ELSIGHT LIMITED — Interim / Quarterly Report 2017

Aug 30, 2017

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ASX APPENDIX 4D HALF-YEAR FINANCIAL REPORT TO 30 JUNE 2017

1. DETAILS OF REPORTING PERIOD

Name of Entity Elsight Limited (“the Company”) ABN 98 616 435 753 Reporting Period 30 June 2017 Previous Corresponding Period 30 June 2016

2. RESULTS FOR ANNOUNCEMENT TO THE MARKET

	30 June 2017	30 June 2016	Increase/	Amount
	US$	US$	(Decrease)	change
			%	US$
Revenues from ordinary activities	401,537	333,445	20%	68,092
Profit/(Loss) after tax from ordinary	(1,538,842)	(48,297)	3,086%	(1,490,545)
activities attributable to members
Profit/(Loss) after tax attributable to	(1,538,842)	(48,297)	3,086%	(1,490,545)
members

Comparisons to the previous corresponding period are comparisons to historical financial information extracted from El-Sight Ltd (Israel) for the half year ended 30 June 2016 (refer to Notes 2(b), 2(e) and 3 of the attached Interim Financial Report).

	Amount Per	Franked Amount
	Security	Per Security
Final Dividend	Nil	Nil
Interim Dividend	Nil	Nil
Previous Corresponding Period	Nil	Nil
Record Date for Determining Entitlements	Not	Applicable

Commentary on results:

For further information, refer to the review of activities contained in the directors’ report, which forms part of the attached Interim Financial Report.

3. NET TANGIBLE ASSETS PER SHARE

3. NET TANGIBLE ASSETS PER SHARE
	30	June	2017	30 June 2016
			US$	US$
Net tangible asset backing per ordinary security		2.65	cents	(1.70) cents

The denominator for the net tangible asset calculation at 30 June 2017 has been adjusted to reflect the capital reorganisation (refer to Notes 2(b), 2(e) and 3 of the attached Interim Financial Report). The number of shares outstanding for the half year ended 30 June 2017 is based on the number of Elsight Limited shares on issue as at 30 June 2017.

Elsight Limited ACN 616 435 753 T: +61 8 6189 1155 | A: Level 2, 46-50 Kings Park Road, West Perth WA 6005

4. DETAILS OF ENTITIES OVER WHICH CONTROL HAS BEEN GAINED OR LOST DURING THE PERIOD

Control gained over entities

Name of entity (or group of entities)	El-Sight Ltd
Date control gained	2 June 2017
Contribution of such entities to the reporting entity’s profit/(loss) from ordinary	N/A
activities during the period (where material)
Consolidated profit/(loss) from ordinary activities of the controlled entity (or group of	N/A
entities) whilst controlled during the whole of the previous corresponding period
(where material)

On 2 June 2017, Elsight Limited completed the acquisition of 100% of the issued capital in El-Sight Ltd, an Israeli company that has developed and owns the El-Sight Israel Multichannel high-band-width-mobile-secured-datalink Technology. The acquisition of El-Sight Ltd has been accounted for as a capital re-organisation rather than a business combination under the Australian Accounting Standards. As such, the historical financial information of the Company will be presented as a continuation of the pre-existing accounting values of Israeli entity El-Sight Ltd. Refer to Notes 2(b), 2(e) and 3 of the attached Interim Financial Report.

Loss of control over entities

Name of entity (or group of entities)	N/A
Date control lost	N/A
Contribution of such entities to the reporting entity’s profit/(loss) from ordinary	N/A
activities during the period (where material)
Consolidated profit/(loss) from ordinary activities of the controlled entity (or group of	N/A
entities) whilst controlled during the whole of the previous corresponding period
(where material)

5. DIVIDEND DETAILS

No dividend has been paid or recommended to be paid for the half-year ended 30 June 2017.

6. DETAILS OF DIVIDEND REINVESTMENT PLANS

Not Applicable

7 DETAILS OF ASSOCIATE AND JOINT VENTURE ENTITIES

N/A

8. FOREIGN ENTITIES

Not Applicable

9. AUDIT

This report has been based on accounts that have been subject to an audit review. There are no items of dispute with the auditor and the audit review is not subject to qualification.

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Nir Gabay Managing Director

31 August 2017

Elsight Limited

Appendix 4D Page 2

ELSIGHT LIMITED ABN 98 616 435 753

INTERIM FINANCIAL REPORT FOR THE HALF YEAR ENDED 30 JUNE 2017

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

CORPORATE DIRECTORY

Registered Office

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

Phone +61 8 6377 8043 Email info@el-sight.com Web www.el-sight.com

Share Registry

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

Phone 1300 288 664 (within Australia) +61 2 9698 5414 (outside Australia) Fax +61 8 9321 2337 Email hello@automic.com.au Web www.automic.com.au

Securities Exchange Listing

Australian Securities Exchange Limited ( ASX) ASX Code: ELS

Legal Advisor

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

Auditor

BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008 AUSTRALIA

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

CONTENTS	PAGE
DIRECTORS’ REPORT	4
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME	6
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	7
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	8
CONSOLIDATED STATEMENT OF CASH FLOWS	9
NOTES TO THE FINANCIAL STATEMENTS	10
DIRECTORS’ DECLARATION	25
AUDITOR’S INDEPENDENCE DECLARATION	26
INDEPENDENT AUDITOR’S REVIEW REPORT	27

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

DIRECTORS’ REPORT

The Directors of Elsight Limited (the Company ) and controlled entities (the Group or Consolidated Entity ) submit the following report for the half year ended 30 June 2017 ( Financial Period ).

