MACRO METALS LIMITED — Proxy Solicitation & Information Statement 2008

Jan 10, 2008

BRAINYTOYS LIMITED ABN 28 001 894 033

NOTICE OF GENERAL MEETING

TIME : 10:30 am (WST) DATE : 11 February 2008 PLACE : “The Kitchen Building” Centre for Adult Education, Heathcote 58-60 Duncraig Road Applecross, Western Australia

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on (08) 9331 8441.

CONTENTS PAGE

Notice of General Meeting (setting out the proposed resolutions)	2
Explanatory Statement (explaining the proposed resolutions)	4
Glossary	11
Schedule 1	12
Proxy Form	14
TIME AND PLACE OF MEETING AND HOW TO VOTE

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The General Meeting of the Shareholders of Brainytoys Limited will be held at 10:30 am (WST) on Monday 11 February 2008 at:

“The Kitchen Building” Centre for Adult Education, Heathcote 58-60 Duncraig Road Applecross, Western Australia

YOUR VOTE IS IMPORTANT

The business of the General Meeting affects your shareholding and your vote is important.

VOTING IN PERSON

To vote in person, attend the General Meeting on the date and at the place set out above.

VOTING BY PROXY

To vote by proxy, please complete and sign the proxy form enclosed with this Notice of Meeting as soon as possible and either:

• (a) send the proxy form by facsimile to the Company on facsimile number (08) 9331 8452; or

• (b) send or deliver the proxy form to the office of the Company at 6-B Bowen Street, O’Connor, WA, 6163,

so that it is received not later than 5.00 pm (WST) on Friday 8 February 2008. Proxy forms received later than this time will be invalid.

Your proxy form is enclosed after the Explanatory Statement

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NOTICE OF GENERAL MEETING

Notice is given that the General Meeting of Shareholders of Brainytoys Limited will be held at “The Kitchen Building” Centre for Adult Education, Heathcote, 58-60 Duncraig Road, Applecross, WA at 10:30 am (WST) on Monday 11 February 2008.

The Explanatory Statement to this Notice of Meeting provides additional information on matters to be considered at the General Meeting. The Explanatory Statement and the proxy form are part of this Notice of Meeting.

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders of the Company on 9 February 2008 at 5.00 pm (WST).

Terms and abbreviations used in this Notice of Meeting and Explanatory Statement are defined in the Glossary.

AGENDA

RESOLUTION 1 – RATIFICATION OF PRIOR ISSUE OF SHARES

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of ASX Listing Rule 7.4 and for all other purposes, Shareholders ratify the allotment and issue of 11,100,061 Shares on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by any person who participated in the issue and any of their associates.

RESOLUTION 2 – APPROVAL FOR ISSUE OF SHARES

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to allot and issue 775,200 Shares to Mr Bob Finn, Chief Operating Officer of the Company, on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities if the Resolution is passed, and any associates of those persons.

RESOLUTION 3 – APPROVAL FOR ISSUE OF SHARES – ACQUISITION

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to allot and issue a total of 19,048,000 Shares to Marshmallow Fun Company, Lic, Marshmallowville and Marshmallow Media on the terms and conditions set out in the Explanatory Statement.”

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Voting Exclusion: The Company will disregard any votes cast on this Resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities if the Resolution is passed, and any associates of those persons.

RESOLUTION 4 – ISSUE OF DIRECTOR OPTIONS

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

“That, for the purpose of ASX Listing Rule 10.11 and for all other purposes, approval is given for the Directors to allot and issue 1,000,000 Options to Mr Larry Bernstein (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mr Larry Bernstein or any of his associates.

RESOLUTION 5 – ISSUE OF DIRECTOR SHARES

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

“That, for the purpose of ASX Listing Rule 10.11 and for all other purposes, approval is given for the Directors to allot and issue 328,445 Shares to Mr Larry Bernstein (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mr Larry Bernstein or any of his associates.

DATED: 10 January 2008

BY ORDER OF THE BOARD

Charles Mackinnon CHAIRMAN

Voting Exclusion Note:

Where a voting exclusion applies, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the proxy form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

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EXPLANATORY STATEMENT

This Explanatory Statement has been prepared for the information of the Shareholders of the Company in connection with the business to be conducted at the General Meeting to be held at “The Kitchen Building” Centre for Adult Education, Heathcote, 58-60 Duncraig Road, Applecross, WA on 11 February 2008 at 10:30 am (WST).

