ELSIGHT LIMITED - Capital/Financing Update 2017

ELSIGHT LIMITED ACN 616 435 753

PROSPECTUS

For an offer of up to 32,500,000 Shares at an issue price of $0.20 per Share to raise up to $6,500,000 (before costs).

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 Shares offered by this Prospectus should be considered highly speculative.

Lead Manager and Corporate Advisor

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AFSL 315235
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This is a Replacement Prospectus dated 27 April 2017. It replaces a prospectus dated 13 April 2017 relating to the Shares of Elsight Limited (ACN 616 435 753).

1.	CORPORATE DIRECTORY .............................................................................................. 1
2.	IMPORTANT NOTICE ..................................................................................................... 2
3.	LETTER FROM THE BOARD ............................................................................................. 4
4.	INVESTMENT OVERVIEW ............................................................................................... 5
5.	DETAILS OF THE OFFER ................................................................................................ 19
6.	COMPANY AND PROJECT OVERVIEW ....................................................................... 21
7.	RISK FACTORS ............................................................................................................ 30
8.	INVESTIGATING ACCOUNTANT’S REPORT ................................................................. 37
9.	BOARD, MANAGEMENT AND CORPORATE GOVERNANCE ..................................... 58
10.	MATERIAL CONTRACTS .............................................................................................. 61
11.	ADDITIONAL INFORMATION ...................................................................................... 63
12.	DIRECTORS’ AUTHORISATION .................................................................................... 74
13.	GLOSSARY .................................................................................................................. 75

1. CORPORATE DIRECTORY

Directors

Registered Office

Anton Uvarov Non-Executive Director Howard Digby Non-Executive Director Nathan Barbarich (retiring) Non-Executive Director

Level 2 46-50 Kings Park Road West Perth WA 6005

Telephone: +61 8 6377 8043

Website: www.el-sight.com

Proposed Directors

Investigating Accountant and Auditor

Maj. Gen. (ret.) Ami Shafran Non-Executive Chair Nir Gabay Managing Director David Furstenberg Non-Executive Director

Company Secretaries

Stephen Buckley Peter Webse

BDO Corporate Finance (WA) Pty Ltd 38 Station Street Subiaco WA 6008

Lead Manager and Corporate Advisor

RM Corporate Finance Pty Ltd AFSL 315235 Level 1 143 Hay Street Subiaco WA 6008

Telephone: +61 8 6380 9210

Israeli Counsel*

Share Registry*

Afik & Co., Attorneys and Notary 103 Hahashmonaim St Tel Aviv 6120101 ISRAEL

Automic Registry Services Level 2 267 St Georges Terrace Perth WA 6000

Australian Counsel

Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street Perth WA 6000

Telephone (within Australia): 1300 288 664 Telephone (outside Australia): +61 2 9698 5414

Email: [email protected]

This entity is included for information purposes only. It has not been involved in the preparation of this Prospectus.

2. IMPORTANT NOTICE

This Prospectus is dated 27 April 2017 and was lodged with the ASIC on that date. This Replacement Prospectus replaces the prospectus lodged by the Company on 13 April 2017 relating to the securities of the Company ( Original Prospectus ). The ASIC, the ASX and their respective 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 the Original Prospectus.

No person is authorised to give information or to make any representation in connection with this Prospectus, 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 Shares the subject of this Prospectus should be considered highly speculative.

2.1 Replacement Prospectus

The difference between this Replacement Prospectus and the Original Prospectus are the inclusion of additional disclosure in relation to the manufacturing and revenue proposition for El-Sight Israel.

2.2 Exposure Period

This Prospectus will be circulated during the Exposure Period. The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. You should be aware that this examination may result in the identification of deficiencies in this Prospectus and, in those circumstances, any application that has been received may need to be dealt with in accordance with Section 724 of the Corporations Act. Applications for Shares under this Prospectus will not be processed by the Company until after the expiry of the Exposure Period. No preference will be conferred on applications lodged prior to the expiry of the Exposure Period.

2.3 Web Site – Electronic Prospectus

A copy of this Prospectus can be downloaded from the website of the Company at www.el-sight.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. 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 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.

2.4 Website

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

2.5 Forwarding-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 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 our Company, the Directors and our management.

We cannot and do not give any assurance that the results, performance or achievements expressed or implied by the forward-looking statements contained in this prospectus will actually occur and investors are cautioned not to place undue reliance on these forward-looking statements.

We have 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, except where required by law.

These forward looking statements are subject to various risk factors that could cause our actual results to differ materially from the results expressed or anticipated in these statements. These risk factors are set out in Section 7 of this Prospectus.

2.6 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 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.

3. LETTER FROM THE BOARD

Dear Investor,

I have great pleasure in presenting this Prospectus, and offering you the opportunity to become a shareholder in Elsight Limited ( Company ).

The Company was incorporated on 13 December 2016 primarily for the purpose of investigating opportunities to invest in technology companies. Subsequently a decision was made to invest in El-Sight Ltd, a company incorporated in Israel ( El-Sight Israel ), and the developer and the owner of the Technology (defined in this Prospectus). The Company will now acquire 100% of the shares of El-Sight Israel and proceed to list on the ASX. The Company is seeking to raise up to $6,500,000 through an issue of up to 32,500,000 Shares at an issue price of $0.20 per Share.

El-Sight Israel was founded in 2009 by Mr Nir Gabay and Mr Roee Kashi to provide multichannel technology for high-bandwidth, stable and secured live data transfer for first responders, such as police and emergency service personnel in Israel. The Technology builds on the mutual experiences of Mr Gabay and Mr Kashi who have a deep technical background coming from Israeli Special Forces and Military Intelligence.

As is often the case with technology that comes from a military and security foundation, profound discoveries can be made due to the unique imperatives driving these applications. Some of these technologies go on to enjoy considerable success across a broad range of civilian markets. El-Sight Israel has created products based on its Technology which are deployed today by homeland security services, police and other first responders, and civilian applications. El-Sight Israel is currently generating revenue and is seeking investment to capitalise on what it considers is a growing opportunity for its products given its success rate in signing up customers.

A significant part of the funds raised will be used to acquire and deploy sales and marketing resources in order to drive revenue growth for existing products. Funds raised will also be used for research and development to enhance the current product lines, to commercialise new technologies and to remain competitive into the future.

The Offer provides an opportunity for you to share in the exciting future of the Company. This Prospectus contains detailed information about the Offer, the Company, El-Sight Israel and the products and markets. It also includes a description of the key risks associated with an investment in the Company, covering those risks typically found in most early stage technology companies, including the ability to grow its user base and generate continuing revenue in response to changing technologies, customer demands and competitive pressures. I encourage you to read the Key Risks in Section 4.6 and the Risk Factors in Section 7. Before making your decision to invest, please carefully read this Prospectus and seek professional advice if required.

The Board looks forward to welcoming you as a Shareholder.

Yours sincerely

Howard Digby

on behalf of the Board of Elsight Limited

4. INVESTMENT OVERVIEW

This section is a summary only and not intended to provide full information for investors intending to apply for Shares offered pursuant to this Prospectus. This Prospectus should be read and considered in its entirety.

4.1 The Company

The Company was incorporated on 13 December 2016 primarily for the purpose of investigating opportunities to invest in technology companies. Subsequently a decision was made to invest in El-Sight Ltd, a company incorporated in Israel ( El-Sight Israel ), and the developer and the owner of the Technology (defined below). The company will now acquire 100% of the shares of El-Sight Israel and proceed to list on the ASX ( Acquisition ).

El-Sight Israel has developed a revolutionary innovative high-bandwidth-mobilesecured-datalink product which enhances the traditional live data transfer methods with a multi-link based technology (the Multichannel ) which is capable of high bandwidth, stable and secured live data transfer ( Technology ). The Technology is currently used in various real-time live data transfer, including tactical security and surveillance and the Company is developing new applications for the Technology.

4.2 Technology

The El-Sight Israel Multichannel high-band-width-mobile-secured-datalink Technology separates streamed video or other data into many small packets, which are each separately encrypted and separately but concurrently sent over any (and as many as available) channels (WIFI, LAN, 4G, 3G SAT etc.) and then received, decrypted, reassembled and streamed in near real time by the Technology receiver. This Technology has been developed into a range of products including portable devices, vehicle mounted and fixed/wall mounted devices for use for secured datalink in tactical security and surveillance situations, with potential for additional applications.

The primary advantages of the Technology include:

high speed and optimised video quality with minimal latency due to unparalleled aggregated multi-channel scalable bandwidth;
solid and reliable ‘in motion’ video and data transmission in extreme conditions due to the ability to determine and aggregate optional routes of transmission, which allow streaming in bad reception conditions; and
secured transmission due to the Multichannel method of dividing the broadcast into numerous parts and transmitting them separately through different channels, thereby limiting interception (additional encryption is also available).

The Technology is a combined hardware, firmware and software solution developed over a number of years with the combined tactical and technological expertise of the El-Sight Israel team and is difficult to imitate.

The Technology is currently used by first responder and homeland security services in Israel including:

SWAT and special forces teams;

Israeli police services;
Israeli emergency services; and
Military and defence services.

The Technology has also recently been tested in emergency medical situations in France by enabling first responder paramedics to live stream an accident scene to a panel of doctors for consultation on actions to take based on the scene being viewed online and with high definition. This testing and product development is ongoing as at the time of this Prospectus.

Following completion of the Acquisition and the Offer, the Company will be focussing on the continuation of the commercialisation and ongoing development of the Technology and growing profitable sales revenues.

4.3 Business Model

The Company’s business model revolves around completing the Acquisition and continuing the commercialisation of the Technology. The terms of the Acquisition are summarised in Section 10.1 of this Prospectus.

El-Sight Israel has commenced commercialising the Technology and to date has modest, revenue streams (refer to the financial information in Section 8), and for the financial year ended 31 December 2016 even achieved a small profit. Fundamentally, El-Sight Israel derives revenues from the sale of its hardware, and accompanying software and ongoing licence and maintenance fees.

The Company’s business model is based on the expansion, through the funds raised under the Offer, of the use of the Technology both within Israel, but also to other countries around the world. In addition, the Company will seek to expand on the usefulness of the Technology beyond its current military and security uses to be applied to new verticals, which may include:

real-time high definition streaming for the media and broadcast markets;
telemedicine;
developing secure connections between business or government facilities; and
autonomous cars, trucks and drones wideband secured connectivity.

4.4 The Objectives

The Company’s main objectives on completion of the Offer are:

complete the Acquisition;
increase the current sales rate of the Technology by expanding sales and marketing resources and building channel partnerships;
undertaking additional research and development on the Technology to expand its scope and usability; and
grow Shareholder value through the exploitation and growth of the Technology in markets around the world.

4.5 Key Investment Highlights

 El-Sight Israel is a market leader in providing high-bandwidth mobile secured data link solutions

Israel has been acknowledged as being a world leader in the development of new security based technologies and the subsequent commercialisation of those technologies.

 El-Sight Israel has an existing diverse customer base, already supplying Technology to homeland security services in Israel and security entities in Israel, as well as other countries around the world

Currently, El-Sight Israel has customers using the Technology, not only in Israel, but also in countries as diverse as South Africa (providing security assistance to secured transport businesses), Singapore, Vietnam and Indonesia.

 El-Sight Israel possesses intellectual property developed over years of research and development

Although El-Sight Israel does not hold any registered intellectual property, the understanding of the processes and systems that enable the Technology to work have been developed over a number of years and are a key asset of El-Sight Israel.

 The online video and data streaming market around the world continues to grow in both the security and commercial spheres

The ability to transmit data, in particular video images at near real time speeds, is of growing interest in not only military, but private security and commercial businesses with offices in diverse locations, is continually growing.

4.6 Key Risks

The business, assets and operations of our Company are subject to certain risk factors that have the potential to influence the operating and financial performance of the Company in the future. These risks can impact on the value of an investment in the securities of our Company.

The Board aims to manage these risks by carefully planning its activities and implementing risk control measures. Some of the risks are, however, highly unpredictable and the extent to which they can effectively manage them is limited.

Set out below are specific risks that the Company is exposed to. Further risks associated with an investment in the Company are outlined in Section 7.

(a) Limited operating history

The Company is essentially a start-up company with limited operating history and to date the Company and El-Sight Israel have limited historical financial performance. The Company was incorporated in December 2016 for the purposes of seeking opportunities to invest in technology companies and seeking a listing on ASX. El-Sight Israel was incorporated in 2009. El-Sight Israel is now in the commercialisation phase of the business cycle and as such carries the normal risks of a

start-up business. Given the limited operating history of the Company and El-Sight Israel, and the limited history of the products, no assurance can be given that the Company will achieve commercial viability through the implementation of its business plan. Until the Company is able to realise value from its products, it is likely to incur ongoing operating losses. Accordingly, the Company is not in a position to give any guidance around likely revenue or profitability.

(b) Intellectual Property risk

The underlying technology on which the Company’s Multichannel technology is built cannot be patented because the concept has been revealed in public lectures in the past. Thus, the Company will not hold any patents or registerable intellectual property.

To counter this, El-Sight Israel and the Company will rely heavily on the ‘first mover’ advantage gained by being the developers of the Technology.

(c)

Key person risk

El-Sight Israel was founded by Nir Gabay and Roee Kashi and has been built based on their knowledge and experience. Both Mr Gabay and Mr Kashi have new employment agreements in place pursuant to which they have been employed by El-Sight Israel, which will be a wholly owned subsidiary of the Company, to continue to build and grow the business of the Company. However, there can be no guarantee that should either Mr Gabay or Mr Kashi leave or their contracts are terminated in accordance with their terms, the Company can attract appropriately qualified staff to replace them. The Company seeks to minimise this risk by providing appropriate incentives to encourage all its employees to work towards the continued growth and success of the Company.

(d) Uncertainty of future profitability

The success of the Company’s operations relies on the ability to attract more government and non-government users of the Technology and ElSight Israel’s products. An inability to attract new clients and users, in particular outside Israel, will affect the Company’s earning ability.

While El-Sight Israel has been successful in attracting clients, in particular in the government and homeland defence sectors in Israel, this will not necessarily translate into successful utilisation in other 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.

(e) Research and development

The Company’s products (summarised in this Prospectus) and its potential products are subject to continued research and development. There is no guarantee that the Company will be able to achieve its desired outcomes from that research and development either to enhance its existing products and adapt them to new and

emerging technologies or to complete the development of the new products 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 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.

(f)

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 the meet the changing needs of its markets and the new and emerging technologies. 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.

(g) Security

As with all technology companies, El-Sight Israel is heavily reliant on the security of its products and associated technologies. Breaches of security could impact user satisfaction and confidence in its products and could impact the Company’s financial performance.

Other breaches of security, such as cyber-attacks by hackers, could render the services and related products unavailable through a disrupted denial of service or other disruptive attacks. Unavailability of the Company’s services could lead to a loss of revenues for the Company. Further, it could hinder the Company's ability to retain existing customers and attract new customers, particularly if its products were perceived to be less secure or reliable than its competitors, which would have a material adverse impact on the Company's prospects.

