ARCHTIS LIMITED — Capital/Financing Update 2021

Feb 11, 2021

ARCHTIS LIMITED ACN 123 098 671

PROSPECTUS

For the offer of up to 1,000 Shares in the capital of the Company at an issue price of $0.30 per Share to raise up to $300 (before expenses).

This Prospectus has been prepared primarily for the purpose of section 708A(11) of the Corporations Act to remove any trading restrictions on the sale of Shares issued by the Company prior to the Closing Date.

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IMPORTANT NOTICE

This document is important and should be read in its entirety. If after reading this Prospectus you have any questions about the Shares being offered under this Prospectus or any other matter, then you should consult your stockbroker, accountant or other professional adviser.

The Shares offered under this Prospectus should be considered speculative.

TABLE OF CONTENTS

1.	CORPORATE DIRECTORY .............................................................................................. 2
2.	TIMETABLE AND IMPORTANT NOTES ............................................................................ 3
3.	DETAILS OF THE OFFER .................................................................................................. 5
4.	PURPOSE AND EFFECT OF THE OFFER ........................................................................... 8
5.	RIGHTS AND LIABILITIES ATTACHING TO SHARES ........................................................ 9
6.	RISK FACTORS ............................................................................................................ 12
7.	ADDITIONAL INFORMATION ...................................................................................... 22
8.	DIRECTORS’ AUTHORISATION .................................................................................... 29
9.	DEFINITIONS ............................................................................................................... 30

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1. CORPORATE DIRECTORY

Directors

Registered Office

Dr Miles Jakeman AM Non-Executive Chairman

Daniel Lai Managing Director and Chief Executive Officer

Leanne Graham Non-Executive Director

Level 3 10 National Circuit BARTON ACT 2600

Telephone: + 61 2 6162 2792 Email: info@archtis.com Website: www.archtis.com

ASX Code

Company Secretary

AR9

James Palmer

Lawyers

Share Registry*

Automic Registry Services Level 5 126 Phillip Street SYDNEY NSW 2000 Telephone: +61 2 9698 5414

Steinepreis Paganin Lawyers and Consultants Level 4, The Read Buildings 16 Milligan Street PERTH WA 6000

Auditors*

RSM Australia Partners Equinox Building 4 Level 2 70 Kent Street DEAKIN ACT 2600

• These entities have not been involved in the preparation of this Prospectus and have not consented to being named in this Prospectus. Their names are included for information purposes only.

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2. TIMETABLE AND IMPORTANT NOTES

2.1 Timetable

Action	Date
Lodgement of Prospectus with the ASIC and ASX	12 February 2021
Opening Date	12 February 2021
Closing Date*	5:00pm WST on 12 May 2021
Expected date of Official Quotation of the Shares	18 May 2021

• The Directors reserve the right to bring forward or extend the Closing Date at any time after the Opening Date without notice. As such, the date the Shares are expected to commence trading on ASX may vary with any change in the Closing Date.

2.2 Important Notes

This Prospectus is dated 12 February 2021 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 Shares may be issued on the basis of this Prospectus later than 13 months after the date of this Prospectus.

The Offer is only available to those who are personally invited to accept the Offer. Applications for Shares offered pursuant to this Prospectus can only be submitted on an original Application Form which accompanies this Prospectus.

This Prospectus is a transaction specific prospectus for an offer of continuously quoted securities (as defined in the Corporations Act) and has been prepared in accordance with section 713 of the Corporations Act. It does not contain the same level of disclosure as an initial public offering prospectus. In making representations in this Prospectus regard has been had to the fact that 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.

2.3 Web Site – Electronic Prospectus

A copy of this Prospectus can be downloaded from the website of the Company at www.archtis.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.

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 the complete and unaltered version of this Prospectus. Any person 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 electronic Application Form, it was not provided together with the electronic Prospectus and any relevant supplementary or replacement prospectus or any of those documents were incomplete or altered.

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2.4 Website

No document or information included on our website is incorporated by reference into this Prospectus.

2.5 Risk Factors

Potential investors should be aware that subscribing for Shares in the Company involves a number of risks. The key risk factors of which investors should be aware are set out in Section 6 of this Prospectus. These risks together with other general risks applicable to all investments in listed securities not specifically referred to, may affect the value of the Shares in the future. Accordingly, an investment in the Company should be considered highly speculative. Investors should consider consulting their professional advisers before deciding whether to apply for Shares pursuant to this Prospectus.

2.6

Overseas Investors

The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and therefore persons into whose possession this document comes should seek advice on and observe any such restrictions. Any failure to comply with these restrictions constitutes a violation of those laws. This Prospectus does not constitute an offer of Shares in any jurisdiction where, or to any person to whom, it would be unlawful to issue in this Prospectus.

2.7 Disclaimer

No person is authorised to give any information or to make any representation in connection with the Offer described in this Prospectus which is not contained in this Prospectus. Any information not so contained may not be relied upon as having been authorised by the Company or any other person in connection with the Offer. You should rely only on information in this Prospectus.

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3. DETAILS OF THE OFFER

3.1 Background

On 22 January 2021, the Company requested that its Shares trading on ASX be placed into a trading halt pending an application to the Supreme Court of Western Australia in relation to the Company’s inadvertent failure to lodge cleansing notices under section 708A(5)(e) of the Corporations Act (the Application ). Subsequently, on 27 January 2021 the Company requested that its Shares be placed in suspension until the Application was resolved.

As a result of the suspension, the Company is presently unable to issue a cleansing notice under Section 708A(5)(e) of the Corporations Act.

3.2 Offer

Under this Prospectus, the Company invites investors identified by the Directors to apply for up to 1,000 Shares at an issue price of $0.30 per Share to raise up to $300 (before expenses). The Offer will only be extended to specific parties on invitation from the Directors. Application Forms will only be provided by the Company to these parties.

All of the Shares offered under this Prospectus will rank equally with Shares on issue at the date of this Prospectus.

3.3 Objective

The Company is seeking to raise only a nominal amount of $300 under this Prospectus and, accordingly, the purpose of this Prospectus is not to raise capital.

