Elixinol Wellness Limited
(Formerly known as Elixinol Global Limited)
ABN 34 621 479 794
Annual Report - 31 December 2022
Elixinol Wellness Limited
Contents
31 December 2022
Directors' 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
Note 1. General information
Note 2. Significant accounting policies
Note 3. Critical accounting judgements, estimates and assumptions
Note 4. Operating segments
Note 5. Revenue
Note 6. Other income
Note 7. Expenses
Note 8. Income tax
Note 9. Cash and cash equivalents
Note 10. Trade and other receivables
Note 11. Inventories
Note 12. Prepayments, deposits and other
Note 13. Investments accounted for using the equity method
Note 14. Property, plant and equipment
Note 15. Right-of-use assets
Note 16. Intangibles
Note 17. Trade and other payables
Note 18. Contract liabilities
Note 19. Borrowings
Note 20. Lease liabilities
Note 21. Issued capital
Note 22. Reserves
Note 23. Dividends
Note 24. Financial instruments
Note 25. Fair value measurement
Note 26. Remuneration of auditors
Note 27. Contingent liabilities
Note 28. Commitments
Note 29. Key management personnel disclosures
Note 30. Related party transactions
Note 31. Parent entity information
Note 32. Interests in subsidiaries
Note 33. Deed of cross guarantee
Note 34. Cash flow information
Note 35. Earnings per share
Note 36. Share-based payments
Note 37. Events after the reporting period
Directors' declaration
Independent auditor's report to the members of Elixinol Wellness Limited
Shareholder information
Corporate directory
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Elixinol Wellness Limited
Directors' report
31 December 2022
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Group' or 'Elixinol Wellness') consisting of Elixinol Wellness Limited (referred to hereafter as 'Elixinol Wellness Limited',
the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 31 December 2022.
Directors
The following persons were directors of Elixinol Wellness Limited during the whole of the financial year and up to the date of
this report, unless otherwise stated:
Helen Wiseman
David Fenlon
Paul Benhaim
Oliver Horn
Independent Non-Executive Director and Chair
Independent Non-Executive Director (effective 28 March 2022)
Non-Executive Director
Non-Executive Director (effective 8 April 2022)
Former Executive Director and Former Global Chief Executive Officer (ended effective 8 April 2022)
Principal activities
The principal activities of the Company during the year relate to its operation as a holding company for each of Elixinol LLC
('Elixinol Americas'), Elixinol Wellness (Byron Bay) Pty Ltd trading as Hemp Foods Australia ('Hemp Foods Australia') and
Elixinol BV and Elixinol Limited (together 'Elixinol Europe').
The principal activities of the Group are:
Elixinol Americas (hemp-derived cannabidiol (‘CBD’) dietary supplements and topicals)
Elixinol Americas is based in Colorado USA, and was established in 2014 and specialises in innovating, marketing and
distribution of products made from premium quality, predominantly 'whole plant' full spectrum CBD, which is extracted from
US grown industrial hemp.
Hemp Foods Australia (hemp-derived foods and skincare products)
Hemp Foods Australia is currently based in Byron Bay Shire, New South Wales, Australia, and was founded in 1999 to
manufacture, market and distribute hemp-derived food, supplements and skincare products. Hemp Foods Australia
distributes mainly within Australia but also supplies to export markets.
Rest of World (hemp-derived cannabidiol ('CBD') food and cosmetics)
Rest of World includes Elixinol Europe, which is based in Utrecht, The Netherlands, and in London, United Kingdom. Elixinol
Europe was established in 2018 to specialise in the development, sourcing, marketing and distribution of hemp-derived CBD
products including skincare. In 2021, the operations ceased and the business model moved to a licensing model that includes
Elixinol Europe, Japan, South Africa and pending approval in Malaysia.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
Operating and financial review
The loss for the Group after providing for income tax and non-controlling interest amounted to $10,571,000 (31 December
2021: $17,025,000).
The Group’s revenues from continuing operations for the year ended 31 December 2022 were $7,055,000 (31 December
2021: $9,338,000).
The Group’s earnings before interest, tax, depreciation and amortisation (‘EBITDA’) from continuing operations, including
share of associates’ net loss and excluding impairments and share-based payments, for the year ended 31 December 2022
was an Adjusted EBITDA loss of $8,538,000 (31 December 2021: Adjusted EBITDA loss of $11,496,000). EBITDA and
Adjusted EBITDA are financial measures which are not prescribed by Australian Accounting Standards (‘AAS’) and represent
the statutory result under AAS, adjusted for certain items. The directors consider EBITDA and Adjusted EBITDA to reflect
the core earnings of the Group.
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Elixinol Wellness Limited
Directors' report
31 December 2022
A reconciliation of Adjusted EBITDA from continuing operations to statutory loss is detailed below:
Loss after income tax
Add back/(deduct):
Income tax expense/(benefit)
Finance costs
Interest income
Depreciation and amortisation
EBITDA
Add back/(deduct):
Impairment of intangibles
Impairment of other assets
Share-based payments
Adjusted EBITDA
2022
$'000
Group
2021
$'000
(10,571)
(17,025)
2
71
(22)
721
(9,799)
(65)
92
(47)
1,490
(15,555)
234
786
241
186
3,679
194
(8,538)
(11,496)
The Group cash flow used in operations for the year ended 31 December 2022 was $8,152,000 (31 December 2021:
$14,071,000), which included $190,000 non-recurring transaction costs.
The Group recognised non-cash impairments of intangibles (including goodwill) of $234,000 (31 December 2021: $186,000)
for the year ended 31 December 2022, relating to the Elixinol Americas cash-generating unit ('CGU').
The Group recognised non-cash impairments of other assets of $786,000 (31 December 2021: $3,679,000) for the year
ended 31 December 2022 relating to inventory and fixed assets.
Americas
The Americas segment comprises the trading results of Elixinol LLC (‘Elixinol Americas’) and its investment in Altmed Pets
LLC (trading as Pet Releaf).
The Americas reported revenue of $3,318,000 for the year ended 31 December 2022 (2021: $4,783,000) and Adjusted
EBITDA loss of $3,568,000 for the year (2021: $5,492,000 Adjusted EBITDA loss).
Throughout 2022, Elixinol Americas continued to implement an aggressive transformation agenda. The business was
focused on improving profitability, achieved by the accelerated move towards an outsourced capital light model, a reduction
in operating expenditures and a further shift toward higher margin consumer channels, such as e-commerce.
The transition to a fully outsourced supply chain was completed at the end of FY2021, with inhouse warehousing and
fulfilment moving to the third-party model during the first quarter of FY2022. This resulted in further operating cost efficiencies
across the year, resulting in annualised savings of $3.3 million, from the prior year.
The Americas' full-time equivalent ('FTE') head count was reduced from 29 to 9, contributing materially to the Company’s
overall reduction in quarterly cash outflows by $1.2 million comparing Q4 FY2022 to Q4 FY2021. Despite these budget and
team reductions, the e-commerce business saw growth every quarter.
Elixinol Americas continued to optimise its online presence via the Shopify e-commerce platform. As a result of the Group’s
focused strategy on higher margin e-commerce channels and the increased demand for online shopping in the post COVID-
19 environment, online sales now represent approximately 70% of US revenues (FY2021: 63%).
Elixinol's loyalty program exceeded expectations with a participation rate of 6.7%, delivering $397,000 in revenue. The
brand's subscription program doubled in size, ending the year with more than 1,000 subscriptions and accounting for 21%
of the eCommerce annual revenue.
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Elixinol Wellness Limited
Directors' report
31 December 2022
In line with its ongoing product development strategy, a number of innovative products were launched in FY2022. In Q1
FY2022, Elixinol launched two new sleep products: the Sleep Rapid Reset Liposome and Sleep THC Free1 gummies. The
Sleep Rapid Reset Liposome and Sleep THC Free1 gummies are unique, melatonin-free options for consumers to support
optimal sleep. Both products contain CBD and CBN, marking it a first for the brand to include a minor cannabinoid into
product formulations. Through Q3 and Q4 FY2022 new Everyday Extra Strength 25mg gummies and Everyday Adaptogen
Complex CBD capsules, containing reishi mushroom, ginseng and gingko, were launched to expand this range.
Toward the end of December 2022, Elixinol Americas launched two new hemp-derived minor cannabinoid products, THCV
and CBD + Delta-9 gummies, which have both performed strongly and quickly moved into the top 5 best-selling SKUs by
revenue/units sold.
During the prior year, Elixinol Americas lodged an application for refundable tax credits which were made available under
the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The value of the credits calculated through to 31
December 2022 totals approximately $1.6m (US$1.2m). Under additional COVID-19 relief measures, Elixinol Americas also
lodged an application for refund of taxes paid in prior years of $0.5m (US$0.3m). Due to an extensive processing backlog at
the Internal Revenue Service (IRS) only $0.8m was received during 2022 and $1.0m was received in January 2023. The
remaining balance of $0.5m is now expected to be received in Q1 FY2023.
Australia
The Australian segment comprises the continuing trading results from Elixinol Wellness (Byron Bay) Pty Ltd trading as Hemp
Foods Australia ('Hemp Foods Australia').
Australia reported revenue of $3,691,000 for the year ended 31 December 2022 (31 December 2021: $4,086,000) and
Adjusted EBITDA loss of $704,000 (31 December 2021: $203,000 Adjusted EBITDA loss).
In H1 FY2022, Hemp Foods Australia’s operational improvement initiatives and growth trajectory halted due to normal
seasonality challenges and amidst a new wave of COVID-19 infections at the beginning of the year. The Company’s Byron
Bay facility was also impacted by the floods in Australia's Northern NSW region, resulting in some operational delays due to
workforce availability. However, from Q2 FY2022, trading conditions improved, supported by new product launches and a
review of distribution arrangements.
The expansion of distribution arrangements also supported a rebound later in the reporting period, with hemp seed products
confirmed for a new Costco store that opened in Auckland, New Zealand, in August 2022. Revenue grew in the second half,
up 18.6% for H2 FY2022 ($2.0m) over H1 FY2022 ($1.7m).
During the year, a fourth product in HFA's successful range of protein powders was made available - the Mixed Berry
flavoured hemp protein was launched as a smooth blend of antioxidant-rich acai and premium-grade Hemp Gold® Protein.
In addition, a seed mix range of four SKUs was also launched and ranged in 830 Coles stores nation-wide in September
2022. This range continues to perform strongly. An additional two SKUs are in the process of being developed to support
and extend the range.
In December 2021, Hemp Foods Australia submitted a New Ingredient Application for its Hemp Seed Oil (HSO) with the
Australian regulator, the Therapeutic Goods Administration (TGA). On 29 November 2022, Hemp Foods Australia received
the TGA’s approval of its application, which means Hemp Seed Oil is now accepted as safe and of appropriate quality to be
a ‘permissible ingredient’ in Listed Medicines (being therapeutic goods listed in the Australian Register of Therapeutic
Goods).
The Therapeutic Goods (Permissible Ingredients) Determination was also subsequently updated to include Hemp Seed Oil.
The Therapeutic Goods (Permissible Ingredients) Determination (No. 5) 2022 has now been published on the Federal
Register of Legislation, with a commencement date of 29 November 2022.
As a result, Hemp Foods Australia has been afforded a two-year period of ‘market exclusivity’ to use and supply the ingredient
for listed complementary medicines in the Australian market. This exclusivity provides a first mover advantage and serves
as a point of differentiation with competitors and will enable Hemp Foods Australia to exclusively produce, sell and/or licence
products that include the Hemp Seed Oil ingredient for two years with exclusivity to make claims on those products over that
period. Taking advantage of this position, the Company plans to launch an entirely new range of Hemp Seed Oil capsules in
the coming months expected to be released in H1 FY2022.
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Elixinol Wellness Limited
Directors' report
31 December 2022
Following the stocking of Hemp Food Australia’s certified organic 250ml Hemp Gold Seed Oil in more than 100 Woolworths
stores in FY2021, the Company has received confirmation that distribution of the oil is going national, with the product to be
stocked across 948 Woolworths stores from February 2023.
Rest of World
The Rest of World segment comprising Elixinol BV, Elixinol Limited and licensing agreements from Elixinol Wellness
(Corporate Services) Pty Ltd ('Rest of World) reported revenue of $46,000 for the year ended 31 December 2022 (31
December 2021: $469,000) and Adjusted EBITDA loss of $135,000 (31 December 2021: $2,321,000 Adjusted EBITDA loss).
During the prior year, the difficult decision to close the Group's own European operations and transition to a licensing model
in the region was made. Subsequently Elixinol Wellness secured a three-year exclusive Trademark and Know-how Licensing
Agreement with the UK’s largest CBD manufacturer and distributor, BRITISH CANNABIS™, at the end of 2021. The deal
enables BRITISH CANNABIS™ to manufacture, market and sell Elixinol CBD products across the UK, ensuring the Elixinol
brand continues to be distributed in the market while realising significant cost savings for the Group.
During the year licensing revenues of $46,000 from our partnership with Elixinol Japan was received.
Share of associates' loss
Share of associates loss during the year ended 31 December 2022 was $73,000 (31 December 2021: $121,000 loss).
Review of financial position
As at 31 December 2022 the net assets of the Group were $9,158,000, including $2,864,000 in cash and cash equivalents.
The key impact during the period was total comprehensive loss of $10,160,000.
Business strategies and future prospects
Refined strategic focus following strategic review completed during the year
The Company has been repositioned towards a branded consumer goods business over the last few years, leading to
improved fundamentals with substantial cost reductions and improved cash-flows. The Company’s strategy is to build a
global, hemp-centric wellness consumer products company, with a stated vision of creating a healthier everyday life through
the power of hemp and plant-based products.
As the Company completed a strategic review process during 2022, it confirmed it will focus its investments on its core assets
of Hemp Foods Australia and Elixinol America who are both well positioned with strong brands, occupying positions of
strategic value as the industry continues to evolve. The strategic review process also resulted in a significantly reduced cost
base and a streamlined organisational structure that now combines corporate with business unit functions and importantly,
confirms the Company’s strategic direction to diversify its operations further towards natural and plant-based wellness
products, thus reducing reliance on its CBD portfolio.
In addition to continuing to consider and evaluate options for shareholder value creation when opportunities arise, the
Company remains focused on driving the already identified cost efficiencies and simplifying the business to strengthen its
balance sheet and further enhance strategic value.
On 29 November 2022, the Company announced it will implement schemes of arrangement with The Sustainable Nutrition
Group Ltd (ASX: TSN) (TSN) to acquire 100% of TSN’s ordinary shares and effect an exchange of options, to further support
the focus on strong brands and a position of strategic value and will result in the Group owning and operating brands across
four key verticals: plant-based food and nutrition, hemp-based nutraceuticals (including cannabinoids such as CBD), pet
nutritional supplements and skin health. TSN brands include Australian Primary Hemp, Mt Elephant, Field Day and The
Australian Superfood Company.
