MACRO METALS LIMITED — Capital/Financing Update 2007

Sep 6, 2007

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ASX ANNOUNCEMENT

07 September 2007

LODGEMENT OF PROSPECTUS

The Directors of Brainytoys Ltd (“BRT”) wish to advise that the attached Prospectus document has today been lodged with ASIC and the ASX.

The Prospectus related to the proposed issue of 7 million shares at a price of 8.5 cents per share for a raising of $595,000 through Mr Dennis McIntyre (authorised representative of stock broker Halifax Investment Services Limited), to paid subscriber clients of the 21[st] Century Investor (a member of the Jamie McIntyre group of companies).

The issue opens on 10 September 2007.

ENDS

For further information contact: Charles Mackinnon Chairman Ph: (08) 9363 1915 Email: cmackinnon@brainytoys.com

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BRAINYTOYS LIMITED

ABN 28 001 894 033

PROSPECTUS

For the issue of up to 7,000,000 fully paid ordinary shares in the capital of the Company, to paid subscribers of the “21st Century Investor” newsletter, at a price of 8.5 cents per share to raise up to $595,000 (Offer). The Directors reserve the right to accept oversubscriptions of up to 2,000,000 fully paid ordinary shares in the capital of the Company at a price of 8.5 cents per share to raise up to $170,000.

Important Notice

This document is important and should be read in its entirety. If after reading this Prospectus you have any questions about the securities being offered under this Prospectus or any other matter, then you should consult your stockbroker, accountant or other professional adviser.

The securities offered by this Prospectus should be considered as speculative.

TABLE OF CONTENTS

TABLE	OF CONTENTS................................................................................................................... 1
IMPORTANT NOTICE ................................................................................................................... 1
1.	CORPORATE DIRECTORY.............................................................................................. 2
2.	DETAILS OF THE OFFER.................................................................................................. 3
3.	PURPOSE AND EFFECT OF THE OFFER........................................................................... 7
4.	CONSOLIDATED STATEMENT OF FINANCIAL POSITION............................................... 8
5.	RIGHTS ATTACHING TO SHARES................................................................................. 10
6.	RISK FACTORS............................................................................................................. 13
7.	ADDITIONAL INFORMATION ...................................................................................... 17
8.	DIRECTORS’ CONSENT................................................................................................ 23
9.	DEFINITIONS................................................................................................................ 24
APPLICATION FORM................................................................................................................. 25

IMPORTANT NOTICE

This Prospectus is dated 7 September 2007 and a copy of this Prospectus was lodged with the ASIC on that date. The ASIC takes no responsibility for the content of this Prospectus.

The Expiry Date of the Prospectus is 13 months after the date it was lodged with the ASIC. No securities will be allotted or issued on the basis of this Prospectus after the Expiry Date.

Applications for Shares offered pursuant to this Prospectus can only be submitted on an original Application Form which accompanies this Prospectus.

The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and therefore persons into whose possession this document comes should seek advice on and observe any such restrictions. Any failure to comply with these restrictions constitutes a violation of those laws. This Prospectus does not constitute an offer of Shares in any jurisdiction where, or to any person to whom, it would be unlawful to issue in this Prospectus.

No person is authorised to give information or to make any representation in connection with this Prospectus, which is not contained in the Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Company in connection with this Prospectus.

In making representations in this Prospectus regard has been had to the fact that the Company is a disclosing entity for the purposes of the Corporations Act and certain matters may reasonably be expected to be known to investors and professional advisers whom potential investors may consult.

A copy of this Prospectus can be downloaded from the website of the Company at www.brainytoys.com. 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 this Prospectus from within Australia.

The Corporations Act prohibits any person passing onto another person an Application Form for Shares 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.

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 Application Form it was not provided together with the electronic Prospectus and any relevant supplementary or replacement Prospectus.

Timetable and Important Dates

Lodgement of Prospectus with the ASIC and ASX 7 September 2007 Opening Date 10 September 2007 Closing Date 22 October 2007 Expected date of Official Quotation of the Shares 31 October 2007

*The Directors reserve the right to bring forward or extend the Closing Date at any time after the Opening Date without notice. As such, the date the Shares are expected to commence trading on ASX may vary with any change in the Closing Date.

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1. CORPORATE DIRECTORY

Directors

Share Registry*

Mr Alexander Aguero Mr Charles MacKinnon Mr Graham Nicol

Computershare Investor Services Pty Limited Level 2 45 St Georges Terrace PERTH WA 6000

Telephone: (08) 9323 2000 Facsimile: (08) 9323 2033

Company Secretary

Solicitors to the Company

Mr Graham Nicol

Steinepreis Paganin Level 4, Next Building 16 Milligan Street PERTH WA 6000

Registered Office

Auditors*

6B Bowen Street O’CONNOR WA 6163

Telephone: (08) 9331 8441 Facsimile: (08) 9331 8452

BDO Chartered Accountants and Advisors Level 8 256 St Georges Terrace Perth WA 6000

• These parties are included for information purposes only. They have not been involved in the preparation of this Prospectus.