The primary purpose of this Prospectus is to remove any ongoing trading restrictions that may have attached to Shares issued by the Company prior to the Closing Date.

Relevantly, section 708A(11) of the Corporations Act provides that a sale offer does not need disclosure to investors if:

• (a) the relevant securities are in a class of securities that are quoted securities of the body;

• (b)

• either:

• (i) a prospectus is lodged with the ASIC on or after the day on which the relevant securities were issued but before the day on which the sale offer is made; or

• (ii) a prospectus is lodged with ASIC before the day on which the relevant securities are issued and offers of securities that have been made under the prospectus are still open for acceptance on the day on which the relevant securities were issued; and

• (c) the prospectus is for an offer of securities issued by the body that are in the same class of securities as the relevant securities.

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3.4 Application for Shares

Applications for Shares must be made by investors at the direction of the Company and must be made using the Application Form accompanying this Prospectus.

Payment for the Shares must be made in full at the issue price of $0.30 per Share.

Completed Application Forms must be mailed or delivered to the Company together with a cheque for the total value of the Shares being applied for and made out to “ archTIS Limited – Offer Account ” as follows:

Delivery by hand	Delivery by post
Level 3 10 National Circuit BARTON ACT 2600	Level 3 10 National Circuit BARTON ACT 2600

3.5 Minimum subscription

There is no minimum subscription.

3.6 Issue of Shares

Issue of Shares under the Offer will take place as soon as practicable after the Closing Date. Application moneys will be held in a separate subscription account until the Shares are issued. This account will be established and kept by the Company in trust for each Applicant. Any interest earned on the application moneys will be for the benefit of the Company and will be retained by the Company irrespective of whether any Shares are issued and each Applicant waives the right to claim any interest.

The Directors will determine the recipients of all the Shares. The Directors reserve the right to reject any application or to allocate any Applicant fewer Shares than the number applied for.

Where the number of Shares issued is less than the number applied for, the surplus moneys will be returned by cheque as soon as practicable after the Closing Date. Where no issue of Shares is made, the amount tendered on application will be returned in full by cheque as soon as practicable after the Closing Date. Interest will not be paid on moneys refunded.

3.7

ASX listing

Application for Official Quotation of the Shares offered pursuant to this Prospectus will be made within 7 days of the date of this Prospectus. If ASX does not grant Official Quotation of the Shares offered pursuant to this Prospectus before the expiration of 3 months after the date of issue of the Prospectus, (or such period as varied by the ASIC), the Company will not issue any Shares and will repay all application monies for the Shares within the time prescribed under the Corporations Act, without interest.

The fact that ASX may grant Official Quotation to the Shares is not to be taken in any way as an indication of the merits of the Company or the Shares now offered for subscription.

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3.8 Restrictions on the distribution of the Prospectus

The distribution of this Prospectus outside of Australia may be restricted by law.

This Offer does not, and is not intended to, constitute an offer in any place or jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer or to issue this Prospectus.

Residents of countries outside Australia should consult their professional advisers as to whether any government or other consents are required, or whether any formalities need to be observed should they wish to make an application to take up Shares on the basis of this Prospectus. The return of a duly completed Application Form will be taken to constitute a representation and warranty that there has been no breach of such laws and that all approvals and consents have been obtained.

3.9

Inquiries

Any questions concerning the Offer should be directed to Mr James Palmer, Company Secretary, on + 61 (0)2 9051 0452.

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4. PURPOSE AND EFFECT OF THE OFFER

4.1 Purpose of the Offer

The primary purpose of this Prospectus is to remove any trading restrictions that may have attached to Shares issued by the Company prior to the Closing Date (including prior to the date of this Prospectus). All of the funds raised from the Offer will be applied towards the expenses of the Offer. Refer to Section 7.8 of this Prospectus for further details relating to the estimated expenses of the Offer.

4.2

Effect of the Offer on capital structure

The effect of the Offer on the Company’s capital structure is set out below.

Shares1	Number
Shares currently on issue2	226,665,057
Shares offered under this Prospectus3	1,000
Total Shares on issue on completion of the Offer3	226,666,157

Notes:

1. The rights and liabilities attaching to the Shares are summarised in Section 5 of this Prospectus.

2. Including a total of 20,293,969 Shares issued by the Company between 31 August 2020 and the date of this Prospectus on exercise of unlisted options and pursuant to an issue of Shares to Directors as approved by Shareholders at the Company’s General Meeting held 27 August 2020.

3. This assumes the Offer is fully subscribed and no Options are exercised prior to the Closing Date.

Options	Number
Unlisted Options exercisable at $0.10 each on or before 10 October 2022	420,000
Unlisted Options exercisable at $0.20 each on or before 1 July 2023	1,450,000
Unlisted Options exercisable at $0.20 each on or before 5 July 2021	1,600,000
Unlisted Options exercisable at $0.24 each on or before the date that is four years from the date of issue	1,365,000
Unlisted Options exercisable at $0.20 each on or before 13 February 2023	540,000
Unlisted Options exercisable at $0.10 each on or before 1 July 2023	500,000
Total Options on issue on completion of the Offer	5,875,000

4.3 Financial effect of the Offer

After expenses of the Offer of approximately $10,000, there will be no proceeds from the Offer. The expenses of the Offer (exceeding $30.00) will be met from the Company’s existing cash reserves.

As such, the Offer will have an effect on the Company’s financial position, being receipt of funds of $300 less costs of preparing the Prospectus of approximately $10,000.

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5. RIGHTS AND LIABILITIES ATTACHING TO SHARES

The following is a summary of the more significant rights and liabilities attaching to Shares being offered pursuant to this Prospectus. This summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of Shareholders. To obtain such a statement, persons should seek independent legal advice.

Full details of the rights and liabilities attaching to Shares are set out in the Constitution, a copy of which is available for inspection at the Company’s registered office during normal business hours.

5.1

General meetings

Shareholders are entitled to be present in person, or by proxy, attorney or representative to attend and vote at general meetings of the Company.

Shareholders may requisition meetings in accordance with section 249D of the Corporations Act and the Constitution of the Company.

