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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to         
001-38875
(Commission file number)
Greenlane Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware83-0806637
State or other jurisdiction of
incorporation or organization
(I.R.S. Employer
Identification No.)
1095 Broken Sound Parkway,Suite 300
Boca Raton, FL33487
(Address of principal executive offices)(Zip Code)
(877) 292-7660
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.01 par value per shareGNLNNasdaq Global Market
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes     No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act. Yes     No 
Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No  £
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
£
Accelerated filer
£
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.












Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No  ☒
As of August 10, 2022, Greenlane Holdings, Inc. had 7,372,997 shares of Class A common stock outstanding and 259,838 shares of Class B common stock outstanding.





Greenlane Holdings, Inc.
Form 10-Q
For the Quarterly Period Ended June 30, 2022

TABLE OF CONTENTS
Page
Item 1.
Item 2.
Item 3.
Item 4.
Other Information
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.
Signatures




PART I
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

GREENLANE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value per share amounts)
June 30,
2022
December 31,
2021
ASSETS(Unaudited)
Current assets
Cash$9,130 $12,857 
Accounts receivable, net of allowance of $2,318 and $1,285 at June 30, 2022 and December 31, 2021, respectively
15,550 14,690 
Inventories, net60,756 66,982 
Vendor deposits11,530 18,475 
Assets held for sale8,813 75 
Other current assets (Note 8)8,026 11,658 
Total current assets113,805 124,737 
Property and equipment, net13,141 20,851 
Intangible assets, net81,774 84,710 
Goodwill41,819 41,860 
Operating lease right-of-use assets6,259 9,128 
Other assets7,764 4,541 
Total assets$264,562 $285,827 
LIABILITIES
Current liabilities
Accounts payable$27,269 $23,041 
Accrued expenses and other current liabilities (Note 8)22,440 25,297 
Customer deposits5,163 7,924 
Current portion of notes payable, including $8,000 owed to related party
11,445 11,615 
Current portion of liabilities held for sale198  
Current portion of operating leases2,502 3,091 
Total current liabilities69,017 70,968 
Notes payable, less current portion and debt issuance costs, net1,284 10,607 
Long-term liabilities held for sale7,582  
Operating leases, less current portion3,837 6,142 
Other liabilities447 1,746 
Total long-term liabilities13,150 18,495 
Total liabilities82,167 89,463 
Commitments and contingencies (Note 7)
STOCKHOLDERS’ EQUITY*
Preferred stock, $0.0001 par value, 10,000 shares authorized, none issued and outstanding
  
Class A common stock, $0.01 par value per share, 600,000 shares authorized; 6,079 shares issued and outstanding as of June 30, 2022; 4,260 shares issued and outstanding as of December 31, 2021*
62 43 
Class B common stock, $0.0001 par value per share, 30,000 shares authorized; 1,059 shares issued and outstanding as of June 30, 2022; 1,087 shares issued and outstanding as of December 31, 2021*
  
Class C Common stock, $0.0001 par value per share, no shares authorized, issued and outstanding as of June 30, 2022 and December 31, 2021
  
Additional paid-in capital*249,191 229,705 
Accumulated deficit(83,000)(55,544)
Accumulated other comprehensive income291 324 
Total stockholders’ equity attributable to Greenlane Holdings, Inc.
166,544 174,528 
Non-controlling interest15,851 21,836 
Total stockholders’ equity182,395 196,364 
Total liabilities and stockholders’ equity$264,562 $285,827 
*After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.

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



GREENLANE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except per share amounts)
Three months ended June 30,Six months ended June 30,
2022202120222021
Net sales$39,916 $34,715 $86,450 $68,724 
Cost of sales31,817 25,662 72,383 51,116 
Gross profit8,099 9,053 14,067 17,608 
Operating expenses:
Salaries, benefits and payroll taxes8,836 5,596 18,897 11,966 
General and administrative10,588 8,398 22,303 17,979 
Depreciation and amortization2,349 642 4,752 1,186 
Total operating expenses21,773 14,636 45,952 31,131 
Loss from operations(13,674)(5,583)(31,885)(13,523)
Other income (expense), net:
Interest expense(266)(133)(672)(249)
Other income (expense), net(557)(120)(611)204 
Total other income (expense), net(823)(253)(1,283)(45)
Loss before income taxes(14,497)(5,836)(33,168)(13,568)
Provision for (benefit from) income taxes(16)4 62 (14)
Net loss(14,481)(5,840)(33,230)(13,554)
Less: Net loss attributable to non-controlling
interest
(2,357)(2,797)(5,774)(6,255)
Net loss attributable to Greenlane Holdings, Inc.$(12,124)$(3,043)$(27,456)$(7,299)
Net loss attributable to Class A common stock per share - basic and diluted (Note 9)*
$(2.27)$(3.23)$(5.57)$(9.07)
Weighted-average shares of Class A common stock outstanding - basic and diluted (Note 9)*
5,337 942 4,925 805 
Other comprehensive income (loss):
Foreign currency translation adjustments(62)243 26 88 
Unrealized gain (loss) on derivative instrument  358 204 
Comprehensive loss
(14,543)(5,597)(32,846)(13,262)
Less: Comprehensive loss attributable to non-controlling interest
(2,357)(2,650)(5,688)(6,077)
Comprehensive loss attributable to Greenlane Holdings, Inc.
$(12,186)$(2,947)$(27,158)$(7,185)
*After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


