ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT
31 DECEMBER 2017
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CONTENTS
Corporate Directory
Chairman’s Letter
Directors’ Report
Auditor’s Independence Declaration
Financial Report
Directors’ Declaration
Independent Auditor’s Report
Corporate Governance Statement
Additional ASX Information
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CORPORATE DIRECTORY
Directors
Major General (ret) Ami Shafran – Non-Executive Chairman
Mr Nir Gabay – Managing Director
Mr David Furstenberg – Non-Executive Director
Mr Howard Digby – Non-Executive Director
Dr Anton Uvarov – Non-Executive Director
Company Secretaries
Mr Stephen Buckley
Mr Peter Webse
Registered Office
Level 2
46 – 50 Kings Park Road
West Perth WA 6005
AUSTRALIA
Ph: +61 8 6377 8043
Email: info@el-sight.com
Web: www.el-sight.com
Auditor
BDO Audit (WA) Pty Ltd
38 Station Street
PO Box 700
Subiaco WA 6008
AUSTRALIA
Legal Advisor
Steinepreis Paganin
Level 4, The Read Buildings
16 Milligan Street
Perth WA 6000
AUSTRALIA
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
ASX Limited
Level 40, Central Park
152-158 St Georges Terrace
Perth WA 6000
ASX Code – ELS
2
Dear Shareholder,
It is an honour and a privilege to be able to write this letter as Chairman of Elsight Limited which was listed on
the Australian Securities Exchange in June 2017. We are humbled and pleased with the support the Company
has received form investors, in the someway that we are excited at the way our products have been received by
Customers.
In calendar 2017 the company grew revenues slightly compared to the previous year while completing a listing
process and undergoing a significant business transformation. As the result of this transformation the company
is positioned well to capitalise on what we believe is significant opportunity for its multichannel technology
across a number of industry segments.
Elsight has already established itself in military, security and first responder markets, and has since made
concrete steps in the field of Telemedicine. The company is also planning its entry into the broadcast sector,
having received considerable interest from parties interested in the ability transmit high quality video over
cellular networks in “real time”. Subsequently the company has uncovered significant market needs for its
technology in the Autonomous Vehicle market, starting with the supply of low latency communications for test
vehicles of which there are thousands on the road today.
In order to properly plan and execute its strategy to address new verticals the company has returned to the
market to raise further investment.
We expect 2018 to be an exciting year, building on the progress made in 2017.
Sincerely,
Maj. Gen. (res) Ami Shafran
Chairman
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
Your Directors present their report, together with the financial statements of Elsight Limited (“the Company”) and controlled
entities (“the Group”) for the financial year ended 31 December 2017.
Directors
The names and the particulars of the Directors of the Company during or since the end of the financial year are:
Name
Status
Major General (ret) Ami Shafran
Non-Executive Chairman
Appointed
2 June 2017
2 June 2017
2 June 2017
Managing Director
Non-Executive Director
Non-Executive Director
13 December 2016
Non-Executive Director
13 December 2016
Resigned
-
-
-
-
-
Mr Nir Gabay
Mr David Furstenberg
Mr Howard Digby
Dr Anton Uvarov
Mr Nathan Barbarich
Non-Executive Director
13 December 2016
2 June 2017
Principal Activities
The principal continuing activities of the Group during the year was the development and commercialisation of multichannel
high-band-width-mobile-secured-datalink technology.
Dividends
There were no dividends paid or recommended during the financial year ended 31 December 2017 (2016: Nil).
Review of operations
Unless otherwise stated all figures in this report are in the Company’s presentation currency US$.
Elsight Limited had a loss for the year of $3,119,570 (2016: profit of $98,000). The 2017 loss included selling, general and
administrative expenses of $1,768,234 and non-cash share based payments of $806,890.
The net assets of the Group have increased by $2,782,823, from net liabilities of $1,418,000 at 31 December 2016 to net
assets of $1,364,823 at 31 December 2017.
As at 31 December 2017, the Group's cash and cash equivalents increased from a balance of $7,000 at 31 December 2016 to
a balance of $1,093,853. As at 31 December 2017 the Group has working capital of $1,227,548 (2016: working capital deficit
of $1,376,000).
Significant changes in the state of affairs
Acquisition of El-Sight Limited 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 (US$3,842,750) 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
(US$896,643) 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;
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
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•
•
•
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
grant date and an 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:
o
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).
o
o
Further information on the capital reorganisation is detailed in Notes 1 and 2 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.
Highlights during the year
During the year ended 31 December 2017, the Company had the following highlights.
ASX Listing
Elsight Limited was admitted to the Official List of ASX Limited and securities commenced on Thursday, 8 June 2017.
Since its listing and up until 31 December 2017, the Company has made the following material announcements:
•
•
•
•
•
•
•
15/06/2017 – Elsight Wins New Fleet Management Project in South Africa
10/08/2017 – Elsight Awarded Strategic Israeli Police & Government Tender
29/08/2017 – Hikvision and Elsight to form Strategic Alliance
03/10/2017 – Elsight to enter lucrative market of Autonomous Vehicles
04/10/2017 – Elsight and Alrena contract for emergency telemedicine joint solution comes in full force
06/11/2017 – Elsight Hosts Expert Cybersecurity Delegation from Australia
29/11/2017 – Elsight Unveils Civilian Vertical Market Solutions
Significant events after the reporting period
Since the reporting date the following significant events have occurred:
•
•
•
•
•
08/01/2018 – Automotive Robotic Industry Ltd places order
11/01/2018 – First purchase order received from autonomous car sector
22/01/2018 – Elsight technology critical to protecting US vice president
22/02/2018 – Elsight releases new Omnisight product
05/03/2018 – Institutional placement closes oversubscribed, to raise A$9,005,189 (before expenses of the offer) from
wholesale and institutional investors through the issue of 12,507,208 fully paid ordinary shares.
There were no other significant events after reporting date.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
Information on Directors
Major General (ret)
Ami Shafran
Non-Executive Chairman (Appointed 2 June 2017)
Qualifications
-
Experience
Major General Shafran is the former Heard of the Israeli Defence Force Information and
Communications Technology Command. In addition, he is currently the Head of the Centre for Cyber
Technology at Ariel University in Israel.
Over the course of his extensive career Major General Shafran held numerous prestigious and
prominent positions in the Defence and Intelligence forces of the Israeli Defence Force, including
serving as its Chief Scientist, service as Chief of Staff of the Ministry of Defence, and the Research and
Development Attache at the Israeli Embassy in Washington DC.
Interest in Shares and
Options at the date of
this report
Nil
Special Responsibilities Nil
Directorships held in
other listed entities
(last 3 years)
Nil
Mr Nir Gabay
Managing Director (Appointed 2 June 2017)
Qualifications
-
Experience
Nir is one of the founders of El-Sight Israel.
Commencing his career in the Israeli military, he has more than 20 years’ experience in
communications, security and surveillance including a mobile cellular provider, local municipality, and
high tech companies., and was previously a member of an Israeli Special Forces unit.
During the past ten years Nir has been involved in a number of technological and business
achievements. Among them is the establishment of El-Sight Israel, which was founded based on his
communications and security experiences.
26,052,974 Ordinary shares and 29,595,000 Performance Options expiring 2 June 2022 exercisable at
$0.20
Interest in Shares
and Options at the
date of this report
Special
Responsibilities
Directorships held in
other listed entities
(last 3 years)
Nil
Nil
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
Information on Directors
Mr David
Furstenberg
Non-Executive Director (Appointed 2 June 2017)
Qualifications
-
Experience
David has held various senior CEO, Chairman, Board member and VP Global sales positions in a number
of publicly traded and privately owned companies, including Comverse (NASDAQ: CNSI) and
Audiocodes (NASDAQ: AUDC), Enure, and Vista (a subsidiary of Israel Aerospace Industries).
Most recently David was the active Chairman at NovelSat and the CEO at InsurBit, as well as a director
of White Cyber Knight Ltd Insurix Inc., all companies involved in cyber and security businesses in some
form.
David has built a speciality in assisting with the turnaround of high tech companies through product
and market repositioning (as opposed to reduction in force).
Interest in Shares
and Options at the
date of this report
Special
Responsibilities
Directorships held in
other listed entities
(last 3 years)
Nil
Nil
Nil
Mr Howard Digby
Non-Executive Director (Appointed 13 December 2016)
Qualifications
Bachelor of Engineering (Mechanical) (Honours)
Experience
Interest in Shares
and Options
Special
Responsibilities
Directorships held in
other listed entities
(last 3 years)
Howard began his career at IBM and has spent 25 years managing technology related businesses in the
Asia Pacific region, of which 12 years were spent in Hong Kong. More recently, he was with The
Economist Group as Regional Managing Director. Prior to this, he held senior regional management
roles at Adobe and Gartner. Upon returning to Perth, Howard served as Executive Editor of WA
Business News and now spends his time as an advisor and investor, having played key roles in several
M&A and reverse takeover transactions.
1,708,334 Ordinary shares and 750,000 Options expiring 2 June 2020 exercisable at $0.30
Nil
4DS Memory Limited (current)
Omni Market Tide Limited (current)
HearMeOut Limited (resigned 11 September 2017)
Estrella Resources Ltd (resign 3 April 2017)
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
Information on Directors
Dr Anton Uvarov
Non-Executive Director (Appointed 13 December 2016)
Qualifications
PhD, MBA
Experience
Interest in Shares
and Options
Special
Responsibilities
Directorship held in
other listed entities
(last 3 years)
Mr Nathan
Barbarich
Anton has significant experience as an equity analyst both in Australia and overseas. Prior to moving
to Australia, he was with Citigroup Global Markets, where he spent two years as a member of the New
York based Healthcare team. Anton’s technical expertise and company knowledge spreads across a
variety of industries and spectrum of market capitalisations, with his particular interest in early stage
startups.
1,708,334 Ordinary shares and 750,000 Options expiring 2 June 2020 exercisable at $0.30
Nil
HearMeOut Limited (resigned 11 September 2017)
Actinogen Medical Limited (resigned 14 August 2017)
Non-Executive Director (Appointed 13 December 2016, Resigned 2 June 2017)
Qualifications
BComm (Property) & BComm (Law)
Experience
Nathan started his career in Stockbroking with ABN Amro in the 1990’s and has since held several
Director and Managing Director positions in Investment Banking and Corporate Finance leading many
recognisable transactions over those nearly 20 years. Nathan has been responsible for listing many
companies onto the ASX, AIM and LSE markets and has been Lead Manager to Capital Raisings in the
many hundreds of millions of dollars. With a particular focus on the small to mid-cap sectors Nathan
has been mandated by Companies in the Resources, Energy, Technology and Industrial sectors and has
held a number of Non-Executive Director positions across his career.
Interest in Shares
and Options
2,325,000 Ordinary shares and 1,000,000 Options expiring 2 June 2020 exercisable at $0.30 (as at the
date of resignation)
Special
Responsibilities
Directorship held in
other listed entities
(last 3 years)
Nil
Nil
Information on Key Management
Mr Roee Kashi
Vice President – Research and Development
Qualifications
-
Experience
Roee commenced his career in the Israeli Defence Force and has over nine years of experience and
expertise in building and developing digital video systems.
Roee has been responsible for some major technological achievements including the development of
the core software of El-Sight Israel’s DVR that is responsible for video encoding and transmission, user
interface design and construction of the system, handheld software development (Pocket PC,
Smartphone), moving cameras, smart searches, and send notification email recordings to name a few.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
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Information on Company Secretaries
Mr Stephen Buckley Company Secretary
Qualifications
GAICD
Experience
Mr Buckley has over 35 years’ experience in financial markets and is managing director of Company
Secretary Solutions Pty Ltd, a company specialising in providing company secretarial, corporate
governance and corporate advisory services. In the 20 years prior to starting his own business, Mr
Buckely has held executive and senior leadership roles in partnership management and business
development.
Mr Peter Webse
Company Secretary
Qualifications
B.Bus, FGIA, FCPA, MAICD
Experience
Mr Webse has over 25 years’ company secretarial experience and is managing director of Platinum
Corporate Secretariat Pty Ltd, a company specialising in providing company secretarial, corporate
governance and corporate advisory services. Mr Webse holds a Bachelor of Business with a double
major in Accounting and Finance, is a Fellow of the Governance Institute of Australia, a Fellow
Certified Practicing Accountant and a Member of the Australian Institute of Company Directors.
Meetings of Directors
The number of formal meetings of Directors held during the period and the number of meetings attended by each director
was as follows:
Ami Shafran
Nir Gabay
Appointed 2 June 2017
Appointed 2 June 2017
David Furstenberg
Appointed 2 June 2017
Howard Digby
Anton Uvarov
Appointed 13 December 2016
Appointed 13 December 2016
Nathan Barbarich
Appointed 13 December 2016, Resigned 2 June 2017
DIRECTORS’ MEETINGS
Number eligible
to attend
Number
Attended
5
5
5
5
5
-
5
5
5
5
5
-
Options
Unissued shares under option
At the date of this report, the unissued ordinary shares of Elsight Limited under option are as follows:
Expiry Date
2 June 2020
2 June 2022
2 June 2022
Issue Date
2 June 2017
2 June 2017
2 June 2017
9 October 2022
29 December 2017
14 November 2022
9 January 2018
Exercise Price
Number Under Option
A$0.30
A$0.20
A$0.20
A$0.60
$A1.08
7,000,000
30,000,000
8,608,000
211,000
25,000
45,844,000
No option holder has any right under the options to participate in any other share issue of the Company or of any other entity.
No options were exercised during the year (2016: Nil).
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
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Proceedings on Behalf of Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to
which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings.
The Company was not a party to any such proceedings during the year.