This purpose of this Explanatory Statement is to provide information that the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions in the Notice of Meeting.

If you have any questions regarding the matters set out in this Explanatory Statement or the preceding Notice of Meeting, please contact the Company, your stockbroker or other professional advisor.

1. RESOLUTION 1 – RATIFICATION OF PRIOR ISSUE OF SHARES

1.1 Background

On 9 January 2008, the Company notified the market (pursuant to Section 708A of the Corporations Act) of a placement of 10,423,932 Shares to professional and sophisticated investors ( Investors ) at an issue price of 15 cents per Share ( Placement Shares ) and the issue of 676,129 Shares to Reveal Entertainment, Inc for the acquisition of the business and assets of Reveal Entertainment, Inc ( Acquisition Shares ).

Resolution 1 seeks Shareholder ratification pursuant to ASX Listing Rule 7.4 for the allotment and issue of the Placement Shares and the Acquisition Shares.

ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue during any 12 month period any equity securities, or other securities with rights to conversion to equity (such as an option), if the number of those securities exceeds 15% of the number of securities in the same class on issue at the commencement of that 12 month period.

ASX Listing Rule 7.4 sets out an exception to ASX Listing Rule 7.1. It provides that where a company in general meeting ratifies the previous issue of securities made pursuant to ASX Listing Rule 7.1 (and provided that the previous issue did not breach ASX Listing Rule 7.1) those securities will be deemed to have been made with shareholder approval for the purpose of ASX Listing Rule 7.1.

By ratifying this issue, the Company will retain the flexibility to issue equity securities in the future up to the 15% annual placement capacity set out in ASX Listing Rule 7.1 without the requirement to obtain prior Shareholder approval.

1.2 Technical Information required by ASX Listing Rules

The following information is provided pursuant to and in accordance with ASX Listing Rule 7.5:

• (a) 11,100,061 Shares were allotted;

• (b) the issue price of the Placement Shares was 15 cents per Share. The Acquisition Shares were issued in consideration for the acquisition of the business and assets of Reveal Entertainment, Inc;

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• (c) the Shares issued were all fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;

• (d) the Placement Shares were allotted and issued to a number of professional and sophisticated investors determined by the Directors. None of the recipients of the Placement Shares were related parties of the Company; and

• (e) funds raised from the issue of the Placement Shares will be applied towards the Company’s business and licence acquisition programme and for working capital purposes.

2. RESOLUTION 2 – APPROVAL FOR ISSUE OF SHARES

2.1 Background

Resolution 2 seeks Shareholder approval pursuant to ASX Listing Rule 7.1 for the allotment and issue of 775,200 Shares to Mr Bob Finn.

A summary of ASX Listing Rule 7.1 is provided in Section 1.1 of this Explanatory Statement.

The effect of Resolution 2 will be to allow the Directors to issue the Shares to Mr Bob Finn during the period of 3 months after the General Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

2.2 Technical information required by ASX Listing Rules

The following information is provided pursuant to and in accordance with ASX Listing Rule 7.3:

• (a) the maximum number of Shares to be issued is 775,200;

• (b) the Shares will be allotted and issued to Mr Bob Finn;

• (c) the Shares will be issued no later than 3 months after the date of the General Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on the same date;

• (d) half of the Shares (387,600 Shares) will be issued for 15 cents per Share. The remainder of the Shares will be issued for nil cash consideration under a contract to engage Mr Finn as Chief Operating Officer of the Company and its subsidiaries;

• (e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares; and

• (f) the Company intends to use the funds raised from the Share issue towards working capital.

3. RESOLUTION 3 – APPROVAL FOR ISSUE OF SHARES – ACQUISITION

• 3.1 Background

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On 9 January 2008, the Company agreed, subject to certain conditions, including obtaining Shareholder approval, to purchase through a wholly owned US subsidiary (Reveal Toys & Entertainment, Inc ( Reveal )) the US based business and assets of the Marshmallow Fun Company, Lic, Marshmallowville and Marshmallow Media (collectively, MFC ) from MFC.

