Exhibit 2.5

                          SECURITIES PURCHASE AGREEMENT
                          -----------------------------


      SECURITIES  PURCHASE  AGREEMENT (this  "Agreement"),  dated as of July 21,
2005, by and among  Futuremedia  PLC, a corporation  organized under the laws of
England and Wales (the "Company"),  on the one hand, and MERCATOR MOMENTUM FUND,
LP ("Momentum  Fund"),  MERCATOR MOMENTUM FUND III, LP ("Momentum Fund III") and
MONARCH POINTE FUND,  LTD.  ("Monarch")  (collectively,  the "Funds") and M.A.G.
CAPITAL, LLC ("M.A.G.") on the other hand.

      WHEREAS:

      A. The Company and the Funds are executing and  delivering  this Agreement
in reliance  upon the exemption  from  securities  registration  afforded by the
provisions of Section 4(2) and Regulation D ("Regulation  D"), as promulgated by
the United  States  Securities  and  Exchange  Commission  (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act").

      B. The Company is issuing (i) Convertible  Debentures in the form attached
hereto as Exhibit A (the  "Debentures")  in the  aggregate  principal  amount of
$4,000,000, pursuant to which ordinary shares in the Company ("Ordinary Shares")
may be issued upon the conversion of the Debentures  (the  "Debenture  Shares");
and (ii) warrants in the form attached  hereto as Exhibit B (the  "Warrants") to
acquire Ordinary Shares ("Warrant Shares").

      C. The Funds are  purchasing,  severally  and not jointly,  subject to the
terms and  conditions  in this  Agreement,  the  Debentures.  For no  additional
consideration, the Warrants are being issued to the Funds and M.A.G.

      D.  Contemporaneously  with the execution and delivery of this  Agreement,
the parties hereto are executing and delivering a Registration  Rights Agreement
in the form attached hereto as Exhibit C (the "Registration  Rights Agreement"),
pursuant to which the Company has agreed to provide certain  registration rights
under the Securities Act and the rules and regulations  promulgated  thereunder,
and applicable state securities laws.

      NOW, THEREFORE, the Company and the Funds hereby agree as follows:

      1. CERTAIN DEFINITIONS.

      For  purposes  of this  Agreement,  the  following  terms  shall  have the
meanings ascribed to them as provided below:

      "Business  Day"  shall mean any day  except  Saturday,  Sunday and any day
which shall be a federal  legal  holiday in the United  States or a day on which
banking  institutions  are  authorized  or required  by law or other  government
action to close.

      "Investment  Amount"  shall  mean  the  dollar  amount  of the  Debentures
purchased by the Funds at the Closing  pursuant to this Agreement,  as set forth
in Section 2 hereto.

<PAGE>

      "Material  Adverse  Effect" shall mean any material  adverse effect on (i)
the  Securities,  (ii) the  ability of the  Company to perform  its  obligations
hereunder (including the issuance of the Debentures and the Warrants), under the
Debentures  and Warrants  (including  the issuance of the  Debenture  Shares and
Warrant  Shares)  or under  the  Registration  Rights  Agreement  or  (iii)  the
business,  operations,  properties,  prospects  or  financial  condition  of the
Company and its subsidiaries taken as a whole.

      "Pro Rata  Percentage"  shall mean, with respect to any Fund, a percentage
computed by dividing such Fund's Investment  Amount by the aggregate  Investment
Amounts of all Funds.

      "Securities" shall mean the Debentures, the Warrants, the Debenture Shares
and the Warrant Shares.

      "Shares" means the Ordinary Shares to be issued upon the conversion of the
Debentures or exercise of the Warrants.

      2. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.

      (a) Generally.  Except as otherwise provided in this Section 2 and subject
to the  satisfaction  (or waiver) of the  conditions  set forth in Section 6 and
Section 7 below,  each Fund  shall  purchase  the number of  Debentures  for the
Investment  Amount as provided in this Section 2 and the Company  shall issue to
the Funds and M.A.G.  the number of Debentures  and Warrants as provided in this
Section 2.

<TABLE>
<CAPTION>

--------------------------------- ---------------- --------------- ---------------- ---------------- ----------------
                                     Mercator         Mercator
                                  Momentum Fund,   Momentum Fund   Monarch Pointe       M.A.G.
                                        LP            III, LP        Fund, Ltd.      Capital, LLC         Total
--------------------------------- ---------------- --------------- ---------------- ---------------- ----------------
<S>                                <C>               <C>             <C>              <C>              <C>
 Investment Amount                 $   1,110,000     $    300,000    $ 2,590,000      $         --     $  4,000,000
--------------------------------- ---------------- --------------- ---------------- ---------------- ----------------
 Warrants                                856,796          231,566      1,999,190         3,087,552        6,175,104
--------------------------------- ---------------- --------------- ---------------- ---------------- ----------------
 Monthly Principal Pmt             $      92,500     $     25,000    $   215,833      $         --     $    333,333
--------------------------------- ---------------- --------------- ---------------- ---------------- ----------------
</TABLE>

      (b) Purchase of Debentures and Warrants; Form of Payment; Closing Date.

      The  execution  of  definitive  documents  relating  to  the  transactions
described herein (the "Execution") shall take place at a time and on a date (the
"Execution  Date") to be specified  by the parties,  which will be no later than
5:00 p.m.  (Pacific  time) on July 22, 2005. On the Execution  Date, the Company
shall  deliver  (a)  Debentures,  in the names and  amounts  set forth below (b)
Warrants,  in the names and  amounts  set forth  below,  and (c) the  Securities
Purchase  Agreement,  and Registration  Rights Agreement,  each duly executed on
behalf of the  Company.  On the  Execution  Date,  the Funds  shall  deliver the
Investment Amount or $4,000,000 by wire transfer of immediately  available funds
to the Company,  and (ii) the  Securities  Purchase  Agreement and  Registration
Rights Agreement, each duly executed on behalf of the Funds and MAG. The closing
("Closing")  will occur when (a) all  documents  and  instruments  necessary  or
appropriate to effect the transactions  contemplated herein are exchanged by the
parties.  All  actions  taken  at  the  Closing  will  be  deemed  to  be  taken
simultaneously  and the date on  which  such  actions  take  place  shall be the
"Closing Date".