Indemnifying Officers
The Company indemnifies each of its Directors, officers and company secretary. The Company indemnifies each director or
officer to the maximum extent permitted by the Corporations Act 2001 from liability to third parties, except where the liability
arises out of conduct involving lack of good faith, and in defending legal and administrative proceedings and applications for
such proceedings.
The Company must use its best endeavours to insure a director or officer against any liability, which does not arise out of
conduct constituting a wilful breach of duty or a contravention of the Corporations Act 2001. The Company must also use its
best endeavours to insure a Director or officer against liability for costs and expenses incurred in defending proceedings
whether civil or criminal.
Insurance Premiums
During the year the Company paid insurance premiums to insure directors and officers against certain liabilities arising out of
their conduct while acting as an officer of the Group. Under the terms and conditions of the insurance contract, the nature
of the liabilities insured against and the premium paid cannot be disclosed.
Environmental Regulations
In the normal course of business, there are no environmental regulations or requirements that the Company is subject to.
Likely Developments and Expected Results of Operations
The Company’s principal continuing activity is the development and commercialisation of multichannel high-band-width-
mobile-secured-datalink technology. The Company’s future developments, prospects and business strategies are to continue
to develop and commercialise this technology.
Indemnification of Auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, BDO Audit (WA) Pty Ltd, as part of the
terms of its audit engagement agreement against claims by third parties arising from their report on the financial report.
Non-audit Services
During the year, BDO Audit (WA) Pty Ltd, the Company’s auditor provided non-audit services of US$10,891 in relation to the
Investigating Accountant’s Report. Full details of their remuneration can be found within the financial statements at Note 7
Auditor’s Remuneration.
In the event that non-audit services are provided by BDO (WA) Pty Ltd, the Board has established certain procedures to ensure
that the provision of non-audit services are compatible with, and do not compromise, the auditor independence
requirements of the Corporations Act 2001. These procedures include:
•
•
non-audit services will be subject to the corporate governance procedures adopted by the Company and will be
reviewed by the Board to ensure they do not impact the integrity and objectivity of the auditor; and
ensuring non-audit services do not involve reviewing or auditing the auditor’s own work, acting in a management or
decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.
Auditor’s Independence Declaration
The auditor’s independence declaration for the year ended 31 December 2017 has been received and can be found on page
19 of the financial report.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
Remuneration Report (Audited)
This remuneration report for the year ended 31 December 2017 outlines the remuneration arrangements of the Group in
accordance with the requirements of the Corporations Act 2001 (Cth), as amended (Act) and its regulations. This information
has been audited as required by section 308(3C) of the Act.
The remuneration report is presented under the following sections:
Introduction
1.
2. Remuneration governance
3. Executive remuneration arrangements
4. Non-executive Director fee arrangements
5. Details of remuneration
6. Additional disclosures relating to equity instruments
7.
Loans to key management personnel (KMP) and their related parties
8. Other transactions and balances with KMP and their related parties
1.
Introduction
Key Management Personnel (KMP) have authority and responsibility for planning, directing and controlling the major
activities of the Group. KMP comprise the directors of the Company and identified key management personnel.
Compensation levels for KMP are competitively set to attract and retain appropriately qualified and experienced directors
and executives. The Board may seek independent advice on the appropriateness of compensation packages, given trends in
comparable companies both locally and internationally and the objectives of the Group’s compensation strategy.
Key management personnel covered in this report are as follows:
Name
Status
Major General (ret) Ami Shafran
Non-Executive Chairman
Mr Nir Gabay
Mr David Furstenberg
Mr Howard Digby
Dr Anton Uvarov
Appointed
2 June 2017
2 June 2017
2 June 2017
Managing Director
Non-Executive Director
Non-Executive Director
13 December 2016
Non-Executive Director
13 December 2016
Resigned
-
-
-
-
-
Mr Nathan Barbarich
Non-Executive Director
13 December 2016
2 June 2017
Mr Roee Kashi
Vice President – Research
and Development
2 June 2017
-
2. Remuneration governance
The Directors believe the Company is not currently of a size nor are its affairs of such complexity as to warrant the
establishment of a separate remuneration committee. Accordingly, all matters are considered by the full Board of Directors,
in accordance with a remuneration committee charter.
During the financial year, the Company did not engage any remuneration consultants.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
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3. Executive remuneration arrangements
The compensation structures are designed to attract suitably qualified candidates, reward the achievement of strategic
objectives, and achieve the broader outcome of creation of value for shareholders. Compensation packages may include a
mix of fixed compensation, equity-based compensation, as well as employer contributions to superannuation funds. Shares
and options may only be issued subject to approval by shareholders in a general meeting.
At the date of this report the Company has two appointed executives, Mr Nir Gabay as Managing Director and Mr Roee Kashi
as Vice President – Research and Development. The terms of their Executive Employment Agreements with Elsight Limited
are summarised in the following table.
Executive Name
Mr Nir Gabay
Mr Roee Kashi
Services Agreement Summary
•
•
•
•
•
•
Executive salary of ILS440,000 per annum (based on the exchange rate at the date of this
report, equals approximately US$127,000 per annum).
Reimbursement of reasonable business expenses incurred in the ordinary course of the
business in accordance with the Group’s reimbursement policies.
The agreement commenced on 5 April 2017 and may be terminated by either party on 12
months’ notice, but is for a minimum period of three years. It may be terminated
immediately with justifiable cause.
Executive salary of ILS420,000 per annum (based on the exchange rate at the date of this
report, equals approximately US$121,000 per annum).
Reimbursement of reasonable business expenses incurred in the ordinary course of the
business in accordance with the Group’s reimbursement policies.
The agreement commenced on 6 April 2017 and may be terminated by either party on
180 days’ notice. It may be terminated immediately with justifiable cause.
At this stage the Board does not consider the Group’s earnings or earnings related measures to be an appropriate key
performance indicator (KPI). In considering the relationship between the Group’s remuneration policy and the consequences
for the Company’s shareholder wealth, changes in share price are analysed as well as measures such as successful completion
of business development and corporate activities.
Performance Conditions Linked to Remuneration
The Group has established and maintains Employee Limited Employee Share Option Plan (Plan) to provide ongoing incentives
to Eligible Participants of the Company. Eligible Participants include:
•
•
•
•
a Director (whether executive or non-executive) of any Group Company;
a full or part time employee of any Group Company;
a casual employee or contractor of a Group Company; or
a prospective participant, being a person to whom the Offer was made but who can only accept the Offer if
arrangement has been entered into that will resulting in the person becoming an Eligible Participant.
The Board adopted the Plan to allow Eligible Participants to be granted Options to acquire shares in the Company.
The purpose of the Plan is to assist in the reward and motivation of Eligible Participants and link the reward of Eligible
Participants to performance and the creation of Shareholder value. It is designed to align the interest of Eligible Participants
more closely to the interests of Shareholders by providing an opportunity for Eligible Participants to receive shares. It provides
the Eligible Participants with the opportunity to share in any future growth in value of the Company and provides greater
incentives for Eligible Participants to focus on the Company’s longer term goals. A total of 38,608,000 Options were issued
to executives under the Plan during the 2017 financial year (2016: nil).
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
4. Non-executive Director fee arrangements
The Board policy is to remunerate Non-executive Directors at a level to comparable companies for time, commitment, and
responsibilities. Non-executive Directors may receive performance related compensation. Directors’ fees cover all main Board
activities and membership of any committee. The Board has no established retirement or redundancy schemes in relation to
Non-executive Directors.
The maximum aggregate amount of fees that can be paid to Non-executive Directors is presently limited to an aggregate of
AU$500,000 (US$390,245) per annum and any change is subject to approval by shareholders at the General Meeting. Fees
for Non-executive Directors are not linked to the performance of the Company. However, to align Directors’ interests with
shareholder interests, the Directors are encouraged to hold shares in the Company.
Total fees for the Non-executive Directors for the financial year were $87,304 (2016: nil) and cover main Board activities only.
Non-executive Directors may receive additional remuneration for other services provided to the Group.
All non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The
letter summarises the board policies and terms, including remuneration, relevant to the office of director.
5. Details of Remuneration
The Key Management Personnel of Elsight Limited includes the current and former Directors of the Company and Key
Management Personnel of Elsight during the year ended 31 December 2017.
31-Dec-17
Directors:
Ami Shafran
Nir Gabay
David Furstenberg
Howard Digby
Anton Uvarov
Nathan Barbarich
Key management:
Roee Kashi
Short Term
Salary, Fees &
Commissions
Post-
Employment
Retirement
Benefits
US$
US$
Non-
monetary
benefits
US$
Other(i)
Share-based
payments(ii)
Total
Performance
based
remuneration
US$
US$
US$
21,826
142,515
21,826
21,826
21,826
-
115,311
345,130
-
18,746
-
5,540
-
-
8,813
579,056
-
-
-
17,295
36,041
-
-
-
-
5,540
-
-
-
-
-
-
21,826
754,670
21,826
21,826
21,826
-
77%
-
-
-
-
10,193
19,006
223,509
366,308
61%
802,565
1,208,282
(i) Israeli social benefits.
(ii)Share-based payment expense is recorded pro-rata over the vesting period. Refer to Section 6 Additional disclosures
relating to equity instruments for further information on share based payments granted to directors and key management
during the year.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
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31-Dec-16
Directors:
Ami Shafran
Nir Gabay
David Furstenberg
Howard Digby
Anton Uvarov
Nathan Barbarich
Key management:
Roee Kashi
Total
(i)Israeli social benefits.
Short Term
Salary, Fees &
Commissions
US$
Post-
Employment
Retirement
Benefits
US$
Other(i)
Share-based
payments
Total
US$
US$
US$
Performance
based
remuneration
-
103,818
-
14,801
-
6,926
-
-
-
-
-
-
-
-
-
-
-
-
104,266
208,084
13,198
27,999
7,276
14,202
-
-
-
-
-
-
-
-
-
125,545
-
-
-
-
124,740
250,285
-
-
-
-
-
-
-
-
6. Additional disclosures relating to equity instruments
KMP Shareholdings
There were no shares issued as remuneration or on the exercise of options during the 2017 financial year (2016: nil).
The number of ordinary shares in Elsight Limited held by each KMP of the Group during the financial year is as follows:
31-Dec-17
Directors:
Ami Shafran
Nir Gabay
David Furstenberg
Howard Digby
Anton Uvarov
Nathan Barbarich
Key management:
Roee Kashi
Total
Balance at
start of the
year
Shares
issued
during the
year(i)
Shares
issued
during the
year(ii)
Shares
issued
during the
year(iii)
Other
changes
during the
year
Balance at
end of the
year
-
-
-
-
1
-
-
1
-
-
-
1,500,000
1,500,000
2,325,000
-
26,052,974
-
-
-
-
-
-
-
208,334
208,334
-
-
-
-
-
(1)
(2,325,000)(iv)
-
26,052,974
-
1,708,334
1,708,334
-
-
5,325,000
2,894,775
28,947,749
-
416,668
-
(2,325,001)
2,894,775
32,364,417
(i)On 13 December 2016, the date of incorporation of Elsight Limited, the issued capital of Elsight Limited was 1 ordinary
share. In January and February 2017 share splits occurred resulting in the division of the 1 ordinary share into 10,000,000
ordinary shares. As a result of the splits, 1,500,000 shares were issued to each of Lamma Nominees Pty Ltd and Yulia Uvarov
and 2,325,000 shares were issued to GNat Pty Ltd. Lamma Nominees Pty Ltd is a related party
of Howard Digby by virtue of being controlled by his spouse. Yulia Uvarov is the Trustee for the Techinvest Nominees and
is a related party of Anton Uvarov by virtue of being controlled by his spouse. GNat Pty Ltd is an entity controlled by Nathan
Barbarich.
(ii)Shares issued to key management personnel as consideration for their shareholding in El-Sight Ltd.
(iii)Shares issued in respect of the conversion of Elsight Limited convertible notes totaling 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.
(iv)Mr Barbarich resigned on 2 June 2017 and is not considered to be a KMP from this date.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
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Options awarded, vested and lapsed during the year
The tables below disclose the number of share options granted, vested or lapsed during the year.
Share options do not carry any voting or dividend rights, and can only be exercised once the vesting conditions have been
met, until their expiry date.
KMP Options Holdings
The number of options over ordinary shares held by each KMP of the Group during the financial year is as follows:
31-Dec-17
Directors:
Ami Shafran
Nir Gabay
David Furstenberg
Howard Digby
Anton Uvarov
Nathan Barbarich
Key management:
Roee Kashi
Total
Balance
at the
start of
the
year
Granted as
remuneration
during the
year(i)
Exercised
during
the year
Options
issued
during
the
year(ii)
Other
changes
during the
year(iii)
Balance at
the end of
the year
Vested
and
exercisable
Unvested
and un-
exercisable
-
-
-
-
-
-
-
-
-
29,595,000
-
-
-
-
9,013,000
38,608,000
-
-
-
-
-
-
750,000
-
-
750,000
- 1,000,000
-
-
- 29,595,000
-
-
-
750,000
-
750,000
(1,000,000)
-
-
-
-
29,595,000
750,000
750,000
-
-
-
-
-
-
- 2,500,000
9,013,000
(1,000,000) 40,108,000
-
-
1,500,000
9,013,000
38,608,000
(i)Refer terms and conditions of the share-based payment arrangements section below for details of remuneration options
issued during the year.
(ii)Options issued to key management personnel in their capacity as seed investors and lead manager.
(iii)Mr Barbarich resigned on 2 June 2017 and is not considered to be a KMP from this date.
Year ended 31 December 2016
There were no options on issue during the 2016 financial year.
