Overview


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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 transformative acquisitions including
the acquisition of two proprietary house brands, EYCE ("Eyce") and DaVinci
("DaVinci"), along with a larger merger with KushCo Holdings, adding a
significant industrial line of business to the Greenlane platform. These
acquisitions strengthened our leading position as a consumer ancillary products
house-of-brands business by adding two established brands to our portfolio (Eyce
and DaVinci), and significantly expanded our customer network, bringing
strategic relationships with leading cannabis multi-state-operators ("MSOs"),
cannabis single-state operators ("SSOs"), and Canadian licensed-producers
("LPs"). Greenlane is a leading ancillary cannabis company, providing a wide
array of consumer ancillary products and industrial ancillary products to
thousands of cannabis producers, processors, brands, and retailers ("Cannabis
Operators"), in addition to specialty retailers, smoke shops and head shops,
convenience stores, and consumers directly through our own proprietary web
stores and large online marketplaces such as Amazon.

We have been developing a world-class portfolio of our own proprietary brands
(the "Greenlane Brands") that we believe will, over time, deliver higher margins
and create long-term value for our customers and shareholders. Our wholly-owned
Greenlane Brands includes our recently launched a more affordable product line -
Groove, innovative silicone pipes and accessories - Eyce, best-in-class premium
vaporizer brand - DaVinci, premium smoke shop and ancillary product brand -
Higher Standards, child-resistant packaging brand - Pollen Gear. We also have
category exclusive licenses for the premium Marley Natural branded products, as
well as the K.Haring Glass Collection.

The Greenlane Brands, along with a curated set of third-party products, are
offered to customers through our proprietary, owned and operated e-commerce
platforms which include Vapor.com, Vaposhop.com, DaVinciVaporizer.com,
PuffItUp.com, HigherStandards.com, EyceMolds.com, and MarleyNaturalShop.com.
These platforms allow us to reach customers directly with helpful resources and
a seamless purchasing experience.

We merchandise vaporizers, packaging, and other ancillary products in the United
States, Canada, Europe and Latin America. We distribute products to retailers
through wholesale operations and distribute products to consumers through
e-commerce activities and our flagship Higher Standards store in New York City's
famed Chelsea Market. We operate our own distribution centers in the United
States, while also utilizing third-party logistics ("3PL") locations in the
United States, Canada, and Europe. We have made tremendous progress
consolidating and streamlining our warehouse and distribution operations
following our acquisitions in 2021, and we look forward to further optimization
of our footprint in 2023.

We manage our business in two different, but complementary, business segments.
The first is the Consumer Goods segment, which focuses on serving consumers
across wholesale, retail, and e-commerce operations-offering both our Greenlane
Brands as well as ancillary products and accessories from select leading
third-party brands, such as Storz and Bickel, Grenco Science, PAX, Cookies and
more. The Consumer Goods segment forms a central part of our growth strategy,
especially as it relates to scaling our own portfolio of higher-margin
proprietary owned brands. In addition to our Consumer Goods segment, we have our
Industrial Goods segment, which focuses on serving Cannabis Operators by
providing ancillary products essential to their daily operations and growth,
such as packaging and vaporization solutions, including our Greenlane Brand
Pollen Gear. Refer to "Note 11- Segment Reporting" within Item 8 to this Annual
Report on Form 10-K for additional information on our reportable segments.

Plan to Accelerate Path to Profitability and Capitalize the Business



In today's economic environment, not to mention the environment of the cannabis
industry itself, the key focus for many companies is profitability. At
Greenlane, we are hyper focused on getting our business profitable and
well-capitalized for long-term sustainability. We have announced numerous
facility closures (both warehouse and office) throughout 2022. The results of
those efforts should be fully materialized in 2023. In addition, we have
substantially reduced our headcount and associated salary and wages expenses. We
have been working hard to right-size our business, focus on core areas, and
reduce our overall cost structure while improving our margins in an effort to be
profitable in 2023.

