Announcement PDF PROSPECTUS For an initial offer of at least 30 million Shares and up to 40 million Shares to be issued at a price of $0.20 per Share to raise at least $6 million and up to $8 million (before costs) EMERALD CLINICS LIMITED ACN 625 085 734 Lead manager: Emerald Clinics Limited ACN 625 085 734 Prospectus For an initial offer of up to 40 million Shares at an issue price of $0.20 each to raise up to $8 million (before costs) This Prospectus has been issued to provide information on the offer of at least 30 million Shares and up to 40 million Shares to be issued at a price of $0.20 per Share to raise at least $6 million and up to $8 million (before costs) (Public Offer). This Prospectus also incorporates the offer of up to 20,625,000 Shares to be issued on conversion of the Convertible Notes (Convertible Note Offer). It is proposed that the Public Offer and the Convertible Note Offer (together, Offers) will close at 5.00 pm (WST) on 17 January 2020. The Directors reserve the right to close the Offers earlier or to extend this date without notice. Applications must be received before that time. This is an important document and requires your immediate attention. It should be read in its entirety. Please consult your professional adviser(s) if you have any questions about this Prospectus. An investment in the Company under this Prospectus should be regarded as highly speculative in nature, and investors should be aware that they may lose some, or all, of their investment. Refer to Section 4 for a summary of the key risks associated with an investment in the Shares. Table of contents Important Information ..................................................................................................................... i Corporate Directory ........................................................................................................................ ii Letter from the Chairman .............................................................................................................. iv Key Offer Details ........................................................................................................................... vi Indicative Timetable ..................................................................................................................... vii Investment Overview ................................................................................................................... viii 1. Details of Offers ................................................................................................... 1 2. Company Overview ........................................................................................... 15 3. Industry Overview .............................................................................................. 25 4. Risk Factors ....................................................................................................... 35 5. Board, Management and Corporate Governance ............................................. 45 6. Financial Information ......................................................................................... 58 7. Material Contracts .............................................................................................. 59 8. Additional information ........................................................................................ 68 9. Authorisation ...................................................................................................... 83 10. Glossary of Terms ............................................................................................. 84 Annexure A Independent Limited Assurance Report ............................................................ 89 Annexure B Legal Opinion ................................................................................................... 117 Page i Important Information Prospectus This Prospectus is dated, and was lodged with ASIC on 11 December 2019. Neither ASIC nor ASX (or their respective officers) take any responsibility for the contents of this Prospectus or the merits of the investment to which this Prospectus relates. The expiry date of this Prospectus is 5.00 pm (WST) on that date which is 13 months after the date this Prospectus was lodged with ASIC. No Shares will be issued on the basis of this Prospectus after that expiry date. Application will be made to ASX within 7 days of the date of this Prospectus for Official Quotation of the Shares the subject of the Offers. No person is authorised to give any information or to make any representation in connection with the Offers, other than as is contained in this Prospectus. Any information or representation not contained in this Prospectus should not be relied on as having been made or authorised by the Company or the Directors in connection with the Offers. It is important that you read this Prospectus in its entirety and seek professional advice where necessary. The Shares the subject of this Prospectus should be considered highly speculative. Exposure Period This Prospectus will be circulated during the Exposure Period. The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. You should be aware that this examination may result in the identification of deficiencies in this Prospectus. In such circumstances, any Application that has been received may need to be dealt with in accordance with section 724 of the Corporations Act. Applications under this Prospectus will not be processed by the Company until after the Exposure Period. No preference will be conferred upon Applications received during the Exposure Period. Electronic Prospectus and Application Forms This Prospectus will generally be made available in electronic form