Q1 2022 Clever Leaves Holdings Inc Earnings Call

[music].

Good afternoon, everyone, and thank you for participating in today's conference call to discuss cleverly financial results for the first quarter ended March 31 2022.

Good afternoon, everyone and thank you for participating in today's conference call discuss quarterly financial results in the first quarter ended March 31st 2022.

Joining us today are Cleverley's CEO , Andres Pajardo, and the company's CFO , Hank Hage.

Joining us today on our quarterly T O.

The harder and the company's CFO okay.

Before I introduce Andres, I remind you that during today's call, including the question and answer session, statements that are not historical facts, including any projections or guidance, statements regarding future events or future financial performance or statements of intent or belief are forward-looking statements and are covered by the safe harbor disclaimers contained in today's press release and the company's public filings with the SEC.

Before I introduce Andreas and mind, you that during today's call, including the question and answer session statements that are not historical facts, including any projections or guidance statements.

Statements regarding future events or future financial performance or statements of intent, but believe our forward looking statements and are covered by the safe Harbor disclaimers contained in today's press release and the company's public filings with the SEC.

Actual outcomes and results may differ materially from what is expressed in or implied by the users who have viewed Shot Fix 2.

Actual outcomes and results may differ materially from what is expressed in or implied by these forward looking statements.

Specifically, these refer to the company's Form 10Q for the quarter ended March 31, 2022, which was filed prior to this call, as well as other filings made by Cleverley's with the FCC from time to time.

Specifically, please refer to the company's Form 10-Q for the quarter ended March 31st 2022, which was filed prior to this call as well as other filings made by cooperating with the SEC from time to time.

These filings identify factors that could cause results to differ materially in those bullet-looking statements.

These filings identify factors that could cause results to differ materially from those forward looking.

Statements.

Please also note that during this call, management will be disclosing adjusted EBITDA, adjusted gross profit, and adjusted gross margin.

Also note that during this call management will be disclosing adjusted EBITDA adjusted profit and adjusted gross margin.

These are non-GAAP financial measures.

These are non-GAAP financial measures as defined by SEC regulations.

And by S E C regulation G.

Second ciliations of these non- GAAP financial measures are the most directly comparable GAAP measures in a statement disclosing the reasons why company management believes that adjusted EBITDA, adjusted gross profit, and adjusted gross margin provide useful information to investors regarding the company's financial condition and results of the operation are included in today's press release that is posted on the company's website. With that, I will turn the call over to Andra.

Reconciliations of these non-GAAP financial measures the most directly comparable GAAP measures in our statements as clothing. The reasons why company management believes that adjusted EBITDA adjusted gross profit adjusted gross margin provides useful information to investors regarding the company's financial condition and results of operation.

In today's press release that is posted on the company's website.

I will turn the call over to Andre.

Thank you Jackie.

We have made strong progress on our streamlined, redefined growth strategy during the first quarter.

We have made strong progress on our streamlined redefined growth strategy during the first quarter.

our cannabinoid revenues increased 195% year over year as we further activated and expanded our B2B partnerships across our target markets, complementing the continued performance strength of our nutraceutical business.

Our cannabinoid revenues increased 195% year over year as we further activated and expanded or BTB partnerships across our target markets complementing the continued performance strength, our nutraceutical business.

Throughout the first quarter, we signed and announced a series of strong strategic partnerships with leaders in our target geographies, both through expanding our existing partnerships and through signing supply agreements with new B2B partners.

The first quarter, we signed and announced a series of strong strategic partnerships with leaders in our target geographies.

Both through expanding our existing partnerships and through Chinese supply agreements with new partners, our suit commercial advancements demonstrate our emerging position as the supplier of choice within the global cannabinoid markets.

our swift commercial advancements demonstrate our emerging position as a supplier of choice within the global cannabis market.

To support this growth we also focus on aligning our cost structure and balance sheet with our renewed strategic priorities.

To support this growth, we also focus on aligning our cost structure and balance sheet with our renewed strategic priority.

While our bottom line reflects several one-time restructuring expenses related to equipment write-offs and employee exits, we believe the changes we have implemented will help us become an even leaner and more efficient operator, as well as drive greater cost savings over the longer term.

While our bottom line reflects several onetime restructuring expenses related to equipment write offs and employee exits.

Believe the changes we have implemented will help us become an even leaner and more efficient operator.

Well I'll, just drive greater cost savings over the longer term.

Subsequent to the quarter, we optimized our balance sheet by paying off two of our largest remaining pieces of debt, our senior convertible note with Catalina LP and our remaining obligations related to the acquisitions of Herbal Brands.

