ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT
31 DECEMBER 2019
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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
Mr Peter Marks – Non-Executive Director
Company Secretary
Mr Mark Licciardo
Registered Office
Level 7
330 Collins Street
Melbourne VIC 3000
AUSTRALIA
Ph: +61 3 8689 9997
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
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
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Dear Shareholder,
The last 12 months have been characterised by significant progress, in particular the development and release
of Halo, our uniquely crafted communication platform. This is the world’s most compact, next-generation
technology, enabling always-on, real-time connectivity. Together, with its hardware solutions our technology
platform is the backbone of remote, mobile and distributed work.
Elsight solutions have demonstrated to be highly relevant for security forces, police, army, medical professionals,
government, and other organisations requiring a secured communication solution while providing always-on
connectivity to the internet at high speeds, low power consumption and secured data transmission. These
solutions are best designed for conversations, meetings, and other forms of communications using video
livestreams. In the rapid onset of COVID-19 globally, Elsight solutions can offer reliable communication for these
groups where this has become even more crucial.
Challenges arising from the spread of the COVID-19 are likely to accelerate the need and use of technologies as
arms of government ,a huge array of businesses as well as consumers go into lockdowns, and millions are forced
to work from home. Businesses have greater motivations and fewer perceived barriers to actively seek
technology-enabled solutions to assist in business continuity.
In the past several weeks Elsight has received a substantial increase in the number of significant requests by
many governments, security services and health ministries for telehealth and generally innovative and secure
communications solutions. The Company is currently assessing its ability to deliver the quantities as well as the
quality of product required. We will have a better view of these promising developments in the coming weeks.
Importantly, Elsight is well positioned to help companies, organisations and governments globally with
innovative solutions, during these turbulent times.
On behalf of my fellow directors, I would like to thank our staff and other stakeholders for continuing to operate
during this period and to our investors for continuing their journey with us.
Stay safe and healthy and we look forward to reporting our progress to you throughout 2020.
Sincerely,
Maj. Gen. (res) Ami Shafran
Chairman
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
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 2019.
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
9 January 2020
Resigned
-
-
-
-
-
Non-Executive Director
1 August 2018
7 January 2020
Deputy Chairman
12 December 2018
24 April 2019
Mr Nir Gabay
Mr David Furstenberg
Mr Howard Digby
Mr Peter Marks
Mr Raj Logaraj
Mick Keelty AO APM
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 2019 (2018: 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 $3,192,433 (2018: loss of $4,206,972). The 2019 loss included selling, general and
administrative expenses of $3,660,673.
The net assets of the Group have decreased by $3,084,798, from net assets of $4,500,060 at 31 December 2018 to net assets
of $1,415,262 at 31 December 2019.
As at 31 December 2019, the Group’s cash and cash equivalents decreased from a balance of $3,632,926 at 31 December
2018 to a balance of $933,517 at 31 December 2019. As at 31 December 2019 the Group has working capital of $936,808
(2018: $4,288,342).
Significant changes in the state of affairs
There were no significant changes to the Company or the state of its affairs during the year.
Highlights during the year
Halo
The Group unveiled its new Halo communication platform at the world’s largest mobile technology conference in February
2019. Halo’s breakthrough technology integrates Elsight’s high bandwidth secured data transmission technology while
introducing a dramatically reduced form factor, weight, power consumption and heat index. The platform is offered in two
main configurations: a highly compact standalone external device, or a lightweight internal board. The Halo 2000/4000
features multiple cellular modules, built in WiFi, and an optional video encoder and an internal battery. Halo is highly
adaptable and able to integrate with any platform or device, making it ideal for future-forward Original Electronic
Manufacturers (OEMs), drones or other application that requires light weight, hi-bandwidth, secured and always-on solution.
During the first half of the year, the Group focused on the development of its Halo technology towards commercialisation,
involving a ramp up in the final testing, logistics, marketing and sales activities.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
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Proof of concept (POC) trials were undertaken throughout the year, with feedback received from the trials incorporated into
Halo performance enhancements resulting in the release of the first commercially available version of Halo, Halo v1.1, in
November 2019. The Group’s testing and pilot programs continued towards the end of the year, with feedback and data
generated by the testing expected to result in additional features and enhancements which will be incorporated in a later
release of Halo v1.2. Through the execution of a methodical, sector-by-sector approach, the Company is aiming to have and
maintain a single, comprehensive version of firmware that is as generic as possible in order to minimise the cost of
installation, integration and adaptation.
The Group continues to receive positive feedback from the field trials being undertaken with POC partners, providing
additional validation of the Group’s flagship Halo program.
Following the end of the reporting period the Group was pleased to announce on 13 January 2020 that it had received an
initial purchase order for 50 Halo units from Israel’s largest defence, aerospace, robotics, and aviation manufacturer – Israel
Aerospace Industries (IAI), a key strategic partner for Elsight. The 50 unit order was received following an extended, wide-
ranging POC that paved the way for the full integration of the Halo communications platform within the robotic and
unmanned systems of IAI subsidiary ELTA.
Halo’s Integration with Drones
In October 2019, Elsight received its first purchase order for ten Halo units from Airobotics, a tier one US-based provider of
automated, industrial drone and aerial data platforms, for a pilot trial. Airobotics’ pilotless drone solution is the world’s first
and only regulatory compliant UAV solution that can be operated remotely. Airobotics’ end-to-end automated drone
platform is purpose-built to simplify drone operations. The pilot trial commenced in November 2019, with Airobotics
successfully conducting a wide range of tests during numerous flights with airborne platforms and fully integrated with Halo
v1.1 onboard as the communications solution. The success of these flight tests follows system adaptations undertaken by
both Elsight and Airobotics to advance the integration process. The next step in the integration process is the carrying out
of additional test flights in different field flight test areas and terrains across the country, and upon their success, additional
field flight tests will be carried out in the U.S. designed to prepare Airobotics’ Halo-integrated platform to become the world’s
first, manually driven and autonomous drone based airborne platform and communication system certified by the Federal
Aviation Authority (FAA) to fly over urban and populated areas.
The Group is making significant progress validating Halo v1.1’s applicability and integrability for drone operations beyond the
visual line of sight (BVLOS) through the field trials with Airobotics, Gadfin, and other drone technology solution providers.
The Group’s partners and clients have carried out hundreds of hours of test flights of Halo-equipped drones, and the
responses coming in indicate that the capabilities of the Halo platform with respect to the facilitation and enabling of BVLOS
drone operations continue to unequivocally differentiate it from other market entrants.
Halo v1.1 Software Platform
In December 2019 the Group received an initial A$91,000 purchase order for Halo firmware equipped Multichannel units
from the official National Fire and Rescue Authority, the official fire and rescue authority of the State of Israel. The National
Fire and Rescue Authority will use these units to provide always-on communication between their national headquarters and
their command and control centres spread across the country.
This is the first purchase order for Elsight technology solutions including the newly released Halo software platform, with a
cloud based, recurring revenue model, in this case supplied as firmware with Multichannel units. Beyond the actual
modernisation and upgrade of the Multichannel platform, this Multichannel equipped with Halo’s advanced firmware
provides the Group with a new capability to sell cloud-based services under a monthly recurring revenue model to existing
and new customers alike.
The purchase order comes after a year of field trials conducted to demonstrate the capabilities of Elsight’s technology, and
the identification of a wide array of applications for Elsight’s technology within the National Fire and Rescue Authority’s
platforms.
Opening of US office with local staff
In November, the Group opened its US office in Atlanta, Georgia and announced the appointment of Ms Karin Zalcberg as
Director of Sales and Marketing for Elsight North America. In North America, the Group remains focused on extending its
ongoing network with a number of Original Equipment Manufacturers (OEMs) in both the defence and civilian sectors. In
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
addition to established OEM relationships the Company has begun laying the groundwork for direct and indirect sales via
distributors and reseller agreements under Ms Zalcberg’s leadership.
Placement
Subsequent to the reporting period the Group announced on 10 January 2020 that it had raised approximately AUD$2.88m
through a placement to a Hong Kong-based group of cornerstone investors who have been shareholders for the majority of
the Group’s history of quotation on the ASX. The funds raised will be used to expand sales and marketing efforts with respect
to the commercialisation of Halo in addition to being earmarked as working capital required for expanding the manufacture
of product. Following the placement, the Group is well attended to execute its commercialisation strategy for 2020.
Significant events after the reporting period
Since the reporting date the following significant events have occurred:
Mr Raj Logaraj resigned as a director of the Company effective 7 January 2020.
Mr Peter Marks became a director of the Company on 9 January 2020.
On 13 January 2020 the Company announced the receipt of an initial purchase order for 50 Halo units from Israel
Aerospace Industries following a large-scale Proof-of-Concept field trial.
On 14 January 2020 the Company completed a private placement to a group of significant investors. 9,000,000 fully
paid ordinary Shares were issued at $0.32 to raise approximately AUD$2.88m.
On 27 February 2020 the Company released a business update as a consequence of COVID-19 virus outbreak.
On 16 March 2020 the Company advised that, following one month of intensive and successful POC test flights using
Halo, CopterPIX PRO has elected to expand the ongoing POC trials and purchase an additional six Halo units for
integration with their drone platforms.
There were no other significant events after reporting date.