by being posted on the Company's website at www.emeraldclinics.com.au. Persons having received a copy of this Prospectus in its electronic form may obtain an additional paper copy of this Prospectus and the relevant Application Form (free of charge) from the Company's registered office during the Offer Period by contacting the Company as detailed in the Corporate Directory. The Offers constituted by this Prospectus in electronic form is only available to persons receiving an electronic version of this Prospectus and the relevant Application Form within Australia. Applications will only be accepted on the relevant Application Form attached to, or accompanying, this Prospectus or in its paper copy form as downloaded in its entirety from www.emeraldclinics.com.au. The Corporations Act prohibits any person from passing on to another person the Application Form unless it is accompanied by or attached to a complete and unaltered copy of this Prospectus. Prospective investors wishing to subscribe for Shares under the Public Offer should complete the relevant Application Form. If you do not provide the information required on the relevant Application Form, the Company may not be able to accept or process your Application. No document or information included on the Company's website is incorporated by reference into this Prospectus. Offers outside Australia No action has been taken to register or qualify the Shares the subject of this Prospectus, or the Offers, or otherwise to permit the public offering of the Shares, in any jurisdiction outside Australia. The distribution of this Prospectus in jurisdictions outside of Australia may be restricted by law and persons who come into possession of this Prospectus outside of Australia should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. This Prospectus does not constitute an offer of Shares in any jurisdiction where, or to any person to whom, it would be unlawful to issue this Prospectus, except to the extent permitted by exemptions set out in Section 1.17. Canada (select Provinces) This Prospectus constitutes an offering of Shares only in the Provinces and to those persons to whom they may be lawfully distributed in the Provinces, and only by persons permitted to sell such Shares. This Prospectus is not, and under no circumstances is to be construed as, an advertisement or a public offering of securities in the Provinces. This Prospectus may only be distributed in the Provinces to persons that are "accredited investors" within the meaning of NI 45-106 – Prospectus Exemptions, of the Canadian Securities Administrators. No securities commission or similar authority in the Provinces has reviewed or in any way passed upon this Prospectus, the merits of the Page i Shares or the offering of Shares and any representation to the contrary is an offence. investor within the meaning of clause 41 of Schedule 1 of the FMC Act. Hong Kong Singapore WARNING: This Prospectus has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, nor has it been authorised by the Securities and Futures Commission in Hong Kong pursuant to the SFO. No action has been taken in Hong Kong to authorise or register this Prospectus or to permit the distribution of this Prospectus or any documents issued in connection with it. Accordingly, the Shares have not been and will not be offered or sold in Hong Kong other than to "professional investors" (as defined in the SFO and any rules made under that ordinance). This Prospectus and any other materials relating to the Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this Prospectus and any other document or materials in connection with the offer or sale, or invitation for subscription or purchase, of Shares, may not be issued, circulated or distributed, nor may the Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore except pursuant to and in accordance with exemptions in Subdivision (4) Division 1, Part XIII of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), or as otherwise pursuant to, and in accordance with the conditions of any other applicable provisions of the SFA. No advertisement, invitation or document relating to the Shares has been or will be issued, or has been or will be in the possession of any person for the purpose of issue, in Hong Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Shares that are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors. No person allotted Shares may sell, or offer to sell, such securities in circumstances that amount to an offer to the public in Hong Kong within six months following the date of issue of such securities. The contents of this Prospectus have not been reviewed by any Hong Kong regulatory authority. You are advised to exercise caution in relation to the Offers. If you are in doubt about any contents of this Prospectus, you should obtain independent professional advice. Malaysia No approval from, or recognition by, the Securities Commission of Malaysia has been or will be obtained in relation to any offer of Shares. The Shares may not be offered or sold in Malaysia except pursuant to, and to persons prescribed under, Part I of Schedule 6 of the Malaysian Capital Markets and Services Act. New Zealand This Prospectus has not been registered, filed with or approved by any New Zealand regulatory authority under the FMC Act. The Shares are not being offered or sold in New Zealand (or allotted with a view to being offered for sale in New Zealand) other than to a person who: (i) is an investment business within the meaning of clause 37 of Schedule 1 of the FMC Act; (ii) meets the investment activity criteria specified in clause 38 of Schedule 1 of the FMC Act;(iii) is large within the meaning of clause 39 of Schedule 1 of the FMC