Terms and conditions of the share-based payment arrangements
The terms and conditions of each grant of options affecting remuneration in the current or a future reporting are as follows:
Option class
Number
granted
Grant
Date
Vesting
and
exercise
date(i)
Expiry
date
Exercise
price
Value per
option at
grant
date(iii)
Vested
%
ESOP Options
8,608,000 2-Jun-17
(ii)
2-Jun-22
A$0.20
US$0.104
Class A Performance Options
10,000,000 2-Jun-17
7-Jun-18
2-Jun-22
A$0.20
US$0.104
Class B Performance Options
10,000,000 2-Jun-17
7-Jun-19
2-Jun-22
A$0.20
US$0.104
Class C Performance Options
10,000,000 2-Jun-17
7-Jun-20
2-Jun-22
A$0.20
US$0.104
-
-
-
-
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
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(i)The vesting and exercise dates of the Performance Options are based on the definition of Year set out below.
Vesting of Performance Options is subject to achievement of the following performance milestones:
Option Class
Performance Milestone
Class A
Performance
Options
Class B
Performance
Options
Class C
Performance
Options
Class A 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(a) 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 B 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(a).
Class C Performance Options will vest and become exercisable upon the Company
achieving aggregate revenue of A$10,000,000 from total sale of products based on the
Technology in a Year(a).
Assessed
likelihood of
milestone
achievement
75%
50%
-
(a)The term Year shall mean one of: (a) the time period commencing 1 January 2017 and ending on the 12 month
anniversary of the completion of the IPO; (b) the 12 month period immediately after the end of the first year, and
(c) the 12 month period immediately after the end of the second Year.
(ii)50% of the 8,608,000 options vest on 2 June 2019, with an additional 6.25% vesting at the end of each quarter of
continuous service thereafter. There are no performance milestones applicable to the ESOP Options.
(iii)The value per option at grant date has been determined using a Black Scholes option pricing model. Details of Black
Scholes inputs and valuations can be found at Note 20. Share-based payment expense is recorded pro-rata over the vesting
period.
31-Dec-17
Directors:
Nir Gabay
Key management:
Roee Kashi
Fair value of
options
granted
during the
year
Value of
options
vested during
the year
Value of
options
lapsed during
the year
US$
US$
US$
Value of
options
included in
remuneration
report for the
year
US$
3,070,611
935,138
-
-
-
-
579,056
223,509
Remuneration
consisting of
options for the
year
US$
77%
61%
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
DIRECTORS’ REPORT
7.
Loans from key management personnel (KMP) and their related parties
Details of loans made to the Group by directors and key management are set out below.
Name
Directors:
Nir Gabay
Howard Digby
Anton Uvarov
Balance at
the start of
the year
US$
66,527
25,000
25,000
Interest
paid and
payable for
the year
US$
Interest not
charged
Repayments
made during
the year
US$
US$
Converted
to equity
during the
year(i)
US$
Balance
at the end
of the
year
US$
Highest
indebtedness
during the
year
US$
-
(i)
(i)
-
(i)
(i)
(66,527)
-
-
-
(25,000)
(25,000)
-
-
-
66,527
25,000
25,000
(i) Shares were issued in respect of the conversion of Elsight Limited convertible notes totaling 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$0.12 per share (a 40% discount to the offer issue price).
8. Other transactions and balances with KMP and their related parties
Transactions with related parties are entered into on terms equivalent to those that prevail in arm’s length transactions. The
Group had the following transactions with members of the Group’s key management personnel and/or their related parties
during the year.
Entity /
Key management personnel
Nature of transaction
Nir Gabay
Nir Gabay
Issue of 26,052,974 ordinary shares(i)
Interest(ii)
Susana Gabay / Nir Gabay
Salary and salary related expenses
Eden Gabay / Nir Gabay
Professional services
Howard Digby
Howard Digby
Lamma Nominees Pty Ltd/
Issue of 208,334 ordinary shares(iii)
Issue of 750,000 options(iv)
Issue of 1,500,000 ordinary shares(v)
Howard Digby
Anton Uvarov
Anton Uvarov
Yulia Uvarov
/
Anton Uvarov
Roee Kashi
Nathan Barbarich
GNat Pty Ltd /
Nathan Barbarich
RM Corporate Finance Pty Ltd /
Nathan Barbarich
RM Corporate Finance Pty Ltd /
Nathan Barbarich
Issue of 208,334 ordinary shares(iii)
Issue of 750,000 options(iv)
Issue of 1,500,000 ordinary shares(v)
Issue of 2,894,775 ordinary shares(i)
Issue of 1,000,000 options(iv)
Issue of 2,325,000 ordinary shares(v)
Corporate advisory fees paid
Capital raising fees paid
271,000
Transaction
value
US$
-
16,774
21,370
1,860
32,023
52,425
0.13
32,023
52,425
0.13
-
69,900
0.13
89,465
Payable
balance
US$
-
16,774
-
-
-
-
-
-
-
-
-
-
-
-
-
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Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY PHILLIP MURDOCH TO THE DIRECTORS OF ELSIGHT LIMITED
As lead auditor of Elsight Limited for the year ended 31 December 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 audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Elsight Limited and the entities it controlled during the period.
Phillip Murdoch
Director
BDO Audit (WA) Pty Ltd
Perth, 28 March 2018
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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
19
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
Revenue
Cost of sales
Gross profit
Other income
Selling, general and administrative expenses
Share based payments
Acquisition and listing costs
Loss on disposal of plant and equipment
Profit/(Loss) before finance expenses
Finance expenses
Profit/(Loss) before income tax
Income tax expense
Profit/(Loss) for the year
Note
3
3
4
20
4
2017
US$
941,000
2016
US$
932,000
(417,461)
(105,000)
523,539
4,433
827,000
13,000
(1,768,234)
(661,000)
(806,890)
(153,374)
(14,453)
(2,214,979)
(904,591)
(3,119,570)
-
(3,119,570)
-
-
-
179,000
(81,000)
98,000
-
98,000
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation, net of tax
18(d)
(184,005)
(20,000)
Total comprehensive income/(loss) for the year attributable to owners
of the Company
(3,303,575)
78,000
Earnings/(loss) per Share attributable to owners of the Company
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
8
8
(3.74)
(3.74)
0.12
0.12
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with
the accompanying notes.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventory
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Plant and equipment
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Borrowings
Convertible loans
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Provision for employees’ severance benefits
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS/(LIABILITIES)
SHAREHOLDERS’ EQUITY/ (DEFICIT)
Issued capital
Reserves
Accumulated losses
SHAREHOLDERS’ EQUITY/ (DEFICIT)
Note
9 a
10
11
12
13
14
15
16
15
17
18
19
2017
US$
1,093,853
568,745
203,485
-
1,866,083
254,736
48,829
303,565
2,169,648
581,255
57,280
-
638,535
126,656
39,634
166,290
804,825
2016
US$
7,000
157,000
310,000
37,000
511,000
59,000
-
59,000
570,000
1,110,000
110,000
667,000
1,887,000
65,000
36,000
101,000
1,988,000
1,364,823
(1,418,000)
5,091,738
847,655
(4,574,570)
1,364,823
5,000
32,000
(1,455,000)
(1,418,000)
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2017
Issued Capital
Accumulated losses
Share Based
Payment Reserve
Foreign Exchange
Reserve
Predecessor
Accounting Reserve
US$
5,000
-
-
-
5,000
5,000
-
-
-
5,842,132
(755,394)
-
-
5,091,738
US$
US$
US$
US$
(1,553,000)
98,000
-
98,000
(1,455,000)
(1,455,000)
(3,119,570)
-
(3,119,570)
-
-
-
-
(4,574,570)
-
-
-
-
-
-
-
-
-
-
-
1,296,456
-
1,296,456
52,000
-
(20,000)
(20,000)
32,000
32,000
-
(184,005)
(184,005)
-
-
-
-
(152,005)
-
-
-
-
-
-
-
-
-
-
-
-
(296,796)
(296,796)
Total
US$
(1,496,000)
98,000
(20,000)
78,000
(1,418,000)
(1,418,000)
(3,119,570)
(184,005)
(3,303,575)
5,842,132
(755,394)
1,296,456
(296,796)
1,364,823
Balance at 1 January 2016
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for
the year
Balance at 31 December 2016
Balance at 1 January 2017
Loss for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for
the year
Transactions with owners in their
capacity as owners:
Issue of shares
Capital raising costs
Share based payments
Transactions under common control(i)
Balance at 31 December 2017
The above Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes.
(i) As a result of the common control transaction, an equity account called ‘Predecessor Account Reserve’ exists. This equity account represents the carrying value of the net liabilities acquired.
See Note 2 for further details of the acquisition.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Other income
Note
2017
US$
2016
US$
719,307
905,000
(2,668,717)
(706,000)
4,433
(91,186)
-
-
(81,000)
13,000
Net cash provided by/(used in) operating activities
9 b
(2,036,163)
131,000
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment
Purchase of intangible assets
Proceeds from disposal of plant and equipment
Payments for pledged deposits
Loan proceeds received from the Company prior to acquisition date
Cash held by the Company at acquisition date
2 a
(173,957)
(4,000)
(50,000)
-
(35,644)
366,178
18,993
-
17,000
(5,000)
-
-
Net cash provided by investing activities
125,570
8,000
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from the issue of shares
Proceeds from bank loans
Proceeds convertible loans
Repayment of convertible loans
Repayment of borrowings
Net cash provided by/(used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Foreign exchange
3,556,279
93,238
-
-
-
32,000
(399,935)
-
(235,521)
(120,000)
3,014,061
(88,000)
1,103,468
7,000
51,000
5,000
(16,615)
(49,000)
Cash and cash equivalents at the end of the financial year
9 a
1,093,853
7,000
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
These consolidated financial statements cover Elsight Limited (Company) and its controlled entities as a consolidated entity
(also referred to as Group). Elsight Limited is a company limited by shares, incorporated and domiciled in Australia. The Group
is a for-profit entity.
The financial statements were issued by the board of directors on 28 March 2018 by the directors of the Company.
The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation and
presentation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation of the financial report
a) Statement of Compliance
These financial statements are general purpose financial statements which have been prepared in accordance with Australian
Accounting Standards (AASBs) (including Australian interpretations) adopted by the Australian Accounting Standard Board
(AASB) and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the Australian Accounting Standards Board has concluded
would result in financial statements containing relevant and reliable information about transactions, events and conditions.
Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with
International Financial Reporting Standards.
b) Basis of Measurement and Reporting Conventions Including Capital Reorganisation
The financial statements, except for cash flow information, have been prepared on an accruals basis and are based on
historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets
and financial liabilities. The amounts presented in the financial statements have been rounded off to the nearest dollar unless
stated otherwise.
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 El-Sight Ltd received the same
proportion of equity instruments in ELS.
Consequently, this 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 31 December 2017; and
the consolidated Group position as at 31 December 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 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. Comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
c)
Principles of Consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December
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,
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 profit or loss and other 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, income, expenses 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.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
d)
Income Tax
Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable
income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured
at the amounts expected to be paid to (recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as
well unused tax losses.
Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when
the tax relates to items that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been
fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition
of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement
also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or
liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is
probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures,
deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be
controlled and it is not probable that the reversal will occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net
settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and
liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended
that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods
in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.
e)
Leases
Leases are classified at their inception as either operating or finance leases based on economic substance of the agreement
so as to reflect the risks and benefits incidental to ownership.
Operating Leases
The minimum lease payments made under operating leases are charged against profits in equal installments over the
accounting periods covered by the lease term where the lessor effectively retains substantially all of the risks and benefits of
ownership of the leased item.
The cost of improvements to or on leased property is capitalized, disclosed as leasehold improvements and amortised.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Finance leases
Leases which effectively transfer substantially all of the risks and rewards incidental to ownership of the leased item to the
Company are capitalised at the present value of the minimum lease payments and disclosed as property, plant and equipment
under lease. A lease liability of equal value is also recognised.
Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term.
Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest
expense calculated using the interest rate implicit in the lease and recognised directly in net profit.
f)
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.
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.
(i)
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.)
(ii) Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.
Gains or losses are recognised in profit or 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.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Derecognition
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.
g)
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.
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.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
h) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits available on demand with banks with original maturity of three
months or less.
i)
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less allowance for impairment. Trade receivables are generally due for settlement within 30 days.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off
by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when
there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of
the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade
receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and
the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to
short-term receivables are not discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in the statement of profit or loss and other comprehensive income within
impairment losses – financial assets. When a trade receivable for which an impairment allowance had been recognised
becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of
amounts previously written off are credited against impairment losses – financial assets in the statement of profit or loss and
other comprehensive income.
j)
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.
k) Revenue Recognition
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.
l) Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin.
m) 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.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
n) Goods and Services Tax (GST)
Revenues, expenses, and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Australian Tax Office (ATO).
Receivable and payables are stated inclusive of the amount of GST receivable or payable. The net amount of the GST
recoverable from, or payable to, the ATO is included with other receivables and payables in the statement of financial
position.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and
financing activities, which are disclosed as operating cash flows.
o) 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.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 share-based payment.
p) Trade and other payables
Liabilities for trade creditors and other amounts carried at cost which is the fair value of the consideration to be paid in the
future for goods and services received, whether or not billed to the Group. Interest, when charged by the lender, is
recognised as an expense on an accruals basis.
q) 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.
r)
Equity and reserves
Share capital represents the fair value of shares that have been issued. Any transaction costs associated with the issuing of
shares are deducted from share capital, net of any related income tax benefits. The option reserve records the value of
share-based payments.
s)
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 USA dollars which is the
Parent’s functional currency.