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2. DETAILS OF THE OFFER

2.1 Shares made available for Subscription

By this Prospectus, the Company invites paid subscribers of the “21st Century Investor” newsletter to apply for a total of up to 7,000,000 Shares at an issue price of 8.5 cents per Share payable in full on application to raise up to $595,000.

The Directors reserve the right to accept oversubscriptions from paid subscribers of the “21st Century Investor” newsletter, up to a maximum of 2,000,000 Shares which would raise an additional $170,000.

All of the Shares offered under this Prospectus will rank equally with Shares on issue at the date of this Prospectus.

The Offer is not underwritten.

2.2 Opening and Closing Dates of the Offer

The Opening Date of the Offer will be 10 September 2007 at 9:00am WST and the Closing Date will be 22 October 2007 at 5:00pm WST. The Directors reserve the right to close the Offer early or extend the Closing Date (as the case may be), should it be considered by them necessary to do so.

2.3

Application for Shares

Applications for Shares must be made using the appropriate Application Form accompanying this Prospectus.

Payment for the Shares must be made in full at the issue price of 8.5 cents per Share. Applications for Shares must be for a minimum of 25,000 Shares and thereafter in multiples of 5,000 Shares.

Completed Application Forms and accompanying cheques must be mailed or delivered to:

Attention: Dennis McIntyre (as authorised representative of Halifax Investor Services) 21st Century Investor PO BOX 4376 CASTLECRAG NSW 2068

or

Attention: Catherine Vann Brainytoys Limited 6B Bowen St O’CONNOR WA 6163

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

2.4 Minimum Subscription

It is a condition of the Offer that a minimum of 3,000,000 Shares are applied for pursuant to this Prospectus (Minimum Subscription). In the event the Minimum

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Subscription is not achieved within four (4) months of the date of lodgement of the Prospectus with the ASIC, no Shares will be issued to any of the Applicants, all application monies will be returned and all applications will otherwise be dealt with in accordance with the Corporations Act.

2.5

Allotment of Shares

Allotment of Shares will take place as soon as practicable after the Minimum Subscription is raised. Thereafter, allotment will occur on a progressive basis.

The Company is unable to issue more than 6,250,000 Shares without shareholder approval. The Company will seek shareholder approval which will enable it to issue the remaining 2,750,000 Shares offered under this Prospectus as soon as practicable. It is anticipated that shareholder approval will be obtained on or about 22 October 2007.

Application moneys will be held in a separate subscription account until allotment. This account will be established and kept by the Company in trust for each applicant. Any interest earned on the application moneys will be for the benefit of the Company and will be retained by the Company irrespective of whether allotment takes place and each applicant waives the right to claim any interest.

The Directors in conjunction with Dennis McIntyre, as authorised representative of Halifax Investor Services, will determine the allottees of all the Shares. The Directors reserve the right to reject any application or to allocate any applicant fewer Shares than the number applied for.

Where the number of Shares allotted is less than the number applied for, the surplus monies will be returned by cheque as soon as practicable after the Closing Date. Where no allotment is made, the amount tendered on application will be returned in full by cheque as soon as practicable after the Closing Date. Interest will not be paid on monies refunded.

2.6 Market Price of Fully Paid Shares

The Company is a disclosing entity for the purposes of the Corporations Act and its Shares are enhanced disclosure securities quoted on ASX.

The highest and lowest market sale prices of the Company’s Shares on ASX during the 3 months immediately preceding the date of lodgement of this Prospectus with the ASIC and the respective dates of those sales were:

Highest: $0.14 per Share on 18 and 19 July 2007. Lowest: $0.07 per Share on 12 July 2007.

The latest available closing sale price of the Company’s Shares on ASX prior to the lodgement of this Prospectus with the ASIC was $0.10 on 6 September 2006.

2.7

ASX Listing

The Company’s Shares are currently traded on ASX. Application will be made within 7 days after the date of issue of this Prospectus to ASX for permission for the Shares issued pursuant to this Prospectus to be listed for official quotation by ASX.

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In the event that ASX does not grant permission for the official quotation of the Shares within 3 months after the date of issue of this Prospectus (or such period as is varied by the ASIC), none of the Shares offered by this Prospectus will be allotted or issued and the Company will repay all application monies for the Shares within the time period set out under the Corporations Act, without interest.

2.8

Restrictions on the Distribution of the Prospectus

The distribution of this Prospectus outside the Commonwealth of Australia may be restricted by law.

This Prospectus is not intended to, and does not, constitute an offer of, or invitation to apply for, securities in any place which, or to any person to whom, the making of such offer or invitation would not be lawful under the laws of any jurisdiction outside Australia.

2.9 Clearing House Electronic Sub-Register System (“CHESS”) and Issuer Sponsorship

The Company will not be issuing share certificates. The Company will apply to ASX to participate in CHESS, for those investors who have, or wish to have, a sponsoring stockbroker. Investors who do not wish to participate through CHESS will be issuer sponsored by the Company. Because the sub-registers are electronic, ownership of securities can be transferred without having to rely upon paper documentation.