Information on Directors
Major General (ret) Ami
Shafran
Non-Executive Chairman (Appointed 2 June 2017)
Qualifications
-
Experience
Interest in Shares and
Options at the date of this
report
Special Responsibilities
Directorships held in other
listed entities (last 3 years)
Major General Shafran is the former Head of the Israeli Defence Force Information and
Communications Technology Command. In addition, he is currently the Head of the Center 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 Attach at the Israeli Embassy in Washington DC.
100,000 options expiring 9 October 2022 exercisable at A$0.60
Nil
Nil
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
Information on Directors
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
local
municipality, and high tech companies. Nir was previously a member of an Israeli Special Forces
unit.
including a mobile cellular provider,
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.
26,159,474 Ordinary shares, 29,595,000 Performance Options expiring 2 June 2022 exercisable
at A$0.20, and 110,000 options expiring 9 October 2022 exercisable at A$0.60
Nil
Nil
Interest in Shares and
Options at the date of this
report
Special Responsibilities
Directorships held in other
listed entities (last 3 years)
Mr David Furstenberg
Non-Executive Director (Appointed 2 June 2017)
Qualifications
-
Experience
Interest in Shares and
Options at the date of this
report
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).
250,000 options expiring 9 October 2022 exercisable at A$0.60
Special Responsibilities
Nil
Directorships held in other
listed entities (last 3 years)
Nil
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
Information on Directors
Mr Howard Digby
Non-Executive Director (Appointed 13 December 2016)
Qualifications
Bachelor of Engineering (Mechanical) (Honours)
Experience
Interest in Shares and
Options
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.
1,795,834 Ordinary shares and 750,000 Options expiring 2 June 2020 exercisable at $0.30
Special Responsibilities
Nil
Directorships held in other
listed entities (last 3 years)
4DS Memory Limited (current)
IMEXHS Limited (current)
HearMeOut Limited (resigned 11 September 2017)
Estrella Resources Limited (resigned 3 April 2017)
Mr Peter Marks
Non-Executive Director (Appointed 9 January 2020)
Qualifications
MBA, Bachelor of Economics, Bachelor of Law, and Grad Dip in Commercial Law
Experience
Peter has over 30 years’ experience in corporate advisory and investment banking. Over the
course of his esteemed career, he has specialized in capital raising IPOs, cross border, M&A
transactions, corporate underwriting and venture capital transactions for companies in Australia,
the US and Israel. He has been involved in a broad range of transactions with a special focus in
the life sciences, biotechnology, medical technology and high tech segments. Peter has served
as both an Executive and Non-Executive Director of a number of different entities which have
been listed on the ASX, NASDAQ, and AIM markets.
Interest in Shares and
Options
Nil
Special Responsibilities
Nil
Directorship held in other
listed entities (last 3 years)
Alterity Therapeutics Limited (current)
Noxopharm Limited (current)
Fluence Corporation Limited (current)
Nyrada Inc (current)
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
Information on Directors
Mr Raj Logaraj
Non-Executive Director (Appointed 1 August 2018, Resigned 7 January 2020)
Qualifications
LLB, LL M
Experience
Mr Logaraj’s career spans law and investment banking. He has served on the Boards of public
companies listed on the Australian Securities Exchange (ASX), Singapore Stock Exchange (SGX)
and the Malaysian Stock Exchange (Bursa Malaysia), dealing with a diverse range of businesses
including Agribusiness, FMCG, Uranium Mining, Medical Devices, Financial Services and on
University Committees and Government Councils in Australia and overseas.
He practiced Law as a Partner of a major law firm in Singapore following graduation with a LLB
(Hons) degree from the National University of Singapore where he also taught Commercial Law
part-time. He subsequently obtained a LL M degree from Sydney University majoring in
International Tax and Public Company Finance and practiced law as an International Partner of
Baker & McKenzie in Australia responsible for the development of its business in the ASEAN
region, as Head of the Corporate and Commercial Group of the Australian offices and as Chair of
its Business Development Committee before joining Turnbull & Partners (now Goldman Sachs
Australia) as Executive Director. He then worked for Temasek Holdings in Singapore as a Board
Director, President of the Financial Solutions Group of its stockbroking unit and Chair of the Risk
and Management Committee.
Interest in Shares and
Options
50,000 Ordinary shares
Special Responsibilities
Nil
Directorship held in other
listed entities (last 3 years)
Nil
Mr Mick Keelty AO APM
Deputy Chairman (Appointed 12 December 2018, Resigned 24 April 2019)
Qualifications
Experience
Masters in Public Policy and Administration, Graduate Certificate in Criminal Justice Education,
AIM (Fellow)
Mick joined the Australian Federal Police Force (AFP) in Canberra and rose through the ranks to
be appointed Commissioner in 2000; the first AFP member to achieve this milestone promotion.
In this position, Mick filled several integral roles, including serving as the inaugural Chairperson
of the Australian Crime Commission (now the Australian Crime & Intelligence Commission). He
was also the Chair of the Asia Pacific Group on Money Laundering, a regional organisation of the
Financial Action Task Force based in France, an initiative of the G7 group of nations. During his
tenure as Commissioner, Mick oversaw the police responses to the Bali bombings, the Indian
Ocean Tsunami and other regional events.
Since leaving the AFP in 2009, Mick has spearheaded major government reviews and inquiries,
leading to monumental organisational changes. Mick has held and continues to hold positions
on several government and private sector advisory boards.
Interest in Shares and
Options at the date of this
report
Nil
Special Responsibilities
Nil
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
Directorships held in other
listed entities (last 3 years)
Nil
Information on Key Management
Mr Roee Kashi
Qualifications
Experience
Vice President – Research and Development
-
Roee commenced his career in the Israeli Defence Force and has over nine years of experience
and expertise in building and developing digital video systems.
Roee has been responsible for some major technological achievements including the development
of the core software of El-Sight Israel’s digital video recorder 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.
Information on Company Secretary
Mr Mark Licciardo
Company Secretary
Qualifications
Experience
B.Bus (Acc), GradDip CSP, FGIA, FCIS, FAICD
Mr Licciardo is the founder and Managing Director of Mertons Corporate Services. Mark has
extensive experience working with Boards of high profile ASX listed companies in the areas of
corporate governance, accounting & finance and company secretarial practice. His expertise
is in developing and guiding effective governance and he is considered a leader in this sector.
His 35 year corporate career has encompassed executive roles in banking and finance, funds
management, investment and infrastructure development. Mark is a director of various ASX
listed public and private companies, a former Chairman of the Governance Institute of
Australia Victorian division, Academy of Design (LCI Melbourne) and Melbourne Fringe Festival
and a former company secretary of Top 50 ASX listed companies Transurban Group and
Australian Foundation Investment Company.
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:
DIRECTORS’ MEETINGS
Number eligible
to attend
Number
Attended
Ami Shafran
Nir Gabay
Appointed 2 June 2017
Appointed 2 June 2017
David Furstenberg
Appointed 2 June 2017
Howard Digby
Appointed 13 December 2016
Peter Marks
Raj Logaraj
Mick Keelty
Appointed 9 January 2020
Appointed 1 August 2018, Resigned 7 January 2020
Appointed 12 December 2018, Resigned 24 April 2019
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9
9
9
-
9
2
9
9
8
9
-
8
1
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
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
18 June 2021
2 June 2022
2 June 2022
9 October 2022
9 October 2022
14 November 2022
4 February 2023
4 March 2023
31 July 2023
31 July 2023
1 December 2023
23 June 2024
12 November 2024
Issue Date
2 June 2017
19 June 2018
2 June 2017
2 June 2017
29 December 2017
2 October 2018
9 January 2018
7 May 2018
7 May 2018
2 October 2018
2 October 2018
1 December 2018
12 August 2019
22 November 2019
Status
Unlisted
Listed
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Exercise Price
Number Under Option
A$0.30
A$1.00
A$0.20
A$0.20
A$0.60
A$.060
$A1.08
A$0.80
A$0.745
A$0.675
A$0.60
A$0.60
A$0.35
A$0.41
6,646,000
6,878,983
30,000,000
8,608,000
125,000
460,000
25,000
24,000
12,000
117,000
200,000
50,000
165,000
186,000
53,496,983
No option holder has any right under the options to participate in any other share issue of the Company or of any other entity.
During the year ended 31 December 2019 354,000 options exercisable at $A0.30 on or before 2 June 2020 were exercised
and converted to ordinary Shares (2018: Nil).
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.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
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 no non-audit services. Details of their remuneration
can be found within the financial statements at Note 6 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 2019 has been received and can be found on page
21 of the financial report.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
Remuneration Report (Audited)
This remuneration report for the year ended 31 December 2019 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
9. Voting of shareholders at last year’s annual general meeting
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
Appointed
2 June 2017
2 June 2017
2 June 2017
Managing Director
Non-Executive Director
Non-Executive Director
13 December 2016
Non-Executive Director
9 January 2020
Resigned
-
-
-
-
-
Non-Executive Director
1 August 2018
7 January 2020
Deputy Chairman
12 December 2018
24 April 2019
Vice President – Research
and Development
2 June 2017
-
Mr Nir Gabay
Mr David Furstenberg
Mr Howard Digby
Mr Peter Marks
Mr Raj Logaraj
Mick Keelty
Mr Roee Kashi
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.
16
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
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 ILS 772,668 per annum (based on the exchange rate at the date of this
report, equals approximately US$211,325 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 ILS 660,000 per annum (based on the exchange rate at the date of this
report, equals approximately US$180,510 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. There were no options were issued to key
management personnel under the Plan during the 2019 financial year (2018: 460,000).
