those states, which could have a material adverse effect on our business, results of operations and financial condition. Additionally, if one or
more states or provinces from which we generate or anticipate generating significant sales of vaporizer products bring actions that require us to obtain certain licenses,
approvals or permits, and if we are not able to obtain the necessary licenses, approvals or permits for financial reasons or otherwise and/or any such license, approval or permit
is determined to be overly burdensome to us, then we may be required to cease sales and distribution of our products to those states, which could have a material adverse effect
on our business, results of operations and financial condition.
 
Certain states, provinces and cities have already restricted the use of electronic cigarettes and vaporizer products in smoke free venues. Additional city, state, provincial
or federal regulators, municipalities, local governments and private industry may enact rules and regulations restricting the use of electronic cigarettes and vaporizer products in
those same places where cigarettes cannot be smoked. Because of these restrictions, our customers may reduce or otherwise cease using our vaporization products or certain
other consumption accessories, which could have a material adverse effect on our business, results of operations and financial condition.
 
The Canadian federal government, as well as certain provincial governments have passed or propose to pass legislation which will restrict the extent to which e-
cigarettes, e-liquid and other vaping products may be displayed or sold. Additionally, Canadian laws require health warnings to be placed on certain vaporizer products, which
could reduce the appeal of these products. These regulations and future regulations could have a material adverse effect on our business, results of operations and financial
condition.
 
Based on regulations surrounding health-related concerns related to the use of some of our vaporizer products, possible new or increased taxes by government entities
intended to reduce use of our products or to raise revenue, additional governmental regulations concerning the marketing, labeling, packaging or sale of some of our products,
negative publicity resulting from actual or threatened legal actions against us or other companies in our industry, all may reduce demand for, or increase the cost of, certain of
our products, which could adversely affect our profitability and ultimate success.
 
Our business depends partly on continued purchases by businesses and individuals selling or using cannabis pursuant to state laws in the United States or Canadian and
provincial laws.
 
Because some of our B2C customers use some of the items that we sell to consume cannabis and some of our B2B customers operate in the legal national and state
cannabis industry, our business depends partly on federal, state, provincial and local laws, regulations, guidelines and enforcement pertaining to cannabis. In both the United
States and Canada, those factors are in flux.
 
United States
 
Currently, in the United States, 47 states and the District of Columbia permit some form of cannabis cultivation, sales, and use for certain medical purposes (“medical
states”). Twenty-four of those states and the District of Columbia have also legalized cannabis for adults for non-medical purposes (sometime referred to as recreational use).
Several medical states may extend legalization to adult use.
 
States’ cannabis programs have proliferated and grown even though the cultivation, sale and possession of cannabis is considered illegal under U.S. federal law. Under
the CSA, cannabis is a Schedule I drug, meaning that the Drug Enforcement Administration recognizes no accepted medical use for cannabis, and the substance is considered
illegal under federal law.
 
In an effort to provide guidance to U.S. Attorneys’ offices regarding the enforcement priorities associated with cannabis in the United States, the U.S. Department of
Justice (the “DOJ”) has issued a series of memoranda detailing its suggested enforcement approach. During the administration of former President Obama, each memorandum
acknowledged the DOJ’s authority to enforce the CSA in the face of state laws, but noted that the DOJ was more committed to using its limited investigative and prosecutorial
resources to address the most significant threats associated with cannabis in the most effective, consistent, and rational way.
 
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On August 29, 2013, the DOJ issued what came to be called the “Cole Memorandum,” which gave U.S. Attorneys the discretion not to prosecute federal cannabis
cases that were otherwise compliant with applicable state law that had legalized medical or adult-use cannabis and that have implemented strong regulatory systems to control
the cultivation, production, and distribution of cannabis. The eight federal priorities were preventing:
 
 
●
The distribution of cannabis to minors;
 
●
Revenue from the sale of cannabis from going to criminal enterprises, gangs, and cartels;
 
●
The diversion of cannabis from states where it is legal under state law in some form to other states;
 
●
State-authorized cannabis activities from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
 
●
Violence and the use of firearms in the cultivation and distribution of cannabis;
 
●
Drugged driving and exacerbation of other adverse public health consequences associated with cannabis use;
 
●
Growing cannabis on public lands and the attendant public safety and environmental dangers posed by cannabis production on public lands; and
 
●
Cannabis possession or use on federal property.
 
Accordingly, the Cole Memorandum provided lawful cannabis-related enterprises a tacit federal go-ahead in states with legal cannabis programs, provided that the
state had adopted and was enforcing strict regulations and oversight of the medical or adult-use cannabis program in accordance with the specific directives of the Cole
Memorandum.
 
On January 4, 2018, Attorney General Jeff Sessions issued a memorandum that rescinded previous DOJ guidance on the state legal cannabis industry, including the
Cole Memorandum. Attorney General Sessions wrote that the previous guidance on cannabis law enforcement was unnecessary, given the well-established principles governing
federal prosecution that are already in place. As a result, federal prosecutors could and still can use their prosecutorial discretion to decide whether to prosecute even state-legal
cannabis activities.
 
Since the Cole Memorandum was rescinded, however, U.S. Attorneys have generally refrained from prosecuting state law compliant marijuana businesses. Current
Attorney General Merrick Garland during his confirmation hearings expressed that “It does not seem to me useful the use of limited resources that we have to be pursuing
prosecutions in states that have legalized and are regulating the use of marijuana, either medically or otherwise.”
 
Since December 2014, companies that are strictly complying with state medical cannabis laws have been protected against enforcement for that activity by an
amendment (originally called the Rohrabacher-Blumenauer Amendment, now called the Joyce Amendment) to the Omnibus Spending Bill, which prevents federal prosecutors
from using federal funds to impede the implementation of medical cannabis laws enacted at the state level. Federal courts have interpreted the provision to bar the DOJ from
prosecuting any person or entity in strict compliance with state medical cannabis laws.
 
While the protection of the Joyce Amendment prevents prosecutions of state law compliant medical cannabis activities, it does not make cannabis legal. The protection
of the Joyce Amendment depends on its continued inclusion in the federal omnibus spending bill, or in some other legislation, and entities’ strict compliance with the state
medical cannabis laws. While industry observers expect Congress to extend the protection in future Omnibus Spending Bills, there can be no assurance that it will do so.
 
Although several cannabis law reform bills are pending in the U.S. Congress, passage of any of them and ultimately the Biden Administration’s support and approval
remain uncertain. Unless and until the U.S. Government changes the law with respect to cannabis, and particularly if Congress does not extend the protection of state medical
cannabis programs, there is a risk that federal authorities could enforce current federal cannabis law. An increase in federal enforcement against companies licensed under state
cannabis laws would negatively impact the state cannabis industries and, in turn, our revenues, profits, financial condition, and business model.
 
Canada
 
On April 13, 2017, the Government of Canada introduced Bill C-45, which proposed the enactment of the Cannabis Act to legalize and regulate access to cannabis.
The Cannabis Act proposed a strict legal framework for controlling the production, distribution, sale and possession of medical and recreational adult-use cannabis in Canada.
On June 21, 2018, the Government of Canada announced that Bill C-45, received Royal Assent. On July 11, 2018, the Government of Canada published the Cannabis
Regulations under the Cannabis Act. The Cannabis Regulations provide more detail on the medical and recreational regulatory regimes for cannabis, including regarding
licensing, physical security requirements, product practices, outdoor growing, security, packaging and labelling (including for cannabis accessories), cannabis-containing drugs,
document retention requirements, reporting and disclosure requirements, the new access to cannabis for medical purposes regime and industrial hemp. The majority of the
Cannabis Act and the Cannabis Regulations came into force on October 17, 2018; additional Cannabis Regulations took effect on October 17, 2019.
 
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As of December 2022, the Minister of Health and the Minister of Mental Health and Addictions has launched the legislative review of the Cannabis Act. The review is
being conducted by a five-member independent, expert panel, who will report their final conclusions and advice to the Ministers by Spring 2024. In addition, Health Canada
announced that amendments to the Cannabis Act and its regulations concerning cannabis research and testing. Notably, these amendments increase the public possession limit
for cannabis beverages to a level that is similar to other forms of cannabis, such as solid edible cannabis products (i.e. gummies or chocolate) and the amendments change how
Health Canada regulates non-therapeutic cannabis research with human participants. As for proposed amendments, Health Canada is proposing amendments to the Cannabis
Regulations to protect public health and safety, in particular by protecting young persons and others from inducements to use inhaled cannabis extracts. The proposed
amendments would restrict the production, sale, promotion, packaging, or labelling of inhaled cannabis extracts with certain flavors, other than the flavor of cannabis.
 
While the Cannabis Act provides for the regulation by the federal government of, among other things, the commercial cultivation and processing of cannabis for
recreational purposes, it provides the provinces and territories of Canada with the authority to regulate with respect to the other aspects of recreational cannabis, such as
distribution, sale, minimum age requirements, places where cannabis can be consumed, and a range of other matters.
 
The governments of every Canadian province and territory have implemented regulatory regimes for the distribution and sale of cannabis for recreational purposes. In
most provinces and territories, the minimum age is 19 years old, except for Québec, where the minimum age is 18. Certain provinces, such as Ontario, have legislation in place
that restricts the packaging of vapor products and the manner in which vapor products are displayed or promoted in stores.
 
The Cannabis Act is a relatively new regime that has no close precedent in Canadian law. The effect of relevant governmental authorities’ administration, application
and enforcement of their respective regulatory regimes and delays in obtaining, or failure to obtain, applicable regulatory approvals which may be required may significantly
delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on our business, financial condition and results of
operations.
 
The federal and state regulatory landscape regarding products containing hemp-derived CBD and other cannabinoids is uncertain and evolving, and new or changing laws
or regulations relating to hemp and hemp-derived products could have a material adverse effect on our business, financial condition and results of operations.
 
In December 2018, the U.S. government changed the legal status of hemp and its derivatives, including hemp-derived CBD and other cannabinoids. The 2018 Farm
Bill, which was signed into law by former President Trump on December 20, 2018 (Pub.L. 115-334), established a new framework for the regulation of hemp production
(defined in the Farm Bill as Cannabis sativa L. with a THC concentration of not more than 0.3 percent on a dry weight basis) and extracts of hemp, including CBD. The law
also removed hemp and extracts of hemp from the federal controlled substances schedules. The section of the Farm Bill establishing a framework for hemp production,
however, makes clear explicitly that it does not affect or modify the United States Federal Food, Drug, and Cosmetic Act (the “FDCA”), section 351 of the Public Health
Service Act (addressing the regulation of biological products), the authority of the Commissioner of the FDA under those laws, or the Commissioner’s authority to regulate
hemp production and sale under those laws.
 
Since passage of the Farm Bill, the FDA has expressed multiple times its position that any cannabis product, whether derived from hemp or otherwise, marketed with a
disease claim (e.g., a claim of therapeutic benefit or disease prevention) must be approved by the FDA for its intended use through one of the drug approval pathways prior to it
being introduced into interstate commerce. The FDA has also repeatedly stated its position that introducing food or dietary supplements with added CBD (or THC), regardless
of source, into interstate commerce is illegal under the FDCA. Although enforcement under the FDCA may be civil or criminal in nature, the FDA has thus far limited its recent
enforcement against companies selling CBD products to warning letters alleging various violations of the FDCA, including that the products bear claims that render the
products unapproved and misbranded new drugs, that CBD is excluded from the FDCA’s definition of “dietary supplement,” and that the FDCA prohibits the addition of CBD
to food. The FDA also tested some of the products, and found that many did not contain the levels of CBD they claimed to contain, which could be the basis for a separate
violation of the FDCA. In addition, some states have taken actions to restrict or prohibit the sale of CBD products under state law. On January 26, 2023, the FDA issued a
statement that after careful review, the FDA concluded that a new regulatory pathway for CBD is needed that balances individuals’ desire for access to CBD products with the
regulatory oversight needed to manage risks. The agency is prepared to work with Congress on this matter.
 
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We currently distribute very limited products containing hemp-derived CBD and other cannabinoids. Although the Farm Bill removed hemp and its derivatives from
the definition of “marijuana” under the CSA, uncertainties remain regarding the cultivation, sourcing, production and distribution of hemp and products containing hemp
derivatives. Certain states prohibit the sale of all or certain types of products containing hemp. The laws and regulations of states that permit the sale of products containing
hemp derivatives, such as CBD, impose various requirements, including requirements to obtain certain permits or licenses, related to the marketing, packaging, safety, and sale
of products containing hemp derivatives. These laws and regulations are rapidly developing. We may have to quickly adapt our operations to comply with forthcoming and
rapidly-shifting federal and state regulations. These regulations could require significant changes to our business, plans or operations concerning hemp-derived products, and
could adversely affect our business, financial condition or results of operations. Additionally, while we believe our current operations with respect to hemp derived products
such as CBD comply with existing federal and state laws relating to hemp and hemp-derived products in all material respects, legal proceedings alleging violations of such laws
could have a material adverse effect on our business, financial condition and results of operations.
 
We are subject to legislative uncertainty that could slow or halt the legalization and use of cannabis, which could materially and adversely affect our business.
 
Continued development of the cannabis industry is dependent upon continued legislative authorization of cannabis at the state level, as well as the U.S. government’s
continued non-enforcement of federal cannabis laws against state-law-compliant cannabis businesses. Any number of factors could slow or halt progress in this area. Further,
progress, while generally expected, is not assured. Well-funded interests, including businesses in the tobacco, alcohol beverage and the pharmaceutical industries, may have a
strong economic opposition to the continued legalization of cannabis. The pharmaceutical industry, for example, is well funded with a strong and experienced lobby that
eclipses the funding of the cannabis movement. Any inroads legalization opponents could make in halting the impending cannabis industry could have a detrimental impact on
our business. While there may be ample public support for legislative action, numerous factors impact the legislative process. Any one of those factors could slow or halt the
continued legalization and use of cannabis, which would negatively impact our business.
 
While we believe that our business and sales do not violate the Federal Paraphernalia Law, legal proceedings alleging violations of such law or changes in such law or
interpretations thereof could materially and adversely affect our business, financial condition or results of operations.
 
Under U.S. Code Title 21 Section 863 (the “Federal Paraphernalia Law”), the term “drug paraphernalia” means “any equipment, product or material of any kind which
is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise
introducing into the human body a controlled substance.” That law exempts “(1) any person authorized by local, State, or Federal law to manufacture, possess, or distribute
such items” and “(2) any item that, in the normal lawful course of business, is imported, exported, transported, or sold through the mail or by any other means, and traditionally
intended for use with tobacco products, including any pipe, paper, or accessory.” Any nonexempt drug paraphernalia offered or sold by any person in violation of the Federal
Paraphernalia Law can be subject to seizure and forfeiture upon the conviction of such person for such violation, and a convicted person can be subject to fines under the
Federal Paraphernalia Law and even imprisonment.
 
We believe our sales do not violate the Federal Paraphernalia Law in any material respect. First, we understand that a substantial majority of the products we offer and
sell were and are not primarily intended or designed for any purpose not permitted by the Federal Paraphernalia Law. Indeed, many of the manufacturers whose products we
sell disclaim that the products are for use with cannabis. Second, we restrict the sale of certain products — those that may have been primarily intended or designed for use with
cannabis — to comply with the Federal Paraphernalia Law’s exemption for sales authorized by state law. In particular, we (a) do not sell those products at all into the states that
have maintained complete or near complete cannabis prohibition and (b) limit the sale of those products to licensed cannabis businesses, such as dispensaries, cultivators, and
manufacturers, in the states that authorize sales of cannabis paraphernalia only through state-licensed cannabis businesses. Third, we have been in business for many years
without facing even threatened legal action under the Federal Paraphernalia Law.
 
While we believe that our business and sales are legally compliant with the Federal Paraphernalia Law in all material respects, any legal action commenced against us
under such law could result in substantial costs and could have an adverse impact on our business, financial condition or results of operations. In addition, changes in cannabis
laws or interpretations of such laws are difficult to predict, and could materially and adversely affect our business.
 
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Officials of the U.S. Customs and Border Protection agency (“CBP”) have broad discretion regarding products imported into the United States, and the CBP has on
occasion seized imported products on the basis that such products violate the Federal Paraphernalia Law. While we believe the products that we import do not violate such
law, any such seizure of the products we sell could have a material adverse effect on our business operations or our results of operations.
 
Officials of the CBP have broad discretion regarding products imported into the United States. Individual shipments of imported products we distribute, as well as
similar products, have been detained or seized by the CBP for a variety of reasons, including because the CBP officials inspecting the goods believed such goods were marketed
as drug paraphernalia and therefore violated the Federal Paraphernalia Law. Although we and other suppliers or distributors of such products have at times successfully
contested such actions of the CBP, such challenges are costly and time consuming. While we would disagree with any conclusion of the CBP that our product sales violate the
Federal Paraphernalia Law, we cannot give any assurance that the CBP will not make additional seizures of our imports, or that if the CBP seizes any of our goods that the CBP
would not seek to impose penalties related to such imports. Should we elect to contest any such seizure, the costs of doing so could be substantial and there are no assurances
we would prevail in a contested proceeding. Additionally, the cost and/or results of any such contest could adversely impact our business, financial condition or results of
operations. Additionally, if the CBP fails to release seized products, we may no longer be able to ensure a sellable supply of some of our products, which could have a material
adverse impact on our business, financial condition and results of operations.
 
Because our business is dependent, in part, upon continued market acceptance of cannabis by consumers, any negative trends could materially and adversely affect our
business, financial conditions or results of operations.
 
We are dependent on public support, continued market acceptance and the proliferation of consumers in the legal cannabis markets. While we believe that the market
and opportunity in the space continue to grow, we cannot predict the future growth rate or size of the market. Any downturns in, or negative outlooks on, the cannabis industry
may materially and adversely affect our business and financial condition.
 
We and our customers may have difficulty accessing the service of banks, which may make it difficult for us and for them to sell our products.
 
Financial transactions involving proceeds generated by cannabis-related activities can form the basis for prosecution under the U.S. federal money laundering statutes,
unlicensed money transmitter statutes and the U.S. Bank Secrecy Act. Guidance issued by the Financial Crimes Enforcement Network (“FinCEN”) clarifies how financial
institutions can provide services to cannabis-related businesses consistent with their obligations under the Bank Secrecy Act. Furthermore, since the rescission by former U.S.
Attorney General Jeff Sessions on January 4, 2018 of the Cole Memorandum, U.S. federal prosecutors have had greater discretion when determining whether to charge
institutions or individuals with any of the financial crimes described above based upon cannabis-related activity. As a result, given these risks and their own related disclosure
requirements, many banks remain hesitant to offer banking services to cannabis-related businesses. Consequently, those businesses involved in the cannabis industry continue
to encounter difficulty establishing banking relationships. Indeed, we have been asked to close bank accounts due to our activity in the cannabis industry. We may become
unable maintain stable banking relationships, which would create significant challenges in operating our business, increase our operating costs, pose additional operational,
logistical and security challenges, and result in our inability to implement our business plan. Additionally, if our more significant customers to are unable maintain their current
banking relationships, we might not be able to continue transacting with such customers.
 
Our payments system and the payment systems of our customers depend on third-party providers and are subject to evolving laws and regulations.
 
We and our retail customers have engaged third-party service providers to perform underlying credit and debit card processing, currency exchange, identity
verification and fraud analysis services. If these service providers do not perform adequately or if our relationships, or the relationships of our retail customers with these
service providers, were to terminate, our ability or the ability of such retail customers to process payments could be adversely affected and our business would be harmed.
 
The laws and regulations related to payments are complex and are potentially impacted by tensions between federal and state treatment of the vaporization, tobacco,
nicotine and cannabis industries. These laws and regulations also vary across different jurisdictions in the United States, Canada and globally. As a result, we are required to
spend significant time and effort to comply with those laws and regulations. Any failure or claim of our failure to comply, or any failure by our third-party service providers to
comply, could cost us substantial resources, could result in liabilities, or could force us to stop offering our customers the ability to pay with credit cards, debit cards and bank
transfers. As we expand the availability of these payment methods or offer new payment methods to our customers in the future, we may become subject to additional
regulations and compliance requirements.
 
Further, through our agreement with our third-party credit card processors, we are indirectly subject to payment card association operating rules and certification
requirements, including restrictions on product mix and the Payment Card Industry Data Security Standard, 02 PCIDSS. We also are subject to rules governing electronic funds
transfers. Any change in these rules and requirements could make it difficult or impossible for us to comply.
 
Due to our acceptance of credit cards in our e-commerce business, we are subject to the Payment Card Industry Data Security Standard, designed to protect the
information of credit card users. We have had a security incident in the past, which we do not believe reached the level of a breach, that would be reportable under state laws or
our other obligations; however there can be no assurance that our determination was correct. In the event our determination is challenged and found to have been incorrect, we
may be subject to claims by one or more state attorney generals, federal regulators, or private plaintiffs and we may additionally be subject to claims or fines from credit
associations.
 
29

 
 
We are subject to certain U.S. federal regulations relating to cash reporting.
 
The U.S. Bank Secrecy Act, enforced by FinCEN, a division of the U.S. Department of the Treasury, requires a party in trade or business to file with the U.S. Internal
Revenue Service (the “IRS”) a Form 8300 report within 15 days of receiving a cash payment of over $10,000. While we receive very few cash payments for the products we
sell, if we fail to comply with these laws and regulations, the imposition of a substantial penalty could have a material adverse effect on our business, results of operations and
financial condition.
 
If countries, states, and provinces continue the trend of imposing, expanding, and increasing taxes on vaporizer products, it could materially and adversely affect our
business.
 
Supply to our customers is sensitive to increased sales taxes and economic conditions affecting their disposable income. Discretionary consumer purchases, such as of
vaporization products and consumption accessories, may decline during recessionary periods or at other times when disposable income is lower and taxes may be higher.
 
As discussed under “Regulatory Developments” above, the sale of vaporization products and certain other consumption accessories is, in certain jurisdictions, subject
to federal, state, provincial and local excise taxes like the sale of conventional cigarettes or other tobacco products, all of which generally have high tax rates and have faced
significant increases in the amount of taxes collected on their sales. Other jurisdictions are contemplating similar legislation and other restrictions on electronic cigarettes and
certain other vaporizer products. Should federal, state, provincial and local governments and/or other taxing authorities continue to impose excise taxes similar to those levied
against conventional cigarettes and tobacco products on vaporization products or consumption accessories, it may have a material adverse effect on the demand for those
products, as consumers may be unwilling to pay the increased costs, which in turn could have a material adverse effect on our business, results of operations and financial
condition.
 
We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our B2C customers would have to pay for our product
offering, which could materially and adversely affect our operating results.
 
An increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies. Additionally, the Supreme
Court of the United States ruled in South Dakota v. Wayfair, Inc. et al, or Wayfair, that online sellers can be required to collect sales and use tax despite not having a physical
presence in the buyer’s state. In response to Wayfair, or otherwise, states or local governments may adopt, or begin to enforce, laws requiring us to calculate, collect, and remit
taxes on sales in their jurisdictions. A successful assertion by one or more states requiring us to collect taxes where we presently do not do so, or to collect more taxes in a
jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest. The imposition
by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us, put us at a
competitive disadvantage if they do not impose similar obligations on our competitors and decrease our future sales, which could have a material adverse impact on our
business, financial condition and results of operations.
 
We may become involved in regulatory or agency proceedings, investigations, prosecutions, and audits.
 
Our business, and the businesses of the suppliers from which we acquire products we sell, requires compliance with many laws and regulations in many jurisdictions
globally across multiple product categories and regulatory regimes. Failure to comply with these laws and regulations could subject us or such suppliers to regulatory or agency
proceedings, investigations, or prosecutions, and could also lead to damage awards, fines and penalties. We or such suppliers may become involved in a number of government
proceedings, investigations and audits. The outcome of any government proceedings, investigations, prosecutions, audits, and other contingencies could harm our reputation or
the reputations of the brands that we sell, require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money,
harming our financial condition. There can be no assurance that any pending or future regulatory or agency proceedings, investigations and audits will not result in substantial
costs or a diversion of management’s attention and resources or have a material adverse impact on our business, financial condition and results of operations.
 
We are subject to increasing international control and regulation.
 
The World Health Organization’s Framework Convention on Tobacco Control (“FCTC”) is the first international public health treaty that establishes a global agenda to
reduce initiation of tobacco use and regulate tobacco in an effort to encourage tobacco cessation. Over 180 governments worldwide have ratified the FCTC, including Canada.
The FCTC has led to increased efforts to reduce the supply of and demand for tobacco products and to encourage governments to further regulate the tobacco industry. The
tobacco industry and others expect significant regulatory developments to take place over the next few years, driven principally by the FCTC.
 
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If the United States ratifies the FCTC and/or national laws are enacted in the United States that reflect the major elements of the FCTC, our business, results of
operations and financial condition could be materially and adversely affected. In addition, if any of our vaporization products or consumption accessories become subject to one
or more of the significant regulatory initiatives proposed under the FCTC or any other international treaty, our business, results of operations and financial condition may also
be materially adversely affected.
 
Countries’ laws implementing the European Union Tobacco Products Directive (“TPD”) impose strict regulations on the approval, sale, and advertising of e-cigarettes.
Although we do not sell or market any material quantities of products classified as e-cigarettes in Europe, countries could enact new laws implementing the TPD or other laws
or regulations that re-classify and/or restrict the products we may sell or market in Europe. Any future measures that limit our ability to market or sell vaporization products or
other consumption accessories in Europe may have a material adverse effect on our business, results of operations, and financial condition.
 
To the extent our existing or future products become subject to international regulatory regimes that we are unable to comply with or fail to comply with, they may
have a material adverse effect on our business, results of operations and financial condition.
 
Changes in our credit profile may affect our relationship with our suppliers, which could have a material adverse effect on our liquidity.
 
Changes in our credit profile may affect the way our suppliers view our ability to make payments and may induce them to shorten the payment terms of their invoices.
Given the large dollar amounts and volume of our purchases from suppliers, a change in payment terms may have a material adverse effect on our liquidity and our ability to
make payments to our suppliers and, consequently, may have a material adverse effect on us.
 
We face intense competition and may fail to compete effectively.
 
The vaporization products and consumption accessories industry is characterized by brand recognition and loyalty, with product quality features, price, marketing and
packaging constituting the primary methods of competition. Substantial marketing support, merchandising display, competitive pricing and other financial incentives generally
are required to introduce a new brand or to improve or maintain a brand’s market position. Our principal competitors may be significantly larger than us and aggressively seek
to limit the distribution or sale of our products.
 
Competition in the vaporization products and consumption accessories industry is particularly intense, and the market is highly fragmented.
 
We experience variability in our net sales and net income on a quarterly basis as a result of many factors.
 
We experience variability in our net sales and net income on a quarterly basis as a result of many factors. These factors include:
 
 
●
the relative mix of vaporization products and consumption accessories sold during the period;
 
●
the general economic environment and competitive conditions, such as pricing;
 
●
the timing of procurement cycles by our customers;
 
●
seasonality in customer spending and demand for products we provide;
 
31

 
 
 
●
variability in supplier programs;
 
●
the introduction of new and upgraded products;
 
●
changes in prices from our suppliers;
 
●
changes to our strategy;
 
●
trade show attendance;
 
●
promotions;
 
●
the loss or consolidation of significant suppliers or customers;
 
●
our ability to control costs;
 
●
the timing of our capital expenditures;
 
●
the condition of our industry in general and our customers specifically;
 
●
regulatory developments that limit or expand the products we may sell, or the manner in which those products may be transported;
 
●
any inability on our part to obtain adequate quantities of products;
 
●
delays in the release by suppliers of new products and inventory adjustments;
 
●
delays in the release of imported products by customs authorities;
 
●
our expenditures on new business ventures and acquisitions;
 
●
performance of acquired businesses;
 
●
adverse weather conditions, natural disasters, pandemics, or other events that affect supply or customer response;
 
●
distribution or shipping to our customers; and
 
●
geopolitical events.
 
Our planned operating expenditures each quarter are based on sales forecasts for the quarter. If our sales do not meet expectations in any given quarter, our operating
results for that quarter may be materially adversely affected. We believe that period-to-period comparisons of our operating results are not necessarily a good indication of our
future performance. In addition, our results in any quarterly period are not necessarily indicative of results to be expected for a full fiscal year. In future quarters, our operating
results may be below the expectations of public market analysts or investors and, as a result, the market price of our Class A common stock could be materially adversely
affected.
 
Product defects could increase our expenses, damage our reputation or expose us to liability.
 
We may not be able to adequately address product defects. Product defects in vaporizers and other accessories may harm the health or safety of our end-consumers. In
addition, remedial efforts could be particularly time-consuming and expensive if product defects are only found after we have sold the defective product in volume. Any actual
or perceived defects in our products could result in unsold inventory, product recalls, repairs or replacements, damage to our reputation, increased customer service costs and
other expenses, as well as divert management attention and expose us to liabilities. Furthermore, a product liability claim brought against us by our customers or end-consumers
could be time-consuming and costly to defend and, if successful, could require us to make significant payments.
 
Contamination of, or damage to, our products could adversely impact sales volume, market share and profitability.
 
Our market position may be affected through the contamination of our products, as well as the material used during the manufacturing processes of the products we
sell, or at different points in the entire supply chain. For example, we have previously detected low levels of contaminants in certain extraction gasses sold by us. We keep
significant amounts of inventory of our products in warehouses and it is possible that this inventory could become contaminated prior to arrival at our premises or during the
storage period. If contamination of our inventory or packaged products occurs, whether as a result of a failure in quality control by us or by one of our suppliers, we may incur
significant costs in replacing the inventory and recalling products. We may be unable to meet customer demand and may lose customers who purchase alternative brands or
products. In addition, consumers may lose confidence in the affected product.
 
Under the terms of our contracts, we generally impose requirements on our suppliers to maintain quality and comply with product specifications and requirements, and
with all federal, state and local laws. Our suppliers, however, may not continue to produce products that are consistent with our standards or that are in compliance with
applicable laws, and we cannot guarantee that we will be able to identify instances in which our suppliers fail to comply with our standards or applicable laws. A loss of sales
volume from a contamination event may occur, and such a loss may affect our ability to supply our current customers and to recapture their business in the event they are forced
to switch products or brands, even if on a temporary basis. We may also be subject to legal action as a result of a contamination, which could result in negative publicity and
affect our sales. During this time, our competitors may benefit from an increased market share that could be difficult and costly to regain. Such a contamination event could
have a material adverse effect on our business, results of operations and financial condition.
 
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We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.
 
In the ordinary course of business, we have and in the future may become the subject of various claims, lawsuits and governmental proceedings seeking damages or
other remedies concerning our commercial operations, the products we distribute, our employees and other matters, including potential claims by individuals alleging injury or
other harm caused by the products we distribute. Some of these claims may relate to the activities of businesses that we have acquired, even though these activities may have
occurred prior to our acquisition of the businesses. The products we distribute may contain lithium ion or similar type batteries that can explode or release hazardous
substances. In addition, defects in the products we distribute could result in death, personal injury, property damage, pollution, release of hazardous substances or damage to
equipment and facilities. Actual or claimed defects in the products we distribute may give rise to claims against us for losses and expose us to claims for damages.
 
We maintain insurance to cover certain of our potential losses, and we are subject to various self-retentions, deductibles and caps under our insurance. We face the
following risks with respect to our insurance coverage:
 
 
●
we may not be able to continue to obtain insurance on commercially reasonable terms;
 
●
we may incur losses from interruption of our business that exceed our insurance coverage;
 
●
we may be faced with types of liabilities that will not be covered adequately or at all by our insurance;
 
●
our insurance carriers may not be able to meet their obligations under the policies; or
 
●
the dollar amount of any liabilities may exceed our policy limits.
 
Even a partially uninsured claim, if successful and of significant size, could have a material adverse effect on us. Finally, even in cases where we maintain insurance
coverage, our insurers may raise various objections and exceptions to coverage that could make uncertain the timing and amount of any possible insurance recovery.
 
Due to our position in the supply chain of vaporization products and consumption accessories, we are subject to personal injury, product liability and environmental claims
involving allegedly defective products.
 
Our customers use certain products we distribute in potentially hazardous applications that can result in personal injury, product liability and environmental claims. A
catastrophic occurrence at a location at which consumers use the products we distribute may result in our company being named as a defendant in lawsuits asserting potentially
large claims, even though we did not manufacture such products or even if such products were not used in the manner recommended by the manufacturer. Applicable law may
render us liable for damages without regard to negligence or fault. Certain of these risks are reduced by the fact that we are, in many instances, a distributor of products that
third-party manufacturers produce, and, thus, in certain circumstances, we may have third-party warranty or other claims against the manufacturer of products alleged to have
been defective. However, there is no assurance that these claims could fully protect us or that the manufacturer would be financially able to provide protection. There is no
assurance that our insurance coverage will be adequate to cover the underlying claims. Our insurance does not provide coverage for all liabilities (including liability for certain
events involving pollution or other environmental claims).
 
We may become subject to significant product liability litigation.
 
The tobacco and e-cigarette industries have experienced and continue to experience significant product liability litigation and other claims, such as those related to
marketing of tobacco and e-cigarettes to minors. As a result of their relative novelty, electronic cigarette, vaporizer product and other consumption product manufacturers,
suppliers, distributors and sellers have only recently become subject to litigation. While we have not been a party to any product liability litigation, several lawsuits have been
brought against other manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. We may be subject to similar claims
in the future relating to our vaporizer products. We may also be named as a defendant in product liability litigation against one of our suppliers by association, including in class
action lawsuits. In addition, we may see increasing litigation over our vaporizer products or the regulation of our products as the regulatory regimes surrounding these products
develop. For example, California’s Proposition 65 (“Prop 65”) requires the State of California to identify chemicals that could cause cancer, birth defects, or reproductive harm,
and businesses selling products in California are then required to warn consumers of any possible exposure to the chemicals on the list. The State of California and private
plaintiffs have been active in enforcing Prop 65 against companies in the tobacco, nicotine, cannabis, and vaporization industries. We may face substantial costs due to
increased product liability litigation relating to new regulations or other potential defects associated with our vaporizer and other consumption products, including litigation
arising out of faulty devices or improper usage, which could have a material adverse effect on our business, results of operations and financial condition.
 
There can be no assurances that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential
liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable
terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of products.
 
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The scientific community has not yet extensively studied the long-term health effects of the use of vaporizers, electronic cigarettes or e-liquids products.
 
Vaporizers, electronic cigarettes and related products were recently developed and therefore the scientific community has not had a sufficient period of time to study
the long-term health effects of their use. Currently, there is no way of knowing whether these products are safe for their intended use. If the scientific community were to
determine conclusively that use of any or all of these products poses long-term health risks, market demand for these products and their use could materially decline. Such a
determination could also lead to litigation and significant regulation. Loss of demand for our product, product liability claims and increased regulation stemming from
unfavorable scientific studies on these products could have a material adverse effect on our business, results of operations and financial condition.
 
Reliance on information technology means a significant disruption could affect our communications and operations.
 
We increasingly rely on information technology systems for our internal communications, controls, reporting and relations with customers, vendors and suppliers, and
information technology is becoming a significantly important tool for our sales staff. Our marketing and distribution strategy is dependent upon our ability to closely monitor
consumer and market trends on a highly specified level, for which we are reliant on our sophisticated data tracking systems, which are susceptible to disruption or failure. In
addition, our reliance on information technology exposes us to cyber-security risks, which could have a material adverse effect on our ability to compete. Security and privacy
breaches may expose us to liability and cause us to lose customers, or may disrupt our relationships and ongoing transactions with other entities with whom we contract
throughout our supply chain. The failure of our information systems to function as intended, or the penetration by outside parties intent on disrupting business processes, could
result in significant costs, loss of revenue, assets or personal or other sensitive data and reputational harm.
 
