Elsight Limited
ABN 98 616 435 753
Annual Report - 31 December 2023
Elsight Limited
Annual Report
Contents
31 December 2023
Corporate directory
Chairman's letter
Directors' report
Auditor's independence declaration
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report
General information
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58
These consolidated financial statements cover Elsight Limited (Company) and its controlled entities (also referred to as Group).
Elsight Limited is a listed public company limited by shares, incorporated and domiciled in Australia. The Group is a for-profit
entity.
A description of the nature of the Group's operations and its principal activities are included in the Directors' report, which is
not part of the financial statements.
The financial statements were issued by the board of directors on 21 March 2024.
1
Elsight Limited
Annual Report
Corporate directory
31 December 2023
Directors
Major General (ret) Ami Shafran – Non-Executive Chairman
Mr David Furstenberg – Executive Director
Mr Howard Digby – Non-Executive Director
Mr Joshua (Jim) Landau – Non-Executive Director
Company secretary
Mr Mark Licciardo
Registered office
Share registry
Auditor
Level 7
330 Collins Street
Melbourne VIC 3000
AUSTRALIA
Ph: +61 3 8689 9997
Email: info@el-sight.com
Automic Registry Services
Level 5, 191 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
RSM Australia Partners
Level 32 Exchange Tower
2 The Esplanade Tower
Perth WA 6000
AUSTRALIA
Securities exchange listing
Elsight Limited shares are listed on the Australian Securities Exchange (ASX code: ELS)
Website
www.el-sight.com
2
Dear Shareholders,
It is an honor to present the 2023 Annual Report for Elsight Limited which outlines the Group’s material progress over the past
year in the high-growth unmanned aerial vehicle (UAV) and unmanned ground systems (UGS) market.
Elsight’s Q4/2023 was marked by significant growth in revenues, orders, and deliveries while expanding from the civil drone
parcel delivery market and into the Homeland Security (HLS), military, and defence arena, led by local needs under combat
conditions.
We can't ignore the challenging events that began on 7 October 2023. However, as the wise expression says, for every calamity,
there lies a window of opportunity. And that opportunity for Elsight kicked into full gear with immediate and massive demand
for our innovative robust connectivity systems for many types of unmanned applications from defence organizations. It must
be said that several new Halo applications were revealed to our team by our customers, such as, video transmission from Go-
Pro cameras in search & rescue missions. Given the fact that defence and warfare’s focus is moving to distributed, low-cost,
intelligent, multi-domain robotic systems and that is exactly where Elsight with its robust connectivity plays a key role, with
our ultra-light, palm-size Halo platform of less than 100 grams.
Within this market of defence, many sub-markets revolve around the critical needs for unmanned surveillance, inspection, and
real-time data or video transmission in use cases such as search & rescue, large event management, natural disasters, fire
fighting, border control, prison management, security of highly sensitive sites, and many others.
Most significantly, Elsight is not removing our focus on the highly promising and growing commercial market in which we have
made excellent traction over the past 3 years, but rather adding these large and matured defence/law enforcement/HLS/first
responder opportunities in key geographic targets to help increase our revenues as our main market takes off.
At a high level, Elsight acquired more than 50 strategic Design-Win partners over the 12 months of 2023 in various market
verticals, for a grand total of 115 Design-Win partners. From that mix, during the first half of the year, the Group won a
strategic, multi-year public tender to supply the Israel Police and other government departments with solutions for
Communication On-The-Move (COTM). In Q4, the orders from local defense organizations skyrocketed to $621K USD (A$951K)
vs $261K (A$400K) in the same quarter in 2022. Since then, our marketing and sales focus has expanded to include regions of
the world that feel threatened by their neighbors such as Eastern Europe , or others who are looking to innovate their defence
tools such as the U.S., Singapore, Japan, and Scandinavia.
On the commercial side, the range of our customers’ drone applications has increased substantially. Here is a taste of the wide
range of use cases and geographies:
o Sphere Drones (Australia) announced its new HubX leveraging drones for the mining industry among others followed
by the success of its Halo pilot remaining in flight during the Optus service outage thanks to the Halo’s multi-link
bonded connection.
o Drone Delivery Canada (Canada) achieved approval for BVLOS flights for its DroneCare route, delivery capabilities
in the healthcare market segment.
o DroneMatrix (Belgium) provides data collec�on for monitoring and surveillance in the port of Antwerp-Bruges.
o Robotican (Israel) combines ground robotics and drone capabilities to redefine indoor and underground
infrastructure reconnaissance.
o Bond (USA) provides public law enforcement or private protection agencies with drone-enabled surveillance for
extra security.
o Speedbird Aero (Brazil) partners with Skyports Drone Services to deliver the Royal Mail in Orkney.
This sample of wide use around the world by drone manufacturers and operators is a testament to the strength of
Elsight’s footprint in the UAV/UGS market.
Elsight con�nues to innovate with technology that offers greater scalability with cost efficiencies to customers. This year
witnessed the launch of the Worldwide version of the Halo drone communica�ons system, enabling operators to fly anywhere
in the world without the need for equipment replacement to accommodate different cellular systems and operators. The team
3
con(cid:415)nued with its innova(cid:415)ve product development roadmap of bringing to market various features such as network and
broadcast remote iden(cid:415)fica(cid:415)on (RID) to ensure regulatory compliance according to the FAA, EASA and in other countries.
Furthermore, Elsight is very proud of the strong customer sa(cid:415)sfac(cid:415)on and tes(cid:415)monials by its loyal partners with its second-to-
none support and speed rate of order delivery.
Once again, I would like to take this opportunity to thank our employees, partners and shareholders for their dedica(cid:415)on and
support and I look forward to providing further updates on our progress throughout 2024.
Sincerely yours,
Major General (ret.) Ami Shafran
Non-Executive Chairman
21 March 2024
4
Elsight Limited
Annual Report
Directors' report
31 December 2023
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 2023.
Directors
The names and the particulars of the directors of the Company during or since the end of the financial year are:
Name
Major General (ret) Ami Shafran
Mr David Furstenberg
Mr Howard Digby
Mr Joshua (Jim) Landau
Status
Non-Executive Chairman
Executive Director
Non-Executive Director
Non-Executive Director
Appointed
2 June 2017
2 June 2017
13 December 2016
1 October 2021
Resigned
-
-
-
-
Company Secretary
Mr Mark Licciardo (Appointed 15 March 2019)
Principal activities
The principal activities of the Group during the year were the development and commercialisation of Halo in the Unmanned
Aerial Vehicle ("UAV") market.
Dividends
There were no dividends paid or recommended during the financial year ended 31 December 2023 (31 December 2022: Nil)
Review and results of operations
Unless otherwise stated all figures in this report are in the Group's presentation currency US$.
Elsight Limited incurred a loss for the year of $3,683,532 (31 December 2022: loss of $4,306,432). The decrease in loss of
$622,901 from 31 December 2022 to 31 December 2023 is due to an increase in the Group’s gross profit and a decrease in
selling, general and administrative expenses.
The net assets of the Group have decreased by $3,510,471, from net assets of $1,849,496 at 31 December 2022 to net liabilities
of $1,660,975 at 31 December 2023.
As at 31 December 2023, the Group’s cash and cash equivalents decreased from a balance of $5,194,794 at 31 December 2022
to a balance of $2,702,593 at 31 December 2023. As at 31 December 2023 the Group has a working capital of $3,148,709 (31
December 2022: working capital of $5,789,295). Excluded from the 31 December 2023 working capital are convertible notes
with a balance of US$4,983,627 which the Group expects to be converted or refinanced before their 30 December 2024
maturity date.
5
Elsight Limited
Annual Report
Directors' report
31 December 2023
REVIEW OF ACTIVITIES
Performance Highlights
• Elsight acquired more than 50 strategic Design-Win partners over
the 12 months of 2023 in various market verticals, for a grand total
of 115 Design-Win partners.
• Baseline Plan (or Planning Versus Execution) - During 2023 the
company exceeded its original Baseline Revenue Plan
• In H1, Elsight won a strategic, multi-year public tender to supply
the Israel Police and other government departments with solutions
for Communication On-The-Move (COTM).
• Highlighted partners using Elsight’s Halo:
o DroneUp, a U.S.-based drone delivery company serving the
retail giant Walmart, expanded its operations.
o Australian-based Sphere Drones announced its new HubX
leveraging drones for the mining industry among others.
o Drone Delivery Canada (DDC) achieved approval for BVLOS
flights for its DroneCare route, delivery capabilities in the
healthcare market segment.
o Airobotics earned its recent US FAA Type Certification in
September for the defense industry.
Annual Sales Metrics
Sales Revenue
$1,541K USD (+87%)
vs $823K in 2022
Recurring Revenue
$411K USD (4x)
vs $73K in 2022
Gross Profit
$807K USD (+85%)
vs $436K in 2022
New Territories
Australia (Sphere Drones)
Japan (ACSL)
Material uptake in
HLS market orders
$621K USD (+111%)
vs $261K in 2022
Recurrent income of total by quarter
D
S
U
$1,000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
$245K
$193K
$52K
4Q22
$264K
$190K
$74K
1Q23
$332K
$239K
$93K
2Q23
$317K
$214K
$103K
3Q23
Recurring Income
One-Time Income
$629K
$487K
$142K
4Q23
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Elsight Limited
Annual Report
Directors' report
31 December 2023
‘Design-Win’ strategy contributing to continued product scalability
In H2, Elsight enjoyed a sharp increase in the demand for dependable communications of data and video in the
homeland security, military, and defense sectors. Customers came from the IDF and other large defense contractors,
including DDR&D (the equivalent of DARPA in the U.S.). The Company’s management sees this trend continuing and
expanding in 2024 by applying a wide range of new use cases to adjacent markets such as global homeland security,
border control, and defense markets.
New product features and developments
Elsight con�nued to innovate during 2023 and introduced several major product features:
H1/23 was dedicated to the Remote ID (RID) being incorporated on all Halo devices to align with United States Federal
Aviation Administration (US FAA part 89) requirements. Having this compliance will ease the certification process for
our partners while saving them costs by eliminating the need for additional dedicated hardware. The Halo RID
capability was recently accepted by the FAA and it adheres to the FAA’s accepted RID-ASTM-F3586-22-NOA-22-01
Means Of Compliance (MOC).