5.2

Voting rights

Subject to any rights or restrictions for the time being attached to any class or classes of shares, at general meetings of shareholders or classes of shareholders:

• (a) each Shareholder entitled to vote may vote in person or by proxy, attorney or representative;

• (b) on a show of hands, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder has one vote; and

• (c) on a poll, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder shall, in respect of each fully paid Share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for each Share held, but in respect of partly paid shares shall have such number of votes as bears the same proportion to the total of such Shares registered in the Shareholder’s name as the amount paid (not credited) bears to the total amounts paid and payable (excluding amounts credited).

5.3

Dividend rights

Subject to the rights of any preference Shareholders and to the rights of the holders of any shares created or raised under any special arrangement as to dividend, the Directors may from time to time declare a dividend to be paid to the Shareholders entitled to the dividend which shall be payable on all Shares according to the proportion that the amount paid (not credited) is of the total amounts paid and payable (excluding amounts credited) in respect of such Shares.

The Directors may from time to time pay to the Shareholders any interim dividends as they may determine. No dividend shall carry interest as against the Company. The Directors may set aside out of the profits of the Company any amounts that they may determine as reserves, to be applied at the discretion of the Directors, for any purpose for which the profits of the Company may be properly applied.

Subject to the ASX Listing Rules and the Corporations Act, the Company may, by resolution of the Directors, implement a dividend reinvestment plan on such terms

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and conditions as the Directors think fit and which provides for any dividend which the Directors may declare from time to time payable on Shares which are participating Shares in the dividend reinvestment plan, less any amount which the Company shall either pursuant to the Constitution or any law be entitled or obliged to retain, be applied by the Company to the payment of the subscription price of Shares.

5.4

Winding-up

If the Company is wound up, the liquidator may, with the authority of a special resolution, divide among the Shareholders in kind the whole or any part of the property of the Company, and may for that purpose set such value as he considers fair upon any property to be so divided, and may determine how the division is to be carried out as between the Shareholders or different classes of Shareholders.

The liquidator may, with the authority of a special resolution, vest the whole or any part of any such property in trustees upon such trusts for the benefit of the contributories as the liquidator thinks fit, but so that no Shareholder is compelled to accept any shares or other securities in respect of which there is any liability.

5.5 Shareholder liability

As the Shares issued will be fully paid shares, they will not be subject to any calls for money by the Directors and will therefore not become liable for forfeiture.

5.6 Transfer of shares

Generally, shares in the Company are freely transferable, subject to formal requirements, the registration of the transfer not resulting in a contravention of or failure to observe the provisions of a law of Australia and the transfer not being in breach of the Corporations Act and the ASX Listing Rules.

5.7 Future increase in capital

The issue of any new Shares is under the control of the Directors of the Company. Subject to restrictions on the issue or grant of Securities contained in the ASX Listing Rules, the Constitution and the Corporations Act (and without affecting any special right previously conferred on the holder of an existing share or class of shares), the Directors may issue Shares as they shall, in their absolute discretion, determine.

5.8

Variation of rights

Under section 246B of the Corporations Act, the Company may, with the sanction of a special resolution passed at a meeting of Shareholders vary or abrogate the rights attaching to shares.

If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class), whether or not the Company is being wound up, may be varied or abrogated with the consent in writing of the holders of three quarters of the issued shares of that class, or if authorised by a special resolution passed at a separate meeting of the holders of the shares of that class.

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5.9 Alteration of constitution

In accordance with the Corporations Act, the Constitution can only be amended by a special resolution passed by at least three quarters of Shareholders present and voting at the general meeting. In addition, at least 28 days written notice specifying the intention to propose the resolution as a special resolution must be given.

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6. RISK FACTORS

6.1 Introduction

The Shares offered under this Prospectus are considered highly speculative. An investment in the Company is not risk free and the Directors strongly recommend potential investors to consider the risk factors described below, together with information contained elsewhere in this Prospectus and to consult their professional advisers before deciding whether to apply for Shares pursuant to this Prospectus.

There are specific risks which relate directly to the Company’s business. In addition, there are other general risks, many of which are largely beyond the control of the Company and the Directors. The risks identified in this Section, or other risk factors, may have a material impact on the financial performance of the Company and the market price of the Shares.

The following is not intended to be an exhaustive list of the risk factors to which the Company is exposed.

6.2 Risks specific to the Company

(a) Suspension from trading

As at the date of this Prospectus, the Company’s Shares are presently suspended from trading on ASX pending the Company applying to the Supreme Court of Western Australia for orders rectifying the inadvertent failure to lodge cleansing notices upon the issue of Shares during the period 31 August 2020 to 11 January 2021.

Should the Company be unsuccessful in obtaining those orders, there is a risk that the Company may remain suspended from trading until it is able to establish a process or mechanism for ensuring the trading of its Shares can occur in accordance with the Corporations Act. However, the Company takes comfort that there is established precedent for companies to seek the orders that the Company is pursuing in circumstances not dissimilar to the circumstances the Company is presently in.

(b) Coronavirus (COVID-19)

The outbreak of the coronavirus disease ( COVID-19 ) is impacting global economic markets. The nature and extent of the effect of the outbreak on the performance of the Company remains unknown. The Company’s Share price may be adversely affected in the short to medium term by the economic uncertainty caused by COVID-19. Further, any governmental or industry measures taken in response to COVID-19 may adversely impact the Company’s operations and are likely to be beyond the control of the Company.

The Directors are monitoring the situation closely and have considered the impact of COVID-19 on the Company’s business and financial performance. However, the situation is continually evolving, and the consequences are therefore inevitably uncertain. In compliance with its continuous disclosure obligations, the Company will continue to update the market in regard to the impact of COVID-19 on potential revenue channels and any adverse impact on the Company and its operations. If

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any of these impacts appear material prior to close of the Offer, the Company will notify investors under a supplementary prospectus.

(c) Capability risks

The provision of services to government agencies relies heavily on having the capability to service the government client and address their needs. The Company has developed its reputation and been appointed to various government panels as a result of displaying that it has the capability to service the relevant needs. Capability risk relates to the ability of the Company to adequately address the following key issues:

• (i) Resource/skills risk: The responsibility of overseeing the day-today operations and the strategic management of the Company depends substantially on its senior management and its key personnel. There can be no assurance given that there will be no detrimental impact on the Company if one or more of these employees cease their employment.