Subsequent to the quarter, we optimized our balance sheet by paying off two of our largest remaining pieces of debt are senior convertible note with Catalina LP and our remaining obligations related to the acquisitions of urban brands.

our focus on commercial execution and organizational efficiency has allowed us to make decisive strategic progress and I believe we are well positioned to maintain our momentum in 2022.

Our focus on commercial execution and organizational efficiency.

With us to make decisive strategic progress and I believe we are well positioned to maintain our momentum in 2022.

As a reminder, we entered 2022 with the commitment to focus all commercial, regulatory and product development efforts on five key markets.

As a reminder, we entered 2022 with the commitment to focus our commercial regulatory and product development efforts on five key markets.

Australia, Brazil, Germany, Israel, and the United States.

<unk>, Brazil, Germany, Israel, and the United States.

During the first quarter, we made strong progress across each of these markets.

During the first quarter, we made strong progress across each of these markets.

To begin with, in Australia, we announced two agreements in February that demonstrate our early momentum in this market.

To begin with.

Australia, we announced two agreements in February that demonstrate our early momentum in Bismarck.

We expanded our existing relationship with Cabinetry, a research driven medical cannabis operator into a two year 3.6 million take or pay agreement.

We expanded our existing relationship with Canotric, a research-driven medical cannabis operator into a two-year, 3.6 million take or pay agreement in which we will begin supplying one strain of our high THC flower from Portugal alongside the CBD oil products we already supply.

In which we will begin supplying one strain over high THC flower from Portugal, alongside the CBD oils products, we already supply.

In addition, we signed our largest Australian supply agreement to date through a new partnership with Australian National Therapeutics Group. Under this four-year take or pay agreement, we will supply a product suite that includes CBD isolate and GMP certified THC crude oil from Colombia and THC flour from Portugal. And the ANTG has agreed to purchase a minimum of $7.0 million worth of product.

In addition, we signed our largest Australian supply agreement to date through our new partnership with Australian National Therapeutics Group under this four year take or pay agreement, we will supply a product suite that includes CBD isolate and GMP certified THC crude oil from Colombia.

And THC flower from Portugal.

<unk> has agreed to purchase a minimum of 7 million.

Millions of dollars worth of products.

We have seen Australia's roster of approved medical patients surge throughout the past year, and the country's cannabis industry revenue is expected to double this year, according to local cannabis consultancy Fresh Leaf Analytics.

We have seen Australia's roaster of approved medical patient search the world the past year and the country's cannabis industry revenue is expected to double this year. According to local cannabis consultancy rationally analytics.

We believe our pharmaceutical-grade products and acid-light capabilities allow us to optimize the support and value we offer to our growing base of Australian B2B partners.

We believe our pharmaceutical grade products and asset light capabilities allow us to optimize the support and value.

Offered to our growing base of Australian <unk> partners.

We also advance our progress with the mix of current and new partners in Germany.

You also what Vance, our progress with a mix of current and new partners in Germany.

In January , we got off to a good start in this market with the launch of our Icana flower product from Portugal, the first batch of which sold out in 24 hours and has since been followed by repurchases from several farmers.

In January we got off to a good start in this market with the launch of our iconic flower product from Portugal, the first batch of which sold out in 24 hours and testing followed by repurchases from several farms.

In February we announced the first theme of our commercials CBD extracts into their country under our partnership with Ft Farm and European specialty pharmaceutical company.

February , we announced the first input of our commercial CBD extracts into the country under a partnership with EtiFarm, a European specialty pharmaceutical company.

This was closely followed by the announcement of our three-year supply agreement with Cancetiva, a German distributor and wholesaler, in which Cancetiva will purchase a minimum of 2 million euro or approximately 2.2 million dollars of high THC cannabis flower contingent upon our Portuguese facility becoming EUGMP certified along with other conditions for close.

This was closely followed by the announcement of our three year supply agreement with <unk>, a German distributor and wholesaler in which kind of stuff do you able to purchase a minimum of 2 million euro or approximately $2 $2 million of high THC cannabis flower contingent upon our Portuguese facility, becoming.

GMP certified along with the other conditions for clothes.

Finally, in March we continue to expand our extra distribution through the one-year international sales agreement we announced with German-Columbian medical cannabis and wellness operator volume aid holdings as well as its German manufacturing partner Fidelio Health.

Finally in March we continued to expand their extra distribution through the one year International sales agreement, we announced with German Colombian medical cannabis and wellness operator volume at holdings as well as its German manufacturing partner <unk> Your health care.

Under this agreement, we will provide Fidelio with access to three of our pharmaceutical great bulk cannabis extracts for use in soft pills or prescriptions made.

