WE SEE
FURTHER
Annual Report 2021
EOS Annual Report 2021 | Contents
CONTENTS
Chairman’s Report
CEO’s Report
EOS in 2021
EOS Directors
Executive Team
Company Overview
Defence
Employee Spotlight – Namisha Chabbra
Space
Employee Spotlight – Jacob Debono
EOS People
Employee Spotlight – Paul Costigan
Our Commitment to STEM
Supporting Our Supply Chain Partners
Corporate Social Responsibility
Review of Operations
Directors’ Report
Auditor’s Report
Directors’ Declaration
Financial Statements and Notes
ASX Additional Information
Corporate Directory
Electro Optic Systems Holdings Annual Report 2021
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25
28
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32
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40
62
69
70
143
145
EOS Annual Report 2021 | Chairman’s Report
CHAIRMAN’S REPORT
Board just prior to the year-end. Ms Shiff’s business acumen
and experience in telecommunications will assist in further
strengthening corporate governance and accountability
within the business.
Importantly, the Directors would like to thank Dr Ben
Greene, Group CEO, the executive team and the entire
EOS workforce for all their efforts throughout the year.
The Group achieved a number of milestones throughout
this period while maintaining a COVID-19-safe workplace
and delivering record production levels across both the
Defence and Space businesses.
This year’s Annual Report focuses on several of the many
highly talented employees within the Group, in areas from
research to production. Our ability to compete effectively on
the global stage is a reflection of the calibre and capability
of our workforce, and of their commitment and ingenuity.
We rely on their ongoing commitment.
Notwithstanding rising geopolitical tensions, we look forward
to our shareholders, employees and other stakeholders
joining the Directors for an expected period of growth for
EOS over the year ahead.
Lt Gen (Ret’d) Peter Leahy AC
Chairman
Electro Optic Systems
Holdings Limited
Both 2020 and 2021 were years that were defined by
investing in the future while dealing with COVID-19.
The Directors acknowledge that a net loss after tax of
$13.8 million for 2021 is a disappointing outcome.
Both Defence Systems and EM Solutions delivered record
results. These profits were reinvested into the development
of future programs such as autonomous systems, counter-
drone technology and SpaceLink.
Our investment into the future of SpaceLink was a key
factor behind the net loss after tax reported in 2021. During
the year, $37 million was invested in SpaceLink, of which
$20.6 million was expensed through profit and loss.
SpaceLink represents an unrivalled opportunity to
establish an optical communications satellite business,
and over the last two years the Company has invested
a total of $49 million in establishing this business and
employing a highly skilled team to unlock the value of
the spectrum licence granted to one of our subsidiaries.
Given the potential value of this business, the overarching
objective of the Board is to retain as much of the value as
possible for EOS shareholders.
Your Board and management are working on two major
actions to improve the share price: first, finalising our efforts
to finance SpaceLink’s initial satellite constellation and,
second, reversing the decline in the order book from $429
million at December 2020 to $342 million at December
2021. While the order book still represents approximately 1.5
years of production, a priority of the Company is to bolster
it through contract wins in the current financial year. To our
knowledge, no major projects that the Company tendered
for during 2020 or 2021 have been cancelled or awarded to
another party.
I wish to recognise and, on behalf of the Directors, to thank
Mr Fred Bart, who stepped down as Chairman on 27 July
2021 after 19 years on the Board, for his contribution. The
value of his stewardship over this period, starting from the
Company’s initial public offer, cannot be overstated. Mr
Bart helped to oversee the evolution of the Company to one
that now has operations in six countries and supplies 12
countries’ militaries with highly sophisticated equipment.
Another integral part of the Company’s development has
been the contribution of Mr Ian Dennis, who also retired
from the Board after more than 20 years of service. In
addition, Mr Dennis held the position of Company Secretary
over this period. His counsel was invaluable, and we wish
him well in his retirement.
The increasing complexity of EOS’ business is altering the
Board’s desired skill matrix. Recent Board vacancies have
enabled the process of Board renewal to begin. To that end,
I would like to welcome Ms Deena Shiff, who joined the
Electro Optic Systems Holdings Annual Report 2021
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EOS Annual Report 2021 | CEO’s Report
CEO’S REPORT
For the year ended 31 December 2021
Increasing Productivity and Output
In 2021, in spite of COVID-related constraints, we:
z directed substantial resources into our domestic
and international supply chains to better protect
them from future environment-related shocks
z continued to add to our international manufacturing
and sustainment infrastructure, enhancing our
ability to meet the needs of our international
partners in the US, the Middle East, Asia and Europe
z significantly improved our Defence manufacturing
and production capabilities
z developed and brought to market a variety of
new products and services that are considered
industry leading.
That we achieved the above during the height of a global
pandemic is a testament to the dedication and resilience of
the entire EOS global workforce.
I am pleased to write to our shareholders from a
position of greater clarity than at the corresponding
moment of 2020, when the global business
environment in which EOS operates was largely
defined by COVID-19-related uncertainty.
We welcome the return to a more normal operating
environment following an unprecedented two-year
period in the history of the Company, the international
business community and the world in general. The
easing of international travel and other pandemic-
related restrictions – and the concurrent normalisation
of several of our major overseas contracts – is
a meaningful development for the EOS group of
companies, whose operations benefit from the mobility
of people and goods around the world.
As I review our present position and the horizon ahead, I
am optimistic about the future of our organisation – as well
as proud at how our people have risen to meet the many
challenges that the COVID-19 pandemic has presented.
Over the past two years, the Company has invested heavily
in its future growth. This decision was a major factor
behind the Company’s FY21 reported loss. Analysis of the
Company’s financial statements, however, demonstrates
that our Defence business remains highly profitable.
During 2021, the Company took certain major strategic
steps, including the consolidation of various operational
areas of the business and the streamlining of internal
business practices and oversight, in preparation
for expected accelerated growth in the near term.
These changes are summarised below and detailed
throughout this Report.
Consolidating the Business
The Company carried out a significant organisational
consolidation via the merging of the former Space Systems
and Communications Systems divisions into a single division,
EOS Space Systems. We expect the principal benefits of this
carefully considered reorganisation to be twofold:
z First, it will streamline a range of business processes
and lines of communication across the Company,
increasing efficiency.
z Second, it will help domestic and global markets –
including potential customers and investors – to
understand EOS’ core business activities more easily.
The R&D and other contributions of the expanded EOS
Space Systems will be a critical pillar of the Company’s
future operations and health.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | CEO’s Report
z the release of Titanis, our market-leading CUAS
(i.e. counter-drone) system
z our successful leadership of the C4 EDGE
program, a large-scale communications capability
demonstration involving dozens of organisations
across the Australian Defence sector
z the commissioning of a live firing range
in western NSW at which EOS can test and
demonstrate new products
z growth of our international allied customer base.
Additional details of EOS Defence Systems’ 2021 activities
can be found in the “Defence” section of this Report (p. 14).
Space Systems
It is a similarly exciting moment in the domestic
space community, where there is a sense of gathering
momentum around our long-held organisational ambition
of creating an enduring sovereign space industry.
The following were among Space Systems’ key
2021 activities:
z the unveiling of our new Guide Star Laser, a globally
noted innovation that will meaningfully bolster our
SDA capabilities
z successful participation in the prestigious, US-led Sprint
Advanced Concept Training (SACT) exercises
z the continuing development of EM Solutions’ two-metre
class “King Cobra” maritime satellite terminal
z provision of mission support to the historic M2
space mission
z the continuing evolution of SpaceLink’s
intellectual property and network of potential
customers and suppliers.
Fuller descriptions of these and other developments are
given in the “Space” section of this Report (p. 18).
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Growth Opportunities
In commercial, civil and military organisations around the
world, there is increasing demand for several emerging
products and services that rely on highly specialised
technologies that EOS has been developing over many years.
That is, the Company’s core capabilities make us ideally
positioned to capitalise on these nascent technological and
geopolitical trends in both the defence and space sectors.
A major impact of the COVID-19 pandemic has
been delays in the awarding of new contracts, both
domestically and internationally. This barrier is falling, and
as we look ahead at the spectrum of opportunities before
us, our focus, more than ever, is on high-value business
areas and product lines that can yield the greatest long-
term value for our shareholders.
Examples include our best-in-class remote weapon
systems (RWS) and counter UAS (CUAS) technologies,
including integration onto uninhabited ground vehicles; our
pioneering capabilities in the promising field of directed
energy; and our formidable Space Domain Awareness
(SDA) infrastructure. All of these are high growth segments
in a defence market which is itself growing very quickly.
In the terrestrial and space communications domains,
both SpaceLink and EM Solutions are poised to achieve
much in 2022 following a year of outstanding progress for
both entities in 2021. Further details are given later, in the
“Space” section of this Report (p. 18).
2021 Highlights
For both EOS Defence Systems and EOS Space Systems,
2021 included a number of notable highlights.
Defence Systems
The Commonwealth’s ongoing $270 billion defence
capability upgrade has been an energising development
for the domestic defence sector, and we have confidence
in our suite of existing and developing defence product
lines and our ability to meet the evolving materiel needs
of the Australian Defence Force and our international
allied partners.
Noteworthy 2021 Defence activities included:
z the continuing delivery of advanced RWS
systems to the Australian Army to fulfil a major
Commonwealth contract
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | CEO’s Report
This Report
The Future
This Report offers a detailed picture of EOS’ current
operations and future outlook.
Our 2021 financial results are described in granular detail in
the “Review of Operations” and “Financial Statements and
Notes” sections on pp. 33 and 70, respectively.
The Report also outlines a range of other activities of the
Company, including:
z our considerable contributions to the health of
Australia’s STEM ecosystem, of which EOS is an
acknowledged leader (see “Our Commitment to STEM”
on p. 28)
z our ongoing efforts to be an exemplar of good
corporate citizenship within the Australian defence and
space sectors (see “Corporate Social Responsibility”
on p. 32)
z progress in relation to our goal of increasing the
diversity of our global workforce and the participation
of women at all levels of the Company, including Board
level (see “EOS People” on p. 22).
Through a series of short profiles, this Report also brings
into focus the contributions of several talented EOS
employees working in a range of capacities across the
Company. We acknowledge that communicating our
story to the market has not always ranked among our
chief organisational strengths. These profiles reflect our
commitment to improve in this area, including by telling the
often remarkable stories of EOS’ global workforce, who are
the fundamental engine that drives the Company forward.
The domestic and global environments in which EOS
operates have changed markedly since 1983, and our
organisational and technical capabilities have advanced
dramatically since those early days.
In certain fundamental respects, however, the Company
has remained entirely unchanged.
We are still passionate about strengthening Australia’s
sovereign capabilities and about the great economic and
other whole-of-nation benefits that onshore technological
innovation can bring wherever in the world we locate.
We are still dedicated to offering Australia’s best and
brightest STEM practitioners challenging, rewarding careers
that will keep them working locally, to the benefit of the
nation in general.
And we are still inspired by the possibilities our technologies
offer for the improved security and economic well-being of
the societies we serve. Our drive to benefit shareholders
and other EOS stakeholders will continue to deliver a wide
range of social benefits.
EOS’ story has been developing for almost 40 years, and
I am excited about the coming phases of that story – the
chapters that are still to be written. I hope that, after reading
this Report, you will share our optimism.
Ben Greene
Chief Executive Officer
31 March 2022
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Key Elements of Financial Performance
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | EOS in 2021
EOS Annual Report 2021 | Section Heading
EOS IN 2021
SpaceLink Corporation
Washington DC and Silicon Valley, USA
EOS Optronics GMBH
Deggendorf, Germany
EOS Defense Systems USA, Inc
EOS Space Technologies, Inc
Huntsville, USA
EOS Defence Systems, Inc
Tucson, USA
EOS Advanced Technologies LLC
Abu Dhabi, UAE
OFFICES IN
ACTIVITIES SPANNING
EMPLOYING
5
18
COUNTRIES
COUNTRIES
554
PEOPLE
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Electro Optic Systems Holdings Annual Report 2021
Electro Optic Systems Holdings Annual Report 2021
EOS Annual Report 2021 | EOS in 2021
EOS CUSTOMERS
AUSTRALIA
USA
UAE
SINGAPORE
SOUTH KOREA
THAILAND
JAPAN
INDIA
NETHERLANDS
FRANCE
PORTUGAL
SPAIN
CANADA
MEXICO
Electro Optic Systems Holdings Annual Report 2021
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EOS Defence Systems
The Hague, The Netherlands
EOS Optronics GMBH
Deggendorf, Germany
EOS Defence Systems Pte Limited
Singapore
EM Solutions Pty Limited
Tennyson, Australia
Electro Optic Systems Holdings Limited
Electro Optic Systems Pty Limited
EOS Defence Systems Pty Limited
EOS Space Systems Pty Limited
Symonston, Hume, Queanbeyan and
Melbourne, Australia
Electro Optic Systems Holdings Annual Report 2021EOS Annual Report 2021 | Section Heading
EOS Annual Report 2021 | Directors
EOS DIRECTORS
Lt Gen (Ret’d) Peter Leahy AC
Chairman (27/07/21–current)
Appointed to the Board on 4 May 2009 (length of service – 12 years).
Peter Leahy AC (age 69) 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, a director of Codan Limited and a
member of the advisory board to Warpforge Limited. In other activities, he is Chairman of the
charity Soldier On and the Red Shield Appeal Committee in the ACT. He was Chairman of the
Company’s Audit and Risk Committee and a member of the Nominations and Remuneration
Committee until his appointment as Chairman.
Dr Ben Greene
Chief Executive Officer, Electro Optic Systems
Appointed to the Board of Electro Optic Systems on 11 April 2002 (length of service – 19 years).
Ben Greene, BE (Hons), Phd in Applied Physics (age 71), is the Chief Executive Officer of Electro
Optic Systems. Dr Greene is the founder of Electro Optic Systems Pty Limited. He is published in
the subject areas of weapon systems, laser tracking, space geodesy, quantum physics, satellite
design, laser remote sensing and the metrology of time. Dr Greene is a member of the Australian
Research Council Centre for Excellence for Engineered Quantum Systems, a past member of
Australia’s Prime Minister’s Science, Engineering and Innovation Council, and has served as
Deputy Chair of the Western Pacific Laser Tracking Network Council and CEO of the Cooperative
Research Centre for Space Environment Management.
The Hon Kate Lundy (Hon LittD, GAICD)
Non-executive director
Appointed to the Board on 23 March 2018 (length of service – four years).
Kate Lundy, HonLittD, GAICD (age 54), served as a Senator representing the Australian Capital
Territory from 1996 to 2015. During this time, she held various frontbench positions in both
Government and Opposition, including Minister for Sport, Multicultural Affairs and Assisting on
Industry and Innovation and the Digital Economy.
Kate remains passionate about technology and innovation, with a focus on the positive impact
of technology on society, culture and the economy. In 2017, ANU awarded her an honorary
Doctor of Letters for her “exceptional contributions to advocacy and policy for information
communications and technology, for the ACT and nationally”. In 2017, Kate was inducted into
the Pearcey Foundation Hall of Fame for “distinguished achievement and contribution to the
development and growth of the Information and Communication Technology Industry”.
Kate is a non-executive director of the Australian Grand Prix Corporation, the National Roads and
Motoring Association and the Cyber Security Research Centre; the Chair of the National Youth
Science Forum and Deputy Chair to the Board of the Canberra Institute of Technology; a member
of the ACT Defence Industry Advisory Board; and ACT Defence Industry Ambassador. She is a
member of the Audit and Risk Committee and the Nominations and Remuneration Committee.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors
Air Marshal (Ret’d) Geoffrey Brown AO
Non-executive director
Appointed to the Board on 21 April 2016 (length of service – five years).
Geoffrey Brown AO (age 63) 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) and a
Master of Arts (Strategic Studies) and is a Fellow of the Institute of Engineering Australia and of
the Royal Aeronautical Society. He is a Strategic Advisor to 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 and a member of the
Audit and Risk Committee.
David Black
Non-executive director
Appointed to the Board on 1 January 2021 (length of service – one year).
David Black, BA (Hons), FCA, MBA, GAICD (age 51), is the Chair of the Audit and Risk Committee
and a member of the Nominations and Remuneration Committee. Before retiring from the Deloitte
Touche Tohmatsu Australia partnership in 2016, David spent 25 years with Deloitte in the UK and
Australia, providing services to a range of clients, including in the defence, manufacturing and
government sectors. David’s experience includes working with start-up businesses, multinational
corporations and the boards of ASX-listed entities on complex accounting, internal and external
auditing, risk management, corporate governance and due diligence engagements. David
previously served as the audit partner of Deloitte Touche Tohmatsu for the periods ending from
June 2005 to December 2009 and June 2012 to June 2016.
David is a Fellow of Chartered Accountants Australia and New Zealand and of the Institute of
Chartered Accountants in England and Wales, has a BA (Hons) in Economics and an MBA, and
is a graduate of the Australian Institute of Company Directors. Since his retirement from Deloitte,
he has established a growing family business, and he serves as independent member on two
government audit committees, chairing one of these.
Deena Shiff
Non-executive director
Appointed 7 December 2021 (length of service – one month).
Deena Shiff, BSc Econ (Hons), LLB, Fellow AICD (age 67), has had a senior executive, legal
and government career. She was the first woman to be appointed Group Managing Director
at Telstra Corporation, is a former Partner at Mallesons Stephen Jacques and has served in
regulatory in-house counsel roles. Deena is currently Chair of the Supervisory Board of Marley
Spoon AG and a non-executive director of Appen Limited and Pro Medicus Limited. She is also
Chair of the Broadband Advisory Council and is on the Board of Opera Australia. Deena was
previously the Chairman of BAI Communications and a director of Infrastructure Australia and
Export Finance Australia.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Executive Team
EXECUTIVE TEAM
Grant Sanderson
Chief Executive Officer, EOS Defence Systems
(Global)
Grant joined EOS in January 2018, although he worked on
major EOS development activities as a consultant during
2016 and 2017. He is a military veteran of 25 years who
prior to joining EOS was the Vice President, Strategy and
Business Development in Australia for the Israeli defence
technology company Elbit Systems. Prior to joining Elbit,
Mr Sanderson was the General Manager, Strategy for the
Thales Australia Land Division and was instrumental in the
major product and manufacturing reforms that brought
the Hawkei, Steyr F90 rifle and ammunition products
to market, including the international sales drive for the
Bushmaster PMV.
Glen Tindall
Chief Executive Officer, EOS Space Systems
(Global)
Glen joined EOS in 2020 as CEO of Communications
Systems and was appointed CEO of Space Systems
in 2021. Prior to joining EOS he spent 17 years with
SES, the world’s largest commercial satellite operator,
delivering satellite communications solutions to
business and government customers throughout
the Indo-Pacific region. He holds an Honours degree
in Electrical Engineering from the University of
Tasmania and an MBA from the Deakin Business
School and is a graduate of the Australian Institute of
Company Directors.
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Electro Optic Systems Holdings Annual Report 2021
EOS Annual Report 2021 | Executive Team
Michael Lock
Chief Financial Officer
Morgan Bryant
Company Secretary and
Chief Legal Officer
Pete Short
Group Chief Operating Officer
Dr Craig Smith
Chief Technology Officer
Matt Jones
CEO for EOS Defence Systems
Australia
Phil Coker
CEO for EOS Defense Systems
USA, Inc
AbdulRahman AlBlooshi
CEO for EOS Advanced
Technologies, UAE
Henry Heng
CEO, EOS Defence Systems,
Asia-Pac
Electro Optic Systems Holdings Annual Report 2021
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EOS Annual Report 2021 | Company Overview
COMPANY OVERVIEW
Electro Optic Systems (EOS) is an Australian technology company
that creates leading-edge products and services for a range of
applications in the defence, space and communications sectors.
We develop and produce world-leading technology to
enhance the security and prosperity of Australia and
its allies.
Our core capabilities include bespoke optical and laser
assemblies, thermal imagers, day cameras, gimbal units,
laser rangefinders and other high-value hardware. Our
expertise in these areas – which we have been honing for
almost 40 years – enables us to bring new and innovative
technologies to market.
EOS operates in two divisions: Defence Systems and
Space Systems.
Defence Systems specialises in technology for weapon
systems optimisation and integration, as well as ISR
(intelligence, surveillance and reconnaissance) and C4
(command, control, communication and computers)
systems for land warfare. Its key products are next-
generation remote weapon systems, vehicle turrets, and
counter-UAS (uninhabited aerial systems) systems.
Space Systems includes all EOS space and
communications businesses, and operates as three
entities: SpaceLink, EM Solutions and Space Technologies.
SpaceLink is launching a constellation of Medium Earth
Orbit satellites to create the communications superhighway
for the space economy. EM Solutions provides global
satellite communications services and systems. Space
Technologies specialises in applying EOS-developed optical
sensors to detect, track, classify and characterise objects in
space, and forms the nucleus of research and development
across the EOS group.
Our customers operate in the civil, commercial and military
spheres and include the Commonwealth of Australia, the
Australian Army and the Royal Australian Navy, Geoscience
Australia, several US government agencies, and various
international allied armies, navies and civil organisations.
We employ a highly skilled workforce of specialist
engineers, scientists and other expert personnel, including
a large contingent of defence force veterans. Our global
workforce comprises almost 550 employees, and we
have international offices in the US, Germany, United Arab
Emirates and Singapore.
Australian Technology, Global Reach
EOS has been headquartered in Canberra since the
Company’s 1983 founding, and the bulk of our products
are manufactured by a local workforce at our Hume,
Queanbeyan and Brisbane production facilities.
In 2020, the company commenced full-rate production at
its state of the art facility in Huntsville, Alabama, to service
contracts for the US and other markets. EOS also has
sustainment infrastructure in Singapore and the UAE to
meet the ongoing needs of our international customers
and allies.
EOS has long had a healthy export business – indeed, the
majority of our customers have historically been overseas-
based – but the Company also has a longstanding
commitment to enhancing Australia’s sovereign
capabilities and is passionate about the whole-of-nation
benefits that onshore technological innovation can bring.
As such, we work closely with Australian owned, Australia-
based suppliers, sourcing individual components from
overseas if they are unavailable or are not made to the
required military standard locally. EOS has actively worked
to enhance the robustness of its supply chain to minimise
the potential impact of exogenous events.
EOS’ business activities are helping to:
z improve Australia’s sovereign and industrial capabilities
and, by extension, our national security
z bring Australia’s defence and space capabilities
closer into line with those of our key allies
z meet the evolving materiel and communications
requirements of the Australian Defence Force
z keep homegrown STEM talent working onshore
z create domestic manufacturing jobs
z generate employment and business opportunities
for our nation-wide network of supply chain
partners, including in rural and regional areas
z burnish Australia’s growing global reputation as a
technological innovator.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Company Overview
OUR VISION
To be Australia’s most-valued
space and defence company
OUR MISSION
To develop and produce
world-leading technology to
enchance the security and
prosperity of Australia and
its allies
WHAT DO WE ASPIRE TO DO BEST?
Develop and produce systems that can detect, identify, stabilise,
control and communicate to improve informed decision-making
WHAT IS OUR PASSION?
Design and harness RF and electro-optical engineering to solve
unique customer challenges
WHAT DRIVES OUR RESOURCING?
We depend on trusted and enduring relationships with agencies
that seek to enhance national security and prosperity
An Industry Leader
Our Vision
The environment in which EOS operates has changed
markedly since 1983, but the Company’s vision of being
Australia’s most valued space and defence company has
remained constant over time.
EOS believes strongly in the need to bolster Australia’s
sovereign capabilities and in the nation-wide benefits
that technological innovation, as well as the creation
of enduring sovereign defence and space industries,
can bring. The Company is well positioned to be at the
vanguard of this exciting future.
In our capacity as a leader within Australia’s defence and
space communities, we undertake a range of activities to
foster growth across those sectors and ensure the ongoing
health of Australia’s science, technology, engineering
and mathematics (STEM) ecosystem. These activities
– several of which are detailed throughout this Report –
include:
z a variety of formal scholarships, internship and PhD
supervision programs
z direct funding of promising STEM research
z participation in industry demonstrations, forums
and joint exercises
z provision of ad hoc and informal assistance to
major university research projects
z provision of mission support to space expeditions.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Defence
DEFENCE
The C4 EDGE sovereign Battlegroup and Below Battlefield Command System prototype was demonstrated in a combat team environment, integrating
mounted/dismounted and uninhabited platforms in a single network
2021 saw EOS Defence Systems
achieve a great deal amid
challenging global conditions.
We increased our profitability; improved the overall
efficiency and capacity of our manufacturing for all
defence product lines; added to our domestic and
international customer base; and unveiled a diverse suite
of new and next-generation products that are considered
industry leading.
A selection of EOS Defence Systems’ key 2021 activities
are summarised below.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Defence
Titanis: a fully integrated, scalable CUAS suite combining soft, hard and directed energy defeat capabilities
Commonwealth RWS Contract
EOS Defence Systems is an acknowledged global pioneer
in remote weapon systems (RWS), given the advantages in
range, accuracy and lethality that our RWS systems offer.
During 2021, EOS continued to deliver on a major contract
with the Commonwealth of Australia by completing
production of 251 RWS for integration onto Australian
Army Bushmaster and Hawkei protected mobility vehicles.
This major government investment – a part of the
ongoing $270 billion Australian Defence Force capability
upgrade – will benefit not only EOS but also the 146
Australian suppliers and more than 1100 domestic
workers within our RWS manufacturing supply chain.
CUAS
The need for adequate defences against attacks by
uninhabited aerial systems (UAS) has become increasingly
urgent in recent years, as advances in UAS technology
continue to heighten the threat posed by drones.
In 2021, EOS Defence Systems brought to market Titanis,
a fully integrated, scalable counter UAS (CUAS) suite
combining specific detection, command and control (C2),
and layered hard and soft kill defeat capabilities necessary
to acquire, track and defeat swarming UAS threats.
EOS is determined to maintain its current place at the
vanguard of this emerging technology, which has significant
market potential, and development of the next generation of
EOS CUAS technologies is already well underway.
C4 EDGE Program
EOS Defence Systems led a
successful industry demonstration
that showed off the capabilities
of the domestic Defence sector
in general, as well as its ability
to meet the Australian Army’s
specific future communications
requirements, as part of the C4 EDGE (Command, Control,
Communications and Computers – Evolutionary Digital
Ground Environment) program.
The focus of the program was battle-critical
communications solutions that could deliver advanced
capabilities for the Australian Army, particularly in
battlegroup and below areas.
As Prime Contractor, EOS played the lead role in
assembling and coordinating the all-Australian industry
collaboration, which included 31 of the nation’s most
innovative small- to medium-sized enterprises. Feedback
on the demonstration from a range of stakeholders has
been unanimously positive.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Defence
The T2000 turret, one of several EOS systems put through their paces at
the Klondyke Range Complex
EOS R400S Dual Weapon System firing off a Royal Netherlands Army
8 × 8 Boxer Combat Reconnaissance Vehicle
UGV Sales to the Netherlands
The Royal Netherlands Army has purchased five R400
systems for evaluation on the THeMIS UGV and will deploy
these systems in a NATO exercise in 2022. Systems are
initially being trialled with the M2 .50Cal MG, but this will
evolve to 30 mm dual systems as trials continue.
Successful Firing of R400 with Cannon on
Dutch Boxer
The R400S Dual Weapon System was demonstrated
firing off a Boxer 8 × 8 Combat Reconnaissance Vehicle
to the Royal Netherlands Army in the Netherlands. This
activity also included the demonstration of the R400S on
the Milrem THeMIS UGV (non-live fire) as a preliminary
to the deployment of weapon systems on remotely
operated platforms.
2021 Awards
We were pleased to be recognised for our innovative work
at the 2021 Defence Connect Australian Defence Industry
Awards, where EOS Defence Systems was named Export
Business of the Year and Manufacturer of the Year.
Live Firing Demonstrations at
Klondyke Range Complex
EOS Defence Systems conducted live firing demonstrations
at the private Klondyke Range Complex in western New
South Wales, exhibiting the advanced capabilities of the
Company’s T2000 Turret and Titanis systems.
This was an important development not only for EOS but
also for the broader Australian defence ecosystem, given
the longstanding shortage of suitable testing ranges in
Australia – which has often forced EOS to conduct these
demonstrations overseas.
EOS worked closely with the landowner to create a field firing
environment in which a broad range of weapon systems
can be tested safely, and the Company has plans to create
further domestic ranges in the coming months and years.
Growing the Customer Base
Middle East
The number of systems delivered to our major Middle East
customer grew steadily through the year, as did our in-
country integration and testing capabilities. This contract,
which is now delivering very high levels of customer
satisfaction, resulted in invoicing of $97.6 million over the
year. Having established a “drumbeat” for the monthly
delivery schedule, this contract will continue to deliver
similar returns over the coming three years.
