<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 20-F
(Mark One)

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

                                       OR

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

                    For the fiscal year ended April 30, 2003.

                                       OR

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

        For the transition period from ______________ to _______________

                         Commission File Number 0-21978
                                               ----------

                       FUTUREMEDIA PUBLIC LIMITED COMPANY
             (Exact name of registrant as specified in its charter)

                                England and Wales
                 (Jurisdiction of incorporation or organization)

         NILE HOUSE, NILE STREET, BRIGHTON, EAST SUSSEX BNI 1HW, ENGLAND
                    (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:
American Depositary Shares (each representing one Ordinary Share)
Ordinary Shares of 1 1/9 p each
Redeemable Warrants

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 period  covered by the annual report:
78,194,457 Ordinary Shares of 1 1/9 p each.

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      X        No
        ----      ----
Indicate by check mark which financial statement item the registrant has elected
to follow:

Item 17           Item 18       X
          ----               -----

<PAGE>



                                TABLE OF CONTENTS

EXPLANATORY NOTE...............................................................2
COMMUNICATIONS WITH HOLDERS OF ADSS............................................3
WARNINGS REGARDING FORWARD LOOKING STATEMENTS..................................4
PART I.........................................................................5
   ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS..............5
   ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE ITEM.......................5
   ITEM 3.  KEY INFORMATION....................................................5
   ITEM 4.  INFORMATION ON THE COMPANY........................................15
   ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS......................24
   ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES........................33
   ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.................38
   ITEM 8.  FINANCIAL INFORMATION.............................................41
   ITEM 9.  THE OFFER AND THE LISTING.........................................42
   ITEM 10. ADDITIONAL INFORMATION ...........................................45
   ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........49
   ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES............49
PART II.......................................................................49
   ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES...................49
   ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF
            SECURITY HOLDERS AND USE OF PROCEEDS..............................49
   ITEM 15. CONTROLS AND PROCEDURES...........................................50
   ITEM 16. [RESERVED]........................................................50
PART III......................................................................50
   ITEM 17. FINANCIAL STATEMENTS..............................................50
   ITEM 18. FINANCIAL STATEMENTS..............................................51
   ITEM 19. EXHIBITS..........................................................52
   SIGNATURES  ................................ ..............................54


                                       1

<PAGE>
                                EXPLANATORY NOTE

As used herein,  except as the context otherwise  requires,  the terms "Company"
and  "Futuremedia  PLC" refer to  Futuremedia  Public  Limited  Company  and its
subsidiaries.  The Company is organized under the laws of England and Wales. The
Company's offices are located at Nile House, Nile Street,  Brighton, East Sussex
BNI 1HW,  England.  The Company's  telephone number is  011-44-1273-829700.  The
Company does not have offices in the United States.

Except as the context otherwise  requires,  "Ordinary Shares" or "Shares" refers
to the Ordinary Shares of 1 1/9 pence each of the Company.

The  Company's  American  Depositary  Shares  ("ADSs") have traded since May 29,
1996, on the Nasdaq SmallCap Market under the symbol FMDAY.  Each ADS represents
the right to receive one Ordinary  Share of the Company.  ADSs are  evidenced by
American Depositary Receipts ("ADRs").  ADSs evidenced by ADRs are issued by the
Bank of New York as Depositary (the  "Depositary") of the Company's ADR facility
in accordance with the terms of a deposit  agreement between the Company and the
Depositary.

The Company publishes its Consolidated  Financial Statements expressed in United
Kingdom  ("UK")  pounds  sterling.  Such  financial  statements  are prepared in
conformity  with United States  generally  accepted  accounting  principles ("US
GAAP"). In this document,  references to "US dollars", "US$", "cents" or "$" are
to  United  States  ("US")   currency  and  references  to  "pounds   sterling",
"sterling",  "GBP",  "pence" or "p" are to UK currency.  Solely for convenience,
this Report  contains  translations  of certain pound  sterling  amounts into US
dollars at  specified  rates.  These  translations  should not be  construed  as
representations  that the pound  sterling  amounts  actually  represent  such US
dollar  amounts or could have been or could be converted  into US dollars at the
rates indicated or any other rates. Unless otherwise indicated,  the translation
of pounds  sterling  into US  dollars  have  been made at the rate of  GBP1.00 =
$1.5998,  the Noon  Buying Rate in New York City for cable  transfers  in pounds
sterling as certified for customs  purposes,  by the Federal Reserve Bank of New
York (the "Noon Buying  Rate") on April 30, 2003.  On November 12, 2003 the Noon
Buying  Rate was GBP  1=$1.6651.  For  information  regarding  rates of exchange
between pounds sterling and US dollars from fiscal 1998 to the present see "Item
3 Selected Financial Data - Exchange Rates."

The  Company's  Fiscal  year ends on April 30 of each year.  References  in this
document to a particular year are to the fiscal year unless otherwise indicated.

References in this annual report to the "Companies Act" are to the Companies Act
1985, as amended,  of Great Britain;  references to the "EU" are to the European
Union.

The Company  furnishes the  Depositary  with annual reports  containing  audited
consolidated   financial  statements  and  an  opinion  thereon  by  independent
auditors.   The  Company  also  furnishes  to  the  Depositary  all  notices  to
shareholders  of the Company.  The  Depositary  makes such notices,  reports and
communications  available for  inspection by record  holders of ADSs and, at the
Company's   request  and  expense,   the  Depositary   mails  such  notices  and
communications  to all record holders of ADSs.  Only persons in whose names ADSs
are registered on the books of the Depositary  will be treated by the Depositary
and the Company as holders of ADSs.

Information  contained on any of the Company's Internet  websites,  or any other
websites referred to herein,  does not constitute part of this report and is not
incorporated by reference herein.




                                      -2-
<PAGE>



                       COMMUNICATIONS WITH HOLDERS OF ADSS

In advance of the Company's  Annual General  Meeting held on April 17, 2003, the
Company advised holders of ADSs that, to minimize  expenses,  it had decided not
to distribute  to holders of ADSs a hard copy of the Company's  annual report to
shareholders.  Instead,  the annual  report was made  available on the Company's
website  (www.Futuremedia.com) and, on request, in hard copy from the Company or
from the Depositary.  The annual report was also filed  electronically  with the
United  States  Securities  and  Exchange  Commission  ("SEC") on Form 6-K.  The
Company believes that this manner of making information  available to holders of
ADSs is consistent  with its obligations  under  applicable law and reserves the
right to make future information available in a similar manner.





                                      -3-
<PAGE>



                  WARNINGS REGARDING FORWARD-LOOKING STATEMENTS

Some  of  the  statements   contained  in  this  Report  and  in  the  documents
incorporated  by reference are  forward-looking  statements made pursuant to the
safe harbor  provisions  Section 21E of the Securities  Exchange Act of 1934, as
amended.  In  essence,  forward-looking  statements  are  predictions  of future
events. Although the Company would not make forward-looking statements unless it
believed it had a reasonable  basis for doing so, the Company  cannot  guarantee
the accuracy of such  statements and actual results may differ  materially  from
expectations.

The  Company's  forward-looking  statements  are accurate only as of the date of
this  Report,  or  in  the  case  of  forward-looking  statements  in  documents
incorporated  by  reference,  as of the date of  those  documents.  The  Company
identifies  forward-looking  statements  with  the  words  "plans",   "expects",
"anticipates",  "estimates," "will",. "should" and similar expressions. Examples
of the Company's forward-looking statements may include statements related to:

     -    the  Company's   plans,   objectives,   expectations  and  intentions,
          including  without  limitation  the Company's  expectations  regarding
          future working capital requirements and financial results;

     -    the timing,  availability,  cost of development and  functionality  of
          products and solutions under development or recently introduced; and

     -    the anticipated growth rate of the market for Internet-based  learning
          technologies  and products in general and the  Company's  products and
          solutions in particular.

All forward-looking  statements in this Report (or in documents  incorporated by
reference  herein)  are  subject  to risks  and  uncertainties,  both  known and
unknown,  that may cause actual results to differ materially from  expectations.
Such factors  include those discussed in the Risk Factors set forth in Item 3.D.
below as well as those discussed elsewhere in this Report. The Company expressly
disclaims  any  obligation  to release  publicly any updates or revisions to any
such statement to reflect any change in  expectations or in information on which
any such statement is based.


                                      -4-
<PAGE>


PART I



ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS.
          ------------------------------------------------------

Not Applicable

ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE.
          ----------------------------------------

Not Applicable

ITEM 3.   KEY INFORMATION.
          ---------------

SELECTED CONSOLIDATED FINANCIAL DATA.

          ------------------------------------
The selected  consolidated  financial data as of April 30, 2002 and 2003 and for
the years ended April 30, 2001, 2002 and 2003 have been derived from the audited
consolidated  financial  statements  of the Company  included  elsewhere in this
Report. The selected consolidated  financial data as of April 30, 1999, 2000 and
2001, and for the years ended April 30, 1999 and 2000 have been derived from the
audited consolidated financial statements of the Company, which are not included
in this Report.

The  information  set forth below  should be read in  conjunction  with,  and is
qualified in its entirety by reference  to, the Company's  audited  consolidated
financial  statements  and notes  thereto and the  discussion  thereof  included
herein.
<TABLE>
<CAPTION>

Income Statement Data                                                 Years Ended April 30
                                           ---------------------------------------------------------------------------
<S>                                          <C>           <C>          <C>          <C>          <C>          <C>
                                             2003(1)       2003         2002         2001         2000         1999
                                             -------       ----         ----         ----         ----         ----

                                                             (in thousands, except per share data)

                                               $           GBP          GBP          GBP          GBP         GBP
Net Sales...........................         2,147        1,342         911          743          867        1,534
Operating loss......................        (1,665)      (1,041)      (2,028)      (3,812)      (2,672)     (1,060)
Loss before income taxes............        (1,740)      (1,088)      (2,012)      (3,697)      (2,645)     (1,122)
Net loss............................        (1,740)      (1,088)      (2,012)      (3,697)      (2,645)     (1,122)
Net loss per share - basic and diluted       (3.74)c      (2.34)p      (6.60)p     (12.71)p     (11.17)p     (5.77)p


</TABLE>


                                      -5-
<PAGE>

<TABLE>
<CAPTION>


Balance Sheet Data                                                          At April 30,
                                            -----------------------------------------------------------------------------
<S>                                           <C>              <C>          <C>          <C>        <C>          <C>
                                              2003(1)          2003         2002         2001       2000         1999
                                              -------          ----         ----         ----       ----         ----

                                                              (in thousands, except number of shares)

                                                 $             GBP          GBP          GBP         GBP          GBP
Cash and cash equivalents...........               699           437          445        2,547      2,612         435
Total assets........................             5,049         3,156        2,089        4,713      4,437       2,461
Total current liabilities...........             2,529         1,581        1,522        2,208        845         366
Long-term debt and capital lease
obligations.........................                 -            -                        442        384         850
                                                                                -
Stockholders' equity................             2,520         1,575          567        2,063      3,208       1,245
Number of Stock.....................        78,194,457    78,194,457   29,648,374   29,648,374 27,416,152  20,684,522
Stock to be issued..................                 -             -   10,346,979            -          -           -

(1)  US dollar amounts have been  translated  solely for convenience at the Noon
     Buying Rate on April 30, 2003 of GBP1.00 = $1.5998.
</TABLE>

EXCHANGE RATES

The Company publishes its financial statements in pounds sterling.  The majority
of the Company's revenues are denominated in pounds sterling and the majority of
the Company's expenses and debt are denominated in Pounds Sterling.

The  following  sets forth the  exchange  rate between the  Company's  financial
reporting currency, the Pound Sterling, and the US dollar, using the Noon Buying
Rate.

         (a)      The  exchange  rate  as of  July  31,  2003,  the  end  of the
                  Company's  first  fiscal  quarter,  was  GBP1=$1.6165,  and at
                  November 12, 2003 was GBP1=$1.6651.

         (b)      The high and low  exchange  rates for each  month  during  the
                  previous six months expressed in US dollars per pound sterling
                  were as follows:

                                               HIGH              LOW

                  October, 2003.........      1.6995            1.6618
                  September, 2003.......      1.6671            1.5684
                  August, 2003..........      1.6185            1.5100
                  July, 2003............      1.6689            1.5913
                  June, 2003............      1.6854            1.6360
                  May, 2003.............      1.6548            1.5985



                                      -6-
<PAGE>


         (c)      For the five most recent fiscal  years,  the average rates for
                  each period,  calculated  by using the average of the exchange
                  rates  on the  last  business  day of each  month  during  the
                  period, were as follows:

                  Year Ended April 30                 Average

                  1999...................              1.6210
                  2000...................              1.6113
                  2001...................              1.4676
                  2002...................              1.4339
                  2003...................              1.5684

B.       CAPITALIZATION AND INDEBTEDNESS.
         -------------------------------
Not Applicable

C.       REASONS FOR THE OFFER AND USE OF PROCEEDS.
         ------------------------------------------
Not      Applicable

D.       RISK FACTORS.
         -------------
This  Report  contains  forward-looking  statements,  which  involve  risks  and
uncertainties.  The Company's actual results could differ  materially from those
anticipated in these forward-looking  statements as a result of certain factors,
including  those set forth in the  following  Risk Factors and elsewhere in this
Report.

         Financial Condition and Liquidity

As of  September  30,  2003,  the  Company  had  working  capital of  GBP237,000
($379,000).  At November 12, 2003,  the Company's  cash  resources and available
borrowings  are less  than  the  resources  the  management  intends  to use for
maintaining the current level of operations for the next twelve months. However,
management  believes that the improved levels of order intake and sales prospect
pipeline  since the end of the year,  notably the recent order for the Company's
Learning for All product from the Royal Mail,  have improved the  expectation of
revenues and cashflows to the extent that the Company's  requirement for working
capital and capital investment for the remainder of the current fiscal year will
be met from trading  activities.


                                      -7-
<PAGE>


                Listing Maintenance Criteria for Nasdaq System;
                    Disclosure Relating to Low-Priced Stocks

The Company's  ADSs, as evidenced by ADRs,  which in turn evidence the Company's
Ordinary  Shares,  are  currently  traded  on the  Nasdaq  SmallCap  Market.  No
assurance can be given that an orderly  trading  market will be sustained in the
future.  Also,  Nasdaq,  requires  that, in order for a company's  securities to
continue to be listed on the Nasdaq SmallCap  Market,  the company must maintain
either a minimum  stockholder's  equity  of  $2,500,000,  $35,000,000  in market
capitalization~  or net income of $500,000 in the most recently completed fiscal
year or in two of the last three  most  recently  completed  fiscal  years.  The
Company had unaudited  stockholder's equity of $2,536,000 at September 30, 2003,
net loss for the financial  year ended April 30, 2003 of $1,740,000 and a market
capitalization  of $38.3  million on November 12. 2003.  In addition,  continued
inclusion   requires  that  the  Company  maintain  two  registered  and  active
market-makers.  The failure to meet these  listing  maintenance  criteria in the
future  may  result in the  de-Listing  of the  Company's  ADSs from the  Nasdaq
SmallCap  Market.  There can be no  assurances  that the Company will be able to
continue to satisfy the applicable standards for continued listing on the Nasdaq
Smallcap  Market.  A failure  to  maintain  such  listing  could have a material
adverse  effect on the  Company's  business and  financial  condition and on the
liquidity and market value of the ADSs. In addition,  in the event the Company's
ADSs are  delisted  from the Nasdaq  SmallCap  Market,  the  Company's  ADSs and
Ordinary  Shares may become  subject  to the "penny  stock"  rules of the United
States Securities and Exchange Commission (the "Commission"). A "penny stock" is
generally an equity security with a market price of less than $5 per share which
is not quoted through the Nasdaq system or a national securities exchange in the
US. Due to the risks  involved in an investment  in penny stocks,  US securities
laws  and   regulations   impose  certain   requirements   and   limitations  on
broker/dealers   who  recommend   penny  stocks  to  persons  other  than  their
established  customers  and  accredited  investors,  including  making a special
written suitability determination for the purchaser, providing purchasers with a
disclosure  schedule  explaining  the  penny  stock  market  and its  risks  and
obtaining the  purchaser's  written  agreement to the  transaction  prior to the
sale. These  requirements may limit the ability of  broker/dealers to sell penny
stocks. Also, because of these requirements and limitations, many broker/dealers
may be  unwilling  to sell  penny  stocks at all.  In the  event  the  Company's
Ordinary  Shares  become  subject to the  Commission's  rules  relating to penny
stock, the trading market for the ADSs may be materially adversely affected.

         Dependence on Market for e-Learning

Most of the Company's  revenues are directly or  indirectly  related to spending
and  investment   plans  of  large   corporate   businesses  and  public  sector
organizations  on  emerging  net-based  learning   technologies  and  associated
services.  These large businesses and public sector organizations may be subject
to significant  fluctuations  as a consequence of general  economic  conditions,
industry  patterns or other  factors  affecting  such  spending and  investment.
Expenditures  for  products  and  services  such as the  Company's  are directly
affected by these  fluctuations.  The Company  expects that its operations  will
continue to depend on these  factors.  Fluctuations,  downturns  or slowdowns in
these large  businesses  could have a material  adverse  effect on the Company's
business, financial condition and results of operations.



                                      -8-
<PAGE>


         New Products and Technological Change

The Company's business will be significantly influenced by technological changes
and  innovations.  The market for the  Company's  products is  characterized  by
rapidly  changing   technology,   evolving   industry   standards  and  frequent
introductions  of  new  products.   The  Company  has  historically   derived  a
significant  portion of its revenues from the sale of new and enhanced products.
The  Company's  future  success  will  depend  upon its  ability to enhance  its
existing products and to develop and introduce,  on a timely and  cost-effective
basis,  new  competitive  products with  features  that meet  changing  customer
requirements and address technological developments.

The Company's  products could be rendered obsolete by new customer  requirements
or the  emergence  of new  technologies.  The failure of the Company to develop,
manufacture  and  sell new  products  and  product  enhancements  in  quantities
sufficient to offset a decline in revenues  from existing  products or to manage
product  transitions  successfully,  would have a material adverse effect on the
Company's business, financial condition and results of operations.

Because of the  complexity of the  Company's  products,  significant  delays can
occur  between a product's  initial  introduction  to the market and wide market
acceptance.  In addition,  new products or  enhancements  may contain  errors or
performance  problems when first  introduced,  when new versions are released or
even after such  products or  enhancements  have been used for a period of time.
Despite  testing by the  Company,  such defects may be  discovered  only after a
product has been  installed  and used by customers.  Such errors or  performance
problems  could avoid  detection in future  upgrades and result in expensive and
time consuming design modifications,  damaged customer  relationships and a loss
of market share.

As new products are introduced,  the Company must attempt to monitor closely the
range of its  products  to be  replaced  and to phase out their  production  and
distribution in a controlled manner.  There can be no assurance,  however,  that
such product  transitions will be executed without  adversely  affecting overall
product sales or that the Company will be successful in identifying, developing,
and marketing new products or enhancing its existing products.

The development of new products has required,  and will continue to require, the
Company to spend significant financial and management  resources.  The Company's
business  would be  materially  adversely  affected if the Company were to incur
delays in  developing  new  products  or  enhancements  or if such  products  or
enhancements  did not gain  market  acceptance.  In  addition,  there  can be no
assurance  that  products  or  technologies  developed  by  one or  more  of the
Company's  present  or  potential  competitors  could not render  obsolete  both
present and future products of the Company.

There is no assurance that the useful life of any product will be long enough to
enable the Company to recover  its  development  costs.  In  addition,  sales of
certain of the Company's products generally may tend to decline over time unless
the products are enhanced or repackaged.

         Changing Customer Preferences

Customer  preferences for  instructional  learning  programs,  entertainment and
other software products are continually changing. There can be no assurance that
the  Company's   products  will  receive  and/or  maintain   substantial  market
acceptance.  Changes in customer  preferences  could adversely  affect levels of
market acceptance of the Company's products and its operating results.



                                      -9-
<PAGE>


         Competition

The net-based  learning  business remains rapidly evolving with a growing number
of  competitors  and is  subject  to rapid  technological  change.  The  Company
currently  competes  both  with  smaller  UK based  companies  as well as larger
multinational  firms in the development and implementation of net-based learning
products. Many of these competitors are more established, better capitalized and
have a better market position than the Company.

In addition,  these  competitors may have the ability to respond more quickly to
new or  emerging  technologies,  may adapt more  quickly to changes in  customer
requirements and may devote greater resources to the development,  promotion and
sale of their products and services than the Company.  The Company may also have
a cost disadvantage compared to competitors who have greater direct buying power
from suppliers or who have lower cost structures.

         Early Stage of Market Development

The markets for most of the Company's  products are at a relatively  early stage
of  development  and customer  acceptance.  Broader  acceptance of the Company's
products will depend on customer and end-user reaction to those products and the
price and  performance  of the  Company's  and its  competitors'  products.  The
Company believes that the development of these markets will, in part,  depend on
the success of the Company's  efforts to inform and demonstrate to its customers
the  perceived  efficacy  of the  Company's  products.  These  markets may never
develop  further  and the  Company's  products  may not achieve  broader  market
acceptance.

         Reliance on Corporate Customers; Lengthy Sales Cycle

A  substantial  portion of the  Company's  revenues is derived from sales of its
products  and  services  to  large  corporate  customers  who use the  Company's
products on their own network  infrastructure.  These  customers  demand  highly
reliable  products and often  require up to several  months to evaluate and test
the effectiveness of the Company's products before deciding whether to commit to
purchase.   Such  evaluations  are  commonly  based  on  the  Company  providing
demonstration  material based on existing solutions produced for other customers
and frequently require significant pre-sales activity.

If a corporate  customer decides to purchase the Company's  products,  the sales
volume of these  products will be  significantly  dependent  upon the timing and
effectiveness  of the efforts of that  customer in  incorporating  the Company's
products into the customer's infrastructure. Some of the Company's customers may
also source  third party  e-Learning  content  products  that  compete  with the
Company's  products.  These  customers  could give higher priority to the use of
competing  products.  Some of the Company's  customers do not have  exclusive or
long-term  purchase  obligations  with the Company.  The failure of customers to
decide to purchase the Company's  products after the Company spends  significant
marketing  resources and the  possibility  that customers may source third party
competing  products  could each have a material  adverse impact on the Company's
business, financial condition and results of operations.

         Reliance on Significant Customers

For the fiscal year ended April 30, 2003,  the Company's  two largest  customers
together  represented  approximately 69% of gross sales of the Company. The loss
of either of these major customers  could have a material  adverse effect on the
Company's business, financial condition and results of operations.


                                      -10-
<PAGE>

         Overseas Customers

Some of the Company's products are supplied to customers located outside the UK.
Action for the recovery of debts from these  customers may prove more  difficult
and more expensive, if it is possible at all, than from customers located within
the jurisdiction of English courts. In addition,  claims against the Company may
be brought in overseas courts,  and may prove more costly or difficult to defend
than claims brought in English courts.

         Dependence on Limited Sources of Supply

The Company  relies on one or only a limited number of suppliers for certain key
software  components,  hosting services and e-Learning content.  These suppliers
are  located  in  various   countries  and  typically  trade  through   European
subsidiaries.  As a result, the Company's relationships with these suppliers are
subject to political,  legal,  economic and other uncertainties,  in addition to
general risks associated with reliance on limited sources of supply. A change of
control  of a supplier  could also  adversely  affect the  Company's  ability to
obtain supplies and provide continuity of service on the same or other favorable
terms,  if at all. The Company does not have long-term  purchasing  arrangements
with all of its suppliers. Obtaining an alternative source of supply of critical
software  components,  hosting  services and  e-Learning  content  could involve
significant  delays and other  costs,  may not be  available  to the  Company on
reasonable  terms,  if at all,  and may have a  material  adverse  effect on the
Company's business,  financial condition and results of operations.  The failure
of a  software  component  supplier,  service  provider  or  e-Learning  content
provider to provide  acceptable  quality and timely updates and/or support at an
acceptable  price, or an interruption of supplies,  hosting  services or support
from such a supplier or provider as a result of a fire, natural calamity, strike
or other  significant  event could materially and adversely affect the Company's
business, financial condition and results of operations.

         Dependence on Outside Contractors

The Company has limited in-house content  production  capabilities and relies on
subcontractors for the majority of its bespoke content  production.  Reliance on
outside  contractors  reduces the  Company's  control  over quality and delivery
schedules.  The ability of the Company to provide its customers with products on
a timely basis  depends,  in part, on the ability of the  contractors to deliver
such  products  to  the  Company  on a  timely  basis.  Any  interruption  in or
termination  of  these  supplies,  a  material  change  in the  purchase  terms,
including  pricing or a reduction in their quality or reliability,  could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

         Dependence on Partnerships

Some of the Company's products are built on a model that seeks to bring together
the best available  content,  technology  and services from the best vendors.  A
significant  proportion of the Company's  proposition is therefore  based on the
strength of its partnership  relations and the Company cannot  guarantee that it
will be able to maintain the required ongoing relationships with its partners.

         Absence of Patent Protection

The Company's ability to compete  successfully will depend on (i) its ability to
protect  its  proprietary  technology,  and (ii) the  ability  of the  Company's
suppliers to protect the  technology of the products  distributed by the Company
on their behalf.  The Company has no patents with respect to its product  design
or production processes.



                                      -11-
<PAGE>

In choosing not to seek patent protection, the Company instead has relied on the
complexity of its technology,  its trade secret protection policies,  common law
trade secret laws,  copyrights,  and  confidentiality  and/or license agreements
entered  into  with  its  employees,  suppliers,  sales  agents,  customers  and
potential customers.

As a part of its trade secret  protection  policies,  the Company tries to limit
access to, and distribution of, its software,  related  documentation  and other
proprietary  information.  There can be no  assurance  that such  strategy  will
prevent or deter others from using the Company's  products to develop equivalent
or superior products or technology, or from doing so independently.

Further,  there can be no assurance  that the Company will seek or obtain patent
protection for future technological developments or that any patents that may be
granted in the future  would be  enforceable  or would  provide the Company with
meaningful protection from competitors.

Moreover,  litigation by the Company to enforce or defend its proprietary rights
could result in significant expense to the Company and divert the efforts of the
Company's  technical and management  personnel,  whether or not such  litigation
results in a favorable  outcome for the Company.  In order to avoid such expense
or  diversion  of  resources,  the  Company  could agree to enter into a license
agreement  or  other  settlement  arrangement,   notwithstanding  the  Company's
continuing belief in its position.

In addition,  there can be no assurance that the Company's  products do not, and
that its proposed  products will not,  infringe any patents or rights of others.
If a patent  infringement claim is asserted against the Company,  whether or not
the Company is successful in defending such claim, the defense of such claim may
be very costly.

While the Company is unable to predict what costs,  if any, would be incurred if
the Company were obliged to devote substantial financial or management resources
to patent  litigation,  its  ability  to fund its  operations  and to pursue its
business goals may be substantially impaired.

         Dependence on Licensing Arrangements

In addition to its internally  generated  products,  the Company  markets,  as a
distributor, a number of products under license from several suppliers and under
varying terms of exclusivity and tenure. While management is confident that such
licensing  arrangements  will continue and, if considered in the Company's  best
interest,  will be renewed,  there can be no  assurance  that  licenses  will be
extended on terms  satisfactory  to the  Company,  if at all.  While the Company
believes that the failure to extend licensing  arrangements  with respect to one
or a small number of products would not  substantially  affect the Company,  the
failure to renew a  significant  number of the  present  licenses  could have an
adverse effect on the future profitability of the Company.

         Seasonality and Product Shortages

The demand for the  Company's  products is generally  expected to be stronger in
the second  half of the fiscal  year  (which ends on April 30) and weaker in the
first half due to seasonal buying patterns in the UK and the rest of Europe.