Internet security poses a risk to our e-commerce sales.
 
At present, we generate a portion of our sales through e-commerce sales on our own websites. We manage our websites and e-commerce platform internally and, as a
result, any compromise of our security or misappropriation of proprietary information could have a material adverse effect on our business, results of operations and financial
condition. We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure Internet
transmission of confidential information, such as credit and other proprietary information. Advances in computer capabilities, new discoveries in the field of cryptography or
other events or developments may result in a compromise or breach of the technology used by us to protect client transaction data. Anyone who is able to circumvent our
security measures could misappropriate proprietary information or cause material interruptions in our operations. We may be required to expend significant capital and other
resources to protect against security breaches or to minimize problems caused by security breaches. To the extent that our activities or the activities of others involve the storage
and transmission of proprietary information, security breaches could damage our reputation and expose us to a risk of loss and/or litigation. Our security measures may not
prevent security breaches. Our failure to prevent these security breaches may result in consumer distrust and may adversely affect our business, results of operations and
financial condition.
 
Security and privacy breaches may expose us to liability and cause us to lose customers.
 
Federal, provincial and state laws require us to safeguard our customers’ financial information, including credit information, as well as our employees’ information.
Although we have established security procedures to protect against identity theft and the theft of information of our customers, distributors, consumers, and employees, our
security and testing measures may not prevent security breaches and breaches of privacy may occur, which would harm our business. Typically, we rely on encryption and
authentication technology licensed from third parties to enhance transmission security of confidential information in relation to financial and other sensitive information that we
have on file. Advances in computer capabilities, new discoveries in the field of cryptography, inadequate facility security or other developments may result in a compromise or
breach of the technology used by us to protect customer data. Any compromise of our security could harm our reputation or financial condition and therefore, our business. In
addition, a party who is able to circumvent our security measures or exploit inadequacies in our security measures, could, among other effects, misappropriate proprietary
information, cause interruptions in our operations or expose customers and other entities with which we interact to computer viruses or other disruptions. Actual or perceived
vulnerabilities may lead to claims against us. To the extent the measures we have taken prove to be insufficient or inadequate, we may become subject to litigation or
administrative sanctions, which could result in significant fines, penalties or damages and harm to our reputation.
 
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If the methodologies of internet search engines are modified, traffic to our websites and corresponding consumer origination volumes could decline.
 
We depend in part on various internet search engines, including Google® and others to direct a significant amount of traffic to our websites. Our ability to maintain the
number of visitors directed to our websites by search engines through which we distribute our content is not entirely within our control. Our competitors’ search engine
optimization (“SEO”) efforts may result in their websites receiving a higher search result page ranking than ours, or Internet search engines could revise their methodologies,
which could adversely affect the placement of our search result page ranking. If search engine companies modify their search algorithms in ways that are detrimental to our
consumer growth or in ways that make it harder for our customers to access or use our websites, or if our competitors’ SEO efforts are more successful than ours, our consumer
engagement and number of consumers could decline. Any reduction in the number of consumers directed to our websites could negatively affect our ability to earn revenue. If
traffic on our websites declines, we may need to employ more costly resources to replace lost traffic, and such increased expense could adversely affect our business, results of
operations and financial condition.
 
We are a holding company and depend upon our subsidiaries for our cash flow.
 
We are a holding company. Our subsidiaries conduct all of our operations and own substantially all of our tangible assets. Consequently, our cash flow and our ability
to meet our obligations or to make other distributions in the future will depend upon the cash flow of our subsidiaries and our subsidiaries’ payment of funds to us in the form of
distributions, dividends, tax sharing payments or otherwise.
 
The ability of our subsidiaries to make any payments to us will depend on their earnings and cash flow, the terms of their current and future indebtedness, tax
considerations and legal and contractual restrictions on their ability to make distributions.
 
Our subsidiaries are separate and distinct legal entities. Any right that we have to receive any assets of or distributions from any of our subsidiaries upon the
bankruptcy, dissolution, liquidation or reorganization, or to realize proceeds from the sale of their assets, will be junior to the claims of that subsidiary’s creditors, including
trade creditors and holders of debt that the subsidiary issued.
 
Our intellectual property may be infringed and we may be unable to secure or maintain all the intellectual property required to sell all of our offerings.
 
We currently rely on trademark and other intellectual property rights to establish and protect the brand names and logos we own or license on the products we
distribute. Third parties have in the past infringed, and may in the future infringe, on these trademarks and our other intellectual property rights. Our ability to maintain and
further build brand recognition is dependent on the continued use of these trademarks, service marks and other proprietary intellectual property, including the names and logos
we own or license. Despite our attempts to ensure these intellectual property rights are protected, third parties may take actions that could materially and adversely affect our
rights or the value of this intellectual property. Any litigation concerning our intellectual property rights or the intellectual property rights of our suppliers, whether successful or
unsuccessful, could result in substantial costs to us and diversions of our resources. Expenses related to protecting our intellectual property rights or the intellectual property
rights of our suppliers, the loss or compromise of any of these rights or the loss of revenues as a result of infringement could have a material adverse effect on our business,
results of operations and financial condition, and may prevent the brands we own or license, or are owned or licensed by our suppliers, from growing or maintaining market
share. There can be no assurance that any trademarks or common marks that we own or license, or are owned or licensed by our suppliers, will not be challenged in the future,
invalidated or circumvented or that the rights granted thereunder or under licensing agreements will provide us or our suppliers competitive advantages. We are dependent on
the validity, integrity and intellectual property of our suppliers and their efforts to appropriately register, maintain and enforce intellectual property in all jurisdictions in which
their products are sold.
 
We devote significant resources to the registration and protection of our trademarks and to anti-counterfeiting efforts. Despite these efforts, we regularly discover
products that infringe on our proprietary rights or that otherwise seek to mimic or leverage our intellectual property or the intellectual property of our suppliers. Counterfeiting
and other infringing activities typically increase as brand recognition increases, especially in markets outside the United States and Canada. Counterfeiting and other
infringement of our intellectual property could divert away sales, and association of our brands with inferior counterfeit reproductions or third party labels could adversely
affect the integrity and reputation of our brands.
 
Although we currently hold a number of patents on our products, we generally rely on patents on the products of our suppliers as well as their efforts in successfully
defending third-party challenges to such products. Third parties have in the past infringed, and may in the future infringe, on our patents and our suppliers’ patents. Our ability
to maintain and enforce our patent rights, and the ability of our suppliers, licensors, collaborators and manufacturers to maintain and enforce their patent rights, against third-
party challenges to their validity, scope or enforceability plays an important role in determining our future. There can be no assurances that we will ever successfully file or
receive any patents in the future, and changes in either the patent laws or in interpretations of patent laws in the United States or other countries may diminish the value of the
intellectual property rights of the products we distribute, license or own. Accordingly, we cannot predict with any certainty the range of claims that may be allowed or enforced
concerning the products that we sell.
 
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In addition, there can be no assurance that standard intellectual property confidentiality and assignment agreements with employees, consultants and other advisors
will not be breached, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known to or independently developed by
competitors. Furthermore, there can be no assurance that our efforts to protect our intellectual property will prevent others from unlawfully using our trademarks, trade secrets,
copyrights and other intellectual property. Our success depends in part, on our continued ability to maintain our intellectual property and those of our suppliers, and to protect
our trade secrets. An inability to continue to preserve and protect our intellectual property would likely have a material adverse effect on our business, results of operations and
financial condition.
 
We are subject to the risks of exchange rate fluctuations.
 
Currency movements and suppliers’ price increases relating to currency exchange rates are significant factors affecting our cost of sales. Many of our products are
purchased from suppliers located in foreign countries and we make payments for our products in numerous currencies. Thus, we bear certain foreign exchange rate risk for
certain of our inventory purchases. In addition, and as part of our strategy, we may undertake further international expansion. As a result, in the future, we may be more
sensitive to the risks of exchange rate fluctuations, which may have a material adverse effect on our business, results of operations and financial condition.
 
There are conflicts of interest among certain of our executive officers and our stockholders.
 
Certain of our executive officers are engaged in other activities and have interests in other entities on their own behalf or on behalf of other persons. Neither we, nor
our stockholders will have any rights in these ventures or their income or profits. Specifically, we sold $0.0 million and $0.0 million in products and supplies to Blum Holdings,
Inc. (“Blum”) in the years ended December 31, 2024 and 2023, respectively. Total gross accounts receivable due from Blum were approximately $0.4 million and $0.4 million
as of December 31, 2024 and 2023, respectively. Nicholas Kovacevich, our former Chief Corporate Development Officer, and a member of our Board until January 6, 2023 is
an investor in Blum and a member of its board of directors.
 
While we are not aware of any conflict that has arisen or any transaction that has not been conducted on an arm’s length basis to date, during the year, Mr. Kovacevich
may have had conflicting fiduciary duties between us, Blum and his own personal financial interests, for which he must recuse himself from certain of our decision-making
processes.
 
We do not allow a conflicted shareholder, director or executive officer to vote on matters wherein a conflict may be perceived. The conflicted person or entity is not
allowed to nominate an alternate person to vote for them either. Other than this safeguard, we do not current have any policy in place, should such a conflict arise.
 
In particular:
 
 
●
our executive officers or directors or their affiliates may have an economic interest in, or other business relationship with, entities that compete in the same businesses
as us; and
 
●
our executive officers or directors or their affiliates have interests in entities that we sell products or services to.
 
In any of these cases:
 
 
●
our executive officers or directors may have a conflict between our current interests and their personal financial and other interests in another business venture;
 
●
our executive officers or directors may have conflicting fiduciary duties to us and the other entity; and
 
●
the terms of transactions with the other entity may not be subject to arm’s length negotiations and therefore may be on terms less favorable to us than those that could
be procured through arm’s length negotiations.
 
We are required to comply with laws and regulations in other countries and are exposed to business risks associated with our international operations.
 
For the years ended December 31, 2024 and 2023, we derived 17.9% and 7.1%, respectively, of our net sales from outside the United States, primarily in Canada and
certain European countries. As a result, we are subject to numerous evolving and complex laws and regulations which apply, among other things, to financial reporting
standards, corporate governance, data privacy, tax, trade regulations, export controls, competitive practices, labor, health and safety laws, laws regarding controlled substances,
laws regarding drug paraphernalia, and regulations in each jurisdiction in which we operate. We are also required to obtain permits and other authorizations or licenses from
governmental authorities for certain of our operations and we or our suppliers must protect our intellectual property worldwide. In the jurisdictions in which we operate, we
need to comply with various standards and practices of different regulatory, tax, judicial and administrative bodies.
 
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There are a number of risks associated with international business operations, including political instability (e.g., the threat of war, terrorist attacks or civil unrest),
inconsistent regulations across jurisdictions, unanticipated changes in the regulatory environment, and import and export restrictions. Any of these events may affect our
employees, reputation, business or financial results as well as our ability to meet our objectives, including the following international business risks:
 
 
●
negative economic developments in economies around the world and the instability of governments, or the downgrades in the debt ratings of certain major economies;
 
●
social and political instability;
 
●
complex regulations governing certain of our products;
 
●
potential terrorist attacks;
 
●
adverse changes in governmental policies, especially those affecting trade, tariffs and investment;
 
●
foreign currency exchange, particularly with respect to the Canadian Dollar, Euro, British Pound Sterling and Australian Dollar; and
 
●
threats that our operations or property could be subject to nationalization and expropriation.
 
We may not be in full compliance at all times with the laws and regulations to which we are subject. Likewise, we may not have obtained or may not be able to obtain
the permits and other authorizations or licenses that we need. If we violate or fail to comply with laws, regulations, permits, labor, health and safety regulations or other
authorizations or licenses, we could be fined or otherwise sanctioned by regulators. In such a case, or if any of these international business risks were to materialize, our
business, results of operations and financial condition could be adversely affected.
 
New tariffs and the evolving trade policy dispute between the United States, China and other nations may adversely affect our business.
 
In 2018, the United States imposed significant tariffs on steel and aluminum imports from a number of countries, including China. These tariffs and the evolving trade
policy dispute between the United States and China may have a significant impact on the industries in which we participate. Many of the products we sell, including without
limitation, certain vaporizer products, aluminum grinders, paper products and plastic products, are subject to the 25 percent tariff and such tariff, along with resultant price
increases, may negatively impact our pricing and customer demand for these products. A “trade war” between the United States, China and other nations or other governmental
action related to tariffs or international trade agreements or policies has the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the
United States economy or certain sectors thereof and, thus, to adversely impact our businesses and results of operations.
 
Our failure to comply with certain environmental, health and safety regulations could materially and adversely affect our business.
 
The storage, distribution and transportation of some of the products that we sell are subject to a variety of federal, state, provincial and local environmental regulations.
We are also subject to operational, health and safety laws and regulations. Our failure to comply with these laws and regulations could cause a disruption in our business, an
inability to maintain our warehousing resources, additional and potentially significant remedial costs and damages, fines, sanctions or other legal consequences that could have
a material adverse effect on our business, results of operations and financial condition. In addition, changes in environmental, employee health and safety or other laws, more
vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations or give rise to material liabilities, which could have a material
adverse effect on our business, financial condition and results of operations.
 
37

 
 
We are transitioning our business and have engaged, and may continue in engage in, dispositions via sales of our assets or other exit activities and other strategic
initiatives and we may face risks related to such transactions.
 
We have engaged in, and expect to continue to pursue, strategic dispositions and initiatives, as we transition our business. Dispositions present significant challenges
and risks relating the separation of disposed businesses. Such risks include: (i) we may incur unanticipated costs or expenses, (ii) we may not be able to successfully separate
divested businesses and related obligations from our operations as planned, and (iii) we may not be able to realize anticipated reductions in costs attributable to divested
businesses or assets. Divestitures may also involve continued financial involvement in, or liability with respect to, the divested businesses. As a result of divestiture
transactions, we could incur severance charges for personnel and payments for lease and other commitments, charges from the impairment or write-off of assets, and other
financial loss due to the transaction. Furthermore, there is the risk that we might lose customers. In addition, we may not realize the degree or timing of benefits we anticipate
when we first enter into a transaction. There can be no assurances that we will manage dispositions or other strategic initiatives successfully, that strategic opportunities will be
available to us on acceptable terms or at all, or that we will be able to consummate desired transactions. Any of the foregoing could materially adversely affect our competitive
position, financial condition, results of operations or cash flows. For more information on the disposition activities we have undertaken to date, please see “Item 7 —
Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
 
Our operations are subject to natural disasters, adverse weather conditions, operating hazards, environmental incidents and labor disputes.
 
We may experience earthquakes, floods, typhoons, power outages, labor and trade disputes or similar events beyond our control that would affect our warehousing and
distribution operations. The occurrences of such events could result in shutdowns or periods of reduced operations, which could significantly disrupt our business operations,
cause us to incur additional costs and affect our ability to deliver our products to our customers as scheduled, which may adversely affect our business, results of operations and
financial condition. Moreover, such events could result in severe damage to property, personal injuries, fatalities, regulatory enforcement proceedings or in us being named as a
defendant in lawsuits asserting claims for large amounts of damages, which in turn could lead to significant liabilities.
 
38

 
 
We are subject to risks associated with public health crises, such as pandemics and epidemics, which may have a material adverse effect on our business. The nature and
extent of future impacts are highly uncertain and unpredictable.
 
We are subject to risks associated with public health crises, such as pandemics and epidemics and the emergence of new viruses may result in new governmental
lockdowns, quarantine requirements or other restrictions to slow the spread of the virus. In addition, any such measures could also impact the global economy more broadly, for
example by leading to further economic slowdowns. If we or any of the third parties with whom we engage, including the suppliers, manufacturers and other third parties in our
global supply chain, were to experience shutdowns or other significant business disruptions, our ability to conduct our business in the manner presently planned could be
materially and negatively impacted.
 
The scope and duration of any future public health crisis, the pace at which government restrictions are imposed and lifted, the scope of additional actions taken to
mitigate the spread of disease, global vaccination and booster rates, the speed and extent to which global markets and utilization rates for our products fully recover from the
disruptions caused by such a public health crisis, and the impact of these factors on our business, financial condition and results of operations, will depend on future
developments that are highly uncertain and cannot be predicted with confidence.
 
To the extent a new pandemic or other public health crises adversely affect our operations and global economic conditions more generally, it may also have the effect
of heightening many of the other risks described herein.
 
Risks Related to Our Organizational Structure
 
Our principal asset is our interest in the Operating Company, and, accordingly, we depend on distributions from the Operating Company to pay our taxes and expenses.
The Operating Company’s ability to make such distributions may be subject to various limitations and restrictions.
 
We are a holding company and have no material assets other than our ownership of all of the Common Units of the Operating Company. As such, we have no
independent means of generating revenue or cash flow. Our ability to pay our operating expenses or declare and pay dividends in the future, if any, will be dependent upon the
financial results and cash flows of the Operating Company and its subsidiaries and distributions we receive from the Operating Company. There can be no assurance that the
Operating Company and its subsidiaries will generate sufficient cash flow to distribute funds to us or that applicable state law and contractual restrictions, including negative
covenants, in any future debt instruments, will permit such distributions. In addition, because we are a holding company, our stockholders’ claims as a stockholder will be
structurally subordinated to all existing and future liabilities and obligations of the Operating Company. Therefore, in the event of a bankruptcy, liquidation or reorganization,
our assets and those of the Operating Company and its subsidiaries will be available to satisfy the claims of our stockholders only after all of our and Greenlane Holdings,
LLC’s and its subsidiaries’ liabilities and obligations have been paid in full.
 
The Operating Company is treated as a partnership for U.S. federal income tax purposes and, as such, is not subject to any entity-level U.S. federal income tax.
Instead, taxable income is allocated to holders of Common Units. As of December 31, 2024 and 2023, we hold all of the outstanding Common Units. Accordingly, we will incur
income taxes on any net taxable income of the Operating Company. Under the terms of the Fourth Amended and Restated Agreement of the Operating Company (the
“Operating Agreement”), the Operating Company is obligated to make tax distributions to holders of Common Units. In addition to tax expenses, we will also incur expenses
related to our operations which we expect could be significant. We intend, as its manager and sole member, to cause the Operating Company to make cash distributions to us in
an amount sufficient to (i) fund our tax obligations in respect of taxable income allocated to us and (ii) cover our operating expenses. However, the Operating Company’s
ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement
to which the Operating Company is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering the Operating Company insolvent.
If we do not have sufficient funds to pay tax or other liabilities or to fund our operations, we may have to borrow funds, which could materially adversely affect our liquidity
and financial condition and subject us to various restrictions imposed by any such lenders.
 
39

 
 
The Tax Receivable Agreement (the “TRA”) may require us to make cash payments to the members of the Operating Company in respect of certain tax benefits to which
we may become entitled.
 
Under the TRA we entered into with the Operating Company and its members, we are required to make cash payments to the members of the Operating Partnership
equal to 85% of the tax benefits, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (i) the increases in the tax basis of assets of the
Operating Company resulting from any redemptions or exchanges of Common Units from the members and (ii) certain other tax benefits related to our making payments under
the TRA. Although we held all of the outstanding Common Units as of December 31, 2024 and 2023, payments under the TRA are not conditioned on any member’s continued
ownership of Common Units or our Class A common stock.
 
The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the amount of gain recognized by prior holders
of Common Units, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable.
 
Fluctuations in our tax obligations and effective tax rate and realization of our deferred tax assets may result in volatility of our operating results.
 
We are subject to taxes by the U.S. federal, state, local and foreign tax authorities, and our tax liabilities will be affected by the allocation of expenses to differing
jurisdictions. We record tax expense based on our estimates of future earnings, which may include reserves for uncertain tax positions in multiple tax jurisdictions, and
valuation allowances related to certain net deferred tax assets. At any one time, many tax years may be subject to audit by various taxing jurisdictions. The results of these
audits and negotiations with taxing authorities may affect the ultimate settlement of these matters. We expect that throughout the year there could be ongoing variability in our
quarterly tax rates as events occur and exposures are evaluated. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors,
including:
 
 
●
changes in the valuation of our deferred tax assets and liabilities;
 
●
expected timing and amount of the release of any tax valuation allowances;
 
●
tax effects of stock-based compensation;
 
●
changes in tax laws, regulations or interpretations thereof; or
 
●
future earnings being lower than anticipated in countries where we have lower statutory tax rates and higher than anticipated earnings in countries where we have
higher statutory tax rates.
 
In addition, our effective tax rate in a given financial statement period may be materially impacted by a variety of factors including but not limited to changes in the
mix and level of earnings, varying tax rates in the different jurisdictions in which we operate, fluctuations in valuation allowances, deductibility of certain items, or by changes
to existing accounting rules or regulations. Further, tax legislation may be enacted in the future which could negatively impact our current or future tax structure and effective
tax rates. We may be subject to audits of our income, sales, and other transaction taxes by U.S. federal, state, local, and foreign taxing authorities. Outcomes from these audits
could have an adverse effect on our operating results and financial condition.
 
If we were deemed to be an investment company under the U.S. Investment Company Act of 1940, as amended (the “1940 Act”), as a result of our ownership of the
Operating Company, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our
business.
 
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (i) it is, or
holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to
engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40%
of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as
such term is defined in either of those sections of the 1940 Act.
 
As the sole manager of the Operating Company, we control and operate the Operating Company. On that basis, we believe that our interest in the Operating Company
is not an “investment security” as that term is used in the 1940 Act. However, if we were to cease participation in the management of the Operating Company, our interest in
The Operating Company could be deemed an “investment security” for purposes of the 1940 Act.
 
40

 
 
We and the Operating Company intend to continue to conduct our operations so that we will not be deemed an investment company. However, if we were to be
deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it
impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
 
Risks Related to Ownership of Our Class A Common Stock
 
The market price of our Class A common stock has been volatile and has declined significantly since our initial public offering and may face more volatility and price
declines in the future. As a result, you may not be able to resell your shares at or above the price at which you have acquired or will acquire shares of our Class A common
stock.
 
The market price of our Class A common stock has been volatile and has declined significantly since our initial public offering and could face more volatility and price
declines in the future as a result of a number of factors, many of which are beyond our control. Furthermore, volatility in our stock price may occur regardless of our operating
performance. As a result, you may not be able to sell your shares at or above the price you paid and you could lose a substantial part or all of your investment in our Class A
common stock. The following factors could affect our stock price:
 
 
●
general market conditions, including conditions that are outside of our control, such as actions or proposed actions of the current U.S. Presidential administration and
the Federal Reserve to curb inflation or the impact of future public health crises; novel and unforeseen market volatility and trading strategies, such as the short
squeeze rallies caused by retail investors on retail trading platforms;
 
●
our financing activities, including the issuance of additional securities;
 
●
our operating and financial performance and the performance of other similar companies;
 
●
the market perception of our industry;
 
●
management turnover;
 
●
the impact, or perceived impact, of new regulations applicable to us, our suppliers or our customers;
 
●
quarterly variations in the rate of growth of our financial indicators, such as net income, net income per share, net sales and adjusted EBITDA;
 
●
our ability to successfully execute our merger and acquisition strategy;
 
●
significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;
 
●
strategic actions by our competitors or our suppliers;
 
●
product recalls or product liability claims;
 
●
changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts;
 
●
liquidity and activity in the market for our Class A common stock;
 
●
speculation in the press or investment community;
 
●
sales of our Class A common stock by us or other stockholders, or the perception that such sales may occur;
 
●
the future incurrence of debt;
 
●
changes in accounting principles;
 
●
additions or departures of key management personnel;
 
●
the de-listing of our Class A common stock from the Nasdaq Capital Market;
 
●
news reports relating to trends, concerns or competitive developments, regulatory changes and other related issues in our industry or target markets;
 
●
investors’ general perception of us and the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
 
●
actions by our stockholders; and
 
●
domestic and international economic, legal and regulatory factors.
 
The stock markets in general have experienced extreme volatility, particularly recently, that has often been unrelated to the operating performance of particular
companies. These broad market fluctuations may adversely affect the trading price of our Class A common stock.
 
Your percentage ownership will be diluted in the future.
 
Your percentage ownership will be diluted in the future as a result of equity awards that we expect will be granted to our directors, officers and employees, as well as
any shares of our Class A common stock, or securities convertible into shares of our Class A common stock, we issue in connection with future capital raising or strategic
transactions at prices that are dilutive to shareholders. Our Second Amended and Restated 2019 Equity Incentive Plan provides for the grant of equity-based awards to our
directors, officers and employees. The issuance of any shares of Class A common stock will dilute the proportionate ownership and voting power of existing security holders.
 
Future securities issuances could result in significant dilution to our stockholders and impair the market price of our common stock.
 
Future issuances of shares of our common stock could depress the market price of our common stock and result in dilution to existing holders of our common stock.
Also, to the extent outstanding options and warrants to purchase our shares of our common stock are exercised or options or other equity-based awards are issued or become
vested, there will be further dilution. The amount of dilution could be substantial depending upon the size of the issuances or exercises. Furthermore, we may issue additional
equity securities that could have rights senior to those of our common stock.
 
41

 
 
Substantial sales and issuances of our Class A common stock have and may continue to occur, or may be anticipated, which have and could continue to cause our stock
price to decline.
 
The market price of shares of our Class A common stock could decline further as a result of substantial sales of our Class A common stock, issuances of Class A
common stock at prices that are dilutive to stockholders, a large number of shares of our Class A common stock becoming available for sale or the perception in the market that
holders of a large number of shares intend to sell their shares. Additionally, we expect that we will seek to raise additional capital from time to time in the future, which may
involve the issuance of additional shares of our Class A common stock, or securities convertible into shares of our Class A common stock in subsequent public or private
offerings at dilutive prices if debt is not available to us to fund our working capital needs.
 
We cannot predict the effect, if any, that these sales, or anticipation of such sales, will have on the market price of our common stock or the timing of any redemption
of Common Units. Sales or issuances of substantial amounts of our Class A common stock (including shares issued in connection with an acquisition), or the perception that
such sales could occur, may adversely affect prevailing market price of our Class A common stock.
 
The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly
now that we are no longer an “emerging growth company.”
 
As a public company, we are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these
reporting and other regulatory requirements is time-consuming and expensive and could have a negative effect on our business, results of operations and financial condition. As
a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the requirements of the
Sarbanes-Oxley Act of 2002 (“SOX”). The cost of complying with these requirements may place a strain on our systems and resources. The Exchange Act requires that we file
annual, quarterly and current reports with respect to our business and financial condition. SOX requires that we maintain effective disclosure controls and procedures and
internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we must commit significant resources, may be
required to hire additional staff and need to continue to provide effective management oversight. Sustaining our growth also will require us to commit additional management,
operational and financial resources to identify new professionals to join our company and to maintain appropriate operational and financial systems to adequately support
expansion. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, results of operations,
financial condition and cash flows.
 
In connection with becoming a public company, we obtained Side A directors’ and officers’ insurance coverage, which increased our annual insurance costs. In the
future, it may be more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs
to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members to our Board in the future, particularly to serve on our audit
committee, and qualified executive officers.
 
As we are no longer an “emerging growth company” as defined in the JOBS Act, we must now comply with various reporting requirements. With these new
requirements, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the
amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.
 
42

 
 
As a public reporting company, we are subject to rules and regulations established from time to time by the SEC regarding our internal control over financial reporting. In
connection with our assessment of the effectiveness of our disclosure controls and procedures, we identified certain material weaknesses in our internal control over
financial reporting, which caused our Chief Executive Officer and Chief Financial Officer to determine that our internal control over financial reporting, as well as our
disclosure controls and procedures, were not effective as of December 31, 2020 and these material weaknesses have not yet been fully remediated as of December 31, 2024
 
As a public reporting company, we are subject to the rules and regulations established from time to time by the SEC. These rules and regulations require that, among
other things, we establish and periodically evaluate procedures with respect to our internal control over financial reporting. Reporting obligations as a public company are likely
to place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel.
 
Our management, including our Chief Executive Officer and Chief Financial and Legal Officer, is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our
internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the
financial statements.
 
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of
the effectiveness of our internal control over financial reporting as of December 31, 2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that as of December 31, 2020, the Company had not maintained effective internal control over financial reporting as a result of the existence of material weaknesses.
Consequently, management, with the participation of our Chief Executive Officer and Chief Financial Officer, also concluded that our disclosure controls and procedures were
not effective as of December 31, 2020 to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the
Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that
information required to be disclosed by the Company in such reports was accumulated and communicated to the Company’s management, including, our Chief Executive
Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
 
A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a
material misstatement of our financial statements will not be prevented or detected on a timely basis. Although we are implementing measures to remediate the material
weaknesses, we cannot give any assurances that the identified material weaknesses will be remediated on a timely basis or at all or that additional material weaknesses will not
be identified in the future in connection with our compliance with the provisions of Section 404 of SOX. Our management may be required to devote significant time and
expense to remediate these material weaknesses and any other material weaknesses that may be discovered in the future and may not be able to remediate such material
weaknesses in a timely manner. The existence of any future material weakness in our internal control over financial reporting could also result in errors in our financial
statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations, and cause investors to lose confidence in our reported
financial information, any of which could lead to a decline in the per share trading price of our common stock.
 
As described in Item 9A of Part II of this Annual Report on Form 10-K, we are continuing to implement our remediation plan to address the identified material
weaknesses, and our management continues to be actively engaged in the remediation efforts. The material weaknesses will not be considered remediated until the applicable
controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
 
As previously disclosed, in 2020, we began a multi-year implementation of a new ERP system, which we completed in 2023. The ERP system serves as our existing
core financial system. Concurrently, in 2023, the re-design of the user access roles and permissions in the new ERP system were completed, and new controls were put into
place. These previously reported material weaknesses related to ineffective user access controls were not yet remediated as of 12/31/2024.
 
43

 
 
We have not paid dividends in the past and have no current plans to pay dividends in the future, and any return on investment may be limited to the value of our common
stock.
 
We do not anticipate paying cash dividends in the foreseeable future. The payment of dividends will depend on our earnings, capital requirements, financial condition,
prospects and other factors our Board may deem relevant. If we do not pay dividends, our stock may be less valuable because a return on your investment will only occur if you
sell our Class A common stock after our stock price appreciates above the price at which you acquired such shares.
 
If securities analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
 
The trading market for our stock depends in part on the research and reports that securities or industry analysts publish about us or our industry. While there are
currently securities analysts covering us, we can provide no assurances that the analysts will continue to publish report or that other securities analysts will initiate coverage. If
no securities analysts cover our company, the trading price for our stock could be negatively impacted. In addition, if one or more of the analysts who cover us downgrade our
stock or publish inaccurate or unfavorable research about our business, our stock price could decline as a result. If one or more of these analysts cease coverage of our company
or fail to publish reports on us regularly, demand for our Class A stock could decrease, which might cause the market price and trading volume of our Class A common stock to
decline.
 
We have a large number of authorized but unissued shares of stock, which could negatively impact a potential investor if they purchase our Class A common stock.
 
On August 9, 2022 and June 5, 2023, we effected reverse stock splits. The reverse stock splits did not change the par value of our Class A common stock or the number
of shares of Class A common stock or preferred shares authorized by our amended and restated certificate of incorporation. Because the number of authorized shares of our
Class A common stock was not reduced proportionally, the reverse stock splits increased our Board’s ability to issue authorized and unissued shares without further stockholder
action. As of December 31, 2023, our amended and restated certificate of incorporation provides for 600,000,000 shares of authorized Class A common stock, 30,000,000
shares of authorized Class B common stock and 10,000,000 shares of authorized preferred stock and we have approximately 3,726,926 shares of Class A common stock
outstanding, 11,860,201 shares reserved for exercise or vesting of outstanding warrants and options to purchase shares of Class A common stock and 203,022 shares of Class A
common stock reserved for future grant under the Company’s equity incentive plan. No shares of Class B common stock or preferred stock are outstanding.
 
On June 18, 2024, the Board unanimously approved and declared advisable, and recommended that our stockholders approve at a Special Meeting that took place on July 29,
2024, the adoption of the 2024 Amendment to effect a reverse stock split of our Common Stock at any whole number between, and inclusive of, one-for-two to one-for-twenty.
Approval of the Proposed 2024 Reverse Stock Split at the 2024 Special Meeting granted the Board the authority, but not the obligation, to file the 2024 Amendment to effect
the Proposed 2024 Reverse Stock Split no later than August 5, 2024, with the exact ratio and timing of the Proposed 2024 Reverse Stock Split to be determined at the discretion
of the Board. On July 23, 2024, the Board approved the reverse split at a ratio of one-for-11 and the Amendment has been filed with the Secretary of State of the State of
Delaware, that became effective on August 5, 2024 at 12:01 AM Eastern Time, before the opening of trading on the Nasdaq. For additional information about the July 29, 2024
Special Meeting and the 2024 Reverse Stock Split, see the Company’s Definitive Proxy Statement filed with the SEC on June 28, 2024 and Form 8-K filed with the SEC on
July 31, 2024.
 
With respect to authorized but unissued and unreserved shares, we could also use such shares to oppose a hostile takeover attempt or delay or prevent changes in
control or changes in or removal of management. The issuance of additional shares of Class A common stock or securities convertible into Class A common stock may have a
dilutive effect on earnings per share and relative voting power and may cause a decline in the trading price of our Class A common stock. We could use the shares that are
available for future issuance in dilutive equity financing transactions, or to oppose a hostile takeover attempt or delay or prevent changes in control or changes in or removal of
management, including transactions that are favored by a majority of the stockholders or in which the stockholders might otherwise receive a premium for their shares over
then-current market prices or benefit in some other manner.
 
44

 
 
Anti-takeover provisions in our certificate of incorporation and amended and restated bylaws and Delaware law could discourage a takeover.
 
Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that might enable our management to resist a takeover.
These provisions include:
 
 
●
authorizing the issuance of “blank check” preferred stock that could be issued by our Board to increase the number of outstanding shares and thwart a takeover
attempt;
 
●
advance notice requirements applicable to stockholders for matters to be brought before a meeting of stockholders and requirements as to the form and content of a
stockholder’s notice;
 
●
restrictions on the transfer of our outstanding shares of Class B common stock;
 
●
a supermajority stockholder vote requirement for amending certain provisions of our amended and restated certificate of incorporation and amended and restated
bylaws;
 
●
the inability of our stockholders to act by written consent;
 
●
a requirement that the authorized number of directors may be changed only by resolution of the Board;
 
●
allowing all vacancies, including newly created directorships, to be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum,
except as otherwise required by law;
 
●
limiting the forum for certain litigation against us to Delaware; and
 
●
limiting the persons that can call special meetings of our stockholders to our Board or the chairperson of our Board.
 
These provisions might discourage, delay or prevent a change in control of our company or a change in our Board. The existence of these provisions could adversely
affect the voting power of holders of Class A common stock and limit the price that investors might be willing to pay in the future for shares of our Class A common stock. In
addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a
Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which
the stockholder became an “interested” stockholder.
 
We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our
Class A common stock, which could depress the market price of our Class A common stock.
 
Our amended and restated certificate of incorporation authorizes us to issue one or more series of preferred stock. Our Board has the authority to determine the
preferences, limitations and relative rights of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any
further vote or action by our stockholders. Our preferred stock can be issued with voting, liquidation, dividend and other rights superior to the rights of our Class A common
stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discourage bids for our Class A common stock at a premium to the market price,
and materially and adversely affect the market price and the voting and other rights of the holders of our Class A common stock.
 
45

 
 
Our amended and restated certificate of incorporation and bylaws provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for
substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our
directors, officers or employees.
 