• (ii) Technology refresh cycle outstrips the Company’s ability to upgrade and or update : The Company’s trusted information sharing solution will quickly move beyond the initial release versions of the Kojensi and DataKloak products, as typically the timeframes for introduction of new capabilities can be in months rather than years. This affects hardware and software and can also include software partners ceasing (sunsetting) components that may form part of the archTIS products.

(iii) Partner risks:

• (A) Partner understanding : there is a risk that the Company’s partners do not understand the potential opportunity that the Company’s trusted information sharing/secure information sharing offerings can afford them, although key partners with whom the Company is currently engaged do have a good understanding of the problem and the archTIS solution.

• (B) Partner demands and lack of skills : there is a risk that the Company’s partners will demand inclusion of their particular product or service, and/or lack complementary skills required to deliver joint solutions.

• (C) Partners commitment : poor commitment from partners to contribute services for no fee and lack of commitment of partners to sell the Kojensi and DataKloak products.

• (iv) Lack of compliance framework for clients : while there are standards for the accreditation of secure software for the government, there is no defined assurance framework for cloud trusted information sharing capabilities in the broader commercial sector.

• (v) Commercial Liability : the sensitive nature of target client information (including privacy data), may expose archTIS to commercial liability for technical failure or compromise of the information.

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Upon the commencement of sales and the provision of services to commercial/non-government clients, these same risks will be relevant to developing and building the trust of commercial clients to use the Company’s products. Anything that diminishes the capability of the client to develop the trust of its clients and deliver its services would likely have a negative effect on the Company’s business and its prospects.

(d) Sales and timing risks

The secure content and collaboration market is still evolving in response to market need. While market demand is growing, available secured sharing information solutions are very limited, focussed on solutions that use basic security but are not accredited for higher levels such as PROTECTED (the government equivalent of ‘commercial-in-confidence’), which is what governments require.

For government customers, the sales cycle can be lengthy however offering a ‘per user per month’ service that comes out of operational rather than capital budgets is expected to significantly reduce government sales cycles.

It is for this reason that archTIS wishes to move into the commercial market where decision cycles are far shorter.

(e)

Competition

The markets in which the Company will operate are particularly competitive, in particular due to the lucrative nature of the contracts and contacts available within the various verticals in which the Company will operate. While the Company will try to manage this risk with a targeted marketing strategy, competition may arise from a number of sources including companies with greater capital resources.

The Company’s performance could be adversely affected if existing or new competitors reduce the Company’s market share through technology development, marketing and increased product or technology offerings or through price reduction for alternatives.

(f) Research and development

The Company’s products (summarised in this Prospectus) and its potential products are subject to continued research and development. In particular, DataKloak products have not yet been completed for commercial sale and use.

There is no guarantee that the Company will be able to achieve its desired outcomes from research and development or beta testing, either to enhance its existing products, adapt them to new and emerging technologies or to complete the development of the new products (such as DataKloak) in the time frame necessary for the introduction into new markets contemplated by the Company. Failure to successfully undertake and complete such research and ongoing development, anticipate market and technology trends and technical problems or estimate research costs or timeframes accurately may adversely affect the Company’s results and viability.

Further, even if the Company successfully completes its contemplated research and ongoing development of its products successfully, there is

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no guarantee that its new products will be adopted into the new markets, or that its enhanced existing products will result in increased sales in its current markets, which may have a negative effect on the Company’s revenues. The incorrect pricing of the Company’s products and services may negatively impact market applicability and/or client perception of the Company. Further, due to the emerging nature of the concepts and client needs, the market (and potential clients) may not be in a position to understand, evaluate and consume the Company’s offerings. This is equally true of the broader market and industry, which may expose the Company to unfair influence through discrediting and inaccurate competitor claims.

(g) Changes to Federal Government R&D Incentive arrangements

archTIS has been eligible for R&D tax incentives. If the Company was no longer eligible for R&D tax incentives this would impact on archTIS’ anticipated costs for development.

(h)

Technology risk

Technology markets, by their very nature, are a continually evolving marketplace. To succeed, the Company will need to research, develop, design, manufacture, assemble and bring to market new enhancements to its existing products as well as new products that are suitable for existing markets and new markets that might not yet exist. The Company cannot guarantee that it will be able to engage in research or develop its existing (and new) products to meet the changing needs of its markets and the new and emerging technologies.

Further, there is a risk that the Company cannot sufficiently develop the specialist skills required to see the solution to fruition in a timely manner. At the same time, products and technologies developed by others may render the Company’s products and systems obsolete or noncompetitive which could materially adversely affect the business, operating results and financial prospects.

In these circumstances the Company would be required to commit resources to developing or acquiring and then deploying new technologies for use in operations and to ensure competitive positioning of its services.

There is also the risk that the Company will not be able to develop new products in the timeframes expected by the market.

(i)

Production costs risk

The Company does not envisage significant production cost risk as the component software is all subject to existing licensing arrangements. The Company’s products have been architected to facilitate product substitution should a software supplier refuse to further license its commercial off-the-shelf products to the Company.

(j) Intellectual Property risk

The Company’s success will depend, in part, on the Company’s ability to obtain patents, protect its trade secrets and operate without infringing on the proprietary rights of others. The Company relies upon a combination

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of patents, trade secret protection (i.e., know how), and confidentiality agreements to protect the intellectual property.

If the Company fails to adequately protect its intellectual property, it may face competition from companies who attempt to create a generic product to compete with the Company’s proposed products. The Company may also face competition from companies who develop a substantially similar product to one of the Company’s proposed products.

Many companies have encountered significant problems in protecting and enforcing intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favour the enforcement of patents and other intellectual property rights, particularly those relating to pharmaceuticals, which could make it difficult for the Company to stop the infringement of its patents or marketing of competing products in violation of its proprietary rights generally. Proceedings to enforce intellectual property rights in foreign jurisdictions could result in substantial cost and divert the Company’s efforts and attention from other aspects of its business.

