Crowd-sourced funding offer document - BOTANIC WELLNESS LIMITED - Prismic
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BOTANIC WELLNESS LIMITED Crowd-sourced funding offer document dated 17 September 2020 Offer of fully-paid ordinary shares in Botanic Wellness Limited at $0.20 cents per share to raise a maximum of $1,000,000 This crowd-sourced funding (CSF) offer document relates to the Offer of fully-paid ordinary shares in Botanic Wellness Limited. This Offer is made under the CSF regime in Part 6D.3A of the Corporations Act 2001 (Corporations Act). ISSUER BOTANIC WELLNESS LIMITED ACN 634 499 219 INTERMEDIARY EQUITISE PTY LIMITED ACN 600053 745 (AFSL 503 190)
CONTENTS Section 1. Risk Warning 3 Section 2. Information about the Company 4 2.1 Letter from the Executive Chairman 5 2.2 Company Details 6 2.3 Description of the Business 6 2.4 Business Model 11 2.5 Business Strategy 13 2.6 Industry Overview 17 2.7 Directors, Advisors and Management 20 2.8 Capital Structure 26 2.9 Historical Financials 27 2.10 Risks 29 Section 3. Information about the Offer 34 3.1 Terms of the Offer 35 3.2 Use of Funds 36 3.3 Rights Associated with the Shares 37 Section 4. Information about Investor Rights 38 4.1 Cooling-off Rights 39 4.2 Communication Facility for the Offer 39 4.3 Proprietary Company Corporate Governance Obligations 39 Glossary 41 Annexures 43 Appendix A – Shareholder Agreement Appendix B - Constitution BOTANIC WELLNESS CSF OFFER DOCUMENT 2
SECTION 1 RISK WARNING Crowd-sourced funding is risky. Issuers using this facility often include new or rapidly growing ventures. Investment in these types of ventures is speculative and carries high risks. You may lose your entire investment and you should be in a position to bear this risk without undue hardship. Even if the company is successful the value of your investment and any return on the investment could be reduced if the company issues more shares. Your investment is unlikely to be liquid. This means you are unlikely to be able to sell your shares quickly or at all if you need the money or decide that this investment is not right for you. Even though you have remedies for misleading statements in the offer document or misconduct by the company you may have difficulty recovering your money. There are rules for handling your money. However, if your money is handled inappropriately or the person operating the platform on which this offer is published becomes insolvent you may have difficulty recovering your money. Ask questions, read all the information given carefully and seek independent financial advice before committing yourself to any investment. BOTANIC WELLNESS CSF OFFER DOCUMENT 3 3
2.1 LETTER FROM THE EXECUTIVE CHAIRMAN Dear Prospective Investor, On behalf of the Directors, it is my pleasure Australia, has obtained the required seed to invite you to become a shareholder in importing and growing licences and an Australian and USA based CBD hemp commenced planting its first 1 million square company, Botanic Wellness Limited. metre crop in New South Wales in early September 2020. The CBD hemp industry has grown rapidly in the United States, Europe and many other The Company has Directors, executives and countries around the world in recent years consultants with a wide range of international with the increasing acceptance of CBD and experience in the cultivation of CBD hemp hemp for a wide range of uses. This growth is seeds and hemp crops, the extraction and expected to accelerate in the next few years. processing of the CBD content from the plant and the marketing and sales of its wholesale Consumers are becoming increasingly and retail CBD products. The Board also has aware of the many benefits of CBD and experience in developing early stage various governments around the world have businesses and successfully arranging for responded by making CBD hemp products the listing of those companies on the ASX. more accessible. In 2018 the USA Farm Act Botanic Wellness is undertaking this equity legalised CBD that is derived from hemp crowdfunding raising to accelerate the growth that contains no more than 0.3% THC (the of its USA and Australian businesses and to psychoactive component of the plant). CBD provide additional working capital to further is now federally legal in the USA and is widely develop its marketing and sales operations expected to become legal in Australia in 2021. internationally. This initial crowdfunding offering provides an opportunity for Australian Botanic Wellness intends to become a leading investors to participate in the rapidly growing provider of a range of CBD hemp based and developing CBD hemp industry. products, initially in the USA and Europe and in the future in Australia as laws here in relation I encourage you to read the Offer Document to the importing, growing and consumption of carefully in its entirety and consult your CBD based products are relaxed. professional adviser before deciding whether to invest in the Company. You should In the USA, the Company produces a variety of particularly consider the Risk Sections in strains of CBD hemp seeds which are grown this Offer Document. in greenhouses and in open fields in Arizona, Colorado and Texas and then planted on I look forward to welcoming you as a various farms (totalling over 2.1 million square shareholder of Botanic Wellness Limited. metres), in Arizona and Texas, with which the Company has a range of joint venture and other farming arrangements. The hemp crops when harvested, are processed by third party processors into CBD distillate and then sold wholesale by the Company to producers of a range of CBD products, or further manufactured by the Company into its own final products for Cary P Stynes LLB. (Melb) MAICD retail sale. Executive Chairman The Company has also recently entered into Botanic Wellness Limited a similar farming joint venture agreement in www.botanicwellness.com.au BOTANIC WELLNESS CSF OFFER DOCUMENT 5
2.2 COMPANY DETAILS This offer of shares is made by Botanic Wellness Limited (ACN 634 499 219)(the Company). The Company was incorporated in June, 2019 and acquired all of the shares in Live Opulent Inc. in the USA and Medical Marijuana Investment Fund Pty Ltd in Australia in July 2019. Registered office and contact details Scottish House Level 4 90 William Street Melbourne, VIC, 3000 Principal place of business Scottish House Level 4 90 William Street Melbourne, VIC, 3000 2.3 DESCRIPTION OF THE BUSINESS 2.3.1 Overview of Botanic Wellness Botanic Wellness intends to become a leading provider of CBD hemp based products, initially in the USA and Europe and, in the future, in Australia as laws here in relation to importing, growing and consumption of CBD hemp based products are relaxed. The Company has existing indoor and outdoor CBD hemp seed growing operations in Colorado, Arizona and Texas and over 2.1 million square metres of CBD hemp crops currently growing in Arizona and Texas in the USA. Botanic Wellness arranges for the processing of the harvested hemp crops into CBD distillate and sells that distillate to wholesale customers or uses it for the production of its own retail CBD products. The Company is also licenced to import seeds and grow hemp in Australia and commenced the planting of its first 1 million square metre Australian CBD hemp crop in New South Wales in early September 2020. It also has a licence to import and supply Schedule 4 and 8 drug products into Australia which can be supplied under the Special Access Scheme. Botanic Wellness plans to expand its existing USA and Australian CBD seed and hemp growing operations and further develop its USA and European marketing and sales operations. The Company also intends to commence importing various CBD hemp products for the Australian market when that becomes commercially viable. BOTANIC WELLNESS CSF OFFER DOCUMENT 6