(h) 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 industries in which the Company will operate, notably the homeland security and defence industries. 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.

The above list of risk factors ought not to be taken as exhaustive of the risks faced by our Company and you should refer to the additional risk factors in Section 7 of this Prospectus before deciding whether to apply for Shares pursuant to this Prospectus.

4.7 The Offer

The Company invites applications for up to 32,500,000 Shares at an issue price of $0.20 per Share to raise up to $6,500,000. The key information relating to the Offer and references to further details are set out below.

Indicative timetable*

Lodgement of Original Prospectus with the ASIC	13 April 2017
Lodgement of Prospectus	27 April 2017
Opening Date	28 April 2017
Closing Date	12 May 2017
Completion of the Acquisition	16 May 2017
Despatch of holding statements	19 May 2017
Expected date for quotation on ASX	26 May 2017

* The above dates are indicative only and may change without notice. The Company reserves the right to extend the Closing Date or close the Offer early without notice.

4.8 Purpose of the Offer

The purpose of the Offer is to facilitate an application by the Company for admission of the Company to the official list of ASX and position the Company to seek to achieve the objectives set out above in Section 4.4.

4.9 Use of Funds

The Company intends to apply funds raised from the Offer, together with existing cash reserves, over the first two years following admission of the Company to the official list of ASX as set out on the following page:

Funds available	Minimum Subscription ($4,500,000)	% of Funds	Full Subscription ($6,500,000)	% of Funds
Existing cash reserves1	$111,827	2.42%	$111,827	1.69%
Funds raised from the Offer	$4,500,000	97.58%	$6,500,000	98.31%
Total	$4,611,827	100%	$6,611,827	100%
Allocation of funds
Expenses of the Offer2	$619,878	13.44%	$749,993	11.34%
Marketing and promotion expenses associated with the Technology	$1,670,282	36.22%	$2,572,442	38.91%
Technology and research and development3	$699,838	15.17%	$1,077,839	16.30%
Corporate overheads4	$674,180	14.62%	1,038,321	15.70%
Payment to Learnicon LLC pursuant to preferred shares held in El-Sight Israel5	$530,000	11.49%	$530,000	8.02%
Unallocated working capital including Administration costs	$417,649	9.05%	$643,232	9.73%
Total	$4,611,827	100%	$6,611,827	100%

1 Refer to the Investigating Accountant’s Report set out in Section 8 of this Prospectus for further details.

2 Refer to Section 11.9 of this Prospectus for further details.

3 Product development includes the ongoing development of existing products into new formats and forms for increasing usage and availability of the products.

4 Corporate overheads include salaries and wages, rents and other corporate costs associated with managing the Company.

5 Learnicon LLC holds 4,445 preferred shares in El-Sight Israel granting it the right to be repaid the subscription amount upon their conversion to ordinary shares. The Company has agreed with Learnicon LLC to pay it US$400,000 (approx. AUD$530,000) to fulfil this obligation. Refer to Section 10.1 for a summary of the Share Sale Agreement.

In the event the Company raises more than the minimum subscription of $4,500,000, the additional funds raised will be first applied towards the increased expenses of the Offer, and then proportionally applied towards the Company’s marketing and product development programs. On completion of the Offer, the Board believes our Company will have sufficient working capital to achieve these objectives.

The above table is a statement of current intentions as of the date of this Prospectus. As with any budget, intervening events including the speed of the

adoption of the Technology or the opening of new markets for the Technology and new circumstances have the potential to affect the manner in which the funds are ultimately applied. The Board reserves the right to alter the way funds are applied on this basis.

4.10 Capital Structure

The capital structure of the Company following completion of the Offer (assuming full subscription) is summarised below[1] :

Shares[2]

	Number
Shares currently on issue	10,000,000
Shares to be issued pursuant to the Offer	32,500,000
Shares to be issued to El-Sight Vendors	35,381,386
Shares to be issued for partial repayment of loan to El-Sight Israel loan from Learnicon LLC6	7,166,667
Shares to be issued on conversion of convertible loans3	5,833,338
Total Shares on completion of the Offer	90,881,391

Options

	Number
Options currently on issue	Nil
Options to be issued pursuant to the Offer	Nil
Options to be issued under Employee Option Plan4	38,608,000
Options to be issued to Lead Manager and seed investors5	7,000,000
Total Options on completion of the Offer	45,608,000

1 Refer to the Investigating Accountant’s Report set out in Section 8 of this Prospectus for further details.

2 The rights attaching to the Shares are summarised in Section 11.2 of this Prospectus.

3 To fund the Company’s initial costs since its incorporation, the Company has issued $700,000 in convertible loans, the terms of which are summarised in Section 10.2 of this Prospectus.

4 A summary of the terms of the Employee Share Option Plan is set out in Section 11.5 of this Prospectus. The Options will be exercisable at $0.20 on or before the date that is five years from the date of issue and otherwise be on the terms set out in Section 11.4.

5 Each Option will be unquoted and exercisable at $0.30 cents on or before the date that is three years from the date of issue and otherwise be on the terms set out in Section 11.4.

6 The Company has agreed to issue these Shares for the partial repayment of an existing loan owing from El-Sight Israel to an unrelated third party, Learnicon LLC.

4.11 Substantial Shareholders

Those Shareholders holding 5% or more of the Shares on issue both as at the date of this Prospectus and on completion of the Offer (assuming full subscription) are set out in the respective tables below.

As at the date of the Prospectus

Shareholder	Shares	Options	% (undiluted)	% (fully diluted)
Intervest HK Limited	3,250,000	Nil	32.5%	32.5%
GNat Pty Ltd1	2,325,000	Nil	23.25%	23.25%
Yulia Uvarova2	1,500,000	Nil	15%	15%
Lamma Nominees Pty Ltd3	1,500,000	Nil	15%	15%
Moshe Cohen	750,000	Nil	7.5%	7.5%

1 GNat Pty Ltd is an entity controlled by retiring Director, Nathan Barbarich.

2 Yulia Uvarov is the Trustee for Techinvest Nominees and is a related party of Director, Anton Uvarov, by virtue of being his wife.

3 Lamma Nominees Pty Ltd is an entity controlled by Director Howard Digby.

On completion of the Offer (assuming no existing substantial Shareholder subscribes and receives additional Shares pursuant to the Offer)

Shareholder	Shares	Options	% (undiluted)	% (fully diluted)
Nir Gabay	26,052,974	29,595,000	28.67%	40.77%
Roee Kashi	2,894,775	9,013,000	3.18%	8.72%
Learnicon LLC	13,600,304	Nil	14.96%	9.96%

The Company will announce to the ASX details of its top-20 Shareholders (following completion of the Offer) prior to the Shares commencing trading on ASX.

4.12 Restricted Securities

Subject to the Company being admitted to the Official List, certain Shares and Options on issue prior to the Offer will be classified by ASX as restricted securities and will be required to be held in escrow for up to 24 months from the date of Official Quotation. During the period in which these securities are prohibited from being transferred, trading in Shares may be less liquid which may impact on the ability of a Shareholder to dispose of his or her Shares in a timely manner.

Our Company will announce to the ASX full details (quantity and duration) of the Shares and Options required to be held in escrow prior to the Shares commencing trading on ASX.

4.13 Financial Information

Notwithstanding that El-Sight Israel has been generating revenue from its operations in recent times, the Directors have considered the matters set out in

ASIC Regulatory Guide 170 and believe that they do not have a reasonable basis to forecast future earnings on the basis that the operations of the Company are relatively small and inherently uncertain. Any forecast or projection information would contain such a broad range of potential outcomes and possibilities that it is not possible to prepare a reliable best estimate forecast or projection.

4.14 Taxation

The acquisition and disposal of Shares will have tax consequences, which will differ depending on the individual financial affairs of each investor. All potential investors in the Company are urged to obtain independent financial advice about the consequences of acquiring Shares from a taxation viewpoint and generally.

To the maximum extent permitted by law, the Company, its officers and each of their respective advisors accept no liability and responsibility with respect to the taxation consequences of subscribing for Shares under this Prospectus.

4.15 Dividend Policy

We anticipate that significant expenditure will be incurred in the evaluation and development of our Company’s projects. These activities, together with the possible acquisition of interests in other projects, are expected to dominate the two year period following the date of this Prospectus. Accordingly, the Company does not expect to declare any dividends during that period.

Any future determination as to the payment of dividends by the Company will be at the discretion of the Directors and will depend on the availability of distributable earnings and operating results and financial condition of the Company, future capital requirements and general business and other factors considered relevant by the Directors. No assurance in relation to the payment of dividends or franking credits attaching to dividends can be given by the Company.

4.16 Directors and Key Personnel

The existing Directors as at the date of this Prospectus are

Howard Digby;
Anton Uvarov; and
Nathan Barbarich.

After the close of the Offer and prior to listing, it is proposed that Mr Barbarich will retire as a Director and the following new Directors will be appointed:

Nir Gabay – Managing Director;
Major General (retired) Ami Shafran – Non-Executive Chairman; and
David Furstenberg – Non-Executive Director.

Outlined below are summaries of the profiles of the Directors and Proposed Directors that will be the Directors of the Company upon the Company’s commencement of trading on ASX.

Major General (retired) Ami Shafran – Non-Executive Chair

Major General Shafran is the former Head of the Israeli Defence Force Information and Communications Technology Command. In addition he is currently the Head of the Centre for Cyber Technology at Ariel University in Israel.

Over the course of his extensive career Major General Shafran held numerous prestigious and prominent positions in the Defence and Intelligence forces of the Israeli Defence Force, including serving as its Chief Scientist, serving as Chief of Staff of the Ministry of Defence, and the Research and Development Attaché at the Israeli Embassy in Washington DC.

Major General Shafran has not served as a Director on any other ASX listed company.

Mr Nir Gabay – Managing Director

Nir is one of the founders of El-Sight Israel.

Commencing his career in the Israeli military, he has more than 20 years’ experience in communications, security and surveillance including a mobile cellular provider, local municipality, and high tech companies, and was previously a member of an Israeli Special Forces unit.

During the past ten years Nir has been involved in a number of technological and business achievements among them is the establishment of El-Sight Israel, which was founded based on his communications and security experiences.

Nir has not previously been a director of any other ASX listed companies.

David Furstenberg – Non Executive Director

David has held various senior CEO, Chairman, Board member and VP Global sales positions in a number of publicly traded and privately owned companies, including: Comverse (NASDAQ: CNSI) and Audiocodes (NASDAQ: AUDC), Enure and Vista (a subsidiary of Israel Aerospace Industries).

Most recently, David was the active Chairman at NovelSat and the CEO at InsurBit, as well as a Director of White Cyber Knight Ltd and Insurisx Inc., all companies involved in cyber and security businesses in some form.

David has built a speciality in assisting with the turnaround of high tech companies through product and market repositioning (as opposed to reduction in force).

David has not previously served as a director of any ASX listed company.

Dr Anton Uvarov – Non-Executive Director

Anton has significant experience as an equity analyst both in Australia and overseas. Prior to moving to Australia, he was with Citigroup Global Markets, where he spent two years as a member of the New York based Healthcare team. Anton’s technical expertise and company knowledge spreads across a variety of industries and spectrum of market capitalisations, with his particular interest in early stage startups.

Anton holds a PhD degree from the University of Manitoba, Canada and an MBA degree from the University of Calgary, Canada. He is currently a non-

executive Director of Actinogen Medical Limited (ASX.ACW) and HearMeOut Limited (ASX.HMO).

Mr Howard Digby – Non-Executive Director

Howard began his career at IBM and has spent 25 years managing technology related businesses in the Asia Pacific region, of which 12 years were spent in Hong Kong. More recently, he was with The Economist Group as Regional Managing Director. Prior to this, he held senior regional management roles at Adobe and Gartner. Upon returning to Perth, Howard served as Executive Editor of WA Business News and now spends his time as an advisor and investor, having played key roles in several M&A and reverse takeover transactions.

Howard is a non-executive Director of Estrella Resources (ASX:ESR) and 4DS Memory Limited (ASX:4DS) and Non-Executive Chairman of HearMeOut Limited (ASX:HMO), and is an advisor to several private startup technology businesses. Howard holds a Bachelor of Engineering (Mechanical) Honours from the University of Western Australia.

Mr Roee Kashi – Vice President – Research and Development

Roee commenced his career in the Israeli Defence Force and has over nine years of experience and expertise in building and developing digital video systems.

Roee has been responsible for some major technological achievements including the development of the core software on El-Sight Israel’s DVR that is responsible for video encoding and transmission, user interface design and construction of the system, handheld software development (Pocket PC, Smartphone), moving cameras, smart searches, and send notification email recordings to name a few.

Roee will serve as the Vice-President of El-Sight Israel, responsible for research and development of existing and new products, where the Company considers his previous experience and knowledge in founding El-Sight Israel and building the existing products will serve the Company moving forward.

4.17 Corporate Governance

To the extent applicable, in light of the Company’s size and nature, the Company has adopted The Corporate Governance Principles and Recommendations (3rd Edition) as published by ASX Corporate Governance Council ( Recommendations ).

The Company’s main corporate governance policies and practices as at the date of this Prospectus are outlined in Section 9.2 of this Prospectus and the Company’s compliance and departures from the Recommendations are set out in Section 9.3 of this Prospectus.

In addition, the Company’s full Corporate Governance Plan is available from the Company’s website (www.el-sight.com).

4.18 Disclosure of Interests

The Company has paid no remuneration to its Board since incorporation to the date of this Prospectus and no remuneration will be paid or accrue until such time as our Company is admitted to the Official List (expected in May 2016).

For each of the Directors of the Company as at the date of listing, the proposed annual remuneration for the financial year following the Company being admitted to the Official List together with the relevant interest of each of these Directors in the securities of the Company as at the date of this Prospectus is set out in the table below.

Director1	Proposed Remuneration	Shares	Options
Ami Shafran	$50,000	Nil	Nil
Nir Gabay	$212,000	26,052,974	29,595,0002
David Furstenberg	$50,000	Nil	Nil
Anton Uvarov	$50,000	1,708,334	750,0003
Howard Digby	$50,000	1,708,334	750,0003

1 Prior to listing, Mr Nathan Barbarich will retire as a Director of the Company. Mr Barbarich has not been paid any fees from the Company for his role as a Director, and will not receive any fees for acting as a Director prior to his retirement. Mr Barbarich currently has an interest in 2,325,000 Shares together with 1,000,000 options exercisable at $0.30 on or before the date that is three years after the date of issue, that will be issue to him (or his nominee) prior to the date of listing.

2 Each Option is unquoted and, subject to the achievement of certain performance hurdles are exercisable at 20 cents on or before the date that is five years from the date of issue. A summary of the performance hurdles are set out in Section 11.3 of this Prospectus.

3 Each Option will be unquoted and will be exercisable at $0.30 on or before the date that is 3 years from the date of issue, and otherwise on the terms and conditions set out in Section 11.4.