(k)

Uncertainty of future profitability

The success of the Company’s operations relies on the ability to attract more commercial users of the Technology and its products. An inability to attract new clients and users will affect the Company’s earning ability.

While the Company has been successful in attracting clients in the government sector in Australia, this will not necessarily translate into successful utilisation in other verticals and countries. Furthermore, the Company’s profitability will be impacted by its ability to successfully execute its commercialisation and growth strategies, economic conditions in the markets in which it operates, competitive factors and regulatory developments. Accordingly, the extent of any future profits are uncertain. Moreover, the level of profitability cannot be predicted.

(l)

Termination provisions in existing contracts or engagements

Like all companies, archTIS has the risk that key personnel may depart. archTIS seeks to manage this risk through appropriate time based incentives in key contracts, as well as through knowledge transfer from key individuals. However, the risk of loss of expertise remains, should key staff such as those identified at Section 11.4 elect to leave.

6.3 Industry specific

(a) User experience risk

The Company's business model is primarily based on securing recurring revenue arising from technology users and customers. Notwithstanding major efforts placed on the user interface and user experience, a poor user experience may not necessarily be anticipated and may affect growth of customer numbers and repeat purchases or ongoing contracts with the Company for use of its services. Factors which may contribute to poor customer experience include:

(i) ease of setting up and commencing use of the products offered; (ii) simplicity and reliability of customer usage; and

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(iii) quality of services provided.

Poor user experiences may result in the loss of customers, adverse publicity, litigation, regulatory enquiries and customers reducing the use of the Company's products. If any of these occur, it may adversely impact the Company's revenues.

Beta testing will provide further data from client experiences and any changes will be included in the final product.

archTIS is addressing this risk through deliberate and strong focus on useability and user experience. Feedback to date from prospective customers is that the user interface exceeds that available for other less secure service offerings.

(b) Scalability

Scalability is key given archTIS’s ambitions to address the market globally. While the Company believes that Kojensi and its service architecture have been built for scalability, there is no guarantee that it will be able to scale up sufficiently to meet future demands and requirements of customers, in its current form.

(c)

Information technology risk

Technology projects involve risks as regards technologies, vendors and employees, and in the actual development and deployment of the solution. Whilst the Company has employed and engaged subjectmatter experts, employs skilled personnel using standard security approaches, there are risks that delivery will fail to meet client expectations or deadlines, that solutions become obsolete, the unforeseen occurs, or platforms are compromised resulting in a negative impact on the Company’s reputation and performance.

Where the client is unhappy with the Company’s technology choice for the cloud platform, this may have a negative effect on the profitability of the Company. Further, clients may have concerns that the Company’s products and services do not satisfy their specific compliance requirements.

(d) Reliance on third party providers

Whilst the Company is dependent upon multiple third parties in developing its products, and on its products being able to operate on and with a range of systems, platforms and devices, it is unable to control third party developers of such systems.

Changes to such external platforms, systems or devices may adversely impact on the functionality of the Company’s products and could make customers less likely to use the Company’s products, which may have a detrimental impact on the Company’s financial performance.

Similarly, the Company’s products assume customers are able to access the internet and cellular networks. If third party providers were to raise the cost of these networks or restrict the ability of customers to access these networks, and thus to use the Company’s products, this would be likely to detrimentally affect the Company’s financial performance.

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(e) Third party tools and platforms

The use of third party tools and software is common practice in the information technology industry, however he Company is exposed to risks associated with their use.

While archTIS employs sound industry practices to minimise such risks, if the third-party tools used by the Company are subject to cyber-attacks by hackers, its products and software may be affected and the Company may lose customers, which would have a negative effect on the Company’s revenues and profit.

(f) Equipment risk

With information technology equipment there is always a risk of failure. Given that in many cases such equipment will not be owned by archTIS, such risk may not be able to be managed by archTIS, beyond normal industry practice in terms of service agreements, and standard backup and recovery protocols.

(g) Infringement of third party intellectual property rights

If a third party accuses the Company of infringing its intellectual property rights or if a third party commences litigation against the Company for the infringement of trademarks or other intellectual property rights, the Company may incur significant costs in defending such action, whether or not it ultimately prevails. Typically, intellectual property litigation is expensive. Costs that the Company incurs in defending third party infringement actions would also include diversion of management’s and technical personnel’s time.

In addition, parties making claims against the Company may be able to obtain injunctive or other equitable relief that could prevent the Company from further using its branding, trademarks or commercialising its products. In the event of a successful claim of infringement against the Company, it may be required to pay damages and obtain one or more licenses from the prevailing third party. If it is not able to obtain these licenses at a reasonable cost, if at all, it could encounter delays in product introductions and loss of substantial resources while it attempts to develop alternative products. Defense of any lawsuit or failure to obtain any of these licenses could prevent archTIS from commercialising available products and could cause it to incur substantial expenditure.

archTIS has not had any third party intellectual property claims to date.

(h) Brand and reputational risks

The Company has established branding of its ‘Kojensi’ product that has been approved by IP Australia . The Company believes that global branding is critical for the long-term success of its business. Negative commentary or a complaint regardless of accuracy via social media, media in general and or word of mouth may have a damaging impact on the ability of the Company to reach its potential and may not necessarily be based on accurate data or real experience. Further, the Company’s existing brand and reputation may not be appropriate to the products and services that the Company is developing. This may impact client engagement and procurement of archTIS products and services.

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Currently, work is underway for specific naming and branding of the cloud and appliance products. This will be done across Australia and relevant geographies.

Claims by third parties of rights to the Company’s names and brands could cause the Company to incur costs or be required to pay damages or lose rights to their use. While not anticipated, if this were to occur it could adversely impact the operating results and potential of the Company.

(i)

Future capital requirements

Depending on the Company’s ability to generate income from its operations, the Company may require further financing in addition to amounts raised under the capital raising. The Company’s capital requirements depend on numerous factors. There is no certainty regarding the ability of the Company to raise sufficient funds to meet its needs into the future. The Company’s future capital requirements depend on a number of factors including the Company’s ability to generate income from its operations. The Company may need to raise additional capital from equity or debt sources due to unforeseen circumstances. There can be no assurance that the Company will be able to raise such capital on favorable terms or at all. If adequate funds are not available on acceptable terms the Company may not be able to develop its business and this may have an adverse impact on the Company’s operations.

