Cipher Pharmaceuticals
Annual Report 2023

Plain-text annual report

MELODIOL GLOBAL HEALTH LIMITED (formerly Creso Pharma Limited) ACN 609 406 911 ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2023 Annual Report For the year ended 31 December 2023 Melodiol Global Health Limited – Annual Report 2023 Contents About Melodiol Corporate Directory Chairman’s Address CEO’s Report Directors’ Report Remuneration Report Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information 3 4 5 6 8 22 36 37 38 39 40 41 91 92 98 2 | P a g e About Melodiol Global Health Melodiol Global Health Limited – Annual Report 2023 Melodiol Global Health Limited (“Melodiol”) is predominantly a global cannabis company with operations in Canada, Europe and Australia. Melodiol strives for the highest quality in its products. It develops, cultivates and distributes both recreational and medical cannabis products, as well as having a medical supplies business. www.melodiolglobalhealth.com 3 | P a g e Melodiol Global Health Limited – Annual Report 2023 Corporate Directory Board of Directors Mr Boaz Wachtel Mr William Lay Mrs Micheline MacKay Ms Jodi Scott Mr Bruce Linton Mr Ben Quirin Mr Peter Hatfull Secretary Mr Winton Willesee Registered Office Non-Executive Chairman CEO and Managing Director Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Suite 5 CPC, 145 Stirling Highway Nedlands, WA 6009 Australia Telephone: +61 8 9389 3180 Website: www.melodiolglobalhealth.com Stock Exchange Listings Listed on the Australian Securities Exchange (ASX Code: ME1) Listed on the Frankfurt Stock Exchange (FRA Code: 1X8) Auditors Bankers Crowe Audit Australia Level 24, 1 O’Connell Street Sydney, NSW 2000 Australia Solicitors Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street Perth WA 6000 Australia Westpac Banking Corporation Level 4, Brookfield Place, Tower Two 123 St Georges Terrace Perth WA 6000 Australia Share Registry Automic Share Registry Level 5, 191 St Georges Terrace Perth WA 6000 Australia Email: hello@automic.com.au Telephone: 1300 288 664 4 | P a g e Chairman’s Address Dear Shareholders, Melodiol Global Health Limited – Annual Report 2023 Chairman’s Address I am pleased to present Melodiol Global Health Limited's Annual Report and financial statements for 2023. Throughout the year, the company has accomplished several significant milestones, demonstrating its unwavering commitment to its defined strategy and resulting in record revenue growth. Strategic M&A Growth During the past year, Melodiol completed the acquisition of Health House International Limited (ASX:HHI). HHI’s Australian business is a leading distributor of medical cannabis products in the rapidly growing Australian market. Additionally, HHI’s European business operates a medical supplies distribution channel. The acquisition of HHI was highly significant for Melodiol, as it allowed the Company to increase its geographical diversification and significant expand its revenue base. Overall, Melodiol's M&A activities, combined with its core existing operating divisions, have enabled the company to build a strategic portfolio of businesses that have the potential to generate significant revenue growth and potential near-term profitability. Organisational Structure & Efficiency The Board and management have been focusing on stringent cost management initiatives across the company's divisions. The Boards overarching objective is for the Company to reach a state of cash flow positive as soon as practically possible. This strategy hinges on revenue growth, corporate cost optimisation, and the rationalisation of business units that produce a drag on cash flow. During the course of the year, revenue from core operating units grew substantially, while non-core operating units Sierra Sage Herbs, LLC, impACTIVE Ltd. and Halucenex Life Sciences were discontinued. These businesses were at a life cycle stage that was capital intensive while having limited contribution to the group’s revenue profile. The rationalisation of these business units, combined with the strong growth observed at both Mernova and HHI are expected to assist the company in achieving its overarching objectives. In conclusion, the Board expresses its gratitude to all of the dedicated employees, fellow directors, and shareholders for their ongoing support throughout 2023. The company's strong leadership team, diverse operations, and expanding international presence positions it well for continued growth and success in the years to come. Yours faithfully, Signature Mr Boaz Wachel Non-Executive Chairman 5 | P a g e CEO’s REPORT Melodiol Global Health Limited – Annual Report 2023 I would like to thank all shareholders for their ongoing support of the company and invite you to read the full Annual Report. I am very pleased to report on Melodiol’s progress for the 2023 fiscal year, which was a transformative year for the company. Due to the hard work of our talented global teams and a significant acquisition, Melodiol was able to report a record year for revenue of $21,564,000, an increase of 148% on prior revenue from the 2022 fiscal year. Additionally, Adjusted EBITDA loss improved to $13.8 million in 2023 vs. $17.6 million in 2022 (21.6% loss reduction) from operations. The Company is committed to continuously reducing operating expenses and increasing revenues to contribute to further improvements in Adjusted EBITDA in 2024. Melodiol Global Health Limited is pleased to provide the following report detailing the considerable progress achieved during 2023 (“FY2023”). These milestones have allowed the Company to continue its transition to an international global cannabis company with the future achievement of business unit profitability being a core focus. Over the course of the year, not only did the Company materially increase revenue, but it also reduced costs across the entire business, and this effort remains ongoing. Financial summary: Summary of revenue by operating division Operating Division Mernova Medicinal Inc. Sierra Sage Herbsi Creso Pharma Switzerland Health House International Total sales of products 2023 $000’s 6,936 2,643 538 11,447 21,564 Change 58% 8% -71% n/a 148% 2022 $000’s 4,390 2,453 1,846 - 8,689 Change 21% n/a -28% - 40% 2021 $000’s 3,638 - 2,580 - 6,218 (i) Sierra Sage Herbs is now a discontinued operation. Results of Operations The Company’s ongoing growth was achieved through strong performances in key divisions such as Mernova Medicinal Inc., and via M&A and performance at Health House International. Notably Total Revenue from continuing operations increased 203.4% year on year to $18.9 million and Adjusted EBITDA (loss) from continuing operations improved to $13.8 million from $17.6 million in 2022 (21.6% loss reduction). The Company is committed to further reductions in operating expenses and increasing revenues to contribute to further improvements in Adjusted EBITDA in 2024. Adjusted EBITDA from continuing operations is defined as net earnings before interest, taxes, depreciation, amortisation, impairment charges, finance costs, and losses attributable to business that were paused at the end of 2023 (Sierra Sage Herbs LLC, impACTIVE and Halucenex). Management considers adjusted EBITDA to be the most accurate representation of the Company’s go-forward position. As described below, during FY23, the Company paused several business units in order to focus on Mernova Medicinal and Health House International, which are the key contributors to the Company’s growing revenue base and demonstrate the strongest cash flow attributes of any operations within the Company’s portfolio. Mernova Medicinal Under the leadership of Micheline MacKay, Mernova posted $6.9 million in revenues in 2023, a 58% increase over 2022. The division continues to expand its product range and customer base. During FY23, Mernova delivered several consecutive quarters of record revenue. It listed a variety of new products in existing markets, and entered the following provincial markets for the first time: Manitoba, Alberta, Newfoundland and Prince Edward Island. The Company expects that Mernova will continue to increase its breadth of product range in existing markets, and continue to enter new markets during FY24. The Company looks forward to providing further updates on Mernova Medicinal throughout the course of FY24. 6 | P a g e CEO’s REPORT Melodiol Global Health Limited – Annual Report 2023 Health House International During FY23, the Company closed the acquisition of Health House International (“HHI”). HHI is comprised of a well established medical cannabis distribution business in the growing Australian market and a medical products company based in the UK. The acquisition of HHI contributed significant revenues of $11.5 million to the group’s results and validated the Company’s strategy of growth through strategic M&A. The acquisition of HHI demonstrated the Company’s ability to pursue accretive, strategic M&A to bolster its revenue base and geographic diversification. As the Australian medicinal cannabis market continues to grow, the Company believes that HHI can continue to be a significant contributor to the Company’s revenue base. Sierra Sage Herbs Over the course of the year, the Company recognised the challenges of competing in a highly competitive environment for consumer packaged goods products in a challenging capital markets environment. As a result of this analysis, the Company made the decision to pause operations at Sierra Sage Herbs pending a sale or closure of the business to focus on its highest potential business units. Creso Pharma Switzerland Revenues from Swiss operations in 2023 declined by 75% from 2022 to $0.5 million due mainly to changes made to restructure the business in 2022 in order to operate it in a more sustainable manner. During 2023 The business continued its European business, in addition to achieving a breakthrough sale of products to South Korea. Creso ImpACTIVE Inc Over the course of the year, the Company recognised the challenges of competing in a highly competitive environment for consumer packaged goods products in a challenging capital markets environment. As a result of this analysis, the Company made the decision to pause operations at Creso impACTIVE pending a sale or closure of the business to focus on its highest potential business units. Halucenex Life Sciences Inc Despite significant progress at Halucenex, the Company recognised the challenges of investing in a clinical stage R&D in a challenging capital markets environment. As a result of this analysis, the Company made the decision to pause operations at Halucenex pending a sale or closure of the business to focus on its highest potential business units. Mr William Lay Managing Director and Group CEO 7 | P a g e Director’s Report Melodiol Global Health Limited – Annual Report 2023 The Directors of Melodiol Global Health Limited (“Melodiol” or the “Company”) present their report, together with the financial statements of the Group, consisting of Melodiol Global Health Limited and its controlled entities (the “Group”) for the financial year ended 31 December 2023. CHANGE OF COMPANY NAME On 31 May 2023, the Company announced that at the Annual General Meeting held on that date a resolution was passed by shareholders to change the Company’s name from Creso Pharma Limited (ASX: CPH) to Melodiol Global Health Limited (ASX: ME1). The change of name took effect on ASX from the commencement of trading on 13 June 2023 DIRECTORS The names and particulars of the Company’s directors in office at any time during or since the end of the reporting period are: Mr Boaz Wachtel Mr William Lay Mrs Micheline MacKay Mr Bruce Linton Ms Jodi Scott Mr Ben Quirin Mr Peter Hatfull Non-Executive Chairman (appointed Chairman on 17 November 2022) CEO and Managing Director (appointed on 17 January 2022) Executive Director (appointed on 17 January 2022) Non-Executive Director (appointed on 17 January 2022) Non-Executive Director (appointed on 4 January 2024, previously an Executive Director) Non-Executive Director (appointed on 10 October 2022) Non-Executive Director (appointed on 30 November 2022) The Directors held office during the entire reporting period unless otherwise stated. Boaz Wachtel, MA. Non-Executive Chairman Member of Audit and Risk Committee (Appointed Chairman on 17 November 2022) Mr Wachtel was Co-Founder and former Managing Director of MMJ-PhytoTech Ltd, Australia's first publicly traded Medical Cannabis Company. Co-founder of IMCPC – International Medical Cannabis Patient Coalition. He is an Israeli medical cannabis pioneer/activist, who formulated and assisted the Ministry of Health with the implementation of the National Medical Cannabis Program – one of only few national programs in the world. He is a frequent lecturer and adviser to governments, national committees, business and NGO's on medical cannabis program formulation, grow operations, international laws and UN drug convention compliance, as well as the founder (1999) and former Chairman of the Green Leaf Party, an Israeli political party for cannabis legalisation/medicalisation, human rights and ecology. Mr Wachtel is a certified clinical research manager and holds an MA in Management and Marketing from the University of Maryland. During the past three years, Mr Wachtel held a directorship in the following other listed entity: Company Roots Sustainable Agricultural Technologies Limited (ASX:ROO) Appointed April 2009 Resigned Current William Lay, B.Com (Hons.) Managing Director and Chief Executive Officer (Appointed 17 January 2022) Mr William Lay is an experienced cannabis executive and previously served as Executive Vice President – Strategy, Origination & Operations at Melodiol. Mr Lay began his career with leading Canadian full service financial investment bank, BMO Capital Markets through roles across Canada and London. During his time with BMO Capital Markets, Mr Lay participated in M&A, equity financing and debt financing transactions totaling >C$3 bn in cumulative value. Shortly after his time with BMO Capital Markets, Mr Lay joined Canopy Growth Corporation (TSE: WEED, NASDAQ: CGC) as an M&A Associate, before being promoted to Associate Director, M&A, in 2019. In this role, he assessed and effected multiple transactions locally and internationally, while concurrently progressing corporate strategy initiatives across the group. During his time at Canopy Growth, Mr Lay built a strong working relationship with Mr Linton, working on many high-profile initiatives together. Over the last six years, Mr Lay has managed and supported over C$5 billion in cannabis M&A transactions, including leading the largest acquisition in the history of the cannabis sector. Mr Lay has not been a director of any other listed entity within the last three years. 8 | P a g e Director’s Report Micheline MacKay, M.Sc., B.Sc. (Hons.), PMP Executive Director (Appointed on 17 January 2022) Melodiol Global Health Limited – Annual Report 2023 Mrs MacKay has 23 years of experience in regulatory environments, including pharmaceuticals, medical devices, and government regulated industries. She has held leadership positions for many years in different areas with a strong focus on business improvements and product development from laboratory scale to commercial operations. Mrs MacKay is currently the Managing Director of Melodiol’s wholly owned Canadian subsidiary, Mernova Medicinal Inc. (“Mernova”). She has been in the position for two years and oversees and manages all functions of this business unit. Prior to this apppintment, Mrs MacKay was the Corporate Manager for Mernova for nearly three years. Mrs MacKay is also the Health Canada designated Responsible Person in Charge at Mernova. Leveraging past experience, she has played a significant role in successfully growing Mernova and has implemented best industry standards. She has practical experience in managing a business through specified key performance indicators, managing budgets, conducting regular audits and performance management. Mrs MacKay has not been a director of any other listed entity within the last three years. Bruce Linton, BPA Non-Executive Director (Appointed on 17 January 2022) Member of Remuneration and Nomination Committee (appointed on 17 January 2023) Bruce Linton is the founder, former CEO, and Chairman of Canopy Growth Corporation. Bruce is currently Co-Chairman and former CEO of Martello Technologies Group Inc., and Chairman of the Advisory Board for Red Light Holland Corp. Holds positions of Advisor with Celadon Pharmaceuticals and Above Foods. Board member of the Canadian Olympic Foundation and is an active member of The Ottawa Hospital Foundation, Campaign Executive Committee. Formerly, Bruce was the founding Executive Chairman of Gage Growth Corp., prior to being acquired by TerrAscend. Founding and former Board of Director member and Chairman of the Governance and Compensation Committee at Mind Medicine Inc and was also Chairman and Chief Executive Officer of Collective Growth Corporation (SPAC) IPO in May 2020 completing its business combination transaction with Innoviz Technologies Ltd. in April 2021. During the past three years, Mr Linton held a directorship in the following other listed entites: Company Martello Technologies Group Inc. (TSXV: MTLO) Mind Medicine Inc. (NEO: MMED) Appointed August 2018 September 2019 Resigned February 2023 September 2021 Jodi Scott, M.Sc.TSU Executive Director (Appointed 10 October 2022) Ms Scott has been employed in the position of President US operations by Melodiol Global Health and was respoonsible for all executive and management matters affecting US retail, manufacturing and distribution of products. Ms Scott has over 20 years of consumer package goods experience working with all the major national retailers. She has launched mutpiple brands and products throughout the US. Ms Jodi Scott was co-founder and CEO of Sierra Sage Herbs LLC, based in Colorado USA. Her in-country presence is expected to unlock several additional value accretive opportunities for Melodiol Global Health in the USA. Ms Scott has not been a director of any other listed entity within the last three years. 9 | P a g e Director’s Report Ben Quirin Non-Executive Director (Appointed 10 October 2022) Member of Remuneration and Nomination Committee (appointed on 17 January 2023) Member of Audit & Risk Committee (appointed on 17 January 2023) Melodiol Global Health Limited – Annual Report 2023 Mr Quirin is Australia-based and has over 20 years experience of global leadership in the telecommunications, technology and pharmaceutical sectors. He has launched multiple new products and led business development in new and emerging markets including Europe, the Middle East, Africa and the Asia Pacific. Mr Quirin was previously Regional Managing Director for Canopy Growth Corporation in APAC, one of the world’s largest cannabis companies. Mr Quirin has not been a director of any other listed entity within the last three years. Peter Hatfull, MAICD Non-Executive Director (Appointed 30 November 2022) Chairman of the Remuneration and Nomination Committee (appointed on 17 January 2023) Chairman of the Audit and Risk Committee (appointed on 17 January 2023) Mr Hatfull has over 30 years’ experience in a range of senior executive positions with Australian and International companies. He has an extensive skill-set in the areas of business optimisation, capital raising and company restructuring. Mr Hatfull has held senior financial and Board positions in Australia, Africa and the UK. He has particular experience in revitalising business plans, attracting investor funding, and implementing profitable strategies. Mr Hatfull graduated as a Chartered Accountant in the United Kingdom, where he worked for Coopers and Lybrand (now PriceWaterhouseCoopers), and subsequently moved to Africa, where he spent 8 years in Malawi. Mr Hatfull moved to Perth in 1988. During the past three years, Mr Hatfull held a directorship in the following other listed entities: Company Roots Sustainable Agricultural Technologies Limited (ASX:ROO) Esense-Lab Limited (ASX:ESE) (delisted August 2021) Pivotal Metals Limited (ASX:PVT) Roto-Gro International Limited (ASX:RGI) Appointed July 2020 July 2020 May 2018 April 2022 Resigned August 2022 August 2021 August 2023 Current 10 | P a g e Director’s Report Melodiol Global Health Limited – Annual Report 2023 DIRECTORS INTERESTS IN EQUITY SECURITIES OF THE COMPANY AND RELATED BODIES CORPORATE The following table sets out each Director’s relevant interest in shares, options and performance rights of the Company or a related body corporate as at the year end. Directors Mr Boaz Wachtel(i) Mr William Lay(ii) Mr Bruce Linton(iii) Mrs Micheline MacKay Ms Jodi Scott Mr Ben Quirin(iv) Mr Peter Hatfull Total Ordinary Shares 10,800,000 42,500,000 13,144,097 3,119,667 267,393,981 - - 336,957,745 Listed Options Unlisted Options Performance Rights 2,933,334 6,291,667 8,389,417 155,983 11,038,499 - - 28,808,900 - 30,000,000 40,000,000 - - 2,000,000 3,000,000 75,000,000 - 57,500,000 - - - - - 57,500,000 Unless stated below, the interests noted above are held directly: (i) (ii) 10,800,000 ordinary shares and 2,933,334 listed options are held by International Water and Energy Savers Ltd, a related party of Boaz Wachtel. 42,500,000 ordinary shares, 6,291,667 listed options, 30,000,000 unlisted options and 57,500,000 performance rights are held by Noble House Consulting Ltd, a related party of William Lay. (iii) 5,000,000 ordinary shares and 5,250,000 listed options are held by HSBC Custody Nominees (Australia) Ltd and 10,000,000 ordinary shares are held by Canaccord Genuity Corp, both are related parties of Bruce Linton. (iv) 2,000,000 unlisted options are hold by BKAH Pty Ltd, a related party of Ben Quirin. 11 | P a g e Director’s Report DIRECTORS’ MEETINGS Melodiol Global Health Limited – Annual Report 2023 The number of Director’s meetings held during the financial year and the number of meetings attended by each Director during the time the Director held office are: Director Board Meetings Audit and Risk Committee Meetings Remuneration and Nomination Committee Meetings Mr Boaz Wachtel Mr William Lay Mr Bruce Linton Mrs Micheline MacKay Ms Jodi Scott Mr Ben Quirin Mr Peter Hatfull Number Eligible to Attend 12 12 12 12 12 12 12 Number Attended 8 12 11 12 10 9 12 Number Eligible to Attend 2 - - - - 2 2 Number Attended 2 - - - - 2 2 Number Eligible to Attend - - 2 - - 2 2 Number Attended - - 1 - - 2 2 In addition to the scheduled Board meetings, Directors regularly communicate with each other and, where necessary, circular resolutions are executed to effect decisions. EXECUTIVES Chris Grundy B.Com. FCA. FGIA/FCIS. GAICD. Chief Financial Officer (Appointed 21 November 2017) Chris Grundy is a career CFO with more than 25 years’ experience in the life sciences sector in Australia, including listed and large multi-national companies, in addition to early-stage, rapidly growing businesses. His previous experience includes roles as CEO and in marketing, including periods in the U.K. and Southern Africa. He qualified as a Chartered Accountant with Ernst & Young. COMPANY SECRETARY Winton Willesee BBus. DipEd. PGDipBus. MCom. FFin. CPA. GAICD. FGIS/FCIS. Company Secretary (Appointed 19 October 2018) Mr Willesee is an experienced company director and secretary with over 20 years’ experience in various roles within the Australian capital markets. Mr Willesee has considerable experience with ASX listed and other companies over a broad range of industries having been involved with many successful ventures from early stage through to large capital development projects. He has a core expertise in strategy, company development, corporate governance, company public listings, merger and acquisition transactions and corporate finance. Mr Willesee holds formal qualifications in Commerce, Economics and Finance, Accounting, Applied Finance and Investment, Applied Corporate Governance and Education. He is a Fellow of the Financial Services Institute of Australasia, the Governance Institute of Australia and the Institute of Chartered Secretaries and Administrators, Graduate of the Australian Institute of Company Directors and a Member of CPA Australia. 12 | P a g e Director’s Report PRINCIPAL ACTIVITIES Melodiol Global Health Limited – Annual Report 2023 The principal activities of the Group during the year were: a) b) c) the cultivation, processing and sale of cannabis products; the distribution of pharmaceuticals internationally, specialising in, but not limited to, the distribution of medicinal cannabis products across Australasia, and non-cannabis products in the United Kingdom and Europe; and the development and sale of beauty and personal care products, produced using proprietary plant-based processes including under the brands Green Goo, Southern Butter and Good Goo. Business Risk The Company’s risk management approach involves the ongoing assessment, monitoring and reporting of risks that could impede the Company's progress in delivering the Company’s strategic priorities. Business risks are identified through best practice methodology using industry and professional expertise. All material business risks have an appropriate mitigation strategy to reduce the risk to an acceptable level for the Company and its investors. At every board meeting, the Company’s Board of Directors reviews strategy, performance, and business risk. Such risks include:  Going concern – see Note 1 to the Consolidated Financial Statements on Page 49 for further explanation.  