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Electro Optic SystemsELECTRO OPTIC SYSTEMS HOLDINGS LIMITED
ACN 092 708 364
www.eos‑aus.com
12
ANNUAL REPORT 2012
CONTENTS
CORPORATE DIRECTORY
Review of Operations
Directors’ Report
Auditors’ Report
Directors’ Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to and forming part of the Financial Statements
ASX Additional Information
Twenty Largest Shareholders
Corporate Governance Statement
1
6
17
20
21
22
23
24
25
79
81
82
Directors
Mr Fred Bart (Chairman)
Dr Ben Greene (Chief Executive Offi cer)
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Company Secretary
Mr Ian Dennis
Registered Offi ce
Suite 2, Level 12
75 Elizabeth Street
Sydney NSW 2000
Australia
Telephone +61 2 9233 3915
Facsimile +61 2 9232 3411
Website www.eos-aus.com
Share Registry
Sydney NSW 2000
GPO Box 7045
Sydney NSW 1115
Australia
Facsimile 1300 137 341
Auditors
Deloitte Touche Tohmatsu
Chartered Accountants
Eclipse Tower
Level 19, 60 Station Street
Parramatta NSW 2150
Australia
Computershare Investor Services Pty Limited
Level 3, 60 Carrington Street
Telephone 1300 855 080 or +61 3 9611 5711 outside Australia
4535 Designed and Produced by RDA Creative www.rda.com.au
REVIEW OF OPERATIONS
1. RESULTS FOR FULL‑YEAR
ENDING 31 DECEMBER 2012
The consolidated entity incurred a net loss during the
year of $10,179,823 (2011: $180,188 profit) on revenues
of $21,919,748 (2011: $32,775,391).
Net cash used by provided by operating activities
was $3,784,501 (2011 ‑ $3,778,311 used).
As at 31 December 2012, the consolidated entity
had cash of $6,686,194 (2011 ‑ $4,885,761) of which
$400,393 (2011 ‑ $496,296) is restricted as it secures
bank guarantees on existing contracts with local and
overseas customers. The cash will become unrestricted
when the contract is concluded or renegotiated.
2. BACKGROUND TO RESULT
Overview:
These stark and disappointing results arise from the
company executing a strategy from 2011 to achieve
sustainability in a new sustaining fiscal reality of reduced
defence expenditure globally. The company assumes
this new reality will extend with globally uneven intensity
until 2016 and have broad consequences such as reduced
sector revenue, rising protectionism, tighter competition,
and industry consolidation both locally and globally.
Notwithstanding the stresses there will also
be opportunities for companies with genuine
customer focus, advanced technology, lean processes,
strong management and secure market access.
EOS has addressed this situation by executing an
aggressive strategy aimed at positioning EOS for future
growth even as constrained circumstances apply.
The key objectives of this strategy were:
A. Production. Achieve significant product cost
reduction and quality improvement, at the same
time as achieving scalability of output to match
unstable demand, by out‑sourcing production to major
partners with existing plant capacity.
B. Costs. Reposition the company for higher profits
at any level of revenue by significantly and sustainably
reducing fixed operating costs.
sectors as they mature. This specialization will drive
further process improvement and cost reduction.
D. Diversification. Achieve diversification through
targeting new geographic markets with emphasis on Asia
and the Middle East where EOS networks are strong.
E. Technology. Accelerate product improvement
programs for space surveillance and remote weapon
systems, and bring the new turret product to production
after 5 years of development.
This agenda is essentially about focusing on long‑term
strengths of technology and market access while refining
business process and reducing costs. These strategic
goals are being achieved. These costs which formed part
of the loss for 2012 were allocated to meet the following
five items required for this strategic re‑positioning:
■ Production: $3.5 million for the relocation of most
EOS production to partners.
■ Impairment: $1.3 million for impairments of all
material for future contracts.
■ Depreciation: $2.6 million for accelerating
depreciation, including licenses.
■ Marketing: $0.8 million for marketing.
■ Development: $1.9 million for product
development costs.
Production $3.5 million:
EOS production capacity in Arizona was relocated
during 2012 to Northrop Grumman facilities in Alabama
and to Hyundai facilities in Korea. These new licensed
facilities are now in production. This transfer has involved
a reduction in staff in EOS USA from over 140 at the peak
of EOS production to only 10 staff now deployed to support
Northrop and Hyundai. The total cost of the relocation
in 2012 was $3.5 million and it is now complete.
Both Northrop Grumman and Hyundai have their
own existing, highly‑qualified production facilities
and resources, and can produce high quality products
at low cost, and for scalable demand. The company’s
production is now much more scalable at short
notice from low demand to high demand, and product
quality is improved.
C. Segregation. Complete the separation of the
company into two independent sectors, called
Defence Systems [for remote weapon systems] and
Space Systems [for space technology and surveillance],
to reflect the different customer bases, security
requirements, technology and skill sets required in these
The overall outsourcing level for EOS across all
programs and all Defence Systems products has
increased from below 15% to above 50% in one
calendar year, with no disruption to supply. The EOS
production facility in Queanbeyan Australia remains in
full production with current orders.
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Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 REVIEW OF OPERATIONS (CONT)
Impairment $1.3 million:
The transfer of production capacity to partners and the
inventory held by EOS without binding sales contracts
required the impairment of inventory held by EOS,
at a cost of $1.5 million. It cannot be assumed that these
parts will be used in the new production arrangements
and accordingly impairment was appropriate.
These impairment charges may be reversed in future if
sales contracts for the existing inventory are received.
Including this impairment, the total cost of relocating
production from Arizona to Alabama and Korea was
approximately $4.8 million. The annual saving in fixed costs
attributable to the relocation of production and closing of
the Tucson production facility is at least $5 million.
The company has thus met its objective of improving
remote weapon system production capacity, cost, quality,
delivery risk, responsiveness and global market access,
all through enhanced collaboration with strategic partners.
From 2013 the company will benefit from the reduction in
fixed cost of $5 million annually. This reduction in fixed costs
will reduce the break‑even revenue for EOS going forward.
Depreciation, amortisation and
impairment $2.6 million:
One impact of reduced revenue in 2012 with no early
rebound in 2013 is an acceleration of depreciation
and amortisation of company assets deployed to
produce revenue. In 2012 depreciation was $2.6 million
[2011 $0.4 million]. This included depreciation of
$1.8 million of tangible assets and $0.8 million of
amortisation and impairment of intangible assets.
There is now no value ascribed to intangible assets in the
financial statements.
Marketing $0.8 million:
EOS outlays towards special marketing projects were a
net $0.8 million in 2012.
Development $1.9 million:
In addition to ongoing development effort to maintain
leading‑edge military technology in EOS current weapon
system products, in recent years EOS has undertaken
development of a new product in the form of a remotely
operated turret for a 30‑40 mm canon.
EOS considers the market for this turret to be
extremely large, and customers have reinforced this
view by contributing over 70% of turret development
costs over the past 4 years. Notwithstanding these
contributions the cost to EOS in 2012 for turret
development effort was $1.9 million.
EOS expects to be in production with this new turret
product in 2015.
Summary
EOS has completed its strategic adjustments in time
to meet current circumstances and in advance of
sequestration in the US and further expected cuts to
government outlays both in Australia and internationally.
The company has achieved lower costs and leaner
operations while positioning new products in new
markets, and bringing new production capacity on line.
Beyond 2013 EOS still requires profitable new contract to
meet future working capital and funding requirements to
continue as a going concern as mentioned in Note 1(a).
3. EOS DEFENCE SYSTEMS
The EOS Defence Systems business is concentrated on
the development, marketing, production and support of
remote weapon systems [RWS] and related products.
Significant developments over 2012 included initial
steps into new markets, first product shipping from new
production facilities, successful testing of the new turret,
and the US Army CROWS program award to a competitor.
US Army CROWS
In May 2010 EOS and Northrop Grumman Corporation
[NGC] agreed to jointly develop, produce and support
RWS for the USA and certain export markets. Those
arrangements included EOS and NGC teaming to
compete for the US Army CROWS program requirement
for RWS. NGC and EOS jointly submitted tenders
[proposals] for the CROWS requirement in March 2012.
In August 2012 the US Army awarded this contract to
Kongsberg, the incumbent competitor. This award was a
major setback to EOS long term plans in the US.
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Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 REVIEW OF OPERATIONS (CONT)
RWS Orders
Product Development
EOS received orders in 2012 from international
customers, such that backlog of undelivered orders
at 31 December 2012 was at the historical average
of 16 months of production. This was a significant
achievement during a year when the budgets of every
customer were reduced. There were no Australian
Defence orders delivered in 2012 and no future
Australian orders in backlog which was disappointing.
All orders in 2012 came from existing customers,
with the exception of the Republic of Korea where
Hyundai continued its success.
Market Diversification
During 2012 the EOS teaming relationship with Hyundai
was formalised and the team achieved its first program
success with defensive weapon systems for the Korean
demilitarised zone [DMZ]. The scope of this program
will change in 2013 because the production phase
has been funded, and a separate competition for the
production contract will take place in early 2013.
In a separate development, in late 2012 Hyundai
was successful, after several years of intense competition,
in achieving an award as prime contractor for up to
2,000 armoured vehicles for the Korean armed forces.
These vehicles will require remote weapon systems and
EOS is supporting Hyundai’s efforts to offer an appropriate
system for this program in 2014.
EOS made significant efforts to expand its existing
business footholds in the Middle East in 2012.
Small quantity sales of weapon systems have established
EOS’s reputation for technology and quality in this market
over the past few years. This market is experiencing
significant growth, and EOS is well positioned to meet
customer requirements in specific programs.
Production Diversification
The transfer of US production of remote weapon systems
from Arizona to a Northrop Grumman Corporation
owned facility in Alabama was completed in Q3 2012 and
the first products were completed in Alabama before
31 December 2012. This facility is now configured to
meet demand from several EOS international customers.
The licensed facility established with Hyundai in Korea
was also completed during 2012.
EOS continues to improve and diversify its product range.
In 2012 incremental improvements were made to the
EOS range of remote weapon systems, but the major
effort was concentrated on the new remote turret for
30‑40 mm canon.
In 2006 EOS joined with a strategic partner to develop a
new unmanned turret for armoured vehicles. EOS and
its partner have developed an unmanned turret to meet
these requirements in consultation with and with funding
support from potential customers.
The ongoing impact of the global financial crisis has
reduced global demand for this turret over the next
5 years from 4,000 units to around 1,500 [US$3 billion].
This is still a significant market and EOS expects to
achieve strong market share notwithstanding rapidly
emerging competition.
The EOS turret underwent final operational testing to qualify
for production, and these tests were successful. The turret
is now expected to move to production from 2015.
4. SPACE BUSINESS
4.1 Commercial Space Operations
EOS space tracking technology is applied in two
commercial domains: precision tracking and space
debris tracking. These two domains use different
equipment and infrastructure. In each domain there
have been important developments during 2012.
Precision tracking delivers satellite orbit data which
is accurate to better than 1 mm, and is used for a
wide range of commercial and scientific applications,
including navigation, banking transaction security,
mapping, surveying, and climate change monitoring.
Only precision laser tracking, combined with precision
laser altimeters flown on special‑purpose satellites,
can accurately measure ice mass and sea levels globally.
Regardless of the cause of climate change, it is important
to all societies to accurately determine whether sea levels
are actually rising and how fast.
There are now several dedicated satellites in orbit
for this purpose, and seven more will launch in
the next 4 years. EOS does not manufacture the
satellite equipment, but the ground stations globally
must be upgraded to the accuracies now provided
by EOS from Australia. Despite funding pressures,
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Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 REVIEW OF OPERATIONS (CONT)
this program has priority among all participating
governments globally. An expansion of EOS activities in
this segment is expected from late in 2013; however this
is dependent on government funding being available.
This is a development with long‑term implications for EOS.
In addition, EOS space debris tracking capabilities
have been recognised by EOS being designated as
the coordinating agency for the first‑ever coordinated
multi‑lateral international effort to systematically track
space debris to avoid collisions in space.
The Western Pacific Laser Tracking Network [WPLTN]
is a multi‑national agency responsible for coordinating
laser tracking for the hemisphere including Australia.
It includes member states Russia, China, Japan, India,
Korea, Australia and Saudi Arabia. All of these countries
have substantial laser space tracking capabilities.
In late 2012 EOS was designated by WPLTN as the
planning and coordinating centre for WPLTN activities
in space debris tracking for collision avoidance. This
program will lead to multi‑site, multi‑country space
debris tracking operations later in 2013. This will
be the launch of laser tracking of space debris for
collision avoidance, since the WPLTN mandate will
create a commercial user portal for debris data.
This is a significant development in the deployment
and application of laser debris tracking technology and
EOS believes that this will lead to commercial contracts
in the future.
The financial constraints on western governments
have delayed all aspects of resolving the space debris
issue, notwithstanding its urgency. EOS’ space debris
de‑orbit effort remains unfunded, although background
research continues. In practice there will likely not be
demand for de‑orbit capability before the tracking of
space debris has been substantially improved globally.
4.2 Space Surveillance and Space
Situation Awareness [SSA]
EOS is committed to meeting the requirements of
Australia and its allies for SS and SSA optical data.
On 14 November 2012 the US and Australian governments
further publicly clarified their intention to deepen defence
space cooperation, including optical space data operations.
Those intentions are now moving towards funding
in both governments. The outcome of those funding
processes is uncertain due to circumstances such
as sequestration in the US, and the reduction of the
Australian defence budget in 2012 and 2013.
4.3 Partnerships
EOS has long‑term alliances with the Australian
National University and the Royal Melbourne
Institute of Technology. These collaborations are
allowing progress towards collective technical objectives
with reduced costs to each individual partner.
EOS will likely enter new strategic partnerships in space
in 2013 as a means to further extend limited funding.
EOS has agreements with European and US aerospace
agencies and entities continue, with the express purpose
of facilitating EOS market access for its data and
systems products.
5. SUMMARY AND OUTLOOK
Through 2012 the company implemented a radical
transformation to meet unprecedented business
conditions in its domestic and global markets.
This company transformation has positioned EOS to ride
out current market conditions which are already more
severe than expected in 2011 when the process was
planned and initiated.
Customer budgets will remain tightly constrained
through 2014 and possibly beyond. Although further
consolidation of EOS reforms is required through 2013,
the associated costs will be low compared to 2012
and are expected to fall within the company’s current
funding capability.
The key issues facing the company in 2012 were customer
budgets and the urgent execution of a reform agenda.
The key issues in 2013 will be:
Defence Sector Revenue
EOS has made significant cuts to its fixed costs, and
has orders which are deliverable over the next 2 years.
These backlogged orders form the bulk of EOS activity
in any year, and are usually supplemented by orders
which arise within each year. Cost reductions have
substantially reduced the volume of short term orders
required to achieve sector profitability in 2013, but EOS
expects that new orders will be more difficult to achieve
in 2013 than previously.
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Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 REVIEW OF OPERATIONS (CONT)
The role of Australia in Defence
Systems Business
The high Australian dollar and the deferral of key
Australian defence programs place the future of Australian
operations in this sector under some uncertainty.
Because the value of Australian defence orders in 2012
was zero and there are no Australian defence orders
for 2013 and beyond in hand, the sustainability of these
local operations will come under pressure without
new sales contracts.
Space Sector Revenue
Space sector commercialisation has been supported
by grants and co‑investment from customers towards
achieving operational configurations which could integrate
with existing customer infrastructure. However the
operational deployment phases due from 2014 will be
substantially more expensive than these upgrades and the
ability of key customers to timely fund those deployments
is presently in doubt. EOS is now working with those
customers to develop more affordable business models
for the customer needs to be achieved.
Growth Opportunities
The constrained fiscal reality in global defence and
aerospace markets will create opportunities for
companies like EOS which have taken early measures
to adapt. EOS must ensure that it leverages its
strengths through the industry consolidations expected
through 2013 and 2014.
Further marketing investments will be required as
EOS pushes forward in north Asia and the Middle East,
and moves forward with the product releases required to
capture new business. However these costs are expected
to be met from normal business operations going forward.
The Company has scheduled orders to deliver under
contract out to December 2014 utilising a leaner
production and process model than in previous years.
