Annual report pursuant to Section 13 and 15(d)

Supplemental Financial Statement Information

v3.23.4
Supplemental Financial Statement Information
 12 Months Ended
Dec. 31, 2022
Property, Plant and Equipment [Abstract]  
Supplemental Financial Statement Information SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
Certain balances herein reflect the restatements described in "Note 2 — Summary of Significant Accounting Policies - Restatement of Previously Issued Financial Statements."
Other Current Assets
The following table summarizes the composition of other current assets as of the dates indicated:
As of December 31,
(in thousands) 2022 2021
Other current assets:
Employee retention credit (ERC) receivable $ 4,854  $ — 
VAT refund receivable (Note 2) $ 143  $ 143 
Prepaid expenses 1,293  2,726 
Indemnification receivable, net 736  122 
Customs bonds 1,378  4,550 
Other 2,716  4,118 
$ 11,120  $ 11,658 
ERC Sale
As of December 31, 2022, we had recorded an ERC receivable of $4.9 million within "Other current assets" on our consolidated balance sheets, and a corresponding amount was included in "Other income (expense), net" in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2022. On February 16, 2023, two of Greenlane Holdings, Inc.’s subsidiaries, Warehouse Goods LLC and Kim International LLC (collectively, the “Company”), entered into an agreement with a third-party institutional investor pursuant to which the investor purchased, for approximately $4.9 million in cash, an economic participation interest, at a discount, in all of the Company’s rights to payment from the United States Internal Revenue Service with respect to the employee retention credits filed by the Company under the Employee Retention Credit (“ERC”) program.
Property and Equipment, Net
The following is a summary of our property and equipment, at costs less accumulated depreciation and amortization:
As of December 31,
(in thousands) Estimated useful life 2022 2021
Furniture, equipment and software
3 - 7 years
 $ 7,492  $ 8,478 
Personal property 5 years —  1,130 
Leasehold improvements
Lesser of lease term or 5 years
 104  1,562 
Building 39 years —  8,128 
Land —  691 
Land improvements 15 years —  601 
Work in process 679  4,871 
8,275  25,461 
Less: accumulated depreciation 4,313  4,610 
Property and equipment, net $ 3,962  $ 20,851 
Depreciation expense for property and equipment for the years ended December 31, 2022 and 2021 was approximately $3.3 million and $2.1 million, respectively. The company reviewed property & equipment assets and determined the ERP system capitalized cost of $7.3 million was impaired and recorded an impairment charge during the three months ended September 2022 as part of the restatement. The ERP system can not be sold separately from the business and the current enterprise value of the business does not support the carrying value of this asset.
Intangible Assets, Net
Identified intangible assets consisted of the following at the dates indicated below:
As of December 31, 2022
(As restated)
(in thousands) Gross carrying
amount		 Accumulated
amortization		 Impairment Charge Carrying value Estimated useful life
Design libraries $ 8,710  $ (1,010) $ (7,700) $ — 
7-15 years
Trademarks and tradenames 6,915  (3,361) (3,554) — 
5-15 years
Customer relationships 43,628  (4,666) (38,962) — 
5-15 years
Other intangibles 753  (275) (478) — 
5-15 years
Total finite-lived intangibles 60,006  (9,312) (50,694) — 
Trademarks 29,500  —  (29,500) —  Indefinite
Total indefinite-lived intangibles 29,500  —  (29,500) — 
Total intangible assets, net $ 89,506  $ (9,312) $ (80,194) $ — 

As of December 31, 2021
(in thousands) Gross carrying
amount		 Accumulated
amortization		 Impairment Charge Carrying value Estimated useful life
Design libraries $ 8,710  $ (573) $ —  $ 8,137  15 years
Trademarks and tradenames 7,055  (2,144) —  4,911 
5-15 years
Customer relationships 43,628  (2,359) —  41,269 
5-15 years
Other intangibles 1,086  (193) —  893 
5-15 years
Total finite-lived intangibles 60,479  (5,269) —  55,210 
Trademarks 29,500  —  —  29,500  Indefinite
Total indefinite-lived intangibles 29,500  —  —  29,500 
Total intangible assets, net $ 89,979  $ (5,269) $ —  $ 84,710 
We evaluate goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each year and at interim dates if indicators of impairment exist. Due to declines in the Company's stock price as well as changes to our estimates and assumptions of the expected future cash flows, management concluded that a triggering event occurred in the third quarter of 2022, based upon which we recorded an impairment charge related to our indefinite-lived intangible assets of $24.9 million. During the fourth quarter of 2022, we further concluded that the remaining $4.6 million balance of indefinite-lived intangibles was impaired. Based upon these assessments, we recorded a total impairment charge related to indefinite-lived intangibles of $29.5 million for the year ended December 31, 2022. We also recorded an impairment charge related to our goodwill balance, as described further below.
We did not acquire any additional intangible assets during the year ended December 31, 2022. The weighted-average amortization period for intangible assets we acquired during the year ended December 31, 2021 was approximately 11.6 years.
Amortization expense for intangible assets was approximately $4.4 million and $2.6 million for the years ended December 31, 2022 and 2021, respectively.

Goodwill
We evaluate goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each year and at interim dates if indicators of impairment exist. Goodwill is assessed for impairment at the reporting unit level. Due to declines in the Company's stock price as well as changes to our estimates and assumptions of the expected future cash flows of our Consumer Goods and Industrial Goods reporting units, management concluded that a triggering event occurred in the third
quarter of 2022, requiring a quantitative impairment test of our goodwill for both of our reporting units. Based on this assessment, we concluded that the fair value of each of our two reporting units was below their respective carrying value.

