clvr-20230930

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 September 30, 2023

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

For the transition period from to

Commission File Number: 001-39820

Clever Leaves Holdings Inc.

(Exact name of registrant as specified in its charter)


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

Bodega 19-B Parque Industrial Tibitoc P.H, Tocancipá - Cundinamarca, Colombia						N/A
(Address of principal executive offices)						(Zip Code)

(Registrant’s telephone number, including area code): (561) 634-7430

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common shares without par value

CLVR

The Nasdaq Stock Market LLC

Warrants, each warrant exercisable for 1/30th common share at an exercise price of $11.50

CLVRW

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of registrant’s common shares outstanding as of November 7, 2023 was 1,745,152.

Table of Contents

CLEVER LEAVES HOLDINGS INC.

TABLE OF CONTENTS


		Page
	PART I - FINANCIAL INFORMATION
ITEM 1.	Financial Statements of Clever Leaves Holdings Inc. (Unaudited)
	Condensed Consolidated Statements of Financial Position as of September 30, 2023 and December 31, 2022	4
	Condensed Consolidated Statements of Operations for the Three and Nine months ended September 30, 2023 and 2022	5
	Condensed Consolidated Statements of Shareholders' Equity for the Three and Nine months ended September 30, 2023 and 2022	6
	Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, 2023 and 2022	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risks	45

ITEM 4.	Controls and Procedures	46

	PART II - OTHER INFORMATION
ITEM 1.	Legal Proceedings	48
ITEM 1A.	Risk Factors	48
ITEM 5.	Other Information	49
ITEM 6.	Exhibits	50
	SIGNATURES	51

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) includes certain statements that are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. You should not place undue reliance on such statements because they are subject to numerous risks and uncertainties which are difficult to predict and many of which are beyond our 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 that we are not able to predict accurately or over which we have no control. The risk factors and cautionary language discussed in this Part I, Item 1A, “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2022 (the “Annual Report” or “2022 Form 10-K”) provide examples of risks, contingencies, uncertainties, and events that may cause our actual results to differ materially from the expectations described by us in such forward-looking statements, including among other things:

•our ability to continue as a going concern;

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

•changes adversely affecting the industry in which we operate;

•our restructuring plans;

•the availability or terms of future financing;

•our ability to achieve our business strategies;

•general economic conditions, including 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 the ongoing war between Israel and Hamas, as well as emerging market conditions;

•the impact and 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 retain our key employees; and

•other factors that are more fully discussed in Part I, Item 1A of the "2022 Form 10-K" under the heading “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. These forward-looking statements speak only as of the date of this Form 10-Q. 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.

This Form 10-Q contains estimates, projections and other information concerning our industry, our business, and the markets for our products. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

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)


		As of		As of
	Note	September 30, 2023		December 31, 2022
Assets
Current:
Cash and cash equivalents		$	6,472	$	12,449
Restricted cash		66		439
Accounts receivable, net		1,746		2,252
Prepaids, deposits and other receivables	6	1,941		2,708

Inventories, net	5	7,709		8,399
Total current assets		17,934		26,247

Investment – Cansativa	7	1,896		5,679
Property, plant and equipment, net of accumulated depreciation of $8,389 and $7,120 for September 30, 2023 and December 31, 2022, respectively	9	12,752		13,963
Assets held for sale - Land		1,500		1,500
Intangible assets, net	8	2,821		3,354

Operating lease right-of-use assets, net	18	820		1,303
Other non-current assets		54		52
Total Assets		$	37,777	$	52,098

Liabilities
Current:
Accounts payable		$	2,088	$	2,299
Accrued expenses and other current liabilities		3,225		4,238

Loans and borrowings, current portion	10	477		465
Warrant liability		108		113
Operating lease liabilities, current portion	18	512		1,239
Deferred revenue		437		1,072
Total current liabilities		6,847		9,426

Loans and borrowing — long-term	10	859		1,065

Operating lease liabilities — long-term	18	366		1,087

Other long-term liabilities		16		112
Total Liabilities		$	8,088	$	11,690

Contingencies and commitments

Shareholders’ equity
Preferred shares, without par value, unlimited shares authorized, nil shares issued and outstanding for each of September 30, 2023 and December 31, 2022		—		—
Common shares, without par value, unlimited shares authorized: 1,726,145 and 1,454,559 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	11	—		—
Additional paid-in capital		223,407		221,313
Accumulated deficit		(193,718)		(180,905)
Total shareholders' equity		29,689		40,408
Total liabilities and shareholders' equity		$	37,777	$	52,098