         Foreign Trade Regulations

While the Company sells  non-UK-produced  products,  it generally purchases them
from  associates  of  foreign   suppliers.   The  Company's  ability  to  remain
competitive  with  respect to the pricing of the  imported  components  could be
adversely affected by increases in tariffs or duties, currency fluctuations,


                                      -12-
<PAGE>

changes in trade treaties,  strikes in air or sea  transportation,  and possible
future  European  legislation  with  respect  to pricing  and  import  quotas on
products from non-EU  countries.  The Company's  ability to be competitive in or
with  the  sales  of  imported  components  also  could  be  affected  by  other
governmental  actions related to, among other things,  anti-dumping  legislation
and international currency fluctuations.

         Absence of Dividends

The Company has not paid cash dividends during its history with the exception of
a dividend  paid in 1990.  It is unlikely  that the Company  will declare or pay
cash  dividends  in the  foreseeable  future.  The  Company  intends  to  retain
earnings, if any, to expand its business operations.

         Changes in Exchange Rates

A  majority  of the  Company's  revenues  to date have been  received  in pounds
sterling and the Company maintains its financial  statements in pounds sterling.
However,  revenues and proceeds of funding  activities are sometimes received in
US dollars,  euros and other  European  currencies,  which are  translated  into
pounds sterling as the Company's functional currency.  Fluctuations in the value
of the pound sterling against the US dollar,  euro and other European currencies
have caused, and are likely to cause, amounts translated into pounds sterling to
fluctuate in comparison with previous  periods.  The Company  currently does not
engage in any hedging  transactions that might have the effect of minimizing the
consequences of currency exchange fluctuations.  Such fluctuations may adversely
affect the Company's results of operations.

         Risks of Possible Future Acquisitions

The  Company  may pursue  potential  acquisitions  of  businesses,  products  or
technologies  that could  complement  or expand the Company's  business.  If the
Company identifies an acquisition candidate,  the Company cannot assure that the
Company  would  be able to  integrate  such  acquired  businesses,  products  or
technologies into the Company's existing business and products.  The negotiation
of potential  acquisitions  as well as the  integration of an acquired  business
could  cause  diversion  of  management's  time  and  resources.  Any  potential
acquisition, whether or not consummated, could have a material adverse effect on
the Company's business,  financial  condition and results of operations.  If the
Company consummates one or more significant  acquisitions in which consideration
consists  of  Ordinary   Shares,   stockholders  of  the  Company  could  suffer
significant dilution of their interests in the Company. In addition, the Company
could incur or assume  substantial debt in connection with an acquisition.  Such
debt could  adversely  affect the  Company's  ability  to obtain  financing  for
working capital or other purposes,  make the Company more vulnerable to economic
downturns and  competitive  pressures and have a material  adverse effect on the
Company's business, financial condition and results of operations.

         Possible Issuance of Additional Shares

The Company presently has outstanding options and warrants, pursuant to which an
aggregate of 5,760,192 Ordinary Shares may be issued upon exercise thereof.  The
issuance  of any  additional  Ordinary  Shares,  whether  upon the  exercise  of
derivative  securities,  including options and/or warrants, in connection with a
financing or  otherwise,  including  additional  Ordinary  Shares  issuable as a
consequence  of any  anti-dilution  provisions  set  forth  in  the  instruments
evidencing such derivative securities,  would reduce the proportionate ownership
and voting power of then-existing Stockholders.

         Risks Associated with Incorporation in England and Wales

The Company is  incorporated  under  English  law.  The rights of holders of the
Shares are largely  governed by English law,  including  the Companies Act 1985,
and by the Company's Memorandum and Articles of Association. These rights differ
in certain  respects from the rights of stockholders in typical US corporations.


                                      -13-
<PAGE>

Although certain  provisions of English law resemble  various  provisions of the
corporation laws of the United States and other European  countries,  principles
of law relating to such matters as the fiduciary  duties of  management  and the
rights of the Company's  stockholders  may differ from those that would apply if
the  Company  were  incorporated  in  another  country.  In  addition,   English
employment law imposes substantial severance obligations on companies.

         Service and Enforcement of Legal Process

All of the  Company's  assets are  located in the  United  Kingdom.  Most of the
Company's  executive  officers and  directors,  and certain of the experts named
herein are not residents of the United States,  and all or substantial  portions
of the assets of such  persons  are  located  outside  the United  States.  As a
result,  it may not be possible to effect  service of process  within the United
States upon such  persons or to enforce  against such persons or the Company any
judgments of United States courts predicated upon the civil liability provisions
of the securities or other laws of the United States.

         Volatility of Stock Price

The market price for the Ordinary  Shares has been and may continue to be highly
volatile.  Factors such as the announcement of technological  innovations or new
products by the Company or its competitors,  variations in anticipated or actual
operating results,  market conditions and general economic conditions may have a
significant impact on the market price of the Ordinary Shares.










                                      -14-
<PAGE>

ITEM 4.  INFORMATION ON THE COMPANY.
         --------------------------

A.       HISTORY AND DEVELOPMENT OF THE COMPANY.
         -----------------------------------------
The legal and  commercial  name of the Company is  "Futuremedia  Public  Limited
Company" or "Futuremedia PLC".

The Company was  incorporated  in England and Wales as a private limited company
in 1982.

The Company is domiciled in England and Wales.  It is  incorporated in and under
the  legislation of England and Wales.  The address of the Company's  registered
office is Nile House, Nile Street,  Brighton,  East Sussex, BN1 1HW, England and
the telephone number of the Company's registered office is 01273 829700.

The Company  provides  e-Learning  solutions to the corporate  market.  The main
elements of the services  provided by the Company are; (i) the  development  and
distribution of its web-based Learning Management System, "SolstraTM "; (ii) the
development and distribution of its complete e-Learning solution,  "easycando ";
(iii) project management and instructional  design of e-Learning  content;  (iv)
aggregation,  brokerage  and  distribution  of leading  e-Learning  content  and
applications  technologies from leading third party vendors;  and (v) consulting
and other  professional  services to support the  development and the successful
implementation of e-Learning solutions.

Following  its  pioneering  of  interactive  laserdisc  technology,  the Company
re-registered  as an English  public  limited  company and completed its initial
public  offering on Nasdaq in 1993.  During the period 1993 to 1996, the Company
expanded  into  Germany,  the  Netherlands  and the US, but withdrew  from these
markets in 1997 and 1998, choosing to concentrate its management focus on the UK
home market and the development of new Internet-enabled solutions.

Recognizing  the  potential  impact on the learning  market of the  developments
being made in Intranet  and Internet  environments,  the Company  commenced  the
development  of SolstraTM in 1997 with BT Group PLC ("BT"),  launching the first
version of the product in February  1998.  In March 2000,  the Company  launched
easycando, its Internet learning portal.

Since April 30, 2000, the Company has invested in capital  expenditure  totaling
GBP350,000  ($560,000) for upgrades to its accounting  system,  network servers,
backup system, power supplies,  internal telephone system and fire alarm systems
together  with the  routine  upgrading  and  provision  of  desktop  and  laptop
computers  and  accessories  as required.  During the year ended April 30, 2003,
investments in capital expenditure used GBP12,000 ($19,000) of cash. The Company
continues to outsource a portion of its production activity and consequently the
equipment now used  comprises  network  hardware,  desktop  personal  computers,
laptops and servers required to support the ongoing business.  Since its move to
Brighton in May 2003,  network  cabling is provided  by the  landlord  under the
leasing arrangement.  Where appropriate, the Company owns its capital equipment,
and it endeavors to maintain a program of upgrading to ensure the cost-effective
provision of desktop and laptop tools to its employees.  All equipment  acquired
for this  purpose is  industry-standard.  For  servers to support  its  Internet
portal business,  the Company constantly reviews the buy/lease options available
and has in the past  used both  options  when  appropriate.  This  equipment  is
typically located in secure co-location  sites.  During fiscal 2001, the Company
invested  GBP130,000  in capital  expenditure  and in fiscal  2002 it invested a
further GBP137,000.



                                      -15-
<PAGE>

The Company  intends to continue to invest in computer  and other  equipment  to
support its  business,  but as of November 12, 2003 does not have any  principle
capital expenditures in progress.

In January,  2003, the Company  contracted for the sale of its premises at Media
House,  Arundel Road,  Walberton for a total sale price of  (GBP)750,000.  The
terms of the sale  provided  for the sale to be divided  and sold in two stages,
one for  (GBP)300,000  in January 2003, and the remaining  (GBP)450,000 at a
time in the future to be determined by the Company's  successful  acquisition of
new  leased  premises,  but in any  case  by the end of May,  2003.  This  event
subsequently  occurred on May 27, 2003 when the Company relocated to Brighton in
East Sussex, some twenty miles from its original location. The ensuing book loss
of  (GBP)118,000  was all  recognized  in the year ended  April 30,  2003.  On
completion of the first sale, the Company repaid the balance  outstanding on the
Loan Stock  Agreement that had been extended from its original  maturity date of
July,  2002.  In order to be able to do so and  still  provide  ongoing  working
capital,  the Company arranged for a bridging mortgage of (pound)300,000  from a
major bank. The mortgage was repaid in May, 2003 on final sale.

Recent Developments

In May 2002, the Company  completed the  acquisition of C2W limited,  a small UK
based consultancy company specializing in resource  management,  in an all-paper
transaction at a net value of GBP29,000  ($46,000),  though the three  personnel
associated  with  that  company  had been  employed  by  Futuremedia  since  the
beginning of April 2002. It is  anticipated  that the  acquisition  will greatly
assist the growth of the Company's knowledge management capabilities, leveraging
the contacts C2W has in the resource, environmental and property sectors.

In September  2002, the Company issued  7,644,346  Ordinary Shares at a price of
GBP 0.0458   ($0.065)  per   Ordinary   Share  for   aggregate   proceeds  of
approximately GBP 350,000 ($560,000) pursuant to a Regulation `S' placement.

In October 2002,  the Company  issued  2,727,647  Ordinary  Shares at a price of
GBP 0.053 ($0.085) per Ordinary Share for aggregate proceeds of approximately
GBP 145,000 ($232,000) pursuant to a Regulation `S' private placement.

In April 2003, the Company  engaged in a number of activities with the object of
improving its financial  standing,  addressing its strategic aims with regard to
the need to develop a  third-generation  learning  management  system  providing
further  working capital for the business and to ensure it continues to meet all
the criteria for continued listing on the Nasdaq SmallCap Market:

Firstly,  in April 2003,  the Company  completed a private  placement  at market
value which resulted in the securing of (pound)1.2 million ($1.9 million) of new
funds from existing and new  shareholders,  including  participation  by certain
employees and directors,  in exchange for the issue of  approximately 19 million
Ordinary Shares. Of the  GBP 1.2  million, GBP 239,000  was outstanding at
April 30, 2003, and was received subsequently to the year end.

Secondly,  in April 2003,  Futuremedia  acquired a 21% equity  stake in Luvit AB
("Luvit"),  a  Swedish  e-Learning  solutions  provider,  by the  investment  of
GBP 641,000 ($1.0 million) directly in Luvit for the issue of 7.8 million new
Luvit shares, and at the same time acquiring a further 3.35 million Luvit shares
from  Volito  AB, a  Swedish  investment  house,  in  exchange  for the issue of
approximately  4.7 million  Futuremedia  shares,  bringing  Futuremedia's  total
holding in Luvit to 29.8%. The Company expects that the investment in Luvit is a
first step in  expanding  the  Company's  position in Europe  outside the United
Kingdom. This investment has been accounted for under the equity method.

Thirdly,  in April  2003,  Futuremedia  acquired,  by the  issue of 3.5  million
Ordinary Shares, the whole of the share capital of Activna Objects Limited, a UK


                                      -16-
<PAGE>

company  that with  rights to a software  tool that the  Company  believes  will
substantially  reduce the development  time and cost for a new third  generation
e-Learning management system.

Subsequent to the year-end, in July, 2003, Futuremedia acquired the entire share
capital of Temp Limited, into which had been transferred the business and assets
of IQDos Limited,  for the issue of 1.125 million Ordinary  Shares,  valuing the
acquisition at approximately $380,000.  IQDos Limited, a wholly-owned subsidiary
of Excel  Communications  Limited,  specializes  in the  production  of  bespoke
e-Learning content and also provides e-Learning consultancy services.

In  August,   2003,  the  Company  completed  a  further  private  placement  of
approximately  5.0 million Ordinary shares, or 6.2% of the issued share capital,
at a price of $0.22 per Ordinary  Share  (representing  a discount to the market
price at the time), for a total sum raised price of approximately GBP 660,000
($1.1  million).  As the  placement  was completed at a discount to then current
market  price,  no  members  of  senior  management  or the  Board of  Directors
participated in the offering.

The Company  believes that, as a result of the acquisitions it has made, it will
be able to offer to the market place a  demonstrable  capability  of providing a
single point of supply solution to its clients'  e-Learning  requirements,  that
should translate into increasing revenues and improved profitability.

In August,  2003,  Volito AB,  contracted  for the purchase of 387,597  Ordinary
Shares  at the then  market  price of  $0.387  per  Ordinary  Share  for a total
purchase price of $150,000.

In September,  2003, a number of the Company's  staff  exercised  part or all of
their share options to purchase  Ordinary Shares under the Company's  Unapproved
Executive  Share  Option  scheme  for a total of 188,838  Ordinary  Shares at an
average price of $0.109 per Ordinary share.  None of these staff were members of
senior management or the Board of Directors.

In November,  2003, the Company contracted with Royal Mail to increase the reach
of its e-Learning  offering to include all eligible  employees and not limit the
e-Learning  opportunity to those who have Internet  access in their workplace by
making available the Company's recently-announced Learning For All product. This
product provides the participants with the hardware, software (both domestic and
on-line) together with Internet  connection in their homes for a period of three
years.  The employee uses a UK tax incentive  scheme based on a salary sacrifice
principle  to  pay  for  the  Package.  Participation  is  optional,  but  it is
anticipated  that the revenue arising from this contract will be in the order of
GBP 2.0  million to  GBP 3.0  million ($3.2 to $4.8 million) over the next
three years, commencing immediately.


B.       BUSINESS OVERVIEW.
         ------------------

THE INTERACTIVE LEARNING AND COMMUNICATIONS INDUSTRY

e-Learning is the industry term for Internet-enabled and technology  distributed
education and training. The key components of e-Learning are content, technology
and services.

e-Learning  content ranges from basic Hyper Text Markup Language  ("HTML") pages
and documents to fully interactive  events and simulations.  It includes bespoke
content  development  and off the shelf  courseware.  There is currently a major
drive to web-enable existing content from various formats such as Instructor led
classes, paper based materials, CD ROM's, and existing intellectual assets.

e-Learning  technologies  have  emerged  to enable the  creation,  distribution,
tracking  and  administration  of  training  and  learning  content,  e-Learning
technologies  also include  compelling  collaborative  tools.  The core piece of
e-Learning  infrastructure  is known as the Learning  Management System ("LMS").
The LMS  supports  and  delivers  the  e-Learning  content  and can  incorporate


                                      -17-
<PAGE>

assessment  and  competency  frameworks.  The LMS provides the ability to track,
manage  and  report  on  learning  activity  and it  can  integrate  with  other
enterprise  systems  such as  Enterprise  Resource  Planning  ("ERP")  and Human
Resources applications.

The  Internet  allows  many  exciting  forms  of  communication  and  e-Learning
facilitates multiple forms of collaboration between peers, instructors,  mentors
and  experts.   Collaboration  can  be  self-paced  using  threaded   discussion
capabilities  and  email,  or they can be  real-time  using  the live  web-based
delivery of events and  collaborative  learning provided by leading suppliers of
such technology.

e-Learning  services are available to support and improve the  effectiveness  of
e-Learning. Consulting services are used to understand learning requirements, to
prepare e-Learning strategies and to ensure successful  implementation.  Content
development  services  are  available  to convert  legacy  content  for  optimal
delivery  over the  Internet.  Hosting  services  are  available  to reduce  the
technological  hurdles to e-Learning.  Service providers can host technology and
content on an ASP model,  removing any hardware or software requirements for the
clients' organization.

THE COMPANY'S PRODUCTS

         The Business Setting

The e-Learning  market has established  itself as a major segment of the overall
learning and training market.

According to the International  Data  Corporation,  as stated in their "European
Corporate  e-Learning Market Forecast and Analysis 2001-2002" published in 2002,
the total spend by West European Corporations on e-Learning was expected to grow
from $409  million in 2001 to $3,246  million in 2006.  The  majority - 52% - of
this spend will be on e-Learning content,  while 32% will be on related services
and the remaining 16% on e-Learning infrastructure.

         The e-Learning Setting

The Company has  continued to expand its  products and service  range and is now
marketing  and  selling a complete  e-Learning  solution  including  consulting,
e-Learning  content  production,   content  brokerage  of  published  e-Learning
content,  software  integration  services,  hosting and management of e-Learning
systems.

The main  objective  underpinning  the expanded  product and service range is to
allow the  Company to provide  customers  with a complete  solution  to selected
business issues,  and to increase the total amount of revenue and profit derived
from the  customer.  In order to  recognize  and manage the  increased  range of
products  and  services  the Company has  re-organized  itself into six business
activities:

1. Futuremedia  Learning Services (FLS) provides consulting services for clients
to develop e-Learning strategies and solutions,  conduct learning needs analysis
and migration plans from existing  learning  delivery method to e-Learning.  FLS
was established around the acquisition of C2W Limited in May 2002.

2. Futuremedia  Content Studio (FMCS) designs and builds  customized  e-Learning
content to address client  business needs such as training to support the launch
of a new  product,  or deliver  and track  training  to comply  with  regulatory
requirements.  FMCS was  established  around  the asset  purchase  of  PalmTeach
Limited in March 2002.

3. Futuremedia  Courseware Services (FCS) sell published e-Learning courses from
leading  publishing  companies.  The e-Learning  courses are often sold together
with technical  integration and assessment services to ensure compatibility with
customer's IT infrastructure, plus associated support and maintenance services.

                                      -18-
<PAGE>

4. Futuremedia  Software Services (FSS) develops the Company's software products
such as the Learning Management System and Activna Content Management System, as
well as, providing software integration services.

5.  Futuremedia  Service Delivery (FSD) provides the above products and services
as a fully managed and hosted solution to the Company's customers.

6. In October 2003,  the Company  furthermore  established  the Learning For All
business  unit which is focused on  enabling  customers  to offer the  Company's
e-Learning  solutions to employees at their homes.  The Learning For All service
includes  the  provision of PC,  Internet  access,  delivery  and  installation,
e-Learning courses, and a personal focused e-Learning environment managed by the
Company.  The Learning For All solution  complements the Company's existing work
focused solutions by providing a learning environment outside the workplace, and
is particularly  applicable to those employees who do not have or need access to
a PC in pursuit of their  normal  duties of  employment.  The  Learning  For All
solution is offered  under a UK  Government  tax  incentive  scheme  whereby the
equipment and services provided can be paid for by participating individuals via
a salary sacrifice arrangement,  enabling the provision of the service at a cost
approximately half of equivalent cost through normal retail channels.

The above six activities may be divided into two distinct business segments. The
first,  described  in the first  group  above,  forms the  resource  consultancy
segment, while the rest fall into the e-Learning segment.

The Company is promoting  and selling the  increased  product and service  range
both as a complete solution as well as independent modules.

NEW PRODUCTS AND TECHNOLOGICAL CHANGES

The markets for the Company's  products and services are highly  competitive and
subject to rapid change.  The Company's  success will depend upon its ability to
enhance its existing  products and  services  and to introduce  new  competitive
products  with  features  that  continue  to  meet  customer   requirements  and
differentiate  it from its competitors.  The challenges of a competitive  market
will be addressed to a significant extent by the partnership approach adopted by
the Company, such as used to develop SolstraTM.

A significant portion of the Company's business is built on an aggregation model
that continually  attempts to bring to the solution the best available  content,
technology and services from the best vendors.  There is associated risk in this
strategy,  as a significant  proportion of the Company's proposition is based on
the strength of its partnership structure, and the Company cannot guarantee that
it will be able to maintain the required ongoing relationship with its partners.

As new products are introduced,  the Company must attempt to monitor closely the
range of its  products  to be  replaced  and to phase out their  production  and
distribution  of  redundant  products in a  controlled  manner.  There can be no
assurance,  however, that there will be sufficient financial resources available
for this  purpose or that such  product  transitions  will be  executed  without
adversely affecting overall product sales or that the Company will be successful
in  identifying,  developing,  and  marketing  new products or in enhancing  its
existing products.

The  Company  continues  to  invest  in the  development  of the  Company's  own
products, predominantly for business-to-business markets.

The Company will continue to address key business to business markets  including
corporate and  governmental  markets.  The corporate  market has been  segmented
vertically based on a number of market filters.  Target vertical markets include
pharmaceutic, manufacturing and financial services.

                                      -19-
<PAGE>

In terms of  geographic  market  scope,  the direct  sales effort of the Company
focuses on the UK and Europe. The Company is attempting to recruit re-sellers to
support greater business  development  across Europe, the US and the rest of the
world. The Company is also committed to broader  worldwide  penetration  through
existing customers and positioning in specific niche markets.

The  Company  will  seek  to  use   partnership   agreements  for   co-marketing
opportunities wherever possible. This will be particularly appropriate where the
Company   provides  a  re-seller   function  for  its  network  of  content  and
applications providers under the easycando solution.

As of November 12, 2003,  the Company  employed nine sales and marketing  people
out of a total of 29 employees.

LICENSE AGREEMENTS

In addition to its internally  generated  products,  the Company  markets,  as a
distributor, a number of products under license from several suppliers and under
varying terms of exclusivity and tenure. While management is confident that such
licensing  arrangements  will continue and, if considered in the Company's  best
interest,  will be renewed,  there can be no  assurance  that  licenses  will be
extended on terms  satisfactory  to the  Company,  if at all.  While the Company
believes that the failure to extend licensing  arrangements  with respect to one
or a small number of products would not  substantially  affect the Company,  the
failure to renew a  significant  number of the  present  licenses  could have an
adverse effect on the future profitability of the Company.

REVENUE STREAMS

During fiscal 2003, the Company derived  approximately 12% of its gross revenues
from its  interactive  production  capability,  approximately  34% of its  gross
revenues from product sales and  approximately  54% form the sale of consultancy
and services in the UK and the rest of Europe. The resource  consultancy segment
derived 15% of the total revenues, and the e-Learning segment the remaining 85%.

The Company's revenues from its operations analyzed by geographic region were as
follows:
<TABLE>
<CAPTION>
                                                                       YEAR ENDED APRIL  30,
                                                   2003                            2002                     2001
                                 ----------------------------           -------------------------  ---------------

<S>                              <C>               <C>                          <C>                    <C>
                                 ($000)        (GBP000)            %        (GBP000)       %       (GBP000)         %

United Kingdom                     2,144         1,340           99.9          849        93.2       491          66.1
Rest of Europe                         3             2            0.1            3         0.3       149          20.0
Rest of World                          -             -              -           59         6.5       103          13.9
                                   -----        ------          -----         ----      ------       ---         -----
TOTALS                             2,147         1,342          100.0          911       100.0       743         100.0
                                   =====        ======          =====         ====       =====       ===         =====
</TABLE>

The Rest of the World consists  predominantly of sales to the US. Certain orders
placed by UK companies have been for products that will be used worldwide.

SEASONALITY

The demand for the  Company's  products is generally  expected to be stronger in
the second  half of the fiscal  year  (which ends on April 30) and weaker in the
first half due to seasonal buying patterns in the UK and the rest of Europe.


                                      -20-
<PAGE>




CUSTOMERS AND SUPPLIERS

The Company markets its products  primarily to local  authorities and commercial
end users in a diverse  and growing  range of  industries,  including  financial
institutions, fast-moving consumer goods manufacturers, automobile companies and
manufacturing,  commercial and service organizations,  mainly through its direct
sales force. The Company provides technical assistance and support to purchasers
of  its  products.  The  technical  assistance  involves  providing  answers  to
questions  ranging from  specifications  and  installation  to  availability  of
supporting  software.  In fiscal  2003,  the  Company's  two  largest  customers
accounted for 59% and 10% of the Company's  revenues,  representing an aggregate
of 69% of revenues  (compared  to 69% and 9% for an  aggregate  of 78% in fiscal
2002 and 20% and 20% for an aggregate of 40% in 2001).

The sales process for the Company's  products usually involves a team drawn from
sales,  marketing,  engineering  and senior  management to provide  planning and
product  customization and to assure open  communications and support throughout
the selling process and after a sale is made. The Company's marketing activities
include participation in trade shows, publication of articles in trade journals,
participation in industry forums and distribution of sales literature.

The Company  provides  support for its  products  through its own support  staff
operating  out of the  Company's  office in the UK. The Company has entered into
contracts in the normal course of its business with certain of its customers and
suppliers, on some of which its financial results are materially dependent.  The
Company  believes  that it has complied and  continues to comply in all material
respects with the terms,  and that it has performed and continued to perform its
obligations in respect, of all such contracts.

COMPETITION

e-Learning  is a  burgeoning  market  that has  shown a huge  growth  in  market
entrants  as  a  result  of  low  perceived  barriers  to  entry.  Although  the
competitive landscape remains fragmented there are clear signs of consolidation.
Market  leadership  is still not clearly  defined,  but  significant  merger and
acquisition  activity is occurring  and several  vendors are  beginning to build
prominent brands and market share.

Developments  in the market since April 30, 2000 have clearly  demonstrated  the
limited  viability of the business to consumer  e-Learning  opportunity  at this
time. The Company remains wholly focused on the business to business opportunity
and therefore competition specific to this sphere is a critical concern.

Leading e-Learning companies include Skillsoft,  NETg, Docent and Saba Software.
Major  consulting  companies  such as  Accenture  and  KPMG are  developing  and
integrating   e-Learning  solutions  and  some  are  creating  separate  branded
initiatives,  e.g. Ernst & Young (Intellinex).  Global technology companies such
as IBM and Hewlett-Packard are moving into e-Learning from a major customer base
in classroom based training.  Enterprise  Resource  Planning ("ERP") vendors are
adding learning  management system modules to their overall  solutions.  Content
companies such as major  publishers are developing  e-Learning  strategies,  and
will bring significant  resources to this arena. These companies tend to be more
established, better capitalized and possessing a larger market position than the
Company.  Because such companies have greater financial and marketing  resources
than the Company,  as well as  substantially  larger  research  and  development
facilities, they represent significant competition to the Company. Many of these
companies at present focus mainly on the US marketplace,  but some are beginning
to build a European and worlwide presence, with varying degrees of success.

The Company plans to differentiate  itself by building on its existing  presence
and proven  record in specific  vertical  markets,  and by developing a detailed
understanding  of the business  conditions and  technology  environment in those


                                      -21-
<PAGE>

industries.  The Company also plans to broaden its product and service  range to
address specific markets,  for example industry specific content aggregation and
technology  integration to meet industry  compliance  requirements.  The Company
expects  that its  emphasis on a complete  solution,  incorporating  technology,
content and services will mitigate the risk  associated with focus solely on one
segment of the e-Learning market, such as technology.

In addition,  the Company sells foreign-produced  products,  which are generally
purchased  from EU  subsidiaries  of foreign  suppliers.  The  ability to remain
competitive  with  respect to the pricing of the  imported  components  could be
adversely affected by increases in tariffs or duties, changes in trade treaties,
strikes in air or sea transportation,  and possible future European  legislation
with respect to pricing and import quotas on products from non-EU countries. The
Company's  ability  to be  competitive  in,  or  with,  the  sales  of  imported
components could also be adversely  affected by other government actions related
to, among other things,  anti-dumping  legislation  and  international  currency
fluctuations.  While the Company does not believe  that such  factors  adversely
impact its business at present, there can be no assurance that such factors will
not materially adversely affect the Company in the future.