DIRECTORS

The names and the particulars of the Directors of the Company during the half year and to the date of this report are:

Name Status Appointed/Resigned Mr Nir Gabay Managing Director Appointed 2 June 2017 Major General (ret) Ami Shafran Non-Executive Chairman Appointed 2 June 2017 Mr David Furstenberg Non-Executive Director Appointed 2 June 2017 Mr Howard Digby Non-Executive Director Appointed 13 December 2016 Dr Anton Uvarov Non-Executive Director Appointed 13 December 2016 Mr Nathan Barbarich Non-Executive Director Appointed 13 December 2016, Resigned 2 June 2017

COMPANY SECRETARY

Mr Stephen Buckley (appointed 13 December 2016)

Mr Peter Webse (appointed Joint Company Secretary 1 February 2017)

REVIEW AND RESULTS OF OPERATIONS

The net loss of the Group after income tax for the half year ended 30 June 2017 amounted to US$1,538,842 (30 June 2016: loss of $48,297).

REVIEW OF ACTIVITIES

During the half year ended 30 June 2017, the following activities were undertaken.

Acquisition of El-Sight Ltd and ASX Listing of Elsight LImited

Elsight Limited was incorporated in Australia on 13 December 2016 primarily for the purpose of investigating opportunities to invest in technology companies.

On 2 June 2017, Elsight Limited completed the acquisition of 100% of the issued capital in El-Sight Ltd, an Israeli company that has developed and owns the El-Sight Israel Multichannel high-band-width-mobile-secured-datalink Technology. The acquisition of El-Sight Ltd has been accounted for as a capital re-organisation rather than a business combination under the Australian Accounting Standards. As such, the historical financial information of the Company will be presented as a continuation of the pre-existing accounting values of Israeli entity El-Sight Ltd.

The terms of the transaction were as follows:

• The issue of 25,000,000 ordinary shares at A$0.20 to raise A$5,000,000 before costs;

• The issue of 35,381,386 ordinary shares to the vendors of El-Sight Ltd;

• The issue of 5,833,338 ordinary shares upon conversion of the outstanding convertible loans of A$700,000 in the Company;

• Cash transfer to Learnicon LLC of US$400,000 as partial repayment of the convertible loans from Learnicon LLC to El-Sight Ltd;

• The issue of 7,166,667 ordinary shares to Learnicon LLC as payment for the outstanding balance of the convertible loans from El-Sight Ltd and settlement of the rights attaching to its preferred shares in El-Sight Ltd;

• The issue of 7,000,000 Options exercisable at $A.030 on or before 2 June 2020 to the lead manager and seed investors;

• The issue of 8,608,000 Employee Share Plan Options exercisable at A$0.20, on or before 2 June 2022 to Mr Roee Kashi, exercisable after the satisfaction of the following vesting condition, 50% on the second anniversary of the Vesting Commencement Date and additional 6.25% at the end of each quarter of continuous service; and

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

DIRECTORS’ REPORT (CONTINUED)

REVIEW OF ACTIVITIES (CONTINUED)

• The issue of 30,000,000 Employee Share Plan Performance Options in three tranches exercisable at $0.20 on or before 2 June 2022 to Mr Nir Gabay and Mr Roee Kashi, exercisable after the satisfaction of the following vesting milestones:

• 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 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 );

• 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

• 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 ).

Further information on the capital reorganisation is detailed in Notes 2 and 3 of the financial statements.

Elsight Limited was admitted to the Official List on the ASX on Tuesday, 6 June 2017 with Official Quotation of the securities commencing on 8 June 2017.

SUBSEQUENT EVENTS

On 2 August 2017 the Company announced an agreement with Alrena to jointly offer the new Smart Medicase emergency telemedicine solution. Smart Medicase is a remote, fully-featured, first-aid medical suitcase that connects ER doctors to the field using cutting edge wireless data & video streaming technologies. This solution enables paramedics and police officers in remote places to help people with injuries and illnesses in emergency situations, while being remotely supervised by the best medical doctors in major hospitals.

On 10 August 2017 the Company announced that it won a significant public tender to supply Israeli Police and other government units with solutions for Communications On-The-Move (COTM) in years to come. The win will turn Elsight into the exclusive supplier of Multichannel COTM solutions for many different applications including but not limited to police cars, prisons, prisoner transport vehicles, fire engines, drones, autonomous unmanned security vehicles, police special units and much more. Based on the terms and conditions of this tender, Elsight will officially enter into a fouryear (2+2 optional) agreement, with no financial cap, that enables the Police and many other similar government agencies to buy solutions based on their own allocated budget.

There have been no other matters or circumstances that have arisen since 30 June 2017.