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 continue 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 recognized other comprehensive Income; otherwise the exchange
difference is recognised in profit or loss.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
t)
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 Group’s sole operating segment is consistent with the presentation of these consolidated financial statements.
u)
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.
v) 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.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
w)
Intangible assets
Development costs that are directly attributable to the design and testing of identifiable and unique products controlled by
the Group are recognised as intangible assets when the following criteria are met:
•
it is technically feasible to complete the product so that it will be available for use;
• management intends to complete the product and use or sell it;
•
there is an ability to use or sell the product;
•
•
•
it can be demonstrated how the product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the product are
available, and
the expenditure attributable to the product during its development can be reliably measured.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready
for use.
Research expenditure and development expenditure that do not meet the criteria in set out above are recognised as an
expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent
period.
x) 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.
y) Critical Accounting Estimates and Judgements
The directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge
and best available current information. Estimates assume a reasonable expectation of future events and are based on
current trends and economic data, obtained both externally and within the Group.
Key Estimates and judgements
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 Note 2 for additional information.
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.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 20.
NOTE 2: 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 1(b) Basis of measurement and reporting conventions, including capital reorganisation; 1(x) Predecessor
accounting; and 1(y) 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
2017
US$
18,993
32,494
7,989
369,986
(208,174)
(518,084)
(296,796)
(296,796)
(296,796)
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 3: REVENUE
Local
Export
Total revenue
2017
US$
500,080
440,920
941,000
2016
US$
642,000
290,000
932,000
NOTE 4: EXPENSES
Profits/(Loss) before income tax from continuing operations includes the
following specific expenses:
2017
US$
2016
US$
Selling, general and administrative expenses:
-
-
-
-
-
-
-
Salaries and related expenses
Advertising and marketing
Exhibits and travel
Office rent, maintenance and communication
Depreciation
Professional services
Others
1,158,077
452,000
19,542
165,033
124,666
52,886
299,966
(51,936)
29,000
4,000
73,000
16,000
51,000
36,000
Total selling, general and administrative expenses
1,768,234
661,000
Finance expenses:
-
-
-
-
Interest and bank fees
Exchange rate differences
Related parties interest
Non-cash interest expense (Note 18(b))
Total finance expenses
61,290
13,122
16,774
813,405
904,591
40,000
2,000
39,000
-
81,000
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 5: INCOME TAX
The financial accounts for the year ended 31 December 2017 comprise the results of Elsight Australia and El-Sight Israel.
The legal parent is incorporated and domiciled in Australia where the applicable tax rate is 30% (2016: 30%). The applicable
tax rate in Israel is 24% (2016: 25%).
(a) Income tax expense
Current tax
Deferred tax
2017
US$
-
-
-
2016
US$
-
-
-
(b) The prima facie tax payable on loss from ordinary activities before
income tax is reconciled to the income tax expense as follows:
Income tax expense/(benefit) on operating loss at 25.23% (2016: 25%)
(194,827)
24,500
Non-deductible items
Non-deductible expenditure
Non-assessable income
Deferred tax assets not recognised
Income tax attributable to operating income/(loss)
Utilisation of tax losses
Income tax expense
Deferred tax assets
Tax losses
Accruals
Deferred tax asset
Less deferred tax assets not recognised
Net deferred tax assets
Deferred tax liabilities
Other
Net deferred tax liabilities
Deferred tax assets not brought to account
Temporary differences
Operating tax losses
Capital loss
Unused tax losses for which no deferred tax asset has been recognised
Carry forward losses
(98,052)
-
292,879
-
-
-
287,978
4,901
292,879
(292,879)
-
-
-
4,901
287,978
108,915
401,794
6,619
(10,717)
-
20,402
(20,402)
-
260,783
-
260,783
(260,783)
-
-
-
-
260,738
-
260,738
Potential future income tax benefits attributable to tax losses carried forward have not been brought to account at 31
December 2017, because the Directors do not believe it is appropriate to regard realisation of the future income tax benefits
as probable.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 6: RELATED PARTY TRANSACTIONS
a) Key Management Personnel Compensation
The totals of remuneration paid to KMP during the year are as follows:
Short-term salary and fees
Retirement benefits
Non-monetary benefits
Other
Share based payments
Total KMP Compensation
b) Other related party transactions
Entity /
2017
US$
345,130
36,041
5,540
19,006
802,565
2016
US$
208,084
27,999
14,202
-
1,208,282
250,285
Key management personnel
Nature of transactions
Transaction value
Payable balance
2017
2016
2017
2016
US$
US$
US$
US$
Nir Gabay
Nir Gabay
Nir Gabay
Issue of 26,052,974 ordinary shares(i)
-
Issue of 29,595,000 performance options(ii)
3,070,611
Interest(iii)
Susana Gabay / Nir Gabay
Salary and salary related expenses
Eden Gabay / Nir Gabay
Professional services
Icontrol / Nir Gabay
Purchases of inventory with deferred
payment terms
-
66,527
Dipio/Nir Gabay and Roee Kashi
Revenue earned
16,987
10,549
Howard Digby
Howard Digby
Issue of 208,334 ordinary shares(iv)
Issue of 750,000 options(v)
Lamma Nominees Pty Ltd/
Issue of 1,500,000 ordinary shares(vi)
Howard Digby
Anton Uvarov
Anton Uvarov
Yulia Uvarov
/
Anton Uvarov
Roee Kashi
Issue of 208,334 ordinary shares(iv)
Issue of 750,000 options(v)
Issue of 1,500,000 ordinary shares(vi)
Issue of 2,894,775 ordinary shares(i)
-
16,774
21,370
1,860
32,023
52,425
0.13
32,023
52,425
0.13
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,774
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
66,527
-
-
-
-
-
-
-
-
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 6: RELATED PARTY TRANSACTIONS
Entity /
Key management personnel
Nature of transactions
Transaction value
Payable balance
2017
2016
2017
2016
US$
US$
US$
US$
Roee Kashi
Roee Kashi
Roee Kashi
Nathan Barbarich
GNat Pty Ltd /
Nathan Barbarich
Issue of 8,608,000 options(vii)
Issue of 405,000 performance options(ii)
Revenue earned
Issue of 1,000,000 options(v)
Issue of 2,325,000 ordinary shares(vi)
RM Corporate Finance Pty Ltd /
Corporate advisory fees paid
Nathan Barbarich
893,117
42,021
-
-
-
4,354
69,900
0.13
89,465
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
RM Corporate Finance Pty Ltd /
Capital raising fees paid
271,000
Nathan Barbarich
(i)Shares issued to key management personnel as consideration for their shareholding in El-Sight Ltd.
(ii)Employee Share Plan Performance Options issued (refer terms, conditions, and valuations at Note 20). 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.
(iii)Interest has been accrued on the historic balance of deferred salaries and reimbursable expenses due to Mr Nir Gabay at a
rate of 5.38% in accordance with Israeli statutory requirements.
(iv)Shares 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.
(v)Options 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 20).
(vi)On 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. As a result of the splits, 1,500,000 ordinary shares were issued to each of Lamma Nominees Pty
Ltd and Yulia Uvarov and 2,325,000 shares were issued to GNat Pty Ltd. The total value of each
lot of shares issued has been calculated at based upon the incorporation date capital of A$1.
Lamma Nominees Pty Ltd is a related party of Howard Digby by virtue of being controlled by his spouse.
Yulia Uvarov is the Trustee for Techinvest Nominees and is a related party of Anton Uvarov by virtue of being controlled by
his spouse.
GNat Pty Ltd is an entity controlled by Nathan Barbarich.
(vii)Employee Share Plan Options issued (refer terms, conditions and valuations at Note 20).
38
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 6: RELATED PARTY TRANSACTIONS
c)
Loans from key management personnel (KMP) and their related parties
Details of loans made to the Group by directors and key management are set out below.
Name
Directors:
Nir Gabay
Howard Digby
Anton Uvarov
Balance at
the start of
the year
US$
66,527
25,000
25,000
Interest
paid and
payable for
the year
US$
Interest not
charged
Repayments
made during
the year
US$
US$
Converted
to equity
during the
year(i)
US$
Balance
at the end
of the
year
US$
Highest
indebtedness
during the
year
US$
-
(i)
(i)
-
(i)
(i)
(66,527)
-
-
-
(25,000)
(25,000)
-
-
-
66,527
25,000
25,000
(i) Shares were issued in respect of the conversion of Elsight Limited convertible notes totaling 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$0.12 per share (a 40% discount to the offer issue price).
NOTE 7: AUDITOR’S REMUNERATION
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related
practices and non-related audit firms:
Auditor remuneration
-
-
-
Auditing and reviewing the financial reports (BDO) – Australia
Auditing and reviewing the financial reports (KMPG) – Israel
Auditing and reviewing the financial reports (Deloitte) – Israel
Other non-audit remuneration
-
-
Investigating Accountant’s Report (BDO) – Australia
International and local tax support (KMPG) – Israel
NOTE 8: EARNINGS/(LOSS) PER SHARE
Earnings/ (Loss) per share (EPS)
2017
US$
28,395
32,980
17,500
78,875
10,891
16,700
27,591
2017
US$
2016
US$
1,080
12,160
-
13,240
-
-
-
2016
US$
a) Profit/(Loss) used in calculation of basic EPS and diluted EPS
(3,119,570)
98,000
b) Weighted average number of ordinary shares outstanding during the
year used in calculation of basic and diluted earnings/ (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 years ended
31 December 2017 and 31 December 2016 has been adjusted to reflect the capital reorganisation. The weighted average
number of shares outstanding for the year ended 31 December 2016 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 Limited as at 31 December
2016 was 20,000 shares on issue which the shareholders subsequently exchanged for shares in the Company.
39
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 9 a : CASH AND CASH EQUIVALENTS
Cash at bank
Total cash and cash equivalents in the statement of cash flows
The Group’s exposure to the risks associated with cash are disclosed in Note 22.
NOTE 9 b : CASH FLOW INFORMATION
Profit / (Loss) after income tax
Non-cash flows in loss after income tax
Non-cash interest expenses
Share based payments expense
Depreciation
Loss/(gain) on sale of plant and equipment
Net finance expense
Changes in assets and liabilities
Decrease/ (increase) in trade and other receivables
Decrease/ (increase) in inventory
(Decrease)/ increase in trade and other payables
(Decrease)/increase in provisions
Cash flow (used in) operating activities
Credit Standby Facilities
2017
US$
1,093,853
1,093,853
2017
US$
(3,119,570)
813,406
806,890
52,886
14,453
-
(243,638)
127,749
(485,685)
(2,654)
(2,036,163)
2016
US$
7,000
7,000
2016
US$
98,000
-
-
16,000
(2,000)
24,000
(57,000)
(73,000)
121,000
4,000
131,000
The Group has a credit standby facility with an Israeli bank in the amount of ILS 200,000 (US$58,000) of which nil was drawn
down at year end.
Non-Cash investing and financing activities
The Group converted debt to equity as described in Notes 16 and 18.
The Group acquired plant and equipment with a value of US$84,919 through finance lease.
There were no other non-cash investing and financing activities during the year.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 10: TRADE AND OTHER RECEIVABLES
CURRENT
Trade and other receivables
Short term deposits
Pledged deposits
Prepaid expenses
2017
US$
378,984
124,134
-
65,627
568,745
2016
US$
79,000
34,000
44,000
-
157,000
All amounts are short-term. The net carrying value of trade and other receivables is considered a reasonable
approximation of fair value. The Group’s exposure to the risks associated with trade and other receivables are disclosed
in Note 22.
NOTE 11: INVENTORY
Inventory at cost
NOTE 12: OTHER CURRENT ASSETS
Supplier advances
NOTE 13: PLANT AND EQUIPMENT
Cost
Accumulated depreciation
Net carrying amount
2017
US$
203,486
203,486
2017
US$
-
-
2017
US$
2016
US$
310,000
310,000
2016
US$
37,000
37,000
2016
US$
405,463
163,000
(150,728)
(104,000)
254,736
59,000
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 13: PLANT AND EQUIPMENT
Computers
US$
13,000
3,000
Motor
vehicles
US$
20,000
-
-
(15,000)
(2,000)
3,000
152,219
-
(7,000)
9,000
25,748
-
(9,945)
1,209
Office
furniture and
equipment
Installations
and leasehold
improvements
US$
32,000
1,000
-
(4,000)
29,000
13,960
Total
US$
85,000
4,000
(15,000)
US$
20,000
-
-
(2,000)
(15,000)
18,000
64,916
59,000
256,843
-
(14,453)
(14,453)
(15,787)
(22,605)
(2,652)
(50,989)
3,370
(1,459)
1,215
4,335
Balance at 1 January 2016
Additions
Disposals
Depreciation expense
Balance at 31 December 2016
Additions
Disposals
Depreciation expense
Foreign currency translation
adjustments
Balance at 31 December 2017
26,012
142,802
18,896
67,026
254,736
NOTE 14: TRADE AND OTHER PAYABLES
CURRENT
Trade payables
Notes payable
Government institutions
Employees and related benefits
Shareholders(i)
Deferred revenue
Other payables and accrued expenses
2017
US$
2016
US$
95,360
284,000
-
45,145
167,982
108,354
45,514
118,900
53,000
12,000
87,000
622,000
35,000
17,000
581,255
1,110,000
All amounts are short-term. The carrying values of trade payables and other payables are considered to approximate fair
value. The Group’s exposure to the risks associated with trade and other payables are disclosed in Note 22.