Under this agreement, we will provide <unk> with access to feel for pharmaceutical grade bulk cannabis extracts for using soft gels for prescription Smith.

Through our I kind of lunch and these three commercial agreements we have made rapid progress with deepening our presence in the German market, which is the largest cannabis market in the European Union.

Through our IKANA launch, and these three commercial agreements, we have made rapid progress with deepening our presence in the German market, which is the largest cannabis market in the European Union.

We are proud to have the pharmaceutical-grade products and processes in place to help newer partners like Fidel, supply German patients with the physician prescribed medicines they need.

We are proud to have their pharmaceutical grade products and processes in place to help newer partners like fee, then supply German patients with the physician prescribed medicines they need.

More broadly, our long-standing relationships with EtiFarm and CancaTIVA to season German operators allow us to expand the depth and breadth of our presence in this market, as these companies occupy meaningful positions in the country's pharmaceutical industry and domestic cannabis supply chain respect.

More broadly our long standing relationships with Ft farm and counts a fever to see some German operators.

Now us to expand the depth and breadth of our presence in this market as these companies occupy meaningful positions in the country's pharmaceutical industry and domestic cannabis supply chain respectively.

We are preparing to advance your German commercial progress even further as our affiliate, Clever Lease Germany, has recently become a fully licensed medical cannabis distributor in this market.

We are preparing to advance our German commercial progress even further as our affiliate cleverly East Germany has recently become a fully licensed medical cannabis distributor in this market.

I'll have more to share on this announcement later in the call, but our ability to navigate Germany regulatory complexity and support significant commercial relationships has given us a meaningful runway for growth within this market and overtime throughout the EU.

I'll have more to share on this announcement later in the call, but our ability to navigate Germany's regulatory complexities and support significant commercial relationships has given us a meaningful runway for growth within this market and over time throughout the EU.

We have also maneuvered through lengthy regulatory complexities in Brazil where we have products in market through the country's compassionate use regulations and two existing product approvals under RDC 327, the local regulatory framework for cannabis products.

We have also maneuvered through lens regulatory complexities in Brazil, where we have products in market through the country's compassionate use recommendations and two existing product approvals under our D. C 27, the local regulatory framework for cannabis products.

Through these and our other pending approvals, we are building the foundation for ramping our current commercial partnerships towards generating recurring revenue over the long term.

Through these and our other pending approvals we are building the foundation for ramping or current commercial partnerships towards generating recurring revenue over the long term.

After adapting to changing quality standards and he's rolling 2021 we have solidified our existing commercial agreements for active pharmaceutical products and signed a comprehensive multiyear strategic partnership with <unk>, the country's leading cannabis company.

After adapting to challenging quality standards in Israel in 2021, we have solidified our existing commercial agreements for active pharmaceutical products and signed a comprehensive multi-year strategic partnership with Intercure, the country's leading cannabis company.

In this partnership, InterQz has access to our high THC medical cannabis flower, and we will cultivate InterQz high-quality strains to allow them to be launched as EU-GMP-compliant branded products within the EU-UK on Australian markets.

And this partnership inter curious has access to our high THC medical cannabis flower and we will cultivate in pictures high quality streams to allow them to launch the EU GMP compliant branded products within the EU UK on Australian markets, we're proud to partner with the <unk> team on product development and to count them among their expanding globe.

We are proud to partner with the Intracure team on product development and to count them among our expanding global customer base for our flower product.

Our customer base for flower products.

Finally, in the US, in January , we entered the domestic CBD market with the launch of Joiso, which provides US consumers with a high quality daily care system at an affordable price.

Finally in the U S. In January we entered the domestic CBD market with the launch of Joy suite, which provides U S consumers with a high quality daily care system at an affordable price point.

This was made possible by the hard work of our Elber Brands team and we've continued working to grow our nutraceutical business by increasing distribution to new clients and expanding penetration of various SKUs within our existing client base.

This was made possible by the hard work for <unk> brands team and will continue working to grow our nutraceutical business by increasing distribution to new clients and expanding penetration of various skus within our existing client base.

Another major tent of our 2022 strategy is preparing and scaling our production capabilities to support the growth and expansion of our flower off.

Another major tenant over 2022 strategy is preparing and scaling our production capabilities to support the growth and expansion of our flower offering.

as we've ramped our Portugal operations over the past year, we've adapted the specifications of our Portugal flower to the needs of our target markets, giving us important insight into the flower cultivation and production that we plan to leverage in Colombia.

As we ramp our Portugal operations over the past year.

We've adapted the specifications for Portugal flower to the needs of our target markets, giving us important insights into the flower cultivation of production that we.