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
17
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
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$349,695) 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 US$146,020 (2018: US$80,283) and cover main Board
activities only. Non-executive Directors may receive additional remuneration for other services provided to the Group.
All non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The
letter summarises the board policies and terms, including remuneration, relevant to the office of director.
5. Details of Remuneration
The Key Management Personnel of Elsight Limited includes the current and former Directors of the Company and Key
Management Personnel of Elsight during the year ended 31 December 2019.
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Directors:
Ami Shafran
Nir Gabay
David Furstenberg
Howard Digby
Peter Marks
Raj Logaraj
Mick Keelty
Key management:
Roee Kashi
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Total
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Short Term
Salary, Fees &
Commissions
Post-
Employment
Retirement
Benefits
US$
US$
Non-
monetary
benefits
US$
Other(i)
Share-based
payments(iii)
Total
Performance
based
remuneration
US$
US$
US$
69,533(ii)
252,640
69,533(ii)
34,767
-
41,720
-
186,238
654,431
-
29,992
-
16,357
-
11,011
80,544
24,495
(388,738)
(65,254)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27,527
-
-
-
-
97,060
34,767
-
41,720
-
28,942
58,934
9,255
25,612
23,990
48,485
226,079
474,504
(124,121)
663,341
14%
596%
28%
-
-
-
48%
(19%)
(i) Israeli social benefits.
(ii) Fees for Ami Shafran and David Fursternberg are comprised of Non-executive Director fees of $34,767 and consulting
fees of $34,767.
(iii) Share-based payment expense is recorded pro-rata over the vesting period. Negative amounts arise due to the reversal of
expense recorded in prior financial years. Refer to Section 6 Additional disclosures relating to equity instruments for further
information. Share-based payment amounts included in the 2019 remuneration table are comprised as follows:
31-Dec-19
10,000,000
Class A
Performance
Options
US$
10,000,000
Class B
Performance
Options
US$
10,000,000
Class C
Performance
Options
US$
Ami Shafran
Nir Gabay
David Furstenberg
Roee Kashi
Total
-
-
-
-
-
-
(400,850)
-
(5,485)
(406,335)
-
-
-
-
-
-
-
-
231,564
231,564
11,011
12,112
27,527
-
50,650
US$
US$
8,608,000
ESOP Options
460,000
ESOP Options
Total
US$
11,011
(388,738)
27,527
226,079
(124,121)
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31-Dec-18
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Directors:
Ami Shafran
Mick Keelty
Nir Gabay
David Furstenberg
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s
u
Howard Digby
Raj Logaraj
Anton Uvarov
Roee Kashi
Key management:
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
Short Term
Salary, Fees &
Commissions
Post-
Employment
Retirement
Benefits
US$
US$
Non-
monetary
benefits
US$
Other(i)
Share-based
payments(iii)
Total
Performance
based
remuneration
US$
US$
US$
22,636(ii)
2,412
155,304
22,636(ii)
37,376
18,690
21,805
139,826
420,685
-
-
-
-
-
-
2,715
-
25,351
2,412
21,043
16,866
15,428
848,317
1,056,958
-
-
-
-
-
-
-
-
-
-
-
-
6,788
-
-
-
29,424
37,376
18,690
21,805
20,000
41,043
9,875
26,741
14,679
30,107
382,740
567,120
1,240,560
1,759,136
11%
-
80%
23%
-
-
-
67%
71%
(i) Israeli social benefits.
(ii) Consulting fees.
(iii) 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. Share-based payment amounts included in the 2018 remuneration
table are comprised as follows:
31-Dec-18
10,000,000
Class A
Performance
Options
US$
10,000,000
Class B
Performance
Options
US$
10,000,000
Class C
Performance
Options
US$
Ami Shafran
Nir Gabay
David Furstenberg
Roee Kashi
Total
-
589,095
-
8,062
597,157
-
256,235
-
3,507
259,742
-
-
-
-
-
-
-
-
371,171
371,171
2,715
2,987
6,788
-
12,490
US$
US$
8,608,000
ESOP Options
460,000
ESOP Options
Total
US$
2,715
848,317
6,788
382,740
1,240,560
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
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6. Additional disclosures relating to equity instruments
KMP Shareholdings
There were no shares issued as remuneration or on the exercise of options during the 2019 financial year (2018: 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-19
Balance at start
of the year
Shares acquired
during the year(i)
Balance at Date
of Appointment/
(Resignation)(ii)
Balance at
end of the year
Directors:
Ami Shafran
Nir Gabay
David Furstenberg
Howard Digby
Peter Marks
Raj Logaraj
Mick Keelty
Key management:
Roee Kashi
Total
-
26,127,974
-
1,795,834
-
50,000
-
2,894,775
30,868,583
-
31,500
-
-
-
-
-
-
31,500
-
-
-
-
-
-
-
-
-
-
26,159,474
-
1,795,834
-
50,000
-
2,894,775
30,900,083
(i)On-market purchases during the year.
(ii)Mr Keelty resigned on 24 April 2019 and is not considered to be a KMP from this date.
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:
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31-Dec-19
Balance at
the start of
the year
Granted as
remuneration
during the
year
Exercised
during the
year
Balance at
Date of
Appointment
/
(Resignation)
(i)
Balance at
the end of the
year
Vested and
exercisable
Vested and
un-
exercisable
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Directors:
Ami Shafran
Nir Gabay
David Furstenberg
Howard Digby
Peter Marks
Raj Logaraj
Mick Keelty
Key management:
Roee Kashi
Total
100,000
29,705,000
250,000
750,000
-
-
-
9,013,000
39,818,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
29,705,000
250,000
750,000
-
-
-
-
9,865,000
-
750,000
-
-
-
9,013,000
39,818,000
5,515,000
16,130,000
Unvested
and
un-
exercisable
100,000
19,840,000
250,000
-
-
-
-
3,498,000
23,688,000
-
-
-
-
-
-
-
-
-
(i)Mr Keelty resigned on 24 April 2019 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 2019
DIRECTORS’ REPORT
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:
Number
granted
Grant Date
Vesting
and
exercise
date(i)
Expiry
date
Exercise
price
Value per
option at
grant
date(iv)
Vested
%
Value
Yet to
Vest
Value Yet
to be
Expensed
US$
US$
10,000,000
2-Jun-17
7-Jun-18
2-Jun-22
A$0.20
US$0.104
100%
10,000,000
2-Jun-17
7-Jun-20
2-Jun-22
A$0.20
US$0.104
10,000,000
2-Jun-17
7-Jun-20
2-Jun-22
A$0.20
US$0.104
-
-
-
-
-
-
-
-
8,608,000
2-Jun-17
(ii)
2-Jun-22
A$0.20
US$0.104
62.5%
334,919
74,797
460,000
28-May-18
(iii)
9-Oct-22
$A0.60
US$0.265
-
121,981
58,842
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Class A Performance
Options
Class B Performance
Options
Class C Performance
Options
ESOP Options
ESOP Options
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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 vested on 7 June 2018 upon achievement of the vesting
milestone (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$10,000,000 from total sale of products based on the
Technology in a Year(a).
Assessed
likelihood of
milestone
achievement
100%
-
-
(a)The term Year shall mean one of: (a) the time period commencing 1 January 2017 and ending on the 12 month
anniversary of the completion of the IPO; (b) the 12 month period immediately after the end of the first year, and
(c) the 12 month period immediately after the end of the second Year.
(ii)50% of the 8,608,000 options vested on 2 June 2019, with an additional 6.25% vesting at the end of each quarter of
continuous service thereafter. A total of 5,380,000 options vested during the year ended 31 December 2019. There are no
performance milestones applicable to the ESOP Options.
(iii)50% of the 460,000 options vest on 2 October 2020, with an additional 6.25% vesting at the end of each quarter of
continuous service thereafter. There are no performance milestones applicable to the ESOP Options.
(iv)The value per option at grant date has been determined using a Black Scholes option pricing model. Share-based
payment expense is recorded pro-rata over the vesting period.
21
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
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31-Dec-19
Directors:
Ami Shafran
Nir Gabay
David Furstenberg
Key management:
Roee Kashi
Total
Fair value of
options
granted during
the year
Value of
options vested
during the year
Value of
options lapsed
during the year
US$
US$
US$
Remuneration
consisting of
options for the
year
US$
-
-
-
-
-
-
-
-
558,198
558,198
-
-
-
-
-
11,011
(388,738)
27,527
226,079
(124,121)
7.
Loans from key management personnel (KMP) and their related parties
There were no loans between the Group and its directors or key management personnel during the year.
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.
Key Management
Personnel or Their
Related Party
Nature of transaction
Ami Shafran
Director and consulting fees included within trade and other payables
Nir Gabay
Executive salary and director fees included within trade and other
payables
Susana Gabay(i)
Salary and salary related expenses
Guy Gabay(i)
Salary and salary related expenses
Eden Gabay(i)
Professional services
Dipio(ii)
Subcontractor
David Furstenberg
Director and consulting fees included within trade and other payables
Howard Digby
Director fees included within trade and other payables
Raj Logaraj
Director fees included within trade and other payables
Roee Kashi
Salary and salary related expenses
(i)Related parties of Nir Gabay.
(ii)Related party of Nir Gabay and Roee Kashi.
