Announcement PDF Prospectus FOS Capital Limited ACN 637 156 275 For the initial public offering of 12 million Shares in FOS Capital Ltd at an Offer Price of $0.25 per Share to raise $3 million. IMPORTANT INFORMATION This is an important document that you should read in full. If you do not understand it, consult your professional advisers. The Shares offered under this Prospectus are subject to certain risks as set out in Section 5. LEAD MANAGER: KS Capital Pty Ltd Important Notices The Offer This Prospectus is issued by FOS Capital Ltd (ACN 637 156 275) (FOS Capital or Company) for the purposes of Chapter 6D of the Corporations Act 2001 (Cth) (Corporations Act). The invitation contained in this Prospectus is an initial public offering to apply for fully paid ordinary shares (Shares) at an Application Price of $0.25 per Share to raise $3,000,000 (Offer). References to FOS or FOS Group The Company was incorporated on 31 October 2019. Prior to the Prospectus Date, the Company acquired (through a wholly owned subsidiary) the entities that carry on the Australian operations of the ‘FOS Lighting’ business. References to FOS or FOS Group throughout this Prospectus are references to the corporate group detailed in Section 3.1. For example, the Investment Overview in Section 1 and the Company Overview in Section 3 and the Financial Information in Section 4 represents the combined business operations of the Company and its wholly owned subsidiaries (which specifically includes the acquired FOS Lighting but not the JSB Lighting business) for the financial years ended 30 June 2019 and 30 June 2020, and also for the half year ended 31 December 2020 (which does include the Company’s 50% share of JSB Lighting at that date). The Prospectus also includes the stand-alone historical financial information for JSB Lighting for the financial years ended 30 September 2019 and 30 September 2020 respectively. JSB Lighting had a 30 September financial year end. Lodgement and listing This replacement prospectus is dated 7 May 2021 and a copy was lodged with the Australian Securities and Investments Commission (ASIC) on that date (Prospectus Date). It is a replacement prospectus, which replaces the prospectus dated 30 April 2021 which was lodged with ASIC on that date (Original Prospectus). For the purposes of this document, this replacement prospectus will be referred to as the Prospectus. This Prospectus provides additional disclosure regarding the terms of the Binding Term Sheet for the acquisition of Baker & McAuliffe Holdings Pty Ltd T/A JSB Lighting in section 8.1.4. It also corrects certain non-material typographical errors. The Company applied to ASX Limited (ASX) on 30 April 2021 for admission of the Company to the official list and quotation of its Shares on the ASX. None of ASIC, ASX or their respective officers take any responsibility for the contents of this Prospectus or the merits of the investment to which this Prospectus relates. The fact that the ASX may admit the Company to the official list and quote the Shares is not to be taken in any way as an indication of the merits of the Company. If granted admission to the ASX, quotation of the Shares will commence as soon as practicable after holding statements are dispatched. The Company does not intend to issue any Shares unless and until the Offer is fully subscribed and the Shares have been granted permission to be quoted on the ASX on terms acceptable to the Company. The Company, the Share Registry and the Lead Manager disclaim all liability, whether in negligence or otherwise, to persons who trade Shares before receiving their holding statement. If permission is not granted for the Shares to be quoted before the end of three months after the Prospectus Date or such longer period permitted by the Corporations Act or with the consent of ASIC, all Application Monies received under the Prospectus will be refunded without interest to Applicants in full within the time prescribed by the Corporations Act. Expiry Date This Prospectus expires on the date that is 13 months after the date of the Original Prospectus (Expiry Date) and no Shares will be issued on the basis of this Prospectus after the Expiry Date. Note to Applicants The information in this Prospectus is not financial product advice and does not take into account your investment objectives, financial situation or particular needs. It is important that you read this Prospectus carefully and in its entirety before deciding whether to invest in the Company. There are risks associated with an investment in the Shares and the Shares offered under this Prospectus should be regarded as a speculative investment. In particular, you should consider the risk factors that could affect the performance of the Company. You should carefully consider these risks in light of your personal circumstances (including financial and tax issues) and seek professional guidance from your stockbroker, solicitor, accountant or other independent professional adviser before deciding whether to invest in the Company. Some of the key risk factors that should be considered by prospective investors are set out in Section 5. There may be risk factors in addition to these that should be considered in light of your personal circumstances. Except as required by law, and only to the extent required, no person named in this Prospectus, nor any other person, warrants or guarantees the performance of the Company or the repayment of capital by the Company or any return on investment made pursuant to this Prospectus. This Prospectus includes information regarding past performance of the FOS Group. Investors should be aware that past performance is not indicative of future performance. No person is authorised to give any information or to make any representation in connection with the Offer described in this Prospectus that is not contained in