ENVIRONMENTAL SOLUTIONS INTERNATIONAL LIMITED ABN 28 009 120 405

SHORT FORM PROSPECTUS

FOR THE ISSUE OF UP TO 200,000 SHARES IN THE CAPITAL OF THE COMPANY AT AN ISSUE PRICE OF 10 CENTS EACH TO RAISE UP TO \$20,000.

This Prospectus has been prepared for the sole purpose of removing any restrictions on the sale of Shares issued without disclosure in December 2005.

Important Notice

This Prospectus is a short form prospectus issued in accordance with Section 712 of the Corporations Act. This Prospectus does not of itself contain all the information that is generally required to be set out in a document of this type but refers to another document the information of which is deemed to be incorporated in this Prospectus.

1.	CORPORATE DIRECTORY
2.	LETTER FROM THE BOARD
3.	INVESTMENT OVERVIEW
4.	DETAILS OF THE OFFER
5.	COMPANY OVERVIEW
6.	DIRECTORS AND CORPORATE GOVERNANCE
7.	INFORMATION DEEMED TO BE INCORPORATED IN PROSPECTUS
8.	PURPOSE AND EFFECT OF THE ISSUE
9.	RIGHTS AND LIABILITIES ATTACHING TO SECURITIES
10.	RISK FACTORS
11.	FURTHER INFORMATION
	12. AUTHORITY OF DIRECTORS
	13. DEFINITIONS

Important Dates

EVENT	DATE
Prospectus lodged with the ASIC	24 January 2006
Opening Date	24 January 2006
Closing Date	27 January 2006
Despatch of Holding Statements	2 February 2006
Expected date securities will recommence trading on ASX*	2 February 2006

These dates are indicative only. The Company reserves the right to extend the Closing Date or close the Offer early without notice.

IMPORTANT NOTICE

This Prospectus is dated 24 January 2006 and a copy of this Prospectus was lodged with the ASIC on that date. The ASIC takes no responsibility for the contents of this Prospectus.

No Shares will be issued on the basis of this Prospectus later than thirteen (13) months after the date of this Prospectus. Application will be made within seven (7) days after the date of this Prospectus for permission for the Shares offered by this Prospectus to be listed for Quotation.

Applicants should read this document in its entirety and, if in any doubt, consult with their professional advisors before deciding whether to apply for Shares. There are risks associated with an investment in the Company and the Shares offered under this Prospectus must be regarded as a speculative investment. The Shares offered under this Prospectus carry no quarantee with respect to return on capital investment, payment of dividends or the future value of the Shares.

Details of the definitions and abbreviations used in this Prospectus are set out in section $13.$

Short Form Prospectus

This Prospectus is a short form prospectus issued in accordance with section 712 of the Corporations Act. This means this Prospectus alone does not contain all the information that is generally required to satisfy the disclosure requirements of the Corporations Act. Rather, it incorporates all other necessary information by reference to information contained in the Notice of Meeting lodged with ASIC on 21 October 2005 (Notice of Meetina).

In referring to the Notice of Meeting, the Company:

identifies the Notice of Meeting as being relevant to the offer of Shares under $(a)$ this Prospectus and containing information that will provide investors and their professional advisers to assist them in making an informed assessment of:
$(i)$ the rights and liabilities attaching to the Shares;
$(ii)$ the capacity of the Company to issue the Shares; and
$(iii)$ the assets and liabilities, financial position and performance, profits and losses and prospects of the Company;
$(b)$ refers investors and their professional advisers to section 7 of this Prospectus which summarises the information in the Notice of Meeting deemed to be incorporated in this Prospectus:
$\left( \mathrm{C}\right)$ informs investors and their professional advisers that they are able to obtain, free of charge, a copy of the Notice of Meeting by contacting the Company at its registered office during normal business hours during the Offer Period; and
$(d)$ advises that the information in the Notice of Meeting will be primarily of interest to investors and their professional advisers or analysts.

$\mathbf{1}$ . CORPORATE DIRECTORY

Directors

Mr Gregory Fendis Mr Sachlan Fraval Mr Faldi Ismail

Share Registry

Security Transfer Registrars* 770 Canning Highway APPLECROSS WA 6153

Telephone: (08) 9315 2333

Company Secretary

Mr Sean Henbury

Solicitors to the Company

Steinepreis Paganin Lawyers and Consultants Level 4, Next Building 16 Milliaan Street PERTH WA 6000

Registered Office

C/- FJH Solutions Pty Ltd Ground Floor 21 Teddinaton Road BURSWOOD WA 6100

Telephone: (08) 9486 2333 Facsimile: (08) 9355 4580

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

$\overline{2}$ IFTTER FROM THE ROARD

Dear Investors,

On 19 November 2004, the Company appointed joint and several administrators pursuant to Section 436A of the Corporations Act.

Prior to this date, on 17 November 2004, the Company's securities were suspended from trading on the official list of ASX.

At a meeting of creditors held on 30 September 2005, the creditors of the Company approved an amended Deed of Company Arrangement (DOCA) which contemplated. inter alia, the restructuring and recapitalisation of the Company, including the settlement of all outstanding creditor claims.

At a meeting of shareholders held on 5 December 2005, the shareholders of the Company approved the various resolutions required to complete the restructuring and recapitalisation of the Company. Following with shareholders' meeting, the DOCA was terminated, the management of the Company was returned to the Directors and the Company's securities were reinstated to trading on ASX.

The recapitalisation proposal involved the issue of Shares and Options to a number of parties to fund payments to creditors under the DOCA and the Company's ongoing activities.

Under the Corporations Act, the allottees of the Shares are restricted from trading those Shares until such time as the Company lodges this Prospectus with the ASIC. The rationale behind this is that the allottees should only be able to trade the Shares if the market is fully informed.

When the Company agreed to issue the Shares to the allottees, the Board covenanted to prepare this Prospectus in order to release the allottees of the restrictions on trading their Shares imposed by the Corporations Act. The Company has prepared this Prospectus in order to comply with this covenant.

The funds raised under this Prospectus will be applied to working capital and the costs of preparation of the Prospectus.

The new Board is looking forward to developing the Company's existing Enersludge technology and directs investors to Section 5 of this Prospectus for further details on the Board's intentions.

Yours faithfully

Sachlan Fravai Director For and on behalf of the Board of Directors

$\mathbf{R}$ INVESTMENT OVERVIEW

$3.1$ Important Notice

This section is 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.

$3.2$ Summary of the Offer

By this Prospectus, the Company invites investors to apply for up to 200,000 Shares at an issue price of \$0.10 each to raise \$20,000. There is no minimum subscription for the Offer.

$3.3$ Indicative Timetable

Lodgement of Prospectus with the ASIC and Opening 24 January 2006 Date Closina Date (5:00pm WST) 27 January 2006

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.