(i)On 8 March 2011, El-Sight Limited entered into a Share Purchase Agreement (“SPA”) with an investor. According to the
SPA, the investors received 4,445 Preferred A Shares of ILS 1 par value each against a total investment in El-Sight of
US$450,000. Amount the other rights of the Preferred A Shares, under the SPA, as amended by an agreement dated 13
December 2016, upon IPO or other public listing of the Company, all Preferred A Shares shall be converted into Ordinary
Shares and the investor shall be entitled to a payment of US$400,000 from the proceeds of the IPO or listing in cash or
shares, as soon as practical after the listing. It is clarified that such entitlement shall not arise in case no IPO is
consummate. The 2016 balance with shareholders includes the invested amounts as noted above, along with credit from
other shareholders.
The preference share entitlements were settled through the issue of shares on 2 June 2017. Refer to Note 18(b) for
details of shares issued and loss recognised.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 15: BORROWINGS
CURRENT
Bank overdraft
Short-term bank loans
Current maturities of long term bank loans
NON-CURRENT
Long term bank loan, net of current maturities
The Group’s exposure to the risks associated with borrowings are disclosed in Note 22.
NOTE 16: CONVERTIBLE LOANS
CURRENT
Convertible loans
Convertible loans
2017
US$
-
4,206
53,074
57,280
2016
US$
19,000
10,000
81,000
110,000
126,656
126,656
65,000
65,000
2017
US$
2016
US$
-
-
667,000
667,000
El-Sight Limited received from Learnicon, LLC, the holder of the Preferred A Shares, several loans that are valued (together
with interest thereupon) as at 31 December 2016 at US$650,000. The loans are repayable 31 December 2019 (“Maturity
Date”). The Company pays interest on any outstanding amounts at a rate per annum equal to 5%, compounded annually and
accrued daily, payable denominated in USD and payable at any time, in one or more instalments. The Company has the right
to pay the loan at any time prior to the Maturity Date without penalty. Until the end of 2016 it was agreed that the loans are
convertible at the best terms given in any investment transaction but at the end of 2016 the agreement was amended, and
accordingly unless an IPO in Australia takes place, after the Maturity Date while any portion of the loan remains outstanding,
the lender at its sole discretion shall have the right to convert the outstanding loan into ordinary shares of El-Sight Limited at
a price per share representing a pre-money valuation of El-Sight Limited of US$5,000,000.
US$250,000 of the convertible loans balance was settled through the issue of shares on 2 June 2017, refer to Note 18 for
details of shares issued and loss recognised. US$400,000 of the convertible loans were repaid in cash upon completion of
the Company’s initial public offering and admission to the ASX Official List.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 17: PROVISIONS
NON-CURRENT
Accrued severance pay
Severance pay fund
Opening net carrying amount
Increase in provision
Severance pay fund utilised
Closing net carrying amount
2017
US$
59,340
(19,706)
39,634
36,000
3,634
-
39,634
2016
US$
42,000
(6,000)
36,000
32,000
-
4,000
36,000
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 18: ISSUED CAPITAL
(a) Share Capital
2017
US$
2016
US$
83,381,391 (31 December 2016: 20,000 ) fully paid ordinary shares
18b
5,091,738
5,000
(b) Movement in Ordinary Capital
Opening balance at 1 January 2016
Movement during the year
Closing balance at 31 December 2016
Date
No.
-
-
-
20,000
-
20,000
Unit
Price
US$
-
-
-
Total
US$
5,000
-
5,000
El-Sight Ltd preference shares converted to ordinary shares in El-
Sight Ltd
1-Jan-17
4,445
0.259
1,150
Less: adjustment for predecessor accounting(i)
2-Jun-17
(24,445)
-
Existing shares of Elsight Limited
2-Jun-17
10,000,000
0.000
Issue of shares to El-Sight Ltd shareholders(ii)
2-Jun-17
35,381,386
-
-
1
-
Issue of shares in relation to capital raising via public offer
2-Jun-17
25,000,000
0.154
3,842,750
Issue of shares upon conversion of Company convertible loans(iii)
2-Jun-17
5,833,338
0.154
896,643
Issue of shares upon conversion of El-Sight Ltd convertible loans(iv)
2-Jun-17
7,166,667
0.154
1,101,588
Costs of capital raising
Issue of 7,000,000 options to lead manager and seed investor,
deemed capital raising cost (Note 20)
-
-
-
-
Closing balance at 31 December 2017
83,381,391
-
-
-
(265,828)
(489,566)
5,091,738
(i)The application of predecessor accounting for the acquisition and consolidation of the common controlled entity El-Sight
Ltd (Israel) required the value of El-Sight Ltd shares on issue as at 31 December 2016 as a comparative.
(ii)The Company issued 35,381,386 fully paid ordinary shares to El-Sight Ltd shareholders, refer to Note 2 for further
information.
(iii)At 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$0.20. Due to the discount on these shares issued, the Company incurred an interest expense of
US$352,605.
(iv)At 31 December 2016 EL-Sight Ltd had a total liability of US$1,100,000 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 Learnicon 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 A$0.20, resulting in a loss of US$460,800 being
recognised on the conversion of convertible loans and preference share entitlements.
45
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 18: ISSUED CAPITAL
(c) Capital Management
Due to the nature of the Group’s activities, the Group does not have ready access to credit facilities, with the primary source
of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is the current working capital
position against the requirements of the Group to meet research and development programs and corporate overheads. The
Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to
initiating appropriate capital raisings as required. Any surplus funds are invested with major financial institutions.
NOTE 19: RESERVES
a) Share Based Payment Reserve
45,819,000 (31 December 2016: nil) options on issue
Ref
19b
2017
US$
1,296,456
1,296,456
2016
US$
-
-
b) Movement in Share Based Payment Reserve
No.
US$
Opening balance at 1 January 2016
Movement during the year
Closing balance at 31 December 2016
Issue of options to lead manager and seed investors (Note 20)
Issue of ESOP options (Note 20)
Issue of ESOP performance options (Note 20)
Issue of ESOP options (Note 20)
Closing balance at 31 December 2017
c)
Foreign Exchange Reserve
-
-
-
7,000,000
8,608,000
30,000,000
211,000
-
-
-
489,566
215,585
586,980
4,325
45,819,000
1,296,456
US$
(152,005)
US$
32,000
The foreign currency translation reserve records exchange differences arising on translation from functional currency to
presentation currency.
d)
Predecessor Accounting Reserve
US$
(296,796)
US$
-
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.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 20: SHARE BASED PAYMENTS
During the year ended 31 December 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 grant date
and additional an 6.25% at the end of each quarter of continuous service.
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:
o
o
O
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).
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.
•
The issue of 211,000 Employee Share Plan Options exercisable at $A.60 on or before 9 October 2022 to employees of
the Group, exercisable after the satisfaction of the following vesting condition, 50% on the second anniversary of the
grant date and an additional 6.25% at the end of each quarter of continuous service.
Fair Value
The Black Scholes option pricing model was used to determine the fair value of the options issued. The Black Scholes inputs
and valuations were as follows:
Options
Lead Manager
and Seed
Investor
Options
ESOP
Options
ESOP Class A
Performance
Options
ESOP Class B
Performance
Options
ESOP Class C
Performance
Options
ESOP
Options
Number of options
7,000,000
8,608,000
10,000,000
10,000,000
10,000,000
211,000
Grant date
Issue date
Exercise price
Expected volatility
Implied option life
Expected dividend yield
Risk free rate
Valuation per option A$
2-Jun-17
2-Jun-17
2-Jun-17
2-Jun-17
2-Jun-17
2-Jun-17
2-Jun-17
2-Jun-17
2-Jun-17
10-Dec-17
2-Jun-17
29-Dec-17
A$0.30
$0.20
$0.20
$0.20
85%
3.00
nil
1.84%
$0.091
85%
5.00
nil
2.14%
$0.135
85%
5.00
Nil
2.14%
$0.135
85%
5.00
Nil
2.14%
$0.135
$0.20
85%
5.00
Nil
2.14%
$0.135
$0.60
100%
4.83
Nil
2.34%
$1.018
Exchange rate
$0.76855
$0.76855
$0.76855
$0.76855
$0.76855
$0.78049
Valuation per option US$
$0.0699
$0.104
$0.104
$0.104
$0.104
$0.795
Total valuation US$
$489,566
$893,117
$1,037,544
$1,037,544
$1,037,544
$167,648
47
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 20: SHARE BASED PAYMENTS
Lead Manager
and Seed
Investor
Options
ESOP
Options
ESOP Class A
Performance
Options
ESOP Class B
Performance
Options
ESOP Class C
Performance
Options
ESOP
Options
Likelihood of milestone
achievement
Assessed likelihood of
performance milestone
achievement
Vesting date
n/a
n/a
n/a
n/a
n/a
n/a
75%
50%
0%
7-Jun-18
7-Jun-19
7-Jun-20
7-Jun-18
7-Jun-19
7-Jun-20
n/a
n/a
n/a
Management have assessed the likelihood of achieving the performance milestone for Class A options as 75% at 31 December
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 31 December 2017 is US$440,386.
Management have assessed the likelihood of achieving the performance milestone for Class B options as 50% at 31 December.
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 31 December 2017 is US$146,594.
The implied value of Class C Performance Options is US$1,037,544 however the probability was determined to be nil at 31
December 2017 due to the uncertainty of meeting the performance milestone.
Share Based Payments Expense
Share based payment expense at 31 December 2017 is comprised as follows:
Issue of 8,608,000 ESOP options
Issue of 30,000,000 ESOP performance options
Issue of 211,000 ESOP options
Total expense recognised in profit or loss
Issue of 7,000,000 options to lead manager and seed investor, deemed capital
raising cost
Total expense recognised in equity
Total share based payments expense
US$
215,585
586,980
4,325
806,890
489,566
489,566
1,296,456
US$
-
-
-
-
-
-
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 21: OPERATING SEGMENTS
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
Group’s sole operating segment is consistent with the presentation of these consolidated financial statements.
NOTE 22: FINANCIAL INSTRUMENTS
Financial Risk Management Policies
The Group’s financial instruments consist mainly of deposits with banks, trade and other debtors, trade and other payables
and borrowings. The main purpose of non-derivative financial instruments is to raise finance for Group’s operations.
Specific Financial Risk Exposures and Management
The main risk the Group is exposed to through its financial instruments are market risk (including fair value and interest rate
risk) and cash flow interest rate risk, credit risk and liquidity risk.
(a) Interest Rate Risk
From time to time the Group has significant interest bearing assets, but they are as a result of the timing of equity raising and
capital expenditure rather than a reliance on interest income. The interest rate risk arises on the rise and fall of interest rates.
The Group’s income and operating cash flows are not expected to be materially exposed to changes in market interest rates
in the future. The exposure to interest rates arises from the cash and cash equivalents balances and borrowings.
The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of
changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial
liabilities, is below:
Floating Interest
Rate
Fixed interest
rate
Non-interest
bearing
2017 Total
US$
US$
US$
US$
679,572
-
679,572
0.9%
-
147,456
147,456
3.3%
532,116
-
-
-
-
-
36,480
36,480
2.5%
414,281
1,093,853
568,745
568,745
983,026
1,662,598
-
0.6%
581,255
-
581,255
-
581,255
183,936
765,191
3.1%
36,480
401,771
897,407
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Weighted average interest rate
Financial Liabilities
Trade and other Payables
Borrowings
Total financial liabilities
Weighted average interest rate
Net financial assets
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 22: FINANCIAL INSTRUMENTS
Floating Interest
Rate
Fixed interest
rate
Non-interest
bearing
2016 Total
US$
US$
US$
US$
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Weighted average interest rate
Financial Liabilities
Trade and other payables
Borrowings
Convertible loans
Total financial liabilities
Weighted average interest rate
-
-
-
-
-
175,000
-
-
-
-
-
-
-
667,000
7,000
157,000
164,000
7,000
157,000
164,000
-
-
1,110,000
1,110,000
-
-
175,000
667,000
175,000
2.00%
667,000
1,110,000
1,952,000
5.00%
-
1.89%
Net financial liabilities
(175,000)
(667,000)
(946,000)
(1,788,000)
Sensitivity Analysis
The following table illustrates sensitivities to the Consolidated Entity’s exposures to changes in interest rates. The table
indicates the impact on how profit and equity values reported at reporting date would have been affected by changes in the
relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement
in a particular variable is independent of other variables.
Year ended 31 December 2017
+/-1% in interest rates
Year ended 31 December 2016
+/-1% in interest rates
Movement in
Movement in
Profit
US$
297
810
Equity
US$
297
810
(b) Credit risk
The maximum exposure to credit risk is limited to the carrying amount, net of any provisions for impairment of those assets,
as disclosed in the Statement of Financial Position and notes to the financial statements.
Credit risk related to balances with banks and other financial institutions and trade and other receivables, and is managed by
the Group in accordance with approved Board policy. The following table provides information regarding the credit risk
relating to cash and money market securities based on Standard and Poor’s counterparty credit ratings.
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Cash and cash equivalents – AA Rated
Trade and other receivables – no rating
Note
9a
10
2017
US$
1,093,853
568,745
2016
US$
7,000
157,000
50
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 22: FINANCIAL INSTRUMENTS
Impaired trade receivables
Individual receivables which are known to be uncollectible are written off by reducing the carrying amount directly. The other
receivables are assessed collectively to determine whether there is objective evidence that an impairment has been incurred
but not yet been identified. For these receivables the estimated impairment losses are recognised in a separate provision for
impairment. The Group considers that there is evidence of impairment if any of the following indicators are present:
•
•
•
significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or financial reorganisation, and
default or delinquency in payments (more than 30 days overdue).
Receivables for which an impairment provision was recognised are written off against the provision when there is no
expectation of recovering additional cash. Impairment losses are recognised in profit or loss within selling, general and
administrative expenses. Subsequent recoveries of amounts previously written off are credited against selling, general and
administrative expenses.
