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, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39820

Clever Leaves Holdings Inc.

(Exact name of registrant as specified in its charter)


British Columbia, Canada						Not Applicable
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

~~489 Fifth Avenue, 27th Floor~~6501 Congress Ave, Suite 240 ~~New York, NY~~Boca Raton, FL						~~10017~~33487
(Address of principal executive offices)						(Zip Code)

(Registrant’s telephone number, including area code): ~~(646) 880-4382~~

(561) 634-7430

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common shares without par value

CLVR

The Nasdaq Stock Market LLC

Warrants, each warrant exercisable for one common share at an exercise price of $11.50

CLVRW

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required 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 (§232.405 of this chapter) 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, a 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of registrant’s common shares and non-voting common shares outstanding as of August ~~12, 2021~~10, 2022 was ~~25,493,766~~42,679,720 and ~~706,086,~~332,961, respectively.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

TABLE OF CONTENTS


		Page
	PART I - FINANCIAL INFORMATION
ITEM 1.	Financial Statements of Clever Leaves Holdings Inc. (Unaudited)
	~~Unaudited~~Condensed Consolidated Statements of Financial Position as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021	4
	~~Unaudited~~Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six ~~Months Ended~~months ended June 30, ~~2021~~2022 and ~~2020~~ ~~Three Months Ended June 30,~~ 2021 ~~and 2020~~	5
	~~Unaudited~~Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six ~~Months Ended~~months ended June 30, ~~2021~~2022 and ~~2020~~ ~~Three Months Ended June 30,~~ 2021 ~~and 2020~~	6
	~~Unaudited~~Condensed Consolidated Statements of Cash Flows for the Three and Six ~~Months Ended~~months ended June 30, ~~2021~~2022 and ~~2020~~2021	87
	Notes to ~~Unaudited~~Condensed Consolidated Financial Statements	98

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3133

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risks	4547

ITEM 4.	Controls and Procedures	4648

	PART II - OTHER INFORMATION
ITEM 1.	Legal Proceedings	4850
ITEM 1A.	Risk Factors	4850
ITEM 5.	Other Information	4850
ITEM 6.	Exhibits	4951
	SIGNATURES	5152

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. Some of the statements in this quarterly report on Form 10-Q of Clever Leaves Holdings Inc. ("Form 10-Q") constitute forward-looking statements that do not directly or exclusively relate to historical facts. You should not place undue reliance on such statements because they are subject to numerous ~~uncertainties~~risks and ~~factors relating to our operations and business environment, all of~~uncertainties which are difficult to predict and many of which are beyond our ~~control.~~control and could cause our actual results to differ from the forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements are often, but not always, made through the use of words or phrases such as “believe,” “anticipate,” “could,” “may,” “would,” “should,” “intend,” “plan,” “potential,” “predict,” “forecast,” “will,” “expect,” “budget,” “contemplate,” “believe,” “estimate,” “continue,” “project,” “positioned,” “strategy,” “outlook” and similar expressions. You should read statements that contain these words carefully because they:

•discuss future expectations;

•contain projections of future results of operations or financial condition; or

•state other “forward-looking” information.

All such forward-looking statements are based on our current expectations and involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. We believe it is important to communicate our expectations to our security holders. However, there may be future events ~~in the future~~ that we are not able to predict accurately or over which we have no control. ~~Many~~The risk factors and cautionary language discussed in Part I, Item 1A, "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2021 (the "Annual Report" or "2021" Form 10-K, provide examples of risks, contingencies, uncertainties, and ~~uncertainties~~events that may cause our actual results to differ materially from the expectations described by us in such forward-looking statements, including among other things:

•changes adversely affecting the industry in which we operate;

•our ability to achieve our business strategies or to manage our growth;

•general economic conditions, including the effects of COVID-19, the United Kingdom's exit from the European Union and the ongoing military conflict between Russia and Ukraine (and resulting sanctions) on the global economy, global financial markets and our business;

•regional political and economic conditions, including emerging market conditions;

•the effects of ~~the coronavirus~~COVID-19 on the ~~global economy, on~~supply and distribution chain, and the ~~global financial markets~~availability of third-party distributors generally;

•the impact and ~~on our business;~~magnitude of rising energy costs;

•the impact and magnitude of inflation and currency fluctuations;

•the regulation and legalization of adult-use, recreational cannabis;

•our ability to maintain the listing of our securities on Nasdaq;

•our ability to retain our key employees;

•the ~~result~~availability or terms of ~~any~~ future ~~financing efforts;~~financing; and

•other factors that are more fully discussed in Part I, Item 1A of the ~~Company's amended December 31, 2020~~2021 Form 10-K ~~(the "Amended Annual Report" or "2020 Form 10-K")~~ under the heading “~~Risk Factors” section,~~“Risk Factors”, and those discussed in other documents we file with the SEC.

These risks could cause actual results to differ materially from those implied by the forward-looking statements contained in this Form 10-Q.

All forward-looking statements included herein attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.

~~Table of Contents~~

ITEM 1. FINANCIAL STATEMENTS

CLEVER LEAVES HOLDINGS INC.

Condensed Consolidated Statements of Financial Position

(Amounts in thousands of U.S. Dollars, except share and per share data)

(Unaudited)

Note June 30, 2021 December 31, 2020
Assets

Current:
Cash and cash equivalents $ 56,621 $ 79,107
Restricted cash 454 353
Accounts receivable, net 1,620 1,676
Prepaids, advances and other 3,790 3,174
Other receivables 1,843 1,306
Inventories, net 5 13,148 10,190
Total current assets 77,476 95,806

Investment – Cansativa 6 1,528 1,553
Property, plant and equipment, net of accumulated depreciation of $4,365 and $3,356 for the six months ended June 30, 2021 and December 31, 2020, respectively 28,704 25,680
Intangible assets, net 8,9 23,498 24,279
Goodwill 8,9 18,508 18,508
Other non-current assets 58 52
Total Assets
$ 149,772 $ 165,878

Liabilities
Current:
Accounts payable $ 3,258 $ 4,429
Accrued expenses and other current liabilities 3,046 4,865
Current portion of Convertible notes 10 27,119 0
Warrant liability 22,736 19,061
Deferred revenue 435 870
Total current liabilities 56,594 29,225
Convertible notes 10 0 27,142
Loans and borrowings 10 6,559 6,701
Deferred revenue 1,565 1,167
Deferred tax liabilities 5,700 5,700
Other long-term liabilities 532 693
Total Liabilities
$ 70,950 $ 70,628

Shareholders’ equity
Common shares, without par value, unlimited shares authorized: 25,629,641 and 24,883,024 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 11 0 0
Preferred shares, without par value, unlimited shares authorized, NaN shares issued and outstanding for each of June 30, 2021 and December 31, 2020 11 0 0
Additional paid-in capital 170,557 164,264
Accumulated deficit (91,735) (69,014)
Total equity attributable to shareholders $ 78,822 $ 95,250
Total liabilities and shareholders' equity $ 149,772 $ 165,878


	Note	June 30, 2022		December 31, 2021

Assets
Current:
Cash and cash equivalents		$	19,025	$	37,226
Restricted cash		438		473
Accounts receivable, net		3,391		2,222
Prepaids, deposits and other receivables	6	4,671		5,064

Inventories, net	5	16,740		15,408
Total current assets		44,265		60,393

Investment – Cansativa	7	5,747		1,458
Property, plant and equipment, net of accumulated depreciation of $7,159 and $5,702 for June 30, 2022 and December 31, 2021, respectively	10	29,502		30,932
Intangible assets, net	8	22,735		23,117

Operating lease right-of-use assets, net	19	3,210		—
Other non-current assets		3		260
Total Assets		$	105,462	$	116,160

Liabilities
Current:
Accounts payable		$	3,225	$	3,981
Accrued expenses and other current liabilities		2,730		2,898
Convertible note due 2024, current portion	11	—		16,559
Loans and borrowings, current portion	11	526		949
Warrant liability		392		2,205
Operating lease liabilities, current portion	19	1,506		—
Deferred revenue, current portion		265		653
Total current liabilities		8,644		27,245
Convertible note due 2024 — long-term	11	—		1,140
Loans and borrowing — long-term	11	1,609		6,447
Deferred revenue		1,271		1,548
Operating lease liabilities — long-term	19	1,859		—
Deferred tax liabilities		6,650		6,650
Other long-term liabilities		840		360
Total Liabilities		$	20,873	$	43,390



Shareholders’ equity
Common shares, without par value, unlimited shares authorized: 39,599,409 and 26,605,797 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	12	—		—
Preferred shares, without par value, unlimited shares authorized, nil shares issued and outstanding for each of June 30, 2022 and December 31, 2021	12	—		—
Additional paid-in capital		216,515		187,510
Accumulated deficit		(131,926)		(114,740)
Total shareholders' equity		84,589		72,770
Total liabilities and shareholders' equity		$	105,462	$	116,160

See accompanying notes to the condensed consolidated financial statements

~~Table of Contents~~

CLEVER LEAVES HOLDINGS INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Amounts in thousands of U.S. Dollars, except share and per share data)

(Unaudited)

Six Months Ended June 30, Three Months Ended June 30,
Note 2021 2020 2021 2020
Revenue 14 $ 7,149 $ 4,853 $ 3,672 $ 1,939
Cost of sales (2,584) (1,785) (1,338) (1,032)
Gross profit 4,565 3,068 2,334 907
Expenses
General and administrative 12 19,348 15,384 10,606 7,264
Sales and marketing 1,485 1,784 807 603
Goodwill impairment 9 0 1,682 0 0
Depreciation and amortization 1,103 717 524 365
Total expenses 21,936 19,567 11,937 8,232
Loss from operations (17,371) (16,499) (9,603) (7,325)
Other Expense (Income), Net
Interest expense, net 1,898 1,789 920 953
Loss (gain) on remeasurement of warrant liability 11 3,675 0 (1,176) 0
Loss on investments 0 228 0 67
Gain on fair value of derivative instrument 0 0 0 (13)
Foreign exchange loss 839 359 80 311
Other (income) expenses, net (1,087) 48 (485) 105
Total other expense (income), net 5,325 2,424 (661) 1,423
Loss before loss from equity investment $ (22,696) $ (18,923) (8,942) (8,748)
Equity investment share of loss 25 16 14 5
Net loss $ (22,721) $ (18,939) $ (8,956) $ (8,753)
Net loss attributable to non-controlling interest 0 (1,648) 0 (744)
Net loss attributable to Clever Leaves Holdings Inc. common shareholders 15 $ (22,721) $ (17,291) $ (8,956) $ (8,009)
Net loss per share attributable to Clever Leaves Holdings Inc. common shareholders - basic and diluted 15 $ (0.90) $ (1.91) $ (0.35) $ (0.82)
Weighted-average common shares outstanding - basic and diluted 15 25,311,077 9,052,317 25,588,987 9,800,604


		Three Months Ended June 30,				Six Months Ended June 30,
	Note	2022		2021		2022		2021
Revenue	17	$	4,657	$	3,672	$	9,881	$	7,149



Cost of sales		(3,353)		(1,904)		(6,539)		(3,241)
Gross profit		1,304		1,768		3,342		3,908

Expenses
General and administrative	13	8,013		10,301		16,274		18,765
Sales and marketing		728		241		1,461		828
Research and development		359		305		771		583
Restructuring expenses	14	(135)		—		3,873		—

Depreciation and amortization		537		524		1,054		1,103
Total expenses		9,502		11,371		23,433		21,279

Loss from operations		(8,198)		(9,603)		(20,091)		(17,371)

Other Expense (Income), net
Interest and amortization of debt issuance cost		652		920		2,770		1,898
(Gain) loss on remeasurement of warrant liability	12	(1,323)		(1,176)		(1,813)		3,675
Gain on investment	7	(6,851)		—		(6,851)		—
Loss on debt extinguishment, net	11	—		—		2,263		—

Foreign exchange loss		307		80		652		839
Other expense (income), net		63		(485)		10		(1,087)
Total other (income) expenses, net		(7,152)		(661)		(2,969)		5,325

Loss before income taxes and equity investment loss		$	(1,046)	$	(8,942)	$	(17,122)	$	(22,696)

Equity investment share of loss		—		14		64		25
Net loss		$	(1,046)	$	(8,956)	$	(17,186)	$	(22,721)
Net loss per share - basic and diluted	18	$	(0.03)	$	(0.35)	$	(0.51)	$	(0.90)
Weighted-average common shares outstanding - basic and diluted	18	39,559,793		25,588,987		33,792,261		25,311,077

See accompanying notes to the condensed consolidated financial statements.

~~Table of Contents~~

CLEVER LEAVES HOLDINGS INC.

Condensed Consolidated Statements of Shareholders’ Equity

(Amounts in thousands of U.S. Dollars, except share and per share data)

(Unaudited)

Common Shares

Preferred Shares
Additional
Paid-in
Capital Retained
(Deficit)
Attributable
to Non-
controlling
Interest
Total
Shareholders’
Equity
Shares $ Shares $
Balance at December 31, 2019 (as previously reported) 19,266,609 $ 2 5,988,957 $ 1 $ 77,428 $ (31,933) $ 4,695 $ 50,193
Retroactive application of recapitalization 11 (10,962,579) (2) (5,988,957) (1) 3 — — 0
Balance at December 31, 2019 (effect of recapitalization) 8,304,030 $ 0 0 $ 0 $ 77,431 $ (31,933) $ 4,695 $ 50,193
Stock-based compensation expenses — — — — 416 — — 416
Net loss — — — — — (9,282) (904) (10,186)
Balance at March 31, 2020 8,304,030 $ 0 0 $ 0 $ 77,847 $ (41,215) $ 3,791 $ 40,423
Stock issuances 2,015,148 — — — 14,021 — — 14,021
Stock based compensation — — — — 296 — — 296
Share repurchase (233,788) — — — (6,250) — — (6,250)
Exercise of stock options 47,607 — — — 12 — — 12
Net loss — — — — — (8,009) (744) (8,753)
Balance at June 30, 2020 10,132,997 $ 0 0 $ 0 $ 85,926 $ (49,224) $ 3,047 $ 39,749


	Common Stock			Additional Paid-in Capital		Retained Deficit		Total Shareholders’ Equity
	Shares	Amount		Amount		Amount		Amount
Balance at December 31, 2020	24,883,024	$	—	$	164,264	$	(69,014)	$	95,250
Net loss	—	—		—		(13,765)		(13,765)
Founders earn-out shares vested	570,212	—		—		—		—
Issuance of common shares upon vesting RSUs	7,713	—		—		—		—
Exercise of warrants	122,639	—		1,410		—		1,410

Stock-based compensation expense	—	—		1,550		—		1,550
Balance at March 31, 2021	25,583,588	$	—	$	167,224	$	(82,779)	$	84,445
Net loss	—	—		—		(8,956)		(8,956)
Issuance of common shares upon vesting RSUs	5,111	—		—		—		—
Stock option exercise	40,942	—		10		—		10
Stock-based compensation expense	—	—		3,323		—		3,323



Balance at June 30, 2021	25,629,641	$	—	$	170,557	$	(91,735)	$	78,822


	Note	Common Stock			Additional Paid-in Capital		Retained Deficit		Total Shareholders’ Equity
		Shares	Amount		Amount		Amount		Amount
Balance at December 31, 2021		26,605,797	$	—	$	187,510	$	(114,740)	$	72,770
Net loss		—	—		—		(16,140)		(16,140)
Issuance of common shares upon vesting RSUs	15	247,453	—		—		—		—
Stock option exercise		116,112	—		22		—		22
Stock-based compensation expense	15	—	—		500		—		500
Issuance of common stock - gross	12	11,047,567	—		23,400		—		23,400
Equity issuance costs	12	—	—		(1,177)		—		(1,177)
Conversions of Convertible Note to common shares	12	607,000	—		1,324		—		1,324
Beneficial conversion feature	11	—	—		1,749		—		1,749
Balance at March 31, 2022		38,623,929	$	—	$	213,328	$	(130,880)	$	82,448
Net loss							(1,046)		(1,046)
Issuance of common shares upon vesting RSUs		39,898	—		—		—		—
Stock option exercise		35,582	—		—		—		—
Stock-based compensation expense		—	—		1,148		—		1,148


Conversions of Convertible Note to common shares		900,000			$	2,039	$	—	2,039


Balance at June 30, 2022		39,599,409	$	—	$	216,515	$	(131,926)	$	84,589

~~Table of Contents~~

~~CLEVER LEAVES HOLDINGS INC.~~

~~Condensed Consolidated Statements of Shareholders’ Equity (continued)~~

~~(Amounts in thousands of U.S. Dollars, except share and per share data)~~

~~(Unaudited)~~

Common Share

Preferred Shares
Additional
Paid-in
Capital Retained
(Deficit)
Total
Shareholders’
Equity
Shares $ Shares $
Balance at December 31, 2020 24,883,024 0 0 0 164,264 (69,014) 95,250
Stock-based compensation expense 13 — — — — 1,550 — 1,550
Issuance of common shares upon vesting of RSUs 13 7,713 — — — — — —
Founders earnout shares vested 11 570,212 — — — — — —
Net loss — — — — — (13,765) (13,765)
Common shares issued for exercise of warrants 11 122,639 — — — 1,410 — 1,410
Balance at March 31, 2021 25,583,588 $ 0 0 $ 0 $ 167,224 $ (82,779) $ 84,445
Stock-based compensation expense — — — — 3,323 — 3,323
Stock option exercise 13 40,942 — — — 10 — 10
Issuance of common shares upon vesting of RSUs 5,111 — — — — — —
Net loss — — — — — (8,956) (8,956)
Balance at June 30, 2021 25,629,641 $ 0 0 $ 0 $ 170,557 $ (91,735) $ 78,822

See accompanying notes to the condensed consolidated financial statements.

~~Table of Contents~~

CLEVER LEAVES HOLDINGS INC.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands of U.S. Dollars)

(Unaudited)

Six Months Ended June 30,
2021 2020
Operating Activities

Net loss $ (22,721) $ (18,939)
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization 1,377 717
Loss on remeasurement of warrant liability 11 3,675 0
Foreign exchange loss 839 330
Share-based compensation expense 13 4,873 713
Goodwill impairment 9 0 1,682
Other non cash expense (income), net (538) 1,527
Loss on investment 0 244
Loss on equity method investment, net 6 25 0
Changes in operating assets and liabilities:
Decrease in accounts receivable 56 43
(Increase) decrease in prepaid expenses (616) 2,573
(Increase) decrease in other receivable (543) 237
Increase in inventory 5 (2,958) (2,238)
(Decrease) in accounts payable and other current liabilities (2,990) (131)
Decrease in other non-current liabilities and other items 25 (1,301)
Net cash used in operating activities $ (19,496) $ (14,543)
Investing Activities
Purchase of property, plant and equipment (4,319) (3,436)
Net cash used in investing activities $ (4,319) $ (3,436)
Financing Activities
Proceeds from issuance of shares, net of issuance costs 13 0 14,021
Proceeds from issuance of long term debt, net of issuance costs 10 0 2,645
Other borrowings 1,223 992
Purchase and cancellation of shares 13 0 (6,250)
Proceeds from exercise of warrants 11 1,410 0
Repayment of debt (1,107) (429)
Stock option exercise 13 10 0
Net cash provided by financing activities $ 1,536 $ 10,979
Effect of exchange rate changes on cash, cash equivalents & restricted cash (106) (29)
(Decrease) in cash, cash equivalents & restricted cash (a)
$ (22,385) $ (7,029)
Cash, cash equivalents & restricted cash, beginning of period (a)
79,460 13,198
Cash, cash equivalents & restricted cash, end of period (a)
$ 57,075 $ 6,169


		Six Months Ended June 30,
		2022		2021
Cash Flow from Operating Activities:
Net loss		$	(17,186)	$	(22,721)
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization		1,984		1,377
Amortization of debt discount and debt issuance cost		1,949		—
Inventory provisions	5	2,126		803
Restructuring and related costs	14	3,430		—
(Gain) loss on remeasurement of warrant liability	12	(1,813)		3,675
Non-cash lease expense	19	155		—

Foreign exchange loss		652		839
Stock-based compensation expense	15	1,648		4,873

Equity investment share of loss		64		25
Gain on investment	7	(6,851)		—
Loss on debt extinguishment	11	2,263		—

Other non-cash expense, net		600		(538)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(1,169)		56
(Increase) in prepaid expenses	6	(1,014)		(616)
Decrease (increase) in other receivables and other non-current assets		178		(543)
(Increase) in inventory	5	(3,458)		(3,761)
(Decrease) in accounts payable and other current liabilities		(1,957)		(2,990)
(Decrease) increase in accrued and other non-current liabilities		(185)		25
Net cash used in operating activities		$	(18,584)	$	(19,496)

Cash Flow from Investing Activities:
Purchase of property, plant and equipment		(1,601)		(4,319)
Proceeds from partial sale of equity method of investment		$	2,498	$	—
Net cash provided by (used in) investing activities		$	897	$	(4,319)

Cash Flow from Financing Activities:

Repayment of debt	11	(22,665)		(1,107)
Other borrowings		73		1,223

Proceeds from issuance of shares	12	23,400		—
Equity issuance costs	12	(1,177)		—

Proceeds from exercise of warrants		—		1,410
Stock option exercise		22		10
Net cash (used in) provided by financing activities		$	(347)	$	1,536
Effect of exchange rate changes on cash, cash equivalents & restricted cash		(202)		(106)
Decrease in cash, cash equivalents & restricted cash		$	(18,236)	$	(22,385)
Cash, cash equivalents & restricted cash, beginning of period (a)		37,699		79,460
Cash, cash equivalents & restricted cash, end of period (a)		$	19,463	$	57,075

(a) These amounts include restricted cash of ~~$454~~$438 and ~~$2,954~~$454 as of June 30, ~~2021~~2022 and June 30, ~~2020, respectively. The June 30,~~ 2021, ~~restricted cash is~~respectively, which are comprised primarily of cash on ~~deposit~~deposits for certain lease arrangements. ~~June 30, 2020 balance represents amounts on deposit from investors related to the tranche 1 of the Series E financing round, as well as cash on deposit for certain lease arrangements~~.

See accompanying notes to the condensed consolidated financial ~~statements.~~statements.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

1. CORPORATE INFORMATION

Clever Leaves Holdings Inc., (the “Company”) is a multi-national ~~U.S.based~~U.S. based holding company focused on ~~cultivating, extracting and selling~~ cannabinoids. In addition to the cannabinoid business, ~~we are~~the Company is also engaged in the non-cannabinoid business of ~~manufacturing and selling homeopathic~~nutraceutical and other natural remedies and wellness ~~products, and nutraceuticals.~~products. The Company is incorporated under the Business Corporations Act of British Columbia, Canada.

The mailing address of ~~our~~the Company's principal executive office is ~~489 Fifth~~6501 Congress Avenue, 27th ~~Floor, New York, NY 10017.~~

~~Business Combination~~

On December 18, 2020 (the "Closing Date"), Clever Leaves International Inc., a corporation organized under the laws of British Columbia, Canada (“Clever Leaves”), and SAMA consummated the previously announced Business Combination contemplated by the Amended and Restated Business Combination Agreement, dated as of November 9, 2020 (the “Business Combination Agreement”), by and among SAMA, Clever Leaves, Clever Leaves Holdings Inc., a corporation organized under the laws of British Columbia, Canada (“Holdco” or the “Company”), and Novel Merger Sub Inc., a Delaware corporation (“Merger Sub”). Pursuant to the Business Combination Agreement, SAMA agreed to combine with Clever Leaves in the Business Combination that resulted in both Clever Leaves and SAMA becoming wholly-owned subsidiaries of Holdco.

Clever Leaves was deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification ("ASC") 805. This determination was primarily based on Clever Leaves’ stockholders prior to the Business Combination having a majority of the voting interests in the combined company, Clever Leaves’ operations comprising the ongoing operations of the combined company, Clever Leaves’ board of directors comprising a majority of the board of directors of the combined company, and Clever Leaves’ senior management comprising the senior management of the combined company. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Clever Leaves’ issuing stock for the net assets of SAMA, accompanied by a recapitalization. The net assets of SAMA are stated at historical cost, with no goodwill or other intangible assets recorded.

While Holdco was the legal acquirer in the Business Combination, because Clever Leaves was deemed the accounting acquirer, the historical financial statements of Clever Leaves became the historical financial statements of the combined company upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Clever Leaves prior to the Business Combination; (ii) the combined results of the Company and Clever Leaves following the closing of the Business Combination; (iii) the assets and liabilities of Clever Leaves’ at their historical cost; and (iv) the Company’s equity structure before and after the Business Combination.

In accordance with applicable guidance, the equity structure has been restated in all comparative periods to reflect the number of shares of the Company's common shares, issued to Clever Leaves’ shareholders in connection with the recapitalization transaction. As such, the shares and corresponding capital amounts and earnings per share related to Clever Leaves’ convertible preferred shares and Clever Leaves’ common shares prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio of 0.3288 shares (the "Exchange Rate") established in the Business Combination Agreement. Activity within the statement of shareholders' equity for the issuances and repurchases of Clever Leaves’ convertible preferred shares were also retroactively converted to Clever Leaves’ common shares. See Note 11. for more information.

Suite 240, Boca Raton, FL 33487.

2. BASIS OF PRESENTATION

The accompanying interim condensed consolidated financial statements (“Financial Statements”) ~~of the Company~~ are unaudited. These Financial Statements have been prepared in accordance with accounting principles generally accepted ~~accounting principles~~ in the United States of America (“U.S. GAAP”) for interim financial statements and with the instructions to Form ~~10Q~~10-Q and Article 10 of regulation ~~S-X; and accordingly,~~S-X. Accordingly, they do not include all disclosures required for annual financial statements. These Financial Statements reflect all adjustments, which, in the opinion of the management, are necessary for a fair presentation of the results for the interim periods presented. All significant intercompany transactions and balances have been eliminated. All adjustments were of a normal recurring nature. Interim ~~period~~ results are not necessarily indicative of results to be expected for the full year.

~~Table of Contents~~

~~CLEVER LEAVES HOLDINGS INC.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)~~

These Financial Statements should be read in conjunction with the ~~Company’s 2020~~Company's audited ~~consolidated~~ financial statements ~~and related notes~~for the year ended December 31, 2021, included in ~~our 2020~~its Annual Report on Form ~~10-K.~~10-K, as filed with the SEC on March 24, 2022 (the "Annual Report").

Prior Period ~~Reclassification-~~Reclassifications - Certain prior period reclassifications were made to conform to the current period presentation.

Going Concern

These ~~consolidated~~interim condensed financial statements have been prepared in accordance with U.S. GAAP, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months.

As shown in the accompanying ~~consolidated~~interim condensed financial statements, the Company had an accumulated deficit as of June 30, ~~2021,~~2022, as well as operating losses and negative cash flows from operations since inception and expects to continue to incur net losses for the foreseeable future until such time that it can generate significant ~~revenues~~revenue from the sale of its available inventories.

~~The Company’s management~~At June 30, 2022, the Company had cash, cash equivalents and restricted cash of $19,463. As of June 30, 2022, based on the Company's current business plan, the Company believes ~~that~~it will achieve sufficient increases in revenue and reductions in net losses, which, coupled with the ~~Company’s~~Company's current cash position, following the consummation of the Business Combination on closing date, and management’s plans to continue similar operations with increased marketing, which the Company believes will result in increased revenue and an improvement in net income, will satisfy the Company's estimated liquidity needs during the twelve months from the issuance of these the condensed consolidated financial statements. ~~Subsequent to~~

During the six months ended June 30, ~~2021,~~2022 the Company raised additional financing ~~by issuing secured Convertible Note~~through an "at-the-market" ("ATM") equity offering as discussed in Note ~~16.~~12.

~~Impact of COVID-19 Pandemic~~

The Company expects its operations to continue to be affected by the ongoing outbreak of the 2019 coronavirus disease (“COVID-19”), which was declared a pandemic by the WHO in March 2020. The spread of COVID-19 has severely impacted many economies around the globe. In many countries, including those where the Company operates, businesses have been forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown. Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions and the Company has taken steps to obtain financial assistance made available from jurisdictional governments, however the Company expects its 2021 financial performance to continue to be impacted and result in a delay of certain of its go-to-market initiatives.