Competition – the industries in which the Company operates, specifically cannabis and nutraceuticals, are highly competitive and subject to rapid change. The Company’s strategies require it to compete successfully. Intellectual property rights and proprietary technology – the Company may need to defend its rights and to protect its trade secrets and proprietary technology, possibly in foreign jurisdictions, against infringement and unauthorised use. Potential acquisition risk – the Company’s strategies include growth by acquisition, which involves risks and costs commonly encountered in making acquisitions of businesses and assets, e.g. integrating cultures and business systems, retaining key personnel and customer and supplier relationships. Strategic alliances – the Company’s operations include strategic alliances with third parties which are subject to periodic negotiation and renewal. Legal and Regulatory changes – many of the Company’s operations and products require compliance with governmental regulations. The applicable regimes are undergoing significant changes which may affect or restrict the Company’s operations. Cultivation risks – part of the Company’s business is the cultivation of cannabis, a perishable agricultural product, which has attendant risks associated with the health of live plants and the quality and quantity of end-products.       Access to active ingredients – some of the Company’s products contain full plant extracts. The Company needs   access to these materials which depends upon securing supplies and supplier relationships. Product liability – the Company’s businesses expose it to risks inherent in the R&D, manufacturing, marketing and use of its products. The Company endeavours to work to rigorous standards and maintains insurance cover, but these may not be sufficient to protect it from large claims, public controversy or reputational damage. Supply chain logistic and relationships – the Company has an international pharmaceutical distribution business that relies on suppliers, transporters and customers to work to ensure the distribution channels work in unison. The Company works tirelessly to ensure these relationships are maintained. 13 | P a g e Melodiol Global Health Limited – Annual Report 2023 Director’s Report OPERATING AND FINANCIAL REVIEW Operating Results The operating results of the Group for the year ended 31 December 2023 were as follows: Cash and cash equivalents Net (liabilities)/assets Divisional revenue from sale of products from: Continuing operations - - - Canada Asia Pacific Switzerland Total revenue from continuing operations Discontinued operations - United States Total revenue Adjusted EBITDA from operations Net loss after tax from operations 31-Dec-2023 $000’s 31-Dec-2022 $000’s 692 (4,058) 6,936 7,349 4,636 18,921 2,643 21,564 (13,778)1 (35,520) 1,388 22,294 4,390 - 1,846 6,236 2,453 8,689 (17,618)2 (32,782)2 1 Adjusted EBITDA from operations is defined as net earnings before interest, taxes, depreciation, amortisation, impairment charges, finance costs, and losses attributable to business that were paused at the end of 2023 (Sierra Sage Herbs LLC, impACTIVE and Halucenex). 2 As stated in 2022. The Company’s ongoing growth was achieved through strong performances in key divisions such as Mernova Medicinal Inc., and via M&A and performance at Health House International. Notably Total Revenue from continuing operations increased 203.4% year on year to $18.9 million and Adjusted EBITDA (loss) from continuing operations improved to $13.8 million from $17.6 million in 2022 (21.6% loss reduction). The Company is committed to further reductions in operating expenses and increasing revenues to contribute to further improvements in Adjusted EBITDA in 2024. Adjusted EBITDA from continuing operations is defined as net earnings before interest, taxes, depreciation, amortisation, impairment charges, finance costs, and losses attributable to business that were paused at the end of 2023 (Sierra Sage Herbs LLC, impACTIVE and Halucenex). Management considers adjusted EBITDA to be the most accurate representation of the Company’s go-forward position. 14 | P a g e Director’s Report OPERATING AND FINANCIAL REVIEW (CONTINUED) Results of Operations Melodiol Global Health Limited – Annual Report 2023 Mernova Medicinal Mernova posted $6.9 million in revenues in 2023, a 57% increase over 2022. The division continues to expand its product range and customer base. During FY23, Mernova delivered several consecutive quarters of record revenue. Health House International During FY23, the Company closed the acquisition of Health House International (HHI). HHI is comprised of a well established medical cannabis distribution business in the growing Australian market and a medical products company based in the UK. The acquisition of HHI contributed significant revenues of $11.5 million to the group’s results and validated the Company’s strategy of growth through strategic M&A. Sierra Sage Herbs and Creso impACTIVE Inc. Over the course of the year, the Company recognised the challenges of competing in a highly competitive environment for consumer packaged goods products in a challenging capital markets environment. As a result of this analysis, the Company made the decision to pause operations at Sierra Sage Herbs and Creso impACTIVE Inc, pending a sale or closure of the business to focus on its highest potential business units. A similar decision was made with respect to Halucenex Life Sciences Inc, noting the cash flow challenges associated with investing in clinical stage R&D initiatives. A more detailed review of the operations of the Group and its financial results is set out in the CEO’s Report on page 7. Dividends No dividends have been paid or declared by the Group during the year (2022: Nil). No dividend is recommended in respect of the current financial year (2022: Nil). 15 | P a g e Director’s Report IMPAIRMENT TESTING Melodiol Global Health Limited – Annual Report 2023 The Board recognises that dependent on market conditions and specific circumstances businesses face may result in the carrying amounts of the Group’s business units exceeding their carrying amount, therefore, the Company implemented impairment assessments of its operating assets according to its accounting policies, which are detailed in the notes to the financial statements. Specifically, the Company determined that the separable cash generating units of the Group were:  Mernova Cannabis Facility;  Health House International Australia;  Health House International UK/Europe;    Halucenex Psilocybin business; and  Switzerland nutraceutical R&D and marketing business; Switzerland Intellectual Property business; Sierra Sage Herbs consumer packaged goods business. Each of these cash generating units was subject to impairment assessment. Management concluded that there were indicators of impairment for the Switzerland IP business and Health House UK/Europe, these assets have been fully impaired. It is noted that operations at Halucenex, Impactive and Sierra Sage were discontinued during the year and have therefore been fully impaired. Management’s 5-year cashflow forecasts for Mernova and Health House Australia have been carefully reviewed for known and anticipated risks and opportunities. Similarly, the discount rates applied to the forecasts, which were based upon operational and market risk assessments and assumptions, were determined to be reasonable and appropriate. It was concluded that no impairment is required for either company. As a result of the impairment testing, the Company determined that an impairment to the carrying value of intangible assets of $17,612,000 (2022: $12,521,000) was required for the financial year ending 31 December 2023. Details of this impairment are disclosed in the notes to the financial statements. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There have been no significant changes in state of affairs during and subsequent to the end of the financial year other than disclosed in the Directors’ Report. Capital Management and Funding Obsidian Convertible Notes On 9 January 2023, the Company secured A$500,000 in funding from Obsidian Global GP, LLC ('Obsidian’) via the issuance of an additional 340,850 convertible notes under the Second Purchase of the convertible note facility announced on 1 November 2022. On 24 March 2023, the Company paid AUD$137,580 in partial settlement of the convertible note facility. During the period, Obsidian converted 500,000 of its First Purchase convertible notes into 41,528,239 Shares, and subsequently redeemed the remaining existing 968,025 First Purchase and Second Purchase convertible notes for an aggregate of 69,096,662 Shares (plus the retention of the 57,857,143 Collateral Shares previously issued). On 24 May 2023, the remaining 260,850 notes were satisfied by the issue of 55,655,738 shares. August 2022 Placement – Related Party Issues In January 2023, the Company issued 43,500,000 Shares to Directors and a former Director for their participation in the placement undertaken in August 2022, which raised $1,740,000 (before costs). 16 | P a g e Director’s Report Melodiol Global Health Limited – Annual Report 2023 La Plata Capital, LLC Debt On 27 January 2023, the Company announced that it had agreed with La Plata Capital LLC ('La Plata’), an existing lender to SSH, to repay USD$717,500 in cash by 31 January 2023, and swap USD$1,282,500 for secured notes valued at USD$1,282,500. A cash payment of USD$250,000 (of the USD$717,500) was made to La Plata on 27 February 2023, and on 6 March 2023, the Company announced that La Plata had agreed to rollover its entire remaining loan of USD$467,500 into secured notes, extending the maturity date by 6 months. On 6 March 2023, the Company agreed to acquire a USD$500,000 interest in a loan from La Plata to (then) acquisition target, Abby & Finn, LLC (‘A&F') (refer to Matters Subsequent to the Reporting Period below for further updates on this proposal) for USD$500,000 of secured notes, issuable to La Plata. On 14 June 2023, the Company announced that La Plata had agreed to extend the maturity date of USD$1,767,500 of its existing secured notes to June 2024, with the maturity date of the balance (USD$482,500) extended to October 2023 (to be automatically extended to June 2024 upon the repayment of non-La Plata secured noteholders). In consideration for the maturity date extensions, the Company acquired the remaining USD$900,000 of La Plata’s loan to A&F, for USD$900,000 of secured notes, issuable to La Plata, with a maturity of June 2024. The Company and La Plata also agreed for the Company to make its March 2023 interest payment to La Plata in equity at a deemed issue price of $0.009 per Share, for which the Company issued 18,981,000 Shares on 26 June 2023. February Placement On 17 February 2023, the Company secured firm commitments from new and existing institutional, professional and sophisticated investors to raise $2m (before costs) through the issue of approximately 132,859,356 fully paid ordinary shares at an issue price of $0.01506 per Share. The total amount raised included a $100,000 commitment from group CEO and Managing Director Mr William Lay (or his nominee), which remains subject to shareholder approval. The raising was satisfied on 24 February 2023 by $1.63 million subscriptions in cash and ~$368,000 subscriptions offset against outstanding invoices owed by the Company. SBC Convertible Notes On 6 March 2023, the Company secured commitments to raise $2.5m through the issuance of secured Convertible Notes to SBC Global Investment Fund (‘SBC’), comprising of one tranche (issued 15 March 2023) with an aggregate purchase price of $1,700,000 pursuant to a convertible securities agreement and a second tranche (issued 2 June 2023) with an aggregate purchase price of $800,000 pursuant to a second convertible securities agreement (together, 'SBC Convertible Note Facility’). Proceeds of the issue were used in part to repay a portion of debt due to Obsidian Global GP, LLC. On 24 May 2023, the Company announced that it had paid its first amortisation payment, and two accelerated amortisation payments under the SBC Convertible Note Facility (plus accrued interest) totalling $810,000, in equity, at a deemed issue price of $0.009 per Share for an aggregate of 90,000,000 Shares, redeeming 675,007 of the SBC Convertible Notes. On 14 June 2023, the Company announced it had paid its second amortisation payment, and one accelerated amortisation payment under the SBC Convertible Note Facility (plus accrued interest) totalling $540,000, in equity, at a deemed issue price of $0.008 per Share for an aggregate of 67,500,000 Shares, redeeming 450,004 of the SBC Convertible Notes. May Placement On 19 May 2023, the Company announced firm commitments to raise $2.5 million through the issue of 204,918,033 Shares at an issue price of $0.0122 per Share, including a commitment of $900,000 from Mr Adam Blumenthal, which remains subject to shareholder approval. As at the date of this report, in addition to the commitment from Mr Blumenthal, $350,000 remains outstanding under the May placement. May Debt-to-Equity Conversions On 19 May 2023, the Company also announced that it had agreed with existing debtors to convert liabilities of $368,333 into equity via the issuance of 36,748,607 Shares (plus free attaching Options) on the same terms as the May placement, and that it had agreed with Director Bruce Linton, subject to shareholder approval, to convert $33,333 worth of Directors fees into equity, on the same terms as the May placement. 17 | P a g e Director’s Report Melodiol Global Health Limited – Annual Report 2023 November Secured Notes - Extensions On 19 May 2023 the Company also announced that it had reached an in principle agreement with a majority of its existing November secured note lenders, to extend the maturity date and repayment date of the secured notes to 30 September 2023, in consideration for an aggregate of 80,901,639 Shares (plus free attaching Options), of which 14,344,262 Shares (and all Options) remain subject to shareholder approval. June Debt-to-Equity Conversions On 14 June 2023 the Company announced that it had agreed to pay $592,778 of existing debt via the issuance of 59,171,735 Shares, 8,333,333 of which were issued on 21 June 2023 (the balance of which remain subject to shareholder approval). Separately, on 15 June 2023, the Company issued 17,777,777 Shares in lieu of payment of invoices totalling $160,000, as approved by shareholders in May 2023. March 2022 Placement – Related Party Participation On 15 June 2023, the Company issued 4,612,320 Shares to a nominee of Adam Blumenthal, for his participation in the placement undertaken in March 2022 (as approved by shareholders on 15 May 2023), which raised $318,250(before costs). The Company also agreed to issue a number of free-attaching Options in connection with the above securities issues throughout the period, which are detailed further in the relevant announcements. On 8 August 2023, Melodiol announced it received firm commitments to issue 167,445,189 Shares at an issue price of $0.00821 per Share totalling $1,374,725 for a cash placement and agreements to convert debt to equity. The Company also agreed to satisfy its obligations under the third amortisation payment to SBC Global Investment Fund under the existing Convertible Note Facility via the issuance of 33,750,000 Shares, totalling $270,000 (including interest), redeeming 225,002 Convertible Notes following which, the first tranche of the facility is now two thirds repaid. September Debt Restructure On 4 September 2023 the Company announced that it had agreed with La Plata to pay all future interest payments in equity, extend October maturity date of USD$482,500 to June 2024 in addition to regular offsets against principal. Additionally, the Company has reached an agreement to convert AUD$200,000 of existing secured notes in addition to accrued interest (AUD$40,438) to equity via the issue of 53,571,429 shares. On 18 October 2023, the Company issued the following; 24,847,217 Broker shares to Everblu in relation to the May Placement; 14,344 262 shares to Adam Blumenthal in relation to the extension of the secured notes announced in the May Placement; 42,200,183 shares to Everblu in relation to the August Placement; 110,619,469 shares in settlement of the Atlantic secured loan; 45,000,000 shares to Everblu for corporate advisory services and 26,966,292 to Everblu for their retainer fee. shares On 23 October 2023, the Company announced a bonus issue of options to all eligible shareholders on the basis of 1 option for each 20 shares held, the bonus options are to be issued for nil consideration and will be exercisable at $0.01 up to 5 years from the date of issue. October Secured Notes – Extension and Interest On 24 October 2023, the Company issued 100,000,000 shares in consideration for the agreement to extend the maturity date of existing secured notes from 30 September 2023 to 30 November 2023. The Company also issued 185,675,804 shares to La Plata in lieu of June and September interest payments. October Placement and Debt Conversion On 26 October 2023, the Company announced firm commitments to raise $1.0 million through the issue of 200,000,000 Shares at an issue price of $0.005 per Share. The Company also agreed to issue 157,339,296 to creditors having a value of $786,696 on the same terms as the placement. 18 | P a g e Director’s Report Melodiol Global Health Limited – Annual Report 2023 October Debt Conversion On 27 October 2023, the Company issued the following; 154,867,257 shares for the conversion of 630,006 T2 Notes; 37,389,381 shares to SBC. Totalling $700,000, in lieu of interest and standstill agreement; 42,616,180 shares to unrelated creditors in lieu of cash and 36,405,312 shares to directors in relation salaries and remuneration. November Re-Price of October Placement and Debt Conversions On 13 November 2023, the Company announced that it had repriced the October Placement and Debt Conversion from $0.005 per Share to $0.002904 per Share. On 16 November 2023, the Company issued 30,737,705 shares for settlement of the Atlantic loan. On 17 November 2023, the Company issued the following; 183,161,158 shares in relation to the October Placement, amended by the November Re-Price; 44,972,436 shares in lieu of cash for repayment of a loan and 43,032,787 shares relating to the May Placement. On 20 November 2023, the Company issued 32,713,497 shares in relation to the October Placement, amended by the November Re-Price. On 27 November 2023, the Company issued the following; 132,233,470 shares in relation to the October Placement, amended by the November Re-Price; 48,209,366 shares in relation to the October Debt Conversion, amended by the November Re-Price and 34,435,262 shares for a loan settlement. On 29 November 2023, the Company issued 180,000,000 shares in consideration for broking services. December Placement On 7 December 2023, the Company issued 115,904,030 shares at an issue price of $0.002 per share for gross proceeds of $231,808. December Share Consolidation On 22 December 2023, the Company announced a proposed share consolidation of 1 share for every 20 shares currently held, subject to shareholder agreement. The shareholder meeting is planned to be on 23 January 2024. The above reflects the material issues affecting the Company’s funding position over the period. A number of additional securities were issued over the period in respect of various matters as announced on the Company’s ASX announcements platform and as reflected in the accounts, including as part of the HHI acquisition, broker and lender fees, director (and former director) and advisor/ambassador remuneration and fees, conversion of performance rights and exercises of options and free-attaching options to previous placements. Acquisitions On 16 May 2023 the Group acquired 100% of the voting equity instruments of Health House International Limited (“HHI”), a company whose principal activity is the distribution of medicinal cannabis and other controlled drugs. Completion of the acquisition follows approval from the second Supreme Court of Western Australia, 100% of the shares in HHI were acquired, see note 28 for further details. 19 | P a g e Director’s Report MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR Melodiol Global Health Limited – Annual Report 2023 On 16 January 2024, the Company issued 167,315,175 shares at an issue price of $0.00128 per share for gross proceeds of $214,163. On 2 February 2024, the Company announced that the consolidation of the issued capital on the basis of 1 security for every 20 securities held had been completed. On 27 February 2024, the Company issued 91,126,313 shares at an issue price of $0.01019 per share for gross proceeds of $928,577. Other than the above, there has been no other matter or circumstance that has arisen since the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group. LIKELY DEVELOPMENTS AND EXPECTED RESULTS Comments on the results of operations and future prospects of the Group are included in the Chairman’s Address, the CEO’s Report and in Matters Subsequent to the End of the Financial Year – all above. Further information on likely developments in the operations of the Group and the expected results of operations have not been included in this Annual Report because the Directors believe it would result in unreasonable prejudice to the Group. ENVIRONMENTAL REGULATION The operations of the Group are not subject to any particular and significant environmental regulations under a law of the Commonwealth or state. There have been no known significant breaches of any environmental requirement. The National Greenhouse and Energy Reporting Act (“NGER”) legislation was considered and determined not to be applicable to the entity. AUDITED REMUNERATION REPORT The Audited Remuneration Report comprises a part of this Directors’ Report and is set out in pages 22 to 35. INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS During the year ended 31 December 2023, the Company paid premiums in respect of a contract insuring the directors and officers of the Company against liabilities incurred as directors or officers to the extent permitted by the Corporations Act 2001. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for them or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF THE AUDITOR There are no officers of the Company who are former partners of Crowe Audit Australia. 20 | P a g e Director’s Report AUDITOR’S INDEPENDENCE DECLARATION Melodiol Global Health Limited – Annual Report 2023 The lead auditor’s independence declaration for the year ended 31 December 2023 has been received and included within the financial statements section of this report. NON-AUDIT SERVICES The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Group are important. Details of the amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 26 to the financial statements. The Board of Directors has considered the position and is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditors, as set out below, did not compromise the auditor independent requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the Board of Directors to ensure they do not impact the impartiality and objectivity of the auditor; and • None of the services undermine the general principles relating to the auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. ANNUAL GENERAL MEETING The Company will hold its next Annual General Meeting (‘AGM’) on 31 May 2024. In accordance with ASX Listing Rule 3.13.1, the closing date for the receipt of nominations from persons wishing to be considered for election as a director of the Company is 9 April 2024. Any nominations must be received in writing no later than 5.00pm (WST) on 9 April 2024 at the Company’s registered office.note PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave to the Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a part for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. CORPORATE GOVERNANCE STATEMENT The Company’s Corporate Governance Statement and its Key to Disclosures, Corporate Governance Council Principles and Recommendations (ASX Appendix 4G) are provided separately to the ASX on the date that this Annual Report is provided to the ASX. The Corporate Governance Statement is available on the Company’s website: www.melodiolglobalhealth.com This report, which includes the Remuneration Report, is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors William Lay CEO and Managing Director 28 March 2024 21 | P a g e Remuneration Report Melodiol Global Health Limited – Annual Report 2023 This remuneration report for the year ended 31 December 2023 comprises a part of the Directors’ Report. It outlines the remuneration arrangements of the Group in accordance with the requirements of the Corporations Act 2001 (“the Act”) and its regulations. This information has been audited as required by section 308(3C) of the Act. The Remuneration Report details the remuneration arrangements for Key Management Personnel (“KMP”) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Parent company. All monetary amounts stated in this report are in Australian Dollars unless otherwise indicated. a) Key Management Personnel Disclosed in this Report The Directors of the Group during or since the end of the financial year were: Mr Boaz Wachtel Mr William Lay Mrs Micheline MacKay Mr Bruce Linton Ms Jodi Scott Mr Ben Quirin Mr Peter Hatfull (Non-Executive Chairman) – Appointed Chairman on 17 November 2022 (Managing Director and CEO) – Appointed on 17 January 2022 (Executive Director) – Appointed on 17 January 2022 (Non-Executive Director) – Appointed on 17 January 2022 (Executive Director) – Appointed on 10 October 2022 (Non-Executive Director) – Appointed on 10 October 2022 (Non-Executive Director) – Appointed on 30 November 2022 Dr James Ellingford Mr Adam Blumenthal (Executive Chairman) – Resigned on 30 November 2022 (Non-Executive Director) Resigned on 10 October 2022 Senior Executives of the Group during or since the end of the financial year were: Mr Chris Grundy Chief Financial Officer There have been no other changes after reporting date and up to the date that the financial report was authorised for issue. The Remuneration Report is set out under the following main headings: A B C D E F G H I Remuneration Governance, Structure and Approvals Remuneration Philosophy Remuneration and Performance Details of Remuneration Service Agreements Share-based Compensation Equity Instruments Issued on Exercise of Remuneration Options Loans with KMP Other Transactions with KMP A Remuneration Governance, Structure and Approvals The Remuneration and Nomination Committee (“RNC”) is a sub-committee of the Board. It is primarily responsible for making recommendations to the Board on:   the over-arching executive remuneration framework; operation of the incentive plans which apply to executive directors and senior executives, including key performance indicators and performance hurdles; remuneration levels of executives; and   Non-Executive Director fees. The Committee reviews and determines the Group’s remuneration policy and structure annually to ensure it remains aligned to business needs, meets the Group’s remuneration principles and is reflective of generally acceptable market practices. 