4.19 Agreements with Directors or Related Parties

Our Company’s policy in respect of related party arrangements is:

(a) a Director with a material personal interest in a matter is required to give notice to the other Directors before such a matter is considered by the Board; and
(b) for the Board to consider such a matter, the Director who has a material personal interest is not present while the matter is being considered at the meeting and does not vote on the matter.

– Services Agreement Nir Gabay

On 5 April 2017 El-Sight Israel entered into an employment agreement with Nir Gabay pursuant to which he is employed as the Chief Executive Officer, reporting back to the Board of Directors of the Company.

Pursuant to the terms of the agreement, Mr Gabay is paid an amount of ILS 37,000 per month (based on the exchange rate as at the date of this Prospectus, equals approximately AUD$13,500 per month) in salary for this role, and is entitled to repayment of expenses incurred in undertaking his role.

The agreement requires Mr Gabay to devote his entire time and attention to the business of the Company.

The agreement may be terminated by either party on 12 months’ notice, but is for a minimum period of three years. Notwithstanding the previous sentence, it may be terminated immediately with justifiable cause.

The agreement is otherwise on terms that are consistent with an employment agreement in Australia, including the payment of the Israeli equivalent of superannuation and the requirement of Mr Gabay to comply with the policies and procedures of the Company that apply from time to time.

Services Agreement – Roee Kashi

On 6 April 2017 El-Sight Israel entered into an employment agreement with Roee Kashi pursuant to which he is employed as the Vice President – Research and Development on a full time basis, reporting to Mr Gabay.

Pursuant to the terms of the agreement, Mr Kashi is paid an amount of ILS 35,000 (based on the exchange rate as at the date of this Prospectus, equals approximately AUD$13,000 per month) in salary for this role, and is entitled to repayment of expenses incurred in undertaking his role.

The agreement is terminable by El-Sight Israel or by Mr Kashi on 180 days’ notice, although it may be terminated immediately with justifiable cause.

The agreement is otherwise on terms that are consistent with an employment agreement in Australia, including the payment of the Israeli equivalent of superannuation and the requirement on Mr Kashi to comply with the policies and procedures of the Company that apply from time to time.

Deeds of indemnity, insurance and access

Our Company has entered into a deed of indemnity, insurance and access with each of its Directors. Under these deeds, our Company agrees to indemnify each officer to the extent permitted by the Corporations Act against any liability arising as a result of the officer acting as an officer of the Company. Our Company is also required to maintain insurance policies for the benefit of the relevant officer and must also allow the officers to inspect board papers in certain circumstances.

5. DETAILS OF THE OFFER

5.1 The Offer

Pursuant to this Prospectus, the Company invites applications for up to 32,500,000 Shares at an issue price of $0.20 per Share to raise up to $6,500,000.

The Shares offered under this Prospectus will rank equally with the existing Shares on issue.

5.2 Minimum subscription

If the minimum subscription to the Offer of $4,500,000 has not been raised within three months after the date of the Original Prospectus, 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.

5.3 Applications

Applications for Shares under the Offer must be made using the Application Form.

Applications for Shares must be for a minimum of 10,000 Shares and thereafter in multiples of 2,000 Shares and payment for the Shares must be made in full at the issue price of $0.20 per Share.

Completed Application Forms and accompanying cheques, made payable to “ Elsight Limited – Share Offer Account ” and crossed “Not Negotiable”, must be mailed or delivered to the address set out on the Application Form by no later than the Closing Date.

The Company reserves the right to close the Offer early.

5.4 ASX listing

Application for Official Quotation by ASX of the Shares offered pursuant to this Prospectus will be made within 7 days after the date of the Original Prospectus.

If the Shares are not admitted to Official Quotation by ASX before the expiration of 3 months after the date of issue of the Original 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.

5.5 Issue

Subject to the minimum subscription to the Offer being reached and ASX granting conditional approval for the Company to be admitted to the Official List, issue of the Shares offered by this Prospectus will take place as soon as practicable after the Closing Date.

Pending the issue of the Shares or payment of refunds pursuant to this Prospectus, all application monies will be held by the Company in trust for the Applicants in a separate bank account as required by the Corporations Act.

The Company, however, will be entitled to retain all interest that accrues on the bank account and each Applicant waives the right to claim interest.

The Directors will determine the recipients of the issued Shares in their sole discretion. 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, or where no issue is made, surplus application monies will be refunded without any interest to the Applicant as soon as practicable after the Closing Date.

5.6 Applicants outside Australia

This Prospectus does not, and is not intended to, constitute an offer in any place or jurisdiction, or to any person to whom, it would not be lawful to make such an offer or to issue this Prospectus. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any of these restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

No action has been taken to register or qualify the Shares or otherwise permit a public offering of the Shares the subject of this Prospectus in any jurisdiction outside Australia. Applicants who are resident in countries other than Australia should consult their professional advisers as to whether any governmental or other consents are required or whether any other formalities need to be considered and followed.

If you are outside Australia it is your responsibility to obtain all necessary approvals for the issue of the Shares pursuant to this Prospectus. The return of a completed Application Form will be taken by the Company to constitute a representation and warranty by you that all relevant approvals have been obtained.

5.7 Oversubscriptions

No oversubscriptions will be accepted by the Company.

5.8 Lead Manager

The Company has engaged RM Corporate Finance Pty Ltd (AFSL 315235) to act as the lead manager and corporate advisor to the Company. The Company will pay RM Corporate Finance Pty Ltd a fee for acting in this capacity, including 6% of the funds raised under the Offer. Refer to Section 10.3 for a summary of the mandate and the fees payable to the lead manager.

5.9 Not underwritten

The Offer is not underwritten.

5.10 Commissions payable

The Company reserves the right to pay a commission of 6% (exclusive of goods and services tax) of amounts subscribed through any licensed securities dealers or Australian financial services licensee in respect of any valid applications lodged and accepted by the Company and bearing the stamp of the licensed securities dealer or Australian financial services licensee. Payments will be subject to the receipt of a proper tax invoice from the licensed securities dealer or Australian financial services licensee.

6. COMPANY AND PROJECT OVERVIEW

6.1 Background

The Company was incorporated in December 2016 for the purpose of investigating opportunities to invest in technology companies. Subsequently a decision was made to invest in El-Sight Israel. The company will now acquire 100% of the shares of El-Sight Israel and proceed to list on the ASX.

El-Sight Israel was incorporated in 2009 by Mr Nir Gabay and Mr Roee Kashi and has been the developer of the Technology. Historically, it has sold products and services exclusively to the Israeli security, intelligence, military and Special Forces, but in more recent times it has been focussing on the sales and marketing of its products to government and private sectors both inside and outside of Israel.

The development of the Technology was commenced for the purpose of providing multichannel technology for high-bandwidth, stable and secured live data transfer for first responders, such as police and emergency service personnel in Israel utilising the mutual experiences of Mr Gabay and Mr Kashi.

Multichannel communications allow a signal to be split up into multiple channels encrypted, transmitted, decrypted and reassembled. Channels can include standard 3G and 4G cellular services, satellite, WIFI, LAN and dedicated radio infrastructure.

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Image shows the receipt of data into the Multichannel and the transmission through the various channels to be reassembled at the other end.

One of the innovative elements to the Technology is its ability to manage bandwidth in a unique way to aggregate several bandwidths and minimise latency, that is, the time delay between when the signal is sent and received. This is achieved by using the Multichannel to aggregate and/or switch between available channels, be it 4G or 3G cellular, satellite or other sources, depending on the best available sources.

Since its development, the Technology has been used in Israel by various first responders and homeland security agencies, and El-Sight Israel has been testing the application of the Technology in other environments outside of security services, including in healthcare. In recent times, El-Sight Israel has commenced growing its market outside Israel and is planning to increase its sales force accordingly through use of the funds received under the Offer.

As part of the Acquisition, Mr Nir Gabay and Mr Roee Kashi will both take on roles with the Company, bringing their expertise and experience in developing the Technology to the ongoing development of the Company and the Technology.

6.2 Business Model

A summary of the business model is set out in Section 4.3.

The Company’s business model revolves around completing the Acquisition and continuing the commercialisation of the Technology and the continued growth of sales revenue to deliver profits to the Company by increasing the marketing and promotion of the Technology and the Company’s products. The terms of the Acquisition are summarised in Section 10.1 of this Prospectus.

The Company will also deploy funds raised under the Offer, to further the use of the Technology both within Israel and other countries around the world as well as continuing research and development of the Technology to develop new commercial products.

The Company sees opportunities to expand on the usefulness of the Technology beyond its current military and security uses including in vertical markets, including:

telemedicine;
real-time high definition streaming for the media and broadcast markets;
developing secure connections between business or government facilities; and
use in autonomous cars and trucks.

Currently, the Technology is being utilised in Israel by first responders, including police and homeland security services due to its ability to enable multiple video streams through a wide-bandwidth service provided through the Technology. Additionally, the Israeli Police service also uses the Technology to provide a multi-channel VPN (virtual private network) to connect their field headquarter computers directly to the national police network, in near real time, with minimal delays.

Outside of Israel, the Technology has been installed and used in transportation businesses in South Africa, where it is used to stream video from within transportation vehicles back to headquarters and enables security teams to respond in a quick fashion where security breaches within those vehicles occur. The Company intends to grow sales in this area through its sales and marketing spend.

Additionally, the Technology has been trialled by a French company in the health field for enabling medics and emergency responders to feed back video footage of accident and emergency scenes to a panel of doctors for delivery of important medical advice based on the circumstances being viewed. These trials are ongoing, but provide positive re-enforcement of the applicability of the Technology in this growing medical field.

El-Sight Israel currently generates revenues by a combination of selling initial hardware solutions, being its Technology, installation services and an ongoing annuity from software and service subscription revenue. This may be levied in

many ways and currently a per unit charge based on the number of signal units is used. The Company intends to continue operating under this model following completion of the Acquisition. Reflecting its size, El-Sight Israel has been achieving small revenues (less than US$1 million) over the last three financial years consistent with its stage of business development, with mostly Israel-based clients, all without material investment in sales due to Company's focus on research and development of its products at such stage. Revenue growth has been driven to date by growing the client base outside of Israel. A change in primary focus from research and development to marketing and sales should enable the Company going forward to continue to achieve sales growth.

Opportunities exist to grow the revenue from existing clients by:

growing the number of signal units purchased or used by that client (such as in field video recorders);
upgrading features in the after-market of supplied products; and
upgrading the number of channels supported in the Multichannel system.

It is expected however that initial revenue growth of the Company after completion of the Acquisition will come mostly from winning new client orders, and a large portion of the funds raised under the Offer are intended to be used in growing marketing and promotion of the Company’s existing products.

Initially, following the listing of the Company on ASX, the Company will focus on existing markets where there has been acceptance of the products, and then seek to expand the use of the Technology in homeland security and homeland defence departments in Israel, Australia and elsewhere, while also promoting the products’ utility in the private security, medical and broadcast sectors.

Following on from that focus, the Company will also seek to expand the use of the Technology in new markets as listed above.

One area where the Company sees significant opportunity within Australia is in remote medicine, by enabling remote doctors, medics and emergency services (such as flying doctor services) direct, real time links from accident or remote medicine scenarios back to major hospitals or specialist professionals for immediate advice and assistance.

In addition, as evidenced by the ongoing development of autonomous vehicles, needing to transmit secure data between vehicles and between vehicles and road services or transport bases, the Company envisages further opportunities for the integration of the Technology, based on its ability to transmit data quickly and securely using multiple available channels, in new and emerging markets not yet in existence.

6.3 Existing industry and potential industries overview

An overview of the industry and the Technology’s competitors is broad due to the broad utility of the Technology.

The Technology sees El-Sight Israel positioned at the cross section of two growing markets:

Mobile video, audio and other data transmission

This market consists of business, and government departments needing or wanting to transmit data, including video and audio, in secure and quick time regardless of connectivity issues. These can include:

emergency units (Fire, Police, Ambulance);
secured transportations;
public transportation services;
isolated areas / border services;
financial institutions and legal firms; and
broadcasters including news channels and live streaming services.
Homeland security and defence

This market consists of National and State services charged with homeland security, such as police, counter terrorism and other first responders, as well as military and defence forces that can often be operating in remote areas or uneven terrain where signals from different channels can be interrupted or even non-existent.

Within these markets, “ C4ISR ” (Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance) represented 16% of the global security market in 2013. The C4ISR market was an estimated $102 billion in 2014 and is expected to grow to $133 billion (per annum) by 2020.

Real-time video transmission for security systems is an integral part of C4ISR and represents an important area of innovation and new spending in the field. Using conservative estimates and if the real-time video segment represents only 5% of the C4ISR market, this translates to a minimum $5 billion addressable market and is expected to grow in the future.

The existing channel sources of data transfer (including video and voice) used across all these market segments are mainly made up of:

satellite;
cellular modems (including 3G and 4G networks); and
dedicated radio infrastructure,

but can also include WIFI and LAN.

Existing market needs have in the past been served by custom made and usually expensive, or broader, more broadcasting-focussed solutions. The Technology was designed specifically for the defence homeland security and first responder markets to address these issues. In the future, the innovations behind the Technology however, may give the company a potential opportunity to also compete with and displace incumbents in civilian broadcasting markets beyond the initial defence and security focus.

In addition to these existing industries in which the Company will operate after completion of the Offer and the Acquisition, the Company will also target new markets.

Those new market opportunities for the Company’s Technology may include consumer media (such as live streaming services enabling users to live stream their activities in near real time) and commercial broadcasting and livestreaming, including by enabling reporters to provide reports in near real time with high quality video and audio streaming.

On the basis of the above, the funds raised under this Offer are intended to be used for the following:

Marketing and business development: Expanding its marketing division by hiring marketing professionals and engaging with different local integrator companies in order to penetrate new international markets and deepen presence in existing markets; and
Research and development: including further developing the existing Multichannel device by enhancing current compression, reducing the device’s size, and integrating video into other technologies.

6.4 Company Products

El-Sight Israel’s existing portfolio of products comprises a broad variety of products including portable devices, vehicle mounted devices and fixed wall/fence mounting devices (for various safe city and sensitive facilities management and surveillance) - all controlled by feature-reach Command, Control, Communications, Computers, and Intelligence ( C4I ) software developed by El-Sight Israel for video/data monitoring, dispatching and recording.

These products will be acquired by the Company under the Acquisition.

Some of the technical benefits of the products include:

simultaneous transmission while recording - all products are capable of dual compression, enabling local recording on-the-box, while real time transmission to the C4I occurs at the quality deemed most appropriate given bandwidth at that time;
high speed and optimized video quality with latency of less than half a second due to unparalleled bandwidth;
solid and reliable ‘in motion’ video transmission in extreme conditions due to the product’s ability to utilise different channels to determine optional routes of transmission which allow streaming in bad reception conditions; and
secured transmission due to the multichannel method of dividing the video into numerous parts and transmitting them separately through different channels, thereby limiting interception (additional encryption is also available).