See accompanying notes to the condensed consolidated financial statements

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 September 30,				Nine Months Ended September 30,
	Note	2023		2022		2023		2022
Revenue, net	15	$	3,820	$	2,867	$	12,779	$	12,008



Cost of sales		(1,878)		(1,568)		(5,877)		(5,635)
Gross profit		1,942		1,299		6,902		6,373

Expenses
General and administrative	12	4,155		5,442		14,327		18,865
Sales and marketing		582		615		1,600		2,075
Research and development		292		343		907		1,114
Restructuring expenses	13	—		(82)		—		3,761
Goodwill impairment				19,000				19,000
Depreciation and amortization		290		305		750		950
Total expenses		5,319		25,623		17,584		45,765

Loss from operations		(3,377)		(24,324)		(10,682)		(39,392)

Other Expense (Income), net
Interest and amortization of debt issuance cost		5		(58)		23		2,696
Gain on remeasurement of warrant liability	11	(60)		(196)		(5)		(2,009)
Gain on investment	7	—		—		—		(6,851)
Investment impairment	7	3,705		—		3,705		—
Loss on debt extinguishment, net	10	—		—		—		2,263

Foreign exchange loss		275		669		297		1,144
Other (income) expense, net		(31)		102		(19)		111
Total other expenses (income), net		3,894		517		4,001		(2,646)

Loss before income taxes and equity investment loss		(7,271)		$	(24,841)	$	(14,683)	$	(36,746)

Deferred income tax (recovery)		—		(6,650)		—		(6,650)

Equity investment share of loss		—		—		—		64
Loss from continuing operations		$	(7,271)	$	(18,191)	$	(14,683)	$	(30,160)
Income (loss) from discontinued operations		2,133		(1,972)		1,869		(7,189)
Net loss		$	(5,138)	$	(20,163)	$	(12,814)	$	(37,349)
Net loss per share:
Basic and diluted from continuing operations	17	$	(4.60)	$	(12.93)	$	(9.70)	$	(24.70)
Basic and diluted from discontinued operations		1.35		(1.41)		1.23		(5.90)
Net loss per share		$	(3.25)	$	(14.33)	$	(8.47)	$	(30.59)
Weighted-average common shares outstanding:		1,580,456		1,407,419		1,513,575		1,221,107
Basic and diluted	17	(3.25)		(14.33)		(8.47)		(30.59)

See accompanying notes to the condensed consolidated financial statements.

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 Stock			Additional Paid-in Capital		Accumulated Deficit		Total Shareholders’ Equity
	Shares	Amount		Amount		Amount		Amount
Balance at December 31, 2021	886,860	$	—	$	187,510	$	(114,740)	$	72,770
Issuance of common shares, gross	368,252	—		23,400		—		23,400
Issuance of common shares upon vesting RSUs	8,248	—		—		—		—
Stock option exercise	3,870	—		22		—		22
Stock-based compensation expense	—	—		500		—		500
Equity issuance costs	—	—		(1,177)		—		(1,177)
Beneficial conversion feature of Convertible Note	—	—		1,749		—		1,749
Conversion of Convertible Note to common shares	20,233	—		1,324		—		1,324
Net loss	—	—		—		(16,140)		(16,140)
Balance at March 31, 2022	1,287,463	$	—	$	213,328	$	(130,880)	$	82,448
Issuance of common shares upon vesting RSUs	1,330	—		—		—		—

Stock option exercise	1,186	—		—		—		—

Stock-based compensation expense	—	—		1,148		—		1,148
Conversion of Convertible Note to common shares	30,000	—		2,039		—		2,039
Net loss	—	—		—		(1,046)		(1,046)
Balance at June 30, 2022	1,319,979	$	—	$	216,515	$	(131,926)	$	84,589
Net loss	—	—		$	—	$	(20,163)	$	(20,163)
Issuance of common shares upon vesting RSUs	828	—		—		—		—

Stock-based compensation expense	—	—		958		—		958

Issuance of common shares - gross	131,573	—		4,286		—		4,286
Equity issuance costs	—	—		(168)		—		(168)

Balance at September 30, 2022	1,452,380	$	—	$	221,591	$	(152,089)	$	69,502


	Note	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Shareholders’ Equity
		Shares	Amount		Amount		Amount		Amount
Balance at December 31, 2022		1,454,559	$	—	$	221,313	$	(180,905)	$	40,408
Issuance of common shares upon vesting RSUs		12,350	—		—		—		—
Stock-based compensation expense		—	—		468		—		468
Equity issuance costs		—	—		(25)		—		(25)
Net loss		—	—		—		(4,081)		(4,081)
Balance at March 31, 2023		1,466,909	$	—	$	221,756	$	(184,986)	$	36,770
Issuance of common shares upon vesting RSUs	14	4,587	—		—		—		—