Sale to Thailand
Singapore-based EOS Defence Systems Pte Limited, a
subsidiary of Electro Optic Systems, announced its first
RWS acceptance by the Thailand Defence Technology
Institute (DTI). DTI is the Thai agency tasked with
overseeing all high-technology acquisition programs for the
Thai military. The successful integration of the EOS R400S-
Mk2-HD RWS with the Milrem Robotics THeMIS combat
uninhabited ground vehicle (UGV) was fully endorsed by
DTI and will be further evaluated by the Royal Thai Army
in the coming year. EOS Defence Systems also received a
contract for R150 systems to be delivered to DTI in 2022.
16
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Employee Spotlight
NAMISHA CHABBRA
Laser Engineer and Physicist
Namisha is an
up-and-coming
laser engineer and
physicist working in
the Directed Energy
(DE) Laser team.
Her day-to-day work – which has
the overarching goal of ensuring the
quality of EOS’ laser-based products –
involves technical as well as practical
elements, and can include everything
from crafting systems documentation
to assembling laser systems to
testing optical components so as to
verify, as Namisha puts it, that they “do
what we want them to do”.
Namisha, who grew up in Canberra,
is the only member of her family with
an engineering bent: her
parents are both longtime
public servants, while
her sister works in law.
As a child, she
remembers with
a chuckle, she
was “never your
‘Barbie-girl’ type”;
instead, she
always preferred
being outside,
experimenting,
Namisha Chabbra inspects a lens that will help to align laser light into an EOS sensor
building things and figuring out how
they fit together and functioned. Her
earliest engineering projects included
smashing bricks in the family
backyard, digging uncommonly
large holes at the beach and using
dubious methods to try to fix faulty
home appliances – with occasionally
disastrous results.
It’s fair to say her engineering abilities
have advanced dramatically since
those days.
“Growing up, maths and physics were
my strongest subjects – and I always
wanted to do something practical
with them,” Namisha says.
On finishing high school, she strongly
considered a combined Science/
Commerce degree, which seemed to
offer the clearest path to her goal of
helping to create new technologies that
would be useful to the world in general.
People around her, though, kept
insisting she’d make a great engineer.
Namisha took note and enrolled in an
undergraduate Engineering degree at
ANU before completing her Honours
in Physics and honing her speciality
in optical and laser systems.
Namisha is currently completing a
PhD in tandem with her part-time
role at EOS. She says her work and
studies are complementing each
other extremely well, and that her job
allows her to put theory into practice.
“At uni, we experiment with lasers,
but here, you really get to see how
they can be commercialised and how
someone might use them in the field.”
She notes that defence and space
are two industries that are “always
at the forefront of what’s new”, and
that the technologies they create tend
to trickle down to the rest of society
over time.
Namisha is making the most of her
opportunity to work on the cutting
edge of laser engineering and
learn from senior colleagues who
rank among the most experienced
practitioners in her field.
Outside of work, she enjoys
bouldering, rock-climbing and
kickboxing – the latter of which
can be cathartic, she laughs, after a
long day of grappling with complex
engineering problems.
If Namisha could give her younger,
brick-breaking self any advice, it
would be to “follow your gut” – and to
remember that “it’ll all work out okay”.
Electro Optic Systems Holdings Annual Report 2021
17
Electro Optic Systems Holdings Annual Report 2021EOS Annual Report 2021 | Section Heading EOS Annual Report 2021 | Space
SPACE
EOS achieved a major breakthrough with its Guide Star Laser technology
This year saw the expansion of
EOS Space Systems, following
the merger of the former
Communications Systems and
Space Systems divisions.
We expect this consolidation, which has already
streamlined a number of business processes, to increase
our productivity in 2022 and beyond.
Throughout 2021, EOS Space Systems:
z continued to fulfil the terms of our domestic
and international contracts
z continued to create and refine new space
technologies
z undertook a range of activities aimed at facilitating
growth across the broader Australian space sector,
of which we are an acknowledged leader.
We also continued to create new jobs and business
opportunities – including export opportunities – for our
extensive, nation-wide network of domestic supply chain
partners.
A summary of EOS Space Systems’ key 2021 activities is
given below.
18
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Space
EOS’ SDA Control Room at the EOS Space Research Centre, Mount Stromlo
Chief of Navy Vice Admiral Michael Noonan AO witnessing the over-the-air
test of the eighth and final Cobra terminal for the Navy’s Anzac Frigates
Guide Star Laser
EOS Space Systems unveiled an innovation in laser
technology that is of significance to the entire global
space community: a Guide Star Laser that facilitates a
step change in laser performance and underpins multiple
applications, including surveillance, laser ranging, laser
effects and laser communications.
This “leap-forward” development – which generated
considerable media attention and public interest – was
the culmination of several years of R&D and represents a
meaningful contribution to humanity’s efforts to mitigate
the growing threat of space debris.
Space Domain Awareness
We continued to produce timely, credible Space Domain
Awareness (SDA) intelligence to meet the needs of our
domestic and international partners, including the Australian
Department of Defence, Geoscience Australia and certain
US government agencies. This included renewing our
operations and maintenance contracts with Geoscience
Australia for a further three years.
EOS offers world-leading SDA capabilities through our
geographically dispersed SDA network – which includes
two major sites (in ACT and WA) that each house
multiple telescopes and sensors – that can accurately
detect, track and characterise the smallest and dimmest
resident space objects both in daylight and at night-time.
These advanced capabilities – which other commercial
providers simply do not possess – give our SDA
customers significant operational advantages.
EM Solutions
EM Solutions’ satellite communications technology
is prized for its reliability, durability and versatility and
is currently used by the Royal Australian Navy (RAN)
and the Australian Border Force, as well as a range of
international allied navies.
In a positive year for EM Solutions, we completed
installation of the eighth and final one-metre “Cobra”
satellite terminal on the RAN’s frigate class ships and
signed new contracts for Cobra terminals to be installed
on the next three shipsets of the RAN’s Offshore Patrol
Vessels and Enhanced Cape Class Patrol Boats.
2021 also saw the release of the two-metre “King Cobra”
Fleet maritime satellite terminal, the next-generation
iteration of the one-metre class Cobra. Several European
navies have already signed contracts calling for the
delivery of the systems in the coming years.
EM Solutions is currently developing a hybrid
satellite terminal that will offer even higher-data-rate
communications.
19
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Space
The SpaceLink relay satellites use optical links to transmit data between spacecraft on orbit and the ground
SpaceLink
M2 Mission Support
EOS provided mission support to the Royal Australian
Air Force and UNSW Canberra’s historic M2 Mission
by supplying precision tracking data to monitor the
separation of the M2 satellite into M2A and M2B and
the subsequent demonstration of formation flying
technologies and techniques.
This was one of a number of ad hoc collaborations with
industry, academia and government in which we worked
in the best interests of the domestic space community in
general, in keeping with our goal of creating an enduring
Australian space industry.
2021 Awards
We were proud to be recognised for our work at the 2021
Space Connect Australian Space Awards, where EOS
Space Systems was named Business of the Year – Large,
and at the 2021 Defence Connect Australian Defence
Industry Awards, where EOS Space Systems was named
Space Business of the Year and EM Solutions was named
Naval Business of the Year.
SpaceLink continued to solidify its supply chain and
potential customer base, signing contracts with several key
vendors and memoranda of understanding with various
stakeholders in the commercial and civil space domains.
We also continued to hone our intellectual property in
the promising area of space communications and data
solutions. Among a range of related developments,
SpaceLink was selected by the US Center for the
Advancement of Science in Space (CASIS) to
demonstrate an optical data relay service to the
International Space Station.
SpaceLink is currently addressing a specific market need
by developing a smaller on-orbit communications satellite
(“Block-0”) that will offer customers faster delivery,
accelerated profitability and reduced costs.
SACT Exercises
EOS participated in three US-led commercial Sprint
Advanced Concept Training (SACT) exercises.
We have built a reputation for providing high-quality
SDA data to support civil and military operations at
this prestigious global industry event, which acts as a
sandbox for innovation and collaboration across the
international space community.
At the exercises, EOS performed routine and dynamic
tasking, daytime debris laser ranging, daytime non-LEO
passive tracking, and rendezvous and proximity operation
analysis, and supported many desired learning objectives.
EOS has gained several accolades for our participation,
through which we successfully demonstrated our SDA
capabilities to the global commercial market.
20
Electro Optic Systems Holdings Annual Report 2021HEADING EOS Annual Report 2021 | Employee Spotlight
JACOB DEBONO
Mechanical Engineer
Jacob works in EOS
Space Systems’
Mechanical
Engineering team,
whose focus, in
broad terms, is the
ruggedisation and
mobilisation of EOS
technologies.
He and his colleagues work to
enhance the durability, stability
and transportability of the many
EOS products that rely on complex
optical systems, including those
used in the growing field of Space
Domain Awareness (SDA), in
which EOS is an acknowledged
global leader.
The powerful but delicate optical
equipment in EOS laser systems
is typically built for use only in the
laboratory, where every environmental
element – from wind-induced
vibration to humidity to temperature –
must be rigidly controlled.
The Mechanical Engineering team
develops, among other things,
technology that addresses the
shortcomings of lab-bound hardware
so that the relevant components will
be capable of withstanding large
temperature fluctuations, the stresses
of long-distance transport and other
environment-related challenges.
These advanced capabilities are
among the factors that make EOS’
SDA products industry-leading.
Jacob has been with EOS for just
over two years, working with team
leader Dejan Stevanovic, whose
professional history includes
positions at NASA and the Australian
Department of Defence. Jacob says
Dejan – “a fantastic mentor” – has
Jacob Debono at EOS’ Space Research Centre at Mount Stromlo.
month spell at the Renault Formula
1 Team Technical Centre in the UK.
For someone who had long been a
devoted F1 fan, it was a dream come
true.
Jacob is passionate about renewable
technology and sustainable
engineering, and he
believes strongly in
giving back to the
community through
charity work.
He was named
a finalist in the
Engineer of the
Year category at the
2021 Momentum
Media Space
Awards.
taught him a great deal about the
highly specialised subfield of opto–
mechanical engineering. “Pretty much
any engineering question you ask,”
he says with a smile, “Dejan tends to
know the answer.”
When asked what he enjoys about
his role, Jacob cites the collaborative,
problem-solving nature of the R&D
processes that are at the heart of
EOS operations. He takes great
satisfaction in the end-to-end nature
of his job, as concepts move from
whiteboard to rough sketch to
finished product, “complete with
maintenance manual”. He also prizes
the variety; he spends roughly equal
parts of his workdays behind the
computer and out in the field, and
every day brings fresh challenges and
problems to be solved.
Jacob’s engineering talent has led him
into some remarkable experiences
outside of work. He was heavily
involved in establishing ANU’s Solar
Racing team and has competed
in the Bridgestone World Solar
Challenge, a 3022-kilometre sprint in
solar cars from Darwin to Adelaide.
In 2017, he was chosen from over
500 applicants to spend a year at the
INFINITI Engineering Academy – a
rare opportunity that included a six-
Electro Optic Systems Holdings Annual Report 2021
21
Electro Optic Systems Holdings Annual Report 2021EOS Annual Report 2021 | Section Heading EOS Annual Report 2021 | EOS People
EOS PEOPLE
EOS’ high-performing people are at the heart of everything we do
and are fundamental to the success of our organisation.
CORPORATE:
59
DEFENCE:
344
SPACE & COMMS:
151
Global Workforce
We are proud to employ a workforce that includes a
diverse range of experiences and backgrounds, all of which
contribute to a collaborative work environment where
innovation and practical problem-solving are valued. EOS
recognises the benefits that all forms of diversity bring to
our Company.
61
Veterans
in the EOS
workforce
Veterans
554
Total EOS
employees/
Directors globally
AUSTRALIA
402
USA
UAE
SINGAPORE
GERMANY
91
48
12
1
25
23
3
10
As at 31 December 2021, EOS employed 59 veterans globally,
comprising 11% of its global workforce.
22
EOS is also proud to employ a significant number of
defence force veterans (see below). We recognise and
greatly value the unique perspectives and skills that
veterans bring to the Company:
z Defence force veterans are an important part of our
business, and in 2021 EOS became a “Solider On”
Platinum Pledge Partner.1
z EOS engages with the Australian Department of Defence
to arrange project and secondment opportunities for
currently serving defence personnel, which assists
personnel to transition into roles at organisations such as
EOS following their military careers.
1 See https://pathways.soldieron.org.au/the-pledge/.
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | EOS People
Diversity and Inclusion
EOS is committed to maintaining an inclusive workplace
that embraces and values diversity in all of its forms,
including in regard to gender, race, ethnicity, disability, age,
sexual orientation, gender identity, marital or family status,
and religious and cultural background.
EOS prioritises the recruitment and retention of the best
available talent at all levels, up to and including the Board
of directors.
Our commitment to diversity allows us to make more
informed and innovative decisions, drawing on the wide
range of ideas, experiences, approaches and perspectives
that employees from diverse backgrounds, and with
differing skillsets, bring to their roles.
We recognise the relative lack of diversity in the industries
in which we operate and are committed to taking action to
redress this in our global EOS workforce.
Historically, the types of work and roles that EOS offers
have commonly been filled by male employees and have
not been seen as being attractive to female employees.
We are working to address this, through improved
advertising and recruitment processes.
The current gender split of EOS’ workforce is broadly
reflective of the number of women working in STEM fields
more generally.
We are actively pursuing plans to increase the number of
women in our workforce; for example:
z ensuring that our job advertisements are appealing
to female candidates
z ensuring that our policies and procedures are wholly
gender-neutral
z offering scholarships and internships for women
considering STEM careers.
We acknowledge that EOS has more work to do to
improve Male:Female ratios across its workforce. Our
ambition remains to improve this proportion markedly.
We have established goals and implemented measures to
significantly improve the gender composition of the EOS
workforce, including:
z continually measuring the percentage of female
employees, including those in management positions
z including gender diversity as a consideration when
selecting new Board members
z launching a scholarships and internship program
for female STEM students to encourage female
students to pursue STEM careers
z celebrating our female staff members through
events and publications, and highlighting their
successes through awards.
When hiring new employees or appointing current
employees into new roles, EOS does not discriminate on
the basis of age.
67
213
128
146
Age
Employees
<39
213
40 – 49
146
50 – 59
126
60+
63
EOS recognises the importance of balancing the career
experience that older personnel offer with the need to attract
less experienced personnel (including recent graduates),
while at the same time providing enhanced internal career
development and growth for its entire workforce.
EOS has now achieved its earlier target of 30 percent
female Board directors and plans to increase this target in
future years.
EOS is very mindful of the need to ensure that its
employees have the full range of skills and experiences
they require to do their jobs, irrespective of age.
EOS Directors and Staff 2021
Number
Female
Female %
Male
Male %
Board
Senior Management (CEO/EVP) *
Australia
Singapore
United States
United Arab Emirates
Germany
Total
6
8
388
12
91
48
1
554
2
-
80
2
23
10
1
118
33%
-
21%
17%
25%
21%
100%
21%
4
8
308
10
68
38
-
436
67%
100%
79%
83%
75%
79%
-
79%
* “Senior Management” is defined as a manager who has a relatively high leadership role in the day-to-day responsibilities of managing the Company.
23
Electro Optic Systems Holdings Annual Report 2021
EOS Annual Report 2021 | EOS People
Staff Retention
A total of 87 employees left EOS employment in the
course of 2021, equating to a global EOS staff attrition
rate of ~16 per cent.
EOS appreciates that a certain amount of staff turnover
is inevitable and is highly aware of the need to keep staff
attrition to a modest level.
We have in place a range of initiatives to maintain an
optimal level of staff retention, including:
z ensuring that newly hired employees are
“onboarded” well
z maintaining a strong focus on workplace health and
safety, so that the physical and mental health of our
workforce is cared for
z managing employee remuneration, in line with
budget, while also being cognisant of external
market wage pressures and remuneration rates at
some of EOS’ competitor organisations
z having a range of contemporary staffing-focused
policies and procedures that are supportive of our
desired workplace culture
z providing learning and development opportunities
for our workforce, enabling professional growth
z enabling existing employees to be temporarily
seconded into other roles or project teams, allowing
them to apply their knowledge and skills in a
different EOS context
z providing a suite of employment benefits to help to
make EOS an attractive place to work.
Learning and Development
EOS is committed to the ongoing development of the
skills of its workforce.
As a defence industry manufacturer, much of our staff
training in 2021 involved on-the-job training in relation to
our systems and processes, including our research and
development capability.
Throughout 2021, we have maintained our accreditation
against the management system standards set by ISO
9001:2015 – Quality Management Systems in respect
to EOS Defence Systems Pty Limited. EOS is required to
provide training to its workforce as part of this accreditation.
Through 2021, EOS staff members have been able
to improve their skills, and acquire new skills, in the
following ways:
z undertaking on-the-job training
z all employees across EOS’ Australian workforce have
been required to complete a series of mandatory,
EOS-developed learning modules covering:
z the EOS Code of Conduct
z work health and safety topics
z preventing harassment and bullying in our
workplaces
z managing data in our IT environment,
including by maintaining the strongest
possible cyber-security and information
security environments across EOS
z attending conferences and seminars (many in an
online format, due to COVID-19-related restrictions)
z employees have been sponsored to undertake
formal management and supervisory qualifications
relevant to their roles
z given that COVID-19 prevented EOS employees
from physically gathering together to undertake
training programs throughout 2021, EOS purchased
a significant number of LinkedIn Learning®
licences, enabling staff members to access a wide
range of learning programs in an online format. This
mode of learning and development will be enhanced
through 2022.
24
Electro Optic Systems Holdings Annual Report 2021EOS Annual Report 2021 | Section Heading EOS People
Paul Costigan
EOS Annual Report 2021 | Employee Spotlight
EOS People
PAUL COSTIGAN
Senior Production Engineer
Paul, a Senior
Production Engineer
who predominantly
works out of EOS’
Queanbeyan
production facility,
understands the
ins and outs of the
Company’s core
technologies better
than most.
Now in his seventh year with EOS,
Paul has done a wide range of
theoretical and practical work at
the Company, and across several
engineering teams – a testament to
his diverse professional toolkit.
“The Company has given me plenty
of opportunities to grow and develop,”
he reflects.
Paul grew up in Canberra and started
at EOS as a graduate engineer, fresh
out of a double Engineering (Hons)/
Commerce degree at ANU.
Initially, he worked strictly on the
production of thermal imagers,
before being promoted into a lead
role in that area. His work scope has
since broadened to include EOS’ best-
in-class sensor units and thermal and
day cameras, which are critical to a
variety of defence products.
In his current role in the Production
Engineering (PE) team – “a tightknit
group”, he says – Paul helps to manage
the processes and documentation that
govern how a number of EOS products
are made. He also offers hands-on
support if problems crop up on the
production floor.
As an expert in refining and
streamlining engineering processes,
his primary goal is to stop those
Paul Costigan calibrates an optical table used in the production of EOS sensor units
eight-month-old baby – and taking
them on weekend adventures. He’s
also a dedicated gymgoer and is
heavily involved in sport, as both
player and spectator. (He particularly
enjoys Oztag, “a less brutal version of
rugby league”.)
Paul’s EOS story is one of continuing
professional development, two-
way loyalty and increasing
responsibility over
time. He has
had a close-up
view as the
Company
has
expanded
over recent
years, as he
has grown
along with it.
problems from cropping up in the
first place. When Paul says his job
is about “continuous improvement”,
he’s not repeating a corporate
catchphrase – the concept is at the
heart of all of his work at EOS.
Paul spent much of 2021 optimising
production processes for EOS’
new-generation hybrid day camera,
ultimately reducing the time needed
for a particular focus mapping
process – one that allows the camera
to be in focus throughout the entire
zoom range – from around four
hours to less than 15 minutes. This
significant breakthrough, which
will go a long way to preventing
production bottlenecks, is just one
recent example of the tangible value
he brings to the Company.
Paul sees the broad-ranging skillsets
within the multidisciplinary PE
team as a major asset. “We’ve got
electronics engineers, mechanical
engineers, software engineers –
even someone with a biomedical
engineering background,” he says.
This means that when challenges
appear, the team has access to a
broad set of capabilities that can help
to overcome them.
When not at work, Paul loves being
with his family – which includes an
Electro Optic Systems Holdings Annual Report 2021
25
Electro Optic Systems Holdings Annual Report 2021EOS Annual Report 2021 | Section Heading EOS Annual Report 2021 | EOS People
COVID-19 and Employee Wellbeing
A significant workplace health and safety priority focus
area throughout 2021 was to ensure that the impacts
of COVID-19 on the EOS workforce were managed
effectively. The EOS HR Department was set the following
objectives:
1. Keep our people safe; and
2. Ensure business continuity.
In the 12 months to 31 December 2021, there were 18
(3.3%) instances of positive COVID cases across the EOS
global workforce.
To manage the impacts of COVID-19, EOS adopted a
range of strategies and plans throughout 2021, including:
z creating a suite of COVID-specific policies and
procedures to protect both employees and EOS’
business interests, the hallmark of which was our
COVID-19 Global Strategy and Divisional Business
Continuity Plans
z implementing a COVID-19 Ambassador role,
which entailed offering employees a source of
expert advice and noting the myriad federal, state/
territory and local government rules to coordinate
an effective, consistent approach to managing
COVID-19 in all EOS places of work
z providing a range of leave entitlements applicable
to employees who were deemed to be “close
contacts”, who contracted the COVID-19
virus themselves or who had significant carer
responsibilities
z enabling many staff members to work from home
on a remote working basis, without needing to
physically come into EOS premises
z revising Business Continuity Plans so that, in the
event of a significant COVID-19 outbreak in a
section of our workforce, we could respond quickly
and effectively to protect employee health and
ensure that our business needs could be met
z giving employees, through the EOS intranet,
easy access to public health information and
government agency requirements specific to
managing instances of COVID-19 in the community
and in EOS workplaces.
Work Health and Safety
Throughout 2021, EOS has continued to have a very
strong focus on managing workplace health and safety.
EOS globally had just five instances of workplace injury
in 2021. While EOS always aims to have zero workplace
incidents and accidents, it is to be noted that of the five
incidents reported, four did not require any time off work
and were relatively minor in nature.
We have in place a workplace health and safety
committee structure and regularly undertake walk-around
site inspections and formal audits of WHS activities in our
workplaces.
All employees are regularly reminded of the importance
of following EOS’ work health and safety policies and
procedures and of complying with all relevant safe work
procedures, as applicable to their duties.
26
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | EOS People
27
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Our Commitment to STEM
OUR COMMITMENT TO STEM
EOS Scholarship recipient Jessica Kreskay at the Andy Thomas Space Foundation 11th Australian Space Forum with James Bennett,
Vice President, EOS Space Systems and Jackie Carpenter, founder of the One Giant Leap Foundation
EOS is deeply committed to nurturing, through practical support, the
next generation of Australian science, technology, engineering and
mathematics (STEM) practitioners.
R&D has been embedded in EOS’ organisational DNA since
the Company’s earliest days, and it is accurate to say that
EOS has been built on the back of STEM research.
It’s therefore appropriate that the Company – a widely
recognised leader in the domestic STEM ecosystem –
offers significant financial and other assistance to up-and-
coming Australian STEM practitioners.
We do this via a range of formal scholarships, awards
and internship programs; by directly funding emerging
and cutting-edge STEM research; and through ad hoc
collaborations with Australia’s leading universities.
In part, these activities serve a straightforward business
imperative: to achieve its organisational objectives, EOS
requires a steady supply of highly qualified STEM staff
members who can dream up and develop innovative,
industry-leading technologies. (The entire EOS Space
Systems team, for example, are degree-qualified, while
30 per cent are PhD-qualified.)
In a broader sense, EOS is – and always has been –
passionate about the manifold benefits that domestic
STEM innovation can bring to the wider national economy
and national security. These include:
z creating onshore manufacturing and technology jobs
z building enduring, nation-wide domestic supply
chains
z improving Australia’s sovereign capabilities and, by
extension, its national security
z enhancing Australia’s growing global reputation as a
technological innovator.
With the above in mind, EOS has directly funded more
than $20 million in Commonwealth-sponsored STEM
research in the last five years alone. The Company also
undertakes a range of activities designed to ensure the
ongoing health of Australia’s STEM pipeline; a selection of
recent examples are summarised below.
28
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Our Commitment to STEM
2021 STEM Activities
EOS Space Systems Research
Awards
EOS Scholarships for Future
Excellence in STEM
EOS Professorial Chair in Laser
Physics
Applicants were required to submit a
short research project proposal outlining
the motivation behind their research
and expected results, and to discuss the
potential impact of their project on the
space science community.
Winners were selected for their
outstanding research project proposals
in the fields of space science and
engineering and were each awarded a
$10,000 prize.
2021 winners: Lauren Fell, Sabrina
Slimani, Skevos Karpathakis and Joshua
Critchley-Marrows.
EOS provides funding of between $4000
and $8000 to be used in a way that
helps recipients learn about and explore
opportunities in STEM.
Recipients are selected for their
outstanding achievements in, and
passion for, space.
Each receiving $4000: Lisa Rheinberger
(Macquarie University), Francesca
Dobbie (Merewether High School, NSW),
Jessica Kreskay (Moorefield Girls High
School, NSW)
Scholarship and internship, receiving
$8000: Olivia Widjaja (UNSW); see profile
below
The University of South Australia (UniSA)
Chair, Professor David Lancaster, will
create two postdoctoral positions and
establish a world-leading research and
teaching group in areas closely aligned
to core EOS capabilities in Space Domain
Awareness.
This development comes in the wake
of EOS’ recent establishment of the
Professorial Chair in Microwave and
Photonic Engineering and Applied
Electromagnetics at the University of
Queensland.
OLIVIA WIDJAJA
EOS Space Systems Intern
Olivia Widjaja, a 2021 EOS
Scholarship for Future Excellence
recipient, is currently studying a
Bachelor of Engineering (Hons),
with a particular focus in aerospace
engineering, at UNSW.
For her internship with the Company,
Olivia has been embedded in EOS
Space Systems’ Astrodynamics
and Software teams, observing and
contributing to efforts to refine an
existing software program used
to characterise the orbital state of
a new object when it is detected
by EOS’ optical tracking systems.
This technology is an important
component of EOS’ Space Domain
Awareness capabilities.
Dr James Bennett, Vice President,
EOS Space Systems, has been
particularly involved in mentoring
Olivia and helping her gain as much
as possible from her chance to work
with some of the domestic space
industry’s most experienced and
knowledgeable practitioners.
Olivia’s current thinking about her
future STEM career is that she would
one day like to help to “push the
boundaries of the space industry” –
an ambition that aligns well with her
internship and everything she has
been working on.
“I hope to see myself working in a
company that specialises in space
sustainability, such as EOS, and
reducing the amount
of space debris in
preparation for
commercialising
spaceflight.”
The funding and
practical experience
that EOS is giving Olivia
will help to bring that
dream closer
to reality.
Electro Optic Systems Holdings Annual Report 2021
29
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Supporting Our Supply Chain Partners
SUPPORTING OUR
SUPPLY CHAIN PARTNERS
We are proud to support the continuous growth of
our domestic supply chain partners and to showcase
their capabilities to the global defence, space and
communications markets.
everything from helping suppliers assess global business
opportunities to fostering SME collectives to address
the problem of scale that limits the expansion of many
homegrown companies.
EOS has reliable access to a range of international
commercial opportunities and organisations that would
typically be out of reach to the dozens of small- to
medium-sized enterprises (SMEs) – many of them family
owned and operated – within our Australian supply chain.
These SMEs create bespoke technologies that have great
utility for a range of commercial, civil and government
organisations globally; however, domestic demand for
their products can sometimes be insufficient to ensure the
businesses’ ongoing viability.
EOS is committed to helping our Australian supply
chain partners grow by incorporating their technologies
into EOS products; by giving them a degree of ongoing
business certainty; by familiarising them with the exacting
requirements of the global defence and space industries;
and by sharing our organisational expertise in the
manufacture and export of high technology products.
This commitment extends beyond the simple awarding
of work packages or purchase orders, and can include
EOS also supports the growth of manufacturing wherever
we operate, creating employment and wider economic
benefits for communities along our supply chains. Many
EOS suppliers operate in rural or regional areas that face
higher-than-average levels of unemployment, and by
working with these companies we help to secure jobs and
upskill workforces in these parts of Australia.
In 2021, EOS exposed Australian businesses from a
number of adjacent sectors to defence programs and
contracting processes through the C4 EDGE program,
which focused on sovereign military communications
solutions.
EOS has long been committed to using Australian-
made components in its products wherever feasible,
and our relationships with domestic suppliers tend to
be longstanding and based on two-way trust. We are
dedicated to advancing the organisational health of
smaller onshore industry participants, which will be critical
to the establishment of enduring sovereign defence and
space industries.
The positive economic impacts of our business activities extend far
beyond our own organisation and are shared in by our vast network
of domestic and global suppliers.