Plan to leverage in Colombia.

As we announced last month, the Colombian government recently, you should join resolution 539, marking the completion of its regulatory framework for the export of medical cannabis flower.

As we announced last month, the Colombian government recently issued joint resolution 539, marking the completion of its regulatory framework for the export of medical cannabis flowers.

Having already exported flower products from Portugal, unsecured EU GMP certification for dried flower products in Colombia, we have been working on developing a Colombian flower product and regulatory pathway for over six months.

Having already exported flower products from Portugal and secured EUGMP certification for dry flower products in Colombia, we have been working on developing our Colombian flower product and regulatory pathways for over six months.

I'll provide additional context around the resolution and our position later in the call, but it represents a welcome regulatory development from which I believe we're a well positioned to benefit.

I'll provide additional context around the risk solution and our position later in the call. They represent a welcome break little redevelopment from which I believe we are well positioned to benefit.

I am proud of our early momentum in 2022, and currently believe where precision to sustain your commercial progress across our redefined core markets through the remainder of the year.

I am proud of our early momentum in 2022 and currently believe we are in a position to sustain our commercial progress across our redefined core markets through the remainder of the year.

to provide greater detail on the financial performance during the first quarter, as well as the other strategic steps we're taking to support our growth opportunities in our target regions. I'd like to turn the call over to our CFO , Hank Hay. Hank, over to you.

To provide greater detail on our financial performance during the first quarter as well as the other strategic steps, we're taking to support our growth opportunities in our target regions.

I'd like to turn the call over to our CFO pancake.

And over to you.

Thank you Andres.

Our revenue in the first quarter of 2022 increased 50% to $5.2 million compared to $3.5 million in the year-ago period.

Our revenue in the first quarter of 2022 increased 50% to $5 2 million compared to $3 5 million in the year ago period.

This increase was driven by continued sales strength in our nutraceutical business, as well as significant year-over-year growth in our cannabinoid revenues, which increased to $190 million.

This increase was driven by continued sales strength in our nutraceutical business as well as significant year over year growth in our cannabinoid revenues.

Which increased to 195%, it's $2 million compared to zero point $7 million in the year ago quarter.

2 million compared to 0.7 million in the year-ago quarter.

Our cannabinoid revenue growth reflects strong performance across our target markets as our existing commercial agreements gradually begin to activate and ramp.

Our cannabinoid revenue growth reflects strong performance across our target markets as our existing commercial agreements gradually begin to activate and ramp.

As Andres just highlighted, we are already off to a strong start with expanding our current partnerships and continuing to grow our partner bases within our core geological

As Andres just highlighted we are already off to a strong start with expanding our current partnerships and continuing to grow our partner basis within our core geography.

Our all-in cost per gram of dry flour in the first quarter of 2022 was 35 cents per gram, compared to 16 cents per gram in the year ago period. The increase was driven by production costs associated with our expanded operations in Portugal, offset by the efficiencies we have maintained in our Colombian operation.

Our all in cost per Gram of dry flower in the first quarter of 2022 was <unk> 35 per gram compared to <unk> 16 per gram in the year ago period.

The increase was driven by production costs associated with our expanded operations in Portugal.

Offset by the efficiencies we have maintained in our Colombian operation.

In Portugal, we continue to anticipate some quarter to quarter choppiness in our consolidated cost per gram as we manage the costs associated with ramping our expanded capacity.

In Portugal, we continue to anticipate some quarter to quarter Choppiness in our consolidated cost per Gram as we manage the cost associated with ramping our expanded capacity.

In Colombia, we also may see a slight increase in production costs in the near term as we grow less flour for extraction and focus on smokable flour for export.

In Colombia.

We also may see a slight increase in production costs in the near term.

As we grow less flower for extraction and focus on smokable flower for export.

Across both geographies, we are focused on capturing economies of scale where we can decrease our unit costs over the longer term.

Across both geographies, we are focused on capturing economies of scale.

We can decrease our unit costs over the longer term.

Our gross profit was $2 million, which includes a $0.8 million inventory write down compared to $2.1 million, which includes a $0.2 million inventory write down in the prior quarter.

Our gross profit was $2 million, which includes a 0.8 million inventory write down.

<unk> to $2 1 million, which includes a 0.2 million inventory write down in the prior quarter.

As a reminder, we are now reporting an adjusted gross profit figure to adjust for our inventory write down that was previously classified in SG&A and is now classified within cost of goods sold.

As a reminder, we are now reporting an adjusted gross profit per year.

To adjust for inventory write down that was previously classified as SG&A and is now classified within cost of goods sold.

