Announcement PDF Avecho Biotechnology Limited ACN 056 482 403 Prospectus A pro rata non-renounceable offer of 1 New Share for every 1 Existing Share held at an issue price of $0.006 per New Share to raise up to approximately $11 million before costs, with 3 free attaching New Options with an exercise price of $0.012 expiring 3 years from the date of issue, for every 2 New Shares subscribed in the Entitlement Offer. An offer of 150,000,000 JLM Options to the Joint Lead Managers (or their nominees). Last date for acceptance and payment is 5:00 pm (AEST) on Wednesday, 3 May 2023 (unless extended) This document is important and requires your immediate attention. It should be read in its entirety. Avecho Biotechnology Limited is subject to regular reporting and disclosure obligations. A copy of this document, and other documents lodged with the Australian Securities and Investments Commission (ASIC) may be obtained from, or inspected at, an ASIC office. If you have any questions, you should contact your stockbroker, solicitor, accountant or other professional adviser. This is a transaction-specific prospectus issued in accordance with section 713 of the Corporations Act 2001 (Cth). NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OF AMERICA CONTENTS 1. 2. 3. 4. DESCRIPTION AND EFFECT OF THE ENTITLEMENT OFFER ............................................ 7 1.1 Overview of Entitlement Offer ...................................................................................... 7 1.2 This Prospectus also contains the following offers of Securities: ................................ 7 1.3 Purpose of the Entitlement Offer .................................................................................. 7 1.4 No trading of Entitlements ............................................................................................ 8 1.5 Opening and closing dates .......................................................................................... 8 1.6 Eligibility of Shareholders ............................................................................................. 8 1.7 No underwriting ............................................................................................................ 8 1.8 Rights attaching to New Shares ................................................................................... 9 1.9 Rights attaching to New Options .................................................................................. 9 1.10 Allotment of New Shares and New Options ................................................................. 9 1.11 Additional Share Facility .............................................................................................. 9 1.12 Shortfall Offer ............................................................................................................. 10 1.13 JLM Options Offer ...................................................................................................... 10 1.14 Prices of Shares ......................................................................................................... 10 1.15 Further information ..................................................................................................... 10 1.16 Target market determination ...................................................................................... 11 1.17 Foreign Shareholders................................................................................................. 11 HOW TO APPLY ..................................................................................................................... 12 2.1 Shareholder's choices ................................................................................................ 12 2.2 Taking up all of your Entitlement ................................................................................ 12 2.3 Taking up all of your Entitlement and applying for Additional Shares and Additional Options ...................................................................................................... 13 2.4 Taking up part of your Entitlement and allow for the balance to lapse ...................... 13 2.5 Allow your Entitlement to lapse .................................................................................. 13 2.6 Consequences of not accepting your Entitlement ..................................................... 13 2.7 Payment ..................................................................................................................... 13 2.8 Entitlement and Acceptance Form is binding ............................................................ 14 2.9 Brokerage and stamp duty ......................................................................................... 16 2.10 Notice to nominees and custodians ........................................................................... 16 EFFECT OF THE ENTITLEMENT OFFER............................................................................. 17 3.1 Effect of the Entitlement Offer .................................................................................... 17 3.2 Effect on Consolidated Statement of pro forma Financial Position ........................... 17 3.3 Effect on capital structure .......................................................................................... 18 3.4 Potential dilutionary impact on Shareholders ............................................................ 18 3.5 Potential impact of Entitlement Offer on control of Avecho ....................................... 18 RISK FACTORS ...................................................................................................................... 20 TABLE OF CONTENTS (continued) Page 5. 4.1 Introduction ................................................................................................................ 