The Company with maintain a watching brief in relation to potential investments in the Rest of the World, which will depend
on progress there in relation to the regulatory environment relating to hemp-based products. It currently has licencing
arrangements in place in the UK, Japan, Malaysia and South Africa.
Vision and mission
The Company’s vision, ambition, and purpose are the cornerstone of its strategy, which is underpinned by the following:
Company Vision:
Ambition:
Purpose:
To create a healthier everyday life through the power of hemp and plant-based products.
Build a global, hemp-centric wellness consumer products company.
Changing lives naturally.
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Elixinol Wellness Limited
Directors' report
31 December 2022
Key strategic objectives identified
The Group remains positive about the market opportunity for hemp-derived food and CBD products, and its ability to leverage
its strong brands and reputation for high quality products. The Group has positioned its strategy towards a branded consumer
goods nutraceutical and food business aimed at delivering profitable growth. The Group’s strategic focus is predicated on
the following strategic initiatives to support revenue growth and margin improvement:
●
●
Continue to operate the Elixinol Americas business with a lean and capital light business model;
Bring to market an extensive new product development pipeline through innovation in functional plant-based foods and
CBD nutraceuticals;
Merge the The Sustainable Nutrition Group ('TSN') business (proposed acquisition announced 29 Nov 2022) with the
Australian hemp foods product offering to realise synergies and economics of scale and broaden national retail
distribution through Woolworths, Coles, Costco and pharmacy chains;
Relentless focus on improving capital efficiency - long term focus on improving cash flow, driving margin accretion and
tightly controlling expenditures;
Continued investment in building global brands in core markets of Australia and US and maintain brand presence in
other select markets; and
Develop an Environmental Social Governance ('ESG') agenda to support our purpose of ‘doing good for people and the
planet through the power of hemp’.
●
●
●
●
Principal risks and uncertainties
Elixinol Wellness operates in a dynamic and evolving environment of health and wellness. Our operations, domestic and
international and digital continue to present both inherent and strategic opportunities and risks that could materially impact
the business. The management of the business and the execution of the Group’s growth strategies are subject to a number
of risks which could adversely affect the Group’s future development. Part of a strong governance framework is
understanding the risks that have the potential to have the greatest impact on our business. The following is not an exhaustive
list or explanation of all risks and uncertainties associated with the Group, but those considered by management to be the
principal risks, which may impact the operations or results of the Group:
Coronavirus (COVID-19)
The ongoing COVID-19 pandemic has had a significant impact on the global economy and the ability of individuals,
businesses, and governments to operate. The effects of the pandemic are widespread and continue to evolve, with ongoing
health, economic and social consequences.
Across the globe, travel, trade, business, working arrangements and consumption have been materially impacted by the
pandemic. The length and duration of the current pandemic and the economic impact remain uncertain. There continues to
be uncertainty as to the lingering effects of the COVID-19 pandemic, including in relation to cost pressures, rising transport
and energy costs, increases in raw material pricing, government, regulatory or health authority actions, tight labour markets
and supply chain challenges.
The impact of some or all of these factors could cause an adverse impact to the Group’s financial performance. Furthermore,
as an international business supplying products to various markets globally, the pandemic and associated long term impacts
could necessitate further capital requirements and/or support (either on a standalone basis or concurrently), which creates
additional challenges and risks for the financial position of the Group.
In addition, the Group's financial position may be adversely impacted if suppliers (including its counterparties, suppliers of IT
services, and other suppliers of products and services) are unable to successfully implement business continuity plans in the
current environment or if any such suppliers are unable to continue as going concerns as a result of the economic impact of
COVID-19 or further virus outbreaks.
However, the extent of the impact on our business, results of operations, financial condition, liquidity and cash flows is largely
dependent on future developments, which are highly uncertain and not predictable, including the long term consequences of
COVID-19 and actions taken to address its impact. Moreover, changes in interest rates, reduced liquidity or a continued
slowdown in Australia and the United States, or global economic conditions may also adversely affect our business, financial
condition, results of operations, liquidity or prospects. Further, extreme market volatility may result in us being unable to react
to market events in a prudent manner.
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Elixinol Wellness Limited
Directors' report
31 December 2022
Agricultural risk and climate change risk
The Group is exposed to the short, medium and long-term climate change and environment related risks, particularly given.
the Group’s businesses are reliant on agricultural products. Specific risks include physical climate-related event risks,
extreme weather events, increased volatility and change in weather patterns including drought, floods and bushfires,
restricted availability and use of water in manufacturing activities, treatment and disposal of waste from manufacturing
processes, increased energy costs and force majeure events. These risks could adversely affect the Group’s operations,
business practices, financial performance and reputation if not adequately managed.
Consumer and marketplace
Unanticipated changes in consumer preference and demand, or competitive pressures that significantly alter the landscape,
such as online channel growth, acquisitions and aggressive price wars, can have adverse effects on the businesses ability
to capture growth opportunities or effectively manage inventory and supply.
Supplier arrangements
The Group relies on several key supplier arrangements to supply raw materials and manufacturers of out-sourced finished
goods products. The failure to maintain long term contracts with these suppliers may impact the Group’s ability to maintain
consistent supply levels and meet the customer demand, thereby having a financial impact.
Risk of adverse events, product liability or other safety issues
As with all food or nutraceutical products, there is a risk that the products sold by the Group could cause serious or
unexpected side effects, including risk or injury to consumers. Should any of the Group’s products be associated with safety
risks such as misuse or abuse, inadvertent mislabelling, tampering by unauthorised third parties, or product contamination
or spoilage, several materially adverse outcomes could occur, including:
●
Regulatory authorities may revoke any approvals that have been granted, impose more onerous facility standards or
product labelling requirements, or force the Group to conduct a product recall;
The Group could be subject to regulatory action or be sued and held liable for any harm caused to customers; or
The Group’s brands and reputation could be damaged.
●
●
These may all impact the financial performance and position of the Group.
Systems, security and data privacy
While the Group has policies and procedures in place to address system security and data risks, there is a risk that these
may not be adequate, which could adversely affect the Group’s reputation and financial position. There is also a risk that
systems are not scalable or have the ability to leverage the synergies of the different businesses across the Group. This may
lead to am operational and financial impact and loss in revenue and profitability.
Key management personnel and employees
The Group relies upon its ability to attract and retain experienced and high performing executives and other employees. The
failure to achieve this may impact upon the Group’s ability to develop and meet its strategies, and may lead to a loss in
revenue and profitability.
Change to laws or regulations
Elixinol Wellness operates in a highly regulated industry in all markets in which goods are manufactured and sold. Changing
geopolitical landscapes and regulations in each of these jurisdictions may impact many aspects of our operations and all
aspects of the supply chain. Remaining compliant with and responsive to changes requires diligent monitoring and
responsiveness by the business.
The Group could be adversely affected by changes in laws, regulations or regulatory policy in the jurisdictions in which it
operates. The operations and proposed operations of Elixinol Wellness are subject to a variety of laws, regulations and
guidelines related to the retail sale of hemp-derived products. The hemp-derived CBD industry is evolving globally, including
in the USA and in Europe and the UK. It is likely that governments worldwide will continue to explore the benefits, risks and
operations of companies involved in the hemp sector.
Elixinol Wellness’ business, prospects, reputation, performance and financial condition could all be affected by changes to
law and regulation, changes to policies, and changes in the supervisory activities and expectations of its regulators across
all of the jurisdictions in which it operates. In particular, the regulation of hemp is developing and, as a result, a change in
government or increase in political lobbying may result in a change in government policy and an amendment of legislation
and/or regulation. For example, there is a risk that the allowable levels of THC in hemp products sold in the US may change.
This could potentially result in additional processing costs for the Group and impact the Company’s overall financial
performance.
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Elixinol Wellness Limited
Directors' report
31 December 2022
There is a further risk that the US Food and Drug Administration ('FDA'), the regulator which regulates ingestible and topical
products including CBD products, may seek to change the laws and regulations governing the manufacturing and marketing
of CBD products in the US. This could include current good manufacturing practice ('CGMPs') regulation, nutrition and
allergen labelling, and label claim regulations and safety requirements including, as applicable, new dietary ingredient ('NDI')
and generally recognised as safe ('GRAS') regulations. In the US, given that many of the applicable laws and regulations are
determined at the state-level, there is also a risk that the regulatory regime governing the Group’s US operations and
distribution network becomes further fragmented and difficult to comply with. The introduction of new legislation or
amendments to existing legislation by governments, or the respective interpretation of the legal requirements in any of the
legal jurisdictions which governs the operations or contractual obligations of Elixinol Wellness, could impact adversely on the
assets, operations, and the financial performance of the Group and the industry in general.
The Group is well positioned to capitalise on favourable long-term trends in the hemp-based wellness products segment and
as the regulatory environment in which the Group operates continues to evolve, the Group is exploring strategic opportunities
including product expansion beyond the Group’s traditional hemp-based, CBD wellness products.
Regulatory compliance and the management of regulatory change are an important part of Elixinol Wellness’ planning
processes. Elixinol Wellness will continue to invest in compliance with and the management of regulatory change and, at the
same time, significant management attention and resources will be required to update existing or implement new processes
to comply with new regulations (such as obligations to provide certain data and information to regulators) or new
interpretations of existing laws or regulations. The failure of Elixinol Wellness to appropriately manage regulatory change,
including failing to implement effective processes to comply with new regulations, could in the future result in Elixinol Wellness
failing to meet a compliance obligation.
To the extent possible, these risks are managed on an ongoing basis. The Group’s overall management of risk is governed
by the Group’s Risk Management Framework. The Audit & Risk Committee has oversight of the operation of the Risk
Management Framework and the management of risk across the Group. Mitigation measures and strategies to address the
risks are maintained and regularly reviewed, including via regular reporting to the Board.
Significant changes in the state of affairs
Following the resignation of Mr Oliver Horn as Global Chief Executive Officer which became effective on 8 April 2022, Mr
Ron Dufficy, the Company's Global Chief Financial Officer, was appointed as Interim Global Chief Executive Officer effective
the same date. In addition, Ms Josephine Lorenz was appointed as Global Chief Financial Officer effective the same date.
On 29 July 2022, Mr Ron Dufficy was appointed Global Chief Executive Officer following the completion of the strategic
review.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
On 29 November 2022, The Company announced that it entered into a binding scheme implementation deed with The
Sustainable Nutrition Group Ltd (ACN 071 666 334) (ASX: TSN) ('TSN'), under which it is proposed that Elixinol Wellness
will acquire 100% of the shares in TSN and exchange 100% of TSN Scheme Options by way of Schemes of Arrangement,
in exchange for 1.1225 EXL shares and 1.1225 EXL options per TSN share and TSN Scheme Option respectively. Current
Elixinol Wellness shareholders will hold 70% of the issued capital of EXL following the implementation of the schemes. The
schemes require regulatory and shareholder approvals.
On 30 November 2022, the Company announced the proposed issue of 9,036,068 performance rights to Canaccord for
consideration of services provided to TSN as TSN's exclusive financial adviser in connection with the scheme implementation
deed announced on 29 November 2022 with the Company. The performance rights have not yet been issued but are
expected to be issued following the completion of the schemes.
On 14 February 2023, the Company announced that the dispute between CannaCare Health GmbH ('CannaCare') and the
Company’s wholly owned subsidiary, Elixinol BV, has now been successfully concluded, with the Arbitration Award made in
the Company’s favour and the Arbitrator ordering a final Award of approximately 543,000 EUR ($835,000). The Arbitration
Award is vindication of the Company’s position that it was owed the payments the subject of the arbitration and that the
claims made by CannaCare’s shareholders were without merit.
No other matter or circumstance has arisen since 31 December 2022 that has significantly affected, or may significantly
affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
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Elixinol Wellness Limited
Directors' report
31 December 2022
Likely developments and expected results of operations
Elixinol Wellness remains positive on the long term market opportunity for hemp-derived CBD and food products and its
ability to leverage its strong reputation for high quality products. Throughout a prolonged period of regulatory change and
uncertainty, Elixinol Wellness has refined its strategy to ensure it operates efficiently and effectively in the current market
and regulatory environment as well as anticipating and pursuing longer term opportunities. Elixinol Wellness’ strategic focus
is now predicated on the following key pillars to support revenue growth and margin improvement:
●
●
●
●
●
Bringing to market an extensive new product pipeline to generate growth at premium margins;
Significant reduction of corporate and head office expenses;
Further optimisation of Elixinol Americas operations to reduce cost;
Seeking new opportunities to increase scale of the US business whilst continuing to lower its cost base;
Consolidation of the TSN and hemp foods operation and product offering to participate in healthy plant-based food
occasions;
Relentless focus on improving capital efficiency with a long term focus on improving cash flow, driving margin accretion
and tightly controlling expenditures;
Continued investment in building global brands in core markets of Australia and US and maintain brand presence in
other select markets;
Continued shift towards a digitally led global business with revenues from e-commerce representing a growing
proportion of overall sales in the Americas business; and
Supply chain optimisation - seeking new opportunities to shorten supply chain and reduce cost of goods.
●
●
●
●
Also refer to 'Business strategies and future prospects' included under 'Review of operations' section above.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State/Territory laws.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in rights:
Helen Wiseman
Independent Non-Executive Director and Chair
Chartered Accountants Australia and New Zealand – Fellow, Graduate of the Australian
Institute of Company Directors, Certified Director, INSEAD International Directors
Programme
Helen Wiseman is a Non-Executive Director and audit committee specialist with
extensive international experience in food, pharmaceutical, natural healthcare,
professional services, energy and natural resources and manufacturing industries.
Helen is a former KPMG partner and brings extensive financial and commercial
acumen, strategic risk oversight and seasoned global governance skills to the board.
Helen was previously named as one of the 2014 Australian Financial Review and
Westpac 100 Women of Influence.
Bid Corporation (JSE: BID)
Chair of Audit and Risk Committee and Member of Remuneration and Nomination
Committee
280,132 ordinary shares
1,043,424 performance rights
9
Elixinol Wellness Limited
Directors' report
31 December 2022
Name:
Title:
Qualifications:
Experience and expertise:
David Fenlon
Independent Non-Executive Director (effective 28 March 2022)
B.Bus
David Fenlon has over 30 years of world-wide experience in the FMCG and consumer
sectors. He is currently CEO of The Platform Alliance Group, Non-Executive Chair for
Nutritional Growth Solutions (ASX: NGS) and Non-Executive Director of Quest for Life
Foundation. He was previously Group CEO and Managing Director of BWX Limited
(ASX: BWX), and prior to that, was Managing Director for Australia and New Zealand
at Blackmores Limited (ASX: BKL). David has worked with leading retail brands both in
Australia and offshore, with a strong focus on strategic planning and business
transformation. David's experience also includes holding key positions in Tesco
throughout Europe and Safeway in the UK and he was a member of the Board of
Directors for the Special Olympics from May 2017 until June 2019.
