Annual Report and Accounts

Brainspark PLC
30 June 2004



For immediate Release

Brainspark Plc

Preliminary Announcement of Audited Results for the year ended 31 December 2003

Chairman's statement

I present the Company's report for the year ended 31 December 2003.

The results show a loss in the year of £2.9 million compared to a loss of £3.1
million for the financial year to 31 December 2002. The results have been
influenced by the continuing negative market conditions affecting the technology
investment market and managements' efforts in successfully renegotiating the
liabilities arising under its lease contract.

As far as the market is concerned, finally there is some evidence of a return of
confidence from investors and financial institutions and I am cautiously
optimistic for the future. Following the acquisitions that were made in the last
quarter of 2002, the Company now has a portfolio covering a geographic area
ranging from UK, to Italy and Israel. Our focus will be on the current portfolio
companies by assisting them to create value, in harsh market conditions.

The cost-cutting measures begun in 2002, have reduced further the cash
'burn-rate' to an average of £41,000 per month for the year, net of recovery of
rent and charges made to the cubs.

One of the most important contributions to the reduction in the monthly cash
'burn-rate' was the surrender of the lease of premises at The Lightwell,
Laystall Street, London EC1R 4PA to Brainspark's landlord, Laystall House
Limited. The existing lease, expiring 24 March 2015, was set at an annual rent
of £534,000 equivalent to about £28 per square foot. The deposit held by the
landlord was forfeited and a reverse premium of £330,000 was paid to the
landlord.

Finally the lease was shortened to one covering two floors at The Lightwell at
an annual rent of £170,000, equivalent to about £22 per square foot. The new
lease is terminable by the Company after three years. The Company hopes to
recover much of this rent from the portfolio companies, which remain unaffected
by the above transaction, as they occupy office space on short-term licences.

In order to preserve cash resources and to demonstrate their own belief in
Brainspark's future, the Directors resolved on 31 July 2003 to use their
contractual remuneration to subscribe either for equivalent equity in Brainspark
or waive their rights to such contractual remuneration in consideration of the
grant of warrants over equity.

The Directors were offered a choice between subscribing for ordinary shares of
1p each or receiving warrants exercisable into such ordinary shares. The shares
were allotted at the price of 1.1p. The Warrants have an exercise price of 1.1p
or 1.32p and are exercisable within three years of grant. The mid-market price
of the Shares at the close of business on 29 June 2004 was 0.63p.

As a results of the distribution by AISoftw@re of the shares that it owned in
the Company as a dividend in kind to its shareholders, made at the end of June
2003, the volume of the shares that have been traded has greatly increased,
jumping from a minimal level to about 1 million of the shares traded daily.



Summary Financial Results

The Group's cash reserves at 31 December 2003 stood at £68,000 compared with
£964,000 at 31 December 2002.

The Group's net asset value (NAV) was £3.8 million at 31 December 2003, compared
with £6.7 million at 31 December 2002, equivalent to 19.76p per share.

On 12 December 2003 Brainspark repaid £100,000 of the £200,000 loan granted by
Cross Atlantic, a major shareholder of the Company.

Market Environment

In my comments on the Interim Results for the six month period to 30 June 2003,
I noted some early signals that could indicate a return of confidence and new
interest for the start up companies. However sentiment towards the technology
sector remains sceptical and the businesses in which the Company invested have
not been able to achieve, for another year, follow-on funding and related
valuation gains as originally hoped for.

Therefore, during the year, Brainspark had to support certain of its portfolio
investments with cash injections through capital increases, day to day credit
and loans.

Operational Changes

The Board continuously monitors its operating approach. From the outset, the
Company has provided a relatively comprehensive range of services and
infrastructure to support the development of its investee businesses. This has
remained our approach but in the current market, the level and the range of the
services and the related cost base has had to be further reduced, reducing to
below £38,000 per month. These actions reduced the negative impact of operating
expenses on our NAV. The Board will continue to be focused during 2004 on
further reducing the monthly cash requirement to a minimum.