The Company is actively pursuing new orders in both
sectors for 2013 and beyond which are required to ensure
the ongoing financial viability of the Company and its
continuation as a going concern. However the nascent
global financial recovery is far from robust and although
EOS selects its customers from the strongest economies,
the company cannot be certain that future customer
procurements will continue as usual or that business
conditions will not further deteriorate.
The Directors continue to consider alliances and
arrangements with existing customers and development
partners to better the position the company for the
future in these difficult times.
Ben Greene
Chief Executive Officer
27 March 2013
5
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS' REPORT
The directors of Electro Optic Systems Holdings Limited submit herewith the annual financial report of the company
for the year ended 31 December 2012. In order to comply with the provisions of the Corporations Act 2001, the directors
report as follows:
Directors
The names and particulars of the directors of the company during or since the end of the financial year are:
Name
Particulars
Fred Bart
Dr Ben
Greene
Ian Dennis
Mark Ureda
Chairman (Age 58). A director since 8 May 2000. He has been Chairman and Director of numerous
private companies since 1980, specialising in manufacturing, property and technology. He is a
member of the Australian Institute of Company Directors and is a member of the Audit Committee
and Remuneration Committee.
BE (Hons), Phd in Applied Physics (Age 61) is the Chief Executive Officer of Electro Optic Systems.
Dr Greene was involved in the formation of Electro Optic Systems. He is widely published in the subject
areas of laser tracking, space geodesy, quantum physics, satellite design, laser remote sensing,
and the metrology of time, and is currently regarded as a world leader in these fields. Dr Greene is a
member of Australia’s Space Industry Innovation Council. Appointed to the Board on 11 April 2002.
BA, C.A. (Age 55) is a Chartered Accountant with experience as director and secretary in various public
listed companies and unlisted technology companies in Australia and overseas. He has been involved in
the investment banking industry and stockbroking industry for the past twenty five years. Prior to that,
he was with KPMG, Chartered Accountants in Sydney. Appointed to the Board on 8 May 2000. He is a
member of the Australian Institute of Company Directors and is a member of the Audit Committee and
Remuneration Committee. He is also company secretary of Electro Optic Systems Holdings Limited.
Non‑executive director (Age 58). Appointed to the Board on 28 April 2005. Mark was vice president,
Strategy and Technology for Northrop Grumman Corporation, a global defence company
until August 2010. Mark is now Vice President and General Manager of the Harman
Professional Loudspeaker Group. Mark received a bachelor’s degree in Engineering from the
University of California at Los Angeles, a master’s degree in Acoustics from the Pennsylvania State
University and a master’s degree in Finance from the UCLA Graduate School of Management.
Lt Gen Peter
Leahy AC
Non‑executive director (Age 60). Appointed to the Board on 4 May 2009. Peter Leahy AC retired
from the Australian Army in July 2008 as a Lieutenant General in the position of Chief of Army.
As well as being Chairman of the Army’s Advisory Committee he was also a Member of the
Defence Committee, the Chiefs of Service Committee, the Council of the Australian War Memorial
and the Board of Defence Housing Australia.
Kevin Scully
Among his qualification he holds a BA (Military Studies), a Master of Military Arts and Science and is
a member of the Australian Institute of Company Directors. In October 2008 he was appointed as a
Professor and the foundation Director of the National Security Institute at the University of Canberra.
He is a director of both Codan Limited and the Kokoda Foundation and a member of the Defence South
Australia Advisory Board.
Non‑executive director (Age 55). Appointed to the Board on 19 September 2011. Kevin Scully has more
than 26 years of experience in equities research and analysis, corporate advisory and related matters,
having worked for more than 12 years in various positions such as the head of research and director
of Schroders and the Netresearch group (which he founded). Kevin is an advisor to two regulatory
authorities of the Singaporean Government (Commercial Affairs Department and the Monetary Authority
of Singapore) since 1999.
The above named directors held office during and since the end of the financial year.
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Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS' REPORT (CONT)
Directorships of Other Listed Companies
Directorships of other listed companies held by directors in the three years immediately before the end of the
financial year were as follows:
Name
Fred Bart
Ian Dennis
Company
Period of directorship
Audio Pixels Holdings Limited
5 September 2000 to date
Audio Pixels Holdings Limited
5 September 2000 to date
Lt Gen Peter Leahy AC
Codan Limited
19 September 2008 to date
Kevin Scully
PNE Micron Holding Limited
11 April 2011 to date
Principal Activities
The principal activities of the consolidated entity are in the space systems, space surveillance and defence products business.
The company is listed on the Australian Securities Exchange.
Review of Operations
A detailed review of operations is included on pages 1 to 5 of this financial report.
Changes to the State of Affairs
There was no significant changes in the state of affairs of the consolidated entity that occurred during the financial period.
Subsequent Events
There has not been any matter or circumstance that has arisen since the end of the financial year, that has significantly
affected or may significantly affect the operations of the consolidated entity, the results of those operations or the state
of affairs of the consolidated entity in future financial years.
Future Developments
The company will continue to operate in the space systems, space surveillance and defence products business.
Please see the review of operations for further details.
Environmental Regulations
In the opinion of the directors the consolidated entity is in compliance with all applicable environmental legislation
and regulations.
7
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS' REPORT (CONT)
Dividends
The directors recommend that no dividend be paid and no amount has been paid or declared by way of dividend since
the end of the previous financial year and up to the date of this report.
Share Options
Share options granted to directors and executives
During and since the end of the financial year no share options were granted to any directors of the company and
consolidated entity as part of their remuneration. On 10 December 2009 the Company issued 1,800,000 options to staff
including the executives listed in the Remuneration Report under the terms of the Employee Share Option Plan. Since these
options were issued, 775,000 have been cancelled due to staff resignations leaving a balance currently outstanding
of 1,025,000 options. These options have an exercise price of $1.30 and are exercisable on or before 8 December 2013.
No options have been issued to executives since the end of the financial year.
Share options on issue at year end or exercised during the year
Details of unissued shares or interests under option are:
Issuing entity
Number of shares
under option
Class of
shares
Exercise price
of option
Expiry date of
options
Electro Optic Systems Holdings Limited
1,025,000
Ordinary
$1.30
8 December 2013
Options issued to executives and staff during 2009 were issued at an exercise price of $1.30 determined by the directors.
The holders of such options do not have the right, by virtue of the option, to participate in any share issue or interest
issue of any other body corporate or registered scheme.
1,564,800 Options issued to directors at an exercise price of $1.95 lapsed on 31 May 2011.
There were no shares or interests issued during the financial year as a result of exercise of an option.
Indemnification and Insurance of Officers and Auditors
During the financial year, the company paid a premium in respect of a contract insuring the Directors and Officers of the
Company and any related body corporate against a liability incurred as such a Director or Officer to the extent permitted
by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the coverage provided
and the amount of the premium. The Company has agreed to indemnify the current Directors, Company Secretary and
Executive Officers against all liabilities to other persons that may arise from their position as Directors or Officers of the
Company and its controlled entities, except where to do so would be prohibited by law. The agreement stipulates that
the Company will meet the full amount of any such liabilities, including costs and expenses.
The Company has not, during or since the financial year indemnified or agreed to indemnify an auditor of the company
or of any related body corporate against any liability incurred as such an auditor.
8
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS' REPORT (CONT)
Directors’ Meetings
The following table sets out the number of directors’ meetings (including meetings of committees of directors)
held during the financial year and the number of meetings attended by each director (while they were a director or
committee member). During the financial year, 12 Board meetings, 2 audit committee meetings and 2 Remuneration
committee meetings were held.
Directors
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Board of directors
Audit committee
Remuneration committee
Held
Attended
Held
Attended
Held
Attended
12
12
12
12
12
12
12
12
12
11
11
10
1
‑
2
‑
2
1
1
‑
2
‑
2
1
2
‑
2
‑
2
‑
2
‑
2
‑
2
‑
Directors’ Shareholdings
The following table sets out each Director’s relevant interest in shares and options of the company or a related body
corporate as at the date of this report.
Directors
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Fully paid ordinary shares
Options
5,309,075
3,954,185
170,050
‑
15,000
‑
‑
‑
‑
‑
‑
‑
Remuneration Report (Audited)
The key management personnel of Electro Optic Systems Holdings Limited during the year were:
Mr Fred Bart (Chairman, Non executive director)
Dr Ben Greene (Chief Executive Officer and director)
Mr Ian Dennis (Non‑executive director)*
Mr Mark Ureda (Non‑executive director)
Lt Gen Peter Leahy AC (Non‑executive director)
Mr Kevin Scully (Non‑executive director) ‑ Commenced 19 September 2011
Mr Mark Bornholt (Chief Executive Officer of Defence Systems) ‑ Commenced 21 March 2011
Dr Craig Smith (Chief Executive Officer of EOS Space Systems Pty Limited)
Mr John Palisi (Chief Financial Officer ‑ Electro Optic Systems Pty Limited) ‑ resigned 3 February 2012
Mr Scott Lamond (Chief Financial Officer ‑ Electro Optic Systems Pty Limited) ‑ appointed 10 August 2012 ‑ Mr Scott Lamond
was Acting Chief Financial Officer from 3 February 2012 to 10 August 2012
Mr Hugo Keyner (Chief Executive Officer EOS Technologies Inc) ‑ Retired on 31 October 2012
*During the period from 3 February 2012 to 10 August 2012 whilst Mr Scott Lamond was Acting Chief Financial Officer, Mr Ian Dennis
assumed an executive role to assist in the finance function.
9
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS' REPORT (CONT)
Remuneration Report (cont)
Executive Director and Senior
Management Remuneration
This report outlines the remuneration arrangements in
place for Directors and Executives of the Company.
Objective
The Directors are responsible for remuneration policies
and packages applicable to the Board members and
executives of the company. The Company has a separate
Remuneration Committee. The broad remuneration
policy is to ensure the remuneration package properly
reflects the persons duties and responsibilities.
Remuneration Structure
In accordance with best practice corporate governance,
the structure of Non‑Executive Director and senior
manager remuneration is separate and distinct.
The Company aims to award Executives with a level and
mix of remuneration commensurate with their position
and responsibilities within the Company and so as to:
■ reward Executives for Company and individual
performance against targets set by reference to
suitable benchmarks;
■ align the interests of Executives with those
of shareholders; and
■ ensure that the total remuneration paid is
competitive by market standards.
Non‑Executive Director Remuneration
Structure
The remuneration paid to Executives is set with
reference to prevailing market levels and typically
comprises a fixed salary and option component.
Options are granted to Executives in line with their
respective levels of experience and responsibility.
Details of the amounts paid and the number of
options granted to Executives are disclosed elsewhere
in the Directors’ Report.
Employment contracts
There are no employment contracts in place with any
Non‑Executive Director of the Company. There are
standard Contracts of Employment with Executive
Directors and Senior Management which contain no
unusual terms. The contracts provide for a termination
period in respect of Ben Greene of 180 days and 90
days in respect of other senior executives. The current
employment contract with Ben Greene expires
on 30 June 2013. There are no other termination
payments or golden parachutes for any directors or
senior executives.
Objective
The Board seeks to set aggregate remuneration at a
level which provides the Company with the ability to
attract and retain directors of the highest calibre, whilst
incurring a cost which is acceptable to shareholders.
Structure
The Company’s Constitution and the Australian
Securities Exchange Listing Rules specify the
aggregate remuneration of Non‑Executive Directors
shall be determined from time to time by a General
Meeting of shareholders. An amount not exceeding
the amount determined is then divided between the
Directors as agreed. The latest determination was at
the Annual General Meeting held on 11 April 2002,
when shareholders approved a maximum aggregate
remuneration of $230,000 per year excluding options.
The amount of aggregate remuneration sought to be
approved by shareholders, the manner in which it
is apportioned amongst Directors, and the policy of
granting options to Directors, are reviewed annually.
Each Non‑Executive Director receives a fee for serving
as a Director of the Company. No additional fees are paid
to any Director for serving on a committee of the Board.
A company associated with Mr Ian Dennis receives a
fee in recognition of additional services provided to
the Group.
10
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS' REPORT (CONT)
Remuneration Report (cont)
Director Remuneration
The following tables disclose the remuneration of the directors of the Company:
Short term
Post Employment
Equity
Non‑monetary
$
Superannuation
$
Options
$
2012
Mr Fred Bart
Dr Ben Greene*
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Salary
& Fees
$
61,000
439,994
197,500
40,875
37,500
40,875
817,744
28,726
* Executive Director during the financial year
2011
Mr Fred Bart
Dr Ben Greene*
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Salary
& Fees
$
61,000
300,000
157,500
40,875
37,500
11,535
608,410
39,182
* Executive Director during the financial year
‑
28,726
‑
‑
‑
‑
‑
39,182
‑
‑
‑
‑
Short term
Post Employment
Equity
Non‑monetary
$
Superannuation
$
Options
$
5,490
37,177
3,375
‑
3,375
‑
49,417
‑
‑
‑
‑
‑
‑
‑
5,490
27,000
3,375
‑
3,375
‑
39,240
‑
‑
‑
‑
‑
‑
‑
Other
Long
Term
Benefits
$
‑
‑
‑
‑
‑
‑
‑
Other
Long
Term
Benefits
$
‑
‑
‑
‑
‑
‑
‑
Total
$
66,490
505,897
200,875
40,875
40,875
40,875
895,887
Total
$
66,490
366,182
160,875
40,875
40,875
11,535
686,832
11
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS' REPORT (CONT)
Remuneration Report (cont)
Executive Remuneration
No executives are employed by the holding company. The following table discloses the remuneration of the executives of
the consolidated entity:
2012
Dr Craig Smith
Mr Mark Bornholt
Mr John Palisi **
Mr Scott Lamond **
Mr Hugo Keyner **
Short term
Post Employment
Equity
Salary
& Fees
$
210,000
210,000
80,324
167,556
85,976
753,856
Non‑monetary
$
Superannuation
$
Options
$
‑
‑
‑
‑
749
749
18,900
18,152
18,900
2,326
‑
‑
15,080
3,630
‑
18,152
55,206
39,934
** John Palisi, Scott Lamond and Hugo Keyner were executives for part of the financial year (See Note 21)
Short term
Post Employment
Equity
Other
Long
Term
Benefits
$
‑
‑
‑
‑
‑
‑
Total
$
247,052
228,900
82,650
186,266
104,877
849,745
Other
Long
Term
Benefits
$
Total
$
2011
Mr Ron Thompson
Dr Craig Smith
Mr Mark Bornholt
Mr John Palisi
Mr Hugo Keyner
Salary
& Fees
$
172,083
197,532
128,423
196,946
154,889
849,873
Non‑monetary
$
Superannuation
$
Options
$
‑
‑
‑
‑
854
854
13,288
35,597
42,760
263,728
17,750
35,597
11,340
‑
17,724
35,597
‑
35,597
‑
‑
‑
‑
250,879
139,763
250,267
191,340
60,102
142,388
42,760
1,095,977
Non‑monetary includes the provision for motor vehicles and health benefits.
12
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS' REPORT (CONT)
Remuneration Report (cont)
Value of Options Issued to Directors and Executives
The following table discloses the value of options granted and exercised during the 2012 year:
Options
Granted
Value at
grant date (i)
$
Options
Exercised
Value at
exercise date
$
Total value
of options
granted and
exercised
$
Value of options
included in
remuneration for
the year (i)
$
Percentage of total
remuneration for the
year that consists of
options
%
Dr Craig Smith
Mr Hugo Keyner
Mr Scott Lamond
‑
‑
‑
‑
‑
‑
‑
‑
‑
18,152
18,152
3,630
7.35
17.31
1.95
(i) The value of options granted during the period is recognised in compensation over the vesting period of the grant.
Value of Options ‑ Basis of Calculation
The total value of options included in remuneration for the year is calculated as follows:
■ The value of the options is determined at grant date, and are included in remuneration on a proportionate basis
from grant date to vesting date. Where the options immediately vest the full value of the option is recognised in
remuneration in the current year.
Elements of Remuneration Related to Performance
There are no performance conditions other than service attached to the above remuneration to directors and executives.