$3.4$ Objectives

To lodge this qualifying disclosure document thereby removing any restrictions that may have attached to the securities issued by the Company in or before December 2005. The funds raised pursuant to this Prospectus will primarily be used to cover costs associated with its preparation and issue and for general working capital.

$3.5$ Use of Proceeds

It is intended to apply funds raised from the Offer first towards expenses of the Offer (estimated to be up to \$15,000) and thereafter towards general working capital.

$3.6$ Capital Structure

The capital structure of the Company following completion of the Offer (assuming only the full subscription (\$20,000) is raised pursuant to the Offer) is summarised below:

Shares	Number
Current	227,434,974
Offer based on Full Subscription being attained	200,000
TOTAL	227,634,974

There will be no change to the Options on issue - currently 30,393,000 as at the date of this Offer.

$\Delta$ DETAILS OF THE OFFER

$4.1$ Offer of Shares

By this Prospectus, the Company offers for subscription up to 200,000 Shares at an issue price of \$0.10 per Share to raise up to \$20,000.

$4.2$ How to Accept

Applications for Shares must be made using the Application Form attached to this Prospectus.

Payment for the Shares must be made in full at the issue price of \$0.10 per Share. Applications for Shares must be for a minimum of 2,000 Shares and thereafter in multiples of 1,000 Shares. Completed Application Forms and accompanying cheques must be delivered to:

Security Transfer Registrars Pty Limited 770 Cannina Hiahway APPLECROSS WA 6153

or mailed to:

Security Transfer Registrars Pty Limited PO Box 635 APPLECROSS WA 6953

Cheques should be made payable to "Environmental Solutions International Limited - Proceeds Account" and crossed "Not Negotiable". Completed Application Forms must reach the Share Reaistry by no later than the Closing Date.

$4.3$ Australian Stock Exchange Listing

Application for official auotation by ASX of the Shares offered pursuant to this Prospectus will be made within 7 days after the date of this Prospectus. If approval is not obtained from ASX before the expiration of 3 months after the date of issue of the Prospectus, (or such longer 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 arant official auotation 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.

4.4 Allotment

Allotment of Shares offered by this Prospectus will take place as soon as practicable after the Closing Date. Prior to allotment, all application monies under the Offer shall be held by the Company on trust. The Company, irrespective of whether the allotment of Shares takes place, will retain any interest earned on the application monies.

The Directors reserve the right to allot Shares in full for any application under the Offer or to allot any lesser number or to decline any application. Directors may in their discretion give preference to Shareholders in accepting applications under the Offer. Where the number of Shares allotted under the Offer is less than

the number applied for, or where no allotment is made, the surplus application monies will be returned by cheque to the applicant within seven (7) days of the allotment date.

Residents Outside Australia and New Zealand 4.5

This Prospectus does not, and is not intended to, constitute an offer in any place or jurisdiction where, 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 and New Zealand may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities law. No action has been taken to reaister or qualify these Shares or otherwise permit a public offerina of the securities the subject of this Prospectus in any jurisdiction outside Australia and New Zealand.

It is the responsibility of applicants outside Australia and New Zealand to obtain all necessary approvals for the allotment and issue of 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 the applicant that all relevant approvals have been obtained.

$4.6$ Taxation Implications

The Directors do not consider that it is appropriate to give potential applicants advice reaarding the taxation consequences of applying for Shares under this Prospectus, as it is not possible to provide a comprehensive summary of the possible taxation consequences. The Company, its advisers and officers, do not accept any responsibility or liability for any taxation consequences to potential Applicants should, therefore, consult their own professional tax applicants. adviser in connection with the taxation implications of the Offer.

$4.7$ Clearing House Electronic Sub-Register System ("CHESS") and Issuer Sponsorship

The Company will not be issuing share certificates. The Company will apply to ASX 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. Because the sub-registers are electronic, ownership of securities can be transferred without having to rely upon paper documentation.

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

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

4.8 Underwriter

The Offer is not underwritten.

4.9 Privacy Act

If you complete an application for Shares, you will be providing personal information to the Company (directly or by the Company's share reaistry). The Company collects, holds and will use that information to assess your application, service your needs as a shareholder, facilitate distribution payments and corporate communications to you as a shareholder and carry out administration.

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

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

Collection, maintenance and disclosure of certain personal information is aoverned by leaislation including the Privacy Act 1988 (as amended), the Corporations Act and certain rules such as the ASTC Settlement 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.

4.10 Enquiries

Any questions concerning the Offer should be directed to the Company Secretary, Mr Sean Henbury on (08) 9486 2333.

$\mathbf{5}$ COMPANY OVERVIEW

$5.1$ The ENERSLUDGETM Technology Assets

As noted in the Section 2 of the Prospectus, the creditors of the Company approved an amended DOCA on 30 September 2005. Under the terms of the DOCA, the Company retained the "Enersludge Technology Assets". These assets comprise:

$\alpha$ all patents and pending application for patents;
$(b)$ all design information including hard copy and electronic design files;
$\left( c\right)$ all other hard copy or electronic files;
$(d)$ all rights of ESI to the pilot plant in Germany and all files and other assets relating to it;
the PDU (lab scale process development unit) and Perspex reactor in $(e)$ storage: and
$(f)$ all rights to the name 'Enersludge'.

$5.2$ Background on the ENERSLUDGETM technology

ENERSLUDGE™ is derived from a technology developed by the late Professor Bayer at Tubingen University in Germany in the mid 1980s. The Bayer lab scale technology was originally sold to the Canadian Government (Environment Canada) before being purchased by ESI in 1989. Over the next 5 years, ESI, in close cooperation with the inventor, Professor Bayer, embarked on a comprehensive development programme for the newly named ENERSLUDGE™ technoloav which included:

$\alpha$ a demonstration pilot plant built in conjunction with Sydney Water; and
extensive Process Development Unit (PDU) trials to research, test and $(b)$ characterise a variety of feed materials in order to determine the optimum process configuration and operating parameters for new plants.

In 1996, ESI was awarded its first order for a commercial scale 'demonstration' ENERSLUDGE™ plant for sewage sludge from the Water Corporation of Western Australia. This contract included one year of plant operation and was successfully completed in 2001.

Shortly thereafter, ESI won a second contract for a pilot demonstration project to process waste sludge from tanneries in Europe and Brazil. This project was funded by the German Government and included 2 years of tannery sludge testing/demonstration. This project is described in more detail in section 5.4.

Since the successful completion of both of these projects, ESI has continued to refine and improve its ENERSLUDGE™ technology and, in particular, build upon the lessons learned from its 'first-generation' plant designs. A much simpler and more robust design, based on not condensing the oil, but rather combusting the hot vapours has been successfully demonstrated on a 1 tonne per day ("tpd") pilot plant in Germany. As a result, a series of lower cost and more flexible 'second-generation' designs are now ready for market.

In the last few years, ENERSLUDGE™ has won a number of industry awards including the West Australian Industry and Export Award for Research and Development, and the Inaugural Banksia Foundation Award for Research and Development.