20 4.2 Risks specific to the Entitlement Offer ....................................................................... 20 4.3 Risks specific to Avecho ............................................................................................ 20 4.4 General risks .............................................................................................................. 22 4.5 Other risks .................................................................................................................. 23 ADDITIONAL INFORMATION ................................................................................................ 24 5.1 Transaction specific prospectus ................................................................................. 24 5.2 Information available to Shareholders ....................................................................... 24 5.3 Rights attaching to New Shares ................................................................................. 24 5.4 Rights attaching to New Options and JLM Options ................................................... 25 5.5 Corporate Governance .............................................................................................. 27 5.6 Litigation ..................................................................................................................... 27 5.7 Interests of Directors .................................................................................................. 27 5.8 Interests of named persons ....................................................................................... 28 5.9 Joint Lead Managers mandate .................................................................................. 28 5.10 Consents .................................................................................................................... 29 5.11 Expenses of the Entitlement Offer ............................................................................. 29 5.12 Electronic Prospectus ................................................................................................ 30 6. DIRECTORS’ AUTHORISATION ........................................................................................... 31 7. DEFINITIONS ......................................................................................................................... 32 -ii- 3445-5895-8882, v. 7 IMPORTANT NOTICES and clearances being obtained for Avecho to lawfully receive any or all of the Application Monies. This Prospectus is dated 3 April 2023 and was lodged with ASIC on that date. Neither ASIC nor ASX take any responsibility for the contents of this Prospectus or the merits of the investment to which this Prospectus relates. The Prospectus expires 13 months after the date of this Prospectus. No securities will be issued on the basis of this Prospectus any later than 13 months after the date of issue of this Prospectus. Definitions, currency and time Defined terms used in this Prospectus are contained in section 7. All references to currency are to Australian dollars and all references to time are to Australian Eastern Standard Time unless otherwise indicated. Taxation consequences for Applicants This Prospectus contains an offer of continuously quoted securities (as defined in the Corporations Act) and options to acquire continuously quoted securities and has been prepared in accordance with section 713 of the Corporations Act. It does not contain the same level of disclosure as an initial public offering prospectus. In making representations in this Prospectus, regard has been had to the fact that Avecho is a disclosing entity for the purposes of the Corporations Act and certain matters may reasonably be expected to be known to investors and professional advisers whom potential investors may consult. There will be tax implications associated with participating in the Entitlement Offer and receiving New Securities. Avecho considers that it is not appropriate to give advice regarding the tax consequences of subscribing for New Securities under this Prospectus, the conversion of New Options into Shares, or the subsequent disposal of any New Securities. Avecho recommends that you consult your professional tax adviser in connection with the Entitlement Offer. Privacy Avecho may make additional announcements after the date of this Prospectus and throughout the period that the Entitlement Offer is open that may be relevant to your consideration about whether you should participate in the Entitlement Offer. No party other than Avecho has authorised or caused the issue of this Prospectus, or takes any responsibility for, or makes, any statements, representations or undertakings in this Prospectus or for any action you take in reliance on this Prospectus. Avecho collects information about each Applicant provided on an Application Form for the purposes of processing the Application and, if the Application is successful, to administer the Applicant's security holding in Avecho. By submitting an Application Form, you will be providing personal information to Avecho (directly or through the Share Registry). Avecho collects, holds and will use that information to assess your Application. Avecho collects your personal information to process and administer your security holding in Avecho and to provide related services to you. Avecho may disclose your personal information for purposes related to your security holding in Avecho, including to the Share Registry, Avecho’s related bodies corporate, agents, contractors and third-party service providers, including mailing houses and professional advisers, and to ASX and regulatory bodies. You can obtain access to personal information that Avecho holds about you. To make a request for access to your personal information held by (or on behalf of) Avecho, please contact Avecho through the Share Registry. By returning an Application Form or otherwise making payment