Elixinol Wellness Annual Report 2021

NOTE 1: GENERAL INFORMATION The financial statements cover Elixinol Wellness Limited as a Group consisting of Elixinol Wellness Limited (‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the period (‘Group’). The financial statements are presented in Australian dollars, which is Elixinol Wellness Limited’s functional and presentation currency. On 17 May 2021, with approval of the shareholders at the Annual General Meeting, the company changed its name from Elixinol Global Limited to Elixinol Wellness Limited. Elixinol Wellness Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered oŠce and principal place of business is: Level 12 680 George Street Sydney NSW 2000 A description of the nature of the Group’s operations and its principal activities are included in the directors’ report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 25 February 2022. The directors have the power to amend and reissue the financial statements. NOTE 2: SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Going concern The annual financial statements have been prepared on a going concern basis, which contemplates the continuation of normal business operations and the realisation of assets and settlement of liabilities in the normal course of business. During the year ended 31 December 2021, the Group incurred a net loss before tax of $17,025,000 (31 December 2020: $104,478,000 loss). During the year, net cash outflows from operating activities were $14,071,000 (31 December 2020: $22,621,000). The year was another significantly challenging period for the Group with COVID-19 having a sustained impact on the global retail environment. The CBD industry experienced far less growth in FY2021 than was generally expected. This was due in part to the pandemic, but also a lack in regulatory clarity in many of the major CBDmarkets, and a saturated industry which resulted in an over-supply of product and reduced pricing. Not withstanding these conditions, the Directors believe that it is reasonably forseeable that the Group will continue as a going concern, and that it is appropriate to adopt the going concern basis in the preparation of the financial report, after consideration of the factors noted within this report. As at 31 December 2021, the Group has net assets of $19,077,000 including cash of $12,649,000. The Directors regularly monitor the Company’s cash position on an ongoing basis and the Group has demonstrated a track record of raising capital and funding as and when required, including completing two capital raises totalling $31,477,000 FY2020. In addition, the net loss before tax of $17,090,000 has been significantly reduced in FY2021 from that recorded in FY2020 of $100,278,000 and the net cash outflow from operating activities reduced to $2,898,000 (excluding $322,000 non- recurring transaction and severance costs) in Q4 FY2021 from $3,820,000 in Q4 FY2020 as expenditure was reduced and the scale of the business operations was reset. In addition, ongoing cash outflow savings of $2.5m per year will be realised through the restructure of the European operations as the business transitioned to a licensing model during Q4 FY2021. Elixinol Wellness secured a three-year exclusive Trademark and Know-how Licensing Agreement with the UK’s largest CBD manufacturer and distributor, BRITISH CANNABIS™, at the end of 2021. The deal enables BRITISH CANNABIS™ to manufacture, market and sell Elixinol CBD products across the UK, ensuring our brand continues to be distributed in the market while realising significant cost savings for the Group. In addition, ongoing cash outflow savings will also be realised in the Americas, through the transition to a fully outsourced supply chain that also near complete in Q4 FY2021 with inhouse warehousing and fulfilment on track to move to a third-party model in Q1 FY2022. Notes to the Consolidated Financial Statements for the year ended 31 December 2021 F INANCI AL REPORT 38 Elixinol Wellness Limited | Annual Report 2021