Act; (iv) is a government agency within the meaning of clause 40 of Schedule 1 of the FMC Act; or (v) is an eligible This Prospectus has been given to you on the basis that you are (i) an existing holder of the Company’s shares, (ii) an "institutional investor" (as defined in the SFA) or (iii) an "accredited investor" (as defined in the SFA). In the event that you are not an investor falling within any of the categories set out above, please return this Prospectus immediately. You may not forward or circulate this Prospectus to any other person in Singapore. Any offer is not made to you with a view to the Shares being subsequently offered for sale to any other party. There are on-sale restrictions in Singapore that may be applicable to investors who acquire Shares. As such, investors are advised to acquaint themselves with the SFA provisions relating to resale restrictions in Singapore and comply accordingly. United States This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. The Shares have not been, and will not be, registered under the US Securities Act of 1933 and may not be offered or sold in the United States except in transactions exempt from, or not subject to, the registration requirements of the US Securities Act and applicable US state securities laws. Speculative Investment The Shares offered pursuant to this Prospectus should be considered highly speculative. There is no guarantee that the Shares offered pursuant to this Prospectus will make a return on the capital invested, that dividends will be paid on the Shares or that there will be an increase in the value of the Shares in the future. Prospective investors should carefully consider whether the Shares offered pursuant to this Prospectus are an appropriate investment for them in light of their personal circumstances, Page ii including their financial and taxation position. Refer to Section 4 for details relating to the key risks applicable to an investment in the Shares. contained in this Prospectus, except where required by law. Cooling off rights do not apply to an investment in Shares pursuant to the Offers. This means that, in most circumstances you cannot withdraw your Application once it has been accepted. The Company cannot and does not give assurances that the results, performance or achievements expressed or implied in the forward-looking statements contained in this Prospectus will actually occur and investors are cautioned not to place undue reliance on these forward-looking statements. Using this Prospectus Photographs and Diagrams Persons wishing to subscribe for Shares offered by this Prospectus should read this Prospectus in its entirety in order to make an informed assessment of the assets and liabilities, financial position and performance, profits and losses, and prospects of the Company and the rights and liabilities attaching to the Shares offered pursuant to this Prospectus. If persons considering subscribing for Shares offered pursuant to this Prospectus have any questions, they should consult their stockbroker, solicitor, accountant or other professional adviser for advice. Photographs used in this Prospectus which do not have descriptions are for illustration only and should not be interpreted to mean that any person shown endorses this Prospectus or its contents or that the assets shown in them are owned by the Company. Diagrams used in this Prospectus are illustrative only and may not be drawn to scale. Unless otherwise stated, all data contained in charts, graphs and tables is based on information available at the date of this Prospectus. Forward-Looking Statements The Company Overview in Section 2 and the Industry Overview in Section 3 of this Prospectus includes attributed statements from books, journals and comparable publications that are not specific to, and have no connection with the Company. The authors of these books, journals and comparable publications have not provided their consent for these statements to be included in this Prospectus, and the Company is relying upon ASIC Corporations (Consents to Statements) Instrument 2016/72 for the inclusion of these statements in this Prospectus without such consent having been obtained. Cooling off rights This Prospectus contains forward-looking statements which are identified by words such as 'believes', 'estimates', 'expects', 'targets', 'intends', 'may', 'will', 'would', 'could', or 'should' and other similar words that involve risks and uncertainties. These statements are based on an assessment of present economic and operating conditions, and on a number of assumptions regarding future events and actions that, as at the date of this Prospectus, are expected to take place. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company, the Directors and management of the Company. Key risk factors associated with an investment in the Company are detailed in Section 4. These and other factors could cause actual results to differ materially from those expressed in any forward-looking statements. The Company has no intention to update or revise forward-looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information Third Party Publications Miscellaneous All financial amounts contained in this Prospectus are expressed as Australian currency unless otherwise stated. Conversions may not reconcile due to rounding. All references to '$' or 'A$' are references to Australian dollars. All references to time in this Prospectus are references to (WST), being the time in Perth, Western Australia, unless otherwise stated. Defined terms and abbreviations used in this Prospectus are detailed in the glossary in Section 10. Page iii Corporate Directory Directors Dr Stewart Washer - Executive Chairman Dr Michael Winlo - Managing