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What changed in Greenlane Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Greenlane Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+363 added−436 removedSource: 10-K (2024-07-19) vs 10-K (2023-03-31)

Top changes in Greenlane Holdings, Inc.'s 2023 10-K

363 paragraphs added · 436 removed · 253 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

54 edited+39 added−37 removed53 unchanged
Biggest changeOur 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. 7 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.
Biggest changeManagement 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 2022 and 2023, the Company received capital from various sources permitting it to right-size the business and position the company for growth.
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. 5 Other Methods of Consumption.
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.
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 4 medical purposes regime and industrial hemp.
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.
Our rolling papers category is comprised of over 100 products across two unique brands, not including accessories such as rolling trays or tips. Our Competitive Strengths We attribute our success to the following competitive strengths: A Clear Market Leader in an Attractive Industry.
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.
Lastly, 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.
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.
The Cannabis Act (the “Cannabis Act”) currently governs the production, sale and distribution of medical cannabis and related oil extracts in 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 (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.
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 9 recognizing and rewarding exceptional performance.
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 are a leading 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 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.
While we purchase our products from over 150 suppliers, a significant percentage of our net sales is dependent on sales 6 of products from a small number of key suppliers, which is why strong relationships are essential to our future success.
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.
We expect these taxes would impact our competitors similarly, assuming their compliance with applicable laws. 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.
We expect these taxes would impact our competitors similarly, assuming their compliance with applicable laws. 11 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.
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 .
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 .
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.
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.
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, product development, brand building, and e-commerce.
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.
As a result, we enjoy a highly motivated and skilled work force 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.
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.
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.
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.
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 to specialty retailers, smoke shops, head shops, convenience stores, and consumers directly through our own proprietary web stores and large online marketplaces such as Amazon.
Greenlane provides a wide array of consumer ancillary products and industrial ancillary products to thousands of cannabis producers, processors, brands, and retailers (“Cannabis Operators”). 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.
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.
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.
We are the sole manager of the Operating Company and, as of December 31, 2022, owned a 100% interest in the Operating Company.
We are the sole manager of the Operating Company and, as of December 31, 2023, owned a 100% interest in the Operating Company.
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.
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. U.S.
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.
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.
Our Consumer Goods segment focuses 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.
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.
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 Industrial Goods business is generally not affected by seasonality. Human Capital Resources As of March 28, 2023, we had 145 full-time employees. Approximately 127 were employed in the U.S., and 18 were employed in Europe. None of our employees are represented by a labor union. We have never experienced a labor-related work stoppage.
Our Industrial Goods business is generally not affected by seasonality. Human Capital Resources As of July 18, 2024, we had 66 full-time employees. Approximately 54 were employed in the U.S., and 12 were employed in Europe. None of our employees are represented by a labor union. We have never experienced a labor-related work stoppage.
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 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 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.
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.
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, and Vaposhop which serves the European market. We also sell our proprietary products direct to consumers via DaVincivaporizer.com, Higherstandards.com, Eycemolds.com, and MarleyNaturalShop.com. Market Knowledge and Understanding.
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, and Vaposhop which serves the European market. 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.
Business Seasonality We have historically experienced only moderate seasonality in our Consumer Goods 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.
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. 9 Business Seasonality We have historically experienced only moderate seasonality in our Consumer Goods 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.
Twenty-one states, and the District of Columbia, have legalized cannabis for non-medical adult use with additional states, such as Ohio, actively considering the legalization of cannabis for non-medical adult use. A n additional eighteen states have legalized medical cannabis in some form, with cer tain of those states permitting only low tetrahydrocannabinol ("THC") oils for a limited class of patients.
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.
We believe the continuing trend of states’ legalization of medicinal and adult-use cannabis is likely to contribute to an increase in the demand for many of our products. In the 2020 election, voters approved ballot initiatives legalizing adult-use cannabis in New Jersey, Arizona, Montana, and South Dakota. Voters also approved initiatives legalizing medical marijuana in Mississippi and South Dakota.
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.
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.
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. 8 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.
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.
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.
Developing A World-Class Portfolio of Proprietary Brands. We intend to continue to develop a portfolio of our own proprietary brands (Greenlane Brands), 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.
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.
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 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 centers in the United States, while also utilizing third-party logistics (“3PL”) locations in the United States, Europe, and Canada.
We believe we have significant opportunities to add product categories through our knowledge of our industry and possible acquisition targets. Be the Employer of Choice. We believe our employees are the key drivers of our success, and we aim to recruit, train, promote and retain the most talented and success-driven personnel in the industry.
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.