                                      -2-
<PAGE>

      Within three (3) Trading Days after receipt of and the Investment  Amount,
the Company  shall deliver by wire transfer of  immediately  available  funds to
M.A.G.  (a) the Due Diligence  Fee in the amount of $190,000,  and (b) the legal
fees in the amount of $10,000.


      3. THE FUNDS' AND M.A.G.'s REPRESENTATIONS AND WARRANTIES.

      Each Fund and M.A.G., severally and not jointly represents and warrants to
the Company as follows:

      (a) Organization,  Good Standing and  Qualification.  Each of the Momentum
Fund and Momentum  Fund III is a limited  partnership  duly  organized,  validly
existing and in good standing  under the laws of the State of California and has
all the requisite  power and authority to carry on its business as now conducted
and as proposed to be conducted.  Monarch is an  international  business company
duly  organized,  validly  existing and in good  standing  under the laws of the
British Virgin Islands and has all the requisite power and authority to carry on
its  business as now  conducted  and as proposed to be  conducted.  M.A.G.  is a
limited liability company duly organized,  validly existing and in good standing
under the laws of the State of California  and has all the  requisite  power and
authority  to carry on its  business  as now  conducted  and as  proposed  to be
conducted.

      (b) Purchase for Own Account.  The Fund is purchasing  the  Securities for
the Fund's own account  and not with a present  view  towards  the  distribution
thereof.  M.A.G. is acquiring the Warrants for M.A.G.'s own account and not with
a present view towards the distribution  thereof.  The Fund understands that the
Fund must bear the economic  risk of this  investment  indefinitely,  unless the
Securities  are  registered  pursuant to the  Securities  Act and any applicable
state  securities  or blue sky laws or an exemption  from such  registration  is
available, and that the Company has no present intention of registering any such
Securities  other than as contemplated  by the  Registration  Rights  Agreement.
Notwithstanding  anything in this  Section 3(b) to the  contrary,  by making the
foregoing  representation,  the  Fund  and  M.A.G.  do not  agree  to  hold  the
Securities  for any minimum or other  specific  term and  reserves  the right to
dispose  of the  Securities  at any time in  accordance  with or  pursuant  to a
registration  statement or an exemption from  registration  under the Securities
Act and any applicable state securities laws.

      (c)  Information.  The Fund and M.A.G.  have been  furnished all materials
relating  to the  business,  finances  and  operations  of the  Company  and its
subsidiaries  and  materials  relating to the offer and sale of the  Securities,
which have been requested by the Fund and M.A.G.  The Fund and M.A.G.  have been
afforded the  opportunity to ask questions of the Company and have received what
the Fund and M.A.G.  believe to be  satisfactory  answers to any such inquiries.
The Fund and M.A.G.  understand that its investment in the Securities involves a
high  degree  of risk.  Neither  such  inquiries  nor any  other  due  diligence
investigation  conducted  by the Fund and  M.A.G.  or its  counsel or any of its
representatives  shall modify,  amend or affect the Fund's and M.A.G.'s right to
rely on the  Company's  representations  and  warranties  contained in Section 4
below.

      (d)  Governmental  Review.  The Fund and M.A.G.  understand that no United
States federal or state agency or any other  government or  governmental  agency
has passed upon or made any recommendation or endorsement of the Securities.

                                      -3-
<PAGE>

      (e)  Accredited  Investor  Status.  The Fund and  M.A.G.  are  "Accredited
Investors" as that term is defined in Rule 501(a) of Regulation D.

      (f)  Authorization;  Enforcement.  The Fund has the  requisite  power  and
authority to enter into and perform its obligations  under this Agreement and to
purchase the  Debentures  and the Warrants in accordance  with the terms hereof.
MAG has the  requisite  power  and  authority  to  enter  into and  perform  its
obligations  under this Agreement and to aquire the Warrants in accordance  with
the terms hereof. This Agreement has been duly and validly authorized,  executed
and  delivered  on behalf  of the Fund and  M.A.G.  and is a valid  and  binding
agreement  of the Fund and M.A.G.  enforceable  against  the Fund and M.A.G.  in
accordance  with  its  terms,  subject  to  applicable  bankruptcy,  insolvency,
reorganization,   moratorium,  fraudulent  transfer  and  other  laws  affecting
creditors'  rights and remedies  generally  and to general  principles of equity
(regardless  of  whether  enforcement  is  sought in a  proceeding  at law or in
equity).

      (g)  Restrictions  on  Transfer.  The  Funds  and  M.A.G.  understand  and
acknowledge that neither the Debentures,  the Warrants, the Debenture Shares nor
the Warrant Shares have been  registered  under the Securities  Act.  Unless and
until otherwise  permitted by the Company,  the Debentures and Warrants and each
certificate  and other  document  evidencing  any of the  Debenture  Shares  and
Warrant Shares shall be endorsed with the legend  substantially in the following
form:

THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S.  SECURITIES  ACT OF 1933,  AS AMENDED,  AND MAY NOT BE  OFFERED,  SOLD,
PLEDGED  OR  OTHERWISE  TRANSFERRED  ("TRANSFERRED")  IN  THE  ABSENCE  OF  SUCH
REGISTRATION  OR AN  APPLICABLE  EXEMPTION  THEREFROM.  IN THE  ABSENCE  OF SUCH
REGISTRATION,  SUCH  SHARES  MAY  NOT BE  TRANSFERRED  UNLESS,  IF  THE  COMPANY
REQUESTS,  THE COMPANY HAS  RECEIVED A WRITTEN  OPINION FROM COUNSEL IN FORM AND
SUBSTANCE  SATISFACTORY  TO THE COMPANY STATING THAT SUCH TRANSFER IS BEING MADE
IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

      (h) Covenants of Funds and M.A.G. Not to Short Stock.  Commencing July 13,
2005 and continuing until such time as the Debentures and Warrants are no longer
outstanding, the Funds and M.A.G., on behalf of themselves and their affiliates,
hereby covenant and agree not to, directly or indirectly, offer to "short sell",
contract  to  "short  sell" or  otherwise  "short  sell" the  securities  of the
Company, including, without limitation, Ordinary Shares that will be received as
a result of the conversion of the Debentures.

      4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .

      The Company  represents and warrants to each Fund as follows and except as
set forth in the  Company's  public  filings  with the  Securities  and Exchange
Commission:

      (a)  Organization  and  Qualification.  The Company is a corporation  duly
organized and existing under the laws of England and Wales and has the requisite
corporate  power to own its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good  standing  in every  jurisdiction  in  which  the  nature  of the
business  conducted  by it makes  such  qualification  necessary  and  where the
failure so to qualify would have a Material  Adverse Effect.  The Company is the
sole record and beneficial owner of all of the outstanding  equity securities of
each such subsidiary.

                                      -4-
<PAGE>

      (b) Authorization;  Enforcement.  The Company has the requisite  corporate
power and  authority  to enter  into and  perform  its  obligations  under  this
Agreement,  the Debentures,  the Warrants and the Registration Rights Agreement;
to issue the Debenture  Shares upon  conversion of the  Debentures in accordance
with the terms of the Debentures;  and to issue and sell the Warrant Shares upon
exercise  of the  Warrants in  accordance  with the terms of the  Warrants,  and
receipt of the exercise price.  The execution,  delivery and performance of this
Agreement, the Debentures, the Warrants and the Registration Rights Agreement by
the Company and the consummation by it of the transactions  contemplated  hereby
and thereby  (including,  without  limitation,  the reservation for issuance and
issuance of the Debenture  Shares and the  reservation for issuance and issuance
of the Warrant  Shares)  have been duly  authorized  by the  Company's  Board of
Directors and no further consent or authorization  of the Company,  its Board of
Directors or its shareholders is required. This Agreement has been duly executed
and delivered by the Company.  This Agreement  constitutes,  and, upon execution
and  delivery by the  Company and the other  parties  thereto,  the  Debentures,
Registration  Rights  Agreement  and the  Warrants  will  constitute,  valid and
binding obligations of the Company enforceable against the Company in accordance
with their  respective  terms,  subject to  applicable  bankruptcy,  insolvency,
reorganization,   moratorium,  fraudulent  transfer  and  other  laws  affecting
creditors' rights and remedies generally and to general principles of equity.

      (c)  Capitalization.  The  capitalization  of the  Company  as of the date
hereof is set forth on Schedule 4(c),  including the  authorized  capital stock,
the number of shares issued and  outstanding,  the number of shares issuable and
reserved for issuance  pursuant to the Company's stock option plans,  the number
of shares issuable and reserved for issuance pursuant to securities  exercisable
for, or convertible into or exchangeable for any shares of capital stock. All of
such  outstanding  shares of the capital stock of the Company have been, or upon
issuance will be, validly issued,  fully paid and  nonassessable.  Except as set
forth on Schedule 4(c), no shares of capital stock of the Company (including the
Debenture  Shares and the Warrant Shares) or any of the subsidiaries are subject
to preemptive  rights or any other  similar  rights of the  shareholders  of the
Company or any liens or encumbrances. Except for the Securities and as disclosed
in Schedule  4(c), as of the date of this  Agreement,  there are no  outstanding
options,  warrants,  scrip,  rights to subscribe to, calls or commitments of any
character  whatsoever to which the Company or any of the subsidiaries is a party
relating to the issuance by the Company or any of its subsidiaries of securities
or rights  convertible  into or exercisable or  exchangeable  for, any shares of
capital  stock of the Company or any of its  subsidiaries,  or  arrangements  by
which the  Company or any of its  subsidiaries  is or may become  bound to issue
additional shares of capital stock of the Company or such  subsidiaries.  Except
as set forth on Schedule 4(c), there are no securities or instruments containing
antidilution or similar  provisions that may be triggered by the issuance of the
Securities in accordance with the terms of this Agreement,  the Debentures,  the
Warrants or the Registration Rights Agreement.

      (d) Issuance of Shares.  The Debenture Shares are duly authorized and upon
the conversion of the Debentures in accordance  with the terms thereof,  will be
validly issued,  fully paid and non-assessable,  and free from all taxes, liens,
claims and  encumbrances  (other than those imposed through acts or omissions of
the Funds), and will not be subject to preemptive rights or other similar rights
of shareholders  of the Company and will not impose personal  liability upon the
holder  thereof.  The  Warrant  Shares  are duly  authorized  and  reserved  for
issuance,  and,  upon  exercise  of the  Warrants in  accordance  with the terms
thereof and receipts of the exercise price,  will be validly issued,  fully paid
and  non-assessable  and free from all taxes and liens,  claims and encumbrances
(other than those imposed through acts or omissions of the Funds  thereof),  and
will not be subject to preemptive rights or other similar rights of shareholders
of the Company and will not impose personal liability upon the holder thereof.

                                      -5-
<PAGE>

      (e)  No  Conflicts.  The  execution,  delivery  and  performance  of  this
Agreement, the Debentures, the Registration Rights Agreement and the Warrants by
the  Company,   and  the   consummation  by  the  Company  of  the  transactions
contemplated hereby and thereby (including,  without limitation, the reservation
for issuance and issuance of the Debenture Shares and the Warrant Shares and the
issuance of the Warrants) will not (i) conflict with or result in a violation of
the Company's  Memorandum  and Articles of Association or (ii) conflict with, or
constitute a default (or an event  which,  with notice or lapse of time or both,
would  become a default)  under,  or give to others  any rights of  termination,
amendment,   acceleration  or  cancellation  of  any  agreement,   indenture  or
instrument to which the Company or any of its subsidiaries is a party, or result
in a  violation  of  any  law,  rule,  regulation,  order,  judgment  or  decree
(including  (assuming the accuracy of the  representations and warranties of the
Funds) the United  States  federal and state  securities  laws and  regulations)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its  subsidiaries  is bound or affected  (except,
with  respect  to  clause  (ii),  for such  conflicts,  defaults,  terminations,
amendments,   accelerations,   cancellations   and   violations  as  would  not,
individually or in the aggregate,  have a Material Adverse Effect).  Neither the
Company  nor  any  of its  subsidiaries  is in  violation  of  its  Articles  of
Association,  By-laws or other organizational  documents and neither the Company
nor any of its subsidiaries is in default (and no event has occurred which, with
notice  or  lapse  of  time  or  both,  would  put  the  Company  or  any of its
subsidiaries in default)  under,  nor has there occurred any event giving others
(with  notice or lapse of time or both) any  rights of  termination,  amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, except for actual or possible
violations,  defaults or rights as would not,  individually or in the aggregate,
have  a  Material  Adverse  Effect.  The  businesses  of  the  Company  and  its
subsidiaries  are not being  conducted  in  violation  of any law,  ordinance or
regulation of any governmental entity, except for actual or possible violations,
if any, the sanctions for which either singly or in the aggregate would not have
a Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the Securities  Act and any  applicable  state  securities
laws, the Company is not required to obtain any consent, approval, authorization
or order of, or make any filing or registration  with, any court or governmental
agency or any regulatory or self  regulatory  agency in order for it to execute,
deliver or perform any of its obligations under this Agreement including without
limitation  the  issuance  and sale of the  Debentures  and Warrants as provided
hereby  (including  without  limitation the issuance of the Debenture Shares and
Warrant Shares) or the Registration Rights Agreement. The Company represents and
warrants  that  issuance of the  Debentures  and the  Warrants  does not require
shareholder approval.

