Quarterly Activities Report: Another Consecutive Quarter of Record Revenues

Melodiol Global Health Limited (ASX:ME1) (‘Melodiol’ or ‘the Company’) is pleased to provide the following update on progress for the three month period ended 30 September 2023 (the ‘quarter’), as well as its Appendix 4C. All financial results are in Australian dollars and unaudited (unless otherwise stated).

Highlights:

• ~$7.5m in unaudited revenue achieved across the Melodiol Group of companies in Q3 FY23 – a 265% increase on the PCP (Q3 FY22: $2.05m), and a 58% rise on last quarter (Q2 FY23: $4.74m)
• Net cash used in operations of $0.34m in Q3 FY23 vs. $2.37m in Q2 FY23
• Total FY23 (unaudited) revenue generated to date now over $14.54m – a record for the Company
• Consistent revenue growth underpinned by Mernova Medicinal Inc. which delivered $1.85m in revenue for the quarter
• Recently acquired subsidiary, Health House International generated unaudited revenue of $4.851m, including $2.99m in net revenue from the division’s Australian operations
• HHI’s Australian operations delivered an unaudited net profit of $312,548 during the quarter - +10% profit margin reflects well-established operating procedures on COGS and a strong sales network across several leading Australian pharmacies
• Record cash receipts from customers secured of $8.27m – up 60% on the prior quarter (Q2 FY23:$5.14m)
• Cash and cash equivalents of $1.31m at the end of the quarter with commitments for an additional $1m received post period end
• Melodiol continues to deliver on its stated strategy of driving revenue growth through optimised operations and strategic M&A while maintaining a stringent focus on costs

During Q3 FY23, Melodiol delivered $7,497,891 in unaudited net revenue, which was a 265% uplift on the previous corresponding period (‘PCP’) (Q3 FY22: $2.05m), and a 58% increase on the prior quarter net revenue of $4.74m. Total FY23 revenue to date currently stands at $14.54m, a record for the Company.

The strong revenue growth was underpinned by 100%-owned Canadian recreational cannabis subsidiary, Mernova Medicinal Inc. (‘Mernova’) which delivered $1.85m in revenue. Pleasingly, the division’s revenue grew 20% on last quarter (Q2 FY2023 sales: A$1.547m) and a 104% rise on the PCP (Q3 FY22: A$907,042).

Additionally, wholly-owned operating division Health House International (‘HHI’ or ‘HHI International’) also achieved strong unaudited revenue of $4.871m, which included $2.99m in net revenue from the subsidiary’s Australian operations.

Continuing strong momentum, HHI’s Australian division also delivered a quarterly net profit before tax of $312,548, when adjusted for Cost of Goods Sold (COGS) and operating expenses. This represents a net- profit-to-sales margin of 10.4% and highlight’s Melodiol’s stated strategy of leveraging strategic M&A to fast track growth and profitability.

Receipts from customers during the period were $8.27m, which marked a 60% increase on the prior quarter (Q2 FY23: $5.14m). Net cash used in operating activities declined from $2.37m in Q2 FY23 to $0.34m in Q3 FY23. Cash used in operating activities (before giving effect to revenue) comprised research and development ($8,000), product manufacturing and operating costs ($4,526,000), advertising and marketing ($166,000), staff costs ($2,072,000), administration and corporate costs ($1,674,000), interest and other costs of finance paid ($7,000) and repayment of government grants and excise tax ($165,000).

At quarter end, the Company had cash at bank of $1.31m. Payments to related parties and their associates as detailed in section six of the attached Appendix 4C relates to Directors Fees ($154,000) and other services ($75,000).

Melodiol remains increasingly focused on continuing to reduce operating cost, while pursuing high growth revenue opportunities to push towards profitability.

Corporate

Debt restructuring

During the quarter, the Company completed and agreed a number of activities to restructure, repay and extend repayment terms of existing debt, including:

• the conversion of 855,008 SBC Convertible Notes (with a face value of $950,000) to fully paid ordinary shares (‘Shares’) (refer ASX announcements dated 8 August 2023 and 26 October 2023);
• the conversion of $700,000 of existing secured loans under the secured note facility announced 1 November 2023 ('November Secured Notes’), to equity (refer to ASX announcement dated 4 September 2023 and Appendix 2A dated 18 September 2023 (relating to Resolution 16 under the Notice of Meeting released 12 September 2023));
• the in-principle agreement with a majority of the remaining November Secured Note holders to extend the maturity date of the November Secured Notes to 30 November 2023 (refer to ASX announcement dated 26 October 2023);
• the issue on 24 October 2023 of Shares in lieu of June and September 2023 interest payments due to La Plata Capital, LLC ('La Plata’), and subject to shareholder approval, the agreement to pay the December 2023, March 2024 and June 2024 interest payments in Shares, as well as a monthly USD80,0000 repayment of principal in Shares (refer to ASX announcement date 4 September 2023); and
• the agreement with La Plata to extend the maturity date of the majority of its debt to June 2024 (refer to ASX announcement date 4 September 2023).

During the quarter the Company undertook a capital raising and debt conversion, raising $574,725 in cash, and repaying $549,875 in existing loans and invoices, for the issue of 167,445,189 Shares and two free- attaching listed options (ASX:ME1O ($0.25, expiring 2/11/2024)) for every one Share issued (which Options are expected to be issued shortly) (refer ASX announcement dated 8 August 2023).

Following the end of the quarter the Company has received firm commitments for a placement to raise $1 million (before costs) and conversion of existing debts of $724,206, each at an issue price of $0.005 per Share, together with two free attaching Options ($0.01, expiring 5 years from issue) for each Share issued (subject to shareholder approval). Refer to the ASX announcement released 26 October 2023 for full details.

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