Hardware

Multichannel

==> picture [330 x 207] intentionally omitted <==

The Multichannel for data or video – enables compression and smart shaping which is capable of bonding and aggregating several channels (with fallback in between and to the Wi-Fi network) in order to achieve a better bandwidth, which enables the transmission of better video quality, resolution, resiliency and availability .

The system extends the bandwidth capabilities of streaming video by aggregating an unlimited number of network links (which could include 4G, 3G / LTE / ETH / SAT / Wi-Fi / Wi-Max) to transmit a single video stream in near real time. It is also a hub for connecting other products (like Tactical units). The Multichannel is portable and can fit into a carrier, such as a backpack or case, for use in mobile scenarios.

Rider

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The Rider is a fixed product suitable for mounting on vehicles, with both Wi-Fi and 3G/LTE capabilities of transmission, and offers data storage as well as transmission capabilities. It enables 2-way audio transmission from a command and control center to the vehicle and also enables automatic uploading of stored data over WIFI.

Tactical MA-2016

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The Tactical MA2016 is a wearable unit primarily developed for infantries with real-time video transmission over 3G/LTE and WIFI connectivity. It can communicate with other products developed, and includes self-recording capabilities and audio chat directly between the unit and the command and control center.

The hardware products are supported by software developed to co-exist with these products:

Software

Commander 360 Software

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El-Sight Israel has also developed a feature reach powerful software for monitoring, control and configuration for the C4I. The software enables the users with access control, layout configuration of the cameras and devices in field and sophisticated processing of the recorded files at field.

In cases where the customer has its own command and control software, ElSight Israel can provide a comprehensive and feature rich API for easy integration. Command and control software is an “open” application that enables integration to similar platforms/systems and directly with any GPS module.

The command and control software enables multiple scenarios control as well as the ability to dispatch video from the control centre to operational units in the field, commanders and to share the data with additional law enforcement agencies operating in conjunction with the user. The system supports video chat, thus, in a military or security scenario, allowing the command chain direct contact with the field.

6.5 Manufacturing

The manufacturing of the products does not require any rare or expensive components with long lead-times, and therefore manufacturing is a relatively simple process. To date, El-Sight Israel has operated by manufacturing its products internally, sourcing its materials as needed from available suppliers. These items typically include the printed circuits and moulded plastics utilised in the products.

Because of this relatively straight forward manufacturing process, the scalability of manufacturing is not considered a material risk of the Company, as the components used are usually readily available and the assembly can be completed either internally or outsourced on an ‘as needs’ basis.

The Company also considers that the manufacturing process will be an advantage in moving into new markets and jurisdiction, as it provides the potential for local manufacturing or assembly of its products in jurisdictions that may demand so.

6.6 Revenues

Copies of the audited accounts of El-Sight Israel are included in the Investigating Accountant’s Report in Section 8.

Those accounts reflect El-Sight Israel’s early stage of business development, with historical losses, but a small profit recorded in the last financial year ending 31 December 2016 achieved by increasing sales revenue over the year before whilst also reducing the costs of those sales.

The success of the Company going forward will rely on the ability of the business to grow sales and maintain clients. As demonstrated by the use of funds, the Company intends on spending a significant amount of the funds received in marketing and promoting the existing products of the Company both in the existing markets in which it has operated and generated sales, but most importantly, in new markets where El-Sight Israel has not had product sales previously. Importantly, this would likely include in Australia.

Until recently, El-Sight Israel acted primarily as the in-house development lab for the Israeli security, intelligence, military and Special Forces. At the end of 2016 ElSight Israel commenced shifting it centre of gravity from being a research and development centric company (with no real sales organisation), to a global sales oriented company. Upon the successful conclusion of this Offer and completion of the Acquisition, the Company intends to expend significant funds on growing its sales force (as shown in Section 4.9 above). Given the demonstrated history of an ability to generate a profit from the business in the last financial year, the Company has cause to believe that by increasing sales beyond historical numbers through its sales and marketing activities after listing, further growth in revenues are feasible and could lead to a positive financial effect on the Company.

6.7 Competitive Analysis

In implementing its business plan and developing its products following the Acquisition, the Company has given consideration to the existing markets and other competitive products available in the various markets in which the Company will operate.

In the homeland security and defence markets, the communication solutions and competitor products are largely based on satellite, single-cellular modems and dedicated radio infrastructure.

In the logistics, and security markets, existing products and competitors rely primarily on single-cellular modems, on the basis that multichannel technology is often cost prohibitive for private companies.

In the media and broadcast markets, existing products primarily use satellite and multiple cellular links (used in products such as LiveU and TVU in Israel).

Based on this analysis, the Company considers that following completion of the Offer and the Acquisition, the Company will own products that offer solutions not otherwise readily available to the markets that it currently operates in and that it can exploit to expand into new markets and new opportunities for the continued growth of the Company and its business.

7. RISK FACTORS

The Shares offered under this Prospectus should be considered speculative because of the nature of the Company's business post the completion of the Acquisition. There are numerous risk factors involved with the Company's business. Set out in Section 4.6 is a number of key risks that the Company has identified may be relevant to its business and the Shares being offered under this Prospects. In addition to those risks, this Section identifies the major areas of risk associated with an investment in the Company, but should not be taken as an exhaustive list of the risk factors to which the Company and its Shareholders are exposed.

Some of these risks can be mitigated by the use of safeguards and appropriate systems and controls, but some are outside the control of the Company and cannot be mitigated. Accordingly, an investment in the Company carries no guarantee with respect to the payment of dividends, return of capital or price at which securities will trade. Potential investors should read the entire Prospectus and consult their professional advisers before deciding whether to apply for Shares.

7.1 Risks specific to the Company

(a) Sales and timing risks

The homeland security market in Israel, where a large portion of El-Sight Israel’s existing business comes from, and other jurisdictions, is a tenderbased market and thus hard to penetrate. The transaction cycle in this industry can be long and may take between months and years to close significant transactions, whilst remaining subject to changes in government policy or spending, while much of the cost incurred by the tendering party may not be recoverable.

The Company will seek to mitigate these risks by having a diverse client base, as outlined in this Prospectus, to seek to ensure that it has a mix of ongoing revenue, whilst also continuing to seek to build its position in the military and homeland security industries, both in Israel and elsewhere, including Australia. However, there can be no guarantee that this strategy will ultimately prove successful or be able to be implemented, because of circumstances of which the Company and El-Sight Israel could not possibly be aware.

(b) Production costs risk

The Company’s existing products are comprised of components received from a small number of main suppliers. Any increase in the production levels required, as a result of ongoing growth in the business, or the inability of those suppliers to supply any of the materials used in the production of the Company’s products, may cause delays or put at risk the Company’s ability to meet its commitments under contracts to supply products and services to its clients.

To mitigate this risk, the Company will need to be able to identify and secure alternative sources for components used in the development of its products, or else may need to increase research and development spending to seek alternative solutions to a lack of components unavailable to the Company when needed.

(c) Regulatory risk

As with any technology product offering, the Company and El-Sight Israel 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 and El-Sight Israel’s ability to operate its business in the jurisdictions in which it currently operates.

7.2 Industry specific

(a) User experience risk

The Company's business model is based on recurring revenue arising from technology users and customers. 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 software services. Factors which may contribute to poor customer experience include:

ease of setting up and commencing use of the products offered;
simplicity and reliability of customer usage; and
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.

(b) Scalability

Scalability is the key to any technology company that is looking at a potential global market. While the Company believes that the Multichannel, other products, software and its service architecture have been built for scalability, there are no guarantees that its products will be able to meet future demand and requirements of consumers.

(c) Information technology risk

With any technical project there are risks with the chosen technology, vendors and employees and in execution. Whilst El-Sight Israel has employed and engaged subject-matter experts, employs experienced persons, standard security technologies and approaches there are risks that delivery will fail to meet expectations or deadlines, that technologies become obsolete, natural disasters occur, the Company or El-Sight Israel is the subject of a fraud or malicious attack or platforms are compromised resulting in a negative impact on the Company’s performance.

(d) Reliance on third party providers

The Company intends to develop El-Sight Israel's products so that they can be utilised with a number of operating systems, internet platforms and other hardware devices. While the Company will therefore depend on its products being able to operate on a range of systems, platforms

and devices, it is unable to control third party developers of such systems. Any changes to external platforms, systems or devices that give preference to competing products or adversely impact on the functionality of the Company’s products may render consumers less likely to use the Company’s products, which may have a detrimental impact on the Company’s financial performance. Likewise, the Company’s products are predicated on consumers being able to access the internet and cellular networks. If third party providers raise the cost of these networks or restrict the ability of consumers to access these networks via the Company’s products, this is likely to detrimentally affect the Company’s financial performance.

(e) Brand risks

El-Sight Israel has established its trademarks. The Company believes that to have 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.

Furthermore, claims by third parties of rights to the Company’s trading names may cause the Company to incur costs or be required to pay damages or lose rights to their use. This may adversely impact on the operating results and potential of the Company.

(f)

Third party tools and platforms

While the use of third party tools and common libraries is common in the industry, the Company is exposed to the risks associated with their use, such as security breaches and hacker attacks. 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.

(g) Infringement of third party intellectual property rights

If a third party accuses the Company or El-Sight Israel of infringing its intellectual property rights or if a third party commences litigation against the Company or El-Sight Israel 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 or El-Sight Israel may be able to obtain injunctive or other equitable relief that could prevent El-Sight Israel from further using its branding, trademarks or commercialising its products. In the event of a successful claim of infringement against the Company or El-Sight Israel, 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. Defence of any lawsuit or failure to obtain any of these licenses could

prevent El-Sight Israel from commercialising available products and could cause it to incur substantial expenditure.

(h) Future capital requirements

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.

(i)

Exchange rate movement

The Company is exposed to exchange rate movements because many of its costs and expenses will be in Israel and revenue it might earn in the future from its operations and product sales may not be paid to the Company in Australian dollars or Israel Shekels (used to pay its research and development costs and other expenses in Israel). Accordingly, movements in exchange rates may have an impact on the Company’s financial position and performance.

(j)

Regulatory compliance

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

(k)

Doing business outside of Australia

The Company currently has all of its operations in Israel. For operational reasons the company may also establish operations in other jurisdictions.

Wherever the Company sets up operations the Company is exposed to a range of multi-jurisdictional risks such as risks relating to currency exchange rates, labour practices, environmental matters, difficulty in enforcing contracts, changes to or uncertainty in the relevant legal and regulatory regime (including in relation to taxation and foreign investment and practices of government and regulatory authorities) and other issues in foreign jurisdictions in which the Company operates.

Businesses that operate across multiple jurisdictions face additional complexities from the unique business requirements in each jurisdiction.

Management experience will help to mitigate, but will not remove, this risk.

(l)

Insurance

The Company and El-Sight Israel seek 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, El-Sight Israel 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.

(n)

Credit risks

The Company will be exposed to credit risks relating to delayed or nonpayments from its customers. A failure by the Company to adequately assess and manage credit risk may result in credit losses potentially resulting in a material adverse effect on the Company’s business, operating and financial performance, including decreased operating cash flows

(o)

Foreign litigation risk

From completion of the Offer, the Company will be the sole shareholder of Elsight Israel (via the Acquisition). Although El-Sight Israel is an Israel company incorporated with limited liability of its shareholders, liability may be placed on the Company in certain circumstances, including in circumstances of creditor fraud and insolvency where Elsight shareholders are aware of those activities. Although the Company and El-Sight Israel will seek to maintain appropriate policies and procedures to minimise this risk, some risk in relation to the activities of El-Sight Israel remains.

Further, shareholders of the Company will be required to comply with the provisions of Israeli law, including the Israeli Law on Enforcement of Foreign Judgments, 5718-1958, in enforcing Australian security and corporate law actions against directors and offices in Israel. Any foreign judgments enforced by an Israeli court are generally payable in Israeli currency which could expose the Company to exchange rate risk.

7.3 General risks

The future prospects of the Company’s business may be affected by circumstances and external factors beyond the Company’s control. Financial performance of the Company may be affected by a number of business risks that apply to companies generally and may include economic, financial, market or regulatory conditions.

(a) 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:

general economic outlook;
introduction of tax reform or other new legislation;
interest rates and inflation rates;
changes in investor sentiment toward particular market sectors;
the demand for, and supply of, capital; and
terrorism or other hostilities.

There is no guarantee that there will be an active market for the Company's securities at the price of the Offer, nor that an active market for the Company's securities will develop in the future. If an active market for the Company's securities does not develop it may be difficult to sell Shares offered pursuant to this Prospectus.

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. As the Company is essentially a start-up technology company, the value attributed by investors to the Company's securities may be subject to significant fluctuations based on investor sentiment toward start-up companies and the technology industry generally and may not reflect the actual operating performance of the Company. Neither the Company nor the Directors warrant the future performance of the Company or any return on an investment in the Company.

(b)

Economic and government risks

The future viability of the Company is also dependent on a number of other factors affecting performance of all industries and not just the technology market including, but not limited to, the following:

general economic conditions in jurisdictions in which the Company operates;
changes in government policies, taxation and other laws in jurisdictions in which the Company operates;
the strength of the equity and share markets in Australia and throughout the world, and in particular investor sentiment towards the online classified advertising sector;

movement in, or outlook on, interest rates and inflation rates in jurisdictions in which the Company operates; and
natural disasters, social upheaval or war in jurisdictions in which the Company operates.

(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.

(d)

Investment risk

The Securities to be issued pursuant to this Prospectus should be considered speculative. They carry no guarantee as to payment of dividends, return of capital or the market value of the Securities. The prices at which an investor may be able to trade the Securities may be above or below the price paid for the Securities. While the Directors commend the Offer, prospective investors must make their own assessment of the likely risks and determine whether an investment in the Company is appropriate to their own circumstances.

8. INVESTIGATING ACCOUNTANT’S REPORT

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ELSIGHT LIMITED Investigating Accountant’s Report

12 April 2017

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12 April 2017

The Directors Elsight Limited Level 2, 46 - 50 Kings Park Road WEST PERTH WA 6005

Dear Directors

INVESTIGATING ACCOUNTANT’S REPORT

1. Introduction

BDO Corporate Finance (WA) Pty Ltd ( ‘BDO’ ) has been engaged by Elsight Limited, a company incorporated in Australia ( ‘Elsight Aust’ or ‘the Company’ ) to prepare this Investigating Accountant's Report ( ‘Report’ ) in relation to certain financial information for inclusion in a prospectus (‘ Prospectus’ ) to be issued by the Company in respect of the proposed initial public offering (‘ IPO ’) and listing on the Australian Securities Exchange ( ‘ASX’ ).

Broadly, the Prospectus will offer up to 32.5 million Shares at an issue price of A$0.20 each to raise up to A$6.5 million before costs (‘ the Offer ’). The minimum subscription of the Offer is A$4.5 million, before costs.

In preparation for listing on the ASX an internal restructure will take place resulting in the newly incorporated Australian company, being the Company, becoming the legal parent of the group subject to the issue of shares under the Offer. As such, the historical financial information of the Company will be presented as a continuation of the pre-existing accounting values of Elsight Ltd, an Israeli incorporated entity which conducts the business (‘ Elsight Israel ’).