Our amended and restated certificate of incorporation and our amended and restated bylaws provide that, unless we consent to the selection of an alternative forum, the
Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, other than any action or
proceeding that, under applicable law, may only be commenced or prosecuted in another forum, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our
directors, officers or other employees to us or to our stockholders, (iii) any action asserting a claim arising pursuant to the Delaware General Corporation Law or our amended
and restated certificate of incorporation or bylaws (iv) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation.
 
We are a “smaller reporting company” under federal securities laws and we cannot be certain whether the reduced reporting requirements applicable to such companies
will make our Class A common stock less attractive to investors.
 
We are a “smaller reporting company” under federal securities laws. For as long as we continue to be a smaller reporting company, we may take advantage of
exemptions from various reporting requirements that are applicable to other public companies, including reduced disclosure obligations regarding executive compensation in
our periodic reports and proxy statements. Generally, we will remain a smaller reporting company so long as our public float remains less than $250 million as of the last
business day of our most recently completed second fiscal quarter. We cannot predict if investors will find our Class A common stock less attractive because we may rely on
these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our
stock price may decline or be more volatile.
 
ITEM 1B. UNRESOLVED STAFF COMMENTS
 
None.
 
ITEM 1C. CYBERSECURITY
 
Cybersecurity Risk Management and Strategy
 
Greenlane is committed to ensuring the highest standards of cybersecurity to protect our systems, networks, and data from cyber threats. We recognize the critical
importance of safeguarding sensitive information and maintaining the trust of our customers, partners, and stakeholders.
 
Our cybersecurity strategy is built on a foundation of proactive risk management, continuous monitoring, and adherence to industry best practices. We employ a multi-
layered approach which leverages cutting-edge technologies to defend against evolving cyber threats.
 
We have made significant investments in modernizing, streamlining, and simplifying our technology footprint to both enhance customer experience and strengthen our
internal security controls.
 
From time-to-time, we may engage third-party consultants, legal advisors, and audit firms to evaluate and test the Company’s risk management systems and assess and
remediate certain potential cybersecurity incidents, as appropriate. We prioritize the integrity of our data access controls to prevent unauthorized access, data breaches, and
malicious activities. We regularly assess and enhance our cybersecurity posture through comprehensive risk assessments, security audits, and vulnerability assessments.
 
46

 
 
Governance
 
Cybersecurity is a shared responsibility requiring collaboration and cooperation across all levels of our organization.
 
Greenlane recognizes that cybersecurity is not solely a technology issue but also a people and process issue. We invest in ongoing employee training and awareness
programs to empower our staff to recognize and respond to potential security threats effectively.
 
Cybersecurity threats are monitored and acted upon by the Company’s information technology security group within the Information Technology team. The Vice
President of Information Technology has over 25 years of IT experience including Fortune 100 public companies. The Vice President of Information Technology meets
regularly with senior management to inform and advise them of the status on all cybersecurity initiatives as well as all cybersecurity incidents, if any.
 
In the event of a cybersecurity incident, we have established incident response plans and protocols to minimize the impact and facilitate swift recovery. The
Company’s Audit Committee oversees cybersecurity risk. The Audit Committee is promptly notified by Information Technology leadership of any potentially serious incidents
including details and recommendations on the detection, mitigation, and remediation of the same. During the calendar year 2024, there have been no known reported
cybersecurity incidents that have materially affected our operations or financial results.
 
We believe in transparency and open communication, promptly informing affected parties and relevant authorities as required by law. Together, we remain vigilant,
adaptive, and resilient in the face of evolving cyber threats, safeguarding the trust and confidence of those we serve.
 
ITEM 2. PROPERTIES
 
We lease our administrative office space in Boca Raton, Florida and our distribution center and offices in Moreno Valley, California in the United States, and an
administrative office location in Canada. We believe that our facilities are adequate for our current global operational needs and we are capable of acquiring or leasing
additional space as necessary.
 
ITEM 3. LEGAL PROCEEDINGS
 
For information regarding legal proceedings as of December 31, 2024, see “Note 7—Commitments and Contingencies” of the Notes to Consolidated Financial
Statements included in Part II, Item 8 of this Form 10-K.
 
ITEM 4. MINE SAFETY DISCLOSURES
 
Not applicable.
 
47

 
 
PART II
 
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
 
Market Information
 
Our Class A common stock is listed on the Nasdaq Capital Market under the symbol “GNLN”.
 
Holders
 
As of March 19, 2025, there were approximately 91 stockholders of record of our Class A common stock. Since certain of our shares of Class A common stock are
held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
 
Dividends
 
We have never declared or paid any cash dividends on our Class A common stock. We intend to retain any future earnings and do not expect to pay cash dividends in
the foreseeable future.
 
Unregistered Sales of Equity Securities
 
There were no unregistered sales of equity securities during the year ended December 31, 2024.
 
On June 29, 2023, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an aggregate of 560,476 shares
of our Class A common stock, pre-funded warrants to purchase up to 3,487,143 shares of our Class A common stock (the “July 2023 Pre-Funded Warrants”) and warrants to
purchase up to 8,095,238 shares of our Class A common stock (the “July 2023 Standard Warrants”). The July 2023 units each consisted of one share of Class A common stock
or a July 2023 Pre-Funded Warrant and two July 2023 Standard Warrants to purchase one share of our Class A common stock. The July 2023 units were offered pursuant to an
effective Registration Statement on Form S-1. The July 2023 Standard Warrants are exercisable immediately at an exercise price equal to $1.05 per share of Class A common
stock for a period of five years. Each July 2023 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 July 2023 Offering generated gross proceeds of approximately $4.3 million and net proceeds to the Company of approximately $3.9 million.
 
As of the date of this Annual Report on Form 10-K, all July 2023 Pre-Funded Warrants have been exercised, based upon which we issued an additional 1,911,000
shares of our Class A common stock for de minimis net proceeds in 2024.
 
In connection with the July 2023 Offering, we entered into privately negotiated agreements with holders participating in the offering to amend existing outstanding
warrants to purchase up to 1,344,367 shares of Class A common stock that were previously issued in connection with the June 2022 and October 2022 Offerings at exercise
prices per share of $50.00 and $9.00, respectively, and expire on December 29, 2027 and November 1, 2029, respectively (collectively, the “Prior Warrants”), effective upon the
closing of the July 2023 Offering to reduce the exercise price of the Prior Warrants to $1.05, the exercise price of the warrants to purchase shares of Class A common stock
offered in the July 2023 Offering. All other terms of the Prior Warrants remained unchanged.
 
On August 12, 2024, the Company entered into a securities purchase agreement with a single institutional investor for aggregate gross cash proceeds of $6.5 million.
In connection with the private placement, the Company issued an aggregate of 2,363,637 units and pre-funded units. The pre-funded units were sold at the same purchase price
as the units, less the pre-funded warrant exercise price of $0.001. Each unit and pre-funded unit consisted of one share of common stock (or one pre-funded warrant) and two
common warrants, each exercisable for one share of common stock at an exercise price of $2.50 per share. The common warrant are exercisable on the initial exercise date
described in the common warrant and will expire 5.0 years from such date.
 
On October 29, 2024, the Company entered into an Exchange Agreement with its Senior Subordinated Lender, whereby the Company agreed to exchange an aggregate
of $4,617,307 of debt originally owed to Agile Capital Funding LLC and Cedar Advance LLC in a 3(a)(9) exchange for new Senior Subordinated Notes in the principal amount
of $4,000,000 due one year from issuance (the “Exchange Note”), reducing outstanding indebtedness by approximately $617,000. The Exchange Note was convertible at the
option of the holder at $3.17 per share. In connection with the Exchange, the Company issued an aggregate of 1,261,830 five year warrants with an exercise price of $3.04 per
share (the “Exchange Warrants”). The Exchange Note was repaid out of the proceeds of the February 2025 Offering.
 
In addition, pursuant to the terms of the Exchange Agreement, the Company agreed to issue warrants to the Holders, with an initial exercise price of $3.04,
exercisable 180 days after issuance (the “Exchange Inducement Warrants”). The Exchange Inducement Warrants were issued to incentivize the holders to exercise some or all
of their existing warrants originally issued on August 13, 2024 (the “Existing Warrants”) for cash, which existing warrants have an exercise price of $2.50 per share. The
Exchange Inducement Warrants are initially exercisable for zero shares, but to the extent that the Holders exercise any of such Existing Warrants during the one-hundred sixty
day inducement period, the Exchange Inducement Warrants will become exercisable on April 30, 2025 for 200% of the number of Existing Warrants exercised for cash during
such inducement period. As part of the February 2025 Offering, the exercise price of these warrants was adjusted to $1.19 per share.
 
Also, pursuant to the Exchange Agreement, the Senior Subordinated Lender agreed that it will exercise its Existing Warrants for cash prior to exercising any of its
outstanding pre-funded warrants, contingent on the market price of the common stock being above $2.50 per share and certain other conditions.
 
ITEM 6. [Reserved]
 
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Overview
 
Founded in 2005, Greenlane is the premier global platform for the development and distribution of premium cannabis accessories, vape devices, and lifestyle products.
In 2021, we completed several acquisitions along with a transformative 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 business 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.
 
48

 
 
We have been developing a world-class portfolio of our own proprietary brands (the “Greenlane Brands”) and carefully curated third-party products 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 our recently launched
more affordable product line – Groove, innovative silicone pipes and accessories and premium ancillary product brand – Higher Standards. We also have category exclusive
licenses for the premium Marley Natural branded products, as well as the K Haring Glass Collection. In 2024, we expanded our assortment to include health and safety
products and entered into strategic partnerships with Safety Strips and Swabtek, offering fentanyl and Drink Spike testing products.
 
Since the end of 2021, the Company has invested significantly in technology, including its e-commerce platforms, internal ERP systems, and B2B capabilities. Our
world-class product portfolio is offered to customers through our proprietary, owned and operated e-commerce platforms which include Vapor.com, PuffItUp.com,
HigherStandards.com, MarleyNaturalShop.com and Wholesale.Greenlane.com. These platforms allow us to reach customers directly with helpful resources and a seamless
purchasing experience.
 
We merchandise vaporizers, packaging, and other ancillary products in the United States, Canada, Europe and Latin America. We distribute products to retailers
through wholesale operations and distribute products to consumers through our e-commerce platforms We operate our own distribution centers in the United States, while also
utilizing third-party logistics (“3PL”) locations in Canada. We have made tremendous progress consolidating and streamlining our warehouse and distribution operations over
the last two years.
 
Plan to Accelerate Path to Profitability and Capitalize the Business
 
In today’s economic landscape, particularly within the cannabis industry, achieving profitability and preserving working capital are paramount. At Greenlane, we are
intensely focused on making our business profitable and well-capitalized for long-term sustainability. Our key initiatives include:
 
 
1.
Technology Enhancements: We remain fully committed to improving our technology, particularly our B2B and e-commerce platforms, to provide a seamless shopping
experience for our wholesale and retail customers.
 
2.
Facility Footprint Rationalization: In 2023 and 2024, we optimized our facilities footprint by reducing warehouse and office space while increasing operational
efficiency and improving fulfillment practices.
 
3.
Headcount Reduction: We have significantly reduced our headcount and associated salary expenses, focusing on maintaining a core group of key employees as we
collectively right-size the business.
 
4.
Cost Structure Optimization: We continue to reduce our overall cost structure while improving margins. In April 2023, we formed two strategic partnerships (described
below in greater detail) to increase margins and significantly reduce working capital requirements.
 
5.
Inventory Management: In 2024, we continued to refine and improve our inventory management and lifecycle strategy that is focused on a quarterly turn and a regular
review of inventory to avoid future write-offs.
 
6.
Sales Force Upgrade: We have upgraded and will continue to upgrade our sales force from a solely account management centric team to a skilled and driven sales team
to acquire new customers while maintaining excellent service with our existing customers.
 
7.
Product Innovation: In 2024, we expanded our product offering to further enhance our assortment available to our customers to include the most up to date technology
available and launched our health and safety product line promoting safe and responsible consumption.
 
8.
Capital Investment: We continue to seek opportunities for securing investment capital to leverage our platform, increase availability and reduce stockouts of our high
demand third-party brands, invest in marketing and sales, and improve our product offerings.
 
Management believes that these initiatives in conjunction with the capital received in the February 2025 Private Placement will significantly reduce costs, help
accelerate the Company’s path to profitability, support business growth, and allow the Company to reinvest capital into its highest demand and highest potential product lines.
 
During 2023 and 2024, the Company received capital from various sources permitting it to right-size the business and position the company for growth and in 2025 the
Company received capital from a Private Placement in February. Such sources are described in greater detail in the Liquidity and Capital Resources Section of this report.
 
49

 
 
During 2023 and 2024, the Company also entered into certain arrangements to reduce working capital requirements and improve its balance sheet.
 
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. 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.
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.
 
On May 6, 2024, the Company, Warehouse Goods and Synergy Imports LLC (“Synergy”) entered into an asset purchase agreement, dated May 1, 2024 (the “Asset
Purchase Agreement”) pursuant to which Synergy purchased all of the intellectual property, a specified amount of inventory, and other assets related to the Eyce and DaVinci
brands. In consideration for the acquisition, all parties entered into a loan modification agreement, effective May 1, 2024 (the “Loan Modification Agreement”) and an amended
and restated secured promissory note, effective May 1, 2024 (the Amended and Restated Secured Promissory Note”), an amendment to the original Eyce and Davinci Asset
Purchase Agreements, a distribution agreement, the termination of a license granted by Eyce, and the termination of certain consulting and employment agreements. The Loan
Modification Agreement was restructured on October 29, 2024 as part of the First Amendment to Amended and Restated Secured Promissory Note.
 
USPS PACT Act Exemption
 
On January 11, 2022, we announced via press release that the United States Postal Service (the “USPS”) had approved our application for a business and regulatory
exemption to the PACT Act (with respect to the business and regulatory exemption granted by the USPS, the “PACT Act Exemption”), allowing us to ship vaporizers and
accessories classified as electronic nicotine delivery systems (“ENDS”) products to other compliant businesses. With this approval, over 97% of our total annual sales became
eligible for shipment by freight, USPS and other major parcel carriers. The PACT Act Exemption also enables us to partner with other businesses that ship ENDS products and
had their supply chains disrupted by PACT Act compliance.
 
On June 24, 2022, we provided via press release an update on the progress of the PACT Act Exemption, following our successful implementation of the controls,
processes and systems required by the USPS in connection with the shipment of ENDS products. We currently possess the ability to fulfill ENDS orders with the USPS which
allows us to reduce shipping costs, decrease fulfillment times and enhance the overall customer experience for approved wholesale customers.
 
Reverse Stock Splits
 
On June 2, 2023, we filed a Certificate of Amendment to the A&R Charter with the SSSD, which effected a one-for-10 reverse stock split (the “2023 Reverse Stock
Split” and together with the 2022 Reverse Stock Split, the “Reverse Stock Splits”) of our issued and outstanding shares of Common Stock at 5:01 PM Eastern Time on June 5,
2023. As a result of the 2023 Reverse Stock Split, every 10 shares of common stock issued and outstanding were converted into one share of common stock. We paid cash in
lieu of fractional shares, and accordingly, no fractional shares were issued in connection with the 2023 Reverse Stock Split.
 
On June 18, 2024, the Board unanimously approved and declared advisable, and recommended that our stockholders approve at a Special Meeting that took place on
July 29, 2024, the adoption of the 2024 Amendment to effect a reverse stock split of our Common Stock at any whole number between, and inclusive of, one-for-two to one-
for-twenty. Approval of the Proposed 2024 Reverse Stock Split at the 2024 Special Meeting granted the Board the authority, but not the obligation, to file the 2024 Amendment
to effect the Proposed 2024 Reverse Stock Split no later than August 5, 2024, with the exact ratio and timing of the Proposed 2024 Reverse Stock Split to be determined at the
discretion of the Board. On July 23, 2024, the Board approved the reverse split at a ratio of one-for-11 and the Amendment has been filed with the Secretary of State of the
State of Delaware, that became effective on August 5, 2024 at 12:01 AM Eastern Time, before the opening of trading on the Nasdaq. For additional information about the July
29, 2024 Special Meeting and the 2024 Reverse Stock Split, see the Company’s Definitive Proxy Statement filed with the SEC on June 28, 2024 and Form 8-K filed with the
SEC on July 31, 2024.
 
The Reverse Stock Splits 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 Second Amended and Restated 2019 Equity Incentive Plan have
also been appropriately adjusted. See “Note 10 — Compensation Plans” for more information.
 
50

 
 
All share and per share amounts in this Annual Report on Form 10-K for the fiscal year ended December 31, 2024 have been retroactively adjusted for all periods
presented to give effect to the Reverse Stock Split.
 
Critical Accounting Estimates
 
We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The
preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates and
assumptions on an ongoing basis. We base our estimates on historical experience, outside advice from parties believed to be experts in such matters, and on various other
assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Judgments and uncertainties affecting the application of those policies may result in materially different amounts
being reported under different conditions or using different assumptions. See “Note 2—Summary of Significant Accounting Policies” of the Notes to Consolidated Financial
Statements included in Part II, Item 8 of this Form 10-K for a description the significant accounting policies and methods used in the preparation of our consolidated financial
statements.
 
Inventories
 
Inventories, consisting of finished products, are primarily accounted for using the weighted-average method, and are valued at the lower of cost and net realizable
value. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to customers or
liquidations. Assumptions about the future disposition of inventory are inherently uncertain and changes in our estimates and assumptions may cause us to realize material
write-downs in the future.
 
Income Taxes and TRA Liability
 
We are a corporation subject to income taxes in the United States. Certain subsidiaries of the Operating Company are taxable separately from us. Our proportional
share of the Operating Company’s subsidiaries’ provisions are included in our consolidated financial statements.
 
As of December 31, 2022, we held all the outstanding Common Units in the Operating Company and are the sole member. As a result, beginning 2023, 100% of the
Operating Company’s US and state income and expenses are included in our US and state tax returns.
 
Our deferred income tax assets and liabilities are computed for differences between the tax basis and financial statement amounts that will result in taxable or
deductible amounts in the future. We compute deferred balances based on enacted tax laws and applicable rates for the periods in which the differences are expected to affect
taxable income. A valuation allowance is recognized for deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized.
In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future
taxable income, tax-planning strategies, and results of recent operations. If we determine we would be able to realize our deferred tax assets for which a valuation allowance
had been recorded, then we would adjust the deferred tax asset valuation allowance, which would reduce our provision for income taxes.
 
We evaluate the tax positions taken on income tax returns that remain open and positions expected to be taken on the current year tax returns to identify uncertain tax
positions. Unrecognized tax benefits on uncertain tax positions are recorded on the basis of a two-step process in which (1) we determine whether it is more likely than not that
the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the
largest amount of tax benefit that is more than 50 percent likely to be realized is recognized. Interest and penalties related to unrecognized tax benefits are recorded in income
tax benefit. We have no uncertain tax positions that qualify for inclusion in our consolidated financial statements.
 
51

 
 
In addition to tax expenses, we may incur expenses related to our operations and may be required to make payments under the Tax Receivable Agreement (the
“TRA”), which could be significant. Pursuant to the Greenlane Operating Agreement, Greenlane Holdings, LLC will generally make pro rata tax distributions to its members in
an amount sufficient to fund all or part of their tax obligations with respect to the taxable income of Greenlane Holdings, LLC that is allocated to them and possibly in excess of
such amount.
 
Legal Contingencies
 
In the ordinary course of business, we are involved in legal proceedings involving a variety of matters. Certain of these matters include speculative claims for
substantial or indeterminate amounts of damages. We evaluate the associated developments on a regular basis and accrue a liability when we believe that it is both probable that
a loss has been incurred and the amount can be reasonably estimated. If we determine there is a reasonable possibility that we may incur a loss and the loss or range of loss can
be estimated, we disclose the possible loss in the accompanying notes to the consolidated financial statements to the extent material.
 
We review the developments in our contingencies that could affect the amount of the provisions that have been previously recorded, and the matters and related
reasonably possible losses disclosed. We make adjustments to our provisions and changes to our disclosures accordingly to reflect the impact of negotiations, settlements,
rulings, advice of legal counsel, and updated information. Significant judgment is required to determine both the probability of loss and the estimated amount of loss.
 
The outcome of these matters is inherently uncertain. Therefore, if one or more legal proceedings were resolved against us for amounts in excess of management’s
expectations, our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable, could be
materially adversely affected. See “Note 7—Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K
for additional information regarding these contingencies.
 
Recent Accounting Pronouncements
 
See “Note 2—Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.
 
52

 
 
Results of Operations
 
The following table presents operating results for the years ended December 31, 2024 and 2023:
 
 
 
For the Year Ended December 31,
 
 
 
 
 
 
(in thousands)
   
% of Net sales
 
 
Change
 
 
 
2024
   
2023
   
2024
 
 
2023
 
 
$
   
%
 
Net sales
 
$
13,275   
$
65,373   
 
100.0%  
 
100.0%  
 
(52,098)  
 
(79.7)%
Cost of sales
 
 
6,993   
 
47,547   
 
52.7%  
 
72.7%  
 
(40,544)  
 
(85.3)%
Gross profit
 
 
6,282   
 
17,826   
 
47.3%  
 
27.3%  
 
(11,544)  
 
(64.8)%
 
 
 
    
 
    
 
  
 
 
  
 
 
    
 
  
Operating expenses:
 
 
    
 
    
 
  
 
 
  
 
 
    
 
  
Salaries, benefits and payroll
taxes
 
 
7,380   
 
17,454   
 
55.6%  
 
26.7%  
 
(10,074)  
 
(57.7)%
General and administrative
 
 
9,764   
 
24,213   
 
73.6%  
 
37.0%  
 
(14,449)  
 
(59.7)%
Impairment of property and
equipment
 
 
153   
 
—   
 
1.2%  
 
0.0%  
 
153   
 
— 
Depreciation and amortization
 
 
800   
 
2,243   
 
6.0%  
 
3.4%  
 
(1,443)  
 
(64.4)%
 
 
 
    
 
    
 
  
 
 
  
 
 
    
 
  
Total operating expenses
 
 
18,097   
 
43,910   
 
136.3%  
 
67.2%  
 
(25,813)  
 
(58.8)%
 
 
 
    
 
    
 
  
 
 
  
 
 
    
 
  
Loss from operations
 
 
(11,815)  
 
(26,084)  
 
(89.0)% 
 
(39.9)% 
 
14,269   
 
(54.7)%
Other income(expense), net:
 
 
    
 
    
 
  
 
 
  
 
 
    
 
  
Interest expense
 
 
(5,941)  
 
(5,450)  
 
(44.8)% 
 
(8.3)% 
 
(491)  
 
(9.0)%
Change in fair value of
contingent consideration
 
 
1,000   
 
—   
 
7.5%  
 
—%  
 
1,000   
 
—%
Loss on extinguishment of debt  
 
(876)  
 
—   
 
(6.6)% 
 
—%  
 
(876)  
 
—%
Other expense, net
 
 
(25)  
 
(791)  
 
(0.2)% 
 
(1.2)% 
 
766   
 
(96.8)%
Total other expense, net
 
 
(5,842)  
 
(6,241)  
 
(44.0)% 
 
(9.5)% 
 
399   
 
(6.4)%
 
 
 
    
 
    
 
  
 
 
  
 
 
    
 
  
Loss before income taxes
 
 
(17,657)  
 
(32,325)  
 
(133.0)% 
 
(49.4)% 
 
14,668   
 
(45.4)%
(Benefit from) provision for
income taxes
 
 
—   
 
—   
 
—%  
 
—%  
 
—   
 
—%
 
 
 
    
 
    
 
  
 
 
  
 
 
    
 
  
Net loss
 
 
(17,657)  
 
(32,325)  
 
(133.0)% 
 
(49.4)% 
 
14,668   
 
(45.4)%
Net loss attributable to non-control
interest
 
 
(17)  
 
(150)  
 
(0.1)% 
 
(0.2)% 
 
133   
 
(88.7)%
Net loss attributable to Greenlane
Holdings, Inc.
 
$
(17,640)  
$
(32,175)  
 
(132.9)% 
 
(49.2)% 
 
14,535   
 
(45.2)%
 
Consolidated Results of Operations
 
Net Sales
 
For the year ended December 31, 2024, total net sales were approximately $13.3 million, compared to approximately $65.4 million for the year ended December 31,
2023, representing a decrease of $52.1 million, or 79.7%. The year-over-year decrease in net sales was due to a major restructuring in April of 2023, involving our packaging
and industrial vaping product lines; transitioning much of this business from a gross sales to a commission structure to preserve working capital. Revenues decreased in the
Consumer Brands Group due, in part, to restructuring efforts and shift in strategy to focus on in-house brands that carry a higher margin profile while rationalizing third-party
brand offerings, which generated top line revenue with lower margins. The consumer products were affected by the inability to access capital markets on equitable terms,
resulting in stock-outs and shortages of higher velocity inventory. The Company is continuing to focus on profitable revenue and as a result top line revenue has significantly
been reduced. Concurrently, the Company has continued its focus on right-sizing the business during the fiscal year ended December 31, 2024 and through present, in an effort
to reduce sales and marketing costs and reduce or eliminate certain administrative functions.
 
53

 
 
Cost of Sales and Gross Margin
 
For the year ended December 31, 2024, cost of sales decreased by $40.6 million, or 85.3%, as compared to the year ended December 31, 2023. The decrease in cost of
sales is aligned with the decrease in revenue of 79.7%.
 
Gross margin increased by 20.0% to 47.3% for the year ended December 31, 2024, compared to gross margin of 27.3% for the same period in 2023. The increase in
gross margins is in part related to transitioning to a commission revenue model for the majority of the vaporizer sales with 100% margin versus gross revenue with lower
margins.
 
Salaries, Benefits and Payroll Taxes
 
Salaries, benefits and payroll taxes expenses decreased by approximately $10.1 million, or 57.7%, to $7.4 million for the year ended December 31, 2024, compared to
$17.5 million for the same period in 2023.
 
The decrease is related to the reduction in workforce to right-size the business and focus on profitability.
 
General and Administrative Expenses
 
General and administrative expenses decreased by approximately $14.4 million, or 59.7%, for the year ended December 31, 2024, compared to the same period in
2023. The decrease is related to major restructuring effort by the Company to reduce cost and right-size the business. The Company focused on reduction across the board in
general and administrative expenses and drove large decreases in professional and outside services, facility expenses, outbound freight, other general and administrative,
marketing, taxes and licenses, and general insurance.
 
Depreciation and Amortization Expense
 
Depreciation and amortization expense decreased $1.4 million, or 64.4%, for the year ended December 31, 2024, compared to the same period in 2023. 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.
 
Impairment of property and equipment
 
Impairment of property and equipment increased $0.2 million, for the year ended December 31, 2024, compared to the same period in 2023. The increase is related to
the write-off of certain fixed assets during the year ended December 31, 2024.
 
Other Income (Expense), Net
 
Interest expense.
 
Interest expense increased approximately $0.5 million during the fiscal year 2024 versus fiscal year 2023. The increase is primarily related to overall debt financing
and refinancing debt on more favorable terms.
 
Change in fair value of contingent consideration.
 
There was a change in fair value of contingent consideration of approximately $1.0 million for the year ended December 31, 2024 compared to the same period in
2023. The change is primarily related to reductions in earnouts related to Davinci and Eyce products.
 
Loss on debt extinguishment
 
There was an increase in loss on debt extinguishment of approximately $0.9 million for the year ended December 31, 2024, compared to the same period in 2023. The
change is primarily related to the October 29, 2024 debt restructuring during the year ended December 31, 2024. For further information, see Note 6, “Debt” of the Notes to
Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
 
Other expense, net.
 
Other expense, net, decreased by approximately $0.8 million for the year ended December 31, 2024 compared to the same period in 2023. The change is primarily due
to non-recurring costs during the year ended December 31, 2023.
 
54

 
 
Net Sales by Geographic Regions
 
 
 
Year Ended December 31,
   
 
 
 
 
 
   
 
   
% of Net sales
   
Change
 
 
 
2024
   
2023
   
2024
   
2023
   
$
   
%
 
Net sales:
 
 
    
 
    
 
    
 
    
 
    
 
  
United States
 
$
10,900   
$
58,539   
 
82.1% 
 
89.5% 
$
(47,639)  
 
(81.4)%
Canada
 
 
157   
 
1,291   
 
1.2% 
 
2.0% 
 
(1,134)  
 
(87.9)%
Europe
 
 
2,218   
 
5,543   
 
16.6% 
 
8.5% 
 
(3,325)  
 
(60.0)%
Total net sales
 
$
13,275   
$
65,373   
 
100.0% 
 
100.0% 
$
(52,098)  
 
(79.7)%
 
For the year ended December 31, 2024, our United States net sales to customers in the United States were approximately $10,9 million, compared to approximately
$58.5 million for the same period in 2023, representing a decrease of $47.6 million, or 81.4%. The year-over-year decrease was primarily due to the Company restructuring as
described above.
 
For the year ended December 31, 2024, our Canadian net sales were approximately $0.2 million, compared to approximately $1.3 million for the same period in 2023,
representing a decrease of $1.1 million, or 87.9%. The year-over-year decrease was primarily due to the Company restructuring as described above.
 
For the year ended December 31, 2024, our European net sales were approximately $2.2 million, compared to approximately $5.5 million for the same period in 2023,
representing a decrease of $3.3 million, or 60.0%. The year-over-year decrease was primarily due to the Company restructuring as described above.
 
Liquidity, Capital Resources and Going Concern
 
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. As of December 31, 2024, we had
approximately $0.9 million of cash, of which none was restricted and $0.1 million was held in foreign bank accounts, and approximately $1.5 million of working capital, which
is calculated as total current assets minus total current liabilities, as compared to approximately $0.5 million of cash, of which none was restricted and $0.1 million was held in
foreign bank accounts, and approximately $3.7 million of working capital as of December 31, 2023. 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.
 
We believe that our cash on hand and the cash flow that we generate from our operations and financing activities from recent equity fundraisings 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 the
next 12 months. Based on our cash on hand and working capital at December 31, 2024, we expect to have sufficient cash to fund planned operations into the second quarter of
2026. This is largely due to the Company’s Private Placement that occurred on February 19, 2025. See Note 13 for more information.
 
Our primary requirements for liquidity and capital are working capital, equity fundraising, 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 equity and debt transactions, as well as proceeds from equity issuances, such as
our July 2023, August 2024, and February 2025 Offerings, each as described and defined below.
 
ATM Program and Shelf Registration Statement
 
We formerly used a shelf registration statement on Form S-3 (the “Shelf Registration Statement”) to conduct securities offerings. In August 2021, we filed a prospectus
supplement and established an “at-the-market” equity offering program (the “ATM Program”) that provided 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.
 
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. Due to the untimely filing of certain of our Quarterly and Annual Reports that
was remediated in 2024, we are unable to issue additional shares of Class A common stock pursuant to the ATM Program or otherwise use the Shelf Registration Statement and
once eligible will be required to file a new S-3 for utilization of our Shelf Registration Statement.
 
55

 
 
Common Stock and Warrant Offerings
 
On June 29, 2023, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an aggregate of 560,476 shares
of our Class A common stock, pre-funded warrants to purchase up to 3,487,143 shares of our Class A Common Stock (the “July 2023 Pre-Funded Warrants”) and warrants to
purchase up to 8,095,238 shares of our Class A common stock (the “July 2023 Standard Warrants”). The July 2023 units were offered pursuant to a Registration Statement on
Form S-1 (the “July 2023 Offering”). The July 2023 Offering generated gross proceeds of approximately $4.3 million and net proceeds to the Company of approximately $3.8
million and closed on July 3, 2023.
 
On August 12, 2024, the Company entered into a securities purchase agreement with three different funds of a single institutional investor for aggregate gross cash
proceeds of $6.5 million. In connection with the private placement, the Company will issue an aggregate of 2,363,637 units and pre-funded units. The pre-funded units will be
sold at the same purchase price as the units, less the pre-funded warrant exercise price of $0.001. Each unit and pre-funded unit will consist of one share of common stock (or
one pre-funded warrant) and two common warrants, each exercisable for one share of common stock at an exercise price of $2.50 per share. The common warrant will be
exercisable on the initial exercise date described in the common warrant and will expire 5.0 years from such date.
 
On October 29, 2024, the Company entered into an Exchange Agreement with its Senior Subordinated Lender, whereby the Company agreed to exchange an aggregate
of $4,617,307 of debt originally owed to Agile Capital Funding LLC and Cedar Advance LLC in a 3(a)(9) exchange for new Senior Subordinated Notes in the principal amount
of $4,000,000 due one year from issuance (the “Exchange Note”), reducing outstanding indebtedness by approximately $617,000. The Exchange Note was convertible at the
option of the holder at $3.17 per share. In connection with the Exchange, the Company issued an aggregate of 1,261,830 five year warrants with an exercise price of $3.04 per
share (the “Exchange Warrants”). The Exchange Note was repaid out of the proceeds of the February 2025 Offering.
 
In addition, pursuant to the terms of the Exchange Agreement, the Company agreed to issue warrants to the Holders, with an initial exercise price of $3.04, exercisable
180 days after issuance (the “Exchange Inducement Warrants”). The Exchange Inducement Warrants were issued to incentivize the holders to exercise some or all of their
existing warrants originally issued on August 13, 2024 (the “Existing Warrants”) for cash, which existing warrants have an exercise price of $2.50 per share. The Exchange
Inducement Warrants are initially exercisable for zero shares, but to the extent that the Holders exercise any of such Existing Warrants during the one-hundred sixty day
inducement period, the Exchange Inducement Warrants will become exercisable on April 30, 2025 for 200% of the number of Existing Warrants exercised for cash during such
inducement period. As part of the February 2025 Offering, the exercise price of these warrants was adjusted to $1.19 per share.
 
Also, pursuant to the Exchange Agreement, the Senior Subordinated Lender agreed that it will exercise its Existing Warrants for cash prior to exercising any of its
outstanding pre-funded warrants, contingent on the market price of the common stock being above $2.50 per share and certain other conditions. The above agreement will
terminate upon the Company receiving certain cash proceeds and prepaying at least $2,250,000 of Cobra Alternative Capital Strategies LLC (“Cobra”) Notes. The Cobra Note
was repaid out of the February 2025 Offering.
 
56

 
 
On February 18, 2025, the Company entered into definitive agreements with institutional investors for the purchase and sale of approximately $25.0 million of shares
of the Company’s Class A common stock (“Common Stock” and investor warrants at a price of $1.19 per Common Unit. The entire transaction was priced at the market under
Nasdaq rules.
 
The offering consisted of the sale of Common Units (or Pre-Funded Units), each consisting of (i) one (1) share of Common Stock or one (1) Pre-Funded Warrant, (ii)
one (1) Series A PIPE Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $1.4875 (“Series A Warrant”) and (iii) one (1) Series B
PIPE Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $2.975 (“Series B Warrant” and together with the Series A Warrant, the
“Warrants”). The initial exercise price of each Series A Warrant is $1.4875 per share of Common Stock. The Series A Warrants are exercisable following stockholder approval
and expire five (5) years thereafter. The number of securities issuable under the Series A Warrant is subject to adjustment as described in more detail in the Series A Warrant.
The initial exercise price of each Series B Warrant is $2.975 per share of Common Stock or pursuant to an alternative cashless exercise option. The Series B Warrants are
exercisable following stockholder approval and expire two and one-half (2.5) years thereafter. The number of securities issuable under the Series B Warrant is subject to
adjustment as described in the Series B Warrant.
 
Also, on February 18, 2025, the Company entered into an Exchange Agreement with certain holders (the “Holders”) of three tranches of warrants to purchase
Common Stock previously issued by the Company in August 2024 and October 2024. Under such Exchange Agreement, such Holders agreed to exchange with the Company
such existing warrants for approximately 6.1 million new warrants to purchase common stock, substantially in the form of the Series B Warrants.
 
