SpaceLink - a timeline

In 2020, EOS wins approval from the US Federal Communications Commission and the Committee on Foreign Investment, to take over Audacy’s license and assets (approximately $AUD10 million (about $6.76 U.S. dollars) and begin offering service from satellites in orbit by 2024. EOS also acquired EM Solutions, an Australian firm focused on microwave satellite communications - 99% of all space communications presently employs microwave technology, with existing sunk costs using this technology of around $1 trillion.

EOS announced plans in 2020 to "... spend approximately $1.2 billion Australian dollars (about $800 million at the time) to create the SpaceLink constellation."

On 13 October 2021, "SpaceLink has awarded OHB System AG [a German company with a close working relationship with EOS] a contract with an anticipated value of more than $300 million to manufacture four satellites for its commercial space data relay constellation.

OHB announced plans to invest $25 million investment in SpaceLink, making OHB “the cornerston investor in the initial round of financing for the project". Was this investment realised?

source and links within:
https://www.eoportal.org/satellite-missions/spacelink#development-status

It appears that multi-million dollar funding arrangements are or were locked-in and SpaceLink was on the road to reality.

So what's changed since 3 March 2022? Shareholders had a right to know ie full continous disclosure.

Well ....

In May 2022, with no hint of dire financial distress to come (eg unmanageable), EOS announced on 27 May ie the AGM presentation; the company is reporting a loss of around $AUD13.8 million. That is palatable, given the capitalisation of the company and EOS positive reporting on SpaceLink as having among others:-

1. Robust customer pipeline with ~200 customer opportunities and (10) customers committed;
2. Highly attractive financial profile with positive cash generation expected by (2024);
3. A defence business profitable and has strong momentum; and
4. US$280 million to develop SpaceLink, of which AUD$49 million of shareholders money had already been invested.

However, within a month, on 29 June 2022, EOS revised its loss to AUD$45 million (AUD$15 million relating to SpaceLink) - taking shareholders by surprise. As a sweetner, EOS stated "...to progress SpaceLink to the next key milestone and initial constellation revenue expected to be slightly more than US$500 million". There seems to be a revised revenue given the use of the word "slightly more". On what basis were all these projections costed - inked client subscriptions, contract sign-on's ... I don’t know?

Then in July 2022, EOS announced a AUD$17 million capital raising exercise that took shareholders and the market by surprise as evident by a plunging share price (SP) - below AUD$1.00 (5 July 2022). It isn't clear whether the institutional offer to raise approximately AUD$15 million was sussessful. I don't know?

Throughout July and August 2022, the SP was volatile - boucing between AUD$1.10'ish and AUD$0.70 (not including short trading).

While it is understandable for revenue to be delayed by contracted parties, supply chain and logistics issues etc, its not acceptable to be suspended from ASX trading for missing reporting deadlines. Then to be informed of a financial year loss of about AUD$100 million and revenue down 45% (in contrast to the AGM presentation three months prior) - plunging the SP to a 52 week low of around AUD$0.46'ish on 8 September 2022.

In the wake of EOS announcement it has been engaged in refinancing negotiations with parties, including ASX listed Saul Patterson who own around 6.5% of EOS. These negotiations are continuing until around 21/22 September 2022. It is hoped that Soul Patterson is conducting negotiations in good faith and asset stripping etc is off the table. It's in all intetests to see the company be successful.

New CEO and CFO
The skills, talents, expertise and knowledge of the company and sector by the new CEO Dr Andreas Schwer and CFO Mr Clive Cuthell is acknowledged, and are well equipped to turn the company around to profitable levels, lift SP and deliver products, services and processes to existing and new markets. The reporting lines are clear. It appears the company is carrying excess baggage and passengers!

Conclusions
A review of Investor Relations is warrented. It is failing retail shareholders by not informing them directly of critical developments. For example, it failed to engage shareholders of the Greenhill’s bankers review commencement in March 2022 - that it was "testing buyer appetite in the business, as part of a strategic review aimed at maximising value for shareholders." (Source: Australian Financial Review, 17 March 2022). Shareholders found this out and Greenhill’s review findings via external sources ie the internet. This is clearly a job for Investor Relations to directly engage with EOS's 18,000 loyal share holders.

The ASX in my humble opinion share in part some responsibility in not performing fully their role, function and duty as best they could particularly in terms of knowing EOS's financials, prior to its suspension from trading. Since May 2022, ESO has reported its financial position on numerous occasions. These have been uploaded on the ASX website - reporting loss of AUS$13.8 million in May, a revised loss of AUS$45 million in June (a big leap); and a capital raising exercise of AUS$17 million in July/August 2022 - ought to have sounded alarm bells.

Soul Patterson consider a statement that they are committed to the future growth and development of EOS. This may also stabilise SP.

EOS Board reassure investors that all cost mitigating and future financing options (including joint venture and merger arrangements) are on the table.

EOS Board members would do well by showing good faith to retail shareholders via on-market security buys.

SpaceLink is a unique opportunity for Australian businesses to play an essential role in new frontiers of innovation and discovery. These opportunities generally come once in a life time.

These are my own views. I own shares in EOS. If any information is incorrect, I sincerely apologise.