KNOSYS LIMITED — Capital/Financing Update 2017

Jun 20, 2017

Appendix 3B New issue announcement

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX’s property and may be made public.

Introduced 01/07/96 Origin: Appendix 5 Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

Knosys Limited

ABN

96 604 777 862

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1 +Class of+securities issued or to be issued 2 Number of+securities issued or to be issued (if known) or maximum number which may be issued 3 Principal terms of the +securities (e.g. if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)	Convertible Notes
	9,625,222
	Convertible Notes - Face value per note: 12 cents - Conversion ratio: 1 note = 1 ordinary share - Attaching option: 1:1 attaching option received on note conversion. - Maturity date of convertible note: 31 May 2018. - Conversion date of convertible note: Maturity date or earlier at the option of the noteholder - Interest payment date: At the earlier of maturity date or conversion date in cash - Interest rate: 10% per annum - Exercise price of an attaching option: 15 cents - Expiry date of an attaching option: 31 May 2018 Please also refer to Notice of General Meeting lodged with ASX on31 May2017

• See chapter 19 for defined terms.

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4 Do the+securities rank equally in all respects from the+issue date with an existing+class of quoted+securities? If the additional+securities do not rank equally, please state: • the date from which they do • the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment • the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 5 Issue price or consideration 6 Purpose of the issue (If issued as consideration for the acquisition of assets, clearly identify those assets) 6a Is the entity an+eligible entity that has obtained security holder approval under rule 7.1A? If Yes, complete sections 6b – 6h in relation to the+securities the subject of this Appendix 3B, and comply with section 6i 6b The date the security holder resolution under rule 7.1A was passed 6c Number of+securities issued without security holder approval under rule 7.1 6d Number of+securities issued with security holder approval under rule 7.1A	n/a
	12 cents
	Funds raised for the purpose of supporting the Company’s current sales, marketing and business development activities and initiatives, continued product development and its general working capital needs.
	Yes
	29 November 2016
	5,857,454
	3,767,768

• See chapter 19 for defined terms.

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6e Number of+securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting) 6f Number of+securities issued under an exception in rule 7.2 6g If+securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the +issue date and both values. Include the source of the VWAP calculation. 6h If+securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements 6i Calculate the entity’s remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements 7 +Issue dates Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A. Cross reference: item 33 of Appendix 3B. 8 Number and +class of all +securities quoted on ASX (_including_the +securities in section 2 if applicable)	Nil	Nil
	Nil
	Yes. Conversion price of notes is 12 cents per share. Notes were issued on 26 May 2017. Shares may be issued on conversion of notes, which conversion may occur on or before 31 May 2018. The attaching options, which arise on conversion of the convertible note have an exercise price of 15 cents. The exercise of which may occur on or before 31 May 2018. 15 day VWAP prior to date of issue of the notes was 14.5 cents. 75% of the VWAP is 10.9 cents. (VWAP calculated from daily trading information sourced from ASX website)
	n/a
	7.1 – Nil 7.1A – 274,403
	Convertible Notes issued – 26 May 2017
	Number	~~+~~Class
	27,199,386	Fully paid ordinary shares

• See chapter 19 for defined terms.

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9 Number and +class of all +securities not quoted on ASX (_including_the +securities in section 2 if applicable) 10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)	Number	~~+~~Class
	50,900,000 7,825,000 800,000 1,400,000 9,625,222	Fully paid ordinary shares escrowed for 24 months from listing date Options with exercise price of $0.25 vesting quarterly over 3 years. First vesting date was 1 July 2015. Options with exercise price of $0.29, vesting at various dates and/or performance hurdles. Options issued under the ESOP with exercise price of $0.25, vesting in three equal tranches over 3 years. First vesting date, 1 October 2017. Convertible notes Face value per note: 12 cents - Conversion ratio: 1 note = 1 ordinary share - Attaching option: 1:1 attaching option received on note conversion. - Maturity date of convertible note: 31 May 2018. - Conversion date of convertible note: Maturity date or earlier at the option of the noteholder - Interest payment date: At the earlier of maturity date or conversion date - Interest rate: 10% per annum - Exercise price of an attaching option: 15 cents - Expiry date of an attaching option: 31 May 2018
	Not applicable.

• See chapter 19 for defined terms.

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Part 2 - Pro rata issue

11 Is security holder approval required? 12 Is the issue renounceable or nonrenounceable? 13 Ratio in which the[+] securities will be offered 14 +Class of +securities to which the offer relates 15 +Record date to determine entitlements 16 Will holdings on different registers (or subregisters) be aggregated for calculating entitlements? 17 Policy for deciding entitlements in relation to fractions 18 Names of countries in which the entity has security holders who will not be sent new offer documents Note: Security holders must be told how their entitlements are to be dealt with. Cross reference: rule 7.7. 19 Closing date for receipt of acceptances or renunciations

• See chapter 19 for defined terms.

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20	Names of any underwriters
21	Amount of any underwriting fee
	or commission
22	Names of any brokers to the
	issue
23	Fee or commission payable to the
	broker to the issue
24	Amount of any handling fee
	payable to brokers who lodge
	acceptances or renunciations on
	behalf of security holders
25	If the issue is contingent on
	security holders’ approval, the
	date of the meeting
26	Date entitlement and acceptance
	form and offer documents will be
	sent to persons entitled
27	If the entity has issued options,
	and the terms entitle option
	holders to participate on
	exercise, the date on which
	notices will be sent to option
	holders
28	Date rights trading will begin (if
	applicable)
29	Date rights trading will end (if
	applicable)
30	How do security holders sell
	their entitlements_in full_through
	a broker?
31	How do security holders sell_part_
	of their entitlements through a
	broker and accept for the
	balance?

• See chapter 19 for defined terms.

