eLectro optic systeMs HoLDinGs LiMiteD
acn 092 708 364
www.eos-aus.com
2019
annuaL report
contents
1
5
Review of Operations
Directors’ Report
20 Auditors’ Report
27 Directors’ Declaration
28 Consolidated Statement of Profi t or Loss and
Other Comprehensive Income
29 Consolidated Statement of Financial Position
31 Consolidated Statement of Changes in Equity
33 Consolidated Statement of Cash Flows
34 Notes to and forming part of the Financial Statements
99 ASX Additional Information
100 Twenty Largest Ordinary Shareholders
corporate Directory
Directors
Share Registry
Mr Fred Bart (Chairman)
Computershare Investor Services Pty Limited
Dr Ben Greene (Chief Executive Offi cer)
Level 3, 60 Carrington Street
Mr Ian Dennis
Lt Gen Peter Leahy AC
Air Marshall Geoff Brown
Ms Kate Lundy
Company Secretary
Mr Ian Dennis
Registered Offi ce
Suite 3, Level 12
75 Elizabeth Street
Sydney NSW 2000
Australia
Telephone +61 2 9233 3915
Facsimile +61 2 9232 3411
Web site www.eos‑aus.com
Sydney NSW 2000
GPO Box 7045
Sydney NSW 1115
Australia
Telephone 1300 855 080 or
+61 3 9611 5711 outside Australia
Facsimile 1300 137 341
Auditors
Deloitte Touche Tohmatsu
Chartered Accountants
8 Brindabella Circuit
Brindabella Business Park
Canberra Airport ACT 2609
Australia
4999 Designed and Produced by RDA Creative www.rda.com.au
review of operations
1. RESULTS FOR FULL‑YEAR ENDED 31 DECEMBER 2019
The consolidated entity (“EOS”) reported an operating profit after income tax of $18,058,758 for the twelve month
period to 31 December 2019 [31 December 2018: $15,081,372] based on revenues from ordinary activities totalling
$165,985,563 [31 December 2018: $87,130,396].
The consolidated entity reported net cash used by operations for the twelve month period totalling $33,829,630
[31 December 2018: $15,686,202]. At 31 December 2019, the consolidated entity held cash totalling $77,881,766
[31 December 2018: $40,538,225]. Cash of $102,025 [31 December 2018: $119,025] is restricted as it secures bank
guarantees on premises.
The profit after tax was based on EBIT of $22,354,491 and tax expense of $3,911,516. Foreign exchange movements did
not make a substantial contribution to this result.
The full year EBIT of $22,354,491 [31 December 2018: $15,118,275] is a substantial improvement over the corresponding
prior period and exceeds prior guidance of $20 million.
These financial results are in line with management expectations. The individual sector performances are further
discussed below.
2. DEFENCE SYSTEMS SECTOR: STATUS AND OUTLOOK
The EOS Defence sector operated to expectations through 2019. An increase in production plant utilisation to
beyond 50% of capacity drove a three‑fold increase in overall sector EBIT from $7.4m to $22.3m (excluding foreign
exchange gains). This sector will again be the driving force behind a forecast 70% growth in EBIT from 2019 to 2020.
From 2016‑2019 EOS expanded annual RWS production capacity from $50 million to around $300 million. The key
factors limiting growth were supply chain limitations and shortages of skilled staff. These factors were progressively
overcome and in 2020 annual production will rise to $250 million, close to current capacity.
This expansion has established scalable production in Australia as a template for replication globally. The Company
is currently expanding annual output capacity from $300 million to $900 million by adding capacity in the
USA ($300 million), Singapore ($150 million) and UAE ($150 million).
This capacity will come on line from mid‑2020 at a rate dictated by market demand. All of the new capacity could be
available by 2024 if needed.
A key requirement for future competitiveness and profitability is the Company’s global supply chain which allows
stable pricing along with offset management and maximising natural currency hedging through flexible supply chain
arrangements. The new EOS plants are evolving to serve as hubs for regional supply chain coordination as part of a
global supply effort.
EOS now estimates the global RWS market for its current product mix to exceed $12 billion over the period 2021‑2030.
This estimate is achieved by discounting the broader RWS market to remove heavy weapons, lower technology
requirements, and potential customers not allied with the US or Australia, with a history of corrupt practice or
unreliable finances.
Applying a similar discounting process results in an estimated $12 billion addressable market over the same period for
the Company’s CUAS [counter unmanned aerial system] products.
The total addressable market for EOS Defence sector products is therefore expected to be around $24 billion over the
decade 2021‑2030, increasing from around $1.2 billion in 2021 at a compound annual growth rate of approximately
15%. This market estimate based on discounted industry models is supported by the observation that EOS is presently
participating in competitive processes for $3 billion in contracts (approximately) equally distributed across three
continents with awards due over the next 34 months.
1
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 review of operations (cont)
eos space DeBris Mana GeMent
One international contract award which had been
expected in 2019 was delayed by protests from local
competitors in that market. These protests are expected
to be overcome by the customer during 2020.
The business model which permits customers to
acquire significant quantities of EOS equipment also
establishes a firm requirement among those customers
for supporting observations from Australian locations.
EOS expects to expand its Australian tracking resources
in the near term to meet this demand.
The company announced late in 2019 a major technology
breakthrough in the control of laser energy in space,
for ground‑based lasers. This new technology has placed
EOS in the forefront of companies competing for market
share in the next generation of space communications.
This breakthrough provided the underlying competitive
advantages allowing EOS to announce the establishment
of the new Communications Sector, which will contribute
to EOS profits from the near term.
The sector also contributed significant technology and
materiel to the Defence Sector CUAS products, and
in particular the high power lasers which are used to
destroy drones.
The outlook for the EOS Space Sector is improving.
As forecast this sector transitioned from loss to profit in 2019
and the sector is expected to be profitable going forward.
EOS is actively positioning product variants and plant
capacity to meet the identified market requirements.
Because EOS is only addressing a market segment for
which its products and practices are reasonably suited,
the Company expects its success rate will be around 40%
corresponding to the performance previously achieved in
this sector in recent years.
The outlook for the Defence Systems business is
very strong.
3. SPACE SYSTEMS SECTOR:
STATUS AND OUTLOOK
The EOS Space Sector was marginally profitable for
2019, as expected.
Space Sector is undertaking a pivot from Australian
space program revenue to direct export sales. This is
required because the Commonwealth first delayed and
then effectively cancelled the budgeted programs for
indigenous space domain activity which EOS had been
addressing, with supporting funding from the customer.
Foreign customers which had been expected to coordinate
requirements through the Commonwealth programs are
now negotiating directly with EOS for access to equipment
and data. These activities have government support where
required and are expected to provide growing revenue
from both products and data services.
2
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 review of operations (cont)
using microwave technology. EOS intends to expand this
market channel to delivery increasingly larger capacity
through hybrid and later optical communications
using satellites.
The outlook for the EOS Communications Sector is
good, and provided both US government approvals are
obtained for the US purchase.
“In September 2019 EOS announced
it had achieved a breakthrough in the
transmission of data to and from satellites
using lasers, opening the way to 1,000‑fold
increases in capacity.”
4. EOS COMMUNICATION SYSTEMS:
STATUS AND OUTLOOK
The space economy is valued at $550 billion annually
with communication services, excluding broadcast,
comprising around $100 billion. Future capacity
requirements for space communications cannot be
met using existing technology, because the microwave
spectrum is saturated and no more operating
licenses can be issued by the ITU (International
Telecommunications Union).
EOS has invested substantial resources to develop
key elements for the next generation of space
communications. In September 2019 EOS announced it
had achieved a breakthrough in the transmission of data
to and from satellites using lasers, opening the way to
1,000‑fold increases in capacity.
This breakthrough is of limited commercial value as the
$100 billion space communication market is entirely
dependent on infrastructure to support microwave
technology. This infrastructure, with almost $1 trillion
in sunk costs if customer equipment is included, is not
compatible with optical communication technology and
therefore forms an almost‑impenetrable barrier to
market entry.
EOS intends to enter this market by offering novel
technologies in the microwave domain, to leverage the
existing infrastructure, before progressively offering
hybrid (optical‑microwave) capabilities and finally
optical communications.
On 1 October 2019 EOS announced it had acquired
EM Solutions, an Australian company specialising in
high performance ground terminals and antennae for
microwave communications. This acquisition is closed
and is already profitable.
On 28 January 2020 EOS announced it will purchase
assets of Audacy Corporation, a US entity specialising
in the operation of constellations of microwave
communication satellites, subject to the approval of the
US Federal Communications Commission (FCC) and
Committee on Foreign Investment in the US (CFIUS).
FCC granted its consent to the transfer of 5 March 2020.
EOS has filed for approval of the US purchase with
CFIUS on 9 March 2020. Approval from both of these
US government entities is required before that purchase
can close.
Upon closing of the US asset purchase, EOS will have
all of the ground segment and space segment elements
necessary to provide space communication customers
with end‑to‑end cost‑effective communication solutions
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ANNUAL REPORT 2019
review of operations (cont)
5. FORECAST
EOS’ fundamental objective is still reliable long term
profit growth.
Relying only on contracts already in hand, the company
expects EBIT to grow around 75% to exceed $36 million
for the full year to 31 December 2020. This guidance is
unchanged since it was last upgraded by the Company
in November 2019.
The 2020 guidance is based on the company achieving
75% growth in output to around $275 million in
revenue across all three business sectors. Capacity
has been successfully tested at the levels required for
this forecast.
The Company believes that new orders, particularly in
the defence sector, will be received during 2020 and
beyond. However there is limited scope to increase
output before Q4 2020 because the current forecast of
70‑75% growth will consume most available resources.
EOS revenue is predominantly derived from contracts
denominated in US$. Forecasts assume no substantial
change in the exchange rate of AU$ against US$.
However exchange rates can be volatile and both
gains and losses can arise from normal operations.
6. SUBSEQUENT EVENTS
Subsequent to the end of the financial year there have
been considerable economic impacts in Australia and
globally arising from the outbreak of COVID‑19 virus and
the respective Government actions to reduce the spread
of the virus.
As this economic impact occurred after the reporting
period, the Consolidated entity believes it constitutes a
“Non‑Adjusting Subsequent Event” as defined in AASB
110 Events after the Reporting Period.
■ In March 2020, the consolidated entity
implemented its Business Continuity Plan where
most staff not directly involved in production will
work from home to limit the potential spread of
the virus and to enable the consolidated entity to
continue to operate and serve our customers.
■ The initial impacts on Consolidated entity’s
operations have been limited by a very strong
inventory of production parts, and the fact that
almost all EOS debtors are ultimately sovereign
entities. The Consolidated entity’s early adoption
of virus‑impeding practices may mitigate future
impacts on business operations.
■ The Consolidated entity will continue to monitor
the impact of COVID‑19 on the business as a
whole including any impact on the supply chain,
production capacity, logistic operations including
product delivery, and collection of receivables.
Therefore, at the date of signing the financial
report the Consolidated entity is unable to
determine what financial effects the outbreak of
the virus could have on the Consolidated entity in
the coming financial period.
Ben Greene
Chief Executive Officer
31 March 2020
4
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 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 2019. 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
Chairman (Age 65). He has been Chairman and Director of numerous public and private companies
since 1980, specialising in manufacturing, property, technology and marketable securities. Mr Bart
is a director of Immunovative Therapies Limited, an Israeli company involved in the manufacture
of cancer vaccines for the treatment of most forms of cancer. He is also Chairman of Audio Pixels
Holdings Limited and a director of Weebit Nano Limited. Appointed to the Board on 8 May 2000
(Length of service ‑ 19 years).
Dr Ben Greene BE (Hons), Phd in Applied Physics (Age 69) is the Chief Executive Officer of Electro Optic Systems.
Ian Dennis
Lt Gen Peter
Leahy AC
Air Marshal
Geoff Brown AO
Dr Greene was involved in the formation of Electro Optic Systems Pty Limited. He is published
in the subject areas of weapon system design, laser tracking, space geodesy, quantum physics,
satellite design, laser remote sensing, and the metrology of time. Dr Greene is Deputy Chair of the
Western Pacific Laser Tracking Network (WPLTN) and has recently served as member of Australia’s
Prime Ministers Science, Engineering and Innovation Council (PMSEIC) and CEO of the Cooperative
Research Centre for Space Environment Management. Appointed to the Board on 11 April 2002
(Length of service ‑ 17 years). He is a member of the Nominations and Remuneration Committee.
BA, C.A. (Age 62) 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 (Length of service ‑ 19 years). He is also director and company secretary of Audio Pixels
Holdings Limited. He is a member of the Audit and Risk Committee and the Nominations and
Remuneration Committee. He is also company secretary of Electro Optic Systems Holdings Limited.
Non‑executive director (Age 67). Appointed to the Board on 4 May 2009 (Length of service 10 years).
Peter Leahy AC retired from the Australian Army in July 2008 as a Lieutenant General in the
position of Chief of Army. Among his qualifications he holds a BA (Military Studies) and a Master
of Military Arts and Science. He is a Professor and the foundation Director of the National Security
Institute at the University of Canberra. He is a director of Codan Limited, Citadel Group Limited
and a member of the advisory board to Warpforge Limited. In other activities he is the Chairman of
the charity Soldier On, the Red Shield Appeal Committee in the ACT, the Australian International
Military Games, which brought the Invictus Games to Sydney in 2018, the Australian Student’s
Veterans Association and is a member of the Advisory Council of China Matters. He is Chairman of
the Audit and Risk Committee and a member of the Nominations and Remuneration Committee.
He was Chairman of the Nominations and Remuneration Committee until 6 February 2020.
Non‑executive director (Age 61). Appointed to the Board on 21 April 2016 (Length of
service ‑ 3 years). Geoffrey Brown retired from the Royal Australian Air Force in July 2015 as Air
Marshal in the position of Chief of Air Force. Among his qualifications he holds a BEng (Mech),
a Master of Arts (Strategic Studies), Fellow of the Institute of Engineering Australia and is a Fellow
of the Royal Aeronautical Society. He is a Director of Lockheed Martin (Australia) Pty Limited,
Chairman of the Sir Richard Williams Foundation and Chairman of the Advisory Board of CAE Asia
Pacific. He is Chairman of the Nominations and Remuneration Committee from 6 February 2020
and a member of the Audit and Risk Committee.
5
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 Directors’ report (cont)
Name
Particulars
The Hon
Kate Lundy
(HonLittD,
GAICD)
Non‑Executive director (age 52) Appointed to the Board on 23 March 2018 (Length of
service ‑ 2 years). Kate Lundy served as a Senator representing the Australian Capital Territory
from 1996 to 2015. During this time she held various front bench positions in both Government and
Opposition, including the Minister for Sport, Multicultural Affairs and Assisting on Industry and
Innovation and the Digital Economy.
Kate continues to be passionate about technology and innovation. Her focus is the positive impact of
technology on society, culture and the economy. In 2017, the Australian National University awarded
her a Doctor of Letters (honorary doctorate) for her “exceptional contributions to advocacy and
policy for information communications and technology, for the ACT and nationally.”
In 2017 Ms Lundy was inducted into the Pearcey Hall of Fame for “distinguished achievement and
contribution to the development and growth of the Information and Communication Technology
Industry”. The Pearcey Foundation is named in honour of Dr Trevor Pearcey, an outstanding
Australian ICT Pioneer, notable for his leadership of the project team that built one of the world’s
earliest digital computers, the CSIR Mark 1, later known as CSIRAC.
Kate is a non‑executive director of the Australian Grand Prix Corporation, the National Roads
and Motoring Association, the Cyber Security Research Centre and the National Youth Science
Forum. Kate is also a member of ACT Defence Industry Advisory Board and ACT Defence Industry
Ambassador. She is a member of the Audit and Risk Committee and a member of the Nominations
and Remuneration Committee.
The above named directors held office during and since the end of the financial year.
Ian Dennis, Peter Leahy, Geoffrey Brown and Kate Lundy are considered independent directors.
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
Lt Gen Peter Leahy AC
Principal Activities
Company
Period of directorship
Audio Pixels Holdings Limited
Weebit Nano Limited
5 September 2000 to date
6 March 2018 to date
Audio Pixels Holdings Limited
5 September 2000 to date
Codan Limited
Citadel Group Limited
19 September 2008 to date
27 June 2014 to date
The principal activities of the consolidated entity are in the space, defence systems and communications business.
The company is listed on the Australian Securities Exchange.
6
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 Directors’ report (cont)
Review of Operations
Subsequent Events
A detailed review of operations is included on pages
1 to 4 of this financial report.
Changes to the State of Affairs
On 11 October 2019, the consolidated entity acquired
all the issued capital of EM Solutions Pty Limited and
created a new business sector of communications.
Apart from the above, there were no significant changes
in the state of affairs of the consolidated entity that
occurred during the financial period.
Share Issues
On 11 October 2019, the Company issued 4,271,357
new ordinary shares at an issue price of $7.31 to the
vendors of EM Solutions Pty Ltd as part consideration
for the acquisition of 100% of the shares in EM
Solutions Pty Ltd. 3,600,112 of these new ordinary
shares are subject to voluntary escrow restrictions
until 30 March 2020.
On 21 November 2019, the Company announced a fully
underwritten placement of 10,144,224 new ordinary
shares at $6.66 to sophisticated and professional
investor clients of Citigroup Global Markets Australia Pty
Limited raising a total of $68m. These new shares were
allotted on 27 November 2019. These funds were used
to support revised EBIT guidance and to fund ongoing
growth initiatives and for working capital.
On 21 November 2019, the Company also announced
a Share Placement Plan to all existing shareholders
registered on 20 November 2019 at the lower of the
same price as the institutional placement of $6.66 or the
price (rounded down to the nearest cent) which is equal
to the volume weighted average price (VWAP) of EOS
shares traded on the Australian Securities Exchange
(ASX) over the 5 trading days up to, and including, the
date that the offer closes, to raise a maximum of $10m.
The Share Placement Plan closed on 9 December 2019
raising $17.0m resulting in the issue of 2,558,753 new
ordinary shares on 13 December 2019 at $6.66 per
share. The Directors decided accept all applications
above the $10m limit.
On 26 December 2019, Electro Optic Systems Holdings
Limited (“EOS” or “Company”) (ASX: EOS), acting
through its wholly‑owned US subsidiary EOS Defense
Systems USA, Inc. (“EOSDS”), executed an agreement to
purchase certain assets of Audacy Corporation, a space
communications company based in the US (“Purchase”)
subject to mandatory Federal Communications
Commission (“FCC”) approval. EOSDS will outlay
approximately A$10 million in cash for the Purchase
including substantial costs associated with securing
mandatory US government spectrum licenses and
other costs.
The transfer of control of Audacy Corporation’s
spectrum licenses to EOSDS is subject to review and
approval by the FCC. The FCC application was lodged on
28 January 2020 and an announcement was made to the
ASX at that time. On 5 March 2020 the FCC granted its
consent to the transfer. EOSDS has also filed for review
of the Acquisition by the US Committee on Foreign
Investment in the US (“CFIUS”) on 9 March 2020.
Although the Company believes the Purchase
is compliant with all statutory and regulatory
requirements, approval of the Purchase by CFIUS cannot
be assured. In the normal course, and subject to those
government approvals and other customary conditions,
EOS anticipates the Purchase to close in mid‑2020
(“Completion”).