Transaction
value
US$
-
-
122,317
16,945
263
84,163
-
-
-
-
Payable
balance
US$
40,797
7,403
3,091
-
-
-
35,928
2,914
3,847
6,940
9. Voting of shareholders at last year’s annual general meeting
The Company received 81% “Yes” votes cast on its Remuneration Report for the 2018 financial year. The Company did not
receive any specific feedback at the AGM regarding its remuneration practices.
REMUNERATION REPORT (END)
22
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ REPORT
Signed in accordance with a resolution of the Board of Directors.
Mr Nir Gabay
Managing Director
24 March 2020
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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 2019, 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 entity it controlled during the period.
Phillip Murdoch
Director
BDO Audit (WA) Pty Ltd
Perth, 24 March 2020
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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 a by a scheme approved under Professional Standards Legislation.
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
Revenue from contracts with customers
Cost of sales
Gross profit
Other income
Selling, general and administrative expenses
Net share based payments income/(expense)
Loss before finance expenses
Finance expenses
Loss before income tax
Income tax expense
Loss for the year
Note
2
3
18
3
2019
US$
1,287,897
(836,732)
451,165
31,952
2018
US$
1,691,922
(771,651)
920,271
78,277
(3,660,673)
(3,836,146)
43,438
(1,362,695)
(3,134,118)
(4,200,293)
(58,315)
(6,679)
(3,192,433)
(4,206,972)
-
-
(3,192,433)
(4,206,972)
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation, net of tax
17(c)
85,318
(615,004)
Total comprehensive loss for the year attributable to owners of the
Company
(3,107,115)
(4,821,976)
Loss per Share attributable to owners of the Company
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
7
7
(3.33)
(3.33)
(4.51)
(4.51)
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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25
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019
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
Right of use assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Borrowings
Lease liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Provision for employees’ severance benefits
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
SHAREHOLDERS’ EQUITY
Issued capital
Reserves
Accumulated losses
SHAREHOLDERS’ EQUITY
Note
8a
9
10
11
12
1d
13
14
1d
14
15
16
17
2019
US$
933,517
571,618
251,148
107,388
1,863,671
292,177
141,909
161,703
595,789
2,459,460
694,882
64,461
167,520
926,863
2018
US$
3,632,926
1,152,211
314,277
93,272
5,192,686
326,701
45,140
-
371,841
5,564,527
883,882
20,462
-
904,344
8,072
109,263
117,335
1,044,198
64,976
95,147
160,123
1,064,467
1,415,262
4,500,060
11,739,495
1,630,987
(11,955,220)
1,415,262
11,667,737
1,613,865
(8,781,542)
4,500,060
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 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2019
Issued Capital Accumulated losses
Share Based
Payment Reserve
Foreign Exchange
Reserve
Predecessor
Accounting Reserve
US$
US$
US$
US$
US$
Total
US$
5,091,738
(4,574,570)
1,296,456
(152,005)
(296,796)
1,364,823
Balance at 1 January 2018
Loss for the year
Other comprehensive loss
Total comprehensive loss for the year
Transactions with owners in their capacity as
owners:
Issue of shares
Capital raising costs
Share based payments
Balance at 31 December 2018
Balance as at 31 December 2018
Change in accounting policy (Note 1d)
Restated total equity at 1 January 2019
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners in their capacity as
owners:
Issue of shares
Exercise of options
Share based payments
-
-
-
7,059,429
(483,430)
-
11,667,737
11,667,737
-
11,667,737
-
-
71,758
-
-
(4,206,972)
-
(4,206,972)
-
-
-
(8,781,542)
(8,781,542)
(6,003)
(8,787,545)
(3,192,433)
-
(3,192,433)
-
24,758
-
Balance at 31 December 2019
11,739,495
(11,955,220)
-
-
-
-
-
1,381,214
2,677,670
2,677,670
-
2,677,670
-
-
-
-
(24,758)
(43,438)
2,609,474
-
(615,004)
(615,004)
-
-
-
(767,009)
(767,009)
-
(767,009)
-
85,318
85,318
-
-
-
(681,691)
-
-
-
-
-
-
(296,796)
(296,796)
-
(296,796)
-
-
-
-
-
-
(296,796)
(4,206,972)
(615,004)
(4,821,976)
7,059,429
(483,430)
1,381,214
4,500,060
4,500,060
(6,003)
4,494,057
(3,192,433)
85,318
(3,107,115)
71,758
-
(43,438)
1,415,262
The above Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Note
2019
US$
2018
US$
1,901,353
1,380,214
(4,389,030)
(4,706,119)
33,165
(26,718)
58,683
(6,679)
Net cash used in operating activities
8b
(2,481,230)
(3,273,901)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment
Purchase of intangible assets
Proceeds from deposits
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from the issue of shares
Repayment of borrowings
Principal elements of lease payments
Net cash (used in)/provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Foreign exchange
(8,522)
(165,709)
(100,222)
-
-
43,658
(108,744)
(122,051)
71,758
6,594,517
(19,511)
(88,552)
(170,601)
-
(118,354)
6,505,965
(2,708,328)
3,110,014
3,632,926
1,093,853
8,919
(570,941)
Cash and cash equivalents at the end of the financial year
8a
933,517
3,632,926
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 2019
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
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 24 March 2020 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 accordance with Australian Accounting Standards, the acquisition did 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. Common control entity accounting was applied at transaction date.
c) Adoption of New and Amended Accounting Standards
The Group had to change its accounting policies as a result of the adoption of AASB 16 Leases from 1 January 2019. The
impact of the adoption of this standard has had a material impact on the amounts presented in the Group’s financial
statements as disclosed below.
d) Changes in Accounting Policies
This note explains the impact of the adoption of AASB 16 Leases on the group’s financial statements and discloses the new
accounting policies that have been applied from 1 January 2019.
The Group has applied the Modified Retrospective Approach in its adoption of AASB 16. Comparative information has not
been restated as permitted under the specific transitional provisions in the standard. The reclassifications and adjustments
arising from the adoption of AASB 16 are recognised in the opening statement of financial position at 1 January 2019, with
the cumulative effect of initial application recognised as an adjustment to the opening retained earnings balance at that date.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AASB 16 Leases – Impact of Adoption
Lease liabilities
On adoption of AASB 16 the group recognised lease liabilities in relation to leases which had previously been
classified as operating leases under the principles of AASB 117 Leases. These liabilities were measured at the
present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1
January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January
2019 was 3.58%.
Lease liabilities recognised at 1 January 2019 are as follows:
Operating lease commitments disclosed as at 31 December 2018
Less: Discount applied
Operating lease commitments discounted using the lessee’s incremental borrowing rate at the
date of initial application
Add: finance lease liabilities recognised as at 31 December 2018
Less: short-term leases recognised on a straight-line basis as expense
Lease liability recognised as at 1 January 2019
2019
US$
361,902
(36,970)
324,932
-
-
324,932
Of which are:
Current lease liabilities
Non-current lease liabilities
Total lease liability
Right of use assets
31 December 2019
1 January 2019
US$
167,520
-
167,520
US$
189,618
135,314
324,932
The associated right of use assets for property and vehicle leases were measured on a retrospective basis as if the
new rules had always been applied. There were no other right of use assets and no onerous lease contracts that
would have required an adjustment to the right of use assets at the date of initial application.
The recognised right of use assets relate to the following types of assets:
Office space
Motor vehicles
Total right of use assets
31 December 2019
1 January 2019
US$
135,645
26,058
161,703
US$
250,155
68,774
318,929
The change in accounting policy affected the following items in the statement of financial position on 1 January
2019:
Right of use assets – increase by US$318,929; and
Lease liabilities – increase by US$324,932.
The net impact on accumulated losses on 1 January 2019 was an increase of US$6,003.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
e) Principles of Consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December
2019. 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 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
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NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
f) Revenue from Contracts with Customers
Group revenues consist of the following elements:
physical products which are sent to the customer, where revenue is recognised upon shipment or arrival of goods,
dependent on the terms that have been agreed with the customer;
IT services, where revenue is recognised in the accounting period in which the services are rendered;
installation fees, which are recognised upon the completion of product installation; and
other revenue including cloud services fees which are recognised over the service period; software license fees
which are recognised over the license period; maintenance fees for which contracts are generally one year with
revenue recognised over the contract period; and service level agreements which are recognised over the
agreement period.
In relation to IT services, cloud services, software licence, maintenance fees and service level agreements, the Group
recognises a contract liability where payments received exceed the services rendered.
The Group has no material contracts where the period between the transfer of the promised goods or services to the
customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the
transaction prices for the time value of money.
Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised to the extent that
it is probable that the economic benefits will flow to the Group and can be reliably measured.
g)
Income Tax
Current income tax expense charged to 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 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.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
h) Financial Instruments
Classification
The Group classifies its financial assets in the following measurement categories:
those to be measured subsequently at fair value (either through OCI, or through profit or loss), and
those to be measured at amortised cost.
The classification depends on how the Group manages the financial assets and the contractual terms of the cash flows. At
year end, all of the Group’s financial assets have been classified as those to be measured at amortised cost.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Impairment
The Group assesses expected credit losses associated on a forward-looking basis. For trade receivables, the Group applies
the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition
of the receivables.
i)
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.
j)
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.
k) Trade receivables
Trade receivables are amounts due from customers for goods or services performed in the ordinary course of business. They
are generally due for settlement within 45 days and therefore are all classified as current. Trade receivables are recognised
initially at the amount of consideration that is unconditional which is considered to be fair value; none of the Group’s trade
receivables contain a financing component. The Group holds the trade receivables with the objective to collect the
contractual cashflows and therefore measures them subsequently at amortised cost using the effective interest method.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and
the days past due. The expected loss rates are based on the Group’s past history, existing market conditions and forward-
looking estimates at the end of each reporting period.
l)
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.
m) Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin.
n) Depreciation
Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount
is the cost of the asset, less its residual value.