In H2/23, Elsight unveiled a Global version of its Halo drone communications system, which will allow operators to fly
anywhere in the world without the need for equipment replacement to accommodate different cellular systems and
operators.
In addi�on, the Company is constantly inves�ng in enhancing its por�olio with an innova�ve product roadmap of
transforma�ve new products and features.
2023 An inflection point of growth
The Company con�nued to enjoy YoY growth in revenues from US$823K in 2022 to US$1,541K in 2023, a growth of 87%. Gross
margin remained the same in 2023 at 53%. Recurring revenue increased in 2023 by 463% at US$411K versus US$73K in 2022.
This accelera�on is due to Elsight’s proprietary data communica�on and cloud services as more Halos are being deployed with
new and exis�ng customers. Market growth is also boosted by the Halo’s scalability, enabling more drones to fly concurrently
by one operator and reducing the dependency on personnel. The number of new customers acquired in 2023 (51) for a grand
total of 115 Design Wins.
As the uncrewed market grows, Elsight profits
As the market con�nues to mature and the rate of adop�on grows, the impact of the increasing recurring revenues will become
more and more material. The growth came from both exis�ng as well as new customers.
Taking all the Design-Wins that have been previously reported with new ones constantly added throughout 2023, the recurring
revenue growth con�nues to validate the Company’s strategy to win increased market share through new Design-Win partners,
growing together as they expand their business throughout various ver�cal markets.
Corporate
In April the Group issued an additional 433,833 convertible notes, resulting in net cash proceeds to the Group of US$70K. The
terms and conditions of the convertible notes are disclosed at note 21.
On 31 July 2023, 200,000 options exercisable at $A0.675 and 55,000 options exercisable at A$0.60 expired without exercise or
conversion.
On 11 August 2023 the Group incorporated a subsidiary in the USA to provide local sales and support to our US customers.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
Likely developments and expected results of operations
The Group’s principal continuing activity is the development and commercialisation of the Halo. The Group’s future
developments, prospects and business strategies are to continue to develop and commercialise this technology.
7
Elsight Limited
Annual Report
Directors' report
31 December 2023
Matters subsequent to the reporting period
On 7 March 2024 the Group issued 201,522 Shares on the conversion of 183,333 convertible notes.
No other matter or circumstance has arisen since 31 December 2023 that has significantly affected, or may significantly affect
the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on Directors
Name:
Title:
Qualifications:
Experience:
Major General (ret) Ami Shafran
Non-Executive Chairman (Appointed 2 June 2017)
-
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 Attaché at the Israeli Embassy
in Washington DC.
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Nil
Nil
Nil
151,070 Ordinary shares
Nil
Name:
Title:
Qualifications:
Experience:
Mr David Furstenberg
Executive Director (Appointed 2 June 2017)
-
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 and 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). He
transitioned from non-Executive to Executive Director of the Company from 1 November
2020.
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Nil
Nil
Nil
151,071 Ordinary shares
Nil
8
Elsight Limited
Annual Report
Directors' report
31 December 2023
Name:
Title:
Qualifications:
Experience:
Mr Howard Digby
Non-Executive Director (Appointed 13 December 2016)
Bachelor of Engineering (Mechanical) (Honours)
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, ending
with 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 a
company director, advisor and investor, having played key roles in several M&A and
reverse takeover transactions.
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
4DS Memory Limited (Non-Executive Director)
Spenda Limited previously known as Cirralto Limited (Non-Executive Director)
Singular Health Group Limited (Non-Executive Chairman)
Vortiv Limited (resigned 19 April 2021)
Nil
2,189,096 Ordinary shares
Nil
Name:
Title:
Qualifications:
Experience:
Mr Joshua (Jim) Landau
Non-Executive Director (Appointed 1 October 2021)
FCPA, FINSIA, AICD, BEE (Hon)
Mr Landau has over 40 years’ experience as a technology entrepreneur and mentor and
brings significant experience as both a senior leader and director of numerous listed and
unlisted companies. He currently serves as a Chair for an Australian TEC group of
managing directors from diverse industries and is a non-executive director of the private
equity Leading Technology Group and Banxa Inc, a listed crypto payments service
provider.
Mr Landau was the co-founder of one of Australia’s first listed software companies,
Software Corporate of Australia, which was listed on the second Board of the ASX and
was the managing director of Australia’s first main board listed IT services company,
Datronics Corporation. He was the former chairman of Centricom the developer of the
Poli Payments platform, a director of Collaborate Corporation and as director or advisor
to several other cutting edge technology companies, including those involved with the
emerging UAV industry.
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Nil
Nil
Nil
100,000 Ordinary shares
Nil
9
Elsight Limited
Annual Report
Directors' report
31 December 2023
Information on Key Management Personnel
Name:
Title:
Qualification:
Experience:
Name:
Title:
Qualification:
Experience:
Mr Yoav Amitai
Chief Executive Officer
BSc Mechanical Engineering
Yoav has been with Elsight for seven years. Prior to becoming the Company’s Chief
Executive Officer, most recently as Chief Operating Officer and as Chief Innovation &
Product Officer before that.
With a degree in Mechanical Engineering from the Ben-Gurion University of the Negev
and a rich resume that includes serving as General Manager of Agor Engineering, Yoav
brings extensive managerial, business strategy, and technical experience to the Elsight
table. Yoav played a major part in initiating and executing Elsight’s strategic transition
from project-based to product-oriented company, leveraging its advanced technology
and shaping its technological and business vision. Yoav is well-versed in product design,
manufacturing, and "creative engineering" solutions and is a perfect fit to lead Elsight’s
team.
Mr Roee Kashi
Chief Technology Officer
-
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.
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Information on Company secretary
Name:
Qualifications:
Experience:
Mr Mark Licciardo
B.Bus (Acc), GradDip CSP, FGIA, FCIS, FAICD
Mr Mark Licciardo, of Acclime Corporate Services, has extensive experience working with
Boards of ASX listed companies in the areas of corporate governance, accounting and
finance and company secretarial practice. His expertise is in developing and guiding
effective governance and he is considered a leader in this sector. His 40-year corporate
career has encompassed executive roles in banking and finance, funds management,
investment and infrastructure development. Mark was the Managing Director and
founder of Mertons Corporate Services which was acquired by Acclime in 2022 and is
currently Partner and Managing Director of Acclime’s Listed Services division and a Non-
executive Director of various public and private companies.
10
Elsight Limited
Annual Report
Directors' report
31 December 2023
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
Appointment dates
DIRECTORS' MEETINGS DIRECTORS' MEETINGS
Number eligible to attend
Number attended
Ami Shafran
David Furstenberg
Howard Digby
Joshua Landau
Appointed 2 June 2017
Appointed 2 June 2017
Appointed 13 December 2016
Appointed 1 October 2021
9
9
9
9
9
9
9
9
Shares under options
Unissued shares under option
At the date of this report, the unissued ordinary shares of Elsight Limited under option are as follows:
Issue Date
Expiry Date
Status
Exercise Price
Option
Number Under
12 August 2019
29 June 2020
29 June 2020
29 June 2020
18 January 2023
23 September 2020
2 February 2021
15 September 2021
15 September 2021
15 December 2021
15 December 2021
26 April 2022
26 May 2022
21 September 2022
18 January 2023
23 June 2024
23 April 2025
15 May 2025
12 June 2025
18 July 2025
27 July 2025
1 February 2026
14 September 2026
14 September 2026
14 December 2026
14 December 2026
25 April 2027
25 May 2027
30 August 2027
18 January 2028
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
A$0.35
A$0.28
A$0.34
A$0.32
A$0.37
A$0.30
A$0.43
A$0.42
A$0.48
A$0.38
A$0.44
A$0.43
A$0.48
A$0.37
A$0.37
100,000
800,000
50,000
100,000
50,000
75,000
130,000
577,000
1,100,000
50,000
200,000
200,000
3,583,452
2,894,000
43,000
9,952,452
No option holder has any right under the options to participate in any other share issue of the Company or of any other entity.
Shares issued on the exercise of options
During the year ended 31 December 2023, 5,000 options exercisable at A$0.37 on or before 30 August 2027 were converted
to ordinary shares (2022: 16,728,000 options exercisable at A$0.20 on or before 2 June 2022 and 120,834 options exercisable
at A$0.28 on or before 23 April 2025 were converted to ordinary shares).
No amounts are unpaid on any of the shares.
Proceedings on behalf of the 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.
11
Elsight Limited
Annual Report
Directors' report
31 December 2023
Indemnifying and insurance of 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.
Indemnification of Auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, RSM Australia Partners, 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
There were no non-audit services provided during the financial year by the auditor.
In the event that non-audit services are provided by RSM Australia Partners, 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.
●
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest dollar.
Auditor's independence declaration
The auditor’s independence declaration as required under section 307C for the year ended 31 December 2023 has been
received and can be found on page 21 of the financial report.
Auditor
RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001.
Remuneration report (audited)
This remuneration report for the year ended 31 December 2023 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.
12
Elsight Limited
Annual Report
Directors' report
31 December 2023
The remuneration report is presented under the following sections:
(1) Introduction
(2) Remuneration governance
(3) Executive remuneration governance
(4) Non-executive Director fee arrangements
(5) Details of remuneration
(6) Additional disclosures relating to equity instruments
(7) Loans from key management personnel (KMP) and their related party
(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
Appointment dates
Major General (ret) Ami Shafran
Mr David Furstenberg
Mr Howard Digby
Mr Joshua Landau
Mr Yoav Amitai
Mr Roee Kashi
Non-Executive Chairman
Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Chief Technology Officer
2 June 2017
2 June 2017
13 December 2016
1 October 2021
1 November 2020
2 June 2017
Resignation
dates
-
-
-
-
-
-
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.
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 and 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.
