SEC Company Response from FUTUREMEDIA PLC (CIK 0000906476) — Apr 15, 2005
FUTUREMEDIA PLC (CIK 0000906476)
Date: April 15, 2005 · CIK: 0000906476 · Accession: 0001144204-05-011562
AI Filing Summary & Sentiment
File numbers found in text: 000-21978
Referenced dates: March 21, 2005
Letter
Re: Futuremedia PLC Form 20-F for the fiscal year ended April 30, 2004 File No. 000-21978
[FUTUREMEDIA LETTERHEAD]
making learning work
Futuremedia Plc Nile House Nile Street Brighton East Sussex BN1 1HW
T +44 (0) 1273 829700 F +44 (0) 1273 829702
April 15, 2005
VIA EDGAR --------- United States Securities and Exchange Commission Division of Corporation Finance ATTN: Joseph Foti, Senior Assistant Chief Accountant 450 Fifth Street, N.W. Washington, D.C. 20549-0306
Ladies and Gentlemen:
This letter is in response to the letter from the Commission's staff dated March 21, 2005 regarding the above referenced filing. The headings below correspond to the headings in the staff's letter, and each of the Company's responses is preceded by the text of the comment from the staff's letter.
In connection with this response letter, the Company acknowledges that (i) the Company is responsible for the adequacy and accuracy of the disclosure in the filing; (ii) staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Registered Office: Nile House Nile Street Brighton East Sussex BN1 1HW Registered in England No. 1616681 VAT No GB 376 832223
<PAGE> United States Securities and Exchange Commission Division of Corporation Finance ATTN: Joseph Foti, Senior Assistant Chief Accountant April 15, 2005 Page 2
Annual Report on Form 20-F for the Fiscal Year ended April 30, 2004
Item 7. Major Shareholders and Related Party Transactions - Page 39.
1. SEC Comment: We note your response to comment 2 that you have no further information on the ultimate beneficial ownership of Rennes Foundation and Jobelin Foundation. However, we are interested in those entities and persons that have voting or investment power in the two Foundations, rather than specifically the beneficial owners. Please supplementally tell us, and disclose in future filings, the names of the entities that have voting or investment power in the Rennes and Jobelin Foundations and the Futuremedia officers and directors that have voting or investment power in those entities.
COMPANY RESPONSE: As indicated in Item 7 (key 2) of the 20-F, Mr. Rolf Herter, who served on the Board on the nomination of Rennes Foundation and Jobelin Foundation, resigned as Director on August 5, 2003. The Company does not have access to any further information regarding the voting or investment power beyond this information or what Rennes Foundation and Jobelin Foundation have disclosed in their 13D filings or other filings with the Commission.
No current director or officer of the Company has any voting or investment power in these entities.
The Company acknowledges the Commission's comment and will provide this disclosure in future filings.
Financial Statements
Notes to the financial statements
Revenue Recognition, page F-8
2. SEC Comment: We note your response to comment 4. You state that you apply the guidance in EITF 00-21 in recognizing revenue from Learning for ALL(TM). EITF 00-21 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting when higher literature provides no guidance. From your disclosure, this e-learning management system consists of providing all hardware, operating system software and other software packages and support services such as delivery, installation, training and support. Tell us supplementally and disclose in future filings if you apply the guidance in SOP 97-2 in recognizing revenue from Learning for ALL(TM). If you apply the guidance in SOP 97-2, tell us how you determined the fair value of each element. If you believe the software is incidental to your product and therefore you are not within the scope of SOP 97-2, explain to us the basis for your conclusion. Also, tell us how you considered the guidance provided in EITF 03-05. We may have further comment based on your response.