On June 22, 2022, we provided an update on the Liquidity Initiatives, which our
management believed could generate more than $30.0 million of liquidity on a
non-dilutive basis by the end of 2022 if all measures were successful. On July
19, 2022, Warehouse Goods entered into that certain Membership Interest Purchase
Agreement and supporting documents to sell our 50% stake in VIBES Holdings LLC
for total consideration of $4.6 million in cash. Additionally, on August 9,
2022, we entered into an asset-based loan pursuant to that certain Loan and
Security Agreement, dated as of August 8, 2022 (the "Loan Agreement"), by and
among the Company, certain subsidiaries of the Company as guarantors, the
parties thereto from time to time as lenders (the "Lenders"), and WhiteHawk
Capital Partners LP, as the agent for the Lenders. As described in the Loan
Agreement, the Lenders agreed to make available to us a term loan of up to $15.0
million on the terms and conditions set forth therein and the other Financing
Agreements (as defined therein). Subsequently, on August 16, 2022, 1095 Broken
Sound Pwky entered into a Purchase and Sale Agreement with a third-party whereby
1095 Broken Sound agreed to sell a certain parcel of real estate including our
headquarters building in Boca Raton, Florida for total consideration of $9.95
million, and on September 22, 2022 we closed on the sale.

In 2022, we announced our plans to divest our packaging division which should
bring in meaningful working capital and allow for substantial cost-reductions.
The divestiture should allow us to further consolidate our warehouse footprint
into one U.S. warehouse for our Consumer Goods and remaining Industrial Goods.
This initiative, combined with restructuring
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some of our other initiatives, should allow us to reduce our overall
cost-structure to a sustainable point, and in combination, convert millions of
dollars of inventory back into working capital, thereby significantly improving
our balance sheet.

Finally, we are working to sell our excess & obsolete ("E&O") inventory of
lower-margin, non-strategic products, along with reducing our overall level of
inventory on hand. In May 2022, we commenced our official E&O sales program
internally and have since sold more than $4.1 million of previously reserved E&O
inventory. Our management anticipates that the proceeds from these E&O sales,
combined with a general sell-down of other non-core third-party brand inventory,
will generate more than $10.0 million in liquidity.

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

Notwithstanding the 2022 Plan and Liquidity Initiatives, we were required to
obtain additional capital through the sale of common stock and warrants in a
public offering that closed in October 2022 and filed a Registration Statement
on Form S-1 with the Securities and Exchange Commission in February 2023 seeking
to register the offering of up to $8 million in units, which has not yet become
effective. See Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources. The
October 2022 offering was completed and the February 2023 Form S-1 was filed, in
order to meet short term funding needs, and we are still seeking to execute our
strategic and other liquidity initiatives.

USPS PACT Act Exemption



On January 11, 2022, we announced via press release that the United States
Postal Service (the "USPS") had approved our application for a business and
regulatory exemption to the PACT Act (with respect to the business and
regulatory exemption granted by the USPS, the "PACT Act Exemption"), allowing us
to ship vaporizers and accessories classified as electronic nicotine delivery
systems ("ENDS") products to other compliant businesses. With this approval,
over 97% of our total annual sales became eligible for shipment by freight, USPS
and other major parcel carriers. The PACT Act Exemption also enables us to
partner with other businesses that ship ENDS products and had their supply
chains disrupted by PACT Act compliance.

On June 24, 2022, we provided via press release an update on the progress of the
PACT Act Exemption, following our successful implementation of the controls,
processes and systems required by the USPS in connection with the shipment of
ENDS products. We expect the ability to fulfill ENDS orders with the USPS to
allow us to reduce shipping costs, decrease fulfillment times and enhance the
overall customer experience for approved wholesale customers.

Reverse Stock Split



On August 4, 2022, we filed a Certificate of Amendment (the "Certificate of
Amendment") to our amended and restated certificate of incorporation with the
Secretary of State of the State of Delaware, which effected a one-for-20 reverse
stock split (the "Reverse Stock Split") of our issued and outstanding shares of
Class A common stock and Class B common stock (collectively, the "Common Stock")
at 5:01 PM Eastern Time on August 9, 2022. As a result of the Reverse Stock
Split, every 20 shares of Common Stock issued and outstanding were converted
into one share of Common Stock. We paid cash in lieu of fractional shares, and
accordingly, no fractional shares were issued in connection with the Reverse
Stock Split.

The Reverse Stock Split did not change the par value of the Common Stock or the
authorized number of shares of Common Stock. All outstanding options, restricted
stock awards, warrants and other securities entitling their holders to purchase
or otherwise receive shares of our Common Stock have been adjusted as a result
of the Reverse Stock Split, as required by the terms of each security. The
number of shares available to be awarded under our Second 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 this Annual Report on Form 10-K for the fiscal year ended December 31, 2022 have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split.

Critical Accounting Policies and 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
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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.

