Elixinol Global Limited Annual Report 2020

The Group’s earnings before interest, tax, depreciation and amortisation (‘EBITDA’) including share of associates’ net loss and excluding impairment from continuing operations for the year ended 31 December 2020 was an Adjusted EBITDA loss of $22,930,000 (2019: Adjusted EBITDA loss of $24,632,000). A reconciliation of Adjusted EBITDA from continuing operations to statutory loss is detailed below: Group 2020 $’000 2019 $’000 EBITDA from continuing operations (Loss)/profit from continuing operations (104,478) (80,512) Add back: Finance costs 49 133 Deduct: Interest income (100) (564) Deduct/(add back): Income tax 4,200 (7,537) Add back: Depreciation and amortisation 3 , 213 2,795 EBITDA from continuing operations (97,116) (85,685) Add back: Impairment of intangibles 39, 1 78 49,059 Add back: Impairment of assets 35,008 11,994 Adjusted EBITDA from continuing operations (22,930) (24,632) The Group’s cash flow used in operations for the year ended 31 December 2020 was $22,621,000 (2019: $51,066,000). The Group recognised non-cash impairments of intangibles (including goodwill) of $39,178,000 for the year ended 31 December 2020 relating to the Elixinol Americas CGU. The Group performed its annual impairment test at 31 December 2019, however as a result of trading performance from the reduction in revenues from the COVID-19 pandemic, indicators of impairment existed for Elixinol Americas as at 30 June 2020. Key assumptions in preparing the cash flow projections are subject to significant judgement about future economic conditions and the rapidly changing regulatory in which the CGU’s operate in and uncertainty of the future impact of COVID-19. As a result, impairment testing was performed at 30 June 2020 and this resulted in a full impairment of intangible assets, including goodwill and customer relationships from private and bulk customers of the Elixionol America CGU. The assumptions were reviewed at the year end and remain consistent with the impairment review performed at the half year. The Group recognised non-cash impairments of assets of $35,008,000 for the year ended 31 December 2020 relating to inventory, fixed assets and equity investments (31 December 2019: $11,994,000, 30 June 2020: $29,787,000). Segment results Americas The Americas segment comprises the trading results of Elixinol LLC (‘Elixinol Americas’) and its investments including Pet Releaf, NCHPP and H&WHoldings. Americas reported revenue of $8,510,000 for the year ended 31 December 2020 (2019: $24,915,000) and EBITDA of $14,170,000 loss for the year (2019: $13,593,000 EBITDA loss). In the US, the regulatory environment remains dynamic and varies from state to state but with a heightened expectation that the Food and Drug Administration (‘FDA’) will progress its rulemaking process regarding marketing of CBD products as dietary supplements. The current CBDmarket continues to be oversupplied posing a challenging environment for the industry. Additionally, COVID-19 factors continued to negatively impact sales, in particular in traditional retail / bricks and mortar channels. To lead the US business transformation, a new leadership team was put in place in March 2020 led by a new Americas CEO. Throughout the year, the full-time equivalent (‘FTE’) head count was reduced from 98 to 39 and thus contributing materially to the Company’s overall reduction in quarterly cash outflows of $10.9 million comparing Q4 FY2020 to Q4 FY2019. As a result of the increased need for online shopping in the COVID-19 environment, online sales now represent approximately 50% of US revenues. During Q4 FY2020, Elixinol Americas progressed its transition towards an integrated in-house, web services and digital marketing team. This enables the Company to reduce external agency costs and provides the agility needed to successfully compete in a digital environment with rapid content creation. F INANCI AL REPORT Company Overview Financial Report Shareholder Information FY2020 Milestones 15 Strategy and Market Update