LASERBOND LIMITED

ABN 24 057 636 692

PROSPECTUS

For the offer of 12,600,000 Shares at an issue price of 20 cents each together with one (1) free attaching Option for every three (3) Shares to raise $2,520,000. Oversubscriptions of up to a further 2,400,000 Shares at an issue price of 20 cents each together with one (1) free attaching Option for every three (3) Shares to raise up to a further $480,000 may be accepted.

MANAGER TO THE OFFER

Westar Capital Limited

IMPORTANT INFORMATION

This is an important document that should be read in its entirety.

If you do not understand it you should consult your professional advisers without delay. The Securities offered by this Prospectus should be considered speculative.

IMPORTANT NOTICE

This Prospectus is dated 3 September 2007 and was lodged with the ASIC on that date. The ASIC and its officers take no responsibility for the contents of this Prospectus or the merits of the investment to which the Prospectus relates.

The expiry date of this Prospectus is at 5.00pm EST on that date which is 13 months after the date this Prospectus was lodged with the ASIC (Expiry Date). No securities may be issued on the basis of this Prospectus after the Expiry Date.

Application will be made to ASX within seven (7) days after the date of this Prospectus for Official Quotation of the Shares and Options the subject of this Prospectus.

The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any of these restrictions. Failure to comply with these restrictions may violate securities laws. Applicants who are resident in countries other than Australia should consult their professional advisers as to whether any governmental or other consents are required or whether any other formalities need to be considered and followed.

This Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer.

It is important that investors read this Prospectus in its entirety and seek professional advice where necessary. The Securities the subject of this Prospectus should be considered speculative.

WEB SITE – ELECTRONIC PROSPECTUS

A copy of this Prospectus can be downloaded from the website of the Company at www.laserbond.com.au. Any person accessing the electronic version of this Prospectus for the purpose of making an investment in the Company must be an Australian resident and must only access the Prospectus from within Australia.

The Corporations Act prohibits any person passing onto another person an application form unless it is attached to a hard copy of this Prospectus or it accompanies the complete and unaltered version of this Prospectus. Any person may obtain a hard copy of this Prospectus free of charge by contacting the Company.

EXPOSURE PERIOD

This Prospectus will be circulated during the Exposure Period. The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. Potential investors should be aware that this examination may result in the identification of deficiencies in the Prospectus and, in those circumstances, any application that has been received may need to be dealt with in accordance with Section 724 of the Corporations Act.

Applications for securities under this Prospectus will not be processed by the Company until after the expiry of the Exposure Period. No preference will be conferred on persons who lodge applications prior to the expiry of the Exposure Period.

1.	CORPORATE DIRECTORY ..................................................................................................4
2.	INVESTMENT HIGHLIGHTS AND MATERIAL RISKS.............................................................5
3.	CHAIRMAN’S LETTER..........................................................................................................6
4.	INVESTMENT OVERVIEW....................................................................................................7
5.	DETAILS OF THE OFFER.................................................................................................... 10
6.	COMPANY AND PROJECT OVERVIEW.......................................................................... 14
7.	DIRECTORS AND CORPORATE GOVERNANCE ............................................................ 20
8.	INVESTIGATING ACCOUNTANT’S REPORT.................................................................... 23
9.	RISK FACTORS................................................................................................................. 41
10.	MATERIAL CONTRACTS.................................................................................................. 44
11.	ADDITIONAL INFORMATION.......................................................................................... 46
12.	DIRECTORS’ AUTHORISATION........................................................................................ 56
13.	GLOSSARY....................................................................................................................... 57

1. CORPORATE DIRECTORY

Directors Manager to the Offer Tim McCauley (Chairman) Westar Capital Limited Wayne Hooper Level 9 Greg Hooper 190 St Georges Terrace PERTH WA 6000 Company Secretary Telephone: (08) 9486 7066 Donna Woodley Facsimile: (08) 9486 8066 Registered Office Solicitors to the Company 28 York Road Steinepreis Paganin INGLEBURN NSW 2565 Lawyers and Consultants Level 4, Next Building Telephone: (02) 9829 3815 16 Milligan Street Facsimile: (02) 9829 2417 PERTH WA 6000 Website Auditors www.laserbond.com.au BDO Kendal Audit and Assurances (WA) 128 Hay Street SUBIACO WA 6008 Telephone: (08) 9380 8400 Facsimile: (08) 9380 8499 Share Registry* Investigating Accountant Registries Limited BDO Kendalls Corporate Finance (WA) Pty Ltd Level 2 Level 8 28 Margaret Street 256 St Georges Terrace Sydney NSW 2000 PERTH WA 6000 Telephone: (02) 9290 9600 Telephone: (08) 9360 4200 Facsimile: (02) 9279 0664 Facsimile: (08) 9481 2524

This entity is included for information purposes only. It has not been involved in the preparation of this Prospectus.

2. INVESTMENT HIGHLIGHTS AND MATERIAL RISKS

2.1 Investment Highlights

(a) Established profitable company.
(b) Specialist in reclamation and surface engineering of industrial components.
(c) Leader in the field with significant barriers to entry due to the unique technology and processes including the LaserBond[TM] system.
(d) Growth planned through acquisition and leverage of unique LaserBond[TM] system and other developed processes.
(e) Experienced senior management.
(f) Many applications for the Company’s technology in the mining and minerals processing industries.

2.2 Material Risks

(a) Competition: As the technology becomes known within the industry, larger companies may be capable of investing the resources necessary to develop laser cladding technology and building similar lasers or utilising laser applications that would compete with the Company’s.
(b) Competing Technologies: Alternatives may be developed in the future that could have an adverse effect on the profitability of the business.
(c) Manufacturing Downturn: Although the Company relies on several industry sectors, a downturn in the manufacturing and mining sector could have an adverse effect on the profitability of the business.
(d) Key Equipment: A breakdown of key equipment and replacement delays could have an adverse effect on the profitability of the business.
(e) Reliance on Key Management: The responsibility of overseeing the day-to-day operations and the strategic management of the Company depends substantially on its senior management and its key personnel. There can be no assurance given that there will be no detrimental impact on the Company if one or more of these employees cease their employment.

3. CHAIRMAN’S LETTER

Dear Investor,

On behalf of the Directors, it is my pleasure to offer you Shares and Options in Laserbond Limited (Laserbond or Company).

Laserbond is an established and profitable Company which specialises in the reclamation and surface engineering of industrial components operating in severe industrial environments. Laserbond commenced trading in 1993 with operations based in Ingleburn, NSW. The Company has maintained a strong track record of technological innovation and growth over the past 14 years.

When the Company commenced trading it introduced the new thermal spraying technology known as the High-Pressure High Velocity Oxygen-Fuel (HP HVOF) system. HP HVOF considerably increased the performance of thermally sprayed coatings and as a consequence broadened the range of coating applications.

In May 2001, after extensive testing, the Company completed construction and commissioning of its first LaserBond™ system, providing superior performance coatings with a metallurgical bond to the substrate (effectively an improved form of welding). LaserBond™ provides a metallurgical or welded bond to the substrate with very controlled heat input and major advantages over other coating techniques. The development of the LaserBond™ process has allowed the Company to grow over the last six years and is the primary product to provide growth in the future.

The primary purpose of this Offer is to mobilise resources to fast track the development of Laserbond through acquisitions in Western Australia and Queensland. The Company has created a comprehensive strategy to expand its unique technologies throughout the country enabling it to better serve its customers.

This Prospectus provides detailed information regarding the Offer, the Company’s activities, strategic relationships, Board of Directors and risk factors relevant to this Offer.

On behalf of the Board, I look forward to welcoming you as a Shareholder.

Yours sincerely

Tim McCauley CHAIRMAN

3 September 2007

4. INVESTMENT OVERVIEW

4.1 Important Notice

This section is not intended to provide full information for investors intending to apply for Securities offered pursuant to this Prospectus. This Prospectus should be read and considered in its entirety.

4.2 Objectives

The strategic objective of the Company is to expand the existing operation via a mix of business acquisitions in other states and expanding the current operation.

The Company will continue with the search and evaluation of like businesses in other states for acquisition and application of its proprietary laser technology in order to create additional revenue streams that are currently not available.

On completion of the Offer, the Board believes the Company will have sufficient working capital to achieve these objectives.

4.3 Indicative Timetable

Lodgement of Prospectus with the	3 September 2007
ASIC
Opening Date	11 September 2007
Closing Date	5.00pm EST on 23 October 2007
Despatch of Holding Statements	26 October 2007
Expected date for listing on ASX	1 November 2007

All dates are indicative and may be subject to change. The Company and the Manager reserve the right to extend the Closing Date or close the Offer early without prior notice. Investors are encouraged to submit their applications as soon as possible.

4.4 Purpose of the Offer and Use of Proceeds

It is intended to apply funds raised from the Offer as follows (assuming the Offer is fully subscribed to raise $2,520,000):

		Year 1	Year 2	Total
Acquisitions and	Business	$500,000	$500,000	$1,000,000
Development
Expenses of issue		$311,000	-	$311,000
Plant & Equipment		$300,000	$300,000	$600,000
Working Capital		$189,000	$170,000	$359,000
Marketing & Development		$150,000	$100,000	$250,000
Total		$1,450,000	$1,070,000	$2,520,000

In the event oversubscriptions (of up to $480,000) are accepted, the funds will be applied in the following order:

(a) $24,000 to expenses of the issue;
(b) $200,000 to acquisitions and business development; and
(c) $256,000 to working capital.

Following completion of the Offer, the Company will have sufficient working capital to carry out its stated objectives.

4.5 Capital Structure

The capital structure of the Company following completion of the Offer is summarised below:

Shares	Number 50,000,400 750,000 12,600,000
Shares on issue at date of Prospectus Shares to be issued1 Shares now offered
Shares on issue at completion of the Offer Shares offered if full oversubscriptions are accepted	63,350,400 2,400,000
Shares on issue at completion of the Offer if full oversubscriptions are accepted Options	65,750,400 Number 6,000,000 1,000,000 4,200,000
Performance Options to be issued2 & 3
Options to be issued1 & 4 Options now offered
Total Options on issue at completion of the Offer Options offered if full oversubscriptions are accepted	11,200,000 800,000
Options on issue at completion of the Offer if full oversubscriptions are accepted	12,000,000

These Shares and Options will be issued to Mr Tim McCauley, a Director, prior to the Company being admitted to the Official List.
These Options will be issued to the Directors, prior to the Company being admitted to the Official List.
Please refer to Section 11.7 for the terms and conditions relating to these Options
These Options are exercisable at $0.20 on or before 30 August 2010, subject to the condition that one third of these options will vest on the anniversary of the grant date each year.