Electronic registers mean that the Company will not be issuing certificates to investors. Instead, investors will be provided with a statement (similar to a bank account statement) that sets out the number of Shares allotted to them under this Prospectus. The notice will also advise holders of their Holder Identification Number (HIN) and explain, for future reference, the sale and purchase procedures under CHESS and issuer sponsorship.

Further monthly statements will be provided to holders in circumstances in which there have been any changes in their security holding in the Company during the preceding month.

2.10

Dividend Policy

The Company’s ability to pay dividends depends on factors such as the earnings, taxation and financial position of the Company. It is the current intention of the Directors to pay dividends if the profitability of the Company’s operations permits. The level of franking of any dividends will be determined by the level of Australian tax paid by the Company.

Until the Company generates sufficient profits, it will not be in a position to declare any dividend and, accordingly, the Directors will not formulate a dividend policy until a profit is generated.

2.11 Taxation

The Company does not propose to give any taxation advice and neither the Company, its Directors nor its officers accept any responsibility or liability for any taxation consequence to applicants. Applicants should consult their own professional tax advisers in regard to taxation implications of the Offer.

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2.12 Privacy Act

If you complete an application for Shares, you will be providing personal information to the Company (directly or by the Company’s share registry). The Company collects, holds and will use that information to assess your application, service your needs as a Shareholder, facilitate distribution payments and corporate communications to you as a Shareholder and carry out administration.

The information may also be used from time to time and disclosed to persons inspecting the register, 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 Company share registry.

You can access, correct and update the personal information that we hold about you. Please contact the Company or its registry if you wish to do so at the relevant contact numbers 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 SCH Business Rules. You should note that if you do not provide the information required on the application for Shares, the Company may not be able to accept or process your application.

2.13 Enquiries

Any questions concerning the Offer should be directed to:

Dennis McIntyre (as authorised representative of Halifax Investor Services) 21st Century Investor

Tel: 1300 664 285 Fax: (02) 9 417 8388 Email: Info@21stcenturyinvestor.com.au

or

Ms Catherine Vann Brainytoys Limited

Tel: (08) 9331 8441 Fax: (08) 9331 8452 Email: catherinev@brainytoys.com

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3. PURPOSE AND EFFECT OF THE OFFER

3.1 Purpose of the Offer

The purpose of the Offer is to raise up to approximately $595,000 with a further $170,000 in oversubscriptions. It is intended that the proceeds from the Offer will be used for working capital and in payment of the proposed acquisition of all of the issued capital of Enertec Enterprises Inc.

Item of Expenditure	Dollar Amount ($m)
Acquisition of Enertec Enterprises Inc.	161,000
Working capital and contingency	384,000
Expenses of the Offer	50,000
Total	$595,000

In the event that the Minimum Subscription is reached but less than the full subscription is reached the Company will scale back the funds applied to working capital. In the event that any oversubscriptions are received these funds will be applied to working capital.

3.2 Effect of the Offer and Pro Forma Consolidated Statement of Financial Position

The principal effect of the Offer (assuming the Offer is fully subscribed and no oversubscriptions are accepted) will be to:

• (a) increase cash reserves by approximately $545,000 immediately after completion of the Offer and estimated expenses of the Offer, assuming all Shares offered under this Prospectus are issued; and

• (b) increase the number of Shares on issue from 55,651,902 Shares as at the date of this Prospectus, to 62,651,902 Shares.

Set out below is:

• (a) an unaudited consolidated statement of financial position of the Company as at 30 June 2007; and

• (b) a pro-forma consolidated statement of financial position of the Company as at 30 June 2007 incorporating the effect of the Offer (assuming the Offer is fully subscribed and no oversubscriptions are accepted).

THE BALANCE OF THIS PAGE IS BLANK

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4. CONSOLIDATED STATEMENT OF FINANCIAL POSITION

BALANCE SHEET

CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other financial assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Patents and Trademarks Intellectual Property Trade and other financial assets Receivables TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Borrowings TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed Equity Reserve Accumulated Losses TOTAL EQUITY	AS AT 30TH JUNE 2007 $ PRO-FORMA $ 653,351 1,198,351 83,541 83,541 29,659 29,659 - -
	766,551 1,311,551
	111,869 111,869 8,699 8,699 - - - - - -
	120,568 120,568
	887,119 1,432,119
	141,844 141,844 - -
	141,844 141,844 242,777 242,777
	242,777 242,777
	384,621 384,621
	502,498 1,047,498
	9,884,872 10,429,872 211,989 211,989 (9,594,363) (9,594,363)
	502,498 1,047,498

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Upon completion of the Offer (assuming the Offer is fully subscribed), the share capital of the Company will be:

No. Shares	Share Equivalents
55,651,902		Shares on issue
	5,000,000	Convertible Notes
7,000,000		Shares offered pursuant to this Prospectus
62,651,9021		Shares on issue after completion of the Offer

1 The Directors reserve the right to accept oversubscriptions of up to 2,000,000 Shares. If this occurs there will be 64,651,902 Shares on issue after completion of the Offer.

The Company has 16,454,498 unlisted Options on issue as at the date of this Prospectus.