Directors and senior executives receive options as disclosed in the above tables which are not subject to specific
performance conditions other than service. The overall performance of the company as measured by the share price
will determine whether the options are exercised and whether the director or executive receives any benefit from
these options. The time service condition has been chosen by the Board as an appropriate condition as it helps in the
retention and motivation of staff. Options issued to certain directors and executives are also subject to vesting provisions
as disclosed below.
13
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS' REPORT (CONT)
Remuneration Report (cont)
Key Management Personnel Option Holdings
Balance at
1/1/12
No.
Granted as
remuneration
No
(Lapsed)
No.
Balance at
31/12/12
No.
Balance
vested at
31/12/12
No
Options
vested during
year
‑
‑
‑
‑
‑
‑
‑
160,000
160,000
32,000
160,000
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
160,000
160,000
80,000
(160,000)
‑
‑
‑
‑
32,000
32,000
160,000
160,000
‑
16,000
80,000
2012
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Mr Mark Bornholt
Dr Craig Smith
Mr John Palisi
Mr Scott Lamond
Mr Hugo Keyner
On 10 December 2009, The Directors’ issued 1,800,000 unlisted options to executives and staff. The options issued to
executives and staff have an exercise price of $1.30 and expire on 8 December 2013. These options vested 20% after
12 months, 30% after 2 years and the balance after 3 years.
Balance at
1/1/11
No
Granted as
remuneration
No
2011
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
200,000
964,800
200,000
200,000
‑
‑
Mr Ron Thompson
160,000
Mr Mark Bornholt
Dr Craig Smith
Mr John Palisi
Mr Hugo Keyner
‑
280,000
160,000
160,000
14
Balance at
31/12/11
No.
Balance
vested at
31/12/11
No.
Options
vested during
year
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
100,000
482,400
100,000
100,000
‑
‑
160,000
80,000
48,000
‑
160,000
160,000
160,000
‑
80,000
80,000
80,000
‑
108,000
48,000
48,000
(Lapsed)
No.
(200,000)
(964,800)
(200,000)
(200,000)
‑
‑
‑
‑
(120,000)
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS' REPORT (CONT)
Remuneration Report (cont)
All options issued during the year ended 31 December 2007 were issued on 31 May 2007. The options issued to
directors have an exercise price of $1.95 and expired on 31 May 2011. These options vested 20% after 12 months,
30% after 2 years and the balance after 3 years.
The 120,000 options issued to Dr Craig Smith during the year ended 31 December 2007 at an exercise price of $1.95
vested 20% after 12 months, 30% after 2 years and the balance after 3 years. These options lapsed during the year.
Other Key Management Personnel options vest 20% after 12 months, 30% after 2 years and the balance after 3 years.
The percentage of the options granted on 10 December 2009 which vested in the current year to Mr Hugo Keyner and
Dr Craig Smith was 50%.
All options outstanding were fully vested at 31 December 2012 and there are no further options to vest in the year
ended 31 December 2013.
The Board policy is not to allow any person to hedge their exposure to risk in relation to the options granted. This policy
may be reviewed should the options become in the money.
The table below sets out summary information about the company’s earnings and movements in shareholder wealth for
the last 5 financial years.
31 December
2012
$
31 December
2011
$
31 December
2010
$
31 December
2009
$
31 December
2008
$
Revenue
21,919,748
32,775,391
33,828,658
37,005,723
38,958,206
Net profit/(loss) before tax
(10,179,823)
Net profit/(loss) after tax
(10,179,823)
180,188
180,188
3,175,142
2,436,249
2,213,006
3,175,142
2,436,249
2,213,006
31 December
2012
$
31 December
2011
$
31 December
2010
$
31 December
2009
$
31 December
2008
$
Share price at start of year
Share price at end of year
Dividends paid
0.55
0.30
‑
1.35
0.55
‑
1.05
1.35
‑
0.41
1.05
‑
0.50
0.41
‑
Audit Committee
The Board appointed three non‑executive directors to form the committee, with a majority of independent directors and the
Chairman being an independent person. The current members of the committee are Lt Gen Peter Leahy AC (Chairman),
Mr Ian Dennis and Mr Kevin Scully. Mr Fred Bart retired from the Audit Committee on 6 June 2012 and was replaced by
Mr Kevin Scully.
15
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS' REPORT (CONT)
Non‑audit services
The Directors are satisfied that the provision of non‑audit services, during the year, by the auditor (or by another
person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed
by the Corporations Act 2001. The Directors have formed this view based on the fact that the nature and scope of each
type of non‑audit service provided means that the audit independence was not compromised.
Details of amounts paid or payable to the auditor for non‑audit services provided during the year by the auditor are
contained in Note 10 to the financial statements.
Auditor’s Independence Declaration
The auditor’s independence declaration is included on page 17 of the annual report.
Signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the Directors
I A Dennis
Director
Dated at Sydney this 27 day of March 2013
16
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 17
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 21 to 78.
18
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 9 to 15
19
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 DIRECTORS’ DECLARATION
The directors declare that:
(a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable;
(b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with
the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view
of the financial position and performance of the company and the consolidated entity;
(c) the directors have been given the declarations required by s.295A of the Corporations Act 2001; and
(d) the attached financial statements are in compliance with International Financial Reporting Standards,
as stated in Note 1 to the financial statements.
Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
I A Dennis
Director
Dated at Sydney this 27 day of March 2013
20
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Note
Revenue
2
21,919,748
32,775,391
166,211
333,807
Changes in inventories of finished goods and
work in progress
Raw materials and consumables used
4,744,819
(164,152)
(17,883,251)
(14,214,487)
‑
‑
‑
‑
Employee benefits expense
Administration expenses
Amortisation of intangibles
Finance costs
Depreciation and amortisation of property, plant
and equipment
Impairment
Impairment of intangibles
Gain on disposal of fixed assets
Foreign exchange (losses)/gains
Occupancy costs
Reversal of/(provision for) non‑recovery of loan
Provision for non‑recovery of investment
Other expenses
(Loss)/Profit before income tax benefit
Income tax benefit
2(b)
2(b)
2(b)
2(b)
2(b)
2(b)
2(b)
2(b)
2(b)
2
4
2(b)
(11,996,783)
(13,338,261)
(2,723,142)
(3,210,571)
(131,519)
(112,741)
(131,533)
(302,881)
(389,990)
(394,804)
(320,650)
(436,729)
‑
‑
‑
‑
(1,886,926)
(426,512)
(657)
(1,095)
‑
333,561
(565,119)
4,603
(196,299)
‑
2,287
573,317
(1,136,400)
(1,356,956)
‑
‑
‑
772
‑
‑
‑
‑
669
‑
‑
‑
‑
‑
2,824,983
(3,573,685)
(204,209)
(400,464)
(216,814)
(359,015)
‑
‑
(10,179,823)
180,188
2,002,306
(4,398,147)
‑
‑
‑
‑
(Loss)/Profit for the period
20
(10,179,823)
180,188
2,002,306
(4,398,147)
Other comprehensive income
Exchange differences arising on translation of
foreign operations
Income tax relating to components of other
comprehensive income
4,173
(527,622)
‑
‑
4,173
(527,622)
‑
‑
‑
‑
‑
‑
Total comprehensive (Loss)/income for the period
(10,175,650)
(347,434)
2,002,306
(4,398,147)
(Loss)/Earnings per share
Basic (cents per share)
Diluted (cents per share)
3
3
(17.9)
(17.9)
0.3
0.3
Notes to the financial statements are included on pages 25 to 78.
21
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2012
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other
TOTAL CURRENT ASSETS
NON‑CURRENT ASSETS
Property, plant and equipment
Intangibles
Other financial assets
Other
TOTAL NON‑CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Borrowings
Provisions
TOTAL CURRENT LIABILITIES
NON‑CURRENT LIABILITIES
Borrowings
Provisions
TOTAL NON‑CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Consolidated
Company
December
2012
$
December
2011
$
December
2012
$
December
2011
$
Note
22
6
7
8
11
9
5
8
12
13
14
13
14
17
19
20
6,686,194
4,885,761
3,502,600
1,324,726
1,874,896
9,835,027
26,983
21,156
3,855,850
10,704,724
588,939
101,316
‑
‑
‑
‑
13,005,879
25,526,828
3,529,583
1,345,882
538,106
2,431,083
985
1,642
‑
‑
‑
714,830
‑
‑
‑
‑
‑
‑
‑
‑
538,106
3,145,913
985
1,642
13,543,985
28,672,741
3,530,568
1,347,524
5,774,085
8,890,029
97,490
120,961
102,191
1,991 867
4,670,600
4,763,852
‑
‑
‑
‑
10,546,876
15,645,748
97,490
120,961
15,032
293,271
308,303
117,223
249,523
366,746
‑
‑
‑
‑
‑
‑
10,855,179
16,012,494
97,490
120,961
2,688,806
12,660,247
3,433,078
1,226,563
75,383,567
75,383,567
75,383,567
75,383,567
7,777,756
7,569,374
7,727,803
7,523,594
(80,472,517)
(70,292,694)
(79,678,292)
(81,680,598)
2,688,806
12,660,247
3,433,078
1,226,563
Notes to the financial statements are included on pages 25 to 78.
22
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
Accumulated
losses
$
Total
$
Issued
capital
$
Foreign
currency
translation
reserve
$
Employee
equity
settled
benefits
reserve
$
Consolidated
2012
Balance at 1 January 2012
12,660,247
(70,292,694)
75,383,567
45,780
7,523,594
Loss for the year
(10,179,823)
(10,179,823)
Exchange differences arising on translation
of foreign operations
4,173
‑
Total comprehensive (loss)/income for the year
(10,175,650)
(10,179,823)
Recognition of share based payments
204,209
‑
‑
‑
‑
‑
‑
4,173
4,173
‑
‑
‑
‑
204,209
Balance at 31 December 2012
2,688,806
(80,472,517)
75,383,567
49,953
7,727,803
2011
Balance at 1 January 2011
12,607,217
(70,472,882)
75,383,567
573,402
7,123,130
Profit for the year
180,188
180,188
Exchange differences arising on translation
of foreign operations
(527,622)
‑
Total comprehensive (loss)/income for the year
(347,434)
180,188
Recognition of share based payments
400,464
‑
‑
‑
‑
‑
‑
(527,622)
(527,622)
‑
‑
‑
‑
400,464
Balance at 31 December 2011
12,660,247
(70,292,694)
75,383,567
45,780
7,523,594
Company
2012
Balance at 1 January 2012
1,226,563
(81,680,598)
75,383,567
Profit for the year
2,002,306
2,002,306
Total comprehensive income for the year
2,002,306
2,002,306
Recognition of share based payments
204,209
‑
‑
‑
‑
Balance at 31 December 2012
3,433,078
(79,678,292)
75,383,567
2011
Balance at 1 January 2011
5,224,246
(77,282,451)
75,383,567
Loss for the year
(4,398,147)
(4,398,147)
Total comprehensive income for the year
(4,398,147)
(4,398,147)
Recognition of share based payments
400,464
‑
‑
‑
‑
Balance at 31 December 2011
1,226,563
(81,680,598)
75,383,567
Notes to the financial statements are included on pages 25 to 78.
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
7,523,594
‑
‑
204,209
7,727,803
7,123,130
‑
‑
400,464
7,523,594
23
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2012
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Note
Cash flows from operating activities
Receipts from customers
28,382,072
36,594,370
13,868
4,361
Payments to suppliers and employees
(24,656,527)
(40,418,655)
(813,318)
(792,057)
Interest received
171,697
348,855
152,342
329,446
Interest and other costs of finance paid
(112,741)
(302,881)
‑
‑
Net cash inflows/(outflows) from
operating activities
Cash flows from investing activities
Advances (to) from wholly‑owned
controlled entities
Proceeds from sale of property,
plant and equipment
22(b)
3,784,501
(3,778,311)
(647,108)
(458,250)
‑
‑
2,824,982
(3,573,685)
Payment for property, plant and equipment
(45,234)
(175,690)
59,543
14,418
‑
‑
‑
‑
Net cash inflows/(outflows) from
investing activities
Cash flows from financing activities
Proceeds of borrowings
Repayment of borrowings
Net cash (outflows)/inflows from
financing activities
Net increase/(decrease) in cash and
cash equivalents
14,309
(161,272)
2,824,982
(3,573,685)
‑
739,020
(1,991,867)
‑
(1,991,867)
739,020
‑
‑
‑
‑
‑
‑
1,806,943
(3,200,563)
2,177,874
(4,031,935)
Cash and cash equivalents at the beginning of
the financial year
4,885,761
8,088,355
1,324,726
5,356,661
Effects of exchange rate fluctuations on the
balances of cash held in foreign currencies
(6,510)
(2,031)
‑
‑
Cash and cash equivalents at the end of the
financial year
22(a)
6,686,194
4,885,761
3,502,600
1,324,726
Notes to the financial statements are included on pages 25 to 78.
24
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
1. Summary of Accounting Policies
Statement of compliance
The financial report is a general purpose financial
report which has been prepared in accordance with
the Corporations Act 2001 and Accounting Standards
and complies with other requirements of the law:
The financial statements comprise the consolidated
financial statements of the Group. For the purposes of
preparing the consolidated financial statements, the
Company is a for‑profit entity. Accounting Standards
include Australian equivalents to International
Financial Reporting Standards (“A‑IFRS”).
The financial report includes the separate financial
statements of the company and the consolidated
financial statements of the group. Compliance with
A‑IFRS ensures that the financial statements and
notes of the company and the consolidated entity
comply with International Financial Reporting
Standards (“IFRS”).
The financial statements were authorised for issue
by the Directors on 27 March 2013.
Basis of preparation
The financial report has been prepared on the basis
of historical cost. Cost is based on the fair values
of the consideration given in exchange for assets.
All amounts are presented in Australian dollars,
unless otherwise stated.
In the application of A‑IFRS management is required
to make judgments, estimates and assumptions
about carrying values of assets and liabilities
that are not readily apparent from other sources.
The estimates and associated assumptions are
based on historical experience and various other
factors that are believed to be reasonable under
the circumstance, the results of which form the
basis of making the judgments. Actual results may
differ from these estimates.
The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in
which the estimate is revised if the revision affects
only that period, or in the period of the revision and
future periods if the revision affects both current and
future periods.
Judgments made by management in the application
of A‑IFRS that have significant effects on the
financial statements and estimates with a significant
risk of material adjustments in the next year
are disclosed, where applicable, in the relevant
notes to the financial statements. The areas of
judgement made by management are in the areas of
asset impairment of property, plant and equipment,
inventory obsolescence and percentage completion
of construction contracts.
Accounting policies are selected and applied in a
manner which ensures that the resulting financial
information satisfies the concepts of relevance
and reliability, thereby ensuring that the substance of
the underlying transactions or other events is reported.
The following significant accounting policies have
been adopted in the preparation and presentation of
the financial report:
(a) Going Concern
The financial report has been prepared on the basis
that the company and the consolidated entity are
going concerns, which assumes continuity of normal
business activities and the realisation of assets
and the settlement of liabilities in the ordinary
course of business.
The consolidated entity incurred a net loss during the
year of $10,179,823 (2011: $180,188 profit). Net cash
provided by operating activities was $3,784,501
(2011 ‑ $3,778,311 used). As at 31 December 2012,
the consolidated entity had cash of $6,686,194
(2011 ‑ $4,885,761) of which $400,393 (2011 ‑ $496,692)
is restricted as it secures bank guarantees on
existing contracts with local and overseas customers.
The cash will become unrestricted if the contracts are
concluded or renegotiated.
In the opinion of the directors, the ability of the
company and the consolidated entity to continue as
going concerns and pay their debts as and when they
fall due is dependent upon:
■ The ability to achieve target production levels
and the required technical/quality levels for the
military business. The directors believe that this
is achievable based on current production plans.
■ The ability to obtain further new profitable contracts.
The directors are in the process of bidding for
new military and space contracts. The results of
these bids are not known as at the date of this
financial report. The Directors are confident that
new contracts will be received during the next
12 months from the current bids outstanding and
from new contracts which have not been bid at
the date of the directors’ report.
25
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
1. Summary of Accounting Policies (cont)
(a) Going Concern (cont)
■ The successful completion of the telescope and
enclosure contracts on hand.