Expressions defined in the Prospectus have the same meaning in this Report. BDO Corporate Finance (WA) Pty Ltd ( ‘BDO’ ) holds an Australian Financial Services Licence (AFS Licence Number 316158).

This Report has been prepared for inclusion in the Prospectus. We disclaim any assumption of responsibility for any reliance on this Report or on the Financial Information to which it relates for any purpose other than that for which it was prepared.

2. Scope

You have requested BDO to perform a review engagement in relation to the historical and pro forma historical financial information described below and disclosed in the Prospectus.

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 AFS Licence No 316158 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Corporate Finance (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

The historical and pro forma historical financial information is presented in the Prospectus in an abbreviated form, insofar as it does not include all of the presentation and disclosures required by Australian Accounting Standards and other mandatory professional reporting requirements applicable to general purpose financial reports prepared in accordance with the Corporations Act 2001.

The Company was incorporated on 13 December 2016 and has limited financial history. As such, the historical financial information of the Company will be presented as a continuation of the pre-existing accounting values of Elsight Israel. The Company has requested BDO to review the following historical financial information of the Company and Elsight Israel (together the ‘Historical Financial Information’ ) included as appendices to our Report:

the audited Statements of Financial Position, Performance and Cash Flows of Elsight Israel for the years ended 31 December 2014, 31 December 2015 and 31 December 2016; and
the audited Statement of Financial Position as at 28 February 2017 and Statements of Financial Performance and Cash Flows of the Company for the period from 13 December 2016 (incorporation) to 28 February 2017.

The Historical Financial Information has been prepared in accordance with the stated basis of preparation, being the recognition and measurement principles contained in Australian Accounting Standards and the Company’s adopted accounting policies. The Historical Financial Information has been extracted from the audited financial reports of Elsight Israel for the years ended 31 December 2014, 31 December 2015 and 31 December 2016 and the Company for the period from 13 December 2016 (incorporation) to 28 February 2017.

The financial reports for Elsight Israel for the years ended 31 December 2014, 31 December 2015 and 31 December 2016 were audited by KPMG Somekh Chaikin (Israel) (‘ KPMG’ ) in accordance with the International Financial Reporting Standards ( ‘IFRS’ ). KPMG issued unmodified audit opinions on the financial reports for these periods, however did include an emphasis of matter noting Elsight Israel has limited capital resources, loss from operations, and accumulated deficit, all of which raise substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters include continued development and marketing as well as seeking additional financing arrangements.

The financial report for the Company for the period 13 December 2016 (incorporation) to 28 February 2017 was audited by BDO Audit (WA) Pty Ltd in accordance with the IFRS. BDO Audit (WA) Pty Ltd issued an unmodified audit opinion on the financial report, however did include an emphasis of matter noting that the ability of the Company to continue as a going concern is dependent upon the future successful raising of necessary funding through equity and debt.

The Historical Financial Information is presented in an abbreviated form, insofar as it does not include all of the presentation and disclosures required by Australian Accounting Standards and other mandatory professional reporting requirements applicable to general purpose financial reports prepared in accordance with the Corporations Act 2001.

Pro Forma Historical Financial Information

You have requested BDO to review the following pro forma historical financial information (the ‘Pro Forma Historical Financial Information’ ) of the Company included in this Report:

the Pro forma Historical Consolidated Statement of Financial Position as at 28 February 2017 which includes:
the subsequent events outlined in section 6 of our Report; and

o the pro forma adjustments for the events outlined in section 7 of our Report.

The stated basis of preparation is the recognition and measurement principles contained in Australian Accounting Standards applied to the Historical Financial Information and the events or transactions to which the pro forma adjustments relate, as described in section 6 and section 7 of this Report, as if those events or transactions had occurred as at the date of the Historical Financial Information. Due to its nature, the Pro Forma Historical Financial Information does not represent the Company’s actual or prospective financial position or financial performance.

The Pro Forma Historical Financial Information has been compiled by the Company to illustrate the impact of the events or transactions described in section 6 and section 7 of this Report on the Company’s financial position as at 28 February 2017. As part of this process, information about the Company’s financial position has been extracted by the Company from its financial statements for the period ended 28 February 2017.

3. Directors’ responsibility

The directors of the Company are responsible for the preparation and presentation of the Historical Financial Information and Pro Forma Historical Financial Information, including the selection and determination of pro forma adjustments made to the Historical Financial Information and included in the Pro Forma Historical Financial Information. This includes responsibility for such internal controls as the directors determine are necessary to enable the preparation of Historical Financial Information and Pro Forma Historical Financial Information are free from material misstatement, whether due to fraud or error.

4. Our responsibility

Our responsibility is to express limited assurance conclusions on the Historical Financial Information and the Pro Forma Historical Financial Information. We have conducted our engagement in accordance with the Standard on Assurance Engagement ASAE 3450 Assurance Engagements involving Corporate Fundraisings and/or Prospective Financial Information .

Our review procedures consisted of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A limited assurance engagement is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain reasonable assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly, we do not express an audit opinion.

Our engagement did not involve updating or re-issuing any previously issued audit or limited assurance reports on any financial information used as a source of the financial information.

5. Conclusion

Historical Financial Information

Based on our review engagement, which is not an audit, nothing has come to our attention that causes us to believe that the Historical Financial Information, as described in the Appendices to this Report, and comprising:

the audited Statements of Financial Position, Performance and Cash Flows of Elsight Israel for the years ended 31 December 2014, 31 December 2015 and 31 December 2016; and

the audited Statement of Financial Position as at 28 February 2017 and Statements of Financial Performance and Cash Flows of the Company for the period from 13 December 2016 (incorporation) to 28 February 2017,

is not presented fairly, in all material respects, in accordance with the stated basis of preparation, as described in section 2 of this Report.

Pro Forma Historical Financial Information

Based on our review engagement, which is not an audit, nothing has come to our attention that causes us to believe that the Pro Forma Historical Financial Information as described in the Appendices to this Report, and comprising:

the Pro forma Historical Consolidated Statement of Financial Position of the Company as at 28 February 2017 which include:
the subsequent events outlined in section 6 of our Report; and
the pro forma adjustments for the events outlined in section 7 of our Report,

is not presented fairly, in all material respects, in accordance with the stated basis of preparation, as described in section 2 of this Report.

6. Subsequent Events

The Pro forma Historical Consolidated Statement of Financial Position reflects the following events that have occurred subsequent to the period ended 31 December 2016 for Elsight Israel and subsequent to the period ended 28 February 2017 for the Company:

During the months of January and February 2017, the Company loaned a total amount of A$499,900 to Elsight Israel to be used for working capital purposes and costs of the Offer.

Apart from the matters dealt with in this Report, and having regard to the scope of this Report and the information provided by the Directors, to the best of our knowledge and belief no other material transaction or event outside of the ordinary business of the Company or Elsight Israel

not described above, has come to our attention that would require comment on, or adjustment to, the information referred to in our Report or that would cause such information to be misleading or deceptive.

7. Assumptions Adopted in Compiling the Pro forma Historical Financial Information

The Pro forma Historical Consolidated Statement of Financial Position is shown in Appendix 2. This has been prepared based on the financial statements of Elsight Israel as at 31 December 2016 and the Company as at 28 February 2017, the subsequent events set out in section 6, and the following transactions and events relating to the issue of Shares under this Prospectus:

In preparation for listing on the ASX an internal restructure will take place resulting in the Company acquiring Elsight Israel under a Share Sale Agreement for the issue of 35,381,386 Shares to the Elsight Israel shareholders. For the purposes of this Report, the restructure has been accounted for as a capital re-organisation rather than a business combination;
The issue of 32,500,000 Shares at an issue price of A$0.20 each to raise A$6,500,000 (before costs) based on the maximum subscription or the issue of 22,500,000 Shares at an issue price of A$0.20 each to raise A$4,500,000 (before costs) based on the minimum subscription, pursuant to the Prospectus;

Costs of the Offer are estimated to be A$749,993 based on the maximum subscription or A$619,878 based on the minimum subscription. The costs that relate to the issue of new shares under the Offer have been offset against contributed equity while the remaining costs have been expensed;
The issue of 5,833,338 Shares upon conversion of the outstanding convertible loans of A$700,000 in the Company upon completion of the Offer. The conversion price was A$0.12 per Share;
The issue of 7,166,667 Shares to Learnicon LLC. This will satisfy the full repayment of the convertible loans from Learnicon LLC to Elsight Israel;
The payment of US$400,000 (A$553,557 at an exchange rate of A$1:US$0.7226) to Learnicon LLC. This will satisfy the full repayment of an other payables amount of US$450,000 (A$622,751 at an exchange rate of A$1:US$0.7226) to Learnicon LLC;
Following the Acquisition, the loan outstanding of A$499,900 between the Company and Elsight Israel will be eliminated upon consolidation;
The issue of 7,000,000 Options (exercisable at A$0.30 on or before the date that is three years from the date of issue) to the lead manager and seed investors. The Options have been valued using the Black Scholes option pricing model. As these securities have been issued in consideration for capital raising services provided, the value of the Options has been offset against contributed equity;
The issue of 8,608,000 Options to Mr Roee Kashi that are exercisable at A$0.20 within five years from the date of issue. These Options have been issued under the Employee Share Option Plan and have been valued using the Black Scholes option pricing model; and
The issue of 30,000,000 Performance Options in three tranches. Performance Options are to be issued as part of the Acquisition. The Performance Options will be granted in three tranches and are exercisable at A$0.20 on or before the date that is five years after the date of issue of those Performance Options. Subject to the exceptions outlined below, the Performance Options will only be exercisable after the satisfaction of the following vesting milestones, each calculated for a given year:
a) one third of the Performance Options will vest and become exercisable upon the Company achieving aggregate revenue of A$1,000,000 from the sale of products based on the Technology in a Year for broadcast or to consumers or to manufacturers of consumer or safety products or any business in the distribution chain of consumer or safety products (‘ Class A Performance Options’ );
b) one third of the Performance Options will vest and become exercisable upon the Company achieving aggregate revenue of A$4,000,000 from total sales of products based on the Technology in a Year (‘ Class B Performance Options’ ); and
c) one third of the Performance Options will vest and become exercisable upon the Company achieving aggregate revenue of A$10,000,000 from total sale of products based on the Technology in a Year (‘ Class C Performance Options’ ).

Refer Section 11.3 of the Prospectus for full terms the Performance Options.

8. Independence

BDO is a member of BDO International Ltd. BDO does not have any interest in the outcome of the proposed IPO other than in connection with the preparation of this Report and participation in due diligence procedures, for which professional fees will be received. BDO Audit (WA) Pty Ltd is the auditor of the Company and from time to time, BDO provides the Company with certain other professional services for which normal professional fees are received.

9. Disclosures

This Report has been prepared, and included in the Prospectus, to provide investors with general information only and does not take into account the objectives, financial situation or needs of any specific investor. It is not intended to be a substitute for professional advice and potential investors should not make specific investment decisions in reliance on the information contained in this Report. Before acting or relying on any information, potential investors should consider whether it is appropriate for their objectives, financial situation or needs.

Without modifying our conclusions, we draw attention to section 2 of this Report, which describes the purpose of the financial information, being for inclusion in the Prospectus. As a result, the financial information may not be suitable for use for another purpose.

BDO has consented to the inclusion of this Report in the Prospectus in the form and context in which it is included. At the date of this Report this consent has not been withdrawn. However, BDO has not authorised the issue of the Prospectus. Accordingly, BDO makes no representation regarding, and takes no responsibility for, any other statements or material in or omissions from the Prospectus.

Yours faithfully

BDO Corporate Finance (WA) Pty Ltd

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Sherif Andrawes

Director

APPENDIX 1 ELSIGHT LIMITED (ISRAEL)

HISTORICAL STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Historical Statement of Profit or Loss and Other Comprehensive Income	Elsight Israel Elsight Israel Elsight Israel Audited for the year Audited for the year Audited for the year ended 31-Dec-16 ended 31-Dec-15 ended 31-Dec-14 US$'000 US$'000 US$'000
Revenue Cost of sales Gross profit Sales, general and administrative expenses Other income Operating profit/(loss) Financing expenses Profit/(loss) for the year Translation differences Total comprehensive loss for the period	932 712 955 (105) (275) (417)
	827 437 538 (661) (842) (766) 13 6 -
	179 (399) (228) (81) (63) (70)
	98 (462) (298) (20) 6 88
	78 (456) (210)

ELSIGHT LIMITED (AUSTRALIA)

HISTORICAL STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Historical Statement of Profit or Loss and Other Comprehensive Income	Company Audited for the period 13-Dec-16 to 28-Feb-17 A$
Revenue Accounting fees Audit fees Company secretary fees Corporate advisor fees Legal fees Other Loss before income tax expense Income tax expense Total comprehensive loss for the period	- (7,488) (1,500) (10,000) (57,000) (26,026) (94)
	(102,108) -
	(102,108)

The Historical Statements of Profit or Loss and Other Comprehensive Income show the historical financial performance of the Company and Elsight Israel and are to be read in conjunction with the notes to and forming part of the Historical Financial Information set out in Appendix 5. Past performance is not a guide to future performance.

APPENDIX 2 ELSIGHT LIMITED

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Notes	Company Elsight Israel Audited as at Audited as at Subsequent 28-Feb-17 31-Dec-16 events Min Max Min Max A$ A$ A$ A$ A$ A$ A$ Pro forma adjustments Pro forma after Offer
CURRENT ASSETS Cash and cash equivalents 2 Short term deposits Trade and other receivables Loan receivable 3 Inventory Other current assets Pledged deposits TOTAL CURRENT ASSETS NON CURRENT ASSETS Fixed assets TOTAL NON CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Loans and credit from banks Trade payables Other payables 4 Convertible loans 5 TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Employee provisions Loans from banks TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 6 Reserves 7 Accumulated losses 8 TOTAL EQUITY	151,345 9,687 499,900 3,326,565 5,196,450 3,987,497 5,857,382 - 47,052 - - - 47,052 47,052 5,924 109,327 - - - 115,251 115,251 499,900 - - (499,900) (499,900) - - - 429,006 - - 429,006 429,006 - 51,204 - - - 51,204 51,204 - 60,891 - - - 60,891 60,891
	657,169 707,169 499,900 2,826,665 4,696,550 4,690,903 6,560,788 - 81,650 - - - 81,650 81,650
	- 81,650 - - - 81,650 81,650
	657,169 788,818 499,900 2,826,665 4,696,550 4,772,552 6,642,437
	- 152,228 - - - 152,228 152,228 59,276 466,371 - - - 525,647 525,647 - 1,069,748 499,900 (1,122,651) (1,122,651) 446,997 446,997 700,000 923,056 - (1,623,056) (1,623,056) - -
	759,276 2,611,403 499,900 (2,745,707) (2,745,707) 1,124,873 1,124,873
	- 49,820 - - - 49,820 49,820 - 89,953 - - - 89,953 89,953
	- 139,773 - - - 139,773 139,773
	759,276 2,751,176 499,900 (2,745,707) (2,745,707) 1,264,646 1,264,646
	(102,107) (1,962,358) - 5,572,372 7,442,257 3,507,906 5,377,791
	1 6,919 - 6,059,796 7,928,888 6,066,716 7,935,809 - 44,285 - 1,696,973 1,696,973 1,741,258 1,741,258 (102,108) (2,013,562) - (2,184,397) (2,183,605) (4,300,068) (4,299,275)
	(102,107) (1,962,358) - 5,572,372 7,442,257 3,507,906 5,377,791
Elsight Israel balances have been converted a	t an exchange rate of A$1:US$0.7226.