The Company will issue up to another 1,500,000 Options at the completion of the Offer pursuant to an agreement with Dennis McIntyre, as authorised representative of Halifax Investor Services. Please see Section 7.2 of this Prospectus for more details.

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5. RIGHTS ATTACHING TO SHARES

The following is a summary of the more significant rights attaching to Shares. This summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of shareholders in the Company. To obtain such a statement, persons should seek independent legal advice.

Full details of the rights attaching to Shares are set out in the Company’s Constitution, a copy of which is available for inspection at the Company’s registered office during normal business hours.

5.1 Rights attaching to Shares

(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

The Directors may from time to time declare a dividend to be paid to shareholders entitled to the dividend. The dividend shall (subject to Clause 6.5 of the Company’s Constitution and to the rights of any preference shareholders and to the rights of the holders of any shares created or raised under any special arrangement as to dividends) be payable on all shares in accordance with the Corporations Act. The Directors may from time to time pay to the shareholders such interim dividends as they may determine. No dividends shall be payable except out of profits. A determination by the Directors as to the profits of the Company shall be conclusive. No dividend shall carry interest as against the Company.

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(d) Winding-Up

If the Company is wound up, the liquidator may, with the authority of a special resolution, 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, 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 and which are subject to escrow restrictions 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)

Changes to Capital Structure

The Company may by ordinary resolution and subject to the Corporations Act and the Listing Rules:

• (i) increase its share capital by the issue of new shares of such amount as is specified in a resolution;

• (ii) consolidate and divide all or any of its share capital into shares of larger amounts than its existing shares;

• (iii) sub-divide all or any of its shares into shares of smaller amount, but so that in the sub-division the proportion between the amount paid and the amount (if any) unpaid on each such share of a smaller amount remains the same; and

• (iv) cancel shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person or have been forfeited and reduce its share capital by the amount of the shares so cancelled.

(g) 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.

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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.

The Shares are quoted on ASX.

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6. RISK FACTORS

6.1 Introduction

The Shares offered under this Prospectus are considered speculative, and involve investors being exposed to risk. The Directors strongly recommend potential applicants examine the contents of this Prospectus and consult their professional advisers before deciding whether to apply for Shares pursuant to this Prospectus.

There are specific risks which relate directly to the Company’s business. In addition, there are other general risks, many of which are largely beyond the control of the Company and the Directors.

The risks identified in this section, or other risk factors, may have a material impact on the financial performance of the Company and the market price of the Company’s shares.

This list is not exhaustive and potential Applicants should examine the contents of this Prospectus and consult their professional advisers before deciding whether to apply for Shares.

6.2 Economic Risks

General economic conditions, movements in interest and inflation rates and currency exchange rates may have an adverse effect on the Company’s exploration, development and production 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.

6.3 Share Market Risks

The price of Shares quoted for trading by ASX is impacted by various international and domestic factors. As the Company is listed on ASX, its Share price is subject to these numerous influences that may affect both the trends in the share market and the share prices of individual companies.

The factors which may create fluctuations in the share market include inflation, economic conditions, commodity prices, interest rates and exchange rates.

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6.4 Product Sales and Development

The Company can make no representations that any of its product development and commercialisation will be successful; that the Company’s development milestones will be achieved; or that the Company will develop further products that are commercially exploitable. Projects can be delayed or fail, or product/market development may cease to be viable for a range of unexpected commercial reasons.

6.5

Business Relationship Risks

The Company enters into business relationships with various parties for the sale of various products.

In these business relationships, there is the risk of an adverse impact on the Company associated with insolvency, default or other managerial failure or activities of any of the other parties involved.

6.6

Intellectual Property Rights

Securing and protecting rights to intellectual property, and in particular to patents, trademarks and copyrights, is highly problematic in the toys and games industry. Accordingly, the best protection for the Company to avoid infringements in international markets is to expedite the development and sale of the Company’s products.

The granting of a patent does not guarantee that the rights of others are not infringed or that competitors will not develop competing intellectual property that circumvents such patents. The Company’s success depends, in part, on its ability to obtain patents, maintain trade secret protection and operate without infringing the proprietary rights of third parties.

Because the patent positions of companies in the toys and games industry can be highly uncertain and frequently involve complex legal evaluation, neither the breadth of claims allowed in such patents nor their enforceability can be predicted. There can be no assurance that any patents that the Company may own or control or license now and in the future will afford the Company commercially significant protection of its intellectual property or its projects, or have commercial application.

While the Company is not aware of any third party interests in its intellectual property rights, and it will take steps to protect and confirm its interest in these rights, there is always a risk of third parties claiming an interest in the intellectual property of the Company and, if any such disputes arise, they could adversely affect the Company.

6.7 Risk and Product Liability, and Uninsured Risks

The Company’s business exposes it to potential product liability risks that are inherent in the research and development, manufacturing, marketing, and use of its products. In the course of maintaining its business, it will be necessary for the Company to secure sufficient levels of insurance to cover various product liability risks. However, there can be no assurance that adequate or necessary insurance coverage will be available at an acceptable cost or in sufficient amounts. If at all, or that product liability or other claims would not materially and adversely affect the business or financial condition of the Company.