      (f) SEC  Documents;  Financial  Statements.  The Company has timely  filed
(subject to  extensions  permissible  under Rule 12b-25 of the Exchange Act) all
reports,  schedules,  forms, statements and other documents required to be filed
by it with the SEC  pursuant to the  Securities  and  Exchange  Act of 1934,  as
amended  ("Exchange  Act"), and has filed all registration  statements and other
documents  required to be filed by it with the SEC pursuant to the 1933 Act (all
of the  foregoing  filed prior to the date  hereof,  and all  exhibits  included
therein  and  financial   statements   and   schedules   thereto  and  documents
incorporated by reference therein,  being hereinafter  referred to herein as the
"SEC Documents").  As of their respective  dates, the SEC Documents  complied in
all  material  respects  with  the  requirements  of  the  Exchange  Act  or the
Securities  Act,  as the case may be, and the rules and  regulations  of the SEC
promulgated  thereunder  applicable  to the SEC  Documents,  and none of the SEC
Documents,  at the time they  were  filed  with the SEC,  contained  any  untrue
statement of a material  fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the  circumstances  under which they were made, not  misleading.  Any statements
made in any such  SEC  Documents  that are or were  required  to be  updated  or
amended  under  applicable  law have been so  updated  or  amended.  As of their
respective  dates,  the financial  statements of the Company included in the SEC


                                      -6-
<PAGE>

Documents   complied  in  all  material  respects  with  applicable   accounting
requirements  and the published rules and regulations of the SEC applicable with
respect thereto. Such financial statements have been prepared in accordance with
United States generally accepted accounting  principles,  consistently  applied,
during the periods  involved  (except (i) as may be otherwise  indicated in such
financial  statements  or the notes  thereto,  or (ii) in the case of  unaudited
interim  statements,  to the extent  they may not  include  footnotes  or may be
condensed or summary statements) and fairly present in all material respects the
consolidated  financial  position of the Company and its  subsidiaries as of the
dates thereof and the results of their operations and cash flows for the periods
then  ended  (subject,  in the  case of  unaudited  statements,  to  normal  and
recurring year-end audit adjustments). Except as set forth in the SEC Documents,
the  Company  has no  liabilities,  contingent  or  otherwise,  other  than  (i)
liabilities  incurred in the ordinary course of business  subsequent to the date
of such SEC  Documents and (ii)  obligations  under  contracts  and  commitments
incurred in the ordinary  course of business and not  required  under  generally
accepted  accounting  principles  to be reflected in such SEC  Documents,  which
liabilities and obligations referred to in clauses (i) and (ii), individually or
in the aggregate, would not have a Material Adverse Effect.

      (g) Absence of Certain Changes.  Except as disclosed in the SEC Documents,
there  has  been  no  change  or  development,  which,  individually  or in  the
aggregate, has had or could have a Material Adverse Effect on the Company.

      (h) Absence of Litigation. Except as disclosed in the SEC Documents, there
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board,  government agency,  self-regulatory  organization or body pending
or, to the  knowledge  of the  Company,  threatened  against  or  affecting  the
Company,  or any of its  subsidiaries,  or any of their directors or officers in
their capacities as such which would have a Material Adverse Effect.

      (i) Intellectual  Property.  The Company and each of its subsidiaries owns
or is licensed to use all patents,  patent applications,  trademarks,  trademark
applications,  trade names, service marks,  copyrights,  copyright applications,
licenses, permits, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and  proprietary  knowledge  (collectively,  "Intangibles")
necessary for the conduct of its business as now being conducted and as proposed
to be conducted.  Neither the Company nor any of its  subsidiaries  has received
written  notice that it is  infringing  upon or in conflict with any third party
Intangibles.  Neither the Company nor any of its  subsidiaries  has entered into
any consent,  indemnification,  forbearance to sue or settlement agreements with
respect to the validity of the Company's or such subsidiary's ownership or right
to use its  Intangibles.  The  Intangibles  are  valid and  enforceable,  and no
registration relating thereto has lapsed,  expired or been abandoned or canceled
or is the subject of  cancellation  or other  adversarial  proceedings,  and all
applications  therefor  are  pending and in good  standing.  The Company and its
subsidiaries  have complied with their contractual  obligations  relating to the
protection of the Intangibles used pursuant to licenses. To the knowledge of the
Company,  no person is infringing on or violating the Intangibles  owned or used
by the Company or any of its subsidiaries.

                                      -7-
<PAGE>

      (j) Environment.  Except as disclosed in the SEC Documents (i) there is no
environmental  liability,  nor factors likely to give rise to any  environmental
liability,  affecting  any  of  the  properties  of  the  Company  or any of its
subsidiaries  that  individually  or in the  aggregate,  would  have a  Material
Adverse  Effect and (ii)  neither the Company  nor any of the  subsidiaries  has
violated any  environmental  law  applicable  to it now or previously in effect,
other  than  such  violations  or  infringements  that,  individually  or in the
aggregate, have not had and will not have a Material Adverse Effect.

      (k) Title.  The Company and each of its subsidiaries has good title in fee
simple to any and all real  property that it owns and good title to all personal
property  owned by it which is material to its  business,  free and clear of all
liens,  encumbrances  and  defects  except  for  such  defects  in  title  that,
individually or in the aggregate,  would not have a Material Adverse Effect. Any
real  property  and  facilities  held under  lease by the  Company or any of its
subsidiaries are held by the Company or such subsidiary under valid,  subsisting
and  enforceable  leases with such  exceptions,  which have not had and will not
have a Material Adverse Effect.