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. 8 Pursue Value-Enhancing Strategic Acquisitions.
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.
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”).
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”).
We believe there are only a select few wholesale distributors carrying a complete line of premium vaporization products and consumption accessories.
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.
Our wholly-owned Greenlane Brands includes our recently launched more affordable product line – Groove, our innovative silicone pipes and accessories line – Eyce, our best-in-class premium vaporizer brand – DaVinci, our premium smoke shop and ancillary product brand – Higher Standards, and our child-resistant packaging brand - Pollen Gear.
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.
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.
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 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.
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.
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.
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.
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, President Biden announced on October 6 th , 2022, that he has asked the Secretary of Health and Human Services, along with the Attorney General, to initiate the administrative process to expeditiously review how cannabis is scheduled under Federal law which, combined with other statements, suggests cannabis’ current Schedule 1 status pursuant to the CSA may be set to improve in the not-too-distant future.
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.
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.
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. 10 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.
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. Canada. Legal access to dried cannabis for medical purposes was first allowed in Canada in 1999.
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).
As part of our 2022 Plan, we completed a series of reductions in force during 2022, which we expect to result in approximately $8.0 million in annualized cash compensation cost savings.
During 2022 and 2023, we completed a series of reductions in force, which we expect to result in approximately $10.0 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.
Refer to "Note 11— Segment Reporting" within Item 8 to this Annual Report on Form 10-K for additional information on our reportable segments. 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.
This diversification in our business segments contributes to greater overall financial stability and resilience against market fluctuations. 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 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 Vapor.com, Vaposhop.com, DaVinciVaporizer.com, PuffItUp.com, HigherStandards.com, EyceMolds.com, and MarleyNaturalShop.com.
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 enables us to reach customers directly, providing them with valuable resources and a seamless purchasing experience.
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 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.
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 grew from CAD 4.8 billion in 2022 to CAD 5.6 billion in 2023, marking a 16.7% increase (Government of Canada, Cannabis Market Reports).
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 environment, not to mention the environment of the cannabis industry itself, the key focus for many companies is profitability.
In addition, our management team has expertise in accounting and finance, mergers and acquisitions, supply chain, information technology, 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.
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, Pollen Gear, Eyce, and most recently DaVinci. We also license certain trademarks and other intellectual property, most notably those associated with our Marley Natural and Keith Haring brands.
We also license certain trademarks and other intellectual property, most notably those associated with our Marley Natural and Keith Haring brands.
The wholesale website gives customers an improved user experience that features an easy-to-use layout to streamline 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.
This platform provides our business customers 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.
It has been widely reported that other countries are considering following suit. Additionally, certain countries in Europe, including Germany, are considering the adoption of laws that would legalize cannabis for adult use. 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.
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.
This initiative, combined with restructuring some of our other initiatives, should allow us to reduce our overall cost-structure, and in combination, convert millions of dollars of inventory back into working capital, thereby significantly improving our balance sheet.
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.
The changes in regulations for cannabis products across Europe are expected to result in a market growth. for medical cannabis, of approximately $13.37 billion in annual sales by 2027, a significant growth from approximately $4.96 billion in 2022. Many European Union countries allow limited cannabis use for medicinal purposes, with some of those countries operating pilot programs.
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.
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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.
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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.
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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.
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We have made tremendous progress consolidating and streamlining our warehouse and distribution in 2023, 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 Consumer and Industrial Goods, positioning us to meet all our customers’ growing demands.
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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.
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Refer to Note 11 — Segment Reporting within Item 8 of this Annual Report on Form 10-K for additional information on our reportable segments We have historically experienced only moderate seasonality in the Consumer Goods side of our business, particularly during the fourth quarter.
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Our Business Relating to the Cannabis Industry The information included below is based on the most recent information available to the Company and, except as expressly stated below, does not give effect to the continued impact of the COVID-19 pandemic; the long-term impacts of which remain uncertain as of the date of this Form 10-K.
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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.
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Cannabis Landscape A January 2022 report of Cowen and Company, one of the leading investment banks and equity research firms serving the cannabis industry, estimated that spending in the U.S. legal cannabis market was approximately $18.9 billion in 2020 and reached approximately $25.3 billion in 2021, representing growth of approximately 33.9%.
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Our Industrial Goods business is generally not affected by seasonality, which provides an important advantage to our overall business model. The stability of the Industrial Goods segment helps to offset the moderate seasonality in Consumer Goods, providing a more consistent revenue stream throughout the year.
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The report projects that by 2030, spending in the U.S. legal cannabis market will reach $64.9 billion, representing a compounded annual growth rate of approximately 11% over the nine-year period from 2021.