The Pro forma Historical Consolidated Statement of Financial Position after the Offer is as per the Consolidated Statement of Financial Position before the Offer adjusted for any subsequent events and the transactions relating to the issue of shares pursuant to this Prospectus. The Pro forma Consolidated Statement of Financial Position is to be read in conjunction with the notes to and forming part of the Historical Financial Information set out in Appendix 5.

APPENDIX 3 ELSIGHT LIMITED (ISRAEL)

HISTORICAL STATEMENT OF FINANCIAL POSITION

Historical Statement of Financial Position	Elsight Israel Elsight Israel Elsight Israel Audited as at Audited as at Audited as at 31-Dec-16 31-Dec-15 31-Dec-14 US$'000 US$'000 US$'000
CURRENT ASSETS Cash and cash equivalents Short-term deposits Trade receivables Inventory Other current assets Pledged deposits TOTAL CURRENT ASSETS NON CURRENT ASSETS Prepaid expenses Fixed assets TOTAL NON CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Loans and credit from banks Trade payables Other payables Convertible loans TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Liabilities for employees severance benefits Loans from banks TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses	7 5 92 34 34 - 79 52 133 310 238 64 37 7 70 44 39 39
	511 375 398 - - 12 59 85 89
	59 85 101
	570 460 499
	110 180 114 337 292 233 773 720 651 667 635 509
	1,887 1,827 1,507 36 32 32 65 97 -
	101 129 32
	1,988 1,956 1,539
	(1,418) (1,496) (1,040)
	5 5 5 32 52 46 (1,455) (1,553) (1,091)
TOTAL EQUITY	(1,418) (1,496) (1,040)

The Historical Statements of Financial Position show the historical financial position of Elsight Israel and are to be read in conjunction with the notes to and forming part of the Historical Financial Information set out in Appendix 5.

APPENDIX 4 ELSIGHT LIMITED (ISRAEL)

HISTORICAL STATEMENTS OF CASH FLOWS

Historical Statement of Cash Flows	Elsight Israel Elsight Israel Elsight Israel Audited for the year Audited for the year Audited for the year ended 31-Dec-16 ended 31-Dec-15 ended 31-Dec-14 US$'000 US$'000 US$'000
Cash flows from operating activities: Profit/(loss) for the year Adjustments for: Depreciation Loss/(gain) on sae of fixed assets Net financing expense/(income) Change in trade and other receivables Change in trade and other payables Change in employee benefits Change in inventory Change in prepaid expenses Net cash flows provide by/(used in) operating activities Cash flows from investing activities: Decrease/(increase) in pledged deposits Interest received Bank deposit Acquisition of fixed assets Disposal of fixed assets Net cash flows provide by/(used in) investing activities Cash flows from financing activities: Loans from banks Convertible loans Net cash flows provide by/(used in) financing activities (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effect of exchange rate fluctuations Cash and cash equivalents at the end of the period	99 (462) (298) 15 20 24 (2) - - 24 25 20
	37 45 44 (57) 144 54 114 129 207 4 - (9) (73) (176) (12) - 12 (12)
	124 (308) (26)
	(5) - 15 - - - - (34) - (4) (16) (49) 17 - -
	8 (50) (34)
	(120) 119 14 32 126 (34)
	(88) 245 (20)
	44 (113) (80) (20) 86 182 (36) 7 (16)
	(12) (20) 86

APPENDIX 4 (CONT)

ELSIGHT LIMITED (AUSTRALIA)

HISTORICAL STATEMENTS OF CASH FLOWS

Historical Statement of Cash Flows	Company Audited for the period 13 -Dec-16 to 28-Feb-17 A$
Cash flows from operating activities:
Payments to suppliers Net cash inflow/(outflow) from operating activities	(48,756)
	(48,756)

Cash flows from financing activities:
Proceeds from issue of shares Proceeds from issue of convertible notes Loan provided Net cash inflow/(outflow) from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period	1 700,000 (499,900)
	200,101

	151,345
	-
Cash and cash equivalents at the end of the period	151,345

The Historical Statements of Cash Flows show the historical cash flows of the Company and Elsight Israel and are to be read in conjunction with the notes to and forming part of the Historical Financial Information set out in Appendix 5.

APPENDIX 5 ELSIGHT LIMITED

NOTES TO AND FORMING PART OF THE HISTORICAL FINANCIAL INFORMATION

Basis of preparation of Historical Financial Information

The Historical Financial Information has been prepared in accordance with the recognition and measurement, but not all the disclosure requirements of the Australian equivalents to International Financial Reporting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001.

Going Concern

The Historical Financial Information has been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.

The ability of the Company to continue as a going concern is dependent on the success of the fundraising under the Prospectus. The Directors believe that the Company will continue as a going concern. As a result, the Historical Financial Information has been prepared on a going concern basis. However, should the fundraising under the Prospectus be unsuccessful, the entity may not be able to continue as a going concern. No adjustments have been made relating to the recoverability and classification of liabilities that might be necessary should the Company not continue as a going concern.

Reporting Basis and Conventions

The Report is also prepared on an accrual basis and is based on historic costs and does not take into account changing money values or, except where specifically stated, current valuations of non-current assets.

The following is a summary of the material accounting policies adopted by the Company in the preparation of the Historical Financial Information. The accounting policies have been consistently applied, unless otherwise stated.

a) Capital Restructure

In preparation for listing on the ASX, an internal restructure will take place resulting in the Company, becoming the legal parent of the group subject to the issue of shares under the Offer. For the purposes of this Report, the restructure has been accounted for as a capital reorganisation rather than a business combination. In the directors’ judgement, the continuation of the existing accounting values is consistent with the accounting that would have occurred if the assets and liabilities had already been in a structure suitable to the initial public offering of shares in the Company and most appropriately reflects the substance of the internal restructure.

b) Cash and Cash Equivalents

For the purpose of the Historical Statement of Cash Flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, high liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts.

c) Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. Trade receivables are generally due for settlement within 30 days.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in the statement of comprehensive income within impairment losses — financial assets. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against impairment losses — financial assets in the statement of comprehensive income.

d) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

e) Contributed Equity

Ordinary shares are classified as equity.

Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. Costs directly attributable to the issue of new shares or options associated with the acquisition of a business are included as part of the purchase consideration.

f) Trade and other payables

Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company. Interest, when charged by the lender, is recognised as an expense on an accrual basis.

g) Financial liabilities

Convertible notes are issued by the Company and automatic conversion is contingent on completion of an initial public offering and the Company’s admission to the ASX’s Official List. The number of shares to be issued does not vary with changes in their fair value. The liability component of the convertible note is recognised at the fair value of a similar liability that does not have an equity conversion option.

h) Revenue

Revenue from sale of goods in the ordinary course of business is measured at fair value of the consideration received or receivable. When the credit period is short and constitutes the accepted credit in the industry, the future consideration is not discounted.

Revenue is recognised when persuasive evidence exists (usually in the form of an executed sales agreement) that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.

Transfer of risks and rewards occurs when the goods are transferred to the customer.

i) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the average principle and includes expenditure incurred in acquiring the inventories and the costs incurred in bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

j) Accounting estimates and judgements

In the process of applying the accounting policies, management has made certain judgements or estimations which have an effect on the amounts recognised in the financial information.

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Valuation of share based payment transactions

The valuation of share-based payment transactions is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the Black Scholes option pricing model taking into account the terms and conditions upon which the instruments were granted.

Options

The fair value of options issued is determined using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted.

NOTE 2. CASH AND CASH EQUIVALENTS	Audited 28-Feb-17 Min Max A$ A$ A$ Pro forma after Offer	Audited 28-Feb-17 Min Max A$ A$ A$ Pro forma after Offer
Cash and cash equivalents	151,345 3,987,497 5,857,382

Audited balance of the Company as at 28 February 2017 Audited balance of Elsight Israel as at 31 December 2016		151,345 151,345 9,687 9,687
Subsequent events: Proceeds from the issue of the loan from the Company to Elsight Israel Pro-forma adjustments: Proceeds from shares issued pursuant to the Offer		499,900 499,900
		499,900 499,900 4,500,000 6,500,000
Costs of the Offer Payment to Learnicon LLC		(619,878) (749,993) (553,557) (553,557)
Pro-forma Balance		3,326,565 5,196,450
		3,987,497 5,857,382

NOTE 3. LOAN RECEIVABLE	Audited Pro forma 28-Feb-17 after Offer A$ A$	Audited Pro forma 28-Feb-17 after Offer A$ A$
Loan receivable	499,900 -

Audited balance of the Company as at 28 February 2017 Audited balance of Elsight Israel as at 31 December 2016		499,900 -
Pro-forma adjustments: Elimination of loan following Acquisition Pro-forma Balance		(499,900)
		(499,900)
		-

NOTE 4. OTHER PAYABLES	Audited Pro forma 28-Feb-17 after Offer A$ A$	Audited Pro forma 28-Feb-17 after Offer A$ A$
Other payables	-	446,997

Audited balance of the Company as at 28 February 2017 Audited balance of Elsight Israel as at 31 December 2016		- 1,069,748
Subsequent events: Issue of the loan from the Company to Elsight Israel Pro-forma adjustments: Elimination of loan following Acquisition		499,900
		499,900 (499,900)
Payment to Learnicon LLC		(622,751)
Pro-forma Balance		(1,122,651)
		446,997

NOTE 5. CONVERTIBLE LOANS	Audited Pro forma 28-Feb-17 after Offer A$ A$	Audited Pro forma 28-Feb-17 after Offer A$ A$
Convertible loans	700,000 -

Audited balance of the Company as at 28 February 2017 Audited balance of Elsight Israel as at 31 December 2016		700,000 923,056
Pro-forma adjustments: Conversion of Company convertible loans Conversion of Learnicon convertible loans Pro-forma Balance		(700,000) (923,056)
		(1,623,056)
		-

NOTE 6. CONTRIBUTED EQUITY	Pro forma Pro forma after Offer after Offer A$ A$ Audited 28-Feb-17 A$
Contributed equity	1 6,066,716 7,935,809
	Number of shares (Min) Number of shares (Max) A$ A$
Audited balance of the Company as at 28 February 2017 Audited balance of Elsight Israel as at 31 December 2016	10,000,000 10,000,000 1 1 - - 6,919 6,919
Pro-forma adjustments: Issue of Shares to Elsight Israel shareholders Acquisition adjustment (Refer Note 9) Proceeds from shares issued pursuant to the Offer Costs of the Offer Issue of Shares upon conversion of Company convertible loans Issue of Shares upon conversion of Elsight Israel convertible loans Issue of Options to lead manager and seed investors deemed cost of the Offer Pro-forma Balance	35,381,386 35,381,386 - - - - (1) (1) 22,500,000 32,500,000 4,500,000 6,500,000 - - (403,204) (534,112) 5,833,338 5,833,338 1,166,668 1,166,668 7,166,667 7,166,667 1,433,333 1,433,333 - - (637,000) (637,000)
	70,881,391 80,881,391 6,059,796 7,928,888
	80,881,391 90,881,391 6,066,716 7,935,809
*35,381,386 Shares will be issued to Elsight Israel shareholders as consideration for the Company's acquisition of the entire issued capital of Elsight Israel. On continuation accounting consolidated basis, no adjustments are required.

NOTE 7. RESERVES	Audited 28-Feb-17 A$	Pro forma after Offer A$
Reserves	-	1,741,258

Audited balance of the Company as at 28 February 2017 Audited balance of Elsight Israel as at 31 December 2016		- 44,285
Pro-forma adjustments: Acquisition adjustment (Refer Note 9) Issue of Options to lead manager and seed investors Issue of Options to Mr Roee Kashi Pro-forma Balance		(102,107) 637,000 1,162,080
		1,696,973
		1,741,258

Using the Black Scholes option pricing model, the fair value of the Options to be issued to the lead manager and seed investors and Mr Roee Kashi has been calculated. The following inputs were used:

	Lead Manager and
	Seed Investors	Mr Roee Kashi
	Options	Options
Number of Options	7,000,000	8,608,000
Exercise price	$ 0.30	$ 0.20
Expected volatility	85%	85%
Implied option life	3.00	5.00
Expected dividend yield	nil	nil
Risk free rate	1.84%	2.14%

Performance Options are to be issued to management as part of an incentive scheme. The Performance Options will be granted in three tranches exercisable at A$0.20 on or before the date that is five years after the date of issue of those Performance Options. Subject to the exceptions outlined below, the Performance Options will only be exercisable after the satisfaction of the following vesting milestones, each calculated for a given year:

a) one third of the Performance Options will vest and become exercisable upon the Company achieving aggregate revenue of A$1,000,000 from the sale of products based on the Technology in a Year for broadcast or to consumers or to manufacturers of consumer or safety products or any business in the distribution chain of consumer or safety products;
b) one third of the Performance Options will vest and become exercisable upon the Company achieving aggregate revenue of A$4,000,000 from total sales of products based on the Technology in a Year; and
c) one third of the Performance Options will vest and become exercisable upon the Company achieving aggregate revenue of A$10,000,000 from total sale of products based on the Technology in a Year.

Refer Section 11.3 of the Prospectus for full terms the Performance Options.

We consider all tranches of Performance Options to have non-market based vesting conditions. For this reason, management has discretion to expense the value the Performance Options over an estimated vesting period. As the Pro forma Historical Consolidated Statement of Financial Position has been prepared at completion of the Offer and the Performance Options have not been issued as yet, no expense has been recorded. However, we have calculated the fair value of the Performance Options as if they vested at the date of this Report using the Black Scholes option pricing model and the following inputs:

Performance Options	Class A Class B	Class C
Number of Performance Options	10,000,000 10,000,000	10,000,000
Exercise price	$ 0.20 $ 0.20	$ 0.20
Expected volatility	85% 85%	85%
Implied option life	5.00 5.00	5.00
Expected dividend yield	nil nil	nil
Risk free rate	2.14% 2.14%	2.14%
Value per Performance Option	$ 0.135 $ 0.135	$ 0.135

NOTE 8. ACCUMULATED LOSSES	Audited 28-Feb-17 Min Max A$ A$ A$ Pro forma after Offer	Audited 28-Feb-17 Min Max A$ A$ A$ Pro forma after Offer
Accumulated losses	(102,108) (4,301,434) (4,300,844)

Audited balance of the Company as at 28 February 2017 Audited balance of Elsight Israel as at 31 December 2016		(102,108) (102,108) (2,013,562) (2,013,562)
Pro-forma adjustments: Acquisition adjustment (Refer Note 9) Costs of the Offer to be expensed Finance expense upon conversion of Company convertible notes Finance expense upon conversion of Learnicon convertible notes Forgiveness of debt following payment to Learnicon LLC Issue of Options to Mr Roee Kashi Pro-forma Balance		102,108 102,108 (218,040) (217,451) (466,668) (466,668) (510,278) (510,278) 69,194 69,194 (1,162,080) (1,162,080)
		(2,185,764) (2,185,174)
		(4,301,434) (4,300,844)

NOTE 9: ACQUISITION ACCOUNTING

Under the Share Sale Agreement, the Company acquires all the shares in Elsight Israel for the issue of 35,381,386 Shares to the Elsight Israel shareholders, equating to a controlling interest in the combined entity. The acquisition of Elsight Israel by the Company is not to be deemed a business combination, as the Company is not considered to be a business under AASB 3 Business Combinations.