EOSDS is not required to make any material payment
for the Purchase until Completion has occurred. EOS
will fund the A$10 million required during 2020 for the
Purchase and related activities from its cash holdings.
Subsequent to the end of the financial year there have
been considerable economic impacts in Australia and
globally arising from the outbreak of COVID‑19 virus and
the respective Government actions to reduce the spread
of the virus.
As this economic impact occurred after the reporting
period, the Consolidated entity believes it constitutes a
“Non‑Adjusting Subsequent Event” as defined in AASB
110 Events after the Reporting Period.
■ In March 2020, the consolidated entity
implemented its Business Continuity Plan where
most staff not directly involved in production will
work from home to limit the potential spread of
the virus and to enable the consolidated entity to
continue to operate and serve our customers.
7
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 Environmental Regulations
In the opinion of the directors the consolidated entity
is in compliance with all applicable environmental
legislation and regulations.
Diversity
The Company values diversity and recognises the
benefits it can bring to the organisation’s ability to
achieve its goals. Accordingly, The Company’s diversity
policy (“Diversity Policy”) was updated on 23 March 2020
and outlines its diversity objectives in relation to gender,
age, cultural background, ethnicity, employment of
veterans and other factors to leverage the widest pool of
available talent. A copy of the Company’s Diversity Policy
is available on the Company’s website.
Section 6 of the Diversity Policy states that the Company
will establish appropriate and meaningful objectives for
achieving gender and other forms of diversity.
The Company’s current objectives are to:
(i) improve the participation of women in the
workforce by measuring the percentage of female
employees and the percentage of those females in
management positions;
(ii) reduce the number of workplace harassment
complaints by measuring annual occurrences and
reducing these to zero;
(iii) improve retention of staff by measuring the
percentage of employees who access flexible
workplace arrangements including flexible hours
and alternative work cycles; and
(iv) encourage retention of staff by measuring the
number of staff who access company education
and study assistance to enhance personal and
corporate development opportunities.
The Company was not in the S & P/ ASX 300 at the
commencement of 1 January 2020.
Directors’ report (cont)
■ The initial impacts on Consolidated entity’s
operations have been limited by a very strong
inventory of production parts, and the fact that
almost all EOS debtors are ultimately sovereign
entities. The Consolidated entity’s early adoption
of virus‑impeding practices may mitigate future
impacts on business operations.
■ The Consolidated entity will continue to monitor
the impact of COVID‑19 on the business as a
whole including any impact on the supply chain,
production capacity, logistic operations including
product delivery, and collection of receivables.
Therefore, at the date of signing the financial
report the Consolidated entity is unable to
determine what financial effects the outbreak of
the virus could have on the Consolidated entity in
the coming financial period.
■ No financial effects arising from the economic
impacts of the virus have been included
in the financial results for the year ended
31 December 2019.
■ Should this emerging macro‑economic risk
continue for a prolonged period, there could
be potentially adverse financial impacts to the
Consolidated entity, including slower revenue
growth and obstruction to the plan towards
increased profitability.
There have been no other transactions or events of a
material and unusual nature between the end of the
reporting period and the date of the report likely, in
the opinion of the Directors of the Company, to affect
significantly the operations of the consolidated entity,
the results of those operations, or state of affairs of the
consolidated entity in future years.
Deed of Cross Guarantee
On 29 March 2018, the parent entity, Electro Optic
Systems Holdings Limited entered into a deed of cross
guarantee with two of its Australian wholly‑owned
subsidiaries Electro Optic Systems Pty Limited and EOS
Defence Systems Pty Limited. On 28 November 2019, EM
Solutions Pty Limited entered into an Assumption Deed
and became a party to the Deed of Cross Guarantee.
Future Developments
The company will continue to operate in the space,
defence systems and communications businesses.
Please see the review of operations for further details.
8
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 Directors’ report (cont)
As at 31 December 2019, the Group’s gender diversity mix is as follows:
Total staff
Senior Management
Board
Number
Female
234
5
6
45
0
1
Female
(%)
19.2
0.0
16.7
Male
189
5
5
Male
(%)
80.2
100.0
83.3
“Senior Management” is defined as a manager who has a relatively high leadership role in the day‑to‑day
responsibilities of managing the Company.
Section 8 of the Diversity Policy requires the Company to disclose in each of its annual reports a summary of the
Diversity Policy and the achievement of the objectives of the Diversity Policy. The Company achievements in meeting the
objectives are as follows:
(i) EOS continues to improve the participation of women in the workforce, noting that 19.2% of staff are female and
the total number of women has increased from 36 (2018) to 45 (2019);
(ii) EOS is committed to reduce the number of harassment complaints to zero noting only one incident reported for
2019 which was investigated with no case to answer;
(iii) Flexible working arrangements are offered to staff with 7.3% (2019) and 7.6 % (2018) of the workforce taking
advantage of the arrangements;
(iv) There are 19 staff in total accessing the EOS company education and study assistance programs in 2019
compared to 18 in 2018.
It is noted that the Company currently has a moderate level of both gender and general diversity, however given the
relatively small number of total employees, a change of one or a few employees may have a significant impact on the
measurable diversity objectives.
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
No options were granted to any director or executive during the year.
Share options on issue at year end or exercised during the year
There were 220,000 options at an exercise price of $2.99 outstanding at year end. No options were exercised during the
year. The 5,500,000 options with an exercise price of $3.00 expired on 31 January 2019 and were not exercised.
There were no shares or interests issued during the financial year as a result of exercise of an option.
9
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 The Shares issued to Directors are subject to both
‘Vesting Conditions’ and ‘Forfeiture Conditions’.
Directors are required to satisfy the Vesting Conditions
in order for their Shares to vest. While Directors hold
their Shares, they will be subject to Forfeiture Conditions
and Directors will forfeit their Shares if either they
fail to satisfy the Vesting Conditions or they cease to
be employed or continue to provide services to EOS
or a consolidated entity or group company in certain
circumstances.
Once the Vesting Conditions have been satisfied,
removed or lifted, the Shares become vested and
Directors may deal with them in accordance with the
rules of the LFSP subject to sale restrictions and
other legal restrictions (such as under the Company’s
trading policy).
The Shares will vest at the end of each ‘Vesting Period’ in
the manner set out in the tables below, provided that the
following conditions are met:
(a) Directors continue to provide services to EOS on
each of the vesting dates (or such other date on
which the Board makes a determination as to
whether the Vesting Condition has been met); and
(b) the performance hurdles set out below are
satisfied, which relate to the Company’s earnings
before income tax (EBIT) and the Company’s share
price. Notably, EBIT and share price hurdles must
both be achieved in order for Shares to vest under
each Tranche.
Directors’ report (cont)
Loan Funded Share Plan
Shareholders approved the issue of 5,180,000 restricted
ordinary shares on 24 April 2018 to directors, senior
executives and staff. The restricted ordinary shares were
issued on 20 June 2018 at a price of $2.99, being the
20 day volume weighted average price up to an including
the trading day immediately prior to the date of issue.
The Company provided an interest free loan to the
Directors and Employees to enable them to acquire the
shares under the Loan Funded Share Plan. The total
amount of the loan is $15,488,200.
Loan funds under LFSP are limited recourse in nature,
which means that if at the date that the loan becomes
repayable the Directors or Employees shares are
worth less than the outstanding balance of the loan,
the Company cannot recover the difference from the
Director or Employee. Interest will not be payable on the
outstanding balance of the loan.
All shares issued under the LFSP are held in an
employee share trust, on behalf of all participants.
The name of the Trust is EOS Loan Plan Limited as
trustee for the Share Plan Trust. All shares under
the LFSP are also subject to a holding lock until all
conditions and the loan are satisfied.
The ordinary shares issued under the LFSP were issued
to an employee share trust on behalf of the following
participants as follows:
Mr Fred Bart (Chairman)
Dr Ben Greene (CEO)
Mr Ian Dennis
Mr Peter Leahy
Mr Geoffrey Brown
Ms Kate Lundy
Dr Craig Smith
Mr Grant Sanderson
Mr Peter Short
Mr Scott Lamond
Other Senior Employees
Total
200,000
2,000,000
200,000
200,000
200,000
200,000
3,000,000
250,000
250,000
250,000
250,000
1,180,000
5,180,000
10
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 Directors’ report (cont)
To the extent Shares vest, they will be subject to sale restrictions for 6, 9, 12 and 15 months respectively as outlined in
the tables.
Measures and hurdles
Vested Shares can be sold after:
(i) EBIT of $5m for 12 months ending
31 December 2018; and
(ii) a Share Price Hurdle of $4.50 by 31 December 2019
(this hurdle must be reached on at least 30
trading days, not necessarily consecutive, by
31 December 2019)
30 June 2020
(25% of Vested Shares)
30 September 2020
(50% of Vested Shares)
31 December 2020
(75% of Vested Shares)
31 March 2021
(100% of Vested Shares)
Measures and hurdles
Vested Shares can be sold after:
(i) EBIT of $15m for 12 months ending
31 December 2019; and
(ii) a Share Price Hurdle of $7.50 by 31 December 2021
(this hurdle must be reached on at least 30
trading days, not necessarily consecutive, by
31 December 2021)
30 June 2022
(25% of Vested Shares)
30 September 2022
(50% of Vested Shares)
31 December 2022
(75% of Vested Shares)
31 March 2023
(100% of Vested Shares)
If the above Vesting Conditions are not satisfied, or if the Board determines that they cannot be satisfied, Directors will
forfeit their unvested Shares (unless the Board exercises its discretion to permit those Shares to vest in accordance with
the terms of the LFSP).
Directors have also imposed additional vesting conditions for Senior Employees under the terms of the LFSP which
specifically relate to the performance of their business sectors within EOS. These conditions as outlined in Note 22 are
in addition to the above vesting conditions for Directors.
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.
11
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 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, 15 Board meetings, three Audit and Risk Committee meetings and two
Nominations and Remuneration Committee meetings were held.
Directors
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Lt Gen Peter Leahy AC
Air Marshal Geoff Brown AO
The Hon Kate Lundy
Board of directors
Audit and Risk
committee
Nominations and
Remuneration
committee
Held
Attended
Held
Attended
Held
Attended
15
15
15
15
15
15
15
15
15
15
14
15
‑
‑
3
3
3
‑
‑
‑
3
3
1
‑
2
‑
2
2
‑
‑
2
‑
2
2
‑
‑
Directors’ Shareholdings
The following table sets out each Director’s relevant interest in shares, restricted ordinary shares under the Loan
Funded Share Plan 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
Lt Gen Peter Leahy AC
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Fully paid ordinary
shares
Fully paid ordinary shares ‑
Loan Funded Share Plan
Unlisted Options
5,324,010
3,973,503
35,025
43,259
11,501
4,826
200,000
2,000,000
200,000
200,000
200,000
200,000
‑
‑
‑
‑
‑
‑
Movement in Director shareholdings during the 2019 are set out in the Remuneration Report.
The unlisted options were exercisable at $3.00 each and expired on 31 January 2019. The fully paid ordinary restricted
shares were issued on 20 June 2018 under the Loan Funded Share Plan at a price of $2.99 and are subject to vesting
and performance criteria.
12
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 Directors’ report (cont)
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)
Lt Gen Peter Leahy AC (Non‑executive director)
Air Marshal Geoffrey Brown AO (Non‑executive director)
The Hon Kate Lundy (Non‑executive director) ‑ Appointed 23 March 2018
Dr Craig Smith (Chief Executive Officer of EOS Space Systems Pty Limited)
Mr Grant Sanderson (Chief Executive Officer EOS Defence Systems Pty Limited)
Mr Scott Lamond (Chief Financial Officer ‑ Electro Optic Systems Pty Limited)
Mr Peter Short (Chief Operating Officer ‑ Electro Optic Systems Pty Limited)
This report outlines the remuneration arrangements in place for Directors and Executives of the consolidated entity.
The Directors are responsible for remuneration policies and packages applicable to the Board members and executives
of the consolidated entity. The consolidated entity has a separate Nominations and 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.
Non‑Executive Director remuneration
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 12 May 2017, when shareholders approved a maximum aggregate remuneration of
$500,000 per year excluding options.
The amount of aggregate remuneration approved by shareholders, the manner in which it is apportioned amongst
Directors, and the policy of granting options to Directors, are reviewed by directors at least every two years.
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 consolidated entity.
13
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 Directors’ report (cont)
Remuneration Report (cont)
Executive Director and Senior Management remuneration
Objective
The consolidated entity aims to award Executives with a level and mix of remuneration commensurate with their
position and responsibilities within the consolidated entity and so as to:
■ reward Executives for group 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.
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 consolidated entity. Executive
Directors and Senior Management are employed under standard employment contracts which contain no unusual
terms. Beyond accrued leave benefits, there are no other termination payments or golden parachutes for any directors
or senior executives. The CEO has a 180 day notice period under his employment contract and the other senior
management have 90 day notice periods under their employment contracts.
Director remuneration
The following tables disclose the remuneration of the directors of the Company:
Short term
Post Employment
Equity
Total
Salary &
Fees
$
Non‑
monetary
$
Superannuation
$
Loan
Funded
Share
Plan
$
Other
Long
Term
Benefits
$
Options
$
$
2019
Mr Fred Bart
Dr Ben Greene*
Mr Ian Dennis#
70,150
498,257
184,196
Lt Gen Peter Leahy AC
43,125
Air Marshal Geoffrey
Brown AO
The Hon Kate Lundy
43,125
43,125
‑
26,163
6,664
18,698
45,250
186,982
‑
‑
‑
‑
4,097
4,097
4,097
4,097
18,698
18,698
18,698
18,698
881,978
26,163
68,302
280,472
‑
‑
‑
‑
‑
‑
‑
‑
95,512
952,137
1,708,789
‑
‑
‑
‑
206,991
65,920
65,920
65,920
952,137
2,209,052
* Executive Director during the financial year
# Includes fees for company secretarial and accounting consultancy services provided of $141,073 (2018: $120,000)
Other long term benefits include annual leave and long service leave expensed during the year.
14
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 Directors’ report (cont)
Remuneration Report (cont)
Short term
Post Employment
Equity
Total
Salary &
Fees
$
Non‑
monetary
$
Superannuation
$
2018
Mr Fred Bart
Dr Ben Greene*
Mr Ian Dennis#
70,150
452,549
163,125
Lt Gen Peter Leahy AC
43,125
Air Marshal Geoffrey
Brown AO
The Hon Kate Lundy
43,125
33,171
‑
26,163
‑
‑
‑
‑
6,664
39,405
4,097
4,097
4,097
3,235
Loan
Funded
Share
Plan
$
8,450
84,495
8,450
8,450
8,450
8,450
Other
Long
Term
Benefits
$
$
‑
87,365
Options
$
2,101
21,006
388,170
1,011,788
2,101
2,101
9,474
‑
‑
‑
‑
‑
177,773
57,773
65,146
44,856
805,245
26,163
61,595
126,745
36,783
388,170
1,444,701
* Executive Director during the financial year
# Includes fees for company secretarial and accounting consultancy services provided of $120,000 (2017: $120,000)
Other long term benefits include annual leave and long service leave expensed during the year.
15
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 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:
Short term
Post Employment
Equity
Total
2019
Salary &
Fees
$
Non‑
monetary
$
Superannuation
$
Dr Craig Smith
Mr Scott Lamond
240,742
242,969
Mr Grant Sanderson
242,969
Mr Peter Short
243,862
970,542
‑
‑
‑
‑
‑
26,287
23,167
23,167
23,167
95,788
Loan
Funded
Share
Plan
$
22,244
23,373
23,091
23,373
92,081
Other
Long
Term
Benefits
$
Options
$
$
‑
‑
‑
‑
‑
191,001
480,274
108,967
398,476
8,332
297,559
52,243
342,645
360,543
1,518,954
Short term
Post Employment
Equity
Total
2018
Salary &
Fees
$
Non‑
monetary
$
Superannuation
$
Dr Craig Smith
Mr Scott Lamond
230,772
230,772
Mr Grant Sanderson
208,707
Mr Peter Short
227,218
897,469
‑
‑
‑
‑
‑
21,923
21,923
18,160
19,905
81,911
Loan
Funded
Share
Plan
$
9,646
10,562
10,253
10,562
41,023
Other
Long
Term
Benefits
$
34,659
26,857
14,660
10,607
Options
$
4,202
3,152
‑
‑
$
301,202
293,266
251,780
268,292
7,354
86,783
1,114,540
No options were granted to, or exercised by any director or executive during 2018 and 2019. Ordinary shares in relation
to the Loan Funded Share Plan were granted during 2018 as outlined earlier in the Directors’ Report.
During the 2016 financial year, 3,000,000 options were granted to Directors on 5 February 2016 and 200,000 options
on 30 May 2016 at an exercise price of $3.00 with an expiry date of 31 January 2019. All these options lapsed on
31 January 2019 unexercised.
During the 2016 financial year, 2,515,000 options were issued to staff on 5 February 2016 at an exercise price of $3.00
with an expiry date of 31 January 2019. 900,000 of these options were issued to senior executives included as part of the
key management personnel. All these options lapsed on 31 January 2019 unexercised.
Other long term benefits include annual leave and long service leave expensed during the year.
16
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 Directors’ report (cont)
Remuneration Report (cont)
The following table sets out each key management personnel’s equity holdings (represented by holdings of fully paid
ordinary unrestricted shares in Electro Optic Systems Holdings Limited).
Balance at
1/1/19
Granted as
remuneration
Received on
exercise of
options
Net other
change
Balance at
31/12/19
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Lt Gen Peter Leahy AC
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Dr Craig Smith
Mr Scott Lamond
Mr Grant Sanderson
Mr Peter Short
No.
5,319,506
3,964,495
90,180
38,755
5,000
3,325
89,450
11,000
‑
‑
No.
No.
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
No.
4,504
9,008
4,504
4,504
6,501
1,501
4,504
2,252
‑
‑
No.
5,324,010
3,973,503
94,684
43,259
11,501
4,826
93,954
13,252
‑
‑
The following table sets out each key management personnel’s equity holdings (represented by holdings of restricted
fully paid ordinary shares in Electro Optic Systems Holdings Limited issued on 20 June 2018 under the Loan Funded
Share Plan).
Balance at
1/1/19
Granted as
remuneration
Received on
exercise of
options
Net other
change
Balance at
31/12/19
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Lt Gen Peter Leahy AC
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Dr Craig Smith
Mr Scott Lamond
Mr Grant Sanderson
Mr Peter Short
No.
200,000
2,000,000
200,000
200,000
200,000
200,000
250,000
250,000
250,000
250,000
No.
No.
No.
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
No.
200,000
2,000,000
200,000
200,000
200,000
200,000
250,000
250,000
250,000
250,000
17
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 Directors’ report (cont)
Remuneration Report (cont)
Elements of remuneration related to performance
There are no performance conditions other than service attached to the above option remuneration to directors and
executives. Directors and senior executives receive options as disclosed which are not subject to specific performance
conditions other than service. In relation to the Loan Funded Share Plan there are market and non‑market conditions.
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.
As detailed above, 5,180,000 ordinary restricted shares were issued to directors, senior executives and senior staff on
20 June 2018 under the Loan Funded Share Plan. These ordinary restricted shares are subject to performance and
vesting conditions detail above.
