(All figures Australian dollars) ARLINGTON, Va., Sept. 12 /PRNewswire-FirstCall/ -- Metal Storm Limited today announced a half year loss in line with management expectations. The $5.9 million loss for the six months ended 30 June 2005 compared with a loss of $5.7 million in the previous corresponding period. Metal Storm Chief Executive Officer and Managing Director, David Smith, said the company made good progress during the half year in its drive towards commercialization of its electronically initiated ballistics technology. "Resources were applied to the scientific and engineering work required to transition the company's core technology from concept prototypes to product readiness," he said. Metal Storm's strategy is to deliver shareholder value in the shortest possible timeframe by commercializing its technology. The focus of commercialisation is on the 40mm Metal Storm weapons system. The half year result included a $1.4 million loss from Metal Storm's former US subsidiary, ProCam Machine LLC (ProCam), which was sold on 1 June 2005 (see note*). The sale of ProCam released valuable cash and management resources to further support the commercialization effort. Research and development (R&D) costs fell to $4.4 million from $5.2 million in the previous corresponding period despite an increased focus on future commercialization. The reduction in costs was mainly due to significant savings made on expenses such as travel and outside consultants. A tax benefit of $310,755 added to the improvement in R&D costs. Net assets declined to $10.3 million at 30 June 2005 from $16.2 million at 31 December 2004, mainly because of the half year loss. Closing cash including commercial bonds was $11.5 million at 30 June 2005, compared to $15.1 million at 31 December 2004. Mr Smith said the company continued to believe its financial resources were sufficient to sustain it until at least September 2006 even if commercial revenues are not achieved or further funds are not raised in that time frame. A number of milestones were achieved in the first half including the announcement in June of a $422,297 contract with Dragonfly Pictures to integrate Metal Storm's first flying demonstration of its technology on an Unmanned Aerial Vehicle (UAV). Milestones announced since 30 June 2005 include: Date Brief details 12 July 2005 Successful live firing of Area Denial Weapon System (ADWS) by a defence consortium including Australia's Defence Science and Technology Organisation (DSTO) and Metal Storm. The ADWS concept is based on networking of multi-barrel weapon pods containing electronically initiated 40mm Metal Storm projectiles, linked with sensors and a "man in the loop" fire control system. 21 July 2005 Boeing contract with Metal Storm to conduct a weapons study. It is an important starting point for what the company hopes will be a long-term and profitable association with Boeing. The work has been completed and Metal Storm is awaiting the outcome of the project evaluation. 18 August 2005 Potential contract with US Department of Energy. Proposed contract for up to $325,000 over one year for the research and development of a short range neutralisation projection system, using our 40mm technology. A result of these negotiations is expected in the next few weeks. 31 August 2005 Advanced Individual Combat Weapon (AICW) Demonstration Firings by a defence consortium, including DSTO and Metal Storm. This integrated weapon combined a Metal Storm 40mm grenade launcher with a standard 5.56mm Steyr assault rifle to demonstrate the capability of a fully integrated dual purpose weapon. The company is focused on discussions with a number of potential partners aimed at taking the AICW concept forward as a commercial project. 2 September 2005 Selection by US Army for Crowd Control Small Business Innovation Research (SBIR -Phase 11) contract negotiations. The project proposed funding amount is $950,000. The SBIR is about developing and testing 40mm Metal Storm less-than-lethal munitions for crowd control applications. If contract negotiations are successful, the winning of a Phase 11 SBIR will be a major step forward for Metal Storm, as it puts the company further along the path of its main goal of producing certified product for commercial sale. Notes: Metal Storm's Australian Stock Exchange trading code: MST Metal Storm's NASDAQ Small Cap ticker symbol: MTSX *ProCam Machine LLC (ProCam) ProCam recorded a $520,443 loss for the five months trading up to the sale of the business on 1 June 2005. The loss for the first six months of the previous financial year was $500,006. A further loss of $930,813 was recorded by Metal Storm on the sale of the business. http://www.metalstorm.com/ About Metal Storm Metal Storm Limited is a defense technology company engaged in the development of electronically initiated ballistics systems using its unique "stacked round" technology. The company is headquartered in Brisbane, Australia and incorporated in the US, with an office in Washington DC. The company has invented a ballistics technology that has no known conventional equivalent. Metal Storm is working with government agencies and departments, as well as industry, to develop a variety of systems utilizing the Metal Storm non-mechanical, electronically fired stacked ammunition system. Safe Harbor Certain statements made herein that use the words "estimate", "project", "intend", "expect", "believe" and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties which could cause the actual results, performance or achievements of the company to be materially different from those which may be expressed or implied by such statements, including, among others, risks or uncertainties associated with the development of the company's technology, the ability of the company to meet its financial requirements, the ability of the company to protect its proprietary technology, potential limitations on the company's technology, the market for the company's products, government regulation in Australia and the US, changes in tax and other laws, changes in competition and the loss of key personnel. For additional information regarding these and other risks and uncertainties associated with the company's business, reference is made to the company's reports filed from time to time with the Securities and Exchange Commission, including the company's Form 20-F. DATASOURCE: Metal Storm Limited CONTACT: Investor: Gregory Pettit, +1-212-885-0301, , Media: Stefan Anikewich, +1-212-885-0505, , both of Hill & Knowlton, for Metal Storm Limited Web site: http://www.metalstorm.com/

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