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 August 7, 2023, we repaid the approximately $4.3 million in aggregate principal amount (the “Loan Repayment”) which remained outstanding under the terms of
the Loan Agreement. 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 6 - Long Term Debt” for more information.
 
57

 
 
ERC Sale
 
On February 16, 2023, two of our wholly owned subsidiaries, Warehouse Goods LLC 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.
 
Future Receivables Financings
 
In July, August, October, and November 2023, the Company received an aggregate of approximately $3.9 million in cash pursuant to the terms of future receivables
financings (collectively, the “Future Receivables Financings”) entered into with two private lenders. As of December 31, 2024, there were no outstanding balances under this
agreement. See “Note 6 - Long Term Debt” for more information.
 
Notes Payable
 
On June 7, 2024, the Company entered into a subscription agreement with Cobra Alternative Capital Strategies, LLC. As of December 31, 2024, the Company has
been loaned $3.1 million with net cash proceeds of $2.6 million.
 
On October 29, 2024, the Company entered into the First Amendment to Amended and Restated Secured Promissory Note (the “Note Amendment”) with Cobra
Alternative Capital Strategies LLC (“Cobra”). Pursuant to the Note Amendment, Cobra agreed to extend the Maturity Date of its senior promissory note dated May 1, 2024,
which is currently due. The new Maturity Date will be October 29, 2025. In consideration for the extension, the Company (i) agreed to make such Notes convertible at the
option of Cobra with a conversion price of $3.17 per share, (ii) agreed to prepay Cobra’s debt with 50% of any money raised by the Company from warrant exercise proceeds
and from capital raise transactions, and (iii) issued Cobra an aggregate of 500,000 five year warrants with an exercise price of $3.04 per share which are identical to the
Exchange Warrants. The Note Amendment was repaid out of the February 2025 Private Placement.
 
58

 
 
Management Initiatives
 
We have completed several initiatives to optimize our working capital requirements. We launched Groove, a new, innovative Greenlane Brands product line, 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 entered into two strategic. First, we entered into a strategic partnership (the “MJ Packaging Partnership”) with A&A Global Imports d/b/a
MarijuanaPackaging.com (“MJ Pack”), a provider of packaging solutions to the cannabis industry. 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, 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 43% throughout fiscal year 2024
to reduce costs and align with our revenue projections.
 
We have incurred net losses of $17.7 million and $32.3 million for the years ended December 31, 2024 and 2023, respectively. For the year ended December 31, 2024,
cash used in operating activities was $6.8 million and cash used in operating activities for the year ended December 31, 2023 was $1.8 million. The recent macroeconomic
environment has caused weaker demand than contemplated under our business plan, resulting in a reduction in projected revenue for the twelve-month period included in the
going concern evaluation.
 
We believe that our cash on hand that includes cash raised in the February 2025 Private Placement and the cash flow that we generate from our operations 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 the next 12 months. 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.
 
Our opinions concerning liquidity are based on currently available information. To the extent this information proves to be inaccurate, or if circumstances change,
future availability of trade credit or other sources of financing may be reduced and our liquidity could be adversely affected. Our future capital requirements and the adequacy
of available funds will depend on many factors, including those described in the section titled “Risk Factors” in Item 1A of this Annual Report on Form 10-K for the year ended
December 31, 2024. 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 of December 31, 2024, 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.
 
59

 
 
Cash Flows
 
The following summary of cash flows for the periods indicated has been derived from our consolidated financial statements included in Part II, Item 8 of this Form 10-
K:
 
 
 
Year Ended December 31,
 
(in thousands)
 
2024
   
2023
 
Net cash used in operating activities
 
$
(6,750)  
$
(1,793)
Net cash (used in) provided by investing activities
 
 
(244)  
 
30 
Net cash provided by (used in) financing activities
 
 
7,427   
 
(10,140)
 
Net Cash Used in Operating Activities
 
During 2024, net cash used in operating activities of approximately $6.8 million was a result of a net loss of $17.7 million offset by non-cash adjustments to net loss of
$6.4 million and a $4.4 million increase in working capital driven by decreases in inventories of $6.3 million and decreases in other current assets of $3.5 million reduced by an
increase in accounts receivable of $2.8 million, decrease in accrued expenses of $0.8 million and a decrease in accounts payable of $2.3 million.
 
During 2023, net cash used in operating activities of approximately $1.8 million was a result of a net loss of $32.3 million offset by non-cash adjustments to net loss of
$6.5 million, including a $24.0 million increase in cash provided by working capital primarily driven by decreases in our accrued expenses and accounts payable, and decreases
in inventories offset by higher other current assets.
 
Net Cash (Used In) Provided by Investing Activities
 
During 2024, net cash provided by investing activities of approximately $0.2 million consisted primarily of capital expenditures.
 
During 2023, net cash provided by investing activities of approximately $0.1 million from $1.1 million of cash proceeds from the sale of certain equity securities
investments, offset by approximately $1.0 million of cash used for capital expenditures, including development costs for our new enterprise resource planning system.
 
Net Cash Provided by (Used in) Financing Activities
 
During 2024, net cash provided by financing activities of $7.4 million primarily consisted of cash proceeds of approximately $3.0 million from the issuance of debt,
$5.6 million from the issuance of Class A common stock, and $1.8 million from the exercise of stock options and warrants, partially offset by approximately $3.2 million in
payments on notes payable, finance lease obligations and other long-term liabilities.
 
During 2023, net cash used in financing activities primarily consisted of approximately $3.9 million of cash proceeds from the issuance of Class A common stock
related to our July 2023 Offering, approximately $3.9 million of cash proceeds from our future receivables financing, $2.1 million of cash proceeds from a secured bridge loan,
offset by approximately $0.3 million of cash used for contingent consideration payments, and approximately $2.1 million of cash used for repayments related to the Eyce and
DaVinci promissory notes, and the $15.0 million payoff of asset based lending loans.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not required.
 
60

 
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
Index to Consolidated Financial Statements
 
Page
Reports of Independent Registered Public Accounting Firm PKF O’Connor Davies PCAOB ID: 127
 
F-1
Report of Independent Registered Public Accounting Firm Marcum LLP PCAOB ID: 688
 
F-3
Consolidated Balance Sheets
 
F-4
Consolidated Statements of Operations and Comprehensive Loss
 
F-5
Consolidated Statements of Stockholders’ Equity
 
F-6
Consolidated Statements of Cash Flows
 
F-7
Notes to Consolidated Financial Statements
 
F-9
 
61

 
 
Report of Independent Registered Public Accounting Firm
 
To the Stockholders and Board of Directors
Greenlane Holdings, Inc.
 
Opinion on the Consolidated Financial Statements
 
We have audited the accompanying consolidated balance sheet of Greenlane Holdings, Inc. (the “Company”) as of December 31, 2024, and the related consolidated statements
of operations and comprehensive loss, stockholders’ equity and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in
the United States of America.
 
As discussed in Note 2 to the financial statements, the Company changed the composition of its segment information in 2024. We have also audited the adjustments necessary
to retrospectively apply the change in the 2023 segment information as provided in Note 12. In our opinion, such adjustments are appropriate and have been properly applied.
We were not engaged to audit, review, or apply any procedures to the Company’s 2023 financial statements other than with respect to the reclassifications and, accordingly, we
do not express an opinion or any other form of assurance on the 2023 financial statements as whole.
 
Also, as discussed in Notes 2 and 12 to the financial statements, the Company adopted the provisions of Accounting Standard Update 2023-07 Segment Information in 2024 on
a retrospective basis.  We have also audited the adjustments necessary to retrospectively apply the change in the 2023 segment information as provided in Note 12. In our
opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the Company’s 2023 financial
statements other than with respect to the adjustment and, accordingly, we do not express an opinion or any other form of assurance on the 2023 financial statements as whole.
 
Basis for Opinion
 
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
 
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audit provides a reasonable basis for our opinion.
 
Critical Audit Matters
 
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to
be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements taken
as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to
which they relate.
 
F-1

 
 
Financial Instruments
 
As described in Note 9 to the consolidated financial statements, during 2024, the Company issued shares of its Class A common stock and related pre-funded and common
stock warrants (“Warrants”). As disclosed in Note 2 to the consolidated financial statements, the Company classifies its Warrants as equity based on evaluation of terms in the
Warrant agreements including, but not limited to, cash settlement provisions and settlement in shares in accordance with Accounting Standards Codification (“ASC”) 815.
Management, with the assistance of an independent valuation expert, estimates the fair value of the Warrants issued using Black Scholes models, which take into consideration
the volatilities of comparable public companies.
 
Given the determination of the warrants as equity classified financial instruments and the fair value of Warrants require management to make significant estimates and
assumptions regarding the relevant valuation calculations, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high
degree of auditor judgment and an increased extent of effort, including the need to involve professionals in our firm having the expertise in the valuation of financial
instruments.
 
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
These procedures included:
 
●
evaluated (1) management’s assessment and the Company’s accounting analysis as to the classification of equity instruments, (2) the identification of any derivatives
included in the agreements.
 
 
●
obtained the Company’s valuation calculation to gain an understanding of management’s key assumptions in determining the fair value of the warrants and assessing
the source information underlying the valuation assumptions.
 
 
●
with the assistance of our valuation specialists, evaluated the methodologies and assumptions used to assess the Company’s fair value of warrants, including the
selection of the valuation methodology and other significant assumptions used by the Company.
 
 
●
performed independent shadow calculations to test the reasonableness of the fair values for warrants concluded on by the Company’s specialist. Such calculations
assessed the mathematical accuracy of the valuation model and assessed the source information underlying the valuation assumptions used in the model to determine
the fair value for the warrants at inception.
 
 
●
Assess the appropriateness of the disclosures in the consolidated financial statements.
 
Going Concern Assessment
 
As described in Note 1 to the consolidated financial statements, the Company has incurred net losses from operations for each of the two years in the period ended December
31, 2024, and net cash used in operating activities was approximately $6.8 million for the year ended December 31, 2024. The Company determined these, and other factors
which include the Company closing on a definitive agreement to sell $25.0 million of shares of the Company’s Class A common stock and investor warrants in February 2025,
did not raise substantial doubt as to the Company’s ability to continue as a going concern one year from the issuance date of the consolidated financial statements. In making
this determination, management prepared a cash flow projection through March 2026. Management used significant assumptions in preparing the cash flow projection, which
included expected revenue and cash receipts, operating costs and other obligations.
 
The principal considerations for our determination that the evaluation of management’s going concern assessment was a critical audit matter are the significant judgment and
subjectivity inherent in the Company’s future cash flow estimate and a high degree of auditor judgment in evaluating management’s forecasts for at least the next twelve
months.
 
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
These procedures included:
●
assessed the overall reasonableness of the Company's future cash flow projections, including performing sensitivity analysis on the significant assumptions utilized by
the Company and comparison to historical trends and other information obtained during the audit
●
compared actual operating results to forecasted amounts to determine the overall reasonableness of future operating cash flow projections.
●
evaluated the adequacy of the Company’s financial statement disclosures
 
/s/ PKF O’Connor Davies, LLP
 
New York, New York
March 20, 2025
 
We have served as the Company’s auditor since November 20, 2024.
 
PCAOB ID No. 127
 
F-2

 
 
Report of Independent Registered Public Accounting Firm
 
To the Stockholders and Board of Directors of
Greenlane Holdings, Inc.
 
Opinion on the Financial Statements
 
We have audited, before the effects of the retrospective adjustments to the disclosures for a change in the composition of reportable segments and the adoption of ASU 2023-07,
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) discussed in Notes 2 and 12 to the accompanying consolidated balance
sheet of Greenlane Holdings, Inc. (the “Company”) as of December 31, 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ equity
and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”) (the 2023 financial statements before the
effects of the adjustments discussed in Notes 2 and 12 to the financial statements are not presented herein). In our opinion, the financial statements, before the effects of the
retrospective adjustments to the disclosures for a change in the composition of reportable segments and adoption of ASU 2023-07 discussed in Notes 2 and 12 to the financial
statements, present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the
year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
 
We were not engaged to audit, review, or apply any procedures to the retrospective adjustments to the disclosures for a change in the composition of reportable segments and
the adoption of ASU 2023-07 discussed in Notes 2 and 12 to the financial statements, and accordingly, we do not express an opinion or any other form of assurance about
whether such retrospective adjustments are appropriate and have been properly applied. Those retrospective adjustments were audited by PKF O’Connor Davies.
 
Explanatory Paragraph – Going Concern
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the
Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These
conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
Basis for Opinion
 
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
 
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audit provide a reasonable basis for our opinion.
 
/s/ Marcum LLP
 
Marcum LLP
 
We have served as the Company’s auditor since 2021 through November 20, 2024.
 
Costa Mesa, CA
July 18, 2024
 
F-3

 
 
GREENLANE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value per share amounts)
 
 
 
December 31, 2024
   
December 31, 2023
 
ASSETS
 
 
    
 
  
Current assets
 
 
    
 
  
Cash
 
$
899   
$
463 
Accounts receivable, net of allowance of $2,616 and $2,209 at December 31, 2024 and 2023,
respectively
 
 
4,262   
 
1,693 
Inventories, net
 
 
14,215   
 
20,529 
Vendor deposits
 
 
3,091   
 
3,765 
Other current assets (Note 8)
 
 
1,305   
 
3,319 
Total current assets
 
 
23,772   
 
29,769 
 
 
 
    
 
  
Property and equipment, net
 
 
1,420   
 
2,476 
Operating lease right-of-use assets
 
 
1,043   
 
1,936 
Other assets
 
 
2,396   
 
3,912 
Total assets
 
$
28,631   
$
38,093 
 
 
 
    
 
  
LIABILITIES
 
 
    
 
  
Current liabilities
 
 
    
 
  
Accounts payable
 
$
9,787   
$
12,103 
Accrued expenses and other current liabilities (Note 8)
 
 
1,218   
 
3,056 
Customer deposits
 
 
2,661   
 
2,775 
Notes payable
 
 
7,674   
 
7,283 
Current portion of operating leases
 
 
926   
 
866 
Current portion of finance leases
 
 
—   
 
7 
Total current liabilities
 
 
22,266   
 
26,090 
 
 
 
    
 
  
Operating leases, less current portion
 
 
83   
 
1,010 
Other liabilities
 
 
—   
 
1 
Total long-term liabilities
 
 
83   
 
1,011 
Total liabilities
 
 
22,349   
 
27,101 
Commitments and contingencies (Note 7)
 
 
   
 
 
 
 
 
    
 
  
STOCKHOLDERS’ EQUITY*
 
 
    
 
  
Preferred stock, $0.0001 par value, 10,000 shares authorized, none issued and outstanding
 
 
—   
 
— 
Class A common stock, $0.01 par value per share, 600,000 shares authorized, 2,267 shares issued and
outstanding as of December 31, 2024; 600,000 shares authorized, and 339 shares issued and outstanding
as of December 31, 2023 *
 
 
21   
 
36 
Class B common stock, $0.0001 par value per share, 30,000 shares authorized, and 0 shares issued and
outstanding as of December 31, 2024; 30,000 shares authorized, and 0 shares issued and outstanding as
of December 31, 2023*
 
 
—   
 
— 
Additional paid-in capital*
 
 
281,074   
 
268,132 
Accumulated deficit
 
 
(274,929)  
 
(257,289)
Accumulated other comprehensive income
 
 
265   
 
245 
Total stockholders’ equity attributable to Greenlane Holdings, Inc.
 
 
6,431   
 
11,124 
Non-controlling interest
 
 
(149)  
 
(132)
Total stockholders’ equity
 
 
6,282   
 
10,992 
Total liabilities and stockholders’ equity
 
$
28,631   
$
38,093 
 
*After giving effect to the Reverse Stock Splits - See Note 9 - Stockholders’ Equity.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-4

 
 
GREENLANE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
 
 
 
For the year ended
December 31,
 
 
 
2024
   
2023
 
Net sales
 
$
13,275   
$
65,373 
Cost of sales
 
 
6,993   
 
47,547 
Gross profit
 
 
6,282   
 
17,826 
 
 
 
    
 
  
Operating expenses:
 
 
    
 
  
Salaries, benefits and payroll taxes
 
 
7,380   
 
17,454 
General and administrative
 
 
9,764   
 
24,213 
Impairment of property, plant and equipment
 
 
153   
 
— 
Depreciation and amortization
 
 
800   
 
2,243 
Total operating expenses
 
 
18,097   
 
43,910 
Loss from operations
 
 
(11,815)  
 
(26,084)
 
 
 
    
 
  
Other (expense) income, net:
 
 
    
 
  
Interest expense
 
 
(5,941)  
 
(5,450)
Change in fair value of contingent consideration
 
 
1,000   
 
— 
Loss on extinguishment of debt
 
 
(876)  
 
— 
Other expense, net
 
 
(25)  
 
(791)
Total other expense, net
 
 
(5,842)  
 
(6,241)
Loss before income taxes
 
 
(17,657)  
 
(32,325)
Provision for (benefit from) income taxes
 
 
—   
 
— 
Net loss
 
 
(17,657)  
 
(32,325)
Less: Net loss attributable to non-controlling interest
 
 
(17)  
 
(150)
Net loss attributable to Greenlane Holdings, Inc.
 
$
(17,640)  
$
(32,175)
 
 
 
    
 
  
Net loss attributable to Class A common stock per share - basic and diluted (Note 9)*
 
$
(14.56)  
$
(8.16)
Weighted-average shares of Class A common stock outstanding - basic and diluted (Note 9)*
 
 
1,212   
 
363 
 
 
 
    
 
  
Other comprehensive income (loss):
 
 
    
 
  
Foreign currency translation adjustments
 
 
20   
 
190 
Comprehensive loss
 
 
(17,637)  
 
(32,135)
Less: comprehensive loss attributable to non-controlling interest
 
 
(17)  
 
(150)
Comprehensive loss attributable to Greenlane Holdings, Inc.
 
$
(17,620)  
$
(31,985)
 
*After giving effect to the Reverse Stock Splits - See Note 9 - Stockholders’ Equity.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-5

 
 
GREENLANE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
 
 
 
Class A
Common Stock
   
Class B
Common Stock
   
Additional
Paid-In     Accumulated   
Accumulated
Other
Comprehensive   
Non-
Controlling   
Total
Stockholders’ 
 
  Shares*     Amount*     Shares*     Amount*    
Capital*    
Deficit
    Income (Loss)    
Interest
   
Equity
 
Balance December 31, 2022
   
145    $
1     
—    $
    —    $
264,031    $
(225,114)   $
55    $
18    $
38,991 
Net loss
   
—     
—     
—     
—     
—     
(32,175)    
    —     
(150)    
(32,325)
Equity-based compensation
   
(1)    
—     
—     
—     
60     
—     
—     
—     
60 
Issuance of Class A shares - Amended
Eyce APA (Note 3)
   
—     
—     
—     
—     
225     
—     
—     
—     
225 
Issuance of Class A shares (Note 9)
   
193     
2     
—     
—     
3,849     
—     
—     
—     
3,851 
Other comprehensive income
   
—     
—     
—     
—     
—     
—     
190     
—     
190 
Balance December 31, 2023
   
339    $
3     
—    $
—    $
268,165    $
(257,289)   $
245    $
(132)   $
10,992 
Net loss
   
—     
—     
—     
—     
—     
(-17,640)    
—     
(17)    
(17,657)
Equity-based compensation
   
17     
—     
—     
—     
86     
—     
—     
—     
86 
Issuance of Class A shares
   
1,911     
18     
—     
—     
7,451     
—     
—     
—     
7,469 
Issuance of Class A warrants
   
—     
—     
—     
—     
5,372     
—     
—     
—     
5,372 
Other comprehensive income
   
—     
—     
—     
—     
—     
—     
20     
—     
20 
Balance December 31, 2024
   
2,267    $
21     
—    $
—    $
281,074    $
(274,929)   $
265    $
(149)   $
6,282 
 
*After giving effect to the Reverse Stock Splits - See Note 9 - Stockholders’ Equity.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-6

 
 
GREENLANE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
 
For the year ended December 31,
 
 
 
2024
   
2023
 
Cash flows from operating activities:
 
 
    
 
  
Net loss
 
$
(17,657)  
$
(32,325)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
 
 
    
 
  
Depreciation and amortization
 
 
800   
 
2,242 
Equity-based compensation expense
 
 
86   
 
284 
Change in fair value of contingent consideration
 
 
(1,000)  
 
262 
Change in provision for credit losses
 
 
245   
 
188 
(Gain) loss on disposal of fixed assets
 
 
215   
 
118 
Loss on extinguishment of debt
 
 
876   
 
  
Impairment of property and equipment
 
 
153   
 
— 
Unrealized loss on equity investments
 
 
—   
 
629 
Amortization of deferred financing costs and debt discount
 
 
4,927   
 
2,820 
Other
 
 
171   
 
— 
Changes in operating assets and liabilities, net of the effects of acquisitions:
 
 
    
 
  
(Increase) decrease in accounts receivable
 
 
(2,814)  
 
4,586 
Decrease in inventories
 
 
6,315   
 
20,113 
Decrease in vendor deposits
 
 
674   
 
2,531 
Decrease in other assets
 
 
3,533   
 
7,769 
Decrease in accounts payable
 
 
(2,319)  
 
(2,770)
Decrease in accrued expenses and other liabilities
 
 
(841)  
 
(7,032)
Decrease in customer deposits
 
 
(114)  
 
(1,208)
Net cash used in operating activities
 
 
(6,750)  
 
(1,793)
Cash flows from investing activities:
 
 
    
 
  
Purchase of property and equipment, net
 
 
(244)  
 
(1,007)
Proceeds from sale of equity investments
 
 
—   
 
1,037 
Net cash (used in) provided by investing activities
 
 
(244)  
 
30 
Cash flows from financing activities:
 
 
    
 
  
Proceeds from issuance of Class A common stock, net of issuance costs
 
 
5,640   
 
3,852 
Proceeds from exercise of stock options and warrants, net of costs
 
 
1,827   
 
— 
Repayment of Asset-Based Loan
 
 
—   
 
(15,000)
Proceeds from Secured Bridge Loan, net of costs
 
 
—   
 
2,090 
Debt issuance costs
 
 
—   
 
(751)
Repayment of loan against future accounts receivable
 
 
(939)  
 
(1,721)
Proceeds from future receivables financing
 
 
225   
 
3,894 
Payments on Eyce and DaVinci promissory notes
 
 
—   
 
(2,133)
Repayments of notes payable
 
 
(2,275)  
 
— 
Proceeds from notes payable
 
 
2,950   
 
— 
Purchase consideration paid for Eyce and DaVinci acquisition
 
 
—   
 
(350)
Other
 
 
(1)  
 
(21)
Net cash (used in) provided by financing activities
 
 
7,427   
 
(10,140)
Effects of exchange rate changes on cash
 
 
3   
 
190 
Net decrease in cash and cash equivalents
 
 
436   
 
(11,713)
Cash and cash equivalents, as of beginning of the year
 
 
463   
 
12,176 
Cash and cash equivalents, as of end of year
 
$
899   
$
463 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-7

 
 
GREENLANE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(in thousands)
 
Reconciliation of cash and restricted cash to condensed consolidated balance sheets:
 
 
 
For the year ended December 31,
 
 
 
2024
   
2023
 
Beginning of the period
 
 
    
 
  
Cash
 
$
463   
$
6,458 
Restricted cash
 
 
—   
 
5,718 
Total cash and restricted cash, beginning of period
 
$
463   
$
12,176 
 
 
 
    
 
  
End of the period
 
 
    
 
  
Cash
 
$
899   
$
463 
Restricted cash
 
 
—   
 
— 
Total cash and restricted cash, end of period
 
$
899   
$
463 
 
 
 
    
 
  
Supplemental disclosures of cash flow information
 
 
    
 
  
Cash paid during the period for interest
 
$
916   
$
4,495 
Cash paid during the period for income taxes
 
$
—   
$
— 
Cash paid for amounts included in the measurement of lease liabilities
 
$
—   
$
1,353 
 
 
 
    
 
  
Non-cash investing activities and financing activities:
 
 
    
 
  
Non-cash purchases of property and equipment
 
$
—   
$
133 
Transfer from contingent consideration to notes payable
 
$
—   
$
1,650 
Transfer from accrued expenses to notes payable
 
$
—   
$
437 
Fair value of common stock warrants issued as a debt discount
 
$
1,699   
 
  
Extinguishment of debt in connection with Synergy Asset purchase agreement
 
$
2,658   
$
— 
Issuance of Class A Warrants
 
$
3,673   
 
— 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-8

 
 
GREENLANE HOLDINGS, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1. BUSINESS OPERATIONS AND ORGANIZATION
 
Organization
 
Greenlane Holdings, Inc. (“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”). 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.
 
We have been developing a 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 more affordable product line and Higher Standards – our premium smoke shop
and ancillary product brand, and our award winning Vapor.com website and 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”). As the sole manager of the
Operating Company, we operate and control all of the business and affairs of the Operating Company, and we conduct our business through the Operating Company and its
subsidiaries. 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 wholly owned
subsidiaries 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. We determined that the Operating Company is a variable interest entity (“VIE”) and that we are the primary beneficiary of the
Operating Company. Accordingly, pursuant to the VIE accounting model, beginning in the fiscal quarter ended June 30, 2019, we consolidated the Operating Company in our
consolidated financial statements and reported a non-controlling interest related to the Common Units held by the members of the Operating Company (other than the Common
Units held by us) on our consolidated financial statements.
 
On August 31, 2021, we completed our merger with KushCo Holdings, Inc. (“KushCo”) and have included the results of operations of KushCo in our consolidated statements
of operations and comprehensive loss from that date forward. 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.
 
Our corporate structure is commonly referred to as an “Up-C” structure. 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
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.
 
F-9

 
 
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 Agreement (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.
 
Reverse Stock Splits
 
On June 2, 2023, we filed a Certificate of Amendment to the A&R Charter with the Secretary of State for the State of Delaware (“SSSD”), which effected a one-for-ten reverse
stock split (the “2023 Reverse Stock Split” and together with the 2022 Reverse Stock Split, the “Reverse Stock Splits”) of our issued and outstanding shares of Common Stock
at 5:01 PM Eastern Time on June 5, 2023. As a result of the 2023 Reverse Stock Split, every ten shares of common stock issued and outstanding were converted into one share
of common stock. We paid cash in lieu of fractional shares, and accordingly, no fractional shares were issued in connection with the 2023 Reverse Stock Split.
 
On July 23, 2024, the Board approved the reverse split at a ratio of one-for-11 and the Amendment has been filed with the Secretary of State of the State of Delaware, which
became effective on August 5, 2024 at 12:01 AM Eastern Time, before the opening of trading on the Nasdaq.
 
The Reverse Stock Splits 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
Splits, as required by the terms of each security. The number of shares available to be awarded under our Amended and Restated 2019 Equity Incentive Plan have also been
appropriately adjusted. See “Note 10 — Compensation Plans” for more information.
 
All share and per share amounts in these consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the
Reverse Stock Splits, including reclassifying an amount equal to the reduction in par value of Common Stock to additional paid-in capital.
 
Liquidity and Going Concern
 
Pursuant to ASC 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”), management must evaluate whether there are conditions and events,
considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these condensed consolidated
financial statements are issued. In accordance with ASC 205-40, management’s analysis can only include the potential mitigating impact of management’s plans that have not
been fully implemented as of the issuance date if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the
plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.
 
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 other equity issuances.
 
We believe that our cash on hand that includes cash raised in the February 2025 Private Placement and the cash flow that we generate from our operations 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 the
next 12 months. Based on our cash on hand and working capital at December 31, 2024, we expect to have sufficient cash to fund planned operations through the second quarter
of 2026. This is largely due to the Company’s Private Placement that occurred on February 19, 2025. See Note 13 for more information.
 
F-10

 
 
ATM Program and Shelf Registration Statement
 
We formerly used a shelf registration statement on Form S-3 (the “Shelf Registration Statement”) to conduct securities offerings from time to time in order to meet our liquidity
needs. In August 2021, we filed a prospectus supplement and established an “at-the-market” equity offering program (the “ATM Program”) that provided 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.
 
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. Due to the untimely filing of certain of our Quarterly and Annual Reports, that
was remediated in 2024, we are unable to issue additional shares of Class A common stock pursuant to the ATM Program or otherwise use the Shelf Registration Statement and
once eligible will be required to file a Form S-3.
 
Common Stock and Warrant Offerings.
 
On June 29, 2023, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an aggregate of 560,476 shares of our
Class A common stock, pre-funded warrants to purchase up to 3,487,143 shares of our Class A Common Stock (the “July 2023 Pre-Funded Warrants”) and warrants to purchase
up to 8,095,238 shares of our Class A common stock (the “July 2023 Standard Warrants”). The July 2023 units were offered pursuant to a Registration Statement on Form S-1
(the “July 2023 Offering”). The July 2023 Offering generated gross proceeds of approximately $4.3 million and net proceeds to the Company of approximately $3.8 million and
closed on July 3, 2023. See “Note 9 – Stockholders’ Equity” for further information.
 
On August 7, 2024, the Company  issued a note (the “Note”) in the principal amount of $3,237,269 to Cobra. The Note is due the earlier of (i)February 5, 2025; or (ii) the
Company’s receipt of at least $3,500,000 of gross proceeds from an offering of their securities (a “Qualified Offering”) and contain a 20% original issue discount. The Notes
are convertible into common stock after maturity if not paid prior. In connection with the issuance of the Note, the Company issued the Investor warrants to purchase up to
1,618,635 shares at the Qualified Offering Price.
 
On August 12, 2024, the Company entered into a securities purchase agreement with a single institutional investor for aggregate gross cash proceeds of $6.5 million. In
connection with the private placement, the Company issued an aggregate of 2,363,637 units and pre-funded units. The pre-funded units were sold at the same purchase price as
the units, less the pre-funded warrant exercise price of $0.001. Each unit and pre-funded unit consisted of one share of common stock (or one pre-funded warrant) and two
common warrants, each exercisable for one share of common stock at an exercise price of $2.50 per share. The common warrant will be exercisable on the initial exercise date
described in the common warrant and will expire 5.0 years from such date.
 
On October 29, 2024, the Company entered into an Exchange Agreement with its Senior Subordinated Lender, whereby the Company agreed to exchange an aggregate of
$4,617,307 of debt originally owed to Agile Capital Funding LLC and Cedar Advance LLC in a 3(a)(9) exchange for new Senior Subordinated Notes in the principal amount of
$4,000,000 due one year from issuance (the “Exchange Note”), reducing outstanding indebtedness by approximately $617,000. The Exchange Note is convertible at the option
of the holder at $3.17 per share. In connection with the Exchange, the Company issued an aggregate of 1,261,830 five year warrants with an exercise price of $3.04 per share
(the “Exchange Warrants”). See Note 4 for more information.
 
In addition, pursuant to the terms of the Exchange Agreement, the Company agreed to issue warrants to the Holders, with an initial exercise price of $3.04, exercisable 180 days
after issuance (the “Exchange Inducement Warrants”). The Exchange Inducement Warrants were issued to incentivize the holders to exercise some or all of their existing
warrants originally issued on August 13, 2024 (the “Existing Warrants”) for cash, which existing warrants have an exercise price of $2.50 per share. The Exchange Inducement
Warrants are initially exercisable for zero shares, but to the extent that the Holders exercise any of such Existing Warrants during the one-hundred sixty day inducement period,
the Exchange Inducement Warrants will become exercisable on April 30, 2025 for 200% of the number of Existing Warrants exercised for cash during such inducement period.
 
Also, pursuant to the Exchange Agreement, the Senior Subordinated Lender agreed that it will exercise its Existing Warrants for cash prior to exercising any of its outstanding
pre-funded warrants, contingent on the market price of the common stock being above $2.50 per share and certain other conditions. The above agreement will terminate upon
the Company receiving certain cash proceeds and prepaying at least $2,250,000 of Cobra Alternative Capital Strategies LLC (“Cobra”) Notes.
 
F-11

 
 
On February 18, 2025, the Company entered into definitive agreements with institutional investors for the purchase and sale of approximately $25.0 million of shares of the
Company’s Class A common stock (“Common Stock” and investor warrants at a price of $1.19 per Common Unit. The entire transaction has been priced at the market under
Nasdaq rules.
 
The offering consisted of the sale of Common Units (or Pre-Funded Units), each consisting of (i) one (1) share of Common Stock or one (1) Pre-Funded Warrant, (ii) one (1)
Series A PIPE Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $1.4875 (“Series A Warrant”) and (iii) one (1) Series B PIPE
Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $2.975 (“Series B Warrant” and together with the Series A Warrant, the
“Warrants”). The initial exercise price of each Series A Warrant is $1.4875 per share of Common Stock. The Series A Warrants are exercisable following stockholder approval
and expire five (5) years thereafter. The number of securities issuable under the Series A Warrant is subject to adjustment as described in more detail in the Series A Warrant.
The initial exercise price of each Series B Warrant is $2.975 per share of Common Stock or pursuant to an alternative cashless exercise option. The Series B Warrants are
exercisable following stockholder approval and expire two and one-half (2.5) years thereafter. The number of securities issuable under the Series B Warrant is subject to
adjustment as described in the Series B Warrant.
 
Also, on February 18, 2025, the Company entered into an Exchange Agreement with certain holders (the “Holders”) of three tranches of warrants to purchase Common Stock
previously issued by the Company in August 2024 and October 2024. Under such Exchange Agreement, such Holders agreed to exchange with the Company such existing
warrants for approximately 6.1 million new warrants to purchase common stock, substantially in the form of the Series B Warrants.
 
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 August 7, 2023, we repaid the approximately $4.3 million in aggregate principal amount (the “Loan Repayment”) which remained outstanding under the terms of the Loan
Agreement. 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 6 - Long Term Debt” for more information.
 
ERC Sale
 
On February 16, 2023, two of our wholly owned subsidiaries, Warehouse Goods LLC and Kim International LLC, 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 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.
 
Future Receivables Financing
 
In July, August, October, and November 2023, the Company received an aggregate of approximately $3.9 million in cash pursuant to the terms of future receivables financings
(collectively, the “Future Receivables Financings”) entered into with two private lenders. At December 31, 2024, no such financing remained outstanding. See “Note 6 - Long
Term Debt” for more information.
 
Secured Bridge Loan
 
On September 22, 2023, the Company entered into a secured loan pursuant to a Loan and Security Agreement (the “September 2023 Loan Agreement”), dated as of September
22, 2023 with Synergy Imports, LLC (the “Secured Bridge Loan Lender”).
 
F-12

 
 
Pursuant to the September 2023 Loan Agreement, the Secured Bridge Loan Lender agreed to make available to the Company a six-month bridge loan of $2.2 million in new
funds. Additionally, the Secured Bridge Loan Lender agreed to defer payments totaling $2,028,604 already owed by the Company under existing payment obligations and
potentially defer up to an additional $2,655,778 which may become due pursuant to existing agreements during the term of the September 2023 Loan Agreement.
 
Subject to certain exceptions, the Company agreed to pledge all of its assets, with the exception of deposit accounts and accounts receivable, as collateral. Additionally, the
Company agreed to transfer one US patent and two related foreign patents and a related trademark in exchange for an exclusive license back of such assets in the area of
smoking products and accessories in connection with the September 2023 Loan Agreement.
 