Key management personnel option holdings
There were 3,500,000 options outstanding at the end of the previous financial year to key management personnel.
These 3,500,000 unlisted options exercisable at $3.00 each expired on 31 January 2019 unexercised:
Directors
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Lt Gen Peter Leahy AC
Air Marshal Geoffrey Brown AO
Senior Executives
Dr Craig Smith
Mr Scott Lamond
Date of Issue
5 February 2016
5 February 2016
5 February 2016
5 February 2016
30 May 2016
5 February 2016
5 February 2016
Unlisted Options at the end of
the financial year held by KMP
‑
‑
‑
‑
‑
‑
‑
‑
Other transactions with key management personnel
During the year, the Company paid a total of $76,814 (2018: $76,814) 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 paid $47,222 (2018: $47,222) 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 $47,222 (2018: $47,222) to GCB Stratos Consulting Pty Limited, a company
associated with Air Marshal Geoffrey Brown in respect of directors fees and superannuation for Geoff Brown.
During the year, the Company paid $141,073 (2018: $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 $30,441 (2018: $28,441) 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 table below sets out summary information about the company’s earnings and movements in shareholder wealth
for the last 5 financial years.
18
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 Directors’ report (cont)
Remuneration Report (cont)
31 December 2019
$
31 December 2018
$
31 December 2017
$
31 December 2016
$
31 December 2015
$
Revenue
165,985,563
87,130,396
23,259,794
25,797,200
30,500,748
Net profit/ (loss)
before tax
Net profit/ (loss)
after tax
Share price at
start of year
Share price at
end of year
Dividends paid
21,970,274
15,081,372
(9,319,930)
(2,918,477)
3,032,442
18,058,758
15,081,372
(9,319,930)
(886,692)
3,032,442
31 December 2019
$
31 December 2018
$
31 December 2017
$
31 December 2016
$
31 December 2015
$
2.45
7.42
‑
2.45
2.45
‑
1.73
2.45
‑
1.49
1.73
‑
0.82
1.49
‑
Audit and Risk Committee
The Board appointed four 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, Air Marshal Geoffrey
Brown AO and Ms Kate Lundy (Joined 26 February 2020).
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 9 to the financial statements.
Nominations and Remuneration
Committee
The Board appointed four non‑executive directors
plus the CEO to form the committee, with a majority
of independent directors and the Chairman being
an independent person. The current members of
the Committee are Air Marshal Geoffrey Brown AO
(Chairman ‑ appointed 6 February 2020), Lt Gen Peter
Leahy AC, Mr Ian Dennis, Ms Kate Lundy and Mr Ben
Greene. Lt Gen Peter Leahy was Chairman until
6 February 2020.
Auditor’s Independence Declaration
The auditor’s independence declaration is included on
page 20 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
Non‑audit Services
I A Dennis
Director
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
Dated at Sydney 31 day of March 2020
19
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 20
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 21
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 22
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 23
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 24
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 25
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 13 to 19
26
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 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 are in compliance with International Financial Reporting
Standards, as stated in Note 1 to the financial statements;
(c) 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; and
(d) the directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the company is within the class of compliance affected by ASIC Corporations
(Wholly Owned Companies) Instrument 2016/785. The nature of the deed of cross guarantee is such that each company
which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of
cross guarantee.
In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which
ASIC Corporations (Wholly Owned Companies) Instrument 2016/785 applies, as detailed in Note 27 to the financial
statements will, as a consolidated entity, be able to meet any liabilities to which they are, or may become,
subject because of the deed of cross guarantee.
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 31 day of March 2020
27
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 consoLiDateD stateMent of profit or Loss
anD otHer coMpreHensive incoMe
for tHe financiaL year enDeD 31 DeceMBer 2019
Revenue
Changes in inventories of work in progress
Raw materials and consumables used
Employee benefits expense
Administration expenses
Amortisation of intangibles
Interest paid ‑ other
Interest expense on right‑of‑use‑assets
Depreciation and amortisation of property, plant and equipment
Depreciation of right‑of‑use‑assets
Foreign exchange gains/ (losses)
Occupancy costs
Other expenses
31 December
2019
$
31 December
2018
$
Note
2(a)
165,985,563
87,130,396
(5,740,505)
(2,842,202)
(84,357,111)
(40,356,855)
2(b)
(33,697,340)
(22,147,866)
2(b)
2(b)
2(b)
2(b)
2(b)
(14,133,068)
(9,502,730)
(354,299)
‑
‑
(36,903)
(384,217)
‑
(1,694,948)
(633,235)
(2,083,154)
‑
610,019
7,712,222
(524,816)
(3,440,347)
(1,655,850)
(801,108)
Profit before income tax benefit
21,970,274
15,081,372
Income tax expense
4
(3,911,516)
‑
Profit for the year
Attributable to:
Owners of the Company
Non‑controlling interests
Other comprehensive income
18,058,758
15,081,372
24
18,435,425
15,302,214
(376,667)
(220,842)
18,058,758
15,081,372
Items that may be reclassified subsequently to profit and loss
Exchange differences arising on translation of foreign operations
337,858
(1,157,927)
Total comprehensive Profit for the year
18,396,616
13,923,445
Attributable to:
Owners of the Company
Non‑controlling interests
Profit/ (Loss) per share
Basic (cents per share)
Diluted (cents per share)
Notes to the financial statements are included on pages 34 to 98.
28
18,773,283
14,144,287
(376,667)
(220,842)
18,396,616
13,923,445
3
3
19.43
19.38
17.22
17.22
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 consoLiDateD stateMent of financiaL position
as at 31 DeceMBer 2019
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Contract asset
Inventories
Other
TOTAL CURRENT ASSETS
NON‑CURRENT ASSETS
Trade and other receivables
Other
Deferred tax asset
Security deposit
Loan to associate
Right of use assets
Goodwill
Intangible assets
Property, plant and equipment
TOTAL NON‑CURRENT ASSETS
TOTAL ASSETS
Consolidated
December
2019
$
December
2018
$
Note
25
77,881,766
40,538,225
5
6
7
8
5
8
4
30
10
11
12
13
14
27,056,202
26,819,746
44,772,583
‑
53,491,173
26,465,499
14,737,600
12,713,727
217,939,324
106,537,197
12,055,798
7,146,990
7,800,037
2,252,177
2,838,900
‑
9,021,823
8,971,929
2,632,783
13,961,128
14,878,316
17,235,701
‑
‑
‑
‑
8,061,509
3,960,849
88,485,995
22,331,945
306,425,319
128,869,142
29
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 consoLiDateD stateMent of financiaL position
as at 31 DeceMBer 2019 (cont)
CURRENT LIABILITIES
Trade and other payables
Current tax payable
Lease liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON‑CURRENT LIABILITIES
Lease liabilities
Provisions
TOTAL NON‑CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
Equity attributable to owners of the Company
Non‑controlling interests
TOTAL EQUITY
Notes to the financial statements are included on pages 34 to 98.
Consolidated
December
2019
$
December
2018
$
Note
15
16
17
16
17
20
23
24
36,970,003
22,328,897
8,352,728
2,613,223
‑
‑
12,882,819
6,366,891
60,818,773
28,695,788
11,386,647
‑
6,513,467
3,891,770
17,900,114
3,891,770
78,718,887
32,587,558
227,706,432
96,281,584
274,311,590
161,784,727
9,312,018
8,472,791
(55,378,740)
(73,814,165)
228,244,868
96,443,353
(538,436)
(161,769)
227,706,432
96,281,584
30
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 consoLiDateD stateMent of cHanGes in equity
for tHe year enDeD 31 DeceMBer 2019
Accumulated
losses
$
Issued
capital
$
Foreign
currency
translation
reserve
$
Employee
equity
settled
benefits
reserve
$
Attributable
to owners of
the parent
$
Non‑
controlling
interests
$
Total Equity
$
2019
Balance at
1 January 2019
(73,814,165) 161,784,727 (1,399,064)
9,871,855
96,443,353
(161,769)
96,281,584
Profit for the year
18,435,425
Exchange differences
arising on translation of
foreign operations
Total comprehensive
profit for the year
‑
18,435,425
‑
‑
‑
‑
‑
18,435,425
(376,667)
18,058,758
337,858
‑
337,858
‑
337,858
337,858
‑
18,773,283
(376,667)
18,396,616
Issue of 4,271,357 new
ordinary shares at $7.31
as part consideration
for the acquisition of EM
Solutions Pty Ltd
Issue of 10,144,224 new
shares at $6.66 each
under the institutional
placement
Issue of 2,558,753 new
shares at $6.66 under the
Share Purchase Plan
Recognition of share
based payments
Balance at
31 December 2019
‑
31,223,620
‑
64,261,948
‑
17,041,295
‑
‑
‑
‑
31,223,620
‑
31,223,620
‑
64,261,948
‑
64,261,948
‑
17,041,295
‑
17,041,295
‑
‑
‑
501,369
501,369
‑
501,369
(55,378,740) 274,311,590 (1,061,206) 10,373,224 228,244,868
(538,436) 227,706,432
31
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 consoLiDateD stateMent of cHanGes in equity
for tHe year enDeD 31 DeceMBer 2019 (cont)
Accumulated
losses
$
Issued
capital
$
Foreign
currency
translation
reserve
$
Employee
equity
settled
benefits
reserve
$
Attributable
to owners of
the parent
$
Non‑
controlling
interests
$
Total Equity
$
2018
Balance at
1 January 2018
(89,116,379) 103,342,071
(241,137)
9,586,065
23,570,620
‑
23,570,620
Profit for the year
15,302,214
‑
‑
‑
15,302,214
(220,842)
15,081,372
Exchange differences
arising on translation of
foreign operations
Total comprehensive
profit for the year
Issue of 10,471,434 new
shares at $2.91 each
Issue of 10,147,123 new
shares at $2.91 each
Issue of 495,858 new
shares at $2.91 under
the Share Purchase Plan
Adjustment arising
from change in
non‑controlling interest
Recognition of share
based payments
Balance at
31 December 2018
‑
‑
(1,157,927)
‑
(1,157,927)
‑
(1,157,927)
15,302,214
‑
(1,157,927)
‑
14,144,287
(220,842)
13,923,445
‑
‑
‑
‑
‑
28,948,278
28,051,722
1,442,656
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
28,948,278
28,051,722
1,442,656
‑
‑
‑
28,948,278
28,051,722
1,442,656
‑
59,073
59,073
‑
285,790
285,790
‑
285,790
(73,814,165) 161,784,727 (1,399,064)
9,871,855
96,443,353
(161,769)
96,281,584
Notes to the financial statements are included on pages 34 to 98.
32
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 consoLiDateD stateMent of casH fLows
for tHe year enDeD 31 DeceMBer 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Interest received
Interest and other costs of finance paid
Consolidated
31 December
2019
$
31 December
2018
$
Note
109,149,110
63,870,012
(141,283,329)
(80,309,969)
(1,881,111)
569,917
(384,217)
‑
790,658
(36,903)
Net cash (outflows) from operating activities
25(c)
(33,829,630)
(15,686,202)
Cash flows from investing activities
Payment for property, plant and equipment
Payment to acquire entity
Loan to associate
Security deposit for performance bond
Net cash (outflows) from investing activities
Cash flows from financing activities
Proceeds from issue of new shares
Repayment of lease liabilities
Net cash inflows from financing activities
(4,599,841)
(3,188,913)
(1,253,836)
(2,780,265)
‑
‑
‑
(8,971,929)
(8,633,942)
(12,160,842)
81,303,243
58,442,656
(1,722,923)
‑
79,580,320
58,442,656
Net increase in cash and cash equivalents
37,116,748
30,595,612
Cash and cash equivalents at the beginning of the financial year
40,538,225
9,989,953
Effects of exchange rate fluctuations on the balances of cash held in
foreign currencies
226,793
(47,340)
Cash and cash equivalents at the end of the financial year
25(a)
77,881,766
40,538,225
Notes to the financial statements are included on pages 34 to 98.
33
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019
1. Summary of Accounting Policies
1(a) Statement of compliance
The financial statements are general purpose
financial statements which have 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 consolidated entity. 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
(“AASB”). Compliance with AASB 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 31 March 2020.
1(b) 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.
1(c) Going Concern
The financial report has been prepared on the going
concern basis 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 had net cash outflows from
operating activities during the year of $33,829,630.
Subsequent to the end of the financial reporting
period, as outlined in Note 31, COVID‑19 was
declared as a worldwide pandemic. This has
resulted in increasing the uncertainty in capital
markets as well as challenges in delivering
contracted services across jurisdictions, and related
uncertainties regarding capital market and business
liquidity in the short term.
In the opinion of the directors, the ability of the
consolidated entity to continue as a going concern
and pay its debts as and when they become due and
payable is dependent upon:
■ the continued ability of the consolidated entity to
deliver current contracts on time, to the required
specification and within budgeted costs;
■ key military and government customers making
timely payments for the goods supplied in
accordance with contractual terms; and
■ the ability to raise funding should the need arise.
If the consolidated entity is unable to achieve
successful outcomes in relation to the above
matters, significant uncertainty would exist as to
the ability of the consolidated entity to continue as
a going concern and therefore, it may be required
to realise its assets and extinguish its liabilities
other than in the normal course of business and
at amounts different from those stated in the
financial report.
No adjustments have been made to the financial
report relating to the recoverability and classification
of recorded asset amounts or to the amounts and
classification of liabilities that might be necessary
should the consolidated entity not continue as a
going concern.
1(d) Adoption of new and revised
Standards
New and amended IFRS Standards that are
effective for the current year
The consolidated entity has adopted all of the new
and revised Standards and Interpretations issued
by the Australian Accounting Standards Board
(the AASB) that are relevant to its operations and
effective for an accounting period that begins on or
after 1 January 2019.
New and revised Standards and amendments
thereof and Interpretations effective for the current
financial year, and which have been applied in the
preparation of this general purpose financial report,
that are relevant to the consolidated entity:
■ AASB 16 Leases
34
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
1. Summary of Accounting Policies (cont)
In the current year, the consolidated entity has
applied AASB 16 Leases for the first time. AASB 16
introduces new or amended requirements with
respect to lease accounting. It introduces significant
changes to the lessee accounting by removing the
distinction between operating and finance leases
and requiring the recognition of a right‑of‑use asset
and a lease liability at the lease commencement
for all leases, except for short‑term leases and
leases of low value assets. In contrast to lessee
accounting, the requirements for lessor accounting
have remained largely unchanged. Details of these
new requirements and the impact of the adoption of
AASB 16 on the consolidated entity’s statements are
described below.
The date of initial application of AASB 16 for the
consolidated entity is 1 January 2019.
The consolidated entity has applied AASB 16 using
the modified retrospective approach with the
cumulative effect of initially applying the Standard
recognised at the date of initial application in
Accumulated Losses.
Impact on Lessee Accounting
Former operating leases
AASB 16 changes how the consolidated entity
accounts for leases previously classified as
operating leases under AASB 117, which were
off‑balance‑sheet.
Applying AASB 16, for all leases (except as noted
below), the consolidated entity:
a) recognises right‑of‑use assets and lease
liabilities in the consolidated statement of
financial position, initially measured at the
present value of future lease payments;
b) recognises depreciation of right‑of‑use
assets and interest on lease liabilities in the
consolidated statement of profit or loss and
other comprehensive income;
c) separates the total amount of cash paid
into a principal portion (presented within
financing activities) and interest (presented
within operating activities) in the consolidated
statement of cash flows.
Lease incentives (e.g. free rent period) are recognised
as part of the measurement of the right‑of‑use
assets and lease liabilities whereas under AASB 117
they resulted in the recognition of a lease incentive
liability, amortised as a reduction of rental expense
on a straight‑line basis.
Under AASB 16, right‑of‑use assets are tested
for impairment in accordance with AASB 136
Impairment of Assets. This replaces the previous
requirement to recognise a provision for onerous
lease contracts.
For short‑term leases (lease term of 12 months
or less) and leases of low‑value assets, the
consolidated entity has opted to recognise a lease
expense on a straight‑line basis as permitted by
AASB 16. This expense is presented within other
expenses in the consolidated statement of profit
or loss as applicable.
Financial impact of initial application of
AASB 16
The initial application of AASB 16 resulted in:‑
i. The creation of a right‑of‑use asset of
$5,278,362 and a lease liability of $5,278,362 as
at 1 January 2019.
ii. A difference of $287,072 between the operating
lease commitments disclosed in applying AASB
117 in the 31 December 2018 annual report,
discounted using the incremental borrowing rate
implicit in (iii) below and the lease liability in
(i) above. This difference is primarily attributable
to the inclusion of certain leases as part of the
opening adjustment that were previously not
disclosed as operating lease commitments.
iii. When measuring lease liabilities,
the consolidated entity discounted lease
payments using the rate implicit in the lease.
Where this could not be determined, the
consolidated entity’s incremental borrowing
rate was used. The weighted average rate
applied is 4.75%.
35
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
1. Summary of Accounting Policies (cont)
New and revised AASB Standards in issue but not yet effective
At the date of authorisation of the financial statements, the consolidated entity has not applied the following new
and revised Australian Accounting Standards, Interpretations and amendments that have been issued but are
not yet effective:
Standard/amendment
AASB 2014‑10 Amendments to Australian Accounting Standards ‑ Sale or Contribution
of Assets between an Investor and its Associate or Joint Venture [AASB 10 & AASB 128],
AASB 2015‑10 Amendments to Australian Accounting Standards ‑ Effective Date of
Amendments to AASB 10 and AASB 128 and AASB 2017‑5 Amendments to Australian
Accounting Standards ‑ Effective Date of Amendments to AASB 10 and AASB 128 and
Editorial Corrections
AASB 2018‑6 Amendments to Australian Accounting Standards ‑ Definition
of a Business
AASB 2018‑7 Amendments to Australian Accounting Standards ‑ Definition of Material
AASB 2019‑1 Amendments to Australian Accounting Standards ‑ References to the
Conceptual Framework
AASB 2019‑3 Amendments to Australian Accounting Standards ‑ Interest Rate
Benchmark Reform
AASB 2019‑5 Amendments to Australian Accounting Standards ‑ Disclosure of the
Effect of New IFRS Standards Not Yet Issued in Australia
Effective for annual
reporting periods
beginning on or after
1 January 2022 (Editorial
corrections in AASB
2017‑5 applied from
1 January 2018)
1 January 2020
1 January 2020
1 January 2020
1 January 2020
1 January 2020
The Directors do expect these new and revised standards issued but not effective to have a material effect on the
financial statements.
1(e) Revenue Recognition
The consolidated entity recognises revenue from the following major sources:
■ Sale of goods
■ Providing services
The consolidated entity recognises revenue from the above two sources both over time and at a point in time
depending on the nature and specifications of contracts entered into with its customers.
For the revenue recognised over time refer to note 2(a) which details the basis of revenue recognition for the
current year.
For revenue recognised at a point in time, the consolidated entity recognises revenue when control transfers
to the customer.
The consolidated entity considers the following requirements in order to assess whether control has passed:
(a) The consolidated entity has a present right to payment for the asset,
(b) The customer has legal title to the asset,
(c) The consolidated entity has transferred physical possession of the asset,
(d) The customer has the significant risks and rewards of ownership of the asset,
(e) The customer has accepted the asset.