GREENLANE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Additional
Paid-In
Capital*
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Non-
Controlling
Interest
Total
Stockholders’
Equity
Shares*Amount*Shares*Amount*SharesAmount
Balance December 31, 20214,260 $43 1,087 $  $ $229,705 $(55,544)$324 $21,836 $196,364 
Net loss— — — — — — — (15,332)— (3,417)(18,749)
Equity-based compensation94 1 — — — — 729 — — 172 902 
Issuance of Class A shares, net of costs - ATM Program557 6 — — — — 6,795 — — — 6,801 
Issuance of Class A shares - contingent consideration191 2 — — — — 3,484 — — — 3,486 
Exchanges of noncontrolling interest for Class A common stock28  (28)— — — 543 — — (543) 
Other comprehensive income— — — — — — — — 361 85 446 
Balance March 31, 20225,130 52 1,059    241,256 (70,876)685 18,133 189,250 
Net loss— — — — — — — (12,124)— (2,357)(14,481)
Equity-based compensation(4) — — — — 371 — — 75 446 
Issuance of Class A shares, net of costs - ATM Program296 3 — — — — 2,221 — — — 2,224 
Issuance of Class A shares, net of costs - June 2022 Offering585 6 — — — — 5,034 — — — 5,040 
Issuance of Class A shares - Amended Eyce APA (Note 3)72 1 — — — — 309 — — — 310 
Reclassification adjustment for gain included in net loss (Note 4)— — — — — — — — (332)— (332)
Other comprehensive income (loss)— — — — — — — — (62) (62)
Balance June 30, 20226,079 $62 1,059 $  $ $249,191 $(83,000)$291 $15,851 $182,395 
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Additional
Paid-In
Capital*
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Non-
Controlling
Interest
Total
Stockholders’
Equity
Shares*Amount*Shares*Amount*SharesAmount
Balance December 31, 2020666 $7 175 $ 76,039 $8 $39,869 $(24,848)$29 $54,192 $69,257 
Net loss— — — — — — — (4,256)— (3,458)(7,714)
Equity-based compensation11  — — — — 182 — — 324 506 
Other comprehensive income— — — — — — — — 18 31 49 
Issuance of Class A common stock21  — — — — 2,005 — — — 2,005 
Exchanges of noncontrolling interest for Class A common stock118 1 (52)— (3,975)(1)5,797 — — (5,797) 
Cancellation of Class B common stock due to forfeitures— —  — — — 8 — — (8) 
Balance March 31, 2021816 8 123  72,064 7 47,861 (29,104)47 45,284 64,103 
Net loss— — — — — — — (3,043)— (2,797)(5,840)
Equity-based compensation(1)— — — — — 161 — — 246 407 
Exchanges of noncontrolling interest for Class A common stock30  — — (1,763)— 983 — — (983) 
Exercise of Class A common stock options2 — 112 — — — 112 
Member distributions— — — — — — — (200)— — (200)
Other comprehensive income— — — — — — — — 96 147 243 
Balance June 30, 2021847 $8 123 $ 70,301 $7 $49,117 $(32,347)$143 $41,897 $58,825 
*After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6