The space systems division has progressed
the completion of the contracts on hand and
the consolidated entity has already provided
for expected losses on contracts in accordance
with Australian Accounting Standard AASB111
“Construction Contracts”.
■ The willingness and ability of key military
customers to make timely payments for goods
supplied in accordance with agreed terms.
(b) Borrowings
Borrowings are recorded initially at fair value, net of
transaction costs. Subsequent to initial recognition,
borrowings are measured at amortised cost with any
difference between the initial recognised amount
and the redemption value being recognised in profit
and loss over the period of the borrowing using the
effective interest rate method.
(c) Cash and cash equivalents
Cash and cash equivalents comprise cash
on hand, cash in banks and investments in
money market instruments, net of outstanding
bank overdrafts. Cash and cash equivalents
includes restricted cash to the extent it relates to
operating activities.
(d) Construction contracts and
work in progress
Where the outcome of a construction contract can be
estimated reliably, revenue and costs are recognised
by reference to the stage of completion of the
contract activity at the reporting date, as measured
by the proportion that contract costs incurred for
work performed to date bear to the estimated
total contract costs, except where this would not
be representative of the stage of completion.
Variations in contract work, claims and incentive
payments are included to the extent that they have
been agreed with the customer.
Where the outcome of a construction contract cannot
be estimated reliably, contract revenue is recognised
to the extent of contract costs incurred that it is
probable will be recoverable. Contract costs are
recognised as expenses in the period in which they
are incurred. When it is probable that total contract
costs will exceed total contract revenue, the expected
loss is recognised as an expense immediately.
Deferred revenue is represented by advance billings
on contracts and the basis of recognition is the
percentage of completion basis.
(e) Embedded derivatives
Derivatives embedded in other financial instruments
or other host contracts are treated as separate
derivatives when their risks and characteristics are
not closely related to those of host contracts and the
host contracts are not measured at fair value with
changes in fair value recognised in profit and loss.
(f) Employee benefits
Provision is made for benefits accruing to employees
in respect of wages and salaries, annual leave,
and long service leave when it is probable that
settlement will be required and they are capable of
being measured reliably.
Provisions made in respect of short term employee
benefits are measured at their nominal values using
the remuneration rate expected to apply at the time
of settlement.
Provisions made in respect of long term employee
benefits are measured as the present value of the
estimated future cash outflows to be made by the
consolidated entity in respect of services provided by
employees up to the reporting date.
Defined contribution plans ‑ Contributions to defined
benefit contribution superannuation plans are
expensed when incurred.
(g) Financial assets
Subsequent to initial recognition, investments
in subsidiaries are measured at cost less
any impairment.
Other financial assets are classified into the following
specified categories: held to maturity investments and
loans and receivables. The classification depends on
the nature and purpose of the financial assets and is
determined at the time of the initial recognition.
26
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
1. Summary of Accounting Policies (cont)
(i) Foreign currency
(g) Financial assets (cont)
Held to maturity investments
Bills of exchange are recorded at amortised cost
using the effective interest method less impairment,
with revenue recognised on an effective yield basis.
The effective interest method is a method of
calculating the amortised cost of a financial
asset and of allocating interest income over the
relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash receipts
through the expected life of the financial asset, or,
where appropriate, a shorter period.
Loans and receivables
Trade receivables, loans and other receivables are
recorded at amortised cost less impairment.
(h) Financial instruments issued
by the company
Debt and equity instruments
Debt and equity instruments are classified as
either liabilities or as equity in accordance with the
substance of the contractual arrangement.
Foreign currency transactions
All foreign currency transactions during the
financial year are bought to account using the
exchange rate in effect at the date of the transaction.
Foreign currency monetary items at reporting date
are translated at the exchange rate existing at
reporting date. Non‑monetary assets and liabilities
carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at
the date when the fair value was determined.
Exchange differences are recognised in profit and
loss in the period they arise.
Foreign operations
On consolidation, the assets and liabilities of the
consolidated entity’s overseas operations are
translated at exchange rates prevailing at the
reporting date. Income and expense items are
translated at the average exchange rates for the
period unless exchange rates fluctuate significantly.
Exchange differences arising, if any, are recognised
in the foreign currency translation reserve, and
recognised in profit and loss on disposal of the
foreign operation.
(j) Goods and services tax
Transaction costs on the issue of
equity instruments
Revenues, expenses and assets are recognised net of
the amount of goods and services tax (GST), except:
Transaction costs arising on the issue of equity
instruments are recognised directly in equity as a
reduction of the proceeds of the equity instruments
to which the costs relate. Transaction costs are the
costs that are incurred directly in connection with
the issue of those equity instruments and which
would not have been incurred had those instruments
not been issued.
Interest
Interest is classified as an expense consistent with
the statement of financial position classification of
the related debt.
i. where the amount of GST incurred is not
recoverable from the taxation authority, it is
recognised as part of the cost of acquisition of
an asset or as part of an item of expense; or
ii.
for receivables and payables which are
recognised inclusive of GST.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables
or payables.
Cash flows are included in the statement of cash
flows on a gross basis. The GST component of cash
flows arising from investing and financing activities
which is recoverable from, or payable to, the taxation
authority is classified as operating cash flows.
27
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
1. Summary of Accounting Policies (cont)
(k) Government grants
Government grants are assistance by the government
in the form of transfers of resources to the consolidated
entity in return for past or future compliance with
certain conditions relating to the operating activities
of the entity. Government grants include government
assistance where there are no conditions specifically
relating to the operating activities of the consolidated
entity other than the requirement to operate in certain
regions or industry sectors.
Government grants relating to income are recognised
as income over the periods necessary to match
them with the related costs. Government grants
that are receivable as compensation for expenses or
losses already incurred or for the purpose of giving
immediate financial support to the consolidated entity
with no future related costs are recognised as income
in the period in which it becomes receivable.
(l) Impairment of assets
At each reporting date, the consolidated entity
reviews the carrying amounts of its tangible and
intangible assets to determine whether there is
any indication that those assets have suffered
an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated
in order to determine the extent of the impairment
loss (if any). Where the asset does not generate
cash flows that are independent from other assets,
the consolidated entity estimates the recoverable
amount of the cash‑generating unit to which the
asset belongs.
Goodwill, intangible assets with indefinite useful
lives and intangible assets not yet available for
use are tested for impairment annually and
whenever there is an indication that the asset may
be impaired. An impairment of goodwill is not
subsequently reversed. Recoverable amount is the
higher of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash
flows are discounted to their present value using a
pre‑tax discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset
(or cash‑generating unit) is estimated to be less
than its carrying amount, the carrying amount
of the asset (cash‑generating unit) is reduced to
its recoverable amount. An impairment loss is
recognised in profit or loss immediately.
Where an impairment loss subsequently reverses,
the carrying amount of the asset (cash‑generating unit)
is increased to the revised estimate of its
recoverable amount, but only to the extent that the
increased carrying amount does not exceed the
carrying amount that would have been determined
had no impairment loss been recognised for
the asset (cash‑generating unit) in prior years.
A reversal of an impairment loss is recognised in
profit and loss immediately.
(m) Income tax
Current tax
Current tax is calculated by reference to the amount
of income taxes payable or recoverable in respect
of the taxable profit or tax loss for the period.
It is calculated using tax rates and tax laws that
have been enacted or substantively enacted by
reporting date. Current tax for current and prior
periods is recognised as a liability (or asset) to the
extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the
comprehensive balance sheet liability method
in respect of temporary differences arising from
differences between the carrying amount of assets
and liabilities in the financial statements and the
corresponding tax base of those items.
In principle, deferred tax liabilities are recognised
for all taxable temporary differences. Deferred tax
assets are recognised to the extent that it is probable
that sufficient taxable amounts will be available
against which deductible temporary differences or
unused tax losses and tax offsets can be utilised.
However, deferred tax assets and liabilities are not
recognised if the temporary differences giving rise
to them arise from the initial recognition of assets
and liabilities (other than as a result of business
combination) which affects neither taxable income
nor accounting profit. Furthermore, a deferred
tax liability is not recognised in relation to taxable
temporary differences arising from goodwill.
28
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
1. Summary of Accounting Policies (cont)
(m) Income tax (cont)
Deferred tax liabilities are recognised for taxable
temporary differences arising on investments in
subsidiaries except where the consolidated entity
is able to control the reversal of the temporary
differences and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets arising from deductible
temporary differences associated with these
investments and interests are only recognised to the
extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of
the temporary differences and they are expected to
reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply to the period(s)
when the assets and liabilities giving rise to them are
realised or settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted by
reporting date. The measurement of deferred tax
liabilities and assets reflects the tax consequences
that would follow from the manner in which the
consolidated entity expects, at the reporting date,
to recover or settle the carrying amount of its assets
and liabilities.
Deferred tax assets and liabilities are offset when
they relate to income taxes levied by the same
taxation authority and the company/consolidated
entity intends to settles its current tax assets and
liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense
or income in the statement of comprehensive income,
except when it relates to items credited or debited
directly to equity, in which case the deferred tax is
also recognised directly in equity, or where it arises
from the initial accounting for a business combination,
in which case it is taken into account in the
determination of goodwill or excess.
Tax consolidation
The company and all its wholly‑owned Australian
resident entities are part of a tax consolidated group
under Australian taxation law. Electro Optic Systems
Holdings Limited is the head entity in the
tax‑consolidated group. Tax expense/income,
deferred tax liabilities and deferred tax assets
arising from temporary differences of the members
of the tax‑consolidated group are recognised in the
separate financial statements of the members of the
tax‑consolidated group using the ‘separate taxpayer
within the group’ approach.
Current tax liabilities and assets and deferred
tax assets arising from unused tax losses and tax
credits of the members of the tax‑consolidated
group are recognised by the company (as head entity
in the tax‑consolidated group).
There are no formal tax funding arrangements
within companies within the tax‑consolidated entity.
(n) Intangible assets
Research and development costs
Expenditure on research activities is recognised
as an expense in the period in which it is incurred.
Where no internally‑generated intangible assets
can be recognised, development expenditure is
recognised as an expense in the period as incurred.
Intangible assets acquired in a
business combination
Intangible assets acquired in a business combination
are identified and recognised separately from
goodwill where they satisfy the definition of
an intangible asset and their fair value can be
measured reliably.
Subsequent to initial recognition, intangible
assets acquired in a business combination are
reported at cost less accumulated amortisation and
accumulated impairment losses, on the same basis
as intangible assets acquired separately.
(o) Inventories
Inventories are measured at the lower of cost and
net realisable value. Costs are assigned on a first‑in
first‑out basis. Net realisable value represents the
estimated selling price less all estimated costs of
completion and costs to be incurred in marketing,
selling and distribution.
29
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
1. Summary of Accounting Policies (cont)
(r) Principles of consolidation
(p) Leased assets
Leases are classified as finance leases whenever the
terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All other
leases are classified as operating leases.
Consolidated entity as lessee
Assets held under finance leases are initially
recognised at their fair value or, if lower,
at amounts equal to the present value of the
minimum lease payments, each determined at the
inception of the lease. The corresponding liability to
the lessor is included in the statement of financial
position as a finance lease obligation.
Lease payments are apportioned between finance
charges and reduction of the lease obligation so
as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges
are charged directly against income.
Finance leased assets are amortised on a straight
line basis over the estimated useful life of the asset.
Operating lease payments are recognised as an
expense on a straight‑line basis over the lease term,
except where another systematic basis is more
representative of the time pattern in which economic
benefits from the leased assets are consumed.
Lease incentives
In the event that lease incentives are received to
enter into operating leases, such incentives are
recognised as a liability. The aggregate benefits of
incentives are recognised as a reduction of rental
expenses on a straight‑line basis, except where
another systematic basis is more representative of
the time pattern in which economic benefits from
the leased assets are consumed.
(q) Payables
Trade payable and other accounts payable are
recognised when the consolidated entity becomes
obliged to make future payments resulting from the
purchase of goods and services.
The consolidated financial statements are prepared
by combining the financial statements of all the
entities that comprise the consolidated entity, being
the company (the parent entity) and its subsidiaries
as defined in Accounting Standard AASB 127
Consolidated and Separate Financial Statements.
Consistent accounting policies are employed in the
preparation and presentation of the consolidated
financial statements.
On acquisition, the assets, liabilities and contingent
liabilities of a subsidiary are measured at their fair
values at the date of acquisition. Any excess of the cost
of acquisition over the fair values of the identifiable
net assets acquired is recognised as goodwill.
If, after reassessment, the fair values of the identifiable
net assets acquired exceeds the cost of acquisition,
the deficiency is credited to profit and loss in the
period of acquisition.
The consolidated financial statements include the
information and results of each subsidiary from the
date on which the company obtains control and until
such time as the company ceases to control such entity.
In preparing the consolidated financial statements,
all inter‑company balances and transactions and
unrealised profits within the consolidated entity are
eliminated in full.
(s) Property, plant and equipment
Plant and equipment, leasehold improvements and
equipment under finance lease are stated at cost
less accumulated depreciation and impairment.
Cost includes expenditure that is directly
attributable to the acquisition of an item. In the
event that settlement of all or part of the purchase
consideration is deferred, cost is determined by
discounting the amounts payable in the future to
their present value as at the date of acquisition.
Depreciation is provided on property, plant and
equipment. Depreciation is calculated so as to write
off the net cost or other revalued amount of each
asset over its expected useful life to its estimated
residual value. Leasehold improvements are
depreciated over the period of the lease or estimated
useful life, whichever is the shorter, using the
straight line method. The estimated useful lives,
residual values and depreciation method is reviewed
at the end of each annual accounting period.
30
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
1. Summary of Accounting Policies (cont)
(s) Property, plant and equipment (cont)
The following estimated useful lives are used in the
calculation of depreciation:
Plant and equipment
5 to 15 years
Leasehold improvements
3 to 5 years
Equipment under finance lease
3 to 5 years
Office equipment
5 to 15 years
Furniture, fixture and fittings
5 to 15 years
Motor vehicles
3 to 5 years
(t) Provisions
Provisions are recognised when the consolidated
entity has a present obligation, the future sacrifice
of economic benefits is probable, and the amount of
the provision can be measured reliably.
When some or all of the economic benefits required
to settle a provision are expected to be recovered from
a third party, the receivable is recognised as an asset
if it is probable that recovery will be received and the
amount of the receivable can be measured reliably.
The amount recognised as a provision is the best
estimate of the consideration required to settle the
present obligation, taking into account the risks and
uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated
to settle the present obligation, its carrying amount is
the present value of those cash flows.
Warranties ‑ Provisions for warranty costs are
recognised as agreed in individual sales contracts,
at the directors best estimate of the expenditure
required to settle the consolidated entity’s liability.
Surplus lease space ‑ The consolidated entity entered
into contracts for the lease of premises in Tucson,
USA which were surplus to the requirements of
the company. Present obligations under the onerous
lease contract were recognised as a provision in 2011.
Redundancy costs ‑ The consolidated entity recognised
costs for redundancy costs in its Tucson, USA plant
which was relocated to Huntsville, Alabama.
Onerous contracts ‑ Present obligations arising
under onerous contracts are recognised and
measured as a provision. An onerous contract is
considered to exist where the Group has a contract
under which the unavoidable costs of meeting the
obligations under the contract exceed the economic
benefits expected to be received under it.
Decommissioning cost and make good of
leased premises ‑ a provision for decommissioning
cost and make good of leased premises is recognised
when there is a present obligation, it is probable that
an outflow of economic benefits will be required to
settle the obligation, and the amount of the provision
can be measured reliably. The estimated future
obligations include the costs of removing the facilities
and restoring the premises.
(u) Revenue recognition
Construction revenue is recognised on the basis of
the terms of the contract adjusted for any variations
or claims allowable under the contract.
Revenue from contracts to provide services is
recognised on a monthly basis in accordance with
the services contracts.
Interest income is recognised as it accrues.
Revenue from the sale of goods is recognised when
the consolidated entity has transferred to the buyer the
significant risks and rewards of ownership of the goods.
(v) Share based payments to employees
Equity‑settled share‑based payments are measured
at fair value at the date of the grant. Fair value is
measured by use of a modified Cox‑Rubenstein
binomial model. The expected life used in the
model has been adjusted, based on management
best estimates, for the effects of non‑transferability,
exercise restrictions and behavioural considerations.