The principal terms and conditions of the proposed acquisition are as follows:

• (a) ( Consideration ): As consideration for the acquisition of the business and assets of MFC, the Company shall pay to MFC:

• (i) an aggregate purchase consideration of $US4,000,000 ($A4,597,700 @ $A1 = $US0.87) satisfied by the allotment and issue of 19,048,000 Shares at an issue price of $A0.15 per Share and the payment of $US1,500,000 (including a $US100,000 deposit to secure the exclusive opportunity) over a one year period;

• (ii) annual royalty sums on sales calculated at the rate of 7% of net wholesale revenue, subject to a minimum payment of $US500,000 per annum for the first five years; and

• (iii) an amount of $US286,000 relating to the reimbursement of deposit down-payments to manufacturers for purchase orders.

• (b) ( Conditions precedent ): Completion of the proposed acquisition is subject to:

• (i) due diligence on the business and assets of MFC by the Company to the sole satisfaction of the Company;

• (ii) the execution of a detailed contract of sale document; and

• (iii) Shareholder approval for the allotment and issue of the Share component of the consideration.

• (c) ( Board appointment ): MFC shall have the right to appoint a nominee to the board of directors of the Company. Further details of the nominee will be provided in due course.

3.2 Information relating to MFC business and assets

Background

The MFC business (including IP) was founded approximately 3 years ago with a simple product (marshmallow blower) by four US citizens, none of whom had any prior experience in the toy and games industry. Since then the business has expanded to a significant degree.

Mr Jeff Berndt, the CEO of Reveal (now a wholly owned subsidiary of the Company) 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 subsidiary of the Company) 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, the Company 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 (Mr Larry Bernstein) and Chief Operating Officer (Mr Bob Finn) appointments the Company is now particularly well equipped to manage these challenges and take the MFC range to much higher sales and profit levels.

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

The founders have experienced production bottlenecks and other challenges, which 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.

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.

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

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$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 Company’s mass retailer commission based sales force can be appropriately mobilised, Company 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 return on purchase outlay will be around 45% for 2008 and substantially higher again for 2009.

Management

The MFC business will be managed from the Company’s/Reveal’s Abilene, Texas base. Mr Bob Finn, the Company’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.

Commercial Rationale and Benefits of the Proposed Acquisition

• The Company 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.

• The Company, 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.

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

• The Company 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.

• The Company’s and its subsidiaries’ 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.

• The Company 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 Company’s and its subsidiaries’ full range of products.

• The consolidation (or bringing together) with effect from 1 January 2008 of 4 new business entities with aggregate historical revenue levels of around $US 20 million will assist the Company’s endeavours to arrange significant confidential invoice and purchase order facilities as a more effective method of funding growth and development.

3.3 Shareholder approval

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Resolution 4 seeks Shareholder approval to issue up to 19,048,000 Shares to MFC as part consideration under the agreement (being the Shares required to be issued pursuant to paragraph (a) above).

Shareholder approval is required pursuant to ASX Listing Rule 7.1. A summary of ASX Listing Rule 7.1 is set out in Section 1.1 of this Explanatory Statement.

3.4 Technical information required by ASX Listing Rules

The following information is provided pursuant to and in accordance with ASX Listing Rules 7.3:

• (a) the maximum number of securities to be issued is 19,048,000 Shares;

• (b) the allottee of the securities will be MFC (or nominees);

• (c) the Shares will be issued to MFC for nil cash consideration as they will be issued as part consideration for the acquisition by the Company of the business and assets of MFC;

• (d) the Shares will be issued no later than 3 months after the date of this General Meeting (or such later date as is permitted by any ASX waiver or modification of the ASX Listing Rules) and it is anticipated that allotment will occur on one date;

• (e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares; and

• (f) no funds will be raised from the issue of the Shares as they will be issued in part consideration under the agreement to acquire the business and assets of MFC.

4. RESOLUTION 4 – ISSUE OF DIRECTOR OPTIONS

4.1 General

The Company has agreed, subject to obtaining Shareholder approval, to allot and issue a total of 1,000,000 Options to Mr Larry Bernstein (a director of the Company) on the terms and conditions set out below.

ASX Listing Rule 10.11 requires shareholder approval to be obtained where an entity issues, or agrees to issue, securities to a related party, or a person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained unless an exception in ASX Listing Rule 10.12 applies.

Mr Bernstein is considered a related party of the Company by virtue of being a Director. No exception under ASX Listing Rule 10.12 applies in these circumstances. Accordingly, Shareholder approval is required pursuant to ASX Listing Rule 10.11.

