We should get an update on this on Monday or Tuesday.
A) Covenants
In past releases to the market, Metal Storm has made clear the criticality of its satisfying certain covenants within the Convertible Note Holders Trust Deed by June 30, 2007.
The company has also previously advised that the two crucial covenants are the requirement to provide fully functional ammunition systems and prototypes of specified systems and to maintain a minimum cash balance of $AUD19.5M up to June 30, 2007.
The company now advises as follows:
1. The independent expert appointed by the Trustee has provided an initial summary report to the Trustee, verbatim:
"Metal Storm Testing - June 2007
On 18 June 2007 Metal Storm completed testing to demonstrate achievement of the Milestones required by the Trust Deed for which you are Trustee. Testing was undertaken at the Bukit Timah complex of Singapore Technologies Kinetics (STK) and included the following systems:
-- Ammunition systems -- integrated with STK
-- The Redback™ system -- Integrated with Electro Optical Systems
-- The 3GL system
The testing program followed the plan provided with my first report to you and agreed as a fair test of the Trust Deed Milestones.
The Metal Storm systems of ammunition, Redback™ and 3GL, performed as required to meet the plan standards in objective firing tests. In addition, Redback™ and 3GL were assessed as meeting the test standards in the areas subjective assessment.
In summary, the Metal Storm projects for ammunition Redback™ and 3GL are assessed as having achieved a "fully functional prototype" state of development and there are no apparent obstacles to them achieving full production standard.
My full report on the testing will follow as soon as possible.
Yours sincerely
Mike Hannan
Independent Expert"
2. The company presently has a cash at bank position of $AUD20.8M.
The covenant requires at least $AUD19.5M to be held. The Board expects net cash out flow to June 30 to be no more than $AUD150,000. Accordingly the Board anticipates this covenant will be met.
As a consequence of the above the Board is confident that all current requirements of the covenants within the Trust Deed will be met and exceeded by June 30, 2007.
