Elixinol Global Limited Annual Report 2020

We must recognise and thank our predecessors, former Non-Executive Chairman Andrew Du¡ and former CEO Stratos Karousos, for the solid groundwork they laid in refocusing the business strategy two years ago towards a leaner, branded consumer goods company. Throughout 2020 we’ve accelerated this strategy and have made great strides forward in our pursuit of top-line growth and improved capital e£ciency, which is starting to materialise in an improving bottom-line performance. Importantly, we’ve also made selective investment decisions in both team capability as well as new product initiatives thus creating new catalysts for growth. Since joining the Company in April 2020, we have been working with the Board and global leadership team to cement Elixinol’s position as one of the leading global hemp derived nutraceutical and food product companies whilst also creating a much leaner cost base. As we move further into FY2021, we look back upon the solid progress we have made towards achieving this goal. While we can’t discount the impact COVID-19 has had on the business, we are now in a secure financial position, buoyed by an increasingly positive regulatory environment in our operating markets, and we have an exciting pipeline of innovative consumer-led products, which is building traction with consumers and customers alike. SMART CHOICES TO CREATE A STABLE YET AGILE BUSINESS Behind every challenge lies opportunity and that is how we have viewed the impact of the global pandemic. We have used this time to evaluate the best path forward. We have been extremely deliberate with our choices which have led to a stable, yet agile business - a business focused on quality and longevity. As briefly mentioned, we made significant e¡orts throughout FY2020 to streamline the business in all markets, focusing on those channels that would be most COVID-19 resilient, divesting low-margin business and driving higher margins through a number of e£ciency improvements across our processes and channels. These e¡orts saw us right-size the business – resulting in an operating cost reduction of close to 50%. This brought our net quarterly cash outflow down to $3.8m in the December quarter (Q4 FY2020) versus $10.9m in the prior corresponding period of Q4 FY2019. We also made smart choices, investing in repositioning the Elixinol brand, product innovation, portfolio expansion and in our new e-commerce platforms. BRAND LAUNCH AND PRODUCT INNOVATION The launch of the new Elixinol brand in FY2020 enabled us to leverage our CBD capabilities into the much bigger and more widely understood nutraceuticals and supplements categories. We achieved this by blending Elixinol CBD with other ingredients with proven health benefits – such as turmeric and melatonin, thus making it easier for consumers to adopt the still relatively new CBD category. We also introduced new customer and consumer-led ranges, including a new range of water-soluble products and our Good Mood CBD Gummies which have received strong early feedback. As a direct result of our brand relaunch and new product innovation, we’ve seen greater retail acceptance and growth in our distribution partners, including new listings with Well Pharmacy, leading TV home shopping channels and Superdrug in the UK. Also, at the heart of our product innovation in FY2020 was the launch of our new comprehensive elixinolSkin CBD skincare range. This opened new growth channels, including Boots Ireland, with whom we launched the product as our first-to-market partner. While at the time of writing, COVID-19 related lockdowns remained in place across many parts of the UK and US, hampering footfall into all bricks & mortar channels, we feel positive that we are well positioned to leverage our strong customer relationships and existing broad distribution as soon as conditions ease. 90 % of Group revenue in FY2020 (vs 64% in FY2019) BRANDED PRODUCTS contributed 51 % from $15.2m in H1 FY2020 to $7.4m in H2 FY2020 CASHUSED INOPERATIONS reduced by $ 8.1 m in H2 FY2020 from $14.8m in H1 FY2020 ADJUSTED EBITDA LOSSES improved to COMPANY OVERV I EW Company Overview Financial Report Shareholder Information 5 FY2020 Milestones Strategy and Market Update