Valuation of Goodwill and Indefinite-Lived Intangible Assets



We allocate the fair value of purchase consideration to the tangible assets
acquired, liabilities assumed, and intangible assets acquired based on their
estimated fair values. The excess of the fair value of purchase consideration
over the fair values of these identifiable assets and liabilities is recorded as
goodwill to reporting units based on the expected benefit from the business
combination. Such valuations require management to make significant estimates
and assumptions. During the measurement period, which is not to exceed one year
from the acquisition date, we may record adjustments to the assets acquired and
liabilities assumed, with the corresponding offset to goodwill. Upon the
conclusion of the measurement period, any subsequent adjustments are recorded to
earnings.

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



We are required to apply judgment when determining whether or not indications of
impairment exist. The determination of the occurrence of a triggering event is
based on various considerations, including on our knowledge of the industry,
historical experience, market conditions, and specific information available at
the time of the assessment. The results of our analysis could vary from period
to period depending on how our judgment is applied and the facts and
circumstances available at the time of the analysis. Judgment is also required
in determining the assumptions and estimates used when calculating the fair
value of the reporting unit or the indefinite-lived intangible asset.

Due to declines in the Company's stock price as well as changes to our estimates
and assumptions of the expected future cash flows, we recorded impairment
charges of approximately $71.4 million related to goodwill and indefinite-lived
intangibles during the year ended December 31, 2022. For additional information
about goodwill and intangible assets, see "Note 3-Business Acquisitions" and
"Note 8-Supplemental Financial Statement Information" of the Notes to
Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.

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 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.

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


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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.

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.


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Results of Operations



The following table presents operating results for the years ended December 31,
2022 and 2021:
                                                                       Year Ended December 31,
                                                                                                % of Net sales                                Change
                                                 2022                 2021                2022                  2021                  $                   %

Net sales                                   $    137,085          $ 166,060                 100.0  %              100.0  %       $ (28,975)              (17.4) %
Cost of sales                                    112,102            132,207                  81.8  %               79.6  %         (20,105)              (15.2) %
Gross profit                                      24,983             33,853                  18.2  %               20.4  %          (8,870)              (26.2) %

Operating expenses:
Salaries, benefits and payroll taxes              31,290             34,012                  22.8  %               20.5  %          (2,722)               (8.0) %
General and administrative                        41,000             47,874                  29.9  %               28.8  %          (6,874)              (14.4) %
Goodwill and indefinite-lived intangibles
impairment charge                                 71,360                  -                  52.1  %                  -  %          71,360

*


Depreciation and amortization                      9,067              4,689                   6.6  %                2.8  %           4,378                93.4  %
Total operating expenses                         152,717             86,575                 111.4  %               52.1  %          66,142                76.4  %
Loss from operations                            (127,734)           (52,722)                (93.2) %              (31.7) %         (75,012)              142.3  %

Other income (expense), net:
Interest expense                                  (2,450)              (574)                 (1.8) %               (0.3) %          (1,876)              326.8  %
Employee retention credits                         4,854                  -                   3.5  %                  -  %           4,854

*


Other expense, net                                  (541)              (117)                 (0.4) %               (0.1) %            (424)              362.4  %
Total other expense, net                           1,863               (691)                  1.3  %               (0.4) %           2,554

*


Loss before income taxes                        (125,871)           (53,413)                (91.9) %              (32.3) %         (72,458)              135.7  %
Provision for income taxes                           (13)                10                     -  %                  -  %             (23)             (230.0) %
Net loss                                        (125,858)           (53,423)                (91.9) %              (32.3) %         (72,435)              135.6  %
Net loss attributable to non-controlling
interest                                         (10,098)           (22,840)                 (7.4) %              (13.8) %          12,742               (55.8) %
Net loss attributable to Greenlane
Holdings, Inc.                              $   (115,760)         $ (30,583)                (84.5) %              (18.4) %       $ (85,177)              278.5  %


*Not meaningful

Consolidated Results of Operations

Net Sales



For the year ended December 31, 2022, total net sales were approximately $137.1
million, compared to approximately $166.1 million for the year ended December
31, 2021, representing a decrease of $29.0 million, or 17.4%. The year-over-year
decrease was primarily driven by a decrease in Consumer Goods segment of $62.0
million, or 56.3% decrease, offset by an increase in the Industrial segment of
$33.0 million or 59.0% due to the net sales contributed by our merger with
KushCo, which have been included in our results of operations since August 31,
2021, which is the merger completion date. The decline in the Consumer Goods
segment is due to a major restructuring effort by the company during fiscal year
2022 to reduce sales and marketing cost to align with revenue, sale of the
Company's minority interest in Vibes brand and a shift in strategy to focus on
in-house brands that have a higher margin profile and rationalized third-party
brand offering generating top line revenue with lower margins.