Nutritional Growth Solutions (ASX: NGS)
Chair of Remuneration and Nomination Committee and Member or Audit and Risk
Committee
None
465,753 performance rights
Other current directorships:
Former directorships (last 3 years): BWX Ltd (ASX: BWX)
Special responsibilities:
Interests in shares:
Interests in rights:
Name:
Title:
Experience and expertise:
Paul Benhaim
Non-Executive Director
Paul has over 26 years’ experience in the hemp industry and is the co-founder of
Elixinol, Elixinol Australia and Hemp Foods Australia. Paul is considered an expert in
the industrial hemp industry and frequently presents at industry conferences globally.
He has also played a role in shaping regulation around cannabis laws.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in rights:
Member of Remuneration and Nomination Committee
29,209,217 ordinary shares
652,566 performance rights
Name:
Title:
Qualifications:
Experience and expertise:
Oliver Horn
Non-Executive Director (effective 8 April 2022)
Former Executive Director and Former Global Chief Executive Officer (ended effective
8 April 2022)
BSc degree, GAICD
Oliver Horn currently holds the role of MD & CEO of Nutra Organics Pty Ltd. Oliver
Horn previously held the role of the Company’s Global CEO and Executive Director
and prior to that, Oliver was the CEO of Swisse Wellness for Australia and New Zealand
(ANZ) and North America. Oliver has extensive senior operational leadership
experience including holding roles at Treasury Wine Estates across ANZ, Europe,
Middle East and Africa. With an established track record for exponential growth in
established and emerging markets, Oliver has extensive experience in building
premium global consumer brands, a deep knowledge of the vitamins, minerals and
supplements (VMS) category, a track record of premium brand building and a passion
for creating businesses with a positive and thriving workplace culture.
None
Other current directorships:
Former directorships (last 3 years): Non-Executive Director of Aumake Ltd (ASX: AUK) (Nov 2019 - Oct 2020)
Member of Audit and Risk Committee
Special responsibilities:
1,203,971 ordinary shares
Interests in shares:
None
Interests in rights:
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
10
Elixinol Wellness Limited
Directors' report
31 December 2022
Executives
Global Chief Executive Officer
Name:
Title:
Qualifications:
Experience and expertise:
Global Chief Financial Officer
Name:
Title:
Qualifications:
Experience and expertise:
Company secretaries
Name:
Title:
Qualifications:
Experience and expertise:
Name:
Title:
Qualifications:
Experience and expertise:
Ron Dufficy
Global Chief Executive Officer (effective 29 July 2022)
Interim Global Chief Executive Officer (effective 8 April 2022)
Former Global Chief Financial Officer (ended effective 8 April 2022)
BEc, MCom, FCPA
Ron is a senior finance executive having held various financial leadership roles with
ASX-listed companies such as CSR Ltd (ASX: CSR) and Aristocrat Leisure Ltd (ASX:
ALL). Ron has significant experience in regulated markets including being based in
the USA for 9 years, most recently as Chief Financial Officer for Aristocrat's largest
and most profitable division, responsible for developing and implementing strategies
to improve profit margins, grow market share and creating a global shared services
organisation. Ron joined the Company in 2017 with a focus on the administrative,
financial, and risk management operations of the Group.
Josephine Lorenz
Global Chief Financial Officer (effective 8 April 2022)
BCom, Chartered Accountants Australia and New Zealand – Fellow
Josephine has over 20 years' global finance experience, having held senior finance
positions in various sectors including the role of Group Financial Controller for
Network Ten and Nine Entertainment Co. (ASX: NEC). She was also formerly the
Head of Finance at Independent Television News Limited in London and has held
various roles at Deloitte in both London and Melbourne, Australia. Josephine joined
Elixinol Wellness in November 2017.
Teresa Cleary
Group General Counsel and Joint Company Secretary
LLB BA GAICD FGIA
Teresa joined the Company on 4 November 2019 and is an experienced corporate
lawyer and governance professional with significant private practice and in-house
experience which has included the role of Supervising Counsel at Telstra Corporation
Limited and General Counsel & Company Secretary at the Australian Institute of
Company Directors ('AICD'). Teresa's expertise includes managing legal and
regulatory risk, corporate advisory, commercial negotiations, dispute resolution and
commercial strategy. Teresa is a Fellow of the Governance Institute of Australia, a
graduate of the AICD and she is an active member of the International Bar
Association. Teresa is also a non-executive director of the Association of Corporate
Counsel, Australia.
Kim Bradley-Ware
Joint Company Secretary
BCom, CPA, LLB
Kim has over 20 years' finance and governance experience in various listed and
private companies, as well as in private practice. Prior to joining Company Matters,
Kim worked with Pan Pacific Petroleum (an ASX and NZX listed entity) since 2001,
most recently as CFO and Company Secretary. Prior to that Kim held various roles in
accounting across a variety of different industries including credit reporting,
telecommunications and media.
11
Elixinol Wellness Limited
Directors' report
31 December 2022
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the
year ended 31 December 2022, and the number of meetings attended by each director were:
H Wiseman
D Fenlon
P Benhaim
O Horn
Attended
Full Board
Held
Remuneration and
Nomination Committee
Held
Attended
Audit and Risk Committee
Held
Attended
30
23
29
29
30
24
30
30
2
1
2
2
2
1
2
2
4
3
4
4
4
3
4
4
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
12
Elixinol Wellness Limited
Directors' report
31 December 2022
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance
with the requirements of the Corporations Act 2001 and its regulations.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
●
Key management personnel;
Principles used to determine the nature and amount of remuneration;
Linking remuneration and company performance;
Details of remuneration;
Service agreements;
Share-based compensation; and
Additional disclosures relating to key management personnel.
Key management personnel
Key management personnel ('KMP') are those persons having authority and responsibility for planning, directing and
controlling the major activities of the entity, directly or indirectly, including all directors.
The KMP of the Group consisted of the following directors of Elixinol Wellness Limited:
●
●
●
●
Helen Wiseman - Independent Non-Executive Director and Chair
David Fenlon - Independent Non-Executive Director (effective 28 March 2022)
Paul Benhaim - Non-Executive Director; and
Oliver Horn - Non-Executive Director (effective 8 April 2022) and former Executive Director and former Global Chief
Executive Officer (ended effective 8 April 2022)
And the following executives of Elixinol Wellness Limited:
●
Ron Dufficy - Global Chief Executive Officer (effective 8 April 2022) and former Global Chief Financial Officer (ended
effective 8 April 2022); and
Josephine Lorenz - Global Chief Financial Officer (effective 8 April 2022).
●
Except if noted, the named persons held their current position for the whole of the financial year and since the end of the
financial year.
Principles used to determine the nature and amount of remuneration
An executive reward framework has been developed to ensure reward for performance is competitive and appropriate for
the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation
of value for shareholders and conforms to the market best practice and advice from independent external advisors for the
delivery of reward. The Board of Directors ('the Board') has ensured that executive reward satisfies the following key criteria
for good reward governance practices:
●
●
●
●
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive compensation; and
transparency.
The Remuneration and Nomination Committee is responsible for determining and reviewing remuneration arrangements for
its directors and executives. The performance of the Group depends on the quality of its directors and executives. The
remuneration philosophy is to attract, motivate and retain high performance and high-quality personnel.
The Remuneration and Nomination Committee ensures the structure of the executive remuneration framework is market
competitive and complementary to the reward strategy of the Group.
The reward framework is designed to align executive reward to shareholders' interests. The Board has considered that it
enhances shareholders' interests by:
●
●
having economic profit and revenue growth as a core component of plan design;
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and
attracting and retaining high calibre executives.
●
13
Elixinol Wellness Limited
Directors' report
31 December 2022
Additionally, the reward framework enhances executives' interests by:
●
●
●
rewarding capability and experience;
reflecting competitive reward for contribution to growth in shareholder wealth; and
providing a clear structure for earning rewards.
Non-Executive Directors' remuneration
Fees and payments to Non-Executive Directors reflect the demands and responsibilities of their role. Non-Executive
Directors' fees and payments are to be reviewed annually by the Remuneration and Nomination Committee. The
Remuneration and Nomination Committee may, from time to time, receive advice from independent remuneration consultants
to ensure Non-Executive Directors' fees and payments are appropriate and in line with the market. The chair's fees will be
determined independently to the fees of other Non-Executive Directors based on comparative roles in the external market.
The chair will not be present at any discussions relating to the determination of their own remuneration.
The Constitution provides that the Non-Executive Directors are entitled to total fixed remuneration not exceeding an
aggregate maximum sum determined by the Company in general meeting. The current amount has been fixed at $500,000
and was approved by shareholders at the Annual General Meeting ('AGM') held on 17 May 2021. Remuneration of directors
may be provided as a contribution to a superannuation fund. Additionally, it is anticipated that Non-Executive Directors will
participate in the Company’s long-term incentive plan.
Executive remuneration
The Group rewards Executives based on their position and responsibility, with a level and mix of remuneration which has
both fixed and variable components.
The Executive remuneration and reward framework has three components:
●
fixed remuneration - to provide a fair and equitable fixed salary, which accurately reflects the skills and responsibilities
of the role and the experience of the individual fulfilling the position;
short-term performance incentives - to encourage and reward for individual outperformance against annual key
performance indicators during the financial year; and
long-term incentive share-based payments - to drive long-term sustainable growth and facilitate alignment between the
senior executive team and the long-term interests of shareholders.
●
●
The combination of these comprises the Executive's total remuneration.
Fixed remuneration
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, is reviewed annually by the
Remuneration and Nomination Committee for market competitiveness to attract and retain talent, to consider individual and
business unit performance as well as the overall performance of the Group.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the Group and provides additional value to the Executive.
Short-Term Incentive Plan ('STIP')
The Company has adopted a STIP which will enable it to assist in the attraction, motivation and retention of the Directors,
executive team and other selected employees of the Group and provide a direct link between remuneration and performance.
Its aim is to reward the Executive and management of the Group for achieving a combination of clearly defined Group,
regional and individual targets.
The STIP is subject to annual review by the Remuneration and Nomination Committee. The structure, performance measures
and weightings may therefore vary from year to year.
The STIP is weighted 65% (65% in 2022) to Group financial measures and 35% (35% in 2022) to individual measures for
Executive KMPs.
STIP Opportunity (at target) is 25-40% (25%-40% for 2022) of Total Fixed remuneration for Executive KMPs.
14
Elixinol Wellness Limited
Directors' report
31 December 2022
Group financial measures are set out below:
●
●
Group net profit after tax ('NPAT') (25% of the STIP) and Group revenue ('Revenue') (40% of the STIP);
Group NPAT and Revenue was chosen to align executive performance with the key drivers of shareholder value and
reflect the short-term performance of the business. Group financial performance measures for future years will be
determined annually; and
minimum threshold performance will be 80% of the on-target performance level of Group NPAT metrics.
Individual measures are set out below:
●
Executive KMPs are set individual objectives based on their specific area of responsibility. These objectives are directly
aligned to the Board approved financial, operational and strategic objectives and include quantitative measures where
appropriate; and
payouts are based on a minimum of 80% achievement (50% for 2021).
●
●
Actual performance against Group financial and individual measures is assessed at the end of the financial year.
The Board determines the amount, if any, of the STIP to be paid to each Executive KMP, seeking recommendations from
the Remuneration and Nomination Committee.
Where performance is below threshold, payment of any STIP amount will be at the sole discretion of the Board. Where
performance is above the threshold, up to 150% of the target STIP amounts are payable.
The STIP amount on-target will be paid in cash or equity and will be subject to relevant local statutory and tax obligations.
The Board at its discretion, may elect to grant equity in lieu of payments in cash.
If a takeover or change of control event occurs or in the case of death, disability, bona fide redundancy or genuine retirement
or another reason (with the exception of resignation or dismissal), the Board at its discretion, may elect to pay pro rata STIP
amounts.
STIP payments granted as equity include the following conditions:
●
●
●
Any STIP outcome deferred into equity cannot be traded until after they have vested;
Any unvested share rights may be forfeited if the Executive ceases to be an employee before the vesting date; and
Share rights which have vested can only be traded in accordance with the Company’s Securities Trading Policy.
Long-Term Incentive Plan ('LTIP')
The LTIP is an equity incentive plan used to align the Directors and Executive KMP’s remuneration to the returns generated
for the Group’s shareholders. The key features of the LTIP are outlined below.
Performance rights over ordinary shares in the Company were issued to KMPs for nil consideration. The nature, timing and
structure of the grant is detailed below.
Performance rights
Performance rights are awarded based on the fixed amount to which the individual is entitled. Upon satisfaction of vesting
and employment conditions, each performance right will, at the Company’s election, convert to a share on a one-for-one
basis or entitle the participant to receive in cash to the value of a share at the Board’s discretion in lieu of an allocation of
shares. Where the Board makes such an election, the amount payable will be as determined below:
Cash payable = (No. of Share Rights x VWAP) - Applicable Withholding Tax (if any) - Amounts paid as superannuation
Where VWAP means the volume weighted average share price of the shares traded on the ASX in the 5 trading days
immediately prior to the relevant vesting date.
LTIP opportunity (at target)
LTIP opportunity has been determined by informed benchmarking.
Performance period
For the 2021 Share Rights grant made during 2021, the performance period of the grant is three financial years in one
tranche following the performance period. The performance period is from 1 January 2021 to 31 December 2023.
For the 2022 Share Rights grant made during 2022, the performance period of the grant is three financial years in one
tranche following the performance period. The performance period is from 1 January 2022 to 31 December 2024.
15
Elixinol Wellness Limited
Directors' report
31 December 2022
Vesting dates
Share Rights granted in 2021
Share Rights granted in 2022
Vesting date
28 February 2024
Vesting date
28 February 2025
Vesting conditions
Share rights which have not lapsed will vest and become exercisable on the date on which any vesting conditions (and any
employment conditions) applicable to the share rights have been satisfied (or waived by the Board) or the date on which the
share rights otherwise vest in accordance with the Plan rules.
The share rights are subject to the following vesting conditions:
●
●
satisfaction of absolute Total Shareholder Return ('TSR') performance hurdles for the relevant vesting period; and
participant must be employed (or continue to be a Director) of the Company or one of its wholly owned subsidiaries at
the time that audited financial statements are released to the ASX following the performance period.