The fair value determined at the grant date
of the equity‑settled share based payments
is expensed on a straight‑line basis over the
vesting period, based on the consolidated entity’s
estimate of shares that will eventually vest.
31
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
1. Summary of Accounting Policies (cont)
(w) AASB Accounting Standards not yet effective
The entity has not elected to early adopt the following Standards and Interpretations which have been issued or
revised by the AASB but are not yet effective:
All other new and revised Standards and Interpretations effective for the period ended 31 December 2012 have been
adopted with no material impact on the amounts or disclosures in the financial statements.
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in
issue but not yet effective.
Standard/Interpretation
AASB 9 Financial Instruments
AASB 10 Consolidated Financial Statements
AASB 12 Disclosure of Interests in Other Entities
AASB 13 Fair Value Measurement
AASB 127 Separate Financial Statements
AASB 2010‑2 Amendments to Australian Accounting Standards
arising from Reduced Disclosure Requirements [AASB 1, 2, 3,
5, 7, 8,101, 102, 107,108, 110, 111, 112, 116, 117,119, 121, 123,
124,127, 128, 131, 133, 134,136, 137,138, 140, 141, 1050 & 1052
and Interpretations 2, 4, 5, 15, 17, 127, 129 & 1052]
AASB 2010‑7 Amendments to Australian Accounting Standards arising
from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112,
118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and
Interpretations 2, 5, 10, 12, 19 & 127]
AASB 2011‑4 Amendments to Australian Accounting Standards
to Remove Individual Key Management Personnel Disclosure
Requirements [AASB 124]
AASB 2011‑7 Amendments to Australian Accounting Standards
arising from the Consolidation and Joint Arrangements Standards
[AASB 1, 2, 3, 5, 7, 101, 107, 112, 118, 121, 124, 132, 133, 136, 138,
139, 1023 & 1038 and Interpretations 5, 9, 16 & 17]
AASB 2011‑8 Amendments to Australian Accounting Standards arising
from AASB 13 [AASB 1, 2, 3, 4, 5, 7, 101, 102, 108, 110, 116, 117, 118,
119, 120, 121, 128, 131, 132, 133, 134, 136, 138, 139, 140, 141, 1004,
1023 & 1038 and Interpretations 2, 4, 12, 13, 14, 17, 19, 131 & 132]
AASB 2011‑10 Amendments to Australian Accounting Standards
arising from AASB 119 (September 2011) [AASB 1, AASB 8,
AASB 101, AASB 124, AASB 134, AASB 1049 & AASB 2011‑8 and
Interpretation 14]
AASB 2011‑11 Amendments to AASB 119 (September 2011) arising
from Reduced Disclosure Requirements
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
1‑Jan‑15
1‑Jan‑13
1‑Jan‑13
1‑Jan‑13
1‑Jan‑13
31‑Dec‑15
31‑Dec‑13
31‑Dec‑13
31‑Dec‑13
31‑Dec‑13
1‑Jul‑13
31‑Dec‑14
1‑Jan‑15
31‑Dec‑15
1‑Jul‑13
31‑Dec‑14
1‑Jan‑13
31‑Dec‑13
1‑Jan‑13
31‑Dec‑13
1‑Jan‑13
31‑Dec‑13
1‑Jul‑13
30‑Jun‑14
32
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
1. Summary of Accounting Policies (cont)
(w) AASB Accounting Standards not yet effective (cont)
Standard/Interpretation
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
AASB 2011‑12 Amendments to Australian Accounting Standards
arising from Interpretation 20 [AASB 1]
AASB 2012‑1 Amendments to Australian Accounting
Standards ‑ Fair Value Measurement ‑ Reduced Disclosure
Requirements [AASB 3, AASB 7, AASB 13, AASB 140 & AASB 141]
AASB 2012‑5 Amendments to Australian Accounting Standards
arising from Annual Improvements 2009‑2011 Cycle [AASB 1, AASB
101, AASB 116, AASB 132 & AASB 134 and Interpretation 2]
AASB 2012‑7 Amendments to Australian Accounting Standards
arising from Reduced Disclosure Requirements [AASB 7, AASB 12,
AASB 101 & AASB 127]
AASB 2012‑10 Amendments to Australian Accounting
Standards ‑ Transition Guidance and Other Amendments [AASB 1, 5,
7, 8, 10, 11, 12, 13, 101, 102, 108, 112, 118, 119, 127, 128, 132, 133, 134,
137, 1023, 1038, 1039, 1049 & 2011‑7 and Interpretation 12]
AASB 2012‑11 Amendments to Australian Accounting
Standards ‑ Reduced Disclosure Requirements and
Other Amendments [AASB 1, AASB 2, AASB 8, AASB 10, AASB 107,
AASB 128, AASB 133, AASB 134 & AASB 2011‑4]
1‑Jan‑13
31‑Dec‑13
1‑Jul‑13
31‑Dec‑14
1‑Jan‑13
31‑Dec‑13
1‑Jul‑13
31‑Dec‑14
1‑Jan‑13
31‑Dec‑13
1‑Jul‑13
31‑Dec‑14
The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no
material financial impact on the financial statements of the company or the consolidated entity but may change
disclosures made.
(x) Comparative amounts
Where the Group changes the presentation or classification of items in its financial statements, it reclassifies the
comparative amounts for consistency and comparability between financial years.
33
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
2. (Loss)/Profit from Operations
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
(a) Revenue
Revenue from operations consisted of the
following items:
Revenue from the sale of goods
16,432,289
24,363,281
Revenue from the rendering of services
2,720,460
5,787,406
Construction contract revenue
2,575,955
2,227,355
21,728,704
32,378,042
‑
‑
‑
‑
‑
‑
‑
‑
Interest revenue:
Bank deposits
Other
Other
171,697
348,855
152,342
329,446
19,347
48,494
13,869
4,361
21,919,748
32,775,391
166,211
333,807
34
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
2. (Loss)/Profit from Operations (cont)
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
(b) (Loss)/profit before income tax has been
arrived at after charging the following expenses:
Borrowing costs
Finance lease finance charges
Interest paid ‑ Other entities
104,363
8,378
112,741
Depreciation ‑ property, plant and equipment
1,886,926
111,371
191,510
302,881
426,512
Impairment of property, plant and equipment
‑
(333,561)
Amortisation ‑ intangibles
Impairment of intangibles
(Reversal of)/provision for non‑recovery of
loan ‑ wholly‑owned controlled entity
Provision for non‑recovery of investment
in subsidiary
131,519
565,119
‑
‑
131,533
‑
‑
‑
Writedown of inventory to net realisable value
1,342,530
1,650,540
Profit on sale of property, plant and equipment
(4,603)
(2,287)
‑
‑
‑
‑
‑
‑
657
1,095
‑
‑
‑
‑
‑
‑
(2,824,982)
3,573,685
204,209
400,464
‑
‑
‑
‑
Foreign exchange gain/(loss)
(196,299)
573,317
(772)
(669)
Operating lease rental expenses:
Minimum lease payments
Employee benefit expense:
Share based payments:
Equity settled
Contributions to defined contribution
superannuation plans
500,552
542,209
204,209
400,464
917,051
1,222,520
Other employee benefits
10,875,523
11,715,277
11,996,783
13,338,261
‑
‑
‑
‑
12,240
377,750
389,990
12,240
308,410
320,650
35
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
3. (Loss)/Earnings per Share
Consolidated
31 December
2012
$
31 December
2011
$
Basic (loss)/earnings per share
(17.9 cents)
0.3 cents
Diluted (loss)/earnings per share
(17.9 cents)
0.3 cents
Basic (Loss)/Earnings per Share
(Loss)/Earnings (a)
(10,179,823)
180,188
Weighted average number of ordinary shares (b)
56,845,926
56,845,926
(a) (Loss)/Earnings used in the calculation of basic earnings per share are the same as the net (loss)/profit in the
statement of comprehensive income.
(b) Options are considered to be potential ordinary shares and are therefore excluded from the weighted average
number of shares used in the calculation of basic earnings per share. Where dilutive, potential ordinary shares are
included in the calculation of diluted earnings per share (see below).
Diluted (Loss)/Earnings per Share
(Loss)/Earnings (a)
(10,179,823)
180,188
Weighted average number of ordinary shares (b)
56,845,926
56,845,926
(a) (Loss)/Earnings used in the calculation of diluted earnings per share are the same as the net (loss)/profit in the
statement of comprehensive income.
(b) The weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted
earnings per share are as follows:
Weighted average number of shares used in the
calculation of basic earnings per share
Staff Share plan
Weighted average number of shares used in the
calculation of diluted earnings per share
56,845,926
56,845,926
‑
‑
56,845,926
56,845,926
(c) The following potential ordinary shares are not dilutive and therefore excluded from the weighted average
number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share:
Staff Share plan
1,025,000
1,538,000
(d) Weighted average number of converted, lapsed, or cancelled potential ordinary shares used in the calculation of
diluted earning per share:
None used as they are not considered dilutive.
36
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
4 Income Tax
(a) The prima facie income tax benefit on pre‑tax accounting profit/(loss) from operations reconciles to the income
tax benefit in the financial statements as follows:
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
(Loss)/Profit from operations
(10,179,823)
180,188
2,002,306
(4,398,147)
Income tax (benefit)/expense calculated at 30%
(3,053,947)
54,056
600,692
(1,319,444)
Non‑deductible provision for non‑recovery
of loan
‑
‑
(847,495)
1,072,106
Share based payments
61,263
120,139
61,263
120,139
Previously unrecognised and unused tax losses
now recognised
‑
Other non‑deductible/non assessable items
(22,231)
(367,922)
(6,058)
‑
5,626
(3,014,915)
(193,727)
(191,598)
(121,573)
Unused tax losses and tax offsets not recognised
as deferred tax assets
3,014,915
193,727
191,598
121,573
Income tax attributable to operating (Loss)/profit
‑
‑
‑
‑
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate
entities on taxable profits under Australian tax law, 25% in Germany, 17% in Singapore and the federal tax rate
applicable in the USA and the State of Arizona has been assumed to approximate a combined rate 40% as their tax
rates apply on a sliding scale. There has been no change in the corporate tax rate when compared with the previous
reporting period.
(b) Unrecognised deferred tax balances
The following deferred tax assets have not been
bought to account as assets
Tax losses ‑ revenue
Temporary differences
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
21,309,046
18,294,131
6,576,523
6,384,925
1,489,161
1,504,013
‑
‑
22,798,207
19,798,144
6,576,523
6,384,925
37
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
4 Income Tax (cont)
(b) Unrecognised deferred tax balances (cont)
Tax consolidation
Relevance of tax consolidation to the consolidated entity
The company and its wholly‑owned Australian resident entities have formed a tax‑consolidated group with
effect from 1 January 2003 and are therefore taxed as a single entity from that date. The head entity within the
tax‑consolidated group is Electro Optic Systems Holdings Limited. The members of the tax‑consolidated entity
group are identified in Note 24.
Nature of tax funding arrangements and tax sharing agreements
There are no formal tax funding or tax sharing arrangements within the tax‑consolidated group.
5. Other Financial Assets
Non‑Current ‑ at cost
Unlisted shares in controlled entities
at cost
provision for non recovery
Carrying value at start of financial year
share options provided at no cost
provision for non recovery
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
4,016,132
3,811,923
(4,016,132)
(3,811,923)
‑
‑
‑
‑
204,209
400,464
(204,209)
(400,464)
‑
‑
The directors have assessed the carrying value of the unlisted shares held in controlled entities and have
determined that, as at 31 December 2012, based upon the net asset position of the controlled entities, the current
and historic trading results and the foreseeable future results from signed contracts on hand the investments are
fully impaired.
38
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
6. Trade and Other Receivables
Current
Trade receivables
GST receivable
Rental deposit related party
Amounts due from customers under construction
contracts (Note 30)
Other debtors
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
1,507,256
9,126,990
81,785
5,843
108,417
‑
274,847
599,620
5,165
‑
‑
21,140
5,843
‑
‑
‑
21,156
‑
‑
‑
1,874,896
9,835,027
26,983
21,156
The average credit period on sales of goods is 30 days. No interest is charged on late payments and no general
allowance for doubtful debts has been made as most contracts are with governments and government agencies.
Ageing of past due not impaired
31‑60 days
61‑90 days
120 days +
Ageing of past due and impaired
120 days +
Total
Movement in allowance for doubtful debts
Balance at the beginning of the financial year
Amount released
Balance at the end of the financial year
344,008
772,031
1,217
9,114
5,148
58,015
354,339
835,194
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
39
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
7. Current Inventories
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Finished goods ‑ at cost
‑
2,354,511
Raw materials ‑ at net realisable value
2,541,172
4,644,227
Work in progress ‑ at cost
1,314,678
3,705,986
3,855,850
10,704,724
8. Other Assets
Current
Prepayments
Non‑current
588,939
101,316
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
Amounts due from wholly‑owned controlled entity
Less Allowance for uncollectible amounts
Movement in allowance for uncollectible amounts
Balance at the beginning of the financial year
Reversal of provision recognised in profit and loss
Balance at the end of the financial year
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
65,258,001
68,082,984
(65,258,001)
(68,082,984)
‑
‑
68,082,984
64,509,299
(2,824,983)
3,573,685
65,258,001
68,082,984
40
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
9. Intangibles
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
License agreement
‑
714,830
‑
‑
On 3 December 2009 as part of the acquisition of the assets of Recon Optical Inc of the USA, the consolidated entity
acquired a licence for the Kollmorgen Licensed patents. The license expires on the expiry of the patents which
expire on 16 July 2017 and relates to the manufacturing of gimbals. The full value of the licence agreement was
impaired during the period based on the forecasted future cash flows from signed contracts on hand.
Movement in intangible assets
Gross carrying amount
Balance at the beginning of the financial year
714,830
849,852
Amortisation
Impairment
Net foreign currency exchange differences
Balance at the end of the financial year
Net book value
(131,519)
(131,533)
(565,119)
(18,192)
‑
‑
‑
(3,489)
714,830
714,830
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
10. Auditors Remuneration
(a) Auditor of the Parent Entity
Audit or review of the financial report
186,031
242,860
186,031
242,860
Taxation services
13,500
12,000
13,500
12,000
199,531
254,860
199,531
254,860
(b) Network firm of the Parent Entity Auditor
Audit or review of the financial report
Taxation services
189
110
299
9,076
1,512
10,588
‑
‑
‑
‑
‑
‑
The auditor of Electro Optic Systems Holdings Limited is Deloitte Touche Tohmatsu.
