20FR12G

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-FR12G

(Mark One)

[ X ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[   ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year___________________________

OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[   ]  SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________________ to ______________________________

Commission file number __________________________________________________________________

BRAINYTOYS LIMITED

(Exact name of Registrant as specified in its charter)

NEW SOUTH WALES, AUSTRALIA

(Jurisdiction of incorporation or organization)

6B BOWEN STREET

O’CONNOR  6163  WESTERN AUSTRALIA

AUSTRALIA    

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:  None

Securities registered or to be registered pursuant to Section 12(g) of the Act.

COMMON SHARES WITH NO PAR VALUE

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:  None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

 30,289,714 common shares, no par value, as of June 30, 2006.  As of the date of this filing, the number of outstanding shares is 40,241,489.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  

Yes o

No  ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o

No ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer  ý

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17

ý

 Item 18  o

1

INTRODUCTION

CURRENCY

Brainytoys Limited (the "Company" or "Brainytoys" herein) uses the Australian dollar as its reporting currency.  All references in this Registration Statement to "dollars" or "$" are expressed in Australian dollars, unless otherwise indicated.  See also Item 3 - "Key Information" for more detailed currency and conversion information.

FINANCIAL STATEMENTS

The financial statements as required under Item #17 are attached hereto and found immediately following the text of this Registration Statement.  The Company’s consolidated financial statements are prepared in accordance with Australian Accounting Standards, Australian equivalents to International Financial Reporting Standards and the Corporations Act 2001, the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP (refer to Note 1 of the accounts included within item 18).  

FORWARD LOOKING STATEMENTS

Statements in this disclosure document concerning our business outlook or future economic performance; anticipated revenues, expenses or other financial items; introductions and advancements in development of products, and plans and objectives related thereto; and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 and U.S. Federal Securities Laws. We urge you to consider that statements which use the terms “anticipate,” “believe,” “expect,” “plan,” “intend,” “estimate,” and similar expressions are intended to identify forward-looking-statements. Forward-looking statements address matters that are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those in these statements. F actors that could cause or contribute to these differences include, but are not limited to, those set forth under “Item 3D - Risk Factors”, Item 4 – “Information on the Company” and Item 5 – “Operating and Financial Review and Prospects, as well as elsewhere in this disclosure document. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly release any update or revision to any forward-looking statements to reflect new information, future events or circumstances, or otherwise after the date hereof.

Unless the context indicates otherwise, the terms "Brainytoys Limited" the "Company", "Brainytoys", “we”, “us”, “our” are used interchangeably in this document and mean Brainytoys Limited and its subsidiary.

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TABLE OF CONTENTS

PART I

	&nbs p;	Page
Item 1	Identity of Directors, Senior Management and Advisers	4
Item 2	Offer Statistics and Expected Timetable	4
Item 3	Key Information	4
Item 4	Information on the Company	11
Item 5	Operating and Financial Review and Prospects	16
Item 6	Directors, Senior Management and Employees	20
Item 7	Major Shareholders and Related Transactions	25
Item 8	Financial Information	27
Item 9	The Offer and Listing	27
Item 10	Additional Information	29
Item 11	Quantitative and Qualitative Disclosure about Market Risk	38
Item 12	Description of Securities Other than Equity Securities	38
	PART II
Item 13	Defaults, Dividend Arrearages and Delinquencies	38
Item 14	Material Modifications to the Rights of Security Holders and the Use of Proceeds	38
Item 15	Controls and Procedures	38
Item 16	(Reserved)
	PART III
Item 17	Financial Statements	39
Item 18	Financial Statements	39
Item 19	Exhibits	39

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PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A.  DIRECTORS AND SENIOR MANAGEMENT.  The following table provides the names and titles of our directors and senior management.

Name	Title
Charles MacKinnon	Chairman of Directors and Chief Financial Officer (1)
Alex Aguero	Managing Director (1)
Graham Nicol	Director and Company Secretary (1)
Catherine Vann	Business Manager (1)
Stephen Zadarnowski	Product Development and Technology Manager (1)

(1)

The business address for our directors and senior management is 6B Bowen Street, O’Connor, Western Australia, 6163 Australia.

B.  ADVISORS.  The legal advisor to the Company regarding this registration statement is:

The Law Offices of Gary L. Blum

3278 Wilshire Blvd, #603

Los Angeles, CA  90010

213.381.7450 phone

213.384.1035 fax

www.gblumlaw.com

C.  AUDITORS.  The following table provides the names and addresses of our auditors for the preceding three years.

Name and business address	Term
BDO Chartered Accountants and Advisers Level 8, 256 St George’s Terrace Perth Western Australia     6000	2004 – Present (Previously audited by BDO Sydney before this date)

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.

KEY INFORMATION

A.

Selected Financial Data

The following tables summarize selected financial data for the Company (stated in Australian dollars) prepared in accordance with Australian Accounting Standards (equivalent to International Financial Reporting Standards - Australian IFRS).  The information in the table was extracted from the more detailed financial statements and related notes included herein and should be read in conjunction with these financial statements and with the information appearing under the heading “Item 5 - Operating and Financial Review and Prospects”.   There is no material difference between USGAAP and Australian IFRS as advised in note 1 of the financial statements contained within item 18 of this document

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INFORMATION IN ACCORDANCE WITH AUSTRALIAN IFRS AND US GAAP¹

	Year ended June 30 (AUD)
	2005	2006
Total revenue	127,441	32,192
Income (loss) from operations	(744,705)	(3,632,737)
Net income (loss)	(744,705)	(3,542,858)
Income (loss) from operations per share	(4.50)	(11.70)
Total assets	3,905,670	428,856
Net assets	3,861,148	324,410
Shareholders’ equity	3,861,148	324,410
Number of shares on issue	30,289,714	30,289,714
Dividends declared per share	None	None
Diluted earnings per share*	N/A	N/A

*Dilutive earnings per share have not been disclosed as the entity does not have on issue any potential common shares which are dilutive.

Footnote 1:

Australian Equivalent to International Reporting Standards differs from International Financial Standards where the company has applied various exemptions under AASB.

EXCHANGE RATES

The following table sets forth, for the financial periods indicated, certain information concerning the Buying Rate for Australian dollars expressed in US dollars per AUD$1.00 as per the Reserve Bank of Australia’s “Daily Statistical Release”.

Five Most Recent Financial Years

Period	High	Low	Period End
12 months to June 30, 2002	0.5674	0.4923	0.5648
12 months to June 30, 2003	0.6674	0.5435	0.6674
12 months to June 30, 2004	0.7708	0.6400	0.6889
12 months to June 30, 2005	0.7905	0.6986	0.7637
12 months to June 30, 2006	0.7636	0.7159	0.7433

Previous Six Months

Period	High	Low	Period End
1-31 August 2006	0.7701	0.7578	0.7627
1-30 September 2006	0.7704	0.7480	0.7480
1-31 October 2006	0.7698	0.7430	0.7692
1-30 November 2006	0.7850	0.7646	0.7850
1-31 December 2006	0.7979	0.7720	0.77720
1-31 January 2007	0.7939	0.7720	0.7751

Latest Practicable Date

At February 1  2007 the Australian dollar expressed in US dollars per AUD$1.00 was $0.7764.

(1)

Represents the average of the Noon Buying Rates on the last day of each month during the period.

(2)

Source www.rba.gov.au/statistics/Historical Exchange Rates

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B.

Capitalization and Indebtedness

The following table summarizes our capitalization and indebtedness as of the date of this filing.  The information in the table should be read in conjunction with the more detailed combined financial statements and notes presented elsewhere in this registration statement.

	As of the date of this filing (Unaudited)
	No of shares	(A$)
Indebtedness
Long term obligations
Guaranteed		Nil
Unguaranteed		Nil
Secured		100,000 (1)
Unsecured		Nil
Shareholders’ Equity
Shares:40,241,489 shares, with no par value, issued and outstanding		8,718,971 (2)
Accumulated deficit*		(8,390,106) (3 )
Subject to Escrow Agreement	12,444,602
Free trading shares	27,796,887
Options to Acquire Stock	10,954,498
Fully Diluted Shares	52,862,654**
Net shareholders’ equity		256,624 (4 )*
Total capitalization		$ 356,624

(1)

Loan bearing interest at 10% p.a. and repayable by June 30, 2010 if not hitherto invested to shares.

(2)

Audited Financial Position as of June 30, 2006 adjusted to reflect capital rights issue raising in July,shares issued in relation to fees and shares issued in September and October and  shares issued on December 15 2006.

(3)

Balance as of June 30, 2006 as per Audited Financial Statements adjusted for unaudited losses for the 5 month period ended November 30,2006 that amounted to $602,132.

(4)

Balance as of  June 30, 2006 as per Audited Financial Statements adjusted for unaudited losses for the period to November 30, 2006 and capital issues during the period July 1 to December 14, 2006.

*

Balance as of June 30, 2006 as per Audited Financial Statements adjusted for subsequent capital issues.

**

Existing shares plus options outstanding together with $100,000 loan notes  converted to 1.666,667 shares

C.  

Reasons for the Offer and use of Proceeds

Not applicable.

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D.

Risk Factors

Investing in our securities will provide you with an equity ownership interest in Brainytoys Ltd.  As one of our shareholders, your investment will be subject to risks inherent in our business.  If any of the following risks actually occur, our business could be harmed.  In that event, the trading price of our shares might decline and you could lose all or part of your investment.  You should carefully consider the following factors as well as other information contained in this registration statement before deciding to invest in shares of our securities.  Additional risks that are not currently known to us or that we deem immaterial may also harm us and the value of your investment.  An investment in our securities involves a high degree of risk.  When evaluating an investment in our shares or business and product opportunities investors should carefully review and consider the following risk factors in addition to the other information contained in this Registration Statement on Form 20-F.

Risks Related to Our Business

Brainytoys Ltd and its subsidiary operates in rapidly changing environments that involve numerous risks and uncertainties, many of which are beyond our control and which could have a material effect on our business, revenues, operating results and financial condition.  The following points highlight some, although not all, of these risks and uncertainties.

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.

Exchange Rate Risk

As the Company’s potential earnings may be derived from international markets, changes in the Australian or US dollar exchange rate may impact on the earnings of the Company.  The exchange rate is affected by numerous factors beyond the control of the Company, including interest rates, inflation and the general economic outlook.

Economic and Government Risks

The future viability of the Company is also dependent on a number of other factors affecting performance of all industries and not just the toys and games industry, including but not limited to the following:

·

general economic conditions in US, Australia, and overseas markets;

·

changes in government policies, taxation and other laws;

·

the strength of the equity and share markets throughout the world;

·

movement in, or outlook on, interest rates and inflation rates; and

·

natural disasters, social upheaval or war.

Additional Requirements for Capital

The Company’s capital requirements depend on numerous factors.  Depending on the Company’s ability to generate income from the products it develops, the Company may require further financing.  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 reduce its development programmes as the case may be.

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.

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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.

Reliance on Key Personnel, and Need to Attract Qualified Staff

The loss of any one or more of the Directors, in particular, Mr. Aguero, could have an adverse impact on the performance and the prospects of the Company.

The Company is also reliant on its management, as well as outsourced manufacturing suppliers and distributors, the loss of whose services could materially and adversely affect the Company and impede the achievements of its commercialisation objectives.

Because of the specialised nature of the Company’s business, its ability to commercialise its products will depend in part upon its ability to attract and retain suitably qualified management, and third party suppliers and distributors over time.

There can be no assurance that the Company will be able to attract or retain sufficiently qualified personnel on a timely basis, retain its key management personnel, or maintain its relationship with key suppliers and distributors.

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.

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.

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

8

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.

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.

Changes to Accounting Standards

For reporting periods beginning on or after January 1, 2005, the Company must comply with Australian Equivalents to International Financial Reporting Standards (IFRS).  These changes will affect the way certain items are reported in the Company’s financial statements.  The most significant changes to accounting treatment under IFRS as it applies to the Company are provided in the notes to the Financial Statements herein.

Investment Speculative

The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or by investors in the Company.  The above factors, and others not specifically referred to above, may in the future materially affect the financial performance of the Company and the value of the securities offered.

Therefore, the Company’s shares carry no guarantee with respect to the payment of dividends, returns of capital or the market value of those Securities.

Company’s Officers and Directors Resident Outside US; Potential Unenforceability of Civil Liabilities and Judgments

The Company and all of its officers and all of its directors are residents of countries other than the United States.  Most of the Company’s assets are located outside the United Stares.  As a result, it may not be possible for investors to effect service of process within the United States upon such persons or enforce in the United States against such persons judgements obtained in United States courts, including judgments predicated upon the civil liability provisions of United States federal securities laws or state securities laws.

The Company believes that a judgment of a United States court predicated solely upon civil liability under United States securities laws would probably be enforceable in Australia if the United States court in which the judgment was obtained has a basis for jurisdiction in the matter that was recognised by an Australian court for such purposes.  However, there is doubt whether an action could be brought in Australia in the first instance on the basis of liability predicated solely upon such laws.

As a foreign private issuer we do not have to provide you with the same information as an issuer of securities based in the U.S.:

Because we are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended, commonly referred to as the Exchange Act, we are exempt from certain provisions of that law that are applicable to U.S. public companies, including (i) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; (ii) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a registered security; and (iii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time. Thus, you are not afforded the same protections or information, which would be made available to you, were you investing in a U.S. public corporation.

9

In accordance with the requirements of the Australian Stock Exchange, we disclose annual and semi-annual results. Our annual results are fully audited and our semi-annual results undergo a limited review by our independent auditors. We also endeavor to immediately disclose in the public media and to the Australian Stock Exchange all information which may have an effect on our stock price. We also disclose other relevant information pertaining to our company as required by Australian Stock Exchange regulations applicable to listed companies. We will provide our semi-annual results and other material information that we make public in Australia in the U.S. under the cover of SEC Form 6-K. Nevertheless, this information may not be the same or as much information as would be made available to you were you investing in a U.S. public corporation.

Risks related to our common stock:

Stock Volatility

The market price of Brainytoys shares has experienced fluctuations and may continue to fluctuate significantly.  The market price of Brainytoys shares may be adversely affected by various factors, including enforcement of existing laws, innovation and technological changes, the emergence of new competitors, quarterly variations in revenue and results of operations, speculation in the press or analyst community and general market conditions or market conditions specific to particular industries, including the toys and games industry.

THERE IS A LIMITED MARKET FOR BRAINYTOYS SHARES WHICH MAY MAKE IT MORE DIFFICULT FOR YOU TO DISPOSE OF YOUR SHARES

Brainytoys shares have been quoted on the ASX under the symbol “BRT” since March 24^th, 2005.  There is a limited trading market for Brainytoys shares.  Accordingly, there can be no assurance as to the liquidity of any markets that may develop for its common stock, the ability of holders of Brainytoys shares to sell its shares, or the prices at which holders may be able to sell Braintyoys shares.

BRAINYTOYS HISTORIC STOCKPRICE HAS BEEN VOLATILE AND THE FUTURE MARKET PRICE FOR OUR SHARES MAY CONTINUE TO BE VOLATILE.  FURTHER, THE LIMITED MARKET FOR BRAINYTOYS SHARES WILL MAKE ITS PRICE MORE VOLATILE.  THIS MAY MAKE IT DIFFICULT FOR YOU TO SELL BRAINYTOYS SHARES FOR A POSITIVE RETURN ON YOUR INVESTMENT.

Penny Stock Rules

As Brainytoys’ shares are subject to the US “Penny Stock” Rules, investors who purchase Brainytoys’ shares may have difficulty re-selling their shares as the liquidity of the market for Brainytoys’ shares may be adversely affected by the impact of the “Penny Stock” Rules.

Although Brainytoys’ stock is not currently deemed “penny stock”, its stock may be subject to US “Penny Stock” Rules in the future, which may make the stock more difficult to trade on the open market.  Brainytoys’ common shares have traded on the ASX since March 24, 2005.  For further details on the market performance of Brainytoys’ shares, see “Item 9A.”  A “penny stock” is generally defined by regulations of the US Securities and Exchange Commission (“SEC”) as an equity security with a market price of less than US$5.00 per share.  However, an equity security with a market price under US$5.00 will not be considered a penny stock if it fits within any of the following exceptions:

(i)

the equity security is listed on NASDAQ or a national securities exchange;

(ii)

the issuer of the equity security has been in continuous operation for less than three years, and either has (a) net tangible assets of at least US$5,000,000, or (b) average annual revenue of at least US$6,000,000; or

(iii)

the issuer of the equity security has been in continuous operation for more than three years, and has net tangible assets of at least US$2,000,000.

If an investor buys or sells a penny stock, SEC regulations require that the investor receive, prior to the transaction, a disclosure explaining the penny stock market and associated risk.  Furthermore, trading in Brainytoys’ common

10

stock is currently subject to rule 15g-9 of the Exchange Act, which relates to non-NASDAQ and non-exchange listed securities.  Under this rule, broker/dealers who recommend Brainytoys’ securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser, and receive the purchaser’s written agreement to a transaction prior to sale.  Securities are exempt from this rule if their market price is at least $5.00 per share.

In the event Brainytoys’ stock is deemed to be penny stock in the future, penny stock regulations will tend to reduce market liquidity of Brainytoys’ common stock, because they limit the broker/dealers’ ability to trade, and a purchaser’s ability to sell, the stock in the secondary market.

The low price of Brainytoys’ shares has a negative effect on the amount and percentage of transaction costs paid by individual shareholders.  The low price of Brainytoys’ common stock also limits Brainytoys’ ability to raise additional capital by issuing additional shares.  There are several reasons for these effects.  First, the internal policies of certain institutional investors prohibit the purchase of low-priced stocks.  Second, many brokerage houses do not permit low-priced stocks to be used as collateral for margin accounts or to be purchased on margin.  Third, some brokerage house policies and practices tend to discourage individual brokers from dealing in low-priced stocks.  Finally, brokers’ commissions on low-priced stocks usually represent a higher percentage of the stock price than commissions on higher priced stocks.  As a result, Brainytoys’ shareholders may pay transaction costs that are a higher p ercentage of their total share value than if Brainytoys’ share price was substantially higher.

The rules described above concerning penny stocks may adversely affect the market liquidity of Brainytoys’ securities.  Brainytoys believes its shares will likely continue to be thinly-traded and that its stock is a “penny stock” as its tangible assets are less than US$2 million.  For more information about penny stocks, contact the Office of Filings, Information and Consumer Services of the U.S. Securities and Exchange Commission, 450 fifth Street, N.W., Washington, D.C. 20549, or by telephone at (202) 272-7440.

ITEM 4.

INFORMATION ON OUR COMPANY

A.

History and Development of the Company

The Company was incorporated in the State of New South Wales, Australia on May 5, 1980under the name Bevona Pty Ltd.  Thereafter, the Company changed its name on July 10, 1980 to Speedy Wheels (Aust) Pty Ltd; on November 18, 1986 to Speedy Wheels Ltd; on September 5, 1999 to Auto Enterprises Ltd; and, finally, on November 4, 2004 to Brainytoys Limited.

.  

Brainytoys is headquartered in Perth, Australia and employs six full time professional and support staff, and, at times, contracts selected specialist staff and consultants as needed.

The principal office of the Company is located at 6B Bowen Street, O’Connor, Western Australia, Australia 6163 and its telephone number is (61) 8 9331 8441.

The Company, under the name Speedy Wheels Ltd and then Auto Enterprises Limited, listed on the Official List of the Australian Stock Exchange Limited (“ASX”) beginning in 1987, but was suspended from quotation in 1999.  On October 15, 2004, Auto Enterprises acquired 100% of the issued capital of Brainytoys.com Pty Ltd. in consideration for the issue of shares for a value of approximately $2.2 million to vendors associated with the Brainytoys business founder, Mr.. Alex Aguero.  On November 5, 2004, the Company changed its name from Auto Enterprises Limited to Brainytoys Limited and was re-listed on the ASX on March 24, 2005.

As a result of the acquisition of Brainytoys.com Pty Ltd, the development and commercialization of the existing and future Brainytoys range of products became the Company’s main focus.  Since that time, approximately $3.5 million of new capital has been raised and applied toward product development.

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B.

Business and Marketing Overview

Brainytoys' corporate aim is to position the Issuer as a significant and profitable participant in the world’s US$59 billion (2003 Sales - Source: US Department of Commerce 2005 Report) toys and games markets with a broad range of products covering key segments of the world market.

The Brainytoys business focus is aimed toward satisfying the large consumer demand for toy and game products, and the requirements of the world’s toy and game markets for the supply of creative, innovative, and new generation products.

Brainytoys has human resource and product innovation skills in the areas of software development, product design, product virtualization, prototype development, mass manufacture, and marketing systems in the toys and games industry.  It is proposed that these skills will be systematically applied in concluding marketing, manufacturing, product licensing, and distribution arrangements with the world’s leading toys and games industry participants.

Brainytoys currently has in excess of 50 products developed, or under development, at a cost of $3 million over the past three years.  Most of these products are expected to be released to the market in calendar year 2007.* Up to this point no product sales have occurred since business commencement.

* Products being released fromApril 1, 2007.

Marketing and Licensing

Brainytoys has entered into a number of agreements with three key distribution partners in Australia, USA and Europe.  These agreements will give Brainytoys the potential to reach up to 20,000+ independent and mass market retail stores across almost all key world markets.  One of the key elements of its marketing model is to consummate licensing agreements for significant brands in most major markets covered by its distribution partners.  This will help to facilitate rapid market penetration.  Major brand licensing arrangements have been finalized in Australasia for the Wiggles and Thomas the Tank Engine, both top-tier brands in the pre-school super-category.

In April and May 2006 Brainytoys made three important announcements regarding manufacturing, distribution and marketing agreements entered into with Hong Kong-based Enertec Enterprises Limited (Enertec), USA-based Reveal Entertainment Inc. (Reveal) and Australian/NZ-based Modern Brands Pty Ltd (Modern Brands).In December 2006 and January 2007 Brainytoys entered into Licensing agreements in relation to the United States market with Dreamworks Animation ( Bees Movie ),Porchlight Entertainment Inc (Jay Jay the Jet Plane ),Classic Media Inc ( Little Golden Books ) and Wiggles International Pty Ltd  ( the  Wiggles ).

These are major milestones in Brainytoys’ development as these agreements offer marketing and distribution channels for the Issuer’s products to a very large number of retail outlets in key world markets.

In aggregate terms, the potential number of outlets for Brainytoys’ products - which Enertec, Reveal and Modern Brands currently market and distribute to - is over 20,000 specialty and mass market retail stores.

These specialty and mass market retail stores are located in Brainytoys’ primary geographical markets, which together account for approximately 80% of worldwide toys and games sales, including the United States, Australia, New Zealand, Canada, UK, France, Germany, other European countries and Central and South America.

Subject to the final approval of a number of products currently being developed - using licensed properties, as per the announcement of the developmental partnership with Modern Brands - Brainytoys expects to deliver over 50 products to its distribution partners in the coming twelve months commencing in January 2007.  The anticipated sales may show seasonal consumer market influences such as the Christmas festive season.

·

Licensing Generally

Licensed toy and game products represent 30%+ of the toy industry (Source:  NPD Market Reports) and is therefore a significant market that Brainytoys must engage.

12

Accounting for approximately US$2.6 billion in royalty revenue in North America alone, entertainment licensing is big business (Source:  Video Age International).

Licensing, in the Brainytoys context, relates to the use of movie, TV, and published or other branded property that can be used to enhance a toy or game’s appeal.

Nearly all the products developed by Brainytoys have significant potential to use licensed properties.

Brainytoys is already developing products with licensed properties, as indicated in the Modern Brands agreement announcement in May this year.

In order to engage with this market Brainytoys announced, in June 13 2006, the appointment of USA-based Mr. Rand Brenner as a specialist Licensing and Marketing executive consultant.

Mr. Brenner will help the Issuer spearhead the expansion of licensed property product development.  He has over 20 years of marketing experience marked by licensing and promotion agreements with such Fortune 1000 companies as Hasbro, Bandai America, Hewlett Packard, Kellogg’s, Quaker Oats, Pepsi and others.

Holding executive positions at Saban Entertainment and Warner Bros., he was largely responsible for the licensing success of such entertainment properties as Mighty Morphin Power Rangers, Batman movies and Looney Tunes.

He also managed the advertising of such brands as Mattel's Hot Wheels at Ogilvy & Mather Advertising, as well as Yamaha electronics, Toshiba computers and Host International Restaurants at NW Ayer Advertising.

Mr. Brenner has a BA in Advertising from California State University in San Jose and an MBA from Pepperdine University.

·

Product Categories

Brainytoys has identified a number of opportunities in the toys and games markets, and has focused development on products for the following segments:

Hand-held LCD electronic games	Construction kits
Electronic toys	Activity kits
Electronic mobile toys	Educational products and toys
Die cast vehicles	Computer animation and multimedia programs
Board games	Web/Mobile phone content
Novelty/collectable/characters	Plush toys and dolls

Brainytoys believes that it has the ability to combine a unique number of elements that will advance the Issuer’s success.  These are:

·

innovative products that bring new twists to existing toy categories;

·

management and technical skills;

·

leading volume manufacturing and marketing relationships; and

·

an understanding of the marketing dynamics and culture of the toys and games industry.

The Issuer’s management philosophy is to adopt a prudent and risk-averse approach to:

13

·

specific product development, by containing product development costs to a maximum of approximately $100,000 for each product;

·

manufacturing and inventory holdings, through the use of contract manufacturing (China and Hong Kong based) and by matching purchase and sales orders from distributors and licensees, thereby virtually eliminating Issuer owned inventories; and

·

product development strategy, through the development of a multi-segment product range ensuring that the Issuer’s success is not tied to the performance of any single product.

In order to commercialize its products, the Issuer is endeavoring to:

·

manufacture and market its products directly to distributors; and

·

use licensing arrangements with major brand names.

The operational matrix of the business includes:

·

develop a product concept;

·

evaluate potential for further development;

·

develop a prototype;

·

present prototype to distributors and obtain feedback;

·

develop marketing profile for product; and

·

sell the product worldwide via distributor partners.

It is anticipated that this development cycle will take from three to twelve months for most products in development.

·

Technology

Brainytoys has expertise in computer-assisted product development processes.

Powerful new computer tools can now be applied to many areas in the product development cycle.

Combining this technology with the availability of low-cost manufacturing opportunities is assisting the Issuer’s ability to develop products in a timely and cost effective manner.

These technology tools include:

·

3D visualization software - for the creation of “virtual” models of the product so that the functional and cosmetic elements can be visualized and assessed before the product is actually built.

·

3D printers - this technology is closely allied to the 3D visualization software listed above, but goes one step by enabling the creation of actual physical product prototypes, derived from 3D designs, in a matter of hours using devices that are no bigger than a large photocopier.

·

3D animation tools - broadcast-quality 3D animation tools are now widely available at low cost.  Combining these tools with the low cost of computing power allows Brainytoys to develop 3D animation dynamic displays of its products, and also 3D animation cartoon programs to support the marketing of its products.

Brainytoys use of this technology is enabling the Issuer to develop products in short time frames, thereby reducing cost and accelerating the product-to-market cycle.

·

Multimedia Product Extension

In its development processes, Brainytoys makes extensive use of software design tools and, specifically, 3D “virtual” design graphic and animation technologies.  In effect, this means that Brainytoys’ design skill set is the same as that required for the development of computer games and other software related products.

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Brainytoys has determined that the Issuer has substantial opportunities to extend some of its current physical toy and game product lines into these “virtual” media segments as well as developing a number of new products.  For example, Brainytoys’ hand-held electronic games and board games could be developed as computer or mobile phone games.

These other media formats include:

·

3D Animation movies/cartoon series;

·

Computer games;

·

Internet/Web games and content;

·

Mobile phone games and content;

Brainytoys is aggressively pursuing these opportunities as they have the potential to deliver significant value to the Issuer.

Brainytoys has already initiated high level discussions with a number of substantial companies in Australia, the US and China to develop these opportunities further.

·

Global Markets

The toys and games industry is a substantial world industry generating an estimated US$59 billion in annual sales, with the North American market generating approximately US$21 billion in sales. (Sources: US Department of Commerce 2005 Report/NDP 2004/5 State of Industry Report)

The toys and games markets are constantly searching for innovative products, and are relatively resilient in economic terms, able to ride out most economic cycles.

One of the most interesting features of these markets is that nearly every “blockbuster” toy or game launched over the last 50 years has been brought forward by independent inventors and small companies.  

The Issuer is especially focused in developing potential blockbuster products.

With its projected production of 20 to 30 new products each year the prospects of achieving such products will be significantly improved.

In order to remain competitive, most of the big toys and games companies license products from other smaller companies and inventors.

C.  ORGANIZATIONAL STRUCTURE

The Company has only one subsidiary, Brainytoys.com Pty Ltd, which is wholly owned by the Company and holds nominal intellectual properties.

D.

PROPERTY, PLANT AND EQUIPMENT

The following table sets forth information concerning our facilities and equipment:

Item and Location	Principal Use	Expiration Date of Lease	Approximate Number of Units/Square Feet
Premises (1)	Office and Warehouse Location	Monthly	800 sq feet
Computer Hardware 3D printers, etc.	Business Operations	N/A	23 Units (2)

15

(1)

Premises

800 square feet of leased office/warehouse located at 6B Bowen Street, O’Connor, Western Australia 6163 on monthly lease at $1579.00 per month.

Additional warehouse facilities (400 sq ft) are rented at Park Place, Hamilton Hill, Western Australia 6163 at $324.00 per month.

(2)

Equipment

Computers, graphic design and rendering software, 3D printers are owned by the Company.  The approximate purchase value of this equipment was $243,000.

ITEM 4A.

UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following information should be read in conjunction with Brainytoys audited consolidated financial statements and related notes, which are prepared in accordance with Australian International Financial Reporting Standards (“Australian IFRS”), included elsewhere in this Form 20-F.  All amounts are expressed in Australian dollars unless otherwise indicated.  The summary of Significant Accounting Policies contained in Note 1 explains the diference between Australian IFRS and US GAAP and this discussion of results of operations and liquidity and capital resources.

The Company acquired 100% of Brainytoys.com Pty Ltd on 15^th October 2004 in consideration for the issue to Alex Aguero of 7,190,600 shares (post capital reconstruction) and a cash payment of $25,000.  A further payment in consideration for the completion of the capital raising and relisting was made in March 2005 to the vendor – this comprised 5 million shares and 2.5 million options and a cash payment of $50,000.  As such, the strategic direction of the Company changed from an investment company to a toy and game development company. Refer to note 15 in the financial statements for full details of the acquisition.

To assist with the acquisition of Brainytoys.com Pty Ltd, a total of 6,734,000 shares at 15 cents were issued as seed capital to raise a total of $1,010,100.  each of the seed capital investors received 1 option for every 2 shares acquired, resulting in 3,367,000 options being issued.

The Company lodged a prospectus dated 9 December 2004 for the offer of 8,750,000 shares at an issue price of 20 cents each to raise a total of $1,750,000, together with up to 2,187,500 free attaching options on a one for four basis.

Since the Company’s acquisition on October 15, 2004 and listing on the Australian Stock Exchange (“ASX”) on March 24, 2005, it has significantly advanced its business model as an innovative developer and wholesaler of contract manufactured toys and games products for world markets, however, in the process has incurred losses of $4.3 million reflecting a write down of virtually all product outlays and acquisition carrying values.  The past two years business activities have been focussed upon developing:

(i)

an extensive suite of products to release to the market;

(ii)

investing in and establishing the necessary production technology infrastructure to develop products; and

(iii)

arranging worldwide distribution networks for the product;

(iv)

negotiating or assisting distributors in the procurement of appropriate brand licences; and

(v)

arranging the accessing of contract manufacturers.

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The process has taken appreciably longer than anticipated, and has involved an outlay of approximately $5 million over the past 2.5 years.  In the process the Board of Directors has changed significantly, with the recent appointment of directors who share management’s strategic vision and had earlier been largely responsible for arranging the requisite capital.

The Company is now strategically well positioned to success for its business model:

(a)

the scheduled release of approximately 10 completed products over the next six months and potentially a further 50 products over the 2007 calendar year.

(b)

the formation of a distribution network enabling retail access to potentially 20,000 new outlets, and

(c)

the recent arrangement of $1.33 million in new capital raisings through an underwritten rights issue of $454,345, a placement to raise $100,000 and an $800,000 secured convertible loan note facility to be drawn down as and when required as to $700,000 ,and a placement to raise $80,000.

In the absence of the expected significant cash inflow arising from product sales the facility ensures that the Company has sufficient liquidity reserves for at least a further 12 months.

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A.

Operating Results

2005 and 2006

The consolidated entity (including the parent and its wholly owned subsidiary) revenues for the financial years ended June 30, 2005 and 2006 were $127,441 and $32,192 respectively, representing interest income.

The consolidated entity’s losses for the financial years ended June 30, 2005 and 2006 were $744,705 and $3,542,858 respectively.

The losses reflect the inclusion of a 2,198,063 Impairment of Intellectual Property asset write down.  No product development expenditure items have been capitalized.  The remaining increase in losses for the period was largely attributable to the conduct of a scaled up research and development program, higher people and other general costs.  As there was no firm sales contracts locked in as of 30 June 2006, this triggered the writedown of intellectual property under IFRS.

6 Months Ended December 31, 2006 ( Unaudited )

The Company has continued to incur final product development and  manufacturing costs in relation to several products to be released to the market at the commencement of the  June  quarter.

The economic entity is expected to incur losses of approximately $600,000 for the period.  Thereafter, the financial position is expected to be improved upon later in the Financial Year.

External Influences - Inflation, foreign Currency Fluctuation, Economic, governmental and political

During the periods in question none of the above considerations impacted upon or influenced the outcome of the Company’s results.

B.

Liquidity and Capital Resources

As of the date of this filing, the Company had cash  reserves of approximately $200,000.  We have financed our operations primarily through a series of private placements of equity securities and debt issuances as described in the following list:

·

5 million common shares issued to Mr Alex Aguero for a value of $1,000,000 to complete the acquisition of Brainytoys.com Pty Ltd in March 2005

·

2,097,333 shares issued for $0.15 per share (as adjusted for 1 for 5 share consolidation) for cash to various seed capital subscribers to raise $314,600 during the period November 2004 – January 2005

·

8.750,000 common shares issued for $0.20 per share cash pursuant to a public prospectus dated December 9, 2004 to raise $1,750,000

·

7,572,429 common shares issued for $0.06 per share cash pursuant to an underwritten 1 for 4 pro rata public prospectus rights issue dated June 23, 2006 to raise $454,346

·

On September 5, 2006, the Issuer entered into a Convertible Note Agreement with Noble Investments Pty Ltd relating to the issue by the Issuer at its option of a series of convertible loan notes to a value of $800,000 maturing on June 30, 2009.  The Issuer has drawn down on 1 convertible note issued at $100,000 which is convertible to 1,666,666 common shares at $0.06 per share

·

1,000,000 common shares issued for $0.08 per share pursuant to a placement to Upton Holdings Pty Ltd

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In the absence of any expected cash inflow arising from product sale during the ensuing financial year the Company is expected (through a drawdown of the note facility) to have sufficient cash resources to sustain its operation through to October 2007.  Notwithstanding that the Company is anticipating an appreciable cash inflow for the ensuing financial year and will only draw down the remaining $700,000 Noble undrawn facility on an as required basis.

The Company does not currently have, nor is it proposing to have, any borrowings aside from the Noble facility which through the date of this filing is $100,000.

C.

Research and Development, Patents and License

Following the acquisition on October 15, 2004 of Brainytoys.com Pty Ltd, the Company’s business has been exclusively directed to the research and development (“R & D”) of:

(i)

a high technology consumer market software focussed methodology for introducing products to the toys and games sector; and

(ii)

up to 68 toys and games products.

By September 30, 2006 Brainytoys will have expended almost $5.5 million in R&D and acquisition costs, an investment it expects to start recouping during the balance of the 2007 Financial Year.

D.

Trend Information

The Company is not yet in a position to identify indicative current or anticipated trends pending the outcome of the sales programs undertaken by the Company’s distributors.

E.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

F.

Tabular Disclosure of Contractual Obligations

The following table summarises our contractual obligations as of the date of this filing, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

	Payments Due by Period
	Less than 1 year	1-3 years	4-5 years	After 5 years
Contractual Obligations:
Long Term Debt Obligations	$	100,000 (1)	-	-
Capital (Finance) Lease Obligations	$		-	-
Operating Lease Obligations	$		-	-
Purchase Obligations
Other Long Term Liabilities Reflected on the Company’s Balance Sheet under GAAP
Total Contractual Obligations and Commitments:			-	-

19

(1)

Represents a secured 10% interest bearing facility provided by Noble Investments Pty Ltd convertible into shares.  The facility is repayable by June 30, 2009 if not hitherto converted to shares.

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.

Directors and Senior Management

The following table sets forth certain information concerning our directors and senior management as of the date of this filing.  All of our directors are residents of Australia.

Name	Age	Position
Charles MacKinnon	60	Chairman and Chief Financial Officer
Alex Aguero	49	Managing Director
Graham Nicol	61	Director and Company Secretary
Catherine Vann	49	Business Manager
Stephen Zadarnowski	51	Technology Manager

Set forth below is a biographical description of our directors and senior management based on information supplied by each of them.

Charles MacKinnon - Chairman and Chief Financial Officer

Mr. MacKinnon holds a Bachelor of Commerce degree from the University of Western Australia and thereafter qualified to become a member of the Australian Society of CPAs.

His expertise includes 35 years at a senior management level (principally at director level) in the UK, Australia, and South East Asia in the investment banking and various other industries.

In 1993, Mr. MacKinnon served as one of the four McCarrey Commissioners conducting a comprehensive efficiency/financial review of State Finances and Public Sector Agencies for the Government of Western Australia.

In recent times he has been Chairman of several public companies and government entities including 6 years as President of the Perth Zoo.  He has also had extensive experience in the agricultural, management consulting, financial, manufacturing and resources, construction, and property management sectors and is Executive Chairman and ultimate owner of Lothbury Advisory Pty Ltd, an Australian licensed investment banking corporate advisory business.

Alex Aguero - Managing Director

Mr. Aguero is the developer of the Brainytoys product range.  Mr. Aguero has been involved in the development of a number of innovative high-tech products and systems since 1981, when he first developed the successful labelling device now marketed world wide by the Casio, Brother and Dymo companies, with several million units held.  Mr. Aguero has worked on high level software and hardware development projects as follows:

·

managing the development and roll-out of national data broadcasting networks with ABC TV and Telstra; and

·

the development, manufacture and marketing of computer and hand-held electric games, interactive information systems, voice activated systems, robotic products, bio-feedback devices, visual stimulation systems and mobile phone data projects.

20

With reference to Brainytoys, Mr. Aguero has management expertise in the development, manufacturing and marketing of advanced technologies, software, toys and games.

Graham Nicol – Director and Company Secretary

Mr. Nicol is a qualified accountant and a member of the ASCPA for 35 years with extensive financial, business and information systems experience at a senior level in diverse industries including motor vehicle distribution, building materials, primary industries, media, small business retail and property management.  Mr. Nicol is a director of Brainytoys Limited.

Stephen Zadarnowski - Technology Manager

Mr. Zadarnowski has an extensive background in IT and internet systems, and online data services (1997-2006), as well as management of information systems.  Mr. Zadarnowski has been employed in the computing industry since 1981, covering home, industrial and commercial projects.  His specific career includes PC games design (1981-2006), database (2001-2006), communications and information systems (1989-2001), electronic and mechanical toy design and programming in embedded systems and emulations (1994-2006).  Mr. Zadarnowski became Brainytoys Ltd’s Technology Manager in 2004; he manages all technical aspects of product design, development, testing, and production, as well as managing the Company’s technological requirements and applications.

Catherine Vann - Business Manager

Ms. Vann’s early career was in teaching business education and English to high school students, and as an Associate of the Imperial Society of the Teachers of Dancing (Cecchetti) teaching classical dance in country towns in South Western Australia.  Ms. Vann has extensive experience in Business Administration, having operated her own consulting business contracting her services to a range of clients including schools, radio production, state government, and software designers and developers.  The software development projects Ms. Vann was involved with include the development of electronic hand-held games, an Australia wide data distribution network using Australia’s national Broadcaster (ABC TV) and a national data distribution network using Telstra’s premium billing network, this last project being partly funded by Telstra, Australia’s premier phone network.  Ms. Vann was also the Business manager of Highforce Investments Pty Ltd from 1 999 to 2001 when the company was managing the software development of a major Internet/Web project.  Ms. Vann joined Brainytoys in 2004 as its Business Manager and manages all aspects of daily administration including Human Resources, corporate health and risk management, policy and procedure, and financial and systems reporting.

B.

Compensation

During the financial year ended June 30, 2006, the Company paid or accrued a total of $396,720 in compensation to its directors and officers.  No other funds were set aside or accrued by the Company during the financial year ended June 30, 2006 to provide pension, retirement or similar benefits for directors or officers of the Company pursuant to any existing plan provided or contributed to by the Company under applicable Australian laws.

The Company is required, under applicable securities legislation in Australia, to disclose to its shareholders details of compensation paid to its executive officers.  The following fairly reflects all material information regarding compensation paid to the Company’s executive officers and directors which has been disclosed to the Company’s shareholders under applicable Australian law.

Cash and Non-Cash Compensation - Executive Officers and Directors

The Company currently has five executive officers and directors.  Charles MacKinnon, Alex Aguero, Graham Nicol, Stephen Zadarnowski and Catherine Vann.  The following table sets forth all annual and long term compensation for services in all capacities to the Company for the financial year ended June 30, 2006 in respect of the individuals who were, at June 30, 2006, the Company’s directors and members of management:

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In addition, the table includes compensation for the following former directors and officers of the Company who no longer serve in that capacity.  The former directors and officers of the Company included in the schedule who no longer serve in that capacity are Brett Fraser, Ian Allen, Howard Read, and Jay Stephenson.

Directors and Key Management Personnel of the Parent Company

2006	Short Term Benefits			Post-employment	Share-based payment
Name	Cash salary and fees	Cash bonus	Non-cash Benefits	Super- annuation	Options	Total
	$	$	$	$	$	$
Non-executive directors
Charles MacKinnon	3,516	-	-	-	-	3,516
Graham Nicol	2,511	-	-	-	-	2,511
Robert Towner	27,073	-	-	2.437	-	29,510
Brett Fraser	59,516	-	- 23,21	2,214	-	61,730
Ian Allen	2,500	-	-	450	-	2,950
Howard Read	2,500	-	-	450	-	2,950
Executive Directors
Alex Aguero	87,273	-	-	-	-	87,273
Other key management personnel
Jay Stephenson	37,500	-	-	-	-	37,500
Stephen Zadarnowski	75,540	-	-	6,810	2,040	84,390
Catherine Vann	75,540	-	-	6,810	2,040	84,390
	373,469	-	-	19,171	4,080	396,720

Fees paid to Mr. Fraser and Mr. Stephenson were paid to Wolfstar Group, a company controlled by Mr. Fraser and Mr. Stephenson.  Brett Fraser’s Directors fees for the year amounted to $22,016.

In order to attract and retain appropriate directors and management, Brainytoys provides incentives in the form of stock options to certain of our qualified employees, directors and officers on terms and conditions which are in accordance with the prevailing rules and policies of the ASX, and our Board of Directors.  As of June 30, 2006, we had issued  incentive stock options to the following directors and officers pursuant to our stock option plan approved by shareholders.All of the directors* have since resigned:The following table sets out certain information relating to share options not exercised by our employees, senior management and directors (including former directors) as at June 30, 2006:

Name	Title of Class	$	Unexercised Options at June 30 2006	Expiry Date
Brett Fraser*	Shares	25c	500,000	30 June 2009
Ian Allen*	Shares	25c	500,000	30 June 2009
Howard Read*	Shares	25c	500,000	30 June 2009
Jay Stephenson*	Shares	25c	500,000	30 June 2009
Stephen Zadarnowski	Shares	20c	300,000	9 January 2011
Catherine Vann	Shares	20c	300,000	9 January 2011
Jocelyn Palacios	Shares	20c	150,000	9 January 2011

22

Bradley Zadarnowski	Shares	20c	150,000	9 January 2011
			2,900,000

Pension and Retirement Plan Disclosure

The Company does not provide retirement benefits for directors and executive officers.

Under Australian government regulations we are legally required to contribute 9% of employees' gross income to an approved superannuation fund. Employees are entitled to contribute additional amounts to the fund at their own discretion.

Termination of employment, Change in Responsibilities and Employment Contracts

Except for as disclosed below, there are no employment contracts, consulting agreements, or “change of control agreements” in place between the Company and any of its Executive Officers.

Alex Aguero, the Company’s Managing Director, is a party to a service agreement entered into on  November 15, 2004 by the Company for a 3 year period.  Under the service agreement Alex Aguero is engaged by the Company to provide services in the capacity of managing Director for an annual remuneration of $80,000 inclusive of statutory superannuation.

Charles MacKinnon was appointed as a director of the Company on May 26, 2006.  Lothbury Advisory Pty Ltd, (a related entity to Charles MacKinnon) has since been engaged by the Company to provide various investment, banking, corporate advisory and corporate administration services for a fee of $10,000 per month which includes the provision that Charles MacKinnon serve as Chairman and Chief Financial Officer.

C.

Board Practices

The term of office of each director is subject to re-election on a rotation basis in accordance with the Company’s Constitution.  Executive officers hold office until their successors are chosen and qualified, subject to earlier removal by the board of directors.

The general duty of the Board of Directors of the Company is to oversee the management of the business and affairs of the Company.  In particular, the Board of Directors is responsible for the following matters:

(a)

adopting a strategic planning process for the Company which establishes the Company’s long term goals and strategies, and monitoring the success of the Company’s management in achieving those goals and implementing the strategy.

(b)

identifying the principal risks with respect to all aspects of the Company’s business, ensuring that there are systems in place to effectively monitor and manage such risks with a view to the long-term viability of the Company, and achieving a proper balance between the risks incurred and the potential return to the Company’s members;

(c)

engaging in succession planning, including appointing, training and monitoring senior management (which includes ensuring that objectives are in place against which management’s performance can be measured, establishing and maintaining programs to train and develop management, providing for the orderly succession of management, and assessing the performance and contribution of the Chief Executive officer of the Company against mutually established objectives; and

(d)

ensuring that the Company has a policy in place to enable it to communicate effectively with its shareholders, other stakeholders and the general public, effectively interpreting the operations of the Company to shareholders, accommodating feedback from shareholders, and ensuring that there are effective controls and information systems in place for the Board of Directors to discharge its responsibilities, such as an audit

23

system which can inform the Board of Directors about the integrity of the data and the compliance of the financial information with appropriate accounting principles.

Committee of the Board of Directors

The Company maintains an Audit Committee, which oversees the accounting and financial reporting processes of the Company and all audits and external reviews of the financial statements of the Company on behalf of the Board, and has general responsibility for oversight of internal controls, accounting and auditing activities of the Company.  Currently, Charles MacKinnon serves as the Chair of the Audit Committee.

The Committee reviews, on a continuous basis, any reports prepared by the Company’s external auditors relating to the Company’s accounting policies and procedures, as well as internal control procedures and systems.  The Committee is also responsible for examining all financial information, including annual financial statements, prepared for securities commissions and similar regulatory bodies prior to filing or delivery of the same.  The Audit Committee also oversees the annual audit process, the Company’s internal accounting controls, any complaints and concerns regarding accounting, internal controls or auditing matters and the resolution of issues identified by the Company’s external auditors.  The Audit Committee recommends to the Board the firm of independent auditors to be nominated for appointment by the shareholders and the compensation of the auditors.  The Audit committee meets on an as needed basis.

D.

Employees

As of the date of this filing, the Company has 6 employees, all of whom work out of the Company’s head office.  The employees’ positions included managerial and support staff positions.  At times, the Company contracts selected specialist staff and consultants as needed.

E.

Share Ownership

The following table sets forth the share ownership of those persons listed in Items 6A and 6b above and includes the details of all options or warrants to purchase shares of the Company held by such persons:

Name	Number of Common Shares Held at Filing date	Number of Options Or Warrants Outstanding at Filing Date	Beneficial Ownership (2)
Charles MacKinnon	1,988,380	393,750	4.9%
Alex Aguero	9,328,918	2,118,750	23.2%
Graham Nicol	465,618	12,500	1.1%
Robert Towner*	505,012	200,000	1.2%
Brett Fraser*	445,833	666,666	1.1%
Ian Allen*	466,667	733,333	1.1%
Howard Read*	200,000	600,000	.5%
Stephen Zadarnowski	-	300,000	-
Catherine Vann	12,500	300,000	-
Jay Stephenson*	62,500	500,000	-

*

Directors during year ended June 30, 2006 who have resigned during that period.

(2)

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  Unissued common shares

24

subject to options, warrants or other convertible securities currently exercisable or convertible, or exercisable or convertible within 60 days, are deemed outstanding for the purpose of computing the beneficial ownership of common shares of the person holding such convertible security but are not deemed outstanding for computing the beneficial ownership of common shares of any other person.  The percentage ownership figure is calculated according to the the number of outstanding common shares as of the date of this filing, which is40,241,489.

ITEM 7

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.

Major shareholders

As of the date of this filing, a total of 40,241,489 shares in our capital were issued and outstanding.

To the best of Brainytoys’ knowledge, no person, corporation or other entity is a beneficial owner of more than 5% of the common shares of Brainytoys, except for those listed below:

Title of Class	Identity of Person or Group	Number of Shares Beneficially Owned (2)	Percent of Class(3)
Shares	Alex Aguero (1)	9,328,918	23.2%
Shares	Noble Investments Pty Ltd (4)	8,051,438	20.0%

(1)

Alex Aguero, Managing Director.

(2)

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  Unissued shares subject to options, warrants or other convertible securities currently exercisable or convertible, or exercisable or convertible within 60 days, are deemed outstanding for the purpose of computing the beneficial ownership of common shares of the person holding such convertible security but are not deemed outstanding for computing the beneficial ownership of common shares of the person holding such convertible security but are not deemed outstanding for computing the beneficial ownership of common shares of any other person.

(3)

Based on 40,241,489 shares issued and outstanding as of the date of this filing.

(4)

Noble Investments Pty Ltd (“Noble”) is a related party to Mr. Tim Lebbon.  Noble holds one secured convertible note of $100,000 which confers upon it a right to convert at its option up to 1,666,667 shares in the Company thereby increasing the number of shares beneficially owned to 9,718,103 representing 23.82% of the share class.

There are currently no voting rights arrangements among the Company’s shareholders and directors.

We are not aware of any direct or indirect ownership or control of the Company by another corporation(s), by any foreign government or by any other natural or legal person(s) severally or jointly. We do not know of any arrangements, the operation of which may at a subsequent date result in a change in control of the Company.

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B.

Related Party Transactions

The Company has not, during the three most recently completed financial years and the subsequent period up to the date of this Registration Statement, entered into transactions or loans with any (a) enterprises that are directly or indirectly controlled by or under common control with us; (b) our associates; (c) individuals directly or indirectly owning voting rights which give them significant influence over us or close members of their respective families; (d) our directors, senior management or close members of their respective families or (e) enterprises in which a substantial interest in the voting power is held or significantly influenced by any of the foregoing individuals (a “Related Party”), except as shown directly below.

Alex Aguero

On 15^th November 2004, the Company entered into a service agreement with Alex Aguero, the Managing Director, for a 3 year period relating to the payment of an annual remuneration of $80,000 inclusive of statutory superannuation.  For the years ended 30^th June 2005 and 2006, Mr Aguero has been paid $55,384 and $87,273 respectively.

Wolfstar Group

A company owned by Brett Fraser (a former director) and Jay Stephenson (former Company Secretary and Chief Financial Officer) was paid $103,000 and $97,016 for the years ended June  30, 2005 and 2006 respectively for corporate and administrative services.

Graham Nicol

G.K. Nicol, CPA, will be paid $40,000 per annum commencing September 1, 2006 for accounting and Company Secretary service together with the provision of Graham Nicol’s services as a director of the Company.

Lothbury Advisory Pty Ltd (“Lothbury”) (Related to Charles MacKinnon)

Lothbury, an Australian licensed investment banker and corporate adviser, was paid $30,000 in September 2006 for the provision of investment banking services and other corporate advisory services relating to the Company’s completed $1.25 million and future capital raisings and various proposed corporate initiatives in addition to the provision of Charles Mackinnon’s services as Chairman, Chief Financial Officer and the provision of other management or administrative functions.  This arrangement is to continue at the rate of $10,000 per month. Lothbury received corporate advisory fees of approximately $100,000 from the Company during the year ended June 30, 2005 for various matters including the arrangement of the seed capital raising, IPO, and the acquisition of Brainytoys.com Pty Ltd.

Leadenhall Australia Limited (Related to Tim Lebbon)

During the year ended June 30, 2006, Leadenhall was paid an underwriting fee calculated at the rate of 6% of the value underwritten for the Company’s 1 for 4 pro rata rights for a raising of $454,348.  The fee was satisfied by the issue of shares.  The issue involved Tim Lebbon’s company, Noble Investments Pty Ltd taking up the $354,425 shortfall in shares.

On September 4, 2006, following the approval of the Company’s shareholders in general meeting the Company entered a Convertible Note Deed with a Tim Lebbon related company, (Noble Investments Pty Ltd) in relation to the provision by Noble of an $800,000 secured convertible note facility to be drawn down as to $100,000 at the Company’s option at any time up to June 30, 2010 for a fee calculated at the rate of 6% and satisfied by the issue of shares.

26

C.

Interests of Experts and Counsel

Not Applicable.

ITEM 8

FINANCIAL INFORMATION

A.

Consolidated Statements and Other Financial Information

The Company’s consolidated financial statements are stated in Australian dollars (A$) and are prepared in accordance with Australian International Financial Reporting Standards (“IFRS”), the application of which, in the case of the Company, confirms in all material respects for the periods presented with United States GAAP, except as discussed in Note 1 to the financial statements.

The financial statements as required under Item 17 are attached hereto and found immediately following the text of this Registration Statement.  The audit reports of the Company are included in the financial statements.

Audited Financial Statements

Fiscal 2006/2005 years ended June 30.

Legal/Arbitration Proceedings

The Directors and the Management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.

Policy on dividend distributions:

Brainytoys has not paid any dividends on its outstanding common shares since its incorporation and does not anticipate that it will do so in the foreseeable future.  All funds of Brainytoys are being retained for development and distribution of the Company’s toys and games products.

B.

Significant Changes

There have been no significant changes to the business of Brainytoys since June 30, 2006 except as otherwise disclosed herein.

ITEM 9

THE OFFER AND LISTING

A.

Offer and Listing Details

Our common shares trade on the Australian Stock Exchange Limited (“ASX”) under the symbol “BRT”.  Our shares began trading on the ASX under the symbol “BRT” on March 24, 2005.  Before we were listed as “BRT”, and prior to our name change, our common shares were traded on the ASX under the name Auto Enterprises Limited and under the symbol “AEL”.  As of February 1, 2007 the stock price on the ASX was A$0.125.  Prior to being re-listed

27

on the ASX on March 24, 2005, the Company had been suspended from trading since 1999.  Currently, our shares are not currently traded on any US trading market

The following information set forth, for the periods indicated, the highest and lowest market quotations for our common shares reported on the daily official list of the ASX.

	HIGH:	LOW:
Calender Year
Calender Year 2005	0.195	0.052
Calender Year 2006	0.1	0.04
Per Quarter
Mar-05	0.195	14.5
Jun-05	0.16	0.066
Sep-05	0.085	0.052
Dec-05	0.065	0.55
Mar-06	0.07	0.40
Jun-06	0.01	0.05
Sep-06	0.65	0.052
Dec-06	0.10	0.052
6 Months to Dec 06
Jun-06	0.065	0.05
Jul-06	0.065	0.052
Aug-06	0.064	0.052
Sep-06	0.06	0.06
Oct-06	0.05	0.09
Nov-06	0.06	0.09
Dec-06	0.10	0.088

As of the date of this filing, there were 40,241,489 shares outstanding; there were approximately 450 registered holders of our shares, of which none of the total outstanding shares were held by registered holders located in the United States.

B.

Plan of Distribution

Not Applicable.

C.

Markets

Our shares are quoted in Australia on the ASX under the trading symbol “BRT”.  

We intend to list our common stock on the Over-The-Counter Bulletin Board ("OTCBB").

There can be no guarantee that the Company’s application to list on the OTCBB will be accepted.

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D.