GREENLANE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six months ended June 30,
20222021
Cash flows from operating activities:
Net loss (including amounts attributable to non-controlling interest)$(33,230)$(13,554)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization4,752 1,186 
Equity-based compensation expense1,630 950 
Change in fair value of contingent consideration92 123 
Change in provision for doubtful accounts1,982 75 
Gain related to indemnification asset(1,798)(1,692)
Unrealized loss on equity investments556  
Unrealized gain on interest rate swap contract(449) 
Other14 (8)
Changes in operating assets and liabilities, net of the effects of acquisitions:
Decrease (increase) in accounts receivable(2,841)600 
Decrease (increase) in inventories6,226 2,080 
Decrease (increase) in vendor deposits6,945 802 
Decrease (increase) in other current assets257 8,031 
(Decrease) increase in accounts payable2,593 (6,738)
(Decrease) Increase in accrued expenses and other liabilities2,302 (6,966)
(Decrease) increase in customer deposits(2,761)(47)
Net cash used in operating activities(13,730)(15,158)
Cash flows from investing activities:
Purchase consideration paid for acquisitions, net of cash acquired (2,403)
Purchases of property and equipment, net(1,272)(1,542)
Proceeds from sale of assets held for sale75 675 
Purchase of intangible assets, net (320)
Net cash used in investing activities(1,197)(3,590)
Cash flows from financing activities:
Member distributions (200)
Proceeds from issuance of Class A common stock, net of costs14,064 112 
Payments on notes payable(1,974) 
Purchase consideration paid for Eyce LLC acquisition(875) 
Other(100)(204)
Net cash provided by (used in) financing activities11,115 (292)
Effects of exchange rate changes on cash85 237 
Net (decrease) in cash(3,727)(18,803)
Cash, as of beginning of the period12,857 30,435 
Cash, as of end of the period$9,130 $11,632 
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease liabilities$1,452 $560 
Lease liabilities arising from obtaining finance lease assets$ $119 
Non-cash investing and financing activities:
Issuance of Class A common stock for business acquisitions$3,486 $2,005 
Non-cash purchases of property and equipment$468 $99 
Issuance of promissory note for business acquisition$ $2,503 
Issuance of contingent consideration for acquisition$ $1,828 
Decrease in non-controlling interest as a result of exchanges for Class A common stock$(543)$(6,780)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7


GREENLANE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BUSINESS OPERATIONS AND ORGANIZATION
Organization
Greenlane Holdings, Inc. (“Greenlane” and, collectively with the Operating Company (as defined below) and its consolidated subsidiaries, the “Company”, "we", "us", and "our") was formed as a Delaware corporation on May 2, 2018. We are a holding company that was formed for the purpose of completing an underwritten initial public offering (“IPO”) of shares of our Class A common stock, $0.01 par value per share (“Class A common stock”), in order to carry on the business of Greenlane Holdings, LLC (the “Operating Company”). The Operating Company was organized under the laws of the state of Delaware on September 1, 2015, and is based in Boca Raton, Florida. Unless the context otherwise requires, references to the “Company” refer to us, and our consolidated subsidiaries, including the Operating Company.
We are the sole manager of the Operating Company and our principal asset is Common Units of the Operating Company (“Common Units”). As the sole manager of the Operating Company, we operate and control all of the business and affairs of the Operating Company, and we conduct our business through the Operating Company and its subsidiaries. We have a board of directors and executive officers, but no employees. All of our assets are held and all of the employees are employed by the Operating Company and its subsidiaries.
We have the sole voting interest in, and control the management of, the Operating Company, and we have the obligation to absorb losses of, and receive benefits from, the Operating Company, that could be significant. We determined that the Operating Company is a variable interest entity (“VIE”) and that we are the primary beneficiary of the Operating Company. Accordingly, pursuant to the VIE accounting model, beginning in the fiscal quarter ended June 30, 2019, we consolidated the Operating Company in our consolidated financial statements and reported a non-controlling interest related to the Common Units held by the members of the Operating Company (other than the Common Units held by us) on our consolidated financial statements.
On August 31, 2021, we completed our previously announced merger with KushCo Holdings, Inc. ("KushCo") and have included the results of operations of KushCo in our consolidated statements of operations and comprehensive loss from that date forward. As such, KushCo financial information is included in our condensed consolidated financial statements for the three and six months ended June 30, 2022, and is excluded from the comparative period in 2021. Immediately following the merger with KushCo, stockholders that held Class A common stock prior to the completion of the merger owned 51.9% and former KushCo stockholders owned 48.1% of the equity of the combined company on a fully diluted basis. In connection with the merger with KushCo, the Greenlane Certificate of Incorporation was amended and restated (the “A&R Charter”) in order to (i) increase the number of authorized shares of Greenlane Class B common stock, $0.0001 par value per share (the “Class B Common stock”), from 10 million shares to 30 million shares in order to effect the conversion of each outstanding share of Class C common stock, $0.0001 par value per share (the “Class C common stock”), into one-third of one share of Class B common stock, (ii) increase the number of authorized shares of Class A common stock from 125 million shares to 600 million shares, and (iii) eliminate references to the Class C common stock. Pursuant to the terms of an Agreement and Plan of Merger, dated as of March 31, 2021 (the "Merger Agreement") with KushCo, immediately prior to the consummation of the business combination, holders of Class C common stock received one-third of one share of Class B common stock for each share of Class C common stock held immediately prior to the closing of the merger.
We merchandise premium cannabis accessories, child-resistant packaging, specialty vaporization solutions and lifestyle products in the United States, Canada and Europe, serving a diverse and expansive customer base with more than 8,500 retail locations, including licensed cannabis dispensaries, smoke shops, and specialty retailers. We distribute to multi-state operators ("MSOs"), licensed producers ("LPs"), other retailers and brands through wholesale operations under our Industrial Goods business segment, and to consumers through both wholesale operations as well as e-commerce activities and our retail stores under our Consumer Goods business segment.
Our corporate structure is commonly referred to as an “Up-C” structure. The Up-C structure allows the members of the Operating Company to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity. One of these benefits is that future taxable income of the Operating Company that is allocated to its members will be taxed on a flow-through basis and therefore will not be subject to corporate taxes at the Operating Company entity level. Additionally, because the members may redeem their Common Units for shares of Class A common stock on a one-for-one basis or, at our option, for cash, the Up-C structure also provides the members with potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded.
In connection with our initial public offering, we entered into a Tax Receivable Agreement (the “TRA”) with the Operating Company and the Operating Company’s members (other than Greenlane Holdings, Inc.) and a Registration Rights (the “Registration Rights Agreement”) with the Operating Company’s members. The TRA provides for the payment by us to the Operating Company’s members of 85.0% of the amount of tax benefits, if any, that we may actually realize (or in some cases,
8


