Announcement PDF Elixinol Wellness Limited Appendix 4E Preliminary final report 1. Company details Name of entity: ABN: Reporting period: Previous period: Elixinol Wellness Limited 34 621 479 794 For the year ended 31 December 2024 For the year ended 31 December 2023 2. Results for announcement to the market The directors present this Appendix 4E on the consolidated entity (referred to as the 'Group') consisting of Elixinol Wellness Limited (referred to as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 31 December 2024. $'000 Revenues from ordinary activities up 80.9% to 14,956 Loss from ordinary activities after tax attributable to the owners of Elixinol Wellness Limited down 77.1% to (1,722) Loss for the year attributable to the owners of Elixinol Wellness Limited down 77.1% to (1,722) 2024 Cents 2023 Cents (1.11) (1.11) (12.68) (12.68) 2024 Cents 2023 Cents 1.75 5.62 2024 $'000 Group 2023 $'000 Net assets Less: Right-of-use assets Less: Intangibles Add: Lease liabilities Net tangible assets 10,026 (265) (6,177) 273 3,857 6,462 (282) (2,297) 559 4,442 Total shares issued (no.)* 220,820,137 79,092,313 Basic loss per share Diluted loss per share Dividends There were no dividends paid, recommended or declared during the current financial period. Comments The loss for the Group after providing for income tax amounted to $1,722,000 (31 December 2023: $7,507,000). 3. Net tangible assets Net tangible assets per ordinary security Calculated as follows: * Total shares issued for 2023 have been restated to account for the 1:8 share consolidation that occurred in the current year. Elixinol Wellness Limited Appendix 4E Preliminary final report 4. Control gained over entities Name of entities (or group of entities) Ananda Food Pty Ltd Date control gained 28 March 2024 $'000 Contribution of such entities to the reporting entity's profit/(loss) from ordinary activities before income tax during the period (where material) (275) Profit/(loss) from ordinary activities before income tax of the controlled entity (or group of entities) for the whole of the previous period (where material) - 5. Loss of control over entities Not applicable. 6. Dividends Current period There were no dividends paid, recommended or declared during the current financial period. Previous period There were no dividends paid, recommended or declared during the previous financial period. 7. Dividend reinvestment plans Not applicable. 8. Details of associates and joint venture entities Reporting entity's percentage holding Name of associate / joint venture Altmed Pets LLC ('Pet Releaf') Group's aggregate share of associates and joint venture entities' profit/(loss) (where material) Profit/(loss) from ordinary activities before income tax 9. Foreign entities Details of origin of accounting standards used in compiling the report: Not applicable. Contribution to profit/(loss) (where material) Reporting period % Previous period % Reporting period $'000 Previous period $'000 - 25.43% - 293 - 293 Elixinol Wellness Limited Appendix 4E Preliminary final report 10. Audit qualification or review Details of audit/review dispute or qualification (if any): The financial statements were subject to an audit by the auditors and the audit report is attached as part of the Annual Report. The audit report contains a paragraph that draws attention to the use of the going concern basis for the preparation of the financial statements. 11. Attachments Details of attachments (if any): The Annual Report of Elixinol Wellness Limited for the year ended 31 December 2024 is attached. 12. Signed Authorised for release by the Board of Directors 28 February 2025 Elixinol Wellness Limited ABN 34 621 479 794 Annual Report - 31 December 2024 Elixinol Wellness Limited Contents 31 December 2024 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. Material accounting policy information 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. Non-current assets classified as held for sale 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. Provisions Note 22. Contingent consideration Note 23. Issued capital Note 24. Reserves Note 25. Dividends Note 26. Financial instruments Note 27. Fair value measurement Note 28. Remuneration of auditors Note 29. Contingent liabilities Note 30. Commitments Note 31. Key management personnel disclosures Note 32. Related party transactions Note 33. Parent entity information Note 34. Business combinations Note 35. Interests in subsidiaries Note 36. Deed of cross guarantee Note 37. Cash flow information Note 38. Earnings per share Note 39. Share-based payments Note 40. Events after the reporting period Consolidated entity disclosure statement Directors' declaration Independent auditor's report to the members of Elixinol Wellness Limited Shareholder information Corporate directory 1 2 23 24 25 26 27 28 28 28 37 38 41 42 42 44 45 46 47 47 47 48 49 50 53 54 54 55 55 56 56 58 58 58 61 63 63 63 63 64 64 65 69 69 70 71 71 73 74 75 76 80 82 Elixinol Wellness Limited Directors' report 31 December 2024 The Directors of Elixinol Wellness Limited ('Elixinol Wellness' or the 'Company') present this report, together with the