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6.8 Uncertainty on Future Profitability

The Company’s ability to operate profitably in the future will depend on its ability to commercialise its products with other organisations on commercial terms. This will depend on the ultimate demand for its products by consumers, which cannot be guaranteed. There is no certainty therefore that the Company can successfully commercialise its projects.

Other factors that will determine the Company’s profitability are its ability to manage its costs, to execute its development and growth strategies, economic conditions in the markets the Company operates, competitive factors and regulatory developments. Accordingly, the extent of future profits, if any, and the time required to achieve a sustained profitability is uncertain. Moreover, the level of such profitability cannot be predicted.

6.9 Industry Risks

The Company’s current and future potential competitors include companies with substantially greater resources than it. There is no assurance that competitors will not succeed in developing products that are more effective or economic than the current products or any of those being developed by the Company, or which would render the products obsolete and/or otherwise uncompetitive. In addition, the Company may not be able to compete successfully against current or future competitors where aggressive pricing policies are employed to capture market share. Such competition could result in price reductions, reduced gross margins and loss of market share, any of which could materially adversely affect the company’s future business, operating results and financial position.

6.10 Potential Acquisitions

As part of its business strategy, the Company may make acquisitions of or significant investments in complementary companies, products or technologies, although no such acquisitions or investments are currently planned. Any such future transactions would be accompanied by the risks commonly encountered in making acquisitions of companies, products and technologies.

6.11 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 and scale back its exploration programmes as the case may be.

6.12 Licensing, Manufacturing and Distribution Agreements

The Company is a party to a number of different licensing, manufacturing and distribution agreements. There can be no assurance given that there will be no detrimental impact on the Company if one or more of these agreements is either breached by another party or if, for reasons outside of the Company’s control, an agreement cannot be renewed or is terminated.

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6.13 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.

6.14 Speculative Nature of Investment Risks

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 Shares offered under this Prospectus.

Therefore, the Shares offered pursuant to this Prospectus carry no guarantee with respect to the payment of dividends, returns of capital or the market value of the Shares.

Potential investors should consider that the investment in the Company is speculative and should consult their professional advisers before deciding whether to apply for Shares

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7. ADDITIONAL INFORMATION

7.1 Continuous Disclosure Obligations

The Company is a “disclosing entity” (as defined in Section 111AC of the Corporations Act) for the purposes of Section 713 of the Corporations Act and, as such, is subject to regular reporting and disclosure obligations. Specifically, like all listed companies, the Company is required to continuously disclose any information it has to the market which a reasonable person would expect to have a material effect on the price or the value of the Company’s securities. The Shares that will be issued pursuant to this Prospectus will be in the same class of Shares that have been quoted on the official list of ASX during the 12 months prior to the issue of this Prospectus.

In general terms “transaction specific prospectuses” are only required to contain information in relation to the effect of the issue of securities on the Company and the rights attaching to the securities. It is not necessary to include general information in relation to all of the assets and liabilities, financial position, profits and losses or prospects of the issuing company.

Having taken such precautions and having made such enquires as are reasonable, the Company believes that it has complied with the general and specific requirements of ASX as applicable from time to time throughout the 12 months before the issue of this Prospectus which required the Company to notify ASX of information about specified events or matters as they arise for the purpose of ASX making that information available to the stock market conducted by ASX.

Information that is already in the public domain has not been reported in this Prospectus other than that which is considered necessary to make this Prospectus complete.

The Company, as a disclosing entity under the Corporations Act, states that:

• (a) it is subject to regular reporting and disclosure obligations;

• (b) copies of documents lodged with the ASIC in relation to the Company (not being documents referred to in section 1274(2)(a) of the Corporations Act) may be obtained from, or inspected at, the offices of the ASIC; and

• (c) it will provide a copy of each of the following documents, free of charge, to any person on request between the date of issue of this Prospectus and the Closing Date:

• (i) the annual financial report most recently lodged by the Company with the ASIC;

• (ii) any half year financial report lodged with the ASIC by the Company after the lodgement of the annual financial report referred to in (i) and before the lodgement of this Prospectus with the ASIC; and

• (iii) any documents used to notify ASX of information relating to the Company during that period in accordance with ASX Listing Rules as referred to in Section 674(1) of the Corporations Act.

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Copies of all documents lodged with the ASIC in relation to the Company can be inspected at the registered office of the Company during normal office hours.

For details of documents lodged with ASX since the date of lodgement of the Company’s latest annual financial report refer to the table set out below.

