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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)

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

For the quarterly period ended March 31, 2021June 30, 2022

or

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

For the transition period from                     to                         

Commission File Number: 001-39820

Clever Leaves Holdings Inc.
(Exact name of registrant as specified in its charter)

British Columbia, CanadaNot Applicable
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
489 Fifth Avenue, 27th Floor6501 Congress Ave, Suite 240
New York, NYBoca Raton, FL
1001733487
(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 classTrading Symbol(s)Name of each exchange on which registered
Common shares without par valueCLVRThe Nasdaq Stock Market LLC
Warrants, each warrant exercisable for one common share at an exercise price of $11.50CLVRWThe 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 May 13, 2021August 10, 2022 was 24,928,26042,679,720 and 1,217,826,332,961, respectively.
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CLEVER LEAVES HOLDINGS INC.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
ITEM 1.
Financial Statements of Clever Leaves Holdings Inc. (Unaudited)
UnauditedCondensed Consolidated Statements of Financial Position as of March 31, 2021June 30, 2022 and December 31, 20202021
4
UnauditedCondensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31,and Six months ended June 30, 2022 and 2021 and 2020
5
UnauditedCondensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31,and Six months ended June 30, 2022 and 2021 and 2020
6
UnauditedCondensed Consolidated Statements of Cash Flows for the Three Months Ended March 31,and Six months ended June 30, 2022 and 2021 and 2020
7
Notes to UnauditedCondensed Consolidated Financial Statements
8
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
2933
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risks
4047
ITEM 4.
Controls and Procedures
4148
PART II - OTHER INFORMATION
ITEM 1.
Legal Proceedings
4350
ITEM 1A.
Risk Factors
4350
ITEM 5.
Other Information
4350
ITEM 6.
Exhibits
4451
SIGNATURESSIGNATURES
4552


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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 uncertaintiesrisks and factors relating to our operations and business environment, all ofuncertainties 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. ManyThe 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 uncertaintiesevents 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 coronavirusCOVID-19 on the global economy, onsupply and distribution chain, and the global financial marketsavailability 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;
•our ability to recognize the anticipated benefitsavailability or terms of the business combination (the “Business Combination”) with Schultze Special Purpose Acquisition Corp. (“SAMA”); and
•the result 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, 20202021 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.


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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)

NoteMarch 31, 2021December 31, 2020
Assets
 
Current:  
Cash and cash equivalents$68,724 $79,107 
Restricted cash451 353 
Accounts receivable, net1,737 1,676 
Prepaids, advances and other3,334 3,174 
Other receivables1,552 1,306 
Inventories, net511,555 10,190 
Total current assets87,353 95,806 
 
Investment – Cansativa61,542 1,553 
Property, plant and equipment, net of accumulated depreciation of $3,915 and $3,356 for the three months ended March 31, 2021 and December 31, 2020, respectively27,336 25,680 
Intangible assets, net8,923,889 24,279 
Goodwill8,918,508 18,508 
Other non-current assets59 52 
Total Assets
$158,687 $165,878 
 
Liabilities
Current:
Accounts payable$3,430 $4,429 
Accrued expenses and other current liabilities3,447 4,865 
Warrant liability23,912 19,061 
Deferred revenue218 870 
Total current liabilities31,007 29,225 
Convertible notes1027,266 27,142 
Loans and borrowings107,924 6,701 
Deferred revenue1,782 1,167 
Deferred tax liabilities5,700 5,700 
Other long-term liabilities563 693 
Total Liabilities
$74,242 $70,628 
 
Shareholders’ equity
Common shares, without par value, unlimited shares authorized: 25,583,588 and 24,883,024 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively110 0 
Preferred shares, without par value, unlimited shares authorized, NaN shares issued and outstanding for each of March 31, 2021 and December 31, 2020110 0 
Additional paid-in capital167,224 164,264 
Accumulated deficit(82,779)(69,014)
Total equity attributable to shareholders$84,445 $95,250 
Total liabilities and shareholders' equity$158,687 $165,878 
NoteJune 30, 2022December 31, 2021
Assets
 
Current:  
Cash and cash equivalents$19,025 $37,226 
Restricted cash438 473 
Accounts receivable, net3,391 2,222 
Prepaids, deposits and other receivables64,671 5,064 
Inventories, net516,740 15,408 
Total current assets44,265 60,393 
 
Investment – Cansativa75,747 1,458 
Property, plant and equipment, net of accumulated depreciation of $7,159 and $5,702 for June 30, 2022 and December 31, 2021, respectively1029,502 30,932 
Intangible assets, net822,735 23,117 
Operating lease right-of-use assets, net193,210 — 
Other non-current assets3 260 
Total Assets
$105,462 $116,160 
 
Liabilities
Current:
Accounts payable$3,225 $3,981 
Accrued expenses and other current liabilities2,730 2,898 
Convertible note due 2024, current portion11— 16,559 
Loans and borrowings, current portion11526 949 
Warrant liability392 2,205 
Operating lease liabilities, current portion191,506 — 
Deferred revenue, current portion265 653 
Total current liabilities8,644 27,245 
Convertible note due 2024 — long-term11— 1,140 
Loans and borrowing — long-term111,609 6,447 
Deferred revenue1,271 1,548 
Operating lease liabilities — long-term191,859 — 
Deferred tax liabilities6,650 6,650 
Other long-term liabilities840 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, respectively12— — 
Preferred shares, without par value, unlimited shares authorized, nil shares issued and outstanding for each of June 30, 2022 and December 31, 202112— — 
Additional paid-in capital216,515 187,510 
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
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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)

Three Months Ended March 31,
Note20212020
Revenue14$3,477 $2,914 
Cost of sales(1,246)(753)
Gross profit2,231 2,161 
Expenses
General and administrative128,742 8,120 
Sales and marketing678 1,181 
Goodwill impairment90 1,682 
Depreciation and amortization579 352 
Total expenses9,999 11,335 
Loss from operations(7,768)(9,174)
Other Expense (Income), Net
Interest expense, net978 836 
Loss on remeasurement of warrant liability114,851 0 
Loss on investments0 161 
Loss on fair value of derivative instrument0 13 
Foreign exchange loss759 48 
Other (income) expenses, net(602)(57)
Total other expense, net5,986 1,001 
Loss before income taxes(13,754)(10,175)
Incomes taxes0 0 
Equity investment share of loss11 11 
Net loss$(13,765)$(10,186)
Net loss attributable to non-controlling interest0 (904)
Net loss attributable to Clever Leaves Holdings Inc. common shareholders15$(13,765)$(9,282)
Net loss per share attributable to Clever Leaves Holdings Inc. common shareholders - basic and diluted15$(0.55)$(1.23)
Weighted-average common shares outstanding - basic and diluted1525,030,080 8,304,030 





Three Months Ended June 30,Six Months Ended June 30,
Note2022202120222021
Revenue17$4,657 $3,672 $9,881 $7,149 
Cost of sales(3,353)(1,904)(6,539)(3,241)
Gross profit1,304 1,768 3,342 3,908 
Expenses
General and administrative138,013 10,301 16,274 18,765 
Sales and marketing728 241 1,461 828 
Research and development359 305 771 583 
Restructuring expenses14(135)— 3,873 — 
Depreciation and amortization537 524 1,054 1,103 
Total expenses9,502 11,371 23,433 21,279 
Loss from operations(8,198)(9,603)(20,091)(17,371)
Other Expense (Income), net
Interest and amortization of debt issuance cost652 920 2,770 1,898 
(Gain) loss on remeasurement of warrant liability12(1,323)(1,176)(1,813)3,675 
Gain on investment7(6,851)— (6,851)— 
Loss on debt extinguishment, net11— — 2,263 — 
Foreign exchange loss307 80 652 839 
Other expense (income), net63 (485)10 (1,087)
Total other (income) expenses, net(7,152)(661)(2,969)5,325 
Loss before income taxes and equity investment loss$(1,046)$(8,942)$(17,122)$(22,696)
Equity investment share of loss— 14 64 25 
Net loss$(1,046)$(8,956)$(17,186)$(22,721)
Net loss per share - basic and diluted18$(0.03)$(0.35)$(0.51)$(0.90)
Weighted-average common shares outstanding - basic and diluted1839,559,793 25,588,987 33,792,261 25,311,077 

See accompanying notes to the condensed consolidated financial statements.
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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
Earnings/(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 recapitalization11(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, 20208,304,030 $0 0 $0 $77,847 $(41,215)$3,791 $40,423 

Common Stock
Additional
Paid-in
Capital		Retained
Deficit
Total
Shareholders’
Equity
SharesAmountAmountAmountAmount
Balance at December 31, 202024,883,024$— $164,264 $(69,014)$95,250 
Net loss— — — (13,765)(13,765)
Founders earn-out shares vested570,212 — — — — 
Issuance of common shares upon vesting RSUs7,713 — — — — 
Exercise of warrants122,639 — 1,410 — 1,410 
Stock-based compensation expense— — 1,550 — 1,550 
Balance at March 31, 202125,583,588$— $167,224 $(82,779)$84,445 
Net loss— — — (8,956)(8,956)
Issuance of common shares upon vesting RSUs5,111 — — — — 
Stock option exercise40,942 — 10 — 10 
Stock-based compensation expense— — 3,323 — 3,323 
Balance at June 30, 202125,629,641$— $170,557 $(91,735)$78,822 
Note

Common Stock
Additional
Paid-in
Capital		Retained
Deficit
Total
Shareholders’
Equity
SharesAmountAmountAmountAmount
Balance at December 31, 202126,605,797 $— $187,510 $(114,740)$72,770 
Net loss— — — (16,140)(16,140)
Issuance of common shares upon vesting RSUs15247,453 — — — — 
Stock option exercise116,112 — 22 — 22 
Stock-based compensation expense15— — 500 — 500 
Issuance of common stock - gross1211,047,567 — 23,400 — 23,400 
Equity issuance costs12— — (1,177)— (1,177)
Conversions of Convertible Note to common shares12607,000 — 1,324 — 1,324 
Beneficial conversion feature11— — 1,749 — 1,749 
Balance at March 31, 202238,623,929 $— $213,328 $(130,880)$82,448 
Net loss(1,046)(1,046)
Issuance of common shares upon vesting RSUs39,898 — — — — 
Stock option exercise35,582 — — — — 
Stock-based compensation expense— — 1,148 — 1,148 
Conversions of Convertible Note to common shares900,000 $2,039 $— 2,039 
Balance at June 30, 202239,599,409 $— $216,515 $(131,926)$84,589 


Common Share

Preferred Shares
Additional
Paid-in
Capital		Retained
Earnings/(Deficit)
Attributable
to Non-
controlling
Interest
Total
Shareholders’
Equity
Shares$Shares$
Balance at December 31, 202024,883,024 0 0 0 164,264 (69,014)0 95,250 
Stock-based compensation expense13— — — — 1,550 — — 1,550 
Issuance of common shares upon vesting of RSUs137,713 — — — — — — — 
Founders earnout shares vested11570,212 — — — — — — — 
Net loss— — — — — (13,765)— (13,765)
Common shares issued for exercise of warrants11122,639 — — — 1,410 — — 1,410 
Balance at March 31, 202125,583,588 $0 0 $0 $167,224 $(82,779)$0 $84,445 