Selling Shareholders

Not Applicable.

E.

Dilution

Not Applicable.

F.

Expenses of the Issue

Not Applicable.

ITEM 10

ADDITIONAL INFORMATION

A.

Share Capital

Shares.

We presently are authorized to issue an unlimited number of our shares, no par value per share.  As of the date of this filing, we have 40,241,489 shares issued and outstanding.

The holders of our shares will elect all directors and are entitled to one vote for each share.  All shares will participate equally in dividends if declared by our board of directors, and in net assets in the event of the liquidation of Brainytoys.  All shares presently outstanding are duly authorised, validly issued, fully paid and non-assessable by Brainytoys.  Our shares have no preference, conversion, exchange, pre-emptive or cumulative voting rights.  At present, no shares of Brainytoys are held by the Company or any of its subsidiaries.

Options.

Set forth below is a table summarising the 10,954,498 outstanding options to purchase shares as of February 1, 2007.

Name	No of Options Granted and Not Exercised	Exercise Price	Expiration Date
Charles MacKinnon (1)	393,750	$0.25	June 30, 2009
Brett Fraser (2) Rob Towner (2)	500,000              200,000	$0.25           $0.25	June 30, 2009 June 30,2009
Graham Nicol (1)	12,500	$0.25	June 30, 2009
Ian Allen (2)	500,000	$0.25	June 30, 2009
Howard Read (2)	500,000	$0.25	June 30, 2009
Jay Stephenson (2)	500,000	$0.25	June 30, 2009
Alex Aguero (1)	2,118,750	$0.25	June 30, 2009
Bradley Zadarnowski	150,000	$0.20	January 9, 2011
Jocelyn Palacios	150,000	$0.20	January 9, 2011

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Stephen Zadarnowski (3)	300,000	$0.20	January 9, 2011
Catherine Vann (3)	300,000	$0.20	January 9, 2011
Shareholders (4)	5,329,498	$0.25	June 30, 2009
	10,954,498

(1)

Current Directors

(2)

Former Directors or Officers

(3)

Management

(4)

Held by 350 option holders

Options

At the date of this report, the unissued ordinary shares of Brainytoys Limited under option are as follows:

Grant Date	Expiration Date	Exercise Price	Number under Option
November 19, 2004	June 30, 2009	$0.25	3,366,998
March 24, 2005	June 30, 2009	$0.25	2,500,000
March 24, 2005	June 30, 2009	$0.25	2,187,500
June 3, 2005	June 30, 2009	$0.25	2,000,000
January 10, 2006	January 9, 2010	$0.20	900,000
			10,954,498

No person entitled to exercise the option has or has any right by virtue of the option to participate in any share issue of any other body corporate.

Warrants

There are no warrants outstanding.

Convertible Loan Notes

·

1 Convertible Note issued at $100,000 and being convertible to 1,666,667 shares at $0.06 per share.

·

7 Convertible Notes issued at $100,000 and each being convertible to that number of Shares that is equal to the drawn down Face Value of each such Convertible Note divided by the higher of the following:

(i)

$0.05 per Share; or

(ii)

the three month volume weighted average price of the Company’s shares, as traded on ASX and discounted by 20%.  The maximum number of shares that may be issued if the 7 Convertible Notes are drawn down in full and converted to shares is 12,000,000 shares.

As the convertible notes have not been drawn down no options are outstanding in relation to the notes.

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History of Share Capital

	Number of Shares	Value of Shares
Shares issued up to June 30 2004	2,614,800	$3,671,211
Shares Issued for cash to Seed Capital subscribers, Oct2004.-Jan. 2005* ($0.15 per share)	13,924,914	$2,088,690
Shares issued to complete acquisition of Brainytoys.com Pty Ltd, March 2005	5,000,000	$1,000,000
Shares issued pursuant to prospectus March 2005. ($0.20 per share) *    Transaction Costs	8,750,000                  -	$1,750,000              ($ 408,037 )
Position as at June 30 2005.	30,289,714	$8,101,864
1 for 4 Rights Issue, July 2006 *	7,572,429	$454,346
Underwriting fee - Rights Issue, July 2006	454,346	27,261
Convertible Note Issue - Fee, September 2006  US Investment Banker issue Placement Issue-December 2006*	800,000                     125,000                  1,000,000	48,000                     7,500                    80,000
Position as of the date of this filing.	40,241,489	8,718,971

*

Shares issued for cash consideration

Resolutions and Authorizations

Resolutions relating to shares sold are subject to the provisions of the Corporations Act 2001 and the ASX Listing provisions.

B.

Memorandum and Articles of Association

Summary of Constitution

1.

The Company was incorporated in the State of New South Wales, Australia on May 5, 1980 under the name Bevona Pty Ltd.  Following several name changes, the Company approved a name change from Auto Enterprises Limited to Brainytoys Limited.  

2.

(a)

a director who has a material interest in a matter that is being considered at a meeting of the directors must not vote on the matter and must not be present while the matter is being considered at the meeting, except where the material interest is an interest that the director has as a shareholder of the Company and in common with the other shareholders of the Company;

(b)

directors remuneration may only be varied by ordinary resolution of the shareholders in general meeting;

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(c)

the directors may exercise all such powers of the Company as are not required to be exercised by the Company in general meeting, including the borrowing of money;

(d)

there is no age limit requirement for the retirement or non-retirement of directors; and

(e)

a director is not required to hold shares in the Company.

3.

Generally, in relation to the rights, preferences and restrictions attaching to each class of shares, the allotment and issue of any new shares is under the control of the directors of the Company.  Subject to restrictions on the issue or grant of securities contained in the Listing Rules, the Constitution and the Corporations Act (and without affecting any special right previously conferred on the holder of an existing share or class of shares), the directors may issue shares as they shall, in their absolute discretion, determine.

(a)

the Directors may from time to time declare and pay or credit a dividend, payable only from profits, in accordance with the Corporations Act.  Subject to any special right as to dividends attaching to a share, all dividends will be declared and paid according to the proportion of the amount paid to the total amount paid and payable in respect of the Shares.  All dividends unclaimed for one year after having been declared may be invested or otherwise made use of by the directors for the benefit of the Company until claimed;

(b)

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 share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for each share held, but in respect of partly paid shares shall have a fraction of a vote equivalent to the proportion which the amount paid up bears to the total issue price for the share;

Directors retire by rotation, one-third at each annual general meeting, and are eligible for re-election.  There is no element of cumulative voting to effect this arrangement.

(c)

in addition to dividend rights (above at 3a.) shareholders may also share in the Company’s profits by way of capitalization of profits – paying up partly or in full unpaid amounts on shares and paying up partly or in full unissued shares;

(d)

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;

(e)

the Company may purchase its own shares on such terms and at such times as may be determined by the directors from time to time;

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(f)

the Constitution does not contain a provision in relation to sinking funds;

(g)

the directors may by resolution make calls on shareholders of partly paid shares to satisfy the whole or part of the debt owing on those shares provided that the dates for payment of those shares were not fixed at the time of issue.  A shareholder to whom notice of a call is given must pay to the Company the amount called in accordance with the notice; and

(h)

the Constitution does not contain any provisions discriminating against any existing or prospective holder of securities as a result of that shareholder owning a substantial number of shares.

4.

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

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

5.

A public company must hold an annual general meeting once each calendar year and within 5 months after the end of the financial year.  The annual general meeting and extraordinary meetings of shareholders are held at such times and places as the board of directors shall determine, or by holders of not less than 5% of the securities issued by the Company who request that the directors call a meeting.  Notices of meetings are sent out to shareholders not less than 28 days before the date of such meeting and shareholders of the Company are entitled to receive notice of, attend and vote at, all meetings of shareholders.

6.

Each shareholder with a registered address outside Australia acknowledges the Company may arrange for a nominee to dispose of any of its entitlement to participate in any issue of shares or share options by the Company to its shareholders.

7.

The Constitution does not contain a provision in relation to a change in control of the Company.  

8.

There is no requirement in the Constitution to disclose ownership over a certain threshold.  However, under the Corporations Act a shareholder with a substantial holding (5% or more) must provide information where there is a movement of at least 1% in their holding.

9.

The Company may by ordinary resolution:

(a)

issue new shares of such amount specified in the resolution;

(b)

consolidate and divide all or any of its shares into shares of larger amount than its existing shares;

(c)

subdivide all or any of its shares into shares of smaller amount (keeping the proportion of paid and unpaid on each share the same);

(d)

cancel shares that have not been taken, or have been forfeited and reducing the amount of its share capital by the amount of the shares so cancelled; and

(e)

reduce its share capital in any way including, but not limited to, distributing to shareholders securities of any other body corporate.

33

C.

Material Contracts

During the years ended June 30, 2005 and 2006, the Company has entered into the following material contracts.

(1)

On June 28, 2004, the Company entered into an agreement with the vendors of Brainytoys.com Pty Ltd (principally Alex Aguero) to acquire 100% of its share capital involving a cash payment of $25,000 and the issue of 35,953,000 shares (pre-consolidation).

(2)

On November 15, 2004, the Company entered into a 3 year agreement with Alex Aguero to provide his services as Managing Director of the Company.

(3)

On April 3, 2006, the Company entered into a memorandum of understanding relating to product distribution in the USA, (for certain segments) and certain parts of Europe with Enertec Enterprises Limited, a Hong Kong-based Company.

(4)

On April 23, 2006, the Company entered into a memorandum of understanding relating to product distribution in the USA with Reveal Entertainment Inc., a Texas-based corporation.

(5)

On April 28, 2006 the Company entered into a memorandum of understanding relating to product distribution in Australia and the United Kingdom with Modern Brands Pty Ltd.

(6)

On June 15, 2006, the Company entered into an agreement with Leadenhall Australia Limited relating to the underwriting by it of a 1 for 4 pro rata rights issue to raise $454,346.

(7)

On August 2, 2006, the Company entered into a Convertible Note Agreement (subject to shareholder approval) with Noble Investments Pty Ltd relating to the issue by the Company at its option of a series of secured convertible loan notes to a value of $800,000 maturing on 30 June 2009.

(8)     On  December 7,  2006,the Company entered into Merchandising Licensing agreement with Porchlight Entertainment,Inc. relating to the Jay Jay the Jet Plane brand and productions for the United States and Canadian markets.

(9)      On December 8,  2006,the Company entered into a Merchandising Licensing Agreement with Classic Media Inc. ( a division of Random House Publications ) relating to the Little Golden Books titles of the United States market.

(10)   On  December 15, 2006, the Company entered into a Merchandising Licensing  agreement with Dreamworks Animation relating to the Bees Movie for the United States market.

(11)   On January 23, 2007,the Company entered into a merchandising licensing agreement with Wiggles International Pty Ltd relating to the Wiggles brand for the United States market

D.

Exchange Controls

Exchange Controls and other limitations affecting security holders:

Australia has largely abolished exchange controls on investment transactions.  The Australian dollar is freely convertible into US dollars except that all payments and cash transactions in excess of $5,000 to non-residents must be reported to the Australian Cash Transactions Agency, which monitors such transactions, whether they are in the form of cash, dividends, capital or profits.

The Foreign Acquisitions and Takeovers Act (“Foreign Acquisitions Act”) sets forth limitations on the rights of non-Australian residents to own or vote the ordinary shares of an Australian company.  The Foreign Acquisitions Act permits the Commonwealth Treasurer to examine acquisitions and arrangements that could result in foreign persons controlling an Australian business.  The Commonwealth Treasurer may prohibit a proposed takeover if it would lead to a change of control of a business where the resultant control would be foreign and therefore considered to be against the national interest.  The Foreign Acquisitions Act contains divestiture provisions to ensure it can be enforced, as well as, stringent monetary-penalty provisions for breaches and the making of false or misleading statements.

34

The Foreign Acquisitions Act requires the prior approval of the Commonwealth Treasurer for certain classes of persons to enter into an agreement to acquire shares of an Australian company, if, after the acquisition, such person or corporation would hold a substantial interest in such corporation, as explained herein.  The foregoing approval requirement applies to the following classes of persons:  (i) any natural person not ordinarily resident in Australia, (ii) any corporation in which either a natural person not ordinarily resident in Australia or a foreign corporation (as defined in the Foreign Acquisitions Act) holds a substantial interest, and (iii0 two or more such persons or corporations which hold an aggregate substantial interest.

The Foreign Acquisitions Act requires foreign persons or foreign-controlled entities to give forty (40) days notice to the Commonwealth Treasurer of a proposal to acquire or increase (or offer to acquire or increase) a single interest of 15% or more of the ownership or voting power of an Australian company.  If two or more foreign persons or foreign-controlled entities are acting together, the threshold is 40% in the aggregate.

The Constitution of the Company does not contain any additional limitations on a non-resident’s right to hold or vote the Company’s securities.

E.

Taxation

The following discussion summarizes US Federal and Australian tax consequences of the ownership of shares by a person (“US Portfolio Stockholder”) that: (i) is a citizen or resident of the US, a US corporation or that otherwise will be subject to US Federal income tax on a net income basis in respect of the Shares; (ii) is not a resident of Australia for Australian tax purposes; (iii) has not, within the preceding five years, beneficially owned 10% of the issued capital or voting stock in the Company; and, (iv) has not used the Shares in carrying on a trade or business, wholly or partly through a permanent establishment in Australia.

The statements regarding US and Australian tax laws set forth herein are based on those laws as in force on the date of this document that may affect the tax consequence described herein (some of which may have retroactive effect).  This summary is not exhaustive of all possible tax consideration and investors are advised to satisfy themselves as to the overall tax consequences, including specifically the consequences under US, state, local and other laws, of the acquisition, ownership and disposition of Shares by consulting their own tax advisers.

Taxation of Gains on Sale

A US Portfolio Stockbroker is not subject to Australian income tax on the sale of its Shares in the Company.

Passive Foreign Investment Company Status

A foreign corporation is classified as a passive foreign investment company (a “PFIC”) in any taxable year in which, after taking into account the income and assets of certain subsidiaries pursuant to the applicable US Internal Revenue Code “look-through” rules, either (i) at least 75% of its gross income is passive income, or (ii) at least 50% of the average value of its assets is attributable to assets that produce passive income from cash holdings and profits from the sale of marketable securities, even if derived from an active business.

If the Company were a PFIC during any year in which a US Portfolio Stockholder owned Shares, that US Portfolio Stockholder would be subject to additional taxes on any gain realised from the sale of any other disposition of the Shares, or any excess distribution received from the Company.

A US Portfolio Stockholder will have an excess distribution to the extent that distributions on Shares during a taxable year exceeded 125% of the average amount received during the three preceding taxable years (or, if shorter,

35

the US Portfolio Stockholders’ holding period for the shares).  To compute the tax on gain or on an excess distribution, (i) the excess distribution or the gain is allocated rateably over the US Portfolio Stockholder’s holding period for the Shares, (ii) the amount allocated to the current taxable year at the highest applicable marginal rate in effect for each year and (iii) an interest charge is imposed to recover the deemed benefit from the deferred payment of the tax attributable to each year.

If the Company is a PFIC, US persons that own an interest in another entity that owns shares in the Company may be treated as indirect holders of their proportionate share of that entity’s Shares, and may be taxed on their proportional share of any gain or excess distribution from that entity attributable to the entity’s in the Company.  A US person that owns an interest in the entity that if an actual holder of Shares will be treated as an indirect holder if (i) the actual holder is itself a PFIC, (ii) the actual holder is a foreign corporation other than a PFIC in which the US person who owns an interest in the actual holder owns (directly or indirectly) at least 50% in value of the actual holder’s shares, or (iii) the actual holder is a partnership, trust or estate in which the US Portfolio Stockholder is a partner or beneficiary.  An indirect holder must take into income its portion of any excess distribution rece ived by the actual holder or any gain recognised by the actual holder on the Shares.  An indirect holder also must treat an appropriate portion of its gain on the sale or disproportion of its interest in the actual holder as gain on the sale of the Shares.  If the Company were a PFIC, a US Portfolio Stockbroker of Shares would generally be subject to similar rules with respect to distribution by, an disposition of the shares of, any direct or indirect subsidiaries of the Company that were PFIC’s.

The Internal Revenue Code provides each US stockholder in a PFIC with an election whereby the additional US tax burden imposed on gain on sale of PFIC stock and receipt of excess distributions from a PFIC, as described above, can be avoided.  This election generally requires that the PFIC stockholder include in its income, its pro-rata share of the PFIC’s distributed and undistributed income, as computed under US tax accounting principles, on an current basis.  In certain cases, a further election is available to an electing PFIC stockholder to defer the tax payable with respect to the stockholder’s pro-rata share of the PFIC’s undistributed income, although in this case interest applies on the deferred tax.  Thus, even if the first or both of these elections are made, a US stockholder of a PFIC loses the tax benefit, which is available with respect to investment in a non-PFIC corporation, of deferring and conver ting to capital gain the investor’s personal US tax liability with respect to the Company’s undistributed income.  These elections also generally require that the PFIC annually provide the electing PFIC shareholder, for inspection by the Internal Revenue Service, an analysis of the PFIC’s income computed under US tax accounting principles.

The Company does not intend to furnish any US Portfolio Stockholder with the information that it would need in order to avoid the PFIC tax treatment described by electing to include its share of the Company’s income on a current basis.  Therefore, these elections may not be available to the Company’s US Portfolio Stockholders.

There are other adverse US tax rules associated with holding Shares in a company that has been a PFIC during any part of a US Portfolio Stockholders holding period.  These include a denial of a step-up in a tax basis on the death of a US individual stockholder, and burdensome reporting requirements.

If the Company ceases to be a PFIC, a US Portfolio Stockholder may avoid the contained application of the tax treatment described above by electing to be treated as if it sold its Shares on the last day of the last taxable year in which the Company was a PFIC.  Any gain is recognised and subjected to tax under the rules described above.  Loss is not recognised.  The US Portfolio Stockholder’s basis in the Shares is increased by the amount of gain recognised on the deemed sale.  This election is not available to a Us Portfolio Stockholder that previously elected to include its share of the Company’s income on a current basis.  The US Congress recently has considered legislation that would alter the PFIC rules substantially.  Prospective investors should consult their own tax advisors as to the potential application of the PFIC rules, as well as, the impact of any proposed legislation that could affect th em.

Taxation of Dividends

36

The Company does not expect to pay cash dividends for the foreseeable future, but, rather, to retain earnings, if any, to finance expansion of its business.  Should the Company begin paying dividends, however, the Company’s dividends to its US Portfolio Stockholders would be exempt from Australian dividend withholding tax to the extent such dividends are considered to be “franked” for Australian tax purposes.  A dividend is considered to be “franked” to the extent that such dividend is paid out of the Company’s income on which Australian corporate tax has been levied.  Even if not “franked”, a dividend will be exempt from Australian dividend withholding tax if it is paid out of the Company’s non-Australian source dividend income and the Company specifies a “foreign dividend account declaration percentage” for such purpo se.  The Company anticipates that if it pays dividends, such dividends would likely be either “franked”, or paid from the Company’s non-Australian source dividend income as specified in the foreign dividend account declaration percentage, and therefore would be exempt from Australian dividend withholding tax.

If, however, dividends are paid by the Company that are not “franked”, nor paid from the initial Company’s non-Australian source dividend income as specified in the foreign dividend account declaration percentage, such dividend would then be subject to Australian dividend withholding tax.  However, in accordance with the provisions of the Australia/United States Income Tax Treaty, Australian withholding tax on dividend income derived by a US stockholder would be limited to 15% of the gross amount of the dividend.  Subject to certain limitations, any Australian dividend withholding tax may be claimed as a credit against the federal income tax liability of the US stockholder.  The overall limitation on non-US taxes eligible for US credit is calculated separately with respect to specific clauses, or “baskets” of income.  For this purpose, dividends distributed by the Company will generally constitute “passive income” or, in the case of certain US Portfolio Stockholder, “financial service income”.  The US tax credits allowable with respect to each income basket cannot exceed the US federal income tax payable with respect to such income.  The consequences of the separate limitation calculation will depend on the nature and sources of each US Portfolio Stockholder’s income and the deductions allocable thereto.

Distributions on the Shares will constitute dividends for US Federal income tax purposes to the extent paid out of current or accumulated earnings and profits, if any of the Company, as determined for US federal income tax purposes.  If the Company pays a dividend, such dividend would likely be paid in Australian dollars.  The amount of dividend income for a US Portfolio Stockholder will be the US dollar value of the dividend payment on the date of receipt, even if the dividend is not converted into US dollars gain or loss, if any, realised on a sale or other disposition of Australian Dollars will be ordinary income or loss to the US Portfolio Stockholder.  Dividends paid by the Company will not be eligible for the “inter-corporate dividends received” deduction allowed to US corporations.

Estate and Gift Tax

Australia does not impose any estate, inheritance or gift taxes.  Therefore, no Australian estate tax, inheritance tax or gift tax will be imposed on the death or upon a lifetime gift by, a US Portfolio Stockholder.

F.

Dividends and Paying Agents

Not applicable.

G.

Statement by Experts

Not applicable.

37

H.

Documents on Display

Persons having a right of inspection of the Company’s records under the Australian Corporations and Securities Legislation can inspect such records by contacting the Company’s registered office at 6B Bowen Street, O’Connor W.A. Australia 6163, Telephone: (61 8) 9331 8441, Facsimile: (61 8) 9331 8452.

I.

Subsidiary Information

For more information on the Company’s subsidiaries, see “Item 4.  Information on the Company - Organizational Structure”.

ITEM 11

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not Applicable.

ITEM 12

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

PART II

ITEM 13

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable.

ITEM 14

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not Applicable.

ITEM 15

CONTROLS AND PROCEDURES

Not Applicable.

ITEM 16

[Reserved]

ITEM 16A

Audit Committee Financial Expert

Not Applicable.

38

ITEM 16B

Code of Ethics

Not Applicable.

ITEM 16C

Principal Accountant Fees and Services

Not Applicable.

ITEM 16D

Exemptions Form the Listing Stands for Audit Committees

Not Applicable.

ITEM 16E

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not Applicable.

PART III

ITEM 17

FINANCIAL STATEMENTS

Our financial statements filed as part of this registration statement are listed in Item 19 Financial Statements and Exhibits.

All financial statement in this Form 20-F, unless otherwise stated, are presented in accordance with Australian IFRS.  

ITEM 18

FINANCIAL STATEMENTS

The Company has elected to provide financial statements pursuant to Item 17.

ITEM 19

EXHIBITS

Exhibit No.

Description

1.1

Historical Company Extract dated September 19, 2006 provided by the Australian Securities and Investments Commission

1.2

Constitution of Brainytoys Limited dated November 22, 2005

2

Form of electronic share certificate.

3.1

Agreement between Alex Aguero and the Company dated June 28, 2004.

3.2

Service Agreement between Alex Aguero and the Company dated October 4, 2004.

39

3.3

Underwriting Agreement dated June 15, 2006 with Leadenhall Australia Ltd.

3.4

Convertible Note Agreement between the Company and Noble Investments Pty Ltd dated August 2, 2006.

40

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf.

	BRAINYTOYS LIMITED
Date: October 10 2006	By:	/s/ Alex Aguero
		Name:  Alex Aguero
		Title:    Managing Director

41

BRAINYTOYS LIMITED

CONSOLIDATED FINANCIAL STATEMENTS

AS AT 30TH JUNE 2006

CONTENTS	PAGE
Income Statement	43
Balance Sheet	44
Cash Flow Statement	46
Notes to Financial Statements	47
Directors’ Declaration
Corporate Governance Statement
Audit Report

42

INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2006
	Note	Economic Entity			Parent Entity
		2006 $	2005 $		2006 $	2005 $
Revenue	3	32,192	127,441		32,192	40,814
Accounting and Audit Fees		(32,794)	(29,638)		(32,794)	(29,638)
Finance Costs		(925)	(796)		(925)	(796)
Consultancy Fees		(177,878)	(134,114)		(177,878)	(134,114)
Share registry and Listing Fees		(29,693)	(38,547)		(29,693)	(38,547)
Legal Costs		(12,778)	(4,173)		(12,778)	(4,173)
People Costs		(575,277)	(339,294)		(575,277)	(314,294)
Computers and Software		(7,487)	(55,067)		(7,487)	(55,067)
Rent		(18,167)	(19,848)		(18,167)	(19,848)
Printing and Stationery		(21,420)	(19,784)		(21,420)	(19,784)
Research and Development		(273,493)	-		(273,493)	-
Supplies and Materials		(27,011)	-		(27,011)	-
Depreciation and amortisation expense		(59,595)	(92,670)		(58,024)	(16,875)
Travel and Accommodation		(122,205)	(61,232)		(122,205)	(61,232)
Share-based payments expense		(6,120)	(4,400)		(6,120)	(4,400)
Impairment of Intellectual Property		(2,198,063)	-		-	-
Impairment of Investment		-	-		(2,187,821)	-
Impairment of Loan		-	-		(25,000)	-
Other expenses	4	(102,023)	(72,583)		(102,023)	(71,296)
Loss from continuing operations		(3,632,737)	(744,705)		(3,645,924)	(729,251)
Income tax benefit	5	89,879	-		89,879	-
Loss from continuing operations		(3,542,858)	(744,705)		(3,556,045)	(729,251)
Loss attributable to members of the parent entity		(3,542,858)	(744,705)		(3,556,045)	(729,251)
Overall Operations
Basic earnings per share (cents per share)	8	(11.7)		(4.5)
Diluted earnings per share (cents per share)	8	N/A		N/A

The accompanying notes form part of these financial statements.

43

BALANCE SHEET AS AT 30 JUNE 2006
	Note	Economic Entity		Parent Entity
		2006 $	2005 $	2006 $	2005 $
CURRENT ASSETS
Cash and cash equivalents	9	93,225	1,399,477	93,225	1,399,477
Trade and other receivables	10	119,789	40,550	119,789	40,550
Other financial assets	11	40,000	40,000	40,000	40,000
TOTAL CURRENT ASSETS		253,014	1,480,027	253,014	1,480,027
NON-CURRENT ASSETS
Property, plant and equipment	12	167,927	220,083	167,927	218,512
Patents and Trademarks	13	7,915	7,494	7,915	7,494
Intellectual Property	14	-	2,198,066	-	-
Trade and other financial assets	15	-	-	-	2,187,821
Trade and other receivables	16	-	-	-	25,000
TOTAL NON-CURRENT ASSETS		175,842	2,425,643	175,842	2,438,827
TOTAL ASSETS		428,856	3,905,670	428,856	3,918,854
CURRENT LIABILITIES
Trade and other payables	17	61,855	22,525	61,855	22,525
Short term borrowings	18	7,864	-	7,864	-
Short term provisions	19	34,727	21,997	32,460	19,727
TOTAL CURRENT LIABILITIES		104,446	44,522	102,179	42,252
TOTAL LIABILITIES		104,446	44,522	102,179	42,252
NET ASSETS		324,410	3,861,148	326,677	3,876,602
EQUITY
Issued Capital	20	8,101,864	8,101,864	8,101,864	8,101,864
Share Based Payments Reserve	21	10,520	4,400	10,520	4,400
Accumulated Losses		(7,787,974)	(4,245,116)	(7,785,707)	(4,229,662)
TOTAL EQUITY		324,410	3,861,148	326,677	3,876,602
The accompanying notes form part of these financial statements.

44

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2006
Economic Entity		$	$	$	$
	Note	Share Capital	Accumulated Losses	Share Based	Total
		Ordinary		Payments Reserve
Balance at 1.7.2004		3,671,211	(3,500,411)	-	170,800
Shares issued during the year		4,430,653	-	-	4,430,653
Profit attributable to members of parent entity		-	(744,705)	-	(744,705)
Share based payments reserve		-	-	4,400	4,400
Balance at 30.6.05		8,101,864	(4,245,116)	4,400	3,861,148
Shares issued during the year – net of costs		-	-	-	-
Profit attributable to members of parent entity		-	(3,542,858)	-	(3,542,858)
Share based payments reserve		-	-	6,120	6,120
Balance at 30 June 2006		8,101,864	(7,787,974)	10,520	324,410

Parent Entity		$	$	$	$
	Note	Share Capital	Accumulated Losses	Share Based	Total
		Ordinary		Payments Reserve
Balance at 1.7.2004		3,671,211	(3,500,411)	-	170,800
Shares issued during the year		4,430,653	-	-	4,430,653
Profit attributable to members of parent entity		-	(729,251)	-	(729,251)
Share based payments reserve		-	-	4,400	4,400
Balance at 30.6.05		8,101,864	(4,229,662)	4,400	3,876,602
Shares issued during the year – net of costs		-	-	-	-
Profit attributable to members of parent entity		-	(3,556,045)	-	(3,556,045)
Share based payments reserve		-	-	6,120	6,120
Balance at 30 June 2006		8,101,864	(7,785,707)	10,520	326,677
The accompanying notes form part of these financial statements.

45

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2006
	Note
		Economic Entity		Parent Entity
		2006 $	2005 $	2006 $	2005 $
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees		(1,332,365)	(777,775)	(1,332,365)	(778,758)
Interest received		32,192	40,814	32,192	40,814
Net cash used in operating activities	23a	(1,300,173)	(736,961)	(1,300,173)	(737,944)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(7,439)	(236,370)	(7,439)	(235,387)
Purchase of other non-current assets		(421)	(7,494)	(421)	(7,494)
Payment for subsidiary (net of cash) acquired		-	(109,232)	-	(109,232)
Net cash used in investing activities		(7,860)	(353,096)	(7,860)	(352,113)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares net of cost		(6,083)	2,352,063	(6,083)	2,352,063
Net cash used in (provided by) financing activities		(6,083)	2,352,063	(6,083)	2,352,063
Net increase in cash held		(1,314,116)	1,262,006	(1,314,116)	1,262,006
Cash at beginning of financial year		1,399,477	137,471	1,399,477	137,471
Cash at end of financial year	9	85,361	1,399,477	85,361	1,399,477
The accompanying notes form part of these financial statements.

46

	NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
	NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
	The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Urgent Issues Group Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
	The financial report covers the economic entity of Brainytoys Ltd and controlled entities and Brainytoys Limited as an individual parent entity. Brainytoys Limited is a listed public company, incorporated and domiciled in Australia.
	The financial report of Brainytoys Limited and controlled entities, and Brainytoys Limited as an individual parent entity comply with all Australian equivalents to International Financial Reporting Standards (AIFRS) in their entirety.
	The following is a summary of the material accounting policiesadopted by the economic entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.
Basis of Preparation
First-time Adoption of Australian Equivalents to International Financial Reporting Standards
Brainytoys Limited and controlled entities, and Brainytoys Limited as an individual parent entity have prepared financial statements in accordance with the Australian equivalents to International Financial Reporting Standards (AIFRS) from 1 July 2005.
In accordance with the requirements of AASB 1: First-time Adoption of Australian Equivalents to International Financial Reporting Standards, adjustments to the parent entity and consolidated entity accounts resulting from the introduction of AIFRS have been applied retrospectively to 2005 comparative figures excluding cases where optional exemptions available under AASB 1 have been applied. These consolidated accounts are the first financial statements of Brainytoys Limited to be prepared in accordance with Australian equivalents to IFRS which complies with IFRS as published by International Accounting Standards Board.
The accounting policies set out below have been consistently applied to all years presented. The parent and consolidated entities have however elected to adopt the exemptions available under AASB 1 relating to AASB 132: Financial Instruments: Disclosure and Presentation, and AASB 139: Financial Instruments: Recognition and Measurement. Refer to Note 28 for further details on changes in accounting policy.
Reconciliations of the transition from previous Australian GAAP to AIFRS have been included in Note 2 to this report. Reconciliation to US GAAP Reconciliation of US GAAP to Australian Equivalent of International Financial Reporting Standards – there are no material differences between US GAAP and the Australian equivalent to International Financial Reporting Standard
Reporting Basis and Conventions
The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.
	Going Concern
	The accounts have been prepared on a going concern basis.   In common with research and development companies, the Group’s operations are subject to risk and uncertainty due primarily to the nature of the research, development and commercialisation to be undertaken. As noted within the Directors’ Report, the ability of the Group to continue as a going concern is dependent upon the Group achieving significant cash flow arising from product sales and/or raising significant additional funding in order to continue to research and develop the Group’s products to achieve a position where it can commercialise or market the products or technology satisfactorily.

47

	NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
	NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
	The Directors and senior management have prepared a cash flow forecast for the ensuing year to satisfy themselves that the Group will have adequate resources for the foreseeable future. Thereafter, in the event cash flow contribution from product sales and/or sufficient capital raising at an amount and timing necessary to meet the future budgeted operational and investing activities of the Group is unfavourable, the Directors believe that they will be able to contain the operating and investment activities sufficiently to ensure that the Group can meet its debts as and when they become due and payable. In the unlikely event that the events referred to above result in a negative outcome, then the going concern basis of accounting may not be appropriate with the result that the Group may have to realise its assets and extinguish its liabilities other than in the normal course of business and in amounts different from that stated in the financial report. The financial report does not include any adjustments relating to the recoverability or classification of recorded asset amounts or classification of liabilities that might be necessary should the Group not be able to continue as going concern.
On 27 July 2006, the Company completed a 1 for 4 rights issue to raise $454,346. On 2 August 2006, the Company entered into a conditional agreement (subject to shareholder approval) for the issue of convertible secured loan notes to Noble Investments Pty Ltd for an undrawn credit facility of $800,000. The Company proposes to issue 8 convertible notes on the series issue date as follows: · One fixed convertible note issued at $100,000 convertible by Noble Investments Pty Ltd at $0.06 each in 1,666,667 ordinary fully paid shares in the company; and · Seven subsequent convertible notes issued at $100,000.  The seven subsequent notes are convertible into that number of Shares equal to the Face Value of the relevant Subsequent Note divided by the higher of $0.05 per Share or the three month volume weighted average price of the Company’s Shares, as traded by the ASX and discounted by 20%.   · The subsequent notes are to be drawn down at the discretion of the Company. · Interest is payable on the drawn notes at 10% per annum. · The Company must execute a Deed of Charge in relation to the relevant Subsequent Note and servicing such amount as specified in the Convertible note Deed. · The conversion of notes to shares in the Company is at the absolute discretion of Noble.
	(a)	Principles of Consolidation
		A controlled entity is any entity controlled by Brainytoys Limited. Control exists where Brainytoys Limited has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with Brainytoys Limited to achieve the objectives of Brainytoys Limited.  A list of controlled entities is contained in Note 15 to the financial statements.
		All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation.
		Where controlled entities have entered or left the economic entity during the year, their operating results have been included from the date control was obtained or until the date control ceased.
		Investments in subsidiaries are accounted for at cost in the individual financial statements of Brainytoys Limited.
	(b)	Income Tax
		The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date.

48

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
		Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.
		Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.
		Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.
		The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
	(c)	Property, Plant, and Equipment
		Each class of property, plant, and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses
		Plant and equipment
		Plant and equipment are measured on the cost basis.
		The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have not been discounted to their present values in determining recoverable amounts.
		The cost of fixed assets constructed within the economic entity includes the cost of materials, direct labour, borrowing costs, and an appropriate proportion of fixed and variable overheads.
		Depreciation
		The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a straight line basis over their useful lives to the economic entity commencing from the time the asset is held ready for use.  Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.
		The depreciation rates used for each class of depreciable assets are:
			Class of Fixed Asset	Depreciation Rate
			Plant and equipment Computers	20% 33%
		The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
		An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
		Gains and losses on disposals are determined by comparing proceeds with the carrying amount.  These gains and losses are included in the income statement.  When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

49

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
	(d)	Intangibles
		Patents and Trademarks
		Patents and trademarks are recognised at cost of acquisition. Patents and trademarks have a definite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful life ranging from 15 to 20 years.
	(e)	Employee Benefits
		Provision is made for the Company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.
	(f)	Cash and cash equivalents
		Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.  Bank overdrafts are shown within short-borrowings in current liabilities on the balance sheet.
	(g)	Revenue
		Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.
		All revenue is stated net of the amount of goods and services tax (GST).
	(h)	Goods and Services Tax (GST)
		Revenues, expenses, and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.
	(i)	Leases
		Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to entities in the economic entity are classified as finance leases.
		Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values.  Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
		Leased assets are depreciated on a straight-line basis over their estimated useful lives where it is likely that the economic entity will obtain ownership of the asset or over the term of the lease.
		Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.
		Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

50

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
	(j)	Research and Development Expenses
		Expenditure during the research phase of a project is recognised as an expense when incurred.  Development costs are capitalised only when technically feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably. Development costs have a finite life and are amortised on a systematic basis matched to the future economic benefits over the useful life of the project.
	k)	Financial Instruments
		Recognition Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below. Financial assets at fair value through profit and loss A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges.  Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the income statement in the period in which they arise. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. Held-to-maturity investments These investments have fixed maturities, and it is the group’s intention to hold these investments to maturity. Any held-to-maturity investments held by the group are stated at amortised cost using the effective interest rate method. Available-for-sale financial assets Available for sale financial assets include any financial assets not included in the above categories. Available-for-sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity. Financial liabilities Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Derivative instruments Derivative instruments are measured at fair value. Gains and losses arising from changes in fair value are taken to the income statement unless they are designated as hedges. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. Impairment At each reporting date, the group assess whether there is objective evidence that a financial instrument has been impaired. In the case of available-for sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement.

51

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
	(l)	Earnings Per Share
		i.          Basic earnings per share Basic earnings per share is determined by dividing the profit attributable to equity holders of the Company, excluding any costs of service equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. ii.          Diluted earnings per share Diluted earnings per share adjusts the figure used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financial costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
	(m)	Intellectual Property
		Intellectual property on consolidation is initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at date of acquisition. The intellectual property is amortised on a straight line basis over the period of 20 years. The balances are reviewed annually and any balance representing future benefits for which the realisation is considered to be no longer probable are written off as impairment losses in the Income Statement.
	(n)	Impairment of Assets
		At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.
		Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
		Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
	(o)	Provisions
		Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will results and that outflow can be reliably measured.
	(p)	Borrowing Costs
		Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in income in the period in which they are incurred.
	(q)	Equity-settled compensation
		The group operates an Incentive Option Scheme share-based compensation plan.  The bonus element over the exercise price of the employee services rendered in exchange for the grant of shares and options is recognised as an expense in the income statement. The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares of the options granted.

52

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
	(q)	Comparative Figures
		Where required by Accounting Standards comparative figures have been adjusted to conform with changes in presentation for the current financial year.
	Critical Accounting Estimates and Judgments
	The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.
	Key Estimates — Impairment
	The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.
	An impairment loss amounting to $2,198,063 has been recognised under the Australian equivalents to IFRS relating to the Intellectual Property which has been written down to its recoverable amount.  This has been recognised in the income statement for the year ended 30 June 2006.
	An impairment loss amounting to $2,187,821 has been recognised under the Australian equivalents to IFRS relating to the Investment in Brainytoys.com Pty Ltd which has been written down to its recoverable amount.  This has been recognised in the income statement for the year ended 30 June 2006.
	An impairment loss amounting to $25,000 has been recognised under the Australian equivalents to IFRS relating to a loan from Brainytoys Limited to Brainytoys.com Pty Ltd which has been written down to its recoverable amount.  This has been recognised in the income statement for the year ended 30 June 2006.

53

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
			Economic Entity
NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS	Note	Previous GAAP at 1.7.2004	Adjustments on introduction of Australian equivalents to IFRS	Australian equivalents to IFRS at 1.7.2004
Reconciliation of Equity at 1 July 2004		$	$	$
ASSETS
CURRENT ASSETS
Cash and cash equivalents		137,471	-	137,471
Trade and other receivables		1,163	-	1,163
Other Financial Assets		40,000	-	40,000
TOTAL CURRENT ASSETS		178,634	-	178,634
NON-CURRENT ASSETS
Property, plant and equipment		-	-	-
Patents and Trademarks		-	-	-
Intellectual Property		-	-	-
TOTAL NON-CURRENT ASSETS		-	-	-
TOTAL ASSETS		178,634	-	178,634
CURRENT LIABILITIES
Trade and other payables		7,834	-	7,834
Short term provisions		-	-	-
TOTAL CURRENT LIABILITIES		7,834	-	7,834
TOTAL LIABILITIES		7,834	-	7,834
NET ASSETS		170,800	-	170,800
EQUITY
Issued capital		3,671,211	-	3,671,211
Reserves	2a	714,554	(714,554)	-
Retained earnings	2d	(4,214,965)	714,554	(3,500,411)
TOTAL EQUITY		170,800	-	170,800

54

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
			Economic Entity
NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS	Note	Previous GAAP at 30.6.2005	Adjustments on introduction of Australian equivalents to IFRS	Australian equivalents to IFRS at 30.6.2005
Reconciliation of Equity at 30 June 2005		$	$	$
ASSETS
CURRENT ASSETS
Cash and cash equivalents		1,399,477	-	1,399,477
Trade and other receivables		40,550	-	40,550
Other Financial Assets		40,000	-	40,000
TOTAL CURRENT ASSETS		1,480,027	-	1,480,027
NON-CURRENT ASSETS
Property, plant and equipment		220,083	-	220,083
Patents and Trademarks		7,494	-	7,494
Intellectual Property		2,198,066	-	2,198,066
TOTAL NON-CURRENT ASSETS		2,425,643	-	2,425,643
TOTAL ASSETS		3,905,670	-	3,905,670
CURRENT LIABILITIES
Trade and other payables		22,525	-	22,525
Short term provisions		21,997	-	21,997
TOTAL CURRENT LIABILITIES		44,522	-	44,522
TOTAL LIABILITIES		44,522	-	44,522
NET ASSETS		3,861,148	-	3,861,148
EQUITY
Issued capital		8,101,864	-	8,101,864
Reserves	2a	714,554	(714,554)	-
Share based payments Reserve	2b	-	4,400	4,400
Retained earnings	2d	(4,955,270)	710,154	(4,245,116)
TOTAL EQUITY		3,861,148	-	3,861,148

55

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
			Parent Entity
NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS	Note	Previous GAAP at 1.7.2004	Adjustments on introduction of Australian equivalents to IFRS	Australian equivalents to IFRS at 1.7.2004
Reconciliation of Equity at 1 July 2004		$	$	$
ASSETS
CURRENT ASSETS
Cash and cash equivalents		137,471	-	137,471
Trade and other receivables		1,163	-	1,163
Other Financial Assets		40,000	-	40,000
TOTAL CURRENT ASSETS		178,634	-	178,634
NON-CURRENT ASSETS
Property, plant and equipment		-	-	-
Patents and Trademarks		-	-	-
Intellectual Property		-	-	-
TOTAL NON-CURRENT ASSETS		-	-	-
TOTAL ASSETS		178,634	-	178,634
CURRENT LIABILITIES
Trade and other payables		7,834	-	7,834
Short term provisions		-	-	-
TOTAL CURRENT LIABILITIES		7,834	-	7,834
TOTAL LIABILITIES		7,834	-	7,834
NET ASSETS		170,800	-	170,800
EQUITY
Issued capital		3,671,211	-	3,671,211
Reserves	2a	714,554	(714,554)	-
Retained earnings	2d	(4,214,965)	714,554	(3,500,411)
TOTAL EQUITY		170,800	-	170,800

56

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
			Parent Entity
NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS	Note	Previous GAAP at 30.6.2005	Adjustments on introduction of Australian equivalents to IFRS	Australian equivalents to IFRS at 30.6.2005
Reconciliation of Equity at 30 June 2005		$	$	$
ASSETS
CURRENT ASSETS
Cash and cash equivalents		1,399,477	-	1,399,477
Trade and other receivables		40,550	-	40,550
Other Financial Assets		40,000	-	40,000
TOTAL CURRENT ASSETS		1,480,027	-	1,480,027
NON-CURRENT ASSETS
Property, plant and equipment		218,512	-	218,512
Patents and Trademarks		7,494	-	7,494
Financial assets		2,187,821		2,187,821
Trade and other receivables		25,000		25,000
TOTAL NON-CURRENT ASSETS		2,438,827	-	2,438,827
TOTAL ASSETS		3,918,854	-	3,918,854
CURRENT LIABILITIES
Trade and other payables		22,525	-	22,525
Short term provisions		19,727	-	19,727
TOTAL CURRENT LIABILITIES		42,252	-	42,252
TOTAL LIABILITIES		42,252	-	42,252
NET ASSETS		3,876,602	-	3,878,602
EQUITY
Issued capital		8,101,864	-	8,101,864
Reserves	2a	714,554	(714,554)	-
Share based payments Reserve	2b	-	4,400	4,400
Retained earnings	2d	(4,939,816)	710,154	(4,229,662)
TOTAL EQUITY		3,876,602	-	3,876,602

57

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
Economic Entity
NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS	Note	Previous GAAP	Effect of transition to Australian equivalents to IFRS	Australian equivalents to IFRS
Reconciliation of Profit or Loss year ended 30 June 2005		$	$	$
Revenue		127,441	-	127,441
Accounting and Audit Fees		(29,638)		(29,638)
Finance Costs		(796)	-	(796)
Consultancy Fees		(134,114)	-	(134,114)
Share Registry and Listing Fees		(38,547)	-	(38,547)
Legal Costs		(4,173)	-	(4,173)
People Costs		(339,294)	-	(339,294)
Computers and Software		(55,067)	-	(55,067)
Rent		(19,848)	-	(19,848)
Printing and Stationery		(19,784)	-	(19,784)
Depreciation expense		(16,875)	-	(16,875)
Amortisation expense		(75,795)	-	(75,795)
Travel and Accommodation		(61,232)	-	(61,232)
Share based payments	2b	-	(4,400)	(4,400)
Other Expenses		(72,583)	-	(72,583)
Loss before income tax		(740,305)	(4,400)	(744,705)
Income tax expense		-	-	-
Loss from continuing operations		(740,305)	(4,400)	(744,705)
Loss for the year		(740,305)	(4,400)	(744,705)
Loss attributable to members of the parent entity		(740,305)	(4,400)	(744,705)

58

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
Parent Entity
NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS	Note	Previous GAAP	Effect of transition to Australian equivalents to IFRS	Australian equivalents to IFRS
Reconciliation of Profit or Loss year ended 30 June 2005		$	$	$
Revenue		40,814	-	40,814
Accounting and Audit Fees		(29,638)		(29,638)
Finance Costs		(796)	-	(796)
Consultancy Fees		(134,114)	-	(134,114)
Share Registry and Listing Fees		(38,547)	-	(38,547)
Legal Costs		(4,173)	-	(4,173)
People Costs		(314,294)	-	(314,294)
Computers and Software		(55,067)	-	(55,067)
Rent		(19,848)	-	(19,848)
Printing and Stationery		(19,784)	-	(19,784)
Depreciation expense		(16,875)	-	(16,875)
Travel and Accommodation		(61,232)	-	(61,232)
Share based payments	2b	-	(4,400)	(4,400)
Other Expenses		(71,297)	-	(71,297)
Loss before income tax		(724,851)	(4,400)	(729,251)
Income tax expense		-	-	-
Loss from continuing operations		(724,851)	(4,400)	(729,251)
Loss for the year		(724,851)	(4,400)	(729,251)
Loss attributable to members of the parent entity		(724,851)	(4,400)	(729,251)

59

NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS	30.6.2005	1.7.2004
Notes to the Reconciliations of Equity and Profit and Loss at 1 July 2004 and 30 June 2005 of Economic and Parent Entity	$	$
(a)Reserves Comprise
Capital Profits Reserve – From July 1 2004 the amounts realised from the sale of the Company’s assets from prior years will be transferred to retained earnings/accumulated losses	(714,554)	(714,554)
(b)Share based payments Reserve	4,400	-
Value of Options granted to Directors and Company Secretary in June 2005
(c) Impairment of Intellectual Property
An impairment loss amounting to $2,198,063 has been recognised under the Australian equivalents to IFRS relating to the Intellectual Property which has been written down to its recoverable amount.  This has been recognised in the income statement for the year ended 30 June 2006.
(d) Retained earnings comprise:
Adjustment of Capital Profits Reserve (refer 2(a))	714,554	714,554
Share Based Payments Reserve (refer 2(b))	(4,400)	-
	710,154	714,554

NOTE 3: OTHER INCOME		Note	Economic Entity		Parent Entity
			2006 $	2005 $	2006 $	2005 $
Operating activities
—	Forgiveness of debt	2a	-	86,627	-	-
—	Interest received	2b	32,192	40,814	32,192	40,814
Total Revenue			32,192	127,441	32,192	40,814
(a) Forgiveness of Debt:
Loans from related parties of Brainytoys.com Pty Ltd were forgiven as part of the acquisition of Brainytoys.com			-	86,627	-	86,627

60

NOTE 3: OTHER INCOME		Note	Economic Entity		Parent Entity
			2006 $	2005 $	2006 $	2005 $
(b)   Interest revenue from:
—	Other parties		32,192	40,814	32,192	40,814
Total Interest Revenue			32,192	40,814	32,192	40,814
NOTE 4: LOSS FOR THE YEAR
(a)	Expenses
Finance Costs
—	external		925	796	925	796
Total finance costs			925	796	925	796
Impairment of non-current assets to recoverable amount
—	Intellectual Property		2,198,063	-	-	-
—	Investment in Brainytoys.com		-	-	2,187,821
—	Intercompany Loan		-	-	25,000	-
Total Impairment			2,198,063		2,212,821
Depreciation and amortisation of non-current assets:
—	plant and equipment		59,595	16,875	58,023	16,875
—	amortisation		-	75,795	-	-
Total depreciation and amortisation			59,595	92,570	58,023	16,875
Rental expense on operating leases			18,167	19,848	18,167	19,848
(b)	Significant Revenues and Expenses
The following significant revenue and expense items are relevant in explaining the financial performance:
People Costs			575,277	339,294	575,277	314,294
Consultancy			177,878	134,114	177,878	134,114
Computers and Software			7,487	55,067	7,487	55,067
Share Registry and Listing Fees			29,693	38,547	29,693	38,547
Research and Development			273,493	-	273,493	-

61

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 5: INCOME TAX EXPENSE		Economic Entity		Parent Entity
		2006 $	2005 $	2006 $	2005 $
(a)	The components of the tax expense comprise Tax rebate from Research and Development	(89,879)	-	(89,879)	-
(b)	The prima facie tax on profit/(loss) from ordinary activities before income tax is reconciled to the income tax as follows:
Prima facie tax payable on profit/(loss) from ordinary activities before income tax at 30% (2005: 30%)
—	economic entity	(1,089,821)	(222,091)
—	parent entity			(1,093,777)	(217,455)
Add:
Tax effect of:
—	Impairment of Intellectual Property	659,419	-		-
—	Impairment of Investment	-	-	656,346	-
—	Impairment of Intercompany loan	-	-	7,500	-
—	other non-allowable items	-	1,998	(5,990)	1,252
		659,419	1,998	657,856	1,252
Less:
Tax effect of:
Losses not brought to account		(430,402)	(220,093)	(435,921)	(216,203)
Income tax attributable to the entity		-	-	-	-
	The applicable weighted average effective tax rates are as follows:	N/A	N/A	N/A	N/A
(c)	Deferred tax assets  have not been brought to account.  These benefits will only be realised if the conditions for deductibility set out in Note 1 occur.
	Temporary differences	4,915	10,904	4,915	10,904
	Tax losses	1,738,979	1,308,577	1,740,608	1,304,687

62

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 6: KEY MANAGEMENT PERSONNEL COMPENSATION
(a) Names and positions held of Economic and Parent Entity key management personnel in office at any time during the financial year:
Key Management Personnel
Directors
Charles MacKinnon	Chairman — Non-Executive – appointed 26 May 2006
Alex Aguero	Managing Director
Graham Nicol	Director — Non-Executive – appointed 26 May 2006
Robert Towner	Chairman — Non-Executive – resigned 26 May 2006
Brett Fraser	Director — Non-Executive – resigned 26 May 2006
Ian Allen	Chairman — Non-Executive – resigned 19 August 2005
Howard Read	Director — Non-Executive – resigned 19 August 2005
Other key management personnel
The following persons also had authority and responsibility for planning, directing, and controlling the activities of the group, directly or indirectly, during the year.
Jay Stephenson	Company Secretary and Chief Financial Officer
Stephen Zadarnowski	Technical Manager
Catherine Vann	Business Manager
All of the above persons were also key management persons during the year ended 30 June 2005 except for Charles MacKinnon and Graham Nicol.

b) Key management personnel compensation	Economic Entity		Parent Entity
	2006 $	2005 $	2006 $	2005 $
Short-term employee benefits	373,469	308,617	373,469	308,617
Post employment benefits	19,171	14,418	19,171	14,418
Share based payments	4,080	4,400	4,080	4,400
Total key management personnel compensation	396,720	327,435	396,720	327,435
The Company has transferred the detailed remuneration disclosures to the Director’s Report in accordance with the Corporations Amendment Regulations 2006 (No 4).  The relevant information can be found in section B of the Remuneration Report on pages 11-12.

63

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 6: KEY MANAGEMENT PERSONNEL COMPENSATION
(d) Equity instrument disclosures relating to key management personnel
(i) Options provided as remuneration and shares issued on exercise of such options Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in section D of the Remuneration Report on pages 13-14. (ii) Option holdings The numbers of options over ordinary shares in the Company held during the financial year by each Director of Brainytoys Limited and other key management personnel of the Group, including their personally related parties, are set out below.
	2006	Balance at the start of the year	Granted during the year as compensation	Exercised during the year	Other changes during the year	Balance at the end of the year	Vested and exercisable at the end of the year
Directors of Brainytoys Limited
	Charles MacKinnon	-	-	-	393,750	393,750	393,750
	Alex Aguero	2,118,750	-	-	-	2,118,750	2,118,750
	Graham Nicol	-	-	-	12,500	12,500	12,500
	Robert Towner	200,000	-	-	(200,000)	-	-
	Brett Fraser	666,666	-	-	(666,666)	-	-
	Ian Allen	733,333	-	-	(733,333)	-	-
	Howard Read	600,000	-	-	(600,000)	-	-
Other Key management personnel of the Group
	Jay Stephenson	500,000	-	-	-	500,000	500,000
	Stephen Zadarnowski	-	300,000	-	-	300,000	300,000
	Catherine Vann	-	300,000	-	-	300,000	300,000
No options are vested and unexercisable at the end of the year.
	2005	Balance at the start of the year	Granted during the year as compensation	Exercised during the year	Other changes during the year	Balance at the end of the year	Vested and exercisable at the end of the year
Directors of Brainytoys Limited
	Alex Aguero	-	-	-	2,118,750	2,118,750	2,118,750
	Brett Fraser	-	500,000	-	166,666	666,666	666,666
	Ian Allen	-	500,000	-	233,333	733,333	733,333
	Howard Read	-	500,000	-	100,000	600,000	600,000
Other Key management personnel of the Group
	Jay Stephenson	-	500,000	-	-	500,000	500,000
	Stephen Zadarnowski	-	-	-	-	-	-

64

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 6: KEY MANAGEMENT PERSONNEL COMPENSATION
	Catherine Vann	-	-	-	-	-	-
(iii) Shareholdings
The numbers of shares in the Company held during the financial year by each Director of Brainytoys Limited and other key management personnel of the Group, including their personally related parties are set out below.  There were no shares granted during the reporting period as compensation.

2006	Balance at the start of the year	Received during the year on the exercise of options	Other changes during the year	Balance at the end of the year
Directors of Brainytoys Limited Ordinary Shares
Charles MacKinnon	-	-	832,500	832,500
Alex Aguero	8,282,851	-	-	8,282,851
Graham Nicol	-	-	399,067	399,067
Robert Towner	505,012	-	(505,012)	-
Brett Fraser	445,833	-	(445,833)	-
Ian Allen	466,667	-	(466,667)	-
Howard Read	200,000	-	(200,000)	-
Other key management personnel of the Group
Jay Stephenson	62,500	-	-	62,500
Catherine Vann	10,000	-	-	10,000
Stephen Zadarnowski	-	-	-	-
Total	9,972,863	-	(385,945)	9,586,918

Charles MacKinnon and Graham Nicol were appointed on 26 May 2006.  Robert Towner and Brett Fraser resigned on 26 May 2006.  Ian Allen and Howard Read resigned on 19 August 2005.

65

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 6: KEY MANAGEMENT PERSONNEL COMPENSATION
	(e) Loans to key management personnel
	Details of loans made to directors of Brainytoys Limited and other key management personnel of the Group, including their personally related parties are set out below.
	(i) Aggregates for key management personnel

Group	Balance at the start of the year $	Interest paid and payable for the year $	Interest not charged $	Balance at the end of the year $	Number in the Group at the end of the year.
2006	8,506	-	-	6,482	1
2005	-	-	-	8,506	1

66

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

(e) Other transactions with key management personnel

Alex Aguero, the Managing Director of Brainytoys Limited, is the sole director and shareholder of Highforce Investments Pty Ltd.  In 2005, Highforce forgave loans to Brainytoys.com Pty Ltd as part of the acquisition.