      (l) Insurance.  The Company and its  subsidiaries  maintain such insurance
relating to their business,  operations,  assets, key-employees and officers and
directors as is appropriate to their business,  assets and  operations,  in such
amounts and against such risks as are customarily carried and insured against by
owners of  comparable  businesses,  assets and  operations,  and such  insurance
coverages  will be  continued  in full  force and  effect to and  including  the
Closing  Date  other  than  those  insurance  coverages  in respect of which the
failure to continue in full force and effect could not reasonably be expected to
have a Material Adverse Effect.

      (m)  Acknowledgment  Regarding the Fund's Purchase of the Securities.  The
Company  acknowledges  and agrees  that  neither  Fund is acting as a  financial
advisor or is acting as a fiduciary of the Company (or in any similar  capacity)
with respect to this Agreement or the transactions  contemplated hereby, and the
relationship  between the  Company  and the Funds is "arms  length" and that any
statement made by any Fund or any of its representatives or agents in connection
with this Agreement and the transactions  contemplated hereby is not advice or a
recommendation  and is merely  incidental to such Fund's  purchase of Securities
and has not been relied upon by the  Company,  its  officers or directors in any
way. The Company further represents to the Funds that its decision to enter into
this  Agreement  has been  based  solely  on an  independent  evaluation  by the
Company.

      (n)  Brokers.  Except for Alegro  Capital  Limited,  the  Company  has not
engaged any person to which or to whom  brokerage  commissions,  finder's  fees,
financial advisory fees or similar payments are or will become due in connection
with this Agreement or the transactions  contemplated  hereby except for M.A.G.,
whose administrative fee will be paid by the Company.

                                      -8-
<PAGE>

      (o) Tax Status. The Company and each of its subsidiaries has made or filed
all material tax returns,  reports and declarations required by any jurisdiction
to which it is subject  (unless  and only to the extent  that the Company or the
applicable  subsidiary  has set aside on its books  provisions  adequate for the
payment  of all unpaid  and  unreported  taxes) and has paid all taxes and other
governmental  assessments  and charges  that are  material  in amount,  shown or
determined to be due on such  returns,  reports and  declarations,  except those
being contested in good faith and has set aside on its books provisions adequate
for the payment of all taxes for periods subsequent to the periods to which such
returns,  reports or  declarations  apply.  There are no material  unpaid  taxes
claimed to be due by the taxing authority of any  jurisdiction.  The Company has
not executed a waiver with respect to any statute of limitations relating to the
assessment or collection of any federal, state or local tax.

      (p)  No  General   Solicitation.   Neither  the  Company  nor  any  person
participating  on  its  behalf  in  the  transactions  contemplated  hereby  has
conducted any "general  solicitation" or "general advertising" as such terms are
used in  Regulation  D, with  respect  to any of the  Securities  being  offered
hereby.

      (q) Securities  Laws.  Neither the Company nor any of its affiliates,  nor
any person acting on their behalf, has, directly or indirectly,  made any offers
or sales of any  security  or  solicited  any offers to buy any  security  under
circumstances  that would require  registration of the Securities  being offered
hereby  under the  Securities  Act or cause this  offering of  Securities  to be
integrated  with any prior offering of securities of the Company for purposes of
the Securities Act or any applicable stockholder approval provisions, including,
without  limitation,  Rule 4350(i) of the  National  Association  of  Securities
Dealers ("NASD") or any similar rule.  Subject to (i) the Company's  reliance on
the representations and warranties of the Funds and M.A.G.  contained herein and
(ii)  any  applicable   post-Closing  filing  requirements   (including  without
limitation  the  filing  of a Form D  with  the  U.S.  Securities  and  Exchange
Commission),  the offer,  sale and delivery of the  Debentures and the Warrants,
and of Ordinary  Shares upon the conversion of thereof,  will be exempt from the
registration requirements of Section 5 of the Securities Act.

      (r) F-2 or F-3 Eligibility.  The Company is currently eligible to register
the resale of its Ordinary Shares on a registration statement on Form F-2 or F-3
under the  Securities  Act.  There  exist no facts or  circumstances  (including
without  limitation any required  approvals or waivers of any circumstances that
may delay or prevent the obtaining of accountant's consents) that would prohibit
or delay the preparation  and filing of a registration  statement on Form F-2 or
F-3 with respect to the Registrable  Securities (as defined in the  Registration
Rights Agreement).

      (s) Disclosure.  All information relating to or concerning the Company and
its subsidiaries set forth in this Agreement or otherwise  provided to the Funds
in connection with the transactions  contemplated  hereby is true and correct in
all material respects and the Company and subsidiaries have not omitted to state
any  material  fact  necessary  in order to make the  statements  made herein or
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading.

      (t)  None of the  officers  or  directors  of the  Company  (i)  has  been
convicted  of any crime  (other than  traffic  violations  or  misdemeanors  not
involving fraud) or is currently under  investigation or indictment for any such
crime, or (ii) has been found by a court or governmental agency to have violated
any securities or commodities  law or to have committed  fraud or is currently a
party to any legal proceeding in which either is alleged.

                                      -9-
<PAGE>

      5. COVENANTS.

      (a)  Satisfaction of Conditions.  The parties shall use their best efforts
to satisfy in a timely manner each of the  conditions set forth in Section 6 and
Section 7 of this Agreement.

      (b) Form D;  Blue  Sky  Laws.  The  Company  agrees  to file a Form D with
respect to the Securities as required  under  Regulation D and to provide a copy
thereof to M.A.G.  promptly after such filing.  The Company shall,  on or before
the Closing Date, take such action as the Company shall reasonably  determine is
necessary to qualify the Securities for sale to the Funds and M.A.G. pursuant to
this Agreement under applicable  securities or "blue sky" laws of the applicable
states of the United  States or obtain  exemption  therefrom,  and shall provide
evidence of any such action so taken to M.A.G. on or prior to the Closing Date.

      (c) Reserved.

      (d) Use of Proceeds.  The Company shall use the net proceeds from the sale
of the  Debentures and the Warrants for the purposes set forth on Schedule 5(d);
and no portion of the net proceeds shall be used to repay any  promissory  notes
due to officers or directors of the Company.

