Elixinol Wellness Limited ACN 621 479 794 (ASX code: EXL) PROSPECTUS 2024 Non-Renounceable Rights Issue Offer For a non-renounceable pro-rata rights issue to Eligible Shareholders on the basis of 1 New Share for every Share held by Shareholders at the Record Date at an issue price of 0.5 cents per New Share ($0.005) together with 1 New Option (with an exercise price of 0.75 cents ($0.0075)) for every 2 New Shares issued under the Offer to raise a maximum of approximately $3.16 million before costs (Rights Issue Offer) and the placement of any Shortfall under the Rights Issue Offer. Sub-underwriters will also be offered the Sub-Underwriter Options. Underwritten by Canaccord Genuity (Australia) Limited ACN 075 071 466 IMPORTANT NOTICE This document is important and should be read in its entirety. If, after reading this Prospectus, you have any questions about the Offer Securities being offered under this Prospectus or any other matter relating to the Offers, then you should consult your professional adviser. An investment in the Offer Securities offered by this Prospectus should be considered speculative. This Prospectus may not be released to US wire services or distributed in the United States except by the Company to a limited number of shareholders who are employees of the Company or “accredited investors” (as defined in Rule 501(a) under the US Securities Act). This Prospectus has also been prepared in accordance with Section 713 of the Corporations Act. IMPORTANT NOTICE 1. Prospectus This Prospectus is dated 19 February 2024. A copy of this Prospectus has been lodged with ASIC on that date. ASIC and its officers take no responsibility for the contents of this Prospectus. No Offer Securities will be issued or allotted on the basis of this Prospectus later than 13 months after the date of this Prospectus (Expiry Date). This Prospectus is a transactional specific prospectus for an offer of continuously quoted securities (being the New Shares offered under this Prospectus) and New Options and has been prepared in accordance with section 713 of the Corporations Act. This Prospectus does not contain the same level of disclosure as an initial public offering prospectus prepared pursuant to Section 710 of the Corporations Act. In making representations in this Prospectus, regard has been made to the fact that the Elixinol Wellness Limited (EXL, Elixinol or the Company) 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. Further information is provided in Sections 7.4 and 7.5 of this Prospectus. This Prospectus is intended to be read in conjunction with the publicly available information in relation to the Company which has been notified to ASX. The Company will apply to ASX within 7 days of the date of this Prospectus for quotation of the New Shares offered under this Prospectus. The ASX takes no responsibility for the contents of this Prospectus. The fact that ASX may quote the New Shares is not to be taken in any way as an indication of the merits of the Company. Applications for New Shares and New Options offered pursuant to this Prospectus, including also for any Addition Securities, can only be submitted on the applicable original Entitlement and Acceptance Form which accompanies this Prospectus. Applications for the Shortfall Offer can only be submitted by invitation from the Company upon the Shortfall Application Form. If you are in any doubt about the contents of this document, you should obtain independent professional advice. 2. Disclaimer The information contained in this Prospectus is not investment advice. Before deciding to invest in the Company, you should read and understand the entire Prospectus and, in particular, in considering the Company's prospects, you should consider the risk factors that could affect the Company's performance. You should carefully consider these risk factors in Section 6 in light of your personal circumstances (including financial and taxation issues) and seek advice from your professional adviser before deciding to invest. Investing in the Company involves risks. None of the Company, the Directors or any other person gives any guarantee as to the success of the Company, the repayment of capital, the payment of dividends, the future value of the Offer Securities or the price at which the New Shares will trade on the ASX. Any references to past performance of the Company is no guarantee of future performance. 3. No Representations other than this Prospectus No person or entity is authorised to give any information or to make any representation in connection with the Offers that is not contained in this Prospectus or has not been released to ASX with the authorisation of the Company. The Application Forms accompanying this Prospectus are important. Please refer to the instructions in Section 4 of this Prospectus regarding the acceptance of the Offer. 