Brett Fraser, a non-executive Director of Brainytoys Limited, is a Director and Joint Shareholder with Jay Stephenson of Wolfstar Group Pty Ltd.  Mr. Stephenson provides Company Secretarial and Chief Financial Officer duties to Brainytoys Ltd, as well as providing corporate advisory advice during the listing process.

Aggregate amounts of each of the above types of other transactions with key management personnel of Brainytoys Limited.

	2006 $	2005 $
Amounts recognised as revenue Loans Forgiven	-	86,627
Amounts recognised as expense Company Secretarial and Corporate Advisory Fees	75,000	93,000

NOTE 7: AUDITORS’ REMUNERATION		Economic Entity		Parent Entity
		2006 $	2005 $	2006 $	2005 $
Remuneration of the auditor of the parent entity for:
—	Auditing or reviewing the financial reports	18,500	17,250	18,500	17,250
		18,500	17,250	18,500	17,250

NOTE 8: EARNINGS PER SHARE		Economic Entity
		2006 $	2005 $
(a)	Reconciliation of earnings to net profit or loss
	Net profit	(3,542,858)	(744,705)
	Earnings used in the calculation of basic EPS	(3,542,858)	(744,705)
(b)	Weighted average number of ordinary shares outstanding during the year used in calculation of basic EPS	30,289,714	16,600,108
Dilutive earnings per share have not been disclosed as the entity does not have on issue any potential ordinary shares which are dilutive.

67

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 9: CASH AND CASH EQUIVALENTS	Note	Economic Entity		Parent Entity
		2006 $	2005 $	2006 $	2005 $
Cash at bank		93,225	1,399,477	93,225	1,399,477
		93,225	1,399,477	93,225	1,399,477
Reconciliation of Cash
Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the balance sheet as follows:
Cash and cash equivalents		93,225	1,399,477	93,225	1,399,477
Bank overdrafts	18	(7,864)	-	(7,864)	-
		85,361	1,399,477	85,361	1,399,477

The effective interest rate on short term bank deposits was 1.95% (2005 5.18%).  The deposits have an average maturity of 90 days.

NOTE 10: TRADE AND OTHER RECEIVABLES
CURRENT
GST Receivable		15,676	31,916	15,676	31,916
R&D Rebate Receivable		89,879	-	89,879	-
Deposits and Prepaids		14,234	8,634	14,234	8,634
		119,789	40,550	119,789	40,550
NOTE 11: OTHER FINANCIAL ASSETS
CURRENT
Available for sale financial assets	11a	40,000	40,000	40,000	40,000
a. Available-for-sale Financial Assets Comprise
Listed Investments, at fair value		40,480	40,160	40,480	40,160
Available-for-sale financial assets comprise investments in the ordinary issued capital of National Income Securities.  The average interest rate for the securities for 2006 was 6.91% (2005 – 6.92%).  The average term of the securities was 91.25 days.

68

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 12: PROPERTY, PLANT AND EQUIPMENT		Economic Entity			Parent Entity
		2006 $		2005 $	2006 $	2005 $
PLANT AND EQUIPMENT
NON-CURRENT
Plant and equipment
At cost		242,824		237,973	245,410	235,387
Accumulated depreciation		(74,897)		(17,890)	(77,483)	(16,875)
Total Property, Plant and Equipment		167,927		220,083	167,927	218,512
(a) Movements in Carrying Amounts
Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year
	Plant and Equipment		Total
Economic Entity:
Balance at the beginning of year	220,083		220,083
Additions	7,439		7,439
Disposals	-		-
Additions through acquisition of entity	-		-
Revaluation increments/ (decrements)	-		-
Depreciation expense	(59,595)		(59,595)
Carrying amount at the end of year	167,927		167,927
Parent Entity:
Balance at the beginning of year	218,512		218,511
Additions	7,439		7,439
Disposals	-		-
Revaluation increments/ (decrements)	-		-
Depreciation expense	(58,024)		(58,024)
Carrying amount at the end of year	167,927		167,927

69

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 13: PATENTS AND TRADEMARKS	Economic Entity			Parent Entity
	2006 $		2005 $	2006 $	2005 $
NON-CURRENT
Patents and Trademarks in relation to toys at cost	7,915		7,494	7,915	7,494
NOTE 14: INTELLECTUAL PROPERTY
NON-CURRENT
Intellectual Property at cost	2,273,861		2,273,861	-	-
Accumulated Amortisation and impairment	(2,273,861)		(75,795)	-	-
Net carrying value	-		2,198,066	-	-
The Directors have considered the intellectual property to be impaired and it has been taken to the income statement in the year ended 30 June 2006.
Balance at beginning of year	2,198,066	-
Additions	-	2,273,861
Disposals	-	-
Amortisation charge	-	(75,795)
Impairment losses	(2,198,066)	-
	-	2,198,066
NOTE 15: OTHER FINANCIAL ASSETS
NON-CURRENT
Shares in controlled entities at cost				2,187,821	2,187,821
Accumulated impairment losses				(2,187,821)	-
Net carrying value	-		-	-	2,187,821
				Percentage Owned %
Controlled Entities	Country of Incorporation		Class of Shares	2006              05	2005
Brainytoys.com Pty Ltd	Australia		Ordinary	100	100

70

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

NOTE 15: OTHER FINANCIAL ASSETS (continued)

Brainytoys.com Pty Ltd was acquired 100% by Brainytoys Ltd on 15 October 2004 for the following consideration:
		$	Notes
15/10/04	7,190,600 ordinary shares (post 5 for 1 consol)	1,078,590	Stage 1
15/10/04	Cash payment	25,000	Stage 2
23/5/05	5,000,000 ordinary shares (post 5 for 1 consol)	1,000,000	Stage 2
23/5/05	Cash payment	50,000	Stage 2
23/5/05	Options (2.5m)	-	Stage 2

Notes:

The options were not included in the acquisition price as the final valuation of the options was not material.

The final allotment of shares and options was granted after one of the conditions precedent being met, that of the successful.

The acquisition of Brainytoys.com was completed in 2 stages:

Stage 1 conditions being satisfied that consisted of the following:

i)

the approval process

ii)

the completion of the sophisticated investor shares and options issue for not less than the minimum capital subscription (means the sum of $400k at an issue of 3 cents per share)

Stage 2 conditions being satisfied that consisted of the following:

i)

the completion of the prospectus issue being defined as the issue of not less than 31.25 m shares at an issue price of 4 cents to raise $1.25 m which was successfully met.

NOTE 16: TRADE AND OTHER RECEIVABLES
NON-CURRENT
Loan to Brainytoys.com Pty Ltd- wholly owned subsidiary – at cost			25,000	25,000
Accumulated impairment losses			(25,000)	-
Net carrying value	-	-	-	25,000

71

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 17: TRADE AND OTHER PAYABLES		Economic Entity		Parent Entity
	Notes:	2006 $	2005 $	2006 $	2005 $
CURRENT – unsecured liabilities
Trade payables		1,675	-	1,675	-
Accrued Expenses		60,180	22,525	60,180	22,525
		61,855	22,525	61,855	22,525

NOTE 18: BORROWINGS
CURRENT Unsecured liabilities
Bank overdraft	9	7,864	-	7,864	-

There are no terms and conditions for the bank overdraft.

NOTE 19: SHORT TERM PROVISIONS
CURRENT
Employee benefits	34,727	21,997	32,460	19,727
Number of employees at year end	6	6

Economic Entity	Long-term Employee Benefits $
Opening Balance at 1 July 2005	21,997
Additional Provisions	164,438
Amounts Used	(151,708)
Unused amounts reversed	-
Balance at 30 June 2006	34,727

Parent Entity	Long-term Employee Benefits $
Opening Balance at 1 July 2005	19,727
Additional Provisions	164,438
Amounts Used	(151,708)
Unused amounts reversed	-
Balance at 30 June 2006	32,460

72

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 20: ISSUED CAPITAL			Economic Entity		Parent Entity
			2006 $	2005 $	2006 $	2005 $
30,289,714  Fully paid ordinary shares		20a	8,101,864	8,101,864	8,101,864	8,101,864
			8,101,864	8,101,864	8,101,864	8,101,864
The Company has authorised share capital amounting to 30,289,714 ordinary shares at no par value.
(a) Ordinary shares
At the beginning of the reporting period			8,101,864	3,671,211	8,101,864	3,671,211
Shares issued during the year post consolidation
—	13,924,599 during October and November 2004		-	2,088,690	-	2,088,690
—	13,750,000 on 24 March 2005		-	2,750,000	-	2,750,000
Transaction costs relating to share issues			-	(408,037)	-	(408,037)
At reporting date			8,101,864	8,101,864	8,101,864	8,101,864

At the beginning of the reporting period		30,289,714	2,614,800	30,289,714	2,614,800
Shares issued during the year:
During October 2004		-	11,827,266	-	11,827,266
During November 2004		-	2,097,648	-	2,097,648
	24 March 2005	-	13,750,000	-	13,750,000
At reporting date		30,289,714	30,289,714	30,289,714	30,289,714
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has a vote on a show of hands.

73

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
(b) Options				Economic Entity		Parent Entity
				2006 No	2005 No	2006 No	2005 No
At the beginning of the reporting period				10,054,498	-	10,054,498	-
Shares issued during the year
During October 2004				-	3,366,998	-	3,366,998
During November 2004				-	4,687,500	-	4,687,500
	During June 2005			-	2,000,000	-	2,000,000
During January 2006				900,000	-	900,000	-
At reporting date				10,954,498	10,054,498	10,954,498	10,054,498
		i	For information relating to share options issued to key management personnel during the financial year, refer to Note 6 and Directors’ Report.
		ii	options issued during 2004 and 2005 are $0.25 options exercisable by 30 June 2009. options issued during January 2006 are $0.20 options exercisable by 9 January 2010.
(c)		Employee share scheme
		For information relating to the Brainytoys Limited Employee Share Scheme, including details of options issued during the financial year, refer to Note 24.

74

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 21: SHARE BASED PAYMENTS RESERVE	Note	Economic Entity		Parent Entity
		2006 $	2005 $	2006 $	2005 $
Share based payments reserve		10,520	4,400	10,520	4,400
The share based payments reserve records items recognised as expenses on valuations of employee share options.
NOTE 22: SEGMENT REPORTING
The Company holds investments and operates solely in Australia and has no business divisions.  The Companies’ principal activities are toy and game development.

NOTE 23: CASH FLOW INFORMATION
(a)	Reconciliation of Cash Flow from Operations with Profit after Income Tax
Profit after income tax		(3,542,858)	(744,705)	(3,556,045)	(729,251)
Cash flows excluded from profit attributable to operating activities
Non-cash flows in profit from ordinary activities
	Depreciation	59,595	16,875	58,024	16,875
	Amortisation	-	75,795	-	-
	Gain on debt forgiveness	-	(86,627)	-	-
	Impairment Loss	2,198,063	-	2,212,821	-
	Share based payments	6,120	4,400	6,120	4,400
Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries
	(Increase)/decrease in receivables	(73,156)	(39,386)	(73,156)	(64,385)
	Increase/(decrease) in payables	39,330	14,691	39,330	14,691
	Increase/(decrease) in provisions	12,733	21,996	12,733	19,726
	Cash flow from operations	(1,300,173)	(736,961)	(1,300,173)	(737,944)

Credit Standby Facilities

The Company currently has no standby credit facilities as at 30 June 2006, however there are $800,000 in convertible notes as outlined in events subsequent to 30 June 2006.

Non-Cash investing and financing activities

The Company has no non-cash investing and financing activities.

75

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

NOTE 24: SHARE-BASED PAYMENTS

The following share-based payment arrangements existed at 30 June 2006.

On 9 January 2006, Under the Brainytoys Limited Incentive Option Scheme, 900,000 share options were granted to employees with more than one year of full-time service to take up ordinary shares at an exercise price of $0.20 each.  The options are exercisable on or before 9 January 2011.  The options hold no voting or dividend rights and are not transferable.  Since balance date, no employee has ceased their employment.  At balance date, no share option has been exercised.

All options granted to key management personnel are ordinary shares in Brainytoys Limited, which confer a right to one ordinary share for every option held.

	Economic Entity				Parent Entity
	2006		2005		2006		2005
	Number of Options	Weighted Average Exercise Price $	Number of Options	Weighted Average Exercise Price $	Number of Options	Weighted Average Exercise Price $	Number of Options	Weighted Average Exercise Price $
Outstanding at the beginning of the year	2,000,000	$0.25	-	-	2,000,000	$0.25	-	-
Granted	900,000	$0.20	2,000,000	$0.25	900,000	$0.20	2,000,000	$0.25
Forfeited	-	-	-	-	-	-	-	-
Exercised	-	-	-	-	-	-	-	-
Expired	-	-	-	-	-	-	-	-
Outstanding at year-end	2,900,000	$0.234	2,000,000		2,900,000	$0.234	2,000,000	$0.25
Exercisable at year-end	2,900,000	$0.234	2,000,000		2,900,000	$0.234	2,000,000	$0.25

The options outstanding at 30 June 2006 had a weighted average exercise price of $0.234 and a remaining weighted average contractual life of 3.47 years.
The weighted average fair value of the options granted during the year was nil.  This price was calculated by using a Black Scholes option pricing model applying the following inputs:
Exercise Price	$0.20
Time to maturity	5 Years
Underlying share price	$0.062
Expected share price volatility	55%
Risk free interest rate	5.96%

76

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

NOTE 25: EVENTS SUBSEQUENT TO REPORTING DATE

On 27 July 2006, the Company completed a 1 for 4 rights issue to raise $454,346.

On 2 August 2006, the Company entered into a conditional agreement (subject to shareholder approval) for the issue of convertible secured loan notes to Noble Investments Pty Ltd for an undrawn credit facility of $800,000.

The Company proposes to issue 8 convertible notes on the series issue date as follows:

·

One fixed convertible note issued at $100,000 convertible by Noble Investments Pty Ltd at $0.06 each in 1,666,667 ordinary fully paid shares in the company; and

·

Seven subsequent convertible notes issued at $100,000.  The seven subsequent notes are convertible into that number of Shares equal to the Face Value of the relevant Subsequent Note divided by the higher of $0.05 per Share or the three month volume weighted average price of the Company’s Shares, as traded by the ASX and discounted by 20%.  

·

The subsequent notes are to be drawn down at the discretion of the Company.

·

Interest is payable on the drawn notes at 10% per annum.

·

The Company must execute a Deed of Charge in relation to the relevant Subsequent Note and servicing such amount as specified in the Convertible note Deed.

·

The conversion of notes to shares in the Company is at the absolute discretion of Noble.

77

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
NOTE 26: RELATED PARTY TRANSACTIONS	Economic Entity		Parent Entity
	2006 $	2005 $	2006 $	2005 $
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.
Transactions with related parties:
Highforce Investments Pty Ltd
Alex Aguero, the Managing Director of Brainytoys Limited, is the sole director and shareholder of Highforce Investments Pty Ltd.  Highforce forgave loans to Brainytoys.com Pty Ltd as part of the acquisition. This has been included as Revenue in the period.	-	86,627	-	86,627
Wolfstar Group Pty Ltd
Brett Fraser, a non-executive Director of Brainytoys Limited, is a Director and Joint Shareholder with Jay Stephenson of Wolfstar Group Pty Ltd.  Mr. Stephenson provides Company Secretarial and Chief Financial Officer duties to Brainytoys Ltd, as well as providing corporate advisory advice during the listing process.	75,000	93,000	75,000	93,000

78

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

NOTE 27: FINANCIAL INSTRUMENTS

a.	Financial Risk Management
	The Group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable, loans to and from subsidiaries, bills and leases.
	The main purpose of non-derivative financial instruments is to raise finance for Group operations.
	The Group does not speculate in the trading of derivative instruments.
	i.	Treasury Risk Management
		The board meets on a regular basis to analyse currency and interest rate exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts.
	ii.	Financial Risks
		The main risks the Group is exposed to through its financial instruments are, foreign currency risk, liquidity risk, and credit risk.
		Foreign currency risk
		The Group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods and services in currencies other than the Group’s measurement currency.
		Liquidity risk
		The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained.
		Credit risk
		The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements.
		The economic entity does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the economic entity.

79

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

NOTE 27: FINANCIAL INSTRUMENTS

b. Financial Instruments

i.	Derivative Financial Instruments
	The economic entity had no derivative financial instruments at 30 June 2006.
ii.	Interest Rate Risk
	The economic entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates, and the effective weighted average interest rate for each class of financial assets and financial liabilities comprises:

2006	Floating Interest Rate	Fixed Interest maturing in 1 year or less	Fixed Interest maturing over 1 to 5 years	Non-interest bearing	2006 total
	$	$	$	$	$
Financial assets
Cash Assets	93,225	-	-	-	93,225
Receivables	-	-	-	119,789	119,789
Other Financial Assets	40,000	-	-	-	40,000
	133,225	-	-	119,789	253,014
Weighted average Interest rate cash	1.95%
Weighted average interest rate other financial assets	6.91%
Financial Liabilities
Overdraft	7,864	-	-	-	7,864
Payables	-	-	-	61,855	61,855
	7,864	-	-	61,855	69,719
Weighted average interest rate	-	-	-	-	-
Net financial assets	125,361	-	-	51,851	183,295

80

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
2005	Floating Interest Rate	Fixed Interest maturing in 1 year or less	Fixed Interest maturing over 1 to 5 years	Non-interest bearing	2005 total
	$	$	$	$	$
Financial assets
Cash Assets	1,399,477	-	-	-	1,399,477
Receivables	-	-	-	40,550	40,550
Other Financial Assets	40,000	-	-	-	40,000
	1,439,477	-	-	40,550	1,480,027
Weighted average Interest rate	5.18%
Weighted average interest rate other financial assets	6.92%
Financial Liabilities
Payables	-	-	-	22,525	22,525
	-	-	-	22,525	22,525
Weighted average interest rate	-	-	-	-	-
Net financial assets	1,439,477	-	-	18,025	1,457,502

iii.		Net Fair Values
		The economic entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates, and the effective weighted average interest rate for each class of financial assets and financial liabilities comprises:
	—		Listed investments have been valued at the quoted market bid price at balance date, adjusted for transaction costs expected to be incurred. For unlisted investments where there is no organised financial market, the net fair value has been based on a reasonable estimation of the underlying net assets or discounted cash flows of the investment.
	—		Other assets and other liabilities approximate their carrying value.

81

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

	Aggregate net fair values and carrying amounts of financial assets and financial liabilities at balance date.
		2006		2005
		Carrying Amount $000	Net Fair Value $000	Carrying Amount $000	Net Fair Value $000
Financial Assets
Available-for-sale financial assets at fair value		40,000	40,480	40,000	40,160
Loans and receivables		119,789	119,789	40,550	40,550
		159,789	160,269	80,550	80,710
Financial Liabilities
Other loans and amounts due		7,864	7,864	-	-
Other liabilities		61,855	61,855	22,525	22,525
		69,719	69,719	22,525	22,525

NOTE 28: CHANGE IN ACCOUNTING POLICY
	a.		The group has adopted the following Accounting Standards for application on or after 1 July 2005.
			—	AASB 132: Financial Instruments: Disclosure and Presentation; and
			The changes resulting from the adoption of AASB 132 relate primarily to increased disclosures required under the Standard and do not affect the value of amounts reported in the financial statements.
			Brainytoys Limited has a long term investment of $40,000 in National Australia Bank.   Under AASB 139: Financial Instruments: Recognition and Measurement, available-for-sale financial assets are required to be revalued at each reporting date, with revaluation increments or decrements to be taken directly to a financial asset revaluation reserve.   As the cost of acquisition of the National Australia Bank investment equated to its fair value at 30 June 2005, the introduction of AASB 139 has had no effect on earnings or reserves for the year ended 30 June 2005.
	b.		The following Australian Accounting Standards have been issued or amended and are applicable to the parent and economic entity but are not yet effective. They have not been adopted in preparation of the financial statements at reporting date.
		AASB Amendment			AASB Standard Affected	Nature of Change in Accounting Policy and Impact	Application Date of the Standard	Application Date for the Group
		2004–3			AASB 1: First-time Adoption of AIFRS	No change, no impact	1 January 2006	1 July 2006
					AASB 101: Presentation of Financial Statements	No change, no impact	1 January 2006	1 July 2006
					AASB 124: Related Party Disclosures	No change, no impact	1 January 2006	1 July 2006

82

Note 28: Change in Accounting Policy
	2005–1	AASB 139: Financial Instruments: Recognition and Measurement	No change, no impact	1 January 2006	1 July 2006
	2005–5	AASB 1: First-time Adoption of AIFRS	No change, no impact	1 January 2006	1 July 2006
		AASB 139: Financial Instruments: Recognition and Measurement	No change, no impact	1 January 2006	1 July 2006
	2005–6	AASB 3: Business Combinations	No change, no impact	1 January 2006	1 July 2006
	2005–10	AASB 139: Financial Instruments: Recognition and Measurement	No change, no impact	1 January 2007	1 July 2007
		AASB 101: Presentation of Financial Statements	No change, no impact	1 January 2007	1 July 2007
		AASB 114: Segment Reporting	No change, no impact	1 January 2007	1 July 2007
		AASB 117: Leases	No change, no impact	1 January 2007	1 July 2007
		AASB 133: Earnings per share	No change, no impact	1 January 2007	1 July 2007
		AASB 132: Financial Instruments: Disclosure and Presentation	No change, no impact	1 January 2007	1 July 2007
		AASB 1: First-time Adoption of AIFRS	No change, no impact	1 January 2007	1 July 2007
		AASB 4: Insurance Contracts	No change, no impact	1 January 2007	1 July 2007
		AASB 1023: General Insurance Contracts	No change, no impact	1 January 2007	1 July 2007
		AASB 1038: Life Insurance Contracts	No change, no impact	1 January 2007	1 July 2007
	2006–1	AASB 121: The Effects of Changes in Foreign Exchange Rates	No change, no impact	1 January 2006	1 July 2006
	New Standard	AASB 7: Financial Instruments: Disclosure	No change, no impact	1 January 2007	1 July 2007

83

Note 28: Change in Accounting Policy
	New Standard	AASB 119: Employee Benefits: December 2004	No change, no impact	1 January 2006	1 July 2006
	All other pending Standards issued between the previous financial report and the current reporting dates have no application to either the parent or economic entity.
	AASB Amendment	AASB Standard Affected
	2005–2	AASB 1023: General Insurance Contracts
	2005–4	AASB 139: Financial Instruments: Recognition and Measurement
		AASB 132: Financial Instruments: Disclosure and Presentation
	2005–9	AASB 4: Insurance Contracts
		AASB 1023: General Insurance Contracts
		AASB 139: Financial Instruments: Recognition and Measurement
		AASB 132: Financial Instruments: Disclosure and Presentation

84

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

NOTE 29: CONTINGENT LIABILITIES There are no contingent liabilities as at 30 June 2006.  (2005: none)
NOTE 30: CAPITAL COMMITMENTS There are no capital commitments as at 30 June 2006.  (2005: none)
NOTE 31: COMPANY DETAILS
The registered office of the Company is:
	Brainytoys Ltd 6/34 York Street NORTH PERTH  WA  6006
The principal places of business are:
	Brainytoys Ltd and Brainytoys Ltd 6/34 York Street 6-B Bowen Street NORTH PERTH  WA  6006 O’CONNOR  WA  6163

85

BDO

Chartered Accountants & Advisers

Level 8, 256 St George’s Terrace Perth WA  6000

PO Box 7426 Cloisters Square Perth WA 6850

Tel:  (61-8) 9360 4200

Fax: (61-8) 9481 2524

Email: bdo@bdowa.com.au

www.bdo.com.au

BRAINYTOYS LIMITED AND ITS CONTROLLED ENTITIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  

We have audited the accompanying balance sheets of Brainytoys Limited (parent) and the economic entity being Brainytoys Limited (parent) and its subsidiary entity (the Company) as of June 30, 2006 and 2005, and the related parent and economic entity income statement, statement of changes in equity and cash flow statement for each of the two years in the years then ended June 30, 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brainytoys Limited (parent) and the economic entity as at June 30, 2006 and 2005, and the results of its operations and its cash flows for each of the two years in conformity with Australian Equivalents to International Financial Reporting Standards.

Substantial doubt about the Company’s ability to continue as a going concern

Without qualification to the opinion expressed above, attention is drawn to the following matter:

As a result of the matters described in Note 1, there is significant doubt whether Brainytoys Limited and its controlled entity will be able to continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at amounts stated in the financial report.

In the absence of significant cash inflow from product sales the company will need to raise significant further capital in order to meet the company’s expenditure commitments to continue to research and develop the company’s products and technology.

/s/ M Shafizadeh

M Shafizadeh

BDO Chartered Accountants

Perth

Western Australia, Australia

Dated this 6th day of February 2007

86

EX-1

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE:  1
001 894 033  BRAINYTOYS LIMITED
==============================================================================

Section 1274B
This extract has been prepared by the Australian Securities
& Investments Commission from information it obtained,
by using a data processor, from the national database.
If you believe that this extract contains any error or omission
please advise the A.S.I.C. promptly.
The Information Division of the Australian Securities & Investments Commission
is certified under the Australian Quality Standard AS 3901
(International Standard ISO 9001).

- ------------------------------- IDENTIFICATION -------------------------------
                                                                  Docimage No
Australian Company Number     001 894 033                          -----------
Australian Business Number 28 001 894 033
Current Company Name       BRAINYTOYS LIMITED
Registered in              NEW SOUTH WALES
Previous State Number      24340617
Registration Date          05/05/1980
Company Bound by           CONSTITUTION
Review Date                05/05/2007

- ------------------------------ CURRENT DETAILS -------------------------------

Period from  05/11/2004
Name         BRAINYTOYS LIMITED                                    020 689 880
Name Start   05/11/2004
Type         AUSTRALIAN PUBLIC COMPANY
Status       REGISTERED
Class        LIMITED BY SHARES
Subclass     LISTED PUBLIC COMPANY
Disclosing Entity  YES

- ------------------------------ PREVIOUS DETAILS ------------------------------

Period from  06/09/1999            To      04/11/2004
Name         AUTO ENTERPRISES LIMITED                              015 477 372
Name Start   06/09/1999
Type         AUSTRALIAN PUBLIC COMPANY
Status       REGISTERED
Class        LIMITED BY SHARES
Subclass     LISTED PUBLIC COMPANY
Disclosing Entity  YES

Period from  19/11/1986            To      05/09/1999
Name         SPEEDY WHEELS LTD
Name Start   19/11/1986
Type         AUSTRALIAN PUBLIC COMPANY
Status       REGISTERED
Class        LIMITED BY SHARES
Subclass     LISTED PUBLIC COMPANY
Disclosing Entity  NO

Period from  11/07/1980            To      18/11/1986
Name         SPEEDY WHEELS (AUST) PTY LTD
Name Start   11/07/1980
Type         AUSTRALIAN PROPRIETARY COMPANY
Status       REGISTERED
Class        LIMITED BY SHARES

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
Subclass     EXEMPT PROPRIETARY COMPANY
Disclosing Entity  NO

Period from  05/05/1980            To      10/07/1980
Name         BEVONA PTY LTD
Name Start   Unknown
Type         AUSTRALIAN PROPRIETARY COMPANY
Status       REGISTERED
Class        LIMITED BY SHARES
Subclass     EXEMPT PROPRIETARY COMPANY
Disclosing Entity  NO

- ---------------------------------- ADDRESSES ---------------------------------

Type         CURRENT REGISTERED OFFICE                             1F0 104 056
Start Date   06/09/2006
Address      6B BOWEN STREET O'CONNOR WA 6163

Type         PREVIOUS REGISTERED OFFICE                            7E0 249 083
Start Date   25/10/2004            To      05/09/2006
Address      UNIT 6 34 YORK STREET NORTH PERTH WA 6006

Type         PREVIOUS REGISTERED OFFICE                            0E9 606 293
Start Date   26/02/2004            To      24/10/2004
Address      LEVEL 11 111 ELIZABETH STREET SYDNEY NSW 2000

Type         PREVIOUS REGISTERED OFFICE                            7E0 088 084
Start Date   13/02/2004            To      25/02/2004
Address      STIRLING WARTON WILLIAMS LEVEL 11 SAINT JAMES CENTRE
            111 ELIZABETH STREET SYDNEY NSW 2000

Type         PREVIOUS REGISTERED OFFICE                            001 894 03M
Start Date   24/12/2001            To      12/02/2004               (AR 2002)
Address      STIRLING WARTON WILLIAMS LEVEL 10 BLIGH HOUSE 4-6 BLIGH STREET
            SYDNEY NSW 2000

Type         PREVIOUS REGISTERED OFFICE                            017 109 273
Start Date   31/01/2001            To      23/12/2001
Address      'CURRENCY HOUSE' LEVEL 15 23-25 HUNTER STREET SYDNEY NSW 2000

Type         PREVIOUS REGISTERED OFFICE                            015 059 850
Start Date   17/05/1999            To      30/01/2001
Address      23 PEARSON WAY OSBORNE PARK WA 6017

Type         PREVIOUS REGISTERED OFFICE                            009 996 655
Start Date   27/07/1992            To      16/05/1999               (AR 1995)
Address      1 RIVER ROAD PARRAMATTA NSW 2150

Type         PREVIOUS REGISTERED OFFICE                            002 598 793
Start Date   27/07/1992            To      27/09/1995
Address      UNIT 1 1 RIVER ROAD PARRAMATTA NSW 2150

Type         PREVIOUS REGISTERED OFFICE
Start Date   Unknown               To      26/07/1992
Address      39 GAREMA COURT KINGSGROVE NSW 2208

Type         CURRENT PRINCIPAL PLACE OF BUSINESS                   017 594 366

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
Start Date   14/12/2001            To      12/02/2004
Address      LEVEL 10 BLIGH HOUSE 4-6 BLIGH STREET SYDNEY NSW 2000

Type         CURRENT PRINCIPAL PLACE OF BUSINESS                   1F0 104 056
Start Date   25/08/2006
Address      6B BOWEN STREET O'CONNOR WA 6163

Type         PREVIOUS PRINCIPAL PLACE OF BUSINESS                  7E0 258 750
Start Date   18/10/2004            To      18/10/2004
Address      6B BOWEN STREET O'CONNOR WA 6163

Type         PREVIOUS PRINCIPAL PLACE OF BUSINESS                  0E9 606 293
Start Date   13/02/2004            To      17/10/2004
Address      LEVEL 11 111 ELIZABETH STREET SYDNEY NSW 2000

Type         PREVIOUS PRINCIPAL PLACE OF BUSINESS                  017 109 273
Start Date   18/01/2001            To      13/12/2001
Address      'CURRENCY HOUSE' LEVEL 15 23-25 HUNTER STREET SYDNEY NSW 2000

Type         PREVIOUS PRINCIPAL PLACE OF BUSINESS                  015 059 850
Start Date   05/05/1999            To      17/01/2001
Address      23 PEARSON WAY OSBORNE PARK WA 6017

Type         PREVIOUS PRINCIPAL PLACE OF BUSINESS                  001 894 03C
Start Date   30/06/1992            To      04/05/1999               (AR 1992)
Address      1 RIVER ROAD PARRAMATTA NSW 2150

Type         PREVIOUS PRINCIPAL PLACE OF BUSINESS                  000 353 829
Start Date   01/01/1991            To      29/06/1992               (AR 1990)
Address      39 GAREMA COURT KINGSGROVE NSW 2208

- ------------------------------------ ROLES -----------------------------------

NOTE: A date or address shown as UNKNOWN has not been updated since the ASIC
 took over the records in 1991. For details, order the appropriate historical
 state or territory documents, available in microfiche or paper format.
* Check documents listed under ASIC Documents Received for recent changes.

Role         PREVIOUS PRINCIPAL EXECUTIVE OFFICER                  001 894 03C
Appointed    19/11/1990            Ceased  08/12/1995               (AR 1992)
Name         CAREY BRIAN MCMAHON
Born         10/11/1953 SYDNEY NSW
Address      70 HOLMES STREET TURRAMURRA NSW 2074

Role         PREVIOUS PRINCIPAL EXECUTIVE OFFICER                  000 680 209
Appointed    Unknown               Ceased  19/11/1990
Name         BRIAN KEITH TONKIN
Born         02/11/1942 SYDNEY NSW
Address      SUITE 1 'QUAYSIDE' 1 WELLINGTON DRIVE NAMBUCCA HEADS NSW 2448

Role         CURRENT DIRECTOR                                      7E0 249 083
Appointed    18/10/2004
Name         ALEXANDER AGUERO
Born         04/10/1956 TEMUCO CHILE
Address      22 MORGAN STREET CANNINGTON WA 6107

Role         CURRENT DIRECTOR                                      1F0 113 883

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
Appointed    26/05/2006
Name         CHARLES WILLIAM MACKINNON
Born         04/01/1946 PERTH
Address      1 EVELYN ROAD CLAREMONT WA 6010

Role         CURRENT DIRECTOR                                      1F0 113 883
Appointed    26/05/2006
Name         GRAHAM KEITH NICOL
Born         21/11/1945 FREMANTLE WA
Address      56 RECREATION ROAD KALAMUNDA WA 6076

Role         PREVIOUS DIRECTOR                                     7E0 249 083
Appointed    18/10/2004            Ceased  26/05/2006
Name         BRETT FRANCIS FRASER
Born         06/04/1963 MOUNT LAWLEY WA
Address      130 TYLER STREET TUART HILL WA 6060

Role         PREVIOUS DIRECTOR                                     1F0 038 196
Appointed    22/08/2005            Ceased  26/05/2006
Name         ROBERT EDGAR THOMAS TOWNER
Born         25/09/1969 PERTH WA
Address      20 RUDWICK STREET MOSMAN PARK WA 6012

Role         PREVIOUS DIRECTOR                                     7E0 249 083
Appointed    18/10/2004            Ceased  19/08/2005
Name         IAN ALLEN
Born         19/02/1952 PRETORIA SOUTH AFRICA
Address      54 VICTORIA AVENUE CLAREMONT WA 6010

Role         PREVIOUS DIRECTOR                                     7E0 253 600
Appointed    26/10/2004            Ceased  19/08/2005
Name         HOWARD READ
Born         10/10/1943 SUBIACO BAHRAIN
Address      10 DEANE STREET COTTESLOE WA 6011

Role         PREVIOUS DIRECTOR
Appointed    22/10/1986            Ceased  18/10/2004
Name         JOHN BRUCE GIBSON
Born         04/10/1940 HURSTVILLE NSW
Address      13 STACEY STREET CRONULLA NSW 2230

Role         PREVIOUS DIRECTOR                                     015 050 039
Appointed    24/11/1998            Ceased  18/10/2004
Name         DONALD ELLIOTT WILSON
Born         15/07/1939 INNISFAIL QLD
Address      UNIT 1 15 STATION STREET NAREMBURN NSW 2065

Role         PREVIOUS DIRECTOR                                     018 004 263
Appointed    06/03/2002            Ceased  18/10/2004
Name         GEOFFREY JOHN GIBBS
Born         27/12/1939 DUBBO NSW
Address      14 WEEROONA ROAD EDENSOR PARK NSW 2176

Role         PREVIOUS DIRECTOR                                     0E8 789 569
Appointed    01/03/2003            Ceased  13/04/2003
Name         DANIEL VINCENT FISHER
Born         15/10/1953 PERTH WA

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE:  5
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
Address      4 QUAY COURT SORRENTO WA 6020

Role         PREVIOUS DIRECTOR                                     0E6 381 143
Appointed    31/10/2001            Ceased  12/02/2002
Name         FINDLAY WILLIAM ANDREWS
Born         12/12/1945 KILWINNING UNITED KINGDOM
Address      111 COONDOOROOPA DRIVE MACLEAY ISLAND QLD 4184

Role         PREVIOUS DIRECTOR                                     0E5 834 625
Appointed    18/01/2001            Ceased  14/12/2001
Name         KEAN HENRY FLANAGAN
Born         12/09/1965 EMPANGENI SOUTH AFRICA
Address      3 WANGANELLA STREET BALGOWLAH NSW 2093

Role         PREVIOUS DIRECTOR                                     016 830 707
Appointed    18/01/2001            Ceased  20/06/2001
Name         ROBERT JAMES FENWICK
Born         14/11/1946 SYDNEY NSW
Address      9 PRINCE ALFRED PARADE NEWPORT NSW 2106

Role         PREVIOUS DIRECTOR                                     016 830 707
Appointed    18/01/2001            Ceased  20/06/2001
Name         JOHN EDWARD REARDEN
Born         01/04/1969 MUDGEE NSW
Address      17 CASEY CRESCENT KARIONG NSW 2250

Role         PREVIOUS DIRECTOR                                     014 612 349
Appointed    29/07/1998            Ceased  18/01/2001
Name         CHARLES WILLIAM MACKINNON
Born         04/01/1946 PERTH WA
Address      15 GOLDSMITH ROAD CLAREMONT WA 6010

Role         PREVIOUS DIRECTOR                                     015 050 039
Appointed    24/11/1998            Ceased  18/01/2001
Name         DANIEL VINCENT FISHER
Born         15/10/1953 PERTH WA
Address      4 QUAY COURT SORRENTO WA 6020

Role         PREVIOUS DIRECTOR                                     015 050 039
Appointed    24/11/1998            Ceased  24/11/1998
Name         DANIEL VINCENT FISHER
Born         15/10/1953 PERTH WA
Address      4 QUAY COURT SORRENTO WA 6020

Role         PREVIOUS DIRECTOR                                     015 009 519
Appointed    10/11/1998            Ceased  24/11/1998
Name         DANIEL FISHER
Born         15/10/1953 PERTH WA
Address      4 QUAY COURT SORRENTO WA 6020

Role         PREVIOUS DIRECTOR                                     015 009 519
Appointed    10/11/1998            Ceased  24/11/1998
Name         DONALD ELLIOTT WILSON
Born         15/07/1939 INNISFAIL QLD
Address      UNIT 1 15 STATION STREET NAREMBURN NSW 2065

Role         PREVIOUS DIRECTOR

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE:  6
001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
Appointed    19/04/1990            Ceased  09/11/1998
Name         LIU VICTOR
Born         24/12/1958 TAIPEI TAIWAN, PROVINCE OF CHINA
Address      EI 7F-3 #742 CHUNG CHEUNG RD TAIP TAIWAN

Role         PREVIOUS DIRECTOR                                     010 797 764
Appointed    26/03/1996            Ceased  09/11/1998
Name         LESLIE RAPOLTI
Born         28/05/1953 SYDNEY NSW
Address      UNIT 2 113A NELSON STREET ANNANDALE NSW 2038

Role         PREVIOUS DIRECTOR                                     010 911 718
Appointed    22/04/1996            Ceased  09/11/1998
Name         GREGORY RUSSELL
Born         19/04/1952 SYDNEY NSW
Address      211 WOOLOOWARE RD S BURRANEER NSW 2230

Role         PREVIOUS DIRECTOR                                     014 209 105
Appointed    16/10/1990            Ceased  09/11/1998
Name         CAREY BRIAN MCMAHON
Born         10/11/1953 SYDNEY NSW
Address      24 GREENHAVEN DRIVE PENNANT HILLS NSW 2120

Role         PREVIOUS DIRECTOR                                     011 248 613
Appointed    24/08/1998            Ceased  09/11/1998
Name         VICTOR LIU
Born         24/12/1958 TAIWAN, PROVINCE OF CHINA
Address      2F NO 26-1 LANE 200 KUANG FU SOUTH RD TAIPEI TAIWAN ROC

Role         PREVIOUS DIRECTOR                                     000 680 209
Appointed    05/05/1980            Ceased  02/10/1998
Name         BRIAN KEITH TONKIN
Born         02/11/1942 SYDNEY NSW
Address      SUITE 1 'QUAYSIDE' 1 WELLINGTON DRIVE NAMBUCCA HEADS NSW 2448

Role         PREVIOUS DIRECTOR
Appointed    17/10/1989            Ceased  25/11/1997
Name         PETER VLANDIS
Born         16/09/1942 GLOUCESTER NSW
Address      4 GLEN AYR AVENUE YOWIE BAY NSW 2228

Role         PREVIOUS DIRECTOR                                     001 190 178
Appointed    16/04/1991            Ceased  23/11/1992
Name         GEORGE JOHN SANTANA
Born         08/02/1952 JOHANNESBURGSAFRIC UNKNOWN
Address      14 JONQUIL COURT DONCASTER EAST VIC 3109

Role         PREVIOUS DIRECTOR
Appointed    05/05/1980            Ceased  21/08/1992
Name         KENDRICK GORDON WILLIAMS
Born         27/09/1937 MELBOURNE VIC
Address      7 NIKOLOFF COURT FULHAM GARDENS SA 5024

Role         PREVIOUS DIRECTOR
Appointed    17/10/1989            Ceased  17/07/1991
Name         EPHRAIM GRUNHARD
Born         11/10/1947 BRUSSELS BELGIUM

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
Address      54 QUEENS PARK ROAD QUEENS PARK NSW 2022

Role         PREVIOUS DIRECTOR
Appointed    Unknown               Ceased  19/11/1990
Name         RAUMOND CHARLES LAYTON
Born         13/05/1925 UNKNOWN
Address      2 LYLA STREET NARWEE NSW 2209

Role         PREVIOUS DIRECTOR
Appointed    05/05/1980            Ceased  29/06/1989
Name         GARY JAMES TONKIN
Born         11/11/1947 SYDNEY NSW
Address      29 BRUNSWICK STREET WALKERVILLE SA 5081

Role         PREVIOUS DIRECTOR
Appointed    05/05/1980            Ceased  08/10/1988
Name         GREGORY JOHN HUNTER
Born         12/09/1951 KOGARAH NSW
Address      31 IRAGA AVENUE PEAKHURST NSW 2210

Role         PREVIOUS DIRECTOR
Appointed    05/05/1980            Ceased  Unknown
Name         WINIFRED ELIZABETH TONKIN
Born         Unknown UNKNOWN
Address      20 WOODLANDS AVENUE BLAKEHURST NSW 2221

Role         CURRENT SECRETARY                                     1F0 104 056
Appointed    25/08/2006
Name         GRAHAM KEITH NICOL
Born         21/11/1945 FREMANTLE WA
Address      56 RECREATION ROAD KALAMUNDA WA 6076

Role         PREVIOUS SECRETARY                                    7E0 249 083
Appointed    18/10/2004            Ceased  25/08/2006
Name         JAY RICHARD STEPHENSON
Born         05/05/1966 EDMONTON CANADA
Address      31 MAMMOTH COURT BALLAJURA WA 6066

Role         PREVIOUS SECRETARY                                    017 594 386
Appointed    14/12/2001            Ceased  18/10/2004
Name         DONALD ELLIOTT WILSON
Born         15/07/1939 INNISFAIL QLD
Address      UNIT 1 15 STATION STREET NAREMBURN NSW 2065

Role         PREVIOUS SECRETARY                                    0E6 089 981
Appointed    18/01/2001            Ceased  14/12/2001
Name         NEIL ALAN GREEN
Born         16/05/1957 SYDNEY NSW
Address      35 WARATAH STREET OATLEY NSW 2223

Role         PREVIOUS SECRETARY                                    015 009 519
Appointed    10/11/1998            Ceased  18/01/2001
Name         CHARLES WILLIAM MACKINNON
Born         04/01/1946 PERTH WA
Address      15 GOLDSMITH ROAD CLAREMONT WA 6010

Role         PREVIOUS SECRETARY                                    008 969 083

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
Appointed    01/01/1995            Ceased  09/11/1998
Name         LESLIE RAPOLTI
Born         28/05/1953 SYDNEY NSW
Address      UNIT 2 113A NELSON STREET ANNANDALE NSW 2038

Role         PREVIOUS SECRETARY                                    014 209 105
Appointed    18/12/1990            Ceased  09/11/1998
Name         CAREY BRIAN MCMAHON
Born         10/11/1953 SYDNEY NSW
Address      24 GREENHAVEN DRIVE PENNANT HILLS NSW 2120

Role         PREVIOUS SECRETARY                                    002 509 162
Appointed    01/07/1992            Ceased  31/12/1994
Name         DAVID CHARLES LOVELL
Born         24/03/1952 SYDNEY NSW
Address      26 LOCHINVAR PARADE CARLINGFORD NSW 2118

Role         PREVIOUS SECRETARY
Appointed    05/05/1980            Ceased  30/06/1992
Name         RAYMOND CHARLES LAYTON
Born         13/05/1925 CASINO NSW
Address      2 LYLA STREET NARWEE NSW 2209

Role         PREVIOUS SECRETARY
Appointed    20/02/1990            Ceased  20/02/1990
Name         BRIAN KEITH TONKIN
Born         02/11/1942 SYDNEY NSW
Address      21 BULLS ROAD BURRANEER NSW 2230

Role         PREVIOUS ALTERNATE DIRECTOR                           0E6 381 143
Appointed    31/10/2001            Ceased  06/10/2004
Name         BRIAN KEITH TONKIN
Address      'THE QUAYSIDE' SUITE 1 1 WELLINGTON DRIVE NAMBUCCA HEADS NSW
            2448

Role         CURRENT APPOINTED AUDITOR                             009 996 655
Appointed    23/11/1992                                             (AR 1995)
NUMBER       052 220 765
Name         BDO NELSON PARKHILL
Address      C/- KEVIN REID LEVEL 23 MMI CENTRE 2 MARKET STREET SYDNEY NSW
            2000

Role         PREVIOUS APPOINTED AUDITOR                            000 353 829
Appointed    Unknown               Ceased  23/11/1992               (AR 1990)
NUMBER       088 681 823
Name         HORWATH & HORWATH
Address      307 PITT STREET SYDNEY NSW 2000

- -------------------------- CURRENT SHARES/INTERESTS --------------------------

NOTE: Check documents listed under ASIC Documents Received for recent changes.

Class        ORD                                                   1F0 057 107
            ORDINARY SHARES
Number of Shares/Interests Issued                         30289399
Total Amount Paid/Taken to be Paid                         8259901.00
Total Amount Due and Payable                                     0.00

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
- -------------------------- PREVIOUS SHARES/INTERESTS -------------------------

NOTE: Check documents listed under ASIC Documents Received for recent changes.

Class        ORD1                                                  001 894 03I
            ORDINARY SHARES                                        (AR 1998)
Number of Shares/Interests Issued                         15221000
Total Amount Paid/Taken to be Paid                         3805250.00
Total Amount Due and Payable                                     0.00

Class        ORD2                                                  001 894 03I
            ORDINARY SHARES                                        (AR 1998)
Number of Shares/Interests Issued                           700000
Total Amount Paid/Taken to be Paid                          112000.00
Total Amount Due and Payable                                 63000.00

Class        ORD3                                                  001 894 03I
            ORDINARY SHARES                                        (AR 1998)
Number of Shares/Interests Issued                           200000
Total Amount Paid/Taken to be Paid                           26000.00
Total Amount Due and Payable                                 24000.00

Class        ORD4                                                  001 894 03G
            ORDINARY SHARES                                        (AR 1996)
Number of Shares/Interests Issued                           300000
Total Amount Paid/Taken to be Paid                           15000.00
Total Amount Due and Payable                                     0.00

Class        ORD5                                                  001 894 03G
            ORDINARY SHARES                                        (AR 1996)
Number of Shares/Interests Issued                            25000
Total Amount Paid/Taken to be Paid                            6250.00
Total Amount Due and Payable                                  1250.00

- ------------------------------------------------------------------------------

NOTE: For each class of shares issued by a company, ASIC records the details
 of the twenty members of the class (based on shareholdings). The details of
 any other members holding the same number of shares as the twentieth ranked
 member will also by recorded by ASIC on the database. Where available,
 historical records show that a member has ceased to be ranked amongst the
 twenty members. This may, but does not necessarily mean, that they have
 ceased to be a member of the company.

- ----------------------- CURRENT SHARE/INTEREST HOLDERS -----------------------

NOTE: Check documents listed under ASIC Documents Received for recent changes.

Class        ORD                   Number Held  240000             001 894 03K
Paid         FULLY                 Beneficial Held  YES             (AR 2000)
Name         LUTMAR PTY LTD
ACN          000 350 005
ABN          11 000 350 005
Address      PO BOX 222 WATERLOO NSW 2017

Class        ORD                   Number Held  181251             001 894 03K
Paid         FULLY                 Beneficial Held   NO             (AR 2000)

Name         ROWE STREET INVESTMENTS PTY. LIMITED

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
ACN          003 331 075
Address      43 EURIMBLA AVENUE RANDWICK NSW 2031

Class        ORD                   Number Held  175000             001 894 03K
Paid         FULLY                 Beneficial Held  YES             (AR 2000)
Name         JOHN WALTER UTZ
Address      22 EDGECLIFFE ESPLANADE SEAFORTH NSW 2092

Class        ORD                   Number Held  150000             001 894 03K
Paid         FULLY                 Beneficial Held   NO             (AR 2000)
Name         AUSTROM PTY LTD
ACN          000 690 719
ABN          98 000 690 719
Address      UNIT 31 50 AUBIN STREET NEUTRAL BAY NSW 2089

Class        ORD                   Number Held  150000             001 894 03K
Paid         FULLY                 Beneficial Held  YES             (AR 2000)
Name         PETER VLANDIS
Address      4 GLEN AYR AVENUE YOWIE BAY NSW 2228

Class        ORD                   Number Held  850000             001 894 03L
Paid         FULLY                 Beneficial Held  YES             (AR 2001)
Name         JOHN BRUCE GIBSON
Address      13 STACEY STREET CRONULLA NSW 2230

Class        ORD                   Number Held  269300             001 894 03L
Paid         FULLY                 Beneficial Held  YES             (AR 2001)
Name         GOLDEN WORDS PTY LTD
ACN          002 167 302
ABN          14 002 167 302
Address      25 ROYAL AVENUE BURNSIDE SA 5066

Class        ORD                   Number Held  206000             001 894 03L
Paid         FULLY                 Beneficial Held  YES             (AR 2001)
Name         GOLDEN WORDS PTY LTD
ACN          002 167 302
ABN          14 002 167 302
Address      25 ROYAL AVENUE BURNSIDE SA 5066

Class        ORD                   Number Held  400000             001 894 03L
Paid         FULLY                 Beneficial Held  YES             (AR 2001)
            ** JOINT MEMBER(S) FOLLOW **
Name         KEITH MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013
            ** JOINT MEMBER(S) FOLLOW **
Name         NITA MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013

Class        ORD                   Number Held  400000             001 894 03L
Paid         FULLY                 Beneficial Held  YES             (AR 2001)
            ** JOINT MEMBER(S) FOLLOW **
Name         KEITH MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013
            ** JOINT MEMBER(S) FOLLOW **
Name         NITA MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013

Class        ORD                   Number Held  250000             001 894 03L

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001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
Paid         FULLY                 Beneficial Held  YES             (AR 2001)
Name         DONALD ELLIOTT WILSON
Address      UNIT 1 15 STATION STREET NAREMBURN NSW 2065

Class        ORD                   Number Held  400000             001 894 03L
Paid         FULLY                 Beneficial Held  YES             (AR 2001)
Name         ROB WRIGHT
Address      204 PARKWAY AVENUE HAMILTON SOUTH NSW 2303

Class        ORD                   Number Held  234500             001 894 03L
Paid         FULLY                 Beneficial Held   NO             (AR 2001)
            ** JOINT MEMBER(S) FOLLOW **
Name         WAYNE KEITH MCKAY
Address      5 HAWERA COURT ASPLEY QLD 4034
            ** JOINT MEMBER(S) FOLLOW **
Name         JENNIFER KAY MCKAY
Address      5 HAWERA COURT ASPLEY QLD 4034

Class        ORD                   Number Held  242900             001 894 03L
Paid         FULLY                 Beneficial Held  YES             (AR 2001)
Name         JEMAYA PTY LTD
ACN          073 409 408
ABN          34 073 409 408
Address      C/- HARTLEY POYNTON LTD GPO BOX W2077 PERTH WA 6846

Class        ORD                   Number Held  268000             001 894 03M
Paid         FULLY                 Beneficial Held  YES             (AR 2002)
Name         CHENG HUANG CHI
Address      26 SEC 2 SA-SEIN RD TA-TU SHIANG TAICHUNG HSEIN TAIWAN

Class        ORD                   Number Held  250000             001 894 03M
Paid         FULLY                 Beneficial Held   NO             (AR 2002)
Name         RODMIN ESTATES PTY LTD
ACN          000 924 836
ABN          15 000 924 836
Address      C/- ANZAC SECURITIES LTD GPO BOX 3291 SYDNEY NSW 2001

Class        ORD                   Number Held  938900             001 894 03M
Paid         FULLY                 Beneficial Held  YES             (AR 2002)
Name         SYMVINE PTY. LIMITED
ACN          080 016 977
ABN          28 080 016 977
Address      8 PEMBURY CLOSE DENHAM COURT NSW 2565

Class        ORD                   Number Held  664321             001 894 03M
Paid         FULLY                 Beneficial Held  YES             (AR 2002)
Name         WESSEX CAPITAL INVESTMENT LTD
ACN          003 315 151
ABN          34 003 315 151
Address      GPO BOX 3778 SYDNEY NSW 2001

Class        ORD                   Number Held  627900             001 894 03M
Paid         FULLY                 Beneficial Held  YES             (AR 2002)
Name         BRIAN KEITH TONKIN
Address      'THE QUAYSIDE' SUITE 1 1 WELLINGTON DRIVE NAMBUCCA HEADS NSW
            2448

Class        ORD                   Number Held  540508             001 894 03M

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
Paid         FULLY                 Beneficial Held  YES             (AR 2002)
Name         KOPAI HOLDINGS PTY LTD
ACN          009 094 848
Address      4 QUAY COURT SORRENTO WA 6020

Class        ORD                   Number Held  234500             001 894 03M
Paid         FULLY                 Beneficial Held  YES             (AR 2002)
            ** JOINT MEMBER(S) FOLLOW **
Name         DAVID WILLIAM MCKAY
Address      15 ECLIPSE STREET BRIDGEMAN DOWNS QLD 4035
            ** JOINT MEMBER(S) FOLLOW **
Name         DONNA MICHELE MCKAY
Address      15 ECLIPSE STREET BRIDGEMAN DOWNS QLD 4035

Class        ORD                   Number Held  8282851            1F0 057 107
Paid         FULLY                 Beneficial Held   NO
Name         ALEX AGUERO
Address      22 MORGAN STREET CANNINGTON WA 6107

Class        ORD                   Number Held  916667             1F0 057 107
Paid         FULLY                 Beneficial Held   NO
Name         NATIONAL AUSTRALIA TRUSTEES LTD.
ACN          007 350 405
ABN          80 007 350 405
Address      GPO BOX 247 MELBOURNE VIC 3001

Class        ORD                   Number Held  772500             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
Name         LOTHBURY PTY LTD
ACN          009 364 863
ABN          57 009 364 863
Address      C/- AUTO DISTRIBUTORS PTY LTD 23 PEARSON WAY OSBORNE PARK WA
            6017

Class        ORD                   Number Held  500000             1F0 057 107
Paid         FULLY                 Beneficial Held   NO
Name         CI LAW TRUST GROUP LIMITED
Address      PO BOX 303 CHANCERY CHAMBERS 8 DUHAMEL PLACE ST HELIER JERSEY
            JE4 8UN CHANNEL ISLANDS UNITED STATES

Class        ORD                   Number Held  500000             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
Name         DAVID JOHN LAURITZ
Address      56 CENTRAL PARK ROAD MALVERN EAST VIC 3145

Class        ORD                   Number Held  500000             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
Name         M. KNOX HOLDINGS PTY. LTD.
ACN          008 127 759
ABN          94 008 127 759
Address      PO BOX 332 FULLARTON SA 5063

Class        ORD                   Number Held  500000             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
Name         ZERO NOMINEES PTY LTD
ACN          091 927 981
ABN          97 091 927 981

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
Address      PO BOX Z5036 PERTH ST GEORGES TCE WA 6831

Class        ORD                   Number Held  466667             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
Name         LANZERAC NOMINEES PTY. LTD.
ACN          009 176 685
Address      54 VICTORIA AVENUE CLAREMONT WA 6010

Class        ORD                   Number Held  355012             1F0 057 107
Paid         FULLY                 Beneficial Held   NO
Name         MANDOLIN PTY. LTD.
ACN          050 844 098
Address      20 RUDWICK STREET MOSMAN PARK WA 6012

Class        ORD                   Number Held  350000             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
Name         BRINZ PTY. LTD.
ACN          008 262 093
ABN          79 008 262 093
Address      PO BOX 587 STIRLING SA 5152

Class        ORD                   Number Held  337750             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
Name         EVERETT B SUNDSTROM
Address      7 NORTHMORE STREET DAGLISH WA 6008

Class        ORD                   Number Held  333334             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
Name         MINERAL SECURITIES LIMITED
ACN          091 158 593
ABN          39 091 158 593
Address      PO BOX Z5152 PERTH WA 6845

Class        ORD                   Number Held  333334             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
Name         CARAPACE PTY LTD
ACN          106 980 241
ABN          35 106 980 241
Address      SUITE 2 1233 HIGH STREET ARMADALE VIC 3143

Class        ORD                   Number Held  333334             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
Name         ELINORA INVESTMENTS PTY LTD
ACN          001 303 948
ABN          27 001 303 948
Address      39 CHERRY STREET WARRAWEE NSW 2074

Class        ORD                   Number Held  333334             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
Name         SABLE CORPORATION PTY LTD
ACN          009 073 554
ABN          40 009 073 554
Address      PO BOX 663 WEST PERTH WA 6872

Class        ORD                   Number Held  320000             1F0 057 107
Paid         FULLY                 Beneficial Held   NO
Name         NOBEL INVESTMENTS PTY LTD

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
ACN          069 092 208
ABN          55 069 092 208
Address      LEVEL 1 121 GREENHILL ROAD UNLEY SA 5061

Class        ORD                   Number Held  316667             1F0 057 107
Paid         FULLY                 Beneficial Held   NO
Name         PINEWOOD ASSET PTY LTD
ACN          107 834 515
Address      PO BOX 257 TUART HILL WA 6939

Class        ORD                   Number Held  312500             1F0 057 107
Paid         FULLY                 Beneficial Held  YES
            ** JOINT MEMBER(S) FOLLOW **
Name         BRADLEY EDWARD GUY
Address      8 LONG REEF PLACE HILLARYS WA 6025
            ** JOINT MEMBER(S) FOLLOW **
Name         YVETTE GUY
Address      8 LONG REEF PLACE HILLARYS WA 6025

Class        ORD                   Number Held  300000             1F0 057 107
Paid         FULLY                 Beneficial Held   NO
            ** JOINT MEMBER(S) FOLLOW **
Name         ROBERT ARCHER BLACK
Address      PO BOX 4024 MOSMAN PARK WA 6012
            ** JOINT MEMBER(S) FOLLOW **
Name         ANN CAROLYN BLACK
Address      PO BOX 4024 MOSMAN PARK WA 6012

- ---------------------- PREVIOUS SHARE/INTEREST HOLDERS -----------------------

NOTE: Check documents listed under ASIC Documents Received for recent changes.