Cost of Sales and Gross Margin



For the year ended December 31, 2022, cost of sales decreased by $20.1 million,
or 15.2%, as compared to the year ended December 31, 2021. The decrease in cost
of sales is aligned with the decrease in revenue of 17.4%.

Gross margin decreased by 2.2% to 18.2% for the year ended December 31, 2022,
compared to gross margin of 20.4% for the same period in 2021. The decrease in
margin is due to the increased weight on margin from the Industrial segment that
has a lower margin profile then the Consumer segment representing 65% of total
revenue for fiscal year 2022 versus only representing 34% of total revenue for
fiscal year 2021. Excluding inventory write-offs of damaged and obsolete
inventory in
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2022 and 2021 of $9.6 million and $10.5 million gross margins decreased 1.5% to 25.2% in 2022, compared to 26.7% for the same period in 2021.



Gross margin, or gross profit as a percentage of net sales, has been and will
continue to be affected by a variety of factors, including the average mark-up
over the cost of our products; the mix of products sold; purchasing
efficiencies; the level of sales for certain third-party brands, which carry
contractual profit sharing obligations; and the potential impact on freight
costs arising from passing of the PACT Act amendment noted under Regulatory
Developments. Many of our products are sourced from suppliers who may use their
own third-party manufacturers, and our product costs and gross margins may be
impacted by the product mix we sell in any given period. Furthermore, Consumer
Goods segment and Industrial segment margins are significantly different, due to
their respective customer bases, product mix and types of transactions.
Industrial segment revenue is comprised of a stable customer base of wholesale
and business to business customers, resulting in a lower-volume of transactions
with a higher average transaction price and lower margin sales. Conversely,
Consumer Goods sales are comprised of business to business, retail and
e-commerce sales that consist of a higher volume of transactions with lower
average prices and higher margins.

Salaries, Benefits and Payroll Taxes



Salaries, benefits and payroll taxes expenses decreased by approximately $2.7
million, or 8.0% , to $31.3 million for the year ended December 31, 2022,
compared to $34.0 million for the same period in 2021. The decrease is related
to a reduction in workforce of 49% throughout fiscal year 2022. The Company
reduced headcount from 308 employees as of December 31, 2021 to 157 employees as
of December 31, 2022. The decrease was offset by a full year of compensation
expense related to the KushCo merger for fiscal year 2022 versus only four
months of expense from the merger date of August 31, 2021 for fiscal year 2021.

As we continue to closely monitor the evolving business landscape, including the
impacts of COVID-19 on our customers, vendors, and overall business performance,
we remain focused on identifying cost-saving opportunities while delivering on
our strategy to recruit, train, promote and retain the most talented and
success-driven personnel in the industry.

General and Administrative Expenses



General and administrative expenses decreased by approximately $6.9 million, or
14.4%, for the year ended December 31, 2022, compared to the same period in
2021. This decrease was primarily due to a decrease of approximately
$4.9 million in professional fees related to accounting, legal, general
sub-contracting and M&A; a decrease of $1.1 million in insurance expense, a
decrease of $1.3 million in marketing expense, a decrease of $1.6 million in
merchant credit card fees due to the decrease in revenue and a gain of $1.4
million related to the sale of assets primarily driven by the sale of the
Company's 50% interest in the Vibes entity and the Company's headquarters in
Boca Florida offset by some asset losses. The decreases were offset by a
one-time VAT liability gain recorded in 2021 of $1.7 million, bad debt expense
increase of $1.1 million and increases in other G&A expenses of $0.7 million.

Goodwill and Indefinite-Lived Intangibles Impairment Charge



We incurred a goodwill and indefinite-lived intangibles impairment charge of
approximately $71.4 million during the year ended December 31, 2022, compared to
no such impairment charge for the comparable period in 2021. This impairment
charge was due to declining business and declining enterprise value.

Depreciation and Amortization Expenses



Depreciation and amortization expense increased $4.4 million, or 93.4%, for the
year ended December 31, 2022, compared to the same period in 2021. The increase
is primarily related to the additional depreciation and amortization expense
related to assets acquired in conjunction with the KushCo merger, the Eyce and
DaVinci business acquisitions, and the ERP implementation.

Other Income (Expense), Net

Interest expense.

Interest expense increased approximately $1.9 million during the fiscal year 2022 versus fiscal year 2021. The increase is primarily related to the new Asset-Based Loan, Bridge Loan and the Eyce and DaVinci promissory notes.

Employee retention credits.