How it works $5.3$

The concept

The key to ENERSLUDGE™ is molecular re-arrangement by heating - achieved by a process of slow pyrolysis plus intimate contacting of the product streams in the main conversion reactor to obtain the optimum quality of products. In this process, the sludge molecules are heated in an oxygen free environment (no combustion), and re-ordered into syngas and char. The syngas can be condensed to produce an oil product

The conversion products capture all the energy that is in the incoming dry sludge. ENERSLUDGETM requires dry waste or sludge as feedstock (typically not more than 10% water by weight) and, since most sludge has a relatively high water content, the incoming sludge usually requires mechanical dewatering and thermal drying (or equivalent) before entering the ENERSLUDGE™ process.

One of the key strengths of ENERSLUDGE™ is its ability to handle pollutants. With a sludge containing a number of pollutants such as heavy metals, organochlorines, pathogens, toxins and/or Endocrine Disrupting Compounds (EDC's). The majority of the heavy metals partition into the char and, when this is combusted, the heavy metals become tightly bonded to the resulting ash. Unlike almost all other thermal processes, the heavy metals remain in the solid phase and are neither vaporised nor leachable all organochlorines, toxins, pathogens and EDC's are destroyed.

The Board has identified a licensed technology using electrolysis on a scaleable basis which can recover the mineralization producing recovery rates approximating to \$3 per tonne and also a dewatering technology that may more efficiently produce a hybrid pellet. Further review of these technologies is to be conducted.

Product usage

This partitioning and 'cleaning' of the incoming sludge provides enormous environmental, operational and commercial flexibility and the ENERSLUDGE™ products can thus be used in a variety of ways.

The syngas can be used as:

a source of process heat on site, primarily for sludge drying; and $\alpha$
$(b)$ a fuel on site to raise steam or produce electricity.

The oil can be used as:

$(a)$ a 'areen' alternative to fuel oil: for example for the upstream drying unit: for firing boilers, kilns, incinerators and other direct combustion devices offsite; or as a fuel for slow speed diesel internal combustion engines to generate electricity; and
$(b)$ a chemical feedstock.

The char can be used as:

a 'green' alternative to coal: for example, for the upstream drying unit $(a)$ or for firing boilers, kilns, incinerators and other direct combustion devices offsite:
an absorbent; as an alternative to carbon in filters and other clean-up $(b)$ systems:
$(c)$ a raw material in the manufacture of brick: during firing, the char releases small amounts of vapours which result in a lightweight brick with excellent insulating properties;
$(d)$ a slow release phosphorus/potassium fertilizer in agriculture; and
$(e)$ a reductant (as well as a fuel) in metalluraical processes.

The use of the syngas, oil and char can result in avoidance of climate change levies and/or generation of Emission Reduction Units (or equivalent).

The variety of potential uses for the ENERSLUDGE™ products from a particular sludge or waste give the technology considerable market and commercial flexibility.

Plant desian

The technology can be designed and delivered in a number of different ways to suit the circumstances. In aeneral, the complete ENERSLUDGE™ solution will comprise of:

$(a)$ sludge/waste dewatering and drying facilities: this is established technology and widely available in the market;
$(b)$ the core ENERSLUDGE™ conversion facilities: producing syngas and char or oil and char: and
$\left( c\right)$ if required, syngas, oil and char combustion facilities with associated ancillary systems.

ENERSLUDGETM can meet the most stringent emissions requirements including the new European Waste Incineration Directive (WID) and the US EPA 503 Regulations.

A typical ENERSLUDGETM conversion 'train' is designed to process 30 to 50 dry tpd which is equivalent to the sewage sludge produced by 500,000 people. This neatly fits into the growing desire to dispose of sewage sludge within the community. Smaller plant sizes, down to as low as 5 tpd can readily be built, and for higher flow rates / larger communities, a number of conversion trains are used.

Waste and sludge types

ENERSLUDGE™ has been tested with a number of wastes and sludge, including sewage sludge, tannery sludge, oily sludge (from refineries), the organic fraction of municipal solid waste (MSW), food waste, agricultural sludge, pulp and paper sludge, used tyres, plastics, chemical and petrochemical wastes.

The quality and yield of the ENERSLUDGE™ products inevitably differs from feedstock to feedstock. ESI's main experience is with dirty feeds such as sewage sludge and tannery sludge.

$5.4$ Australian sewage sludge demonstration plant

In 1996, ESI, in conjunction with a local engineering contractor, entered into a contract with the Water Corporation of Western Australia to build an integrated sewage sludge dewatering, drying and energy recovery facility at one of Perth's main wastewater treatment plants. The project also included a demonstration of the ENERSLUDGE™ technology at commercial scale.

The plant was built in phases and was successfully operated by ESI for one year prior to handover to the client in June 2001. The plant met all contractual, performance and legislative requirements.

The Water Corporation of Western Australia decided in late 2002 not to operate the conversion portion of the plant, opting instead to recycle the dried pellets to arable land close to Perth as a fertiliser supplement since this is a much cheaper means of sludge disposal.

Where such recycling is possible, ENERSLUDGE™ is unlikely to be competitive.

The decision by the Water Corporation was simply based on economics and did not reflect any lack of confidence in the ENERSLUDGE™ process.

5.5 Tannery sludge demonstration project

Tannery sludge is produced as a by-product in the production of leather from cow hides and, owing to the number of chemicals used in the curing of hides, it is highly polluted.

In 1998. ESI was awarded a contract by the German Government to demonstrate that ENERSLUDGE™ provides a long-term sustainable solution for tannery sludge. The project included the purchase of a small sludge dryer unit and the construction of a new 20kg/hr dual reactor pilot plant, based on the design applied at the Australian demonstration plant.

The project was successfully completed in 2002 following two years of operational testing in Germany and Brazil.

$5.6$ Latest Technology Development

Based on the knowledge gained from both the Australian demonstration plant and the tannery pilot plant, ESI continued development of the technology to simplify the process, make it more robust, and most importantly, reduce capital and operating costs. The concept of a single paddle reactor and syngas combustion in a Hot Vapour Combustor (HVC) was thoroughly investigated and shown to provide superior performance. As a result, ESI purchased the tannery pilot plant and converted it into a 1 tpd sinale paddle reactor pilot plant. This new demonstration plant is configured to operate both in oil condensation and syngas combustion (HVC) modes. Extensive test work in Germany has shown the simplicity and robustness of the new system, particularly when operating in HVC mode. The pilot plant is housed in a standard ISO container and can be readily transported by road and ship to any location.

5.7 ENERSLUDGE™ commercialisation

$5.7.1$ Strateav

Since the completion of the Australian demonstration plant two years ago, ESI has been pursuing a strategy to commercialise ENERSLUDGETM in as many markets as possible by:

$\alpha$ pursuing relationships with business partners to introduce major infrastructure installations globally assisted by the provision of infrastructure finance in the key markets around the world. In pursuit of this objective, the Company has appointed Securities International Limited, an investment bank with expertise in the issue of Medium Term Notes, as advisors to this strategy; and
$(b)$ pursuing projects in its own capacity whilst the network of business partners is being set up.