Class        ORD                   Number Held  300000             1F0 057 107
Paid         FULLY                 Beneficial Held   NO
Name         ROBERT ARCHER BLACK
Address      PO BOX 4024 MOSMAN PARK WA 6012

Class        ORD                   Number Held  938900             001 894 03K
Paid         FULLY                 Beneficial Held  YES             (AR 2000)
Name         APPLEDORE HOLDINGS PTY. LTD.
ACN          010 137 505
Address      76 DOURO ROAD WELLINGTON POINT QLD 4160

Class        ORD                   Number Held  627900             001 894 03K
Paid         FULLY                 Beneficial Held  YES             (AR 2000)
Name         FIDELITY ADMINISTRATORS PTY. LIMITED
ACN          004 007 390
Address      SUITE 1 'QUAYSIDE' 1 WELLINGTON DRIVE NAMBUCCA HEADS NSW 2448

Class        ORD                   Number Held  234500             001 894 03L
Paid         FULLY                 Beneficial Held   NO             (AR 2001)
Name         FANGO PTY. LTD.
ACN          057 348 946
ABN          67 057 348 946
Address      15 ECLIPSE STREET BRIDGEMAN DOWNS QLD 4035

Class        ORD                   Number Held  1745328            001 894 03L

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
Paid         FULLY                 Beneficial Held  YES             (AR 2001)
Name         IT SECURITIES PTY LIMITED
ACN          084 239 654
ABN          57 084 239 654
Address      PO BOX N332 GROSVENOR PLACE NSW 1220

Class        ORD                   Number Held  664312             001 894 03K
Paid         FULLY                 Beneficial Held  YES             (AR 2000)
Name         WESSEX CAPITAL INVESTMENT LTD
ACN          003 315 151
ABN          34 003 315 151
Address      GPO BOX 3778 SYDNEY NSW 2001

Class        ORD                   Number Held  290508             001 894 03K
Paid         FULLY                 Beneficial Held  YES             (AR 2000)
Name         KOPAI HOLDINGS PTY LTD
ACN          009 094 848
Address      4 QUAY COURT SORRENTO WA 6020

Class        ORD                   Number Held  290508             001 894 03K
Paid         FULLY                 Beneficial Held  YES             (AR 2000)
Name         LOTHBURY LIMITED
Address      23 PEARSON WAY OSBORNE PARK WA 6017

Class        ORD                   Number Held  400000             001 894 03K
Paid         FULLY                 Beneficial Held  YES             (AR 2000)
Name         MAVIS IRENE WRIGHT
Address      16 ORIANA DRIVE MERMAID WATERS QLD 4218

Class        ORD                   Number Held  380000             001 894 03K
Paid         FULLY                 Beneficial Held  YES             (AR 2000)
            ** JOINT MEMBER(S) FOLLOW **
Name         KEITH MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013
            ** JOINT MEMBER(S) FOLLOW **
Name         DAVID MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013
            ** JOINT MEMBER(S) FOLLOW **
Name         NITA MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013

Class        ORD                   Number Held  242900             001 894 03K
Paid         FULLY                 Beneficial Held  YES             (AR 2000)
Name         JEMAYA PTY LTD (THE FEATHERBY FAMILY A/C) C/-HARTL
            -EY POYNTON LIMITED
Address      GPO BOX W2077 PERTH WA 6846

Class        ORD                   Number Held  133000             001 894 03K
Paid         FULLY                 Beneficial Held   NO             (AR 2000)
Name         DARMAL PTY. LIMITED
ACN          008 560 236
ABN          93 008 560 236
Address      C/- D A DIXON GPO BOX 1481 CANBERRA ACT 2601

Class        ORD1                  Number Held  1083000            001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
Name         VICTOR LIU

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 16
001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
Address      2F NO 26-1 LANE 200 KUANG FU SOUTH RD TAIPEI TAIWAN ROC

Class        ORD1                  Number Held  898000             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
Name         CAREY BRIAN MCMAHON
Address      24 GREENHAVEN DRIVE PENNANT HILLS NSW 2120

Class        ORD1                  Number Held  2906000            001 894 03I
Paid         FULLY                 Beneficial Held   NO             (AR 1998)
Name         MACARTHURCOOK LIMITED
ACN          009 110 463
ABN          64 009 110 463
Address      23 PEARSON WAY OSBORNE PARK WA 6017

Class        ORD1                  Number Held  800000             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
            ** JOINT MEMBER(S) FOLLOW **
Name         KEITH MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013
            ** JOINT MEMBER(S) FOLLOW **
Name         NITA MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013

Class        ORD1                  Number Held  638000             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
Name         CHI PING LIU
Address      2F NO 30-1 LANE 200 KUNG - FU SOUTH RD TAIPEI TAIWAN

Class        ORD1                  Number Held  368000             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
Name         HSIAO LIU
Address      2F NO 30-1 LANE 200 KUNG - FU SOUTH RD TAIPEI TAIWAN

Class        ORD1                  Number Held  340000             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
Name         EDWARD SANDERS
Address      25 ROYAL AVENUE BURNSIDE SA 5066

Class        ORD1                  Number Held  184900             001 894 03I
Paid         FULLY                 Beneficial Held   NO             (AR 1998)
Name         E.M. SANDERS NOMINEES PTY. LTD.
ACN          007 803 723
Address      25 ROYAL AVENUE BURNSIDE SA 5066

Class        ORD2                  Number Held  200000             001 894 03I
Paid         PARTIALLY             Beneficial Held  YES             (AR 1998)
Name         CAREY BRIAN MCMAHON
Address      24 GREENHAVEN DRIVE PENNANT HILLS NSW 2120

Class        ORD1                  Number Held  627900             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
Name         FIDELITY ADMINISTRATORS PTY. LIMITED
ACN          004 007 390
Address      SUITE 1 'QUAYSIDE' 1 WELLINGTON DRIVE NAMBUCCA HEADS NSW 2448

Class        ORD1                  Number Held  600000             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)

Name         JOHN BRUCE GIBSON

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 17
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
Address      13 STACEY STREET CRONULLA NSW 2230

Class        ORD1                  Number Held  400000             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
Name         GOLDEN WORDS PTY LTD
ACN          002 167 302
ABN          14 002 167 302
Address      25 ROYAL AVENUE BURNSIDE SA 5066

Class        ORD1                  Number Held  400000             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
Name         MAVIS IRENE WRIGHT
Address      16 ORIANA DRIVE MERMAID WATERS QLD 4218

Class        ORD1                  Number Held  380000             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
            ** JOINT MEMBER(S) FOLLOW **
Name         KEITH MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013
            ** JOINT MEMBER(S) FOLLOW **
Name         DAVID MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013
            ** JOINT MEMBER(S) FOLLOW **
Name         NITA MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013

Class        ORD1                  Number Held  268000             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
Name         CHI CHENG HUANG
Address      26 SEC 2 SA-SEIN RD TA-TU SHIANG TAICHUNG HSEIN TAIWAN

Class        ORD1                  Number Held  240000             001 894 03I
Paid         FULLY                 Beneficial Held   NO             (AR 1998)
Name         RODMIN ESTATES PTY LTD
ACN          000 924 836
ABN          15 000 924 836
Address      C/- ANZAC SECURITIES LTD GPO BOX 3291 SYDNEY NSW 2001

Class        ORD1                  Number Held  234000             001 894 03I
Paid         FULLY                 Beneficial Held   NO             (AR 1998)
Name         DARMAL PTY. LIMITED
ACN          008 560 236
ABN          93 008 560 236
Address      C/- D A DIXON GPO BOX 1481 CANBERRA ACT 2601

Class        ORD1                  Number Held  175000             001 894 03I
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
Name         JOHN WALTER UTZ
Address      22 EDGECLIFFE ESPLANADE SEAFORTH NSW 2092

Class        ORD1                  Number Held  150000             001 894 03I
Paid         FULLY                 Beneficial Held   NO             (AR 1998)
Name         AUSTROM PTY LTD
ACN          000 690 719
ABN          98 000 690 719
Address      UNIT 31 50 AUBIN STREET NEUTRAL BAY NSW 2089

Class        ORD1                  Number Held  150000             001 894 03I

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
Paid         FULLY                 Beneficial Held  YES             (AR 1998)
Name         PETER VLANDIS
Address      4 GLEN AYR AVENUE YOWIE BAY NSW 2228

Class        ORD1                  Number Held  600000             009 996 655
Paid         FULLY                 Beneficial Held  YES             (AR 1995)
Name         CHRISSA MARIA VLANDIS
Address      4 GLEN AYR AVENUE YOWIE BAY NSW 2228

Class        ORD1                  Number Held  531000             009 996 655
Paid         FULLY                 Beneficial Held  YES             (AR 1995)
Name         WINIFRED ELIZABETH TONKIN
Address      20 WOODLANDS AVENUE BLAKEHURST NSW 2221

Class        ORD1                  Number Held  1069000            001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
Name         JOHN BRUCE GIBSON
Address      13 STACEY STREET CRONULLA NSW 2230

Class        ORD1                  Number Held  920000             001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
Name         LIU VICTOR
Address      2F NO 30-1 LANE 200 KUNG - FU SOUTH RD TAIPEI TAIWAN

Class        ORD1                  Number Held  568000             001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
Name         CAREY BRIAN MCMAHON
Address      70 HOLMES STREET TURRAMURRA NSW 2074

Class        ORD1                  Number Held  538000             001 894 03H
Paid         FULLY                 Beneficial Held  YES             (AR 1997)
Name         CHI PING LIU
Address      2F NO 30-1 LANE 200 KUNG - FU SOUTH RD TAIPEI TAIWAN

Class        ORD1                  Number Held  414000             001 894 03H
Paid         FULLY                 Beneficial Held  YES             (AR 1997)
Name         DAVID SANDERS
Address      25 ROYAL AVENUE BURNSIDE SA 5066

Class        ORD1                  Number Held  475300             001 894 03H
Paid         FULLY                 Beneficial Held   NO             (AR 1997)
Name         GOLDEN WORDS PTY LTD
ACN          002 167 302
ABN          14 002 167 302
Address      15 ELAMANG AVENUE KIRRIBILLI NSW 2061

Class        ORD1                  Number Held  1680000            001 894 03H
Paid         FULLY                 Beneficial Held   NO             (AR 1997)
Name         FIDELITY ADMINISTRATORS PTY. LIMITED
ACN          004 007 390
Address      BRIAN TONKIN FAMILY ACCOUNT UNIT 1 1 WELLINGTON DRIVE
            NAMBUCCA HEADS NSW 2448

Class        ORD1                  Number Held  800000             001 894 03H
Paid         FULLY                 Beneficial Held  YES             (AR 1997)
            ** JOINT MEMBER(S) FOLLOW **
Name         KEITH MCKAY

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 19
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
Address      6 SPIERS STREET NORTHGATE QLD 4013
            ** JOINT MEMBER(S) FOLLOW **
Name         NITA MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013

Class        ORD2                  Number Held  300000             001 894 03H
Paid         FULLY                 Beneficial Held  YES             (AR 1997)
Name         CAREY BRIAN MCMAHON
Address      70 HOLMES STREET TURRAMURRA NSW 2074

Class        ORD3                  Number Held  200000             001 894 03H
Paid         FULLY                 Beneficial Held  YES             (AR 1997)
Name         DAVID CHARLES LOVELL
Address      26 LOCHINVAR PARADE CARLINGFORD NSW 2118

Class        ORD3                  Number Held  300000             001 894 03H
Paid         FULLY                 Beneficial Held  YES             (AR 1997)
Name         LES RAPOLTI
Address      UNIT 2 113A NELSON STREET ANNANDALE NSW 2038

Class        ORD3                  Number Held  200000             001 894 03H
Paid         FULLY                 Beneficial Held  YES             (AR 1997)
Name         CAREY BRIAN MCMAHON
Address      70 HOLMES STREET TURRAMURRA NSW 2074

Class        ORD3                  Number Held  200000             001 894 03H
Paid         FULLY                 Beneficial Held  YES             (AR 1997)
Name         GREGORY RUSSELL
Address      211 WOOLOOWARE RD S BURRANEER NSW 2230

Class        ORD1                  Number Held  1680000            001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
            ** JOINT MEMBER(S) FOLLOW **
Name         BRIAN KEITH TONKIN
Address      SUITE 1 'QUAYSIDE' 1 WELLINGTON DRIVE NAMBUCCA HEADS NSW 2448
            ** JOINT MEMBER(S) FOLLOW **
Name         LYNN CHRISTINE TONKIN
Address      SUITE 1 'QUAYSIDE' 1 WELLINGTON DRIVE NAMBUCCA HEADS NSW 2448

Class        ORD1                  Number Held  800000             001 894 03H
Paid         FULLY                 Beneficial Held  YES             (AR 1997)
Name         MCKAY KEITH GORDON & NITA ISABEL ON ACCOUNT WDS MA
            -C SUPER FUND
Address      6 SPIERS STREET NORTHGATE QLD 4013

Class        ORD3                  Number Held  200000             001 894 03H
Paid         FULLY                 Beneficial Held  YES             (AR 1997)
Name         DAVID LOVELL
Address      26 LOCHINVAR PARADE CARLINGFORD NSW 2118

Class        ORD5                  Number Held  1000               001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
Name         CHRIS HAMMING
Address      7 EDWARD STREET MACQUARIE FIELDS NSW 2564

Class        ORD5                  Number Held  3000               001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)

Name         MICHAEL HAMMING

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 20
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
Address      7 EDWARD STREET MACQUARIE FIELDS NSW 2564

Class        ORD5                  Number Held  3000               001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
Name         PETER KENNEDY
Address      4 SCHOOL STREET EAGLEHAWK VIC 3556

Class        ORD5                  Number Held  4500               001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
Name         PETER MEDBURY
Address      5 MCPHERSON PLACE RUSE NSW 2560

Class        ORD5                  Number Held  1500               001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
Name         ALAN THOMSON
Address      UNIT 28 37 WRIGHT STREET HENLEY BEACH SA 5022

Class        ORD5                  Number Held  4500               001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
Name         LUCAS TONKIN
Address      UNIT 8 9 NERANG ROAD CRONULLA NSW 2230

Class        ORD5                  Number Held  1500               001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
Name         DAVID TULIP
Address      12 JONES STREET ENGADINE NSW 2233

Class        ORD5                  Number Held  4500               001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
Name         GORDON URQUHART
Address      8 LOVE STREET CRESTMEAD QLD 4132

Class        ORD5                  Number Held  1500               001 894 03G
Paid         FULLY                 Beneficial Held  YES             (AR 1996)
Name         RAY YATES
Address      30-34 KINGSWAY MUMRYBEN FOREST QLD 4125

Class        ORD4                  Number Held  300000             001 894 03G
Paid         PARTIALLY             Beneficial Held  YES             (AR 1996)
Name         LES RAPOLTI
Address      UNIT 2 113A NELSON STREET ANNANDALE NSW 2038

Class        ORD1                  Number Held  400000             001 894 03E
Paid         FULLY                 Beneficial Held  YES             (AR 1994)
Name         MAVIS IRENE WRIGHT
Address      16 ORIANA DRIVE MERMAID WATERS QLD 4218

Class        ORD1                  Number Held  800000             001 894 03E
Paid         FULLY                 Beneficial Held  YES             (AR 1994)
            ** JOINT MEMBER(S) FOLLOW **
Name         KEITH GORDON MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013
            ** JOINT MEMBER(S) FOLLOW **
Name         NITA ISABEL MCKAY
Address      6 SPIERS STREET NORTHGATE QLD 4013

Class        ORD1                  Number Held  236000             001 894 03E

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 21
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
Paid         FULLY                 Beneficial Held  YES             (AR 1994)
Name         CHI CHENG HUANG
Address      ITY 26 SEC 1 FU SHIN RD TAICHUNG C TAIWAN

Class        ORD1                  Number Held  1130000            009 996 655
Paid         FULLY                 Beneficial Held  YES             (AR 1995)
Name         MCKAY, KEITH,MCKAY, DAVID & MCKAY NITA IN TRUST FO
            -R WDS MAC SUPER FUND
Address      6 SPIERS STREET NORTHGATE QLD 4013

Class        ORD1                  Number Held  318000             001 894 03C
Paid         FULLY                 Beneficial Held  YES             (AR 1992)
Name         HAIAO YEN LIU
Address      YUNG HO CITY TAIPEI TAIWAN

Class        ORD1                  Number Held  174000             001 894 03C
Paid         FULLY                 Beneficial Held  YES             (AR 1992)
Name         CAREY BRIAN MCMAHON
Address      70 HOLMES STREET TURRAMURRA NSW 2074

Class        ORD1                  Number Held  200000             001 894 03C
Paid         FULLY                 Beneficial Held  YES             (AR 1992)
Name         DAVID ANDREW SANDERS
Address      25 ROYAL AVENUE BURNSIDE SA 5066

Class        ORD1                  Number Held  200000             001 894 03C
Paid         FULLY                 Beneficial Held  YES             (AR 1992)
Name         RODMIN ESTATES PTY LTD
ACN          000 924 836
ABN          15 000 924 836
Address      70 PHILLIP STREET SYDNEY NSW 2000

- ----------------------------- REGISTERED CHARGES -----------------------------

NOTES:
* This extract may not contain all charges registered prior to the start of
* the Corporations Law. Please check STATE/TERRITORY records held by the ASIC.
* This extract may not contain provisional charges which lapsed prior to 1991.
* For details of provisional charges deleted after 1991, order the relevant
 DOCIMAGE documents. These details will NOT appear in a Charges Extract.
* For details on the amounts and property relating to charges, or details of
 documents for Satisfactions,Assignments or Changes, print a CHARGES EXTRACT.
* Check documents listed under ASIC Documents Received for recent changes.
- ------------------------------------------------------------------------------

ASIC Charge No          52792
Status                  SATISFIED
Date & Time registered  30/06/1980  00:01
Date Created            23/06/1980
State Charge No         4519
Chargee/trustee         BRIAN KEITH TONKIN
Chargee/trustee         LYNN CHRISTINE TONKIN
Chargee/trustee         GARY JAMES TONKIN
Chargee/trustee         BEVERLEY LENORE TONKIN

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 22
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------

DOCUMENTS relating to this Charge Date Lodged  Processed  Pages    Docimage No
- --------------------------------- -----------  ---------  -----    -----------
C1                                                            1    000 144 130
-C1         NOTICE OF CHARGE
C4                                                            1    000 144 131
-C4         RELEASE / SATISFACTION OF CHARGE
- ------------------------------------------------------------------------------

ASIC Charge No          52877
Status                  SATISFIED
Date & Time registered  22/07/1980  00:01
Date Created            23/06/1980
State Charge No         4520
Chargee/trustee         THE SPEEDY WHEELS SUPERANNUATION FUND
                       050 151 570

DOCUMENTS relating to this Charge Date Lodged  Processed  Pages    Docimage No
- --------------------------------- -----------  ---------  -----    -----------
C1                                                            1    000 144 132
-C1         NOTICE OF CHARGE
C4                                                            2    000 144 134
-C4         RELEASE / SATISFACTION OF CHARGE
- ------------------------------------------------------------------------------

ASIC Charge No          53309
Status                  SATISFIED
Date & Time registered  05/11/1980  00:01
Date Created            31/10/1980
State Charge No         457
Chargee/trustee         1925 ADVANCES LIMITED
                       007 569 066

DOCUMENTS relating to this Charge Date Lodged  Processed  Pages    Docimage No
- --------------------------------- -----------  ---------  -----    -----------
C1                                                            1    000 144 135
-C1         NOTICE OF CHARGE
C4                                                            2    000 144 136
-C4         RELEASE / SATISFACTION OF CHARGE
- ------------------------------------------------------------------------------

ASIC Charge No          53326
Status                  SATISFIED
Date & Time registered  04/01/1982  00:01
Date Created            23/12/1981
State Charge No         10253
Chargee/trustee         THE SPEEDY WHEELS SUPERANNUATION FUND
                       050 151 570

DOCUMENTS relating to this Charge Date Lodged  Processed  Pages    Docimage No
- --------------------------------- -----------  ---------  -----    -----------
C1                                                            1    000 144 137
-C1         NOTICE OF CHARGE
C4                                                            1    000 144 138
-C4         RELEASE / SATISFACTION OF CHARGE
- ------------------------------------------------------------------------------

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 23
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
ASIC Charge No          53352
Status                  SATISFIED
Date & Time registered  05/12/1984  13:58
Fixed/floating          BOTH FIXED & FLOATING
Date Created            23/11/1984
State Charge No         9911
Chargee/trustee         AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
                       005 357 522

DOCUMENTS relating to this Charge Date Lodged  Processed  Pages    Docimage No
- --------------------------------- -----------  ---------  -----    -----------
C1                                                            2    000 144 139
-C1         NOTICE OF CHARGE
C4                                                            1    000 144 140
-C4         RELEASE / SATISFACTION OF CHARGE
- ------------------------------------------------------------------------------

ASIC Charge No          53386
Status                  SATISFIED
Date & Time registered  12/01/1987  15:26
Fixed/floating          BOTH FIXED & FLOATING
Date Created            12/12/1986
State Charge No         21425
Chargee/trustee         AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
                       005 357 522

DOCUMENTS relating to this Charge Date Lodged  Processed  Pages    Docimage No
- --------------------------------- -----------  ---------  -----    -----------
C1                                                            2    000 144 141
-C1         NOTICE OF CHARGE
312                               24/10/1995   13/11/1995     1    009 547 894
-312        NOTIFICATION OF
-312A       DISCHARGE
- ------------------------------------------------------------------------------

ASIC Charge No          391355
Status                  SATISFIED
Date & Time registered  29/06/1993  15:40
Fixed/floating          BOTH FIXED & FLOATING
Date Created            11/06/1993
Chargee/trustee         NATIONAL AUSTRALIA BANK LIMITED
                       004 044 937

DOCUMENTS relating to this Charge Date Lodged  Processed  Pages    Docimage No
- --------------------------------- -----------  ---------  -----    -----------
309                               29/06/1993   30/06/1993    14    004 114 613
-309        NOTIFICATION OF
-309A       DETAILS OF A CHARGE
312                               19/11/1998   25/11/1998     1    014 006 924
-312        NOTIFICATION OF
-312C       RELEASE OF PROPERTY
312                               18/01/1999   18/01/1999     1    014 771 348
-312        NOTIFICATION OF
-312A       DISCHARGE

- -------------------------- ASIC DOCUMENTS RECEIVED ---------------------------

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 24
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
NOTES:
* Documents already listed under Registered Charges are not repeated here.
* Data from Documents with no Date Processed are not included in this Extract.
* Documents with "***" pages have not yet been imaged and are not available
 via DOCIMAGE. Imaging takes approximately 2 weeks from date of lodgement.
* The document list for a current/historical extract will be limited unless
 you requested ALL documents for this extract.

Document List period requested - All documents

Form Type  Date Received  Date Processed  Effective Date  Pages    Docimage No
- ---------  -------------  --------------  --------------  -----    -----------

7053A       13/09/2006      13/09/2006      13/09/2006        6    5E1 570 456
-7053A      Disclosure Notice - Ex Australian Stock Exchange
-02002      ASX Form 604 - Change in a Substantial Shareholder

7053A       08/09/2006      08/09/2006      08/09/2006        8    5E1 568 292
-7053A      Disclosure Notice - Ex Australian Stock Exchange
-06013      ASX - Appendix 3b

7053A       07/09/2006      07/09/2006      07/09/2006        1    5E1 567 325
-7053A      Disclosure Notice - Ex Australian Stock Exchange
-14001      ASX Other

7053A       04/09/2006      04/09/2006      04/09/2006        1    5E1 564 454
-7053A      Disclosure Notice - Ex Australian Stock Exchange
-08003      ASX Results of Meeting

7053A       04/09/2006      04/09/2006      04/09/2006        1    5E1 564 455
-7053A      Disclosure Notice - Ex Australian Stock Exchange
-14001      ASX Other

484         31/08/2006      31/08/2006      31/08/2006        5    1F0 113 883
-484E       Change to Company Details Appointment or Cessation of A
-           Company Officeholder

484         30/08/2006      30/08/2006      30/08/2006        4    1F0 104 056
-484        Change to Company Details
-484B       Change of Registered Address
-484C       Change of Principal Place of Business (Address)
-484E       Appointment or Cessation of a Company Officeholder

7053A       28/08/2006      28/08/2006      28/08/2006        1    5E1 560 552
-7053A      Disclosure Notice - Ex Australian Stock Exchange
-12007      ASX Co. Secretary Appointment/resignation

7053A       28/08/2006      28/08/2006      28/08/2006        2    5E1 560 331
-7053A      Disclosure Notice - Ex Australian Stock Exchange
-02009      ASX Change of Director's Interest Notice

7053A       24/08/2006      24/08/2006      24/08/2006        2    5E1 559 317
-7053A      Disclosure Notice - Ex Australian Stock Exchange
-02009      ASX Change of Director's Interest Notice

7053A       18/08/2006      18/08/2006      18/08/2006       74    5E1 557 140
-7053A      Disclosure Notice - Ex Australian Stock Exchange

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 25
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
-03003      ASX Preliminary - Final Statement
-03002      ASX Top 20 Shareholders
-03011      ASX ASC Annual Audited Accounts
-03012      ASX ASC Annual Audit Review
-03013      ASX ASC Annual Director's Statement
-03020      Full Year Accounts

7053A       04/08/2006      04/08/2006      04/08/2006       21    5E1 552 889
-7053A      Disclosure Notice - Ex Australian Stock Exchange
-08006      ASX Notice of Meeting - Other
-08004      ASX Proxy Form

7053A       04/08/2006      04/08/2006      04/08/2006       12    5E1 552 890
-7053A      Disclosure Notice - Ex Australian Stock Exchange
-08006      ASX Notice of Meeting - Other

7053A       31/07/2006      31/07/2006      31/07/2006        5    5E1 550 807
-7053A      Disclosure Notice - Ex Australian Stock Exchange
-19004      ASX - Commitments Test Entity - Fourth Quarter Report

7053A       20/07/2006      20/07/2006      20/07/2006        4    5E1 547 299
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02001      ASX FORM 603 - BECOMING A SUBSTANTIAL SHAREHOLDER

7053A       14/07/2006      14/07/2006      14/07/2006        2    5E1 545 461
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02009      ASX CHANGE OF DIRECTOR'S INTEREST NOTICE

7053A       13/07/2006      13/07/2006      13/07/2006        2    5E1 545 329
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06001      ASX RENOUNCEABLE ISSUE
-06009      ASX ISSUED CAPITAL - OTHER

7053A       13/07/2006      13/07/2006      13/07/2006        2    5E1 545 331
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02009      ASX CHANGE OF DIRECTOR'S INTEREST NOTICE

7053A       13/07/2006      13/07/2006      13/07/2006        2    5E1 545 332
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02009      ASX CHANGE OF DIRECTOR'S INTEREST NOTICE

7053A       11/07/2006      11/07/2006      11/07/2006        8    5E1 544 563
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06013      ASX - APPENDIX 3B

A104        29/06/2006      20/07/2006      29/06/2006       32    020 174 850
-A104       SUPPLEMENTARY PAGES TO IMAGED DOCUMENT
-           Alters 021 030 731

7053A       16/06/2006      16/06/2006      16/06/2006       32    5E1 534 635
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06010      ASX PROSPECTUS

764B        15/06/2006      16/06/2006      23/06/2006        2    021 030 731
-764BA      PROSPECTUS FOR EQUITIES - UNQUOTED
-           Altered by 020 174 850

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 26
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
7057        15/06/2006      29/06/2006      15/06/2006        1    021 030 732
-7057       DOCUMENT LODGED AS CONDITION OF S1084/S741(1) EXEMPTION
-           - PROSPECTUS

7053A       13/06/2006      13/06/2006      13/06/2006        2    5E1 533 388
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12008      ASX COMPANY ADMINISTRATION - OTHER

7053A       01/06/2006      01/06/2006      01/06/2006        2    5E1 529 706
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS

7053A       01/06/2006      01/06/2006      01/06/2006        2    5E1 529 707
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS

7053A       01/06/2006      01/06/2006      01/06/2006        9    5E1 529 709
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06013      ASX - APPENDIX 3B

7053A       29/05/2006      29/05/2006      29/05/2006        2    5E1 528 713
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02010      ASX INITIAL DIRECTOR'S INT. NOTICE X5& FINAL DIRECTOR'S INT.

7053A       29/05/2006      29/05/2006      29/05/2006        2    5E1 528 718
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02010      ASX INITIAL DIRECTOR'S INT. NOTICE X5& FINAL DIRECTOR'S INT.

7053A       26/05/2006      26/05/2006      26/05/2006        2    5E1 528 355
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06001      ASX RENOUNCEABLE ISSUE
-06003      ASX PLACEMENT
-14011      OVERSEAS LISTING

7053A       26/05/2006      26/05/2006      26/05/2006        1    5E1 528 352
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION

7053A       02/05/2006      02/05/2006      02/05/2006        4    5E1 518 673
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-11002      ASX PROGRESS REPORT - OTHER

7053A       28/04/2006      28/04/2006      28/04/2006        5    5E1 517 377
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-19003      ASX COMMITMENTS TEST ENTITY - THIRD QUARTER REPORT

7053A       27/04/2006      27/04/2006      27/04/2006        2    5E1 516 251
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-11001      ASX PROGRESS REPORT

7053A       04/04/2006      04/04/2006      04/04/2006        2    5E1 507 345
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-11002      ASX PROGRESS REPORT - OTHER

7053A       15/03/2006      15/03/2006      15/03/2006       23    5E1 499 043
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03004      ASX HALF-YEARLY REPORT

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 27
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
-03009      ASX HALF-YEARLY AUDIT REVIEW
-03010      ASX HALF-YEARLY DIRECTOR'S STATEMENT
-03015      ASX ASC HALF-YEARLY AUDITED ACCOUNTS
-03019      HALF YEARLY REPORT AND HALF YEAR ACCOUNTS

7053A       22/02/2006      22/02/2006      22/02/2006        5    5E1 489 172
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-19002      ASX COMMITMENTS TEST ENTITY/APP.4C-SECOND QUARTER REPORT

7053A       22/02/2006      22/02/2006      22/02/2006        1    5E1 488 062
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12008      ASX COMPANY ADMINISTRATION - OTHER

7053A       09/01/2006      09/01/2006      09/01/2006        9    5E1 469 076
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06013      ASX - APPENDIX 3B

7053A       22/11/2005      22/11/2005      22/11/2005        2    5E1 453 381
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

7053A       22/11/2005      22/11/2005      22/11/2005       57    5E1 453 386
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12011      ASX ARTICLES OF ASSOCIATION

7053A       22/11/2005      22/11/2005      22/11/2005        5    5E1 453 247
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-15002      ASX CHAIRMAN'S ADDRESS

7053A       22/11/2005      22/11/2005      22/11/2005        2    5E1 453 240
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-15002      ASX CHAIRMAN'S ADDRESS

7053A       28/10/2005      28/10/2005      28/10/2005        5    5E1 442 978
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-19001      ASX COMMITMENTS TEST ENTITY - FIRST QUARTER REPORT

7053A       26/10/2005      26/10/2005      26/10/2005        8    5E1 441 606
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06013      ASX - APPENDIX 3B

7053A       26/10/2005      26/10/2005      26/10/2005        1    5E1 441 610
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER

7053A       25/10/2005      25/10/2005      25/10/2005        8    5E1 440 677
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08001      ASX NOTICE OF ANNUAL MEETING
-08004      ASX PROXY FORM

7053A       25/10/2005      25/10/2005      25/10/2005       56    5E1 440 685
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03001      ASX ANNUAL REPORT
-03002      ASX TOP 20 SHAREHOLDERS
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS
-03012      ASX ASC ANNUAL AUDIT REVIEW
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 28
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
-03020      FULL YEAR ACCOUNTS

7053A       11/10/2005      11/10/2005      11/10/2005        1    5E1 434 702
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12008      ASX COMPANY ADMINISTRATION - OTHER

7053A       30/09/2005      30/09/2005      30/09/2005       52    5E1 431 350
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03001      ASX ANNUAL REPORT
-03002      ASX TOP 20 SHAREHOLDERS
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS
-03012      ASX ASC ANNUAL AUDIT REVIEW
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT
-03020      FULL YEAR ACCOUNTS

7053A       27/09/2005      27/09/2005      27/09/2005        1    5E1 429 295
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER

7053A       13/09/2005      13/09/2005      13/09/2005       19    5E1 423 517
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03003      ASX PRELIMINARY - FINAL STATEMENT

7053A       26/08/2005      26/08/2005      26/08/2005        1    5E1 416 221
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION

484         25/08/2005      25/08/2005      25/08/2005        3    1F0 038 196
-484E       CHANGE TO COMPANY DETAILS APPOINTMENT OR CESSATION OF A
-           COMPANY OFFICEHOLDER

7053A       19/08/2005      19/08/2005      19/08/2005       16    5E1 413 195
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02010      ASX INITIAL DIRECTOR'S INT. NOTICE X5& FINAL DIRECTOR'S INT.
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS
-02009      ASX CHANGE OF DIRECTOR'S INTEREST NOTICE
-06013      ASX - APPENDIX 3B

7053A       19/08/2005      19/08/2005      19/08/2005        1    5E1 413 194
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION

7053A       02/08/2005      02/08/2005      02/08/2005        3    5E1 406 437
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER

7053A       25/07/2005      25/07/2005      25/07/2005        5    5E1 402 418
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-19004      ASX - COMMITMENTS TEST ENTITY - FOURTH QUARTER REPORT

7053A       25/07/2005      25/07/2005      25/07/2005        2    5E1 402 006
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER

7053A       21/07/2005      21/07/2005      21/07/2005        1    5E1 400 973
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 29
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
2205        27/06/2005      14/07/2005      13/01/2005        5    021 599 133
-2205B      NOTIFICATION OF RESOLUTION RELATING TO SHARES CONVERT SHARES
-           INTO LARGER OR SMALLER NUMBER

484         27/06/2005      14/07/2005      14/07/2005        7    1F0 057 107
-484        CHANGE TO COMPANY DETAILS
-484O       CHANGES TO SHARE STRUCTURE
-484N       CHANGES TO (MEMBERS) SHARE HOLDINGS

7053A       19/05/2005      19/05/2005      19/05/2005        2    5E1 374 032
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

7053A       19/05/2005      19/05/2005      19/05/2005        1    5E1 374 026
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-15002      ASX CHAIRMAN'S ADDRESS

7053A       29/04/2005      29/04/2005      29/04/2005        5    5E1 367 069
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-19003      ASX COMMITMENTS TEST ENTITY - THIRD QUARTER REPORT

7053A       20/04/2005      20/04/2005      20/04/2005       19    5E1 363 071
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08006      ASX NOTICE OF MEETING - OTHER
-08004      ASX PROXY FORM

5059        14/04/2005      15/04/2005      14/04/2005        2    020 167 821
-5059       APPROVAL TO REDUCE PERIOD FOR NOTICE OF MEETING TO APPROVE
-           GIVING FINANCIAL BENEFITS

7053A       12/04/2005      12/04/2005      12/04/2005        2    5E1 359 754
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02009      ASX CHANGE OF DIRECTOR'S INTEREST NOTICE

5057        11/04/2005      11/04/2005      11/04/2005       17    020 167 789
-5057A      MATERIAL INCLUDING PROPOSED NOTICE OF MEETING TO APPROVE
-           GIVING FINANCIAL BENEFITS

7053A       24/03/2005      24/03/2005      24/03/2005        2    5E1 353 643
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02009      ASX CHANGE OF DIRECTOR'S INTEREST NOTICE

7053A       24/03/2005      24/03/2005      24/03/2005        2    5E1 353 443
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-11001      ASX PROGRESS REPORT

7053A       24/03/2005      24/03/2005      24/03/2005        1    5E1 353 444
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-09002      ASX REINSTATEMENT TO OFFICIAL QUOTATION

7053A       24/03/2005      24/03/2005      24/03/2005        1    5E1 353 445
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03014      ASX PERIODIC REPORTS - OTHER

7053A       24/03/2005      24/03/2005      24/03/2005        2    5E1 353 446
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03002      ASX TOP 20 SHAREHOLDERS

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 30
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
7053A       24/03/2005      24/03/2005      24/03/2005        1    5E1 353 399
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-11001      ASX PROGRESS REPORT

7053A       23/03/2005      23/03/2005      23/03/2005        3    5E1 353 330
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-09002      ASX REINSTATEMENT TO OFFICIAL QUOTATION

7053A       23/03/2005      23/03/2005      23/03/2005        1    5E1 353 317
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03014      ASX PERIODIC REPORTS - OTHER

7053A       23/03/2005      23/03/2005      23/03/2005        1    5E1 353 318
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER

7053A       23/03/2005      23/03/2005      23/03/2005       34    5E1 353 321
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12008      ASX COMPANY ADMINISTRATION - OTHER

7053A       04/03/2005      04/03/2005      04/03/2005        1    5E1 345 877
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06010      ASX PROSPECTUS

7053A       01/03/2005      01/03/2005      01/03/2005        1    5E1 344 101
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER
-06010      ASX PROSPECTUS

7053A       28/02/2005      28/02/2005      28/02/2005       16    5E1 343 391
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03004      ASX HALF-YEARLY REPORT
-03009      ASX HALF-YEARLY AUDIT REVIEW
-03010      ASX HALF-YEARLY DIRECTOR'S STATEMENT
-03015      ASX ASC HALF-YEARLY AUDITED ACCOUNTS
-03019      HALF YEARLY REPORT AND HALF YEAR ACCOUNTS

7053A       22/02/2005      22/02/2005      22/02/2005        1    5E1 340 219
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER
-06010      ASX PROSPECTUS

7053A       11/02/2005      11/02/2005      11/02/2005        1    5E1 335 929
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER

7053A       11/02/2005      11/02/2005      11/02/2005        1    5E1 335 856
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06010      ASX PROSPECTUS

7053A       28/01/2005      28/01/2005      28/01/2005        1    5E1 330 003
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER

7053A       13/01/2005      13/01/2005      13/01/2005        1    5E1 324 794
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 31
001 894 033  BRAINYTOYS LIMITED
==============================================================================
                                                                  Docimage No
                                                                  -----------
7053A       07/01/2005      07/01/2005      07/01/2005        2    5E1 322 551
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER

7053A       23/12/2004      23/12/2004      23/12/2004       14    5E1 320 183
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08006      ASX NOTICE OF MEETING - OTHER
-08004      ASX PROXY FORM

7053A       16/12/2004      16/12/2004      16/12/2004        9    5E1 317 072
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06013      ASX - APPENDIX 3B

7053A       16/12/2004      16/12/2004      16/12/2004       46    5E1 316 945
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06010      ASX PROSPECTUS

7057        09/12/2004      10/12/2004      09/12/2004        1    020 174 065
-7057       DOCUMENT LODGED AS CONDITION OF S1084/S741(1) EXEMPTION
-           - PROSPECTUS

764B        09/12/2004      10/12/2004      17/12/2004       48    020 174 064
-764BA      PROSPECTUS FOR EQUITIES - UNQUOTED

7053A       19/11/2004      24/11/2004      19/11/2004        1    5E1 302 547
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12008      ASX COMPANY ADMINISTRATION - OTHER

484         17/11/2004      22/11/2004      22/11/2004        4    020 706 896
-484E       CHANGE TO COMPANY DETAILS APPOINTMENT OR CESSATION OF A
-           COMPANY OFFICEHOLDER

7053A       05/11/2004      05/11/2004      05/11/2004        1    5E1 295 922
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12008      ASX COMPANY ADMINISTRATION - OTHER

484         03/11/2004      03/11/2004      03/11/2004        1    7E0 258 750
-484C       CHANGE TO COMPANY DETAILS CHANGE OF PRINCIPAL PLACE OF
-           BUSINESS (ADDRESS)

205         03/11/2004      05/11/2004      15/10/2004        1    020 689 880
-205A       NOTIFICATION OF RESOLUTION CHANGING COMPANY NAME

7053A       26/10/2004      26/10/2004      26/10/2004        2    5E1 290 175
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS

7053A       26/10/2004      26/10/2004      26/10/2004        2    5E1 290 176
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS

7053A       26/10/2004      26/10/2004      26/10/2004        2    5E1 290 177
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS

7053A       26/10/2004      26/10/2004      26/10/2004        2    5E1 290 178
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 32
001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
-02010      ASX INITIAL DIRECTOR'S INT. NOTICE X5& FINAL DIRECTOR'S INT.

7053A       26/10/2004      26/10/2004      26/10/2004        2    5E1 290 179
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02010      ASX INITIAL DIRECTOR'S INT. NOTICE X5& FINAL DIRECTOR'S INT.

7053A       26/10/2004      26/10/2004      26/10/2004        2    5E1 290 180
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02010      ASX INITIAL DIRECTOR'S INT. NOTICE X5& FINAL DIRECTOR'S INT.

7053A       26/10/2004      26/10/2004      26/10/2004        2    5E1 290 185
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS

484         26/10/2004      26/10/2004      26/10/2004        2    7E0 253 600
-484E       CHANGE TO COMPANY DETAILS APPOINTMENT OR CESSATION OF A
-           COMPANY OFFICEHOLDER

7053A       19/10/2004      19/10/2004      19/10/2004        1    5E1 286 299
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION
-12007      ASX CO. SECRETARY APPOINTMENT/RESIGNATION

7053A       18/10/2004      18/10/2004      18/10/2004        1    5E1 285 433
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

7053A       18/10/2004      18/10/2004      18/10/2004        1    5E1 285 434
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

484         18/10/2004      18/10/2004      18/10/2004        4    7E0 249 083
-484        CHANGE TO COMPANY DETAILS
-484B       CHANGE OF REGISTERED ADDRESS
-484E       APPOINTMENT OR CESSATION OF A COMPANY OFFICEHOLDER

7053A       11/10/2004      11/10/2004      11/10/2004        1    5E1 282 688
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION

484         11/10/2004      11/10/2004      11/10/2004        2    7E0 244 572
-484E       CHANGE TO COMPANY DETAILS APPOINTMENT OR CESSATION OF A
-           COMPANY OFFICEHOLDER

7053A       16/09/2004      16/09/2004      16/09/2004       56    5E1 271 190
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08006      ASX NOTICE OF MEETING - OTHER
-14001      ASX OTHER
-08006      ASX NOTICE OF MEETING - OTHER
-08004      ASX PROXY FORM

7053A       16/09/2004      16/09/2004      16/09/2004        2    5E1 271 196
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08001      ASX NOTICE OF ANNUAL MEETING
-08004      ASX PROXY FORM

7053A       16/09/2004      16/09/2004      16/09/2004        1    5E1 271 171

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 33
001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03014      ASX PERIODIC REPORTS - OTHER

7053A       06/09/2004      06/09/2004      06/09/2004        1    5E1 266 193
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08001      ASX NOTICE OF ANNUAL MEETING

7053A       03/09/2004      03/09/2004      03/09/2004        2    5E1 265 562
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08001      ASX NOTICE OF ANNUAL MEETING
-08004      ASX PROXY FORM

7053A       31/08/2004      31/08/2004      31/08/2004       25    5E1 263 010
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03001      ASX ANNUAL REPORT
-03002      ASX TOP 20 SHAREHOLDERS
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS
-03012      ASX ASC ANNUAL AUDIT REVIEW
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT
-03020      FULL YEAR ACCOUNTS

7053A       30/08/2004      30/08/2004      30/08/2004        9    5E1 262 564
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03003      ASX PRELIMINARY - FINAL STATEMENT

410         17/08/2004      18/08/2004      17/08/2004        2    020 557 535
-410B       APPLICATION FOR RESERVATION OF A NEW NAME UPON CHANGE OF
-           NAME

7053A       14/07/2004      14/07/2004      14/07/2004       28    5E1 239 347
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-07001      ASX ASSET ACQUISITION

7051        25/02/2004      02/03/2004      31/12/2003       13    020 057 606
-7051       HALF YEARLY REPORTS

7053A       24/02/2004      24/02/2004      24/02/2004       12    5E1 170 931
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03004      ASX HALF-YEARLY REPORT
-03010      ASX HALF-YEARLY DIRECTOR'S STATEMENT
-03009      ASX HALF-YEARLY AUDIT REVIEW
-03015      ASX ASC HALF-YEARLY AUDITED ACCOUNTS
-03019      HALF YEARLY REPORT AND HALF YEAR ACCOUNTS

7053A       24/02/2004      24/02/2004      24/02/2004        1    5E1 170 827
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03004      ASX HALF-YEARLY REPORT

484         19/02/2004      19/02/2004      16/02/2004        2    0E9 606 293
-484        CHANGE TO COMPANY DETAILS
-484B       CHANGE OF REGISTERED ADDRESS
-484C       CHANGE OF PRINCIPAL PLACE OF BUSINESS (ADDRESS)

7053A       09/02/2004      09/02/2004      09/02/2004        1    5E1 160 133
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12003      ASX DETAILS OF REGISTERED OFFICE ADDRESS

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 34
001 894 033  BRAINYTOYS LIMITED
==============================================================================
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                                                                  -----------
484         06/02/2004      06/02/2004      06/02/2004        2    7E0 088 084
-484B       CHANGE TO COMPANY DETAILS CHANGE OF REGISTERED ADDRESS

7053A       21/10/2003      21/10/2003      21/10/2003        1    5E1 112 677
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

7053A       17/09/2003      17/09/2003      17/09/2003       25    5E1 095 973
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03001      ASX ANNUAL REPORT
-03002      ASX TOP 20 SHAREHOLDERS
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS
-03012      ASX ASC ANNUAL AUDIT REVIEW
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT
-03020      FULL YEAR ACCOUNTS
-08001      ASX NOTICE OF ANNUAL MEETING
-08004      ASX PROXY FORM

7053A       11/09/2003      11/09/2003      11/09/2003        9    5E1 092 476
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03003      ASX PRELIMINARY - FINAL STATEMENT

7053A       07/05/2003      07/05/2003      07/05/2003        1    5E1 048 294
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION

304         07/05/2003      07/05/2003      13/04/2003        1    0E8 789 850
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

304         07/05/2003      07/05/2003      01/03/2003        1    0E8 789 569
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

7053A       17/03/2003      17/03/2003      17/03/2003        1    5E1 031 763
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02001      ASX FORM 603 - BECOMING A SUBSTANTIAL SHAREHOLDER

7053A       17/03/2003      17/03/2003      17/03/2003        2    5E1 031 765
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02001      ASX FORM 603 - BECOMING A SUBSTANTIAL SHAREHOLDER

7053A       14/03/2003      14/03/2003      14/03/2003        1    5E1 030 240
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03009      ASX HALF-YEARLY AUDIT REVIEW

7053A       14/03/2003      14/03/2003      14/03/2003       24    5E1 030 242
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03004      ASX HALF-YEARLY REPORT
-03010      ASX HALF-YEARLY DIRECTOR'S STATEMENT
-03015      ASX ASC HALF-YEARLY AUDITED ACCOUNTS

7053A       10/03/2003      10/03/2003      10/03/2003        1    5E1 027 740
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION

7053A       10/03/2003      10/03/2003      10/03/2003        2    5E1 027 741

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 35
001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS

7053A       27/02/2003      27/02/2003      27/02/2003        1    5E1 023 533
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-14001      ASX OTHER

316         22/01/2003      23/01/2003      20/01/2003        6    001 894 03M
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY                  (AR 2002)

902         24/12/2002      07/01/2003      31/10/2001        4    018 838 621
-902        SUPPLEMENTARY DOCUMENT
-           Alters 0E6 381 143

7053A       10/12/2002      10/12/2002      10/12/2002       51    5E0 954 187
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12011      ASX ARTICLES OF ASSOCIATION

7053A       28/10/2002      28/10/2002      28/10/2002        1    5E0 919 780
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

7053A       30/09/2002      30/09/2002      30/09/2002       27    5E0 901 712
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03001      ASX ANNUAL REPORT
-03002      ASX TOP 20 SHAREHOLDERS
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS
-03012      ASX ASC ANNUAL AUDIT REVIEW
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT

7053A       30/09/2002      30/09/2002      30/09/2002        2    5E0 901 713
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08001      ASX NOTICE OF ANNUAL MEETING
-08004      ASX PROXY FORM

7053A       30/09/2002      30/09/2002      30/09/2002        2    5E0 901 676
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08001      ASX NOTICE OF ANNUAL MEETING
-08004      ASX PROXY FORM

7053A       12/09/2002      12/09/2002      12/09/2002       20    5E0 890 852
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03003      ASX PRELIMINARY - FINAL STATEMENT

7053A       27/08/2002      27/08/2002      27/08/2002        1    5E0 879 979
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-11001      ASX PROGRESS REPORT

7053A       05/08/2002      05/08/2002      05/08/2002        4    5E0 869 992
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02001      ASX FORM 603 - BECOMING A SUBSTANTIAL SHAREHOLDER
-02003      ASX FORM 605 - CEASING TO BE A SUBSTANTIAL SHAREHOLDER

7053A       04/07/2002      04/07/2002      04/07/2002        1    5E0 855 986
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02009      ASX CHANGE OF DIRECTOR'S INTEREST NOTICE

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 36
001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
7053A       21/06/2002      24/06/2002      21/06/2002        1    5E0 851 207
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02009      ASX CHANGE OF DIRECTOR'S INTEREST NOTICE

7053A       12/04/2002      12/04/2002      12/04/2002       19    5E0 828 058
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03015      ASX ASC HALF-YEARLY AUDITED ACCOUNTS
-03009      ASX HALF-YEARLY AUDIT REVIEW
-03010      ASX HALF-YEARLY DIRECTOR'S STATEMENT

7053A       21/03/2002      21/03/2002      21/03/2002        1    5E0 820 770
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

7053A       18/03/2002      18/03/2002      18/03/2002        1    5E0 819 314
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02009      ASX CHANGE OF DIRECTOR'S INTEREST NOTICE

7053A       15/03/2002      15/03/2002      15/03/2002       19    5E0 818 946
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03004      ASX HALF-YEARLY REPORT

7053A       14/03/2002      14/03/2002      14/03/2002        1    5E0 817 792
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02006      ASX SHAREHOLDER DETAILS - OTHER

304         12/03/2002      22/03/2002      06/03/2002        2    018 004 263
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

7053A       07/03/2002      07/03/2002      07/03/2002        2    5E0 814 520
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS

7053A       05/03/2002      05/03/2002      05/03/2002        1    5E0 813 547
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-11001      ASX PROGRESS REPORT

7053A       05/03/2002      05/03/2002      05/03/2002        1    5E0 813 548
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02010      ASX INITIAL DIRECTOR'S INT. NOTICE X5& FINAL DIRECTOR'S INT.