The proportion of TSR share rights that will vest will be determined by reference to the absolute TSR of the Company during
the relevant performance period, in accordance with the following vesting schedule:
Company's TSR over the relevant
performance period
Percentage of TSR share rights vesting
Below 10%
Greater than 10% but less than 20%
Equal to or greater than 20%
0% of the TSR share rights will vest
40% of the TSR share rights will vest
100% of the TSR share rights will vest
Cessation of employment (Employment Conditions)
Subject to the Board determining otherwise (in its absolute discretion), should a participant cease to be an employee or
Director of the Elixinol Group because of:
●
●
resignation or dismissal: all unvested rights or options lapse;
death, disability, bona fide redundancy, genuine retirement or another reason (with the exception of resignation or
dismissal): a pro rata number of unvested rights or options will not lapse, and any vested right or option will not lapse.
All other rights or options will lapse.
Disposal restrictions
When vesting occurs, restriction on disposal of shares will be subject to the Company’s Securities Trading Policy.
A participant may not enter into any arrangement for the purpose of hedging, or otherwise affecting their economic exposure
to their performance rights.
Change of control
The Board in its absolute discretion may determine that all or some of a participants unvested options or rights vest where a
Takeover Event or Control Event occurs.
Use of remuneration consultants
During the financial period ended 31 December 2022, the Board did not consult or did not engage remuneration advisors for
benchmarking of executive remuneration.
Voting and comments made at the Company's 26 May 2022 AGM
At the 26 May 2022 AGM, 78.45% of the votes received supported the adoption of the remuneration report for the year ended
31 December 2021. The Company did not receive any specific feedback at the AGM regarding its remuneration practices.
16
Elixinol Wellness Limited
Directors' report
31 December 2022
Linking remuneration and company performance
Impact of the Group’s 2022 performance on remuneration
A challenging environment and a lack of regulatory development across key markets contributed significantly towards
revenue growth targets not being achieved during 2022. However, following the Strategic Review announced in February
2022 and due to a focus on cost reduction and margin improvement the Group delivered on its EBITDA targets on the re-
based cost structure. The Group also delivered numerous strategic objectives designed to position the Company for future
growth across the business including announcing the proposed acquisition of The Sustainable Nutrition Group via a scheme
of arrangement. The business has been successfully repositioned with a significantly reduced cost base.
The link between Executive KMP remuneration and Group financial performance is detailed below:
Revenue
Adjusted EBITDA
Net loss after tax
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Opening share price
Closing share price on 31 December
2022
$'000
7,055
(8,538)
(10,571)
(3.34)
(3.34)
$0.072
$0.021
2021
$'000
2020
$'000
9,338
(11,496)
(17,025)
15,010
(22,930)
(104,478)
(5.41)
(5.41)
$0.175
$0.072
(58.25)
(58.25)
$0.570
$0.175
2019
Restated
$'000
30,714
(24,632)
(83,071)
(62.71)
(62.71)
$2.500
$0.570
2018
$'000
37,131
(114)
(860)
0.79
0.79
1.000
2.500
There were no dividends declared or paid during the financial year.
Details of remuneration
Amounts of remuneration
Details of the remuneration of Directors and other KMP of the Group are set out in the following tables.
2022
Non-Executive
Directors:
H Wiseman
D Fenlon (b)
P Benhaim
O Horn (a)
Executive
Directors:
O Horn (a)
Other KMP:
R Dufficy
J Lorenz (b)
Short-term benefits
Post-employment
benefits
Long-term
benefits
Cash salary
and fees
$
Cash
bonus
$
Other
fees
$
Super-
annuation
$
Termination
payments
$
Deferred
STI (c)
$
Share-
based
payments
Equity-
settled
Perform-
ance
Rights
$
Total
$
122,046
59,380
76,138
54,980
112,134
-
-
-
-
-
283,586
155,505
863,769
37,015
23,419
60,434
3,873
6,133
7,801
5,686
-
-
-
-
-
-
-
-
17,513
6,684
11,171
-
143,432
72,197
95,110
60,666
7,856
65,833
-
(65,500)
120,323
24,430
16,082
71,861
-
-
65,833
73,054
46,221
119,275
(121,598)
6,172
296,487
247,399
(145,558) 1,035,614
-
-
-
-
-
-
-
-
17
Elixinol Wellness Limited
Directors' report
31 December 2022
(a)
(b)
(c)
O Horn changed from Executive Director to Non-Executive Director on 8 April 2022. Remuneration reflects periods as to which O Horn was in those positions.
Remuneration is from date of appointment to 31 December 2022.
66,4% of the current year STI to be settled as Equity-settled Performance Rights with a vesting date of 31 March 2023.
Short-term benefits
Post-employment
benefits
Long-term
benefits
Cash salary
and fees
$
Cash
bonus
$
Other
fees
$
Super-
annuation
$
Termination
payments
$
Deferred
STI
$
Share-
based
payments
Equity-
settled
Perform-
ance
Rights
$
Total
$
108,702
98,734
-
-
-
-
10,578
9,599
372,715
74,260
-
22,285
260,716
840,867
56,883
131,143
-
-
24,284
66,746
-
-
-
-
-
-
-
7,464
4,487
126,744
112,820
-
99,819
569,079
-
-
(75,678)
266,205
36,092 1,074,848
2021
Non-Executive
Directors:
H Wiseman
P Benhaim
Executive
Directors:
O Horn (a)
Other KMP:
R Dufficy (b)
(a)
(b)
On 7 July 2021, the Company granted Oliver Horn 868,132 performance rights over ordinary shares with an exercise price of $0.00 and a vesting date of 28 February 2024 with their
issue subject to shareholder approval at the next shareholder meeting. Shareholder approval will be sought at the Company’s annual general meeting in May 2022. The amount
recognised in this financial year ($99,819) is a representation of the performance period.
LTIP value of equity includes negative amounts for options forfeited during the year (not included in % remuneration in the table below).
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
H Wiseman
D Fenlon
P Benhaim
O Horn
Executive Directors:
O Horn
Other KMP:
R Dufficy
J Lorenz
Fixed remuneration
2021
2022
2022
At risk - STI
2021
2022
At risk - LTI
2021
88%
91%
88%
100%
94%
-
96%
-
100%
70%
-
-
-
-
-
-
-
-
-
12%
9%
12%
-
6%
-
4%
-
13%
-
17%
63%
70%
83%
-
12%
9%
17%
-
25%
21%
-
-
18
Elixinol Wellness Limited
Directors' report
31 December 2022
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Executive Directors:
O Horn
Other KMP:
R Dufficy
J Lorenz
Cash bonus paid/payable
2021
2022
Cash bonus forfeited
2021
2022
-
47%
-
53%
28%
28%
57%
-
72%
72%
43%
-
Service agreements
Remuneration and other terms of employment for KMP are formalised in service agreements.
The total fixed remuneration ('TFR') is subject to annual review.
Details of these agreements effective from 1 January 2023 are as follows:
Fixed
Remuneration
$ (a)
Notice Period Notice Period
Target STI by Executive by Company
months
months
$
Restraint
Period
months
Ron Dufficy (b)
Josephine Lorenz (b)
325,000
235,000
130,000
82,250
6
3
6
3
12
3
(a)
(b)
Fixed remuneration comprises base cash remuneration, superannuation (superannuation equal to the minimum amount required to be paid to comply with the superannuation guarantee
legislation) and other benefits which can be sacrificed for cash at the employee's elections.
KMPs are entitled to participate in a long-term incentive plan, as discussed in this report.
KMP have no entitlement to termination payments in the event of removal for misconduct.
Any payments on termination will be subject to the termination benefits cap under the Corporations Act.
Share-based compensation
Issue of shares
There were no shares issued to Directors and other KMP as part of compensation during the year ended 31 December 2022.
Performance rights
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of Directors and
other KMP in this financial year or future reporting years are as follows:
Name
H Wiseman
R Dufficy
J Lorenz
P Benhaim
H Wiseman
R Dufficy
J Lorenz
H Wiseman
P Benhaim
D Fenlon
Number of
rights
granted Grant date
62,271 30 July 2020
548,077 7 July 2021
280,218 7 July 2021
186,813 7 July 2021
280,879 7 July 2021
1,366,438 21 January 2022
698,625 21 January 2022
700,274 21 January 2022
465,753 21 January 2022
465,753 26 May 2022
Vesting date and
exercisable date
Expiry date
28 February 2024
28 February 2024
28 February 2024
28 February 2025
28 February 2025
28 February 2025
28 February 2025
28 February 2026
28 February 2026
28 February 2026
30 October 2025
7 October 2026
7 October 2026
7 October 2026
7 October 2026
21 April 2027
21 April 2027
21 April 2027
21 April 2027
21 April 2027
Fair value
per right
at grant date
$0.092
$0.076
$0.076
$0.083
$0.083
$0.115
$0.115
$0.141
$0.141
$0.057
Performance rights granted carry no dividend or voting rights.
19
Elixinol Wellness Limited
Directors' report
31 December 2022
Other than outlined above, there were no other performance rights or options over ordinary shares granted to or vested in
Directors and other KMP as part of compensation during the year ended 31 December 2022.
Shares issued in the past financial year were approved under section 10.14 of the ASX Listing Rules.
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each Director and other members of KMP of the
Group, including their personally related parties, is set out below:
Ordinary shares
H Wiseman
D Fenlon
P Benhaim (a)
O Horn
R Dufficy
J Lorenz (b)
Balance at
the start of
Received
as part of
the year remuneration
Additions
Disposals/
other
Balance at
the end of
the year
280,132
-
29,209,217
1,203,971
623,901
-
31,317,221
-
-
-
-
156,593
-
156,593
-
-
-
-
-
99,670
99,670
280,132
-
-
-
- 29,209,217
1,203,971
-
780,494
-
99,670
-
- 31,573,484
(a)
Held indirectly due to Paul Benhaim's interest with the holder of the shares, Raw With Life Pty Ltd. Included as disposals are 313,791 shares which were transferred to Equities First
Holdings LLC (Equities First) under a margin loan facility (Loan Facility) are included as disposals. The term of the Loan Facility is three years. Under the terms of the Loan Facility, Mr
Benhaim transferred the Secured Shares to Equities First and procures registration of the Secured Shares in the name of Equities First by way of transfer to an account nominated by
Equities First. Equities First may, during the term of the loan, deal with the Secured Shares. Shares provided as security must be returned to Mr Benhaim on repayment of the loan, in
accordance with the terms of the Loan Facility.
Addition of ordinary shares includes ordinary shares held on becoming KMP on 8 April 2022.
(b)
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial year by each Director and
other members of KMP of the Group, including their personally related parties, is set out below:
Performance rights over ordinary shares
H Wiseman (a)
D Fenlon
P Benhaim (b)
O Horn
R Dufficy
J Lorenz (c)
Balance at
the start of
the year
62,271
-
-
361,722
1,138,461
-
1,562,454
Granted
Vested
981,153
465,753
652,566
-
1,366,438
1,067,803
4,533,713
-
-
-
-
(156,593)
-
(156,593)
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
(361,722)
(433,791)
(88,960)
(884,473)
1,043,424
465,753
652,566
-
1,914,515
978,843
5,055,101
(a)
(b)
(c)
On 7 July 2021 the company granted two tranches to Helen Wiseman performance rights over ordinary shares with their issue subject to shareholder approval at the next shareholder
meeting. 280,879 performance rights were granted with a vesting date of 28 February 2025.Shareholder approval was obtained at the company’s annual general meeting in May 2022
and as such the options have not included in the table above as granted in the current year.
On 7 July 2021 the company granted two tranches to Paul Benhaim performance rights over ordinary shares with their issue subject to shareholder approval at the next shareholder
meeting. 186,813 performance rights were granted with a vesting date of 28 February 2025.Shareholder approval was obtained at the company’s annual general meeting on XX May
2022 and as such the options have been included in the table above as granted in the current year.
Performance rights granted includes performance rights held on becoming KMP on 8 April 2022.
20
Elixinol Wellness Limited
Directors' report
31 December 2022
Loans to key management personnel and their related parties
Prior to its acquisition by Elixinol Wellness Limited, Hemp Foods Australia entered into a Shareholder Loan Deed with Raw
With Life, an entity controlled by Mr Paul Benhaim, whereby Raw With Life agreed to lend $250,000 to Hemp Foods Australia.
The loan is made on an unsecured basis, with no interest payable. Hemp Foods Australia undertakes to repay the loan
subject to achievement of predefined performance milestones. This is a related party agreement, as Raw With Life holds (as
at the date of this report) approximately 9.25% of the shares in Elixinol Wellness Limited. The Group assessed the fair value
of the loan at the reporting date and the amount is not materially different from its carrying value.
This concludes the remuneration report, which has been audited.
21
Elixinol Wellness Limited
Directors' report
31 December 2022
Shares under option or performance rights
Unissued ordinary shares of Elixinol Wellness Limited under option or performance rights which have not yet vested at the
date of this report are as follows:
Grant date
30 July 2020
7 July 2021
7 July 2021*
21 January 2022
21 January 2022*
Expiry date
30 October 2025
7 October 2026
7 October 2026
21 April 2027
21 April 2027
Number
under rights
62,271
2,210,204
467,692
7,756,755
1,631,780
12,128,702
*
Performance rights to Directors approved at AGM on 27 May 2022.
No person entitled to exercise the option or performance rights had or has any right by virtue of the option or performance
right to participate in any share issue of the Company or of any other body corporate.
Shares issued on the exercise of options or performance rights
There were no ordinary shares of Elixinol Wellness Limited issued on the exercise of performance rights during the year
ended 31 December 2022 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the
Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company
or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 26 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
22
Elixinol Wellness Limited
Directors' report
31 December 2022
The directors are of the opinion that the services as disclosed in note 26 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants (including Independence Standards) issued by the Accounting Professional and
Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-
making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
●
Officers of the Company who are former partners of BDO Audit Pty Ltd
There are no officers of the Company who are former partners of BDO Audit Pty Ltd.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
This 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
___________________________
Helen Wiseman
Independent Non-Executive Director and Chair
27 February 2023
23
Tel: +61 2 9251 4100
Fax: +61 2 9240 9821
www.bdo.com.au
Level 11, 1 Margaret Street
Sydney NSW 2000
Australia
DECLARATION OF INDEPENDENCE BY LEAH RUSSELL TO THE DIRECTORS OF ELIXINOL WELLNESS
LIMITED
As lead auditor of Elixinol Wellness Limited for the year ended 31 December 2022, I declare that, to
the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Elixinol Wellness Limited and the entities it controlled during the
period.
