Elixinol Wellness Annual Report 2021

Letter fromChair and Global CEO Our strategy has been to transformElixinol Wellness to a lower cost, higher margin, consumer led wellness company with improved profitability. All whilst caring for and investing in the wellbeing of our teams across the world throughout the pandemic. COMPANY OVERV I EW Helen Wiseman Chair Oliver Horn Global CEO Dear Fellow Shareholders, On behalf of the Elixinol Wellness Board, we present our Annual Report for Financial Year 2021 (FY21). FY21 was another significantly challenging period with COVID-19 having a sustained impact on the global retail environment. The CBD industry experienced far less growth in 2021 than was initially forecasted. This was due in part to the pandemic, but also a lack in regulatory clarity in many of the major CBD markets, and a saturated industry which resulted in an over- supply of product and reduced pricing. Given the continuation of these unstable market conditions, our FY21 focus remained on further building the foundations laid in FY20 to transform Elixinol Wellness to a lower cost, higher margin, consumer- led wellness company. As a Board and management team we worked hard to reduce the cost of doing business and to enhance product margins, while at the same time making well considered and selective investment decisions to support brand building, product innovation and e-commerce initiatives. Our strategy has been to control what was controllable and optimise the business for current conditions, while ensuring the wellbeing of our team and our partners throughout the pandemic. Overall, we are pleased with our transformation progress in FY21. We have created a well-funded and leaner consumer products wellness company with leading brands that are strongly positioned in long-term growth categories especially once the US CBD market conditions improve and the current oversupply has cycled through. Importantly, we have more cost eciencies identified for FY22 that will significantly support our path to profitability. EVOLVINGOUR REGIONAL STRATEGIC FOCUS In the US we continued to transform our business model throughout FY21 by fully outsourcing our supply chain and a continued shift towards e-commerce. These activities delivered strong margin improvement and wide-ranging cost reductions, translating to $8.7m Adjusted EBITDA improvement ending the year at a $5.5m Adjusted EBITDA loss for the Americas segment (FY20 $14.2m loss). 4 Elixinol Wellness Limited | Annual Report 2021