See accompanying notes to the condensed consolidated financial statements.
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CLEVER LEAVES HOLDINGS INC.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands of U.S. Dollars)
(Unaudited)

Three Months Ended March 31,
  20212020
Operating Activities
  
Net loss$(13,765)$(10,186)
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization795 352 
Loss on remeasurement of warrant liability114,851 0 
Foreign exchange loss759 61 
Share-based compensation expense131,550 416 
Goodwill impairment90 1,682 
Non-cash interest expense, net430 836 
Loss on investment0 161 
Loss on equity method investment, net611 11 
Loss on derivative instruments0 13 
Changes in operating assets and liabilities:
Increase in accounts receivable(61)(51)
(Increase) decrease in prepaid expenses(160)777 
(Increase) decrease in other receivable(253)225 
Increase in inventory5(1,365)(1,117)
(Decrease) increase in accounts payable and other current liabilities(2,417)461 
Decrease in other non-current liabilities and other items(1,002)(862)
Net cash used in operating activities$(10,627)$(7,221)
Investing Activities
Purchase of property, plant and equipment(2,216)(1,655)
Net cash used in investing activities$(2,216)$(1,655)
Financing Activities
Proceeds from issuance of long term debt, net of issuance costs100 16,966 
Other borrowings1,223 0 
Proceeds from exercise of warrants111,410 0 
Net cash provided by financing activities$2,633 $16,966 
Effect of exchange rate changes on cash, cash equivalents & restricted cash(75)(13)
(Decrease) increase in cash, cash equivalents & restricted cash (a)
$(10,285)$8,077 
Cash, cash equivalents & restricted cash, beginning of period (a)
79,460 13,198 
Cash, cash equivalents & restricted cash, end of period (a)
$69,175 $21,275 
Supplemental schedule of cash flow information:
Cash paid for interest$548 $0 
Cash paid for income taxes, net of refunds$0 $0 
Six Months Ended June 30,
 20222021
Cash Flow from Operating Activities: 
Net loss$(17,186)$(22,721)
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization1,984 1,377 
Amortization of debt discount and debt issuance cost1,949 — 
Inventory provisions52,126 803 
Restructuring and related costs143,430 — 
(Gain) loss on remeasurement of warrant liability12(1,813)3,675 
Non-cash lease expense19155 — 
Foreign exchange loss652 839 
Stock-based compensation expense151,648 4,873 
Equity investment share of loss64 25 
Gain on investment7(6,851)— 
Loss on debt extinguishment112,263 — 
Other non-cash expense, net600 (538)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable(1,169)56 
(Increase) in prepaid expenses6(1,014)(616)
Decrease (increase) in other receivables and other non-current assets178 (543)
(Increase) in inventory5(3,458)(3,761)
(Decrease) in accounts payable and other current liabilities(1,957)(2,990)
(Decrease) increase in accrued and other non-current liabilities(185)25 
Net cash used in operating activities$(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 $(4,319)
Cash Flow from Financing Activities:
Repayment of debt11(22,665)(1,107)
Other borrowings73 1,223 
Proceeds from issuance of shares1223,400 — 
Equity issuance costs12(1,177)— 
Proceeds from exercise of warrants— 1,410 
Stock option exercise22 10 
Net cash (used in) provided by financing activities$(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 $451$438 and $18,100$454 as of March 31,June 30, 2022 and June 30, 2021, and March 31, 2020, respectively. The March 31, 2021 restricted cash isrespectively, which are comprised primarily of cash on depositdeposits for certain lease arrangements. March 31, 2020 balance represents amounts on deposit from investors pending closing of 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.
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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 New York-basedU.S. based holding company focused on cannabinoids. In addition to the cannabinoid business, we arethe Company is also engaged in the non-cannabinoid business of homeopathicnutraceutical 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 ourthe Company's principal executive office is 489 Fifth6501 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 accordingly,with the instructions to Form 10-Q and Article 10 of regulation 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.

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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 2020Company's audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2020 ("20202021, included in its Annual Report on Form 10-K"10-K, as filed with the SEC on March 24, 2022 (the "Annual Report").

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

Going Concern
These consolidatedinterim 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 consolidatedinterim condensed financial statements, the Company had an accumulated deficit as of March 31, 2021,June 30, 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 revenuesrevenue from the sale of its available inventories.

The Company’s managementAt 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 thatit will achieve sufficient increases in revenue and reductions in net losses, which, coupled with the Company’sCompany's current cash position, following the consummation of the Business Combination, 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.
Impact of COVID-19 Pandemic
During the six months ended June 30, 2022 the Company raised additional financing through an "at-the-market" ("ATM") equity offering as discussed in Note 12.

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 are being 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. Global stock markets have also experienced increased volatility and, in certain cases, significant declines.

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.

The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remains unclear. It is not possible to reliably estimate the duration and severity of these consequences, nor their impact on the financial position and results of the Company for future periods.

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.


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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 statementsFinancial 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 at Marchas of June 30, 2022 and December 31, 2021:2021.
SubsidiariesJurisdiction of incorporationOwnership
Clever Leaves US, Inc.Delaware, United States100%
NS US Holdings, Inc.Delaware, United States100%
Herbal Brands, Inc.Delaware, United States100%
1255096 B.C. Ltd. ("Newco")British Columbia, Canada100%
Northern Swan International, Inc. (“NSI”)British Columbia, Canada100%
Northern Swan Management, Inc.British Columbia, Canada100%
Northern Swan Deutschland Holdings, Inc.British Columbia, Canada100%
Northern Swan Portugal Holdings, Inc.British Columbia, Canada100%
Clever Leaves Portugal Unipessoal LDAPortugal100%
Clever Leaves II Portugal Cultivation SAPortugal100%
Northern Swan Europe, Inc.British Columbia, Canada100%
Nordschwan Holdings, Inc.British Columbia, Canada100%
Clever Leaves Germany GmbHFrankfurt, Germany100%
NS Herbal Brands International, Inc.British Columbia, Canada100%
Herbal Brands, Ltd.London, United Kingdom100%
Clever Leaves International, Inc.British Columbia, Canada100%
Eagle Canada Holdings, Inc. (“Eagle Canada”)British Columbia, Canada100%
Ecomedics S.A.S. (“Ecomedics”)Bogota, Colombia100%
Clever Leaves UK LimitedLondon, United Kingdom100%
Subsidiaries Jurisdiction of incorporation Ownership
June 30, 2022December 31, 2021
Clever Leaves US, Inc. ("SAMA")Delaware, United States100%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, Canada100%100%
Northern Swan International, Inc. (“NSI”) British Columbia, Canada 100%100%
Arizona Herbal Brands, Inc. (1)
British Columbia, Canada100%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 Kingdom100%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 LimitedLondon, United Kingdom100%100%

(1)
The financial statementsArizona 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 PRONOUNCEMENTSPOLICIES

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 Taxes2016-02, Leases (Topic 740) - Simplifying the Accounting for Income Taxes (“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 Company is currently evaluating the effect of adopting ASU No. 2019-12 and does not expect the ASU to have a 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 under Topic 815. ASU No. 2020-01 is effective for the Company beginning January 1, 2021. The adoption of ASU did not have a material impact to the Company's consolidated financial statements.842)
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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 October 2020,February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-02, Leases ("ASU 2016-02") and in July 2018, the FASB issued this ASU No. 2020-09, Debt -2018-11, Leases (Topic 470)842): Targeted Improvements ("ASU No. 2020-09"2018-11"), which clarifies, streamlines, (collectively referred to as "ASC 842"). This guidance requires the recognition of right-of-use ("ROU") assets and in some cases eliminates,lease liabilities, arising from financing and operating leases, on the disclosuresconsolidated balance sheet, along with additional qualitative and quantitative disclosures. Companies are required to adopt this guidance using a registrant must provide in lieumodified retrospective approach and apply the transition provisions under the guidance at either 1) the later of the subsidiary’s audited financial statements. The rules require certain enhanced narrative disclosures, including the terms and conditionsbeginning of the guaranteesearliest comparative period presented in the financial statements and how the legal obligationscommencement date of the issuer and guarantor, as well as other factors, may affect payments to holderslease, or 2) the beginning of the debt securities. period of adoption (i.e., on the effective 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 amendmentsCompany adopted the guidance on January 1, 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 ASU No. 2020-09 are effective January 4, 2021ASC 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 earlier compliance is permitted. Thenot 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 ASUthis 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.

Recently Issued Accounting Pronouncements Not Yet AdoptedASU No. 2021-04, Earnings Per Share (Topic 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.

ASU No. 2016-13- Credit Losses on Financial Instruments (Topic 326)
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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 TotalLevel 1 Level 2 Level 3 Total
As of March 31, 2021
As of June 30, 2022As of June 30, 2022
Assets:Assets:Assets:
Investment – CansativaInvestment – Cansativa— — 5,747 5,747 
Total AssetsTotal Assets$— $— $5,747 $5,747 
Liabilities:Liabilities:
Loans and borrowingsLoans and borrowings— 2,135 — 2,135 
Warrant liabilityWarrant liability— — 392 392 
Total LiabilitiesTotal Liabilities$— $2,135 $392 $2,527 
As of December 31, 2021As of December 31, 2021
Assets:Assets:
Investment – CansativaInvestment – Cansativa0 0 1,542 1,542 Investment – Cansativa— — 1,458 1,458 
Total AssetsTotal Assets0 0 1,542 1,542 Total Assets$— $— $1,458 $1,458 
Liabilities:Liabilities:Liabilities:
Loans and borrowingsLoans and borrowings0 7,924 0 7,924 Loans and borrowings— 7,396 — 7,396 
Warrant liabilityWarrant liability0 0 23,912 23,912 Warrant liability— — 2,205 2,205 
Convertible notesConvertible notes0 27,266 0 27,266 Convertible notes— 17,699 — 17,699 
Total LiabilitiesTotal Liabilities$0 $35,190 $23,912 $59,102 Total Liabilities$— $25,095 $2,205 $27,300 
As of December 31, 2020
Assets:
Investment – Cansativa0 0 1,553 1,553 
Total Assets$0 $0 $1,553 $1,553 
Liabilities:
Loans and borrowings$0 $6,701 $0 $6,701 
Warrant liability0 0 19,061 $19,061 
Convertible notes0 27,142 0 $27,142 
Total Liabilities$0 $33,843 $19,061 $52,904 

DuringInvestment – 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 March 31, 2021June 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 December 31, 2020, there were no transfers betweencarries 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 measurement levels.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, 2022:
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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)


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

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 as of June 30, 2022 and December 31, 2021:
As of
June 30,
2022		December 31,
2021
Risk-free interest rate2.99%1.11%
Expected volatility80%60%
Share Price$0.98$3.10
Exercise Price$11.50$11.50
Expiration dateDecember 18, 2025December 18, 2025

•The risk-free interest rate assumptions are 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.