are deemed to realize) as a result of (i) the step-up in tax basis in our share of the Operating Company's assets resulting from the redemption of Common Units under the mechanism described above and (ii) certain other tax benefits attributable to payments made under the TRA. Pursuant to the Registration Rights Agreement, we have agreed to register the resale of shares of Class A common stock that are issuable to the Operating Company’s members upon redemption or exchange of their Common Units.

The A&R Charter and the Fourth Amended and Restated Operating Agreement of the Operating Company (the “Operating Agreement”) require that (a) we at all times maintain a ratio of one Common Unit owned by us for each share of our Class A common stock issued by us (subject to certain exceptions), and (b) the Operating Company at all times maintains (i) a one-to-one ratio between the number of shares of our Class A common stock issued by us and the number of Common Units owned by us, and (ii) a one-to-one ratio between the number of shares of our Class B common stock owned by the non-founder members of the Operating Company and the number of Common Units owned by the non-founder members of the Operating Company.
The following table sets forth the economic and voting interests of our common stock holders as of June 30, 2022:
Class of Common Stock (ownership)
Total Shares (1)*
Class A Shares (as converted) (2)*
Economic Ownership in the Operating Company (3)
Voting Interest in Greenlane (4)
Economic Interest in Greenlane (5)
Class A6,078,633 6,078,633 85.2 %85.2 %100.0 %
Class B1,059,240 1,059,240 14.8 %14.8 % %
Total7,137,873 7,137,873 100.0 %100.0 %100.0 %
*After giving effect to the one-for-20 Reverse Stock Split effective August 9, 2022.
(1) Represents the total number of outstanding shares for each class of common stock as of June 30, 2022.
(2) Represents the number of shares of Class A common stock that would be outstanding assuming the exchange of all outstanding shares of Class B common stock upon redemption of all related Common Units. Shares of Class B common stock would be canceled, without consideration, on a one-to-one basis pursuant to the terms and subject to the conditions of the Operating Agreement.
(3) Represents the indirect economic interest in the Operating Company through the holders' ownership of common stock.
(4) Represents the aggregate voting interest in us through the holders' ownership of Common Stock. Each share of Class A common stock and Class B common stock entitles its holder to one vote per share on all matters submitted to a vote of our stockholders.
(5) Represents the aggregate economic interest in us through the holders' ownership of Class A common stock.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021. The condensed consolidated results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or any other future annual or interim period. Certain reclassifications have been made to prior year amounts or balances to conform to the presentation adopted in the current year.
Principles of Consolidation
Our condensed consolidated financial statements include our accounts, the accounts of the Operating Company, and the accounts of the Operating Company's consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Reverse Stock Split
On August 4, 2022, we filed a Certificate of Amendment (the "Certificate of Amendment") to the A&R Charter with the Secretary of State of the State of Delaware, which effected a one-for-20 reverse stock split (the “Reverse Stock Split”) of our issued and outstanding shares of Class A common stock and Class B common stock (collectively, the "Common Stock") at 5:01 PM Eastern Time on August 9, 2022. 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.
9