That said, our adjusted gross profit, which excludes the inventory write-down in the first quarter of 2022, increased 25% to $2.9 million, compared to $2.3 million in the year-ago period. This reflects an adjusted gross margin of 55.2%, compared to 66.4% in the year-ago period.

That said, our adjusted gross profit.

Which excludes the inventory write down in the first quarter of 2022 increased 25% to $2 9 million compared to $2 3 million in the year ago period. This reflects an adjusted gross margin of 55, 2%.

Compared to 66, 4% in.

In the year ago period.

The year-over-year gross profit growth on an adjusted basis reflects the strong revenue performance I just discussed.

The year over year gross profit growth on an adjusted basis reflects the strong revenue performance I just discussed.

Partially offset by higher production costs as we scale and optimize our Portugal operation.

Partially offset by higher production costs, as we scale and optimize our Portugal operation.

And our nutraceutical business. We have also continued to weather a pandemic related impacts around wage pressure rising transportation costs and the availability of both labor and materials and we anticipate that these will continue to serve as headwinds for our margin performance over the coming quarter.

In our nutraceutical business, we have also continued to weather pandemic-related impacts around wage pressure, rising transportation costs, and the availability of both labor and materials. And we anticipate that these will continue to serve as headwinds for our margin performance over the coming quarter.

<unk>.

We are closely monitoring the impact of these effects on our business.

We are closely monitoring the impacts of these effects on our business in the near term and on the broader labor and supply chain conditions over the longer term.

The near term and on the broader labor and supply chain conditions over the longer term.

Operating expenses in the first quarter of 2022 were $13.9 million compared to $9.9 million for the same period in 2021.

Operating expenses in the first quarter of 2022 were $13 9 million compared to $9 9 million for the same period in 2021.

The increase is primarily attributable to a $4 million one-time restructure charge which stemmed from our efforts to align our cost structure with our redefined strategic priorities for the year ahead.

The increase is primarily attributable to a $4 million, one time restructuring charge, which stemmed from our efforts to align our cost structure with our redefined strategic priorities for the year ahead.

Within our $4 million restructuring charge, approximately $2.8 million of the restructuring charge was related to charging off certain excess extraction equipment for our Colombian operators.

Within our $4 million restructuring charge, approximately $2 8 million of the restructuring charge was related to charging off certain excess extraction equipment, where our Columbian operation as we continue to prepare for dried flower exports later this year.

as we continue to prepare for dry flower exports later this year. And the remaining $1.2 million was related to employee exit costs.

And the remaining $1 2 million was related to employee exit costs.

While these expenses constrained our bottom line during the first quarter, we believe these restructuring efforts will result in projected cost savings of approximately $2 million for the balance of the year. And we believe they represent an approximate $4 million cost reduction on an annualized basis for 2023.

While these expenses constrained our bottom line during the first quarter. We believe these restructuring efforts will result in projected cost savings of approximately $2 million for the balance of the year and we believe they represent an approximate $4 million cost reduction on an annualized basis for 2012.

Three.

We believe our realigned cost structure will allow us to focus more fully on our core operational activities related to driving revenue growth in our target market. Our focus on deep prioritizing non core operational efforts.

We believe our realigned cost structure will allow us to focus more fully on our core operational activities related to driving revenue growth in our target markets.

Our focus on deep prioritizing noncore operational efforts.

including M&A, minority investments, and long-term projects without a clear ROI is a clear part of our strategy that is already positioning us to operate from an even more efficient foundation going forward.

Including M&A minority investments and long term projects without a clear ROI is.

As a clear part of our strategy that is already positioning us to operate from an even more efficient foundation going forward.

Net loss in the first quarter of 2022 increased $16 1 million compared to $13 8 million for the same period in 2021, primarily driven by a $4 million restructuring expense.

Net loss in the first quarter of 2022 increased to $16.1 million compared to $13.8 million for the same period in 2021, primarily driven by a $4 million construction expense.

offset by increase in loss due to 1.7 million of debt discount write-off and loss on debt extinguishment of 2.3 million due to extinguishment of debt as offset on gain remeasurement of warrant liability.

Offset by increase in loss due to $1 7 million of debt discount write off.

And loss on debt extinguishment of $2 3 million due to extinguishment of debt as offset on gain remeasurement of warrant liability.

adjusted EBITDA in the first quarter of 2022 was negative 6.7 million compared to negative 5.5 million for the same period in 2021 due to inventory write-down, increased R&D expenses for Colombian smokable dry flour, and additional sales and marketing activities.

Adjusted EBITDA in the first quarter of 2022 was negative $6 7 million compared to negative $5 5 million.