AUDITOR’S INDEPENDENCE DECLARATION

The Auditor’s Independence Declaration to the Directors of the Consolidated Entity on page 26 forms part of the Directors’ Report for the half year ended 30 June 2017.

This report is signed in accordance with a resolution of the Board of Directors.

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Mr Nir Gabay Managing Director 31 August 2017

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

FOR THE HALF YEAR ENDED 30 JUNE 2017

Note Revenue Cost of sales Gross profit Selling, administration and general expenses Share based payments 6 Transaction costs Loss before financing expenses Finance expenses Loss before income tax expense Income tax expense Loss for the half year Items that may be reclassified subsequently to profit and loss Foreign currency translation, net of tax Total comprehensive loss for the period net of tax Basic and diluted loss per share (cents) 8	Half year ended 30 June 2017 US$ Half year ended 30 June 2016 US$ 401,537 333,445 (284,588) (37,679)
	116,949 295,766 (529,778) (319,815) (107,829) - (135,343) -
	(656,001) (24,049) (882,841) (24,248)
	(1,538,842) (48,297) - -
	(1,538,842) (48,297) (224,390) (46,005)
	(1,763,232) (94,302)
	(1.85) (0.06)

The accompanying notes form part of these financial statements.

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2017

Notes	30 June 2017 US$ 31 Dec 2016 US$
CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventory Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Borrowings Convertible loans TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Provision for employees’ severance benefits Borrowings TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS/(DEFICIENCY) EQUITY Issued capital 4 Reserves 5 Accumulated losses TOTAL EQUITY/(DEFICIT)	2,634,920 7,000 191,564 157,000 168,077 310,000 83,703 37,000
	3,078,264 511,000
	115,884 59,000
	115,884 59,000
	3,194,148 570,000
	742,673 1,110,000 93,935 110,000 - 667,000
	836,608 1,887,000
	42,100 36,000 109,334 65,000
	151,434 101,000
	988,042 1,988,000
	2,206,106 (1,418,000)
	5,091,739 5,000 108,209 32,000 (2,993,842) (1,455,000)
	2,206,106 (1,418,000)

The accompanying notes form part of these financial statements.

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 30 JUNE 2017

	CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 30 JUNE 2017
	Issued Capital US$ Accumulated Losses US$ Share Based Payment Reserve US$ Foreign Exchange Reserve US$ Predecessor Accounting Reserve US$ Total US$
Balance as at 1 January 2017 Total Comprehensive Income Loss for the period Foreign currency translation differences Total comprehensive loss for the period Transactions with owners in their capacity as owners: Issue of shares Capital raising costs Share based payments Transactions under common control1 Balance as at 30 June 2017	5,000 (1,455,000) - 32,000 - (1,418,000) - (1,538,842) - - - (1,538,842) - - - (224,390) - (224,390)
	- (1,538,842) - (224,390) - (1,763,232)
	5,842,132 - - - - 5,842,132 (755,393) - (755,393) - - 597,395 - - 597,395 - - - - (296,796) (296,796)
	5,091,739 (2,993,842) 597,395 (192,390) (296,796) 2,206,106
	Issued capital US$ Accumulated Losses US$ Share Based Payment Reserve US$ Foreign Exchange Reserve US$ Predecessor Accounting Reserve US$ Total US$
Balance as at 1 January 2016 Total Comprehensive Income Loss for the period Foreign currency translation differences Total comprehensive loss for the period Balance as at 30 June 2016	5,000 (1,552,276) - 52,000 - (1,495,276) - (48,297) - - - (48,297) - - - (46,005) - (46,005)
	- (48,297) - (46,005) - (94,302)
	5,000 (1,600,573) - 5,995 - (1,589,578)

The accompanying notes form part of these financial statements.

1 As a result of a common control transaction, an equity acccount called ‘Predecessor Accounting Reserve’ exists. This equity account represents the carrying value of the net liabilities acquired. See Note 3 for further details of the acquistion.

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

CONSOLIDATED STATEMENT OF CASHFLOWS

FOR THE HALF YEAR ENDED 30 JUNE 2017

	Half year ended 30 June 2017 US$ Half year ended 30 June 2016 US$
CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Interest paid Payments to suppliers and employees Net cash used for operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets Proceeds from disposal of fixed assets Loan proceeds received from the Company prior to acquisition date Cash held by the Company at acquisition date 3(a) Net cash used for investing activities CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from the issue of shares Proceeds from bank loans Proceeds from convertible loans Repayment of convertible loans Repayment of borrowings Repayment of related party borrowings Net cash provided by financing activities Net increase in cash and cash equivalents held Cash and cash equivalents at the beginning of period Impact of movement in foreign exchange rates Cash and cash equivalents at the end of period	419,904 214,163 (31,541) (24,248) (1,135,105) (174,421)
	(746,742) 15,494
	(65,488) - - 23,886 366,178 - 18,993 -
	319,683 23,886
	3,556,279 - 92,085 - - 14,842 (400,000) - (131,838) (46,993) (12,037) -
	3,104,489 (32,151)
	2,677,430 7,229 7,000 5,000 (49,510) -
	2,634,920 12,229

The accompanying notes form part of these financial statements.