The Reverse Stock Split did not change the par value of the Common Stock or the authorized number of shares of Common Stock. All outstanding options, restricted stock awards, warrants and other securities entitling their holders to purchase or otherwise receive shares of our Common Stock have been adjusted as a result of the Reverse Stock Split, as required by the terms of each security. The number of shares available to be awarded under our Amended and Restated 2019 Equity Incentive Plan have also been appropriately adjusted. See "Note 10 — Compensation Plans" for more information.

All share and per share amounts in these unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of Common Stock to additional paid-in capital.
Liquidity
Our principal sources of liquidity at June 30, 2022 consisted of cash on hand, future cash anticipated to be generated from operations, the June 2022 Offering described in Note 9, and our ATM Program described below.

We have an effective shelf registration statement on Form S-3 (the "Shelf Registration Statement") and may opportunistically conduct securities offerings from time to time in order to meet our liquidity needs. However, we may be unable to access the capital markets, including because of current market volatility and the performance of our stock price.
As described in further detail in "Note 9 - Stockholders' Equity," in August 2021, we established an "at-the-market" equity offering program (the "ATM Program") that provides for the sale of shares of our Class A common stock having an aggregate offering price of up to $50 million, from time to time. Net proceeds from sales of our shares of Class A common stock under the ATM Program are expected to be used for working capital and general corporate purposes. Since the launch of the ATM program in August 2021 and through June 30, 2022, we sold 972,624 shares of our Class A common stock under the ATM Program, which generated gross proceeds of approximately $12.7 million and paid fees to the sales agent of approximately $0.4 million. In connection with the filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Annual Report”) with the SEC on March 31, 2022, the ATM Program became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3 ("Instruction I.B.6") because our public float was less than $75 million. For so long as our public float is less than $75 million, the aggregate market value of the shares of Class A common stock sold by us pursuant to Instruction I.B.6 during any twelve consecutive months may not exceed one-third of our public float.
Also as described in further detail in "Note 9 - Stockholders' Equity," on June 27, 2022, we entered into a securities purchase agreement with an accredited investor, pursuant to which we agreed to issue and sell an aggregate of 585,000 shares of our Class A common stock, pre-funded warrants to purchase up to 495,000 shares of our Class A common stock (the “June 2022 Pre-Funded Warrants”) and warrants to purchase up to 1,080,000 shares of our Class A common stock (the “June 2022 Standard Warrants” and, together with the June 2022 Pre-Funded Warrants, the “June 2022 Warrants”), in a registered direct offering (the “June 2022 Offering”). The June 2022 Offering generated gross proceeds of approximately $5.4 million and net proceeds to the Company of approximately $5.0 million.
Following the completion of the June 2022 Offering, we are unable to issue additional shares of Class A common stock pursuant to the ATM Program or otherwise use the Shelf Registration Statement for a period of time due to the requirements of Section 5635 of the rules of the Nasdaq Stock Market LLC (the "Nasdaq Exchange Cap"), which requires that stockholder approval be obtained before listed companies issue in excess of 20% of their outstanding common stock in certain transactions, which will limit our liquidity options in the capital markets.

As described in "Note 6 - Debt," in December 2021, we entered into a Secured Promissory Note (the "December 2021 Note") which was subsequently amended on June 30, 2022 (the “First Amendment”) and on July 14, 2022 (the "Second Amendment" and together with the December 2021 Note and the First Amendment, the "Bridge Loan"), with Aaron LoCascio, the Company’s former President and co-founder and a member of the Board, which provided for a loan of $8.0 million originally maturing on June 30, 2022. On July 14, 2022, we repaid $4.0 million of the aggregate principal amount due under the Bridge Loan, and on July 19, 2022, we repaid the remaining balance on the Bridge Loan in full. As a result, all obligations under the Bridge Loan have been satisfied.