An asset is depreciated from the date it is ready for use, meaning the date it reaches the location and condition required
for it to operate in the manner intended by management.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of the fixed
asset item, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied
in the assets.
The estimated useful lives for the current and comparative periods are as follows:
Computers – 3 years
Furniture and equipment – 7-17 years
Motor vehicles – 7 years
Leasehold improvements are depreciated over the shorter of the lease period or the useful life of the leasehold
improvement.
Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if
appropriate.
o) 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.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
p) Employee Benefits
Post-employment benefits
The Company has a post-employment benefit plan in place in accordance with its obligations under Israeli employment
law. Under Israeli employment law, in the event of termination of an employee, the Group is obligated to pay the employee
their last monthly salary multiplied by the number of years the employee was employed. The value of this severance pay
obligation is recorded net of accumulated severance fund benefits as a liability for employees’ severance benefits in the
Group’s statement of financial position.
Short term employee benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service
is provided or upon the actual absence of the employee when the benefit is not accumulated.
The employee benefits are classified, for measurement purposes, as short-term benefits or as other long-term benefits
depending on when the Group expects the benefits to be wholly settled.
Equity-settled compensation
The Group operates an employee share and option plan. Share-based payments to employees are measured at the fair
value of the instruments issued and amortised over the vesting periods. The fair value of performance right options is
determined using the satisfaction of certain performance criteria (Performance Milestones). The number of shares option
and performance rights expected to vest is reviewed and adjusted at the end of each reporting period such that the amount
recognised for services received as consideration for the equity instruments granted is based on the number of equity
instruments that eventually vest. The fair value is determined using either a Black Scholes or Monte Carlo simulation model
depending on the type of share-based payment.
q) 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.
r) 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.
s)
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.
t)
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.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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.
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 operations with functional currencies other than United States 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 profit or loss in the period in which the operation is disposed of.
u)
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.
v)
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.
w) Earnings per share
Basic earnings per share is calculated by dividing:
the profit attributable to members 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).
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
x)
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 over a period of 3 – 7 years.
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.
y) 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.
z) 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
Share based payments
The Group initially measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions
requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the
grant.
This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life
of the share option, volatility and dividend yield and making assumptions about them, as well as an assessment of the
probability of achieving non-market based vesting conditions.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The probability of achieving non-market based vesting conditions of performance options is assessed at each reporting
period.
Management has applied judgement in assessing the likelihood of achieving the performance milestones for Class B and C
Performance Options based on revenues from future contracts expected to be realised prior to the vesting date.
The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 18.
Trade receivables
Management assess impairment of the Group’s trade receivables based on assumptions about risk of default and expected
loss rates. The Group uses judgement in making these assumptions and selecting the inputs for the expected credit loss model
under AASB 9 and impairment calculation, based on the Group’s past history, existing market conditions as well as forward-
looking estimates at the end of each reporting period.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 2: REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue recognised at a point in time:
-
Sale of physical goods
Revenue recognised over a period of time:
-
SLA and other services
Total revenue
2019
US$
2018
US$
1,040,884
1,610,938
247,013
80,984
1,287,897
1,691,922
The Group has recognised the following assets and liabilities related to contracts with customers:
-
-
Contract assets
Contract liabilities
-
-
34,610
40,668
There were no significant movements in contract assets or liabilities during the year.
NOTE 3: EXPENSES
Loss before income tax from continuing operations includes the following
specific expenses:
2019
US$
2018
US$
Selling, general and administrative expenses:
-
-
-
-
-
-
-
-
-
Salaries and related expenses
Sales, marketing and exhibitions
Travel
Office related expenses
Amortisation of right of use lease asset
Depreciation of plant and equipment and amortisation of intangible
assets
Professional services
Research
Others
604,288
747,172
157,724
168,686
178,567
78,854
388,899
1,140,758
195,725
1,410,444
94,826
230,688
289,958
-
71,186
564,967
917,827
256,250
Total selling, general and administrative expenses
3,660,673
3,836,146
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Finance expenses:
-
-
-
Interest on borrowings and bank fees
Implied interest on leases
Exchange rate differences
Total finance expenses
5,592
8,517
44,206
58,315
6,679
-
-
6,679
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 4: INCOME TAX
The financial accounts for the year ended 31 December 2019 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% (2018: 30%). The applicable
tax rate in Israel is 23% (2018: 23%).
(a) Income tax expense
Current tax
Deferred tax
2019
US$
-
-
-
2018
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 27.50% (2018: 27.07%)
(1,432,727)
(2,203,410)
Non-deductible items
Non-deductible expenditure
Deferred tax assets not recognised
Income tax attributable to operating income/(loss)
Utilisation of tax losses
Income tax expense
Deferred tax assets
Investments
Accruals
Provisions
Tax losses
Deferred tax asset
117,684
1,315,043
63,626
2,139,784
-
-
-
-
-
-
2,153,287
1,538,003
4,276
63,127
1,366,689
3,587,379
4,710
58,158
835,151
2,436,022
Less deferred tax assets not recognised
(3,587,379)
(2,436,022)
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
-
-
-
-
-
-
2,220,690
1,366,689
-
1,540,890
835,151
-
Unused tax losses for which no deferred tax asset has been recognised
3,587,379
2,376,041
Carry forward losses
Potential future income tax benefits attributable to tax losses carried forward have not been brought to account at 31
December 2019 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 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 5: 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
2019
US$
2018
US$
654,431
420,685
58,934
25,612
48,485
41,043
26,741
30,107
(124,121)
1,240,560
663,341
1,759,136
Key management personnel or
their related party
Nature of transactions
Transaction value
Payable balance
Nir Gabay
Executive salary and director fees included
within trade and other payables
2019
2018
2019
2018
US$
US$
US$
US$
-
-
7,403
45,147
Salary and salary related expenses
122,317
93,608
3,091
2,951
Susana Gabay (related party of Nir
Gabay)
Guy Gabay (related party of Nir
Gabay)
Eden Gabay (related party of Nir
Gabay)
Salary and salary related expenses
16,945
-
Professional services
263
2,376
Dipio (related party of Nir Gabay
and Roee Kashi)
Revenue earned
Howard Digby
Roee Kashi
Ami Shafran
Mick Keelty
David Furstenberg
Raj Logaraj
Director fees included within trade and
other payables
Salary and salary related expenses
Director and consulting fees included within
trade and other payables
Director fees included within trade and
other payables
Director and consulting fees included within
trade and other payables
Director fees included within trade and
other payables
84,163
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,914
5,876
6,940
6,990
40,797
41,139
-
2,275
35,928
41,139
3,847
3,526
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 5: RELATED PARTY TRANSACTIONS
c)
Loans from key management personnel (KMP) and their related parties
There were no loans between the Group and its directors or key management personnel in the current or prior year.
NOTE 6: 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 (BDO) – Israel
Other non-audit remuneration
-
Special Purpose Accountant’s Report (BDO) – Israel
NOTE 7: EARNINGS/(LOSS) PER SHARE
Earnings/ (Loss) per share (EPS)
2019
US$
27,983
15,000
42,983
-
-
2019
US$
2018
US$
30,741
15,000
45,741
5,007
5,007
2018
US$
a) Profit/(Loss) used in calculation of basic EPS and diluted EPS
(3,192,433)
(4,206,972)
b) Weighted average number of ordinary shares outstanding during the
year used in calculation of basic and diluted earnings/ (loss) per share
95,991,667
93,352,891
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 8a : 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 20.
NOTE 8b : CASH FLOW INFORMATION
Loss after income tax
Non-cash flows in loss after income tax
Share based payments
Depreciation of plant and equipment and amortisation of intangible assets
Amortisation of right of use lease asset
Changes in assets and liabilities
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventory
Decrease/(increase) in supplier advances
(Decrease)/increase in trade and other payables
Increase in provisions
Cash flows used in operating activities
2019
US$
933,517
933,517
2018
US$
3,632,926
3,632,926
2019
US$
2018
US$
(3,192,433)
(4,206,972)
(43,438)
78,854
178,567
653,108
86,953
(6,045)
(260,498)
23,702
1,362,695
71,186
-
(891,547)
(131,155)
97,244
363,723
60,925
(2,481,230)
(3,273,901)
Non-Cash investing and financing activities
There were no non-cash investing and financing activities during the year.
Reconciliation of cash and non-cash movements in liabilities arising from financial activities:
Short term borrowings
Long term borrowings
Total borrowings
2018
US$
20,462
64,976
85,438
Cash
flows
Non-cash foreign
exchange movement
Transfer from long
term to short term
(19,511)
-
(19,511)
3,551
3,055
6,606
59,959
(59,959)
-
2019
US$
64,461
8,072
72,533
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 9: TRADE AND OTHER RECEIVABLES
CURRENT
Trade and other receivables
Loss allowance
Short term deposits
Prepaid expenses
2019
US$
2018
US$
428,547
1,024,530
(9,310)
79,358
73,023
(2,257)
73,106
56,832
571,618
1,152,211
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 20.