Restricted securities

Subject to the Company being admitted to the Official List, certain of the Shares and Options on issue prior to the Offer and certain of the Shares issued on the exercise of the Options on issue prior to the Offer, may be classified by ASX as restricted securities and may be required to be held in escrow.

5. DETAILS OF THE OFFER

5.1 The Offer

By this Prospectus, the Company offers for subscription up to 12,600,000 Shares at 20 cents each together with one (1) free attaching Option for every three (3) Shares to raise up to $2,520,000.

The Shares offered under this Prospectus will rank equally with the existing Shares on issue.

The Options will be exercisable at 25 cents on or before 31 August 2009. The full terms and conditions of the Options are set out in Section 11.1 of this Prospectus.

Westar is the Manager to the Offer.

5.2 Applications

Applications

Applications for Securities under the Offer must be made using the Application Form.

Payment for the Shares must be made in full at the issue price of 20 cents per Share. Applications for Shares must be for a minimum of 10,000 Shares and thereafter in multiples of 1,000 Shares. Completed application forms and accompanying cheques must be mailed or delivered to:

Registries Limited Level 2 28 Margaret Street Sydney NSW 2000

Registries Limited PO Box R67 Royal Exchange Sydney NSW 1223

Cheques should be made payable to “Laserbond Limited – Share Offer Account” and crossed “Not Negotiable”. Completed application forms must reach one of the above addresses by no later than the Closing Date.

The Company reserves the right to close the Offer early.

5.3 Oversubscriptions

In the event that subscriptions under the Offer exceed 12,600,000 Shares, the Company may accept oversubscriptions of up to a further $480,000 through the issue of up to a further 2,400,000 Shares at an issue price of 20 cents each, together with a further 800,000 free attaching Options. The maximum amount which may be raised under this Prospectus is therefore $3,000,000.

5.4 Allotment

Subject to ASX granting approval for the Company to be admitted to the Official List, allotment of Securities offered by this Prospectus will take place as soon as practicable after the Closing Date. Prior to allotment, all application monies shall be held by the Company on trust. The Company, irrespective of whether the allotment of Securities takes place, will retain any interest earned on the application monies.

The Directors reserve the right to allot Securities in full for any application or to allot any lesser number or to decline any application. Where the number of Securities allotted is less than the number applied for, or where no allotment is made, the surplus application monies will be returned by cheque to the applicant within seven (7) days of the allotment date.

5.5 Minimum Subscription

The minimum subscription to be raised pursuant to this Prospectus is $2,520,000.

If the minimum subscription has not been raised within four (4) months after the date of this Prospectus, all applications will be dealt with in accordance with the Corporations Act.

5.6 ASX Listing

The Company will apply to ASX within seven (7) days after the date of this Prospectus for admission to the Official List and for Official Quotation of the Securities offered under this Prospectus. If the Securities are not admitted to Official Quotation within three (3) months after the date of this Prospectus, or such longer period as is permitted by the Corporations Act, none of the Securities offered by this Prospectus will be allotted or issued. In that circumstance, all applications will be dealt with in accordance with the Corporations Act.

5.7 Applicants outside Australia

This Prospectus does not, and is not intended to, constitute an offer in any place or jurisdiction, or to any person to whom, it would not be lawful to make such an offer or to issue this Prospectus. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. No action has been taken to register or qualify these Securities or otherwise permit a public offering of the Securities the subject of this Prospectus in any jurisdiction outside Australia.

It is the responsibility of applicants outside Australia to obtain all necessary approvals for the allotment and issue of the Securities pursuant to this Prospectus. The return of a completed application form will be taken by the Company to constitute a representation and warranty by the applicant that all relevant approvals have been obtained.

5.8 Underwriter

The Offer is not underwritten.

5.9 Manager to the Offer

Westar Capital Limited has been appointed as the manager to the Offer. The Company has agreed to pay Westar a fee of $80,000 in respect of the services provided by Westar. The Company has also agreed to pay Westar a commission of 6% in respect of valid applications lodged and accepted by the Company and bearing the stamp of Westar.

5.10 Commissions on Application Forms

The Company reserves the right to pay a commission of 6% (inclusive of goods and services tax) of amounts subscribed to any licensed securities dealers or Australian Financial Services licensee in respect of valid applications lodged and accepted by the Company and bearing the stamp of the licensed securities dealer or Australian Financial Services licensee. Payments will be subject to the receipt of a proper tax invoice from the licensed securities dealer or Australian Financial Services licensee.

5.11 CHESS

The Company will apply to participate in the Clearing House Electronic Subregister System (CHESS). CHESS is operated by ASX Settlement and Transfer Corporation Pty Ltd (ASTC), a wholly owned subsidiary of ASX, in accordance with the Listing Rules and the ASTC Settlement Rules.

Under CHESS, the Company will not issue certificates to investors. Instead, Share and Option holders will receive a statement of their holdings in the Company. If an investor is broker sponsored, ASTC will send a CHESS statement.

5.12 Risk factors

Prospective investors in the Company should be aware that subscribing for securities the subject of this Prospectus involves a number of risks. These risks are set out in Section 9 of this Prospectus and investors are urged to consider those risks carefully (and if necessary, consult their professional adviser) before deciding whether to invest in the Company.

The risk factors set out in Section 9, and other general risks applicable to all investments in listed securities not specifically referred to, may in the future affect the value of the Securities. Accordingly, an investment in the Company should be considered speculative.

5.13 Privacy Statement

If you complete an application for Shares, you will be providing personal information to the Company. The Company collects, holds and will use that information to assess your application, service your needs as a Shareholder and to facilitate distribution payments and corporate communications to you as a Shareholder.

The information may also be used from time to time and disclosed to persons inspecting the register, including bidders for your securities in the context of takeovers; regulatory bodies, including the Australian Taxation Office; authorised securities brokers; print service providers; mail houses and the Share Registry.

You can access, correct and update the personal information that we hold about you. If you wish to do so, please contact the Share Registry at the relevant contact number set out in this Prospectus.

Collection, maintenance and disclosure of certain personal information is governed by legislation including the Privacy Act 1988 (as amended), the Corporations Act and certain rules such as the ASTC Settlement Rules. You should note that if you do not provide the information required on the application for Securities, the Company may not be able to accept or process your application.

6. COMPANY AND PROJECT OVERVIEW

6.1 Background

Laserbond is an established and profitable company which specialises in the reclamation and surface engineering of industrial components operating in severe industrial environments. Laserbond commenced trading as HVOF Australia Pty Ltd, in early 1993. The founders’ vision was to dramatically reduce maintenance costs for their customers and extend machinery life through embracing leading edge technologies to meet the customer’s needs. The opportunity to provide this service was afforded by developments in thermal spraying technology known as “High Pressure High Velocity Oxy Fuel” (HP HVOF). HP HVOF increased the performance of thermally sprayed coatings and as a consequence broadened the range of thermally sprayed coating applications.

By initially concentrating on these new applications, the Company quickly established itself as a major player in the thermal spray market. Since then, the Company has invested in a comprehensive range of thermal spraying technologies and robotic systems, including combustion, arc spray and plasma spray, and other HVOF systems. The Company has also reinvested profits into establishing a large general-purpose engineering workshop including modern Computer Numerical Control (CNC) and conventional machines, to allow coated components to be manufactured and finished to the required dimensions and tolerances.

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The Company recognises the need to invest into its future and to be at the forefront of next generation technologies. To drive these changes and maintain the confidence of this growth industry, the Company has invested considerably into research and development. One key result has been the development of a metallographic laboratory, with a scanning electron microscope. This allows detailed investigation of feed materials and coatings for the optimisation of coating system operating parameters. To our knowledge it remains the only commercial thermal spray and laser applicator in this country with this equipment and knowledge, and as a result, is the technological leader in its field. The laboratory allows the Company to undertake the bulk of material characterisation and testing, thus minimising reliance on contract work for material testing and analysis. By keeping this work in-house the Company retains the required knowledge that accompanies such work and thereby increases its capacity to be self sufficient in terms of ongoing technical development.

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In keeping with its vision of providing world leading surfacing technologies, the Company invested significant research and development time in the search for surfacing techniques that provided a welded bond, but still with low heat input. In May 2001, after extensive testing, the Company completed construction and commissioning of its first LaserBond™ system, providing superior performance coatings with a metallurgical bond to the substrate. Again, the impetus for the development of this process was the broadening of applications. LaserBond™ provides a metallurgical or welded bond to the substrate with very controlled heat input and has major advantages over other coating techniques

The development of the LaserBond™ process has been instrumental in the growth of the Company over the last six years and is the main growth product for the future.

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The Company received the award for “The Most Outstanding Innovation by a Small to Medium Enterprise” in the 2002 Western Sydney Industry Awards conducted by the NSW State Government. Economically speaking, the Western Sydney region covered by these awards is the third largest region in Australia, behind the Sydney and Melbourne business districts. The awards are judged by independent panels of eminent members of the business and academic communities. This award was in recognition for the Company’s continued implementation of innovative surface engineering techniques and in particular for its design, construction and commissioning and successful implementation of the LaserBond™ system. In 2003 it was “Highly Commended” in the Advanced Manufacturing Technology category of the Western Sydney Industry Awards. It was also a finalist in the 2006 Western Sydney Industry Awards.

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In December 2004, the Company obtained an “R&D Start” grant from the Australian Federal Government for further Research and Development of the LaserBond™ process over the next three years. This has assisted Laserbond to remain at the forefront of the development of the technology and applications and cement its position as a technological leader with tremendous opportunities for growth.

6.2 Details on the Products

The Company utilises a range of surface engineering technologies, including LaserBond™, High Pressure High Velocity Oxy-Fuel, plasma thermal spray and various others.

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LaserBond™

LaserBond™ achieves a welded bond with limited and precisely controlled heat input. Heat sensitive components, such as hardened shafts and gears, can be repaired with minimal risk of distortion or other undesirable heat effects.

The metallurgical bond allows LaserBond™ applied layers to be used in high impact and other heavily loaded situations. The controlled energy minimises the undesirable thermal decomposition of hard phases such as carbides, resulting in superior wear resistance. Due to the extremely low dilution with the substrate, high performance surfaces can be applied in a thin layer.