Stock-based compensation expense	12	—	—		433		—		433
Issuance of common shares - gross		51,986	—		438		—		438
Equity issuance costs		—	—		(97)		—		(97)


Net loss		—	—		—		(3,595)		(3,595)
Balance at June 30, 2023		1,523,482	$	—	$	222,530	$	(188,581)	$	33,949
Issuance of common shares upon vesting RSUs		738	—		—		—		—

Stock-based compensation expense		—	—		52		—		52
Issuance of common shares - gross		201,912	—		903		—		903
Equity issuance costs		—	—		(77)		—		(77)
Round off due to reverse split		13	—		—				—

Net loss		—	—		—		(5,138)		(5,138)
Balance at September 30, 2023		1,726,145	$	—	$	223,407	$	(193,718)	$	29,689

The above Condensed Consolidated Statements of Stockholders’ Equity reflects a 1 for 30 reverse stock split effective August 25, 2023, see Note 2 for further information

See accompanying notes to the condensed consolidated financial statements.

CLEVER LEAVES HOLDINGS INC.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands of U.S. Dollars)

(Unaudited)


		Nine Months Ended September 30,
		2023	2022
Cash Flow from Operating Activities:
Loss from continuing operations		(14,683)	(30,160)
Gain (loss) from discontinued operations		1,869	(7,189)
Net loss		(12,814)	(37,349)
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization		1,933	2,935
Gain on sale of fixed assets		(2,825)	—
Amortization of debt discount and debt issuance cost		—	1,949
Inventory provision	5	591	3,822
Restructuring and related costs	13	—	3,791
Gain on remeasurement of warrant liability	11	(5)	(2,009)
Intangible asset impairment		—	19,000
Deferred tax recovery		—	(6,650)
Amortization of right of use asset	18	483	128
Foreign exchange loss		341	1,420
Stock-based compensation expense	14	954	2,606
Investment impairment		3,705	—
Equity investment share of loss		—	64
Gain on investment	7	—	(6,851)
Loss on debt extinguishment, net	10	—	2,263

Other non-cash expense, net		—	600
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		506	(369)
Decrease (increase) in prepaid expenses and other receivables	6	767	(466)
(Increase) decrease in other non-current assets		(638)	555
(Decrease) in lease liability	18	(788)	—
Decrease (increase) in inventory		99	(5,067)
(Decrease) in accounts payable and other current liabilities		(2,178)	(4,756)
(Decrease) increase in accrued and other non-current liabilities		(96)	415
Net cash used in operating activities		(9,965)	(23,969)

Cash Flow from Investing Activities:
Proceeds from sale of fixed assets		2,825	—
Purchase of property, plant and equipment		(187)	(1,856)
Proceeds from partial sale of equity method of investment		—	2,498
Net cash provided by investing activities		2,638	642

Cash Flow from Financing Activities:

Repayment of debt	10	(323)	(22,897)
Other borrowings		—	73

Proceeds from issuance of shares	11	1,340	27,686
Equity issuance costs	11	(199)	(1,345)


Stock option exercise		—	22
Net cash provided by financing activities		818	3,539
Effect of exchange rate changes on cash, cash equivalents & restricted cash		159	(304)
Decrease in cash, cash equivalents & restricted cash		(6,350)	(20,092)
Cash, cash equivalents & restricted cash, beginning of period (a)		12,888	37,699
Cash, cash equivalents & restricted cash, end of period (a)		6,538	17,607

(a) These amounts include restricted cash of $66 and $454 as of September 30, 2023 and September 30, 2022, respectively, which are comprised primarily of cash on deposits 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 cannabinoids. In addition to the cannabinoid business, the Company is also engaged in the non-cannabinoid business of nutraceutical and other natural remedies and wellness products. The Company is incorporated under the Business Corporations Act of British Columbia, Canada.

The mailing address of the Company's principal executive office is Bodega 19-B Parque Industrial Tibitoc P.H, Tocancipá - Cundinamarca, Colombia.

2. BASIS OF PRESENTATION

The accompanying interim condensed consolidated financial statements (“Financial Statements”) are unaudited. These Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial statements and 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 results are not necessarily indicative of results to be expected for the full year.

The Financial Statements include the accounts of the Company and its wholly owned subsidiaries. Company’s subsidiaries and respective ownership percentage has not changed from the year ended December 31, 2022.