The same periods in 2021 due to inventory write down increased R&D expenses for Colombian smokable dry flower.

And additional sales and marketing activities.

At March 31, 2022, our cash found increase to $44.8 million compared to $37.7 million at December 31, 2021. The increase was primarily attributable to our activity on our at-the-market offering through which we has raised $22.8 million in net proceeds as of the end of the first quarter.

At March 31, 2022, our cash balance increased to $44 8 million.

<unk> to $37 7 million at December 31, 2021 the.

The increase was primarily attributable to our activity on our aftermarket offering through which we have raised $22 8 million in net proceeds as of the end of the first quarter.

Subsequent to the first quarter, we have strengthened our balance sheet, even further through paying off two major pieces of debt.

Subsequent to the first quarter, we have strengthened our balance sheet even further through paying off two major pieces of debt. On April 5th, we repaid the remaining approximate 13.2 million balance of the aggregate amount outstanding under our secured invertible note with Catalina LP.

On April 5th we repaid the remaining approximate.

$13 2 million balance of the aggregate amount outstanding under our secured convertible note with Catalina L. P.

As a result of the repayment, all of our outstanding debt and obligations we owed under the note purchase agreement and convertible note are paid in full, which offers us greater balance sheet flexibility.

As a result of the repayment.

All of our outstanding debt obligations, we owed under the note purchase agreement and convertible notes are paid in full which offers us a greater balance sheet flexibility.

On May 2nd, we fully repaid our outstanding debt and obligations under our loan and security agreement between herbal brands and rock trust capital, representing an aggregate principal amount of $5.6 million, approximately $46.7 thousand in accrued and unpaid interest, and approximately $3.1 thousand in aggregate fees.

On may 2nd we fully repaid our outstanding debt and obligations under our loan and security agreement between herbal brands in Rockford capital, representing an aggregate principal amount of $5 6 million.

Approximately $46 7000 in crude.

Unpaid interest and approximately $3 1000 in aggregate fees.

In total, these amounts represented our outstanding debt related to our acquisition of herbal brands in 2019.

In total these amounts represented our outstanding debt related to our acquisition of herbal brands in 2019.

As a result, the company's debt has been reduced from $22 6 million to $2 1 million.

As a result, the company's debt has been reduced from $22.6 million to $2.19 million.

thereby yielding annual total interest expense savings of 0.69.

Thereby yielding.

Total interest expense savings of zero point $6 million.

These actions represent significant progress in our efforts to optimize our balance sheet and drive greater cash efficiency.

These actions represent significant progress on our efforts to optimize our balance sheet and drive greater cash efficiency.

Throughout 2022, we remain committed to further improving our liquidity position through reducing our expenses and investment and working capital.

Throughout 2022, we remain committed to further improving our liquidity position.

Reducing our expenses and investment and working capital.

Lastly, as present trends in commercial momentum in our business hold, we are reiterating our full year 2022 financial guidance. We expect our 2022 revenue to range between 20 million and 25

Lastly, as present trends in commercial momentum in our business hold we are reiterating our full year 2020 to financial guidance, we expect our 2022 revenue to range between 20 million and $25 million.

reflecting an adjusted gross margin between 50 to 55%.

Reflecting an adjusted gross margin between 50% to 55%.

Our top line expectations reflect expected increase in our cannabinoid revenues relative to 2021 as we continue to activate commercial opportunities in our core market.

Our top line expectations reflect expected increase in our cannabinoid breath is relative to 2021 as we continued to activate commercial opportunities in our core market.

Meanwhile, our adjusted gross margin expectations reflect higher production costs in Portugal and continued supply chain and labor cost headwinds in our cannabinoids and nutraceutical businesses, respectively.

Meanwhile, our adjusted gross margin expectations reflect higher production costs in Portugal, and continued supply chain and labor cost headwinds in our cannabinoid and nutraceutical businesses respectively.

We also continue to expect our full year adjusted EBITDA to be within the range of negative $23 million to negative $20 million.

We also continue to expect our full year adjusted EBITDA to be within the range of negative 23 million to negative 20 million.

with capital expenditures ranging between $2 million and $3 million. This CAPEX range represents a maintenance level annual run rate.

With capital expenditures range of between $2 million and $3 million. This capex range represents a maintenance level annual run rate.

We have made solid progress with advancing our more streamlined growth strategy during the first quarter and we believe our focus on restructuring our cost and optimizing our cash profile has positioned us to continue strengthening our foundation for long term growth and profitability.