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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:
March 31,
2021		 December 31,
2020		June 30,
2022		 December 31,
2021
Raw materialsRaw materials$1,083 $1,148 Raw materials$1,346 $1,477 
Work in progress – cultivated cannabisWork in progress – cultivated cannabis66 1,482 Work in progress – cultivated cannabis3,209 1,241 
Work in progress – harvested cannabis and extractsWork in progress – harvested cannabis and extracts2,670 274 Work in progress – harvested cannabis and extracts363 1,070 
Finished goods – cannabis extractsFinished goods – cannabis extracts7,478 7,003 Finished goods – cannabis extracts11,123 11,432 
Finished goods – otherFinished goods – other258 283 Finished goods – other699 188 
Total
Total
$11,555 $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 receivable2,209 2,322 
Deposits95 47 
Other receivable and advances266 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 996.819996.82 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 accountsaccounted 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.
The Company recorded its investment in Cansativa at the cost basis of an aggregated amount of EUR 999.915, approximately $1,075, which is comprised of EUR 3.096 for the initial nominal amount of the Seed Financing Round and EUR 996.819 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
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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 999.92, approximately $1,075, which is comprised of EUR 3.10 for the initial nominal amount of the Seed Financing Round and EUR 996.82 for the remaining Seed Financing Round (i.e., Capital Reserve Payment), with no transaction costs.

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 unexercisedun-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-installednewly 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 EUROEUR 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 salessale 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.

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 March 31,June 30, 2022 and 2021, the Company's share offrom the investment was $nil and net losses of $14, respectively. For the six months ended June 30, 2022 and 2021, the Company's share from the investment were $11. For the three months ended March 31, 2020 the Company's sharenet losses of $64 and net earnings from the investment were $10.


losses of $25, respectively.
7. BUSINESS COMBINATIONS
2020

Business Combination

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.

Pursuant to the Business Combination Agreement, each of the following transactions occurred in 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 par 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 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 result of the Merger, all 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.

In connection with the closing of the Business Combination, the Company's bylaws were amended and restated to, among other things, provide for an unlimited number of common shares without par value, an unlimited number of non-voting common shares without par value and an unlimited number of preferred shares without par value.

In connection with the Business Combination, SAMA obtained commitments (the “Subscription Agreements”) from 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 are holders of the 2022 Convertible Notes agreed to purchase shares of SAMA common stock in exchange for the transfer of the PIK Notes received in satisfaction of approximately $2,881 of accrued and outstanding interest under the 2022 Convertible Notes from January 1 to December 31,
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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)
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 exchange for our common shares, on a 1-for-one basis, in connection with the Closing.

The Business Combination is accounted for as a recapitalization in accordance with U.S. GAAP. Under this method of accounting, SAMA was treated as 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 goodwill or other intangible assets recorded.

The following table reconciles the elements of the Business Combination to the consolidated statement of cash flows and the consolidated statement of shareholders’ equity for the year ended December 31, 2020:

Recapitalization
Cash - SAMA trust and cash, net of redemptions$86,644 
Cash - SAMA PIPE6,000 
Non-cash PIK(2,881)
Cash assumed from SAMA698 
Cash consideration to certain Clever Leaves shareholders(3,057)
Less: transaction costs and advisory fees(13,895)
Net Business Combination$73,509 
Non-cash PIK2,881 
Deferred issuance costs1,503 
Warranty liability(29,841)
Net liabilities assumed from SAMA(258)
Net contributions from Business Combination$47,794 

See Note11. for more information on all capital stock issuances.

8. INTANGIBLE ASSETS, NET

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, duringas part of the Herbal Brand acquisition in 2019, the Company acquired finite-lived intangible assets with a gross value of approximately $7,091 as part of its Herbal Brands acquisition.$7,075. During the three months ended March 31,June 30, 2022 and 2021 and 2020 the Company recorded approximately $390$191 and $217,$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.

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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 March 31, 2021June 30, 2022 and December 31, 2020.2021. The value of product formulation intangible asset is included in the value of Brand:
March 31, 2021June 30, 2022
Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Carrying
Amount		 Weighted-
Average
Useful Life
(in Years)		 Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Carrying
Amount		 Weighted-
Average
Useful Life
(in Years)
Finite-lived intangible assets:
Finite-lived intangible assets:
 
Finite-lived intangible assets:
       
Customer contractsCustomer contracts$925 $725 $200 0.2Customer contracts$925 $925 $— 0.0
Customer relationshipsCustomer relationships1,000 350 650 4.1Customer relationships1,000 578 422 3.3
Customer listCustomer list650 249 401 3Customer list650 412 238 1.8
BrandBrand4,516 878 3,638 8Brand4,500 1,425 3,075 6.8
Total finite-lived intangible assetsTotal finite-lived intangible assets$7,091 $2,202 $4,889 Total finite-lived intangible assets$7,075 $3,340 $3,735 
Indefinite-lived intangible assets:
Indefinite-lived intangible assets:
Indefinite-lived intangible assets:
LicensesLicenses$19,000 N/A$19,000 Licenses$19,000 N/A$19,000 
Total indefinite-lived intangible assetsTotal indefinite-lived intangible assets$19,000 N/A$19,000 Total indefinite-lived intangible assets$19,000 N/A$19,000 
Total intangible assetsTotal intangible assets$26,091 $2,202 $23,889 Total intangible assets$26,075 $3,340 $22,735 
December 31, 2020December 31, 2021
Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Carrying
Amount		 Weighted-
Average
Useful Life
(in Years)		 Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Carrying
Amount		 Weighted-
Average
Useful Life
(in Years)
Finite-lived intangible assets:
Finite-lived intangible assets:
 
Finite-lived intangible assets:
       
Customer contractsCustomer contracts$925 $525 $400 0.5Customer contracts$925 $925 $— 0.0
Customer relationshipsCustomer relationships1,000 304 696 4.4Customer relationships1,000 487 513 3.4
Customer listCustomer list650 217 433 3.3Customer list650 346 304 2.3
BrandBrand4,516 766 3,750 8.3Brand4,500 1,200 3,300 7.3
Total finite-lived intangible assetsTotal finite-lived intangible assets$7,091 $1,812 $5,279 Total finite-lived intangible assets$7,075 $2,958 $4,117 
Indefinite-lived intangible assets:
Indefinite-lived intangible assets:
Indefinite-lived intangible assets:
LicensesLicenses$19,000 N/A$19,000 Licenses$19,000 N/A$19,000 
Total indefinite-lived intangible assetsTotal indefinite-lived intangible assets$19,000 N/A$19,000 Total indefinite-lived intangible assets$19,000 N/A$19,000 
Total intangible assetsTotal intangible assets$26,091 $1,812 $24,279 Total intangible assets$26,075 $2,958 $23,117 

2020 Interim Impairment Testing - Finite-Lived Intangibles

In accordance with ASC Topic 350, “Intangibles – Goodwill and Other,” the Company performs its annual impairment test as
of December 31 of each year. As part of the 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 carrying value of its 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 2021 annual 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-livedIn performing such review, the Company makes judgments about the recoverability of purchased finite lived intangible assets consisting of certain of the Company’s licenses, were reviewed as part of thewhenever events or changes in circumstances indicate that an impairment assessment during the first quarter of 2020 similar to goodwill, in accordancemay exist. The Company recognizes an impairment if
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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 anthe carrying amount of the long-lived asset group exceeds the Company’s estimate of the asset group’s undiscounted future cash flows.

Significant assumptions used in the 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 carrying valueCannabinoid segment, our estimated revenue projections reflect that Decree 811 that was followed by the passing of anythe 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 regulation and the technical guidelines for commercializing dried flower and medicinal-grade cannabis extracts.

Indefinite-lived intangible assets, consisting of certain of the Company’s finite or indefinite-lived intangible assets as a resultlicenses, were reviewed for the annual impairment assessment during the fourth quarter of the impairment assessments performed as of March 31, 2020.2021 similar to goodwill, in accordance with ASC 350.

For each of the three and six months ended March 31,June 30, 2022 and June 30, 2021, and 2020, 0no 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 as of December 31 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 as of March 31, 2021:June 30, 2022:
Estimated
Amortization
Expense
2022$1,728 
2023702 
2024585 
2025542 
2026542 
Thereafter790 
Total$4,889 

Estimated
Amortization
Expense
2022$412 
2023715 
2024542 
2025542 
2026482 
Thereafter1,042 
Total$3,735 

9. GOODWILL

The following table presents goodwill by segment:Impairment Testing

CannabinoidNon- CannabinoidTotal
Balance at December 31, 2020$18,508 $0 $18,508 
Balance at March 31, 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 duringDuring the three months ended March 31, 2021.

In accordance with ASC Topic 350, “Intangibles – Goodwill and Other,”fourth quarter of 2021, the Company performs its annual impairment test as of December 31 of each year. The Company also reviews goodwill for impairment wheneverassessed whether there were events or changes in circumstances that would indicate that our goodwill may have been impaired. The Company 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 result, the Company determined that it was more likely than not that the carrying value of its cannabinoid operating segment exceeds the fair value as of the year end testing date. Based upon the Company's 2021 annual goodwill may not be recoverable. After the close of each interim quarter, management assesses whether there exists any indicators of impairment requiringtest, the Company to perform an interimconcluded 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 analysis.charge related to the cannabinoid segment, as a result, the Company had no goodwill on the statement of financial position as of December 31, 2021.

For 2020, the Company performed a qualitative assessmentthree and six months ended June 30, 2021, no impairment was recognized related to determine whether indicatorsthe carrying value of impairment existed. goodwill.

The Company considered, among other factors,calculated the financial performance, industry conditions, as well as macroeconomic developments. Based upon such assessment,fair value of the Company determined that itoperating segments using discounted estimated future cash flows. The weighted-average cost of capital used in testing the reporting unit for impairment was not more-likely-than-not that an impairment existed as14%, with a perpetual growth rate of December 31, 2020. There were no further indicators of impairment during the first quarter of 2021.3%.

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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. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following:
June 30,
2022		 December 31,
2021
Land$5,065 $5,065 
Building & warehouse16,251 13,381 
Laboratory equipment6,379 6,295 
Agricultural equipment2,476 2,404 
Computer equipment1,723 1,681 
Furniture & appliances827 852 
Construction in progress (a)
2,688 5,709 
Other1,252 1,247 
Property, plant and equipment, gross36,661 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 Company's Colombian and Portugal facilities
11. DEBT
March 31,
2021		 December 31,
2020
Series D Convertible Notes due March 2022(a)
$27,266 $27,142 
Herbal Brands Loan due May 2023 and other borrowings7,924 6,701 
Ending balance
$35,190 $33,843 
____________
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 portion526 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, net1,609 1,687 
Total debt, long term$1,609 $7,587 
Ending balance$2,135 $25,095 
(a)NetConvertible Note, current portion is reflected net of debt discount and debt issuance costs of $2,197 as of December 31, 2021.
(b)Herbal Brand's Loan, non-current is reflected net of debt issuance costs of $410 in as of $608 and $741 in 2021 and 2020, respectively.December 31, 2021.