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• 32 How do security holders dispose of their entitlements (except by sale through a broker)?

• 33 +Issue date

Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

• 34 Type of[+] securities ( tick one )

• (a) +Securities described in Part 1

• (b)[All other ][+][securities ]

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

• 35 If the[+] securities are[+] equity securities, the names of the 20 largest holders of the additional[+] securities, and the number and percentage of additional[+] securities held by those holders

• 36 If the[+] securities are[+] equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories

• 1 - 1,000

• 1,001 - 5,000

• 5,001 - 10,000

• 10,001 - 100,000

• 100,001 and over

• 37 A copy of any trust deed for the additional[+] securities

• See chapter 19 for defined terms.

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Entities that have ticked box 34(b)

38 Number of[+] securities for which +quotation is sought 39 +Class of +securities for which quotation is sought 40 Do the[+] securities rank equally in all respects from the[+] issue date with an existing[+] class of quoted +securities? If the additional[+] securities do not rank equally, please state: • the date from which they do • the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment • the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 41 Reason for request for quotation now Example: In the case of restricted securities, end of restriction period (if issued upon conversion of another[+] security, clearly identify that other[+] security)

42 Number and +class of all +securities quoted on ASX ( including the[+] securities in clause 38)

• See chapter 19 for defined terms.

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Quotation agreement

• 1 +Quotation of our additional +securities is in ASX’s absolute discretion. ASX may quote the[+] securities on any conditions it decides.

• 2 We warrant the following to ASX.

• The issue of the[+] securities to be quoted complies with the law and is not for an illegal purpose.

• There is no reason why those[+] securities should not be granted +quotation.

• An offer of the[+] securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any[+] securities to be quoted and that no-one has any right to return any[+] securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the[+] securities be quoted.

• If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the[+] securities be quoted.

• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.

• 4 We give ASX the information and documents required by this form. If any information or document is not available now, we will give it to ASX before +quotation of the +securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

==> picture [105 x 50] intentionally omitted <==

Sign here: ............................................................ (Company secretary)

Date: 21 June 2017

Print name: Stephen Kerr

== == == == ==

• See chapter 19 for defined terms.

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Appendix 3B – Annexure 1

Calculation of placement capacity under rule 7.1 and rule 7.1A for eligible entities

Introduced 01/08/12 Amended 04/03/13

Part 1

Rule 7.1 – Issues exceeding 15% of capital

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

• Insert number of fully paid[+] ordinary 78,099,386 securities on issue 12 months before the + issue date or date of agreement to issue Add the following: • Number of fully paid[+] ordinary securities Nil issued in that 12 month period under an exception in rule 7.2

• • Number of fully paid[+] ordinary securities Nil issued in that 12 month period with shareholder approval

• • Number of partly paid[+] ordinary Nil securities that became fully paid in that 12 month period

• Note: • Include only ordinary securities here – other classes of equity securities cannot be added

• • Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed

• • It may be useful to set out issues of securities on different dates as separate line items

• Subtract the number of fully paid[+] ordinary Nil securities cancelled during that 12 month period “A” 78,099,386

• See chapter 19 for defined terms.

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Step 2: Calculate 15% of “A”

“B”		0.15
		[Note: this value cannot be changed]
Multiply“A” by	0.15	11,714,908

Step 3: Calculate “C”, the amount of placement capacity under rule 7.1 that has already been used

• Insert number of[+] equity securities issued 5,857,454 convertible notes, with 5,857,454 or agreed to be issued in that 12 month attaching options to be received on note period not counting those issued: conversion, if the convertible note is converted.

• • Under an exception in rule 7.2 (refer to Part 2 below for balance of issued

• • Under rule 7.1A convertible notes and attaching options as applied against additional placement

• • With security holder approval under rule capacity under rule 7.1A) 7.1 or rule 7.4

• Note: • This applies to equity securities, unless specifically excluded – not just ordinary securities

• • Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed

• • It may be useful to set out issues of securities on different dates as separate line items

• “C” 11,714,908

Step 4: Subtract “C” from [“A” x “B”] to calculate remaining placement capacity under rule 7.1

placement capacity under rule 7.1
“A” x 0.15	11,714,908
Note: number must be same as shown in
Step 2
Subtract“C”	11,714,908
Note: number must be same as shown in
Step 3
Total[“A” x 0.15] – “C”	Nil
	[Note: this is the remaining placement
	capacity under rule 7.1]

• See chapter 19 for defined terms.

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Part 2

Rule 7.1A – Additional placement capacity for eligible entities Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

“A” 78,099,386 Note: number must be same as shown in Step 1 of Part 1 Step 2: Calculate 10% of “A” “D” 0.10 Note: this value cannot be changed Multiply “A” by 0.10 7,809,939

Step 3: Calculate “E”, the amount of placement capacity under rule 7.1A that has already been used

• Insert number of[+] equity securities issued or agreed to be issued in that 12 month period under rule 7.1A 3,767,768 convertible notes, with 3,767,768 attaching options to be received on note

• Notes: conversion, if the convertible note is • This applies to equity securities – not converted. just ordinary securities

• • Include here – if applicable – the securities the subject of the Appendix 3B to which this form is annexed

• • Do not include equity securities issued under rule 7.1 (they must be dealt with in Part 1), or for which specific security holder approval has been obtained

• It may be useful to set out issues of securities on different dates as separate line items

• “E” 7,535,536

• See chapter 19 for defined terms.

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Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A

Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A	Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A
“A” x 0.10 Note: number must be same as shown in Step 2	7,809,939
Subtract“E” Note: number must be same as shown in Step 3	7,535,536
Total[“A” x 0.10] – “E”	274,403 Note: this is the remaining placement capacity under rule 7.1A

• See chapter 19 for defined terms.

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