Leah Russell
Director
BDO Audit Pty Ltd
Sydney, 27 February 2023
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation.
Elixinol Wellness Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 31 December 2022
Revenue
Other income
Interest income calculated using the effective interest method
Expenses
Raw materials and consumables used and processing expenses
Employee benefits expenses and Directors' fees
Share-based payments
Depreciation and amortisation expense
Impairment of intangibles
Impairment of other assets
Professional services expenses
Sales and marketing expenses
Administrative expenses
Distribution costs
Finance costs
Loss before income tax benefit/(expense)
Income tax benefit/(expense)
Loss after income tax benefit/(expense) for the year attributable to the owners
of Elixinol Wellness Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year attributable to the owners of Elixinol
Wellness Limited
Note
2022
$'000
Group
2021
$'000
5
6
7
7
7
7
8
7,055
9,338
502
22
2,429
47
(3,817)
(5,542)
(241)
(721)
(234)
(786)
(2,150)
(1,478)
(2,294)
(814)
(71)
(4,442)
(9,661)
(194)
(1,490)
(186)
(3,679)
(2,379)
(3,062)
(3,099)
(620)
(92)
(10,569)
(17,090)
(2)
65
(10,571)
(17,025)
411
411
367
367
(10,160)
(16,658)
Cents
Cents
Basic loss per share
Diluted loss per share
35
35
(3.34)
(3.34)
(5.41)
(5.41)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
25
Elixinol Wellness Limited
Consolidated statement of financial position
As at 31 December 2022
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax refund due
Prepayments, deposits and other
Total current assets
Non-current assets
Trade and other receivables
Investments accounted for using the equity method
Property, plant and equipment
Right-of-use assets
Intangibles
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Lease liabilities
Employee benefits
Accrued expenses
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note
2022
$'000
9
10
11
8
12
10
13
14
15
16
17
18
19
20
19
20
Group
2021
$'000
12,649
2,970
2,201
541
1,227
19,588
183
2,617
1,308
1,173
463
5,744
2,864
3,974
1,740
59
675
9,312
83
2,826
375
737
152
4,173
13,485
25,332
1,377
22
320
697
216
808
3,440
250
637
887
2,208
94
428
747
229
1,009
4,715
250
1,290
1,540
4,327
6,255
9,158
19,077
21
22
218,122
9,682
(218,646)
218,058
9,094
(208,075)
9,158
19,077
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
26
Elixinol Wellness Limited
Consolidated statement of changes in equity
For the year ended 31 December 2022
Group
Foreign
currency
translation
reserve
$'000
Issued
capital
$'000
Share-based
payments
reserve
$'000
Accumulated
losses
$'000
Total equity
$'000
Balance at 1 January 2021
217,730
8,308
663
(191,050)
35,651
Loss after income tax benefit for the year
Other comprehensive income for the year, net
of tax
Total comprehensive (loss)/income for the year
-
-
-
-
367
367
-
-
-
(17,025)
(17,025)
-
367
(17,025)
(16,658)
Transactions with owners in their capacity as
owners:
Share-based payments (note 36)
Share issue transaction costs (note 21)
438
(110)
-
-
(244)
-
-
-
194
(110)
Balance at 31 December 2021
218,058
8,675
419
(208,075)
19,077
Group
Foreign
currency
translation
reserve
$'000
Issued
capital
$'000
Share-based
payments
reserve
$'000
Accumulated
losses
$'000
Total equity
$'000
Balance at 1 January 2022
218,058
8,675
419
(208,075)
19,077
Loss after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive (loss)/income for the year
Transactions with owners in their capacity as
owners:
Share-based payments (note 36)
-
-
-
-
411
411
-
-
-
(10,571)
(10,571)
-
411
(10,571)
(10,160)
64
-
177
-
241
Balance at 31 December 2022
218,122
9,086
596
(218,646)
9,158
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
27
Elixinol Wellness Limited
Consolidated statement of cash flows
For the year ended 31 December 2022
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Government grants
Interest received
Interest and other finance costs paid
Income taxes refunded
Note
6
2022
$'000
6,999
(15,989)
364
22
(71)
523
Group
2021
$'000
9,650
(24,070)
354
51
(92)
36
Net cash used in operating activities
34
(8,152)
(14,071)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Loans to other entities
Proceeds from disposal of property, plant and equipment
Net cash from/(used in) investing activities
Cash flows from financing activities
Share issue transaction costs
Repayment of lease liabilities
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
10
21
(5)
(7)
(1,148)
291
(869)
(160)
(132)
-
464
172
-
(757)
(110)
(1,047)
(757)
(1,157)
(9,778)
12,649
(7)
(15,056)
27,743
(38)
Cash and cash equivalents at the end of the financial year
9
2,864
12,649
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
28
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 1. General information
The financial statements cover Elixinol Wellness Limited as a Group consisting of Elixinol Wellness Limited ('Company' or
'parent entity') and the entities it controlled at the end of, or during, the period ('Group'). The financial statements are
presented in Australian dollars, which is Elixinol Wellness Limited's functional and presentation currency.
On 17 May 2021, with approval of the shareholders at the Annual General Meeting, the company changed its name from
Elixinol Global Limited to Elixinol Wellness Limited.
Elixinol Wellness Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Level 12
680 George Street
Sydney NSW 2000
A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is
not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 27 February 2023. The
directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Going concern
The annual financial statements have been prepared on a going concern basis, which contemplates the continuation of
normal business operations and the realisation of assets and settlement of liabilities in the normal course of business.
During the year ended 31 December 2022, the Group incurred a net loss before tax of $10,571,000 (31 December 2021:
$17,025,000). During the year, net cash outflows from operating activities were $8,152,000 (31 December 2021:
$14,071,000).
The year was another significantly challenging period for the Group. The CBD industry experienced far less growth in FY2022
than was generally expected. This was due in part to the slow opening of the retail sector from the pandemic, but also a lack
of regulatory clarity in many of the major CBD markets, and a saturated industry which resulted in an over-supply of product
and reduced pricing.
On 29 November 2022, the Group announced a proposed acquisition of The Sustainable Nutrition Group (‘TSN’) that will
increase the size and scale of the Australia operations and enable economies of scale to be realised through the combined
group. The proposed acquisition also included a commitment of up to $2,000,000 with $1,148,000 of this drawdown occurring
prior to 31 December 2022.
As at 31 December 2022, the Group had net assets of $9,158,000 including cash of $2,864,000. Also, Elixinol Americas
lodged an application for refundable tax credits in FY2021 which were made available under the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act). The value of the credits calculated through to 31 December 2022, yet to be received
totals approximately $1.5m (US$1.0m). Subsequent to year end, $1.0m was received from the Internal Revenue Service in
January 2023 with the remaining $0.5m expected to be received in early FY2023, to further boost the Group cash reserves.
The Directors regularly monitor the Group’s cash position on an ongoing basis and continues to explore debt funding and
capital markets to support the going concern and working capital requirements associated with its revenue base.
29
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 2. Significant accounting policies (continued)
In addition, the net loss before tax has been significantly reduced in FY2022 from that recorded in FY2021 and the net cash
outflow from operating activities reduced to $1,527,000 (excluding non-recurring transaction and severance costs) in Q4
FY2022 as expenditure was reduced and the scale of the business operations was reset.
The current cash flow forecasts support the business as a going concern and the Group has plans in place to defer
discretionary expenditure including reducing headcount if necessary and corporate costs in the current cash flow forecast
period to take steps to moderate the cash outflows of the business as needed. In addition, the Group has a history of raising
capital as required and is exploring options to raise additional capital and or debt funding.
However, there is a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going
concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of
business.
Basis of preparation
These general purpose 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, as appropriate
for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of the 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 3.
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 31.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Elixinol Wellness Limited as
at 31 December 2022 and the results of all subsidiaries for the period then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group 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 to direct the activities of the entity. 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 entities in the Group 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.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable
to the parent.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling
interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises
the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in
profit or loss.
30
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 2. Significant accounting policies (continued)
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same basis
as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation
of resources to operating segments and assessing their performance. Refer to note 4.
Foreign currency translation
Foreign currency transactions
Foreign currency transactions are translated into the individual entity's functional currency 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 financial period-end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting
date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange
rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences
are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
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. For each contract with a customer, the Group: identifies the contract with a
customer; identifies the performance obligations in the contract; determines the transaction price which takes into account
estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance
obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and
recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer
of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts,
rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates
are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration
is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues
until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject
to the constraining principle are recognised as a refund liability.
Sale of goods - hemp products
Sale of goods revenue is recognised when its performance obligation to transfer control of the goods to the customer is
satisfied which occurs either at the point of sale or when delivery is completed by way of shipping the product to the location
specified by the customer and the ownership risks have therefore passed to the customer pursuant to the contract.
The Group sells a variety of hemp-based products in the wholesale and eCommerce market. These sales relate to both the
manufacture and distribution of hemp-derived finished products and hemp food based products manufactured by the Group.
The Group does not act in the capacity as agent in any customer contracts. General invoices are issued to customers on
delivery with 30 day payment terms.
Government grants
Grants from the government are recognised at their fair value when there is reasonable assurance that the grant will be
received and the consolidated entity will comply with all attached conditions. Government grants relating to costs are deferred
and recognised in profit or loss as other income over the periods necessary to match them with the costs that they are
intended to compensate.
31
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 2. Significant accounting policies (continued)
Interest
Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Research activities
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
An income tax benefit will arise for the financial year where an income tax loss is incurred and, where permitted to do so, is
carried-back against a qualifying prior period’s tax payable to generate a refundable tax offset.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the
timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable
future
●
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.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable
that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on
either the same taxable entity or different taxable entities which intend to settle simultaneously.
Elixinol Wellness Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax
consolidated group under the tax consolidation regime. In addition, Elixinol Wellness Limited (the 'head entity') and its wholly-
owned US subsidiaries have also formed an income tax consolidation group within the US jurisdiction. Therefore, the head
entity and each subsidiary (in both Australian and the US) in each tax consolidated group continue to account for their own
current and deferred tax amounts.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated groups.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax consolidated groups. The tax funding arrangement ensures that the
intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a
contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
32
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 2. Significant accounting policies (continued)
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.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Trade and other receivables
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
- 45 days.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The
provision rates are based on days past due for groupings of various customers with similar loss patterns (i.e. by product type,
country). The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable
information that is available at the reporting date about past events, current conditions and forecasts of future economic
conditions. Generally, trade receivables are written-off if past due for more than 90 days and are not subject to enforcement
activity.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Inventories
Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on a 'first in first
out' basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate
proportion of variable and fixed overhead expenditure based on normal operating capacity. 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.
Associates
Associates are entities over which the Group has significant influence but not control or joint control. Investments in
associates are accounted for using the equity method. Under the equity method, the share of the profits or losses of the
associate is recognised in profit or loss and the share of the movements in equity is recognised in other comprehensive
income. Investments in associates are carried in the statement of financial position at cost plus post-acquisition changes in
the Group's share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the
investment and is neither amortised nor individually tested for impairment. Dividends received or receivable from associates
reduce the carrying amount of the investment.
When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any unsecured
long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on
behalf of the associate.
The Group discontinues the use of the equity method upon the loss of significant influence over the associate and recognises
any retained investment at its fair value. Any difference between the associate's carrying amount, fair value of the retained
investment and proceeds from disposal is recognised in profit or loss.
33
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 2. Significant accounting policies (continued)
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated using diminishing value bases, so as to write off the net cost over its expected useful life. The
following bases are used in the calculation of depreciation:
Leasehold improvements
Furniture, fittings and equipment
Computer equipment
Machinery
over the unexpired period of the lease
12 to 30%
30 to 50%
20%
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets,
whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the
lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for
any remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms
of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as
incurred.
Intangible assets
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.
Website and software
Significant costs associated with the development of the revenue generating aspects of the website, including the capacity
of placing orders, are deferred and amortised on a straight-line basis over the period of their expected benefit, being their
finite useful life of 3 years.
Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected
benefit, being their finite life of 4 years.
34
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 2. Significant accounting policies (continued)
Patents and trademarks
Significant costs associated with patents and trademarks are capitalised as an asset. These costs are not subsequently
amortised as they are considered to be indefinite life assets because there is no foreseeable limit to the cash flows generated
by them and they have no legal, contractual, regulatory, economic, or competitive limiting factors. Patents and trademarks
are tested annually for impairment.
Customer relationships
Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their
expected benefit, being their finite useful life of 5 years.
Brand names
Brand names acquired in a business combination are not amortised as they are considered to be indefinite life assets
because there is no foreseeable limit to the cash flows generated by them and they have no legal, contractual, regulatory,
economic, or competitive limiting factors. Brand names are tested annually for impairment.
Impairment of non-financial assets
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.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts
are unsecured and are usually paid within 30 days of recognition.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration
(or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods
or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is
earlier). Contract liabilities are recognised as revenue when the Group performs under the contract.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or,
if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed
payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected
to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably
certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or
a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset
is fully written down.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in
the period in which they are incurred.
35
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 2. Significant accounting policies (continued)
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 wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the
rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
the Monte Carlo 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 are 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.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
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.
Fair value measurement
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.
Issued capital
Ordinary shares are classified as equity.
36
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 2. Significant accounting policies (continued)
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.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Elixinol Wellness Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting 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 2022. The Group's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group,
are set out below.
AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-Current
and AASB 2022-6 Amendments to Australian Accounting Standards - Non-current Liabilities with Covenants
AASB 2020-1 was issued in March 2020 and is applicable to annual periods beginning on or after 1 January 2023, as
extended by AASB 2020-6. Early adoption is permitted. AASB 2022-6 was issued in December 2022 and is applicable to
annual periods beginning on or after 1 January 2023. Early adoption is permitted where AASB 2020-1 is also early adopted.
37
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 2. Significant accounting policies (continued)
These standards amend AASB 101 ‘Presentation of Financial Statements’ to clarify requirements for the presentation of
liabilities in the statement of financial position as current or non-current. The amendments clarify that a liability is classified
as non-current if an entity has the right at the end of the reporting period to defer settlement of the liability for at least 12
months after the reporting period. If the deferral right is subject to the entity complying with covenants in the loan arrangement
based on information up to and including reporting date, the deferral right will exist where the entity is able to comply with
the covenant on or before the end of the reporting date even if compliance is assessed after the reporting date. The deferral
right will be deemed to exist at reporting date if the entity is required to comply with the covenant only after the reporting date
based on post-reporting date information. Additional disclosure is required about loan arrangements classified as non-current
liabilities in such circumstances which enables users of financial statements to understand the risk that the liabilities could
become repayable within twelve months after the reporting period. Classification of a liability as non-current is unaffected by
the likelihood that the entity will exercise its right to defer settlement of the liability for at least 12 months after the reporting
date or even if the entity settles the liability prior to issue of the financial statements. The meaning of settlement of a liability
is also clarified.
