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

FORM 10-Q
(Mark One)

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

For the quarterly period ended June 30, 2021

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 Floor
New York, NY
10017
(Address of principal executive offices)(Zip Code)

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

                                                        
(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 outstanding as of August 12, 2021 was 25,493,766 and 706,086, respectively.
1

Table of Contents
CLEVER LEAVES HOLDINGS INC.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
ITEM 1.
Unaudited Consolidated Statements of Financial Position as of June 30, 2021 and December 31, 2020
Unaudited Consolidated Statements of Operations and Comprehensive Loss for the
Six Months Ended June 30, 2021 and 2020
Three Months Ended June 30, 2021 and 2020
Unaudited Consolidated Statements of Shareholders’ Equity for the
Six Months Ended June 30, 2021 and 2020
Three Months Ended June 30, 2021 and 2020
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020
Notes to Unaudited Consolidated Financial Statements
ITEM 2.
ITEM 3.
ITEM 4.
PART II - OTHER INFORMATION
ITEM 1.
ITEM 1A.
ITEM 5.
ITEM 6.


2

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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 uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. 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 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 events in the future that we are not able to predict accurately or over which we have no control. Many risks, contingencies and uncertainties may cause 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;
the effects of the coronavirus on the global economy, on the global financial markets and on our business;
our ability to maintain the listing of our securities on Nasdaq;
our ability to retain our key employees;
the result of any future financing efforts; and
other factors that are more fully discussed in Part I, Item 1A of the Company's amended December 31, 2020 Form 10-K (the "Amended Annual Report" or "2020 Form 10-K") under the heading “Risk Factors” section, 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.


3

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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)

Note
June 30, 2021December 31, 2020
Assets
 
Current:  
Cash and cash equivalents$56,621 $79,107 
Restricted cash454 353 
Accounts receivable, net1,620 1,676 
Prepaids, advances and other3,790 3,174 
Other receivables1,843 1,306 
Inventories, net513,148 10,190 
Total current assets77,476 95,806 
 
Investment – Cansativa61,528 1,553 
Property, plant and equipment, net of accumulated depreciation of $4,365 and $3,356 for the six months ended June 30, 2021 and December 31, 2020, respectively
28,704 25,680 
Intangible assets, net8,923,498 24,279 
Goodwill8,918,508 18,508 
Other non-current assets58 52 
Total Assets
$149,772 $165,878 
 
Liabilities
Current:
Accounts payable$3,258 $4,429 
Accrued expenses and other current liabilities3,046 4,865 
Current portion of Convertible notes1027,119  
Warrant liability22,736 19,061 
Deferred revenue435 870 
Total current liabilities56,594 29,225 
Convertible notes10 27,142 
Loans and borrowings106,559 6,701 
Deferred revenue1,565 1,167 
Deferred tax liabilities5,700 5,700 
Other long-term liabilities532 693 
Total Liabilities
$70,950 $70,628 
 
Shareholders’ equity
Common shares, without par value, unlimited shares authorized: 25,629,641 and 24,883,024 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
11  
Preferred shares, without par value, unlimited shares authorized, nil shares issued and outstanding for each of June 30, 2021 and December 31, 2020
11  
Additional paid-in capital170,557 164,264 
Accumulated deficit(91,735)(69,014)
Total equity attributable to shareholders$78,822 $95,250 
Total liabilities and shareholders' equity
$149,772 $165,878 
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)

Six Months Ended June 30,Three Months Ended June 30,
Note2021202020212020
Revenue14$7,149 $4,853 $3,672 $1,939 
Cost of sales(2,584)(1,785)(1,338)(1,032)
Gross profit4,565 3,068 2,334 907 
Expenses
General and administrative1219,348 15,384 10,606 7,264 
Sales and marketing1,485 1,784 807 603 
Goodwill impairment9 1,682   
Depreciation and amortization1,103 717 524 365 
Total expenses21,936 19,567 11,937 8,232 
Loss from operations(17,371)(16,499)(9,603)(7,325)
Other Expense (Income), Net
Interest expense, net1,898 1,789 920 953 
Loss (gain) on remeasurement of warrant liability113,675  (1,176) 
Loss on investments 228  67 
Gain on fair value of derivative instrument   (13)
Foreign exchange loss839 359 80 311 
Other (income) expenses, net(1,087)48 (485)105 
Total other expense (income), net5,325 2,424 (661)1,423 
Loss before loss from equity investment $(22,696)$(18,923)(8,942)(8,748)
Equity investment share of loss25 16 14 5 
Net loss$(22,721)$(18,939)$(8,956)$(8,753)
Net loss attributable to non-controlling interest (1,648) (744)
Net loss attributable to Clever Leaves Holdings Inc. common shareholders15$(22,721)$(17,291)$(8,956)$(8,009)
Net loss per share attributable to Clever Leaves Holdings Inc. common shareholders - basic and diluted15$(0.90)$(1.91)$(0.35)$(0.82)
Weighted-average common shares outstanding - basic and diluted1525,311,077 9,052,317 25,588,987 9,800,604 