Corrosion and wear resistant surfaces as thin as 0.3mm are possible. Heat affected zones are minimised and the cracking inherent in weld hard facing minimised.

Typical LaserBond™ applied materials include Tungsten Carbide, tool steels, stainless steels, Nickel alloys such as Inconel, Cobalt alloys such as Stellite1, and copper and copper alloys. The Company’s LaserBond™ system is very flexible. Very small and large components (up to large rolls of 1600mm diameter and 6m length) can be processed. Hard to reach areas such as some inside diameters and recesses (e.g. crankshaft pins) can also be repaired.

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High Pressure High Velocity Oxy-Fuel

The HP HVOF process sprays the molten droplets of coating material at extremely high velocities, resulting in thermally sprayed surfaces of the highest quality and performance. HP HVOF coatings are very dense, well bonded, and free of the oxides and tensile stresses typically found in coatings provided by other thermal spray processes. Consequently, they perform better in service.

HP HVOF’s wear resistant surfaces typically provide more than 4 times the wear resistance of chrome plating, through hardening and other hard facing techniques. They are being used around the world as more environmentally friendly and superior replacements for chrome. Surfaces combining resistance to corrosion and wear are also applied by HP HVOF.

Typical HP HVOF materials include tungsten carbide, chrome carbide, nickel alloys such as inconel, cobalt alloys such as stellite, and various carbon and stainless steels.

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Plasma Thermal Spray

Plasma thermal spray is typically used where higher melting point materials such as ceramics need to be deposited. Applications include high temperature thermal barrier coatings and wear resistant coatings where thermal and electrical resistance are also desired.

Typical plasma applied materials include chrome oxide, zirconia, aluminium oxide and various ceramic blends.

Other Thermal Spraying Systems

For economical dimensional restoration, arc spray and combustion metal spraying systems are used. Arc spray uses an electric arc to continuously melt and spray molten droplets of a wire feed stock. Combustion metal spraying uses an oxygen fuel flame as the heat source. These systems produce lower cost and lower quality coatings to HP HVOF type systems. Typical materials include stainless and carbon steels, nickel alloys, bronzes, aluminium and copper.

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6.3 Market Overview

Laserbond specialises in the reclamation and surface engineering of machine components operating in severe industrial environments such as mining and minerals processing. It provides a service to a range of industries to extend the life of components subject to corrosion and/or wear. This includes rebuilding and rehabilitating worn components so they can be returned to service, as well as the application of wear and corrosion resistant coatings to new spares for various industries. With LaserBond[TM] coatings, the operation life of the parts can be dramatically increased and the cost of downtime and replacement of parts be reduced considerably. In capital intensive industries, the services the Company provides lead to large savings in operational costs.

The benefits for our customers are:

longer lasting components;
less frequent downtime to change worn components;

planning reliability of maintenance and replacements;
significant cost savings; and
increased production rates.

Key Industries serviced by the Company include:

mining equipment manufacturers and service companies;
steel making and processing;
slurry and submersible pump manufacturers;
valve manufacturers;
non ferrous metal manufacturers and processors;
pulp & paper manufacturers and converters;
brick & block makers;
concrete products manufacturers;
electrical power generation;
hydraulic service companies;
glass & glass wool manufacturing;
the timber industry; and
plastics & packaging.

Within the domestic market, the LaserBond™ process is in high and rapidly growing demand. Whilst the Company currently services industries all over Australia, the majority of its business is in New South Wales. The logistics of transporting large components currently preclude the Company from obtaining some business in key interstate markets.

Domestically, the Company is planning to expand its operations to include facilities to more thoroughly service interstate markets, initially focussing on Western Australia and Queensland through acquisitions.

Internationally, the advantages of LaserBond™ over other technologies for many applications are yet to be realised and there is significant market potential. The relatively small markets in Australia have led the Company to develop a diverse range of applications for the technology, and this knowledge development can be used to enter international markets.

The Company intends to expand the business into additional markets where the Company’s competitive advantages can be fully leveraged.

7. DIRECTORS AND CORPORATE GOVERNANCE

7.1 Directors

Tim McCauley – Executive Chairman

Tim has extensive experience as a company director and senior executive with significant strengths in developing business channels, strategic development and finance. Tim began his career with KPMG accountants and recently held the position of Managing Director, in the listed company Auto One Limited. Prior to joining Auto One, Tim spent over 15 years with multinational companies in senior roles developing and managing operations throughout the USA and Australia. Tim provides his expertise at the Board level to a number of private companies, utilising his expertise throughout the international community. Tim is a qualified accountant holding university degrees in accounting and finance. Tim holds an MBA and is a member of the Institute of Company Directors.

Wayne Hooper – Executive Director

Wayne is a professional engineer with significant experience within the engineering and manufacturing industries. His engineering experience included design, maintenance and project management. Prior to joining the company in 1994, Wayne also held senior roles in marketing and sales management within a large manufacturing organisation. He holds degrees in Science and Engineering (Honours Class 1) and completed his MBA in 1994. He is involved in laser technology development, factory, engineering and administration of the Company.

Greg Hooper – Executive Director

Greg was the founder of the Company in late 1992. Greg has extensive experience working with multinational suppliers to the welding and thermal sprayed coatings industries and the developments of markets. With his knowledge, and seeing the potential applications for his technology, Greg founded the Company assisted by other members of the Hooper family. Greg, utilising the in house laboratory, developed the applications parameters for the HVOF and LaserBond[TM] processes. Greg will focus on the ongoing research and development of laser technology and HVOF as well as new technology driven applications.

7.2 Corporate Governance

The Directors monitor the business affairs of the Company on behalf of Shareholders and have formally adopted a corporate governance policy which is designed to encourage Directors to focus their attention on accountability, risk management and ethical conduct.

Presently the Board consists solely of executive directors. However, the Board is intending to appoint at least one non-executive director in the next 12 months.

7.3 The Board of Directors

The Company’s Board of Directors is responsible for corporate governance of the Company. The Board develops strategies for the Company, reviews

strategic objectives and monitors performance against those objectives. The goals of the corporate governance processes are to:

(a) maintain and increase Shareholder value;
(b) ensure a prudential and ethical basis for the Company’s conduct and activities; and
(c) ensure compliance with the Company’s legal and regulatory objectives.

Consistent with these goals, the Board assumes the following responsibilities:

(a) developing initiatives for profit and asset growth;
(b) reviewing the corporate, commercial and financial performance of the Company on a regular basis;
(c) acting on behalf of, and being accountable to, the Shareholders; and
(d) identifying business risks and implementing actions to manage those risks and corporate systems to assure quality.

The Company is committed to the circulation of relevant materials to Directors in a timely manner to facilitate Directors’ participation in the Board discussions on a fully-informed basis.

7.4 Composition of the Board

Election of Board members is substantially the province of the Shareholders in general meeting. However, subject thereto, the Company is committed to the following principles:

(a) the Board is to comprise Directors with a blend of skills, experience and attributes appropriate for the Company and its business; and
(b) the principal criterion for the appointment of new Directors is their ability to add value to the Company and its business.

No formal nomination committee or procedures have been adopted for the identification, appointment and review of the Board membership, but an informal assessment process, facilitated by the Chairman in consultation with the Company’s professional advisors, has been committed to by the Board.

7.5 Independent professional advice

Subject to the Chairman’s approval (not to be unreasonably withheld), the Directors, at the Company’s expense, may obtain independent professional advice on issues arising in the course of their duties.

7.6 Remuneration arrangements

The remuneration of an Executive Director will be decided by the Board, without the affected Executive Director participating in that decisionmaking process.

The total maximum remuneration of Non-Executive Directors is the subject of a Shareholder resolution in accordance with the Company’s Constitution, the Corporations Act and the ASX Listing Rules, as applicable. The determination of Non-Executive Directors’ remuneration within that maximum will be made by the Board having regard to the inputs and value to the Company of the respective contributions by each Non-Executive Director. The current limit, which may only be varied by Shareholders in general meeting, is an aggregate amount of $200,000 per annum.

The Board may award additional remuneration to Non-Executive Directors called upon to perform extra services or make special exertions on behalf of the Company.

7.7 External audit

The Company in general meetings is responsible for the appointment of the external auditors of the Company, and the Board from time to time will review the scope, performance and fees of those external auditors.

7.8 Audit committee

The Company intends to appoint a separate constituted audit committee.

7.9 Identification and management of risk

The Board’s collective experience will enable accurate identification of the principal risks that may affect the Company’s business. Key operational risks and their management will be recurring items for deliberation at Board meetings.

7.10 Ethical standards

The Board is committed to the establishment and maintenance of appropriate ethical standards.

8. INVESTIGATING ACCOUNTANT’S REPORT

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BDO Kendalls Corporate Finance (WA) Pty Ltd Level 8, 256 St Georges Terrace Perth WA 6000 PO Box 7426 Cloisters Square Perth WA 6850 Phone 61 9360 4200 Fax 61 9481 2524 [email protected] www.bdo.com.au

Our ref: SA:/SM.

ABN 27 124 031 045

31 August 2007

The Directors Laserbond Limited PO Box 597 Ingleburn NSW 1890

Dear Sirs

I N V E S T I G AT I N G A C C O U N T AN T ’ S R E P O R T

1. Introduction

We have prepared this Investigating Accountant’s Report (“ Report ”) on historical financial information of Laserbond Limited (“ Laserbond ” or “ the Company ”) for inclusion in a Prospectus.

The Prospectus will offer a minimum of 12,600,000 ordinary shares at an issue price of $0.20 each together with one free attaching option for every three shares to raise a minimum of $2,520,000 before costs (“ the Offer ”). Laserbond reserve the right to accept oversubscriptions of up to an additional 2,400,000 ordinary shares at an issue price of $0.20 each together with one free attaching option for every three shares to raise an additional $480,000.

Expressions defined in the Prospectus have the same meaning in this Report.

2. Basis of Preparation

This Report has been prepared to provide investors with information on the Income Statement, Statement of Changes in Equity and the Balance Sheet as noted in Appendices 1, 2 and 3.