We have made solid progress with advancing our more streamlined growth strategy during the first quarter, and we believe our focus on restructuring our costs and optimizing our cash profile has positioned us to continue strengthening our foundation for long-term growth and profitability. This concludes my prepared remarks, and now I'll turn the call back over to Andres to review some of our recent commercial and production highlights in greater depth.

This concludes my prepared remarks, and now I'll turn the call back over to Andreas to review some of our recent commercial and production highlights in greater depth.

Andreas.

Thank you Henk.

Before we open the call up to questions I'd like to briefly review the progress we've made in several of our core markets. After the end of the first quarter.

Before we open the call up to questions, I'd like to briefly review the progress we've made in several of our core markets after the end of the first quarter.

From both a production and commercial standpoint, we're improving our positioning in our key regions of focus and building upon the strong foundation we have laid over the past year.

From both a production and commercial standpoint, we're improving our positioning in our key regions of focus and building upon the strong foundation, we have laid over the past year.

First, as I mentioned earlier, Clever Leaf celebrated the Colombian government's issuance of joint resolution 539 in early April , which marked the completion of the regulatory framework needed to facilitate the export of medical cannabis flour from Colombia.

First.

As I mentioned earlier, Kevin leaves celebrated the Colombian government issuance of joined brisk solution <unk> nine in early April which marked the completion of the regulatory framework needed to facilitate the export of medical cannabis flower from Colombia.

The resolution details the process and requirements for exporting medical cannabis flour and cannabis derivatives, which will help inform the regulatory and product development preparations we've had underway for months.

The resolution details to processing requirements for exporting medical cannabis flower and Kent Davies.

Which will help inform the regulatory and product development preparations we've had underway for months.

To this end, we've already successfully produced high THC cannabis flower in our early research and development phase and we have had experience growing milled flower for extraction for over four years. In conjunction with our experience with exporting dried flower products from Portugal, we believe we can leverage our learnings to ensure our Colombian flower products meet the regulatory requirements in both Colombia and our end market.

To this end we've already successfully produce high THC cannabis flower in her early research and development phase and we have had experienced growing milled.

Flower for extraction for over four years.

Junction with our experienced with exporting bright power products from Portugal, We believe we can leverage our learnings to ensure a Colombian flower products meet the regulatory requirements in both Colombia, and our end markets.

We have already signed commercial agreements and several of our target markets and we expect to begin fulfilling this agreement by the end of this year in fact, we anticipate exporting milled flower products as soon as Q3 of this year, even though our experience and existing infrastructure for these products.

We have already signed commercial agreements in several of our target markets and we expect to begin fulfilling this agreement by the end of this year. In fact, we anticipate exporting milled flower products as soon as Q3 of this year, given our experience and existing construction for this product.

We also ultimately plan to launch a Colombian flower in Germany through our wholly owned subsidiary, Cleverly's Germany, building upon the momentum of our Icona flower brand.

We also ultimately plan to launch a Colombian flurry in Germany through our wholly owned subsidiary clever in East Germany Bill.

Building upon the momentum of our kind of flower brand.

With our current expertise, scale, quality certifications, and growing partner base, we believe we are world-positioned to expand our flower portfolio and capture this expanding growth opportunity within the Global Medical Cannabis Market.

With our current expertise scale quality certifications and growing partner base. We believe we are well positioned to expand your flower portfolio captured this expanding growth opportunity within the global medical cannabis market.

To provide some additional updates around clever needs Germany, we also recently announced that this affiliate has received all of the required regulatory licenses permit and certifications by German authority to be able to distribute medical cannabis to wholesalers and around 20,000 pharmacies across the country.

To provide some additional updates around flavor needs, Germany. We also recently announced that this affiliate has received all of the required regulatory licenses permits sensor applications by German authority to be able to distribute medical academies to wholesalers and around 20000 pharmacies across the country.

The requirements include a wholesale distribution license granted in compliance with the German medical products.

The requirements into the wholesale distribution license granted in compliance with the German medical products.

a Certificate of Good Distribution Practices, or GDP, and a permit for the trade in narcotics trucks in compliance with the German Narcotics Drugs Act.

A certificate of good distribution practices or GDP on a permit for the trading or cottage trucks in compliance with the German courts drugs Act.

Our status as a fully licensed distributor complements the already strong commercial momentum we have generated in this market, and it grants us greater access to pharmaceutical distribution channels.

Our status as a fully licensed distributor complement the already strong commercial momentum we have generated in this market.

<unk> greater access to pharmaceutical distribution channels.

As we support the growth of our IKANA flower brand, our German B2B partner base, we look forward to leveraging this additional opportunity to explore the German market's potential and serve as a reliable, flexible partner within Germany's strict regulatory framework.