NUMBER OF SUPPLY CHAIN BUSINESSES:
Defence
146
Space & Comms
343
EOS’ domestic supply chain includes hundreds
of businesses – located in all corners of the
country – that create and support thousands
of onshore manufacturing and STEM jobs.
Our Australian suppliers operate in a wide
range of adjacent industries, and EOS works
actively to help them to grow their businesses
and navigate global markets.
30
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Supporting Our Supply Chain Partners
Building Australian Industry Capability
EOS is dedicated to utilising and advancing Australian Industry Capability (AIC).
The significant investment in AIC reflects the Company’s longstanding commitment to growing
sovereign Australian defence, space and communications industries that are globally competitive.
Our benchmark for local content is more than 80 per cent for products delivered to the ADF and
more than 70 per cent for export products.
EOS maintains high
benchmarks for local
content in products
delivered to Australian
and international
customers.
Australian customers
International customers (exports)
MORE THAN 80%
AUSTRALIAN CONTENT
MORE THAN 70%
AUSTRALIAN CONTENT
31
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Corporate Social Responsibility
CORPORATE SOCIAL
RESPONSIBILITY
The increasing complexity of EOS’ business
necessitates robust corporate governance.
Our business operates under a clear and purposeful
governance framework that:
Human Rights and Defence Exports
z promotes transparency
z ensures accountability
z manages risk throughout the Company appropriately
z deals with all stakeholders respectfully
z calls for careful stewardship of the environment.
There are three key pillars that underpin our corporate
governance framework, as shown below.
EOS Corporate Governance Framework
Environmental
Social
Governance
Energy efficiency
management
Safe disposal of
chemical waste
Waste
management
Water usage and
conservation
Board
governance
Board diversity
Compliance
with all relevant
legislation
Modern Slavery
Statement
Management
of the wellbeing
of the EOS
workforce
Employee
Assistance
Program
Support for
charities (e.g.
ex-defence force
veterans)
Workplace health
and safety
Workplace
benefits
Our Commitment to Ethical Exports
EOS defence products are exported from Australia to allies
and coalition partners of Australia and the US, and access
is subject to simultaneous formal approval by both these
countries. This dual restriction renders these products
among the most highly controlled in the world, since both
the US and Australia closely observe the laws of armed
conflict and apply high human rights standards.
EOS operates under Australian and US export controls that
are designed to protect human rights around the globe.
Australia is a participating state in a number of multilateral
export control regimes, and the Department of Defence
assesses export applications against legislative criteria
that include human rights and Australia’s international
obligations.
Meanwhile, the US controls the export, import and use
of military items under the International Traffic in Arms
Regulations process, with these regulations operating
separately and in addition to Australian controls.
To obtain necessary export approvals, EOS technologies
undergo rigorous assessments under Australian and US
export control systems to confirm that they will not be
used to carry out human rights abuses.
This approach helps to ensure the integrity of our exports
and the safety of communities around the world.
Environment
EOS recognises the need for businesses to:
z take active steps to mitigate the environmental
impacts of their operations
z address the environmental challenges facing the
planet and space.
Our approach to environmental considerations is
underpinned by judicious compliance with government
legislation and all related regulations.
EOS is committed to:
z a culture of energy efficiency
z minimising resource usage in both the
manufacturing and the corporate context
z ensuring that our waste is disposed of
appropriately.
32
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Review of Operations
REVIEW OF OPERATIONS
For the year ended 31 December 2021
1. Results for full year ended
EBITDA and EBIT
31 December 2021
The consolidated entity (“EOS”) or reported an operating
loss after tax of $13,841,610 for the twelve-month period
to 31 December 2021 (31 December 2020: $25,207,896)
after allowing for income tax expense of $9,230,936
(31 December 2020: $4,693,154 income tax benefit).
Revenues from ordinary activities were $212,330,648 (31
December 2020: $180,182,366).
The net loss before income tax of $4,610,674 represents
a Loss Before Interest and Tax of $1,697,584 after
adjusting for interest expense of $2,913,090 (refer note
2c). Foreign exchange gains of $9,797,241 contributed to
this result.
The consolidated entity reported net cash generated by
operations for the twelve-month period totalling $221,454
(31 December 2020: $109,159,317 net cash used by
operations). At 31 December 2021, the consolidated
entity held cash totalling $59,260,655 (31 December
2020: $65,933,499).
Key elements of financial performance are:
Revenue and Other Income
For the year ended 31 December 2021 EOS recorded
revenue and other income of $213.3m (2020: $190.3m)
representing an increase of $23m (12.1%).
The increase in revenue was driven by the Defence
segment ($184.5m, 18.0% increase), the Communications
segment ($23.3m, 19.3% increase) and the Space segment
($4.5m, 5.0% increase).
Loss Before Tax
Loss before tax for the year was $4.6m compared to
a 2020 loss before tax of $29.9m (improvement of
$25.3m).
This was driven by the revenue increase of $32.1m, a
fall in other income of $9.1m, material costs remaining
reasonably steady (decrease of $4.4m), a $25.5m reversal
in foreign exchange (2021: $9.8m gain, 2020: $15.7m
loss), an increase in employee benefits expense of
$16.0m, an increase in administration expense of $6.1m
and an increase in interest expense of $1.5m.
EBITDA for 2021 was $11.9m compared to an EBITDA loss
of $18.9m in 2020.
Underlying EBITDA (excl. foreign exchange gains / losses)
for 2021 was $2.1m (2020: loss of $3.2m).
EBIT for 2021 was a loss of $1.7m (2020: loss of $28.5m).
Underlying EBIT (excl. foreign exchange gains / losses) for
2021 was a loss of $11.5m (market guidance loss of $11m
to loss of $15m) compared to a 2020 underlying EBIT loss
(excl. foreign exchange gains / losses) of $12.8m.
Foreign Exchange
The above results were heavily influenced by a foreign
exchange gain in the year of $9.8m (2020: loss of $15.7m).
Cash
Total cash receipts for the year were $233.9m (2020:
$107.6m). The significant increase in cash receipts was
largely due to the start of payments under a major export
contract, where EOS received cash of $94.4m during the
year.
Net cash flow from operating activities was an inflow of
$0.2m (2020: outflow of $109.2m) driven mainly by cash
receipts, a reduction in income tax paid and an increase
in interest and costs of finance paid due to the new $35m
debt facility entered into during the year.
Cash outflow from investing activities was comparable
with 2020 ($0.7m increase in outflow).
As referenced above, the Consolidated Entity entered into
a debt facility during the year which contributed to a net
cash inflow from financing of $30.6m (2020: inflow of
$135.9m mainly due to the issue of new shares).
These resulted in a net cash outflow for the year of $6.9m
and, after foreign exchange adjustments, a closing cash
balance of $59.3m (2020: $65.9m).
33
Electro Optic Systems Holdings Annual Report 2021
EOS Annual Report 2021 | Review of Operations
Contract Asset
3. Organisational Restructure
The contract asset arises due to a difference between when
the Consolidated Entity is required to recognise revenue
under Australian Accounting Standards and when it is able
to invoice customers.
The contract asset is largely comprised of amounts relating
to one significant export contract.
As at 31 December 2021 the contract asset was $128.3m
(31 December 2020: $137.9m). The relatively small
movement in the balance masks that during the year
the consolidated entity invoiced $97.6m against a major
export contract and $1.7m against other contracts. This
invoicing was offset by new, un-invoiced revenue in export
and domestic programs and foreign exchange adjustments
leading to a net reduction of $9.6m.
2. COVID-19 Impacts in 2021
EOS continues to be impacted by the ongoing COVID-19
pandemic. In 2020 and flowing into early-2021, the largest
impacts from COVID-19 within EOS were felt by EOS
Defence Systems (“Defence”) arising from disruption to its
global supply chain, international transport systems, and its
customers’ ability to conduct tests for product acceptance
or for contract award.
These issues delayed the achievement of performance
milestones required prior to invoicing customers, which
flowed through into delayed cash receipts. The issues
are subsiding due to improved practices and an easing of
restrictions on business globally.
The Company adopted measures to prevent the spread of
infection and reduce operational impact from COVID-19.
These steps proved relatively effective with only 18
employees (approximately 3.5% of global workforce)
reporting that they contracted COVID-19 during 2021.
Despite this and other COVID-19 restrictions, EOS achieved
a record annual rate of production of remote weapon
systems (RWS).
Some contract awards were delayed during the year
as qualifying live firing tests were cancelled or delayed,
and governments deferred program awards and
announcements. The delay in contract awards coupled
with record levels of production resulted in a reduction of
backlog to $342m at 31 December 2021 compared with
$429m as at the end of 2020.
It is expected that the normal conversion of pipeline to
contracted backlog will resume in H1 2022.
In September 2021, EOS combined the Space Systems
and Communications Systems divisions into one division
with tighter linkages between space and communications
activities where synergies can now be better exploited to
improve profitability. Operational integration was initiated
in FY21.
The new EOS Space Systems division (“Space”) is led by Mr
Glen Tindall, and Dr Craig Smith has taken up a new role as
Group Chief Technology Officer.
4. EOS Defence Systems
Defence completed a challenging yet successful year in
2021 when revenue and divisional profit reached record
levels despite COVID-19 disruptions. Growth was strong
across all areas of the Defence portfolio, including in
the support and sustainment sector which is driven by
cumulative sales over the prior decade.
Key results for Defence were:
z Revenue of $184.5m represents a 18.0% increase
over the corresponding prior period.
z Underlying EBIT of $17.1m compares to an
underlying EBIT loss of $9.6m in the corresponding
prior period.
These results were achieved while Defence maintained
a high level of investment of funds and human capital in
research and development, especially for directed energy
products.
The business produced 271 RWS for five customer
programs during a period where COVID-19 had its biggest
impact thus far on our Australian facilities. The workforce
improved productivity in both production and support
programs, over levels achieved by the business in 2020.
The Defence team also successfully delivered the C4 EDGE
Program in Australia, several customer funded development
contracts in Australia, the US, South-East Asia and Europe,
as well as numerous customer demonstrations around
the world. These activities have positioned the business
to take immediate advantage of the opportunities arising
from defence markets reopening and rapidly emerging
geostrategic challenges.
34
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Review of Operations
Commonwealth Remote Weapon Systems
(RWS) Contract
In September 2020, EOS contracted with the
Commonwealth of Australia for the delivery of 251 RWS
and related materiel. The production of these systems
was successfully completed in 2021 and delivery of the
related materiel will be completed in 2022.
A key focus of this accelerated acquisition was the
preservation of the Australian supply chain for advanced
defence manufacture. This objective was achieved.
The design, engineering and production work completed
on this program will deliver significant benefits to future
production effort for the Australian Defence Force (ADF),
coming initially on the RWS contracted for Land 400
Phase 2 and then on other RWS requirements.
Counter Uninhabited Aircraft System
(CUAS) Developments
EOS has invested significant resources to develop a
complete range of capabilities for the defeat of drones.
Over the past four years a substantial development, test
and demonstration program based in Australia, USA and
the Middle East has established EOS as the only western
hemisphere provider with the entire suite of direct
kill capabilities supported by a full suite of detection,
jamming and command capabilities that are required to
defeat sophisticated drone attacks.
While other companies offer CUAS solutions that
have similar detection and jamming capabilities to the
EOS Titanis system (Titanis), key advantages to EOS
come from long-term leadership in precision hard kill
engagement of moving and manoeuvring targets.
EOS is unique in the ownership of both directed energy
(laser) and remotely operated weapon systems that are
optimised to defeat drone attacks. Competitive pricing
and very low per-drone-kill cost efficiency of these
capabilities makes Titanis a singular system in the CUAS
market. Demand for demonstration of this capability for
proliferating acquisition programs in allied countries is
stretching the availability of EOS personnel and equipment.
In Q2 2020 EOS was selected as the preferred provider
of CUAS capability for a large program for critical
infrastructure protection. Customer delays in providing
the financial, logistic and technical support to enable
pre-award testing of the full EOS system have delayed the
award which is now expected in H2 2022.
Meanwhile operational use of drones in military conflict is
escalating rapidly, driving demand for this technology and
in particular EOS’ directed energy capability.
Prime Contractor for C4 EDGE Program
In December 2021 an all-Australian industry team, led by
EOS as Prime Contractor, successfully demonstrated an
Australian-developed tactical secret Command, Control,
Communications and Computing (“C4”) solution under a
$34.3m contract with the Australia Army.
The demonstration of a sovereign Battlegroup and Below
Battlefield Command System in such a short period
of time using only Australian technology was a major
achievement. The C4 EDGE capability will help address
the Army’s significant future requirements for sovereign
communications systems. The Government’s 2020
Defence Strategic Update lays out an investment pipeline
for battlefield communications and command systems of
between $5.0bn and $7.5bn over the next 20 years.
Marketing and Demonstrations
A key pre-requisite for securing defence contract awards
is the successful demonstration of products in realistic
conditions. Over the course of 2021, Defence conducted
live fire demonstrations both in Australia and overseas.
Highlights were:
z The R400 Dual Weapon System was demonstrated
shooting off a Boxer 8x8 to the Royal Netherlands
Army in the Netherlands. This activity also
included the demonstration of the R400 on the
MILREM THeMIS UGV (non-live fire) preliminary to
the deployment of weapon systems on remotely
operated platforms to counter drones.
z In the US, the local EOS Defence team
demonstrated R400 and R150 systems to the
Program Manager of the US Army Crew Served
Weapons program at Fort Benning in Georgia as
well as participating in the annual Bushmaster
User Conference, hosted by Northrop Grumman in
Arizona, with R400 and R150 systems.
z In 2021, Defence established the capability
to conduct live fire test, development and
demonstration shooting in Australia at the Klondyke
Range Facility in Western NSW. This range enables
Defence to test fire out to a range of 32 kilometres.
Defence also moved forward with doctrinal and thought
leadership publications and activities to help customers
address rapid technological and geopolitical change.
These efforts address the impact of drones and AI as well
as adapting force planning and projection against new
geopolitical threats.
Customers are considering a future environment where
significant combat power could be applied anywhere
35
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Review of Operations
on earth without requiring a large contingent of human
operators. This future capability could be based upon the
application of a number of EOS-developed technologies
including RWS, free space optical communications and
high bandwidth satellite communications.
Other customer engagement activities throughout 2021
included a large presence at the Land Forces Conference
in Brisbane, the DSEI Conference in London and the AUSA
Conference in Washington DC. Despite COVID-19, foreign
delegations were received from several nations.
EOS Space Systems
Organisational Structure
In September 2021, the former Communications Systems
and Space Systems divisions were merged to form an
enlarged EOS Space Systems (“Space”) under unified
management. This merger allows for better synergies
between the technical teams now totalling approximately
150 full-time staff, around half of which hold engineering
or science degrees.
Rowan Gilmore retired as CEO of EM Solutions in
December 2021 and EM Solutions management passed
to Georgios Makris, Vice President Operations and John
Logan, Vice President Programs. This transition had been
planned for some time and was executed smoothly. In
January 2022 Rowan Gilmore was appointed to the newly
created position of Deputy Chief Executive Officer at EOS.
The SpaceLink organisation expanded to approximately
30 full-time staff at the end of 2021. To be close
to customers, suppliers, and regulators SpaceLink
established offices in the US in both Tyson’s Corner,
Virginia and Mountain View, California.
EM Solutions
EM Solutions ended 2021 with a record order backlog
of $42m, representing around 18 months of capacity.
The order book reflects a healthy mix of demand across
multiple product lines and multiple customers across
Europe, North America, Asia and Australia.
New contracts have been signed for Cobra terminals
for the next three shipsets of the Royal Australian Navy
(RAN) SEA1180 (Offshore Patrol Vessels) and the six
SEA1445 (Enhanced Cape Class Patrol Boats) projects.
Additional contracts have also been signed for 2m Fleet
terminals by three European navies for delivery in 2022
through 2024.
The eighth and final Cobra terminal for the RAN’s Anzac
Frigate quality-of-life upgrade was completed during the
year, an occasion marked by a visit to EM Solutions from
the Chief of Navy, Vice Admiral Michael Noonan.
In Australia, EM Solutions was awarded Naval Business
of the Year for 2021 by the specialist industry magazine,
Defence Connect.
EM Solutions has increased supply of Ka-Band transceivers
for use on deployable SATCOM terminals manufactured
by a leading US Defence contractor. EM Solutions made a
strategic decision to expand its product offering into the
space sector and has already received an order by a North
American satellite manufacturer for RF subsystems to be
used on a next generation satellite platform.
Development of the new 2m Fleet terminal remains
on schedule. In December EM Solutions was able to
demonstrate its tracking performance to the RAN. First
deliveries are due in 2022.
The first Cobra Antenna Diversity Systems (ADS) were
shipped to complete deliveries for the Cobra systems ordered
by three European navies. These systems allow customers
to optimise usage and allocate resources between the typical
two, or three, antenna units fitted to a vessel.
EM Solutions achieved certification of the Cobra ADS
for use with the Wideband Global SATCOM system
(WGS), the high-capacity United States Space Force
satellite communications system. This is a significant
achievement as it allows operation on the largest defence
satellite network in the world.
EM Solutions is continuing to develop a hybrid optical
/ RF communications terminal which will allow higher
data rate communications for users. EM Solutions
successfully demonstrated that the tracking technology
used in the Cobra and Fleet terminals is sufficiently
accurate for the antenna to provide an optical
communications link.
Disruption to the global supply chain for electronics
and semiconductors was managed through careful
management of the supply chain and sourcing alternate
componentry. EM Solutions has avoided any major
delays to production due to supply chain.
With COVID-19 lockdowns preventing staff from travelling,
EM Solutions trialled and successfully completed the first
remotely supported terminal installation for a European
customer. A representative office was established in the
Netherlands to support our customers in the Benelux
area, notably several European navies. This decision
proved especially useful during COVID-19 restrictions
when it was difficult to fly internationally.
36
Electro Optic Systems Holdings Annual Report 2021 Space Technologies
Space provides technology solutions to address global
requirements for space debris mitigation, space traffic
management, space domain awareness and space
communications. These solutions typically comprise
EOS sensors integrated with large EOS real-time software
platforms that manage vast and rapidly changing data
sets. Space is frequently an incubator for advanced
technologies deployed in other EOS divisions.
The Space Systems team continued their focus on R&D
activities for the group as well as managing the two
current space laser tracking stations at Mount Stromlo,
ACT and Learmonth, WA observatories.
In 2021, Space Systems announced a major development
in laser technology which can significantly advance the
global effort to mitigate space debris. This innovation
involves the use of a Guide Star Laser to allow high
speed adaptive optics to form laser beams that can
track and move space debris at lower altitudes and
faster speeds than previously possible. This intellectual
property, owned by EOS, was developed in collaboration
with the Space Environmental Research Centre (SERC)
and will now be commercialised. Applications range
from space debris mitigation to high bandwidth satellite
communications. Space Systems has also provided laser
technology and R&D expertise for the development of
high-power laser systems for CUAS systems for Defence
applications.
EOS Space Systems is continuing to strengthen its
credentials as Australia’s premier provider of ground
based optical sensors by participating in a range of
domestic and international space domain awareness
(SDA) exercises highlighting EOS’ capability ability to find,
fix, track and assess a variety of space objects.
During the Sprint Advanced Concept Training (SACT)
21-3 exercise, a global space operations’ training event,
led by the US Space Force, EOS was able to track objects
with high fidelity in all orbital regimes and provide timely
military intelligence into several key space events. This
included the optical tracking of a cubesat during the
daytime. Data from EOS was specifically singled out
for its quality of data and the analysis provided. EOS
also completed an integration activity with the SDA
Marketplace, an e-commerce marketplace for space data,
and successfully completed a trial data supply contract.
The Australian Department of Defence awarded
EOS a contract to participate in SACT 22-1 with live
demonstrations of several new and emerging space
capabilities. This included demonstrating daytime laser
ranging to uncooperative space objects (objects without
retroreflectors) and observing several space objects
during the daytime. EOS is the first Australian company to
EOS Annual Report 2021 | Review of Operations
have developed such daytime sensing technologies and
this will increase the observing capacity of the EOS SDA
network.
EOS Space Systems was awarded the Defence Connect
Space Business of the Year for 2021.
SpaceLink
The SpaceLink team conducted an industry Request for
Proposal (RFP) in May 2021, followed by a Request for
Tender (RFT) process resulting in selection of primary
vendors for the satellite buses, payload and ground
segment. Contracts were awarded to several key vendors,
the most notable being in September 2021 SpaceLink
announced it had selected OHB System AG (OHB) of
Germany as the preferred manufacturer of SpaceLink’s
Block-1 constellation of MEO satellites. SpaceLink then
entered into an Authority to Proceed (ATP) agreement
with OHB to undertake a co-engineering phase intended
to deliver an optimised satellite design that was suited
to OHB production capabilities and met all SpaceLink
performance requirements.
As announced to the ASX on 25 February 2022, during
the ATP major improvements in design were identified
leading to an increase in satellite capacity and lifetime.
These improvements however also resulted in an
extension of the expected project schedule by six months
and a cost increase from US$700m to US$750m.
As a result of this, and against a backdrop of declining
capital markets and market pressure for earlier service
delivery, SpaceLink applied new technology to the design
of a lower cost constellation (Block-0) providing full
service before mid-2024. The new design will achieve
service delivery on orbit for a total project cost of
US$240m.
For further details refer to the ASX release of 25 February
2022.
SpaceLink customer engagement is proceeding well
with multiple Memoranda of Understanding (MoUs)
being signed in the commercial domain and strong
partnerships developing in the civil space domain.
SpaceLink is seeing rapid progress with US defence and
intelligence community customers, and the focus is on
securing awards for services from 2024.
SpaceLink was selected by the Center for the
Advancement of Science in Space (CASIS) to provide
a demonstration of an optical data relay service to the
International Space Station (ISS).
37
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Review of Operations
6. Outlook
Rising Geopolitical Tensions
A hallmark of 2021 has been rising geopolitical tensions
in Eastern Europe, the Middle East and North Asia. Adding
to these tensions has been the impact of the COVID-19
pandemic which has highlighted the fragility of supply
chains resulting in product shortages and reinforcing
the importance of national manufacturing capabilities in
areas such as pharmaceuticals and defence.
Space has rapidly become a more contested domain with
more countries developing and demonstrating their space
capabilities. Governments have recognised that space
is a critical domain for both commerce and national
security, and are allocating greater resources for SDA, as
well as offensive and defensive technologies.
Relevance of EOS Technologies
In recent years EOS investments in technology
development have focused on secure and resilient
communications, directed energy, CUAS capability, space
asset protection and remotely operated systems.
All of these areas are now experiencing strong demand,
and EOS business divisions expect to benefit as Australia
and its allies invest in these new capabilities. EOS
customers are increasing their current and planned outlays
for advanced defence technology, and are coinvesting with
EOS in research, development and testing.
Some examples of the technologies of interest are:
z Hypersonic glide missiles and hypersonic missiles
with speeds of between Mach 3 and Mach 12 have
been tested by two countries in the past several
years requiring the development of new defensive
weapon systems.
z Anti-satellite capabilities supported by an array of
sensors to characterise and target space assets are
being developed by several nations. Multiple attack
options (cyber, electronic, directed energy weapons;
anti-satellite missiles; or space-based weapons)
enable potential adversaries to damage or destroy
satellites. To date, four countries have successfully
tested missiles to destroy satellites in low earth
orbit. Three of these demonstrations have occurred
in the past two years. The recent destruction of a
Russian satellite is estimated to have generated
approximately 1,500 pieces of extra space debris
elevating the need for enhanced SDA capabilities.
z Attacks on high value infrastructure targets using a
combination of drones and missiles have escalated,
triggering strong demand for counter drone
technologies including directed energy defences.
z Australia has recognised that space is a domain
critical to Defence operations and has recently
established a space capability. The Force Structure
Plan committed $7bn over the next decade to
transition the ADF from a consumer to a sovereign
contributor in space. According to the Air Force,
“this investment will also provide new and exciting
opportunities for Australian industry”. Defence
has committed to transform the way it operates in
space, including “satellite communications, space
domain awareness, positioning, navigation and
timing, and earth observation capabilities”.
z Uninhabited Autonomous Vehicles (UAVs) is a
rapidly emerging technology that has the potential
to transform force projection and force protection.
At its core is secure, responsive and resilient
communications. Within EOS, the integration of
technologies from C4 EDGE, Defence Systems, EM
Solutions and SpaceLink will be crtical to emerging
UAV programs.
Momentum and Headwinds
A) Positive Momentum
The Company achieved significant progress in key areas
across the Group:
z Production volumes increased to record levels
despite ongoing productivity constraints due to
COVID-19 and staff shortages.
z Gross margin of the major revenue segments
was at or above prior levels in 2021, with a strong
improvement in group profitability.
z SpaceLink achieved advances in terms of customer
development, satellite projected performance and
business model profitability, and then leapt ahead
with a faster, better, cheaper option to launch its
space communication services.
z Management of the impacts of COVID-19 has
improved, and even though the processes and
procedures that were successful in 2021 may not
apply efficiently to the next developments in the
pandemic, a response culture has been developed.
z Supply chain performance improved in terms of
reduced disruption and cost, as initial elements of
lean production are implemented.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Review of Operations
z The Company restructured to two coherent P&L
2022 Outlook
Whilst the Omicron variant of COVID-19 is not expected
to significantly impact on EOS’s ability to deliver existing
contracts on time and on budget in 2022, there remains
a risk that the emergence of new COVID-19 variants may
have an adverse impact on our suppliers, customers,
employees and EOS operations. Since the onset of
COVID-19, the Company and its suppliers have used
the time to adjust and develop increased resilience. The
steps taken to diversify supply chains, hold additional
componentry, and minimise the risk of spread of
COVID-19 in the workplace are likely to limit disruption
caused by any future outbreak.
Rising geopolitical tensions, particularly in Eastern
Europe, the continuing COVID-19 pandemic and a
Federal election in Australia all introduce uncertainty
to forecasting outcomes for 2022. Notwithstanding,
management expects revenue growth in 2022.
Ben Greene
Chief Executive Officer
31 March 2022
segments, expanded and improved management,
and accelerated succession processes throughout
leadership positions as required for the next stages
of growth.
z Cash receipts of $94.5m were received from a
foreign customer under an existing contract, and a
similar amount of receipts are expected from this
program in 2022.
z Revenue deferred from Q4 2021 is on track to be
recognised in 2022, and provided Q4 2022 deliveries
are maintained on schedule, could add momentum
to 2022.
(B) Headwinds
The Company enters 2022 with headwinds that it is
addressing:
z Against a history of near-best practice in staff
retention, the Company is experiencing higher levels
of staff turnover due to national skills shortages,
intense salary competition, and COVID-19 impacts
on health and well-being.
z The cost of capital is inexorably increasing as
inflation increases and capital market uncertainties
increase globally. This will inhibit rapid growth in
EOS if not addressed. The Company is responding
by tightening focus across opportunities and
reducing costs to preserve capital for the best
growth opportunities. This situation is not expected
to ease in 2022.
z Backlog at $342m has fallen to around 1.5 years
of current revenue, below the Company’s preferred
level of two years, while still meeting aerospace
norms. No expected (higher than 50% probability)
contract award has been lost to a competitor, and
the backlog decline is principally due to COVID-19
delays in awards. This situation should correct
through 2022 as customers emerge from a long
period of COVID-19 induced disruption to their
business processes.
z The Company’s pipeline assessment, risk-weighted
for probability of success, has recently been
reduced to $2.6bn driven by a tighter focus on
business opportunities, revised expectations of
capital, human resource availability, and updated
market and competitor intelligence. A tighter focus
typically leads to improved probability of success in
the remaining opportunity set, so a rebound in the
risk-weighted pipeline may occur through 2022.
39
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
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 2021.
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
Lt Gen Peter
Leahy AC
Chairman (27 July 2021 – Current) (age 69). Appointed to the Board on 4 May 2009 (length of
service – 12 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 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 Student’s Veterans Association and
is a member of the Advisory Council of China Matters. He was Chairman of the Company’s Audit
and Risk Committee and a member of the Nominations and Remuneration Committee until his
appointment as Chairman.
Dr Ben Greene
BE (Hons), Phd in Applied Physics (age 71) is the Chief Executive Officer of Electro Optic Systems.
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 of Electro Optic
Systems on 11 April 2002 (length of service - 19 years).
Air Marshal
Geoffrey
Brown AO
Non-executive director (age 63). Appointed to the Board on 21 April 2016 (length of service – five
years). Geoffrey Brown AO 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 Institution of Engineers 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 and a member of the Audit and Risk Committee.
40
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Name
Particulars
The Hon Kate
Lundy
HonLittD, GAICD. Non-Executive director (age 54) appointed to the Board on 23 March 2018 (length
of service – four 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.
David Black
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 and the Cyber Security Research Centre. Kate is the Chair of the National Youth Science
Forum and Deputy Chair to the Board of the Canberra Institute of Technology. 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.