this Prospectus. Any information not so contained may not be relied upon as having been authorised by the Company or any other person in connection with the Offer. You should rely only on information contained in this Prospectus. Financial information presentation Section 4 sets out in detail the Financial Information referred to in this Prospectus and the basis of preparation of that information is set out in Section 4.2. The Financial Information has been prepared and presented in accordance with the recognition and measurement principles of Australian Accounting Standards (AAS) (including the Australian Accounting Interpretations) issued by the Australian Accounting Standards Board (AASB), which are consistent with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board. All financial amounts contained in this Prospectus are expressed in Australian currency, unless otherwise stated. Any discrepancies between totals and sums of components in tables and figures contained in this Prospectus are due to rounding. The Historical Financial Information in this Prospectus should be read in conjunction with, and are qualified by reference to, the information contained in Section 4, the risk factors in section 5 and the Independent Limited Assurance Report in Section 9. Where Financial Information and metrics represent pro forma amounts, they have been labelled pro forma. Market and industry data based primarily on management estimates This Prospectus (and in particular Section 2) contains data relating to the industries, segments and end‑markets in which FOS Group operates (Industry Data). Such information includes, but is not limited to, statements and data relating to: estimated historical market size, market segmentation and its industry position. Unless otherwise stated, this information has been prepared by the Company using both publicly available data and its own internally generated data. The Company’s internally generated data is based on estimates and assumptions that both the Directors and the Company’s management believe to be reasonable, as at the Prospectus Date. The Industry Data has not been independently prepared or verified and the Company cannot assure you as to its accuracy or the accuracy of the underlying assumptions used to estimate such Industry Data. The Company’s estimates involve risks and uncertainties and are subject to change based on various factors, including those described in the risk factors set out in Section 5. In addition to the Industry Data, this Prospectus uses third party market data, estimates and projections (Third Party Data). There is no assurance that any of the Third Party Data, estimates or projections contained in the Third Party Data will be achieved. The Company has not independently verified the Third Party Data. Estimates involve risks and uncertainties and are subject to change based on various factors, including those described in the risk factors set out in Section 5. Forward‑looking statements This Prospectus contains forward‑looking statements that are identified by words such as ‘may’, ‘could’, ‘believes’, ‘estimates’, ‘expects’, ‘intends’ and other similar words that involve risks and uncertainties. Any forward‑looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause actual events or outcomes to differ materially from the events or outcomes expressed or anticipated in these statements, many of which are beyond the control of FOS Group. The forward‑looking statements should be read in conjunction with, and qualified by reference to, the risk factors as set out in Section 5, and other information contained in this Prospectus. The Directors cannot and do not give any assurance that the results, performance or achievements expressed or implied by the forward‑looking statements contained in this Prospectus will actually occur and investors are cautioned not to place undue reliance on such forward‑looking statements. The Company does not intend to update or revise forward‑looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this Prospectus, except where required by law. In respect of the third‑party estimates and projections, the Company has obtained significant portions of this information from Third Party Data. Statements of past performance This Prospectus includes information regarding past performance of the FOS Group. Investors should be aware that past performance is not, and should not be relied upon as being, indicative of future performance. Foreign jurisdictions This Prospectus does not constitute an offer or invitation to apply for Shares in any place in which, or to any person to whom, it would be unlawful to make such an offer or invitation. No action has been taken to register or qualify the Shares or the Offer, or to otherwise permit a public offering of the Shares, in any jurisdiction outside Australia. The taxation treatment of Australian securities may not be the same as those for securities in foreign jurisdictions. The distribution of this Prospectus outside Australia may be restricted by law, and persons who come into possession of this Prospectus outside Australia should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. In particular, the Shares have not been, and will not be, registered under the United States Securities Act of 1933, as amended (US Securities Act) or any state securities laws in the United States and may not be offered, sold, pledged or transferred in the United States unless the shares are registered under the US Securities Act, or an exemption from the registration requirements of the US Securities act and applicable US state securities laws is available. See Section 7.6.3 for more details on selling restrictions that apply to the Offer and sale of Shares in jurisdictions outside Australia. Exposure Period The Corporations Act prohibits the Company from processing applications for Shares