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 1: REPORTING ENTITY

The interim financial report ( Report ) of Elsight Limited (the Company ) and it’s controlled entities (the Group ) ( Consolidated Entity ) for the half year ended 30 June 2017 was authorised for issue in accordance with a resolution of the Directors on 30 August 2017.

Elsight Limited is a listed public company, trading on the Australia Securities Exchange, limited by shares, incorporated and domiciled in Australia.

The Group’s registered office and principal place of business is Level 2, 46-50 Kings Park Road, West Perth Western Australia 6005 Australia.

NOTE 2: BASIS OF PREPARATION

a) Statement of compliance

This interim financial report does not include full disclosures of the type normally included in an annual financial report. Therefore, it cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the Company as in the full financial report. It is recommended that this interim financial report be read in conjunction with any public announcements made by Elsight Limited up to the date of this report in accordance with the continuous disclosure requirements arising under the Corporations Act 2001 and the ASX Listing Rules.

b) Basis of measurement and reporting conventions including capital reorganisation

This interim financial report has been prepared on an accruals basis and is based on historical cost. The interim financial report is presented in United States dollars and all values are rounded to the nearest dollar unless otherwise stated.

On 2 June 2017 Elsight Limited (‘ELS’) completed a transaction with the shareholders of El-Sight Ltd to acquire 100% of the share capital of El-Sight Ltd in exchange for 35,381,386 shares. In accordance with Australian Accounting Standards, the acquisition does not meet the definition of a business combination as ELS was established for the sole purpose of facilitating the listing process and to acquire El-Sight Ltd by way of an equity swap. The shareholders of ElSight Ltd receive the same proportion of equity instruments in ELS.

Consequently, this interim report presents:

• the results of El-Sight Ltd for the period from 1 January 2017 to 2 June 2017;

• the results of the consolidated Group for the period from 2 June 2017 to 30 June 2017; and

• the consolidated Group position as at 30 June 2017.

The comparative financial information included in the Company’s financial statements is that of El-Sight Ltd, not the Company. However, the capital structure of the legal acquirer, the Company is adopted in the interim financial report.

The accounting policies adopted are consistent with the accounting policies adopted in El-Sight Ltd’s last annual financial statements for the year ended 31 December 2016. Accounting standards applied by the Company for the first time at 30 June 2017 are disclosed at Note 2(d).

c) Adoption of new and revised accounting standards

In the Financial Period, the Company has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 January 2017. It has been determined by the Company that, there is no impact, material or otherwise, of the new and revised standards and interpretations on its business and therefore no change is necessary to Company accounting policies. No retrospective change in accounting policy or material reclassification has occurred requiring the inclusion of a third Statement of Financial Position as at the beginning of the comparative financial period, as required under AASB 101.

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 2: BASIS OF PREPARATION (CONTINUED)

d) First time adoption of accounting standards

The following accounting standards have been applied for the first time during the half year ended 30 June 2017:

Foreign currency transactions and balances

Functional and presentation currency

The functional currency of each entity within the Group is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in United States dollars, which is the presentation currency of the parent entity.

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continued to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the profit or loss.

Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income, otherwise the exchange difference is recognised in profit or loss.

Group companies

The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows:

• assets and liabilities are translated at year-end exchange rates prevailing at that reporting period;

• income and expenses are translated at average exchange rates for the period; and

• retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. These differences are recognised in the profit or loss in the period in which the operation is disposed of.

Principles of consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 30 June 2017. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

• Exposure, or rights, to variable returns from its involvement with the investee, and

• The ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee,

• Rights arising from other contractual arrangements,

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 2: BASIS OF PREPARATION (CONTINUED)

d) First time adoption of accounting standards (continued)

Principles of consolidation (continued)

• The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

• De-recognises the assets (including goodwill) and liabilities of the subsidiary

• De-recognises the carrying amount of any non-controlling interests

• De-recognises the cumulative translation differences recorded in equity

• Recognises the fair value of the consideration received

• Recognises the fair value of any investments retained

• Recognises any surplus or deficit in profit and loss

Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.

Financial instruments

Initial recognition and measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 2: BASIS OF PREPARATION (CONTINUED)

d) First time adoption of accounting standards (continued)

Financial instruments (continued)

Classification and subsequent measurement

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period. (All other loans and receivables are classified as non-current assets.)

Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Gains or losses are recognised in profit and loss through the amortisation process and when the financial liability is derecognised.

Derivative instruments

The Group does not trade or hold derivatives.

Financial guarantees

The Group has no material financial guarantees.

Impairment

At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

De-recognition

Financial assets are derecognised where the contractual rights to receipt of cash flow expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset.

Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

Impairment of non-financial assets

At the end of each reporting period, the Directors assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information, including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits.

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ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 2: BASIS OF PREPARATION (CONTINUED)

d) First time adoption of accounting standards (continued)

- Impairment of non financial assets (continued)

If any such indication exists, an impairment test is carried out on the asset by comparing the asset’s recoverable amount, being the higher of its fair value less costs to sell and its value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

Depreciation

Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is the cost of the asset, less its residual value.

An asset is depreciated from the date it is ready for use, meaning the date it reaches the location and condition required for it to operate in the manner intended by management.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of the fixed asset item, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the assets.