Interest revenue is recognised on an accrual basis.
36
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
1. Summary of Accounting Policies (cont)
Sales‑related warranties
Debt instruments
Sales‑related warranties cannot be purchased
separately and they serve as an assurance that
the products sold comply with agreed‑upon
specifications. Accordingly, the consolidated entity
will continue to account for these warranties in
accordance with AASB 137 Provisions, Contingent
Liabilities and Contingent Assets consistent with its
current accounting treatment.
1(f)(i) Financial assets
Classification
The consolidated entity classifies its financial assets
in the following measurement categories:
■ Those to be measured subsequently at fair value
(through profit or loss), and
■ Those to be measured at amortised cost.
The classification depends on the consolidated
entity’s business model for managing financial
assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses
will either be recorded in profit or loss or other
comprehensive income. For investments in debt
instruments, this will depend on the business model
in which the investment is held.
For investments in equity instruments that are
not held for trading, this will depend on whether
the consolidated entity has made an irrevocable
election at the time of initial recognition to account
for the equity investment at fair value through
other comprehensive income. The consolidated
entity reclassifies debt investments when and
only when its business model for managing those
assets changes.
Measurement
At initial recognition, the consolidated entity
measures a financial asset at its fair value plus,
in the case of a financial asset not at fair value
through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried
at fair value through profit or loss are expensed
in profit or loss. Measurement of cash and cash
equivalents and trade and other receivables
remains at amortised cost consistent with the
comparative period.
Subsequent measurement of debt instruments
depends on the consolidated entity’s business
model for managing the asset and the cash
flow characteristics of the asset. There are two
measurement categories into which the consolidate
entity classifies its debt instruments:
■ Amortised cost: Assets that are held for collection
of contractual cash flows where those cash
flows represent solely payments of principal and
interest are measured at amortised cost. A gain
or loss on a debt investment that is subsequently
measured at amortised cost and is not part of
a hedging relationship is recognised in profit or
loss when the asset is derecognised or impaired.
Interest income from these financial assets is
included in finance income using the effective
interest rate method.
■ Fair value through profit or loss (FVPL): Assets
that do not meet the criteria for amortised cost
or FVOCI are measured at fair value through
profit or loss. A gain or loss on a debt investment
that is subsequently measured at fair value
through profit or loss and is not part of a hedging
relationship is recognised in profit or loss and
presented net in the statement of profit or loss
within other gains/(losses) in the period in which
it arises.
Equity instruments
The consolidated entity subsequently measures
all equity investments at fair value. Where the
consolidated entity management has elected
to present fair value gains and losses on equity
investments in other comprehensive income,
there is no subsequent reclassification of fair value
gains and losses to profit or loss following the
derecognition of the investment. Dividends from
such investments continue to be recognised in profit
or loss as other income when the consolidated
entity’s right to receive payments is established.
Impairment losses (and reversal of impairment
losses) on equity investments measured at FVOCI
are not reported separately from other changes
in fair value. Changes in the fair value of financial
assets at fair value through profit or loss are
recognised in other expenses in the statement of
profit or loss and other comprehensive income
as applicable.
37
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
1. Summary of Accounting Policies (cont)
Impairment
The consolidated entity or group assesses on a
forward looking basis the expected credit losses
associated with its debt instruments carried at
amortised cost. The impairment methodology applied
depends on whether there has been a significant
increase in credit risk. For trade receivables, and
lease receivables, the consolidated entity applies
the simplified approach permitted by AASB 9, which
requires expected lifetime losses to be recognised
from initial recognition of the receivables.
1(f)(ii) Financial Liabilities
Interest bearing liabilities
All loans and borrowings are initially recognised at
fair value, being the amount received less attributable
transaction costs. After initial recognition, interest
bearing liabilities are stated at amortised cost with any
difference between cost and redemption value being
recognised in the statement of profit or loss over the
period of the borrowings on an effective interest basis.
Trade and other payables
Liabilities are recognised for amounts to be paid
for goods or services received. Trade payables
are settled on terms aligned with the normal
commercial terms in the consolidated entity’s
countries of operation.
(g) 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.
(h) 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.
(i) Foreign currency
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 or
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 or loss on
disposal of the foreign operation.
(j) Goods and services tax
Revenues, expenses and assets are recognised net of
the amount of goods and services tax (GST), except:
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.
38
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (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 and intangible assets with indefinite
useful lives 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 cost of disposal 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 or 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 recognised on 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.
39
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
1. Summary of Accounting Policies (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 profit or loss
and other 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 consolidated entity 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
as ta 31 December 2019. Since 31 December 2019,
the consolidated entity has entered into tax funding
and tax sharing agreements with all the entities
within the tax consolidated group.
(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.
The following estimated useful lives are used in the
calculation of amortisation:
Core technology (not patented)
Patented technology
Software
Customer contracts and
relationships
10 years
15 years
5 years
15 years
Intangible assets were valued by an independent
valuer as part of the Purchase Price Acquisition
Valuation as at 11 October 2019.
40
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
1. Summary of Accounting Policies (cont)
(o) Inventories
Inventories are measured at the lower of cost
and net realisable value. Costs are assigned on
a weighted average cost basis for raw material
inventory and standard cost for finished goods.
Net realisable value represents the estimated
selling price less all estimated costs of completion
and costs to be incurred in marketing, selling
and distribution.
(p) Leased assets
Policies applicable from 1 January 2019
(See Note 1(d))
The consolidated entity assesses whether a contract
is or contains a lease, at inception of a contract.
The consolidated entity recognises a right‑of‑use
asset and a corresponding lease liability with
respect to all lease agreements in which it is the
lessee, except for short‑term leases (defined as
leases with a lease term of 12 months or less) and
leases of low value assets. For these leases, the
consolidated entity recognises the lease payments
as an operating expense on a straight‑line basis
over the term of the lease unless another systematic
basis is more representative of the time pattern
in which economic benefits from the leased asset
are consumed.
The lease liability is initially measured at the present
value of the lease payments that are not paid at
the commencement date, discounted by using the
rate implicit in the lease. If this rate cannot be
readily determined, the consolidated entity uses its
incremental borrowing rate.
Lease payments included in the measurement of the
lease liability comprise:
■ fixed lease payments (including in‑substance
fixed payments), less any lease incentives;
■ variable lease payments that depend on an index
or rate, initially measured using the index or rate
at the commencement date;
■ the amount expected to be payable by the lessee
under residual value guarantees;
■ the exercise price of purchase options, if the
lessee is reasonably certain to exercise the
options; and
■ payments of penalties for terminating the lease,
if the lease term reflects the exercise of an option
to terminate the lease.
The lease liability is presented as a separate line in
the consolidated statement of financial position.
The lease liability is subsequently measured by
increasing the carrying amount to reflect interest
on the lease liability (using the effective interest
method) and by reducing the carrying amount to
reflect the lease payments made.
The consolidated entity remeasures the lease
liability (and makes a corresponding adjustment to
the related right‑of‑use asset) whenever:
■ the lease term has changed or there is a change
in the assessment of exercise of a purchase
option, in which case the lease liability is
remeasured by discounting the revised lease
payments using a revised discount rate.
■ the lease payments change due to changes
in an index or rate or a change in expected
payment under a guaranteed residual value,
in which cases the lease liability is remeasured
by discounting the revised lease payments
using the initial discount rate (unless the lease
payments change is due to a change in a floating
interest rate, in which case a revised discount
rate is used).
■ a lease contract is modified and the lease
modification is not accounted for as a separate
lease, in which case the lease liability is
remeasured by discounting the revised lease
payments using a revised discount rate.
The consolidated entity did not make any such
adjustments during the period.
The right‑of‑use assets comprise the initial
measurement of the corresponding lease
liability, lease payments made at or before the
commencement day and any initial direct costs.
They are subsequently measured at cost less
accumulated depreciation and impairment losses.
Whenever the consolidated entity incurs an
obligation for costs to dismantle and remove a
leased asset, restore the site on which it is located
or restore the underlying asset to the condition
required by the terms and conditions of the lease,
a provision is recognised and measured under
AASB 137. The costs are included in the related
right‑of‑use asset, unless those costs are incurred
to produce inventories.
41
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
1. Summary of Accounting Policies (cont)
The consolidated entity as lessee
Right‑of‑use assets are depreciated over the
shorter period of lease term and useful life of the
underlying asset. If a lease transfers ownership of
the underlying asset or the cost of the right‑of‑use
asset reflects that the consolidated entity expects to
exercise a purchase option, the related right‑of‑use
asset is depreciated over the useful life of the
underlying asset. The depreciation starts at the
commencement date of the lease.
The right‑of‑use assets are presented as a
separate line in the consolidated statement of
financial position.
The consolidated entity applies AASB 136
Impairment of Assets (as per Note 1(l) to determine
whether a right‑of‑use asset is impaired and
accounts for any identified impairment loss per the
accounting policy disclosed in the 31 December 2018
annual report.
Variable rents that do not depend on an index or
rate are not included in the measurement the lease
liability and the right‑of‑use asset. The related
payments are recognised as an expense in the
period in which the event or condition that triggers
those payments occurs and are included in the line
“other expenses” in the statement of profit or loss.
As a practical expedient, AASB 16 permits a
lessee not to separate non‑lease components,
and instead account for any lease and associated
non‑lease components as a single arrangement.
The consolidated entity has not used this
practical expedient.
Policies applicable prior to 1 January 2019
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.
The consolidated entity as lessor
Income from operating leases is recognised on a
straight‑line basis over the term of the relevant
lease. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the
carrying amount of the leased asset and recognised
on a straight‑line basis over the lease term.
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 asset
are consumed. Contingent rentals arising under
operating leases are recognised as an expense in
the period in which they are incurred. In the event
that lease incentives are received to enter into
operating leases, such incentives are recognised
as a liability. The aggregate benefit of incentives is
recognised as a reduction of rental expense on a
straight‑line basis, except where another systematic
basis is more representative of the time pattern
in which economic benefits from the leased asset
are consumed.
(q) Basis of consolidation
The consolidated financial statements incorporate
the financial statements of the Company and entities
controlled by the Company. Control is achieved when
the Company:
■ Has power over the investee;
■ Is exposed, or has rights, to variable returns from
its involvement with the investee; and
■ Has the ability to use its power to affect
its returns.
The Company reassesses whether or not it controls
an investee if facts and circumstances indicate
that there are changes to one or more of the three
elements of control listed above.
Consolidation of a subsidiary begins when the
Company obtains control over the subsidiary and
ceases when the Company loses control of the
subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year
are included in the consolidated statement of profit
or loss and other comprehensive income from the
date the Company gains control until the date when
the Company ceases to control the subsidiary.
All intra group assets and liabilities, equity, income,
expenses, and cash flows relating to transactions
between members of the consolidated entity are
eliminated in full on consolidation.
42
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
1. Summary of Accounting Policies (cont)
(s) 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.
Contract losses ‑ Present obligations arising under
onerous contracts are recognised and measured as
a provision. An onerous contract is considered to
exist where the consolidated entity 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‑ a provision for
decommissioning cost 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.
Non‑controlling interest in subsidiaries are
identified separately from the consolidated entity’s
equity therein. Those interest of non‑controlling
shareholders that are present ownership interest
entitling these holders to a proportionate share of
net assets upon liquidation may initially be measured
at fair value or at the non‑controlling interests’
proportionate share of the fair value of the acquiree’s
identifiable net assets. The choice of measurement is
made on and acquisition‑by‑acquisition basis. Other
non‑controlling interests are initially measured at fair
value. Subsequent to acquisition, the carrying amount
of non‑controlling interest is the amount of those
interests at initial recognition plus the non‑controlling
interests’ share of subsequent changes in equity.
Total comprehensive income is attributed to
non‑controlling interests even if this results in
non‑controlling interests having a deficit balance.
(r) 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.
The following estimated useful lives are used in the
calculation of depreciation:
Plant and equipment
Leasehold improvements
Leased assets
Office equipment
5 to 15 years
3 to 5 years
3 to 5 years
5 to 15 years
Furniture, fixture and fittings
5 to 15 years
Motor vehicles
3 to 5 years
43
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
1. Summary of Accounting Policies (cont)
(t) 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 the Black Scholes 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.
Ordinary shares issued under the Loan Funded
Share Plan is accounted for as an in substance
option and were initially measured using a Monte
Carlo simulation model. Directors’ reassess the
non‑market inputs and adjust throughout the life
for likely eventuality.
(u) Interests in joint operations
A joint operation is a joint arrangement whereby the
parties that have joint control of the arrangement
have rights to the assets, and obligations for the
liabilities, relating to the arrangement. Joint control
is the contractually agreed sharing of control of
an arrangement, which exists only when decisions
about the relevant activities require unanimous
consent of the parties sharing control.
When a group entity undertakes its activities under
joint operations, the consolidated entity as a joint
operator recognises in relation to its interest in a
joint operation:
■ its assets, including its share of any assets
held jointly;
■ its liabilities, including its share of any liabilities
incurred jointly;
■ its revenue from the sale of its share of the output
arising from the joint operations;
■ its share of the revenue from the sale of the
output by the joint operation; and
■ its expenses, including its share of any expenses
incurred jointly.
The consolidated entity accounts for the assets,
liabilities, revenues and expenses relating to its
interest in a joint operation in accordance with the
AASB’s applicable to the particular assets, liabilities
revenues and expenses.
When a consolidated entity transact with a joint
operation in which a consolidated entity is a
joint operator (such as a sale or contribution of
assets), the consolidated entity is considered
to be conducting the transaction with the other
parties to the joint operation, and gains or losses
resulting from the transactions are recognised in
the consolidated entity’s consolidated financial
statements only to the extent of other parties’
interest in the joint operation.
When a consolidated entity transacts with a joint
operation in which a consolidate entity is a joint
operator (such as a purchase of assets), the
consolidate entity does not recognise its share of
the gains and losses until it resells those assets to a
third party.
(v) Goodwill
Goodwill is initially recognised and measured as the
excess of the sum of the consideration transferred,
the amount of any non‑controlling interests in
the acquire, and the fair value of the acquirer’s
previously held equity interest (if any) over the net
of the acquisition‑date amount of the identifiable
assets acquired and liabilities assumed.
Goodwill is not amortised but is reviewed for
impairment at least annually. For the purpose of
impairment testing, goodwill is allocated to each of
the consolidated entity or group’s cash‑generating
units expected to benefit from the synergies
of the combination. Cash‑generating units to
which goodwill has been allocated are tested for
impairment annually, or more frequently when there
is an indication that the unit may be impaired.
(w) Critical accounting judgements
In the application of the consolidated entity’s
accounting policies, management is required to
make judgements, 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 these judgements. Actual results may differ
from these estimates.
44
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
1. Summary of Accounting Policies (cont)
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.
Key judgement and sources of
estimation uncertainty
The following are the key assumptions concerning
the future, and other key sources of estimation
uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within
the next financial year:
Recoverable amount of goodwill
The directors made a critical judgement in relation
to the recoverable amount of goodwill in Note 12
and the allocation of goodwill to the three cash
generating units. Judgement is made regarding the
future cash flows of the three cash generating units.
Deferred tax
The directors made a critical judgement in relation
to recognising the deferred tax balances described
in Note 4(b). The directors currently consider it
probable that sufficient taxable amounts will be
available against which deductible temporary
differences can be utilised in the Australian tax
consolidated entity. No deferred tax assets have
been recognised in the foreign subsidiaries.
Warranty provision
The directors made a critical judgement in relation
to the valuation of the provision for warranty costs
described in Note 18. The valuation is determined
based on the director’s best estimate of the
expenditure required to settle the consolidated
entity’s liability under its warranty program.
Loan to associate
The directors made a critical judgement in
relation to the treatment of the loan to associate.
The directors determined that based on the
disclosure in Note 10 that treating the advances
under the Unsecured Convertible Note deed as a
loan in associate was appropriate based on the facts
pertaining to the loan.
Judgements in determining revenue recognised in
the period
There are complexities and judgements associated
with interpreting key revenue contracts entered into
by the entity against the requirements of AASB 15.
This results in a significant level of management
judgement and estimation in relation to interpreting
and accounting for complex contractual terms,
including multiple performance obligations, and
clauses with regards to cancellations and warranties
(amongst others).
(x) Business combinations
Acquisitions of businesses are accounted for
using the acquisition method. The consideration
transferred in a business combination is measured
at fair value, which is calculated as the sum of the
acquisition‑date fair values of assets transferred
by the consolidated entity, liabilities incurred by
the consolidated entity to the former owners of
the acquiree and the equity interest issued by
the consolidated entity in exchange for control
of the acquiree. Acquisition‑related costs are
recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets
acquired and the liabilities assumed are recognised
at their fair value at the acquisition date, except that:
■ deferred tax assets or liabilities and assets
or liabilities related to employee benefit
arrangements are recognised and measured in
accordance with IAS 12 and IAS 19 respectively;
■ liabilities or equity instruments related to
share‑based payment arrangements of the
acquiree or share‑based payment arrangements
of the consolidated entity entered into to replace
share‑based payment arrangements of the
acquiree are measured in accordance with IFRS 2
at the acquisition date (see below); and
■ assets (or disposal groups) that are classified
as held for sale in accordance with IFRS 5 are
measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of
the consideration transferred, the amount of any
non‑controlling interests in the acquiree, and the
fair value of the acquirer’s previously held equity
interest in the acquiree (if any) over the net of the
acquisition‑date amounts of the identifiable assets
acquired and the liabilities assumed.
45
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
1. Summary of Accounting Policies (cont)
If, after reassessment, the net of the
acquisition‑date amounts of the identifiable assets
acquired and liabilities assumed exceeds the
sum of the consideration transferred, the amount
of any non‑controlling interests in the acquiree
and the fair value of the acquirer’s previously
held interest in the acquiree (if any), the excess
is recognised immediately in profit or loss as a
bargain purchase gain.
When the consideration transferred by the
consolidated entity in a business combination
includes a contingent consideration arrangement,
the contingent consideration is measured at its
acquisition‑date fair value and included as part
of the consideration transferred in a business
combination. Changes in fair value of the contingent
consideration that qualify as measurement period
adjustments are adjusted retrospectively, with
corresponding adjustments against goodwill.
Measurement period adjustments are adjustments
that arise from additional information obtained
during the ‘measurement period’ (which cannot
exceed one year from the acquisition date) about
facts and circumstances that existed at the
acquisition date.
The subsequent accounting for changes in the
fair value of the contingent consideration that do
not qualify as measurement period adjustments
depends on how the contingent consideration is
classified. Contingent consideration that is classified
as equity is not remeasured at subsequent reporting
dates and its subsequent settlement is accounted
for within equity. Other contingent consideration is
remeasured to fair value at subsequent reporting
dates with changes in fair value recognised in profit
or loss.
When a business combination is achieved in stages,
the consolidated entity’s previously held interests
(including joint operations) in the acquired entity
are remeasured to its acquisition‑date fair value
and the resulting gain or loss, if any, is recognised
in profit or loss. Amounts arising from interests in
the acquiree prior to the acquisition date that have
previously been recognised in other comprehensive
income are reclassified to profit or loss, where such
treatment would be appropriate if that interest were
disposed of.
