GNLN

• During Q2, strides were made in key segments with focus on profitability and new products.
• Revenue declined from Q1 to Q2 due to seasonality, model shift to net recognition, and packaging group restructuring.
• Total operating expenses reduced from $15 million in Q1 to $14.1 million in Q2, with further reductions expected in Q3.
• Completed consolidation of eight facilities, saving over $4M annually. Labor-related expenses decreased, though severance charges impacted. G&A decreased from $7.7M in Q1 to $7M in Q2.
• Launched 5 new products from house brands, expanded into disposable nicotine offerings with industry partners.
• Paid off $15M facility with White Oak Capital ahead of anniversary.

• Expect expense reductions to accelerate in Q3, with substantial savings from facilities, professional fees, and technology.
• Nicotine sales expected to provide a lift in the back half of Q3.
• Asset-light strategy with CCELL showing progress, and new products launching to drive growth.

For the second quarter of 2023, total net sales were $19.6 million, a decrease of $4.3 million from Q1 2023. The quarter-over-quarter decrease was primarily driven by a $1.8 million decrease in the Consumer Goods segment (23% decrease) and a $2.5 million decrease in the Industrial segment (16% decrease).

Q: Could you paint a picture of the path to profitability, especially regarding margin base and sales growth needed?

A: It's a combination of expense cuts accelerating in Q3/Q4 as contractual elements and leases decrease, and nicotine sales providing a lift in the back half of Q3. The asset-light strategy with CCELL is helping, and new products are expected to contribute.

Q: How is the transition with MSO operators and shift away from packaging going?

A: Conversations with MSOs have improved as dispensaries focus on retail-centric analytics. The company is one of few able to offer full product arrays for dispensaries, and these conversations are expected to continue improving in Q3/Q4