13
Elsight Limited
Annual Report
Directors' report
31 December 2023
At the date of this report the Company has three appointed executives, Mr David Furstenberg as Executive Director, Mr Yoav
Amitai as Chief Executive Officer and Mr Roee Kashi as Chief Technology Officer. The terms of their Employment Agreements
with Elsight Limited are summarised in the following table.
Executive Name
Services Agreement Summary
Mr David Furstenberg
Mr Yoav Amitai
Mr Roee Kashi
- Executive salary of AUD $50,000 per annum (based on the exchange rate at 20 March
2024, equals approximately US$33,000 per annum).
- Reimbursement of reasonable business expenses incurred in the ordinary course of the
business in accordance with Group's reimbursement policies.
- The agreement commenced on 1 June 2017 and may be terminated by either party
with no notice period.
- For the year ended 31 December 2023, executive salary of ILS 660,000 per annum
(based on the exchange rate at 20 March 2024, equals approximately US$180,000).
- Reimbursement of reasonable business expenses incurred in the ordinary course of the
business in accordance with Group's reimbursement policies.
- The agreement commenced on 1 November 2020 and may be terminated by either
party on 104 days’ notice. It may be terminated immediately with justifiable cause.
- For the year ended 31 December 2023, executive salary of ILS 756,000 per annum
(based on the exchange rate at 20 March 2024, equals approximately US$206,000).
- Reimbursement of reasonable business expenses incurred in the ordinary course of the
business in accordance with 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.
As the Group is in the early stages of operations 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.
Employee Share Option Plan
The Group has established and maintains the Elsight 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 the Group;
●
a full or part time employee of the Group;
●
a casual employee or contractor of the Group; 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 issued to key
management personnel or their related parties under the Plan during the 31 December 2023 financial year (31 December 2022:
5,033,452).
Group Performance
The table below shows the performance of the Group over the last 5 reporting periods:
14
Elsight Limited
Annual Report
Directors' report
31 December 2023
Financial Year
31 Dec 2023
31 Dec 2022
31 Dec 2021
31 Dec 2020
31 Dec 2019
Loss for the year
Loss per share (cents)
Share price
US$3,683,532
US$4,306,433
US$6,043,694
US$3,880,688
US$3,192,433
US$2.45
A$0.38
US$2.97
A$0.34
US$4.53
A$0.38
US$3.62
A$0.425
US$3.33
A$0.39
4. Non-executive director fee arrangement
The Board policy is to remunerate Non-executive directors at a level to comparable companies for time, commitment, and
responsibilities. Non-executive directors may receive performance related compensation. directors’ fees cover all main Board
activities and membership of any committee. The Board has no established retirement or redundancy schemes in relation to
Non-executive Directors.
The maximum aggregate amount of fees that can be paid to Non-executive directors is presently limited to an aggregate of
A$300,000 (US$203,721) 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$110,586 (2021: US$116,060) and cover main Board
activities only. Non-executive directors may receive additional remuneration for other services provided to the Group.
All non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter
summarises the board policies and terms, including remuneration, relevant to the office of director.
5. Details of remuneration
The Key Management Personnel of Elsight Limited includes the current and former Directors of the Company and Key
Management Personnel of Elsight during the year ended 31 December 2023.
31 December
2023
Directors:
Ami Shafran
David
Furstenberg
Howard Digby
Joshua Landau
Peter Marks
Key
management:
Yoav Amitai
Roee Kashi
Short term benefits
Salary &
fees
US$
Other (i)
US$
Non-
monetary
benefits
US$
33,221
33,221
33,215
39,865
-
-
-
-
-
-
-
-
-
-
-
179,813
218,006
15,041
15,122
14,844
8,319
Total
537,341
30,163
23,163
Share-
based
payments
Performanc
e based
remunerati
on
Post-
employment
Bonuses
US$
retirement
benefits
US$
(ii)
US$
(iii)
%
-
-
-
-
-
-
-
-
-
-
-
4,285
-
-
-
-
-
-
-
-
-
-
-
26,550
30,418
52,757
125,337
18%
32%
61,253
178,094
Total
US$
33,221
33,221
33,215
44,150
-
-
289,005
397,202
830,014
15
Elsight Limited
Annual Report
Directors' report
31 December 2023
31 December
2022
Directors:
Ami Shafran
David
Furstenberg
Howard Digby
Joshua Landau
Key
management:
Yoav Amitai
Roee Kashi
Short term benefits
Salary &
fees
US$
Other(i)
US$
Non-
monetary
benefits
US$
Share-
based
payments
Performanc
e based
remunerati
on
Post-
employment
Bonuses
US$
retirement
benefits
US$
(ii)
US$
(iii)
%
Total
US$
34,927
34,927
34,923
41,914
-
-
-
-
-
-
-
-
-
-
-
-
-
656
2%
35,583
-
-
4,296
1,639
-
-
4%
-
-
36,566
34,923
46,210
-
375,706
414,325
943,313
179,380
215,212
16,003
27,869
14,951
10,310
-
77,390
26,485
31,631
138,887
51,913
37%
31%
Total
541,283
43,872
25,261
77,390
62,412
193,095
(i) Israeli social benefits.
(ii) Share-based payment expense is recorded pro-rata over the vesting period. Refer to Section 6 Additional disclosures relating
to equity instruments for further information.
(iii) Performance based remuneration relates to options issued as share based payments and bonuses.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Directors:
Ami Shafran
David Furstenberg
Howard Digby
Joshua Landau
Other Key Management
Personnel:
Yoav Amitai
Roee Kashi
Fixed Remuneration
STI - cash bonus
LTI - Options
31 December
2023
31 December
2022
31 December
2023
31 December
2022
31 December
2023
31 December
2022
100%
100%
100%
100%
98%
96%
100%
100%
82%
68%
63%
69%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2%
4%
-
-
-
18%
18%
32%
37%
13%
There were no bonuses during the year ended 31 December 2023.
The US$77,390 cash bonus paid to Roee Kashi on 2 June 2022 was at the discretion of the CEO in recognition of Roee’s
significant contributions to the Group, previously in his role as Vice President R&D and most recently in his current role as Chief
Technology Officer. There were no specific performance criteria applied in determining the bonus value, rather the bonus has
been awarded in recognition of Roee’s achievements throughout his 13-year service period.
6. Additional disclosures relating to equity instruments
KMP Shareholding
There were no shares issued as KMP remuneration during the 31 December 2023 financial year (31 December 2022: nil).
16
Elsight Limited
Annual Report
Directors' report
31 December 2023
There were no options issued as KMP remuneration during the 31 December 2023 financial year (31 December
2022: 5,033,452).
The number of ordinary shares in Elsight Limited held by each KMP of the Group during the financial year is as follows:
Shares
purchased on
market during
the year
Options
exercised and
converted to
shares during
the year
Balance at the
start of the year
Shares sold
during the year
Balance at the
end of the year
61,440
61,440
2,117,004
80,000
-
6,317,454
8,637,338
70,630
70,631
54,092
20,000
-
-
215,353
-
-
-
-
-
-
-
-
-
-
-
-
-
-
132,070
132,071
2,171,096
100,000
-
6,317,454
8,852,691
Directors:
Ami Shafran
David Furstenberg
Howard Digby
Joshua Landau
Key Management:
Yoav Amitai
Roee Kashi
Total
KMP Option holdings
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.
The number of options over ordinary shares held by each KMP of the Group (and/or their related party) during the financial
year is as follows:
Options over ordinary shares
Directors:
Ami Shafran
David Furstenberg
Howard Digby
Joshua Landau
Key management:
Yoav Amitai
Roee Kashi
Total
Balance at
the start of
the year
Granted
during
the year
Exercised
during
the year
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
128,085
-
3,798,452
1,550,000
5,476,537
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(128,085)
-
(15,000)
-
(143,085)
-
-
-
-
3,783,452
1,550,000
5,333,452
There were no options exercised by KMP during the year ended 31 December 2023.
Details of vested and unvested options at year end is as follows:
17
Elsight Limited
Annual Report
Directors' report
31 December 2023
Options over ordinary shares
Key management:
Yoav Amitai
Roee Kashi
Total
Vested and
exercisable
Unvested and
un-exercisable
Balance at the
end of the year
527,619
544,795
1,072,414
3,255,833
1,005,205
4,261,038
3,783,452
1,550,000
5,333,452
Terms and conditions of the share-based payment arrangements
The terms and conditions of each grant of options affecting remuneration in the current or a future reporting are as follows:
Option class
Number
Grant date
Vesting and
Expiry
Exercise
granted
exercise date
date
price
Value per
option
at grant date
(v)
Vested
%
ESOP Options
100,000
24/06/2019
ESOP Options
200,000
10/05/2020
ESOP Options
3,583,452
26/05/2022
ESOP Options
1,450,000
30/08/2022
(i)
(ii)
(iii)
(iv)
23/06/2024
A$0.35
US$0.18
100.00%
23/04/2025
A$0.28
US$0.22
91.67%
26/05/2027
A$0.48
US$0.17
9.38%
30/08/2027
A$0.37
US$0.18
31.25%
18
Elsight Limited
Annual Report
Directors' report
31 December 2023
(i) 50% of the 100,000 options vested on 21 June 2021, with an additional 6.25% vesting at the end of each quarter of
continuous service thereafter. A total of 12,500 options vested during the year ended 31 December 2023, resulting in the
options becoming fully vested during the year. There are no performance milestones applicable to the ESOP Options.
(ii) 50% of the 200,000 options vested on 23 April 2021, with the remaining 50% vesting over a period of 3 years quarterly. A
total of 33,340 options vested during the year ended 31 December 2023. There are no performance milestones applicable to
the ESOP Options.
(iii) The 3,583,452 ESOP options were issued in 4 tranches of 895,863 Options each vesting subject to the achievement of the
following Performance Milestones:
- Tranche 1 – Revenue milestone of US$3.0M in one (1) year in each of the years 2022 or 2023 (not achived).
- Tranche 2 – Closing 20-day Volume Weighted Average Price (VWAP) of A$0.90 commencing 1 January 2023 until 31 December
2024, or closing 45- day VWAP of A$0.90 until 31 December 2022.