Note 3. Critical accounting judgements, estimates 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 (refer to the respective notes) within the next financial year are
discussed below.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering all the possible financial effects and impacts that the COVID-19 pandemic has
had, or may have, on the Group based on known information and how this impacts the measurement, presentation and
disclosure in the Group year report. This consideration extends to the nature of the products and services offered, customers,
supply chain, staffing and geographic regions in which the Group operates.
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, the impact of the
COVID-19 pandemic and forward-looking information that is available. The allowance for expected credit losses is calculated
based on the information available at the time of preparation. The actual credit losses in future years may be higher or lower.
Provision for impairment of inventories
The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the
provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that
affect inventory obsolescence.
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 assessing the value of the asset
at fair value less costs of disposal and using value-in-use models which incorporate a number of key estimates and
assumptions. Refer to note 16.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining
the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business
for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based
on the Group's current understanding of the tax law. Where the final tax outcome of these matters is different from the
carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such
determination is made. Refer to note 8.
38
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future
taxable amounts will be available to utilise those temporary differences and losses. Refer to note 8.
Note 4. Operating segments
Identification of reportable operating segments
The Group is organised into three operating segments: Americas, Australia and Rest of World. There is one single business
segment, being the sale of nutraceutical and related hemp products. These operating segments are based on the internal
reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers
('CODM')) in assessing performance and in determining the allocation of resources. There is no aggregation of operating
segments.
The CODM reviews Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation), adjusted for impairment
and share-based payments. The accounting policies adopted for internal reporting to the CODM are consistent with those
adopted in the financial statements.
The information provided to the CODM is on a monthly basis.
Types of products and services
The principal products and services of each of these operating segments are as follows:
Americas
Australia
Rest of World
This includes the trading results of Elixinol LLC ('Elixinol Americas') and its investments and
joint ventures in the US through the manufacture and distribution of hemp-derived
cannabidiol (‘CBD’) products.
This includes the results from the operations of Elixinol Wellness (Byron Bay) Pty Ltd
(formerly known as Hemp Foods Australia Pty Ltd) ('Hemp Foods Australia').
This includes the results from trading operations of Elixinol BV and Elixinol Ltd (together
'Elixinol Europe') and through the manufacture and distribution of hemp-derived CBD
products, and licencing agreements in place across the rest of the World.
'Unallocated' represents corporate, being Elixinol Wellness Limited (corporate).
Intersegment transactions
Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable
that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Intersegment loans are
eliminated on consolidation.
Major customers
During the year ended 31 December 2022, 22% of sales were derived from three major customers (31 December 2021: 17%
of sales were derived from three major customers).
39
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 4. Operating segments (continued)
Operating segment information - Continuing operations
Group - 2022
Revenue
Sales to external customers
Licence revenue
Total revenue
Adjusted EBITDA
Depreciation and amortisation
Impairment of intangibles
Impairment of assets
Interest income
Finance costs
Share-based payments
Loss before income tax expense
Income tax expense
Loss after income tax expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Group - 2021
Revenue
Sales to external customers
Total revenue
Adjusted EBITDA
Depreciation and amortisation
Impairment of intangibles
Impairment of assets
Interest income
Finance costs
Share-based payments
Loss before income tax benefit
Income tax benefit
Loss after income tax benefit
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Americas
$'000
Australia Rest of World Unallocated
$'000
$'000
$'000
3,318
-
3,318
3,691
-
3,691
-
46
46
-
-
-
(3,568)
(704)
(135)
(4,131)
6,578
2,832
618
3,457
1,343
1,388
101
1,495
Americas
$'000
Australia Rest of World Unallocated
$'000
$'000
$'000
4,783
4,783
4,086
4,086
469
469
-
-
(5,492)
(203)
(2,321)
(3,480)
8,981
2,960
793
12,598
2,599
1,502
335
1,819
40
Total
$'000
7,009
46
7,055
(8,538)
(721)
(234)
(786)
22
(71)
(241)
(10,569)
(2)
(10,571)
13,485
13,485
4,327
4,327
Total
$'000
9,338
9,338
(11,496)
(1,490)
(186)
(3,679)
47
(92)
(194)
(17,090)
65
(17,025)
25,332
25,332
6,255
6,255
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 4. Operating segments (continued)
Geographical information
Americas
Australia
Rest of World
Unallocated
Sales to external customers
2021
$'000
2022
$'000
Geographical non-current
assets
2021
$'000
2022
$'000
3,318
3,691
46
-
4,783
4,086
469
-
3,404
544
-
224
4,663
758
-
323
7,055
9,338
4,172
5,744
The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets,
post-employment benefits assets and rights under insurance contracts.
Note 5. Revenue
Sale of goods
Licence revenue
Revenue
2022
$'000
7,009
46
Group
2021
$'000
9,338
-
7,055
9,338
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Group - 2022
Geographical regions
Americas
Australia
Rest of World
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
* Other includes bulk and private label
eCommerce
$'000
Retail
$'000
Other *
$'000
2,314
427
-
852
2,726
-
2,741
3,578
2,741
-
3,578
-
2,741
3,578
152
538
46
736
690
46
736
Total
$'000
3,318
3,691
46
7,055
7,009
46
7,055
41
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 5. Revenue (continued)
Group - 2021
Geographical regions
Americas
Australia
Rest of World
Timing of revenue recognition
Goods transferred at a point in time
* Other includes bulk and private label.
Note 6. Other income
Net foreign exchange (loss)/gain
Net gain/(loss) on disposal of property, plant and equipment
Government grants (COVID-19)
Government grants
Sub-lease income and other
eCommerce
$'000
Retail
$'000
Other *
$'000
3,027
470
154
1,503
2,821
315
253
795
-
Total
$'000
4,783
4,086
469
3,651
4,639
1,048
9,338
3,651
4,639
1,048
9,338
2022
$'000
(41)
30
-
55
458
502
Group
2021
$'000
84
(76)
1,920
64
437
2,429
Government grants (COVID-19)
During the year, the Group received JobKeeper support payments from the Australian Government amounting to $nil (31
December 2021: $42,000) which were passed on to eligible employees. These were been recognised as government grants
in the financial statements and recorded as other income over the period in which the related employee benefits were
recognised as an expense. These grants were taxable.
During the year, the Group received NSW COVID-19 Business Grant and NSW COVID-19 JobSaver Payment from the NSW
Government amounting to $nil (31 December 2021: $248,000) which were in relation to COVID-19 relief from decline in
turnover from extended lockdowns impacting the business. These grants were recognised as government grants in the
financial statements and recorded as other income. These grants were taxable.
During the year, the Group received US Employee retention credits totaling $309,000 which were released from the 2021
accrued balance. (31 December 2021: $1,630,000 accrued US Employee Retention Credits) which is in relation to the
application for refundable tax credits which were made available under the Coronavirus Aid, Relief, and Economic Security
Act (CARES Act). Due to an extensive processing backlog at the Internal Revenue Service ('IRS') the cash was received in
the current financial year.
Government grants
During the year, the Group received a Business Growth Grant from the Australian Government amounting to $15,000 (31
December 2021: $64,000) which was in relation to marketing and export of goods. This grant has been recognised as
government grants in the financial statements and recorded as other income. The grant is taxable.
During the year, the Group received Service NSW flood recovery grant of $8,000 (31 December 2021: $nil) which was in
relation to damages to flood affected areas of Northern NSW. This grant has been recognised as government grants in the
financial statements and recorded as other income. The grant is taxable.
42
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 6. Other income (continued)
During the year, the Group received the Export Market Development Grant ('EMDG') $25,000 (31 December 2021: $nil).
Grant total over 3 years is $73,800 which was in relation to promotional activities for eligible products in foreign countries.
This grant has been recognised as government grants in the financial statements and recorded as other income. The grant
is taxable.
During the year, the Group received Wage Subsidies $7,000 (31 December 2021: $nil) which was in relation to hiring eligible
job-seekers. This grant has been recognised as government grants in the financial statements and recorded as other income.
The grant is taxable.
Note 7. Expenses
Loss before income tax includes the following specific expenses:
Cost of sales
Cost of sales
Depreciation and amortisation
Property, plant and equipment (note 14)
Right-of-use assets (note 15)
Intangibles (note 16)
Total depreciation and amortisation
Impairment of intangibles
Website and software
Patents and trademarks
Total impairment of intangibles
Impairment of other assets
Inventory
Leasehold improvements
Motor vehicles
Computer equipment
Machinery
Land and buildings - right-of-use
Prepayments, deposits and other
Total impairment of other assets
Finance costs
Interest and finance charges paid/payable on lease liabilities
Interest and finance charges paid/payable on Premium Funding
Finance costs expensed
Superannuation expense
Defined contribution superannuation expense
43
2022
$'000
Group
2021
$'000
3,817
4,442
177
453
91
721
234
-
234
253
-
-
-
530
3
-
786
52
19
71
346
713
431
1,490
204
(18)
186
2,778
(42)
3
11
596
-
333
3,679
79
13
92
219
195
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 8. Income tax
Income tax expense/(benefit)
Current tax
Adjustment recognised for prior periods
Aggregate income tax expense/(benefit)
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate
Loss before income tax benefit/(expense)
Tax at the statutory tax rate of 25%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Impairment of assets
Other non-deductible permanent differences
Adjustment recognised for prior periods
Current year tax losses not recognised
Current year temporary differences not recognised
Difference in overseas tax rates
Income tax expense/(benefit)
2022
$'000
2
-
2
Group
2021
$'000
4
(69)
(65)
(10,569)
(17,090)
(2,642)
(4,273)
-
11
(2,631)
-
4,558
(2,028)
103
(227)
17
(4,483)
(69)
6,157
(2,137)
467
2
(65)
As a consequence of the application of anti-inversion rules in the USA applying to the Group, the Group is treated as a
resident of the USA for US tax purposes and a resident of Australia for Australian income tax purposes.
Tax losses not recognised
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available
against which the losses can be utilised.
The Group has a $24,077,000 (31 December 2021: $18,140,000) of tax effected revenue losses which have not been brought
to account at 31 December 2022.
Income tax refund due
Income tax refund due
Note 9. Cash and cash equivalents
Current assets
Cash at bank
Cash on deposit
44
2022
$'000
Group
2021
$'000
59
541
2022
$'000
Group
2021
$'000
2,746
118
12,649
-
2,864
12,649
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 10. Trade and other receivables
Current assets
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Loan to The Sustainable Nutrition Group
GST recoverable
Employee tax credits receivable
Receivable from sub-lease
Non-current assets
Receivable from sub-lease
2022
$'000
759
(140)
619
564
1,148
128
1,416
99
Group
2021
$'000
1,001
(468)
533
562
-
133
1,647
95
3,974
2,970
83
183
Allowance for expected credit losses
The Group has recognised a net profit of $261,000 (31 December 2021: net loss of $62,000) in profit or loss in respect of
the expected credit losses for the year ended 31 December 2022.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Expected credit loss rate
2021
%
2022
%
Carrying amount
2021
$'000
2022
$'000
Allowance for expected
credit losses
2021
$'000
2022
$'000
Group
Not overdue
1 to 30 days overdue
31 to 60 days overdue
61 to 90 days overdue
Over 90 days overdue
1%
1%
6%
8%
91%
1%
1%
6%
8%
99%
417
173
14
5
150
759
278
232
11
14
466
1,001
2
1
1
-
136
140
2022
$'000
468
64
(67)
(325)
140
3
2
1
1
461
468
Group
2021
$'000
1,249
62
(843)
-
468
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Unused amounts reversed
Closing balance
45
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 11. Inventories
Current assets
Raw materials - at cost
Less: Provision for impairment
Work in progress - at cost
Less: Provision for impairment
Finished goods - at cost
Less: Provision for impairment
Stock in transit - at cost
2022
$'000
87
-
87
621
(172)
449
1,016
(30)
986
Group
2021
$'000
7,514
(7,331)
183
302
(266)
36
2,176
(380)
1,796
218
186
1,740
2,201
Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value. Net realisable
values have been reviewed taking into account estimated future demand of finished goods, expiration dates on inventory
and current market prices. With the transition to a fully outsourced, remaining raw materials on hand at 31 December 2021
fully impaired were scrapped or disposed of in Q1 FY2022.
Note 12. Prepayments, deposits and other
Current assets
Prepayments
Security deposits
Note 13. Investments accounted for using the equity method
Non-current assets
Investment in associate - Altmed Pets LLC
2022
$'000
509
166
675
Group
2021
$'000
1,057
170
1,227
2022
$'000
Group
2021
$'000
2,826
2,617
46
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 13. Investments accounted for using the equity method (continued)
Interests in associates
Interests in associates are accounted for using the equity method of accounting. Information relating to associates of the
Group are set out below:
Principal place of business /
Country of incorporation
Ownership interest
2022
2021
%
%
United States of America
25.43%
25.43%
Name
Altmed Pets LLC*
*
Holding through Elixinol LLC
Summarised financial information
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Summarised statement of profit or loss and other comprehensive income
Revenue
Expenses
Loss before income tax
Other comprehensive income
Total comprehensive loss
Reconciliation of the Group's carrying amount
Opening carrying amount
Share of loss after income tax
Reversal of impairment of investment
Related party eliminations
Foreign exchange
Closing carrying amount
47
Altmed Pets LLC
2021
$'000
2022
$'000
2,388
767
2,207
383
3,155
2,590
2,133
290
1,552
-
2,423
1,552
732
1,038
14,896
(15,182)
13,035
(13,510)
(286)
(475)
-
-
(286)
(475)
2,617
(73)
73
-
209
2,316
(121)
121
96
205
2,826
2,617
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 14. Property, plant and equipment
Non-current assets
Leasehold improvements - at cost
Less: Accumulated depreciation
Less: Impairment
Furniture, fittings and equipment - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
Computer equipment - at cost
Less: Accumulated depreciation
Machinery - at cost
Less: Accumulated depreciation
Less: Impairment
2022
$'000
279
(127)
(124)
28
134
(119)
15
-
-
-
707
(693)
14
1,929
(848)
(763)
318
Group
2021
$'000
364
(183)
(124)
57
162
(126)
36
59
(44)
15
693
(639)
54
5,776
(1,063)
(3,567)
1,146
375
1,308
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Leasehold
improve-
Furniture,
fittings and
ments equipment
$'000
$'000
Motor
Computer
vehicles equipment Machinery
$'000
$'000
$'000
Group
Balance at 1 January 2021
Additions
Disposals
Exchange differences
Impairment of assets
Depreciation expense
Balance at 31 December 2021
Additions
Disposals
Exchange differences
Impairment of assets
Depreciation expense
Balance at 31 December 2022
Land
$'000
376
-
(401)
25
-
-
-
-
-
-
-
-
-
Total
$'000
2,471
184
(571)
138
(568)
(346)
1,308
14
(60)
53
(763)
(177)
1,701
171
(156)
116
(596)
(90)
1,146
4
(49)
52
(763)
(72)
318
375
79
-
-
(6)
42
(58)
57
-
(3)
-
-
(26)
28
72
5
(3)
(3)
-
(35)
36
7
(3)
-
-
(25)
15
29
-
-
2
(3)
(13)
15
-
(5)
-
-
(10)
-
214
8
(11)
4
(11)
(150)
54
3
-
1
-
(44)
14
48
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 15. Right-of-use assets
Non-current assets
Land and buildings - right-of-use
Less: Accumulated depreciation
Less: Impairment
2022
$'000
3,351
(1,910)
(704)
Group
2021
$'000
4,039
(2,162)
(704)
737
1,173
The Group leases land and buildings for its offices, warehouses and retail outlets under agreements of between 2 to 5 years
with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are
renegotiated.