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 bear interest of 8.00% per annum, payable quarterly in arrears, and are 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 are guaranteed by the Company’s subsidiaries and secured by 1,300,002 common shares of pledged equity interests in specific subsidiaries.
A noteholder may 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 may 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 is 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 sand subsequent changes to their fair are not recognized; and 2) 2022 Convertible Notes are 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 approximately $30,258 of Class C Preferred Shares and approximately $27,750 of Series D convertible debt on its statement of financial position.
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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 March 2020, the Company amended certain terms of its 2022 Convertible Notes. As a result of this amendment the Company amended 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 may 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 is 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 proposes 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 does 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) have 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 have 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 become 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 will be amended such that Holdco and certain of its subsidiaries, as the case may be, will, in connection with the Business Combination, pledge 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.
Herbal Brands Loan due May 2023

In AprilMay 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 bearsbore 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
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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)
maturity date of May 2, 2023 and requiresrequired the Company to repay, on a quarterly basis, 85% of positive operating cash flows. The Company cancould 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. ThisThe 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. SeeFor more information, refer to Note 11. for further details regarding12.
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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 agreednet debt to deferEBITDA 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 Combinationbusiness 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 three months ended March 31,June 30, 2022 and 2021, and 2020, the Company recognized interest expense of approximately $202$476 and $157,$188, respectively, from the Herbal Brands Loan and repaid principal of approximately NaN$5,642 and NaN,$1,107, respectively, of the Herbal Brands Loan in accordance with the terms of the loan agreement. The
For the six months ended June 30, 2022 and 2021, the Company expects to repayrecognized interest expense of approximately $1,000 to $1,300$715 and $390, respectively, from the Herbal Brands Loan and repaid principal of approximately $5,642 and $1,107, respectively, of the Herbal Brands Loan in 2021.

Other Borrowings

Portugal line of credit

In January 2021, Clever Leaves Portugal Unipessoal LDA borrowed EUR 1.00 million (the "Portugal Line of Credit"), from a local lender (the "Portugal Lender") underaccordance with the terms of its credit linethe loan agreement. The Portugal Line of Credit pays interest quarterly at a rate of Euribor plus 3.0 percentage points. Principal will be repaid through quarterly installments of approximately EUR 62,500 beginning February 28, 2022. As of March 31, 2021, the full amount borrowed was outstanding under the Portugal Line of Credit.


11. CAPITAL STOCK
Common Shares

As of March 31,June 30, 2022, there was no outstanding principal balance, including interest, of the Herbal Brands Loan.

2024 Note Purchase Agreement

On July 19, 2021, the Company's amendedCompany entered into a Note Purchase Agreement with Catalina LP (“the "Note Purchase Agreement") and restated articlesissued a secured convertible note (the "Convertible Note") to Catalina LP (“Catalina”), 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 provided for an unlimited numbermaturity three years from the date of votingissuance and interest accrual at a rate of 5% per annum from the date of issuance. Interest on the Convertible Note was payable on 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 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 an unlimited numberthe noteholder could redeem all or a portion of non-votingthe outstanding principal and accrued interest owing under the Convertible Note into common shares, without par value.at a per share
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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)
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.

Preferred SharesIf 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 March 31, 2021, the Company's amendedinception 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 restated certificatedetermined that in order for the Convertible Note to be subject to ASC 480, there must be a 90% likelihood of incorporation provided for an unlimitedsettlement using a variable number of preferred shares without par value. Assuch that the monetary value is substantially fixed. Based upon the overall assessment of March 31,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 had no preferred shares issuedanalyzed the convertible instrument for a beneficial conversion feature in accordance with ASC 470-10 and outstanding.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.
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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)
Business Combination
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.

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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, a total of 39,599,409 and 26,605,797 common shares were issued and outstanding, respectively.
Preferred Shares

As of June 30, 2022 and December 31, 2021, the Company had no preferred shares issued and outstanding.

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 1,562,339issued 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 one-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 9,654,721the 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 stockEquity 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 theseof the Equity Distribution Agreement, the Company may issue and sell its common shares, would be releasedwithout 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 reserveunder the Equity Distribution Agreement have been made, and any such future sales will be releasedmade, pursuant to the Sponsor ifCompany’s effective registration statement on Form S-3 (File No.
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CLEVER LEAVES HOLDINGS INC.
Notes to the closingUnaudited 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'sAgent.

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 willrequested by the Company to be releasedsold, 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 priceterms 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. Asgross 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. DuringATM and Equity Distribution Agreement during the three months ended March 31, 2021,June 30, 2022. As of June 30, 2022, the conditionCompany 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% ofCompany raised additional financing pursuant to its ATM program and the share reserve was met and therefore 570,212 share are included in the Company's statement of shareholders equity.Equity Distribution Agreement. For more information, refer to Note 20.

Warrants

As of March 31, 2021,June 30, 2022, excluding the Rock Cliff warrants, the Company had outstanding 12,877,36012,877,361 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.

AsIn accordance to ASC 815, certain provisions of March 31, 2021,private warrants that do not meet the Company received total proceeds of $1,410 from the exercise of 122,640 of its public warrants by their holders.

The private warrantscriteria 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 at March 31, 2021,of June 30, 2022, the Company performed a valuation of the private warrants and as a result recorded a lossnet gain on remeasurement for the three and six months ended June 30, 2022, of approximately $4,851$1,323 and $1,813, respectively, in its statement of operations and comprehensive loss.operations.

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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)
TheAs of June 30, 2021, the Company determinedperformed a valuation of the fair value of its private warrants usingand as a result recorded, in the Monte Carlo simulation model. The following assumptions were used to determinestatement of operations, a net gain on remeasurement for the fair valuethree months ended June 30, 2021 of approximately $1,176 and net loss on remeasurement for the Private Warrants at March 31, 2021:
March 31,six months ended June 30, 2021,
Risk-free interest rate1.00%
Expected volatility60%
Share price$10.29
Exercise price$11.50
Expiration dateDecember 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 and implied volatility of public warrants.

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 noteholders. The warrants vest when the 2022 Convertible Note issued to the warrantholder is converted into shares and expire on March 30, 2023. The warrants will be cancelled if the 2022 Convertible Note issued to the warrantholder is repaid.

approximately $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.

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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)
12.13. GENERAL AND ADMINISTRATION
The components of general and administrative expenses were as follows:
Three months endedThree Months Ended June 30,Six Months Ended June 30,
March 31,
2021		 March 31,
2020		2022202120222021
Salaries and benefitsSalaries and benefits$3,326 $4,546 Salaries and benefits$3,856 $3,660 $8,405 $6,986 
Office and administrationOffice and administration1,186 628 Office and administration1,237 1,280 2,360 2,466 
Professional feesProfessional fees2,234 1,396 Professional fees1,360 1,573 3,079 3,807 
Share based compensationShare based compensation1,550 416 Share based compensation1,148 3,323 1,648 4,873 
RentRent260 465 Rent388 397 790 657 
Other(a)Other(a)186 669 Other(a)24 68 (8)(24)
Total
Total
$8,742 $8,120 
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
13. SHARE-BASED COMPENSATION

Clever Leaves Holdings Inc. 2020 Incentive Award Plan

In connection with – With the Business Combination,recent passage of Regulation 227 in February 2022 and the Joint Resolution 539 of 2022 by the Colombian Government in April 2022, the Company adopted the Clever Leaves Holdings Inc. 2020 Incentive Award Plan (the “2020 Plan”) which provideswill be able to export cannabis flower for medicinal use. With this significant new opportunity opening up, the Company to grant incentive stock options, nonqualified stock options, restricted share unitsevaluated its current production capacity for cannabis extracts and other shares-based awards to its employees, directors, officers, outside advisors and non-employee consultants.

thus
As of March 31, 2021, the Company has reserved 2,813,215 common shares for issuance to its employees, directors, outside advisors and non-employee consultants pursuant to the 2020 Plan. Unless otherwise provided, at the time of grant, the options issued pursuant to the 2020 Plan generally expire ten years from the date of grant and generally vest over four years, with 25% of the award vesting in four equal installments. As of March 31, 2021 and December 31, 2020, 2,423,388 and 2,813,215 shares, respectively, were available for future grants of the Company’s common shares under the 2020 Plan.

Clever Leaves Holdings Inc. 2020 Earnout Award Plan

In connection with the Business Combination, the Company adopted the Clever Leaves Holdings Inc. 2020 Earnout Award Plan (the “Earnout Plan”). The purpose of the Earnout Plan is to provide equity awards following the Closing Date to certain directors, employees and consultants that have contributed to the Business Combination. Under the Earnout Plan, (i) shares constituting 50% of the share reserve will be issued only if the closing price of the Company's common shares on Nasdaq equals or exceeds $12.50 per share (as adjusted for shares splits, reverse splits, stock dividends, reorganizations, recapitalizations or any similar event) 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% of the share reserve will be issued only if the closing price 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 or any similar event) for any 20 trading days within any consecutive 30 trading day period on or before the fourth anniversary of the Closing. Equity awards granted prior to these hurdles being met will vest only if the applicable hurdles are achieved; equity awards granted following the hurdles being achieved need not include the hurdles. In addition, the Company’s board of directors may choose to impose additional vesting conditions. As of March 31, 2021 and December��31, 2020, 401,282 and 1,440,000 shares, respectively, were available for future grants of the Company’s common shares under the Earnout Plan. As of March 31, 2021, 1,038,718 shares have been granted under the Earnout Plan.
The 2018 Plan, 2020 Plan, and Earnout Plan are administered by the Company’s board of directors or, at the discretion of the Company’s board of directors, by a committee thereof. The exercise prices, vesting and other restrictions are determined at the
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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)
discretionidentified the need to scale back on some of the Company’s boardextraction capacity and related assets. Excess assets, including a large extractor, was identified and abandoned for a total of directors, or$2,773 during the three months ended March 31, 2022.

Reduction-in-workforce - The Company approved plans to reduce its committee if so delegated. The Company’s boardworkforce in various departments across multiple geographies to effectively align its resources and manage operating costs, which resulted in a total charge of directors valuesapproximately $1,235 of severance costs for the Company’s common shares, taking into considerationthree months ended March 31, 2022 related to the most recently available valuation thereof performed by third parties, as well as additional factors which may have changed since the dateworkforce reductions. As of June 30, 2022, we paid $388 and reversed $135 of the most recent contemporaneous valuation throughtotal $1,235 of severance costs. At June 30, 2022, the datebalance of grant.$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 Award ValuationCompensation Expense

The following table presentssummarizes the weighted-average assumptions usedCompany's share-based compensation expense for each of its awards, included in the Black-Scholes-Merton option pricing model to determineConsolidated Statements of Operations for the fair value of stock optionsthree and RSUs granted during periods presented:
Three Months Ended
March 31, 2021
Expected term5.00 - 6.25
Risk-free interest rate0.78 - 1.02%
Expected dividend yield0.0%
Expected volatility90%
six months ended June 30, 2022.