Given the continued evolution of the COVID-19 pandemic and the related complexities and uncertainties associated with the additional variants, the Company’s business operations could be significantly impacted. We continue to monitor closely the impact of COVID-19, with a focus on the health and safety of our employees, and business continuity. We have implemented various measures to reduce the spread of the virus including requiring that our non-production employees work from home, restricting visitors to production locations, screening employees with infrared temperature readings and requiring them to complete health questionnaires on a daily basis before they enter facilities, implementing social distancing measures at our production locations, enhancing facility cleaning protocols, and encouraging employees to adhere to preventative measures recommended by the WHO. Our global operational sites have been reduced to business-critical personnel only and physical distancing measures are in effect. In addition, since our non-production workforce can effectively work remotely using various technology tools, we are able to maintain our full operations. Although our operational sites remain open, mandatory or voluntary self-quarantines may further limit the staffing of our facilities.

108

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

Principles of Consolidation

The ~~accompanying condensed consolidated financial statements~~Financial Statements include the accounts of the Company and its consolidated subsidiaries. The following table provides a summary of the Company’s subsidiaries and respective ownership percentage atas of June 30, 2022 and December 31, ~~2020 and June 30, 2021:~~2021.

~~Subsidiaries~~

~~Jurisdiction of incorporation~~

~~Ownership~~

~~Clever Leaves US, Inc.~~

~~Delaware, United States~~

~~100%~~

~~NS US Holdings, Inc.~~

~~Delaware, United States~~

~~100%~~

~~Herbal Brands, Inc.~~

~~Delaware, United States~~

~~100%~~

~~1255096 B.C. Ltd. ("Newco")~~

~~British Columbia, Canada~~

~~100%~~

~~Northern Swan International, Inc. (“NSI”)~~

~~British Columbia, Canada~~

~~100%~~

~~Northern Swan Management, Inc.~~

~~British Columbia, Canada~~

~~100%~~

~~Northern Swan Deutschland Holdings, Inc.~~

~~British Columbia, Canada~~

~~100%~~

~~Northern Swan Portugal Holdings, Inc.~~

~~British Columbia, Canada~~

~~100%~~

~~Clever Leaves Portugal Unipessoal LDA~~

~~Portugal~~

~~100%~~

~~Clever Leaves II Portugal Cultivation SA~~

~~Portugal~~

~~100%~~

~~Northern Swan Europe, Inc.~~

~~British Columbia, Canada~~

~~100%~~

~~Nordschwan Holdings, Inc.~~

~~British Columbia, Canada~~

~~100%~~

~~Clever Leaves Germany GmbH~~

~~Frankfurt, Germany~~

~~100%~~

~~NS Herbal Brands International, Inc.~~

~~British Columbia, Canada~~

~~100%~~

~~Herbal Brands, Ltd.~~

~~London, United Kingdom~~

~~100%~~

~~Clever Leaves International, Inc.~~

~~British Columbia, Canada~~

~~100%~~

~~Eagle Canada Holdings, Inc. (“Eagle Canada”)~~

~~British Columbia, Canada~~

~~100%~~

~~Ecomedics S.A.S. (“Ecomedics”)~~

~~Bogota, Colombia~~

~~100%~~

~~Clever Leaves UK Limited~~

~~London, United Kingdom~~

~~100%~~


Subsidiaries	Jurisdiction of incorporation	Ownership
		June 30, 2022	December 31, 2021
Clever Leaves US, Inc. ("SAMA")	Delaware, United States	100%	100%
NS US Holdings, Inc.	Delaware, United States	100%	100%
Herbal Brands, Inc.	Delaware, United States	100%	100%
1255096 B.C. Ltd. ("Newco")	British Columbia, Canada	100%	100%
Northern Swan International, Inc. (“NSI”)	British Columbia, Canada	100%	100%
Arizona Herbal Brands, Inc. (1)	British Columbia, Canada	100%	100%
Northern Swan Management, Inc.	British Columbia, Canada	100%	100%
Clever Leaves Australia Pvt Ltd	Australia	100%	100%
Northern Swan Deutschland Holdings, Inc.	British Columbia, Canada	100%	100%
Northern Swan Portugal Holdings Inc.	British Columbia, Canada	100%	100%
Clever Leaves Portugal Unipessoal LDA	Portugal	100%	100%
Clever Leaves II Portugal Cultivation SA	Portugal	100%	100%
Northern Swan Europe, Inc.	British Columbia, Canada	100%	100%
Nordschwan Holdings, Inc.	British Columbia, Canada	100%	100%
Clever Leaves Germany GmbH	Hamburg, Germany	100%	100%
NS Herbal Brands International, Inc.	British Columbia, Canada	100%	100%
Herbal Brands, Ltd.	London, United Kingdom	100%	100%
Clever Leaves International, Inc.	British Columbia, Canada	100%	100%
Eagle Canada Holdings, Inc. (“Eagle Canada”)	British Columbia, Canada	100%	100%
Ecomedics S.A.S. (“Ecomedics”)	Bogota, Colombia	100%	100%
Clever Leaves UK Limited	London, United Kingdom	100%	100%

(1)

~~The financial statements~~Arizona Herbal Brands, Inc. was dissolved by way of voluntary dissolution under the subsidiaries are prepared for the same reporting period as the parent company. All intra-group balances, transactions, unrealized gains and losses resulting from intra-group transactions have been eliminated.Business Corporation Act on December 31, 2021.

3. SUMMARY OF SIGNIFICANT ACCOUNTING ~~PRONOUNCEMENTS~~POLICIES

The Company's significant accounting policies are disclosed in its audited consolidated financial statements for the year ended December 31, 2021, included in the Annual Report. Except as noted below, there have been no other changes in the Company's significant accounting policies as discussed in the Annual Report.

Use of Accounting Estimates

The preparation of these Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the Financial Statements and accompanying notes in the reported period. These estimates include, but are not limited to, allowance for doubtful accounts, inventory valuation, determination of fair value of stock-based awards and estimate of incremental borrowing rate for determining the present value of future lease payments. While the significant estimates made by management in the preparation of the consolidated financial statements are reasonable, prudent, and evaluated on an ongoing basis, actual results may differ materially from those estimates.

Recently Adopted Accounting Pronouncements

~~In December 2019, the FASB issued~~

ASU No. ~~2019-12,~~ ~~Income Taxes~~2016-02, Leases (Topic ~~740) - Simplifying the Accounting for Income Taxe~~s (“ASU No. 2019-12"), which is intended to simplify various aspects related to accounting for income taxes. ASU No. 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU No. 2019-12 is effective for the Company beginning January 1, 2021. The ASU has no material impact to its consolidated financial statements.

~~In January 2020, the FASB issued ASU No. 2020-01,~~ ~~Investments — Equity Securities (Topic 321), Investments — Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)~~ (“ASU No. 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under842)

119

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

~~Topic 815.~~ In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-02, Leases ("ASU ~~No. 2020-01 is~~2016-02") and in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements ("ASU 2018-11") (collectively referred to as "ASC 842"). This guidance requires the recognition of right-of-use ("ROU") assets and lease liabilities, arising from financing and operating leases, on the consolidated balance sheet, along with additional qualitative and quantitative disclosures. Companies are required to adopt this guidance using a modified retrospective approach and apply the transition provisions under the guidance at either 1) the later of the beginning of the earliest comparative period presented in the financial statements and the commencement date of the lease, or 2) the beginning of the period of adoption (i.e., on the effective ~~for~~date). Under the transition method using the second application date, a company initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company ~~beginning~~adopted the guidance on January 1, ~~2021. The~~2022, beginning of our calendar year 2022, using the modified retrospective transition method and initially applied the transition provisions at January 1, 2022, which allowed us to continue to apply the legacy guidance in ASC 840 for periods prior to calendar year 2022. We elected the package of transition practical expedients, which among other things, allows us to keep the historical lease classifications and not have to reassess the lease classification for any existing leases as of the date of adoption. We also made the following accounting policy elections as allowed by ASC 842:

•to apply the short-term lease exception, which allows us to keep leases with an initial term of twelve months or less off the statement of financial position.

•to account for each separate lease component of a contract and its associated non-lease components as a single-lease component for all our leases.

As a result of the adoption of ~~ASU~~this standard, there was no adjustment to the opening balance of retained earnings as there was no cumulative effect adjustment at the date of adoption. Accordingly, the primary impact of adopting ASC 842 was the recognition of ROU assets and lease liabilities for operating leases of approximately $4,120 and $4,120, respectively for all existing leases which had remaining obligations as of January 1, 2022. ASC 842 did not have a material impact ~~to the Company's consolidated financial statements.~~on our results of operations and comprehensive income or statement of cash flow.

~~In October 2020, the FASB issued this~~

ASU No. ~~2020-09,~~ ~~Debt -~~2021-04, Earnings Per Share (Topic ~~470)~~ ("ASU No. 2020-09"), which clarifies, streamlines, and in some cases eliminates, the disclosures a registrant must provide in lieu of the subsidiary’s audited financial statements. The rules require certain enhanced narrative disclosures, including the terms and conditions of the guarantees and how the legal obligations of the issuer and guarantor, as well as other factors, may affect payments to holders of the debt securities. The amendments in ASU No. 2020-09 are effective January 4, 2021 and earlier compliance is permitted. The adoption of ASU did not have a material impact to the Company's consolidated financial statements.

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~260)

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options ("ASU No. 2021-04"), which provides a principles-based framework to determine whether an issuer should recognize the modification or exchange as an adjustment to equity or an expense. ASU No. 2021-04 requires issuers to account for modifications or exchanges of freestanding equity-classified written call options (e.g., warrants) that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. The amendments in ASU No. 2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for all entities, including adoption in an interim period. The adoption of ASU No.2021-04 did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

ASU No. 2020-06, Debt (Topic 815)

In August 2020, the FASB issued ASU No. 2020-06, Debt - (Topic 815) ("ASU No. 2020-06"), which simplifies an issuer’s

accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. The

amendments in ASU No. 2020-06 are effective for public companies, other than smaller reporting companies, for fiscal years

beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments

are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early

adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those

fiscal years. The Company is currently evaluating the effect of adopting ASU No. ~~2021-04.~~2020-06.

~~In February 2016, the FASB issued~~ ASU 2016-02, “Leases”, which was further clarified by ASU 2018-10, “Codification Improvements to Topic 842, Leases”, and ASU 2018-11, “Leases—Targeted Improvements”, both issued in July 2018. ASU 2016-02 affects all entities that lease assets and will require lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of less than one year) as of the dateNo. 2016-13- Credit Losses on which the lessor makes the underlying asset available to the lessee. The effective date of this ASU has now been delayed for two years by the issuance of ASU 2020-05 and the Company will be adopting this standard on January 1, 2022. While the Company expects the adoption of these standards will not result in a material increase to the reported assets and liabilities, the Company has not yet determined the full impact that the adoption of this standard will have on its condensed consolidated financial statements.

Financial Instruments (Topic 326)

1210

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses for certain financial instruments and financial assets. For trade receivables, we are required to estimate lifetime expected credit losses. For available-for-sale debt securities, the Company will recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. ASU 2016-13 is effective for the Company’s fiscal year beginning January 1, 2023. The Company is currently evaluating the effect of adopting ASU No 2016-13.

4. FAIR VALUE MEASUREMENTS

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities, except for those assets and liabilities that are short term in nature and approximate the fair values, as of the periods presented:


		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total

As of June 30, 2021
As of June 30, 2022										As of June 30, 2022
Assets:	Assets:									Assets:
Investment – Cansativa										Investment – Cansativa	—		—		5,747		5,747
Total Assets										Total Assets	$	—	$	—	$	5,747	$	5,747
Liabilities:										Liabilities:
Loans and borrowings										Loans and borrowings	—		2,135		—		2,135
Warrant liability										Warrant liability	—		—		392		392

Total Liabilities										Total Liabilities	$	—	$	2,135	$	392	$	2,527

As of December 31, 2021										As of December 31, 2021
Assets:										Assets:
Investment – Cansativa	Investment – Cansativa	0		0		1,528		1,528		Investment – Cansativa	—		—		1,458		1,458
Total Assets	Total Assets	0		0		1,528		1,528		Total Assets	$	—	$	—	$	1,458	$	1,458
Liabilities:	Liabilities:									Liabilities:
Loans and borrowings	Loans and borrowings	0		6,559		0		6,559		Loans and borrowings	—		7,396		—		7,396
Warrant liability	Warrant liability	0		0		22,736		22,736		Warrant liability	—		—		2,205		2,205
Convertible notes	Convertible notes	0		27,119		0		27,119		Convertible notes	—		17,699		—		17,699

Total Liabilities	Total Liabilities	$	0	$	33,678	$	22,736	$	56,414	Total Liabilities	$	—	$	25,095	$	2,205	$	27,300

As of December 31, 2020
Assets:

Investment – Cansativa		0		0		1,553		1,553
Total Assets		$	0	$	0	$	1,553	$	1,553
Liabilities:
Loans and borrowings		$	0	$	6,701	$	0	$	6,701
Warrant liability		0		0		19,061		$	19,061
Convertible notes		0		27,142		0		$	27,142

Total Liabilities		$	0	$	33,843	$	19,061	$	52,904

~~During~~

Investment – Cansativa

Our investment in Cansativa’s equity securities that was previously accounted for using the equity method was partially divested during the three months ended June 30, 2022. Given that this investment does not have a “readily determinable fair value,” or is not traded in a verifiable public market, the Company accounted for this investment under ASC 321, Investments - Equity Securities. The Company used the practical expedient available under ASU 2016-01, the cost method investment which presents and carries this investment using the alternative measurement method which is cost minus impairment, if any, plus or minus changes resulting from observable price changes in “orderly transactions,” as defined in ASC 321, for the identical or a similar investment of the same issuer. The Company periodically reviews the investments for other than temporary declines in fair value below cost and more frequently when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. As of June 30, 2022, the Company believes the carrying value of its cost method investments were recoverable in all material respects. For more information, refer to Note 7 to our unaudited condensed consolidated interim financial statements for the period ended of June 30, 2022.

The following table provides a summary of changes in fair value of the Company’s level 3 investments for the six months ended June 30, ~~2021, there were no transfers between fair value measurement levels.~~

~~The change in fair value of warrant liabilities related to private warrants during the six months ended June 30, 2021 and 2020 is as follows:~~


~~Private Placement Warrants~~	~~Total Warrant Liability~~
~~Warrant liability at December 31, 2020~~	$	~~19,061~~
~~Change in fair value of warrant liability~~	$	~~4,851~~
~~Warrant liabilities at March 31, 2021~~	$	~~23,912~~
~~Change in fair value of warrant liabilities~~	$	~~(1,176)~~
~~Warrant liabilities at June 30, 2021~~	$	~~22,736~~

The Company determined the fair value of its private warrants using the Monte Carlo simulation model. The following assumptions were used to determine the fair value of the Private Warrants at December 31,2020 and June 30,2021:

2022:

1311

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

As of
June 30,
2021 December 31,
2020
Risk-free interest rate 0.76% 0.43%
Expected volatility 60% 60%
Share Price $10.15 $8.90
Exercise Price $11.50 $11.50
Expiration date December 18, 2025 December 18, 2025


	Level 3
Balance, December 31, 2021 (Measured at equity method)	$	1,458
Share of Equity investment loss	$	(64)
Balance, March 31, 2022	$	1,394
Sale on investments	$	(515)
Gain due to change in fair value included in earnings	$	4,868
Balance, June 30, 2022	$	5,747

During the six months ended June 30, 2022, there were no transfers between fair value measurement levels.

The change in fair value of warrant liabilities related to private warrants during the six months ended June 30, 2022, is as follows:


Private Placement Warrants:	Total Warrant Liability
Warrant liability at December 31, 2021	$	2,205
Change in fair value of warrant liability	(490)
Warrant liabilities at March 31, 2022	$	1,715
Change in fair value of warrant liability	(1,323)
Warrant liabilities at June 30, 2022	$	392


	As of
	June 30, 2022	December 31, 2021
Risk-free interest rate	2.99%	1.11%
Expected volatility	80%	60%
Share Price	$0.98	$3.10
Exercise Price	$11.50	$11.50
Expiration date	December 18, 2025	December 18, 2025

•The risk-free interest rate assumptions are ~~was~~ based on U.S. dollar zero curve derived from swap rates at the valuation date, with a term to maturity matching the remaining term of warrants.

•The expected volatility assumptions are based on average of historical volatility based on comparable industry volatilities of public warrants.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

5. INVENTORY, NET

Inventories are comprised of the following items as of the periods presented:


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Raw materials	Raw materials	$	1,035	$	1,148	Raw materials	$	1,346	$	1,477
Work in progress – cultivated cannabis	Work in progress – cultivated cannabis	67		1,482		Work in progress – cultivated cannabis	3,209		1,241
Work in progress – harvested cannabis and extracts	Work in progress – harvested cannabis and extracts	3,230		274		Work in progress – harvested cannabis and extracts	363		1,070
Finished goods – cannabis extracts	Finished goods – cannabis extracts	8,556		7,003		Finished goods – cannabis extracts	11,123		11,432
Finished goods – other	Finished goods – other	260		283		Finished goods – other	699		188
Total	Total	$	13,148	$	10,190	Total	$	16,740	$	15,408

During the three and six months ended June 30, 2022, the Company recorded inventory provisions for approximately $1,281 and $2,126, respectively, to cost of sales to write-down obsolete inventories. During the three and six months ended June 30, 2021, the Company recorded inventory provisions for approximately $635 and $803, respectively, to cost of sales to write-down obsolete inventory.

6. PREPAID, DEPOSITS AND OTHER RECEIVABLE

Prepaid and advances are comprised of the following items as of the periods presented:


	June 30, 2022		December 31, 2021
Prepaid expenses	$	2,101	$	935
Indirect tax receivable	2,209		2,322
Deposits	95		47
Other receivable and advances	266		1,760
Total	$	4,671	$	5,064

Prepayments and deposits represent amounts previously paid to vendors for security deposits and supplies, leased premises, facility construction and expansion projects not yet delivered.

7. INVESTMENTS

Cansativa

On December 21, 2018, the Company, through its subsidiary Northern Swan Deutschland Holdings, Inc., entered into a seed investment agreement with the existing stockholders of Cansativa GmbH (“Cansativa”), a German limited liability company primarily focused on the import and sale of cannabis products for medical use and related supplements and nutraceuticals. Prior to the Company’s investment, Cansativa’s registered and fully paid-in share capital amounted to 26,318 common shares. Under the investment agreement, the Company has agreed with the existing stockholders to invest up to EUR 7,000 in Cansativa in 3 separate tranches of, respectively, EUR 1,000, EUR 3,000 and up to a further EUR 3,000. The first EUR 1,000 (specifically, EUR ~~999.915,~~999.92, approximately $1,075, or “Seed Financing Round”) was invested in Cansativa to subscribe for 3,096 newly issued preferred voting shares at EUR 322.97 per preferred share, and as cash contributions from the Company to Cansativa. The seed EUR 322.97 per share price was based on a fully diluted pre-money valuation for Cansativa of EUR 8,500, and the increase of Cansativa’s registered share capital by the 3,096 preferred shares in the Seed Financing Round provided the Company with 10.53% of the total equity ownership of Cansativa. The Company paid the seed investment subscription by, first, an initial nominal payment of EUR 3.1, (i.e., EUR 1.00 per share) upon signing the investment agreement to demonstrate the Company’s intent to invest, and the remainder of EUR ~~996.819~~996.82 was settled in January 2019 to officially close the investment deal after certain closing conditions have been met by the existing stockholders and Cansativa. The Company ~~accounts~~accounted for its investment in Cansativa using the equity accounting method, due to the Company's significant influence, in accordance with ASC 323, Investments — Equity Method and Joint Ventures.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

The Company recorded its investment in Cansativa at the cost basis of an aggregated amount of EUR ~~999.915,~~999.92, approximately $1,075, which is comprised of EUR ~~3.096~~3.10 for the initial nominal amount of the Seed Financing Round and EUR ~~996.819~~996.82 for the remaining Seed Financing Round (i.e., Capital Reserve Payment), with no transaction costs. Subsequent to the Seed Financing Round, the Company had an option, within 18 months after the Signing Date, to increase its investment in Cansativa by subscribing to up to 9,289 newly issued (additional) preferred shares (“Tranche 2 Option”) for an amount of up to EUR 3,000.06833 based on the same seed share price of EUR 322.97. When the Tranche 2 Option is exercised from time to time, the Company is entitled to subscribe to a number of up to 578 additional Seed Preferred Shares (in case of full exercise of the Tranche 2 Option) for their respective nominal value of EUR 1.00. The Company estimated that the value of the Tranche 2 Option at the time of the initial investment was approximately EUR 419 ($450). The Company’s equity method investment at the time of Seed Financing Round was approximately 10.53% of the book value of Cansativa’s net assets of approximately EUR 1,100, and approximately EUR 465 of equity method goodwill, as Cansativa was a newly formed entity with limited identifiable assets to which a significant fair value could be applied. The Company’s options to acquire additional shares in Cansativa are accounted for as equity instruments within the scope of ASC 321,

~~Investments — Equity Securities~~.

In accordance with the seed investment agreement, in September 2019, the Company made an additional investment of approximately EUR 650, or approximately $722, for 2,138 shares in Cansativa, thereby increasing its equity ownership to 16.6% of the book value of Cansativa’s net assets of approximately EUR 1,233, and approximately EUR 1,122 of equity method goodwill as Cansativa was still in the process of getting the licenses and expanding its operations. As of September 30, 2020, the balance of Tranche 2 option expired ~~unexercised~~un-exercised and as a result the Company recognized a loss on investment of approximately $370 in its Statement of Operations and Comprehensive Loss and the carrying value of the Tranche 2 option was reduced to ~~NaN.~~nil.

In December 2020, Cansativa allocated shares of its common stock to a ~~newly-installed~~newly installed employee-stock ownership plan (“ESOP”). As a result of the ESOP installment, the Company’s equity ownership of Cansativa, on a fully-diluted basis, decreased from 16.59% to 15.80% of the book value of Cansativa’s net assets. Additionally, Cansativa raised additional capital through the issuance of Series A preferred stock (“Cansativa Series A Shares”) to a third-party investor at a per share price of ~~EURO~~EUR 543.31. As a result of the Series A Share issuance, the Company’s equity ownership of Cansativa, on a fully diluted basis, decreased from 15.80% to 14.22% of the book value of Cansativa’s net assets. The Company accounted for the transaction as a proportionate ~~sales~~sale of ownership share and recognized a gain of approximately $211 in its consolidated statement of operations within loss on investments line. This change did not impact the equity method classification.

~~For~~

In April 2022, the Company sold 1,586 shares in Cansativa to an unrelated third-party for approximately EUR 2,300.

As a result of this sale, the Company's equity ownership of Cansativa, on a fully diluted basis, decreased from 14.22% to 8.97% of the book value of Cansativa net assets. Furthermore, the Company relinquished the board seat, indicating that the Company's influence was no longer "significant", to which the equity method of accounting was applicable. Going forward, the Company will account for this investment under ASC 321, Investments – Equity Securities. The Company will utilize the practical expedient under ASC 321 as the investment does not qualify for the practical expedient under ASC 820 and there is no readily determinable fair value for these privately held shares of Cansativa on a recurring basis.

At the time of the sale, the Company compared the transaction value of the shares sold to the carrying value of shares sold and recognized a gain of $1,983. Immediately following the sale, the Company then remeasured its retained interest which resulted in an additional gain of $4,868. As a result, a total of $6,851 is recorded in other income in the Consolidated Statements of Operations during the three and six months ended June 30, 2022. Using the measurement alternative, as defined in ASC 321, the Company will remeasure the value of its retained interest if and when additional sales of Cansativa shares occur with third parties.

For the three months ended June 30, 2022 and 2021, the Company's share ~~of net losses~~ from the investment ~~were~~was $nil and net losses of $14, ~~and $25,~~ respectively. For the ~~three and~~ six months ended June 30, ~~2020~~2022 and 2021, the Company's share ~~of net losses~~ from the investment were $5net losses of $64 and ~~$16,~~net losses of $25, respectively.

8. INTANGIBLE ASSETS, NET

~~7. BUSINESS COMBINATIONS~~

~~2020~~The Company has acquired cannabis-related licenses as part of a business combination with a gross value of approximately $19,000, which have indefinite useful lives as they are expected to generate economic benefit to the Company in perpetuity. In addition, as part of the Herbal Brand acquisition in 2019, the Company acquired finite-lived intangible assets with a gross value of approximately $7,075. During the three months ended June 30, 2022 and 2021 the Company recorded approximately $191 and $391, respectively, of amortization related to its finite-lived intangible assets. During the six months ended June 30, 2022 and 2021 the Company recorded approximately $382 and $781, respectively, of amortization related to its finite-lived intangible assets.

~~Business Combination~~

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

The following tables present details of the Company’s total intangible assets as of June 30, 2022 and December 31, 2021. The value of product formulation intangible asset is included in the value of Brand:


	June 30, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted- Average Useful Life (in Years)
Finite-lived intangible assets:
Customer contracts	$	925	$	925	$	—	0.0
Customer relationships	1,000		578		422		3.3
Customer list	650		412		238		1.8
Brand	4,500		1,425		3,075		6.8
Total finite-lived intangible assets	$	7,075	$	3,340	$	3,735

Indefinite-lived intangible assets:
Licenses	$	19,000	N/A		$	19,000
Total indefinite-lived intangible assets	$	19,000	N/A		$	19,000
Total intangible assets	$	26,075	$	3,340	$	22,735


	December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted- Average Useful Life (in Years)
Finite-lived intangible assets:
Customer contracts	$	925	$	925	$	—	0.0
Customer relationships	1,000		487		513		3.4
Customer list	650		346		304		2.3
Brand	4,500		1,200		3,300		7.3
Total finite-lived intangible assets	$	7,075	$	2,958	$	4,117

Indefinite-lived intangible assets:
Licenses	$	19,000	N/A		$	19,000
Total indefinite-lived intangible assets	$	19,000	N/A		$	19,000
Total intangible assets	$	26,075	$	2,958	$	23,117

On December 18, 2020, Clever Leaves and SAMA consummated the Business Combination contemplated by the Amended and Restated Business Combination Agreement, dated as of November 9, 2020, by and among SAMA, Clever Leaves, the Company and Merger Sub.Impairment Testing - Finite-Lived Intangibles

~~Pursuant to~~In accordance with ASC Topic 350, “Intangibles – Goodwill and Other,” the ~~Business Combination Agreement,~~Company performs its annual impairment test as

of December 31 of each year. As part of the ~~following transactions occurred~~review, the Company will perform a qualitative assessment to determine whether indicators of impairment existed, along with considering, among other factors, the financial performance, industry conditions, as well as microeconomic developments. The Company also reviews goodwill for impairment whenever events or changes in circumstances indicate that the following order: (i) pursuant to a court-approved Canadian plan of arrangement (the “Plan of Arrangement” and the arrangement pursuant to such Plan of Arrangement, the “Arrangement”), at 11:59 p.m., Pacific time, on December 17, 2020 (2:59 a.m., Eastern time, on December 18, 2020) (a) all of the Clever Leaves shareholders exchanged their Class A common shares without parcarrying value of Clever Leaves (“Clever Leaves common shares”) for our common shares without par value (“common shares”) and/or non-voting common shares without par value (“non-voting common shares”) (as determined in accordanceits goodwill may not be recoverable. After the close of each interim quarter,

management assesses whether any indicators of impairment exist requiring the Company to perform an interim goodwill impairment analysis.