BA(Hons), FCA, MBA, GAICD. Non-executive director (age 51) appointed to the Board on 1 January
2021 (length of service – one year). David is the Chair of the Audit and Risk Committee and a
member of the Nominations and Remuneration Committee. Before retiring from the Deloitte Touche
Tohmatsu Australia partnership in 2016, David Black spent 25 years with Deloitte in the UK and
Australia. During that time David provided services to a range of clients including in the Defence,
Manufacturing and Government sectors. David’s experience includes working with growing
start-up businesses, multinational corporations and the boards of ASX listed entities on complex
accounting, internal and external auditing, risk management, corporate governance and due diligence
engagements. David previously served as the audit partner of Deloitte Touche Tohmatsu for the
Company for the periods ending from June 2005 to December 2009 and June 2012 to June 2016.
David is a Fellow of Chartered Accountants Australia and New Zealand, a Fellow of the Institute
of Chartered Accountants in England and Wales, has a BA(Hons) in Economics, an MBA and is a
Graduate of the Australian Institute of Company Directors.
Since his retirement from Deloitte, David has established a growing family business, The Coastal
Brewing Company, and serves on two Government sector audit committees as the independent
member, Chairing one of those committees.
Deena Shiff
B.Sc. (Econ) Hons (London School of Economics), LLB (University of Cambridge), Fellow AICD. Non-
executive Director (age 67) appointed 7 December 2021 (length of service – 1 month). Deena has had
a senior executive career, legal career and has worked for government. Deena was the first woman to
be appointed to the role of Group Managing Director at Telstra Corporation. Deena is a former legal
Partner at Mallesons Stephen Jacques and has served in regulatory in-house counsel roles.
Deena is currently Chairman of the Supervisory Board of Marley Spoon A.G., non-executive Director
of Appen Limited and Pro Medicus Limited. Deena is also the Chairman of the Australian Broadband
Advisory Council and is on the Board of Opera Australia.
Deena was previously the Chairman of BAI Communications and a director of Infrastructure Australia
and Export Finance Australia.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Name
Particulars
Fred Bart
Ian Dennis
Chairman (retired 27 July 2021) (age 67). He has been Chairman and Director of numerous
public and private companies since 1980, specialising in manufacturing, property, technology and
marketable securities. He is also Chairman of Audio Pixels Holdings Limited, Noxopharm Limited and
a director of Weebit Nano Limited. Appointed to the Board on 8 May 2000 and retired on 27 July 2021
(length of service – 21 years).
Non-executive director (retired 28 May 2021) (age 64) BA, C.A. 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 twenty-five years. Prior to that, he was with KPMG Chartered Accountants
in Sydney. He is also director and company secretary of Audio Pixels Holdings Limited. He was a
member of the Audit and Risk Committee and the Nominations and Remuneration Committee.
He was also company secretary of Electro Optic Systems Holdings Limited until 27 August 2021.
Appointed to the Board on 8 May 2000 and retired on 28 May 2021 (length of service – 21 years).
The above-named directors held office during and since the end of the financial year, apart from:
z David Black who was appointed as a director on 1 January 2021
z Deena Shiff who was appointed as a director on 7 December 2021
z Fred Bart who retired as a director on 27 July 2021
z Ian Dennis who retired as a director on 28 May 2021
Lt Gen Peter Leahy AC, Air Marshall Geoffrey Brown AO, the Hon Kate Lundy, Deena Shiff and David Black are considered
independent directors.
On 28 May 2021 Morgan Bryant was appointed as Company Secretary.
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
Deena Shiff
Company
Audio Pixels Holdings Limited
Weebit Nano Limited
Noxopharm Limited
Period of directorship
5 September 2000 to date
6 March 2018 to date
8 May 2020 to date
Audio Pixels Holdings Limited
5 September 2000 to date
Codan Limited
Citadel Group Limited
Marley Spoon A.G.
Appen Limited
Pro Medicus Limited
19 September 2008 to date
27 June 2014 to 9 December 2020
5 June 2018 to date
15 May 2015 to date
1 August 2020 to date
Principal activities
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.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Review of Operations
A detailed review of operations is included on pages 33 to 39 of this financial report.
Changes to the state of affairs
There were no significant changes in the state of affairs of the consolidated entity during the financial period.
Share issues
On 15 March 2021, the Company announced the issue of 1,185,000 ordinary fully paid securities at $5.27 under the Loan
Funded Share Plan.
On 31 May 2021 the Company issued 150,000 ordinary fully paid securities at $4.06 per share under the Loan Funded
Share Plan in accordance with Resolution 6 passed by Shareholders at the Annual General Meeting on 28 May 2021.
During the year staff repaid loans under the Loan Funded Share Plan in respect of 83,125 shares at $2.99 each amounting
to $248,544.
Subsequent events
On 23 February 2022 SpaceLink Corporation (“SpaceLink”), a wholly owned subsidiary of the consolidated entity, executed
two agreements with OHB System AG (“OHB”).
(a) A Deed of Agreement which finalised the amounts due to OHB under the Authority to Proceed contract which was
entered into between the parties on 15 October 2021 and ran to 14 December 2021.
An amount of US$3,000,000 (A$4,131,588) has been recorded as a liability in other payables as at 31 December 2021
representing the full and final settlement of all amounts due to OHB for that period.
The amount of US$3,000,000 (A$4,131,588) has also been recorded as an addition to capital work in progress as at 31
December 2021, representing the value of the foreground IP and materials developed by or procured by OHB using these
funds and transferred to SpaceLink.
(b) A Heads of Agreement which sets out the contractual relationship between SpaceLink and OHB going forward relating
to the development of Block-1 of the SpaceLink Satellite Data Relay Constellation.
Under this Agreement SpaceLink has agreed to:
z Pay OHB costs incurred by OHB between 1 January 2022 and 24 February 2022 with third party vendors in
respect of potential deliverables for inclusion in Block-1 activity which has now been deferred. The amount
payable is up to US$7,000,000 in aggregate
z Offer OHB an agreement to undertake Risk Management Activities in relation to Block-1 over a 15-month period
with such agreement to be on a cost-plus basis and initially funded by SpaceLink to US$5,000,000
On 17 March 2022 EOS announced that it had engaged Greenhill & Co. as financial adviser to assist in undertaking a strategic
review, including ensuring all feasible funding options are explored and assessed in the context of the broader range of
strategic options for EOS. As at the date of this report no outcome from the strategic review has been determined.
Apart from the above, the Directors are not aware of any significant subsequent events since the end of the financial
period and up to the date of this report.
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 significantly affect 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 6 April 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.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
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.
Environmental regulations
In the opinion of the directors the consolidated entity is in compliance with all applicable environmental legislation and regulations.
Ethical labour
The consolidated entity has established measures regarding fair labour practices and guidelines that create a respectful and
safe work environment for our employees globally. The Company is committed to treat all of its employees with respect and
strictly prohibits the use of slavery, forced labour and human trafficking. To prevent the occurrence of forced, compulsory or
child labour, the consolidated entity has implemented local labour policies and practices to comply with the Modern Slavery
Act. Any person who applies for employment with the Company does so on a voluntary basis and all employees are legally
entitled to leave upon reasonable notice without penalty. In accordance with the Company’s global recruiting guidelines,
offers of employment must be conditional upon successful completion of required background checks. Background checks
are required to protect the safety of employees and to ensure that employees meet the Company’s standards.
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:
z improve the participation of women in the workforce by measuring the percentage of female employees and the
percentage of those females in management positions;
z reduce the number of workplace harassment complaints by measuring annual occurrences and reducing these to zero;
z improve retention of staff by measuring the percentage of employees who access flexible workplace arrangements
including flexible hours and alternative work cycles; and
z encourage retention of staff by measuring the number of staff who access company education and study
assistance to enhance personal and corporate development opportunities.
As at 31 December 2020, the Group’s gender diversity mix is as follows:
EOS Directors and Staff 2021
Number
Female
Female %
Male
Male %
Board
Senior Management (CEO/EVP)
Australia
Singapore
United States
United Arab Emirates
Germany
Total staff
6
8
388
12
91
48
1
554
2
-
80
2
23
10
1
118
33%
-
21%
17%
25%
21%
100%
21%
4
8
308
10
68
38
-
436
67%
100%
79%
83%
75%
79%
-
79%
44
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Commentary
“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:
z EOS continues to improve the participation of women in the workforce. There has been an increase in female staff
from 103 (2020) to 116 (2021);
z EOS is committed to reduce the number of harassment complaints reported each year. In 2021 there were no
incidents reported across the consolidated entity;
z Flexible working arrangements including work from home has increased substantially in 2021 in light of the
Covid-19 pandemic; and
z In 2021 EOS invested $50,000 in the EOS Space Systems Research Awards, in which grants of up to $10,000 were
awarded to STEM candidates with a particular focus on Indigenous Australians, women and applicants from rural
and regional areas. EOS also established the EOS Scholarships for Future Excellence in STEM in which funding
scholarships were provided to support women in STEM education and work programs, as well as establishing
internships within EOS with a view to increasing gender diversity in STEM careers.
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 of Electro Optic Systems Holdings Limited during the year.
On 15 March 2021, the Company issued 475,000 unlisted options at an exercise price of $5.27 to directors, executives
and employees of overseas subsidiaries expiring on 16 March 2026 under the Employee Share Option Plan.
On 22 July 2021, the Company issued 280,000 unlisted options at an exercise price of $4.31 to executives and employees
of an overseas subsidiary expiring on 22 July 2026 under the Employee Share Option Plan.
Share options on issue at year end or exercised during the year
There were 1,830,000 unlisted options outstanding at year end. 1,075,000 options were granted in previous reporting
periods whilst 755,000 were granted in the current year, as per the table below.
Options
220,000
635,000
220,000
475,000
280,000
1,830,000
Issue Date
20 June 2018
19 May 2020
Expiry Date
31 March 2023
18 May 2025
16 November 2020
16 November 2025
15 March 2021
22 July 2021
16 March 2026
22 July 2026
Exercise Price
$2.99
$4.75
$5.82
$5.27
$4.31
No options were exercised during the year.
There were no shares or interests issued during the financial year as a result of exercise of an option.
45
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Loan funded share plan (“LFSP”)
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 and including the trading day immediately prior to the date of issue.
On 19 May 2020 the Company issued 2,270,000 ordinary shares to staff under the Loan Funded Share Plan at a price of
$4.75 being the same price as the institutional placement announced on 15 April 2020.
On 29 May 2020 shareholders approved the issue of 2,500,000 ordinary shares to directors at a price of $4.92 being the 20-
day volume weighted average price up to and including the trading day immediately prior to the date of issue.
On 10 August 2020 the Company issued 860,000 ordinary shares to staff under the Loan Funded Share Plan at a price of $5.62
being the 20-day volume weighted average price up to and including the trading day immediately prior to the date of issue.
On 14 October 2020 the Company issued 150,000 ordinary shares to staff under the Loan Funded Share Plan at a price of $5.47
being the 20-day volume weighted average price up to and including the trading day immediately prior to the date of issue.
On 15 March 2021 the Company issued 1,185,000 ordinary shares to staff under the Loan Funded Share Plan at a price of $5.27
being the 20-day volume weighted average price up to and including the trading day immediately prior to the date of issue.
On 31 May 2021 the Company issued 150,000 ordinary shares to a Director under the Loan Funded Share Plan and in
accordance with a resolution passed by shareholders at the Annual General Meeting on 28 May 2021 at a price of $4.06
being the 20-day volume weighted average price up to and including the trading day immediately prior to the date of issue.
During the year, the Company provided interest free loans to the Directors of $609,000 and staff of $6,244,950 to enable
them to acquire the shares under the Loan Funded Share Plan. This resulted in the total amount of the loans outstanding
under the Loan Funded Share Plan being $50,224,331 at year-end.
Loan funds under the LFSP are limited recourse in nature, meaning that the Company’s recourse is limited to the shares. 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 Pty Ltd 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 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.
Fred Bart and Ian Dennis were assessed by the Board as good leavers upon their retirement. Therefore, they did not forfeit
their loan funded shares and these are included in outstanding balances at 31 December 2021.
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).
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
The ordinary shares issued under the LFSP were issued to an employee share trust on behalf of the following participants
as follows:
Sold
during
2020
19 May
2020 Issue
29 May
2020 Issue
10 August
2020 Issue
14 October
2020 Issue
15 March
2021 Issue
31 May
2021 Issue
Directors
Lt Gen Peter Leahy
AC (Chairman)
20 June
2018 Issue
200,000
Dr Ben Greene (CEO)
2,000,000
Mr David Black
-
Air Marshall Geoffrey
Brown AO
The Hon Kate
Lundy
200,000
200,000
Ms Deena Shiff
-
-
-
-
-
-
-
Mr Ian Dennis
(Retired)
Mr Fred Bart
(Retired)
200,000
(50,000)
200,000
-
Directors Total
3,000,000
(50,000)
-
-
-
-
-
-
-
-
100,000
2,000,000
-
100,000
100,000
-
100,000
100,000
2,500,000
Employees
Dr Craig Smith
250,000
Mr Glen Tindall
-
Mr Grant
Sanderson
Mr Michael Lock
Mr Neil Carter
250,000
-
-
Mr Peter Short
250,000
Mr Scott Lamond
250,000
Mr Tahir Khan
-
-
-
-
-
-
-
-
-
80,000
-
160,000
-
-
160,000
80,000
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
330,000
-
-
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance
of shares
outstanding
at 31
December
2021
Lapsed
shares at 31
December
2021*
(50,000)
250,000
(1,000,000)
3,000,000
-
-
150,000
-
150,000
-
-
-
-
-
(50,000)
250,000
(50,000)
250,000
-
-
(50,000)
200,000
(50,000)
250,000
-
-
-
-
-
-
-
-
-
150,000
(1,250,000)
4,350,000
-
-
90,000
165,000
-
90,000
-
-
-
-
-
-
-
-
-
-
-
(40,000)
290,000
-
330,000
(80,000)
420,000
-
-
165,000
500,000
(80,000)
420,000
(40,000)
290,000
-
100,000
(310,000)
3,427,500
Other Senior
Employees
1,180,000
(152,500)
1,690,000
-
30,000
150,000
840,000
Employees Total
2,180,000
(152,500)
2,270,000
-
860,000
150,000
1,185,000
-
(550,000)
5,942,500
Total, Directors
and Employees
5,180,000
(202,500)
2,270,000
2,500,000
860,000
150,000
1,185,000
150,000
(1,800,000)
10,292,500
* The following conditions were not met:
• Share price hurdle of $9.50 by 31 December 2021, resulting in 1,250,000 shares issued to Directors lapsing.
• Space systems profit exceeds $3m for 2021, resulting in 117,500 shares issued to Space Systems staff lapsing.
• EBIT of $36m by 2021, resulting in 432,500 shares issued to KMP and other senior employees lapsing.
47
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
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.
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, 22 Board meetings, six Audit and Risk Committee meetings and three Nominations
and Remuneration Committee meetings were held.
Directors
Lt Gen Peter Leahy AC1
Dr Ben Greene
Air Marshal Geoff Brown AO
The Hon Kate Lundy
Mr David Black
Ms Deena Shiff2
Mr Fred Bart3
Mr Ian Dennis4
Board of directors
Audit and Risk committee
Nominations and
Remuneration committee
Eligible to
attend
Attended
Eligible to
attend
Attended
Eligible to
attend
Attended
22
22
22
22
22
1
8
6
22
22
22
22
22
1
8
6
3
-
6
6
6
-
-
3
3
-
6
6
6
-
-
3
2
-
3
3
3
-
-
-
2
-
3
3
3
-
-
-
1 Lt Gen Peter Leahy AC resigned from the Audit and Risk Committee after becoming Chairman on 27 July 2021.
2 Appointed 7 December 2021
3 Retired 27 July 2021
4 Retired 28 May 2021
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Remuneration report (Audited)
The key management personnel (KMP) of Electro Optic Systems Holdings Limited during the year were:
Lt Gen Peter Leahy AC (Chairman, Non-executive director)
Dr Ben Greene (Chief Executive Officer and director)
Air Marshal Geoffrey Brown AO (Non-executive director)
The Hon Kate Lundy (Non-executive director)
Mr David Black (Non-executive director) (appointed 1 January 2021)
Ms Deena Shiff (Non-executive director) (appointed 7 December 2021)
Mr Fred Bart (Chairman, Non-executive director) (retired 27 July 2021)
Mr Ian Dennis (Non-executive director) (retired 28 May 2021)
Mr Grant Sanderson (Chief Executive Officer - EOS Defence Systems Pty Limited)
Mr Glen Tindall (Chief Executive Officer – EOS Space Systems Pty Limited)
Mr Michael Lock (Chief Financial Officer – Electro Optic Systems Pty Limited) – Appointed 1 March 2021
Mr Peter Short (Chief Operating Officer – Electro Optic Systems Pty Limited)
Dr Craig Smith (Chief Technology Officer – Electro Optic Systems Pty Limited) until 30 September 2021 *
Mr Tahir Khan (Acting Chief Financial Officer – Electro Optic Systems Pty Limited) until 28 February 2021 #
Mr Scott Lamond (Chief Financial Officer – Electro Optic Systems Pty Limited) until 28 February 2021 #
Mr Neil Carter (Chief Strategy Officer – Electro Optic Systems Pty Limited) until 8 November 2021 ^
* Dr Smith assumed the role of Chief Technology Officer from 1 October 2021. Dr Smith was previously the Chief
Executive Officer of EOS Space Systems Pty Limited. Dr Smith was not included in KMP at 31 December 2021.
# Mr Khan assumed the role of Acting Chief Financial Officer for the period 28 August 2020 to 28 February 2021.
Mr Lamond maintained authority and responsibility for planning, directing and controlling activities of the consolidated
entity during this period. Mr Khan and Mr Lamond were not included in KMP at 31 December 2021.
^ Mr Carter left the Company on 8 November 2021.
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.
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Electro Optic Systems Holdings Annual Report 2021
EOS Annual Report 2021 | Directors’ Report
Directors’ shareholdings
The following table sets out each Director’s relevant interest in shares, restricted ordinary shares under the LFSP of the
company or a related body corporate as at the date of this report.
Fully paid ordinary
Fully paid ordinary
Fully paid ordinary
Balance of
Fully paid
ordinary shares
shares restricted
shares restricted
shares restricted
Lapsed shares
restricted – LFSP
Fully paid
– LFSP issued on
– LFSP issued on
– LFSP issued on
at 31 December
outstanding at 31
Directors
ordinary shares
20 June 2018
29 May 2020
31 May 2021
2021^
December 2021
Lt Gen Peter
Leahy AC
60,077
200,000
100,000
Dr Ben Greene
3,987,139
2,000,000
2,000,000
Air Marshal
Geoffrey Brown AO
The Hon Kate
Lundy
19,335
200,000
100,000
6,694
200,000
100,000
Mr David Black
10,880
Ms Deena Shiff
-
-
-
-
-
Mr Fred Bart*
5,324,010
200,000
100,000
Mr Ian Dennis#
41,843
150,000
100,000
-
-
-
-
150,000
-
-
-
(50,000)
250,000
(1,000,000)
3,000,000
(50,000)
250,000
(50,000)
250,000
-
-
150,000
-
(50,000)
250,000
(50,000)
200,000
* Fred Bart retired as Director on 27 July 2021. These shareholdings reflect his interests as at the date of resignation.
# Ian Dennis retired as Director on 28 May 2021. These shareholdings reflect his interests as at the date of resignation.
^ Refer to the table on page 21 which details restricted shares forfeited upon failure to meet share-price hurdles.
Movement in Director shareholdings during the 2021 are set out in the Remuneration Report.
The fully paid ordinary restricted shares were issued on 20 June 2018 under the LFSP at a price of $2.99 and are subject
to vesting and performance criteria.
The fully paid restricted shares were issued on 29 May 2020, following approval at the Annual General Meeting, under the
LFSP at a price of $4.92 and are subject to vesting and performance criteria.
The fully paid restricted shares were issued on 31 May 2021, following approval at the Annual General Meeting, under the
LFSP at a price of $4.06 and are subject to vesting and performance criteria.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
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 29 May 2020, when shareholders approved a maximum aggregate remuneration of
$1,000,000 per year excluding options.
The amount of aggregate remuneration provided to Directors is approved by shareholders. The manner in which it is
apportioned amongst Directors, and the policy of granting options to Directors, is determined by Directors within the limits
set by shareholders.
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 received a fee in recognition
of additional services provided to the consolidated entity up to 31 August 2021.
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 so as to:
z reward Executives for group and individual performance against targets set by reference to suitable benchmarks;
z align the interests of Executives with those of shareholders; and
z 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.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Director remuneration
The following tables disclose the remuneration of the directors of the Company:
Short term
Post
Employment
2021
Lt Gen Peter Leahy AC
Dr Ben Greene*
Air Marshal Geoffrey
Brown AO
The Hon Kate Lundy
Mr David Black
Ms Deena Shiff
Mr Fred Bart
Mr Ian Dennis#
Salary &
Fees
$
91,260
703,878
63,782
63,782
63,782
4,359
95,745
116,636
1,203,224
Non-
monetary
Super-
annuation
$
-
26,163
-
-
-
-
-
-
$
8,966
27,498
6,218
6,218
6,218
436
9,255
2,530
Equity
Loan
Funded
Share Plan
$
32,641
593,214
32,641
32,641
23,941
-
18,512
13,146
Other
Long Term
Benefits
$
Total
$
-
132,867
178,410
1,529,163
-
102,641
-
-
-
-
-
102,641
93,941
4,795
123,512
132,312
26,163
67,339
746,736
178,410
2,221,872
* Executive Director during the financial year
# Includes fees for company secretarial and accounting consultancy services provided of $90,000
Short term
Post
Employment
Salary &
Fees
Non-
monetary
Super-
annuation
$
127,854
746,193
279,927
63,927
63,927
63,927
-
1,345,755
$
-
26,163
-
-
-
-
-
26,163
$
12,146
28,827
6,073
6,073
6,073
6,073
-
65,265
Equity
Loan
Funded
Share Plan
$
31,510
477,261
31,510
31,510
31,510
31,510
-
634,811
Other
Long Term
Benefits
$
Total
$
-
171,510
67,401
1,345,845
-
-
-
-
-
67,401
317,510
101,510
101,510
101,510
-
2,139,395
2020
Mr Fred Bart
Dr Ben Greene*
Mr Ian Dennis#
Lt Gen Peter Leahy AC
Air Marshal Geoffrey
Brown AO
The Hon Kate Lundy
Mr David Black
* Executive Director during the financial year
# Includes fees for company secretarial and accounting consultancy services provided of $216,000
Other long-term benefits include annual leave and long service leave expensed during the year.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Executive remuneration
No executives are employed by the holding company. The following table discloses the remuneration of the executives of
the consolidated entity for the period during which they were considered key management personnel:
Short term
Post
Employment
Salary &
Fees
Non-
monetary
Super-
annuation
2021
Dr Craig Smith
Mr Scott Lamond
Mr Grant Sanderson
Mr Peter Short
Mr Neil Carter
Mr Glen Tindall
Mr Tahir Khan
Mr Michael Lock
$
266,948
56,059
347,032
347,032
508,835
350,000
56,059
294,923
2,226,888
$
-
-
-
-
-
-
-
-
-
Short term
Post
Employment
Salary &
Fees
Non-
monetary
Super-
annuation
2020
Dr Craig Smith
Mr Scott Lamond
Mr Grant Sanderson
Mr Peter Short
Mr Neil Carter
Mr Glen Tindall
Mr Tahir Khan
$
358,197
358,197
358,197
358,197
215,577
168,269
130,003
1,946,637
$
-
-
-
-
-
-
-
-
Equity
Loan
Funded
Share Plan
$
5,508
2,143
42,698
48,958
62,167
33,860
2,766
53,979
Other
Long Term
Benefits
$
22,596
(4,913)
12,484
46,099
-
20,267
6,247
22,615
Total
$
320,879
58,615
436,050
475,791
615,122
438,252
70,398
400,296
211,041
252,079
125,395
2,815,403
Equity
Loan
Funded
Share Plan
$
25,921
26,383
33,647
33,647
43,028
30,869
10,580
Other
Long Term
Benefits
$
23,639
10,041
20,798
16,662
4,238
12,181
22,671
Total
$
441,786
428,650
446,671
442,535
283,323
227,305
175,604
184,932
204,075
110,230
2,445,874
$
25,827
5,326
33,836
33,702
44,120
34,125
5,326
28,779
$
34,029
34,029
34,029
34,029
20,480
15,986
12,350
No options were granted to or exercised by any director or executive during 2021 and 2020. Ordinary shares in relation to
the Loan Funded Share Plan were granted during 2021.
Other long-term benefits include annual leave and long service leave expensed during the year.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Loan funded share plan
Vesting Principles
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 employees 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; or
(c) Directors resolve to extend and/or waive performance hurdles as set out below for staff only, noting that Directors
cannot resolve to extend or waive any requirements relating to Directors.
Further Measures, Hurdles and Sale Restrictions
Staff and Directors may be subject to individualised measures and hurdles associated with any shares issued to them
under to the Loan Funded Share Plan. To the extent Shares vest, they will be subject to sale restrictions as outlined in the
tables below for each separate issue of Loan Funded Shares.
Phase 1: Issue of 5,180,000 shares on 20 June 2018 at $2.99 per share
TRANCHE A (applies to 50% of the total number of Shares issues)
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 issues)
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)
* This price hurdle was extended by three years by the Directors on 16 November 2021 for executives and staff,
only, and not for directors.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Remuneration report (continued)
Phase 2: Issue of shares during the year ended 31 December 2020, including:
On 19 May 2020, the issue of 2,270,000 ordinary restricted shares to employees at an issue price of $4.75.
On 29 May 2020, the issue of 2,500,000 ordinary restricted shares to directors at an issue price of $4.92.
On 10 August 2020, the issue of 860,000 ordinary restricted shares to employees at an issue price of $5.62.
On 14 October 2020, the issue of 150,000 ordinary restricted shares to employees at an issue price of $5.47.
TRANCHE A (applies to 50% of the total number of Shares issued )
Measures and hurdles
A share Price Hurdle of $9.50 by 31
December 2021 (this hurdle must be
reached on at least 30 trading days,
not necessarily consecutive, by 31
December 2021)*
Vesting period
The period of
two calendar
years ending 31
December 2021
Vested Shares can be sold after:
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)
TRANCHE B (applies to 50% of the total number of Shares issued )
Measures and hurdles
A Share Price Hurdle of $11.50 by 31
December 2022 (this hurdle must be
reached on at least 30 trading days,
not necessarily consecutive, by 31
December 2022)*
Vesting period
The period of
four calendar
years ending 31
December 2023
Vested Shares can be sold after:
30 June 2024
(25% of Vested Shares)
30 September 2024
(50% of Vested Shares)
31 December 2024
(75% of Vested Shares)
31 March 2025
(100% of Vested Shares)
* This price hurdle was extended by three years by the Directors on 16 November 2021 for executives and staff, only, and not for directors.
If the above Vesting Conditions are not satisfied, or if the Board determines that they cannot be satisfied, Directors will
forfeit their unvested Shares.
Under Phase 2 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 the Company. These conditions are
outlined in Note 22 are in addition to the above vesting conditions for Directors.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Remuneration report (continued)
Phase 3: Issue of shares on 15 March 2021
On 15 March 2021, the issue of 1,185,000 ordinary shares to staff at a price of $5.27 being the 20-day volume weighted
average price up to and including the trading day immediately prior to the date of issue.
TRANCHE A (applies to 50% of the total number of Shares issued )
Measures and hurdles
A share Price Hurdle of $9.50 by
30 June 2023 (this hurdle must be
reached on at least 30 trading days, not
necessarily consecutive, by 30 June
2023)*
Vesting period
The period of two
calendar years
ending 30 June
2023
Vested Shares can be sold after:
30 June 2023
(25% of Vested Shares)
30 September 2023
(50% of Vested Shares)
31 December 2023
(75% of Vested Shares)
31 March 2024
(100% of Vested Shares)
TRANCHE B (applies to 50% of the total number of Shares issued )
Measures and hurdles
A Share Price Hurdle of $11.50 by
30 June 2025 (this hurdle must be
reached on at least 30 trading days, not
necessarily consecutive, by 30 June
2025)*
Vesting period
The period of four
calendar years
ending 30 June
2025
Vested Shares can be sold after:
30 June 2025
(25% of Vested Shares)
30 September 2025
(50% of Vested Shares)
31 December 2025
(75% of Vested Shares)
31 March 2026
(100% of Vested Shares)
* This price hurdle was extended by three years by the Directors on 16 November 2021 for executives and staff.
If the above Vesting Conditions are not satisfied, or if the Board determines that they cannot be satisfied, Directors will
forfeit their unvested Shares.