      (e) Due Diligence Fee and Expenses.  At the Closing, the Company shall (i)
pay to M.A.G.  a due diligence fee of $190,000;  and (ii) reimburse  M.A.G.  for
$10,000 in legal expenses  reasonably  incurred by M.A.G.  and its affiliates in
connection  with the  negotiation,  preparation,  execution and delivery of this
Agreement,  the Debenture,  the Registration Rights Agreement,  the Warrants and
the other agreements to be executed in connection herewith,  including,  without
limitation,  in conducting M.A.G.'s and its affiliates' and advisors' reasonable
due diligence and M.A.G.'s and its  affiliates'  reasonable  attorneys' fees and
expenses (the "Expenses").

      (f) Reserved.

      (g) Reservation of Shares.  The Company has and shall at all times use its
commercially  reasonable  best efforts to have  authorized  and reserved for the
purpose of issuance a  sufficient  number of Ordinary  Shares to provide for the
issuance of the Shares as provided in Section 2 hereof,  and the full conversion
of the Debentures and the issuance of the Warrant Shares in connection therewith
and as  otherwise  required  hereby and by the Warrants in  accordance  with the
Registration  Rights  Agreement.  The  Company  shall not  reduce  the number of
Ordinary Shares reserved for issuance under this Agreement, the Debentures,  the
Warrants  (except as a result of the  issuance  of the  Warrant  Shares upon the
exercise of the  Warrants)  or the  Registration  Rights  Agreement  without the
consent of the Funds and M.A.G.

      (h) Listing.  On the Closing  Date,  the Company's  Ordinary  Shares shall
trade on the NASDAQ Small Cap  ("NASDAQ") The Company shall use its best efforts
to continue trading of its Ordinary Shares on the NASDAQ, or alternatively,  the
Nasdaq National  Market System,  Over-the-Counter  Bulletin Board,  the New York
Stock  Exchange  ("NYSE")  or the  American  Stock  Exchange  ("AMEX")  (each  a
"Subsequent  Market")  and  will  comply  in all  respects  with  the  Company's
reporting,  filing and other obligations under the bylaws or rules of the NASDAQ
or a Subsequent Market, as applicable.

                                      -10-
<PAGE>

      (i) No  Integrated  Offerings.  The  Company  shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act.

      6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

      The  obligation  of the  Company  hereunder  to issue and sell  Shares and
Warrants to a Fund at the Closing hereunder is subject to the  satisfaction,  at
or  before  the  Closing  Date,  of each of the  following  conditions  thereto;
provided,  however, that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion.

      (a) The  applicable  Fund shall have executed the  signature  page to this
Agreement and the Registration  Rights Agreement,  and delivered the same to the
Company.

      (b) The  applicable  Fund shall have  delivered to the escrow  holder such
Fund's Investment Amount in accordance with Section 2(b) above.

      (c) The  representations  and warranties of the  applicable  Fund shall be
true and correct as of the date when made and as of the  Closing  Date as though
made at that time (except for  representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date),  and the  applicable  Fund shall have  performed,  satisfied  and
complied in all material respects with the covenants,  agreements and conditions
required by this  Agreement to be  performed,  satisfied or complied with by the
applicable Fund at or prior to the Closing Date.

      (d)  No  statute,  rule,  regulation,  executive  order,  decree,  ruling,
injunction;  action,  proceeding  or  interpretation  shall  have been  enacted,
entered, promulgated, endorsed or adopted by any court or governmental authority
of competent jurisdiction or any self-regulatory  organization,  or the staff of
any  thereof,  having  authority  over the  matters  contemplated  hereby  which
questions the validity of, or challenges or prohibits the  consummation  of, any
of the transactions contemplated by this Agreement.

      7.  CONDITIONS  TO EACH  FUND'S  OBLIGATION  TO  PURCHASE  DEBENTURES  AND
WARRANTS.

      The obligation of each Fund hereunder to purchase  Debentures and Warrants
to be purchased by it hereunder is subject to the satisfaction, at or before the
Closing  Date,  of  each  of  the  following  conditions,  provided  that  these
conditions  are for such Fund's  sole  benefit and may be waived by such Fund at
any time in such Fund's sole discretion:

      (a) The Company shall have executed the signature pages to this Agreement,
the Debentures,  and the Security  Agreement and delivered the same to M.A.G. on
its own behalf and on behalf of the Funds.

                                      -11-
<PAGE>

      (b) The Company shall have  executed the  signature  pages of the Warrants
and the Registration  Rights Agreement,  and delivered the same to M.A.G. on its
own behalf and on behalf of the Funds.

      (c) The Shares shall be quoted on the NASDAQ or  authorized  for quotation
or trading on a  Subsequent  Exchange  and shall not have been  suspended  or be
under threat of suspension by the SEC or the NASD.

      (d) The  representations  and  warranties of the Company shall be true and
correct in all material  respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date, which  representations and warranties shall be true
and correct as of such date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants,  agreements and conditions
required by this  Agreement to be  performed,  satisfied or complied with by the
Company at or prior to the Closing  Date.  In the event that this  Agreement  is
executed  prior to the Closing  Date,  M.A.G.  shall have received a certificate
executed on behalf of the Company by its Chief  Financial  Officer,  dated as of
the Closing Date, to the foregoing  effect and attaching true and correct copies
of the resolutions  adopted by the Board of Directors of the Company authorizing
the execution,  delivery and performance by the Company of its obligations under
this  Agreement,  the  Debentures,  the  Warrants  and the  Registration  Rights
Agreement.

      (e)  No  statute,  rule,  regulation,  executive  order,  decree,  ruling,
injunction,  action,  proceeding  or  interpretation  shall  have been  enacted,
entered, promulgated, endorsed or adopted by any court or governmental authority
of competent jurisdiction or any self-regulatory  organization,  or the staff of
any  thereof,  having  authority  over the  matters  contemplated  hereby  which
questions the validity of, or challenges or prohibits the  consummation  of, any
of the transactions contemplated by this Agreement.

      (f) From the date of this Agreement  through the Closing Date, there shall
not have occurred any Material Adverse Effect.

      8. GOVERNING LAW MISCELLANEOUS.

      (a) Governing Law;  Jurisdiction.  This Agreement shall be governed by and
construed in  accordance  with the laws of the State of New York  applicable  to
contracts made and to be performed in the State of New York,  without  regarding
to conflicts of laws provisions.

      (b)  Counterparts.   This  Agreement  may  be  executed  in  two  or  more
counterparts,  all of which shall be considered  one and the same  agreement and
shall  become  effective  when  counterparts  have been signed by each party and
delivered to the other party.  This Agreement,  once executed by a party, may be
delivered to the other  parties  hereto by facsimile  transmission  of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.