INTELLECTUAL PROPERTY

The  Company's  ability to compete  successfully  will  depend on its ability to
protect  its  proprietary  technology,  and on  the  ability  of  the  Company's
suppliers to protect the  technology of the products  distributed by the Company
on  their  behalf.   Although  the  Company  believes  that  its  technology  is
proprietary,  the Company has no patents with  respect to its product  design or
production processes.

In choosing not to seek patent protection, the Company instead has relied on the
complexity of its technology,  its trade secret protection policies,  common law
trade secret laws,  copyrights,  and  confidentiality  and/or license agreements
entered  into  with  its  employees,  suppliers,  sales  agents,  customers  and
potential  customers.  As part of its  trade  secret  protection  policies,  the
Company  limits  access  to,  and   distribution   of,  its  software,   related
documentation  and other  proprietary  information.  There can be no  assurance,
however,  that such a  strategy  will  prevent  or deter  others  from using the
Company's products to develop equivalent or superior products or technology,  or
from doing so independently. Further, there can be no assurance that the Company
will seek or obtain patent protection for future technological developments, nor
that any patents that may be granted in the future would be enforceable or would
provide the Company with meaningful protection from competitors.

The "SolstraTM" trade name is a registered trademark owned by BT and licensed to
the Company.  The Company and BT have jointly  registered the solstra.com domain
name on the World Wide Web. The Company has registered the futuremedia.co.uk and
easycando.com domain names on the World Wide Web.

The Company has licenses to certain  software on a normal  commercial  basis. It
uses this software  variously for its normal  business  purposes and for product
development.  Certain  elements of the Company's  products are dependant on such
licenses.  The Company  believes that it has complied and continues to comply in
all material respects with the terms of all such licenses.


                                      -22-
<PAGE>

C.       ORGANIZATIONAL STRUCTURE.
         -------------------------

The Company is the principal  operating  business of the  Futuremedia  Group. It
also has the following wholly-owned subsidiaries:

           NAME                                     COUNTRY OF INCORPORATION
           ----                                     ------------------------
           Lasermedia UK Ltd                        England
           Lasermedia International Ltd.            England
           Futuremedia Interactive Ltd.             England
           Futuremedia America Inc.                 United States
           Easycando.com Ltd.                       England
           Futuremedia (BVI) Ltd                    British Virgin Islands
           C2W Ltd.                                 England
           Activna Objects Ltd.                     England
           Temp Ltd                                 England



D.       PROPERTY, PLANT AND EQUIPMENT.
         -------------------------------

Since the  completion  for the sale of its main office in Arundel,  West Sussex,
England,  in June 2003, the Company owns no real  property.  Its offices in Nile
Street, Brighton, England are subject to a lease agreement, which as at November
12, 2003, was still in the process of being finalized. The Company believes that
these premises are adequate for its immediate needs.



                                      -23-
<PAGE>

ITEM 5   OPERATING AND FINANCIAL REVIEW AND PROSPECTS
         ---------------------------------------------

The following discussion, Operating and Financial Review and Prospects, contains
forward-looking statements, which involve risks and uncertainties. The Company's
actual  results  could  differ   materially  from  those  anticipated  in  these
forward-looking  statements as a result of certain factors,  including those set
forth under "Risk Factors" in Item 3.D. and elsewhere in this Report.

A.       OPERATING RESULTS.
         ------------------

OVERVIEW

For the fiscal years ended April 30, 2001,  2002 and 2003, the Company  reported
net  losses  of  GBP3,697,000,   GBP2,012,000  and  GBP1,088,000   ($1,740,000),
respectively,   on  revenues  of   GBP743,000,   GBP911,000   and   GBP1,342,000
($2,147,000), respectively. As a consequence of the Company's operating results,
the Company has encountered  significant  cash constraints on its operations for
most of fiscal years 2001, 2002 and 2003.  Since April 30, 2003, the Company has
continued  to  sustain  trading  losses,  with a  consequent  impact on its cash
position.  However, management believes that the improved levels of order intake
and sales prospect pipeline since the end of the year,  notably the recent order
for the  Company's  Learning for All product from the Royal Mail,  have improved
the  expectation  of revenues  and  cashflows  to the extent that the  Company's
requirement for working capital and capital  investment for the remainder of the
current fiscal year will be met from trading activities.

2003 COMPARED WITH 2002

Revenues

The Company achieved sales of GBP1,342,000  ($2,147,000) in the year ended April
30, 2003 an increase of 47% when compared to  GBP911,000  in the previous  year.
The improvement in revenues has resulted not only from the continued increase in
the core  business  of  providing  e-Learning  management  systems  and  generic
products from GBP 743,000 in 2001, GBP 911,000 in 2002 to  GBP 1,142,000
in 2003 but also from the  acquisitions  made in April  2002 and May 2002  which
have had the effect of  broadening  the  offering  the  Company is able to make,
enabling  clients to contract with  Futuremedia  as a single point of supply for
their e-Learning  requirements and has added a further GBP 200,000 revenue in
2003 of  resource  consultancy.  At April 30,  2003,  the  Company  had  forward
customer  orders  of  approximately  GBP873,000   ($1,397,000),   that  will  be
substantially   fulfilled  in  the  following   twelve  months,   compared  with
GBP1,122,000  at April 30, 2002.  The reduction in the value of the  outstanding
order book reflects the market wherein  clients more often contract for services
on a single year basis rather than  committing to multiple year  contracts.  The
acqusition  of C2W in May 2002,  analyzed as a separate  business  segment,  has
resulted  in  an  increase  in   revenues   from  this   descrete   activity  of
GBP 200,000 ($320,000)

Cost of Sales

The Company's  cost of sales as a percentage  of revenues  decreased to 83% from
169% in 2002.  The  improvement  in percentage for the current year reflects not
only the increase in revenues,  but also the cost  reductions made in the latter
part of fiscal 2002 that have been sustained throughout the current fiscal year.
These cost savings were made largely through reduced  headcount and consequently
direct labor cost, which can be regarded as fixed by nature,  making the cost of
sales  percentage to sales figures  sensitive to changes in volume.  Also, since
the  acquisition  of the assets and staff of Palm Teach  Limited,  at the end of
fiscal 2002, the Company has benefited from the skills and expertise acquired in
the  management of bespoke  projects,  with a resultant  improvement  in project
margins.


                                      -24-
<PAGE>


Gross Profit

Gross Profit as a percentage of revenues  improved from (69)% gross loss in 2002
to 17% gross profit in 2003.  Cost of sales  includes a  significant  element of
cost which may be regarded as fixed by nature,  since it represents  the cost of
permanent  staff and third  party  hosting  whose  function  is to  provide  the
resources necessary to ensure the availability and effectiveness of the services
offered by the Company to its customers. The reduction to certain of these fixed
costs as a result of the Company's cost  reduction  plans executed in the latter
part of  fiscal  2002  and  sustained  throughout  fiscal  2003,  together  with
increased  revenues,  has  resulted in the reversal of the prior year gross loss
into a gross profit.  The  acquisition  of C2W limited had a positive  impact on
gross margin of GBP 41,000 ($66,000) in the current year.

Operating Expenses

Operating expenses reduced by 10% to approximately GBP1.3 million ($2.1 million)
or 95% of total revenues in 2003 from GBP1.4 million ($2.1 million),  or 154% of
total revenues in 2002. The decrease in actual  expenditure in 2003 results from
management's cost reduction  policies  implemented during the latter part of the
previous year,  sustained  throughout fiscal 2003. These cost reductions largely
resulted from a reduction in headcount in the support areas such as the finance,
management and HR areas.

Interest Income and Expense

Net interest expense for 2003 was GBP47,000 ($75,000) compared to a net interest
income  for 2002 of  GBP3,000,  as a result  of  higher  rate  interest  charges
incurred as a result of the delayed  settlement of the  outstanding  Convertible
loan,  whereby,  since the loan was not repaid on the due date, the  contractual
interest rate increased from two percentage points over base to 20%.

Foreign Currency Gains/Losses

There were no financial  gains or losses from exchange  rate  movements in 2003,
compared with a gain of GBP13,000 in 2002, as a result of relatively stable GBP,
USD and euro currencies throughout the period.

Income Tax Expense

There was no tax charge in 2003 and in 2002. The Company  possesses  significant
tax  losses in the UK that are  available  for  offset  against  future  profits
without limit of time. At April 30, 2003, potential deferred tax assets amounted
to GBP4,323,000 ($6,916,000), of which GBPnil ($nil) was recognized, compared to
GBP4,142,000 at April 30, 2002, of which GBPnil was recognized in expectation of
the results for the year to April 30, 2004.



2002 COMPARED WITH 2001

Revenues

The Company  achieved  sales of  GBP911,000  in the year ended April 30, 2002 an
increase  of  22%  when  compared  to  GBP743,000  in  the  previous  year.  The
improvement in revenues resulted from the successful transition away from CD-Rom
based product sales following  implementation of the Company's strategy to focus
on the provision of internet-based  solutions.  The success of this strategy was
demonstrated  by the fact that in 2002 95% of the total  revenues  came from the
provision of  e-Learning  products and services  compared  with 59% in 2001.  At
April 30, 2002,  the Company had a backlog of customer  orders of  approximately
GBP1,122,000 compared with GBP1,429,000 at April 30, 2001, the 2001 number being
higher as a result of the  inclusion  of the major  Consignia  order  covering a
period of two years, which was renewed, for one further year, in March 2003.

                                      -25-
<PAGE>

Cost of Sales

The  Company's  cost of sales as a percentage  of revenues  decreased to 169% in
2002  from  241% in 2001.  The  decrease  in  percentage  for the  current  year
reflected  not only the  increase in revenues  but also the  reduction in actual
costs  year on year of 14%  resulting  from  management's  implementation  of an
aggressive cost reduction policy in the latter half of fiscal year 2002.

Gross Loss

Gross loss as a percentage of revenues  improved from (141)% in 2001 to (69)% in
2002. Cost of sales includes a significant element of cost which may be regarded
as fixed by  nature,  since it  represents  the cost of  permanent  staff  whose
function is to provide the resources  necessary to ensure the  availability  and
effectiveness  of the  services  offered by the  Company to its  customers.  The
reduction  to certain of these  fixed  costs as a result of the  Company's  cost
reduction plans,  together with increased revenues,  has resulted in the reduced
Gross Margin percentage loss.

Operating Expenses

Operating  expenses reduced by 49% to approximately  GBP1.4 million,  or 154% of
total  revenues  in 2002  from  approximately  GBP2.8  million  or 372% of total
revenues in 2001.  The  decrease in actual  expenditure  in 2002  resulted  from
management's cost reduction  policies  implemented  during the year, mainly as a
result of reductions in staff made in April/May 2001 and again in November 2001,
and the closure of the office in London resulting in a substantial  reduction in
facilities expense.

Interest Income and Expense

Net interest  income for 2002 was GBP3,000  compared to GBP84,000 in 2001,  as a
result of the reduction of the amount of cash available for investment.

Foreign Currency Gains/Losses

Financial  gains from  exchange  rate  movements  amounted to  GBP13,000 in 2002
compared  with a gain of  GBP31,000  in 2001.  Gains  arose  primarily  from the
marginal  strengthening  of the GBP against the US dollar  throughout the fiscal
year, which was lower than the previous year.

Income Tax Expense

There was no tax charge in 2002 and in 2001. The Company  possesses  significant
tax  losses in the UK that are  available  for  offset  against  future  profits
without limit of time. At April 30, 2002, potential deferred tax assets amounted
to  GBP4,142,000,  of which GBPnil was  recognized,  compared to GBP3,592,000 of
which GBPnil was recognized.

The Company is not aware of governmental economic, fiscal, monetary or political
policies or factors that have materially  affected,  or could materially  affect
its operations.

B.       LIQUIDITY AND CAPITAL RESOURCES.
         ---------------------------------

INTERNAL AND EXTERNAL SOURCES OF LIQUIDITY

In January 2003, the Company  contracted for the sale of its premises at Arundel
Road,  Walberton,  West  Sussex for a total  price of  GBP750,000  ($1,200,000),
GBP118,000  ($189,000)  below the  carrying  value.  Under the terms of the sale
contract,  the  property  was divided  into two parts and sold in two lots,  the
first for GBP300,000 ($480,000),  took place in January 2003, and the second for
GBP450,000  ($720,000)  took  place  in  May,  2003.  On  the  first  sale,  the
outstanding loan under the Loan Stock Agreement between the Company and Waverton
Holdings  Limited was repaid in full,  and at that time,  the Company took out a
GBP300,000  ($480,000)  mortgage  provided by a major bank,  repayable  on final


                                      -26-
<PAGE>

completion,  to enable both the full  repayment of the  outstanding  loan and to
provide  working  capital  pending the receipt of the balance of monies due from
the sale of the premises. The mortgage was repaid in full after the close of the
fiscal year, in May 2003, when the sale was completed.

Since its initial  public  offering in 1993, the Company has undertaken a series
of private  placements  to fund its working  capital and to allow  investment in
product  developments.  Between May 1999 and April 2002,  the Company  issued an
aggregate of 17,848,229  Ordinary Shares to  approximately  30 non-US persons in
reliance on Regulation S,  representing  aggregate gross proceeds to the Company
of approximately GBP7.9 million ($12.6 million). During the year ended April 30,
2003,  the  Company  also  issued a further  29,327,993  shares in  reliance  of
Regulation S,  representing  aggregate  gross  proceeds of GBP1.7  million ($2.7
million), of which GBP 239,000  ($382,000) was outstanding at April 30, 2003,
and was received subsequently to the year-end.

Subsequent  to the year end, in August,  2003,  the Company  completed a Private
Placement  in which it  contracted  for the issue of  approximately  5.0 million
Ordinary  shares,  or 6.2% of the issued share capital,  at a price of $0.22 per
Ordinary Share  (representing  a discount to the market price at the time),  for
total proceeds of approximately GBP 660,000 ($1.1 million). As the placement was
completed  at a discount  to then  current  market  price,  no members of senior
management or the Board of Directors participated in the offering.

Also in August, 2003, Volito AB, contracted for the purchase of 387,597 Ordinary
Shares  at the then  market  price of  $0.387  per  Ordinary  Share  for a total
purchase price of $150,000.

Also in August,  2003, a number of the Company's  staff exercised part or all of
their share options to purchase  Ordinary Shares under the Company's  Unapproved
Executive  Share  Option  scheme  for a total of 188,838  Ordinary  Shares at an
average  price of  $0.109  per  Ordinary  share  for a total  purchase  price of
GBP 12,000 ($20,000). None of these staff were members of senior  management or
the Board of Directors.

At November 12, 2003, the Company's cash resources and available  borrowings are
less than the  resources  the  management  intends  to use for  maintaining  the
current  level of operations  for the next twelve  months.  However,  management
believes that the improved  levels of order intake and sales  prospect  pipeline
since the end of the year,  notably the recent order for the Company's  Learning
for All product from the Royal Mail,  have improved the  expectation of revenues
and cashflows to the extent that the Company's  requirement  for working capital
and capital  investment for the remainder of the current fiscal year will be met
from trading activities.


SOURCES AND AMOUNTS OF CASH FLOWS

On November 14,  2003,  the latest date  available at time of filing,  the total
amount of cash and cash equivalents on hand was GBP371,000  ($594,000)  compared
with a total of cash and cash equivalents at April 30, 2003 of GBP437,000.  This
decrease  primarily  represents  losses incurred in the five months to September
30, 2003, offset by gross investment receipts of GBP786,000 ($1,257,000).

In April, 2003, the Company acquired a 21% equity stake in Luvit AB ("Luvit"), a
Swedish e-Learning  solutions provider,  by the investment of approximately $1.0
million directly in Luvit for the issue of 7.8 million new Luvit shares,  and at
the same time  acquiring a further 3.35  million  Luvit shares from Volito AB, a
Swedish investment house, in exchange for the issue of approximately 4.7 million
Futuremedia shares,  bringing Futuremedia's total holding in Luvit to 29.8%. The
Company  expects that the  investment  in Luvit is a first step in expanding the
Company's position in Europe outside the United Kingdom.

                                      -27-
<PAGE>

On April 30,  2003,  the total amount of cash and cash  equivalents  on hand was
GBP 437,000 ($699,000) as compared to cash and cash equivalents of GBP445,000 as
at April 30, 2002. This minor change reflects the effect of the losses sustained
in the year to April 30, 2003, offset by the funding  initiatives  undertaken by
the Company  together  with the proceeds  from the first part of the sale of its
premises and the provision of a mortgage pending  completion on the second part,
net of the repayment of the amounts  outstanding under the Loan Stock Agreement.
The Company's  ratio of current  assets to current  liabilities  stood at 0.9 at
April 30,  2003,  compared  with 0.6 at April 30,  2002,  the April 2002 numbers
containing  the entire  balance  outstanding  on the Loan Stock being current at
that  time,  whilst  the  numbers  for April 2003  include  the  entire  balance
outstanding on the short-term mortgage. As at September 30, 2003, this ratio was
1.2.

On April 30,  2002,  the total amount of cash and cash  equivalents  on hand was
GBP445,000  ($651,000) as compared to cash and cash  equivalents of GBP2,547,000
as at April 30, 2001.  This  reduction  primarily  represents  the effect of the
losses sustained in the year, offset by the funding initiative undertaken by the
Company in April,  2002 and cash generated as a result of up-front payments from
clients for the provision of the  Company's  services.  The  Company's  ratio of
current assets to current  liabilities stood at 0.6 at April 30, 2002,  compared
with 1.6 at April ~30, 2001,  the entire  balance  outstanding on the Loan Stock
being current as at April 30, 2002. As at September 30, 2002 this ratio was 0.8.

Cash balances have been constrained  primarily as a result of operating  losses.
This has resulted in the Company suffering periods of severe  constraints on its
operations  arising from the  requirement to maintain its cash flow. The Company
expects to continue to experience constraints because of these requirements.

As of April 30,  2003,  the Company had no long-term  obligations,  the mortgage
from a major bank being repayable in full on final completion of the sale of the
Company's premises, due in less than twelve months from the balance sheet date.

At  April  30,  2003,  the  Company  had  no  material  commitment  for  capital
expenditure. As of November 12, 2003 the Company had no material commitments for
capital expenditures.

The Company has secured the  provision of its Internet  Service  Provider  (ISP)
service requirements with Siemens UK Ltd. for a period of three years commencing
September  2001.  The terms of the contract  allow  termination  on three months
notice  after the  completion  of the first  year.  In April  2001,  the Company
contracted  with  Consignia Plc (UK) for the provision of a learning  management
system  comprising a hosted service  together with learning content for a period
of 22 months  commencing  June 1,  2001.  The total  value of the  contract  was
approximately GBP1,000,000 ($1,438,600). This contract was renewed for a further
period of twelve months in with effect from April 1, 2003. In November 2003, the
Company was awarded a  significant  contract by Royal Mail for the  provision of
its Learning for All product to all the client's employees.  It is expected that
the Company will have to make significant commitment to third party suppliers in
the delivery of these products and services.


C.       RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
         ----------------------------------------------------

COMPANY SPONSORED RESEARCH AND DEVELOPMENT

The Company is committed to appropriate ongoing product research and development
in an effort to  continually  upgrade,  modify and improve its  products to meet
changing  market and consumer  needs.  The Company has been a beta test site for
hardware  products and software  developed by a number of companies and has also


                                      -28-
<PAGE>

developed  software and hardware  itself for internal  purposes and for the open
market.  Research and  development  work is undertaken by the  development  team
whose focus has been on SolstraTM and  easycando,  supported by other members of
production staff as required.

During the fiscal year ended April 30, 2003, a total of GBP131,000 ($210,000) of
research and development costs was expensed. During the fiscal years ended April
30, 2002 and 2001,  GBP311,000 and GBP608,000,  respectively,  of research costs
were expensed. An average of two staff were employed on research and development
activities in the year ended April 30, 2003.

STRATEGIC RELATIONSHIPS


The Company,  when it determines it to be  advantageous,  enters into agreements
with others for joint  financing of products.  The Company  believes  that these
relationships  can help to widen the Company's  product range.  The Company also
intends to develop  commercial  arrangements  with providers of on-line learning
courses  for the  re-sale of their  products  through  easycando.  To date,  the
Company  has  contracted   with   KnowledgePool   Ltd.   (England),   Intellexis
International  Ltd. (London,  England),  SmartForce Ltd (UK), Xebec McGraw-Hill,
(UK), and SkillSoft (US).

D.       TREND INFORMATION.
         ------------------
At November 12, 2003, the Company had a forward order book of customer orders of
approximately GBP1,098,000  ($1,756,000),  compared with GBP873,000 at April 30,
2003.

E.       RECENT ACCOUNTING PRONOUNCEMENTS.
         ---------------------------------

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity." SFAS No. 150
specifies that freestanding  financial  instruments  within its scope constitute
obligations of the issuer and that, therefore,  the issuer must classify them as
liabilities.   Such  freestanding   financial  instruments  include  mandatorily
redeemable financial instruments,  obligations to repurchase the issuer's equity
shares by  transferring  assets,  and  certain  obligations  to issue a variable
number of  shares.  SFAS No.  150 is  effective  immediately  for all  financial
instruments  entered  into or  modified  after  May  31,  2003.  For  all  other
instruments, SFAS No. 150 is effective at the beginning of the second quarter of
2004.  The Company has  determined  that the statement  will not have a material
impact on the consolidated  financial  position,  results of operations and cash
flows of the Company.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness of Others,  an Interpretation of FASB Statements No. 5, 57, and 107
and Rescission of FASB  Interpretation  No. 34" (FIN No. 45). The interpretation
requires  that upon  issuance  of a  guarantee,  the  entity  must  recognize  a
liability for the fair value of the obligation it assumes under that obligation.
This  interpretation  is  intended  to improve the  comparability  of  financial
reporting,   by  requiring  identical  accounting  for  guarantees  issued  with
separately  identified  consideration and guarantees  issued without  separately
identified consideration.  The disclosure requirements are effective for interim
and annual  financial  statements  ending after  December 15, 2002.  The initial
recognition and measurement  provisions are effective for all guarantees  within
the scope of FIN 45 issued or modified  after  December  31,  2002.  The Company
currently does not provide any guarantees.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable  Interest  Entities"  (FIN No. 46). The  interpretation  clarifies  the
application  of  Accounting  Research  Bulletin No. 51  "Consolidated  Financial
Statements"  to  certain  entities  in which  equity  investors  do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial  support  from other  parties.  FIN No.46 is  applicable
immediately for variable  interest  entities created after January 31, 2003. For


                                      -29-
<PAGE>

variable  interest entities created prior to January 31, 2003, the provisions of
FIN 46 are  applicable  for periods  ending after December 15, 2003. The Company
does not  expect  this  Interpretation  to have an  effect  on the  consolidated
financial statements.

In November 2002,  the EITF released  Issue  Abstract No. 00-21,  Accounting for
Revenue  Arrangements with MULTIPLE  DELIVERABLES." This consensus requires that
revenue  arrangements with MULTIPLE  DELIVERABLES be divided into separate units
of accounting if the deliverables in the arrangements meet specific criteria. In
addition,  arrangement  consideration must be allocated among the separate units
of accounting based on their relative fair values, with certain limitations. The
Company will be required to adopt the provision of this consensus are applicable
for  revenue  arrangements  entered  into after June 30,  2003.  The  company is
currently  evaluating  the impact of the adoption of this  pronouncement  on its
consolidated financial statements.



F.       CRITICAL ACCOUNTING POLICIES.
         -----------------------------

The  Company   considers  certain   accounting   policies  relating  to  revenue
recognition and  capitalization of research and development costs to be critical
to its business operations.

Revenue recognition.
Net sales represent the value of goods and services  delivered,  excluding value
added tax, and for the year ended April 30, 2003 can be  categorized by activity
into one of five operating departments.

Consultancy  Service - Consultancy  revenues fall into the Futuremedia  Learning
Services  unit.  These  revenues  are  invoiced at the  completion  of each work
package, and revenues recognized at that time.

Bespoke Products - Bespoke  production  revenues are managed within  Futuremedia
Content  Studio.  These are products  that are  specifically  designed to meet a
customer's   individual   e-learning   needs.  Due  to  the   customization  and
modification required, revenue for these long-term contracts are recognized on a
percentage-of- completion basis based on costs incurred.

Learning  Management  Systems  -  A  Learning  Management System is specifically
designed  for  the  customer to meet all of their e-learning needs. The revenues
are  managed  through  the Futuremedia Software Services. Futuremedia Courseware
Services  and  Futuremedia  Service  Delivery  units.  These systems can include
multiple  elements  such  as:  a  license  for Solstra, hosting services, set up
charges,  integration and support services and content. For these contracts, the
Company  recognizes  revenue  over  the  period  of  the  license.

Blended  learning  Solution - Blended Learning solutions are those which combine
an  element  of  e-Learning,  together with physical classroom or workbook based
training.  The  revenues  are managed through the Futuremedia Software Services,
Futuremedia  Courseware  Services and Futuremedia Service Delivery units. It can
include multiple solutions such as supply of e-Learning materials, workbooks and
classroom  based  instruction.  The  Learning  Management  System  element  is
recognized over the period of the license agreement and the remaining element is
recognized on the delivery of the service for classroom based instruction and on
the  delivery  of  the  product  for  the  workbooks.

In other  situations,  the Company  allocates  revenue to the elements  based on
objective  evidence of the fair value.  Revenue is recognized when the following
criteria are met for each element:

-    There is persuasive evidence of an arrangement
-    The Company has delivered the product to the customer
-    Collection of the fees is probable; and
-    The amount of the fees to be paid by the customer is fixed and determinable

Revenue  received  for hosting  and support  services  are  recognized  over the
service period.

                                      -30-
<PAGE>


Research and Development costs.

The Company  expenses  research and development  costs,  including  expenditures
related to  development of the Company's  software  products that do not qualify
for  capitalization.  Software  development costs are capitalized  subsequent to
establishing technological feasibility. Capitalized costs are amortized based on
the  larger of the  amounts  computed  using (a) the ratio  that  current  gross
revenues for each product bears to the total of current and  anticipated  future
gross  revenues  for  that  product  or (b) the  straight-line  method  over the
remaining  estimated economic life of the product.  Expected future revenues and
estimated  economic  lives are subject to  revisions  due to market  conditions,
technology  changes,  and other  factors  resulting  in  shortfalls  of expected
revenues or reduced  economic  lives.  Software  development  costs  capitalized
during  fiscal  2003,  2002,  and  2001,  totaled  (pound)62,   (pound)Nil,  and
(pound)Nil,  respectively.  Amortization  expense,  included  in cost  of  goods
sold/general and administrative,  was (pound)Nil, (pound)Nil, and (pound)109 for
the samE periods, respectively. Software capitalized in 2003 were not internally
generated.   These  arose  from  the  acquisition  of  Activna  Objects  Limited
Capitalized software costs, net of accumulated  amortization,  were (pound)62 at
April 30, 2003, and (pound)Nil at April 30, 2002.

Accumulated  amortization amounted to(pound)264 at April 30, 2003, and(pound)264
at April 30, 2002



G.       RELATED PARTY TRANSACTIONS.
         ---------------------------

Since its initial  public  offering in 1993, the Company has undertaken a number
of private  placements  to fund its working  capital and to allow  investment in
product   developments.   These   private   placements   include  the  following
transactions each of which was completed in reliance on Regulation S:



-        In July 2000,  the Company  completed an additional  private  placement
         under  Regulation S pursuant to which the Rennes  Foundation  purchased
         1,944,444  Ordinary  Shares  at a  price  of  $1.80  per  share  for an
         aggregate  purchase  price of  approximately  $4.0 million in cash. See
         "Major Shareholders".

-        In March 2002,  the Company  contracted  and  received the cash for the
         issue of an aggregate of 4,702,410  Ordinary  Shares at the then market
         price of $0.083 per Ordinary Share  representing an aggregate  purchase
         price of approximately $390,000. The following individuals and entities
         purchased the number of Ordinary  Shares  indicated in connection  with
         this  private  placement:  the Rennes  Foundation  (1,204,819  shares);
         Noesis NV (301,205 shares); Mr. M Johansson (361,446 shares) and Mrs. M
         Pillinger, wife of S Pillinger, a then Director of the Company (100,000
         shares).

