In this CEO Bulletin I provide a direct update on Company progress in itsmain development projects. Future updates will be either in the form of aCEO Bulletin or a Corporate File Open Briefing.

Metal Storm is continuing its focused research and development efforttoward a single goal -- delivering Metal Storm weapons and ammunition tothe market that are qualified safe and durable so that military customerscan buy them.

We are well advanced on several key, interlinked projects that are designedto deliver this outcome. I will describe each of these below, togetherwith achievements, progress and expectations.

Ammunition Project

The common factor for all our low velocity 40mm weapon systems will be theammunition they fire. The primary goal of the ammunition project is toproduce safe yet lethal ammunition that performs well in its ballistics andcan be mass produced at a competitive cost.

The current project focuses on the completion of a Metal Storm 40mm adaptortail that can be fitted to conventional low velocity 40mm warheads,converting them for use with Metal Storm weapons. This will allow us toexploit the many 40mm warhead natures already available in the marketwithout extensive re-qualification.

For the qualification of the first ammunition nature, the warhead and tailcombination must endure extensive environmental, performance and durabilitytesting before it will be accepted for use by military forces around theworld.

The ammunition project has a goal of completing qualification testing fortransportation and man-firing by the end of this calendar year. It is aproject that is receiving a majority of our engineering investment, asammunition is essential for any and all weapons systems the Company maydeliver.

Over the past few months the project team has completed the overallammunition design and produced two slight variants which are concurrentlybeing taken through pre-qualification testing to see which performs betterfor the lowest manufacturing cost.

Earlier this year the project team completed proof guns and fire controlsystems capable of measuring time to barrel exit, muzzle velocity andinstantaneous pressure readings between each round in the stack as roundsare progressively fired from the weapon. With this extensive dataavailable a well disciplined approach to ammunition design optimization hasbeen possible.

The proof guns have been designed to be capable of taking a stack of sixrounds rather than four. If current testing on six round stacks issuccessful, the instantaneous firepower to weight ratio of each Metal Stormweapon system could be further increased by up to 50%.

The team has completed several significant pre-qualification test programsincluding firing stacks of 3 rounds at extremely low and extremely hightemperatures, firing stacks at a range of 200 metres to examine longerrange flight ballistics, plus electromagnetic interference testing and arange of durability tests.

Systems Safety Plan documentation is a massive but essential part of eachproject currently underway. The Company has commissioned Qinetiq, thehighly respected UK Defence firm to guide our team to produce System SafetyPlans of a standard acceptable to military forces worldwide.

We expect to lock off the final preferred design of the 40mm Metal Stormammunition in time for qualification testing that is scheduled for thefourth quarter.

In parallel with the primary ammunition project, the Company also continuesits research and development of less lethal ammunition. Spearheaded by theMetal Storm Inc (MSI) engineering team with respected industry partners, anumber of less lethal munitions are currently in development, includingsponge rounds and chemical payload rounds.

3GL Project

The goal of the 3GL project is to deliver a lightweight hand held 3 shotgrenade launcher that can be used stand-alone or under-slung on an assaultrifle, and qualify it safe for man-firing.

A fully functional 3GL concept prototype was demonstrated in June 2007.Since then the weapon has been subjected to extensive re-design and testingto improve its durability, ballistic properties, increase speed of loadingand unloading, reduce manufacturing costs and improve its overallergonomics and user interface.

The team has built 6 versions of the weapon over the last 12 months, andthese have supported approximately 300 test firings.

Ergonomic grip and user interface design has been a significant effort forthe team. For example, a compact version with a short pistol grip andrecessed LED indicators replacing the screen display (shown below) will beexhibited alongside the existing design at AUSA in October.

Having completed a range of pre-qualification testing, the 3GL team expectsto complete final design lock-off by October. Several weapons will thenbe built to this design and qualified in two phases. The first phase willqualify the weapon for safe man-firing using inert rounds and is scheduledto be completed in parallel with the ammunition qualification. The secondphase requires the use of qualified ammunition, and will therefore beundertaken early in 2009 as soon as the ammunition completes itsqualification process.