The estimated useful lives for the current and comparative periods are as follows:

Computers – 3 years Furniture and equipment – 7-17 years Motor vehicles – 7 years

Leasehold improvements are depreciated over the shorter of the lease period or the useful life of the leasehold improvement.

Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.

Revenue

Revenue from the sale of goods in the ordinary course of business is measured at the 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.

• 14 -

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 2: BASIS OF PREPARATION (CONTINUED)

d) First time adoption of accounting standards (continued)

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.

Employee benefits

Post-employment benefits

The Company has a post-employment benefit plan in place in accordance with its obligations under Israeli employment law. Under Israeli employment law, in the event of termination of an employee, the Group is obligated to pay the employee their last monthly salary multiplied by the number of years the employee was employed. The value of this severance pay obligation is recorded net of accumulated severance fund benefits as a liability for employees’ severance benefits in the Group’s statement of financial position.

Short term employee benefits

Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided or upon the actual absence of the employee when the benefit is not accumulated.

The employee benefits are classified, for measurement purposes, as short-term benefits or as other long-term benefits depending on when the Group expects the benefits to be wholly settled.

Equity settled compensation

The Group operates an employee share and option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortised over the vesting periods. The fair value of performance right options is determined using the satisfaction of certain performance criteria (Performance Milestones). The number of shares option and performance rights expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest. The fair value is determined using either a Black Scholes or Monte Carlo simulation model depending on the type of sharebased payment.

Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.

• 15 -

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 2: BASIS OF PREPARATION (CONTINUED)

d) First time adoption of accounting standards (continued)

Segment information

Identification of reportable segments

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (the chief operating decision makers) in assessing performance and in determining the allocation of resources. The two reportable segments include Australia and Israel.

Earnings per share

Basic earnings per share is calculated by dividing:

• the profit attributable to member of the parent entity, excluding any costs of servicing equity other than ordinary shares

• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year (if any).

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:

• the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and

• the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

Share based payments

Share-based payments are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The fair value of options is determined using the Black-Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest.

Predecessor accounting

Business combinations involving entities under common control are accounted for using the predecessor accounting method. Under this method;

• carrying values are not restated in the accounts of the acquiring entity, rather prior book values are maintained. As a result no fair value adjustments are recorded on the acquisition; and

• the carrying value of net assets or liabilities acquired is recorded as a separate element of equity.

• 16 -

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 2: BASIS OF PREPARATION (CONTINUED)

e) Critical accounting judgments and estimates

The preparation of financial statements requires the use of certain critical accounting judgements and estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. There are no areas involving a high degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements except for the following:

Key judgment: capital reorganisation

The acquisition of 100% of the issued capital of El-Sight Ltd (Israel) by the Company, by way of issuing the shareholders of El-Sight Ltd fully paid shares in the Company, has been determined by management to be a capital reorganisation as the transaction does not meet the definition of a business. Capital reorganisation transactions are a complex accounting area because there is no specific applicable accounting standards to these types of transactions. In the absence of specific guidance, management has used the guidance in AASB 108 ‘Accounting Policies, Change in Accounting Estimates and Errors (para 10) whereby management have used its judgment in developing and applying a relevant and reliable accounting policy using pre-combination book values to account for this transaction as no substantive economic change has occurred. Refer to Notes 2(d) and 3 for additional information.

- Key estimate: Share based payments

The Group initially measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant.

This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them, as well as an assessment of the probability of achieving non-market based vesting conditions.

The probability of achieving non-market based vesting conditions of performance options is assessed at each reporting period.

The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 6.

• 17 -

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 3: COMMON CONTROL ENTITY

Summary of Acquisition

On 13 December 2016, Elsight Limited (the acquirer) was incorporated in Australia primarily for the purpose of investigating opportunities to invest in technology companies.

On 2 June 2017, the Company completed a transaction with the shareholders of El-Sight Ltd (Israel) under common control to acquire 100% of the share capital in El-Sight Ltd in exchange for 35,381,386 ordinary shares in the Company. Refer to Notes 2(b) Basis of measurement and reporting conventions, including capital reorganisation; 2(d) Predecessor accounting; and 2(e) Critical accounting judgments and estimates for further information.

As at the date of acquisition, the assets and liabilities of the Company were as follows:

(a) Assets and Liabilities at Acquisition Date Cash and cash equivalents Prepayments Other receivables Intercompany loan receivable Trade and other payables Convertible loans Net liabilities of Elsight Limited at acquisition date (b) Predecessor Accounting Reserve Net liabilities of Elsight Limited at acquisition date Predecessor Accounting Reserve	18,993 32,494 7,989 369,986 (208,174) (518,084)
	(296,796)
	(296,796)
	(296,796)