(j)

Exchange rate movement

Once it is servicing overseas customers the Company could be exposed to exchange rate movements. Accordingly, movements in exchange rates may have an impact on the Company’s financial position and performance.

(k)

Regulatory risk and compliance

As with any technology product offering, the Company may be exposed to the regulatory environment of a particular jurisdiction. Any adverse regulation may restrict the ability to operate its products in a particular jurisdiction. Similarly, any change in regulation may restrict the Company’s ability to operate its business in the jurisdictions in which it currently operates.

The Company is required to comply with the laws governing privacy, taxation and consumer trade practices in each jurisdiction in which it operates. The Company may be subject to other laws in jurisdictions in which it plans to operate and the applicable laws may change from time to time.

These laws and applicable regulations give rise to risks and compliance costs for the Company. Non-compliance with such regulations, changes in the interpretation of current regulations, loss or failure to secure renewal of an accreditation, or the introduction of new laws or regulations may lead to fines imposed on the Company by the relevant regulatory authority or Governmental body, revocation of permits or licenses, or damage to the Company’s reputation and may have a material adverse effect on the Company’s costs, business model and competitive

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environment and therefore could materially adversely affect the Company’s future financial performance and position.

(l) Insurance

The Company seeks to maintain appropriate policies of insurance consistent with those customarily carried by organisations in their industry sector. Any increase in the cost of the insurance policies of the Company or the industry in which they operate could adversely affect the Company’s business, financial condition and operational results. The Company’s insurance coverage may also be inadequate to cover losses it sustains. Uninsured loss or a loss in excess of the Company’s insured limits could adversely affect the Company’s business, financial condition and operational results.

(m) Contractual disputes

The Company's business model is dependent in part on contractual agreements with third parties that have an interaction with the Company's target market. The Company is aware that there are associated risks when dealing with third parties including but not limited to insolvency, fraud and management failure. Should a third party contract fail, there is the potential for negative financial and brand damage for the Company.

6.4 General risks

(a) Economic

General economic conditions, introduction of tax reform, new legislation, movements in interest and inflation rates and currency exchange rates may have an adverse effect on the Company’s activities, as well as on its ability to fund those activities.

(b)

Market conditions

Share market conditions may affect the value of the Company’s quoted securities regardless of the Company’s operating performance. Share market conditions are affected by many factors such as:

• (i) general economic outlook;

• (ii) introduction of tax reform or other new legislation;

• (iii) interest rates and inflation rates;

• (iv) changes in investor sentiment toward particular market sectors;

• (v) the demand for, and supply of, capital; and

• (vi) terrorism or other hostilities.

The market price of securities can fall as well as rise and may be subject to varied and unpredictable influences on the market for equities in general and industrial stocks in particular. Neither the Company nor the

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Directors warrant the future performance of the Company or any return on an investment in the Company.

(c)

Litigation

The Company is exposed to the risk of actual or threatened litigation or legal disputes in the form of customer claims, intellectual property claims, personal injury claims, employee claims and other litigation and disputes. If any claim was successfully pursued it may adversely impact the financial performance, financial position, cash flow and share price of the Company.

As at the date of this Prospectus, the Company is not aware of any pending litigation.

6.5 Investment risk

The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or by investors in the Company. The above factors, and others not specifically referred to above, may in the future materially affect the financial performance of the Company and the value of the Shares offered under this Prospectus.

Therefore, the Shares to be issued pursuant to this Prospectus carry no guarantee with respect to the payment of dividends, returns of capital or the market value of those Shares.

Potential investors should consider that the investment in the Company is highly speculative and should consult their professional advisers before deciding whether to apply for Shares pursuant to this Prospectus.

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7. ADDITIONAL INFORMATION

7.1 Litigation

As at the date of this Prospectus, the Company is not involved in any legal proceedings and the Directors are not aware of any legal proceedings pending or threatened against the Company.

7.2

Continuous disclosure obligations

The Company is a “disclosing entity” (as defined in section 111AC of the Corporations Act) for the purposes of section 713 of the Corporations Act and, as such, is subject to regular reporting and disclosure obligations. Specifically, like all listed companies, the Company is required to continuously disclose any information it has to the market which a reasonable person would expect to have a material effect on the price or the value of the Company’s securities.

This Prospectus is a “transaction specific prospectus”. In general terms a “transaction specific prospectus” is only required to contain information in relation to the effect of the issue of securities on the Company and the rights attaching to the securities. It is not necessary to include general information in relation to all of the assets and liabilities, financial position, profits and losses or prospects of the issuing company.

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 and does not include all of the information that would be included in a prospectus for an initial public offering of securities in an entity that is not already listed on a stock exchange. Investors should therefore have regard to the other publicly available information in relation to the Company before making a decision whether or not to invest.

Having taken such precautions and having made such enquires as are reasonable, the Company believes that it has complied with the general and specific requirements of ASX as applicable from time to time throughout the 3 months before the issue of this Prospectus which required the Company to notify ASX of information about specified events or matters as they arise for the purpose of ASX making that information available to the stock market conducted by ASX.

Information that is already in the public domain has not been reported in this Prospectus other than that which is considered necessary to make this Prospectus complete.

The Company, as a disclosing entity under the Corporations Act states that:

• (a) it is subject to regular reporting and disclosure obligations;

• (b) copies of documents lodged with the ASIC in relation to the Company (not being documents referred to in section 1274(2)(a) of the Corporations Act) may be obtained from, or inspected at, the offices of the ASIC; and

• (c) it will provide a copy of each of the following documents, free of charge, to any person on request between the date of issue of this Prospectus and the Closing Date:

• (i) the annual financial report most recently lodged by the Company with the ASIC;

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• (ii) any half-year financial report lodged by the Company with the ASIC after the lodgement of the annual financial report referred to in (i) and before the lodgement of this Prospectus with the ASIC; and

• (iii) any continuous disclosure documents given by the Company to ASX in accordance with the ASX Listing Rules as referred to in section 674(1) of the Corporations Act after the lodgement of the annual financial report referred to in (i) and before the lodgement of this Prospectus with the ASIC.