In conjunction with the ~~Business Combination Agreement) and (b) certain Clever Leaves shareholders received approximately $3,100~~2021 annual impairment testing, the Company reviewed finite-lived intangible assets for impairment. In performing such review, the Company makes judgments about the recoverability of purchased finite lived intangible assets whenever events or changes in ~~cash in the aggregate (the “Cash Arrangement Consideration”), such~~circumstances indicate that ~~immediately following the Arrangement, Clever Leaves became our direct wholly-owned subsidiary; (ii) at 12:01 a.m., Pacific time (3:01 a.m. Eastern time), on December 18, 2020, Merger Sub merged~~an impairment may exist. The Company recognizes an impairment if

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

~~with and into SAMA, with SAMA surviving such merger as our direct wholly-owned subsidiary (the “Merger”) and, as a result~~the carrying amount of the ~~Merger, all~~long-lived asset group exceeds the Company’s estimate of the shares of SAMA common stock were converted into the right to receive our common shares as set forth in the Business Combination Agreement; (iii) immediately following the consummation of the Merger, we contributed 100% of the issued and outstanding capital stock of SAMA (as the surviving corporation of the Merger) to Clever Leaves, such that, SAMA became a direct wholly-owned subsidiary of Clever Leaves; and (iv) immediately following the contribution of SAMA to Clever Leaves, Clever Leaves contributed 100% of the issued and outstanding shares of NS US Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of Clever Leaves, to SAMA. Upon the closing of the Merger, SAMA changed its name to Clever Leaves US, Inc.asset group’s undiscounted future cash flows.

~~In connection with~~Significant assumptions used in the ~~closing~~impairment analysis include financial projections of free cash flow (including assumptions about revenue projections, regulations, operating margins, capital requirements and income taxes), long-term growth rates for determining terminal value beyond the discretely forecasted periods and discount rates. For our intangible assets related to the Cannabinoid segment, our estimated revenue projections reflect that Decree 811 that was followed by the passing of the ~~Business Combination,~~Regulation 227 in February 2022, which was further resolved in April 2022, to allow us to export cannabis flower from Colombia starting 2023. The Colombian government signed Resolution 539, which outlines the ~~Company's bylaws were amended~~regulation and ~~restated to, among other things, provide~~the technical guidelines for ~~an unlimited number of common shares without par value, an unlimited number of non-voting common shares without par value~~commercializing dried flower and ~~an unlimited number of preferred shares without par value.~~medicinal-grade cannabis extracts.

~~In connection with the Business Combination, SAMA obtained commitments (the “Subscription Agreements”) from~~Indefinite-lived intangible assets, consisting of certain ~~investors (the “Subscribers”) to purchase $8,881 in shares of SAMA common stock for a purchase price of $9.50 per share, in the SAMA PIPE. As part~~ of the ~~SAMA PIPE, certain Subscribers who~~Company’s licenses, were ~~holders of the 2022 Convertible Notes agreed to purchase shares of SAMA common stock in exchange~~reviewed for the ~~transfer~~annual impairment assessment during the fourth quarter of ~~the PIK Notes received~~2021 similar to goodwill, in satisfaction of approximately $2,881 of accrued and outstanding interest under the 2022 Convertible Notes from January 1 to December 31, 2020. Prior to the effective time of the Merger, SAMA issued an aggregate of 934,819 shares of SAMA common stock the Subscribers in the SAMA PIPE that were exchanged for our common shares, on a 1-for-one basis, in connectionaccordance with ~~the Closing.~~ASC 350.

~~The Business Combination is accounted for as a recapitalization in accordance with U.S. GAAP. Under this method~~For the three and six months ended June 30, 2022 and June 30, 2021, no impairment was recognized related to the carrying value of ~~accounting, SAMA was treated as~~any of the "acquired" company for financial reporting purposes (see Note 1). Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Clever Leaves issuing shares for the net assets of SAMA, accompanied by a recapitalization. The net assets of SAMA are stated at historical cost, with no goodwillCompany’s finite or ~~other~~indefinite-lived intangible ~~assets recorded.~~assets.

Amortization Expense

The following table ~~reconciles~~reflects the ~~elements of the Business Combination to the consolidated statement of cash flows and the consolidated statement of shareholders’ equity~~estimated future amortization expense for each period presented for the ~~year ended December 31, 2020:~~Company’s finite-lived intangible assets as of June 30, 2022:


	~~Recapitalization~~
~~Cash - SAMA trust and cash, net of redemptions~~	$	~~86,644~~

~~Cash - SAMA PIPE~~	~~6,000~~
~~Non-cash PIK~~	~~(2,881)~~
~~Cash assumed from SAMA~~	~~698~~


~~Cash consideration to certain Clever Leaves shareholders~~	~~(3,057)~~
~~Less: transaction costs and advisory fees~~	~~(13,895)~~
~~Net Business Combination~~	$	~~73,509~~
~~Non-cash PIK~~	~~2,881~~
~~Deferred issuance costs~~	~~1,503~~
~~Warranty liability~~	~~(29,841)~~
~~Net liabilities assumed from SAMA~~	~~(258)~~

~~Net contributions from Business Combination~~	$	~~47,794~~

~~See Note 11. for more information on all capital stock issuances.~~


	Estimated Amortization Expense
2022	$	412
2023	715
2024	542
2025	542
2026	482
Thereafter	1,042
Total	$	3,735

~~8. INTANGIBLE ASSETS~~9. GOODWILL

Impairment Testing

During the fourth quarter of 2021, the Company assessed whether there were events or changes in circumstances that would indicate that our goodwill may have been impaired. The Company ~~has acquired cannabis-related licenses~~performed a quantitative impairment test, including computing the fair value of the reporting units and comparing that value to its carrying value. The Company considered external and internal factors, including overall financial performance and entity-specific factors as part of the assessment. We recognized the challenge of the overall decline in the cannabinoid sector in the months preceding December 31, 2021, combined with our stock price volatility and related factors and as a ~~business combination with a gross~~result, the Company determined that it was more likely than not that the carrying value of ~~approximately $19,000, which have indefinite useful lives~~its cannabinoid operating segment exceeds the fair value as ~~they are expected to generate economic benefit~~of the year end testing date. Based upon the Company's 2021 annual goodwill impairment test, the Company concluded that goodwill was impaired as of the testing date of December 31, 2021. During the three months ended December 31, 2021 the Company recognized $18,508 non-cash goodwill impairment charge related to the ~~Company in perpetuity. In addition, during 2019~~cannabinoid segment, as a result, the Company ~~acquired finite-lived intangible assets with a gross value~~had no goodwill on the statement of ~~approximately $7,091~~financial position as ~~part~~ of ~~its Herbal Brands acquisition. During~~December 31, 2021.

For the three and six months ended June 30, 2021, ~~and 2020 the Company recorded approximately $781 and $438, respectively, of amortization~~no impairment was recognized related to ~~its finite-lived intangible assets. During~~ the ~~three months ended June 30, 2021~~carrying value of goodwill.

The Company calculated the fair value of the operating segments using discounted estimated future cash flows. The weighted-average cost of capital used in testing the reporting unit for impairment was 14%, with a perpetual growth rate of 3%.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

~~and 2020 the Company recorded approximately $391 and $227, respectively, of amortization related to its finite-lived intangible assets.~~

The following tables present details of the Company’s total intangible assets as of June 30, 2021 and December 31, 2020. The value of product formulation intangible asset is included in the value of Brand:

June 30, 2021
Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Weighted-
Average
Useful Life
(in Years)
Finite-lived intangible assets:

Customer contracts $ 925 $ 925 $ 0 0
Customer relationships 1,000 395 605 3.9
Customer list 650 282 368 2.8
Brand 4,516 991 3,525 7.8
Total finite-lived intangible assets $ 7,091 $ 2,593 $ 4,498

Indefinite-lived intangible assets:
Licenses $ 19,000 N/A $ 19,000
Total indefinite-lived intangible assets $ 19,000 N/A $ 19,000
Total intangible assets $ 26,091 $ 2,593 $ 23,498

December 31, 2020
Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Weighted-
Average
Useful Life
(in Years)
Finite-lived intangible assets:

Customer contracts $ 925 $ 525 $ 400 0.5
Customer relationships 1,000 304 696 4.4
Customer list 650 217 433 3.3
Brand 4,516 766 3,750 8.3
Total finite-lived intangible assets $ 7,091 $ 1,812 $ 5,279

Indefinite-lived intangible assets:
Licenses $ 19,000 N/A $ 19,000
Total indefinite-lived intangible assets $ 19,000 N/A $ 19,000
Total intangible assets $ 26,091 $ 1,812 $ 24,279
10. PROPERTY, PLANT AND EQUIPMENT, NET

~~2020 Interim Impairment Testing~~

In conjunction with the impairment testing performed as of March 31, 2020 (refer to Note 9. for more detail) the Company reviewed finite-lived intangible assets for impairment. Indefinite-lived intangible assets, consisting of certainProperty, plant and equipment, net consisted of the ~~Company’s licenses, were reviewed as part~~following:


	June 30, 2022		December 31, 2021
Land	$	5,065	$	5,065
Building & warehouse	16,251		13,381
Laboratory equipment	6,379		6,295
Agricultural equipment	2,476		2,404
Computer equipment	1,723		1,681
Furniture & appliances	827		852
Construction in progress (a)	2,688		5,709
Other	1,252		1,247
Property, plant and equipment, gross	36,661		36,634
Less: accumulated depreciation	(7,159)		(5,702)
Property, plant and equipment, net	$	29,502	$	30,932

(a) Construction in progress primarily relates to on-going construction of the ~~impairment assessment during the first quarter~~Company's Colombian and Portugal facilities

11. DEBT


	June 30, 2022		December 31, 2021
Convertible Notes due 2024, current portion (a)	—		16,559
Herbal Brands Loan due May 2023, current portion	—		470
Other loans and borrowings, current portion	526		479
Total debt, current portion	$	526	$	17,508
Convertible notes due 2024	—		1,140
Herbal Brands Loan due May 2023 (b)	—		4,760
Other loans and borrowings, net	1,609		1,687
Total debt, long term	$	1,609	$	7,587
Ending balance	$	2,135	$	25,095

(a)Convertible Note, current portion is reflected net of ~~2020 similar to goodwill, in accordance~~

~~Table~~debt discount and debt issuance costs of ~~Contents~~

~~CLEVER LEAVES HOLDINGS INC.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)~~

with ASC 350. The Company did not recognize an impairment related to the carrying value of any of the Company’s finite or indefinite-lived intangible assets as a result of the impairment assessments performed as of March 31, 2020.

~~For each of the three and six months ended June 30, 2021 and 2020, 0 impairment was recognized related to the carrying value of any of the Company’s finite or indefinite-lived intangible assets.~~

~~Annual Impairment Testing~~

~~In accordance with ASC Topic 350, “Intangibles – Goodwill and Other,” the Company performs its annual impairment test~~$2,197 as of December 31, 2021.

(b)Herbal Brand's Loan, non-current is reflected net of ~~each year. Refer to Note 9. for more detail.~~

~~Amortization Expense~~

~~The following table reflects the estimated future amortization expense for each period presented for the Company’s finite-lived intangible assets~~debt issuance costs of $410 in as of ~~June 30, 2021:~~

Estimated
Amortization
Expense
2021 382
2022 $ 795
2023 715
2024 542
2025 572
Thereafter 1,492
Total $ 4,498

~~9. GOODWILL~~

~~The following table presents goodwill by segment:~~

Cannabinoid Non- Cannabinoid Total
Balance at December 31, 2020 $ 18,508 $ 0 $ 18,508
Balance at June 30, 2021 $ 18,508 $ 0 $ 18,508
Cumulative goodwill impairment charges(a)
$ 0 $ 1,682 $ 1,682

~~(a)~~ ~~Amount refers to cumulative goodwill impairment charges related to impairments recognized in 2020; 0 impairment charges were recognized during the three and six months ended June 30,~~December 31, 2021.

~~In accordance with ASC Topic 350, “Intangibles – Goodwill and Other~~,” the Company performs its annual impairment test as of December 31 of each year. The Company also reviews goodwill for impairment whenever events or changes in circumstances indicate that the carrying value of its goodwill may not be recoverable. After the close of each interim quarter, management assesses whether there exists any indicators of impairment requiring the Company to perform an interim goodwill impairment analysis.

For 2020, the Company performed a qualitative assessment to determine whether indicators of impairment existed. The Company considered, among other factors, the financial performance, industry conditions, as well as macroeconomic developments. Based upon such assessment, the Company determined that it was not more-likely-than-not that an impairment existed as of December 31, 2020. There were no further indicators of impairment during the three and six months ended June 30, 2021.

~~Table of Contents~~

~~CLEVER LEAVES HOLDINGS INC.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)~~

~~First quarter of 2020 Interim impairment Testing~~

As of March 31, 2020, the Company recognized the COVID-19 pandemic and its impact as a negative indicator to its business performance. As a result, the Company performed an assessment to determine whether goodwill was impaired. Based upon such assessment, the Company determined that it was more likely than not that only the carrying value of its non-cannabinoid operating segment exceeded the fair value as of March 31, 2020.

Following the results of such assessment, the Company recorded an impairment for the full carrying value of the operating segment’s goodwill carrying value. The Company calculated the fair value of the operating segment using discounted estimated future cash flows. The weighted-average cost of capital used in testing the reporting unit for impairment was 19%, with a perpetual growth rate of 2%. As a result of this interim impairment testing, the Company recognized a $1,682 non-cash goodwill impairment charge related to the non-cannabinoid operating segment in the first quarter of 2020. Following the recognition of this non-cash goodwill impairment charge, the operating segment’s goodwill was NaN.

~~10. DEBT~~

June 30,
2021 December 31,
2020
Series D Convertible Notes due March 2022(a)
$ 27,119 $ 27,142
Herbal Brands Loan due May 2023 and other borrowings 6,559 6,701
Total Debt $ 33,678 $ 33,843
Less: Current portion of long-term debt (27,119) 0
Ending balance $ 6,559 $ 33,843

~~(a)Net of debt issuance costs of $483 and $741 in 2021 and 2020, respectively.~~

~~Series D Convertible Notes due March 2022~~

In March 2019 and in connection with the Company's Series D fundraising, the Company issued secured convertible notes totaling $27,750, with maturity date of March 30, 2022 (“2022 Convertible Notes”). The 2022 Convertible Notes bore interest of 8.00% per annum, payable quarterly in arrears, and were secured through collateral, guarantee, and pledge agreements signed between the Company, the noteholders, and an appointed paying and collateral agent. Specifically, the 2022 Convertible Notes were guaranteed by the Company’s subsidiaries and secured by 1,300,002 common shares of pledged equity interests in specific subsidiaries.

A noteholder could convert the principal amount, in whole or in part, at a minimum of $1,000 into common shares at a conversion price of $11.00 per share. The Company could issue financing securities (common shares) upon the exercise of the conversion options within each convertible note, in part or in whole, at the option of the holder at any time or at the option of the issuer subsequent to a trigger event (i.e., a qualified IPO at greater than or equal to $13.54 per common share, or a non-qualified IPO with a 10-day trailing volume weighted average price exceeding $13.54 per common share). The Company was contractually restricted from prepaying the obligations prior to the maturity date except in the case of (1) conversion of the whole or part of the principal amount or (2) a change in control which would trigger immediate repayment in full.

~~In its assessment to determine the accounting treatment for the Class C Preferred Shares and 2022 Convertible Notes, the Company reviewed the guidance in ASC 480 —~~ ~~Distinguishing Liabilities from Equity~~. Based on the analysis the Company deemed that the: 1) Class C Preferred Shares meet the criteria for a freestanding equity classified instrument that are initially measured at fair value and subsequent changes to their fair are not recognized; and 2) 2022 Convertible Notes were debt-like in nature. In its assessment, the Company considered the terms and features within the hybrid instrument, including redemption consideration, the preferred shares’ cumulative dividend, voting rights, contingent and optional conversion feature, as well as the liquidation rights, prior to concluding on the classification. Following the review, no features were segregated, and no derivative instruments or beneficial conversion features were recognized. As a result, upon issuance, the Company recognized

~~Table of Contents~~

~~CLEVER LEAVES HOLDINGS INC.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)~~

~~approximately $30,258 of Class C Preferred Shares and approximately $27,750 of Series D convertible debt on its statement of financial position.~~

~~In March 2020, the Company amended certain terms of its 2022 Convertible Notes. As a result of this amendment the Company am~~ended the 2022 Convertible Notes to provide for an increase in the rate of interest payable on the principal amount to 10% and to provide that such interest could be payable in-kind at maturity. In addition, the Company amended the restrictive covenants to allow for the creation, incurrence or assumption of certain additional debt, as well as to extend the date on which the Company was required to deliver its audited year-end financial statements. The amendments were accounted for as debt modification.

~~In connection with the Business Combination (Note 7.) and effective on the Closing Date, Clever Leaves and the holders of the~~ ~~2022 Convertible Notes~~ agreed to amend the terms of the 2022 Convertible Notes as follows: (i) decrease the interest rate to 8%, commencing January 1, 2021, and provide that such interest is to be paid in cash, quarterly in arrears; (ii) provide for the payment of all accrued and outstanding interest from January 1, 2020 to December 31, 2020 to be made in the form of PIK Notes; to consent to the transfer of the PIK Notes to SAMA in exchange for the PIPE Shares to be issued as part of the SAMA PIPE pursuant to the terms of the Subscription Agreements; (iii) at the option of Clever Leaves, satisfy the payment of quarterly interest by issuing the Company's common shares to the noteholders, at a price per share equal to 95% of the 10-day volume weighted average trading price of the Company's common shares ending ~~three~~ trading days prior to the relevant interest payment date (the “10-Day VWAP”); (iv) at the option of Clever Leaves, prepay, in cash, any or all amounts outstanding under the 2022 Convertible Notes at any time without penalty; (v) at the option of Clever Leaves on each quarterly interest payment date, repay up to the lesser of (a) $2,000, or (b) an amount equal to 4 times the average value of the daily volume of Holdco common shares traded during the 10-Day VWAP period, of the total amounts outstanding under the ~~2022 Convertible Notes~~ at such time by issuing Holdco common shares to the noteholders at a price per share equal to 95% of the 10-Day VWAP; and (vi) at the option of each noteholder, in the event, following the Merger Effective Time, Clever Leaves, the Company or any of their respective affiliates proposed to issue equity securities for cash or cash equivalents (the “Equity Financing”) (save and except for certain exempt issuances) at any time after Clever Leaves, the Company or any of their respective affiliates completes one or more equity financings raising, in aggregate, net proceeds of $25,000 (net of reasonable fees, including reasonable accounting, advisory and legal fees, commissions and other out-of-pocket expenses and inclusive of net cash retained as a result of the Business Combination on the Merge Effective Time), convert an amount of principal and/or accrued interest owing under the ~~2022 Convertible Notes~~ into subscriptions to purchase up to the noteholder’s pro rata share of 25% of the total securities issued under such Equity Financing on the same terms and conditions as such Equity Financing is offered to subscribers; provided, however, that if the noteholder did not elect to participate in such Equity Financing through the conversion of amounts owing under the ~~2022 Convertible Notes, then Clever Leaves shall be required to repay, in cash within~~ ~~five~~ (5) business days following the closing of such Equity Financing, an amount equal to the noteholder’s pro rata share of 25% of the total net proceeds raised from such Equity Financing (collectively, the “November 2020 Convertible Amendments”). The November 2020 Convertible Amendments were accounted as debt modification. As of closing of the Business Combination, the conversion price was changed from ~~$11.00~~ ~~to $30.62 per share.~~

In connection with the November 2020 Amendments, the Required Holders (as that term is defined in the amended and restated intercreditor and collateral agency agreement, dated as of May 10, 2019, in respect of the ~~2022 Convertible Notes) agreed to waive Clever Leaves’ required compliance with certain restrictive covenants set forth in the~~ ~~2022 Convertible Notes~~ ~~solely for the purposes of allowing Clever Leaves, Holdco and their affiliates to complete the Business Combination, and agreed to direct GLAS Americas LLC, as collateral agent in respect of the~~ ~~2022 Convertible Notes, to further provide its consent therefor.~~

~~In accordance with the terms of the~~ ~~2022 Convertible Notes~~ and in connection with the November 2020 Amendments, Holdco, 1255096 B.C. Ltd. and SAMA (as the surviving corporation of the Merger) each entered into a guarantee agreement in favor of the collateral agent in respect of the ~~2022 Convertible Notes~~ (the “Guarantees”) and became guarantors thereunder. Further, the terms of the amended and restated pledge agreement, dated as of May 10, 2019, made by Clever Leaves in favor of the collateral agent was amended such that Holdco and certain of its subsidiaries, as the case may be, in connection with the Business Combination, pledged all of the shares in the capital of each of Clever Leaves, 1255096 B.C. Ltd., SAMA (as the surviving corporation of the Merger), Northern Swan International, Inc. and NS US Holdings, Inc. to the collateral agent.

~~Subsequently, on July 19, 2021, the 2022 Convertible Notes with accrued interest through that date were settled. Please refer to Note 16 for more details.~~

~~Table of Contents~~

~~CLEVER LEAVES HOLDINGS INC.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)~~

Herbal Brands Loan due May 2023

In ~~April~~May 2019 and in connection with the Herbal Brands, Inc ("Herbal Brands") acquisition, the Company entered into a loan agreement (the "Loan and Security Agreement") with Rock Cliff Capital under which the Company secured a non-revolving loan of $8,500 (the "Herbal Brands Loan"). The Herbal Brands Loan ~~bears~~bore interest at 8.00% per annum, calculated based on the actual number of days elapsed, due and payable in arrears on the first day of each fiscal quarter commencing July 1, 2019. The Herbal Brands Loan iswas to be repaid or prepaid prior to its maturity date of May 2, 2023 and ~~requires~~required the Company to repay, on a quarterly basis, 85% of positive operating cash flows. The Company ~~can~~could also choose to prepay a portion of or the full balance of the loan, subject to a fee equal to the greater of (i) zero, and (ii) $2,338, net of interest payments already paid on such prepayment date. ~~This~~The loan iswas secured by inventory, property plant and equipment and other assets as collateral.

In connection with the Herbal Brands Loan, the Company issued equity-classified warrants for Class C preferred shares to Rock Cliff Capital (the "Rock Cliff Warrants") with an initial fair value of $717, which was reflected in additional paid-in capital, with an initial expiration date of May 3, 2021. ~~Refer~~For more information, refer to Note ~~11 for further details regarding~~12.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the ~~Rock Cliff Warrants.~~Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

The Herbal Brands Loan and Rock Cliff Warrants were deemed freestanding financial instruments with the loan accounted for as debt, subsequently measured using amortized cost, and the Rock Cliff Warrants, representing a written call option, accounted for as an equity-classified contract with subsequent changes in fair value not recognized as long as warrants continue to be classified as equity. Using a relative fair value method, at the time of issuance, the Company recognized approximately $7,783 as loans and borrowings and approximately $717 in additional paid-in capital for the equity classified warrant.

In August 2020, the Company amended certain terms of the Herbal Brands Loan to provide for additional interest of 4.00% per annum, compounding quarterly and payable in-kind at maturity. In addition, the Company extended the expiration date of the Rock Cliff Warrants to May 3, 2023. As part of the amendment, the ~~parties agreed~~net debt to ~~defer~~EBITDA covenant test was no longer required due to the ~~covenant testing under the Herbal Brands Loan until September 30, 2021.~~occurrence of a Qualified IPO on December 18, 2020. The Company accounted for the amendment to the Herbal Brands Loan as a debt modification. Due to the extension of the warrants expiration, the Company reviewed the fair value of the options before and after the amendment, as a result the Company recognized approximately $400 of additional debt issuance costs related to the increase in the fair value of the warrants in its statement of financial ~~position.~~position at December 31, 2021. Such costs will be amortized on a straight-line basis through the amended expiration date of the Rock Cliff Warrants.

Following the closing of the ~~Business Combination~~business combination on December 18, 2020 between Clever Leaves International Inc., a corporation organized under the laws of British Columbia, Canada, Schultze Special Purpose Acquisition Corp., a Delaware corporation, Novel Merger Sub Inc., a Delaware corporation and the Company, which resulted in both Clever Leaves International Inc. and Schultze Special Purpose Acquisition Corp. becoming wholly owned subsidiaries of the Company (the "Business Combination") and pursuant to the terms, the holder of the Rock Cliff Warrants can purchase 63,597 of the Company's common shares at a strike price of $26.73 per share.

In May 2022, the Company fully repaid the Herbal Brands Loan in the amount of approximately $5,642, including interest and fees, in full satisfaction of Herbal Brands' obligations under the Loan and Security Agreement. As a result of the full repayment of the Herbal Brand Loan, the Company recorded the remaining amortization balance of the Rock Cliff Warrants within interest and amortization of debt issuance cost" in the Consolidated Statement of Operation.

For the ~~six~~three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recognized interest expense of approximately ~~$390~~$476 and ~~$310,~~$188, respectively, from the Herbal Brands Loan and repaid principal of approximately ~~$1,107~~$5,642 and ~~$429,~~$1,107, respectively, of the Herbal Brands Loan in accordance with the terms of the loan agreement.

For the ~~three~~six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recognized interest expense of approximately ~~$188~~$715 and ~~$154,~~$390, respectively, from the Herbal Brands Loan and repaid principal of approximately ~~$1,107~~$5,642 and ~~$414,~~$1,107, respectively, of the Herbal Brands Loan in accordance with the terms of the loan agreement.

~~Other Borrowings~~As of June 30, 2022, there was no outstanding principal balance, including interest, of the Herbal Brands Loan.

~~Portugal line of credit~~2024 Note Purchase Agreement

~~In January~~On July 19, 2021, ~~Clever Leaves Portugal Unipessoal LDA borrowed EUR 1.00 million~~the Company entered into a Note Purchase Agreement with Catalina LP (“the "Note Purchase Agreement") and issued a secured convertible note (the ~~"Portugal Line~~"Convertible Note") to Catalina LP (“Catalina”), an affiliate of ~~Credit")~~SunStream Bancorp Inc., a joint venture initiative sponsored by Sundial Growers Inc. (Nasdaq: SNDL), pursuant to the Note Purchase Agreement in the principal amount of $25,000. The Convertible Note provided for maturity three years from ~~a local lender (the "Portugal Lender") under~~ the ~~terms~~date of ~~its credit line agreement. The Portugal Line of Credit pays~~issuance and interest ~~quarterly~~accrual at a rate of ~~Euribor plus 3.0 percentage points. Principal will be repaid through~~5% per annum from the date of issuance. Interest on the Convertible Note was payable on a quarterly ~~installments~~basis, either in cash or by increasing the principal amount of ~~approximately EUR 62.5 beginning February 28, 2022. As~~the Convertible Note, at the Company's election. The Company may, in its sole discretion, prepay any portion of ~~June 30, 2021,~~ the ~~full amount borrowed was~~ outstanding ~~under~~principal and accrued and unpaid interest on the ~~Portugal Line of Credit.~~Convertible Note at any time prior to the maturity date.

The principal and accrued interest owing under the Convertible Note could be converted at any time by the holder into the Company's common shares, without par value, at a per share price of $13.50. Up to $12,500 in aggregate principal under the Convertible Note could be so converted within one year of issuance, subject to certain additional limitations.

Subject to certain limitations set forth in the Convertible Note, each of the Company and the noteholder could redeem all or a portion of the outstanding principal and accrued interest owing under the Convertible Note into common shares, at a per share

2118

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

~~11.~~price equal to the greater of (x) an 8% discount to the closing price per share on the applicable redemption date or (y) $6.44 (the “Optional Redemption Rate”). Up to $12,500 in aggregate principal under the Convertible Note could be so redeemed within one year of issuance, subject to certain additional limitations.

If the closing price per share of the Company’s common shares on the Nasdaq Capital Market is below $7.00 for 15 consecutive trading days, neither party would be permitted to redeem any portion of the Convertible Note until the closing price per common share has been above $7.00 for 15 consecutive trading days. At any time, including during the time while the holder is restricted from redeeming all or any portion of the Notes, the holder of the Convertible Note could elect to receive cash repayment of principal and accrued interest on the Convertible Note, in an amount not to exceed $3,500 in any 30 consecutive calendar day period, which amount shall be reduced to $2,000 when the principal on the Convertible Note is less than $12,500.

The holder of the Convertible Note would not be entitled to convert any portion of the Convertible Note if, after such conversion, such holder would have beneficial ownership of, and direct or indirect control or direction over, more than 9.99% of the Company’s outstanding common shares.