The Directors have resolved that the proposed Option issue to Mr Bernstein is considered to be on arm’s length terms. Accordingly, Chapter 2E of the Corporations Act does not apply in these circumstances.

4.2 Technical information required by ASX Listing Rules

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The following information is provided pursuant to and in accordance with ASX Listing Rule 10.13:

• (a) the related party is Mr Larry Bernstein, and he is a related party by virtue of being a Director of the Company;

• (b) the maximum number of Options to be issued to Mr Bernstein is 1,000,000;

• (c) the Options will be granted to Mr Bernstein no later than 1 month after the date of the General Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules) and it is anticipated that the Options will be issued on one date;

• (d) the Options will be granted for nil cash consideration, accordingly no funds will be raised; and

• (e) the terms and conditions of the Options are set out in Schedule 1.

5. RESOLUTION 5 – ISSUE OF DIRECTOR SHARES

5.1 General

The Company has agreed, subject to obtaining Shareholder approval, to allot and issue a total of 328,445 Shares at 15 cents per Share to Mr Larry Bernstein (a director of the Company) on the terms and conditions set out below.

Shareholder approval is required pursuant to ASX Listing Rule 10.11. A summary of ASX Listing Rule 10.11 is set out in Section 4.1 of this Explanatory Statement.

The Directors have resolved that the proposed Share issue to Mr Bernstein is considered to be on arm’s length terms. Accordingly, Chapter 2E of the Corporations Act does not apply in these circumstances.

5.2 Technical information required by ASX Listing Rules

The following information is provided pursuant to and in accordance with ASX Listing Rule 10.13:

• (a) the related party is Mr Larry Bernstein, and he is a related party by virtue of being a director of the Company;

• (b) the maximum number of Shares to be issued to Mr Bernstein is 328,445;

• (c) the Shares will be issued at 15 cents per Share;

• (d) the Shares will be granted to Mr Bernstein no later than 1 month after the date of the General Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules) and it is anticipated that the Shares will be issued on one date;

• (e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares; and

• (f) funds raised from the issue of the Shares will be applied to working capital.

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GLOSSARY

ASX means ASX Limited.

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

Board means the board of directors of the Company.

Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.

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

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the current directors of the Company.

Explanatory Statement means the explanatory statement accompanying the Notice of Meeting.

General Meeting means the meeting convened by the Notice of Meeting.

Notice of Meeting means this notice of general meeting including the Explanatory Statement..

Option means an option to acquire a Share on the terms set out in Schedule 1.

Optionholder means a holder of Options.

Resolution means a resolution contained in the Notice.

Reveal means Reveal Toys & Entertainment, Inc, a wholly owned subsidiary of the Company.

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

Shareholder means a holder of Shares.

WST means Western Standard Time as observed in Perth, Western Australia.

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SCHEDULE 1 – TERMS AND CONDITIONS OF OPTIONS

The Options entitle the holder to subscribe for Shares on the following terms and conditions:

• (a) Each Option gives the Optionholder the right to subscribe for one Share. To obtain the right given by each Option, the Optionholder must exercise the Options in accordance with the terms and conditions of the Options.

• (b) The Options will expire at 5:00 pm (WST) on 31 December 2012 ( Expiry Date ). Any Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.

• (c) The amount payable upon exercise of each Option will be $0.25 ( Exercise Price ).

• (d) The Options held by each Optionholder may be exercised in whole or in part, and if exercised in part, multiples of 1,000 must be exercised on each occasion.

• (e) An Optionholder may exercise their Options by lodging with the Company, before the Expiry Date:

• (i) a written notice of exercise of Options specifying the number of Options being exercised; and

• (ii) a cheque or electronic funds transfer for the Exercise Price for the number of Options being exercised;

( Exercise Notice ).

• (f) An Exercise Notice is only effective when the Company has received the full amount of the Exercise Price in cleared funds.

• (g) Within 10 Business Days of receipt of the Exercise Notice accompanied by the Exercise Price, the Company will allot the number of Shares required under these terms and conditions in respect of the number of Options specified in the Exercise Notice.

• (h)

• The Options are not transferable.

• (i) All Shares allotted upon the exercise of Options will upon allotment rank pari passu in all respects with other Shares.

• (j) The Company will not apply for quotation of the Options on ASX. However, The Company will apply for quotation of all Shares allotted pursuant to the exercise of Options on ASX within 10 Business Days after the date of allotment of those Shares.