Director Dr Alistair Vickery - Executive Director Mr Matthew Callahan - Non-Executive Director Proposed Director Sir John Tooke - Proposed Non-Executive Director Company Secretary Mr Simon Robertson Registered Office 50 Angove Street Level 1 NORTH PERTH WA 6006 Share Registry* Phone: 08 6559 2800 Email: admin@emeraldclinics.com.au Website: www.emeraldclinics.com.au Automic Pty Ltd Level 2, 267 St Georges Terrace PERTH WA 6000 Phone: (within Australia): 1300 288 664 (outside Australia): +61 2 9698 5414 Lead Manager PAC Partners Securities Pty Ltd Level 10, 330 Collins Street MELBOURNE VIC 3000 a Corporate Authorised Representative of PAC Asset Management Pty Ltd holder of an Australian Financial Services Licence (AFSL No. 335 374) Proposed Stock Exchange Listing Lawyers Australian Securities Exchange (ASX) Proposed ASX Code: EMD HWL Ebsworth Level 20, 240 St Georges Terrace PERTH WA 6000 UK Lawyers Fieldfisher LLP Free Trade Exchange Level 5, 37 Peter Street MANCHESTER M2 5GB UK Page ii Investigating Accountant BDO Corporate Finance (WA) Pty Ltd 38 Station Street SUBIACO WA 6008 Auditor* Stantons International Audit and Consulting Pty Ltd trading as Stantons International Level 2, 1 Walker Avenue WEST PERTH WA 6005 * These entities are included for information purposes only. They have not been involved in the preparation of this Prospectus. Page iii Letter from the Chairman Dear Applicant, On behalf of the Board, I am pleased to offer you the opportunity to participate in an issue of Shares in Emerald Clinics Limited (Emerald or the Company). Emerald is an Australian company establishing and operating a network of patient-centred medical clinics that specialise in safe cannabinoid treatment and real-world clinical evidence generation (Clinics). The kind of evidence Emerald will gather is needed by licensed producers, regulators, prescribers and patients to ensure any potential benefits of cannabinoid medicines for patients can be realised. Legalisation of medicinal cannabis has created a large therapeutics industry that is still in its infancy globally. Several companies hold manufacturing and production licences, however patient access to cannabinoid medicines may be restricted in some jurisdictions. In Australia, for example, cannabinoid medicines are only available to patients through either the Authorised Prescriber Scheme (APS) or the Special Access Scheme Part B (SAS-B) administered by the Therapeutic Goods Administration (TGA). Similar models are in place, or in development, in many other jurisdictions around the world. The Company believes the lack of high quality clinical evidence contributes to a restriction on patient access. Emerald sees the compilation of this evidence as an opportunity. Emerald has established a network of specialist Clinics staffed and managed by experienced clinicians who have received training in cannabinoid medicine. Emerald’s clinicians are also supported by a research team and a purpose-built technology platform that securely captures clinical data from consenting patients to generate a unique real-world clinical evidence data asset. The clinical evidence Emerald will build has the potential to benefit patients by supporting drug development programs, payment coverage decisions, clinical decision support tools and more. Emerald’s strategy is to become the leading, independent operator of data-driven, patient-centric, specialist cannabinoid management clinics across Australia and the world. Emerald will provide, where appropriate, patient access to cannabinoid medicines under the guidance of a trained clinician. In addition, Emerald will continue to develop its data management platform to capture and generate a comprehensive real-world data asset that can be used as evidence to help evaluate the safety and efficacy of cannabinoid medicines. To accomplish these goals, the Company intends to expand its existing Clinics in Perth, Sydney, Melbourne and regional New South Wales with further Clinics in 2020, as well as expand Emerald’s care and data capture model internationally. Emerald has already closed multiple anonymous patient data deals demonstrating both the strategic need for, and commercial potential of, Emerald's unique data assets and knowledge-generating care model. The purpose of the Public Offer is to raise a minimum of $6 million and up to $8 million (before associated costs) by the issue of Shares at an issue price of $0.20 each. The Lead Manager to the Public Offer is PAC Partners (see Section 7.1 for further details). Proceeds raised under the Public Offer will enable the Company to: (a) operate the Clinics and expand the number of Clinics throughout Australia; (b) further develop and commercialise the Data Platform; (c) develop novel IP concerning the use of cannabinoid medicine; (d) attract and retain high quality clinical staff; Page iv (e) meet the costs of the Offers; and (f) meet the conditions to apply for Official Quotation of the Shares on the ASX. The Company has established a Board and management team possessing skills and experience spanning clinical medicine, clinical trials, data science, learning health systems, digital health, medicinal cannabis, medical clinic operations, capital raising, corporate governance and administration. The Board believes the Public Offer represents an attractive and timely opportunity to become a shareholder in a company that will own data-driven cannabinoid medicine Clinics providing patient care with a focus on building real-world data. Together with the expertise and experience of its personnel, Emerald's offering positions investors to capitalise on the current positive demand for real-world evidence to support the development and differentiation of cannabinoid