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Group
Balance at 1 January 2021
Lease liability remeasured
Disposals
Exchange differences
Depreciation expense
Balance at 31 December 2021
Modification of lease assumptions
Exchange differences
Impairment of assets
Depreciation expense
Balance at 31 December 2022
For other AASB 16 and lease related disclosures refer to the following:
●
●
●
●
Refer to note 7 for interest on lease liabilities and other lease payments;
Refer to note 20 for lease liabilities at 31 December 2022;
Refer to note 24 for maturity analysis of lease liabilities; and
Refer to the consolidated statement of cash flows for repayment of lease liabilities.
Land and
buildings -
right-
of-use
$'000
1,412
450
(36)
60
(713)
1,173
(12)
32
(3)
(453)
737
49
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 16. Intangibles
Non-current assets
Website and software - at cost
Less: Accumulated amortisation
Less: Impairment
Patents and trademarks - at cost
Less: Impairment
Customer relationships - at cost
Less: Accumulated amortisation
Less: Impairment
2022
$'000
1,049
(808)
(241)
-
152
-
152
-
-
-
-
Group
2021
$'000
1,029
(672)
(41)
316
149
(2)
147
2,475
(1,256)
(1,219)
-
152
463
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Group
Balance at 1 January 2021
Additions
Disposals
Exchange differences
Impairment of assets
Amortisation expense
Balance at 31 December 2021
Additions
Exchange differences
Impairment of assets
Amortisation expense
Balance at 31 December 2022
Website and Patents and
trademarks
$'000
software
$'000
Customer
relationships
$'000
657
127
-
25
(204)
(289)
316
-
9
(234)
(91)
-
123
23
(17)
-
18
-
147
5
-
-
-
152
137
-
-
5
-
(142)
-
-
-
-
-
-
Total
$'000
917
150
(17)
30
(186)
(431)
463
5
9
(234)
(91)
152
50
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 17. Trade and other payables
Current liabilities
Trade payables
GST and sales tax payable
Credit cards
Other payables
Refer to note 24 for further information on financial instruments.
Note 18. Contract liabilities
Current liabilities
Contract liabilities
Reconciliation
Reconciliation of the written down values at the beginning and end of the current and
previous financial year are set out below:
Opening balance
Payments received in advance
Transfer to revenue - performance obligations satisfied in previous periods
Closing balance
2022
$'000
1,076
28
53
220
Group
2021
$'000
1,362
43
179
624
1,377
2,208
2022
$'000
Group
2021
$'000
22
94
94
22
(94)
22
89
94
(89)
94
Unsatisfied performance obligations
The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the
reporting period was $22,000 as at 31 December 2022 ($94,000 as at 31 December 2021) and is expected to be recognised
as revenue in future periods as follows:
Within 6 months
Note 19. Borrowings
Current liabilities
Insurance premium funding
Non-current liabilities
Related party loan from Raw With Life
51
2022
$'000
22
2022
$'000
Group
2021
$'000
94
Group
2021
$'000
320
428
250
250
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 19. Borrowings (continued)
Refer to note 24 for further information on financial instruments.
Prior to its acquisition by Elixinol Wellness Limited, Hemp Foods Australia entered into a Shareholder Loan Deed with Raw
With Life, an entity controlled by Mr Paul Benhaim, whereby Raw With Life agreed to lend $250,000 to Hemp Foods Australia.
The loan is made on an unsecured basis, with no interest currently payable. Hemp Foods Australia undertakes to repay the
loan subject to achievement of predefined performance milestones. This is a related party agreement, as Raw With Life holds
(as at the date of this report) approximately 9.4% of the shares in Elixinol Wellness Limited. The Group assessed the fair
value of the loan at the reporting date and the amount is not materially different from its carrying value.
Note 20. Lease liabilities
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Lease make good provision
2022
$'000
Group
2021
$'000
697
747
568
69
637
1,223
67
1,290
Refer to note 24 for further information on financial instruments.
Note 21. Issued capital
2022
Shares
2021
Shares
2022
$'000
Group
2021
$'000
Ordinary shares - fully paid
316,132,461 315,778,066
218,122
218,058
Movements in ordinary share capital
Details
Date
Shares
Issue price
$'000
Balance
Performance rights issued
Performance rights issued
Performance rights issued
Performance rights issued
Performance rights issued
Share issue transaction costs
1 January 2021
31 January 2021
28 February 2021
31 May 2021
31 August 2021
21 October 2021
313,227,117
468,750
854,430
379,747
379,272
468,750
$0.000
$0.000
$0.000
$0.000
$0.000
Balance
Issue of shares on exercise of performance rights
31 December 2021
28 February 2022
315,778,066
354,395
$0.000
Balance
31 December 2022
316,132,461
217,730
87
135
60
69
87
(110)
218,058
64
218,122
Balance of issued capital reflects Treasury shares on acquisition of Altmed Pet LLC on 24 April 2019 of 133,110 shares.
Treasure shares are ordinary shares of the parent entity held by subsidiaries and /or associates
52
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 21. Issued capital (continued)
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.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide
returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost
of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding
relative to the current Company's share price at the time of the investment.
The capital risk management policy remains unchanged from the 31 December 2021 Annual Report.
Note 22. Reserves
Foreign currency translation reserve
Share-based payments reserve
2022
$'000
9,086
596
Group
2021
$'000
8,675
419
9,682
9,094
Foreign currency translation reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their
remuneration, and other parties as part of their compensation for services.
Note 23. Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 24. Financial instruments
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.
53
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 24. Financial instruments (continued)
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 and evaluates financial risks within the Group's operating units. Finance provides
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.
In addition, the Group is exposed to non-financial instrument risk on the translation of foreign subsidiaries from their functional
currency to the presentation currency. This presentation risk is separate to the foreign currency risk dealt with in this note.
The carrying amount of the Group's foreign currency denominated financial assets and financial liabilities at the reporting
date were as follows:
Group
US dollars
Euros
2022
$'000
-
-
-
Assets
2021
$'000
-
12
12
2022
$'000
217
1
218
Liabilities
2021
$'000
184
-
184
The Group had net liabilities denominated in foreign currencies of $218,000 (assets of $nil less liabilities of $218,000) as at
31 December 2022 (31 December 2021: net liabilities of $172,000 (assets of $12,000 less liabilities of $184,000)). Based on
this exposure, had the Australian dollar weakened or strengthened against these foreign currencies with all other variables
held constant, the Group's profit before tax for the period would have been as follows.
The sensitivity analysis carried out by the Group considers the effects on its trade receivables and payables of 5% increase
and decrease between the relevant foreign currency and the Australian dollar (reporting currency).
AUD strengthened
AUD weakened
Group - 2022
% change
Effect on
profit before
tax
$'000
Effect on
equity
$'000
US dollars
Euros
5%
5%
11
-
11
11
-
11
% change
5%
5%
Effect on
profit before
tax
$'000
Effect on
equity
$'000
(11)
-
(11)
(11)
-
(11)
54
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 24. Financial instruments (continued)
AUD strengthened
AUD weakened
Group - 2021
% change
Effect on
profit before
tax
$'000
Effect on
equity
$'000
US dollars
Euros
Pounds Sterling
5%
5%
5%
9
-
-
9
9
-
-
9
% change
5%
5%
5%
Effect on
profit before
tax
$'000
Effect on
equity
$'000
(10)
1
-
(9)
(10)
1
-
(9)
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 year and the spot rate at
the reporting date. A positive number indicates an increase in profit, a negative number indicates a decrease in profit. The
actual foreign exchange loss for the year ended 31 December 2022 was $41,000 (31 December 2021: gain of $84,000).
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group is not exposed to any significant interest rate risk.
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 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 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.
Consistent with our credit procedures we categorise our receivables based on days past due and we adjust our expected
credit losses in relation to those receivables as and when there is a change in days past due in expected receivables.
Expected credit loss is initially recognised in respect to a receivable when it is 30 days past due.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents)
to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast
cash flows and matching the maturity profiles of financial assets and liabilities.
55
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 24. Financial instruments (continued)
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.
Group - 2022
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Lease liability
Interest-bearing - fixed rate
Insurance premium funding
Total non-derivatives
Group - 2021
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Lease liability
Interest-bearing - fixed rate
Insurance premium funding
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
-
-
1,076
273
-
-
3.26%
697
568
8.30%
320
2,366
-
568
-
-
-
-
-
-
-
-
-
-
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
1,076
273
1,265
320
2,934
Remaining
contractual
maturities
$'000
-
-
1,362
803
-
-
-
-
3.29%
747
1,016
207
3.03%
428
3,340
-
1,016
-
207
-
-
-
-
-
1,362
803
1,970
428
4,563
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Note 25. Fair value measurement
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair
values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market
interest rate that is available for similar financial liabilities.
56
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 26. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by BDO Audit Pty Ltd, the auditor of
the Company, and its network firms:
Audit services - BDO Audit Pty Ltd
Audit or review of the financial statements
Other services - BDO Audit Pty Ltd
Taxation compliance services
Other advisory services
Other services - network firms
Taxation services
Other advisory services
Note 27. Contingent liabilities
The Group had no contingent liabilities as at 31 December 2022 and 31 December 2021.
Note 28. Commitments
Inventory purchase commitments
Committed at the reporting date but not recognised as liabilities, payable:
Inventory purchases under contract
2022
$
Group
2021
$
255,219
234,351
39,495
145,578
9,472
10,779
185,073
20,251
440,292
254,602
78,811
-
76,389
52,746
78,811
129,135
2022
$'000
Group
2021
$'000
1,081
71
In conjunction with the proposed acquisition of The Sustainable Nutruition Group ('TSN'), the Company has agreed to provide
a loan to TSN of up to $2.0m. A total of $1,148,000 was drawn down on this loan on the loan at 31 December 2022 with a
remaining commitment of $852,000 to be funded prior to closing of the scheme.
Note 29. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Share-based payments
57
2022
$
Group
2021
$
924,203
137,694
(26,283)
972,010
66,746
36,092
1,035,614
1,074,848
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 30. Related party transactions
Parent entity
Elixinol Wellness Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 32.
Associates and other investee
Interests in associates are set out in note 13.
Key management personnel
Disclosures relating to key management personnel are set out in note 29 and the remuneration report included in the
directors' report.
Transactions between the parent company, its subsidiaries and joint operations are eliminated on consolidation and are not
disclosed in this note.
Receivable from and payable to related parties
All transactions were made on normal commercial terms and conditions and at market rates.
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
2022
$
Group
2021
$
Non-current borrowings:
Loan from Raw With Life, an entity controlled by Paul Benhaim, to Hemp Foods Australia Pty
Ltd
250,000
250,000
Prior to its acquisition by Elixinol Wellness Limited, Hemp Foods Australia entered into a Shareholder Loan Deed with Raw
With Life, an entity controlled by Mr Paul Benhaim, whereby Raw With Life agreed to lend $250,000 to Hemp Foods Australia.
The loan is made on an unsecured basis, with no interest currently payable. Hemp Foods Australia undertakes to repay the
loan subject to achievement of predefined performance milestones. This is a related party agreement, as Raw With Life holds
(as at the date of this report) approximately 9.25% of the shares in Elixinol Wellness Limited. The Group assessed the fair
value of the loan at the reporting date and the amount is not materially different from its carrying value.
Loan transactions were made on negotiated terms and conditions.
Note 31. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive loss
2022
$'000
Parent
2021
$'000
(10,161)
(16,658)
(10,161)
(16,658)
58
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 31. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
2022
$'000
Parent
2021
$'000
2,634
12,265
10,657
20,895
1,286
1,365
1,499
1,818
218,800
596
(210,238)
218,735
419
(200,077)
9,158
19,077
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
Except for the deed of cross guarantee, as detailed in note 33, the parent entity had no other guarantees in relation to the
debts of its subsidiaries as at 31 December 2022 and 31 December 2021.
Contingent liabilities
The parent entity had no contingent liabilities as at 31 December 2022 and 31 December 2021.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 31 December 2022 and 31 December
2021.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the
following:
●
●
Investments in subsidiaries 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
Note 32. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 2:
Name
Elixinol LLC
EXL International Holdings LLC
Elixinol Wellness (Corporate Services) Pty Ltd
Elixinol Wellness (Byron Bay) Pty Ltd (trading as Hemp Foods
Australia)
Elixinol BV
Elixinol Ltd
Principal place of
business / Country of
incorporation
United States of America
United States of America
Australia
Australia
Netherlands
United Kingdom
Ownership interest
2022
2021
%
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
59
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 33. Deed of cross guarantee
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others:
Elixinol Wellness Limited
Elixinol Wellness (Corporate Services) Pty Ltd
Elixinol Wellness (Byron Bay) Pty Ltd
Elixinol LLC
EXL International Holdings LLC
Elixinol BV
Elixinol Ltd
The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, and as there are no other
parties to the deed of cross guarantee that are controlled by Elixinol Wellness Limited, they also represent the 'Extended
Closed Group'.
By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial statements
and directors' report under Corporations Instrument 2016/785 issued by the Australian Securities and Investments
Commission.
The consolidated statement of profit or loss and other comprehensive income and consolidated statement of financial position
are substantially the same as the Group and therefore have not been separately disclosed.