As of December 31, 2022, we had recorded an ERC receivable of $4.9 million
within "Other current assets" on our consolidated balance sheets, and a
corresponding amount was included in "Other income (expense), net" in our
consolidated statement of operations and comprehensive loss for the year ended
December 31, 2022. On February 16, 2023, two of Greenlane Holdings, Inc.'s
subsidiaries, Warehouse Goods LLC and Kim International LLC (collectively, the
"Company"),
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entered into an agreement with a third-party institutional investor pursuant to
which the investor purchased, for approximately $4.9 million in cash, an
economic participation interest, at a discount, in all of the Company's rights
to payment from the United States Internal Revenue Service with respect to the
employee retention credits filed by the Company under the Employee Retention
Credit ("ERC") program.

Other expense, net.

Other expense, net, increased by approximately $0.4 million for the year ended
2022 primarily due to changes in the fair value of contingent consideration and
other losses, compared to the same period in 2021.

Segment Operating Performance



Following the completion of the KushCo merger in late August 2021, we reassessed
our operating segments based on our new organizational structure. Based on this
assessment, we determined we had two operating segments as of December 31, 2021,
which are the same as our reportable segments: (1) Consumer Goods, which largely
comprises Greenlane's legacy operations across the United States, Canada, and
Europe, and (2) Industrial Goods, which largely comprises KushCo's legacy
operations. These changes in operating segments align with how we manage our
business as of the fourth quarter of 2022.

The Consumer Goods segment focuses on serving consumers across wholesale, retail
and e-commerce operations-through both our proprietary brands, including Eyce,
DaVinci, Marley Natural, Keith Haring, and Higher Standards, as well as
lifestyle products and accessories from leading brands, like Storz and Bickel,
Grenco Science, and many more. The Consumer Goods segment forms a central part
of our growth strategy, especially as it relates to scaling our own portfolio of
higher-margin proprietary owned brands.

The Industrial Goods segment focuses on serving the premier cannabis brands,
operators, and retailers through our wholesale operations by providing ancillary
products essential to their growth, such as customizable packaging and supply
products, which includes our Greenlane Brand Pollen Gear and vaporization
solutions offering which includes CCELL branded products.

Our CODM allocates resources to and assesses the performance of our two
operating segments based on the operating segments' net sales and gross profit.
The following table sets forth information by reportable segment for the years
ended December 31, 2022 and 2021:

                                                                                  % of Total Net sales                            Change
                                        2022               2021                2022                  2021                  $                  %
Net sales:
Consumer Goods                      $  48,134          $ 110,105                  35.1  %               66.3  %       $ (61,971)             (56.3) %
Industrial Goods                       88,951             55,955                  64.9  %               33.7  %          32,996               59.0  %
Total net sales                     $ 137,085          $ 166,060                 100.0  %              100.0  %

                                                                                 % of Segment Net sales                           Change
Cost of sales:                          2022               2021                2022                  2021                  $                  %
Consumer Goods                      $  38,531          $  87,561                  80.0  %               79.5  %       $ (49,030)             (56.0) %
Industrial Goods                       73,571             44,646                  82.7  %               79.8  %          28,925               64.8  %
Total cost of sales                 $ 112,102          $ 132,207

Gross profit:
Consumer Goods                      $   9,603          $  22,544                  20.0  %               20.5  %       $ (12,941)             (57.4) %
Industrial Goods                       15,380             11,309                  17.3  %               20.2  %           4,071               36.0  %
Total gross profit                  $  24,983          $  33,853


Consumer Goods

For the year ended December 31, 2022, our Consumer Goods operating segment
reported net sales of approximately $48.1 million compared to approximately
$110.1 million for the same period in 2021, representing a decrease of $62.0
million or 56.3%. The decline in the Consumer Goods segment is due to a major
restructuring effort by the Company during fiscal year 2022 to reduce sales and
marketing cost to align with revenue, sale of the Company's minority interest in
Vibes brand and a shift in strategy to focus on in-house brands that have a
higher margin profile and rationalized third-party brand offering generating top
line revenue with lower margins.
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For the year ended December 31, 2022, cost of sales decreased by $49.0 million,
or 56.0%, as compared to the same period in 2021. The decrease in cost of sales
was primarily due to the 56.3% decrease in Consumer Goods net sales.

Gross margin remained relatively flat at approximately 20.0% for the year ended
December 31, 2022, compared to gross margin of approximately 20.5% for the same
period in 2021. Excluding inventory write-offs of damaged and obsolete inventory
charges of $3.8 million, gross margin was approximately 28% for year ended
December 31, 2022, compared to gross margin of approximately 25.0%, excluding
damaged and obsolete charges of $5.2 million, for the same period in 2021.

