Announcement PDF CELSIUS COAL LIMITED (TO BE RENAMED “FAVOURIT LIMITED”) ACN 009 162 949 PROSPECTUS The Prospectus has been prepared for, among other things, a public offer of up to 30,000,000 Shares at an issue price of $0.20 per Share to raise up to $6,000,000, with a minimum subscription of $4,000,000 (Public Offer). The Public Offer is scheduled to close at 5.00pm (WST) on the Closing Date unless extended or withdrawn. Applications must be received before that time to be valid. IMPORTANT INFORMATION This is an important document that should be read in its entirety. If you do not understand it you should consult your professional advisers without delay. The Securities offered by this Prospectus should be considered highly speculative. CONTENTS 1. CORPORATE DIRECTORY.............................................................................................. 1 2. IMPORTANT NOTICE ..................................................................................................... 2 3. KEY DATES AND OFFER STATISTICS............................................................................... 5 4. CHAIRMAN’S LETTER ..................................................................................................... 6 5. INVESTMENT OVERVIEW ............................................................................................... 8 6. DETAILS OF THE OFFERS .............................................................................................. 20 7. COMPANY OVERVIEW ............................................................................................... 29 8. FAVOURIT CORPORATE STRUCTURE ........................................................................... 47 9. RISK FACTORS ............................................................................................................ 51 10. BOARD, MANAGEMENT, INTERESTS AND CORPORATE GOVERNANCE.................... 63 11. FINANCIAL INFORMATION......................................................................................... 68 12. INVESTIGATING ACCOUNTANT’S REPORT ................................................................. 98 13. CORPORATE GOVERNANCE .................................................................................... 104 14. MATERIAL CONTRACTS ............................................................................................ 107 15. ADDITIONAL MATERIAL INFORMATION ................................................................... 115 16. DIRECTORS’ AUTHORISATION .................................................................................. 123 17. GLOSSARY AND INTERPRETATION............................................................................ 124 i 1. CORPORATE DIRECTORY Current Directors1 Registered Office William Oliver – Non-Executive Director and Chairman London House Level 3 216 St Georges Terrace PERTH WA 6000 Alistair Muir – Non-Executive Director Ranko Matic – Non-Executive Director Proposed Directors Martin Dalgleish, Non-Executive Director and Chairman Toby Simmons, Chief Executive Officer and Managing Director Richard Kuo, Non-Executive Director Dennis Verrios, Non-Executive Director Company Secretary Ph: +61 8 9226 4500 Fax: +61 8 9226 4300 Website: www.favouritlimited.com.au Share Registry* Automic Registry Services Suite 1A, Level 1 7 Ventnor Avenue WEST PERTH WA 6005 Telephone: +61 8 9324 2099 Legal Advisers to Company CLA Steinepreis Paganin Lawyers and Consultants Level 4, The Read Buildings 16 Milligan Street PERTH WA 6000 Proposed ASX Code: Auditor* FAV RSM Australia Partners 8 St Georges Terrace PERTH WA 6000 Ranko Matic Current ASX Code: Lead Manager to the Offer Asia Principal Capital-Corporate Finance Pty Ltd Level 18 201 Kent Street SYDNEY NSW 2000 Ph: +61 8 9261 9100 Fax: +61 8 9261 9111 Investigating Accountant RSM Financial Services Australia Pty Ltd Level 21 55 Collins Street MELBOURNE VIC 3000 1 Resigning upon completion of the Acquisition. * These entities have been included for information purposes only. They have not been involved in the preparation of this Prospectus. 1 2. IMPORTANT NOTICE 2.1 General This Prospectus is dated 9 March 2016 and was lodged with the ASIC on that date. The ASIC and its officers take no responsibility for the contents of this Prospectus or the merits of the investment to which this Prospectus relates. No person is authorised to give information or to make any representation in connection with the Offers, which is not contained in the Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Company in connection with this Prospectus. It is important that you read this Prospectus in its entirety and seek professional advice where necessary. The Securities that are the subject of this Prospectus should be considered highly speculative. 