41
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
11. Property, Plant and Equipment
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
(a) Plant and equipment ‑ at cost
5,905,447
6,013,397
Less accumulated depreciation and impairment
(5,755,546)
(4,944,358)
149,901
1,069,039
(b) Leased assets ‑ at cost
361,997
362,181
Less accumulated amortisation and impairment
(144,845)
(77,607)
217,152
284,574
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
(c) Office equipment ‑ at cost
2,755,422
2,752,175
15,048
15,048
Less accumulated depreciation and impairment
(2,589,636)
(1,996,675)
(14,063)
(13,406)
165,786
755,500
985
1,642
(d) Furniture, fixtures and fittings ‑ at cost
280,703
300,212
Less accumulated depreciation and impairment
(275,436)
(274,814)
5,267
25,398
(e) Leasehold improvements ‑ at cost
1,128,493
1,140,721
Less accumulated depreciation and impairment
(1,128,493)
(844,149)
‑
296,572
(f) Motor vehicle ‑ at cost
17,736
18,081
Less accumulated depreciation and impairment
(17,736)
(18,081)
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
7,000,000
7,000,000
(7,000,000)
(7,000,000)
‑
‑
538,106
2,431,083
985
1,642
(g) Satellite ‑ at cost
Less impairment
Total net book value of Property,
Plant and Equipment
42
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
11. Property, Plant and Equipment (cont)
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Cost
Plant and equipment
Balance at beginning of year
6,013,397
6,047,822
Additions
Asset transfers
Disposals
Net foreign currency exchange differences
18,640
9,730
(65,066)
(71,254)
33,060
‑
(62,168)
(5,317)
Balance at end of year
5,905,447
6,013,397
Leased assets
Balance at beginning of year
362,181
Asset transfer
Transfer to office equipment
‑
‑
Net foreign currency exchange differences
(184)
414,285
19,315
(71,431)
12
Balance at end of year
361,997
362,181
Office equipment
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
Balance at beginning of year
2,752,175
2,601,098
15,048
15,048
Additions
Asset transfers
Transfer from leased assets
Disposals
Net foreign currency exchange differences
26,594
4,979
‑
(3,862)
(24,464)
115,149
‑
71,431
(30,322)
(5,181)
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
Balance at end of year
2,755,422
2,752,175
15,048
15,048
43
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
11. Property, Plant and Equipment (cont)
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Furniture, fixtures and fittings
Balance at beginning of year
300,212
299,546
Additions
Disposals
Asset transfers
Net foreign currency exchange differences
‑
‑
(14,709)
(4,800)
7,586
(6,590)
‑
(330)
Balance at end of year
280,703
300,212
Leasehold improvements
Balance at beginning of year
1,140,721
1,142,806
Additions
Disposals
‑
‑
19,895
(21,159)
Net foreign currency exchange differences
(12,228)
(821)
Balance at end of year
1,128,493
1,140,721
Motor vehicle
Balance at beginning of year
Net foreign currency exchange differences
Balance at end of year
18,081
(345)
17,736
18,104
(23)
18,081
Satellite
Balance at beginning of year
Balance at end of year
7,000,000
7,000,000
7,000,000
7,000,000
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
44
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
11. Property, Plant and Equipment (cont)
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Accumulated Depreciation/
Amortisation/Impairment
Plant and equipment
Balance at beginning of year
(4,944,358)
(4,299,133)
Depreciation
Impairment
Disposals
Net foreign currency exchange differences
(898,344)
(318,269)
‑
(371,085)
12,305
74,851
50,711
(6,582)
Balance at end of year
(5,755,546)
(4,944,358)
Leased plant and equipment
Balance at beginning of year
Amortisation expense
Impairment
Asset transfer
Transfer to office equipment
Net foreign currency exchange differences
(77,607)
(67,422)
‑
‑
‑
184
(62,539)
(67,089)
(83)
(19,315)
71,431
(12)
Balance at end of year
(144,845)
(77,607)
Office equipment
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
Balance at beginning of year
(1,996,675)
(2,578,921)
(13,406)
(12,311)
Depreciation
Impairment
Transfer from leased assets
Disposals
Net foreign currency exchange differences
(619,166)
‑
‑
1,683
24,522
(15,458)
633,698
(71,431)
30,322
5,115
(657)
(1,095)
‑
‑
‑
‑
‑
‑
‑
‑
Balance at end of year
(2,589,636)
(1,996,675)
(14,063)
(13,406)
45
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
11. Property, Plant and Equipment (cont)
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Net foreign currency exchange differences
4,800
Balance at end of year
(275,436)
(274,814)
Furniture, fixtures and fittings
Balance at beginning of year
Depreciation
Impairment
Disposals
Leasehold improvements
Balance at beginning of year
Amortisation
Impairment
Disposals
(274,814)
(290,212)
(5,422)
(1,220)
‑
‑
‑
‑
9,697
6,591
330
60,534
21,159
11,550
(844,149)
(912,916)
(296,572)
(24,476)
Net foreign currency exchange differences
12,228
Balance at end of year
(1,128,493)
(844,149)
Motor vehicle
Balance at beginning of year
(18,081)
(18,104)
Net foreign currency exchange differences
345
23
Balance at end of year
(17,736)
(18,081)
Satellite
Balance at beginning of year
(7,000,000)
(7,000,000)
Balance at end of year
(7,000,000)
(7,000,000)
The Group reassessed the remaining useful lives of assets during the current period.
46
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
11. Property, Plant and Equipment (cont)
Aggregate depreciation, impairment and amortisation allocated during the period is recognised as an expense and
disclosed in Note 2 to the financial statements.
Impairment of property, plant and equipment
The consolidated entity has assessed the carrying amount of plant and equipment in the Queanbeyan and Tucson
facilities and determined an impairment (reversal) charge for the year of Nil (2011: reversal $333,561). The basis to
assess for any potential impairment was fair value less costs to sell and fair value determined by reference to an
active market for second hand manufacturing equipment.
12. Current Trade and Other Payables
Trade payables
Accruals
Amounts due to customers under construction
contracts (Note 30)
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
1,473,693
3,223,921
511,974
295,309
10,831
86,659
6,802
114,159
3,788,418
5,370,799
‑
‑
5,774,085
8,890,029
97,490
120,961
The average credit period on purchases of goods is 30 days and no interest is payable on goods purchased within
agreed credit terms. The consolidated entity has financial risk management policies in place to ensure that all
payables are paid within the credit timeframe.
13. Borrowings
Secured ‑ At amortised cost
Current
Finance lease liabilities (Note 26)
102,191
113,524
Secured promissory Note 2
Secured promissory Note 3
Non‑current
‑
‑
1,139,323
739,020
102,191
1,991,867
Finance lease liabilities (Note 26)
15,032
117,223
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
47
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
13. Borrowings (cont)
The finance lease liabilities are secured by the leased assets. The average weighted interest rate charged on
the finance leases was 10.03% (2011 ‑ 9.95%). The secured promissory Note 2 of $1,139,323 (US$1,159,375)
was denominated in US dollars and attracted an interest rate of 5%. The secured promissory Note 3 of
$739,020 (US$752,027) was denominated in US dollars and attracted an interest rate of 5%. The promissory
notes were secured by the inventory purchased and a guarantee from the parent company. The promissory
notes have been repaid in full during the year.
14. Provisions
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Current
Employee benefits (Note 16)
2,382,606
2,126,061
Surplus lease space
Contract losses
Contract credit
Redundancy costs
Decommissioning costs
Make good of leased premises
Warranty (Note 15)
Non‑current
‑
222,191
308,776
‑
250,000
‑
87,642
22,422
‑
201,185
250,000
29,481
1,507,027
2,047,061
4,670,600
4,763,852
Employee Benefits (Note 16)
293,271
249,523
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
48
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
14. Provisions (cont)
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Movement in surplus lease space
provision ‑ current
Balance at 1 January
Payments made
Balance as at 31 December
87,642
110,141
(87,642)
(22,499)
‑
87,642
‑
‑
‑
The surplus lease space provisions related to the leased premises at 3160 East Transcon Way, Tucson, Arizona, USA.
Movement in contract loss provision
Balance at 1 January
Additional provision recognised
22,422
166,496
222,191
‑
Reductions resulting from re‑measurement
(22,422)
(144,074)
Balance as at 31 December
222,191
22,422
‑
‑
‑
‑
The provision for contract losses is based on assessment by management of the additional costs to complete
existing contracts not recoverable from the customer.
Movement in contract credit provision
Balance at 1 January
Additional provision recognised
Balance as at 31 December
‑
308,776
308,776
‑
‑
‑
‑
‑
The provision is for an agreed credit to be provided to a customer.
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
49
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
14. Provisions (cont)
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Movement on redundancy provision
Balance at 1 January
Payments made
Additional provision recognised for Tucson relocation
Balance as at 31 December
201,185
(201,185)
‑
‑
‑
‑
201,185
201,185
Movement on decommissioning costs
Balance at 1 January
Balance as at 31 December
250,000
250,000
250,000
250,000
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
The provision for decommissioning costs relate to an obligation to dismantle and refurbish a telescope at a future date.
Movement on make good of leased premises
Balance at 1 January
29,481
29,519
Reductions resulting from re‑measurement
(29,481)
(38)
Balance as at 31 December
‑
29,481
‑
‑
‑
‑
‑
‑
The provision for make good of leased premises costs related to an obligation to make good the premises in at
3160 East Transcon Way, Tucson, Arizona, USA on expiry of the lease.
50
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
15. Warranty Provisions
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Movement in warranty provision
Balance at 1 January
2,047,061
2,912,985
Reductions resulting from re‑measurement
(1,212,164)
(1,835,221)
Additional provisions recognised
672,130
969,297
Balance as at 31 December
1,507,027
2,047,061
‑
‑
‑
‑
‑
‑
‑
‑
The provision for warranty claims represents the present value of the directors’ best estimate of the future sacrifice
of economic benefits that will be required under the consolidated entity’s 12‑month warranty program for military
products and telescopes. The estimate has been made on the basis of historical industry accepted warranty trends
and may vary as a result of new materials, altered manufacturing processes or other events affecting product quality.
16. Employee Benefits
The aggregate employee benefits liability recognised in the financial statements is as follows:
Provision for employee entitlements
Current (Note 14)
Non‑Current (Note 14)
2,382,606
2,126,061
293,271
249,523
‑
‑
‑
‑
51
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
17. Issued Capital
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Balance at the beginning of the financial
year ‑ Ordinary shares
75,383,567
75,383,567
75,383,567
75,383,567
Balance at the end of the financial year
75,383,567
75,383,567
75,383,567
75,383,567
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share
capital from 1 July 1998. Therefore, the company does not have a limited amount of authorised capital and issued
shares do not have a par value.
Fully Paid Ordinary Shares
Number
Number
Number
Number
Balance at the beginning of financial year
56,845,926
56,845,926
56,845,926
56,845,926
Balance at end of financial year
56,845,926
56,845,926
56,845,926
56,845,926
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
18. Directors and Employee Share Option Plan
(a) Unlisted Options issued under the Employee Share Option Plan
On 28 June 2002, shareholders approved the adoption of an Employee Share Option Plan.
On 10 December 2009 Directors approved the issue of 1,800,000 unlisted options to staff at an exercise price of
$1.30 exercisable on or before 8 December 2013.
The consolidated entity has an ownership‑based compensation scheme for employees (including directors)
of the company. In accordance with the provisions of the scheme, as approved by shareholders at a previous annual
general meeting, employees with more than three months service with the company may be granted options to
purchase ordinary shares at exercise prices determined by the directors based on market prices at the time the
issue of options were made.
Each share option converts to one ordinary share in Electro Optic Systems Holdings Limited. No amounts are paid
or payable by the recipient on receipt of the options. The options carry neither rights to dividends nor voting rights.
Options may be exercised at any time from the date of vesting to the date of expiry.
The number of options granted is determined by the directors and takes into account the company’s and individual
achievements against both qualitative and quantitive criteria.
52
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
18. Directors and Employee Share Option Plan (cont)
(b) Unlisted Options issued under the Employee Share Option Plan
2012
2011
Weighted
average
exercise price
$
Weighted
average
exercise price
$
Number
Number
Balance at the beginning of the financial year (i)
1,538,000
1.30
3,393,800
1.62
Granted during the year (ii)
Exercised during the year (iii)
Lapsed during the year (iv)
Balance at the end of the financial year (v)
Exercisable at end of the year
(i) Balance at the beginning of the year
‑
‑
(513,000)
1,025,000
1,025,000
‑
‑
1.30
1.30
(1,855,800)
1,538,000
769,000
‑
‑
1.89
1.30
2012
Staff options
2011
Staff options
Director options
Staff options
Staff options
Number
Grant date
Expiry date
Exercise
Price
Fair value at
grant date
1,538,000
10/12/09
8/12/13
$1.30
$1,481,094
Number
Grant date
Expiry date
60,000
1,564,800
31/5/07
31/5/07
60,000
23/11/07
1,709,000
10/12/09
3,393,800
31/5/11
31/5/11
31/5/11
8/12/13
Exercise
Price
Fair value at
grant date
$1.95
$44,100
$1.95
$1,150,128
$1.95
$7,764
$1.30
$1,645,767
$2,847,759
Staff and Director options carry no rights to dividends and no voting rights.
53
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
18. Directors and Employee Share Option Plan (cont)
(b) Unlisted Options issued under the Employee Share Option Plan (cont)
(ii) Granted during the year
2012
2011
Number
Grant Date
Expiry Date
Exercise
Price
Fair Value
Received
$
Fair value at
grant date
$
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
There were no options issued during 2012 or 2011.
All the options granted to staff during 2009 vested over a three year period with 20% vesting after 12 months,
a further 30% after 2 years and the balance after 3 years.
Options were priced using a modified Cox‑Rubenstein binomial pricing model. Where relevant, the expected life
used in the model has been adjusted based on management’s best estimate for the effects of non‑transferability,
exercise restrictions and behavioural conditions. Expected volatility is based on the historical share price volatility
over a two year period.
The following inputs were used in the model for grants during the year ended 31 December 2009:
Dividend yield
Expected volatility (linearly interpolated)
Risk free interest rate
Expected life of options
Grant date share price
Exercise price
(iii) Exercised during the year
‑
133.9%
3.75%
4 years
$1.20
$1.30
Number
of Options
Exercised
Grant
Date
Exercise
Date
Expiry
Date
Exercise
Price
No. of
Shares
Issued
Fair Value
Received
Fair Value
of Shares
at Date of
Issue
Nil
Nil
‑
‑
‑
‑
‑
‑
‑
‑
Nil
Nil
Nil
Nil
Nil
Nil
2012
2011
54
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
18. Directors and Employee Share Option Plan (cont)
(b) Unlisted Options issued under the Employee Share Option Plan (cont)
(iv) Lapsed during the year
Number
of Options
Lapsed
Grant
Date
Exercise
Date
Expiry
Date
Exercise
Price
No. of
Shares
Issued
Fair Value
Received
Fair Value
of Shares
at Date of
Issue
2012
Staff
2011
Staff
Staff
513,000
10/12/09
‑
8/12/13
$1.30
60,000
31/5/07
60,000
23/11/07
Directors
1,564,800
31/5/07
Staff
171,000
10/12/09
1,855,800
(v) Balance at the end of the financial year
‑
‑
‑
‑
31/5/11
31/5/11
31/5/11
8/12/13
$1.95
$1.95
$1.95
$1.30
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
2012
Staff options
2011
Staff options
Number
Grant date
Expiry date
Exercise
Price
Fair value at
grant date
1,025,000
10/12/09
8/12/13
$1.30
$987,075
Number
Grant date
Expiry date
Exercise
Price
Fair value at
grant date
1,538,000
10/12/09
8/12/13
$1.30
$1,481,094
Staff and Director options carry no rights to dividends and no voting rights.
All the options granted to staff during 2009 vested over a three year period with 20% vesting after 12 months,
a further 30% after 2 years and the balance after 3 years. No options were issued during 2010, 2011 and 2012.
The difference between the total market value of the options issued during the financial year, at the date of issue,
and the total amount received from employees (nil) is recognised in the financial statements over the vesting period
as disclosed in Note 18 to the financial statements.
55
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
19. Reserves
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Foreign currency translation
49,953
45,780
‑
‑
Employee equity‑settled benefits
7,727,803
7,523,594
7,727,803
7,523,594
7,777,756
7,569,374
7,727,803
7,523,594
Foreign currency translation
Balance at beginning of financial year
45,780
573,402
Translation of foreign operations
Balance at end of financial year
4,173
(527,622)
49,953
45,780
‑
‑
‑
‑
‑
‑
Exchange differences relating to the translation from US dollars, being the functional currency of the consolidated
entity’s foreign controlled entities in the USA, Euros, being the functional currency of the consolidated entity’s
foreign controlled entity in Germany and Singaporean dollars, being the functional currency of the consolidated
entity’s foreign controlled entity in Singapore, into Australian dollars are brought to account by entries made
directly to the foreign currency translation reserve.
Employee equity‑settled benefits
Balance at beginning of financial year
7,523,594
7,123,130
7,523,594
7,123,130
Share based payment
204,209
400,464
204,209
400,464
Balance at end of financial year
7,727,803
7,523,594
7,727,803
7,523,594
The employee equity‑settled benefits reserve arises on the grant of share options to directors and executives
under the Employee Share Option plan. Further information about share‑based payments to employees is made
in Note 18 to the financial statements.