Directors have also imposed 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 are outlined in Note 22 are in addition to
the above vesting conditions for Directors.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Phase 4: Issue of shares on 31 May 2021
On 31 May 2021 the issue of 150,000 ordinary shares to a director as approved by shareholders at a price of $4.06 being
the 20-day volume weighted average price up to and including the trading day immediately prior to the date of issue.
TRANCHE A (applies to 50% of the total number of Shares issued )
Measures and hurdles
A share Price Hurdle of $9.50 by
30 June 2023 (this hurdle must be
reached on at least 30 trading days, not
necessarily consecutive, by 30 June
2023)
Vesting period
The period of two
calendar years
ending 30 June
2023
Vested Shares can be sold after:
30 June 2023
(25% of Vested Shares)
30 September 2023
(50% of Vested Shares)
31 December 2023
(75% of Vested Shares)
31 March 2024
(100% of Vested Shares)
TRANCHE B (applies to 50% of the total number of Shares issued )
Measures and hurdles
A Share Price Hurdle of $11.50 by
30 June 2025 (this hurdle must be
reached on at least 30 trading days, not
necessarily consecutive, by 30 June
2025)
Vesting period
The period of four
calendar years
ending 30 June
2025
Vested Shares can be sold after:
30 June 2025
(25% of Vested Shares)
30 September 2025
(50% of Vested Shares)
31 December 2025
(75% of Vested Shares)
31 March 2026
(100% of Vested Shares)
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Electro Optic Systems Holdings Annual Report 2021
EOS Annual Report 2021 | Directors’ Report
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
Granted as
Purchases of
Lt Gen Peter Leahy AC
Dr Ben Greene
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Ms Deena Shiff
Mr Fred Bart*
Mr Ian Dennis*
Dr Craig Smith*
Mr Scott Lamond*
Mr Grant Sanderson
Mr Peter Short
Mr Neil Carter*
Mr Glen Tindall
Mr Michael Lock
1/1/21
No.
50,077
3,987,139
13,773
5,394
-
-
5,324,010
41,843
100,772
14,110
-
937
2,700
-
-
remuneration
Sales of shares
No.
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
shares
No.
10,000
-
5,562
1,300
10,880
-
-
-
-
-
-
-
-
-
24,000
* These persons were not members of the key management personnel of the consolidated entity at 31 December 2021.
Balance at
31/12/21
No.
60,077
3,987,139
19,335
6,694
10,880
-
5,324,010
41,843
100,772
14,110
-
937
2,700
-
24,000
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 under the LFSP).
Balance at
Granted as
Purchases of
1/1/21
remuneration
Sales of shares
Mr Fred Bart*
Dr Ben Greene
Mr Ian Dennis*
Lt Gen Peter Leahy AC
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Ms Deena Shiff
Dr Craig Smith
Mr Michael Lock
Mr Grant Sanderson
Mr Peter Short
Mr Neil Carter*
Mr Glen Tindall
No.
300,000
4,000,000
250,000
300,000
300,000
300,000
-
-
330,000
-
410,000
410,000
500,000
330,000
No.
No.
-
-
-
-
-
-
150,000
-
-
165,000
90,000
90,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
shares
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Lapsed at
31/12/21
No.^
(50,000)
Balance at
31/12/21
No.^
250,000
(1,000,000)
3,000,000
(50,000)
(50,000)
(50,000)
(50,000)
-
-
(40,000)
-
(80,000)
(80,000)
-
-
200,000
250,000
250,000
250,000
150,000
-
290,000
165,000
420,000
420,000
500,000
330,000
^ Refer to table on page 21 which details restricted shares to be forfeited upon failure to meet 31 December 2021 share-price hurdle
* These persons were not members of the key management personel of the consolidated entity at 31 December 2021.
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Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Elements of remuneration related to performance
There are service conditions and performance conditions both market and non-market conditions attached to the
restricted fully paid ordinary shares issued under the Loan Funded Share Plan.
The overall performance of the Company as measured by the share price will determine whether the shares are exercised
and whether the director or executive receives any benefit from these shares. The time service condition has been chosen
by the Board as an appropriate condition as it helps in the retention and motivation of staff.
The ordinary restricted shares were issued to directors, senior executives and senior staff under the LFSP. These ordinary
restricted shares are subject to performance and vesting conditions.
Other transactions with key management personnel
During the year, the Company paid a total of $105,000 (2020: $140,000) 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 $29,166 (2020: $70,000) 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 $70,000 (2020: $70,000) 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 $17,500 (2020: $nil) to Technology Innovation Partners Pty Ltd, a company associated
with Ms Kate Lundy in respect of directors’ fees and superannuation for Kate Lundy.
During the period Mr Dennis was KMP, the Company paid $90,000 (2020: $216,000) 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 $18,970 (2020: $31,775) 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.
59
Electro Optic Systems Holdings Annual Report 2021 EOS Annual Report 2021 | Directors’ Report
Company performance and shareholder returns, last five financial years
The table below sets out summary information about the Company’s earnings and movements in shareholder wealth for
the last five financial years.
31 December
2021
$
31 December
2020
$
31 December
2019
$
31 December
2018
$
31 December
2017
$
Revenue
212,330,648
180,182,366
165,385,019
87,130,396
23,259,794
Net profit/(loss)
before tax
Net profit/(loss)
after tax
Share price at
start of year
Share price at
end of year
Dividends
paid
(4,610,674)
(29,901,050)
21,396,585
15,081,372
(9,319,930)
(13,841,610)
(25,207,896)
17,642,981
15,081,372
(9,319,930)
31 December
2021
$
31 December
2020
$
31 December
2019
$
31 December
2018
$
31 December
2017
$
5.91
2.34
-
7.42
5.91
-
2.45
7.42
-
2.45
2.45
-
1.73
2.45
-
60
Electro Optic Systems Holdings Annual Report 2021
EOS Annual Report 2021 | Directors’ Report
Audit and Risk Committee
The current members of the Committee are Mr David Black (Chairman), Air Marshal Geoffrey Brown AO, the Hon Kate
Lundy and Ms Deena Shiff.
The Audit and Risk Committee have reviewed the consolidated entity’s risk management profile during the year to satisfy
themselves that it continues to be sound and that the consolidated entity is operating with due regard to the risk appetite
set by the Board. The Chief Operating Officer prepares a risk profile for each monthly Board Meeting including a Board
Residual Risk Heat Map to ensure continuous monitoring of risk.
Nominations and Remuneration Committee
The current members of the Committee are Air Marshal Geoffrey Brown AO (Chairman), Mr David Black and
the Hon Kate Lundy.
Non-audit services
The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person
or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The Directors have formed this view based on the fact that the nature and scope of each type of
non-audit service provided means that the audit independence was not compromised.
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are
contained in Note 9 to the financial statements.
Auditor’s independence declaration
The auditor’s independence declaration is included on page 62 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
Ben Greene
Director
Dated at Canberra this 31st day of March 2022
61
Electro Optic Systems Holdings Annual Report 2021 Deloitte Touche Tohmatsu
ABN 74 490 121 060
8 Brindabella Circuit
Brindabella Business Park
Canberra Airport
Canberra ACT 2609
Australia
Phone: +61 2 6263 7000
www.deloitte.com.au
31 March 2022
The Board of Directors
Electro Optic Systems Holdings Limited
18 Wormald Street
Symonston ACT 2609
Dear Board Members,
AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo EElleeccttrroo OOppttiicc SSyysstteemmss HHoollddiinnggss LLiimmiitteedd
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Electro Optic Systems Holdings Limited.
As lead audit partner for the audit of the financial report of Electro Optic Systems Holdings Limited for the year
ended 31 December 2021, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours faithfully
DELOITTE TOUCHE TOHMATSU
Chris Biermann
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
62
36
Electro Optic Systems Holdings Annual Report 2021
63
Electro Optic Systems Holdings Annual Report 2021 Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 63Deloitte Touche Tohmatsu ABN 74 490 121 060 8 Brindabella Circuit Brindabella Business Park Canberra Airport Canberra ACT 2609 Australia Phone: +61 2 6263 7000 www.deloitte.com.au IInnddeeppeennddeenntt AAuuddiittoorr’’ss RReeppoorrtt ttoo tthhee mmeemmbbeerrss ooff EElleeccttrroo OOppttiicc SSyysstteemmss HHoollddiinnggss LLiimmiitteedd RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt Opinion We have audited the financial report of Electro Optic Systems Holdings Limited (the “Company”) and its subsidiaries (the “Consolidated entity”) which comprises the consolidated statement of financial position as at 31 December 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Consolidated Entity is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Consolidated entity’s financial position as at 31 December 2021 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Consolidated entity in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 1 in the financial report, which indicates that the Consolidated Entity had a loss before tax of $4,610,674 and a net decrease in cash of $6,672,844 during the year ended 31 December 2021. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Consolidated entity’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. 64
Electro Optic Systems Holdings Annual Report 2021 64 Our procedures in relation to going concern included, but were not limited to: • Challenging the underlying assumptions reflected in management’s cash flow forecasts, including the timing of expected cash flows; • Assessing the historical accuracy of the forecasts prepared by management; • Inquiring with management and the board as to knowledge of events and conditions that may impact the assessment on the Consolidated entity’s ability to pay its debts as and when they fall due; and • Assessing the adequacy of the disclosures in Note 1(c) to the financial statements. KKeeyy AAuuddiitt MMaatttteerrss Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. KKeeyy AAuuddiitt MMaatttteerr HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr RReevveennuuee rreeccooggnniittiioonn ffoorr ssiiggnniiffiiccaanntt ccoonnttrraaccttss Electro Optic Systems Holdings (EOSH) has five significant agreements with customers (key contracts) that account for approximately 81% of total consolidated revenue. These key contracts are complex, span over several years and the accounting implications thereof are of significance to the performance of the entity. There are judgements associated with interpreting the revenue recognised for contracts entered into by the entity against the requirements of AASB 15 Revenue from Contracts with Customers. 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, clauses with regards to cancellations, penalties for late delivery and warranties (amongst others); and • Accounting judgements and treatments in relation to the application of AASB 15 including the assessment of performance obligations, allocation of revenue, variable consideration and consideration of revenue recognition as being at a point in time or over time. Our procedures included, but were not limited to: • Enquiring and performing a walkthrough of the process for recording revenue and assessing judgements applied to the key contracts to identify and test relevant controls; • Reviewing key contracts and assessing revenue recognition against the requirements of the relevant accounting standard; • Testing on a sample basis, revenue transactions recorded in relation to the key contracts and assessing whether these have been appropriately accounted for with regard to the accounting policy adopted, including agreeing these to underlying records, including shipment and milestone documentation; and • Assessing the application of any adjustments in relation to variable elements of revenue recognition, including the application of the late delivery clauses. We also assessed the appropriateness of the disclosures in Notes 1(f) and 2(a) to the financial statements. RReeccoovveerraabbiilliittyy ooff ggooooddwwiillll aanndd iinnttaannggiibbllee aasssseettss AASB 136 Impairment of Assets requires goodwill acquired in a business combination to be tested annually for impairment. The standard also applies to assessing impairment of intangible assets. Our procedures included, but were not limited to: • Enquiring and performing a walkthrough of the process to compute management’s cash flow forecasts to identify and test relevant controls; 65
Electro Optic Systems Holdings Annual Report 2021 65 KKeeyy AAuuddiitt MMaatttteerr HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr The determination of the recoverable amount requires management judgement in determining and applying: • Cash flow projections; • Expected future growth in the product market; and • Discount rates. • Challenging management’ assessment on the underlying inputs and assumptions applied when making key judgements and estimates; • Assessing the status of any new/ongoing/potential contracts based on discussions with management and external research (where available); • Performing an independent sensitivity analysis to determine whether reasonably foreseeable changes to the key inputs and assumptions would trigger impairment; • Engaging our internal valuation specialists to assist in the evaluation of management’s assumptions applied in their assessment in calculating the recoverable amount of the identified CGUs, including future cash flows, growth rates, discount rates and terminal value calculations; and • Comparing the recoverable amount of the CGUs to the carrying value to determine whether an impairment is required. We also assessed the appropriateness of the disclosures in Notes 12 and 13 to the financial statements. CCaappiittaall wwoorrkk iinn pprrooggrreessss EOSH as part of its business generation activity, incurs expenditure on construction and customisation of assets ahead of revenue being generated. These include specific projects and associated assets in the defence and space segments. AASB 116 Property Plant and Equipment requires that an item of Property Plant and Equipment only be recognised if it is probable that future economic benefits associated with the item will flow to the entity. Management judgement is required in: • The determination of whether the expenditure meets the capitalisation criteria under AASB 116; and • The future economic benefits expected to be generated. Our procedures included, but were not limited to: • Enquiring and performing a walkthrough of the process to assess the eligibility of costs that can be capitalised to identify and test relevant controls; • Inspecting documentation of costs capitalised in the period and assessing if they have been correctly capitalised; and • Obtaining and assessing management’s assessment of the recoverability of the capital work in progress with reference to the expected future economic benefits from the assets. We also assessed the appropriateness of the disclosures in Note 14 to the financial statements. CCoonnttrraacctt AAsssseett rreeccoovveerraabbiilliittyy As a result of the timing of revenue recognition for a contract with a customer in a foreign jurisdiction, EOSH have recognised a contract asset of $117,056,589 (refer Note 1(x)) in the statement of financial position. The contract asset represents amounts reflected in revenue on a milestone basis but not billed to the customer. AASB 9 Financial Instruments requires that contract Our procedures included, but were not limited to: • Enquiring and performing a walkthrough of the process to assess the recoverability of the contract asset to identify and test relevant controls; • Obtaining and assessing management’s assessment of the factors impacting the ECL in relation to the contract asset and any required ECL charges; 66
Electro Optic Systems Holdings Annual Report 2021 66 KKeeyy AAuuddiitt MMaatttteerr HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr assets are subject to an assessment in relation to the expected credit loss (ECL). Impairment is required to be recognised where an ECL exists. The determination of the ECL requires management judgement in considering management’s ability to realise the contract asset. • Recalculating contract assets recorded by management; and • Enquiring, obtaining and evaluating documentation in relation to the performance against the contract including any variations of the contract. We also assessed the appropriateness of the disclosures in Notes 1 (x) and 6 to the financial statements. OOtthheerr IInnffoorrmmaattiioonn The directors are responsible for the other information. The other information comprises the information included in the Corporate Directory, Review of Operations, Director’s Report and ASX Additional Information, which we obtained prior to the date of this auditor’s report, and also includes information which has been included in the Consolidated entity’s annual report (but does not include the financial report and our auditor’s report thereon) which was made available to us after that date. Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Consolidated entity to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Consolidated entity or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. 67
Electro Optic Systems Holdings Annual Report 2021 67 As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Consolidated entity’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Consolidated entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Consolidated entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 68
Electro Optic Systems Holdings Annual Report 2021 68 RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 49 to 60 of the Directors’ Report for the year ended 31 December 2021. In our opinion, the Remuneration Report of Electro Optic Systems Holdings Limited, for the year ended 31 December 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU Chris Biermann Partner Chartered Accountants Canberra, 31 March 2022 EOS Annual Report 2021 | Directors’ Declaration
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
Ben Greene
Director
Dated at Canberra this 31st day of March 2022
Electro Optic Systems Holdings Annual Report 2021
69
EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Corporate Directory
EOS Annual Report 2021 | Financial Statements
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
For the financial year ended 31 December 2021
Revenue
Other income
Changes in inventories of work in progress and finished goods
Raw materials and consumables used
Employee benefits expense
Administration expenses
Amortisation of intangibles
Interest expense
Depreciation and amortisation of property, plant and equipment
Impairment of capital work in progress
Depreciation of right-of-use-assets
Loss on disposal of property, plant and equipment
Foreign exchange gains / (losses)
Occupancy costs
Other expenses
(Loss) before income tax
Note
2(a)
2(b)
31 December
2021
$
31 December
2020
$
212,330,648
180,182,366
975,161
10,085,114
5,662,754
(38,292,672)
(117,221,392)
(77,694,633)
2(c)
(69,202,553)
(53,211,757)
(25,950,048)
(19,774,924)
2(c)
2(c)
2(c)
2(c)
2(c)
2(c)
(2,823,476)
(2,913,090)
(3,954,048)
(1,789,867)
(2,346,628)
(1,436,475)
(3,045,714)
-
(4,984,755)
(4,165,264)
(8,917)
(299,900)
9,797,241
(15,682,452)
(1,962,137)
(2,566,195)
(1,709,006)
(2,509,105)
(4,610,674)
(29,901,050)
Income tax (expense) / benefit
4
(9,230,936)
4,693,154
(Loss) for the year
Attributable to:
Owners of the Company
Non-controlling interests
Other comprehensive income
(13,841,610)
(25,207,896)
24
(13,004,520)
(24,402,682)
(837,090)
(805,214)
(13,841,610)
(25,207,896)
Items that may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign operations
Total comprehensive (Loss) for the year
1,344,029
(2,106,188)
(12,497,581)
(27,314,084)
Attributable to:
Owners of the Company
Non-controlling interests
(Loss) per share
Basic (cents per share)
Diluted (cents per share)
(11,660,491)
(26,508,870)
(837,090)
(805,214)
(12,497,581)
(27,314,084)
3
3
(9.97)
(9.97)
(19.52)
(19.52)
Notes to the financial statements are included on pages 75 to 142.
70
Electro Optic Systems Holdings Annual Report 2021
Electro Optic Systems Holdings Limited and Consolidated Entities
EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
Current Assets
Cash and cash equivalents
Trade and other receivables
Tax receivable
Contract asset
Inventories
Prepayments
Total Current Assets
Non‑Current Assets
Trade and other receivables
Contract asset
Other assets
Deferred tax asset
Security deposits
Loan to associate
Right of use assets
Goodwill
Intangible assets
Property, plant and equipment
Total Non‑Current Assets
Total Assets
Current Liabilities
Trade and other payables
Current tax payable
Secured borrowings
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 75 to 142.
Consolidated
31 December
2021
$
31 December
2020
$
Note
25
5
6
7
8
5
6
8
4
33
10
11
12
13
14
15
16
17
18
17
18
20
23
24
59,260,655
23,533,145
195,928
106,843,848
74,579,376
20,398,751
284,811,703
‑
21,452,681
‑
4,506,193
28,140,759
2,513,380
28,601,271
14,878,316
17,109,179
56,078,490
173,280,269
65,933,499
35,810,801
-
124,532,902
67,308,339
13,135,088
306,720,629
2,063,782
13,364,148
956,073
11,342,664
16,671,414
2,391,940
20,142,641
14,878,316
19,723,572
29,125,518
130,660,068
458,091,972
437,380,697
43,036,517
-
34,448,384
5,159,847
14,178,464
96,823,212
52,235,653
36,736
-
3,442,031
15,099,074
70,813,494
24,864,019
7,248,891
32,112,910
128,936,122
329,155,850
17,665,942
9,306,752
26,972,694
97,786,188
339,594,509
413,727,547
11,567,049
(93,958,006)
331,336,590
(2,180,740)
329,155,850
413,479,003
8,412,642
(80,953,486)
340,938,159
(1,343,650)
339,594,509
Electro Optic Systems Holdings Annual Report 2021
Electro Optic Systems Holdings Limited and Consolidated Entities
71
EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Accumulated
losses
$
Issued
capital
$
Foreign
currency
translation
reserve
$
Employee
equity
settled
benefits
reserve
$
Attributable
to owners
of the
parent
$
Non-
controlling
interests
$
Total Equity
$
(80,953,486) 413,479,003
(3,167,394)
11,580,036 340,938,159
(1,343,650) 339,594,509
2021
Balance at
1 January 2021
(Loss) for the year
(13,004,520)
Exchange differences
arising on translation
of foreign operations
Total comprehensive
(loss)/ profit for
the year
-
(13,004,520)
-
-
-
-
-
(13,004,520)
(837,090)
(13,841,610)
1,344,029
-
1,344,029
-
1,344,029
1,344,029
-
(11,660,491)
(837,090)
(12,497,581)
Repayment of loans
in respect of 83,125
Loan Funded Share
Plan shares at $2.99
per share
Recognition of
share-based
payments
Balance at
31 December 2021
-
-
248,544
-
-
-
-
248,544
1,810,378
1,810,378
-
-
248,544
1,810,378
(93,958,006) 413,727,547
(1,823,365)
13,390,414 331,336,590
(2,180,740) 329,155,850
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EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Accumulated
losses
$
Issued
capital
$
Foreign
currency
translation
reserve
$
Employee
equity
settled
benefits
reserve
$
Attributable
to owners
of the
parent
$
Non-
controlling
interests
$
Total Equity
$
(56,550,804) 274,311,590
(1,061,206)
10,373,224 227,072,804
(538,436) 226,534,368
2020
Balance at
1 January 2020
(Loss) for the year
(24,402,682)
Exchange differences
arising on translation
of foreign operations
Total comprehensive
(loss) for the year
-
(24,402,682)
-
-
-
-
-
(24,402,682)
(805,214)
(25,207,896)
(2,106,188)
-
(2,106,188)
-
(2,106,188)
(2,106,188)
-
(26,508,870)
(805,214)
(27,314,084)
Issue of 28,269,553
new shares at $4.75
under the institutional
placement
Issue of 2,451,463
new shares at $4.40
under the Share
Purchase Plan
Repayment of loans
in respect of 202,500
Loan Funded Share
Plan shares at $2.99
per share
Recognition of
share-based
payments
Balance at
31 December 2020
- 127,775,501
- 127,775,501
-
10,786,437
-
10,786,437
-
-
-
- 127,775,501
-
10,786,437
-
-
605,475
-
605,475
-
-
1,206,812
1,206,812
-
-
605,475
1,206,812
(80,953,486) 413,479,003
(3,167,394)
11,580,036 340,938,159
(1,343,650) 339,594,509
Notes to the financial statements are included on pages 75 to 142.
Electro Optic Systems Holdings Annual Report 2021
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EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
Cash flows from operating activities
Receipts from customers and other income
Payments to suppliers and employees
Income tax paid
Interest received
Interest and other costs of finance paid
31 December
2021
$
31 December
2020
$
Note
233,934,138
107,617,093
(225,250,939)
(204,442,935)
(2,627,129)
(11,968,689)
30,276
671,590
(5,864,892)
(1,036,376)
Net cash inflows/(outflows) from operating activities
25(b)
221,454
(109,159,317)
Cash flows from investing activities
Payment for property, plant and equipment
Payment for intangible assets
Security deposit for performance bond
Net cash (outflows) from investing activities
Cash flows from financing activities
Proceeds from issue of new shares
Repayment of loans in respect of loan funded share plan shares
Repayment of lease liabilities
Proceeds from borrowings
Transaction costs related to borrowings
Net cash inflows from financing activities
(29,006,573)
(24,554,327)
‑
(5,166,750)
(8,701,244)
(7,258,061)
(37,707,817)
(36,979,138)
‑
138,561,938
248,544
605,475
(3,852,347)
(3,238,674)
35,000,000
(811,739)
-
-
30,584,458
135,928,739
Net (decrease) in cash and cash equivalents
(6,901,905)
(10,209,716)
Cash and cash equivalents at the beginning of the financial year
65,933,499
77,881,766
Effects of exchange rate fluctuations on the balances of cash held in
foreign currencies
229,061
(1,738,551)
Cash and cash equivalents at the end of the financial year
25(a)
59,260,655
65,933,499
Notes to the financial statements are included on pages 75 to 142.
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EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Section Heading
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 December 2021
1. Summary of accounting policies
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 2022.
b. Basis of preparation
The financial report has been prepared on the basis of
historical cost unless otherwise stated. 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. The functional currency
of the consolidated entity is Australian dollars. Certain
comparative amounts have been restated to apply with
the method of computation in the current year.
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 a loss before tax of
$4,610,674 and a net decrease in cash for the year of
$6,672,844 (net decrease of $6,901,905 before adjusting
for foreign exchange fluctuations of $229,061).
On 17 March 2022 the Company announced that it had
engaged Greenhill & Co. as financial adviser to assist in
undertaking a strategic review, including ensuring all feasible
funding options are explored and assessed in the context
of the broader range of strategic options for the business.
As at the date of this report no outcome from the
strategic review has been determined and hence the
consolidated entity has prepared cash flow forecasts
for the next 12 months based upon the ‘as‑is’ business,
including the following key assumptions:
z Conversion of approximately $33 million
from the contract asset to cash by no later
than early April 2022, and monthly receipts
from April onwards;
z Obtaining a 6 month debt facility of approximately
$15 million in May 2022 to fund short term working
capital requirements;
z Obtaining by June 2022 equity funding for operating
and capital expenditure in relation to SpaceLink; and
z Rolling over the $35 million working capital
facility which was entered into in August 2021
or refinancing it before its maturity on
5 September 2022.
Depending on the outcome of the strategic review, and
the path chosen by the directors, these assumptions
may change.
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:
z ratification of the contract variations and the
continued realisation of the contract asset;
z key military and government customers making
timely payments for the goods supplied in
accordance with contractual terms;
z the continued ability of the consolidated entity
to deliver contracts on time, to the required
specifications and within budgeted costs;
z conversion of key opportunities within the Defence
sector pipeline; and
z the ability of the consolidated entity to secure
continued access to debt and/or equity funding
which includes extending the expiry date or
refinancing the current debt facility, obtaining
additional short term debt funding, and raising
additional equity funding.
Electro Optic Systems Holdings Annual Report 2021
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EOS Annual Report 2021 | Financial Statements
1. Summary of accounting
policies (cont)
If the consolidated entity is unable to achieve successful
outcomes in relation to the above matters, material
uncertainty would exist that may cast significant doubt
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.
d. Significant events and transactions ‑
impact of COVID-19
Since the outbreak of the pandemic, the consolidated
entity has been affected in multiple ways through
increasing supply chain costs, product delivery delays,
delays in contract negotiations and execution, access
to customers and reduced production. This has had
a corresponding impact on operating performance,
including increased costs and delays in the award of new
work both domestically and overseas.
The COVID‑19 control measures introduced by the
Federal Government, States and Territories, which
included border closures, lock downs and stay at home
orders, continued to impact the consolidated entity’s
ability to carry out key demonstrations and other activities
throughout 2021.
Significant judgement and estimates
While the specific areas of judgement did not change, the
impact of COVID‑19 resulted in the application of further
judgement by the directors in preparing the financial
report in areas such as revenue recognition, impairment
assessment on goodwill and intangibles as well as the
collectability of contract asset (see Note 1(x)).
The directors have reviewed the collectability of the
contract asset as at 31 December 2021 of $128,296,529.
The directors have concluded that no provisions or
adjustments to the contract asset should be recognised
given the nature of the counterparties involved and the
payments received during the year. Please refer to the
discussion of critical accounting judgements at Note 1(x).
The directors are of the view that the estimates used
in preparing this financial report are reasonable.
Estimates and outcomes that have been applied in the
measurement of the consolidated entity’s contract asset
may change in the future and any 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.
e. 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 the current
year summarised below.
z AASB 2020-8 Amendments to Australian
Accounting Standards ‑ Interest Rate Benchmark
Reform ‑ Phase 2
z AASB 2021-3 Amendments to Australian
Accounting Standards ‑ Covid‑19‑Related Rent
Concessions beyond 30 June 2021
These standards do not materially affect the consolidated
entity’s accounting policies or any of the amounts
recognised in the financial statements.
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EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
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 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 2020-3 Amendments to Australian Accounting Standards ‑
Annual Improvements 2018‑2020 and Other Amendments
AASB 2020-1 Amendments to Australian Accounting Standards
‑ Classification of Liabilities as Current or Non‑current and
AASB 2020-6 Amendments to Australian Accounting Standards ‑
Classification of Liabilities as Current or Non‑current ‑ Deferral of
Effective Date
2021-2 Amendments to Australian Accounting Standards
‑ Disclosure of Accounting Policies and Definition of
Accounting Estimates
2021-5 Amendments to Australian Accounting Standards ‑
Deferred Tax related to Assets and Liabilities arising from a
Single Transaction
Effective for annual
reporting periods
beginning on or after
Expected to be initially
applied in the financial
year ending
1 January 2022
(Editorial corrections in
AASB 2017-5 applied
from 1 January 2018)
31 December 2022
1 January 2022
31 December 2022
1 January 2023
31 December 2023
1 January 2023
31 December 2023
1 January 2023
31 December 2023
f. Revenue recognition
The consolidated entity recognises revenue from the following major sources:
z engineering design, manufacture and supply of remote weapons stations and related installation, integration and
support services;
z design, manufacture, delivery and operation of sensors for space domain awareness and space control; and
z design, development and provision of satellite communications products, systems and services.
Customer contracts across all segments, including both products and services, are highly customised and are configured
specifically for each client’s operational and commercial requirements.