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
(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 $50,193 
Retroactive application of recapitalization11(10,962,579)(2)(5,988,957)(1)3— —  
Balance at December 31, 2019 (effect of recapitalization)8,304,030$  $ $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 $  $ $77,847 $(41,215)$3,791 $40,423 
Stock issuances2,015,148 — — — 14,021 — — 14,021 
Stock based compensation— — — — 296 — — 296 
Share repurchase(233,788)— — — (6,250)— — (6,250)
Exercise of stock options47,607 — — — 12 — — 12 
Net loss— — — — — (8,009)(744)(8,753)
Balance at June 30, 202010,132,997 $  $ $85,926 $(49,224)$3,047 $39,749 













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CLEVER LEAVES HOLDINGS INC.
Condensed Consolidated Statements of Shareholders’ Equity (continued)
(Amounts in thousands of U.S. Dollars, except share and per share data)
(Unaudited)

Common Share

Preferred Shares
Additional
Paid-in
Capital
Retained
(Deficit)
Total
Shareholders’
Equity
Shares$Shares$
Balance at December 31, 202024,883,024    164,264 (69,014)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 $  $ $167,224 $(82,779)$84,445 
Stock-based compensation expense    3,323  3,323 
Stock option exercise1340,942    10  10 
Issuance of common shares upon vesting of RSUs5,111       
Net loss     (8,956)(8,956)
Balance at June 30, 202125,629,641 $  $ $170,557 $(91,735)$78,822 


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)

Six Months Ended June 30,
  20212020
Operating Activities
  
Net loss$(22,721)$(18,939)
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization1,377 717 
Loss on remeasurement of warrant liability113,675  
Foreign exchange loss839 330 
Share-based compensation expense134,873 713 
Goodwill impairment9 1,682 
Other non cash expense (income), net(538)1,527 
Loss on investment 244 
Loss on equity method investment, net625  
Changes in operating assets and liabilities:
Decrease in accounts receivable56 43 
(Increase) decrease in prepaid expenses(616)2,573 
(Increase) decrease in other receivable(543)237 
Increase in inventory5(2,958)(2,238)
(Decrease) in accounts payable and other current liabilities(2,990)(131)
Decrease in other non-current liabilities and other items25 (1,301)
Net cash used in operating activities$(19,496)$(14,543)
Investing Activities
Purchase of property, plant and equipment(4,319)(3,436)
Net cash used in investing activities$(4,319)$(3,436)
Financing Activities
Proceeds from issuance of shares, net of issuance costs13 14,021 
Proceeds from issuance of long term debt, net of issuance costs10 2,645 
Other borrowings1,223 992 
Purchase and cancellation of shares13 (6,250)
Proceeds from exercise of warrants111,410  
Repayment of debt(1,107)(429)
Stock option exercise1310  
Net cash provided by financing activities$1,536 $10,979 
Effect of exchange rate changes on cash, cash equivalents & restricted cash(106)(29)
(Decrease) in cash, cash equivalents & restricted cash (a)
$(22,385)$(7,029)
Cash, cash equivalents & restricted cash, beginning of period (a)
79,460 13,198 
Cash, cash equivalents & restricted cash, end of period (a)
$57,075 $6,169 
(a) These amounts include restricted cash of $454 and $2,954 as of June 30, 2021 and June 30, 2020, respectively. The June 30, 2021 restricted cash is comprised primarily of cash on deposit for certain lease arrangements. June 30, 2020 balance represents amounts on deposit from investors related to the tranche 1 of the Series E financing round, as well as cash on deposit for certain lease arrangements.


See accompanying notes to the condensed consolidated financial statements.
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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 U.S.based holding company focused on cultivating, extracting and selling cannabinoids. In addition to the cannabinoid business, we are also engaged in the non-cannabinoid business of manufacturing and selling homeopathic and other natural remedies, wellness products, and nutraceuticals. The Company is incorporated under the Business Corporations Act of British Columbia, Canada.

The mailing address of our principal executive office is 489 Fifth 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.