We are in the process of establishing a payment plan (the “Payment Plan”) for the repayment of approximately $6.0 million in liabilities due to a third-party vendor (the “Vendor”) relating to previously purchased inventory. In connection with our ongoing discussions with the Vendor, on July 18, 2022, we paid $1.0 million of the approximate $6.0 million balance due to the Vendor in cash and, during the period of July 26, 2022 through July 31, 2022, we returned approximately $1.3 million in inventory to the Vendor, which was accepted by the Vendor and will be credited against the remaining outstanding balance owed by us to the Vendor once the Vendor has confirmed the value of the returned inventory. Currently, we expect to owe the Vendor approximately $3.5 million in remaining liabilities pending the Vendor’s confirmation of the value of the inventory returned to it. We expect to enter into the Payment Plan to repay the remainder of the amount due to the Vendor in the amount of $200,000 in cash each week until the remainder of the liabilities due to the Vendor are repaid in full. However, we can provide no assurances as to the timing of our entry into the Payment Plan, the final terms of the Payment Plan or that we will enter into the Payment Plan at all.
10


As described in "Note 13 - Subsequent Events," on July 19, 2022, Warehouse Goods LLC ("Warehouse Goods"), a wholly owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement and supporting documents (collectively, the “Sale Agreement”), to sell the Company’s 50% stake in VIBES Holdings LLC for total consideration of $5.3 million in cash.

Also as described in "Note 13 - Subsequent Events," on August 9, 2022, we entered into an asset-based loan agreement dated as of August 8, 2022 (the “Loan Agreement”), which makes available to the Company a term loan of up to $15.0 million.

We believe that our cash on hand will be sufficient to fund our working capital and capital expenditure requirements, as well as our debt repayments and other liquidity requirements associated with our existing operations, for at least the next 12 months.
Use of Estimates
Conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts in our condensed consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. U.S. GAAP requires us to make estimates and judgments in several areas. Such areas include, but are not limited to: the collectability of accounts receivable; the allowance for slow-moving or obsolete inventory; the realizability of deferred tax assets; the fair value of goodwill; the fair value of contingent consideration arrangements; the useful lives of intangible assets and property and equipment; the calculation of our VAT taxes receivable and VAT taxes, fines, and penalties payable; our loss contingencies, including our TRA liability; and the valuation and assumptions underlying equity-based compensation. These estimates are based on management's knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ materially from those estimates.
In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") a global pandemic. We expect uncertainties around our key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic, including the possible resurgence of new strains. Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our condensed consolidated financial statements.
Voluntary Change in Accounting Principle
During the first quarter of 2022, we made a voluntary change in accounting principle to classify outbound shipping and handling costs associated with the distribution of products to our customers as a component of "general and administrative" costs within our condensed consolidated statements of operations and comprehensive loss. These costs were previously recorded as a component of "cost of sales" within our condensed consolidated statements of operations and comprehensive loss. We made the voluntary change in accounting principle because we believe the classification of outbound shipping and handling costs within "general and administrative" costs better reflects the selling effort and enhances the comparability of our financial statements with many of our industry peers. In accordance with U.S. GAAP, the change has been reflected in the condensed consolidated statements of operations and comprehensive loss through retrospective application as follows:
For the three months ended June 30, 2021For the six months ended June 30, 2021
(in thousands)Prior to ChangeEffect of ChangeAs AdjustedPrior to ChangeEffect of ChangeAs Adjusted
Cost of sales$26,944 $(1,282)$25,662 $53,640 $(2,524)$51,116 
Gross profit$7,771 $1,282 $9,053 $15,084 $2,524 $17,608 
General and administrative$7,116 $1,282 $8,398 $15,455 $2,524 $17,979 
Total operating expenses$13,354 $1,282 $14,636 $28,607 $2,524 $31,131 
Segment Reporting
We manage our global business operations through our operating and reportable business segments. Due to our recent merger with KushCo, we reassessed and updated our operating segments. Therefore, beginning with the fourth quarter of 2021, we determined we had following two reportable operating business segments: (1) Industrial Goods, which largely comprises KushCo's legacy operations across the United States and Canada, and (2) Consumer Goods, which largely comprises Greenlane's legacy operations across the United States, Canada, and Europe. Our reportable segments have been identified based on how our chief operating decision maker ("CODM"), manages our business, makes resource allocation and operating decisions, and evaluates operating performance. Our CODM is our Chief Executive Officer ("CEO"). These changes in operating segments align with how we manage our business beginning with the fourth quarter of 2021. Segment disclosures within this Form 10-Q have been retrospectively restated to reflect the change in segments. See “Note 12—Segment Reporting.”
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Revenue Recognition
Revenue under bill-and-hold arrangements was $0 for the three and six months ended June 30, 2022, respectively, and $0.1 and $0.3 million for the three and six months ended June 30, 2021, respectively. Storage fees charged to customers for bill-and-hold arrangements are recognized as invoiced. Such fees were not significant for the three and six months ended June 30, 2022 and 2021.
Our liability for returns, which is included within "Accrued expenses and other current liabilities" in our condensed consolidated balance sheets, was approximately $1.0 million as of June 30, 2022 and December 31, 2021, respectively. The recoverable cost of merchandise estimated to be returned by customers, which is included within "Other current assets" in our condensed consolidated balance sheets, was approximately $0.2 million as of June 30, 2022 and December 31, 2021, respectively.
For the three and six months ended June 30, 2022, one customer represented approximately 21% and 19% of our net sales. No single customer represented more than 3% of our net sales for the three and six months ended June 30, 2021. As of June 30, 2022, two  customers represented approximately 23%, and 12% of accounts receivable, respectively. As of December 31, 2021, two customers represented approximately 13% and 11% of accounts receivable, respectively.
Value Added Taxes