2.3.2 Investment Highlights 1. Vertically integrated business model The Company has experience and expertise in seed breeding and growing as well as hemp crop cultivation and harvesting. The Company arranges for the processing of the hemp plants for the extraction of the CBD from the plant to create CBD distillate. It then markets and sells its CBD distillate product to third party producers of CBD hemp products and manufactures, markets and sells its own CBD products for online and traditional retail sale under its “Opulent” brand in the USA and Europe. The Company intends to import, market and sell its range of CBD products in Australia when laws here permit. 2. Commercially focused and adaptive business model Botanic Wellness has entered into a range of commercial agreements in the USA, Europe and Australia and intends to continue to invest and develop its capabilities in the CBD hemp and related sectors in areas that it considers will be most immediately valuable and strategic in the future. The Company had revenues of AUD $2.3m in the 2020 Financial Year (unaudited). 3. Global asset footprint The Company currently has CBD hemp seed growing operations in 3 states in the USA and over 2.1 million square metres of CBD hemp crops growing in Arizona and Texas and is replicating its USA operations in Australia. It also proposes to expand its marketing and sales operations in the USA and Europe, and Australia when laws here permit, to give it greater exposure to the rapidly increasing demand from consumers for CBD hemp products. The Company also commenced the planting its first 1 million square metre Australian hemp crop in NSW in early September 2020. It also has a licence to import and supply Schedule 4 and 8 drug products into Australia which can be prescribed to patients under the Special Access Scheme. 4. Strategic relationships The Company has developed a wide range of commercial relationships with large commercial farmers, processors, product manufacturers and distributors and retailers of CBD hemp products in the USA and Europe and intends to continue to make this a priority in the future. 5. Rapidly growing markets The CBD hemp market is growing rapidly worldwide, driven by a relaxation of regulations relating to a range of CBD products, increasing global awareness of the perceived health and wellness benefits of CBD, and the increasing availability of CBD products at an affordable price. 6. Experienced Board, Management and Executive team The Company has extensive international experience in all aspects of the CBD hemp industry as well as considerable experience in developing early stage companies in new and rapidly growing industries and in listing and operating companies on the ASX. BOTANIC WELLNESS CSF OFFER DOCUMENT 7 7
2.3.3 What is Hemp? Hemp refers to the plant Cannabis sativa L., of which there are many different varieties and breeding lines. Cannabis sativa L. is a multi-purpose plant that has been domesticated and utilised for bast (phloem) fibre in the stem, a multi-purpose fixed oil in the “seeds” and a resin secreted by epidermal glands. What is the difference between hemp and cannabis? Hemp and cannabis both come from the genus Cannabis sativa L. but have distinctly different chemical compositions and uses and are subject to different legal treatment both within jurisdictions and in different jurisdictions. A significant distinction between hemp and cannabis is that in cannabis, the levels of cannabinoid “THC” are higher. THC is the element of the plant that has the psychoactive properties that make a user feel “high”. Hemp generally contains only small amounts of THC (less than 0.3%) and therefore does not have the psychoactive properties of cannabis. Hemp with CBD can now be grown, subject to certain restrictions, in many different countries, as a less heavily regulated agricultural crop. In the USA, hemp and its derivative products are now federally legal. In Australia, hemp production regulations vary according to the intended end use of the plant. BOTANIC WELLNESS CSF OFFER DOCUMENT 8
Key Terms • Cannabinoids Cannabis contains a seemingly unique class of chemicals, the cannabinoids (phytocannabinoids), of which more than 120 are thought to exist in Cannabis sativa plants. • CBD Cannabidiol (CBD) is one of the two most common cannabinoids found in the plant and is non-psychoactive. CBD is believed to interact with the body through the endocannabinoid system which regulates the body’s homeostasis, or general state of balance. The endocannabinoid system is made up of millions of cannabinoid receptor sites located primarily throughout the brain, central nervous system and immune system, that act in neural communication. CBD is widely believed to have a positive effect on such functions as mood, sleep, appetite, hormone regulation and immune response. • Hemp seed oil Hemp seed oil is obtained by pressing the seeds of the hemp plant. When cold pressed, the hemp seed oil has a nutty flavour if ingested. Unlike other methods to extract oil, cold pressed hemp seed oil retains its flavour, aroma and nutritional value. Hemp derived CBD oil is derived from the flowers and leaves of the hemp plant. It is a natural botanical extract that is high in cannabidiol (CBD), the non-psychoactive compound of cannabis resin extract. • THC cannabinoids. It has a predominant psychoactive effect and occurs in higher levels in some varieties of cannabis indica plants, typically described as marijuana. Uses of Hemp There are four usable parts of the hemp plant: the inner fibres (hurd), the outer fibres (bast), the seeds and the female flower. Different varieties are selected for growing, depending on the part to be used. Hemp has a very broad range of uses including being turned into oils, used in food, nutraceuticals and in a wide range of industrial applications. More recent applications for hemp fibre also include: 1. Supplements and medicines 2. Lotions and cosmetics 3. Textiles 4. Building materials 5. Industrial applications 6. Other consumer products, such as paper BOTANIC WELLNESS CSF OFFER DOCUMENT 9