-        In March 2002, the Company  contracted for the issue of an aggregate of
         759,700  Ordinary  Shares at a market price of $0.07 per Ordinary Share
         pursuant to the stock  transaction for the acquisition of the assets of
         Palm Teach  Limited,  together  with the issue of an aggregate  702,900
         Ordinary  shares at a market price of $0.07 per Ordinary  share to four
         key individuals on their joining the Company. The following individuals
         and  entities  received  the number of  Ordinary  Shares  indicated  in
         connection  with  this  transaction:   Mr.  P  Copeland  as  beneficial
         shareholder  of Palm Teach Limited  (759,700  shares);  Mr. S Pillinger
         (209,450 shares).

-        Also in April  2002,  the Company  contracted  for the issue of 803,046
         Ordinary  Shares at the then market price of $0.07 per  Ordinary  Share
         under  a  Salary  sacrifice  arrangement,   representing  an  aggregate


                                      -31-
<PAGE>

         purchase  price of $56,000.  The  following  individual  purchased  the
         number  of  Ordinary   Shares   indicated  in   connection   with  this
         transaction: Mr. M Johansson (648,183 shares). At the same time, Mrs. J
         Vandamme  agreed to accept 102,000  Ordinary Shares at a price of $0.07
         per Ordinary  Share in settlement of outstanding  invoiced  charges for
         work done for the Company.

         In October 2002,  the Company  contracted and received the cash for the
         issue of an aggregate of 2,727,647  Ordinary  Shares at the then market
         price of $0.085 per Ordinary Share  representing an aggregate  purchase
         price of approximately $232,000. The following individuals and entities
         purchased the number of Ordinary  Shares  indicated in connection  with
         this private  placement:  the Rennes Foundation  (1,177,647 shares) and
         Mr. M Johansson (182,353 shares).

         In April,  2003,  the Company  contracted and received the cash for the
         issue of an aggregate of 16,706,000  Ordinary Shares at the then market
         price of $0.10 per Ordinary Share  representing  an aggregate  purchase
         price  of  approximately  $1,670,000.  The  following  individuals  and
         entities   purchased  the  number  of  Ordinary  Shares   indicated  in
         connection with this private placement: Mr J Vandamme (200,000 shares),
         Mr. M Johansson  (150,000  shares) and Mr D Bailey (150,000 shares) and
         Volito AB (8,500,00 shares).

         Also in  April,  2003,  the  Company  contracted  for the  exchange  of
         3,350,000  shares  in Luvit AB for the issue of  4,685,315  Futuremedia
         shares at the then market price of $0.10 per ordinary  shares to Volito
         AB.

         In August 2003,  the Company  contracted  and received the cash for the
         issue of 387,597 Ordinary shares at the then market price of $0.387 per
         Ordinary share for a total aggregate  price of $150,000.  The following
         individuals  and  entities  purchased  the  number of  Ordinary  Shares
         indicated in connection with this private placement: Volito AB (387,597
         shares).

H.       COMMITMENTS.
         ------------

The Company has secured the  provision of its Internet  Service  Provider  (ISP)
service requirements with Siemens UK Ltd. for a period of three years commencing
September  2001.  The terms of the contract  allow  termination  on three months
notice  after the  completion  of the first  year.  In April  2001,  the Company
entered into a sales  contract with  Consignia Plc (now Royal Mail) (UK) for the
provision of a learning  management  system comprising a hosted service together
with learning  content for a period of 22 months  commencing  June 1, 2001.  The
total value of the contract was approximately  GBP1,000,000  ($1,438,600).  This
contract  was  renewed  for a further  period of twelve  months with effect from
April 1, 2003. In November 2003, the Company was awarded a significant  contract
by Royal  Mail for the  provision  of its  Learning  for All  product to all the
client's  employees.  It  is  expected  that  the  Company  will  have  to  make
significant  commitments  to third  party  suppliers  in the  delivery  of these
products and services.



                                      -32-
<PAGE>



          ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.
                  ------------------------------------------

A.       DIRECTORS AND SENIOR MANAGEMENT.
         --------------------------------
The  Company's  directors  and  senior  management,  and any  employees  such as
scientists or designers  upon whose work the Company is dependent as of the date
of this Report are as follows:
<TABLE>
<CAPTION>

                                                     DIRECTOR
                 NAME                      AGE         SINCE            POSITION WITH THE COMPANY
<S>               <C>                       <C>          <C>                      <C>
               --------                  -------    -----------  ----------------------------------------------
BOARD MEMBERS:

David Bailey(1) ................            44          2002       Non-employee Director from April 2002
Mats Johansson(3)...............            45          1996       CEO Futuremedia PLC from December 2000
Carl Kleman (1)(2)..............            57          2003       Non-employee      Director
Cornelis Wit(l) (2).............            57          1997       Non-employee      Director
Jan Vandamme(1)(2)..............            44          1998       Non-employee      Director and Chairman

SENIOR MANAGEMENT:

Peter Machin....................            54           -         Company Secretary and Chief Accounting Officer

</TABLE>

(1) Member of the Audit Committee.
(2) Member of the Remuneration Committee
(3) Resigned as Director January 2002, re-appointed April 2002

Mr. D Bailey has served as a non-executive director since his appointment to the
board in April 2002. David Bailey. Mr. Bailey has formerly worked for both Ernst
& Young  and  Coopers &  Lybrand,  specializing  in the  turnaround  market  and
business  development,  and now has his  own  independent  consultancy  business
providing advice on business growth  strategies and delivering  profitability to
largely bank-led clients

Mr. Mats Johansson joined Futuremedia in 1996, was promoted to Managing Director
in 1998, and appointed CEO in December 2000.  Previously Mr.  Johansson has held
senior management positions at Student Literature AB, American Express Inc., and
subsequently  co-founded a national catalogue and retail business in the US. Mr.
Johansson has an MBA from Harvard Business School.

Mr. Carl Kleman,  a graduate of the  Stockholm  School of Economics and Business
Administration,  joined the Board of Futuremedia Plc in August 2003. He has held
several CFO and CEO  positions  within  Europe and  Scandinavia  and brings wide
experience   of   general    management,    acquisitions,    divestitures    and
reorganizations.

Mr.  Cornelis  Wit is  President,  Corporate  Finance  at Noesis  Capital  Corp,
Florida,  USA, an  international  investment  banking  firm.  Until 1994, he was
President  and CEO of DMV Inc. He has held senior  positions  in  pharmaceutical
companies  in South  America and Europe.  He holds  directorships  in  Whitehall
Specialities,  USA,  OmniCom  Systems,  USA,  UCI Web,  USA,  IVC,  Madrid,  and
K.D.Pharma, Germany.

Mr. Jan  Vandamme is a director of various  companies  specializing  in Internet
related  activities.  Mr.  Vandamme  also holds  directorships  in UCI Web,  USA
OmniCom Systems USA and Digital  Diagnostic  Imaging SA,  Belgium.  Mr. Vandamme
previously  served as a representative  of Profrigo NV. Mr Vandamme is no longer
affiliated with Profrigo.

                                      -33-
<PAGE>

Mr.  Peter  Machin  joined  the  Company  in  1996  and  holds  a UK  accounting
qualification and has extensive  experience of financial management in computing
services providers such as International Computers Ltd. He has served as Company
Secretary and Chief Accounting Officer since April 1999.

Mr. David Bailey was  appointed to the board on the  nomination  of a private UK
investor. Mr. Wit was appointed to the Board on the nomination of Noesis NV. Mr.
Rolf  Herter  resigned  from the Board on August 5,  2003.  Mr.  Herter had been
appointed  to the Board on the  nomination  of  Rennes  Foundation  and  Jobelin
Foundation.

B. COMPENSATION.
   --------------
The total remuneration  (excluding pension  contributions) paid to the Company's
directors and  executive  officers (a total of five persons) for fiscal 2003 was
GBP282,000 ($451,000).

The Company may  reimburse  non-employee  directors for their costs and expenses
incurred in attending  Board  meetings and may enter into contracts for services
with non-employee directors.

In October 1997,  non-executive director Mr. Wit was granted options to purchase
5,000 Ordinary shares at a price of $0.594 per Ordinary  share,  and in November
1998, was granted  options to purchase a further  100,000  Ordinary  Shares at a
price of $1.00 per Ordinary  Share under the Unapproved  Executive  Share Option
Plan. These options were cancelled in February 2002 and replaced with options to
purchase  52,250  Ordinary  Shares at a price of $0.10 per  ordinary  shares and
52,250 Ordinary  Shares at $0.15 per Ordinary  Share,  which vested in July 2002
and expire at the end of February  2010.  At the same time,  further  options to
purchase  150,000  Ordinary  Shares at $0.10  per  ordinary  share  and  150,000
Ordinary Shares at $0.15 per Ordinary Share were granted to Mr. Wit.

In November 1998,  non-executive  director Mr.  Vandamme was granted  options to
purchase 100,000  Ordinary Shares at a price of $1.00 per Ordinary Share.  These
options were  cancelled in February  2002 and replaced  with options to purchase
50,000  Ordinary  Shares  at a price of $0.10 per  ordinary  shares  and  50,000
Ordinary  Shares  at $0.15 per  Ordinary  Share,  which  vested in July 2002 and
expire  at the end of  February  2010.  At the same  time,  further  options  to
purchase  250,000  Ordinary  Shares at $0.10  per  ordinary  share  and  250,000
Ordinary Shares at $0.15 per Ordinary Share were granted to Mr. Vandamme.

In February  2002,  a total of 745,000  options to purchase  Ordinary  Shares at
various  prices  ranging  from  $0.594 to $3.00 per  Ordinary  Share  previously
granted to Mr.  Johansson  were  cancelled and replaced with options to purchase
372,500  Ordinary  Shares at a price of $0.10 per  ordinary  shares and  372,500
Ordinary  Shares  at $0.15 per  Ordinary  Share,  which  vested in July 2002 and
expire at the end of February  2012.  At the same time, a further grant was made
to Mr.  Johansson to purchase  150,000  ordinary  shares at a price of $0.10 per
Ordinary  Share and  150,000  Ordinary  Shares at a price of $0.15 per  Ordinary
Share vesting in February and March 2003, which will expire in February 2010.

In April 2002, Mr. Johansson agreed to sacrifice  GBP31,433  ($45,990) of salary
over the period January 2002 to August 2002 in exchange for the issue of 648,183
Ordinary Shares at a value of $0.07 per Ordinary Share.

In November 2002, a total of 500,000 options to purchase  Ordinary Shares at the
then market price of $0.091 per Ordinary Share,  vesting  between  November 2004
and  November  2005,  were granted to Mr D Bailey.  Of these,  250,000 were only
exercisable on the achievement of specific  performance  targets. As at November
12,  2003,  these  performance  targets had not been met, and  therefore,  these
options lapsed.

At November 12, 2003 none of the above options had been exercised.



                                      -34-
<PAGE>

EMPLOYMENT CONTRACTS

The Company has entered into employment agreements with all of its employees and
employee-directors, subject to customary terms and conditions.

The  employment  contract with Mr.  Johansson,  which  commenced on November 12,
1996, and which is a continuous full-time  employment  contract,  was amended in
April 2002 such that it can be  terminated  by either  party upon three  months'
written notice. The employment contract with Mr. Machin, which commenced in July
1997, is a continuous  full-time  employment  contract that can be terminated by
either party upon three months' written notice.

C        BOARD PRACTICES.
         ----------------

Directors hold office until removed by a resolution of the  shareholders  of the
Company,  removal by all of the members of the Board,  resignation or death,  or
until the  expiration  of their  terms.  The  Company's  executive  officers are
appointed by the Board.

At every Annual General Meeting of the shareholders of the Company, the terms of
all of the directors expire.

Any  director  may be  removed  from the  Board by  unanimous  vote of the other
directors.

Under  section  303 of the  Companies  Act 1985,  shareholders  may  remove  any
director,  by ordinary  resolution  (subject to special notice of the resolution
being  given  to the  director  and the  right of the  director  to  attend  the
shareholder meeting where the vote will be cast) adopted by the affirmative vote
of a  majority  of the  shares  voting  at an Annual  or  Extraordinary  General
Meeting.

Mr. Johansson has a service contract with the Company,  which provides for three
months' notice of  termination of employment or payment in lieu of notice.  This
contract is subject to English  employment law, and on termination other than by
mutual consent the employee may be entitled to additional  compensation for loss
of employment,  including without limitation  statutory redundancy pay and other
compensation.

The Audit Committee is responsible for, among other things:  recommending to the
Board  of  Directors  the  nomination  of  the  Company's  independent  auditor;
reviewing and monitoring the Company's  financial reporting process and internal
control systems;  reviewing the Company's annual financial statements, the scope
of the audit and the role and performance of the independent auditor;  reviewing
the  independence  of the  independent  auditors;  and  providing  a channel for
communication  between  the  independent  auditor,  management  and the Board of
Directors.

The Remuneration  Committee is responsible  for, among other things,  reviewing,
monitoring and approving the remuneration of the executive  directors and senior
management of the Company.

D        EMPLOYEES.
         -----------

At  November  12,  2003,  the  Company  employed  29  persons,  two of whom were
executives.  Of the  remainder,  17 were  engaged  in  technology  delivery  and
support,  nine in sales and  marketing and two in  administrative  and financial
matters.

As of April 30,  2003,  the  Company  employed  19  persons,  one of whom was an
executive.  Of the other  employees  as of April 30,  2003,  12 were  engaged in
technology  delivery  and  support,  three in sales and  marketing  and three in
administrative and financial matters.

In addition,  it is Company policy to employ contract staff from time to time to
support  specialized  production  requirements  and to increase  its  production


                                      -35-
<PAGE>

capacity  and  flexibility  and to reduce  lead  times.  The  Company  may offer
permanent  employment to individual  contractors  when management can reasonably
foresee a continuing  commercial  requirement for the contractor's  skills.  The
average number of temporary  employees during the year ending April 30, 2003 was
two.

None of the Company's employees is covered by a collective bargaining agreement.
All of the Company's employees are employed in the UK. The Company believes that
its relations with its employees are good.

The Company's ability to achieve its business objectives is, in part,  dependent
on its ability to recruit the specialist skills it requires, both on a permanent
and a contract basis.

Management   of  the   Company   has   developed   a   collaborative   style  of
decision-making, which they believe allows them to draw on the talent and skills
of their executive  personnel.  The Company normally carries out monthly reviews
of its  operations,  including  its profits and losses,  sales,  marketing,  and
production.   The  Company  has  introduced  incentives  to  the  staff  through
profit-related bonuses,  merit-based promotions and issues of share options. See
"Employee Profit Sharing and Option Plans."

E.       SHARE OWNERSHIP.
        -------------------

SHARE OWNERSHIP

With respect to the share ownership in the Company of the officers and directors
of the Company, see the disclosure in "Major Shareholders".

EMPLOYEE PROFIT-SHARING AND OPTION PLANS

In July 1993, the Company  adopted three  employee  profit share or share option
plans: the "Approved  Executive Option Scheme," the "Unapproved  Executive Share
Option Scheme", and the "Employee Share Ownership Plan".

Under the Company's "Approved Executive Share Option Scheme," options to acquire
the Company's Ordinary Shares may be granted to all or selected  employees.  Any
full-time employee,  other than a director, of the Company who is not within two
years of his or her due date of retirement  and who,  within one year  preceding
the grant,  did not hold more than 10% of the share  capital of the Company,  is
eligible to participate.  The exercise price of the options must be no less than
85%, of the fair market value of the  Company's  ADSs on the date of grant.  The
aggregate value of shares underlying the options granted to any employee may not
exceed the greater of GBP100,000 ($160,000) or four times earnings.

Under the  Company's  "Unapproved  Executive  Share Option  Scheme,"  options to
acquire  Ordinary  Shares  may  be  granted  to  selected  full-time  employees,
including  directors,  based  on their  performance.  Such  options  may also be
granted to  non-employee  directors.  The exercise price of the options  granted
must be at or above the fair market value of the  Company's  ADSs.  The value of
options to be granted is not subject to any financial limit, although the number
of  shares  over  which  options  may  be  granted  is  subject  to  an  overall
restriction, as described below.

In August 1993,  options to purchase an aggregate of 45,186  Ordinary  Shares at
$4.25 per Ordinary Share were granted to employees under the Approved  Executive
Share Option Scheme. In May 1995,  options to purchase 44,647 Ordinary Shares at
$2.55 per Ordinary Share were granted to employees under the Approved  Executive
Share Option Scheme.  In February  1998,  options to purchase  121,000  Ordinary
Shares at  $0.90625  per  Ordinary  Share were  granted to  employees  under the
Approved Share Option Scheme. In July 2000,  options to purchase 90,000 Ordinary
shares at $1.5938 per  Ordinary  Share were  granted  under the  Approved  Share
Option Scheme. No options have been exercised under the Approved Executive Share


                                      -36-
<PAGE>

Option  Scheme.  Taking into  consideration  options  that have lapsed  prior to
exercise and upon termination of employment, options to purchase an aggregate of
759  Ordinary  Shares  at $4.25 per  Ordinary  Share,  options  to  purchase  an
aggregate  of 947  Ordinary  Shares  at $2.55 per  Ordinary  Share,  options  to
purchase  20,500  Ordinary  shares at $0.90625 per Ordinary Share and options to
purchase  12,000  Ordinary  shares at $1.5938 per  Ordinary  share  respectively
remained outstanding and unexercised as at November 12, 2003.

The  following  options  have been issued as of  November  12,  2003,  under the
Company's "Unapproved Executive Share Option Scheme."
<TABLE>
<CAPTION>

<S>                              <C>                  <C>               <C>             <C>
      NO OF                 SUBSCRIPTION             DATE                           EXERCISABLE WHEN THE MARKET
     SHARES                     PRICE             EXERCISABLE       EXPIRY DATE     PRICE AT LEAST EQUALS
---------------            ----------------      --------------   --------------- -------------------------
      5,000                    $0.53               Current          Oct 2007        No Restriction
      5,000                    $0.19               Current          Jan 2007        No Restriction
    100,000                    $1.00               Current          Sept 2010       No Restriction
     57,250                    $0.35               Current          May 2011        No Restriction
     57,250                    $0.35               11/01/03         May 2011        No Restriction
     57,250                    $0.35               05/01/04         May 2011        No Restriction
     57,250                    $0.35               11/01/04         May 2011        No Restriction
    100,000                    $0.25               Current          Oct 2006        $1.00
      5,000                    $0.19               Current          Sept 2010       No Restriction
      5,000                    $0.59               Current          Sept 2010       No Restriction
    474,750                    $0.15               Current          Feb 2012        No Restriction
  1,163,355                    $0.15               Current          Feb 2012        No Restriction
    474,750                    $0.10               Current          Feb 2012        No Restriction
  1,194,777                    $0.10               Current          Feb 2012        No Restriction
     50,000                    $0.09               Current          Oct 2012        No Restriction
     50,000                    $0.09               10/16/04         Oct 2012        No Restriction
     50,000                    $0.09               10/16/05         Oct 2012        No Restriction
    125,000                    $0.09               11/01/03         Nov 2012        No Restriction
    125,000                    $0.09               11/01/04         Nov 2012        No Restriction

  4,156,632
  ===========

</TABLE>

         (1) Exercisable  provided that the grantee achieves  specific  personal
sales targets.

The Company's  "Employee  Share  Ownership Plan" (also known as the Approved Net
Profit  Sharing  Scheme) was  terminated  with effect from  September  2000.  No
payments were due and no monies were set aside at the termination of the scheme.



                                      -37-
<PAGE>


          ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
                   ---------------------------------------------------
A. MAJOR SHAREHOLDERS.
   -------------------
The following table sets forth certain information,  as of November 12, 2003, to
the extent  that it is known to the  Company or can be  ascertained  from public
filings, as of the date of this Report with respect to the beneficial  ownership
of the Company's ADSs by (i) each director, senior manager and key employee, and
(ii) each person known by the Company to own 5% or more of the  Company's  ADSs.
This  information  is based upon  information  received from or on behalf of the
named individuals.

<TABLE>
<CAPTION>

<S>     <C>                                                         <C>              <C>                    <C>
  Name of Beneficial Owner                                     Number of ADSs    Number of share      Percentage
  (1)                                                           Beneficially         options          Beneficially
                                                                   Owned          Beneficially            Owned,
                                                                                    owned (3)         including
                                                                                                       options
  Rennes Foundation (2)                                        13,150,218       -          -                 15.1
  Jobelin Foundation (2)                                          447,778       -          -                  0.5
  Volito AB                                                     9,817,440       -          -                 11.3
  C Witt                      Board Member                              1                  -                  -
  D. Bailey                   Board Member                        696,154            500,000                0.8
  M Johansson                 Board Member & C.E.O              2,485,846             75,000                2.9
  J. Vandamme                 Board Member & Chairman             902,001                  -                1.0
  C. Kleman                   Board Member                              -                  -                  -
  P. Machin                   CAO and Company Secretary
                                                                  272,604            25,000                  0.3
  Board as a Group            Five persons                      4,084,001            575,000                 4.7

</TABLE>

           (1)    For purposes of US securities laws only, persons may be deemed
                  to be the  beneficial  owners of securities  reflected in this
                  table.  It should  be  noted,  however,  that the  meaning  of
                  beneficial ownership is significantly  different under English
                  law, and no inference is intended, nor should it be construed,
                  as to the status of beneficial  ownership of these  securities
                  under the laws of England.

           (2)    Beneficially owned by entities of which directors or executive
                  officers (or former  directors  or executive  officers) of the
                  Company   are   also   directors,    executive   officers   or
                  shareholders.  The  directors  and  executive  officers of the
                  Company  disclaim  beneficial  ownership of these shares.  Mr.
                  Rolf  Herter,  who  served on the Board on the  nomination  of
                  Rennes  Foundation  and  Jobelin  Foundation,  resigned  as  a
                  Director on August 5, 2003.

         (3)      Includes options to purchase  Ordinary Shares granted pursuant
                  to the  Company's  share option  plans at prices  varying from
                  $0.10 to $1.00. See "Share Ownership".

At  November  12,  2003,  the Rennes  Foundation,  and the  Jobelin  Foundation,
Swiss-based  investment funds, held a total of 13,597,996 shares in the Company,
representing  a holding of 15.9% of the  shares in issue.  During the last three
years,  the Rennes  Foundation  acquired  1,666,667  ordinary shares in February
2000, 1,944,444 ordinary shares in July 2000, 1,204,819 ordinary shares in March
2002, 1,177,647 ordinary shares in October 2002 and 3,550,000 ordinary shares in
April 2003 under  Regulation  S and has also  acquired a further  226,701 on the
open market in the same period.  To the Company's  knowledge,  Rennes Foundation
and Jobelin Foundation are under common control.


                                      -38-
<PAGE>


Except for the status as director(s)  and/or  officer(s) of certain of the major
shareholders  listed above,  to the knowledge of the Company the Company's major
shareholders do not have voting rights different from other shareholders.  As of
November 12, 2003, the Company had approximately  eight  shareholders of record,
one of whom  acts as  Depositary  for the  Company's  ADR  facility  and is a US
resident.  At November 12, 2003, the Depositary had approximately 141 holders of
record of ADSs. Based on information  received from the Depositary,  the Company
believes that there are approximately 3,500 beneficial owners of ADSs.

There  are no  arrangements,  known  to the  Company,  which  may  operate  at a
subsequent date to cause a change in control of the Company.

B.       RELATED PARTY TRANSACTIONS.
         ---------------------------

On March 9, 2000,  the Company  entered  into a Finder's  Agreement  with Noesis
Capital  Corporation.   The  Agreement   contemplated  that  Noesis  would  make
introductions  on behalf of the Company to facilitate  possible  future business
transactions.  The  agreement was  terminated on July 13, 2000.  The Company has
made no payments  in  connection  with the  Finder's  Agreement  and it does not
expect  to make any such  payments.  Mr.  N.  Letschert,  a former  non-employee
director of the Company and Mr. C. Wit, a serving  non-employee  director of the
Company, are directors of Noesis Capital Corporation.

Since its initial  public  offering in 1993, the Company has undertaken a number
of private  placements  to fund its working  capital and to allow  investment in
product   developments.   These   private   placements   include  the  following
transactions each of which was completed in reliance on Regulation S:

In April 1999, the Company issued an aggregate of 454,547  Ordinary  Shares at a
price  of  $0.616  per  share,  representing  an  aggregate  purchase  price  of
approximately  $280,000.  The following  individuals and entities  purchased the
number of Ordinary Shares  indicated in connection with this private  placement:
Noesis N.V. (123,377 shares); Mr. M. Johansson (6,088 shares); and Ms. M. Blake,
the spouse of Mr. M. Johansson  (6,088 shares).  Mr. Johansson is a director and
executive officer of the Company.

In July 1999, the Rennes  Foundation  purchased  1,153,845  Ordinary Shares at a
price  of  $0.65  per  share,   representing  an  aggregate  purchase  price  of
approximately $750,000.

In October 1999, the Company issued an aggregate of 3,199,999 Ordinary Shares at
a price  of  $0.55  per  share,  representing  an  aggregate  purchase  price of
approximately $1.8 million. The following individuals and entities purchased the
number of Ordinary Shares  indicated in connection with this private  placement:
the Rennes Foundation  (2,227,272  shares);  Noesis N.Y.  (363,636  shares);  In
February 2000, the Rennes Foundation  purchased  1,666,667  Ordinary Shares at a
price  of  $3.00  per  share,   representing  an  aggregate  purchase  price  of
approximately $5.0 million. See "Major Shareholders".

In July 2000,  the Company  completed  an  additional  private  placement  under
Regulation  S  pursuant  to which  the  Rennes  Foundation  purchased  1,944,444
Ordinary Shares at a price of $1.80 per share for an aggregate purchase price of
approximately $4.0 million in cash. See "Major Shareholders".

In March 2002, the Company  contracted and received the cash for the issue of an
aggregate of 4,702,410  Ordinary  Shares at a price of $0.083 per Ordinary Share
representing  an  aggregate  purchase  price  of  approximately   $390,000.  The
following  individuals  and  entities  purchased  the number of Ordinary  Shares
indicated in  connection  with this  private  placement:  the Rennes  Foundation
(1,204,819  shares) ; Noesis  NV  (301,205  shares);  Mr. M  Johansson  (361,446
shares)  and Mrs. M  Pillinger,  wife of S  Pillinger,  a then  Director  of the
Company (100,000 shares).

In April 2002, the Company contracted for the issue of an aggregate of 1,462,600
Ordinary  Shares at a price of $0.10 per  Ordinary  Share  pursuant to the stock
transaction  acquisition  of the assets of Palm  Teach  Limited.  The  following


                                      -39-
<PAGE>

individuals  and entities  received the number of Ordinary  Shares  indicated in
connection with this  transaction:  Mr. P Copeland as beneficial  shareholder of
Palm Teach Limited (759,700 shares); Mr. S Pillinger (209,450 shares).

Also in April 2002,  the Company  contracted and received the cash for the issue
of  3,276,923   Ordinary  shares  at  a  price  of  $0.065  per  Ordinary  Share
representing an aggregate purchase price of approximately  $213,000. At the same
time, the following entity contracted for the purchase of the number of Ordinary
Shares indicated in connection with this private  placement:  Silverdash Limited
(7,646,154 shares). In September,  2002, it became apparent that this GBP350,000
($512,000)investment,  payable in  installments  by the end of  September  2002,
would not be fully paid, but that only some  GBP90,000  would be provided by the
original source.  Alternative  investors were sought and found for the remaining
GBP260,000 ($380,000) during October 2002.