4. Forward looking information Some of the statements appearing in this Prospectus may be in the nature of forward looking statements, including statements of current intention, statements of opinion and predictions as to possible future events. You should be aware that such statements are not statements of fact and there can be no certainty of outcome in relation to the matters to which the statements relate. Forward looking statements are subject to many inherent risks and uncertainties before actual outcomes are achieved. Those risks and uncertainties include factors and risks specific to the industry in which the Company operates as well as general economic conditions, interest rates, exchange rates and conditions in the financial markets. Actual events or results may differ materially from the events or results expressed or implied in any forward looking statement and any variation may be materially positive or negative. Forward looking information (including forecast financial information) is subject to uncertainty and contingencies, many of which are outside the control of the Company. 5. No cooling off rights apply to this Offer Cooling off rights do not apply to an investment pursuant to the Offers. This means that, in most circumstances, you cannot withdraw your Application Form once it has been lodged. 6. Offer Restrictions on Distribution This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. No action has been taken to lodge this Prospectus in any jurisdiction outside of Australia or to otherwise permit a public offering of New Shares or New Options in any jurisdiction outside Australia. In particular, the Offer Securities have not been, and will not be, registered under the US Securities Act and may only be offered and sold in the United States in accordance with an available exemption from registration under the US Securities Act and applicable US state securities laws. Return of a duly completed Application Form will be taken by the Company as a representation that that the Applicant is an Eligible Shareholder. 7. Prospectus availability Those investors who receive this Prospectus electronically are advised that the issue of securities under this Prospectus is only available to persons receiving the Prospectus in accordance with the distribution restrictions described in item 6 above. A paper copy of this Prospectus may be obtained free of charge from the Company or downloaded from the ASX website. The information on the ASX website or the Company's website do not form part of this Prospectus. 8. Definitions and glossary, financial amounts and time Definitions of certain terms used in this Prospectus are contained in Section 9. Unless otherwise indicated, all references to currency are to Australian dollars and all references to time are to Melbourne, Victoria time. TABLE OF CONTENTS Key Offer details 2 Important Dates* 2 1. RIGHTS ISSUE OFFER OVERVIEW 4 2. DETAILS OF THE OFFERS 8 3. EFFECT OF THE OFFERS 17 4. ACTION REQUIRED BY ELIGIBLE SHAREHOLDERS 19 5. RIGHTS AND LIABILITIES ATTACHING TO THE NEW SHARES, NEW OPTIONS AND SUB-UNDERWRITER OPTIONS 24 6. RISKS 26 7. ADDITIONAL INFORMATION 31 8. DIRECTORS' STATEMENT 37 9. DEFINITIONS 39 10. CORPORATE DIRECTORY 41 ANNEXURE A – OPTION TERMS AND CONDITIONS APPLICATION FORMS 2 Key Offer details Key details of the Offer Offer to Eligible Shareholders 1 New Share for every Share held at the Record Date at the Issue Price plus: • 1 New Option for every 2 New Shares issued under the Offer; and • the Top-Up Facility for Shareholders who subscribe for their full Entitlement Issue Price per New Share 0.5 cents per New Share payable in full on Application Exercise Price per New Option 0.75 cents per New Option Maximum number of New Shares issued under this Prospectus 632,871,613 (subject to rounding) New Shares Maximum number of New Options to be issued under 316,435,807 (subject to rounding) New this Prospectus Options Maximum number of Sub-Underwriter Options which, subject to shareholder approval, may be issued under this Prospectus Maximum proceeds (excluding costs associated with the Offer) if the Maximum Subscription Amount is achieved 316,435,807 (subject to rounding) SubUnderwriter Options Approximately $3.16 million for New Shares (before expenses and costs of the issue) Maximum number of Shares on issue following the 1,265,743,226 Shares (subject to Offer (excluding any shares issued upon the exercise rounding) of any Options) Maximum number of Options on issue following the 767,691,060 Options (subject to Offer (excluding any shares issued upon the exercise rounding) of any Options) Important Dates* Event Record Date to determine Entitlements under the Rights Issue Offer Date 22 February 2024 Prospectus (including Entitlement & Acceptance 26 February 2024 Form and Shortfall Application Form) despatched. Opening Date Closing Date for acceptances under the Rights Issue Offer and Top-Up Offer Issue of the New Shares and New Options Trading (T+2) of New Shares expected to commence 26 February 2024 5.00pm on 15 March 2024 Before noon (Melbourne time), 22 March 2024 26 March 2024 * The above dates are indicative only and subject to change. All dates and times are Australian Eastern Daylight Time (AEDT). The Company reserves the right, subject to the Corporations Act and the Listing Rules, to extend these dates without prior notice including extending the last date for receipt of the Application Form, or to delay or withdraw the Rights Issue Offer and Top-Up Offer at any time without prior notice. If withdrawn, all Application Monies for New Shares which have not been issued will be refunded (without interest) as soon as practicable. 