22 | P a g e Remuneration Report A Remuneration Governance, Structure and Approvals (continued) Melodiol Global Health Limited – Annual Report 2023 In particular, the RNC and Board aim to ensure that remuneration practices are:     competitive and reasonable, enabling the Company to attract and retain key talent; aligned to the Company’s strategic and business objectives and the creation of shareholder value; transparent and easily understood; and acceptable to shareholders.  Non-Executive Directors’ Remuneration Structure Remuneration of Non-Executive Directors is based on fees approved by the Board of Directors and is set at levels to reflect market conditions and encourage the continued services of the Directors. The nature and amount of remuneration is collectively considered by the Board of Directors with reference to relevant employment conditions and fees commensurate to a company of similar size and level of activity, with the overall objective of ensuring maximum stakeholder benefit from the retention of high performing Directors. The total aggregate fixed sum per annum to be paid to Non-Executive Directors in accordance with the Company’s Constitution shall initially be no more than $500,000 and may be varied by ordinary resolution of the Shareholders in a General Meeting. In accordance with the Company’s Constitution, the Directors may at any time, subject to the Listing Rules, adopt a scheme or plan which they consider to be in the interests of the Company and which is designed to provide superannuation benefits for both present and future Non-Executive Directors, and they may from time to time vary this scheme or plan. Remuneration may also include an invitation to participate in share-based incentive programmes in accordance with Company policy. The remuneration of Non-Executive Directors is detailed in Table 1 in “Section D – Details of Remuneration” and their contractual arrangements are disclosed in “Section E – Service Agreements”.  Executive Remuneration Structure The nature and amount of remuneration of executives are assessed on a periodic basis with the overall objective of ensuring maximum stakeholder benefit from the retention of high- performing executives. The main objectives sought when reviewing executive remuneration is that the Company has: Coherent remuneration policies and practices to attract and retain Executives; Executives who will create value for shareholders; Competitive remuneration offered benchmarked against the external market; and Fair and responsible rewards to Executives having regard to the performance of the Group, the performance of the Executives and the general pay environment.     The remuneration of Executives is detailed in Table 1 in “Section D – Details of Remuneration” and their contractual arrangements are disclosed in “Section E – Service Agreements”.  Executive Remuneration Approvals The Company aims to reward Executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company and aligned with market practice. Executive contracts are reviewed annually by the Remuneration and Nomination Committee. The process consists of a review of company, business unit and individual performance, relevant comparative remuneration internally and externally and where appropriate, external advice independent of management. Executive remuneration and incentive policies and practices must be aligned with the Company’s vision, values and overall business objectives. Executive remuneration and incentive policies and practices must be designed to motivate management to pursue the Company’s long-term growth and success and demonstrate a clear relationship between the Company’s overall performance and performance of the executives. 23 | P a g e Remuneration Report B Remuneration Philosophy Melodiol Global Health Limited – Annual Report 2023 KMP have authority and responsibility for planning, directing and controlling the activities of the Group. KMP of the Group comprise of the Directors and other senior executives. The Group’s broad remuneration policy is to ensure the remuneration package properly reflects the person’s duties and responsibilities and that remuneration is competitive in attracting, retaining and motivating people of the highest quality. No remuneration consultants were employed during the financial year. C Remuneration and Performance The following table shows the gross revenue, losses, earnings per share (“EPS”) and share price of the Group for the years ended 31 December 2023 and 31 December 2022. Revenue from continued operations ($000’s) Revenue from discontinued operations ($000’s) Net loss after tax ($000’s) EPS (cents) Share price ($) 31-Dec-2023 18,921 2,643 (52,446) (1.88) 0.004 31-Dec-2022 6,236 2,453 (32,782) (2.24) 0.020 Relationship between Remuneration and Company Performance Given the current phase of the Company’s development, the Remuneration and Nomination Committee does not consider earnings during the current and previous financial years when determining the nature and amount of remuneration of KMP. The pay and reward framework for key management personnel may consist of the following areas: a) Fixed Remuneration – base salary b) Variable Short-Term Incentives c) Variable Long-Term Incentives A combination of these comprises the key management personnel’s total remuneration. a) Fixed Remuneration – Base Salary The fixed remuneration for each senior executive is influenced by the nature and responsibilities of each role and knowledge, skills and experience required for each position. Fixed remuneration provides a base level of remuneration which is market competitive and comprises a base salary inclusive of statutory superannuation. It is structured as a total employment cost package. Key management personnel are offered a competitive base salary that comprises the fixed component of pay and rewards. External remuneration consultants may provide analysis and advice to ensure base pay is set to reflect the market for a comparable role. No external advice was taken this year. Base salary for key management personnel is reviewed annually to ensure the executives’ pay is competitive with the market. The pay of key management personnel is also reviewed on promotion. There is no guaranteed pay increase included in the contract of any KMP. b) Variable Remuneration – Short Term Incentives (STI) Discretionary cash bonuses may be paid to senior executives annually, subject to the requisite Board and shareholder approvals where applicable. c) Variable Remuneration – Long Term Incentives (LTI) Employee Incentive Plan The Melodiol Global Health Limited Employee Incentive Plan (“Plan”) was adopted by the Company during the year ended 31 December 2021. 24 | P a g e Remuneration Report C Remuneration and Performance (continued) Melodiol Global Health Limited – Annual Report 2023 The current Plan provides the Board with the discretion to grant Plan Securities to eligible participants which will vest subject to the achievement of performance hurdles as determined by the Board at the time the Plan Securities are granted. The objective of the Plan is to attract, motivate and retain employees and it is considered that the Plan will enable the Group to make grants to Eligible Participants so that long-term incentives form a key component of their total annual remuneration. The Board believes that grants under the Plan will serve a number of purposes including:   to act as a key retention tool; and to focus attention on the generation of shareholder value. Any grants under the Plan will be subject to the achievement of vesting conditions. Appropriate vesting conditions may be formulated for each Eligible Participant to participate in the Plan based on their role and responsibilities in the Group. Performance will be assessed at the end of the performance period. Refer to Schedule 6 of the Notice of Annual General Meeting dated 19 May 2021 for further information on the Plan. D Details of Remuneration Details of the nature and amount of each major element of the remuneration of each KMP of the Group during the financial year are: Table 1 – Remuneration of KMP of the Group for the year ended 31 December 2023 is set out below: 31 December 2023 Directors William Lay Micheline MacKay Jodi Scott Boaz Wachtel Bruce Linton Ben Quirin Peter Hatfull Senior Executives Chris Grundy Total Short-term Employee Benefits Salary & fees $ Non- monetary benefits $ Other/ bonus $ Post- Employment Share Based Payments Total Termination payments Superannuation & Insurance Performance Rights/Options(vi) $ $ $ $ 411,514 184,517 318,390 80,000 80,000 80,000 72,235 306,667 1,533,323 - - - - - - - - - - 53,305 - - - - - 53,305 - - - - - - - - - - - - - - - 7,765 26,346 34,111 483,361 28,077 91,242 - 2,720 2,802 3,256 894,875 265,899 409,633 80,000 82,720 82,802 83,256 295,000 906,458 628,012 2,527,197 25 | P a g e Remuneration Report D Details of Remuneration (continued) Melodiol Global Health Limited – Annual Report 2023 Table 2 – Remuneration of KMP of the Group for the year ended 31 December 2022 is set out below: 31 December 2022 Directors William Lay (iii) Micheline MacKay (iii) Jodi Scott (iv) James Ellingford (i) Adam Blumenthal (ii) Boaz Wachtel Bruce Linton (iii) Ben Quirin (iv) Peter Hatfull (v) Senior Executives Chris Grundy Total Short-term Employee Benefits Salary & fees $ Non- monetary benefits $ Other/ bonus $ Post- Employment Share Based Payments Total Termination payments Superannuation & Insurance Performance Rights/Options(vi) $ $ $ $ 389,043 157,434 87,732 133,833 112,888 80,000 76,825 18,413 6,307 290,000 1,352,475 - - - - - - - - - - - - 27,701 456 - - - - - - - 28,157 - - - 144,000 - - - - - - 144,000 - - - 13,688 11,461 - - - 662 24,430 50,241 - - - 80,000 - 40,000 16,679 - - 389,043 185,135 88,188 371,521 124,349 120,000 93,504 18,413 6,969 - 136,679 314,430 1,711,552 (i) (ii) (iii) (iv) (v) (vi) Mr Ellingford stepped down as an executive on 26 April 2022 and resigned as a director on 30 November 2022. Mr Blumenthal’s Kunna SAS, Kunna Canada fee ceased effective from 14 March 2022, and he resigned as a director on 10 October 2022. Mr Lay, Ms Mackay and Mr Linton were appointed directors on 17 January 2022. Ms Scott and Mr Quirin were appointed directors on 10 October 2022. Mr Hatfull was appointed as a director on 30 November 2022. Authorisation of shares issued to Mr Ellingford, Mr Boaz and Mr Linton was obtained on 29 December 2022. The shares were issued after 31 December 2022. The following table shows the relative proportions of remuneration that are linked to performance and those that are fixed, based on the amounts disclosed as statutory remuneration expense in the tables above: Table 3 – Relative proportion of fixed vs variable remuneration expense Name Directors William Lay Micheline MacKay Jodi Scott James Ellingford Adam Blumenthal Boaz Wachtel Bruce Linton Ben Quirin Peter Hatfull Senior Executives Chris Grundy Fixed Remuneration 2022 2023 At Risk – STI (%) At Risk – LTI (%) 2023 2022 2023 2022 46% 69% 78% - - 100% 97% 97% 96% 53% 100% 85% 99% 78% 100% 67% 82% 100% 100% 100% - 20% - - - - - - - - - 15% 1% - - - - - - - 54% 11% 22% - - - 3% 3% 4% 47% - - - 22% - 33% 18% - - - 26 | P a g e Remuneration Report D Details of Remuneration (continued) Table 4 – Shareholdings of KMP (direct and indirect holdings) Melodiol Global Health Limited – Annual Report 2023 31 December 2023 Balance at 01/01/2023 Granted as Remuneration Exercised Net Change – Otheri Sold Balance at 31/12/2023 Directors William Lay Micheline MacKay Jodi Scott Boaz Wachtel Bruce Linton Ben Quirin Peter Hatfull Senior Executives Chris Grundy Total 10,000,000 - 209,364,678 10,800,000 5,411,884 - - 25,000,000 3,119,667 11,405,312 - 2,732,213 - - 940,000 236,516,562 19,000,000 61,257,192 5,000,000 - - - - - - - 5,000,000 2,500,000 - 46,623,991 - 5,000,000 - - - - - - - - - 42,500,000 3,119,667 267,393,981 10,800,000 13,144,097 - - - 54,123,991 (19,000,000) (19,000,000) 940,000 337,897,745 iWilliam Lay - placement participation 2,500,000. Jodi Scot - loan repayment 44,972,436 and purchase 1,651,555. Bruce Linton - placement participation 5,000,000. Table 5 – Unlisted Option holdings of KMP (direct and indirect holdings) 31 December 2023 Balance at 01/01/2023 Granted as Remuneration Exercise Net Change – Other Sold Balance at 31/12/2023 Vested & Exercisable Directors William Lay Micheline MacKay Jodi Scott Boaz Wachtel Bruce Linton Ben Quirin Peter Hatfull Senior Executives Chris Grundy Total 20,000,000 - - - 40,000,000 - - 10,000,000 - - - - 2,000,000 3,000,000- - 60,000,000 - 15,000,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - 30,000,000 - - - 40,000,000 2,000,000 3,000,000 30,000,000 - - - 40,000,000 2,000,000 3,000,000- - 75,000,000 - 75,000,000 27 | P a g e Remuneration Report D Details of Remuneration (continued) Table 6 – Listed Option holdings of KMP (direct and indirect holdings) Melodiol Global Health Limited – Annual Report 2023 31 December 2023 Balance at 01/01/2023 Granted as Remuneration Exercised Net Change – Other Sold Balance at 31/12/2023 Vested & Exercisable Directors William Lay Micheline MacKay Jodi Scott Boaz Wachtel Bruce Linton Ben Quirin Peter Hatfull Senior Executives Chris Grundy Total 1,666,667 - - 2,933,334 - - - 313,334 4,913,335 - - - - 2,732,213 - - - 2,732,213 - - - - - - - - - 4,625,000 155,983 11,038,499 - 5,657,204 - - - - - - - - - 6,291,667 155,983 11,038,499 2,933,334 8,389,417 - - 6,291,667 155,983 11,038,499 2,933,334 8,389,417 - - 47,000 21,523,686 (313,334) (313,334) 47,000 28,855,900 47,000 28,855,900 Table 7 – Performance rights holdings of KMP (direct and indirect holdings) 31 December 2023 Balance at 01/01/2023 Granted as Remuneration Vested and Exercised Others- Lapsed Balance not Vested at 31/12/2023 Balance Vested not Exercised at 31/12/2023 Directors William Lay Micheline MacKay Jodi Scott Boaz Wachtel Bruce Linton Ben Quirin Peter Hatfull Senior Executives Chris Grundy Total 10,000,000 - - - - - - 57,500,000 - - - - - - (5,000,000) - - - - - - (5,000,000) - - - - - - 32,500,000 - - - - - - 25,000,000 - - - - - - - 10,000,000 15,000,000 72,500,000 - (5,000,000) - (5,000,000) - 32,500,000 15,000,000 40,000,000 28 | P a g e Melodiol Global Health Limited – Annual Report 2023 Remuneration Report E Service Agreements Current Key Management Personnel The following individuals were considered key management personnel as at 31 December 2023:  Mr Boaz Wachtel – Non-Executive Chairman Contract: Commenced on 18 October 2016. Appointed Chairman on 17 November 2022. - - - Director’s Fee: $80,000 per annum from 22 May 2021. - Director’s Fees are paid to International Water and Energy Savers Limited. - - Notice Period: 12 months. - Term: 3 years or as extended per the Consultant Agreement. Performance Based Bonus: Mr Wachtel is entitled to a discretionary bonus equal to 50% of the Fee on an annual basis, subject to meeting performance criteria agreed by the Board each year.  Mr William Lay – Managing Director and Chief Executive Officer Contract: Commenced on 17 January 2022. Base Salary: Initially CAD$350,000 per annum increased to CAD$386,000 from 1 August 2022 Performance bonus: None. Long term incentives: Subject to shareholder approval Mr Lay is entitled to 7,500,000 performance rights conditional upon Group revenue meeting or exceeding $30 million Australian dollars within 24 months of his appointment. Subject to shareholder approval Mr Lay is entitled to 10,000,000 unlisted options with an exercise price of $0.20 per share and an expiry date of 17 January 2024. The options vest on condition that Mr Lay has maintained continuous employment with the Group for 12 months from the date of his appointment. Term: 4 years. - - Notice Period: 2 months.  Mrs Micheline MacKay – Executive Director Contract: Commenced on 17 January 2022. Base Salary: Initially CAD$122,400 per annum increased to CAD$150,000 from 1 March 2022 and then increased to CAD$175,000 from 11 March 2023. Performance bonus: Determined at the sole discretion of the Melodiol Board. Long term incentives: None Term: Ongoing. - - - - Notice Period: 4 weeks.  Ms Jodi Scott– Executive Director - - - - - Contract: Commenced on 10 October 2022. Base Salary: $250,000 per annum Performance bonus: Determined at the sole discretion of the Board. Long term incentives: None Term: The initial term is 3 years from the appointment of Ms Scott within the role of President, US Operations of Sierra Sage Herbs LLC (“Initial Term”) and will be automatically extended by two years (“First Renewal Term”) and a further two years following the First Renewal Term(“Second Renewal Term”), unless SSH provides notice of its intention not to renew within at least 90 days before the end of the Initial Term, First Renewal Term or Second Renewal Term. - Notice Period: 3 months.  Mr Bruce Linton– Non-Executive Director Contract: Commenced on 17 January 2022. Base Salary: $80,000 per annum Performance bonus: Nil Long term incentives: Mr Linton was issued 10,000,000 unlisted options with an exercise price of $0.09 per share and an expiry date of 17 January 2024. The options were to vest and become exercisable on the date that is six months after Mr Linton’s appointment date. Term: Ongoing, subject to shareholder approval. - - Notice Period: None. - - - - - - - - - - 29 | P a g e Melodiol Global Health Limited – Annual Report 2023 Remuneration Report E Service Agreements (continued)  Mr Ben Quirin– Non-Executive Director - - - - Contract: Commenced on 10 October 2022. Base Salary: $80,000 per annum Performance bonus: None. Long term incentives: Subject to shareholder approval, Mr Quirin is entitled to 2,000,000 unlisted options with an exercise price of $0.04 per share and an expiry date of 10 October 2024. The Options vest and become exercisable as follows: - - - 1/3 of the options will vest on the date that is six months after the appointment date; 1/3 of the options will vest on the date that is twelve months after the appointment date; and 1/3 of options will vest on the date that is eighteen months after the appointment date. Term: Ongoing, subject to shareholder approval. - - Notice Period: None.  Mr Peter Hatfull– Non-Executive Director Contract: Commenced on 30 November 2022. Base Salary: $80,000 per annum Performance bonus: None. Long term incentives: None. Term: Ongoing, subject to shareholder approval. - - - - - - Notice Period: None.  Mr Chris Grundy – Chief Financial Officer - - Contract: Commenced on 21 November 2017. Base Salary: $290,000 per annum (plus statutory superannuation entitlements) from 26 March 2021 and increased to $315,000 per annum (plus statutory superannuation entitlements) from 01 May 2023. - Performance bonus: Determined at the sole discretion of the Board. - Term: No fixed term. - Notice Period: 12 weeks. - Bonus: Mr Grundy is entitled to a discretionary bonus on an annual basis as determined by the Company. Former Key Management Personnel The following individuals are no longer key management personnel (KMP) but were considered to have been KMP during the financial year ending 31 December 2022:  Dr James Ellingford – Executive Chairman (resigned) Contract: Commenced on 20 November 2015. Contract: Terminated on 30 November 2022 - - - Director’s Fee: $60,000 per annum (plus statutory superannuation entitlements) from 1 June 2020. - Mernova Medicinal Inc.- Consultancy fee of $5,000 per month. - - - Audit and Risk Committee Fee: $6,000 per annum. Remuneration and Nomination Committee Fee: $20,000 per annum. Term: No fixed term.  Mr Adam Blumenthal – Non-Executive Director (resigned) Contract: Commenced on 20 November 2015. Contract: Terminated 19 October 2022 - - - Director’s Fee: $48,000 per annum (plus statutory superannuation entitlements). - Mernova Medicinal Inc.- Consultancy fee of $5,000 per month. - - - Kunna Canada Limited and Kunna S.A.S – Director’s fee of $6,000 per month. Remuneration and Nomination Committee Fee: $20,000 per annum. Term: No fixed term. 30 | P a g e Remuneration Report F Share-based Compensation Melodiol Global Health Limited – Annual Report 2023 The Company rewards Directors for their performance and aligns their remuneration with the creation of shareholder wealth by issuing shares, options and/or performance rights. Share-based compensation is at the discretion of the Board and no individual has a contractual right to receive any guaranteed benefits. Issue of shares During the current financial year, shareholders the Company approved the issue of 61,257,192 shares to KMP as part of their remuneration. refer to Table 4. Options During the current financial year, the Company approved the issue of 12,000,000 unlisted options and 2,732,213 listed options to KMP as part of their remuneration, refer to Table 5 and Table 6. Performance Rights The performance rights are expensed over the performance period to which is consistent with the period over which the services have been performed. The fair value of the rights is determined based on the market price of the company’s shares at the grant date, with an adjustment made to take into account the vesting period and expected dividends during that period that will not be received by the employees. The terms and conditions of each grant of performance rights affecting remuneration in the current or future reporting period are as follows: Code Grant Date Vesting date Performance period Expiry date ME1PERR43 ME1PERR43 ME1PERR51 ME1PERR52 6 September 2021 6 September 2021 30 June 2023 27 October 2023 ME1PER53 10 November 2023 17 September 2022 17 September 2022 17 Jan 2024 31 Dec 2023 & 30 Jun 2024 31 Dec 2023 17 September 2021– 17 September 2023 17 September 2021– 17 September 2023 30 June 2023 – 17 January 2024 17 January 2022 – 30 June 2024 17 September 2023 17 September 2023 17 January 2024 27 October 2028 01January 2022– 30 June2023 10 November 2028 Value per Performance Right at Grant Datei $0.125 $0.125 $0.010 $0.007 $0.007 (i) The assessed fair value at grant date of Performance Rights granted to the individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. 31 | P a g e Remuneration Report F Share-based Compensation (continued) Melodiol Global Health Limited – Annual Report 2023 The performance rights that were granted, vested and forfeited during the year are as follows: Name/code William Lay ME1PERR43 ME1PERR43 ME1PERR51 ME1PERR52 Chris Grundy ME1PER53 Year granted 2021 2021 2023 2023 2023 Balance at start of year Granted during year Rights to performance rights Vested/Exercised Forfeited Number Number Number % Number % Balance at end of year (unvested) Number Maximum value yet to vesti $ 5,000,000 5,000,000 - - - - 7,500,000 50,000,000 (5,000,000)ii - - 25,000,000iii 100 - - 50 (5,000,000) - - - - - - - - 7,500,000 25,000,000 - - 75,000 175,000 - 15,000,000 15,000,000iii - - (i) (ii) (iii) The maximum value of the performance rights yet to vest has been determined as the amount of the grant date fair value of the rights that is yet to be expensed. For the 2021 grant, the maximum value yet to vest for this grant was estimated based on the share price of the company at the grant date. The minimum value of performance rights yet to vest is nil, as the shares will be forfeited if the vesting conditions are not met. Exercised. Vested. Further information on the performance rights is set out in note 24 to the financial statements. G Equity Instruments Issued on Exercise of Remuneration Options No remuneration options were exercised by KMP during the financial year (2022: Nil). 32 | P a g e Remuneration Report H Transactions with KMP and Related Parties (a) Key Management Personnel Compensation Details relating to key management personnel, including remuneration paid, are below. Melodiol Global Health Limited – Annual Report 2023 Short-term benefits Termination payments Post-employment benefits Share-based payments (b) Transactions and balances with related parties During the year, the Group had transactions with related parties as follows: EverBlu Capital Pty Ltd(i) – a company of which Adam Blumenthal is the Chairman Capital raising fees payable in cash Capital raising fees payable in shares Legal fees Corporate advisory payable in shares Monthly retainer IRESS service fees Out of scope fees Cash component of share issues Balance owing to EverBlu Capital Pty Ltd at 31 December Balance owing to Melodiol at 31 December Everblu Capital Corporate Pty Ltd(i) – a company of which Adam Blumenthal is the Chairman Capital raising fees Capital raising fees payable in shares Monthly retainer Debt restructuring fees Business development and investor relations Facilitation fees Out of scope fees, including restructuring and corporate advice Balance owing to EverBlu Capital Corporate Pty Ltd at 31 December Balance owing to Melodiol at 31 December The above fees are inclusive of GST. 2023 $ 2022 $ 1,586,628 - 34,111 906,458 2,527,197 1,380,632 144,000 50,241 136,679 1,711,553 2023 $ 2022 $ - - - - - - - - - - - - - - - - - - - - - 308,996 829,258 - 70,000 495,000 3,399 - - 1,706,653 899,258 - 149,838 3,774,815 13,095 - - - - 3,937,748 3,774,815 - (i) Mr Blumenthal resigned as a director on 10 October 2022. Any transactions past this date, including through companies that he controls, have not been disclosed above as they ceased being a related party. 