• 18 -

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 4: ISSUED CAPITAL 30 June 2017 US$ 31 Dec 20161 US$	NOTE 4: ISSUED CAPITAL 30 June 2017 US$ 31 Dec 20161 US$
(a) Share Capital 83,381,391 (31 December 2016: 20,000) fully paid ordinary shares 5,091,739 5,000 Date No. Unit Price US$ Total US$
(b) Movement in Ordinary Capital Opening balance at 1 January 20171 - El-Sight Ltd preference shares converted to ordinary shares in El-Sight Ltd 1-Jan-17 Less: adjustment for predecessor accounting1 2-Jun-17 Existing shares of Elsight Limited 2-Jun-17 Issue of shares to El-Sight Ltd shareholders2 2-Jun-17 Issue of shares in relation capital raising via public offer 2-Jun-17 Issue of shares upon conversion of Company convertible loans3 2-Jun-17 Issue of shares upon conversion of El-Sight Ltd convertible loans4 2-Jun-17 Costs of capital raising - Issue of 7,000,000 options to lead manager and seed investor, deemed capital raising cost (Note 6) - Closing balance at 30 June 2017	20,000 - 5,000 4,445 0.259 1,150 (24,445) - - 10,000,000 0.000 1 35,381,386 - - 25,000,000 0.154 3,842,750 5,833,338 0.154 896,643 7,166,667 0.154 1,101,588 - - (265,827) - - (489,566)
	83,381,391 - 5,091,739

1The application of predecessor accounting for the acquisition and consolidation of the common controlled entity: ElSight Ltd (Israel) required the value of El-Sight Ltd shares on issue as at 31 December 2016 as a comparative.

2The Company issued 35,381,386 fully paid ordinary shares to El-Sight Ltd shareholders; refer to Note 3 for further information.

3At 31 December 2016 the Company had A$700,000 worth of convertible notes on issue. Upon completion of the Company’s initial public offering and admission to the ASX Official List, the convertible notes automatically converted to 5,833,333 shares, each at a price of A$0.12 per share (a 40% discount to the offer issue price). The shares issued have been valued at the offer issue price of $A0.20. Due to the discount on these shares issued, the Company incurred an interest expense of US$352,605.

4At 31 December 2016 El-Sight Ltd had a total liability of US$1,110,000 to Learnicon LLC, consisting of convertible loans of US$650,000 and El-Sight Ltd preference share entitlements of US$450,000. US$400,000 of the convertible loans were repaid in cash upon completion of the Company’s initial public offering and admission to the ASX Official List. 7,166,667 shares were issued to Leanicon LLC to repay the US$250,000 convertible loans balance and to settle the US$450,000 preference share entitlements. The shares issued have been valued at the offer issue price of $A0.20, resulting in a loss of US$460,800 being recognised on the conversion of convertible notes and preference share entitlements.

• 19 -

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 5: RESERVES	30 June 2017 US$ 31 Dec 2016 US$
(a) Share Based Payment Reserve 45,608,000 (31 December 2016: Nil) options on issue 597,395 - No. $ (b) Movement in Share Based Payment Reserve Opening balance at 1 January 2016 - - Movement during the year - - Closing balance at 31 December 2016 - - Opening balance at 1 January 2017 - - Issue of options to lead manager and seed investors (Note 6) 7,000,000 489,566 Issue of ESOP options (Note 6) 8,608,000 29,464 Issue of ESOP performance options (Note 6) 30,000,000 78,365 Closing balance at 30 June 2017 45,608,000 597,395 US$ US$ (c) Foreign exchange reserve (192,390) 32,000 The foreign currency translation reserve records exchange differences arising on translation from functional currency to presentation currency. US$ US$ (d) Predecessor Accounting Reserve (296,796) -	597,395 - No. $ - - - -
	- - - - 7,000,000 489,566 8,608,000 29,464 30,000,000 78,365
	45,608,000 597,395

The reserve arises from the capital reorganisation and records the net liabilities of Elsight Limited as at the acquisition date of 2 June 2017. Refer to Note 2(d).

NOTE 6: SHARE BASED PAYMENTS

Summary of Share Based Payments Issued

During the half year ended 30 June 2017 the Company recorded the following share based payments:

• The issue of 7,000,000 Options exercisable at $A.30 on or before 2 June 2020 to the lead manager and seed investors;

• The issue of 8,608,000 Employee Share Plan Options exercisable at A$0.20, on or before 2 June 2022 to Mr Roee Kashi, exercisable after the satisfaction of the following vesting condition, 50% on the second anniversary of the Vesting Commencement Date and additional 6.25% at the end of each quarter of continuous service; and

• The issue of 30,000,000 Employee Share Plan Performance Options in three tranches exercisable at $0.20 on or before 2 June 2022 to Mr Nir Gabay and Mr Roee Kashi, exercisable after the satisfaction of the following vesting milestones:

• 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 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 );

• 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

• 20 -

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 6: SHARE BASED PAYMENTS (CONTINUED)

• O 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 ).

The term “Year” shall mean one of: (a) the time period commencing 1 January 2017 and ending on the 12 month anniversary of the completion of the 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.

