Metal Storm continues its focused marketing and development of its 40mm and18mm weapons systems. This CEO Bulletin provides an update on our businessdevelopment and engineering initiatives as we approach thecommercialisation of our initial product family.

I will open with a progress report on the activities of Metal Storm Inc(MSI) in marketing and US military contracts, before updating you on ourAustralian activities, including weapons and munitions developmentprojects.

Marketing & Business Development - USA

Metal Storm recently exhibited at three major US defence shows -- theNational Guard Show, Modern Day Marine Exposition and the world's largestmilitary land power forum, the Association of the United States Army (AUSA)exhibition.

At the exhibitions, the company displayed the 3GL three shot 40mm grenadelauncher and the 12 gauge Multi-Shot Accessory Under-barrel Launcher(MAUL). The FireStorm 40mm 4 barrel remotely operated weapon system wasalso on display at AUSA.

Feedback from all three shows, which were attended by senior figures fromthe US defence industry, the US Army, the US Department of Defense andCongressional leaders, was extremely positive and engaging.

As a result of Metal Storm's investment in the exhibitions we areprogressing a number of potential opportunities with US and internationalgovernment agencies, as well as commercial companies interested inco-development and marketing co-operation.

However, for me the most important feedback of the show was from the manyservice men and women that have experienced tours of duty on the front linein Iraq and Afghanistan. They handled our weapons and explained how theweapons would be of real benefit to them in the field. Many commented thatthey were impressed by the weight, balance and potential firepower of boththe 3GL and MAUL. Several made strong suggestions that they needed us toget them into service as soon as possible so that they could use thempersonally in combat operations.

The new Metal Storm promotional video used on our video displays at theseshows can be seen athttp://www.metalstorm.com/release/promo-video-400k.html.

Market Research Demonstration Contract - US Marine Corps

MSI recently announced the successful completion of its US$103,751 contractto participate in a market research demonstration for the US Marine CorpsSystem Command's Mission Payload Module - Non Lethal Weapons System(MPM-NLWS) program.

MSI provided a FireStorm 40mm 4 barrel weapons system, together with asupply of stacked chemical payload rounds and frangible nose blunt impactchemical dispersion rounds for the demonstration. The demonstration wasconducted by US Navy personnel at the Naval Surface Warfare Center inDahlgren, Virginia, with firings at ranges of 30 and 150 metres.

As one of only two companies selected to perform the MPM-NLWSdemonstration, I believe that this puts MSI in a strong position to respondto the upcoming System Development and Demonstration phase RFP. The USGovernment also anticipates issuing a solicitation for weapon productioncontracts to provide a significant MPM-NLWS capability to the US Marinesand potentially other branches of the military.

We view this MPM-NLWS as one of the most significant short termopportunities for FireStorm to be deployed with a major branch of the USmilitary, and are excited to be one of the two suppliers selected for theMarket Research Demonstration stage.

Non-Lethal Munitions Development

Recognising the rapidly emerging US market for non-lethal alternatives tolethal force, Metal Storm has been continuing its development of non-lethalmunitions for its 40mm weapons systems. In recent weeks MSI undertookfurther test firing of FireStorm with stacked smoke rounds and frangiblenose blunt impact chemical dispersion rounds at a test range in Wyoming(see photos below).

To operate effectively, many non-lethal rounds have a soft or fragile noseby comparison to their lethal cousins. The Metal Storm engineering team hasdeveloped innovative approaches to ensure that these projectiles areprotected even when fired in a stacked configuration, thus providing awider range of non-lethal projectile options with all the performancebenefits of Metal Storm stacked round firing technology.

MAUL - 12 Gauge Accessory Shotgun

The MAUL was initially conceived as a 12 gauge launcher for door breachingrounds. After initial development and delivery of a bench weapon and 600munitions under contract with the US Marines Warfighting Laboratory and ademonstration firing at the NDIA show in Dallas in May this year, theOffice of Naval Research awarded MSI a US$936,695 contract to continue workon the MAUL.

Metal Storm has recognised the potential for a very lightweight,semi-automatic shotgun accessory for existing combat weapons. Giving thesoldier or law enforcement officer the option of a lethal or less lethalresponse, stand-off door breaching capability and the versatility of ashotgun in one very small accessory weapon is a breakthrough that fullycapitalizes on the benefits of Metal Storm stacked round technology.

The new MAUL design takes this concept to the extreme. It has a totallength less than the barrel of an M4 carbine, a capacity for up to 5 lesslethal rounds, no moving parts in the firing sequence, and an unloadedweight of less than 2lb. The MAUL (shown at right, on an M4 Carbine), isspec'd to take a key position in the arsenal of military and lawenforcement organisations.

MSI expects man-firing of the MAUL in June 2009 with the first lethal andless lethal munition natures. Due to its versatility and its applicabilityto law enforcement as well as military operations, we anticipate a strongdemand for the MAUL.