33 | P a g e Remuneration Report H Transactions with KMP and Related Parties (continued) Suburban Holdings Pty Ltd – related party Amount drawn down by Melodiol Amount repaid Balance owing at 31 December International Water and Energy Savers Ltd - a company controlled by Boaz Wachtel Director’s Fees for Boaz Wachtel Bonus for Boaz Wachtel payable in shares Balance owing from Melodiol at 31 December HBAM Holdings Inc - a company controlled by Bruce Linton Director’s Fees for Bruce Linton Balance owing from Melodiol at 31 December BQ Advisory - a company controlled by Ben Quirin Director’s Fees for Ben Quirin Director remuneration options Balance owing from Melodiol at 31 December Jodi Scott Loan repayments Interest on loan Lease payments Extinguished debt Balance owing from Melodiol at 31 December Kelly Hoyt – a person related to Jodi Scott Salary Bonus Balance owing from Melodiol at 31 December Kathleen Scott– a person related to Jodi Scott Salary Bonus Balance owing from Melodiol at 31 December William Lay Consulting fee Director remuneration Director incentive Loan to ME1 Loan to SSH Loan to Mernova Balance owing from Melodiol at 31 December Melodiol Global Health Limited – Annual Report 2023 2023 $ 2022 $ - - - 1,000,001 - - 80,000 - 53,333 82,720 46,667 80,000 2,802 82,802 363,863 42,691 71,343 (453,980) - 163,465 - 163,465 142,493 - 142,493 222,538 75,028 408,333 (102,517) - - 102,517 80,000 40,000 40,000 93,504 23,346 18,413 - - 136,861 7,136 17,306 386,680 - - - - - - - - - - 18,327 81,673 100,000 (ii) Mr Blumenthal resigned as a director on 10 October 2022. Any transactions past this date, including through companies that he controls, have not been disclosed above as they ceased being a related party. 34 | P a g e Remuneration Report H Transactions with KMP and Related Parties (continued) Melodiol Global Health Limited – Annual Report 2023 Other Share and Option Transactions with Related Parties 2023 2022 Shares Options Performance Rights Shares Options EverBlu Capital Pty Ltd(i) Broker fees Issue of Shares - Corporate Advisory Mandateii Share issue cost in February-22 Placement Subtotal EverBlu Capital Corporate Pty Ltd (i) Share issue cost in August-22 Placement Subtotal International Water and Energy Savings Director bonus – Boaz Watchel Subtotal James Ellingford Director bonus – James Ellingford(ii) Subtotal HBAM Holding Inc Equity incentive to Director’s remuneration – Bruce Lintoniii Subtotal Quitin Alleaume Trust Director’s fee – Ben Quirin Subtotal Noble House Consulting Director’s remuneration -Will Lay Director incentive Consulting fee Subtotal Jodi Scott Loan and loan interest repayment Subtotal - - - - - - - - - - - - - - - - - - - - - - 2,732,213 2,732,213 2,732,213 2,732,213 2,000,000 2,000,000 10,000,000 25,000,000 7,500,000 50,000,000 25,000,000 10,000,000 62,500,000 44,972,436 44,972,436 - 2,000,000 - 2,000,000 - - 57,971,032 57,971,032 - 175,000,000 - 175,000,000 2,000,000 2,000,000 4,000,000 4,000,000 - - - - - - 10,000,000 10,000,000 (i) (ii) Mr Blumenthal resigned as a director on 10 October 2022. Any transactions past this date, including through companies that he controls, have not been disclosed above as they ceased being a related party. Mr Ellingford resigned as a director on 30 November 2022. Any transactions past this date, including through companies that he controls, have not been disclosed above as they ceased being a related party. Terms and conditions All transactions with related parties were reviewed by the Board and were made on normal commercial terms and conditions and at market rates. Other than the above, there were no other transactions with KMP or related parties during the year ended 31 December 2023. I Additional Information Voting and comments made at the Company’s 2023 Annual General Meeting (“AGM”): At the 2023 AGM, 91.83% of the votes received supported the adoption of the remuneration report for the year ended 31 December 2022. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. End of Audited Remuneration Report 35 | P a g e Crowe Audit Australia ABN 13 969 921 386 Level 24, 1 O’Connell Street Sydney NSW 2000 Main +61 (02) 9262 2155 Fax +61 (02) 9262 2190 www.crowe.com.au Auditor’s Independence Declaration Under Section 307c of the Corporations Act 2001 to the Directors of Melodiol Global Health Limited As lead engagement partner, I declare that, to the best of my knowledge and belief, during the year ended 31 December 2023 there have been: (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) no contraventions of any applicable code of professional conduct in relation to the audit. Yours sincerely, Crowe Audit Australia John Haydon Senior Partner 28 March 2024 Sydney Some of the Crowe personnel involved in preparing this document may be members of a professional scheme approved under Professional Standards Legislation such that their occupational liability is limited under that Legislation. To the extent that applies, the following disclaimer applies to them. If you have any questions about the applicability of Professional Standards Legislation Crowe’s personnel involved in preparing this document, please speak to your Crowe adviser. Liability limited by a scheme approved under Professional Standards Legislation. The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership is external audit, conducted via the Crowe Australasia external audit division and Unison SMSF Audit. All other professional services offered by Findex Group Limited are conducted by a privately owned organisation and/or its subsidiaries. Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a separate and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe Global or any other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or partnership interest in Findex (Aust) Pty Ltd. Services are provided by Crowe Audit Australia, an affiliate of Findex (Aust) Pty Ltd. © 2024 Findex (Aust) Pty Ltd 36 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Financial Year Ended 31 December 2023 Melodiol Global Health Limited – Annual Report 2023 Note 4 4 12 5(a) 5(b) 5(c) 13/14 10 5(d) 29 Revenue from continuing operations Revenue Other income Expenses Raw materials and consumables used Loss on fair value adjustments Administrative expenses Depreciation and amortisation expenses Employee benefit expenses Impairment of intangibles and PPE Impairment of loan Other expenses Loss on disposal of assets Finance costs (Loss) from continuing operations before income tax Income tax expense (Loss) from continuing operations after income tax (Loss) from discontinued operations Net result for the period Other comprehensive income Exchange differences on translation of foreign operations Other comprehensive income for the year, net of tax Total comprehensive (loss) for the year (Loss) for the year attributable to: Non-controlling interest Owners of Melodiol Global Health Australia Limited Total comprehensive (loss) for the year attributable to: Non-controlling interest Owners of Melodiol Global Health Australia Limited (Loss) per share for the year attributable to the members of Melodiol Global Health Limited: Basic and Diluted loss per share from continuing and discontinued operations (cents) Basic and Diluted loss per share from continuing operations (cents) 7 7 2023 $000’s 2022 $000’s 18,921 799 (16,586) (1,518) (9,430) (675) (4,459) (8,618) (2,762) (1,451) (53) (9,691) (35,523) 3 (35,520) (16,926) (52,446) 6,236 305 (6,865) (407) (9,600) (1,404) (3,151) (5,891) - (350) (307) (426) (21,861) (2) (21,863) (10,919) (32,782) 1,027 1,027 1,525 1,525 (51,419) (31,257) - (52,446) (52,446) - (51,419) (51,419) (1.88) (0.61) - (32,782) (32,782) - (31,257) (31,257) (2.24) (0.74) The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the notes to the financial statements. 37 | P a g e Consolidated Statement of Financial Position As at 31 December 2023 Melodiol Global Health Limited – Annual Report 2023 Note 2023 $000’s 2022 $000’s ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Biological assets Other assets Total current assets Non-current assets Property, plant and equipment Intangible assets Other assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Provisions Lease liability Borrowings Total current liabilities Non-Current liabilities Lease liability Total non-current liabilities Total liabilities Net assets EQUITY Issued Capital Reserves Accumulated losses Total equity 8 10 11 12 15 13 14 15 16 17 18 19 20 692 2,976 1,461 391 - 5,520 9,655 3,595 274 13,524 1,388 2,563 5,508 265 2,146 11,870 9,978 15,848 286 26,112 19,044 37,982 12,974 482 149 9,413 23,018 84 84 8,642 375 - 6,671 15,688 - - 23,102 15,688 (4,058) 22,294 150,470 15,332 (169,860) 128,382 20,510 (126,598) (4,058) 22,294 The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements. 38 | P a g e Consolidated Statement of Changes in Equity For the Financial Year ended 31 December 2023 Melodiol Global Health Limited – Annual Report 2023 Foreign Currency Translation Reserve $000’s 1,383 - 1,525 Accumulated Losses $000’s (94,823) (32,782) - Total $000’s 27,759 (32,782) 1,525 1,525 (32,782) (31,257) - - - - - - - - - 2,908 2,908 - 1,027 - - - - - - - - 1,007 (126,598) (126,598) (52,446) - 9,942 12,874 3,065 130 137 20 49 (425) - 22,294 22,294 (52,446) 1,027 Issued Capital $000’s Share-based Payment Reserve $000’s 109,951 - - - 9,942 12,874 504 - 120 20 - (5,029) - 128,382 128,382 - - 11,248 - - - - - 2,561 130 17 - 49 4,604 (1,007) 17,602 17,602 - - - - 1,027 (52,446) (51,419) 5,286 1,342 5,693 5,608 2,827 1,490 1,245 484 333 - (2,845) 625 150,470 - 136 - 1,939 - 2 - 445 - 7 1,075 (9,809) 11,397 - - - - - - - - - - - - 3,935 - - - - - - - - - - - 9,184 (169,860) 5,286 1,478 5,693 7,547 2,827 1,492 1,245 929 333 7 (1,770) - (4,058) Group At 1 January 2022 Loss for the year Other comprehensive income Total comprehensive income/(loss) for the year after tax Transactions with owners in their capacity as owners: Issue of share capital Issue of shares for the acquisition (see note 28) Issue of equity for services Share-based payments Shares issued to Directors Exercise of options Embedded derivative - Convertible Notes Options Share issuance costs Expired options At 31 December 2022 At 1 January 2023 Loss for the year Other comprehensive income Total comprehensive income/(loss) for the year after tax Transactions with owners in their capacity as owners: Issue of share capital Issue of shares for the acquisitions Conversion of convertible notes Issue of equity for services Issue of equity to settle loans Issue of equity for loan extensions Issue of equity to extinguish liability Share-based payments Shares issued to Directors Embedded derivative Share issuance costs Expired options At 31 December 2023 The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial statements. 39 | P a g e Consolidated Statement of Cash Flows For the Financial Year ended 31 December 2023 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Payments for research Interest received Operating cash flows from discontinued operations Net cash used in operating activities 29 8(a) Cash flows from investing activities Payments for plant and equipment Payments for intangibles Cash acquired on acquisition of Health House International Ltd Loan to Health House International Ltd Investing cash flows from discontinued operations Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from exercise of options Proceeds from borrowings Repayment of borrowings Borrowing costs Payment of share issue costs Financing cash flows from discontinued operations Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effect on exchange rate fluctuations on cash held Cash and cash equivalents at the end of the year 29 29 8 Melodiol Global Health Limited – Annual Report 2023 Note 2023 $000’s 2022 $000’s 19,250 (22,426) (6) 5 (4,964) (8,141) (313) - 232 - - (81) 5,124 - 565 (1,803) (318) (699) 4,636 7,505 (717) 1,388 21 692 6,484 (20,463) (86) - (3,241) (17,306) (258) (5) - (2,100) 79 (2,284) 9,942 20 1,457 (266) (117) (623) 3,398 13,811 (5,779) 7,184 (17) 1,388 The Consolidated Statement of Cash Flows should read in conjunction with the notes to the financial statements. 40 | P a g e Notes to the Consolidated Financial Statements NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (a) Corporate Information Melodiol Global Health Limited – Annual Report 2023 Melodiol Global Health Limited (referred to as “Melodiol” or the “Company”) is a company domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange. The consolidated financial statements of the Company as at and for the year ended 31 December 2023 comprise the Company and its subsidiaries (together referred to as the “Group” or the “Group”). The Registered Office is disclosed in the Corporate Directory of the Annual Report. (b) Basis of Preparation Statement of compliance The consolidated financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (“IFRS”) adopted by the International Accounting Standards Board (“IASB”). Melodiol is a for-profit entity for the purpose of preparing the financial statements. The annual report was authorised for issue by the Board of Directors on 28 March 2024 Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income and derivative financial instruments. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 30. New, revised or amended standards and interpretations adopted by the Group The Group has adopted all the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The new and revised Standards and Interpretations did not have any significant impact. New standards and interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 31 December 2023. The Group's assessment of the impact of these new or amended Accounting Standards and Interpretations is that they are not applicable. 41 | P a g e Notes to the Consolidated Financial Statements NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) Melodiol Global Health Limited – Annual Report 2023 Significant Judgements and Estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 2. Going Concern The financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business. As disclosed in the financial statements, the Group incurred a loss of $52,446,000 (2022: $32,782,000) and had net cash outflows from operating activities of $8,141,000 (2022: $17,306,000) for the year ended 31 December 2023. The Group had a deficiency between current assets and current liabilities of $17,498,000 (2022: $3,818,000 surplus) as at 31 December 2023. As a result of these matters, there is a material uncertainty related to events or conditions that may cast significant doubt on whether the Group will continue as a going concern and, therefore, whether it will realise its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial report. The continuing viability of the Group and its ability to continue as a going concern and meet its debts and commitments as they fall due are dependent upon the Group being successful with the following factors:    The ability of the Group to raise additional funds from shareholders, new investors and debt markets. The Group has successfully conducted a number of capital raises in the current and recent years. When taking these into account, there is a reasonable expectation that alternative sources of funding can be sourced, as and when required. Further, the Company understands it will require further funding to continue to execute its growth strategy as planned. In its determination on going concern, the Board placed significant reliance upon the representations of its Corporate Advisor with respect to its confidence in its ability to continue raising capital on behalf of the Company; Increased revenue from opportunities with existing and new customers and sales arrangements as they are realised into sales revenue in the Group’s North American and European operations, or should this fail the closure of underperforming business units; and Effective monitoring and reduction of the Group’s overhead expenditures, including the continued realisation of head office cost reductions. In the event that the Group is unable to achieve the matters detailed above, it may not be able to continue as a going concern and therefore the Group may not be able to realise its assets and extinguish its liabilities in the ordinary course of operations and at the amounts stated in the financial statements. No adjustments have been made to the recoverability and classification of recorded asset values and the amount and classification of liabilities that might be necessary should the Group and the Company not continue as going concerns. 42 | P a g e Notes to the Consolidated Financial Statements NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) (c) Principles of Consolidation Melodiol Global Health Limited – Annual Report 2023 Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Melodiol as at 31 December 2023 and the results of all subsidiaries for the year then ended. Melodiol and its subsidiaries together are referred to in this financial report as the Group. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. (d) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board. Management has determined that based on the report reviewed by the Board and used to make strategic decisions, that the Group has four reportable segments. (e) Foreign Currency Translation Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the Company operates (“functional currency”). The consolidated financial statements are presented in Australian dollars, which is Melodiol’s functional and presentation currency. The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/ Directors’ Reports) Instrument 2016/191 and in accordance with that instrument, amounts in the consolidated financial statements and directors’ report have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar. Transactions and balances Foreign currency transactions are translated into Australian Dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. 43 | P a g e Notes to the Consolidated Financial Statements NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) (e) Foreign Currency Translation (continued) Melodiol Global Health Limited – Annual Report 2023 Group companies The results and financial position of foreign entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:  Assets and liabilities for each statement of financial position account presented are translated at the closing  rate at the date of that statement of financial position; Income and expenses for each statement of profit or loss and other comprehensive income account are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and  All resulting exchange differences are recognised in other comprehensive income and foreign currently translation reserve. (f) Revenue Recognition The Group recognises revenue as follows: Revenue from contracts with customers The Group generates revenue through the sale of a range of products across its operations:  Mernova Medicinal Inc (“MMI”) generates revenue from the production and distribution of pharmaceutical- grade and recreational cannabis to large retailers and wholesalers throughout North America.  Health House International Ltd (“HHI”) generates revenue from the distribution of pharmaceutical products to   the United Kingdom, Europe and Australia. Sierra Sage Herbs LLC (“SSH”) generates revenue from the production and distribution of personal beauty and health products through a number of distribution channels, including through traditional wholesaling and retailing channels, as well as via online distribution channels such as Amazon. During the year, SSH discontinued it’s operations. Creso Pharma Switzerland (“CPS”) generates revenue from the production and distribution of medicinal products for both the human and animal markets through wholesale and retail distribution chains. Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. Revenue is recorded net of sales discounts and rebates, duties and taxes. 44 | P a g e Notes to the Consolidated Financial Statements NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) Melodiol Global Health Limited – Annual Report 2023 Sale of goods Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery. Where delivery cannot be determined on an individual order basis, a provision is recognised for deferred sales as disclosed in note 2 to properly recognise revenue in the period in which it has been earned. Goods sold via online systems, such as Amazon, pose a risk of goods being returned or failing to be successfully delivered. The Group recognises a provision to reflect these risks as disclosed in note 2. Interest revenue Interest revenue is recognised as it accrues, using the effective interest method. (g) Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. 45 | P a g e Notes to the Consolidated Financial Statements NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) (h) Trade and Other Receivables Melodiol Global Health Limited – Annual Report 2023 Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. (i) Property, Plant and Equipment Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated using the straight-line method to allocate their cost over their estimated useful lives to estimate residual value. The following estimated useful lives are used in the calculation of depreciation: Buildings and Improvements Plant and Equipment Machinery Equipment Irrigation and Lighting Security Systems 30 years 3 – 10 years 5 – 10 years 5 – 10 years 5 – 10 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. When revalued assets are sold, it is Group policy to transfer any amounts included in other reserves in respect of those assets to retained earnings. (j) Intangible Assets The Group has acquired significant intangible assets as a result of business acquisitions. Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Intellectual property is considered to provide a benefit to the Group over a finite useful life and is amortised using the straight-line method over the following periods: Patents and trademarks Licenses (Canadian) Client relationships Useful life 5 – 10 years 5 – 30 years 5 years 46 | P a g e Notes to the Consolidated Financial Statements NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) Melodiol Global Health Limited – Annual Report 2023 Intellectual Property The estimated useful life and amortisation method are reviewed at the end of each reporting year, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives are comprised of certain acquired brand name, product rights, and licences to grow which are carried at cost less accumulated impairment losses. Indefinite life intangible assets are not amortised but are tested for impairment annually and when there is an indication of impairment. Licences Significant costs associated with licences are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 3 to 30 years. (k) Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. (l) Trade and Other Payables Liabilities are recognised for amounts to be paid in the future for goods and services received whether or not billed to the Group. (m) Discontinued Operations Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss. Additional disclosures are provided in Note 29. All other notes to the financial statements include amounts for continuing operations, unless indicated otherwise. 47 | P a g e Notes to the Consolidated Financial Statements NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) (n) Borrowings Melodiol Global Health Limited – Annual Report 2023 Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fees are deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fees are capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Convertible Notes When a conversion feature of a debt instrument results in the conversion of a fixed amount of stated principal into a fixed number of shares, it satisfies the ‘fixed for fixed’ criterion and, therefore, is classified as an equity instrument. The value of the liability component and the equity conversion component were determined at the date the instrument was issued. The fair value of the liability component at inception is calculated using a market interest rate for an equivalent instrument without a conversion option. (o) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. (p) Employee Benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months of the reporting date are recognised in current liabilities in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. 48 | P a g e Notes to the Consolidated Financial Statements NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) (q) Share-based Payments Melodiol Global Health Limited – Annual Report 2023 Equity-settled share-based compensation benefits are provided to key management personnel, employees and outside parties for services provided. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees and outside parties in exchange for the rendering of services. The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. 49 | P a g e Notes to the Consolidated Financial Statements NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) (r) Contributed Equity Ordinary shares are classified as equity. Melodiol Global Health Limited – Annual Report 2023 Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. (s) Goods and Services Tax (“GST”) Revenue, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables area stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included as a current asset or liability in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the taxation authority, are presented as operating cash flows. (t) Current and Non-Current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. 