Our Company
We are a multi-national cannabis company with the mission to be an
industry-leading global cannabinoid company recognized for our principles,
people and performance while fostering a healthier global community. We are
working to develop one of the industry's leading, low-cost global
business-to-business supply chains with the goal of providing high quality,
pharmaceutical grade cannabis and wellness products to customers and patients at
competitive prices. In addition to the cannabinoid business, we are also engaged
in the non-cannabinoid business of formulating, manufacturing, marketing,
selling, distributing, and otherwise commercializing homeopathic and other
natural remedies, wellness products, and nutraceuticals. We continue to invest
in building a distribution network with a global footprint, with operations and
investments in Colombia, Portugal, Germany, the United States and Canada.
Our business model is focused on partnering with leading and emerging cannabis
businesses by providing them with lower cost product, variable cost structures,
reliable supply throughout the year, and accelerated speed to market. This is
achievable due to our production locations, capacity, product registrations and
various product certifications. To date, we have had limited export shipments of
our cannabis products to Australia, Brazil, Canada, Chile, Germany, Israel,
Italy, the Netherlands, New Zealand, Peru, Poland, Spain, South Africa, the
United Kingdom and the United States.
We manage our business in two segments: the Cannabinoid and Non-Cannabinoid
segments.
1.The Cannabinoid operating segment is comprised of the Company's cultivation,
extraction, manufacturing, commercialization, and distribution of cannabinoid
products. This operating segment is in the early stages of commercializing
cannabinoid products internationally subject to applicable international and
state laws and regulations. All our customers and sales for our cannabinoid
segment products are primarily outside of the U.S.
2.The Non-Cannabinoid operating segment is comprised of the brands and
manufacturing assets acquired as part of our acquisition of Herbal Brands. The
segment is engaged in the business of formulating, manufacturing, marketing,
selling, distributing, and otherwise commercializing wellness products and
nutraceuticals, excluding cannabinoid products. Our principal customers for the
Herbal Brands products include specialty and health retailers, mass retailers
and specialty and health stores in the U.S.

Factors Impacting our Business
We believe that our future success will primarily depend on the following
factors:
Globalization of the industry. Due to our multi-national operator ("MNO") model
focused on geographic diversification, which distinguishes us from many of our
competitors and allows us to scale our production in low-cost regions of the
world, we believe we are well positioned to capitalize in markets where the
medical cannabis and hemp industry offers a reasonably regulated and free flow
of goods across national boundaries. While certain countries, such as Canada,
have historically not welcomed imported cannabis or hemp products for commercial
purposes, other countries, such as Germany and Brazil, depend primarily on
imports.
Global medical market expansion. We believe that we are well-positioned to
capitalize on expansion of global cannabis markets, as more legal medical
cannabis geographies emerge. Medical cannabis is now authorized at the national
or federal level in over 41 countries, and more than half of these countries
have legalized or introduced significant reforms to their cannabis-use laws to
broaden the scope of permitted medical uses beyond the original parameters. Over
the past three years, we have established regional operations in Canada,
Colombia, Portugal, and Germany, and we have invested significant resources in
personnel and partnerships to build the foundation for new export channels.
Product development and innovation. Because of the rapid evolution of the
cannabis industry, the disparate regulations across different geographies, and
the time required to develop and validate pharmaceutical-grade products, the
pace at which we can expand our portfolio of products and formulations will
impact market acceptance for our products. To increase our output while
maintaining or reducing unit costs, we may need to enhance our cultivation,
extraction, and other processing methods. We believe our focus on the production
of proprietary and exclusive products or formulations that comply with stringent
regulations, or that result in enhanced benefits for patients or consumers,
could create advantages in various markets.
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Regulatory expertise and adaptation. As more markets welcome the importation of
cannabis or hemp products for commercial purposes, which requires navigating and
complying with the strict and evolving cannabis regulations across the different
geographies, we believe that we are well positioned to expand in these markets.
Clever Leaves has built a global regulatory team that is experienced in
developing good relationships with regulatory agencies and governments that
govern and shape the cannabis industry in their respective jurisdictions. Key
expertise includes complying with and securing quotas, product approvals, export
permits, import permits and other geographic specific licenses.
Strategically expanding productive capacity and manufacturing capabilities. It
is beneficial to have low operating costs and to control the production process
to generate consistency and quality on a large scale. As we expand into new
markets and grow our presence in existing markets, we expect significant
investments in cultivation and processing will be required, which may
necessitate additional capital raises. We also aim to increase productive
capacity through innovation in cultivation or processing methods, improving
yields and output levels of our existing assets. While we believe our core
cultivation and extraction operations in Colombia are adequately sized for our
current business operations, as our cannabis sales grow and expand to flower
products, we plan to expand our operations and invest in advanced processing or
finished good manufacturing capabilities, particularly in Colombia and Portugal.
Key Operating Metrics
We use the following key operating metrics to evaluate our business and
operations, measure our performance, identify trends affecting our business,
project our future performance and make strategic decisions. Other companies,
including companies in our industry, may calculate key operating metrics with
similar names differently, which may reduce their usefulness as comparative
measures.
The following tables presents select operational and financial information of
the Cannabinoid segment for the three and nine months ended September 30, 2021,
and 2020:
                                                   Three months ended September 30,
Operational information:                               2021              2020 (d)                     Change
(In $000s, except kilogram and per gram
data)
Kilograms (dry flower) harvested (a)                   17,304             14,160              3,144                 22  %
Costs to produce (b)                               $    2,597          $   2,176          $     421                 19  %
Costs to produce per gram                          $     0.15          $    0.15          $       -                  -  %