The table below presents changes in the carrying amount of goodwill by reportable segment for the year ended December 31, 2022:
(in thousands) Industrial Goods Consumer Goods Total
Balance at December 31, 2021 $ 24,332  $ 17,528  $ 41,860 
Goodwill impairment charge (24,332) $ (17,528) $ (41,860)
Foreign currency translation adjustment —  $ —  $ — 
Balance at December 31, 2022 $ —  $ —  $ — 
Accrued Expenses and Other Current Liabilities
The following table summarizes the composition of accrued expenses and other current liabilities as of the dates indicated:
As of December 31,
(in thousands) 2022 2021
Accrued expenses and other current liabilities:
VAT payable $ 2,809  $ 4,393 
Contingent consideration 2,738  5,641 
Accrued employee compensation 3,812  6,055 
Accrued professional fees 818  1,700 
Refund liability 329  1,481 
Accrued construction in progress (ERP) 170  1,061 
Sales tax payable 578  1,034 
Accrued third-party logistics fees —  421 
Other 628  3,342 
$ 11,882  $ 25,128 
Customer Deposits
For certain product offerings such as child-resistant packaging, closed-system vaporization solutions and custom-branded retail products, we may receive a deposit from the customer (generally 25% - 50% of the total order cost, but the amount can vary by customer contract), when an order is placed by a customer. We typically complete orders related to customer deposits within one to six months from the date of order, depending on the complexity of the customization and the size of the order, but the order completion timeline can vary by product type and terms of sale with each customer. Changes in our customer deposits liability balance during the year ended December 31, 2022 and 2021, respectively, were as follows:
(in thousands) Customer Deposits
Balance as of December 31, 2020 $ 2,729 
Customer deposits assumed as part of the KushCo and DaVinci acquisitions (Note 3 - Business Acquisitions) 3,974 
Increases due to deposits received, net of other adjustments 20,066 
Revenue recognized (18,845)
Balance as of December 31, 2021 7,924 
Increases due to deposits received, net of other adjustments 12,016 
Revenue recognized (15,957)
Balance as of December 31, 2022 $ 3,983 

Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income (loss) for the periods presented were as follows:
(in thousands) Foreign Currency Translation Unrealized Gain or (Loss) on Derivative Instrument Total
Balance at December 31, 2020 $ 183  $ (154) $ 29 
Other comprehensive income (loss) 115  376  491 
Less: Other comprehensive (income) loss attributable to non-controlling interest (16) (180) (196)
Balance at December 31, 2021 282  42  324 
Other comprehensive income (loss) (211) 358  147 
Less: Reclassification adjustment for (gain) loss included in net loss (Note 4) —  (332) (332)
Less: Other comprehensive (income) loss attributable to non-controlling interest (16) (68) (84)
Balance at December 31, 2022 $ 55  $ —  $ 55 
Supplier Concentration
Our four largest vendors accounted for an aggregate of approximately 57.4% and 51.8% of our total purchases for the years ended December 31, 2022 and 2021, respectively. We expect to maintain our relationships with these vendors.
Related Party Transactions

Nicholas Kovacevich, our Chief Corporate Development Officer owns capital stock of Unrivaled Brands Inc. (“Unrivaled”) and serves on the Unrivaled board of directors. Net sales to Unrivaled totaled approximately $0.4 million and $0.1 million for the years ended December 31, 2022 and 2021, respectively. Total gross accounts receivable due from Unrivaled were approximately $0.4 million as of December 31, 2022 and 2021, respectively. On February 8, 2023, we filed a lawsuit against Unrivaled in Superior Court of California, Orange County, seeking to compel the repayment of Unrivaled's open balance due to us. We can provide no assurances that we will be successful in this lawsuit, or that the amounts due to us, or any portion thereof, will be recovered.

Adam Schoenfeld, co-founder and a former director of the Company, has a significant ownership interest in one of our customers, Universal Growing. Net sales to Universal Growing were less than approximately $0.1 million for the year ended December 31, 2022, and approximately $0.2 million for the year ended December 31, 2021. Total gross accounts receivable due from Universal Growing as of December 31, 2021 and 2022 were de minimis.

In December 2021, we entered into a Secured Promissory Note with Aaron LoCascio, our co-founder, former Chief Executive Officer and President, and a current director of the Company, with respect to the $8.0 million Bridge Loan. On June 30, 2022, we entered into the First Amendment to the Secured Promissory Note, which provided for the extension of the maturity date of the Secured Promissory Note from June 30, 2022 to July 14, 2022. On July 19, 2022, we fully repaid the Bridge Loan and as a result, all obligations under the Bridge Loan have been satisfied.

On July 19, 2022, Warehouse Goods entered into a Membership Interest Purchase Agreement and supporting documents (collectively, the “Sale Agreement”) with Portofino Partners LLC (“Portofino”) to sell the Company’s 50% stake in VIBES Holdings LLC for total consideration of $4.6 million in cash. The transactions contemplated by the Sale Agreement were completed on July 19, 2022, immediately following the signing of the Sale Agreement. Portofino is an entity partially controlled by Adam Schoenfeld. The Sale Agreement was approved by the affirmative vote of a majority of the disinterested members of the Board and the audit committee of the Board in accordance with the Company’s related party transactions policy.

Renah Persofsky, a current director of the Company, is a member of the board of directors of Tilray Brands, Inc. ("Tilray"). Net sales to Tilray totaled approximately $2.2 million for the year ended December 31, 2022. Because Ms. Persofsky's indirect interest in this transaction related solely to being a director of Tilray, pursuant to Item 404 of SEC Regulation S-K, Ms. Persofsky's indirect interest in this transaction is deemed not material because it arises solely because she is a director of Tilray.