through BPAY® in accordance with the instructions on the Application Form, you acknowledge that you have read this Prospectus and you have acted in accordance with, and agree to the terms of, the applicable Entitlement Offer as detailed in this Prospectus. Foreign offers This Prospectus and the accompanying Application Form do not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make that offer or invitation. In particular, this Prospectus does not constitute an offer to Ineligible Foreign Shareholders to participate in the Entitlement Offer and may not be distributed in the United States of America and the New Securities may not be offered or sold, directly or indirectly, to persons in the United States of America, unless such person is otherwise determined by Avecho to be eligible. Governing law This Prospectus, the Entitlement Offer and the contracts formed on acceptance of the Applications are governed by the law applicable in Victoria, Australia. Each Applicant submits to the exclusive jurisdiction of the courts of Victoria and courts competent to hear appeals from those courts. This Prospectus is not to be distributed in, and no offer of New Securities is to be made in countries other than Australia and New Zealand to the extent the offer can be made in accordance with applicable securities laws (see section 1.17 for restrictions). The distribution of this Prospectus (including an electronic copy) in other jurisdictions may be restricted by law and, therefore, persons who come into possession of this Prospectus should seek advice on and observe these restrictions. Any failure to comply with these restrictions may constitute a violation of applicable securities laws. No representations No person is authorised to give any information, or to make any representation, in connection with the Entitlement Offer which is not contained in this Prospectus. Any information or representation in connection with the Entitlement Offer not contained in the Prospectus may not be relied upon as having been authorised by Avecho or any of its officers. Except as required by law, and only to the extent so required, none of Avecho, or any other person, warrants or guarantees the future performance of Avecho or any return on any investment made pursuant to this Prospectus. No action has been taken to register or qualify the Entitlement Offer, the Entitlements, the New Securities, or otherwise permit the public offering of the New Securities, in any jurisdiction other than Australia. Past performance Foreign exchange control restrictions or restrictions on remitting funds from your country to Australia may apply. Each Application will be subject to all requisite authorities Investors should note that Avecho’s past performance, including past share price performance, cannot be relied 1 upon as an indicator of (and provides no guidance as to) Avecho’s future performance including Avecho’s future financial position or share price performance. Forward looking statements This Prospectus contains certain forward-looking statements with respect to the financial condition, results of operations, projects and business of Avecho and certain plans and objectives of the management of Avecho. These forward-looking statements involve known and unknown risks, uncertainties and other factors which are subject to change without notice and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct. Forward-looking statements are provided as a general guide only and there can be no assurance that actual outcomes will not differ materially from these statements. Neither Avecho, nor any other person, gives any representation, warranty, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statement will actually occur. In particular, those forward-looking statements are subject to significant uncertainties and contingencies, many of which are outside the control of Avecho. A number of important factors could cause actual results or performance to differ materially from the forward-looking statements. Investors should consider the forward-looking statements contained in this Prospectus in light of those disclosures. Risks Refer to section 4 of the Prospectus for a summary of general and specific risk factors that may affect Avecho. Trading of New Securities Avecho will have no responsibility and disclaims all liability (to the maximum extent permitted by law) to persons who trade New Securities they believe will be issued to them before they receive their holding statements, whether on the basis of confirmation of the allocation provided by Avecho or the Share Registry or otherwise, or who otherwise trade or purport to trade New Securities in error or to which they do not hold or are not entitled. If you are in any doubt as to these matters, you should first consult with your stockbroker, accountant or other professional adviser. 2 3445-5895-8882, v. 7 CHAIRMAN’S LETTER 3 April 2023 Dear Shareholder As a valued Shareholder of Avecho Biotechnology Limited ACN 056 482 403 (Avecho or Company), I am pleased to offer you the opportunity to participate in a pro rata non-renounceable offer of 1 new fully paid ordinary share (New Share) for every 1 Existing Share held on the Record Date at an issue price of $0.006 per New Share. Every 2 New Shares will be accompanied by 3 free attaching options with an exercise price of $0.012, expiring 3 years from the date of issue (New Options). The Company will apply for the quotation of the New Options on ASX. The offer of New Shares and New Options (Entitlement Offer) will raise up to approximately $11 million before costs (excluding funds raised from the exercise of New Options, if any). The issue price of $0.006 per Share under the Entitlement Offer represents a: • 33.33% discount to the last closing price of $0.009 on Friday, 31 March 2023 (being the last trading day before Avecho announced the Entitlement Offer); and • 26.83% discount to the 15-day volume weighted average price of Shares on ASX of $0.0082 as at Friday, 31 March 2023. The number of New Shares and New Options that you are entitled to subscribe for under the Entitlement Offer (Entitlement) is set out in your personalised Entitlement and Acceptance Form that is enclosed with this Prospectus. Entitlements are non-renounceable and will not be tradeable on ASX or otherwise transferable. Eligible Shareholders who do not take up their Entitlements in full will not receive any payment or value in respect of those entitlements that they do not take up. Peak Asset Management and CPS Capital are joint lead managers (Joint Lead Managers) to the Entitlement Offer. The Entitlement Offer is not underwritten. Use of funds The proceeds of the Entitlement Offer will provide funds for: • manufacturing activities associated with the production of test articles to be used in the Phase III clinical trial, in addition to formal stability studies required for a future regulatory submission; • the conduct of a pivotal randomised, placebo-controlled Phase III clinical trial testing the company’s proprietary CBD soft-gel capsule’s ability to manage the symptoms of insomnia; and • costs of the Entitlement Offer. It is expected that the total cost of the Phase III clinical trial will be approximately $12 million. The Company intends to leverage the research & development tax re-imbursement on the trial spend to fund the day-to-day operations of the Company in addition to any cost over-run on the Phase III trial. Upon successful completion of the Entitlement Offer, the Board intends to consider the appointment of a further Director who would complement the skills of the existing Board with a focus on the Company’s needs as it progresses through the Phase III clinical trial. 3 Risks All investors should be aware that an investment in Avecho carries a number of significant risks, including: • the Entitlement Offer is not underwritten; • uncertainty surrounding the future financial performance of Avecho, and potential requirement for Avecho to raise additional funds; • risks associated with the development and commercialisation of Avecho’s technology; • risk regarding Avecho’s ability to protect its intellectual property rights; and • risks and challenges commonly faced by online product offerings including the risk of technology changes, unauthorised hacking, disruption, general misuse or unauthorised disclosure of a user’s personal data. This is just a summary of the risks relevant to investing in Avecho. I encourage all investors to read the risks section in section 4 carefully before deciding whether to participate in the Entitlement Offer. Other information This Prospectus contains important information, including: ● instructions on how to apply, detailing how to participate in the Entitlement Offer, and a timetable of key dates; ● a personalised Entitlement and Acceptance Form, to be completed in accordance with the instructions; and ● instructions on how to take up all or part of your Entitlement via BPAY®. The Entitlement Offer closes at 5:00 pm (AEST) on Wednesday, 3 May 2023. Please read in full the details on how to submit your application, which are set out in this Prospectus. For further information regarding the Entitlement Offer, please call the offer information line on 1300 850 505 (within Australia) and +61 3 9415 5000 (outside Australia) between 8:30 am to 5:00 pm (AEST) Monday to Friday during the offer period. The Company has also launched an online Investor Hub where Shareholders can engage directly with management and access additional information. You can access the Hub at: https://ave.freshamplify.com/welcome. You should also consult your stockbroker, solicitor, accountant or other professional adviser to evaluate whether or not to participate in the Entitlement Offer. On behalf of the Board, I encourage you to consider this investment opportunity and thank you for your ongoing support. Yours sincerely Dr Gregory Collier Chairman 4 3445-5895-8882, v. 7 SUMMARY OF THE ENTITLEMENT OFFER Entitlement Offer 1 New Share for every 1 Existing Share held by an Eligible Shareholder, with every 2 New Shares being accompanied by 3 free attaching New Options expiring 3 years from the date of issue. Issue Price $0.006 per New Share Exercise Price of New Options $0.012 per New Option Amount to be raised under the Entitlement Offer (excluding funds raised from exercise of Options, if any) Up to approximately $11 million Shares and Options on issue as at the date of this Prospectus 1,837,869,344 Shares 122,443,182 quoted Options expiring 31 December 2023 97,844,268 unquoted Options with various expiry dates Total number of New Shares and New Options to be issued under the Entitlement Offer Up to approximately 1,837,869,344 New Shares (subject to rounding) Up to approximately 2,756,804,016 New Options (subject to rounding) Key dates Time and Date (AEST) Activity Announcement of Entitlement Offer Monday, 3 April 2023 Lodgement of Prospectus with ASIC and ASX Monday, 3 April 2023 Shares begin to trade on an “ex-entitlement” basis Wednesday, 5 April 2023 Record Date for determining Eligible Shareholders under the Entitlement Offer 7:00pm on Thursday, 6 April 2023 Entitlement Offer open and Prospectus and Applications Forms sent to Eligible Shareholders Thursday, 13 April 2023 5:00pm on Wednesday, 3 May 2023 Entitlement Offer close New Shares quoted on a deferred settlement basis (from market open) Thursday, 4 May 2023 Results of Entitlement Offer announced to ASX Tuesday, 9 May 2023 Issue Date – allotment and issue of New Securities Wednesday, 10 May 2023 Normal trading of New Securities Thursday, 11 May 2023 This timetable is indicative only and subject to change. The Directors may vary these dates subject to the Listing Rules. An extension of the Closing Date will delay the anticipated