Selected financial information:
Revenue                                            $      901          $   1,136          $    (235)               (21) %
Kilograms sold (c)                                         2,687          14,461            (11,774)               (81) %
Revenue per grams sold                             $     0.34          $    0.08          $    0.26                325  %


                                                   Nine months ended September 30,
Operational information:                               2021              2020 (d)                      Change
(In $000s, except kilogram and per gram
data)
Kilograms (dry flower) harvested (a)                   44,326             42,253              2,073                   5  %
Costs to produce (b)                               $    7,237          $   5,850          $   1,387                  24  %
Costs to produce per gram                          $     0.16          $    0.14          $    0.02                  14  %

Selected financial information:
Revenue                                            $    2,157          $   1,531          $     626                  41  %
Kilograms sold (c)                                      7,564             17,948            (10,384)                (58) %
Revenue per grams sold                             $     0.29          $    0.09          $    0.20                 222  %



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_______________
(a)Kilograms (dry flower) harvested - represents the weight of dried plants
post-harvest both for sale and for research and development purposes. This
operating metric is used to measure the productivity of our farms.
(b)Costs to produce - includes costs associated with cultivation, extraction,
depreciation, quality assurance and supply chain related to kilograms (dry
flower)
(c)Kilograms sold - represents the amount in kilograms of product sold in dry
plant equivalents. Extract is converted to dry plant equivalent for purposes of
this metric.
(d)Prior year information was revised to conform to the current period
presentation.
During the three months ended September 30, 2021 and 2020 we sold 2,687 and
14,461 kilograms, respectively, of dry flower equivalents. For the three months
ended September 30, 2021, our cannabinoid segment sales were primarily in
Colombia, Australia, and Israel. The decrease in our cannabinoid segment sales
was primarily driven by the reduced sales activity for cannabinoid products
during the three months ended September 30, 2021.

During the nine months ended September 30, 2021 and 2020 we sold 7,564 and
17,948 kilograms, respectively, of dry flower equivalents. For the nine months
ended September 30, 2021, our cannabinoid segment sales were primarily in
Colombia, Australia, Israel and Brazil. The decrease in dry flower equivalents
was primarily due to selling more higher margin products.
We harvested 17,304 kilograms of cannabinoids in the three months ended
September 30, 2021, as compared to 14,160 kilograms in the three months ended
September 30, 2020. The increase was primarily attributable to the addition of
production capacity at the Company's Portugal facilities, partially offset by
our planned production capacity at the Company's Colombia facilities.

We harvested 44,326 kilograms of cannabinoids in the nine months ended
September 30, 2021, as compared to 42,253 kilograms in the nine months ended
September 30, 2020. The increase was primarily attributable to the addition of
production capacity at the Company's Portugal facilities, partially offset by
our planned production capacity at the Company's Colombia facilities.
Costs to produce were approximately $0.15 per gram of dry flower equivalent for
the three months ended September 30, 2021, as compared to $0.15 per gram of dry
flower equivalent for the three months ended September 30, 2020. The cost to
produce remained flat due to comparable production capacity during the two
periods.

Costs to produce were approximately $0.16 per gram of dry flower equivalent for
the nine months ended September 30, 2021, as compared to $0.14 per gram of dry
flower equivalent for the nine months ended September 30, 2020. The increase in
costs to produce per gram was primarily driven by initial higher production
costs at our Portugal facility as we continued to expand production capacity.
The increase in costs was partly reduced by lower production costs at our
facilities in Colombia and the resulting economies of scale.
Recent Developments

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, including ongoing distribution in global supply
chains. 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. 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.

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

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Closing of the Business Combination

On December 18, 2020, 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, by and among SAMA, Clever
Leaves, the Company and Merger Sub.