During the year, the following gains/(losses) were recognised in profit or loss in relation to impaired receivables:
Impairment losses
-
individually impaired receivables
- movement in provision for impairment
Reversal of previous impairment losses
2017
US$
-
12,376
-
2016
US$
-
-
-
As at 31 December 2017, trade receivables of US$27,033 (2016 – nil) were past due but not impaired. These relate to a
number of independent customers for whom there is no recent history of default. The ageing analysis of these trade
receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
(c) Liquidity risk
2017
US$
2,410
22,529
2,094
27,033
2016
US$
-
-
-
-
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting
its obligations related to financial liabilities. The Group’s approach to managing liquidity is to ensure, as far as possible, that
it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Group’s reputation.
The Group manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash
flows.
The following are the contractual maturities of financial liabilities based on the actual rates at the reporting date excluding
interest payments:
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 22: FINANCIAL INSTRUMENTS
2017
Interest
rate
Less than 6
months
6-12
months
1-2
years
2-5
years
Over 5
years
US$
US$
US$
US$
US$
Total
contractual
cash flows
US$
Carrying
amount
US$
Financial
liabilities at
amortised cost
Trade and other
payables
Borrowings
-
3.1%
581,255
28,640
-
28,640
609,895
28,640-
-
50,896
-
50,896
-
75,760
75,760
-
-
-
581,255
183,936
581,255
183,936
765,191
765,191
2016
Interest
rate
Less than 6
months
6-12
months
1-2
years
2-5
years
Over 5
years
US$
US$
US$
US$
US$
Total
contractual
cash flows
US$
Carrying
amount
US$
Financial
liabilities at
amortised cost
Trade and other
payables
Borrowings
-
1,110,000
-
-
-
2%
55,000
1,165,000
55,000
55,000
30,000
30,000
35,000
35,000
-
-
-
1,110,000
1,110,000
175,000
1,285,000
175,000
1,285,000
(d) Net fair Value of financial assets and liabilities
Fair value estimation
Due to the short term nature of the receivables and payables the carrying value approximates fair value.
(e) Currency risk
The currency risk is the risk that the value of financial instruments will fluctuate due to change in foreign exchange rates.
Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency
that is not the Company’s functional currency. The company is exposed to foreign exchange risk arising from various currency
exposures primarily with respect to the US Dollar (the functional currency), the New Israeli Shekel, the Australian Dollar and
the Singapore Dollar.
The Company’s policy is not to enter into any currency hedging transactions.
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Borrowings
Net exposure
New Israeli
Shekels
US$
407,903
501,153
(487,810)
(183,936)
237,310
2017 Total
US$
407,903
501,153
(487,810)
(183,936)
237,310
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 22: FINANCIAL INSTRUMENTS
Cash and cash equivalents
New Israeli Shekels
2016 Total
US$
7,000
US$
7,000
Trade and other receivables
157,000
157,000
Trade and other payables
(1,110,000)
(1,110,000)
Borrowings
Net exposure
(175,000)
(175,000)
(1,121,000)
(1,121,000)
NOTE 23: PARENT ENTITY FINANCIAL INFORMATION
The following information of the legal parent Elsight Limited has been prepared in accordance with Australian Accounting
Standards and the accounting policies as outlined in Note 1.
(a)
Financial Position of Elsight Limited
ASSETS
Current assets
Non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Non-current liabilities
TOTAL LIABILITIES
NET ASSETS/(LIABILITIES)
SHAREHOLDERS’ EQUITY/(DEFICIT)
Issued capital
Reserves
Accumulated Losses
SHAREHOLDERS’ EQUITY/(DEFICIT)
(b) Statement of profit or loss and other comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive loss
2017
US$
753,541
704,729
1,458,270
93,447
-
93,447
1,364,823
5,085,588
999,637
(4,720,402)
1,364,823
(4,718,794)
(18)
(4,718,812)
2016
US$
54,171
-
54,171
55,784
-
55,784
(1,613)
-
(5)
(1,608)
(1,613)
(1,608)
(5)
(1,613)
(c) Guarantees entered into by Elsight Limited for the debts of its subsidiary
There are no guarantees entered into by Elsight Limited.
(d) Contingent liabilities of Elsight Limited
There were no contingent liabilities as at 31 December 2017 (2016: Nil).
(e) Commitments by Elsight Limited
There were no commitments as at 31 December 2017 (2016: Nil).
53
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 24: CONTROLLED ENTITIES
The ultimate legal parent entity of the Group is Elsight Limited, incorporate and domiciled in Australia. The consolidated
financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policies described in Note 1.
Controlled entity
El-Sight Ltd
Country of
Incorporation
Israel
Percentage Owned
2017
100%
2016
-
The proportion of ownership interest is equal to the proportion of voting power held.
NOTE 25: COMMITMENTS
Operating lease commitments:
No longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
2017
US$
193,229
368,017
-
561,246
2016
US$
4,812
-
-
4,812
The Group has an office lease in Israel that commenced on 1 January 2018 for a period of three years with the option to
renew for a further three years at a rate of US$12,000 per month.
The Group has six automobile leases that commenced in 2017, each for a period of three years. Monthly rental payments
range from US$1,695 to US$2,725 per lease.
NOTE 26: CONTINGENT LIABILITIES
The Group has no known contingent liabilities as at 31 December 2017.
NOTE 27: EVENTS SUBSEQUENT TO REPORTING DATE
Since the reporting date the following significant events have occurred:
•
•
•
•
•
08/01/2018 – Automotive Robotic Industry Ltd places order
11/01/2018 – First purchase order received from autonomous car sector
22/01/2018 – Elsight technology critical to protecting US vice president
22/02/2018 – Elsight releases new Omnisight product
05/03/2018 – Institutional placement closes oversubscribed, to raise A$9,005,189 (before expenses of the offer) from
wholesale and institutional investors through the issue of 12,507,208 fully paid ordinary shares.
There were no other significant events after balance date.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
NOTE 28: NEW ACCOUNTING STANDARDS FOR APPLICATION IN FUTURE PERIODS
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
Australian accounting standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the Group for the year ended 31 December
2017. Relevant Standards and Interpretations are outlined in the table below.
Application Date of
Standard
Application Date of
Group
1 January 2018
1 January 2018
New/revised pronouncement
Explanation of amendments
AASB 9
Financial Instruments
AASB 9 (December 2014) is a new standard which replaces AASB 139. This new version
supersedes AASB 9 issued in December 2009 (as amended) and AASB 9 (issued in
December 2010) and includes a model for classification and measurement, a single,
forward-looking ‘expected loss’ impairment model and a substantially- reformed
approach to hedge accounting.
AASB 9 is effective for annual periods beginning on or after 1 January 2018. However, the
Standard is available for early adoption. The own credit changes can be early adopted in
isolation without otherwise changing the accounting for financial instruments.
Classification and measurement
AASB 9 includes requirements for a simpler approach for classification and
measurement of financial assets compared with the requirements of AASB 139.
There are also some changes made in relation to financial liabilities.
The main changes are described below.
Financial assets
a)
Financial assets that are debt instruments will be classified based on (1)
the objective of the entity's business model for managing the financial
assets; (2) the characteristics of the contractual cash flows.
income. Dividends
b) Allows an irrevocable election on initial recognition to present gains and
losses on investments in equity instruments that are not held for trading
in other comprehensive
in respect of these
investments that are a return on investment can be recognised in profit
or loss and there is no impairment or recycling on disposal of the
instrument.
Financial assets can be designated and measured at fair value through
profit or loss at initial recognition if doing so eliminates or significantly
reduces a measurement or recognition inconsistency that would arise
c)
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 28: NEW ACCOUNTING STANDARDS FOR APPLICATION IN FUTURE PERIODS
New/revised pronouncement
Explanation of amendments
Application Date of
Standard
Application Date of
Group
from measuring assets or liabilities, or recognising the gains and losses
on them, on different bases.
Financial liabilities
Changes introduced by AASB 9 in respect of financial liabilities are limited to the
measurement of liabilities designated at fair value through profit or loss (FVPL) using the
fair value option.
Where the fair value option is used for financial liabilities, the change in fair value is to
be accounted for as follows:
•
•
The change attributable to changes in credit risk are presented in other
comprehensive income (OCI)
The remaining change is presented in profit or loss
AASB 9 also removes the volatility in profit or loss that was caused by changes in the
credit risk of liabilities elected to be measured at fair value. This change in accounting
means that gains or losses attributable to changes in the entity’s own credit risk would
be recognised in OCI. These amounts recognised in OCI are not recycled to profit or loss
if the liability is ever repurchased at a discount.
Impairment
The final version of AASB 9 introduces a new expected-loss impairment model that will
require more timely recognition of expected credit losses. Specifically, the new Standard
requires entities to account for expected credit losses from when financial instruments
are first recognised and to recognise full lifetime expected losses on a more timely basis.
AASB 15 Revenue from Contracts with Customers replaces the existing revenue
recognition standards AASB 111 Construction Contracts, AASB 118 Revenue and related
interpretations (Interpretation 13 Customer Loyalty Programmes, Interpretation 15
Agreements for the Construction of Real Estate, Interpretation 18 Transfers of Assets
from Customers, Interpretation 131 Revenue – Barter Transactions Involving
56
1 January 2018
1 January 2018
AASB 15
Revenue from Contracts with Customers
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 28: NEW ACCOUNTING STANDARDS FOR APPLICATION IN FUTURE PERIODS
New/revised pronouncement
Explanation of amendments
Application Date of
Standard
Application Date of
Group
Advertising Services and Interpretation 1042 Subscriber Acquisition Costs in the
Telecommunications Industry). AASB 15 incorporates the requirements of IFRS 15
Revenue from Contracts with Customers issued by the International Accounting
Standards Board (IASB) and developed jointly with the US Financial Accounting
Standards Board (FASB).
AASB 16
Leases
The key features of AASB 16 are as follows:
Lessee accounting:
1 January 2019
1 January 2019
•
•
•
Lessees are required to recognise assets and liabilities for all leases with a
term of more than 12 months, unless the underlying assets is of low value.
A lessee measures right-of-use assets similarly to other non-financial assets
and lease liabilities similarly to other financial liabilities.
Assets and liabilities arising from a lease are initially measured on present
value basis. The measurement includes non-cancellable lease payments
(including inflation-linked payments), and also includes payments to be made
in optional periods if the lessee is reasonably certain to exercise an option to
extend the lease, or not to exercise an option to terminate the lease.
•
AASB 16 contains disclosure requirements for lessees.
Lessor accounting:
•
AASB 16 substantially carries forward the lessor accounting requirements
in AASB 117. Accordingly, a lessor continues to classify its leases as
operating leases or finance leases, and to account for those two types of
leases differently.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
NOTE 28: NEW ACCOUNTING STANDARDS FOR APPLICATION IN FUTURE PERIODS
New/revised pronouncement
Explanation of amendments
Application Date of
Standard
Application Date of
Group
•
AASB 16 also requires enhanced disclosures to be provided by lessors
that will improve information disclosed about a lessor’s risk exposure,
particularly to residual value risk.
AASB 16 supersedes:
(a) AASB 117 Leases
(b)
Interpretation 4 Determining whether an Arrangement contains a Lease
(c) SIC-15 Operating Leases-Incentives
SIC-27 Evaluating the Substance of Transaction Involving the Legal Form of a Lease.
The Group has decided not to early adopt any of the new and amended pronouncements. The impact of the above standards is yet to be determined unless noted otherwise above.
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ELSIGHT
LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER
2017
DIRECTORS'
DECLARATION
In the Director's
opinion:
1. The consolidated
financial
statements
and notes set out on pages 20 to 58 are in accordance
with the Corporations
Act 2001, including:
a)complying
professional
with Australian Accounting
reporting
Standards,
the matters
Corporations
documented
requirements,
noting
in Note 1 (a);
Regulations
2001 and other mandatory
b)giving
a true and fair view, the consolidated
financial
position
as at 31 December 2017
and of its
performance for
the year ended on that date;
entity's
and
2. There are reasonable
grounds
to believe
that the Company will be able to pay its debts as and when they become
due and payable.
3. This declaration
has been made after receiving
the declaration
with Section
295A of
the Corporations
Act 2001 for the financial
to be made to the directors
required
2017.
year ended 31 December
in accordance
This declaration
Directors
by:
is made in accordance
with a resolution
of the Board of Directors
and is signed
for and on behalf
of the
Managing
Director
28 March 2018
59
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
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INDEPENDENT AUDITOR'S REPORT
To the members of Elsight Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Elsight Limited (the Company), which comprises the statement
of financial position as at 31 December 2017, the statement of profit or loss and other comprehensive
income, the statement of changes in equity and the statement of cash flows for the year then ended,
and notes to the financial report, including a summary of significant accounting policies, and the
directors’ declaration.
In our opinion the accompanying financial report of Elsight Limited, is in accordance with the
Corporations Act 2001, including:
(i)
Giving a true and fair view of the Company’s financial position as at 31 December 2017 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Company in accordance with the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to
our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
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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Accounting for share-based payments
Key audit matter
How the matter was addressed in our audit
During the year ended 31 December
Our procedures included, but were not limited to the
2017, the Group issued performance
following:
options to key management personnel
and employees of the group which have
been accounted for as share-based
payments.