- Tranche 3 – Closing 20-day VWAP of A$1.80 commencing 1 January 2023 until 31 December 2024, or closing 45-day VWAP
of A$1.80 until 31 December 2023.
- Tranche 4 – Service condition only – 25% on 26 May 2023 and an additional 6.25% at the end of each quarter of continuous
services thereafter.
The Black Scholes option pricing model was used to determine the fair value of Tranches 1 and 4. The fair value of Tranches 2
and 3 was determined using a Monte Carlo simulation model.
At 31 December 2023 the likelihood of achieving the Tranche 1 Performance Milestone and the Tranche 4 service condition
has been assessed at nil and 100% respectfully (2022:100% likelihood for both Tranche 1 and Tranche 4. The likelihood of
achieving the Tranche 2 and 3 Performance Milestones is built into the Monte Carlo Simulation model.
(iv) 25% of the 1,450,000 options vested on 30 August 2023, with an additional 6.25% vesting at the end of each quarter of
continuous service thereafter. 453,125 options vested during the year ended 31 December 2023 . There are no performance
milestones applicable to the ESOP Options.
(v) Except as otherwise noted above, the value per option at grant date has been determined using a Black Scholes option
pricing model. Where noted the options have been valued using Monte Carlo simulation models. Share-based payment
expense is recorded pro-rata over the vesting period.
7. Loans to key management personnel (KMP) and their related parties
There are no loans between the Group and key management personnel.
8. Other transactions and balance with KMP and their related parties
There were no other transactions with KMP or their related parties at 31 December 2023 (2022: none).
At 31 December 2023 the following balances are recorded in relation to KMP or their related parties:
Key Management Personnel and their Related Party
Nature of transaction
Payable balance
US$
Ami Shafran
David Furstenberg
Yoav Amitai
Roee Kashi
Director and consulting fees
Director and consulting fees
Salary and salary related expenses
Salary and salary related expenses
6,738
6,738
18,653
23,348
9. Voting of shareholders at last year's annual general meeting
The Company received 99.75% “Yes” votes cast on its Remuneration Report for the 31 December 2023 financial year. The
Company did not receive any specific feedback at the AGM regarding its remuneration practices.
19
Elsight Limited
Annual Report
Directors' report
31 December 2023
REMUNERATION REPORT (END)
This concludes the remuneration report, which has been audited and signed in accordance with a resolution of the Board of
Directors.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Mr David Furstenberg
Executive Director
21 March 2024
20
RSM Australia Partners
Level 32, Exchange Tower
2 The Esplanade Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 (0) 8 9261 9100
F +61 (0) 8 9261 9111
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Elsight Limited for the year ended 31 December 2023, I
declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
Perth, WA
Dated: 21 March 2024
TUTU PHONG
Partner
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent
accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
Elsight Limited
Annual Report
Consolidated statement of profit or loss and other comprehensive income
For the year ended 31 December 2023
Revenue from contracts with customers
Cost of sales
Gross profit
Other income
Selling, general and administrative expenses
Net share-based payments expense
Loss before finance expense
Net finance expenses
Loss before income tax expense
Income tax expense
Note
31 December
2023
US$
31 December
2022
US$
4
5
6
25
7
9
1,541,168
(733,644)
823,241
(387,159)
807,524
436,082
202,627
217,980
(3,641,306)
(400,949)
(4,451,842)
(496,196)
(3,032,104)
(4,293,976)
(651,428)
(12,457)
(3,683,532)
(4,306,433)
-
-
Loss after income tax expense for the year attributable to the owners of Elsight
Limited
(3,683,532)
(4,306,433)
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss
Foreign currency translation, net of tax
24
(244,250)
(264,849)
Other comprehensive loss for the year, net of tax
(244,250)
(264,849)
Total comprehensive loss for the year attributable to the owners of Elsight Limited
(3,927,782)
(4,571,282)
Loss per share attributable to owners of the Company attributable to the owners of
Elsight Limited
Basic loss per share
Diluted loss per share
8
8
(2.45)
(2.45)
(2.97)
(2.97)
Cents
Cents
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
22
Elsight Limited
Annual Report
Consolidated statement of financial position
As at 31 December 2023
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventory
Total current assets
Non-current assets
Plant and equipment
Right-of-use assets
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Convertible notes
Lease liabilities
Total current liabilities
Non-current liabilities
Convertible notes
Lease liabilities
Provisions
Total non-current liabilities
Total liabilities
Net (liabilities)/assets
Equity
Issued capital
Reserves
Accumulated losses
Total (deficiency)/ equity
Note
31 December
2023
US$
31 December
2022
US$
12
14
15
16
17
18
19
21
20
21
20
22
2,702,593
661,753
689,267
4,053,613
5,194,794
584,200
951,942
6,730,936
107,092
242,262
33,590
382,944
140,114
112,639
21,319
274,072
4,436,557
7,005,008
529,116
196,664
4,983,627
179,123
5,888,530
736,655
117,897
-
87,089
941,641
93,349
68,891
46,762
209,002
4,138,048
28,795
47,028
4,213,871
6,097,532
5,155,512
(1,660,975)
1,849,496
23
24
23,750,494
666,567
(26,078,036)
23,749,095
1,511,909
(23,411,508)
(1,660,975)
1,849,496
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
23
Elsight Limited
Annual Report
Consolidated statement of changes in equity
For the year ended 31 December 2023
Issued
capital
US$
Share-based
payment
Reserve
Foreign
Exchange
Reserve
Predecessor
Accounting
Reserve
US$
US$
US$
Equity
reserve
US$
Accumulated
losses
US$
Total equity
US$
Balance at 1 January 2022
21,375,191 3,384,301
(497,190)
(296,796)
-
(21,133,241) 2,832,265
Loss after income tax
expense for the year
Other comprehensive loss
for the year, net of tax
Total comprehensive loss
for the year
Transactions with owners in
their capacity as owners:
Issue of Shares, net of
transaction costs (note 23)
Share-based payments
(note 25)
Exercise, expiry and
cancellation of options
Financial instruments
recognised in equity
Balance at 31 December
2022
-
-
-
2,373,904
-
-
-
-
-
-
-
496,196
(2,028,166)
-
-
(264,849)
(264,849)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,306,433)
(4,306,433)
-
(264,849)
(4,306,433)
(4,571,282)
-
-
2,373,904
496,196
2,028,166
-
718,413
-
718,413
23,749,095
1,852,331
(762,039)
(296,796)
718,413
(23,411,508)
1,849,496
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
24
Elsight Limited
Annual Report
Consolidated statement of changes in equity
For the year ended 31 December 2023
Share-
based
payment
Reserve
Foreign
Exchange
Reserve
Predecessor
Accounting
Reserve
US$
US$
US$
Issued
capital
US$
Equity
reserve
US$
Accumulated
losses
US$
Total
deficiency
in equity
US$
Balance at 1 January 2023
23,749,095 1,852,331
(762,039)
(296,796)
718,413
(23,411,508) 1,849,496
Loss after income tax
expense for the year
Other comprehensive loss
for the year, net of tax
Total comprehensive loss for
the year
Transactions with owners in
their capacity as owners:
Issue of Shares, net of
transaction costs (note 23)
Share-based payments (note
25)
Exercise, expiry and
cancellation of options
Financial instruments
recognised in equity (note
21)
Balance at 31 December
2023
-
-
-
1,399
-
-
-
-
-
-
-
400,949
(1,017,004)
-
-
(244,250)
(244,250)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,683,532)
(3,683,532)
-
(244,250)
(3,683,532)
(3,927,782)
-
-
1,399
400,949
1,017,004
-
14,963
-
14,963
23,750,494
1,236,276
(1,006,289)
(296,796)
733,376
(26,078,036)
(1,660,975)
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
25
Elsight Limited
Annual Report
Consolidated statement of cash flows
For the year ended 31 December 2023
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Proceeds from government grants
Note
31 December
2023
US$
31 December
2022
US$
1,338,606
(3,891,150)
184,804
(14,718)
190,135
965,095
(4,623,972)
1,804
(14,227)
-
Net cash (used in) operating activities
13
(2,192,323)
(3,671,300)
Cash flows from investing activities
Purchase of plant and equipment
Purchase of intangible assets
Net cash (used in) investing activities
Cash flows from financing activities
Proceeds from convertible notes
Net proceeds from the issue of shares
Principal elements of lease payments
Net cash (used in)/ from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
(8,079)
(36,000)
(3,532)
-
(44,079)
(3,532)
69,685
1,231
(190,338)
4,810,613
2,376,051
(224,147)
(119,422)
6,962,517
(2,355,824)
5,194,794
(136,377)
3,287,685
1,990,057
(82,948)
Cash and cash equivalents at the end of the financial year
12
2,702,593
5,194,794
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
26
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 1. Material Accounting Policies
These consolidated financial statements cover Elsight Limited (Company) and its controlled entities (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 21 March 2024 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.
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
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.
c) Going concern
The financial statements are prepared on the going concern basis, which contemplates the continuity of normal business
activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
As disclosed in the financial statements, the Group recorded a net loss of US$3,683,532 and had net cash outflows from
operating activities of US$2,192,323. As at the reporting date, the Group had net current liabilities of US$1,834,917.
The Directors have taken the following matters into consideration in forming a view that the Group is a going concern, amongst
other matters:
●
●
●
●
The Group has cash on hand of US$2,702,593 at 31 December 2023;
The 25,149,500 convertible notes maturing 30 December 2024 are expected to be converted to equity, refinanced to
extend their maturity date, or be refinanced via other means;
The Directors have the ability to manage the quantum and timing of operating expenditures and related cash flows should
the need arise; and
The Group is expected to have access to a range of working capital finance opportunities should it choose to increase its
funding.
d) Adoption of new and amended Accounting Standards
The Group has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its
operations and effective for annual reporting periods beginning on or after 1 January 2023. It has been determined by the
Group that there is no impact, material or otherwise, of the new and revised standards and interpretations on its business and
therefore no change is necessary to Group accounting policies. No retrospective change in accounting policy of material
reclassification has occurred during the year.
