MACRO METALS LIMITED — M&A Activity 2008

Jan 8, 2008

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ASX ANNOUNCEMENT

ACQUISITION OF MARSHMALLOW FUN COMPANY ASSETS

The Directors of Brainytoys Limited (‘BRT’ or ‘the Company’) wish to announce the proposed acquisition of the US based business and assets of the Marshmallow Fun Company, LLC, Marshmallowville, and Marshmallow Media (collectively called ‘MFC’), by a US subsidiary.

1. Key Terms and Conditions

1.1. Price for purchase of MFC

BRT is to pay (a) an aggregate purchase consideration of US$4 million (AU$4,571,428 at AU$ 1 = US$0.875) satisfied by the issue of US$2.5 million in new shares in BRT (19,048,000shares) at an issue price of AU$0.15 per share and the payment of $1.5 million cash (including a US$100,000 deposit to secure the exclusive acquisition opportunity) over a one year period in consideration for the acquisition with effect from 1 January 2008 of the business and assets (including intangible assets) of MFC, (b) annual royalty sums on sales calculated at the rate of seven per cent (7%) of net wholesale revenue subject to a minimum royalty payment of US$500,000 per annum for the first five years, and (c) an amount of US$286,000 relating to the reimbursement of deposit downpayments to manufacturers for purchase orders.

1.2. Board appointment

MFC shall have the right to appoint a nominee to the Board of Directors of BRT. The proposed appointee is a high profile US citizen; further details will be provided at the appropriate time in relation to this matter.

1.3. Conditions

The proposed acquisition is subject to due diligence on BRT’s part and shareholder approval pursuant to ASX listing provisions specifically in relation to the issue of new BRT shares.

2. Information Relating to MFC Assets

2.1. Background

The MFC business (including IP) was founded approximately three years ago with a simple product (marshmallow blower) by four US citizens (the vendors of the MFC assets), none of whom had any prior experience in the toy and games industry. Since then the business has expanded to a significant degree.

Coincidentally Mr Jeff Berndt, the CEO of Reveal Toys & Entertainment, Inc (now a wholly owned subsidiary of BRT), was also involved at the outset as a marketing strategist and distributor of MFC products to the specialty stores market segment.

In a further coincidence, Enertec Enterprises Limited in Hong Kong (also now a wholly owned BRT subsidiary) has had a manufacturing agency role in relation to arranging the manufacture of some MFC products in China.

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Due to these pre-existing relationships, BRT is well aware of the building demand for the growing MFC product range and the production, management, sales and logistic challenges ahead.

With its recent Board appointments (Mr Larry Bernstein) and Chief Operating Officer (Mr Bob Finn), BRT is now particularly well equipped to manage these challenges and take the MFC range to much higher sales and profit levels.

The founders/vendors of MFC are interested in selling the MFC assets to BRT because they believe the business can be taken to significantly higher sales and profit levels under the BRT management team, in both the US and other world markets as compared to the status quo.

The founders/vendors have experienced production bottlenecks and other challenges that have handicapped their ability to fully meet demand and exploit current and future opportunities, especially those offered by the mass market, which remains largely untapped by these products.

• 2.2. Product and business description

MFC is the leading producer of Marshmallow related toy products. MFC developed (through the skills of a professional gunsmith/ballistics expert) and sought patents and other intellectual property protections relating to the idea of combining fun food (marshmallow) with a fun concept – kids shooting soft and safe ammunition at targets and each other. The four products so far released encompass a range of different retail price points, including a Marshmallow Blower, a Marshmallow Shooter, a Marshmallow Blaster, and Bow ‘n Mallow. The Bow ‘n Mallow has just been released and is expected to be followed shortly thereafter by a range of additional products and customer friendly product innovations resulting in a comprehensive family of products to expand sales and win floor space in retail outlets. The Marshmallow products are the ultimate “big kid toys” and can transform a party (kids or adults) into a fun circus.

The Marshmallow Shooter shoots miniature marshmallows with rapid fire over 30 feet and is great safe fun for kids and adults. The Shooter comes with 25 foam or marshmallow pellets. The Marshmallow Blaster includes an air compression chamber that blasts normal sizes marshmallows over 30 feet.

The official website at www.marshmallowville.com details the current range of products, news and events, MForce comics and some of the recent awards including American Toy of the Year for 2007 at America Online, Creative Child Magazine and New Yorker Magazine. The products have caught the imagination of the US media with regular recent appearances on top rating television shows.

The Marshmallow products have so far been successfully sold through catalogue sale businesses such as Hammacher Schlemmer, Drug Store.com and other specialty stores or channels. Due to production scheduling and other issues, the MFC has not been in a position to adequately satisfy market demand and therefore has made no attempt to address the mass retail markets which would normally represent 70% of the toy market.

2.3. Financial information and financial rationale for the proposed acquisition

The business generated revenue of approximately US$3 million and US$4 million for calendar years 2006 and 2007, with a revenue budget of US$ 7 million for calendar year 2008. Earnings before abnormals and tax were approximately US$1.2 million in 2007 and is estimated at US$1.8 million after allowing for royalties of US$500,000 for calendar year 2008. Based upon the assumption that the BRT Group’s mass retailer commission-based sales force can be appropriately

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mobilised, BRT management expects a further significant increase in revenues and earnings (net of royalties) for calendar year 2009

In the event that the 2008 and 2009 estimates are achieved, the prima facie BRT return on purchase outlay will be around 45% for 2008 and substantially higher again for 2009.

2.4.

Management

The MFC business will be managed from BRT/Reveal’s Abilene, Texas base. Mr Bob Finn, BRT’s recently appointed Group Chief Operating Officer will be ultimately responsible for the management of the business, ably assisted by Mr Jeff Berndt, the CEO of Reveal, Mr Jones Lee (Enertec Hong Kong) for production, and the proposed engagement of one of the MFC vendors as the Brand Manager.

3. Commercial Rationale and Benefits of the Proposed Acquisition

• BRT has the necessary US-based sales network, vendor listings, and logistical interface to significantly increase MFC sales levels in both the specialty stores and mass retail chain sales channels.

• BRT, through Enertec, has the advantage of a comprehensive Hong Kong and Chinese manufacturing sourcing, quality control expertise and logistical base to better manage inventories and customer delivery schedules.

• BRT will use the soon to be acquired UK subsidiary business as a springboard for launching MFC into UK and European markets.

• BRT will further develop its Abilene-based (Texas, USA) Reveal business to an improved critical mass level through additional human resources, and by enhancing its logistics and inventory management skills.

• BRT Group product, technology, and market development skills will be used to expand the MFC family of products (including Marshmallowville) and create further extensions to the MFC products, including the introduction of advanced electronics to the range.

• BRT believes that the MFC range has significant opportunities in the development of licensing and reverse licensing programs.

• The ownership of a perceived to be “hot” range of products will facilitate improved market entry for specialty and mass markets for the BRT Group’s full range of products.

• The consolidation (or bringing together) with effect from 1 January 2008 of four new business entities with aggregate historical revenue levels of around US$20 million will assist the BRT Group’s endeavours to arrange significant confidential invoice and purchase order facilities as a more effective method of funding growth and development.

ENDS

For further information contact Alex Aguero, Managing Director, alexa@brainytoys.com Charles MacKinnon, Chairman, cmackinnon@brainytoys.com Ph: (08) 9331 8441 09 January 2008

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