Date	Description of Announcement
07/09/2007	Enertec Acquisition Agreement Executed
05/09/2007	Additional convertible notes
04/09/2007	Agreement with WANY Robotics
04/09/2007	Independent report - RM Research
31/08/2007	Preliminary Final Report
29/08/2007	Little Golden Books Press Release
24/08/2007	Appendix 3B
21/08/2007	Placement
26/07/2007	New Product Releases
23/07/2007	Appendix 4C - quarterly
16/07/2007	Proposed Acquisitions
12/07/2007	Sales to Australian and US Markets
01/06/2007	Explanation of shares disposal
01/06/2007	Change in substantial holding
01/06/2007	Change of Director's Interest Notice
22/05/2007	Change in substantial holding
15/05/2007	Change of Director's Interest Notice
15/05/2007	Change of Director's Interest Notice
15/05/2007	Change of Director's Interest Notice
15/05/2007	Becoming a substantial holder
08/05/2007	Results of Meeting
08/05/2007	Outcome of Renounceable Rights Issue
04/05/2007	Appointment of former HASBRO Toys President
24/04/2007	Commitments Test Entity - Third Quarter Report

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19/04/2007	Entitlements trading closing date change
19/04/2007	Timetable Change - Renounceable Rights Issue
03/04/2007	Address of registered office
30/03/2007	Disclosure Document
30/03/2007	Appendix 3B
30/03/2007	Change of Director's Interest Notice
29/03/2007	ASIC Form 484 - Change to Company Details
29/03/2007	Investor Presentation March 2007
29/03/2007	Rights Issue to raise $1.24 million
26/03/2007	Trading Halt
21/03/2007	Lodgement of 20F to SEC
13/03/2007	Acquires US Wiggles products licence
09/03/2007	Restricted securities release from escrow
01/03/2007	Licensing Agreement with Dreamworks Animation SKG
01/03/2007	Half Yearly Report/Half Year Accounts
30/01/2007	Commitments Test Entity - Second Quarter Report
09/01/2007	Porchlight licensing agreement
15/12/2006	Placement
14/12/2006	Little Golden Books Licensing Agreement
07/12/2006	Change of Director's Interest Notice
22/11/2006	AGM Results of Resolutions
22/11/2006	AGM Managing Director's Address
22/11/2006	AGM Chairman's Address
17/11/2006	Notice of Annual General Meeting
23/10/2006	Commitments Test Entity - First Quarter Report
20/10/2006	Annual Report
16/10/2006	Commences Manufacture
27/09/2006	Annual Report 2006

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ASX maintains files containing publicly available information for all listed companies. The Company’s file is available for inspection at ASX during normal hours.

7.2 Material Contract Summaries

On 31 August 2007 the Company agreed with Dennis McIntyre as authorised representative of Halifax Investor Services that the Offer is to be made exclusively to paid subscribers of the “21st Century Investor” newsletter. The Company agreed that it would pay:

• (a) a placement success fee calculated at the rate of 6% of the gross sum raised from the Offer to paid subscribers of the “21st Century Investor” newsletter, payable at the completion of the Offer; and

• (b) an option incentive fee of 1,500,000 Options to be issued at the completion of the Offer. If the Offer does not reach full subscription of 7,000,000 Shares, the Options will be issued in the same proportion to 1,500,000 Options as the amount of capital actually raised bears to $595,000. The Options are to be exercisable at a price of 9 cents per Option at any time prior to 31 December 2009.

7.3 Consents

The following consents have been given in accordance with the Corporations Act and have not been withdrawn as at the date of lodgement of this Prospectus with the ASIC.

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

None of the entities referred to in this Section 7.3 have authorised or caused the issue of this Prospectus and do not accept any liability to any persons in respect of any false or misleading statement in, or omission from, any part of this Prospectus.

7.4 Directors’ Interests

Other than as set out below or elsewhere in this Prospectus, no Director nor any organisation in which such a Director is a partner or director, has or had within 2 years before the lodgement of this Prospectus with the ASIC, any interest in:

• (a) the promotion or formation of the Company;

• (b) property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the offer of Shares pursuant to this Prospectus; or

• (c) the offer of Shares pursuant to this Prospectus,

and no amounts have been paid or agreed to be paid (in cash or shares or otherwise) to any Director or to any organisation in which any such Director is a partner or director, either to induce him to become, or to qualify him as, a Director or otherwise for services rendered by him or by the firm in connection with the promotion or formation of the Company.

Each Directors’ interests in Shares and Options at the date of this Prospectus are:

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Director	Shares	Options1
Mr Alexander Aguero	5,675,806	5,121,450
Mr Charles MacKinnon	5,007,451	2,393,750
Mr Graham Nicol	620,825	512,500

1 Options are exercisable at 32.5 cents each and expire on 31 December 2011

The Constitution of the Company provide that the Directors may be paid for their services as Directors, a sum not exceeding such fixed sum per annum as may be determined by the Company in general meeting, where notice of the amount of the suggested increase and the maximum sum that may be paid shall have been given to shareholders in the notice convening the meeting.

In the last two years prior to lodgement of this Prospectus at the ASIC $285,055 (2007 financial year) and $190,440 (2006 financial year) (including GST where applicable), has been accrued or been paid by the Company by way of remuneration for services provided by the Directors, companies associated with the Directors or their associates in their capacity as directors, consultants or advisers. Directors, companies associated with the Directors or their associates are also reimbursed for all reasonable expenses incurred in the course of conducting their duties which include, but are not in any way limited to, out of pocket expenses, travelling expenses, disbursements made on behalf of the Company and other miscellaneous expenses.