During the third quarter of 2020, as part of a global tax strategy review, we determined that our European subsidiaries based in the Netherlands, which we acquired on September 30, 2019, had historically collected and remitted value added tax ("VAT") payments, which related to direct-to-consumer sales to other European Union ("EU") member states, directly to the Dutch tax authorities. In connection with our subsidiaries' payment of VAT to Dutch tax authorities rather than other EU member states, we may become subject to civil or criminal enforcement actions in certain EU jurisdictions, which could result in penalties.

We performed an analysis of the VAT overpayments to the Dutch tax authorities, which we expected to be refunded to us, and VAT payable to other EU member states, including potential fines and penalties. Based on this analysis, we recorded VAT payable of approximately $0.9 million and $2.5 million relating to this matter within "Accrued expenses and other current liabilities" in our condensed consolidated balance sheet as of June 30, 2022 and December 31, 2021, respectively.

Pursuant to the purchase and sale agreement by which we acquired our European subsidiaries, the sellers are required to indemnify us against certain specified matters and losses, including any and all liabilities, claims, penalties and costs incurred or sustained by us in connection with non-compliance with tax laws in relation to activities of the sellers. The indemnity (or indemnification receivable) is limited to an amount equal to the purchase price under the purchase and sale agreement. During the three and six months ended June 30, 2022, we recognized a gain of approximately $0 and $1.8 million, respectively, within "general and administrative expenses" in our condensed consolidated statements of operations and comprehensive loss, which represented the partial reversal of a charge previously recognized based on the difference between the VAT payable and the VAT receivable and indemnification asset, as the indemnification asset became probable of recovery based on the reduction in our previously estimated VAT liability for penalties and interest based on our voluntary disclosure to, and ongoing settlement with, the relevant tax authorities in the EU member states.

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

As noted above, we have voluntarily disclosed VAT owed to several relevant tax authorities in the EU member states, and believe in doing so we will reduce our liability for penalties and interest. Nonetheless, we may incur expenses in future periods related to such matters, including litigation costs and other expenses to defend our position. The outcome of such matters is inherently unpredictable and subject to significant uncertainties. Refer to "Note 7—Commitments and Contingencies" for additional discussion regarding our contingencies.
Recently Issued Accounting Guidance Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses. The standard requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale securities and requires estimated credit losses to be recorded as allowances rather than as reductions to the amortized cost of the securities. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2022 for filers that are eligible to be smaller reporting companies under the SEC's definition. Early adoption is permitted. We do not believe the adoption of this new guidance will have a material impact on our consolidated financial statements and disclosures.
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In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform. These amendments are not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarified the scope and application of the original guidance. ASU No. 2020-04 and ASU No. 2021-01 are effective as of March 12, 2020 through December 31, 2022 and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020. We are still evaluating the impact these standards will have on our consolidated financial statements and related disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if it had originated the contracts. Prior to this ASU, an acquirer generally recognizes contract assets acquired and contract liabilities assumed that arose from contracts with customers at fair value on the acquisition date. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The ASU is to be applied prospectively to business combinations occurring on or after the effective date of the amendment (or if adopted early as of an interim period, as of the beginning of the fiscal year that includes the interim period of early application). We are still assessing this standard’s impact on our consolidated financial statements.