NOTE 10: INVENTORY
Inventory at cost
NOTE 11: OTHER CURRENT ASSETS
Supplier advances
NOTE 12: PLANT AND EQUIPMENT
Cost
Accumulated depreciation
Net carrying amount
2019
US$
251,148
251,148
2019
US$
107,388
107,388
2019
US$
2018
US$
314,277
314,277
2018
US$
93,272
93,272
2018
US$
584,186
523,046
(292,009)
(196,345)
292,177
326,701
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 12: PLANT AND EQUIPMENT
Balance at 1 January 2018
Additions
Disposals
Computers
US$
26,012
47,469
-
Motor
vehicles
US$
142,802
-
-
Depreciation expense
(22,092)
(23,203)
Foreign currency translation
adjustments
Balance at 31 December 2018
Additions
Disposals
(2,954)
(9,583)
48,435
4,845
-
110,016
-
-
Depreciation expense
(26,575)
(23,401)
Foreign currency translation
adjustments
3,408
8,561
Office
furniture and
equipment
Installations
and leasehold
improvements
US$
18,896
41,954
-
(5,056)
(2,901)
52,893
3,677
-
(5,338)
4,417
US$
67,026
68,247
-
Total
US$
254,736
157,670
-
(12,704)
(63,055)
(7,212)
(22,650)
115,357
326,701
-
-
8,522
-
(13,443)
(68,757)
9,325
25,711
Balance at 31 December 2019
30,113
95,176
55,649
111,239
292,177
NOTE 13: TRADE AND OTHER PAYABLES
CURRENT
Trade payables
Other payables and accrued expenses
Contract liability
2019
US$
122,090
538,182
34,610
694,882
2018
US$
194,848
648,366
40,668
883,882
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 20.
NOTE 14: BORROWINGS
CURRENT
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 20.
2019
US$
64,461
64,461
8,072
8,072
2018
US$
20,462
20,462
64,976
64,976
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
2019
US$
2018
US$
131,100
116,684
(21,837)
(21,537)
109,263
95,147
95,147
14,116
-
39,634
55,513
-
109,263
95,147
2019
US$
2018
US$
16b
11,739,495
11,667,737
Date
No.
Unit
Price
US$
Total
US$
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NOTE 16: ISSUED CAPITAL
(a) Share Capital
96,242,599 (31 December 2018: 95,888,599) fully paid ordinary shares
(b) Movement in Ordinary Capital
NOTE 15: PROVISIONS
NON-CURRENT
Accrued severance pay
Severance pay fund
Opening net carrying amount
Increase in provision
Severance pay fund utilised
Closing net carrying amount
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Opening balance at 1 January 2018
83,381,391
-
5,091,738
Issue of institutional placement shares
15-Mar-18
12,507,208
0.56
7,059,429
Costs of capital raising
Issue of 625,360 options to lead manager, deemed capital raising
cost
-
-
-
-
(464,911)
(18,519)
Closing balance at 31 December 2018
Issue of shares on conversion of options
Issue of shares on conversion of options
Issue of shares on conversion of options
Closing balance at 31 December 2019
(c) Capital Management
95,888,599
11,667,737
1-Aug-19
2-Oct-19
22-Oct-19
100,000
232,000
22,000
0.20
0.20
0.21
20,100
47,043
4,615
96,242,599
11,739,495
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.
46
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 17: RESERVES
a) Share Based Payment Reserve
Ref
2019
US$
2018
US$
47,219,360 (31 December 2018: 47,269,360) options on issue
17b
2,609,474
2,677,670
b) Movement in Share Based Payment Reserve
Opening balance at 1 January 2018
Pro-rata expense of 8,608,000 ESOP options
Pro-rata expense of 30,000,000 ESOP performance options
Pro-rata expense of 211,000 ESOP options
Issue of ESOP options
Issue of ESOP options
Issue of ESOP options
Issue of options to lead manager
Issue of director options
Issue of ESOP options
Issue of ESOP options
Cancellation of ESOP options on termination of employment
Closing balance at 31 December 2018
Net pro-rata (income) of options issued in prior periods (Note 18)
Issue of ESOP options (Note 18)
Issue of ESOP options (Note 18)
Issue of ESOP options (Note 18)
Cancellation of ESOP options on termination of employment
Options exercised and converted to fully paid ordinary shares
2,609,474
2,677,670
No.
US$
45,819,000
1,296,456
-
-
-
25,000
68,000
42,000
625,360
460,000
194,000
200,000
371,171
856,898
79,516
15,380
10,533
3,298
18,518
12,489
9,305
40,368
(164,000)
(36,262)
47,269,360
2,677,670
-
50,000
215,000
186,000
(147,000)
(354,000)
(31,733)
12,214
6,496
6,823
(37,238)
(24,758)
Closing balance at 31 December 2019
47,219,360
2,609,474
c)
Foreign Exchange Reserve
2019
US$
2018
US$
(681,691)
(767,009)
The foreign currency translation reserve records exchange differences arising on translation from functional currency to
presentation currency.
d)
Predecessor Accounting Reserve
2019
US$
2018
US$
(296,796)
(296,796)
The reserve arises from the capital reorganisation and records the net liabilities of Elsight Limited as at the acquisition date
of 2 June 2017.
47
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 18: SHARE BASED PAYMENTS
Options Issued in Prior Periods
Options issued in prior periods that impact the year ended 31 December 2019 are as follows:
Description
Grant date
Exercise
price
Expiry
date
Options
granted
Options forfeited
on termination of
employment(i)
A$
No.
No.
Options on
issue at 31
Dec 2019
No.
Vesting
condition
Net pro-rata
income/(expense)
recorded at 31 Dec 2019
ESOP Performance Options
2-Jun-17
$0.20
2-June-22
30,000,000
2-Jun-17
$0.20
2-June-22
8,608,000
10-Dec-17
$0.60
9-Oct-22
211,000
(86,000)
ESOP Options
ESOP Options
ESOP Options
ESOP Options
ESOP Options
9-Jan-18
5-Feb-18
$1.08 14-Nov-22
$0.80
4-Feb-23
26-Apr-18
$0.745
4-Mar-23
Director Options
28-May-18
$0.60
9-Oct-22
ESOP Options
ESOP Options
Total
1-Aug-18
1-Aug-18
$0.675
31-Jul-23
$0.60
31-Jul-23
-
-
30,000,000
(ii),(iii),(iv)
8,608,000
125,000
25,000
-
12,000
460,000
117,000
200,000
(v)
(v)
(vi)
(v)
(vii)
(viii)
(v)
(ix)
25,000
68,000
42,000
460,000
194,000
200,000
-
(68,000)
(30,000)
-
(77,000)
-
39,808,000
(261,000)
39,547,000
US$
(406,335)
231,564
28,659
2,256
(5,576)
1,381
50,650
11,798
16,632
(68,971)
164,000 options were forfeited as of 31 December 2018; an additional 97,000 options were forfeited during the year ended 31 December 2019.
10,000,000 Class A Performance Options vested on 7 June 2018 upon achievement of the vesting milestone
(i)
(ii)
(iii) 10,000,000 Class B Performance options vest and become exercisable upon the Company achieving aggregate revenue of A$4,000,000 from total sale of products based on the
Technology in a Year. The implied value of Class B Performance Options is US$1,037,544 however the probability was determined to be nil at 31 December 2019 due to the uncertainty
of meeting the performance milestone by 7 June 2020. The expense recorded in relation to these options in prior financial years of $406,335 has been reversed during the year ended
31 December 2019.
(iv) 10,000,000 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. The implied value of Class C Performance Options is US$1,037,544 however the probability was determined to be nil at 31 December 2019 due to the uncertainty
of meeting the performance milestone by 7 June 2020.
50% on the second anniversary of the grant date and an additional 6.25% at the end of each quarter of continuous service thereafter.
(v)
(vi) 50% on 15 November 2017 and an additional 3.125% at the end of each quarter of continuous service thereafter.
(vii) 50% on 5 March 2020 and an additional 6.25% at the end of each quarter of continuous service thereafter.
(viii) 50% on 10 October 2020 and an additional 6.25% at the end of each quarter of continuous service thereafter.
(ix) 50% vested immediately and 50% on 1 August 2019.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 18: SHARE BASED PAYMENTS
Share Based Payments Issued During the Year Ended 31 December 2019
During the year ended 31 December 2019 the Group recorded the following share based payments:
The issue of 50,000 Employee Share Plan Options exercisable at A$0.60, on or before 1 December 2023 to employees
of the Group, exercisable after the satisfaction of the following vesting condition, 50% on 1 December 2019 and an
additional 12.25% at the end of each quarter of continuous services thereafter, resulting in an expense of US$12,214
recorded at 31 December 2019.
The issue of 215,000 Employee Share Plan Options exercisable at A$0.35, on or before 23 June 2024 to employees of
the Group, exercisable after the satisfaction of the following vesting condition, 50% on 24 June 2021 and an additional
6.25% at the end of each quarter of continuous services thereafter. 50,000 of these options were cancelled during
the year following the termination of employees’ employment with the Group. The pro-rata expense of the
remaining 165,000 options of US$6,496 has been recorded at 31 December 2019.
The issue of 186,000 Employee Share Plan Options exercisable at A$0.41, on or before 12 November 2024 to an
employee of the Group, exercisable after the satisfaction of the following vesting condition, 50% on 13 August 2021
and an additional 6.25% at the end of each quarter of continuous services thereafter, resulting in an expense of
US$6,823 recorded at 31 December 2019.