50 | P a g e Notes to the Consolidated Financial Statements Melodiol Global Health Limited – Annual Report 2023 NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) (u) Inventories Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on a weighted average basis. Cost comprises direct materials and delivery costs, direct labour and import duties and other taxes. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Inventories of harvested cannabis and finished goods are valued at the lower of cost and net realisable value. Inventories of harvested cannabis are transferred from biological assets at their fair value less cost to sell up to the point of harvest, which becomes the initial deemed cost. All subsequent direct and indirect post-harvest costs are capitalised to inventory as incurred, including labour related costs, consumables, materials, packaging supplies, utilities, facilities costs, quality and testing costs, and production related depreciation. Net realisable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Inventories for resale and supplies and consumables are valued at the lower of costs and net realisable value, with cost determined using the weighted average cost basis. The cost of goods sold is comprised of the cost of inventories expensed in the period and the direct and indirect costs of shipping and fulfilment including labour related costs, materials, shipping costs, customs and duties, royalties, utilities, facilities costs, and shipping and fulfilment related depreciation. AASB 141 Agriculture (Biological assets) The Group’s biological assets consist of cannabis plants. The Group capitalises all the direct and indirect costs as incurred related to the biological transformation of the biological assets between the point of initial recognition and the point of harvest including labour related costs, grow consumables, materials, utilities, facilities costs, quality and testing costs, and production related depreciation. The Group measures biological assets at fair value less cost to sell up to the point of harvest, which becomes the basis for the cost inventories after harvest. Costs to sell includes post-harvest production, shipping and fulfilment costs. The net unrealised gains or losses arising from changes in fair value less cost to sell during biological transformation are included in profit or loss of the related period. Seeds are measured at fair value. The Company recognises the mother plants used for cloning the cannabis plants through the statement of profit or loss as they have a useful life less than one year. 51 | P a g e Notes to the Consolidated Financial Statements NOTE 1 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) (v) Fair value measurement Melodiol Global Health Limited – Annual Report 2023 When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. (w) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss. The category includes derivative instruments, including imbedded derivatives, with financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial liability out of fair value through profit or loss category. 52 | P a g e Notes to the Consolidated Financial Statements Melodiol Global Health Limited – Annual Report 2023 NOTE 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS AND ASSUMPTIONS The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Share based payments The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either a hybrid Monte Carlo or the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. The valuation model inputs are disclosed in note 24 and include forward-looking assumptions. Revenue from contracts with customers involving sale of goods When recognising revenue in relation to the sale of goods to customers, the key performance obligation of the Group is considered to be the point of delivery of the goods to the customer, as this is deemed to be the time that the customer obtains control of the promised goods and therefore the benefits of unimpeded access. Fair value measurement The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the ‘fair value hierarchy’): - - - Level 1: Quoted prices in active markets for identical items (unadjusted) Level 2: Observable direct or indirect inputs other than Level 1 inputs Level 3: Unobservable inputs (i.e. not derived from market data) The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurements of the item. Transfers between items between levels are recognised in the period they occur. The Group measures a number of items at fair value, including the following which are considered level 3 in the fair value hierarchy: - - Biological assets Embedded derivative portion of the convertible notes For more detailed information in relation to the fair value measurement of the items above, please refer to the applicable notes. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions (refer to note 14). 53 | P a g e Notes to the Consolidated Financial Statements Melodiol Global Health Limited – Annual Report 2023 NOTE 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS AND ASSUMPTIONS (CONTINUED) Biological assets and inventory Biological assets A subsidiary of the Group, Mernova Medicinal Inc. (“MMI”) grows and manufactures a range of biological assets and harvested cannabis inventories. Management is required to make a number of estimates in calculating the fair value of biological assets and harvested cannabis inventory including a number of assumptions, such as estimating the stage of growth of the cannabis, harvesting costs, sales price and expected yields. Refer to note 12 for further detail. Obsolescence The Group grows and manufactures a range of biological products through its subsidiary MMI. These products are subject to potential obsolescence. Management is required to make assumptions in relation to obsolescence of products and product categories. An inventory provision is recognised where the realisable value from sale of inventory is estimated to be lower than the inventory’s carrying value. Inventory provisions for different products and product categories are estimated based on various factors, including expected sales profile, prevailing sales prices, product deterioration rates, seasonality and expected losses associated with slow-moving inventory items as well as on specific identification. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience, historical collection rates and forward-looking information that is available. The allowance for expected credit losses, as disclosed in note 10 , is calculated based on the information available at the time of preparation. The actual credit losses in future years may be higher or lower. Estimation of useful lives of assets The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. 54 | P a g e Notes to the Consolidated Financial Statements NOTE 3 SEGMENT INFORMATION Melodiol Global Health Limited – Annual Report 2023 The Group requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker (“CODM”) in order to allocate resources to the segments and to assess their performance. On this basis, the Group’s reportable segments under AASB 8 are as follows: • Europe includes Health House International Limited (“HHI”), UK division, who distribute pharmaceutical products and Creso Pharma Switzerland GmbH (“Switzerland”) which includes the development and commercialisation of its nutraceutical products – located in Switzerland. • Canada includes the operating companies; Mernova Medicinal Inc (“Mernova”), Halucenex Life Sciences Inc. and (“Halucenex”), Creso Impactive Ltd (“Impactive”), together with corporate holding companies Creso Canada Corporate Limited, Creso Canada Limited, 3321739 Nova Scotia Limited, 4340965 Nova Scotia Limited ("4NS”) and Kunna Canada Limited, all located in Canada. Impactive, Halucenex and 4NS discontinued operations during the year. • United States of America (USA) includes the operating company Sierra Sage Herbs LLC which develops and sells personal beauty and health products, together with corporate holding company Creso Pharma US, Inc., all located in USA. All USA compaines discontinued operations during the year. • Asia Pacific includes the parent company Melodiol Global Health Limited (“Melodiol”) which provides the Group’s corporate administration – located in Australia and Health House International Limited (“HHI”), Australia division, who distribute pharmaceutical products. Such structural organisation is determined by the nature of risks and returns associated with each business segment and defines the management structure as well as the internal reporting system. It represents the basis on which the group reports its primary segment information to the Board. The following table presents details of revenue and operating profit by business segment as well as reconciliation between the information disclosed for reportable segments and the aggregated information in the financial statements. The information disclosed in the table below is derived directly from the internal financial reporting system used by the Board of Directors to monitor and evaluate the performance of our operating segments separately. Year ended 31 December 2023 Revenue Royalty income Total segment revenue Other income Asia Pacific $000’s 7,349 - 7,349 680 Europe Canada USA $000’s $000’s $000’s All other segments $000’s 4,636 24 4,660 6,936 - 6,936 30 89 - - - - Loss before tax expensei Total Segment Assets Total Segment Liabilities (26,306) 6,047 14,559 (2,345) 622 1,609 (6,872) 12,244 2,863 - 131 4,071 Total $000’s 18,921 - 18,921 799 (35,523) 19,044 23,102 - (24) (24) - - - - (i) Included in profit and loss are impairments to operating segments of the Group as follows: Year ended 31 December 2023 Impairment of intangible assets and investments Asia Pacific $000’s 11,142 Europe Canada USA $000’s $000’s $000’s All other segments $000’s - - - - Total $000’s 11,142 55 | P a g e Notes to the Consolidated Financial Statements NOTE 3 SEGMENT INFORMATION (CONTINUED) Year ended 31 December 2022 Revenue Total segment revenue Other income Asia Pacific $000’s Europe Canada USA $000’s $000’s $000’s - - - 84 1,846 192 2,038 4,390 - 4,390 - 221 - - - - Loss before in tax expense Total Segment Assets Total Segment Liabilities (6,023) 3,113 6,067 (7,931) 6,490 183 (7,907) 21,671 1,114 - 6,708 8,324 Europe Canada USA $000’s 5,891 $000’s $000’s - - - Year ended 31 December 2022 Impairment of intangible assets Asia Pacific $000’s - NOTE 4 REVENUE AND OTHER INCOME Revenue from continuing operations Revenue from sale of products Other income Interest received Other Income Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Consolidated Major product lines Pharmaceutical products Nutraceutical products Cannabis products Total Geographical regions Asia Pacific Europe Canada Total Timing of revenue recognition Goods transferred at a point in time Total Melodiol Global Health Limited – Annual Report 2023 South America $000’s - (192) (192) - - - - All other segments $000’s Total $000’s 6,236 - 6,236 305 (21,861) 37,982 15,688 Total $000’s 5,891 2023 $000’s 2022 $000’s 18,921 18,921 679 120 799 7,349 4,636 6,936 18,921 7,349 4,636 6,936 18,921 18,921 18,921 6,236 6,236 84 221 305 - 1,846 4,390 6,236 - 1,846 4,390 6,236 6,236 6,236 56 | P a g e Notes to the Consolidated Financial Statements NOTE 5 EXPENSES (a) Administrative expenses Accounting and company secretarial fees Travel costs General and administration expenses Compliance and regulatory expenses Consulting fees Corporate advisory and business development Legal fees Investor and Media Relations Marketing US based Marketing & Media Relations (b) Depreciation and amortisation expense Total depreciation per note 13 Less: capitalised to inventory Amortisation expense per note 14 (c) Employee benefit expenses Director fees Wages and salaries Recruitment fees Superannuation Other employee expenses (d) Finance costs Interest Expense Bank Charges Capital Raising Fees Loan Settlement Fees Realised Foreign Exchange Gain/Loss Gain on embedded derivative Loss on extinguish of liability Melodiol Global Health Limited – Annual Report 2023 2023 $000’s 2022 $000’s 1,838 144 805 1,097 2,103 1,588 714 347 794 - 9,430 691 (507) 491 675 962 2,249 88 189 971 4,459 2,384 42 726 5,695 (36) - 880 9,691 2,232 257 636 481 3,374 674 1,021 486 387 52 9,600 620 (629) 1,413 1,404 1,301 1,605 4 95 146 3,151 34 (16) 176 1 15 (17) 235 426 57 | P a g e Notes to the Consolidated Financial Statements NOTE 6 INCOME TAX EXPENSE The components of tax expense comprise: Current tax Adjustments for current tax of prior periods (a) Income tax expense reported in the of profit or loss and other comprehensive income The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax as follows: Loss before income tax expense Prima facie tax benefit on loss before income tax at 25% (2022: 25%) (b) Tax effect of: Tax effect on different tax rate of overseas subsidiaries Share-based payments Travel expenses Legal expenses Capital raising costs Others non-deductible expenses Temporary differences Tax losses not recognised Total (c) Deferred tax assets not brought to account are: Carried forward losses Total The benefit for tax losses will only be obtained if: Melodiol Global Health Limited – Annual Report 2023 2023 $000’s 2022 $000’s 24 24 2 2 (52,443) (13,111) (32,780) (8,195) 1,912 105 - - (384) 6,197 (1,090) 6,390 24 2,518 33 57 251 (441) - (1,162) 6,941 2 52,323 52,323 35,266 35,266  The Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised; and  The losses are transferred to an eligible entity in the Group; and  The Group continues to comply with the conditions for deductibility imposed by tax legislation; and  No changes in tax legislation adversely affect the consolidated in realising the benefit from the deduction for the losses. 58 | P a g e Notes to the Consolidated Financial Statements NOTE 7 LOSS PER SHARE Melodiol Global Health Limited – Annual Report 2023 Basic loss per share amounts are calculated by dividing net loss for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted loss per share amounts are calculated by dividing the net loss attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Net loss for the year Non-controlling interest Net loss for the year attributable to the owners of Melodiol Global Health Limited 2023 $000’s (52,446) - (52,446) 2022 $000’s (32,782) - (32,782) Weighted average number of ordinary shares for basic and diluted loss per share. 2,788,444,701 1,466,246,213 Options on issue are not considered dilutive to the earnings per share as the Company is in a loss-making position. Continuing and discontinuing operations Basic and diluted loss per share (cents) Discontinuing operations Basic and diluted loss per share (cents) NOTE 8 CASH AND CASH EQUIVALENTS Cash at bank and on hand (1.88) (0.61) (2.24) (0.74) 692 692 1,388 1,388 Some cash at bank earns interest at floating rates based on daily deposit rates. Short-term deposits are made in varying periods, depending on the immediate cash requirements of the Group and earn interest at the respective short-term deposit rate, currently 0.85% (2022: 0.01%), this rate can change frequently. (a) Reconciliation of net loss after tax to net cash flows from operations Loss for the financial year (52,446) (32,782) Adjustments for: Depreciation and amortisation (Gain) on foreign exchange Share based payments NRV adjustments to inventory and fair value adjustments to biological assets Loss on disposal of tangible assets Impairment of intangible assets Impairment of tangible assets Impairment of investments Issue of equity for services Issue of equity to extinguish liability Absorption of depreciation costs in biological assets and inventory (see note 5) Accretion of finance costs/income on convertible notes Issue of equity to settle interest charges Other non-cash items Changes in assets and liabilities Receivables Inventories Biological assets Trade and other payables Provisions Net cash used in operating activities NOTE 8CASH AND CASH EQUIVALENTS (CONTINUED) 2,027 (21) 1,074 1,541 53 17,612 238 2,762 6,475 6,532 (507) 1,328 498 (152) (171) 4,329 (126) 706 107 (8,141) 2,578 (17) 130 (3,448) 307 12,521 - - 3,202 - (629) - - 147 (196) (1,724) 192 2,270 143 (17,306) 59 | P a g e Notes to the Consolidated Financial Statements Melodiol Global Health Limited – Annual Report 2023 (b) Non-cash investing and financing activities 2023 $000’s 2022 $000’s Equity issued for the conversion of convertible notes Equity issued as share issue costs Issue of shares and options for the acquisitions of Health House International Ltd (see note 28) Issue of shares for the acquisitions of Sierra Sage Herbs LLC Issue of share to settle loans (5,693) (1,073) 1,479 - (2,827) (49) (4,604) - 12,874 - (c) Changes in liabilities arising from financing activities Movement in debt instruments Sierra Sage Herbs LLC acquisition Abby & Finn Investments (note 10) Health House acquisition International Ltd Movement in debt instruments Sierra Sage Herbs LLC acquisition 31 December 2022 $000’s Cash Flows $000’s Non-cash Flows $000’s 31 December 2023 $000’s 3,293 3,378 - - 6,671 (2,847) (369) - (182) (3,398) (446) (106) 2,762 825 3,035 3,105 2,903 2,762 643 9,413 31 December 2021 $000’s Cash Flows $000’s Non-cash Flows $000’s 31 December 2022 $000’s - - - 4,471 - 4,471 (1,178) 3,378 2,200 3,293 3,378 6,671 NOTE 9 INVESTMENT USING EQUITY METHOD Interests in associate is accounted for using the equity method of accounting. Information relating to associates is set out below: Name Activity Principal place of business/ Country of incorporation CLV Frontier Brands Pty Ltd Developing terpene beers and non-alcoholic beverages Estonia/ Australia Reconciliation of the group’s carrying amount Opening carrying amount Share of (loss) after income tax Closing carrying amount Ownership interest 2022 2023 % % 33⅓% 33⅓% - - - - - - 60 | P a g e Notes to the Consolidated Financial Statements NOTE 10 TRADE AND OTHER RECEIVABLES Trade debtors Less: provision for expected credit losses Value added taxes receivable Other deposits and receivables Melodiol Global Health Limited – Annual Report 2023 2023 $000’s 2022 $000’s 2,394 (595) 13 1,164 2,976 1,939 (47) 24 647 2,563 Allowance for expected credit losses A provision for credit loss of $595,000 was recognised in the income statement for the year ended 31 December 2023 (2022: $47,000). During the year the Company provided $2,762,000 against a loan due from Abby & Finn that was deemed to be irrecoverable, see notes 8 (C) and 18 for further details. The ageing for Trade debtors is as follows; December $1,033,000, November $556,000, October $283,000, September and older $522,000. NOTE 11 INVENTORIES Finished goods Work in progress Consumables 2023 $000’s 2022 $000’s 360 1,041 60 1,461 1,842 3,416 250 5,508 During the year ended 31 December 2023, the Group gained $1,681,000 (2022: gained $590,000) of fair value adjustments on the growth of its biological assets included in inventory sold. As at 31 December 2023, the Group holds 693 kilograms of harvested cannabis (2022: 791 kilograms). Inventories recognised as an expense during the year ended 31 December 2023 amounted to $17,282,000 (2022: $6,695,000). During the year a gain of $599,000 (2022: charge of $1,703,000) was recognised in relation to product. NOTE 12 BIOLOGICAL ASSETS The Group’s biological assets consist of 4,768 cannabis plants as at 31 December 2023 (2022: 4,313 cannabis plants). The continuity of biological assets is as follows: Carrying amount at 1 January Production costs capitalised Increase/(decrease) in FVLCS due to biological transformation Foreign exchange translation Less: Transfer to inventory upon harvest Carrying amount at 31 December 2023 $000’s 2022 $000’s 265 5,352 (1,518) (30) (3,678) 391 457 5,025 (407) 8 (4,818) 265 The fair value of biological assets is determined using a valuation model to estimate expected harvest yield per plant applied to the estimated price per gram less processing and selling costs. The expected cash flow model assumes the biological assets as at 31 December 2023 will grow to maturity, be harvested and converted into finished goods inventory and sold to Canadian and overseas customers. 61 | P a g e Notes to the Consolidated Financial Statements NOTE 12 BIOLOGICAL ASSETS (CONTINUED) Melodiol Global Health Limited – Annual Report 2023 The sales price used in the valuation of biological assets is based on the average expected selling price of cannabis products and can vary based on different strains being grown. Selling costs vary depending on methods of selling and are considered based on the expected method of selling and the determined additional costs which would be incurred. Expected yields for the cannabis plant is also subject to a variety of factors, such as strains being grown, length of growing cycle, and space allocated for growing. The Group’s method of accounting for biological assets attributes value accretion on a straight-line basis throughout the life of the biological asset from initial cloning to the point of harvest. Management reviews all significant inputs based on historical information obtained as well as based on planned production schedules. Only when there is a material change from expected fair value used for cannabis does the Group make any adjustments to the fair value used. During the year, there was no material change to these inputs and therefore there has been no change in the determined fair value per plant. Dried Flower The dried flower model utilises the following significant assumptions: Weighted average of expected loss of plants until harvest Expected yields for cannabis plants (average grams per plant) Expected number of growing weeks Weighted average number of growing weeks completed as a percentage of total growing weeks at period-end Estimated selling price per gram After harvest costs to complete and sell per gram Reasonable margin on after harvest costs to complete and sell per gram Shake The shake model utilises the following significant assumptions: Expected yields for cannabis plants (average grams per plant) Expected number of growing weeks Estimated selling price per gram After harvest costs to complete and sell per gram Reasonable margin on after harvest costs to complete and sell per gram Weighted Average 31 December 2023 5% 40 12 56% C$4.00 C$0.80 C$3.20 Weighted Average 31 December 2023 20 12 C$0.00 C$0.00 C$0.00 Weighted Average 31 December 2022 5% 37 12 57% C$4.00 C$1.22 C$2.78 Weighted Average 31 December 2022 11 12 C$0.00 C$0.00 C$0.00 Sensitivity analysis Assuming all other unobservable inputs are held constant, management has quantified the sensitivity of the inputs and determined the following:  Selling price per gram – a decrease in the average selling price per gram by 10% would result in the biological asset value decreasing by C$49,000 and inventory decreasing by C$97,000.  Harvest yield per plant – a decrease in the harvest yield per plant of 10% would result in the biological asset value decreasing by C$82,000. These inputs are level 3 on the fair value hierarchy and are subject to volatility in market prices, unanticipated regulatory changes, harvest yields, loss of crops, and several uncontrollable factors, which could significantly affect the fair value of biological assets in future periods. The average exchange rate is 1.1157 CAD/AUD. Other disclosures No cannabis, whether as finished goods or biological assets, were not pledged as security for the Group’s loans or borrowings in 2023 (2022: none). At 31 December 2023, the Group had no commitments in relation to growing its cannabis (2022: nil). 62 | P a g e Notes to the Consolidated Financial Statements NOTE 13 PROPERTY, PLANT AND EQUIPMENT Opening net book amount Additions (Capital Expenditure and Acquired assets) Disposals Depreciation charge Provision for impairment Foreign exchange translation Closing net book amount Cost Accumulated depreciation Net book amount Melodiol Global Health Limited – Annual Report 2023 2023 $000’s 2022 $000’s 9,978 727 (53) (1,055) (238) 296 9,655 13,073 (3,418) 9,655 10,436 364 (307) (663) - 148 9,978 12,340 (2,362) 9,978 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Disposals Provision for impairm’t Foreign currency fluctuation $000’s Deprec’n expense Balance at 31 Dec 2023 $000’s $000’s Balance at 1 Jan 2023 Additions $000’s $000’s Acquired on acquisition $000’s 387 8,082 203 149 936 221 - 9,978 - - 163 3 142 4 - 312 - - 84 - - - 331 415 Land Buildings & Improvement Plant and equipment Machinery & Equipment Irrigation & Lighting Security System Other assets Total $000’s $000’s - - - (1) (52) - - (53) - (26) - - - (212) (238) 4 48 (20) 49 62 3 150 296 - (310) (94) (85) (269) (58) (239) (1,055) 391 7,820 310 115 819 170 30 9,655 Balance at 1 Jan 2022 Additions Acquired on acquisition Disposals $000’s $000’s $000’s $000’s Foreign currency fluctuation $000’s Depreciation expense Balance at 31 Dec 2022 $000’s $000’s 382 8,210 191 185 1,199 269 10,436 - 100 59 1 178 5 343 - - 21 - - - 21 - - - - (307)i - (307) 5 113 4 4 18 4 148 - (341) (72) (41) (152) (57) (663) 387 8,082 203 149 936 221 9,978 Land Buildings & Improvement Plant and equipment Machine & Equipment Irrigation & Lighting Security System Total (i) During the period, the Group reviewed the plant and equipment in use and determined that irrigation and lighting equipment with a carrying value of $53,000 (2022: $307,000) was obsolete or otherwise no longer providing ongoing economic value to the Group. As a result, the Group recognised a loss on disposal of the equipment equal to its carrying value during the period. 