FireStorm Enhancement

FireStorm has been enhanced significantly over the course of the year, withthe development and integration of its own video camera targeting system,targeting laser rangefinder and a non-lethal laser dazzler.

During the year it has been the subject of many test firings anddemonstrations, including being operated by US Navy personnel for the MPMMarket Research Demonstration.

Australian Engineering Operations

In September 2008, we appointed David Pashen as Metal Storm's newEngineering Development Manager.

Although born in Brisbane, David served in the British Army from 1984-2000,rising to the rank of Major in the Royal Electrical and MechanicalEngineers (REME). He had a six month tour as military spokesman for theBritish Forces during the NATO deployment into Kosovo in 1999, and morerecently did a tour of duty in Iraq as a reservist.

His post-military career includes senior engineering and businessdevelopment positions with organizations such as the UK defence technologycompany QinetiQ. David's experience as a military customer representativegives him vital insight into the process of military procurement. This,combined with his extensive engineering management, business developmentand bid management experience, makes him a valuable addition to the MetalStorm team.

Nova Defence Audit

In parallel to our core engineering development and testing operations, wehave undertaken a significant engineering process improvement activity.This is to ensure that when our qualification testing evidence comes underthe scrutiny of potential customers, we have rigorous and transparentprocesses to prove absolutely the efficacy of each test performed.

To that end we brought in a team of weapons qualification specialists andengineering consultants from Nova Defence to audit our current projectstatus, project deliverables and schedules. We asked them to makerecommendations on engineering process improvements to ensure that once wecomplete the qualification tests, the background documentation and processfor those tests would be of a standard acceptable to military forces.

Nova Defence has developed an integrated team of Explosive Ordnance /Weapons Design Engineers and is one of the major suppliers of thisspecialist engineering field to the Australian Defence Force (ADF). Nova'sengineering team undertakes detailed design analysis of weapons andexplosive ordnance components to ensure the highest levels of safety,reliability and sustainability are attained. Nova has involvement in mostof the ADF high profile weapon systems acquisitions.

Nova Defence Nick Kemp commented at the end of the review, "Metal Storm hasan incredibly enthusiastic and committed team of engineers, who are workingextremely hard to deliver the 3GL as a qualified, military standard weaponsystem. The 3GL itself was at a more advanced stage of maturity than wehad expected, and with appropriate planning and support we believe that the3GL program objectives are entirely achievable."

Nova outlined a series of recommendations for engineering processimprovement which the company is now implementing to ensure itsqualification testing meets the standards expected by its major potentialcustomers.

3GL Development and Qualification

Based on the findings of the Nova review, we can confirm that early in thenew year we expect to qualify the 3GL and ammunition tail for safeman-firing using inert warheads.

Safety documentation, together with test plans and details of the chosentest firing range, are being prepared for submission to the appropriateAustralian authorities for approval to conduct the first man-firingdemonstration early in 2009.

With the ability to demonstrate man-firing of 3GL, and with full HEDPammunition qualification in sight, we will be able to ramp up the salesprocess for 3GL in earnest.

In parallel to the man-firing qualification, we are now well underway witha second phase of the 3GL design spiral, with a design being refined topass the more stringent environmental qualification needed to move the 3GLfrom being safe to demonstrate under controlled conditions, to being safeand robust enough for military trials.

Ammunition Development and Qualification

Our 40mm ammunition development and qualification project has beenchallenging, but has achieved significant progress resulting in anammunition tail design we expect to qualify as safe for man-firing early in2009.

This will complete a key goal we originally set out to achieve and willallow us to commence man-firing demonstrations with the 3GL using stackedinert warheads on open air ranges early in the new year.

We have already proven in recent bench test firings that Metal Storm highexplosive (HE) ammunition fires and detonates effectively in stackedconfigurations from the 3GL and other test barrels.

The engineering team is continuing work that will lead to the qualificationof the HE round for man-firing. This part of the project slowed a littleas we refined one of the tail body material properties to ensure it wouldpass the environmental qualification tests before locking down the finaldesign. To make sure this schedule change had minimal impact on thecritical path to sales, we increased the priority of qualifying the 3GLweapon and inert ammunition for man-firing.

The ability to shoulder fire the weapon will allow us to kick off ourbusiness development in 2009 armed with a weapon we can demonstrate.

Conclusion

This Bulletin has focused on the significant progress MSI has made in itsmarketing and military contract activities in the US as well as our work inAustralia and Singapore in preparing weapons and ammunition to meetqualification requirements in the first half of 2009.

I look forward to providing details of the man-firing of 3GL and otherevents by way of further releases in due course.

Lee Finniear2nd December, 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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Company Contact:Australia & USADr Lee FinniearChief Executive OfficerMetal Storm LimitedPh: +61 7 3123 4700