20. Accumulated Losses
Balance at beginning of financial year
(70,292,694)
(70,472,882)
(81,680,598)
(77,282,451)
Net (Loss)/profit attributable to members
of the parent entity
(10,179,823)
180,188
2,002,306
(4,398,147)
Balance at end of financial year
(80,472,517)
(70,292,694)
(79,678,292)
(81,680,598)
56
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
21. Key Management Personnel Compensation
The key management personnel of Electro Optic Systems Holdings Limited during the year were:
Mr Fred Bart (Chairman, Non‑executive director)
Dr Ben Greene (Chief Executive Officer and director)
Mr Ian Dennis (Non‑executive director)*
Mr Mark Ureda (Non‑executive director)
Lt Gen Peter Leahy AC (Non‑executive director)
Mr Kevin Scully (Non‑executive director) commenced 19 September 2011
Dr Craig Smith (Chief Executive Officer of EOS Space Systems Pty Limited)
Mr Mark Bornholt (Chief Executive Officer Defence Systems) ‑ commenced 21 March 2011
Mr John Palisi (Chief Financial Officer ‑ Electro Optic Systems Pty Limited) resigned 3 February 2012
Mr Scott Lamond (Chief Financial Officer ‑ Electro Optic Systems Pty Limited) appointed
10 August 2012 ‑ Mr Scott Lamond was Acting Chief Financial Officer from 3 February 2012 to 10 August 2012
Mr Hugo Keyner (Chief Executive Officer EOS Technologies Inc) retired 31 October 2012
*During the period 3 February 2012 to 10 August 2012 whilst Scott Lamond was Acting Chief Financial Officer, Mr Ian Dennis
assumed an executive role to assist in the finance function.
Key management personnel compensation policy
The board reviews the remuneration packages of all key management personnel on an annual basis.
Remuneration packages are reviewed and determined with regard to current market rates and are benchmarked
against comparable industry salaries, adjusted by a performance factor to reflect changes in the performance
of the company.
The aggregate compensation of the key management personnel of the consolidated entity and company is set out below:
Consolidated
Company
2012
$
2011
$
Short‑term employee benefits
1,601,075
1,498,319
Post‑employment benefits
Share‑based payment
Other long term benefits
104,623
39,934
‑
99,342
142,388
42,760
2012
$
377,750
12,240
‑
‑
2011
$
308,410
12,240
‑
‑
1,745,632
1,782,809
389,990
320,650
57
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
21. Key Management Personnel Compensation (cont)
The compensation of the non executive directors is paid by the holding company and is the same for both the
holding company and the consolidated entity. The compensation for Dr Ben Greene and the senior executives are
paid by subsidiary companies.
‑
‑
‑
‑
‑
‑
‑
Other
Long
Term
Benefits
$
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
Total
$
66,490
505,897
200,875
40,875
40,875
40,875
895,887
247,052
228,900
82,650
186,266
104,877
849,745
1,745,632
Short term
Equity
settled
Share based
payments
Post
Employment
Non‑monetary
$
Superannuation
$
Options
$
2012
Directors
Mr Fred Bart
Dr Ben Greene*
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Salary &
Fees
$
61,000
439,994
197,500
40,875
37,500
40,875
‑
28,726
‑
‑
‑
‑
5,490
37,177
3,375
‑
3,375
‑
817,744
28,726
49,417
Executives
Dr Craig Smith
Mr Mark Bornholt
Mr John Palisi
Mr Scott Lamond
Mr Hugo Keyner
210,000
210,000
80,324
167,556
85,976
753,856
‑
‑
‑
‑
749
749
1,571,600
29,475
18,900
18,900
2,326
15,080
‑
55,206
104,623
18,152
‑
‑
3,630
18,152
39,934
39,934
58
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
21. Key Management Personnel Compensation (cont)
Short term
Equity
settled
Share based
payments
Post
Employment
Non‑monetary
$
Superannuation
$
Options
$
2011
Directors
Mr Fred Bart
Dr Ben Greene*
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Salary &
Fees
$
61,000
300,000
157,500
40,875
37,500
11,535
‑
39,182
‑
‑
‑
‑
5,490
27,000
3,375
‑
3,375
‑
608,410
39,182
39,240
Other
Long
Term
Benefits
$
‑
‑
‑
‑
‑
‑
‑
Total
$
66,490
366,182
160,875
40,875
40,875
11,535
686,832
‑
‑
‑
‑
‑
‑
‑
Executives
Mr Ron Thompson
Dr Craig Smith
Mr Mark Bornholt
Mr John Palisi
Mr Hugo Keyner
* Executive director
172,083
197,532
128,423
196,946
154,889
849,873
‑
‑
‑
‑
854
854
13,288
17,750
11,340
17,724
‑
35,597
42,760
263,728
35,597
‑
35,597
35,597
‑
‑
‑
‑
250,879
139,763
250,267
191,340
60,102
142,388
42,760
1,095,977
1,458,283
40,036
99,342
142,388
42,760
1,782,809
Non‑monetary includes the provision for motor vehicles and health benefits.
Further details on options can be found in Note 18.
59
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
22. Notes to the Cash Flow Statement
(a) Reconciliation of Cash and cash equivalents
For the purposes of the cash flow statement, cash includes cash on hand and at call deposits with banks or
financial institutions, investments in money market instruments maturing within less than two months and net of
bank overdrafts. Cash at the end of the financial year as shown in the statements of cash flows is reconciled to the
related items in the statement of financial position as follows:
Consolidated
Company
2012
$
2011
$
2012
$
2011
$
Cash and cash equivalents
6,686,194
4,885,761
3,502,600
1,324,726
(b) Reconciliation of (Loss)/profit for the year to net cash flows from operating activities
(Loss)/profit for the period
(10,179,823)
180,188
2,002,306
(4,398,147)
(Profit) on disposal of fixed assets
Equity settled share‑based payments
Amortisation of intangibles
Impairment of intangibles
Depreciation of fixed assets
Impairment
Foreign exchange movements
Provision for non‑recovery of loan
Provision for non‑recovery of investment
(4,603)
204,209
131,519
565,119
1,886,926
‑
25,220
‑
‑
(2,287)
400,464
131,533
‑
426,512
(333,561)
(520,741)
‑
‑
‑
‑
657
‑
‑
‑
‑
‑
‑
1,095
‑
‑
‑
‑
(2,824,982)
3,573,685
204,209
400,464
Writedown of inventory
1,342,530
1,650,540
‑
‑
(Increase)/decrease in assets
Current receivables
Inventories
Other current assets
Increase/(decrease) in liabilities
7,960,131
5,674,434
(5,827)
(6,603)
5,506,344
(752,012)
(487,623)
152,204
‑
‑
‑
‑
‑
‑
Provisions
178,499
(747,650)
Current trade and other payables
(1,978,231)
(1,146,272)
(23,471)
(28,474)
Other
Borrowings for inventory
216,665
(608,056)
‑
(4,182,672)
Deferred income and amounts due to customers
under construction contracts
(1,582,381)
(4,100,935)
‑
‑
‑
‑
‑
‑
Net cash inflows/(outflows) from
operating activities
3,784,501
(3,778,311)
(647,108)
(458,250)
60
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
22. Notes to the Cash Flow Statement (cont)
(c) Non‑Cash Operating Activities
In December 2010, a subsidiary company EOS Defense Systems, Inc acquired 32 completed inventory units for
a purchase price of US$5,300,000, payable in certain instalments in accordance with and under the terms of a
promissory note executed by EOS Defense Systems, Inc. The promissory note provided for interest to be paid at
5% per annum. The principal and interest due and paid in full by 31 January 2012.
In September 2011, a subsidiary company EOS Defense Systems, Inc acquired 21 completed inventory units for
a purchase price of US$752,027, payable in certain instalments in accordance with and under the terms of a
promissory note executed by EOS Defense Systems, Inc. The promissory note provided for interest to be paid at
5% per annum. The principal and interest due and paid in full by 31 January 2012.
23. Related Party Disclosures
(a) Equity interests in related parties
Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 24.
(b) Key management personnel compensation
Details of key management personnel compensation are disclosed in Note 21.
(c) Key management personnel equity holdings (represented by holdings of fully paid ordinary shares in
Electro Optic Systems Holdings Limited)
2012
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Mr Mark Bornholt
Mr John Palisi
Dr Craig Smith
Mr Scott Lamond
Mr Hugo Keyner
Balance at
1/1/12
No.
Granted as
remuneration
No.
Received on
exercise of
options
No.
Net other
change
No.
Balance at
31/12/12
No.
5,309,075
3,954,185
170,050
‑
15,000
‑
‑
‑
89,450
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
5,309,075
3,954,185
170,050
‑
15,000
‑
‑
‑
89,450
‑
‑
61
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
23. Related Party Disclosures (cont)
2011
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Mr Mark Bornholt
Mr Ron Thompson
Dr Craig Smith
Mr John Palisi
Mr Hugo Keyner
Balance at
1/1/11
No.
Granted as
remuneration
No.
Received on
exercise of
options
No.
Net other
change
No.
Balance at
31/12/11
No.
5,309,075
3,954,185
170,050
‑
15,000
‑
‑
347,745
89,450
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
5,309,075
3,954,185
170,050
‑
15,000
‑
‑
347,745
89,450
‑
‑
(d) Key management personnel option holdings.
Balance at
1/1/12
No.
Granted as
remuneration
No.
Exercised
(Lapsed)
No.
Balance at
31/12/12
No.
Balance
vested and
exercisable
at 31/12/12
No.
Options
vested
during year
‑
‑
‑
‑
‑
‑
‑
160,000
160,000
32,000
160,000
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
160,000
160,000
80,000
(160,000)
‑
‑
‑
‑
32,000
32,000
160,000
160,000
‑
16,000
80,000
2012
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Mr Mark Bornholt
Dr Craig Smith
Mr John Palisi
Mr Scott Lamond
Mr Hugo Keyner
The Company did not issue any options during the year ended 31 December 2010, 2011 and 2012 to Key
management personnel. Refer to Note 18 for further details of options outstanding.
62
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
23. Related Party Disclosures (cont)
Balance at
1/1/11
No.
Granted as
remuneration
No.
Exercised
(Lapsed)
No.
Balance at
31/12/11
No.
Balance
vested and
exercisable
at 31/12/11
No.
Options
vested
during year
200,000
964,800
200,000
200,000
‑
‑
‑
160,000
280,000
160,000
160,000
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
(200,000)
(964,800)
(200,000)
(200,000)
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
160,000
(120,000)
160,000
‑
‑
160,000
160,000
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
80,000
80,000
80,000
80,000
48,000
48,000
48,000
48,000
2011
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Mr Mark Ureda
Lt Gen Peter Leahy AC
Mr Kevin Scully
Mr Mark Bornholt
Mr Ron Thompson
Dr Craig Smith
Mr John Palisi
Mr Hugo Keyner
Refer to Note 18 for further details of options outstanding.
(e) Transactions with other related parties
Other related parties includes:
■ the parent entity;
■ entities with significant influence over the consolidated entity; and
■ subsidiaries.
Amounts receivable from entities in the wholly‑owned group are disclosed in Note 8 to the financial statements.
Certain entities within the group have lent money to other entities within the wholly‑owned group on an interest
free basis. The amounts receivable by the ultimate parent entity in the wholly‑owned group are disclosed in Note 8
to the financial statements. The ultimate parent entity in the wholly‑owned group has provided for this amount
based upon the net asset position of the controlled entities.
On 18 March 2011, Fire Control Systems Pty Limited paid an unfranked dividend of $26,500,000 to Electro Optic
Systems Pty Limited. On 31 December 2011, Fire Control Systems Pty Limited paid an unfranked dividend of
$7,700,000 to Electro Optic Systems Pty Limited. Both these entities are wholly owned subsidiaries of the Group.
63
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
23. Related Party Disclosures (cont)
(f) Other transactions with key management personnel
During the year, the Company paid a total of $66,490 (2011: $66,490) to 4F Investments Pty Limited, a company
associated with Mr Fred Bart in respect of directors fees and superannuation for Fred Bart.
During the year, the Company received $13,868 (2011: $4,361) from 4F Investments Pty Limited, a company
associated with Mr Fred Bart in respect of shared Sydney office facilities.
During the year, the Company paid $40,875 (2011: $40,875) to Dennis Corporate Services Pty Limited, a company
associated with Mr Ian Dennis in respect of directors fees and superannuation for Ian Dennis.
During the year, the Company paid $160,000 (2011: $120,000) to Dennis Corporate Services Pty Limited, a company
associated with Mr Ian Dennis in respect of consulting fees for company secretarial and accounting services.
During the year, the Company paid $5,543 (2011: Nil) to Audio Pixels Holdings Limited, a company of which Fred Bart
and Ian Dennis are directors and shareholders in respect of shared Sydney office facilities. The Company also paid a
rental deposit of $5,843 (2011: Nil) to Audio Pixels Holdings Limited included in Note 6.
(g) Parent entity
The parent entity in the consolidated group is Electro Optic Systems Holdings Limited.
24. Controlled Entities
Name of Entity
Parent Entity
Country of
Incorporation
December
2012
%
December
2011
%
Electro Optic Systems Holdings Limited
Australia #
Controlled Entities
Electro Optic Systems Pty Limited
Fire Control Systems Pty Limited
FCS Technology Holdings Pty Limited
EOS Space Systems Pty Limited
EOS Optronics GmbH
EOS Defense Systems Pte Limited
EOS USA, Inc. (Inc in Nevada)
EOS Technologies, Inc. (Inc in Arizona)
EOS Defense Systems, Inc (Inc in Arizona)
# These companies form part of the Australian consolidated tax entity.
All entities are audited by Deloitte Touche Tohmatsu.
Australia #
Australia #
Australia #
Australia #
Germany
Singapore
USA
USA
USA
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
64
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
25. Contingent Liabilities
(a) Entities within the consolidated entity are involved in contractual disputes in the normal course of
contracting operations. The directors believe that the entities within the consolidated entity can settle
any contractual disputes with customers and should any customers commence legal proceedings against
the company, the directors believe that any actions can be successfully defended. As at the date of this
report no legal proceedings have been commenced against any entity within the group.
26. Capital and Leasing Commitments
(a) Finance leasing commitments
Payable ‑ minimum future lease payments not
later than one year
later than one year and not later than five years
later than five years
Minimum lease payments
Less future finance charges
Total lease liability
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
108,663
17,038
‑
131,634
125,701
‑
125,701
257,335
(8,478)
(26,588)
117,223
230,747
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
65
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
26. Capital and Leasing Commitments (cont)
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
(b) Finance leasing commitments
Payable ‑ Present value of minimum future lease
payments not later than one year
later than one year and not later than five years
later than five years
102,191
15,032
‑
113,524
117,223
‑
Present value of minimum lease payments
117,223
230,747
Represented by:
Current liability (Note 13)
Non‑current liability (Note 13)
(c) Operating lease commitments
Non‑cancellable operating leases contracted for
but not recognised in the financial statements:
Payable:
102,191
15,032
117,223
113,524
117,223
230,747
not later than one year
500,552
556,453
later than one year and not later than five years
later than five years
‑
‑
‑
‑
500,552
556,453
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
66
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
26. Capital and Leasing Commitments (cont)
Operating Leases
Leasing arrangements
Operating leases relate to:
Premises at 2500 N. Tucson Boulevard, Suite 100, Tuscon Arizona with a lease term which expires on 30 September 2013.
There is no option to renew after 30 September 2013 and future lease payments are fixed under the contract. There is no
option to purchase the property.
Premises in Queanbeyan, Australia for a 5 year period to 31 December 2008 with a 5 year option. The Company has
the first right of refusal in respect of the purchase of the property. The Company is on a month to month basis
whilst a new lease is negotiated.
Premises at EOS House at Mt Stromlo, Australia are the subject of an expired leases. The Company occupies the
premises on a month to month basis.
Shared premises in Sydney which are on a month to month arrangement with Audio Pixels Holdings Limited,
a company associated with directors Mr Fred Bart and Mr Ian Dennis.
Finance Leases
Leasing arrangements
Finance leases relate to motor vehicles, computer and office equipment with lease terms of between one and
three years. The consolidated entity has options to purchase the computer and office equipment for a nominal
amount at the conclusion of the lease arrangements. The consolidated entity has options to purchase motor
vehicles for agreed residual amounts at the conclusion of the lease arrangements.
27. Subsequent Events
The Directors are not aware of any significant subsequent events since the end of the financial period and up to the
date of this report.
28. Financial Risk Management Objectives and Policies
The Group’s principal financial instruments comprise receivables, payables, borrowings, finance leases,
cash and short term deposits.