      (c)  Headings.  The  headings of this  Agreement  are for  convenience  of
reference  and shall not form part of, or affect  the  interpretation  of,  this
Agreement.

      (d)  Severability.  If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or  enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

                                      -12-
<PAGE>

      (e)  Entire  Agreement;   Amendments;   Waiver.  This  Agreement  and  the
instruments  referenced  herein contain the entire  understanding of the parties
with  respect  to  the  matters  covered  herein  and  therein  and,  except  as
specifically set forth herein or therein, neither the Company nor the Funds make
any  representation,  warranty,  covenant or  undertaking  with  respect to such
matters.  No provision of this  Agreement may be waived or amended other than by
an instrument in writing  signed by the Company and by the Funds.  Any waiver by
the Funds,  on the one hand,  or the Company,  on the other hand, of a breach of
any  provision  of this  Agreement  shall not operate as or be construed to be a
waiver  of any  other  breach of such  provision  of or any  breach of any other
provision of this  Agreement.  The failure of the Funds, on the one hand, or the
Company,  on the other hand to insist upon strict  adherence to any term of this
Agreement on one or more  occasions  shall not be considered a waiver or deprive
that party of the right  thereafter to insist upon strict adherence to that term
or any other term of this Agreement.

      (f) Notices. Any notices required or permitted to be given under the terms
of this Agreement  shall be sent by certified or registered mail (return receipt
requested) or delivered  personally or by courier or by confirmed telecopy , and
shall be effective five days after being placed in the mail, if mailed,  or upon
receipt  or  refusal  of  receipt,  if  delivered  personally  or by  courier or
confirmed  telecopy,  in each case addressed to a party.  The addresses for such
communications shall be:

If to the Company:

Futuremedia Plc
Nile House
Nile Street
Brighton
BN1 1HW

Tel: +44 (0) 1273 829700
Fax: +44 (0) 1273 829702

with a copy to:

Mark A. Dorff, Esq.
Brown Rudnick / 8 Clifford Street / London W1S 2LQ
Tel: +44-20-7851-6005 (Direct)
Fax: +44-20-7851-6100

                                      -13-
<PAGE>

If to a Fund or M.A.G.

M.A.G. Capital, LLC
         555 South Flower Street
         Suite 4200
         Los Angeles, CA 90071
         Telephone No.: (213) 533-8288
         Facsimile No.:  (213) 533-8285
         Attention:        David Firestone

With a copy to

Sheppard Mullin Richter & Hampton LLP
         333 South Hope Street
         48th Floor
         Los Angeles, CA 90071-1448
         Telephone No.: (213) 620-1780
         Facsimile No.:  (213) 620-1398
         Attention:        David C. Ulich

Each party hereto may from time to time change its address or  facsimile  number
for notices under this Section 8 by giving at least ten (10) days' prior written
notice of such changed address or facsimile  number, in the case of the Funds to
the Company, and in the case of the Company to all of the Funds and M.A.G.

      (g) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the  parties and their  successors  and  assigns.  The Company
shall not assign this Agreement or any rights or obligations  hereunder  without
the prior written  consent of each of the Funds and M.A.G.  The Funds and M.A.G.
will not assign their rights  hereunder  except in  compliance  with federal and
state securities laws.

      (h) Third Party Beneficiaries.  This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of nor may any provision  hereof be enforced by any other
person.

      (i) Survival.  The  representations  and warranties of the Company and the
agreements   and   covenants   of  the   Company   shall   survive  the  Closing
notwithstanding any due diligence investigation conducted by or on behalf of the
Funds and M.A.G.  Moreover,  none of the  representations and warranties made by
the  Company  herein  shall act as a waiver of any rights or  remedies a Fund or
M.A.G. may have under  applicable  federal or state securities laws. The Company
agrees to indemnify  and hold  harmless  each Fund and M.A.G.  and each of their
managers,  officers,  directors,   employees,   partners,  members,  agents  and
affiliates  for loss or damage  relating to the Securities  purchased  hereunder
arising as a result of or  related  to any  breach by the  Company or any of its
representations or covenants set forth herein, including advancement of expenses
as they are incurred.

      (j) Further  Assurances.  Each party shall do and perform,  or cause to be
done and  performed,  all such  further acts and things,  and shall  execute and
deliver all such other agreements,  certificates,  instruments and documents, as
the other  party may  reasonably  request  in order to carry out the  intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

                                      -14-
<PAGE>

      (k)  Termination.  In the  event  that the  Closing  Date  shall  not have
occurred on or before July 22, 2005,  unless the parties agree  otherwise,  this
Agreement  shall  terminate at the close of business on such date and the escrow
holder shall return all funds to the Fund.  Notwithstanding  any  termination of
this  Agreement,  any party not in breach of this  Agreement  shall preserve all
rights and  remedies it may have  against  another  party hereto for a breach of
this Agreement prior to or relating to the termination hereof.

      (l) Joint  Participation  in Drafting.  Each party to this  Agreement  has
participated in the negotiation and drafting of this Agreement,  the Debentures,
the Registration Rights Agreement,  and the Warrants. As such, the language used
herein and  therein  shall be deemed to be the  language  chosen by the  parties
hereto to express their mutual intent,  and no rule of strict  construction will
be applied against any party to this Agreement, the Debentures, the Registration
Rights Agreement, or the Warrants.

      (m) Equitable Relief.  Each party  acknowledges that a breach by it of its
obligations  hereunder  will  cause  irreparable  harm to the other  parties  by
vitiating  the  intent  and  purpose of the  transactions  contemplated  hereby.
Accordingly,  each party acknowledges that the remedy at law for a breach of its
obligations hereunder will be inadequate and agrees, in the event of a breach or
threatened  breach by such party of the provisions of this  Agreement,  that the
other parties shall be entitled, in addition to all other available remedies, to
an  injunction  restraining  any breach and  requiring  immediate  issuance  and
transfer, without the necessity of showing economic loss and without any bond or
other security being required.

      (n)  Determinations.  Except as otherwise  expressly  provided herein, all
consents, approvals and other determinations to be made by the Funds pursuant to
this  Agreement and all waivers and  amendments to or of any  provisions in this
Agreement  prior to the Closing  Date to be binding upon a Fund shall be made by
such Fund and except as  otherwise  expressly  provided  herein,  all  consents,
approvals  and other  determinations  (other  than  amendments  to the terms and
provisions of this Agreement) to be made by the Funds pursuant to this Agreement
and all waivers and amendments to or of any  provisions in this Agreement  after
the Closing Date shall be made by the Funds.