financial statements of the Company and its controlled entities ('Consolidated Entity' or 'Group') for the year ended 31 December 2024 ('FY24'). Directors The Directors of the Company in office during the financial year and up to the date of this report are as follows. Directors were in office for the entire period unless otherwise stated. David Fenlon Pauline Gately Natalie Butler Ronald Dufficy Independent Non-Executive Chair Non-Executive Director Executive Director (appointed 28 March 2024) Managing Director and Group Chief Executive Officer (resigned 28 March 2024) Principal activities The principal activities of the Company during the year relate to its operation as a holding company for each of, Elixinol Wellness (Byron Bay) Pty Ltd, The Sustainable Nutrition Group Pty Ltd, The Sustainable Nutrition Group (Australia) Pty Ltd, and Ananda Food Pty Ltd (together 'Australia'), Elixinol LLC ('Elixinol Americas'), as well as Elixinol BV and Elixinol Limited (together 'Rest of World'). The principal activities of the Group are: Australia Elixinol's Australian operations encompass a vertically integrated business that produces, manufactures, and distributes a range of highly complementary products for health-conscious consumers across four verticals – human nutrition, human wellness, pet wellness and superfood ingredients. These products are sold under brands including Hemp Foods Australia, Mt Elephant, The Healthy Chef (newly acquired), Soul Foods, Ananda Equine, and Field Day, and are distributed through grocery, wholesale, and e-commerce channels. The Australian Superfood Co also supplies Australian native ingredients to white label customers as well as food, beverage, and beauty manufacturers while Australian Primary Hemp delivers quality hemp ingredients across white label customers and other manufacturers. Elixinol Americas Established in 2014, Elixinol Americas is based in the United States and specialises in marketing and distributing products made from premium quality, predominantly 'whole plant' full spectrum CBD. During FY24, the Company operated exclusively as an e-commerce business. Rest of World Established in 2018, Rest of World comprises Elixinol Europe specialising in the development, sourcing, marketing and distribution of hemp-derived CBD products, including skincare. Having moved to a licensing business model several years ago, this segment now makes a limited contribution to Elixinol's revenue. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Operating and financial review FY24 was a transformative year and resilience for Elixinol Wellness, delivering significant revenue growth driven by acquisitions (The Healthy Chef and Ananda Food) and organic growth (Hemp Foods Australia). Although the Australian retail sector faced sustained headwinds during 2024, including persistent cost-of-living pressures, cautious consumer spending, and nine consecutive quarters of declining per capita retail sales volumes, Elixinol maintained its focus of growth and strategic innovation. With retailers tightening ranges, particularly in premium categories, the Company’s strategic initiatives and diversified brand portfolio enabled it to deliver exceptional growth, demonstrating the strength of our strategy and operational execution: ● FY24 revenue hit $15.0 million, up $8.3 million on FY23, with proforma revenue of $17.7 million (i.e. including Ananda Food and The Healthy Chef acquisitions on a full-year basis), reflecting strong acquisitions and the Company’s impressive portfolio expansion. ● Australian sales displayed a robust performance throughout FY24 doubling year-on-year to $12.8 million in FY24 and $3.8 million in the final quarter, fuelled by grocery expansion, high-impact promotions, and e-commerce success. ● The Healthy Chef added $668,000 to FY24 Q4 revenue, accelerating the Group’s D2C strategy, while distributor revenue rose 59% year-on-year, reinforcing our multi-channel approach. ● Bulk Ingredients revenue soared 210% YoY, capitalising on B2B growth and product diversification. 2 Elixinol Wellness Limited Directors' report 31 December 2024 Margin expansion and profitability Gross margins in FY24 were impacted by a shift in channel mix, decreasing by 3 percentage points from an average of 41% in FY23 to 38% in FY24. This was primarily due to the significant expansion of the Australian business into the B2B channel, which grew by 123% in FY24. Although margins in the B2B segment are typically lower than those in the eCommerce direct-to-consumer segment, the Group managed to improve margins throughout the year despite supply chain cost pressures throughout the year. By Q4, gross margins rose to 40% (up from an average of 38%), with Australian margins showing a notable improvement to 37%. While the business faced challenges early on in FY24, it successfully navigated those pressures and saw margin recovery as the year progressed. The shift in channel mix, while initially margin-dilutive, has contributed positively to growth, and the company's focus to control costs and improve efficiency in the latter part of the year were effective. Healthy Chef and Elixinol USA