The Directors intend to aggressively pursue a global implementation strategy for ENERSLUDGE^TM based on identified processes, including dewatering, to significantly improve the economics. In addition, the Board anticipates that further revenue streams may be derived from metal recoveries and potentially other products which could be processed by the same low energy dewatering process.

The Directors have entered into negotiations with a third party in relation to the acquisition of the dewatering technology referred to above and are hopeful of reaching agreement on the terms of the acquisition in the coming weeks.

The Directors believe a new stand alone/transportable module may provide a profitable way forward to both penetrate domestic markets and global markets. This model addresses contractors already contracted to transport sewage waste by converting what would be disposed of as waste to useful commodity products. In this connection, the Directors are in negotiations with a contractor currently under contract to 26 Sewage Plants to remove the semi processed waste. The Directors envisage a transportable ENERSLUDGE™ processing unit being attached to the output of the treatment system and the contractor then cartina the fully processed ENERSLUDGE™ products that are then on sold to commodity buvers.

It is also anticipated that any further capital requirements will be raised by way of equity for the domestic market leveraged by Medium Term Note facilities (Off balance sheet debt) to overseas infrastructure partners/customers.

$5.7.2$ Current Status

Sewage Sludge

The company is currently reviewing all previous company agreements with a view to optimising future agreements. These include the following:

$\alpha$ a Technology Licence Agreement is in place with Ondeo-Degremont (the world's leading water management company) for France on an exclusive basis and elsewhere on a case by case basis. This Agreement was in put in place in July 2002 after a technology review by Ondeo-Degremont including a fact finding and due-diligence visit to Perth and the Australian demonstration plant;

$(b)$ a Technology Licence Agreement is in place with Mitsubishi Electric Corporation for Japan on a non-exclusive basis. The original Agreement was put in place in October 2000:
$\left( c\right)$ ESI has re-entered discussion in relation to a cooperation agreement with ZWT Wasser und Abwassertechnik GmbH (ZWT), a small German wastewater company, to get a commercial demonstration plant up and running in Bavaria supported by the Bavarian Government. However, the status of this agreement requires further consideration.

Tannery Sludge

EU reaulations reaarding the disposal of tannery sludge are currently in a state of flux and the future direction is not clear. Currently, most of the tannery sludge from Germany is used in old mine site reclamation and whilst this is under threat. no firm leaislative direction has vet emerged.

Oily Sludge

All oil refineries produce small auantities of oily sludge that is so polluted that it cannot be returned to any part of the refining process. ESI has had discussions with refineries in Singapore and looked at the business case for entering the contract oily sludge waste disposal market. However, the waste incineration market in Singapore currently has significant over-capacity and whilst incinerators are not ideally suited to oily sludge (due to its high calorific value and hence resulting higher temperatures in the incinerators), the business case is currently fraaile.

ESI has not reviewed the European or North American oily sludge markets in significant detail. This could be an exciting niche Build-Own-Operate (BOO) opportunity for ENERSLUDGE™ given that the oil companies generally want to outsource the disposal and treatment of oily sludge.

Interest has been shown in providing ESI with technology to make this sludge economically usable and of sianificant commercial value.

$\mathbf{A}$ DIRECTORS AND CORPORATE GOVERNANCE

$6.1$ Directors

Mr Gregory Fendis

Grea received a bachelors dearee in Engineering from RMIT.

He has had extensive experience in the design, installation and commissioning of large complex computer-based systems. In particular he specialises in Smart Card Technology and ID based card systems. He has an understanding of smart card products, fechnology issues, marketing and customer needs. His technology experience spans over 20 years.

Grea has attended and participated in numerous Smart Card conferences and training sessions and the following represents highlights of his involvement in this industry:

Grea has been instrumental in the establishment of technology transfer agreements with some of the largest Smart Card organisations in the world:

Innovatron (the smart card patent holder) to introduce Innovatron's $\alpha$ smart card based technology and payment terminals to the Asia Pacific region. Of major interest was the CityCard.
$(b)$ Gemplus (the largest smart card manufacturer in the world) - to establish a joint sales marketing team and to establish a large state-ofthe-art smart card manufacturing facility for the Asia Pacific region.
$\left( \bigcirc \right)$ DataCard - To distribute and integrate DataCard's world leading product range of card systems into the Australian and New Zealand market.
$(d)$ Card Services International - to establish, promote, distribute and channel manage CSI's EMV compliant payment products in Asia Pacific.

Grea was actively involved in the establishment and ongoing management of card bureau services. He assisted the largest security printer in the Asian Pacific region, to become the world's first third-party activator for VisaCash Smart Cards. His work continued in the establishment of similar card bureaus in other various countries. Greg project managed the Visa Cash product as a means to establishing a highly secure, high volume, Visa accredited bureau for the financial and other markets.

Grea was also involved in the logistics for the introduction of Visa's disposable VisaCash products on the Gold Coast. From this involvement he then established the relationships and technical knowledge to provide reloadable facilities to Visa.

Grea has extensive experience in the establishment of plastic card personalisation bureaus and in the design, development and implementation of technology for National ID systems, Driving Licence and Vehicle Registration Systems. He has established strategic relationships with Australian State Transport Departments, Australian Government agencies and other Australian manufactures to provide a total plastic card solution.

Mr Sachian Fraval

Sachlan is an accountant by training and a former Fellow of the Institute of Chartered Accountants, London, Durina 1966 to 1971 he was Articled to Turquand Young & Co, now Ernst & Young. During his term at TY&Co Sachlan carried out every aspect of large company audits, taxation, management accountancy and system development in a variety of industries.

For the last nine vears Sachlan has been directly involved in the development and marketina of a range of Scientific Instruments and Components worldwide. His main focus during this period was in the field of forensic science particularly in the use of high powered tuneable light sources for trace evidence enhancement. He has introduced systems and provided business development strategies for all company divisions includina:

$(a)$ Forensic Science:
$(b)$ Liaht Guides:
$|C|$ Automatic Waste plastic bottle sortina: and
$(d)$ Biometrics.

He has specialised in the development of innovation at the individual level, believing that Australia has great innovation which demands to be resourced to reach its full potential.

Sachlan has over 30 years experience in corporate and business development of private and public companies in the UK, USA and Australia. He has been actively involved as a director of high tech companies in development and marketing of lasers, hand held computers, forensic science equipment, biometrics solutions and light guide products.