2.3.4 Key Achievements to Date 2018 January Medical Marijuana Investment Fund Established May Conducts Series A capital raising at $0.05 cents (raised $1.25 million) 2019 June Establishes Botanic Wellness Limited and acquires Live Opulent Inc. (USA) and Medical Marijuana Investment Fund P/L (Aust) July Conducts Series B capital raising at $0.10 cents (raised $100,000) September Planted first USA crops in Arizona - 96 acres Late 2019 Conducts Series C capital raising at $0.15 cents and plants further 220 acres of crops in Arizona 2020 March Commenced harvesting first hemp crop for processing April/May Commenced harvesting second group of crops in Arizona July Commenced planting third group of crops in Arizona September Crowd-sourced funding campaign with Equitise November Planned IPO launch... The Company is conducting this equity crowdfunding capital raising to increase awareness of the Company and its products, expand its USA, Europe and Australian business operations, to provide additional working capital and to meet the costs of conducting its intended IPO and ASX listing. BOTANIC WELLNESS CSF OFFER DOCUMENT 10
2.4 BUSINESS MODEL 2.4.1 Overview The Company’s objective is to become a significant producer of CBD hemp seeds, hemp crops and hemp related products for both wholesale and retail sale in the USA, Europe, Australia and Asia when laws permit. 2.4.2 Core Business Model Botanic Wellness’ business model is to own or manage all the required elements of its CBD hemp business including seed cultivation, growing, harvesting, extraction, processing and wholesale and retail online and offline sales. The Company enters into joint venture style agreements with large commercial farmers and takes a “stream” of the revenue and earnings derived from the wholesale and retail sale of its CBD products over the term of the agreement. Under these joint venture arrangements the farmer contributes their farming land, farming expertise, farm machinery and labour to plant, cultivate, maintain and harvest the CBD hemp crops and Botanic Wellness contributes the required CBD hemp seeds from its various seed growing operations, the necessary licences and permits and its specific CBD hemp growing, harvesting, processing, sales and marketing expertise. Both the farmer and the Company are then reimbursed for the costs of their respective inputs on a pre-agreed basis when the various products (seeds, biomass, crude, distillate and fibre) are sold. They then share the profits from the sale of the products produced on a 50/50 basis. The Company is able to mitigate traditional agricultural and product production risk by entering into a range of agreements with farming, processing and product companies at various stages of the process from “seed to sale” and in multiple locations throughout the USA and Australia. BOTANIC WELLNESS CSF OFFER DOCUMENT 11
2.4.3 Operations Botanic Wellness is focused on owning and / or managing all of the required components of the CBD hemp value chain which include the following: 1. The Company operates a 750 square (see Section 2.5.5) and allow the metre CBD hemp seed growing importing of its CBD hemp seeds from greenhouse facility in Colorado, in the the USA into Australia and the licences USA and has recently been licensed to required to allow it to grow hemp crops expand this with an additional 7,000 on a large commercial scale in southern square metre outdoor seed growing NSW. The Company commenced the operation capable of producing an planting of its first 1 million square additional approximately 400 pounds of metres of crops in NSW in early seeds per year. September 2020. 2. The Company also has a 370 square 7. The Company has also recently begun metre seed growing greenhouse facility selling its certified CBD distillate product in Arizona, capable of producing another to wholesale buyers in the USA and 150-200 pounds of seeds per year and Europe and has also now launched its a 54,600 square metre outdoor seed first retail CBD products for sale which growing property in Texas capable of are being sold under its more exclusive producing another 3,000 – 4,000 pounds “Opulent” brand and will also soon be of seeds per year. sold under its mainstream “Botanic Wellness” brand. The Company also has 3. The Company recently completed a range of additional retail products due the harvesting of its first group of to be launched later this year. joint venture crops which covered approximately 1.2 million square 8. The Company had revenues of AUD metres in Arizona. The Company is now $2.3m in the 2020 FY (unaudited), processing the hemp from those crops generated through the sale of its CBD into THC free distillate for both wholesale hemp seeds, CBD distillate and final sale to customers wanting to produce retail CBD products and only a small loss their own branded CBD products and for before accounting for its immediately the purpose of producing the Company’s available sale inventory which will be own CBD products for retail sale under sold during the next 6-12 months. the “Opulent” and soon the “Botanic Wellness” brands. The Company has now commenced planting its second series of crops with its farmers in Arizona with an initial 162,000 square metres currently being planted. 5. In addition, the Company is now growing hemp crops on three new commercial farms in Texas covering a total crop area of approximately 2.1 million square metres. Harvesting of these crops is expected to commence in early December 2020. 6. The Company has also now commenced operations in Australia having obtained the required licences and permits BOTANIC WELLNESS CSF OFFER DOCUMENT 12
2.4.4 Sources of Revenue Botanic Wellness produces CBD hemp seeds for its own use as well as for sale to third parties, cultivates and harvests the CBD hemp crops for the extraction and production of CBD distillate and sells that CBD distillate wholesale to manufacturers of a variety of CBD based products as well as for the production and sale of its own retail products. While the Company primarily grows seeds and crops to produce its own final CBD products for retail sale, it does sell the various products it produces at each level of the production process. The Company sells CBD seeds to third party farmers for their own use particularly as states in the USA and various countries open up to hemp farming. It will also sells biomass and crude produced to customers who may want to purchase those products and distillate to both wholesale customers and customers wanting to produce CBD products of their own. The Company is increasing the number of CBD retail products it produces from its first range of “Opulent” branded CBD 30ml and 60ml CBD gel caps to proposed ranges of other products that will be launched over the next 2-3 months under both its high end “Opulent” and mainstream “Botanic Wellness” brands. 2.5 BUSINESS STRATEGY 2.5.1 Overview Botanic Wellness has established seed growing operations in Colorado, Arizona and Texas in the USA and joint venture farming operations to growing CBD hemp crops in Arizona and Texas. The Company intends to further develop its CBD hemp seed growing operations in Colorado, Arizona and Texas and in additional states of the USA as appropriate strategic opportunities arise and to expand its current CBD hemp growing and cultivation operations in Arizona and Texas from approx. 