If the initial accounting for a business combination
is incomplete by the end of the reporting period in
which the combination occurs, the consolidated
entity reports provisional amounts for the items for
which the accounting is incomplete.
Those provisional amounts are adjusted during
the measurement period (see above), or additional
assets or liabilities are recognised, to reflect new
information obtained about facts and circumstances
that existed as of the acquisition date that, if known,
would have affected the amounts recognised as of
that date.
(y) Derivative liabilities
Derivative liabilities are initially recognised at fair
value on issue. After initial recognition, they are
subsequently measured at fair value through profit
or loss.
(z) Investments in associates
An associate is an entity over which the Group has
significant influence and that is neither a subsidiary
nor an interest in a joint venture. Significant
influence is the power to participate in the financial
operating policy decisions of the investee but is not
control or joint control over these policies.
The Group measures the interest in an associate
at fair value through profit and loss from the date
which significant influence is obtained.
The Group applies IFRS9, including the impairment
requirements, to long‑term interests in an associate
or joint venture to which the equity method is not
applied and which form part of the net investment in
the investee.
Furthermore, in applying IFRS 9 to long‑term
interests, the Group does not take into account
adjustments to their carrying amount required by
IAS 28 (i.e. adjustments to the carrying amount of
long‑term interests arising from the allocation of
losses of the investee or assessment of impairment
in accordance with IAS 28).
46
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
2. Profit from operations
(a) Revenue
Revenue from operations consisted of the following items:
Revenue from the sale of goods
Revenue from the rendering of services
Total revenue
Disaggregation of Revenue
Consolidated
31 December
2019
$
31 December
2018
$
159,170,211
84,299,210
6,214,808
2,040,120
165,385,019
86,339,330
The consolidated entity derives its revenue from the transfer of goods and services over time and at a point in
time in the following major segments.
Timing of revenue recognition
Over time
Defence segment ‑ Sale of goods
Communication segment ‑ Sale of goods
Communication segment ‑ Providing services
Total Revenue recognised over time
Revenue
$
Revenue
$
135,025,200
60,105,786
1,265,438
113,984
‑
‑
136,404,622
60,105,786
The consolidated entity recognises revenue for the overseas remote weapon system contracts over time as
the goods manufactured under these contracts do not have an alternative use for the entity, and EOS has
an enforceable right to payment for performance completed to date under the contracts. AASB 15 takes a
control‑based approach to revenue recognition, where the transfer of a good or service happens as the customer
obtains control of that good or service. Under our current significant contracts, the control of the goods transfer
when the goods are delivered, or when a milestone is met. The output method, based on the delivery of goods
to customers or the achievement of contract milestones faithfully depicts our performance under the contracts
and best depicts the pattern of transfer of goods to the customers. Revenue in relation to a contract earned on a
milestone basis has been adjusted for a variable element.
All other revenue is recognised at a point in time.
At a point in time
Communications segment ‑ Sale of goods
Communications segment ‑ Providing services
Defence segment ‑ Sale of goods
Defence segment ‑ Providing services
Space segment ‑ Sale of goods
Space segment ‑ Providing services
Total Revenue recognised at a point in time
Revenue
$
488,201
23,805
Revenue
$
‑
‑
22,335,015
23,724,572
1,114,122
1,129,557
‑
5,019,254
468,850
910,565
28,980,397
26,233,544
Total Revenue
165,385,019
86,339,330
47
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
2. Profit from operations (cont)
Other revenue
Interest revenue:
Bank deposits
Other
(b) Profit before income tax has been arrived at after charging the
following expenses:
Borrowing costs
Interest paid
Interest expense on right of use assets
Amortisation of intangibles
Depreciation and amortisation ‑ property, plant and equipment
Depreciation on right of use assets
Foreign exchange (gains)
Operating lease rental expenses:
Minimum lease payments
Employee benefit expense:
Share based payments:
Equity settled
Contributions to defined contribution superannuation plans
Other employee benefits
Consolidated
31 December
2019
$
31 December
2018
$
569,917
30,627
790,658
408
165,985,563
87,130,396
31 December
2019
$
31 December
2018
$
‑
36,903
384,217
354,299
1,694,948
2,083,154
‑
‑
633,235
‑
(610,019)
(7,712,222)
‑
2,053,962
501,369
285,790
2,160,445
1,530,708
31,035,526
20,331,368
33,697,340
22,147,866
48
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019
notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
3. Profit per Share
Basic EPS
Diluted EPS
Basic Profit per Share
Profit (a)
31 December
2019
$
31 December
2018
$
19.43 cents
17.22 cents
19.38 cents
17.22 cents
18,058,758
15,081,372
Weighted average number of ordinary shares used in the calculation of basic
earnings per share(b), (c)
92,942,896
87,582,641
Weighted average number of ordinary shares used in the calculation of diluted
earnings per share(b), (c)
93,162,896
87,582,641
(a) Profit used in the calculation of basic earnings per share are the same as the net profit in the statement of profit
or loss and other comprehensive income.
(b) There are potential ordinary shares and hence diluted earnings per share is different to basic earnings
per share. The 220,000 unlisted options exercisable at $2.99 outstanding are in the money at 31 December 2019
and are considered dilutive.
(c) The 5,180,000 ordinary shares issued on 20 June 2018 at a price of $2.99 under the Loan Funded Share Plan
are not included in the weighted average number of ordinary shares as they are treated as in substance options
for accounting purposes. The Loan Funded Share Plan shares are not considered dilutive as all performance
conditions in relation to these shares have not all been met at balance date. The first vesting date of 12.5% of
these shares is 30 June 2020.
49
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
4. Income Tax
Corporation income tax
Current year
Consolidated
31 December
2019
$
31 December
2018
$
3,911,516
‑
(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:
Profit/(Loss) from operations
21,970,274
15,081,372
Income tax expense calculated at 30%
Effect of different tax rates of subsidiaries operating in other jurisdictions
Tax fair value adjustments on acquisition
Tax rate difference of subsidiary acquired
Share based payments
Other non‑deductible/ non assessable items
Deferred tax assets now bought to account
Adjustment in respect of prior years
6,591,082
4,524,412
203,428
339,726
(101,064)
150,411
(166,904)
‑
‑
85,737
(328,209)
1,054,960
6,855,374
5,498,205
(4,233,732)
24,530
‑
‑
Unused Australian tax losses and tax offsets now bought to account
(1,770,284)
(5,498,205)
Unused tax losses and tax offsets not recognised as deferred tax assets
Income tax expense attributable to Operating Profit
3,035,628
3,911,516
‑
‑
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, 0% in United Arab Emirates
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.
50
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
4. Income Tax (cont)
(b) Deferred tax balances
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against currents tax liabilities and when they relate to income taxes levied by the same taxation authority and the
consolidated entity intends to settle current tax assets and liabilities on a net basis.
The following are the major deferred tax liabilities and assets recognised by the consolidated entity and movements
thereon during the current and prior period.
Deferred tax assets
Accruals
Section 40‑880 deduction
Provision for annual leave
Provision for long service leave
Provision for estimated credit losses
Provision for decommissioning costs
Provision for obsolete stock
Provision for make good costs
Provision for warranty
Other
Income tax losses
Deferred tax liabilities
Foreign exchange gain arising from tax fair
value adjustment
Prepaid insurance
Right of use assets
Provision for deferred tax liabilities on
acquired intangible assets
Total
Charge/
(credit) to
profit and
loss
2018
Acquisition of
subsidiary
2019
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
83,926
429,044
512,970
1,199,328
1,298,488
894,210
40,282
75,000
‑
89,087
2,679,651
10,909
(100,983)
65,494
1,264,822
121,978
128,063
1,420,466
1,022,273
‑
‑
6,186
12,980
24,341
(10,909)
334,520
40,282
75,000
6,186
102,067
2,703,992
‑
233,537
6,269,898
1,111,697
7,381,595
(51,439)
(183,353)
(11,760)
‑
‑
‑
(51,439)
(183,353)
(11,760)
93,085
(4,389,228)
(4,296,143)
6,116,431
(3,277,531)
2,838,900
At the reporting date, the consolidated entity has unused tax losses emanating from its non‑Australian entities.
No deferred tax asset has been recognised in respect of these balances as it is not considered probable that there
will be future taxable profits available in these jurisdictions.
51
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
4. Income Tax (cont)
(c) Unrecognised deferred tax balances
The following deferred tax assets have not been bought to account as assets
Tax losses ‑ revenue
Temporary differences
(d) Franking account balance
Consolidated
31 December
2019
$
31 December
2018
$
23,129,161
17,052,793
322,854
2,954,843
23,452,015
20,007,636
Adjusted franking account balance
1,881,111
‑
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 27.
Nature of tax funding arrangements and tax sharing agreements
As at 31 December 2019, there were no formal tax funding or tax sharing arrangements within the tax‑consolidated
or group. Since the end of the financial year, the consolidated entity has entered into tax funding and tax sharing
arrangements with entities in the Australian tax consolidated group.
52
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
5. Trade and other receivables
Current
Trade receivables
GST receivable
Employee receivables
Other debtors
Non‑current
Trade receivables
Consolidated
31 December
2019
$
31 December
2018
$
25,688,863
26,228,489
1,022,437
571,575
166,434
178,468
‑
19,682
27,056,202
26,819,746
12,055,798
7,146,990
The average credit period on sales of goods is 45 days. No interest is charged on outstanding late receivables.
The consolidated entity always measures the loss allowance for trade receivables at an amount equal to
lifetime ECL. The expected credit losses on trade receivables are estimated using a provision matrix by reference
to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for
factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate
and an assessment to both the current as well as the forecasted direction of conditions at the reporting date.
The consolidated entity has not recognised any loss allowance.
There has been no change in the estimation techniques or significant assumptions made during the current
reporting period.
The consolidated entity writes off a trade receivable when there is information indicating that the debtor is in
severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under
liquidation or has entered bankruptcy proceedings, or when the trade receivables are over two years past due,
whichever occurs earlier. None of the trade receivables that have been written off is subject to enforcement activities.
Ageing of past due not impaired
0‑30 days
31‑60 days
61‑90 days
91‑120 days
120 days +
95,967
275,617
420,324
‑
‑
791,908
‑
321,346
‑
‑
19,060
340,406
53
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
6. Contract Asset
Consolidated
31 December
2019
$
31 December
2018
$
Unbilled revenue
44,772,583
9,777
Being amounts reflected in revenue on a milestone basis but not billed to the
customer in the defence segment.
The consolidated entity always measures the loss allowance for unbilled revenue at an amount equal to
lifetime ECL. The expected credit losses on unbilled revenue are estimated using a provision matrix by reference
to past known default experience of the customer, being a government, and an analysis of the customer’s current
financial position, adjusted for factors that are specific to the customer, general economic conditions of the industry
in which the customers operate and an assessment to both the current as well as the forecasted direction of
conditions at the reporting date. The consolidated entity has not recognised any loss allowance as the customer is a
government customer secured by a letter of credit.
There has been no change in the estimation techniques or significant assumptions made during the current
reporting period.
7. Inventories
Raw materials ‑ at net realisable value
Work in progress ‑ at cost
41,642,033
20,356,864
11,849,140
6,108,635
53,491,173
26,465,499
54
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
8. Other Assets
Current
Prepayments
Non‑current
Prepayments
Consolidated
31 December
2019
$
31 December
2018
$
14,737,600
12,713,727
7,800,037
2,252,177
These prepayments relate to prepayments made to suppliers for the delivery of component parts in relation to
current orders.
9. Auditors Remuneration
(a) Auditor of the Parent Entity
Audit or review of the financial report
Taxation services
(b) Other Auditor
Audit or review of the financial report
Taxation services
The auditor of Electro Optic Systems Holdings Limited is Deloitte Touche Tohmatsu.
247,800
8,925
256,725
12,568
1,266
13,834
196,665
5,670
202,335
2,976
893
3,869
55
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
10. Loan to associate
Consolidated
31 December
2019
$
31 December
2018
$
Unsecured convertible note to associate ‑ AEI Air (Holdings) Limited
2,632,783
‑
On 23 April 2019 the consolidated entity entered into an Unsecured Convertible Note deed with a supplier AEI
Air (Holdings) Limited (”supplier”). The terms of the deed require the supplier to issue to the consolidated entity
up to five convertible notes, subject to certain conditions, of which $2,780,265 has been paid. All five notes were
convertible, in aggregate, into such number of shares which represents 51% of the issued share capital of the
supplier at the date of conversion. Following payment of the first note the consolidated entity appointed two
out of five directors of the supplier and had the right to appoint, remove or replace such number of directors
which represent 50% of the board of directors (equivalent to 50% of directors’ voting rights under the revised
articles of association). The meeting of certain conditions, including product specifications would enable the
consolidated entity to request the issuance of the remaining notes at their discretion, and convert these into equity.
The convertible notes are redeemable upon an event of default or at the maturity date (being 36 months after date
of issue of the first note above ‑ 23 April 2019), and on redemption the supplier must repay the face value of the
notes to the consolidated entity.
On 23 April 2019 the consolidated entity also entered into a Put and Call Option deed with the shareholders of the
supplier. This deed allows the consolidated entity to call the remaining 49% of the shareholding in the supplier
at an aggregate exercise price based on an adjusted Net Profit after Tax (NPAT) multiple. The shareholders also
have a put option over the same interest. Further, under this agreement, should certain conditions be met, the
shareholders are able to request the draw down of loan advances to a maximum of GBP1,714,500, payable to the
shareholders in four equal tranches. As at the date of this report the vendors have elected not to make any draw
down of the loans under the agreement. Should the loans be called the agreement contains an offset clause under
which the consolidated entity can offset against amounts payable should the put and call options be exercised.
The put and call options can be exercised by the consolidated entity (or the shareholders) at any time up to and
including 30 June 2022 but are conditional on the exercise of the Unsecured Convertible Notes as referred to above.
The put and call option liability (in relation to the option) is carried at fair value through profit and loss.
Following initial assessment of these arrangements, a subsequent event was disclosed in the half‑year report
outlining that the consolidated entity controlled the supplier from the date of the payment of the second note.
Subsequent to the issuance of the half‑year report the directors sought legal advice in relation to the
arrangements. As a result in the second half of the year the directors have reassessed these arrangements and
now consider that the conclusion that the consolidated entity controlled the supplier from the date of the second
note (as disclosed as a subsequent event in the half‑year report) is not appropriate, and that the nature of the
arrangement with the supplier should be disclosed as an associate as the nature of the Group’s interest is that of
significant influence rather than accounting control.
On 30 December 2019, the consolidated entity entered into an agreement with an entity in the United Arab Emirates
(who is a joint venture partner to EOS) to acquire a 2% interest in the supplier should the consolidated entity
exercise its Unsecured Convertible Note to acquire 51% of the supplier, leaving the consolidated entity with a
potential 49% interest. The consolidated entity also formally rescinded its right to appoint, remove or replace such
number of directors which represent 50% of the board of directors (equivalent to 50% of directors’ voting rights
under the revised articles of association) via deed poll.
Refer to the commitments note (Note 30) for potential commitments under the shareholder loans arrangements.
56
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
11. Right of use assets
(a) Office premises ‑ at cost
Less accumulated depreciation and impairment
(b) Office equipment ‑ at cost
Less accumulated depreciation and impairment
Cost
Office premises
Balance on transition
Additions
Disposals
Net foreign exchange differences
Balance at end of year
Office equipment
Balance on transition
Additions
Balance at end of year
Accumulated Depreciation/Amortisation/ Impairment
Office premises
Balance on transition
Depreciation
Disposals
Net foreign exchange differences
Balance at end of year
Office equipment
Balance on transition
Depreciation
Balance at end of year
Consolidated
31 December
2019
$
31 December
2018
$
15,345,320
(1,805,748)
13,539,572
531,391
(109,835)
421,556
13,961,128
5,236,070
10,255,750
(170,979)
24,479
15,345,320
42,292
489,099
531,391
(1,973,319)
170,979
(3,408)
(1,805,748)
(109,835)
(109,835)
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
57
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
12. Goodwill
Consolidated
31 December
2019
$
31 December
2018
$
Being goodwill in relation to the purchase of EM Solutions Pty Ltd as at
11 October 2019
14,878,316
The consolidated entity acquired all the issued capital of EM Solutions Pty Ltd on 11 October 2019 as detailed in
Note 28.
The carrying amount of goodwill has been allocated to cash generating units (“CGUs”) as follows:
Defence
Space
Communications
2,504,938
2,504,938
9,868,440
14,878,316
‑
‑
‑
‑
‑
A description of each of the CGUs is outlined in Note 34.
The consolidated entity tests goodwill annually for impairment or more frequently if there are indicators that
goodwill might be impaired.
The recoverable amount of each cash‑generating unit is determined based on the fair value less costs of disposal
arrived by discounting a cash flow forecast with the weighted average cost of capital of each CGU. The cash
flow forecast for each CGU which were approved by the directors consists of detailed projections for a five‑year
period included a terminal value calculation for the final year assuming a growth rate assumption in the range of
2.5% to 4.0%.
The weighted average cost of capital takes into account the risk free rate, equity market risk and the specific risk
premium for each CGU. Discount rates used in the calculation are given below:
Defence
Space
Communications
14.1%
23.7%
18.5%
‑
‑
‑
The consolidated entity conducted an analysis of the sensitivity of the impairment test to changes in key
assumptions used to determine the recoverable amount for each of the group of CGUs to which goodwill is
allocated. The directors believe that any reasonably possible change in the key assumptions on which the
recoverable amount of the three CGU’s would not cause the aggregate carrying amount to exceed the aggregate
recoverable amount of the related CGUs.
A 1% increase in the discount rate is considered reasonably possible based on recent experience and would reduce
the headroom in the “Communication” CGU but not result in an impairment charge.