3 Letter from the Non-Executive Chairman On behalf of the Board of Elixinol Wellness Limited (Company), I invite you to participate in the Company’s fully underwritten non-renounceable pro-rata entitlement offer of 1 New Share for every Share held at an Issue Price of 0.5 cents per New Share, plus 1 New Option for every 2 New Shares issued under the Offer (Rights Issue Offer) to raise up to maximum of approximately $3.16 million. The Offers may be summarised as follows: • Eligible Shareholders may subscribe under the Rights Issue Offer for 1 New Share for every Share held as at the Record Date (together with 1 New Option for every 2 New Shares issued under any Shortfall). • New Shares are priced at 0.5 cents ($0.005) per New Share. • There is no minimum subscription to be raised under this Prospectus before the Rights Issue Offer can close. • Eligible Shareholders may also subscribe for Addition Securities beyond their rights issue Entitlement on the basis that some other existing Shareholders will be either ineligible or may fail to fully take up their Entitlement (Top-Up Offer). This Top-Up Offer to apply for Addition Securities is restricted only to Eligible Shareholders (other than Directors and related parties of the Company). • If there remains any Shortfall after allocation of Entitlements to Eligible Shareholders under the Rights Issue Offer and Top-Up Offer, the Directors also reserve the right for up to 3 months after the close of the Rights Issue Offer to place any Shortfall at the Board’s discretion under this Prospectus but at a price no less than the Issue Price (Shortfall Offer). Any subscriptions under the Shortfall Offer will be allocated in the Board's absolute discretion. • The Rights Issue Offer is underwritten by Canaccord Genuity (Australia) Limited. The Company will, subject to shareholder approval, issue Canaccord with up to 316,435,807 Sub-Underwriter Options to be distributed to the sub-underwriters on the same terms as the New Options under the Rights Issue Offer. A copy this Prospectus has been lodged with ASIC and the ASX and can be accessed on the ASX website or via the Company's website: Error! Hyperlink reference not valid.. As announced on 12 February 2024, the funds from the Offers are important and will be applied to complete the purchase of purchase of Ananda Food Pty Ltd ACN 107 362 863 (which is a wholly owned subsidiary of Ecofibre Limited ACN 140 245 263 (ASX:EOF)) and for general working capital purposes. For more information, please see section 2.4 of this Prospectus. We look forward to your participation in the Offers. Yours sincerely David Fenlon Non-Executive Chairman Elixinol Wellness Limited 4 1. RIGHTS ISSUE OFFER OVERVIEW 1.1 Overview of the Offers This Section is not intended to provide full information for investors intending to apply for New Shares and New Options offered pursuant to this Prospectus. This Prospectus and all of its Sections should be read and considered in their entirety. Question Response Where to find more information What is the Rights Issue Offer Non-renounceable offer of New Shares, accompanied by attaching options (i.e., the New Options) as described below (Rights Issue Offer). Sections 2.1 and 2.6 What are the terms of the Rights Issue Offer 1 New Share for every Share held on the Record Date at an issue price of 0.5 cents per Share ($0.005), plus the grant to the subscribers of 1 New Option expiring 36 months from the date of issue at an exercise price of 0.75 cents for every 2 New Shares issued under the Rights Issue Offer. Section 2.1 Are the New Shares and Options to be Quoted on the ASX Yes, the New Shares, New Options and SubUnderwriter Options will be quoted on the ASX. Section 2.3 and Annexure A Can I sell or transfer my Entitlements No, the Rights Issue Offer is non-renounceable and, accordingly, you cannot offer to sell or transfer any of your Entitlement on ASX or via an off-market transfer. Section 2.6 Am I an Eligible Shareholder The Rights Issue Offer and Top-Up are made to Eligible Shareholders registered as a holder of Shares as at 7.00 pm (AEDT) on Thursday. 