delivered positive earnings before interest, tax, depreciation and amortisation (‘EBITDA’), and the Group approached EBITDA break-even by year-end, reinforcing our disciplined financial management. Impressive growth amid transformation Group revenue from continuing operations reached $15.0 million during FY24, up 80% on FY23 revenue of $8.3 million. Robust revenue growth during the period was underpinned by contributions from the Company’s acquisitions (Ananda Food Pty Ltd in March 2024 and The Healthy Chef business in October) as well as organic growth in its expanded brand portfolio and flagship Hemp Foods Australia brand. The Company’s expanded market reach and enhanced product offerings in key growth segments are expected to bolster further revenue gains in FY25. Loss Reduction Driven by Efficiency Although the Group reported losses in FY24, the net loss after tax decreased to $1.7 million compared to the previous year (FY23: $7.5 million). EBITDA closing in on break-even EBITDA from continuing operations including share of associates’ net loss and excluding impairment and share-based payments for the period ended 31 December 2024 is detailed below. EBITDA and Adjusted EBITDA are not prescribed by Australian Accounting Standards ('AAS') and represent the Group’s statutory result under AAS, adjusted for certain items, Elixinol directors view these metrics as a reliable indicator of the Group’s core earnings. Notably, Adjusted EBITDA loss from continuing operations, excluding non-recuring items and other adjustments, improved significantly by 41% to $2.8 million, compared with a loss of $4.6 million in FY23. This improvement reflects the positive impact of the Group’s cost optimisation and efficiency initiatives, management’s focus on core business operations, economies of scale (especially for a reduction in overhead corporate expenses of 27% (from $2.3m FY23 to $1.7m)), and a disciplined approach to cost management. A reconciliation of Adjusted EBITDA from continuing operations to statutory loss is detailed below: 2024 $'000 Group 2023 $'000 Loss after income tax (1,722) (7,507) Add back/(deduct): Income tax (benefit)/expense Finance costs Interest income Depreciation and amortisation EBITDA (3,589) 212 (30) 1,042 (4,087) 3 101 (213) 597 (7,019) 371 46 914 1,718 675 - (2,756) (4,626) Add back/(deduct): Impairment of other assets Share-based payments One-off transactions Adjusted EBITDA 3 Elixinol Wellness Limited Directors' report 31 December 2024 Cash Flow and Financial Position While the Group utilised $3.5 million of operating cash during the year up by $0.7 million in FY23, this included $0.9 million of nonrecurring costs that supported the two acquisitions during the year, one-off product recall costs and acquisition integration costs. Normalised cash burn (excluding one-off expenses) reduced throughout the year with operating cash burn reduced to $196,000 in the final quarter in FY24, a 25% reduction from the prior quarter. Impairment and Strategic Adjustments Recognition of a non-cash impairment amounting to $371,000 also represents a significant reduction from $1,718,000 in FY23. This reduced impairment, primarily related to the prior year impairment of the investment held for sale in Altmed Pets of $1,326,000, rightof-use asset of $238,000 offset by $211,000 increase in inventory provision. One-off transactions Included transaction and restructuring costs of $717,000 and product recall costs of $197,000. Segment results Australia Elixinol’s Australian business comprises Elixinol Wellness (Byron Bay) Pty Ltd, The Sustainable Nutrition Group Pty Ltd, The Sustainable Nutrition Group (Australia) Pty Ltd and Ananda Food Pty Ltd (from 28 March 2024). Record Australian revenue of $12.9 million during FY24 represents a 130% increase on FY23 sales of $5.6 million. Elixinol’s acquisitions over the last 18 months -The Sustainable Nutrition Group Ltd (TSN), Ananda Food Pty Ltd (AF) and The Healthy Chef made significant contributions to sales performance during the year. Americas The Americas segment comprised the trading results of Elixinol LLC. Elixinol Americas reported revenue of $2.1million during the period, representing a 22% decline from FY23 of $2.6 million. However, Elixinol USA’s transition to an e-commerce business model significantly reduced costs resulting in a positive contribution $80,000 to EBITDA, a significant improvement from an adjusted EBITDA loss of $1,365,000 in FY23. Share of associates' loss Share of associates loss during the year ended 31 December 2024 was $nil (31 December 2023: $nil). The investment sale was finalised on 13 May 2024. Review of financial position As at 31 December 2024, Group net assets were $10.0 million, including $1.1 million in cash and cash equivalents culminating in a total comprehensive loss of $1.7 million. The Directors consider that the Group will continue as a going concern, as explained in note 2 to the financial statements. Business strategies and future prospects The Group's business strategy encompasses building a Sustainable Nutrition Company that creates clean and healthy products and ingredients. We deliver