As such the consolidation of these two companies is on the basis of the continuation of Elsight Israel with no fair value adjustments, whereby Elsight Israel is deemed to be the accounting parent. Therefore, the pre-acquisition equity balances of the Company (totalling A$1 of contributed equity and A$102,108 of accumulated losses) are eliminated against the reserves on consolidation.

NOTE 10: RELATED PARTY DISCLOSURES

Transactions with Related Parties and Directors Interests are disclosed in the Prospectus.

NOTE 11: COMMITMENTS AND CONTINGENCIES

Elsight Israel had a disputed debt with a certain vendor, who provided it certain products in the total amount of US$214,000. Both sides reached an agreement under which no later than 1 July 2017, Elsight Israel will pay 75% of the debt (US$160,000) as satisfaction of the entire debt. This amount has been provided for in the financial statements for Elsight Israel as at 31 December 2016.

At the date of the Report no other material commitments or contingent liabilities exist that we are aware of, other than those disclosed in the Prospectus.

9. BOARD, MANAGEMENT AND CORPORATE GOVERNANCE

9.1 Directors and key personnel

Detailed biographies of the Directors, Proposed Directors and key employees are contained in Section 4.16 of this Prospectus.

9.2 ASX Corporate Governance Council Principles and Recommendations

Our Company has adopted comprehensive systems of control and accountability as the basis for the administration of corporate governance. The Board is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the Company's needs.

To the extent applicable, our Company has adopted The Corporate Governance Principles and Recommendations (3rd Edition) as published by ASX Corporate Governance Council ( Recommendations ).

In light of the Company’s size and nature, the Board considers that the current board is a cost effective and practical method of directing and managing the Company. As the Company’s activities develop in size, nature and scope, the size of the Board and the implementation of additional corporate governance policies and structures will be reviewed.

The Company’s main corporate governance policies and practices as at the date of this Prospectus are outlined below and the Company’s full Corporate Governance Plan is available in a dedicated corporate governance information section of the Company’s website (www.El-Sight.com).

Board of directors

The Board is responsible for corporate governance of the Company. The Board develops strategies for the Company, reviews strategic objectives and monitors performance against those objectives. The goals of the corporate governance processes are to:

(a) maintain and increase Shareholder value;
(b) ensure a prudential and ethical basis for the Company’s conduct and activities; and
(c) ensure compliance with the Company’s legal and regulatory objectives.

Consistent with these goals, the Board assumes the following responsibilities:

(a) developing initiatives for profit and asset growth;
(b) reviewing the corporate, commercial and financial performance of the Company on a regular basis;
(c) acting on behalf of, and being accountable to, the Shareholders; and
(d) identifying business risks and implementing actions to manage those risks and corporate systems to assure quality.

The Company is committed to the circulation of relevant materials to Directors in a timely manner to facilitate Directors’ participation in the Board discussions on a fully-informed basis.

Composition of the Board

Election of Board members is substantially the province of the Shareholders in general meeting.

Identification and management of risk

The Board’s collective experience will enable accurate identification of the principal risks that may affect the Company’s business. Key operational risks and their management will be recurring items for deliberation at Board meetings.

Ethical standards

The Board is committed to the establishment and maintenance of appropriate ethical standards.

Independent professional advice

Subject to the Chairman’s approval (not to be unreasonably withheld), the Directors, at the Company’s expense, may obtain independent professional advice on issues arising in the course of their duties.

Remuneration arrangements

The remuneration of an executive Director will be 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.

In addition, a Director may be paid fees or other amounts (i.e. subject to any necessary Shareholder approval, non-cash performance incentives such as Options) as the Directors determine where a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director.

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 Board reviews and approves the remuneration policy to enable the Company to attract and retain executives and Directors who will create value for Shareholders having consideration to the amount considered to be commensurate for a company of its size and level of activity as well as the relevant Directors’ time, commitment and responsibility. The Board is also responsible for reviewing any employee incentive and equity-based plans including the appropriateness of performance hurdles and total payments proposed.

Trading policy

The Board has adopted a policy that sets out the guidelines on the sale and purchase of securities in the Company by its key management personnel (i.e. Directors and, if applicable, any employees reporting directly to the managing director). The policy generally provides that the written acknowledgement of the Chair (or the Board in the case of the Chairman) must be obtained prior to trading.

External audit

The Company in general meetings is responsible for the appointment of the external auditors of the Company, and the Board from time to time will review the scope, performance and fees of those external auditors.

Audit committee

The Company will not have a separate audit committee until such time as the Board is of a sufficient size and structure, and the Company’s operations are of a sufficient magnitude for a separate committee to be of benefit to the Company. In the meantime, the full Board will carry out the duties that would ordinarily be assigned to that committee under the written terms of reference for that committee, including but not limited to, monitoring and reviewing any matters of significance affecting financial reporting and compliance, the integrity of the financial reporting of the Company, the Company’s internal financial control system and risk management systems and the external audit function.

Diversity policy

The Board has adopted a diversity policy which provides a framework for the Company to achieve, amongst other things, a diverse and skilled workforce, a workplace culture characterised by inclusive practices and behaviours for the benefit of all staff, improved employment and career development opportunities for women and a work environment that values and utilises the contributions of employees with diverse backgrounds, experiences and perspectives.

9.3 Departures from Recommendations

Under the ASX Listing Rules the Company will be required to provide a statement in its annual financial report or on its website disclosing the extent to which it has followed the Recommendations during each reporting period. Where the Company has not followed a Recommendation, it must identify the Recommendation that has not been followed and give reasons for not following it.

The Company’s departures from the Recommendations will also be announced prior to admission to the official list of the ASX.

10. MATERIAL CONTRACTS

10.1 Acquisition Agreement

On or about 11 April 2017 the Company, El-Sight Israel and the shareholders of ElSight Israel entered into a share sale agreement ( Agreement ). The agreement superseded a binding terms sheet entered into between the parties in December 2016.

Pursuant to the Agreement, the Company agreed to acquire 100% of the issued shares in El-Sight Israel from the shareholders. The Agreement is conditional upon a number of the conditions, the following of which remain outstanding as at the date of this Prospectus:

(a) the Company lodging this Prospectus with ASIC and receiving valid applications to support the admission of the Company to ASX;
(b) the Company receiving conditional approval from ASX to list on ASX;
(c) all third party consents being obtained by each party;
(d) there being no material adverse change (as defined in the Agreement) to either the Company or El-Sight Israel prior to completion;
(e) none of the warranties becoming untrue, incorrect or misleading in a material manner;
(f) no action having been taken, or any statute, rule, regulation or order having been enacted or deemed applicable to the transactions contemplated in the Agreement, and no temporary or permanent restraining order having been issued by any government agency that would materially restrain or prohibit the transaction; and
(g) each party having performed all obligations and agreements and having complied with all covenants and conditions in all material respects.

In consideration for all the shares in El-Sight Israel, the Company will issue the shareholders 35,381,386 Shares in the Company to be distributed pro rata between the holders of fully paid ordinary shares and preferred shares in El-Sight Israel.

In addition, the Company has agreed to issue 7,166,667 to Learnicon LLC for the repayment of a converting loan made by Learnicon LLC to El-Sight Israel and will also pay US$400,000 to Learnicon LLC as the full and final repayment of rights under the preferred shares that are held by Learnicon LLC in EL-Sight Israel and which will also be acquired by the Company.

The Company has also agreed to issue Mr Gabay and Mr Kashi, both shareholders, 30,000,000 Performance Options on the terms summarised in Section 11.3 below, and under the ESOP, will issue Mr Kashi a further 8,608,000 Options.

The Agreement also provides that the Board of the Company will comprise the Board outlined in this Prospectus with Mr Uvarov and Mr Digby together with the three Proposed Directors.

The Agreement also contains detailed warranties about El-Sight Israel from the major shareholders and otherwise contains terms considered standard for an Agreement of this nature, including warranties from the major shareholders of ElSight Israel, associated indemnities.

10.2 Converting Loan Agreements

The Company has entered into a series of convertible loan agreements to raise $700,000 for the purpose of funding the Company and providing a loan to ElSight Israel.

Under the terms of those loans, each loan is convertible into Shares in the Company, to be issued on the successful completion of the Offer and the receipt of approval from ASX for the listing of the Company on ASX at $0.12 per Share.

No interest is payable on the loans and they are unsecured. They otherwise contain terms standard for converting loans including in relation to covenants and confidentiality.

10.3 Lead Manager Agreement

On 25 January 2017, the Company engaged RM Corporate Finance Pty Ltd (AFSL 315235) ( Lead Manager ) to act as the lead manager of the Convertible Note raising and the Offer and to act as the corporate advisor to the Company on an ongoing basis.

Under the mandate, RM Corporate Finance is due the following fees:

(a) 6% fee on the funds raised under the Convertible Notes;
(b) a corporate advisory fee of $15,000 (plus GST) per month on an ongoing basis, reduced to $10,000 per month after the Company is successfully listed on ASX;
(c) an IPO management fee of $50,000 (plus GST);
(d) 6% fee on funds raised under the Offer; and
(e) the issue of 1,000,000 Options exercisable at $0.30 on or before the date that is three years from the date of issue.

Three months after the successful completion of the listing of the Company on ASX, the mandate is able to be terminated on 30 days’ notice, and is otherwise on terms consistent with mandates of this nature.

10.4 Deeds of Indemnity and Insurance

The Company has entered into a deed of indemnity, insurance and access with each of its Directors. Under these deeds, the Company agrees to indemnify each officer to the extent permitted by the Corporations Act against any liability arising as a result of the officer acting as an officer of the Company. The Company is also required to maintain insurance policies for the benefit of the relevant officer and must also allow the officers to inspect board papers in certain circumstances. The Company intends to enter a deed on materially the same terms with the Proposed Director following his appointment.

11. ADDITIONAL INFORMATION

11.1 Litigation

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

11.2 Rights attaching to Shares

The following is a summary of the more significant rights attaching to Shares. 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 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.

(a) 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.

(b) 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:

(i) each Shareholder entitled to vote may vote in person or by proxy, attorney or representative;
(ii) 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
(iii) 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 the Share, 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).

(c) 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 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.

(d) Winding-up

If the Company is wound up, the liquidator may, with the authority of a special resolution of the Company, 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 of the Company, 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.

(e) Shareholder liability

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

(f) Transfer of Shares

Generally, Shares 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 or the ASX Listing Rules.

(g) Variation of rights

Pursuant to 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.

(h) Alteration of Constitution

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.

11.3 Performance Options

The terms and conditions of the Performance Options to be issued as part of the Acquisition are as follows:

(a) Exercisable at $0.20 ( Exercise Price ) on or before the date that is five years ( Expiry Date ) after the date of issue of those Performance Options. Subject to the exceptions outlined below, the Performance Options will only be exercisable after the satisfaction of the following vesting milestones, each calculated for a given Year (As defined below):
(i) one third of the Performance Options will vest and become exercisable upon the Company achieving aggregate revenue of AU$1,000,000 from the sale of products based on the Technology in a Year for broadcast or to consumers or to manufacturers of consumer or safety products or any business in the distribution chain of consumer or safety products ( Class A Performance Options );
(ii) one third of the Performance Options will vest and become exercisable upon the Company achieving aggregate revenue of AU$4,000,000 from total sales of products based on the Technology in a Year ( Class B Performance Options ); and
(iii) one third of the Performance Options will vest and become exercisable upon the Company achieving aggregate revenue of AU$10,000,000 from total sale of products based on the Technology in a Year ( Class C Performance Options ).
(b) The term “ Year ” shall mean one of: (a) the time period commencing 1.1.2017 and ending on the 12 months anniversary of the listing of completion of the relisting or IPO; (b) The 12 month period immediately after the end of the first Year; and (c) The 12 month period immediately after the end of the second Year.
(c) Each Performance Option entitles the holder to one fully paid ordinary share upon exercise.
(d) It is hereby clarified that each of the milestones set forth above stands alone (but each is aggregated into the next), and upon completion of each milestone (in whatever order) the options shall become vested and each of the option holders shall be entitled to exercise their respective portion of the Performance Options.

(e) In the event that the engagement of an option holder with the Buyer or Company is terminated for “ Cause ” (as defined below), all unvested options held by such holder shall lapse. Such Performance Options will only become exercisable on satisfaction of the applicable milestones as set out above.
(f) Upon an M&A Event (as defined below), the Performance Options of each option holder shall become fully vested and exercisable into ordinary shares at their election even if the milestones were not yet met.
(g) For the purpose of this Schedule “ Cause ” shall mean with respect to the relevant holder: (i) conviction of any felony involving moral turpitude affecting the Company or Buyer (as applicable) or any crime involving fraud; (ii) embezzlement of funds of Company or Buyer (as applicable); (iii) intentional falsification of Company or Buyer (as applicable) records or reports; (iv) intentional gross negligence; or (v) breach of confidentiality or non-compete provision in an engagement agreement which such holder executed with Company or Buyer (as applicable).
(h) For the purpose of this Schedule “ M&A Event ” shall mean any of the following transactions: (i) the sale or other disposal of all or substantially all of the assets or shares of Company or Buyer (as applicable); (ii) the consolidation, merger or reorganization of Company or Buyer (as applicable) with or into any other entity, except for the sole purpose of changing Company’s or Buyer’s (as applicable) domicile and except for any such transaction in which the shareholders of Company or Buyer (as applicable) immediately prior to such transaction hold, after such transaction, at least fifty percent (50%) of the outstanding share capital of Company or Buyer (as applicable) or the surviving company, or (iii) any transaction or a series of related transactions in which a person or entity or a group of persons or entities acquire from Company or Buyer (as applicable) more than fifty percent (50%) of the outstanding share capital of the Company or Buyer (as applicable).

11.4 Options to be issued

(a) Entitlement

Each Option entitles the holder to subscribe for one Share upon exercise of the Option.

(b) Exercise Period

The Options are exercisable at any time on or prior to the Expiry Date ( Exercise Period ).