7053A       26/02/2002      26/02/2002      26/02/2002        2    5E0 810 055
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-11001      ASX PROGRESS REPORT

304         25/02/2002      07/01/2003      12/02/2002        2    017 862 206
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

7053A       14/02/2002      14/02/2002      14/02/2002       24    5E0 805 465
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03001      ASX ANNUAL REPORT
-03002      ASX TOP 20 SHAREHOLDERS
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS
-03012      ASX ASC ANNUAL AUDIT REVIEW

==============================================================================
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001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT

7053A       13/02/2002      13/02/2002      13/02/2002        1    5E0 804 603
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION

7053A       07/02/2002      07/02/2002      07/02/2002        1    5E0 801 009
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03014      ASX PERIODIC REPORTS - OTHER
-08006      ASX NOTICE OF MEETING - OTHER

7053A       31/01/2002      31/01/2002      31/01/2002        1    5E0 786 517
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-14001      ASX OTHER

316         25/01/2002      01/02/2002      25/01/2002        6    001 894 03L
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY                  (AR 2001)

7053A       22/01/2002      22/01/2002      22/01/2002        5    5E0 768 957
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS

7053A       08/01/2002      08/01/2002      08/01/2002        1    5E0 750 628
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-14001      ASX OTHER

7053A       27/12/2001      27/12/2001      27/12/2001        1    5E0 744 793
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08006      ASX NOTICE OF MEETING - OTHER

7053A       18/12/2001      18/12/2001      18/12/2001        1    5E0 738 815
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION
-12003      ASX DETAILS OF REGISTERED OFFICE ADDRESS
-12007      ASX CO. SECRETARY APPOINTMENT/RESIGNATION

203         17/12/2001      21/12/2001      14/12/2001        1    017 594 366
-203        NOTIFICATION OF
-203A       CHANGE OF ADDRESS
-203G       CHANGE OF ADDRESS - PRINCIPAL PLACE OF BUSINESS

304         17/12/2001      18/01/2002      14/12/2001        2    017 594 386
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

7053A       03/12/2001      03/12/2001      03/12/2001        2    5E0 723 979
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03003      ASX PRELIMINARY - FINAL STATEMENT

7053A       30/11/2001      30/11/2001      30/11/2001       18    5E0 722 877
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03003      ASX PRELIMINARY - FINAL STATEMENT

7053A       09/11/2001      09/11/2001      09/11/2001        2    5E0 708 812
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02001      ASX FORM 603 - BECOMING A SUBSTANTIAL SHAREHOLDER

==============================================================================
HISTORICAL COMPANY EXTRACT                       19/09/2006  12:58    PAGE: 38
001 894 033  BRAINYTOYS LIMITED
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                                                                  Docimage No
                                                                  -----------
7053A       05/11/2001      05/11/2001      05/11/2001        3    5E0 705 516
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION
-02001      ASX FORM 603 - BECOMING A SUBSTANTIAL SHAREHOLDER

304         05/11/2001      07/01/2003      31/10/2001        1    0E6 381 143
-304        NOTIFICATION OF
-304A       CHANGE TO OFFICEHOLDERS OF AUSTRALIAN COMPANY
-304E       CHANGE TO ALTERNATE DIRECTOR OF AUSTRALIAN COMPANY
-           Altered by 018 838 621

7053A       02/11/2001      02/11/2001      02/11/2001        2    5E0 704 391
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02001      ASX FORM 603 - BECOMING A SUBSTANTIAL SHAREHOLDER

7053A       12/10/2001      12/10/2001      12/10/2001        2    5E0 688 735
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-16002      ASX LETTER TO SHAREHOLDERS

909         07/09/2001      12/09/2001      01/09/2001        1    017 474 499
-909        NOTICE OF ADDRESS OF BRANCH REGISTER

7053A       05/09/2001      05/09/2001      05/09/2001       23    5E0 665 770
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03004      ASX HALF-YEARLY REPORT
-03015      ASX ASC HALF-YEARLY AUDITED ACCOUNTS
-03009      ASX HALF-YEARLY AUDIT REVIEW
-03010      ASX HALF-YEARLY DIRECTOR'S STATEMENT

7053A       23/08/2001      23/08/2001      23/08/2001        2    5E0 658 814
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-09001      ASX SUSPENSION FROM OFFICIAL QUOTATION

304         21/08/2001      21/08/2001      20/08/2001        1    0E6 089 981
-304C       NOTIFICATION OF CHANGE OF NAME OR ADDRESS OF OFFICEHOLDER

902         06/07/2001      10/07/2001      06/02/2001        2    017 306 762
-902        SUPPLEMENTARY DOCUMENT
-           Alters 016 971 853

7053A       03/07/2001      03/07/2001      03/07/2001        3    5E0 637 775
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-16002      ASX LETTER TO SHAREHOLDERS
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION

304         03/07/2001      03/07/2001      20/06/2001        1    0E5 944 424
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

304         03/07/2001      03/07/2001      20/06/2001        1    0E5 944 395
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

7053A       01/06/2001      01/06/2001      01/06/2001        1    5E0 626 099
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12008      ASX COMPANY ADMINISTRATION - OTHER
-12003      ASX DETAILS OF REGISTERED OFFICE ADDRESS

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001 894 033  BRAINYTOYS LIMITED
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                                                                  Docimage No
                                                                  -----------
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION
-12007      ASX CO. SECRETARY APPOINTMENT/RESIGNATION

304         03/05/2001      03/05/2001      01/05/2001        1    0E5 834 625
-304C       NOTIFICATION OF CHANGE OF NAME OR ADDRESS OF OFFICEHOLDER

7053A       03/04/2001      03/04/2001      03/04/2001        2    5E0 607 263
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-16002      ASX LETTER TO SHAREHOLDERS

7106        26/03/2001      27/03/2001      26/03/2001        1    014 838 294
-7106        ORDER THAT NO SECURITIES BE OFFERED, ISSUED, SOLD OR
-           TRANSFERRED
-           Alters 014 845 728

7105        12/03/2001      13/03/2001      12/03/2001        1    014 838 134
-7105       INTERIM ORDER THAT NO SECURITIES BE OFFERED, ISSUED, SOLD
-           ORTRANSFERRED
-           Alters 014 845 728

7053A       27/02/2001      27/02/2001      27/02/2001        1    5E0 591 169
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06010      ASX PROSPECTUS

207         22/02/2001      05/03/2001      06/02/2001        5    016 971 853
-207        NOTIFICATION OF SHARE ISSUE
-           Altered by 017 306 762

7105        21/02/2001      22/02/2001      21/02/2001        1    014 846 000
-7105       INTERIM ORDER THAT NO SECURITIES BE OFFERED, ISSUED, SOLD
-           ORTRANSFERRED
-           Alters 014 845 728

7053A       15/02/2001      15/02/2001      15/02/2001       85    5E0 586 029
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06010      ASX PROSPECTUS

7053A       14/02/2001      14/02/2001      14/02/2001        7    5E0 585 345
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06013      ASX - APPENDIX 3B

7053A       14/02/2001      14/02/2001      14/02/2001        7    5E0 585 346
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06013      ASX - APPENDIX 3B

7053A       14/02/2001      14/02/2001      14/02/2001        7    5E0 585 348
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06013      ASX - APPENDIX 3B

304         31/01/2001      05/02/2001      18/01/2001        2    016 830 707
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

316         30/01/2001      01/03/2001      30/01/2001        5    001 894 03K
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY                  (AR 2000)

7057        29/01/2001      30/01/2001      29/01/2001        1    014 845 727

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001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
-7057       DOCUMENT LODGED AS CONDITION OF S1084/S741(1) EXEMPTION
-           - PROSPECTUS

764B        29/01/2001      30/01/2001      29/01/2001       82    014 845 728
-764BB      PROSPECTUS FOR EQUITIES - QUOTED
-           Altered by 014 846 000
-           Altered by 014 838 134
-           Altered by 014 838 294

218         24/01/2001      02/02/2001      24/01/2001       51    016 889 256
-218        CONSTITUTION OF COMPANY

205         24/01/2001      02/02/2001      18/01/2001        1    016 889 255
-205J       NOTIFICATION OF RESOLUTION ALTERING THE CONSTITUTION

205         24/01/2001      02/02/2001      18/01/2001        2    016 889 254
-205R       NOTIFICATION OF RESOLUTION (GENERAL)

203         24/01/2001      31/01/2001      18/01/2001        1    017 109 273
-203        NOTIFICATION OF
-203A       CHANGE OF ADDRESS
-203G       CHANGE OF ADDRESS - PRINCIPAL PLACE OF BUSINESS

304         24/01/2001      31/01/2001      18/01/2001        2    017 109 272
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

7053A       19/01/2001      19/01/2001      19/01/2001        2    5E0 532 169
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

7053A       02/01/2001      02/01/2001      02/01/2001        3    5E0 528 304
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS

7053A       29/12/2000      29/12/2000      29/12/2000        3    5E0 528 162
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 205G NOTICE - DIRECTOR'S INTERESTS

7053A       18/12/2000      18/12/2000      18/12/2000       83    5E0 526 298
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08006      ASX NOTICE OF MEETING - OTHER
-08004      ASX PROXY FORM

7053A       12/12/2000      12/12/2000      12/12/2000        2    5E0 524 963
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08001      ASX NOTICE OF ANNUAL MEETING

7053A       08/12/2000      08/12/2000      08/12/2000        1    5E0 524 450
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

7053A       29/09/2000      29/09/2000      29/09/2000       26    5E0 507 374
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03001      ASX ANNUAL REPORT
-03002      ASX TOP 20 SHAREHOLDERS
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS

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001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
-03012      ASX ASC ANNUAL AUDIT REVIEW
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT

7053A       21/09/2000      21/09/2000      21/09/2000        2    5E0 505 930
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-07001      ASX ASSET ACQUISITION

7053A       12/09/2000      12/09/2000      12/09/2000       19    5E0 503 652
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03003      ASX PRELIMINARY - FINAL STATEMENT

7053A       21/03/2000      22/03/2000      21/03/2000       24    5E0 475 220
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03004      ASX HALF-YEARLY REPORT
-03015      ASX ASC HALF-YEARLY AUDITED ACCOUNTS
-03009      ASX HALF-YEARLY AUDIT REVIEW
-03010      ASX HALF-YEARLY DIRECTOR'S STATEMENT

902         04/02/2000      24/01/2001      21/04/1999        1    015 406 863
-902        SUPPLEMENTARY DOCUMENT
-           Alters 015 449 527

316         27/01/2000      01/02/2000      20/01/2000        7    001 894 03J
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY                  (AR 1999)

7053A       26/10/1999      26/10/1999      26/10/1999       32    5E0 441 283
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03001      ASX ANNUAL REPORT
-03002      ASX TOP 20 SHAREHOLDERS
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS
-03012      ASX ASC ANNUAL AUDIT REVIEW
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT

7053A       26/10/1999      26/10/1999      26/10/1999        2    5E0 441 277
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08001      ASX NOTICE OF ANNUAL MEETING
-08004      ASX PROXY FORM

7053A       25/10/1999      25/10/1999      25/10/1999        5    5E0 440 767
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08002      ASX NOTICE OF EXTRAORDINARY MEETING
-08003      ASX RESULTS OF MEETING

7053A       05/10/1999      05/10/1999      05/10/1999        2    5E0 436 547
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-09010      ASX STOCK EXCHANGE ANNOUNCEMENT - OTHER

7053A       30/09/1999      30/09/1999      30/09/1999       30    5E0 435 722
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS
-03012      ASX ASC ANNUAL AUDIT REVIEW
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT

7053A       13/09/1999      13/09/1999      13/09/1999       17    5E0 430 900
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03003      ASX PRELIMINARY - FINAL STATEMENT

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                                                                  -----------
205         03/09/1999      23/01/2001      23/08/1999        6    015 477 372
-205A       NOTIFICATION OF RESOLUTION CHANGING COMPANY NAME

284         01/07/1999      01/07/1999      03/06/1999        1    015 415 407
-284C       NOTIFICATION OF SHARE CANCELLATION SHARES A COMPANY HAS
-           BOUGHT BACK

410         15/06/1999      15/06/1999      15/06/1999        1    015 460 961
-410B       APPLICATION FOR RESERVATION OF A NEW NAME UPON CHANGE OF
-           NAME

203         10/05/1999      20/05/1999      05/05/1999        1    015 059 850
-203        NOTIFICATION OF
-203A       CHANGE OF ADDRESS
-203G       CHANGE OF ADDRESS - PRINCIPAL PLACE OF BUSINESS

7053A       10/05/1999      10/05/1999      10/05/1999        1    5E0 410 219
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12003      ASX DETAILS OF REGISTERED OFFICE ADDRESS

205         30/04/1999      23/01/2001      21/04/1999        1    015 449 527
-205R       NOTIFICATION OF RESOLUTION (GENERAL)
-           Altered by 015 406 863

7053A       21/04/1999      21/04/1999      21/04/1999        2    5E0 407 160
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

7053A       07/04/1999      07/04/1999      07/04/1999        1    5E0 405 033
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-14001      ASX OTHER

7053A       07/04/1999      07/04/1999      07/04/1999        2    5E0 404 974
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-09010      ASX STOCK EXCHANGE ANNOUNCEMENT - OTHER

280         26/03/1999      26/03/1999      26/03/1999       54    012 083 647
-280        NOTICE OF MEETING AND DOCUMENTS RE BUY-BACK

7053A       19/03/1999      19/03/1999      19/03/1999       53    5E0 401 570
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08002      ASX NOTICE OF EXTRAORDINARY MEETING
-08004      ASX PROXY FORM

5057        05/03/1999      10/03/1999      05/03/1999       56    004 497 850
-5057A      MATERIAL INCLUDING PROPOSED NOTICE OF MEETING TO APPROVE
-           GIVING FINANCIAL BENEFITS

7053A       05/03/1999      05/03/1999      05/03/1999       27    5E0 398 757
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03004      ASX HALF-YEARLY REPORT
-03015      ASX ASC HALF-YEARLY AUDITED ACCOUNTS
-03009      ASX HALF-YEARLY AUDIT REVIEW
-03010      ASX HALF-YEARLY DIRECTOR'S STATEMENT

7053A       23/02/1999      23/02/1999      23/02/1999        1    5E0 396 814
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE

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001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
-12003      ASX DETAILS OF REGISTERED OFFICE ADDRESS

280         22/12/1998      22/12/1998      22/12/1998       16    014 653 215
-280        NOTICE OF MEETING AND DOCUMENTS RE BUY-BACK

7053A       22/12/1998      22/12/1998      22/12/1998       19    5E0 377 362
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-09001      ASX SUSPENSION FROM OFFICIAL QUOTATION

304         07/12/1998      11/12/1998      24/11/1998        2    015 050 039
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

7053A       04/12/1998      04/12/1998      04/12/1998        1    5E0 371 226
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

7053A       26/11/1998      26/11/1998      26/11/1998        2    5E0 368 683
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-16001      ASX LETTER TO SHAREHOLDERS - OTHER
-12008      ASX COMPANY ADMINISTRATION - OTHER

304         16/11/1998      06/01/1999      09/11/1998        2    015 009 519
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

304         16/11/1998      06/01/1999      09/11/1998        2    015 050 040
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

7053A       10/11/1998      10/11/1998      10/11/1998        1    5E0 364 337
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-11001      ASX PROGRESS REPORT

316         30/10/1998      05/11/1998      27/10/1998        6    001 894 03I
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY                  (AR 1998)

7053A       29/10/1998      29/10/1998      29/10/1998        4    5E0 360 615
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08001      ASX NOTICE OF ANNUAL MEETING
-08004      ASX PROXY FORM

7053A       29/10/1998      29/10/1998      29/10/1998       34    5E0 360 612
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03001      ASX ANNUAL REPORT
-03002      ASX TOP 20 SHAREHOLDERS
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS
-03012      ASX ASC ANNUAL AUDIT REVIEW
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT

304         09/10/1998      20/10/1998      02/10/1998        2    014 415 403
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

7053A       06/10/1998      06/10/1998      06/10/1998        1    5E0 353 490
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION

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001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
7052        28/09/1998      02/10/1998      30/06/1998       30    013 641 372
-7052A      YEARLY ACCOUNTS REGISTERED AUSTRALIAN COMPANY

7053A       11/09/1998      11/09/1998      11/09/1998       18    5E0 347 836
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03003      ASX PRELIMINARY - FINAL STATEMENT

304         31/08/1998      02/09/1998      24/08/1998        2    011 248 613
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

7053A       31/08/1998      31/08/1998      31/08/1998        2    5E0 343 731
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 235 NOTICE - DIRECTOR'S INTERESTS

7053A       26/08/1998      26/08/1998      26/08/1998        1    5E0 342 613
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION

7053A       17/08/1998      17/08/1998      17/08/1998        1    5E0 339 902
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-07002      ASX ASSET DISPOSAL

304         05/08/1998      06/08/1998      29/07/1998        2    014 612 349
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

7053A       31/07/1998      31/07/1998      31/07/1998        1    5E0 336 673
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-12008      ASX COMPANY ADMINISTRATION - OTHER

7053A       16/07/1998      16/07/1998      16/07/1998        2    5E0 333 148
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 235 NOTICE - DIRECTOR'S INTERESTS

7053A       02/07/1998      03/07/1998      02/07/1998        4    5E0 330 352
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02001      ASX FORM 603 - BECOMING A SUBSTANTIAL SHAREHOLDER

7053A       30/06/1998      30/06/1998      30/06/1998        3    5E0 328 708
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-14001      ASX OTHER

7053A       12/06/1998      12/06/1998      12/06/1998        2    5E0 324 502
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-07002      ASX ASSET DISPOSAL
-03014      ASX PERIODIC REPORTS - OTHER
-14001      ASX OTHER

304         01/05/1998      13/05/1998      14/04/1998        2    014 209 105
-304C       NOTIFICATION OF CHANGE OF NAME OR ADDRESS OF OFFICEHOLDER

7053A       26/03/1998      26/03/1998      26/03/1998        2    5E0 311 408
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-16002      ASX LETTER TO SHAREHOLDERS

7053A       19/03/1998      19/03/1998      19/03/1998        1    5E0 310 190

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001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-06009      ASX ISSUED CAPITAL - OTHER

7053A       16/03/1998      16/03/1998      16/03/1998       24    5E0 309 304
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03004      ASX HALF-YEARLY REPORT
-03009      ASX HALF-YEARLY AUDIT REVIEW
-03010      ASX HALF-YEARLY DIRECTOR'S STATEMENT
-03015      ASX ASC HALF-YEARLY AUDITED ACCOUNTS

7053A       02/02/1998      02/02/1998      02/02/1998        2    5E0 297 462
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-02007      ASX SECTION 235 NOTICE - DIRECTOR'S INTERESTS

7053A       22/01/1998      22/01/1998      22/01/1998        1    5E0 286 040
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-08003      ASX RESULTS OF MEETING

304         02/12/1997      05/12/1997      25/11/1997        2    013 864 320
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

316         02/12/1997      05/01/1998      26/11/1997        6    001 894 03H
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY                  (AR 1997)

7053A       03/11/1997      03/11/1997      03/11/1997       43    5E0 253 788
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03001      ASX ANNUAL REPORT
-03002      ASX TOP 20 SHAREHOLDERS
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS
-03012      ASX ASC ANNUAL AUDIT REVIEW
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT
-08001      ASX NOTICE OF ANNUAL MEETING
-08004      ASX PROXY FORM

7053A       26/09/1997      26/09/1997      26/09/1997       32    5E0 239 239
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS
-03012      ASX ASC ANNUAL AUDIT REVIEW
-03013      ASX ASC ANNUAL DIRECTOR'S STATEMENT
-03002      ASX TOP 20 SHAREHOLDERS

7053A       19/09/1997      19/09/1997      19/09/1997        3    5E0 236 491
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03003      ASX PRELIMINARY - FINAL STATEMENT

7053A       12/09/1997      12/09/1997      12/09/1997       18    5E0 234 356
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03003      ASX PRELIMINARY - FINAL STATEMENT

7053A       30/06/1997      30/06/1997      30/06/1997        1    5E0 200 960
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-01009      ASX TAKEOVER OTHER

7053A       25/02/1997      25/02/1997      25/02/1997       24    5E0 173 215
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-03004      ASX HALF-YEARLY REPORT

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001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
-03015      ASX ASC HALF-YEARLY AUDITED ACCOUNTS
-03009      ASX HALF-YEARLY AUDIT REVIEW
-03010      ASX HALF-YEARLY DIRECTOR'S STATEMENT

7053A       19/12/1996      19/12/1996      19/12/1996        4    5E0 116 297
-7053A      DISCLOSURE NOTICE - EX AUSTRALIAN STOCK EXCHANGE
-16001      ASX LETTER TO SHAREHOLDERS - OTHER

316         03/12/1996      05/12/1996      27/11/1996        5    001 894 03G
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY                  (AR 1996)

205         03/12/1996      23/12/1996      25/11/1996        1    011 232 068
-205R       NOTIFICATION OF RESOLUTION (GENERAL)

03011       06/11/1996      12/11/1996      06/11/1996       37    0S0 093 030
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS

03005       04/11/1996      08/11/1996      04/11/1996        2    0S0 096 236
-03005      ASX ANNUAL REPORT - CONFIRMATION OF DESPATCH

14001       01/11/1996      04/11/1996      31/10/1996        3    0S0 097 632
-14001      ASX OTHER

09007       31/10/1996      01/11/1996      31/10/1996        3    0S0 099 840
-09007      ASX TRADING HALT

03011       30/09/1996      30/09/1996      27/09/1996       33    0S0 082 896
-03011      ASX ASC ANNUAL AUDITED ACCOUNTS

17003       18/09/1996      18/09/1996      17/09/1996        3    0S0 085 393
-17003      ASX RESPONSE TO ASX QUERY

03014       10/09/1996      11/09/1996      10/09/1996       19    0S0 087 883
-03014      ASX PERIODIC REPORTS - OTHER

03003       06/09/1996      06/09/1996      05/09/1996       19    0S0 087 780
-03003      ASX PRELIMINARY - FINAL STATEMENT

14001       19/08/1996      20/08/1996      16/08/1996        3    0S0 088 171
-14001      ASX OTHER

02007       12/07/1996      12/07/1996      12/07/1996        5    0S0 064 926
-02007      ASX SECTION 235 NOTICE - DIRECTOR'S INTERESTS

02007       27/06/1996      28/06/1996      27/06/1996        3    0S0 068 735
-02007      ASX SECTION 235 NOTICE - DIRECTOR'S INTERESTS

304         30/04/1996      06/05/1996      22/04/1996        2    010 911 718
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

304         09/04/1996      15/04/1996      26/03/1996        2    010 797 764
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

02007       01/04/1996      01/04/1996      01/04/1996        3    0S0 063 828
-02007      ASX SECTION 235 NOTICE - DIRECTOR'S INTERESTS

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                                                                  -----------
12001       21/03/1996      22/03/1996      20/03/1996        3    0S0 061 908
-12001      ASX DIRECTOR APPOINTMENT/RESIGNATION

7051        12/03/1996      13/03/1996      31/12/1995       11    010 915 847
-7051       HALF YEARLY ACCOUNTS

7053        27/02/1996      28/02/1996      27/02/1996       13    0S0 046 601
-7053       DISCLOSURE NOTICE

7053        25/01/1996      29/01/1996      25/01/1996        2    0S0 041 572
-7053       DISCLOSURE NOTICE

7053        22/12/1995      28/12/1995      22/12/1995        9    0S0 047 313
-7053       DISCLOSURE NOTICE

205         04/12/1995      08/12/1995      27/11/1995        1    010 646 354
-205R       NOTIFICATION OF RESOLUTION (GENERAL)

7053        30/11/1995      01/12/1995      30/11/1995        3    0S0 058 819
-7053       DISCLOSURE NOTICE

7053        07/11/1995      08/11/1995      07/11/1995        8    0S0 053 827
-7053       DISCLOSURE NOTICE

316         28/09/1995      29/09/1995      28/09/1995       44    009 996 655
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY                  (AR 1995)

7053        22/09/1995      25/09/1995      22/09/1995       38    0S0 035 637
-7053       DISCLOSURE NOTICE

7053        21/09/1995      22/09/1995      21/09/1995       38    0S0 035 420
-7053       DISCLOSURE NOTICE

7053        30/08/1995      31/08/1995      30/08/1995        3    0S0 034 351
-7053       DISCLOSURE NOTICE

7053        30/08/1995      31/08/1995      30/08/1995        3    0S0 034 361
-7053       DISCLOSURE NOTICE

7053        30/08/1995      30/08/1995      30/08/1995       14    0S0 034 322
-7053       DISCLOSURE NOTICE

991         01/08/1995      01/08/1995      01/08/1995        1    009 804 862
-991        NOTIFICATION OF LOCATION OF BOOKS STORED ON COMPUTER

7053        25/07/1995      25/07/1995      25/07/1995        1    0S0 031 382
-7053       DISCLOSURE NOTICE

7053        01/06/1995      02/06/1995      01/06/1995        1    0S0 029 939
-7053       DISCLOSURE NOTICE

7053        19/05/1995      22/05/1995      19/05/1995        1    0S0 029 619
-7053       DISCLOSURE NOTICE

7053        28/03/1995      28/03/1995      28/03/1995        1    0S0 027 986
-7053       DISCLOSURE NOTICE

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001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
205         27/03/1995      30/03/1995      13/03/1995        7    008 699 363
-205K       NOTIFICATION OF RESOLUTION ALTERING THE ARTICLES

7051        20/03/1995      21/03/1995      31/12/1994       10    008 958 858
-7051       HALF YEARLY ACCOUNTS

7053        16/03/1995      17/03/1995      16/03/1995        1    0S0 027 585
-7053       DISCLOSURE NOTICE

7053        14/03/1995      15/03/1995      31/12/1994       10    0S0 027 391
-7053       DISCLOSURE NOTICE

7053        07/03/1995      08/03/1995      07/03/1995        1    0S0 027 120
-7053       DISCLOSURE NOTICE

7053        06/03/1995      06/03/1995      03/03/1995        3    0S0 027 025
-7053       DISCLOSURE NOTICE

7053        27/02/1995      27/02/1995      24/02/1995        9    0S0 026 726
-7053       DISCLOSURE NOTICE

7053        03/01/1995      03/01/1995      31/12/1994        1    0S0 024 298
-7053       DISCLOSURE NOTICE

304         03/01/1995      20/01/1995      31/12/1994        2    008 969 083
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

909         14/12/1994      24/01/1995      05/12/1994        1    005 811 991
-909        NOTICE OF ADDRESS OF BRANCH REGISTER

316         28/10/1994      10/01/1995      24/10/1994       62    001 894 03E
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY                  (AR 1994)

7053        27/10/1994      27/10/1994      22/09/1994        1    0S0 022 003
-7053       DISCLOSURE NOTICE

7053        24/10/1994      24/10/1994      24/10/1994        1    0S0 021 858
-7053       DISCLOSURE NOTICE

7053        07/10/1994      10/10/1994      30/06/1994       38    0S0 021 290
-7053       DISCLOSURE NOTICE

7053        07/10/1994      10/10/1994      07/10/1994        1    0S0 021 291
-7053       DISCLOSURE NOTICE

7053        27/09/1994      27/09/1994      30/06/1994        1    0S0 020 895
-7053       DISCLOSURE NOTICE

7053        14/09/1994      14/09/1994      30/06/1994       11    0S0 020 491
-7053       DISCLOSURE NOTICE

7020        12/05/1994      12/05/1994      12/05/1994        1    004 345 587
-7020       INSTRUMENT OF EXEMPTION UNDER SUB-SECTION 1084(2) (OFFERING
-           SECURITIES FOR SUBSCRIPTION OR PURCHASE)

7018        12/05/1994      12/05/1994      12/05/1994        2    004 345 585

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001 894 033  BRAINYTOYS LIMITED
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                                                                  -----------
-7018       DECLARATION UNDER SUB-SECTION 1084(6) CORP LAW (OFFERING
-           SECURITIES FOR SUBSCRIPTION OR PURCHASE)

7020        12/05/1994      12/05/1994      12/05/1994        1    004 345 584
-7020       INSTRUMENT OF EXEMPTION UNDER SUB-SECTION 1084(2) (OFFERING
-           SECURITIES FOR SUBSCRIPTION OR PURCHASE)

7018        12/05/1994      12/05/1994      12/05/1994        1    004 345 586
-7018       DECLARATION UNDER SUB-SECTION 1084(6) CORP LAW (OFFERING
-           SECURITIES FOR SUBSCRIPTION OR PURCHASE)

766         11/05/1994      12/05/1994      11/05/1994       12    004 345 575
-766        SUPPLEMENTARY PROSPECTUS - NON-MANAGED INVESTMENT SCHEME(S)

764         03/05/1994      13/05/1994      03/05/1994       49    004 351 036
-764A       COPY OF NON-REGISTERABLE PROSPECTUS

316         28/01/1994      08/02/1994      22/11/1993       45    001 894 03D
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY                  (AR 1993)

316         30/12/1992      08/02/1994      23/11/1992       36    001 894 03C
-316        ANNUAL RETURN                                          (AR 1992)
-316Q       RESIGNATION OR REMOVAL OF AUDITOR
-316C       CHANGE TO OFFICEHOLDERS
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY

304         06/08/1992      11/08/1992      30/06/1992        4    002 509 162
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

203         20/07/1992      22/07/1992      06/07/1992        1    002 598 793
-203        NOTIFICATION OF
-203A       CHANGE OF ADDRESS
-203B       CHANGE OF OFFICE HOURS

207         11/12/1991      02/01/1992      18/11/1991        3    001 952 965
-207B       NOTIFICATION OF ALLOTMENT OF SHARES REGARDING SUBSEQUENT
-           ALLOTMENT

207         03/12/1991      04/12/1991      02/07/1991        3    001 953 866
-207B       NOTIFICATION OF ALLOTMENT OF SHARES REGARDING SUBSEQUENT
-           ALLOTMENT

316         29/11/1991      14/02/1992      29/11/1991       54    001 894 03B
-316        ANNUAL RETURN                                          (AR 1991)
-316E       CORRECTIONS
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY

909         23/10/1991      24/10/1991      16/09/1991        1    002 025 398
-909        NOTICE OF ADDRESS OF BRANCH REGISTER

304         02/08/1991      04/09/1991      17/07/1991        4    001 039 745
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

304         02/05/1991      03/05/1991      16/04/1991        8    001 190 178
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN

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-           COMPANY

304         01/01/1991      07/02/1991      19/11/1990        1    000 680 209
-304A       NOTIFICATION OF CHANGE TO OFFICEHOLDERS OF AUSTRALIAN
-           COMPANY

316         01/01/1991      10/05/1991      01/01/1991       33    000 353 829
-316        ANNUAL RETURN                                          (AR 1990)
-316H       ANNUAL RETURN - LISTED PUBLIC COMPANY
-316F       CHANGE OF CLASS OR SUBCLASS
-316E       CORRECTIONS

- ----------------------------- PRE-ASIC DOCUMENTS -----------------------------

Origin  Date Received  Form Type  Status
- ------  -------------  ---------  ------

NOTE: Historical company documents (pre 1991) are held by the ASIC as Paper
 or microfiche records and are not available electronically via DOCIMAGE.
NSW     07/11/1989      61A        RCVD
NSW     28/12/1989      66         RCVD
NSW     21/02/1990      61A        RCVD
NSW     20/03/1990      61A        RCVD
NSW     17/05/1990      61A        RCVD
NSW     02/11/1990      61A        RCVD
NSW     31/12/1990      M'FICHE

                            *** END OF REPORT ***

PRINTED BY LAWPOINT ON 19 SEP 2006 AT 12:58pm FOR ML    REF 1856-2

EX-1

CORPORATIONS ACT 2001

CONSTITUTION

of

BRAINYTOYS LIMITED

ABN 28 001 894 033

Adopted by Special Resolution

CONTENTS

1.	INTERPRETATION		1
	1.1	Definitions	1
	1.2	Corporations Act Definitions	2
	1.3	Status of Constitution	2
	1.4	Headings	2
	1.5	Displacement of Replaceable Rules	2
2.	SHARE CAPITAL AND VARIATION OF RIGHTS		3
	2.1	Rights Attaching to Shares	3
	2.2	Issue of Shares	3
	2.3	Share Options	3
	2.4	Classes of Shares	3
	2.5	Preference Shares	3
	2.6	Recognition of Trusts	4
	2.7	Unregistered Interests	4
	2.8	Share Certificates and Share Option Certificates	4
	2.9	Section 1071H of the Corporations Act	4
	2.10	Commissions	5
	2.11	Restricted Securities	5
	2.12	Non-Issue or Cancellation of Certificate	5
	2.13	No Prohibition on Foreign Ownership	5
	2.14	Payment of Interest out of Capital	5
3.	MINIMUM SHAREHOLDING		5
	3.1	Effect of this Clause	5
	3.2	Definitions	6
	3.3	Minimum Shareholding	6
	3.4	Sale of Listed Securities of Minority Member	6
	3.5	Acceptance of Offer	7
	3.6	Appointment of Attorney	7
	3.7	Transfer	7
	3.8	Proceeds of Sale	7
	3.9	Receipt of Proceeds	7
	3.10	Registration of Purchaser	7
	3.11	Remedies Limited	8
	3.12	Cost of Sale of Listed Securities	8
	3.13	Exemption from Clause 3	8
	3.14	Notice to Exempt	8
	3.15	Election to Exempt	8
	3.16	Takeover Offer or Announcement	8
	3.17	Use by Company of Clause 3	9
4.	UNCERTIFICATED HOLDINGS AND ELECTRONIC TRANSFERS		9
	4.1	Electronic or Computerised Holding	9
	4.2	Statement of Holdings	9

	4.3	Share Certificates	9
	4.4	Listing Rules	9
5.	LIEN		9
	5.1	Lien for Members Debts	9
	5.2	Generally	9
	5.3	Exemption	10
	5.4	Dividends	10
	5.5	Sale of Shares	11
	5.6	Restrictions on Sale	11
	5.7	Person Authorised to Sign Transfers	11
	5.8	Proceeds of Sale	11
	5.9	Protection of Lien under ASTC Settlement Rules	11
	5.10	Further Powers re Forfeited Shares and Liens	11
6.	CALLS ON SHARES		12
	6.1	Calls	12
	6.2	Payment of Calls	12
	6.3	Quoted Shares	12
	6.4	Unquoted Shares	12
	6.5	Joint Liability	12
	6.6	Deemed Calls	12
	6.7	Differentiation between Shareholders	13
	6.8	Payments in Advance of Calls	13
	6.9	Outstanding Moneys	13
	6.10	Revocation or Postponement	13
	6.11	Compliance with Listing Rules and Corporations Act	13
7.	FORFEITURE OF SHARES		14
	7.1	Failure to Pay Call	14
	7.2	Forfeiture	14
	7.3	Sale of Forfeited Shares	14
	7.4	Continuing Liability	14
	7.5	Officer’s Statement Prima Facie Evidence	14
	7.6	Procedures	14
	7.7	Listing Rules and ASTC Settlement Rules	15
8.	TRANSFER OF SHARES		15
	8.1	Form of Transfer	15
	8.2	CHESS Transfers	15
	8.3	Participation in CHESS	15
	8.4	Registration Procedure	15
	8.5	Power to Refuse to Register	16
	8.6	Closure of Register	16
	8.7	Retention of Transfers by Company	16
	8.8	Powers of Attorney	16
	8.9	Other Securities	16
	8.10	Branch Register	16
	8.11	Compliance with ASTC Settlement Rules	17

	8.12	Issuer Sponsored Subregister	17
	8.13	Transferor Holds Shares until Registration of Transfer	17
9.	TRANSMISSION OF SHARES		17
	9.1	Death of Shareholder Leaving a Will	17
	9.2	Death or Bankruptcy of Shareholder	17
	9.3	Registration by Transmission or to Beneficiary	17
	9.4	Limitations to Apply	18
	9.5	Death of a Joint Holder	18
	9.6	Joint Personal Representatives	18
	9.7	ASTC Transfer	18
	9.8	Joint Holders	18
10.	CHANGES TO CAPITAL STRUCTURE		18
	10.1	Alterations to Capital	18
	10.2	Reduction of Capital	19
	10.3	Buy-Backs	19
11.	GENERAL MEETINGS		19
	11.1	Convening of General Meetings of Shareholders	19
	11.2	Cancellation of a General Meeting of Shareholders	19
	11.3	Convening of General Meetings of Shareholders by a Director	19
	11.4	Notice	20
	11.5	Notice to Home Branch	20
	11.6	Annual General Meeting	20
12.	PROCEEDINGS AT GENERAL MEETINGS		20
	12.1	Quorum	20
	12.2	Persons Entitled to Attend a General Meeting	21
	12.3	Refusal of Admission to Meetings	21
	12.4	Chairman	21
	12.5	Vacating Chair	22
	12.6	Disputes Concerning Procedure	22
	12.7	General Conduct	22
	12.8	Casting Vote	22
	12.9	Adjournment	22
	12.10	Notice of Resumption of Adjourned Meeting	22
	12.11	Voting Rights	23
	12.12	Voting - Show of Hands	23
	12.13	Results of Voting	23
	12.14	Poll	23
	12.15	Manner of Taking Poll	23
	12.16	Meeting May Continue	24
	12.17	Voting by Joint Holders	24
	12.18	Shareholder under Disability	24
	12.19	Payment of Calls	24
	12.20	Objection to Voting	24
	12.21	Proxies	24
	12.22	Electronic Appointment of Proxy	25

	12.23	Proxy Votes	25
	12.24	Representatives of Corporate Shareholders	25
13.	THE DIRECTORS		26
	13.1	Number of Directors	26
	13.2	Rotation of Directors	26
	13.3	Election of Directors	26
	13.4	Additional Directors	27
	13.5	Removal of Director	27
	13.6	Vacation of Office	27
	13.7	Remuneration	27
	13.8	Initial Fees to Directors	28
	13.9	Expenses	28
	13.10	No Share Qualification	28
14.	POWERS AND DUTIES OF DIRECTORS		28
	14.1	Management of the Company	28
	14.2	Borrowings	28
	14.3	Attorneys	29
	14.4	Cheques, etc.	29
	14.5	Retirement Benefits for Directors	29
	14.6	Securities to Directors or Shareholders	29
15.	PROCEEDINGS OF DIRECTORS		30
	15.1	Convening a Meeting	30
	15.2	Procedure at Meetings	30
	15.3	Quorum	30
	15.4	Majority Decisions	30
	15.5	Casting Votes	30
	15.6	Alternate Directors	30
	15.7	Continuing Directors May Act	31
	15.8	Chairman	31
	15.9	Committees	31
	15.10	Written Resolutions	32
	15.11	Defective Appointment	32
	15.12	Directors May Hold Other Offices	32
	15.13	Directors May Hold Shares, etc	32
	15.14	Directors Not Accountable for Benefits	32
	15.15	Disclosure of Interests in Related Matters	33
	15.16	Disclosure of Shareholding	33
	15.17	Related Body Corporate Contracts	33
	15.18	Voting, Affixation of Seal	33
	15.19	Home Branch to be Advised	34
16.	MEETING BY INSTANTANEOUS COMMUNICATION DEVICE		34
	16.1	Meetings to be Effectual	34
	16.2	Procedure at Meetings	34
	16.3	Minutes	35
	16.4	Definition	35

17.	MANAGING AND EXECUTIVE DIRECTORS		35
	17.1	Appointment	35
	17.2	Remuneration	35
	17.3	Powers	35
	17.4	Rotation	35
	17.5	Secretary	35
18.	SEALS		36
	18.1	Common Seal	36
	18.2	Share Seal	36
19.	ACCOUNTS, AUDIT AND RECORDS		36
	19.1	Accounting records to be kept	36
	19.2	Audit	36
	19.3	Inspection	37
20.	MINUTES		37
	20.1	Minutes to be Kept	37
	20.2	Signature of Minutes	37
	20.3	Requirements of the Corporations Act	37
21.	DIVIDENDS AND RESERVES		37
	21.1	Dividends	37
	21.2	Interim Dividend	37
	21.3	Dividends only Payable from Profits	37
	21.4	No Interest	38
	21.5	Reserves	38
	21.6	Alternative Method of Payment of Dividend	38
	21.7	Payment of Dividends	38
	21.8	Unclaimed Dividends	39
22.	CAPITALISATION OF PROFITS		39
	22.1	Capitalisation	39
	22.2	Application of Capitalised Amounts	39
	22.3	Procedures	39
23.	BONUS SHARE PLAN		40
	23.1	Authorisation of Bonus Share Plan	40
	23.2	Amendment and Revocation	40
24.	DIVIDEND REINVESTMENT PLAN		40
	24.1	Authorisation of Dividend Reinvestment Plan	40
	24.2	Amendment and Revocation	40
25.	NOTICES		40
	25.1	Service	40
	25.2	Deemed receipt of Notice	41
	25.3	Notice to Joint Holders	41
	25.4	Notices to Personal Representatives and Others	41
	25.5	Persons Entitled to Notice	41
	25.6	Change of Address	42
	25.7	Incorrect Address	42
26.	WINDING UP		42
	26.1	Distribution in Kind	42
	26.2	Trust for Shareholders	42
	26.3	Order for winding up	42
27.	INDEMNITIES AND INSURANCE		42
	27.1	Liability to Third Parties	42
	27.2	Defending Proceedings	43
	27.3	Insurance	43
	27.4	Disclosure	44
	27.5	Definition	44
28.	OVERSEAS SHAREHOLDERS		44
29.	LOCAL MANAGEMENT		44
	29.1	Local Management	44
	29.2	Local Boards or Agencies	44
	29.3	Appointment of Attorneys	45
	29.4	Authority of Attorneys	45
30.	DISCOVERY		45
31.	SALE OF THE COMPANY'S MAIN UNDERTAKING		45
32.	COMPLIANCE (OR INCONSISTENCY) WITH THE LISTING RULES		45
33.	CONSISTENCY WITH CHAPTER 2E OF THE CORPORATIONS ACT		46
	33.1	Requirements of Chapter 2E	46
	33.2	Definitions	46
34.	TRANSITIONAL		46
	34.1	Provisions Relating to Official Quotation of Securities	46
	34.2	Severance	47
		SCHEDULE 1	48

CORPORATIONS ACT

CONSTITUTION

of

BRAINYTOYS LIMITED

ABN 28 001 894 033

1.

INTERPRETATION

1.1

Definitions

In this Constitution:

Alternate Director means a person appointed as an alternate director under clause 15.6.

ASIC means Australian Securities and Investments Commission.

ASTC Settlement Rules mean the settlement rules of Australian Settlement and Transfer Corporation Pty Ltd.

ASTC Transfer means a transfer of quoted securities or quoted rights effected in:

(a)

accordance with the ASTC Settlement Rules; or

(b)

substantial accordance with the ASTC Settlement Rules and determined by the Australian Settlement and Transfer Corporation to be an effective transfer.

ASX means Australian Stock Exchange Limited.

Auditor means the Company’s auditor.

Bonus Share Plan means a plan implemented under clause 23.

Business Day means a day other than a Saturday, a Sunday, New Year's Day, Australia Day, Good Friday, Easter Monday, Anzac Day, Christmas Day, Boxing Day and any other day declared and published by ASX to be a day which is not a business day.

CHESS Approved Securities means securities of the Company for which CHESS approval has been given in accordance with the ASTC Settlement Rules, or such amended definition as may be prescribed by the Listing Rules from time to time.

CHESS System means the Clearing House Electronic Subregister System operated by Australian Settlement and Transfer Corporation Pty Ltd or such other securities clearing house as is approved pursuant to the Corporations Act and to which the Listing Rules apply.

Company means Brainytoys Limited (ABN 28 001 894 033) or as it is from time to time named in accordance with the Corporations Act of this jurisdiction.

Constitution means this constitution as altered or amended from time to time.

Corporations Act means the Corporations Act 2001 (Cth).

Corporations Regulations means the Corporations Regulations 2001 (Cth).

Director means a person appointed to the position of a director of the Company and where appropriate, includes an Alternate Director.

Directors means all or some of the Directors acting as a board.

Dividend Reinvestment Plan means a plan implemented under clause 24.

Home Branch means the state branch of ASX designated as such in relation to the Company by ASX.

Listed Securities means any Shares, Share Options, stock, debentures, debenture stock or other securities for the time being issued by the Company and officially quoted by ASX on its stock market.

Listing Rules means the listing rules of ASX and any other rules of ASX which are applicable while the Company is admitted to the official list of ASX, each as amended or replaced from time to time, except to the extent of any express written waiver by ASX.

Loan Securities includes:

(a)

unsecured notes or unsecured deposit notes;

(b)

mortgage debentures or mortgage debenture stock;

(c)

debentures or debenture stock; and

(d)

for the purposes of the Listing Rules, convertible loan securities.

Office means the registered office of the Company.

Officer means any Director or Secretary of the Company or such other person within the meaning of that term as defined by the Corporations Act.

Prescribed Rate means the rate of 18% per annum or such other rate as may from time to time be fixed by the Directors.

Registered Office means the registered office of the Company in the State.

Register of Shareholders means the register of Shareholders kept by the Company in accordance with Section 169 of the Corporations Act (including any branch register and any computerised or electronic subregister established and administered under the ASTC Settlement Rules).

Related Body Corporate means a corporation which by virtue of the provisions of Section 50 of the Corporations Act is deemed to be related to the relevant corporation and related has a corresponding meaning.

Representative means a person authorised to act as a representative of a corporation under clause 12.24.

Restricted Securities has the meaning ascribed to it by the Listing Rules.

Seal means the common seal of the Company and includes any official seal and, where the context so admits, the Share Seal of the Company.

Secretary means any person appointed to perform the duties of a secretary of the Company.

Share means a share in the capital of the Company.

Shareholder means a person or company registered in the Register of Shareholders as the holder of one or more Shares and includes any person or company who is a member of the Company in accordance with or for the purposes of the Corporations Act.

Shareholding Account means an entry in the Register of Shareholders in respect of a Shareholder for the purpose of providing a separate identification of some or all of the ordinary Shares registered from time to time in the name of that Shareholder and Securities Account has an equivalent meaning in relation to Listed Securities of all kinds, including ordinary Shares.

Share Option means an option to require the Company to issue a Share.

Share Seal means the duplicate common seal referred to in clause 18.2.

State means Western Australia.

1.2

Corporations Act Definitions

Any word or expression defined in or for the purposes of the Corporations Act shall, unless otherwise defined in clause 1.1 or the context otherwise requires, have the same meaning when used in this Constitution, and the rules of interpretation specified in or otherwise applicable to the Corporations Act shall, unless the context otherwise requires, apply in the interpretation of this Constitution.

1.3

Status of Constitution

This Constitution is adopted by the Company in substitution for any former memorandum and articles of association or other constituent documents of the Company. To the extent permitted by law, the replaceable rules provided for in the Corporations Act do not apply to the Company.

1.4

Headings

Headings are inserted in this Constitution for convenience only, and shall not affect the interpretation of this Constitution.

1.5

Displacement of Replaceable Rules

The provisions of the Corporations Act that apply to public companies as replaceable rules are displaced completely by this Constitution in relation to the Company.

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2.

SHARE CAPITAL AND VARIATION OF RIGHTS

2.1

 Rights Attaching to Shares

Subject to this Constitution and to the terms of issue of Shares, all Shares attract the right to receive notice of and to attend and vote at all general meetings of the Company, the right to receive dividends, in a winding up or a reduction of capital, the right to participate equally in the distribution of the assets of the Company (both capital and surplus), subject to any amounts unpaid on the Share and, in the case of a reduction, to the terms of the reduction.

2.2

Issue of Shares

Without prejudice to any special rights previously conferred on the holders of any existing Shares or class of Shares, unissued Shares shall be under the control of the Directors and, subject to the Corporations Act, the Listing Rules and this Constitution, the Directors may at any time issue such number of Shares either as ordinary Shares or Shares of a named class or classes (being either an existing class or a new class) at the issue price that the Directors determine and with such preferred, deferred, or

other special rights or such restrictions, whether with regard to dividend, voting, return of capital or otherwise, as the Directors shall, in their absolute discretion, determine.

2.3

 Share Options

Subject to the Listing Rules, the Directors may at any time and from time to time issue Share Options on such terms and conditions as the Directors shall, in their absolute discretion, determine.

2.4

Classes of Shares

If at any time the share capital of the Company 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) may be varied, whether or not the Company is being wound up, 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 the class. Any variation of rights under this clause 2.4 shall be subject to Part 2F.2 of Chapter 2F of the Corporations Act. The provisions of this Constitution relating to general meetings shall apply so far as they are capable of application and with necessary alterations to every such separate meeting except that a quorum is constituted by two persons who together hold or represent by proxy not less than one-third of the issued Shares of the class.

2.5

Preference Shares

Subject to the Listing Rules and the Corporations Act, the Company may issue preference Shares:

(a)

that are liable to be redeemed whether at the option of the Company or otherwise; and

(b)

including, without limitation preference shares of the kind described in clause 2.5(a) in accordance with the terms of Schedule 1.

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2.6

Recognition of Trusts

Except as permitted or required by the Corporations Act, the Company shall not recognise a person as holding a Share or Share Option upon any trust.

2.7

Unregistered Interests

The Company is not bound by or compelled in any way to recognise any equitable, contingent, future or partial right or interest in any Share or Share Option (whether or not it has notice of the interest or right concerned) unless otherwise provided by this Constitution or by law, except an absolute right of ownership in the registered holder of the Share or Share Option.

2.8

Share Certificates and Share Option Certificates

Subject to the ASTC Settlement Rules (if applicable), clause 4 and the Listing Rules, a person whose name is entered as a Shareholder in the Register of Shareholders is entitled without payment to receive a Share certificate or notice (as the case may be) in respect of the Share under the Seal in accordance with the Corporations Act but, in respect of a Share or Shares held jointly by several persons, the Company is not bound to issue more than one certificate or notice. Delivery of a certificate or notice for a Share to one of several joint Shareholders is sufficient delivery to all such holders. In addition:

(a)

Share certificates or notices in respect of Shares shall only be issued in accordance with the Listing Rules;

(b)

subject to this Constitution, the Company shall despatch all appropriate Share certificates within 5 Business Days of the issue of any of its Shares and within 5 Business Days after the date upon which a transfer of any of its Shares is lodged with the Company;

(c)

where a Share certificate is lost, worn out or destroyed, the Company shall issue a duplicate certificate in accordance with the requirements of Section 1070D of the Corporations Act and the Listing Rules; and

(d)

the above provisions of this clause 2.8 shall, with necessary alterations, apply to Share Options.

If securities of the Company are CHESS Approved Securities and held in uncertificated mode, then the preceding provisions of this clause 2.8 do not apply to those Securities and the Company shall allot such CHESS Approved Securities and enter those CHESS Approved Securities into the Shareholder's uncertificated holding in accordance with the Listing Rules and the ASTC Settlement Rules.

2.9

Section 1071H of the Corporations Act

Clause 2.8 shall not apply if and to the extent that, on an application by or on behalf of the Company, the ASIC has made a declaration under Section 1071H(5) of the Corporations Act published in the Commonwealth of Australia Gazette that the Company is a person in relation to whom Section 1071H of the Corporations Act does not apply.

4

2.10

Commissions

The Company may, subject to the Listing Rules, exercise the powers of paying commission conferred by Section 258C of the Corporations Act if the percentage or the amount of the commission paid or agreed to be paid is disclosed. Such commission may be satisfied by the payment of cash or the allotment of fully or partly paid Shares or partly in the one way and partly in the other. The Company may also on any issue of Shares pay such brokerage as may be lawful.

2.11

Restricted Securities

The Company shall comply in all respects with the requirements of the Listing Rules with respect to Restricted Securities. Without limiting the generality of the above:

(a)

Restricted Securities cannot be disposed of during the escrow period except as permitted by the Listing Rules or the ASX;

(b)

 the Company will refuse to acknowledge a disposal (including registering a transfer), assignment or transfer of Restricted Securities during the escrow period except as permitted by the Listing Rules or the ASX; and

(c)

during a breach of the Listing Rules relating to Restricted Securities or a breach of a restriction agreement the holder of the Restricted Securities is not entitled to any dividend or distribution, or voting rights, in respect of the Restricted Securities.

2.12

Non-Issue or Cancellation of Certificate

Notwithstanding any other provision of this Constitution, the Company need not issue a certificate, and may cancel any certificate without issuing a certificate in substitution, in respect of any Shares or Share Options of the Company in any circumstances where the non-issue or cancellation of that certificate is permitted by the Corporations Act, the Listing Rules or the ASTC Settlement Rules.

2.13

No Prohibition on Foreign Ownership

Nothing in this Constitution shall have the effect of limiting or restricting the ownership of any securities of the Company by foreign persons except where such limits or restrictions are prescribed by Australian law.

2.14

Payment of Interest out of Capital

Where any Shares are issued for the purpose of raising money to defray the expenses of the construction of any works or buildings or the provision of any plant which can not be made profitable for a lengthened period the Company may pay interest on so much of such share capital as is paid up for the period and may charge this interest to capital as part of the cost of construction of the works, buildings or plant.

3.

MINIMUM SHAREHOLDING

3.1

Effect of this Clause

The provisions of this clause have effect notwithstanding any other provision of this Constitution, except clause 32.

5

3.2

Definitions

In this clause:

Authorised Price means the price per share of the Listed Securities equal to the simple average of the last sale prices of the Listed Securities quoted on ASX for each of the ten trading days immediately preceding the date of any offer received by the Company pursuant to clause 3.5.

Date of Adoption means the date upon which this clause is inserted in this Constitution by special resolution of the members of the Company.

Date of Effect means the date immediately following the date of expiry contained in the second notice by the Company to Minority Members in accordance with clause 3.15.

Minimum Shareholding means a number of shares equal to a "marketable parcel" of Listed Securities within the meaning of the Listing Rules.

Minority Member means a member holding less than the Minimum Shareholding on or at any time after the Date of Adoption.

Purchaser means the person or persons (including one or more members) whose offer or offers to purchase Listed Securities is or are accepted by the Company.

3.3

Minimum Shareholding

Subject to clauses 3.13 to 3.15 (inclusive), on and from the Date of Effect, the shareholding of a member which is less than the Minimum Shareholding may be sold by the Company pursuant to the provisions of this clause 3.

3.4

Sale of Listed Securities of Minority Member

Subject to clauses 3.13 to 3.15 (inclusive), on and from the Date of Effect, each Minority Member shall be deemed to have irrevocably appointed the Company as his agent:

(a)

to sell all the Listed Securities held by him at a price not less than the Authorised Price and without any cost being incurred by the Minority Member;

(b)

to deal with the proceeds of the sale of those Listed Securities in accordance with this clause; and

(c)

where the Listed Securities are CHESS Approved Securities held in uncertificated form, to initiate a Holding Adjustment (as defined in the ASTC Settlement Rules) to move the securities from the CHESS Holding (as defined in the ASTC Settlement Rules) of the Minority Member to an Issuer Sponsored or Certificated Holding (as defined in the ASTC Settlement Rules) for the sale of the Listed Securities.

6

3.5

Acceptance of Offer

Where the Company receives an offer for the purchase of all the Listed Securities of a Minority Member to whom this clause applies at the date of the offer at a price not less than the Authorised Price, the Company may accept the offer on behalf of that Minority Member.

3.6

Appointment of Attorney

The Company shall, by instrument in writing, appoint a person or persons to act as attorney or attorneys of each Minority Member to whom this clause applies, to execute an instrument or instruments of transfer of their Listed Securities to the Purchaser.

3.7

Transfer

Where:

(a)

all the Listed Securities of each Minority Member to whom this clause applies at any time are sold to one Purchaser; or

(b)

all the Listed Securities of two or more Minority Members to whom this clause applies at any time are sold to one Purchaser, the transfer may be effected by one instrument of transfer.

3.8

Proceeds of Sale

The Company shall receive the aggregate proceeds of the sale of all of the Listed Securities of each Minority Member to whom this clause applies at any time and shall:

(a)

immediately cause the name of the Purchaser to be entered in the Register of Shareholders as the holder of the Listed Securities sold; and

(b)

within fourteen days of receipt of the relevant share certificate or otherwise as soon as is practicable, cause the pro rata proportions of the proceeds attributable to each Minority Member to be sent to each Minority Member by cheque mailed to his address in the Register of Shareholders (or in the case of joint holders, to the address of the holder whose name is shown first in the Register of Shareholders), this cheque to be made payable to the Minority Member (or, in the case of joint holders, to them jointly). In the case where a Minority Member's whereabouts are unknown or where a Minority Member fails to return the share certificate or certificates (where required) relating to the Listed Securities sold, the proceeds of sale shall be applied in accordance with the applicable laws dealing with unclaimed moneys.

3.9

Receipt of Proceeds

The receipt by the Company of the proceeds of sale of Listed Securities of a Minority Member shall be a good discharge to the Purchaser of all liability in respect of the purchase of the Listed Securities.

3.10

Registration of Purchaser

Upon entry of the name of the Purchaser in the Register of Shareholders as the holder of the Listed Securities of a Minority Member to whom this clause applies:

7

(a)

the Purchaser shall not be bound to see to the regularity of the actions and proceedings of the Company pursuant to this Constitution or to the application of the proceeds of sale; and

(b)

the validity of the sale shall not be impeached by any person.

3.11

Remedies Limited

The remedy of any Minority Member to whom this clause applies in respect of the sale of his or her Listed Securities is expressly limited to a right of action in damages against the Company to the exclusion of any other right, remedy or relief against any other person.

3.12

Cost of Sale of Listed Securities

The Company shall bear all the costs of the sale of the Listed Securities.

3.13

Exemption from Clause 3

The Company must give written notice to a Minority Member and, where the Shares are CHESS Approved Securities, to the Controlling Participant (as defined in the ASTC Settlement Rules) for the holding of the Minority Member, advising of the Company's intention to sell his or her shareholding pursuant to this clause 3. Unless the Minority Member, within 6 weeks of receipt of notice from the Company in accordance with this clause 3, gives written notice to the Company that it desires its shareholding to be exempted from clause 3, then the provisions of clause 3 shall apply to this Minority Member. Where Shares are CHESS Approved Securities, a written notice by the Company in terms of this clause shall comply with the ASTC Settlement Rules.

3.14

Notice to Exempt

Where a Minority Member has given written notice to the Company that it desires its shareholding to be exempted from clause 3 it may, at any time, revoke or withdraw that notice. In that event the provisions of clause 3 shall apply to the Minority Member.

3.15

Election to Exempt

Where a Minority Member has not given written notice to the Company within 6 weeks of receipt of notice from the Company in accordance with clause 3 that it desires its shareholding to be exempted from clause 3, then the Company shall give that Minority Member and, where the Shares are CHESS Approved Securities, to the Controlling Participant (as defined in the ASTC Settlement Rules) for the holding of the Minority Member, a second written notice complying with the ASTC Settlement Rules advising that the Company intends to sell its shareholding immediately upon expiration of 5 Business Days from the date of that notice unless the Minority Member gives written notice to the Company within that time that it desires its shareholding to be exempted from clause 3, in which case clause 3 shall not apply to the Minority Member.

3.16

Takeover Offer or Announcement

The Company shall not commence to sell Listed Securities comprising less than a Minimum Shareholding following the announcement of a takeover offer or takeover announcement for the Company.