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EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
1. Summary of accounting
policies (cont)
Transaction price
Revenue is measured based on the consideration to
which the consolidated entity expects to be entitled in
a contract with a customer. This transaction price is
updated for changes in scope or price (or both) that are
approved by all parties to the contract, either in writing or
by oral agreement.
Revenue recognition is constrained for negative variable
consideration in relation to delays in formal customer
acceptance or potential late delivery penalties/liquidated
damages. Once the constraint is removed, a cumulative
catch-up adjustment is made to recognise the
related revenue.
There is no significant financing component in the
consolidated entity’s contracts with customers as the
period between provision of goods and services and
the receipt of cash from customers is usually less than
a year. Payments terms which extend beyond a year
are for reasons other than the provision of a significant
financing component.
Timing of revenue recognition
The timing of revenue recognition (i.e., over time or
at a point in time) is determined by the nature and
specifications of the contracts that the consolidated
entity enters into with its customers.
Revenue recognition over time
Goods manufactured and services delivered under the
consolidated entity’s major contracts do not have an
alternative use for EOS and EOS has an enforceable right
to payment for performance completed to date, therefore,
the consolidated entity recognises revenue for its major
contracts over time.
z Under certain contracts, control of the goods
manufactured and services provided transfers
as the Company delivers against the contract.
The transaction price is allocated to performance
obligations based on standalone selling prices.
The output method, based on the delivery of goods
or services to customers or the achievement
of contract milestones, best depicts progress
under these contracts as it represents the best
measurement of value to the customer of goods or
services to date relative to the remaining goods or
services promised under the contract.
z For other contracts the input method offers the
best depiction of progress under the contract. For
such contracts, the consolidated entity recognises
revenue by reference to costs incurred to date
relative to total expected contract costs.
Revenue recognition at a point in time
For contracts where revenue at a point in time offers the
best depiction of EOS’s satisfaction of its performance
obligations, the consolidated entity recognises revenue
when control transfers to the customer. Control is
assessed as transferred to the customer when the
consolidated entity has a present right to payment for
the asset, typically upon delivery of goods and services
to customers.
Under bill and hold arrangements, revenue is recognised
once formal acceptance is received from customers.
Interest revenue is recognised using the effective interest
rate method.
g. Financial instruments
Financial assets
Classification
The consolidated entity classifies its financial assets in
the following measurement categories:
z those to be measured subsequently at fair value
(through profit or loss); and
z 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 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.
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1. Summary of accounting
policies (cont)
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 trade and
other receivables remains at amortised cost consistent
with the comparative period.
Debt instruments
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.
The consolidated entity measures its debt instruments
using the amortised cost basis. Using this method,
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.
Impairment
The consolidated entity 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,
contract assets, loans to associates 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.
Financial Liabilities
Interest bearing liabilities
All loans and borrowings are initially recognised at fair
value less 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.
EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
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.
h. 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 include restricted cash to the extent it relates
to operating activities.
i. 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.
Contributions to defined benefit contribution
superannuation plans are expensed when incurred.
j. 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 the reporting date. Non‑monetary assets
and liabilities 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.
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EOS Annual Report 2021 | Financial Statements
1. Summary of accounting
m. Impairment of assets
policies (cont)
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.
k. Goods and services tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
z 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
z 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.
l. Government grants
Government grants are recognised in profit or loss on
a systematic basis over the periods in which the costs
for which the grants are intended to compensate are
recognised. Where a grant’s primary condition is that
the consolidated entity should purchase, construct or
otherwise acquire non-current assets (including property,
plant and equipment) are recognised as deferred income in
the consolidated statement of financial position, which is
subsequently transferred to profit or loss on a systematic
basis over the useful lives of the related assets.
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 the grant’s
becomes receivable.
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.
The 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 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 (CGU) is estimated to be less than its carrying
amount, the carrying amount of the asset or CGU is
reduced to its recoverable amount. An impairment loss is
recognised in profit or loss immediately.
Other than goodwill, where an impairment loss
subsequently reverses the carrying amount of the
asset or CGU 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 or CGU in
prior years. A reversal of an impairment loss is recognised
in profit or loss immediately.
n. 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, using tax rates
and tax laws that have been enacted or substantively
enacted by the 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).
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EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
1. Summary of accounting
Tax consolidation
policies (cont)
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 their
corresponding tax base.
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.
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 the 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
settle its current tax assets and liabilities on a net basis.
The company and all its wholly owned Australian 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 the head entity in the tax‑consolidated group).
There are formal tax funding and tax sharing arrangements
between the companies comprising the Australian
tax‑consolidated entity as at 31 December 2021.
o. 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 on a straight-line basis:
Current and deferred tax for the period
Core technology (not patented)
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.
Patented technology
Software
Customer contracts and relationships
Licences
10 years
15 years
5 years
15 years
4 years
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EOS Annual Report 2021 | Financial Statements
1. Summary of accounting
policies (cont)
p. 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 and work in process.
Net realisable value represents the estimated selling
price less all estimated costs of completion, costs
to be incurred in marketing, selling and distribution,
and provision for obsolescence.
q. Leased assets
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:
z fixed lease payments (including in‑substance fixed
payments), less any lease incentives;
z variable lease payments that depend on an index or
rate, initially measured using the index or rate at the
commencement date;
z the amount expected to be payable by the lessee
under residual value guarantees;
z the exercise price of purchase options, if the lessee
is reasonably certain to exercise the options; and
z 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:
z 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.
z 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 change in lease payments is due to
a change in a floating interest rate, in which case a
revised discount rate is used).
z 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 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.
Right-of-use assets are depreciated over the shorter
period of the lease term and the 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.
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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 an acquisition-by-acquisition
basis. Other non-controlling interests are initially
measured at fair value. Subsequent to acquisition, the
carrying amount of non-controlling interests 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.
s. Property, plant and equipment
Plant and equipment and leasehold improvements
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 are
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
Office equipment
Furniture, fixture and fittings
Motor vehicles
Computer equipment
Test equipment
5 to 15 years
3 to 5 years
5 to 15 years
5 to 15 years
3 to 5 years
3 to 4 years
3 to 4 years
1. Summary of accounting
policies (cont)
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(m)) to determine whether a
right-of-use asset is impaired and accounts for any
identified impairment loss per that accounting policy.
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.
r. 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:
z has power over the investee;
z is exposed, or has rights, to variable returns from its
involvement with the investee; and
z 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.
Non‑controlling interests in subsidiaries are identified
separately from the consolidated entity’s equity
therein. The interests of non‑controlling shareholders
with present ownership interests entitling them to a
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1. Summary of accounting
policies (cont)
t. Provisions
Provisions are recognised when the consolidated entity
has a present obligation, the future sacrifice of economic
benefits is probable, and the amount of the provision can
be measured reliably.
When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, the receivable is recognised as an asset if it is
probable that recovery will be received, and the amount of
the receivable can be measured reliably.
The amount recognised as a provision is the best
estimate of the consideration required to settle the
present obligation, taking into account the risks and
uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the
present value of those cash flows.
Warranties
Provisions for warranty costs are recognised as agreed in
individual sales contracts, at the directors best estimate
of the expenditure required to settle the consolidated
entity’s liability. Sales‑related warranties cannot be
purchased separately, and they serve as an assurance
that the products sold comply with agreed-upon
specifications.
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.
Make good provisions and decommissioning costs
A make good provision, including decommissioning costs,
is recognised when there is a present obligation which it
is probable that an outflow of economic benefits will be
required to settle and the amount of the provision can
be measured reliably. The estimated future obligations
include the costs of dismantling and removing leasehold
improvement, decommissioning plant and equipment, or
otherwise restoring facilities and premises as required in
accordance with the underlying agreements.
u. 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 are accounted for as an in-substance option and
initially measured using a Monte Carlo simulation model.
Directors reassess the non-market inputs and adjust
throughout the life for likely eventuality.
v. 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:
z its assets, including its share of any assets
held jointly;
z its liabilities, including its share of any liabilities
incurred jointly;
z its revenue from the sale of its share of the output
arising from the joint operations;
z its share of the revenue from the sale of the output
by the joint operation; and
z 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 Standards applicable to
the particular assets, liabilities revenues and expenses.
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1. Summary of accounting
policies (cont)
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
(CGU). Judgement is made regarding the pipeline of sales
opportunities, discount rate applied to the estimated
free cash flows, and long‑term growth rates applied in
estimating the future value of each CGU.
Capitalisation and recoverable amount of capital
work in progress
A critical judgement exists in the decision to capitalise
work in progress (see Note 14). The consolidated entity
capitalises work in progress when the Directors believe
that the expenditure in question creates or enhances an
asset from which future economic benefits will flow, and
that the consolidated entity controls the asset. The capital
works in progress asset increased during the 12-month
period to 31 December 2021 by additions of $30,756,873
to a total value of $44,297,472. The asset is driven by
capital works undertaken by SpaceLink and Defence.
A critical judgement also exists in relation to the
recoverability of capital work in progress.
The SpaceLink capital works in progress consists of
resources expended in developing the ground and
space assets that will underpin the SpaceLink business.
The introduction of a new technology to the SpaceLink
constellation that will mitigate the cost and schedule of
initial entry into service also resulted in an impairment
of $1,789,867 to some of the previously capitalised
costs. The Directors have assessed the recoverable
amount of the SpaceLink capital works in progress asset
on 31 December 2021 and concluded that no further
impairments should be recognised. This judgement
is based on the Directors’ understanding of the
development efforts achieved by SpaceLink to date and
feedback received from investors, industry partners and
probable customers.
When a consolidated entity transacts 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 consolidated entity is a joint operator
(such as a purchase of assets), the consolidated entity
does not recognise its share of the gains and losses until
it resells those assets to a third party.
w. 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 acquirer,
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.
x. 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 circumstances,
the results of which form the basis of making these
judgements. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the
period of the revision and future periods if the revision
affects both current and future periods.
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1. Summary of accounting
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 19. The valuation is determined based on the
Directors’ best estimate of the expenditure required
to settle the consolidated entity’s liability under its
warranty obligations.
During the year the Company reviewed the accumulated
data regarding warranty claims on relevant sales to
date, in particular from a significant defence contract
to a customer in a foreign jurisdiction for which the
warranty period was substantially complete. The results
of this review were compared to the framework used to
estimate warranty provisions, particularly for sales of
defence materiel, which in turn indicated that lower rates
were justified. Based on this analysis, the Directors have
accordingly determined that the Company should adjust
the rates used to estimate warranty provisions.
Estimates and outcomes that have been applied in the
assessing warranty provisions may change in the future
and the consolidated entity will recognise any revisions
deemed necessary as a result.
Loan to associate
The directors made a critical judgement in relation to
the treatment of the loan to an associate. The directors
determined that based on the disclosure in Note 10,
treating the advances under the Unsecured Convertible
Note deed as a loan to an associate was appropriate
based on the facts pertaining to the loan.
policies (cont)
The Company also continued to invest through EOSDS
in the ongoing engineering development of counter
drone defence, predominantly in the areas of directed
energy (DE) and counter uninhabited aerial strike
(CUAS) technologies. The Directors have assessed
the recoverable amount of the EOSDS capital works in
progress asset on 31 December 2021 and concluded that
no impairments should be recognised. This judgement
is based on the engagements completed during the
year and feedback received from industry partners and
probable customers.
Actual results may differ from this estimate.
Estimates and outcomes that have been applied in
the measurement of the consolidated entity’s contract
asset may change in the future. 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.
Contract asset
A critical judgement exists in relation to the recoverability
of the contract assets described in Note 6. Of the
total contract assets of $128,296,529, an amount of
$117,056,589 relates to a contract with a customer in a
foreign jurisdiction. As outlined in Note 1(d), as a result
of COVID‑19 the Company has experienced delays in
finalising variations to this contract. These delays, along
with the requirement for onsite acceptance of products
(which has also been delayed as a result of COVID‑19
travel restrictions), have resulted in delays in the
conversion of the contract asset into cash and judgement
and estimation uncertainty in relation to recoverability.
Timing differences between revenue recognition and
invoicing are expected to arise due to differences
between the consolidated entity’s revenue recognition
policies (see Note 1(f)) and the terms of the underlying
contracts. The directors have concluded that any
estimated credit losses against the contract asset are
immaterial. This judgement is based on the nature of
the counterparties involved (primarily sovereign entities),
the payments received during the year, and continuing
communications with clients regarding administration of
the underlying contracts.
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1. Summary of accounting
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 consolidated
entity 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 consolidated entity measures the interest in an
associate at fair value through profit and loss from the
date which significant influence is obtained.
The consolidated entity applies AASB 9, 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.
policies (cont)
Judgements in determining revenue recognised
in the period
The Directors make judgements in terms of the nature
and timing of revenue recognised under contracts
between the consolidated entity and its clients, in
accordance with the provisions of AASB15. A summary
of the accounting policies adopted by the consolidated
entity in regard to revenue recognition is set out in
Note 1(f).
The Directors made a critical judgement in relation
to the revenue recognised under a major production
contract with a foreign customer. Under the contract, late
deliveries against the contracted schedule may result
in the application of late delivery penalties. Given the
delays and other impacts experienced from the COVID
pandemic (see Note 1(d)) there was a possibility that late
delivery penalties could possibly be applied and so the
consolidated entity had therefore constrained revenue
recognised under the contract before and during the
year, some of which were applied and recognised in
the first half of the year. In September 2021 the client
formally confirmed that any remaining penalties that
may otherwise have accrued against deliveries through
to 31 December 2021 would be waived. Given the
Company’s positive operating performance under the
contract, good relationships with the client, and track
record of payments received during the year, the Directors
determined that all variable consideration withheld
against this contract should be released, resulting in a
cumulative catch-up of the previously withheld variable
consideration (see Note 6).
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2. Loss from ordinary activities
(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
2021
$
31 December
2020
$
162,185,340
157,671,132
50,145,308
22,511,234
212,330,648
180,182,366
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
Defence segment ‑ Providing services
Space segment ‑ Providing services
Communication segment ‑ Sale of goods
Communication segment ‑ Providing services
Total Revenue recognised over time
103,058,662
120,292,034
38,682,200
15,061,354
3,382,834
-
15,053,426
15,125,671
243,941
1,094,170
160,421,063
151,573,229
Revenue in relation to a contract earned on milestones basis has been adjusted for variable elements. During 2019 and
2020 revenue was constrained in relation to potential late deliveries on a major foreign contract, some of which were
applied and recognised in the first half of the year. During the later half of the year the variable revenue was assessed
as not being constrained and there was a cumulative positive catch-up adjustment to revenue and the contract asset
(refer to Note (6)).
Revenue recognition is discussed at Note 1(f).
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 ‑ Providing services
Total revenue recognised at a point in time
7,132,337
2,830,490
865,564
480,640
36,940,916
19,422,937
5,833,698
1,137,070
1,570,973
4,304,097
51,909,585
28,609,137
Total revenue
212,330,648
180,182,366
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2. Loss from ordinary activities (cont)
(b) Other income
Interest:
Bank deposits
Other
Jobkeeper
Grant income
Other
Total other income
(c) Expenses
(Loss) before income tax has been arrived at after charging following expenses:
Employee benefits expense:
Share based payments (equity settled)
Contributions to defined contribution superannuation plans
Other employee benefits
Total employee benefits expense
Interest expense
Interest expense on right of use assets
Interest on secured borrowings
Interest on discounting of the contract asset
Total interest expense
Other finance costs
Amortisation of intangibles
Impairment of capital work in progress
Depreciation and amortisation of property, plant and equipment
Depreciation on right of use assets
Foreign exchange gains/(losses)
Consolidated
31 December
2021
$
31 December
2020
$
30,276
425,949
-
133,299
385,637
557,375
114,215
5,773,350
3,314,081
326,093
975,161
10,085,114
1,810,378
4,749,710
1,206,812
3,573,509
62,642,465
48,431,436
69,202,553
53,211,757
1,187,502
1,036,376
975,465
750,123
-
400,099
2,913,090
1,436,475
3,701,925
2,823,476
1,789,867
3,954,048
4,984,755
2,844,712
2,346,628
-
3,045,714
4,165,264
9,797,241
(15,682,452)
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3. Earnings per share
Basic EPS
Diluted EPS
Basic (Loss)/ Profit per Share
Consolidated
31 December
2021
$
31 December
2020
$
(9.97 cents)
(19.52 cents)
(9.97 cents)
(19.52 cents)
(Loss) (a)
(13,841,610)
(25,207,896)
2021
No.
2020
No.
Weighted average number of ordinary shares used in the calculation of basic
earnings per share and diluted earnings per share (b), (c)
138,876,922
129,164,714
(a) The loss used in the calculation of basic earnings per share is the same as the net loss in the statement of profit or
loss and other comprehensive income.
(b) The 1,830,000 unlisted options outstanding are not considered dilutive as all the conditions of exercise have not
been met at the reporting date and given the consolidated entity made a loss in the year.
(c) The 2,270,000 ordinary shares issued on 19 May 2020 at a price of $4.75 each, the 2,500,000 ordinary shares issued
on 29 May 2020 at $4.92 each, the 860,000 ordinary shares issued on 10 August 2020 at $5.62 each, the 150,000
ordinary shares issued on 14 October 2020 at $5.47 each, the 1,185,000 ordinary shares issued on 15 March 2021
at $5.27 each and the 150,000 ordinary shares issued on 31 May 2021 at $4.06 each, 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 options are not considered dilutive given the consolidated entity made a loss
in the year.
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Consolidated
31 December
2021
$
31 December
2020
$
4. Income tax
Corporation income tax
Current year expense/(benefit)
9,230,936
(4,693,154)
(a) The prima facie income tax expense on pre‑tax accounting (loss)/
profit from operations reconciles to the income tax expense in the
financial statements as follows:
(Loss) from operations
(4,610,674)
(29,901,050)
Income tax (benefit) calculated at 30%
(1,383,202)
(8,970,315)
Effect of different tax rates of subsidiaries operating in other jurisdictions
Share based payments
Amortisation of intangible assets in other jurisdictions
Other non‑deductible/non assessable items
Adjustment in respect of prior years
Unused Australian tax losses and tax offsets now brought to account
Unused tax losses and tax offsets not recognised as deferred tax assets
Income tax expense/(benefit) attributable to Operating (Loss)/ Profit
2,065,568
543,113
368,083
452,919
362,044
225,028
(2,065,152)
(452,101)
(471,590)
(8,382,425)
238,624
(290,547)
(99,651)
(1,899,306)
9,563,553
9,230,936
5,879,124
(4,693,154)
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. Tax rates in
the USA apply at a Federal, State and local level and can vary depending upon location. The tax rates applicable to the
consolidated entity’s USA operations haves been assumed to approximate a combined rate 40%. There has been no
change in the corporate tax rate when compared with the previous reporting period.
(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.
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4. Income tax (cont)
The following are the major deferred tax liabilities and assets recognised by the consolidated entity and movements
thereon during the current and prior period.
Charge/
(credit) to
profit and loss
$
2020
$
Recognised
in other
Comprehensive
income
$
Deferred tax assets
Accruals
Business capital expenditure deductible
over five years
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
Contract asset
Income tax losses
Foreign exchange gain arising from
tax fair value adjustment
Deferred tax liabilities
Prepaid insurance
Right of use assets
Property plant and equipment
Other
Acquired intangible assets
440,995
(198,421)
2,459,479
1,868,334
1,192,064
37,768
75,000
29,206
151,038
(756,693)
505,667
253,724
(37,768)
‑
132,835
179,572
3,677,947
(1,750,566)
85,765
44,382
280,270
(44,382)
6,083,264
(5,727,803)
16,145,242
(7,163,565)
(117,681)
266,217
(1,073,531)
93,141
4,252
(5,844)
-
(183,017)
(3,877,583)
(4,802,578)
418,562
327,094
Total
11,342,664
(6,836,471)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2021
$
242,574
1,702,786
2,374,001
1,445,788
‑
75,000
162,041
330,610
1,927,381
366,035
-
355,461
8,981,677
(24,540)
270,469
(1,079,375)
(183,017)
(3,459,021)
(4,475,484)
4,506,193
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EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
Charge/
(credit) to
profit and loss
$
2019
$
Recognised
in other
Comprehensive
income
$
2020
$
512,970
(71,975)
-
440,995
(756,806)
1,951,463
1,264,822
1,420,466
1,022,273
40,282
75,000
6,186
102,067
2,703,992
-
447,868
169,791
(2,514)
-
23,020
48,971
973,955
85,765
233,537
(189,155)
106,473
7,488,068
5,976,791
6,705,711
(11,760)
(183,353)
277,977
65,672
-
(1,073,531)
(4,296,143)
(4,491,256)
418,560
(311,322)
2,459,479
1,868,334
1,192,064
37,768
75,000
29,206
151,038
3,677,947
85,765
44,382
6,083,264
-
-
-
-
-
-
-
-
-
-
1,951,463
16,145,242
-
-
-
-
-
266,217
(117,681)
(1,073,531)
(3,877,583)
(4,802,578)
4. Income tax (cont)
Deferred tax assets
Accruals
Business capital expenditure deductible
over five years
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
Contract asset
Income tax losses
Foreign exchange gain arising from tax fair
value adjustment
Deferred tax liabilities
Right of use assets
Prepaid insurance
Property plant and equipment
Acquired intangible assets
Total
2,996,812
6,394,389
1,951,463
11,342,664
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.
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4. Income tax (cont)
(c) Unrecognised deferred tax balances
The following deferred tax assets have not been brought to account as assets
Tax losses ‑ revenue
Temporary differences
(d) Franking account balance
Adjusted franking account balance
Tax consolidation
Consolidated
31 December
2021
$
31 December
2020
$
40,315,837
29,314,979
1,021,536
158,053
41,337,373
29,473,032
18,054,718
14,503,704
Relevance of tax consolidation to the consolidated entity
The company and some of its wholly owned Australian resident taxable 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 2021, there were formal tax funding and tax sharing arrangements within the Australian
tax‑consolidated or group.
5. Trade and other receivables
Current
Trade receivables
GST receivable
Employee receivables
Other debtors
Non-current
Trade receivables
22,391,113
34,343,138
930,883
181,010
30,139
702,664
764,999
-
23,533,145
35,810,801
-
2,063,782
The average debtor days on sales of goods is 50 days. No interest is charged on outstanding late receivables.
The consolidated entity measures the loss allowance for trade receivables at an amount equal to the lifetime expected
credit loss (ECL). The ECL on trade receivables are estimated using a provision matrix by reference to past known default
experience of the debtors and an analysis of the debtors’ current financial position, adjusted for factors that are specific
to the debtors. Based on this analysis, any ECLs on trade receivable balances at the end of the period are immaterial.
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).
There were no receivables written off during the year and no receivables balances as at the end of the period are subject
to enforcement activities.
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EOS Annual Report 2021 | Financial Statements
Consolidated
31 December
2021
$
31 December
2020
$
106,843,848
124,532,902
21,452,681
13,364,148
128,296,529
137,897,050
6. Contract asset
Unbilled revenue ‑ current
Unbilled revenue ‑ non‑current
The contract asset reflects amounts recognised in revenue on a milestone or a delivery basis in the defence, space,
and communications segments, but not yet billed to the customer. Timing differences between the satisfaction of
performance obligations and receipt of cash are expected to arise due to differences between the consolidated entity’s
revenue recognition policies (see Note 1(f)) and the terms of the underlying contracts. This is because contracts typically
bill on a milestone basis that may not necessarily reflect progress under the contract.
The consolidated entity measures the loss allowance for the contract asset at an amount equal to the lifetime expected
credit loss (ECL). The ECL on unbilled revenue is estimated using a provision matrix by reference to past known default
experience with customers and an analysis of customers’ current financial position, adjusted for factors that are specific
to the customers. There has been no change in the estimation techniques or significant assumptions made during the
current reporting period.
The directors have concluded that any ECL against the contract asset is immaterial. This judgement is based on the
nature of the counterparties involved, the payments received during the year, and continuing communications with the
clients regarding administration of the underlying contracts.
During 2019 and 2020 revenue was constrained in relation to potential late deliveries on a major foreign contract, some of
which were recognised in the first half of the year. Based on formal correspondence from the customer, positive operating
performance under the contract and payments received under the contract during the year, the Directors determined that
all remaining variable consideration withheld against this contract should be released, resulting in a cumulative catch-up
to revenue in the year (see Note 1(x)).
The movement in the contract asset during the financial year is set out below.
Opening balance
Invoicing during the financial year
Net revenue recognised during the year
Variable consideration previously constrained, now recognised
Impact of foreign exchange and other movements
Impact of discounting ‑ net
Closing balance
137,897,050
44,152,133
(99,259,341)
-
63,359,075
105,059,701
18,315,767
4,355,786
8,308,152
(15,384,686)
(324,174)
(285,884)
128,296,529
137,897,050
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7. Inventories
Raw materials ‑ at net realisable value and cost
Work in progress ‑ at cost
Finished goods ‑ at cost
Provision for obsolete stock
Consolidated
31 December
2021
$
31 December
2020
$
27,626,422
17,243,821
47,493,091
49,345,296
‑
(540,137)
796,516
(77,294)
74,579,376
67,308,339
8. Prepayments and other assets
Current Prepayments*
20,398,751
13,135,088
Non-current other assets
-
956,073
*These prepayments relate to prepayments made to suppliers for the delivery of component parts in relation to current orders.
9. Remuneration of auditors
(a) Deloitte and related network firms*
Audit or review of the financial reports
- Consolidated entity
Other services
‑ Tax consulting services
(b) Other Auditor and their related network firms
Audit or review of the financial reports
Other services
‑ Taxation services
* The auditor of Electro Optic Systems Holdings Limited is Deloitte Touche Tohmatsu.
447,728
426,799
57,750
505,478
21,000
447,799
15,000
15,279
3,963
18,963
4,228
19,507
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EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
10. Loan to associate
Unsecured convertible note to associate ‑ AEI Air (Holdings) Limited
Consolidated
31 December
2021
$
31 December
2020
$
2,513,380
2,391,940
On 23 April 2019 the consolidated entity entered into an Unsecured Convertible Note deed with a supplier, AEI Air
(Holdings) Limited (”AEI”). See Note 30 for details of AEI.
The terms of the deed require AEI to issue to the consolidated entity up to five convertible notes, subject to certain
conditions, of which $2,780,265 (GBP1,500,000) has been paid, representing only four convertible notes. All five notes
could be converted, in aggregate, into such number of shares which represents 51% of the issued share capital of the AEI
at the date of conversion. Following payment of the first note the consolidated entity appointed two out of five directors
of AEI 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 the date of issue of the first note
above ‑ 23 April 2019), and on redemption AEI must repay the face value of the notes to the consolidated entity. At the
date of this report the consolidated entity has not requested the additional notes to be issued or that any notes be
converted to equity.
On 23 April 2019 the consolidated entity also entered into a Put and Call Option deed with the shareholders of AEI. This
deed allows the consolidated entity to call the remaining 49% of the shareholding in AEI 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 drawdown 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 conditions required to enable the vendors to make any draw down of the loans under the agreement have not
been met. 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.
The nature of the arrangement with AEI is as an associate, as the nature of the consolidated entity’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 AEI should the consolidated entity exercise its Unsecured
Convertible Note to acquire 51% of AEI, 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.
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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 at the beginning of the year
Adjustment due to lease modification
Additions
Disposals
Net foreign exchange differences
Balance at the end of the year
Office equipment
Balance at the beginning of the year
Additions
Write-offs
Balance at the end of the year
Accumulated Depreciation/Amortisation/ Impairment
Office premises
Balance at the beginning of the year
Adjustment due to lease modification
Depreciation
Disposals
Net foreign exchange differences
Balance at the end of the year
Office equipment
Balance at the beginning of the year
Depreciation
Write-offs
Balance at the end of the year
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Consolidated
31 December
2021
$
31 December
2020
$
37,150,891
24,352,681
(9,384,256)
(5,377,819)
27,766,635
18,974,862
1,611,855
(777,219)
834,636
1,658,150
(490,371)
1,167,779
28,601,271
20,142,641
24,352,681
15,345,320
31,758
13,251,297
(835,275)
350,430
4,918,308
4,681,032
(42,292)
(549,687)
37,150,891
24,352,681
1,658,150
531,391
64,492
1,126,759
(110,787)
1,611,855
-
1,658,150
(5,377,819)
(1,805,748)
(4,188)
-
(4,636,359)
(3,784,728)
835,275
(201,165)
42,292
170,365
(9,384,256)
(5,377,819)
(490,371)
(348,396)
61,548
(109,835)
(380,536)
-
(777,219)
(490,371)
EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
12. Goodwill
Goodwill
The carrying amount of goodwill has been allocated to cash generating units
(“CGUs”) as follows:
Defence
Space
Communications
Consolidated
31 December
2021
$
31 December
2020
$
14,878,316
14,878,316
2,504,938
2,504,938
9,868,440
2,504,938
2,504,938
9,868,440
14,878,316
14,878,316
A description of each of the CGUs is outlined in Note 31.