As we support the growth of right kind of flower brand, our German <unk> partner base.

Look forward to leveraging this additional opportunity to explore the German markets potential and serve as a reliable flexible partner within Germany strict regulatory framework.

Lastly, in the U S. Our certifications and focus on pharmaceutical grade quality has helped drive our recently announced partnership with volume Therapeutics and American clinical stage biopharmaceutical company.

Lastly, in the US, our certifications and focus on pharmaceutical-grade quality has helped drive our recently announced partnership with Biom Therapeutics, an American clinical stage biopharmaceutical company.

Under the two year supply agreement, we have agreed to provide high quality CBD isolate which will be Houston formulations for studies and clinical trials for rare neurological and develop adult diseases.

Under the three-year supply agreement, we have agreed to provide high-quality CBD isolate, which will be using formulations for studies and clinical trials for rare neurological and developmental diseases.

Biome has already shown the clinical benefits of cannabidiol in epilepsy patients and the company obtained its orphan drug designation in 2021.

Volume has already shown the clinical benefits of <unk> patients.

And the company obtained orphan drug designation in 2021.

partnering with strong biopharmaceutical companies like Biome will help us not only establish our pharmaceutical presence and awareness of our top quality standards within the U.S.

Partnering with strong biopharmaceutical companies like buy them will help us not only established pharmaceutical presence and awareness of our top quality standards within the U S.

but also support our enduring commitment to advancing research around cannabinoids and their potential health benefits. To summarize our Q1 performance and recent highlights, we are steadily executing on our redefine growth strategy, positioning us to progress through 2022 as a linear and more efficient organization.

But also support our enduring commitment to advancing research around cannabinoids under potential health banner.

<unk> for Q1 performance and recent highlights.

We're steadily executing on our redefined growth strategy positioning us to progress through 2022, as a leaner and more efficient organization.

By narrowing our focus towards our target markets, we can more effectively allocate our resources towards adding value to our current partnerships, while also identifying new opportunities to expand our partner base and leverage regulatory tailwinds.

By narrowing our focus towards our target markets, we can more effectively allocate our resources towards adding value to our current partnerships, while also identifying new opportunities to expand our partner base and leverage regulatory tailwind.

From a cost perspective, as Hank mentioned, we are focused on aligning our cost structure with these strategic priorities.

From a cost perspective as Hank mentioned, we are focused on aligning our cost structure would be strategic priorities.

As we optimized our production operations, strengthen our balance sheet, and pair down non-cooperational expenditures, we are focused on enhancing our capital efficiency to support long-term growth.

As we optimize their production operations strengthening our balance sheet and pare down non core operational expenditures were focused on enhancing our capital efficiency to support long term growth.

I am proud of the momentum we are building and of our team's hard work towards our longer term vision. We look forward to providing updates on our progress and maximizing the value we create for all of our stakeholders through our renewed strategic approach. Operator, we will now open the call.

I am proud of the momentum we are building I don't know if our teams hard work towards your longer term vision.

Look forward to providing updates on our progress and maximizing the value we create for all of our stakeholders through our renewed strategic approach.

Operator, we will now open the call for Q&A.

Thank you Sir.

Thank you, sir. Ladies and gentlemen, we will now be conducting a question and answer session.

Ladies and Jason will now be conducting a question and answer session.

If you'd like to ask a question, please put a star in one on your telephone keypad.

If you ask the question. Please press Star then one on the telephone keypad.

A confirmation terminal indicates your line is in the question queue.

A confirmation tone will indicate your line is in the question queue.

He represents Tarden, too, if he would like to leave the Christian Cube.

You bet basis talking to you soon.

She leaves the question queue.

For participants using a speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

All participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock is.

Yes.

The proposed amendments probably call for questions.

Yes.

Yes.

Yeah.

Yeah.

Alright, okay.

At this time, this concludes our question and answer session. I would now like to turn the conference back over to Mr Fiyardo for closing comments.

At this time. This concludes our question and answer session I would now like to turn the conference back over to Mr. Fiat for.

The closing comments.

Well thank you very much. You know I'd like to thank everybody who attended the call today and you know we look forward to speaking with our investors, analysts, when we report our second quarter results in August . So thanks everyone.

Well, thank you very much.

I'd like to thank everybody, who attended the call today, and we look to forward to speaking with our investors and analysts when we report our second quarter results.

Thanks, everyone.

Thank you very much, sir. Ladies and gentlemen, that concludes today's teleconference. Thank you for your participation, and you may now disconnect your lines.

Thank you very much Sir ladies and gentlemen that concludes today's teleconference.

For your participation and you may now disconnect your lines.

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