This Report does not address the rights attaching to the shares to be issued in accordance with the Prospectus, nor the risks associated with the investment, and has been prepared based on the complete Offer being achieved. BDO Kendalls Corporate Finance (WA) Pty Ltd (“ BDO Kendalls ”) has not been requested to consider the prospects for the Company, the shares on offer and related pricing issues, nor the merits and risks associated with becoming a shareholder and accordingly has not done so, and does not purport to do so. BDO Kendalls accordingly takes no responsibility for these matters or for any matter or omission in the Prospectus, other than responsibility for this Report. Risk factors are set out in the Prospectus.

3. Background

The Company was incorporated on 30 September 1992 as HVOF Australia Pty Limited and converted to HVOF Australia Limited, a public company on 4 May 2007. HVOF Australia Limited changed its name to Laserbond Limited on 18 May 2007.

As at 31 December 2006 the company had 1,200 ordinary shares on issue. On 28 February 2007 the members of Laserbond passed a circulating resolution to convert every one fully paid ordinary share on issue into 41,667 fully paid ordinary shares. The total number of ordinary shares on issue therefore increased from 1,200 ordinary shares to 50,000,400 ordinary shares.

The principal activity of the Company has been to specialise in the reclamation and surface engineering of industrial components operating in severe industrial environments.

4. Scope

You have requested BDO Kendalls to prepare an Investigating Accountant's Report covering the following financial information:

♦ Laserbond’s Balance Sheet as at 31 December 2006;
♦ Laserbond’s Income Statement and Statement of Changes in Equity for the year ended 30 June 2006 and the six months ended 31 December 2006;
♦ the proforma Balance Sheet as at 31 December 2006 reflecting the actual position as at that date, major transactions between that date and the date of our report and the proposed capital raising under the Prospectus; and
♦ the accounting policies applied by Laserbond in preparing its financial statements.

The historical financial information set out in the appendices to this Report has been extracted from the financial statements of the Company for the year ended 30 June 2006 and the six months ended 31 December 2006, which were audited and reviewed by BDO Kendalls Audit & Assurance (WA).

The Directors are responsible for the preparation of the historical financial information including determination of the adjustments.

We have conducted our review of the historical financial information in accordance with the Australian Auditing and Assurance Standard AUS 902 “Review of Financial Reports”. We made such inquiries and performed such procedures as we, in our professional judgment, considered reasonable in the circumstances including:

♦ a review of work papers, accounting records and other documents pertaining to balances in existence at 31 December 2006;
♦ a review of the assumptions used to compile the pro-forma Balance Sheet;
♦ a review of the adjustments made to the pro-forma historical financial information;
♦ a comparison of consistency in application of the recognition and measurement principles in Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by the Company disclosed in the appendices to this Report; and
♦ enquiry of Directors and others.

These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Our review was limited primarily to an examination of the historical financial information, the pro-forma financial information, analytical review procedures and discussions with both management and directors. A review of this nature provides less assurance than an audit and, accordingly, this Report does not express an audit opinion on the historical information or pro-forma financial information included in this Report or elsewhere in the Prospectus.

In relation to the information presented in this Report:

♦ support by another person, corporation or an unrelated entity has not been assumed;
♦ the amounts shown in respect of assets do not purport to be the amounts that would have been realised if the assets were sold at the date of this Report; and
♦ the going concern basis of accounting has been adopted.

5. Conclusion

Statement on Historical Financial Information

Based on our review, which was not an audit, nothing has come to our attention which would cause us to believe the historical financial information as set out in the Appendices to this report does not present fairly the financial performance for the year ended 30 June 2006 and the six months ended 31 December 2006 and the financial position of the Company as at 31 December 2006, in accordance with the measurement and recognition requirements (but not all of the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia.

Statement of Pro-forma Financial Information

Based on our review, which was not an audit, nothing has come to our attention which would cause us to believe the pro-forma financial information does not present fairly the financial position of the Company as at 31 December 2006, in accordance with the measurement and recognition requirements (but not all of the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia as if the pro-forma transactions had occurred on that date.

6. Subsequent Events

Apart from the matters dealt with in this Report, and having regard to the scope of our Report, to the best of our knowledge and belief, no other material transactions or events outside of the ordinary business of the Company have come to our attention that would require comment on, or adjustment to, the information referred to in our Report or that would cause such information to be misleading or deceptive.

7. Assumptions Adopted in Compiling the Pro-forma Balance Sheet

The pro-forma balance sheet post issue is shown in Appendix 2. This has been prepared based on the reviewed financial statements as at 31 December 2006 and the transactions and events relating to the issue of shares under this Prospectus. They are as follows:

Subsequent Events

♦ The members of Laserbond passed a circulating resolution to convert every one fully paid ordinary share on issue into 41,667 fully paid ordinary shares. The total number of ordinary shares on issue therefore increased from 1,200 ordinary shares to 50,000,400 ordinary shares.

Pro-forma

♦ The issue of 6,000,000 incentive options to directors at an exercise price of $0.25 and expiry date of no earlier than 30 August 2012;
♦ The issue of 1,000,000 employee options to directors at an exercise price of $0.20 and expiry date of no earlier than 30 August 2010;
♦ The issue of 750,000 ordinary shares to directors at an issue price of $0.20;
♦ The maximum issue of 12,600,000 ordinary fully paid shares at an issue price of $0.20 each together with 1 free attaching option for every 3 shares to raise $2,520,000, pursuant to the Public Offer; and
♦ The payment of expenses associated with the preparation and issue of the Prospectus and the listing of the Company amounting to $311,000. These have been netted off against the share capital raised.

8. Disclosures

BDO Kendalls Corporate Finance (WA) Pty Ltd is the corporate advisory arm of BDO Kendalls in Perth.

Neither BDO Kendalls Corporate Finance (WA) Pty Ltd nor BDO Kendalls, nor any director or executive or employee thereof, has any financial interest in the outcome of the proposed transaction except for the normal professional fee due for the preparation of this Report.

Consent to the inclusion of the Investigating Accountant’s Report in the Prospectus in the form and context in which it appears, has been given. At the date of this Report, this consent has not been withdrawn.

Yours faithfully

BDO Kendalls Corporate Finance (WA) Pty Ltd

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Sherif Andrawes

Director

APPENDIX 1 LASERBOND LIMITED INCOME STATEMENT

Sales Revenue Cost of Sales Gross Profit Other revenue Selling expenses Administration expenses R&D expenditure Finance lease expenses Repairs and maintenance Borrowing costs Other expenses Net Profit before income tax Income tax expense Net Profit after income tax	Reviewed Six months ended 31 Dec 2006 Audited Year ended 30 June 2006 $ $ 1,888,452 2,996,109 (251,933) (333,912)
	1,636,519 2,662,197
	428,746 853,814 (33,286) (68,306) (936,049) (1,471,712) (288,138) (649,102) (110,959) (309,326) (125,353) (270,404) (15,068) (12,652) (217,455) (201,079)
	338,957 533,430
	(94,368) (150,982)
	244,589 382,448

The Income Statement is to be read in conjunction with the notes to and forming part of the financial statements set out in Appendix 4.

APPENDIX 2 LASERBOND LIMITED BALANCE SHEET

Notes CURRENT ASSETS Cash and cash equivalents 2 Trade and other receivables 3 Inventory TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment 4 Intangibles Deferred tax asset TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 5 Short-term borrowings 6 Short-term provisions 7 Current tax liabilities TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term borrowings 6 Long-term provisions 7 TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 8 Share based payment reserve 9 Retained earnings 10 TOTAL EQUITY	Reviewed 31 Dec 2006 $ 695,774 1,071,500 161,069 1,928,343 374,849 14,697 43,272 432,818 2,361,161 289,715 28,060 74,880 101,632 494,287 87,574 61,317 148,891 643,178 1,717,983 1,200 - 1,716,783 1,717,983	Pro-forma Adjustments $ 2,209,000 - - 2,209,000 - - - - 2,209,000 - - - - - - - - - 2,209,000 2,359,000 616,700 (766,700) 2,209,000	Pro-forma After Issue $ 2,904,774 1,071,500 161,069
			4,137,343
			374,849 14,697 43,272
			432,818
			4,570,161
			289,715 28,060 74,880 101,632
			494,287
			87,574 61,317
			148,891
			643,178
			3,926,983
			2,360,200 616,700 950,083
			3,926,983

The pro-forma Balance Sheet after Issue is as per the Balance Sheet before Issue adjusted for the transactions relating to the issue of shares pursuant to this Prospectus. The Balance Sheet is to be read in conjunction with the notes to and forming part of the financial statements set out in Appendix 4.

APPENDIX 3 LASERBOND LIMITED STATEMENT OF CHANGES IN EQUITY

Balance at the beginning of the period Profit for the period Dividends declared in the period Total recognised for the Period Transactions with equity holders in their capacity as equity holders: Contributions of equity, net of transaction costs Issue of share based payments Total equity	Audited 30 June 2006 Reviewed 31 December 2006 Pro-forma Adjustments Pro-forma After Issue $ $ $ $ 1,332,588 1,601,950 (716,700) 835,250 382,448 244,589 - 244,589 (113,086) (129,756) - (129,756)
	1,601,950 1,716,783 (716,700) 950,083 1,200 1,200 2,359,000 2,360,200 - - 616,700 616,700
	1,603,150 1,717,983 2,209,000 3,926,983

The Statement of Changes in Equity is to be read in conjunction with the notes to and forming part of the financial statements set out in Appendix 4.

APPENDIX 4 LASERBOND LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION FOR THE PERIOD ENDED 31 DECEMBER 2006

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of the historical financial information included in this Report have been set out below.

(a) Basis of Preparation of Financial Statements

The historical financial information has been prepared in accordance with the measurement but not all the disclosure requirements of Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board and Urgent Issues Company Interpretations.

The historical financial information has also been prepared on a historical cost basis. The carrying values of recognised assets and liabilities that are hedged are adjusted to record changes in the fair value attributable to the risks that are being hedged. Non-current assets and disposal groups heldfor-sale are measured at the lower of carrying amounts and fair value less costs to sell.

Compliance with Australian equivalents to International Financial Reporting Standards (AIFRS) ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

(b) Foreign Currency Translation

The functional and presentation currency of the Company is Australian dollars.

Foreign currency transactions are translated into the functional currency using the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. Foreign exchange gains and losses resulting from settling foreign currency transactions, as well as from restating foreign currency denominated monetary assets and liabilities, are recognised in the income statement, except for differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when fair value was determined.

(c) Revenue Recognition

Revenue from the sale of goods or services is recognised in accordance with the percentage of completion method. The stage of completion is measured by reference to labour hours incurred to date as a percentage of estimated total labour hours for each contract. Where the contract outcome cannot be reliably measured, revenue is recognised only to the extent of the expenses recognised that are recoverable.

