Office of Naval Research Awards Contract to Metal Storm

ARLINGTON, VA (NASDAQ: MTSX) is pleased to announce that Metal Storm Incorporated (MSI) has been awarded a major contract worth almost $US1 million to progress the development of one of its weapon systems for the U.S. military.

MSI has been contracted by the Office of Naval Research (ONR) for the further development of a 12-gauge, Multi-shot Grenade Launcher. The Cost Plus Fixed Fee (CPFF) contract is valued at $US936,695. Work commences immediately with delivery scheduled in under 12 months.

The project will extend the work performed previously under a contract with the United States Marine Corps for a Multi-Shot Accessory Underbarrel Launcher (MAUL). The MAUL is a lightweight grenade launcher and shotgun attachment that fits under the barrel of a combat weapon such as the M-16 or M-4. It is capable of shooting 4 rounds from a single cartridge.

The MAUL was recently demonstrated before an audience of more than a hundred people at one of world's premier small arms events, the International Infantry and Joint Services Small Arms Symposium in Dallas, Texas.

Peter D. Faulkner, Metal Storm Inc. General Manager, said: "In the early phases of this project we will be consulting with the Operational Commanders to determine mission needs and to identify the relevant current and future operational areas that the MAUL must address to be successful on the battlefield. This emphasis will bring the warfighter an auxiliary weapon with advanced capabilities beyond that of legacy weapons and enhance the effectiveness of the individual infantryman in both lethal and non-lethal scenarios."

The MAUL design incorporates Metal Storm Limited's patented, electronically initiated stacked projectile technology. It is capable of firing munitions across the spectrum, from fragmenting and door breaching grenades to non-lethal projectiles for law enforcement applications.

Metal Storm Limited CEO, Dr Lee Finniear, said the ONR contract provides a catalyst for the next stage of taking MAUL on its path to commercial production.

"It is clear from this latest U.S. Navy contract that the MAUL weapon has the potential to provide a capability needed by today's fighting soldier," Dr Finniear said.

"I am very pleased that Metal Storm technology is embedded at the core of this unique weapon, and that the potential benefits of MAUL appear clear to the US Military."

Notes:

Metal Storm's Australian Stock Exchange trading code: MST
Metal Storm's NASDAQ Small Cap ticker symbol: MTSX

About Metal Storm

Metal Storm Incorporated is an engineering services company, licensed to utilize Metal Storm Limited Stacked Projectile Electronic Ballistics Technology within the United States defense and homeland security markets.

Metal Storm Limited is a multi-national defence technology company engaged in the development of electronically initiated ballistics systems using its unique "stacked projectile" technology. The company is headquartered in Brisbane, Australia and incorporated in Australia. Metal Storm Limited technology and products are represented in the USA by Metal Storm Inc., which has offices in Arlington, Virginia.

Metal Storm is working with government agencies and departments, as well as industry, to develop a variety of systems utilising the Metal Storm non-mechanical, electronically fired stacked ammunition system.

Metal Storm's weapon technology uses computer-controlled electronic ignition and a system of stacked projectiles, to achieve a completely non-mechanical gun that is very lightweight and compact, providing a very high firepower to weight ratio. The Metal Storm weapons system utilizes multiple barrels mounted together on one platform which allows varying munitions types to be deployed in a single, low cost, lightweight weapon system. Firing the weapons by electronic ignition requires no moving parts, allowing reliable long term unattended weapon operation.

Safe Harbour

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.

Company Contact: Australia Dr Lee Finniear Chief Executive Officer Metal Storm Limited Ph: +61 7 3123 4700 USA Peter Faulkner General Manager Metal Storm Inc. Ph: +1 703 248 8218

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