(cid:127) Reviewing the relevant terms and conditions to obtain an
understanding of the contractual nature of the share-based
payment arrangements
(cid:127) Reviewed and evaluated management’s assessment of the
Refer to notes 1 and 20 of the financial
likelihood of achieving the non-market performance conditions
report for a description of the
attached to the share-based payments
accounting policy and significant
(cid:127) Reviewing management’s determination of the fair value of
estimates and judgements applied to
the share-based payments granted, considering the
these arrangements.
appropriateness of the valuation model used and assessing the
Share-based payments are a complex
accounting area and due to the complex
and judgemental estimates used in
determining the fair value of the share-
based payments, we consider the
Group’s accounting for share-based
payments to be a key audit matter.
Accounting for capital reorganisation
valuation inputs using internal specialists where appropriate
(cid:127) Assessing the allocation of the share-based payment expense
over the relevant vesting period
(cid:127) Assessing the adequacy of the Group’s disclosures in Notes 1
and 20 of the financial report.
Key audit matter
How the matter was addressed in our audit
On 2 June 2017 Elsight limited acquired 100% of the
Our procedures included, but were not limited to the
issued capital of El-sight Ltd, by issuing the
following:
shareholders of El-sight Ltd fully paid ordinary shares in
Elsight Limited. The transaction has been accounted
for as a capital reorganisation and not an acquisition,
as the shareholders of El-sight Ltd are the same
shareholders of Elsight Limited.
(cid:127) Obtaining an understanding of the relevant
agreements in line with management’s assessment
that the new company Elsight Limited has been set up
to be combined with a business (El-sight Ltd) under a
capital reorganisation and that therefore this does
Capital reorganisation transactions are a complex
not meet the definition of a business.
accounting area because there is no specific applicable
(cid:127) Evaluating the appropriateness of the use of capital
accounting standards for these types of transactions. In
reorganisation accounting as it was applied to this
the absence of specific guidance, management is
transaction.
required to use its judgement in developing and
(cid:127) Assessing that the transaction was accounted for by
applying an accounting policy that is relevant and
using pre-combination book values, with no fair value
reliable.
uplift being recognised by El-sight Ltd on this
There is a risk in the financial statements that amounts
are incorrectly recognised and/or inappropriately
disclosed.
transaction.
(cid:127) Assessing the adequacy of the Group’s disclosures in
respect of the accounting for this acquisition in Note
1 and 2 in the financial report, including the
Refer to Note 1 and 2 of the financial report for a
significant judgements involved and the accounting
description of the accounting policy and judgements
policy adopted.
applied to this transaction.
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Other information
The directors are responsible for the other information. The other information comprises the
information in the Company’s annual report for the year ended 31 December 2017, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the 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
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 18 of the directors’ report for the
year ended 31 December 2017.
In our opinion, the Remuneration Report of Elsight Limited, for the year ended 31 December 2017,
complies with section 300A of the Corporations Act 2001.
62
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Phillip Murdoch
Director
Perth, 28 March 2018
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CORPORATE GOVERNANCE STATEMENT
This Corporate Governance Statement is current as at 15 March 2018 and has been approved by the Board of the Company.
This Corporate Governance Statement discloses the extent to which the Company follows the recommendations set by the
ASX Corporate Governance Council in its publication Corporate Governance Principles and Recommendations 3rd Edition
(Recommendations). The Recommendations are not mandatory, however the Recommendations that have not been followed
have been identified and reasons for not following them, along with what (if any) alternative governance practices have been
adopted in lieu of the Recommendation.
The Company has adopted Corporate Governance Policies which provide written terms of reference for the Company’s
corporate governance practices. The Board of the Company has not yet formed an audit committee, nomination committee,
risk management committee or remuneration committee.
The Company’s Corporate Governance Policies are contained within the Corporate Governance Plan and available on the
Company’s website at www.el-sight.com
Principle 1: Lay solid foundations for management and oversight
Roles of the Board & Management
The role of the Board is to provide overall strategic guidance and effective oversight of management. The Board derives its
authority to act from the Company’s Constitution.
The Board is responsible for and has the authority to determine all matters relating to the strategic direction, policies,
practices, establishing goals for management and the operation of the Company. The Board delegates responsibility for the
day-to-day operations and administration of the Company to the Managing Director.
The role of management is to support the Managing Director and implement the running of the general operations and
financial business of the Company, in accordance with the delegated authority of the Board.
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
In addition to matters it is expressly required by law to approve, the Board has reserved the following matters to itself:
(cid:127)
(cid:127)
overseeing the Company, including its control and accountability systems;
appointment, evaluation, rewarding and if necessary the removal of the Managing Director (or equivalent), the
Company Secretary and senior management personnel;
ratifying the appointment, and where appropriate, the removal, of senior executives;
in conjunction with members of the senior management team, develop corporate objectives, strategies and operations
plans and approve and appropriately monitor plans, new investments, major capital and operating expenditures, use of
capital, acquisitions, divestitures and major funding activities;
establishing appropriate levels of delegation to the executive Directors to allow them to manage the business efficiently;
monitoring actual performance against planned performance expectations and reviewing operating information at a
requisite level, to understand at all times the financial and operating conditions of the Company, including the reviewing
and approving of annual budgets;
monitoring the performance of senior management, including the implementation of strategy, and ensuring appropriate
resources are available to them;
identifying areas of significant business risk and ensuring that the Company is appropriately positioned to manage those
risks;
overseeing the management of safety, occupational health and environmental matters;
satisfying itself that the financial statements of the Company fairly and accurately set out the financial position and
financial performance of the Company for the period under review;
satisfying itself that there are appropriate reporting systems and controls in place to assure the Board that proper
operational, financial, compliance, and internal control processes are in place and functioning appropriately;
ensuring that appropriate internal and external audit arrangements are in place and operating effectively;
reporting accurately to shareholders, on a timely basis; and
ensuring that the Company acts legally and responsibly on all matters and assuring itself that the Company has adopted,
and that its practice is consistent with, a number of guidelines including:
(cid:16) Code of Conduct;
(cid:16) Continuous Disclosure Policy;
(cid:16) Diversity Policy;
(cid:16) Performance Evaluation Practices;
(cid:16) Procedures for Selection and Appointment of Directors;
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CORPORATE GOVERNANCE STATEMENT
(cid:16) Remuneration Policy;
(cid:16) Risk Management Review Procedure and Internal Compliance and Control;
(cid:16) Securities Trading Policy; and
(cid:16) Shareholders Communication Strategy.
Subject to the specific authorities reserved to the Board under the Board Charter, the Board delegates to the Managing
Director responsibility for the management and operation of Elsight. The Managing Director is responsible for the day-to-day
operations, financial performance and administration of Elsight within the powers authorised to him from time-to-time by
the Board. The Managing Director may make further delegation within the delegations specified by the Board and will be
accountable to the Board for the exercise of those delegated powers.
Further details of Board responsibilities, objectives and structure are set out in the Board Charter which is contained within
the Corporate Governance Place available on the Elsight website.
Board Committees
The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the formation
of separate committees at this time including audit and risk, remuneration or nomination committees, preferring at this stage
of the Company’s development, to manage the Company through the full Board of Directors. The Board assumes the
responsibilities normally delegated to the audit and risk, remuneration and nomination Committees.
If the Company’s activities increase, in size, scope and nature, the appointment of separate committees will be reviewed by
the Board and implemented if considered appropriate.
Board Appointments
The Company undertakes comprehensive reference checks prior to appointing a director or putting that person forward as a
candidate to ensure that person is competent, experienced, and would not be impaired in any way from undertaking the
duties of director. The Company provides relevant information to shareholders for their consideration about the attributes
of candidates together with whether the Board supports the appointment or re-election.
The terms of the appointment of a non-executive director, executive directors and senior executives are agreed upon and set
out in writing at the time of appointment.
The Company Secretary
The Company Secretary is accountable directly to the Board, through the Chairman, on all matters to do with the proper
functioning of the Board, including agendas, Board papers and minutes, advising the Board and its Committees (as applicable)
on governance matters, monitoring that the Board and Committee policies and procedures are followed, communication with
regulatory bodies and the ASX and statutory and other filings.
Diversity
The Board has adopted a Diversity Policy which provides a framework for the Company to establish and achieve measurable
diversity objectives, including in respect to gender, age, ethnicity and cultural diversity. The Diversity Policy allows the Board
to set measurable gender diversity objectives (if considered appropriate) and to assess annually both the objectives (if any
have been set) and the Company’s progress towards achieving them.
The Board considers that, due to the size, nature and stage of development of the Company, setting measurable objectives
for the Diversity Policy at this time is not appropriate. The Board will consider setting measurable objectives as the Company
increases in size and complexity.
The participation of women in the Company at the date of this report is as follows:
(cid:120)
(cid:120)
(cid:120)
Women employees in the Company
Women in senior management positions
Women on the Board
26%
16%
0%
The Company’s Diversity Policy is available on its website.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CORPORATE GOVERNANCE STATEMENT
Board & Management Performance Review
On an annual basis, the Board conducts a review of its structure, composition and performance.
The annual review includes consideration of the following measures:
(cid:120)
(cid:120)
comparison of the performance of the Board against the requirements of the Board charter;
assessment of the performance of the Board over the previous twelve months having regard to the corporate strategies,
operating plans and the annual budget;
review the Board’s interaction with management;
identification of any particular goals and objectives of the Board for the next year;
review the type and timing of information provided to the directors; and
identification of any necessary or desirable improvements to Board or committee charters.
(cid:120)
(cid:120)
(cid:120)
(cid:120)
The method and scope of the performance evaluation will be set by the Board and may include a Board self-assessment
checklist to be completed by each Director. The Board may also use an independent adviser to assist in the review.
The Chairman has primary responsibility for conducting performance appraisals of Non-Executive Directors, in conjunction
with them, having particular regard to:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
contribution to Board discussion and function;
degree of independence including relevance of any conflicts of interest;
availability for and attendance at Board meetings and other relevant events;
contribution to Company strategy;
membership of and contribution to any Board committees; and
suitability to Board structure and composition.
The Board conducts an annual performance assessment of the Managing Director against agreed key performance indicators.
The Managing Director conducts an annual performance assessment of senior executives against agreed key performance
indicators
Due to Elsight only listing in June 2017, no formal appraisal of the Board or Managing Director has been conducted.
Independent Advice
Directors have a right of access to all Company information and executives. Directors are entitled, in fulfilling their duties and
responsibilities, to seek independent external professional advice as considered necessary at the expense of the Company,
subject to prior consultation with the Chairman. A copy of any such advice received is made available to all members of the
Board.
Principle 2: Structure the board to add value
Board Composition
During the financial year and as at the date of this report the Board was comprised of the following members:
Ret Gen Ami Shafran
Mr Nir Gabay
Mr Howard Digby
Mr David Furstenberg
Dr Anton Uvarov
Mr Nathan Barbarich
Non-Executive Chairman (appointed 2 June 2017)
Managing Director (appointed 2 June 2017)
Non-Executive Director and Chairman (appointed 13 December 2016)
Non-Executive Director (appointed 2 June 2017)
Non-Executive Director (appointed 13 December 2016)
Non-Executive Director (appointed 13 December 2016; ceased 2 June 2017)
The Board comprises of the majority of Non-Executive Directors.
Elsight has adopted a definition of 'independence' for Directors that is consistent with the Recommendations.
Nir Gabay is not considered to be independent as he is an executive director of the Company and in addition, he is also a
substantial holder.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CORPORATE GOVERNANCE STATEMENT
Board Selection Process
The Board considers that a diverse range of skills, backgrounds, knowledge and experience is required in order to effectively
govern Elsight. The Board believes that orderly succession and renewal contributes to strong corporate governance and is
achieved by careful planning and continual review.
The Board is responsible for the nomination and selection of directors. The Board reviews the size and composition of the
Board regularly and at least once a year as part of the Board evaluation process.
The Board will establish a Board Skills Matrix. The Board Skills Matrix will include the following areas of knowledge and
expertise:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
strategic expertise;
specific industry knowledge;
accounting and finance;
risk management;
experience with financial markets; and
investor relations.
Induction of New Directors and Ongoing Development
New Directors are issued with a formal Letter of Appointment that sets out the key terms and conditions of their appointment,
including Director's duties, rights and responsibilities, the time commitment envisaged, and the Board's expectations
regarding involvement with any Committee work.
An induction program is in place and new Directors are encouraged to engage in professional development activities to
develop and maintain the skills and knowledge needed to perform their role as Directors effectively.
Principle 3: Act ethically and responsibly
The Company has implemented a Code of Conduct, which provides a framework for decisions and actions in relation to ethical
conduct in employment. It underpins the Company’s commitment to integrity and fair dealing in its business affairs and to a
duty of care to all employees, clients and stakeholders.
All employees and Directors are expected to:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
respect the law and act in accordance with it;
maintain high levels of professional conduct;
respect confidentiality and not misuse Company information, assets or facilities;
avoid real or perceived conflicts of interest;
act in the best interests of shareholders;
by their actions contribute to the Company’s reputation as a good corporate citizen which seeks the respect of the
community and environment in which it operates;
perform their duties in ways that minimise environmental impacts and maximise workplace safety;
exercise fairness, courtesy, respect, consideration and sensitivity in all dealings within their workplace and with
customers, suppliers and the public generally; and
act with honesty, integrity, decency and responsibility at all times.
(cid:120)
(cid:120)
(cid:120)
An employee that breaches the Code of Conduct may face disciplinary action including, in the cases of serious breaches,
dismissal. If an employee suspects that a breach of the Code of Conduct has occurred or will occur, he or she must report
that breach to the Company Secretary, or in their absence, the Chairman. No employee will be disadvantaged or prejudiced
if he or she reports in good faith a suspected breach. All reports will be acted upon and kept confidential.
Principle 4: Safeguard integrity in corporate reporting
The Board as a whole fulfills to the functions normally delegated to the Audit Committee as detailed in the Audit Committee
Charter.