2.2 Re-compliance Prospectus This Prospectus is a re-compliance prospectus for the purposes of satisfying Chapters 1 and 2 of the ASX Listing Rules and to satisfy the ASX requirements for re-admission to the Official List following a change in nature and scale of the Company’s activities. 2.3 Investment Advice This Prospectus does not provide investment advice and has been prepared without taking into account your financial objectives, financial situation or particular needs (including financial or taxation issues). You should seek professional investment advice before subscribing for Securities under this Prospectus. 2.4 Expiry Date No Securities may be issued on the basis of this Prospectus later than 13 months after the date of this Prospectus. 2.5 Forward-looking statements This Prospectus contains forward-looking statements which are identified by words such as ‘may’, ‘could’, ‘believes’, ‘estimates’, ‘targets’, ‘expects’, or ‘intends’ and other similar words that involve risks and uncertainties. These statements are based on an assessment of past and present economic and operating conditions, and on a number of assumptions regarding future events and actions that, as at the date of this Prospectus, are expected to take place. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company, its Directors, proposed Directors and management. Although the Company believes that the expectations reflected in the forward looking statements included in this Prospectus are reasonable, none of the Company, its Directors, proposed Directors or officers, or any person named in this Prospectus, can give, or gives, any assurance that the results, performance or achievements expressed or implied by the forward-looking statements 2 contained in this Prospectus will actually occur or that the assumptions on which those statements are based will provide to be correct or exhaustive beyond the date of its making. Investors are cautioned not to place undue reliance on these forward-looking statements. Except to the extent required by law, the Company has no intention to update or revise forward-looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this Prospectus. The forward looking statements contained in this Prospectus are subject to various risk factors that could cause our actual results to differ materially from the results expressed or anticipated in these statements. The key risk factors of investing in the Company are set out in Section 9 of this Prospectus. 2.6 Privacy statement By completing and returning an Application Form, you will be providing personal information directly or indirectly to the Company, the Share Registry, the Lead Manager and other brokers involved in the Public Offer, Favourit and related bodies corporate, agents, contractors and third party service providers of the foregoing (Collecting Parties). The Collecting Parties collect, hold and will use that information to assess your application, service your needs as a Shareholder and to facilitate distribution payments and corporate communications to you as a Shareholder. By submitting an Application Form, you authorise the Company to disclose any personal information contained in your Application Form (Personal Information) to the Collecting Parties where necessary, for any purpose in connection with an Offer, including processing your acceptance of an Offer and complying with applicable law, the ASX Listing Rules, the ASX Settlement Operating Rules and any requirements imposed by any Public Authority. If you do not provide the information required in the Application Form, the Company may not be able to accept or process your acceptance of an Offer. If the Offers are successfully completed, your Personal Information may also be used from time to time and disclosed to persons inspecting the register of Shareholders, including bidders for your securities in the context of takeovers, regulatory authorities (including those regulating the wagering and gaming business activities of Favourit), authorised securities brokers, print service providers, mail houses and the Share Registry. Any disclosure of Personal Information made for the above purposes will be on a confidential basis and in accordance with the Privacy Act 1988 (Cth) and all other legal requirements. If obliged to do so by law or any Public Authority, Personal Information collected from you will be passed on to third parties strictly in accordance with legal requirements. Once your Personal Information is no longer required, it will be destroyed or de-identified. As Favourit’s business activities are conducted in and regulated under other jurisdictions, if required by overseas Public Authorities, Personal Information may be disclosed to such Public Authorities. Subject to certain exemptions under law, you may have access to Personal Information that the Collecting Parties hold about you and seek correction of such information. Access and correction requests, and any other queries regarding this privacy statement, must be made in writing to the Share Registry 3 at the address set out in the Corporate Directory in Section 0 of this Prospectus. A fee may be charged for access. 