Electro Optic Systems Holdings Limited (ASX:EOS) Achieve Significant Developments in Remote Weapon System Business

Sydney, July 28, 2011 AEST (ABN Newswire) - Electro Optic Systems Holdings Limited (ASX:EOS) continues to expand its remote weapon systems business with increasing market success.

New Market Penetration

In June 2011 EOS executed agreements to supply remote weapon systems to a significant military customer which had not previously purchased remote weapon systems from any source.

The sale was achieved in open competition and after competitive firing trials in the foreign country, where the EOS product excelled. The program requirement is approximately 400 weapon systems over approximately 5 years, subject to annual budget appropriations. Delivery of this order will commence within 2011.

EOS expects the longer term requirements of this customer to be substantially in excess of this initial program requirement, and the current order places EOS and its' local partners in a strong position for future procurements.

This order represents a significant breakthrough for EOS, since the customer is a major military organisation not in the Australian region which has made its decision only after an exhaustive selection process open to all RWS providers globally.

EOS Incorporates in Singapore

In June 2011 EOS Defence Systems Pte Limited was established as a wholly-owned subsidiary of EOS in Singapore. Singapore is the 3rd country where EOS has established subsidiaries, after the US and Germany.

The Singapore subsidiary has three key objectives:

1. Serve as a marketing and customer liaison office for the ASEAN region, where EOS has current and potential customers;

2. Coordinate an expanding EOS supplier network in the region, enhancing EOS' ability to respond to production volume fluctuations through a coordinated supplier network; and

3. Establish depot spare parts and repair facilities in Singapore, leveraging excellent regional transport links to enhance EOS product support.

EOS Defence Systems Pte Limited is led by Mr Henry Heng, an aerospace industry specialist with over 20 years of industry experience in military systems. This subsidiary is already operational.

Executive Appointment

EOS has appointed Mark Bornholt AM to a senior executive position in its weapon system business to support expanding foreign customer requirements in the face of challenging local conditions in Australia.

Mr Bornholt will oversee EOS marketing, which will be re-organised with particular emphasis on closer coordination with EOS internal programs for expansion and improvement of its remote weapon systems family.

Mr Bornholt is a recently retired Australian Army Brigadier. His extensive military experience and relationship with key customers will facilitate the efficient allocation of EOS marketing and development resources.

Economic Conditions and Capacity

During 2011 EOS Australian operations are contending with an escalating exchange rate and a tight labour market, especially for skilled staff. Consequently EOS will expand its Australian operations at a slower rate than the expected growth in demand for remote weapon systems.

Expansion of Australian operations going forward will be focused on activities currently achieving the highest yield and with competitive advantages resistant to further exchange rate rises.

The EOS production facility in Tucson [USA] was substantially expanded and upgraded in 2010, and it will increase output to meet demand.

CROWS Developments

The US Army has recently released draft tender documents for the CROWS program. This is the penultimate pre-tender phase, and signifies that the Army is on schedule to release the formal tender to qualified bidders late in 2011.

EOS has teamed with Northrop Grumman Corporation for this opportunity and the team is actively positioning to provide a highly competitive response to any request for tender from Army.

Summary

The US Army CROWS program is currently on schedule for contract award in early 2012 and extensive preparations for this competition are in hand.

Independent of CROWS, the EOS remote weapon systems business continues to grow, with a significant new customer added and existing customers forecasting new orders.

EOS is taking prudent steps to expand and consolidate is regional business, and laying foundations for further expansion with key management appointments.

EOS contingency planning for the current economic conditions is in effect with pre-positioned capacity in the US able to meet demand.

Background

EOS has two main business divisions - military and space - where it develops, manufactures and sells highly sophisticated technology with a wide range of applications.

EOS remote weapon systems (RWS) are already in wide use with advanced military organisations globally. In brief, EOS remote weapon systems enable a weapon mounted atop a vehicle to be fired rapidly and highly accurately by a gunner safely inside the vehicle.

In its space division, EOS is a producer of telescopes and technology to support space surveillance, space situation awareness and space ablation. In space surveillance, EOS laser tracking technology can track orbiting objects - as small as 2 cm in size.

EOS has around 140 employees, based in Canberra Australia, Tucson Arizona, Singapore and Deggendorf in Germany. The company also has manufacturing centres in Queanbeyan and in Tucson, Arizona.

Contact

Ben Greene Ph: +61-414-365-658 http://www.eos-aus.com