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 generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial statements and with the instructions to Form 10Q and Article 10 of regulation S-X; and accordingly, do not include all disclosures required for annual financial statements. These Financial Statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. 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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CLEVER LEAVES HOLDINGS INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)
These Financial Statements should be read in conjunction with the Company’s 2020 audited consolidated financial statements and related notes in our 2020 Form 10-K.

Prior Period Reclassification- Certain prior period reclassifications were made to conform to the current period presentation.
Going Concern
These consolidated financial statements have been prepared in accordance with U.S. GAAP, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months.

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

The Company’s management believes that the Company’s current cash position, following the consummation of the Business Combination on closing date, and management’s plans to continue similar operations with increased marketing, which the Company believes will result in increased revenue and an improvement in net income, will satisfy the Company's estimated liquidity needs during the twelve months from the issuance of the consolidated financial statements. Subsequent to June 30, 2021, the Company raised additional financing by issuing secured Convertible Note as discussed in Note 16.

Impact of COVID-19 Pandemic

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

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


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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)
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. The following table provides a summary of the Company’s subsidiaries and respective ownership percentage at December 31, 2020 and June 30, 2021:
Subsidiaries Jurisdiction of incorporation Ownership
Clever Leaves US, Inc.Delaware, United States100%
NS US Holdings, Inc. Delaware, United States 100%
Herbal Brands, Inc. Delaware, United States 100%
1255096 B.C. Ltd. ("Newco")British Columbia, Canada100%
Northern Swan International, Inc. (“NSI”) British Columbia, Canada 100%
Northern Swan Management, Inc. British Columbia, Canada 100%
Northern Swan Deutschland Holdings, Inc. British Columbia, Canada 100%
Northern Swan Portugal Holdings, Inc. British Columbia, Canada 100%
Clever Leaves Portugal Unipessoal LDA Portugal 100%
Clever Leaves II Portugal Cultivation SA Portugal 100%
Northern Swan Europe, Inc. British Columbia, Canada 100%
Nordschwan Holdings, Inc. British Columbia, Canada 100%
Clever Leaves Germany GmbH Frankfurt, Germany 100%
NS Herbal Brands International, Inc. British Columbia, Canada 100%
Herbal Brands, Ltd. London, United Kingdom 100%
Clever Leaves International, Inc.British Columbia, Canada100%
Eagle Canada Holdings, Inc. (“Eagle Canada”) British Columbia, Canada 100%
Ecomedics S.A.S. (“Ecomedics”) Bogota, Colombia 100%
Clever Leaves UK Limited London, United Kingdom 100%

The financial statements of 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.

3. ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (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 ASU has no material impact to its consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments — Equity Securities (Topic 321), Investments — Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU No. 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under
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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)
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.
In October 2020, the FASB issued this ASU No. 2020-09, Debt - (Topic 470) ("ASU No. 2020-09"), which clarifies, streamlines, and in some cases eliminates, the disclosures a registrant must provide in lieu of the subsidiary’s audited financial statements. The rules require certain enhanced narrative disclosures, including the terms and conditions of the guarantees and how the legal obligations of the issuer and guarantor, as well as other factors, may affect payments to holders of the debt securities. The amendments in ASU No. 2020-09 are effective January 4, 2021 and earlier compliance is permitted. The adoption of ASU did not have a material impact to the Company's consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
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 Company is currently evaluating the effect of adopting ASU No. 2021-04.

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


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CLEVER LEAVES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(Amounts in thousands of U.S. dollars, except share and per share amounts and where otherwise noted)
4. FAIR VALUE MEASUREMENTS
The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities, except for those assets and liabilities that are short term in nature and approximate the fair values, as of the periods presented:
Level 1
 
Level 2
 
Level 3
 
Total
As of June 30, 2021
Assets:
Investment – Cansativa  1,528 1,528 
Total Assets  1,528 1,528 
Liabilities:
Loans and borrowings 6,559  6,559 
Warrant liability  22,736 22,736 
Convertible notes 27,119  27,119 
Total Liabilities$ $33,678 $22,736 $56,414 
As of December 31, 2020
Assets:
Investment – Cansativa  1,553 1,553 
Total Assets$ $ $1,553 $1,553 
Liabilities:
Loans and borrowings$ $6,701 $ $6,701 
Warrant liability  19,061 $19,061 
Convertible notes 27,142  $27,142 
Total Liabilities$ $33,843 $19,061 $52,904 
During the six months ended June 30, 2021, there were no transfers between fair value measurement levels.