63 | P a g e Notes to the Consolidated Financial Statements NOTE 14 INTANGIBLE ASSETS Licences (Canadian) (i) Intellectual property acquired on acquisition Goodwill acquired on acquisition (ii) Intellectual property purchased Melodiol Global Health Limited – Annual Report 2023 2023 $000’s 2022 $000’s 103 - 3,462 30 3,595 280 15,560 - 8 15,848 (i) (ii) Licences (Canadian) Comprise the cannabis cultivation licence granted by Health Canada to Mernova Medicinal Inc in March 2019. The directors have considered the recoverability of the Canadian licence. The Mernova facility commenced cultivation in 2019, its operations have grown continuously since then and the directors are confident of the growth prospects of the business. Goodwill acquired on acquisition Comprises of Goodwill acquired on the acquisition of Health House International Limited (see note 28) for details). Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 January 2023 Additions Acquired on acquisition (see note 28) Impairment from discontinuing operationsi Impairment from continuing operationsi Foreign exchange translation Amortisation expense Balance at 31 December 2023 Remaining amortisation period (years) Consolidated Balance at 1 January 2022 Additions Acquired on acquisition (see note 28) Impairment from discontinuing operationsi Impairment from continuing operationsi Foreign exchange translation Amortisation expense Balance at 31 December 2022 Licences (Canadian) $000’s 280 - - - - 4 (181) 103 25 Licences (Canadian) $000’s 1,156 - - - - (28) (848) 280 Intellectual Property $000’s 15,568 - - (9,232) (5,928) 142 (520) 30 5 Intellectual Property $000’s 7,158 5 18,403 (6,630) (3,459) 1,158 (1,067) 15,568 Computer Software $000’s - - - - - - - - - Computer Software $000’s - - - - - - - - Goodwill $000’s - - 5,914 - (2,452) - - 3,462 - Goodwill $000’s - - 2,429 - (2,432) 3 - - Total $000’s 15,848 - 5,914 (9,232) (8,380) 146 (701) 3,595 Total $000’s 8,314 5 20,832 (6,630) (5,891) 1,133 (1,915) 15,848 (i) The Group conducted impairment testing as detailed below. As a result, an impairment charge against intangible assets of $17,612,000 (2022: $12,521,000) for continued operations was recognised during the period. Note 3 discloses the breakdown of impairment by segment. 64 | P a g e Notes to the Consolidated Financial Statements NOTE 14 INTANGIBLE ASSETS (CONTINUED) Impairment indicators Melodiol Global Health Limited – Annual Report 2023 As noted in note 1(k), at the end of each reporting period, the Group assesses whether there were events or changes in circumstances that would indicate that a Cash Generating Unit (“CGU”) was impaired. The following factors were identified in the consideration of impairment indicators:      The Mernova CGU of the Company’s business is in its relatively early phase and needs to continue its development to grow its revenues and become cash flow positive. The Swiss CGU of the Company’s business has been affected by changes in the regulations of its products in its principal markets in Europe, leading to the need to re-formulate the products and rediscuss them with its distribution partners for those markets. The Swiss IP CGU of the Company’s business holds intellectual property rights acquired from Sierra Sage Herbs. The Health House UK/Europe CGU was acquired on 16 May 2023, the company distributes pharmaceutical products to UK, Europe and Asia. The Health House Australia CGU was acquired on 16 May 2023, the company distributes pharmaceutical products in Australia. Impairment Testing – Value-in-use Mernova Cannabis Operations CGU The Group’s Mernova Cannabis operations CGU represents its operations dedicated to the cultivation, processing and sale of cannabis to both wholesale and retail customers. This CGU is attributed to the Group’s Canadian operating segment. The impairment testing performed at 31 December 2023 supported the recoverable amount of the CGU and did not result in any impairment charge during the period (2022: $Nil). Switzerland Research & Development CGU The Group’s Switzerland Research & Development CGU represents its operations dedicated to the research and development of hemp and cannabis biotechnology, including the development of novel formulations and delivery forms, and the sale and distribution of hemp derived products. This CGU is attributed to the Company’s European operating segment. The impairment testing performed at 31 December 2023 supported the recoverable amount of the CGU and did not result in any impairment charge during the period (2022: $Nil). Switzerland Intellectual Property CGU The Group’s Switzerland Intellectual Property CGU, acquired during the period, represents its operations, being the exploitation of intellectual property rights. This CGU is attributed to the Company’s European operating segment. The impairment testing performed at 31 December 2023 indicated the recoverable amount of the CGU on a relief from royalty method to the carrying value of the associated intangibles, being brand names. The relief from royalty method is a calculation of the amount of the hypothetical royalty that would be paid if the brands were licensed from an independent third party. When the recoverable amount of the brand is less than the carrying amount, an impairment loss is recognised. This resulted in the Group recognising an impairment charge of $8,690,000 (2022: $5,891,000) against the CGU during the period. 65 | P a g e Notes to the Consolidated Financial Statements NOTE 14 INTANGIBLE ASSETS (CONTINUED) Melodiol Global Health Limited – Annual Report 2023 Halucenex CGU The Group’s Halucenex CGU, discontinued operations during the year, and was therefore fully impaired. The impairment charge in the year was $7,157,000 (2022: $Nil). Sierra Sage Herbs CGU The Group’s Sierra Sage Herbs CGU, discontinued operations during the year, and was therefore fully impaired. The impairment charge in the year was $1,852,000 (2022: $6,630,000). Health House UK/Europe CGU The Group’s Health House International UK/Europe CGU, acquired during the period, represents its operations which distributes pharmaceutical products to UK, Europe and Asia. This CGU is attributed to the Company’s Europe operating segment. The impairment testing performed resulted in an impairment charge of $2,452,000 (2022: n/a) against the CGU. Health House Australia CGU The Group’s Health House International Australia CGU, acquired during the period, represents its operations which distributes pharmaceutical products to Australia. This CGU is attributed to the Company’s Asia Pacific operating segment. The impairment testing performed at 31 December 2023 supported the recoverable amount of the CGU and did not result in any impairment charge during the period (2022: $n/a). Significant Judgements and Estimates The following key assumptions were used in the impairment testing model for each of the CGU’s: Forecast period and short-term revenue growth rate (a) Terminal / long term revenue growth rate (b) Pre-tax discount rate (c) Mernova Health House Australia 5 years 3% terminal rate 23% 5 years 3% terminal rate 19% Assumption (a) Forecast period and short-term revenue growth rate Approach used to determine values The forecast is based on a Board approved budget for FY23 and growth estimates for four periods beyond the budget period. Specific factors considered in the forecasts used in the impairment model:   The Mernova CGU is becoming well-established, with revenues continuously increasing as a result of production efficiencies, improvements in quality and yields, an expanded product range including premium products, penetration of new provinces and increased market share through a growing customer base. The CGU has an average forecast growth of 8% across the forecast period. This growth trend is also supported by revenues increasing by 61% in FY2023 (2022: 21%), highlighting the growth phase that the Company has experienced as it moved to full production. The Health House Australia CGU is an established business presenting performance-enhancing opportunities under new management. Given the changing competitive environment, particularly in Australia, and the business’s evolving operations, management has judged that it would be prudent to apply a growth rate of 7% to the forecast cash flows of the CGU. (b) Terminal / long term growth rate This is the weighted average growth rate used to extrapolate cash flows beyond the forecast period. The long-term growth rate has been set at 3% to reflect the uncertainty in the forecast future cash flows. 66 | P a g e Notes to the Consolidated Financial Statements NOTE 14 INTANGIBLE ASSETS (CONTINUED) Melodiol Global Health Limited – Annual Report 2023 (c) Pre-tax discount rate As at December 2023, the pre-tax discount rate for Mernova is 19%, based on the progress and de-risking of the business that has occurred in FY23. As noted above, this is supported by the significant increase in FY23 revenue and the plans in place to deliver continued growth. The discount rate as at 31 December 2023 still includes a risk premium based on management’s assessment of risks specific to the CGU, including changes in the industry environment as it matures, the still early-stage nature of Mernova’s business and general execution risks inherent in the forecasts. The Health House Australia CGU is an established, EBITDA-positive business presenting performance-enhancing opportunities under new management. Given the changing competitive environment, particularly in Australia, and the business’s evolving operations, management has judged that it would be prudent to apply a pre-tax discount rate of 23% to the forecast cash flows of the CGU. For the Swiss Operations CGU, the directors and management have considered and assessed reasonably possible changes for other key assumptions and have not identified any instances that could cause a significant impact to the impairment model. For the Mernova and Health House UK/Europe CGUs, any change of 5% to the key assumptions would not cause any additional impairment. This sensitivity assumes the specific assumption moves in isolation, whilst all other assumptions are held constant. In reality, a change in this assumption may accompany a change in another assumption. For HHI, it would take a discount rate of 26% to affect the carrying value of Goodwill. NOTE 15 OTHER ASSETS Current Assets Loan to Health House International Limitedi Non-current Assets Other assets 2023 $000’s 2022 $000’s - 2,146 274 274 286 286 I The Company entered into a facility agreement with Health House International Limited (“HHI”) during the prior period. Under the terms of the agreement and a subsequent amendment entered into in November 2022, the key terms are: Interest of 12% is payable in arrears on the principal outstanding; The facility limit is $3,400,000; and    Restricts the right of HHI to dispose of its assets or allow an encumbrance over any such assets without the authorisation of Melodiol Global Health. After the Company acquired HHI the loan is eliminated on consolidation and therefore there is no balance at the year end. NOTE 16 TRADE AND OTHER PAYABLES Trade payables Payables to related parties (note 23) Accrued expenses Accrued expenses for related parties (note 23) Income in Advance Other payables 2023 $000’s 8,964 193 3,448 55 60 254 12,974 2022 $000’s 4,036 113 2,971 - 26 1,496 8,642 67 | P a g e Notes to the Consolidated Financial Statements Melodiol Global Health Limited – Annual Report 2023 NOTE 17 PROVISIONS Employee provisions 2023 $000’s 2022 $000’s 482 375 Amounts not expected to be settled within the next 12 months The current provision for employee benefits includes all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount is presented as current, since the Group does not have an unconditional right to defer settlement. NOTE 18 BORROWINGS Secured borrowings Deed of trust loansi Other loansii Total secured borrowings Unsecured borrowings Convertible notesiii Related party loansiv Other loans Total unsecured borrowings Total borrowings Unused facilities i. Secured deed of trust loans 2023 $000’s 2022 $000’s 2,689 5,510 8,199 1 103 1,110 1,214 9,413 111 2,393 2,952 5,345 851 475 - 1,326 6,671 2,780 The company entered into a loan facility via a Loan Trust Deed between Melodiol Global Health Limited and Briant Nominees Pty Ltd, denominated in Australian dollars. The facility operates with the following key terms:  Maximum drawdown of $5,000,000 Australian dollars;  Annualised interest rate of 30%;  Original Repayment date of 21 May 2023;  Capacity based on mutual agreement to rollover loans into convertible notes if required conditions are met by 31 January 2023, 24 March 2023, negotiations are ongoing regarding an extension of the loan or potential conversion to convertible loan note; and Secured by a fixed charge against Mernova Medicinal Inc’s (‘MMI’) Cannabis Cultivation Facility located in Nova Scotia, Canada.  During the period $500,000 was drawn down against the facility and $734,792 of accumulated interest has been recognised. The conditions of the loans enable the loan to be rolled over by subscription into convertible notes with each note having a face value of A$100,000. The conditions precedent for rollover of loans into convertible notes are: the Company has made an offer to the lender, inviting them to subscribe for Convertible Notes; and the Company has obtained shareholder approval for the issue of the Convertible Notes to lenders or their nominees; and the lender has subscribed for convertible notes in accordance with the conditions as set out in the loan deed.    68 | P a g e Notes to the Consolidated Financial Statements NOTE 18 BORROWINGS (CONTINUED) Melodiol Global Health Limited – Annual Report 2023 Attached to each Convertible Note (face value of A$100,000) are 1,000,000 options with an exercise price of $0.08 and an expiry date 4 years from date of issue. The notes are convertible into ordinary shares of the Company at a conversion price of $0.05 per share. In addition, on conversion, the note holder is entitled to one option for every 4 ordinary shares acquired on conversion. The exercise price of the options is $0.08 with options being able to be exercised on or before the elapse of four years after the first issue within the class of options. The security charge is over MMI’s facilities which is a purpose-built facility to Health Canada GPP standard, scalable to 200,000 sq. ft. It contains 10 grow rooms with potential to produce 4,000kg annually. ii. Secured other loans On 27 January 2023, the group restructured the La Plata loan and announced that it had agreed with La Plata Capital LLC ('La Plata’ – the “Lender”), an existing lender to SSH, to repay US$717,500 under the Loan Trust Deed (“LTD”) in cash by 31 January 2023, and swap US$1,282,500 for secured notes valued at US$1,282,500 (“the First Loan”). A cash payment of US$250,000 (of the US$717,500) was made to La Plata on 27 February 2023. During the year, The group issued 18,981,000 shares at AU$0.01 on 26 June 2023 and 185,675,804 shares at AU$0.00576 on 24 October 2023 to settle Jan-Sep interest payable to the Lender. Pursuant to a Continuing Guaranty dated on or about January 11, 2023, the Guarantors (Jodi Scott and Michael Hoyt) have guaranteed repayment to Lender of US$1,750,000 in total of the amounts due under the Restated converting Loan Deed (“CLD”) (US$1,282,500 of the First Loan) and US$467,500 due under the LTD. On 2 March 2023, the Group issued an additional US$500,000 (“Second Loan”) of Melodiol Convertible Notes pursuant to the Amended and Restated CLD, in exchange for a 31.25% interest in Lender’s participation commercial loan to Abby&Finn, LLC (“A&F”). The combination of the restructure Laplata loan of US$1,282,500 (“First loan) and US$500,000 Convertible notes (“Second loan”) have formed the restated CLD. On 14 June 2023, the Company announced that La Plata had agreed to extend the maturity date of US$1,782,500 of its existing secured notes to June 2024. In consideration for the maturity date extensions, the Group agreed to purchase the Lender’s remaining 68.75% participation interest in the commercial loan to A&F, to obtain 100% of the participation interests in the A&F loan, by increasing the amount owed under the Restated CLD by US$900,000 (“Third loan”). At the year-end, an assessment was made on the recoverability of the A&F loan which stood at US$2,762,000, it was concluded that the loan was likely to be irrecoverable and therefore provided against, see note 10. The Second and Third Loan under the Restated CLD facility operates with the following key terms:  Maximum drawdown of US$1,500,000;  Undrawn facility of US$100,000.  Annualised interest rate of 13%;  Repayment date: June 2024.  Secured by the Second Land Security Instruments and the Second Security Agreement. See note 31 for further details of the assets pledged as security. 69 | P a g e Notes to the Consolidated Financial Statements NOTE 18 BORROWINGS (CONTINUED) iii. Unsecured convertible notes – Obsidian Global GP LLC Melodiol Global Health Limited – Annual Report 2023 The company entered into a convertible note loan facility with Obsidian Global GP LLC (“Obsidian”) on 27 October 2022, denominated in Unites States dollars. The maximum drawdown under the facility was $5,000,000 in three tranches as follows:    Tranche 1 $1,750,000 5 business days after execution of the agreement; Tranche 2 $1,750,000 5 business days after shareholder approval; and Tranche 3 $1,500,000 on a date to be agreed between the Company and investor. Since 31 December 2022, $500,000 was drawn in relation to Tranche 2. Tranche 2 was reduced from $1,750,000 to $500,000 on mutual agreement between the Company and Obsidian. Tranche 3 was not utilised and no longer available after the company entered into the convertible notes’ agreement with SBC Global Investment Fund. As at 31 December 2023, tranche 1 and tranche 2 have been exercised and settled by shares. The fair value of the liability components recorded was Nil (2022: $851,000). i. Unsecured convertible notes – SBC Global Investment Fund The company entered into a convertible note loan facility with SBC Global Investment Fund (“SBC”) on 5 March 2023 denominated in Australian dollars. The facility includes two tranches as follows: Funding (Purchase Price) Number of convertible securities Purchase date Maturity date Period (Months) Face value Total face value Tranche 1 $1,700,000 1,700,000 15/03/2023 15/12/2023 9 $1.1111 $1,888,870 Tranche 2 $800,000 800,000 2/06/2023 2/03/2024 9 $1.1111 $888,880 As at 31 December 2023, the convertible notes comprise of:   Convertible note facilities issued in Tranche 1 of 349,987 notes at an issue price of US$0.011 per note and Convertible note facilities issued in Tranche 2 of 169,994 notes at an issue price of US$0.009 per note. On issue, the notes are convertible at the lower of $0.04 or 150% of the average of the 5 daily VWAPs during the 5 Actual Trading Days prior to the Purchase Date, rounded down to the nearest A$0.001. Notwithstanding the price above notes are subject to a minimum conversion price of A$0.008 per share. Redemption is subject to certain conditions being met. The Group notes that the maturity date of the facility has passed and is undertaking ongoing discussions with SBC to address the situation. Amortisation payment amount    Tranche 1: Amortisation amount is $250,000, commencing 60 days after the purchase date and continuing until the maturity date. Tranche 2: Amortisation amount is $125,000, commencing 60 days after the purchase date and continuing until the maturity date. First amortisation Payment under the First Convertible Securities Agreement was due on 12 May 2023. The Parties also agree: (i) to accelerate two Amortisation Payments, with those payments being due and payable no later than 24 May 2023; (ii) that the first Amortisation Payment and two accelerated Amortisation Payments, together with interest due and payable at the time of these payments, be settled by the issue of Amortisation Shares to the Investor at an Amortisation Price of $0.009 each, being a total of 90,000,000 Shares which must be issued no later than 24 May 2023; The Company agrees to use reasonable endeavours to settle the Amortisation Payment due in June 2023 by the issue of Amortisation Shares.  Amortisation price is the lower of 93% of the lowest 1-day VWAP during the 10 Actual Trading Days immediately prior to the relevant redemption or conversion, rounded down to the nearest A$0.001, or the conversion price. 70 | P a g e Melodiol Global Health Limited – Annual Report 2023 Notes to the Consolidated Financial Statements NOTE 18 BORROWINGS (CONTINUED) Committed options.  Tranche 1: As part of the convertible note facilities, a maximum of 50,000,000 of quoted options will be issued at an exercise price of $0.08 with an expiration date of 31 January 2027, a maximum of 20,00,000 of unquoted options will be issued at an exercise price of $0.03 with an expiry date of 31 January 2027 and a commitment options payment of $194,580 due for payment no later than 26 May 2023. As at 31 December 2023, no options have been issued. The net proceeds received from the issue of the convertible notes was $1,700,000 for tranche 1 and $400,000 for tranche 2. These proceeds have been split between a financial liability element and an equity component. The financial liability component comprises the fair value of the convertible note together with the embedded derivative financial liability relating to the conversion feature and the committed options given. The equity component represents the embedded derivative relating to the committed options and has been credited to the options reserve. The net proceeds on issue have been classified as follows: Equity component – broker options Liability component – convertible notes Liability component – embedded derivative Tranche 1 Tranche 2 $ $ 156,854 1,196,335 346,831 61,773 336,627 1,600 Net proceeds on inception 1,700,020 400,000 Liability component – convertible notes Transaction costs capitalised Net borrowings recorded on inception 1,196,335 (214,906) 981,429 336,627 (56,537) 280,090 At 31 December 2023, the fair value of the liability components recorded was   Tranche 1 $388,870. Tranche 2 $177,718. The derivative instruments of the convertible notes have been valued using Black-Scholes model (inclusive of risk-free rate, simulation price, and Dividend yield). On 26 February 2024, the investor forbear from taking any enforcement actions under the Convertible Security agreements in respect of known present default until 4 March 2024, subject to a payment of $40,000 in reduction of the amount outstanding under the First Security Agreement no later than 29 February 2024 and $30,000 in reduction of the amount outstanding under the First Security Agreement no later than 8 March 2024. ii. Unsecured related party loans On 22 December 2022, William Lay advanced $75,000 Canadian dollars and $12,391 United States dollars to the Company, resulting a liability of AU$100,000. On 10 January 2023, the Group settled a AU$100,000 loan owing to William Lay through the issuance of 2,500,000 shares at AU$0.04 price. On 11 January 2023, William Lay advanced another AU$115,390 for operating expenses, leaving a liability of AU$102,517 as at the end of December 2023, which is reflected in note 23. The loan has free interest rate and no fixed term of repayment. In June 2021, Sierra Sage Herbs LLC. (‘SSH’) and the controlling shareholder Jodi Scott entered into a revolving line of credit denominated in Unites States dollars. Between 15 June 2022 and 30 September 2022, a total of $361,000 United States dollars were drawn down against the facility. After which a total of $120,000 Unites States dollars has been repaid in four equal instalments and the outstanding balance of US$273,481 was settled by 44,972,436 shares on 17 November 2023. 71 | P a g e Notes to the Consolidated Financial Statements Melodiol Global Health Limited – Annual Report 2023 NOTE 18 BORROWINGS (CONTINUED) iii. Unsecured other loans Unsecured other loans comprise of  Nandil loan of $225,000 with an interest rate of 20% with the repayment date of 15 Dec 2023. On 27 Nov 2023, the company settled a $100,000 of the loan amount by issuing of 34,435,262 shares. If the loan repayment is not made by due date, interest will accrue at 8% per quarter until both principal and interest amounts are repaid. In addition, the company will also pay the lender a fee of $100,000 for making the facility available to the company, with payment of this fee to occur upon expiry of the facility. Corporate Mining loan, amounting to $366,000 with the repayment date of 21 February 2024 and the company will pay the Lender interest in the amount of $183,000 on the earlier of: (i) the Repayment Date; or (ii) the date the Lender demands repayment of the Total Amount Owing.   HHI loan balance of $683,000 in relation to o 150,00 Euro between HHP Malta and Gees Pharma Limited with an interest rate of 5%. The purpose of the loan to provide a performance bond to the government of Malta. Repayment date is 30 June 2024. o 73,440 GBP between HHP UK and Oakways with an interest rate of 5%. Repayment date is 30 June 2024. o AU$50,035 between HHI Australia and AttVest with an interest rate of 5.3% and the repayment date of 31 May 2024. iv. Fair value The borrowings of the Group are of a short-term nature for which there is not a material difference between their fair value and carrying amount. v. Risk Detail of the group’s exposure to risk arising from borrowings are set out in note 21. 