Also in April 2002,  the Company  contracted  for the issue of 803,046  Ordinary
Shares  at a  price  of  $0.07  per  Ordinary  Share  under a  Salary  sacrifice
arrangement,  representing an aggregate purchase price of $56,000. The following
individual  purchased the number of Ordinary Shares indicated in connection with
this  transaction:  Mr. M Johansson  (648,183  shares).  At the same time, Mr. J
Vandamme  agreed  to  accept  102,000  Ordinary  Shares  at a price of $0.07 per
Ordinary Share in settlement of outstanding  invoiced  charges for work done for
the Company.

In October  2002,  the Company  completed a new  investment  round from existing
investors and affiliates,  raising a further GBP150,000 ($230,000),  represented
by the issuance of a further 2.7 million  (approximately)  ordinary  shares at a
price of $0.085 per share,  at market rate.  The following  individuals/entities
purchased the number of shares  indicated in connection  with this  transaction:
Rennes Foundation (1,177,647 shares), M Johannson (181,176 shares).

In April, 2003, the Company issued of an aggregate of 16,706,000 Ordinary Shares
at a price of $0.10 per Ordinary  Share and an  aggregate of 2,250,000  Ordinary
Shares at a price of $0.08 per Ordinary Share representing an aggregate purchase
price  of  approximately   $1,851,000,   of  which  approximately  $382,000  was
outstanding  at April 30, 2003 and received  subsequently  to the year-end.  The
following  individuals  and  entities  purchased  the number of Ordinary  Shares
indicated in  connection  with this private  placement:  Mr J Vandamme  (200,000
shares),  Mr. M Johansson  (150,000 shares) and Mr D Bailey (150,000 shares) and
Volito AB (8,500,00 shares).

Also in April, 2003, the Company contracted for the exchange of 3,350,000 shares
in Luvit AB for the issue of 4,685,315  Ordinary  Shares at a price of $0.10 per
Ordinary Share to Volito AB.

In August 2003,  the Company  contracted  and received the cash for the issue of
387,597  Ordinary  shares at a market price of $0.387 per  Ordinary  share for a
total  aggregate  price of  $150,000.  The  following  individuals  and entities
purchased  the number of  Ordinary  Shares  indicated  in  connection  with this
private placement: Volito AB (387,597 shares).

C. INTERESTS OF EXPERTS AND COUNSEL.

Not Applicable



                                      -40-
<PAGE>
     ITEM 8.  FINANCIAL INFORMATION.
              -----------------------

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.
   ---------------------------------------------------------

CONSOLIDATED FINANCIAL STATEMENTS

The  consolidated  Financial  Statements and Other Financial  Information of the
Company are listed under Item 18 in this Report.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

DIVIDEND POLICY

Holders of  Futuremedia  ordinary  shares may, by ordinary  resolution,  declare
dividends,  but may not declare dividends in excess of the amount recommended by
the directors.  The directors may also pay interim dividends. No dividend may be
paid other than out of profits available for  distribution.  Futuremedia has not
in the past  declared or paid any  dividends to holders of its ordinary  shares,
and there is no present intention to declare or pay any such dividend.

B.       SIGNIFICANT CHANGES.
         ---------------------
Not Applicable.



                                      -41-
<PAGE>


          ITEM 9.  THE OFFER AND THE LISTING.
                   --------------------------

A.       OFFER AND LISTING DETAILS.
         -------------------------

The Company's ADSs have traded since May 29, 1996, on the Nasdaq SmallCap Market
under the symbol FMDAY.

The  Company's  warrants  were traded on the Nasdaq  SmallCap  Market  under the
symbol  FMDYW from May 29, 1996 until June 25,  1997.  Since then they have been
quoted on the OTC  Bulletin  Board.  From August 19, 1993 until May 29, 1996 the
Company's ADSs and warrants  traded on the Nasdaq National  Market.  The Company
agreed to allow the warrants issued on August 19, 1993 to lapse in August 2003.

The  closing  bid  prices  of the  Company's  securities  have been  within  the
following  ranges during the periods  shown.  The quotations set forth below are
inter-dealer quotations, without retail mark-ups, mark-downs or commissions, and
do not necessarily represent actual transactions.

(1) The five most recent full financial years:



                                                        ADS PRICE
                                                       -----------
              YEAR ENDING APRIL 30,               HIGH              LOW
                                                    $                $
                                               ------------     ------------
                      1999                        1.563            0.438
                      2000                        3.844            0.469
                      2001                        3.125            0.160
                      2002                        0.38                0.05
                      2003                        0.159            0.060


                                                      WARRANTS PRICE
                                                      --------------
              YEAR ENDING APRIL 30,               HIGH              LOW
                                                    $                $
                                               ------------     ------------
                      1999                        0.031            0.031
                      2000                        0.031            0.031
                      2001                        0.031            0.031
                      2002                        0.031            0.031
                      2003                        0.031            0.031


                                      -42-
<PAGE>


         (2) Each full financial  quarter for the two most recent full financial
ADSs: FMDAY

YEAR ENDED APRIL 30                                   HIGH                LOW
-------------------                                   ----                ---
2002           First quarter..............            0.380              0.190
               Second quarter.............            0.250              0.060
               Third quarter..............            0.330              0.050
               Fourth quarter.............            0.160              0.070
2003           First quarter..............            0.120              0.070
               Second quarter.............            0.140              0.060
               Third quarter..............            0.159              0.100
               Fourth quarter.............            0.101              0.060
2004           First quarter..............            0.520              0.100
               Second quarter.............            0.460              0.250

WARRANTS       FMDYW                                  HIGH                LOW
--------       -----                                  ----                ---
                                                        $                  $
2002           First quarter..............            0.031              0.031
               Second quarter.............            0.031              0.031
               Third quarter..............            0.031              0.031
               Fourth quarter.............            0.031              0.031
2003           First quarter..............            0.031              0.031
               Second quarter.............            0.031              0.031
               Third quarter..............            0.031              0.031
               Fourth quarter.............            0.031              0.031
2004           First quarter..............            0.031              0.031
               Second quarter.............            0.031              0.031
(3) Each month for the most recent six months:

                                                         ADS PRICE
                                                         ----------
                                                  HIGH               LOW
                                                     $                $
                                                 -------          ---------
                              October 2003         0.10             0.07
                             September 2003        0.10             0.09
                               August 2003         0.46             0.34
                                July 2003          0.52             0.23
                                June 2003          0.33             0.19
                                May 2003           0.21             0.10


                                                       WARRANTS PRICE
                                                       --------------
                                                    HIGH             LOW
                                                     $                 $
                                                 -------          ---------
                              October 2003         0.031            0.031
                             September 2003        0.031            0.031
                               August 2003         0.031            0.031
                                July 2003          0.031            0.031
                                June 2003          0.031            0.031
                                May 2003           0.031            0.031


The  share  price  of the  Ordinary  Shares  on July  31,  2003,  the end of the
Company's first fiscal quarter,  was $0.43,  the last reported sale price of the
Ordinary Shares on November 12, 2003 on the Nasdaq SmallCap Market was $0.45.

                                      -43-
<PAGE>

B.       PLAN OF DISTRIBUTION.
         ----------------------
Not Applicable

C.       MARKETS.
         -------
The  Company's  ADSs are listed on the Nasdaq  SmallCap  Market under the symbol
"FMDAY".  The Company's  Warrants are traded on the OTC Bulletin Board under the
symbol "FMDYW".

D.       SELLING SHAREHOLDERS.
         ---------------------
Not Applicable

E.       DILUTION.
         ---------
Not Applicable

F.       EXPENSES OF THE ISSUE.
         ---------------------
Not Applicable



                                      -44-
<PAGE>
 ITEM 10.         ADDITIONAL INFORMATION.
                  ----------------------
A. SHARE CAPITAL.
   --------------
Not Applicable

B.       MEMORANDUM AND ARTICLES OF ASSOCIATION.
         ----------------------------------------
Incorporated  by reference to the Company's  Registration  Statement on Form F-I
(Registration  No.  33-639941)and  by reference to Exhibit 3.1 to the  Company's
Annual Report on Form 20-F for the year ended April 30, 2000.

C.       MATERIAL CONTRACTS.
        ----------------------
The Company has secured the  provision of its Internet  Service  Provider  (ISP)
service requirements with Siemens UK Ltd. for a period of three years commencing
September  2001.  The terms of the contract  allow  termination  on three months
notice  after the  completion  of the first  year.  In April  2001,  the Company
contracted  with Consignia (now Royal Mail) (UK) for the provision of a Learning
Management System comprising a hosted service together with learning content for
a period of 22 months  commencing  June 1, 2001. The total value of the original
contract  was  approximately  GBP1,000,000  ($1,438,600),  and was renewed for a
further  twelve  months with effect from April 1, 2003.  As at November 12, 2003
the rental  agreement for the  occupancy of the Company's  offices at Nile House
was still being finalized.

In November,  2003, the Company contracted with Royal Mail to increase the reach
of its e-Learning  offering to include all eligible  employees and not limit the
e-Learning  opportunity to those who have Internet  access in their workplace by
making available the Company's recently-announced Learning For All product. This
product provides the participants with the hardware, software (both domestic and
on-line) together with Internet  connection in their homes for a period of three
years.  The employee uses a UK tax incentive  scheme based on a salary sacrifice
principle  to  pay  for  the  Package.  Participation  is  optional,  but  it is
anticipated  that the revenue arising from this contract will be in the order of
GBP 2.0  million to  GBP 3.0  million ($3.2 to $4.8 million) over the next
three years, commencing immediately.

D.       EXCHANGE CONTROLS.
         -----------------
There are currently no UK foreign exchange control restrictions on the import or
export of capital,  including the  availability of cash and cash equivalents for
use by the Company, or on payment of dividends on securities of the Company.

There are no  restrictions  under  the  Company's  Memorandum  and  Articles  of
Association or under English law that limit the right of non-resident or foreign
owners to hold or vote the Company's securities.

E.       TAXATION.
         ---------
UNITED KINGDOM INCOME TAX

The following  discussion of taxation is intended only as a descriptive  summary
and it does not  purport to be a complete  technical  analysis or listing of all
potential tax effects relevant to the Ordinary Shares or ADSs. The statements of
United  Kingdom  and United  States tax law set forth below are based (i) on the
laws and the UK Inland Revenue practice and published  Statements of Practice in
force as of the date of this report;  and (ii) assumes that each  obligation  in
the deposit  agreement  among the Company,  the  Depositary and the holders from


                                      -45-
<PAGE>

time to time of ADSs and any related  agreement  will be performed in accordance
with its terms. The statements herein are subject to any changes occurring after
the date of this report in UK or US law, or in the double  taxation  conventions
between the US and the UK with  respect to income and  capital  gains taxes (the
"Income  Tax  Convention")  and with  respect  to estates  and gifts  taxes (the
"Estate Tax Convention").

The Company anticipates that if any cash dividends are paid by the Company,  the
dividends  would be paid in pounds  sterling.  As a result,  fluctuations in the
exchange rate between  sterling and US dollars will affect the US dollar amounts
received  by holders  of ADSs upon  conversion  by the  Depositary  of  dividend
payments into US dollars.

The Company does not expect to pay cash  dividends for the  foreseeable  future,
but rather, to retain earnings to finance the expansion of the business.

Up to April 5, 1999,  an  individual  shareholder  resident  in the UK is for UK
income tax  purposes  treated as having  taxable  income equal to the sum of the
dividend  paid to him plus a tax  credit  equal to 1/4 of the  amount of the net
dividend.  The tax credit is  available to be set against the  individual's  tax
liability on the dividend,  which for a  shareholder  within the lower and basic
tax  rate  bands  will  satisfy  this  tax  liability  on UK  dividends,  and in
appropriate cases may be refunded to him.

From April 6, 1999, the rate of tax credit has reduced to 10% and refunds of tax
credits are no longer possible.  However, an individual shareholder whose income
is within  the lower or basic tax rate bands will be liable to tax at 10% on his
individual  income.  As such,  the tax credit  will  continue to satisfy the tax
liability on UK dividends.  For higher rate taxpayers,  the dividend income will
be liable to UK tax at 32.5%  (which  after  relief for the  reduced  tax credit
leaves the tax effect unchanged for higher rate taxpayers).

Under the current Income Tax Convention,  a US resident  individual or corporate
holder  of an  Ordinary  Share  or ADS  who or  which  satisfied  the  following
conditions(an "Eligible US Holder"):

(i) is resident in the case purposes);  in the US for the purposes of the Income
Tax Convention  (and, of a  corporation,  not also resident in the UK for UK tax
purposes);

(ii) is not a corporation  which,  alone or together with one or more associated
corporations,  controls, directly or indirectly, 10% or more of the voting stock
of the Company;

(iii) whose holding of the Ordinary Shares or ADSs is not effectively  connected
with a permanent  establishment in the UK through which such holder carries on a
business  or  with a  fixed  base  in the UK from  which  such  holder  performs
independent personal services; and

(iv) under certain circumstances, is not an investment or holding company 25% or
more of the capital of which is owned,  directly or indirectly,  by persons that
are neither  individual  residents  nor  citizens of the US, will  generally  be
entitled under the current Income Tax Convention to receive,  in addition to any
dividend paid by the Company,  an amount equal to the tax credit available to UK
resident shareholders in respect of such dividend,  but subject to a withholding
tax equal to 15% of the sum of the dividend paid and the tax credit.


                                      -46-
<PAGE>
For  example,  with the tax  credit  at the rate of 1/4 of the net  dividend,  a
dividend of GBP80.00 will entitle such a holder to receive, upon compliance with
the refund  procedures  described below an additional  payment of GBP5.00 (i.e.,
the tax credit of GBP20.00 less withholding tax of GBP15.00). The refund may not
be available in certain circumstances if the holder is exempt from US tax on the
dividend received.

Arrangements  have been  made by the  Depositary  so that,  subject  to  certain
exemptions, the tax credit will be refunded, net of the withholding tax, to a US
ADS holder if the ADS holder  completes  the  declaration  on the reverse of the
dividend  check and presents the check for payment  within three months from the
date of issue of the check. The exceptions include certain investment or holding
companies.

ADS  holders  who do not  satisfy  the  foregoing  requirements,  and holders of
Ordinary  Shares,  must,  in order to obtain a refund of tax credit  (net of the
withholding  tax),  file in the manner and at the time  described  in US Revenue
Procedure 80-18,  1980-1 C.B. 623, and US Revenue  Procedure 81-58,  1981-2 C.B.
678, a claim for refund of tax credit  identifying the dividends with respect to
which the tax  credit was paid.  Claims  for  refund of tax credit  must be made
within six years of the UK year of assessment  (the 12-month period ending April
5 in each year) in which the related  dividend  was paid.  The first claim for a
refund of tax credit is made by sending the  appropriate UK form in duplicate to
the Director of the Internal Revenue Service Center with which the holder's last
federal  income  tax  return  was  filed.  Forms  may be  obtained  from the IRS
Assistant  Commissioner   (International),   950  L'Enfant  Plaza  South,  S.W.,
Washington,  DC 20024, Attention:  Taxpayers Service Division.  Because a refund
claim  is  not  considered  made  until  the  UK  tax  authorities  receive  the
appropriate form from the Internal Revenue Service,  forms should be sent to the
Internal  Revenue  Service  well  before  the end of the  applicable  limitation
period.  Any claim for refund of tax credit by a US holder after the first claim
should be filed  directly  with the UK Inspector of Foreign  Dividends,  Lynwood
Road, Thames Ditton, Surrey, KT7 0DP, England.

Dividends  (including  amounts in  respect  of the tax  credit  and any  amounts
withheld)  must be included in gross income by a US holder,  and will  generally
constitute foreign source "passive" or "financial  services" income for purposes
of applying the foreign tax credit  limitations.  Such  dividends will generally
not be eligible for the dividends received deduction allowed to US corporations.
Subject  to certain  limitations,  the  applicable  UK  withholding  tax will be
treated as a foreign tax  eligible for credit  against such  holder's US federal
income tax.

UNITED KINGDOM TAXATION ON CAPITAL GAINS

Under the current Income Tax Convention, the US and the UK each may, in general,
tax capital gains in accordance  with the  provisions of its domestic law. Under
current UK law, residents of the US who are not resident or ordinarily  resident
in the UK will not be liable to UK capital  gains tax on  capital  gains made on
the  disposal of their ADSs or  Ordinary  Shares  unless  those ADSs or Ordinary
Shares are held in  connection  with a trade  carried on through a permanent  UK
establishment.  AUS  holder of an ADS or  Ordinary  Share  will be liable for US
federal  income tax on such gains to the same  extent as on any other gains from
sales of stock.

UNITED KINGDOM INHERITANCE TAX

Under the current  Estate Tax  Convention,  ADSs or  Ordinary  Shares held by an
individual  who for the purpose of the  convention is domiciled in the US and is
not a national  of the UK will not,  provided  any tax  chargeable  in the US is
paid,  be subject to UK  inheritance  tax on the  disposal  of ADSs or  Ordinary
Shares by way of gift or upon the individual's death unless the ADSs or Ordinary
Shares are part of the business  property of a permanent UK establishment of the
individual  or,  in the  case of a  holder  who  performs  independent  personal
services,  pertain to a fixed base situated in the UK. In the  exceptional  case
where the ADSs or Ordinary Shares are subject both to UK inheritance tax and to


                                      -47-
<PAGE>

US federal gift or estate tax, the Estate Tax Convention  generally provides for
double taxation to be relieved by means of credit relief.

UNITED KINGDOM STAMP DUTY AND STAMP DUTY RESERVE TAX

Transfer of ADSs are not  subject to UK stamp duty  provided  that the  transfer
instrument  is not executed in, and at all times  remains  outside of, the UK In
addition,  with effect  from July 1, 1996,  stamp duty is not  chargeable  on an
instrument  where the transferee is a member of an electronic  transfer  system.
Under the Finance Act 1986, a stamp duty reserve tax ("SDRT") of 1.5% is payable
on all  transfers  to the  Depositary,  or its nominee,  of Ordinary  Shares for
inclusion in ADSs. Such SDRT is calculated on the purchase price or market value
of the Ordinary Shares so transferred.

F.       DIVIDENDS AND PAYING AGENTS.
         ----------------------------
Not Applicable

G.       STATEMENT BY EXPERTS.
         ---------------------
Not Applicable

H.       DOCUMENTS ON DISPLAY.
         -------------------

Copies of this Annual Report on Form 20-F, including the exhibits hereto, may be
inspected  without  charge  at the  Commission's  principal  office at 450 Fifth
Street, NW, Washington, D.C. 20549, and copies of all or any part thereof may be
obtained  from the  Commission  upon payment of certain fees  prescribed  by the
Commission.

I.       SUBSIDIARY INFORMATION.
         -----------------------

Not Applicable



                                      -48-
<PAGE>

          ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES 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.
                   --------------------------------------------------
None.

          ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
                   HOLDERS AND USE OF PROCEEDS.
                   --------------------------------------------------
None.



                                      -49-
<PAGE>


          ITEM 15.         CONTROLS AND PROCEDURES.
                           -----------------------
An evaluation was carried out, under the supervision and with the  participation
of the Company's  management including its Chief Executive Officer and principal
financial  officer,   of  the  effectiveness  of  its  disclosure  controls  and
procedures  (as defined in SEC Rules 13a-15 (e) and  15d-15(e)).  Based on their
evaluation of the Company's  disclosure controls and procedures as of the end of
the period covered by this Report,  the Company's  Chief  Executive  Officer and
principal financial officer concluded that the Company's disclosure controls and
procedures are designed to ensure that  information  required to be disclosed by
the  Company  in the  reports  that it files or  submits  under  the  Securities
Exchange  Act of 1934,  as  amended,  is  recorded,  processed,  summarized  and
reported within the time periods  specified in the SEC's rules and forms and are
operating in an effective manner.

There have been no changes in the  Company's  internal  control  over  financial
reporting  that  occurred  during the period  covered by this  Report  that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal control over financial reporting.


          ITEM 16.         [RESERVED].
          ----------------------------


          ITEM 16A.        AUDIT COMMITTEE FINANCIAL EXPERT.
          --------------------------------------------------
Not applicable

          ITEM 16B.        CODE OF ETHICS.
          --------------------------------
Not applicable

          ITEM 16C.        PRINCIPAL ACCOUNTANT FEES AND SERVICES.
          --------------------------------------------------------
Not applicable

          ITEM 16D.        EXEMPTIONS FROM THE LISTING STANDARDS
                           FOR AUDIT COMMITTEES.
          -------------------------------------------------------------

Not applicable

          ITEM 17.         FINANCIAL STATEMENTS.
          --------------------------------------

Not Applicable




                                      -50-
<PAGE>

          ITEM 18.         FINANCIAL STATEMENTS.
          --------------------------------------

The  following  audited  consolidated  financial  statements,  together with the
independent  auditors' reports,  are filed as part of this Annual Report on Form
20-F.
<TABLE>
<CAPTION>

FINANCIAL STATEMENTS                                                                                  PAGE
                                                                                                      ----
<S>                                                                                                    <C>
Report of Independent Auditors.......................................................                  F1
Report of Previous Independent Auditors..............................................                  F3
Audited Financial Statements
     Consolidated Balance Sheets at April 30, 2003 and 2002..........................                  F5
     Consolidated  Statements  of Income for the fiscal years ended April 30,  2003,  2002             F6
     and 2001........................................................................
     Consolidated  Statements  of Changes  in  Shareholders'  Equity for the fiscal  years             F8
     ended April 30, 2003, 2002 and 2001.............................................
     Consolidated  Statements  of Cash Flows for the fiscal  years ended  April 30,  2003,             F9
     2002 and 2001...................................................................
     Notes to Consolidated Financial Statements......................................                  F10

Luvit AB Audited Financial Statements
     Income Statements  for the Year Ended December 31, 2002 . . . . . . .  . . . . .                  F32
     Balance Sheet at December 31, 2002    . . . . . . . .. . . . . . . . . . . . . .                  F33
     Cash Flow Statements for the fiscal year ended 2002, 2001  . . . . . . . . . . .                  F35
     Notes to the Accounts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  F36

Financial Statement Schedule


</TABLE>

All other  Schedules are omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or Notes thereto.



                                      -51-
<PAGE>

          ITEM 19.         EXHIBITS.
          ----------------------------

The following exhibits are filed as part of this Annual Report on Form 20-F.
<TABLE>
<CAPTION>

  EXHIBIT                                               EXHIBIT DESCRIPTION
   NUMBER                                               --------------------
------------
<S>                                                           <C>
1.1            Memorandum and Articles of Association of the  Registrant,  as amended  (previously  filed as Exhibit
               3.1 to the Company's  Annual Report on Form 20-F for the year ended April 30, 2000 (the "2000 20-F"),
               and incorporated herein by reference).

2.1            Description  of the  Registrant's  Ordinary  shares  (included  in the  Registrant's  Memorandum  and
               Articles of Association,  as amended,  previously  filed as Exhibit 3.1 to 2000 20-F and incorporated
               herein by reference)

2.2            Form of Warrant Agreement  (including form of Warrant  Certificate),  as amended (previously filed as
               Exhibit  4.3 to the  Company's  Registration  Statement  on Form F-I  (File No.  33-63994)  (the "F-I
               Registration Statement") and incorporated herein by reference).

2.3            Form of Deposit Agreement,  as amended (including specimen American Depositary  Receipt),  as amended
               (previously  filed as  Exhibit  4.5 to the F-I  Registration  Statement  and  incorporated  herein by
               reference).

2.4            Form of Registration  Rights  Agreement  (previously  filed as Exhibit 10.17 to the F-I  Registration
               Statement and incorporated herein by reference).

2.5            Loan Stock Agreement between the Registrant and Futuremedia (BVI)
               Limited (the "Loan Stock Agreement") (previously filed as Exhibit
               4.5 to 2000 20-F and incorporated herein by reference).

2.6            Form of Warrant issued in connection with the Loan Stock Agreement  (previously  filed as Exhibit 4.6
               to 2000 20-F and incorporated herein by reference).

4.1            Blanket  Purchase Order between Ford Motor Company  Limited and  Futuremedia  Limited,  dated May 19,
               1986,  and amendment  dated July 1, 1991  (previously  filed as Exhibit 10.7 to the F-I  Registration
               Statement and incorporated herein by reference).

4.2            License  Agreement  between Ford Motor Company Limited and Futuremedia  Limited,  dated May 19, 1986,
               and amendment dated July 1, 1991 (previously filed as Exhibit 10.8 to the F-I Registration  Statement
               and herein incorporated by reference).

4.3            Approved  Executive  Share  Option  Scheme,  as  Amended  (previously  filed as  Exhibit  99.1 to the
               Registrant's  Registration Statement on Form S-8 filed April 12, 2000 (File No. 33 - i1828) (the "S-8
               Registration Statement") and incorporated herein by reference).

4.4            Unapproved  Executive Share Option Scheme  (previously  filed as Exhibit 99.2 to the S-8 Registration
               Statement) and incorporated herein by reference).

4.5            Approved  Net Profit  Sharing  Scheme,  as  Amended  (previously  filed as  Exhibit  10.20 to the F-I
               Registration Statement and incorporated herein by reference).

4.6            Incentive Profit Sharing Scheme (previously filed as Exhibit 10.6 to 2000 20-F).

                                      -52-
<PAGE>

4.7            Amendment  dated May 2, 1996 to Exhibit  10.1  (previously  filed as exhibit  10.22 to the  Company's
               Annual Report on Form 20F for the year ended April 30, 1997 and incorporated herein by reference).

4.8            Agreement  dated  January  9,  1998  between  the  Registrant  and  British   Telecommunications  PLC
               (previously  filed as Exhibit  10.28 to the  Company's  Annual Report on Form 20-F for the year ended
               April 30, 1998 and incorporated herein by reference).

4.11           Agreement  dated September 17, 1999 between the Registrant and National  Westminster  Bank PLC (filed
               as Exhibit 10.30 to the  Company's  Annual Report on Form 20-F for the year ended April 30, 1999 (the
               "1999 20-F")).

4.12           Agreement  dated May 1, 1999  between the  Registrant  and Mentor
               Management Consulting  (previously filed as Exhibit 10.31 to 1999
               20-F and incorporated herein by reference).

8.1            List of  Subsidiaries  of the  Registrant  (previously  filed  as
               Exhibit 8.1 to the  Company's  Annual Report on Form 20-F for the
               year ended April 30, 2001, and incorporated herein by reference).

12.1           Chief Executive Officer Certification. (SEC Rule 13a-14(a) / 15d-14(a)).

12.2           Chief Accounting Officer Certification. (SEC Rule 13a-14(a) / 15d-14(a)).

13.1           Chief Executive Officer Certification (18 U.S.C. 1350).

13.2           Chief Accounting Officer Certification (18 U.S.C. 1350).

Consent of BDO Stoy Hayward,  Independent Auditors
               (filed herewith - see page F2 of this Report).

Consent of Ernst & Young LLP,  Independent Auditors
               (filed herewith - see page F4 of this Report).

Consent of Ernst & Young AB (for Luvit AB),  Independent
               Auditors (filed herewith - see page F44 of this Report).
</TABLE>


                                      -53-
<PAGE>






                                   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 Annual Report on its behalf.

                                FUTUREMEDIA PLC.
                                  (Registrant)

                                               By:  /s/ Mats A I Johansson
                                               Name:    Mats A I Johansson
                                               Title: Chief Executive Officer
                                                      and Authorized Signatory
Date:    17 November 2003.






                                      -54-
<PAGE>



FUTUREMEDIA PLC AND SUBSIDIARIES
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Futuremedia PLC

We have audited the accompanying  consolidated balance sheets of Futuremedia PLC
as of  April  30,  2003  and 2002 and the  related  consolidated  statements  of
operations,  shareholders'  equity, and cash flows for the two years then ended.
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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes 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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Futuremedia PLC at
April 30, 2003 and 2002,  and the results of its  operations  and its cash flows
for the two years then ended in conformity with accounting  principles generally
accepted in the United States of America.