Fair Value
The fair value of ASX listed options has been determined with reference to market price on the date of commencement of
trade. The Black Scholes option pricing model was used to determine the fair value of the unlisted options issued. The Black
Scholes inputs and valuations were as follows:
Options
ESOP Options
ESOP Options
ESOP Options
Number of options
Grant date
Issue date
Exercise price
Expected volatility
Implied option life
Expected dividend yield
Risk free rate
50,000
1-Dec-18
7-Feb-19
A$0.60
100%
5 years
nil
2.46%
Valuation per option A$
$0.4164
Exchange rate
$0.7015
Valuation per option US$
$0.2921
Total valuation US$
$14,605
215,000
186,000
24-Jun-19
20-Nov-19
12-Aug-19
22-Nov-19
A$0.35
100%
A$0.41
100%
4.87 years
4.98 years
nil
2.21%
$0.2605
$0.6994
$0.1822
$39,172
nil
2.21%
$0.3294
$0.6994
$0.2304
$42,851
Share Based Payments Expense
Share based payment expense is comprised as follows:
Total net (income)/expense recognised in profit or loss (i)
Total expense recognised in equity
Total net share based payments (income)/expense
2019
US$
(43,438)
-
(43,438)
2018
US$
1,362,695
18,519
1,381,214
(i)
Income of US$406,335 on adjustment to Class B Performance options probability less pro-rata expense of options
issued in 2019 and prior periods of $362,897.
49
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 19: 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 20: 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 not considered to be material.
(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.
Cash and cash equivalents – AA Rated
Trade and other receivables – no rating
Impaired trade receivables
Note
8a
9
2019
US$
933,517
571,618
2018
US$
3,632,926
1,152,211
The Group assesses expected credit losses associated on a forward looking basis. For trade receivables, the Group applies
the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition
of the receivables.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, amongst others, the failure or a debtor to engage in a repayment plan with the Group, and
a failure to make contractual payments for a period of greater than 120 days past due.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 20: FINANCIAL INSTRUMENTS
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
2019
US$
6,654
6,654
-
2018
US$
-
(10,119)
-
As at 31 December 2019, trade receivables of US$228,806 (2018 – US$32,786) were past due but not impaired. These relate
to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade
receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
2019
US$
13,971
2,485
212,350
228,806
2018
US$
25,054
1,770
5,962
32,786
Of the past due receivables of US$228,806 at 31 December 2019, US$30,000 remained outstanding at the date of annual
report publication.
(c) Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting
its obligations related to financial liabilities. The Group’s approach to managing liquidity is to ensure, as far as possible, that
it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Group’s reputation.
The Group manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash
flows.
The following are the contractual maturities of financial liabilities based on the actual rates at the reporting date excluding
interest payments:
2019
Interest
rate
Less than
6 months
6-12
months
1-2 years
2-5 years
US$
US$
US$
US$
Over 5
years
US$
Total
contractual
cash flows
US$
Carrying
amount
US$
Financial liabilities at amortised cost
Trade and
other payables
Borrowings
Lease liabilities
-
2.33%
-
694,882
10,307
83,760
-
53,145
83,760
788,949
136,905
-
8,044
-
8,044
-
1,037
-
1,037
-
-
-
-
694,882
72,533
167,520
694,882
72,533
167,520
934,935
934,935
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 20: FINANCIAL INSTRUMENTS
2018
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
-
2.32%
883,882
9,296
893,178
-
9,399
9,399
-
58,509
58,509
-
8,234
8,234
-
-
-
883,882
85,438
969,320
883,882
85,438
969,320
(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 and the New Israeli Shekel.
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
Lease liabilities
Net exposure
United States
Dollars
US$
82,983
208,407
-
-
-
2019 Total
US$
82,983
208,407
-
-
-
291,390
291,390
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 21: 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
2019
US$
661,357
870,068
1,531,425
126,125
-
126,125
1,405,300
2018
US$
3,139,213
1,492,528
4,631,741
131,681
-
131,681
4,500,060
11,733,347
1,645,555
(11,973,602)
1,405,300
11,661,588
1,658,923
(8,820,451)
4,500,060
(2,977,311)
(4,100,050)
(145,768)
(716,592)
(3,123,079)
(4,816,642)
ASSETS
Current assets
Non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Non-current liabilities
TOTAL LIABILITIES
NET ASSETS
SHAREHOLDERS’ EQUITY
Issued capital
Reserves
Accumulated Losses
SHAREHOLDERS’ EQUITY
(b) Statement of profit or loss and other comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive loss
(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 2019 (2018: Nil).
(e) Commitments by Elsight Limited
There were no commitments as at 31 December 2019 (2018: Nil).
NOTE 22: CONTROLLED ENTITIES
The ultimate legal parent entity of the Group is Elsight Limited, incorporated 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
Country of Incorporation
Percentage Owned
El-Sight Ltd
Israel
2019
100%
2018
100%
The proportion of ownership interest is equal to the proportion of voting power held.
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 23: COMMITMENTS
The Group has no commitments which are not recorded on the statement of financial position as at 31 December 2019.
NOTE 24: CONTINGENT LIABILITIES
The Group has no known contingent liabilities as at 31 December 2019.
NOTE 25: EVENTS SUBSEQUENT TO REPORTING DATE
Since the reporting date the following significant events have occurred:
Since the reporting date the following significant events have occurred:
Mr Raj Logaraj resigned as a director of the Company effective 7 January 2020.
Mr Peter Marks became a director of the Company on 9 January 2020.
On 13 January 2020 the Company announced the receipt of an initial purchase order for 50 Halo units from Israel
Aerospace Industries following a large-scale Proof-of-Concept field trial.
On 14 January 2020 the Company completed a private placement to a group of significant investors. 9,000,000 fully
paid ordinary Shares were issued at $0.32 to raise approximately $2.88m.
On 27 February 2020 the Company released a business update as a consequence of COVID-19 virus outbreak.
On 16 March 2020 the Company advised that, following one month of intensive and successful POC test flights using
Halo, CopterPIX PRO has elected to expand the ongoing POC trials and purchase an additional six Halo units for
integration with their drone platforms.
There were no other significant events after reporting date.
NOTE 26: NEW ACCOUNITNG STANDARDS FOR APPLICATION IN FUTURE PERIODS
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 2019. Relevant Standards and Interpretations are
outlined in the table below.
New/revised pronouncement
Explanation of amendments
AASB 2019-5 (issued
November 2019)
Amendments to Australian
Accounting Standards –
Disclosure of the Effect of New
IFRS Standards Not Yet Issued
in Australia
This amendment adds paragraph 17 to AASB
1054 Australian Additional Disclosures. New
paragraph 17 clarifies that, in complying with
paragraph 30 of AASB 108 Accounting Policies,
Changes in Accounting Estimates and Errors,
entities intending to assert compliance with
IFRS must also disclose the potential effect of
IFRS standards that are yet to be issued by the
AASB.
Application
Date
Standard
Application
Date of Group
of
1 January 2020
1 January 2020
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.
54
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
DIRECTORS’ DECLARATION
In the Director’s opinion:
1.
The consolidated financial statements and notes set out on pages 22 to 51 are in accordance with the Corporations
Act 2001, including:
a)
complying with Australian Accounting Standards, Corporations Regulations 2001 and other mandatory
professional reporting requirements, noting the matters documented in Note 1 (a);
b) giving a true and fair view, the consolidated entity’s financial position as at 31 December 2019 and of its
performance for the year ended on that date; and
2.
3.
There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
This declaration has been made after receiving the declaration required to be made to the directors in accordance
with Section 295A of the Corporations Act 2001 for the financial year ended 31 December 2019.
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the
Directors by:
Mr Nir Gabay
Managing Director
24 March 2020
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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
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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) and its subsidiary (the Group),
which comprises the consolidated statement of financial position as at 31 December 2019, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the 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 the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 31 December 2019 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 Group 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 a by a scheme approved under Professional Standards Legislation.
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Accounting for Shared-based payments
Key audit matter
How the matter was addressed in our audit
During the year ended 31 December 2019, the
Group issued options to key management
personnel and employees and options to advisors
which have been accounted for as share-based
payments.
Refer to notes 1 and 18 of the financial report for
a description of the accounting policy and
significant estimates and judgements applied to
these arrangements.
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.
Our procedures included, but were not limited
to the following:
(cid:127) Reviewing the relevant terms and conditions
to obtain an understanding of the contractual
nature of the share-based payment
arrangements
(cid:127) Reviewing and evaluating management’s
assessment of the likelihood of achieving the
non-market performance conditions attached to
the share-based payments
(cid:127) Reviewing management’s determination of the
fair value of the share-based payments granted,
considering the appropriateness of the valuation
model used and assessing the valuation inputs
using BDO’s internal valuation 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 18 of the financial
report.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 31 December 2019, but does not include
the financial report and the 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.
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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 ability of the group 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 Group 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/ar1.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 13 to 19 of the directors’ report for the
year ended 31 December 2019.
In our opinion, the Remuneration Report of Elsight Limited, for the year ended 31 December 2019,
complies with section 300A of the Corporations Act 2001.
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, 24 March 2020
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ANNUAL REPORT 31 DECEMBER 2019
CORPORATE GOVERNANCE STATEMENT
ELSIGHT LIMITED
ABN 98 616 435 753
This Corporate Governance Statement is current to the date of signing the Directors’ report and has been approved by the
Board of the Company. This statement relates to the reporting period ending 31 December 2019.