2.1 million square metres in 2020 to approx. 4 million square metres by 2021. The Company currently utilises third party suppliers for its extraction and production of crude and distillate and the manufacturing of its final CBD retail products but intends to enter partnership arrangements and possibly undertake acquisitions of such facilities in the USA as strategic opportunities arise. The Company also intends to develop a similar CBD hemp growing operation in Australia both with a view of manufacturing and selling its CBD products in the Australian market when laws here permit and for the purpose of exporting to international markets as existing markets expand and new markets open up. Botanic Wellness intends to further develop its vertically integrated business and produce, manufacture and ultimately distribute and sell its range of CBD hemp based products under the “Opulent” and “Botanic Wellness” brands to wholesale customers in the USA, Europe and Asia and Australia when laws permit commercial operations. The Company also intends to supply customers and partners wishing to produce a range of products using its biomass and hemp fibre. BOTANIC WELLNESS CSF OFFER DOCUMENT 13
2.5.2 Current Business Strategy Key elements of the Botanic Wellness business strategy are: 1. the growing of a variety of genetic strains of seeds, the use of the seeds developed and grown in its joint venture farming operations and the sale of those seeds to third party farmers and others 2. the growing of CBD hemp crops for the extraction and production of CBD for processing into crude and distillate for sale to wholesale customers wanting to produce CBD products 3. the production of THC free distillate for the Company’s own retail CBD products for online and offline sales initially in the USA and Europe and ultimately in Australia and South East Asia 4. optimising growing, harvesting, extraction, production, and distribution and sales efficiencies and building scale in all parts of the business; and 5. building strategic relationships with key customers and suppliers 2.5.3 Research and Development The Company is constantly developing and growing new strains of seeds as more research is done into the health and wellness effects of different cannabinoid elements. This will enable it to develop new and improved products, different methods of consumption and different sales and marketing methods and processes. It is constantly researching and developing better pre and post planting soil preparation methods, improved planting and growing methods including seed concentration per acre, crop location, watering methods and pest control to improve its crop yields and increase CBD levels in the plants while at the same time minimising THC levels. It will regularly monitor the CBD market and consumer behaviour and develop new products and sales methods to meet developing consumer behaviour and understanding of the benefits and uses of CBD products to ensure that it remains at the forefront of the market. The CBD health and wellness market is growing rapidly around the world and there remain numerous growth opportunities throughout the USA as new states open up to hemp farming and additional countries throughout Europe and South East Asia permit CBD hemp farming and the production and sale of CBD hemp and related products. BOTANIC WELLNESS CSF OFFER DOCUMENT 14
2.5.4 Intellectual Property The Company may, if it considers it commercially appropriate, register some of its CBD seed strains to protect them from use by competitors. Botanic Wellness intends to apply for registration of trademarks in Australia, the USA and Europe relating to its brands as they are developed. The Company proposes to operate two distinct product ranges under the more exclusive “Opulent” brand and the value for money “Botanic Wellness” brand. 2.5.5 Regulatory Licences Hemp is still strictly regulated in Australia. However, subject to compliance with state and territory licensing and Federal government requirements, including prescribed maximum THC levels and good character requirements, the Australian regulatory landscape allows the cultivation and supply of hemp seed and hemp-based food products. Botanic Wellness and its wholly owned subsidiaries Live Opulent Inc in the USA and Medical Marijuana Investment Fund Pty Ltd in Australia, have applied for or obtained and maintain the following key statutory licences, which permit the operation of its business in the USA and Australia: LICENCE ISSUING LICENCE TERM & ENTITY STATUS REFERENCE AUTHORITY DETAILS RENEWAL Licence to EXPORT substances Dept of Health, specified in Schedule 8 of Expires MMIF 1921816 Office of Drug Granted Customs (Prohibited Imports) 31 Dec 2020 Control (ODC) Regulations 1956 Expires 31 Oct Victoria Licence to Sell or supply by BW 24211240 2020 (currently Granted Health wholesale - Schedule 4 drugs being renewed) Expires 31 Oct Victoria Licence to Sell or supply by BW 22211290 2020 (currently Granted Health wholesale - Schedule 8 drugs being renewed) Dept of Licence to cultivate and supply Expires BW Agriculture low - TCH hemp under the Hemp Granted 5 years NSW Act 200 NSW Licence to possess, cultivate and/ Agriculture Application BW or process low THC Cannabis for Victoria underway non-therapeutic purposes Dept of Health, Medicinal Cannabis Licence Application BW Office of Drug (covering cultivation and underway Control (ODC) production) Dept of Health, Medicinal Cannabis Manufacture Application BW Office of Drug Licence underway Control (ODC) Licence to Manufacture or Supply Application BW NSW Govt Drugs of Addiction in NSW underway Granted Arizona Dept of Licence to cultivate, harvest and 5 Jun 2019/ LOI AZ-G190108 Granted Agriculture transport hemp Renewed to 31 Dec 2021 BOTANIC WELLNESS CSF OFFER DOCUMENT 15
LICENCE ISSUING LICENCE TERM & ENTITY STATUS REFERENCE AUTHORITY DETAILS RENEWAL Colorado Dept of Licence to cultivate 6 Jun 2019 to LOI 79868 Granted Agriculture hemp indoors 9 Jun 2021 Texas Farmers have Licence to cultivate, harvest and LOI Dept of Licences in their Granted transport hemp Agriculture own names 19 Sept to 30 Sept 2020 (renewal Permit to import conditionally application has Dept of non-prohibited goods under MMIF 0003633175 been lodged Granted Agriculture Biosecurity Act 2019 (cannabis on 28/7/20 seeds for sowing) application number 0004512102) Licence to IMPORT substances Dept of Health, specified in Schedule 4 of Expires MMIF 1921815 Office of Drug Granted Customs (Prohibited Imports) 31 Dec 2020 Control (ODC) Regulations 1956 2.5.6 Growth Opportunities There are a range of growth opportunities for Botanic Wellness. These include: 1. Increasing seed sales from its existing facilities in Colorado, Arizona and Texas 2. increasing the amount of land on which it is currently growing CBD hemp in Arizona and Texas and other states within the USA 3. further developing its hemp extraction and production relationships and capabilities and developing its own production facilities in the USA 4. further developing the Company’s sales and marketing and distribution capabilities for its CBD hemp based products for wholesale customers and its own online and offline retail network 5. developing similar business operations in Australia and South East Asia 2.5.7 Distribution Strategy The Company sells its seeds, biomass, crude, distillate and wholesale and retail products through both online and offline traditional sales channels (retail stores) using its sales team and various sales consultants based in the USA, Europe and Australia. Major customers include farmers and others requiring various strains of CBD hemp seeds for growing, buyers wanting hemp biomass and fibre, wholesalers, manufacturers and distributors requiring bulk THC free distillate for the production of their own products and retail buyers wanting a range of CBD health and wellness products which they can purchase either through the Company’s online and offline retail channels. BOTANIC WELLNESS CSF OFFER DOCUMENT 16