These Financial Statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2022, included in its Annual Report on Form 10-K, as filed with the SEC on March 30, 2023 (the "Annual Report").

On August 24, 2023, the Company effected a one-for-thirty reverse share split of its common shares ((the “Reverse Share Split”), effective as of 5:00 p.m. Eastern Time on August 24, 2023 (the “Effective Time”). All share and per share information in these financial statements has been retroactively adjusted to reflect the Reverse Share Split. No fractional shares were issued in connection with the Reverse Share Split. Instead, each fractional share remaining after completion of the Reverse Share Split that was less than half of a whole share was rounded down and canceled without consideration to the holders thereof and each fractional share that was at least half of a whole share was rounded up to one whole share.

Discontinued Operations

During the fiscal year 2022, the Company undertook various strategic initiatives aimed at reducing costs, improving organizational efficiency, and optimizing its business model. As part of these initiatives, the Company implemented several restructuring activities.

Additionally, in December 2022, the Company made the decision to shut down its Portugal operations in order to preserve cash. In January 2023, the Company further approved the wind-down of its entire Portuguese operations to enhance operating margin and focus solely on cannabis cultivation and production in Colombia. As part of this restructuring plan, the Company has completed the cessation of its Portuguese flower cultivation, post-harvest processes, and manufacturing activities. Subsequently, the post harvest facility has been sold and preparations are currently underway for the sale of the farm land with the objective of concluding the sale by March 31, 2024.

Considering the nature and extent of the restructuring activities undertaken, in accordance with Accounting Standards Codification (ASC) 205, Presentation of Financial Statements, the Company has determined that these operations meet the "discontinued operations" criteria as of September 30, 2023. As a result, the condensed consolidated statements of financial position, the condensed consolidated statements of operations, the condensed consolidated statements of cash flows, and the notes to the consolidated financial statements have been restated for all periods presented to reflect the discontinuation of these operations in accordance with ASC 205.

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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)

Please refer to Note 19, "Discontinued Operations," for further details regarding the discontinued businesses. The discussion in the notes to these financial statements, unless otherwise noted, pertains solely to the Company's continuing operations.

Going Concern

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

As shown in the accompanying interim condensed financial statements, the Company had an accumulated deficit as of September 30, 2023, 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 revenue from the sale of its available inventories.

At September 30, 2023, the Company had cash and cash equivalents of $6,472. As of September 30, 2023, the Company’s current working capital, anticipated operating expenses and net losses, and the uncertainties surrounding its ability to raise additional capital as needed, raise substantial doubt as to whether existing cash and cash equivalents will be sufficient to meet its obligations as they come due within twelve months from the date the consolidated financial statements were issued. The consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company’s ability to execute its operating plans through 2023 and beyond depends on its ability to obtain additional funding, which may include several initiatives such as raising capital, reducing working capital, and monetizing non-core assets, to meet planned growth requirements and to fund future operations, which may not be available on acceptable terms, or at all.

Principles of Consolidation

The Financial Statements include the accounts of the Company and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company's significant accounting policies are disclosed in its audited consolidated financial statements for the year ended December 31, 2022, 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, intangible assets, useful lives of property and equipment, revenue recognition and income taxes and related tax asset valuation allowances. 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

ASU No. 2016-13- Credit Losses on Financial Instruments (Topic 326)

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit

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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)

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. ASU 2016-13 is effective for the Company’s fiscal year beginning January 1, 2023. We have adopted the provisions of Accounting Standards Update (ASU) No. 2016-13, Credit Losses on Financial Instruments (Topic 326). After careful consideration and analysis, we have determined that the adoption of this pronouncement has not had a material impact on our financial reporting. Therefore, our financial statements and disclosures have not been significantly affected by the adoption of this standard.

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 September 30, 2023
Assets:
Investment – Cansativa	—		—		1,896		1,896
Total Assets	$	—	$	—	$	1,896	$	1,896
Liabilities:
Loans and borrowings	—		1,336		—		1,336
Warrant liability	—		—		108		108

Total Liabilities	$	—	$	1,336	$	108	$	1,444

As of December 31, 2022
Assets:
Investment – Cansativa	—		—		5,679		5,679
Total Assets	$	—	$	—	$	5,679	$	5,679
Liabilities:
Loans and borrowings	—		1,530		—		1,530
Warrant liability	—		—		113		113
Total Liabilities	$	—	$	1,530	$	113	$	1,643