<PAGE> United States Securities and Exchange Commission Division of Corporation Finance ATTN: Joseph Foti, Senior Assistant Chief Accountant April 15, 2005 Page 3
COMPANY RESPONSE:
The Company launched its award-winning Learning For All(TM) product in November 2003, providing participants with hardware, software (both off-line and on-line), and Internet connection in their homes for a period of three years. Futuremedia hosts the website providing access to online materials. Participants, who have to be employees of the sponsoring client, use a UK tax incentive scheme based on a salary sacrifice principle to pay for the package. The participants not only receive a selection of desktop and laptop fully-integrated computers with options for printers and scanners, but Futuremedia also provides for delivery, installation, training and support.
The software included in the package, which are all off-the-shelf products, comprises the operating software, a selection of interactive games software and a selection of interactive Learning software accessible on CDrom, anti-virus and adult filter software, together with a number of netbased Learning titles, accessible via the hosted website. The aggregate selling value of all of the software provided amounts to approximately 30% of the total package price.
The Company believes that the software components are incidental to the Learning For All(TM) product, and that therefore has not applied the guidance in SOP 97-2. This conclusion is based on the following:
o the software is not a significant focus of the marketing effort, and is available for purchase separately;
o no post-contract customer support is provided; and
o the Company does not incur any significant cost within the scope of FASB Statement No. 86.
Guidance provided under EITF 03-05 only applies where software is more than incidental, and has therefore not been applied.
3. SEC Comment: Tell us supplementally how you considered the guidance provided in EITF 00-3 and its impact on your revenue recognition policy.
COMPANY RESPONSE: The Company believes that the guidance given under EITF 00-3 that seeks to determine whether certain software elements should be recognized separately does not apply in the case of the Learning For All(TM) product because the contractual arrangements do not allow the customer the right to take the software at any time during the hosting period. The nature of the sale therefore does not meet the requirement that both the following criteria are satisfied:
<PAGE> United States Securities and Exchange Commission Division of Corporation Finance ATTN: Joseph Foti, Senior Assistant Chief Accountant April 15, 2005 Page 4
o the customer does not have the right to take the software at any time during the hosting period without significant penalty; and
o it must be feasible for the customer either to run the software on its own hardware or to host the software with another third party.
Form 6-K dated December 15, 2004
4. SEC Comment: We note during the six months ended October 31, 2004 you recorded a loss in value which was other than a temporary decline of your investment in Luvit AB of GBP 282,000. Tell us supplementally the following in regards to your investment:
o what factors you considered in determining the fair value of your investment,
o how you determined the fair value of your investment at October 31, 2004 and
o why you believe the remaining value of your investment is recoverable.
Refer to paragraph 19(h) of APB 18.
COMPANY RESPONSE: The original investment in Luvit AB was made in April 2003, and totaled (pound)943,000, representing a 29.8% holding in that company, and has therefore been recorded under the equity method. Of the (pound)943,000, (pound)204,000 was recorded as investments, being 29.8% of the net assets of Luvit AB at the time of acquisition. The remaining (pound)739,000 was recorded as goodwill.
By the end of the fiscal year ended April 30, 2004, the Company's sale of shares in Luvit AB and the Company's share of losses incurred by Luvit AB had reduced the carrying value of the investment to zero, and impairment testing had reduced the value of goodwill to (pound)639,000. During the first six months of the following fiscal year, Luvit AB continued to sustain losses. Using the established principle of valuing the goodwill based on the trading price of Luvit shares over the six months preceding the balance sheet date, a further impairment was taken of (pound)282,000 in the six month period ended October 31, 2004.
The Company believed at the time of the filing that, given the steady improvement in the performance of Luvit AB, the value of Luvit shares would stabilize and that Futuremedia's investment in Luvit would be recoverable.
<PAGE> United States Securities and Exchange Commission Division of Corporation Finance ATTN: Joseph Foti, Senior Assistant Chief Accountant April 15, 2005 Page 5
5. SEC Comment: It appears that you have discontinued applying the equity method in accounting for your investment in Luvit AB in 2005 (i.e. recording your share of losses in Luvit AB). Tell us why you believe it is not appropriate to continue recording your share of the losses of Luvit AB. Also, tell us supplementally if you are required to provide additional funding to Luvit AB beyond your investment. Refer to the guidance in paragraph 19(i) of APB 18.