In May 2024, the Company modified its debt agreement with Synergy to reduce the principal balance due by $2.7 million from $5.1 million as part of the Loan Modification
Agreement concurrent with the Asset Purchase Agreement. Synergy acquired certain assets from the Company in exchange for the reduction in overall principal owed. During
2024 Cobra acquired the Secured Bridge Loan from the Secured Bridge Loan Lender which was restructured as part of the Note Amendment on October 29, 2024. See “Note 6
- Long Term Debt” for more information
 
Note Payable
 
On June 7, 2024, the Company entered into a subscription agreement with Cobra Alternative Capital Strategies, LLC (the “Subscription Agreement”). As of December 31,
2024, the Company has been loaned $3.1 million with net cash proceeds of $2.6 million pursuant to the Subscription Agreement. The note was issued with a 20% original issue
discount and is due in full on December 7, 2024. See “Note 6 - Long Term Debt” for more information. During the year ended December 31, 2024, the Company repaid the
amount in full.
 
On August 7, 2024, the Company issued a note (the “Note”) in the principal amount of $3,237,269 to Cobra. The Note is due the earlier of (i)February 5, 2025; or (ii) the
Company’s receipt of at least $3,500,000 of gross proceeds from an offering of their securities (a “Qualified Offering”) and contain a 20% original issue discount. The Notes
are convertible into common stock after maturity if not paid prior. In connection with the issuance of the Note, the Company issued the Investor warrants to purchase up to
1,618,635 shares at the Qualified Offering Price.
 
On October 29, 2024, the Company entered into the First Amendment to Amended and Restated Secured Promissory Note (the “Note Amendment”) with Cobra. Pursuant to the
Note Amendment, Cobra agreed to extend the Maturity Date of its Secured Bridge Loan and the Subscription Agreement (together the “Notes”). The new Maturity Date will be
October 29, 2025. In consideration for the extension, the Company (i) agreed to make such Notes convertible at the option of Cobra with a conversion price of $3.17 per share,
(ii) agreed to prepay Cobra’s debt with 50% of any money raised by the Company from warrant exercise proceeds and from capital raise transactions, and (iii) issued Cobra an
aggregate of 500,000 five year warrants with an exercise price of $3.04 per share which are identical to the Exchange Warrants. This loan was repaid in full as part of the
February 2025 Private Placement.
 
Management Initiatives
 
We have completed several initiatives to optimize our working capital requirements. We launched Groove, a new, innovative Greenlane Brands product line, 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 entered into two strategic partnerships. 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.
 
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 partner. While the
strategic partnership may result in a decrease in top line revenue for these packaging and vape products, this partnership combined with some of our other restructuring
initiatives should allow us to reduce our overall cost-structure and enhance our margins, thereby improving our balance sheet.
 
We have successfully renegotiated many of our vendor and supplier partnership terms and are continuing to improve working capital arrangements with our vendors and
suppliers. We have made progress consolidating and streamlining our office, warehouse, and distribution operations footprint. We have reduced our workforce significantly to
reduce costs and align with our revenue projections.
 
The Company has incurred net losses of $17.7 million and $32.3 million for the years ended December 31, 2024 and 2023, respectively. For the years ended December 31,
2024 and 2023, cash used in operating activities were $6.7 million and $1.8 million, respectively. 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 believe that our cash on hand and the cash flow that we generate from our operations 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 the next 12 months. Moving forward, 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. For a more complete description of
our initiatives, see the Management Discussion and Analysis.
 
F-13

 
 
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
 
Our audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
and with the instructions to Form 10-K and Article 8 of Regulation S-X.
 
Principles of Consolidation
 
Our consolidated financial statements include our accounts, the accounts of the Operating Company, and the accounts of the Operating Company’s consolidated subsidiaries.
All significant intercompany balances and transactions have been eliminated in consolidation.
 
Use of Estimates
 
Conformity with U.S. 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. We base our
estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. U.S. GAAP requires us to make
estimates and judgments in several areas. Such areas include, but are not limited to the following: the collectability of accounts receivable; the allowance for slow-moving or
obsolete inventory; the realizability of deferred tax assets; the fair value of contingent consideration arrangements; the useful lives property and equipment; the calculation of
our VAT taxes receivable and VAT taxes, fines, and penalties payable; our loss contingencies, including our TRA liability; and the valuation and assumptions underlying equity-
based compensation and warrants. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future.
The actual results could differ materially from those estimates.
 
Segment Reporting
 
We manage our global business operations through our operating and reportable business segments. As of December 31, 2024, we determined that we have one reportable
operating business segment. Our reportable segment has 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 (“CFO”), manages our business, makes resource allocation and operating decisions, and evaluates
operating performance.
 
Business Combinations
 
Our business combinations are accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations (“ASC 805”). Under the
acquisition method, we recognize 100% of the assets we acquire and liabilities we assume, regardless of the percentage we own, at their estimated fair values as of the date of
acquisition. Any excess of the purchase price over the fair value of the net assets and other identifiable intangible assets we acquire is recorded as goodwill. To the extent the
fair value of the net assets we acquire, including other identifiable assets, exceeds the purchase price, a bargain purchase gain is recognized. The assets we acquire, and
liabilities we assume from contingencies, are recognized at fair value if we can readily determine the fair value during the measurement period. The operating results of
businesses we acquire are included in our consolidated statement of operations from the date of acquisition. Acquisition-related costs are expensed as incurred. See “Note 3—
Business Acquisitions.”
 
Equity-Based Compensation
 
We account for equity-based compensation grants of equity awards to employees in accordance with ASC Topic 718, Compensation — Stock Compensation. This standard
requires us to measure compensation expense based on the estimated fair value of share-based awards on the grant date and recognize as expense over the requisite service
period, which is generally the vesting period. We estimate the fair value of stock options using the Black-Scholes model on the grant date. The Black-Scholes model requires us
to use several variables to estimate the grant-date fair value of our equity-based compensation awards including expected term, expected volatility and risk-free interest rates.
Our equity-based compensation costs are recognized using a graded vesting schedule. For liability-classified awards, we record fair value adjustments up to and including the
settlement date. Changes in the fair value of our equity-based compensation liability that occur during the requisite service period are recognized as compensation cost over the
vesting period. Changes in the fair value of the equity-based compensation liability that occur after the end of the requisite service period but before settlement, are recognized
as compensation cost of the period in which the change occurs. We account for forfeitures as they occur. See “Note 10—Compensation Plans.”
 
F-14

 
 
Loss Contingencies
 
Certain conditions may exist which may result in a loss to us, but which will only be resolved when one or more future events occur or fail to occur. Management assesses such
contingent liabilities and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us,
or unasserted claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought therein.
 
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability is estimable, the liability would be accrued in
our consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed.
 
Loss contingencies considered remote are generally not disclosed. Unasserted claims that are not considered probable of being asserted and those for which an unfavorable
outcome is not reasonably possible have not been disclosed.
 
Fair Value Measurements
 
We apply the provisions of ASC Topic 820, Fair Value Measurements, which defines fair value, establishes a framework for its measurement and expands disclosures about fair
value measurements. Fair value is defined as the exchange price we would receive for an asset or an exit price we would pay to transfer a liability in the principal, or most
advantageous, market for our asset or liability in an orderly transaction with a market participant on the measurement date. We determine the fair market values of our financial
instruments based on the fair value hierarchy, which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. The following three levels of inputs may be used to measure fair value:
 
Level 1 — Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
 
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
The carrying amounts of our financial instruments, including cash, accounts receivable, accounts payable, accrued expenses and short-term debt, are carried at historical cost
basis, which approximates their fair values because of their short-term nature. The fair value of our long-term debt is the estimated amount we would have to pay to repurchase
the debt, inclusive of any premium or discount attributable to the difference between the stated interest rate and market rate of interest at each balance sheet date. On a recurring
basis, we measure and record contingent consideration using fair value measurements in the accompanying consolidated financial statements. See “Note 4—Fair Value of
Financial Instruments.”
 
We also own equity securities of private entities, which do not have readily determinable fair values. We elected to measure these equity securities at cost minus impairment, if
any. At each reporting period, we make a qualitative assessment considering impairment indicators to evaluate whether our investment is impaired. The equity securities are
adjusted to fair value when an observable price change can be identified. See “Note 4—Fair Value of Financial Instruments.”
 
Cash
 
For purposes of reporting cash flows, we consider cash on hand, checking accounts, and savings accounts to be cash. We also consider all highly-liquid investments with
original maturities of three months or less from the date of purchase to be cash equivalents. We place our cash with high credit quality financial institutions, which provide
insurance through the Federal Deposit Insurance Company. At times, the balance in our accounts may exceed federally insured limits. We perform periodic evaluations of the
relative credit standing of these institutions and do not expect any losses related to such concentrations. As of December 31, 2024, and 2023, approximately $0.1 million and
$0.1 million, respectively, of our cash balances were in foreign bank accounts and uninsured. As of December 31, 2024, and 2023, we had no cash equivalents.
 
F-15

 
 
Accounts Receivable, net
 
Accounts receivable represent amounts due from customers for merchandise sales and are recorded when revenue is earned and are carried at the original invoiced amount less
an allowance for any expected credit loss. An account is considered past due when payment has not been rendered by its due date based upon the terms of the sale. Generally,
accounts receivable are due thirty days after the billing date. We maintain an allowance for credit losses to reserve for potentially uncollectible receivable amounts. In
evaluating our ability to collect outstanding receivable balances, we consider various factors including the age of the balance, the creditworthiness of the customer, the
customer’s current financial condition, current economic conditions, and other factors that may affect our ability to collect from customers. We write off accounts as
uncollectible on a case-by-case basis. We pledge accounts receivable as collateral for our long-term debt, see “Note 6—Debt.”
 
Inventories, net
 
Inventories consist of finished goods that we value at the lower of cost or net realizable value on a weighted average cost basis for the majority of the inventory. We established
an allowance for slow-moving or obsolete inventory based upon assumptions about future demands and market conditions. At December 31, 2024, and 2023, the reserve for
obsolescence was approximately $9.0 million and $9.5 million, respectively. We pledge inventory as collateral for our long-term debt, see “Note 6— Debt.”
 
Vendor Deposits
 
Vendor deposits represent prepayments we make to vendors for inventory purchases. A significant number of vendors require us to prepay for inventory purchases.
 
Customs Bonds
 
The Company is required to obtain customs bonds to import goods into the United States to provide security for payment of duties, taxes and other fees incurred as a result of
importing goods. Customs bonds are included in “Other current assets” in our consolidated balance sheets, see “Note 8 - Supplemental Financial Statement Information.”
 
Assets Held for Sale
 
We generally consider assets to be held for sale when (i) we commit to a plan to sell the assets, (ii) the assets are available for immediate sale in their present condition, (iii) we
have initiated an active program to locate a buyer and other actions required to complete the plan to sell the assets, (iv) consummation of the planned sale transaction is
probable, (v) the assets are being actively marketed for sale at a price that is reasonable in relation to their current fair value, (vi) the transaction is expected to qualify for
recognition as a completed sale, within one year, and (vii) significant changes to or withdrawal of the plan is unlikely. Following the classification of any depreciable assets
within a disposal group as held for sale, we discontinue depreciating the asset and write down the asset to the lower of carrying value or fair market value less cost to sell, if
needed.
 
Property and Equipment, net
 
We state property and equipment at cost or, if acquired through a business combination, fair value at the date of acquisition. We calculate depreciation and amortization using
the straight-line method over the estimated useful lives of the assets, except for our leasehold improvements, which are depreciated over the shorter of their estimated useful
lives or their related lease term. Upon the sale or retirement of assets, the cost and related accumulated depreciation are removed from our accounts and the resulting gain or
loss is credited or charged to income. We expense costs for repairs and maintenance when incurred. Property and equipment includes assets recorded under finance leases, see
“Note 5—Leases.” We pledge property and equipment as collateral for our long-term debt, see “Note 6—Debt.”
 
Impairment of Long-Lived Assets
 
We assess the recoverability of the carrying amount of our long lived-assets, including property and equipment and finite-lived intangibles, whenever events or changes in
circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be assessed when estimated undiscounted future
cash flows from the operation and disposition of the asset group are less than the carrying amount of the asset group. Asset groups have identifiable cash flows and are largely
independent of other asset groups. Measurement of an impairment loss is based on the excess of the carrying amount of the asset group over its fair value.
 
Changes in our future operations and business lines could affect the estimated undiscounted future cash flows from the operation of certain long-lived assets, such as customer
relationships, and may give rise to impairment losses in future periods.
 
Debt Modifications and Extinguishments
 
When the Company modifies or extinguishes debt, it first evaluates whether the modification qualifies as a troubled debt restructuring (TDR) under ASC Topic 470-60, which
requires debt modifications to be evaluated if (1) the borrower is experiencing financial difficulty, and (2) the lender grants the borrower a concession. If a TDR is determined
not to have occurred, the Company evaluates the modification in accordance with ASC Topic 470-50-40, which requires modification to debt instruments to be evaluated to
assess whether the modifications are considered “substantial modifications”. A substantial modification of terms is accounted for as an extinguishment.
 
If there is a conversion feature within the debt instrument, the Company evaluates whether the conversion feature should be bifurcated under ASC 815 as a derivative. If the
Company believes the embedded conversion feature has no fair value on the date of issuance (measurement date) and the embedded conversion feature has no beneficial
conversion feature, the embedded conversion feature does not meet the criteria in ASC 470-50-40-10 or 470-20-25 and the issuance of the convertible debt is considered a
modification, and not an extinguishment that would require the recognition of a gain or loss. If the Company determines the change in fair value of the derivative meets the
criteria for substantial modification under ASC 470 it will treat the modification as extinguishment and recognize a loss from debt extinguishment.
 
Investment in Equity Securities
 
Our investment in equity securities without readily determinable fair value consist of ownership interests in Airgraft Inc. We determined that our ownership interest does not
provide us with significant influence over the operations of this investments. Accordingly, we account for our investment in this entity as equity securities. Airgraft Inc. is a
private entity 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. Investments in equity securities are included within “Other assets” in our consolidated balance sheets. See “Note 4—Fair Value of Financial Instruments.”
 
F-16

 
 
Foreign Currency Translation
 
Our consolidated financial statements are presented in United States (U.S.) dollars. The functional currency of one of the Operating Company’s wholly-owned, Canada-based,
subsidiaries is the Canadian dollar. The functional currency of the Operating Company’s wholly-owned, Netherlands-based subsidiary is the Euro. The assets and liabilities of
these subsidiaries are translated into U.S. dollars at current exchange rate at each balance sheet date for assets and liabilities and an appropriate average exchange rate for each
applicable period within our consolidated statements of operations and comprehensive loss. Capital accounts are translated at their historical exchange rates when the capital
transactions occurred. The foreign currency translation adjustments are included in accumulated other comprehensive loss, a separate component of stockholders’ deficit in our
consolidated balance sheets. Other exchange gains and losses are reported within our consolidated statements of operations and comprehensive loss.
 
Comprehensive (Loss) Income
 
Comprehensive (loss) income includes net (loss) income as currently reported by us, adjusted for other comprehensive items. Other comprehensive items consist of foreign
currency translation gains and losses and unrealized gains and losses on derivative financial instruments that qualify as hedges.
 
Advertising
 
We expense advertising costs as incurred and include them in general and administrative expenses in our consolidated statements of operations and comprehensive loss.
Advertising costs were approximately $0.5 million and $1.2 million for the years ended December 31, 2024, and 2023, respectively.
 
Income Taxes
 
We are a corporation subject to income taxes in the United States. Certain subsidiaries of the Operating Company are taxable separately from us. Our proportional share of the
Operating Company’s subsidiaries’ provisions are included in our consolidated financial statements.
 
As of December 31, 2024 and 2023, we hold all the outstanding Common Units in the Operating Company and are the sole member. As a result, starting in 2023, 100% of the
Operating Company’s US and state income and expenses will be included in our US and state tax returns.
 
Our deferred income tax assets and liabilities are computed for differences between the tax basis and financial statement amounts that will result in taxable or deductible
amounts in the future. We compute deferred balances based on enacted tax laws and applicable rates for the periods in which the differences are expected to affect taxable
income. A valuation allowance is recognized for deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In
making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future
taxable income, tax-planning strategies, and results of recent operations. If we determine we would be able to realize our deferred tax assets for which a valuation allowance
had been recorded, then we would adjust the deferred tax asset valuation allowance, which would reduce our provision for income taxes.
 
We evaluate the tax positions taken on income tax returns that remain open and positions expected to be taken on the current year tax returns to identify uncertain tax positions.
Unrecognized tax benefits on uncertain tax positions are recorded on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax
positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest
amount of tax benefit that is more than 50 percent likely to be realized is recognized. Interest and penalties related to unrecognized tax benefits are recorded in income tax
benefit. We have no uncertain tax positions that qualify for inclusion in our consolidated financial statements. See “Note 11—Income Taxes.”
 
F-17

 
 
Tax Receivable Agreement (TRA)
 
We entered into the TRA with the Operating Company and each of the members of the Operating Company 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 that are funded by us or exchanges of Common Units as described above in “Note 1—Business Operations and Organization” and (ii)
certain other tax benefits attributable to payments made under the TRA.
 
We compute annual tax benefits by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits. The Operating Company
expects to benefit from the remaining 15% of any tax benefits that it may actually realize. The TRA payments are not conditioned upon any continued ownership interest in the
Operating Company. The rights of each noncontrolling interest holder under the TRA are assignable to transferees of its interest in the Operating Company. The timing and
amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Operating Company
generates each year and the applicable tax rate.
 
We periodically evaluate the realizability of the deferred tax assets resulting from the exchange of Common Units for our Class A common stock. If the deferred tax assets are
determined to be realizable, we then assess whether payment of amounts under the TRA have become probable. If so, we record a TRA liability equal to 85% of such deferred
tax assets. In subsequent periods, we assess the realizability of all of deferred tax assets subject to the TRA. If we determine that a deferred tax asset with a valuation allowance
is realizable in a subsequent period, the related valuation allowance will be released and consideration of a corresponding TRA liability will be assessed. The realizability of
deferred tax assets, including those subject to the TRA, is dependent upon the generation of future taxable income during the periods in which those deferred tax assets become
deductible and consideration of prudent and feasible tax-planning strategies.
 
The measurement of the TRA is accounted for as a contingent liability. Therefore, once we determine that a payment to a member of the Operating Company has become
probable and can be estimated, the estimated payment will be accrued. See “Note 11—Income Taxes.”
 
Revenue Recognition
 
Revenues from the sale of our merchandise are recognized at a point in time when control of merchandise is transferred to the customer. Revenue is measured based on the
amount of consideration expected to be received in exchange for those goods or services, reduced by promotional discounts and estimates for return allowances and refunds.
Taxes collected from customers for remittance to governmental authorities are excluded from net sales.
 
Revenue is generated primarily from the sale of finished products to customers, whereby each product unit represents a single performance obligation. Revenue is recognized
from product sales when the customer has obtained control of the products, which is either at point of sale or delivery to the customer, depending upon the specific terms and
conditions of the arrangement, or at the point of sale for our retail store sales. We provide no warranty on products sold. Product warranty is provided by the manufacturers. For
certain product offerings we may receive a deposit from the customer (generally 25% - 50% of the total order cost, but the amount can vary by customer contract) when an
order is placed by a customer. We typically complete these orders within one to six months from the date of order, depending on the complexity of the customization and the
size of the order, but the completion timeline can vary by product type and terms of sales with each customer. See “Note 8—Supplemental Financial Statement Information” for
a summary of changes to our customer deposits liability balance during the years ended December 31, 2024 and 2023.
 
Product returns are estimated based on historical experience and recorded as a refund liability that reduces the net sales for the period. Actual historical returns, current
economic trends and changes in order volume are analyzed when evaluating the adequacy of sales returns allowances in any reporting period. Liability for returns, which is
included within “Accrued expenses and other current liabilities” in the consolidated balance sheets, was approximately $0.1 million and $0.1 million as of December 31, 2024
and 2023, respectively. There were no liabilities related to refunds as of December 31, 2024.
 
We elected to account for shipping and handling expenses that occur after the customer has obtained control of products as a fulfillment activity in cost of sales. Shipping and
handling fees charged to customers are included in net sales upon completion of our performance obligations. We apply the practical expedient provided for by the applicable
revenue recognition guidance by not adjusting the transaction price for significant financing components for periods less than one year. We also apply the practical expedient
provided by the applicable revenue recognition guidance based upon which we generally expense sales commissions when incurred because the amortization period is one year
or less. Sales commissions are recorded within “Salaries, benefits and payroll tax expenses” in the consolidated statements of operations and comprehensive loss.
 
F-18

 
 
The Company transitioned to a commission revenue model for the majority of the sales of industrial vaporizers and packaging products. The company operates as a sales agent
servicing vape customers and receives a commission for these services. The company was previously working directly with these customers and recognizing gross revenue
versus straight commission revenue. The Company recognizes this fee on a periodic basis when the products have been shipped for the end consumer. In working with their
partner, the Company is not responsible for fulfilling a promise to provide the specified goods, does not establish the pricing with its partners customers, and does not have
control over the goods that will be shipped. As such, the Company is an agent and recognizes its revenue on a net basis for its service. The partner company pays Greenlane a
negotiated percentage-based fee on a quarterly basis.
 
Two customers represented approximately 32% our net sales for the year ended December 31, 2024. One customer represented approximately 21% of our net sales for the year
ended December 31, 2023. As of December 31, 2024 the Company had no customers make up more than 5% of its accounts receivable balance. As of December 31, 2023 the
Company has a concentration of credit risk with its accounts receivable balance as one customer represented approximately 11% of accounts receivable.
 
Value Added Taxes
 
During the third quarter of 2020, as part of a global tax strategy review, we determined that our European subsidiaries based in the Netherlands, which we acquired on
September 30, 2019, had historically collected and remitted value added tax (“VAT”) payments, which related to direct-to-consumer sales to other European Union (“EU”)
member states, directly to the Dutch tax authorities. In connection with our subsidiaries’ payment of VAT to Dutch tax authorities rather than other EU member states, we may
become subject to civil or criminal enforcement actions in certain EU jurisdictions, which could result in penalties.
 
We performed an analysis of the VAT overpayments to the Dutch tax authorities, which we expected to be refunded to us, and VAT payable to other EU member states,
including potential fines and penalties. Based on this analysis, we recorded VAT payable of approximately $0.4 million relating to this matter within “Accrued expenses and
other current liabilities” in our consolidated balance sheet as of December 31, 2024 and 2023, respectively.
 
Pursuant to the purchase and sale agreement by which we acquired our European subsidiaries, the sellers are required to indemnify us against certain specified matters and
losses, including any and all liabilities, claims, penalties and costs incurred or sustained by the Company in connection with non-compliance with tax laws in relation to
activities of the sellers. The indemnity (or indemnification receivable) is limited to an amount equal to the purchase price under the purchase and sale agreement.
 
As 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. Refer to “Note 7—Commitments and Contingencies” for additional discussion
regarding our contingencies.
 
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 elements. See “Note 9—Stockholders’ Equity - Net Loss Per Share.”
 
Recently Adopted Accounting Guidance
 
In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies that a contractual sale
restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security’s unit of
account. This standard is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. Adoption of this standard did not have a material impact
on our consolidated financial statements.
 
In November 2023, the FASB issued Accounting Standards Update 2023-07 – Segment Reporting – Improvements to Reportable Segment Disclosures (“ASU 2023-07”). We
adopted Accounting Standards Update No. 2023-07, which enhances disclosures required for operating segments. ASU 2023-07 expands public entities’ segment disclosures by
requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment
profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure
requirements of ASU 2023-07 are required for entities with a single reportable segment. Refer to Note 12 in the Notes to the Consolidated Financial Statements.
 
F-19

 
 
Recently Issued Accounting Guidance Not Yet Adopted
 
In December 2023, the FASB issued Accounting Standards Update 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”),
amending existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. ASU 2023-09 is
effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retrospective basis. We
are currently evaluating the effect of adopting ASU 2023-09 on our income tax disclosures.
 
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, (Subtopic 220-40) (“ASU
2024-03”). ASU 2024-03 improves disclosures regarding the types of expenses included in commonly presented expense captions, including disaggregating the amounts of
employee compensation, depreciation and amortization included within each income statement expense caption. This standard is effective for fiscal years beginning after
December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of the standard on its
consolidated financial statements and disclosures.
 
NOTE 3. BUSINESS ACQUISITIONS AND DISPOSITIONS
 
EU Subsidiary Purchase Agreement
 
In May 2024, the Company entered into an agreement with a group of individuals to sell 100% equity interests of one of the Company’s wholly-owned subsidiaries, Shavita
B.V. and substantially all of the assets of ARI Logistics B.V. As of the December 31, 2024, the close of the transaction is in dispute as there was pending consideration
obligations due to be transferred to the Company not met, as well as other monetary obligations of the purchasers that remain unsatisfied. As a result the Company did not
record a sale of the business under ASC 805. Business Combinations. The Company intends to vigorously pursue its claims against Shavita and the purchaser group. As of
December 31, 2024, the Company continues to run the operations. ARI Logistics, B.V. and Shavita B.V. represented 16.7% of the Company’s total net sales in 2024.
 
F-20

 
 
NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS
 
Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
 
The carrying amounts for certain of our financial instruments, including cash, accounts receivable, accounts payable and certain accrued expenses and other assets and
liabilities, approximate fair value due to the short-term nature of these instruments.
 
As of December 31, 2023, 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:
 
 
 
Consolidated
Balance Sheet
 
Fair Value at December 31, 2023
 
(in thousands)
 
Caption
 
Level 1
   
Level 2
   
Level 3
   
Total
 
Liabilities:
 
 
 
 
   
 
   
 
   
 
 
Contingent consideration - current
 
Accrued expenses and other
current liabilities
 
$
—   
$
—   
$
1,000   
$
1,000 
Total Liabilities
 
 
 
$
—   
$
—   
$
1,000   
$
1,000 
 
There were no transfers between Level 1 and Level 2 and no transfers to or from Level 3 of the fair value hierarchy during the years ended December 31, 2024 and 2023.
 
Contingent Consideration
 
Each period we revalue our contingent consideration obligations associated with business acquisitions to their fair value. The estimate of the fair value of 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. Changes in the fair value of contingent consideration are included within “Other income (expense), net” in our
consolidated statements of operations and comprehensive loss.
 
F-21

 
 
A reconciliation of our liabilities that are measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December
31, 2024 and 2023 is as follows:
 
(in thousands)
 
Contingent
Consideration
 
Balance, December 31, 2022
 
$
2,738 
Cash payments for earn contingent consideration
 
 
(350)
Transfer to notes payable
 
 
(1,650)
Loss from fair value adjustments included in results of operations
 
 
262 
Balance, December 31, 2023
 
$
1,000 
Gain from fair value adjustments included in results of operations
 
 
(1,000)
Balance, December 31, 2024
 
$
— 
 
Equity Securities Without a Readily Determinable Fair Value
 
Our investment in equity securities without readily determinable fair value consists of ownership interest in Airgraft Inc. We determined that our ownership interests do not
provide the Company with significant influence over the operations of this investment. Accordingly, we account for our investment in this entity as equity securities.
 
Airgraft Inc. is a private entity 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 did not identify any fair value adjustments related to these equity securities during the years ended December 31, 2024 and 2023.
 
As of December 31, 2024 and 2023, the carrying value of our investment in equity securities without a readily determinable fair value was approximately $1.9 million, included
within “Other assets” in our consolidated balance sheets.
 
NOTE 5. LEASES
 
Greenlane as a Lessee
 
As of December 31, 2024, we had facilities financed under operating leases consisting of a warehouses and offices, with lease term expirations in 2026. Lease terms are
generally three to seven years for warehouses and office space. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
 
F-22

 
 
The following table provides details of our future minimum lease payments under operating lease liabilities recorded in our consolidated balance sheet as of December 31,
2024. 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
 
2025
 
$
942 
2026
 
 
81 
2027
 
 
— 
2028
 
 
— 
2029 and thereafter
 
 
— 
Total minimum lease payments
 
$
1,023 
Less: imputed interest
 
 
14 
Present value of minimum lease payments
 
 
1,009 
Less: current portion
 
 
926 
Long-term portion
 
$
83 
 
Rent expense under operating leases was approximately $1.4 million and $2.1 million for the years ended December 31, 2024 and 2023, respectively.
 
The following expenses related to our operating leases were included in “general and administrative expenses” within our consolidated statements of operations and
comprehensive loss:
 
 
 
For the year ended December 31,
 
(in thousands)
 
2024
   
2023
 
Operating lease cost
 
$
912   
$
1,613 
Variable lease cost
 
 
440   
 
461 
Total lease cost
 
$
1,352   
$
2,074 
 
The table below presents the terms and discount rates of the Company’s operating leases as of December 31, 2024:
 
 
 
2024
   
2023
 
Weighted average remaining lease terms
 
 
1.0 years   
 
1.9 years 
Weighted average discount rate
 
 
2.3% 
 
2.2%
 
NOTE 6. DEBT
 
Our debt balance, excluding operating lease liabilities and finance lease liabilities, consisted of the following amounts at the dates indicated:
 
 
 
As of December 31,
 
(in thousands)
 
2024
   
2023
 
Future Receivables Financing
 
 
—   
 
2,174 
Secured Bridge Loan
 
 
—   
 
5,109 
Secured Bridge Loan 2
 
 
3,674   
 
— 
Secured Bridge Loan 3
 
 
4,000   
 
— 
 
 
7,674   
 
7,283 
Less unamortized debt issuance costs
 
 
—   
 
— 
Less current portion of debt
 
 
(7,674)  
 
(7,283)
Debt, net, excluding operating and finance leases and liabilities
 
$
—   
$
— 
 
F-23

 
 
Future Receivables Financings
 
In July, August, October, and November 2023, the Company received an aggregate of approximately $3.9 million in cash pursuant to the terms of future receivables financings
(collectively, the “Future Receivables Financings”) entered into with two private lenders the “Future Receivables Financings”). During the year ended December 31, 2024, the
Company’s financings were in a series of transactions refinanced as they were not able to make the proscribed monthly payments for the repayment of cash advances. As such
the refinancings and the payment schedule was restructured and the total balance increased to $4.6 million which included deferred financing fees of approximately $2.8
million.
 
During the year ended December 31, 2024, the Future Receivables Financings were purchased by the Senior Subordinated Lender and paid down to $0 during the October 29,
2024 restructuring.
 
On October 29, 2024, the Company entered into an Exchange Agreement with its Senior Subordinated Lender, whereby the Company agreed to exchange an aggregate of
$4,617,307 of debt originally owed to Agile Capital Funding LLC and Cedar Advance LLC in a 3(a)(9) exchange for new Senior Subordinated Notes in the principal amount of
$4,000,000 due one year from issuance (the “Exchange Note”), reducing outstanding indebtedness by approximately $617,000. The Exchange Note is convertible at the option
of the holder at $3.17 per share. In connection with the Exchange, the Company issued an aggregate of 1,261,830 five year warrants with an exercise price of $3.04 per share
(the “Exchange Warrants”).
 
The Company evaluated the Exchange Agreement under ASC 470-50, Debt – Modifications and Extinguishment. As a result, the Company determined that the Exchange
Agreement should be accounted for as an extinguishment and the Company recorded the Exchange Agreement debt instrument at fair value which included the consideration in
common stock warrants transferred. The resulting loss on extinguishment of $2.0 million is included in loss on extinguishment of debt in the accompanying consolidated
statement of operations for the year ended December 31, 2024.
 
As noted above, the Company issued 1,261,830 common stock warrants which were deemed to classified as equity as the warrants were exercisable for a fixed price of $3.04
and for a fixed number of shares with no potential for cash redemption. The Company determines the value of the warrants using an appropriate valuation method, including a
Black-Scholes. As part of the debt extinguishment the 1,261,830 Exchange Warrants were valued at $2.6 million using the Black-Scholes model.
 
Note Payable
 
On June 7, 2024, the Company entered into a subscription agreement for a note payable with Cobra Alternative Capital Strategies, LLC (“Cobra”).
 
On August 7, 2024, the Company  issued a note (the “Note”) in the principal amount of $3,237,269 to Cobra. The Note is due the earlier of (i)February 5, 2025; or (ii) the
Company’s receipt of at least $3,500,000 of gross proceeds from an offering of their securities (a “Qualified Offering”) and contain a 20% original issue discount. The Notes
are convertible into common stock after maturity if not paid prior. In connection with the issuance of the Note, the Company issued the Investor warrants to purchase up to
1,618,635 shares at the Qualified Offering Price.
 
On October 29, 2024, the Company entered into the First Amendment to Amended and Restated Secured Promissory Note (the “Note Amendment”) with Cobra. Pursuant to the
Note Amendment, Cobra agreed to extend the Maturity Date of its senior promissory note dated May 1, 2024, which is currently due. The new Maturity Date will be October
29, 2025.
 
In consideration for the extinguishment of the Secured Bridge Loan, Cobra paid off the $2.7 million balance owed to Synergy as part of the Secured Bridge Loan. In exchange
for paying off the Secured Bridge Loan, the Company (i) agreed to make the Cobra Notes convertible at the option of Cobra with a conversion price of $3.17 per share, (ii)
agreed to prepay Cobra’s debt with 50% of any money raised by the Company from warrant exercise proceeds and from capital raise transactions, and (iii) issued Cobra an
aggregate of 500,000 five year warrants with an exercise price of $3.04 per share which are identical to the Exchange Warrants. The Exchange common stock warrants which
were deemed to classified as equity as the warrants were exercisable for a fixed price of $3.04 and for a fixed number of shares with no potential for cash redemption. The
Company determines the value of the warrants using an appropriate valuation method, including a Black-Scholes. As part of the debt extinguishment the 500,000 Exchange
Warrants were valued at $1.0 million using the Black-Scholes model.
 
F-24

 
 
Secured Bridge Loan
 
On September 22, 2023, the Company entered into a secured loan pursuant to a Loan and Security Agreement (the “September 2023 Loan Agreement”), dated as of September
22, 2023 with Synergy Imports, LLC (the “Secured Bridge Loan Lender” or “Synergy”).
 
Pursuant to the September 2023 Loan Agreement, the Secured Bridge Loan Lender agreed to make available to the Company a six-month bridge loan of $2.2 million in new
funds. Additionally, the Secured Bridge Loan Lender agreed to defer payments totaling $2,028,604 already owed by the Company under existing payment obligations and
potentially defer up to an additional $2,655,778 which may become due pursuant to existing agreements during the term of the September 2023 Loan Agreement.
 
Subject to certain exceptions, the Company agreed to pledge all of its assets, with the exception of deposit accounts and accounts receivable, as collateral. Additionally, the
Company agreed to transfer one US patent and two related foreign patents and a related trademark in exchange for an exclusive license back of such assets in the area of
smoking products and accessories in connection with the September 2023 Loan Agreement.
 
On May 6, 2024, the Company, Warehouse Goods and Synergy entered into an asset purchase agreement, dated May 1, 2024 (the “Asset Purchase Agreement”) pursuant to
which Synergy purchased all of the intellectual property, a specified amount of inventory, and other assets related to the Eyce and DaVinci brands. In consideration for the
acquisition, all parties entered into a loan modification agreement, effective May 1, 2024 (the “Loan Modification Agreement”) and an amended and restated secured
promissory note, effective May 1, 2024 (the “Amended and Restated Secured Promissory Note”), an amendment to the original Eyce and Davinci Asset Purchase Agreements,
a distribution agreement, the termination of a license granted by Eyce, and the termination of certain consulting and employment agreements. The Company evaluated the
extinguishment of the Secured Bridge Loan under ASC 470-50, Debt – Modifications and Extinguishment. As a result, the Company determined that the Secured Bridge Loan
should be accounted for as an extinguishment and the Company recorded the resulting gain on extinguishment of $2.1 million in the accompanying consolidated statement of
operations for the year ended December 31, 2024 As part of the overall modification, the principal balance with Synergy decreased to $2.7 million from $5.1 million. Synergy
acquired certain assets from the Company in exchange for the reduction in overall principal owed and as part of the transaction, the Company recognized a gain on the debt
modification of $2.2 million. This amount is included in the accompanying financial statements within the statement of operations for year ended December 31, 2024 within
other income (expense). The Secured Bridge Loan balance of $2.7 million was paid in full by Cobra as part of the October 29, 2024 First Amendment to Amended and Restated
Secured Promissory Note. The First Amendment to Amended and Restated Secured Promissory Note was repaid in full in February 2025 with proceeds from the Private
Placement.
 