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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.
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Our experience and awareness of the markets in which we operate lead us to believe that demand for the types of products we sell should grow in tandem with the industry. The North American Cannabis Landscape United States and Territories.
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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.
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In addition, our management team has expertise in accounting and finance, mergers and acquisitions, supply chain, information technology, and operations. Most importantly, our senior team has vast experience in the cannabis industry and other industries we serve, along with an understanding and appreciation for the historical and cultural nuances, including the social justice components.
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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.
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At Greenlane, we are hyper focused on getting our business profitable and well-capitalized for long-term sustainability. On March 10, 2022, we announced our strategic plan (the “2022 Plan”) to reduce our cost structure, increase liquidity and accelerate our path to profitability.
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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.
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The 2022 Plan included multiple reductions 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 (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”).
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In the United States, the number of users grew from 42 million in 2022 to 47 million in 2023, an 11.9% increase (Cannabis Consumer Trends Study 2023. Canada. Legal access to dried cannabis for medical purposes was first allowed in Canada in 1999.
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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.
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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). In Canada, cannabis consumers increased from 7.6 million in 2022 to 8.3 million in 2023, a 9.2% rise (Canadian Cannabis Consumer Survey 2023).
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The Liquidity Initiatives generated more than $30.0 million of liquidity on a non-dilutive basis by the end of 2022. 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.
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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.
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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.
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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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn 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. 12 Due to the restrictions imposed on us by General Instruction I.B.6 of Form S-3 and our low market capitalization and total public float, we are not able to use our universal shelf registration statement on Form S-3 for a period of time, which limits our liquidity options.
Biggest changeIn 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.
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; • 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.
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; 30 ● 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.
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; 42 • 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 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.
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,” 25 and that the FDCA prohibits the addition of CBD to food.
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.
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. 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.
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. 19 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.
There can be no assurance that any pending or future regulatory or agency proceedings, 28 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.
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 Proposed Regulations would: (1) prohibit the promotion of nicotine vaping products and nicotine 17 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.
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.
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. 24 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.
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.
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. If the methodologies of internet search engines are modified, traffic to our websites and corresponding consumer origination volumes could decline.
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. 33 If the methodologies of internet search engines are modified, traffic to our websites and corresponding consumer origination volumes could decline.
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. 11 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.
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.
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 22 U.S. Department of Agriculture, U.S.
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.
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 32 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.
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.
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. 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.
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. 15 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.
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 26 impact on our business, financial condition or results of operations.
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.
As a result, we are subject to numerous 34 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.
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.
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. We are subject to certain U.S. federal regulations relating to cash reporting. The U.S.
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. 28 We are subject to certain U.S. federal regulations relating to cash reporting. The U.S.
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. The scientific community has not yet extensively studied the long-term health effects of the use of vaporizers, electronic cigarettes or e-liquids products.
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. 32 The scientific community has not yet extensively studied the long-term health effects of the use of vaporizers, electronic cigarettes or e-liquids products.
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, 2022, we hold all of the outstanding Common Units.
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, 2023 and 2022, we hold all of the outstanding Common Units.
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) 37 fund our tax obligations in respect of taxable income allocated to us and (ii) cover our operating expenses.
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.
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.
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.
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 recently ruled in South Dakota v.
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.
Our suppliers, however, may not 30 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.
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.
Such a contamination event could have a material adverse effect on our business, results of operations and financial condition. We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.
Such a contamination event could have a material adverse effect on our business, results of operations and financial condition. 31 We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.
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. 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 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. 25 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.
We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act. 38 As the sole manager of the Operating Company, we control and operate the Operating Company.
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.
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.
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.
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.
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.
In addition, changes in cannabis laws or interpretations of such laws are difficult to predict, and could materially and adversely affect our business. Officials of the U.S.
In addition, changes in cannabis laws or interpretations of such laws are difficult to predict, and could materially and adversely affect our business. 27 Officials of the U.S.
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, 2022.
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, 2023.
The State of California and private plaintiffs have been active in enforcing Prop 65 against companies in the tobacco, nicotine, cannabis, and 31 vaporization industries.
The State of California and private plaintiffs have been active in enforcing Prop 65 against companies in the tobacco, nicotine, cannabis, and vaporization industries.
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 170 governments worldwide have ratified the FCTC, including Canada.
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.
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. 40 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.
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. 41 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.
Twenty-one 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. 23 States’ cannabis programs have proliferated and grown even though the cultivation, sale and possession of cannabis is considered illegal under U.S. federal law.
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.