27
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 1. Material Accounting Policies (continued)
e) Principles of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December
2023. 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.
f) 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.
●
28
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 1. Material Accounting Policies (continued)
g) Foreign currency transactions and balances
Functional and presentation currency
The functional currency of each entity within the Group is measured using the currency of the primary economic environment
in which that entity operates. The consolidated financial statements are presented in United States dollars which is the Group’s
presentational currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at
historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair
value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in 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.
h) Goods and Services Tax (GST)
Revenues, expenses, and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Australian Tax Office (ATO).
Receivable and payables are stated inclusive of the amount of GST receivable or payable. The net amount of the GST
recoverable from, or payable to, the ATO is included with other receivables and payables in the statement of financial position.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and
financing activities, which are disclosed as operating cash flows.
i) 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.
●
29
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 1. Material Accounting Policies (continued)
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.
Note 2. New accounting standards for application in future periods
There are no 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 2023 which are expected to have a material
impact on the Group in future reporting periods.
Note 3. Critical accounting estimates and judgements
The directors evaluate estimates and judgements incorporated into the consolidated 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.
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.
Assumptions made regarding the collectability of the Group’s receivables are disclosed at note 14.
Convertible notes
Convertible notes on issue have been determined to contain a debt and equity component and are therefore accounted for as
a compound financial instrument with the debt component recognised at fair value on inception then at amortised cost through
profit and loss while the equity component has been measured at fair value and recorded in reserves. In assessing the terms
of the convertible notes the Group has considered the conversion terms contained in the contractual agreement. Key inputs
used to determine the allocation between debt and equity are as follows:
Face value per note
Number of notes on issue at 31 December 2023
Coupon rate
Time to maturity
Interest
Discount rate
A$0.30
25,583,333
8%
2 years from the date of issue
Capitalised for settlement on maturity
17%
30
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 4. Revenue from contracts with customers
Revenue recognised at a point in time:
- Sale of physical goods
- Data usage
Revenue recognised over a period of time:
- Service level agreements and other services
- Halo as a service
Total revenue
The Group has recognised the following assets and liabilities related to contracts with
customers:
- Contract liabilities (note 19)
There were no significant movements in contract assets or liabilities during the year.
Accounting policy for revenue
The Group revenues consist of the following elements:
31 December
2023
US$
31 December
2022
US$
1,003,865
305,467
665,309
76,262
193,535
38,301
60,234
21,436
1,541,168
823,241
76,608
117,897
●
●
●
●
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;
data usage, which is recognised over the usage period;
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; and service level agreements which are recognised over the agreement period.
In relation to cloud services, software license 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 transaction price allocated to the performance condition. Revenue is recognised to the extent that
it is probable that the economic benefits will flow to the Group and can be reliably measured.
Note 5. Other income
Net foreign exchange gain
Recovery of bad debts in form of inventory
Israeli Innovation Authority government Grant Income
Total Other income
31 December
2023
US$
31 December
2022
US$
67,745
-
134,882
-
217,980
-
202,627
217,980
31
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 5. Other income (continued)
Accounting policy for other income
Grant income from Israeli Innovation Authority is recognised when the Group recognises the related expenses for which the
grants are intended to compensate.
Note 6. Selling, general and administrative expenses
Research
Sales, marketing and exhibitions
Salaries and related expenses
Professional services
Office expenses
(Reversal of bad debts)/bad debts
Amortisation of right of use asset
Depreciation of plant and equipment and amortisation of intangible asset
Travel
Exchange rate differences
Other expenses
Total selling, general and administrative expenses
31 December
2023
US$
31 December
2022
US$
1,446,234
709,054
486,076
361,663
139,304
-
192,878
59,766
45,431
-
200,900
1,683,450
877,830
661,287
447,855
211,792
(15,151)
221,386
110,162
71,231
(19,810)
201,810
3,641,306
4,451,842
Accounting policy for operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin.
Note 7. Finance expenses/(income)
Interest income
Accrued and effective interest on convertible notes (note 21)
Interest on borrowings and bank fees
Implied interest on leases
Total net finance expenses
Note 8. Loss per share
31 December
2023
US$
31 December
2022
US$
(184,805)
821,315
7,275
7,643
(1,804)
-
7,095
7,166
651,428
12,457
31 December
2023
US$
31 December
2022
US$
Loss after income tax attributable to the owners of Elsight Limited
(3,683,532)
(4,306,433)
32
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 8. Loss per share (continued)
Weighted average number of ordinary shares used in calculating basic earnings per share
150,320,019 144,876,769
Weighted average number of ordinary shares used in calculating diluted earnings per share
150,320,019 144,876,769
Number
Number
Basic loss per share
Diluted loss per share
Cents
Cents
(2.45)
(2.45)
(2.97)
(2.97)
Accounting policy for earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Elsight Limited, 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 financial year.
Diluted earnings per share
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 shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Note 9. Income tax
The financial accounts for the year ended 31 December 2023 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% (31 December 2022: 30%). The
applicable tax rate in Israel is 23% (31 December 2022: 23%).
33
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 9. Income tax (continued)
(a) Income tax expense
Current tax
Deferred tax
Aggregate income tax expense
Numerical reconciliation of income tax and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 27.37% (2022: 25.49%)
Non-deductible items
Non-deductible expenditure
Deferred tax assets not recognised
Deferred tax assets
Investments and loans
Accruals
Provisions
Tax losses
Less deferred tax assets not recognised
Deferred tax liabilities
Other
Net deferred tax liabilities
Income tax expense
Carry forward losses
31 December
2023
US$
31 December
2022
US$
-
-
-
-
-
-
(3,683,532)
(4,306,433)
(1,008,071)
(1,097,710)
583,497
424,574
-
268,872
828,838
-
5,677,154
5,980
54,864
5,066,111
(10,804,109)
5,272,447
5,194
53,994
4,257,943
(9,589,578)
-
-
-
-
-
-
Potential future income tax benefits attributable to tax losses carried forward have not been brought to account at 31
December 2023 because the directors do not believe it is appropriate to regard realisation of the future income tax benefits as
probable.
Accounting Policy for 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.
34
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 9. Income tax (continued)
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement
also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable
that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred
tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and
it is not probable that the reversal will occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net
settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and
liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended
that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods
in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.
Note 10. Related party transactions
Subsidiaries
Interests in subsidiaries are set out in note 29.
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
Bonuses
Other
Share based payments
Total KMP Compensation
31 December
2023
US$
31 December
2022
US$
537,341
61,253
23,163
-
30,163
178,094
541,283
62,412
25,261
77,390
43,872
193,095
830,014
943,313
35
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 10. Related party transactions (continued)
b) Other related party transactions
There were no other transactions with related parties during the year ended 31 December 2023 (31 December 2022: Nil).
As at 31 December 2023 the following balances are recorded in relation to KMP or their related parties:
Key management
personnel
or their related party
Nature of transaction
Prepayment balance
Payable balance
31 December
2023
US$
31 December
2022
US$
31 December
2023
US$
31 December
2022
US$
Ami Shafran
David Furstenberg
Yoav Amitai
Roee Kashi
Director fees
Director fees
Salary and related expenses
Salary and related expenses
-
-
-
-
5,093
5,093
-
-
6,738
6,738
18,653
23,348
-
-
8,383
8,558
c) Loans from key management personnel (KMP) and their related parties
There were no loans to or from related parties at the current and previous reporting date or during the financial year.
Note 11. 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 (RSM) - Australia
- Auditing and reviewing the financial reports (BDO) - Australia
- Auditing and reviewing the financial reports (BDO) - Israel
Note 12. Cash and cash equivalents
CURRENT
Cash at bank - unrestricted
Cash at bank - restricted
31 December
2023
US$
31 December
2022
US$
31,560
2,692
27,000
-
40,167
25,000
61,252
65,167
31 December
2023
US$
31 December
2022
US$
2,666,722
35,871
5,155,378
39,416
Total cash and cash equivalents in the consolidated statement of cash flows
2,702,593
5,194,794
Restricted cash relates to bank deposits in place as security guarantees.
The Group's exposure to the risks associated with cash are disclosed in note 27.
36
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 12. Cash and cash equivalents (continued)
Accounting policy for cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less.
Note 13. Cash flow information
Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the year
Non-cash flows in loss after income tax:
Share-based payments
Foreign exchange differences
Amortisation of right of use lease asset
Depreciation of plant and equipment and amortisation of intangible assets
Interest expense
Change in assets and liabilities:
Increase in trade and other receivables
(Increase)/decrease in inventory
Increase/(decrease) in trade and other payables
Increase in provisions
Increase in contract liabilities
Net cash used in operating activities
Non-cash investing and financing activities
31 December
2023
US$
31 December
2022
US$
(3,683,532)
(4,306,433)
400,949
(54,932)
192,878
59,766
821,315
496,196
-
221,386
110,162
-
(311,889)
230,533
70,563
1,116
80,910
(23,104)
(207,169)
(53,957)
13,547
78,072
(2,192,323)
(3,671,300)
There were no material non-cash investing and financing activities during the year ended 31 December 2023 or 31 December
2022.
37
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 14. Trade and other receivables
Current assets
Trade receivables
Allowance for doubtful accounts
Prepaid expenses
Short term deposits
Convertible note receivables
GST receivable
31 December
2023
US$
31 December
2022
US$
726,209
(171,586)
554,623
376,495
(176,865)
199,630
87,947
11,780
-
99,727
114,313
15,671
246,548
376,532
7,403
8,038
661,753
584,200
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 is disclosed in Note 27.
As disclosed at note 21, the Group issued 25,149,500 convertible notes on 30 December 2022. At 31 December 2022, the
Group has recorded a receivable of US$246,548 in relation to convertible notes proceeds held on trust by the Broker for
settlement of costs which have been accrued within trade and other payables at 31 December 2022. These amounts were
settled net during the year ended 31 December 2023.