58
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
13. Intangible assets
Being intangible assets identified in the purchase of EM Solutions Pty Ltd as at
11 October 2019
Core technology (not patented)
Patented technology
Software
Customer contracts and relationships
Less
Amortisation of intangibles
Consolidated
31 December
2019
$
31 December
2018
$
10,772,000
3,556,000
486,000
2,776,000
17,590,000
354,299
17,235,701
‑
‑
‑
‑
‑
‑
‑
59
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
14. Property, Plant and Equipment
(a) Plant and equipment ‑ at cost
Less accumulated depreciation and impairment
(b) Leased assets ‑ at cost
Less accumulated amortisation and impairment
(c) Office equipment ‑ at cost
Less accumulated depreciation and impairment
(d) Furniture, fixtures and fittings ‑ at cost
Less accumulated depreciation and impairment
(e) Leasehold improvements ‑ at cost
Less accumulated depreciation and impairment
(f) Motor vehicle ‑at cost
Less accumulated depreciation and impairment
(g) Computer software ‑ at cost
Less accumulated depreciation
(h) Test equipment ‑ at cost
Less accumulated depreciation
(i) Satellite ‑ at cost
Less impairment
Total net book value of Property, Plant and Equipment
60
Consolidated
31 December
2019
$
31 December
2018
$
12,051,766
9,502,565
(8,751,221)
(7,748,865)
3,300,545
1,753,700
26,066
(26,066)
‑
26,066
(26,066)
‑
5,879,604
4,670,390
(4,320,255)
(3,909,971)
1,559,349
760,419
1,711,437
1,560,332
(803,502)
(679,155)
907,935
881,177
2,025,460
1,499,424
(1,362,124)
(1,118,477)
663,336
380,947
370,810
(86,764)
284,046
436,726
(152,441)
284,285
2,790,535
(1,728,522)
1,062,013
102,260
(36,377)
65,883
128,499
(9,776)
118,723
‑
‑
‑
7,000,000
7,000,000
(7,000,000)
(7,000,000)
‑
‑
8,061,509
3,960,849
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
14. Property, Plant and Equipment (cont)
Cost
Plant and equipment
Balance at beginning of year
Additions
Disposals
Net foreign currency exchange differences
Balance at end of year
Leased assets
Balance at beginning of year
Net foreign currency exchange differences
Balance at end of year
Office equipment
Balance at beginning of year
Additions
Transfers
Disposals
Net foreign currency exchange differences
Balance at end of year
Consolidated
31 December
2019
$
31 December
2018
$
9,502,565
7,649,696
2,549,914
1,554,016
‑
(254,022)
(713)
552,875
12,051,766
9,502,565
26,066
‑
23,551
2,515
26,066
26,066
4,670,390
3,955,490
1,261,347
542,589
(8,818)
‑
(43,848)
(124,401)
533
296,712
5,879,604
4,670,390
61
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
14. Property, Plant and Equipment (cont)
Furniture, fixtures and fittings
Balance at beginning of year
Additions
Disposals
Net foreign currency exchange differences
Balance at end of year
Leasehold improvements
Balance at beginning of year
Additions
Net foreign currency exchange differences
Balance at end of year
Motor vehicle
Balance at beginning of year
Additions
Net foreign currency exchange differences
Balance at end of year
Computer software
Balance at beginning of the year
Additions
Transfers
Net foreign currency exchange differences
Balance at end of year
Test equipment ‑ at cost
Balance at beginning of the year
Additions
Balance at end of year
Satellite
Balance at beginning of year
Balance at end of year
62
Consolidated
31 December
2019
$
31 December
2018
$
1,560,332
157,510
(6,405)
826,911
675,373
‑
‑
58,048
1,711,437
1,560,332
1,499,424
1,205,945
526,036
‑
246,859
46,620
2,025,460
1,499,424
102,260
268,380
170
60,682
41,578
‑
370,810
102,260
128,499
299,243
8,818
166
‑
128,499
‑
‑
436,726
128,499
‑
2,790,535
2,790,535
‑
‑
‑
7,000,000
7,000,000
7,000,000
7,000,000
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
14. Property, Plant and Equipment (cont)
Accumulated Depreciation/Amortisation/ Impairment
Plant and equipment
Balance at beginning of year
Depreciation
Acquired from EM Solutions Pty Ltd
Disposals
Net foreign currency exchange differences
Balance at end of year
Leased plant and equipment
Balance at beginning of year
Net foreign currency exchange differences
Balance at end of year
Office equipment
Balance at beginning of year
Depreciation
Transfers
Acquired from EM Solutions Pty Ltd
Disposals
Net foreign currency exchange differences
Balance at end of year
Consolidated
31 December
2019
$
31 December
2018
$
(7,748,865)
(7,188,427)
(769,031)
(231,677)
(261,585)
‑
‑
254,022
(1,648)
(552,875)
(8,751,221)
(7,748,865)
(26,066)
‑
(26,066)
(23,551)
(2,515)
(26,066)
(3,909,971)
(3,563,079)
(365,127)
(174,834)
8,842
(101,909)
43,848
4,062
‑
‑
124,401
(296,459)
(4,320,255)
(3,909,971)
63
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
14. Property, Plant and Equipment (cont)
Furniture, fixtures and fittings
Balance at beginning of year
Depreciation
Acquired from EM Solutions Pty Ltd
Disposals
Net foreign currency exchange differences
Balance at end of year
Leasehold improvements
Balance at beginning of year
Depreciation
Net foreign currency exchange differences
Consolidated
31 December
2019
$
31 December
2018
$
(679,155)
(585,429)
(91,045)
(40,047)
6,405
340
(35,338)
‑
‑
(58,388)
(803,502)
(679,155)
(1,118,477)
(243,647)
‑
(940,851)
(131,005)
(46,621)
Balance at end of year
(1,362,124)
(1,118,477)
Motor vehicle
Balance at beginning of year
Depreciation
Acquired from EM Solutions Pty Ltd
Net foreign currency exchange differences
Balance at end of year
Computer software
Balance at beginning of the year
Depreciation
Transfers
Net foreign currency exchange differences
Balance at end of year
64
(36,377)
(36,533)
(13,480)
(374)
(15,591)
(20,697)
‑
(89)
(86,764)
(36,377)
(9,776)
(134,141)
(8,842)
318
‑
(9,776)
‑
‑
(152,441)
(9,776)
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
14. Property, Plant and Equipment (cont)
Test equipment
Balance at beginning of the year
Depreciation
Acquired from EM Solutions Pty Ltd
Balance at end of year
Satellite
Balance at beginning of year
Balance at end of year
Consolidated
31 December
2019
$
31 December
2018
$
‑
(55,482)
(1,673,040)
(1,728,522)
‑
‑
‑
‑
(7,000,000)
(7,000,000)
(7,000,000)
(7,000,000)
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 and determined no impairment
charge for the year of Nil (2018: Nil).
15. Current Trade and Other Payables
Trade payables
Accruals
Unearned revenue
Consolidated
31 December
2019
$
31 December
2018
$
18,338,094
11,277,520
16,245,406
1,399,605
2,386,503
9,651,772
36,970,003
22,328,897
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.
65
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019
notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
16. Leases
Analysed as follows:
Non‑current
Current
Maturity analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Less: unearned interest
Consolidated
31 December
2019
$
31 December
2018
$
11,386,647
2,613,223
13,999,870
3,221,803
2,933,866
2,789,806
1,774,389
1,438,046
4,139,070
16,296,980
2,297,110
13,999,870
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
The consolidated entity does not face a significant liquidity risk with regard to its lease liabilities. All lease
obligations in Australia are denominated in Australian dollars and leases in overseas entities are based in the
currencies of the country concerned.
Disclosure required by AASB 17
Non‑cancellable operating lease payables
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
‑
‑
‑
‑
1,882,845
4,145,792
‑
6,028,637
66
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019
notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
17. Provisions
Current
Employee benefits (Note 19)
Provision for straight lining of rent
Provision for make good
Decommissioning costs
Under utilised space
Warranty (Note 18)
Non‑current
Employee Benefits (Note 19)
Make good of premises
Estimated credit losses
Warranty (Note 18)
Consolidated
31 December
2019
$
31 December
2018
$
8,688,573
4,620,115
‑
15,497
43,919
250,000
212,715
3,687,612
‑
250,000
884,855
596,424
12,882,819
6,366,891
757,199
296,302
134,273
409,262
132,776
‑
5,325,693
3,349,732
6,513,467
3,891,770
67
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
17. Provisions (cont)
Movement on decommissioning costs
Balance at 1 January
Balance as at 31 December
The provision for decommissioning costs relate to an obligation to dismantle and
refurbish a telescope at a future date.
Movement in straight lining of rental
Balance at 1 January
(Decrease)/ Increase during the period
Balance as at 31 December
Movement in make good of premises
Balance at 1 January
Increase during the period from new lease
Balance as at 31 December
Movement in under utilised space
Balance at 1 January
(Decreases)/ Increases resulting from re‑measurement
Balance as at 31 December
Movement in estimated credit losses
Balance at 1 January
(Decreases)/ Increases resulting from re‑measurement
Balance as at 31 December
Consolidated
31 December
2019
$
31 December
2018
$
250,000
250,000
250,000
250,000
15,497
(15,497)
‑
7,225
8,272
15,497
132,776
163,526
296,302
80,000
52,776
132,776
884,855
(672,140)
212,715
‑
884,855
884,855
‑
134,273
134,273
‑
‑
‑
68
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
18. Warranty Provisions
Movement in warranty provision
Balance at 1 January
Reductions resulting from expiry
Additional provisions recognised
Balance as at 31 December
Current (Note 17)
Non‑Current (Note 17)
Consolidated
31 December
2019
$
31 December
2018
$
3,946,156
1,561,755
(1,248,966)
(944,692)
6,316,115
3,329,093
9,013,305
3,946,156
3,687,612
596,424
5,325,693
3,349,732
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 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.
19. Employee Benefits
The aggregate employee benefits liability recognised in the financial statements is as follows:
Provision for employee entitlements
Current (Note 17)
Non‑Current (Note 17)
8,688,573
4,620,115
757,199
409,262
69
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
20. Issued Capital
Consolidated
31 December
2019
$
31 December
2018
$
Balance at the beginning of the financial year ‑ Ordinary shares
161,784,727
103,342,071
Issue of 10,471,434 new shares at $2.91 on 9 February 2018
(net of issuance costs)
Issue of 10,147,123 new shares at $2.91 on 16 March 2018 (net of issuance costs)
Issue of 495,758 new shares at $2.91 on 21 March 2018 under the Small
Shareholder Plan
Issue of 5,180,000 new shares at $2.99 on 20 June 2018 under the Loan Funded
Share Plan
‑
‑
‑
‑
Issue of 4,271,357 new shares at $7.31 as part of the acquisition cost of
EM Solutions Pty Ltd on 11 October 2019
Issue of 10,144,224 new shares at $6.66 on 27 November 2019
(net of issuance costs)
Issue of 2,558,753 new shares at $6.66 on 13 December 2019 under the Share
Purchase Plan
31,223,620
64,261,948
17,041,295
28,948,278
28,051,722
1,442,656
‑
‑
‑
‑
Balance at the end of the financial year
274,311,590
161,784,727
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
Balance at the beginning of financial year
Issue of new shares at $2.91 on 9 February 2018
Issue of new shares at $2.91 on 16 March 2018
Issue on new shares at $2.91 on 21 March 2018 under the
Small Shareholder Plan
Issue of new shares at $2.99 on 20 June 2018 under the Loan Funded Share Plan
Issue of new shares at $7.31 on 11 October 2019
Issue of new shares at $6.66 on 27 November 2019
Issue of new shares at $6.66 under the Share Purchase Plan
Number
Number
96,103,879
69,809,564
‑
‑
‑
‑
10,471,434
10,147,123
495,758
5,180,000
4,271,357
10,144,224
2,558,753
‑
‑
‑
Balance at end of financial year
113,078,213
96,103,879
Fully paid ordinary shares carry one vote per share and carry the right to dividends. The 5,180,000 ordinary
shares issued on 20 June 2018 under the Loan Funded Share Plan are restricted shares subject to vesting
and performance criteria under the Plan detailed in Note 22 to the financial statements and are treated as in
substance options.
70
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
21. Directors and Employee Share Option Plan
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.
On 28 June 2002, shareholders approved the adoption of an Employee Share Option Plan.
(a) Unlisted Options issued under the Employee Share Option Plan
2019
2018
Weighted
average
exercise
price
$
Number
Number
Balance at the beginning of the financial year (i)
5,720,000
3.00
5,620,000
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
‑
‑
(5,500,000)
220,000
‑
‑
‑
3.00
3.00
3.00
220,000
‑
(120,000)
5,720,000
5,500,000
Weighted
average
exercise
price
$
3.00
2.99
‑
3.00
3.00
3.00
2019
2018
Number
Grant date
Expiry date
Exercise
Price
Fair value at
grant date
5,720,000
5,620,000
Various
Various
31/1/19
31/1/19
3.00
3.00
$1,920,119
$1,892,410
Staff and Director options carry no rights to dividends and no voting rights.
71
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
21. Directors and Employee Share Option Plan (cont)
(ii) Granted during the year
2019
Staff options
2018
Staff options
Number
Grant date
Expiry date
Exercise
Price
Fair value at
grant date
‑
‑
‑
‑
‑
220,000
20/6/18
31/3/2023*
2.99
$61,369
These staff options have similar vesting and forfeiture conditions as those issued under the Loan Funded Share
Plan summarised in Note 22. The options issued were priced using the Monte Carlo Simulation method 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.
The following inputs were used in the model for the option grants made on 20 June 2018:
Dividend yield
Expected volatility (linearly interpolated)
Risk free interest rate
Expected life of options
Grant date share price
Exercise price
‑
30.00%
2.32%
1,745 days *
$2.91
$2.99
* These options commence to vest after 30 June 2020 on the basis of 12.5% of their number each quarter subject to share price
and profitability hurdles being achieved.
The Options issued during the financial year ended 31 December 2016 were priced using the Black Scholes 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 the option grants made on 5 February 2016:
Dividend yield
Expected volatility (linearly interpolated)
Risk free interest rate
Expected life of options
Grant date share price
Exercise price
‑
82.77%
1.745%
1,085 days
$1.18
$3.00
72
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
21. Directors and Employee Share Option Plan (cont)
The following inputs were used in the model for the option grant made on 30 May 2016:
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
There were no options exercised during the year.
(iv) Lapsed during the year
5,500,000 (2018: 120,000) Staff options lapsed during the year.
(v) Balance at the end of the financial year
‑
82.77%
1.745%
975 days
$1.40
$3.00
2019
Staff options
2018
Staff options
Staff options
Director options
Director options
Number
Grant date
Expiry date
Exercise
Price
Fair value at
grant date
220,000
20/6/18
31/3/23
$2.99
61,369
2,300,000
220,000
3,000,000
200,000
5,720,000
5/2/16
20/6/18
5/2/16
30/5/16
31/1/19
31/3/23
31/1/19
31/1/19
$3.00
$2.99
$3.00
$3.00
645,150
61,369
1,122,000
91,600
1,920,119
Staff and Director options carry no rights to dividends and no voting rights.
All options granted to directors and staff in 2016 vest on the basis of 50% after one year and 50 % after two years
from the date of issue.
All options granted to staff on 20 June 2018 commence to vest after 30 June 2020 on the basis of 12.5% of their
options each quarter subject to share price and profitability hurdles being achieved.
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 the employees (nil) is recognised in the financial statements over the vesting
period as disclosed in Note 22 to the financial statements.
73
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
22. Loan Funded Share Plan
The Board has established an employee incentive scheme known as the Electro Optic Systems Holdings Limited
Loan Funded Share Plan (LFSP), pursuant to which fully paid restricted ordinary shares in the Company (Shares)
are acquired by Directors and selected employees of the Company using a loan made to them by the Company.
Shareholders approved the establishment of the LFSP and the participation of directors in the LFSP at the Annual
General Meeting held on 24 April 2018. The loans are limited recourse, interest and fee free and are repayable
in full on the earlier of the termination date of the loan (5 years) or the date on which the shares are sold in
accordance with the terms of the LFSP.
Under the applicable Accounting Standards, the LFSP shares are accounted for as options, which give rise to share
based payments.
The Company issued 5,180,000 new restricted fully paid ordinary shares under the LFSP at an issue price of $2.99
on 20 June 2018 based on the ‘Market Value’ which was determined as the 20 day volume weighted average price of
Shares up to and including the trading day immediately prior to the date of issue (that is, the 20 most recent trading
days on the ASX). The issue of the 5,180,000 restricted fully paid ordinary shares at $2.99 created loans to Directors
and staff under the LFSP of $15,488,200.
The 5,180,000 restricted fully paid ordinary shares were issued under the LFSP on 20 June 2018 as follows:
Directors and KMP’s
Mr Fred Bart
Dr Ben Greene
Mr Ian Dennis
Lt Gen Peter Leahy AC
Air Marshal Geoff Brown AO
The Hon Kate Lundy
Dr Craig Smith
Mr Scott Lamond
Mr Grant Sanderson
Mr Peter Short
Selected Employees
Number of
Shares
Fair Value at
grant date
200,000
2,000,000
200,000
200,000
200,000
200,000
250,000
250,000
250,000
250,000
$55,790
$557,900
$55,790
$55,790
$55,790
$55,790
$69,738
$69,738
$69,738
$69,738
4,000,000
$1,115,802
1,180,000
$329,161
5,180,000
$1,444,963
The Shares issued to Directors and selected employees are subject to both ‘Vesting Conditions’ and ‘Forfeiture
Conditions’. The vesting conditions are split into two different tranches which are outlined in the table below.
Directors and selected employees are required to satisfy the Vesting Conditions in order for their Shares to vest.
While Directors and selected employees hold their Shares, they will be subject to Forfeiture Conditions and
Directors will forfeit their Shares if either they fail to satisfy the Vesting Conditions or they cease to be employed
or continue to provide services to EOS or a consolidated entity or group company in certain circumstances.
Once the Vesting Conditions have been satisfied, removed or lifted, the Shares become vested and Directors and
selected employees may deal with them in accordance with the rules of the LFSP subject to sale restrictions and
other legal restrictions (such as under the Company’s trading policy).
74
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
22. Loan Funded Share Plan (cont)
The Shares will vest at the end of each ‘Vesting Period’ in the manner set out in the tables below, provided that the
following conditions are met:
(a) Directors and selected continue to provide services to EOS on each of the vesting dates (or such other date on
which the Board makes a determination as to whether the Vesting Condition has been met); and
(b) the performance hurdles set out below are satisfied, which relate to the Company’s earnings before income tax
(EBIT) and the Company’s share price. Notably, EBIT and share price hurdles must both be achieved in order for
Shares to vest under each Tranche.
To the extent Shares vest, they will be subject to sale restrictions for 6, 9, 12 and 15 months respectively as outlined
in the tables.
TRANCHE A (applies to 50% of the total number of Shares to be issued to Directors)
Measures and hurdles
Vested Shares can be sold after:
(i) EBIT of $5m for 12 months ending
31 December 2018; and
(ii) a Share Price Hurdle of $4.50 by
31 December 2019
(this hurdle must be reached on at least
30 trading days, not necessarily consecutive,
by 31 December 2019)
30 June 2020
(25% of Vested Shares)
30 September 2020
(50% of Vested Shares)
31 December 2020
(75% of Vested Shares)
31 March 2021
(100% of Vested Shares)
TRANCHE B (applies to 50% of the total number of Shares to be issued to Directors)
Measures and hurdles
Vested Shares can be sold after:
(i) EBIT of $15m for 12 months ending
31 December 2019; and
(ii) a Share Price Hurdle of $7.50 by
31 December 2021
(this hurdle must be reached on at least
30 trading days, not necessarily consecutive,
by 31 December 2021)
30 June 2022
(25% of Vested Shares)
30 September 2022
(50% of Vested Shares)
31 December 2022
(75% of Vested Shares)
31 March 2023
(100% of Vested Shares)
75
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
22. Loan Funded Share Plan (cont)
Over and above the above conditions, KMP and employees who work for Space and Defence Systems have to meet
the additional hurdles summarised below:
Tranche A
i) Defence Systems profit exceeds A$8m for 2018 and A$20m for 2019;
ii) Space Systems loss does not exceed A$3m for 2018 and A$2m for 2019;
iii) Defence Systems production exceeds 275 units for 2018 and 400 units for 2019.
Tranche B
i) Defence Systems profit exceeds A$20m for 2020;
ii) Space Systems profit exceeds $1M for 2020 and $3M for 2021;
iii) Defence Systems production exceeds 480 units or 2020.
If the above Vesting Conditions are not satisfied, or if the Board determines that they cannot be satisfied, Directors
and selected employees will forfeit their unvested Shares (unless the Board exercises its discretion to permit those
Shares to vest in accordance with the terms of the LFSP).