/s/ BDO Stoy Hayward

London, England

October 23, 2003


                                      -F1-
<PAGE>



CONSENT OF INDEPENDENT AUDITORS

We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statement  (Form S-8 No.  333-11828)  of our  report  dated  October  23,  2003,
relating to the consolidated  financial  statements of Futuremedia PLC appearing
in the Company's Annual Report on Form 20-F for the year ended April 30, 2003.



/s/ BDO Stoy Hayward
BDO Stoy Hayward
London, England


November 17, 2003






                                      -F2-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders Futuremedia PLC

We have audited the consolidated  statements of income, changes in shareholders'
equity and cash flows of  Futuremedia  PLC for the year  ended  April 30,  2001.
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 audit.

We conducted our audit in accordance with United Kingdom auditing  standards and
United States generally  accepted  auditing  standards.  Those standards require
that we plan and perform the audit to obtain reasonable  assurance about whether
the financial  statements are free of material  misstatement.  An audit includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall financial  statement  presentation.  We believe our audit
provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated  results of operations and consolidated
cash flows of  Futurmedia  PLC for the year ended April 30,  2001 in  conformity
with accounting principles generally accepted in the United States.


                                                    /S/ ERNST& YOUNG LLP

Southampton, England
November 17, 2001



                                      -F3-
<PAGE>



CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No.  333-11828)  pertaining to the Futuremedia PLC Approved  Executive Share
Option Scheme and Unapproved  Executive  Share Option Scheme of our report dated
November 14, 2001 on the  consolidated  financial  statements of Futuremedia PLC
included in this Annual Report (Form 20-F) for the year ended April 30, 2003.


                                                    /S/ ERNST& YOUNG LLP


Southampton, England
November 17,  2003



                                      -F4-
<PAGE>

<TABLE>
<CAPTION>


FUTUREMEDIA PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

                                                                                    April 30,
                                                             ---------------------------------------------------------
<S>                                                                 <C>                <C>                <C>
                                                                    2003               2003               2002
                                                                    ----               ----               ----
                                                                  ($'000)            (GBP'000)          (GBP'000)
ASSETS

Current assets
   Cash and cash equivalents...............................          699                 437                445
   Accounts receivable, less allowance of GBP35,000
   ($56,000) in 2003 and GBP59,000 in 2002 for doubtful
   accounts................................................          427                 267                112
   Amounts recoverable on contracts........................           70                  44                 15
   Other current assets....................................           21                  13                  3
   Receivable from stock subscription                                382                 239                  -
   Inventories - finished goods............................            2                   1                  2
   Prepaid expenses........................................          602                 376                393
                                                                  -------            ---------           --------
   Total current assets....................................        2,203               1,377                970


Equity Investment in Luvit AB..............................          326                 204                 -

   Property held for Sale                                            720                 450                908

Property and equipment
    Land and buildings.....................................            -                   -                 59
    Audio visual and computer equipment....................          683                 427                414
    Office equipment.......................................          114                  71                 71
                                                                  -------            ---------           --------

                                                                     797                 498                544
Accumulated depreciation...................................          670                 419                386
                                                                  -------            ---------           --------

                                                                     127                  79                158

Other assets
Goodwill                                                             392                 245                 53
Intangible assets..........................................           99                  62                  -
Goodwill on Investment in Luvit AB.........................        1,182                 739                  -
                                                                  -------            ---------           --------

Total assets...............................................        5,049               3,156               2,089
                                                                  =======            =========           ========

See accompanying notes to the consolidated financial statements.

</TABLE>

                                      -F5-
<PAGE>
<TABLE>
<CAPTION>


FUTUREMEDIA PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

                                                                                        April 30,
                                                                    --------------------------------------------------
<S>                                                                      <C>               <C>              <C>
                                                                         2003              2003             2002
                                                                         ----              ----             ----
                                                                        ($'000)         (GBP'000)        (GBP'000)
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
    Fees received in advance.....................................            685              428               696
    Accounts payable.............................................            710              444               196
    Other taxes and social security costs........................            155               97                82
    Other accounts payable.......................................            174              109                19
    Other accrued expenses.......................................            325              203               119
    Convertible loan                                                           -                -               410
     Bank mortgage                                                           480              300                 -
                                                                           -----            -----            ------

        Total current liabilities................................          2,529            1,581             1,522


Shareholders' equity
         Ordinary shares of 1 1/9p each
         Authorized - 125,000,000
         Issued and outstanding- 78,194,457 at April 30, 2003,             1,390              869               329
         29,648,374 at April 30, 2002............................
         Shares to be issued 10,346,979 at April 30, 2002                      -                -               506
         Preference shares of 2p each
         Authorized - 2,000,000
         None issued.............................................              -                -                 -
         Additional paid-in capital..............................         27,070           16,921            14,822
         Accumulated deficit.....................................        (25,774)         (16,111)          (15,023)

Other comprehensive loss- cumulative translation
adjustment.......................................................           (166)            (104)              (67)
                                                                           -----            -----            ------

Total shareholders' equity.......................................          2,520            1,575               567
                                                                           -----            -----            ------


Total liabilities and shareholders' equity.......................          5,049            3,156             2,089
                                                                           =====            =====            ======

See accompanying notes to the consolidated financial statements.


</TABLE>

                                      -F6-
<PAGE>

<TABLE>
<CAPTION>

FUTUREMEDIA PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                       Year ended April 30,
                                                                   (IN 000'S EXCEPT SHARE DATA)
                                                                   ----------------------------
<S>                                                 <C>               <C>               <C>                <C>
                                                    2003              2003              2002               2001
                                                    ----              ----              ----               ----

                                                     $                GBP                GBP               GBP

Net Sales
    Products.................................         995              622               394                400
    Services.................................       1,152              720               517                343
                                                    -----              ---               ---                ---
Total Net sales............................         2,147            1,342               911                743

Cost of sales
    Products..............................            606              379               315                271
    Services..............................          1,176              735             1,221              1,518
                                                    -----              ---             -----              -----
Total Cost of sales........................         1,782            1,114             1,536              1,789


Gross profit/(loss).........................          365              228              (625)            (1,046)

Operating expenses
     Sales and marketing....................          146               91               165                558
     General and administrative.............        1,814            1,134             1,175              2,051
     Facilities expenses....................           70               44                63                157

Total operating expenses....................        2,030            1,269             1,403              2,766

Operating loss..............................       (1,665)          (1,041)           (2,028)            (3,812)

Interest income.............................            2                1                32                120
Interest expense............................          (77)             (48)              (29)               (36)
Foreign currency gains......................            -                -                13                 31

Net loss....................................       (1,740)          (1,088)           (2,012)            (3,697)
                                              =======================================================================

Loss per share basic and diluted............        (3.74)c          (2.34)p            (6.60)p           (12.71)p

Weighted average shares outstanding.........     46,414,194       46,414,194        30,501,619         29,098,429


See accompanying notes to the consolidated financial statements.

</TABLE>

                                      -F7-
<PAGE>
<TABLE>
<CAPTION>


FUTUREMEDIA PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                          Number of       Share       Additional                                    Cumulative         Total
                           Ordinary      Capital       Paid-in     Shares to be     Accumulated     Translation    Shareholders'
                            Shares        Amount       Capital        Issued          Deficit       Adjustment         Equity
                         ------------- ------------- ------------- -------------- ---------------- -------------- -----------------
<S>                           <C>           <C>       <C>                 <C>         <C>
                                          (GBP`000)     (GBP`000)     (GBP`000)      (GBP`000)        (GBP`000)      (GBP`000)


At April 30, 2000         27,416,152           305        12,253             -         (9,314)             (36)         3,208
                                                                                                                  -----------------
Exchange translation
adjustments.....
                                   -             -             -             -              -              (41)           (41)
Net loss........                   -             -             -             -         (3,697)               -         (3,697)
                                                                                                                  -----------------
Comprehensive loss                                             -
                                   -             -                           -              -                -         (3,738)
                                                                                                                       -------
Issuance of shares
(net of issuance
costs of GBP69,000)...     2,232,222            24         2,569             -              -                -          2,593
                         ------------- ------------- ------------- -------------- ---------------- -------------- -----------------
At April 30, 2001         29,648,374           329        14,822             -        (13,011)             (77)         2,063
                                                                                                                  -----------------
Exchange translation
adjustments.....
                                   -             -             -             -              -               10             10
Net loss........                   -             -             -             -         (2,012)               -         (2,012)
                                                                                                                  -----------------
Comprehensive loss
                                   -             -             -             -              -                -         (2,002)
                                                                                                                  -----------------
Shares to be issued
(net of issuance
costs of
GBP64,000)...             10,346,979             -             -           506              -                -            506
                         ------------- ------------- ------------- -------------- ---------------- -------------- -----------------
At April 30, 2002         39,995,353           329        14,822           506        (15,023)             (67)           567
                                                                                                                  -----------------
Exchange translation
adjustments.....
                                   -             -             -             -              -              (37)           (37)
Net loss........                   -             -             -             -         (1,088)               -         (1,088)
                                                                                                                  -----------------
Comprehensive loss
                                   -             -             -             -              -                -         (1,125)
                                                                                                                  -----------------
Issuance of shares
(net of issuance
costs of
GBP120,000)..             38,199,104           540         2,099          (506)             -                -          2,133
                         ------------- ------------- ------------- -------------- ---------------- -------------- -----------------
At April 30, 2003         78,194,457           869        16,921             -        (16,111)            (104)         1,575
                         ==========================================================================================================

See accompanying notes to the consolidated financial statements.


</TABLE>

                                      -F8-
<PAGE>

<TABLE>
<CAPTION>



FUTUREMEDIA PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                Year ended April 30,
                                                        ----------------------------------------------------------------------
<S>                                                               <C>               <C>               <C>              <C>
                                                                  2003              2003              2002             2001
                                                             $                       GBP               GBP              GBP
                                                                  `000              `000              `000            `000

Operating activities
Net loss........................................                (1,740)           (1,088)           (2,012)          (3,697)
Adjustments to reconcile net loss to net cash used by
operating activities............................
   Depreciation.................................                   209               131               147              111
   Shares issued for services...................                    17                11                94                -
   Loss/(profit) on disposal of fixed assets....                   188               118                (1)              16
   Amortization of deferred production costs....                     -                 -                 -              109
   Accounts receivable..........................                  (238)             (149)              221              (61)
   Allowance for doubtful accounts..............                   (38)              (24)              142             (175)
   Amounts recoverable on contracts.............                   (46)              (29)              118               (9)
   Other current assets.........................                   (16)              (10)               33               96
   Inventories..................................                     -                 -                 -                1
   Prepaid expenses.............................                    27                17                51             (365)
   Deferred production costs....................                     -                 -                 -                -
   Fees received in advance.....................                  (456)             (285)             (212)             903
   Accounts payable.............................                   397               248              (466)             389
   Other accounts payable.......................                   143                89              (107)              99
   Other taxes and social security costs........                    24                15               (49)               7
   Other accrued expenses.......................                   134                84              (262)             (35)
   Deferred tax valuation allowance.............                     -                 -                 -               65

Net cash used by operating activities...........                (1,395)             (872)           (2,303)          (2,546)
                                                              ---------           -------         ---------        ---------


Purchase of equity investment...................                (1,026)             (641)                -                -
Capital expenditures............................                   (19)              (12)             (137)            (130)
Proceeds on disposal of fixed assets............                   480               300                 1                -
                                                              ---------           -------         ---------        ---------

Net cash used by investing activities...........                  (565)             (353)             (136)            (130)
                                                              ---------           -------         ---------        ---------

Financing activities
Proceeds of share issues........................                 2,315             1,447               423            2,661
Share issue costs...............................                  (192)             (120)              (64)             (69)
Proceeds from short-term debt                                      480               300                 -                -
(Repayment)/proceeds of/from Waverton                             (656)             (410)              (32)              58
                                                              ---------           -------         ---------        ---------
Net cash provided by financing activities.......                 1,947             1,217               327            2,650
                                                              ---------           -------         ---------        ---------
Effects of exchange rate changes................                     -                 -                10              (39)
                                                              ---------           -------         ---------        ---------
Net (decrease)/increase in cash and cash equivalents..             (13)               (8)           (2,102)             (65)
Cash and cash equivalents at beginning of period                   712               445             2,547            2,612
                                                              ---------           -------         ---------        ---------
Cash and cash equivalents at end of period......                   699               437               445            2,547
                                                              =========           =======         =========        =========

Supplemental disclosure of cashflow information
Interest paid during the period.................                    77                48                29               36
                                                              =========           =======         =========        =========

Supplemental disclosure of non-cash transactions
Issuance of shares in acquisitions..............                   405               253                53                -
Issuance of shares for services.................                    17                11                94                -
Issuance of shares in investment................                   480               300                 -                -
Receivable from stock subscription..............                   382               239                 -                -

See accompanying notes to the consolidated financial statements.

</TABLE>

                                      -F9-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS
Futuremedia PLC was  incorporated in England in 1982 as Futuremedia  Limited and
re-registered  as a public  company in 1993.  The  Company's  activities  can be
regarded as falling into one of two business segments.  The first and largest is
that of the  provision  of Internet and  Intranet  learning  and  communications
products and  services,  with some  production  of learning  and  communications
material  on  other  media,  such as  CD-ROM.  The  second  is that of  resource
consultancy,  whereby  Futuremedia  provides source information  residing in the
public domain on waste and resource management to large corporates.

PRINCIPLES OF CONSOLIDATION
The consolidated  financial  statements include the financial  statements of the
Company and all its  subsidiaries  (together the "Company").  All  inter-company
accounts and transactions have been eliminated.

FINANCIAL RESOURCES AND GOING CONCERN
In the course of its operations the Company has sustained  continuing  operating
losses which have resulted in the Company  requiring  short-term  bank and other
loans and equity and loan stock finance to sustain its operations.

Since its initial public offering  ("IPO"),  the Company has incurred net losses
and  experienced  negative  cash flows from operating activities and at November
12,  2003,  the  Company's cash resources and available borrowings are less than
the resources the management intends to use for maintaining the current level of
operations  for  the  next  twelve months. However, management believes that the
improved levels of order intake and sales prospect pipeline since the end of the
year,  notably  the recent order for the Company's Learning for All product from
the  Royal  Mail, have improved the expectation of revenues and cashflows to the
extent that the Company's requirement for working capital and capital investment
for  the  remainder  of  the  current  fiscal  year  will  be  met  from trading
activities.  Accordingly,  the directors have prepared the accounts for the year
ended  April  30,  2003  on  a  going  concern  basis.

ESTIMATES
The preparation of financial statements in conformity with US generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported  amounts of certain assets and liabilities and disclosure of
contingent  assets and  liabilities at the date of financial  statements and the
reported  amounts of revenues and expenses during the reporting  period.  Actual
results  could  differ  from  those  estimates.  Management  believes  that  the
estimates are reasonable.

CONVENIENCE TRANSLATIONS
Translation of the financial  statements at April 30, 2003 and for the year then
ended from sterling into US dollars is for  informational  purposes only and has
been made at the April 30, 2003 Noon Buying Rate of GBP1.00 to $1.5998.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash and short-term deposits with maturities
of less than three months at inception.


                                      -F10-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.              SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)


INVENTORIES
Inventories  are  stated  at the lower of cost,  determined  on the basis of the
first in, first out method, and market value.


PROPERTY AND EQUIPMENT
Property  and  equipment  is  carried  at cost.  Depreciation  is  charged  on a
straight-line  basis to costs and expensed over the expected useful lives of the
assets. Depreciation is provided at the following annual rates:


Freehold buildings.................................2%
Freehold land.....................................Nil
Property improvements..............................20%
Audiovisual and computer equipment
         Long-term.................................15%
         Mid-term..................................20%
         Short-term................................33%
         Office equipment..........................20%

Leasehold  improvements  are amortized over the shorter of their estimated lives
and the non-cancelable term of the lease.

Freehold  land  and  buildings  are held  for  sale at the  lower  of cost  less
depreciation and fair value less cost to sell.

The  freehold  buildings  have not been  depreciated  since they were put on the
market.

GOODWILL
The Company adopted SFAS No. 142 on May 1, 2002.  Under this standard,  goodwill
will be tested for  impairment  on an annual  basis or  whenever  indicators  of
impairment arise. The Company completed its transitional impairment tests in the
quarter ended October 31, 2002 and no impairment  was recorded.  Prior to May 1,
2002,  goodwill was tested for impairment in a manner  consistent with property,
plant and equipment and intangible assets with a definite life.
The Company  performed  the required  annual  impairment  test as of February 1,
2003,. This test indicated that there was no impairment.

NET SALES
Net  sales  represent the value of goods and services delivered, excluding value
added  tax, and for the year ended April 30, 2003 can be categorized by activity
under  one  of  five  operating  departments.

Consulting  Services  -  Consulting  revenues  fall  in the Futuremedia Learning
Services  unit.  These  revenues  are  invoiced  at  the completion of each work
package,  and  revenues  recognized  at  that  time.

                                      -F11-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.              SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)


Bespoke  Products  -  Bespoke production revenues are managed within Futuremedia
Content  Studio.  These  are  products  that are specifically designed to meet a
customer's  individual  e-learning  needs.  Due  to  the  customization  and
modification required, revenue for these long-term contracts are recognized on a
percentage-of-  completion  basis  based  on  costs  incurred.

Learning  Management  Systems  -  A  Learning  Management System is specifically
designed  for  the customer to meet all of their e-learning needs.  The revenues
are  managed  through  the Futuremedia Software Services, Futuremedia Courseware
Services  and  Futuremedia  Service  Delivery  units.  These systems can include
multiple  elements  such  as:  a  license  for Solstra, hosting services, set up
charges,  integration and support services and content. For these contracts, the
Company  recognizes  revenue  over  the  period  of  the  licence.

Blended  Learning  Solution - Blended Learning solutions are those which combine
an  element  of  e-Learning,  together with physical classroom or workbook based
training  The  revenues  are  managed through the Futuremedia Software Services,
Futuremedia  Courseware Services and Futuremedia Service Delivery units.  It can
include multiple solutions such as supply of e-Learning materials, workbooks and
classroom  based  instruction.  The  Learning  Management  System  element  is
recognized over the period of the license agreement and the remaining element is
recognized on the delivery of the service for classroom based instruction and on
the  delivery  of  the  product  for  the  workbooks.

In  other  situations,  the  Company  allocates revenue to the elements based on
objective  evidence of the fair value.  Revenue is recognized when the following
criteria  are  met  for  each  element:

-          There  is  persuasive  evidence  of  an  arrangement
-          The  Company  has  delivered  the  product  to  the  customer
-          Collection  of  the  fees  is  probable;  and
-          The  amount  of  the  fees  to  be  paid by the customer is fixed and
           determinable

Revenue  received  for  hosting  and  support  services  are recognized over the
service  period.



PENSIONS
The  Company   operates  a  number  of  defined   contribution   pension  plans.
Contributions  are charged to income as they become  payable in accordance  with
the rules of the plans.

FOREIGN CURRENCY TRANSLATION

Transactions  in  non-functional  currencies are recorded at the rates ruling at
the date of the  transactions.  Gains and losses  resulting from  non-functional
currency translations, and the remeasurement of non-functional currency balances
are  included  in the  determination  of net  income in the period in which they
occur, in accordance with the requirements of Statement of Financial  Accounting
Standards No. 52, "Foreign Currency Translation."

Assets and liabilities of overseas  subsidiaries  are translated at the exchange
rate in effect at the year end. Income statement  accounts are translated at the
average rate of exchange  prevailing  during the year.  Translation  adjustments
arising  from the use of  differing  exchange  rates  from  period to period are
included in a separate component of shareholder's equity.

EQUITY METHOD INVESTMENTS
Investments in companies in which Futuremedia Plc has significant influence, but
less than a  controlling  voting  interest,  are  accounted for using the equity
method.  Under the equity method, only Futuremedia Plc investment in and amounts
due to and from the equity  investee  are included in the  consolidated  balance
sheet;  only Futuremedia  Plc's share of the investee's  earnings is included in
the consolidated operating results


                                      -F12-
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       SIGNIFICANT ACCOUNTING POLICIES- (CONTINUED)

LONG-LIVED ASSETS
Long  lived  assets  are  evaluated  for  impairment  when  events or changes in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable through the estimated  undiscounted future cash flows resulting from
the use of these assets,  when any such  impairment  exists,  the related assets
will be written down to fair value.

COMPREHENSIVE INCOME (LOSS)
Comprehensive  income  (loss) is defined to include all changes in equity except
those  resulting from  investments by owners and  distributions  to owners.  The
Company's  only item of other  comprehensive  income (loss) is foreign  currency
translation  adjustments.  LOSS PER SHARE  Earnings per share  figures have been
calculated using the method required by Statement of Financial Standards No. 128
"Earnings per Share".  Under the  provisions of SFAS NO. 128, basic net loss per
share is computed by dividing the loss  attributable to common  shareholders for
the period by the weighted average number of shares of common stock  outstanding
during the  period,  which  included  shares to be issued.  The  calculation  of
diluted  loss per  share  gives  effect to common  stock  equivalents,  however,
potential  common  shares are  excluded if their  effect is  anti-dilutive.  The
calculation  excludes a total of  2,448,574  warrants to purchase an  equivalent
number of Ordinary shares,  together with 5,431,951 options to purchase Ordinary
shares  outstanding as at April 30, 2003 under the Company's  Executive Approved
and Unapproved Share Option Schemes.

INCOME TAXES
The Company  accounts for income taxes using the  liability  method  required by
statement of Financial  Accounting  Standards  No. 109,  "Accounting  for Income
Taxes."  Deferred  income  taxes  reflect  the  net  tax  effects  of  temporary
differences between the carrying amounts of assets and liabilities for financial
reporting  purposes  and the  amounts  used for income tax  purposes.  Valuation
allowances are  established  when necessary to reduce deferred tax assets to the
amount expected to be realized.

STOCK-BASED EMPLOYEE COMPENSATION
The  Company's  financial  statements  are  presented  in  accordance  with  the
Accounting  Principles  Board's  Opinion No. 25,  Accounting for Stock Issued to
Employees ("APB No. 25"). Under APB No. 25, generally,  no compensation  expense
is  recognized  in  connection  with the  awarding  of stock  option  grants  to
employees  provided  that, as of the grant date, all terms  associated  with the
award  are fixed and the  quoted  market  price of the stock is equal to or less
than the amount an employee  must pay to acquire  the stock as  defined.  As the
Company only issues fixed term stock option grants at or above the quoted market
price on the date of the grant,  there is no compensation  expense recognized in
the  accompanying  combined  financial  statements.   The  Company  adopted  the
disclosure  only  provisions  of  SFAS  No.  123,   Accounting  for  Stock-Based
Compensation   ("SFAS  123"),   which  requires  certain   financial   statement
disclosures,  including pro forma operating results had the Company prepared its
consolidated financial statements in accordance with the fair value based method
of accounting for stock-based compensation.



                                      -F13-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)


Stock-Based  Compensation  Transition and Disclosure ("SFAS 148"), the pro forma
effects of  stock-based  compensation  on net income (loss) and net earnings per
share  have  been  estimated  at the  date  of  grant  using  the  Black-Scholes
option-pricing model based on the following weighted average assumptions:


                                                   April 30,
                                        2003         2002         2001
                                        -----        -----        ----
       Risk-free interest rate           4.0%         3.8%          5.2%
       Volatility                       19.0%        31.8%        127.6%
       Expected life (years)             3.3          3.3           8.0


<TABLE>
<CAPTION>



                                                                          Year ended April 30
                                                  --------------------------------------------------------------------
                                                       2003              2003             2002             2001
                                                       ----              ----             ----             ----
<S>                                                   <C>                   <C>              <C>              <C>
                                                      ($'000)         (GBP `000)       (GBP `000)        (GBP'000)
Net loss as reported.......................           (1,740)          (1,088)           (2,012)          (3,697)
Add: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of tax                      (170)             (106)             (44)            (195)
Pro-forma net loss.........................           (1,910)          (1,194)           (2,056)          (3,892)

                                                         $               GBP               GBP              GBP
Net loss per share as reported.............           (3.74)c          (2.34)p           (6.60)p         (12.71)p
Pro forma net income (loss) per ordinary share:
                                                      (4.11)c          (2.57)p           (6.74)p         (13.38)p
Basic
                                                      (4.11)c          (2.57)p           (6.74)p         (13.38)p
Diluted

</TABLE>

ADVERTISING COSTS
All  advertising  costs incurred in the promotion of the Company's  products and
services are expensed as incurred. Advertising costs were GBP65,000,  GBP16,000,
and GBPNil for the years ended April 30, 2001,2002 and 2003.

ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts  receivable  consist  primarily  of  amounts  due to us from our normal
business  activities.  The Company's ability to collect outstanding  receivables
from our customers is critical to our operating  performance  and cash flows. We
maintain an allowance  for  doubtful  accounts to reflect the  estimated  future
uncollectability  of accounts  receivable  based on past collection  history and
specific  risks  that  have  been  identified  by  reviewing   current  customer
information.  After all  attempts  to  collect a  receivable  have  failed,  the
receivable  is written  off  against  the  allowance.  Based on the  information
available to us, we believe our allowance for doubtful  accounts as of April 30,
2003,  is  adequate.  However,  actual  write-offs  might  exceed  the  recorded
allowance.

                                      -F14-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1     SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)


       ----------------------------------------------------------
                                   2003      2003         2002
       ----------------------------------------------------------
                                   $'000    GBP'000     GBP'000
       ----------------------------------------------------------
       Allowance at May 1           94        59          201
       ----------------------------------------------------------
       Utilized during year        (94)      (59)        (201)
       ----------------------------------------------------------
       Provided in year             56        35           59
       ----------------------------------------------------------
       Allowance at April 30        56        35           59
       ----------------------------------------------------------


2.     LOANS

The Convertible  Loan was due for repayment in July, 2002, but was not repaid on
the due date due to a lack of available  funds,  but the  convertible  loan note
holder  agreed to defer  repayment  until the  Company  had  secured  additional
financing to enable it to do so. Under the  contractual  term of the convertible
loan,  interest was payable at 20% per annum beyond the  contractual  settlement
date. The convertible  loan remained in place on these terms until January 2003,
when a final settlement was agreed simultaneously with the Company concluding an
agreement for the sale of its premises at Arundel, West Sussex.

At the same time,  the Company  entered into a short term  mortgage  arrangement
with a major bank under which it drew down  GBP 300,000  ($480,000) to enable
the full  repayment  of the above loan and to provide  further  working  capital
until such time that the total  proceeds  of sale were  received.  Interest  was
payable at the rate of 6.0% per annum.



                                                                APRIL 30
                                                          ---------------------
                                                          2003             2002
                                                          ----             ----
                                                                (GBP'000)

Bank mortgage loan                                           300              -
                                                          =======          =====
Convertible Variable Rate Unsecured Loan Stock 2002           -              410
                                                          =======          =====

The Bank  mortgage  loan,  which was secured by way of a charge on the property,
included a maximum loan period not to exceed twelve months,  an interest rate of
2% above the Bank's own base rate,  payable on  repayment.  The loan was repaid,
subsequent  to the year end,  in May 2003 when the second  part of the  property
sale was completed.