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Share-based compensation award type:
Stock Options85 365 270 721 
RSUs1,063 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.
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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 summarizesis 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
Balance as at December 31, 2020896,888 $5.22 3.96$2,889 
Granted51,434 $14.40 9.92
Exercised0 $0 — $0 
Forfeited0 $0 — 
Balance as at March 31, 2021948,322 $6.15 4.06$3,922 
Vested and expected to vest as at March 31, 2021937,041 $6.10 4.07$3,923 
Vested and exercisable as at March 31, 2021494,776 $6.17 3.71$2,102 
Stock Options
Weighted-Average
Exercise Price
 
Weighted-Average
Remaining
Contractual
Term (Years)
Aggregate Intrinsic Value
Balance as at December 31, 2021784,193 $5.91 3.68$— 
Granted23,114 $2.16 9.55— 
Exercised(158,882)$0.24 — $130 
Forfeited(48,579)$10.00 — — 
Expired(101,048)$6.28 — — 
Balance as of June 30, 2022498,798 $6.70 2.83$— 
Vested and expected to vest as of June 30, 2022488,265 $6.61 2.76$— 
Vested and exercisable as of June 30, 2022367,724 $6.27 2.11$— 

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 awardsstock-options granted during the threesix months ended MarchJune 30, 2022 and 2021 was $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 $10.60.$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 March 31, 2021:
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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)

Restricted Share Units
Weighted-Average
Grant Date Fair Value
Unvested as of December 31, 202078,634 $3.25 
Granted338,393 14.33 
Vested(7,713)14.40 
Canceled/forfeited0 0 
Unvested as of March 31, 2021409,314 $12.47 
The following table summarizes the changes in the Company’s time-based restricted share unit activity during the six months ended June 30, 2022:

The total fair value of time-based RSUs vested during the three months ended March 31, 2021 and 2020 was $111 and NaN, respectively.
Restricted Share Units
Weighted-Average
Grant Date Fair Value
Non-vested as of December 31, 2021502,701 $10.93 
Granted2,004,324 2.53 
Vested(252,083)9.27 
Canceled/forfeited(637,177)3.43 
Non-vested as of June 30, 20221,617,765 $3.74 

Market-based Restricted Share Units

During the three months ended March 31, 2021, theThe 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 four4 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 threesix months ended March 31, 2021:June 30, 2022:

Three Months Ended
March 31, 2021Weighted Average Assumptions
Grant date share price$14.402.53 
Risk-free interest rate0.51.6 %
Expected dividend yield0.0 %
Expected volatility9075 %
Expected life (in years)1.82.54 - 3.82.36


The following table summarizes the changes in the Company’s market-based restricted share unit activity during the threesix months ended March 31, 2021:June 30, 2022:
Restricted Share Units
Weighted-Average
Grant Date Fair Value
Unvested as of December 31, 20200 $0 
Granted1,038,718 13.89 
Vested0 0 
Canceled/forfeited0 0 
Unvested as of March 31, 20211,038,718 $13.89 

NaN market-based RSUs vested during the three months ended March 31, 2021 and 0 RSUs were granted during the three months ended March 31, 2020.

Share-Based Compensation Expense

During the three months ended March 31, 2021 and 2020, the Company recognized share-based compensation expense related
Restricted Share Units
Weighted-Average
Grant Date Fair Value
Non-vested as of December 31, 20211,073,331 $12.94 
Granted— — 
Vested(35,268)13.91 
Canceled/forfeited(285,539)12.77 
Non-vested as of June 30, 2022752,524 $12.96 
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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)
16. REVENUE

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 stock optionscustomers. The Company’s policy is to record revenue when control of $356the goods transfers to the customer. The Company evaluates the transfer of control through evidence of the customer’s receipt and $416, respectively,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 generaltime, and administrative expenserevenue 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 consolidated statementperiod in which the Company's right to the consideration is unconditional. The Company's contract liabilities consist of operations. The stock-based compensation expense related to unvested stock option awards not yet recognized as of March 31, 2021 and 2020 was $2,472 and $370, respectively,advance payment from a customer, which is expected to be recognized over a weighted-average periodclassified on the Consolidated Statements of 1.8 yearsFinancial Position as current and 2.5 years,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.

During the three months ended MarchAs of December 31, 2021, the Company's deferred revenue, included in current and 2020, the Company recognized share-based compensation expense related to its RSUs of $1,194non-current liabilities was $653 and NaN, respectively, in general and administrative expense in the consolidated statement of operations. The total compensation cost related to unvested RSU awards not yet recognized as of March 31, 2021 and 2020 was $18,602 and NaN, respectively, which is expected to be recognized over a weighted-average period of 3.2 years and 0 years,$1,548, respectively.
The Company recognized total share-based compensation expense of $1,550 and $416 for the three months ended March 31, 2021 and 2020, respectively, in general and administrative expense in the consolidated statement of operations. Share-based compensation costs were not tax deductible for the periods presented.


14.17. 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 profitprofit/(loss) to consolidated incomeincome/(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.

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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 March 31, 2021,June 30, 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 beare 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 homeopathicnutraceuticals 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.

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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:
Three months ended
 March 31,
2021		March 31,
2020
Segment Net Sales:
Cannabinoid$677 $242 
Non-Cannabinoid2,800 2,672 
Total Net Sales3,477 2,914 
 
Segment Profit (Loss):
Cannabinoid(2,864)(5,401)
Non-Cannabinoid612 480 
Total Segment Loss$(2,252)$(4,921)
 
Reconciliation:
Total Segment Loss(2,252)(4,921)
Unallocated corporate expenses(3,387)(1,804)
Non-cash share based compensation(1,550)(416)
Depreciation and amortization(579)(352)
Goodwill impairment0 (1,682)
Loss from operations$(7,768)$(9,174)
 
Loss on fair value of derivative instrument0 13 
Loss(gain) on remeasurement of warrant liability4,851 0 
Loss on investments0 161 
Foreign exchange loss759 48 
Interest expense978 836 
Miscellaneous, net(602)(57)
Loss from operations before income taxes$(13,754)$(10,175)

During the three months ended March 31, 2021 and 2020, revenues from GNC and its affiliates accounted for approximately 19% and 36% of the Company’s net sales; the net sales attributable to the GNC are reflected in the non-cannabinoid segment. 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 and Australia.
March 31,
2021		December 31,
2020
Long-lived assets
  
Cannabinoid$27,148 $25,485 
Non-Cannabinoid162 176 
Other(a)
26 19 
 $27,336 $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,
 2022202120222021
Segment Net Sales:
Cannabinoid$1,299 $579 $3,290 $1,256 
Non-Cannabinoid3,358 3,093 6,591 5,893 
Total net sales4,657 3,672 9,881 7,149 
 
Segment Profit (Loss):
Cannabinoid(5,338)(3,604)(13,026)(6,468)
Non-Cannabinoid666 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 loss307 80 — 652 839 
Interest and amortization of debt issuance cost652 920 — 2,770 1,898 
Other expense (income), net63 (485)— 10 (1,087)
Loss before loss from equity investment$(1,046)$(8,942)$(17,122)$(22,696)
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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 revenuesrevenue by channel for the for the periods presented:
 Three months ended
 March 31,
2021		March 31,
2020
Mass retail$1,888 $1,021 
Specialty, health and other retail225 312 
Distributors1,232 1,339 
E-commerce132 242 
$3,477 $2,914 

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Mass retail$2,239 $1,721 $5,236 $3,609 
Distributors1,664 1,448 3,322 2,680 
Specialty, health and other retail560 350 952 575 
E-commerce194 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,
2022202120222021
United States$3,275 $3,092 $6,508 $5,892 
Israel385 $198 $1,023 $198 
Australia133 358 684 640 
Brazil277 4 920 146 
Germany408 — 552 — 
Other179 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 RevenuesPercentage of Accounts Receivable
Three Months Ended June 30,Six Months Ended June 30,June 30,December 31,
202220212022202120222021
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
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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 
Portugal12,145 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 lossincome 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:

Three Months EndedThree Months Ended June 30,Six Months Ended June 30,
March 31, 2021March 31, 20202022202120222021
Numerator:Numerator:Numerator:
Net lossNet loss$(13,765)$(10,186)Net loss$(1,046)$(8,956)$(17,186)$(22,721)
Denominator:Denominator:Denominator:
Weighted-average common shares outstanding - basic and dilutedWeighted-average common shares outstanding - basic and diluted25,030,080 8,304,030 Weighted-average common shares outstanding - basic and diluted39,559,793 25,588,987 33,792,261 25,311,077 
Net loss per share attributable to Clever Leaves Holdings Inc. common shareholders - basic and diluted$(0.55)$(1.23)
Net loss per common share- basic and dilutedNet 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.

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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 at March 31,as of June 30, 2022 and 2021, and 2020, from the computation of diluted net loss per share attributable to common shareholders because including them would have had an anti-dilutive effect:
March 31, 2021March 31, 2020
Common stock warrants17,850,460 0 
SAMA earnout shares570,211 0 
Stock options948,322 1,195,024 
Unvested restricted share units1,448,032 0 
Total20,817,025 1,195,024 

June 30, 2022June 30, 2021
Common stock warrants17,840,951 17,850,460 
SAMA earnout shares570,211 570,211 
Stock options498,798 802,769 
Unvested restricted share units2,370,289 1,442,943 
Total21,280,249 20,666,383 

19. LEASES

On January 1, 2022, we adopted the accounting standard ASC 842, Leases, using the modified retrospective method. We elected this adoption date as our date of initial application. As a result, we have not updated financial information related to, nor have we provided disclosures required under ASC 842 for, periods prior to 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 Company has entered into agreements under which we lease various real estate spaces in North America, Europe and Latin America, under non-cancellable leases that expire on various dates through calendar year 2029. Some of our leases include options to extend the term of such leases for a period from 12 months to 60 months, and/or have options to early terminate the lease. Some of our leases require us to pay certain operating expenses in addition to base rent, such as taxes, insurance and maintenance costs.

As the 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 in a similar economic environment.

Practical Expedients

The 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 Company does not recognize ROU assets or lease liabilities for leases with original terms or renewals of one year or less.

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

The operating lease costs in the 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 the fixed base rent payments and are excluded from the calculation of operating lease liabilities and ROU assets. For the three and six months ended June 30, 2022, cash paid for
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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)
amounts associated with our operating lease liabilities were approximately $475 and $898, respectively, which were classified as operating activities in the consolidated statement of cash flows.