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 the Defence CGU consists of projections for a five‑year period including a terminal value
calculation for the final year. The Space CGU and the Communications CGU are both expected to benefit from the
investment that the consolidated entity has made in SpaceLink, which is valued over a 15‑year period. The cash flow
forecasts for the Space CGU and the Communications CGU therefore consist of projections for a 15-year period, including
a terminal value calculation for the final year.
At 31 December 2021 the consolidated entity has assessed both internal and external indicators of impairment and did
not find any such indicators.
Key assumptions
The key assumptions in the impairment model are:
Assumption
Basis of Assumption
Sales opportunities pipeline
Discount rate
Long-term growth rate
Sales opportunities are risk weighted for the combined probability of a given project
going ahead and the likelihood that the consolidated entity is successful in achieving
the anticipated role in that project.
Takes into account the risk‑free rate, equity market risk and the specific risk premium
for each CGU. Discount rates are therefore determined separately for each CGU, based
on each CGU’s individual circumstances.
Represents the rate relevant to market conditions and business plans. The long‑term
growth rate included in the terminal value in calculating the fair value less costs of
disposal for each CGU was 2.5%.
The discount rates used in calculating the fair value less costs of disposal for each CGU are given below.
Defence
Space
Communications
12.8%
18.0%
14.4%
12.3%
18.0%
14.5%
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12. Goodwill (cont)
Sensitivity analysis
The consolidated entity conducted a sensitivity analysis to test changes in the key assumptions used to determine the
recoverable amount for each of the CGUs to which goodwill is allocated.
The Directors believe that any reasonably possible change in the key assumptions would not cause the recoverable
amount of either the Space CGU or the Communications CGUs to fall below their respective carrying value. Sensitivity
testing for these CGUs included reducing the sales pipeline by 25%; reducing the long‑term growth rate to 0.5% and
increasing the discount rate by an additional 15%. In each case (and in combination) the recoverable amount of each CGU
exceeded its respective carrying amount.
Sensitivity testing for the Defence CGU included reducing the sales pipeline by 17%; reducing the long‑term growth rate
to 0.5%; and increasing the discount rate to 18%. In each case the recoverable amount of the Defence CGU exceeded
its carrying amount. Increasing the discount rate beyond 18% or reducing the future sales pipeline by more than 17%, or
both in combination, would remove the headroom in the recoverable amount of the Defence CGU. The Directors do not
consider movements beyond these level to be a reasonably possible change.
13. Intangible assets
Core
technology
(not patented)
$
Patented
technology
$
Software
$
Customer
contracts
and
relationships
$
Licences
$
Total
$
Cost
At 1 January 2020
10,772,000
3,556,000
486,000
2,776,000
‑
17,590,000
Additions
Exchange differences
-
-
‑
‑
‑
‑
‑
‑
4,781,742
4,781,742
52,757
52,757
At 31 December 2020
10,772,000
3,556,000
486,000
2,776,000
4,834,499
22,424,499
Exchange differences
-
‑
‑
‑
241,162
241,162
At 31 December 2021
10,772,000
3,556,000
486,000
2,776,000
5,075,661
22,665,661
Amortisation
At 1 January 2020
Charge for the year
At 31 December 2020
Exchange differences
Charge for the year
At 31 December 2021
Carrying Amount
239,050
1,077,200
1,316,250
52,609
237,067
289,676
21,570
97,200
118,770
41,070
185,067
226,137
‑
354,299
750,094
2,346,628
750,094
2,700,927
‑
‑
‑
‑
32,079
32,079
1,077,200
2,393,450
237,067
526,743
97,200
215,970
185,067
411,204
1,226,942
2,823,476
2,009,115
5,556,482
At 31 December 2021
8,378,550
3,029,257
270,030
2,364,796
3,066,546
17,109,179
At 31 December 2020
9,455,750
3,266,324
367,230
2,549,863
4,084,405
19,723,572
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EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
Consolidated
31 December
2021
$
31 December
2020
$
17,373,314
(8,996,673)
8,376,641
14,546,429
(7,237,683)
7,308,746
4,730,224
3,774,960
(2,811,703)
(1,938,813)
1,918,521
1,836,147
1,318,005
(433,666)
884,339
1,300,250
(310,956)
989,294
2,440,399
2,260,998
(1,680,437)
(1,322,428)
759,962
938,570
609,984
(284,263)
325,721
1,588,015
(962,354)
625,661
523,195
(172,455)
350,740
1,353,760
(549,613)
804,147
2,736,081
2,578,086
(2,056,041)
(1,760,383)
680,040
817,703
7,000,000
7,000,000
(7,000,000)
(7,000,000)
-
-
44,297,472
(1,789,867)
42,507,605
16,080,171
-
16,080,171
14. Property, plant and equipment
(a) Plant and equipment ‑ at cost
Less accumulated depreciation and impairment
(b) Office equipment ‑ at cost
Less accumulated depreciation and impairment
(c) Furniture, fixtures and fittings ‑ at cost
Less accumulated depreciation and impairment
(d) Leasehold improvements ‑ at cost
Less accumulated depreciation and impairment
(e) Motor vehicle ‑at cost
Less accumulated depreciation and impairment
(f) Computer software ‑ at cost
Less accumulated depreciation
(g) Test equipment ‑ at cost
Less accumulated depreciation
(h) Satellite ‑ at cost
Less impairment
(i) Capital works in progress
Less impairment
Total net book value of Property, Plant and Equipment
56,078,490
29,125,518
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EOS Annual Report 2021 | Financial Statements
14. Property, plant and equipment (cont)
Cost
Plant and equipment
Balance at beginning of year
Additions
Transfers
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Office equipment
Balance at beginning of year
Additions
Transfers
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Furniture, fixtures and fittings
Balance at beginning of year
Additions
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Leasehold improvements
Balance at beginning of year
Additions
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Motor vehicles
Balance at beginning of year
Additions
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
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Consolidated
31 December
2021
$
31 December
2020
$
14,546,429
12,051,766
562,318
2,035,632
(34,908)
263,843
5,538,539
88,815
(3,116,301)
(16,390)
17,373,314
14,546,429
3,774,960
865,764
-
(13,990)
103,490
4,730,224
1,300,250
17,614
-
141
1,318,005
2,260,998
309,371
(132,776)
2,806
2,440,399
523,195
81,547
-
5,242
609,984
5,879,604
1,072,109
(88,816)
(3,043,055)
(44,882)
3,774,960
1,711,437
197,570
(601,681)
(7,076)
1,300,250
2,025,460
762,090
(483,229)
(43,323)
2,260,998
370,810
194,751
(30,332)
(12,034)
523,195
EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
Consolidated
31 December
2021
$
31 December
2020
$
1,353,760
252,557
(135,474)
113,737
3,435
1,588,015
2,578,086
157,995
-
2,736,081
436,726
1,038,800
(114,654)
-
(7,112)
1,353,760
2,790,535
193,286
(405,735)
2,578,086
7,000,000
7,000,000
7,000,000
7,000,000
16,080,171
30,756,873
(2,035,632)
(707,627)
(109,551)
313,238
-
16,080,171
-
-
-
-
44,297,472
16,080,171
14. Property, plant and equipment (cont)
Cost (cont)
Computer software
Balance at beginning of the year
Additions
Disposals and write offs
Other movements
Net foreign currency exchange differences
Balance at end of year
Test equipment ‑ at cost
Balance at beginning of the year
Additions
Disposals and write offs
Balance at end of year
Satellite
Balance at beginning of year
Balance at end of year
Capital works in progress
Balance at the beginning of the year
Additions
Transfer
Reallocation to cost of sales
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
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EOS Annual Report 2021 | Financial Statements
14. Property, plant and equipment (cont)
Accumulated depreciation/impairment
Plant and equipment
Balance at beginning of year
Depreciation
Disposals and write offs
Other movements
Net foreign currency exchange differences
Balance at end of year
Leased plant and equipment
Balance at beginning of year
Disposals and write offs
Balance at end of year
Office equipment
Balance at beginning of year
Depreciation
Other movements
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Furniture, fixtures and fittings
Balance at beginning of year
Depreciation
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Leasehold improvements
Balance at beginning of year
Depreciation
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
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Electro Optic Systems Holdings Limited and Consolidated Entities
Consolidated
31 December
2021
$
31 December
2020
$
(7,237,683)
(1,594,668)
-
12,149
(176,471)
(8,751,221)
(1,067,045)
3,116,301
(544,998)
9,280
(8,996,673)
(7,237,683)
-
-
-
(26,066)
26,066
-
(1,938,813)
(4,320,255)
(823,498)
-
4,131
(53,523)
(706,697)
22,487
3,043,044
22,608
(2,811,703)
(1,938,813)
(310,956)
(122,230)
-
(480)
(803,502)
(114,912)
601,681
5,777
(433,666)
(310,956)
(1,322,428)
(1,362,124)
(479,910)
(472,101)
126,482
(4,581)
483,228
28,569
(1,680,437)
(1,322,428)
EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
Consolidated
31 December
2021
$
31 December
2020
$
(172,455)
(108,227)
-
(3,581)
(284,263)
(549,613)
(529,857)
126,558
(7,568)
(1,875)
(86,764)
(112,469)
17,204
9,574
(172,455)
(152,441)
(328,656)
21,772
(92,222)
1,934
(962,355)
(549,613)
(1,760,383)
(1,728,522)
(295,658)
-
-
(243,834)
211,854
119
(2,056,041)
(1,760,383)
(7,000,000)
(7,000,000)
(7,000,000)
(7,000,000)
-
(1,789,867)
(1,789,867)
-
-
-
14. Property, plant and equipment (cont)
Accumulated depreciation/impairment (cont)
Motor vehicle
Balance at beginning of year
Depreciation
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Computer software
Balance at beginning of the year
Depreciation
Disposals and write offs
Other movements
Net foreign currency exchange differences
Balance at end of year
Test equipment
Balance at beginning of the year
Depreciation
Disposal
Net foreign currency exchange differences
Balance at end of year
Satellite
Balance at beginning of year
Balance at end of year
Capital work in progress
Balance at beginning of the year
Impairment
Balance at end of year
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 $1,789,867
impairment charge for the year in capital work in progress (2020: Nil).
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EOS Annual Report 2021 | Financial Statements
15. Current trade and other payables
Trade payables
Accruals
Contract liability
Consolidated
31 December
2021
$
31 December
2020
$
18,588,238
16,782,525
7,665,754
43,036,517
18,248,534
7,480,477
26,506,642
52,235,653
The average creditor days on purchases of goods is 60 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.
Contract liability represents amounts received from customers in advance of the satisfaction of relevant performance
obligations under the applicable contracts. The consolidated entity expects to deliver the goods and services in question
within the next 12 months, in accordance with the terms of the underlying contracts. The amount of $26,506,642 included
in contract liabilities at 31 December 2020 has been recognised in revenue in 2021 (2020: $2,386,503).
16. Secured borrowings
RNC Nominees Pty Ltd loan
34,448,384
-
On 27 August 2021 the consolidated entity entered into a $35 million working capital facility with RNC Nominees Pty Ltd.
The facility has a 12‑month term and carries interest of 9% per annum. The funds were drawn on 6 September 2021, with
repayment in full required on or before 5 September 2022. The loan is secured by a general security deed which ranks
pari passu with the Export Finance Australia facility (Note 33). Transaction costs of $811,739 were incurred in obtaining
the loan. These transaction costs are included in the carrying amount of the loan and are amortised over the loan period
using the effective interest method. Interest paid on the loan is disclosed at Note 2(c).
17. Lease liabilities
Analysed as follows:
Current
Non-current
Maturity analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Less: unearned interest
5,159,847
24,864,019
30,023,866
3,442,031
17,665,942
21,107,973
6,761,379
5,440,510
5,686,024
5,021,435
4,746,598
7,340,108
34,996,054
(4,972,188)
30,023,866
4,602,728
4,162,953
3,720,925
3,249,481
2,791,722
6,108,025
24,635,834
(3,527,861)
21,107,973
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 currency of the
country concerned.
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EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
18. Provisions
Current
Employee benefits
Decommissioning costs
Warranty (Note 19)
Non-current
Employee Benefits
Provision for make good
Warranty (Note 19)
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 make good of premises ‑ current
Balance as at 1 January
(Decreases)/Increases resulting from re‑measurement
Balance as at 31 December
Movement in make good of premises ‑ non‑current
Balance as at 1 January
Increase during the period from new lease
Balance as at 31 December
Movement in under‑utilised space
Balance as at 1 January
(Decreases)/Increases resulting from re‑measurement
Balance as at 31 December
Consolidated
31 December
2021
$
31 December
2020
$
12,339,463
10,473,192
250,000
250,000
1,589,001
4,375,882
14,178,464
15,099,074
1,360,419
1,052,870
4,835,602
7,248,891
919,353
503,457
7,883,942
9,306,752
250,000
250,000
250,000
250,000
-
-
-
503,457
549,413
1,052,870
43,919
(43,919)
-
296,302
207,155
503,457
-
-
-
212,715
(212,715)
-
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EOS Annual Report 2021 | Financial Statements
19. Warranty provisions
Movement in warranty provision
Balance as at 1 January
Reductions resulting from expiry
Reduction resulting from change in estimate
Additional provisions recognised
Balance as at 31 December
Current (Note 18)
Non-Current (Note 18)
Consolidated
31 December
2021
$
31 December
2020
$
12,259,824
9,013,305
(352,643)
(1,273,596)
(7,107,424)
-
1,624,846
4,520,115
6,424,603
12,259,824
1,589,001
4,375,882
4,835,602
7,883,942
The provision for warranty is determined based on Directors’ best estimate of the expenditure required to settle the
consolidated entity’s liability under its warranty undertakings for military products, satellite communication terminals
and telescopes.
The Directors made a critical judgement in relation to the valuation of the provision for warranty costs. The valuation is
determined based on the Directors’ best estimate of the expenditure required to settle the consolidated entity’s liability
under its warranty obligations.
During the year the Company reviewed the accumulated data regarding warranty claims on relevant sales to date, in
particular from a significant defence contract to a customer in a foreign jurisdiction for which the warranty period was
substantially complete. This review indicated that lower rates than those previously, particularly for sales of defence
materiel, were justified. Based on this review the Directors have accordingly determined that the rates used to estimate
warranty provisions should be adjusted.
Estimates and outcomes that have been applied in the assessing warranty provisions may change in the future and the
consolidated entity will recognise any revisions deemed necessary as a result.
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EOS Annual Report 2021 | Financial Statements
Consolidated
31 December
2021
$
31 December
2020
$
20. Issued capital
Balance at the beginning of the financial year ‑ Ordinary shares
413,479,003
274,311,590
Issue of 28,269,553 new shares at $4.75 on 20 April 2020 (net of issuance costs)
Issue of 2,451,463 new shares at $4.40 on 14 May 2020 under the
Share Purchase Plan
Loan repayments on 202,500 shares issued under the Loan Funded Share Plan at $2.99
-
-
-
127,775,501
10,786,437
605,475
Loan repayments on 83,125 shares issued under Loan Funded Share Plan at $2.99
248,544
-
Balance at the end of the financial year
413,727,547
413,479,003
Fully Paid Ordinary Shares
Number
Number
Balance at the beginning of financial year
Issue of new shares at $4.75 on 20 April 2020
Issue of new shares at $4.40 under the Share Purchase Plan on 14 May 2020
Issue of new shares at $4.75 under the Loan Funded Share Plan to staff on
19 May 2020
Issue of new shares at $5.92 under the Loan Funded Share Plan to Directors on
29 May 2020
Issue of new shares at $5.62 under the Loan Funded Share Plan to staff on
10 August 2020
Issue of new shares at $5.47 under the Loan Funded Share Plan to staff on
14 October 2020
149,579,229
113,078,213
-
-
-
-
-
-
28,269,553
2,451,463
2,270,000
2,500,000
860,000
150,000
-
-
Issue of 1,185,000 new shares at $5.27 on 15 March 2021 under the Loan Funded
Share Plan
Issue of 150,000 new shares at $4.06 on 31 May 2021 to a Director under the Loan
Funded Share Plan
1,185,000
150,000
Balance at end of financial year
150,914,229
149,579,229
Fully paid ordinary shares carry one vote per share and carry the right to dividends. The shares issued 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 for accounting purposes.
The loan repayments in respect of 83,125 shares issued under the Loan Funded Share Plan at $2.99 each made during
the year resulted in the increase in Issued Capital of $248,544 as these shares are treated as in substance options for
accounting purposes.
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EOS Annual Report 2021 | Financial Statements
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 both Company and individual
achievements against both qualitative and quantitative criteria.
On 28 June 2002, shareholders approved the adoption of an Employee Share Option Plan.
Unlisted Options issued under the Employee Share Option Plan:
2021
2020
Balance at the beginning of the financial year (i)
Granted during the year (ii)
Exercised during the year (iii)
Lapsed during the year (iv)
Weighted
average
exercise price
$
4.60
4.91
-
-
Number
1,075,000
755,000
-
-
Number
220,000
855,000
-
-
Balance at the end of the financial year (v)
1,830,000
4.73
1,075,000
Exercisable at the end of the year
110,000
2.99
82,500
Weighted
average
exercise price
$
2.99
5.02
-
-
4.60
2.99
110
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EOS Annual Report 2021 | Financial Statements
21. Directors and employees share option plan (cont)
(i) Balance at the beginning of the year
2021
Number
220,000
635,000
220,000
1,075,000
Grant date
Expiry date
Exercise Price
20/06/2018
31/03/2023
19/05/2020
18/05/2025
16/11/2020
16/11/2025
$2.99
$4.75
$5.82
Fair value at
grant date
$61,369
$408,305
$197,134
$666,808
2020
220,000
20/06/2018
31/03/2023
$2.99
$61,369
(ii) Granted during the year
2021
Staff options
Staff options
2020
Staff options
Staff options
475,000
280,000
755,000
635,000
220,000
855,000
15/03/2021
16/03/2026
22/07/2021
22/07/2026
19/05/2020
18/05/2025
16/11/2020
16/11/2025
(iii) Exercised during the year
There were no options exercised during the year (2020: nil).
(iv) Lapsed during the year
No Staff options lapsed during the year (2020: nil).
(v) Balance at the end of the financial year
2021
Staff options
Staff options
Staff options
Staff options
Staff options
2020
Staff options
Staff options
Staff options
220,000
220,000
635,000
475,000
280,000
1,830,000
220,000
635,000
220,000
1,075,000
20/06/2018
31/03/2023
16/11/2020
16/11/2025
19/05/2020
18/05/2025
15/03/2021
16/03/2026
22/07/2021
22/07/2026
16/11/2020
16/11/2025
19/05/2020
18/05/2025
20/06/2018
31/03/2023
$5.27
$4.31
$4.75
$5.82
$2.99
$5.82
$4.75
$5.27
$4.31
$5.82
$4.75
$2.99
$744,800
$202,160
$946,960
$408,305
$197,134
$605,439
$61,369
$197,134
$408,305
$744,800
$202,160
$1,613,768
$197,134
$408,305
$61,369
$666,808
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EOS Annual Report 2021 | Financial Statements
21. Directors and employees share option plan (cont)
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 inputs used in the model for these option grants are summarised in the table below:
Issue date
20/06/2018
19/05/2020
16/11/2020
15/03/2021
22/07/2021
Number of staff options
220,000
635,000
220,000
475,000
280,000
Dividend yield
Expected volatility (linearly
interpolated)
Risk free interest rate
-
-
-
-
-
30.00%
2.32%
40.00%
0.40%
40.00%
0.31%
45.00%
0.71%
45.00%
0.58%
Expected life of options
1,745 days *
1,789 days
1,825 days
1,827 days
1,826 days
Grant date share price
Exercise price
Fair value of options on grant date:
$2.91
$2.99
Tranche A (50% of options issued)
Tranche B (50% of options issued)
$0.2885
$0.2694
$4.98
$4.75
$0.557
$0.729
$6.07
$5.82
$0.773
$1.019
$5.37
$5.27
$1.370
$1.766
$4.16
$4.31
$0.494
$0.950
*These options commenced 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.
Staff options carry no rights to dividends and no voting rights.
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.
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EOS Annual Report 2021 | Financial Statements
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 participants (“Participants”) of the consolidated entity 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 (five 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 Shares are subject to both ‘Vesting Conditions’ and ‘Forfeiture Conditions’:
z The vesting conditions are split into two different tranches which are outlined in the tables below. Participants are
required to satisfy the Vesting Conditions in order for their Shares to vest.
z While Participants hold their Shares, they will be subject to Forfeiture Conditions and Participants 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 the consolidated entity in certain circumstances.
Once the Vesting Conditions have been satisfied, removed or lifted, the Shares vest and Participants 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) participants 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 Conditions have been met);
(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; and
(c) further vesting conditions may apply to individualised arrangements.
If the 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).
All the ordinary restricted fully paid shares issued have been 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.
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EOS Annual Report 2021 | Financial Statements
22. Loan funded share plan (cont)
The following tables summarise the loan funded shares issued to date:
2018 Loan funded shares:
Issue date
20 June 2018
(Shareholders approved the participation of directors in the LFSP at the Annual General
Meeting (AGM) held on 24 April 2018)
Shares issued
5,180,000
(4,000,000 shares issued to directors and KMP)
Fair Value at issue date
$1,444,963
Dividend yield
Expected volatility
(linearly interpolated)
-
30.00%
Risk free interest rate
2.32%
Expected life of options
1,745 days
Issue price
Grant date share price
$2.99
$2.91
Vesting conditions:
Tranche A: (applies to 50% of the total number of shares to be issued above)
Measures and hurdles:
1. EBIT of $5m for the 12 months ending 31 December 2018 (met); and
2. 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) (met)
Vested Shares can be sold after:
30‑Jun‑20: (25% of Vested Shares)
30‑Sep‑20: (50% of Vested Shares)
31‑Dec‑20: (75% of Vested Shares)
31‑Mar‑21: (100% of Vested Shares)
Other conditions and status:
i. Defence Systems profit exceeds A$8m for 2018 and A$20m for 2019 (met);
ii. Space Systems loss does not exceed A$3m for 2018 and A$2m for 2019 (met);
iii. Defence Systems production exceeds 275 units for 2018 and 350 units for 2019.
The production target for 2019 was originally 400 units, however, was varied by the
Board to 350 units in accordance with its discretion and has been met.
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EOS Annual Report 2021 | Financial Statements
22. Loan funded share plan (cont)
2018 Loan funded shares (continued):
Vesting conditions:
Tranche B: (applies to 50% of the total number of shares to be issued above)
Measures and hurdles
1. EBIT of $15m for the 12 months ending 31 December 2019; and
2. 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) *.
Vested Shares can be sold after:
30‑Jun‑22: (25% of Vested Shares)
30‑Sep‑22: (50% of Vested Shares)
31‑Dec‑22: (75% of Vested Shares)
31‑Mar‑23: (100% of Vested Shares)
Other conditions and status:
i. The original condition was that Defence Systems profit exceeds A$20m for 2020,
however this was removed by the Board in accordance with its discretion due
to COVID;
ii. Space Systems profit exceeds $1M for 2020 (met)and $3M for 2021 (not met **);
iii. Defence Systems production exceeds 272 units for 2020. The production target
for 2020 was originally 480 units, however was varied by the Board to 272 units in
accordance with its discretion due to COVID and has been met.
* EBIT hurdle for the 12 months ended 31 December 2019 and the share price hurdle of $7.50 by 31 December 2021 were both met.
** As the profit target for 2021 was not met, 117,500 shares issued to employees in Space Systems lapsed on 31 December 2021.
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22. Loan funded share plan (cont)
2020 Loan funded shares:
Issue date
Shares issued
Fair Value at issue date
Dividend yield
Expected volatility
(linearly interpolated)
Risk free interest rate
19 May 2020
29 May 2020
10 August 2020
14 October 2020
2,270,000*
$1,459,611
-
40.00%
0.31%
2,500,000**
$2,463,750
-
40.00%
0.34%
860,000***
$651,880
-
40.00%
0.34%
150,000
$125,925
-
40.00%
0.23%
Expected life of options
1,789 days
1,752 days
1,679 days
1,643 days
Issue price
Grant date share price
$4.75
$4.98
$4.92
$5.68
$5.62
$5.68
$5.47
$6.01
Vesting conditions:
Tranche A: (applies to 50% of the total number of shares to be issued above)
Measures and hurdles:
A share Price Hurdle of $9.50 by 31 December 2021 (this hurdle must be reached on at
least 30 trading days, not necessarily consecutive, by 31 December 2021****).
Vesting period:
The period of 2 calendar years ending 31 December 2021
Vested Shares can be sold after:
30‑Jun‑22: (25% of Vested Shares)
30‑Sep‑22:(50% of Vested Shares)
31‑Dec‑22: (75% of Vested Shares)
31‑Mar‑23: (100% of Vested Shares)
Other conditions and status:
i. Six staff members within EM Solutions must achieve an EBIT for EM Solutions of $3m
for the year ended 31 December 2020 (met);
ii. Eight senior executives including four KMP’s originally had EBIT target for the
consolidated entity of $27m for the year ended 31 December 2020, however this was
removed by the Board as a result of COVID;
iii. One executive in the Communications Systems sector has specific project milestones
in relation to his project; and
iv. Participants in the various sectors have to meet the additional hurdles established by
the directors in relation to each sector.
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EOS Annual Report 2021 | Financial Statements
22. Loan funded share plan (cont)
2020 Loan funded shares (cont)
Vesting conditions:
Tranche B: (applies to 50% of the total number of shares to be issued above)
Measures and hurdles:
A Share Price Hurdle of $11.50 by 31 December 2022 (this hurdle must be reached on at
least 30 trading days, not necessarily consecutive, by 31 December 2022 *****).
Vesting period:
The period of four calendar years ending 31 December 2023
Vested Shares can be sold after:
30‑Jun‑24: (25% of Vested Shares)
30‑Sep‑24:(50% of Vested Shares)
31‑Dec‑24: (75% of Vested Shares)
31‑Mar‑25: (100% of Vested Shares)
Other conditions and status:
i. Six staff members within EM Solutions must achieve an EBIT for EM Solutions Pty Ltd
of $3m for the year ended 31 December 2020 (met);
ii. Eight senior executives including four KMP’s have an EBIT target for the consolidated
entity of $36m for the year ended 31 December 2021 (not met ******);
iii. One executive in the Communications Systems sector has specific project milestones
in relation to his project; and
iv. Participants in the various sectors have to meet the additional hurdles established by
the directors in relation to each sector.
*580,000 shares issued to KMP.
**All shares issued to Directors following approval at the AGM held on 29 May 2020.
***830,000 shares issued to KMP.
**** This price hurdle date of 31 December 2021 was extended by three years by the Directors on 16 November 2021 for executives and staff.
As the price hurdle was not met, 1,250,000 shares issued to Directors lapsed on 31 December 2021.
***** This price hurdle date of 31 December 2022 was extended by three years by the Directors on 16 November 2021 for executives and staff.
******As the EBIT target for the consolidated entity was not met for 2021, 432,500 shares issued to executives lapsed on
31 December 2021.
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22. Loan funded share plan (cont)
2021 Loan funded shares:
Issue date
Shares issued
Fair Value at issue date
Dividend yield
Expected volatility (linearly interpolated)
Risk free interest rate
Expected life of options
Issue price
Grant date share price
15 March 2021
31 May 2021
1,185,000*
$2,602,880
-
45%
0.71%
150,000**
$114,750
-
45%
0.71%
1,827 days
1,491 days
$5.27
$5.37
$4.06
$4.10
Vesting conditions:
Tranche A: (applies to 50% of the total number of shares to be issued above)
Measures and hurdles:
A share Price Hurdle of $9.50 by 30 June 2023 (this hurdle must be reached on at least
30 trading days, not necessarily consecutive, by 30 June 2023***).
Vesting period:
The period ending 30 June 2023
Vested Shares can be sold after:
30‑Jun‑23: (25% of Vested Shares)
30‑Sep‑23: (50% of Vested Shares)
31‑Dec‑23: (75% of Vested Shares)
31‑Mar‑24: (100% of Vested Shares)
Other conditions and status:
i. Space Systems sector is EBIT positive in 2022
ii. Defence Systems sector is EBIT positive in 2022
iii. Participants in the various sectors have to meet the additional hurdles established by
the Directors in relation to each sector.
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22. Loan funded share plan (cont)
Tranche B: (applies to 50% of the total number of shares to be issued above)
Measures and hurdles:
A Share Price Hurdle of $11.50 by 30 June 2025 (this hurdle must be reached on at least
30 trading days, not necessarily consecutive, by 30 June 2025****).
Vesting period:
The period ending 30 June 2025
Vested Shares can be sold after:
30‑Jun‑25: (25% of Vested Shares)
30‑Sep‑25:(50% of Vested Shares)
31‑Dec‑25: (75% of Vested Shares)
31‑Mar‑26: (100% of Vested Shares)
Other conditions and status:
i. Space Systems sector is EBIT positive in 2024
ii. Defence Systems sector is EBIT positive in 2024
iii. Participants have to meet the additional hurdles established by the Directors in relation
to each sector.
