Revenues equaled €1.48 million, up 4% from the first quarter 2003 results. EBITDA losses (earnings before interest, taxes, depreciation and amortization) reduced to €682,000 from an EBITDA loss of €1.65 million in the year ago period.

"We continue to experience great interest in our new product line-up as reflected in our increased sales pipeline for both asset management and wealth management", stated Rocco Pellegrinelli, Chairman and Chief Executive Officer of Brainpower. "However, sales cycles remain long with new business signed during the quarter in line with the fourth quarter 2003. We have seen continued strong interest in our private client advisory product, Brainpower ProActiv(TM), where we signed a further two contracts in the quarter in Switzerland, one of the world's leading private client markets.

In the meantime, we have implemented a further cost reduction plan. This is targeted primarily at non-sales related parts of the organisation and we are looking to achieve €1.2 million in annualized savings. Whilst we expect to see the full impact of the new cost reduction plan in the second half of the year, management will also continue to focus on cost control in general, which has helped reduce operating costs, excluding restructuring costs, by €86,000 in the quarter or 5% from the already excellent results shown in the previous quarter. As part of the cost reduction plan there was a restructuring charge of €92,000 in the quarter.

Furthermore, given that Brainpower's latest product development plan is significantly achieved, management has started to re-deploy resources from research and development to support the enterprise-wide sales opportunities. We hope that this will start to have a considerable positive impact on the new business pipeline moving forward."

Bill Holwell, Chief Financial Officer of Brainpower, added, "As I have previously stated, the shift by some clients from term to perpetual licenses with upfront fees causes some revenue variability on a quarterly basis. We anticipate this to continue moving forward, but expect to see revenues trending upwards. This has also had an impact on Brainpower's total backlog of booked revenue to be recognized over the next two to three years, which equaled €6.9 million at the end of the first quarter, down slightly from €7.2 million at December 31, 2003.

We showed strong cash flow from operations in the quarter, in fact our best since Brainpower's IPO, due to a continued focus on cash collection and cost control. Cash used in operations equaled €82,000, down from €1.32 million used in the first quarter of 2003. However, due to our six-monthly invoicing pattern we expect cash used in operations to be higher in the second quarter of 2004 than the first. The company has access to short-term credit facilities to cover expected future cash outflows, however, Brainpower is assessing funding alternatives to ensure that the company has further funding available if required."

REVENUES

Recognized revenue in the quarter ended March 31, 2004 equaled €1.48 million, up from €1.42 million recognized in the year-ago period. Revenues were, however, lower than the €1.75 million recognized in the quarter ended December 31, 2003.

Gross profit in the first quarter was €1.18 million or 80% of revenue, versus €1.09 million (77% of revenue) in the year-ago period and €1.45 million (83% of revenue) in the fourth quarter 2003.

OPERATING EXPENSES

For the quarter ended March 31, 2004, Brainpower's operating expenses excluding restructuring costs and before depreciation and amortisation were €1.77 million; a substantial reduction from the €2.68 million incurred in the first quarter 2003 and 5% below the €1.86 million incurred in the fourth quarter 2003.

Sales & Marketing
Total sales and marketing costs decreased substantially from €1.13 million in the first quarter 2003 to €786,000 for the quarter ended March 31, 2004. These costs were slightly higher than the €709,000 incurred in the fourth quarter 2003.

There were a total of 24 employees in sales and marketing functions at March 31, 2004, an increase of five from 19 as at December 31, 2003.

Research & Development
R&D costs decreased from €832,000 in the year ago period and €609,000 in the quarter ended December 31, 2003 to €543,000.

There were a total of 30 employees in R&D at March 31, 2004, down five from 35 at December 31, 2003.

General & Administrative
G&A costs decreased from €718,000 in the first quarter 2003 and from €538,000 in the fourth quarter 2003 to €442,000 for the period ended March 31, 2004.
There was no change in the number of employees in general and administrative roles, which remained at 13 people.

Restructuring
Restructuring charges for the quarter ended March 31, 2004 totaled €92,000.

OTHER PROFIT & LOSS ITEMS

Total depreciation and amortization expense for the period ended March 31, 2004 was €138,000 versus €201,000 incurred during the first quarter 2003. Depreciation and amortization expense recognized in the fourth quarter 2003 equaled €211,000.

EBITDA losses before restructuring costs reduced to €590,000 from an EBITDA loss of €1.59 million in the year ago period.

The net loss for the first quarter was €886,000, a 53% reduction from net losses of €1.87 million in the first quarter 2003, and a 20% increase from the net loss of €736,000 in the fourth quarter 2003.

BALANCE SHEET

Brainpower's cash position as at March 31, 2004 was €447,000 compared to €357,000 at the end of the previous quarter and €3.87 million at the end of the first quarter 2003. The cash used in operations for the quarter was €82,000, substantially less than the €1.32 million used in the previous quarter and €1.2 million in the year ago period.

As previously announced, the company has a short-term credit facility of €1.4 million, of which €700,000 is non-cancelable. As at March 31, 2004, the company had drawn down €186,000 against the facility. In addition, the company has a credit facility of €950,000, which is collateralized by accounts receivable balances and bears an average interest rate of 6.3 percent, The company had €201,000 outstanding against the facility at March 31, 2004. Given the company's sales projections, management believes that Brainpower will have sufficient funding to achieve EBITDA breakeven during 2004.

As at March 31, 2004 the accumulated deficit was €33.36 million compared to the accumulated deficit of €32.48 million at the end of the first quarter 2003. Shareholders equity ended the quarter at €200,000.

HEADCOUNT

Brainpower employed a total of 73 people at March 31, 2004, down one from the number employed at the end of the fourth quarter 2003.