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 June 30, 2022:

Leases and a reconciliation to the operating lease liabilities as of June 30, 2022
Remainder of Year 2022$819 
20231,422 
2024831 
2025281 
2026131 
Thereafter213 
Total future fixed operating lease payments$3,697 
Less: Imputed interest$332 
Total operating lease liabilities$3,365 
Weighted-average remaining lease term - operating leases2.97
Weighted-average discount rate - operating leases9.3 %

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 
20231,562 
2024845 
2025337 
2026152 
Thereafter286 
Total$5,092 

20. SUBSEQUENT EVENTS

Equity Distribution Agreement

On January 14, 2022, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Canaccord Genuity LLC, as sales agent (the “Agent”). Under the terms of the Equity Distribution Agreement, the Company may issue and sell its common shares, without par value, having an aggregate offering price of up to $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 ATM offering, for aggregate net proceeds of $3,051 and may issue and sell additional shares, subject to the limitations, as described in Note 12.
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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 companyoperator 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, peopleUnited 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 homeopathicnutraceutical 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. ThisWe 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’sour 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 ourOur customers and sales for our cannabinoid segment products are presentlymostly 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
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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.
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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 hasWe 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 March 31, 2021June 30, 2022 and 2020:2021:
Three months ended March 31, Three months ended June 30, 
Operational information:Operational information:20212020 ChangeOperational 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)
15,566 11,759  3,807  32 %
Kilograms (dry flower) harvested (a)
1,200 11,464  (10,264) (90)%
Costs to produce (b)
Costs to produce (b)
$2,044  $1,744  $300  17 %
Costs to produce (b)
$2,717 $2,476  $241  10 %
Costs to produce per gramCosts to produce per gram$0.13  $0.15  $(0.02) (13)%Costs to produce per gram$2.26 $0.22  $2.05  N/M
Selected financial information:Selected financial information:Selected financial information:
RevenueRevenue$663 $242  $421  N/MRevenue$1,299 $579  $720  124 %
Kilograms sold(c)
Kilograms sold(c)
2,476  1,256  1,220  N/M
Kilograms sold (c)
1,8322,401  (569) (24)%
Revenue per grams soldRevenue per grams sold$0.27  $0.19  $0.08  42 %Revenue per grams sold$0.71 $0.24  $0.47  196 %
N/M: Not a meaningful percentage.percentage
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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)
6,1844,877  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 March 31,June 30, 2022 and 2021 and 2020 we sold 2,4761,832 and 1,2562,401 kilograms, respectively, of dry flower equivalents.equivalent. For the three months ended March 31, 2021,June 30, 2022, our cannabinoidCannabinoid segment sales were primarily in Colombia, Australia, Israel, Germany and Brazil. The decrease in sale of dry flower equivalent for the Cannabinoid segment was primarily due the seasonality of our sales. Gross margin increased because lower revenue was offset by the higher margin of products sold, as evidenced by increased revenue per grams sold.
During the six months ended June 30, 2022 and 2021 we sold 6,184 and 4,877 kilograms, respectively, of dry flower equivalent. For the six months ended June 30, 2022, our Cannabinoid segment sales were primarily in Australia, Israel, Germany and Brazil. The increase in sale of dry flower equivalent for the Cannabinoid segment was primarily driven by the Company continued expansion of itsdue to increased sales activity for cannabinoid products.and selling more products which have higher margins.

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We harvested 15,5661,200 kilograms of cannabinoids in the three months ended March 31, 2021,June 30, 2022, as compared to 11,75911,464 kilograms in the three months ended March 31, 2020.June 30, 2021. The increasedecrease was attributable to a decrease in our planned production capacity at our Colombia and Portugal facilities to manage inventory levels.

We harvested 8,585kilograms of cannabinoids in the six months ended June 30, 2022, as compared to 27,023 kilograms in the six months ended June 30, 2021. The decrease was primarily attributable to the expansion ofa decrease in our cultivationplanned productions capacity at our Colombia and Portugal facilities in Colombia, as well as addition of production capacity in Portugal.to manage inventory levels.

Costs to produce were approximately $0.13$2.26 per gram of dry flower equivalent for the three months ended March 31, 2021,June 30, 2022, as compared to $0.15$0.22 per gram of dry flower equivalent for the three months ended March 31, 2020.June 30, 2021. The decrease in costs to produce per gram isincrease was primarily driven by the expansion of our cultivation facilitiessignificantly reduced agricultural output in Colombia and the resulting economies of scale, partly offset by higher cost per gramcontinued 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 $0.63 per gram of dry flower equivalent for the six months ended June 30, 2022, as compared to $0.18 per gram of dry flower equivalent for the six months ended June 30, 2021. The increase was primarily driven by our significantly reduced agricultural output in Colombia and continued extract processing costs on current inventory in Colombia, as well as expenses associated with our ramping cultivation capacity in Portugal.
Recent Developments

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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 are beinghave 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. Global stock markets have also experienced increased volatility and, in certain cases, significant declines.

Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions and the Company haswe have taken steps to obtain financial assistance made available from jurisdictional governments, however the Company expects its 2021we expect our future financial performance to continue to be impacted and result in a delay of certain of itsour go-to-market initiatives.

More recently, other, more infectious, variants of COVID-19 have been identified, which continue to spread throughout the 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 durationspread 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 impacttemporarily 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 as well as the effectiveness of government and central bank responses, remains unclear. It is not possible to reliably estimate the duration and severity of these consequences, nor their impact on the financial position and results of the Company for future periods.

We continue to monitor closely the impact of COVID-19, with a focus on the healthevolve and, safety ofat this time, we cannot predict when certain restrictions that remain in place to protect 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.

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 Annual Report on Form 10-K/A for the year ended December 31, 2020 ("2020 Form 10-K").

Portugal Licensing

In August 2020, we received a provisional license from the National Authority of Medicines and Health Products, the Portuguese pharmaceutical regulator (“INFARMED") to cultivate, import and export dried cannabis flower produced at our Portuguese cultivation site and in March 2021, we received our definitive license. Under the current license granted by INFARMED, our production facility in Portugal is currently cultivating cannabis for commercial purposes. Our Portugal facility received the Good Agricultural and Collection Practices (“GACP") certificate in March 2021. To maintain the GACP certificate, we must cultivate and operate under GACP guidelines.

These certificates mustcustomers will no longer be renewed annually.

needed.
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ClosingRecognizing that local conditions vary for our offices around the world and that the trajectory of the Business Combinationvirus 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 CombinationEquity 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, eachterms 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/oroffering 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 parequity 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 determinedon 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 receiveEquity Distribution Agreement, we may offer and sell our common shares as set forth inhaving 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.

Convertible Note Amendments

In connection with the Business Combination, on November 9, 2020, Clever LeavesCompany raised additional financing pursuant to its ATM program and the noteholders agreedEquity Distribution Agreement. For more information, refer to amend the terms of the 2022 Convertible NotesNote 20 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.

Following the closing of the Business Combination, the 2022 Convertible Notes remained outstanding, but are convertible into our common shares in accordance with their terms. For additional detail see " - Liquidity and Capital Resources - Debt - Convertible Note Amendments" our unaudited condensed consolidated interim financial statements for the three monthsperiod ended March 31, 2021 included in this Form 10-Q.of June 30, 2022.
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
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INFARMED, our production facility in Portugal is currently cultivating cannabis for commercial purposes. Our Portugal facility received the GACP certificate in March 2021. To maintain the GACP certificate, we must cultivate and operate under GACP guidelines.
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 beguncontinue to carry outgrow 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.
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•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 March 31, 2021June 30, 2022 compared to three and six months ended March 31, 2020June 30, 2021

Consolidated Statements of Net Loss DataOperations
(inIn thousands of U.S. dollars)
Three months ended March 31,
20212020
Revenue$3,477 $2,914 
Cost of sales(1,246)(753)
Gross profit2,231 2,161 
General and administrative expenses8,742 8,120 
Sales and marketing expenses678 1,181 
Goodwill impairment— 1,682 
Depreciation and amortization expenses579 352 
Loss from operations(7,768)(9,174)
Interest expense, net978 836 
Loss on remeasurement of warrant liability4,851 — 
Loss on investments— 161 
Loss on fair value of derivative instrument— 13 
Foreign exchange loss759 48 
Other (income) expenses, net(602)(57)
Total other expenses, net5,986 1,001 
Loss before income taxes(13,754)(10,175)
Current income tax recovery— — 
Deferred current income tax recovery— — 
Equity investments and securities loss11 11 
Net loss$(13,765)$(10,186)
Net loss attributable to non-controlling interest— (904)
Net loss attributable to Company$(13,765)$(9,282)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue$4,657 $3,672 $9,881 $7,149 
Cost of sales(3,353)(1,904)(6,539)(3,241)
Gross Profit1,304 1,768 3,342 3,908 
Expenses
General and administrative expenses8,013 10,301 16,274 18,765 
Sales and marketing expenses728 241 1,461 828 
Research and development359 305 771 583 
Restructuring expenses(135)— 3,873 — 
Depreciation and amortization expenses537 524 1,054 1,103 
Total expenses9,502 11,371 23,433 21,279 
Loss from operation(8,198)(9,603)(20,091)(17,371)
Other Expense (Income), net
Interest and amortization of debt issuance cost652 920 2,770 1,898 
(Gain) loss on remeasurement of warrant liability(1,323)(1,176)(1,813)3,675 
Gain on investment(6,851)— (6,851)— 
Loss on debt extinguishment, net— — 2,263 — 
Foreign exchange loss307 80 652 839 
Other expense (income), net63 (485)10 (1,087)
Total other (income) expenses, net(7,152)(661)(2,969)5,325 
Loss before income taxes and equity investment loss$(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)
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Revenue by Channel
(inIn thousands of U.S. dollars)
The following table provides our revenuesrevenue by channel for the three and six months ended March 31, 2021June 30, 2022 and 2020.2021.
Three months ended March 31,Three Months Ended June 30,Six Months Ended June 30,
202120202022202120222021
Mass retailMass retail$1,888 $1,021 Mass retail$2,239 $1,721 $5,236 $3,609 
DistributorsDistributors1,664 1,448 3,322 2,680 
Specialty, health and other retailSpecialty, health and other retail225 312 Specialty, health and other retail560 350 952 575 
Distributors1,232 1,339 
E-commerceE-commerce132 242 E-commerce194 153 371 285 
TotalTotal$3,477 $2,914 Total$4,657 $3,672 $9,881  $7,149 

Revenue

Revenue increased to $3,477$4,657 for the three months ended March 31, 2021 from $2,914June 30, 2022, as compared to $3,672 for the three months ended March 31, 2020.June 30, 2021. The increase was driven primarily by theincreased sales in both our Non-Cannabinoid and Cannabinoid segments. The increased sales in our Non-Cannabinoid segment were primarily driven by continued sales strength from mass retailers and specialty distributors. The growth in our Cannabinoid segment sales 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 Company expands itssix months ended June 30, 2021. The increase was driven by increased sales pipeline.in both our Non-Cannabinoid and Cannabinoid segments. The increased sales in our Non-Cannabinoid segment were primarily driven by continued sales strength from specialty distributors. The growth in our Cannabinoid segment sales reflects continued expansion of sales activity and selling more products which have higher margins.

Cost of sales

Cost of sales increased to $1,246$3,353 for the three months ended March 31, 2021June 30, 2022, as compared to $753$1,904 for the three months ended March 31, 2020.June 30, 2021. The increase iswas due to increase incosts 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 three months ended June 30, 2022 as compared to the comparable period in the prior year.