2.7 Website – Electronic Prospectus A copy of this Prospectus can be downloaded from the website of the Company at www.favouritlimited.com.au or www.celsiuscoal.com. If you are accessing the electronic version of this Prospectus for the purpose of making an investment in the Company, you must be an Australian resident and must only access this Prospectus from within Australia. There is no facility for any of the Offers to be accepted electronically or by applying online. Shares will not be issued under the electronic version of the Prospectus. The Corporations Act prohibits any person passing onto another person an Application Form unless it is attached to a hard copy of this Prospectus or it accompanies a complete and unaltered version of this Prospectus. You may obtain a hard copy of this Prospectus free of charge by contacting the Company. The Company reserves the right not to accept an Application Form from a person if it has reason to believe that when that person was given access to the Application Form, it was not provided together with the Prospectus and any relevant supplementary or replacement prospectus or any of those documents were incomplete or altered. 2.8 Defined terms Unless the contrary intention appears or the context otherwise requires, words and phrases contained in this Prospectus have the same meaning and interpretation as given in the Corporations Act and capitalised terms have the meaning given in the Glossary in Section 17 of this Prospectus. 2.9 Time All references to time in this Prospectus are references to Australian Western Standard Time. 2.10 Photographs and Diagrams Photographs used in this Prospectus which do not have descriptions are for illustration only and should not be interpreted to mean that any person shown in them endorses the Prospectus or its contents or that the assets shown in them are owned by the Company. Diagrams used in this Prospectus are illustrative only and may not be drawn to scale. 2.11 Enquiries If you are in any doubt as to how to deal with any of the matters raised in this Prospectus, you should consult your broker or legal, financial or other professional adviser without delay. Should you have any questions about any of the Offers or how to accept any of the Offers, please call the Company Secretary on +61 8 9226 4500. 4 3. KEY DATES AND OFFER STATISTICS 3.1 Indicative timetable1 Lodgement of Prospectus with the ASIC 9 March 2016 Opening Date of the Offers 9 March 2016 Closing Date of the Offers 15 April 2016 Settlement of Favourit Acquisition2 22 April 2016 (Issue of Consideration Shares, Adviser Shares, Conversion Securities, Public Offer Shares and others pursuant to the Acquisition Agreement) Anticipated date for re-admission to ASX 29 April 2016 1 The above dates are indicative only and may change without notice. The Company reserves the right to extend the Closing Date or close the Offers early without prior notice. The Company also reserves the right (subject to the terms of the Acquisition Agreement) not to proceed with any of the Offers at any time before the issue of Shares to Applicants. 2 The above stated date for the settlement of the Favourit Acquisition is only a good faith estimate by the Directors and may have to be varied as required. 3.2 Key Statistics of the Offers Shares currently on issue 1,614,034 Shares to be issued to Favourit Shareholders(1) 60,600,000 Public Offer issue price $0.20 Maximum Shares to be issued under Public Offer(2) 30,000,000 Shares to be issued to the Adviser 3,636,000 Conversion Shares to be issued to Celsius Noteholders 4,208,644 Conversion Options to be issued to Celsius Noteholders 2,104,328 Securities on issue Post-Acquisition(3)(4) 102,163,006 Notes: 1. 2. 3. 4. Further information regarding the terms of the Consideration Shares to be issued to Vendors is set out in Section 15.2. Assuming the maximum subscription of $6,000,000 is achieved under the Public Offer. Comprise 100,058,678 Shares and 2,104,328 Options and assumes no additional Securities are issued. A detailed capital structure is set out in Section 8.6. 