Investment – Cansativa

Our investment in Cansativa's equity securities does not have a “readily determinable fair value,” or is not traded in a verifiable public market. The Company accounted for this investment under ASC 321, Investments - Equity Securities. The Company used the practical expedient available under ASU 2016-01, the cost method investment which presents and carries this investment using the alternative measurement method which is cost minus impairment, if any, plus or minus changes resulting from observable price changes in “orderly transactions,” as defined in ASC 321, for the identical or a similar investment of the same issuer. The Company periodically reviews the investments for other than temporary declines in fair value below cost and more frequently when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

On October 17, 2023,Northern Swan Deutschland Holdings, Inc. (“Northern Swan”), a wholly-owned subsidiary of the Company entered into an agreement for sale of its remaining investments in the shares of Cansativa. The Company considered the sale price as fair value of the investment and recognized an impairment loss of $3,705 as the difference between fair value and carrying value of these investment at September 30, 2023. For more information, refer to Note 7 and Note 20.

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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 provides a summary of changes in fair value of the Company’s level 3 investments for the nine months ended September 30, 2023:


	Level 3
Balance, December 31, 2022	$	5,679
Change in value due to foreign exchange gain	74
Balance, March 31, 2023	$	5,753

Change in value due to foreign exchange gain	24
Balance, June 30, 2023	$	5,777
Change in value due to foreign exchange loss	(176)
Impairment loss	(3,705)
Balance, September 30, 2023	$	1,896

During the nine months ended September 30, 2023, there were no transfers between fair value measurement levels.

The change in fair value of warrant liabilities related to private warrants during the nine months ended September 30, 2023, is as follows:


Private Placement Warrants:	Total Warrant Liability
Warrant liability at December 31, 2022	$	113
Change in fair value of warrant liability	44
Warrant liabilities at March 31, 2023	$	157
Change in fair value of warrant liability	11
Warrant liabilities at June 30, 2023	$	168
Change in fair value of warrant liability	(60)
Warrant liabilities at September 30, 2023	$	108

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 September 30, 2023 and December 31, 2022:


	As of
	September 30, 2023	December 31, 2022
Risk-free interest rate	4.98%	4.23%
Expected volatility	160%	105%
Share Price	$0.12	$0.31
Exercise Price	$11.50	$11.50
Expiration date	December 18, 2025	December 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.

•Exercise price and Share price at September 30, 2023 are adjusted post Reverse Share Split.

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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)

5. INVENTORIES, NET

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


	September 30, 2023		December 31, 2022
Raw materials	$	1,213	$	1,204
Work in progress – harvested cannabis and extracts	279		21
Finished goods – cannabis extracts	5,832		6,703
Finished goods – other	385		471
Total	$	7,709	$	8,399

During the three and nine months ended September 30, 2023 the Company recorded inventory provisions for approximately $264 and $591, respectively, to cost of sales to write-down obsolete inventories. During the three and nine months ended September 30, 2022, the Company recorded inventory provisions for approximately $555 and $1,103, respectively, to cost of sales to write-down obsolete inventory.

6. PREPAID, DEPOSITS AND OTHER RECEIVABLES

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


	September 30, 2023		December 31, 2022
Prepaid and advances	$	765	$	650
Indirect tax receivables	1,080		2,007
Deposits	96		51
Total	$	1,941	$	2,708

Prepaid and advances represents amounts paid upfront to vendors for director and officer's insurance and advances for supplies.

7. INVESTMENTS

Cansativa

On December 21, 2018, the Company, through its subsidiary Northern Swan , 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 999.92, 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 996.82 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 accounted for its investment in Cansativa using the equity accounting method, due to the Company's significant influence, in accordance with ASC 323, Investments — Equity Method and Joint Ventures.

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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 999.92, 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 un-exercised and as a result the Company recognized a loss on investment of approximately $370 in its Statement of Operations and Comprehensive Loss and the carrying value of the Tranche 2 option was reduced to 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 EUR 543.31. As a result of the Series A Share issuance, the Company’s equity ownership of Cansativa, on a fully diluted basis, decreased from 15.80% to 14.22% of the book value of Cansativa’s net assets. The Company accounted for the transaction as a proportionate sale of ownership share and recognized a gain of approximately $211 in its consolidated statement of operations within loss on investments line. This change did not impact the equity method classification.

In April 2022, the Company sold 1,586 shares in Cansativa to an unrelated third-party for approximately EUR 2,300. Additionally Cansativa issued 10,184 series B and 992 ESOP shares. As a result, the Company's equity ownership of Cansativa, on a fully diluted basis, decreased from 14.22% to 7.6% of the book value of Cansativa's 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. The Company started to account for this investment under ASC 321, Investments – Equity Securities. The Company utilized 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. A total of $6,851 is recorded as gain on investment during the nine months period ended September 30, 2022.