this through a diverse portfolio for health-conscious consumers. Key strategic objectives for FY25 While FY24 closed on a strong note, early FY25 is expected be a period of recalibration as the Group focuses on further solidifying its foundation for sustained long-term growth. Since April 2024, our top priority has been resetting strong operation foundations: ● Strengthening processes and procedures to ensure seamless operations. ● Merging facilities post-Ananda acquisition for efficiency and scale. ● Building a robust product pipeline, with 30+ products in development set to be ready for launch in H2 FY25. ● Developing pivotal retail opportunities that will drive significant momentum later in the year. As a result, Q1 FY25 is expected to be a flat quarter, as with a focus on quality, operational excellence, and margin improvements to create a solid platform for exponential growth in the second half of the year. 4 Elixinol Wellness Limited Directors' report 31 December 2024 With retail recovery expected mid-2025, Elixinol Wellness’ priorities include: ● Product Innovation & Channel Diversification – Expanding into ready-to-eat health and supplement categories, while scaling the Healthy Chef’s business to improve margins and reduce reliance on grocery. ● Operational and Cost Efficiencies – Maximising synergies from acquisitions, improving supply chain efficiency, and enhancing profitability. ● Reinvigorating the USA Market – Deploying targeted marketing strategies to reignite sales in topicals and hemp-based health. ● Strengthening Hemp Leadership – Investing in supply-chain partnerships that will supercharge growth. We are now in the calm before the storm of growth. With strong fundamentals, strategic focus, and disciplined execution, Elixinol Wellness is poised to deliver exceptional results in 2025. Principal risks and uncertainties Below are the material business risks that could impact the Group’s ability to achieve its strategic objectives and affect its operations, along with key measures implemented to mitigate these risks. The risks are listed in no particular order and exclude general risks that could significantly affect most businesses under normal operating conditions. These risks are continuously managed as part of our ongoing risk management framework. Agricultural risk and climate change risk The Group is exposed to agricultural risk due to its reliance on agricultural products, making it vulnerable to the inherent risks of the agriculture industry. These risks include pests, plant diseases, storms, fires, frost, floods, water availability and salinity, bird damage, and force majeure events. Such risks could affect financial performance by increasing costs (due to low yields or higher prices from reduced supply) or by limiting the availability of products needed to meet customer demand. Supplier arrangements The Group has arrangements with a number of key suppliers. To the extent that Group entities cannot secure and retain key suppliers, their respective ability to maintain consistent production levels may be compromised, which in turn may have an adverse impact on the financial performance and position of Elixinol Wellness. 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 Elixinol Wellness could cause serious or unexpected side effects, including risk or injury to consumers. Should any of Elixinol Wellness’ 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 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 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 a 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. 5 Elixinol Wellness Limited Directors' report 31 December 2024 Change to laws or regulations The Group’s operations are highly regulated and 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 the Group 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, the United Kingdom and Japan. It is likely that governments worldwide will continue to explore the benefits, risks and operations of companies involved in the hemp sector. The Group’s 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 and impact the overall financial performance of the Group. 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’ regulation, nutrition and allergen labelling, and label claim regulations and safety requirements including, as applicable, ‘new dietary ingredient’ and ‘generally recognised as safe’ 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 the Group, could impact adversely on the assets, operations, and the financial performance of the Group and the industry in general. Regulatory compliance and the management of regulatory change are an important part of the Group’s planning processes. The Group intends to continue to invest in compliance and the management and implementation 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. Failure to appropriately manage and implement 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, and this could in turn lead to a financial impact and loss in revenue and profitability. Loss of key relationships The hemp-derived industry has undergoing rapid growth and change, which has resulted in