Copies of all documents lodged with the ASIC in relation to the Company can be inspected at the registered office of the Company or an ASIC office during normal office hours.

Details of documents lodged with ASX since the date of lodgement of the Company’s latest annual financial report and before the lodgement of this Prospectus with the ASIC are set out in the table below :

Date	Description of Announcement
09/02/2021	Request for Extension of Voluntary Suspension
04/02/2021	Appendix 2A
04/02/2021	Change of Director's Interest Notice
03/02/2021	Request for extension of Voluntary Suspension
02/02/2021	Expanded executive management team with key C-suite hires
29/01/2021	Appendix 4C - quarterly
27/01/2021	Suspension from Official Quotation
22/01/2021	Change of Director's Interest Notice
22/01/2021	Change of Director's Interest Notice
22/01/2021	Trading Halt
21/01/2021	Cleansing Statement
21/01/2021	Appendix 2A
19/01/2021	Nucleus Cyber license renewal with Department of Defence
11/01/2021	Appendix 2A
06/01/2021	Appendix 2A
24/12/2020	Appendix 2A
23/12/2020	Results of Meeting
21/12/2020	Shareholder Meeting 23 December 2020 - Further Information
08/12/2020	archTIS acquisition Nucleus Cyber expands partner channel
03/12/2020	Change in substantial holding
24/11/2020	Appendix 2A
23/11/2020	Notice of Annual General Meeting/Proxy Form
23/11/2020	Ceasing to be a substantial holder
19/11/2020	Becoming a substantial holder

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Date	Description of Announcement
18/11/2020	Cleansing Statement
18/11/2020	Appendix 2A
12/11/2020	Appendix 2A
12/11/2020	Proposed issue of Securities - AR9
12/11/2020	Capital Raising Announcement
10/11/2020	Trading Halt
03/11/2020	Corporate Governance Statement
29/10/2020	Proposed issue of Securities - AR9
29/10/2020	Investor Presentation on Nucleus Cyber acquisition
29/10/2020	archTIS acquires Nucleus Cyber
26/10/2020	Appendix 2A
23/10/2020	Appendix 2A
22/10/2020	Appendix 2A
21/10/2020	Quarterly Cashflow Report
16/10/2020	Appendix 2A
15/10/2020	Appendix 2A
14/10/2020	Appendix 2A
09/10/2020	Appendix 4G
01/10/2020	Appendix 2A
24/09/2020	Appendix 2A
24/09/2020	Appendix 2A
23/09/2020	Appendix 2A
23/09/2020	Appendix 2A
23/09/2020	Appendix 3G
23/09/2020	Appendix 2A
23/09/2020	Appendix 2A
22/09/2020	Investor Presentation
21/09/2020	Annual Report to shareholders

ASX maintains files containing publicly available information for all listed companies. The Company’s file is available for inspection at ASX during normal office hours.

The announcements are also available through the Company’s website www.archtis.com

7.3 Market price of Shares

The Company is a disclosing entity for the purposes of the Corporations Act and its Shares are enhanced disclosure securities quoted on ASX.

The highest, lowest and last market sale prices of the Shares on ASX during the

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three months immediately preceding the date of lodgement of this Prospectus with the ASIC and the most recent dates of those sales were:

	Price	Date
Highest	$0.42	23 November 2020
Lowest	$0.295	31 December 2020
Last	$0.30	21 January 2021

7.4 Details of substantial holders

Based on publicly available information as at 9 February 2021, those persons which (together with their associates) have a relevant interest in 5% or more of the Shares on issue are set out below:

Shareholder	Shares	%
HSBC Custody Nominees (Australia) Limited	16,569,417	7.31
Kurt Mueffelmann	13,011,697	5.74

7.5 Directors’ Interests

Other than as set out below or elsewhere in this Prospectus, no Director nor any firm in which such a Director is a partner, has or had within 2 years before the lodgement of this Prospectus with the ASIC, any interest in:

• (a) the formation or promotion of the Company;

• (b) property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer pursuant to this Prospectus; or

• (c) the Offer,

and no amounts have been paid or agreed to be paid (in cash or Shares or otherwise) to any Director or to any firm in which any such Director is a partner or director, either to induce them to become, or to qualify them as, a Director or otherwise for services rendered by them or by the firm in connection with the formation or promotion of the Company or the Offer.

Security holdings

The relevant interest of each of the Directors in the securities of the Company as at the date of this Prospectus is set out in the table below.

Director	Shares	Options
Dr Miles Jakeman	1,454,545	540,0001
Daniel Lai	9,574,252	Nil
Leanne Graham	753,636	Nil

Notes:

1. Unlisted Options exercisable at $0.20 each on or before 13 February 2023.

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Remuneration

The remuneration of an executive Director is decided by the Board, without the affected executive Director participating in that decision-making process. The total maximum remuneration of non-executive Directors is initially set by the Constitution and subsequent variation is by ordinary resolution of Shareholders in general meeting in accordance with the Constitution, the Corporations Act and the ASX Listing Rules, as applicable. The determination of non-executive Directors’ remuneration within that maximum will be made by the Board having regard to the inputs and value to the Company of the respective contributions by each non-executive Director. The current amount has been set at an amount not to exceed $250,000 per annum.

A Director may be paid fees or other amounts (ie non-cash performance incentives such as Options, subject to any necessary Shareholder approval) as the other Directors determine where a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. In addition, Directors are also entitled to be paid reasonable travelling, hotel and other expenses incurred by them respectively in or about the performance of their duties as Directors.

The following table shows the total (and proposed) annual remuneration paid to both executive and non-executive directors.