8

3.17

Use by Company of Clause 3

This clause 3 may be invoked only once in any twelve month period after its adoption or re-adoption.

4.

UNCERTIFICATED HOLDINGS AND ELECTRONIC TRANSFERS

4.1

Electronic or Computerised Holding

The Directors may do anything they consider necessary or desirable and which is permitted under the Corporations Act and the Listing Rules to facilitate the participation by the Company in the CHESS System and any other computerised or electronic system established or recognised by the Corporations Act or the Listing Rules for the purposes of facilitating dealings in Shares or securities.

4.2

Statement of Holdings

Where the Directors have determined not to issue share certificates or to cancel existing Share certificates, a Shareholder shall have the right to receive such statements of the holdings of the Shareholder as are required to be distributed to a Shareholder under the Corporations Act or the Listing Rules.

4.3

Share Certificates

If the Directors determine to issue a certificate for Shares held by a Shareholder, the provisions in relation to Share certificates contained in clause 2 shall apply.

4.4

Listing Rules

The Company shall comply with the Listing Rules and the ASTC Settlement Rules in relation to the CHESS System.

5.

LIEN

5.1

Lien for Members Debts

The Company has a first and paramount lien on each Share (except where the Share is a Listed Security and is fully paid up) registered in a Shareholder’s name in respect of all money owed to the Company by the Shareholder (including any money payable under clause 5.2 to the extent that the Company has made a payment in respect of a liability or a requirement referred to in that clause) but not any unpaid call once the Share has been forfeited under section 254Q.

5.2

Generally

Whenever any law for the time being of any country, state or place imposes or purports to impose any immediate or future possible liability upon the Company to make any payments or empowers any government or taxing authority or governmental official to require the Company to make any payment in respect of any Shares held either jointly or solely by any Shareholder, or in respect of any transfer of Shares, or of any dividends, bonuses or other moneys due or payable or accruing due or which may become due or payable to such Shareholder by the Company on or in respect of any Shares or for or on account or in respect of any Shareholder, and whether in consequence of:

9

(a)

the death of such Shareholder;

(b)

the non-payment of any income tax or other tax by such Shareholder;

(c)

the non-payments of any estate, probate, succession, death, stamp or other duty by the executor or administrator of such Shareholder or by or out of his estate; or

(d)

any other act or thing,

the Company in every case:

(e)

shall be fully indemnified by such Shareholder or his executor or administrator from all liability;

(f)

shall have a lien upon all dividends, bonuses and other moneys payable in respect of the Shares held either jointly or solely by this Shareholder for all moneys paid by the Company in respect of the Shares or in respect of any dividend, bonus or other money or for an account or in respect of this Shareholder under or in consequence of any law, together with interest at the Prescribed Rate from date of payment to date of repayment, and may deduct or set off against any dividend, bonus or other moneys so paid or payable by the Company together with interest at the Prescribed Rate;

(g)

may recover as a debt due from this Shareholder or his or her executor or administrator, wherever constituted or situate, any moneys paid by the Company under or in consequence of any such law and interest on these moneys at the Prescribed Rate and for the period mentioned above in excess of any dividend, bonus or other money as mentioned above then due or payable by the Company to such Shareholder; and

(h)

may, subject to the Listing Rules, if any such money be paid or payable by the Company under any such law, refuse to register a transfer of any Shares by this Shareholder or his executor or administrator until the money and interest mentioned above is set off or deducted or, in case the money and interest exceeds the amount of any dividend, bonus or other money then due or payable by the Company to the Shareholder, until this excess is paid to the Company.

Nothing in this clause contained shall prejudice or affect any right or remedy which any law may confer or purport to confer on the Company, and, as between the Company and every such Shareholder, his or her executor, administrator and estate, wherever constituted or situate, any right or remedy which this law shall confer on the Company shall be enforceable by the Company.

5.3

Exemption

The Directors may at any time exempt a Share wholly or in part from the provisions of this clause 5.

5.4

Dividends

Whenever the Company has a lien on a Share, the lien extends to all dividends payable in respect of the Share.

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5.5

Sale of Shares

Subject to clause 5.6, the Company may sell, in such manner as the Directors think fit, any Shares on which the Company has a lien.

5.6

Restrictions on Sale

A Share on which the Company has a lien shall not be sold unless:

(a)

the sum in respect of which the lien exists is presently payable; and

(b)

the Company has, not less than 14 days before the date of the sale, given to the registered holder for the time being of the Share or the person entitled to the Share by reason of the death or bankruptcy of the registered holder a notice in writing setting out, and demanding payment of, that part of the amount in respect of which the lien exists as is presently payable.

5.7

Person Authorised to Sign Transfers

For the purpose of giving effect to a sale of a Share under clause 5.5, the Directors may authorise a person to transfer the Shares sold to the purchaser of the Shares. The Company shall register the purchaser as the holder of the Shares comprised in any such transfer and he or she is not bound to see to the application of the purchase money. The title of the purchaser to the Shares is not affected by any irregularity or invalidity in connection with the sale.

5.8

Proceeds of Sale

The proceeds of a sale under clause 5.5 shall be applied by the Company in payment of that part of the amount in respect of which the lien exists as is presently payable, and the residue (if any) shall (subject to any like lien for sums not presently payable that existed upon the Shares before the sale) be paid to the person entitled to the Shares at the date of the sale.

5.9

Protection of Lien under ASTC Settlement Rules

The Company may do all such things as may be necessary or appropriate for it to do under the ASTC Settlement Rules to protect any lien, charge or other right to which it may be entitled under any law or this Constitution.

5.10

Further Powers re Forfeited Shares and Liens

Where a transfer following the sale of any Shares after forfeiture or for enforcing a lien, charge or right to which the Company is entitled under any law or under this Constitution is effected by an ASTC Transfer, the Company may do all things necessary or desirable for it to do under the ASTC Settlement Rules in relation to that transfer.

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6.

CALLS ON SHARES

6.1

Calls

(a)

The Directors may by resolution make calls on Shareholders of party paid Shares to satisfy the whole or part of the debt owing on those Shares provide that the dates for payment of those Shares were not fixed at the time of issue.

(b)

A call shall be deemed to have been made at the time when the resolution of the Directors authorising the call was passed.

(c)

A call may be required or permitted to be paid by instalments.

(d)

Failure to send a notice of a call to any Shareholder or the non-receipt of a notice by any Shareholder does not invalidate the call.

6.2

Payment of Calls

A Shareholder to whom notice of a call is given in accordance with this Constitution must pay to the Company the amount called in accordance with the notice.

6.3

Quoted Shares

(a)

The Directors must not make the date for payment of calls, (Due Date), for Shareholders who hold quoted partly paid Shares, less than 30 Business Days and no more than 40 Business Days from the date the Company dispatches notices to relevant Shareholders that a call is made.

(b)

If after a call is made, new Shareholders purchase the same class of Share subject to the call, or if the holdings of the original Shareholders on whom the call was made change, Directors must dispatch a notice informing these Shareholders that a call has been made at least 4 days before the Due Date.

(c)

The Company must enter a call payment on the Company register no more than 5 Business Days after the Due Date.

6.4

Unquoted Shares

The Directors must not make the Due Date for Shareholders who hold quoted partly paid Shares, less than 5 Business Days from the date the Company dispatches notices to relevant Shareholders that a call is made.

6.5

Joint Liability

The joint holders of a Share are jointly and severally liable to pay all calls in respect of the Share.

6.6

Deemed Calls

Any amount that, by the terms of issue of a Share, becomes payable on allotment or at a fixed date, shall for the purposes of this Constitution be deemed to be a call duly made and payable, and, in case of non-payment, all the relevant provisions of this Constitution as to payment of interest and expenses, forfeiture or otherwise apply as if the amount had become payable by virtue of a call duly made and notified.

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6.7

Differentiation between Shareholders

The Directors may, on the issue of Shares, differentiate between the holders as to the amount of calls to be paid and the times of payment.

6.8

Payments in Advance of Calls

The Directors may accept from a Shareholder the whole or any part of the amount unpaid on a Share although no part of that amount has been called up, in which case the Directors shall nominate whether the amount so paid is to be treated as capital or a loan to the Company by the Shareholder, and:

(a)

if the amount paid is nominated to be capital, it shall be deemed as from the date of the nomination to have been applied in paying up (so far as it will extend) the unpaid balance of the total issue price of the Share, but the dividend entitlement attaching to the Share shall remain as it was prior to the payment so made until there is a call in respect of the Share under this clause 6 of an amount equal to or greater than the amount so paid; or

(b)

if the amount paid is nominated to be a loan to the Company, it shall carry interest at a rate, not exceeding the Prescribed Rate, as is agreed between the Directors and the Shareholder, shall not be repayable unless the Directors so determine, shall not confer on the Shareholder any rights attributable to subscribed capital, and shall, unless so repaid, be applied in payment of calls on the Share as and when the calls become due.

6.9

Outstanding Moneys

Any moneys payable in respect of a call made in accordance with this Constitution which remain outstanding shall from and including the day for payment until the date payment is received bear interest at the Prescribed Rate.

6.10

Revocation or Postponement

The Directors may revoke or postpone a call in accordance with the Listing Rules and/ or the Corporations Act, if revocation or postponement is not prohibited by either.

6.11

Compliance with Listing Rules and Corporations Act

The Company shall comply with the Listing Rules and the Corporations Act in relation to calls. All Listing Rule requirements in relation to calls are not covered in this Constitution.

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7.

FORFEITURE OF SHARES

7.1

Failure to Pay Call

If a Shareholder fails to pay a call or instalment of a call on the day appointed for payment of the call or instalment, the Directors may, at any time after this day during the time any part of the call or instalment remains unpaid (but subject to this clause 7.1) serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest that has accrued. The notice shall name a further day being not less than 14 days after the date of notice on or before which the payment required by the notice is to be made and shall state that, in the event of non-payment at or before the time appointed, the Shares in respect of which the call was made will be liable to be forfeited.

7.2

Forfeiture

If the requirements of a notice served under clause 7.1 are not complied with, any Share in respect of which a call is unpaid at the expiration of 14 days after the day for its payment may be forfeited by a resolution of the Directors to that effect. Such a forfeiture shall include all dividends declared in respect of the forfeited Shares and not actually paid before the forfeiture.

7.3

Sale of Forfeited Shares

A forfeited Share may be sold or otherwise disposed of on the terms and in the manner that the Directors determine and, at any time before a sale or disposition, the forfeiture may be cancelled on the terms the Directors determine.

7.4

Continuing Liability

A person whose Shares have been forfeited ceases to be a Shareholder in respect of the forfeited Shares, but remains liable to pay the Company all money that, at the date of forfeiture, was payable by him to the Company in respect of the Shares (including interest at the Prescribed Rate from the date of forfeiture on the money for the time being unpaid if the Directors decide to enforce payment of the interest), but his or her liability ceases if and when the Company receives payment in full of all the money (including interest) payable in respect of the Shares.

7.5

Officer’s Statement Prima Facie Evidence

A statement in writing declaring that the person making the statement is a Director or a Secretary of the Company, and that a Share in the Company has been duly forfeited on a date stated in the statement, is prima facie evidence of the facts stated in the statement as against all persons claiming to be entitled to the Share.

7.6

Procedures

The Company may receive the consideration (if any) given for a forfeited Share on any sale or disposition of the Share, and may execute a transfer of the Share in favour of the person to whom the Share is sold or disposed of. Upon the execution of the transfer, the transferee shall be registered as the holder of the Share and is not bound to see to the application of any money paid as consideration. The title of the transferee to the Share is not affected by any irregularity or invalidity in connection with the forfeiture, sale or disposal of the Share.

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7.7

Listing Rules and ASTC Settlement Rules

The Company shall comply with the Listing Rules with respect to forfeited Shares and may do all such things as may be necessary or appropriate for it to do under the ASTC Settlement Rules to protect any lien, charge or other right to which it may be entitled under any law or this Constitution.

8.

TRANSFER OF SHARES

8.1

Form of Transfer

Subject to this Constitution, Shareholders may transfer any Share held by them by:

(a)

an ASTC Transfer or any other method of transferring or dealing in Shares introduced by ASX or operated in accordance with the ASTC Settlement Rules or Listing Rules and in any such case recognised under the Corporations Act; or

(b)

an instrument in writing in any usual or common form or in any other form that the Directors approve.

8.2

CHESS Transfers

(a)

The Company must comply with all obligations imposed on the Company under the Corporations Act, the Listing Rules and the ASTC Settlement Rules in respect of an ASTC Transfer or any other transfer of Shares.

(b)

Notwithstanding any other provision in this Constitution, the Company must not prevent, delay or interfere with the registration of an ASTC Transfer or any other transfer of Shares.

8.3

Participation in CHESS

The Directors may do anything they consider necessary or desirable and which is permitted under the Corporations Act, the Listing Rules and the ASTC Settlement Rules to facilitate participation by the Company in any system established or recognised by the Corporations Act and the Listing Rules or the ASTC Settlement Rules in respect of transfers of or dealings in marketable securities.

8.4

Registration Procedure

Where an instrument of transfer referred to in clause 8.1(b) is to be used by a Shareholder to transfer Shares, the following provisions apply:

(a)

the instrument of transfer must be executed by or on behalf of both the transferor and the transferee unless it is a sufficient transfer of marketable securities within the meaning of the Corporations Act;

(b)

the instrument of transfer shall be left at the Registered Office for registration accompanied by the certificate for the Shares to be transferred (if any) and such other evidence as the Directors may require to prove the title of the transferor and his right to transfer the shares;

(c)

a fee shall not be charged on the registration of a transfer of Shares or other securities; and

(d)

on registration of a transfer of Shares, the Company must cancel the old certificate (if any).

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8.5

Power to Refuse to Register

The Directors may refuse to register any transfer of Shares (other than an ASTC Transfer) where:

(a)

the Listing Rules permit the Company to do so;

(b)

the Listing Rules require the Company to do so; or

(c)

the transfer is a transfer of Restricted Securities which is or might be in breach of the Listing Rules or any escrow agreement entered into by the Company in relation to such Restricted Securities pursuant to the Listing Rules.

Where the Directors refuse to register a transfer in accordance with this clause, they shall send notice of the refusal and the precise reasons for the refusal to the transferee and the lodging broker (if any) in accordance with the Listing Rules.

8.6

Closure of Register

Subject to the Listing Rules and the ASTC Settlement Rules, the Register of Shareholders may be closed during such time as the Directors may determine, not exceeding 30 days in each calendar year or any one period of more than 5 consecutive Business Days.

8.7

Retention of Transfers by Company

All instruments of transfer which are registered will be retained by the Company, but any instrument of transfer which the Directors decline or refuse to register (except in the case of fraud) shall on demand be returned to the transferee.

8.8

Powers of Attorney

Any power of attorney granted by a Shareholder empowering the donee to transfer Shares which may be lodged, produced or exhibited to the Company or any Officer of the Company will be taken and deemed to continue and remain in full force and effect, as between the Company and the grantor of that power, and the power of attorney may be acted on, until express notice in writing that it has been revoked or notice of the death of the grantor has been given and lodged at the Office or at the place where the Register of Shareholders is kept.

8.9

Other Securities

The provisions of this clause 8 shall apply, with necessary alterations, to any other Listed Securities for the time being issued by the Company.

8.10

Branch Register

The Company may cause a Register of Shareholders to be kept in any place (including without limitation, a branch register) and the Directors may from time to time make such provisions as they (subject to the Corporations Act, the Listing Rules and the ASTC Settlement Rules) may think fit with respect to the keeping of any such Register.

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8.11

Compliance with ASTC Settlement Rules

The Company shall comply with the ASTC Settlement Rules and the Listing Rules in relation to all matters covered by those rules.

8.12

Issuer Sponsored Subregister

The Company may establish and maintain an issuer sponsored subregister in compliance with any relevant provisions of the Corporations Act, the Listing Rules or the ASTC Settlement Rules.

8.13

Transferor Holds Shares until Registration of Transfer

A transferor of Shares remains the registered holder of the Shares transferred until an ASTC Transfer has taken effect in accordance with the ASTC Settlement Rules or the transfer is registered in the name of the transferee and is entered in the Register of Shareholders in respect of them, whichever is the earlier.

9.

TRANSMISSION OF SHARES

9.1

Death of Shareholder Leaving a Will

On the death of a Shareholder who leaves a will appointing an executor, the executor shall be entitled as from the date of death, and on behalf of the deceased Shareholder's estate, to the same dividends and other advantages and to the same rights whether in relation to meetings of the Company, or voting or otherwise, as the Shareholder would have been entitled to if he or she had not died, whether or not probate of the will has been granted. Nevertheless, if probate of the will is granted to a person or persons other than the executor first referred to in this clause 9, his or her executor's rights shall cease, and these rights shall only be exercisable by the person or persons to whom probate is granted as provided in clauses 9.2and 9.3. The estate of a deceased Shareholder will not be released from any liability to the Company in respect of the Shares.

9.2

Death or Bankruptcy of Shareholder

Subject to clause 9.1, where the registered holder of a Share dies or becomes bankrupt, his or her personal representative or the trustee of his or her estate, as the case may be, shall be entitled upon the production of such information as is properly required by the Directors, to the same dividends and other advantages, and to the same rights (whether in relation to meetings of the Company, or to voting or otherwise), as the registered holder would have been entitled to if he or she had not died or become bankrupt.

9.3

Registration by Transmission or to Beneficiary

A person becoming entitled to a Share in consequence of the death or, subject to the Bankruptcy Act 1966, the bankruptcy of a Shareholder may, upon information being produced that is properly required by the Directors, elect by written notice to the Company either to be registered himself or herself as holder of the Share or to have some other person nominated by the person registered as the transferee of the Share. If this person elects to have another person registered, he or she shall execute a transfer of the Share to that other person.

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9.4

Limitations to Apply

All the limitations, restrictions and provisions of this Constitution relating to the right to transfer Shares and the registration of a transfer of Shares are applicable to any notice or transfer as if the death or bankruptcy of the Shareholder had not occurred and the notice or transfer were a transfer signed by that Shareholder.

9.5

Death of a Joint Holder

In the case of the death of a Shareholder who was a joint holder, the survivor or survivors shall be the only persons recognised by the Company as having any title to the deceased's interest in the Shares, but this clause 9.5 does not release the estate of a deceased joint holder from any liability in respect of a Share that had been jointly held by this person with one or more other persons.

9.6

Joint Personal Representatives

Where two or more persons are jointly entitled to any Share in consequence of the death of the registered holder, they shall, for the purpose of this Constitution, be deemed to be joint holders of the Share.

9.7

ASTC Transfer

In the case of an ASTC Transfer the provisions of this clause 9 are subject to any obligation imposed on the Company or the person entitled to the relevant Shares on the death or bankruptcy of a member by the Listing Rules, the ASTC Settlement Rules or any law.

9.8

Joint Holders

If more than three persons are registered as holders of Shares in the Company in the Register of Shareholders (or a request is made to register more than three persons), then only the first three persons will be regarded as holders of Shares in the Company and all other names will be disregarded by the Company for all purposes.

10.

CHANGES TO CAPITAL STRUCTURE

10.1

Alterations to Capital

Subject to the Listing Rules, the Company may, by ordinary resolution:

(a)

issue new Shares of such amount specified in the resolution;

(b)

consolidate and divide all or any of its Shares into Shares of larger amount than its existing Shares;

(c)

subject to the Listing Rules, 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

(d)

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, subject to the Corporations Act, reduce the amount of its share capital by the amount of the Shares so cancelled.

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10.2

Reduction of Capital

Subject to the Corporations Act and the Listing Rules, the Company may reduce its share capital in any way including, but not limited to, distributing to shareholders securities of any other body corporate and, on behalf of the shareholders, consenting to each shareholder becoming a member of that body corporate and agreeing to be bound by the constitution of that body corporate.

10.3

Buy-Backs

(a)

In this clause "Buy-Back Provisions" means the provisions of Part 2J.1 Division 2 of the Corporations Act.

(b)

The Company may, subject to the Corporations Act and the Listing Rules and in accordance with the Buy-Back Provisions, purchase its own Shares on such terms and at such times as may be determined by the Directors from time to time:

(c)

The Company may give financial assistance to any person or entity for the purchase of its own Shares in accordance with the Buy-Back Provisions on such terms and at such times as may be determined by the Directors from time to time.

11.

GENERAL MEETINGS

11.1

Convening of General Meetings of Shareholders

The Directors may, by a resolution passed by a majority of Directors, convene a general meeting of Shareholders in accordance with this clause 11 and the requirements of the Corporations Act.

11.2

Cancellation of a General Meeting of Shareholders

(a)

A general meeting of Shareholders convened by the Directors in accordance with clause 11.1 may be cancelled by a resolution passed by a majority of Directors.

(b)

Notice of the cancellation of a general meeting of Shareholders must be given to the Shareholders in accordance with clause 25, but notice of such cancellation must be given to each Shareholder not less than two (2) days prior to the date on which the meeting was proposed to be held.

11.3

Convening of General Meetings of Shareholders by a Director

Any Director may, whenever he or she thinks fit, convene a general meeting of Shareholders, and a general meeting shall also be convened on requisition as is provided for by the Corporations Act, or in default, may be convened by such requisitions as empowered to do so by the Corporations Act. If there are no Directors for the time being, a Secretary may convene a general meeting of Shareholders for the purpose of enabling the election of Directors but for no other purpose. A general meeting may be held at two or more venues simultaneously using any technology that gives the Shareholders as a whole a reasonable opportunity to participate.

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11.4

Notice

A notice of a general meeting shall be given in accordance with the requirements of the Corporations Act, clause 25 and the Listing Rules, and:

(a)

must specify the place, the day and the time of the meeting;

(b)

must state the general nature of the business to be transacted at the meeting;

(c)

must include such statements about the appointment of proxies as are required by the Corporations Act;

(d)

must specify a place and fax number for the purposes of receipt of proxy appointments; and

(e)

may specify an electronic address for the purposes of receipt of proxy appointments,

and shall include any other information required to be included in the notice by the Listing Rules. The non-receipt of a notice of a general meeting by a Shareholder or the accidental omission to give this notice to a Shareholder shall not invalidate any resolution passed at the meeting.

11.5

Notice to Home Branch

(a)

The Company shall notify the Home Branch of any meeting at which Directors are to be elected at least 5 Business Days before the closing day for receipt of nominations for Directors, and in any other case (other than a meeting to pass a special resolution) at least 10 Business Days before the meeting is held, and in the case of a meeting convened to pass a special resolution, at least 15 Business Days before the meeting is held. All notices convening meetings shall specify the place, date and hour of the meeting, and shall set out all resolutions to be put to the meeting.

(b)

The Company shall notify the Home Branch as soon as is practicable after any general meeting in the case of special business as to whether or not the resolutions were carried and in the case of ordinary business as to which of those resolutions were not carried or were amended or were withdrawn.

11.6

 Annual General Meeting

An annual general meeting shall be held in accordance with the requirements of the Corporations Act.

12.

PROCEEDINGS AT GENERAL MEETINGS

12.1

Quorum

No business shall be transacted at any general meeting unless a quorum is present comprising 2 Shareholders present in person, by proxy, attorney or Representative.  For the purpose of determining whether a quorum is present, a person attending as a proxy, attorney or Representative, shall be deemed to be the Shareholder present in person. If a quorum is not present within 15 minutes after the time appointed for a general meeting, the meeting, if convened upon a requisition shall be dissolved, but in any other case, it shall stand adjourned to a date and place to be fixed by the Directors. If at such adjourned meeting a quorum is not present, the Shareholders present in person, by proxy, attorney or Representative shall constitute a quorum.

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12.2

Persons Entitled to Attend a General Meeting

The persons entitled to attend a general meeting shall be:

(a)

Shareholders, in person, by proxy, attorney or Representative;

(b)

Directors;

(c)

the Company's auditor; and

(d)

any other person or persons as the chairman may approve.

12.3

Refusal of Admission to Meetings

The chairman of a general meeting may refuse admission to a person, or require a person to leave and not return to, a meeting if the person:

(a)

refuses to permit examination of any article in the person’s possession;

(b)

is in possession of any:

(i)

electronic or recording device;

(ii)

placard or banner; or

(iii)

other article,

which the chairman considers to be dangerous, offensive or liable to cause disruption; or

(c)

causes any disruption to the meeting.

12.4

Chairman

The person elected as the chairman of the Directors' meeting under clause 15.8 shall, if willing, preside as chairman at every general meeting. Where a general meeting is held and a chairman has not been elected under clause 15.8 or the chairman or, in his absence, the vice-chairman is not present within 15 minutes after the time appointed for holding of the meeting or is unwilling to act:

(a)

the Directors present may elect a chairman of the meeting; or

(b)

if no chairman is elected in accordance with subsection (a), the Shareholders present shall elect one of their number to be the acting chairman of the meeting.

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12.5

Vacating Chair

At any time during a meeting and in respect of any specific item or items of business, the chairman may elect to vacate the chair in favour of another person nominated by the chairman (which person must be a Director unless no Director is present or willing to act). That person is to be taken to be the chairman and will have all the power of the chairman (other than the power to adjourn the meeting), during the consideration of that item of business or those items of business.

12.6

Disputes Concerning Procedure

If there is a dispute at a general meeting about a question of procedure, the chairman may determine the question.

12.7

General Conduct

The general conduct of each general meeting of the Company and the procedures to be adopted at the meeting will be determined by the chairman, including the procedure for the conduct of the election of Directors.

12.8

Casting Vote

In the case of an equality of votes, the chairman of the meeting shall have a second or casting vote.

12.9

Adjournment

The chairman may, with the consent of the meeting, and shall, if so directed by the meeting, adjourn the meeting from time to time and from place to place, but no business shall be transacted on the resumption of any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. A poll cannot be demanded on any resolution concerning the adjournment of a general meeting except by the chairman.

12.10

Notice of Resumption of Adjourned Meeting

When a meeting is adjourned for 30 days or more, notice of the resumption of the adjourned meeting shall be given in the same manner as for the original meeting, but otherwise, it is not necessary to give any notice of any adjournment or of the business to be transacted on the resumption of the adjourned meeting.

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12.11

Voting Rights

Subject to any rights or restrictions for the time being attached to any class or classes of Shares, at meetings of Shareholders or classes of Shareholders:

(a)

each Shareholder entitled to vote may vote in person or by proxy, attorney or Representative;

(b)

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

(c)

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 being equivalent to the proportion which the amount paid (not credited) is of the total amounts paid and payable in respect of those Shares (excluding amounts credited).

12.12

Voting - Show of Hands

At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is demanded in accordance with clause

12.13

Results of Voting

Unless a poll is so demanded, a declaration by the chairman that a resolution has on a show of hands been carried or carried unanimously or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of general meetings of the Company, is conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution.

12.14

Poll

A poll may be demanded before or immediately upon the declaration of the result of the show of hands by:

(a)

the chairman of the general meeting;

(b)

at least 5 Shareholders present in person or by proxy, attorney or Representative having the right to vote on the resolution; or

(c)

any one or more Shareholders holding not less than 5% of the total voting rights of all Shareholders having the right to vote on the resolution.

12.15

Manner of Taking Poll

If a poll is duly demanded, it shall be taken in such manner and either at once or after an interval or adjournment or otherwise as the chairman directs, and the result of the poll shall be the resolution of the meeting at which the poll was demanded. A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith.

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12.16

Meeting May Continue

A demand for a poll shall not prevent the continuation of the meeting for the transaction of other business.

12.17

Voting by Joint Holders

In the case of joint holders of Shares, the vote of the senior who tenders a vote, whether in person or by proxy, attorney or Representative, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the Register of Shareholders.

12.18

Shareholder under Disability

If a Shareholder is of unsound mind or is a person whose person or estate is liable to be dealt with in any way under the law relating to mental health, his committee or trustee or any other person that properly has the management of his estate may exercise any rights of the Shareholder in relation to a general meeting as if the committee, trustee or other person were the Shareholder.

12.19

Payment of Calls

A Shareholder is not entitled to any vote at a general meeting unless all calls presently payable by him in respect of Shares have been paid. Nothing in this clause prevents such a Shareholder from voting at a general meeting in relation to any other Shares held by that Shareholder provided all calls and other sums payable by him have been paid on those other Shares.

12.20

Objection to Voting

An objection may be raised to the qualification of a voter only at the meeting or adjourned meeting at which the vote objected to is given or tendered. This objection shall be referred to the chairman of the meeting, whose decision shall be final. A vote not disallowed pursuant to such an objection is valid for all purposes.

12.21

Proxies

An instrument appointing a proxy:

(a)

shall be in writing under the hand of the appointor or of his attorney, or, if the appointor is a corporation, executed in accordance with the Corporations Act;

(b)

shall specify the manner in which the proxy is to vote in respect of a particular resolution and, where an instrument of proxy so provides, the proxy is not entitled to vote on the resolution except as specified in the instrument;

(c)

shall be deemed to confer authority to demand or join in demanding a poll;

(d)

shall be in such form as the Directors determine and which complies with Division 6 of Part 2G.2 of the Corporations Act;

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(e)

shall not be valid unless the original instrument and the power of attorney or other authority (if any) under which the instrument is signed, or a copy or facsimile which appears on its face to be an authentic copy of that proxy, power or authority, is or are deposited or sent by facsimile transmission to the Registered Office, or at such other place (being the place or being in the reasonable proximity of the place at which the meeting is to be held) as is specified for that purpose in the notice convening the meeting, duly stamped where necessary, by the time (being not less than 48 hours) prior to the commencement of the meeting (or the resumption of the meeting if the meeting is adjourned and notice is given in accordance with clause 12.10) as shall be specified in the notice convening the meeting (or the notice under clause 12.10, as the case may be); and

(f)

shall comply with the Listing Rules.

12.22

Electronic Appointment of Proxy

For the purposes of clause 12.21, an appointment received at an electronic address will be taken to be signed by the appointor if:

(a)

a personal identification code allocated by the Company to the appointor has been input into the appointment; or

(b)

the appointment has been verified in another manner approved by the Directors.

12.23

Proxy Votes

A vote given in accordance with the terms of an instrument of proxy is valid notwithstanding the previous death or unsoundness of mind of the principal, the revocation of the instrument (or the authority under which the instrument was executed) or the transfer of the Share in respect of which the instrument or power is given, if no intimation in writing of the death, unsoundness of mind, revocation or transfer has been received by the Company at the Registered Office before the commencement of the meeting or adjourned meeting at which the instrument is used or the power is exercised.

12.24

Representatives of Corporate Shareholders

A body corporate (the appointor) that is a Shareholder may authorise, in accordance with Section 250D of the Corporations Act, by resolution of its Directors or other governing body, such person or persons as it may determine to act as its Representative at any general meeting of the Company or of any class of Shareholders. A person so authorised shall be entitled to exercise all the rights and privileges of the appointor as a Shareholder. When a Representative is present at a general meeting of the Company, the appointor shall be deemed to be personally present at the meeting unless the Representative is otherwise entitled to be present at the meeting. The original form of appointment of a Representative, a certified copy of the appointment, or a certificate of the body corporate evidencing the appointment of a Representative is evidence of a Representative having been appointed.

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13.

THE DIRECTORS

13.1

Number of Directors

The Company shall at all times have at least 3 Directors. The number of Directors shall not exceed 9. Subject to the Corporations Act, the Company may, by ordinary resolution, increase or reduce the number of Directors and may also determine in what rotation the increased or reduced number is to go out of office. Subject to any resolution of the Company determining the maximum and minimum numbers of Directors, the Directors may from time to time determine the respective number of Executive and Non Executive Directors.

13.2

Rotation of Directors

Subject to clause 17.4, at the Company's first annual general meeting after incorporation, all the Directors shall retire from office, and at the annual general meeting in every subsequent year, one-third of the Directors for the time being, or, if their number is not a multiple of 3, then the number nearest one-third (rounded upwards in case of doubt), shall retire from office, provided always that no Director except a Managing Director shall hold office for a period in excess of 3 years, or until the third annual general meeting following his or her appointment, whichever is the longer, without submitting himself for re-election. The Directors to retire at an annual general meeting other than the first annual general meeting are those who have been longest in office since their last election, but, as between persons who became Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by drawing lots. A retiring Dir ector is eligible for re-election. An election of Directors shall take place each year.

13.3

Election of Directors

Subject to the provisions of this Constitution, the Company may elect a person as a Director by resolution passed in general meeting. A Director elected at a general meeting is taken to have been elected with effect immediately after the end of that general meeting unless the resolution by which the Director was appointed or elected specifies a different time. No person other than a Director seeking reelection shall be eligible for election to the office of Director at any general meeting unless the person or some Shareholder intending to propose his or her nomination has, at least 30 Business Days before the meeting, left at the Registered Office a notice in writing duly signed by the nominee giving his or her consent to the nomination and signifying his or her candidature for the office or the intention of the Shareholder to propose the person. Notice of every candidature for election as a Director shall be given to each Shareholder with or as part of the notice of the meeting at which the election is to take place. The Company shall observe the requirements of Section 225 of the Corporations Act with respect to the election of Directors. If the number of nominations exceeds the vacancies available having regard to clause 13.1, the order in which the candidates shall be put up for election shall be determined by the drawing of lots supervised by the Directors and once sufficient candidates have been elected to fill up the vacancies available, the remaining candidates shall be deemed defeated without the need for votes to be taken on their election.

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13.4

Additional Directors

The Directors may at any time appoint a person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors, but so that the total number of Directors does not at any time exceed the maximum number specified by this Constitution. Any Director so appointed holds office only until the next following general meeting and is then eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation (if any) at that meeting.

13.5

Removal of Director

The Company may by resolution remove any Director before the expiration of his period of office, and may by resolution appoint another person in his place. The person so appointed is subject to retirement at the same time as if he had become a Director on the day on which the Director in whose place he is appointed was last elected a Director.

13.6

Vacation of Office

The office of Director shall automatically become vacant if the Director:

(a)

ceases to be a Director by virtue of Section 203D or any other provision of the Corporations Act;

(b)

becomes bankrupt or makes any arrangement or composition with his creditors generally;

(c)

becomes prohibited from being a Director by reason of any order made under the Corporations Act;

(d)

becomes of unsound mind or a person whose person or estate is liable to be dealt with in any way under the law relating to mental health;

(e)

resigns his or her office by notice in writing to the Company;

(f)

is removed from office under clause 13.5; or

(g)

is absent for more than 6 months, without permission of the Directors, from meetings of the Directors held during that period.

13.7

Remuneration

The Directors shall be paid out of the funds of the Company, by way of remuneration for their services as Directors. Subject to clause 13.8 below, the total aggregate fixed sum per annum to be paid to the Directors from time to time will not exceed the sum determined by the Shareholders in general meeting and the total aggregate fixed sum will be divided between the Directors as the Directors shall determine and, in default of agreement between them, then in equal shares. No non-executive Director shall be paid as part or whole of his remuneration a commission on or a percentage of profits or a commission or a percentage of operating revenue, and no executive Director shall be paid as whole or part of his remuneration a commission on or percentage of operating revenue. The remuneration of a Director shall be deemed to accrue from day to day. Any increase in the remuneration of Directors shall be in accordance with the Corporations Act and the Listing Rules.

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13.8

Initial Fees to Directors

The total aggregate fixed sum per annum to be paid to Directors in accordance with clause 13.7 shall initially be $200,000 and may be varied by ordinary resolution of the Shareholders in General Meeting.

13.9

Expenses

The Directors shall be entitled to be paid reasonable travelling, hotel and other expenses incurred by them respectively in or about the performance of their duties as Directors. If any of the Directors being willing are called upon to perform extra services or make any special exertions on behalf of the Company or its business, the Directors may remunerate this Director in accordance with such services or exertions, and this remuneration may be either in addition to or in substitution for his or her share in the remuneration provided for by clause 13.7.

13.10

No Share Qualification

A Director is not required to hold any Shares.

14.

POWERS AND DUTIES OF DIRECTORS

14.1

Management of the Company

Subject to the Corporations Act and the Listing Rules and to any other provision of this Constitution, the business of the Company shall be managed by the Directors, who may pay all expenses incurred in promoting and forming the Company, and may exercise all such powers of the Company as are not, by the Corporations Act or the Listing Rules or by this Constitution, required to be exercised by the Company in general meeting.

14.2

Borrowings

Without limiting the generality of clause 14.1, the Directors may at any time:

(a)

exercise all powers of the Company to borrow money, to charge any property or business of the Company or all or any of its uncalled capital and to issue debentures or give any other security for a debt, liability or obligation of the Company or of any other person;

(b)

subject to Shareholder approval, sell or otherwise dispose of the whole or any part of the assets, undertakings and other properties of the Company or any that may be acquired on such terms and conditions as they may deem advisable, but:

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(i)

if the Company is listed on ASX, the Company shall comply with the Listing Rules which relate to the sale or disposal of a company’s assets, undertakings or other properties; and

(ii)

on the sale or disposition of the Company's main undertaking or on the liquidation of the Company, no commission or fee shall be paid to any Director or Directors or to any liquidator of the Company unless it shall have been ratified by the Company in general meeting, with prior notification of the amount of such proposed payments having been given to all Shareholders at least 7 days prior to the meeting at which any such payment is to be considered; and

(c)

take any action necessary or desirable to enable the Company to comply with the Listing Rules.

14.3

Attorneys

The Directors may, by power of attorney, appoint any person or persons to be the attorney or attorneys of the Company for the purposes, with the powers, authorities and discretions (being powers, authorities and discretions vested in or exercisable by the Directors), for the period and subject to the conditions as they think fit. This power of attorney may contain provisions for the protection and convenience of persons dealing with the attorney as the Directors may determine and may also authorise the attorney to delegate all or any of the powers, authorities and discretions vested in the person.

14.4

Cheques, etc.

All cheques, promissory notes, bankers drafts, bills of exchange and other negotiable instruments, and all receipts for money paid to the Company, shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, by any two Directors or in any other manner as the Directors determine.

14.5

Retirement Benefits for Directors

The Directors may at any time, subject to the Listing Rules, adopt any scheme or plan which they consider to be in the interests of the Company and which is designed to provide retiring or superannuation benefits for both present and future non-executive Directors, and they may from time to time vary this scheme or plan. Any scheme or plan may be effected by agreements entered into by the Company with individual Directors, or by the establishment of a separate trust or fund, or in any other manner the Directors consider proper. The Directors may attach any terms and conditions to any entitlement under any such scheme or plan that they think fit, including, without limitation, a minimum period of service by a Director before the accrual of any entitlement and the acceptance by the Directors of a prescribed retiring age. No scheme or plan shall operate to confer upon any Director or on any of the dependants of any Director any benefits exceeding those contemplated in Se ction 200F of the Corporations Act or the Listing Rules, except with the approval of the Company in general meeting.

14.6

Securities to Directors or Shareholders

If a Director acting solely in the capacity of Director of the Company shall become personally liable for the payment of any sum primarily due by the Company, the Directors may create any mortgage, charge or security over or affecting the whole or any part of the assets of the Company by way of indemnity to secure the persons or person so becoming liable from any loss in respect of such liability.

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15.

PROCEEDINGS OF DIRECTORS

15.1

Convening a Meeting

A Director may at any time, and a Secretary shall, whenever requested to do so by one or more Directors, convene a meeting of the Directors, but not less than 24 hours' notice of every such meeting shall be given to each Director either by personal telephone contact or in writing by the convenor of the meeting. The Directors may by unanimous resolution agree to shorter notice. An accidental omission to send a notice of a meeting of Directors to any Director or the nonreceipt of such a notice by any Director does not invalidate the proceedings, or any resolution passed, at the meeting.

15.2

Procedure at Meetings

The Directors may meet together for the despatch of business and adjourn and, subject to this clause 15, otherwise regulate the meetings as they think fit.

15.3

Quorum

No business shall be transacted at any meeting of Directors unless a quorum is present, comprising 2 Directors present in person, or by instantaneous communication device, notwithstanding that less than 2 Directors may be permitted to vote on any particular resolution or resolutions at that meeting for any reason whatsoever. Where a quorum cannot be established for the consideration of a particular matter at a meeting of Directors, one or more of the Directors may call a general meeting of the Company to deal with the matter.

15.4

Majority Decisions

Questions arising at any meeting of Directors shall be decided by a majority of votes. A resolution passed by a majority of Directors shall for all purposes be deemed a determination of "the Directors". An Alternate Director has one vote for each Director for whom he or she is an alternate. If an Alternate Director is also a Director, he or she also has a vote as a Director.

15.5

Casting Votes

In the case of an equality of votes, the chairman of the meeting shall have a second or casting vote, but the chairman shall have no casting vote where only 2 Directors are competent to vote on the question.

15.6

Alternate Directors

A Director may appoint any person to be an alternate Director in his or her place during any period as he or she thinks fit, and the following provisions shall apply with respect to any alternate Director:

(a)

he or she is entitled to notice of meetings of the Directors and, if his or her appointor Director is not present at such a meeting, he or she is entitled to attend and vote in the place of the absent Director;

(b)

he or she may exercise any powers that his or her appointor Director may exercise, and the exercise of any such power by the alternate Director shall be deemed to be the exercise of the power by his or her appointor Director;

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(c)

he or she is subject to the provisions of this Constitution which apply to Directors, except that Alternate Directors are not entitled in that capacity to any remuneration from the Company;

(d)

he or she is not required to hold any Shares;

(e)

his or her appointment may be terminated at any time by his or her appointor Director notwithstanding that the period of the appointment of the alternate Director has not expired, and the appointment shall terminate in any event if his or her appointor Director vacates office as a Director; and

(f)

the appointment, or the termination of an appointment, of an alternate Director shall be effected by a written notice signed by the Director who made the appointment given to the Company.

15.7

Continuing Directors May Act

In the event of a vacancy or vacancies in the office of a Director, the remaining Directors may act but, if the number of remaining Directors is not sufficient to constitute a quorum at a meeting of Directors, they may act only for the purposes of appointing a Director or Directors, or in order to convene a general meeting of the Company.

15.8

Chairman

The Directors shall elect from their number a chairman of their meetings and may determine the period for which he or she is to hold office. Where a Directors' meeting is held and a chairman has not been elected or is not present at the meeting within 10 minutes after the time appointed for the meeting to begin, the Directors present shall elect one of their number to be the acting chairman of the meeting. The Directors may elect a Director as deputy chairman to act as chairman in the chairman’s absence.

15.9

Committees

The Directors may delegate any of their powers to a committee or committees consisting of such of their number as they think fit. The Directors may at any time revoke any such delegation of power. A committee to which any powers have been so delegated shall exercise the powers delegated in accordance with any directions of the Directors, and a power so exercised shall be deemed to have been exercised by the Directors. The members of such a committee may elect one of their number as chairman of their meetings. Questions arising at a meeting of a committee shall be determined by a majority of votes of the members present and voting. In the case of an equality of votes, the chairman shall have a casting vote.

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15.10

Written Resolutions

A resolution in writing signed by all the Directors for the time being (or their respective alternate Directors), except those Directors (or their alternates) who expressly indicate their abstention in writing to the Company and those who would not be permitted, by virtue of Section 195 of the Corporations Act to vote, shall be as valid and effectual as if it had been passed at a meeting of the Directors duly convened and held. This resolution may consist of several documents in like form, each signed by one or more Directors. Copies of the documents to be signed under this clause must be sent to every Director who is entitled to vote on the resolution. The resolution is taken to have been passed when the last Director signs the relevant documents. A telex, telegram, facsimile transmission or other document produced by mechanical means and bearing the signature of the Director, printed mechanically and with his authority, shall be deemed to be a document in writing si gned by the Directors.

15.11

Defective Appointment

All acts done by any meeting of the Directors or of a committee of Directors or by any person acting as a Director are, notwithstanding that it is afterwards discovered that there was some defect in the appointment of a person to be, or to act as, a Director, or that a person so appointed was disqualified, as valid as if the person had been duly appointed and was qualified to be a Director or to be a member of the committee.

15.12

Directors May Hold Other Offices

A Director may hold any other office or place of profit in or in relation to the Company (except that of auditor) in conjunction with his or her office of Director and on any terms as to remuneration or otherwise that the Directors shall approve.

15.13

Directors May Hold Shares, etc.

A Director may be or become a shareholder in or director of or hold any other office or place of profit in or in relation to any other company promoted by the Company or in which the Company may be interested, whether as a vendor, shareholder or otherwise.

15.14

Directors Not Accountable for Benefits

No Director shall be accountable for any benefits received as the holder of any other office or place of profit in or in relation to the Company or any other company referred to in clause 15.3 or as a shareholder in or director of any such company.

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15.15

Disclosure of Interests in Related Matters

As required by the Corporations Act, a Director must give the Directors notice of any material personal interest in a matter that relates to the affairs of the Company. No Director shall be disqualified by his office from contracting with the Company whether as vendor, purchaser or otherwise, nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested be avoided or prejudiced on that account, nor shall any Director be liable to account to the Company for any profit arising from any such contract or agreement by reason only of such Director holding that office or of the fiduciary relationship thereby established, but a Director who has a material interest in a matter that is being considered at a meeting of the Directors must not vote on the matter (or in relation to a proposed resolution under Section 195(2) of the Corporations Act in relation to the matter) and must not be present while the matter (or a proposed resolution of that kind) is being considered at the meeting, except where the material interest is an interest that the Director has as a Shareholder of the Company and in common with the other Shareholders of the Company or where a resolution has been passed in accordance with Section 195(2) of the Corporations Act, in which cases the Director may be present but may not vote. Nothing in this Constitution shall be read or construed so as to place on a Director any restrictions other than those required by Section 195 of the Corporations Act or the Listing Rules.

15.16

Disclosure of Shareholding

A Director must give to the Company such information about the Shares or other securities in the Company in which the Director has a relevant interest and at the times that the Secretary requires, to enable the Company to comply with any disclosure obligations it has under the Corporations Act or the Listing Rules.

15.17

Related Body Corporate Contracts

A Director shall not be deemed to be interested or to have been at any time interested in any contract or arrangement by reason only that in a case where the contract or arrangement has been or will be made with, for the benefit of, or on behalf of a Related Body Corporate, he or she is a shareholder in that Related Body Corporate.

15.18

Voting, Affixation of Seal

A Director may in all respects act as a Director in relation to any contract or arrangement in which he or she is interested, including, without limiting the generality of the above, in relation to the use of the Company's common seal, but a Director may not vote in relation to any contract or proposed contract or arrangement in which the Director has directly or indirectly a material interest.

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15.19

Home Branch to be Advised

The Directors shall advise the Home Branch without delay of any material contract involving Director’s or Directors' interests. The advice shall include at least the following information:

(a)

the names of the parties to the contract;

(b)

the name or names of the Director or Directors who has or have any material interest in the contract;

(c)

particulars of the contract; and

(d)

particulars of the relevant Director's or Directors' interest or interests in that contract.

16.

MEETING BY INSTANTANEOUS COMMUNICATION DEVICE

16.1

Meetings to be Effectual

A Director shall be entitled to attend a Directors' meeting by means of an instantaneous communication device rather than in person. In those circumstances, a Director shall still receive all materials and information to be made available for the purposes of the Directors' meeting. For the purposes of this Constitution, the contemporaneous linking together by instantaneous communication device of a number of consenting Directors not less than the quorum, whether or not any one or more of the Directors is out of Australia, shall be deemed to constitute a Directors’ meeting and all the provisions of this Constitution as to the Directors' meetings shall apply to such meetings held by instantaneous communication device so long as the following conditions are met:

(a)

all the directors for the time being entitled to receive notice of the Directors’ meeting (including any alternate for any Director) shall be entitled to notice of a meeting by instantaneous communication device for the purposes of such meeting. Notice of any such Directors' meeting shall be given on the instantaneous communication device or in any other manner permitted by the clause;

(b)

each of the Directors taking part in the Directors' meeting by instantaneous communication device must be able to hear each of the other Directors taking part at the commencement of the Directors' meeting; and

(c)

at the commencement of the Directors' meeting each Director must acknowledge his or her presence for the purpose of a Directors' meeting of the Company to all the other Directors taking part.

A Directors’ meeting held by instantaneous communication device shall be deemed to have been held at the Registered Office.

16.2

Procedure at Meetings

A Director may leave a Directors' meeting held under clause 16.1 by informing the Chairman of the Directors' meeting and then disconnecting his instantaneous communication device. Unless this procedure has been followed a Director shall be conclusively presumed to have been present and to have formed part of the quorum at all times during the Directors' meeting by instantaneous communication device.

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16.3

Minutes

A minute of the proceedings at a meeting held under clause 16.1 shall be sufficient evidence of such proceedings and of the observance of all necessary formalities if certified as a correct minute by the chairman or the person taking the chair at the meeting under clause 16.1.

16.4

Definition

For the purposes of this Constitution, "instantaneous communication device" shall include telephone, television or any other audio or visual device which permits instantaneous communication.

17.

MANAGING AND EXECUTIVE DIRECTORS

17.1

Appointment

The Directors may from time to time appoint one of their number to the office of managing director ("Managing Director") of the Company or to any other office, (except that of auditor), or employment under the Company, either for a fixed term or at will, but not for life and, subject to the terms of any agreement entered into in a particular case, may revoke any such appointment. A Director other than a Managing Director so appointed is in this Constitution referred to as an executive director ("Executive Director"). The appointment of a Managing Director or Executive Director so appointed automatically terminates if he ceases for any reason to be a Director.

17.2

Remuneration

Subject to clause 13.7, a Managing Director or Executive Director shall, subject to the terms of any agreement entered into in a particular case, receive remuneration (whether by way of salary, commission or participation in profits, or partly in one way and partly in another) as the Directors may determine.

17.3

Powers

The Directors may, upon such terms and conditions and with such restrictions as they think fit, confer upon a Managing Director or Executive Director any of the powers exercisable by them. Any powers so conferred may be concurrent with, or be to the exclusion of, the powers of the Directors. The Directors may at any time withdraw or vary any of the powers so conferred on a Managing Director.

17.4

Rotation

A Managing Director shall not retire by rotation in accordance with clause 13.2, but Executive Directors shall.

17.5

Secretary

A Secretary of the Company shall hold office on such terms and conditions, as to remuneration and otherwise, as the Directors determine. There must be at least one Secretary of the Company at all times.

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18.

SEALS

18.1

Common Seal

Subject to the Corporations Act, the Company may have a Seal. The Directors shall provide for the safe custody of the Seal. The Seal shall only be used by the authority of the Directors, or of a committee of the Directors authorised by the Directors to authorise the use of the Seal. Every document to which the Seal is affixed shall be signed by a Director and countersigned by another Director, (who may be an alternate Director) a Secretary or another person appointed by the Directors to countersign that document or a class of documents in which that document is included.

18.2

Share Seal

Subject to the Corporations Act, the Company may have a duplicate Seal, known as the Share Seal, which shall be a facsimile of the Seal with the addition on its face of the words "Share Seal", and the following provisions shall apply to its use:

(a)

any certificate for Shares may be issued under the Share Seal and if so issued shall be deemed to be sealed with the Seal;

(b)

subject to the following provisions of this clause 18.2, the signatures required by clause 18.1 on a document to which the Seal is affixed may be imposedby some mechanical means;

(c)

subject to the following provisions of this clause 18.2, the Directors may determine the manner in which the Share Seal shall be affixed to any document and by whom a document to which the Share Seal is affixed shall be signed, and whether any signature so required on such a document must be actually written on the document or whether it may be imposed by some mechanical means;

(d)

the only documents on which the Share Seal may be used shall be Share or stock unit certificates, debentures or certificates of debenture stock, secured or unsecured notes, option certificates and any certificates or other documents evidencing any Share Options or rights to take up any Shares in or debenture stock or debentures or notes of the Company; and

(e)

signatures shall not be imposed by mechanical means nor (except when the requirements of clause 18.1 as to signatures are complied with) shall the Share Seal be used on any certificate or other document mentioned in clause 18.2(d) unless the certificate or other document has first been approved for sealing or signature (as the case may be) by the Board or other authorised person or persons.

19.

ACCOUNTS, AUDIT AND RECORDS

19.1

Accounting records to be kept

The Directors shall cause proper accounting and other records to be kept by the Company and shall distribute copies of the Company's accounts and reports as required by the Corporations Act and the Listing Rules.

19.2

Audit

The Company shall comply with the requirements of the Corporations Act and the Listing Rules as to the audit of accounts, registers and records.

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19.3

Inspection

The Directors shall determine whether and to what extent, and at what time and places and under what conditions, the accounting records and other documents of the Company or any of them will be open to the inspection of Shareholders other than Directors. A Shareholder other than a Director shall not be entitled to inspect any document of the Company except as provided by law or authorised by the Directors or by the Company in general meeting.

20.

MINUTES

20.1

Minutes to be Kept

The Directors shall cause to be kept, in accordance with Section 1306 of the Corporations Act, minutes of:

(a)

all proceedings of general meetings and Directors meetings; and

(b)

all appointments of Officers and persons ceasing to be Officers.

20.2

Signature of Minutes

All minutes shall be signed by the chairman of the meeting at which the proceedings took place or by the chairman of the next succeeding meeting.

20.3

Requirements of the Corporations Act

The Company and the Officers shall comply with the requirements of Part 2G.3 of Chapter 2G of the Corporations Act.

21.

DIVIDENDS AND RESERVES

21.1

Dividends

The Directors may from time to time declare a dividend to be paid to the Shareholders entitled to the dividend. Subject to clause 6.5 and subject 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 dividend, the dividend as declared shall be payable on all Shares according to the proportion that the amount paid (not credited) is of the total amounts paid and payable (excluding amounts credited) in respect of such Shares in accordance with Part 2H.5 of Chapter 2H of the Corporations Act.

21.2

Interim Dividend

The Directors may from time to time pay to the Shareholders any interim dividends that they may determine.

21.3

Dividends only Payable from Profits

No dividend shall be payable except out or profits. A determination by the Directors as to the profits of the Company shall be conclusive.

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21.4

No Interest

No dividend shall carry interest as against the Company.

21.5

Reserves

The Directors may set aside out of the profits of the Company any amounts that they may determine as reserves, to be applied at the discretion of the Directors, for any purpose for which the profits of the Company may be properly applied. Pending any application of the reserves, the Directors may invest or use the reserves in the business of the Company or in other investments as they think fit.

21.6

Alternative Method of Payment of Dividend

When declaring any dividend and subject at all times to the Corporations Act and the Listing Rules, the Directors may:

(a)

direct payment of the dividend to be made wholly or in part by the distribution of specific assets or documents of title (including, without limitation, paid-up Shares, debentures or debenture stock of this or any other company, gold, gold or mint certificates or receipts and like documents) or in any one of more of these ways, and where any difficulty arises with regard to the distribution the Directors may settle it as they think expedient and in particular may issue fractional certificates and may fix the value for distribution of specific assets or any part of them and may determine that cash payments shall be made to any Shareholders upon the basis of the value so fixed in order to adjust the rights of all parties and may vest any of these specific assets in trustees upon trusts for the persons entitled to the dividend as may seem expedient to the Directors; or

(b)

direct that a dividend be payable to particular Shareholders wholly or partly out of any particular fund or reserve or out of profits derived from any particular source and to the remaining Shareholders wholly or partly or of any other particular fund or reserve or out of profits derived from any other particular source and may so direct notwithstanding that by so doing the dividend will form part of the assessable income for taxation purposes of some Shareholders and will not form part of the assessable income of others.

For the purposes of this clause, the Company is authorised to distribute securities of another body corporate by way of dividend and, on behalf of the shareholders, provide the consent of each shareholder to becoming a member of that body corporate and the agreement of each shareholder to being bound by the constitution of that body corporate.

21.7

Payment of Dividends

All dividends shall be dispatched simultaneously to the Shareholders entitled to the dividend. Any dividend payable may be paid by:

(a)

cheque sent through the mail directed to:

(i)

the address of the Shareholder shown in the Register or to the address of the joint holders of Shares shown first in the Register; or

38

(ii)

an address which the Shareholder has, or joint holders have, in writing notified the Company as the address to which dividends should be sent;

(b)

electronic funds transfer to an account with a bank or other financial institution nominated by the Shareholder and acceptable to the Company; or

(c)

any other means determined by the Directors.

21.8

Unclaimed Dividends

Except as otherwise provided by statute, all dividends unclaimed for one year after having been declared may be invested or otherwise made use of by the Directors for the benefit of the Company until claimed.

22.

CAPITALISATION OF PROFITS

22.1

Capitalisation

The Directors, subject to the Listing Rules, may from time to time determine to capitalise any amount, being the whole or a part of the amount for the time being standing to the credit of any reserve account or the profit and loss account or otherwise available for distribution to Shareholders, and that that amount be applied, in any of the ways mentioned in clause 22.2 for the benefit of Shareholders in the proportions to which those Shareholders would have been entitled in a distribution of that amount by way of dividend.

