ELECTRO OPTIC SYSTEMS HOLDINGS LIMITED — Capital/Financing Update 2007

Aug 26, 2007

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Electro Optic Systems Holdings Limited

A.C.N. 092 708 364

Suite 2, Level 12, 75 Elizabeth Street, Sydney NSW 2000 Tel +61 2 9233 3915 Fax +61 2 9232 3411 http://www.eos-aus.com

27 August 2007

The Manager Company Announcements Office Australian Stock Exchange Limited Exchange Centre, 20 Bridge Street Sydney NSW 2000

U.S. Army Awards CROWS Production Order

The U.S. Army has awarded a contract to Kongsberg Defence and Aerospace AS [Norway] for the production of weapon systems for the U.S. Army’s CROWS (“Common Remotely Operated Weapon System”) program. ROI bid as prime contractor for the contract. EOS was a sub-contractor in the ROI bid.

ROI and EOS currently continue to produce CROWS under existing contracts with the U.S. Army. At this time it is not known whether the Army intends to move to a single provider for CROWS production in the long term, or if a policy of maintaining competition and industrial capability in the U.S. will be followed.

It is possible that certain administrative protests and legal actions against the award may be lodged by unsuccessful bidders. The outcome of any potential protest or legal action, and any implications for EOS, cannot be known at this time. EOS does not intend to lodge any protests or undertake any legal actions on its own behalf.

The loss of the CROWS contract is a disappointment for EOS and a setback to the U.S. component of its global strategy. However the Company’s position as a provider of remote weapon systems has never been stronger. This strength is based on EOS’ customers’ orders, technology, products, efficiency of execution and substantial working capital.

Customer Orders

EOS has been increasingly successful in marketing its military products world-wide. It now has a strong backlog of confirmed and funded military orders for future delivery. These orders are all based on tenders and proposals undertaken by EOS as a prime contractor with key strategic customers around the world.

Customers world-wide are generally impressed by the quality and costcompetitiveness of EOS’ products and by the fact that no competitor has ever matched them for performance in a side-by-side competitive shooting or operational comparison.

EOS is highly confident of executing new orders in the next 90 days such that the order backlog for customers outside the U.S. will be extended beyond $50 million.

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Within the U.S. the Company remains active in the existing CROWS program. ROI and EOS continue to produce CROWS systems under the UMR contract. Earlier in this month EOS received an order for US$8 million for CROWS spare parts.

Technology and Products

EOS has the most advanced range of technologies and products in the remotely operated weapons system sector and continues to develop new products which meet stringent customer requirements. For over a decade EOS has led the world in weapon systems technology across a wide range of applications and missions. Over the past three years this technology has been transformed with increasing efficiency and success into competitive products from the most advanced combat thermal sensor to the world’s lightest and fastest weapon system (Redback[TM] ). These advanced technologies and products underpin the Company’s growth expectations in the global marketplace.

Efficiency of Execution

The market for remote weapon systems is likely to exceed US$5 billion over the next 5 years. This market is highly segmented by type and configuration. Flexible, scalable and low cost production systems are required to meet global market requirements. The Company has a significant capacity for producing quality products at low cost as a direct result of substantial investments in equipment, training, supplier development, outsourcing, design improvement and data systems. The Company’s production facilities can now efficiently address different customers and market segments more cost effectively than any time in its history.

Working Capital

EOS currently has $21 million in cash and $9m in inventories. It considers this is sufficient working capital to fund all current orders for its military products, as well as new and larger orders expected in the near term.

The loss of the US CROWS program is a setback for EOS but the management team remains highly focused on bringing the global opportunity in remotely operated weapons systems to fruition.

Dr Ben Greene Chief Executive Officer

Further information:

Dr Ben Greene +61 2 6222 7901 www.eos-aus.com

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