As stated above, the Board was focused during the first half of 2003 on
renegotiating surrender of the lease at The Lightwell.

Board Changes

Sheryl Daniels Young tendered her resignation with effect from 10 April 2003.
Sheryl has made an invaluable contribution to the Company and I was sorry that
her other personal commitments meant that she felt that she could no longer act
as a Director. We wish her well.

Investment Committee Changes

At the end of 2003, Prof. John Campbell was appointed as a member of the
Investment Committee, replacing Sheryl Daniels Young. Professor Campbell's
extensive experience should greatly assist the Board through difficult market
conditions.

Business Process

Brainspark continues to monitor and rationalize its operational infrastructure
and leverage the knowledge and market potential of the whole investment
portfolio.

This is a consequence of the difficult market conditions and is a modification
of the Company's original strategy.

At the outset, Brainspark's strategy was to take a role in the initial stages of
financing new business ideas. It would find and, develop businesses and then
look to exit relatively quickly through a trade sale or flotation.

Investments Review

Brainspark has holdings in eleven companies: six in the UK, three in Italy, one
in Israel and one in USA. Its stakes rang from nearly 2 per cent to nearly 52
per cent of the relevant portfolio companies. The portfolio covers a wide range
of business sectors including Web service, application service providers and
advanced technology solution.

Many of the portfolio companies have not made progress as originally envisaged;
but, in spite of that, the Directors believe that our portfolio companies are
concentrating on improving their businesses over a longer time frame.

Among the portfolio companies, positive signs are emerging especially at
EasyArt, GeoSim, Kerb, Metapack and The Usability Company.

On 4 December 2003, Brainspark sold its stake (4.16 per cent) in Propex (a
company providing an internet exchange for commercial property) for £77,000.

In addition, during the year, the Company increased its holding structure as
follows:

1. December 2003, the Company increased its percentage ownership in Fortune
Cookie from 25 per cent to 29.44 per cent by capitalising a £48,000 of rental
charges payable. This transaction puts Fortune Cookie in a better financial
position to enter into discussions for potential mergers to enlarge its market
share and to participate in a large innovation project overseas.

2. June 2003 to March 2004, Brainspark made further investments in GeoSim
Systems Limited increasing its ownership to 51.75 per cent.

3. The Company's interest in Ludonet has reduced from 35 per cent to 14.875 per
cent as a result of the dilution in the Group's interest after Ludonet received
Euro 230,000 (£ 162,000) from new investors.

4. MetaPack, the Company increased its stake through a capital injection of
£15,000, increasing the percentage ownership from 4.97 to 5.89.

Prospects

We face the future with guarded optimism. We still have to consider certain
issues going forward - the impact of external market conditions and internally,
further rationalising the portfolio taking into consideration the opportunities
that are presented by these companies.

On 29 December 2003, the Board agreed to issue up to £500,000 convertible loan
notes. An initial allotment of £50,000 Notes has already been issued.

The Company's current strategy is to raise further capital from existing key
shareholders, and sell some of the non strategic portfolio companies, with the
objective of using the proceeds for general working capital purposes to purchase
new investments and to support a potential IPO for at least one of our portfolio
companies.

I think that the Board has taken the necessary steps to enable the financial
performance of Brainspark to improve. A good response to our proposed capital
raising and a positive change in market sentiment towards the technology sector
will clearly provide further support to the business. If sentiment in the
technology market improves, the Company's prospects should also improve.


Prof. Francesco Gardin
Chairman
28 June 2004







Financial Statements

Consolidated profit and loss account
For the year ended 31 December 2003

                                                              2003        2002
                                                             £'000       £'000
                                -------------------------   --------   ---------

Turnover                                                         -           -
Net operating expenses - recurring                            (680)     (1,612)
Net operating expenses - exceptional                           (39)     (1,087)
                                                            --------   ---------

Total net operating expenses/Group operating loss             (719)     (2,699)

Share of operating loss of associated undertakings          (1,915)       (335)
                                                            --------   ---------
Total operating loss: Group and share of associated
undertakings                                                (2,634)     (3,034)