Although we held all of the outstanding Common Units as of December 31, 2022, payments under the TRA are not conditioned on any member’s continued ownership of Common Units or our Class A common stock.
Although we held all of the outstanding Common Units as of December 31, 2023 and 2022, payments under the TRA are not conditioned on any member’s continued ownership of Common Units or our Class A common stock.
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, 2022 and 2021, we derived 7.8% and 12.1%, respectively, of our net sales from outside the United States, primarily in Canada and certain European countries.
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, 2023 and 2022, we derived 7.1% and 7.8%, respectively, of our net sales from outside the United States, primarily in Canada and certain European countries.
Because the number of authorized shares of our Class A common stock was not reduced proportionally, the Reverse Stock Split increased our Board’s ability to issue authorized and unissued shares without further stockholder action.
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.
For example, our recent merger 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.
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.
As a result of several factors, including but not limited to our financial performance, market sentiment about the cannabis industry, volatility in the financial markets generally due to the tightening of monetary policy by the Board of Governors of the United States Federal Reserve Bank (the “Federal Reserve”) and other geopolitical events, events such as the ongoing war in Ukraine, the per share price of our Class A common stock has declined below the minimum bid price threshold required for continued listing.
As a result of several factors, including but not limited to our financial performance, market sentiment about the cannabis industry, volatility in the financial markets generally due to the tightening of monetary policy by the Board of Governors of the United States Federal Reserve Bank (the “Federal Reserve”) and other geopolitical events, events such as the ongoing wars around the world, the per share price of our Class A common stock has declined below the minimum bid price threshold required for continued listing.
The Reverse Stock Split 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.
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.
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.
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.
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.
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.
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.
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.
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 Global Market; • news reports relating to trends, concerns or competitive developments, regulatory changes and other related issues in our industry or target markets, including, but not limited to, EVALI; • 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. 39 The stock markets in general have experienced extreme volatility, particularly recently, that has often been unrelated to the operating performance of particular companies.
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.
At present, we generate a portion of our sales through e-commerce sales on our own websites and fulfillment activities through third-party 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.
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 may be forced to continue to seek equity capital at dilutive prices through our ATM Program or otherwise 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.
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.
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.
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.
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 $0.4 million and $0.2 million in products and supplies to Unrivaled Brands Inc.
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 $0.4 million in products and supplies to Blum Holdings, Inc.
The scope and duration of any future public health crisis, including the potential emergence of new variants of the COVID-19 virus, 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.
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 the COVID-19 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.
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.
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 substantially completed for our Consumer Products division in 2022.
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.
We are also subject to operational, health and safety laws and regulations. 35 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.
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.
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.
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.
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.
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.
We estimate that we had cash available as of December 31, 2022 of $6.5 million. In addition, our revenue for the year ended December 31, 2022 was down from prior years and has declined in recent quarters.
We had cash available as of December 31, 2023 of $0.5 million. In addition, our revenue for the year ended December 31, 2023 was down from prior years and has declined in recent quarters.
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.
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.
("Unrivaled") in the years ended December 31, 2022 and 2021, respectively. Total gross accounts receivable due from Unrivaled were approximately $0.4 million and $0.4 million as of December 31, 2022 and 2021, respectively.
(“Blum”) in the years ended December 31, 2023 and 2022, respectively. Total gross accounts receivable due from Blum were approximately $0.4 million and $0.4 million as of December 31, 2023 and 2022, respectively.
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.
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.
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.
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.
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, we effected the Reverse Stock Split.
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.
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.
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.
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.
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. 23 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.
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.
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.
For example, products manufactured by CCELL represented approximately 39.1% and 15.2% of our net sales in the years ended December 31, 2022 and 2021, respectively, and products manufactured by Storz & Bickel represented approximately 5.5% and 9.6% of our net sales in the years ended December 31, 2022 and 2021, respectively.
For example, products manufactured by CCELL represented approximately 41.5% and 39.1% of our net sales in the years ended December 31, 2023 and 2022, respectively, and products manufactured by Storz & Bickel represented approximately 5.5% of our net sales in both years ended December 31, 2023 and 2022.
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.
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 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.
Accordingly, we cannot predict with any certainty the range of claims that may be allowed or enforced concerning the products that we sell. 34 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.
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.
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. 24 On August 29, 2013, the DOJ issued what came to be called the “Cole Memorandum,” which gave U.S.
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.
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.
Products manufactured by Grenco Science represented approximately 4.6% and 9.0% of our net sales in the years ended December 31, 2022 and 2021, respectively, and products manufactured by Davinci represented approximately 4.0% and 1.5% of our net sales in the years ended December 31, 2022 and 2021, respectively.