Mr Faldi Ismail

Faldi currently consults to a number of clients providing corporate advisory services in Australia and Indonesia. Prior to corporate consulting, Mr Ismail has spent over 4 years working as a tax senior with Pitcher Partners in Perth and a senior within their corporate restructuring division. Mr Ismail facilitated with a number of the ASX restructures including Matrix Oil NL and Deep Yellow Ltd during his term. Faldi resigned his position from Pitcher Partners in April 2004 and has no ongoing association with the firm.

Faldi is currently a director of Kalimantan Investment Corporation Limited (the major shareholder of Canadian public listed company Kalimantan Gold Corporation Limited), company secretary of unlisted public company Cascara Corporation Limited and recently resigned his position as company secretary of ASX listed Eldore Mining Corporation Limited (ASX code: EDM) (formerly Riley Corporation Limited).

Faldi holds a Bachelor of Business from Edith Cowan University where he double majored in Accounting and Finance.

$6.2$ Corporate Governance

The Company's main corporate governance policies and practices are outlined below:

$6.2.1$ The Board of Directors

The Company's Board of Directors 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:

maintain and increase shareholder value: $\alpha$
$(b)$ ensure a prudential and ethical basis for the Company's conduct and activities: and
$\left( c\right)$ ensure compliance with the Company's legal and regulatory objectives.

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

$\alpha$ developing initiatives for profit and asset growth;
$(b)$ reviewing the corporate, commercial and financial performance of the Company on a reaular basis:
$\left( \text{c} \right)$ 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.

$6.2.2$ Composition of the Board

Election of Board members is substantially the province of the Shareholders in general meeting. However, subject thereto, the Company is committed to the following principles:

$(a)$ the Board is to comprise Directors with a blend of skills, experience and attributes appropriate for the Company and its business; and
$(b)$ the principal criterion for the appointment of new Directors is their ability to add value to the Company and its business.

No formal nomination committee or procedures have been adopted for the identification, appointment and review of the Board membership, but an informal assessment process, facilitated by the Chairman in consultation with the Company's professional advisors, has been committed to by the Board.

$6.2.3$ 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.

$6.2.4$ 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 the subject of a Shareholder resolution in accordance with the Company's Constitution, the Corporations Act and the ASX Listing Rules, as applicable. The determination of non-executive Directors' remuneration within that maximum will be made by the Board having regard to the inputs and value to the Company of the respective contributions by each non-executive Director.

The Board may award additional remuneration to non-executive Directors called upon to perform extra services or make special exertions on behalf of the Company.

$6.2.5$ 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.

$6.2.6$ Audit committee

The Company is to have a separate constituted audit committee.

$6.2.7$ 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.

$6.2.8$ Ethical standards

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

$\overline{z}$ INFORMATION DEFMED TO BE INCORPORATED IN PROSPECTILS

$7.1$ Short Form Prospectus

This Prospectus is a short form prospectus issued in accordance with section 712 of the Corporations Act. This means that this Prospectus does not of itself contain all the information that is generally required to be set out in a document of this type, however, it incorporates by reference information contained the Notice of Meeting that has been lodged with the ASIC.

The information to be incorporated by reference into this Prospectus is summarised below in section 7.2 and will primarily be of interest to investors and their professional advisers or analysts.

Investors and their professional advisers are able to obtain a copy of the Notice of Meeting free of charge by contacting the Company at its registered office during normal business hours during the Offer Period. The Notice of Meeting will also be available by searching the ASIC's records in relation to the Company, or by visiting ASX's website at www.asx.com.au.

$7.2$ Summary of Information Deemed to be Incorporated

Set out below is a summary of the information contained in the Notice of Meeting that is deemed to be incorporated in this Prospectus to assist investors and their professional advisers to determine whether they need to obtain a copy of the Notice of Meeting for the purposes of making an informed investment decision in relation to the Shares.

Recapitalisation Proposal

Pursuant to the Notice of Meeting, Shareholder approval was sought and obtained for a recapitalisation proposal that can be summarised as follows:

$(a)$ the Company was authorised to allot and issue 190,000,000 Shares to Rofin Australia Pty Ltd (Rofin) (or its nominees) at an issue price of \$0.001 each (together with 30,000,000 free attaching options) to raise \$190,000;
$(b)$ the Company was authorised to allot and issue up to 220,000,000 Shares at an issue price of not less than \$0.01 each to raise up to a further \$2,200,000:
all of the existing directors and company secretary were removed from $\left( \circ \right)$ office: and
$(d)$ new directors nominated by Rofin were appointed to the Board.

In relation to the authorisation referred to in paragraph (b) above, only 22,000,000 Shares were issued at an issue price of \$0,10 each.

Details of Rofin and further information on the DOCA are set out in the explanatory statement accompanying the Notice of Meeting. Further, an independent expert's report was also sent to Shareholders as part of the Notice of Meeting, which commented on the fairness and reasonableness of the recapitalisation proposal to the non associated shareholders.

Independent Expert's Report

The Notice of Meeting included an independent expert's report prepared by Stanton Partners Corporate Pty Ltd. The report concludes, amongst other things, that the recapitalisation proposal as set out in the Notice of Meeting is fair and reasonable to the non associated shareholders in the Company.

The report also comments on the future direction of the Company as well as advantages and disadvantages of the recapitalisation proposal.

$\mathbf{R}$ PURPOSE AND EFFECT OF THE ISSUE

$8.1$ Purpose of the Offer and use of funds raised

The purpose of the Offer is to raise up to approximately \$20,000. The proceeds from the Offer will be used to meet anticipated costs of the Offer (\$15,000) and the balance for general working capital.

$8.2$ Effect of the Offer and Pro Forma Balance Sheet

The principal effect of the Offer will be to:

$(a)$ increase cash reserves by approximately \$5,000 after deducting estimated expenses of the Offer and assuming all Shares offered under this Prospectus are issued; and
increase the number of Shares on issue from 227,434,974 as at the date $(b)$ of this Prospectus to up to 227,634,974 Shares.

Set out below is:

an unaudited statement of financial position of the Company as at 19 $(a)$ January 2006 and
$(b)$ an unaudited pro forma balance sheet as at 24 January 2006 incorporating the effect of the Offer.

	Unaudited	Proforma
	19/01/2006	Unaudited
		24/01/2006
	\$ 1000	\$ '000
CURRENT ASSETS
Cash	1,129	1,134
TOTAL CURRENT ASSETS	1,129	1,134
TOTAL ASSETS	1,129	1,134
CURRENT LIABILITES
Payables
Interest Bearing Liabilities
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS	1,129	1,134
EQUITY
Contributed equity	25,644	25,664
Accumulated losses	(24.515)	(24, 530)
TOTAL EQUITY	1,129	1,134

Notes:

The Company's main asset is the Enersludge Technology which has not been independently valued for $\mathbf{L}$ the purposes of the Statement of Financial Position. This asset was written down to nil as at 30 June 2004 as disclosed in the 2003/04 Annual Report of ESI. The asset would be subject to an impairment test under the Australian equivalents of International Financial Reporting Standards ("A-IFRS") and, to date, the Company Rofin has not placed a current value on the asset notwithstanding the fact that the Directors consider the technology to have some value.
The pro-forma Statement of Financial Position has been prepared to reflect the consolidated financial $2.$ position of the Company as at 24 January 2006 as if the following transactions had occurred on that date:
$\ddot{\bullet}$ the issue of 200,000 Shares at \$0,10 per Share to raise \$20,000 pursuant to this Prospectus; and
the payment of expenses associated with the Offer totalling \$15,000. $\bullet$

$\bullet$ RIGHTS AND HABILITIES ATTACHING TO SECURITIES

The following is a summary of the more significant rights and liabilities attaching to securities.