Pursuant to the Business Combination Agreement, each of the following
transactions occurred in the following order: (i) pursuant to a court-approved
Canadian plan of arrangement (the "Plan of Arrangement" and the arrangement
pursuant to such Plan of Arrangement, the "Arrangement"), at 11:59 p.m., Pacific
time, on December 17, 2020 (2:59 a.m., Eastern time, on December 18, 2020) (a)
all of the Clever Leaves shareholders exchanged their Class A common shares
without par value of Clever Leaves ("Clever Leaves common shares") for our
common shares without par value ("common shares") and/or
non-voting common shares without par value ("non-voting common shares") (as
determined in accordance with the Business Combination Agreement) and (b)
certain Clever Leaves shareholders received approximately $3,100 in cash in the
aggregate (the "Cash Arrangement Consideration"), such that, immediately
following the Arrangement, Clever Leaves became our direct wholly-owned
subsidiary; (ii) at 12:01 a.m., Pacific time (3:01 a.m. Eastern time), on
December 18, 2020, Merger Sub merged with and into SAMA, with SAMA surviving
such merger as our direct wholly-owned subsidiary (the "Merger") and, as a
result of the Merger, all of the shares of SAMA common stock were converted into
the right to receive 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.

On December 18, 2020, SAMA's units, shares of SAMA common stock and warrants
ceased trading on The Nasdaq Stock Market ("Nasdaq"), and our common shares and
warrants began trading on Nasdaq under the symbols "CLVR" and "CLVRW,"
respectively.
EU GMP Certification
On July 8, 2020, Clever Leaves received European Union Good Manufacturing
Practices ("EU GMP") certification from the Croatian Agency for Medicinal
Products and Medical Devices for its post-harvest and extraction facilities
located in Colombia. EU GMP certification is expected to expand Clever Leaves'
ability to serve the burgeoning European medical cannabis and hemp markets,
which have rigorous quality, compliance, and regulatory requirements. Because we
are among a small number of companies globally to have earned EU GMP
certification, EU GMP certification is also expected to expand our early mover
advantage in the pharmaceutical channel as global demand increases and more
legal cannabis geographies emerge.
Portugal Licensing

In March 2021, we received a license from INFARMED to cultivate, import and
export dried cannabis flower produced at our Portuguese cultivation site,
replacing a similar provisional license issued to us during the COVID-19
Pandemic in August 2020.
Under the current license granted by INFARMED, our production facility in
Portugal is currently cultivating cannabis for commercial purposes. Our Portugal
facility received third-party GACP certification in March 2021. To maintain the
GACP certificate, we must cultivate and operate under GACP guidelines.
2024 Note Purchase Agreement and 2022 Convertible Notes repayment
On July 19, 2021, we entered into the Note Purchase Agreement with Catalina LP
in a transaction exempt from registration pursuant to Section 4(a)(2) of the
Securities Act, the Catalina LP Convertible Note in the principal amount of
$25,000. The Catalina LP Convertible Note matures three years from its issuance
date, and we have the option to prepay the outstanding principal and accrued
interest on the Catalina LP Convertible Note at any time at our election.
Interest accrues on the Catalina LP Convertible Note at five percent (5%) per
annum and is payable on a quarterly basis, either in cash or, at our option, by
increasing the principal amount of the note. The Catalina LP Convertible Note is
guaranteed by certain subsidiaries of the Company and secured by pledged equity
interests in certain subsidiaries of the Company.

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

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

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

During the three months ended September 30, 2021, the Company issued a total of
538,403 common shares upon debt conversion to the noteholder of $4,361 aggregate
principal amount.. As of September 30, 2021, the outstanding principal balance,
including interest, of the Convertible Note payable was $20,846. Subsequent to
September 30, 2021, the Company issued an additional 181,682 common shares upon
debt conversion to the noteholder, with a value of $1,199. See Note 18 for more
detail.

On July 19, 2021, the Company fully repaid its 2022 Convertible Notes with
accrued interest and cancelled the associated warrants. Under the Payout and
Release Agreement, the Company paid an amount equal to the sum of 90% of the
aggregate outstanding principal on the 2022 Convertible Notes, including accrued
interest and certain legal fees.

The Company recorded a gain on extinguishment of debt, net of unamortized debt
financing costs, for the amount of $2,267, in connection with the settlement of
the 2022 Convertible Notes, during the three months ended September 30, 2021.

Components of Results of Operations
Revenue - in our Cannabinoid segment, revenue is primarily comprised of sales of
our cannabis products, which currently include cannabidiol isolate, full
spectrum and standardized extracts. In our Non-Cannabinoid segment, revenue is
primarily composed of sales of our nutraceutical products to our retail
customers. As we have only recently begun to carry out our cannabinoid sales
operations, our main revenue is derived from our Herbal Brands business.
Cost of Sales - in our Cannabinoid segment, cost of sales is primarily composed
of pre-harvest, post-harvest and shipment and fulfillment. Pre-harvest costs
include labor and direct materials to grow cannabis, which includes water,
electricity, nutrients, integrated pest management, growing supplies and
allocated overhead. Post-harvest costs include costs associated with drying,
trimming, blending, extraction, purification, quality testing and allocated
overhead. Shipment and fulfillment costs include the costs of packaging,
labelling, courier services and allocated overhead. Total cost of sales also
includes cost of sales associated with accessories and inventory adjustments. In
our Non-Cannabinoid segment, cost of sales primarily includes raw materials,
labor, and attributable overhead, as well as packaging labelling and fulfillment
costs.

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