Sonic Foundry Completes Private Financing of $5 Million Convertible Subordinated Debt

Sonic Foundry, Inc. (Nasdaq: SOFO) today announced it has completed a $5 million private financing to institutional investors of 7.5% convertible subordinated debentures expiring September, 2002.

The notes and accrued interest will be convertible into common stock at $10.28 per share, subject to certain adjustments. In addition to the notes, the Company issued 97,276 warrants expiring September, 2004, each exercisable for one share of common stock at a conversion price of $10.28 per share.

"This transaction is the first step in our overall strategy to assure the resources necessary to further our goals in becoming a leading force in the fast developing interactive new media arena," said Rimas Buinevicius, Chairman and Chief Executive Officer of Sonic Foundry. "This private financing meets our near-term needs and allows us the flexibility necessary to implement a longer term financing strategy."

The Company said proceeds from the debt offering will be used primarily for sales and marketing programs associated with the expansion of its consumer product line and services, and for working capital and general corporate purposes.

Concurrent with this private financing, Sonic Foundry's 7,662,483 preferred shares outstanding have been converted to 3,831,239 common shares, totaling the Company's outstanding common shares at 6,497,249 as of September 15, 1999.