Accounting policy for trade and other receivables
Trade receivables are amounts due from customers for goods or services performed in the ordinary course of business. They
are generally due for settlement within 45 days and therefore are all classified as current. Trade receivables are recognised
initially at the amount of consideration that is unconditional which is considered to be fair value; none of the Group’s trade
receivables contain a financing component. The Group holds the trade receivables with the objective to collect the contractual
cashflows and therefore measures them subsequently at amortised cost using the effective interest method.
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and
the days past due. The expected loss rates are based on the Group’s past history, existing market conditions and forward-
looking estimates at the end of each reporting period.
Note 15. Inventory
Inventory
31 December
2023
US$
31 December
2022
US$
689,267
951,942
From 31 December 2021 to 31 December 2022 the Group’s inventory balance increased by US$217,980 due to bad debts
recovered in the form of inventory. The Group has recognised other income of US$217,980 in relation to recoveries of bad
debts at 31 December 2022.
38
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 15. Inventory (continued)
The annual expense on written down of inventory to net realisable value amounted to US$8,281 (31 December 2022:
US$7,353).
Inventories recognised as an expense during the year ended 31 December 2023 amounted to US$411,032 (31 December 2022:
US$220,495).
Accounting policy for inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the average principle
and includes expenditure incurred in acquiring the inventories and the costs incurred in bringing them to their existing location
and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and selling expenses.
Note 16. Plant and equipment
Cost
Accumulated depreciation
Net carrying amount
31 December
2023
US$
31 December
2022
US$
439,786
(332,694)
442,633
(302,519)
107,092
140,114
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Motor
vehicles
US$
Office
furniture and
equipment
US$
Installation
and leasehold
improvements
US$
Computers
US$
Total
US$
202,598
3,531
(42,306)
(23,709)
140,114
10,166
(4,006)
(39,182)
Balance at 1 January 2022
Additions
Foreign currency translation adjustment
Depreciation expense
Balance at 31 December 2022
Additions
Foreign currency translation adjustment
Depreciation expense
Balance at 31 December 2023
18,231
3,531
(8,982)
(2,281)
10,499
10,166
(148)
(9,747)
10,770
15,954
-
(7,821)
(1,854)
6,279
-
(187)
(6,092)
63,473
-
(10,733)
(7,377)
45,363
-
(1,350)
(9,012)
104,940
-
(14,770)
(12,197)
77,973
-
(2,321)
(14,331)
-
35,001
61,321
107,092
Accounting policy for property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
39
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 16. Plant and equipment (continued)
Accounting policy for 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.
Note 17. Right-of-use assets
Motor vehicles
Less: Accumulated amortisation
Office space at cost
Less: Accumulated amortisation
31 December
2023
US$
31 December
2022
US$
203,005
(133,856)
69,149
530,963
(357,850)
173,113
231,438
(150,721)
80,717
261,777
(229,855)
31,922
242,262
112,639
The right of use assets recognised at 31 December 2023 and 31 December 2022 relate to motor vehicle leases and office space.
Accounting policy for right-of-use assets
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities included the net
present value of fixed lease payments.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
The amount of the initial measurement of lease liability;
●
Any lease payments made at or before the commencement date less any lease incentives received;
●
Any initial direct costs; and
●
Restoration costs.
●
40
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 17. Right-of-use assets (continued)
The Group’s leasing activities and how these are accounted for
The Group leases an office in Or Yehuda and various motor vehicles. Rental contracts are typically made for fixed period of 1 –
3 years but may have extension options. Lease terms are negotiated on an individual basis and contain a range of terms and
conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are
held by the lessor. Leased assets may not be used as security for borrowings purposes.
The lease payments are discounted using the interest rate implicit in the lease. If the rate cannot be readily determined, which
is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual
lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
●
●
●
where possible uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect
changes in the financing conditions since third-party financing was received;
uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the individual
lessee, which does not have recent third-party financing; and
makes adjustments specific to the lease, e.g. term, country and security.
If a readily observable amortising loan rate is available to the individual lessee (through recent financing or market data) which
has a similar payment profile to the lease, then the group entities use that rate as a starting point to determine the incremental
borrowing rate.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included
in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the right-of-use asset.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line
basis.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less without a
purchase option. Low-value assets comprise IT equipment and small items of office furniture.
Extension and termination options
Extension and termination options are included in the Group’s office lease, exercisable at the option of the Group.
Determining the lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise
an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only
included in the lease term if the lease is reasonably certain to be extended (or not terminated).
For the Group’s leases, the following factors are normally the most relevant:
●
●
●
If there are significant penalty payments to terminate (or not extend), the Group is typically reasonably certain to extend
(or not terminate).
If any leasehold improvements are expected to have a significant remaining value, the Group is typically reasonably certain
to extend (or not terminate).
Otherwise, the Group considers other factors including historical lease durations and the costs and business disruption
required to replace the leased asset.
41
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 17. Right-of-use assets (continued)
There are no extension options in office and vehicles leases that have not been included in the lease liability because the Group
expects to exercise the extension options.
The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or
not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in
circumstances occurs, which affects this assessment, and that is within the control of the lessee. There was no impact of revising
lease terms in current or previous financial year.
Note 18. Trade and other payables
Current
Trade payables
Other payables and accrued expenses
31 December
2023
US$
31 December
2022
US$
108,941
420,175
64,332
672,323
529,116
736,655
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 27.
Accounting policy for 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.
Note 19. Contract liabilities
Current
Contract liabilities - deferred revenue
Contract liabilities - Israel Innovation Authority government grant
31 December
2023
US$
31 December
2022
US$
76,608
120,056
117,897
-
196,664
117,897
Accounting policy for contract liabilities - revenue
Contract liabilities represent the Group's obligation to transfer goods or services to a customer and are recognised when a
customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration
(whichever is earlier) before the Group has transferred the goods or services to the customer.
Accounting policy for contract liabilities – Israel Innovation Authority government grant
Contract liabilities represent grant proceeds received in excess of expenses incurred for which the grants are intended to
compensate.
42
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 20. Lease liabilities
Current
Non-current
31 December
2023
US$
31 December
2022
US$
179,123
87,089
68,891
28,795
248,014
115,884
The lease liabilities relate to the Group's office lease and motor vehicle leases. Lease liabilities have been measured at the
present value of the lease payments, discounted using the Group’s incremental borrowing rate in effect on lease execution
date. Incremental borrowing rates applied range from 3.09% – 3.23%.
Accounting policy for lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value
of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less
any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under
residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur,
and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed
in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if
there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee;
lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is
made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written
down.
Note 21. Convertible notes
Current
Convertible notes
Non-current
Convertible notes
Net carrying amount of convertible notes
31 December
2023
US$
31 December
2022
US$
4,983,627
-
93,349
4,138,048
5,076,976
4,138,048
43
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 21. Convertible notes (continued)
On 30 December 2022, the Group issued 25,149,500 convertible notes with a face value of A$0.30 each, for total proceeds of
US$5,123,481. On 5 April 2023 the Group issued a further 433,833 convertible notes, bringing the total number of convertible
notes on issue at 31 December 2023 to 25,583,333.
The balance of US$4,983,627 related to the 25,149,500 convertible notes maturing on 30 December 2024 is classified as
current. The balance of US$93,349 related to the 433,833 convertible notes maturing on 5 April 2025 is non-current.
The notes are convertible into ordinary shares of the parent entity, at any time at the option of the holder, or repayable on the
above maturity dates. The conversion rate is 1 ordinary share for each note held at a conversion price of A$0.30, subject to
certain anti-dilution clauses that may alter the conversion ratio in certain circumstances.
The notes bear interest at 8%, with interest capitalised for payment on the earlier of redemption or conversion.
The convertible notes are secured over all assets of the Company and its subsidiary.
A reconciliation of the convertible note facility at inception is as follows:
Face value of convertible notes
Transaction costs
Conversion option recognised in equity, net
Value recognised at 31 December 2022
Face value of 433,833 convertible notes
Transaction costs adjustment
Conversion option recognised in equity, net
Accrued interest
Effective interest
Foreign currency translation adjustment
Value recognised at 31 December 2023
US$
5,123,481
(227,522)
(757,911)
4,138,048
87,912
13,078
(14,963)
405,644
415,671
31,586
5,076,976
The fair value of the liability recognised on inception has been determined based on the net present value of convertible note
contractual cashflows using a discount rate of 17%. The difference between the fair value of the liability component and the
face value of convertible notes has been recognised in equity on inception and will be recorded to profit or loss as effective
interest over the life of the convertible notes. Transaction costs incurred in relation to the convertible note have been
recognised pro-rata against the liability and equity components.
Accounting policy for convertible notes
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective interest method.
The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of
financial position, net of transaction costs.
On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an
equivalent non-convertible bond and this amount is carried as a non-current liability on the amortised cost basis until
extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance
cost. The remainder of the proceeds are allocated to the conversion option that is recognised and included in shareholders
equity as a convertible note reserve, net of transaction costs. The carrying amount of the conversion option is not remeasured
in the subsequent years. The corresponding interest on convertible notes is expensed to profit or loss.
44
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 22. Provisions
Non-current liabilities
Accrued severance pay
Severance pay fund
31 December
2023
US$
31 December
2022
US$
49,791
(3,029)
50,185
(3,157)
46,762
47,028
Movements in provisions
Movements in each class of provision during the current financial year and previous financial year are set out below:
Carrying amount at the start of the year
Decrease in provision
Severance pay fund utilised
Carrying amount at the end of the year
31 December
2023
US$
31 December
2022
US$
47,028
(395)
94
78,427
(49,124)
17,725
46,727
47,028
Accounting policy for provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is
probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of
money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision
resulting from the passage of time is recognised as a finance cost.
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.
