Futuremedia announced that Cornell Capital Partners, LP has agreed to provide up to US$10 million of growth capital to Futuremedia. The proceeds of the transaction are expected to be used for the acquisition of EBC and working capital for growth. The financing will be provided in two tranches, $2.5 million provided currently, and $7.5 million subject to certain conditions including the Company securing an extension to the existing agreement to acquire EBC and shareholder approval of the EBC acquisition (and related Cornell financing) before May 31, 2006. The Company expects to notify shareholders in early 2006 about the schedule for the Annual General Meeting, which is expected to be held in several months.
Commenting on the transaction, Leonard M. Fertig, Chief Executive Officer of Futuremedia plc, said, “Cornell Capital’s investment in Futuremedia is an endorsement of our business and the attractive growth opportunities we are pursuing. Subject to satisfying the conditions mentioned above, the additional capital we have raised today provides us with the funding to complete the acquisition of EBC, one of the UK’s most profitable e-learning businesses. If completed we expect this acquisition to strengthen our market position and broaden our capabilities in the e-learning marketplace while transforming Futuremedia into one of the largest and most diverse learning companies in the UK.”
As previously announced, the current EBC agreement contemplated closing by December 23, 2005. Because of the Company’s current share price and the shareholder approval requirements under the rules of The Nasdaq Stock Market, the Company has not been able to structure financing for the acquisition on acceptable terms without shareholder approval and the associated delay. The Company is currently in discussions with the EBC shareholders regarding an extension to the terms of the existing agreement to allow time for shareholder approval but no agreement has yet been reached.
The US$2.5 million investment was made via a private placement in the form of a loan that is convertible (subject to certain terms and conditions) into Ordinary Shares of Futuremedia. The loan may be converted from time to time at Cornell’s option (subject to certain restrictions and limitations). The conversion rate is based on the lesser of 105% of the closing price of Futuremedia ADR’s on December 6 2005 (US$0.525) or 95% of the lowest volume weighted average price of the Company’s ADSs for any period of three consecutive trading days during the 30 trading days immediately preceding the time of conversion. The loan has a term of three years and bears interest initially at an annual rate of 10% (reducing to 9% in year two and 7% in year three). In connection with the investment, Futuremedia issued to Cornell 187,500 Ordinary Shares at nominal value and warrants to purchase an additional 250,000 Ordinary Shares with an exercise price of US$0.70 per share. Cornell also received a commitment fee of US$187,500.
Alegro Capital acted as Futuremedia's exclusive financial adviser on the acquisition of EBC and the financing.
Futuremedia also announced today a change in its senior financial management. Mr. Mark Wilsher, currently Chief Financial Officer, will be leaving his position effective January 1, 2006. CFO responsibilities will be handled on an interim basis by Mr. Stephen Oliver, formerly Chief Financial Officer of Epic Group plc.
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