Products manufactured by PAX represented approximately 3.6% and 3.3% of our net sales in the years ended December 31, 2023 and 2022, respectively, and products manufactured by Davinci represented approximately 7.5% and 4.0% of our net sales in the years ended December 31, 2023 and 2022, respectively.
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.
In the jurisdictions in which we operate, we need to comply with various standards and practices of different regulatory, tax, judicial and administrative bodies. 35 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.
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. 16 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 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.
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.
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. 22 We may not be able to establish sustainable relationships with large retailers or regional or national chains.
The payment of dividends will depend on our earnings, capital requirements, financial condition, prospects and other factors our Board may deem relevant.
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.
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.
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.
As of December 31, 2022, 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 15,985,637 shares of Class A common stock outstanding, 18,752,297 shares reserved for exercise or vesting of outstanding warrants and options to purchase shares of Class A common stock and 886,424 shares of Class A common stock reserved for future grant under the Company’s equity incentive plan.
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.
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 .
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.
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.
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. 12 Our ability to fund our capital requirements will depend on many factors, and if we are unsuccessful in increasing sales and generating positive cash flows we may have to further reduce our costs by curtailing future operations to continue as a business.
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.
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.
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.
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.
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, particularly sales by our directors, executive officers, and significant shareholders pursuant to plans of disposition adopted in accordance with Rule 10b5-1 of the Exchange Act, 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.
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.
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. 15 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.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES We lease our headquarters in Boca Raton, Florida with approximately 4,000 square feet of office space. We have also entered into leases for distribution centers in the United States, Canada and Europe, administrative office locations in the United States and Europe, and a retail store in the United States.
Biggest changeITEM 2. PROPERTIES We lease our headquarters in Boca Raton, Florida with approximately 1,600 square feet of office space. We have also entered into a lease for our distribution center in the United States, and an administrative office location in Europe.
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. 43
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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol "GNLN" since April 18, 2019. Prior to that time, there was no public market for our stock.
Biggest changeITEM 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 Captial Market under the symbol “GNLN”. Holders As of July 18, 2024 , there were approximately 78 stockholders of record of our Class A common stock.
We intend to retain any future earnings and do not expect to pay cash dividends in the foreseeable future.
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, 2023.
Removed
Our Class B common stock is neither listed nor traded on any stock exchange. Holders As of December 31, 2022, there were approximately 93 stockholders of record of our Class A common stock.
Added
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”).
Removed
Unregistered Sales of Equity Securities During the three months ended December 31, 2022, we issued shares of Class A common stock in exchange for an equivalent number of shares of Class B common stock and Common Units of the Operating Company pursuant to the terms of our Amended and Restated Certificate of Incorporation and the Operating Company's Third Amended and Restated Operating Agreement, as follows: Date Class A shares issued * 10/11/2022 172 10/31/2022 1,588 10/31/2022 428 12/1/2022 172 12/8/2022 172 12/15/2022 71,250 12/15/2022 76,137 12/30/2022 172 12/30/2022 86 These shares were issued in reliance on an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933.
Added
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.
Added
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.
Added
The July 2023 Offering generated gross proceeds of approximately $4.3 million and net proceeds to the Company of approximately $3.9 million.
Added
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.
Added
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.
Added
All other terms of the Prior Warrants remained unchanged. ITEM 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRecent 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. 48 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%.