increasing consolidation and formation of strategic relationships. It is expected that this consolidation and strategic partnering will continue. Acquisitions or other consolidating transactions could harm the Group in a number of ways. The Group may lose strategic relationships if third parties with whom the Group has arrangements with are acquired by or enter into relationships with a competitor (which could cause the Group to lose access to necessary resources). The Group’s current competitors could become stronger, or new competitors could form from consolidations. This could cause the Group to lose access to markets or expend greater resources in order to stay competitive. Separately, the relationship between the Group and third parties may deteriorate organically, which may have an adverse impact on the business of the Group. Production risk The ability for Group entities to cultivate and produce products is dependent on a number of key inputs and their related costs. These key inputs include raw materials, electricity, water, other utilities and skilled labour. Any significant interruption or negative change in the availability or cost of these inputs could materially impact the production of the business and subsequently, the operating results of the Group. In particular, given the nature of the raw materials used by each of the Group entities, supply may be limited to a single or limited number of suppliers, with access to these raw materials more competitive than conventional ingredients. As a result, there is an enhanced risk of difficulties in securing the required supplies, or to do so on appropriate terms. Reputational risk There is a risk that incidents beyond the control of the Group entities could occur which would have the effect of reducing patient, medical/scientific or regulatory confidence, or preferences for cannabis or medicinal cannabis products generally. This reputational risk could result from incidents involving members of the Group or other non-related industry participants. 6 Elixinol Wellness Limited Directors' report 31 December 2024 Protection of intellectual property The Group’s success will depend on, in part, its ability to protect its intellectual property, including its trade marks, copyright, trade secrets and know-how. To the extent the Group fails to protect its intellectual property or infringes a third party’s intellectual property, the Group may face increased competition from similar products, have to cease using certain intellectual property or be liable for damages. In the event that this occurs, there is a risk that it has a materially adverse impact on the Group’s operations, financial performance and future prospects. Competition risk The industries in which the current Group entities are involved is subject to domestic and international competition. While the entities will undertake all reasonable due diligence in their business decisions and operations, they will have no influence or control over the activities or actions of their competitors, which activities or actions may, positively or negatively, affect the operating and financial performance of the Group. Some of the Group’s competitors and potential competitors may have significantly more financial resources and marketing experience than EXL which may lead to reduced margins and loss of revenue or loss of market share for the Group. Further, Group revenues in the future may be reduced as the industry consolidates and seeks revenue accretion at the expense of profit margin. Uncontracted sales A material proportion of the Group’s revenue is derived from uncontracted customer relationships, with sales made under standard terms and conditions. There is a risk that these customer relationships may not be able to be maintained, or new relationships may not be formed, on terms acceptable to the Group. Additionally, given the uncontracted nature of these relationships, it is not possible to guarantee consistency of sales volumes, price or terms going forward. The Group’s financial performance could be materially and adversely impacted by wholesale customers: ● Materially changing their trading terms; ● Promoting the products of one or more of the Group’s competitors; or ● Refusing to promote or stock the Group’s products or significantly reducing orders for its products. Contracts and agreements There are a number of risks associated with the Group’s existing contracts and agreements, including those related to previous supply arrangements and property leases. There is a risk that the Group’s existing contracts may be terminated, lost or impaired, or renewed on less favourable terms. Some of the Group’s contracts can be terminated without cause or on short notice periods (depending on events and circumstances), and although the relevant parties may continue to operate on existing commercial terms, a number of its existing contracts have expired or will shortly expire. A loss of any of the Group’s contracts could have an adverse effect on its business, operating and financial performance. Similarly, there is a risk that the Group may not meet its existing obligations under c