Revenue from the sale of goods or services is recognised when the service is provided.

Sale of Goods and Services

Revenue from sale of goods or services is recognised when the significant risks and rewards of ownership have passed to the buyer and can be reliably measured. Risks and rewards are considered passed to buyer when goods have been delivered to the customer.

APPENDIX 4 LASERBOND LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION FOR THE PERIOD ENDED 31 DECEMBER 2006

(c) Revenue Recognition (Continued)

Interest

Revenue is recognised as interest accrues using the effective interest method. The effective interest method uses the effective interest rate which is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial asset.

(d) Income Tax

The income tax expense for the period is the tax payable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for all temporary differences, between carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, at the tax rates expected to apply when the assets are recovered or liabilities settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. Exceptions are made for certain temporary differences arising on initial recognition of an asset or a liability if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit.

Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities, associates and interests in joint ventures where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax balances relating to amounts recognised directly in equity are also recognised directly in equity.

(e) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on a first-in first-out basis.

(f) Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation.

Plant and equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

APPENDIX 4 LASERBOND LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION FOR THE PERIOD ENDED 31 DECEMBER 2006

(g) Impairment of Assets

At each reporting date the Company assesses whether there is any indication that individual assets are impaired. Where impairment indicators exist, recoverable amount is determined and impairment losses are recognised in the income statement where the asset's carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purpose of assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Where it is not possible to estimate recoverable amount for an individual asset, recoverable amount is determined for the cash-generating unit to which the asset belongs.

(h) Financial Instruments

Recognition

Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.

Financial assets at fair value through profit and loss

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AASB 139: Financial Instruments: Recognition and Measurement. Derivatives are also categorised as held for trading unless they are designated as hedges. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the income statement in the period in which they arise.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method.

(i) Intangibles

Patents and trademarks

Patents and trademarks are recognised at cost of acquisition. Patents and trademarks have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful life.

(j) Cash and Cash Equivalents

“Cash and cash equivalents” includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(k) Trade and Other Payables

Trade and other payables represent liabilities for goods and services provided to the Company prior to the year end and which are unpaid. These amounts are unsecured and have 30-60 day payment terms.

APPENDIX 4 LASERBOND LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION FOR THE PERIOD ENDED 31 DECEMBER 2006

(l) Provisions

Provisions are recognised when the entity has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

(m) Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in income in the period in which they are incurred.

(n) Contributed Equity

Ordinary shares are classified as equity. Mandatorily redeemable preference shares (if any) are classified as liabilities.

Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. Costs directly attributable to the issue of new shares or options associated with the acquisition of a business are included as part of the purchase consideration.

(o) Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of GST except:

where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as an operating cash flow.

APPENDIX 4 LASERBOND LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION FOR THE PERIOD ENDED 31 DECEMBER 2006

(p) Share Based Payments

The Company provides benefits to employees (including directors) of the Company in the form of share-based payment transactions, whereby employees render services in exchange for shares or options over shares ("equity-settled transactions").

The fair value of options is recognised as an expense with a corresponding increase in equity (share option reserve). The fair value is measured at grant date and recognised over the period during which the holder becomes unconditionally entitled to the options. Fair value is determined by an independent valuer using a Black-Scholes option pricing model. In determining fair value, no account is taken of any performance conditions other than those related to the share price of Laserbond ("market conditions"). The cumulative expense recognised between grant date and vesting date is adjusted to reflect the directors best estimate of the number of options that will ultimately vest because of internal conditions of the options, such as the employees having to remain with the company until vesting date, or such that employees are required to meet internal sales targets. No expense is recognised for options that do not ultimately vest because internal conditions were not met. An expense is still recognised for options that do not ultimately vest because a market condition was not met.

Where the terms of options are modified, the expense continues to be recognised from grant date to vesting date as if the terms had never been changed. In addition, at the date of the modification, a further expense is recognised for any increase in fair value of the transaction as a result of the change.

Where options are cancelled, they are treated as if vesting occurred on cancellation and any unrecognised expenses are taken immediately to the income statement. However, if new options are substituted for the cancelled options and designated as a replacement on grant date, the combined impact of the cancellation and replacement options are treated as if they were a modification.

APPENDIX 4 LASERBOND LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION FOR THE PERIOD ENDED 31 DECEMBER 2006

NOTE 2. CASH AND CASH EQUIVALENTS Cash at bank Adjustments arising in the preparation of the pro-forma cash balance are summarised as follows: Reviewed balance at 31 December 2006 Proceeds from shares issued under this Prospectus Capital raising costs Proforma Balance NOTE 3. TRADE AND OTHER RECEIVABLES Trade Receivables Loan – Related Party Total Trade and other receivables NOTE 4. PROPERTY, PLANT AND EQUIPMENT Plant and Equipment – at cost Accumulated Depreciation – Plant and Equipment Motor Vehicles – at cost Accumulated Depreciation – Motor Vehicles Research and Development Equipment Accumulated Depreciation – R & D Equipment Total Property, Plant and Equipment	31 December 2006 $ 695,774 31 December 2006 $ 1,011,000 60,500 1,071,500 31 December 2006 $ 659,740 (422,496) 237,244 243,184 (129,068) 114,116 32,147 (8,658) 23,489 374,839	Pro-forma After Issue $ 2,904,774
		695,774 2,520,000 (311,000)
		2,904,774
		Pro-forma After Issue $ 1,011,000 60,500
		1,071,500
		Pro-forma After Issue $ 659,740 (422,496)
		237,244
		243,184 (129,068)
		114,116
		32,147 (8,658)
		23,489
		374,839

APPENDIX 4 LASERBOND LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION FOR THE PERIOD ENDED 31 DECEMBER 2006

NOTE 5. TRADE AND OTHER PAYABLES Trade Payables Other Payables and accruals (including annual leave accrual) Total Trade and other payables NOTE 6. BORROWINGS Loan – Related Party Hire Purchase Leases - Payable not later than 12 months - Payable between 12 months and five years Total Borrowings Analysis of Borrowings Current Non-current NOTE 7. PROVISIONS CURRENT Provision for Dividends NON-CURRENT Provision for Employee Benefits	31 December 2006 $ 75,574 214,141 289,715 31 December 2006 $ 9,056 19,004 87,574 115,634 28,060 87,574 115,634 31 December 2006 $ 74,880 61,317	Pro-forma After Issue $ 75,574 214,141
		289,715
		Pro-forma After Issue $ 9,056 19,004 87,574
		115,634
		28,060 87,574
		115,634
		Pro-forma After Issue $ 74,880
		61,317

APPENDIX 4 LASERBOND LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION FOR THE PERIOD ENDED 31 DECEMBER 2006

APPENDIX 4 LASERBOND LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION FOR THE PERIOD ENDED 31 DECEMBER 2006
31 December 2006 $ NOTE 8. CONTRIBUTED EQUITY Contributed equity 1,200 Adjustments arising in the preparation of the pro-forma balance are summarised as follows: Number of Shares Reviewed at 31 December 2006 1,200 Conversion of each ordinary share into 41,667 ordinary shares 49,999,200 Issue of shares at $0.20 each pursuant to the Prospectus 12,600,000 Issue of shares to directors at $0.20 each pursuant to the Prospectus 750,000 Capital raising costs - Pro forma balance 63,350,400 31 December 2006 $ NOTE 9. SHARE BASED PAYMENTS RESERVE Share based payments reserve - Adjustments arising in the preparation of the pro-forma balance are summarised as follows: Number of Options Reviewed balance at 31 December 2006 - Issue of 1 free attaching option for every 3 shares issued pursuant to the Prospectus at an exercise price of $0.25, expiring on or before August 2009 4,200,000 Issue of performance options to directors at $0.25 each pursuant to the Prospectus 6,000,000 Issue of employee options to directors at $0.25 each pursuant to the Prospectus 1,000,000 Pro forma balance 11,200,000	Pro-forma After Issue $ 2,360,200
	$ 1,200 - 2,520,000 150,000 (311,000)
	2,360,200
	Pro-forma After Issue $ 616,700
	$ - - 537,000 79,700
	616,700

APPENDIX 4 LASERBOND LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION FOR THE PERIOD ENDED 31 DECEMBER 2006

NOTE 9. SHARE BASED PAYMENTS RESERVE (Cont’d)

The following options issued to directors pursuant to the prospectus:

Class Performance options Employee options	Number Exercise Price Exercise Date Value 6,000,000 $0.25 30 August 2012 $0.0895 1,000,000 $0.20 30 August 2010 $0.0797 7,000,000	$ 537,000 79,700
		616,700

Using the Black and Scholes option valuation methodology, the fair value of the options were calculated. The following inputs were used:

Input Performance Options Employee Options Share Price $0.20 $0.20 Exercise Price $0.25 $0.20 Expected Volatility 50% 50% Expiry Date 30 August 2012 30 August 2010 Expected Dividends Nil Nil Risk free interest rate 6.09% 6.23% Value per option $0.0895 $0.0797 31 December 2006 Pro-forma After Issue $ $ NOTE 10. RETAINED EARNINGS Retained Earnings 1,716,783 950,083 Adjustments arising in the preparation of the pro-forma balance is summarised as follows: Reviewed balance at 31 December 2006 1,716,783 Issue of share to directors (150,000) Issue of performance options to directors (537,000) Issue of employee options to directors (79,700) Pro forma balance 950,083	Input Performance Options Employee Options Share Price $0.20 $0.20 Exercise Price $0.25 $0.20 Expected Volatility 50% 50% Expiry Date 30 August 2012 30 August 2010 Expected Dividends Nil Nil Risk free interest rate 6.09% 6.23% Value per option $0.0895 $0.0797 31 December 2006 Pro-forma After Issue $ $ NOTE 10. RETAINED EARNINGS Retained Earnings 1,716,783 950,083 Adjustments arising in the preparation of the pro-forma balance is summarised as follows: Reviewed balance at 31 December 2006 1,716,783 Issue of share to directors (150,000) Issue of performance options to directors (537,000) Issue of employee options to directors (79,700) Pro forma balance 950,083	Input Performance Options Employee Options Share Price $0.20 $0.20 Exercise Price $0.25 $0.20 Expected Volatility 50% 50% Expiry Date 30 August 2012 30 August 2010 Expected Dividends Nil Nil Risk free interest rate 6.09% 6.23% Value per option $0.0895 $0.0797 31 December 2006 Pro-forma After Issue $ $ NOTE 10. RETAINED EARNINGS Retained Earnings 1,716,783 950,083 Adjustments arising in the preparation of the pro-forma balance is summarised as follows: Reviewed balance at 31 December 2006 1,716,783 Issue of share to directors (150,000) Issue of performance options to directors (537,000) Issue of employee options to directors (79,700) Pro forma balance 950,083
	31 December 2006 $ 1,716,783
		1,716,783 (150,000) (537,000) (79,700)
		950,083

APPENDIX 4 LASERBOND LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION FOR THE PERIOD ENDED 31 DECEMBER 2006

NOTE 11: RELATED PARTY DISCLOSURES

Transactions with Related Parties and Directors Interests are disclosed in the Prospectus.