Biggest changeRecent 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. 49 Results of Operations The following table presents operating results for the years ended December 31, 2023 and 2022: For the Year Ended December 31, (in thousands) % of Net sales Change 2023 2022 2023 2022 $ % Net sales $ 65,373 $ 137,085 100.0 % 100.0 % (71.6 ) (52.3 )% Cost of sales 47,547 112,102 72.7 % 81.8 % (64.6 ) (57.6 )% Gross profit 17,826 24,983 27.3 % 22.3 % (7.2 ) (28.6 )% Operating expenses: Salaries, benefits and payroll taxes 17,454 31,290 26.7 % 22.8 % (13.8 ) (44.2 )% General and administrative 24,213 41,000 37.0 % 29.9 % (16.8 ) (40.9 )% Goodwill and indefinite-lived intangibles impairment charge — 71,360 — % 52.1 % (71.4 ) (100.0 )% Definite-lived intangibles impairment charge — 50,694 — % 37.0 % (50.7 ) (100.0 )% PP&E impairment charge — 7,336 — % 5.4 % (7.3 ) (100.0 )% Depreciation and amortization 2,243 7,405 3.4 % 5.4 % (5.2 ) (69.7 )% Total operating expenses 43,910 209,085 67.2 % 152.5 % (165.2 ) (79.0 )% Loss from operations (26,084 ) (184,102 ) (39.9 )% (134.3 )% 158.0 (85.8 )% Other income(expense), net: Interest expense (5,450 ) (2,450 ) (8.3 )% (1.8 )% (3.0 ) 122.4 % Employee retention credits — 4,854 — % 3.5 % (4.9 ) (100.0 )% Other expense, net (791 ) (541 ) (1.2 )% (0.4 )% 0.3 (46.3 )% Total other (expense) income, net (6,241 ) 1,863 (9.5 )% 1.4 % (8.1 ) (435.0 )% Loss before income taxes (32,325 ) (182,239 ) (49.4 )% (132.9 )% 149.9 (82.3 )% (Benefit from) provision for income taxes — (13 ) — % — % — (100.0 )% Net loss (32,325 ) (182,226 ) (49.4 )% (132.9 )% 149.9 (81.8 )% Net (loss) income attributable to non-control interest (150 ) (12,717 ) (0.2 )% (9.3 )% 12.6 (98.8 )% Net loss attributable to Greenlane Holdings, Inc. $ (32,175 ) $ (169,509 ) (49.2 )% (123.7 )% 137.3 (81.0 )% Consolidated Results of Operations Net Sales For the year ended December 31, 2023, total net sales were approximately $65.4 million, compared to approximately $137.1 million for the year ended December 31, 2022, representing a decrease of $71.7 million, or 52.3%.
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.
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.
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 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 our bridge loan.
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 53 lenders under the Loan Agreement agreed to release $5.7 million in funds held in a blocked account pursuant to the terms of the Loan Agreement.
On February 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.
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 46 are not readily apparent from other sources.
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.
The repatriation of cash balances from our foreign 52 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.
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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview 44 Founded in 2005, Greenlane is the premier global platform for the development and distribution of premium cannabis accessories, vape devices, and lifestyle products.
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.
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.
The 2023 decline in the Consumer Goods segment is due to a major restructuring effort by the Company during fiscal year 2023 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.
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 2022, net cash provided by investing activities of (i) approximately $12.0 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.
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.
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, 2023 .
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.
As a result, in 2023, 100% of the Operating Company’s US and state income and expenses are now 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 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 believe that our cash on hand and the cash flow that we generate from our operations will not 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.
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”).
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”).
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.
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.
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.
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.
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.
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.
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.
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.
These changes in operating segments align with how we manage our business as of the fourth quarter of 2022.
These changes in operating segments align with how we manage our business as of the fourth quarter of 2023.
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.
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 other equity issuances.
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.
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.
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.
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, Arizer and more.
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.
See “Note 10 — Compensation Plans” for more information. 47 All share and per share amounts in this Annual Report on Form 10-K for the fiscal year ended December 31, 2023 have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split.
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.
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 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.
As of December 31, 2023, we had 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, which is calculated as total current assets minus total current liabilities, as compared to approximately $6.5 million of cash, of which $0.8 million was held in foreign bank accounts, and approximately $41.0 million of working capital as of December 31, 2022.
The 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 as described above. For the year ended December 31, 2023, our Canadian net sales were approximately $1.3 million, compared to approximately $5.8 million for the same period in 2022 , representing a decrease of $4.5 million, or 77.8%.
Our CODM allocates resources to and assesses the performance of our two operating segments based on the operating segments' net sales and gross profit.
Our “Chief Operations Decision Marker (“CODM”) allocates resources to and assesses the performance of our two operating segments based on the operating segments’ net sales and gross profit.
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.
We have no uncertain tax positions that qualify for inclusion in our consolidated financial statements. 48 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.
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.
The number of shares available to be awarded under our Second Amended and Restated 2019 Equity Incentive Plan have also been appropriately adjusted.
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%.
The year-over-year decrease was primarily due to an overall business decline in the Industrial and Consumer Goods segments as described above. For the year ended December 31, 2023, our European net sales were approximately $5.1 million, compared to approximately $4.9 million for the same period in 2022 , representing an increase of $0.11 million, or 2.6%.
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.
General and Administrative Expenses General and administrative expenses decreased by approximately $16.8 million, or 40.9 %, for the year ended December 31, 2023 , compared to the same period in 2022 .
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.
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. 51 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.
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%.
Industrial Goods For the year ended December 31, 2023, our Industrial Goods operating segment reported net sales of approximately $36.6 million compared to approximately $89.0 million for the same period in 2022 , representing an decrease of $52.3 million or (58.8%).
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.
H 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.
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.