The Convertible Note was subject to certain events of default. The occurrence of these events of default would give rise to a 5% increase in the interest rate to a total of 10% per annum for as long as the event of default continues and give the holder of the Convertible Note the right to redeem the outstanding principal and accrued interest on the Convertible Note at the Optional Redemption Rate. Certain events of default also require the Company to repay all outstanding principal and accrued interest on the Convertible Note. In addition, in certain circumstances, if the Company failed to timely deliver common shares as required upon conversion or redemption of the Convertible Note, then the Company would be required to pay, on each day that such failure to deliver common shares continues, an amount in cash equal to 0.75% of the product of (x) the number of common shares the Company failed to deliver (on or prior to share delivery deadline and to which holder is entitled) multiplied by (y) any closing trading price of the common shares (selected by the Holder in writing during the period beginning on the applicable Conversion/Redemption Date and ending on the applicable Conversion/Redemption Share Delivery Deadline.) The obligations of the Company under the Note Purchase Agreement were guaranteed by certain of the Company's subsidiaries.

The Company evaluated all settlement possibilities to conclude if the Convertible Note represented an obligation under ASC 480. As of the inception of the Convertible Note, the Company analyzed whether the Share Redemption is predominant based on the likelihood the Convertible Note would settle in accordance with that particular provision, compared to the likelihood of settling under all other possibilities and determined that in order for the Convertible Note to be subject to ASC 480, there must be a 90% likelihood of settlement using a variable number of shares such that the monetary value is substantially fixed. Based upon the overall assessment of settlement possibilities, the Company concluded that the Convertible Note is not subject to ASC 480.

In connection with the 2024 Convertible Note and issuance of common shares upon Convertible Note conversions during year 2021, the Company analyzed the convertible instrument for a beneficial conversion feature in accordance with ASC 470-10 and in accordance to ASC 815. The Company determined it was not a derivative requiring liability treatment and the redemption feature was not bifurcated as a derivative liability, as it was closely related to the host. The Company concluded that during October 2021, the contingency linked to the beneficial conversion factor was met and the beneficial conversion factor with discount on debt was recognized. The Company recorded a beneficial conversion feature of $4,748 in Additional Paid in Capital. The discount created by the beneficial conversion factor was amortized from the date the contingency was met to maturity or earlier redemption date of holder's put. As a result, the Company recorded $3,519 total debt amortization, within Interest expense in the Consolidated Statement of Operations for 2021. The Conversion feature was evaluated under ASC 815 for an embedded derivative and noted that conversion features qualifies for the scope exception for instruments that are indexed to Company's own equity and bifurcation is not required from the host debt instrument.

The Company evaluated the guidance for Beneficial Conversion Features ("BCF") per ASC 470. At the commitment date, the fair value of the shares contingently issuable upon conversion was greater than the allocated proceeds and calculated the intrinsic value of conversion feature for the amount of $9,496 which should be recognized in earnings if and when the contingencies are resolved. In establishing the accounting policy for the recognition of this contingent BCF, the Company considered that this settlement is only available to a limited portion of principal ($12,500 convertible in the first year), when price is below $7.00. The second half of the debt becomes convertible when the trading price falls to $7.00 during the second or third year the Convertible Note is outstanding. During 2021, first contingency feature was resolved and BCF for $4,748 was recorded.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

Additionally, the Company recorded debt issuance cost of $630 and debt discount of $335, which together total of $965. The discount created by the beneficial conversion factor was amortized from the date the contingency was met to maturity or earlier redemption date of holder's put. These costs are amortized to interest expense over the life of the debt. A portion of the discount was accelerated in proportion to the extent note holder had the right to exercise the contingent put to receive cash repayments on account of principal and accrued Interest.

On January 13, 2022, the Company and Catalina LP entered the First Amendment to the Secured Convertible Note (the "First Amendment Agreement"), amending certain terms of the original Secured Convertible Note issued by the Company to Catalina. The amendment changed the Optional Redemption Price to be the greater of (i) $2.208 ($6.44 in the Original Note); and (ii) an 8% discount to the 4-day lowest volume weighted average trading price (VWAP) of the Common Shares on the Nasdaq Capital Market on each of the three days prior to and including the date of the Optional Redemption Notice (the Original Note provided for an 8% discount to the closing price of the Common Shares on the Original Redemption Date). These amendments were temporary amendments that would have expired on July 19, 2022, at which time the terms of the original note apply with respect to such amendments. The First Amendment Agreement allowed Catalina to elect to receive cash repayment on account of Principal if the closing price per share of the Company’s common shares on the Nasdaq Capital Market is below $2.20 (from $7.00 in the original Secured Convertible Note) on any 10 of the previous 20 trading days. The terms of the Original Note would have applied to redemptions or repayments after July 19, 2022, unless further amended by the parties thereto.

The amendment also added the limitations on redemptions into Common Shares by Catalina as follows: (1) from and after February 1, 2022, Catalina may redeem up to an aggregate amount of $2,000 (the “Base Redemption Amount”) during a calendar month at the Optional Redemption Price; (2) from and after February 1, 2022, Catalina may redeem up to an additional $1,500 (the “Additional Redemption Amount”) during a calendar month at a redemption price that is the greater of (i) $4.60 and (ii) an 8% discount to the 4-day VWAP; and (3) until January 31, 2022, Catalina may redeem up to an aggregate amount of $4,000 (the “Make-Up Base Redemption Amount”) at the Optional Redemption Price; and (4) until January 31, 2022, Catalina may redeem up to an additional $3,000 (the “Make-Up Additional Redemption Amount”) at a redemption price that is the greater of (i) $4.60 and (ii) an 8% discount to the 4-day VWAP. The Company compared the change in fair value of the conversion feature to the pro forma carrying amount and noted that it is more than 10%. The Company accounted for this amendment as a debt extinguishment. The Company also compared the effective conversion price with fair value of the Company's common stock and noted no BCF to be reacquired at the time of extinguishment. As a result, during the three months ended March 31, 2022, the Company recognized a loss on debt extinguishment of $2,263 which included unamortized debt issuance cost and BCF that was evaluated under the terms of the original Catalina LP Secured Convertible note.

At the amendment date, new terms were evaluated for Beneficial Conversion Features ("BCF") per ASC 470 and noted that the fair value of the shares issuable upon conversion was greater than the allocated proceeds. As a result, the Company calculated and recorded the intrinsic value of conversion feature and BCF of $1,749. The Company recognized $1,644 discount created by the BCF for the quarter ended March 31, 2022, accelerating amortization on straight line basis from the date of amendment to the date of payment. No other derivative bifurcation was noted.

In April 2022, the Company fully repaid its 2024 Convertible Note with accrued interest. As a result of the full repayment of the 2024 Convertible Note, the Company recognized the remaining balance of $105 discount created by the BCF for the quarter ended June 30, 2022, within interest expense in the Consolidated Statement of Operations.

For the three months ended June 30, 2022, the Company repaid principal of $13,237 and accrued interest of $9, for a total amount of $13,246, of the 2024 Convertible Note.

For the six months ended June 30, 2022, the Company repaid principal of $16,719 and accrued interest of $27, for a total amount of $16,746, of the 2024 Convertible Note.

During the three and six months ended June 30, 2022, the Company issued a total of 900,000 and 1,507,000 common shares upon debt conversion to the noteholder of $2,039 and $3,363 aggregate principal amount, respectively.

As of June 30, 2022, there was no outstanding principal balance, including interest, of the 2024 Convertible Note payable.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

Other Borrowings

Portugal Debt

In January 2021, Clever Leaves Portugal Unipessoal LDA borrowed €1,000 ($1,213) (the "Portugal Debt"), from a local lender (the "Portugal Lender") under the terms of its credit line agreement. The Portugal Debt pays interest quarterly at a rate of Euribor plus 3 percentage points. This loan is secured by our mortgaged asset.

For the three months ended June 30, 2022 and 2021, the Company recognized interest expense of approximately €7 ($8) and nil, respectively, and repaid principal of approximately €63 ($67) and nil, respectively, of the Portugal Debt in accordance with the terms of the loan agreement. For the six months ended June 30, 2022 and 2021, the Company recognized interest expense of approximately €15 ($17) and nil, respectively, and repaid principal of approximately €125 ($137) and nil, respectively, of the Portugal Debt in accordance with the terms of the loan agreement. The outstanding principal balance of the Portugal Debt as of June 30, 2022 and December 31, 2021 was €875 ($1,076) and €1,000 ($1,213), respectively.

Colombia Debt

Ecomedics S.A.S. has entered into loan agreements with multiple local lenders (collectively, the "Colombia Debt"), under which the Company borrowed approximately COP$5,305,800 ($1,295) of mainly working capital loans. The working capital loans are secured by mortgage of our farm land in Colombia as collateral. These loans bear interest at a range of 10.96% to 12.25% per annum denominated in Colombian pesos. The first payment of the principal and interest will be repaid six months after receiving the loan. After the first payment, the principal and interest will be repaid semi-annually.

For the three months ended June 30, 2022 and 2021, the Company recognized interest expense of approximately COP$240,405 ($61) and nil, respectively, and repaid principal of approximately COP$310,842 ($66) and nil, respectively. For the six months ended June 30, 2022 and 2021, the Company recognized interest expense of approximately COP$251,335 ($64) and nil respectively, and repaid principal of approximately COP$568,842 ($133) and nil, respectively. The outstanding principal balance of the Colombia Debt as of June 30, 2022 and December 31, 2021 was COP$4,369,984 ($1,059) and COP$4,592,095 ($1,153), respectively.

12. CAPITAL STOCK

Common Shares

As of June 30, 2022 and December 31, 2021, ~~the Company's amended~~a total of 39,599,409 and ~~restated articles provided for an unlimited number of voting~~26,605,797 common shares ~~without par value~~were issued and ~~an unlimited number of non-voting common shares without par value.~~outstanding, respectively.

Preferred Shares

~~Preferred Shares~~

As of June 30, ~~2021, the Company's amended~~2022 and ~~restated certificate of incorporation provided for an unlimited number of preferred shares without par value. As of June 30,~~December 31, 2021, the Company had no preferred shares issued and outstanding.

~~Business Combination~~Convertible Note due July 2024

In connection with the ~~Business Combination,~~convertible note purchase agreement, for the consolidated statement of shareholders' equity has been retroactively restated to reflect the number of shares received in the Business Combination. The consolidated statement of shareholders' equity as of December 31, 2020 reflects the following transactions consummated in connection with the Business Combination in regards to outstanding instruments of Clever Leaves: (i) the conversion of the Series E Convertible Debentures to 984,567 of the Company's common shares, (ii) the conversion of the redeemable non-controlling interest of Eagle Canada, a former subsidiary ofthree and six months ended June 30, 2022, the Company ~~to 1,562,339~~issued a total of the Company's common shares, adjusted to reflect the secondary sale of 287,564 of the Company's common shares, (iii) the automatic conversion, on a 1-for-one basis, of Clever Leaves' Class C convertible preferred shares to 1,456,439 of the Company's common shares triggered by the consummation of the Business Combination, (iv) the automatic conversion, at the liquidation preference of 1.4x900,000 and conversion price per share of $3.288, of Class D Preferred Shares to 3,571,591 of the Company's common shares triggered by the consummation of the Business Combination (a Class D Liquidation Event), (v) the exercise of the warrants held by Neem Holdings, LLC for 300,000 of the Company's common shares, and (vi) the recapitalization of 1,168,421 shares and 8,486,3001,507,000, shares of ~~outstanding SAMA founders stock and SAMA~~ common stock ~~respectively,~~upon debt conversion to ~~9,654,721~~the noteholder, respectively. For more information, refer to Note 11 to our unaudited condensed consolidated interim financial statements for the period ended of ~~the Company's common shares.~~June 30, 2022.

~~In addition, SAMA founders received 1,140,423 common shares in exchange for their SAMA common stock~~Equity Distribution Agreement

On January 14, 2022, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Canaccord Genuity LLC, as ~~earnout shares.~~sales agent (the “Agent”). Under the terms ~~these~~of the Equity Distribution Agreement, the Company may issue and sell its common shares, ~~would be released~~without par value, having an aggregate offering price of up to $50,000 from ~~escrow as follows: (i) shares constituting 50%~~time to time through the Agent. The issuance and sale of the common shares ~~reserve~~under the Equity Distribution Agreement have been made, and any such future sales will be ~~released~~made, pursuant to the ~~Sponsor if~~Company’s effective registration statement on Form S-3 (File No.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the ~~closing~~Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

333-262183), which includes an “at-the-market” (“ATM”) offering prospectus supplement (the "Prospectus Supplement"), as amended by Amendment No.1 and Amendment No.2 (defined below).

On March 24, 2022, the Company filed Amendment No. 1 to the Prospectus Supplement ("Amendment No. 1") indicating that it was, at that time, subject to “baby shelf” rules pursuant to Instruction I.B.6. of Form S-3. As such, the Company could not sell more than one-third of the aggregate market value of the voting and non-voting common equity held by non-affiliates, with such aggregate market value calculated using figures from a date or dates, as the case may be, within the preceding 60-days from the date of filing the Annual Report. Pursuant to this baby shelf cap, the Company could not offer to or sell equity securities for more than one-third of its public float, which, limited the aggregate offering price pursuant to the ATM to approximately $18,111.

The Company filed Amendment No. 2 to the Prospectus Supplement (“Amendment No. 2”) on March 28, 2022, to reflect that it was no longer subject to the limitations under General Instruction I.B.6 of Form S-3 and, therefore, in accordance with the terms of the Equity Distribution Agreement, the Company may offer and sell its common shares having an aggregate offering price of up to $46,599 from time to time through the ~~Company's~~Agent.

Subject to terms of the Equity Distribution Agreement, the Agent is not required to sell any specific number or dollar amount of common shares but has agreed to act as the Company’s sales agent, using commercially reasonable efforts to sell on Nasdaq equals or exceeds $12.50 per share (as adjusted for shares splits, reverse splits, stock dividends, reorganizations, recapitalizations) for any 20 trading days within any consecutive 30 trading day period on or before the ~~second anniversary of the Closing, and (ii) shares constituting the remaining 50%~~Company’s behalf all of the common shares ~~reserve will~~requested by the Company to be ~~released~~sold, consistent with the Agent’s normal trading and sales practices, on terms mutually agreed between the Agent and the Company. The Agent is entitled to compensation under the ~~Sponsor if the closing price~~terms of the Company's common shares on Nasdaq equals or exceeds $15.00 per share (as adjusted for stock splits, reverse splits, stock dividends, reorganizations, recapitalizations) for any 20 trading days within any consecutive 30 trading day period on or before the fourth anniversaryEquity Distribution Agreement at a fixed commission rate not to exceed 3.0% of the ~~Closing. As~~gross proceeds from each issuance and sale of ~~December 31, 2020,~~common shares. The Company did not sell any shares of common stock under the ~~shares were legally outstanding, however since none of the performance condition were met, 0 shares were included in the Company's statement of shareholders equity. During~~ATM and Equity Distribution Agreement during the three months ended June 30, ~~2021,~~2022. As of June 30, 2022, the ~~condition~~Company had issued and sold 11,047,567 shares pursuant to the ATM offering, for aggregate net proceeds of $22,223, which consisted of gross proceeds of $23,400 and $1,177 equity issuance costs.

Subsequent to June 30, 2022, the ~~first 50% of~~Company raised additional financing pursuant to its ATM program and the ~~shares reserve was met and therefore 570,212 shares are included in the Company's statement of shareholders equity.~~Equity Distribution Agreement. For more information, refer to Note 20.

Warrants

As of June 30, ~~2021,~~2022, excluding the Rock Cliff warrants, the Company had ~~outstanding~~ 12,877,361 of its public warrants classified as a component of equity and 4,900,000 of its private warrants recognized as liability. Each warrant entitles the holder to purchase 1 common share at an exercise price of $11.50 per share commencing 30 days after the closing of the Business Combination and will expire on December 18, 2025, at 5:00 p.m., New York City time, or earlier upon redemption. Once the warrants are exercisable, the Company may redeem the outstanding public warrants at a price of $0.01 per warrant if the last reported sales price of the Company’s common shares equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading day period ending on the third trading day prior to the date on which the Company will send the notice of redemption to the warrant holders. The private warrants were issued in the same form as the public warrants, but they (i) are not redeemable by the Company and (ii) may be exercised for cash or on a cashless basis at the holder’s option, in either case as long as they are held by the initial purchasers or their permitted transferees (as defined in the warrant agreement). Once a private warrant is transferred to a holder other than an affiliate or permitted transferee, it is treated as a public warrant for all purposes. The terms of the warrants may be amended in a manner that may be adverse to holders with the approval of the holders of at least a majority 50.1% of the then outstanding warrants.

~~Table of Contents~~

~~CLEVER LEAVES HOLDINGS INC.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)~~

~~For the six months ended, June 30, 2021, the Company received total proceeds of $1,410 from the exercise of 122,639 of its public warrants by their holders.~~

~~The~~In accordance to ASC 815, certain provisions of private warrants that do not meet the criteria for equity treatment are recorded as liabilities with the offset to additional paid-in capital and are measured at fair value at inception and at each reporting period in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the statement of operations and comprehensive loss in the period of change.

As atof June 30, 2022, the Company performed a valuation of the private warrants and as a result recorded a net gain on remeasurement for the three and six months ended June 30, 2022, of approximately $1,323 and $1,813, respectively, in its statement of operations.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

As of June 30, 2021, the Company performed a valuation of the private warrants and as a result recorded, in the statement of operations, a net gain on remeasurement for the three months ended June 30, 2021 of approximately $1,176 and net loss on remeasurement for the six months ended June 30, 2021, of approximately ~~$3,675 in its statement of operations and comprehensive loss.~~

~~Series D Convertible Notes due March 2022~~

In connection with the issuance of the 2022 Convertible Notes, Clever Leaves issued 9,509 warrants to acquire Clever Leaves common shares to one of the note holders. The warrants vest when the 2022 Convertible Note issued to the warrant holder is converted into shares and expire on March 30, 2023. The warrants were cancelled in July 2021 upon repayment of the 2022 Convertible Note. Refer to Note 16. for more information.

$3,675.

Herbal Brands Acquisition

In April 2019, the Company issued the Rock Cliff Warrants to purchase 193,402 Clever Leaves Class C convertible preferred shares on a 1:1 basis, at a strike price of $8.79 per share. The fair value of the Rock Cliff Warrants was $717. The warrants can be exercised in part or in whole at any time prior to the expiration date of May 3, 2021, and are not assignable, transferable, or negotiable. The equity classified warrants are amortized to interest expense over the life of the debt. In May 2022, the Company fully repaid the Herbal Brand loan, and as a result, the Company recognized the remaining amortization balance within interest expense in the Consolidated Statement of Operation.

In August 2020 and in connection with the Company's modification to the Herbal Brands Loan, the Company extended the expiration date of the Rock Cliff Warrants to May 3, 2023. Following the closing of the Business Combination and pursuant to the terms, the holder of the Rock Cliff Warrants can purchase 63,597 of the Company's common shares at a strike price of $26.73 per share.

During the three and six months ended June 30, 2022, the Company amortized $38 and $200, respectively, to interest expense.

During the three and six months ended June 30, 2021, the Company amortized $38 and $75, respectively, to interest expense.

~~12.~~13. GENERAL AND ADMINISTRATION

The components of general and administrative expenses were as follows:


		Six months ended				Three Months Ended					Three Months Ended June 30,				Six Months Ended June 30,
		June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020			2022		2021		2022		2021

Salaries and benefits	Salaries and benefits	$	6,986	$	8,826	$	3,660	$	4,280	Salaries and benefits	$	3,856	$	3,660	$	8,405	$	6,986
Office and administration	Office and administration	2,466		1,279		1,280		651		Office and administration	1,237		1,280		2,360		2,466
Professional fees	Professional fees	3,807		2,975		1,573		1,579		Professional fees	1,360		1,573		3,079		3,807
Share based compensation	Share based compensation	4,873		713		3,323		297		Share based compensation	1,148		3,323		1,648		4,873
Rent	Rent	657		770		397		305		Rent	388		397		790		657
Other(a)	Other(a)	559		821		373		152		Other(a)	24		68		(8)		(24)
Total	Total	$	19,348	$	15,384	$	10,606	$	7,264	Total	$	8,013	$	10,301	$	16,274	$	18,765

(a) For the three and six months ended June 30, 2021, the Company reclassified $305 and $583, respectively, research and development ("R&D") expenses, reported in the previous periods in other general & administrative expense to R&D expense, as presented on the Consolidated Statement of Operations, to conform to the current period presentation.

14. RESTRUCTURING EXPENSE

The Company has been reviewing, planning and implementing various strategic initiatives targeted principally at reducing costs, enhancing organizational efficiency and optimize its business model. As part of this process, the Company recorded a restructuring charge of approximately $4,008 related to asset write off, severance, and other related costs during the three months ended March 31, 2022.

Asset write off – With the recent passage of Regulation 227 in February 2022 and the Joint Resolution 539 of 2022 by the Colombian Government in April 2022, the Company will be able to export cannabis flower for medicinal use. With this significant new opportunity opening up, the Company evaluated its current production capacity for cannabis extracts and thus

Table of Contents

CLEVER LEAVES ~~INTERNATIONAL~~HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(InAmounts in thousands of U.S. dollars, except ~~where otherwise noted and~~ share and per share amounts and where otherwise noted)

~~13.~~identified the need to scale back on some of the extraction capacity and related assets. Excess assets, including a large extractor, was identified and abandoned for a total of $2,773 during the three months ended March 31, 2022.

Reduction-in-workforce - The Company approved plans to reduce its workforce in various departments across multiple geographies to effectively align its resources and manage operating costs, which resulted in a total charge of approximately $1,235 of severance costs for the three months ended March 31, 2022 related to the workforce reductions. As of June 30, 2022, we paid $388 and reversed $135 of the total $1,235 of severance costs. At June 30, 2022, the balance of $712 of accrued termination related costs remained outstanding as part of "Other long-term liabilities" on our statement of financial position.

15. SHARE-BASED COMPENSATION

Stock-Based Compensation Plans

The Company's 2018 Equity Incentive Plan, 2020 Equity Incentive Plan and Earnout Plan are described in the Company's 2021 Form 10-K.

Share-Based Compensation Expense

The following table summarizes the Company's share-based compensation expense for each of its awards, included in the Consolidated Statements of Operations for the three and six months ended June 30, 2022.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022	2021

Share-based compensation award type:
Stock Options	85		365		270	721
RSUs	1,063		2,958		1,378	4,152
Total Shared Based Compensation Expense	$	1,148	$	3,323	1,648	4,873

The Company recognized share-based compensation expense in general and administrative expense.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

Stock Options

The following table ~~summarizes~~is a summary of options activity for the Company’s ~~stock option activity since December 31, 2020:~~equity incentive plans for the six months ended June 30, 2022:


		Stock Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value			Stock Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Balance as at December 31, 2020		896,888	$	5.22	3.96	$	2,889
Balance as at December 31, 2021								Balance as at December 31, 2021	784,193	$	5.91	3.68	$	—
Granted	Granted	60,079	$	13.92	9.70	—		Granted	23,114	$	2.16	9.55	—
Exercised	Exercised	(40,942)	$	0.24	—	$	434	Exercised	(158,882)	$	0.24	—	$	130
Forfeited	Forfeited	(27,857)	$	12.11	—	—		Forfeited	(48,579)	$	10.00	—	—
Expired	Expired	(85,399)	$	8.40	—	—		Expired	(101,048)	$	6.28	—	—
Balance as at June 30, 2021		802,769	$	5.96	3.97	$	3,361
Vested and expected to vest as at June 30, 2021		791,488	$	5.90	4.09	$	3,364
Vested and exercisable as at June 30, 2021		413,241	$	6.23	3.77	$	1,702
Balance as of June 30, 2022								Balance as of June 30, 2022	498,798	$	6.70	2.83	$	—
Vested and expected to vest as of June 30, 2022								Vested and expected to vest as of June 30, 2022	488,265	$	6.61	2.76	$	—
Vested and exercisable as of June 30, 2022								Vested and exercisable as of June 30, 2022	367,724	$	6.27	2.11	$	—

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common shares for all stock options that had exercise prices lower than the fair value of the Company’s common shares.

The weighted-average grant-date fair value per share of ~~share-based awards~~stock-options granted during the six months ended June 30, 2022 and 2021 was ~~$10.11.~~$1.95 and 10.11, respectively.

The share-based compensation expense related to unvested stock options awards not yet recognized as of June 30, 2022 and December 31, 2021, was $728 and $1,414, respectively, which is expected to be recognized over a weighted average period of 1.5 and 1.4 years, respectively.

Restricted Share Units

Time-based Restricted Share Units

The fair value for time-based RSUs is based on the closing price of the Company’s common shares on the grant date.

~~The following table summarizes the changes in the Company’s time-based restricted share unit activity during the three months ended June 30, 2021:~~

Restricted Share Units
Weighted-Average
Grant Date Fair Value
Unvested as of December 31, 2020 78,634 $ 3.25
Granted 365,300 14.04
Vested (12,824) 8.66
Canceled/forfeited (6,219) 13.89
Unvested as of June 30, 2021 424,891 $ 12.28

~~Market-based Restricted Share Units~~

During the six months ended June 30, 2021, the Company granted RSUs with both a market condition and a service condition (market-based RSUs) to the Company’s employees. The market-based condition for these awards requires that the Company’s

2425

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

The following table summarizes the changes in the Company’s time-based restricted share unit activity during the six months ended June 30, 2022:


	Restricted Share Units	Weighted-Average Grant Date Fair Value
Non-vested as of December 31, 2021	502,701	$	10.93
Granted	2,004,324	2.53
Vested	(252,083)	9.27
Canceled/forfeited	(637,177)	3.43
Non-vested as of June 30, 2022	1,617,765	$	3.74

Market-based Restricted Share Units

The Company has previously granted RSUs with both a market condition and a service condition (market-based RSUs) to the Company’s employees. No such market-based RSUs were granted during the six months ended June 30, 2022. The market-based condition for these awards requires that (i) the Company’s common shares maintain a closing price equal to or greater than $12.50 ~~or $15.00 per share~~ for any 20 trading days within any consecutive 30 trading day period on or before December 18, 2022 (which condition was met on March 16, 2021) or (ii) the Company's common shares maintain a closing price equal to or greater than $15.00 for any 20 trading days within any consecutive 30 trading day period on or before December 18, ~~2024, respectively.~~2024. Provided that the market-based condition is satisfied, and the respective employee remains employed by the Company, the market-based restricted share units will vest in ~~four~~4 equal annual installments on the applicable vesting date.

The following table presents the weighted-average assumptions used in the Monte Carlo simulation model to determine the fair value of the market-based restricted share units granted in the six months ended June 30, ~~2021:~~2022:


	~~Six Months Ended~~Weighted Average Assumptions
	~~June 30, 2021~~
Grant date share price	$	~~14.40~~2.53
Risk-free interest rate	~~0.5~~1.6		%
Expected dividend yield	0.0		%
Expected volatility	9075		%
Expected life (in years)	~~1.8~~2.54 - ~~3.8~~2.36

The following table summarizes the changes in the Company’s market-based restricted share unit activity during the six months ended June 30, ~~2021:~~2022:

Restricted Share Units
Weighted-Average
Grant Date Fair Value
Unvested as of December 31, 2020 0 $ 0
Granted 1,038,718 13.89
Canceled/forfeited (20,666) 4.02
Unvested as of June 30, 2021 1,018,052 $ 13.89

~~NaN market-based RSUs vested during the six months ended June 30, 2021.~~

~~Please refer to Note 16 for RSUs granted subsequent to June 30, 2021.~~

~~Share-Based Compensation Expense~~

~~The following table summarizes the Company's recognized share-based compensation expense for each of its awards for the periods presented:~~

Six Months Ended Three Months Ended
Share-based compensation award type June 30,
2021 June 30,
2020 June 30,
2021 June 30,
2020
Stock Options 721 713 365 297
RSUs 4,152 0 2,958 0
Total Shared Based Compensation Expense 4,873 713 3,323 297

~~The Company recognized share-based compensation expense in general and administrative expense in its Condensed Consolidated Statements of Operations.~~


	Restricted Share Units	Weighted-Average Grant Date Fair Value
Non-vested as of December 31, 2021	1,073,331	$	12.94
Granted	—	—
Vested	(35,268)	13.91
Canceled/forfeited	(285,539)	12.77
Non-vested as of June 30, 2022	752,524	$	12.96

2526

Table of Contents

CLEVER LEAVES ~~INTERNATIONAL~~HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(InAmounts in thousands of U.S. dollars, except ~~where otherwise noted and~~ share and per share ~~amounts)~~amounts and where otherwise noted)

16. REVENUE

~~14.~~

The Company’s policy is to recognize revenue at an amount that reflects the consideration that the Company expects that it will be entitled to receive in exchange for transferring goods or services to its customers. The Company’s policy is to record revenue when control of the goods transfers to the customer. The Company evaluates the transfer of control through evidence of the customer’s receipt and acceptance, transfer of title, the Company’s right to payment for those products and the customer’s ability to direct the use of those products upon receipt. Typically, the Company’s performance obligations are satisfied at a point in time, and revenue is recognized, either upon shipment or delivery of goods. In instances where control transfers upon customer acceptance, the Company estimates the time period it takes for the customer to take possession and the Company recognizes revenue based on such estimates. The transaction price is typically based on the amount billed to the customer and includes estimated variable consideration where applicable.