date for issue of the New Shares and New Options. The Directors also reserve the right not to proceed with the whole or part of the Entitlement Offer any time before the allotment and issue of the New Shares and New Options. In that event, the relevant Application Monies (without interest) will be returned in full to Applicants. The commencement of quotation of New Securities is subject to the discretion of ASX. 5 Cooling off rights do not apply to an investment in New Securities. You cannot withdraw your Application once it has been accepted. ENQUIRIES If you have any investor relations questions about the Entitlement Offer, please call the offer information line, on 1300 850 505 (within Australia) and +61 3 9415 5000 (outside Australia). Alternatively, contact your stockbroker, solicitor, accountant or other professional adviser. The Company has also launched an online Investor Hub where Shareholders can engage directly with management and access additional information. You can access the Hub at: https://ave.freshamplify.com/welcome. 6 3445-5895-8882, v. 7 1. DESCRIPTION AND EFFECT OF THE ENTITLEMENT OFFER 1.1 Overview of Entitlement Offer The Entitlement Offer is a pro rata non-renounceable offer of 1 new fully paid ordinary share (New Share) for every 1 Existing Share held on the Record Date at an issue price of $0.006 per New Share. Every 2 New Shares will be accompanied by 3 free attaching options with an exercise price of $0.012, expiring 3 years from the date of issue (New Options). The Company will apply for the quotation of the New Options on ASX. The offer of New Shares and New Options (Entitlement Offer) will raise up to approximately $11 million before costs (excluding funds raised from the exercise of New Options, if any). Eligible Shareholders who are on Avecho’s share register on the Record Date are entitled to acquire 1 New Share for every 1 Existing Share held on the Record Date, as well as 3 attaching New Options for every 2 New Shares subscribed in the Entitlement Offer (Entitlement). Fractional Entitlements will be rounded down to the nearest whole number of New Shares and New Options. A personalised Entitlement and Acceptance Form setting out your Entitlement accompanies this Prospectus. Eligible Shareholders may subscribe for all or part of their Entitlement and those who take up their Entitlements in full may also subscribe for Additional Shares. Eligible Shareholders should be aware that an investment in Avecho involves risks. The risk factors identified by Avecho are summarised in section 4 of this Prospectus. 1.2 1.3 This Prospectus also contains the following offers of Securities: (a) the Additional Share Facility which is summarised in section 1.11; (b) the Shortfall Offer which is summarised in section 1.12; and (c) the JLM Options Offer which is summarised in section 1.13. Purpose of the Entitlement Offer The Entitlement Offer will raise up to approximately $11 million. It is anticipated that the funds raised from the Entitlement Offer (excluding funds raised from exercise of New Options, if any) will be applied as follows: Description Use of Funds GMP manufacture of CBD soft-gel capsule for use in Phase III clinical trials and registration batches for formal stability Main study costs including patient recruitment, investigator and site costs in addition to CRO management of the study Costs of the Entitlement Offer Use of funds (A$m) Use of funds (%) 1.30m 11.8% 9.35m 85% 0.35m 3.2% It is expected that the total cost of the Phase III clinical trial will be approximately $12 million. The company intends to leverage the research & development tax re-imbursement on the trial spend to fund the day-to-day operations of the company in addition to any cost over-run on the Phase III trial. The above table is a statement of current intentions as of the date of this Prospectus. The above proposed use of funds and their relative priority is subject to ongoing review and 7 evaluation by Avecho. As with any budget, the actual use of funds raised under the Entitlement Offer may change depending on the outcome of the programs as they proceed. Avecho reserves the rights to alter the way in which funds are applied on this basis. 1.4 No trading of Entitlements Eligible Shareholders’ Entitlements under the Entitlement Offer are personal and cannot be renounced, traded, transferred, assigned or otherwise dealt with. 1.5 Opening and closing dates The Entitlement Offer will open on 9:00 am (AEST) on Thursday, 13 April 2023 and will close at 5:00 pm (AEST) on Wednesday, 3 May 2023 or such later date as determined by Avecho in its absolute discretion, subject to compliance with the Listing Rules. 1.6 Eligibility of Shareholders The Entitlement Offer is being offered to each Shareholder on the Record Date who: (a) are registered as a holder of fully paid ordinary shares in Avecho as at 7:00 pm (AEST) on Thursday, 6 April 2023 (Record Date); (b) have a registered address in Australia or New Zealand as noted on the Company’s share register, or are a Shareholder that the Company has otherwise determined is eligible to participate in the Entitlement Offer; (c) are not in the United States and are not a person (including nominees or custodians) acting for the account or benefit of a person in the United States (to the extent such person holds existing shares for the account or benefit of such person in the United States); and (d) are eligible under all applicable securities laws to receive an offer under the Entitlement Offer, (Eligible Shareholders). Any Shareholder who is not an Eligible Shareholder will be an Ineligible Foreign Shareholder. Avecho reserves the right to determine whether a Shareholder is an Eligible Shareholder or an Ineligible Foreign Shareholder. By returning a completed personalised Entitlement and Acceptance Form with payment or making a payment by BPAY®, you will be taken to have re