Loss on ordinary activities before interest                 (2,634)     (3,034)
Net interest receivable                                         39         123
Amounts written off investments                               (311)       (200)
                                                            --------   ---------
Loss on ordinary activities before taxation                 (2,906)     (3,111)

Tax on loss on ordinary activities                               -           -
                                                            --------   ---------
Loss on ordinary activities after taxation                  (2,906)     (3,111)
                                                            --------   ---------
Retained loss for the financial year                        (2,906)     (3,111)
                                                            --------   ---------

Loss per 1p ordinary share                                   (1.55p)     (2.31p)
Basic and diluted earnings per share

The loss for the year is derived wholly from continuing activities.
Consolidated statement of total recognised gains and losses
For the year ended 31 December 2003

                                                              2003        2002
                                                             £'000       £'000
Loss for the financial year                                 (2,906)     (3,111)
Foreign exchange translation difference                          -          32
-----------------------------                               --------    --------
Total recognised gains and losses for the year              (2,906)     (3,079)
-----------------------------                               --------    --------

There are no differences between the results disclosed and the historical cost
equivalents.

Balance sheets at 31 December 2003

                                  Group      Group      Company    Company
                                      2003       2002       2003       2002
                                     £'000      £'000      £'000      £'000
            ---------------------     ------     ------    -------   --------

Fixed assets
Tangible assets                         80        306          -          -
Investments in subsidiary
undertakings                             -          -      3,291      5,068
Investments in associated
undertakings                         2,639      4,291          -          -
Other investments                    1,567      1,826          -          -
                                      ------     ------    -------   --------
                                     4,286      6,423      3,291      5,068
                                      ------     ------    -------   --------

Current assets
Debtors                                295        921      1,338      1,876
Cash at bank and in hand                68        964          -          -
                                      ------     ------    -------   --------
                                       363      1,885      1,338      1,876
Creditors: amounts falling due
within one year (including
convertible debt)                     (689)      (525)      (268)       (50)
                                      ------     ------    -------   --------
Net current (liabilities)/assets      (326)     1,360      1,070      1,826
                                      ------     ------    -------   --------
Total assets less current
liabilities                          3,960      7,783      4,361      6,894
Provisions for liabilities and
charges                               (122)    (1,092)         -          -
---------------------                 ------     ------    -------   --------
Net assets                           3,838      6,691      4,361      6,894
---------------------                 ------     ------    -------   --------

Capital and reserves
Called up share capital              1,923      1,874      1,923      1,874
Share premium account               28,562     28,558     28,562     28,558
Other reserves                       6,813      6,845          -          -
Profit and loss account (deficit)  (33,460)   (30,586)   (26,124)   (23,538)
---------------------                 ------     ------    -------   --------
Total equity shareholders' funds     3,838      6,691      4,361      6,894
---------------------                 ------     ------    -------   --------

Reconciliation of movements in shareholders' funds
For the year ended 31 December 2003
                                       --------    -------    ------    --------
                                        Group      Group      Company   Company
                                         2003       2002      2003        2002
                                        £'000      £'000     £'000       £'000
                                       --------    -------    ------    --------

Loss for the period                    (2,906)    (3,111)   (2,586)     (2,870)
New share capital issued                   53      2,757        53       2,757
Foreign exchange translation
differences                                 -         32         -           -
------------------                     --------    -------    ------    --------

Net reduction in shareholders' funds   (2,853)      (322)   (2,533)       (113)
Opening shareholders' funds             6,691      7,013     6,894       7,007
------------------                     --------    -------    ------    --------
Closing shareholders' funds             3,838      6,691     4,361       6,894
------------------                     --------    -------    ------    --------

Consolidated cash flow statement
For the year ended 31 December 2003
                                                             ------- -----------
                                                              2003        2002
                                                             £'000       £'000
                                                             ------- -----------

Net cash outflow from operating activities                    (967)     (1,451)

