Elixinol Wellness Annual Report 2021

Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Going concern Key audit matter How the matter was addressed in our audit For the year ended 31 December 2021, the Group incurred a net loss of $17m and net cash outflows of $15m indicating a potential going concern issue. The financial report has been prepared on a going concern basis and as the directors’ assessment of the Group’s ability to continue as a going concern can be highly judgemental we identified going concern as a significant risk requiring special audit consideration. Due to these factors, we considered this area to be a key audit matter. Our procedures included, but were not limited to: • An evaluation of the directors’ assessment of the Group’s ability to continue as a going concern. In particular we reviewed management prepared cashflow forecast for the period to end February 2023; • Reviewed the inputs to the cashflow forecast including comparing to prior periods, and known business plans for the future; • Assessed management’s ability to accurately forecasting, by review of current performance to prior period forecast; and • Reviewed the disclosures in the financial statements to determine whether they are adequate. The directors assessment of going concern is included in note 2 to the financial report. Impairment / Recoverability of non-current assets Key audit matter How the matter was addressed in our audit There is a risk that carrying value of the Group’s non-current assets might be impaired if they are unlikely to produce economic benefits in excess of their carrying value. The Group has seen lower than expected revenue growth and demand for its products. Based on these factors, it was identified that impairment indicators exist. Due to the significant assumptions and judgments that are involved in impairment assessments, we have determined that this is a key audit matter. Our procedures included, but were not limited to: • Reviewed and analysed the Group’s value-in-use cash flow models to support the carrying value of non-current-assets; • Performed procedures on the forecasts and discounted cash flow models, including assessment of inputs in order to test the impairment analysis; • Enquired with management, corroborating assumptions with audit evidence and assessed the judgements made in respect of non-current asset impairment assessments prepared by the Group; • Assessed management’s ability to accurately forecast, by review of current performance to prior period forecast. Independent Auditor’s Report continued F INANCI AL REPORT 78 Elixinol Wellness Limited | Annual Report 2021