NOTE 12: COMMITMENTS AND CONTINGENCIES

At the date of the report no material commitments or contingent liabilities exist that we are aware of, other than those disclosed in the prospectus.

9. RISK FACTORS

9.1 Introduction

An investment in the Company is not risk free and prospective new investors should consider the risk factors described below, together with information contained elsewhere in this Prospectus, before deciding whether to apply for Securities.

The following is not intended to be an exhaustive list of the risk factors to which the Company is exposed.

9.2 Competition

As the technology becomes known with-in the industry, larger companies may be capable of investing the resources necessary to develop laser cladding technology and building similar lasers or utilising laser applications that would compete with the Company’s. In the Australian market, timely expansion into Western Australia and Queensland would negate this impact and place greater emphasis on service, knowledge, reputation, reliability and an Australian wide operating presence.

9.3 Competing Technologies

Whilst the processes Laserbond uses for surface engineering and reclamation have been very successful and profitable in many applications, alternatives may be developed in the future that could have an adverse effect on the profitability of the business.

9.4 Raw Material Pricing

The Company’s metals and other raw materials are subject to world wide demand and commodity price fluctuations. The Company does use forward cover techniques to lock in long term material purchases. However, material costs are not a major factor in the Company’s cost of goods.

9.5 Manufacturing Downturn

Although the Company relies on several industry sectors, a downturn in the manufacturing and mining sector could have an adverse effect on the profitability of the business.

9.6 Key Equipment

A breakdown of key equipment and replacement delays could have an adverse effect on the profitability of the business.

9.7 Reliance on Key Management

The responsibility of overseeing the day-to-day operations and the strategic management of the Company depends substantially on its senior management and its key personnel. There can be no assurance given that there will be no detrimental impact on the Company if one or more of these employees cease their employment.

9.8 Occupational Health & Safety (OHS)

Regulatory changes to the Federal Governments OHS rules relating specifically to the business could have an adverse effect on the profitability of the business.

9.9 Economic Risks

General economic conditions, movements in interest and inflation rates and currency exchange rates may have an adverse effect on the Company’s activities, as well as on its ability to fund those activities.

Further, share market conditions may affect the value of the Company’s quoted securities regardless of the Company’s operating performance. Share market conditions are affected by many factors such as:

(a) general economic outlook;
(b) interest rates and inflation rates;
(c) currency fluctuations;
(d) changes in investor sentiment toward particular market sectors;
(e) the demand for, and supply of, capital; and
(f) terrorism or other hostilities.

9.10 Market Conditions

The market price of the Shares can fall as well as rise and may be subject to varied and unpredictable influences on the market for equities in general. Neither the Company nor the Directors warrant the future performance of the Company or any return on an investment in the Company.

9.11 Operating Risks

The operations of the Company may be affected by various factors, including difficulties in commissioning and operating plant and equipment; mechanical failure or plant breakdown; unanticipated metallurgical problems; industrial accidents; industrial disputes; and unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment.

9.12 Additional Requirements for Capital

The Company’s capital requirements depend on numerous factors. Depending on the Company’s ability to generate income from its operations, the Company may require further financing in addition to amounts raised under the capital raising. Any additional equity financing will dilute shareholdings, and debt financing, if available, may involve restrictions on financing and operating activities. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations.

9.13 Investment Speculative

The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or by investors in the Company. The above factors, and others not specifically referred to above, may in the future materially affect the financial performance of the Company and the value of the securities offered under this Prospectus. Therefore, the securities to be issued pursuant to this Prospectus carry no guarantee with respect to the payment of dividends, returns of capital or the market value of those securities.

Potential investors should consider that the investment in the Company is speculative and should consult their professional advisers before deciding whether to apply for securities pursuant to this Prospectus.

10. MATERIAL CONTRACTS

The Directors consider that the material contracts described below are the contracts which an investor would reasonably regard as material and which investors and their professional advisers would reasonably expect to find described in this Prospectus for the purpose of making an informed assessment of the Offer.

The following is a summary only of the material contracts and their substantive terms.

10.1 Grant Agreement – Industry Research and Development Board

On 14 February 2005, the Company entered into an agreement with the Industry Research and Development Board (IRDR) on behalf of the Commonwealth of Australia for the payment of a grant of funds for use for the project of developing laser coating technologies.

The grant is subject to:

(a) the Commonwealth having sufficient program funding available at the time a payment is due to the Company; and
(b) the Company demonstrating satisfactory progress and expenditure on the Project in accordance with the agreement.

The material terms of the agreement are as follows:

(a) (Grant): the Grant is for a maximum amount of $976,141 which is a dollar for dollar match to the Company’s expenditure on the specified research and development projects. The total budget for the project was $1,952,282;
(b) (Project): the project will develop laser coating as high performance, repeatable and user-friendly surface enhancement and reclamation system and expand the range of materials to which it can be efficiently applied. The project will also develop processes to enable the coating of materials of extreme hardness or high performance on a range of substrates using an enhanced laser coating system (Project);
(c) (Conduct of Project): the Company must use the grant solely for the Project and in accordance with a budget specified in the agreement and the terms of the agreement;
(d) (Project Duration):
(i) Commencement Date: 10 September 2004

(ii) Completion Date: 9 September 2007;

(e) (Payments): progress payments will be made if the Commonwealth is satisfied that the Company has incurred the relevant eligible expenditure, achieved satisfactory progress on the Project having regard to various performance milestones set out in the Deed, submitted all progress reports due and met its other obligations

under the agreement. Progress payments are paid to the Company as the progress reports are submitted.

(f) (Completion): The final payment will be made to the Company when the Project has been completed to the satisfaction of the Commonwealth and the Company has provided all reports and performed according to the agreement.
(g) (Termination): the Commonwealth may terminate the agreement by notice to the Company if the Company is in breach of a term or warranty of the agreement, or becomes insolvent, going into administration or receivership. On termination the Commonwealth is no longer obliged to make payments and the Commonwealth may by notice to the Company require them to repay some or all of the Grant.

10.2 Directors’ Deeds of Indemnity and Access

The Company intends to enter into a deed of indemnity and access with each of its Directors. The deeds also provide for access to Board papers and insurance for a period of 7 years after the Director ceases to be an officer of the Company.

11. ADDITIONAL INFORMATION

11.1 Rights Attaching to Securities

Ordinary Shares

The rights, privileges and restrictions attaching to Shares can be summarised as follows:

(a) General Meetings

Shareholders are entitled to be present in person, or by proxy, attorney or representative to attend and vote at general meetings of the Company.

Shareholders may requisition meetings in accordance with Section 249D of the Corporations Act and the Constitution of the Company.

(b)

Voting Rights

Subject to any rights or restrictions for the time being attached to any class or classes of shares, at general meetings of shareholders or classes of shareholders:

(i) each shareholder entitled to vote may vote in person or by proxy, attorney or representative;
(ii) on a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a shareholder has one vote; and
(iii) on a poll, every person present who is a shareholder or a proxy, attorney or representative of a shareholder shall, in respect of each fully paid share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for the share, but in respect of partly paid shares shall have such number of votes as bears the same proportion to the total of such shares registered in the shareholder’s name as the amount paid (not credited) bears to the total amounts paid and payable (excluding amounts credited).

(c) Dividend Rights

Subject to the rights of persons (if any) entitled to shares with special rights to dividend the Directors may declare a final dividend out of profits in accordance with the Corporations Act and may authorise the payment or crediting by the Company to the shareholders of such a dividend. The Directors may authorise the payment or crediting by the Company to the shareholders of such interim dividends as appear to the Directors to be justified by the profits of the Company. Subject to the rights of persons (if any) entitled to shares with special rights as to dividend all dividends are to be declared and paid according to the amounts paid or credited as paid on the shares in respect of which the dividend is paid. Interest

may not be paid by the Company in respect of any dividend, whether final or interim.

(d) Winding-Up

If the Company is wound up, the liquidator may, with the authority of a special resolution of the Company, divide among the shareholders in kind the whole or any part of the property of the Company, and may for that purpose set such value as he considers fair upon any property to be so divided, and may determine how the division is to be carried out as between the shareholders or different classes of shareholders. The liquidator may, with the authority of a special resolution of the Company, vest the whole or any part of any such property in trustees upon such trusts for the benefit of the contributories as the liquidator thinks fit, but so that no shareholder is compelled to accept any shares or other securities in respect of which there is any liability. Where an order is made for the winding up of the Company or it is resolved by special resolution to wind up the Company, then on a distribution of assets to members, shares classified by ASX as restricted securities at the time of the commencement of the winding up shall rank in priority after all other shares.

(e) Transfer of Shares

Generally, shares in the Company are freely transferable, subject to formal requirements, the registration of the transfer not resulting in a contravention of or failure to observe the provisions of a law of Australia and the transfer not being in breach of the Corporations Act or the Listing Rules.

(f)

Variation of Rights

Pursuant to Section 246B of the Corporations Act, the Company may, with the sanction of a special resolution passed at a meeting of shareholders vary or abrogate the rights attaching to shares.

If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class), whether or not the Company is being wound up may be varied or abrogated with the consent in writing of the holders of three-quarters of the issued shares of that class, or if authorised by a special resolution passed at a separate meeting of the holders of the shares of that class.