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

Operating expenses
(inIn thousands of U.S. dollars)
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Three months ended March 31,
 20212020Change
General and administrative$8,742 $8,120 $622  8 %
Sales and marketing678 1,181 (503) (43)%
Goodwill impairment— 1,682 (1,682)(100)%
Depreciation and amortization579 352 227  64 %
Total operating expenses$9,999 $11,335 
(as a percentage of revenue)  
General and administrativeN/MN/M
Sales and marketing19 %41 %
Goodwill impairment— %58 %
Depreciation and amortization17 %12 %
Total operating expensesN/MN/M
Three months ended June 30,
 20222021Change
General and administrative expenses$8,013 $10,301 $(2,288) (22)%
Sales and marketing expenses728 241 $487  202 %
Research and development359 305 $54  18 %
Restructuring expenses(135)— $(135) N/A
Depreciation and amortization expenses537 524 $13  2 %
Total operating expenses$9,502 $11,371 
(As a percentage of revenue)  
General and administrative expenses172 %281 %
Sales and marketing expenses16 %7 %
Research and development8 %8 %
Restructuring expenses(3)%— %
Depreciation and amortization expenses12 %14 %
Total operating expenses204 %310 %
N/M: Not a meaningful percentage

Six Months Ended June 30,
 20222021Change
General and administrative expenses$16,274 $18,765 $(2,491) (13)%
Sales and marketing expenses1,461 828 $633  76 %
Research and development771 583 $188  32 %
Restructuring expenses3,873 — $3,873  N/A
Depreciation and amortization expenses1,054 1,103 $(49) (4)%
Total operating expenses$23,433 $21,279 
(As a percentage of revenue)  
General and administrative expenses165 %262 %
Sales and marketing expenses15 %12 %
Research and development8 %8 %
Restructuring expenses39 %— %
Depreciation and amortization expenses11 %15 %
Total operating expenses237 %298 %
N/M: Not a meaningful percentage
Three months ended June 30, 2022 compared to three months ended June 30, 2021
General and administrative. General and administrative expenses increaseddecreased to $8,742$8,013 for the three months ended March 31, 2021 from $8,120June 30, 2022, as compared to $10,301 for the three months ended March 31, 2020. The increase wasJune 30, 2021, primarily due to higher legal and professional fees related to public company requirements, and higher office and administration expense, driven mainly by insurance costs. The increase was partlythe decrease in share-based compensation, in part offset by lower overall employee costs, driven by measures taken in response to the COVID-19 pandemic in 2020, mostly offset by an increase in share-based compensation.payroll related costs due to idle capacity.
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Sales and marketing. Sales and marketing expenses decreasedincreased to $678$728 for the three months ended June 30, 2022, as compared to $241 for the three months ended June 30, 2021. The increase in spending was related to the potential launch of cannabinoid products, combined with easing of cost controls measures imposed in the comparable prior year period to address the impact of the COVID-19 pandemic.

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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, 2021 from $1,181 for2022. During the three months ended March 31, 2020, primarily due to our cost control measures to address the impact from the COVID-19 pandemic.
Goodwill impairment. ForJune 30, 2022, we reversed approximately $135 of accrued charges and no additional restructuring charges were recognized during the three months ended March 31, 2020, the Company recognized a goodwill impairment of $1,682 related to our Herbal Brands business. For more information, see Note 8. and Note 10. to our 2020 Form 10-K.June 30, 2022.
Depreciation and amortization. Depreciation and amortization expenseexpenses increased slightly to $579$537 for the three months ended March 31, 2021June 30, 2022, from $352$524 for the three months ended March 31, 2020, primarilyJune 30, 2021. The increase is mainly associated with the increased fixed asset depreciation due to capital expenditures for the expansion of our cultivation and extraction assets. Additionally,assets in Portugal, partially offset by the increase is attributable to the higherlower amortization expensecosts recognized during the three months ended March 31, 2021June 30, 2022 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 was amortized, which was fully amortized as of June 30, 2021.
Six Months Ended June 30, 2022 compared to six months ended June 30, 2021
General and administrative. General and administrative expenses decreased to $16,274 for the six months ended June 30, 2022, as compared to $18,765 for the six months ended June 30, 2021, primarily due to the decrease in share-based compensation, in part offset by increase in payroll related costs due to idle capacity.

Sales and marketing. Sales and marketing expenses increased to $1,461 for the six months ended June 30, 2022, as compared to $828 for the six months ended June 30, 2021. The increase in spending was related to the potential launch of cannabinoid products, combined with easing of cost controls measures imposed in the comparable prior year period to address the impact of the COVID-19 pandemic.

Research and development. Research and development expenses increased to $771 for the six months ended June 30, 2022 as compared to $583 for the six months ended June 30, 2021. The increase is amortized.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 $3,873 related to asset write off, severances, and other related costs for the six months ended June 30, 2022.
Depreciation and amortization. Depreciation and amortization expenses decreased to $1,054 for the six months ended June 30, 2022, from $1,103 for the six months ended June 30, 2021. The decrease is mainly attributable to the lower amortization 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 the acceleration of the period over which the useful life of the GNC intangible asset 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 March 31,
20212020Change
Interest expense, net$978 $836 $142 17 %
Loss on remeasurement of warrant liability4,851 — 4,851 N/M
Loss on other investments— 161 (161)(100)%
Loss on fair value of derivative instrument— 13 (13)(100)%
Foreign exchange loss759 48 711 N/M
Other (income) expenses, net(602)(57)(545)N/M
Total$5,986 $1,001 $4,985 N/M
Three months ended June 30,
20222021Change
Interest and amortization of debt issuance cost$652 $920 $(268)(29)%
Gain on remeasurement of warrant liability(1,323)(1,176)(147)13 %
Gain on investment(6,851)— (6,851)N/M
Foreign exchange loss307 80 227 N/M
Other expense (income), net63 (485)548 (113)%
Total$(7,152)$(661)$(6,491)N/M
N/M: Not a meaningful percentage
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Six Months Ended June 30,
20222021Change
Interest and amortization of debt issuance cost$2,770 $1,898 $872 46 %
(Gain) loss on remeasurement of warrant liability(1,813)3,675 (5,488)(149)%
Gain on investment(6,851)— (6,851)N/A
Loss on debt extinguishment, net2,263 — 2,263 N/A
Foreign exchange loss652 839 (187)(22)%
Other income, net10 (1,087)1,097 (101)%
Total$(2,969)$5,325 $(8,294)(156)%
N/M: Not a meaningful percentage

Three months ended June 30, 2022 compared to three months ended June 30, 2021
Interest expense,and amortization of debt issuance cost, net. Interest expense,and amortization of debt issuance cost, net for the three months ended March 31, 2021 was $978June 30, 2022 decreased to $652, as compared to $836$920 for the three months ended March 31, 2020.June 30, 2021. The increasedecrease was primarily attributabledue to increasedthe interest expense associated with the additional paid-in-kind interest on2022 Convertible Note and the Herbal Brands loan, as well as higher debt issuance costs. The increase is partly offset byLoan in the lower interest ratecomparable prior year period.

Gain on the 2022 Convertible Notes following the 2020 Convertible Note Amendments. For additional details, see Note 10. to our unaudited condensed consolidated interim financial statementsremeasurement of warrant liability. Gain on remeasurement of warrant liability was $1,323 for the three months ended March 31, 2021 included in this Form 10-Q.
Loss on remeasurementJune 30, 2022, as compared to a gain of warrant liability. Loss on remeasurement was $4,851$1,176 for the three months ended March 31, 2021 compared to nil for the three months ended March 31, 2020.June 30, 2021. The loss isgains are directly attributable to the remeasurement of the warrant liability at March 31, 2021. For more information referas of June 30, 2022 and June 30, 2021, respectively, due to Note 11.the change in the underlying value related to our unaudited condensed consolidated interim financial statements for the three months ended March 31, 2021 included in this Form 10-Q.private warrants during those periods.
Loss
Gain on investmentsinvestments. . Loss on investment was nil for the three months ended March 31, 2021 compared to a loss of $161 for the three months ended March 31, 2020. The lossGain on investments for the three months ended March 31, 2020June 30, 2022 was primarily related$6,851, as compared to the decline in the carrying value of our investments in Lift & Co. shares and Cansativa.
Loss on fair value of derivative instrument. The loss$nil for the three months ended March 31, 2020June 30, 2021. The gain on investments for the three months ended June 30, 2022 was driven byrelated to the fair valuesale of Cansativa shares to an unrelated third-party and the revaluation of the underlying derivative instruments.Company's retained interest of the shares still held.

Foreign exchange loss. The impact of foreign exchange for the three months ended March 31, 2021June 30, 2022 was a loss of $759$307, as compared to a loss of $48$80 for the three months ended March 31, 2020.June 30, 2021. The foreign exchange losses for the three months ended March 31, 2021June 30, 2022, were primarily driven by the currency fluctuations of the Euro versus the U.S. Dollar.
Other (income) expenses, netincome.. Other (income) expenses, net includes costsitems not individually material to our consolidated financial statements.

Six Months Ended June 30, 2022 compared to six months ended June 30, 2021
Interest and amortization of debt issuance cost, net. Interest and amortization of debt issuance cost, net for the six months ended June 30, 2022 increased to $2,770, as compared to $1,898 for the six months ended June 30, 2021. The increase was primarily due to writing off of debt discount costs recognized in connection with the beneficial conversion factor related to the 2024 Convertible Note as the note was fully paid off in the three months ended June 30, 2022.
(Gain) loss on remeasurement of warrant liability. 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, 2021. The loss was primarily related to the debt extinguishment as a result of the amendment of the 2024 Note Purchase Agreement on January 13, 2022.
Foreign exchange loss. The impact of foreign exchange for the six months ended June 30, 2022 was a loss of $652, as compared to a loss of $839 for the six months ended June 30, 2021. The foreign exchange losses for the six months ended June 30, 2022, were primarily driven by the currency fluctuations of the Euro versus the U.S. Dollar.
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Other income. Other (income) expenses, net includes 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’sour 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 March 31, 2021June 30, 2022 included in this Form 10-Q.
Revenue by segment
(inIn thousands of U.S. dollars)
Three months ended March 31,
20212020
Segment Revenue:
Cannabinoid$677 $242 
Non-Cannabinoid2,800 2,672 
Total Revenue$3,477 $2,914 

Three months ended June 30,Six Months Ended June 30,
2022202120222021
Segment Revenue:
Cannabinoid$1,299 $579 $3,290 $1,256 
Non-Cannabinoid3,358 3,093 6,591 5,893 
Total revenue$4,657 $3,672 $9,881 $7,149 
Cannabinoid. Cannabinoid revenue increased to $677$1,299 for the three months ended March 31, 2021, from $242June 30, 2022, as compared to $579 for the three months ended March 31, 2020,June 30, 2021. For the six months ended June 30, 2022, Cannabinoid revenue increased to $3,290 as compared to $1,256 for the six months ended June 30, 2021. The increase in both periods was driven primarily by our continued pushkey customer contracts maturing and transitioning from preparation to expand our Cannabinoid sales operations.revenue generating phase.
Non-Cannabinoid. RevenueNon-Cannabinoid revenue increased to $3,358 for the three months ended March 31, 2021 increasedJune 30, 2022, as compared to $2,800 from $2,672 for$3,093 the three months ended March 31, 2020 and is attributableJune 30, 2021. For the six months ended June 30, 2022, non-cannabinoid revenue increased to $6,591 as compared to $5,893 for the Herbal Brands businesssix months ended June 30, 2021. The increase in both periods was driven primarily by stronger demand from specialty distributors combined with recovery of demand from COVID-19 that resulted in the U.S. The increase was partly driven by favorable mix.closure of store fronts or reduction in foot traffic for our retail partners in the prior period and increased sales efforts in various revenue channels.
Segment profit/loss
(inIn thousands of U.S. dollars)
Three months ended June 30,Change
20222021$%
Segment Profit/(Loss):
Cannabinoid$(5,338)$(3,604)(1,734)48 %
Non-Cannabinoid666 634 32 5 %
Total Segment Loss (a)
$(4,672)$(2,970)(1,702)57 %
Three months ended March 31,Change
20212020$%
Segment Profit/(Loss):
Cannabinoid$(2,864)$(5,401)2,537 (47)%
Non-Cannabinoid612 480 132 28 %
Total Segment Loss (a)
$(2,252)$(4,921)2,669 (54)%
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Six Months Ended June 30,Change
20222021$%
Segment Profit/(Loss):
Cannabinoid$(13,026)$(6,468)(6,558)101 %
Non-Cannabinoid1,014 1,246 (232)(19)%
Total Segment Loss (a)
$(12,012)$(5,222)(6,790)130 %
(a) For a reconciliation of segment profit/(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 March 31, 2021 June 30, 2022, included in this Form 10-Q.