Fair Value

The Black Scholes option pricing model was used to determine the fair value of the options issued to the lead manager and seed investors and Mr Roee Kashi. The Black Scholes inputs and valuations were as follows:

	Lead Manager and Seed Investor Options	Mr Roee Kashi Options
Number of options	7,000,000	8,608,000
Exercise price	A$0.30	A$0.20
Expectedvolatility	85%	85%
Implied option life	3.00	5.00
Expected dividend yield	nil	nil
Risk free rate	1.84%	2.14%
Valuation per option	US$0.0699	US$0.104
Total valuation	US$489,566	US$893,117

The Black Scholes option pricing model was used to determine the fair value of Class A and B performance options. The Black Scholes inputs and valuations were as follows:

	Class A Performance Options	Class B Performance Options
Numberofoptions	10,000,000	10,000,000
Exercise price	A$0.20	A$0.20
Expected volatility	85%	85%
Implied option life	5.00	5.00
Expected dividend yield	nil	nil
Risk freerate	2.14%	2.14%
Valuation per option	A$0.135	A$0.135
Exchange rate	$0.76855	$0.76855
Valuation per option	US$0.104	US$0.104
Total valuation	US$1,037,544	US$1,037,544
Likelihood of milestone achievement	100%	100%
Estimated date of milestone achievement	7 June 2018	7 June 2019

Management have assessed the likelihood of achieving the performance milestone for Class A options as 100% at 30 June 2017. The total expense of the options of US$1,037,544 is to be recorded pro-rata over the expected vesting period, which has been determined as 8 June 2017 – 7 June 2018 in accordance with the definition of Year set out above. Pro-rata expense recognised at 30 June 2017 is US$62,709.

Management have assessed the likelihood of achieving the performance milestone for Class B options as 50% at 30 June 2017. The total expense of the options of US$1,037,544 is to be recorded pro-rata over the expected vesting period, which has been determined as 8 June 2017 – 7 June 2019 in accordance with the definition of Year set out above. Pro-rata expense recognised at 30 June 2017 is US$15,656.

The implied value of Class C Performance Options is US$1,037,544 however the probability was determined to be nil at 30 June 2017 due to the uncertainty of meeting the performance milestone.

• 21 -

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 6: SHARE BASED PAYMENTS (CONTINUED)

Share Based Payments Expense

Share based payment expense at 30 June 2017 is comprised as follows:

Issue of 8,608,000 ESOP options Issue of 30,000,000 ESOP performance options Total expense recognised in profit or loss Issue of 7,000,000 options to lead manager and seed investor, deemed capital raising cost Total expense recognised in equity Total share based payments expense	30 June 2017 US$ 30 June 2016 US$ 29,464 - 78,365 -
	107,829 -
	489,566 -
	489,566 -
	597,395 -

NOTE 7: DIVIDENDS

The Company did not pay or propose any dividends in the half year to 30 June 2017.

NOTE 8: LOSS PER SHARE

The following reflects income and share data used in the calculation of basic and diluted loss per share.

	30 June 2017	30 June 2016
	US$	US$
Total loss for the period	(1,538,842)	(48,297)
	No.	No.
Weighted average number of ordinary shares in calculating basic
and diluted loss per share	83,381,391	83,381,391

The weighted average number of ordinary shares outstanding (the denominator of the EPS Calculation) for the half years ended 30 June 2017 and 30 June 2016 has been adjusted to reflect the capital reorganisation. The weighted average number of shares outstanding for the half year ended 30 June 2017 is based on the weighted average number of shares of Elsight Limited outstanding in the period following the acquisition. The share capital of El-Sight Ltd as at 30 June 2016 was 20,000 shares on issue which the shareholders subsequently exchanged for shares in the Company.

NOTE 9: COMMITMENTS

There have been no other changes to the Company’s commitments since 31 December 2016.

NOTE 10: SEGMENT INFORMATION

The Company has identified its operating segment based on internal reports that are reviewed by the Board and management. The company has one operating segment.

NOTE 11: CONTINGENT ASSET AND LIABILITIES

The directors are not aware of any contingent liabilities or assets as at 30 June 2017 or subsequent to period end.

• 22 -

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 12: RELATED PARTY TRANSACTIONS

Entity / Key management personnel	Nature of transactions	Transaction value $US	Payable balance US$
Nir Gabay	Issue of 26,052,974 ordinary shares1	-	-
Nir Gabay	Issue of 29,595,000 performance options2	77,308	-
Nir Gabay	Executive salary and director fees	55,309	2,349
Major General (ret) Ami Shafran	Director fees	2,309	2,349
Howard Digby	Issue of 208,334 ordinary shares3	32,023	-
Howard Digby	Issue of 750,000 options4	52,425	-
Howard Digby	Director fees	2,309	2,349
Lamma Nominees Pty Ltd/ Howard Digby	Issue of 1,500,000 ordinary shares5	0.13	-
Anton Uvarov	Issue of 208,334 ordinary shares3	32,023	-
Anton Uvarov	Issue of 750,000 options4	52,425	-
Anton Uvarov	Director fees	2,309	2,349
Yulia Uvarov / Anton Uvarov	Issue of 1,500,000 ordinary shares5	0.13	-
David Furstenberg	Director fees	2,309	2,349
Roee Kashi	Issue of 2,894,775 ordinary shares1	-	-
Roee Kashi	Issue of 8,608,000 options6	29,464	-
Roee Kashi	Issue of 405,000 performance options2	1,058	-
Roee Kashi	Executive salary	66,508	-
Nathan Barbarich	Issue of 1,000,000 options4	69,900	-
RM Corporate Finance Pty Ltd / Nathan Barbarich	Corporate advisory fees paid	57,000	-
RM Corporate Finance Pty Ltd / Nathan Barbarich	Capital raising fees paid	271,000	-

1Shares issued to key management personnel as consideration for their shareholding in El-Sight Ltd.