The Company intends to build several "spare" 3GL weapons in the same batchas the qualification weapons so demonstrations can be carried out inparallel to the qualification initiative.

Multi-Barrel Project

Formerly known as the Redback project, the Multi-Barrel projectincorporates many of the original objectives of Redback, but extends themsubstantially. The overall project goal is to create modular "plug n play"Metal Storm barrels, fire control systems and sensor interfaces that can benetworked together in extensible configurations.

At this stage it is inappropriate to release specific details, however, theintended development will make the deployment and control of an extendednetwork of Metal Storm weapons systems with varying barrel configurations apowerful and simple task.

The above innovations will be applied to both Redback and FireStorm weaponssystems as each weapon continues on its development path.

FireStorm Project

FireStorm is a combined mount, sighting system and 4 barrel, 16 shotgrenade launcher developed by Metal Storm.

Since its introduction last year FireStorm has been a platform used todeliver the US Army Crowd Control SBIR Contract demonstration, and is theplatform used for 40mm less lethal munitions development by the MSIengineering team.

Recent advances to the system have been the inclusion of a Metal Stormcamera sighting system and laser rangefinder. In its less lethalconfiguration the Company has also integrated a laser dazzler onto theFireStorm pod to provide an additional response alternative during crowdcontrol operations.

FireStorm is currently being prepared for the less lethal firingdemonstrations for the US Marine Corps in September.

MAUL Project

The first phase of the project to deliver under the contract with theOffice of Naval Research are currently underway. Further reports will beprovided as the project proceeds.

IP Protection Project

Metal Storm has amassed a large patent portfolio with 213 patents grantedand 137 patents pending throughout the world.

Over a year ago the Company hired a full time, qualified IP Specialist tomanage and improve its IP Portfolio. Managing legal fees, driving downcosts whilst improving coverage has been a challenging but vital endeavour.

Over the last few months a specific project has been established in theengineering team to focus on IP protection. The key goal is to ensure thatthe Company maximises the IP protection on its product designs before theproducts are released to the market.

Work has been proceeding well and we are filing a range of patents andpatent claims as a result of this project initiative.

Conclusion

This Bulletin has focused on the product development projects currentlyunderway at Metal Storm. We expect that our weapons and ammunition willmeet the qualification requirements set down in our test plans, and that wewill be able to offer demonstrations to potential customers in the firsthalf of 2009.

Further updates on other aspects of Metal Storm business will follow infuture Open Briefings and CEO Bulletins in the coming months.

Lee Finniear18th August 2008.

Notes:

Metal Storm's Australian Stock Exchange trading code: MST

Metal Storm's OTC Symbol: MTSXY

About Metal Storm

Metal Storm Limited is a multi-national defence technology company engagedin the development of electronically initiated ballistics systems using itsunique "stacked projectile" technology. The company is headquartered inBrisbane, Australia and incorporated in Australia. Metal Storm Limitedtechnology 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 asindustry, to develop a variety of systems utilising the Metal Stormnon-mechanical, electronically fired stacked ammunition system.

Metal Storm's weapon technology uses computer-controlled electronicignition and a system of stacked projectiles, to achieve a completelynon-mechanical gun that is very lightweight and compact, providing a veryhigh firepower to weight ratio. The Metal Storm weapons system utilizesmultiple barrels mounted together on one platform which allows varyingmunitions types to be deployed in a single, low cost, lightweight weaponsystem. Firing the weapons by electronic ignition requires no movingparts, 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 toidentify forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. These forward-looking statementsinvolve known and unknown risks and uncertainties which could cause theactual results, performance or achievements of the company to be materiallydifferent from those which may be expressed or implied by such statements,including, among others, risks or uncertainties associated with thedevelopment of the company's technology, the ability of the company to meetits financial requirements, the ability of the company to protect itsproprietary technology, potential limitations on the company's technology,the market for the company's products, government regulation in Australiaand the US, changes in tax and other laws, changes in competition and theloss of key personnel. For additional information regarding these andother risks and uncertainties associated with the company's business,reference is made to the company's reports filed from time to time with theSecurities and Exchange Commission, including the company's Form 20-F.

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