5 4. CHAIRMAN’S LETTER Dear Investor, On behalf of the Board, I am delighted to invite you to participate in the ownership and future growth of Celsius Coal Limited (to be renamed “Favourit Limited”). The Company previously operated as a coal and nickel explorer, and since April 2015, had been evaluating alternative corporate opportunities, both in Australia and overseas. As announced on 26 October 2015, the Company is proposing to change its operations to a company focused on operating in the global online gambling industry via the acquisition of 100% of the issued capital of Favourit Global Pty Ltd (Favourit). On 28 January 2016, shareholders approved (amongst other things) this change in the Company’s direction. Favourit has developed and owns a socially designed betting platform that operates in the global online gambling market estimated by the Global Betting and Gaming Consultancy (GBGC) to be US$450 billion in 2014, measured in annual gross gambling revenue1. The technology platform, founded within TOTE Tasmania Pty Ltd in 2012 by brothers Toby and Josh Simmons, is an internationally scalable, multi-channel and differentiated platform that intends to broadly disrupt the global online gambling market. Funds raised to date have enabled the design, development and early stage commercialisation of Favourit’s own sportsbook business. Favourit (via its subsidiary, Favourit Enterprises) recently partnered with a leading European based service provider (EveryMatrix) to provide the necessary and more commoditised back office functionality, allowing Favourit to operate as a licenced sportsbook under its own brand in certain international markets. Favourit is focused on re-engineering the online sports betting experience for today’s digital age. The current sportsbook competitive landscape is largely focused on the betting transaction between the customer and the bookmaker, with little to no integration of social features or data. The socially designed disruption opportunity is real and substantial, particularly in the growing market of sports betting customers around the world who have high familiarity with the social media channels they use frequently each and every day. Favourit launched its unique multi-channel platform in the UK market in late 2015, offering real money sports and racing betting via its socially focused user experience. Favourit’s early operating performance is beginning to demonstrate that its marketing strategy and unique value proposition assist in lowering its customer acquisition cost. Should this continue to be demonstrated at scale, it should ensure that Favourit is a highly valuable business in this rapidly developing global industry. Favourit also aims to demonstrate over time that the socially designed user experience leads to higher engagement, greater activity and therefore enhanced financial returns. The global online gambling market is a prime market for disruption. This market has evolved from the early days of “high street” betting shops that had a narrow customer appeal, to telephone call centres, through to transactional online platforms, and now to socially designed online betting platforms such as Favourit, the addressable market is substantial in size and is of course global. Favourit has chosen the UK as its initial market entry focus. Based on Favourit’s observations, most market incumbents are largely reliant on technologies that deliver transactional based functions which restricts them to primarily 1 Global Betting and Gaming Consultants’ Global Gambling Report tenth edition (http://www.gbgc.com/globalgambling-revenues-pass-us-450-billion-in-2014/) 6 compete on price and promotions, the size of their marketing budget and, in some cases, use celebrity endorsers. Favourit competes and differentiates on the basis of its socially designed user experience, savvy digital, affiliate and social marketing, and its clear focus on the larger market segment (by volume) of online betting customers. Over time, this is intended to ensure that the platform has a broader appeal to those users who value the entertainment aspect of the betting experience, rather than just the betting transaction itself. Socially designed features leveraging “big data” such as trending, hot and recommended bets based on betting activity, gamification elements including competitive leaderboard rankings, one-click to follow bet placement, and relevant content feeds all add to the platform differentiation of Favourit. This Prospectus is being issued to assist the Company to re-comply with the ASX Listing Rules and also raise sufficient funds to complete the proposed Transaction. Under this Prospectus, the Company proposes to raise a minimum of $4,000,000 and a maximum of $6,000,000 pursuant to the Public Offer. I encourage you to read the Prospectus carefully and in its entirety, particularly the section on risks. On behalf of the Board, I invite you to subscribe for Shares in the Company and look forward to welcoming you as a shareholder. Yours sincerely, BILL OLIVER CHAIRMAN 9 March 2016 7 5. INVESTMENT OVERVIEW This Section is a summary only and is not intended to provide full information for investors intending to apply for Securities offered pursuant to this Prospectus. This Prospectus should be read and considered in its entirety. Item A. Summary Further information The Company Who is the issuer of this Prospectus? Celsius Coal Limited (ACN 009 162 949) (to be renamed “Favourit Limited”) (ASX Code: CLA) (Company) is