in the seven‑day period after lodgement of the Original Prospectus (Exposure Period). ASIC may extend this period by up to a further seven days (that is, up to a total of 14 days). The purpose of the Exposure Period is to enable the Prospectus to be examined by market participants prior to the raising of the funds. The examination may result in the identification of certain deficiencies in this Prospectus in which case any Application may need to be dealt with in accordance with section 724 of the Corporations Act. Applications received during the Exposure Period will not be processed until after the expiry of the Exposure Period. No preference will be given to Applications received during the Exposure Period. Prospectus availability During the Offer Period, a paper copy of this Prospectus is available free of charge to any Applicant in Australia by calling 1300 241 087 (within Australia) and +617 3277 7222 (outside Australia) from 9am to 5 pm (AEST), Monday to Friday (excluding public holidays). This Prospectus is also available to Applicants in Australia or New Zealand in electronic form at the Company’s website www.foscapital.com.au. The Offer constituted by this Prospectus in electronic form is available only to persons downloading or printing it within Australia and is not available to persons in any other jurisdiction (including the United States). Persons who access the electronic version of this Prospectus must ensure that they download and read the entire Prospectus. Applications Applications may be made only during the Offer Period on the Application Form attached to, or accompanying this Prospectus in its paper copy form, or in its electronic form, which must be downloaded in its entirety from www.foscapital.com.au. By making an Application, you represent and warrant that you were given access to the Prospectus, together with an Application Form. The Corporations Act prohibits any person from passing on to another person an Application Form unless it is attached to, or accompanied by, the complete and unaltered version of this Prospectus. No cooling‑off rights Cooling‑off rights do not apply to an investment in Shares issued under the Prospectus. This means that, in most circumstances, you cannot withdraw your Application once it has been accepted. Definitions and abbreviations Defined terms and expressions used in this Prospectus are explained in the Glossary at the end of this Prospectus. Unless otherwise stated or implied, references to times in this Prospectus are to Australian Eastern Standard Time (AEST). Privacy By filling out an Application Form to apply for Shares, you are providing personal information to the Company and the Share Registry, which is contracted by the Company to manage Applications. The Company and the Share Registry on their behalf, may collect, hold and use that personal information in order to process your Application, service your needs as a Shareholder, provide facilities and services that you request and carry out appropriate administration. Some of this personal information is collected as required or authorised by certain laws including the Income Tax Assessment Act 1997 (Cth) and the Corporations Act. If you do not provide the information requested in an Application Form, the Company and the Share Registry may not be able to process or accept your Application Form. Your personal information may also be used from time to time to inform you about other products and services offered by the Company, that it considers may be of interest to you. Your personal information may also be provided to the Company’s agents and service providers on the basis that they deal with such information in accordance with the Company’s privacy policy. The agents and service providers of the Company may be located outside Australia where your personal information may not receive the same level of protection as that afforded under Australian law. The types of agents and service providers that may be provided with your personal information and the circumstances in which your personal information may be shared are: • the Share Registry for ongoing administration of the register of members; • printers and other companies for the purpose of preparation and distribution of statements and for handling mail; • market research companies for the purpose of analysing the Shareholder base and for product development and planning; and • legal and accounting firms, auditors, contractors, consultants and other advisers for the purpose of administering, and advising on, the Shares and for associated actions. If an Applicant becomes a Shareholder, the Corporations Act requires the Company to include information about the Shareholder (including name, address and details of the Shares held) in its public register of members. If you do not provide all the information requested, your Application Form may not be able to be processed. The information contained in the Company’s register of members must remain there even if a person ceases to be a Shareholder. Information contained in the Company’s register of members is also used to facilitate dividend payments and corporate communications (including financial results, annual reports and other information that the Company may wish to communicate to its Shareholders) and compliance by the Company with legal and regulatory requirements. An Applicant has a right to access and correct the information that the Company and the Share Registry hold about that person, subject to certain exemptions under law. Applicants can obtain a copy of the Company’s privacy policy by visiting the Company’s website www.foscapital.com.au. The privacy policy contains further details regarding access, correction and complaint rights and procedures. The Share Registry’s complete privacy policy can be accessed by calling 1300 737 760 9am to 5pm (AEST), Monday to Friday (excluding public holidays) and requesting a copy. Photographs and diagrams Photographs and diagrams used in this Prospectus that do not have descriptions are for illustration only and should not be interpreted to mean that any person shown in them endorses this Prospectus or its contents. Diagrams used in this Prospectus are illustrative only and may not be drawn to scale. Unless otherwise stated, all data contained in charts, graphs and tables is based on information available at the Prospectus Date. Independent Limited Assurance Report The Investigating Accountant has prepared the Independent Limited Assurance Report in relation to the Financial Information. The Independent Limited Assurance Report is provided in Section 9. Questions If you have any questions about how to apply for Shares, please call FOS Group on 1300 241 087 (within Australia) and +617 3277 7222 (outside Australia) from 9am to 5pm (AEST), Monday to Friday (excluding public holidays). Instructions on how to apply for Shares are set out in Section 7 of this Prospectus and on the back of the Application Form. If you have any questions about whether to invest in the Company, you should seek professional advice from your accountant, financial adviser, stockbroker, lawyer or other professional adviser. FOS Capital Limited | Prospectus 1 Contents Important Notices������������������������������������������������������������������������������������������������������������������������������������ IFC Key Offer Information���������������������������������������������������������������������������������������������������������������������������������� 3 Chairman’s Letter��������������������������������������������������������������������������������������������������������������������������������������� 4 1. Investment Overview���������������������������������������������������������������������������������������������������������������������������� 6 2. Industry Overview������������������������������������������������������������������������������������������������������������������������������ 20 3. Company Overview����������������������������������������������������������������������������������������������������������������������������� 26 4. Financial Information�������������������������������������������������������������������������������������������������������������������������� 41 5. Risk Factors��������������������������������������������������������������������������������������������������������������������������������������� 62 6. Key People, Interests and Benefits�������������������������������������������������������������������������������������������������������� 70 7. Details of the Offer������������������������������������������������������������������������������������������������������������������������������ 82 8. Material Contracts������������������������������������������������������������������������������������������������������������������������������ 91 9. Independent Limited Assurance Report������������������������������������������������������������������������������������������������� 96 10. Additional Information���������������������������������������������������������������������������������������������������������������������� 103 11. Glossary������������������������������������������������������������������������������������������������������������������������������������������ 111 Corporate Directory�������������������������������������������������������������������������������������������������������������������������������� IBC 2 Key Offer Information Key Dates Prospectus Date 7 May 2021 Offer opens (Opening Date) 9.00am (Melbourne time) 10 May 2021 Offer closes (Closing Date) 5.00pm (Melbourne time) 31 May 2021 Issue of Shares under the Offer (Completion of the Offer) 3 June 2021 Expected date of despatch of holding statements 4 June 2021 Expected commencement of trading of Shares on ASX (on a normal settlement basis) 9 June 2021 This timetable is indicative only. The Company (in consultation with the Lead Manager) reserves the right to vary dates of the Offer (subject to the ASX Listing Rules and the Corporations Act) without prior notice, including to close the Offer early, extend the date the Offer closes, accept late Applications or withdraw the Offer and the issue of Shares (in each case without notifying any recipient of the Prospectus or any Applicant). The Offer – Key Statistics Offer Price $0.25 per Share Number of Shares offered under this Prospectus1 12,000,000 Gross proceeds from the Offer $3,000,000 Total number of Shares on issue at Completion of the Offer 45,000,000 Number of Shares to be held by the Existing Shareholders on Completion of the Offer2,3 35M Expected Free Float4 22% Indicative market capitalisation of the Company at the Offer Price5 $11,250,000 Pro forma net cash position (as at 31 December 2020)6 $5,100,169 1. 2. 3. 4. The Offer must be fully subscribed in order to proceed. Shares held by the Existing Shareholders will be subject to escrow arrangements as described in Section 8.2. 35 million Shares assumes HGL subscribes to 2M Shares, refer note 6.7. Free float is calculated as the percentage of Shares on Completion of the Offer that are not subject to voluntary or mandatory escrow (see Section 7.1) nor held by Directors or affiliated Shareholders of the Company (see Section 8.2). 5. Market capitalisation at the Offer Price is defined as the Offer Price multiplied by the total number of Shares on issue on Completion of the Offer (assuming the Offer is successful). 