The Company evaluated the extinguishment of the Secured Bridge Loan under ASC 470-50, Debt – Modifications and Extinguishment. As a result, the Company determined
that the Secured Bridge Loan should be accounted for as an extinguishment and the Company recorded the Cobra debt instrument at fair value which included the consideration
in common stock warrants transferred. The resulting loss on extinguishment recorded of $1.0 million is included in loss on extinguishment of debt in the accompanying
consolidated statement of operations for the year ended December 31, 2024.
 
As noted above, the company issued 500,000 common stock warrants which were deemed to classified as equity as the warrants were exercisable for a fixed price of $3.04 and
for a fixed number of shares with no potential for cash redemption. The Company determines the value of the warrants using an appropriate valuation method, including a
Black-Scholes. As part of the debt extinguishment the 500,000 Exchange Warrants were valued at $1.0 million using the Black-Scholes model.
 
Future Minimum Principal Payments
 
The following table summarizes future scheduled minimum principal payments of debt at December 31, 2024. Future debt principal payments are presented based upon the
stated maturity dates in the respective debt agreement.
 
(in thousands)
 
2025
   
2026
   
2027
   
2028
   
2029
   
Total
 
Bridge Loan 2
 
 
3,674   
 
—   
 
—   
 
—   
 
—   
 
3,674 
Bridge Loan 3
 
 
4,000   
 
—   
 
—   
 
—   
 
—   
 
4,000 
Total
 
$
7,674   
$
—   
$
—   
$
—   
$
—   
$
7,674 
 
NOTE 7. COMMITMENTS AND CONTINGENCIES
 
Legal Proceedings
 
In the ordinary course of business, we are involved in various legal proceedings involving a variety of matters. We do not believe there are any pending legal proceedings that
will have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is
inherently unpredictable and subject to significant uncertainties.
 
On November 13, 2024, Pryor Cashman made a demand for arbitration for unpaid legal invoices in the amount of $320,511.48. The Company intends to dispute these claims in
arbitration as it contends the services were not authorized or rendered and expects the case to be resolved at a significant discount (Arbitration, S.D. N.Y.).
 
On February 11, 2025, Earth’s Healing, Inc. (Case No. 25-Cv-1428 (N.D. Cal.)) brought a purchaser class action antitrust action against four U.S. Distributors of Ccell
products, including Greenlane Holdings. Inc. The Company believes the case is baseless and without merit, and the Company is jointly defending the case with the other named
defendants.
 
On December 17, 2024, Crossmark, Inc. brought a breach of contract suit against our subsidiary, Warehouse Goods, LLC, in the amount of $297,181.90. The Company intends
to defend this breach of contract suit vigorously (Case No. 502024CA011856XXXAM B AI).
 
On February 25, 2025, the Company received a Civil Investigation Demand regarding an investigation to determine whether there is or has been a violation of 31 U.S.C. 372
the False Claims Act concerning allegations of false claims submitted to federal programs for approval, payment, and subsequent forgiveness of a Kim International LLC (a
subsidiary of Kushco which the Company acquired in 2021) 2020 Federal Payment Protection Program (“PPP) loan of approximately $1.9 million dollars. At this stage, it is
only a request for information which the Company has provided. The False Claims Act allows for the DOJ to recoup any PPP loans as well as potential treble damages for any
violation. At this time, the Company can not assess the likely outcome of the investigation.
 
On December 16, 2024, S.K et al brought a consumer class action antitrust action against four U.S. distributions of Ccell products, including Greenlane Holdings, Inc., alleging
antitrust violations. The Company believes the case is baseless and without merit and is currently jointly defending these claims with the other named defendants in the case.
 
On November 15, 2024, Vaporous Technologies, Inc. brought a suit for liquidated damages in the amount of $664,289.43 under the September 2020 Manufacturing Agreement
by Vaporous against Warehouse Goods. LLC. The Company believes they have strong defenses against this suit.
 
F-25

 
 
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.
 
NOTE 8. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
 
Property and Equipment, net
 
The following is a summary of our property and equipment, at costs less accumulated depreciation and amortization:
 
 
 
 
 
As of December 31,
 
(in thousands)
 
Estimated useful life
 
2024
   
2023
 
Furniture, equipment and software
 
3 - 7 years
 
$
8,595   
$
8,570 
Personal property
 
5 years
 
 
—   
 
— 
Leasehold improvements
 
Lesser of lease term or 5 years
 
 
33   
 
51 
Building
 
39 years
 
 
—   
 
— 
Land
 
 
 
 
—   
 
— 
Land improvements
 
15 years
 
 
—   
 
— 
Work in process
 
 
 
 
20   
 
411 
 
 
 
 
8,648   
 
9,032 
Less: accumulated depreciation
 
 
 
 
7,228   
 
6,556 
Property and equipment, net
 
 
 
$
1,420   
$
2,476 
 
Depreciation expense for property and equipment for the years ended December 31, 2024 and 2023 was approximately $0.8 million and $2.2 million, respectively.
 
F-26

 
 
Intangible Assets, Net
 
As of December 31, 2024 and 2023, all indefinite-lived intangibles were written off. We did not acquire any additional intangible assets during the years ended December 31,
2024 and 2023. There was no amortization expense for intangible assets for the years ended December 31, 2024 and 2023, respectively.
 
Goodwill
 
We evaluated 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 was assessed for impairment at the reporting unit level. There were no goodwill impairments during the years ended December 31, 2024 and 2023.
 
Other Current Assets
 
The following table summarizes the composition of other current assets as of the dates indicated:
 
 
 
As of December 31,
 
(in thousands)
 
2024
   
2023
 
Other current assets:
 
 
    
 
  
VAT refund receivable (Note 2)
 
$
43   
$
78 
Prepaid expenses
 
 
301   
 
1,207 
Indemnification receivable, net
 
 
7   
 
7 
Customs bonds
 
 
952   
 
1,229 
Other
 
 
2   
 
798 
 
$
1,305   
$
3,319 
 
F-27

 
 
Accrued Expenses and Other Current Liabilities
 
The following table summarizes the composition of accrued expenses and other current liabilities as of the dates indicated:
 
 
 
As of December 31,
 
(in thousands)
 
2024
   
2023
 
Accrued expenses and other current liabilities:
 
 
    
 
  
VAT payable (including amounts related to VAT matter described in Note 2)
 
$
—   
$
313 
Contingent consideration
 
 
—   
 
1,000 
Accrued employee compensation
 
 
1,052   
 
861 
Accrued expenses
 
 
166   
 
499 
Refund liability (including accounts receivable credit balances)
 
 
—   
 
68 
Sales tax payable
 
 
—   
 
315 
 
$
1,218   
$
3,056 
 
Customer Deposits
 
For certain customized product offerings, we may receive a deposit from the customer (generally 25% - 50% of the total order cost, but the amount can vary by customer
contract), when an order is placed by a customer. We typically complete orders related to customer deposits within one to six months from the date of order, depending on the
complexity of the customization and the size of the order, but the order completion timeline can vary by product type and terms of sale with each customer. Changes in our
customer deposits liability balance during the year ended December 31, 2024 and 2023, respectively, were as follows:
 
 
(in thousands)
 
Customer Deposits
 
Balance as of December 31, 2022
 
$
3,983 
Increases due to deposits received, net of other adjustments
 
 
4,191 
Customer Overpayments
 
 
220)
Revenue recognized
 
 
(5,619)
Balance as of December 31, 2023
 
$
2,775 
Increases due to deposits received, net of other adjustments
 
 
— 
Customer Overpayments
 
 
— 
Revenue recognized
 
 
(114)
Balance as of December 31, 2024
 
$
2,661 
 
Accumulated Other Comprehensive Income (Loss)
 
The components of accumulated other comprehensive income (loss) for the periods presented were as follows:
 
 
(in thousands)
 
Foreign
Currency
Translation
   
Unrealized Gain
or (Loss) on
Derivative
Instrument
   
Total
 
Balance at December 31, 2022
 
$
55   
$
—   
$
55 
Other comprehensive income (loss)
 
 
190   
 
—   
 
190)
Less: Other comprehensive (income) loss attributable to non-controlling
interest
 
 
—   
 
—   
 
— 
Balance at December 31, 2023
 
$
245   
$
     —   
$
245 
Other comprehensive income (loss)
 
 
20   
 
—   
 
20 
Less: Other comprehensive (income) loss attributable to non-controlling
interest
 
 
—   
 
—   
 
— 
Balance at December 31, 2024
 
$
265   
$
—   
$
265 
 
Supplier Concentration
 
Our four largest vendors accounted for an aggregate of approximately 61.3% and 25.3% of our total purchases for the years ended December 31, 2024 and 2023, respectively
We expect to maintain our relationships with these vendors.
 
F-28

 
 
Related Party Transactions
 
Renah Persofsky, a Greenlane Director, is also a Principal Owner of Green Gruff USA Inc, (“Green Gruff”). As of December 31, 2024, there have been no transactions between
the Company and Green Gruff.
 
Nicholas Kovacevich, our former Chief Corporate Development Officer owns capital stock of Blum Holdings Inc. (“Blum”) and serves on the Blum board of directors. Total
accounts receivable due from Blum were approximately $0.4 million as of December 31, 2024 and 2023, respectively. On February 8, 2023, we filed a lawsuit against Blum in
Superior Court of California, Orange County, seeking to compel the repayment of Blum’s open balance due to us. As of the date of these financial statements were available to
be issued, there has been a judgement received in favor of the Company.
 
Three individuals who were employees of the Company at the time are principals in Synergy Imports, LLC the Lender on the Secured Bridge Loan taken out on September 22,
2023, however, none are executive officers or directors of the Company.
 
NOTE 9. 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).
 
Effective June 5, 2023, we completed a one-for-10 reverse stock split (the “2023 Reverse Stock Split” and together with the 2022 Reverse Stock Split, the “Reverse Stock
Splits”) of our issued and outstanding shares of Common Stock, as further described in “Note 2 - Summary of Significant Accounting Policies.” As a result of the 2023 Reverse
Stock Split, every 10 shares of Common Stock issued and outstanding were converted into one share of Common Stock. We paid cash in lieu of fractional shares, and
accordingly, no fractional shares were issued in connection with the 2023 Reverse Stock Split.
 
On June 18, 2024, the Board unanimously approved and declared advisable, and recommended that our stockholders approve at a Special Meeting that took place on July 29,
2024, the adoption of the 2024 Amendment to effect a reverse stock split of our Common Stock at any whole number between, and inclusive of, one-for-two to one-for-twenty.
Approval of the Proposed 2024 Reverse Stock Split at the 2024 Special Meeting granted the Board the authority, but not the obligation, to file the 2024 Amendment to effect
the Proposed 2024 Reverse Stock Split no later than August 5, 2024, with the exact ratio and timing of the Proposed 2024 Reverse Stock Split to be determined at the discretion
of the Board. On July 23, 2024, the Board approved the reverse split at a ratio of one-for-11 and the Amendment has been filed with the Secretary of State of the State of
Delaware, that became effective on August 5, 2024 at 12:01 AM Eastern Time, before the opening of trading on the Nasdaq. For additional information about the July 29, 2024
Special Meeting and the 2024 Reverse Stock Split, see the Company’s Definitive Proxy Statement filed with the SEC on June 28, 2024 and Form 8-K filed with the SEC on
July 31, 2024.
 
The Reverse Stock Splits did not change the par value of the Common Stock or the authorized number of shares of Common Stock. All share and per share amounts in these
unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split,
including reclassifying an amount equal to the reduction in par value of Common Stock to additional paid-in capital.
 
F-29

 
 
Common Stock and Warrant Offerings
 
July 2023 Offering
 
On June 29, 2023, we entered into securities purchase agreements with certain investors, pursuant to which we agreed to issue and sell an aggregate of 560,476 shares of our
Class A common stock, pre-funded warrants to purchase up to 3,487,143 shares of our Class A common stock (the “July 2023 Pre-Funded Warrants”) and warrants to purchase
up to 8,095,238 shares of our Class A common stock (the “July 2023 Standard Warrants”). The July 2023 units each consisted of one share of Class A common stock or a July
2023 Pre-Funded Warrant and two July 2023 Standard Warrants to purchase one share of our Class A common stock. The July 2023 units were offered pursuant to an effective
Registration Statement on Form S-1. The July 2023 Standard Warrants are exercisable immediately at an exercise price equal to $1.05 per share of Class A common stock for a
period of five years. Each July 2023 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 July 2023 Offering generated gross proceeds of approximately $4.3 million and net proceeds to the Company of approximately $3.9 million.
 
As of the date of this Annual Report on Form 10-K, all July 2023 Pre-Funded Warrants have been exercised, based upon which we issued an additional 1,911,000 shares of our
Class A common stock subsequent to year end, for de minimis net proceeds.
 
In connection with the July 2023 Offering, the Company entered into privately negotiated agreements with holders participating in the offering to amend existing outstanding
warrants to purchase up to 1,344,367 shares of Class A common stock that were previously issued in connection with the June 2022 and October 2022 Offerings at exercise
prices per share of $50.00 and $9.00, respectively, and expire on December 29, 2027 and November 1, 2029, respectively (collectively, the “Prior Warrants”), effective upon the
closing of the July 2023 Offering to reduce the exercise price of the Prior Warrants to $1.05, the exercise price of the warrants to purchase shares of Class A common stock
offered in the July 2023 Offering. All other terms of the Prior Warrants remained unchanged.
 
August 2024 Private Placement
 
On August 12, 2024, the Company entered into a securities purchase agreement with a single institutional investor pursuant to which we agreed to issue and sell an aggregate of
58,000 shares of our Class A common stock, pre-funded warrants to purchase up to 2,305,637 shares of our Class A common stock (the “August 2024 Pre-Funded Warrants”)
and warrants to purchase up to 4,727,274 shares of our Class A common stock (the “August 2024 Standard Warrants”). for aggregate gross cash proceeds of $6.5 million. In
connection with the private placement, the Company will issue an aggregate of 2,363,637 units and pre-funded units. The pre-funded units will be sold at the same purchase
price as the units, less the pre-funded warrant exercise price of $0.001. Each unit and pre-funded unit will consist of one share of common stock (or one pre-funded warrant)
and two common warrants, each exercisable for one share of common stock at an exercise price of $2.50 per share. The common warrant will be exercisable on the initial
exercise date described in the common warrant and will expire 5.0 years from such date.
 
October 2024 Private Placement
 
On October 29, 2024, the Company entered into an Exchange Agreement with its Senior Subordinated Lender and with Cobra. In connection with the Exchange, the Company
issued an aggregate of 1,761,830 five year warrants with an exercise price of $3.04 per share (the “Exchange Warrants”). The Exchange Warrants which were deemed to
classified as equity as the warrants were exercisable for a fixed price of $3.04 and for a fixed number of shares with no potential for cash redemption. The Company determines
the value of the warrants using an appropriate valuation method, including a Black-Scholes. As part of the debt extinguishments the 1,761,830 Exchange Warrants were valued
at $3.7 million using the Black-Scholes model.
 
Warrant activity for the years ending December 31, 2024 and 2023 is as follows:
 
 
 
Number of
Warrants
   
Weighted Average
Exercise Price
 
 
 
 
    
 
  
Balance, December 31, 2022
 
 
166,131   
$
638.58 
Issued
 
 
1,052,951   
 
8.07 
Expired
 
 
-   
 
- 
Exercised
 
 
(444,983)  
 
3.32 
Balance, December 31, 2023
 
 
774,099   
 
110.40 
Issued
 
 
10,413,376   
 
1.71 
Expired or rescinded
 
 
-   
 
- 
Exercised
 
 
(1,424,384)  
 
0.25 
Balance, December 31, 2024
 
 
9,763,091   
$
8.75 
 
As of December 31, 2024, outstanding warrants have a weighted average remaining life of 3.32 years.
 
Fair Value of Warrants issued:
 
The following ranges of assumptions were used in calculations of the Black-Scholes option pricing models for warrants issued in the years ended December 31, 2024 and
December 31, 2023:
 
 
 
2024
 
 
2023
 
Stock price
 
$
3.68 - $4.05   
$
38.50 - $5.50
Risk-free interest rate
 
 
3.79% -4.395% 
 
3.30% - 4.72%
Expected term (in years)
 
 
5.8 to 6.0   
 
5.0 to 6.0 
Expected share price volatility
 
 
79.85% 
 
81.11% to 95.32%
Expected dividend yield
 
 
0.0% - 0.0% 
 
0.0% - 0.0%
 
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 elements.
 
F-30

 
 
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):
 
 
 
For the year ended December 31,
 
(in thousands, except per share data)
 
2024
   
2023
 
Numerator:
 
 
    
 
  
Net loss
 
$
(17,657)  
$
(32,325)
Less: Net loss attributable to non-controlling interests
 
 
17   
 
150 
Plus: Deemed Dividend on “October 2022 Standard Warrants”
 
 
—   
 
(388)
Net loss attributable to Class A common stockholders
 
$
(17,640)  
$
(32,563)
Denominator:
 
 
    
 
  
Weighted average shares of Class A common stock outstanding*
 
 
1,212   
 
3,993 
Net loss per share of Class A common stock - basic and diluted*
 
$
(14.56)  
$
(8.16)
 
*After giving effect to the Reverse Stock Splits.
 
The July 2023 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 years ended
December 31, 2024 and 2023, beginning with their issuance date, as their stated exercise price of $0.001 was non-substantive and their exercise was virtually assured.
 
The August 2024 Pre-Funded Warrants were included in the weighted-average in the computation of basic net loss per share of Class A commons stock for the year ended
December 31, 2024, beginning with their issuance date, as their stated exercise price of $0.001 was non-substantive and their exercise was virtually assured.
 
On June 29, 2023 in connection with the July 2023 Offering, the Company entered into agreements with holders participating in the offering to amend existing outstanding
warrants to purchase up to 1,344,367 shares of Class A common stock that were previously issued in November 2022 at an exercise price per share of $9.00. The warrants
expire on November 1, 2029. In connection with the amendment, the exercise price of the warrants was reduced to $1.05. The impact of the amendment resulted in a deemed
dividend in the amount of $0.4 million. The deemed dividend was calculated by the change in fair value.
 
For the years ended December 31, 2024 and 2023, 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 years ended December 31, 2024 and 2023, all Common Units
of the Operating Company and Class B common stock had been exchanged for Class A common stock, and we owned.
 
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would
be anti-dilutive (in common stock equivalent shares):
 
 
 
For the year ended
 
 
 
December 31, 2024
   
December 31, 2023
 
Stock options to purchase common stock
 
 
334   
 
360 
Warrants to purchase common stock
 
 
9,763,091   
 
774,099 
 
 
9,763,425   
 
774,459 
 
NOTE 10. COMPENSATION PLANS
 
Amended and Restated 2019 Equity Incentive Plan
 
In April 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”). 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. 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. Following the effect of the Reverse Stock Splits, the total number of shares of Class A
common stock authorized for issuance is 10,000 shares.
 
The Second Amended 2019 Plan provides eligible participants with compensation opportunities in the form of cash and equity incentive awards. The Second Amended 2019
Plan is designed to enhance our ability to attract, retain and motivate our employees, directors, and executive officers, and incentivizes them to increase our long-term growth
and equity value in alignment with the interests of our stockholders.
 
On June 2, 2023, the Company’s stockholders approved a third amendment and restatement of the 2019 Plan (the “Third Amended Plan”). The Third Amended Plan, among
other things, increases the number of shares of Class A common stock authorized for issuance under the Second Amended 2019 Plan by 19,078 shares to an aggregate of 29,078
shares. As of the date of this Annual Report on Form 10-K, we have not filed a Registration Statement on Form S-8 with the Securities and Exchange Commission to register
the additional shares authorized under the Third Amended Plan.
 
F-31

 
 
Equity-Based Compensation Expense
 
Equity-based compensation expense is included within “salaries, benefits and payroll taxes” in our consolidated statements of operations and comprehensive loss. We
recognized equity-based compensation expense as follows:
 
 
 
For the year ended December 31,
 
(in thousands)
 
2024
   
2023
 
Stock options - Class A common stock
 
$
—   
$
36 
Restricted shares - Class A common stock
 
 
86   
 
37 
Total equity-based compensation expense
 
$
86   
$
73 
 
There were no options granted during the years ended December 31, 2024 and 2023.
 
As of December 31, 2024, there was no remaining unrecognized compensation expense.
 
NOTE 11. INCOME TAXES
 
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 was generally not subject to U.S. federal and
certain state and local income taxes. Any taxable income or loss generated by the Operating Company was 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. The Operating Company was also subject to taxes in foreign
jurisdictions. 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.
 
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 U.S. income and expenses will be included in our US and state tax returns.
 
The Company’s United States and foreign operations components of income (loss) from continuing operations before income taxes are as follows:
 
 
 
For the year ended December 31,
 
(in thousands)
 
2024
   
2023
 
United States
 
$
(15,563)  
$
(30,325)
Foreign
 
$
(2,094)  
$
(2,000)
Total
 
$
(17,657)  
$
(32,325)
 
Income Tax Expense
 
The income tax (benefit) expense for the years ended December 31, 2024 and 2023 consisted of the following:
 
 
 
For the year ended December 31, 2024
   
For the year ended December 31, 2023
 
(in thousands)
 
Federal    
Foreign    
State
   
Total
   
Federal    
Foreign    
State
   
Total
 
Current tax (benefit) expense
 
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
  
Current year
 
$
—   
$
—   
$
—   
$
—   
$
—   
$
—   
$
—   
$
—)
Total current year
 
 
—   
 
—   
 
—   
 
—   
 
—   
 
—   
 
—   
 
—)
Deferred tax (benefit) expense
 
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
  
Current year
 
 
(3,325)  
 
(277)  
 
(998)  
 
(4,600)  
 
(5,991)  
 
(500)  
 
(1,798)  
 
(8,289)
Change in valuation allowance
 
 
3,325   
 
277   
 
998   
 
4,600   
 
5,743   
 
500   
 
1,219   
 
7,462 
Change in tax rate
 
 
—   
 
—   
 
—   
 
—   
 
—   
 
—   
 
780   
 
780)
Tax conversion of Operating Company
 
 
—   
 
—   
 
—   
 
—   
 
—   
 
—   
 
—   
 
— 
Up-C consolidation
 
 
—   
 
—   
 
—   
 
—   
 
—   
 
—   
 
—   
 
—)
KushCo merger or true ups
 
 
—   
 
—   
 
—  
 
—   
 
248   
 
—   
 
(201)  
 
47 
Total deferred tax (benefit) expense
 
 
—   
 
—   
 
—   
 
—   
 
—   
 
—   
 
—   
 
— 
Income tax (benefit) expense
 
$
—   
$
—   
$
—   
$
—   
$
—   
$
—   
$
—   
$
—)
 
F-32

 
 
A reconciliation of the income tax (benefit) expense computed at the U.S. federal statutory income tax rate to the income tax expense recognized is as follows:
 
 
 
For the year ended December 31,
 
(in thousands)
 
2024
   
2023
 
Expected federal income tax (benefit) expense at statutory rate
 
$
(3,331)  
$
(6,788)
State tax expense, net of federal benefit
 
 
(840)  
 
(1,605)
Loss attributable to non-controlling interests
 
 
—   
 
4 
Change in valuation allowance
 
 
4,171   
 
7,462 
Change in tax rates
 
 
    
 
  
Prior year true-ups
 
 
—   
 
227 
Other, net
 
 
—   
 
700 
Income tax (benefit) expense
 
$
—   
$
— 
 
Deferred Tax Assets and Liabilities
 
The components of deferred tax assets and liabilities were as follows:
 
 
 
 
As of December 31,
 
(in thousands)
 
2024
   
2023
 
Deferred tax assets:
 
 
    
 
  
Goodwill and other intangible assets
 
$
35,225   
$
36,018 
Fixed assets
 
 
394   
 
943 
Inventory
 
 
2,364   
 
2,854 
Allowance for doubtful accounts
 
 
688   
 
833 
Operating lease liability
 
 
265   
 
164 
Equity-based compensation
 
 
2,598   
 
2,576 
Business interest carryforward
 
 
8,710   
 
6,897 
Net operating loss carryforwards
 
 
74,609   
 
67,667 
Other
 
 
130   
 
411 
Total deferred tax assets
 
 
124,983   
 
118,363 
Valuation allowance
 
 
(124,709)  
 
(118,262)
Net deferred tax assets
 
 
(274)  
 
101 
Deferred tax liability:
 
 
    
 
  
Right of use assets
 
 
(274)  
 
(101)
Total deferred tax liabilities
 
 
(274)  
 
(101)
Net deferred tax assets and liabilities
 
$
—   
$
— 
 
We had approximately $268.5 million of Federal net operating loss carryforwards, of which approximately $9.8 million expire in 2038, and the remainder are not subject to
expiration. Their utilization is limited to 80% of our future taxable income. We also had approximately $263.5 of State net operating loss carryforwards that begin expiring in
2038, $14.9 million of Dutch that begin expiring in 2029, and $0.2 million Canadian net operating loss carryforwards that begin expiring in 2026. Their utilization is limited to
our future taxable income. We have not completed our evaluation of NOL utilization limitations under Internal Revenue Code, as amended (the “Code”) Section 382, change in
ownership rules. Due to the fact that there is a full valuation allowance and losses being generated in the current year, any limitation based on the code would not have a
material impact on the net deferred tax asset balance. In addition, the deduction for business interest is limited to 30 percent of taxable income (the “Section 163(j) limitation”).
The interest that is not deductible due this limitation is carried forward to subsequent years and subject to the next years Section 163(j) limitation. At December 31, 2024 we
had 26.3 million of business interest carryforwards, which includes $17.6 million from the KushCo merger. The utilization of the business interest carryforward from the
KushCo merger may be further limited by the application of the Section 382 rules.
 
F-33

 
 
During the years ended December 31, 2024 and 2023, respectively, management performed an assessment of the realizability of our deferred tax assets based upon which
management determined that it is not more likely than not that the results of operations will generate sufficient taxable income to realize portions of the net operating loss
benefits. Consequently, we established a full valuation allowance against our deferred tax assets and reflected a carrying balance of $0 as of December 31, 2024 and 2023,
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.
 
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 year ended December 31, 2024 and 2023, we did not have any unrecognized tax benefits as a result of tax positions taken during a prior period or during the current
period. No interest or penalties have been recorded as a result of tax uncertainties. The Company is subject to audit examination for federal and state purposes for the years
2019 – 2023. As of the date these financial statements were issued, there were not any ongoing income tax audits.
 
Tax Receivable Agreement (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. The Operating
Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. The TRA payments are not conditioned upon any continued ownership
interest in the Operating Company. The rights of each noncontrolling interest holder under the TRA are assignable to transferees of its interest in the Operating Company. The
timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Operating
Company generates each year and the applicable tax rate.
 
As noted above, we evaluated the realizability of the deferred tax assets resulting from the IPO and the related transactions completed in April 2019 and established a full
valuation allowance against those benefits. 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 December 31, 2024 and 2023.
 
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 years ended December 31, 2024 and 2023, we did not make any payments, inclusive of interest, to members of the Operating Company pursuant to the TRA.
 
NOTE 12. SEGMENT REPORTING
 
We define our segments as those operations whose results are regularly reviewed by our CODM to analyze performance and allocate resources. Therefore, segment information
is prepared on the same basis that management reviews financial information for operational decision-making purposes. Our CODM is a committee comprised of our CEO and
our CFO.
 
We determined we had one operating segment as of December 31, 2024. This operating segment aligns with how we manage our business as of the fourth quarter of 2024. The
accounting policies of the reportable segments are the same as those described in “Note 2 - Summary of Significant Accounting Policies.”
 
F-34

 
 
Our CODM assesses the performance of our one operating segment based on the operating segments’ net sales and gross profit. The following table sets forth information by
reportable segment for the years ended December 31, 2024 and 2023
 
 
 
 
For the year ended December 31,
 
(in thousands)
 
2024
   
2023
 
Net sales
 
$
13,275   
$
65,373 
Cost of sales
 
 
6,993   
 
47,547 
Gross profit
 
$
6,282   
$
17,826 
 
The following table sets forth specific asset categories which are reviewed by our CODM in the evaluation of operating segments:
 
 
 
For the year ended December 31,
 
(in thousands)
 
2024
   
2023
 
Accounts receivable, net
 
$
4,262   
$
1,693 
Inventories
 
$
14,215   
$
20,529 
Vendor deposits
 
$
3,091   
$
3,765 
 
The following table sets forth net sales disaggregated by geography:
 
 
 
 
For the year ended December 31,
 
(in thousands)
 
2024
   
2023
 
United States
 
$
10,900   
$
58,539 
Canada
 
 
157   
 
1,291 
Europe
 
 
2,218   
 
5,543 
Total net sales
 
$
13,275   
$
65,373 
 
The following table sets forth our long-lived assets by geographic area, which consist of property and equipment, net, and operating lease right-of-use assets:
 
 
 
 
As of December 31,
 
(in thousands)
 
2024
   
2023
 
United States
 
$
2,459   
$
4,255 
Canada
 
 
4   
 
4 
Europe
 
 
-   
 
153 
Total long-lived assets
 
$
2,463   
$
4,412 
 
See “Note 8—Supplemental Financial Statement Information” for goodwill by reportable segment.
 
NOTE 13. SUBSEQUENT EVENTS
 
On February 19, 2025, Greenlane Holdings, Inc. (the “Company”) consummated a private placement (the “Private Placement”) pursuant to a securities purchase
agreement (“Purchase Agreement”) with institutional investors (the “Purchasers”) for the purchase and sale of approximately $25.0 million of shares of the Company’s Class A
common stock (the “Common Stock”) and investor warrants at a price of $1.19 per Common Unit. The entire transaction was priced at the market under Nasdaq rules. The
offering consisted of the sale of Common Units (or Pre-Funded Units), each consisting of (i) one (1) share of Common Stock or one (1) Pre-Funded Warrant, (ii) one (1) Series
A PIPE Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $1.4875 (the “Series A Warrant”) and (iii) one (1) Series B PIPE
Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $2.975 (the “Series B Warrant” and together with the Series A Warrant, the
“Warrants”).
 
The initial exercise price of each Series A Warrant is $1.4875 per share of Common Stock. The Series A Warrants are exercisable following stockholder approval and
expire five (5) years thereafter. The number of securities issuable under the Series A Warrant is subject to adjustment as described in more detail in the Series A Warrant. The
initial exercise price of each Series B Warrant is $2.975 per share of Common Stock or pursuant to an alternative cashless exercise option. The Series B Warrants are
exercisable following stockholder approval and expire two and one-half (2.5) years thereafter. The number of securities issuable under the Series B Warrant is subject to
adjustment as described in the Series B Warrant.
 
In connection with the Private Placement, the Company entered into a registration rights agreement with the Purchasers on February 18, 2025 (the “Registration Rights
Agreement”), pursuant to which the Company is required to file a registration statement covering the resale of the Securities within 30 calendar days of the closing of the
offering.
 
F-35

 
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.
 
ITEM 9A. CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an
evaluation (pursuant to Rule 13a-15(b) of the Exchange Act) of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange
Act as of December 31, 2024.
 
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and
procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is accumulated
and communicated to management, including our Chief Executive Officer and Chief Financial and Legal Officer, to allow timely decisions regarding required disclosure.
 
Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial and Legal Officer concluded that our disclosure
controls and procedures were ineffective as of December 31, 2024 due to the material weaknesses identified and described below.
 
Management’s Report on Internal Control Over Financial Reporting
 
Our management, including our Chief Executive Officer and Chief Financial and Legal Officer, is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our
internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the
financial statements.
 
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial and Legal Officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, based on the framework in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 framework). Based on this evaluation, our Chief Executive Officer and
Chief Financial and Legal Officer have concluded that as of December 31, 2024, the Company has not maintained effective internal control over financial reporting due to the
material weaknesses identified and described below.
 
62

 
 
Material Weaknesses
 
As previously described in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2021, we began implementing a remediation plan to address
the material weaknesses identified in the prior year, and our management continues to be actively engaged in the remediation efforts.
 
Among the previously reported design and operating deficiencies which contributed to material weaknesses in our control activities, management noted ineffective
user access controls over certain IT systems to appropriately segregate duties and adequately restrict user access to financial applications and data to the appropriate personnel.
While certain compensating control activities have been designed and implemented to mitigate the risks related to ineffective user access controls, these compensating control
activities are not expected to operate at a level of precision that would prevent or detect a misstatement that could be material.
 
Control Environment
 
We did not maintain an effective control environment to enable the identification and mitigation of risks of material accounting errors and ensure corrective activities
were appropriately applied, prioritized, and implemented in a timely manner.
 
Risk Assessment
 
As part of our remediation efforts related to the material weaknesses identified in the prior year, we continued our efforts during 2024 to design an effective risk
assessment, which was completed or fully implemented in order to identify and mitigate key business and financial reporting risks to the organization. Control deficiencies
were identified which constitute material weaknesses relating to: (i) identifying, assessing, and communicating appropriate objectives, (ii) identifying and analyzing risks to
achieve these objectives, (iii) considering the potential for fraud in assessing risks to the achievement of objectives, and (iv) identifying and assessing changes that could
significantly impact the system of internal controls.
 
Control Activities
 
As part of our remediation efforts related to the material weaknesses identified in the prior year, we continued our efforts during 2024 to design and implement control
activities, however, design efforts relating to control activities were not fully implemented. Control deficiencies were identified associated with control activities. Specifically,
these control deficiencies constitute material weaknesses, either individually or in the aggregate, relating to: (i) selecting and developing control activities that contribute to the
mitigation of risks and support achievement of objectives, (ii) selecting and developing general control activities over technology to support the achievement of objectives, and
(iii) deploying control activities through policies that establish what is expected and procedures that put policies into action.
 
The following design and operating deficiencies, individually and in the aggregate, contributed to material weaknesses in our control activities, including:
 
 
●
Lack of direct and precise journal entry review
 
●
Ineffective user access controls over certain IT systems to appropriately segregate duties and adequately restrict user access to financial applications and data to the
appropriate personnel, including systems and data used in financial close and reporting
 
Information and Communication
 
We did not implement effective information and communication control activities. A control deficiency was identified which constitutes a material weakness relating
to information technology controls, which includes information security, systems change management and computer operations for systems and applications that are critical to
processing financial transactions and capturing and reporting information in the financial reporting process. These ineffective information technology controls contributed to
ineffective data validation of spreadsheets and system-generated reports utilized in the preparation of the financial statements and disclosures.
 
Monitoring
 
We did not implement effective monitoring activities. Control deficiencies were identified which constitute material weaknesses, individually and in the aggregate,
relating to: (i) selecting, developing, and performing ongoing evaluation to ascertain whether the components of internal controls are present and functioning, and (ii)
evaluating and communicating internal control deficiencies in a timely manner to those parties responsible for taking corrective action.
 
63

 
 
Remediation Plan and Status
 
Changes in Internal Control Over Financial Reporting
 
As discussed above, in 2021 we began a multi-year implementation of a new ERP system which fully replaced our legacy financial systems in 2024. The ERP system
is designed to accurately maintain the Company’s financial records, enhance the flow of financial information, improve data management and provide timely information to our
management team.
 
There were no other changes to our internal control over financial reporting that occurred during the quarter ended December 31, 2024 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
 
Inherent Limitations on Effectiveness of Controls
 
Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of
the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur
because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management
override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that
any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the
degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud
may occur and not be detected.
 