Note 23. Issued capital
31 December
2023
Shares
31 December
2022
Shares
31 December
2023
US$
31 December
2022
US$
Share capital
150,324,581 150,319,581
23,750,494
23,749,095
45
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 23. Issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
US$
Balance
Issue of shares on conversion of options
Issue of shares on conversion of options
Issue of shares on conversion of options
Issue of shares on conversion of options
Cost of capital raising
1 January 2022
24 January 2022
22 April 2022
23 May 2022
3 August 2022
133,470,748
54,166
13,040,720
3,687,280
66,667
-
US$0.20
US$0.15
US$0.14
US$0.20
21,375,191
10,881
1,933,078
519,162
12,971
(102,188)
Balance
Issue of shares on conversion of options
31 December 2022
30 November 2023
150,319,581
5,000
US$0.28
23,749,095
1,399
Balance
31 December 2023
150,324,581
23,750,494
Capital management
Due to the nature of the Group’s activities, the Group does not have ready access to credit facilities, with the primary source
of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is the current working capital
position against the requirements of the Group to meet research and development programs and corporate overheads. The
Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to
initiating appropriate capital raisings as required. Any surplus funds are invested with major financial institutions.
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does
not have a limited amount of authorised capital.
Accounting policy for equity
Share capital represents the fair value of shares that have been issued. Any transaction costs associated with the issuing of
shares are deducted from share capital, net of any related income tax benefits.
Ordinary shares are classified as equity.
Note 24. Reserves
Share Based Payment Reserve
Foreign Exchange Reserve
Predecessor Accounting Reserve
Convertible note reserve
(a) Share Based Payment Reserve
31 December
2023
US$
31 December
2022
US$
1,236,276
(1,006,289)
(296,796)
733,376
1,852,331
(762,039)
(296,796)
718,413
666,567
1,511,909
31 December
2023
US$
31 December
2022
US$
9,952,452 Options (31 December 2022: 34,541,104 Options)
1,236,276
1,852,331
46
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 24. Reserves (continued)
(b) Movement in Share Based Payment Reserve
Opening balance at 1 January 2022
Expense of options issued in prior periods, prior to cancellations
Issue of ESOP options
Issue of ESOP options
Issue of ESOP options
Issue of ESOP options
Options exercised and converted to fully paid ordinary shares
Expiry of options
Vested options cancelled on termination of employment
Unvested options cancelled on termination of employment
Closing balance at 31 December 2022
Opening balance at 1 January 2023
Expense of options issued in prior periods, prior to cancellations
Issue of ESOP options
Issue of ESOP options
Options exercised and converted to fully paid ordinary shares
Expiry of options
Vested options cancelled on termination of employment
Unvested options cancelled on termination of employment
Closing balance at 31 December 2023
No
US$
46,571,819
-
200,000
300,000
3,583,452
3,222,000
(16,848,834)
(574,000)
(219,201)
(1,694,132)
3,384,301
313,303
10,792
15,379
135,029
110,128
(1,762,156)
(211,739)
(54,272)
(88,434)
34,541,104
1,852,331
No
US$
34,541,104
-
50,000
43,000
(5,000)
(23,539,652)
(468,500)
(668,500)
1,852,331
446,908
4,301
2,797
(883)
(932,812)
(83,309)
(53,057)
9,952,452
1,236,276
Share based payment options on issue at 31 December 2023 have a weighted average exercise price of AUD$0.42 (31
December 2022: AUD$0.74) and a weighted average remaining contractual life of 3.08 years (31 December 2022: 1.47 years).
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their remuneration,
and other parties as part of their compensation for services.
Equity-settled compensation
The Group operates an employee share and option plan. Share-based payments to employees are measured at the fair value
of the instruments issued and amortised over the vesting periods. The fair value of performance right options is determined
using the satisfaction of certain performance criteria (Performance Milestones). The number of shares option and performance
rights expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for
services received as consideration for the equity instruments granted is based on the number of equity instruments that
eventually vest. The fair value is determined using Black Scholes and Monte Carlo simulation models.
c) Foreign Exchange Reserve
2023
US$
2022
US$
(1,006,289)
(762,039)
The foreign currency translation reserve records exchange differences arising on translation from functional currency to
presentation currency.
47
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 24. Reserves (continued)
d) Predecessor Accounting Reserve
2023
US$
2022
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.
e) Equity Reserve
2023
US$
2022
US$
733,376
718,413
The equity reserve holds the equity component of the convertible notes and is not remeasured from inception. This value will
remain in the reserve until the convertible notes are converted or repaid.
Note 25. Share-based payments
Options issued in Prior Periods
Options issued in prior periods that impact the year ended 31 December 2023 are as follows:
Description
Grant date
Exercise price
Expiry date
ESOP Options
ESOP Options
ESOP Options
ESOP Options
ESOP Options
ESOP Options
ESOP Options
ESOP Options
ESOP Options
ESOP Options
ESOP Options
ESOP Options
24/06/2019
10/05/2020
09/08/2020
02/02/2021
15/09/2021
15/09/2021
15/12/2021
15/12/2021
26/04/2022
26/04/2022
26/05/2022
30/08/2022
$0.35
$0.28
$0.30
$0.43
$0.42
$0.48
$0.38
$0.44
$0.43
$0.49
$0.48
$0.37
23/06/2026
23/04/2025
27/07/2025
01/02/2026
14/09/2026
14/09/2026
14/12/2026
14/12/2026
25/04/2027
25/04/2027
26/05/2027
30/08/2027
Options on
issue at
31 December
2023
Vesting
conditions
Net pro-rata
income/(expe
nse) at
31 December
2023
100,000 (i)
700,000 (ii)
75,000 (iii)
130,000 (iv)
577,000 (v)
1,100,000 (v)
50,000 (vi)
200,000 (vi)
200,000 (vii)
- (viii)
3,583,452 (ix)
2,894,000 (x)
9,609,452
(227)
(8,210)
(2,703)
845
(24,493)
(57,364)
6,234
(9,434)
(10,319)
5,978
(51,574)
(242,584)
(393,851)
48
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 25. Share-based payments (continued)
(i) 50% on 24 June 2021 and an additional 6.25% at the end of each quarter of continuous service thereafter. The options
became fully vested on 24 June 2023.
(ii) 50% on 23 April 2021 and an additional 4.17% at the end of each quarter of continuous service thereafter. The options will
become fully vested on 27 July 2024.
(iii) 50% on 28 July 2022 and an additional 6.25% at the end of each quarter of continuous service thereafter. The options will
become fully vested on 27 July 2024.
(iv) 50% on 2 February 2023 and an additional 6.25% at the end of each quarter of continuous service thereafter. The options
will become fully vested on 1 February 2025.
(v) 25% on 15 September 2022 and an additional 6.25% at the end of each quarter of continuous service thereafter. The
options will become fully vested on 15 September 2025.
(vi) 25% on 15 December 2022 and an additional 6.25% at the end of each quarter of continuous service thereafter. The options
will become fully vested on 26 April 2026.
(vii) 25% on 26 April 2023 and an additional 6.25% at the end of each quarter of continuous service thereafter. The options will
become fully vested on 26 April 2026.
(viii)Options cancelled on termination of employment during the year ended 31 December 2023.
(ix) The options vest in 4 tranches of 895,863 Options, subject to the achievement of the following Performance Milestones:
- Tranche 1 – Revenue milestone of US$3.0M in one (1) year in each of the years 2022 or 2023 (not achieved).
- Tranche 2 – Closing 20-day Volume Weighted Average Price (VWAP) of A$0.90 commencing 1 January 2023 until 31 December
2024, or closing 45-day VWAP of A$0.90 until 31 December 2022.
- Tranche 3 – Closing 20-day VWAP of A$1.80 commencing 1 January 2023 until 31 December 2024, or closing 45-day VWAP of
A$1.80 until 31 December 2023.
- Tranche 4 – Service condition only – 25% on 26 May 2023 and an additional 6.25% at the end of each quarter of continuous
services thereafter
(x) 25% on 30 August 2023 and an additional 6.25% at the end of each quarter of continuous service thereafter. The options
will become fully vested on 30 August 2026.
Share Based Payments Issued During the Year Ended 31 December 2023
During the year ended 31 December 2023 the Group recorded the following share based payments:
●
●
The issue of 50,000 Employee Share Plan Options exercisable at A$0.37, on or before 18 July 2025 to an employee of the
Group. The options vested on issue resulting in an expense of US$4,301 recorded at 31 December 2023. The Black Scholes
option pricing model was used to determine the fair value of the unlisted options issued.
The issue of 43,000 Employee Share Plan Options exercisable at A$0.37, on or before 18 January 2028 to an employee of
the Group, exercisable after the satisfaction of the following vesting condition, 25% on 18 January 2024 and an additional
6.25% at the end of each quarter of continuous services thereafter, resulting in an expense of US$2,797 recorded at 31
December 2023. The Black Scholes option pricing model was used to determine the fair value of the unlisted options
issued.
Fair Value
Option fair values were determined using the following option pricing models and inputs:
49
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 25. Share-based payments (continued)
Options
Option pricing model
Number of options
Grant date
Issue date
Exercise price
Expected volatility
Implied option life
Expected dividend yield
Risk free rate
Valuation per option A$
Exchange rate
Valuation per option US$
Total valuation US$
ESOP
Options
ESOP
Options
Black
Scholes
43,000
Black
Scholes
50,000
18 Jan 2023 18 Jan 2023
18 Jan 2023 18 Jan 2023
A$0.37
70%
2.5 years
nil
3.43%
$0.13
$0.66
$0.09
$4,301
A$0.37
70%
5 years
nil
3.43%
$0.18
$0.66
$0.12
$5,160
Share Based Payment Expense
Share based payment expense is comprised as follows:
Expense of options issued in comparative and prior periods
Reversal of expense recognised in a prior period due to a change in the number of options expected to vest1
Issue of 50,000 ESOP options
Issue of 43,000 ESOP options
Total net expense recognised in profit or loss
31 December
2023
US$
495,277
(101,426)
4,301
2,797
400,949
1On 26 May 2022 CEO Yoav Amitai was granted 3,584,452 Employee Share Plan Options exercisable at A$0.48 on or before 26
May 2027, vesting in 4 tranches of 895,863, with each Tranche subject to the achievement of a Performance Milestone. The
likelihood of achieving the Tranche 1 Performance Milestone has been reduced from 100% at 31 December 2022 to nil at 31
December 2023, resulting in a reversal of previously recognised share based payment expense of US$101,426 during the year
ended 31 December 2023.
