6 May 2002 Part 1/1 -------- PINEAPPLEHEAD LIMITED --------------------- HOMEX - Melbourne ------------------------- Review of direction of company - Update In the statement dated 15 March 2002 accompanying the release of Pineapplehead's financial results for the 6 months to December 31, 2001, Directors announced that a review of the future direction of the Company was being undertaken and that an announcement of the outcome of this review would be made within 4-6 weeks. This review is still proceeding incorporating action on a number of fronts:- COST REDUCTION/CASH RESERVES Since December 2001 the benefits of action taken in the December quarter to reduce costs, as outlined in the above statement, have made a significant impact on operating performance. Average monthly operating costs (excluding depreciation and amortisation) in the March 2002 quarter were $250,000 per month lower than average monthly operating costs in the 6 months to December 2001. In the March 2002 quarter, the Company, as a result of these cost reductions and improved sales, recorded a small loss at the EBITDA level. Cash balances have fluctuated in the $1.0-$1.5M range over the last 3 months. Future Reality showed an improvement in sales to levels commensurate with expectations at the time of acquisition. This resulted in Future Reality contributing positively to earnings in the March quarter. SPORTS STRATEGY We have decided to concentrate the company on its sports strategy - ie a provider of graphics and virtual reality applications for broadcasting of major sports in Australia and overseas. This was the original driver for the listing of the company and whilst growth of interactive and digital TV has been much slower than anticipated, we still consider there is worthwhile potential for the Company's technology in the medium to longer term. Over the last 2 years the Company has successfully grown sports revenues both domestically and internationally. Major cricket contracts have been won with Channel 9 in Australia and Channel 4 in the UK, and more recently golf contracts have been won with The Golf Channel and NBC in the USA, to add to the golf contract with Channel 7 in Australia. In addition to the cricket and golf contracts the Company has recently procured, horse racing contracts with the Racing Network in the UK and with World Series Racing covering horse racing events in Asia, Europe, North America and Australia, It has also procured a contract for rugby with Channel 7 in Australia in 2002. DIVESTMENT In parallel with our concentration on sports broadcasting we have been actively seeking ways to redeploy funds from our other businesses. In the short term this is likely to lead to the divestment of Future Reality and divestment options are under review. We will keep shareholders informed of progress on implementing our restructuring plans. For further information contact: Evan Kourambas CHIEF EXECUTIVE OFFICER Pineapplehead Ltd Phone (03) 9852 7444