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.
•
•
In addition to matters it is expressly required by law to approve, the Board has reserved the following matters to itself:
•
•
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:
Code of Conduct;
Continuous Disclosure Policy;
Diversity Policy;
Performance Evaluation Practices;
Procedures for Selection and Appointment of Directors;
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ANNUAL REPORT 31 DECEMBER 2019
CORPORATE GOVERNANCE STATEMENT
ELSIGHT LIMITED
ABN 98 616 435 753
Remuneration Policy;
Risk Management Review Procedure and Internal Compliance and Control;
Securities Trading Policy;
Shareholders Communication Strategy; and
Whistleblower Policy.
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:
• Women employees in the Company
• Women in senior management positions
• Women on the Board
16%
0%
0%
The Company’s Diversity Policy is available on its website.
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ANNUAL REPORT 31 DECEMBER 2019
CORPORATE GOVERNANCE STATEMENT
ELSIGHT LIMITED
ABN 98 616 435 753
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:
•
•
•
•
•
•
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.
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:
•
•
•
•
• membership of and contribution to any Board committees; and
•
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;
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 Mick Keelty AO APM
Mr Nir Gabay
Mr Howard Digby
Mr David Furstenberg
Mr Raj Logaraj
Mr Peter Marks
Non-Executive Chairman (appointed 2 June 2017)
Non-Executive Deputy Chairman (appointed 13 December 2018,
resigned 24 April 2019)
Managing Director (appointed 2 June 2017)
Non-Executive Director (appointed 13 December 2016)
Non-Executive Director (appointed 2 June 2017)
Non-Executive Director (appointed 1 August 2018, resigned 7 January
2020)
Non-Executive Director (appointed 9 January 2020)
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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ANNUAL REPORT 31 DECEMBER 2019
CORPORATE GOVERNANCE STATEMENT
ELSIGHT LIMITED
ABN 98 616 435 753
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 has established a Board Skills Matrix. The Board Skills Matrix includes the following areas of knowledge and
expertise:
•
•
•
•
•
•
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:
•
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.
•
•
•
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 under the terms of the Company’s Whistleblower Policy. 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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ANNUAL REPORT 31 DECEMBER 2019
CORPORATE GOVERNANCE STATEMENT
ELSIGHT LIMITED
ABN 98 616 435 753
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:
•
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.
The Company also makes available a telephone number and email address for shareholders to make enquiries of the
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ANNUAL REPORT 31 DECEMBER 2019
CORPORATE GOVERNANCE STATEMENT
ELSIGHT LIMITED
ABN 98 616 435 753
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:
•
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.
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 2019
CORPORATE GOVERNANCE STATEMENT
Principle 8: Remunerate fairly and responsibly
The Board as a whole fulfills 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:
•
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.
•
•
•
•
•
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 2019
ADDITIONAL ASX INFORMATION
The shareholder information set out below was applicable as at 18 March 2020
As at 18 March 2020 there were 105,242,599 ordinary fully paid shares held by 900 individual shareholders.
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
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED A/C 2
CITICORP NOMINEES PTY LIMITED
JB TORO PTY LTD
DAVID LI KWOK PO
INTERVEST HK LIMITED
IBI TRUST MANAGEMENT
JP MORGAN NOMINEES AUSTRALIA PTY LIMITED
LAMMA NOMINEES PTY LTD
AWZ HLS INVESTMENT FUND I LP
MS YULIA URAROVA
GNAT PTY LTD
ALBION HAWTHORN PTY LTD
RIGI INVESTMENTS PTY LIMITED
TENBAGGA RESOURSES PTY LTD
THE LF POINT PTY LTD
CS FOURTH NOMINEES PTY LIMITED
BRISPOT NOMINEES PTY LTD
MR MOSHE COHEN
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
DEAD KNICK PTY LTD
Holding
26,052,974
14,568,832
8,251,613
6,033,115
6,000,000
3,250,000
2,894,775
2,141,835
1,500,000
1,500,000
1,500,000
1,364,522
1,345,500
1,300,000
1,171,750
1,127,586
1,120,065
884,603
700,000
673,680
642,500
MISS KWAI-KUIN LEE & MR JASON BATTISTESSA
478,000
Totals: Top 20 holders of Issued Capital - Ordinary and Escrow (Total)
84,501,350
Total Remaining Holders Balance
20,741,249
% IC
24.76%
13.84%
7.84%
5.73%
5.70%
3.09%
2.75%
2.04%
1.43%
1.43%
1.43%
1.30%
1.28%
1.24%
1.11%
1.07%
1.06%
0.84%
0.67%
0.64%
0.61%
0.45%
80.29%
19.71%
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ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
SUBSTANTIAL HOLDERS
The names of the substantial shareholders disclosed to the Company as substantial shareholders as at 18 March 2020 are:
Name
NIR GABAY1
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED A/C 2
CITICORP NOMINEES PTY LIMITED
JB TORO PTY LTD
DAVID LI KWOK PO
DISTRIBUTION OF EQUITY SECURITIES
No of Shares Held
% of Issued Capital
26,052,974
14,568,832
8,251,613
6,033,115
6,000,000
24.76%
13.84%
7.84%
5.73%
5.70%
Holding Ranges
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over.
Totals
Holding less than a marketable parcel
Ordinary fully paid
shares
Options
Performance options
124
254
146
305
71
900
198
1
20
28
97
27
173
-
-
-
-
2
2
RESTRICTED SECURITIES
As at 18 March 2020 the following shares are subject to escrow:
•
•
26,052,974 Ordinary Fully Paid Shares escrowed to 30/09/2020
17,950,000 Ordinary Fully Paid Shares escrowed to 31 March 2020
TWENTY LARGEST QUOTED OPTION HOLDERS
Security class:
ELSO - OPTIONS EXPIRING 18 JUNE 2021 @ $1.00
Position
Holder Name
1
2
3
4
5
6
7
MCNEIL NOMINEES PTY LIMITED
MR IAN JAMES ARATHOON
KEVIN BORG HOLDINGS PTY LTD
GLENEAGLE SECURITIES (AUST) PTY LTD
MR MICHAEL BENEDICT COOKSON
CS FOURTH NOMINEES PTY LIMITED
MR COLIN WEEKES
Holding
% IC
1,184,307
17.22%
600,000
8.72%
300,000
4.36%
203,835
180,000
173,611
2.96%
2.62%
2.52%
152,813
2.22%
1 Securities are held beneficially and registered in the name of IBI Trust Management (Nir Gabay A/C)
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8
9
10
11
12
13
14
15
16
17
18
19
20
ELSIGHT LIMITED
ABN 98 616 435 753
ANNUAL REPORT 31 DECEMBER 2019
MR IAN STUART FISHER
MR VINCENT ALEXANDRE SWINNEN
TIZOKU SECURITIES PTY LIMITED
THE LF POINT PTY LTD
MR GRANT MALCOLM WALKER
FINK INK PTY LTD
ROBERTSON ARCHITECTURAL SERVICES PTY LTD
140,351
140,000
126,739
125,000
118,675
111,111
105,808
2.04%
2.04%
1.84%
1.82%
1.73%
1.62%
1.54%
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
100,000
1.45%
HALIFAX SOLUTIONS LIMITED
JUSTIN TERENCE ROSENBERG
VEMAC ASCENT INVESTMENTS PTY LTD
LEHAV PTY LTD
JAMORA NOMINEES PTY LTD
99,703
95,036
91,667
80,336
74,285
1.45%
1.38%
1.33%
1.17%
1.08%
Total
4,203,277
61.10%
Total issued capital - selected security class(es)
6,878,983
100.00%
UNQUOTED SECURITIES
As at 18 March 2020, the following unquoted securities are on issue:
Security Code
Security Name
Total Holders
Total Holdings
ELSOPT01
ELSOPT02
ELSOPT03
ELSOPT04
ELSOPT06
ELSOPT07
ELSOPT08
ELSOPT09
ELSOPT10
ELSOPT11
ELSPO1
ELSPO2
ELSEO2
TOTAL
OPTS EXP 3YRS FROM 02/06/2017 @ $0.30
22
OPTIONS EXP 02/06/27 @ $0.20
OPTIONS EXPIRING 9 OCTOBER 2022 @ $0.60
OPTIONS EXPIRING 14 NOVEMBER 2022 @ $1.08
OPTIONS EXPIRING 31 JULY 2023 @ $0.675
OPTIONS EXPIRING 31 JULY 2023 @ $0.60
OPTIONS EXPIRING 9 OCTOBER 2022 @ $0.60
OPTIONS EXPIRING 1 DECEMBER 2023 @ $0.60
OPTIONS EXPIRING 23 JUNE 24 @ $0.35
OPTIONS EXPIRING 12 NOVEMBER 24 @ $0.41
PERF OPTS @ 20C EX 5YRS FROM 02/06/17
PERF OPT @ 20C EX 5YRS FROM 02/06/17
EMPLOYEE OPTIONS EXPIRING 4 MARCH 2023 @
AU$0.745
1
1
1
1
1
1
1
1
1
1
1
1
6,646,000
8,608,000
125,000
25,000
117,000
200,000
460,000
50,000
165,000
186,000
29,595,000
405,000
12,000
ON-MARKET BUY BACK
There is currently no on-market buyback program.
34
46,594,000
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