On October 17, 2023, Northern Swan entered into an agreement to sell a total of 3,648 shares of Cansativa to Cansativa and EIP Entrepreneurial Investment GmbH, representing Northern Swan’s entire interest in Cansativa, for approximately EUR 1.8 million ($1.9 million). The Company compared the subsequent transaction value of the shares sold to the carrying value and the impairment loss of $3,705 was recorded in the Consolidated statement of Operations during the three and nine months ended September 30, 2023.

8. INTANGIBLE ASSETS, NET

As part of the Herbal Brand acquisition in 2019, the Company acquired finite-lived intangible assets with a gross value of approximately $7,091. During the three months ended September 30, 2023 and 2022 the Company recorded $167 and $191, respectively, of amortization related to its finite-lived intangible assets. During the nine months ended September 30, 2023 and 2022 the Company recorded $533 and $573, respectively, of amortization related to its finite-lived intangible assets.The following tables present details of the Company’s total intangible assets as of September 30, 2023 and December 31, 2022. The value of product formulation intangible asset is included in the value of Brand:

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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)


	September 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted- Average Useful Life (in Years)
Finite-lived intangible assets:
Customer contracts	$	925	$	925	$	—	0.0
Customer relationships	1,000		767		233		2.6
Customer list	650		574		76		0.6
Trade name	4,516		2,004		2,512		5.6
Total finite-lived intangible assets	$	7,091	$	4,270	$	2,821


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted- Average Useful Life (in Years)
Finite-lived intangible assets:
Customer contracts	$	925	$	925	$	—	0.0
Customer relationships	1,000		669		331		3.0
Customer list	650		478		172		1.3
Trade name	4,516		1,665		2,851		6.3
Total finite-lived intangible assets	$	7,091	$	3,737	$	3,354

Indefinite-lived intangible assets:
Licenses	$	19,000	N/A		$	19,000
Impairment Charge	(19,000)		N/A		(19,000)
Total indefinite-lived intangible assets	—				—

Total intangible assets	$	7,091	$	3,737	$	3,354

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. As part of the review, the Company has performed 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 intangibles for impairment whenever events or changes in circumstances indicate that the carrying value of its intangibles 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 and other intangible assets impairment analysis.

Impairment Testing - Finite-Lived Intangibles

In conjunction with the 2022 annual impairment testing, the Company reviewed finite-lived intangible assets for impairment. In performing such review, the Company makes judgments about the recoverability of purchased finite lived intangible assets whenever events or changes in circumstances indicate that an impairment may exist. The Company recognizes an impairment if the carrying amount of the long-lived asset group exceeds the Company’s estimate of the asset group’s undiscounted future

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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)

cash flows. For the nine months ended September 30 2023, no impairment was recognized related to the carrying value of any of the Company's finite lived intangible assets. The Company will perform an impairment test at fiscal year ending December 31, 2023.

Impairment Testing - Indefinite-Lived Intangibles

In 2022, due to the continued decline in the Company’s share price and the projected revenues falling behind target, the Company performed an interim impairment assessment on its indefinite-lived intangible assets, consisting of cannabis related licenses for its Colombian operations. 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. Utilizing a discounted cash flow model with a weighted average cost of capital (“WACC”) of 24%, the Company performed the assessment and recognized an impairment charge of $19,000 along with the related deferred tax liability write-off of $6,650 for the year ended December 31, 2022. As a result of this recognition in 2022, no indefinite-lived intangible assets exist as of September 30, 2023.

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 September 30, 2023:


	Estimated Amortization Expense
2023	$	167
2024	585
2025	542
2026	482
2027	452
Thereafter	593
Total	$	2,821

9. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following:


	September 30, 2023		December 31, 2022
Land	$	1,806	$	1,806
Building & warehouse	7,768		7,658
Laboratory equipment	6,496		6,416
Agricultural equipment	1,480		1,477
Computer equipment	1,433		1,397
Furniture & appliances	794		785
Construction in progress	106		240
Other	1,258		1,304
Property, plant and equipment, gross	21,141		21,083
Less: accumulated depreciation	(8,389)		(7,120)
Property, plant and equipment, net	$	12,752	$	13,963

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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)

10. DEBT


	September 30, 2023		December 31, 2022
Loans and borrowings, current portion	$	477	$	465
Loans and borrowings, non-current portion	859		1,065
Total debt	$	1,336	$	1,530

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 3.0 percentage points.