72 | P a g e Notes to the Consolidated Financial Statements Melodiol Global Health Limited – Annual Report 2023 NOTE 19 ISSUED CAPITAL (a) Issued and fully paid Ordinary shares (b) Movement in issued shares – 2023 At 1 January 2023 Issuance of shares pursuant to a placement Issue of Shares as part consideration for acquisitions Issue of shares to employees & consultants Exercise of options Conversion of employee performance rights Conversion of convertible notes Issue of shares to settle loan Issue of shares for services Issue of shares to Directors Issue of share capital for extinguish of liability Less: Equity raising costs At 31 December 2023 Movement in issued shares – 2022 At 1 January 2022 Issuance of shares pursuant to a Placement Issue of Shares as consideration for acquisitions Exercise of options Conversion of Employee Performance Rights Issue of shares for services Shares issued to Directors Issue of shares as collateral shares to Obsidian Less: Equity raising costs At 31 December 2022 2023 2022 No. 4,728,824,027 $000’s 150,470 No. 1,835,962,135 $000’s 128,382 Number 1,835,962,135 742,739,192 78,961,436 19,000,000 225 5,533,000 567,041,445 680,512,531 648,575,710 55,757,192 94,741,161 - 4,728,824,027 Number 1,226,370,447 199,351,467 357,614,203 405,430 5,550,000 1,670,588 - 45,000,000 - 1,835,962,135 $000’s 128,382 5,286 1,342 190 - 625 5,693 4,316 5,606 628 1,245 (2,843) 150,470 $000’s 109,951 9,942 12,874 20 - 504 120 (5,029) 128,382 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. 73 | P a g e Notes to the Consolidated Financial Statements NOTE 20 RESERVES Share-based payments Foreign currency translation reserve Movement reconciliation Share-based payments reserve Balance at the beginning of the year Equity settled share-based payment transactions (Note 23) Embedded derivative – convertible notes options Issue of options for services Issue of options for acquisitions Issue of options for loan extensions Expired options Balance at the end of the year Foreign currency translation reserve Balance at the beginning of the year Effect of translation of foreign currency operations to group presentation Balance at the end of the year Melodiol Global Health Limited – Annual Report 2023 2023 $000’s 2022 $000’s 11,397 3,935 15,332 17,602 884 7 2,575 136 2 (9,809) 11,397 2,908 1,027 3,935 17,602 2,908 20,510 11,248 130 49 7,182 - - (1,007) 17,602 1,383 1,525 2,908 Share-based payment reserve The share-based payment reserve is used to record the value of share-based payments provided to outside parties, and share-based remuneration provided to employees and directors. The issue of the exchangeable shares are considered a share-based payment and are valued using the Black-Scholes model. Foreign currency translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the reporting entity. 74 | P a g e Notes to the Consolidated Financial Statements NOTE 21 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Melodiol Global Health Limited – Annual Report 2023 Financial risk management objectives The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk. Risk management is carried out by senior finance executives (‘Finance’) under policies approved by the Board of Directors (‘the Board’). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group’s operating units. Finance reports to the Board on a monthly basis. Market risk Foreign currency risk The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The carrying amount of the Group’s foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: Cash and cash equivalents Trade and other receivables Trade and other payables Cash and cash equivalents Trade and other receivables Trade and other payables GBP €000’s 115 467 (712) EUR £000’s 57 - - GBP €000’s EUR £000’s - - - - - - 2023 CHF Fr.000’s 67 271 (178) 2022 CHF Fr.000’s 203 154 (114) CAD $000’s 104 706 (2,724) USD $000’s 31 95 (4,106) CAD $000’s 79 729 (871) USD $000’s 238 973 (3,392) The Group’s profit and loss has limited exposure to movements in foreign currencies as the Company and its subsidiaries substantially operated in their respective functional currencies. The foreign exchange gain recognised in financing costs in the profit and loss for the year ended 31 December 2023 was $36,000 (2022: loss of $15,000). The predominant risk from fluctuations in foreign currencies is changes to net assets and other comprehensive income resulting from translation of subsidiary operations whose functional currency is different from the functional currency of the Company. The Group had net assets denominated in foreign currencies of $5,084,000 as at 31 December 2023 (2022: $25,247,000). Based on this exposure, had the Australian dollar weakened by 5%/strengthened by 5% (2022: weakened by 5%/strengthened by 5%) against these foreign currencies with all other variables held constant, the Group’s other comprehensive income for the year would have been $254,000 lower/$254,000 higher (2022: $1,262,000 lower/$1,262,000 higher) and equity would have been $254,000 lower/$254,000 higher (2022: $1,262,000 lower/$1,262,000 higher). The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable possible fluctuations taking into consideration movements over the last 6 months each year and the spot rate at each reporting date. Price risk The Group is not exposed to any significant price risk. 75 | P a g e Notes to the Consolidated Financial Statements NOTE 21 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Melodiol Global Health Limited – Annual Report 2023 Interest rate risk The Group’s main interest rate risk arises from Short-term borrowings. Borrowings obtained at fixed rates expose the Group to fair value risk (no borrowings with a variable rate). The group’s risk to movements in interest rates is set out in the following table: Non-interest bearing borrowings Fixed interest borrowings Total borrowings 2023 $000’s 2022 $000’s 103 9,310 9,413 100 6,571 6,671 The group is not subject to interest rate risk on current borrowings. Had the group required refinancing of its existing debt facilities, an increase in the weighted average interest rate applicable to borrowings of 1% per annum would have resulted in an additional $94,000 financing costs during the period. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The Group obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does not hold any collateral. The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade and other receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the Group based on recent sales experience, historical collection rates and forward-looking information that is available. Generally, trade receivables and other receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor or partner to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. Liquidity Risk Liquidity risk arises from the possibility that Melodiol might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The Group seeks to manage its liquidity risk through the following mechanisms:  Maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows Comparing the maturity profile of financial liabilities with the realisation profile of financial assets   Matching the maturity profiles of financial assets and liabilities  Maintaining the support of lenders  Negotiating with stakeholders to defer payments and/or settle payments in equity  Maintaining a reputable credit profile  Managing credit risk related to financial assets 76 | P a g e Notes to the Consolidated Financial Statements NOTE 21 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Melodiol Global Health Limited – Annual Report 2023 Remaining contractual maturities The following tables detail the Group’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Weighted average interest rate % 1 year or less $000’s Between 1 and 2 years $000’s Between 2 and 5 years $000’s Remaining contractual maturities $000’s Consolidated – 2023 Non-derivatives Non-interest bearing Trade and other payables Borrowings Interest-bearing – fixed rate Borrowings Maturity Analysis 1 – 3 months 4 – 6 months 1 -2 years Total non-derivatives - - 12,974 103 13,077 27.05 9,310 16,774 5,510 103 22,387 - - - - - - - - - - - - - - - - 12,974 103 13,077 9,310 16,774 5,510 103 22,387 Weighted average interest rate % 1 year or less $000’s Between 1 and 2 years $000’s Between 2 and 5 years $000’s Remaining contractual maturities $000’s Consolidated – 2022 Non-derivatives Non-interest bearing Trade and other payables Borrowings Interest-bearing – fixed rate Borrowings Maturity Analysis 1 – 3 months 4 – 6 months 1 -2 years Total non-derivatives - - 8,642 100 8,742 - - - 18.70 5,720 851 11,694 2,768 - 14,462 - - 851 851 - - - - - - - - 8,642 100 8,742 6,571 11,694 2,768 851 15,313 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. 77 | P a g e Notes to the Consolidated Financial Statements NOTE 22 CAPITAL RISK MANAGEMENT Melodiol Global Health Limited – Annual Report 2023 For the purpose of the Company’s capital includes issued capital and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Company’s capital management is to maximise shareholder value. The Company’s objective when managing capital is to safeguard the ability to continue as a going concern so that it can provide returns to shareholders and benefits to other stakeholders and to maintain an optimal capital structure. Management effectively manages the company’s capital by regularly assessing the company’s financial risks and its capital structure in response to changes in these risks and the market. In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. NOTE 23 RELATED PARTY DISCLOSURE (a) Key Management Personnel Compensation Details relating to key management personnel, including remuneration paid, are below. EverBlu Capital Pty Ltd(i) – a company of which Adam Blumenthal is the Chairman Capital raising fees payable in cash Capital raising fees payable in shares Legal fees Corporate advisory payable in shares Monthly retainer IRESS service fees Out of scope fees Balance owing to EverBlu Capital Pty Ltd at 31 December Balance owing to Melodiol at 31 December Everblu Capital Corporate Pty Ltd(i) – a company of which Adam Blumenthal is the Chairman Capital raising fees Capital raising fees payable in shares Monthly retainer Debt restructuring fees Business development and investor relations Facilitation fees Out of scope fees, including restructuring and corporate advice Balance owing to EverBlu Capital Corporate Pty Ltd at 31 December Balance owing to Melodiol at 31 December The above fees are inclusive of GST. 2023 $ 2022 $ - - - - - - - - - - - - - - - - - - - - 308,996 829,258 - 70,000 495,000 3,399 1,706,653 899,258 - 149,838 3,774,815 13,095 - - - - 3,937,748 3,774,815 - (i) Mr Blumenthal resigned as a director on 10 October 2022. Any transactions past this date, including through companies that he controls, have not been disclosed above as they ceased being a related party. 78 | P a g e Notes to the Consolidated Financial Statements NOTE 23 RELATED PARTY DISCLOSURE (CONTINUED) Suburban Holdings Pty Ltd – related partyi Amount drawn down by Melodiol Amount repaid Balance owing at 31 December International Water and Energy Savers Ltd – a company controlled by Boaz Wachtel Director’s Fees for Boaz Wachtel Bonus for Boaz Wachtel payable in shares Balance owing from Melodiol at 31 December HBAM Holdings Inc – a company controlled by Bruce Linton Director’s Fees for Bruce Linton Balance owing from Melodiol at 31 December BQ Advisory – a company controlled by Ben Quirin Director’s Fees for Ben Quirin Director remuneration options Balance owing from Melodiol at 31 December Jodi Scott Loan repayments Interest on loan Lease payments Extinguished debt Balance owing from Melodiol at 31 December William Lay Consulting fee Director remuneration Director incentive Loan to ME1 Loan to SSH Loan to Mernova Balance owing from Melodiol at 31 December Melodiol Global Health Limited – Annual Report 2023 2023 $ 2022 $ - - - 1,000,001 - - 80,000 - 53,333 82,720 46,667 18,413 2,802 53,333 363,863 42,691 71,343 (453,980) - 222,538 75,028 408,333 (102,517) - - 102,517 80,000 40,000 40,000 93,504 23,346 18,413 - - 136,861 7,136 17,306 - 386,680 - - - - 18,327 81,673 100,000 (i) Mr Blumenthal resigned as a director on 10 October 2022. Any transactions past this date, including through companies that he controls, have not been disclosed above as they ceased being a related party. 79 | P a g e Notes to the Consolidated Financial Statements NOTE 23 RELATED PARTY DISCLOSURE (CONTINUED) (b) Transactions with related parties – non-cash Melodiol Global Health Limited – Annual Report 2023 Other Share and Option Transactions with Related Parties 2023 2022 Shares Options Performance Rights Shares Options EverBlu Capital Pty Ltd(i) Broker fees Issue of Shares – Corporate Advisory Mandateii Share issue cost in February-22 Placement Subtotal EverBlu Capital Corporate Pty Ltd (i) Share issue cost in August-22 Placement Subtotal International Water and Energy Savings Director bonus – Boaz Watchel Subtotal James Ellingford Director bonus – James Ellingford(ii) Subtotal HBAM Holding Inc Equity incentive to Director’s remuneration – Bruce Lintoniii Subtotal Quitin Alleaume Trust Director’s fee – Ben Quirin Subtotal Noble House Consulting Director’s remuneration – Will Lay Director incentive Consulting fee Subtotal Jodi Scott Loan and loan interest repayment Subtotal - - - - - - - - - - - - - - - - - - - - - - 2,732,213 2,732,213 2,732,213 2,732,213 2,000,000 2,000,000 10,000,000 25,000,000 7,500,000 50,000,000 25,000,000 10,000,000 62,500,000 44,972,436 44,972,436 - 2,000,000 - 2,000,000 - - 57,971,032 57,971,032 - 175,000,000 - 175,000,000 2,000,000 2,000,000 4,000,000 4,000,000 - - - - - - 10,000,000 10,000,000 (i) (ii) Mr Blumenthal resigned as a director on 10 October 2022. Any transactions past this date, including through companies that he controls, have not been disclosed above as they ceased being a related party. Mr Ellingford resigned as a director on 30 November 2022. Any transactions past this date, including through companies that he controls, have not been disclosed above as they ceased being a related party. Terms and conditions All transactions with related parties were reviewed by the Board and were made on normal commercial terms and conditions and at market rates. (c) Key Management Personnel Compensation Details relating to key management personnel, including remuneration paid, are below. Short-term benefits Termination payments Post-employment benefits Share-based payments 2023 $ 2022 $ 1,586,628 - 34,111 906,458 2,527,197 1,380,632 144,000 50,241 136,679 1,711,553 Other than the above, there were no other transactions with KMP during the year ended 31 December 2022. 80 | P a g e Notes to the Consolidated Financial Statements NOTE 24 SHARE BASED PAYMENTS Recognised share-based payment transactions (a) Unlisted options issued to employees and consultants Performance rights issued to employees and consultants Shares issued to employee and consultants Melodiol Global Health Limited – Annual Report 2023 2023 $ 2022 $ 18,827 425,896 484,319 929,042 48,298 81,815 - 130,113 Share based payments are valued on the basis set out in note 1 (q). For share-based payments issued during a financial year the parameters used in the valuations are set out in the share-based payments note to the financial statements in that year. (b) Movements in unlisted options during the year Grant Date Issue Date Date of Expiry Exercise Price Balance at the start of the year Issued during the year Exercised during the year 12-02-2020 12-02-2020 25-06-2020 02-06-2020 02-06-2020 02-06-2020 23-12-2020 23-12-2020 11-01-2021 11-01-2021 11-01-2021 11-01-2021 11-01-2021 14-07-2021 31-08-2021 31-08-2021 06-09-2021 06-09-2021 25-10-2021 12-12-2022 27-01-2023 10-06-2023 16-05-2023 16-05-2023 16-05-2023 16-05-2023 16-05-2023 30-06-2023 07-07-2023 30-06-2023 16-05-2023 10-11-2023 16-11-2023 12-02-2020 12-02-2020 25-06-2020 02-06-2020 02-06-2020 02-06-2020 23-12-2020 23-12-2020 11-01-2021 11-01-2021 11-01-2021 11-01-2021 11-01-2021 14-07-2021 31-08-2021 31-08-2021 06-09-2021 06-09-2021 25-10-2021 12-12-2022 27-01-2023 10-06-2023 16-05-2023 16-05-2023 16-05-2023 16-05-2023 16-05-2023 30-06-2023 07-07-2023 30-06-2023 16-05-2023 10-11-2023 16-11-2023 12-02-2023 12-02-2023 25-06-2023 02-06-2023 02-06-2023 02-06-2023 23-12-2023 23-12-2025 11-01-2023 11-01-2023 11-01-2023 11-01-2023 11-01-2023 14-07-2024 01-08-2024 01-08-2024 06-09-2024 06-09-2024 25-10-2024 12-06-2024 17-01-2024 17-01-2024 08-06-2024 10-06-2024 10-06-2024 10-06-2024 10-06-2024 24-08-2024 24-08-2024 10-10-2024 28-06-2025 30-11-2024 16-11-2027 $0.35 $0.40 $0.1389 $0.17 $0.25 $0.20 $0.20 $0.039 $0.24 $0.27 $0.30 $0.40 $0.40 $0.38 $0.15 $0.18 $0.18 $0.25 $0.1375 $0.14 $0.09 $0.02 $0.38 $0.4 $1.34 $2.00 $2.65 $0.03 $0.03 $0.04 $0.02 $0.04 $0.02 2,128,387 6,847,725 5,752,688 27,764,706 4,000,000 8,000,000 833,333 30,000,000 8,000,000 8,000,000 8,000,000 2,500,000 300,000 12,000,000 12,000,000 12,000,000 10,000,000 10,000,000 1,000,000 53,358,712 - - - - - - - - - - - - - - - - - - - - 62,583,352 10,000,000 10,000,000 27,999,934 626,250 626,250 626,250 626,250 132,859,360 126,219,254 2,000,000 1,648,263 3,000,000 10,654,042 222,485,551 389,469,205 Weighted average exercise price $0.18 $0.08 Expired/ Cancelled during the year (2,128,387) (6,847,725) (5,752,688) (27,764,706) (4,000,000) (8,000,000) - - (8,000,000) (8,000,000) (8,000,000) (2,500,000) (300,000) - - - - - - - - - - - - - - - - - - - - (81,293,506) Balance at the end of the year - - - - - - 833,333 30,000,000 - - - - - 12,000,000 12,000,000 12,000,000 10,000,000 10,000,000 1,000,000 115,942,064 10,000,000 10,000,000 27,999,934 626,250 626,250 626,250 626,250 132,859,360 126,219,254 2,000,000 1,648,263 3,000,000 10,654,042 530,661,250 $0.236 $0.103 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 81 | P a g e Notes to the Consolidated Financial Statements (d) Movements of listed options during the year Melodiol Global Health Limited – Annual Report 2023 Options Issue Date Date of Expiry Issue Price Exercise Price Balance at start of the year Issued during the year Exercised during the year ME10 ME10A ME10D ME10E 02-11-2021 02-11-2024 $0.00 $0.25 422,941,788 356,890,378 22-01-2021 22-01-2023 $0.00 $0.05 63,954,018 2023 31-01-2027 $0.00 $0.08 13-11-2023 13-11-2028 $0.00 $0.01 - - 1,330,481,743 184,867,992 486,895,806 1,872,240,113 - - - - - Expired/ Cancelled during the year Balance at end of the year (225) 779,831,941 (63,954,081) - - - 1,330,481,743 184,867,992 (63,954,243) 2,295,181,676 (e) Summary of performance rights granted and vested during the year Balance at the start of the year Granted during the year Vested during the year Cancelled/Lapsed during the year Balance at the end of the year 10,549,000 106,500,000 (5,533,000) (5,016,000) 106,500,000 NOTE 25 COMMITMENTS AND CONTINGENCIES There are no contractual commitments or contingent liabilities at 31 December 2023 (2022: Nil). 82 | P a g e Notes to the Consolidated Financial Statements NOTE 26 AUDITOR’S REMUNERATION Melodiol Global Health Limited – Annual Report 2023 During the financial year the following fees were paid or payable for services provided by Crowe Audit Australia and BDO Audit Pty Ltd, the auditor of the company and unrelated firms: Auditors of the Group – Crowe Audit Services Audit of the Group and controlled entities Total services provided by Crowe Auditors of the Group – BDO Audit Services Audit and review of annual and half-year of the Group and controlled entities Other services – Independent Expert Report – Income tax return and GST audit Total services provided by BDO Other firms Audit and reviews of the financial statements – MNP Audit and reviews of the financial statements – PwC Other services – Independent Expert Report – Income tax return and GST audit Total services provided by other firms 2023 $ 2022 $ 340,000 340,000 - - 182,970 520,220 249,992 22,967 - - 455,929 520,220 65,603 34,138 118,500 102,770 66,349 80,043 517,700 40,459 246,133 779,429 1,042,062 1,299,649 83 | P a g e Notes to the Consolidated Financial Statements NOTE 27 INVESTMENT IN CONTROLLED ENTITIES Company Name Principal Activities Melodiol Global Health Limited – Annual Report 2023 Country of Incorporation Ownership interest 2023 2022 Creso Pharma Switzerland GmbH Creso Canada Limited Creso Canada Corporate Limited Mernova Medicinal Inc. 3321739 Nova Scotia Limited Kunna Canada Limited Kunna S.A.S Halucenex Life Sciences Inc. Creso Impactive Limited Sierra Sage Herb LLC Creso Pharma US Inc. 4340965 Nova Scotia Limited Health House International Limited Development of nutraceutical products Switzerland Corporate entity Corporate entity Cultivation of cannabis plants and sale of cannabis products Corporate Entity Corporate entity Holder of cannabis licenses in Colombia Clinical stage psychedelic drug development company CBD based life sciences company Manufacture and sale of packaged consumer products Corporate entity Corporate entity Distributor of medicinal cannabis and other controlled drugs Canada Canada Canada Canada Canada Colombia Canada Canada United States of America United States of America Canada Australia % 100 100 100 100 100 100 100 100 100 100 100 100 100 % 100 100 100 100 100 100 100 100 100 100 100 100 - 84 | P a g e Notes to the Consolidated Financial Statements NOTE 28 BUSINESS COMBINATIONS Melodiol Global Health Limited – Annual Report 2023 On 16 May 2023 the Group acquired 100% of the voting equity instruments of Health House International Limited, a company whose principal activity is the distribution of medicinal cannabis and other controlled drugs. Details of the provisional fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows: Cash and cash equivalents Inventories Receivables Property, plant and equipment Borrowings Payables Lease liabilities Total net liabilities Fair value of consideration paid Issue of ordinary shares Issue of options Pre-acquisition loan Total consideration Provisionally determined value of intangibles (including goodwill) Fair value provisionally determined $'000 621 282 2,185 415 (825) (3,608) (349) (1,279) 1,343 136 3,156 4,635 5,914 Acquisition costs of $212,000 were incurred as a result of the transaction and have been expensed in the Statement of Profit or Loss and Other Comprehensive Income. As at 31 December 2023, the Group has recorded a provisionally determined value of intangibles (including goodwill) or $5,914,000 in respect of the acquisition of Health House International Limited. Subsequent to the acquisition, the Group conducted impairment testing on the goodwill acquired. As a result, an impairment charge against goodwill of $2,452,000 (2022: $Nil) was recognised during the period, leaving a balance of $3,462,000 at the year end (2022: N/A) The goodwill recognised will not be deductible for tax purposes. 85 | P a g e Notes to the Consolidated Financial Statements NOTE 29 DISCONTINUED OPERATIONS Melodiol Global Health Limited – Annual Report 2023 During the year the Group discontinued the following operations, at the year-end these operations were in abandonment:  Halucenex Life Sciences Inc. and  4340965 Nova Scotia Limited  Creso Impactive Limited  Sierra Sage Herb LLC and  Creso Pharma US Inc. The results of the discontinued operations are presented below: Statement of Profit and Loss from Discontinued Operations Revenue from discontinued operations Revenue Other income Expenses Raw materials and consumables used Loss on fair value adjustments Administrative expenses Depreciation and amortisation expenses Employee benefit expenses Impairment of intangibles (note 14) Other expenses Loss on disposal of assets Finance costs (Loss) from discontinued operations before income tax Income tax expense (Loss) from discontinued operations 2023 $000’s 2022 $000’s 2,643 2,453 139 34 (2,878) - (2,562) (844) (3,638) (9,233) (388) - (138) (16,899) (27) (16,926) (1,537) - (1,823) (544) (2,093) (6,630) (513) - (266) (10,919) - (10,919) 86 | P a g e Notes to the Consolidated Financial Statements NOTE 29 DISCONTINUED OPERATIONS (CONTINUED) Statement of Cash Flows from Discontinued Operations Cash flows from discontinued operating activities Receipts from customers Payments to suppliers and employees Payments for research Interest received Interest paid Net cash used in discontinued operating activities Cash flows from discontinued investing activities Payments for plant and equipment Cash acquired on acquisition of Sierra Sage Herbs LLC Net cash from in discontinued investing activities Cash flows from discontinued financing activities Proceeds from borrowings from the Parent entity Net cash from discontinued financing activities Net cash (outflow)/inflow from discontinued activities Melodiol Global Health Limited – Annual Report 2023 2023 $000’s 2022 $000’s 4,559 (9,377) (124) 35 (57) (4,964) - - - 2,367 (5,166) (339) - (103) (3,241) (86) 165 79 4,636 4,636 3,398 3,398 (327) 236 87 | P a g e Notes to the Consolidated Financial Statements NOTE 30 PARENT ENTITY INFORMATION Set out below is the supplementary information about the parent entity. Statement of Financial Position and Statement of Profit or Loss and Other Comprehensive Income Melodiol Global Health Limited – Annual Report 2023 Total current assets Loans receivable and investments in controlled entities Total assets Total current liabilities Total liabilities Equity Contributed equity Reserves Accumulated losses Total equity 2023 $000’s 2022 $000’s 6,043 2,478 8,521 12,579 12,579 3,113 25,248 28,361 6,066 6,066 150,470 11,397 (165,925) (4,058) 128,382 17,602 (123,690) 22,294 Total comprehensive profit/(loss) (42,235) (31,257) Contingent liabilities The parent entity had no contingent liabilities as at 31 December 2023 and 31 December 2022. Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 31 December 2023 and 31 December 2022. Material accounting policies The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 1, except for the following:  Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.  Investments in associates are accounted for at cost, less any impairment, in the parent entity.  Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. 