      (o)  Costs  and  Attorneys'  Fees.  If any  action  at law or in equity is
necessary to enforce or interpret the terms of this Agreement,  the Registration
Rights  Agreement or any of the Debentures or Warrants,  the prevailing party or
parties shall be entitled to receive from the other party or parties  reasonable
attorneys'  fees,  costs and  necessary  disbursements  in addition to any other
relief to which the prevailing party or parties may be entitled.

      9. ADDITIONAL FUNDING.

The Funds will provide additional funding ("Additional  Funding") in the form of
Convertible  Debentures to Company in the amount of  $2,000,000  (or such larger
amount as agreed with the Company) on the terms herein  subject to the following
milestones and conditions:

                                      -15-
<PAGE>

      (a)  Company  requests  the  Additional  Funding  in  writing on or before
September 30, 2006;

      (b) There is not and there has not been at any time,  a default by Company
under the terms of this  Agreement,  the  Debentures,  the  Registration  Rights
Agreement or the Warrants;

      (c) The  closing  price of the  Ordinary  Shares on the  NASDAQ for the 20
trading days  immediately  preceding the written request for Additional  Funding
has been equal to or greater than the Conversion Price;

      (d) The Company  exceeds FY 2006 Q2 Budget Revenue of UK  (pound)4,172,000
(as defined in the Company's Board Minutes) and reaches break-even EBIT; and

      (e) Shareholder approval of the Additional Funding is not required.

Provided  that the Market Price (as defined in the  Debentures)  of the Ordinary
Shares at the closing  date of the  Additional  Funding is less than or equal to
$0.80 per share,  then the  conversion  price for the  debentures  issued in the
Additional  Funding shall equal the Conversion Price. If the Market Price of the
Ordinary  Shares at the closing date of the  Additional  Funding is greater than
$0.80 per share,  then the  conversion  price for the  debentures  issued in the
Additional  Funding  shall  equal the Market  Price on the  closing  date of the
Additional  Funding.  Upon the closing of the  Additional  Funding,  the Company
shall issue additional  warrants to the Funds and M.A.G.  calculated by dividing
$1,000,000 by the conversion price of the convertible  debentures  issued in the
Additional Financing.  The exercise price per share for the Warrants shall equal
the closing  price of the Ordinary  Shares on the last trading day preceding the
closing of the Additional Funding.

      10. RIGHT OF FIRST REFUSAL.

Commencing  on the Closing  Date hereof and  continuing  until the  Registration
Statement (as defined in the Registration  Rights Agreement) is deemed effective
by the SEC,  the Funds shall have a right of first  refusal on any  financing in
which the  Company  is the  issuer of debt or equity  securities.  Such right of
first  refusal to be exercised  within five (5) trading  days after  delivery of
written notice by Company to the Funds of the terms of a prospective financing.

11. NASDAQ RULES

In accordance with the shareholder approval  requirements under the rules of the
Nasdaq  Stock  Market,  notwithstanding  any other  provision  contained in this
Agreement,  the  Debenture  or the  Warrants,  in no event  shall the Company be
obligated  in  connection  with the  transactions  contemplated  hereby to issue
shares  representing more than 19.99% of its outstanding capital stock as of the
date hereof (and before giving effect to the transactions  contemplated  hereby)
without prior approval of its  shareholders at a general meeting called for that
purpose.

                            Signature Page to Follow


                                      -16-
<PAGE>


      IN WITNESS  WHEREOF,  the parties  have caused this  Agreement  to be duly
executed as of the date first above written.

Futuremedia PLC                                 M.A.G. Capital, LLC

By:  /s/ Leonard M. Fertig                      By:      /s/ David Firestone
   --------------------------------                -------------------------
Name:    Leonard M. Fertig                      Name:    David Firestone
     ------------------------------                  -------------------
Title:   President                              Title:   Managing Member
      -----------------------------                   ------------------


The Funds:
Mercator Momentum Fund LP                       Monarch Pointe Fund, Ltd.
                                                -------------------------
By: M.A.G. Capital, LLC,
Its: General Partner                            By:      /s/ David Firestone
                                                   -------------------------
                                                Name:    David Firestone
By:      /s/ David Firestone                    Title:   President
     ------------------------------                  -------------------
Name:    David Firestone
     ------------------------------
Title:   Managing Member
     ------------------------------

Mercator Momentum Fund III, LP
By: M.A.G. Capital, LLC,
Its: General Partner

By:      /s/ David Firestone
     ------------------------------
Name:    David Firestone
     ------------------------------
Title:   Managing Member
     ------------------------------

                                      -17-
<PAGE>

                              DISCLOSURE SCHEDULES
                              --------------------


                         Schedule 4(c) - Capitalization
                         ------------------------------

o     Authorised  capital:  250,000,000  ordinary  shares  of 1 1/9  pence  each
      ("Ordinary  Shares")  and  2,000,000  preference  shares  of 2 pence  each
      ("Preference Shares").

o     Outstanding  capital:  91,769,479 Ordinary Shares. There are no Preference
      Shares outstanding.

o     Outstanding options:  There are currently  outstanding options to purchase
      of an aggregate of 5,188,899 Ordinary Shares.

o     Total option pool:  There are an aggregate of 15,070,818  Ordinary  Shares
      reserved for issuance  under the Company's  share option plans  (including
      the 5,188,899  Ordinary  Shares  covered by  outstanding  options as noted
      above).

o     Alegro warrants:  Following completion of the transactions contemplated by
      this Agreement,  the Company will be obligated to issue warrants to Alegro
      Capital  Limited  equal to 5% of the funds  raised  based on the price per
      share of  transaction  and with an exercise  price equal to such per share
      price. Such warrants will otherwise be on substantially  similar terms and
      conditions as the Warrants to be issued under this Agreement.


                         Schedule 5(d) - Use of Proceeds
                         -------------------------------

Use of proceeds include the following:

o     payment of certain existing creditors;

o     investment in our new products including "e-shop" and "FM broadband"; and

o     general working capital,  including  funding  inventories and paying trade
      debtors in connection with increased sales activity.


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