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

$9.1$ Rights Attaching to Shares

The rights, privileges and restrictions attaching to Shares can be summarised as follows:

$(a)$ 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 Company's Constitution.

Voting Rights $(b)$

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:

each Shareholder entitled to vote may vote in person or by $\left( i \right)$ proxy, attorney or representative; and
$(ii)$ 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
on a poll, every person present who is a Shareholder or a proxy, $(iii)$ 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 which the amount paid (not credited) is of 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).

Dividend Rights $(c)$

The Directors may from time to time declare a dividend to be paid to the Shareholders entitled to the dividend.

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 dividends, the dividend as declared shall be payable on all Shares in proportion to the Shares held by the The Directors may from time to time pay to the Shareholders.

Shareholders any interim dividends that they may determine. $N_O$ dividend shall be payable except out of profits. A determination by the Directors as to the profits of the Company shall be conclusive. No dividend shall carry interest as against the Company.

$(d)$ Variation of Rights

Under 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 the issue of the shares of that class), whether or not the Company is being wound up may be varied or abroaated 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.

$(e)$ Rights on Winding-up

If the Company is wound up, the liquidator may, with the authority of a special resolution, divide amona 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 or she considers fair upon any property to be so divided, and may determine how the division is to be carried out as between the Shareholders or different classes of Shareholders.

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

Transfer of Shares $(f)$

Generally, Shares in the Company are freely transferable, subject to formal requirements, and so long as the registration of the transfer does not result in a contravention of or failure to observe the provisions of a law of Australia and the transfer is not in breach of the Corporations Act or the Listina Rules.

$(q)$ Creation and offer of further shares

The allotment and issue of any new shares is at the discretion of the Board of the Company. Subject to any restrictions on the allotment of shares imposed by the Company's Constitution, the Corporation Act and the Listing Rules, the Board of the Company may issue those new shares on such terms and conditions, and with rights and privileges, as the Board of the Company from time to time may determine.

$10₁$ RISK FACTORS

$10.1$ General

The Shares offered under this Prospectus should be considered speculative because of the nature of the Company's business.

The business activities of the Company are subject to various risks that may impact on the future performance of the Company. 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 quarantee with respect to the payment of dividends, return of capital or price at which Shares will trade.

A number of material risk factors are set out below. This list is not exhaustive and potential applicants should examine the contents of this Prospectus and consult their professional advisers before deciding whether to apply for Shares.

$10.2₁$ Status of the Company's Business

The Company is subject to all the usual risks encountered by evolving organisations including:

$(a)$ capital adequacy;
$(b)$ cash flow:
$\mathcal{L}$ commodity markets; and
$(d)$ continuity of personnel.

$10.3$ General Economic Climate

Factors such as inflation, currency fluctuations, interest rates, supply and demand of capital and industrial disruption have an impact on business costs, commodity prices and stock market prices. The Company's share price, operations, business and profitability can be affected by these factors, which are beyond the control of the Company and its directors.

$10.4$ Share Market Conditions

There are aeneral risks associated with any investment and the share market. The price of Shares may rise and fall depending on a range of actors beyond the Company's control and which are unrelated to the Company's financial performance. These factors may include movements on international stock markets, interest rates and exchange rates, together with domestic and international economic conditions, inflation rates, commodity supply and demand, government taxation and royalties, war, global hostilities and acts of terrorism.

$10.5$ Future Capital Requirements

The Company's capital requirements depend on numerous factors. Depending on the Company's ability to generate income from its investments, the Company may require further financing in addition to the amounts raised under the Offer.

If additional capital is raised by an issue of securities this may have the effect of diluting Shareholders' interests in the Company. Any debt financing, if available, may involve financial covenants which limit the Company's operations. If the Company cannot obtain such additional capital, the Company may be required to reduce the scope of any expansion which could adversely affect its business, operating results and financial condition.

$10.6$ Relignce on Key Personnel

The Company is dependent on its management, the loss of whose services could materially and adversely affect the Company and impede the growth of its business.

There can be no assurance that the Company will be able to attract or retain sufficiently qualified personnel on a timely basis to develop its business.

$10.7₁$ Development and Commercialisation of Intellectual Property

The Company is relying on its ability to develop and commercialise the Intellectual Property. A failure to successfully develop and commercialise the Intellectual Property could lead to a loss of opportunities and adversely impact on the Company's operating results and financial position.

$10.8$ Intellectual Property Rights

Securing rights to intellectual property, and in particular patents, is an integral part of securing potential product value in the outcomes of the Company's research and development. Competition in retaining and sustaining protection of intellectual property and the complex nature of intellectual property can lead to expensive and lengthy patents disputes for which there can be no guaranteed outcome.

The granting of a patent does not guarantee that the rights of others are not infringed or that competitors will not develop competing Intellectual Property that circumvents such patents. The Company's success depends, in part, on its ability to obtain patents, maintain trade secret protection and operate without infringing the proprietary rights of third parties. Because the position of patents can be highly uncertain and frequently involve complex legal and scientific evaluation, neither the breadth of claims allowed in the Company's patents nor their enforceability can be predicted. There can be no assurance that any patents the Company may own or control or licence now and in the future will afford the Company commercially significant protection of the Intellectual Property, or that any of the projects that may arise from the Intellectual Property will have commercial applications.

Although the Company is not aware of any third party interests in relation to its intellectual property rights in the Intellectual Property, and has taken steps to protect and confirm its interest in these rights, there is always a risk of third parties claiming involvement in technological discoveries, and if any disputes arise, they could adversely affect the Company.

Although the Company will implement all reasonable endeavours to protect the Intellectual Property, there can be no assurance that these measures have been, or will be sufficient.

$10.9^°$ Research and Development

The Company can make no representation that any of its research into or development of the Intellectual Property will be successful, that the development milestones will be achieved, or that the Intellectual Property will be developed into products that are commercially exploitable.

There are many risks inherent in the development of the Company's technology. Projects can be delayed or fail to demonstrate any benefit, or research may cease to be viable for a range of scientific and commercial reasons.

10.10 Product Liability and Insurance Risk

Through its business, the Company is exposed to potential product liability risks that are inherent in the research and development, manufacturing, marketing and use of its products or products developed in the future. It will be necessary to secure insurance to help manage such risks. The Company may not be able to maintain insurance for product or service liability on reasonable terms in the future and, in addition, the Company's insurance may not be sufficient to cover large claims, or the insurer could disclaim coverage on claims.