ITEM 9B. OTHER INFORMATION
 
None.
 
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
 
Not applicable.
 
64

 
 
PART III
 
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
Directors and Officers
 
As of the date of this Report, our directors and executive officers are as follows:
 
Name
 
Age(1)
 
Title
 
Director Since
Barbara Sher
 
57
 
Chief Executive Officer
 
2024
Lana Reeve
 
58
 
Chief Legal and Finance Officer
 
—
Rob Shields
 
57
 
Chief Growth Officer
 
—
Donald Hunter
 
68
 
Chairman of the Board of Directors
 
2021
Renah Persofsky
 
67
 
Independent Director
 
2022
Aaron LoCascio
 
40
 
Independent Director
 
2018
Michael Howe
 
72
 
Independent Director
 
2024
 
(1) Age as of March 17, 2025
 
Barbara Sher: Ms. Sher has previously served as our Chief Operations Officer beginning in November 2023 and was appointed Chief Executive Officer in May 2024. She
brings over 20 years of experience in senior executive roles at both large and small and public and private companies. Ms. Sher has served as SVP of Customer Experience at
the Company since June 2022, and previously served as Senior Vice President of Retail Sales at Newfold Digital, Inc., Vice President of Business Development at Newfold
Digital, Inc., and as Vice President of Business Development at Web.com. Ms. Sher received her MBA from Seton Hall University and her B.A. in communications from The
College of New Jersey. On December 31, 2024, the Board of Directors (the “Board”) of Greenlane Holdings, Inc (the “Company”) and its shareholders appointed Barbara Sher
as a member of the Board, effective immediately. She has no arrangement or understanding with any person pursuant to which she was selected as a director of the Company.
 
Lana Reeve: Ms. Reeve has served as our Chief Financial and Legal Officer since December 2022. Ms. Reeve brings over 25 years of experience in senior legal and
finance roles at both large and small and public and private companies. Prior to her current role, Ms. Reeve previously served as President and Chief Legal Officer at
Authentys, Inc., Senior Vice President, Legal M&A at RealPage, Inc., and Executive Vice President, Finance and Legal, and Chief Legal Officer at NWP Services Corporation.
Ms. Reeve received her J.D. from Santa Clara University School of Law and her B.S. in business and finance from San Jose State University.
 
Rob Shields. Mr. Shields has served as our Chief Growth Officer since January 2025. Mr. Shields is a trusted global sales and marketing leader with over 30 years of
experience in growing purpose-driven consumer and business technology brands. Mr. Shields has served as President and Country Head for MOOMOO Financial where he was
responsible for all aspects of market entry and expansion across Canada including regulatory, legal, human resources, marketing, and financial operations and was Chief
Marketing, Customer Experience & Sales Officer, at Questrade, one of Canada’s leading, non-bank online brokerages with over $30 billion in assets under administration.
 
Donald Hunter: Mr. Hunter has served as a director since the merger with KushCo in August 2021 and previously served as a director of KushCo from February 2018 until
the closing of the merger. Since 2007, Mr. Hunter served as principal at Donald Hunter, LLC, a consulting practice that assists private equity firms and entrepreneurs to enhance
the value of their technology companies until 2021. He previously served as Chief Operating Officer and Chief Financial Officer of Harbor Global Company Limited, a
publicly traded investment management, natural resources, and real-estate company from 2000 through 2006, and as a senior executive at The Pioneer Group, Inc. from 1988
through 2000, with responsibility for international start-up companies. Mr. Hunter began his career at the General Electric Company, where he was a member of the corporate
audit staff and a graduate of its Financial Management Training Program. Since 2013, Mr. Hunter served as a member of the board of directors of The LGL Group, Inc.
(“LGL”), an NYSE-listed frequency and spectrum control engineering and manufacturing company, and also serves as the Chairman of the LGL Audit Committee and a
member of its Nominating Committee, and formerly served on its Compensation Committee until December 2022. Previously, Mr. Hunter served as a member of the board of
directors, Chairman of the Audit Committee and member of the Nominating Committee of Juniper Pharmaceuticals, a Nasdaq-listed specialty pharmaceuticals company, from
March 2014 through March 2016, and a member of the board of directors of LICT Corporation, a holding company with subsidiaries in telecommunications and multimedia,
from June 2014 through June 2015. Mr. Hunter qualifies as a financial expert under the applicable rules of the SEC and is an active member of the National Association of
Corporate Directors. He holds a Bachelor of Science, magna cum laude, and an MBA with high honors from Boston University. Mr. Hunter’s more than 25 years of public
company experience and knowledge of corporate governance, SEC reporting, internal controls, international operations and mergers and acquisitions matters led to his
appointment as director.
 
Renah Persofsky: Ms. Persofsky has served as a director since April 2022. Ms. Persofsky has served as the Chief Executive Officer of Strajectory Corp. since 2010 and was
an Executive Consultant of Canadian Imperial Bank of Commerce from 2011 to 2021. Since October 2017 Ms. Persofsky has served as the Vice Chairwoman and Lead
Director of Tilray Inc. (Nasdaq: TLRY) (previously Aphria Inc.) and has served as the Executive Chairwoman of Green Gruff Inc. since July 2019. Ms. Persofsky is also
currently a Board Member of K.B. Recycling Ltd., (Alkemy) and Hydrofarm Holdings Group (Nasdaq: HYFM). Ms. Persofsky has also previously served as an Executive
Consultant to many iconic brands including Tim Hortons, Canadian Tire, Canada Post and Interac, and was an Executive Officer of the Bank of Montreal. She previously co-
chaired the Canadian Minister’s Advisory Committee on Electronic Commerce, as well as served as a Special Advisor to the Minister of Foreign Affairs and Trade. Ms.
Persofsky’s extensive public company board experience and governance and management experience led to her appointment to the Board.
 
Aaron LoCascio: Mr. LoCascio, our co-founder, has served as a director since May 2018, served as our President from August 2021 until December 2021, served as our
Chief Executive Officer from May 2018 until August 2021 and served as the Chief Executive Officer of Greenlane Holdings, LLC from its inception in 2007 until August 2021.
He received his Associate’s degree in Accounting from Valencia Community College. Mr. LoCascio brings to the board extensive executive leadership experience, industry
relationships and knowledge, and, through his position as our co-founder and as our former Chief Executive Officer and President, he will use his full range of skills and
perspective to further our success.
 
Michael Howe.Mr. Howe is a dynamic entrepreneur and leader with a proven track record of consumer business successes. From November 2018 to August 2019, he co-
developed The Good Clinic concept (TGC), an innovative primary care clinic brand. Michael sold the concept to Mitesco in Mar 2020 and served as CEO until Sept 2022. He
bought the concept back from Mitesco in Dec 2023. He is now actively involved with First Choice Healthcare Solutions to funded and expand the redesigned TGC. From
January to present, Michael is serving as the independent director for P1, and Indianapolis based, PE funded dental services organization. During this same time period,
Michael has served as executive coach for the entire Executive Leadership team of P1, a group of 8 executives ranging form VP to CEO and Founder. The focus of these efforts
are providing strategic, operational, and personal executive guidance to the eight individuals. Michael’s entrepreneurial spirit, business acumen, and passion for developing
others make him a standout figure in both the corporate and community sectors. We believe that Mr. Howe is qualified to serve as a member of the Board because of his
extensive business background
 
Family relationships
 
There are no family relationships among any of our executive officers or directors.

 
Audit Committee
 
The Audit Committee is comprised of Mr. Howe and Mr. Hunter. Mr. Hunter is the chair of the Audit Committee, and Mr. Hunter qualifies as an “audit committee financial
expert” as that term is defined by the applicable regulations of the Securities and Exchange Commission (the “SEC”). The Board as determined that each of the directors
serving on our Audit Committee is “independent” within the meaning of the applicable rules of the SEC and the Nasdaq listing standards.
 
65

 
 
Code of Conduct and Ethics
 
Our Board has established a code of conduct and ethics that applies to our officers, directors and employees. Among other matters, our code of business conduct and ethics
is designed to deter wrongdoing and to promote:
 
 
●
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
 
 
 
 
●
full, fair, accurate, timely and understandable disclosure in our SEC reports and other public communications;
 
 
 
 
●
compliance with applicable laws, rules and regulations;
 
 
 
 
●
prompt internal reporting of violations of the code to appropriate persons identified in the code; and
 
 
 
 
●
accountability for adherence to the code of business conduct and ethics.
 
Any waiver of the code of conduct and ethics for our executive officers or directors must be approved by our Board or a committee of our Board, and any such waiver shall
be promptly disclosed to stockholders as required by law and Nasdaq regulations.
 
Stockholder Nomination Procedures
 
As of the date of this Report, there have been no material changes to the procedures by which stockholders may recommend nominees to our Board of Directors.
 
Delinquent Section 16(a) Reports
 
Section 16(a) of the Exchange Act requires that our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Executive officers, directors and greater than 10% stockholders are required by the SEC to
furnish the Company with copies of all Forms 3, 4 and 5 that they file.
 
Based on our review of the copies of such forms, and/or on written representations from the reporting persons that they were not required to file a Form 5 for the fiscal
year, we believe that these filing requirements were satisfied by the reporting persons during the fiscal year ended December 31, 2023; except for one Form 4 filed with the
SEC on May 30, 2023, by Craig Snyder, our former Chief Executive Officer, related to Class A Common Stock acquired by Mr. Snyder on May 22, 2023.
 
Insider Trading Policy
 
The Company maintains an Insider Trading Policy applicable to all directors, officers, and employees, which is designed to prevent trading in the Company’s securities
based on material nonpublic information. The policy includes provisions restricting trading during blackout periods, pre-clearance requirements for executive officers and
directors, prohibitions on hedging and pledging Company stock, and guidelines to ensure compliance with applicable securities laws. A copy of the Insider Trading Policy is
filed as Exhibit 19 to this Annual Report on Form 10-K.
 
ITEM 11. EXECUTIVE COMPENSATION
 
COMPENSATION OF NAMED EXECUTIVE OFFICERS
 
The following provides compensation information pursuant to the scaled disclosure rules applicable to emerging growth companies and smaller reporting companies under SEC
rules. Our named executive officers (“NEOs”) for the year ended December 31, 2024 were Barbara Sher, our current Chief Executive officer, Nicholas Kovacevich, our former
Chief Corporate Development Officer, Craig Snyder, our former Chief Executive Officer, Lana Reeve, our Chief Financial and Legal Officer, William Mote, our former Chief
Financial Officer, and Darshan Dahya, our former Chief Accounting Officer.
 
The compensation of our NEOs generally consists of a combination of base salary, bonuses and equity-based compensation. Bonus awards for 2024 and 2023 were determined
at the sole discretion of the Compensation Committee based on an assessment of the performance of the NEOs.
 
66

 
 
The following tables contain certain compensation information for our NEOs in the fiscal years ended December 31, 2024 and 2023.
 
Summary Compensation Table
 
Name and Principal Position
 
Year
 
Salary
   
Bonus    
Option
Awards    
Stock
Awards    
All Other
Compensation   
Total
 
Nicholas Kovacevich(1) Former Chief Corporate Development
Officer
 
2024
   
      
      
      
      
      
  
 
 
2023
  $
97,692    $ 260,000    $
—    $
—    $
219,700    $
577,392 
Barbara Sher(2) Chief Executive Officer
 
2024
  $
300,198     
      
      
      
      
300,198 
 
 
2023
  $
21,290    $
—    $
—    $
—     
—    $
21,290 
Craig Snyder(3) Former Chief Executive Officer
 
2024
  $
118,687     
      
      
      
      
  
 
 
2023
  $
341,442    $
97,500    $
—    $
—     
—    $
438,942 
 
 
 
   
      
      
      
      
      
  
Lana Reeve(4) Chief Financial and Legal Officer
 
2024
  $ 307,531.62     
      
      
      
      
  
 
 
2023
  $ 270,899.65     
—     
—    $
—     
—    $ 270,899.65 
Rob
Shields(5)
Chief Growth Officer
 
2024
   
      
      
      
      
      
  
 
(1) Mr. Kovacevich stepped down from his position as Chief Executive Officer of the Company effective December 31, 2022 and was appointed Chief Corporate Development
Officer of the Company effective January 1, 2023.
 
(2) Ms. Sher was appointed Chief Operations Officer of the Company effective November 14, 2023 and subsequently named Chief Executive Offering in May 2024.
 
(3) Mr. Snyder was appointed Chief Executive Officer of the Company effective January 1, 2023 and subsequently stepped down in May 2024.
 
(4) Ms. Reeve was appointed Chief Financial and Legal Officer of the Company effective December 6, 2022.
 
(5) Mr. Shields was appointed Chief Growth Officer of the Company effective January 1, 2025.
 
67

 
 
Outstanding Equity Awards at Fiscal Year-End December 31, 2024
 
The following table presents information about our NEO’s outstanding equity awards as of December 31, 2024.
 
Name
 
Number of
Securities
Underlying
Unexercised
Options
Exercisable   
Number of
Securities
Underlying
Unexercised
Options
Unexercisable   
Option
Exercise
Price
   
Option
Expiration
Date
   
Number of
Shares
That Have
Not Vested    
Market
Value of
Shares
That Have
Not
Vested(1)  
Barbara Sher(1)
Chief Executive Officer
 
 
10   
 
—   
$
49   
 
7/1/2032   
 
—   
 
— 
 
 
 
    
 
    
 
    
 
    
 
    
 
  
Lana Reeve(2)
Chief Financial and Legal Officer
 
 
—   
 
—   
 
—   
 
—   
 
—   
 
— 
 
 
 
    
 
    
 
    
 
    
 
    
 
  
Craig Snyder (3)
Former Chief Executive Officer
 
 
—   
 
—   
—   
 
—   
 
—   
— 
 
Market value of shares reflects the number of shares multiplied by $0.2828 per share, which was the closing price of our Class A Common Stock on the Nasdaq Capital Market
on July 17, 2024.
 
(1) Ms. Sher was previously Chief Operating Officer and appointed Chief Executive Officer effective May 25, 2024.
 
(2) Ms. Reeve was appointed Chief Financial and Legal Officer of the Company effective December 6, 2022.
 
(3) Mr. Snyder was appointed Chief Executive Officer of the Company effective January 1, 2023 and resigned in May 2024.
 
Employment Agreements
 
Name and Principal Position
 
Annual Base Salary
   
Annual Bonus
Barbara Sher
Chief Executive Officer(1)
 
$
300,000   
Up to 60% of base salary based upon the attainment of one or more
performance goals
Lana Reeve
Chief Financial and Legal Officer(3)
 
$
300,000   
Up to 60% of base salary based upon the attainment of one or more
performance goals
Rob Shields
Chief Growth Officer (4)
 
$
250,000   
Up to 50% of base salary based upon the attainment of one or more
performance goals
 
(1) Ms. Sher was formerly the Chief Operating Officer and appointed Chief Executive Officer of the Company effective May 25, 2024
 
(2) Ms. Reeve was appointed Chief Financial and Legal Officer of the Company effective December 6, 2022.
 
(4) Mr. Shields was appointed Chief Growth Officer of the Company effective January 6, 2025.
 
Ms. Sher, Ms. Reeve, and Mr. Shields’ employment agreements provides for an original term of up to one year. Each of Ms. Sher, Ms. Reeve, and Mr. Shields’ employment
agreements also provide for automatic one-year extensions unless either party gives written notice of termination not less than 60 days prior to the termination of the then-
current term. Ms. Sher, Ms. Reeve, and Mr. Shields are entitled to the annual compensation described above and are eligible to receive an annual incentive bonus. Ms. Sher, Ms.
Reeve and Mr. Shields’ performance against this bonus are determined by company performance and individual performance. For Ms. Sher and Ms. Reeve, the weighting is
60% company and 30% individual calculated upon the base salary as shown above. For Mr. Shields, the weighting of 50% company against company and individual
performance goals calculated upon the base salary as shown above. During the term of employment, Ms. Sher, Ms. Reeve, and Mr. Shields are entitled to participate in all
employee benefit plans and programs made available to our employees generally, subject to the eligibility and participation restrictions of each such plan or program and
entitled to reimbursement for all reasonable business expenses incurred in connection with carrying out their respective duties.
 
68

 
 
Pursuant to their employment agreements, Ms. Sher, Ms. Reeve, and Mr. Shields may terminate their employment at any time without cause. Ms. Sher, Ms. Reeve, and Mr.
Shields are terminable by us at any time: (i) without cause; (ii) for cause (as defined in each of Ms. Sher, Ms. Reeve, and Mr. Shields’ employment agreements); (iii) in the
event of death; or (iv) in the event of disability that cannot be accommodated under the requirements of law. Upon termination of Ms. Sher’s, Ms. Reeve’s, or Mr. Shields’
employment agreements, neither party shall have any further obligation except for obligations accruing prior to the date of termination. If terminated without cause, Ms. Sher,
Ms. Reeve, and Mr. Shields are entitled to receive his or her base salary to the date of termination, any bonus that has accrued but is unpaid as of the date of termination and any
reimbursable expenses not yet reimbursed as of such date. If terminated without cause, Ms. Sher and Ms. Reeve are also entitled to severance equal nine months of their base
salary in effect on the date of termination. If terminated without cause, Mr. Shields is entitled to severance equal to three (3) months during the first six months of employment,
six (6) months during the second six months of employment and shall have nine (9) months thereafter. In addition, if terminated without cause, Ms. Sher and Ms. Reeve are
entitled to a cash payment equal to the applicable COBRA premium payments that would be payable by Ms. Sher and Ms. Reeve to continue their Company-provided
healthcare services for themselves and any dependents (the “Company Healthcare Plan”) covered at the time of termination (collectively, the “COBRA Payment”). If
terminated without cause, Ms. Sher and Ms. Reeve are entitled a COBRA Payment equal to four months of coverage under the Company Healthcare Plan.
 
Pursuant to their employment agreements, Ms. Sher, Ms. Reeve and Mr. Shields are subject to customary confidentiality restrictions and work-product provisions, and Ms.
Sher, Ms. Reeve and Mr. Shields are subject to customary non-competition covenants and non-solicitation covenants with respect to our employees, consultants and customers.
 
We do not currently maintain any retirement plans, other than matching 401(k) plans, for our executives or other employees.
 
Director Compensation
 
For the fiscal year ended December 31, 2024, each of our independent directors received a base annual fee of $60,000, paid in quarterly installments. In consideration for their
attendance at meetings of the Board exceeding the 10 designated Board meetings, Mr. Hunter and Ms. Persofsky received an additional fee of $10,000 and Mr. LoCascio and
Ms. Persofsky received an additional fee of $5,000. Additionally, as compensation for serving as the chair of the Board or the chair of a Board committee, Mr. Hunter and Ms.
Persofsky received a base annual fee of $16,000, paid in quarterly installments. Mr. Howe who is was appointed to the Board on December 31, 2024 will receive a base annual
fee of $16,000, paid in quarterly installments. In addition, we reimburse our directors for their reasonable out-of-pocket expenses incurred in attending Board and committee
meetings. Ms. Sher who was appointed to the Board on December 31, 2024 will not receive any additional compensation for her service on the Board.
 
The following provides compensation information pursuant to the scaled disclosure rules applicable to smaller reporting companies under SEC rules and the JOBS Act.
 
Director Compensation Table
 
The following table provides information on the compensation of our directors for the fiscal year ended December 31, 2024, other than Ms. Sher, who receives no separate
compensation for her service as a director. For information related to the compensation of Ms. Sher, please refer to “Executive Officer Compensation — Summary
Compensation Table.”
 
Name
 
Fees Paid in Cash
   
Awards(1)
   
Total
 
Donald Hunter
 
$
86,000   
$
   
$
86,000 
Aaron LoCascio
 
$
65,000   
$
   
$
65,000 
Renah Persofsky
 
$
62,000   
$
   
$
62,000 
Gina Collins (1)
 
$
—   
$
—   
$
— 
Michael Howe
 
$
—   
$
—   
$
— 
 
(1) On January 24, 2024, Gina Collins gave notice of her resignation from our Board of Directors and from each committee of the Board, effective immediately.
  
69

 
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
PRINCIPAL STOCKHOLDERS
 
The following table sets forth certain information as of July 18, 2024, regarding the beneficial ownership of shares of our Class A Common Stock (including shares
issuable upon the exercise or conversion of securities that entitle the holders thereof to obtain Class A Common Stock upon exercise or conversion in accordance with the terms
thereof) by (a) each of our directors, (b) each of our executive officers, (c) all of our directors and executive officers as a group, and (d) each person known to us to be the
beneficial owner of more than five percent of our Class A Common Stock. Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting
and dispositive power with respect to such shares. The SEC has defined “beneficial ownership” of a security to mean the possession, directly or indirectly, of voting power
and/or dispositive power with respect to such security. A stockholder is also deemed to be, as of any date, the beneficial owner of all securities that such stockholder has the
right to acquire within 60 days after that date through (a) the exercise of any option, warrant or right, (b) the conversion of a security, (c) the power to revoke a trust,
discretionary account or similar arrangement, or (d) the automatic termination of a trust, discretionary account or similar arrangement.
 
Unless otherwise indicated, the address of each person listed below is c/o Greenlane Holdings, Inc. 1095 Broken Sound Parkway, Suite 100, Boca Raton, Florida 33487.
 
Name
 
Number of
Shares of
Class A
Common
Stock
Beneficially
Owned
   
% of All
Class A
Common
Stock
Shares(1)
 
 
 
    
  
Donald Hunter(2)
 
 
96   
 
* 
Renah Persofsky(3)
 
 
66   
 
* 
Aaron LoCascio (4)
 
 
0   
 
* 
Michael Howe
 
 
0   
 
* 
Barbara Sher(5)
 
 
12,500   
 
* 
Lana Reeve
 
 
0   
 
* 
All executive officers, directors and director nominees as a group (5 people)
 
 
12,662   
 
0.00483 
Greater than 5% Beneficial Owners
 
 
    
 
  
Armistice Capital, LLC (6)
 
 
219,687   
 
9.99%
Hudson Bay Capital Management LP (7)
 
 
96   
 
*
 
(1) Based on an aggregate of 5,821,359 shares of our Class A Common Stock outstanding as of July 18, 2024.
(2) Includes 899 shares of Class A Common Stock issuable upon exercise of stock options within 60 days after July 18, 2024.
(3) Includes 725 shares of Class A Common Stock issuable upon exercise of stock options within 60 days after July 18, 2024.
(4) Includes 422 shares of Class A Common Stock issuable upon exercise of stock options within 60 days after July 18, 2024.
(5) Includes 100 shares of Class A Common Stock issuable upon exercise of stock options within 60 days after July 18, 2024
(6) Based solely upon the Schedule 13G filed with the SEC by the beneficial owner on February 14, 2024 reporting beneficial ownership as of December 31, 2023, Armistice
Capital, LLC possess shared voting shared dispositive power over 381,044 shares. Armistice Capital, LLC is the investment manager of Armistice Capital Master Fund
Ltd. (the “Master Fund”), the direct holder of the shares, and pursuant to an Investment Management Agreement, Armistice Capital, LLC exercises voting and investment
power over the securities of held by the Master Fund and thus may be deemed to beneficially own the securities held by the Master Fund. Steven Boyd, as the managing
member of Armistice Capital, LLC, may be deemed to beneficially own the securities held by the Master Fund. The Master Fund specifically disclaims beneficial
ownership of the securities directly held by it by virtue of its inability to vote or dispose of such securities as a result of its Investment Management Agreement with
Armistice Capital, LLC.
(7) Based solely upon the Schedule 13G filed with the SEC by the beneficial owner on February 5, 2024 reporting beneficial ownership as of December 31, 2023, Hudson Bay
Capital Management LP (the “Investment Manager”) and Sander Gerber possess shared voting shared dispositive power over 294,806 shares. Includes 294,806 shares of
Class A Common Stock issuable upon exercise of warrants. The Investment Manager serves as the investment manager to Hudson Bay Master Fund Ltd. and Hudson Bay
Fund LP, in whose name the securities are held. As such, the Investment Manager may be deemed to be the beneficial owner of all shares of Class A Common Stock,
subject to a 9.99% ownership blocker, if any, underlying the securities held by Hudson Bay Master Fund Ltd. and Hudson Bay Fund LP. Mr. Gerber serves as the managing
member of Hudson Bay Capital GP LLC, which is the general partner of the Investment Manager. Mr. Gerber disclaims beneficial ownership of these securities.
 
70

 
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
Related Party Transaction Policy
 
Our Board recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests and/or improper valuation (or the perception thereof). Our
Board has adopted a written policy on transactions with related persons under which:
 
●any related-person transaction must be reviewed and approved or ratified by the Audit Committee, or the chair of the Audit Committee in the event management decides it is
not practicable or desirable to wait until the next committee meeting; and
 
●management must periodically inquire of directors and officers with respect to any potential related-person transaction of which they may be a party or of which they may be
aware.
 
●any employment relationship or transaction involving an executive officer and any related compensation must be approved by the compensation committee of the Board or
recommended by the compensation committee to the Board for its approval.
 
In connection with the review and approval or ratification of a related-person transaction:
 
●management must disclose to the Audit Committee or the chair of the Audit Committee, (i) the basis on which the person is a related person; (ii) the material facts of the
related-party transaction, including the proposed aggregate value of such transaction or, in the case of indebtedness, the amount of principal and interest that would be involved
and other principal terms of such indebtedness; (iii) the benefits to the Company of the proposed related-party transaction; (iv) if applicable, the availability of other sources of
comparable products or services; and (v) an assessment of whether the proposed related-party transaction is on terms that are comparable to the terms available to an unrelated
third party or to employees unrelated third parties or to employees generally. The Audit Committee may seek bids, quotes or independent valuations from third parties in
connection with assessing any related-person transaction; and
 
●to the extent required to be disclosed in our applicable filings under the Securities Act or the Exchange Act, and related rules, management must ensure that the related-person
transaction is disclosed in accordance with such acts and related rules.
 
In addition, the related-person transaction policy provides that from time-to-time Audit Committee shall review any previously approved or ratified related-party transactions
that remain ongoing and have a remaining term of more than six months or remaining amounts payable to or receivable from the Company of more than $75,000. Based on all
relevant facts and circumstances, taking into consideration the Company’s contractual obligations, the Audit Committee shall determine if it is in the best interests of the
Company and its stockholders to continue, modify or terminate the related-person transaction.
 
71

 
 
Related Party Transactions
 
Operating Agreement
 
We operate our business through Greenlane Holdings, LLC and its subsidiaries. The operations of Greenlane Holdings, LLC, are set forth in the Greenlane Holdings, LLC’s
Fourth Amended and Restated Operating Agreement, which we refer to as the “Operating Agreement.” As of December 31, 2023, we are the sole member of Greenlane
Holdings, LLC and hold all of the outstanding common units in Greenlane Holdings, LLC.
 
Appointment as Manager
 
We are the sole manager of Greenlane Holdings, LLC. As the manager, we control all of the day-to-day business affairs and decision-making of Greenlane Holdings, LLC. As
such, we, through our officers and directors, are responsible for all operational and administrative decisions of Greenlane Holdings, LLC and the day-to-day management of
Greenlane Holdings, LLC’s business.
 
Compensation
 
We are not entitled to compensation for our services as the manager. We are entitled to reimbursement by Greenlane Holdings, LLC for all fees and expenses incurred on behalf
of Greenlane Holdings, LLC, including all expenses associated with this offering and maintaining our corporate existence, and all fees, expenses and costs of being a public
company (including expenses incurred in connection with public reporting obligations, proxy statements, stockholder meetings, stock exchange fees, transfer agent fees, legal
fees, SEC and FINRA filing fees and offering expenses) and maintaining our corporate existence, including all costs of maintaining our Board and committees of the board,
executive compensation and certain insurance policies.
 
Distributions
 
The Operating Agreement requires “tax distributions,” as that term is defined in the Operating Agreement, to be made by Greenlane Holdings, LLC to its “members,” as that
term is defined in the Operating Agreement. Tax distributions will be made at least annually based on such member’s allocable share of the taxable income of Greenlane
Holdings, LLC and at a commencing tax rate equal to the highest effective marginal combined federal, state and local income tax rate applicable to corporate or individual
taxpayers that may potentially apply to any member for the relevant period taking into account (i) any deductions pursuant to Section 199A of the Code, and (ii) the character of
the relevant tax items (e.g., ordinary or capital), as we, as the sole manager of Greenlane Holdings, LLC, reasonably determine. For this purpose, the taxable income of
Greenlane Holdings, LLC, and our allocable share of such taxable income, shall be determined without regard to any tax basis adjustments that result from our deemed or
actual purchase of Common Units from the members (as described below under “— Tax Receivable Agreement”). The tax rate used to determine tax distributions will apply
regardless of the actual final tax liability of any such member. Tax distributions will also be made only to the extent all distributions from Greenlane Holdings, LLC for the
relevant period were otherwise insufficient to enable each member to cover its tax liabilities as calculated in the manner described above. The Operating Agreement also allows
for distributions to be made by Greenlane Holdings, LLC to its members on a pro rata basis out of “distributable cash,” as that term is defined in the Operating Agreement. We
expect Greenlane Holdings, LLC may make distributions out of distributable cash periodically to the extent permitted by the agreements governing its indebtedness and as
required by Greenlane Holdings, LLC for its capital and other needs, such that we in turn are able to make dividend payments, if any, to the holders of our Class A Common
Stock.
 
Dissolution
 
The Operating Agreement provides that the decision of the manager will be required to voluntarily dissolve Greenlane Holdings, LLC. In addition to a voluntary dissolution,
Greenlane Holdings, LLC will be dissolved upon a change of control transaction under certain circumstances, as well as upon the entry of a decree of judicial dissolution or
other circumstances in accordance with Delaware law. Upon a dissolution event, the proceeds of a liquidation will be distributed in the following order: (i) first, to pay all
expenses of winding up Greenlane Holdings, LLC; and (ii) second, to pay all debts and liabilities and obligations of Greenlane Holdings, LLC.
 
Indemnification and Exculpation
 
The Operating Agreement provides for indemnification for all expenses, liabilities and losses reasonably incurred by any person by reason of the fact that such person is or was
a member or is or was serving at the request of Greenlane Holdings, LLC as the manager, an officer, an employee or an agent of Greenlane Holdings, LLC; provided, however,
that there will be no indemnification for actions made not in good faith or in a manner which the person did not reasonably believe to be in or not opposed to the best interests
of Greenlane Holdings, LLC, or, with respect to any criminal action or proceeding other than by or in the right of Greenlane Holdings, LLC, where the person had reasonable
cause to believe the conduct was unlawful, or for breaches of any representations, warranties or covenants by such person or its affiliates contained in the Operating Agreement
or in other agreements with Greenlane Holdings, LLC.
 
We, as the manager, and our affiliates, will not be liable to Greenlane Holdings, LLC for damages incurred by any acts or omissions as the manager, provided that the acts or
omissions of these exculpated persons are not the result of fraud, intentional misconduct, knowing violations of law, or breaches of the Operating Agreement or other agreement
with Greenlane Holdings, LLC.
 
72

 
 
Tax Receivable Agreement
 
In connection with our initial public offering we entered into a tax receivable agreement (the “Tax Receivable Agreement”) with Greenlane Holdings, LLC and each of the
members of Greenlane Holdings, LLC. We expect to obtain an increase in our share of the tax basis of the assets of Greenlane Holdings, LLC when a member receives cash or
shares of our Class A Common Stock in connection with a redemption or exchange of such member’s Common Units for Class A Common Stock or cash (such basis increase,
the “Basis Adjustments”). We intend to treat such acquisition of Common Units as a direct purchase by us of Common Units or net capital assets from a member for U.S.
federal income and other applicable tax purposes, regardless of whether such Common Units are surrendered by a member to Greenlane Holdings, LLC for redemption or sold
to us upon the exercise of our election to acquire such Common Units directly. Basis Adjustments may have the effect of reducing the amounts that we would otherwise pay in
the future to various tax authorities. The Basis Adjustments may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is
allocated to those capital assets.
 
The Tax Receivable Agreement provides for the payment by us to such persons of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances
are deemed to realize, as a result of the Transactions described above, including increases in the tax basis of the assets of Greenlane Holdings, LLC arising from such
Transactions, and tax basis increases attributable to payments made under the Tax Receivable Agreement and deductions attributable to imputed interest and other payments of
interest pursuant to the Tax Receivable Agreement. Greenlane Holdings, LLC will have in effect an election under Section 754 of the Code effective for each taxable year in
which a redemption or exchange of Common Units for shares of our Class A Common Stock or cash occurs. These Tax Receivable Agreement payments are not conditioned
upon any continued ownership interest in either Greenlane Holdings, LLC or us by any member. The rights of each member under the Tax Receivable Agreement are assignable
by each member with our consent, which we may not unreasonably withhold, so long as the assignee joins as a party to the Tax Receivable Agreement. We expect to benefit
from the remaining 15% of tax benefits, if any, that we may actually realize.
 
The actual Basis Adjustments, as well as any amounts paid to the members under the Tax Receivable Agreement, will vary depending on a number of factors, including:
 
●the timing of any subsequent redemptions or exchanges — for instance, the increase in any tax deductions will vary depending on the fair value, which may fluctuate over
time, of the depreciable or amortizable assets of Greenlane Holdings, LLC at the time of each redemption or exchange;
 
●the price of shares of our Class A Common Stock at the time of redemptions or exchanges — the Basis Adjustments, as well as any related increase in any tax deductions, is
directly related to the price of shares of our Class A Common Stock at the time of each redemption or exchange;
 
●the extent to which such redemptions or exchanges are taxable — if a redemption or exchange is not taxable for any reason, increased tax deductions will not be available; and
 
●the amount and timing of our income — the Tax Receivable Agreement generally will require us to pay 85% of the tax benefits as and when those benefits are treated as
realized under the terms of the Tax Receivable Agreement. If we do not have taxable income, we generally will not be required (absent a change of control or other
circumstances requiring an early termination payment) to make payments under the Tax Receivable Agreement for that taxable year because no tax benefits will have been
actually realized. However, any tax benefits that do not result in realized tax benefits in a given taxable year will likely generate tax attributes that may be utilized to generate
tax benefits in previous or future taxable years. The utilization of any such tax attributes will result in payments under the Tax Receivable Agreement.
 
For purposes of the Tax Receivable Agreement, cash savings in income and franchise tax are computed by comparing our actual income and franchise tax liability to the
amount of such taxes that we would have been required to pay had there been no Basis Adjustments and had the Tax Receivable Agreement not been entered into. The Tax
Receivable Agreement generally applies to each of our taxable years, beginning with the first taxable year ending after the completion of this offering. There is no maximum
term for the Tax Receivable Agreement; however, the Tax Receivable Agreement may be terminated by us pursuant to an early termination procedure that requires us to pay the
members an agreed upon amount equal to the estimated present value of the remaining payments to be made under the agreement (calculated based on certain assumptions,
including regarding tax rates and utilization of the Basis Adjustments).
 
The payment obligations under the Tax Receivable Agreement are obligations of our company and not of Greenlane Holdings, LLC. Although the actual timing and amount of
any payments that may be made under the Tax Receivable Agreement will vary, we expect that the payments that we may be required to make to the members could be
substantial. Any payments made by us to members under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been
available to us or to Greenlane Holdings, LLC and, to the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, the unpaid amounts
generally will be deferred and will accrue interest until paid by us.
 
73

 
 
Decisions made by us in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may
influence the timing and amount of payments that are received by a member under the Tax Receivable Agreement. For example, the earlier disposition of assets following a
transaction that results in a Basis Adjustment will generally accelerate payments under the Tax Receivable Agreement and increase the present value of such payments.
 