• (k) If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

• (l) There are no participating rights or entitlements inherent in the Options and Optionholders 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 Optionholders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue.

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• (m) In the event the Company proceeds with a pro rata issue (except a bonus issue) of securities to Shareholders after the date of issue of the Options, the exercise price of the Options will be reduced in accordance with the formula set out in ASX Listing Rule 6.22.2.

• (n) In the event the Company proceeds with a bonus issue of securities to Shareholders after the date of issues of the Options, the number of securities over which an Option is exercisable may be increased by the number of securities which the Optionholder would have received if the Option had been exercised before the record date for the bonus issue.

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PROXY FORM

APPOINTMENT OF PROXY BRAINYTOYS LIMITED ABN 28 001 894 033

GENERAL MEETING

I/We

being a member of Brainytoys Limited entitled to attend and vote at the Meeting, hereby Appoint Name of proxy

or failing the person so named or, if no person is named, the Chairman of the Meeting or the Chairman’s nominee, to vote in accordance with the following directions or, if no directions have been given, as the proxy sees fit at the General Meeting to be held at “The Kitchen Building” Centre for Adult Education, Heathcote, 58-60 Duncraig Road, Applecross, WA on 11 February 2008 at 10.30 am (WST). If no directions are given, the Chairman will vote in favour of all of the resolutions.

Voting on Business of the General Meeting

FOR AGAINST ABSTAIN Resolution 1 Ratification of prior issue of Shares Resolution 2 Approval for issue of Shares Resolution 3 Approval for issue of Shares – Acquisition Resolution 4 Issue of Director Options Resolution 5 Issue of Director Shares

If you do not wish to direct your proxy how to vote, please place a mark in this box

By marking this box, you acknowledge that the Chairman may exercise your proxy even if he has an interest in the outcome of the resolution and votes cast by him other than as proxy holder will be disregarded because of the interest. The Chairman will vote in favour of all of the resolutions if no directions are given.

YOU MUST EITHER MARK THE BOXES DIRECTING YOUR PROXY HOW TO VOTE OR MARK THE BOX INDICATING THAT YOU DO NOT WISH TO DIRECT YOUR PROXY HOW TO VOTE, OTHERWISE THIS APPOINTMENT OF PROXY FORM WILL BE DISREGARDED.

If you mark the abstain box for a particular item, you are directing your proxy not to vote on that item on a show of hands or on a poll and that your shares are not to be counted in computing the required majority on a poll.

Signed this day of 2008

By:

Individuals and joint holders Companies (affix common seal if appropriate) Signature Director Signature Director/Company Secretary Signature Sole Director and Sole Company Secretary

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BRAINYTOYS LIMITED ABN 28 001 894 033

Instructions for Completing ‘Appointment of Proxy’ Form

1. A member entitled to attend and vote at a Meeting is entitled to appoint not more than two proxies to attend and vote on their behalf. Where more than one proxy is appointed, such proxy must be allocated a proportion of the member’s voting rights. If the shareholder appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half the votes.

2. A duly appointed proxy need not be a member of the Company. In the case of joint holders, all must sign.

3. Corporate shareholders should comply with the execution requirements set out on the proxy form or otherwise with the provisions of Section 127 of the Corporations Act. Section 127 of the Corporations Act provides that a company may execute a document without using its common seal if the document is signed by:

4. two directors of the company;

5. a director and a company secretary of the company; or

6. for a proprietary company that has a sole director who is also the sole company secretary – that director.

For the Company to rely on the assumptions set out in Sections 129(5) and (6) of the Corporations Act, a document must appear to have been executed in accordance with Section 127(1) or (2). This effectively means that the status of the persons signing the document or witnessing the affixing of the seal must be set out and conform to the requirements of Section 127(1) or (2) as applicable. In particular, a person who witnesses the affixing of a common seal and who is the sole director and sole company secretary of the company must state that next to his or her signature.

1. Completion of a proxy form will not prevent individual shareholders from attending the meeting in person if they wish. Where a shareholder completes and lodges a valid proxy form and attends the meeting in person, then the proxy’s authority to speak and vote for that shareholder is suspended while the shareholder is present at the meeting

2. Where a proxy form or form of appointment of corporate representative is lodged and is executed under power of attorney, the power of attorney must be lodged in like manner as this proxy.

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