2 Employee Share Plan Performance Options issued (refer terms, conditions, and valuations at Note 6). The value recorded in the table above represents the pro-rata expense of the options recorded in the consolidated statement of profit or loss and other comprehensive during the period.

3Shares issued in respect of the conversion of Elsight Limited convertible notes totalling A$25,000 each for Mr Digby and Mr Uvarov on completion of the Company’s Initial Public Offer and admission to the ASX Official List. The conversion price was A$0.12 per share (a 40% discount to the offer issue price). The shares issued have been valued at the offer issue price of $A0.20.

• 23 -

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

NOTE 12: RELATED PARTY TRANSACTIONS (CONTINUED)

4Options issued to key management personnel in their capacity as seed investor or lead manager. Options are exercisable at A$0.30 on or before 2 June 2020 (refer terms, conditions and valuations at Note 6).

5On 13 December 2016, the date of incorporation of Elsight Limited, the issued capital of Elsight Limited was 1 ordinary share at A$1. In January and February 2017 share splits occurred resulting in the division of the 1 ordinary share into 10,000,000 ordinary shares (the existing capital of Elsight Limited at acquisition date). As a result of the splits, 1,500,000 ordinary shares were issued to each of Lamma Nominees Pty Ltd and Yulia Uvarov . The total value of each lot of shares issued has been calculated at A$0.15/US$0.13 based upon the incorporation date capital of A$1.

Lamma Nominees Pty Ltd is a related party of Howard Digby by virtue of being controlled by his wife.

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

6 Employee Share Plan Options issued (refer terms, conditions and valuations at Note 6).

NOTE 13: SUBSEQUENT EVENTS

On 2 August 2017 the Company announced an agreement with Alrena to jointly offer the new Smart Medicase emergency telemedicine solution. Smart Medicase is a remote, fully-featured, first-aid medical suitcase that connects ER doctors to the field using cutting edge wireless data & video streaming technologies. This solution enables paramedics and police officers in remote places to help people with injuries and illnesses in emergency situations, while being remotely supervised by the best medical doctors in major hospitals.

On 10 August 2017 the Company announced that it won a significant public tender to supply Israeli Police and other government units with solutions for Communications On-The-Move (COTM) in years to come. The win will turn Elsight into the exclusive supplier of Multichannel COTM solutions for many different applications including but not limited to police cars, prisons, prisoner transport vehicles, fire engines, drones, autonomous unmanned security vehicles, police special units and much more. Based on the terms and conditions of this tender, Elsight will officially enter into a fouryear (2+2 optional) agreement, with no financial cap, that enables the Police and many other similar government agencies to buy solutions based on their own allocated budget.

There have been no other matters or circumstances that have arisen since 30 June 2017.

• 24 -

ELSIGHT LIMITED ABN 98 616 435 753 INTERIM FINANCIAL REPORT 30 JUNE 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2017

DIRECTORS’ DECLARATION

The Directors of Elsight Limited declare that:

1. The financial statements and notes, as set out on pages 6 to 24 are in accordance with the Corporations Act 2001 and:

2. a) comply with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations 2001; and

3. b) give a true and fair view of the Consolidated Entity’s financial position as at 30 June 2017 and of its performance for the period ended on that date.

4. In the Directors’ opinion there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

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Mr Nir Gabay Managing Director 31 August 2017

• 25 -

Tel: +61 8 6382 4600 38 Station Street Fax: +61 8 6382 4601 Subiaco, WA 6008 www.bdo.com.au PO Box 700 West Perth WA 6872 Australia

==> picture [78 x 31] intentionally omitted <==

DECLERATION OF INDEPENDENCE BY PHILLIP MURDOCH TO THE DIRECTORS OF ELSIGHT LIMITED

As lead auditor for the review of Elsight Limited for the half-year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been:

1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

2. No contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Elsight Limited and the entity it controlled during the period.

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Phillip Murdoch

Director

BDO Audit (WA) Pty Ltd Perth, 31 August 2017

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 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 Audit (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.

Tel: +61 8 6382 4600 38 Station Street Fax: +61 8 6382 4601 Subiaco, WA 6008 www.bdo.com.au PO Box 700 West Perth WA 6872 Australia

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INDEPENDENT AUDITOR’S REVIEW REPORT

To the members of Elsight Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Elsight Limited, which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the half-year ended on that date, notes comprising a statement of accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entity it controlled at the half-year’s end or from time to time during the half-year.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Elsight Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

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

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Elsight Limited, would be in the same terms if given to the directors as at the time of this auditor’s review report.

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 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 Audit (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.

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Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Elsight Limited is not in accordance with the Corporations Act 2001 including:

• (i) Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of its performance for the half-year ended on that date; and

• (ii) Complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

BDO Audit (WA) Pty Ltd

==> picture [95 x 52] intentionally omitted <==

Phillip Murdoch

Director

Perth, 31 August 2017