NOTE 3. BUSINESS ACQUISITIONS
Supplemental Unaudited Pro Forma Financial Information
On March 2, 2021, we acquired substantially all the assets of Eyce LLC ("Eyce"), a designer and manufacturer of silicon pipes, bubblers, rigs, and other smoking and vaporization-related accessories and merchandise.
On August 31, 2021, we completed our previously announced merger with KushCo pursuant to the terms of the Merger Agreement dated as of March, 31, 2021.
On November 29, 2021, we acquired substantially all the assets of Organicix, LLC (d/b/a and hereinafter referred to as “DaVinci”), a leading developer and manufacturer of premium portable vaporizers.
The following table presents pro forma results for the three and six months ended June 30, 2022 and 2021 as if our acquisition of Eyce and DaVinci, along with the closing of the merger with KushCo, had occurred on January 1, 2021, and Eyce, DaVinci, and KushCo's results had been included in our consolidated results beginning on that date (in thousands):
For the three months ended June 30,For the six months ended June 30,
2022202120222021
(unaudited)(unaudited)
Net sales$39,916 $67,292 $86,450 $130,085 
Cost of sales31,817 52,171 72,383 100,524 
Gross profit8,099 15,121 14,067 29,561 
Net loss$(14,481)$(12,238)$(33,230)$(30,005)

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

The impact of the Eyce and DaVinci acquisition and the KushCo merger on the actual results reported by us in subsequent periods may differ significantly from that reflected in this pro forma information for a number of reasons, including but not limited to, non-achievement of the expected synergies from these combinations and changes in the regulatory environment. As a result, the pro forma information is not necessarily indicative of what our financial condition or results of operations would have been had the acquisitions been completed on the applicable date of this pro forma financial information. In addition, the pro forma financial information does not purport to project our future financial condition and results of operations.

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Amended Eyce APA

On April 7, 2022, we entered into an amendment to that certain Asset Purchase Agreement, dated March 2, 2021 (the “Amended Eyce APA”), by and between Eyce and Warehouse Goods to accelerate the issuance of shares of Class A common stock issuable to Eyce under the agreement upon the attainment of certain EBITDA and revenue benchmarks (the “Amended 2022 Contingent Payment”), in an amount equal to $0.9 million. We issued 71,721 shares of Class A common stock to Eyce under the Amended 2022 Contingent Payment, which vest ratably in seven quarterly tranches starting on July 1, 2022, such that on January 1, 2024 (the “Vesting Date”), all shares issued to Eyce under the Amended 2022 Contingent Payment will have vested. The shares of Class A common stock issued under the Amended 2022 Contingent Payment are subject to certain forfeiture restrictions tied to the continued employment of certain Eyce personnel with the Company through the Vesting Date. The Amended Eyce APA also provided for the payment of $0.9 million in cash in four equal installments on April 1, 2023, July 1, 2023, October 1, 2023 and January 1, 2024, contingent on the achievement of certain deliverables outlined in the Amended Eyce APA and the continued employment of certain Eyce personnel.

The transaction was accounted for separately from acquisition accounting for the Eyce business combination. Specifically, we recorded a gain of approximately $0.3 million within "other income (expense), net" in our condensed consolidated statement of operations and comprehensive income for the three and six months ended June 30, 2022 to write-off the balance of the Eyce 2022 Contingent Payment. Also, we recorded approximately $0.5 million in compensation expense related to the Amended 2022 Contingent Payment within "salaries, benefits and payroll taxes" in our condensed consolidated statement of operations and comprehensive income for the three and six months ended June 30, 2022.

NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

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

As of June 30, 2022, we had equity securities, an interest rate swap contract and contingent consideration that are required to be measured at fair value on a recurring basis.

Our equity securities that are required to be measured at fair value on a recurring basis consist of investments in XS Financial Inc. and High Tide Inc. We have determined that our ownership does not provide us with significant influence over the operations of these entities. Accordingly, we account for our investment in these entities as equity securities, and we record changes in the fair value of these investments in "other income (expense), net" in our condensed consolidated statements of operations and comprehensive loss.

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

Condensed Consolidated
Balance Sheet Caption
Fair Value at June 30, 2022
(in thousands)Level 1Level 2Level 3Total
Assets:
Equity securitiesOther assets$1,062 $ $ $1,062 
Interest rate swap contractOther assets 186  186 
Total Assets$1,062 $186 $ $1,248 
Liabilities:
Contingent consideration - currentAccrued expenses and other current liabilities$ $ $2,319 $2,319 
Contingent consideration - long-termOther long-term liabilities  269 269 
Total Liabilities$ $ $2,588 $2,588 


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Condensed Consolidated
Balance Sheet Caption
Fair Value at December 31, 2021
(in thousands)Level 1Level 2Level 3Total
Assets:
Equity securitiesOther assets$1,919 $ $ $1,919 
Total Assets$1,919 $