the issuer of this Prospectus. Section 7 The Company is an ASX listed public company in the business of minerals exploration. The Company currently holds nickel assets in Western Australia. What is the intended Acquisition? The Company has agreed to acquire 100% of the issued share capital of Favourit Global Pty Ltd (ACN 158 297 655) (Favourit) from Favourit’s Shareholders (Transaction). Section 7 and 14 The Acquisition, once completed, will lead to a significant change in the nature and scale of the Company’s activities. As a result, the Company was required to obtain shareholder approval for (among other things) the Acquisition and to re-comply with Chapters 1 and 2 of the ASX Listing Rules. Shareholder approval was obtained on 28 January 2016. A summary of the key terms of the Acquisition is set out in Section 14.1. What is the purpose of this Prospectus? The purpose of this Prospectus is to raise sufficient capital through the issue of Shares under the Public Offer to fund the Merged Group’s ongoing marketing, development, and working capital requirements, and to seek readmission to the Official List of ASX as “Favourit Limited”. The proposed use of funds raised under the Public Offer is set out in Section 6.4. Section 6.4 A further purpose of this Prospectus is to cleanse the issue of Securities to be issued to the Vendors, the Adviser, and Celsius Noteholders pursuant to section 708A(11) of the Corporations Act. Further information in relation to this is set out in Section 6. 8 Item Summary Further information Business Model of Favourit post-Acquisition Who Favourit? is Favourit is an Australian incorporated company that develops and owns a socially designed betting platform that operates primarily in the UK online betting market (Favourit Platform). Sections 7 and 8 The Favourit Platform was initially incubated by TOTE Tasmania, then acquired from the Tatts Group (Tatts) by the current Favourit management in early 2012 (following the Tatts acquisition of TOTE Tasmania in late 2011). The Favourit Platform, while under development and beta testing, initially operated by offering a virtual currency (i.e. non real-money gaming) and affiliate model (real-money gaming through affiliated licensed bookmakers) until November 2014 when the Favourit Platform was launched into the UK market as a Favourit branded bookmaker. The Favourit Platform provides a socially designed user experience for betting on sports, racing, and casino games. Favourit (via its subsidiary, Favourit Enterprises) has partnered with EveryMatrix, a UK and Romanian based technology provider of white-label bookmaking administrative and risk management services. EveryMatrix provides Favourit with the back-office bookmaking function, including odds pricing, risk management, gambling licence access, and regulatory compliance. Favourit operates as a whitelabel partner of EveryMatrix. EveryMatrix has licences to operate in the UK, Malta, Curacao, and Ireland. As a whitelabel partner, Favourit (via its subsidiary, Favourit Enterprises) does not hold any gambling licence itself. Rather, bookmaking services are conducted by EveryMatrix under its licences, and Favourit promotes these services to customers using the Favourit brand. The Favourit Platform is multi-channelled and available across desktop browser and mobile (HTML5) devices. It differentiates itself from other betting platforms through its features leveraging “big data” such as trending, hot and recommended bets based on betting activity, gamification elements including competitive leaderboard rankings and one-click to follow bet placement. Favourit is actively developing and investigating new market opportunities through continual international business development in regulated markets. Favourit is an Australian proprietary company with two wholly owned subsidiaries, being Favourit Enterprises Ltd (a company incorporated in the Isle of Man with registration number 128937C) and Favourit Australia Pty 9 Item Summary Further information Ltd (ACN 602 262 644) (Subsidiaries) (with Favourit and the Subsidiaries together being the Favourit Group). Post-Acquisition, the Company and Favourit shall together form the merged group (Merged Group), and the Merged Group shall continue to carry on the business of Favourit. The Company is currently looking to divest or wind up its existing mining interests and focus exclusively on the Favourit business. How will Favourit generate income? Favourit derives its revenue through new and returning customers utilising the Favourit Platform for betting activities. Favourit and EveryMatrix share in the net gaming revenue derived from all betting activity on the Favourit Platform in contracted markets, including the UK. Section 7.4 What will be the key business strategies of Favourit? Favourit’s key business strategies will be to focus on: Section 7 What will be the key