Disaggregation of Revenue

Refer to Note 17 Segment Reporting to our unaudited condensed consolidated interim financial statements for the period ended of June 30, 2022 for disaggregation of revenue data.

Contract Balances

The timing of revenue recognition, billing and cash collections results in billed accounts receivable and deferred revenue primarily attributable to advanced customer payment, on the Consolidated Statements of Financial Position. Accounts receivables are recognized in the period in which the Company's right to the consideration is unconditional. The Company's contract liabilities consist of advance payment from a customer, which is classified on the Consolidated Statements of Financial Position as current and non-current deferred revenue.

As of June 30, 2022, the Company's deferred revenue, included in current and non-current liabilities was $265 and $1,271, respectively.

As of December 31, 2021, the Company's deferred revenue, included in current and non-current liabilities was $653 and $1,548, respectively.

17. SEGMENT REPORTING

Operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the Company’s Chief Executive Officer, “CEO”) in deciding how to allocate resources and in assessing the Company’s performance.

Operating segments for the Company are organized by product type and managed by segment managers who are responsible for the operating and financial results of each segment. Due to the similarities in the manufacturing and distribution processes for the Company’s products, much of the information provided in these consolidated financial statements and the footnotes to the consolidated financial statements, is similar to, or the same as, that information reviewed on a regular basis by the Company’s CEO.

The Company’s management evaluates segment profit/loss for each of the Company’s operating segments. The Company defines segment profit/loss as income from continuing operations before interest, taxes, depreciation, amortization, share-based compensation expense, gains/losses on foreign currency fluctuations, gains/losses on the early extinguishment of debt and miscellaneous expenses. Segment profit/loss also excludes the impact of certain items that are not directly attributable to the reportable segments’ underlying operating performance. Such items are shown below in the table reconciling segment ~~profit~~profit/(loss) to consolidated ~~income~~income/(loss) from continuing operations before income taxes. The Company does not have any material inter-segment sales. Information about total assets by segment is not disclosed because such information is not reported to or used by the Company’s CEO. Segment goodwill and other intangible assets, net, are disclosed in Note 9 and Note 8, respectively.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

As of June 30, ~~2021,~~2022, the Company’s operations were organized in the following 2 reportable segments:

1.The Cannabinoid operating segment: comprised of the Company’s cultivation, extraction, manufacturing and commercialization of cannabinoid products. This operating segment is in the early stages of commercializing cannabinoid products internationally pursuant to applicable international and domestic legislation, regulations, and other permits. The Company’s principal customers and sales for its products ~~will initially be~~are primarily outside of the U.S.

2.Non-Cannabinoid operating segment: comprised of the brands acquired as part of the Herbal Brands acquisition in April 2019. The segment is engaged in the business of formulating, manufacturing, marketing, selling, distributing, and otherwise commercializing ~~homeopathic~~nutraceuticals and other natural remedies, wellness products, detoxification products, nutraceuticals, and nutritional and dietary supplements. The Company’s principal customers for its Herbal Brands products include mass retailers, specialty and health retailer and distributors in the U.S.

~~Table of Contents~~

~~CLEVER LEAVES HOLDINGS INC.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)~~

The following table is a comparative summary of the Company’s net sales and segment profit by reportable segment for the periods presented:

Six Months Ended Three Months Ended
June 30,
2021 June 30,
2020 June 30,
2021 June 30,
2020
Segment Net Sales:
Cannabinoid $ 1,256 $ 395 $ 579 $ 153
Non-Cannabinoid 5,893 4,458 3,093 1,786
Total Net Sales 7,149 4,853 3,672 1,939

Segment Profit (Loss):
Cannabinoid (6,468) (9,855) (3,604) (4,454)
Non-Cannabinoid 1,246 413 634 (67)
Total Segment Loss $ (5,222) $ (9,442) $ (2,970) $ (4,521)

Reconciliation:
Total Segment Loss (5,222) (9,442) (2,970) (4,521)
Unallocated corporate expenses (6,173) (3,945) (2,786) (2,141)
Non-cash share based compensation (4,873) (713) (3,323) (297)
Depreciation and amortization (1,103) (717) (524) (365)
Goodwill impairment 0 (1,682) 0 0
Loss from operations $ (17,371) $ (16,499) $ (9,603) $ (7,325)

Loss on fair value of derivative instrument 0 0 0 (13)
Loss(gain) on remeasurement of warrant liability 3,675 0 (1,176) 0
Loss on investments 0 228 0 67
Foreign exchange loss 839 359 80 311
Interest expense 1,898 1,789 920 953
Miscellaneous, net (1,087) 48 (485) 105
Loss before loss from equity investment $ (22,696) $ (18,923) $ (8,942) $ (8,748)

~~During 2021 and 2020, the Company's net sales for the non-cannabinoid segment were in the U.S.; cannabinoid net sales were outside of the U.S., primarily in Colombia, Israel, Brazil and Australia.~~

June 30,
2021 December 31,
2020
Long-lived assets

Cannabinoid $ 28,528 $ 25,485
Non-Cannabinoid 151 176
Other(a)
25 19
$ 28,704 $ 25,680

~~(a)“Other” includes long-lived assets primarily in the Company’s corporate offices.~~

Long-lived assets consist of non-current assets other than goodwill; intangible assets, net; deferred tax assets; investments in unconsolidated subsidiaries and equity securities; and financial instruments. The Company’s largest markets in terms of long-lived assets are Colombia and Portugal.


	Three Months Ended June 30,					Six Months Ended June 30,
	2022		2021			2022		2021
Segment Net Sales:
Cannabinoid	$	1,299	$	579		$	3,290	$	1,256
Non-Cannabinoid	3,358		3,093			6,591		5,893
Total net sales	4,657		3,672			9,881		7,149

Segment Profit (Loss):
Cannabinoid	(5,338)		(3,604)			(13,026)		(6,468)
Non-Cannabinoid	666		634			1,014		1,246
Total segment loss	$	(4,672)	$	(2,970)		$	(12,012)	$	(5,222)

Reconciliation:
Total segment loss	(4,672)		(2,970)			(12,012)		(5,222)
Unallocated corporate expenses	(1,841)		(2,786)			(5,377)		(6,173)
Non-cash share-based compensation	(1,148)		(3,323)			(1,648)		(4,873)
Depreciation and amortization	(537)		(524)			(1,054)		(1,103)

Loss from continuing operations before income taxes	$	(8,198)	$	(9,603)		$	(20,091)	$	(17,371)

Loss on debt extinguishment, net	—		—		—	2,263		—

(Gain) loss on remeasurement of warrant liability	(1,323)		(1,176)		—	(1,813)		3,675
Gain on investment	(6,851)		—		—	(6,851)		—
Foreign exchange loss	307		80		—	652		839
Interest and amortization of debt issuance cost	652		920		—	2,770		1,898
Other expense (income), net	63		(485)		—	10		(1,087)
Loss before loss from equity investment	$	(1,046)	$	(8,942)		$	(17,122)	$	(22,696)

2728

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

The following table disaggregates the Company’s ~~revenues~~revenue by channel for the periods presented:

Six Months Ended Three Months Ended
June 30,
2021 June 30,
2020 June 30,
2021 June 30,
2020
Mass retail $ 3,609 $ 2,033 $ 1,721 $ 1,012
Specialty, health and other retail 575 910 350 598
Distributors 2,680 1,575 1,448 236
E-commerce 285 335 153 93
$ 7,149 $ 4,853 $ 3,672 $ 1,939


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Mass retail	$	2,239	$	1,721	$	5,236	$	3,609
Distributors	1,664		1,448		3,322		2,680
Specialty, health and other retail	560		350		952		575
E-commerce	194		153		371		285
Total	$	4,657	$	3,672	$	9,881	$	7,149

The following table represents the Company's revenues attributed to countries based on location of customer:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
United States	$	3,275	$	3,092	$	6,508	$	5,892
Israel	385		$	198	$	1,023	$	198
Australia	133		358		684		640
Brazil	277		4		920		146
Germany	408		—		552		—
Other	179		20		194		273
Total	$	4,657	$	3,672	$	9,881	$	7,149

During the six months ended June 30, 2022 and 2021, the majority of the Company's net sales for the non-cannabinoid segment were in the U.S., with approximately $6.5 million of non-cannabinoid net sales.

Percentage of Revenues

Percentage of Accounts Receivable

Three Months Ended June 30,

Six Months Ended June 30,

June 30,

December 31,

2022

2021

2022

2021

2022

2021

Customer A

20%

Customer B (a)

15%

10%

17%

25%

Customer C (b)

15%

18%

Customer D (a)

10%

Customer E (b)

14%

* denotes less than 10%

(a) net sales attributed are reflected in the non-cannabinoid segments

(b) net sales attributed are reflected in the cannabinoid segments

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)


	June 30, 2022		December 31, 2021
Long-lived assets
Colombia	$	17,146	$	18,950
Portugal	12,145		11,733
Other(a)	211		249
Total	$	29,502	$	30,932

(a)“Other” includes long-lived assets primarily in the U.S.

Long-lived assets consist of non-current assets other than goodwill; intangible assets, net; investments in unconsolidated subsidiaries and equity securities; and financial instruments.

~~15.~~18. NET LOSS PER SHARE

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the year, without consideration for common share equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common share equivalents outstanding for the year determined using the treasury-stock method. For purposes of this calculation, common share warrants and stock options are considered to be common share equivalents and are only included in the calculation of diluted net ~~loss~~income per share when their effect is dilutive.

The following table sets forth the computation of basic and diluted net loss and the weighted average number of shares used in computing basic and diluted net loss per share:


		Six Months Ended				Three Months Ended					Three Months Ended June 30,				Six Months Ended June 30,
		June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020			2022		2021		2022		2021
Numerator:	Numerator:									Numerator:
Net loss	Net loss	$	(22,721)	$	(18,939)	$	(8,956)	$	(8,753)	Net loss	$	(1,046)	$	(8,956)	$	(17,186)	$	(22,721)
Adjustments to reconcile to net loss available to common stockholders:

Net loss attributable to non-controlling interests		0		(1,648)		0		(744)
Net loss attributable to Clever Leaves Holdings Inc. common shareholders — basic and diluted		$	(22,721)	$	(17,291)	$	(8,956)	$	(8,009)

Denominator:	Denominator:									Denominator:
Weighted-average common shares outstanding - basic and diluted	Weighted-average common shares outstanding - basic and diluted	25,311,077		9,052,317		25,588,987		9,800,604		Weighted-average common shares outstanding - basic and diluted	39,559,793		25,588,987		33,792,261		25,311,077

Net loss per share attributable to Clever Leaves Holdings Inc. common shareholders - basic and diluted		$	(0.90)	$	(1.91)	$	(0.35)	$	(0.82)
Net loss per common share- basic and diluted										Net loss per common share- basic and diluted	$	(0.03)	$	(0.35)	$	(0.51)	$	(0.90)

The Company's potentially dilutive securities, which include common stock, warrants, stock options, and unvested restricted stock have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders is the same.

2830

Table of Contents

CLEVER LEAVES HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)

The Company excluded the following potential common shares, presented based on amounts outstanding atas of June 30, ~~2021~~2022 and ~~2020,~~2021, from the computation of diluted net loss per share attributable to common shareholders because including them would have had an anti-dilutive effect:


		June 30, 2021	June 30, 2020		June 30, 2022	June 30, 2021

Common stock warrants	Common stock warrants	17,850,460	0	Common stock warrants	17,840,951	17,850,460
SAMA earnout shares	SAMA earnout shares	570,211	0	SAMA earnout shares	570,211	570,211
Stock options	Stock options	802,769	1,083,498	Stock options	498,798	802,769
Unvested restricted share units	Unvested restricted share units	1,442,943	0	Unvested restricted share units	2,370,289	1,442,943
Total	Total	20,666,383	1,083,498	Total	21,280,249	20,666,383

~~16. SUBSEQUENT EVENTS~~

~~2024 Notes Purchase Agreement~~19. LEASES

On ~~July 19, 2021,~~January 1, 2022, we adopted the ~~Company entered into a Note Purchase Agreement with Catalina LP (“~~accounting standard ASC 842, Leases, using the "Note Purchase Agreement") and issued a secured convertible note (the "Convertible Note") to Catalina LP (“SunStream”), an affiliate of SunStream Bancorp Inc., a joint venture initiative sponsored by Sundial Growers Inc. (Nasdaq: SNDL), pursuant to the Note Purchase Agreement in the principal amount of $25,000. The Convertible Note matures three years from themodified retrospective method. We elected this adoption date as our date of ~~issuance and accrues interest from the date of issuance at the rate of 5% per annum. Interest on the Convertible Note is payable on~~initial application. As a quarterly basis, either in cash or by increasing the principal amount of the Convertible Note, at the Company's election. The Company may, in its sole discretion, prepay any portion of the outstanding principal and accrued and unpaid interest on the Convertible Note at any timeresult, we have not updated financial information related to, nor have we provided disclosures required under ASC 842 for, periods prior to ~~the maturity date.~~January 1, 2022. The primary changes to our policies relate to recognizing most leases on our statement of financial position as liabilities with corresponding right-of-use ("ROU") assets.

The ~~principal~~Company has entered into agreements under which we lease various real estate spaces in North America, Europe and ~~accrued interest owing~~Latin America, under non-cancellable leases that expire on various dates through calendar year 2029. Some of our leases include options to extend the ~~Convertible Note may be converted at any time by~~term of such leases for a period from 12 months to 60 months, and/or have options to early terminate the ~~holder into the Company's common shares, without par value (the "common share"), at a per share price~~lease. Some of ~~$13.50. Up~~our leases require us to ~~$12,500~~pay certain operating expenses in ~~aggregate principal under the Convertible Note may be so converted within one year of issuance, subject~~addition to ~~certain additional limitations.~~

base rent, such as taxes, insurance and maintenance costs.

~~Subject to certain limitations set forth in~~As the ~~Convertible Note, each of~~Company’s leases do not typically provide an implicit rate, the Company utilizes the appropriate incremental borrowing rate, determined as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and ~~the noteholder may redeem all or~~in a portion of the outstanding principal and accrued interest owing under the Convertible Note into common shares, at a per share price equal to the greater of (x) an 8% discount to the closing price per share on the applicable redemption date or (y) $6.44 (the “Optional Redemption Rate”). Up to $12,500,000 in aggregate principal under the Convertible Note may be so redeemed within one year of issuance, subject to certain additional limitations.similar economic environment.

If the closing price per share of the Company’s common shares on the Nasdaq Capital Market is below $7.00 for 15 consecutive trading days, neither party will be permitted to redeem any portion of the Convertible Note until the closing price per common share has been above $7.00 for 15 consecutive trading days, and the holder of the Convertible Note may elect to receive cash repayment of principal and accrued interest on the Convertible Note, in an amount not to exceed $3,500,000 in any 30 consecutive calendar day period, which amount shall be reduced to $2,000,000 when the principal on the Convertible Note is less than $12,500,000.Practical Expedients

The ~~holder~~modified retrospective approach included a package of optional practical expedients that we elected to apply. Among other things, these expedients permitted us not to reassess prior conclusions regarding lease identification, lease classification and initial direct costs under ASC 842. The Company does not separate lease and non-lease components in determining ROU assets or lease liabilities for real estate leases. Additionally, the ~~Convertible Note will~~Company does not ~~be entitled to convert any portion~~recognize ROU assets or lease liabilities for leases with original terms or renewals of ~~the Convertible Note if, after such conversion, such holder would have beneficial ownership of, and direct~~one year or ~~indirect control or direction over, more than 9.99% of the Company’s outstanding common shares.~~less.


	Financial Statement Classification	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Operating lease costs:
Fixed lease costs	Operating expenses	$	426	$	889
Variable lease costs	Operating expenses	$	22	$	22
Total lease costs		$	448	$	911

The ~~Convertible Note is subject to certain events of default. The occurrence of these events of default would give rise to a five percent (5%) increase~~operating lease costs in the ~~interest rate~~table above include costs for long-term and short-term leases. Total short-term costs for the three and six months ended June 30, 2022 was approximately $44 and $101, respectively. Variable lease costs primarily include maintenance, utilities and operating expenses that are incremental to ~~a total~~the fixed base rent payments and are excluded from the calculation of ~~ten percent (10%) per annum~~operating lease liabilities and ROU assets. For the three and six months ended June 30, 2022, cash paid for as long as the event of default continues, and give the holder of the Convertible Note the right to redeem the outstanding principal and accrued interest on the Convertible Note at the Optional Redemption Rate. Certain events of default (including the failure of a registration statement to be declared by the SEC effective within 90 days of issuance in accordance with the Registration Rights Agreement described below) also require the Company to repay all outstanding principal and accrued interest on the Convertible Note. In addition, in

Table of Contents

CLEVER LEAVES ~~INTERNATIONAL~~HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(InAmounts in thousands of U.S. dollars, except ~~where otherwise noted and~~ share and per share ~~amounts)~~

~~16. SUBSEQUENT EVENTS~~ ~~(cont.)~~amounts and where otherwise noted)

~~certain circumstances, if~~amounts associated with our operating lease liabilities were approximately $475 and $898, respectively, which were classified as operating activities in the ~~Company fails to timely deliver common shares as required upon conversion or redemption~~consolidated statement of ~~the Convertible Note, then the Company will be required to pay, on each day that such failure to deliver common shares continues, an amount in~~ cash equal to 0.75% of the product of (x) the number of common shares the Company failed to deliver multiplied by (y) any closing trading price of the common shares on any day during the period when such shares were required to be delivered. The obligations of the Company under the Note Purchase Agreement are guaranteed by certain of the Company's subsidiaries.flows.

~~Repayment~~The following table shows our undiscounted future fixed payment obligations under our recognized operating leases and a reconciliation to the operating lease liabilities as of ~~2022 Convertible Notes~~June 30, 2022:


Leases and a reconciliation to the operating lease liabilities as of June 30, 2022
Remainder of Year 2022	$	819
2023	1,422
2024	831
2025	281
2026	131
Thereafter	213
Total future fixed operating lease payments	$	3,697

Less: Imputed interest	$	332
Total operating lease liabilities	$	3,365

Weighted-average remaining lease term - operating leases	2.97
Weighted-average discount rate - operating leases	9.3		%

Due to our election to apply the effective date method of adoption for ASC 842, we have included the following additional disclosure under our historical lease accounting under ASC 840.

As of December 31, 2021, future minimum lease payments under non-cancelable operating lease were as follows


Lease Commitments
2022	$	1,910
2023	1,562
2024	845
2025	337
2026	152
Thereafter	286
Total	$	5,092

20. SUBSEQUENT EVENTS

Equity Distribution Agreement

On ~~July 19, 2021,~~January 14, 2022, the Company ~~fully repaid its 2022 Convertible Notes~~entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with ~~accrued interest and cancelled the associated warrants.~~Canaccord Genuity LLC, as sales agent (the “Agent”). Under the ~~Payout and Release~~terms of the Equity Distribution Agreement, the Company ~~agreed~~may issue and sell its common shares, without par value, having an aggregate offering price of up to ~~pay an amount equal~~$50,000 from time to time through the Agent. Subsequent to June 30, 2022, the Company has issued and sold 2,828,834 shares pursuant to the ~~sum~~ATM offering, for aggregate net proceeds of ~~90% of~~$3,051 and may issue and sell additional shares, subject to the ~~aggregate outstanding principal amount on the 2022 Convertible Notes with accrued interest and certain legal fees to repay the 2022 Convertible Notes.~~

~~Grant of RSUs~~

~~On July 1, 2021, the Company granted 431,566 additional RSUs to employees with 4 years vesting period available under the 2020 Earnout Award Plan. Please refer to~~limitations, as described in Note ~~13 for more details on the 2020 Earnout Plan.~~12.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Amounts in thousands of U.S. dollars, except as otherwise noted.

Our Company

We are a multi-national ~~cannabis company~~operator in the botanical cannabinoid and nutraceutical industries, with operations and investments in Colombia, Portugal, Germany the ~~mission to be an industry-leading global cannabinoid company recognized for our principles, people~~United States and ~~performance while fostering a healthier global community.~~Canada. We are working to develop one of the industry’s leading, low-cost global business-to-business supply chains with the goal of providing high quality, pharmaceutical grade cannabis and wellness products to customers and patients at competitive ~~prices.~~ prices produced in a sustainable and environmentally friendly manner. Our customers consist of retail distributors and pharmaceutical and cannabis companies.

We have invested in ecologically sustainable, large-scale, botanical cultivation and processing, as the cornerstone of our medical cannabinoid business, and we continue to develop strategic distribution channels and brands. We currently own approximately 2.1 million square feet of greenhouse cultivation capacity across two continents and approximately 15 million square feet of agricultural land. In addition, our pharmaceutical-grade extraction facility is capable of processing 104,400 kilograms of dry flower per year.

In July 2020, we became one of a small number of vertically integrated cannabis companies to receive EU GMP certifications for our Colombian operations. We believe this certification provides us with one of the largest licensed capacities for cannabis cultivation and cannabinoid extraction globally, while our strategically located operations allow us to produce our products at a fraction of the average cost of production incurred by our peers in Canada and the United States.

In addition to the cannabinoid business, we are also engaged in the non-cannabinoid business of formulating, manufacturing, marketing, selling, distributing, and otherwise commercializing ~~homeopathic~~nutraceutical and other natural remedies and wellness products, ~~and nutraceuticals. We continue~~ to ~~invest in building a distribution network with a global footprint, with operations and investments in Colombia, Portugal, Germany,~~more than 20,000 retail locations across the United States, through our wholly owned subsidiary Herbal Brands, Inc. (“Herbal Brands”). Herbal Brands has an Arizona based GMP-compliant, Food and ~~Canada.~~Drug Administration (“FDA”) registered facility and is a national distributor of nutraceutical products. Along with nutraceutical products, after conducting research and development on variety of CBD products, Herbal Brands launched its first consumer brand, Joysol, to include cannabinoids (CBD) for distribution through its existing distribution channels in January 2022. Herbal Brands’ nationwide customer base provides a platform we intend to leverage for greater potential cannabinoid distribution in the future, should U.S. federal laws change and regulations permit.

Our business model is focused on partnering with leading and emerging cannabis and pharmaceutical businesses by providing them with lower cost product, variable cost structures, reliable supply throughout the year, and accelerated speed to market. ~~This~~We believe this is achievable due to our production locations, capacity, product registrations and various product certifications. To date, we have had limited export shipments of our cannabis products to Australia, Brazil, Canada, Chile, Germany, Israel, Italy, the Netherlands, New Zealand, Peru, Poland, Spain, South Africa, the United Kingdom and the United States.

We manage our business in two segments: the Cannabinoid and Non-Cannabinoid segments.

1.The Cannabinoid operating segment is comprised of ~~the Company’s~~our cultivation, extraction, manufacturing, commercialization, and distribution of cannabinoid products. This operating segment is in the early stages of commercializing cannabinoid products internationally subject to applicable international and state laws and regulations. ~~All our~~Our customers and sales for our cannabinoid segment products are ~~presently~~mostly outside of the ~~U.S.~~United States.

2.The Non-Cannabinoid operating segment is comprised of the brands and manufacturing assets acquired as part of our acquisition of Herbal Brands. The segment is engaged in the business of formulating, manufacturing, marketing, selling, distributing, and otherwise commercializing wellness products and ~~nutraceuticals, excluding cannabinoid products.~~nutraceuticals. Our principal customers for the Herbal Brands products include specialty and health retailers, mass retailers and specialty and health stores in the ~~U.S.~~United States.

Factors Impacting our Business

We believe that our future success will primarily depend on the following factors:

Globalization of the industry. Due to our ~~multi-national operator (“MNO")~~MNO model focused on geographic diversification, which distinguishes us from many of our competitors and allows us to scale our production in low-cost regions of the world, we believe we are well positioned to capitalize in markets where the medical cannabis and hemp industry offers a reasonably regulated and free flow of

Table of Contents

goods across national boundaries. While certain countries, such as Canada, have historically not welcomed imported cannabis or hemp products for commercial purposes, other countries, such as Germany, Brazil and ~~Brazil,~~Israel, depend primarily on imports.

Global medical market expansion. We believe that we are well-positioned to capitalize on expansion of global cannabis markets, as more legal medical cannabis geographies emerge. Medical cannabis is now authorized at the national or federal level in over 41 countries, and more than half of these countries have legalized or introduced significant reforms to their cannabis-use laws to broaden the scope of permitted medical uses beyond the original parameters. Over the past three years, we have established regional operations in ~~Canada,~~ Colombia, Portugal, Germany, the United States and ~~Germany,~~Canada, and we have invested significant resources in personnel and partnerships to build the foundation for new export channels.

Product development and innovation. Because of the rapid evolution of the cannabis industry, the disparate regulations across different geographies, and the time required to develop and validate pharmaceutical-grade products, the pace at which we can expand our portfolio of products and formulations will impact market acceptance for our products. To increase our output while maintaining or reducing unit costs, we may need to enhance our cultivation, extraction, and other processing methods. We believe our focus on the production of proprietary and exclusive products or formulations that comply with stringent regulations, or that result in enhanced benefits for patients or consumers, could create advantages in various markets.

~~Table of Contents~~

Regulatory expertise and adaptation. As more markets welcome the importation of cannabis or hemp products for commercial purposes, which requires navigating and complying with the strict and evolving cannabis regulations across the different geographies, we believe that we are well positioned to expand in these markets. ~~Clever Leaves has~~We have built a global regulatory team that is experienced in developing good relationships with regulatory agencies and governments that govern and shape the cannabis industry in their respective jurisdictions. Key expertise includes complying with and securing quotas, product approvals, export permits, import permits and other geographic specific licenses.

Strategically expanding productive capacity and manufacturing capabilities. It is beneficial to have low operating costs and to control the production process to generate consistency and quality on a large scale. As we expand into new markets and grow our presence in existing markets, we expect significant investments in cultivation and processing will be required, which may necessitate additional capital raises. We also aim to increase productive capacity through innovation in cultivation or processing methods, improving yields and output levels of our existing assets. While we believe our core cultivation and extraction operations in Colombia are adequately sized for our current business operations, as our cannabis sales grow and expand to flower products, we plan to expand our operations and invest in advanced processing or finished good manufacturing capabilities, particularly in Colombia and Portugal.

Key Operating Metrics

We use the following key operating metrics to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance and make strategic decisions. Other companies, including companies in our industry, may calculate key operating metrics with similar names differently, which may reduce their usefulness as comparative measures.