Industrial Goods



For the year ended December 31, 2022, our Industrial Goods operating segment
reported net sales of approximately $89.0 million compared to approximately
$56.0 million for the same period in 2021, representing an increase of $33.0
million or 59.0%. The increase is directly related to net sales contributed by
our merger with KushCo, which have been included in our results of operations
since August 31, 2021, which is the merger completion date.

For the year ended December 31, 2022, cost of sales increased by $28.9 million,
or 64.8%, as compared to the same period in 2021. The increase is directly
related to cost of sales contributed by our merger with KushCo, which have been
included in our results of operations since August 31, 2021, which is the merger
completion date.

Gross margin was approximately 17.3% for the year ended December 31, 2022,
compared to gross margin of approximately 20.2% for the same period in 2021,
representing 2.9% year over year decrease. Excluding inventory write-offs of
damaged and obsolete inventory charges of $5.1 million, gross margin was
approximately 23% for year ended December 31, 2022, compared to gross margin of
approximately 30%, excluding damaged and obsolete charges of $5.3 million, for
the same period in 2021.

Net Sales by Geographic Regions



                                     Year Ended December 31,
                                                          % of Net sales                    Change
                       2022            2021             2022            2021            $             %
Net sales:
United States     $    126,333      $ 146,006              92.2  %     

87.9  %    $ (19,673)      (13.5) %
Canada                   5,810          9,717               4.2  %       5.9  %       (3,907)      (40.2) %
Europe                   4,942         10,337               3.6  %       6.2  %       (5,395)      (52.2) %
Total net sales   $    137,085      $ 166,060             100.0  %

100.0 % $ (28,975) (17.4) %





For the year ended December 31, 2022, our United States net sales to customers
in the United States were approximately $126.3 million, compared to
approximately $146.0 million for the same period in 2021, representing a
decrease of $19.7 million, or 13.5%. The year-over-year decrease was primarily
due to an overall business decline in the Industrial and Consumer Goods
segments.

For the year ended December 31, 2022, our Canadian net sales were approximately
$5.8 million, compared to approximately $9.7 million for the same period in
2021, representing a decrease of $3.9 million, or 40.2%. The year-over-year
decrease was primarily due to an overall business decline in the Industrial and
Consumer Goods segments.

For the year ended December 31, 2022, our European net sales were approximately
$4.9 million, compared to approximately $10.3 million for the same period in
2021, representing a decrease of $5.4 million, or 52.2%.

Liquidity and Capital Resources



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 other equity issuances such as our June
2022 and October 2022 offerings. As of December 31, 2022, we had approximately
$12.2 million of which $5.7 million was restricted and $0.8 million was held in
foreign bank accounts, and approximately $41.0 million of working capital, which
is calculated as total current assets minus total current liabilities, as
compared to approximately $12.9 million of cash, of which $0.7 million was held
in foreign bank accounts, and approximately $53.8 million of working capital as
of December 31, 2021. The repatriation of cash balances from our foreign
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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.

At Greenlane, we are hyper-focused on making our business profitable and
well-capitalized for long-term sustainability, and we have completed several
initiatives to optimize our working capital requirements. We launched Groove, a
new, innovative Greenlane Brands product line, which is accretive to gross
profit, and we also rationalized our third-party brands product offering, which
enables us to reduce inventory carrying costs and working capital requirements.
We are in the process of divesting the packaging product line, which is expected
to provide liquidity and allow for ongoing substantial cost reductions. We have
successfully renegotiated supplier partnership terms and are continuing to
improve working capital arrangements with suppliers. We have made tremendous
progress consolidating and streamlining our office, warehouse, and distribution
operations footprint in 2022 and we have plans to continue consolidating and
streamlining in 2023. We have reduced our workforce by approximately 49%
throughout fiscal year 2022 to reduce costs and align with our revenue
projections. We continue to improve internal systems with a focus on improving
efficiency through technology.

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 at least the next 12
months. We have an effective shelf registration statement on Form S-3 (the
"Shelf Registration Statement"); however, for so long as our public float is
less than $75 million, our ability to utilize the Shelf Registration to raise
capital is limited as further set forth in the paragraph below. The Shelf
Registration Statement registers shares of our Class A common stock, preferred
stock, $0.0001 par value per share (the "preferred stock"), depository shares
representing our preferred stock, warrants to purchase shares of our Class A
common stock, preferred stock or depository shares, and rights to purchase
shares of our Class A common stock or preferred stock that may be issued by us
in a maximum aggregate amount of up to $200 million. In August 2021, we filed a
prospectus supplement and established an "at-the-market" equity offering program
(the "ATM Program") that provides for the sale of shares of our Class A common
stock having an aggregate offering price of up to $50 million, from time to
time. Net proceeds from sales of our shares of Class A common stock under the
ATM Program are expected to be used for working capital and general corporate
purposes. However, we may be unable to access the capital markets because of
current market volatility and the performance of our stock price.