22.2

Application of Capitalised Amounts

The ways in which an amount may be applied for the benefit of Shareholders under clause 22.1 are:

(a)

in paying up any amounts unpaid on Shares held by Shareholders;

(b)

in paying up in full unissued Shares or debentures to be issued to Shareholders as fully paid; or

(c)

partly as mentioned in paragraph (a) and partly as mentioned in paragraph (b).

22.3

Procedures

The Directors shall do all things necessary to give effect to the resolution referred to in clause 22.1 and, in particular, to the extent necessary to adjust the rights of the Shareholders among themselves, may:

(a)

issue fractional certificates or make cash payments in cases where Shares or debentures could only be issued in fractions; and

(b)

authorise any person to make, on behalf of all the Shareholders entitled to any further Shares or debentures upon the capitalisation, an agreement with the Company providing for the issue to them, credited as fully paid up, of any further Shares or debentures or for the payment up by the Company on their behalf of the amounts or any part of the amounts remaining unpaid on their existing Shares by the application of their respective proportions of the sum resolved to be capitalised,

and any agreement made under an authority referred to in paragraph (b) is effective and binding on all the Shareholders concerned.

39

23.

BONUS SHARE PLAN

23.1

Authorisation of Bonus Share Plan

Subject to the Listing Rules and the Corporations Act, the Company may, by ordinary resolution in general meeting, authorise the Directors to implement a Bonus Share Plan on such terms and conditions as are referred to in the resolution and which plan provides for any dividend which the Directors may declare from time to time under clause 21, less any amount which the Company shall either pursuant to this Constitution or any law be entitled or obliged to retain, not to be payable on Shares which are participating Shares in the Bonus Share Plan but for those Shares to carry instead an entitlement to receive an allotment of additional fully paid ordinary Shares to be issued as bonus Shares.

23.2

Amendment and Revocation

Any resolution passed by the Company in general meeting pursuant to clause 23.1 may, at any time, be amended or revoked by the Company by ordinary resolution in general meeting.

24.

DIVIDEND REINVESTMENT PLAN

24.1

Authorisation of Dividend Reinvestment Plan

Subject to the Listing Rules and the Corporations Act, the Company may, by resolution of the Directors, implement a Dividend Reinvestment Plan on such terms and conditions as are referred to in the resolution and which plan provides for any dividend which the Directors may declare from time to time under clause 21 and payable on Shares which are participating Shares in the Dividend Reinvestment Plan, less any amount which the Company shall either pursuant to this Constitution or any law be entitled or obliged to retain, to be applied by the Company to the payment of the subscription price of ordinary fully paid Shares.

24.2

Amendment and Revocation

Any resolution passed by the Company in general meeting pursuant to clause 24.1 may, at any time, be amended or revoked by the Company by ordinary resolution in general meeting.

25.

NOTICES

25.1

Service

A notice may be given by the Company to any Shareholder either by:

(a)

serving it on him or her personally; or

(b)

by sending it by post to the Shareholder at his or her address as shown in the Register of Shareholders or the address supplied by the Shareholder to the Company for the giving of notices to this person. Notices to Shareholders whose registered address is outside Australia shall be sent by airmail or, where applicable, by the means provided for by clause 25.7; or

(c)

be sending it to the fax number or electronic address (if any) nominated by the member.

40

25.2

Deemed receipt of Notice

A notice will be deemed to be received by a Shareholder when:

(a)

where a notice is served personally, service of the notice shall be deemed to be effected when hand delivered to the member in person;

(b)

where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, pre-paying and posting a letter containing the notice, and to have been effected, in the case of a notice of a meeting, on the date after the date of its posting and, in any other case, at the time at which the letter would be delivered in the ordinary course of post;

(c)

where a notice is sent by facsimile, service of the notice shall be deemed to be effected upon confirmation being received by the Company that all pages of the notice have been successfully transmitted to the member’s facsimile machine at the facsimile number nominated by the member; and

(d)

where a notice is sent to an electronic address by electronic means, service of the notice shall be deemed to be effected once sent by the Company to the electronic address nominated by the member (regardless of whether or not the notice is actually received by the member).

25.3

Notice to Joint Holders

A notice may be given by the Company to the joint holders of a Share by giving the notice to the joint holder first named in the Register of Shareholders in respect of the Share.

25.4

Notices to Personal Representatives and Others

A notice may be given by the Company to a person entitled to a Share in consequence of the death or bankruptcy of a Shareholder by serving it on him or her or by sending it to him or her by post addressed to the person by name or by the title or representative of the deceased or assignee of the bankrupt, or by any like description, at the address (if any) supplied for the purpose by the person or, if such an address has not been supplied, at the address to which the notice might have been sent if the death or bankruptcy has not occurred.

25.5

Persons Entitled to Notice

Notice of every general meeting shall be given to:

(a)

every Shareholder;

(b)

every person entitled to a Share in consequence of the death or bankruptcy of a Shareholder who, but for his death or bankruptcy, would be entitled to receive notice of the meeting;

(c)

every Director or Alternate Director;

(d)

the auditor for the time being of the Company; and

(e)

if the Company has issued and there are currently any Listed Securities, the Home Branch.

41

No other person is entitled to receive notices of general meetings.

25.6

Change of Address

The Company shall acknowledge receipt of all notifications of change of address by Shareholders.

25.7

Incorrect Address

Where the Company has bona fide reason to believe that a Shareholder is not known at his or her registered address, and the Company has subsequently made an enquiry in writing at that address as to the whereabouts of the Shareholder and this enquiry either elicits no response or a response indicating that the Shareholder or his present whereabouts are unknown, all future notices will be deemed to be given to the Shareholder if the notice is exhibited in the Registered Office (or, in the case of a member registered on a Branch Register, in a conspicuous place in the place where the Branch Register is kept) for a period of 48 hours (and shall be deemed to be duly served at the commencement of that period) unless and until the Shareholder informs the Company of a new address to which the Company may send him notices (which new address shall be deemed his registered address).

26.

WINDING UP

26.1

Distribution in Kind

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 a value as the liquidator considers fair upon any property to be so decided, and may determine how the division is to be carried out as between the Shareholders or different classes of Shareholders.

26.2

Trust for Shareholders

The liquidator may, with the authority of a special resolution, vest the whole or any part of any 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.

26.3

Order for winding up

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 Shareholders, Shares classified by ASX as Restricted Securities at the time of the commencement of the winding up shall rank in priority after all other Shares.

27.

INDEMNITIES AND INSURANCE

27.1

Liability to Third Parties

The Company:

(a)

indemnifies and agrees to keep indemnified every director, principal executive officer or secretary of the Company;

42

(b)

may, by deed, indemnify or agree to indemnify an officer (other than a director, principal executive officer or secretary) of the Company,

against a liability to another person, other than the Company or a related body corporate of the Company, PROVIDED THAT:

(c)

the provisions of the Corporations Act (including, but not limited to, Chapter 2E) are complied with in relation to the giving of the indemnity; and

(d)

the liability does not arise in respect of conduct involving a lack of good faith on the part of the officer.

27.2

Defending Proceedings

The Company:

(a)

hereby indemnifies and agrees to keep indemnified every director, principal executive officer and secretary of the Company; and

(b)

may, by deed, indemnify or agree to indemnify an officer of the Company (other than a director, principal executive officer or secretary);

out of the property of the Company in relation to the period during which that officer held his or her office against a liability for costs and expenses incurred by that officer in that capacity:

(c)

in defending proceedings, whether civil or criminal, in which:

(i)

judgment is given in favour of that officer; or

(ii)

that officer is acquitted; or

(d)

in connection with an application in relation to any proceedings referred to in clause 27.2(c) in which relief is granted to that officer by the Court under the Corporations Act.

27.3

Insurance

The Company or a related body corporate of the Company may pay, or agree to pay, a premium under a contract insuring an officer in relation to the period during which that officer held that office, including in respect of a liability for costs and expenses incurred by a person in defending civil or criminal proceedings whether or not the officer has successfully defended himself or herself in these proceedings, provided that:

(a)

the provisions of the Corporations Act (including, but not limited to, Chapter 2E) are complied with in relation to the payment of the premium; and

(b)

the liability does not arise out of conduct involving a wilful breach of duty to the Company or a contravention of Sections 184(2) or (3) of the Corporations Act.

43

27.4

Disclosure

Subject to any exception provided for in the Corporations Act, full particulars of the Company's indemnities and insurance premiums in relation to the officers must be included each year in the Directors' Report.

27.5

Definition

For the purposes of this clause 27, “officer” means:

(a)

a director, secretary or executive officer of the Company, whether past, present or future by whatever name called and whether or not validly appointed to occupy or duly authorised to act in such a position; and

(b)

any person who by virtue of any applicable legislation or law is deemed to be a director or officer of the Company, including without limitation, the persons defined as an officer of a company by Section 9 of the Corporations Act.

Nothing in this clause 27 precludes the Company from indemnifying employees (other than officers) and consultants or sub-contractors where the Directors consider it is necessary or appropriate in the exercise of their powers to manage the Company.

28.

OVERSEAS SHAREHOLDERS

Each Shareholder with a registered address outside Australia acknowledges that, with the approval of the Home Branch, the Company may, as contemplated by the Listing Rules, arrange for a nominee to dispose of any of its entitlement to participate in any issue of Shares or Share Options by the Company to Shareholders.

29.

LOCAL MANAGEMENT

29.1

Local Management

The Directors may from time to time provide for the management and transaction of the affairs of the Company in any specified locality whether in or outside the State in such manner as it thinks fit and the provisions contained in clauses 29.2, 29.3and 29.4shall be without prejudice to the general powers conferred by this clause 29.1.

29.2

Local Boards or Agencies

The Directors may at any time and from time to time establish any local boards or agencies for managing any of the affairs of the Company in any specified locality and appoint any persons to be Shareholders of a local board or any managers or agents and may fix their remuneration. The Directors may from time to time and at any time delegate to any person so appointed any of the powers, authorities and discretions for the time being vested in the Directors other than the power of making calls and may authorise the Shareholders for the time being of any local board or any of them to fill up any vacancies on a local board and to act notwithstanding vacancies. This appointment or delegation may be made on the terms and subject to the conditions that the Directors think fit and the Directors may at any time remove any person so appointed and may annul or vary any or all of this delegation.

44

29.3

Appointment of Attorneys

The Directors may at any time and from time to time by power of attorney under the Company's seal appoint any person or persons to be the attorney or attorneys of the Company for purposes and with powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under the clause) and for the period and subject to the conditions that the Directors may from time to time think fit. This appointment may (if the Directors think fit) be made in favour of the Shareholders or any of the Shareholders of any local board established under clause 29.2 or in favour of any company or of the Shareholders, directors, nominees or managers of any company or firm or in favour of any fluctuating body of persons whether or not nominated directly by the Directors. The power of attorney may contain any provisions for the protection or convenience of persons dealing with such attorney or attorneys that the Directors think fit.

29.4

Authority of Attorneys

Any such delegates or attorneys as appointed under this Constitution may be authorised by the Directors to sub-delegate all or any of the powers, authorities and discretions for the time being vested in them.

30.

DISCOVERY

Save as provided by the Corporations Act or the Listing Rules no Shareholder shall be entitled to require discovery of any information in respect of any details of the Company's trading or any matter which is or may be in the nature of a trade secret, mystery of trade or technical process which may relate to the business of the Company and which in the opinion of the Directors it would be expedient in the interests of the Shareholders of the Company to communicate.

31.

SALE OF THE COMPANY'S MAIN UNDERTAKING

For so long only as any of the securities of the Company are Listed Securities then, notwithstanding anything to the contrary contained in this Constitution, any sale or disposal of the Company's main undertaking shall be conditional upon approval by an ordinary resolution of the Shareholders.

32.

COMPLIANCE (OR INCONSISTENCY) WITH THE LISTING RULES

If the Company is admitted to the Official List of ASX, the following clauses apply:

(a)

notwithstanding anything contained in this Constitution, if the Listing Rules prohibit an act being done, the act shall not be done;

(b)

nothing contained in this Constitution prevents an act being done that the Listing Rules require to be done;

(c)

if the Listing Rules require an act to be done or not to be done, authority is given for that act to be done or not to be done (as the case may be);

(d)

if the Listing Rules require this Constitution to contain a provision and it does not contain such a provision, this Constitution is deemed to contain that provision;

45

(e)

if the Listing Rules require this Constitution not to contain a provision and it contains such a provision, this Constitution is deemed not to contain that provision; and

(f)

if any provision of this Constitution is or becomes inconsistent with the Listing Rules, this Constitution is deemed not to contain that provision to the extent of inconsistency.

33.

CONSISTENCY WITH CHAPTER 2E OF THE CORPORATIONS ACT

33.1

Requirements of Chapter 2E

Notwithstanding any other provision to the contrary contained in this Constitution:

(a)

the Company shall not give a financial benefit to a related party except as permitted by Chapter 2E of the Corporations Act;

(b)

all notices convening general meetings for the purposes of Section 208 of the Corporations Act shall comply with the requirements of Sections 217 to227 of the Corporations Act;

(c)

all meetings convened pursuant to Section 221 shall be held in accordance with the requirements of Section 225 of the Corporations Act; and

(d)

no holder of Shares or person on their behalf shall be entitled to vote or vote on a proposed resolution under Part 2E.1 of the Corporations Act if that holder of Shares is a related party of the public company to whom the resolution would permit a financial benefit to be given or an associate of such a related party.

33.2

Definitions

For the purposes of this clause 33 the terms:

(a)

"financial benefit" and "related party" shall have the meanings given or indicated by Part 2E.1 and Part 2E.2 of the Corporations Act"; and

(b)

"associate" shall have the meaning given to it in Division 2 of Part 1.2 of the Corporations Act.

34.

TRANSITIONAL

34.1

Provisions Relating to Official Quotation of Securities

Subject to clause 34.2 the provisions of this Constitution which relate to the official quotation of the Company's securities on ASX ("Official Quotation"), including but not limited to clauses which refer to ASX, the Listing Rules, the ASTC Settlement Rules, the Home Exchange, CHESS, Restricted Securities or Listed Securities shall not come into effect until such time as the Company is admitted to the official list of entities that ASX has admitted and not removed.

46

34.2

Severance

To the extent that any of the provisions of this Constitution referred to in clause 34.1 above can continue to have effect following severance of the matters relating to Official Quotation, then such provisions shall be valid and effectual, notwithstanding clause 34.1, as from the date of adoption of this Constitution by special resolution of the members of the Company.

47

SCHEDULE 1

(Clause 2.4)

PREFERENCE SHARES

1.

In this schedule, unless the context otherwise requires:

Dividend Date means, in relation to a Preference Share, a date specified in the Issue Resolution on which a Dividend in respect of that Preference Share is payable.

Dividend Rate means, in relation to a Preference Share, the term specified in the Issue Resolution for the calculation of the amount of Dividend to be paid in respect of that Preference Share on any Dividend Date, which calculation may be wholly or partly established by reference to an algebraic formula.

Franked Dividend has the same meaning ascribed to it in Section 160APA of the Tax Act.

Issue Resolution means the resolution specified in clause 4 of this schedule.

Preference Share means a preference share issued under clause 2.5.

Redeemable Preference Share means a Preference Share which the Issue Resolution specified as being, or being at the option of the Company to be, liable to be redeemed.

Redemption Amount means, in relation to a Redeemable Preference Share, the amount specified to be paid on redemption of the Redeemable Preference Share.

Redemption Date means, in relation to a Redeemable Preference Share, the date specified in the Issue Resolution for the redemption of that Preference Share.

Tax Act means the Income Tax Assessment Act 1936.

2.

Each Preference Share confers upon its holder:

(a)

the right in a winding up to payment in cash of the capital (including any premium) then paid up on it, and any arrears of Dividend in respect of that Preference Share, in priority to any other class of Shares;

(b)

the right in priority to any payment of Dividend to any other class of Shares to a cumulative preferential Dividend payable on each Dividend Date in relation to that Preference Share calculated in accordance with the Dividend Rate in relation to that Preference Share; and

(c)

no right to participate beyond the extent elsewhere specified in clause 2 of this schedule in surplus assets or profits of the Company, whether in a winding up or otherwise.

3.

Each Preference Share also confers upon its holder the same rights as the holders of ordinary Shares to receive notices, reports, audited accounts and balance sheets of the Company and to attend general meetings and confers upon its holder the right to vote at any general meeting of the Company in each of the following circumstances and in no others:

(a)

during a period during which a dividend (or part of a dividend) in respect of the Preference Share is in arrears;

(b)

on a proposal to reduce the Company’s share capital;

(c)

on a resolution to approve the terms of a buy-back agreement;

(d)

on a proposal that affects rights attached to the Preference Share;

(e)

on a proposal to wind up the Company;

(f)

on a proposal for the disposal of the whole of the Company’s property, business and undertaking; and

(g)

during the winding up of the Company.

4.

The Board may only allot a Preference Share where by resolution it specifies the Dividend Date, the Dividend Rate, and whether the Preference Share is or is not, or at the option of the Company is to be, liable to be redeemed, and, if the Preference Share is a Redeemable Preference Share, the Redemption Amount and Redemption Date for that Redeemable Preference Share and any other terms and conditions to apply to that Preference Share.

5.

The Issue Resolution in establishing the Dividend Rate for a Preference Share may specify that the Dividend is to be one of:

(a)

fixed;

(b)

variable depending upon any variation of the respective values of any factors in an algebraic formula specified in the Issue Resolution; or

(c)

variable depending upon such other factors as the Board may specify in the Issue Resolution, and may also specify that the Dividend is to be a Franked Dividend or not a Franked Dividend.

6.

Where the Issue Resolution specifies that the Dividend to be paid in respect of the Preference Share is to be a Franked Dividend the Issue Resolution may also specify:

(a)

the extent to which such Dividend is to be franked (within the meaning of the Tax Act); and

(b)

the consequences of any Dividend paid not being so franked, which may include a provision for an increase in the amount of the Dividend to such an extent or by reference to such factors as may be specified in the Issue Resolution.

7.

Subject to the Corporations Act, the Company must redeem a Redeemable Preference Share on issue:

(a)

on the specified date where the Company, at least 15 Business Days before that date, has given a notice to the holder of that Redeemable Preference Share stating that the Redeemable Preference Share will be so redeemed on the specified date; and

(b)

in any event, on the Redemption Date, but no Redeemable Preference Share may be redeemed and no notice of redemption may be given before the second anniversary of the date upon which that Redeemable Preference Share is issued.

8.

The certificate issued by the Company in relation to any Preference Share must specify in relation to that Preference Share:

(a)

the date of issue of the Preference Share;

(b)

the Dividend Rate and Dividend Dates;

(c)

whether the Preference Share is a Redeemable Preference Share and if it is:

(i)

the Redemption Amount and Redemption Date; and

(ii)

the conditions of redemption (if any);

(d)

the conditions of participation (if any) in respect of the Preference Share set out in clause 3 of this schedule; and

(e)

any other matter the Board determines.

9.

On redemption of a Redeemable Preference Share, the Company, after the holder has surrendered to the Company the certificate in respect of that Redeemable Preference Share, must pay to the holder the Redemption Amount in cash, by cheque or in any other form that the holder agrees to in writing.

48

EX-2

Brainytoys Limited

ABN 28 001 894 033

Computershare

All correspondence to:

Computershare Investor Services Pty Limited

GPO Box 2975 Melbourne

Victoria 3001 Australia

1300 557 010

61 3 9415 4000

61 8 9323 2033

web.queries@computershare.com.au

www.computershare.com

MR JOHN SMITH &

MR JIM SMITH &

MRS JANE SMITH

FLAT 123

123 SAMPLE STREET

SAMPLEVILLE VIC 3030

Securityholder Reference Number (SRN)

I 1234567890

Important: You will need to quote this number and

name of issuer for all future dealings in these

Keep it safe and confidential.

Incorporated in New South Wales securities.

ASX code: BRT:                                             

Security class:  FULLY PAID ORDINARY SHARES

Tax File Number/ABN: Not Quoted

Page Number: 1 of 1

Issuer Sponsored Holding Statement as at 30 June 2004

Date	Transaction Type	Registry Reference	Quantity On	Quantity Off	Holding Balance
		OPENING BALANCE			0
30/06/04	Transfer	0099/10099949	10000		10000
		CLOSING BALANCE			10000

The Australian Taxation Office advises you to keep this statement as a permanent record. Disposal of securities by Australian residents may result in Capital Gains Tax. If you would like a copy of "Guide to Capital Gains Tax", published by the ATO, telephone 1300 720 092.

The closing balance shown in this statement is that recorded on the register at the close of business on the statement date.

The closing balance on this statement may not be the current holding balance. Neither the security issuer nor the registrar will be liable for any financial loss incurred by a securityholder who relies on the balance shown without making their own adjustments for any transactions which have yet to be registered.

Please keep this statement for future reference. A fee may be charged for replacement.

Collection and Disclosure Statement

YOUR PERSONAL INFORMATION AND THE ROLE OF THE SECURITIES REGISTRAR

Computershare Investor Services Pty Limited (ABN 48 078 078 279 277) (“CIS”) understands that your privacy is important to you.

In its capacity as registrar for securities issuers (“our clients”), CIS collects personal information. Such information may include your name, address, securityholding balance, tax file number and bank account details. The Primary purpose of collection of personal information if for the maintenance of our clients’ registers of securityholders, facilitating distribution payments and other corporate actions and communications. If you do not provide complete and accurate information, we may not be able to effectively maintain your securityholding.

The Corporations Act 2001, Privacy Act 1988 and rules such as the ASTC Settlement Rules govern the collection, use and disclosure of your personal information.

Your personal information may be disclosed to the securities issuer, persons inspecting securities registers, bidders for your securities in the context of take-overs, regulatory bodies, including the Australian Tax Office, and authorized securities brokers. Your personal information may also be disclosed to contracted external service providers for the purpose of paying distributions and mailing corporate communication such as notice of meetings, proxy forms, annual reports and other information that our clients may wish to communicate to their securityholders. These disclosures are either required or permitted by the Corporations Act 2001, the ASTC Settlement Rules or other legislation.

Under the National Privacy Principles, you can access personal information that we hold about you although there are some exceptions to this. You also have the right to request that we correct information about you which is inaccurate, incomplete or out of date. If you wish to do so, please contact the relevant CIS office at the address set out on the documentation sent to you in relation to your securityholding. If your securityholding is broker sponsored, you need to contact that broker to update your registered name and address.

To ensure the integrity and safety of securityholders’ personal information, CIS will only disclose to securityholders such information if our internal procedures are satisfied. In certain cases we may charge you a fee for access to information but we will inform you at the time.

In accordance with the Corporation Act 2001 and subject to compliance with the requirements of the Privact Act 1988, you may be sent material (including marketing material) approved by the securities issuer in addition to general corporate communications. You may elect not to receive marketing material by contacting CIS on 1300 850 505 or 61 3 9415 4000 outside Australia.

EX-3

THIS DEED is made ________________the day of ________________ 2005

BETWEEN:

BRAINYTOYS LIMITED (ABN 28 001 894 033) of Unit 6, 34 York Street, North Perth, Western

Australia (Brainytoys);

AND

BRAINYTOYS.COM PTY LTD (ACN 091 822 481) of C/- Unit 6, 34 York Street, North Perth,

Western Australia (Brainytoys.com);

AND

ALEXANDER AGUERO of 6B Bowen Street, O’Connor, Western Australia (Aguero);

AND

HIGHFORCE INVESTMENTS PTY LTD (ACN 066 339 697) of 6B Bowen Street, O’Connor,

Western Australia (Highforce),

(Aguero and Highforce are jointly and severally the Assignors).

RECITALS:

A.

Brainytoys, Brainytoys.com and Aguero entered into the Share Sale Agreement with the purpose and intent of Brainytoys acquiring 100% of the issued capital of Brainytoys.com and, consequentially, 100% of the legal beneficial interest in the Intellectual Property Rights.

B.

The Share Sale Agreement has now been completed and the Parties wish to enter into this Deed to acknowledge the purpose, intent and effect of the Share Sale Agreement.

C.

To the extent that Brainytoys.com was not the owner of 100% of the legal and beneficial interest in the Intellectual Property Rights as at the Effective Date, the Assignors wish to assign and transfer to Brainytoys.com the legal and beneficial interest in the Intellectual Property Rights which Brainytoys.com did not own as at the Effective Date and Brainytoys.com has agreed to the assignment on the terms and conditions set out in this Deed.

IT IS AGREED as follows:

1.

DEFINITIONS AND INTERPRETATION

1.1

Definitions

Author means each and every creator or author of the Toys and Games.

Business Day means a day on which trading banks in Western Australia are open for business.

Deed means the deed constituted by this document.

Deed of Acknowledgement means the deed of acknowledgement entered into between Aguero, Brainytoys and Brainytoys.com dated 9 December 2004.

Effective Date means the date of settlement of the Share Sale Agreement.

1

Encumbrance means any encumbrance, mortgage, pledge, charge, lien, assignment, hypothecation, security interest, title retention, preferential right or trust arrangement and any other security or agreement of any kind given or created and including any possessory lien in the ordinary course of business whether arising by operation of law or by contract.

Highforce Obligations means any and all obligations of any kind owed by the Assignors to third parties relating to the Intellectual Property Rights and/or the Toys and Games, including, without limitation, the obligations of the Assignors under the contracts annexed to this Deed as Annexure A.

Intellectual Property Rights means statutory and other proprietary rights in respect of inventions, innovations, patents, utility models, designs circuit layouts, mask rights, copyrights, confidential information, trade secrets, know-how, trade marks and all other rights in respect to intellectual property as defined in Article 2 of the Convention establishing the World Intellectual Property Organisation of July 1967 in connection with the Toys and Games.

Moral Rights means any of the rights described in Article 6bis of the Berne Convention for the Protection of Literary and Artistic Works 1886, being droit moral or other analogous rights arising under the Copyright Act 1968 and any other law of Australia, that exist or that may come to exist, anywhere in the world, including without limitation:

(a)

a right of attribution of ownership; or

(b)

a right not to have authorship falsely attributed; or

(c)

a right of integrity of authorship.

Party means a party to this Deed.

Share Sale Agreement means the agreement entered into between Brainytoys, Aguero, Brainytoys.com and Lothbury Pty Ltd dated 28 June 2004 pursuant to which Brainytoys agreed to acquire 100% of the issued capital of Brainytoys.com.

Toys and Games means the toys and games developed or in the process of being developed by the Assignors as at the Effective Date, including, but not limited to, the toys and games described in Schedule 1.

1.2

Interpretation

In this Deed unless the context otherwise requires:

(a)

headings are for convenience only and do not affect its interpretation;

(b)

an obligation or liability assumed by, or a right conferred on, 2 or more Parties binds or benefits all of them jointly and each of them severally;

(c)

the expression person includes an individual, the estate of an individual, a corporation, an authority, an association or joint venture (whether incorporated or unincorporated), a partnership and a trust;

(d)

a reference to any Party includes that Party’s executors, administrators, successors and permitted assigns, including any person taking by way of novation;

(e)

a reference to any document (including this Deed) is to that document as varied, novated, ratified or replaced from time to time;

2

(f)

a reference to any statute or to any statutory provision includes any statutory modification or re-enactment of it or any statutory provision substituted for it, and all ordinances, by-laws, regulations, rules and statutory instruments (however described) issued under it;

(g)

words importing the singular include the plural (and vice versa) and words indicating a gender include every other gender;

(h)

reference to Parties, clauses, schedules, exhibits or annexures are references to Parties, clauses, schedules, exhibits and annexures to or of this Deed and a reference to this Deed includes any schedule, exhibit or annexure to this Deed;

(i)

 where a word or phrase is given a defined meaning, any other part of speech or grammatical form of that word or phrase has a corresponding meaning;

(j)

 a reference to $ or dollar is to Australian currency; and

(k)

a reference to a defined term that is not defined in this Deed, has the same meaning as in the Licence Agreement, unless otherwise stated.

2.

OPERATIVE PROVISION

(a)

The Parties agree and acknowledge that this Deed supersedes and replaces the Deed of Acknowledgement.

(b)

The Assignors represent and warrant that:

(i)

Brainytoys.com has not at all times been the owner of 100% of the Intellectual Property rights;

(ii)

on or before the date of execution of the Share Sale Agreement, the Assignors assigned 100% of their legal and beneficial interest in the Intellectual Property Rights to Brainytoys.com free from Encumbrances (Initial Assignment) so that, as at the date of execution of the Share Sale Agreement, Brainytoys.com was the sole, legal and beneficial owner of the Intellectual Property Rights. For the avoidance of doubt, the Initial Assignment did not include an assignment of the Highforce Obligations, which are the sole responsibility of the Assignors; and

(iii)

the purpose, intent and effect of the Share Sale Agreement was:

(A)

the acquisition by Brainytoys of 100% of the issued capital of Brainytoys.com; and

(B)

the consequential acquisition by Brainytoys of 100% of the legal beneficial interest in the Intellectual Property Rights free from Encumbrances.

3.

ASSIGNMENT

3.1

The Assignment

To the extent that Brainytoys.com was not the owner of 100% of the legal and beneficial interest in the Intellectual Property Rights as at the Effective Date, the Assignors hereby assign to Brainytoys.com all of their legal and beneficial interest in the Intellectual Property Rights free from Encumbrances, and Brainytoys.com accepts the assignment of such interest in the Intellectual Property Rights so as to take

3

 effect on and from the Effective Date in consideration for the sum of $10 payable by Brainytoys.com (receipt of which is hereby acknowledged).

3.2

Warranty by the Assignors

The Assignors represent and warrant to Brainytoys.com that they are entitled to transfer their interest in the Intellectual Property Rights subsisting in the Toys and Games to Brainytoys.com free and clear of all third party interests, charges, mortgages and other Encumbrances whatsoever.

3.3

Reservation of rights

Brainytoys.com and Brainytoys reserve their rights to take any action or lodge any claims or damages against the Assignors in respect to the Intellectual Property Rights subsisting in the Toys and Games and any other rights they have under this Deed.

3.4

Perfection of Title

To the extent that the Intellectual Property Rights are not capable of being transferred, the Assignors hold those Intellectual Property Rights in trust for Brainytoys.com to the extent legally permissible, and must take all reasonable action to enforce or defend the rights of Brainytoys in the Intellectual Property Rights.

4.

MORAL RIGHTS

4.1

Consent from Author

As soon as practicable after and with effect on and from the date of this Deed, the Assignors will provide Brainytoys.com with an irrevocable and unconditional consent (to the fullest extent permitted by law – either present or future) by the Author to do any act or omission which may, except for this clause, infringe the Moral Rights of the Author, including without limitation, consent to:

(a)

reproduce any of the Toys and Games in whatever form Brainytoys.com sees fit (including the making of any distortions, additions or alterations to the Toys and Games or any part of it as so reproduced); and

(b)

reproduce the Toys and Games or any part of them without making any identification of the Author as author of those Toys and Games.

4.2

Undertaking from Author

As soon as practicable after and with effect from the date of this Deed, the Assignors will obtain a written undertaking from the Author that the Author will unconditionally and irrevocably waive and agree not to enforce any and all Moral Rights that the Author may have in the Intellectual Property Rights.

4.3

Consent and waiver in favour of Brainytoys

The consent and waiver given under this clause 4 is to be given in favour of and for the benefit of Brainytoys.com, Brainytoys and their successors, assignees and licensees and shall survive termination of this Deed.

4.4

Warranty from the Author

As soon as practicable after the date of this Deed, the Assignors will provide Brainytoys.com with warranties from the Author that the Author:

4

(a)

is the sole author of the works comprising the Intellectual Property Rights and sole holder of the Moral Rights in the Intellectual Property Rights;

and

(b)

has not granted any consent or waiver in respect of the Moral Rights in the Intellectual Property Rights to any other party.

4.5

Indemnity from the Author

With effect from the date of this Deed, the Assignors will obtain from the Author an indemnity whereby the Author agrees to indemnify and keep indemnified Brainytoys and Brainytoys.com from and against any and all actions, claims, demands, proceedings, losses, costs and damages that they incur or may incur as a result of, or arising from, a breach of any of the Author's warranties given in clause 4.4.

5.

ASSIGNORS’ UNDERTAKING

The Assignors undertake at their own expense to do all acts and execute all documents necessary or desirable for effecting the title of Brainytoys.com to the Intellectual Property Rights and obtaining the Author’s consent in relation to Moral Rights as set out in clause 4, and in case of default, the Assignors hereby appoint Brainytoys.com as its attorney for such purposes.

6.

WARRANTIES

6.1

Assignors’ Warranties and Representations

The Assignors represent, warrant and undertake to Brainytoys and Brainytoys.com that:

(a)

the contracts annexed to this Deed as Annexure A constitute:

(i)

all of the agreements and arrangements made by the Assignors in relation to the Intellectual Property Rights; and

(ii)

all of the Highforce Obligations which exist as at the date of execution of this Deed;

(b)

neither the execution of this Deed nor the performance by the Assignors of its obligations will cause the Assignors to be in breach of any agreement to which it is a party or is subject;

(c)

the Toys and Games are presently subsisting and the particulars of the Intellectual Property Rights as set out in Schedule 1 are true and correct;

(d)

subject to this Deed, the Assignors have full right and title to the Intellectual Property Rights;

(e)

the Assignors have not granted any licences or other user rights to any person in relation to any rights, title or interest in the Intellectual Property Rights;

(f)

subject to this Deed and the Share Sale Agreement, the Assignors have not entered into any deed or arrangement involving the sale, mortgage, pledge, granting of options or any other rights over the Assignors' right, title and interest in the Intellectual Property Rights;

(g)

the use by Brainytoys.com and any licensee of Brainytoys.com of the Intellectual Property Rights will not infringe any patent, trade mark, registered design, copyright or similar or other industrial commercial property rights of any person nor give rise to payment by Brainytoys.com or any licensee of Brainytoys.com of any royalty to any third party or to any liability to pay compensation;

(h)

Brainytoys.com shall have and enjoy quiet possession of the Intellectual Property Rights uninterrupted by the Assignors or any person claiming under the Assignors;

(i)

the Assignors are not aware of any fact by which the Intellectual Property Rights may be declared invalid;

(j)

no other party has any claim to the Intellectual Property Rights or the rights to exploit the Intellectual Property Rights;

(k)

they have the full corporate power to enter into and be bound by this Deed; and

5

(l)

they have provided to Brainytoys.com all of the information in their possession or control on the Intellectual Property Rights that an assignee for value would ordinarily expect to receive.

7.

DELIVER UP

The Assignors agree to deliver up to Brainytoys.com on request all certificates of title, papers, plans, reports and items in relation to all the rights agreed to be assigned pursuant to this Deed.

8.

INDEMNITY

The Assignors agree to indemnify and keep indemnified Brainytoys and Brainytoys.com against all damages, losses, costs, expenses and liabilities claimed, suffered or incurred, whether before or after the date of this Deed as a consequence of any breach of any of its representations, warranties or undertakings in this Deed or any failure to perform its obligations under this Deed including any damages, losses, costs, expenses and liabilities claimed, suffered or incurred by any third party.

9.

CONFIDENTIALITY

9.1

Terms to remain confidential

Each Party is to keep confidential the terms of this Deed, and any other confidential information obtained in the course of furthering this Deed, or during the negotiations preceding this Deed, and is not to disclose it to any person except:

(a)

to employees, legal advisers, auditors and other consultants requiring the information for the purposes of this Deed;

(b)

with the consent of the other Parties;

(c)

if required by law or a stock exchange;

(d)

if strictly and necessarily required in connection with legal proceedings relating to this Deed; or

(e)

 if the information is generally and publicly available other than as a result of a breach of confidence.

9.2

Disclosure of Information

A Party disclosing confidential information must use all reasonable endeavours to ensure that persons receiving the confidential information from it do not disclose the information except in the circumstances permitted in clause 9.1.

9.3

Obligations continuing

The obligations under this clause 9 contain obligations, separate and independent from the other obligations of the Parties and remain in existence for a period of five (5) years from the date of execution of this Deed, regardless of any termination of this Deed.

9.4

ASX Listing

The Parties acknowledge that Brainytoys is a company listed on ASX and accordingly is required to make certain disclosures in the circumstances set out in the ASX Listing Rules.

10.

NOTICES

6

10.1

Requirements for Notice

Each notice authorised or required to be given to a Party shall be in writing and may be delivered personally or sent by properly addressed and prepaid mail or facsimile in each case addressed to the Party at its address set out in clause 10.2, or as the case may be to such other address as it may from time to time notify to the other Parties pursuant to clause 10.3.

10.2

Address of Parties

The initial address of the Parties shall be as follows:

In the case of the Assignors:

6B Bowen Street

O’CONNOR WA

Facsimile: INT + TBA

Attention: The Company Secretary

In the case of Brainytoys and Brainytoys.com:

Unit 6

34 York Street

NORTH PERTH WA 6006

Facsimile: INT + 61 8 9228 0704

Attention: The Company Secretary

10.3

Change of Address

Each Party may from time to time change its address by giving notice pursuant to clause 10.1 to the other Parties.

10.4

Receipt of Notice

Any notice given pursuant to clause 10.1 will be conclusively deemed to have been received:

(a)

in the case of personal delivery, on the actual day of delivery if delivered prior to 5 pm (Perth time) on a Business Day or on the next following Business Day if delivered after 5 pm (Perth time) on a Business Day or on a day other than a Business Day;

(b)

if sent by mail, on the second clear Business Day after the day of posting; or

(c)

if sent by facsimile, on the day the facsimile was sent by clear transmission.

11.

FURTHER ASSURANCE

Each Party shall sign, execute and do all deeds, acts, documents and things as may reasonably be required by the other Party to effectively carry out and give effect to the terms and intentions of this Deed.

12.

GOVERNING LAW

This Deed shall be governed by and construed in accordance with the law from time to time in the State of Western Australia and the Parties agree to submit to the non-exclusive jurisdiction of the courts of Western Australia and the courts which hear appeals therefrom.

13.

VARIATION

7

No modification or alteration of the terms of this Deed shall be binding unless made in writing dated subsequent to the date of this Deed and duly executed by the Parties.

14.

COSTS

14.1

Stamp Duty

All stamp duty assessed on or in respect of this Deed shall be paid by the Assignors.

14.2

Legal Costs

Each Party shall bear their own legal costs of and incidental to the preparation, negotiation and execution of this Deed.

15.

MISCELLANEOUS

15.1

Severance

If any provision of this Deed is invalid and not enforceable in accordance with its terms, all other provisions which are self-sustaining and capable of separate enforcement without regard to the invalid provision shall be and continue to be valid and forceful in accordance with their terms.

15.2

Entire Agreement

This Deed shall constitute the sole understanding of the Parties with respect to the subject matter and replaces all other agreements with respect thereto.

15.3

Counterparts

This Deed may be executed in any number of counterparts (including by way of facsimile) each of which shall be deemed for all purposes to be an original and all such counterparts taken together shall be deemed to constitute one and the same instrument.

15.4

Time

Time shall be of the essence in this Deed in all respects.

8

EXECUTED by the Parties as a Deed.

EXECUTED BY

BRAINYTOYS.COM PTY LTD

ACN 091 822 481

in accordance with the Corporations Act:

Director

Director/Secretary

EXECUTED BY

BRAINYTOYS LIMITED

ABN 28 001 894 033

in accordance with the Corporations Act:

Director

Director/Secretary

9

Signed by ALEXANDER AGUERO

in the presence of:

(Signature)

Signature of Witness

Full Name of Witness

(BLOCK LETTERS)

Address

Occupation

EXECUTED BY

HIGHFORCE INVESTMENTS PTY LTD

ACN 066 339 697

in accordance with the Corporations Act:

Director

Director/Secretary

10

SCHEDULE 1

Toys and Games

[Insert list of Toys and Games].

Include the 30 – 40 toys and games that were included in the Product pack.

11

ANNEXURE A

Contracts relating to Intellectual Property

12

TABLE OF CONTENTS
1.	DEFINITIONS AND INTERPRETATION	1
2.	OPERATIVE PROVISION	3
3.	ASSIGNMENT	4
4.	MORAL RIGHTS	4
5.	ASSIGNORS’ UNDERTAKING	5
6.	WARRANTIES	5
7.	DELIVER UP	6
8.	INDEMNITY	6
9.	CONFIDENTIALITY	7
10.	NOTICES	7
11.	FURTHER ASSURANCE	8
12.	GOVERNING LAW	8
13.	VARIATION	8
14.	COSTS	8
15.	MISCELLANEOUS	9
	SCHEDULE 1	12
	ANNEXURE A	13

13

BRAINYTOYS.COM PTY LTD

ACN 091 822 481

(Brainytoys.com)

and

BRAINYTOYS LIMITED

ABN 28 001 894 033

(Brainytoys)

and

ALEXANDER AGUERO

(Aguero)

and

HIGHFORCE INVESTMENTS PTY LTD

ACN 066 339 697

(Highforce)

DEED OF ACKNOWLEDGEMENT AND ASSIGNMENT

14

EX-3

BRAINYTOYS LIMITED

(ACN 001 894 033)

and

HIGHFORCE INVESTMENTS PTY LTD

(ACN 066 339 697)

and

ALEXANDER AGUERO

____________________________________________

DEED OF EMPLOYMENT

_____________________________________________

THIS DEED made the 4th day of October 2004.

BETWEEN:

BRAINYTOYS LIMITED (ACN 001 894 033) of Unit 6/34 York Street, North Perth WA 6006(the “Employer”)

And

HIGHFORCE INVESTMENTS PTY LTD (ACN 066 339 697) of 6-B Bowen Street, O’Connor Western Australia 6163 (Highforce)

And

ALEXANDER AGUERO of 6-B Bowen Street, O’Connor Western Australia 6163

(the “Employee”)

RECITALS:

A

The Employer is in the business of developing and marketing toy and game products.

B

The Employer has offered to employ the Employee, via a Service Agreement with Highforce, the Employee’s private company, on terms and conditions set out in this Deed.

C

The Employee has freely accepted the terms and conditions offered by the Employer.

THE PARTIES COVENANT AND AGREE THAT:

1

DEFINITIONS AND INTERPRETATION

1.1

Definitions

In this Deed, except to the extent the subject matter or context may otherwise require, the following definitions apply:

Board means the Board of Directors of the Employer;

Business means the toy and game development business of the Employer, (excluding Mobile Phone and Internet products);

Client(s) means any person, company, partnership, joint venture or any association who has engaged the services of or acquired product or other goods of the Employer;

Confidential Information means:

(a)

all trade and business secrets and other confidential information and documents relating to the affairs or business of the Employer, or which come into the Employee’s possession in the course of and by reason of their employment, whether or not the same were originally supplied by the Employer;

(b)

any information regarding any of the Employer’s market intelligence, plans, investments and other future aspects of its operations in Western Australia and other markets;

(c)

any intellectual property rights in the Employer’s products, including computer generated data, designs, patents, trademarks and copyright, and all technical data, diagrams, plans, drawings, sketches, designs, business plans and reports, business manufacturing methods and systems;

(d)

any information that is by its nature confidential and which the Employee knows or ought to know is confidential and includes information relation to the financial position of the Employer and, in particular, includes information relating to the assets and liabilities of the business of the Employer and other matters that do or may affect the financial position or reputation of the Employer or any of its members;

(e)

any information relating to the Employer’s internal company management and structure of each of its business, or the personnel, policies and strategies of the Employer;

(f)

the policies, strategies, practices and procedures of the Employer;and

(g)

the remuneration package of the Employee;

Deed means this deed and any variations agreed between the Employer and Employee;

Duties means all duties and other obligations required to be performed and complied with by the Employee pursuant to this Deed, including the duties specified in the First Schedule;

MCE Act means the Minimum Conditions of Employment Act 1993 (WA);

Related Body Corporate has the meaning given to that term in Section 50 of the Corporations Act 2001; and Term means the term of this Deed commencing on 1 November 2004 and ceasing on 31 October 2007.

1.2

Interpretation

In this Deed, unless the context otherwise requires:

(a)

a reference to a person includes a reference to the person’s executors, administrators, and assigns of that person or being a company, its successors and assigns;

(b)

references to a statute shall include all amendments for the time being in force and any other statute enacted in substitution for and the regulations, by-laws and other orders for the time being made pursuant to such statutes;

(c)

references to parts, clauses, sub-clauses, paragraphs and schedules by number shall be references to parts, clauses, subclauses, paragraphs and schedules respectively so numbered in this Deed;

(d)

headings and margin notes are inserted for the purpose of reference only and shall not be or form part of this Deed or in any way affect the operation or the interpretation of this Deed;

(e)

references to “person” includes a body corporate;

(f)

the expression “and/or” refers to both the conjunctive and disjunctive alternatives; and

(g)

every word in the singular number shall be construed as including the plural number and every word in the plural number shall be construed as including singular manner.

2

APPOINTMENT AND TERM

(a)

The Employer employs and the Employee accepts the appointment as Managing Director for a term of 3 years on and from 1 November 2004 until 31 October 2007 unless otherwise terminated sooner or extended in accordance with this Deed.

(b)

On or before the 30 June 2007 the Employer and Employee shall enter into negotiations as to whether to extend the terms of this Deed on terms mutually agreeable.

3

DUTIES

(a)

The Employee shall perform the Duties set out in the First Schedule on the terms and conditions of this Deed and shall:

(i)

perform such duties and functions in relation to the Employer and the business of the Employer as the Employer shall from time to time allocate to the Employee including, but not limited to, those specific duties and functions set out in this Deed;

(ii)

at all times act faithfully, honestly and diligently in the performance of the Employee's duties and functions;

(iii)

observe and comply with all directions given by the authorised representatives of the Employer;

(iv)

during work time devote the whole of the Employee's time, attention, skills and ability to the performance of the Employee's obligations under this Deed to successfully promote the Employer’s business; and

(v)

use all proper means to maintain and improve and promote the business of the Employer.

(b)

The Employer in its discretion and as it may direct from time to time, may also require the Employee to carry out or provide such other duties for which the Employee is reasonably qualified.

4

SALARY PACKAGE

(a)

The Employer will:

(i)

pay Highforce the sum of $80,000 per annum, inclusive of Superannuation, for the provision of the Employee’s services;

(ii)

pay the sums referred to in paragraphs 4(a)(i) by equal fortnightly installments by electronic funds transfer into an account nominated by the Employee;

(iii)

reimburse home telephone and internet costs associated with business use.

(b)

The salary package referred to in clause 4(a) is paid in satisfaction

of and takes into account all aspects of the Employee's employment including hours of work.

(c)

In the event that the Employee becomes entitled to any amounts pursuant to an industrial instrument including, without limitation, an award, order or registered Deed issued by an industrial tribunal, commission or authority, the Employer may apply all or part of the Employee's salary package (including salary) in full or part satisfaction of those amounts.

5

REVIEW OF SALARY

The Board will review the Employee’s salary annually in July of each year.

6

BONUS

A bonus may be paid to the Employee depending upon the Employee’s performance. The terms upon which a bonus may be paid, will be set by the Board each year.

7

SUPERANNUATION

Salary sacrifice into superannuation is available. However the basis upon which superannuation contributions are made available and the basis for determining the amount of those contributions is at the sole discretion of the Employer but, in exercising its discretion, the Employer will at all times comply with applicable superannuation legislation.

8

HOURS OF WORK

The Employee’s minimum weekly hours of work are 30. The Employee however acknowledges that he may be required to work longer hours if and when necessary to complete the duties required of them.

9

LOCATION AND TRAVEL

The Employee will be located at Perth and may be required to undertake travel as the Employer may require from time to time.

10

EXPENSES

The Employer will reimburse the Employee for all expenses properly incurred by the Employee in the performance of their Duties subject to the Employee providing documentary evidence of expenses claimed.

11

NON COMPETITION

(a)

Subject to clause 11(b), the Employee agrees that he will not, without the prior written consent of the Employer, during his employment carry on, provide services to or be engaged by any business or activity which is competitive with any business carried on by the Employer or any of its Related Bodies Corporate at any time during his employment.

(b)

The Employer and the Employee acknowledge that the Employee may act in a capacity outside the scope of the Employee’s employment with the Employer subject to the following conditions:

(i)

the Employer consents to the Employee acting in the capacity;

(ii)

the Employee acting in this capacity does not interfere with the Employee’s performance of the Employee’s Duties to the Employer pursuant to this Deed; and

(iii)

the Employee acknowledges that the Employer is not liable in any way whatsoever for any of the actions of the Employee when acting in a capacity outside the scope of the Employee’s employment.

12

ANNUAL LEAVE

(a)

The Employee shall be entitled, for each year of service, to four (4) weeks paid annual leave, accruing pro rata on a weekly basis in accordance with the MCE Act.

(b)

The Employee acknowledges and agrees to take its annual leave when most convenient to the operation of the Business.

13

SICK LEAVE

(a)

The Employee shall be entitled to 10 days paid sick leave for each completed year of service in accordance with the MCE Act.

(b)

Sick leave will accumulate to a maximum of 30 days. On termination of employment the Employee will not be entitled to be paid for any unused sick leave.

(c)

The Employee may be required to provide evidence to prove the entitlement before receiving payment.

14

BEREAVEMENT LEAVE

The Employee shall be entitled to up to two (2) days paid bereavement leave in accordance with the MCE Act.

15

PARENTAL LEAVE

The Employee shall be entitled to parental leave in accordance with the MCE Act.

16

LONG SERVICE LEAVE

The Employee shall be entitled to long service leave in accordance with the Long Service Leave Act 1958 (WA).

17

ANNUAL PERFORMANCE APPRAISAL

(a)

The Employee’s performance will be formally reviewed annually in July of each of year.

(b)

The Employee’s performance review will be carried out by the Board, or such other person, as may be nominated by the Board. The Employer will seek input from the Employee prior to the review but in general, reviews take into consideration the Employee’s professional ability, contribution to the business, prospects with the Employer and the extent to which the Employee has advanced during the period concerned.

(c)

Whilst performance reviews may be taken into account when conducting salary reviews, the primary purpose of performance reviews is developmental.

18

INTERNET AND EMAIL USAGE

(a)

The Employee agrees to use the email and internet services provided by the Employer in a responsible manner and to comply with all relevant policies and procedures pertaining to the use of the email and internet services.

(b)

The use of email and the internet are for business purposes and may be monitored, inspected, reproduced or copied by the Employer.

(c)

The Employee may make limited use of the email and internet services for personal use but the Employee should be aware of the Employer’s right to monitor, review or intercept such communications.

(d)

The Employee must not use the email or internet access to transmit, copy or download material or statements which are offensive, obscene, pornographic, violent, abusive, illegal including material which could constitute discrimination on unlawful grounds including, but not limited to sex, race, disability, religion, or sexual orientation.

(e)

Should the Employee receive email which contain material or statements which could constitute a breach of these obligations, the Employee shall immediately delete the material from the Employee’s computer systems.

19

TERMINATION OF EMPLOYMENT

(a)

Subject to clause 19(d) and prior to the expiration of the Term of the Employee's employment, the Employee’s employment may be terminated by or the Employee by the giving of 4 weeks’ notice in writing to the Employer.

(b)

Subject to and without limiting the Employer’s rights under clause 19(d), the Employer may terminate the Employee’s employment with 4 weeks’ notice prior to the expiration of the Term.

(c)

The Employer may, in its absolute discretion, terminate the Employee's employment by:

(i)

making a payment in lieu of the notice period set out in clause 19(b); or

(ii)

by giving part of the notice period set out in clause 19(b), and by making part payment in lieu of the balance of the notice period.

(d)

The Employer may, prior to the expiration of the Term, terminate the Employee's employment without notice or a payment in lieu of notice if the Employee:

(i)

commits any serious or persistent breach of any of the terms of this Deed including without limitation, dishonesty, misconduct or willful neglect in the performance of the Employee's Duties and obligations under this Deed;

(ii)

refuses to comply with any reasonable instruction or direction

from an authorised representative of the Employer;

(iii)

is convicted of any criminal offence relevant to the performance of the Employee's obligations under this Deed;and

(iv)

is a bankrupt or is removed from Office under the Corporations Act 2001 or under the Employer’s Constitution.

(e)

If the Employee’s employment is terminated under clause 19(d) or on the basis of redundancy the Employee is not entitled to a redundancy or severance payment other than as provided in this clause.

(f)

In the event that either party gives notice of termination of the Employee’s employment, the Employee shall also immediately resign the Office effective as from a date directed by the Board.

(g)

If the Employee’s employment is terminated other than for reasons set out in clause 19(d), and the Employee is not then otherwise in default of this Deed and his employment, the Employee will, in connection with his retirement from the Office, receive in addition to the required notice period in clause 19(b) a benefit payment in respect of past services in accordance with the formula set out in the Corporations Act 2001.

20

CONFIDENTIAL INFORMATION

Without limiting any common law duties or obligations of the Employee, the Employee must not, except in the proper course of the Employee’s Duties, either during or after the termination of the Employee's employment, disclose or use in any manner whatsoever, any Confidential Information.

21

EMPLOYER PROPERTY

(a)

Upon termination of the Employee's employment (howsoever caused), or at any other time upon demand, the Employee must immediately deliver to the Employer or its authorized representative:

(i)

all documents or other material (including all copies) in the Employee's possession or control relating in any way to any Confidential Information; and

(ii)

all files, documentation, publications, computer equipment, software, discs, keys, and all other property whatsoever of the Employer.

22

RESTRAINT

(a)

The Employer has invested a substantial amount of time and effort to develop business relationships with its Clients. To protect the Employer’s goodwill, the Employee must not, either during the Employee’s employment or for a period of 3 months after the termination of the Employee’s employment (however caused), either alone or (whether as servant or agent or in any other capacity) for or in association with any other person, firm, organisation or business:

(i)

solicit, entice away, interfere with or endeavour to solicit, entice away or interfere with any person, firm or company who was a Client of the Employer either at the time of the Employee’s termination of employment or during the employment of the Employee; or

(ii)

employ, engage, solicit or entice away or endeavour to employ, engage, solicit or entice away from the Employer any employee of the Employer.

(b)

Clauses 22(a)(i) and 22(b)(ii) shall be construed and have effect as if they were a number of separate subclauses, with each sub clause being separable from the other. If any of the sub clauses are invalid or unenforceable for any reasons, such invalidity on enforceability shall not prejudice or affect the validity or enforceability of the other sub clause.

23

ASSIGNMENT

This Deed and the rights and benefits of the Employee under this Deed are personal to the Employee and are not assignable or transferable by the Employee and may not be assigned, pledged or encumbered by the Employee.

24

GOVERNING LAW

This Deed shall be governed by and construed in accordance with the law of the State of Western Australia and the Employer and the Employee agree to submit to the jurisdiction of the courts of Western Australia.

25

VARIATION OF TERMS

The terms of this Deed may be varied from time to time by the mutual agreement made in writing by the Employer and the Employee.

26

SURVIVAL OF TERMS

The obligations of the Employee contained in Clauses 19,20, 21 and 22 shall survive the termination of this Deed (howsoever caused) and shall ensure for the benefit of the Employer.

27

SEVERABILITY

If any of the terms and conditions of this Deed are void, or become voidable reason of any statute or rule of law then that term or condition shall be severed from this Deed without affecting the enforceability of the remaining terms and conditions.

28

ENTIRE DEED

This Deed constitutes the entire agreement between the partiesand supersedes any representations, warranties, covenants, guarantees and any other terms and conditions not contained and recorded herein.

Executed as a Deed:

EXECUTED by BRAINYTOYS LIMITED   )

(ACN 001 894 033) in accordance with

    )

Section 127 of the Corporations Act 2001:

    )

    )

/s/ Ian Allen	/s/ Howard K. Read
Signature of Director	Signature of Director/Secretary
Ian Allen	Howard K. Read
Print Name	Print Name

EXECUTED by HIGHFORCE      )

INVESTMENTS PTY LTD

   )

(ACN 007 998 914) in

   )

accordance with Section 127 of the

Corporations Act 2001:

/s/ Tim Lebbon	/s/ Alexander Aguero
Signature of Director	Signature of Director/Secretary

Signed by the said Alexander Aguero in the presence of:

/s/ Alexander Aguero

ALEXANDER AGUERO

/s/ Jay Stephenson

Witness Signature

Jay Stephenson

Witness Name

31 Mammoth Court , Virginia

Address

Accountant

Occupation

FIRST SCHEDULE

DUTIES OF THE MANAGING DIRECTOR

JOB DESCRIPTION FORM (JDF)

TITLE:

Managing Director

SUMMARY:

Provides strategic advice and counsel to the Board in accordance with the considered positioning of the Company in relation to the expectations, beliefs and perceptions of its shareholders.