Although the Company endeavours to work to rigorous standards, there is still the potential for the products to contain defects that may result in system failures. These defects or problems could result in the loss of or delay in generating revenue, loss of market share, failure to achieve market acceptance, diversion of development resources, injury to the Company's reputation or increased insurance costs.

If the Company fails to meet its clients' expectations, the Company's reputation could suffer and it could be liable for damages.

Further, the Company is exposed to the risk of catastrophic loss to necessary equipment or other facilities, which would have a serious impact on the Company's operations. The Company gives no assurance that all such risks will be adeauately managed through its insurance policies to ensure that catastrophic loss does not have an adverse effect on its performance.

10.11 Requiatory Risk

The introduction of new legislation or amendments to existing legislation by governments, developments in existing common law, or the respective interpretation of the legal requirements in any of the legal jurisdictions that govern the Company's operations or contractual obligations, could impact adversely on the assets, operations and, ultimately, the financial performance of the Company and its shares. In addition, there is a commercial risk that leagle action may be taken against the Company in relation to commercial matters.

$10.12$ Unforeseen Expenditure Risk

Expenditure may need to be incurred that has not been taken into account in the preparation of this Prospectus. Although the Company is not aware of any such additional expenditure requirements, if such expenditure is subsequently incurred, this may adversely affect the expenditure proposals of the Company.

10.13 Speculative Nature of Investment

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

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

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

$11$ FIIRTHER INFORMATION

$11.1$ Continuous Disclosure and Documents Available for Inspection

The Company is listed on ASX and its Shares are auoted on ASX. The Company is a disclosina entity under the Corporations Act and, as such, is subject to reaular reporting and disclosure requirements. As a listed company, the Company is subject to the Listing Rules that require it to immediately notify ASX of any information concerning the Company of which it is or becomes aware and which a reasonable person would expect to have a material effect on the price or value of Shares.

Copies of documents lodged in relation to the Company with the ASIC may be obtained from or inspected at any office of the ASIC.

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

The Company will provide a copy of all documents used to notify ASX of information relating to the Company under the provisions of the Listing Rules since termination of the Deed of Company Arrangement on or about 15 December 2005.

Date	Details
19 December 2005	Appendix 3B.
19 December 2005	Initial Director's Interest Notice.
19 December 2005	Initial Director's Interest Notice.
19 December 2005	Initial Director's Interest Notice.
20 December 2005	Distribution Schedule/Capital Structure.
20 December 2005	Top 20 Shareholders.
21 December 2005	Appointment of Company Secretary.
16 January 2006	Removal of Company from External Administration.
16 January 2006	Annual Financial Report for the year ended 30 June 2005.
18 January 2006	Reinstatement to Official Quotation
18 January 2006	Circular: Reinstatement to Official Quotation

$11.2$ Taxation

It is the responsibility of all persons to satisfy themselves of the particular taxation treatment that applies to them by consulting their own professional tax advisers before investing in the Shares. Taxation consequences will depend on particular circumstances. Neither the Company nor any of its officers accept any liability or responsibility in respect of the taxation consequences of the matters referred

to above or any other taxation consequences connected with an investment in the Shares in the Company.

$11.3$ Interests of Directors and Advisers

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

$(a)$ the promotion or formation of the Company;
$(b)$ property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the offer of securities pursuant to this Prospectus; or
$\overline{c}$ the offer of securities pursuant to this Prospectus.

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

Each of the Directors are currently paid a fee of \$2,000 per month (commencing from December 2005). None of the Directors are paid any other remuneration.

Director	Shares	Options*
Gamed Pty Ltd (an entity controlled by Mr Greg Fendis).	ΝïΙ	6,000,000
Romfal Sifat Pty Ltd (an entity controlled by Mr Faldi Ismail).	ΝÏ	6,000,000
Research and Development Consulting Services Pty Ltd as bare trustee - holds Options on trust for Mr Sachlan Fraval.	Nil	7,960,000 Options (6,000,000 of which are held on trust for Mr Sachlan Fraval)

The Directors' interests in Shares and Options at the date of this Prospectus are:

In addition to the above, Rofin Australia Pty Ltd (of which Mr Sachlan Fraval is a director and shareholder) holds 190,000,000 Shares. A significant proportion of these Shares may be transferred to various parties if certain conditions are met. Please refer to the Notice of Meeting for further details.

$11.4$ Interests of Experts and Advisers

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

the promotion or formation of the Company; $(a)$
$(b)$ property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the offer of securities

pursuant to this Prospectus: or

$\left( c\right)$ the offer of securities pursuant to this Prospectus,

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

Steinepreis Paganin have acted as solicitors to the Company and will be paid approximately \$10,000 for providing legal services in respect of the Prospectus. Subsequently, fees will be charged in accordance with normal charge out rates,

$11.5$ Consents

Persons who make statements in this Prospectus or who made statements in the Notice of Meeting which is being incorporated by reference into this Prospectus need to provide their written consent for such use.

Each of the parties referred to in this section 11.5:

$\alpha$ does not make, or purport to make, any statement in this Prospectus other than those referred to in this section; and
to the maximum extent permitted by law, expressly disclaim and take $(b)$ no responsibility for any part of this Prospectus other than a reference to its name and a statement included in this Prospectus with the consent of that party as specified in this section.

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

Stanton Partners Corporate Pty Ltd has consented to the incorporation by reference in this Prospectus of its independent expert's report as referred to in Section 7.2 of this Prospectus. Stanton Partners Corporate Pty Ltd does not make, or purport to make, any other statement in the Prospectus and to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any other part of the Prospectus. Stanton Partners Corporate Pty Itd has not withdrawn its consent prior to the lodgement of this Prospectus with ASIC.

$11.6$ Legal Proceedings

There is no litigation, arbitration or proceedings pending against or involving the Company as at the date of this Prospectus.

$11.7$ Expenses of the Issue

The total expenses of the Offer and the DOCA are estimated to be \$15,000 and are expected to be applied towards the items set out in the table below:

I Item of Expenditure	Amount (\$)
l ASIC Fees	2.010
Advisers' Fees	10.000
Miscellaneous	-2.090
TOTAL	15,000

$\overline{12}$ . AUTHORITY OF DIRECTORS

Each of the Directors has consented to the lodgement of this Prospectus with the ASIC in accordance with section 720 of the Corporations Act.

Dated the 24th day of January 2006

Faldi Ismail Director For and on behalf of Environmental Solutions International Limited

$13.$ DEFINITIONS

Applicant means a person who submits an Application Form.

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

ASIC means Australian Securities and Investments Commission.

ASX means Australian Stock Exchange Limited (ACN 008 624 691).

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

Business Day means a day other than a Saturday or Sunday on which banks are open for business in Perth, Western Australia.