Accounting policy for 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 an appropriate valuation models. The number of
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.
50
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 26. 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.
For the year ended 31 December 2023, the Group’s revenues have been derived from the following geographical locations:
· Israel – 43% (2022: 35%)
· United States of America – 34% (2022: 43%)
· Other foreign countries – 23% (2022: 23%)
For year ended 31 December 2023, the Group has three major customers contributing 19%, 11% and 9% of total revenues (31
December 2022: two major customers contributing 21% and 15%). All major customers are from the UAV sector, with two
major customers located in the United States of America and one located in Israel.
Note 27. Financial instruments
Financial risk management policies
The Group’s financial instruments consist mainly of deposits with banks, trade and other debtors and trade and other payables.
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.
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 consolidated 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 held in Australian banks - A+ Rated
Cash and cash equivalents held in Israel banks - A Rated
Trade and other receivables - no rating
Note
12
12
14
31 December
2023
US$
31 December
2022
US$
64,423
2,638,170
661,753
4,895,093
299,701
584,200
51
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 27. Financial instruments (continued)
Impaired trade receivables
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.
During the year, the following gains/(losses) were recognised in profit or loss in relation to impaired receivables:
Impairment gains/(losses):
- individually recovered/(impaired) receivables
- movement in provision for impairment
31 December
2023
US$
31 December
2022
US$
-
-
-
7,613
7,538
15,151
As at 31 December 2023, trade receivables of US$141,476 (31 December 2022: US$19,139) were past due but not impaired.
These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these
trade receivables is as follows:
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
31 December
2023
US$
31 December
2022
US$
5,338
34,196
101,942
-
722
18,417
141,476
19,139
(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:
52
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 27. Financial instruments (continued)
31 December
2023
Less than 6
6 - 12
1- 2
2 - 5
Over 5
Total
contractual
Carrying
Interest
rate
%
months
US$
months
US$
years
US$
years
US$
years
US$
cash flow
US$
amount
US$
Financial
liabilities at
amortised cost
Trade and other
payable
Lease liabilities
Borrowings
31 December
2022
Financial
liabilities at
amortised cost
Trade and other
payable
Lease liabilities
Borrowings
-
3.15%
8.00%
529,116
95,912
-
87,900
- 5,989,053
-
62,836
103,312
-
7,554
-
-
-
-
529,116
254,202
529,116
248,014
6,092,365 5,076,976
625,028 6,076,953
166,148
7,554
-
6,875,683 5,854,106
Less than 6
6 - 12
1 - 2
2 - 5
Over 5
Total
contractual
Carrying
Interest
rate
%
months
US$
months
US$
years
US$
years
US$
years
US$
cash flow
US$
amount
US$
-
3.20%
8.00%
736,655
61,692
-
-
27,127
-
21,782
- 5,976,028
-
8,383
-
-
-
-
736,655
118,984
736,655
115,884
5,976,028 4,138,048
798,347
27,127 5,997,810
8,383
-
6,831,667 4,990,587
(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. Any reasonable fluctuation in exchange rates is
not expected to have a material impact on either profit or equity.
53
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 27. Financial instruments (continued)
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Net exposure
United States Dollar
31 December
2023
US$
31 December
2022
US$
2,235,468
385,750
(2,041)
31,955
120,798
(8,876)
2,619,177
143,877
Accounting policy for 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.
Note 28. Parent entity information
The following information of the legal parent Elsight Limited has been prepared in accordance with Australian Accounting
Standards and Group accounting policies.
54
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 28. Parent entity information (continued)
Statement of financial position
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets/(liabilities)
Equity
Issued capital
Foreign Exchange Reserve
Share Based Payment Reserve
Convertible note reserve
Accumulated losses
Total equity/(deficiency)
Statement of profit or loss and other comprehensive income
Loss after income tax
Other comprehensive loss for the year, net of tax
Total comprehensive loss
Guarantees entered into by Elsight Limited for the debts of its subsidiary
There are no guarantees entered into by Elsight Limited.
Contingent liabilities of Elsight Limited
There were no contingent liabilities as at 31 December 2023 (31 December 2022: Nil).
Commitments by Elsight Limited
There were no commitments as at 31 December 2023 (31 December 2022: Nil).
Note 29. Controlled entities
Parent
31 December
2023
US$
31 December
2022
US$
101,297
5,203,378
3,365,863
3,467,160
1,106,777
6,310,155
5,034,787
322,611
93,349
5,128,136
4,138,048
4,460,659
(1,660,976)
1,849,496
23,744,345
(2,442,536)
1,236,275
733,376
(24,932,436)
23,742,945
(2,386,760)
1,852,331
718,411
(22,077,431)
(1,660,976)
1,849,496
Parent
31 December
2023
US$
31 December
2022
US$
(3,872,008)
(3,267,271)
(55,775)
(3,927,783)
(1,304,011)
(4,571,282)
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 Group's
accounting policies.
55
Elsight Limited
Annual Report
Notes to the consolidated financial statements
31 December 2023
Note 29. Controlled entities (continued)
Name
El-Sight Ltd
Elsight LLC
Principal place of business /
Country of incorporation
Israel
USA
Ownership interest
31 December
2023
%
31 December
2022
%
100%
100%
100%
-
Elsight LLC was incorporated on 11 August 2023.
The proportion of ownership interest is equal to the proportion of voting power held.
Note 30. Commitments
The Group has no commitments which are not recorded on the statement of financial position as at 31 December 2023.
Note 31. Contingent liabilities
The Group has obtained grant proceeds from the Israel Innovation Authority in relation to its Halo Beyond the Visual Line of
Sight (BVLOS) project. In return, the Group is obligated to pay royalties amounting to 3% of future Halo revenues up to the
total amount of the grant. Through the year ended 31 December 2023 total grant proceeds obtained amounted to US$188,135.
The total grant is expected to be worth approximately US$450,000 (ILS 1,570,624). No repayments are required during the
project period which concludes 31 December 2024. Repayments will commence from 1 January 2025 based on Halo revenue
generated from that date forward, contingent upon the successful outcome of the Group’s research and development
programs and attainment of sales. The Group has no obligation to repay these grants if sales are not generated. If the project
fails the Group has no obligation to repay any grant received. Repayments are linked to the exchange rate of the US dollar and
bear interest at annual LIBOR rates.
The Group has no other known contingent liabilities as at 31 December 2023.
Note 32. Events after the reporting period
On 7 March 2024 the Group issued 201,522 Shares on the conversion of 183,333 convertible notes.
No other matter or circumstance has arisen since 31 December 2023 that has significantly affected, or may significantly affect
the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
56
Elsight Limited
Annual Report
Directors' declaration
31 December 2023
In the Director's opinion:
1.
a)
b)
2.
3.
The consolidated financial statements and notes are in accordance with the Corporations Act 2001, including:
complying with Australian Accounting Standards, Corporations Regulations 2001 and other mandatory professional
reporting requirements, noting the matters documented in Note 1; and
giving a true and fair view, the consolidated entity’s financial position as at 31 December 2023 and of its performance
for the year ended on that date.
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 2023.
This declaration is made in accordance with a resolution of the Board of Directors pursuant to section 295(5)(a) and is signed
for and on behalf of the Directors by:
___________________________
Mr David Furstenberg
Executive Director
21 March 2024
57
.
Opinion
RSM Australia Partners
Level 32, Exchange Tower
2 The Esplanade Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 (0) 8 9261 9100
F +61 (0) 8 9261 9111
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ELSIGHT LIMITED
We have audited the financial report of Elsight Limited (the Company) and its controlled entities (the Group), which
comprises the consolidated statement of financial position as at 31 December 2023, 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 statements, 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 2023 and of its financial
performance for the year then ended; 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 auditor independence requirements of 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.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent
accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
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.
Key Audit Matter
Going Concern
Refer to Note 1 in the financial statements
The Group recorded a net loss of $3,683,532 and had
net cash outflows
from operating activities of
$2,192,323. As at the reporting date, the Group had
net current liabilities of $1,834,917.
The directors’ have prepared the financial report on a
going concern basis based on a cash flow forecast
which considers the factors disclosed in Note 1.
We determined this assessment of going concern to
be a key audit matter due
the significant
judgements involved in preparing the cash flow
forecast.
Revenue from Contracts with Customers
Refer to Note 4 in the financial statements
to
Revenue from contracts with customers for the year
ended 31 December 2023 was $1,541,168. The
primary revenue source is sale of physical goods to
customers.
Revenue was identified as a key audit matter due to:
The balance is material to the Group, and there
associated with management
are
risks
identification of
including
judgements,
contracts
obligations,
determination of the transaction price and the
timing of revenue recognition; and
the
performance
and
Revenue recognition is a presumed fraud risk
under the Australian Auditing Standards.
Other Information
How our audit addressed this matter
Our audit procedures included:
Assessing and discussing with management the
reasonableness of the Group’s cash flow forecast;
the mathematical accuracy of
Checking
management’s cash flow forecast;
Critically assessing the directors’ reasons on why
they believe it is appropriate to prepare the
financial report on a going concern basis; and
Assessing the adequacy of disclosures in the
financial report.
Our audit procedures included:
Assessing whether
revenue
recognition accounting policies are in accordance
with Australian Accounting Standards;
the Group’s
Obtaining a detailed understanding of each of the
revenue streams and the process for determining
and recognising revenue;
On a sample basis, substantively testing revenue
recognised to supporting documentation;
Substantively
testing a sample of
revenue
transactions before and after the reporting date to
assess whether revenue is recognised in the
correct financial period; and
Assessing the disclosures in the financial report.
The directors are responsible for the other information. The other information comprises the information included
in the Group's annual report for the year ended 31 December 2023, 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 accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the 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 have 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 at: https://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 within the directors' report for the year ended 31 December
2023.
In our opinion, the Remuneration Report of Elsight Limited, for the year ended 31 December 2023, 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.
RSM AUSTRALIA PARTNERS
Perth, WA
Dated: 21 March 2024
TUTU PHONG
Partner