The following table presents select operational and financial information of the Cannabinoid segment for the three and six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Three months ended June 30,
Operational information: 2021 2020 Change
(In $000s, except kilogram and per gram data)
Kilograms (dry flower) harvested(a)
11,464 16,948 (5,484) (32) %
Costs to produce (b)
$ 2,476 $ 1,930 $ 546 28 %
Costs to produce per gram $ 0.22 $ 0.11 $ 0.11 100 %
Selected financial information:
Revenue $ 579 $ 153 $ 426 278 %
Kilograms sold (c)
2,401 2,231 170 8 %
Revenue per grams sold $ 0.24 $ 0.07 $ 0.17 243 %


		Six months ended June 30,									Three months ended June 30,
Operational information:	Operational information:	2021		2020		Change				Operational information:	2022		2021 (d)		Change
(In $000s, except kilogram and per gram data)	(In $000s, except kilogram and per gram data)									(In $000s, except kilogram and per gram data)
Kilograms (dry flower) harvested(a)	Kilograms (dry flower) harvested(a)	27,322		28,707		(1,385)		(5)	%	Kilograms (dry flower) harvested (a)	1,200		11,464		(10,264)		(90)	%
Costs to produce (b)	Costs to produce (b)	$	4,634	$	3,674	$	960	26	%	Costs to produce (b)	$	2,717	$	2,476	$	241	10	%
Costs to produce per gram	Costs to produce per gram	$	0.17	$	0.13	$	0.04	31	%	Costs to produce per gram	$	2.26	$	0.22	$	2.05	N/M

Selected financial information:	Selected financial information:									Selected financial information:
Revenue	Revenue	$	1,256	$	395	$	861	218	%	Revenue	$	1,299	$	579	$	720	124	%
Kilograms sold(c)	Kilograms sold(c)	4,883		3,487		1,396		40	%	Kilograms sold (c)	1,832		2,401		(569)		(24)	%
Revenue per grams sold	Revenue per grams sold	$	0.26	$	0.11	$	0.15	136	%	Revenue per grams sold	$	0.71	$	0.24	$	0.47	196	%

N/M: Not a meaningful percentage

Table of Contents



	Six Months Ended June 30,
Operational information:	2022		2021 (d)		Change
(In $000s, except kilogram and per gram data)
Kilograms (dry flower) harvested (a)	8,585		27,023		(18,438)		(68)	%
Costs to produce (b)	$	5,415	$	4,985	$	430	9	%
Costs to produce per gram	$	0.63	$	0.18	$	0.45	242	%

Selected financial information:
Revenue	$	3,290	$	1,256	$	2,034	162	%
Kilograms sold (c)	6,184		4,877		1,307		27	%
Revenue per grams sold	$	0.53	$	0.26	$	0.27	104	%

_______________

(a)Kilograms (dry flower) harvested —- represents the weight of dried plants post-harvest both for sale and for research and development purposes. This operating metric is used to measure the productivity of our farms.

(b)Costs to produce —- includes costs associated with cultivation, extraction, depreciation, quality assurance and supply chain related to kilograms (dry flower) harvested.

(c)Kilograms sold —- represents the amount in kilograms of product sold in dry plant equivalents. Extract is converted to dry plant equivalent for purposes of this metric.

(d)Prior year information was revised to conform to the current period presentation.

During the three months ended June 30, ~~2021~~2022 and ~~2020~~2021 we sold ~~2,401~~1,832 and ~~2,231~~2,401 kilograms, respectively, of dry flower ~~equivalents.~~equivalent. For the three months ended June 30, ~~2021,~~2022, our ~~cannabinoid~~Cannabinoid segment sales were primarily in ~~Colombia,~~ Australia, Israel, Germany and ~~Israel.~~Brazil. The ~~increase~~decrease in sale of dry flower equivalent for the Cannabinoid segment was primarily ~~driven~~due the seasonality of our sales. Gross margin increased because lower revenue was offset by the ~~Company's continued expansion~~higher margin of ~~its sales activity for cannabinoid products.~~

products sold, as evidenced by increased revenue per grams sold.

During the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 we sold ~~4,883~~6,184 and ~~3,487~~4,877 kilograms, respectively, of dry flower ~~equivalents.~~equivalent. For the six months ended June 30, ~~2021,~~2022, our ~~cannabinoid~~Cannabinoid segment sales were primarily in ~~Colombia,~~ Australia, Israel, Germany and Brazil. The increase in sale of dry flower equivalent for the Cannabinoid segment was primarily ~~driven by the Company's continued expansion of its~~due to increased sales activity ~~for cannabinoid products.~~and selling more products which have higher margins.

We harvested ~~11,464~~1,200 kilograms of cannabinoids in the three months ended June 30, ~~2021,~~2022, as compared to ~~16,948~~11,464 kilograms in the three months ended June 30, ~~2020.~~2021. The decrease was ~~primarily~~ attributable to ~~adjustment~~a decrease in our planned production capacity at ~~the Company's~~our Colombia and Portugal facilities ~~partly offset by addition of production capacity at the Company's Portugal facilities.~~to manage inventory levels.

We harvested ~~27,322~~ 8,585kilograms of cannabinoids in the six months ended June 30, ~~2021,~~2022, as compared to ~~28,707~~27,023 kilograms in the six months ended June 30, ~~2020.~~2021. The decrease was primarily attributable to ~~adjustment~~a decrease in our planned ~~production~~productions capacity at ~~the Company's~~our Colombia and Portugal facilities ~~partly offset by addition of production capacity at the Company's Portugal facilities.~~to manage inventory levels.

Costs to produce were approximately $2.26 per gram of dry flower equivalent for the three months ended June 30, 2022, as compared to $0.22 per gram of dry flower equivalent for the three months ended June 30, ~~2021, as compared to $0.11 per gram of dry flower equivalent for the three months ended June 30, 2020.~~2021. The increase ~~in costs to produce per gram is~~was primarily driven by ~~initially higher production costs in~~ our ~~Portugal facility as we continue with its expansion. The increase in costs was partly~~significantly reduced ~~by lower production costs at our facilities~~agricultural output in Colombia and ~~the resulting economies of scale.~~continued extract processing costs on current inventory in Colombia, as well as expenses associated with our ramping cultivation capacity in Portugal.

Costs to produce were approximately ~~$0.17~~$0.63 per gram of dry flower equivalent for the six months ended June 30, ~~2021,~~2022, as compared to ~~$0.13~~$0.18 per gram of dry flower equivalent for the six months ended June 30, ~~2020.~~2021. The increase ~~in costs to produce per gram is~~was primarily driven by ~~initially higher production costs in~~ our ~~Portugal facility as we continue with its expansion. The increase in costs was partly~~significantly reduced ~~by lower production costs at our facilities~~agricultural output in Colombia and ~~the resulting economies of scale.~~

continued extract processing costs on current inventory in Colombia, as well as expenses associated with our ramping cultivation capacity in Portugal.

Recent Developments

Table of Contents

Licensing Requirement - Decree 811

The Colombian government passed Decree 811 in late July 2021, which replaced Decree 613. Decree 811 removed the prohibition contained in Decree 613 to export cannabis flowers. In February 2022, the Colombian government passed Regulation 227, which defines the procedures to begin cultivating cannabis for exporting the flower for medicinal use. Later, in April 2022, a joint resolution 539 was passed, which allows us to export cannabis flower for medicinal use.

2024 Convertible Note Settlement

On April 5, 2022, the Company repaid to Catalina LP (“Catalina” or the "Holder”) an amount equal to $13,246, in full satisfaction of the aggregate amount outstanding, including accrued interest, under the Secured Convertible Note (the “Convertible Note”) issued pursuant to the Note Purchase Agreement, dated July 19, 2021, between the Company and Catalina, as amended on January 13, 2022 (the “Note Purchase Agreement”). As a result of the repayment, all outstanding indebtedness and obligations of the Company owing to Catalina under the Note Purchase Agreement and Convertible Note have been paid in full.

Pursuant to the repayment and termination of the Convertible Note, our ancillary agreements, including the Guarantee made by Clever Leaves International, Inc., 1255096 B.C. Ltd., NS US Holdings, Inc., Herbal Brands, Inc., Northern Swan International, Inc., Northern Swan Management, Inc., Clever Leaves US Inc., Northern Swan Deutschland Holdings, Inc. and Northern Swan Portugal Holdings, Inc., in favor of Catalina, and the pledge agreements made in favor of Catalina by us, Clever Leaves International, Inc., 1255096 B.C. Ltd. and Clever Leaves US Inc., each dated as of July 19, 2021, in respect of the shares of Clever Leaves International Inc., 1255096 B.C. Ltd., Northern Swan International, Inc., Clever Leaves US, Inc., and NS US Holdings, Inc. were concurrently terminated.

Herbal Brands Loan Settlement

On May 2, 2022, the Company fully repaid its outstanding indebtedness and obligations under the Herbal Brand's Loan and Security Agreement in the aggregate principal amount of $5,592, accrued and unpaid interest of $47 and aggregate fees of $3, in full satisfaction of Herbal Brands' obligations under the Loan and Security Agreement (the “Payoff”). Notwithstanding the provisions of the Loan and Security Agreement, no Back-End Fee (as defined in the Loan and Security Agreement) was due in connection with the Payoff. In addition, in connection with the Payoff, all liens, guarantees and encumbrances under the Loan and Security Agreement were released.

Impact of COVID-19 Pandemic

~~The Company expects its~~

We expect our operations to continue to be affected by the ongoing outbreak of the 2019 coronavirus disease (“COVID-19”), which was declared a pandemic by the WHO in March 2020. The spread of COVID-19 has severely impacted many economies around the globe. In many countries, including those where ~~the Company operates,~~we operate, businesses have been forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown. ~~Given~~Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions and we have taken steps to obtain financial assistance made available from jurisdictional governments, however we expect our future financial performance to continue to be impacted and result in a delay of certain of our go-to-market initiatives.

More recently, other, more infectious, variants of COVID-19 have been identified, which continue to spread throughout the ~~continued evolution~~U.S. and worldwide. We could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the current COVID-19 pandemic. Since the onset of the global pandemic in 2020, we have been closely monitoring the spread of COVID-19 and its variants, and plan to continue taking steps to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address the COVID-19 pandemic. The spread of COVID-19 caused us to modify our business practices, including implementing a temporary global work from home policy in March 2020 for all employees who were able to perform their duties remotely and temporarily restricting all nonessential business travel, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, the customers we serve and other business partners in light of COVID-19 and variants thereof. Where and to the extent permitted to be open under local regulations, our office sites are operational with appropriate safety precautions based on vaccination rates and local guidance. The effects of the COVID-19 pandemic ~~and the related complexities and uncertainties associated with the additional variants, the Company’s business operations could be significantly impacted. We~~ continue to ~~monitor closely the impact of COVID-19, with a focus on the health~~evolve and, ~~safety of~~at this time, we cannot predict when certain restrictions that remain in place to protect our employees and ~~business continuity.~~

~~For more information on the potential impact of COVID-19 on our business, refer to “~~Risk Factors — Risks Related to Our Business — The current outbreak of the novel coronavirus, or COVID-19, has caused severe disruptions in the global economy and to our business, and may have an adverse impact on our performance and results of operations~~” in our 2020 Form 10-K.~~

customers will no longer be needed.

3336

Table of Contents

~~Closing~~Recognizing that local conditions vary for our offices around the world and that the trajectory of the ~~Business Combination~~virus continues to be uncertain, we may adjust our plans for employees returning to our offices as deemed necessary. Since early 2021, global vaccination efforts have been underway to control the pandemic. However, due to the speed and fluidity with which the COVID-19 pandemic continues to evolve, and the emergence of highly contagious variants, we do not yet know the full extent of the impact of COVID-19 on our business operations. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, including the effectiveness of vaccination and booster vaccination campaigns, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected. We remain focused on maintaining a strong balance sheet, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from a business and financial perspective relating to COVID-19 and variants thereof. For additional information related to the actual or potential impacts of COVID-19 on our business, please read Part I, Item 1A, "Risk Factors" of the 2021 Form 10-K.

~~On December 18, 2020, Clever Leaves and SAMA consummated the previously announced Business Combination contemplated by the Amended and Restated Business Combination~~Equity Distribution Agreement ~~dated as of November 9, 2020, by and among SAMA, Clever Leaves, the Company and Merger Sub.~~

~~Pursuant to~~ On January 14, 2022, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Canaccord Genuity LLC, as sales agent (the “Agent”). Underthe ~~Business Combination Agreement, each~~terms of the ~~following transactions occurred in the following order: (i) pursuant to a court-approved Canadian plan of arrangement (the “Plan of Arrangement”~~Equity Distribution Agreement, we may issue and the arrangement pursuant to such Plan of Arrangement, the “Arrangement”), at 11:59 p.m., Pacific time, on December 17, 2020 (2:59 a.m., Eastern time, on December 18, 2020) (a) all of the Clever Leaves shareholders exchanged their Class A common shares without par value of Clever Leaves (“Clever Leaves common shares”) forsell our common shares, without par value, (“having an aggregate offering price of up to $50,000 from time to time through the Agent. The issuance and sale of the common ~~shares”~~shares under the Equity Distribution Agreement have been made, and any such future sales will be made, pursuant to our effective registration statement on Form S-3 (File No. 333-262183), which includes an “at-the-market” (“ATM”) ~~and/or~~offering prospectus supplement (the “Prospectus Supplement”), as amended by Amendment No. 1 and Amendment No. 2 (defined below).

On March 24, 2022, we filed Amendment No. 1 to the Prospectus Supplement (“Amendment No. 1”) indicating that we were, at that time,subject to “baby shelf” rules pursuant to Instruction I.B.6. of Form S-3. As such, we could not sell more than one-third of the aggregate market value of the voting and non-voting common ~~shares without par~~equity held by non-affiliates, with such aggregate market value calculated using figures from a date or dates, as the case may be, within the preceding 60-days from the date of filing the Annual Report. Pursuant this baby shelf cap, we could not offer to or sell equity securities for more than one-third of our public float, which limited the aggregate offering price pursuant to the ATM to approximately $18,111.

We filed Amendment No. 2 to the Prospectus Supplement (“~~non-voting common shares”~~Amendment No. 2”) ~~(as determined~~on March 28, 2022, to reflect that we were no longer subject to the limitations under General Instruction I.B.6 of Form S-3 and, therefore, in accordance with the Business Combination Agreement) and (b) certain Clever Leaves shareholders received approximately $3,100 in cash in the aggregate (the “Cash Arrangement Consideration”), such that, immediately following the Arrangement, Clever Leaves became our direct wholly-owned subsidiary; (ii) at 12:01 a.m., Pacific time (3:01 a.m. Eastern time), on December 18, 2020, Merger Sub merged with and into SAMA, with SAMA surviving such merger as our direct wholly-owned subsidiary (the “Merger”) and, as a resultterms of the ~~Merger, all of the shares of SAMA common stock were converted into the right to receive~~Equity Distribution Agreement, we may offer and sell our common shares ~~as set forth in~~having an aggregate offering price of up to $46,599 from time to time through the Business Combination Agreement; (iii) immediately following the consummation of the Merger, we contributed 100% of the issued and outstanding capital stock of SAMA (as the surviving corporation of the Merger) to Clever Leaves, such that, SAMA became a direct wholly-owned subsidiary of Clever Leaves; and (iv) immediately following the contribution of SAMA to Clever Leaves, Clever Leaves contributed 100% of the issued and outstanding shares of NS US Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of Clever Leaves, to SAMA. Upon the closing of the Merger, SAMA changed its name to Clever Leaves US, Inc.Agent.

On December 18, 2020, SAMA’s units, shares of SAMA common stock and warrants ceased trading on The Nasdaq Stock Market (“Nasdaq”), and our common shares and warrants began trading on Nasdaq underSubsequent to June 30, 2022, the ~~symbols “CLVR” and “CLVRW,” respectively.~~

~~2022 Convertible Note Payoff~~

~~In connection with the Business Combination, on November 9, 2020, Clever Leaves~~Company raised additional financing pursuant to its ATM program and the ~~noteholders agreed~~Equity Distribution Agreement. For more information, refer to ~~amend~~Note 20 to our unaudited condensed consolidated interim financial statements for the ~~terms~~period ended of the 2022 Convertible Notes to, among other matters, decrease the interest rate to 8%, commencing January 1, 2021, and provide that such interest is to be paid in cash, quarterly in arrears, and also provides the Company with the option to satisfy the payment of quarterly interest by issuing common shares to the noteholders.

On July 19, 2021, we prepaid the holders of the 2022 Convertible Notes and the 2022 Convertible Notes were discharged. The aggregate amount prepaid by the Company was $25,115 representing the sum of (1) ninety percent (90%) of the aggregate outstanding principal amount owing under the 2022 Convertible Notes; (2) all accrued interest through July 19, 2021 and (3) certain legal fees.

~~EU GMP Certification~~

On July 8, 2020, Clever Leaves received European Union Good Manufacturing Practices ("EU GMP") certification from the Croatian Agency for Medicinal Products and Medical Devices for its post-harvest and extraction facilities located in Colombia. EU GMP certification is expected to expand Clever Leaves’ ability to serve the burgeoning European medical cannabis and hemp markets, which have rigorous quality, compliance, and regulatory requirements. Because we are among a small number of companies globally to have earned EU GMP certification, EU GMP certification is also expected to expand our early mover advantage in the pharmaceutical channel as global demand increases and more legal cannabis geographies emerge.

~~Portugal Licensing~~

In August 2020, we received a license from INFARMED to cultivate, import and export dried cannabis flower produced at our Portuguese cultivation site and, similar to other licensed cannabis companies in Portugal, we are listed as of August 2020 on INFARMED’s Licensing Department’s registry. Due to the COVID-19 pandemic and restrictions on INFARMED’s ability to conduct a physical inspection of our Portuguese operation, the license was issued under a special licensing procedure and requires a confirmatory physical inspection from INFARMED. Our license provides our Portuguese operations the same rights and qualifications as licenses issued under the normal procedures, including the ability to conduct commercial operations. The physical inspection took place on August 27, 2020 and, upon successful completion of the inspection review, we expect our current license to be replaced with a license issued under the normal procedures. Under the current license granted by INFARMED, our production facility in Portugal is currently cultivating cannabis for commercial purposes. Our Portugal

~~Table of Contents~~

~~facility received the GACP certificate in March 2021. To maintain the GACP certificate, we must cultivate and operate under GACP guidelines.~~

In March 2021, we received a license from INFARMED to cultivate, import and export dried cannabis flower produced at our Portuguese cultivation site, replacing a similar provisional license issued to us during the COVID-19 Pandemic in August 2020. Our Portugal facility received third-party GACP certification in March 2021.

~~2024 Note Purchase Agreement and 2022 Convertible Notes repayment~~

On July 19, 2021, we entered into the Note Purchase Agreement with Catalina LP in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act, the Catalina LP Convertible Note in the principal amount of $25,000. The Catalina LP Convertible Note matures three years from its issuance date, and we may prepay the outstanding principal and accrued interest on the Catalina LP Convertible Note at any time at our election. Interest accrues on the Catalina LP Convertible Note at five percent (5%) per annum and is payable on a quarterly basis, either in cash or, at our option, by increasing the principal amount of the note. The Catalina LP Convertible Note is guaranteed by certain subsidiaries of the Company and secured by pledged equity interests in certain subsidiaries of the Company.

The principal and accrued interest owing under the Catalina LP Convertible Note may be converted at any time by the holder into common shares at a per share price of $13.50, subject to certain limitations. Up to $12,500 in aggregate principal under the Catalina LP Convertible Note may be so converted within one year of issuance. In addition, each of the Company and the holder may redeem all or a portion of the outstanding principal and accrued interest owing under the Catalina LP Convertible Note into common shares, at a per share price equal to the greater of (x) an 8% discount to the closing price per share on the applicable redemption date or (y) $6.44 (the “Optional Redemption Rate”), subject to certain limitations. Up to $12,500 in aggregate principal under the Catalina LP Convertible Note may be so redeemed within one year of issuance.

The holder of the Catalina LP Convertible Note will not be entitled to convert any portion of the Catalina LP Convertible Note if, after such conversion, such holder would have beneficial ownership of, and direct or indirect control or direction over, more than 9.99% of the Company’s outstanding common shares.

In connection with the issuance of the Catalina LP Convertible Note, we agreed, pursuant to a Registration Rights Agreement with Catalina LP dated as of July 19, 2021 (the “Catalina LP Registration Rights Agreement”), to register for resale with the SEC all of the common shares issuable under the Catalina LP Convertible Note, and in any event not less than 3,881,988 common shares (which represents the number of common shares that would be issuable if the entire principal amount of the Catalina LP Convertible Note was redeemed at the minimum Optional Redemption Rate). Under the Catalina LP Registration Rights Agreement, we are required to use commercially reasonable efforts to have such registration statement declared effective by the SEC within 90 calendar days of the Catalina LP Convertible Note issuance date, and to keep such registration statement continuously effective until the earlier of (x)June 30, days after the maturity date of the Catalina LP Convertible Note or (y) the date on which all common shares issued or issuable upon conversion of the Catalina LP Convertible Note are no longer restricted securities under Rule 144 of the Securities Act. There are no contractual transfer restrictions or lock-up arrangements on the common shares issuable upon conversion or redemption of the Catalina LP Convertible Note.2022.

Components of Results of Operations

Revenue — in our Cannabinoid segment, revenue is primarily comprised of sales of our cannabis products, which currently include cannabidiol isolate, full spectrum and standardized extracts. In our Non-Cannabinoid segment, revenue is primarily composed of sales of our nutraceutical products to our retail customers. As we ~~have only recently begun~~continue to ~~carry out~~grow our cannabinoid sales operations, our main revenues are derived from our Herbal Brands business.

Cost of Sales — in our Cannabinoid segment, cost of sales is primarily composed of pre-harvest, post-harvest and shipment and ~~fulfillment.~~fulfillment costs. Pre-harvest costs include labor and direct materials to grow cannabis, which includes water, electricity, nutrients, integrated pest management, growing supplies and allocated overhead. Post-harvest costs include costs associated with drying, trimming, blending, extraction, purification, quality testing and allocated overhead. Shipment and fulfillment costs include the costs of packaging, labelling, courier services and allocated overhead. Total cost of sales also includes cost of sales associated with accessories and inventory adjustments. In our Non-Cannabinoid segment, cost of sales primarily includes raw materials, labor, and attributable overhead, as well as packaging labelling and fulfillment costs.

Operating Expenses— We classify our operating expenses as general and administrative, sales and marketing, and research and development expenses.

3537

Table of Contents

•General and administrative expenses include salary and benefit expenses for employees, other than in sales and marketing and research and development, including share-based compensation, costs of legal expenses, professional services, general liability insurance, rent and other office and general expenses.

•Sales and marketing expenses consist primarily of services engaged in marketing and promotion of our products and costs associated with initiatives and development programs and salary and benefit expenses for certain employees.

•Research and development expenses primarily consist of salary and benefit expenses for employees engaged in research and development activities, as well as other general costs associated with R&D activities.

Results of Operations

Three and six months ended June 30, ~~2021~~2022 compared to three and six months ended June 30, ~~2020~~2021

Consolidated Statements of ~~Net Loss Data~~Operations

(inIn thousands of U.S. dollars)

Six months ended June 30, Three months ended June 30,
2021 2020 2021 2020
Revenue $ 7,149 $ 4,853 $ 3,672 $ 1,939
Cost of sales (2,584) (1,785) (1,338) (1,032)
Gross profit 4,565 3,068 2,334 907
General and administrative expenses 19,348 15,384 10,606 7,264
Sales and marketing expenses 1,485 1,784 807 603
Goodwill impairment — 1,682 — —
Depreciation and amortization expenses 1,103 717 524 365
Loss from operations (17,371) (16,499) (9,603) (7,325)
Interest expense, net 1,898 1,789 920 953
Loss on remeasurement of warrant liability 3,675 — (1,176)
Loss on investments — 228 — 67
Loss on fair value of derivative instrument — — — (13)
Foreign exchange loss 839 359 80 311
Other (income) expenses, net (1,087) 48 (485) 105
Total other expenses, net 5,325 2,424 (661) 1,423
Loss before income taxes (22,696) (18,923) (8,942) (8,748)
Equity investments and securities loss 25 16 14 5
Net loss $ (22,721) $ (18,939) $ (8,956) $ (8,753)
Net loss attributable to non-controlling interest — (1,648) — (744)
Net loss attributable to Company $ (22,721) $ (17,291) $ (8,956) $ (8,009)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue	$	4,657	$	3,672	$	9,881	$	7,149



Cost of sales	(3,353)		(1,904)		(6,539)		(3,241)
Gross Profit	1,304		1,768		3,342		3,908

Expenses
General and administrative expenses	8,013		10,301		16,274		18,765
Sales and marketing expenses	728		241		1,461		828
Research and development	359		305		771		583
Restructuring expenses	(135)		—		3,873		—

Depreciation and amortization expenses	537		524		1,054		1,103
Total expenses	9,502		11,371		23,433		21,279

Loss from operation	(8,198)		(9,603)		(20,091)		(17,371)

Other Expense (Income), net
Interest and amortization of debt issuance cost	652		920		2,770		1,898
(Gain) loss on remeasurement of warrant liability	(1,323)		(1,176)		(1,813)		3,675
Gain on investment	(6,851)		—		(6,851)		—
Loss on debt extinguishment, net	—		—		2,263		—

Foreign exchange loss	307		80		652		839
Other expense (income), net	63		(485)		10		(1,087)
Total other (income) expenses, net	(7,152)		(661)		(2,969)		5,325

Loss before income taxes and equity investment loss	$	(1,046)	$	(8,942)	$	(17,122)	$	(22,696)

Equity investments share of loss	—		14		64		25
Net loss	$	(1,046)	$	(8,956)	$	(17,186)	$	(22,721)

Table of Contents

Revenue by Channel

(inIn thousands of U.S. dollars)

The following table provides our ~~revenues~~revenue by channel for the three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.


		Six months ended June 30,				Three months ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Mass retail	Mass retail	$	3,609	$	2,033	$	1,721	$	1,012	Mass retail	$	2,239	$	1,721	$	5,236	$	3,609
Distributors										Distributors	1,664		1,448		3,322		2,680
Specialty, health and other retail	Specialty, health and other retail	575		910		350		598		Specialty, health and other retail	560		350		952		575
Distributors		2,680		1,575		1,448		236
E-commerce	E-commerce	285		335		153		93		E-commerce	194		153		371		285
Total	Total	$	7,149	$	4,853	$	3,672	$	1,939	Total	$	4,657	$	3,672	$	9,881	$	7,149

Revenue

Revenue increased to $4,657 for the three months ended June 30, 2022, as compared to $3,672 for the three months ended June 30, ~~2021 from $1,939 for the three months ended June 30, 2020.~~2021. The increase was ~~due primarily to higher~~driven by increased sales in both our Non-Cannabinoid and Cannabinoid segments. The increased sales in our Non-Cannabinoid segment were primarily driven by ~~a favorable comparison to prior year quarter during which we saw a decline~~continued sales strength from mass retailers and specialty distributors. The growth in ~~sales as restrictions imposed due to COVID-19 resulted in the closure of store fronts~~

~~Table of Contents~~

~~or reduction in foot traffic for our retail partners. The increase was also due to increased sales from~~ our Cannabinoid segment ~~as we continue to expand our~~ sales ~~pipeline.~~reflects continued expansion of sales activity and selling more products which have higher margins.

Revenue increased to $9,881 for the six months ended June 30, 2022, as compared to $7,149 for the six months ended June 30, ~~2021 from $4,853 for the six months ended June 30, 2020.~~2021. The increase was ~~primarily due to~~driven by increased sales ~~from~~in both our Non-Cannabinoid and Cannabinoid segments. The increased sales in our Non-Cannabinoid segment ~~which~~ were ~~impacted~~primarily driven by ~~COVID-19 and resulted~~continued sales strength from specialty distributors. The growth in ~~the closure of store fronts or reduction in foot traffic for our retail partners in the prior period, along with increased sales from~~ our Cannabinoid segment sales reflects continued expansion of sales activity and selling more products which ~~were $395 in the prior year period.~~have higher margins.

Cost of sales

Cost of sales increased to ~~$1,338~~$3,353 for the three months ended June 30, ~~2021,~~2022, as compared to ~~$1,032~~$1,904 for the three months ended June 30, ~~2020, primarily~~2021. The increase was due to costs associated with increased sales ~~activity when~~from both our Non-Cannabinoid and Cannabinoid segments and increased inventory provisions related to aged, obsolete or unusable inventory, during the three months ended June 30, 2022 as compared to the comparable period in the prior ~~period which was impacted as a result of the COVID-19 pandemic.~~year.