CHESS means ASX Clearing House Electronic Subregistry System.

Closing Date means 5.00 p.m. WST on 27 January 2006 or (unless extended or closed early).

Company means Environmental Solutions International Limited (ABN 28 009 120 405).

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

Corporations Act means the Corporations Act 2001 (Cth).

Deed of Company Arrangement means the deed of company arrangement approved by creditors of the Company on 30 September 2005.

Directors means the directors of the Company from time to time.

Dollars or S means Australian dollars unless otherwise stated.

Enersludge Technology means the technology described in Sections 5.2 to 5.7 of this Prospectus.

Intellectual Property means the intellectual property that the Company has an interest in at the date of this Prospectus (including the Enersludge Technology) and also the intellectual property that the Company may obtain an interest in at some future point in time.

Listing Rules or ASX Listing Rules means the official Listing Rules of ASX.

Notice of Meeting means the notice of meeting lodged by the Company with ASIC on or about 21 October 2005.

Offer means the offer of Shares pursuant to this Prospectus.

Offer Period means the period commencing on the Opening Date and ending on the Closina Date.

Official List means the official list of ASX.

Opening Date means 24 January 2006.

Rofin means Rofin Australia Pty Ltd (ACN 005 425 507).

Quotation and Official Quotation means official quotation on ASX.

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

Shareholder means a holder of Shares.

WST means Western Standard Time, Perth, Western Australia.

APPLICATION FORM

ENVIRONMENTAL SOLUTIONS INTERNATIONAL LIMITED

ABN 28 009 120 405

The securities to which this application form (Application Form) relates are fully paid ordinary shares (Shares) in the capital of Environmental Solutions International Limited (Company). A prospectus containing informatio A person who gives another person access to the Application Form must at the same time and by the same means give the other person access to the Prospectus and any supplementary documents.

PLEASE READ ALL INSTRUCTIONS ON THE REVERSE OF THIS FORM



Joint Applicant #2 or

Joint Applicant #3 or

Postal Address (PLEASE PRINT) Street Number	Street


Suburb/Town						State		Post Code


ABN, Tax File Number or Exemption		Applicant #2				Applicant #3


CHESS HIN or Existing SRN (where applicable) Number of Shares applied for							Application Money enclosed at 10 cents per Share
				AS
I/We whose full name(s) and address appear above hereby apply for the number of Shares shown above (to be allocated to me/us by the Company in respect of this Application) under the Prospectus on the terms set out in the Prospectus.
Cheque Details:		Drawer	Experience: Bank			BSB or Branch		Commanded Amount
PLEASE ENTER
CHEQUE DETAILS THANKYOU
My/Our contact numbers in the case of inquiry are:
$\text{Telephone}$ ( )					$\textsf{Fast}(\cdot)$
Cheques should be made payable to 'Environmental Solutions International Limited-Share Offer Account, and crossed 'Not Negotiable'.

APPLECROSS WA 6153

GUIDE TO THE APPLICATION FORM

If an applicant has any questions on how to complete this Application Form, please telephone Security Transfer Registrars on (08) 9315 2333.

Application for Shares A.

The Application Form must only be completed in accordance with instructions included in the Prospectus.

В. Name of Applicant

Write the Applicant's FULL NAME. This must be either an individual's name or the name of a company. Please refer to the bottom of this page for the correct form of registerable title. Applications using the incorrect form of registerable title may be rejected.

$\mathbf{C}$ Name of Joint Applicants or Account Designation

If JOINT APPLICANTS are applying, up to three joint Applicants may register. If applicable, please provide details of the Account Designation in brackets. Please refer to the bottom of this page for instructions on the correct form of registerable title.

Ď. Address

Enter the Applicant's postal address for all correspondence. If the postal address is not within Australia, please specify Country after City/Town.

Contact Details E.

Please provide a contact name and davtime telephone number so that the Company can contact the Applicant if there is an irregularity regarding the Application Form.

CHESS HIN or existing SRN Details F.

The Company participates in CHESS. If the Applicant is already a participant in this system, the Applicant may complete this section with their existing CHESS HIN. If the applicant is an existing shareholder with an Issuer Sponsored account, the SRN for this existing account may be used. Otherwise leave the section blank and the Applicant will receive a new Issuer Sponsored account and statement.

G. Cheque Details

Make cheques payable to 'Environmental Solutions International Limited-Share Offer Account' in Australian currency and cross them 'Not Negotiable'. Cheques must be drawn on an Australian Bank. The amount of the cheque should agree with the amount shown on the Application Form.

Н. Declaration

This Application Form does not need to be signed. By lodging this Application Form and a cheque for the application money this Applicant hereby:

$(1)$ applies for the number of Shares specified in the Application Form or such lesser number as may be allocated by the Directors;
$\alpha$ agrees to be bound by the constitution of the Company;
$(3)$ authorises the directors of the Company to complete or amend this Application Form where necessary to correct any errors or omissions:
$(4)$ acknowledges that he/she has received a copy of the Prospectus attached to this Application Form or a copy of the Application Form before applying for the Shares; and
acknowledges that he/she will not provide another person with this Application Form unless it is attached to or accompanied by the $(5)$ Prospectus.

CORRECT FORMS OF REGISTRABLE TITLE

Note that ONLY legal entities are allowed to hold securities. Application Forms must be in the name(s) of a natural person(s), companies or other legal entities acceptable to the Company. At least one full given name and the sumame is required for each natural person. Application Forms cannot be completed by persons under 18 years of age. Examples of the correct form of registrable title are set out below.

Type of Investor	Correct Form of Registration	Incorrect Form of Registration
Individual Use given names in full, not initials	Mr John Alfred Smith	S&A Smith
Use the company's full title, not abbreviations Company	ABC Pty Ltd	ABSG P/L ABC Co Of
Joint Holdings	Mr Peter Robert Williams &	Peter Robert &
Use full and complete names	Ms Louise Susan Williams	Louise & Williams
Trusts	Mrs Susan Jane Smith	Sue Smith Family Trust
Use the trustee(s) personal name(s).
Deceased Estates	Ms Jane Mary Smith &	Estate of late John Smith
Use the executor(s) personal name(s).	Mr Frank William Smith
		John Smith Deceased
Minor (a person under the age of 18)	Mr John Alfred Smith	Master Peter Smit
Use the name of a responsible adult with an appropriate designation.
Partnerships	Mr John Robert Smith &	John Smith and Son
Use the partners personal names.	Mr Michael John Smith

Long Names.	Mr John William Alexander	Mr John WA Robertson-Smith
	Robertson-Smith
Clubs/Unincorporated Bodies/Business Names	Mr Michael Peter Smith	ABC Tennis Association
Use office bearer(s) personal name(s).
Superannuation Funds	Jane Smith Pty Ltd	ane Smith Pty Ltd Superannuation
Use the name of the trustee of the fund.		Fund