Due to the small size of the group significant risk management decisions are taken by the board of directors.
These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk,
liquidity risk and cash flow interest rate risk.
The Group does not use derivative financial instruments to hedge these risk exposures.
67
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
28. Financial Risk Management Objectives and Policies (cont)
Risk Exposures and Responses
(a) Interest rate risk
The Group’s exposure to market interest rates relates primarily to the Group’s cash holdings.
At balance date, the Group had the following mix of financial assets and liabilities exposed to Australian variable
interest rate risk that are not designated in cash flow hedges:
Consolidated
Company
2012
$
2011
$
2012
$
2011
$
Financial assets
Cash and cash equivalents
6,686,194
4,885,761
3,502,600
1,324,726
Financial Liabilities
Lease liabilities
(117,223)
(230,747)
‑
‑
6,568,971
4,655,014
3,502,600
1,324,726
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential
renewals of existing positions, alternative financing and the mix of fixed and variable interest rates.
At 31 December 2012, if interest rates had moved, as illustrated in the table below, with all other variables
held constant, post tax profit and equity would have been affected as follows:
Judgements of reasonably possible movements
Consolidated
+1% (100 basis points)
‑.5% (50 basis points)
Company
+1% (100 basis points)
‑.5% (50 basis points)
Post Tax Profit
Higher/(Lower)
Equity
Higher/(Lower)
2012
$
2011
$
2012
$
2011
$
66,862
48,858
66,862
48,858
(33,431)
(24,429)
(33,431)
(24,429)
35,026
(17,513)
13,247
(6,624)
35,026
(17,513)
13,247
(6,624)
The movements in profits are due to lower interest rates on cash balances. The cash balances were higher in 2012
than in 2011 and accordingly the sensitivity is higher.
68
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
28. Financial Risk Management Objectives and Policies (cont)
(b) Foreign currency risk
As a result of purchases of inventory denominated in United States Dollars, the Group’s statement of financial
position can be affected significantly by movements in the US$/A$ exchange rates. Exchange rates are managed
within approved policy parameters using natural hedges and no derivatives are used.
The Group also has transactional currency exposures. Such exposures arise from sales or purchases by an
operating entity in currencies other than the functional currency.
The policy of the Group is to convert surplus foreign currencies to Australian dollars. The group also holds cash
deposits in US dollars to secure US dollar bank guarantees to overseas customers.
At 31 December 2012, the Group had the following exposure to US$ foreign currency:
Consolidated
Company
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
2012
$
2011
$
1,176,313
241,350
1,155,120
4,350,913
2,331,433
4,592,263
Trade and other payables
554,568
3,504,284
Promissory note
Finance leases
‑
‑
1,878,343
‑
554,568
5,382,627
2012
$
520
‑
520
‑
‑
‑
‑
2011
$
12,806
‑
12,806
‑
‑
‑
‑
Net exposure
1,776,865
(790,364)
520
12,806
All US$ denominated financial instruments were translated to A$ at 31 December 2012 at the exchange
rate of 1.0374 (2011: 1.0176).
69
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
28. Financial Risk Management Objectives and Policies (cont)
(b) Foreign currency risk (cont)
At 31 December 2012, had the Australian Dollar moved, as illustrated in the table below, with all other variables
held constant, post tax profit and equity would have been affected as follows:
Judgements of reasonably possible movements
Consolidated
AUD/USD +10%
AUD/USD ‑5%
Company
AUD/USD +10%
AUD/USD ‑5%
Post Tax Profit
Higher/(Lower)
Equity
Higher/(Lower)
2012
$
2011
$
2012
$
2011
$
(275,905)
96,491
(275,905)
96,491
(38,911)
(13,068)
(38,911)
(13,068)
(64)
(7)
(1,165)
583
(64)
(7)
(1,165)
583
Management believes the balance date risk exposures are representative of risk exposure inherent
in financial instruments.
As noted, foreign currency transactions entered into during the financial year are managed within approved
policy parameters using natural hedges. The director’s do not consider that the net exposure to foreign currency
transactions is material after considering the effect of natural hedges.
(c) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial
loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties which are
continuously monitored.
The credit risk on liquid funds is limited because the counterparties are banks with high credit‑ratings assigned by
international credit agencies.
(d) Liquidity risk management
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.
Ultimate responsibility for liquidity risk management rests with the board of directors, who has built an
appropriate risk management framework for the management of the Group’s short, medium and long term
funding and liquidity requirements. The Group manages liquidity by maintaining adequate cash reserves by
continuously monitoring forecast and actual cash flows and managing maturity profiles of financial assets.
Significant uncertainties relating to the ability of the company and the consolidated entity to continue as going
concerns and pay their debts as and when they fall due are set out in Note 1(a).
70
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
28. Financial Risk Management Objectives and Policies (cont)
(d) Liquidity risk management (cont)
Liquidity and interest tables
The following tables detail the Company’s and the Group’s remaining contractual maturity for its non‑derivative
financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group can be required to pay. The table includes both interest and
principal cash flows.
Weighted
average
effective
interest rate
%
Less than
1 month
$
1‑3 months
$
3 months
to 1 year
$
1‑5 years
$
Consolidated
2012
Other non interest bearing liabilities
0.00
1,985,667
‑
‑
‑
Finance lease liability
10.03
12,067
24,133
108,603
11,857
2011
Other non interest bearing liabilities
‑
3,519,230
‑
‑
‑
Finance lease liability
Promissory note
Company
2012
Other non interest bearing liabilities
2011
Other non interest bearing liabilities
9.95
5.00
‑
‑
10,970
21,940
98,730
125,701
1,925,302
97,490
120,961
‑
‑
‑
‑
‑
‑
‑
‑
‑
71
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
28. Financial Risk Management Objectives and Policies (cont)
(d) Liquidity risk management (cont)
The following tables detail the Company’s and the Group’s remaining contractual maturity for its non‑derivative
financial assets. The tables have been drawn up based on the undiscounted contractual maturities of the financial
assets including interest that will be earned on these assets except where the Company/Group anticipates that the
cash flow will occur in a different period.
Weighted
average
effective
interest rate
%
Less than
1 month
$
1‑3 months
$
3 months
to 1 year
$
1‑5 years
$
Consolidated
2012
Non interest bearing
Variable interest rate instruments
‑
‑
2,361,884
‑
Fixed interest rate instruments
3.10
4,320,267
2011
Non interest bearing
Variable interest rate instruments
6,682,151
‑
‑
259,045
‑
Fixed interest rate instruments
3.64
4,434,199
4,693,244
‑
‑
15,197
15,197
‑
‑
40,336
40,336
Company
2012
Non interest bearing
Variable interest rate instruments
‑
‑
520
‑
‑
Fixed interest rate instruments
3.22
3,496,714
19,270
2011
Non interest bearing
Variable interest rate instruments
‑
‑
12,806
‑
Fixed interest rate instruments
4.54
1,316,783
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
(e) Price risk
The Group’s exposure to commodity price risk is minimal. The Group does not make investments in equity securities.
72
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
29. Segment Information
AASB 8 requires operating segments to be identified on the basis of internal reports about components of the
Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the
segment and to assess performance. The identification of the Group’s reportable segments has not changed from
those disclosed in the previous Annual Report.
The consolidated entity operates in Australia, USA, Singapore and Germany in the development, manufacture and
sale of telescopes and dome enclosures, laser satellite tracking systems and the manufacture of electro‑optic
fire control systems.
Product and Services within each Segment
Space Systems
EOS is a global supplier of large optical systems. During the period the consolidated entity continued the process of
completing existing contracts.
Space Surveillance
EOS’s laser‑based space surveillance systems have been demonstrated in customer trials and EOS is now
well‑placed to be a major contributor to the next generation of space tracking capability. Future business is
dependent on large government contracts being awarded in the space sector.
In addition, EOS has substantial space resources in its own right, and may enter the market for space data
provision in the future.
Defence
EOS develops, manufactures and markets advanced fire control, surveillance, and weapon systems to approved
military customers. These products either replace or reduce the role of a human operator for a wide range of
existing and future weapon systems in the US, Australia and other markets.
73
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
29. Segment Information (cont)
Segment Revenues
Space systems
Space surveillance
Defence
Consolidated
31 December
2012
$
31 December
2011
$
338,889
824,200
4,446,909
3,214,813
16,962,253
28,387,523
Total of all segments
21,748,051
32,426,536
Unallocated
Total
Segment Results
Space systems
Space surveillance
Defence
171,697
348,855
21,919,748
32,775,391
(1,272,474)
(577,615)
107,423
(395,895)
(8,192,150)
1,978,160
Total of all segments
(9,357,201)
1,004,650
Unallocated
(822,622)
(824,462)
(Loss)/profit before income tax expense
(10,179,823)
180,188
Income tax expense
‑
‑
(Loss)/profit for the period
(10,179,823)
180,188
The revenue reported above represents revenue from external customers. There were no intersegment sales
during the period. There were no discontinued operations during the period.
The consolidated entity has one customer (2011: two customers) who each provided in excess of 10% of
consolidated revenue. These customer(s) are within the Defence segment with total revenue of $15,475,370
(2011 ‑ $24,021,715).
74
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
29. Segment Information (cont)
Segment Assets and Liabilities
Space systems
Space surveillance
Defence
Assets
Liabilities
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
169,569
434,378
700,073
803,320
375,689
1,090,208
2,593,756
2,966,952
6,312,533
22,262,394
7,444,127
12,011,474
Total all segments
6,857,791
23,786,980
10,737,956
15,781,746
Unallocated
6,686,194
4,885,761
117,223
230,748
Consolidated
13,543,985
28,672,741
10,855,179
16,012,494
Assets used jointly by reportable segments are allocated on the basis of the revenue earned by the individual
reportable segments.
Depreciation, impairment
and amortization of
segment assets
Acquisition of segment
assets
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
6,659
87,380
1,619
6,316
3,048
6,700
7,953
27,598
1,781,830
685,388
35,485
140,139
Other Segment Information
Space systems
Space surveillance
Defence
Total all segments
1,875,869
693,323
45,234
175,690
Unallocated
Consolidated
707,695
(600,372)
‑
‑
2,583,564
92,951
45,234
175,690
75
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
29. Segment Information (cont)
Information on Geographical Segments
31 December 2012
Geographical Segments
Australasia
North America
Germany
Total
31 December 2011
Geographical Segments
Australasia
North America
Germany
Total
Revenue from
External Customers
$
21,420,123
498,084
1,541
Segment Assets
$
11,276,983
2,239,679
27,323
21,919,748
13,543,985
Revenue from
External Customers
$
28,942,040
3,810,273
23,078
Segment Assets
$
22,878,566
5,692,857
101,318
32,775,391
28,672,741
Acquisition of
Segment Assets
$
30,223
14,331
680
45,234
Acquisition of
Segment Assets
$
138,444
31,104
6,142
175,690
76
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
30. Construction Contracts
Consolidated
Company
31 December
2012
$
31 December
2011
$
31 December
2012
$
31 December
2011
$
Construction work in progress
12,481,076
9,662,837
Less
Provision for losses
Progress billings
(221,191)
(22,422)
(15,773,456)
(14,411,594)
(3,513,571)
(4,771,179)
Recognised and included in the financial
statements as amounts due:
From customers under construction contracts:
Current (Note 6)
274,847
599,620
To customers under construction contracts:
Current (Note 12)
(3,788,418)
(5,370,799)
(3,513,571)
(4,771,179)
Retentions included in progress billings
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
77
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT)
31. Additional Company Information
Electro Optic Systems Holdings Limited is a listed public company in Australia, incorporated in Australia. The
company and its subsidiaries operate in Australia, North America, Singapore and Germany.
Principal Place of Business
EOS House
Mt Stromlo Observatory
Cotter Road
Weston Creek ACT 2611
Australia
Tel: 02 6222 7900
Fax: 02 6299 7687
German Operations
Ulrichsberger Str. 17 3 OG
94469 Deggendorf
Germany
Tel: +49 991 2910083
Fax: +49 991 2910399
Registered Office
Suite 2, Level 12
75 Elizabeth Street
Sydney NSW 2000
Australia
Tel: 02 9233 3915
Fax: 02 9232 3411
USA Operations
2500 N. Tucson Boulevard
Suite 100
Tucson, Arizona 85716
USA
Tel: +1 (520) 624 6399
Fax: +1 (520) 624 1906
Singapore Operations
Co‑Ord Centre Pte Ltd
4 Shenton Way #28‑01
SGX Centre II
Singapore 068807
Tel: +65 6224 0100
Fax: +65 6227 6002
78
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 ASX ADDITIONAL INFORMATION
Additional information required by the Australian Stock Exchange Listing Rules and not disclosed elsewhere in this report.
HOME EXCHANGE
The Company’s ordinary shares are quoted on the Australian Stock Exchange Limited under the trading symbol “EOS”.
The Home Exchange is Sydney.
SUBSTANTIAL SHAREHOLDERS
At 11 March 2013 the following substantial shareholders were registered:
Fred Bart Group
Technology Investments Pty Limited Group
Northrop Grumman Space and Mission Systems Corp.
Ordinary Shares
Percentage of total
Ordinary shares
5,309,075
3,954,185
5,000,000
14,263,260
9.33%
6.96%
8.80%
25.09%
VOTING RIGHTS
At 11 March 2013 there were 1,064 holders of fully paid ordinary shares.
Rule 74 of the Company’s Constitution stipulates the voting rights of members as follows:
“Subject to any rights or restrictions for the time being attached to any class or classes of shares and to this Constitution:
(a) on a show of hands every person present in the capacity of a Member or a proxy, attorney or representative
(or in more than one of these capacities) has one vote; and
(b) On a poll every person present who is a Member or proxy, attorney or Representative has member present has:
(i) For each fully paid share that the person holds or represents ‑ one vote; and
(ii) For each share other than a fully paid share that the person holds or represents ‑ that proportion of one vote
that the amount paid (not credited) on the shares bears to the total amount paid and payable on the share
(excluding amounts credited).”
79
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 ASX ADDITIONAL INFORMATION (CONT)
OTHER INFORMATION
In accordance with Listing Rule 4.10.19, the Company has used the cash and assets in a form readily convertible to cash
that it had at the time of admission in a way consistent with its business objectives.
The Company has a sponsored Level 1 American Depositary Receipt (ADR) program on the Over‑The‑Counter (OTC)
market in the USA with the ADR ticker symbol of EOPSY. The ration of ADR’s to Ordinary shares is 1:5 and the
CUSIP Number is 28520B1070. The local custodian is National Australia Bank Limited and the US Depositary Bank
is BNY Mellon.
DISTRIBUTION OF SHAREHOLDINGS
At 11 March 2013 the distribution of share and option holdings were:
Range
1 ‑ 1,000
1,001 ‑ 5,000
5,001 ‑ 10,000
10,001 ‑ 100,000
100,001 and over
Ordinary Shareholders
Number of Shares
182
362
211
236
73
1,064
105,103
1,076,920
1,836,319
7,765,787
46,061,797
56,845,926
There were 260 ordinary shareholders with less than a marketable parcel.
There is no current on‑market buy‑back.
80
Electro Optic Systems Holdings Limited and Controlled Entities| ANNUAL REPORT 2012 TWENTY LARGEST SHAREHOLDERS - QUOTED
TWENTY LARGEST ORDINARY SHAREHOLDERS ‑ QUOTED
At 11 March 2013 the 20 largest ordinary shareholders held 60.17% of the total issued fully paid quoted ordinary
shares of 56,845,926.
Shareholder
Fully Paid Ordinary Shares
Percentage of Total
1. Citicorp Nominees Pty Limited
2. N & J Properties Pty Limited
3. Mr Kevin Tay Hak Leong
4. Technology Transformations Pty Limited
5. DBS Vickers Securities (Singapore) Pte Ltd
6. Crea8ive Nominees Pty Limited
7. Capitol Enterprises Limited
8. Emichrome Pty Limited
9. A & D Wire Limited
10. Technology Investments Pty Limited
11. Landed Investments Limited
12. Madam Lim Gek Kuan
13. Landed Investments NZ Limited
14. Rinfast Pty Limited
15. Emichrome Pty Limited
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