*345,000 shares issued to KMP.
** All shares issued to a Director following approval at the AGM held on 28 May 2021.
*** This price hurdle date of 30 June 2023 was extended by three years by the Directors on 16 November 2021 for executives and staff.
**** This price hurdle date of 30 June 2025 was extended by three years by the Directors on 16 November 2021 for executives and staff.
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22. Loan funded share plan (cont)
Other features of the LFSP structure
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.
There may be circumstances where LFSP participants cease working for the consolidated entity prior to the vesting of
their LFSP shares and where participants cease working for the entity after the vesting of their LFSP shares but prior
to there being a right of sale of some or all of those vested shares. In either instance, on cessation of employment, the
Board has discretion to determine whether the Participant is a Bad Leaver, a Good Leaver or a Leaver and the following
provisions apply:
Bad Leaver. All Unvested Loan Funded Shares held by the Participant will be forfeited and any Vested Loan
Funded Shares will be disposed of or Bought-back, in each case in accordance with the buy-back rules of the
Scheme, if either:
z they remain subject to any Conditions or disposal restrictions;
z they remain held in trust (for any reason); or
z the Loan applicable to those Shares has not been repaid in full.
Good Leaver. Subject to the Board’s discretion to determine otherwise (including the discretion to permit some or all
Unvested Loan Funded Shares to vest based on its assessment of the circumstances in which the Participant has
ceased employment), Unvested Loan Funded Shares will vest pro rata to the proportion of the Vesting Period that
has elapsed as at the date on which employment ceases and having regard to the extent to which any Performance
Conditions have been achieved (as determined by the Board). The balance of Loan Funded Shares that do not vest
will be disposed of or Bought‑back, in each case in accordance with the buy‑back rules of the Scheme.
Leaver. Unvested Loan Funded Shares will normally be disposed of or Bought-back, in each case in accordance
with the buy‑back rules of the scheme, subject to the Board’s discretion to permit some or all of those Unvested
Loan Funded Shares to vest based on its assessment of the circumstances in which the Participant has ceased
employment.
A Good Leaver or Leaver may retain Vested Loan Funded Shares and may deal with any Vested Loan Funded Shares
subject to repaying the outstanding Loan balance by the earlier of its expiry date or the date which is three months from
the cessation date or twelve months in the case of a Participant who ceases employment due to death.
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EOS Annual Report 2021 | Financial Statements
Consolidated
31 December
2021
$
31 December
2020
$
(1,823,365)
(3,167,394)
13,390,414
11,580,036
11,567,049
8,412,642
(3,167,394)
(1,061,206)
1,344,029
(2,106,188)
(1,823,365)
(3,167,394)
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
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
11,580,036
10,373,224
1,810,378
1,206,812
13,390,414
11,580,036
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 (loss) attributable to members of the parent entity
Balance at end of financial year
(80,953,486)
(56,550,804)
(13,004,520)
(24,402,682)
(93,958,006)
(80,953,486)
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EOS Annual Report 2021 | Financial Statements
Consolidated
31 December
2021
$
31 December
2020
$
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 three 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
59,260,655
65,933,499
(b) Reconciliation of (loss) before income tax to net cash flows from
operating activities
(Loss) before income tax
(4,610,674)
(29,901,050)
Amortisation of intangibles
Equity settled share-based payments
Depreciation and amortisation of property, plant and equipment
Impairment of capital work in progress
Depreciation of right of use assets
Loss on sale of property, plant and equipment
Tax paid
Foreign exchange movements
(Increase)/decrease in assets
Receivables and contract assets
Inventories
Other assets and prepayments
Increase/(decrease) in liabilities
Provisions
Trade and other payables
Deferred income
Net cash inflows / (outflows) from operating activities
2,823,476
1,810,378
3,954,048
1,789,867
4,984,755
8,917
2,346,628
1,206,812
3,045,714
-
4,165,264
299,900
(2,627,129)
(11,968,689)
(1,544,254)
(41,369)
23,941,960
(92,507,500)
(7,271,037)
(13,817,166)
(6,047,467)
7,736,949
(3,660,661)
5,009,540
5,510,163
(8,854,489)
(18,840,888)
24,120,139
221,454
(109,159,317)
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EOS Annual Report 2021 | Financial Statements
Consolidated
31 December
2021
$
31 December
2020
$
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:
Short term benefits
Post‑employment benefits
Share based payments
Long term benefits
(c) Transactions with other related parties
Other related parties include:
z the parent entity;
z associates;
z joint venture partners; and
z subsidiaries.
3,456,275
3,318,555
278,380
998,815
303,805
250,197
838,886
177,631
5,037,275
4,585,269
The consolidated entity did not enter into any transactions with other related parties outside of the ordinary course
of business.
(d) Other transactions with key management personnel or director related entities
During the year, the Company paid a total of $105,000 (2020: $140,000) 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 $29,166 (2020: $70,000) 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 $70,000 (2020: $70,000) 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 $17,500 (2020: $nil) to Technology Innovation Partners Pty Ltd, a company associated
with Ms Kate Lundy in respect of directors’ fees and superannuation for Kate Lundy.
During the year, the Company paid $90,000 (2020: $216,000) 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 $18,970 (2020: $31,775) 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.
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EOS Annual Report 2021 | Financial Statements
27. Controlled entities
Name of Entity
Parent Entity
Country of
Incorporation
December
2021
%
December
2020
%
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 Communications Systems Pty Ltd (ii)
EM Solutions Pty Ltd (ii), (iii)
EOS Loan Plan Pty Ltd (iv)
Australian Missile Alliance Pty Ltd (v)
EOS Optical Technologies Ltd (vi)
EOS Space Spectrum LLC
Spacelink Corporation
EOS USA, Inc. (Inc in Nevada)
EOS Technologies, Inc. (Inc in Arizona)
EOS Defense Systems, Inc (Inc in Arizona)
EOS Defense Systems USA Inc (Inc in Alabama)
EOS Advanced Technologies LLC (vii)
EOS Optronics GmbH
EOS Defense Systems Pte Limited
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
USA
USA
USA
USA
USA
USA
UAE
Germany
Singapore
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
49
100
100
100
100
100
100
100
100
100
-
-
-
100
100
100
100
100
100
49
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 6 April 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.
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EOS Annual Report 2021 | Financial Statements
27. Controlled entities (cont)
(iv) EOS Loan Plan Pty Ltd is the trustee of the Loan Funded Share Plan. EOS Loan Plan Pty Ltd was incorporated
on 5 December 2019. Electro Optic Systems Holdings Limited has the ability to direct the relevant activities of
the entity.
(v) On 2 June 2021, Australian Missile Alliance Pty Ltd was incorporated in Australia with the consolidated entity
owning 100% of the issued share capital.
(vi) On 25 November 2021, EOS Optical Technologies Ltd was incorporated in New Zealand with the consolidated
entity owning 100% of the issued share capital.
(vii) 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.
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.
(a) 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 and other income
Changes in inventories of work in progress and finished goods
Raw materials and consumables used
Employee benefits expense
Administration expenses
Amortisation of intangibles
Interest paid on right of use assets
Interest on secured borrowings
Interest on discounting of the contract asset
Depreciation and amortisation of property, plant and equipment
Depreciation of right of use assets
Loss on sale of fixed assets
Foreign exchange gains/(losses)
Occupancy costs
Provision for loss on loans to subsidiaries
Other expenses
Consolidated
31 December
2021
$
31 December
2020
$
206,175,693
184,789,288
4,568,559
(36,809,495)
(106,640,032)
(79,358,918)
(41,029,474)
(35,395,800)
(27,636,751)
(16,336,737)
(1,596,533)
(1,006,379)
(975,465)
(750,123)
(2,286,740)
(3,034,938)
(8,917)
(1,596,533)
(1,199,353)
-
-
(2,109,304)
(2,626,573)
(299,900)
9,907,679
(21,809,465)
(1,194,909)
-
(1,831,052)
(1,176,656)
(9,156,651)
(2,010,713)
Profit/(Loss) before income tax
32,660,618
(25,096,810)
Income tax (expense)/ benefit
(9,230,936)
4,693,154
Profit/(Loss) for the year
23,429,682
(20,403,656)
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27. Controlled entities (cont)
(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 statement of financial position of the entities which are parties to the deed of cross guarantee:
Consolidated
31 December
2021
$
31 December
2020
$
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Current tax asset
Contract assets
Inventories
Other
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Contract asset
Loans to subsidiaries
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
48,813,906
63,385,562
21,299,620
35,438,666
195,928
-
106,539,102
124,464,309
69,080,037
60,943,278
17,125,196
11,482,807
263,053,789
295,714,622
-
2,063,782
21,244,607
13,364,149
83,724,407
25,219,459
-
956,073
4,506,193
11,342,664
22,557,678
13,102,140
2,513,380
2,391,940
20,490,035
16,553,740
14,878,316
14,878,316
14,042,634
15,639,168
27,203,231
19,363,984
211,160,481
134,875,415
474,214,270
430,590,037
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EOS Annual Report 2021 | Financial Statements
27. Controlled entities (cont)
(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)
Consolidated
31 December
2021
$
31 December
2020
$
CURRENT LIABILITIES
Trade and other payables
Current tax liabilities
Secured borrowings
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
TOTAL EQUITY
The consolidated 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/(loss) for the year
Balance at end of the year
28. Joint operations
33,360,521
49,492,514
-
36,736
34,448,384
-
2,582,286
2,043,059
11,733,803
13,716,579
82,124,994
65,288,888
6,828,535
15,341,106
19,070,444
9,258,350
25,898,979
24,599,456
108,023,973
89,888,344
366,190,297
340,701,693
413,727,547
413,479,003
13,390,414
11,580,036
(60,927,664)
(84,357,346)
366,190,297
340,701,693
(84,357,346)
(63,953,690)
22,429,682
(20,403,656)
(60,927,664)
(84,357,346)
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 earned from the operation. The operation is not yet active.
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29. Financial risk management objectives and policies
The consolidated entity’s principal financial instruments comprise receivables, payables, contract assets, borrowings,
finance leases, cash and short‑term deposits. These instruments expose the consolidated entity to a variety of risks that
it must manage including, market risk (such as 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 consolidated 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 exposed to interest rate risk that are not
designated in cash flow hedges:
Financial assets
Cash and cash equivalents
Security deposits
Consolidated
31 December
2021
$
31 December
2020
$
59,260,655
65,933,499
21,871,032
12,313,468
81,131,687
78,246,967
At balance date the consolidated entity had financial liabilities with a fixed rate of interest. These liabilities therefore do
not introduce an exposure to movement in interest rates.
Financial Liabilities
Borrowings
34,448,384
34,448,384
-
-
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 2021, 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)
‑0.1% (10 basis points)
Post Tax (Loss)
Higher/(Lower)
Equity
Higher/(Lower)
2021
$
2020
$
2021
$
2020
$
567,922
(56,792)
547,729
(54,773)
567,922
(56,792)
547,729
(54,773)
The movements in profits are due to lower interest rates on cash balances.
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EOS Annual Report 2021 | Financial Statements
29. Financial risk management objectives and policies (cont)
(b) Foreign currency risk
The consolidated entity’s financial results can be significantly affected 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 2021, the consolidated entity had the following exposure to US$ foreign currency:
Financial assets
Cash and cash equivalents
Security deposits
Contract asset
Trade and other receivables
Financial liabilities
Lease liabilities
Trade and other payables
Consolidated
31 December
2021
$
31 December
2020
$
41,183,065
6,905,482
26,925,341
15,777,649
117,056,589
137,897,050
4,556,516
25,794,723
189,721,511
186,374,904
7,104,211
20,756,245
27,860,456
3,632,322
3,270,171
6,902,493
Net exposure
161,861,055
179,472,411
All US$ denominated financial instruments were translated to A$ at 31 December 2021 at the exchange rate of 0.7261
(2020: 0.7707).
At 31 December 2021 and 2020, 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)
2021
$
2020
$
2021
$
2020
$
(10,901,081)
(11,420,972)
(10,901,081)
(11,420,972)
6,311,152
6,612,141
6,311,152
6,612,141
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EOS Annual Report 2021 | Financial Statements
29. Financial risk management objectives and policies (cont)
At 31 December 2021, 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
Consolidated
31 December
2021
$
31 December
2020
$
1,024,911
1,469,650
2,494,561
320,748
1,081,129
1,401,877
138,926
61,972
200,268
83,566
91,485
175,051
Net exposure
1,092,684
25,217
All Singapore $ denominated financial instruments were translated to A$ at 31 December 2021 at the exchange rate of
1.0207 (2020: 1.0187).
At 31 December 2021 and 2020, 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)
2021
$
93,834
(23,263)
2020
$
(2,128)
569
2021
$
93,834
(23,263)
2020
$
(2,128)
569
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 directors do not consider that the net exposure to foreign currency transactions is
material after considering the effect of natural hedges.
(c) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in a financial loss to the
consolidated entity. The consolidated entity has adopted a policy of only dealing with creditworthy counterparties.
The credit risk on liquid funds is limited because the counterparties are banks with high credit‑ratings from international
credit agencies.
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EOS Annual Report 2021 | Financial Statements
29. Financial risk management objectives and policies (cont)
(d) Liquidity risk management
The consolidated entity or group’s approach to managing liquidity risk 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, which 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, continuously
monitoring forecast and actual cash flows and managing the 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
$
34,448,384
1-5 years
$
9%
-
-
8,449,530
10,138,708
16,782,525
6,146,264
7,324,987
12,207,759
-
-
Consolidated
2021
Borrowings
Trade payables and
accruals
2020
Trade payables and
accruals
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.
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29. Financial risk management objectives and policies (cont)
Consolidated
2021
Non-interest bearing
Cash and cash equivalent
Receivables
Contract asset
Weighted
average
effective
interest rate
%
-
-
-
Fixed interest rate instruments
0.04%
15,784,829
2020
Non-interest bearing
Cash and cash equivalent
Receivables
Contract asset
-
-
-
Less than
1 month
$
1-3 months
$
3 months to
1 year
$
1-5 years
$
43,475,826
-
-
16,867,521
5,458,791
64,801
-
-
-
-
106,843,848
22,093,130
-
-
76,128,176
5,458,791
106,908,649
22,093,130
5,771,383
-
-
-
17,171,569
3,903,270
13,268,299
2,063,782
-
-
-
-
124,532,902
13,650,032
-
-
Fixed interest rate instruments
0.08%
60,166,131
83,109,083
3,903,720
137,801,201
15,713,814
(e) Price risk
The consolidated entity’s exposure to commodity price risk is minimal. The consolidated entity does not make
investments in equity securities.
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EOS Annual Report 2021 | Financial Statements
29. Financial risk management objectives and policies (cont)
(f) Categories of financial assets and liabilities
Financial assets
Amortised cost
Cash and cash equivalents
Trade and other receivables
Contract asset
Security deposits
Loan to associate
Total at amortised cost
Current
Non-current
Financial liabilities
Interest bearing loans and borrowings
Secured borrowings
Lease liabilities
Total interest bearing loans and borrowings
Current
Non-current
Debt instruments at amortised cost
Trade and other payables
Provisions
Total debt instruments at amortised cost
Current
Non-current
(g) Commodity price risk
Consolidated
31 December
2021
$
31 December
2020
$
59,260,655
65,933,499
23,533,145
37,874,583
128,296,529
137,897,050
28,140,759
16,671,414
2,513,380
2,391,940
241,744,468
260,768,486
189,637,648
226,277,202
52,106,820
34,491,284
34,448,384
-
30,023,866
21,107,973
64,472,250
21,107,973
39,608,231
3,442,031
24,864,019
17,665,942
43,036,517
52,235,653
21,427,355
24,405,826
64,463,872
76,641,479
57,214,981
67,334,727
7,248,891
9,306,752
The consolidated entity’s exposure to commodity price risk is minimal. The consolidated entity does not make
investments in equity securities.
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EOS Annual Report 2021 | Financial Statements
30. 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).
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EOS Annual Report 2021 | Financial Statements
31. 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 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 Space Systems has a range of ground products available to support the burgeoning Australian and international
space markets. This includes significant investments into passive optical and laser sensing equipment at both its
Mt Stromlo and Learmonth sites, which ideally positions the company to be a major contributor to the next generation of
space tracking.
EOS also provides manufacturing and supply of various telescopes and dome enclosures for customers around the
world. EOS Space Systems astrometric products are the equipment of choice for providing reliable and high-quality
optical systems under demanding environmental conditions.
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
EOS specialises in innovative optical, microwave and on-the-move radio and satellite products that help to deliver high
speed, resilient and assured telecommunications anywhere in the world. Developments in EOS laser technology has
opened aligned markets in space optical communications and various high power laser applications. Several large
government programs are currently undergoing procurement activities in this area which have the opportunity to
transform the business.
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EOS Annual Report 2021 | Financial Statements
31. Segment information (cont)
Segment Revenues
Communications
Space
Defence
Total of all segments
Segment Results
Communications
Space
Defence
Total of all segments
Unallocated holding company costs
(Loss)/ Profit before income tax expense
Income tax benefit/ (expense)
(Loss) for the year
Consolidated
31 December
2021
$
31 December
2020
$
23,295,268
19,530,971
4,519,904
4,304,097
184,515,476
156,347,298
212,330,648
180,182,366
(21,183,809)
(2,518,270)
(3,887,734)
1,000,140
24,736,666
(24,824,330)
(334,877)
(26,342,460)
(4,275,797)
(3,558,590)
(4,610,674)
(29,901,050)
(9,230,936)
4,693,154
(13,841,610)
(25,207,896)
The revenue reported above represents revenue from external customers. During the period there were intersegment
sales of $1,795,263. 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 $133,889,632.
136
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EOS Annual Report 2021 | Financial Statements
31. Segment information (cont)
Segment Assets and Liabilities
Assets
Liabilities
31 December
2021
31 December
2020
31 December
2021
31 December
2020
$
$
$
$
Communications
60,571,113
32,432,251
29,326,721
13,836,505
Space
Defence
5,664,758
4,806,956
4,525,401
2,380,589
304,454,687
317,536,577
95,084,000
81,569,094
Total all segments
370,690,558
354,775,784
128,936,122
97,786,188
Unallocated cash and security deposit
87,401,414
82,604,913
-
-
Consolidated
458,091,972
437,380,697
128,936,122
97,786,188
Assets used jointly by reportable segments are allocated on the basis of the revenue earned by the individual
reportable segments.
Other Segment Information
Depreciation, impairment and
amortisation of segment assets
Acquisition of segment assets
31 December
2021
31 December
2020
31 December
2021
31 December
2020
$
$
$
$
Communications
Space
Defence
Total all segments
6,274,637
3,425,588
21,782,084
429,770
3,830,211
10,534,618
61,084
4,387,324
7,873,996
118,264
5,718,871
2,313,561
11,103,692
16,521,895
33,004,040
24,554,327
Unallocated management
Consolidated
3,017,528
13,552,146
1,683,610
9,557,606
-
-
33,004,040
24,554,327
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EOS Annual Report 2021 | Financial Statements
31. Segment information (cont)
Information on Geographical Segments
31 December 2021
Geographical Segments
Australasia
Middle East ‑ United Arab Emirates
Middle East ‑ other
North America
Europe
Total
31 December 2020
Geographical Segments
Australasia
Middle East ‑ United Arab Emirates
Middle East ‑ other
North America
Europe
Total
Revenue
from External
Customers
$
Segment
Assets*
$
Acquisition
of Segment
Assets
$
127,885,297
82,939,853
11,481,373
71,761,229
1,765,419
130,763
33,476
7,529,526
5,121,120
-
-
31,961,982
21,391,904
2
-
212,330,648
116,667,256
33,004,040
Revenue
from External
Customers
$
Segment
Assets*
$
Acquisition
of Segment
Assets
$
52,631,195
68,913,417
17,697,790
107,816,575
2,482,860
486,856
1,345,322
-
-
10,293,815
12,473,769
6,369,681
8,095,459
1
-
180,182,366
83,870,047
24,554,327
*Segment Assets reflects the requirements of AASB 8.33 (b) and reflect only non‑current assets other than financial instruments and
deferred tax assets.
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EOS Annual Report 2021 | Financial Statements
31 December
2021
$
31 December
2020
$
7,951,125
53,442,438
264,975,814
195,314,394
272,926,939
248,756,832
35,977,498
1,412,877
-
-
35,977,498
1,412,877
236,949,441
247,343,955
413,727,547
413,479,003
13,390,414
10,526,740
(190,168,520)
(176,661,788)
236,949,441
247,343,955
(13,506,732)
(31,789,014)
-
-
(13,506,732)
(31,789,014)
32. Parent entity disclosure
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
(Accumulated losses)
Total equity
Financial performance
(Loss) for the period
Other comprehensive income
Guarantees entered into by the parent entity in relation to the debts
of its subsidiaries
Guarantee provided under the deed of cross guarantee
108,706,167
89,888,344
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. On 28 November 2019,
EM Solutions Pty Limited entered into an Assumption Deed and became a party to the Deed of Cross Guarantee.
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EOS Annual Report 2021 | Financial Statements
33. 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 consolidated entity.
(b) The consolidated entity executed an offset agreement in relation to an overseas defence contract for an amount
of US$16,133,925 (A$22,219,579) secured by an offset bond for the full amount. The offset bond is guaranteed
by Export Finance Australia under a Bond Facility Agreement and is secured by a cash security deposit of
US$3,226,785 (A$4,443,916) and a fixed and floating charge over the assets of the consolidated entity.
(c) The consolidated entity maintains a performance bond for US$31,635,147 (A$43,567,801) in relation to an overseas
defence sector contract. The performance bond is guaranteed by Export Finance Australia under a Bond Facility
Agreement and is secured by a cash security deposit of US$12,654,055 (A$17,427,116) and a fixed and floating
charge over the assets of the consolidated entity.
(d) The consolidated entity maintains a performance bond for US$3,670,000 (A$5,054,310) in relation to a spectrum
licence granted by the US Federal Communications Commision (FCC). This bond is established through a surety
bond with RLI Insurance Company, fully secured by a cash security deposit.
(e) 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.
(f) 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 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 holds no direct equity in AEI Air (Holdings) Limited at the date of this report.
The consolidated entity maintains cash deposits with banks and financial institutions as security for various performance
and rental bonds. The detail of such cash deposits is as per below:
Offset bond for a defence contract
Performance bond for a defence contract
Performance bond for SpaceLink’s satellite launch
Rental bonds
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Consolidated
2021
$
2020
$
4,443,916
-
17,427,116
12,313,468
5,054,310
1,215,417
3,464,181
893,765
28,140,759
16,671,414
EOS Annual Report 2021 | Financial Statements and Notes
EOS Annual Report 2021 | Financial Statements
34. Subsequent events
On 23 February 2022 SpaceLink Corporation (‘SpaceLink’), a wholly owned subsidiary of the consolidated entity, executed
two agreements with OHB System AG (‘OHB’):
(a) A Deed of Agreement which finalised the amounts due to OHB under the Authority to Proceed contract which was
entered into between the parties on 15 October 2021 and ran to 14 December 2021.
An amount of US$3,000,000 (A$4,131,588) has been recorded as a liability in other payables as at
31 December 2021 representing the full and final settlement of all amounts due to OHB for that period.
The amount of US$3,000,000 (A$4,131,588) has also been recorded as an addition to capital work in progress as
at 31 December 2021, representing the value of the foreground IP and materials developed by or procured by OHB
using these funds and transferred to SpaceLink.
(b) A Heads of Agreement which sets out the contractual relationship between SpaceLink and OHB going forward
relating to the development of Block-1 of the SpaceLink Satellite Data Relay Constellation.
Under this Agreement SpaceLink has agreed to:
i. Pay OHB costs incurred by OHB between 1 January 2022 and 24 February 2022 with third party vendors in respect
of potential deliverables for inclusion in Block‑1 activity which has now been deferred. The amount payable is up to
US$7,000,000 in aggregate.
ii. Offer OHB an agreement to undertake Risk Management Activities in relation to Block‑1 over a 15‑month period
with such agreement to be on a cost-plus basis and initially funded by SpaceLink to US$5,000,000.
On 17 March 2022 EOS announced that it had engaged Greenhill & Co. as financial adviser to assist in undertaking
a strategic review, including ensuring all feasible funding options are explored and assessed in the context of the
broader range of strategic options for EOS. As at the date of this report no outcome from the strategic review has
been determined.
Apart from the above, the Directors are not aware of any significant subsequent events since the end of the financial
period and up to the date of this report.
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EOS Annual Report 2021 | Financial Statements
35. 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
18 Wormald Street
Symonston
ACT 2609
Australia
Tel: 02 6222 7900
Fax: 02 6299 7687
USA Operations Tucson
2122 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
456 Alexandra Road
Fragrance Empire Building
#21002 Singapore
Tel: +65 6304 3130
Principal Place of Business
18 Wormald Street
Symonston
ACT 2609
Australia
Tel: 02 6222 7900
Fax: 02 6299 7687
German Operations
Ulrichsberger Str. 17
D-94469 Deggendorf
Germany
Tel: +49 991 2892 1964
Fax: +49 991 3719 1884
USA Operations Virginia
8260 Greensboro Drive
Suite 503, McLean
VA 22102
United States
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
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EOS Annual Report 2021 | ASX Additional Information
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 28 March 2022 the following substantial shareholders were registered:
EOS Loan Plan Pty Ltd
Citicorp Nominees Pty Limited
VOTING RIGHTS
Ordinary Shares
Percentage of total Ordinary shares
12,009,375
8,690,548
7.96%
5.76%
At 25 March 2022 there were 18,881 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.
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EOS Annual Report 2021 | ASX Additional Information
DISTRIBUTION OF SHAREHOLDINGS
At 28 March 2022 the distribution of shareholdings were:
Range
1-1,000
1,001 ‑ 5,000
5,001 ‑ 10,000
10,001 ‑ 100,000
100,001 and over
Ordinary
Shareholders
10,386
5,816
1,372
1,177
130
18,881
Number of
Shares
4,434,889
14,420,337
10,313,201
30,988,608
90,757,194
Percentage
of Shares
2.94
9.56
6.83
20.53
60.14
150,914,229
100.00%
There were 2,493 ordinary shareholders with less than a marketable parcel.
There is no current on-market buy-back.
TWENTY LARGEST ORDINARY SHAREHOLDERS
At 28 March 2022 the 20 largest ordinary shareholders held 43.29% of the total issued fully paid quoted ordinary shares
of 150,914,229.
Rank
Shareholder
Fully Paid
Ordinary Shares
Percentage
of Total
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
EOS Loan Plan Pty Ltd
Citicorp Nominees Pty Limited
Washington H Soul Pattinson & Company
HSBC Custody Nominees (Australia) Limited
N & J Properties Pty Ltd
JP Morgan Nominees Australia Pty Limited
Brazil Farming Pty Ltd
Technology Transformations Pty Limited
UBSs Nominees Pty Ltd
CS Third Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
Buttonwood Nominees Pty Ltd
Capitol Enterprises Limited
A & D Wire Limited
Brispot Nominees Pty Ltd
Technology Investments Pty Ltd
Bundarra Trading Company Pty Ltd
Mr Peter Donald Bradley
KAM Superannuation Fund Pty Ltd
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12,009,375
8,690,548
7,225,946
5,202,995
4,348,530
3,763,482
2,832,129
2,758,662
2,594,603
2,242,531
2,100,785
1,860,910
1,780,570
1,550,000
1,457,276
1,301,090
1,216,477
1,005,173
700,000
693,000
7.96%
5.76%
4.79%
3.45%
2.88%
2.49%
1.88%
1.83%
1.72%
1.49%
1.39%
1.23%
1.18%
1.03%
0.97%
0.86%
0.81%
0.67%
0.46%
0.46%
65,334,082
43.29%
EOS Annual Report 2021 | Corporate Directory
CORPORATE DIRECTORY
Directors
Share Registry
Lt Gen Peter Leahy AC (Chairman)
Dr Ben Greene (Chief Executive Officer)
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Ms Deena Shiff
Company Secretary
Mr Morgan Bryant
Registered Office
18 Wormald Street
Symonston ACT 2609
Australia
Telephone +61 2 6222 7900
Email
Website www.eos‑aus.com
info@eos‑aus.com
ACN Number
092 708 364
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
Australia
GPO Box 7045
Sydney NSW 1115
Telephone 1300 855 080 or
613 9611 5711 outside Australia
Facsimile
1300 137 341
Auditors
Deloitte Touche Tohmatsu
8 Brindabella Circuit
Brindabella Business Park, ACT, 2609
GPO Box 823
Canberra, ACT, 2601
Australia
Electro Optic Systems Holdings Annual Report 2021
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