                                      -F15-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.  FAIR VALUES OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>


                                                                       April 30,
                                         --------------------------------------------------------------------
                                              2003                                 2002
                                          Carrying               Fair         Carrying          Fair
                                            Value                Value           Value          Value
                                         ----------------- ----------------- -------------- -----------------
<S>                                               <C>               <C>               <C>          <C>
                                             (GBP'000)         (GBP'000)         (GBP'000)    (GBP'000)
Cash and cash equivalents...........              437               437              445          445
Unsecured loan stock................               -                 -               410          410
Short term mortgage                               300               300               -            -

The carrying value of these financial instruments approximates fair value due to
the short period until maturity.
</TABLE>

4.  INCOME TAXES

Deferred  income taxes reflect the net effects of temporary  difference  between
the carrying amounts of assets and liabilities for financial  reporting purposes
and the amounts  used for income tax  purposes.  Significant  components  of the
Company's deferred tax liabilities and assets are as follows:

                                                        April 30,
                                             --------------------------------
                                                    2003              2002
                                                    ----              ----
                                                          (GBP'000)

Book over tax depreciation                               99               97
Operating losses carried forward                      4,224            4,005
Other differences and tax benefits of
exceptional pension charge                                -               40
                                                  -----------      ------------
                                                      4,323            4,142
Less:  valuation allowance                           (4,323)          (4,142)
Net deferred tax assets                                   -                -
                                                  ===========      ============

There is no time limit on the utilization of the operating losses carried
forward tax value.

GBP14,080,000  which are specific to certain  companies  and cannot be relieved
against  profits  in  other  Group   companies.   Amounts  invested  in  foreign
subsidiaries  are  considered  permanently  invested.  It  is  not  possible  to
determine taxes on undistributed earnings.

For  financial  reporting  purposes,  loss  before  income  taxes  includes  the
following components :

                                          Year ended April 30,
                               -------------------------------------------
                                    2003            2002         2001
                                    ----            ----         ----
                                                  (GBP'000)
United Kingdom                       (1,027)        (1,985)       (3,664)
Overseas                                (61)           (27)          (33)
                                     -------        -------     ---------
                                     (1,088)        (2,012)       (3,697)
                                     =======        =======     =========

                                      -F16-
<PAGE>


FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.       INCOME TAXES (CONTINUED)

The  reconciliation  of income tax computed at the UK statutory  tax rate to the
effective rate is:
<TABLE>
<CAPTION>

                                                            Year ended April 30,
                               --------------------------------------------------------------------------------
                                         2003                       2002                           2001
<S>                                  <C>                       <C>                            <C>
                                (GBP'000)       %       (GBP'000)             %         (GBP'000)         %
Statutory rate...............     (326)       (30.0)        (604)           (30.0)        (1,110)      (30.0)
Unrelievable UK tax losses...      291         26.8          550             27.3          1,094        29.6
Non deductible expenses......       35          3.2           54              2.7              -           -
Other sundry items...........        -             -           -                -             16         0.4
                               --------      -------     --------        --------       --------     ---------
                                     -             -           -                -              -           -
                               ========      =======     ========       =========       ========     =========

</TABLE>



5. LEASE COMMITMENTS

The future minimum  rental  payments under  non-cancelable  operating  leases at
April 30, 2003 are:

                                                    Equipment
                                                  ---------------
                                                    (GBP'000)
2004........................................            2
2005........................................            1
2006........................................            -
2007                                                    -
2008........................................            -
2009                                                    -

Rental expense was GBP105,000,  GBP71,000 and GBP11,000  ($18,000) for the years
ended April 30, 2001, 2002 and 2003.



6.  PREPAID EXPENSES

Prepaid  expenses  for the year ended  April 30, 2003 of  GBP376,000  ($601,000)
includes  the  forward  purchase of  learning  materials  in respect of existing
customer  contracts of  GBP323,000,  together with prepaid  expenses for hosting
services,  dues and subscriptions,  insurances and salary sacrifices aggregating
GBP53,000.

Prepaid  expenses for the year ended April 30, 2002 of  GBP376,000  included the
forward purchase of learning materials of GBP276, together with prepaid expenses
for hosting  services,  office  rent,  insurances,  dues and  subscriptions  and
insurances aggregating GBP100,000.


                                      -F17-
<PAGE>


FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7. SEGMENT INFORMATION, EXPORT SALES AND MAJOR CUSTOMERS

The Company  views its business as falling into one of two  operating  segments.
The major segment is that of  e-Learning  and comprises the provision of its own
and third party  products  and  services  which  together  provide  clients with
learning  solutions.  The second and much  smaller  segment is that of  resource
consultancy,  a capability provided as a result of the Company's  acquisition of
C2W Limited in May 2002. The  accounting  policies for the segments are the same
as those described in the summary of accounting policies.
<TABLE>
<CAPTION>

                                                 2003                2003               2002              2001
<S>                                             <C>                    <C>                 <C>               <C>
                                                $'000              GBP'000             GBP'000           GBP'000
Net Sales:
e-Learning services                                 1,827               1,142                911              743
Resource consultancy services                         320                 200                  -                -
                                                      ---                 ---                  -                -
Total Net Sales                                     2,147               1,342                911              743

Cost of sales
e-Learning services                                 1,528                 955              1,536            1,789
Resource consultancy services                         254                 159                  -                -
                                                      ---                 ---                  -                -
Total Cost of sales                                 1,782               1,114              1,536            1,789

Gross profit/(loss):
e-Learning services                                   299                 187              (625)          (1,046)
Resource consultancy services                          66                  41                  -                -
                                                       --                  --                  -                -
Total Gross profit/(loss)                             365                 228              (625)          (1,046)

Operating expenses:
e-Learning services                                 1,841               1,151              1,403            2,766
Resource consultancy services                         189                 118                  -                -
                                                      ---                 ---                  -                -
Total Operating expenses                            2,030               1,269              1,403            2,766

Operating loss
e-Learning services                               (1,542)               (964)            (2,028)          (3,812)
Resource consultancy services                       (123)                (77)                -                -
                                                    -----                ----                -                -
Total Operating loss                              (1,665)             (1,041)            (2,028)          (3,812)

</TABLE>

                                      -F18-
<PAGE>


FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.  SEGMENT INFORMATION, EXPORT SALES AND MAJOR CUSTOMERS (CONTINUED)



                                   2003                2003             2002
                                   $'000             GBP'000           GBP'000

Assets:
e-Learning services                    1,313               821              458
Resource consultancy services            194               121                -
                                         ---               ---             ----
Total segment assets                   1,507               942              405

Unallocated assets:
Cash                                     699               437              445
Prepaid expenses                          85                53              117
Other current assets                     403               252                3
Property and equipment                   847               529            1,066


Goodwill                               1,182               739                -
Investments                              326               204                -
                                         ---               ---             ----

Total assets                           5,049             3,156            2,089


The  Company's  sales were  divided by  geographical  location  of  customer  as
follows:

                                                    Year ended April 30,
                                           ------------------------------------
                                           2003             2002       2001
                                           ----             ----       ----
                                                          (GBP'000)
United Kingdom.......................    1,340               849         491
Rest of Europe.......................        2                 3         149
Rest of the World....................        -                59         103
                                         -------           ------       -----
                                          1,342              911         743
                                         =======           ======       =====

During the year ended April 30, 2003,  one customer  accounted  for 59% of sales
and another for 10% of sales; during the year ended April 30, 2002, one customer
accounted  for 69% of sales and  another  for 9% of sales,  and  during the year
ended April 30, 2001, two customers each accounted for 20% of sales.

At April 30, 2003 the major customers  identified above accounted for 10% of the
amounts receivable, 8% in 2002 and 23% in 2001.


                                      -F19-
<PAGE>
<TABLE>
<CAPTION>


FUTUREMEDIA PLC SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.       SEGMENT INFORMATION, EXPORT SALES AND MAJOR CUSTOMERS  (CONTINUED)

Information about the Company's operations by geographic area is as follows:

<S>                                                     <C>                <C>              <C>              <C>
                                                  UNITED KINGDOM    REST OF THE      ELIMINATIONS      CONSOLIDATED
                                                                        WORLD
                                                 -----------------  -------------- ----------------- ---------------
                                                                               (GBP'000)

YEAR ENDED APRIL 30, 2003

Net sales
         Customers........................                  1,342           -                  -          1,342
         Total............................                  1,342           -                  -          1,342
                                                 -----------------  -------------- ----------------- ---------------
Operating Loss                                             (1,023)          (18)               -         (1,041)
Net Interest  income and foreign  currency gains
and losses      ..............................
                                                               (5)          (43)               -            (48)
                                                 -----------------  -------------- ----------------- ---------------

Loss before income taxes..................                 (1,027)          (61)                -        (1,088)
                                                 =================  ============== ================= ===============
Identifiable assets...........................                 79             -                 -            79
                                                 =================  ============== ================= ===============
YEAR ENDED APRIL 30, 2002

Net sales
         Customers..........................                  911              -                -           911
                                                 -----------------  -------------- ----------------- ---------------
         Total..............................                  911              -                -           911
Operating Loss..............................               (2,028)             -                -        (2,028)
Net Interest income and foreign currency gains                 45            (29)               -            16
                                                 -----------------  -------------- ----------------- ---------------
and losses..................................
Loss before income taxes....................               (1,983)           (29)               -        (2,012)
                                                 =================  ============== ================= ===============
Identifiable assets.........................                  158              -                -          1589
                                                 =================  ============== ================= ===============
YEAR ENDED APRIL 30, 2001

Net sales
         Customers..........................                  743              -                -          743
                                                 -----------------  -------------- ----------------- ---------------

         Total..............................                  743              -                -          743
                                                 =================  ============== ================= ===============
Operating Loss..............................               (3,812)             -                -       (3,812)
Net Interest  income and foreign  currency gains
and losses..................................                  148            (33)               -          115
                                                 -----------------  -------------- ----------------- ---------------
Loss before income taxes....................               (3,664)           (33)               -       (3,697)
                                                 =================  ============== ================= ===============

Identifiable assets.........................                  167              -                -          167
                                                 =================  ============== ================= ===============

</TABLE>

                                      -F20-
<PAGE>


FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. PENSION PLANS

The Company operates various defined contribution pension plans on behalf of the
directors  and other  staff.  Contributions  payable  are  charged  to Income as
incurred.  Contributions  by the Company are  determined in accordance  with the
rules of the pension  plans.  Contributions  aggregated  GBP38,000  ($61,000) in
2003,  GBP43,000 in 2002,  and GBP51,000 in 2001. The Company has no obligations
in respect  of post  retirement  benefits  other  than the  pension  obligations
described above.

9. ACQUISITIONS

Operations of acquired  companies are included in  consolidated  operations from
the date of  acquisition  and that the fair value of common stock was determined
based on the quoted market price when the terms of acquisition were agreed to.

The Company  acquired,  on March 1, 2002,  the assets and business of Palm Teach
Limited for a total  consideration of GBP54,000  ($85,000) The  consideration of
GBP54,000  represents  the  fair  value  of the  759,700  shares  issued  to the
shareholders.  The  net  assets  at the  time  of the  acquisition  amounted  to
approximately (pound)1,000. As of the year end, GBP53,000 was therefore recorded
as goodwill.

In May 2002,  the Company  acquired the assets and  business of C2W  Limited,  a
services  company  providing  resource and  management  consultancy to corporate
clients, for a total consideration of (pound)29,000 ($46,000). The consideration
of  GBP29,000  represents  the fair value of the  454,400  shares  issued to the
shareholders.  As at the year-end, GBP29,000 ($32,000) was recorded as Goodwill.
The acquisition was accounted for using the purchase method.

In April  2003,  the  Company  acquired  the assets of Activna  Objects  Limited
("Activna"), a non-trading UK company with ownership of a software tool that the
Company believes will  substantially  reduce the development time and cost for a
new third generation  e-Learning  management  system. The net assets of Activna,
comprising the software  intangible of GBP62,500,  sundry creditors of GBP62,500
and sundry  debtors of GBP100,  amounted to GBP100  ($160),  were acquired for a
total  consideration of GBP224,000  ($350,000).  The consideration of GBP224,000
represents the fair value of the 3,500,000 shares issued to the shareholders. As
at the year-end, the whole of the GBP224,000 ($350,000) is recorded as Goodwill.
The acquisition was accounted for using the purchase  method.  A formal purchase
price allocation has not been finalized. The Company expects to finalize this in
2004 fiscal year as the Company is in the process of determining  the fair value
of the internally generated software purchased.

Also in April 2003, the Company acquired a 29.8% shareholding in Luvit AB, which
has been accounted for under equity  accounting  rules. The total  consideration
paid for this  shareholding  amounted  to  GBP643,000  ($1,000,000)  in cash and
GBP300,000  ($480,000) in Futuremedia  shares, and represents fair value for the
cash and 4,685,315 shares issued.

At the time of the investment, the net assets of Luvit AB amounted to GBP686,000
($1,097,000),  therefore  these financial  statements  show an investment  value
arising  from  this   transaction   of   GBP204,000   ($326,000),   representing
Futuremedia's 29.8%  shareholding,  with the remaining  GBP739,000  ($1,182,000)
appearing as goodwill.


                                      -F21-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. ACQUISITIONS (CONTINUED)

The following is summarized financial  information on the assets and liabilities
of Luvit AB as of 31 March 2003.


                                                As of March 31, 2003
---------------------------------------------------- --------- --------------
                                            $(000's) GBP(000`s)   SEK(000's)
---------------------------------------------------- --------- --------------
Total current assets                            581       363          4,868
---------------------------------------------------- --------- --------------
Total non-current assets                      1,115       697          9,357
---------------------------------------------------- --------- --------------
Total assets                                  1,696     1,060         14,225
---------------------------------------------------- --------- --------------
Total current liabilities                       926       579          7,772
---------------------------------------------------- --------- --------------
Total non-current liabilities                   474       296          3,976
---------------------------------------------------- --------- --------------
Total liabilities                             1,400       875         11,748
---------------------------------------------------- --------- --------------
Net assets                                      296       185          2,477
---------------------------------------------------- --------- --------------




10. INTANGIBLE ASSETS AND GOODWILL

INTANGIBLE ASSETS

                                                Year ended April 30
                                      ----------------------------------------
                                              2003                 2002
                                            ----                 ----
       Cost                                          (GBP'000)
       At May 1.....................         264                 264
       Additions ...................          62                   -
       Amounts written off..........           -                   -
                                          ------              ------
       At April 30..................         326                 264
                                          ------              ------

       Amortization
       At May 1.....................         264                 264
       Charge for year..............           -                   -

       Amounts written off..........           -                   -
                                          ------              ------
       At April 30..................         264                 264
                                          ------              ------
       Net book amount at April 30..          62                   0
                                          ======              ======


The  addition in 2003  represents  the  software  tool owned by Activna  Objects
Limited,   acquired  by  Futuremedia  in  April  2003.  (GBP)264,000  in  2002
represents internally developed software.




                                      -F22-
<PAGE>




FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.      INTANGIBLE ASSETS AND GOODWILL (CONTINUED)

The table below shows  expected  amortization  expense for  acquired  intangible
assets recorded as of April 30, 2003.


                                              2004     2005     2006
                                              ----     ----     ----
Amortization expense (GBPthousands)            21        21      20

The above  amortization  expense  forecast  is an  estimate.  Actual  amounts of
amortization  expense  may  differ  from  estimated  amounts  due to  additional
intangible  asset  acquisitions,  impairment of intangible  assets,  accelerated
amortization of intangible assets, and other events


Goodwill
                                   ------------------------------
                                    2003                    2002
                                   -------                 ------
   Cost                                         (GBP'000)
   At May 1......................      53                       -
   Additions ....................     931                      53
   Amounts written off...........       -                       -
                                   -------                 ------
   At April 30...................     984                      53
                                   =======                 ======


Of the GBP984,000  goodwill at April 30, 2003,  GBP30,000 is attributable to the
resource  consultancy  business segment,  GBP216,000 to the e-Learning  business
segment and the  remaining  GBP739,000  being the  investment  in Luvit,  is not
allocable to business segment.


                                      -F23-
<PAGE>


FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)


11.      PROPERTY PLANT AND EQUIPMENT
<TABLE>
<CAPTION>

                                                                    April 30,
                                      ----------------------------------------------------------------------
                                                     2003                                2002
                                                    ----                                ----
<S>                                     <C>          <C>          <C>      <C>           <C>
                                       COST     DEPRECIATION     NET       COST     DEPRECIATION     NET
                                      --------- ------------- ------------ ------- --------------- ---------
                                                                 (GBP'000)
Property improvements...............      -            -           -          59           59           -
Audiovisual and computer equipment
    Mid-term........................     78           78           -          78           69           9
    Short-term......................    349          283          66         336          237          99
Office Equipment....................     71           58          13          71           21          50
                                      --------- ------------- ------------ ------- --------------- ---------
                                        498          419          79         544          386         158
                                      ========= ============= ============ ======= =============== =========
</TABLE>

The net book value  includes no amounts in respect of assets held under  capital
leases.

Freehold land and buildings at a carrying  value of  GBP450,000,  ($720,000) are
held for sale at the lower of cost less  depreciation  and fair value less costs
to sell at April 30, 2003, and represents the second and final part  outstanding
on the  agreement  for sale  reached in January  2003  whereby the  property was
divided into two separate parts. The sale of the remaining part was concluded in
May 2003. The whole of the loss on sale amounting to  (GBP)118,000  ($188,000)
has been taken to the income statement in the current fiscal year.



12.      CHANGES IN SHAREHOLDER EQUITY

In July 2000,  the Company  completed  an  additional  private  placement  under
Regulation  S  pursuant  to which  the  Rennes  Foundation  purchased  1,944,444
Ordinary Shares and another non-US investor purchased 277,778 Ordinary shares at
a price of  GBP 1.12  ($1.80) per Share for an  aggregate  purchase  price of
approximately GBP 2.5 million ($4.0 million) in cash.

Also in July 2000, an option to purchase  10,000  ordinary  shares at a price of
GBP 0.31 ($0.50) per ordinary share under the Company's  Unapproved Executive
Share Option Plan was exercised by an employee of the Company.

In March 2002, the Company contracted for the issue of and received the cash for
an aggregate of 4,702,410  Ordinary Shares at a price of GBP 0.051  ($0.083)
per Ordinary Share  representing  an aggregate  purchase price of  approximately
GBP 244,000 ($390,000).

Also in March 2002,  the Company  contracted  for the issue of an  aggregate  of
759,700  Ordinary  Shares at a market price of GBP 0.04  ($0.07) per Ordinary
Share  pursuant to the stock  transaction  for the  acquisition of the assets of
Palm Teach  Limited,  together with the issue of an aggregate  702,900  Ordinary
shares at a market price of  GBP 0.04  ($0.07) per Ordinary share to four key
individuals on their joining the Company.

Also in April 2002,  the Company  contracted  for the issue of and  received the
cash for  3,276,923  Ordinary  shares at a price of GBP 0.041  ($0.065)  per
Ordinary  Share  representing  an  aggregate  purchase  price  of  approximately
GBP 133,000 ($213,000).

                                      -F24-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 12.     CHANGES IN SHAREHOLDER EQUITY (CONTINUED)

Also in April 2002,  the Company  contracted  for the issue of 803,046  Ordinary
Shares at a price of GBP 0.044  ($0.07)  per  Ordinary  Share under a Salary
sacrifice arrangement, representing an aggregate purchase price of GBP 35,000
($56,000).  At the same time, a further  102,000  Ordinary  Shares at a price of
GBP 0.044  ($0.07) per Ordinary  Share were agreed to be issued in settlement
of outstanding invoiced charges for work done for the Company.

In May, 2002, the Company  issued 454,400  Ordinary  Shares at a market price of
GBP 0.0690  ($0.10) per Ordinary share pursuant to the stock  transaction for
the acquisition of C2W limited.

In September  2002, the Company issued  7,644,346  Ordinary Shares at a price of
GBP 0.0458   ($0.065)  per   Ordinary   Share  for   aggregate   proceeds  of
approximately GBP 350,000 ($560,000) pursuant to a Regulation `S' placement.

In October 2002,  the Company  issued  2,727,647  Ordinary  Shares at a price of
GBP 0.055 ($0.085) per Ordinary Share for aggregate proceeds of approximately
GBP 150,000 ($232,000) pursuant to a Regulation `S' private placement.

In December  2002,  the Company  issued  231,396  Ordinary  Shares at a price of
GBP 0.0484  ($0.075) for an aggregate of GBP 11,000  ($17,000) pursuant to
an agreement for the payment of sales commissions to a third party.

In April  2003,  the Company  issued  16,706,000  Ordinary  shares at a price of
GBP 0.064  ($0.10) per Ordinary share for aggregate proceeds of approximately
GBP 1,071,000 ($1,670,000) pursuant to a Regulation `S' private placement. At
April  30,  2003,  $202,000  of the  $1,670,000  was  outstanding  and  received
subsequently to the year-end.

Also in April 2003, the Company issued  2,250,000  Ordinary shares at a price of
GBP 0.051  ($0.08) per Ordinary share for aggregate proceeds of approximately
GBP 115,000  ($180,000) pursuant to a Regulation `S' private placement.  This
investment  agreement  also  provided  for the issue of  1,594,334  warrants  to
purchase  an  equivalent  number of Ordinary  Shares at a price of  GBP 0.053
($0.085) per  Ordinary  Share,  valid for three years.  The proceeds of $180,000
were  outstanding  at  April  30,  2003 and were  received  subsequently  to the
year-end.

Also in April 2003, the Company issued  4,685,315  Ordinary Shares at a price of
GBP 0.0625  ($0.10) per  Ordinary  Share  pursuant to an agreement to acquire
3,350,000  shares  in  Luvit AB from  the  present  holder,  Volito  AB,  for an
aggregate price of GBP 300,000 ($480,000) approximately.

Also in April 2003, the Company issued 3,500,000  Ordinary Shares pursuant to an
agreement to acquire the entire share capital of Activna Objects Limited.

At April 30, 2003 there were 854,240 warrants outstanding for the purchase of an
equivalent  number of Ordinary shares,  issued in August 1993 at the time of the
Company's initial float, at a price of $5.65 per Ordinary Share,  which were due
to expire in August 2003.  The Company  decided not to extend these warrants for
any further period,  and  consequently  these warrants lapsed  subsequent to the
year-end,  in August 2003.  There were also  1,594,334  warrants  outstanding at
April 30, 2003  redeemable for the purchase of an equivalent  number of Ordinary
shares at a purchase price of $0.085 per Ordinary  Share,  issued in April 2003,
which expire in April 2006.

                                      -F25-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.      CHANGES IN SHAREHOLDER EQUITY (CONTINUED)

All shares contracted to be issued in 2002 were issued in 2003.

13.      EMPLOYEE PROFIT-SHARING AND OPTION PLANS

In July 1993, the Company  adopted three employee  profits share or share option
schemes, as follows.

Under the Company's "Approved Executive Share Option Scheme", options to acquire
the Company's Ordinary Shares may be granted to all or selected  employees.  Any
full time employee,  other than a director, of the Company who is not within two
years of his or her due date for retirement  and who,  within one year preceding
the grant,  did not hold more than 10% of the share  capital of the Company,  is
eligible to participate.  The exercise price of the options must be no less than
85% of the fair market  value of the  Company's  ADSs on the date of grant.  The
value of shares  underlying  the options  granted to any employee may not exceed
the greater of 100,000  ($162,000) or four times earnings.  An option  generally
becomes exercisable three years after the date on which it was granted,  and may
not be  exercised  more than ten  years  after  the date of  grant.  In  certain
circumstances,  an option will be exercisable  after the death or termination of
the employment of the option holder.  No UK income tax will be payable,  even if
the options are granted at a discount to market value, either at the time of the
grant or the exercise of the options, although there are certain conditions that
must be satisfied  concerning  the timing of any exercise.  UK capital gains tax
may be payable at the time of the ultimate disposition of the underlying shares.

Under the Company's "Unapproved  Executive Share Option Scheme",  options may be
granted to selected full-time  employees,  including  directors,  based on their
performance. The exercise price of the options granted must be at least the fair
market value of the  Company's  ADSs.  The value of options to be granted is not
subject to any  financial  limit,  although  the number of shares over which the
options may be granted is subject to an overall restriction.

In addition to the  foregoing,  the Company  maintains a net profit sharing plan
(the "Employee  Profit Share Scheme" or the "Incentive  Profit Sharing  Scheme")
pursuant  to which cash may be paid to  employees  out of the  Company's  annual
profits. No such distributions were made in the

years ended April 30,  2003,  2002 or 2001.  Pursuant to an  agreement  with the
underwriter of the Company's initial public offering, the aggregate value of the
cash that may be issued annually under the Employee Profit Share Scheme will not
exceed  10% of the  Company's  pre-tax  profits,  and,  based  on the  Company's
performance, may be limited to 10% of the Company's post-tax profits.

Determinations as to the granting of options to  employee-directors  are made by
the Remuneration Committee.

Under the Approved  Executive  Share Option  Scheme,  759 options at an exercise
price of $4.25 and 947 options at an exercise price of $2.55 were outstanding at
the year end which  subsequently  lapsed  without being  exercised on August 19,
2003. 20,500 options are outstanding at an exercise price of $0.90625 and may be
exercised  until  January 16,  2008 and 13,500  options  are  outstanding  at an
exercise price of $1.5938 and may be exercised until July 25, 2010.


                                      -F26-
<PAGE>


FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.      EMPLOYEE PROFIT-SHARING AND OPTION PLANS (CONTINUED)

A summary of the option  outstanding under the Company's  "Approved Share Option
Scheme" as at April 30, 2003 is as follows:

                              Number of Shares            Weighted
                               Under Option             Average Option
                                                        Price Per Share
                              -------------            -----------------
Outstanding April 30, 2000..        46,962                  $1.4277
Options granted.............        90,000                  $1.5938
Options forfeited...........       (58,574)                 $1.5741
                              -------------
Outstanding April 30, 2001..        78,388                  $1.5090
Options forfeited...........       (37,865)                 $1.4767
                              -------------
Outstanding April 30, 2002..        40,523                  $1.5096
                               ============
Options forfeited...........        (4,817)                 $3.2053
                               ------------
Outstanding April 30, 2003..        35,706                  $1.2809
                               ============




                                      -F27-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.      EMPLOYEE PROFIT-SHARING AND OPTION PLANS - (CONTINUED)

The following options have been issued under the Company's "Unapproved Executive
Share Option Scheme", and were outstanding as at April 30, 2003.
<TABLE>
<CAPTION>

      NO OF                 SUBSCRIPTION             DATE                           EXERCISABLE WHEN THE MARKET
     SHARES                     PRICE             EXERCISABLE       EXPIRY DATE     PRICE AT LEAST EQUALS
-------------               --------------        ------------      ------------   -------------------------------
<S>     <C>                      <C>                 <C>               <C>            <C>

      5,000                    $0.53               Current          Oct 2007        No Restriction
      5,000                    $0.19               Current          Jan 2007        No Restriction
    100,000                    $1.00               Current          Sept 2010       No Restriction
     69,750                    $0.35               Current          May 2011        No Restriction
     69,750                    $0.35               Current          May 2011        No Restriction
     69,750                    $0.35               05/01/04         May 2011        No Restriction
     69,750                    $0.35               11/01/04         May 2011        No Restriction
    100,000                    $0.25               Current          Oct 2006        $1.00
      5,000                    $0.19               Current          Sept 2010       No Restriction
      5,000                    $0.59               Current          Sept 2010       No Restriction
    474,750                    $0.15               Current          Feb 2012        No Restriction
  1,223,355                    $0.15               Current          Feb 2012        No Restriction
    474,750                    $0.10               Current          Feb 2012        No Restriction
  1,424,390                    $0.10               Current          Feb 2012        No Restriction
     50,000                    $0.09               10/16/03         Oct 2012        No Restriction
     50,000                    $0.09               10/16/04         Oct 2012        No Restriction
     50,000                    $0.09               10/16/05         Oct 2012        No Restriction
     25,000                    $0.09               10/16/03         Oct 2012        See (1) Below
     25,000                    $0.09               10/16/04         Oct 2012        See (1) Below
     25,000                    $0.09               10/16/05         Oct 2012        See (1) Below
     50,000                    $0.09               10/16/03         Oct 2012        See (1) Below
     50,000                    $0.09               10/16/04         Oct 2012        See (1) Below
     50,000                    $0.09               10/16/05         Oct 2012        See (1) Below
    125,000                    $0.09               11/01/03         Nov 2012        No Restriction
    125,000                    $0.09               11/01/04         Nov 2012        No Restriction
    100,000                    $0.09               11/01/03         Nov 2012        See (1) Below
    150,000                    $0.09               11/01/03         Nov 2012        See (1) Below
     66,667                    $0.09               11/03/03         Nov 2012        No Restriction
     66,667                    $0.09               11/03/04         Nov 2012        No Restriction
     66,666                    $0.09               11/03/05         Nov 2012        No Restriction
     25,000                    $0.09               11/03/03         Nov 2012        See (1) Below
     25,000                    $0.09               11/03/04         Nov 2012        See (1) Below
     25,000                    $0.09               11/03/05         Nov 2012        See (1) Below
     50,000                    $0.09               11/03/03         Nov 2012        See (1) Below
     50,000                    $0.09               11/03/04         Nov 2012        See (1) Below
     50,000                    $0.09               11/03/05         Nov 2012        See (1) Below
-----------

  5,396,245
===========
</TABLE>

(1)  Exercisable  only on achievement of the option holders  achieving an agreed
level of customer orders within an agreed period. None of these targets were met
in the year.  Failure  to meet  these  targets  will  result in the lapse of the
options.