88 | P a g e Notes to the Consolidated Financial Statements NOTE 31 ASSETS PLEDGED AS SECURITY The carrying amount of assets pledged as security for borrowings are: Melodiol Global Health Limited – Annual Report 2023 Current Floating charge Cash and cash equivalents Trade and other receivables Inventories Total current assets pledged as security Non-current assets First mortgage Land and buildings Floating charge Plant and equipment Intangible assets Total non-current assets pledged as security Total assets pledged as security 2023 $000’s 2022 $000’s 31 95 5 131 8,070 - - - 8,070 8,201 352 1,436 2,548 4,336 8,288 16 2,353 2,369 10,657 14,993 The Group has loans which are subject to security pledges. The pledged assets include a fixed charge over the production facility owned by Mernova Medicinal Inc. and a floating charge over the assets of Sierra Sage Herbs LLC. Further information regarding the borrowings is presented at note 18. 89 | P a g e Notes to the Consolidated Financial Statements NOTE 32 EVENTS AFTER THE REPORTING DATE Melodiol Global Health Limited – Annual Report 2023 On 16 January 2024, the Company issued 167,315,175 shares at an issue price of $0.00128 per share for gross proceeds of $214,163. On 2 February 2024, the Company announced that the consolidation of the issued capital on the basis of 1 security for every 20 securities held had been completed. On 27 February 2024, the Company issued 91,126,313 shares at an issue price of $0.01019 per share for gross proceeds of $928,577. Other than the above, there has been no other matter or circumstance that has arisen since the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group. 90 | P a g e Directors’ Declaration In the directors' opinion: Melodiol Global Health Limited – Annual Report 2023  the financial statements and notes set out on pages 37 to 90 are in accordance with the Corporations Act 2001, including: - - - complying with the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and complying with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; and giving a true and fair view of the Group's financial position as at 31 December 2023 and of its performance for the financial year ended on that date; and  there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Mr Wiliam Lay CEO and Managing Director 28 March 2024 91 | P a g e Crowe Audit Australia ABN 13 969 921 386 Level 24, 1 O’Connell Street Sydney NSW 2000 Main +61 (02) 9262 2155 Fax +61 (02) 9262 2190 www.crowe.com.au Independent Auditor’s Report to the Members of Melodiol Global Health Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Melodiol Global Health Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2023, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group’s financial position as at 31 December 2023 and of its financial performance for the year then ended; and (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Some of the Crowe personnel involved in preparing this document may be members of a professional scheme approved under Professional Standards Legislation such that their occupational liability is limited under that Legislation. To the extent that applies, the following disclaimer applies to them. If you have any questions about the applicability of Professional Standards Legislation Crowe’s personnel involved in preparing this document, please speak to your Crowe adviser. Liability limited by a scheme approved under Professional Standards Legislation. The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership is external audit, conducted via the Crowe Australasia external audit division and Unison SMSF Audit. All other professional services offered by Findex Group Limited are conducted by a privately owned organisation and/or its subsidiaries. Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a separate and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe Global or any other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or partnership interest in Findex (Aust) Pty Ltd. Services are provided by Crowe Audit Australia, an affiliate of Findex (Aust) Pty Ltd. © 2024 Findex (Aust) Pty Ltd 92 Independent Auditor’s Report Melodiol Global Health Limited Material Uncertainty Related to Going Concern We draw attention to Note 1 in the financial report under the heading ‘Going Concern’ which outlines the directors’ assessment in relation to the appropriateness of the going concern basis for the preparation of the financial statements. The matters as set out in Note 1 indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern, and whether it will realise the assets and extinguish its liabilities in the normal course of business, at the amounts stated in the financial report. Our opinion is not modified in respect of this matter. 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. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Key Audit Matter Acquisition of HHI Group As disclosed in Note 28 of the financial report, on 16 May 2023 the Group acquired 100% of the voting equity instruments of Health House International Limited. Accounting for business combinations can be complex, requiring the Group to exercise judgement in how the structure and substance of the transaction is treated in accordance with AASB 3 Business Combinations, including the requirement to identify and determine the fair value of the assets and liabilities acquired. Due to the magnitude of the transaction and the significant judgement and complexity involved in accounting for the transaction, this acquisition is considered to be a key audit matter. How We Addressed the Key Audit Matter Our audit procedures included: • Reviewing the business sale agreement to understand the terms and conditions of the acquisition and evaluating management’s accounting thereof and application of the relevant accounting standards; • Comparing the assets and liabilities recognised on acquisition against the executed agreements and the historical financial information of the acquired entity; • Evaluating and challenging the assumptions made and methodology used in management’s determination of the fair value of assets and liabilities acquired, including goodwill, and the consideration paid; and • Considering the adequacy of the business combination disclosures and accounting policy in light of the requirements of the Australian Accounting Standards. Impairment of Intangibles At 31 December 2023, the carrying value of intangible assets was $3,595,000 as disclosed in Note 14. Under AASB 136 Impairment of Assets, indefinite life assets and assets with indicators of impairment, must be assessed for impairment on an annual basis. Impairment testing requires management to make significant judgements and estimates as part of the assumptions used. Our audit procedures included: • Obtaining management’s assessment of impairment indicators under AASB 136 for each cash generating unit and reviewing the resulting conclusion; • Assessing whether the impairment testing methodology used by the Group meets the requirements of the Australian Accounting Standards; © 2024 Findex (Aust) Pty Ltd www.crowe.com.au 93 Independent Auditor’s Report Melodiol Global Health Limited Key Audit Matter How We Addressed the Key Audit Matter Detailed disclosures are contained in Note 14 to the financial report, which includes the related accounting policies and the critical accounting judgements and estimates used to determine whether the carrying value of assets are recoverable. During the year, the Group has impaired a significant portion of intangibles across the Group, which given the significance of the intangible assets, the material amount of the impairment charge recorded and the estimates and judgements exercised when assessing impairment, gives rise to being treated as a key audit matter. Convertible Notes As disclosed in note 18 of the financial report, the Group has issued convertible notes during the year. The accounting for convertible notes was considered a key audit matter due to the complexity involved in assessing whether to account for the notes as equity, liability or a combination of both, as well as the subsequent measurement of the individual components, based on the terms and conditions of the agreements. Assessment of whether convertible notes are to be accounted for as equity, liabilities or a combination of both involves significant judgement and a high degree of estimation in determining the fair values of the respective components. • Assessing whether the cash generating units identified by management are appropriate and consistent with our understanding of the Group’s internal reporting and operations; • Evaluating the estimates and judgements, including but not limited to, cash flow forecasts, growth rates and discount rates, used in the Group’s valuation models by our internal valuation experts; • Checking the mathematical accuracy of the Group’s valuation models; and • Evaluating the adequacy of the impairment disclosures in the financial report, particularly those relating to intangible assets and to judgements and estimates. Our audit procedures included: • Obtaining an understanding of the terms and conditions of the convertible note agreements and assessing management’s accounting for the convertible note balances; • Agreeing balances to supporting documentation and obtaining confirmations from lenders, as appropriate; • Assessing the classification of each component as debt or equity under AASB 132 Financial Instruments: Presentation; • Considering the appropriateness of the valuation methodology used by management against the requirements of the relevant Australian Accounting Standards; • Assessing the reasonableness of the inputs to the valuation with assistance from our internal valuation experts; • Assessing the accounting and measurement of convertible notes subsequent to initial recognition; and • Reviewing the disclosures made within the financial report to ensure they are in accordance with the requirements of AASB 7 Financial Instruments – Disclosures. © 2024 Findex (Aust) Pty Ltd www.crowe.com.au 94 Independent Auditor’s Report Melodiol Global Health Limited Key Audit Matter How We Addressed the Key Audit Matter Related Party Transactions The Group has disclosed related party transactions as required by AASB 124 Related Party Transactions in Note 23 of the financial report. The Group has transactions with related parties during the year which includes the issue of shares and options to related parties. There is a risk that these transactions may not have been entered into on an arm’s length basis and that the completeness of related party transactions has not been adequately captured and disclosed in the financial statements and has therefore been considered a key audit matter. Other Information Our audit procedures included, amongst others: • Reviewing the documentation supporting related party transactions to gain an understanding of the transactions and assess whether they are at arm’s length, are recorded correctly and appropriately disclosed; and • Obtaining the confirmations of related party transactions from all key management personnel and review in line with disclosures to ensure completeness. The directors are responsible for the other information. The other information comprises the information included in the Group’s Annual Report for the year ended 31 December 2023 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Other Matter The financial report of the Group for the year ended 31 December 2022 was audited by another auditor who expressed an unmodified opinion on that financial report on 31 March 2023. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. © 2024 Findex (Aust) Pty Ltd www.crowe.com.au 95 Independent Auditor’s Report Melodiol Global Health Limited Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the group as a basis for forming an opinion on the group financial report. We are responsible for the direction, supervision and review of the audit work performed for the purposes of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter © 2024 Findex (Aust) Pty Ltd www.crowe.com.au 96 Independent Auditor’s Report Melodiol Global Health Limited should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the remuneration report included in pages 22 to 35 of the directors’ report of the directors’ report for the year ended 31 December 2023. In our opinion, the remuneration report of Melodiol Global Health Limited, for the year ended 31 December 2023, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Crowe Audit Australia John Haydon Senior Partner 28 March 2024 Sydney © 2024 Findex (Aust) Pty Ltd www.crowe.com.au 97 Shareholder Information The shareholder information set out below was applicable as at 1 March 2024. 1. QUOTATION Melodiol Global Health Limited – Annual Report 2023 Listed securities in Melodiol Global Health Limited are quoted on the Australian Securities Exchange under ASX codes ME1 (Fully Paid Ordinary Shares), ME1O (Listed Options), ME1OD (Listed Options) and ME1OE (Listed Options). 2. VOTING RIGHTS The voting rights attached to the Fully Paid Ordinary shares of the Company are: (a) (b) at a meeting of members or classes of members each member entitled to vote may vote in person or by proxy or by attorney; and on a show of hands every person present who is a member has one vote, and on a poll every person present in person or by proxy or attorney has one vote for each ordinary share held. There are no voting rights attached to any Options, Performance Rights, Performance Shares or Convertible Notes on issue. 3. ON MARKET BUY-BACK There is no on-market buy back in place. 4. RESTRICTED SECURITIES There are no restricted securities listed on the Company’s register as at 1 March 2024: 5. DISTRIBUTION OF SECURITY HOLDERS 5.1 Fully Paid Ordinary Shares Shares Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and above Total Holders 17,624 5,354 1,096 1,899 458 26,431 Units 5,389,677 13,053,493 8,189,554 65,787,248 300,576,111 392,996,083 % 1.37% 3.32% 2.08% 16.74% 76.48% 100.00% On 1 March 2024, there were 25,460 holders of unmarketable parcels of less than 50,000 ordinary shares (based on the closing share price of $0.01). 5.2 Listed ME1O Options exercisable at $5.00 on or before 2 November 2024 Shares Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and above Total Holders 21,829 1,828 200 223 54 24,134 Units 4,005,596 3,904,519 1,448,166 6,439,863 23,183,313 38,981,457 % 10.28% 10.02% 3.72% 16.52% 59.47% 100.00% 98 | P a g e Shareholder Information Melodiol Global Health Limited – Annual Report 2023 5.3 Listed ME1OD Options exercisable at $1.60 on or before 31 January 2027 Shares Range Holders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and above Total 1,370 105 26 140 58 1,699 Units 148,419 235,089 202,369 5,996,441 59,941,134 66,523,452 5.4 Listed ME1OE Options exercisable at $0.12 on or before 13 November 2028 Shares Range Holders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and above Total 1,370 105 26 140 58 1,699 Units 148,419 235,089 202,369 5,996,441 59,941,134 66,523,452 % 0.22% 0.35% 0.30% 9.01% 90.11% 100.00% % 0.22% 0.35% 0.30% 9.01% 90.11% 100.00% 99 | P a g e Shareholder Information 5.5 Unlisted Options Class ME1OPT33 Options ($0.78, 23/12/2025) ME1OPT38 Options ($7.60, 14/07/2024) ME1OPT39 Options ($3.00, 01/08/2024) Quantity on Issue 1,500,000 600,000 6,000,000 ME1OPT40 Options ($3.60, 01/08/2024) 600,000 ME1OPT41 Options ($3.60, 06/09/2024) ME1OPT42 Options ($5.00, 06/09/2024) ME1OPT43 Options ($2.75, 25/10/2024) 500,000 500,000 50,000 ME1OPT45 Options ($2.80, 12/06/2024) 5,797,079 Melodiol Global Health Limited – Annual Report 2023 Distribution of Holders All the securities in this class are held by: - Bruce Linton All the securities in this class are held by: - Atlantic Capital Holdings Pty Ltd There are 2 security holders holding between 10,001 and 100,000 securities in this class and 1 security holder holding more than 100,001 of securities in this class. The following holder holds more than 20% of securities in this class: - Mr Edward Sugar holds 450,000 securities (75%) There are 2 security holders holding between 10,001 and 100,000 securities in this class and 1 security holder holding more than 100,001 of securities in this class. The following holder holds more than 20% of securities in this class: - Mr Edward Sugar holds 450,000 securities (75%) All the securities in this class are held by: - Noble House Consulting Ltd All the securities in this class are held by: - Noble House Consulting Ltd There are 2 security holders, each holding between 10,001 and 100,000 securities in this class. The following holders hold more than 20% of securities in this class: - Mr Kevin Tansey holds 25,000 securities (50%) - Mr Brett Ayers holds 25,000 securities (50%) There are 33 security holders holding between 1,001 and 5,000 securities in this class, there are 3 security holders holding between 5,001 and 10,000 securities in this class, there are 22 security holders holding between 10,001 and 100,000 securities in this class and there are 10 security holders holding more than 100,001 of securities in this class. The following holder holds more than 20% of securities in this class: - Everblu Capital Corporate P/L (46.02%) ME1OPT48 Options ($8.00, 28/06/2024) ME1OPT49 Options ($26.80, 28/06/2024) ME1OPT50 Options ($40.00, 28/06/2024) ME1OPT51 Options ($53.00, 28/06/2024) 31,312 31,312 31,312 31,312 All the securities in this class are held by: - Mr Antony Samios All the securities in this class are held by: - Mr Antony Samios All the securities in this class are held by: - Mr Antony Samios All the securities in this class are held by: - Mr Antony Samios 100 | P a g e Shareholder Information ME1OPT52 Options ($0.40, 28/06/2025) ME1OPT53 Options ($7.60, 08/06/2024) 82,413 1,399,916 ME1OPT54 Options ($0.60, 24/08/2024) 12,953,911 ME1OPT55 Options ($0.80, 10/10/2024) ME1OPT57 Options ($0.44, 16/11/2027) 100,000 532,700 Melodiol Global Health Limited – Annual Report 2023 All the securities in this class are held by: - Zelira Therapeutics Limited There are 62 security holders holding between 0 and 1,000 securities in this class, there are 95 security holders holding between 1,001 and 5,000 securities in this class, there are 19 security holders holding between 5,001 and 10,000 securities in this class, there are 22 security holders holding between 10,001 and 100,000 securities in this class and there are 3 security holders holding more than 100,001 of securities in this class. No holder holds more than 20% of securities in this class. There are 17 security holders holding between 10,001 and 100,000 securities in this class and there are 19 security holders holding more than 100,001 of securities in this class. The following holder holds more than 20% of securities in this class: - Everblu Capital Corporate P/L (51.28%) All the securities in this class are held by: - BKAH Pty Ltd < Quirin Alleaume A/C> There is 1 security holder holding between 5,001 and 10,000 securities in this class, there are 3 security holders holding between 10,001 and 100,000 securities in this class and there are 2 security holders holding more than 100,001 of securities in this class. The following holders hold more than 20% of securities in this class: - Pathways Corp Investments Pty Ltd holds 163,888 securities (30.77%) T Slate Nominees Pty Ltd holds 137,953 securities (25.90%) - ME1OPT58 Options ($0.80, 30/11/2024) 150,000 All the securities in this class are held by: - Mr Peter Ernest Hatfull 101 | P a g e Shareholder Information 5.6 Performance Rights Class ME1PERR45 Performance Rights ME1PERR46 Performance Rights ME1PERR47 Performance Rights ME1PERR48 Performance Rights ME1PERR49 Performance Rights ME1PERR50 Performance Rights ME1PERR52 Performance Rights ME1PERR54 Performance Rights Quantity on Issue 25,000 25,000 50,000 25,000 25,000 50,000 2,500,000 1,500,000 5.7 Performance Shares Class ME1PERS2 Performance Shares Quantity on Issue 150,000 ME1PERS3 Performance Shares 150,000 Melodiol Global Health Limited – Annual Report 2023 Distribution of Holders All the securities in this class are held by: - Kolby Wayne Tullier & Tracy Theriot Tullier Kolby Wayne Tullier & Tracy Theriot Tullier Kolby Wayne Tullier & Tracy Theriot Tullier Troy Van Biezen All the securities in this class are held by: - All the securities in this class are held by: - All the securities in this class are held by: - All the securities in this class are held by: - All the securities in this class are held by: - All the securities in this class are held by: - Noble House Consulting Ltd All the securities in this class are held by: - Chincherinchee Nominees Pty Ltd Troy Van Biezen Troy Van Biezen Distribution of Holders There are 2 security holders, each holding between 10,001 and 100,000 securities in this class. The following holders hold more than 20% of securities in this class: - Mr Kevin Tansey holds 75,000 securities (50%) - Mr Brett Ayers holds 75,000 securities (50%) There are 2 security holders, each holding between 10,001 and 100,000 securities in this class. The following holders hold more than 20% of securities in this class: - Mr Kevin Tansey holds 75,000 securities (50%) - Mr Brett Ayers holds 75,000 securities (50%) 102 | P a g e Shareholder Information Melodiol Global Health Limited – Annual Report 2023 5.8 Convertible Notes Class ME1CON7 Convertible Notes ME1CON8 Convertible Notes Quantity on Issue 17,499 Distribution of Holders All the securities in this class are held by: - SBC Global Investment Fund 8,499 All the securities in this class are held by: - SBC Global Investment Fund 6. TWENTY LARGEST SHAREHOLDERS AS AT 25 MARCH 2024 The following shareholders have provided substantial shareholder notices to the Company as at 1 March 2024: Name: Jodi Scott Holder of: 267,393,981 fully paid ordinary shares, representing 5.80% as at 21 November 2023 Notice Received: 21 November 2023 7. TWENTY LARGEST SHAREHOLDERS AS AT 1 MARCH 2024 LTD 7 8 9 NOMINEES 1 2 3 4 5 6 Name 10 BAY STREET PTY LIMITED SABA NOMINEES PTY LTD MR SAMER HILAL & MRS NIDAA HILAL JODI SCOTT MR MAN CHUN KUNG GREGORY DENISE PTY LTD BEIRNE TRADING PTY LTD ROTHERWOOD ENTERPRISES PTY LTD STATE PTY ONE 10 MR PEPPI SCHIANO DICOLA 11 12 7 SCOOPS PTY LTD JAMBER INVESTMENTS PTY LTD HASNIE4 PTY LTD HADDED CONSULTING GROUP PTY LTD HADDED SUPERANNUATION SRGG PTY LTD EUTHENIA TYCHE PTY LTD BNP PARIBAS NOMS PTY LTD 15 16 17 18 MR POH SENG TAN 19 STRUCTURE INVESTMENTS PTY LTD 13 14 14 LTD PTY 20 MORSEC NOMINEES PTY LTD Totals Shares Held 26,857,703 14,186,900 14,000,000 13,287,121 6,979,242 5,652,391 4,869,792 4,464,087 4,000,000 3,400,000 3,273,594 3,076,213 3,048,298 3,000,000 3,000,000 2,804,160 2,700,000 2,693,348 2,600,000 2,453,385 2,431,211 % 6.83% 3.61% 3.56% 3.38% 1.78% 1.44% 1.24% 1.14% 1.02% 0.87% 0.83% 0.78% 0.78% 0.76% 0.76% 0.71% 0.69% 0.69% 0.66% 0.62% 0.62% 128,777,445 32.77% 103 | P a g e Shareholder Information Melodiol Global Health Limited – Annual Report 2023 8. TWENTY LARGEST LISTED ME1O OPTION HOLDERS AS AT 1 March 2024 1 2 3 4 5 6 7 7 7 8 9 10 11 12 13 14 15 16 17 18 19 20 LTD PARTY NOMINEES Name NANDIL PTY LTD MR LEON SPENCER WILLIAM HUNTER THIRD PTY MR PERNA PERERA JAMBER INVESTMENTS PTY LTD R AND K JONES SUPERANNUATION PTY LTD ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD SIX DEGREES GROUP HOLDINGS PTY LTD HIRSCH FINANCIAL PTY LTD CASCADE COMPANY PTY LTD HSBC CUSTODY NOMINEES LIMITED-GSCO ECA MR PRADEEP SURANGA BOGAHAWALAGE MR YASHPAL THAKUR MRS VICKI PATRICIA ANN BRIXEY MR GEORGE NITSOS MASTER BLAYNE LAIDLAW MR STACEY HUBERT CARTER BNP PARIBAS NOMS PTY LTD MR ASHRAF ADIEB ABADER GHOBRIAL MR BRANDON MARK LEE SUBURBAN HOLDINGS PTY LTD MR BILL FLEMING Totals (AUSTRALIA) Shares Held 4,567,600 1,522,819 1,230,000 1,000,000 839,867 656,433 609,013 609,013 609,013 583,470 545,741 524,371 511,397 504,450 500,066 500,050 500,000 486,792 462,090 400,000 345,720 318,419 % 11.72% 3.91% 3.16% 2.57% 2.15% 1.68% 1.56% 1.56% 1.56% 1.50% 1.40% 1.35% 1.31% 1.29% 1.28% 1.28% 1.28% 1.25% 1.19% 1.03% 0.89% 0.82% 17,826,324 45.73% 104 | P a g e Shareholder Information 9. TWENTY LARGEST LISTED ME1OD OPTION HOLDERS AS AT 1 March 2024 Melodiol Global Health Limited – Annual Report 2023 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 18 18 19 20 Name EVERBLU CAPITAL CORPORATE P/L ATLANTIC CAPITAL HOLDINGS PTY LTD EVERBLU CAPITAL PTY LTD CPS CAPITAL GROUP PTY LTD MR LUCAS GUY HALL MR PAUL DUREY RIMOYNE PTY LTD MR PERNA PERERA ORCA CAPITAL GMBH PHEAKES PTY LTD MRS KRISHNA SMIT NAYAK ACHIEVEMENT NOMINEES PTY LTD CELTIC CAPITAL PTY LTD MR SMIT DIPAKKUMAR NAYAK MR MARC LOUIS GILCHRIST MR SUSHIL KUMAR MAINALI JAMBER INVESTMENTS PTY LTD CHIFLEY PORTFOLIOS PTY LTD CHINCHERINCHEE NOMINEES PTY LTD DRH SUPERANNUATION PTY LTD HSBC CUSTODY NOMINEES LIMITED-GSCO ECA MR JOHN WALTERS & MS BERNADETTE PARKER Totals (AUSTRALIA) Shares Held 25,472,242 5,500,955 4,807,831 3,327,868 1,524,000 1,338,492 1,024,590 1,000,000 983,606 950,000 836,070 676,229 617,922 550,211 544,886 526,000 500,000 498,007 498,007 498,007 440,179 374,400 % 38.29% 8.27% 7.23% 5.00% 2.29% 2.01% 1.54% 1.50% 1.48% 1.43% 1.26% 1.02% 0.93% 0.83% 0.82% 0.79% 0.75% 0.75% 0.75% 0.75% 0.66% 0.56% 52,489,502 78.90% 105 | P a g e Shareholder Information 10. TWENTY LARGEST LISTED ME1OE OPTION HOLDERS AS AT 1 March 2024 Melodiol Global Health Limited – Annual Report 2023 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Name JODI SCOTT HASNIE4 PTY LTD JAMBER INVESTMENTS PTY LTD ROBERT LEE-STEERE AUSTRALIA PTY LTD MR HIMANSHU GUPTA & MRS NIDHI GUPTA SBC GLOBAL INVESTMENT FUND MR GARY BENJAMIN MUNN SOIRHU PTY LTD MR RICHARD GUY DARLING NOBLE HOUSE CONSULTING LTD ALM EQUITY'S PTY LTD BNP PARIBAS NOMS PTY LTD MR POH SENG TAN MR PEPPI SCHIANO DICOLA CITICORP NOMINEES PTY LIMITED JENNIFER SCOTT MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED KATHY SCOTT ATLANTIC CAPITAL HOLDINGS PTY LTD MR CRAIG JOSEPH CRIDDLE Totals Shares Held 551,924 222,414 153,810 140,335 132,518 124,391 107,550 107,500 105,000 100,000 98,853 92,783 82,500 80,000 79,039 72,579 69,718 67,792 57,299 % 5.98% 2.41% 1.67% 1.52% 1.44% 1.35% 1.16% 1.16% 1.14% 1.08% 1.07% 1.00% 0.89% 0.87% 0.86% 0.79% 0.75% 0.73% 0.62% 54,665 2,500,670 0.59% 27.08% 106 | P a g e 

Continue reading text version or see original annual report in PDF format above