The 5,180,000 ordinary restricted fully paid shares issued on 20 June 2018 were valued using the Monte Carlo
Simulation method model as the shares have a share price hurdle in the vesting conditions. Where relevant,
the expected life used in the model has been adjusted based on management’s best estimate for the effects of
non‑transferability, vesting restrictions and behavioural conditions. Expected volatility is based on the historical
share price volatility.
The following inputs were used in the model for the option grants made on 20 June 2018:
Dividend yield
Expected volatility (linearly interpolated)
Risk free interest rate
Expected life of options
Grant date share price
Issue price
Other features of the LFSP structure
‑
30.00%
2.32%
1,745 days
$2.91
$2.99
Shares are held in an employee share trust, on behalf of Participants, until all Vesting Conditions are satisfied in
accordance with their terms of issue and the Loan relating to the Shares is repaid in full.
If the Company pays dividends or make capital distributions, the after‑tax value of any dividends paid or
distributions made to a Participant will be applied to repay the Loan. The balance (i.e., the estimated value of the
tax payable by the Participant on the dividend or distribution) is paid to the Participant to allow them to fund their
tax liability on the dividend or distribution.
At the end of the period for the Vesting Conditions and subject to continuous employment or engagement of
services with the Company, the Participants are able to dispose of their Shares on repayment of any outstanding
Loan balance. However, the Board may impose sale restrictions on the Shares for a period of time after vesting.
All unvested Shares will automatically vest in the event of a change in control of the Company.
76
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
23. Reserves
Foreign currency translation
Employee equity‑settled benefits
Foreign currency translation
Balance at beginning of financial year
Translation of foreign operations
Balance at end of financial year
Consolidated
31 December
2019
$
31 December
2018
$
(1,061,206)
(1,399,064)
10,373,224
9,871,855
9,312,018
8,472,791
(1,399,064)
(241,137)
337,858
(1,157,927)
(1,061,206)
(1,399,064)
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, Singaporean dollars, being the functional currency of the consolidated entity’s
foreign controlled entity in Singapore and Dirham being the functional currency in the United Arab Emirates, into
Australian dollars are brought to account by entries made directly to the foreign currency translation reserve.
Exchange differences previously accumulated in the foreign currency translation reserve (in respect to translating
the net assets of foreign operations) are reclassified to profit or loss on disposal of the foreign operation.
Employee equity‑settled benefits
Balance at beginning of financial year
Share based payment
Balance at end of financial year
9,871,855
9,586,065
501,369
285,790
10,373,224
9,871,855
The employee equity‑settled benefits reserve arises on the grant of share options to directors and executives under
the Employee Share Option Plan and Loan Funded Share Plan. Further information about share‑based payments
to employees is made in Note 22 to the financial statements. Items included in employee equity‑settled benefits
reserve will not be reclassified subsequently to profit or loss.
24. Accumulated Losses
Balance at beginning of financial year
Net profit attributable to members of the parent entity
Balance at end of financial year
(73,814,165)
(89,116,379)
18,435,425
15,302,214
(55,378,740)
(73,814,165)
77
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
25. Notes to the Cash Flow Statement
(a) Reconciliation of Cash and cash equivalents
For the purposes of the statement of cash flows, 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 statement of cash flows is reconciled to the
related items in the statement of financial position as follows:
Cash and cash equivalents ‑ current
(b) Restricted cash
Consolidated
31 December
2019
$
31 December
2018
$
77,881,766
40,538,225
Cash held as security for performance bonds and leases
102,025
119,025
(c) Reconciliation of profit for the year to net cash flows from operating activities
Profit for the year
21,970,274
15,081,372
Amortisation of intangibles
Equity settled share‑based payments
Depreciation of property, plant and equipment
Depreciation of right of use assets
Net assets acquired from acquisition
Tax paid
Foreign exchange movements
(Increase)/decrease in assets
Current receivables
Contract assets
Inventories
Other current assets
Increase/(decrease) in liabilities
Provisions
Trade and other payables
Deferred income
Net cash (outflows) from operating activities
78
354,299
501,369
1,694,948
2,083,154
4,392,972
(1,881,111)
‑
285,790
633,235
‑
‑
‑
61,171
(1,110,411)
(4,997,782)
(21,694,865)
(44,772,583)
‑
(27,025,674)
(12,669,925)
(7,571,733)
(4,763,962)
9,137,625
4,308,025
19,488,710
5,998,330
(7,265,269)
(1,753,791)
(33,829,630)
(15,686,202)
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
26. Related Party Disclosures
(a) Equity interests in related parties
Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 27.
(b) Key management personnel compensation
The aggregate compensation of the key management personnel of the consolidated entity is set out below:
31 December
2019
$
31 December
2018
$
1,878,683
1,728,877
164,090
372,553
1,312,680
143,506
211,905
474,953
3,728,006
2,559,241
Short term benefits
Post‑employment benefits
Share based payments
Long term benefits
(c) Transactions with other related parties
Other related parties includes:
■ the parent entity;
■ associates;
■ Joint venture partners;
■ entities with significant influence over the consolidated entity; and
■ subsidiaries.
On 30 December 2019, the consolidated entity entered into an agreement to sell 2% of its convertible note to
acquire 51% of AEI Air (Holdings) Limited for GBP78,431 should the consolidated entity exercise its convertible note.
The purchaser was Alebtekar Remote Control Systems Manufacturing Of United Arab Emirates who is the 51%
shareholder in EOS Advanced Technologies LLC.
(d) Other transactions with key management personnel or director related entities
During the year, the Company paid a total of $76,814 (2018: $66,795) 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 paid $47,222 (2018: $47,222) 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 $47,222 (2018: $47,222) to GCB Stratos Consulting Pty Limited, a company
associated with Mr Geoff Brown in respect of directors fees and superannuation for Geoff Brown.
During the year, the Company paid $141,073 (2018: $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 $30,441 (2018: $28,441) 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.
(e) Parent entity
The parent entity in the group is Electro Optic Systems Holdings Limited.
79
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
27. Controlled Entities
Name of Entity
Parent Entity
Country of
Incorporation
December 2019
%
December 2018
%
Electro Optic Systems Holdings Limited (i), (ii)
Australia
Controlled Entities
Electro Optic Systems Pty Limited (ii), (iii)
EOS Defence Systems Pty Limited (ii), (iii)
FCS Technology Holdings Pty Limited (ii)
EOS Space Systems Pty Limited (ii)
EOS UAE Holdings Pty Limited (ii)
EOS Advanced Technologies LLC (iv)
EOS Optronics GmbH
EM Solutions Pty Ltd (ii), (iii), (v)
EOS Defense Systems Pte Limited
EOS USA, Inc. (Inc in Nevada)
EOS Technologies, Inc. (Inc in Arizona)
EOS Defense Systems, Inc (Inc in Arizona)
EOD Defense Systems USA Inc (Inc in Alabama)
Australia
Australia
Australia
Australia
Australia
UAE
Germany
Australia
Singapore
USA
USA
USA
USA
100
100
100
100
100
49
100
100
100
100
100
100
100
100
100
100
100
100
49
100
‑
100
100
100
100
100
(i) Electro Optic Systems Holdings Limited is the head entity within the tax‑consolidated group.
(ii) These companies form part of the Australian consolidated tax entity.
(iii) These wholly owned subsidiaries have entered into a deed of cross guarantee with Electro Optic Systems
Holdings Limited pursuant to ASIC Corporations (Wholly‑owned Companies) Instrument 2016/875 and are relieved
from the requirement to prepare and lodge an audited financial report.
On 29 March 2018, the parent entity, Electro Optic Systems Holdings Limited entered into a deed of cross
guarantee with two of its Australian wholly‑owned subsidiaries Electro Optic Systems Pty Limited and EOS
Defence Systems Pty Limited. On 28 November 2019, the parent entity Electro Optic Systems Holdings
Limited entered into a Deed of Assumption which joined EM Solutions Pty Limited as part of the Deed of Cross
Guarantee from the effective date of acquisition which was 11 October 2019.
(iv) Whilst the consolidated entity owns less than 50% of the shares, pursuant to the shareholder and related
agreements, it has existing rights that give it the ability to direct the relevant activities of the company and is
entitled to 80% of company distributions.
(v) On 11 October 2019, the consolidated entity acquired 100% of the issued share capital of EM Solutions Pty Ltd,
obtaining control of EM Solutions Pty Ltd.
Deloitte Touche Tohmatsu is the auditor of the consolidated entity. EOS Defense Systems Pte Limited is audited
by Assurance Affiliates, Chartered Accountants in Singapore and EOS Advanced Technologies LLC is audited by
M A International Consulting LLC in UAE and are the only entities with a separately appointed statutory auditor.
80
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019
notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
27. Controlled Entities (cont)
27(b) Consolidated income statement, consolidated statement of financial position and movements
in consolidated retained earnings of entities party to the deed of cross guarantee
The consolidated income statement of the entities which are parties to the deed of cross guarantee are:
Revenue
Changes in inventories of work in progress
Raw materials and consumables used
Employee benefits expense
Administration expenses
Amortisation of intangibles
Interest paid ‑ other
Interest paid on right of use assets
Depreciation and amortisation of property, plant and equipment
Depreciation of right of use assets
Foreign exchange gains
Occupancy costs
Other expenses
Provision for loss on loans to subsidiaries
31 December
2019
$
31 December
2018
$
160,841,154
85,444,179
(5,740,505)
(2,842,202)
(82,358,595)
(39,709,340)
(22,895,466)
(16,461,267)
(13,969,054)
(8,352,985)
(354,299)
‑
‑
(29,472)
(155,570)
‑
(1,472,602)
(600,082)
(738,249)
‑
644,402
7,708,137
(720,119)
(1,424,097)
(945,491)
(943,862)
(17,156,416)
(11,822,666)
Profit before income tax
14,500,584
11,444,949
Income tax
Profit for the year
(3,911,516)
‑
10,589,068
11,444,949
81
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
27. Controlled Entities (cont)
27(b) Consolidated income statement, consolidated statement of financial position and movements
in consolidated retained earnings of entities party to the deed of cross guarantee (cont)
The consolidated statement of financial position of the entities which are parties to the deed of cross guarantee are:
Consolidated
31 December
2019
$
31 December
2018
$
75,555,109
37,938,141
26,306,652
26,326,301
44,772,583
‑
48,772,856
25,213,232
13,753,650
11,448,915
209,160,850
100,926,589
12,055,798
7,800,038
2,838,900
9,021,823
2,632,783
8,510,087
14,878,316
17,235,701
‑
9,399,167
‑
8,971,929
‑
‑
‑
‑
6,688,302
3,792,113
81,661,748
22,163,209
290,822,598
123,089,798
34,248,144
16,855,009
8,352,728
1,175,021
‑
‑
11,399,119
4,099,587
55,175,012
20,954,596
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Contact assets
Inventories
Other
TOTAL CURRENT ASSETS
NON‑CURRENT ASSETS
Trade and other receivables
Other
Deferred tax assets
Security deposit
Loan to associate
Right of use asset
Goodwill
Intangible assets
Property, plant and equipment
TOTAL NON‑CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Current tax liabilities
Lease liabilities
Provisions
TOTAL CURRENT LIABILITIES
82
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
27. Controlled Entities (cont)
27(b) Consolidated income statement, consolidated statement of financial position and movements
in consolidated retained earnings of entities party to the deed of cross guarantee (cont)
NON‑CURRENT LIABILITIES
Lease liabilities
Provisions
TOTAL NON‑CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Consolidated
31 December
2019
$
31 December
2018
$
7,295,865
6,448,533
13,744,398
‑
3,849,314
3,849,314
68,919,410
24,803,910
221,903,188
98,285,888
274,311,590
161,784,727
10,373,224
9,871,855
(62,781,626)
(73,370,694)
221,903,188
98,285,888
The consolidated retained earnings/(accumulated losses) of the entities which are party to the deed of cross
guarantee are:
Balance at the start of the year
Add
Net profit for the year
Balance at end of the year
31 December
2019
$
31 December
2018
$
(73,370,694)
(84,815,643)
10,589,068
11,444,949
(62,781,626)
(73,370,694)
83
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
28. Acquisition of Subsidiary
On 11 October 2019, the consolidated entity acquired 100% of the issued share capital of EM Solutions Pty Ltd,
obtaining control of EM Solutions Pty Ltd. EM Solutions Pty Ltd specialises in innovative optical, microwave and
on‑the‑move radio and satellite products that help deliver high speed, resilient and assured telecommunications
anywhere in the world. The business of EM Solutions Pty Limited has potential synergies with both the Space and
Defence segments of the consolidated entity.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the
table below:
Tangible assets
Property, plant and equipment
Working capital
Deferred tax assets
Other assets and liabilities
Net cash
Net tangible operating assets
Intangible assets
Core technology (not patented)
Patented technology
Software
Customer contracts and relationships
Total identifiable intangibles
Deferred tax on newly identified intangible assets
Goodwill
Total intangible assets
Total net assets acquired
Satisfied by:
Cash paid and payable
Equity issued
Completion adjustments
Total consideration for shares
1,195,767
1,997,934
1,111,697
131,750
277,313
4,714,461
10,772,000
3,556,000
486,000
2,776,000
17,590,000
(4,389,228)
14,878,316
28,079,088
32,793,549
1,485,000
31,223,620
84,929
32,793,549
The Goodwill of $14,878,316 arising from the acquisition has been determined from the Purchase Price Allocation
from Leadenhall Valuations Pty Limited as at 11 October 2019.
The fair value of the 4,271,357 ordinary shares issued as part of the consideration paid for EM Solutions Pty Ltd was
determined on the basis of fair market value on the date of issue of the shares being $7.31.
Acquisition‑related costs (included in administrative expenses) amounted to $37,556.
EM Solutions Pty Ltd contributed $1,891,428 revenue and a loss of $202,821 to the consolidated entity’s profit before
tax for the period between 11 October 2019 (Date of acquisition) and the reporting date.
84
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
29. Joint Operations
The consolidated entity is party to a joint operation. The consolidated entity has a share in the operation based on
capital contributions that entitles it to a proportionate share of revenue earnt from the operation.
The operation is not yet active.
30. Contingent Liabilities and Commitments
(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 consolidate entity.
(b) Under the terms of a contract in the Defence sector, the Company has an obligation to enter into and execute an
offset agreement with the overseas Government Authority. Once the agreement is executed, the Company will
be required to lodge an offset bond of approximately US$17m with the overseas Government Authority to ensure
that local content requirements are met. The final terms of the offset bond are still being negotiated.
(c) The consolidated entity provided a performance bond in respect of a contract in the Defence sector for
US$31,635,147 in relation to an overseas defence sector contract. The performance bond was provided by
Efic under a Bond Facility Agreement and is secured by a cash security deposit of A$9,021,823 and a fixed and
floating charge over the assets of the consolidated entity.
(d) Electro Optic Systems Holdings Limited entered into a deed of cross guarantee on 6 April 2018 with two of its
wholly‑owned subsidiaries, Electro Optic Systems Pty Limited and EOS Defence Systems Pty Limited, pursuant
to ASIC Corporations (Wholly‑owned Companies) Instrument 2016/785 and relieved from the requirement to
prepare and lodge an audited financial report. On 28 November 2019, EM Solutions Pty Ltd entered into an
Assumption Deed and became a party to the Deed of Cross Guarantee.
(e) Electro Optic Systems Pty Limited, a wholly owned subsidiary of Electro Optic Systems Holdings Limited, has
entered into an Unsecured Convertible Note Deed with the vendors of AEI Air (Holdings) Limited and others
to advance funds up to GBP2,000,000 as a series of convertible notes which will entitle Electro Optic Systems
Pty Limited to convert these convertible notes, when advanced in full, to acquire 49% of the equity in AEI Air
(Holdings) Limited. Electro Optic Systems Pty Limited has also entered into a Put and Call Option Deed with the
vendors of AEI Air (Holdings) Limited to acquire a further 49% from the vendors of AEI Air (Holdings) Limited
based on a profitability formula over the four year period from 1 January 2019 to 31 December 2022 and
meeting various milestones The Put and Call Option Deed also includes provisions for Electro Optic Systems Pty
Limited to make vendor loans of up to GBP1,714,500 to the vendors of AEI Air (Holdings) Limited which are fully
repayable should the Put and Call Option not be exercised. Where the Put and Call Option is exercised the loans
are able to offset the exercise price on settlement. At the date of this report GBP1,500,000 has been advanced
under the Unsecured Convertible Note Deed and no amounts have been advanced to the vendors under the
Put and Call Option Deed at their request. Electro Optic Systems Pty Limited hold no direct equity in AEI Air
(Holdings) Limited at the date of this report.
85
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
31. Subsequent Events
On 26 December 2019, Electro Optic Systems Holdings Limited (“EOS” or “Company”) (ASX: EOS), acting through
its wholly‑owned US subsidiary EOS Defense Systems USA, Inc. (“EOSDS”), executed an agreement to purchase
certain assets of Audacy Corporation, a space communications company based in the US (“Purchase”) subject to
mandatory Federal Communications Commission (“FCC”) approval. EOSDS will outlay approximately A$10 million
in cash for the Purchase including substantial costs associated with securing mandatory US government spectrum
licenses and other costs.
The transfer of control of Audacy Corporation’s spectrum licenses to EOSDS is subject to review and approval by the
FCC. The FCC application was lodged on 28 January 2020 and an announcement was made to the ASX at that time.
On 5 March 2020 the FCC granted its consent to the transfer. EOSDS has also filed for review of the Acquisition by
the US Committee on Foreign Investment in the US (“CFIUS”) on 9 March 2020.
Although the Company believes the Purchase is compliant with all statutory and regulatory requirements, approval
of the Purchase by CFIUS cannot be assured. In the normal course, and subject to those government approvals and
other customary conditions, EOS anticipates the Purchase to close in mid‑2020 (“Completion”).
EOSDS is not required to make any material payment for the Purchase until Completion has occurred. EOS will fund
the A$10 million required during 2020 for the Purchase and related activities from its cash holdings.
Subsequent to the end of the financial year there have been considerable economic impacts in Australia and
globally arising from the outbreak of COVID‑19 virus and the respective Government actions to reduce the spread of
the virus.
As this economic impact occurred after the reporting period, the Consolidated entity believes it constitutes a
“Non‑Adjusting Subsequent Event” as defined in AASB 110 Events after the Reporting Period.
■ In March 2020, the consolidated entity implemented its Business Continuity Plan where most staff not
directly involved in production will work from home to limit the potential spread of the virus and to enable the
consolidated entity to continue to operate and serve our customers.
■ The initial impacts on Consolidated entity’s operations have been limited by a very strong inventory of production
parts, and the fact that almost all EOS debtors are ultimately sovereign entities. The Consolidated entity’s early
adoption of virus‑impeding practices may mitigate future impacts on business operations.
■ The Consolidated entity will continue to monitor the impact of COVID‑19 on the business as a whole including
any impact on the supply chain, production capacity, logistic operations including product delivery, and
collection of receivables. Therefore, at the date of signing the financial report the Consolidated entity is unable
to determine what financial effects the outbreak of the virus could have on the Consolidated entity in the coming
financial period.
■ No financial effects arising from the economic impacts of the virus have been included in the financial results for
the year ended 31 December 2019.