On March 31, 2022, the date on which our Annual Report on Form 10-K for the
fiscal year ended December 31, 2021 (the "2021 Annual Report") was filed with
the SEC, the Shelf Registration Statement became subject to the offering limits
set forth in Instruction I.B.6 because our public float was less than $75
million. For so long as our public float is less than $75 million, the aggregate
market value of securities sold by us under the Shelf Registration Statement
(including our ATM Program) pursuant to Instruction I.B.6 during any twelve
consecutive months may not exceed one-third of our public float. Since the
launch of the ATM program in August 2021 and through September 30, 2022, we sold
972,624 shares of our Class A common stock under the ATM Program, which
generated gross proceeds of approximately $12.7 million. In light of our low
cash position, we have been forced to sell stock under our ATM program at prices
that may not otherwise be attractive and are dilutive. We have offered $6.8
million in securities pursuant to Instruction I.B.6 in the twelve calendar
months preceding the date of filing of this Quarterly Report on Form 10-Q.
Following the completion of the June 2022 Offering we are unable to issue
additional shares of Class A common stock pursuant to the ATM Program or
otherwise use the Shelf Registration Statement for a period of time due to the
restrictions under Instruction I.B.6 to Form S-3, which will limit our liquidity
options in the capital markets.

On March 10, 2022, we announced the 2022 Plan to reduce our cost structure,
increase liquidity and accelerate our path to profitability. The 2022 Plan
includes a recently completed reduction in force, reduction of facility
footprints worldwide, a sale leaseback of our headquarters building, disposition
of non-core assets, discontinuation of lower-margin third-party brands, increase
of prices on select products and securing an asset-based loan that will support
our working capital needs (with respect to the sale of the Company's
headquarters building, discontinuation and disposition of non-core and
lower-margin inventory and securing an asset-backed loan, the "Liquidity
Initiatives"). Please see "Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Overview - 2022 Plan" for more
information.

On June 27, 2022, we entered into a securities purchase agreement with an
accredited investor, pursuant to which we agreed to issue and sell an aggregate
of 585,000 shares of our Class A common stock, pre-funded warrants to purchase
up to 495,000 shares of our Class A common stock (the "June 2022 Pre-Funded
Warrants") and warrants to purchase up to 1,080,000 shares of our Class A common
stock (the "June 2022 Standard Warrants" and, together with the June 2022
Pre-Funded Warrants, the "June 2022 Warrants"), in a registered direct offering
(the "June 2022 Offering"). The June 2022 Offering generated gross proceeds of
approximately $5.4 million and net proceeds to the Company of approximately
$5.0 million. All June 2022 Pre-Funded Warrants were exercised in July 2022, for
de minimis net proceeds.

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



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
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lenders under the Loan Agreement agreed to release $5.7 million in funds held in a blocked account pursuant to the terms of the Loan Agreement.



On October 27, 2022, we entered into securities purchase agreements with certain
investors, pursuant to which we agreed to issue and sell an aggregate of
6,955,555 shares of our Class A common stock, 1,377,780 October 2022 Pre-Funded
Warrants and 16,666,670 October 2022 Standard Warrants. The October 2022 Units
were offered pursuant to a Registration Statement on Form S-1. The October 2022
Offering generated gross proceeds of approximately $7.5 million and net proceeds
to the Company of approximately $6.8 million.

On November 3, 2022, we entered into that certain Lease Termination Agreement,
dated as of October 31, 2022 solely for reference purposes (the "Lease
Termination Agreement"), by and between us and Warland Investments Company (the
"Landlord"), which provided for the termination of our lease at 6261 Katella
Avenue in Cypress, California (collectively, the "Lease Termination"). Pursuant
to the terms of the Lease Termination Agreement, we agreed to pay a fee of
approximately $0.5 million as an early termination fee in consideration for the
Landlord agreeing to terminate all of our remaining obligations under the
Cypress lease. We expect the Lease Termination to result in approximately $1.7
million in savings, although we can provide no assurances as to the total amount
of savings ultimately realized from the Lease Termination.