The aggregate fees and benefits paid to the Directors in the last two financial

years are summarised in the table below:

Director	Salary/Fees	Salary/Fees	Number of
	2006	2007	Options
Mr Alexander Aguero	$87,273	$125,472	3,000,000
Mr Charles MacKinnon	$3,516	$120,000	2,000,000
Mr Graham Nicol	$2,511	$39,583	500,000

7.5 Interests of Experts and Advisers

Other than as set out below or elsewhere in this Prospectus, no expert nor any organisation in which such expert has an interest, has or had within 2 years before the lodgement of this Prospectus with the ASIC, any interest in:

• (a) the promotion or formation of the Company;

• (b) property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the offer of Shares pursuant to this Prospectus; or

• (c) the offer of Shares pursuant to this Prospectus,

and no amounts have been paid or agreed to be paid (in cash or shares or otherwise) to any expert or to any firm in which any such expert is a partner, either to induce him to become, or to qualify him as, a expert or otherwise for services rendered by him or by the firm in connection with the promotion or formation of the Company.

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Steinepreis Paganin act as solicitors to the Company. Steinepreis Paganin will be paid approximately $7,500 for services provided in relation to this Prospectus. In the last 2 years Steinepreis Paganin have been paid $42,162.29 for their services.

Dennis McIntyre as authorised representative of Halifax Investor Services acts as Manager to the Offer. Dennis McIntyre as authorised representative of Halifax Investor Services will be paid up to approximately $35,700 for services provided in relation to this Prospectus. In the last 2 years Dennis McIntyre as authorised representative of Halifax Investor Services has not received any other payment from the Company for his services.

7.6 Estimated Expenses of Offer

The estimated expenses of the Offer (assuming it is fully subscribed and no oversubscriptions are accepted) are as follows:

Item
ASX Fees	$3,451
ASIC Fees	$2,010
Placement Fees	$35,700
Legal and Other Expenses	$8,839
Total	$50,000

7.7 Electronic Prospectus

Pursuant to Class Order 00/044, the ASIC has exempted compliance with certain provisions of the Corporations Act 2001 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 Entitlement and Acceptance Form. If you have not, please phone the Company and the Company will send you, for free, either a hard copy or a further electronic copy of the Prospectus, or both.

The Company reserves the right not to accept an Entitlement and Acceptance Form from a person if it has reason to believe that when that person was given access to the electronic Entitlement and Acceptance 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.

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8. DIRECTORS’ CONSENT

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 in writing to the lodgement of this Prospectus with the ASIC.

==> picture [259 x 60] intentionally omitted <==

==> picture [209 x 2] intentionally omitted <==

----- Start of picture text -----

_________
----- End of picture text -----

CHARLES MACKINNON DIRECTOR For and on behalf of BRAINYTOYS LIMITED

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9. DEFINITIONS

Application Form means the application form either attached to or accompanying this Prospectus.

ASIC means the Australian Securities and Investments Commission.

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

Business Day means a day on which trading takes place on the stock market of ASX.

Closing Date means the closing date for receipt of Application Forms under this Prospectus as set out in Section 2.2.

Company or Brainytoys means Brainytoys Limited (ABN 28 001 894 033).

Constitution means the Company’s Constitution as at the date of this Prospectus.

Corporations Act means the Corporations Act 2001 (Cth).

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

Dollar or “$” means Australian dollars.

Listing Rules or ASX Listing Rules means the Listing Rules of ASX.

Offer means the proposed issue of Shares referred to in the “Details of the Offer” section of this Prospectus.

Opening Date means the opening date for receipt of Application Forms under this Prospectus as set out in Section 2.2.

Option means an option to acquire a Share.

Prospectus means this Prospectus.

Shares means the Shares the subject of the Issue.

Share means a fully paid ordinary share in the capital of the Company and where the context permits means the Shares the subject of the Issue.

WST means Western Standard Time.

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APPLICATION FORM

BRAINYTOYS LIMITED

ACN 28 001 894 033

The securities to which this application form (Application Form) relates are fully ordinary paid shares (Shares) in the capital of Brainytoys Limited (Company). A prospectus containing information regarding investment in Shares was lodged with the Australian Securities and Investments Commission on 7 September 2007 (Prospectus). While the Prospectus is current, the Company will send paper copies of the Prospectus, any supplementary documents and the Application Form, free of charge to any person upon request. You should read the Prospectus before applying for Shares. A person who gives another person access to the Application Form must at the same time and by the same means give the other person access to the Prospectus and any supplementary document. The Corporations Act prohibits any person from passing onto another person an application form unless it is attached to a hard copy of the Prospectus or it accompanies the complete and unaltered version of the Prospectus.

PLEASE READ ALL INSTRUCTIONS ON THE REVERSE OF THIS FORM

Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName	Full name (PLEASE PRINT) Title, Given Name(s) & Surname orCompanyName				Broker Code	Broker Code	Broker Code	Broker Code	Broker Code	Broker Code							Adviser Code	Adviser Code	Adviser Code	Adviser Code	Adviser Code	Adviser Code
Joint Applicant # 2or
Joint Applicant #3 or
Postal Address (PLEASE PRINT) Street Number Street
Suburb/Town																														State Applicant # 3			State								Post		Code
ABN,Tax File Number or Exemption																Applicant				# 2
CHESS HIN or Existing SRN (where applicable)
NumberofShares appliedfor																						Application Money enclosed at8.5 cents perShare
																						A$……………………………

I/We whose full name(s) and address appear above hereby apply for the number of Shares shown above (to be allocated to me/us by the Company in respect of this Application) under the Prospectus on the terms set out in the Prospectus.