Options

The terms and conditions of the Options are as follows:

(a) each Option entitles the holder to one (1) Share in the Company;
(b) the Options are exercisable at any time on or prior to 5.00pm (EST) on 31 August 2009 (Expiry Date) by completing an option exercise form and delivering it together with the payment for the number of Shares in respect of which the Options are exercised to the registered office of the Company;

(c) the Option exercise price is $0.25 per option;
(d) an Option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the Option can be exercised;
(e) subject to the Corporations Act, the Listing Rules and the Company’s Constitution, the Options are freely transferable;
(f) all Shares issued upon exercise of the Options will rank pari passu in all respects with the Company’s then issued Shares. The Company will apply for quotation of the Options and all Shares issued upon exercise of the Options on ASX;
(g) there are no participating rights or entitlements inherent in the Options and holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 Business Days after the issue is announced. This will give Option holders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue; and
(h) if at any time the issued capital of the Company is reconstructed, all rights of an Option holder are to be changed in a manner consistent with the Corporations Act and the Listing Rules.

11.2 Employee Share Option Plan

The Company has established an employee share option plan (ESOP) in order to provide an incentive for employees to participate in the future growth of the Company. The ESOP will be administered in accordance with the ESOP rules, which are summarised below.

11.2.1 Option Issue

The Board may, in its absolute discretion, offer options to eligible participants under the ESOP (Employee Options). The Employee Options will be issued for no consideration and each Employee Option will carry the right in favour of the Employee Option holder to subscribe for one Share in the capital of the Company.

An eligible participant is a full or part time employee or a Director of the Company or any associated body corporate. The Company must obtain Shareholder approval before the participation under the ESOP of an eligible participant who is a Director, or related party of the Company.

The Employee Options issued under the ESOP are not transferable except with the prior written consent of the Board.

11.2.2 Exercise Price

The exercise price for the Employee Options granted under the ESOP will be the price fixed by the Board prior to the grant of the Employee Option.

11.2.3 Exercise Restrictions

The Employee Options granted under the ESOP may be subject to such other restrictions on exercise and may be fixed by the Directors prior to the grant of the Employee Options including, without limitation, length of service by the employee and threshold prices at which Shares are traded on ASX. Any restrictions so imposed by the Directors must be set out on the Employee Option certificate.

11.2.4 Participation in Dividends, Rights Issues and Bonus Issues

The Employee Options granted under the ESOP do not give any right to participate in dividends or rights issues until Shares are allotted pursuant to the exercise of the relevant Employee Option. The number of Shares issued on the exercise of Employee Options will be adjusted for bonus issues made prior to the exercise of the Employee Options.

11.2.5 Eligibility

Under the ESOP, the Director’s may invite full or part time employees, or a Director of the Company, or any Associated Body Corporate, to participate in the ESOP and receive Employee Options. The number of Shares underlying Employee Options granted under the ESOP when aggregated with:

(a) the maximum number of Shares that could be issued on exercise of unexercised Employee Options and any other employee incentive share or Employee Option plan; and
(b) the number of Shares issued on exercise of Employee Options under the ESOP and any other employee incentive share or Employee Option plan in the last 5 years, must not exceed 5% of the issued Shares at the time of grant of the Employee Options. This restriction will not apply if the Company has a current prospectus under which the Employee Options are granted.

11.2.6 Term of Employee Options

The Employee Options granted under the ESOP have a term specified on the face of each certificate.

11.2.7 Subdivision or Consolidation

If the Company, after having granted any Employee Option, reduces it’s issued Share capital or subdivides or consolidates its Shares, the number of the Shares issued to the Employee Option holder on exercise of an Employee Option will be reduced, subdivided or consolidated, as the case may be, in accordance with the ASX Listing Rules.

11.3 Disclosure of Interests

Directors are not required under the Company’s Constitution to hold any Shares. As at the date of this Prospectus, the Directors have relevant interests in Securities as set out in the table below:

Director	Shares	Options	Performance Options
Wayne Hooper	7,728,395	Nil	Nil
Greg Hooper	8,000,064	Nil	Nil
Tim McCauley	Nil	Nil	Nil

As at the date that the Company is admitted to the Official List, the Directors will have relevant interests in Securities as set out in the table below:

Director	Shares	Options	Performance Options
Wayne Hooper	7,728,395	Nil	2,000,0003 & 4
Greg Hooper	8,000,064	Nil	2,000,0003 & 4
Tim McCauley	750,0001	1,000,0001 & 2	2,000,0003 & 4

These securities will be issued to Mr McCauley prior to the Company being admitted to the Official List of ASX.
These options are exercisable at $0.20 on or before 30 August 2010, subject to the condition that one third of these options will vest on the anniversary of the grant date each year.
These Options are exercisable at $0.25 on or before 30 August 2012 (please refer to section 11.7 for the full terms and conditions of these performance options).
These securities will be issued to the Directors prior to the Company being admitted to the Official List of ASX.

11.4 Remuneration

The Company’s Constitution provides that the remuneration of nonexecutive Directors will be not more than the aggregate fixed sum determined by a general meeting. The aggregate remuneration for nonexecutive Directors has been set at an amount not to exceed $200,000 per annum.

Following completion of the Offer, it is proposed that each of the current Directors will enter into executive services agreements on ordinary commercial terms. Subject to due consideration and approval by the Board, it is currently proposed that the current Directors will be paid the following salaries:

Director	20081
Greg Hooper	$180,000
Wayne Hooper	$180,000
Tim McCauley	$150,000

1 It is proposed that the Directors will each be paid these salaries (plus superannuation and the use of a vehicle and all vehicle expenses).

11.5 Fees and Benefits

Other than as set out below or elsewhere in this Prospectus, no:

(a) Director of the Company;
(b) person named in this Prospectus as performing a function in a professional advisory or other capacity in connection with the preparation or distribution of this Prospectus;
(c) promoter of the Company; or
(d) underwriter (but not a sub-underwriter) to the issue or a financial services licensee named in the Prospectus as a financial services licensee involved in the issue,

has, or had within 2 years before lodgement of this Prospectus with the ASIC, any interest in:

(i) the formation or promotion of the Company;
(ii) any property acquired or proposed to be acquired by the Company in connection with its formation or promotion or in connection with the offer of Securities under this Prospectus; or
(iii) the offer of Securities under this Prospectus,

and no amounts have been paid or agreed to be paid and no benefits have been given or agreed to be given to any of those persons as an inducement to become, or to qualify as, a Director of the Company or for services rendered in connection with the formation or promotion of the Company or the offer of Securities under this Prospectus.

The Company has advanced Greg Hooper an amount of $60,500. This loan is interest free and is repayable prior to 31 December 2009.

The Company currently leases the premises in which it operates, from W & R Hooper Investments Pty Limited. This company is associated with Rex and Wayne Hooper. Rex Hooper is a former director and Wayne is current Director of Laserbond. As at the date of this Prospectus, they are both substantial shareholders of Laserbond. All rent is paid at the prevailing market value which is assessed by an independent registered valuer every 3 years. The current rent paid by the Company is $92,800 per annum and the lease is for a term of 1 year after which a longer term lease will be renegotiated.

BDO Kendal Audit and Assurances (WA) (BDO Kendal Audit) have acted as auditor to the Company. No fees will be paid to BDO Kendal Audit in relation to the Offer. During the 24 months preceding lodgement of this Prospectus with the ASIC, BDO Kendalls has received a total of $30,000 from the Company.

BDO Kendalls Corporate Finance (WA) Pty Ltd (BDO Kendal Corporate) has acted Investigating Accountant and has prepared an Investigating Accountant’s Report which has been included in Section 8 of this Prospectus. The Company estimates it will pay BDO Kendal Corporate a total of $10,000 for these services. Subsequently, fees will be charged in accordance with normal charge out rates. During the 24 months preceding

lodgement of this Prospectus with the ASIC, BDO Kendalls has not received any other fees from the Company.

Steinepreis Paganin has acted as the solicitors to the Company in relation to the Offer and has been involved in due diligence enquiries on legal matters. The Company estimates it will pay Steinepreis Paganin $30,000 for these services. Subsequently, fees will be charged in accordance with normal charge out rates. During the 24 months preceding lodgement of this Prospectus with the ASIC, Steinepreis Paganin has not received any other fees for legal services.

Westar Capital Limited has acted as the Manager to the Offer. The Company will pay Westar Capital Limited a fee of $80,000 for these services plus a commission of 6% in respect of valid applications lodged and accepted by the Company and bearing the stamp of Westar.

11.6 Consents

Each of the parties referred to in this section:

(a) does not make, or purport to make, any statement in this Prospectus other than those referred to in this section; and
(b) to the maximum extent permitted by law, expressly disclaim and take no responsibility for any part of this Prospectus other than a reference to its name and a statement included in this Prospectus with the consent of that party as specified in this section.

BDO Kendalls has given their written consent to being named as auditor and Investigating Accountant in this Prospectus and to the inclusion of the Investigating Accountant’s Report in Section 8 in the form and context in which the report is included. BDO Kendalls has not withdrawn its consent prior to lodgement of this Prospectus with the ASIC.

Steinepreis Paganin has given its written consent to being named as the solicitor to the Company in this Prospectus. Steinepreis Paganin has not withdrawn its consent prior to the lodgement of this Prospectus with the ASIC.

Registries Limited has given its written consent to being named as the Company’s Share Registry in this Prospectus and has not withdrawn its consent prior to lodgement of this Prospectus with the ASIC.

Westar Capital Limited has given its written consent to being named as the Manager to the Offer in this Prospectus and has not withdrawn its consent prior to lodgement of this Prospectus with the ASIC.

11.7 Performance Options

The material terms and conditions of the Performance Options are as follows

(a) each Performance Option entitles the holder to one (1) Share in the Company;
(b) subject to paragraph (c), the Performance Options are exercisable at any time on or prior to 5.00pm (EST) on 30 August 2012 (Expiry

Date) by completing an option exercise form and delivering it together with the payment for the number of Shares in respect of which the Performance Options are exercised to the registered office of the Company;

(c) the Performance Options are only exercisable upon the volume weighted average price of Share quotes on ASX remaining above $0.40 for a consecutive period of thirty (30) days;
(d) the Performance Option exercise price is $0.25 per Performance Option;
(e) subject to the Corporations Act, the Listing Rules and the Company’s Constitution, the Performance Options are freely transferable;
(f) all Shares issued upon exercise of the Performance Options will rank pari passu in all respects with the Company’s then issued Shares. The Company will apply for quotation of all Shares issued upon exercise of the Performance Options on ASX. The Company will not apply for quotation of the Performance Options on ASX;
(g) there are no participating rights or entitlements inherent in the Performance Options and holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Performance Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 Business Days after the issue is announced. This will give option holders the opportunity to exercise their performance Options prior to the date for determining entitlements to participate in any such issue; and
(h) if at any time the issued capital of the Company is reconstructed, all rights of a Performance Option holder are to be changed in a manner consistent with the Corporations Act and the Listing Rules.

