re: instos not selling, page-2

re: instos not selling PART C.

Comment: they did mention that the Australian/US Governments have recently put in place (the first ever) "joint security clearance" to enable EOS/Northrop and the US Air Force to work together. Northrop recently doubled its team to 16 working on the "project" with the view to having a document completed for funding by the end of the year. The Aust Government is also assisting the project and may fund part of the project (mainly for Australian base sites.) This "security clearance agreement" gives me some confidence in the project as why would two Governments including the US? sign off on such terms if the EOS technology had little to offer. Obviously something is in play here. EOS has spent more than $50 million on its space technology over the last 10 years.

When I asked Mark Ureda who sits on the EOS board as Northrop’s representative (and works for Northrop), he said he couldn't comment on future funding, yet said if you review the world press you will get an idea how much of a pressing concern space is becoming. Basically he was saying that with China etc increasing their funding activities in space, the US would have to do the same. When I pressed him on what sort of revenues space tracking could deliver, he basically said that as some of the space project would continue to be “classified” it was likely that EOS would be consolidated (by someone, not necessarily Northrop) once funded as it would be very hard for EOS to keep the market informed..

Pg 6 onwards will give you a feel for how many countries are setting up “space tracking networks” for both military and commercial reasons.
http://www.spacesecurity.org/BN-TheSpaceEnvironment.pdf
Other press articles written concerning EOS can be found at the following address:
http://www.eos-aus.com/?pid=4

Basically the announcement and subsequent reduction in revenue from $95 to $74 million for 2006 had the effect of making EOS forecast a loss of around $5 million verses a loss of around $1 million for the 2006 year. Most of this reduction in revenue will likely be just deferred until 2007 however. At the end of the year, this position will still leave EOS with around $13-14 million in cash, with the company expecting to be cash flow positive by 4th quarter 2006.