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 695,555 shares of our Class A common stock, pre-funded warrants to purchase up to 137,778 shares of our Class A Common Stock (the “October 2022 Pre-Funded Warrants”) and warrants to purchase up to 1,666,667 shares of our Class A common stock (the “October 2022 Standard Warrants”).
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 have successfully renegotiated supplier partnership terms and are continuing to improve working capital arrangements with suppliers. We have made progress consolidating and streamlining our office, warehouse, and distribution operations footprint. We have reduced our workforce by approximately 49% throughout fiscal year 2023 to reduce costs and align with our revenue projections.
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”).
Due to the untimely filing of certain of our Quarterly and Annual Reports, we are unable to issue additional shares of Class A common stock pursuant to the ATM Program or otherwise use the Shelf Registration Statement. 53 Common Stock and Warrant Offerings On June 27, 2022, we entered into a securities purchase agreement with an accredited investor, pursuant to which we agreed to issue and sell an aggregate of 58,500 shares of our Class A common stock, pre-funded warrants to purchase up to 49,500 shares of our Class A common stock (the “June 2022 Pre-Funded Warrants”) and warrants to purchase up to 108,000 shares of our Class A common stock (the “June 2022 Standard Warrants” and, together with the June 2022 Pre-Funded Warrants, the “June 2022 Warrants”), in a registered direct offering (the “June 2022 Offering”).
Greenlane is a leading ancillary cannabis company, providing a wide array of consumer ancillary products and industrial ancillary products to thousands of cannabis producers, processors, brands, and retailers (“Cannabis Operators”), in addition to specialty retailers, smoke shops and head shops, convenience stores, and consumers directly through our own proprietary web stores and large online marketplaces such as Amazon.
Greenlane 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. 45 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.
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”).
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”).
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.
See “Note 6 - Long Term Debt” for more information. 54 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.
The October 2022 Offering generated gross proceeds of approximately $7.5 million and net proceeds to the Company of approximately $6.8 million.
The October 2022 units were offered pursuant to a Registration Statement on Form S-1 (the “October 2022 Offering”). The October 2022 Offering generated gross proceeds of approximately $7.5 million and net proceeds to the Company of approximately $6.8 million.
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.
Refer to “Note 12— 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 landscape, particularly within the cannabis industry, achieving profitability and preserving working capital are paramount.
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.
We incurred a impairment charge of approximately $7.3 million to fixed assets related to the ERP system during the year ended December 31, 2022, compared to no such impairment charge fore the comparable year in 2023. This impairment charges were due to declining business and declining enterprise value.
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.
As of December 31, 2023 , we did not have any off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. 55 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) 2023 2022 Net cash provided by (used in) operating activities $ (1,793 ) $ (26,426 ) Net cash provided by (used in) investing activities 30 12,025 Net cash (used in) provided by financing activities (10,140 ) 13,930 Net Cash Used in Operating Activities 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 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%.
Gross margin was approximately 21.4% for the year ended December 31, 2023, compared to gross margin of approximately 17.3% for the same period in 2022 , representing 4.1% year over year increase. 52 Net Sales by Geographic Regions Year Ended December 31, % of Net sales Change 2023 2022 2023 2022 $ % Net sales: United States $ 58,539 $ 126,333 89.5 % 92.2 % $ (67,794 ) (53.7 )% Canada 1,291 5,810 1.9 % 4.2 % (4,519 ) (77.8 )% Europe 5,072 4,942 7.8 % 3.6 % 130 2.6 % Total net sales $ 65,373 $ 137,085 100.0 % 100.0 % $ (71,712 ) (52.3 )% For the year ended December 31, 2023, our United States net sales to customers in the United States were approximately $58.5 million, compared to approximately $126.3 million for the same period in 2022 , representing a decrease of $67.8 million, or 53.7%.
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 following table sets forth information by reportable segment for the years ended December 31, 2023 and 2022: % of Total Net sales Change 2023 2022 2023 2022 $ % Net sales: Consumer Goods $ 28,737 $ 48,134 43.9 % 35.1 % $ (19,397 ) (40.3 )% Industrial Goods 36,636 88,951 56.0 % 64.9 % (52,315 ) (58.8 )% Total net sales $ 65,373 $ 137,085 % of Segment Net sales Change Cost of sales: 2023 2022 2023 2022 $ % Consumer Goods $ 18,754 $ 38,531 65.3 % 80.0 % $ (19,777 ) (51.3 )% Industrial Goods 28,793 73,571 78.6 % 82.7 % (44,778 ) (60.9 )% Total cost of sales $ 47,547 $ 112,102 Gross profit: Consumer Goods $ 9,983 $ 9,603 34.7 % 20.0 % $ 380 13.2 % Industrial Goods 7,843 15,380 21.4 % 17.3 % (7,537 ) (20.6 )% Total gross profit $ 17,826 $ 24,983 Consumer Goods For the year ended December 31, 2023, our Consumer Goods operating segment reported net sales of approximately $28.7 million compared to approximately $48.1 million for the same period in 2022 , representing a decrease of $19.4 million or 40.3%.
