Hi everyone,There are some really key things to take away from...

Hi everyone,

There are some really key things to take away from Q2 report:

1.Net Operating Cashflow position is drivenby aggressive decline in production (1.2b)

	Q2 2022	Q1 2022	Q4 2021	Q3 2021	Q2 2021
1	$8.62M	$22.77M	$43.84M	$21.02M	$29.36M

In the most recent quarter, EOS winded down production by a staggering-62% from last quarter and -70% same time last year. What’s key here is that the $3.48M operating cashflow surplus is at the direct costof company output. This will likely translate to weaker future earnings.

2.The performance bond exposures; in conjunctionwith secured cash deposit pledge continues to increase (7.6)

		Q2 2022	Q1 2022	Q4 2021	Q3 2021	Q2 2021
1	Bond Exposure	$73.18M	$67.33M	$69.46M	$69.94M	$63.64M
2	Cash Pledged	$30.02M	$27.62M	$21.87M	$22.02M	$21.15M

Over the past year, EOS has shown an inability to unlock security pledges from their cash at a pace that would meaningfully facilitate undisrupted cashflow. To be fair, we don’t know whether this is due to delays in validation testing from customers or whether EOS has insufficient cashflow or resources to rectify reported defects.

Either way, this accumulation of bond exposure coupled with unrealisable cash is a concern to how EOS is managing their post fulfilment activity.

3.The strategic review does not provide acoherent cashflow strategy in the mid to long term horizon

Q1 Activity statement noted 1 Estimated quarter of funding available (8.5). A screenshot below speaks to the mitigants moving forward:

What is especially alarming here is that the strategic review mentioned above took no part in mitigating this quarter’s cashflow position. In fact, it was due to a sharp halt to production/manufacturing costs and very likely, the unexpected capital raise of the $15M will likely tip next quarter’s cashflow into a marginal surplus.