2.6 INDUSTRY OVERVIEW 2.6.1 Current Market In the USA, Botanic Wellness operates in the hemp sector growing seeds, cultivating hemp, extracting oils from that hemp, processing the oils to distillate and selling that distillate to a range of business customers and retail customers. In Australia, Botanic Wellness is also intending to operate in the hemp sector supplying various Australian hemp products to the Australian and to international markets. 2.6.2 The Opportunity Legislation Change In December 2018, the USA passed the 2018 Farm Bill which removed hemp and its extracts from restrictions under the Controlled Substances Act. This has had the effect of making hemp a federally legal agricultural commodity that can be commercially cultivated and used in the USA. Various individual state laws and regulations also apply across the USA. In late 2017 foods containing hemp became legal for human consumption in Australia. The laws in relation to the use and consumption of hemp are developing rapidly throughout the world with a general move to greater liberalisation globally. The use of hemp in a wide variety of applications is now readily accepted internationally. BOTANIC WELLNESS CSF OFFER DOCUMENT 17
Consumer Trends Growth in demand for CBD hemp products is expected to be driven by a variety of factors: • Consumer demand There is growing awareness of the perceived benefits of CBD. In addition, there is a developing understanding of the various uses of different parts of the hemp plant. • Environment and sustainability Hemp is considered a sustainable crop by producers and consumers who are seeking more environmentally friendly and sustainable products to grow. • Industry growth drivers CBD products are being increasingly sought after for their perceived therapeutic benefits and an increasing number of products containing CBD are being developed. • Increased research and development and range of products The passing of the 2018 USA Farm Bill and similar legislation in other countries and increasing consumer demand has led to an increase in research and development into the potential benefits of CBD. This is expected to result in a significant increase in the range of CBD products available and their use as nutraceuticals in health and wellness applications. • Expansion of retail channels The increased availability of CBD hemp products in traditional retail channels, beyond dispensaries and smoking shops, is also normalising the product and assisting acceptance and growth in understanding and demand. What does this mean for Botanic Wellness? The global cannabidiol market was valued at USD 4.6 billion in 2018 and is expected to grow at a compound annual growth rate (CAGR) of 22.2% from 2019 to 2025 to reach USD 23.6 billion by 2025. The demand for cannabidiol (CBD) for medical and wellness purposes is high due to its perceived healing properties, which is the key factor driving the growth of the market. Moreover, growing product adoption and utilization owing to government approvals is a major factor anticipated to drive the demand for cannabidiol infused products. Source: Grandview Research – December 2019 The Global CBD Hemp Oil Market is expected to grow at a CAGR of roughly 30.7% over the next five years and will reach 760 million USD in 2024, from 150 million USD in 2020 Source: 360 Research Reports – August 2020 BOTANIC WELLNESS CSF OFFER DOCUMENT 18
2.6.3 Key Competitors Each of the areas in which Botanic Wellness business operates has various currently known and is likely to have emerging competitors. The industry is evolving rapidly in the USA, Europe and Australia and elsewhere around the world and more competitors in the various sectors in which the Company operates are likely to emerge. 2.6.4 Competitive Advantages The Company through its various farming joint venture arrangements is able to control the variety and quality of the products it produces and the pricing at which those products are produced to maintain its competitive pricing advantage. The Company is constantly reviewing its planting, growing, harvesting and extraction, production and manufacturing methods in this rapaidly evolving sector to ensure that it is constantly maintaining best practices from a product quality and pricing perspective. BOTANIC WELLNESS CSF OFFER DOCUMENT 19
2.7 DIRECTORS, ADVISORS AND MANAGEMENT 2.7.1 Directors The Company is managed by the Board of Directors and has access to a range of experts on its Advisory Board who have a wide range of expertise in all aspects of the Company’s business. The Board comprises: • Cary Stynes LLB. (Melb.) MAICD Co-Founder and Executive Chairman • Donald Gritten Jr President and Chief Executive Officer • Joe Wicker Jr Executive Director and Chief Operating Officer • Jeffrey Tang JP B.ECO M.ACC (NSW) Non-Executive Director, Head of Asia Cary Stynes LLB. (Melb.) MAICD Co-Founder and Executive Chairman Cary Stynes is the Executive Chairman of the Company. He oversees the operations and investment strategy of the Company. He holds a current legal practicing certificate and is admitted to practice in the Supreme Court of Victoria and High Court of Australia. He is the principal of Stynes Consulting a legal and consulting practice specialising in early stage companies. He was previously a lawyer with international law firm Minter Ellison before establishing his own law firm which he has operated for over 25 years. In 1994 he co-founded media and advertising company, Media and Entertainment Group Limited which listed on the ASX in 1995 and expanded throughout Australia as well as into Hong Kong, Singapore, New Zealand and South America. That company was ultimately acquired by CPH Limited. Since 2000 he has arranged the ASX listing and been the Managing Director or Chief Executive Officer of ASX listed Software Communication Group Limited, CBD Online, subsequently CBD Energy Limited and The Swish Group Limited. He is also a former Non-Executive Director of Traffic Technologies Limited, MCM Entertainment Limited, Teys Limited (now Oakdale Resources Limited), and arranged the ASX listing and was General Legal and Commercial Counsel for USA (Hollywood) based digital media and advertising company engage: BDR Limited. He also sat on the Board of children’s cancer charity The Koala Foundation. He has in various capacities arranged the restructuring, re-capitalisation, IPOs and RTOs of a number of Australian and international companies on the ASX in the media and technology, infrastructure, mining, retail, agriculture and and related sectors and sat on a number of private and public company boards as, Managing Director, Executive Director, Non Executive Director, General Legal Counsel and Company Secretary for over 25 years. BOTANIC WELLNESS CSF OFFER DOCUMENT 20