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.
Salaries, Benefits and Payroll Taxes Salaries, benefits and payroll taxes expenses decreased by approximately $13.8 million, or 44.2% , to $17.4 million for the year ended December 31, 2023, compared to $31.3 million for the same period in 2022. The decrease is related to a major restructuring effort by the company to reduce headcount and cost to align with revenue.
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.
Reverse Stock Split 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.
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 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.
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.
For the year ended December 31, 2023, cost of sales decreased by $19.8 million, or 51.3%, as compared to the same period in 2022 . The decrease in cost of sales was primarily due to the 40.3% decrease in Consumer Goods net sales.
This initiative, combined with restructuring 45 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.
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.
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.
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 2022 and 2023, the Company received capital from various sources permitting it to right-size the business and position the company for growth.
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 Investing Activities During 2023, net cash provided by investing activities of (i) 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.
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%.
The decrease in cost of sales is aligned with the decrease in revenue of 52.3%. Gross margin increased by 5% to 27.3% for the year ended December 31, 2023, compared to gross margin of 22.3% for the same period in 2022.
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.
Other expense, net, increased by approximately $0.3 million for the year ended December 31, 2023 , for slight changes to non-recurring costs during the year ended December 31, 2023. 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.
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.
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.
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.
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.
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.
Depreciation and Amortization Expense Depreciation and amortization expense decreased $5.2 million , or 69.7% , for the year ended December 31, 2023 , compared to the same period in 2022 . The decrease is primarily related to the intangible and fixed asset impairments recorded as of December 31, 2023, reducing amortization expense. Other Income (Expense), Net Interest expense.
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.
Net Cash (Used in) Provided by Financing Activities During 2023, net cash used in financing activities primarily consisted of (i) approximately $3.9 million of cash proceeds from the issuance of Class A common stock related to our July 2023 Offering, (ii) approximately $3.9 million of cash proceeds from our future receivables financing, (iii) $2.1 million of cash proceeds from a secured bridge loan, offset by (iv) approximately $0.3 million of cash used for contingent consideration payments, (v) and approximately $2.1 million of cash used for repayments related to the Eyce and DaVinci promissory notes, and (vi) the $15.0 million payoff of asset based lending loans.
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.
Interest expense increased approximately $3.0 million during the fiscal year 2023 versus fiscal year 2022. The increase is primarily related to the exiting ABL facility which accelerated deferred interest expense as well as the promissory notes for the Eyce and DaVinci acquisition. Other expense, net.
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.
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.
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 54 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.
During 2022, net cash used in operating activities of approximately $26.4 million was a result of a net loss of $182.2 million offset by non-cash adjustments to net loss of $140.6 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..
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.
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.
Removed
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.
Added
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.
Removed
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.
Added
Facility Footprint Rationalization: In 2023, we optimized our facilities footprint by reducing warehouse and office space while increasing operational efficiency and improving fulfillment practices. The full benefit of those efforts are expected to be realized in 2024. 3.
Removed
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.
Added
In April 2023, we formed two strategic partnerships (described below in greater detail) to increase margins and significantly reduce working capital requirements in our Industrial Goods segment. Similarly, our Consumer Goods segment restructured arrangements with several third-party brands in 2022 and 2023 to reduce our working capital needs. 5.
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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.
Added
Inventory Management: In 2023, we implemented a new inventory management and lifecycle strategy that is focused on a quarterly turn and a regular review of inventory to avoid future write-offs. 6.
Removed
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.
Added
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.
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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.
Added
Product Innovation: In 2023, we launched Groove, an innovative new product line with a value-based price point and in 2024 we have begun to expand our product offering to further enhance our assortment available to our customers. 8.
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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.
Added
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.
Removed
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.
Added
Such sources are described in greater detail in the Liquidity and Capital Resources Section of this report.
Removed
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).
Added
During 2022, the Company also monetized several non-core assets to provide necessary working capital including the sale and lease-back of its headquarters building and the sale of its interest in the Vibes brand. 46 During 2023 and 2024, the Company also entered into certain arrangements to reduce working capital requirements and improve its balance sheet.

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