Metal Storm Announces CEO Bulletin — August 2008

BRISBANE, AUSTRALIA–(EMWNews – August 18, 2008) – Metal Storm Limited (ASX: MST)

(PINKSHEETS: MTSXY)

In this CEO Bulletin I provide a direct update on Company progress in its

main development projects. Future updates will be either in the form of a

CEO Bulletin or a Corporate File Open Briefing.

Metal Storm is continuing its focused research and development effort

toward a single goal — delivering Metal Storm weapons and ammunition to

the market that are qualified safe and durable so that military customers

can buy them.

We are well advanced on several key, interlinked projects that are designed

to deliver this outcome. I will describe each of these below, together

with achievements, progress and expectations.

Ammunition Project

The common factor for all our low velocity 40mm weapon systems will be the

ammunition they fire. The primary goal of the ammunition project is to

produce safe yet lethal ammunition that performs well in its ballistics and

can be mass produced at a competitive cost.

The current project focuses on the completion of a Metal Storm 40mm adaptor

tail that can be fitted to conventional low velocity 40mm warheads,

converting them for use with Metal Storm weapons. This will allow us to

exploit the many 40mm warhead natures already available in the market

without extensive re-qualification.

For the qualification of the first ammunition nature, the warhead and tail

combination must endure extensive environmental, performance and durability

testing before it will be accepted for use by military forces around the

world.

The ammunition project has a goal of completing qualification testing for

transportation and man-firing by the end of this calendar year. It is a

project that is receiving a majority of our engineering investment, as

ammunition is essential for any and all weapons systems the Company may

deliver.

Over the past few months the project team has completed the overall

ammunition design and produced two slight variants which are concurrently

being taken through pre-qualification testing to see which performs better

for the lowest manufacturing cost.

Earlier this year the project team completed proof guns and fire control

systems capable of measuring time to barrel exit, muzzle velocity and

instantaneous pressure readings between each round in the stack as rounds

are progressively fired from the weapon. With this extensive data

available a well disciplined approach to ammunition design optimization has

been possible.

The proof guns have been designed to be capable of taking a stack of six

rounds rather than four. If current testing on six round stacks is

successful, the instantaneous firepower to weight ratio of each Metal Storm

weapon system could be further increased by up to 50%.

The team has completed several significant pre-qualification test programs

including firing stacks of 3 rounds at extremely low and extremely high

temperatures, firing stacks at a range of 200 metres to examine longer

range flight ballistics, plus electromagnetic interference testing and a

range of durability tests.

Systems Safety Plan documentation is a massive but essential part of each

project currently underway. The Company has commissioned Qinetiq, the

highly respected UK Defence firm to guide our team to produce System Safety

Plans of a standard acceptable to military forces worldwide.

We expect to lock off the final preferred design of the 40mm Metal Storm

ammunition in time for qualification testing that is scheduled for the

fourth quarter.

In parallel with the primary ammunition project, the Company also continues

its research and development of less lethal ammunition. Spearheaded by the

Metal Storm Inc (MSI) engineering team with respected industry partners, a

number of less lethal munitions are currently in development, including

sponge rounds and chemical payload rounds.

3GL Project

The goal of the 3GL project is to deliver a lightweight hand held 3 shot

grenade launcher that can be used stand-alone or under-slung on an assault

rifle, 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 testing

to improve its durability, ballistic properties, increase speed of loading

and unloading, reduce manufacturing costs and improve its overall

ergonomics and user interface.

The team has built 6 versions of the weapon over the last 12 months, and

these have supported approximately 300 test firings.

Ergonomic grip and user interface design has been a significant effort for

the team. For example, a compact version with a short pistol grip and

recessed LED indicators replacing the screen display (shown below) will be

exhibited alongside the existing design at AUSA in October.

Having completed a range of pre-qualification testing, the 3GL team expects

to complete final design lock-off by October. Several weapons will then

be built to this design and qualified in two phases. The first phase will

qualify the weapon for safe man-firing using inert rounds and is scheduled

to be completed in parallel with the ammunition qualification. The second

phase requires the use of qualified ammunition, and will therefore be

undertaken early in 2009 as soon as the ammunition completes its

qualification process.

The Company intends to build several “spare” 3GL weapons in the same batch

as the qualification weapons so demonstrations can be carried out in

parallel to the qualification initiative.

Multi-Barrel Project

Formerly known as the Redback project, the Multi-Barrel project

incorporates many of the original objectives of Redback, but extends them

substantially. The overall project goal is to create modular “plug n play”

Metal Storm barrels, fire control systems and sensor interfaces that can be

networked together in extensible configurations.

At this stage it is inappropriate to release specific details, however, the

intended development will make the deployment and control of an extended

network of Metal Storm weapons systems with varying barrel configurations a

powerful and simple task.

The above innovations will be applied to both Redback and FireStorm weapons

systems as each weapon continues on its development path.

FireStorm Project

FireStorm is a combined mount, sighting system and 4 barrel, 16 shot

grenade launcher developed by Metal Storm.

Since its introduction last year FireStorm has been a platform used to

deliver the US Army Crowd Control SBIR Contract demonstration, and is the

platform used for 40mm less lethal munitions development by the MSI

engineering team.

Recent advances to the system have been the inclusion of a Metal Storm

camera sighting system and laser rangefinder. In its less lethal

configuration the Company has also integrated a laser dazzler onto the

FireStorm pod to provide an additional response alternative during crowd

control operations.

FireStorm is currently being prepared for the less lethal firing

demonstrations for the US Marine Corps in September.

MAUL Project

The first phase of the project to deliver under the contract with the

Office of Naval Research are currently underway. Further reports will be

provided as the project proceeds.

IP Protection Project

Metal Storm has amassed a large patent portfolio with 213 patents granted

and 137 patents pending throughout the world.

Over a year ago the Company hired a full time, qualified IP Specialist to

manage and improve its IP Portfolio. Managing legal fees, driving down

costs whilst improving coverage has been a challenging but vital endeavour.

Over the last few months a specific project has been established in the

engineering team to focus on IP protection. The key goal is to ensure that

the Company maximises the IP protection on its product designs before the

products are released to the market.

Work has been proceeding well and we are filing a range of patents and

patent claims as a result of this project initiative.

Conclusion

This Bulletin has focused on the product development projects currently

underway at Metal Storm. We expect that our weapons and ammunition will

meet the qualification requirements set down in our test plans, and that we

will be able to offer demonstrations to potential customers in the first

half of 2009.

Further updates on other aspects of Metal Storm business will follow in

future Open Briefings and CEO Bulletins in the coming months.

Lee Finniear

18th 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 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 & USA Dr Lee Finniear Chief Executive Officer Metal Storm Limited Ph: +61 7 3123 4700