11.8 Restricted Securities

Certain existing security holders may be required to enter into agreements which restrict dealings in Securities held by them. These agreements will be entered into in accordance with the Listing Rules.

11.9 Expenses of the Offer

Assuming the Company raises $2,520,000, the total expenses of the Offer are estimated to be approximately $311,000 and are expected to be applied towards the items set out in the table below:

Item of Expenditure	Amount ($)
ASIC fees	$2,010
ASX fees	$14,641
Advisers’ fees	$40,000
Manager’s fees	$80,000

Commissions on Application Forms Printing Miscellaneous TOTAL	$156,000* $8,000 $10,349
	$311,000

In the event the Offer is fully oversubscribed, this amount may increase up to $180,000.

11.10 Litigation

As at the date of this Prospectus, the Company is not involved in any legal proceedings and the Directors are not aware of any legal proceedings pending or threatened against the Company.

11.11 Electronic Prospectus

Pursuant to Class Order 00/044, the ASIC has exempted compliance with certain provisions of the Corporations Act to allow distribution of an electronic prospectus and electronic application form on the basis of a paper prospectus lodged with the ASIC, and the publication of notices referring to an electronic prospectus or electronic application form, subject to compliance with certain conditions.

If you have received this Prospectus as an electronic Prospectus, please ensure that you have received the entire Prospectus accompanied by the relevant application forms. If you have not, please email the Company at [email protected] and the Company will send you, for free, either a hard copy or a further electronic copy of the Prospectus or both. Alternatively, you may obtain a copy of the Prospectus from the Company’s website at www.laserbond.com.au.

The Company reserves the right not to accept an application form from a person if it has reason to believe that when that person was given access to the electronic application form, it was not provided together with the electronic Prospectus and any relevant supplementary or replacement prospectus or any of those documents were incomplete or altered.

11.12 Taxation

The acquisition and disposal of Securities in the Company will have tax consequences, which will differ depending on the individual financial affairs of each investor. All potential investors in the Company are urged to obtain independent financial advice about the consequences of acquiring Securities from a taxation viewpoint and generally.

To the maximum extent permitted by law, the Company, its officers and each of their respective advisors accept no liability and responsibility with respect to the taxation consequences of subscribing for Securities under this Prospectus.

11.13 Forecasts

The Company is a thermal spraying technology company. Given the uncertainties associated with forecasting future revenue, the Directors

believe that reliable forecasts can not be prepared and accordingly have not included forecasts in this Prospectus.

12. DIRECTORS’ AUTHORISATION

This Prospectus is issued by the Company and its issue has been authorised by a resolution of the Directors.

In accordance with Section 720 of the Corporations Act, each Director has consented to the lodgement of this Prospectus with the ASIC.

Tim McCauley For and on behalf of LASERBOND LIMITED

13. GLOSSARY

Where the following terms are used in this Prospectus they have the following meanings:

A$ or $ means an Australian dollar.

Application Form means the application form accompanying this Prospectus relating to the Offer.

ASIC means Australian Securities & Investments Commission.

ASX means ASX Limited (ABN 98 008 624 691).

Board means the board of Directors as constituted from time to time.

Business Day means a week day when trading banks are ordinarily open for business in Perth, Western Australia.

Company or Laserbond means Laserbond Limited (ABN 24 057 636 692).

Closing Date means the closing date of the Offer as set out in Section 4.3.

Constitution means the constitution of the Company.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the directors of the Company at the date of this Prospectus.

EST means Eastern Standard Time, Sydney, New South Wales.

Exposure Period means the period of 7 days after the date of lodgement of this Prospectus, which period may be extended by the ASIC by not more than 7 days pursuant to Section 727(3) of the Corporations Act.

Listing Rules means the official listing rules of ASX.

Manager or Westar means Westar Capital Limited (ABN 28 009 372 838).

Offer means the offer of Shares and Options pursuant to this Prospectus as outlined in Section 5.

Official List means the Official List of ASX.

Official Quotation means official quotation by ASX in accordance with the Listing Rules.

Option means an option to subscribe for a Share subject to the terms and conditions set out in Section 11.1 of this Prospectus.

Performance Option means an option to subscribe for a Share subject to the terms and conditions set out in Section 11.7 of this Prospectus.

Prospectus means this prospectus.

Securities means Shares and Options.

Share means a fully paid ordinary share in the capital of the Company.

Share Registry means Registries Limited.

Shareholder means a holder of Shares.

� PIN CHEQUE(S) HERE

Application form Laserbond Limited

Broker Reference – Stamp Only

ABN 24 057 636 692

Fill out this Application form if you wish to apply for shares in Laserbond Limited

Broker Code Advisor Code • Please read the Prospectus dated 3 September 2007. • Follow the instructions to complete this Application form (see reverse). • Print clearly in capital letters using black or blue pen. A B Number of shares you are applying for Total amount payable x $0.20 per share = Minimum of 10,000 shares to be applied for, and thereafter in multiples of 1,000 shares. C Write the name(s) you wish to register the shares in (see reverse for instructions) Applicant 1 Name of Applicant 2 or < Account Designation > Name of Applicant 3 or < Account Designation > D Write your postal address here Number / Street Suburb/Town State Postcode E CHESS participant – Holder Identification Number (HIN) Important please note sections C & D do not match exactly with your registration details if the name & address details above in X held at CHESS, any Securities issued as a result of your application will be held on the Issuer Sponsored subregister.

F Enter your Tax File Number(s), ABN, or exemption category Applicant #1 Applicant #2 Applicant #3

G Cheque payment details

Please enter details of the cheque(s) that accompany this application. Name of drawer of cheque Cheque BSB No. Account Cheque Amount A$ No. No.

==> picture [504 x 49] intentionally omitted <==

H Contact telephone number (daytime/work/mobile)	H Contact telephone number (daytime/work/mobile)	H Contact telephone number (daytime/work/mobile)	H Contact telephone number (daytime/work/mobile)	H Contact telephone number (daytime/work/mobile)	H Contact telephone number (daytime/work/mobile)		I Email address	I Email address	I Email address

By submitting this Application form, I/We declare that this Application is completed and lodged according to the Prospectus and the instructions on the reverse of the Application form and declare that all details and statements made by me/us are compete and accurate. I/We agree to be bound by the constitution of Laserbond Limited (the Company). I/We was/were given access to the Prospectus together with the application form. I/We represent, warrant and undertake to the Company that our subscription for the above shares will not cause the Company or me/us to violate the laws of Australia or any other jurisdiction which may be applicable to this subscription for shares in the Company.

Guide to the Application Form

YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE COMPLETING THIS APPLICATION FORM.

Please complete all relevant sections of the appropriate Application Form using BLOCK LETTERS. These instructions are cross-referenced to each section of the Application Form.

Instructions

If applying for Shares insert the number of Shares for which you wish to subscribe at Item A (not less than 10,000 and then in multiples of 1,000 Multiply by $ 0.20 AUD to calculate the total for Shares and enter the $amount at B.

Write your full name . Initials are not acceptable for first names.

Enter your Australian tax file number ("TFN") or ABN or exemption category, if you are an Australian resident. Where applicable, please enter the TFN /ABN of each joint Applicant. Collection of TFN's is authorised by taxation laws. Quotation of your TFN is not compulsory and will not affect your Application Form.

Enter your postal address for all correspondence. All communications to you from he Company will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered.

If you are sponsored in CHESS by a stockbroker or other CHESS participant, you may enter your CHESS HIN if you would like the allocation to be directed to your HIN.

Complete cheque details as requested. Make your cheque payable to Laserbond Limited – Share Offer Account in Australian currency, cross it and mark it "Not negotiable" . Cheques must be made in Australian currency, and cheques must be drawn on an Australian Bank.

Enter your contact details so we may contact you regarding your Application Form or Application Monies.

NB: your registration details provided must match your

CHESS account exactly.

Enter your email address so we may contact you regarding your Application Form or Application Monies or other correspondence.

Correct Forms of Registrable Title

Note that ONLY legal entities can hold the Shares. The Application must be in the name of a natural person(s), companies or other legal entities acceptable to the Company. At least one full given name and surname is required for each natural person.

Examples of the correct form of registrable title are set out below.

Type of Investor	Correct Form of Registrable Title	Incorrect Form of Registrable Title
Individual	Mr John David Smith	J D Smith
Company	ABC Pty Ltd	ABC P/L or ABC Co
Joint Holdings	Mr John David Smith & Mrs Mary Jane Smith	John David & Mary Jane Smith
Trusts	Mr John David Smith	John Smith Family Trust
Deceased Estates	Mr Michael Peter Smith	John Smith (deceased)
Partnerships	Mr John David Smith & Mr Ian Lee Smith	John Smith & Son
Clubs/Unincorporated Bodies	Mr John David Smith	Smith Investment Club
Superannuation Funds	John Smith Pty Limited	John Smith Superannuation Fund

Lodgement

Mail your completed Application Form with cheque(s) attached to the following address:

Mailing address:	Delivery address:
LaserbondLimited	LaserbondLimited
C/- RegistriesLimited	C/- RegistriesLimited
POBox R67	Level 2
ROYAL EXCHANGE NSW 1223	28Margaret Street
	SYDNEY NSW 2000

It is not necessary to sign or otherwise execute the Application Form.

If you have any questions as to how to complete the Application Form, please contact Registries Limited on 02 9290 9600.

Privacy Statement:

Registries Limited advises that Chapter 2C of the Corporations Act 2001 (Cth) requires information about you as a shareholder (including your name, address and details of the shares you hold) to be included in the public register of the entity in which you hold shares. Information is collected to administer your share holding and if some or all of the information is not collected then it might not be possible to administer your share holding. Your personal information may be disclosed to the entity in which you hold shares. You can obtain access to your personal information by contacting us at the address or telephone number shown on the Application Form.

Our privacy policy is available on our website (http://www.registriesltd.com.au/help/share_privacy.html)

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LASERBOND LIMITED — Share Issue/Capital Change 2007

65215_rns_2007-09-24_499b6db4-a7bd-4def-b3ef-b4aace90d2d9.pdf