COMPANY RESPONSE: The assumption that the Company has discontinued the equity method of accounting for its investment in Luvit AB in fiscal 2005 is incorrect. Since making the initial investment in April 2003, the transaction has been recorded using the equity method. During the period 1 May 2004 to 31 October 2004, Futuremedia's percentage holding remained at 27.2%. Losses recorded by Luvit AB during the same period are shown below, together with Futuremedia's share of those losses:
Period Luvit AB (loss) Futuremedia's share at 27.2% (pound)k (pound)k
1 May 2004 to 31 July 2004 189 51
1 August 2004 to 31 October 2004 268 72
Total for six months to 31 October 457 123
No losses were recorded in the period May 1, 2004 to October 31, 2004 since the value of the investment had already been written down to zero at the end of the previous fiscal year. However, during the same period, Futuremedia has recorded a (pound)282,000 impairment against the remaining goodwill asset, a substantially higher write down in carrying value beyond its share of losses.
The Company is under no obligation to provide additional funding to Luvit AB beyond its original investment.
<PAGE> United States Securities and Exchange Commission Division of Corporation Finance ATTN: Joseph Foti, Senior Assistant Chief Accountant April 15, 2005 Page 6
Please note that Geoff Bicknell is no longer the Company's Chief Financial Officer. All future correspondence should be directed to the attention of Mark Wilsher.
Please do not hesitate to contact me if you have any further questions or comments. We have sent a courtesy copy of this letter to Claire Lamoureaux of the Commission's staff.
Very truly yours,
FUTUREMEDIA PLC
By /s/ Peter Machin
-------------------------------------
Company Secretary
Show Raw Text
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<TEXT>
[FUTUREMEDIA LETTERHEAD]
making learning work
Futuremedia Plc
Nile House
Nile Street
Brighton
East Sussex
BN1 1HW
T +44 (0) 1273 829700
F +44 (0) 1273 829702
April 15, 2005
VIA EDGAR
---------
United States Securities and Exchange Commission
Division of Corporation Finance
ATTN: Joseph Foti, Senior Assistant Chief Accountant
450 Fifth Street, N.W.
Washington, D.C. 20549-0306
Re: Futuremedia PLC
Form 20-F for the fiscal year ended April 30, 2004
File No. 000-21978
Ladies and Gentlemen:
This letter is in response to the letter from the Commission's staff dated
March 21, 2005 regarding the above referenced filing. The headings below
correspond to the headings in the staff's letter, and each of the Company's
responses is preceded by the text of the comment from the staff's letter.
In connection with this response letter, the Company acknowledges that (i)
the Company is responsible for the adequacy and accuracy of the disclosure in
the filing; (ii) staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action with respect to
the filing; and (iii) the Company may not assert staff comments as a defense in
any proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
Registered Office: Nile House Nile Street Brighton East Sussex BN1 1HW
Registered in England No. 1616681 VAT No GB 376 832223
<PAGE>
United States Securities and Exchange Commission
Division of Corporation Finance
ATTN: Joseph Foti, Senior Assistant Chief Accountant
April 15, 2005
Page 2
Annual Report on Form 20-F for the Fiscal Year ended April 30, 2004
Item 7. Major Shareholders and Related Party Transactions - Page 39.
1. SEC Comment: We note your response to comment 2 that you have no
further information on the ultimate beneficial ownership of Rennes
Foundation and Jobelin Foundation. However, we are interested in
those entities and persons that have voting or investment power in
the two Foundations, rather than specifically the beneficial owners.
Please supplementally tell us, and disclose in future filings, the
names of the entities that have voting or investment power in the
Rennes and Jobelin Foundations and the Futuremedia officers and
directors that have voting or investment power in those entities.