Cheque Details:

PLEASE ENTER Drawer CHEQUE DETAILS THANKYOU My/Our contact numbers in the case of inquiry are: Telephone ( ) . . . . . . . . . . . . . . . . . . . . . . . . .	Drawer	Bank	BSB or Branch	Amount
		Fax ( ) . . . . . . . . . . . . . .		. . . . . . . . . . .

Cheques should be made payable to “Brainytoys Limited – Share Offer Account”, crossed “NOT NEGOTIABLE”.

Cheques and completed Application Forms should be forwarded, to arrive no later than 5:00pm on the Closing Date (or such other date as is determined by the Directors) to either:

Attention: Dennis McIntyre, 21st Century Investor, PO BOX 4376, CASTLECRAG NSW 2068; or Attention: Catherine Vann, Brainytoys Limited, 6B Bowen St, O’CONNOR WA 6163.

GUIDE TO THE APPLICATION FORM

If an applicant has any questions on how to complete this Application Form, please telephone the Share Registry on (08) 9323 2000.

A. Application for Shares

The Application Form must only be completed in accordance with instructions included in Prospectus.

B. Name of Applicant

Write the Applicant’s FULL NAME. This must be either an individual’s name or the name of a company. Please refer to the bottom of this page for the correct form of registrable title. Applications using the incorrect form of registrable title may be rejected.

C. Name of Joint Applicants or Account Designation

If JOINT APPLICANTS are applying, up to three joint Applicants may register. If applicable, please provide details of the Account Designation in brackets. Please refer to the bottom of this page for instructions on the correct form of registrable title.

D. Address

Enter the Applicant’s postal address for all correspondence. If the postal address is not within Australia, please specify Country after City/Town.

E. Contact Details

Please provide a contact name and daytime telephone number so that the Company can contact the Applicant if there is an irregularity regarding the Application Form.

• F. CHESS HIN or existing SRN Details

The Company participates in CHESS. If the Applicant is already a participant in this system, the Applicant may complete this section with their existing CHESS HIN. If the applicant is an existing shareholder with an Issuer Sponsored account, the SRN for this existing account may be used. Otherwise leave the section blank and the Applicant will receive a new Issuer Sponsored account and statement.

• G. Cheque Details

Make cheques payable to “Brainytoys Limited – Share Offer Account” in Australian currency and cross them “Not Negotiable”. Cheques must be drawn on an Australian Bank. The amount of the cheque should agree with the amount shown on the Application Form.

H. Declaration

• This Application Form does not need to be signed. By lodging this Application Form and a cheque for the application money this Applicant hereby:

• (1) applies for the number of Shares specified in the Application Form or such lesser number as may be allocated by the Directors;

• (2) agrees to be bound by the constitution of the Company;

• (3) authorises the directors of the Company to complete or amend this Application Form where necessary to correct any errors or omissions;

• (4) acknowledges that he/she has received a copy of the Prospectus attached to this Application Form or a copy of the Application Form before applying for the Shares; and

• (5) acknowledges that he/she will not provide another person with this Application Form unless it is attached to or accompanied by the Prospectus.

CORRECT FORMS OF REGISTRABLE TITLE

Note that ONLY legal entities are allowed to hold securities. Application Forms must be in the name(s) of a natural person(s), companies or other legal entities acceptable to the Company. At least one full given name and the surname is required for each natural person. Application Forms cannot be completed by persons under 18 years of age. Examples of the correct form of registrable title are set out below.

below.
Type of Investor	Correct Form of Registration	Incorrect Form of Registration
Individual Usegiven names in full,not initials	Mr John Alfred Smith	J A Smith
CompanyUse the company’s full title,not abbreviations	ABC PtyLtd	ABC P/L or ABC Co
Joint Holdings Use full and complete names	Mr Peter Robert Williams & Ms Louise Susan Williams	Peter Robert & Louise S Williams
Trusts Use the trustee(s) personal name(s).	Mrs Susan Jane Smith	Sue Smith Family Trust
Deceased Estates Use the executor(s) personal name(s).	Ms Jane Mary Smith & Mr Frank William Smith	Estate of late John Smith or John Smith Deceased
Minor (a person under the age of 18) Use the name of a responsible adult with an appropriate designation.	Mr John Alfred Smith	Master Peter Smith
Partnerships Use the partners personal names.	Mr John Robert Smith & Mr Michael John Smith	John Smith and Son
Long Names.	Mr John William Alexander Robertson-Smith	Mr John W A Robertson-Smith
Clubs/Unincorporated Bodies/Business Names Use office bearer(s) personal name(s).	Mr Michael Peter Smith	ABC Tennis Association
Superannuation Funds Use the name of the trustee of the fund.	Jane Smith Pty Ltd	Jane Smith Pty Ltd Superannuation Fund