Item 4.02 Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
As
previously disclosed by Clever Leaves Holdings Inc. (“Clever Leaves” or the “Company”), on December 18, 2020,
in connection with the closing of the business combination between Clever Leaves International Inc. and Schultze Special Purpose
Acquisition Corp. (“SAMA”), a special purpose acquisition company, the Company assumed SAMA’s obligations under the
warrant agreement that governs the terms of SAMA’s private placement warrants and public warrants (collectively, the “warrants”).
Each warrant no longer represents a right to acquire one share of SAMA common stock and instead represents the right to acquire one common
share of the Company on the same terms. The Company has previously classified the warrants as equity.
On
April 12, 2021, the Staff of the Securities and Exchange Commission released a Staff Statement on Accounting and Reporting Considerations
for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Statement”). The SEC Statement
discussed “certain features of warrants issued in SPAC transactions” that “may be common across many entities”
and indicated that when one or more of such features is included in a warrant, the warrant “should be classified as a liability
measured at fair value, with changes in fair value each period reported in earnings.”
On May 3, 2021, the Audit Committee
of the Board of Directors of the Company, after considering the recommendations of management, concluded that the Company’s previously
issued consolidated financial statements as of and for the years ended December 31, 2020 and 2019 should no longer be relied upon due
to required corrections related to the accounting for warrants. Following consideration of the guidance in the SEC Statement, the Company
concluded that certain of its warrants should have been classified as liabilities measured at fair value in the affected financial statements,
with changes in fair value each period reported in earnings.
The Company
is in the process of preparing an amendment to its Annual Report on Form 10-K for the year ended December 31, 2020 in order to provide
restated consolidated financial statements and applicable footnote disclosures and other related revisions, including in Management’s
Discussion and Analysis of Financial Condition and Results of Operations, based on the restated financial information.
The Company
expects that the restated financial information will not impact previously reported revenues, loss from operations, long-term debt or
cash flows from operating activities. The Company anticipates that the restated financial information will affect net loss, earnings per
share, current liabilities, total liabilities, additional paid-in capital, accumulated deficit and total shareholders’ equity for
the December 31, 2020 reporting period.
The Audit
Committee of the Company’s Board of Directors has discussed with BDO Canada LLP, the Company’s independent registered public
accounting firm, the matters disclosed in this Item 4.02.
Forward-Looking Statements
This
report 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. Forward-looking statements generally are accompanied by words
such as “aim,” “anticipate,” “believe,” “can,” “continue,” “could,”
“estimate,” “evolve,” “expect,” “forecast,” “future,” “guidance,”
“intend,” “may,” “opportunity,” “outlook,” “pipeline,” “plan,”
“predict,” “potential,” “projected,” “seek,” “seem,” “should,”
“will,” “would” and similar expressions (or the negative versions of such words or expressions) that predict or
indicate future events or trends or that are not statements of historical matters. Such statements may include, but are not limited to,
statements regarding Clever Leaves’ intent to restate certain historical financial statements and the timing and impact of the restatement.
These statements are based on current expectations on the date of this report and involve a number of risks and uncertainties that may
cause actual results to differ significantly. These forward-looking statements are not guarantees of future performance, conditions or
results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside
Clever Leaves’ control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking
statements. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made.
Clever Leaves expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in its expectations with respect thereto or any change in events, conditions, or circumstances
on which any statement is based.