Donald Gritten Jr. President and Chief Executive Officer Donald (Don) Gritten Jr. is a business strategy consultant and is President and CEO of the Company’s USA operations. He was a formerly a sergeant in the US Army and on active duty for two years and served for nine years in the US Army Reserves. In early 2000, Don began his business career in the accounting and tax area. Since then Don has owned a number of medical related practices, a management-consulting firm, as well as business accounting firm and an insurance brokerage. In the last 15 years he has purchased and sold a number of private companies. Over the past 15 years Don has also given a large number of speeches and consulted to numerous business owners and CEOs. Don presents seminars based on his experiences and based on what’s worked for him in the past, and what’s working now. Don is an experienced consultant and M&A specialist. Don began researching and working in the hemp industry in 2015. He has developed the Company’s seed growing operations in Colorado. In Arizona, he has overseen the operation of the Company’s multiple farming operations and production and manufacturing operations focusing on the vertical integration of the business from seed production to wholesale and retail sales. Don has worked with some of the the most experienced operators in the hemp business and brings that experience to the Company. Joe Wicker Jr. Executive Director and Chief Operating Officer Joe has a background in finance and economics and has been a business owner and entrepreneur for over 25 years. He understands markets and develops and implements strategies to maximise efficiency and profitability. He recently became involved in the rapidly growing hemp industry and has used his extensive experience in business development, real estate and mortgage banking to acquire property, create partnerships with large agricultural farmers and developing a vertical integration strategy for the hemp industry. Prior to his involvement in the hemp industry he was the owner of various property investment companies from 2004 to 2018. These companies bought and sold investment real estate in various parts of the USA during this time. Joe was responsible for identifying and acquiring key asset purchases and maintaining a consistent flow of real estate inventory as wells a sales pipeline. He designed and implemented processes to support the businesses growth and build and maintain contacts and relationships, He implement marketing systems and processes, that identified new customer markets and developed various sales approaches for those markets. BOTANIC WELLNESS CSF OFFER DOCUMENT 21
Jeffrey Tang JP B.ECO M.ACC (NSW). Non-Executive Director, Head of Asia Jeffrey has been a cannabis/hemp entrepreneur since 2013 and is the founder and CEO of Hemp Australia Pty Ltd. He holds a Bachelor of Economics, Masters of Professional Accounting form the University of New South Wales and has a Diploma of Financial Planning and is a Justices of the Peace in NSW. He has 10 years of diverse experiences in property development, investor relations and International trade in particular in relation to trade with China. He is skilled in business development planning, negotiation, international business and global sourcing of a wide range of products for the Chinese market in particular. 2.7.2 Advisory Board Dr. James Evans MD MBA FACP CHCQM (Arizona USA) Dr. Evans is a dual board certified internal medicine physician with 19 years of clinical and administrative experience. He founded and built a multi-disciplinary clinic and has also help set up hospitalist programmes at various hospitals. In addition, Dr. Evans has assisted both hospitals and clinics with implementing quality assurance, quality improvement and patient safety programs. Dr. Evans has extensive hospital experience running an independent private hospital service for over 7 years at Phoenix/ St. Luke’s Medical Center. He also has significant managed care experience and was a former executive medical director of Health Choice, a large Arizona Health plan that serves over 200,000 members where his focus was credentialing and quality improvement. He has served as the Chief Medical Officer for the Arizona Department of Economic Security where he provided oversight for the medical services of 44,000 residents with developmental disabilities. He maintains active clinical privileges at several local hospitals. He is a graduate of Harvard College in physics and mechanical engineering and earned his medical degree from the University of Michigan and completed an internal medicine residency at Columbia University affiliated hospitals in New York City. He also holds an MBA in Finance from Grand Canyon University. He is a designated fellow in the American College of Physicians and is also Board Certified in Health Care Quality Management by the American Board of Quality Assurance and Utilization Review Physicians. BOTANIC WELLNESS CSF OFFER DOCUMENT 22
Dr. Jamie Rickcord MBBS Bsc (Hons) FRACGP (NSW) Dr Rickcord is the Founder and Medical Director of Ananda Clinics, an intergrative general practitioner and authorized cannabinoid prescriber in New South Wales. Prior to his fellowship he held multiple medical positions. He spent 5 years working in anaesthesia, intensive care and emergency in accredited ANZCA programmes. He also spent time working in rural and remote areas as an emergency doctor and GP registrar. He worked as a General Practitioner at the Lismore GP Super Clinic from 2016 to 2019 and at the Lismore Clinic GP from 2019 to 2020. He graduated from the Imperial College School of Medicine in the UK with an MBBS in 2006 and a BSc (Hons) Medical Sciences with Pediatrics in 2004. He received a Fellowship Award from the Royal Australian College of General Practice in 2016. He is also currently completing a Master of Medicine – Trauma Informed Psychotherapy. 2.7.3 Senior Executives and Consultants Jason Oran VP of Farming Operations (Texas and Colorado USA) He joined the USA Army National Guard in 1999. After his military service in the army he worked as a United Nations and State Department defence contractor for 5 years where he led several units of contractors through various countries providing security for foreign diplomats. After he left the military and government service he commenced working in farming and construction. He helped develop three separate construction firms and was involved in managing their operations for 8 years. He subsequently purchased a farm in Colorado and began farming in 2016. He focussed on permaculture, developing responsible farming techniques which leave the soil and environment better than before use. He believes that there is no better crop for the planet than hemp. He manages the Company’s seed and plant genetic programmes and operations on the Company’s farms in Colorado, Arizona and Texas and consults on the Company’s Australian farming operations. BOTANIC WELLNESS CSF OFFER DOCUMENT 23