Director	FY2019	FY2020	FY2021
Dr Miles Jakeman	Nil	$28,827	$89,812
Daniel Lai	$323,010	$271,220	$251,749
Leanne Graham	$75,573	$60,383	$54,756

7.6 Interests of experts and advisers

Other than as set out below or elsewhere in this Prospectus, no:

• (a) person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus;

• (b) promoter of the Company; or

• (c) underwriter (but not a sub-underwriter) to the issue or a financial services licensee named in this Prospectus as a financial services licensee involved in the issue,

holds, or has held within the 2 years preceding lodgement of this Prospectus with the ASIC, any interest in:

• (d) the formation or promotion of the Company;

• (e) any property acquired or proposed to be acquired by the Company in connection with:

• (i) its formation or promotion; or

• (ii) the Offer; or

• (f) the Offer,

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and no amounts have been paid or agreed to be paid and no benefits have been given or agreed to be given to any of these persons for services provided in connection with:

• (g) the formation or promotion of the Company; or

• (h) the Offer.

Steinepreis Paganin has acted as the solicitors to the Company in relation to the Offer. The Company estimates it will pay Steinepreis Paganin $5,000 (excluding GST and disbursements) for these services. During the 24 months preceding lodgement of this Prospectus with the ASIC, Steinepreis Paganin has been paid fees totalling $5,000 (excluding GST and disbursements) for legal services provided to the Company.

7.7

Consents

Chapter 6D of the Corporations Act imposes a liability regime on the Company (as the offeror of the Securities), the Directors, the persons named in the Prospectus with their consent as Proposed Directors, any underwriters, persons named in the Prospectus with their consent having made a statement in the Prospectus and persons involved in a contravention in relation to the Prospectus, with regard to misleading and deceptive statements made in the Prospectus, Although the Company bears primary responsibility for the Prospectus, the other parties involved in the preparation of the Prospectus can also be responsible for certain statements made in it.

Each of the parties referred to in this Section:

• (a) does not make, or purport to make, any statement in this Prospectus other than those referred to in this Section; and

• (b) in light of the above, only to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part of this Prospectus other than a reference to its name and a statement included in this Prospectus with the consent of that party as specified in this Section.

Steinepreis Paganin has given its written consent to being named as the solicitors to the Company in this Prospectus. Steinepreis Paganin has not withdrawn its consent prior to the lodgement of this Prospectus with the ASIC.

7.8

Estimated expenses of Offer

The estimated expenses of the Offer are estimated to be approximately $10,000 (excluding GST) and are expected to comprise legal fees and other administrative expenses, including ASIC fees. The estimated expenses will be paid out of the Company’s existing working capital.

7.9

Electronic Prospectus

ASIC has exempted compliance with certain provisions of the Corporations Act to allow distribution of an electronic prospectus and electronic application form on the basis of a paper prospectus lodged with the ASIC, and the publication of notices referring to an electronic prospectus or electronic application form, subject to compliance with certain conditions.

If you have received this Prospectus as an electronic Prospectus, please ensure that you have received the entire Prospectus accompanied by the Application

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Form. If you have not, please phone the Company on + 61 2 6162 2792 and the Company will send you, for free, either a hard copy or a further electronic copy of the Prospectus, or both.

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 electronic Application Form, it was not provided together with the electronic Prospectus and any relevant supplementary or Prospectus or any of those documents were incomplete or altered.

7.10 Clearing House Electronic Sub-Register System (CHESS) and Issuer Sponsorship

The Company will not be issuing Share certificates. The Company is a participant in CHESS, for those investors who have, or wish to have, a sponsoring stockbroker. Investors who do not wish to participate through CHESS will be issuer sponsored by the Company. Because the sub-registers are electronic, ownership of securities can be transferred without having to rely upon paper documentation.

Electronic registers mean that the Company will not be issuing certificates to investors. Instead, investors will be provided with a statement (similar to a bank account statement) that sets out the number of Shares issued to them under this Prospectus. The notice will also advise holders of their Holder Identification Number or Security Holder Reference Number and explain, for future reference, the sale and purchase procedures under CHESS and issuer sponsorship.

Further monthly statements will be provided to holders if there have been any changes in their security holding in the Company during the preceding month.

7.11 Privacy Act

If you complete an application for Shares, you will be providing personal information to the Company. The Company collects, holds and will use that information to assess your application, service your needs as a Shareholder, facilitate distribution payments and corporate communications to you as a Shareholder and carry out administration.

The information may also be used from time to time and disclosed to persons inspecting the register, bidders for your securities in the context of takeovers, regulatory bodies, including the Australian Taxation Office, authorised securities brokers, print service providers, mail houses and the Company’s Share Registry.

You can access, correct and update the personal information that we hold about you. Please contact the Company if you wish to do so at the relevant contact numbers set out in this Prospectus.

Collection, maintenance and disclosure of certain personal information is governed by legislation including the Privacy Act 1988 (Cth) (as amended), the Corporations Act and certain rules such as the settlement rules of the securities clearing house which operates CHESS. You should note that if you do not provide the information required on the application for Shares, the Company may not be able to accept or process your application.

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8. DIRECTORS’ AUTHORISATION

This Prospectus is issued by the Company and its issue has been authorised by a resolution of the Directors.

In accordance with section 720 of the Corporations Act, each Director has consented to the lodgement of this Prospectus with the ASIC.

==> picture [108 x 20] intentionally omitted <==

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Daniel Lai

Managing Director and Chief Executive Officer For and on behalf of ArchTIS Limited

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9. DEFINITIONS

$ means Australian dollars.

Applicant means an investor who applies for Shares pursuant to the Offer.

Application Form means an application form either attached to or accompanying this Prospectus.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited (ACN 008 624 691) or the financial market operated by it, as the context requires.

ASX Listing Rules means the listing rules of the ASX.

Board means the board of Directors unless the context indicates otherwise.

Closing Date means the date specified in the timetable in Section 2.1 of this Prospectus (unless extended or brought forward).

Company means archTIS Limited (ACN 123 098 671).

Constitution means the constitution of the Company as at the date of this Prospectus.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the directors of the Company as at the date of this Prospectus.

Offer means the offer of Shares referred to in the “Details of the Offer” Section of this Prospectus.

Official Quotation means official quotation on ASX.

Option means an option to acquire a Share.

Prospectus means this prospectus.

Share means a fully paid ordinary share in the capital of the Company.

Shareholder means a shareholder of the Company.

WST means western standard time as observed in Perth, Western Australia.

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