Cost of sales increased to ~~$2,584~~$6,539 for the six months ended June 30, ~~2021~~2022, as compared to ~~$1,785~~$3,241 for the six months ended June 30, ~~2020.~~2021. The increase iswas due to ~~increase in~~costs associated with increased sales from both our Non-Cannabinoid and Cannabinoid segments and increased inventory provisions related to aged, obsolete or unusable inventory, during the ~~Cannabinoid and Non-Cannabinoid segments~~six months ended June 30, 2022 as compared to the comparable period in ~~2021.~~the prior year.

Operating expenses

(In thousands of U.S. dollars)

3739

Table of Contents



	Three months ended June 30,
	2022			2021			Change
General and administrative expenses	$	8,013		$	10,301		$	(2,288)	(22)	%
Sales and marketing expenses	728			241			$	487	202	%
Research and development	359			305			$	54	18	%
Restructuring expenses	(135)			—			$	(135)	N/A

Depreciation and amortization expenses	537			524			$	13	2	%
Total operating expenses	$	9,502		$	11,371

(As a percentage of revenue)
General and administrative expenses	172		%	281		%
Sales and marketing expenses	16		%	7		%
Research and development	8		%	8		%
Restructuring expenses	(3)		%	—		%

Depreciation and amortization expenses	12		%	14		%
Total operating expenses	204		%	310		%

~~Operating expenses~~

~~(in thousands of U.S. dollars)~~

Three months ended June 30,
2021 2020 Change
General and administrative $ 10,606 $ 7,264 $ 3,342 46 %
Sales and marketing 807 603 204 34 %
Depreciation and amortization 524 365 159 44 %
Total operating expenses $ 11,937 $ 8,232
(as a percentage of revenue)
General and administrative 289 % 375 %
Sales and marketing 22 % 31 %
Depreciation and amortization 14 % 19 %
Total operating expenses 325 % 425 %
N/M: Not a meaningful percentage

Six months ended June 30,
2021 2020 Change
General and administrative $ 19,348 $ 15,384 $ 3,964 26 %
Sales and marketing 1,485 1,784 (299) (17) %
Goodwill impairment — 1,682 (1,682) (100) %
Depreciation and amortization 1,103 717 386 54 %
Total operating expenses $ 21,936 $ 19,567
(as a percentage of revenue)
General and administrative 271 % 317 %
Sales and marketing 21 % 37 %
Goodwill impairment — % 35 %
Depreciation and amortization 15 % 15 %
Total operating expenses 307 % 403 %



	Six Months Ended June 30,
	2022			2021			Change
General and administrative expenses	$	16,274		$	18,765		$	(2,491)	(13)	%
Sales and marketing expenses	1,461			828			$	633	76	%
Research and development	771			583			$	188	32	%
Restructuring expenses	3,873			—			$	3,873	N/A

Depreciation and amortization expenses	1,054			1,103			$	(49)	(4)	%
Total operating expenses	$	23,433		$	21,279

(As a percentage of revenue)
General and administrative expenses	165		%	262		%
Sales and marketing expenses	15		%	12		%
Research and development	8		%	8		%
Restructuring expenses	39		%	—		%

Depreciation and amortization expenses	11		%	15		%
Total operating expenses	237		%	298		%

N/M: Not a meaningful percentage

Three months ended June 30, ~~2021~~2022 compared to three months ended June 30, ~~2020~~

2021

General and administrative. General and administrative expenses ~~increased~~decreased to ~~$10,606~~$8,013 for the three months ended June 30, 2022, as compared to $10,301 for the three months ended June 30, 2021, ~~from $7,264 for the three months ended June 30, 2020,~~ primarily due to the ~~increase~~decrease in share-based compensation, ~~along with higher office and administration related costs (driven mainly by the insurance cost) related to a public company requirement. The increase was partially~~in part offset by ~~lower salaries and benefits~~increase in payroll related costs due to ~~cost cutting measures.~~idle capacity.

Sales and marketing. Sales and marketing expenses increased to ~~$807~~$728 for the three months ended June 30, ~~2021 from $603~~2022, as compared to $241 for the three months ended June 30, ~~2020, primarily due to the~~2021. The increase in spending was related to the potential launch of cannabinoid products, ~~along~~combined with ~~the launch~~easing of ~~Project Change Lives campaign~~cost controls measures imposed in the ~~U.S.~~comparable prior year period to address the impact of the COVID-19 pandemic.

Table of Contents

Research and development. Research and development expenses increased to $359 for the three months ended June 30, 2022 as compared to $305 for the three months ended June 30, 2021. The increase is primarily due to research and development activities related to our cannabinoid products development.

Restructuring. We have been reviewing, planning and implementing various strategic initiatives targeted principally at reducing costs, enhancing organizational efficiency and optimizing our business model. As part of this process, we recorded a restructuring charge of approximately $4,008 related to asset write off, severances, and other related costs for the three months ended March 31, 2022. During the three months ended June 30, 2022, we reversed approximately $135 of accrued charges and no additional restructuring charges were recognized during the three months ended June 30, 2022.

Depreciation and amortization. Depreciation and amortization expenses increased slightly to $537 for the three months ended June 30, 2022, from $524 for the three months ended June 30, ~~2021 from $365 for~~2021. The increase is mainly associated with the ~~three months ended June 30, 2020, primarily~~increased fixed asset depreciation due to capital expenditures for expansion of our cultivation and extraction assets in Portugal, partially offset by the lower amortization costs recognized during the three months ended June 30, 2022 as ~~well as higher~~compared to the comparable prior year period. The decrease in amortization ~~expense~~costs recognized was due to the acceleration of the period over which the useful life of the GNC intangible asset ~~is amortized.~~

~~Table~~was amortized, which was fully amortized as of ~~Contents~~June 30, 2021.

Six ~~months ended~~Months Ended June 30, ~~2021~~2022 compared to six months ended June 30, ~~2020~~

2021

General and administrative. General and administrative expenses ~~increased~~decreased to ~~$19,348~~$16,274 for the six months ended June 30, 2022, as compared to $18,765 for the six months ended June 30, 2021, ~~from $15,384 for the six months ended June 30, 2020. The increase was~~ primarily due to the ~~increase~~decrease in share-based compensation, ~~professional fees, and office and administration (driven mainly by the insurance cost) related costs, related to company requirements. The increase was partially~~in part offset by ~~lower salaries and benefits~~increase in payroll related costs due to ~~cost cutting measures.~~idle capacity.

Sales and marketing. Sales and marketing expenses ~~decreased~~increased to ~~$1,485~~$1,461 for the six months ended June 30, ~~2021 from $1,784~~2022, as compared to $828 for the six months ended June 30, ~~2020, primarily due to our cost control measures to address the impact from the COVID-19 pandemic, partially offset by the~~2021. The increase in spending was related to the potential launch of cannabinoid products, ~~along~~combined with ~~the launch~~easing of ~~Project Change Lives campaign~~cost controls measures imposed in the ~~US.~~comparable prior year period to address the impact of the COVID-19 pandemic.

~~Goodwill impairment.~~

Research and development ~~For~~. Research and development expenses increased to $771 for the six months ended June 30, ~~2020,~~2022 as compared to $583 for the ~~Company recognized a goodwill impairment of $1,682~~six months ended June 30, 2021. The increase is primarily due to research and development activities related to our ~~Herbal Brands business. For more information, see Note 8~~cannabinoid products development.

Restructuring. We have been reviewing, planning and ~~Note 10~~implementing various strategic initiatives targeted principally at reducing costs, enhancing organizational efficiency and optimizing our business model. As part of this process, we recorded a restructuring charge of approximately $3,873 related to ~~our 2020 Form 10-K.~~asset write off, severances, and other related costs for the six months ended June 30, 2022.

Depreciation and amortization. Depreciation and amortization ~~expense increased~~expenses decreased to $1,054 for the six months ended June 30, 2022, from $1,103 for the six months ended June 30, ~~2021 from $717 for the six months ended June 30, 2020, primarily due to capital expenditures for the expansion of our cultivation and extraction assets. Additionally, the increase~~2021. The decrease is mainly attributable to the ~~higher~~lower amortization ~~expense~~costs recognized during the six months ended June 30, 2021 as compared to the comparable prior year period. The decrease in amortization costs recognized was due to ~~increase of in-use assets, as well as~~ the acceleration of the period over which the useful life of the GNC intangible asset ~~is amortized.~~was amortized, which was fully amortized as of June 30, 2021. The decrease was partially offset by increased fixed asset depreciation due to capital expenditures for expansion of our cultivation and extraction assets in Portugal.

Non-operating income and expenses

(inIn thousands of U.S. dollars)

Three months ended June 30,
2021 2020 Change
Interest expense, net $ 920 $ 953 $ (33) (3) %
Loss (gain) on remeasurement of warrant liability (1,176) — (1,176) N/M
Loss (gain) on other investments — 67 (67) (100) %
Loss on fair value of derivative instrument — (13) 13 (100) %
Foreign exchange loss 80 311 (231) (74) %
Other expenses, net (485) 105 (590) N/M
Total $ (661) $ 1,423 $ (2,084) (146) %

Six Months Ended June 30,
2021 2020 Change
Interest expense, net $ 1,898 $ 1,789 $ 109 6 %
Loss on remeasurement of warrant liability 3,675 — 3,675 100 %
Loss on other investments — 228 (228) (100) %
Foreign exchange loss 839 359 480 134 %
Other (income) expenses, net (1,087) 48 (1,135) N/M
Total $ 5,325 $ 2,424 $ 2,901 120 %



	Three months ended June 30,
	2022		2021		Change
Interest and amortization of debt issuance cost	$	652	$	920	$	(268)	(29)	%
Gain on remeasurement of warrant liability	(1,323)		(1,176)		(147)		13	%
Gain on investment	(6,851)		—		(6,851)		N/M


Foreign exchange loss	307		80		227		N/M
Other expense (income), net	63		(485)		548		(113)	%
Total	$	(7,152)	$	(661)	$	(6,491)	N/M

N/M: Not a meaningful percentage

Table of Contents



	Six Months Ended June 30,
	2022		2021		Change
Interest and amortization of debt issuance cost	$	2,770	$	1,898	$	872	46	%
(Gain) loss on remeasurement of warrant liability	(1,813)		3,675		(5,488)		(149)	%
Gain on investment	(6,851)		—		(6,851)		N/A
Loss on debt extinguishment, net	2,263		—		2,263		N/A

Foreign exchange loss	652		839		(187)		(22)	%
Other income, net	10		(1,087)		1,097		(101)	%
Total	$	(2,969)	$	5,325	$	(8,294)	(156)	%

N/M: Not a meaningful percentage

Three months ended June 30, ~~2021~~2022 compared to three months ended June 30, ~~2020~~2021

Interest ~~expense,~~and amortization of debt issuance cost, net. Interest ~~expense,~~and amortization of debt issuance cost, net for the three months ended June 30, ~~2021~~2022 decreased to ~~$920~~$652, as compared to ~~$953~~$920 for the three months ended June 30, ~~2020. Interest~~2021. The decrease was primarily due to the interest expense ~~is primarily~~ associated with the ~~issuance of the~~ 2022 Convertible ~~Notes, as well as a promissory note issued in relation to~~Note and the Herbal Brands ~~acquisition.~~Loan in the comparable prior year period.

Gain on remeasurement of warrant liability. Gain on remeasurement of warrant liability was $1,323 for the three months ended June 30, 2022, as compared to a gain of $1,176 for the three months ended June 30, 2021. The gains are directly attributable to the remeasurement of the warrant liability as of June 30, 2022 and June 30, 2021, ~~compared~~respectively, due to ~~nil~~the change in the underlying value related to the private warrants during those periods.

Gain on investments. Gain on investments for the three months ended June 30, ~~2020. The gain is directly attributable~~2022 was $6,851, as compared to ~~the remeasurement of the warrant~~

~~Table of Contents~~

~~liability at June 30, 2021. For more information refer to Note 11. to our unaudited condensed consolidated interim financial statements for the period ended June 30, 2021 included in this Form 10-Q.~~

~~Loss on investments. We recorded a loss on investment of $67~~$nil for the three months ended June 30, ~~2020 related to the decline in the carrying value of our investment in Lift & Co. shares.~~

~~Gain on fair value of derivative instrument. We recorded a~~2021. The gain on ~~fair value of derivative instrument of $13~~investments for the three months ended June 30, ~~2020~~2022 was related to the ~~derivative instrument for our investment in Lift & Co. warrants.~~sale of Cansativa shares to an unrelated third-party and the revaluation of the Company's retained interest of the shares still held.

Foreign exchange loss. The impact of foreign exchange for the three months ended June 30, ~~2021~~2022 was a loss of ~~$80~~$307, as compared to a loss of ~~$311~~$80 for the three months ended June 30, ~~2020.~~2021. The foreign exchange losses for the three months ended June 30, ~~2020~~2022, were primarily driven by the currency fluctuations of the ~~Colombian peso~~Euro versus the U.S. Dollar.

Other ~~(income) expenses, net~~income.. Other (income) expenses, net includes items not individually material to our consolidated financial statements.

Six ~~months ended~~Months Ended June 30, ~~2021~~2022 compared to six months ended June 30, ~~2020~~2021

Interest ~~expense,~~and amortization of debt issuance cost, net. Interest ~~expense,~~and amortization of debt issuance cost, net for the six months ended June 30, ~~2021 was $1,898~~2022 increased to $2,770, as compared to ~~$1,789~~$1,898 for the six months ended June 30, ~~2020.~~2021. The increase was primarily ~~attributable~~due to ~~increased interest expense associated~~writing off of debt discount costs recognized in connection with the ~~additional paid-in-kind interest on~~beneficial conversion factor related to the ~~Herbal Brands loan, as well as higher debt issuance costs. The increase is partly offset by the lower interest rate on the 2022 Convertible Notes following the 2020~~2024 Convertible Note ~~Amendments. For additional details, see Note 10. to our unaudited condensed consolidated interim financial statements for~~as the ~~period~~note was fully paid off in the three months ended June 30, ~~2021 included in this Form 10-Q.~~2022.

~~Loss~~(Gain) loss on remeasurement of warrant ~~liability~~liability. ~~. Loss~~Gain on remeasurement of warrant liability was $1,813 for the six months ended June 30, 2022, as compared to a loss of $3,675 for the six months ended June 30, 2021. The gain and loss are directly attributable to the remeasurement of the warrant liability as of June 30, 2022 and June 30, 2021, respectively, due to the change in the underlying value related to the private warrants during those periods.

Gain on investments. Gain on investments for the six months ended June 30, 2022 was $6,851, as compared to $nil for the six months ended June 30, 2021. The gain on investments was related to the sale of Cansativa shares to an unrelated third-party and the revaluation of the Company's retained interest of the shares still held.

Loss on debt extinguishment, net. Net loss on debt extinguishment was $2,263 for the six months ended June 30, 2022 compared to nil for the six months ended June 30, ~~2020.~~2021. The loss is directly attributable to the remeasurement of the warrant liability at June 30, 2021 due to change in underlying market price. For more information refer to Note 11. to our unaudited condensed consolidated interim financial statements for the three months ended June 30, 2021 included in this Form 10-Q.

~~Loss on investments~~. Loss on investment was nil for the six months ended June 30, 2021 compared to a loss of $228 for the six months ended June 30, 2020. The loss on investments for the three months ended June 30, 2020 was primarily related to the ~~decline in~~debt extinguishment as a result of the ~~carrying value~~amendment of ~~our investments in Lift & Co. shares and Cansativa.~~the 2024 Note Purchase Agreement on January 13, 2022.

Foreign exchange loss. The impact of foreign exchange for the six months ended June 30, ~~2021~~2022 was a loss of ~~$839~~$652, as compared to a loss of ~~$359~~$839 for the six months ended June 30, ~~2020.~~2021. The foreign exchange losses for the six months ended June 30, ~~2021~~2022, were primarily driven by the currency fluctuations of the Euro ~~and Colombian peso~~ versus the U.S. Dollar.

Table of Contents

Other ~~(income) expenses, net~~income.. Other (income) expenses, net includes ~~costs~~items not individually material to our consolidated financial statements.

Operating Results by Business Segment

Our management evaluates segment profit/loss for each of ~~the Company’s~~our reportable segments. We define segment profit/loss as income from continuing operations before interest, taxes, depreciation, amortization, stock-based compensation expense, gains/losses on foreign currency fluctuations, gains/losses on the early extinguishment of debt and miscellaneous expenses. Segment profit/loss also excludes the impact of certain items that are not directly attributable to the reportable segments’ underlying operating performance. For a reconciliation of segment profit to loss from continuing operations before income taxes, see Note ~~14.~~17 to our unaudited condensed consolidated interim financial statements for the three months ended June 30, ~~2021~~2022 included in this Form 10-Q.

~~Table of Contents~~

Revenue by segment

(inIn thousands of U.S. dollars)

Six months ended June 30, Three months ended June 30,
2021 2020 2021 2020
Segment Revenue:
Cannabinoid $ 1,256 $ 395 $ 579 $ 153
Non-Cannabinoid 5,893 4,458 3,093 1,786
Total Revenue $ 7,149 $ 4,853 $ 3,672 $ 1,939


	Three months ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Segment Revenue:
Cannabinoid	$	1,299	$	579	$	3,290	$	1,256
Non-Cannabinoid	3,358		3,093		6,591		5,893
Total revenue	$	4,657	$	3,672	$	9,881	$	7,149

Cannabinoid. Cannabinoid revenue increased to ~~$579 and $1,256~~$1,299 for the three ~~and~~months ended June 30, 2022, as compared to $579 for the three months ended June 30, 2021. For the six months ended June 30, ~~2021, respectively, from $153 and $395~~2022, Cannabinoid revenue increased to $3,290 as compared to $1,256 for the ~~three and~~ six months ended June 30, ~~2020, respectively~~2021. The increase in both periods was driven primarily by ~~the sale of cannabinoid products as the~~key customer contracts ~~with key clients are~~ maturing and transitioning from a preparation to a revenue generating phase.

Non-Cannabinoid. Non-Cannabinoid revenue increased to ~~$3,093 and $5,893~~$3,358 for the three ~~and~~months ended June 30, 2022, as compared to $3,093 the three months ended June 30, 2021. For the six months ended June 30, ~~2021, respectively, from $1,786 and $4,458~~2022, non-cannabinoid revenue increased to $6,591 as compared to $5,893 for the ~~three and~~ six months ended June 30, ~~2020, respectively,~~2021. The increase in both periods was driven primarily by ~~the~~stronger demand from specialty distributors combined with recovery of demand from COVID-19 that resulted in the closure of store fronts or reduction in foot traffic for our retail partners in the prior ~~period.~~period and increased sales efforts in various revenue channels.

Segment profit/loss

(inIn thousands of U.S. dollars)


		Three months ended June 30,				Change				Three months ended June 30,				Change
		2021		2020		$	%			2022		2021		$	%
Segment Profit/(Loss):	Segment Profit/(Loss):								Segment Profit/(Loss):
Cannabinoid	Cannabinoid	$	(3,604)	$	(4,454)	850	(19)	%	Cannabinoid	$	(5,338)	$	(3,604)	(1,734)	48	%
Non-Cannabinoid	Non-Cannabinoid	634		(67)		701	(1046)	%	Non-Cannabinoid	666		634		32	5	%
Total Segment Loss (a)	Total Segment Loss (a)	$	(2,970)	$	(4,521)	1,551	(34)	%	Total Segment Loss (a)	$	(4,672)	$	(2,970)	(1,702)	57	%

Table of Contents


		Six months ended June 30,				Change				Six Months Ended June 30,				Change
		2021		2020		$	%			2022		2021		$	%
Segment Profit/(Loss):	Segment Profit/(Loss):								Segment Profit/(Loss):
Cannabinoid	Cannabinoid	$	(6,468)	$	(9,855)	3,387	(34)	%	Cannabinoid	$	(13,026)	$	(6,468)	(6,558)	101	%
Non-Cannabinoid	Non-Cannabinoid	1,246		413		833	202	%	Non-Cannabinoid	1,014		1,246		(232)	(19)	%
Total Segment Loss (a)	Total Segment Loss (a)	$	(5,222)	$	(9,442)	4,220	(45)	%	Total Segment Loss (a)	$	(12,012)	$	(5,222)	(6,790)	130	%

(a) For a reconciliation of segment (loss) to loss before income taxes see Note ~~Note 14.~~17 to our unaudited condensed consolidated interim financial statements for the three and six months ended June 30, ~~2021~~2022, included in this Form 10-Q.

Cannabinoid — Cannabinoid segment loss ~~decreased~~increased to $5,338 for the three months ended June 30, 2022 compared to a loss of $3,604 for the three months ended June 30, 2021, ~~from a loss of $4,454 for~~primarily attributed to increased inventory provisions recognized in the three months ended June 30, ~~2020 primarily~~2022 due to ~~cost control measures implemented by us starting in the second quarter of 2020, as well as~~aged, obsolete or unusable inventory and increased sales ~~of cannabinoid products. The decrease was partly offset by costs incurred from the expansion of our operations in Colombia~~ and ~~Portugal.~~marketing costs.

Cannabinoid segment loss ~~decreased~~increased to $13,026 for the six months ended June 30, 2022 compared to a loss of $6,468 for the six months ended June 30, 2021, ~~from $9,855 for the six months ended June 30, 2020,~~ primarily due to ~~cost control measures implemented by us starting in~~ the ~~second quarter of 2020,~~restructuring charges recognized during the three months ended March 31, 2022 as ~~well as~~

~~Table of Contents~~

~~increased sales of cannabinoid products. The decrease was partly offset by costs incurred from the expansion~~part of our ~~operations in Colombia~~strategic initiatives targeted principally at reducing costs, enhancing organizational efficiency and ~~Portugal.~~

optimize its business model.

Non-Cannabinoid — Non-Cannabinoid segment ~~had~~profit increased to $666 for the three months ended June 30, 2022, compared to a profit of $634 for the three months ended June 30, ~~2021 compared~~2021. The increase was primarily attributable to ~~a loss of $67~~increased sales, partially offset by increased payroll related costs and sales and marketing costs.

Non-Cannabinoid segment profit decreased to $1,014 for the ~~three~~six months ended June 30, ~~2020. The increase is primarily due~~2022, compared to ~~cost control measures implemented by us starting in the second quarter~~a profit of~~2020, as well as increased sales of cannabinoid products.~~

~~Non-Cannabinoid segment profit increased to~~ $1,246 for the six months ended June 30, ~~2021 compared~~2021. The decrease was primarily attributable to ~~$413 the six months ended June 30, 2020. The increase is primarily due to cost control measures implemented by us starting in the second quarter of2020, as well as~~ increased payroll related costs and sales ~~of non-cannabinoid products.~~

and marketing costs.

Liquidity and Capital Resources

Material Cash Requirements

We believe we will have adequate means to meet our needs to fund operations for at least 12 months.Besides cash reserves and expected income from operations, we also have access to our investments which may be liquidated in the event that we need to access the funds for operations. Expected uses of cash include payroll and benefits, inventory purchases, contractual obligations for leases, and other operational priorities. We have repaid our material debt and remaining debt payment requirement will be insignificant.

The following table sets forth the major components of our Consolidated Statements of Cash Flows for the periods presented:

(inIn thousands of U.S. dollars)


		Six months ended June 30,						Six months ended June 30,
			2021		2020				2022		2021
Net cash used in operating activities	Net cash used in operating activities		$	(19,496)	$	(14,543)	Net cash used in operating activities		$	(18,584)	$	(19,496)
Net cash used in investing activities			(4,319)		(3,436)
Net cash provided by financing activities			1,536		10,979
Net cash provided by (used in) investing activities							Net cash provided by (used in) investing activities		897		(4,319)
Net cash (used in) provided by financing activities							Net cash (used in) provided by financing activities		(347)		1,536
Effect of foreign currency translation on cash and cash equivalents	Effect of foreign currency translation on cash and cash equivalents		(106)		(29)		Effect of foreign currency translation on cash and cash equivalents		(202)		(106)
Cash, cash equivalents, and restricted cash beginning of period	Cash, cash equivalents, and restricted cash beginning of period		79,460		13,198		Cash, cash equivalents, and restricted cash beginning of period		37,699		79,460
Cash, cash equivalents, and restricted cash end of period	Cash, cash equivalents, and restricted cash end of period		57,075		6,169		Cash, cash equivalents, and restricted cash end of period		19,463		57,075
(Decrease) increase in cash and cash equivalents			$	(22,385)	$	(7,029)
Decrease in cash and cash equivalents							Decrease in cash and cash equivalents		$	(18,236)	$	(22,385)

Table of Contents

Cash flows used in operating activities

The ~~change~~decrease in net cash used by operating activities during the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020,~~2021, was primarily related to changes in the use of ~~working capital,~~operating assets and liabilities, driven by a decrease in accounts payable and other current liabilities as offset by increase in ~~General~~prepaid expenses, accounts receivable and ~~Administrative expenses and interest expenses resulting in overall increase in net loss, net of non-cash items.~~inventory.

Cash flows from investing activities

The ~~increase~~decrease in net cash used in investing activities during the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020,~~2021, was primarily related to ~~higher~~lower capital expenditures in ~~Portugal.~~Portugal, as we near the completion of our capital expenditure cycle, reducing our capital expenditure in the future and the proceeds received for the sale of shares of investment in Cansativa during the three months ended June 30, 2022.

Cash flows from financing activities

The decrease in net cash provided by financing activities during the six months ended June 30, ~~2021,~~2022 compared to the six months ended June 30, ~~2020,~~2021, was primarily ~~due to~~driven by the ~~higher~~repayment of the 2024 Convertible Note and the Herbal Brands loans during the six months ended June 30, 2022, offset in part by net proceeds from ~~debt~~issuance of shares under the Equity Distribution Agreement and ~~equity financings~~the related shelf registration statement. For more information refer to Note 11 and 12 to our unaudited condensed consolidated interim financial statements for the period ended of June 30, 2022 included in ~~the first half of 2020 compared to the first half of 2021.~~this Form 10-Q.

Sources of Liquidity

We have historically financed our operations through the issuance of shares, the ~~sale~~issuance of convertible ~~debentures~~debt and cash from operations. In connection with the closing of the Business Combination we received approximately $73,509 of net proceeds (refer to Note 7. to the unaudited condensed consolidated interim financial statements included within this Form 10-Q). As of June 30, ~~2021,~~2022 and December 31, ~~2020,~~2021, we had cash and cash equivalents of ~~$56,621~~$19,025 and ~~$79,107,~~$37,226, respectively, which were held for working capital, repayment of loans and general corporate purposes. This represents an overall decrease of ~~$22,486.~~$18,201. Our outstanding warrants entitle the holder to receive one common share for each warrant, at an exercise price of $11.50 per warrant. As of June 30, 2022, we have 17,840,951 warrants outstanding.

During the three months ended March 31, 2022, we entered into the Equity Distribution Agreement and filed the related shelf registration statement on Form S-3 (as described in Note 12 under the caption “Equity Distribution Agreement��), which we believe will provide an ongoing source of liquidity. Due to our current public float and applicable SEC rules and regulations, our ability to raise capital pursuant to this shelf registration statement may become limited. For more information refer to Note 12 to our unaudited condensed consolidated interim financial statements for the period ended of June 30, 2022 included in this Form 10-Q.

We have had operating losses and negative cash flows from operations since inception and expect to continue to incur net losses for the foreseeable future until such time, if ever, that we can generate significant ~~revenues~~revenue from the sale of our available

~~Table of Contents~~

inventories. We anticipate that we will continue to incur losses from operations due to pre-commercialization activities, marketing and manufacturing activities, and general and administrative costs to support operations. ~~On July 19, 2021,~~During the ~~Company entered into a~~three months ended June 30, 2022, we fully repaid its 2024 Convertible Note ~~Purchase Agreement~~ and ~~issued a secured convertible note~~Herbal Brands Loan with accrued interest. For more information refer to Note 11 to our unaudited condensed consolidated interim financial statements for the period ended of June 30, 2022 included in ~~the principal amount of $25,000.~~this Form 10-Q.

We have historically been able to manage liquidity requirements through cost management and cost reduction measures, supplemented with raising additional financing. While we have been successful in raising financing in the past, there can be no assurances that additional financing will be available when needed on acceptable terms, or at all. The continued spread of COVID-19 and uncertain market and regulatory conditions may further limit our ability to access capital. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, and suspend or curtail planned programs. Any of these actions could materially harm our business, results of operations, financial condition, and prospects.