The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor
when any vacancy arises. Candidates for the position of external auditor must demonstrate complete independence from the
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CORPORATE GOVERNANCE STATEMENT
Company throughout the engagement period. The Board may otherwise select an external auditor based on criteria relevant
to the Company’s business and circumstances. The performance of the external auditor is reviewed on an annual basis by
the Board.
The Board receives regular reports from management and from external auditors. It also meets with the external auditors as
and when required.
The external auditors attend Elsight's AGM and are available to answer questions from security holders relevant to the audit.
Prior approval of the Board must be gained for non-audit work to be performed by the external auditor. There are qualitative
limits on this non-audit work to ensure that the independence of the auditor is maintained.
There is also a requirement that the lead engagement partner responsible for the audit not perform in that role for more than
five years.
CEO and CFO Certifications
The Board, before it approves the entity’s financial statements for a financial period, receives from its CEO and CFO (or, if
none, the persons fulfilling those functions) a declaration provided in accordance with Section 295A of the Corporations Act
that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements
comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of
the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control
which is operating effectively.
Principle 5: Make timely and balanced disclosure
The Company has a Continuous Disclosure Policy which outlines the disclosure obligations of the Company as required under
the ASX Listing Rules and Corporations Act. The policy is designed to ensure that procedures are in place so that the market
is properly informed of matters which may have a material impact on the price at which Company securities are traded.
The Board considers whether there are any matters requiring disclosure in respect of each and every item of business that it
considers in its meetings. Individual Directors are required to make such a consideration when they become aware of any
information in the course of their duties as a Director of the Company.
The Company is committed to ensuring all investors have equal and timely access to material information concerning the
Company.
The Board has designated the Company Secretary as the person responsible for communicating with the ASX. All key
announcements at the discretion of the Managing Director are to be circulated to and reviewed by all members of the Board.
The Chairman, the Board, Managing Director and the Company Secretary are responsible for ensuring that:
a)
company announcements are made in a timely manner, that announcements are factual and do not omit any material
information required to be disclosed under the ASX Listing Rules and Corporations Act; and
company announcements are expressed in a clear and objective manner that allows investors to assess the impact of
the information when making investment decisions.
b)
Principle 6: Respect the rights of security holders
The Company recognises the value of providing current and relevant information to its shareholders. The Board of the
Company aims to ensure that the shareholders are informed of all major developments affecting the Company’s state of
affairs.
The Company respects the rights of its shareholders and to facilitate the effective exercise of those rights the Company is
committed to:
(cid:127)
communicating effectively with shareholders through releases to the market via ASX, the company website, information
posted or emailed to shareholders and the general meetings of the Company;
giving shareholders ready access to clear and understandable information about the Company; and
making it easy for shareholders to participate in general meetings of the Company.
(cid:127)
(cid:127)
The Company also makes available a telephone number and email address for shareholders to make enquiries of the
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CORPORATE GOVERNANCE STATEMENT
Company. These contact details are available on the “Corporate Directory” page of the Company’s website.
Shareholders may elect to, and are encouraged to, receive communications from Elsight and Elsight's securities registry
electronically. The contact details for the registry are available on the “Corporate Directory” page of the Company’s website.
The Company maintains information in relation to its Constitution, governance documents, Directors and senior executives,
Board and committee charters, annual reports and ASX announcements on the Company’s website.
Principle 7: Recognise and manage risk
The Board is committed to the identification, assessment and management of risk throughout Elsight's business activities.
The Board is responsible for the oversight of the Company’s risk management and internal compliance and control framework.
The Company does not have an internal audit function. Responsibility for control and risk management is delegated to the
appropriate level of management within the Company with the Managing Director having ultimate responsibility to the Board
for the risk management and internal compliance and control framework. Elsight has established policies for the oversight
and management of material business risks.
Elsight's Risk Management and Internal Compliance and Control Policy recognises that risk management is an essential
element of good corporate governance and fundamental in achieving its strategic and operational objectives. Risk
management improves decision making, defines opportunities and mitigates material events that may impact security holder
value.
Elsight believes that explicit and effective risk management is a source of insight and competitive advantage. To this end,
Elsight is committed to the ongoing development of a strategic and consistent enterprise wide risk management program,
underpinned by a risk conscious culture.
Elsight accepts that risk is a part of doing business. Therefore, the Company’s Risk Management and Internal Compliance and
Control Policy is not designed to promote risk avoidance. Rather, Elsight's approach is to create a risk conscious culture that
encourages the systematic identification, management and control of risks whilst ensuring we do not enter into unnecessary
risks or enter into risks unknowingly.
Elsight assesses its risks on a residual basis; that is it evaluates the level of risk remaining and considering all the mitigation
practices and controls. Depending on the materiality of the risks, Elsight applies varying levels of management plans.
The Board has required management to design and implement a risk management and internal compliance and control system
to manage Elsight’s material business risks. It receives regular reports on specific business areas where there may exist
significant business risk or exposure. The Company faces risks inherent to its business, including economic risks, which may
materially impact the Company’s ability to create or preserve value for security holders over the short, medium or long term.
The Company has in place policies and procedures, including a risk management framework (as described in the Company’s
Risk Management and Internal Compliance and Control Policy), which is developed and updated to help manage these risks.
The Board does not consider that the Company currently has any material exposure to environmental or social sustainability
risks.
The Company’s process of risk management and internal compliance and control includes:
(cid:120)
identifying and measuring risks that might impact upon the achievement of the Company’s goals and objectives, and
monitoring the environment for emerging factors and trends that affect those risks;
formulating risk management strategies to manage identified risks, and designing and implementing appropriate risk
management policies and internal controls; and
monitoring the performance of, and improving the effectiveness of, risk management systems and internal compliance
and controls, including regular assessment of the effectiveness of risk management and internal compliance and control.
(cid:120)
(cid:120)
The Board review’s the Company’s risk management framework at least annually to ensure that it continues to effectively
manage risk.
Management reports to the Board as to the effectiveness of Elsight’s management of its material business risks at each Board
meeting.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
CORPORATE GOVERNANCE STATEMENT
Principle 8: Remunerate fairly and responsibly
The Board as a whole fulfills to the functions normally delegated to the Remuneration Committee as detailed in the
Remuneration Committee Charter.
Elsight has implemented a Remuneration Policy which was designed to recognise the competitive environment within which
Elsight operates and also emphasise the requirement to attract and retain high caliber talent in order to achieve sustained
improvement in Elsight’s performance. The overriding objective of the Remuneration Policy is to ensure that an individual’s
remuneration package accurately reflects their experience, level of responsibility, individual performance and the
performance of Elsight.
The key principles are to:
(cid:120)
review and approve the executive remuneration policy to enable the Company to attract and retain executives and
Directors who will create value for shareholders;
ensure that the executive remuneration policy demonstrates a clear relationship between key executive performance
and remuneration;
fairly and responsibly reward executives having regard to the performance of the Group, the performance of the
executive and the prevailing remuneration expectations in the market;
remunerate fairly and competitively in order to attract and retain top talent;
recognise capabilities and promote opportunities for career and professional development; and
review and approve equity based plans and other incentive schemes to foster a partnership between employees and
other security holders.
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
The Board determines the Company’s remuneration policies and practices and assesses the necessary and desirable
competencies of Board members. The Board is responsible for evaluating Board performance, reviewing Board and
management succession plans and determines remuneration packages for the Managing Director, Non-Executive Directors
and senior management based on an annual review.
Elsight’s executive remuneration policies and structures and details of remuneration paid to directors and key management
personnel (where applicable) are set out in the Remuneration Report.
Non-Executive Directors receive fees (including statutory superannuation where applicable) for their services, the
reimbursement of reasonable expenses and, in certain circumstances options.
The maximum aggregate remuneration for Non-Executive Directors is $300,000 per annum as disclosed within the Company’s
constitution. The Directors set the individual Non-Executive Directors fees within the limit approved by shareholders.
Executive directors and other senior executives (where appointed) are remunerated using combinations of fixed and
performance based remuneration. Fees and salaries are set at levels reflecting market rates and performance based
remuneration is linked directly to specific performance targets that are aligned to both short and long term objectives.
The Company prohibits Directors and employees from entering into any transaction that would have the effect of hedging or
otherwise transferring the risk of any fluctuation in the value of any unvested entitlement in the Company’s securities to any
other person.
Further details in relation to the company’s remuneration policies are contained in the Remuneration Report, within the
Directors’ report.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
ADDITIONAL ASX INFORMATION
The shareholder information set out below was applicable as at 12 March 2018.
As at 12 March 2018 there were 868 holders of Ordinary Fully Paid Shares.
VOTING RIGHTS
The voting rights of the ordinary shares are as follows:
(a)
(b)
(c)
at meetings of members each member entitled to vote may vote in person or by proxy or attorney;
on a show of hands each person present who is a member has one vote; and
on a poll each person present in person or by proxy or by attorney has one vote for each ordinary share held.
There are no voting rights attached to any of the options that the Company currently has on issue. Upon exercise of these
options, the shares issued will have the same voting rights as existing ordinary shares.
TWENTY LARGEST SHAREHOLDERS
The names of the twenty largest holders of each class of listed securities are listed below:
Ordinary Full Paid Shares
Holder Name
IBI TRUST MANAGEMENT
LEARNICON LLC
CITICORP NOMINEES PTY LIMITED
INTERVEST HK LIMITED
IBI TRUST MANAGEMENT
J P MORGAN NOMINEES AUSTRALIA LIMITED
GNAT PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JB TORO PTY LTD
LAMMA NOMINEES PTY LTD
AWZ HLS INVESTMENT FUND I LP
YULIA UVAROVA
DEAD KNICK PTY LTD
MOSHE COHEN
LEON FINK HOLDINGS PTY LTD
MR TIMOTHY JOHN PEARS
MR NICHOLAS FINLAYSON
BT GLOBAL HOLDINGS PTY LTD
TERRA CAPITAL NEW HORIZONS FUND PTY LTD
MR PAUL HENRI VERON & MRS JULIE ANNE VERON
Holding
26,052,974
13,600,304
3,658,945
3,250,000
2,894,775
2,581,643
2,325,000
2,148,524
2,121,470
1,500,000
1,500,000
1,500,000
1,000,000
916,667
900,000
789,500
600,000
375,000
340,000
300,000
% IC
31.25%
16.31%
4.39%
3.90%
3.47%
3.10%
2.79%
2.58%
2.54%
1.80%
1.80%
1.80%
1.20%
1.10%
1.08%
0.95%
0.72%
0.45%
0.41%
0.36%
Totals
68,884,317
82.00%
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
SUBSTANTIAL HOLDERS
The names of the substantial shareholders disclosed to the Company as substantial shareholders as at 12 March 2018 are:
Name
Nir Gabay1
Learnicon LLC
DISTRIBUTION OF EQUITY SECURITIES
Ordinary Fully Paid Shares
Holding Ranges
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Totals
Unmarketable Parcels – 76 Holders
No of Shares Held
% of Issued Capital
26,052,974
13,600,304
31.25%
16.31%
Holders
Total Units
% Issued
Share Capital
147
260
171
239
51
868
95,262
715,660
1,418,785
7,655,766
73,495,918
83,381,391
0.11%
0.86%
1.70%
9.18%
88.15%
100.00%
RESTRICTED SECURITIES
As at 12 March 2018 the following shares are subject to escrow:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
2,894,775 Ordinary Fully Paid Shares escrowed until 2 June 2018
48,483,955 Ordinary Fully Paid Shares escrowed until 8 June 2019
7,000,000 Options expiring 2 June 2020 @ $0.30 escrowed until 8 June 2019
8,608,000 Options expiring 2 June 2022 @ $0.20 voluntarily escrowed until 8 June 2019
29,595,000 Performance Options expiring 2 June 2022 @ $0.20 escrowed until 8 June 2019
405,000 Performance Options expiring 2 June 2022 @ $0.20 voluntarily escrowed until 8 June 2019
UNQUOTED SECURITIES
As at 12 March 2018, the following unquoted securities are on issue:
29,595,000 Performance Options2 expiring 2 June 2022 @ $0.20 escrowed until 8 June 2019 - 1 Holder
Holders with more than 20%
Holder Name
Holding
% IC
IBI Trust Management
29,595,000
100.00%
405,000 Performance Options2 expiring 2 June 2022 @ $0.20 voluntarily escrowed until 8 June 2019 - 1 Holder
Holders with more than 20%
Holder Name
Mr Roee Kashi
Holding
% IC
405,000
100.00%
1 Securities are held beneficially and registered in the name of IBI Trust Management (Nir Gabay A/C>
2 Details on the performance conditions surrounding the Performance Options are contained within the Directors’ Report.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2017
7,000,000 Options expiring 2 June 2020 @ $0.30 escrowed until 8 June 2019– 27 Holders
There are no Holders with more than 20%
8,608,000 Options expiring 2 June 2022 @ $0.20 voluntarily escrowed until 8 June 2019 – 1 Holder
Holders with more than 20%
Holder Name
Mr Roee Kashi
211,000 Options expiring 9 October 2022 @ $0.60 – 1 Holder
Holders with more than 20%
Holder Name
IBI Trust Management
25,000 Options expiring 14 November 2022 @ $1.08 – 1 Holder
Holders with more than 20%
Holder Name
IBI Trust Management
ON-MARKET BUY BACK
There is currently no on-market buyback program.
ASX LISTING RULE 4.10.19
Holding
% IC
8,608,000
100.00%
Holding
% IC
211,000
100.00%
Holding
% IC
25,000
100.00%
The Company has used its cash and assets in a form readily convertible to cash that it had at the time of reinstatement of
the Company’s securities to quotation in a way consistent with its business objectives.
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