The Tax Receivable Agreement provides that if (i) we materially breach any of our material obligations under the Tax Receivable Agreement, (ii) certain mergers, asset sales,
other forms of business combination, or other changes of control were to occur, or (iii) we elect an early termination of the Tax Receivable Agreement, then our obligations, or
our successor’s obligations, under the Tax Receivable Agreement would accelerate and become due and payable, based on certain assumptions, including an assumption that we
would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.
 
As a result, (i) we could be required to make cash payments to the members that are greater than the specified percentage of the actual benefits we ultimately realize in respect
of the tax benefits that are subject to the Tax Receivable Agreement, and (ii) if we elect to terminate the Tax Receivable Agreement early, we would be required to make an
immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement, which payment may be made
significantly in advance of the actual realization, if any, of such future tax benefits. In these situations, our obligations under the Tax Receivable Agreement could have a
material adverse effect on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combination, or other
changes of control. There can be no assurance that we will be able to finance our obligations under the Tax Receivable Agreement.
 
Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine. If any such position is subject to a challenge by a taxing
authority the outcome of which would reasonably be expected to materially affect a recipient’s payments under the Tax Receivable Agreement, then we will not be permitted to
settle or fail to contest such challenge without the consent (not to be unreasonably withheld or delayed) of each member that directly or indirectly owns at least 10% of the
outstanding Common Units. We will not be reimbursed for any cash payments previously made to any member pursuant to the Tax Receivable Agreement if any tax benefits
initially claimed by us are subsequently challenged by a taxing authority and ultimately disallowed. Instead, in such circumstances, any excess cash payments made by us to a
member will be netted against any future cash payments that we might otherwise be required to make under the terms of the Tax Receivable Agreement. However, we might not
determine that we have effectively made an excess cash payment to the members for a number of years following the initial time of such payment and, if our tax reporting
positions are challenged by a taxing authority, we will not be permitted to reduce any future cash payments under the Tax Receivable Agreement until any such challenge is
finally settled or determined. As a result, it is possible that we could make cash payments under the Tax Receivable Agreement that are substantially greater than our actual cash
tax savings.
 
Payments are generally due under the Tax Receivable Agreement within a specified period of time following the filing of our tax return for the taxable year with respect to
which the payment obligation arises, although interest on such payments will begin to accrue at a rate of LIBOR plus 100 basis points from the due date (without extensions) of
such tax return. Any late payments that may be made under the Tax Receivable Agreement will continue to accrue interest at LIBOR plus 500 basis points until such payments
are made, including any late payments that we may subsequently make because we did not have enough available cash to satisfy our payment obligations at the time at which
they originally arose.
 
Indemnification Agreements
 
Our Bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the laws of the State of Delaware in effect from time to time, subject to
certain exceptions contained in our Bylaws. In addition, our Charter provides that our directors will not be personally liable to us or our stockholders for any damages other
than for breaches of fiduciary duty involving intentional misconduct, fraud or a knowing violation of law.
 
We have entered into indemnification agreements with each of our executive officers and directors. The indemnification agreements provide the executive officers and directors
with contractual rights to indemnification, and expense advancement and reimbursement, to the fullest extent permitted under the laws of the State of Delaware in effect from
time to time, subject to certain exceptions contained in those agreements.
 
There is no pending litigation or proceeding naming any of our directors or officers to which indemnification is being sought, and we are not aware of any pending litigation
that may result in claims for indemnification by any director or officer.
 
74

 
 
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 
The following table presents fees for professional services rendered by Marcum for the years ended December 31, 2024, and 2023:
 
 
 
Year ended December 31,
 
 
 
2024
   
2023
 
 
 
 
   
 
 
Audit Fees - Marcum
  $
475,010    $
528,815 
Audit Fees PKF O’Connor Davies LLP
   
25,000     
- 
Audit-Related Fees
  $
—    $
— 
 
   
      
  
Tax Fees
  $
—    $
— 
 
   
      
  
All Other Fees
  $
—    $
— 
 
Pre-Approval Policy
 
Our Board of Directors as a whole pre-approves all services provided by PKF O’Connor Davies, LLP. For any non-audit or non-audit related services, the Board of Directors
must conclude that such services are compatible with the independence as our auditors.
 
75

 
 
PART IV
 
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
We have filed the following documents as part of this Form 10-K:
 
(1) Consolidated Financial Statements
 
Index to Consolidated Financial Statements
 
Page
Reports of Independent Registered Public Accounting Firm PKF O’Connor Davies PCAOB ID: 127
 
F-1
Report of Independent Registered Public Accounting Firm Marcum LLP PCAOB ID: 688
 
F-3
Consolidated Balance Sheets
 
F-4
Consolidated Statements of Operations and Comprehensive Loss
 
F-5
Consolidated Statements of Stockholders’ Equity
 
F-6
Consolidated Statements of Cash Flows
 
F-7
Notes to Consolidated Financial Statements
 
F-9
 
(2) Financial Statement Schedules
 
All financial statement schedules are omitted since they are not required or are not applicable, or the required information is included in the consolidated financial statements
and accompanying notes included in this Form 10-K.
 
(3) Exhibits Required by Item 601 of Regulation S-K
 
Exhibit
Number
  Description
 
   
3.1
  Amended and Restated Certificate of Incorporation of Greenlane Holdings, Inc. (Incorporated by reference to Exhibit 3.1 to Greenlane’s Quarterly Report on
Form 10-Q, filed November 15, 2021).
3.2
  Second Amended and Restated By-Laws of Greenlane Holdings, Inc. (Incorporated by reference to Exhibit 3.2 to Greenlane’s Current Report on Form 8-K, filed
April 25, 2019).
3.3
  Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Greenlane Holdings, Inc., effective August 9, 2022 (Incorporated by
reference to Exhibit 3.1 to Greenlane’s Current Report on Form 8-K, filed on August 4, 2022).
3.4
  Amendment to the Second Amended and Restated Bylaws of Greenlane Holdings, Inc. (Incorporated by reference to Exhibit 3.1 to Greenlane’s Current Report
on Form 8-K, filed on April 12, 2023).
3.5
  Certificate of Designation of the Series A Preferred Stock (Incorporated by reference to Exhibit 3.2 to Greenlane’s Current Report on Form 8-K, filed on April
12, 2023).
4.1
  Form of Stock Certificate (Incorporated by reference to Exhibit 4.1 to Greenlane’s Registration Statement on Form S-1/A, filed on April 8, 2019).
4.2
  Form of Convertible Promissory Note (Incorporated by reference to Exhibit 4.2 to Greenlane’s Registration Statement on Form S-1, filed on March 20, 2019).
4.3
  Description of Registrant’s Securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 (Incorporated by reference to Exhibit 4.3 to
Greenlane’s Annual Report on Form 10-K, filed on April 24, 2020).
4.4
  Form of August 2021 Standard Warrant (Incorporated by reference to Exhibit 4.1 to Greenlane’s Current Report on Form 8-K, filed August 10, 2021).
4.5
  Form of August 2021 Pre-Funded Warrant (Incorporated by reference to Exhibit 4.2 to Greenlane’s Current Report on Form 8-K, filed August 10, 2021).
4.6
  Form of Stock Option Assumption Notice – KushCo Options (Incorporated by reference to Exhibit 99.2 to Greenlane’s Registration Statement on Form S-8,
filed August 31, 2021).
4.7
  Form of Assumed June 12, 2018 KushCo Warrant, dated as of August 31, 2021 (Incorporated by reference to Exhibit 4.4 to Greenlane’s Quarterly Report on
Form 10-Q, filed November 15, 2021).
4.8
  Form of Assumed January 18, 2019 KushCo Warrant, dated as of August 31, 2021 (Incorporated by reference to Exhibit 4.5 to Greenlane’s Quarterly Report on
Form 10-Q, filed November 15, 2021).
4.9
  Form of Assumed August 21, 2019 KushCo Warrant, dated as of August 31, 2021 (Incorporated by reference to Exhibit 4.6 to Greenlane’s Quarterly Report on
Form 10-Q, filed November 15, 2021).
4.10
  Form of Assumed September 30, 2019 KushCo Warrant, dated as of August 31, 2021 (Incorporated by reference to Exhibit 4.7 to Greenlane’s Quarterly Report
on Form 10-Q, filed November 15, 2021).
4.11
  Form of Assumed February 10, 2020 KushCo Warrant, dated as of August 31, 2021 (Incorporated by reference to Exhibit 4.8 to Greenlane’s Quarterly Report on
Form 10-Q, filed November 15, 2021).
4.12
  Form of Assumed February 24, 2021 KushCo Warrant, dated as of August 31, 2021 (Incorporated by reference to Exhibit 4.9 to Greenlane’s Quarterly Report on
Form 10-Q, filed November 15, 2021).
4.13
  Form of June 2022 Pre-Funded Warrant (Incorporated by reference to Exhibit 4.2 to Greenlane’s Current Report on Form 8-K, filed June 28, 2022).
4.14
  Form of June 2022 Standard Warrant (Incorporated by reference to Exhibit 4.1 to Greenlane’s Current Report on Form 8-K, filed on June 28, 2022).
 
76

 
 
4.15
  Form of October 2022 Standard Warrant (Incorporated by reference to Exhibit 4.1 to Greenlane’s Current Report on Form 8-K, filed on November 1, 2022).
4.16
  Form of October 2022 Pre-Funded Warrant (Incorporated by reference to Exhibit 4.2 to Greenlane’s Current Report on Form 8-K, filed November 1, 2022).
4.17
  Form of July 2023 Standard Warrant (Incorporated by reference to Exhibit 4.1 to Greenlane’s Current Report on Form 8-K, filed on July 3, 2023).
4.18
  Form of July 2023 Pre-Funded Warrant (Incorporated by reference to Exhibit 4.2 to Greenlane’s Current Report on Form 8-K, filed on July 3, 2023).
4.19
  Form of July 2023 Warrant Amendment (Incorporated by reference to Exhibit 4.3 to Greenlane’s Current Report on Form 8-K, filed on July 3, 2023).
10.3
  Registration Rights Agreement between Greenlane Holdings, Inc. and the Original Members of Greenlane Holdings, LLC (Incorporated by reference to Exhibit
10.1 to Greenlane’s Current Report on Form 8-K, filed April 25, 2019).
10.4
  Fourth Amended and Restated Operating Agreement of Greenlane Holdings, LLC. (Incorporated by reference to Exhibit 10.4 to Greenlane’s Annual Report on
Form 10-K, filed March 31, 2022).
10.5
  Reorganization Agreement among Greenlane Holdings, Inc., Greenlane Holdings, LLC and the Members listed on the signature pages thereto (Incorporated by
reference to Exhibit 10.3 to Greenlane’s Current Report on Form 8-K, filed April 25, 2019).
10.6
  Purchase and Sale Agreement, dated as of August 16, 2022, by and between 1095 Broken Sound Pwky LLC and ASC Capital LLC (Incorporated by reference to
Exhibit 10.3 to Greenlane’s Quarterly Report on Form 10-Q, filed November 14, 2022).
10.7
  Form of Indemnification Agreement by and between Greenlane Holdings, Inc. and each of its Directors and Officers (Incorporated by reference to Exhibit 10.2
to Greenlane’s September 30, 2020 Quarterly Report on Form 10-Q, filed November 16, 2020).
10.8†
  Second Amended and Restated Greenlane Holdings, Inc. 2019 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to Greenlane’s Registration
Statement on Form S-8, filed August 31, 2022).
10.9
  Contribution Agreement, dated as of February 20, 2018, by and among Greenlane Holdings, LLC (f/k/a Jacoby Holdings LLC), the Sellers named therein and
Better Life Products, Inc., as Seller Representative (Incorporated by reference to Exhibit 10.10 to Greenlane’s Registration Statement on Form S-1, filed on
March 20, 2019).
10.10
  Contribution Agreement, dated as of January 4, 2019, by and among Greenlane Holdings, LLC, Pollen Gear Holdings, LLC and Pollen Gear LLC. (Incorporated
by reference to Exhibit 10.18 to Greenlane’s Registration Statement on Form S-1, filed on March 20, 2019).
10.11
  Form of August 2021 Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to Greenlane’s Current Report on Form 8-K, filed August 10,
2021).
10.12†
  Separation and General Release Agreement by and between Warehouse Goods LLC and Adam Schoenfeld, dated as of March 9, 2022 (Incorporated by
reference to Exhibit 10.1 to Greenlane’s Current Report on Form 8-K, filed on March 10, 2022).
10.13
  Placement Agency Agreement, dated August 9, 2021 (Incorporated by reference to Exhibit 10.2 to Greenlane’s Current Report on Form 8-K, filed August 10,
2021).
10.14
  Assignment and Assumption Agreement, dated as of November 5, 2018, by and between Jacoby & Co. Inc. and Warehouse Goods LLC, relating to Employment
Agreement with Adam Schoenfeld (Incorporated by reference to Exhibit 10.17 to Greenlane Holdings, Inc.’s Registration Statement on Form S-1, filed on
March 20, 2019).
10.15†
  Separation and General Release Agreement by and between Warehouse Goods LLC and William Mote, dated as of May 16, 2022 (Incorporated by reference to
Exhibit 10.4 to Greenlane’s Quarterly Report on Form 10-Q, filed May 16, 2022).
10.16†
  Separation and General Release Agreement by and between Warehouse Goods LLC and Aaron LoCascio, dated as of December 30, 2021 (Incorporated by
reference to Exhibit 10.1 to Greenlane’s Current Report on Form 8-K, filed January 4, 2022).
10.17†
  Separation and General Release Agreement by and between Warehouse Goods LLC and Rodrigo de Oliveira, dated as of August 12, 2022 (Incorporated by
reference to Exhibit 10.4 to Greenlane’s Quarterly Report on Form 10-Q, filed August 15, 2022).
10.18
  Membership Interest Purchase Agreement, dated as of July 19, 2022, by and among Warehouse Goods LLC and Portofino Partners LLC (Incorporated by
reference to Exhibit 10.1 to Greenlane’s Current Report on Form 8-K, filed July 19, 2022).
10.19
  Placement Agency Agreement, dated June 27, 2022 (Incorporated by reference to Exhibit 10.2 to Greenlane’s Current Report on Form 8-K, filed June 28, 2022).
10.20
  Form of June 2022 Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to Greenlane’s Current Report on Form 8-K, filed June 28, 2022).
10.21
  Form of October 2022 Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to Greenlane’s Current Report on Form 8-K, filed November 1,
2022).
10.22
  Placement Agency Agreement, dated October 27, 2022 (Incorporated by reference to Exhibit 10.2 to Greenlane’s Current Report on Form 8-K, filed November
1, 2022).
 
77

 
 
10.23
  Loan and Security Agreement, dated as of August 8, 2022, by and between Greenlane Holdings, Inc., the subsidiaries of Greenlane Holdings, Inc. named therein
as guarantors, the parties thereto from time to time as lenders, and WhiteHawk Capital Partners LP, as the agent for the Lenders (Incorporated by reference to
Exhibit 10.4 to Greenlane’s Quarterly Report on Form 10-Q, filed November 14, 2022).
10.24†
  Amended and Restated Employment Agreement Employment Agreement by and between Warehouse Goods LLC and Nicholas Kovacevich, dated as of October
6, 2022. (Incorporated by reference to Exhibit 10.1 to Greenlane’s Current Report on Form 8-K, filed October 7, 2022).
10.25
  Form of Guaranty Agreement by and between Greenlane Holdings, Inc., the subsidiaries of Greenlane Holdings, Inc. named therein as guarantors, the parties
thereto from time to time as Lenders, and WhiteHawk Capital Partners LP, as the agent for the Lenders (included in Exhibit 10.23).
10.26
  Form of Pledge Agreement by and between Greenlane Holdings, Inc., the subsidiaries of Greenlane Holdings, Inc. named therein as guarantors, the parties
thereto from time to time as Lenders, and WhiteHawk Capital Partners LP, as the agent for the Lenders (included in Exhibit 10.23).
10.27
  Form of U.S. Intellectual Property Security Agreement by and between Greenlane Holdings, Inc., the subsidiaries of Greenlane Holdings, Inc. named therein as
guarantors, the parties thereto from time to time as Lenders, and WhiteHawk Capital Partners LP, as the agent for the Lenders (included in Exhibit 10.23).
10.28
  Form of Canadian Security Agreement by and between Greenlane Holdings, Inc., the subsidiaries of Greenlane Holdings, Inc. named therein as guarantors, the
parties thereto from time to time as Lenders, and WhiteHawk Capital Partners LP, as the agent for the Lenders (included in Exhibit 10.23).
10.29
  Form of Canadian Intellectual Property Security Agreement, dated as of August 8, 2022, by and between Greenlane Holdings, Inc., the subsidiaries of Greenlane
Holdings, Inc. named therein as guarantors, the parties thereto from time to time as Lenders, and WhiteHawk Capital Partners LP, as the agent for the Lenders
(included in Exhibit 10.23).
10.30†
  Employment Agreement by and between Warehouse Goods LLC and Lana Reeve, dated as of December 6, 2022 (Incorporated by reference to Exhibit 10.1 to
Greenlane’s Current Report on Form 8-K, filed December 8, 2022).
10.31†
  Further Amended and Restated Employment Agreement by and between Warehouse Goods LLC and Craig Snyder, dated as of January 1, 2023 (Incorporated by
reference to Exhibit 10.1 to Greenlane’s Current Report on Form 8-K, filed January 6, 2023).
10.32
  Risk Participation of ERC Claim Agreement, dated as of February 16, 2023 (Incorporated by reference to Exhibit 10.2 to Greenlane’s Quarterly Report on Form
10-Q, filed on May 15, 2023).
10.33
  Amendment No. 2, dated as of February 9, 2023, to Loan and Security Agreement, by and between Greenlane Holdings, Inc, the subsidiaries of Greenlane
Holdings, Inc. named therein as guarantors, the parties thereto from time to time as Lenders, and WhiteHawk Capital Partners LP, as the agent for the Lenders
(Incorporated by reference to Exhibit 10.1 to Greenlane’s Quarterly Report on Form 10-Q/A, filed January 8, 2024).
10.34
  Form of July 2023 Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to Greenlane’s Current Report on Form 8-K, filed on July 3, 2023).
10.35
  Placement Agency Agreement, dated as of June 29, 2023 (Incorporated by reference to Exhibit 10.2 to Greenlane’s Current Report on Form 8-K, filed on July 3,
2023).
10.36
  Loan and Security Agreement, dated as of September 22, 2023, between Greenlane and Synergy Imports, LLC. (Incorporated by reference to Exhibit 10.3 to
Greenlane’s Quarterly Report on Form 10-Q, filed on January 9, 2024).
10.37
  Secured Promissory Note, dated as of September 22, 2023, between Greenlane and Synergy Imports, LLC. (Incorporated by reference to Exhibit 10.4 to
Greenlane’s Quarterly Report on Form 10-Q, filed on January 9, 2024).
10.38
  Asset Purchase Agreement, effective May 1, 2024, by and among Greenlane Holdings, Inc, Warehouse Goods LLC and Synergy Imports LLC (Incorporated by
reference to Exhibit 10.1 to Greenlane’s Current Report on Form 8-K, filed on May 10, 2024).
10.39
  Loan Modification Agreement, effective May 1, 2024, by and among Warehouse Goods LLC, Synergy Imports LLC and the Guarantors as defined therein
(Incorporated by reference to Exhibit 10.2 to Greenlane’s Current Report on Form 8-K, filed on May 10, 2024).
10.40
  Amended and Restated Secured Promissory Note, effective May 1, 2024, by Warehouse Goods LLC and Synergy Imports LLC (Incorporated by reference to
Exhibit 10.3 to Greenlane’s Current Report on Form 8-K, filed on May 10, 2024).
10.41†
  Employment Agreement by and among Warehouse Goods LLC and Lana Reeve (Incorporated by reference to Exhibit 10.1 to Greenlane’s Current Report on
Form 8-K, filed on May 23, 2024).
19*
  Insider Trading Policy
21.1*
  List of subsidiaries of Greenlane Holdings, Inc.
23.1*
  Consent of Marcum LLP
23.2*
  Consent of PKF O’Connor Davies, LLP
31.1*
  Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
  Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
  Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
97.1*
  Greenlane Holdings, Inc. Clawback Policy
101*
  The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, were formatted in Inline XBRL (Extensible
Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss,
(iii) Condensed Consolidated Statements of Stockholders’ Equity, and (iv) Condensed Consolidated Statements of Cash Flows. The instance document does not
appear in the Interactive Data File because its XBRL tags are imbedded within the Inline XBRL document.
104*
  Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL
 
*
Filed herewith.
†
Indicates a management contract or compensatory plan or arrangement.
 
ITEM 16. FORM 10-K SUMMARY
 
None.
 
78

 
 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
 
 
GREENLANE HOLDINGS, INC.
 
 
 
Date: March 20, 2025
By: /s/ Barbara Sher
 
 
Barbara Sher
 
 
Chief Executive Officer
 
 
(Principal Executive Officer)
 
Date: March 20, 2025
By: /s/ Lana Reeve
 
 
Lana Reeve
 
 
Chief Financial and Legal Officer
 
 
(Principal Financial and Accounting Officer)
 
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
 
Signature
 
Title
 
Date
/s/ Barbara Sher
 
Chief Executive Officer
(Principal Executive Officer)
 
March 20, 2025
Barbara Sher
 
 
 
 
 
 
 
 
 
/s/ Lana Reeve
 
Chief Financial and Legal Officer
(Principal Financial and Accounting Officer)
 
March 20, 2025
Lana Reeve
 
 
 
 
 
 
 
 
 
/s/ Donald Hunter
 
Director
 
March 20, 2025
Donald Hunter
 
 
 
 
 
 
 
 
 
/s/ Aaron LoCascio
 
Director
 
March 20, 2025
Aaron LoCascio
 
 
 
 
 
 
 
 
 
/s/ Renah Persofsky
 
Director
 
March 20, 2025
Renah Persofsky
 
 
 
 
 
 
 
 
 
/s/ Michael Howe
 
Director
 
March 20, 2025
Michael Howe
 
 
 
 
 
79
 

 
Exhibit 19
 
INSIDER TRADING POLICY (adopted by the Board of Directors on 4/17/2019) To Directors, Officers and Employees of Greenlane Holdings, Inc. and its subsidiaries
(collectively, the “Company”): Attached is the Insider Trading Policy (the “Policy”) for directors, officers and employees of the Company, which has been adopted by the Board
of Directors. Please read this Policy very carefully. All directors, officers and employees are subject to this Policy, including the blackout periods and pre-clearance procedures
described in Parts V and VI of this Policy and should sign and return one copy of the Policy to Greenlane Holdings, Inc. at 1095 Broken Sound Parkway, Suite 300, Boca
Raton, FL 33487; Attention: General Counsel. The Policy The Company’s common stock will be publicly traded following our initial public offering. The purchase or sale of,
or other transactions in, publicly-traded securities of the Company while you are aware of material non-public information, or the disclosure of material non-public information
to others who then trade in publicly traded securities of the Company, is prohibited by U.S. federal securities laws. U.S. federal securities laws impose liability not only on
persons who trade, or tip inside information to others who trade, but on companies and other controlling persons who fail to take reasonable steps to prevent insider trading by
company employees. As a result, if we do not take active steps to adopt preventive policies and procedures covering securities trades by personnel (including service providers)
of the Company, the consequences could be severe. In addition to responding to U.S. federal securities laws, we are adopting this Policy to avoid even the appearance of
improper conduct on the part of anyone employed by or associated with the Company (not just so-called “insiders”). We have all worked hard over the years to establish our
reputation for integrity and ethical conduct. We cannot afford to have that reputation damaged. In addition to the limitations on trading contained in this Policy, directors and
officers of the Company are also subject to certain reporting requirements under Section 16 of the U.S. Securities Exchange Act of 1934 (the “Exchange Act”). In addition, any
person who beneficially owns 5% or more of the Company’s Class A common stock is subject to certain reporting requirements under Section 13(d) of the Exchange Act. You
should contact the Company’s General Counsel or, if the Company does not then have a General Counsel, the Company’s Chief Financial Officer, or his or her designee if you
need further information with respect to these reporting obligations. The Consequences The U.S. Securities and Exchange Commission (the “SEC”) and NASDAQ (the stock
market where shares of the Company’s common stock will initially be listed) are extremely effective in detecting insider trading. The SEC and the U.S. Department of Justice
have prosecuted cases involving trading or tipping by employees at all levels of a business, trading or tipping by family members and friends, trading involving offshore
accounts and trading involving only a small amount of stock. The consequences of insider trading violations can be severe: For individuals who trade on inside information (or
tip information to others): ● civil penalties of up to three times the profit gained or loss avoided; ● criminal fines (no matter how small the profit); and ● jail terms. For a
company (as well as possibly any supervisory person) that fails to take appropriate steps to prevent illegal trading, civil and criminal penalties. Moreover, if any employee
violates this Policy, Company-imposed sanctions, including dismissal for misconduct or cause, could result. Needless to say, any of the above consequences, even an
investigation by the SEC that does not result in prosecution, can tarnish the reputation of the Company, its management and the person involved, and irreparably damage a
career.
 
 
 

 
Exhibit 21.1
 
Legal Name
 
Jurisdiction of Incorporation
 
Percentage Owned
 
 
 
 
 
ARI Logistics B.V.
 
Netherlands
 
100%
Better Life Holdings, LLC
 
Delaware
 
100%
Banana G’s LLC
 
Delaware
 
50%
Conscious B.V.
 
Netherlands
 
100%
Global Pacific Holdings LLC
 
Delaware
 
100%
Greenlane Holdings, LLC
 
Delaware
 
100%
Greenlane Holdings EU B.V.
 
Netherlands
 
100%
GS Fulfillment LLC
 
Delaware
 
100%
HSCM LLC
 
Delaware
 
100%
HS Products LLC
 
Delaware
 
100%
KCH Distribution Inc
 
Canada
 
100%
KIM International, LLC
 
California
 
100%
Kush Energy, LLC
 
Colorado
 
100%
Kush Supply Co. LLC
 
Nevada
 
100%
Merger Sub Gotham 2, LLC (successor to KushCo Holdings, Inc.)
 
Delaware
 
100%
Pollen Gear LLC
 
Delaware
 
100%
Rocketmang LLC
 
Delaware
 
100%
Shavita B.V.
 
Netherlands
 
100%
South Atlantic Holdings LLC
 
Delaware
 
100%
Vape World Distribution LTD
 
Canada
 
100%
Warehouse Goods LLC
 
Delaware
 
100%
 
 

 
Exhibit 23.1
 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
 
We consent to the incorporation by reference in the Registration Statement of Greenlane Holdings, Inc. on Form S-3 ( File No. 333-257654) and Forms S-8 (File Nos. 333-
267202, 333-259211, and 333-231419) of our report dated July 18, 2024, which includes an explanatory paragraph as to the company’s ability to continue as a going concern
with respect to our audits of the consolidated financial statements of Greenlane Holdings, Inc. as of December 31, 2023 and 2022 and for the years ended December 31, 2023
and 2022, which report is included in this Annual Report on Form 10-K of Greenlane Holdings, Inc. for the year ended December 31, 2023.
 
/s/ Marcum llp
 
Marcum llp
Costa Mesa, CA
March 20, 2025
 
 

 
Exhibit 23.2
 
Independent Registered Public Accounting Firm's Consent
 
We consent to the incorporation by reference in the Registration Statement of Greenlane Holdings, Inc. on Forms S-8 (Nos. 333-267202, 333-259211 and 333-231419), Form
S-3 (No. 333-257654) and Form S-1 (No. 333-281831) of our report dated March 20, 2025, with respect to our audit of the consolidated financial statements of Greenlane
Holdings, Inc. as of December 31, 2024 and for the year then ended, which report is included in this Annual Report on Form 10-K of Greenlane Holdings, Inc. for the year
ended December 31, 2024.
 
/s/ PKF O’Connor Davies, LLP
 
New York, New York
March 20, 2025
 
 
 

 
Exhibit 31.1
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Barbara Sher, certify that:
 
1. I have reviewed this Annual Report on Form 10-K of Greenlane Holdings, Inc.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
 
 
 
b.
Designed such internal control over financial reporting, or caused such control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
 
 
 
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
 
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
 
Date: March 20, 2025
/s/ BARBARA SHER
 
Barbara Sher
 
Chief Executive Officer
 
(Principal Executive Officer)
 
 

 
Exhibit 31.2
 
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Lana Reeve, certify that:
 
1. I have reviewed this Annual Report on Form 10-K of Greenlane Holdings, Inc.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
 
 
 
b.
Designed such internal control over financial reporting, or caused such control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
 
 
 
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
 
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
 
 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
 
Date: March 20, 2025
/s/ LANA REEVE
 
Lana Reeve
 
Chief Financial and Legal Officer
 
(Principal Financial Officer)
 
 

 
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Annual Report of Greenlane Holdings, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2024, as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I,Barbara Sher, the Chief Executive Officer of the Company, and I, Lana Reeve, the Chief Financial and Legal Officer
of the Company, certify, to our knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
 
1.
the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
 
 
 
 
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: March 20, 2025
/s/ BARBARA SHER
 
Barbara Sher
 
Chief Executive Officer
 
(Principal Executive Officer)
 
 
 
/s/ LANA REEVE
 
Lana Reeve
 
Chief Financial and Legal Officer
 
(Principal Financial Officer)
 
 

 
Exhibit 97.1
 
GREENLANE HOLDINGS, INC.
CLAWBACK POLICY
 
1.
Introduction
 
The Board of Directors (the “Board”) of Greenlane Holdings, Inc. (the “Company”) believes that it is in the best interests of the Company and its shareholders to create and
maintain a culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy. The Board has therefore
adopted this policy which provides for the recoupment of certain executive compensation in the event of an Accounting Restatement resulting from material noncompliance
with financial reporting requirements under the federal securities laws (the “Policy”). This Policy is designed to comply with Section 10D of the Securities Exchange Act of
1934 (the “Exchange Act”).
 
2.
Administration
 
This Policy shall be administered by the Board or, if so designated by the Board, the Compensation Committee, in which case references herein to the Board shall be deemed
references to the Compensation Committee. Any determinations made by the Board shall be final and binding on all affected individuals.
 
3.
Covered Executives
 
This Policy applies to each individual who served or serves as a current or former Covered Executive, at any time during the applicable performance period for any
performance-based compensation Received by such executive on or after the Effective Date.
 
4.
Recoupment; Accounting Restatement
 
In the event the Company is required to prepare an Accounting Restatement of its financial statements due to the Company’s material noncompliance with any financial
reporting requirement under the securities laws, the Board will:
 
a)
review, with respect to each Covered Executive, all performance-based compensation Received by such Covered Executive during the applicable period,
 
b)
determine the amount of excess Incentive Compensation Received by such Covered Executive during the applicable period;
 
c)
require reimbursement or forfeiture of any excess Incentive Compensation Received by any Covered Executive during the three completed fiscal years immediately
preceding the date on which the Company is required to prepare an Accounting Restatement; and
 
d)
reasonably promptly but in any event no later than 60 days after the date an Accounting Restatement is filed with the SEC, provide to each Covered Executive a written
notice containing the amount of excess Incentive Compensation and a demand for repayment or return, as applicable.
 
 

 
 
5.
Incentive Compensation
 
For purposes of this Policy, Incentive Compensation means any of the following; provided that, such compensation is granted, earned, or vested based wholly or in part on the
attainment of a financial reporting measure:
 
 
●
Annual bonuses and other short- and long-term cash incentives.
 
 
●
Stock options.
 
 
●
Stock appreciation rights.
 
 
●
Restricted stock.
 
 
●
Restricted stock units.
 
 
●
Performance shares.
 
 
●
Performance units.
 
Financial reporting measures include:
 
 
●
Company stock price.
 
 
●
Total shareholder return.
 
 
●
Revenues.
 
 
●
Net income.
 
 
●
Earnings before interest, taxes, depreciation, and amortization (EBITDA).
 
 
●
Funds from operations.
 
 
●
Liquidity measures such as working capital or operating cash flow.
 
 
●
Return measures such as return on invested capital or return on assets.
 
 
●
Earnings measures such as earnings per share.
 
6.
Excess Incentive Compensation: Amount Subject to Recovery
 
The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on the erroneous data over the Incentive Compensation that
would have been paid to the Covered Executive had it been based on the restated results, as determined by the Board.
 
If the Board cannot determine the amount of excess Incentive Compensation Received by the Covered Executive directly from the information in the Accounting Restatement,
then it will make its determination based on a reasonable estimate of the effect of the Accounting Restatement.
 
 

 
 
7.
Method of Recoupment
 
The Board will determine, in its sole discretion, the method for recouping Incentive Compensation hereunder based on all applicable facts and circumstances which may
include, without limitation:
 
a)
requiring reimbursement of cash Incentive Compensation previously paid;
 
b)
seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards;
 
c)
offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive;
 
d)
cancelling outstanding vested or unvested equity awards; and/or
 
e)
taking any other remedial and recovery action permitted by law, as determined by the Board.
 
Notwithstanding anything herein to the contrary, the Company shall not be required to seek recoupment to the extent the Board determines that recoupment would be
impracticable in a manner consistent with Rule 10D-1 of the Exchange Act and the listing standards of the national securities exchange on which the Company’s securities are
listed, because either the direct expenses paid to a third party to assist in enforcing this Policy against a Covered Executive would exceed the amount to be recovered from that
Covered Executive, after the Company has made a reasonable attempt to recover the excess Incentive Compensation.
 
8.
Reporting and Disclosure
 
The Company shall file all disclosures with respect to this Policy with the SEC in accordance with the requirements of all applicable securities laws and shall provide any
documentation with respect thereto to Nasdaq in accordance with the listing rules.
 
9.
No Indemnification
 
The Company shall not indemnify any Covered Executives or their beneficiaries against the loss of any incorrectly awarded Incentive Compensation pursuant to the terms of
this Policy or otherwise indemnify or provide advancement of any costs related to the Company’s enforcement of this Policy.
 
10. Interpretation
 
The Board is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy. It is
intended that this Policy be interpreted in a manner that is consistent with the requirements of Nasdaq Listing Rule 5608, any other applicable rules of Nasdaq and Section 10D
of the Exchange Act and any applicable rules or standards adopted by the SEC.
 
11. Effective Date
 
This Policy shall be effective as of October 2, 2023 (the “Effective Date”) and shall apply to Incentive Compensation that is Received by any Covered Executive on or after
that date.
 
 

 
 
12. Amendment; Termination
 
The Board may amend or terminate this Policy from time to time in its discretion and shall amend this Policy as it deems necessary, including as and when it determines that it
is legally required by any federal securities laws, SEC rule or rules of any national securities exchange or national securities association on which the Company’s securities are
listed. Notwithstanding anything herein to the contrary, no amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into
account any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate any federal securities laws, SEC rule or the
rules of any national securities exchange or national securities association on which the Company’s securities are listed.
 
13. Other Recoupment Rights
 
The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any employment agreement, equity award agreement, or similar
agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require a Covered Executive to agree to abide by the terms of
this Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company
pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the
Company.
 
14. Successors
 
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives.
 
15. Definitions
 
For purposes of this Policy, the following terms shall have the following meanings:
 
a)
“Accounting Restatement” means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the
securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial
statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
 
b)
“Covered Executive” means each executive officer, as determined by the Board in accordance with Section 10D of the Exchange Act and the listing standards of the
national securities exchange on which the Company’s securities are listed.
 
c)
“Received” means the date of actual or deemed receipt, and for purposes of the foregoing, Incentive Compensation shall be deemed received in the Company’s fiscal
period during which the applicable financial reporting measure is attained, even if payment or grant of the Incentive Compensation occurs after the end of that period.
 
d)
“SEC” means the U.S. Securities and Exchange Commission.