For the three months ended September 30, 2023 and 2022, the company recognized interest expense of approximately €11 ($12) and €7 ($7), respectively, and repaid principal of approximately €63 ($68) and €63 ($63), respectively, of the Portugal Debt in accordance with the terms of the loan agreement. For the nine months ended September 30, 2023 and 2022, the company recognized interest expense of approximately €31 ($33) and €22 ($24), respectively, and repaid principal of approximately €188 ($201) and €188 ($200), respectively, of the Portugal Debt in accordance with the terms of the loan agreement. As of September 30, 2023 and December 31, 2022, the outstanding principal balance of the Portugal Debt was €563 ($604) and €875 ($1,076), 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 was repaid six months after receiving the loan. After the first payment, the principal and interest is repaid semi-annually.

For the three months ended September 30, 2023 and 2022, the Company recognized interest expense of approximately COP$53,145 ($21) and COP$7,809 ($2), respectively. For the nine months ended September 30, 2023 and 2022, the Company recognized interest expense of approximately COP$160,245 ($64) and COP$259,144 ($67) respectively, and repaid principal of approximately COP$222,978 ($53) and COP$875,864 ($213), respectively. For the period ended September 30, 2023, and December 31, 2022, the outstanding principal balance was approximately COP$2,967,844 ($732) and COP$3,471,576 ($725), respectively.

11. CAPITAL STOCK

Common Shares

As of September 30, 2023 and December 31, 2022, a total of 1,726,145 and 1,454,559 common shares were issued and outstanding, respectively. For more information, refer to Note 2. The increase in outstanding shares was primarily the result of shares issued under the ATM. See Equity Distribution Agreement disclosed below.

Reverse Share Split

On August 24, 2023, the Company effected a one-for-thirty Reverse Share Split of its common shares All share and per share information in these financial statements has been retroactively adjusted to reflect the Reverse Share Split. No fractional shares were issued in connection with the Reverse Share Split. Instead, each fractional share remaining after completion of the Reverse

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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)

Share Split that was less than half of a whole share was rounded down and canceled without consideration to the holders thereof and each fractional share that was at least half of a whole share was rounded up to one whole share.

As a result of the Reverse Share Split, at the Effective Time, the number of outstanding Shares was reduced from approximately 45.7 million to approximately 1.5 million.

The Reverse Share Split was, effected to regain compliance with Nasdaq Listing Rule 5550(a)(2), which requires the Company to maintain a minimum bid price of at least $1.00 per share.

For the three months ended September 30, 2023, the Company issued and sold 201,912 shares on a post-Reverse Share Split basis pursuant to the ATM offering, for aggregate net proceeds of $824 which consisted of gross proceeds of $902 and $78 of equity issuance costs.

For the nine months ended September 30, 2023, the Company issued and sold 253,898 shares on a post-Reverse Share Split basis pursuant to the ATM offering, for aggregate net proceeds of $1,140 which consisted of gross proceeds of $1,340 and $200 of equity issuance costs.

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. The issuance and sale of the common shares under the Equity Distribution Agreement have been made, and any such future sales will be made, pursuant to the Company’s effective registration statement on Form S-3 (File No. 333-262183), which includes an “at-the-market” (“ATM”) offering prospectus supplement (the "Prospectus Supplement"), as amended from time to time.

Following the filing of the 2022 Form 10-K, we are subject to the limitations under General Instruction I.B.6. of Form S-3. and , we filed Amendment No. 3 to the Prospectus Supplement, to reflect the lower maximum offering amount based on the then aggregate market value of our outstanding common shares held by non-affiliates. If our public float increases such that we may sell additional amounts under the Equity Distribution Agreement and the Prospectus Supplement, we will file another amendment to the Prospectus Supplement prior to making additional sales.

Warrants

As of September 30, 2023, the Company had 12,877,361 of its public warrants classified as a component of equity and 4,900,000 of its private warrants recognized as liability. In connection with the Reverse Share Split, the warrants were adjusted in accordance with their terms such that each warrant entitles the holder to purchase 1/30 common share, at an exercise price of $345 per share. The warrants will expire on December 18, 2025, at 5:00 p.m., New York City time, or earlier upon redemption. 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 $540.00 per share (as adjusted for share splits, share capitalization, 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.

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

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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 September 30, 2023, the Company performed a valuation of the private warrants and as a result recorded a net loss on remeasurement for the three and nine months ended September 30, 2023, of approximately $60 and $5, respectively, in its statement of operations.

As of September 30, 2022, the Company performed a valuation of the private warrants and as a result recorded, in the statement of operations, a net gain on remeasurement for the three and nine months ended September 30, 2022 of approximately $196 and $2,009, respectively.