medicines. Potential investors should be aware that there are risks associated with the Emerald business and therefore there are risks associated with an investment in the Company. These risks include business risks related to the access and sale of medicinal cannabis, sourcing data from third parties, data collection risks and patient uptake. The key risks are identified in Section 4 of the Prospectus. I encourage you to read this Prospectus in its entirety to gain a full understanding of the Company’s operations before making an investment decision. On behalf of the Board, I look forward to welcoming you as a shareholder of the Company. Yours sincerely, Dr Stewart Washer Executive Chairman Emerald Clinics Limited Page v Key Offer Details Key Details of the Offers1 No. of Shares (Minimum Subscription) No. of Shares (Maximum Subscription) Options Existing Securities on Issue2 133,277,778 133,277,778 18,350,000 Shares offered under the Public Offer (at an Offer Price of $0.20 per Share) 30,000,000 40,000,000 n/a Convertible Note Offer3 20,625,000 20,625,000 n/a Total Securities on issue on completion of the Offers 183,902,778 193,902,778 18,350,000 Notes: 1. Please refer to Section 1.9 for further details relating to the proposed capital structure of the Company. 2. See Section 1.9 for further details of the current capital structure of the Company. See Section 8.3 for the terms and conditions of the Options. 3. See Section 7.7 for the terms and conditions of the Convertible Notes. Page vi Indicative Timetable Event Date Lodgement of this Prospectus with ASIC 11 December 2019 Opening Date for the Offers 19 December 2019 Closing Date for the Offers 17 January 2020 Allotment Date 23 January 2020 Despatch of holding statements 29 January 2020 Expected date for quotation on ASX 7 February 2020 Note: The dates shown in the table above are indicative only and may vary subject to the Corporations Act, the Listing Rules and other applicable laws. In particular, the Company reserves the right to vary the Opening Date and the Closing Date without prior notice, which may have a consequential effect on the other dates. Applicants are therefore encouraged to lodge their Application Form as soon as possible after the Opening Date if they wish to invest in the Company. Page vii Investment Overview This Section is not intended to provide full information for investors intending to apply for Shares offered pursuant to this Prospectus. This Prospectus should be read and considered in its entirety. The Shares offered pursuant to this Prospectus carry no guarantee in respect of return of capital, return on investment, payment of dividends or the future value of the Shares. Topic Summary More Information Introduction Who is the Company and what does it do? Emerald Clinics Limited (ACN 625 085 734) (Company or Emerald) is an Australian incorporated company that operates a network of specialist medical clinics (Clinics) and uses purposebuilt software and technology to gather high quality clinical data from informed and consenting patients. Section 2 Emerald is a clinical services and healthcare technology company focussed on the provision of care for patients clinically determined to have exhausted conventional therapies and who may be suitable for cannabinoid-based medicines. In addition, Emerald uses technology to capture clinical data that can be used to generate clinical evidence relating to the safety and efficacy of cannabinoidbased medicines. Emerald has established four medical centres in Australia including one site each in West Leederville WA, Woolloomooloo NSW, Tintenbar NSW and Richmond VIC. Additional Clinics are planned across Australia within the next 12 months. Emerald is also considering the viability of expanding its operations to the United Kingdom. What is the Company's strategy? Emerald provides patient-centric and independent specialist clinical expertise. All patients are referred to Emerald by a patient’s treating doctor. As such, Emerald forms an integral part of a patient’s care team. Emerald’s Care Model (as described in Section 2.4) includes suitability screening and treatment planning as well as treatment safety and efficacy monitoring. All patients are invited to share their anonymous clinical data with the Emerald team via an informed consent process. Section 2.4 Emerald's mission is to ensure that cannabinoid-based medicines are appropriately prescribed to suitable patients in order to improve health outcomes and quality-of-life. A core component of the Emerald Care Model is the capture of comprehensive real-world data (RWD), from consenting patients that can be used as real world evidence (RWE) to support innovation across the cannabinoid medicine industry (Emerald Data Platform). All data is captured, encrypted and stored in either an electronic health record (EHR) or an FDA-compliant electronic data capture system (EDC). In addition to organic growth within the clinical network, Emerald will also seek to acquire data from pharmaceutical companies, research organisations and country-specific health record agencies Page viii Topic Summary More Information and regulators to further enrich the Data Platform and Emerald Care Model upon securing all appropriate consents. Ultimately, the combination of patient access, clinic and drug development customers, along with the revenue from the use of the Data Platform and Emerald Care Model will drive value for investors. What is the Company's financial position? A summary of the financial history of the Company is in the financial information section and Independent Limited Assurance Report contained in Section 6 and Annexure A respectively. What is the proposed capital structure of the Company? On the basi