Returns on investments and servicing of finance
Interest received                                               39         125
Interest paid                                                    -         (65)
-------------------------                                    ------- -----------
Net cash inflow from returns on investments and servicing
of                                                              39          60
finance                                                      ------- -----------
-------------------------

Capital expenditure and financial investment
Receipts from sale of tangible fixed assets                      -          11
Purchase of other investments                                  (15)       (128)
Sale of other investments / own shares                          77         176
-------------------------                                    ------- -----------
Net cash inflow from capital expenditure and financial
investment                                                      62          59
-------------------------                                    ------- -----------

Acquisitions and disposals
Purchase of subsidiary undertaking                               -      (2,324)
Purchase of investments in associated undertaking             (165)       (964)
Loans to associated undertakings                               (15)          -
-------------------------                                    ------- -----------
Net cash outflow from acquisitions and disposals              (180)     (3,288)
-------------------------                                    ------- -----------
                                                             ------- -----------
Net cash outflow before financing                           (1,046)     (4,620)
-------------------------                                    ------- -----------

Financing
Issue of ordinary share capital                                  -          31
5% Convertible bond issue                                       50           -
Loan from major shareholder                                    200           -
Partial repayment of loan to major shareholder                (100)          -
-------------------------                                    ------- -----------
Net cash inflow from financing                                 150          31
-------------------------                                    ------- -----------
                                                             ------- -----------
Decrease in net cash for the period                           (896)     (4,589)
-------------------------                                    ------- -----------

Reconciliation of cash flow to movement in net funds
Net cash at beginning of period                                964       5,553
Decrease in net cash in the period                            (896)     (4,589)
-------------------------                                    ------- -----------
Net cash at end of period                                       68         964
-------------------------                                    ------- -----------

Notes

1                   Loss per share
The loss per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period. For diluted earnings per share, the weighted
average number of ordinary shares in issue is adjusted to assume conversion of
all dilutive potential ordinary shares.

Reconciliation of the loss and weighted average number of shares used in the
calculation are set out below:
          ---------- -------    -------- -------   -------   --------- -------
                     (Loss)       2003   Per       (Loss)       2002   Per
                                         share                         share
                      £'000   Weighted   Amount     £'000   Weighted   Amount
                              average    pence              average    pence
                              no                            no
                              of                            of
                              shares                        shares
                              000's                         000's
          ----------  ------- --------     -------  ------- ---------    -------

 Basic loss per
 share
 Loss attributable
 to
 ordinary            (2,906)   187,487     (1.55)  (3,111)   134,681     (2.31)
 shareholders         
                      -------   --------   -------  -------  ---------   -------

Financial Reporting Standard No14 requires presentation of diluted earnings per
share when a company could be called upon to issue shares that would decrease
net profit or increase net loss per share. For a loss making company with
outstanding share options, net loss per share would only be increased by the
exercise of out-of-the money options. Since it seems inappropriate that option
holders would act irrationally, no adjustment has been made to diluted earnings
per share for out-of-the money options as there are no other diluting share
issues, diluted earnings per share equals basic earnings per share.

2. Basis of Preparation

The above results for the year ended 31 December 2003 are an abridged version of
the Group's statutory financial statements which have not been filed at the
Registrar of Companies and on which the auditors have issued an unqualified
report. The consolidated profit and loss account, consolidated balance sheet and
consolidated cashflow statement do not constitute statutory financial statements
within the meaning of Section 240 of the Companies Act 1985 (as amended).

The results for the year ended 31 December 2002 have been extracted from the
financial statements of the Group on which an unqualified report from the
auditors has been issued and which have been filed with the Registrar of
Companies.

3. Annual general meeting

This will be convened at Sion Hall, 56 Victoria Embankment, London EC4 Y0DZ on
29 July 2004 at 11 am



Copies of this notice and the Report & Accounts are available from the offices
of Beaumont Cornish Ltd, Georgian House, 63 Coleman Street, London. EC2R 5BB
For a period of 30 days from the date hereof.

Audited accounts for the year ending 31 December 2003 are being posted to
shareholders




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