22 February 2024 (Record Date). Definition of Eligible Shareholder and Section 0 Can I purchase Addition Securities at the same price (Top-Up Offer)? Yes, the Company is also offering a Top-Up Facility so Eligible Shareholders who fully subscribe for their entitlement under the Rights Issue Offer will also have the right to apply for Addition Securities (not subscribed for by other Eligible Shareholders) at the same Issue Price (Top-Up Offer). For every 2 Additional Shares issued, subscribers will also receive 1 New Option. Sections 2.1 and 2.10 How will the Addition Securities be allocated The Company reserves the right to scale back any applications for Addition Securities in their absolute and sole discretion where the aggregate of New Shares applied for under the Top-Up Offers exceeds the Section 2.10 5 Question Response Where to find more information available shortfall from Shareholders who have not taken up, or are ineligible to take up, their Entitlement in full. When determining the amount (if any) by which to scale back an application, the Company may take into account a number of factors, including the size of an Applicant’s shareholding in the Company, the extent to which an Applicant has sold or bought additional Shares in the Company before and after both the announcement of the Rights Issue Offer and the Record Date, as well as when the application was made. Shortfalls – Shortfall Offer If there remains any Shortfall, the Directors reserve the right for up to 3 months from the close of the Rights Issue Offer to place any Shortfall at their discretion at a price no less than the Issue Price. The issue of Shares (and accompanying Options) under a Shortfall (if any), if issued, will be allocated by the Board in its discretion. In each case, the issue of every 2 New Shares under the Shortfall will be accompanied by the issue of 1 New Option. Application may only be made under the Shortfall Offer pursuant to a Shortfall Application Form. Section 2.11 Is the Offer underwritten Yes, the Rights Issue Offer is underwritten. Section 2.9 As announced on 12 February 2024, the subunderwriters to the Rights Issue Offer (introduced by the Underwriter) will receive one (1) for two (2) options for each New Share sub-underwritten (being the SubUnderwriter Options), issued on the same terms as the New Options. The Sub-Underwriter Options will be subject to shareholder approval - to be sought as soon as practicable. If the Company is unable to obtain shareholder approval to issue up to 316,435,807 Sub-Underwriter Options, the Company will issue the maximum number of SubUnderwriter Options to the Sub Underwriters as permitted under its unused capacity pursuant to ASX Listing Rule 7.1. How do the New Shares rank in comparison to existing Shares All New Shares issued under the Offers (including on exercise of any Options or Sub-Underwriter Options) will rank equally in all respects with existing Shares from the date of their issue. Sections 2.18 and 5.1 What are my choices? As an eligible Shareholder you may: Section 4.1 6 Question Response • • • Where to find more information take up all of your Entitlement under the Rights Issue Offer (and if you have taken up all your Entitlement, you may also apply for participation in the Top-Up Facility under the Top-Up Offer); or exercise only a portion of your Entitlement and allow the balance to lapse; or do nothing, in which case all of your Entitlements will lapse, and you will receive no value for those lapsed Entitlements. What will be the effect of the Offers on control The effect of the Offers on the control of the Company will vary with the level of Entitlements taken up by Eligible Shareholders under the Offers and the issue of any Shortfall. The Board will not allocate any Addition Securities such that such an allocation would result in a Shareholder having an interest in the Company in excess of 19.9% on the completion of the Offers. In this regard, no Chapter 6 approvals under the Corporations Act will be sought. Section 3.2 How do I apply for New Shares / Options under the Rights Issue Offer Eligible Shareholders can apply for New Shares and New Options under the Rights Issue Offer by making payment by BPAY® or EFT in the amount of the Rights Issue Offer (and Top-Up Offer, if applicable) applied for. Sections 4.2 and 4.3 You do not need to return the Entitlement and Acceptance Form and the Company will assume that you have applied for that number of New Shares corresponding to the subscription monies paid. You may accept all or part of your Entitlement. How do I apply for New Shares / Options under the Shortfall Offer You can apply for New Shares and Options (Additional Securities) under the Shortfall Offer by completing the relevant sections of the Shortfall Application Form accompanying this Prospectus, sending it to the Share Registry and making payment by EFT in the amount of the Shortfall Offer applied for. Section 4.7 How can I obtain further information