COMPANY RESPONSE: As indicated in Item 7 (key 2) of the 20-F, Mr.
Rolf Herter, who served on the Board on the nomination of Rennes
Foundation and Jobelin Foundation, resigned as Director on August 5,
2003. The Company does not have access to any further information
regarding the voting or investment power beyond this information or
what Rennes Foundation and Jobelin Foundation have disclosed in
their 13D filings or other filings with the Commission.
No current director or officer of the Company has any voting or
investment power in these entities.
The Company acknowledges the Commission's comment and will provide
this disclosure in future filings.
Financial Statements
Notes to the financial statements
Revenue Recognition, page F-8
2. SEC Comment: We note your response to comment 4. You state that you
apply the guidance in EITF 00-21 in recognizing revenue from
Learning for ALL(TM). EITF 00-21 addresses how to determine whether
an arrangement involving multiple deliverables contains more than
one unit of accounting when higher literature provides no guidance.
From your disclosure, this e-learning management system consists of
providing all hardware, operating system software and other software
packages and support services such as delivery, installation,
training and support. Tell us supplementally and disclose in future
filings if you apply the guidance in SOP 97-2 in recognizing revenue
from Learning for ALL(TM). If you apply the guidance in SOP 97-2,
tell us how you determined the fair value of each element. If you
believe the software is incidental to your product and therefore you
are not within the scope of SOP 97-2, explain to us the basis for
your conclusion. Also, tell us how you considered the guidance
provided in EITF 03-05. We may have further comment based on your
response.
<PAGE>
United States Securities and Exchange Commission
Division of Corporation Finance
ATTN: Joseph Foti, Senior Assistant Chief Accountant
April 15, 2005
Page 3
COMPANY RESPONSE:
The Company launched its award-winning Learning For All(TM) product
in November 2003, providing participants with hardware, software
(both off-line and on-line), and Internet connection in their homes
for a period of three years. Futuremedia hosts the website providing
access to online materials. Participants, who have to be employees
of the sponsoring client, use a UK tax incentive scheme based on a
salary sacrifice principle to pay for the package. The participants
not only receive a selection of desktop and laptop fully-integrated
computers with options for printers and scanners, but Futuremedia
also provides for delivery, installation, training and support.
The software included in the package, which are all off-the-shelf
products, comprises the operating software, a selection of
interactive games software and a selection of interactive Learning
software accessible on CDrom, anti-virus and adult filter software,
together with a number of netbased Learning titles, accessible via
the hosted website. The aggregate selling value of all of the
software provided amounts to approximately 30% of the total package
price.
The Company believes that the software components are incidental to
the Learning For All(TM) product, and that therefore has not applied
the guidance in SOP 97-2. This conclusion is based on the following:
o the software is not a significant focus of the marketing
effort, and is available for purchase separately;
o no post-contract customer support is provided; and
o the Company does not incur any significant cost within the
scope of FASB Statement No. 86.
Guidance provided under EITF 03-05 only applies where software is
more than incidental, and has therefore not been applied.
3. SEC Comment: Tell us supplementally how you considered the guidance
provided in EITF 00-3 and its impact on your revenue recognition
policy.
COMPANY RESPONSE: The Company believes that the guidance given under
EITF 00-3 that seeks to determine whether certain software elements
should be recognized separately does not apply in the case of the
Learning For All(TM) product because the contractual arrangements do
not allow the customer the right to take the software at any time
during the hosting period. The nature of the sale therefore does not
meet the requirement that both the following criteria are satisfied:
<PAGE>
United States Securities and Exchange Commission
Division of Corporation Finance
ATTN: Joseph Foti, Senior Assistant Chief Accountant
April 15, 2005
Page 4
o the customer does not have the right to take the software at
any time during the hosting period without significant
penalty; and
o it must be feasible for the customer either to run the
software on its own hardware or to host the software with
another third party.