The change in fair value of warrant liabilities related to private warrants during the six months ended June 30, 2021 and 2020 is as follows:
Private Placement WarrantsTotal Warrant Liability
Warrant liability at December 31, 2020$19,061 
Change in fair value of warrant liability
$4,851 
Warrant liabilities at March 31, 2021
$23,912 
Change in fair value of warrant liabilities
$(1,176)
Warrant liabilities at June 30, 2021
$22,736 

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

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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
June 30,
2021
December 31,
2020
Risk-free interest rate
0.76%
0.43%
Expected volatility
60%
60%
Share Price
$10.15
$8.90
Exercise Price
$11.50
$11.50
Expiration dateDecember 18, 2025December 18, 2025
The risk-free interest rate assumptions are was based on U.S. dollar zero curve derived from swap rates at the valuation date, with a term to maturity matching the remaining term of warrants.
The expected volatility assumptions are based on average of historical volatility based on comparable industry volatilities of public warrants.


5. INVENTORY
Inventories are comprised of the following items as of the periods presented:
June 30,
2021
 December 31,
2020
Raw materials$1,035 $1,148 
Work in progress – cultivated cannabis
67 1,482 
Work in progress – harvested cannabis and extracts
3,230 274 
Finished goods – cannabis extracts
8,556 7,003 
Finished goods – other
260 283 
Total
$13,148 $10,190 



6. 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 three 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, approximately $1,075, or “Seed Financing Round”) was invested in Cansativa to subscribe for 3,096 newly issued preferred voting shares at EUR 322.97 per preferred share, and as cash contributions from the Company to Cansativa. The seed EUR 322.97 per share price was based on a fully diluted pre-money valuation for Cansativa of EUR 8,500, and the increase of Cansativa’s registered share capital by the 3,096 preferred shares in the Seed Financing Round provided the Company with 10.53% of the total equity ownership of Cansativa. The Company paid the seed investment subscription by, first, an initial nominal payment of EUR 3.1, (i.e., EUR 1.00 per share) upon signing the investment agreement to demonstrate the Company’s intent to invest, and the remainder of EUR 996.819 was settled in January 2019 to officially close the investment deal after certain closing conditions have been met by the existing stockholders and Cansativa. The Company accounts 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.
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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 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 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, balance of Tranche 2 option expired unexercised 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 nil.

In December 2020, Cansativa allocated shares of its common stock to a newly-installed employee-stock ownership plan (“ESOP”). As a result of the ESOP installment, the Company’s equity ownership of Cansativa, on a fully-diluted basis, decreased from 16.59% to 15.80% of the book value of Cansativa’s net assets. Additionally, Cansativa raised additional capital through the issuance of Series A preferred stock (“Cansativa Series A Shares”) to a third-party investor at a per share price of EURO 543.31. As a result of the Series A Share issuance, the Company’s equity ownership of Cansativa, on a fully diluted basis, decreased from 15.80% to 14.22% of the book value of Cansativa’s net assets. The Company accounted for the transaction as a proportionate sales of ownership share and recognized a gain of approximately $211 in its consolidated statement of operations within loss on investments line. This change did not impact the equity method classification.
For the three and six months ended June 30, 2021 the Company's share of net losses from the investment were $14 and $25, respectively. For the three and six months ended June 30, 2020 the Company's share of net losses from the investment were $5 and $16, 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
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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 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 were 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, 2020. Prior to the effective time of the Merger, SAMA issued an aggregate of 934,819 shares of SAMA common stock the Subscribers in the SAMA PIPE that were exchanged for our common shares, on a one-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 Note 11. for more information on all capital stock issuances.

8. INTANGIBLE ASSETS
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, during 2019 the Company acquired finite-lived intangible assets with a gross value of approximately $7,091 as part of its Herbal Brands acquisition. During the six months ended June 30, 2021 and 2020 the Company recorded approximately $781 and $438, respectively, of amortization related to its finite-lived intangible assets. During the three months ended June 30, 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)
and 2020 the Company recorded approximately $391 and $227, respectively, of amortization related to its finite-lived intangible assets.
The following tables present details of the Company’s total intangible assets as of June 30, 2021 and December 31, 2020. The value of product formulation intangible asset is included in the value of Brand:
June 30, 2021
 Gross
Carrying
Amount
 Accumulated
Amortization
 Net
Carrying
Amount
 Weighted-
Average
Useful Life
(in Years)
Finite-lived intangible assets:
       
Customer contracts$925 $925 $ 0
Customer relationships1,000 395 605 3.9
Customer list650 282 368