dependencies of Favourit’s business model • designing, developing, and marketing solutions for, and servicing of, the online gambling market via its unique, socially designed Favourit Platform; and • ongoing development and investigation of new regulated market opportunities through continual international business development. The key factors that Favourit will depend on to meet its objectives are: • successful marketing of Favourit, and the Favourit Platform to new customers; • retaining customers by providing responsive customer service, competitive offers and promotions as well as a unique customer experience; • the ability to provide and offer back-end administrative services including odds compilation, risk management, gambling licence access, and regulatory compliance, currently provided to Favourit via EveryMatrix; • continued compliance with gambling regulators in various markets that Favourit intends to conduct its business; • maintaining and developing the Favourit Platform to service customers; and • generating sufficient gross gaming revenue from its operations to generate positive cashflow in future years. Section 7 10 Item Summary Further information What are the key benefits of the Acquisition? The Board considers that the key benefits of the Acquisition will be the opportunity for its shareholders to gain exposure to a unique global socially designed sports betting platform that is well placed to deliver high growth in a substantial and growing addressable market with a differentiated platform to the majority of Favourit’s competitors. Section 7 What are the effects of the Acquisition? The effect of the Acquisition will see the nature and scale of the business activities of the Company change with the Company proposing to focus on developing and marketing Favourit’s Platform and services. Sections 7,9, 10, and 12 The effect of the Acquisition is set out in the capital structure table in Section 8.6 and the pro-forma balance sheet of the Company set out in Section 12. The effect of the Acquisition on the Company’s risk profile, including the dilutive impact on the Company’s existing Shareholders, is set out in Section 9 (a summary of key risks is also set out in Section C below). What are the key investment highlights? The Directors and Proposed Directors are of the view that an investment in Favourit provides the following nonexclusive list of key highlights: • An attractive investment opportunity for the Company to change its business focus to that of a company operating in the global gambling industry; • A large and growing global market opportunity, with Favourit aiming to deliver a scalable, socially designed betting platform; • Strategically positioned product, focused on the fast growing segments of sports betting, live betting and mobile platform delivery, supported by the launch of Favourit’s casino product; • Scalable business model delivered through a proprietary technology platform with a low cost base and the ability to deploy new product offerings and expand into new geographic markets; • Engaging, innovative and intuitive technology designed to increase user engagement and lower customer acquisition costs, by delivering products to suit customers’ needs and are likely to be more engaging due to community, content and data analytics as compared to transactional platforms offered by traditional operators; • A differentiated platform in an industry with regulations acting as barriers to entry, including strong entertainment and socially designed 11 Item Summary Further information experience; C. • Pure online model minimises capital requirements for global expansion and future growth; • An experienced board who bring substantial experience in gaming, gambling, media, and technology, as well as commercialisation of highgrowth consumer digital platforms; and • An experienced management team with experience in building enterprise level scalable platforms, digital customer acquisition and strategic skills in the gambling and related industries. Key Risks What are the key risks of an investment in the Company? The business, assets and operations of the Company are and will be subject to certain risk factors. These factors can impact on the value of an investment in the Securities of the Company. Section 9 Set out below are specific risks the Company is and will be exposed to post-Acquisition. An investment in the Company should be considered highly speculative. Further risk factors affecting Favourit and the Merged Group are set out in Section 9. Risks associated with UKGC Licence and with UK Whitelabel Agreement with EveryMatrix Computer system risk Given that a significant majority of the Merged Group’s customers are UK residents, the most material risks are in respect of the UKGC Licence and the UK Whitelabel Agreement with EveryMatrix. Section 9.3(a) A risk exists that the UKGC Licence ma