6. Net cash of $5,100,169 is calculated on a pro forma basis (as at 30 December 2020), immediately after Completion of the Offer assuming the Offer is successful. FOS Capital Limited | Prospectus 3 Chairman’s Letter Dear Investor, On behalf of the Board, I have great pleasure in inviting you to become a Shareholder of FOS Capital Ltd (the Company). The Company offers investors the opportunity to acquire Shares in an established and innovative Australian lighting company that intends to grow operations, both organically and through the acquisition of industrial, electrical and technology businesses that offer clear synergies to FOS Group’s existing business operations. The Company, through its wholly‑owned subsidiaries, operates an Australian based lighting design, engineering and manufacturing business serving the commercial, retail and industrial lighting sectors. The Company’s wholly owned subsidiary, FOS Lighting Group Pty Ltd, commenced trading in April 2019, and in June 2019 it acquired FOS Lighting (formerly Frend Lighting Industries Pty Ltd) from Gerard Lighting Holdings Pty Ltd. The Frend lighting business was established in 1996 and continues to manufacture a broad range of commercial indoor and outdoor luminaires at its Brisbane manufacturing facility. In November 2020 the Company acquired a 50% shareholding in Baker & McAuliffe Holdings Pty Ltd, trading as ‘JSB Lighting’ from ASX listed HGL limited and in February 2021 the Company acquired 100% ownership. JSB Lighting was established over 28 years ago and has offices in each Australian state as well as New Zealand. JSB Lighting represents an exciting turn-around opportunity due to its recent significant trading losses. The Company has already made significant positive progress with the turn-around strategy, details of which are contained in Section 3. The acquisitions of Frend and JSB Lighting provide the Company with a platform to grow business operations leveraging the Directors’ extensive experience in the lighting industry and opportunities that comes with expanded supplier and distribution networks. The Company will continue to explore complementary value adding acquisitions as part of its overall growth strategy. The Australian lighting market (estimated at $2.67 billion per annum7) is a dynamic industry that is undergoing major technological change as it moves to new and innovative technology, mainly through LED. The Company’s experienced management team understands the demands of the lighting market, thus ensuring the Company is well positioned to capitalise on these industry changes. The directors believe that COVID‑19 has led to a clear shift for customers to prefer to source Australian‑made products rather than from overseas suppliers. FOS is very well positioned to take advantage of this change as it is one of very few Australian lighting companies to have a fully integrated local manufacturing facility. The Company is seeking to raise $3 million (before costs of the Offer) through the issue of 12 million Shares at the Offer Price of $0.25 per Share. Upon the successful Completion of the Offer, the Company will have 45,000,000 Shares on issue and a market capitalisation of $11,250,000 at the Offer Price. The purpose of the Offer is to provide FOS with access to capital markets (that the Company expects will give it added financial flexibility to pursue further growth opportunities), broaden the Shareholder base and provide a liquid market for its Shares. All proceeds from the Offer will be used to assist FOS Group to continue its business growth, including sales and marketing and to meet the costs of the Offer. Upon Completion of the Offer, new Shareholders are expected to hold 22% of the Shares and the Existing Shareholders (including management) will retain up to 78% of the Shares. Existing Shares held by the Existing Shareholders are expected to be subject to mandatory escrow for 24 months. This Prospectus contains important information about the Offer, the industry the Company operates in as well as the financial performance and position, operations, and the management team of the Company. The key risks associated with an investment in the Company are set out in Section 5. Key risks include implementation risk associated with the JSB turn-around strategy, loss of key personnel, the fact that the combined FOS Group has a limited trading history under current management, that it operates in a highly competitive industry. I encourage you to read this document carefully and in its entirety before making an investment decision. The Directors and senior management are excited about the future of the Company and the FOS Group and we look forward to welcoming you as a Shareholder. Yours faithfully, Sandy Beard Chairman 7. (IBIS World) Report C2432 Electric Lighting Equipment manufacturers in Australia. 4 Highlights HY21 Revenue 27 + PBT 339 % + to $3.5M to $595K Order Book Acquisition of 37 % % JSB Lighting to $1.4M JSB costs reduced by $ 1.8M pa Established national presence Employees 92% + to 50 These highlights represent the % change for FOS Lighting as at 31 December 2020 when compared to 31 December 2019 and excludes JSB Lighting and IPO costs FOS Capital Limited | Prospectus 5 1. Investment Overview 6 1. Investment Overview 1.1. Introduction This information is a selective overview only. Prospective investors should read the Prospectus in full, before deciding to invest in Shares. Topic Summary Where to find more information Who is FOS Group FOS Capital Ltd ACN 637 156 275 (Company). Section 3.1.4 The Company holds 100% of the issued share capital in FOS Lighting Group Pty Ltd and it is also the ultimate holding company of FOS Lighting Pty Ltd and Baker & McAuliffe Holdings Pty Ltd T/A JSB Lighting (JSB Lighting). What does FOS Group do? The ‘FOS Group’ encompasses the Company, FOS Lighting Group Pty Ltd, FOS Lighting Pty Ltd (formerly Frend Lighting) and Baker & McAuliffe Holdings Pty Ltd T/A JSB Lighting. The FOS Group has design, engineering, and manufacturing expertise and is a supplier of commercial, retail and industrial lighting solutions. Section 3.1 What industry does FOS Group operate in? The FOS Group