12. GENERAL AND ADMINISTRATION

The components of general and administrative expenses were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

Salaries and benefits	$	2,263	$	2,781	$	7,464	$	9,719
Office and administration	736		1,096		2,168		3,169
Professional fees	667		495		2,933		2,893
Share based compensation	52		958		954		2,606
Rent	178		196		564		627
Other (a)	259		(84)		244		(149)
Total	$	4,155	$	5,442	$	14,327	$	18,865

(a) For the nine months ended September 30, 2023 and 2022, other general and administrative costs includes freight-out cost of approximately $464 and $454, respectively, related to costs of packaging, labelling, and courier services, respectively.

13. RESTRUCTURING EXPENSE

The Company has been reviewing, planning and implementing various strategic initiatives targeted principally at reducing costs, enhancing organizational efficiency and optimizing its business model. As part of this process, the Company recorded a restructuring charge related to asset write off, severance, and other related costs during the year 2022. For the nine months ended September 30, 2022, the Company recorded $3,761 of restructuring charge related to asset write off, severance, and other related costs. No such restructuring expense was charged during the nine months ended September 30, 2023.

Our restructuring charges are comprised primarily of costs related to asset abandonment, including future lease commitments, and employee termination costs related to headcount reductions.

14. 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 2022 Form 10-K.

In connection with the Reverse Share Split, at the Effective Time, the maximum number of Shares issuable under each of the Company’s 2020 Incentive Award Plan, as amended (the “Incentive Award Plan”), and the Company’s 2020 Earnout Award Plan (the “Earnout Plan” and together, the “Plans”) has been equitably adjusted to reflect the Reverse Share Split.

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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 number of Shares underlying each award of restricted share units (whether vesting based on time or performance) issued under the Plans that were outstanding as of immediately prior to the Reverse Share Split has been ratably adjusted to reflect the Reverse Share Split.

Each award of restricted share units issued under the Earnout Award Plan that vested based on the achievement by the Company of certain threshold Share prices, outstanding as of immediately prior to the Reverse Share Split, has had its Share price targets ratably adjusted to reflect the Reverse Share Split.

The number of Shares underlying stock option awards issued under the Incentive Award Plan that were outstanding and unexercised as of immediately prior to the Reverse Share Split and the exercise price of such stock options has been ratably adjusted to reflect the Reverse Share Split.

Share-Based Compensation Expense

The following table summarizes the Company's share-based compensation expense for each of its awards, included in the Consolidated Statements of Operations for the three and nine months ended September 30, 2023.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

Share-based compensation award type:
Stock Options	$	7	$	66	$	820	$	336
RSUs	45		892		134		2,270
Total Shared Based Compensation Expense	$	52	$	958	$	954	$	2,606

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

Stock Options

The following table is a summary of options activity for the Company’s equity incentive plans for the nine months ended September 30, 2023:


	Stock Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Balance as at December 31, 2022	13,619	$	233.46	2.56	$	—


Forfeited	(479)	$	336.36	—	—
Expired	(4,222)	$	320.87	—	—
Balance as of September 30, 2023	8,918	$	157.03	1.52	$	—
Vested and expected to vest as of September 30, 2023	8,576	$	151.33	1.56	$	—
Vested and exercisable as of September 30, 2023	7,731	$	123.73	1.04	$	—

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 share-based compensation expense related to unvested stock options awards not yet recognized as of September 30, 2023 and December 31, 2022, was $166 and $392, respectively, which is expected to be recognized over a weighted average period

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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)

of 0.95 and 1.0 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 nine months ended September 30, 2023:


	Restricted Share Units	Weighted-Average Grant Date Fair Value
Non-vested as of December 31, 2022	45,566	$	105.05
Granted	45,251	7.49
Vested	(18,108)	88.96
Canceled/forfeited	(5,602)	43.38
Non-vested as of September 30, 2023	67,107	$	48.75

Market-based Restricted Share Units

The Company has previously granted RSUs with both a market condition and a service condition (market-based RSUs) to the Company’s employees. No such market-based RSUs were granted during the nine months ended September 30, 2023. 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 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. Provided that the market-based condition is satisfied, and the respective employee remains employed by the Company, the market-based restricted share units will vest in four equal annual installments on the applicable vesting date.

The following table summarizes the changes in the Company’s market-based restricted share unit activity during the nine months ended September 30, 2023:


	Restricted Share Units	Weighted-Average Grant Date Fair Value
Non-vested as of December 31, 2022	17,632	$	384.03
Granted	—	—
Vested	(15)	274.52 </