On February 3, 2023, we filed a Registration Statement on Form S-1 (the "February 2023 S-1") seeking to register the public offering of up to $8.0 million in units, which has not yet become effective. We can provide no assurances as to whether the February 2023 S-1 will become effective, or whether we will undertake this public offering following the filing of this Annual Report on Form 10-K.



On February 16, 2023, two of our wholly owned subsidiaries, Warehouse Goods and
Kim International LLC, entered into an agreement with a third-party
institutional investor pursuant to which the investor purchased, for
approximately $4.9 million in cash, an economic participation interest, at a
discount, in all of our rights to payment from the United States Internal
Revenue Service with respect to the employee retention credits filed by us under
the Employee Retention Credit program.

Our opinions concerning liquidity are based on currently available information.
To the extent this information proves to be inaccurate, or if circumstances
change, future availability of trade credit or other sources of financing may be
reduced and our liquidity could be adversely affected. Our future capital
requirements and the adequacy of available funds will depend on many factors,
including those described in the section titled "Risk Factors" in Item 1A of
this Annual Report on Form 10-K for the year ended December 31, 2022. Depending
on the severity and direct impact of these factors on us, we may be unable to
secure additional financing to meet our operating requirements on terms
favorable to us, or at all.

As of December 31, 2022, 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.

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)                                                2022               2021
Net cash used in operating activities                 $     (26,426)          $ (37,330)
Net cash provided by (used in) investing activities          12,025

(19,691)


Net cash provided by financing activities                    13,930

38,963

Net Cash Used in Operating Activities

During 2022, net cash used in operating activities of approximately $26.4 million was a result of a net loss of $125.9 million offset by non-cash adjustments to net loss of $84.2 million, including an impairment charge related to goodwill and indefinite-lived intangibles of $71.4 million, and a $15.2 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.



During 2021, net cash used in operating activities of approximately $37.3
million consisted of (i) net loss of $53.4 million, offset by non-cash
adjustments to net loss of approximately $9.6 million, including stock-based
compensation expense of approximately $5.7 million, depreciation and
amortization expense of approximately $4.7 million, and an offsetting reversal
on the allowance of an indemnification receivable of approximately $1.7 million,
and (ii) $6.5 million cash used in working capital primarily driven by decreases
in accounts payable, accrued expenses and customer deposits of approximately
$6.9 million, offset by decreases in accounts receivable, inventories, vendor
deposits and other current assets of approximately $13.4
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million, which included the collection of an indemnification asset of
approximately $0.9 million, and the reduction of our VAT receivable balance upon
the collection of a refund from the Dutch tax authorities of approximately $4.1
million.

Net Cash Provided by (Used in) Investing Activities



During 2022, net cash provided by investing activities of (i) approximately $9.6
million of cash proceeds from the sale of our assets held for sale, (ii)
approximately $4.6 million of cash proceeds from the disposition of our
interests in VIBES, and (iii) approximately $0.6 million of cash proceeds from
the sale of certain equity securities investments, offset by approximately $2.8
million of cash used for capital expenditures, including development costs for
our new enterprise resource planning system.

During 2021, net cash used in investing activities of approximately $19.7 million consisted of (i) approximately $15.6 million of cash used for the acquisition of Eyce, KushCo, and DaVinci, net of cash acquired, (ii) $4.4 million for capital expenditures, including development costs for our new enterprise resource planning system, and (iii) $0.3 million of cash for the purchase of intangible assets, offset by proceeds from the sale of assets held for sale of approximately $0.7 million.

Net Cash Provided by Financing Activities



During 2022, net cash provided by financing activities primarily consisted of
(i) approximately $21.1 million of cash proceeds from the issuance of Class A
common stock related to our ATM Program, the June 2022 Offering and the October
2022 Offering, (2) approximately $14.6 million of cash proceeds from our
Asset-Based Loan, offset by debt issuance costs of $1.5 million, and (iii)
approximately $0.9 million of cash used for contingent consideration payments,
(iv) and approximately $19.4 million of cash used for repayments related to the
Eyce and DaVinci promissory notes, the payoff of the Real Estate Note, and
repayment of the Bridge Loan.

During 2021, net cash provided by financing activities of approximately $39.0
million primarily consisted of cash proceeds of approximately $32.6 million from
the issuance of Class A common stock in conjunction with our Common Stock and
Warrant Offering in August 2021 and ATM Program, net proceeds from the issuance
of the Bridge Loan of approximately $7.9 million, and cash proceeds of
approximately $0.3 million from the exercise of stock options and warrants,
offset primarily by approximately $1.1 million in payments on other long-term
liabilities, notes payable and finance lease obligations and $0.2 million in
distributions.

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