The Company  accounts for options  granted under these plans in accordance  with
the  provisions  of APB No. 25.  Variable  options are  required to be marked to
market at each period end until they are


                                      -F28-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

13.      EMPLOYEE PROFIT-SHARING AND OPTION PLANS - (CONTINUED)


forfeited,  exercised,  or expire  unexercised.  Those  options whose vesting is
dependent on  performance  will be accounted  for as variable  options until the
performance criteria is met.


In February,  2002, 1,075,000 existing options to purchase ordinary shares under
the  Unapproved  Executive  Share Option Scheme at prices  varying from $0.59 to
$3.00 per Ordinary  share were  cancelled  and replaced with options to purchase
556,417  Ordinary shares at $0.10 per Ordinary share and 518,083 Ordinary shares
at $0.15 per Ordinary  share,  vesting between July 2002 and March 2003, and are
now accounted for as variable options. There is an immaterial difference between
the  exercise  price  of the  variable  options  and the  trading  price  of the
Company's stock at the year end, therefore no compensation  expense was recorded
in the current fiscal year.

A summary of the  options  outstanding  under the  Company's  "Unapproved  Share
Option Scheme" as at April 30, 2003 is as follows:

                                     NUMBER OF SHARES      WEIGHTED AVERAGE
                                     UNDER OPTION          OPTION PRICE PER
                                                           SHARE
                                     -----------------     ----------------

Outstanding at April 30, 2000......     1,794,000                $0.83
                                      ------------
Option granted ....................     1,010,001                $1.41
Options lapsed.....................      (280,667)               $1.47
Options exercised..................       (10,000)               $0.50
                                      ------------
Outstanding at April 30, 2001......     2,513,334                $0.99
Options granted....................     4,742,251                $0.165
Options lapsed and cancelled.......    (2,796,834)               $0.9056
                                      ------------
Outstanding at April 30, 2002......     4,458,751                $0.1605
                                      ============
Options granted                         1,365,000                $0.0883
                                      ============
Options lapsed and cancelled             (427,506)               $0.1267
                                      ============
Outstanding at April 2003               5,396,245                $0.095
                                      ============


No share options were granted at market price in the years to April 30, 2003 and
2002. 313,338 share options were granted at market price in the year ended April
30, 2001.

The weighted  average fair value of the 375,000  options granted at below market
price in the year ended  April 30,  2003 was  GDP0.030  ($0.047).  There were no
options  granted at below market price in 2002. The weighted  average fair value
of options  granted  below  market  price in the year ended  April 30,  2001 was
GBP0.60.  The weighted  average fair value of the 990,000  options granted above
market  price in the year  ended  April 30,  2003 was  GBP0.023  ($0.037),  2002
GBP0.04  and 2001  GBP0.28.  The  determination  of the fair  value of all stock
options  granted in 2003,  2002 and 2001 was calculated  using the Black Scholes
method based on (i)  risk-free  interest  rates of 4.00% (2002:  3.84% and 2001:
5.25%), (ii) expected option lives of 3 to 5 years (weighted average 3.3 years),
(iii) dividend yield of 0% and iv) a volatility of 0.190 (2002:  0.318 and 2001:
1.276).


                                      -F29-
<PAGE>


FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.      NEW ACCOUNTING PRONOUNCEMENTS

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity." SFAS No. 150
specifies that freestanding  financial  instruments  within its scope constitute
obligations of the issuer and that, therefore,  the issuer must classify them as
liabilities.   Such  freestanding   financial  instruments  include  mandatorily
redeemable financial instruments,  obligations to repurchase the issuer's equity
shares by  transferring  assets,  and  certain  obligations  to issue a variable
number of  shares.  SFAS No.  150 is  effective  immediately  for all  financial
instruments  entered  into or  modified  after  May  31,  2003.  For  all  other
instruments, SFAS No. 150 is effective at the beginning of the second quarter of
2004.  The Company has  determined  that the statement  will not have a material
impact on the consolidated  financial  position,  results of operations and cash
flows of the Company.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness of Others,  an Interpretation of FASB Statements No. 5, 57, and 107
and Rescission of FASB  Interpretation  No. 34" (FIN No. 45). The interpretation
requires  that upon  issuance  of a  guarantee,  the  entity  must  recognize  a
liability for the fair value of the obligation it assumes under that obligation.
This  interpretation  is  intended  to improve the  comparability  of  financial
reporting,   by  requiring  identical  accounting  for  guarantees  issued  with
separately  identified  consideration and guarantees  issued without  separately
identified consideration.  The disclosure requirements are effective for interim
and annual  financial  statements  ending after  December 15, 2002.  The initial
recognition and measurement  provisions are effective for all guarantees  within
the scope of FIN 45 issued or modified  after  December  31,  2002.  The Company
currently does not provide any guarantees.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable  Interest  Entities"  (FIN No. 46). The  interpretation  clarifies  the
application  of  Accounting  Research  Bulletin No. 51  "Consolidated  Financial
Statements"  to  certain  entities  in which  equity  investors  do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial  support  from other  parties.  FIN No.46 is  applicable
immediately for variable  interest  entities created after January 31, 2003. For
variable  interest entities created prior to January 31, 2003, the provisions of
FIN 46 are applicable for periods ending after December 15, 2003.

The  Company  does not  expect  this  Interpretation  to have an  effect  on the
consolidated financial statements.

In November 2002,  the EITF released  Issue  Abstract No. 00-21,  Accounting for
Revenue  Arrangements with MULTIPLE  DELIVERABLES." This consensus requires that
revenue  arrangements with MULTIPLE  DELIVERABLES be divided into separate units
of accounting if the deliverables in the arrangements meet specific criteria. In
addition,  arrangement  consideration must be allocated among the separate units
of accounting based on their relative fair values, with certain limitations. The
Company will be required to adopt the provision of this consensus are applicable
for  revenue  arrangements  entered  into after June 30,  2003.  The  company is
currently  evaluating  the impact of the adoption of this  pronouncement  on its
consolidated financial statements.


                                      -F30-
<PAGE>

FUTUREMEDIA PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.      COMMITMENTS

The Company has secured the  provision of its Internet  Service  Provider  (ISP)
service requirements with Siemens UK Ltd. for a period of three years commencing
September  2001.  The terms of the contract  allow  termination  on three months
notice  after the  completion  of the first  year.  In April  2001,  the Company
contracted  with  Consignia Plc (UK) for the provision of a learning  management
system  comprising a hosted service  together with learning content for a period
of 22  months  commencing  June 1,  2001.The  total  value of the  contract  was
approximately GBP1,000,000 ($1,600,000). This contract was renewed for a further
twelve  months from April 1, 2003. In November  2003,  the Company was awarded a
significant  contract by Royal Mail for the  provision  of its  Learning for All
product to all the client's employees. It is expected that the Company will have
to make significant commitment to third party suppliers in the delivery of these
products and services.


16.      SUBSEQUENT EVENTS

Subsequent to the year end, in July, 2003, Futuremedia acquired the entire share
capital of Temp Limited, into which had been transferred the business and assets
of IQDos Limited, for the issue of 1.125 million Futuremdia shares,  valuing the
acquisition  at  approximately   (GBP)238,000  ($380,000).  IQDos  Limited,  a
wholly-owned  subsidiary of Excel  Communications  Limited,  specializes  in the
production  of  bespoke   e-Learning   content  and  also  provides   e-Learning
consultancy   services,   and  will  substantially  improve  the  capability  of
Futuremedia to present itself to the marketplace as a single point of supply for
total e-Learning solutions. The acquisition was accounted for using the purchase
method.

In  August,  2003,  the  Company  completed  a  Private  Placement  in  which it
contracted for the issue of approximately  5.0 million Ordinary shares,  or 6.2%
of the  issued  share  capital,  at a price of  $0.22  per  Ordinary  Share at a
discount to the market price at the time,  for total  proceeds of  approximately
(GBP)660,000  ($1.1 million).  No major shareholders,  employees or Affiliates
were allowed to participate.

In August,  2003,  Volito AB,  contracted  for the purchase of 387,597  Ordinary
Shares at the market  price of $0.387 per  Ordinary  Share for a total  purchase
price of (GBP)94,000 ($150,000).

In September,  2003, a number of the Company's  staff  exercised  part or all of
their share options to purchase  Ordinary Shares under the Company's  Unapproved
executive  Share  Option  scheme  for a total of 188,838  Ordinary  Shares at an
average price of $0.109 per Ordinary share.  None of these staff were Affiliates
or Control Persons.

                                      -F31-
<PAGE>

<TABLE>
<CAPTION>

LUVIT AB ACCOUNTS FOR THE YEAR TO DECEMBER 31, 2002

INCOME STATEMENT - GROUP


<S>                                                                         <C>
(Amounts in thousands SEK)                             NOTE                YEAR ENDED
                                                                        DECEMBER 31, 2002

Net sales                                               1,2                  12 239
Capitalized development expenditures
                                                          5                   1 084
TOTAL OPERATING INCOME                                                       13 323

OPERATING EXPENSES
Direct costs                                                                 -1 915
Other external costs                                    4,9                  -8 696
Personnel costs                                           3                 -19 037
Depreciations (Write-downs of tangible and
intangible fixed assets)                                5,6                  -9 946
OPERATING RESULT                                                            -26 271

RESULT FROM FINANCIAL INVESTMENTS
Interest income and similar profit/loss items
                                                                                206
Interest expenses and similar profit/loss
items                                                                          -799
RESULT AFTER FINANCIAL ITEMS                                                -26 864

Tax on current year result                               11                       -
NET LOSS FOR THE YEAR                                                       -26 864

DATA/SHARES
Average number of shares                                                 15 666 262
Number of shares                                                         29 678 431
Equity/share in SEK                                                            0,34
Result/share                                                               Negative

</TABLE>


NUMBER OF SHARES
Uncalled  subscriptions  for options do not cause any dilution  effects,  as the
present value of the subscription price exceeds the actual value of the shares.

DEFINITIONS

EQUITY/SHARE
Equity divided by number of shares at year-end adjusted for stock dividend issue
and split.

RESULT/SHARE
Result  after tax  divided by number of shares at  year-end  adjusted  for stock
dividend issue and split.


                                      -F32-
<PAGE>

<TABLE>
<CAPTION>


BALANCE SHEET - GROUP

<S>                                                                        <C> <C>
(Amounts in thousands SEK)                             NOTE       DECEMBER 31, 2002

ASSETS

FIXED ASSETS
INTANGIBLE FIXED ASSETS
Capitalized development expenditure
                                                          5                   8 223
TOTAL INTANGIBLE FIXED ASSETS                                                 8 223
TANGIBLE FIXED ASSETS
Equipment                                                 6                   3 634
TOTAL TANGIBLE FIXED ASSETS                                                   3 634

TOTAL FIXED ASSETS                                                           11 857

CURRENT ASSETS
CURRENT RECEIVABLES
Accounts receivable - trade                                                   2 636
Other current receivables                                                       354
Prepaid expenses and accrued income
                                                         12                     348
TOTAL CURRENT RECEIVABLES                                                     3 338

CASH AND BANK BALANCES                                                        1 367

TOTAL CURRENT RECEIVABLES                                                     4 705


TOTAL ASSETS                                                                 16 562


</TABLE>
                                      -F33-
<PAGE>
<TABLE>
<CAPTION>


BALANCE SHEET - GROUP

<S>                                                                        <C> <C>
(Amounts in thousands SEK)                             NOTE       DECEMBER 31, 2002

EQUITY AND LIABILITIES

EQUITY                                                   11
RESTRICTED EQUITY
Share capital (29 678 431 shares at par SEK
0,10)
                                                                              2 968
Restricted reserves                                                          33 906
TOTAL RESTRICTED EQUITY                                                      36 874

ACCUMULATED LOSS
Loss brought forward                                                            -18
Loss for the year                                                           -26 864
TOTAL ACCUMULATED LOSS                                                      -26 882

TOTAL EQUITY                                                                  9 992

LIABILITIES
LONG-TERM LIABILITIES
Liabilities to credit institutions                       8                    1 978
TOTAL LONG-TERM LIABILITIES                                                   1 978

CURRENT LIABILITIES
Accounts payable - trade                                                        696
Other current liabilities                                                       806
Accrued expenses and deferred income
                                                         12                   3 090
TOTAL CURRENT LIABILITIES                                                     4 592

TOTAL EQUITY AND LIABILITIES
                                                                             16 562

MEMORANDUM ITEMS - GROUP

PLEDGED SECURITIES AND CONTINGENT LIABILITIES

PLEDGED SECURITIES
Floating charges                                                              5 000

CONTINGENT LIABILITIES                                   13                    None

TOTAL                                                                         5 000
</TABLE>


                                      -F34-
<PAGE>

<TABLE>
<CAPTION>

CASH FLOW STATEMENT - GROUP

<S>                                                                                   <C>
                                                                                   YEAR ENDED
                                                                                  DECEMBER 31,
Amounts in thousands SEK)                                                            2002

OPERATING ACTIVITIES
Result after financial items                                                       -26 865

ADJUSTMENTS FOR ITEMS NOT INCLUDED IN CASH FLOW
Result from disposal of equipment                                                       30
Options                                                                                -35
Depreciation/Write-downs                                                            10 023
Exchange rate difference financial fixed assets                                        -13
                                                                                   -16 860

Tax paid                                                                              -298

CASH FLOW FROM ACTIVITIES BEFORE NET CHANGE IN WORKING CAPITAL
ITEMS                                                                              -17 158

CHANGE IN WORKING CAPITAL ITEMS
Increase(-)/Decrease(+) in current receivables                                       1 100
Increase(+)/Decrease(-) in current liabilities                                      -1 844
CASH FLOW FROM ACTIVITIES AFTER CHANGE IN WORKING CAPITAL ITEMS
                                                                                   -17 902

INVESTING ACTIVITIES
Shareholders  contribution given                                                       -30
Acquisition of financial fixed assets                                                 -297
Acquisition of tangible fixed assets                                                  -863
Capitalization of intangible fixed assets                                           -1 084
CASH FLOW FROM INVESTING ACTIVITIES                                                 -2 274

FINANCING ACTIVITIES
New share issue                                                                     15 622
Options                                                                                  -
Loan raised                                                                          1 978
Amortization of debt                                                                     -
CASH FLOW FROM INVESTING ACTIVITIES                                                 17 600

INCREASE/DECREASE IN CASH                                                           -2 576
Balance at beginning of year                                                         3 942
Exchange rate difference in cash                                                         1
CASH AT THE END OF THE YEAR                                                          1 367



</TABLE>

                                      -F35-
<PAGE>


LUVIT AB

NOTES TO THE ACCOUNTS

ACCOUNTING PRINCIPLES


GENERAL
The annual accounts have been prepared  according to the Annual Accounts Act and
the  Swedish  Financial  Accounting  Standards  Council's   recommendations  and
statements.


GROUP ACCOUNTS

EXTENT
The group accounts are including the parent  company,  subsidiaries in which the
parent company directly or indirectly owns shares equivalent to more than 50% of
the voting power. There are at present no associated companies within the group.


ACCOUNTING METHOD
The  group  accounts have been prepared according to the acquisition accounting.
This means that acquired subsidiaries' assets and liabilities have been recorded
at market value, which has been the basis when calculating purchase price of the
shares. The group's equity includes the parent company's equity, and the part of
the  subsidiaries'  equity which has been added after acquiring these companies.


VALUATION PRINCIPLES

INCOME
LUVIT  has  an  income model which means that customers are leasing the software
and  are  paying  A  monthly, quarterly or annual fee. The income is distributed
over  the  contracted  period.  LUVIT  sells also software licences, and is then
using  delivery  date  at  the income recognition. Delivery of a right of use is
considered  to take place when a binding order or agreement has been agreed, and
when  the  customer has access to the software. When an order or an agreement is
including  restricted  conditions,  the income recognition will take place first
when  the  conditions  of  the  agreement  are  met.

Income from service agreement refers partly to producing new software and partly
to continuous service and support. Income recognition is made at each chargeable
period. Income recognition of income from installation and training is made when
these are carried out.

RECEIVABLES
Receivables  have been  recorded  at the lowest of nominal  value and the amount
that is expected to be received.


                                      -F36-
<PAGE>


RECEIVABLES AND LIABILITIES IN FOREIGN CURRENCIES
Current  receivables and  liabilities in foreign  currencies have been valued at
closing day rate,  and  unrealized  exchange  profit and loss is included in the
result.

ASSETS
Capitalization  of  development  costs have been made  according  to the Swedish
Financial Accounting Standards Council's  recommendation RR15 Intangible assets.
Depreciation  is being  made out of  estimated  economic  life.  Costs for basic
function is estimated to 5 years and will be  written-off  by 20% a year.  Costs
for new software will be capitalized during the manufacturing  process,  and the
economic life is estimated to 12 months. Straight-line depreciation for economic
life will be made from date of completion.

Most tangible  assets are  equipment.  Assets are  accounted for at  acquisition
value, net of accumulated depreciations. Depreciation according to plan is based
on the assets' acquisition value and estimated economic lifetime.

The following economic lifetimes have been used;

Capitalized development costs       1 to 5 years
Equipment                           3 to 5 years



                                      -F37-
<PAGE>


SUPPLEMENTARY INFORMATION


NOTE 1            INTRA-GROUP PURCHASES AND SALES
Out of total intra-group purchases and sales,  0% (0%) of the purchases and 0%
( 0 %) of  the  sales  refer  to  other  group  companies.  Out  of  the  parent
company's  total purchases and sales, 0 % (0 %) of the purchases and 0 % ( 0
%) of the sales  refer to other  companies  within  the group  being  subject to
recommendations  in the Annual  Accounts  Act (ARL)  (LUVIT AB  (public  limited
liability company) with subsidiary).

NOTE 2            DISTRIBUTION OF NET SALES

PARENT COMPANY

Net sales are distributed by geographical markets as follows:
                                          YEAR ENDED
                                         DECEMBER 31,
GEOGRAPHICAL MARKET  (amounts in 000`s SEK)  2002
The Nordic countries                       10 551
Europe excl of the Nordic countries         1 505
North and South America                       142
Asia                                           41
TOTAL                                      12 239

NOTE 3            PERSONNEL

GROUP
<TABLE>
<CAPTION>
<S>     <C>                                  <C>            <C>

AVERAGE NUMBER OF EMPLOYEES                           2002
                                           NUMBER OF    OUT OF WHICH
                                           EMPLOYEES         ARE MEN
Sweden                                            28              18
France                                             1               -

SALARIES AND OTHER COMPENSATIONS
                                           2002
AMOUNTS IN              BOARD OF    OUT OF WHICH          OTHER
000`S              DIRECTORS AND    IS BONUS AND      EMPLOYEES
SEK                           MD         SIMILAR
Sweden                     1 007               -         10 338
France                         -               -            568

SALARIES AND OTHER COMPENSATIONS
                                           2002
AMOUNTS             SALARIES AND         PAYROLL   OUT OF WHICH
IN 000`S                   OTHER        OVERHEAD    ARE PENSION
SEK                COMPENSATIONS                       EXPENSES
Sweden                    11 220           5 820          1 735
France                       906               -              -

</TABLE>

                                                   -F38-
<PAGE>



SALARIES AND COMPENSATIONS
The annual general meeting decided a fee to the Board of Directors  amounting to
100  tSEK  to be  distributed  among  the  members  of  the  Board.  Salary  and
compensation to the Managing Director amounted in 2002 to 907 tSEK. The Managing
Director  has at  present a monthly  salary of 72 tSEK.  Other  officers  of the
company had 1 102 tSEK during 2002 and have at present a total monthly salary of
112 tSEK.

CONDITIONS OF EMPLOYMENT
The Managing Director has a term of notice of twelve months from the part of the
comp-any  and six months from his own part.  Other  officers of the company have
three months mutual term of notice. A  non-competition  clause in the employment
contracts for the Managing  Director and other officers of the company  prohibit
them to work with comp-eting  business within six months after having terminated
the employment.

SEVERANCE PAY AGREEMENT
The  employment  contract  for the  Managing  Director  includes  a clause as to
severance  pay of 12 months  salary at notice from the  company,  which means an
amount of 864 tSEK inclusive of payroll overhead.  Other officers of the company
have not agreements about severance pay.

PENSION EXPENSES
The Group has only pension plans subject to a fixed amount.  The  retirement age
for the  Managing  Director and other  officers of the company is 65 years.  The
Group;s  pension  expenses  include 291 tSEK (151)  related to the  Managing
Director and 159 tSEK (164) related to other officers of the company.  The Group
have not  outstanding  pension  obligations  towards  members of the Board,  the
Managing Director or other officers of the company.

NOTE 4            LEASE AGREEMENTS

GROUP
The company has entered into the following operating lease agreements:

CHARGES DUE FOR PAYMENT (AMOUNTS IN 000`S SEK)         EQUIPMENT
Year 2003                                                 151
Year 2004-2007                                            296
Year 2008 or later                                          -

NOTE 5            INTANGIBLE ASSETS

AMOUNTS IN 000`S SEK                                     GROUP
Acquisition value opening balance                       25 076
Purchases                                                1 084
Accumulated acquisition value closing balance
                                                        26 160
Depreciation opening balance                           -10 031
Current year depreciation                               -7 906
Accumulated depreciation closing balance               -17 937
Book-value at December 31, 2002                          8 223

Intangible  fixed  assets  refer to  capitalized  development  expenditures  for
computer software.



                                      -F39-
<PAGE>




NOTE 6            TANGIBLE FIXED ASSETS

                                                                    GROUP
                                                                EQUIPMENT
Acquisition value opening balance                                   7 040
Purchases                                                             899
Sales/Disposals                                                       -99
ACCUMULATED ACQUISITION VALUE CLOSING BALANCE
                                                                    7 840
Depreciation opening balance                                       -2 474
Sales/Disposals                                                        33
Current year depreciation                                          -1 790
ACCUMULATED DEPRECIATION CLOSING BALANCE                           -4 231
NET BOOK VALUE CLOSING BALANCE                                      3 609
EQUIPMENT THAT CANNOT BE DEPRECIATED                                   25
BOOK-VALUE                                                          3 634

Last financial year, depreciation amounting to 1 384 SEK was reported.


NOTE 7            FEES TO AUDITOR

                                                    2002
AMOUNTS IN 000`S SEK                             ----------
Audit Ernst & Young                                  119
Other advisory services Ernst & Young                 73
TOTAL                                                192
NOTE 8              LONG-TERM LIABILITIES

GROUP AND PARENT COMPANY                            2002
AMOUNTS IN OOO`S SEK
Utilized overdraft facility                        1 978
TOTAL                                              1 978

The total overdraft facility in the parent company amounts to 2 mSEK.



                                      -F40-
<PAGE>


NOTE 9  TAXES

GROUP AND PARENT COMPANY
The parent company has an unutilized loss  carry-forward  amounting to approx 26
mSEK after the assessment year 2003. The total loss  carry-forward for the Group
(LUVIT  AB  (public)  with  subsidiary)  amounts  to  approx  26 mSEK  after the
assessment year 2003.

Deferred tax income tax  recoverable,  in accordance  with RR 9 referable to the
loss  carry-forward,  was valued at zero,  as it is today not  possible to judge
when the fiscal loss  carry-forward  will be utilized.  There are not either any
deferred taxes referable to temporary differences.

NOTE 10               PREPAID EXPENSES AND ACCRUED INCOME (AMOUNTS IN 000`S SEK)

                                                 December 31,
GROUP AND PARENT COMPANY                           2002
Prepaid rents                                       234
Deposits                                              9
Other items                                         105
TOTAL                                               348

NOTE 11  CHANGE IN EQUITY
<TABLE>
<CAPTION>

GROUP
AMOUNTS IN 000`S SEK
<S>     <C>                                       <C>                  <C>              <C>             <C>
                                                  SHARE CAPITAL      RESTRICTED    LOSS BROUGHT   CURRENT YEAR
                                                                       RESERVES         FORWARD         RESULT
Opening balance at January 31, 2002                        1 432        105 157         -43 624        -41 695
Appropriation of loss according
to decision at Annual General Meeting:

Transferred into new account                                                            -41 695         41 695
Settled against share premium reserve                                   -85 302          85 302
New share issue                                            1 536         14 086
Options                                                                     -35
Current year result                                                                                    -26 864
CLOSING BALANCE AT DECEMBER 31, 2002                       2 968         33 906             -18        -26 864

NOTE 12                 ACCRUED EXPENSES AND DEFERRED INCOME

                                                                    December 31,
GROUP AND PARENT COMPANY                                                 2002
                                                                    -----------
Vacation pay                                                              816
Payroll overhead                                                        1 018
Accrued provisions                                                          -
Other items (mainly accrued development expenditures
and consultants` fees)                                                  1 256
TOTAL                                                                   3 090

</TABLE>

                                      -F41-
<PAGE>


NOTE 13                       CONTINGENT LIABILITIES


GROUP AND PARENT COMPANY
LUVIT`s  dialogue with the tax  authorities  as to the right to deduct input
tax for costs connected with the new share issue has resulted in a decision from
their side.  As the company does not share the  authorities` view  together
with the fact that praxis in this  respect is unclear,  the company has appealed
against the decision with the county administrative court.












                                      -F42-
<PAGE>

                         Report of Independent Auditors





To the Board of Directors and Shareholders of LUVIT AB (publ):

We  have audited the accompanying consolidated balance sheets of LUVIT AB (publ)
and  its  subsidiaries  as  of  December  31,  2002 and the related consolidated
statements  of income and cash flows for the year ended December 31, 2002. These
financial statements are the responsibility of LUVIT AB (publ)'s management. Our
responsibility  is  to express an opinion on these financial statements based on
our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in Sweden and in the United States of America.  Those standards  require that we
plan and  perform the audit to obtain  reasonable  assurance  about  whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  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 consolidated financial statements referred to above present
fairly,  in  all material respects, the consolidated financial position of LUVIT
AB (publ) and its subsidiaries as of December 31, 2002, the consolidated results
of  LUVIT AB (publ)'s operations and cash flows for the years ended December 31,
2002,  in  conformity  with  generally accepted accounting principles in Sweden.



Lund, Sweden

November 13, 2003


/S/ Goran Carlsson                       /S/ Ake Stenmo
Authorized Public Accountant             Authorized Public Accountant

Ernst & Young AB                         Ernst & Young AB



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CONSENT OF INDEPENDENT AUDITORS



We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statement  (Form S-8 No.  333-11828)  of our report  dated  November  13,  2003,
relating to the  consolidated  financial  statements  of Luvit AB  appearing  in
Futuremedia plc's Annual Report on Form 20-F for the year ended April 30, 2003.


/s/ Kerstin Mouchard
Kerstin Mouchard
Partner
Ernst & Young AB
Lund, Sweden


November 14, 2003


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