NOTE 8. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION

ERC Sale

As of December 31, 2022, we had recorded an Employee Retention Credit (“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 ERC program.

Property and Equipment, net

The following is a summary of our property and equipment, at costs less accumulated depreciation and amortization:

 SCHEDULE OF PROPERTY PLANT AND EQUIPMENT LESS DEPRECIATION AND AMORTIZATION

Depreciation expense for property and equipment for the years ended December 31, 2023 and 2022 was approximately $2.2 million and $3.3 million, respectively.

Intangible Assets, Net

Identified intangible assets consisted of the following at the dates indicated below:

 SCHEDULE OF IDENTIFIED INTANGIBLE ASSETS

We evaluated goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each year and at interim dates if indicators of impairment exist. 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 years ended December 31, 2023 and 2022. .

Amortization expense for intangible assets was approximately $0 million and $4.4 million for the years ended December 31, 2023 and 2022, respectively.

Goodwill

We evaluated goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each year and at interim dates if indicators of impairment exist. Goodwill was assessed for impairment at the reporting unit level. 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, and goodwill was fully impaired for both reporting units during the year ended December 31, 2022.

Other Current Assets

The following table summarizes the composition of other current assets as of the dates indicated:

 SCHEDULE OF OTHER CURRENT ASSETS

Accrued Expenses and Other Current Liabilities

The following table summarizes the composition of accrued expenses and other current liabilities as of the dates indicated:

 SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Customer Deposits

For certain product offerings, we may receive a deposit from the customer (generally 25% - 50% of the total order cost, but the amount can vary by customer contract), when an order is placed by a customer. We typically complete 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, 2023 and 2022, respectively, were as follows:

 SCHEDULE OF CHANGES IN CUSTOMER DEPOSIT LIABILITY

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) for the periods presented were as follows:

 SCHEDULE OF COMPONENTS OF ACCUMULATED COMPREHENSIVE INCOME LOSS

Supplier Concentration

Our four largest vendors accounted for an aggregate of approximately 25.3% and 57.4% of our total purchases for the years ended December 31, 2023 and 2022, respectively We expect to maintain our relationships with these vendors.

Related Party Transactions

Nicholas Kovacevich, our former Chief Corporate Development Officer owns capital stock of Blum Holdings Inc. (“Blum”) and serves on the Blum board of directors. Net sales to Blum totaled approximately $0.4 million for the ended December 31, 2022. Total accounts receivable due from Blum were approximately $0.4 million as of December 31, 2023 and 2022, respectively. On February 8, 2023, we filed a lawsuit against Blum in Superior Court of California, Orange County, seeking to compel the repayment of Blum’s open balance due to us. As of the date of these financial statements were available to be issued, there has been a judgement received in favor of the Company.

Three individuals who were employees of the Company at the time are principals in Synergy Imports, LLC the Lender on the Secured Bridge Loan taken out on September 22, 2023, however, none are executive officers or directors of the Company.

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 approximately less than $0.1 million for the year ended December 31, 2022. Total gross accounts receivable due from Universal Growing as of December 31, 2023 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. In addition, $2.4 million was transferred to Portofino.

Renah Persofsky, a 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, respectively.