■ Should this emerging macro‑economic risk continue for a prolonged period, there could be potentially adverse
financial impacts to the Consolidated entity, including slower revenue growth and obstruction to the plan
towards increased profitability.
There have been no other transactions or events of a material and unusual nature between the end of the reporting
period and the date of the report likely, in the opinion of the Directors of the Company, to affect significantly the
operations of the consolidated entity, the results of those operations, or state of affairs of the consolidated entity in
future years.
86
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
32. Financial Risk Management Objectives and Policies
The consolidated entity’s principal financial instruments comprise receivables, payables, borrowings, finance
leases, cash and short term deposits.
Due to the small size of the consolidated entity 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 consolidated entity does not use derivative financial instruments to hedge these risk exposures.
The directors consider that the carrying amount of financial assets and liabilities recognised in these financial
statements approximate their fair values.
Risk Exposures and Responses
(a) Interest rate risk
The consolidate entity’s exposure to market interest rates relates primarily to the consolidated entity’s cash
holdings.
At balance date, the consolidated entity had the following mix of financial assets and liabilities exposed to interest
rate risk that are not designated in cash flow hedges:
Financial assets
Cash and cash equivalents
Security deposit
Consolidated
2019
$
2018
$
77,881,766
40,538,225
9,021,823
8,971,929
86,903,589
49,510,154
The consolidated entity 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 2019, if interest rates had moved, as illustrated in the table below, with all other variables held
constant, post tax (loss) and equity would have been affected as follows:
Judgements of reasonably
possible movements
Consolidated
+1% (100 basis points)
‑.5% (50 basis points)
Post Tax (Loss)
Higher/(Lower)
Equity
Higher/(Lower)
2019
$
2018
$
2019
$
2018
$
608,325
495,116
608,325
495,116
(304,163)
(247,588)
(304,163)
(247,588)
The movements in profits are due to lower interest rates on cash balances. The cash balances were higher in 2019
than in 2018 and accordingly the sensitivity is higher.
87
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
32. Financial Risk Management Objectives and Policies (cont)
(b) Foreign currency risk
As a result of purchases of inventory denominated in United States Dollars, the consolidated entity’s statement
of financial position can be affected significantly by movements in the US$/A$ exchange rates. There are also
exposures to Singapore dollars from operations in that country. Exchange rates are managed within approved policy
parameters using natural hedges and no derivatives are used.
The consolidated entity 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 consolidated entity is to convert surplus foreign currencies to Australian dollars. The consolidated
entity also holds cash deposits in US dollars to secure US dollar bank guarantees and performance bonds to
overseas customers.
At 31 December 2019, the consolidated entity had the following exposure to US$ foreign currency:
Financial assets
Cash and cash equivalents
Security deposit
Contract asset
Trade and other receivables
Financial liabilities
Accruals
Lease liabilities
Trade and other payables
Net exposure
Consolidated
2019
$
2018
$
9,945,796
3,642,504
9,021,823
8,971,929
44,692,332
‑
43,879,390
40,562,230
107,539,341
53,176,663
12,527,901
5,368,188
‑
‑
5,001,530
2,168,101
22,897,619
2,168,101
84,641,722
51,008,562
All US$ denominated financial instruments were translated to A$ at 31 December 2019 at the exchange rate of
0.7013 (2018: 0.7052).
At 31 December 2019 and 2018, 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%
Post Tax Profit
Higher/(Lower)
Equity
Higher/(Lower)
2019
$
2018
$
2019
$
2018
$
(5,386,291)
(4,267,142)
(5,386,291)
(4,267,142)
3,118,379
2,684,661
3,118,379
2,684,661
88
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
32. Financial Risk Management Objectives and Policies (cont)
At 31 December 2019, the consolidated entity had the following exposure to Singapore $ foreign currency:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Lease liabilities
Net exposure
Consolidated
2019
$
28,262
1,721
29,983
23,544
160,795
184,339
(154,356)
2018
$
34,031
24,964
58,995
32,954
‑
32,954
26,041
All Singapore $ denominated financial instruments were translated to A$ at 31 December 2019 at the exchange
rate of 0.9437 (2018: 0.9614).
At 31 December 2019 and 2018, 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/SING +10%
AUD/SING ‑5%
Post Tax Profit
Higher/(Lower)
Equity
Higher/(Lower)
2019
$
2018
$
2019
$
5,661
(17,817)
(1,417)
2,471
5,661
(17,817)
2018
$
(1,417)
2,471
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 counterparty will default on its contractual obligations resulting in a financial
loss to the consolidated entity. The consolidated entity 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.
89
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
32. Financial Risk Management Objectives and Policies (cont)
(d) Liquidity risk management
The consolidated entity or 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 consolidated entity’s short, medium and long term funding
and liquidity requirements. The consolidated entity manages liquidity by maintaining adequate cash reserves by
continuously monitoring forecast and actual cash flows and managing maturity profiles of financial assets.
Liquidity and interest tables
The following tables detail the consolidated entity’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 consolidated entity 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
2019
Other non‑interest bearing liabilities
2018
Other non‑interest bearing liabilities
‑
‑
35,262,877
12,676,855
‑
‑
‑
‑
‑
‑
90
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
32. Financial Risk Management Objectives and Policies (cont)
(d) Liquidity risk management (cont)
The following tables detail the consolidated entity’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/Consolidated entity anticipates
that the cash flow will occur in a different period.
Consolidated
2019
Non‑interest bearing
Receivables
Contract asset
Weighted
average
effective
interest rate
%
Less than
1 month
$
1‑3 months
$
3 months
to 1 year
$
1‑5 years
$
‑
‑
‑
5,194,169
25,867,331
‑
‑
‑
‑
‑
‑
‑
12,055,798
44,772,583
Fixed interest rate instruments
1.04
42,724,165
30,077,466
‑
‑
73,785,665
30,077,466
44,772,583
12,055,798
2018
Non‑interest bearing
Receivables
‑
‑
12,168,586
26,248,171
‑
‑
Fixed interest rate instruments
1.56
9,001,059
28,427,519
47,417,816
28,427,519
‑
‑
‑
‑
‑
7,146,990
‑
7,146,990
(e) Price risk
The consolidated entity’s exposure to commodity price risk is minimal. The consolidated entity does not make
investments in equity securities.
91
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
33. Details of Associates
Name of Entity:
AEI Air (Holdings) Limited
Place of incorporation:
United Kingdom
Principal place of business:
1 Kings Ride Park
Ascot
Berkshire SL5 8AP
UK
Principal activity:
Defence products
Deemed percentage holding:
The consolidated entity holds unsecured convertible notes, which are convertible
into shares representing a 49% equity interest.
Aggregate share of net
profits/ (losses)
Nil ‑ The investment in the associate is debt in nature and therefor the
consolidated entity does not have a share in any profit/(loss).
Please refer to Note 10 for additional information.
The above associate is accounted for using the policy outlined in Note 1(z).
92
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
34. Segment Information
AASB 8 requires operating segments to be identified on the basis of internal reports about components of the
consolidated entity 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 consolidated entity’s reportable segments has changed from those disclosed in the
previous 2018 Annual Report with the addition of the Communication Systems segment following the acquisition
of EM Solutions Pty Ltd. The consolidated entity’s reportable segments are Defence Systems, Space Systems and
Communication Systems.
The consolidated entity operates in Australia, USA, Singapore, UAE and Germany in the development, manufacture
and sale of telescopes and dome enclosures, laser satellite tracking systems, the manufacture of electro‑optic fire
control systems and the design and manufacturing of microwave satellite dishes and receivers.
Product and Services within each Segment
Space Systems
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.
The space sector also manufactures and sells telescopes and dome enclosures for space projects.
Defence Systems
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, Australasia, Middle East and other markets.
Communication Systems
EMS specializes in innovative optical, microwave and on‑the‑move radio and satellite products that help deliver
high speed, resilient and assured telecommunications anywhere in the world.
93
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
34. Segment Information (cont)
Segment Revenues
Communication
Space
Defence
Total of all segments
Unallocated interest received
Total
Segment Results
Communications
Space
Defence
Total of all segments
Unallocated holding company costs
Profit before income tax expense
Income tax expense
Profit for the year
Consolidated
31 December
2019
$
31 December
2018
$
1,891,778
‑
5,020,183
1,379,421
158,503,685
84,960,317
165,415,646
86,339,738
569,917
790,658
165,985,563
87,130,396
(202,821)
‑
414,318
(2,153,278)
22,217,435
17,766,199
22,428,932
15,612,921
(458,658)
(531,549)
21,970,274
15,081,372
(3,911,516)
‑
18,058,758
15,081,372
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 had two customers who each provided in excess of 10% of consolidated revenue.
The customers are within the Defence segment and provided combined revenue of $142,634,267.
94
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
34. Segment Information (cont)
Assets
Liabilities
31 December
2019
$
31 December
2018
$
31 December
2019
$
31 December
2018
$
Segment Assets and Liabilities
Communications
17,822,705
‑
7,882,435
‑
Space
Defence
2,126,387
726,984
4,612,872
5,504,682
199,572,638
78,632,004
66,223,580
27,082,876
Total all segments
219,521,730
79,358,988
78,718,887
32,587,558
Unallocated cash and security deposit
86,903,589
49,510,154
‑
‑
Consolidated
306,425,319
128,869,142
78,718,887
32,587,558
Assets used jointly by reportable segments are allocated on the basis of the revenue earned by the individual
reportable segments.
Depreciation, impairment
and amortisation of
segment assets
Acquisition of
segment assets
31 December
2019
$
31 December
2018
$
31 December
2019
$
31 December
2018
$
754,517
26,087
‑
3,730,639
‑
18,935
122,570
30,551
3,115,360
527,787
3,999,756
3,158,362
Other Segment Information
Communications
Space
Defence
Total all segments
3,895,964
546,722
7,852,965
3,188,913
Unallocated management
236,437
86,513
‑
‑
Consolidated
4,132,401
633,235
7,852,965
3,188,913
95
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
34. Segment Information (cont)
Information on Geographical Segments
31 December 2019
Geographical Segments
Australasia
Middle East
North America
Germany
Total
31 December 2018
Geographical Segments
Australasia
Middle East
North America
Germany
Total
Revenue from
External Customers
$
Segment Assets
$
Acquisition of
Segment Assets
$
23,351,295
44,913,294
97,720,974
‑
165,985,563
55,486,937
3,053,274
3,396,402
77
61,936,690
6,649,144
1,041,462
162,360
‑
7,852,966
Revenue from
External Customers
$
Segment Assets
$
Acquisition of
Segment Assets
$
18,060,761
‑
69,069,405
230
87,130,396
3,826,473
109,603
2,276,550
400
6,213,026
3,043,380
114,982
30,551
‑
3,188,913
Management allocated ‘Revenue from External Customers’ on the basis of the jurisdiction in which the
counterparty to the revenue contract resides. The comparative balance in relation to the ‘Revenue from External
Customers’ reported in 2018 has been amended to reflect the reclassification of an amount of $69,069,405
previously reported in the ‘Australasia’ segment which should have been reported under the ‘North America’
segment, being the geographic segment in which the external customer resides.
The comparative figures in relation to ‘Segment Assets’ have also been restated to reflect the requirements of
AASB 8.33 (b) and reflect only non‑current assets other than financial instruments and deferred tax assets.
96
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
35. Parent Entity Disclosure
Financial position
Assets
Current assets
Non‑current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
(Accumulated losses)
Total equity
Financial performance
(Loss) for the period
Other comprehensive income
31 December
2019
$
31 December
2018
$
72,132,587
33,973,209
76,260,951
‑
148,393,538
33,973,209
8,739,410
95,790
8,739,410
95,790
139,654,128
33,877,419
274,311,590
161,784,727
10,373,224
9,871,855
(145,030,686)
(137,779,163)
139,654,128
33,877,419
(7,251,523)
(32,628,847)
‑
‑
(7,251,523)
(32,628,847)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
Guarantee provided under the deed of cross guarantee (i)
68,919,410
24,803,910
Electro Optic Systems Holdings Limited has entered into a deed of cross guarantee on 29 March 2018 with two
of its wholly owned subsidiaries. Electro Optic Systems Pty Limited and EOS Defence Systems Pty Limited.
On 28 November 2019, EM Solutions Pty Limited entered into an Assumption Deed and became a party to the
Deed of Cross Guarantee.
97
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 notes to anD forMinG part of tHe financiaL stateMents
for tHe year enDeD 31 DeceMBer 2019 (cont)
36. 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, Middle East, Singapore and Germany.
Registered Office
Principal Place of Business
Suite 3, Level 12
75 Elizabeth Street
Sydney NSW 2000
Australia
Tel: 02 9233 3915
Fax: 02 9232 3411
90 Sheppard Street
Hume
ACT 2620
Australia
Tel: 02 6222 7900
Fax: 02 6299 7687
USA Operations Tucson
German Operations
2122 N. Dragoon Street
Unit 6
Tucson, Arizona 85745
USA
Tel: +1 (520) 624 6399
Fax: +1 (520) 624 1906
USA Operations Alabama
2865
Wall Triana Hwy SW
Huntsville
AL 35824 USA
Singapore Operations
10, Pandon Crescent
#06‑01
Singapore 128466
Tel: +65 6304 3055
Ulrichsberger Str. 17
D‑94469 Deggendorf
Germany
Tel: +49 991 2892 1964
Fax: +49 991 3719 1884
United Arab Emirates Operations
Tawazun Industrial Park (TIP)
Zone 2, Facility 15,
Al Ajban Area,
Abu Dhabi,
UAE
Tel: +971 2 492 7112
Fax: +971 2 492 7110
98
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 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 17 March 2020 the following substantial shareholders were registered:
Regal Funds Management Pty Ltd
VOTING RIGHTS
Ordinary Shares
8,484,152
Percentage of total
Ordinary shares
7.50%
At 17 March 2020 there were 7,367 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).”
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.
99
Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019 contents
asX aDDitionaL inforMation (cont)
corporate Directory
Mr Ian Dennis
Lt Gen Peter Leahy AC
Air Marshall Geoff Brown
Ms Kate Lundy
Company Secretary
Mr Ian Dennis
Registered Offi ce
Suite 3, Level 12
75 Elizabeth Street
Sydney NSW 2000
Australia
Telephone +61 2 9233 3915
Facsimile +61 2 9232 3411
Web site www.eos‑aus.com
Sydney NSW 2000
GPO Box 7045
Sydney NSW 1115
Australia
Telephone 1300 855 080 or
+61 3 9611 5711 outside Australia
Facsimile 1300 137 341
Auditors
Deloitte Touche Tohmatsu
Chartered Accountants
8 Brindabella Circuit
Brindabella Business Park
Canberra Airport ACT 2609
Australia
Ordinary Shareholders
Number of Shares
Directors
Share Registry
Mr Fred Bart (Chairman)
Computershare Investor Services Pty Limited
Dr Ben Greene (Chief Executive Offi cer)
Level 3, 60 Carrington Street
At 17 March 2020 the 20 largest ordinary shareholders held 54.05% of the total issued fully paid quoted ordinary shares
33 Consolidated Statement of Cash Flows
of 113,078,213.
Shareholder
34 Notes to and forming part of the Financial Statements
1. Citicorp Nominees Pty Limited
Fully Paid Ordinary Shares
Percentage of Total
Review of Operations
DISTRIBUTION OF SHAREHOLDINGS
1
At 17 March 2020 the distribution of shareholdings were:
5
Range
Directors’ Report
1‑1,000
20 Auditors’ Report
1,001 ‑ 5,000
5,001 ‑ 10,000
27 Directors’ Declaration
10,001 ‑ 100,000
100,001 and over
28 Consolidated Statement of Profi t or Loss and
Other Comprehensive Income
There were 127 ordinary shareholders with less than a marketable parcel.
29 Consolidated Statement of Financial Position
There is no current on‑market buy‑back.
TWENTY LARGEST ORDINARY SHAREHOLDERS
31 Consolidated Statement of Changes in Equity
2. EOS Loan Plan Pty Ltd
99 ASX Additional Information
3. JP Morgan Nominees Australia Limited
4. Washington H. Soul Pattinson and Company
100 Twenty Largest Ordinary Shareholders
5. N & J Properties Pty Limited
6. HSBC Custody Nominees (Australia) Limited
7. HSBC Custody Nominees (Australia) Limited A/C 2
8. Technology Transformations Pty Limited
9. Merrill Lynch (Australia) Nominees Pty Limited
10. Brazil Farming Pty Ltd
11. UBS Nominees Pty Ltd
12. National Nominees Limited
13. Capitol Enterprises Limited
14. A & D Wire Limited
15. Warbont Nominees Pty Ltd
16. CS Fourth Nominees Pty Limited <11 A/C>
17. Technology Investments Pty Limited
18. CS Fourth Nominees Pty Limited <13 A/C>
19. Emichrome Pty Limited
20. Landed Investments NZ Limited
3,619
2,440
598
608
102
7,367
1,701,460
5,973,718
4,536,594
16,942,586
83,923,855
113,078,213
13,423,306
11.87%
5,180,000
4,856,309
4,576,046
4,090,000
4,050,427
3,686,390
2,763,844
2,311,754
2,217,129
2,122,810
1,561,501
1,550,000
1,457,276
1,452,551
1,399,305
1,209,659
1,175,379
1,029,449
1,010,000
61,123,135
4.58%
4.29%
4.05%
3.62%
3.58%
3.26%
2.44%
2.04%
1.96%
1.88%
1.38%
1.37%
1.30%
1.28%
1.24%
1.07%
1.04%
0.91%
0.89%
54.05%
100
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Electro Optic Systems Holdings Limited and Controlled Entities ANNUAL REPORT 2019
contents
1
5
Review of Operations
Directors’ Report
20 Auditors’ Report
27 Directors’ Declaration
28 Consolidated Statement of Profi t or Loss and
Other Comprehensive Income
29 Consolidated Statement of Financial Position
31 Consolidated Statement of Changes in Equity
33 Consolidated Statement of Cash Flows
34 Notes to and forming part of the Financial Statements
99 ASX Additional Information
100 Twenty Largest Ordinary Shareholders
corporate Directory
Directors
Share Registry
Mr Fred Bart (Chairman)
Dr Ben Greene (Chief Executive Offi cer)
Mr Ian Dennis
Lt Gen Peter Leahy AC
Air Marshall Geoff Brown
Ms Kate Lundy
Company Secretary
Mr Ian Dennis
Registered Offi ce
Suite 3, Level 12
75 Elizabeth Street
Sydney NSW 2000
Australia
Telephone +61 2 9233 3915
Facsimile +61 2 9232 3411
Web site www.eos‑aus.com
Computershare Investor Services Pty Limited
Level 3, 60 Carrington Street
Sydney NSW 2000
GPO Box 7045
Sydney NSW 1115
Australia
Telephone 1300 855 080 or
+61 3 9611 5711 outside Australia
Facsimile 1300 137 341
Auditors
Deloitte Touche Tohmatsu
Chartered Accountants
8 Brindabella Circuit
Brindabella Business Park
Canberra Airport ACT 2609
Australia
4999 Designed and Produced by RDA Creative www.rda.com.au
eLectro optic systeMs HoLDinGs LiMiteD
acn 092 708 364
www.eos-aus.com
2019
annuaL report