Contact our Share Registry on 1300 288 664 (within Australia) or +61 2 9698 5414 (from outside Australia) at any time between 9:00am to 5:00pm Monday to Friday until the Closing Date. For advice, actively consult your broker, accountant or other professional adviser. N/A Risk Factors There are many risks associated with an investment in the Company, including relating to the Company's business, its regulatory environment, its financial Section 6 7 Question Response requirements generally. These risks will in part turn upon the Company's ability to: • • • ensure distribution of its product; manage capital expenditure in producing and marketing the products; and ensuring customer acceptance of the products. Refer to Section 6 for a more detailed description of some of these Risk Factors. Where to find more information 8 2. DETAILS OF THE OFFERS 2.1 The Offers The Rights Issue Offer: The Company is offering Eligible Shareholders the opportunity to subscribe for 1 New Share for every Share held at 7:00pm on the Record Date at an Issue Price of 0.5 cents ($0.005) per New Share, together with the grant of 1 New Option expiring 36 months from the date of issue and an exercise price of exercise price of 0.75 cents for every 2 New Shares issued under this offer (Rights Issue Offer). Your Entitlement under the Rights Issue Offer is shown on, and you may only make application for New Shares and New Options pursuant to, the terms of the accompanying Entitlement & Acceptance Form. Details on how to accept the Rights Issue Offer are set out in Section 4. The Top-Up Offer: Eligible Shareholders who fully subscribe for their entire Entitlement under the Rights Issue Offer may also apply under the Top-Up Facility for Addition Securities known as their TopUp Offer. The allocation of any Addition Securities will be limited to the extent that there are sufficient New Shares available (after all acceptances have been received under the Rights Issue Offer) which have not been taken up by some of the Eligible Shareholders and have therefore formed a "Shortfall". The Shortfall Offer: Subject to the Corporations Act and the Listing Rules, the Board reserves the right to offer any Shortfall (after the allocations of all New Shares under the Rights Issue Offer and the Top-Up Offer) to other eligible investors within a 3-month period after the close of the Rights Issue Offer. In each case, each issue of New Shares under any Shortfall will be accompanied by 1 New Option for every 2 New Shares subscribed under the Shortfall. The Options will have an expiry date being the date which is 36 months from the date of issue and an exercise price of exercise price of 0.75 cents. Application may only be made under the Shortfall Offer pursuant to a Shortfall Application Form. Under the Underwriting Agreement (see section 2.9 below), subject to shareholder approval (as necessary), the Company will issue to the Underwriter up to 316,435,807 options (being the Sub-Underwriter Options) on the same terms as the New Options to be distributed to sub-underwriters. An application form the Sub-Underwriter Options is also attached to this Prospectus. 2.2 Eligible Shareholders Eligible Shareholders are those holders of Shares who: • are registered as a holder of Shares as at the Record Date; and • have an address on the Company's share register in Australia or New Zealand. 9 Shareholders who do not satisfy each of the above mentioned criteria are regarded as 'Ineligible Foreign Shareholders'. All Ineligible Foreign Shareholders will be sent a letter advising of their inability to participate in the Rights Issue Offer and Top-Up Offer. The Company, in its absolute discretion, reserves the right to determine whether a Shareholder is an Eligible Shareholder and is therefore able to participate in the Rights Issue Offer and Top-Up Offer, or an Ineligible Foreign Shareholder and is therefore unable to participate in the Rights Issue Offer and Top-Up Offer. The Company disclaims all liability to the maximum extent permitted by law in respect of any determination as to whether a Shareholder is an Eligible Shareholder or an Ineligible Foreign Shareholder. 2.3 Size and Nature of the Offers As at the date of this Prospectus, the Company has on issue 632,871,613 Shares and 134,819,446 Options (at varying expiry dates, all exercisable at $0.02). Approximately 632,871,613 New Shares, 316,435,807 New Options, plus 316,435,807 Sub-Underwriter Options will be offered under the Offers to raise approximately $3.16 million before the expenses of the Rights Issue Offer are taken into account and without the exercise of any of the Options. There is no minimum subscription under the Rights Issue Offer before the Company may use the funds raised after the close of the Offers. 