Uses of Liquidity

Our primary need for liquidity is to fund working capital requirements, capital expenditures, debt service obligations and for general corporate purposes. Our ability to fund operations, ~~and~~ make planned capital expenditures and debt service obligations depends on future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business and other factors. Our condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that we will continue to be in operation for the foreseeable future and, accordingly, will be able to realize our assets and discharge our liabilities in the normal course of operations as they come due.

Table of Contents

We manage our liquidity risk by preparing budgets and cash forecasts to ensure we have sufficient funds to meet obligations. In managing working capital, we may limit the amount of our cash needs by selling inventory at wholesale rates, pursuing additional financing sources, and managing the timing of capital expenditures. While we believe we have sufficient cash to meet working capital requirements in the short term, we may need additional sources of capital and/or financing, to meet planned growth requirements and to fund construction activities at our cultivation and processing facilities.

We believe that cash on hand, including the additional financing raised pursuant to the Company's ATM offering subsequent to June 30, 2022, is sufficient to satisfy ~~the Company's~~our estimated liquidity needs during the twelve months from the issuance of the condensed consolidated interim financial statements for the six months ended June 30, ~~2021.~~2022. If this amount, together with cash from operations is subsequently insufficient for us to continue to operate as a going concern, we may need to raise additional cash through debt, equity or other forms of financing to fund future operations which may not be available on acceptable terms, or at all.

Debt

Total debt outstanding as of June 30, 2022 and December 31, ~~2020 was $33,843.~~ 2021was $2,135 and $25,095, respectively.

The ~~balance was~~debt outstanding as of June 30, 2022 is comprised of our other borrowings of $2,135, related to our Portugal and Colombia debt.

The debt outstanding as of December 31, 2021 is comprised of the ~~2022~~remaining balance of the 2024 Convertible ~~Notes~~Note of ~~approximately $27,750~~$17,699, net of debt issuance cost, that was issued in ~~March 2019,~~July 2021, the ~~debt of $8,500~~$5,230 Herbal Brands Loan, which was issued to finance the Herbal Brands acquisition in April 2019, ~~as well as other borrowings, net of principal repayments for~~and the ~~Herbal Brands Loan and debt issuance costs.~~

Total debt outstanding as of June 30, 2021 was $33,678. The balance is comprised of the 2022 Convertible Notes of approximately $27,119 issued in March 2019 (included in current liabilities) and total net long-term debt outstanding as of June 30, 2021 was $6,559. The balance is comprised theremaining debt of ~~$5,700 issued to finance the Herbal Brands acquisition in April 2019,~~$2,166 from other borrowings. Other borrowing consists of the debt related to the local line of credit agreement in Portugal ~~Line of Credit, as well as other borrowings.~~and the working capital loan in Colombia.

During the three months ended June 30, 2022, we fully repaid our 2024 Convertible Note with accrued interest and Herbal Brands Loan with accrued interest. For more information refer to Note ~~10.~~11 to our unaudited condensed consolidated interim financial statements for the ~~six months~~period ended of June 30, ~~2021~~2022 included in this Form 10-Q. ~~On July 19, 2021, we prepaid the holders of the 2022 Convertible Notes and the 2022 Convertible Notes were discharged.~~

Portugal ~~Line of Credit~~Debt

In January 2021, Clever Leaves Portugal Unipessoal LDA borrowed ~~EURO 1 million~~€1,000 ($1,213) (the "Portugal ~~Line of Credit"~~Debt"), from a local lender ~~S.A.,~~ (the "Portugal Lender") under the terms of its credit line agreement. The Portugal ~~Line of Credit~~Debt pays interest quarterly at a rate of Euribor plus ~~3.0~~3 percentage points. ~~Principal~~This loan is secured by our mortgaged asset.

Colombia Debt

Ecomedics S.A.S. has entered into loan agreements with multiple local lenders (collectively, the "Colombia Debt"), under which the Company borrowed approximately COP$5,305,800 ($1,295) of mainly working capital loans. The working capital loans are secured by mortgage of our farm land in Colombia as collateral. These loans bear interest at a range of 10.96% to 12.25% per annum denominated in Colombian pesos. The first payment of the principal and interest will be repaid ~~through quarterly installments~~six months after receiving the loan. After the first payment, the principal and interest will be repaid semi-annually.

For the three months ended June 30, 2022 and 2021, the Company recognized interest expense of approximately ~~EURO 62.5 beginning February 28, 2022. As~~COP$240,405 ($61) and nil, respectively, and repaid principal of approximately COP$310,842 ($66) and nil, respectively. For the six months ended June 30, 2022 and 2021, the Company recognized interest expense of approximately COP$251,335 ($64) and nil respectively, and repaid principal of approximately COP$568,842 ($133) and nil, respectively. The outstanding principal balance of the Colombia Debt as of June 30, 2022 and December 31, 2021 ~~the full amount borrowed~~ was ~~outstanding under the Portugal Line~~COP$4,369,984 ($1,059) and COP$4,592,095 ($1,153), respectively.

Table of ~~Credit.~~Contents

Herbal Brands Debt

In April 2019, to facilitate the financing of the Herbal Brands acquisition, Herbal Brands entered into the Herbal Brands Loan with, and issued warrants to, a third-party lender, Rock Cliff Capital LLC (“Lender”).

~~Table of Contents~~

The Herbal Brands Loan iswas a non-revolving loan with a principal amount of $8,500 and interest of 8% per annum due and payable in arrears on the first day of each fiscal quarter, commencing July 1, 2019, and calculated based on the actual number of days elapsed. In addition, Herbal Brands iswas required to pay in kind interest ("PIK") on the outstanding principal amount of the Herbal Brands Loan from August 27, 2020 until payment in full at a rate equal to 4.0% per annum, with such PIK interest being capitalized as additional principal to increase the outstanding principal balance of the Herbal Brands Loan on the first day of each fiscal quarter. The Herbal Brands Loan iswas to be repaid or prepaid prior to its maturity date of May 2, 2023. On a quarterly basis, the loan ~~requires~~required Herbal Brands to repay 85% of positive operating cash flows. Herbal Brands ~~can~~could also choose to prepay a portion or the Herbal Brands Loan, subject to a fee equal to the greater of (1) zero, and (2) $2,338, net of interest payments already paid (excluding PIK interest paid and PIK interest capitalized as outstanding principal) on such prepayment date. The Herbal Brands Loan iswas guaranteed by certain subsidiaries of the Company, secured by Herbal Brands’ assets and equity interests in Herbal Brands and is subject to certain covenants. The Herbal Brands Loan remained outstanding following the closing of the Business Combination.

Concurrently with the execution of the Herbal Brands Loan, Clever Leaves issued warrants to the Lender to purchase 193,402 Class C preferred shares of Clever Leaves on a 1:1 basis, at a price of $8.79 per share. The warrants ~~can~~could be exercised in whole or in part at any time prior to the expiration date of May 3, 2021, and are not assignable, transferable, or negotiable. Following the closing of the Business Combination, the warrants issued to the Lender remained outstanding but entitle the Lender to purchase our common shares ~~of the Company~~ rather than common shares of Clever ~~Leaves.~~Leaves International.

On August 27, 2020, we amended certain terms of the Herbal Brands Loan to provide for an additional interest of 4% per annum, compounding quarterly and payable in-kind at maturity. In addition, we extended the expiry date of the outstanding 193,402 warrants until May 3, 2023. As part of the amendment, the ~~parties agreed to defer the~~ covenant testing under the Herbal Brands Loan ~~until September 30, 2021.~~was no longer required due to the occurrence of a Qualified IPO on December 18, 2020.

Following the closing of the Business Combination and pursuant to the terms, the holder of the Rock Cliff Warrants can purchase 63,597 of ~~the Company's~~our common shares at a strike price of $26.73 per share.

~~Convertible notes~~

In March 2019, as part of the Series D financing, Clever Leaves issued $27,750 aggregate principal amount of secured convertible notes (the “2022 Convertible Notes”) with a maturity date of March 30, 2022 (the “2022 Maturity Date”). The 2022 Convertible Notes initially had an interest of 8% per annum, payable quarterly in cash in arrears. The 2022 Convertible Notes were guaranteed by certain subsidiaries of Clever Leaves and were secured by pledged equity interests in certain subsidiaries. In March 2020 and June 2020, Clever Leaves and the noteholders amended the terms of the 2022 Convertible Notes, to increase in the interest rate to 10% from January 1, 2020 and provided that such interest is to be paid in-kind on the 2022 Maturity Date.

On July 19, 2021, Clever Leaves prepaid the holders of the 2022 Convertible Notes and the 2022 Convertible Notes were discharged. The aggregate amount prepaid by the Company was $25,115 representing the sum of (1) ninety percent (90%) of the aggregate outstanding principal amount owing under the 2022 Convertible Notes; (2) all accrued interest through July 19, 2021 and (3) certain legal fees.

In October 2018, as part of the Series C financing, Clever Leaves issued $17,890 aggregate principal amount of noninterest bearing unsecured convertible debentures due 2021 (the “2021 Convertible Debentures”). The 2021 Convertible Debentures had a maturity date of September 30, 2021. All of the 2021 Convertible Debentures were converted into an aggregate of 2,546,670 of Class C preferred shares in March 2019.

Subsequently, in July 2021, Series D convertible notes with accrued interest were settled and the related warrants were cancelled. For more information, refer to Note 16. to our unaudited condensed consolidated interim financial statements for the six months ended June 30, 2021 included in this Form 10-Q.

Contingencies

In the normal course of business, we receive inquiries or become involved in legal disputes regarding various litigation matters. In the opinion of management, as of June 30, ~~2021~~2022 any potential liabilities resulting from claims we have received would not have a material adverse effect on our consolidated financial statements.

~~Table of Contents~~

Off-Balance Sheet Arrangements

We did not have off-balance sheet arrangements during the periods presented, other than the obligations discussed above.

Critical Accounting Policies and Significant Judgments and Estimates

See Part II, Item 7, "Critical Accounting Policies and Estimates" in our ~~2020~~2021 Form 10-K. There have been no material changes to our critical accounting policies and estimates since our ~~2020~~2021 Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~There have been no material changes~~

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to ~~our exposures to market risk since December 31, 2020.~~provide the information under this item.

4547

Table of Contents

Item 4. Controls and Procedures

Evaluation of Controls and Procedures

~~Our management,~~Management, with the participation of ~~our~~the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of as June 30, 2022. The term "disclosure control and procedures" as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as ~~of June 30, 2021. Our disclosure~~amended (the "Exchange Act"), means controls and other procedures of a company that are designed to ensure that information ~~we are~~ required to ~~disclose~~be disclosed by a company in the reports ~~we file~~that it files or ~~submit~~submits under the Exchange Act ~~is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and~~ is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of June 30, ~~2021~~2022 were not effective due to a material weakness as described below.

~~Previously Identified Material Weakness~~

As disclosed in our 2020 Form 10-K, in connection with the audit of the Company’s financial statements as of and for the year ended December 31, 2020, our management identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified relates to the fact that the Company has not yet designed and maintained an effective control environment commensurate with its financial reporting requirements, including a) lack of a sufficient number of trained professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately, and to allow for proper segregation of duties b) lack of structures, reporting lines and appropriate authorities and responsibilities to achieve financial reporting objectives, and c) lack of evidence to support the performance of controls and the adequacy of review procedures, including the completeness and accuracy of information used in the performance of controls.

~~Remediation Plan~~

Management is committed to taking the steps necessary to remediate the control deficiencies that constituted the above material weakness. We have made the following enhancements to our control environment:

a.We added accounting and finance personnel to the Company and one of our key subsidiaries to strengthen our internal accounting team, to provide additional individuals to allow for segregation of duties in the preparation and review of schedules, calculations, and journal entries that support financial reporting, to provide oversight, structure and reporting lines, and to provide additional review over our disclosures. These personnel includes SEC Reporting Senior Manager and Manager at the corporate level, a Controller at one of our key subsidiaries and a SOX manager at another key subsidiaries ;

b.We enhanced our controls to improve the preparation and review over complex accounting measurements, and the application of GAAP to significant accounts and transactions, and our financial statement disclosures; and,

c.We engaged outside consultants to assist us in our evaluation of the design, implementation, and documentation of internal controls that address the relevant risks, and that provide for appropriate evidence of performance of our internal controls (including completeness and accuracy procedures).

~~Our remediation activities are ongoing during 2021. In addition to the above actions, we expect to engage in additional activities, including, but not limited to:~~

a.~~Adding more technical accounting resources to enhance our control environment;~~

b.Until we have sufficient technical accounting resources, engaging external consultants to provide support and to assist us in our evaluation of more complex applications of GAAP, and to assist us with documenting and assessing our accounting policies and procedures; and,

c.~~Engaging outside consultants to assist us in providing technical Sarbanes-Oxley Act training to individuals throughout the organization that are responsible for executing internal controls.~~

Under the direction of the audit committee of the board of directors, management will continue to take measures to remediate the material weakness in 2021. As such, we will continue to enhance corporate oversight over process-level controls and

~~Table of Contents~~

structures to ensure that there is appropriate assignment of authority, responsibility, and accountability to enable remediation of our material weakness. We believe that our remediation plan will be sufficient to remediate the identified material weakness and strengthen our internal control over financial reporting.

We believe the corrective actions and controls need to be in operation for a sufficient period for management to conclude that the control environment is operating effectively and has been adequately tested through audit procedures. Therefore, the material weakness has not been remediated as of the date of this report.

As we continue to evaluate, and work to improve, our internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary.

~~Changes in Internal Control over Financial Reporting~~

The Company is in the process of implementing certain changes in its internal controls to remediate the material weakness described above. Except as noted above, no change to our internal control over financial reporting occurred during the three months ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting

Because of their inherent limitations, our disclosure controls and procedures and our internal control over financial reporting may not prevent material errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to risks, including that the control may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate.

Material Weakness in Internal Control over Financial Reporting

As initially reported in the Annual Report on Form 10-K for the year ended December 31, 2020, Management did not maintain effective control environment attributed to the following:

•The Company's insufficient number of trained professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately.

•The Company's insufficient segregation of duties.

•Lack of structure, reporting lines and appropriate authorities and responsibilities to achieve financial reporting objectives. Lack of evidence to support the performance of controls and the adequacy of review procedures, including the completeness and accuracy of information used in the performance of controls

Remediation Efforts and Status of Material Weakness

As disclosed in our 2021 Form 10-K, our remediation efforts were ongoing and significant progress towards the ongoing remediation of the material weakness has been made. Management have taken and are committed to continue to take steps necessary to remediate the control deficiencies that constituted the above material weakness. Until the remediation efforts discussed below, including any additional remediation efforts that our Management identifies as necessary, are completed, the material weakness described above will continue to exist.

During the year ended December 31, 2021 and the six months ended June 30, 2022, we made the following enhancements to our control environment:

1.We added accounting and finance personnel to the Company and one of our key subsidiaries to strengthen our internal accounting team, to provide additional individuals to allow for segregation of duties in the preparation and review of schedules, calculations, and journal entries that support financial reporting, to provide oversight, structure and reporting lines, and to provide additional review over our disclosures. These personnel include a SEC Reporting Director and a Manager at the corporate level, a Controller at one of our key subsidiaries and a SOX manager at another key subsidiary;

Table of Contents

2.We enhanced our controls to improve the preparation and review over complex accounting measurements, and the application of GAAP to significant accounts and transactions, and our financial statement disclosures; and,

3.We engaged outside consultants to assist us in our evaluation of the design, implementation, and documentation of internal controls that address the relevant risks, and that provide for appropriate evidence of performance of our internal controls (including completeness and accuracy procedures) and to provide technical Sarbanes-Oxley Act training to individuals throughout the organization that are responsible for executing internal controls.

Our remediation activities are ongoing during calendar year 2022. In addition to the above actions, we expect to engage in additional activities, including, but not limited to:

1.Adding more technical accounting resources to enhance our control environment and to allow for proper segregation of duties;

2.Enhance the Company's accounting software system with a system designed with the functionality to properly segregate duties;

3.Until we have sufficient technical accounting resources, we will continue to engage external consultants to provide support and to assist us in our evaluation of more complex applications of GAAP, and to assist us with documenting and assessing our accounting policies and procedures; and,

4.Engaging outside consultants to assist us in performing testing in order to evaluate the operating effectiveness of our internal controls.

Under the direction of the audit committee of the board of directors, management will continue to take measures to remediate the material weaknesses in calendar year 2022. As such, we will continue to enhance corporate oversight over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability to enable remediation of our material weaknesses. We believe that our remediation plan will be sufficient to remediate the identified material weaknesses and strengthen our internal control over financial reporting.

We believe the corrective actions and controls are in process and need to be in operation for a sufficient period for management to conclude that the control environment is operating effectively and has been adequately tested through audit procedures. Therefore, the material weaknesses have not been remediated as of the date of this report.

Changes in Internal Control over Financial Reporting

The Company is in the process of implementing certain changes in its internal controls to remediate the material weakness described above. Except as noted above, no change to our internal control over financial reporting occurred during the three months ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various investigations, claims and lawsuits arising in the normal conduct of our business, none of which, in our opinion, will have a material adverse effect on our financial condition, results of operations, or cash flows. We cannot assure you that we will prevail in any litigation. Regardless of the outcome, any litigation may require us to incur significant litigation expense and may result in significant diversion of management attention.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our ~~2020~~2021 Form 10-K, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. There have been no material changes to our risk factors since our ~~2020~~2021 Form 10-K.

Item 5. Other Information

Not applicable.

4850

Item 6. Exhibits

Exhibit No.

Description

3.1

Amended and Restated Articles of Clever Leaves Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC by Clever Leaves Holdings Inc. on December 23, 2020).

~~4.1~~4.2

Specimen Common Share Certificate of Clever Leaves Holdings Inc. (incorporated by reference to Exhibit 4.1 to the Current Report on Form 10-Q filed with the SEC by Clever Leaves Holdings Inc. on May 17, 2021)~~. (incorporated by reference to Exhibit 4.3 to the Current Report on Form 10-Q filed with the SEC by Clever Leaves Holdings Inc. on May 17, 2021).~~.

~~4.2~~4.3

Specimen Warrant Certificate of Clever Leaves Holdings Inc. (incorporated by reference to Exhibit ~~4.2~~4.5 to Amendment No. 2 to the ~~Current Report~~Registration Statement on Form ~~10-Q~~S-4 (File No. 333-241707) filed with the SEC by Clever Leaves Holdings Inc. on ~~May 17, 2021)~~November 9, 2020).

4.4

Warrant Agreement, dated December 10, 2018, between Schultze Special Purpose Acquisition Corp. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.1 of Schultze Special Purpose Acquisition Corp.’s Current Report on Form 8-K, filed with the SEC on December 14, 2018).

~~4.3~~4.5

Assignment, Assumption and Amendment Agreement, dated as of December 18, 2020, among Clever Leaves Holdings Inc., Schultze Special Purpose Acquisition Corp. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.4 of the Current Report on Form 8-K filed with the SEC by Clever Leaves Holdings Inc. on December 28, 2020).

4.6

Waiver of Certain Rights, dated February 2, 2022, between Schultze Special Purpose Acquisition Sponsor, LLC and Clever Leaves Holdings Inc. (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8_K filed with the SEC by Clever Leaves Holdings Inc. on February 2, 2022.

4.7

Assignment, Assumption and Amendment Agreement No. 2, dated as of April 12, 2021, among Clever Leaves Holdings Inc., Continental Stock Transfer & Trust Company and Computershare Inc. ~~(incorporated~~ (incorporate by reference to Exhibit 4.3 to ~~the~~ Current Report on Form 10-Q ~~filed~~file with the SEC by Clever Leaves Holdings, Inc. on May 17, ~~2021~~).

~~4.4~~

~~Secured Convertible Note, dated as July 19, 2021(incorporated by reference to Exhibit 4.~~1 ~~to the~~ C ~~urrent~~ R ~~eport on~~ ~~Form 8-K filed with the SEC by~~ ~~Clever Leaves Holdings Inc. on July~~ ~~19, 2021~~).

~~10.1~~

Note Purchase Agreement, dated as of July 19, 2021, between Catalina LP and Clever Leaves Holdings Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC by Clever Leaves Holdings Inc. on July 19, 2021).

~~10.2~~

Guarantee, dated as of July 19, 2021, by each of Clever Leaves US, Inc., Clever Leaves International Inc., 1255096 B.C. Ltd., NS US Holdings, Inc., Herbal Brands, Inc., Northern Swan International, Inc., Northern Swan Management, Inc., Northern Swan Deutschland Holdings, Inc. and Northern Swan Portugal Holdings, Inc. in favor of Catalina LP. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC by Clever Leaves Holdings Inc. on July 19, 2021).

~~10.3~~

~~Pledge Agreement, dated as of July 19, 2021, made by Clever Leaves Holdings, Inc in favor of Catalina LP~~. ~~(incorporated by reference to Exhibit 10.~~3 ~~to the Current Report on Form 8-K filed with the SEC by Clever Leaves Holdings Inc. on July 19, 2021)~~.

~~10.4~~

~~Pledge Agreement, dated as of July 19, 2021, made by Clever Leaves International Inc. in favor of Catalina LP~~. ~~(incorporated by reference to Exhibit 10.~~4 ~~to the Current Report on Form 8-K filed with the SEC by Clever Leaves Holdings Inc. on July 19, 2021)~~.

~~10.5~~

~~Pledge Agreement, dated as of July 19, 2021, made by 1255096 B.C. Ltd. in favor of Catalina LP~~. ~~(incorporated by reference to Exhibit 10.~~5 ~~to the Current Report on Form 8-K filed with the SEC by Clever Leaves Holdings Inc. on July 19,~~ 2021)

~~10.6~~

~~Pledge Agreement, dated as of July 19, 2021, made by Clever Leaves US, Inc. in favor of Catalina LP~~.~~(incorporated by reference to Exhibit 10.~~6 ~~to the Current Report on Form 8-K filed with the SEC by Clever Leaves Holdings Inc. on July 19, 2021)~~.

~~10.7~~

~~Registration Rights Agreement, dated as of July 19, 2021, between Catalina LP and Clever Leaves Holdings Inc~~.~~(incorporated by reference to Exhibit 10.~~7 ~~to the Current Report on Form 8-K filed with the SEC by Clever Leaves Holdings Inc. on July 19, 2021)~~.

~~10.8~~

Payout and Release Agreement, dated as of July 13, 2021, by and among Clever Leaves International Inc., Clever Leaves Holdings Inc., GLAS Americas LLC, as collateral agent, GLAS USA LLC, as paying agent, and other parties named therein.~~(incorporated by reference to Exhibit 10.~~8 ~~to the Current Report on Form 8-K filed with the SEC by Clever Leaves Holdings Inc. on July 19, 2021)~~

~~10.9~~

~~Subordination Agreement, entered into as of July 19, 2021, by and between Catalina LP and Rock Cliff Capital LLC.(incorporated by reference to Exhibit 10.~~9 ~~to the Current Report on Form 8-K filed with the SEC by Clever Leaves Holdings Inc. on July 19, 2021)~~

~~Exhibit No.~~

~~Description~~

31.1**

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..

31.2**

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1***

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document ~~- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~

101.SCH

Inline XBRL Taxonomy ~~Extension Schema.~~Schema Linkbase Document

101.CAL

Inline XBRL Taxonomy ~~Extension~~ Calculation ~~Linkbase.~~Linkbase Document

101.DEF

Inline XBRL Taxonomy ~~Extension~~ Definition ~~Linkbase.~~Linkbase Document

101.LAB

Inline XBRL Taxonomy ~~Extension Label Linkbase.~~Labels Linkbase Document

~~101.PRE~~101. PRE

Inline XBRL Taxonomy ~~Extension~~ Presentation ~~Linkbase.~~Linkbase Document

104

Cover Page Interactive Date File - (formatted as Inline XBRL and contained in Exhibit 101)

** Filed herewith

*** Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Clever Leaves Holdings Inc.
August ~~12, 2021~~11, 2022
	By:	/s/ ~~Kyle Detwiler~~Andres Fajardo
	Name:	~~Kyle Detwiler~~Andres Fajardo
	Title:	Chief Executive Officer
		(Principal Executive Officer)


	Note	June 30, 2021		December 31, 2020
Assets
Current:
Cash and cash equivalents		$	56,621	$	79,107
Restricted cash		454		353
Accounts receivable, net		1,620		1,676
Prepaids, advances and other		3,790		3,174
Other receivables		1,843		1,306
Inventories, net	5	13,148		10,190
Total current assets		77,476		95,806


Investment – Cansativa	6	1,528		1,553
Property, plant and equipment, net of accumulated depreciation of $4,365 and $3,356 for the six months ended June 30, 2021 and December 31, 2020, respectively		28,704		25,680
Intangible assets, net	8,9	23,498		24,279
Goodwill	8,9	18,508		18,508
Other non-current assets		58		52
Total Assets		$	149,772	$	165,878

Liabilities
Current:
Accounts payable		$	3,258	$	4,429
Accrued expenses and other current liabilities		3,046		4,865
Current portion of Convertible notes	10	27,119		0
Warrant liability		22,736		19,061
Deferred revenue		435		870
Total current liabilities		56,594		29,225
Convertible notes	10	0		27,142
Loans and borrowings	10	6,559		6,701
Deferred revenue		1,565		1,167

Deferred tax liabilities		5,700		5,700
Other long-term liabilities		532		693
Total Liabilities		$	70,950	$	70,628



Shareholders’ equity
Common shares, without par value, unlimited shares authorized: 25,629,641 and 24,883,024 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	11	0		0
Preferred shares, without par value, unlimited shares authorized, NaN shares issued and outstanding for each of June 30, 2021 and December 31, 2020	11	0		0
Additional paid-in capital		170,557		164,264
Accumulated deficit		(91,735)		(69,014)

Total equity attributable to shareholders		$	78,822	$	95,250


Total liabilities and shareholders' equity		$	149,772	$	165,878


		Common Share			Preferred Shares			Additional Paid-in Capital		Retained (Deficit)		Total Shareholders’ Equity
		Shares	$		Shares	$


Balance at December 31, 2020		24,883,024	0		0	0		164,264		(69,014)		95,250

Stock-based compensation expense	13	—	—		—	—		1,550		—		1,550


Issuance of common shares upon vesting of RSUs	13	7,713	—		—	—		—		—		—
Founders earnout shares vested	11	570,212	—		—	—		—		—		—
Net loss		—	—		—	—		—		(13,765)		(13,765)



Common shares issued for exercise of warrants	11	122,639	—		—	—		1,410		—		1,410







Balance at March 31, 2021		25,583,588	$	0	0	$	0	$	167,224	$	(82,779)	$	84,445


Stock-based compensation expense		—	—		—	—		3,323		—		3,323

Stock option exercise	13	40,942	—		—	—		10		—		10
Issuance of common shares upon vesting of RSUs		5,111	—		—	—		—		—		—
Net loss		—	—		—	—		—		(8,956)		(8,956)












Balance at June 30, 2021		25,629,641	$	0	0	$	0	$	170,557	$	(91,735)	$	78,822


	Cannabinoid		Non- Cannabinoid		Total




Balance at December 31, 2020	$	18,508	$	0	$	18,508

Balance at June 30, 2021	$	18,508	$	0	$	18,508

Cumulative goodwill impairment charges(a)	$	0	$	1,682	$	1,682


	June 30, 2021		December 31, 2020
Series D Convertible Notes due March 2022(a)	$	27,119	$	27,142
Herbal Brands Loan due May 2023 and other borrowings	6,559		6,701
Total Debt	$	33,678	$	33,843

Less: Current portion of long-term debt	(27,119)		0
Ending balance	$	6,559	$	33,843


	Restricted Share Units	Weighted-Average Grant Date Fair Value
Unvested as of December 31, 2020	78,634	$	3.25
Granted	365,300	14.04
Vested	(12,824)	8.66
Canceled/forfeited	(6,219)	13.89
Unvested as of June 30, 2021	424,891	$	12.28


	Six Months Ended		Three Months Ended
Share-based compensation award type	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020

Stock Options	721	713	365	297
RSUs	4,152	0	2,958	0
Total Shared Based Compensation Expense	4,873	713	3,323	297