Amayea Maat Operations Manager (USA) Amayea has a Master of Science in Management and Organization Behaviour and is also a certified and licensed trainer of B.A.N.K. She is a customer operations and human resource executive with an expertise in blending thought leadership with sound business acumen to achieve top-tier service excellence. She is an innovative leader who combines strategic thinking with technical execution to optimise an organisations effectiveness. She has previously worked for a number of fortune 500 companies including Xerox and Intuit. She has spent the majority of her professional career leading large organisations and has been successful in developing top tier teams utilising change leadership, organisational effectiveness and process improvement strategies. She has experience in empowering people to reach goals within organisations and has considerable experience in managing business operations for small / medium businesses where she coaches and consults with them to help business owners improve their culture, productivity and impact to the bottom line. Michael Morris Head of European Operations (based in Spain) Michael Morris has over 25 years experience in both the United Kingdom and the Middle East where he has held various senior roles in a diverse variety of businesses. Michael has significant experience in financial management and is focused on identifying, developing and implementing best practice operations for the Company throughout Europe which is a significant focus for the Company. Michael was already actively involved in the medical cannabis and CBD hemp industries prior to joining the Company as an investor and is a firm believer and passionate advocate for its future worldwide potential. He has previously undertaken a number of consultancy projects within the industry. BOTANIC WELLNESS CSF OFFER DOCUMENT 24
Jeremy Magoon VP of Sales Jeremy joined Live Opulent in 2017 as a sales broker and was promoted to VP of Sales in June 2019. He now heads up and coordinates sales of all of the Company’s products across North America and Europe in conjunction with the Company’s Chief Operating Officer. He is responsible for recruiting, training and developing the Company’s sales team and following up and coordinating the leads provided by others within the Company and third party sales lead generators. He has considerable prior experience in sales representation and project coordination and developing systems that enable the efficient and effective management of sales leads. 2.7.4 Organisational Structure BOTANIC WELLNESS LIMITED ACN 634 499 219 100% 100% MEDICAL MARIJAUNA LIVE OPULENT LLC INVESTMENT FUND ACN 623 904 389 BOTANIC WELLNESS CSF OFFER DOCUMENT 25
2.8 CAPITAL STRUCTURE 2.8.1 Capital Table MMIF Founders and Series A Shareholders 100,000,000 100,000,000 Live Opulent Inc. Founders and Investors 100,000,000 100,000,000 Series A,B,C,D Shareholders (at $0.05, $0.10, 7,679,044 7,679,044 $0.15 and $0.20 cents) Total Existing Shareholders 207,679,044 207,679,044 Shares to be issued in Equitise Crowdfunding 1,250,000 5,000,000 Raising - Sept - Oct 2020) @ $0.20 cents (if $250,000 (if $1,000,000 to raise $250,000 - $1,000,000 is raised) is raised) Total Shares on Issue 208,929,044 212,679,044 2.8.2 Debt Facility The Company has a commercial loan of $325,000 provided by private lender AMG Capital Pty Ltd which is secured against the assets of the Company. The loan was entered into in April 2020 to assist in the payment of the costs of harvesting the first series of the Company’s crops in Arizona, carries a commercial interest rate and was rolled over on 21 June 2020 and is expected to be rolled over again on 21 September 2020 on similar terms with the payment of an extension fee and at the same rate of interest for a further term. BOTANIC WELLNESS CSF OFFER DOCUMENT 26
2.9 HISTORICAL FINANCIALS 2.9.1 Consolidated Profit and Loss Statement 2018, 2019, 2020 (unaudited) (AUD$) 2020 2019 2018 Total Income Sales 253,576 43,329 0 Joint Venture Sales (Includes other Income) 2,069,509 0 0 Total Income 2,323,085 43,329 0 Total Cost of Sales Farmers 1,147,759 0 0 Seeds, Labour Materials & Processing 867,977 20,000 0 Stock of Seeds, Distillate & Finished Product (5,845,841) 0 0 (available for sale)* Total Cost of Sales (3,830,104) 20,000 0 Gross Profit 6,153,189 23,329 0 Expenses General Expenses 322,192 168,009 0 Payroll Expenses 372,474 13,460 0 Motor Vehicle Expenses 69,169 7,693 972 Insurance Expenses 2,216 0 0 Travel and Accommodation 175,593 130,998 48,683 Directors Fees 111,423 90,000 0 Total Expenses 1,053,067 410,160 49,655 Net Profit/(Loss) 5,100,121 (386,831) (49,655) Note * Company had inventory valued at AUD $ 5,845,841 of seeds, biomass, distillate and final CBD product available for immediate sale as at 30 June 2020 BOTANIC WELLNESS CSF OFFER DOCUMENT 27
2.9.2 Consolidated Balance Sheet - 30 June 2020 (unaudited) (AUD$) Botanic Wellness Limited 2020 ASSETS Current Assets Cash (Note 1) 2,359 Other Current Assets Seed, Distillate, Finished Product (available for immediate sale) 5,845,841 Other Current Assets 844,238 Total Assets 6,692,438 LIABILITIES Current Liabilities Loans (Note 2) 325,000 Total Current Liabilities 325,000 Total Non Current Liabilities 0 Total Liabilities 325,000 Net Assets 6,367,438 Equity Shareholders Capital 1,703,803 Retained Earnings (436,486) Current Year Earnings 5,100,121 Total Equity 6,367,438 Note 1: Cash at bank as at 16 September 2020: $127,020 Note 2: See Section 2.8.2 BOTANIC WELLNESS CSF OFFER DOCUMENT 28