Form 6-K dated December 15, 2004
4. SEC Comment: We note during the six months ended October 31, 2004
you recorded a loss in value which was other than a temporary
decline of your investment in Luvit AB of GBP 282,000. Tell us
supplementally the following in regards to your investment:
o what factors you considered in determining the fair value of
your investment,
o how you determined the fair value of your investment at
October 31, 2004 and
o why you believe the remaining value of your investment is
recoverable.
Refer to paragraph 19(h) of APB 18.
COMPANY RESPONSE: The original investment in Luvit AB was made in
April 2003, and totaled (pound)943,000, representing a 29.8% holding
in that company, and has therefore been recorded under the equity
method. Of the (pound)943,000, (pound)204,000 was recorded as
investments, being 29.8% of the net assets of Luvit AB at the time
of acquisition. The remaining (pound)739,000 was recorded as
goodwill.
By the end of the fiscal year ended April 30, 2004, the Company's
sale of shares in Luvit AB and the Company's share of losses
incurred by Luvit AB had reduced the carrying value of the
investment to zero, and impairment testing had reduced the value of
goodwill to (pound)639,000. During the first six months of the
following fiscal year, Luvit AB continued to sustain losses. Using
the established principle of valuing the goodwill based on the
trading price of Luvit shares over the six months preceding the
balance sheet date, a further impairment was taken of (pound)282,000
in the six month period ended October 31, 2004.
The Company believed at the time of the filing that, given the
steady improvement in the performance of Luvit AB, the value of
Luvit shares would stabilize and that Futuremedia's investment in
Luvit would be recoverable.
<PAGE>
United States Securities and Exchange Commission
Division of Corporation Finance
ATTN: Joseph Foti, Senior Assistant Chief Accountant
April 15, 2005
Page 5
5. SEC Comment: It appears that you have discontinued applying the
equity method in accounting for your investment in Luvit AB in 2005
(i.e. recording your share of losses in Luvit AB). Tell us why you
believe it is not appropriate to continue recording your share of
the losses of Luvit AB. Also, tell us supplementally if you are
required to provide additional funding to Luvit AB beyond your
investment. Refer to the guidance in paragraph 19(i) of APB 18.
COMPANY RESPONSE: The assumption that the Company has discontinued
the equity method of accounting for its investment in Luvit AB in
fiscal 2005 is incorrect. Since making the initial investment in
April 2003, the transaction has been recorded using the equity
method. During the period 1 May 2004 to 31 October 2004,
Futuremedia's percentage holding remained at 27.2%. Losses recorded
by Luvit AB during the same period are shown below, together with
Futuremedia's share of those losses:
Period Luvit AB (loss) Futuremedia's
share at 27.2%
(pound)k (pound)k
1 May 2004 to 31 July 2004 189 51
1 August 2004 to 31 October 2004 268 72
Total for six months to 31 October 457 123
No losses were recorded in the period May 1, 2004 to October 31,
2004 since the value of the investment had already been written down
to zero at the end of the previous fiscal year. However, during the
same period, Futuremedia has recorded a (pound)282,000 impairment
against the remaining goodwill asset, a substantially higher write
down in carrying value beyond its share of losses.
The Company is under no obligation to provide additional funding to
Luvit AB beyond its original investment.
<PAGE>
United States Securities and Exchange Commission
Division of Corporation Finance
ATTN: Joseph Foti, Senior Assistant Chief Accountant
April 15, 2005
Page 6
Please note that Geoff Bicknell is no longer the Company's Chief Financial
Officer. All future correspondence should be directed to the attention of Mark
Wilsher.
Please do not hesitate to contact me if you have any further questions or
comments. We have sent a courtesy copy of this letter to Claire Lamoureaux of
the Commission's staff.
Very truly yours,
FUTUREMEDIA PLC
By /s/ Peter Machin
-------------------------------------
Company Secretary
cc: Claire Lamoureaux (Via Fax)
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