(c) Notice of Exercise

The Options may be exercised during the Exercise Period by notice in writing to the Company in the manner specified on the Option certificate ( Notice of Exercise ) and payment of the Exercise Price for each Option being exercised in Australian currency by electronic funds transfer or other means of payment acceptable to the Company.

(d) Exercise Date

A Notice of Exercise is only effective on and from the later of the date of receipt of the Notice of Exercise and the date of receipt of the payment

of the Exercise Price for each Option being exercised in cleared funds ( Exercise Date ).

(e) Timing of issue of Shares on exercise

Within 15 Business Days after the later of the following:

(i) the Exercise Date; and
(ii) when excluded information in respect to the Company (as defined in section 708A(7) of the Corporations Act) (if any) ceases to be excluded information,

but in any case no later than 20 Business Days after the Exercise Date, the Company will:

(iii) issue the number of Shares required under these terms and conditions in respect of the number of Options specified in the Notice of Exercise and for which cleared funds have been received by the Company;
(iv) if required, give ASX a notice that complies with section 708A(5)(e) of the Corporations Act, or, if the Company is unable to issue such a notice, lodge with ASIC a prospectus prepared in accordance with the Corporations Act and do all such things necessary to satisfy section 708A(11) of the Corporations Act to ensure that an offer for sale of the Shares does not require disclosure to investors; and
(v) if admitted to the official list of ASX at the time, apply for official quotation on ASX of Shares issued pursuant to the exercise of the Options.

If a notice delivered under (e)(iv) for any reason is not effective to ensure that an offer for sale of the Shares does not require disclosure to investors, the Company must, no later than 20 Business Days after becoming aware of such notice being ineffective, lodge with ASIC a prospectus prepared in accordance with the Corporations Act and do all such things necessary to satisfy section 708A(11) of the Corporations Act to ensure that an offer for sale of the Shares does not require disclosure to investors.

(f) Shares issued on exercise

Shares issued on exercise of the Options rank equally with the then issued shares of the Company.

(g) Reconstruction of capital

If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

(h) Participation in new issues

There are no participation rights or entitlements inherent in the Options and holders will not be entitled to participate in new issues of capital

offered to Shareholders during the currency of the Options without exercising the Options.

(i) Change in exercise price

An Option does not confer the right to a change in Exercise Price or a change in the number of underlying securities over which the Option can be exercised.

(j) Transferability

The Options are transferable subject to any restriction or escrow arrangements imposed by ASX or under applicable Australian securities laws.

11.5 Employee Share Option Plan

The Company has adopted an employee share option plan ( ESOP ). The key terms of the ESOP are set out below:

(a) The ESOP is intended to provide an incentive to retain, in the employment or service or directorship of the Company persons of training, experience and provide the ability to attract new employees, directors or consultants whose services are considered valuable.
(b) The Board or a committee appointed by the Board will administer the ESOP.
(c) The persons eligible to participate in the ESOP include any employees, directors and consultants of the Company or any subsidiary of the Company.
(d) At least 44,618,613 Options must be reserved under the ESOP. Pursuant to the Performance Options (which may only be issued to Mr Nir Gabay and Mr Roee Kashi) and the Options being issued to Mr Roee Kashi, the Company will be issuing a total of 38,608,000 Options under the Plan initially.
(e) The Company will comply with laws relevant in the jurisdiction in which a recipient lives, including initially appointing a trustee to hold the Options under the ESOP for the recipients in Israel.
(f) The exercise price of the Options shall be determined by the Board.
(g) Options issued under the ESOP may be subject to adjustments where:
(i) the Company is separated, reorganised, merged, acquired or consolidated with or into another corporation, the Board may determine that any vesting conditions that have not yet been satisfied shall be accelerated so that any unvested options become immediately vested;
(ii) a share dividend, share split, combination or exchange of shares, recapitalisation or any other like event, the options issued under the ESOP shall be likewise adjusted;
(iii) if all or a substantial portion of the Shares in the Company are sold under a merger or reorganisation, then the options under

the ESOP on issue will be accelerated to enable the holders to participate in the merger.

(h) Upon the termination of any holder’s employment with the Company, any unvested options will immediately expire.
(i) Unless otherwise prescribed by the Board, upon the termination of a holder’s employment with the Company, any vested options remain on issue in accordance with their terms, unless the employment is terminated by the Company for cause, or the termination is as a result of death or disability (in which case the options must be exercised within 12 months from the effective date of termination).
(j) Options issued under the ESOP are generally not transferable.
(k) The ESOP shall remain effective for the period of 10 years from the date of its adoption.
(l) The Board of the Company may alter or amend the ESOP at any time, except that no amendment shall be made which would impair the rights of the holder of any options already granted.
(m) The ESOP remains subject to the laws in any jurisdiction in which the Company operates and any rules imposed by ASX.

11.6 Interests of Directors

Other than as set out in this Prospectus, no Director or proposed Director holds, or has held within the 2 years preceding lodgement of this Prospectus with the ASIC, any interest in:

(a) the formation or promotion of the Company;
(b) any property acquired or proposed to be acquired by the Company in connection with:
(i) its formation or promotion; or
(ii) the Offer; or
(c) the Offer,

and no amounts have been paid or agreed to be paid and no benefits have been given or agreed to be given to a Director or proposed Director:

(d) as an inducement to become, or to qualify as, a Director; or
(e) for services provided in connection with:
(i) the formation or promotion of the Company; or (ii) the Offer.

11.7 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:

(e) the formation or promotion of the Company;
(f) any property acquired or proposed to be acquired by the Company in connection with:
(i) its formation or promotion; or
(ii) the Offer; or
(g) the Offer,

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:

(h) the formation or promotion of the Company; or
(i) the Offer.

BDO Corporate Finance (WA) Pty Ltd has acted as Investigating Accountant and the Auditor and has prepared the Investigating Accountant’s Report which is included in Section 8 of this Prospectus. The Company estimates it will pay BDO Corporate Finance (WA) Pty Ltd a total of $14,000 (excluding GST) for these services. During the 24 months preceding lodgement of this Prospectus with the ASIC, BDO Corporate Finance (WA) Pty Ltd has not received any fees from the Company for any other services.

RM Corporate Finance Pty Ltd (AFSL 315235) has acted as the lead manager and corporate advisor to the Company in relation to the Offer. Details of the fees payable to RM Corporate Finance Pty Ltd are set out in Section 10.3 above. During the 24 months preceding lodgement of this Prospectus with the ASIC, RM Corporate Finance Pty Ltd has received or is entitled to receive fees totalling $72,000.

Steinepreis Paganin has acted as the solicitors to the Company in relation to the Offer. The Company estimates it will pay Steinepreis Paganin $70,000 (excluding GST) for these services. Subsequently, fees will be charged in accordance with normal charge out rates. During the 24 months preceding lodgement of this Prospectus with the ASIC, Steinepreis Paganin has not received any fees for services provided to the Company.

11.8 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 disclaim and take 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.

BDO Corporate Finance (WA) Pty Ltd has given its written consent to being named as Investigating Accountant and the Auditor in this Prospectus and to the inclusion of the Investigating Accountant’s Report in Section 8 of this Prospectus in the form and context in which the information and report is included. BDO Corporate Finance (WA) Pty Ltd has not withdrawn its consent prior to lodgement of this Prospectus with the ASIC.

RM Corporate Finance Pty Ltd (AFSL 315235) has given its written consent to being named as the lead manager and corporate advisor to the Company in this Prospectus. RM Corporate Finance Pty Ltd has not withdrawn its consent prior to the lodgement of this Prospectus with the ASIC.

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.

Automic Registry Services has given its written consent to being named as the share registry to the Company in this Prospectus. Automic Registry Services has not withdrawn its consent prior to the lodgement of this Prospectus with the ASIC.

11.9 Expenses of the Offer

The total expenses of the Offer (excluding GST) are estimated to be approximately $619,878 for minimum subscription or $749,993 for full subscription and are expected to be applied towards the items set out in the table below:

Item of Expenditure	Minimum	Full
	Subscription	Subscription
	($)	($)
ASIC fees	2,350	2,350
ASX fees	79,285	89,400
Broker Commissions	270,000	390,000
Lead Manager Fees	95,000	95,000
Legal Fees – Australia	70,000	70,000
Legal Fees – Israel	53,333	53,333

Audit fees - Israel Investigating Accountant’s Fees Printing and Distribution TOTAL	33,333 33,333 14,000 14,000 2,577 2,577
	619,878 749,993

11.10 Continuous disclosure obligations

Following admission of the Company to the Official List, the Company will be a “disclosing entity” (as defined in Section 111AC of the Corporations Act) and, as such, will be subject to regular reporting and disclosure obligations. Specifically, like all listed companies, the Company will be 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.

Price sensitive information will be publicly released through ASX before it is disclosed to shareholders and market participants. Distribution of other information to shareholders and market participants will also be managed through disclosure to the ASX. In addition, the Company will post this information on its website after the ASX confirms an announcement has been made, with the aim of making the information readily accessible to the widest audience.

11.11 Electronic Prospectus

If you have received this Prospectus as an electronic Prospectus, please ensure that you have received the entire Prospectus accompanied by the Application Form. If you have not, please contact the Company and the Company will send you, for free, either a hard copy or a further electronic copy of this Prospectus or both. Alternatively, you may obtain a copy of this Prospectus from the website of the Company at www.el-sight.com.

11.12 Financial Forecasts

The Directors have considered the matters set out in ASIC Regulatory Guide 170 and believe that they do not have a reasonable basis to forecast future earnings on the basis that the operations of the Company are inherently uncertain. Accordingly, any forecast or projection information would contain such a broad range of potential outcomes and possibilities that it is not possible to prepare a reliable best estimate forecast or projection.

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

The Company will apply to participate 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.

Electronic sub-registers mean that the Company will not be issuing certificates to investors. Instead, investors will be provided with statements (similar to a bank account statement) that set 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.

Electronic sub-registers also mean ownership of securities can be transferred without having to rely upon paper documentation. 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.

11.14 Privacy statement

If you complete an Application Form, 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 and to facilitate distribution payments and corporate communications to you as a Shareholder.

The information may also be used from time to time and disclosed to persons inspecting the register, including 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 share registry.

You can access, correct and update the personal information that we hold about you. If you wish to do so, please contact the share registry at the relevant contact number set out in this Prospectus.

Collection, maintenance and disclosure of certain personal information is governed by legislation including the Privacy Act 1988 (as amended), the Corporations Act and certain rules such as the ASX Settlement Operating Rules. 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.

12. 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.

Howard Digby Director For and on behalf of Elsight Limited

13. GLOSSARY

Where the following terms are used in this Prospectus they have the following meanings:

$ means an Australian dollar.

Acquisition means the acquisition of 100% of the shares in El-Sight Israel by the Company.

Application Form means the application form attached to or accompanying this Prospectus relating to the Offer.

ASIC means Australian Securities & 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 official listing rules of ASX.

Board means the board of Directors as constituted from time to time.

Closing Date means the closing date of the Offer as set out in the indicative timetable in the Investment Overview in Section 4 of this Prospectus (subject to the Company reserving the right to extend the Closing Date or close the Offer early).

Company means Elsight Limited (ACN 616 435 753).

Constitution means the constitution of the Company.

Corporations Act means the Corporations Act 2001 (Cth).

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

El-Sight Israel means El Sight Ltd, a company incorporated in Israel, company number 51-424298-1.

Exposure Period means the period of 7 days after the date of lodgement of this Prospectus, which period may be extended by the ASIC by not more than 7 days pursuant to Section 727(3) of the Corporations Act.

Lead Manager and Corporate Advisor means RM Corporate Finance Pty Ltd (AFSL 315235).

Offer means the offer of Shares pursuant to this Prospectus as set out in Section 5 of this Prospectus.

Official List means the official list of ASX.

Official Quotation means official quotation by ASX in accordance with the ASX Listing Rules.

Option means an option to acquire a Share.

Optionholder means a holder of an Option.

Original Prospectus means the prospectus lodged by the Company dated 13 April 2017.

Prospectus means this prospectus.

Section means a section of this Prospectus.

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

Shareholder means a holder of Shares.

Technology means high-bandwidth-mobile-secured-datalink product which enhances the traditional live data transfer methods with a multi-link based technology which is capable of high bandwidth, stable and secured live data transfer

WST means Western Standard Time as observed in Perth, Western Australia.

AI assistant

ELSIGHT LIMITED — Capital/Financing Update 2017

64836_rns_2017-06-06_84099ddd-fa16-4701-b7fe-fa5ad90b50bc.pdf

ELSIGHT LIMITED ACN 616 435 753

PROSPECTUS

IMPORTANT INFORMATION

Lead Manager and Corporate Advisor

TABLE OF CONTENTS

1. CORPORATE DIRECTORY

Directors

Registered Office

Proposed Directors

Investigating Accountant and Auditor

Company Secretaries

Lead Manager and Corporate Advisor

Israeli Counsel*

Share Registry*

Australian Counsel

2. IMPORTANT NOTICE

2.1

Replacement Prospectus

2.2

Exposure Period

2.3 Web Site – Electronic Prospectus

2.4 Website

2.5 Forwarding-looking statements

2.6 Photographs and Diagrams

3. LETTER FROM THE BOARD

Howard Digby

4. INVESTMENT OVERVIEW

4.1

The Company

4.2

Technology

4.3 Business Model

4.4 The Objectives

The Company’s main objectives on completion of the Offer are:

4.5 Key Investment Highlights

 El-Sight Israel is a market leader in providing high-bandwidth mobile secured data link solutions

 El-Sight Israel has an existing diverse customer base, already supplying Technology to homeland security services in Israel and security entities in Israel, as well as other countries around the world

 El-Sight Israel possesses intellectual property developed over years of research and development

 The online video and data streaming market around the world continues to grow in both the security and commercial spheres

4.6 Key Risks

(a) Limited operating history

(b) Intellectual Property risk

(c)

Key person risk

(d) Uncertainty of future profitability

(e) Research and development

(f)

Technology risk

(g) Security

(h) Competition

4.7

The Offer

Indicative timetable*

4.8 Purpose of the Offer

4.9 Use of Funds

4.10 Capital Structure

Options

4.11 Substantial Shareholders

On completion of the Offer (assuming no existing substantial Shareholder subscribes and receives additional Shares pursuant to the Offer)

4.12 Restricted Securities

4.13 Financial Information

4.14

Taxation

4.15 Dividend Policy

4.16 Directors and Key Personnel

Major General (retired) Ami Shafran – Non-Executive Chair

Mr Nir Gabay – Managing Director

David Furstenberg – Non Executive Director

Dr Anton Uvarov – Non-Executive Director

Mr Howard Digby – Non-Executive Director

Mr Roee Kashi – Vice President – Research and Development

4.17 Corporate Governance

4.18 Disclosure of Interests

4.19 Agreements with Directors or Related Parties

– Services Agreement Nir Gabay

Services Agreement – Roee Kashi

Deeds of indemnity, insurance and access

ELSIGHT LIMITED Capital/Financing Update 2017