Note 34. Cash flow information
Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax benefit/(expense) for the year
Adjustments for:
Depreciation and amortisation
Impairment of non-current assets
Impairment of intangibles
Impairment of inventory
Net loss on disposal of property, plant and equipment
Share-based payments
Doubtful debts
Others
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Decrease in income tax refund due
Decrease/(increase) in prepayments, deposits and other
Decrease in trade and other payables
Increase/(decrease) in contract liabilities
Decrease in provision for income tax
Decrease in other provisions
Increase/(decrease) in accrued expenses
Increase/(decrease) in premium funding
2022
$'000
Group
2021
$'000
(10,571)
(17,025)
721
533
234
253
61
241
64
132
144
227
482
552
(831)
(72)
-
(13)
(201)
(108)
1,489
771
186
2,778
76
194
62
(50)
(2,014)
(244)
-
(51)
(619)
5
(29)
(115)
87
428
Net cash used in operating activities
(8,152)
(14,071)
60
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 34. Cash flow information (continued)
Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified
in the Group's consolidated statement of cash flows as cash flows from financing activities.
Group
Balance at 1 January 2021
Net cash used in financing activities
Lease liability remeasured
Exchange differences
Balance at 31 December 2021
Net cash used in financing activities
Exchange differences
Balance at 31 December 2022
Note 35. Earnings per share
Loan with
Raw With Life
$'000
Lease
liabilities
$'000
2,494
(1,047)
450
140
2,037
(757)
(15)
250
-
-
-
250
-
-
250
Total
$'000
2,744
(1,047)
450
140
2,287
(757)
(15)
1,265
1,515
2022
$'000
Group
2021
$'000
Loss after income tax attributable to the owners of Elixinol Wellness Limited
(10,571)
(17,025)
Weighted average number of ordinary shares used in calculating basic earnings per share
316,076,146 314,819,959
Weighted average number of ordinary shares used in calculating diluted earnings per share 316,076,146 314,819,959
Number
Number
Basic loss per share
Diluted loss per share
Cents
Cents
(3.34)
(3.34)
(5.41)
(5.41)
Performance rights (note 36) have not been included in the calculation diluted earnings per share as their inclusion would be
anti-dilutive to the Group as at 31 December 2022 and 31 December 2021.
Note 36. Share-based payments
The Group has established a long-term incentive share-based payment ('LTIP'). Under the LTIP, the Board at is absolute
discretion can include options and performance rights over ordinary shares in the Company to directors, key management
personnel and employees.
During the current year 13,767,195 performance rights were issued for $nil consideration and the share-based payment debit
in profit and loss was $128,000 that included $212,000 credit for forfeitures and $340,000 debit current period expense. The
equity movement was a credit of $126,000 that included $64,000 credit for performance rights exercised as issue capital,
and $331,000 movement in the share-based payment reserve.
During the prior year 6,694,468 performance rights were issued for nil consideration and the share-based payment debited
in the profit or loss was $194,000 and the equity movement was a credit of $194,000.
61
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 36. Share-based payments (continued)
Performance rights are awarded based on the fixed amount to which the individual is entitled. Upon satisfaction of vesting
and employment conditions, each performance right will, at the Company’s election, convert to a share on a one-for-one
basis or entitle the participant to receive in cash to the value of a share at the Board’s discretion in lieu of an allocation of
shares.
The performance period of share rights granted in 2020 is from 1 January 2020 to 31 December 2022. The performance
period of the grant made in 2019 is three financial years in three equal tranches from the financial year of granting. For
the grant made during 2018, the performance period is from 20 March 2018 to 31 December 2022.
The performance period of share rights granted in 2021 is from 1 January 2021 to 31 December 2023.
The vesting dates are as follows:
Share Rights granted in 2021
Share Rights granted in 2022
Vesting date
28 February 2024
Vesting date
28 February 2025
Grant dates and details
Set out below are summaries of performance rights granted under the plan:
2022
Grant date
Expiry date
03/07/2023
15/08/2023
21/12/2024
30/10/2025
07/10/2026
07/10/2026
21/04/2027
26/08/2027
26/08/2027
26/08/2027
03/04/2018
15/05/2018
21/09/2019
30/07/2020
07/07/2021
07/07/2021
21/01/2022
26/05/2022
26/05/2022
26/05/2022
2021
Grant date
Expiry date
03/04/2018
15/05/2018
21/09/2019
30/07/2020
30/07/2020
16/10/2020
07/07/2021
07/07/2021
07/07/2021
03/07/2023
15/08/2023
21/12/2024
30/10/2025
30/10/2025
02/01/2026
07/10/2026
07/10/2026
07/10/2026
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
30,112
225,000
9,598
910,654
354,395
3,124,981
-
-
-
-
-
-
- 11,523,034
144,689
-
467,692
-
1,631,780
-
4,654,740 13,767,195
-
-
-
-
(354,395)
-
-
-
-
-
(354,395)
(30,112)
(225,000)
(9,598)
(848,383)
-
(914,777)
(3,766,279)
(144,689)
-
-
-
-
-
62,271
-
2,210,204
7,756,755
-
467,692
1,631,780
(5,938,838) 12,128,702
Balance at
the start of
the year
60,224
450,000
35,166
937,500
1,356,923
1,234,177
-
-
-
4,073,990
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
751,439
4,609,442
1,333,587
6,694,468
-
-
-
(937,500)
-
(1,234,177)
(379,272)
-
-
(2,550,949)
(30,112)
(225,000)
(25,568)
-
(446,269)
-
(17,772)
(1,484,461)
(1,333,587)
(3,562,769)
30,112
225,000
9,598
-
910,654
-
354,395
3,124,981
-
4,654,740
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 2.39
years (31 December 2021: 3.65 years).
62
Elixinol Wellness Limited
Notes to the consolidated financial statements
31 December 2022
Note 36. Share-based payments (continued)
For the performance rights granted during the current financial year, the valuation model inputs used to determine the fair
value at the grant date, are as follows:
Grant date
Expiry date
21/01/2022
26/05/2022
26/05/2022
26/05/2022
21/04/2027
26/08/2027
26/08/2027
26/08/2027
Share price
at grant date
Expected
volatility*
Dividend
yield
Risk-free
Fair value
interest rate* at grant date
$0.073
$0.048
$0.048
$0.048
91.10%
-
95.60%
91.10%
-
-
-
-
-
-
-
-
$0.056
$0.000
$0.083
$0.057
*
Where no % is stated there are no market vesting conditions attached to the performance rights and vesting condition includes continuity of service.
Volatilities, betas and correlations (all using the equally weighted model) are calculated using the Stambaugh method, which
handles assets with short price histories (e.g. newly listed stocks) without truncating the histories of all the assets to match
the number of prices for the assets with the shortest history.
Note 37. Events after the reporting period
On 29 November 2022, The Company announced that it entered into a binding scheme implementation deed with The
Sustainable Nutrition Group Ltd (ACN 071 666 334) (ASX: TSN) ('TSN'), under which it is proposed that Elixinol Wellness
will acquire 100% of the shares in TSN and exchange 100% of TSN Scheme Options by way of Schemes of Arrangement,
in exchange for 1.1225 EXL shares and 1.1225 EXL options per TSN share and TSN Scheme Option respectively. Current
Elixinol Wellness shareholders will hold 70% of the issued capital of EXL following the implementation of the schemes. The
schemes require regulatory and shareholder approvals.
On 30 November 2022, the Company announced the proposed issue of 9,036,068 performance rights to Canaccord for
consideration of services provided to TSN as TSN's exclusive financial adviser in connection with the scheme implementation
deed announced on 29 November 2022 with the Company. The performance rights have not yet been issued but are
expected to be issued following the completion of the schemes.
On 14 February 2023, the Company announced that the dispute between CannaCare Health GmbH ('CannaCare') and the
Company’s wholly owned subsidiary, Elixinol BV, has now been successfully concluded, with the Arbitration Award made in
the Company’s favour and the Arbitrator ordering a final Award of approximately 543,000 EUR ($835,000). The Arbitration
Award is vindication of the Company’s position that it was owed the payments the subject of the arbitration and that the
claims made by CannaCare’s shareholders were without merit.
No other matter or circumstance has arisen since 31 December 2022 that has significantly affected, or may significantly
affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
63
Elixinol Wellness Limited
Directors' declaration
31 December 2022
In the directors' opinion:
●
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 31 December
2022 and of its performance for the financial year ended on that date;
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
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group
will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross
guarantee described in note 33 to the financial statements.
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
___________________________
Helen Wiseman
Independent Non-Executive Director and Chair
27 February 2023
64
Tel: +61 2 9251 4100
Fax: +61 2 9240 9821
www.bdo.com.au
Level 11, 1 Margaret St
Sydney NSW 2000
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Elixinol Wellness Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Elixinol Wellness Limited (the Company) and its subsidiaries
(the Group), which comprises the consolidated statement of financial position as at 31 December 2022,
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 report, including a summary of significant accounting policies and the
directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 31 December 2022 and of its
financial performance for the year ended on that date; and
(ii)
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 Corporations
Act 2001 and the ethical requirements of the Accounting Professional and 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 confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Material uncertainty related to going concern
We draw attention to Note 2 in the financial report which describes the events and conditions which
give rise to the existence of a material uncertainty that may cast significant doubt about the Group’s
ability to continue as a going concern and therefore the Group may be unable to realise its assets and
discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this
matter.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO
Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of
BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member
firms. Liability limited by a scheme approved under Professional Standards Legislation.
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.
Impairment / recoverability of investment in Atmed Pets LLC (‘Pet Releaf’)
Key audit matter
How the matter was addressed in our audit
There is a risk that the carrying value of
Our procedures included but were not limited to:
the investment in Pet Releaf might be
impaired if Pet Releaf is unable to
generate economic benefits in excess of
the carrying value.
Due to the significant assumptions and
judgements that are involved in
impairment assessments, we have
determined that this is a key audit matter.
(cid:127)
(cid:127)
(cid:127)
Reviewed and analysed the Group’s value-in-use cash
flow models to support the carrying value of non-
current-assets.
Performed procedures on the forecasts and discounted
cash flow models, including validation of inputs in order
to test the impairment analysis.
Compared Pet Releaf’s financial performance to the
forecast results and discussed potential indicators of
impairment including reviewing performance for the
period subsequent to the financial year end.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 31 December 2022, but does not include
the financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and 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.
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 has no realistic alternative but to do so.
2
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.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 31
December 2022.
In our opinion, the Remuneration Report of Elixinol Wellness Limited, for the year ended 31 December
2022, 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.
BDO Audit Pty Ltd
Leah Russell
Director
Sydney, 27 February 2023
3
Elixinol Wellness Limited
Shareholder information
31 December 2022
The shareholder information set out below was applicable as at 23 February 2023.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
% of total
shares
issued
Number
of holders
3,109
2,507
1,147
2,478
521
0.42
2.20
2.88
24.42
70.08
9,762
100.00
7,716
9.53
RAW WITH LIFE PTY LTD (BENHAIM TRADING A/C)
CITICORP NOMINEES PTY LIMITED
D & G HEALTH LLC
BNP PARIBAS NOMS PTY LTD (DRP)
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
MRS KELLY DANIELLE VAGG
MR ERIC CHI KEUNG WONG
MR MICHAEL ERNEST GRANATA (THE GRANATA FAMILY A/C)
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
MR JIA HONG ZHANG
PANTHER TRADING PTY LTD (PANTHER A/C)
MR JYOTINDRA SUBEDI
MR GABRIEL GEORGES ALKAN
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MS XIAO LAN WANG
MR RAYMOND WINDWARD DYNE
EIGHTEEN HOLDINGS PTY LTD
MR KIERAN JOHN O'BRIEN
KANEDEN ENTERPRISES PTY LTD (ROSEBURGH FAMILY SUPER A/C)
MS SIU LING WU & MR CHUNG YIN LIU
Unquoted equity securities
Performance rights issued
69
Ordinary shares
% of total
shares
issued
Number held
29,209,217
16,300,377
5,119,229
4,411,662
4,294,462
3,537,770
2,310,226
2,200,000
2,017,205
1,858,472
1,576,471
1,500,283
1,467,982
1,371,933
1,339,568
1,300,000
1,300,000
1,271,500
1,200,000
1,194,135
9.24
5.15
1.62
1.39
1.36
1.12
0.73
0.70
0.64
0.59
0.50
0.47
0.46
0.43
0.42
0.41
0.41
0.40
0.38
0.38
84,780,492
26.80
Number
on issue
Number
of holders
12,128,702
18
Elixinol Wellness Limited
Shareholder information
31 December 2022
There were no person that holds 20% or more of unquoted performance rights.
Substantial holders
Substantial holders in the Company are set out below:
RAW WITH LIFE PTY LTD (BENHAIM TRADING A/C)
CITICORP NOMINEES PTY LIMITED
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
% of total
shares
issued
Number held
29,209,217
16,300,377
9.24
5.15
Ordinary shares
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.
There are no other classes of equity securities.
70
Elixinol Wellness Limited
Corporate directory
31 December 2022
Directors
Helen Wiseman - Independent Non-Executive Director and Chair
David Fenlon - Independent Non-Executive Director
Paul Benhaim - Non-Executive Director
Oliver Horn - Non-Executive Director
Global Chief Executive Officer
Ron Dufficy
Global Chief Financial Officer
Josephine Lorenz
Company secretaries
Teresa Cleary
Kim Bradley-Ware
Registered office
Mailing address
Share register
Auditor
Level 12
680 George Street
Sydney NSW 2000
Tel: (02) 4044 4585 (within Australia)
Tel: +61 (0) 2 4044 4585 (outside Australia)
PO Box 20547
World Square NSW 2002
Automic Pty Ltd
Level 5
126 Phillip Street
Sydney NSW 2000
Tel: 1300 288 664 (within Australia)
Tel: +61 (0) 2 9698 5414 (outside Australia)
BDO Audit Pty Ltd
Level 11
1 Margaret Street
Sydney NSW 2000
Stock exchange listing
Elixinol Wellness Limited shares are listed on the Australian Securities Exchange
(ASX code: EXL) and trades on the American Over-The-Counter ('OTC') marketplace.
Website
Twitter
www.elixinolwellness.com
EXLWellness
Corporate Governance Statement
The Company’s directors and management are committed to conducting the Group’s
business in an ethical manner and in accordance with the highest standards of
corporate governance. The Company has adopted and substantially complies with
the ASX Corporate Governance Principles and Recommendations (4th Edition)
(‘Recommendations’) to the extent appropriate to the size and nature of the Group’s
operations.
The Company has prepared a Corporate Governance Statement which sets out the
corporate governance practices that were in operation throughout the financial year,
identifies any Recommendations that have not been followed, and provides reasons
for not following such Recommendations.
The Company’s Corporate Governance Statement and policies, which is approved at
the same time as the Annual Report, can be found on its website:
https://www.elixinolwellness.com/site/About-Us/corporate-governance
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