2.9.3 Key Assumptions Botanic Wellness’s growing revenues are expected to be driven by: • organic growth of its existing businesses due to increasing awareness of and demand in the USA and Europe of the health and wellness benefits of CBD hemp products; • relaxation of current restrictions on CBD hemp products in Australia expected in early 2021 • future growth in various Asian markets where laws in relation to the the supply ofproducts containing CBD are gradually being relaxed. 2.10 RISKS 1. Relatively early stage business Botanic Wellness is at a relatively early stage in the development of its business, in an industry that has recently undergone material regulatory changes and is evolving extremely rapidly. As a result, investing in the Company should be considered highly speculative and involves significant risk. The sales potential of Botanic Wellness’s products is still at a relatively early commercial stage. The ongoing and future demand for the Company’s products, in existing and target markets, is still being established and is uncertain. There is a risk that there may not be sufficient demand for the Company’s products for their sustainable commercial exploitation. 2. Uncertainty of future profitability and revenue Botanic Wellness operates in all the required segments of the CBD hemp business, seed breeding and production, crop cultivation; CBD distillate production and wholesale and retail online and offline sales. The future success of Botanic Wellness will depend on the Company successfully implementing its business plan in relation to the development of its business. The future success of the Company is contingent on a number of factors and may be impacted by adverse developments relating to the market for hemp and CBD products generally, or in relation to the particular CBD products sold by the Company. As a result, anticipated sales may not be achieved and even if achieved, may not result in Botanic Wellness achieving and maintaining its margins and planned level of profitability. 3. Obtaining and retaining licences and permits Hemp growing and the production of hemp goods is highly regulated by governments at Federal and State levels. Botanic Wellness’s business is dependent on obtaining and then retaining the appropriate licences and permits issued by the relevant regulatory authorities for the cultivation, manufacture and sale of hemp in the United States, Europe and Australia and elsewhere it may decide to operate in the future. BOTANIC WELLNESS CSF OFFER DOCUMENT 29
4. Risk created by recent legislative changes Botanic Wellness operates in an industry that has recently experienced material regulatory and legislative changes. Given that Federal legislation, and state-based legislation, is still in its relative infancy, there is a risk that the interpretation and implementation of the law may change or be subject to legal uncertainties. Additionally, given the varied and evolving regulation of hemp at a State level in the USA, there is a degree of uncertainty that could make ongoing legal compliance challenging. 5. Risk of adverse future regulatory changes There is a risk that a change in government or political disposition of governments to the hemp industry may result in a change in government policy and the relevant regulatory regimes under which Botanic Wellness operates, resulting in the loss of certain markets or increased operating costs for Botanic Wellness. 6. US Food and Drug Administration The FDA has published its view as an advisory guidance that CBD products cannot be marketed as foods or dietary supplements in the USA. It is widely considered that this position “is unsettled and unsupported by law or regulations” and “is not a final determination”. Should the FDA consider the sale of CBD hemp or nutraceutical products impermissible, the Company’s business could be impacted and the Company’s financial viability may be at risk. 7. Product liability risk Botanic Wellness intends in the future to supply a variety of hemp and CBD based products either manufactured from its own hemp or from hemp it purchases from other growers. As with any product, there is a risk that the products sold by the Company may cause risk or injury to consumers. Should any of Botanic Wellness’s products be associated with safety risks such as misuse or abuse, incorrect labelling or tampering or product contamination or spoilage, a number of materially adverse outcomes could occur. 8. Workplace health and safety and workers’ compensation risk Botanic Wellness must comply with health and safety laws in the USA and Australia. Despite the Company’s compliance measures, there remains a risk that penalties and other liabilities for the violation of health and safety laws and standards may be imposed on the Company and may have an adverse effect on the Company’s reputation and its revenue, profitability and growth. 9. Agricultural risk The Company’s business is based on agricultural production and supply. As such, the business is subject to all of the usual risks inherent in the agriculture industry. These risks include the risk of crop failure caused by insects, birds, plant diseases, storm, fire, frost, flood, water salinity, pests and other force majeure events. BOTANIC WELLNESS CSF OFFER DOCUMENT 30
10. Currency risk and lack of hedging The Company is exposed to foreign currency risk, mainly through its foreign currency cash balances, receivables and payables denominated in foreign currencies and financial instruments held by overseas operations. The Company’s exposure is mainly against the US dollar (USD) and is managed through continuous monitoring of movements in exchange rates and by settling foreign currency purchases with proceeds from foreign currency income. Currently Botanic Wellness does not have, nor at this stage does it intend to have, any currency hedging arrangements in place. 11. Sector exposure Botanic Wellness business model is based on the sale of CBD hemp and associated products. As such, the Company is materially exposed to any adverse conditions or events that may impact the CBD and hemp industries or parts thereof in which the Company operates. 12. Loss of key customers and distributors The loss of any one or more of the Company’s material customers or distributors or contracts may materially and adversely affect the Company’s revenue, profitability and growth. 13. Increased competition risk The Company’s markets are subject to increasing domestic and international competition. The actions of the Company’s competitors may negatively affect the operating and financial performance of the Company. Botanic Wellness’s competitive position may be adversely impacted by an existing or new competitor who attempts to aggressively grow its business or increase its market share. 14. Uncontracted sales volumes risk A material proportion of the Company’s revenue is derived from customer relationships that do not guarantee sales volumes. It is therefore not possible for Botanic Wellness to contractually guarantee consistency of sales volumes, price or terms in the future. 15. Seasonal grower contracts The Company’s joint venture farmers are separately contracted for a specified number of crops or years. Although many growers are contracted for consecutive or multiple seasons, variations in commodity prices for different crops and other factors may cause farmers to prefer growing alternate crops to hemp in the future. Failure to maintain, and where needed, increase the numbers of farmers or farming land available for its crops may have a material adverse effect on the Company’s performance and financial position. 16. Commodity price risk The Company’s performance is subject to local and international commodity prices for CBD hemp supply. Prices of agricultural commodities fluctuate considerably and are affected by a variety of regional and global factors that are beyond the control of the Company. BOTANIC WELLNESS CSF OFFER DOCUMENT 31
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