2.4 Use of Funds The Company proposes to use the funds received* pursuant to the Offers (assuming the maximum amount is raised and no exercise of any of the Options or Sub-Underwriter Options) as described below: Indicative expenditure Complete the purchase of Ananda Food Pty Ltd General Working Capital and capital raising costs** Maximum funds raised under the Offers Description $ As announced on 12 February 2024, $2.000,000 the purchase price of Ananda Food Pty Ltd includes an upfront payment of $2,000,000 and a deferred cash consideration up to a maximum value of $1,000,000 subject to hurdle requirements based on the performance of Ananda Food Pty Ltd. up to $1,160,000 Day to day working capital requirements and capital raising costs for the Offers $3.16m * As the Rights Issue Offer are underwritten, the maximum raising of $3.16 million is expected to be raised. ** The Company will pay cash commission to the Underwriter. See section 2.9 for more detail. Any such commission costs have not been taken into account in the use of funds above. 10 2.5 Opening and Closing Date The Rights Issue Offer and the Top-Up Offer will open for receipt of acceptances on Monday, 26 February 2024. The Closing Date for acceptance of your Entitlement is 5.00pm, Friday, 15 March 2024. The Company reserves the right, subject to the Corporations Act and the Listing Rules, to extend the last date for the close of the Rights Issue Offer, or to delay or withdraw the Rights Issue Offer at any time without prior notice. Where the Rights Issue Offer is withdrawn, all Application Monies will be refunded (without interest) as soon as practicable by EFT to your bank account. Any extension of the Closing Date will have a consequential effect on the issue date of New Shares, New Options and any Sub-Underwriter Options. 2.6 Entitlements under the Rights Issue Offer The Rights Issue Offer and the Top-Up Offer (i.e. the Rights Issue Offer) are nonrenounceable and therefore Eligible Shareholders cannot offer to sell or transfer any of their Entitlement on ASX or via an off-market transfer (or any other exchange or privately transferred). Shareholders who do not take up their Rights Issue Offer in full will have their percentage interest in the Company diluted as compared to that percentage as at the date the Rights Issue Offer is made. Your Entitlement has been calculated and rounded up to the nearest whole number (at the offer ratio) and where the Company receives acceptances in aggregate in excess of the maximum number of available Shares – all acceptances will be pro rata reduced to that maximum available under the Rights Issue Offer. As described in Sections 2.10 and 2.11, any New Shares not taken up by an Eligible Shareholder by the Closing Date will form part of the Shares available under the Top-Up Offer and Shortfall Offer. 2.7 Entitlements and acceptance The Entitlement of Eligible Shareholders to participate in the Rights Issue Offer will be determined on the Record Date. Your Entitlement is shown on the Entitlement & Acceptance form accompanying this Prospectus. 2.8 No cooling off rights Cooling off rights do not apply to an investment in New Shares. You cannot withdraw your Application once it has been received. 2.9 Underwriting The Rights Issue Offer are underwritten by Canaccord Genuity (Australia) Limited ACN 075 071 (Canaccord). A summary of the material terms of the Underwriting Agreement is set out below. Fees: Canaccord will be paid the following fees: 11 » underwriting fee of 4.0%; and » issue management fee of 2.0%, of the total gross amount raised in the Rights Issue. EXL must also reimburse Canaccord for all reasonable costs and expenses of and incidental to the Rights Issue (including professional and legal fees). Sub-Underwriter Options Subject to completion of the Rights Issue Offer and shareholder approval of the SubUnderwriter Options, EXL agrees to issue Canaccord Genuity (Australia) Limited's nominees, up to 316,435,807 Sub-Underwriter Options on the same terms as the New Options. If the Company is unable to obtain shareholder approval to issue up to 316,435,807 SubUnderwriter Options, the Company will issue the maximum number of Sub-Underwriter Options to the sub underwriters as permitted under its unused capacity pursuant to ASX Listing Rule 7.1. Conditions Precedent and Termination Events Canaccord Genuity (Australia) Limited's obligation to underwrite the Rights Issue is subject to the satisfaction of certain conditions precedent documented in the Underwriting Agreement that are customary for a transaction of this nature. If one or more of those conditions are not satisfied by the relevant date or if certain events occur, then Canaccord may terminate the Underwriting Agreement. The events which may trigger termination of the Underwriting Agreement include (but are not limited to) the following: » the All Ordinaries Index & Emerging Companies Index as published by the ASX falls below 10% of its respective level as at the close of business on the Business Day prior to