Cannabinoid — Cannabinoid segment loss decreasedincreased to $2,864$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, primarily attributed to increased inventory provisions recognized in the three months ended June 30, 2022 due to aged, obsolete or unusable inventory and increased sales and marketing costs.


Cannabinoid segment loss 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, primarily due to the restructuring charges recognized during the three months ended March 31, 2021 from $5,401 for the three months ended March 31, 2020, primarily due to cost control measures implemented by us starting in the second quarter of 2020,2022 as well as increased sales of cannabinoid products. The decrease was partly offset by costs incurred from the expansionpart of our operations in Colombiastrategic initiatives targeted principally at reducing costs, enhancing organizational efficiency and Portugal.optimize its business model.
Non-Cannabinoid — Non-Cannabinoid segment profit increased to $612$666 for the three months ended March 31, 2021June 30, 2022, compared to $480a profit of $634 for the three months ended March 31, 2020.June 30, 2021. The increase iswas primarily attributable to cost control measures implemented duringincreased sales, partially offset by increased payroll related costs and sales and marketing costs.
Non-Cannabinoid segment profit decreased to $1,014 for the second quartersix months ended June 30, 2022, compared to a profit of 2020, which continued through$1,246 for the first quarter of 2021, as well assix months ended June 30, 2021. The decrease was primarily attributable to increased sales.payroll related costs and sales and marketing costs.

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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)
 Three months ended March 31, Six months ended June 30,
 2021 2020  2022 2021
Net cash used in operating activitiesNet cash used in operating activities $(10,627)$(7,221)Net cash used in operating activities $(18,584)$(19,496)
Net cash used in investing activities (2,216)(1,655)
Net cash provided by financing activities 2,633 16,966 
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities 897 (4,319)
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities (347)1,536 
Effect of foreign currency translation on cash and cash equivalentsEffect of foreign currency translation on cash and cash equivalents (75)(13)Effect of foreign currency translation on cash and cash equivalents (202)(106)
Cash, cash equivalents, and restricted cash beginning of periodCash, 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 periodCash, cash equivalents, and restricted cash end of period 69,175 21,275 Cash, cash equivalents, and restricted cash end of period 19,463 57,075 
(Decrease) increase in cash and cash equivalents $(10,285)$8,077 
Decrease in cash and cash equivalentsDecrease in cash and cash equivalents $(18,236)$(22,385)

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Cash flows used in operating activities
The changedecrease in net cash used by operating activities during the threesix months ended March 31, 2021June 30, 2022 compared to the threesix months ended March 31, 2020,June 30, 2021, was primarily related to changes in the use of working capital, partlyoperating assets and liabilities, driven by a decrease in accounts payable and other current liabilities as offset by a lower net loss, net of non-cash items.increase in prepaid expenses, accounts receivable and inventory.
Cash flows from investing activities
The increasedecrease in net cash used in investing activities during the threesix months ended March 31,June 30, 2022 compared to the six months ended June 30, 2021, comparedwas primarily related to lower capital expenditures in 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 March 31, 2020, was primarily related to higher capital expenditures in Portugal.June 30, 2022.
Cash flows from financing activities
The decrease in net cash provided by financing activities during the threesix months ended March 31, 2021,June 30, 2022 compared to the threesix months ended March 31, 2020,June 30, 2021, was primarily due todriven by the higherrepayment 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 debtissuance of shares under the Equity Distribution Agreement and equity financingsthe 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 quarter of 2020 compared to the first quarter of 2021.this Form 10-Q.

Sources of Liquidity

We have historically financed our operations through the issuance of shares, the saleissuance of convertible debenturesdebt 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 March 31, 2021,June 30, 2022 and December 31, 2020,2021, we had cash and cash equivalents of $68,724$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 $10,383.$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 revenuesrevenue from the sale of our available 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. During the three months ended June 30, 2022, we fully repaid its 2024 Convertible Note and 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 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, and did so as recently as the fourth quarter of 2020, 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.
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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.
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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'sour estimated liquidity needs during the twelve months from the issuance of the condensed consolidated interim financial statements for the threesix months ended March 31, 2021.June 30, 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 net debt outstanding as of MarchJune 30, 2022 and December 31, 2021 was $35,190. 2021was $2,135 and $25,095, respectively.
The balancedebt 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 2022remaining balance of the 2024 Convertible NotesNote 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, and the remaining debt of $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, net of principal repayments forand 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 and debt issuance costs.with accrued interest. For more information seerefer to Note 10.11 to our unaudited condensed consolidated interim financial statements for the three monthsperiod ended March 31, 2021of June 30, 2022 included in this Form 10-Q.
Total debt outstanding as of December 31, 2020 was $33,843. The balance is comprised of the 2022 Convertible Notes of approximately $27,750 issued in March 2019, the debt of $8,500 issued to finance the Herbal Brands acquisition in April 2019, as well as other borrowings, net of principal repayments for the Herbal Brands Loan and debt issuance costs.
Portugal Line of CreditDebt

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 CreditDebt pays interest quarterly at a rate of Euribor plus 3.03 percentage points. PrincipalThis 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 through quarterly installmentssix 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 62,500 beginning February 28, 2022. AsCOP$240,405 ($61) and nil, respectively, and repaid principal of Marchapproximately 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 LineCOP$4,369,984 ($1,059) and COP$4,592,095 ($1,153), respectively.
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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”).
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 requiresrequired Herbal Brands to repay 85% of positive operating cash flows. Herbal Brands cancould also choose to prepay a portion or the Herbal Brands Loan, subject to a fee equal to the greater of (1) zero, and (2) $2,337,$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 cancould be exercised in whole
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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'sour 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 are guaranteed by certain subsidiaries of Clever Leaves and are 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.

In connection with the Business Combination, on November 9, 2020, Clever Leaves and the noteholders agreed to amend the terms of the 2022 Convertible Notes to: (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 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 our common shares to the noteholders, at a price per share equal to 95% of 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 principal and any other amounts outstanding under the 2022 Convertible Notes up to the lesser of (a) $2,000, or (b) an amount equal to four times the average value of the daily volume of common shares traded during the 10-Day VWAP period, of the total amounts outstanding under the 2022 Convertible Notes at such time by issuing 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 proposes 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 Merger 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 does 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 Note Amendments”).

In connection with the November 2020 Convertible Note 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) have 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, the Company and their affiliates to complete the Business Combination, and have agreed to direct GLAS Americas LLC, as collateral agent in respect of the 2022 Convertible Notes, to further provide its consent therefor.

In connection with the consummation of the Business Combination, the Company, 1255096 B.C. Ltd., an indirect subsidiary of the Company, and Clever Leaves US, Inc. (as the surviving corporation of the Merger) each entered into a guarantee agreement in favor of GLAS Americas LLC, as the collateral agent, in respect of the 2022 Convertible Notes and became guarantors thereunder. In addition, 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 further amended and restated pursuant to a second amended and restated pledge
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agreement such that Clever Leaves pledged all of the shares in the capital of each of 1255096 B.C. Ltd. and Clever Leaves US, Inc. (as the surviving corporation of the Merger) in favor of the collateral agent. In addition, the Company pledged all of the shares in the capital of Clever Leaves in favor of the collateral agent, 1255096 B.C. Ltd. pledged all of the shares in the capital of Northern Swan International, Inc. in favor of the collateral agent, and Clever Leaves US, Inc. pledged all of the shares in the capital of NS US Holdings, Inc. in favor of the collateral agent, each pursuant to a pledge agreement.

Following the closing of the Business Combination, the 2022 Convertible Notes remained outstanding, but are convertible into our common shares in accordance with their terms. 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 noteholders. The warrants vest when the 2022 Convertible Note issued to the warrantholder is converted into shares and expire on March 30, 2023. The warrants will be cancelled if the 2022 Convertible Note issued to the warrantholder is repaid.

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.

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 March 31, 2021June 30, 2022 any potential liabilities resulting from claims we have received would not have a material adverse effect on our consolidated financial statements.

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 20202021 Form 10-K. There have been no material changes to our critical accounting policies and estimates since our 20202021 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.
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Item 4. Controls and Procedures
Evaluation of Controls and Procedures

Our management,Management, with the participation of ourthe 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 March 31, 2021. Our disclosureamended (the "Exchange Act"), means controls and other procedures of a company that are designed to ensure that information we are required to disclosebe disclosed by a company in the reports we filethat it files or submitsubmits 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 March 31, 2021June 30, 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;
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 structures to ensure that there is appropriate assignment of authority, responsibility, and accountability to enable remediation of
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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 March 31, 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;
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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.



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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 20202021 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 20202021 Form 10-K.

Item 5. Other Information
Not applicable.




4350

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).
4.2**4.3
Specimen Warrant Certificate of Clever Leaves Holdings Inc. (incorporated by reference to Exhibit 4.5 to Amendment No. 2 to the Registration Statement on Form S-4 (File No. 333-241707) filed with the SEC by Clever Leaves Holdings Inc. on November 9, 2020).
4.3**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).
4.5
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.
10.1
Amendment No. 4, dated as of January 26, 2021, by and among Clever Leaves International Inc., Clever Leaves Holdings Inc., and other parties named therein (incorporated (incorporate by reference to Exhibit 10.22 of the Annual4.3 to Current Report on Form 10-K filed10-Q file with the SEC by Clever Leaves Holdings, Inc. on March 30,May 17, 2021).
10.2*
2020 Incentive Award Plan of Clever Leaves Holdings Inc. (incorporated by reference to Exhibit 10.37 to the Registration Statement on Form S-1 (File No. 333-252241) filed with the SEC by Clever Leaves Holdings Inc. on January 19, 2021).
10.3*
Addendum to the Employment Agreement between Ecomedics S.A.S. and Julian Wilches effective as of February 25, 2021. (incorporated by reference to Exhibit 10.52 of the Annual Report on Form 10-K filed with the SEC by Clever Leaves Holdings Inc. on March 30, 2021).
10.4*
Employment Agreement, dated as of February 9, 2021, between NS US Holdings, Inc. and Henry R. Hague, III (incorporated by reference to Exhibit 10.55 to the Annual Report on Form 10-K for the year ended filed with the SEC by Clever Leaves Holdings Inc. on February 22, 2021).
31.1**
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 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.INSInline 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.SCHInline XBRL Taxonomy Extension Schema.Schema Linkbase Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase.Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase.Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase.Labels Linkbase Document
101.PRE101. PREInline XBRL Taxonomy Extension Presentation Linkbase.Linkbase Document
104Cover Page Interactive Date File - (formatted as Inline XBRL and contained in Exhibit 101)
__________
* Indicates management contract or compensatory plan or arrangement
** 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.
May 17, 2021August 11, 2022
By:/s/ Kyle DetwilerAndres Fajardo
Name:Kyle DetwilerAndres Fajardo
Title:Chief Executive Officer
(Principal Executive Officer)