Facilitates business interactions between industry executives and the Company to ensure effective and efficient processes and outcomes for the Company.

Manages and Directs the development and implementation of corporate policy, strategic planning and management processes.

Manages and Directs the creation, development and implementation of both long and short term corporate and market plans.

DUTIES AND RESPONSIBILITIES:

1 Manages, co-ordinates and provides leadership for the Company to ensure

    timely delivery of outcomes in line with Board resolutions.

2 Sets long range objectives and formulates plans to achieve these;

3 Maintains operating plan and develops budget for presentation to the Board;

4 Provides leadership to other staff and directing product and market

   development;

5 Monitors and reports to the Board on overall Company performance and

    market placement.

6 Manages special projects and assignments as required.

7 Liaises with high-level industry representatives on relevant matters concerning

    the Company.

8 Undertakes travel as approved by the Board to advance the standing and

    profitability of the Company.

9 Undertakes such other duties as required by the Board.

TABLE OF CONTENTS

NO	DESCRIPTION	PAGE
1	DEFINITIONS AND INTERPRETATION	2
2	APPOINTMENT AND TERM	4
3	DUTIES	5
4	SALARY PACKAGE	5
5	REVIEW OF SALARY	6
6	BONUS	6
7	SUPERANNUATION	6
8	HOURS OF WORK	6
9	LOCATION AND TRAVEL	6
10	EXPENSES	6
11	NON COMPETITION	7
12	ANNUAL LEAVE	7
13	SICK LEAVE	7
14	BEREAVEMENT LEAVE	7
15	PARENTAL LEAVE	8
16	LONG SERVICE LEAVE	8
17	ANNUAL PERFORMANCE APPRAISAL	8
18	INTERNET AND EMAIL USAGE	8
19	TERMINATION OF EMPLOYMENT	9
20	CONFIDENTIAL INFORMATION	10
21	EMPLOYER PROPERTY	10
22	RESTRAINT	11
23	ASSIGNMENT	12
24	GOVERNING LAW	12
25	VARIATION OF TERMS	12
26	SURVIVAL OF TERMS	12
27	SEVERABILITY	12
28	ENTIRE DEED	13

EX-3

LEADENHALL AUSTRALIA LIMITED

ABN 63 007 997 248

AFS License No. 228819

(“Underwriter”)

and

BRAINYTOYS LIMITED
ABN 28 001 894 033

(“Company”)

_________________________________________

UNDERWRITING AGREEMENT

_________________________________________

THIS AGREEMENT is made the 15^th day of June 2006.

BETWEEN:

Leadenhall Australia Limited (ABN 63 007 997 248) of Level 1.31 Franklin Street, Adelaide, South Australia 5000 (“Underwriter”);

AND

Brainytoys (ABN 28 001 894 033) of Unit 6, 34 York Street, North Perth, Western Australia 6006 (“Company”).

RECITALS:

A.

The directors of the Company have authorized and resolved to issue an invitation to shareholders of the Company for the purpose of the Pro-Rata Offer of Shares.

B.

The Company has requested the Underwrite to fully underwrite the Pro-Rata Offer.  A maximum 7,572,429 shares can be issued pursuant to the Pro-Rata Offer if fully subscribed.  At the issue price of 6 cents the Pro-Rata Offer would raise up to $454, 346 for the company.  The Underwrite has agreed to do so upon the terms and conditions set out in this Agreement.

IT IS AGREED as follows:

1.

DEFINITIONS AND INTERPRETATION

1.1

In this Agreement, unless the context or subject matter otherwise requires”

“Agreement” and “this Agreement” means the agreement constituted by this document and includes the recitals”

“Application Form” means the entitlement and acceptance form that is accompanied by or attached to and forms part of the invitation to enable Participants to apply for the Underwritten Shares;

“ASIC” means the Australian Securities and Investments Commission;

“ASX” means the Australian Stock Exchange Limited (CAN 008 624 691);

“Business Day” means a day that is not a Saturday, Sunday or public holiday in Western Australia;

“Closing Date” means 7 July 2006;

“Corporations Act” means the Corporations Act (Ctn) 2001;

“Execution Date” means the date on which the last of the Parties executes this Agreement;

“Invitation” means the invitation issued to the Company’s existing Shareholders with respect to the Pro-Rata Offer and includes the Application Form:

“GST” means the tax imposed by A New Tax System (Goods and Services Imposition – General) Act 1999.

“Offer” means the offer of Shares for Subscription referred to in Recital B.

2

“Ordinary Share” means ordinary shares in the capitol of the Company, irrespective of whether they are fully paid or partly paid ordinary shares, unless otherwise specified;

“Participants” means those persons to whom the Pro-Rata Offer is made pursuant to the invitation;

“Party” means a party to this Agreement and “Parties” has a corresponding meaning:

“Pro-Rata Closing Date” means the final date that the company will accept applications to participate in the Pro-Rata Offer as advised by the Company to the Underwriter in writing, and as stated in the invitation;

“Pro-Rata Offer” means a pro-rata renounceable entitlement issue of up to 7,572,429 Shares on the basis of one Share for every four Ordinary Shares held at the Record Date;

“Pro-Rata Shortfall” means those Shares the subject of the Pro-Rata Offer that have not been validly applied for by the Pro-Rata Offer Closing Date;

“Prospectus” means the Brainytoys Limited prospectus dated 14 June 2006 to be issued by the Company in relation to the Offer in the form initialed on behalf of the Company prior to lodgment with ASIC;

“Record Date” means the date that applicants need to be registered on the Company’s share register as holders of fully paid Ordinary Shares in the capital of the Company to entitle them to participate in the Pro-Rata Offer, as advised by the Company to the Underwriter in writing, and as stated in the invitation;

“Share” means a fully paid ordinary share in the capital of the Company;

“Shortfall Notice” has the meaning given to it by clause 7.1;

“Underwriter’s Shortfall” means the difference between the Underwritten Shares and the number of Shares validly applied for pursuant to the Pro-Rata Offer where the Underwritten Shares exceed the number of Shares validly applied for;

“Underwritten Shares” means up to a maximum of 7,572,429 Shares that are to be offered pursuant to the Pro-Rata Offer the subject of the invitation;

“Underwritten Sum” means the sum of $454, 345.74 (being 7,572,429 multiplied by 6 cents); and

“WST” means Western Standard Time.

1.2

Unless the context otherwise requires, in the interpretation of this Agreement:

(a)

the singular shall include the plural and vis versa;

(b)

reference to any Party shall mean and include a reference to that Party its successors and assigns;

(c)

references to recitals, schedules, pages and clauses are references to recitals, schedules, pages and clauses of this Agreement;

(d)

headings in this Agreement are for convenience only and shall not affect its interpretation; and

3

(e)

a reference to currency or $ means Australian dollars

2.

OFFER OF SHARES

The Pro-Rata Offer shall be made in accordance with the terms and conditions of the invitation and, the Underwrite shall underwrite the offer of the Underwritten Shares subject to Clause 3.

3.

AGREEMENT TO UNDERWRITE

3.1

Subject to clause 3.2, the Underwriter agrees to underwrite the issue of the Underwritten Shares on and subject to the terms and conditions of this Agreement.

3.2

The Underwriter reserves the right to enter into sub-underwriting arrangements in respect of the Underwritten Shares with such persons and on such terms and conditions as it sees fit in its absolute discretion.

4.

LIABILITY FOR CONTENT OF INVITATION

As between the Parties, the Company shall take full responsibility for the form and content of the invitation and for all claims, proceedings and actions however arising out of the invitation and for all claims, proceedings and actions however arising out of the invitation or its publication (other than as may arise out of the form or content of any material prepared, published or circulated by the Underwriter without the prior written consent of the Company or out of the use of the invitation by the Underwriter  otherwise than in its capacity as Underwriter to the Company), and subject to those qualifications, the Company agrees to indemnify and keep indemnified the Underwriter form and against all costs and expense in respect of all claims, proceedings and actions however arising out of the invitation or its publication excluding those arising as a consequence of any negligent act or omission or breach of the Agreement by the Underwriter.

5.

APPLICATIONS FOR THE SHARES

5.1

Applications under the Offer will be accepted with effect from the date of issue of the Prospectus and will close on the Closing Date (or such other date as may be approved in writing by the Underwriter in its absolute discretion).

5.2

The Company shall only accept applications for the Shares offered by the invitation on properly completed Application Forms.  Unless the Underwriter otherwise agrees in writing any other application shall be invalid.

5.3

Other than with the prior written consent of the Underwriter, no valid Application Form shall be declined by the Company.

5.4

An application for the Shares pursuant to the Pro-Rata Offer under the invitation is valid only if the properly complete Application Form is accompanied by the payment of subscription monies and is otherwise capable of being accepted by the company.

6.

CONDUCT OF THE OFFER OF THE SHARES

6.1

None of the Parties shall make any announcement as to the progress of the Pro-Rata Offer without the prior written consent of the other Party, which consent shall not be unreasonably withheld.  No consent is necessary if the making of an announcement is required by the ASIC, providing that the contents of this announcement do not exceed that requirement.

6.2

No advertising or publicity in relation to the Pro-Rata offer shall be undertaken without the prior written approval of the Underwriter, unless waived by the Underwriter.

4

6.3

The Company shall take responsibility for the content of all advertising and publicity and will indemnify and keep indemnified the Underwriter from and against all claims and proceedings whatsoever and howsoever arising out of any advertising and publicity.  This indemnity shall not extend to any claim or proceedings instituted as a result of any act or omission on the part of the Underwriter, or its employees, servants or agents, which has not been expressly authorized by the Company.

7.

SHORTFALL SHARES

7.1

If the Company has not received on or before the Pro-Rata Offer Closing Date valid applications for all of the Underwritten Shares it shall, within one Business Day of the Pro-Rata Offer Closing Date, give written notice (signed by a director of the Company) to the Underwriter of the same specifying the total number of Shares validly applied for pursuant to the Pro-Rata Offer, the number of valid applications received, the Pro-Rata Shortfall, the Underwriter’s Shortfall and certifying that as at the date of the notice:

(a)

the Company has duly observed, performed and complied with all of the provisions of this Agreement, the Corporations Act and any other law; and

(b)

there has been no default or breach by the Company of any of the provisions of this Agreement.

7.2

Within five (5) Business Days after the receipt by the Underwriter of the notice referred to in clause 7.1 and provided that all of the matters referred to in clause 7.1 (a) and (b) are true and correct, the Underwriter will lodge or cause to be lodged with the Company:

(a)

Application Forms together with a cheque or cheques made payable to the Company for the number of Shares comprising the Underwriter’s Shortfall.

8.

DISCHARGE OF UNDERWRITER’S OBLIGATIONS

The Underwriter shall be deemed to have discharged its obligations under this Underwriting Agreement in respect of the Pro-Rata Offer upon the first of the following events to occur.

(a)

The whole of the Pro-Rata offer having been subscribed for:

(b)

The Underwriter having complied with all of its obligations pursuant to clauses 7.2 and 10 of this Agreement; or

(c)

The Underwriter terminating this Underwriting Agreement pursuant to clause 12.

9.

ALLOTMENT AND ISSUE OF THE SHARES

The Company shall proceed to allot and issue the Shares the subject of the Pro-Rata Offer as early as practicable after the Pro-Rata Offer Closing Date and otherwise in accordance with the invitation and shall make all necessary arrangements to dispatch holding statements for the Shares to the respective Participants as soon as practicable after that date.

10.

OBLIGATIONS OF THE UNDERWRITER

The Underwriter shall perform all of its obligations in a manner which is consistent with the Company gaining official quotation for the Underwritten Shares.  The Underwriter shall deliver or cause to be delivered all documents required by the ASX from the Underwriter or any broker participating in the Pro-Rata Offer forthwith upon that requirement being notified to them.

5

11.

ENQUIRIES BY THE UNDERWRITER

11.1

At all times until the Underwritten Shares are allotted, the Underwriter and its professional advisers are entitled to make such examinations and enquiries of and concerning the business, assets, liabilities, books and accounts of the Company as the Underwriter may reasonably require for the purposes of the Offer and this Agreement.  The Company must promptly furnish all such information and documents requested by the Underwriter or its advisers.

11.2

Without limiting the generality of clause 11.1, the Company must promptly furnish the Underwriter with copies of notifications to and approvals of ASX, evidence of registration of the Prospectus and any other material or information relevant to the Offer.

12.

TERMINATION

12.1

The Underwriter may without cost or liability to themselves terminate their obligations under this Underwriting Agreement or renegotiate their obligations herein at their sale choice and discretion on or at any time after the happening of any of the following events on or before the time at which the Underwriter is required to lodge or caused to be lodged with the Company an application for Shares under clause 7.2:

(a)

Any announcement is made by the Government of Australia or any state of Australia or any governmental authority or the Reserve Bank or Australia which in the reasonable opinion of the Underwriter could materially adversely affect the success of the Pro-Rata Offer as a consequence of proposed or promulgated legislation or regulations which would materially adversely affect the operations of the Company or any industry in which the Company operates; or

(b)

There is in the reasonable opinion of the Underwriter any material adverse change in relation to any of the interests held by the Company or in any of its projects of businesses which are referred to in the Prospectus;

(c)

The Company is in default under any of the terms and conditions of this Underwriting Agreement or any of the provisions binding on it hereunder.

(d)

The Company withdraws the Prospectus;

(e)

The occurrence of any event  set in 652C of the Corporations Act in relation to the Company as though the Company were a target, other than any allotment of securities, and any grant of security, contemplated in the Prospectus;

(f)

The Prospectus does not comply with the relevant provisions of the Corporations Act;

(g)

If a resolution is passed by the Company for its voluntary liquidation or an order is made for its winding-up or the Company enters into a scheme of arrangements with its creditors under the Corporations Act or any liquidator, receiver, or official manger is appointed in respect of the Company or if the Company becomes insolvent;

(h)

There is in the reasonable opinion of the Underwriter a material adverse change in the state of domestic and/or overseas securities markets that jeopardize the success of the Pro-Rata Offer;

(i)

There is in the opinion of the Underwriter any material adverse change in the financial position or prospects of the Company; or

(j)

ASX refuses, does not grant on terms acceptable to the Underwriter, or withdraws approval for the granting of Official Quotation for the Shares offered pursuant to the Pro Rata Offer or ASX makes a statement to that effect to the Company, the Underwriter or any other person;

6

12.2

Any termination by the Underwriter under clause 11.1 shall take effect when notice in writing thereof is given by the Underwriter to the Company.

13.

UNDERWRITING FEE

13.1

The Company shall, within five (5) Business Days of the Underwriter complying with clause 7.2 or the Company allotting all of the Underwritten Shares whichever is the earliest, pay to the Underwriter an underwriting fee of 6% of the Underwritten Sum plus GST.  These fees shall be satisfied by the issue of shares in the Company at an issue price of 6 cents each.

13.2

In addition to the fee referred to in clause 13.1, the Company must within five (5) Business Day of receipt of written notice from the Underwriter pay to that Underwriter (or as it directs) the Underwriter’s incidental costs and expense, that were approved by the Company, in respect to acting as Underwriter for the Pro-Rata Offer.  The value of such costs and expenses have been agreed at $5,000 plus GST.

14.

GOODS AND SERVICES TAX (GST)

14.1

If any supply made by the Underwriter under this agreement (including the supply of any rights, goods, services, benefits or other things) is subject to GST, the Underwriter may.  If it incurs a liability to pay GST in respect of that supply, recover form the Company an amount on account of GST in addition to any payment or other consideration for that supply.

14.2

The additional amount is:

(a)

equal to the Price (or the relevant part of the Price if only part of the Price relates to a supply which is subject to GST) for the supply multiplied by the prevailing GST rate; and

(b)

payable at the same time and in the same manner as the Company is required to pay or provide the consideration for the supply to which the additional amount relates.

14.3

If the Company is required to reimburse the Underwriter for any Costs incurred by the Underwriter, in addition to those set out in Clause 13.2 the amount of the Costs incurred is taken for the purposes of this agreement to be reduced by the amount of any input Tax Credit to which the Underwriter is entitled to claim in respect of Costs.

14.4

Within 14 days of receiving an amount under the clause, the Underwriter must provide the Company with a Tax invoice.

15.

NOTICES

15.1

Each notice authorized or required to be given to a Party shall be in writing and may be delivered personally or sent by properly addressed and prepaid mail or facsimile in each case addressed to the Party at its address set out in clause 15.2, or as the case may be to such other address or it may from time to time notify to the other Party pursuant to clause 15.3.

15.2

The initial address of the Parties shall be as follows:

In the case of the Underwriter:

Level 1

31 Franklin Street

Adelaide SA 5000

Facsimile, +61 8 8385 2200

Attention: Mr. T Lebbon

7

In the case of the Company:

Unit 6

34 York Street

NORTH PERTH WA 6006

Facsimile: +62 8 9228 0704

Attention: Mr. A Aquero

15.3

Each Party may from time to time change its address by giving notice pursuant to clause 15 to the other Party.

15.4

Any notice given pursuant to clause 15 will be conclusively deemed to have been received:

(a)

In the case of personal delivery, on the actual day of delivery if delivered prior to 5 pm (Perth time) on a Business Day or on the next following business Day if delivered after 5 pm (Perth time) on a Business Day or on other than a Business Day;

(b)

If sent by mail, on the seventh clear Business Day after the day of posting; or

(c)

If sent by facsimile, on the day the facsimile was sent by clear transmission.

16.

FURTHER ASSURANCE

Each Party shall sign, execute and do all deeds, acts, documents and things as may reasonably be required by the other Party to effectively carry out and give effect to the terms and intentions of this Agreement.

17.

GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the law from time to time in the State of Western Australia and the Parties agree to submit to the non-exclusive jurisdiction of the courts of Western Australia and the courts which near appeals therefrom.

18.

VARIATION

No modification or alteration of the terms of this Agreement shall be binding unless made in writing dated subsequent to the date of this Agreement and duly executed by the Parties.

19.

COSTS

19.1

All stamp duty assessed on or in respect of this Agreement shall be paid by the Company.

19.2

The Company shall pay all legal costs of and incidental to the preparation negotiation and execution of this Agreement.

20.

MISCELLANEOUS

20.1

If any provision of this Agreement or part thereof shall be invalid and not enforceable in accordance with its term, all other provisions or parts there of which are self-sustaining and capable of separate enforcement without regard to the provisions, shall be an continue to valid and forceful in accordance with their terms.

20.2

This Agreement shall constitute the sole understanding of the Parties with respect to the subject matter and replaces all other agreements with respect thereto.

8

20.3

This Agreement may be executed in any number of counterparts (including by way of facsimile) each of which shall be deemed for all purposes to be an original and all such counterparts take together shall be deemed to constitute one and the same instrument.

9

EXECUTED by the Parties as an agreement

THE COMMMON SEAL of

LEADENHALL AUSTRALIA LIMITED

ABN 63 007 997 248

Was hereunto affixed by authority of

the Board of Directors in the presence of:

Director

Secretary

THE COMMON SEAL of

BRAINYTOYS LIMITED

ABN 28 001 894 033

Was hereunto affixed by authority of

the Board of Directors in the presence of:

Director

Director/ Secretary

10

EX-3

Brainytoys Limited

(ACN 001 894 033)

and

Noble Investments Pty Ltd

(ACN 007 998 914)

Table of contents

Clause Page

1. Definitions and Interpretation	4
2. Completion of Issue of Convertible Notes	8
3. Note Certificates	9
4. Covenants and Warranties by Company	10
5. Events of Default	11
6. Reports by Company	13
7. Notices	13
8. Register of Convertible Noteholder	14
9. Lodgement of Documents by Noble	15
10. Invalidity	15
11. Discharge and Release	15
12. Applicable Law	15
13. Counterparts	16
Schedule 1	17
Schedule 2	28
Schedule 3	30
Schedule 4	33

This Deed is made on 2 August 2006.

Between:

1.

Brainytoys Limited

(ABN 28 001 894 033)

of Unit 8, 34 York Street, North Perth, Western Australia

(“Company”)

and

2.

Noble Investments Pty Ltd

(ACN  007 998 914)

of Level 1, 31 Franklin Street Adelaide in the State of South Australia

(“Noble”)

Recitals

A.

The Company wishes to borrow the Principal Monies, throught the issue of Convertible Notes

B.

The Company proposes to issue eight convertible notes on the Series Issue Date.

C.

The Company proposes to raise up to $800,000 by way of issue of:

(i)

one fixed Convertible Note issued at $100,000 convertible by Noble at $0.06 each into 1,666,667 ordinary fully paid shares in the Company; and

(ii)

seven subsequent Convertible Notes issued at $100,000 each convertible to that number of Shares that is equal to the draw down face value by Noble subject to the terms and conditions of this Deed.

The parties agree

In consideration of, among other things, the mutual promises contained in this Deed.

1.

 Definitions and Interpretation

1.1

In this Deed, and all documents issued under or pursuant to this Deed, unless the context otherwise requires:

1.1.1

“Act” means Corporations Act 2001;

1.1.2

“Application Form” means an application form for Convertible Notes in the form set out in Schedule 2;

1.1.3

“ASX” means Australia Stock Exchange Limited (ACN 006 624 691);

1.1.4

“Business Day” means a day on which:

(a)

 banks are open for business in Perth, Western Australia; and

(b)

the ASX is open for trading in securities;

1.1.5

“Charge” means the first ranking fixed and floating charge over the assets and undertakings of the Company securing the repayment of the Moneys Owing in substantially the same form as Schedule 4 to this Agreement;

1.1.6

“Conditions of Issue” means in respect of the Convertible Notes, the Conditions specified in Schedule 1 to this Deed;

1.1.7

 “Conversion Notice” means a notice in the form set out on each Note Certificate;

1.1.8

“Convert” in relation to a Note, means the redemption of that Convertible Note in conjunction with the Company applying, at the irrevocable direction of the Noble, the principal amount of that Convertible Note in subscription for Ordinary Shares immediately in accordance with the Conditions of Issue, and ‘conversion’ will be construed accordingly;

1.1.9

“Convertible Note” or “Convertible Notes” means the First Note or Subsequent Note created on the terms of Schedule 1 under the provision of this Deed and for the time being outstanding and a reference to a Convertible Note that is outstanding as at a particular date means a Convertible Note that has not been converted or redeemed prior to that date;

1.1.10

“Convertible Note Resolution” means the Convertible Note resolution required to be passed by Shareholders of the Company in accordance with ASX Listing Rule 7.1;

1.1.11

“Directors” means directors of the Company;

1.1.12

“Event of Default” means any of the events listed in clause 5 of this Deed;

1.1.13

“Facility Fee” means 6% of the Face Value of each Convertible Note payable in fully paid Ordinary Shares at an issue price of 6 cents per shares.

1.1.14

“First Note” means the first note to be issued by the Company at a face value of $100,000 convertible into Ordinary Shares issued at 6 cents per share;

1.1.15

“Issue of Shares Resolution” means that resolution required to be passed by Shareholders in accordance with ASX Listing Rule 7.1;

1.1.16

“Maturity Date” means 30 June 2010 on which date all Convertible Notes must be converted into Shares or redeemed or if the Convertible Note is not drawn down will expire;

1.1.17

“Note Certificate” means a certificate in the form or to the effect of the form of the certificate set out in Schedule 3, or in such other form as the Company determines;

1.1.18

“Ordinary Shares” means (subject to any reorganisation or reconstruction of capital) fully paid ordinary shares in the capital of the Company;

1.1.19

“Principal Monies” means the total amount paid or deemed to be paid on issue of the Convertible Notes issued pursuant to this Deed (stated on each Note Certificate) but not exceeding the sum of $100,000.00;

1.1.20

“Public Authority” means any government or minister, or any government, semi-governmental or judicial entity, department, instrumentally or authority;

1.1.21

“Registered Office” means the registered office of the Company from time to time, within the meaning of the Act;

1.1.22

“Register of Noteholders” means the separate register of Noteholders kept by or on behalf of the Company under this Deed;

1.1.23

“Requested Amount” means that amount requested by the Company forming part or all of the Principal Monies, being a multiple of $100,000.00;

1.1.24

“Secretary” means the Secretary of the Company;

1.1.25

“Security Interest” means a mortgage, pledge, lien, charge, preferential right, trust, arrangement, agreement or other arrangement given, arising or created as security;

1.1.26

“Series Issue Date” means the day after the date on which the shareholders approve the Convertible Note resolution and Share Issue resolution;

1.1.27

“Subsequent Note” means the remaining seven Convertible Notes issued by the Company subject to clause 3;

1.1.28

“writing” included printing, typing, lithography and other modes of reproducing words in a visible form and “written” has a corresponding meaning.

1.2

Schedules

The Schedules to this Deed are an integral part of this Deed.

1.3

Interpretation

1.3.1

In this Deed, unless the context otherwise requires:

(a)

expressions used herein have the same meaning as those used in the Deed of Company Arrangement;

(b)

the singular includes the plural and vice versa;

(c)

words importing a gender include the other genders;

(d)

other grammatical forms of defines words or phrases have corresponding meanings;

(e)

 a reference to a clause, part of a clause, schedule or annexure is a reference to that clause or part of a clause of or schedule or annexure to this Deed;

(f)

a reference to this Deed includes its recitals, schedules and any annexures as it may from time to time be amended and except to the extent that the context clearly otherwise indicates includes all supplemental or collateral deeds whether or not they are expressly incorporated in such reference;

(g)

terms defined in the Act have the same meaning as in the Act;

(h)

terms defined in the Deed of Company Arrangement have the same meaning as in the Deed of Company Arrangement;

(i)

a reference to a party to this Deed includes that party’s successors and permitted assigns;

(j)

a reference to a document or agreement, including this Deed, includes a reference to that document or agreement as novated, altered or replaced from

time to time and, in the case of this Deed, to any supplemental or collateral documents to this Deed;

(k)

a reference to “dollar”, “$”, “$A”, or “A$” is a reference to Australian currency;

(l)

a reference to a specific time for the performance of an obligation is a reference to that time in the State or Territory where the obligation is to be performed;

(m)

use of a term denoting subject matter which comprises more than one part or aspect includes a reference to each or any part or aspect of the subject matter; and

(n)

a reference to a group of persons is a reference to all of them collectively to any one or more of them collectively and to each of them individually.

1.4

Headings

Headings are for reference only and do not form part of this Deed.

1.5

Reference to Legislation

Legislation referred to in this Deed is as amended or replaced from time to time.

2.

Completion of Issue of Convertible Notes

2.1

Condition Precedent

It is a condition precedent to the issue of the Convertible Notes that the Company pass the:

2.1.1

 Convertible Note Resolution; and

2.1.2

Issue of Shares Resolution.

2.2

 Issue of Convertible Notes

2.2.1

The Company will issue 8 Convertible Notes on the Series Issue Date after the satisfaction of the Conditions in clause 2.1

2.2.2

On the Series Issue Date:

(a)

the Directors will issue the First Note to Noble upon and subject to the terms of this Deed; and

(b)

Noble will subscribe for the First Note by payment of the Principal Monies, or such part thereof which has not been paid or deemed to be paid.

2.2.3

On the Series Issue Date:

(a)

The Directors will issue the Subsequent Notes to Noble, subject to clause 2.2.3(b) and the terms of this Deed;

(b)

The Subsequent Notes are issued subject to the following conditions precedent being fulfilled by the Company:

(i)

sending a written notice to Noble at any time stating that it requires Noble to subscribe for an amount not greater than $100,000 under the next subsequent Note; and

(ii)

execute a Deed of Charge in relation to the relevant Subsequent Note in favour of Noble for the amount specified under the written notice forwarded to Noble under clause 2.2.3(b)(i).

2.3

Drawdown

The facility the subject of this Deed is a come and go facility, to be used by the Company only for its reasonable and proper requirements for working capital, from time to time, until the Maturity

Date. Notwithstanding any other provision of this Deed, Noble is not obliged to subscribe for any Convertible Notes which are not issued for that purpose.

2.4

Facility Fee

The Company will pay Noble a Facility Fee on the Series Issue Date regardless of whether the Company elects to drawdown the First Note or drawdown any or all of the Subsequent Notes.

3.

Note Certificates

3.1

Issue of Certificates

Subject to the Conditions of Issue the Company must issue to Noble a Note Certificate for each Note promptly after the Principal Monies represented by the Convertible Notes are subscribed.

3.2

Conditions of Use

The Conditions of Issue are deemed to be included or endorsed on the Note Certificate without need for any specific mention or words of incorporation.

3.3

Execution of Certificates

3.3.1

Subject to any requirement of the Act, each Note Certificate must be executed either:

(a)

under a seal of the Company; or

(b)

by an officer of the Company duly authorised to do so by a resolution of the Directors; and any signature required for such execution or authentication may be a facsimile which is printed as part of the Note Certificate or which is applied by mechanical or other means.

3.4

Validity of Convertible Notes Issued

3.4.1

Despite any breach of or non-compliance by the Company with any of the provisions of this Deed, all Convertible Notes in respect of which a Note Certificate has been issued under clause 3.1 will, as between:

(a)

Noble and the Company; and

(b)

Noble and any liquidator of the Company; be deemed to have been validly issued under this Deed.

4.

Covenants and Warranties by Company

4.1

 The Company covenants with Noble that it will:

4.1.1

carry on and conduct the Company’s business in a proper and efficient manner;

4.1.2

keep or cause to be kept proper books for accounts and enter in those books full particulars of all dealings and transactions in relation to its business;

4.1.3

execute and do all such assurances, act and things as shall be reasonably required for giving effect and the full benefit of this Deed to and in favour of Noble;

4.1.4

secure the Convertible Notes by a Charge which must be executed by the Company and Noble before each Note is issued;

4.1.5

not grant any Security Interest over the assets of the Company or any Subsidiary to grant any Security Interest over the assets of the Subsidiary, prior to the Maturity Date, which ranks ahead of Noble, save where such interests arise out of the ordinary course of

business or operation of law;

4.1.6

neither incur nor permit any Subsidiary to incur additional Financial Indebtedness without Noble’s prior approval.

4.2

The Company warrants that:

4.2.1

it is validly existing and in good standing;

4.2.2

it has the power to enter into and perform its obligation under this document and to carry out the transactions contemplated by this document;

4.2.3

all information provided to Noble in connection with the transactions contemplated by this document are true and accurate as at the date of this document;

4.2.4

it has not omitted to provide to Noble any information material to Noble’s assessment of the transactions contemplated by this document.

5.

Events of Default

5.1

For the purposes of this Deed, an Event of Default occurs:

5.1.1

unless Noble otherwise agrees in writing, if the Company does not pay any monies which become payable by the Company pursuant to this Deed on their due date for payment (or where the Company demonstrates to Noble that the Company’s failure to pay on time is caused by a failure in the banking system, within 72 hours after that time);

5.1.2

where, except for the purposes of a solvent reconstruction or amalgamation:

(a)

an order is made, or a resolution is passed for the winding up, dissolution or administration of the Company under Part 5.3A of the Act;

(b)

the Company enters into any arrangement, compromise or composition with or assignment for the benefit of any creditors of the Company or any class of them; or

(c)

 the Company ceases or suspends the conduct of all or a substantial part of its business or disposes of all or a substantial part of its assets;

5.1.3

with respect to any substantial part of the assets of the Company;

(a)

a receiver or similar officer is appointed; or

(b)

any distress, attachment or execution is levied or enforced;

5.1.4

unless Noble otherwise agrees in writing, the Company is in breach of any covenant or undertaking contained in this Deed (other than those referred to elsewhere in this clause) or the Conditions of Issue which breach is prejudicial to the Interests of Noble and such breach is not rectified within 10 Business Days of notice by Noble to do so.

6.

Reports by Company

The Company must within the relevant specified time limit, provide or cause to be provided to Noble all accounts and reports of the Company as may be required to be given to holders of Ordinary Shares by the Act and the Listing Rules of the ASX.

7.

Notices

7.1

A notice required or authorised to be given or served on a party under this Deed must be in writing and may be given or served by facsimile, post or hand to that party at its facsimile number or address appearing in this clause or such other facsimile number or address as the party may have notified the other party or parties in writing.

7.1.1

Company Brainytoys Limited

Attention: Alex Aguero

Address: Unit 6, 34 York Street North Perth, WA.

Facsimile No: (08) 9228 0704

7.1.2

Noble Noble Investments Pty Ltd

Attention: Mr T Lebbon

Address: Level 1, 31 Franklin Street Adelaide, SA.

Facsimile No: (08) 8385 2299

7.2

A notice is deemed to have been given or served on the party to whom it was sent:

7.2.1

in the case of hand delivery, on delivery during Business Hours;

7.2.2

in the case of pre-paid post, two Business Days after the date of despatch;

7.2.3

in the case of facsimile transmission, at the time of despatch if, following transmission, the sender receives a transmission confirmation report or, if the sender’s facsimile machine is not equipped to issue a transmission confirmation report, the recipient confirms in writing that the notice has been received.

7.3

A notice given or served under this Deed is sufficient if:

7.3.1

in the case of a company, it is signed by a director, officer or secretary of that company; or

7.3.2

in the case of an individual, it is signed by the party.

7.4

The provisions of this clause are in addition to any other mode of service permitted by law.

7.5

In this clause “notice” includes a demand, request, consent, approval offer and any other instrument or communication made, required or authorised to be given under this Deed.

7.6

In this clause:

7.6.1

“Business Hours” means from 9.00 am to 5.00 pm on a Business Day;

7.6.2

for the avoidance of doubt, a notice given or served under this Deed is deemed to have been validly given or served if delivery or service occurred during Business Hours in Perth, Western Australia.

8.

Register of Noteholder

8.1

Register

The Company must establish and keep a Register of Noteholders. There must be recorded on the Register of Noteholders the name and address of the noteholder and the date of issue or transfer of

such Convertible Notes and the amount of Convertible Notes held by the noteholder and as regards Convertible Notes no longer outstanding particulars of their conversion or redemption by the Company.

8.2

Closure of Register

Subject to the Act, the Company may from time to time close the Register of Noteholders for any period or periods not exceeding in total 30 days in any calendar year. The property in the Convertible Notes will for all purposes be regarded as situated at the place where the Register of Noteholders is for the time being situated and not elsewhere.

9.

Lodgement of Documents by Noble

Where in this Deed provision is made for or reference is made to the production surrender, lodgement or delivery of Note Certificates, instruments of transfer or transmission of Convertible Notes or other documents or the giving of notice in each case by Noble to the Company, the same

will be deemed not to have been produced, surrendered, lodged, delivered or given to the Company by Noble unless and until it is actually received by the Company at its Registered Office.

10.

Invalidity

Any provision of this Deed which is invalid or unenforceable in any jurisdiction will as to that jurisdiction only be read down or severed to the extent of that invalidity or unenforceability provided that the remaining

provisions of this Deed are properly and effectively self-sustaining and capable of separate enforcement without regard to the read down or severed provisions in that jurisdiction. Such remaining provisions continue to be valid and enforceable in accordance with their terms.

11.

Discharge and Release

11.1

By force of this clause, the Company will immediately be discharged and released from its liabilities, obligations and covenants under this Deed in respect of any Note on the first to occur of the date on which:

11.1.1

that Note and interest on that Note is redeemed or satisfied; or

11.1.2

that Note is converted.

12.

Applicable Law

This Deed is governed by and is to be construed in accordance with the Acts of the State of Western Australia. Each party irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of the Western Australia and to Courts entitled to hear appeals from these Courts.

13.

Counterparts

This Deed may be executed in any number of counterparts, and by the parties in separate counterparts, but is not effective until each party has executed at least one counterpart. Each counterpart of this Deed

constitutes an original of this Deed but the counterparts together constitute one and the same instrument.

Executed as a Deed:

EXECUTED by BRAINYTOYS LIMITED   )

(ACN 001 894 033) in accordance with

    )

s127 of the Corporations Act 2001:

    )

    )

/s/ Charles MacKinnon	/s/ Graham Nicol
Signature of Director	Signature of Director/Secretary
Charles MacKinnon	Graham Nicol
Print Name	Print Name

EXECUTED by NOBLE INVESTMENTS      )

PTY LTD (ACN 007 998 914) in

   )

accordance with s127 of the

   )

Corporations Act 2001:

   )

/s/ Tim Lebbon	/s/ Chris Lebbon
Signature of Director	Signature of Director/Secretary
Tim Lebbon	Chris Lebbon
Print Name	Print Name

Schedule 1

Conditions of Issue of The Convertible Notes

1.

 Definitions

1.1

Words and expressions defined in the Deed and the Deed of Company Arrangement have the same meaning in these Conditions of Issue, unless the context otherwise requires.

1.2

In addition, in these Conditions of Issue, unless the context otherwise

requires:

“Conversion Date” means, where a notice is given:

(a)

in accordance with Condition 4.1(a), the second Business Day after the giving of such notice;

(b)

in accordance with Condition 4.2, the Maturity Date.

“Coupon Rate” means a fixed rate of 10 percent per annum.

“Deed” means the deed entitled “Convertible Note Deed” executed by the Company.

“Dividend Declaration Date” means a date on which the Directors declare or determine that an interim dividend or a final dividend will be paid to holders of Ordinary Shares.

“Dividend Payment Due” means that the date on which the Company pays a dividend (interim or final) to holders of Ordinary Shares.

“Dividend Record Date” means a Business Day:

(a)

being at least nine Business Days (or such other period as the Company may from time to time determine) after a Dividend Declaration Date; and

(b)

before the Dividend Payment Date.

“Face Value” in relation to a Note means the principal amount of that amount of that Note as set out in Condition 2.1 (a).

“Interest Payment Date” for a Note, means:

(a)

the last day of each quarter (being the months March, June, September and December) after the Note Issue Date;

(b)

where Convertible Notes are converted pursuant to Condition 4.1 (a), the Conversion Date;

(c)

where Convertible Notes are redeemed pursuant to a Redemption Event, the Redemption Date;

(d)

where Convertible Notes are redeemed or converted on the Maturity Date, that date.

“Note Issue Date” means, for a Note, the issue date specified on the face of the Note Certificate for that Note.

“Redemption Date” means:

(a)

where a notice is given in accordance with Condition 8.1, the second Business Day after the Redemption Event; and

(b)

otherwise, the Maturity Date.

“Redemption Event” has the meaning given in Condition 7.1.

“Redemption Notice” means a notice in the form set out in each Note Certificate.

“Requested Amount” means that amount requested by the Company forming part or all of the Principal Monies, up to an amount of $100,000.00.

1.2

Clause 1.2, 1.3, 1.4 and 1.5 of the Deed are incorporated into these Conditions of Issue as if set out in full.

2.

General Terms of Issue

2.1

Each of the Convertible Notes will:

(a)

have a Face Value of, and be issued at the Requested Amount;

(b)

bear interest as provided in Condition 3;

(c)

be convertible in the manner and at the time provided by Condition 4 into the number of Ordinary Shares determined in accordance with Condition 5.5;

(d)

be redeemable in the manner and at the times provided by Condition 7;

(e)

be transferable only in accordance with Condition 11; and

(f)

mature on the Maturity Date and, unless converted, will be redeemed on that date as provided in Condition 7.3.

2.2

Subject to compliance by the Company with the provisions of clause 2.3 of the Deed, each of the Convertible Notes must be paid for in full on application.

3.

Interest

3.1

The Company must, subject to Condition 3.4 pay to Noble on each Interest Payment Date, interest on a monthly basis in arrears in respect of Noble’s Notes calculated under this Condition 3.

3.2

Interest accrues daily and is calculated by:

(a)

multiplying the Face Value of the total number of Convertible Notes held by Noble by the Coupon Rate; and

(b)

dividing the resultant amount by 365; and

(c)

rounding the resultant amount to the nearest cent (with half a cent being rounded upwards).

3.3

The Company will pay to Noble interest accrued on Noble’s Notes converted or redeemed from the day after the last interest Payment Date (and if there has been no previous Interest Payment Date, from and including the Issue Date) to the date of conversion or redemption. The interest must be paid on the Conversion Date or the Redemption Date, as the case may be.

3.4

Interest on Convertible Notes:

(a)

will cease to accrue on the Conversion Date or the Redemption Date (as the case may be) when the Convertible Notes are converted or redeemed; and

(b)

in any other case, will cease to accrue on repayment or redemption of the Convertible Notes or on the Note otherwise ceasing to exist.

3.5

The Company’s certificate as to the amount of interest that accrues and is payable on a Note is (in the absence of manifest error) conclusive and binding on Noble.

3.6

If the Company defaults in payment of interest on the Interest Payment Date as provided under this Condition 3, a penalty interest rate of two (2) percent per annum will apply on the amount outstanding. The

penalty interest will accrue daily from the Interest Payment Date to the date of payment of the amount outstanding and the penalty interest calculated under this Condition 3.6 will also be payable on that date.

4.

General Rights of Conversion

4.1

Convertible Notes are convertible by Noble:

(a)

at any time at the discretion of Noble; or

(b)

on the Maturity Date, in accordance with Condition 4.2, into the number of Ordinary Shares determined in accordance with Condition 5.5 by a Noble delivering to the Company:

(c)

a Conversion Notice requiring the Company to convert Convertible Notes specified in the Conversion Notice; and

(d)

the Note Certificate(s) comprising or including Note(s) to be converted.

4.2

Where the Noble wishes to convert Convertible Notes on the Maturity Date, the Conversion Notice must be delivered to the Company at least 2 Business Days prior to the Maturity Date.

5.

Allotment of Shares on Conversion

5.1

A notice given under Condition 4.1 is irrevocable unless the Company otherwise determines.

5.2

The Ordinary Shares to which a holder of Convertible Notes is entitled in the case of conversion of Convertible Notes under Condition 4.1 must be allotted on the Conversion Date and any such allotment will have effect and be deemed to have been made on that Conversion Date.

5.3

Ordinary Shares allotted on conversion of Convertible Notes under Condition 4.1 will participate in full for all dividends provided that where the Conversion Date occurs after a Dividend Record Date but on or before a Dividend Payment Date the Ordinary Shares allotted will not participate in the dividends paid on the Dividend Date but will participate equally with all other Ordinary Shares on issue in respect of any future dividends.

5.4

Subject to Condition 5.3, Ordinary Shares allotted on conversion of Convertible Notes will rank equally in all respects and form one class with the Ordinary Shares on issue at the Conversion Date.

5.5

Subject to Condition 5.6, on conversion of a Note in accordance with Condition 4.1:

(a)

the Company must redeem that Note for an amount equal to its Face Value; and

(b)

Noble, by operation of this Condition 5.5, hereby directs the Company to apply the whole or part of the monies payable to it on redemption under paragraph (a) in subscribing for the maximum number of Ordinary Shares at an issue price which for the purposes of the First Note shall be the sum of six cents ($0.06) and the Subsequent Notes shall be at the higher of the sum of 5 cents ($0.05) and the rolling three month volume weighted average price, prior to the conversion date, of the Company’s Ordinary Shares, traded on the ASX discounted by twenty percent (20%).

5.6

The issue price, in respect to the First Note, for the Shares to be issued to Noble (calculated under condition 5.5 of the Convertible Note Deed) at which the Company is obliged to issue shares to Noble

upon receipt of a Conversion Notice is 6 cents ($0.06). The First Note will be convertible at the option of Noble into that number of Note Shares determined by reference to the amount of the face value of the Note and the price of 6 cents such that the maximum number of Shares which may be issued is 1,666,667.

5.7

The minimum issue price, in respect to the Subsequent Notes, for the Shares to be issued to Noble (calculated under Condition 5.5 of the Convertible Note Deed) at which the Company is obliged to issue

shares to Noble upon receipt of a Conversion Notice is 5 cents ($0.05). Each Subsequent Note will be convertible at the option of Noble into that number of Shares determined by reference to the amount of the

draw down face value of each such Subsequent Note and the following price: viz the higher of, $0.05 per share and, the rolling three month volume weighted average price of the Company’s ordinary shares

immediately prior to conversion, traded on the ASX discounted by 20% (that is, the lowest price at which Shares will be issued is $0.05 per share) such that the maximum number of Shares which may be issued

is 14,000,000.

5.8

The Company will apply to have all Shares issued to Noble including those Shares converted from the Convertible Notes in to Shares quoted on the ASX within 10 business days after allotment.

6.

Participation In Issues

6.1

Noble will have the right to participate in all share and other security issues whilst the Note is outstanding, as though all outstanding Convertible Notes had been converted to Ordinary Shares immediately prior to the announcement of such issue on the ASX.

7.

Redemption Events and General Rights of Redemption

7.1

Upon the occurrence of any of the following events (each a ‘Redemption Event’) prior to the Maturity Date, Noble may serve a Redemption Notice on the Company at any time thereafter requiring the redemption of all or any of its Convertible Notes for the Face Value of those Convertible Notes in accordance with Condition 7.2:

(a)

on default by the Company of its obligation to make interest payments under Condition 3;

(b)

on default by the Company on any bank debt or other finance facility;

(c)

on the occurrence of an Event of Default.

7.2

Convertible Notes are redeemable by Noble on the occurrence of a Redemption Event in accordance with Condition 7.1 for the Face Value of those Convertible Notes on the Redemption Date by Noble delivering to the Company:

(a)

a Redemption Notice requiring the Company to redeem all or any of the Convertible Notes specified in the Redemption Notice; and

(b)

the Note Certificate(s) comprising or including the Note(s) to be redeemed.

7.3

If Noble does not convert a Note on or before the Maturity Date, the Company must redeem all outstanding Convertible Notes on the Maturity Date for cash at Face Value.

7.4

The Company undertakes to notify Noble immediately after it becomes aware of a Redemption Event described in Condition 7.1(a).

8.

Cancellation of Convertible Notes

All Convertible Notes redeemed or converted by the Company will thereupon be cancelled and may not be reissued.

9.

Entitlements To Certificates

9.1

Subject to the Act, and these Conditions of Issue, Noble will be entitled to a Note Certificate for each Note held by Noble.

9.2

Noble may waive its entitlement to a Note Certificate.

10.

Cancellation, Production and Replacement of Certificates

10.1

The ranking of the Convertible Notes will in no way be affected by the cancellation of the Certificate on which they were originally included or of any subsequent Note Certificate on which they were included.

10.2

Noble must, as a condition precedent to receiving payment of or in respect of the principal amount of Convertible Notes comprised in Noble’s Note Certificate, produce the Note Certificate to the Company,

in the case of contemplated payment by the Company. This Condition will not, however, preclude payment by the Company at its own entire responsibility prior to production of the Note Certificate if the Company elects to make such a payment. On payment to Noble, the Note Certificate will be deemed to have been cancelled.

10.3

If the Note Certificate becomes worn out or defaced, then on production and delivery of the Note Certificate to the Company together with any other evidence as the Company may require, the Company, subject to these Conditions of Issue, will cancel the same and issue a new Note Certificate in its place.

10.4

Subject to the Act and these Conditions of Issue, if the Note Certificate is lost or destroyed, the Company will issue a duplicate Note Certificate in its place on application in writing by Noble accompanied by:

(a)

a statutory declaration or any other evidence as the Company may require that the Note Certificate has been lost or destroyed and has not been pledged, mortgaged, charged, sold or otherwise disposed of and, if lost, that proper searches for the same have been made;

(b)

an undertaking in writing that if it is found or received by Noble, it will be returned to the Company;

(c)

if required by the Company, a copy of an advertisement which has recently appeared in a daily newspaper circulating generally throughout the State or Territory in which the Register on which the Note is registered is kept, stating that the Note Certificate has been lost or destroyed and that

Noble intends, within a time specified by that advertisement, to apply to the Company for the issue of a duplicate Note Certificate;

(d)

if required by the Company, a bond for an amount equal to the face value of the relevant Note or such lesser amount in any particular case as the Company may determine, indemnifying the Company against loss following production to the Company of the original Note Certificate; and

(e)

payment to the Company of such out-of-pocket expense of the Company in investigating evidence as the Directors of the Company deem adequate; all of which will be at the expense of Noble making the applications.

10.5

Any stamp duty payable on a New Certificate issued under this Condition 10 must be paid by the Company.

11.

Transfer of Convertible Notes

11.1

Subject to this Condition 11, Convertible Notes are fully transferable.

11.2

Convertible Notes may only be transferred by:

(a)

 a written transfer instrument in any usual or common form; or

(b)

any other form approved by the Directors.

11.3

A written transfer instrument must be forwarded for registration to the address of the Registrar on which Noble’s Notes are recorded accompanied by the Note Certificates (in any) for the Convertible Notes to be transferred and such other evidence as the Directors of the Company may require to prove:

(a)

the title of the transferor, or Noble’s right to transfer the Convertible Notes;

(b)

the due execution of the transfer; and

(c)

the due compliance with the provisions of any relevant statute relating to stamp duties; and if satisfied with such evidence and that the transferor has otherwise complied with this Condition 11, the Company will register the transfer and recognise the transferee as Noble entitled to the

amount of Convertible Notes comprised in the transfer.

11.4

A written transfer instrument must be:

(a)

executed by the transferor;

(b)

executed by the transferee; and

(c)

in the case of a transfer of partly paid Convertible Notes, be endorsed or accompanied by an instrument executed by the transferee or by the transferee’s broker to the effect that the

transferee agrees to accept the Convertible Notes subject to the terms and conditions in which the transferor held them, to become a noteholder and to be bound by this Deed.

11.5

Subject to the Act, the written transfer instrument may comprise two or more documents.

11.6

Subject to the transfer of the Convertible Notes the transferor will indemnify the Company in the event the transferee defaults for non payment of any Principal Monies on any Convertible Note.

11.7

A transferor of Convertible Notes remains the holder of the Convertible Notes transferred until the transfer is registered and the name of the transferee entered in the Register in respect of the Convertible Notes.

A transfer of Convertible Notes does not pass the right to any interest payable in the Convertible Notes until such registration.

11.8

Despite anything contained elsewhere in this Condition 11, the Directors of the Company may in their absolute discretion refuse to register any transfer that is not in accordance with Condition 11.2 and

11.3.

11.9

No instrument of transfer will be registered by the Company during any period when the relevant Register or any transfer books relating thereto is closed. Further, no transfer needs to be registered during the eleven Business Days before any day fixed or determined for the computation of interest. The transferor will be deemed to remain the owner of that Note until the name of the transferee is entered in the

relevant Register.

11.10

The Company must:

(a)

register all registrable transfer forms (if any), split certificates (if any), renunciations (if any) and transfers (if any);

(b)

issue Note Certificates (if any) and transmission receipts (if any); and

(c)

mark or note transfer forms (if any); without charge, except where the issue of any Note Certificates is to replace a lost or destroyed Note Certificate (if any).

11.11

Transfers of Convertible Notes between Registers will be effected free of charge, provided that Noble will, on demand, pay to the Company any stamp duty which may be payable on such transfer.

11.12

Any power of attorney granted by Noble may be lodged, produced, or exhibited to the Company or any of the its officers and will, as between the Company and Noble:

(a)

be taken and deemed to continue and will remain in full force and effect; and

(b)

may be acted upon.

11.13

All instruments of transfer which are registered and the Note Certificate (if any) surrendered to the Company will remain the property of the Company and will be retained by it for a period of three years or such minimum period or in such alternative form as may be permitted by law after receipt. However, any instrument of transfer which the Company declines to register will (except in the case of fraud or suspected fraud) be returned on demand to the person depositing the instrument.

12.

Noble’s Maximum Liability

The maximum aggregate amount which the Company may recover from Noble in respect of all claims arising from a breach of any obligation by Noble under or on connection with this document is limited to the Principal Monies.

13.

Payment To Noble

13.1

Any interest or other monies payable on or in respect of any Convertible Notes must be paid in Australian dollars only:

(a)

by payment by cheque marked “not negotiable” and sent through the post to the address of Noble on the Register of Noble or other person entitled thereto; or

(b)

by deposit to such account with any bank (as that expression is defined in the Banking Act 1959 (Commonwealth) in Australia as Noble, by written notice to the Company, may direct; or

(c)

by any other method of transferring money approved by the Directors from time to time.

Every cheque referred to in paragraph (a) will be sent at the risk of the Company and payment will be deemed to have been made when the cheque is received by Noble at the address of the Noble on the

Register of Noble or by other Person entitled to the Monies represented by the cheque at the address specified by that Person.

13.2

If a payment is due under a Note on a day which is not a Business Day, or if payment is to be made to an account on a day on which banks are not open for general banking business in the city in which the account is located, Noble is entitled to payment of such amount on the first following day that is a Business Day, and is not entitled to any interest or other payment in respect of any such delay.

Schedule 2

BRAINYTOYS LIMITED

ACN 001 894 033

APPLICATION FOR FIRST CONVERTIBLE NOTE SUBJECT TO THE TERMS

AND CONDITIONS DATED ________________ 2006 (“NOTES”)

1

Noble Investments Pty Ltd hereby confirm that we qualify as a sophisticated or professional investor/s as defined in the Corporations Act.

2

We apply for one Note up to $100,000 in Brainytoys Limited on the Terms and Conditions dated __________________2006.

3

We lodge the full application money of $100,000. .............................................................

(Please make cheque payable to “Brainytoys Limited”)

4

Surname (Please print)

..........................................................................................................................................

5

Postal address (Please print)

..........................................................................................................................................

6

Contact name

..........................................................................................................................................

7

Tax file number or exemption

..........................................................................................................................................

___________________________________________________________________

_

We hereby apply for the Convertible Notes mentioned above and confirm that all details and statements made by us on the form are complete and correct. We acknowledge that the allotment and issue of Convertible Notes is at the discretion of Brainytoys Limited. We hereby authorise the Directors of Brainytoys Limited to register us as the holder(s) of the Convertible Notes allotted to us, and we agree to be bound by the Terms and Conditions dated __________ 2006 and by the Constitution of the Company when Shares in the Company are allotted and issued to us on conversion of the Convertible Notes.

We hereby agree that we will not disclose the terms and conditions of the Convertible Notes (“the confidential information”) other than to related parties, fellow directors, shareholders or professional advisors, and will use best endeavours to ensure that those parties to whom the confidential information is disclosed will not disclose the confidential information.

……………………………………………………………….

(Signature)

Dated the­­__________ day of ___________ 2006

Schedule 3

Note Certificate

Brainytoys Limited

ACN 001 894 033

ISSUE OF SECURED CONVERTIBLE NOTE OF BRAINYTOYS LIMITED

(“Note”)

REGISTERED OFFICE

Note Certificate No: X

Unit 6, 34 York Street

NORTH PERTH WA 6006

THIS IS TO CERTIFY that:

1.

On this day, __ of ______ was/were registered the holder(s) of __ Note under a Deed dated _______ (“Terms and Conditions of Issue”) by The Company Limited (“Company”) drawn to the value of

$____________.

2.

 The Note:

(a)

is issued by the Company on and subject to the Terms and Conditions of Issue contained in the Deed, including the Conditions of Issue forming Schedule 1 to that Deed; and

(b)

may be converted into fully paid ordinary shares in the Company in accordance with and pursuant to the Terms and Conditions of Issue.

3.

The Terms and Conditions of Issue are incorporated in and form part of this Certificate.

DATED

EXECUTED by BRAINYTOYS LIMITED   )

(ACN 001 894 033) in accordance with

    )

s127 of the Corporations Act 2001:

    )

    )

Signature of Director	Signature of Director/Secretary
Print Name	Print Name

Note:

(a)

 This Note Certificate must be surrendered on any transfer, conversion or redemption of the Note comprised in this Note Certificate.

(b)

 In order to exercise a right to convert, the registered holder should complete the notice of conversion of Note below and deposit the notice together with this Note Certificate at the

Registered Office.

(c)

In order to exercise a right to redeem, the registered holder should complete the notice of redemption of Note below and deposit the notice with this Note Certificate at the Registered

Office.

Notice of Conversion of Convertible Notes

TO:

Brainytoys Limited

Noble Investments Pty Ltd ACN 007 998 914 gives notice of the exercise of its right to redeem the Note included in this Note Certificate into cash for the Face Value on Redemption Date.

If this notice is signed by an attorney, the attorney declares that he or she has no notice of revocation of the power of attorney of which this Notice is signed.

Date:

EXECUTED by NOBLE INVESTMENTS      )

PTY LTD (ACN 007 998 914) in

   )

accordance with s127 of the

   )

Corporations Act 2001:

   )

Signature of Director	Signature of Director/Secretary
Print Name	Print Name

Schedule 4

CHARGE