As filed with the Securities and Exchange Commission on July 15, 2005
SEC Registration No. 333-125239
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Delaware NEOMEDIA TECHNOLOGIES, INC. 36-3680347
(State or other jurisdiction of (Name of issuer in its charter) (I.R.S. Employer
incorporation or organization) Identification No.)
Charles T. Jensen
2201 Second Street, Suite 402
2201 Second Street, Suite 402 Fort Myers, Florida 33901-3083
Fort Myers, Florida 33901 (239) 337-3434
(239) 337-3434 7373 Telecopier No.: (239) 337-3668
(Address and telephone number of (Primary Standard Industrial (Name, address, and telephone number
Registrant's principal executive offices) Classification Code Number) of agent for service)
With copies to:
Clayton E. Parker, Esq. Ronald S. Haligman, Esq.
Kirkpatrick & Lockhart LLP Kirkpatrick & Lockhart Nicholson Graham LLP
201 S. Biscayne Blvd., Suite 2000 201 S. Biscayne Blvd., Suite 2000
Miami, FL 33131 Miami, FL 33131
Telephone No.: (305) 539-3305 Telephone No.: (305) 539-3319
Telecopier No.: (305) 358-7095 Telecopier No.: (305) 358-7095
Approximate date of commencement of proposed sale to the public: From time to
time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, please check the
following box. |_|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
--------------------------------------------------- ----------------- ----------------- ------------------- ----------------
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
To be Price per Offering Registration
Title of Securities to be Registered Registered(1) Share (2) Price (2) Fee
--------------------------------------------------- ----------------- ----------------- ------------------- ----------------
Shares underlying warrants to purchase Common 54,000,000 $0.446 $24,084,000 $2,834.69
Stock, par value $0.01 per share
--------------------------------------------------- ----------------- ----------------- ------------------- ----------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(1), using the average of the closing bid and ask prices of
NeoMedia's common stock of $0.446 per share as reported in the
Over-the-Counter Bulletin Board on July 13, 2005, which is a date within
five business days of the date of this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRAITON STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRAITON STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
Subject to Completion or Amendment
Dated ________, 2005
54,000,000 Shares
NEOMEDIA TECHNOLOGIES, INC.
Shares Underlying Warrants to Purchase Shares of Common Stock
54,000,000 Shares Underlying Warrants to Purchase
Shares of Common Stock of NeoMedia Technologies, Inc.
All of the shares of common stock offered in this Prospectus are being offered
by the selling security holders in transactions as described in the plan of
distribution. The Company will not receive any of the proceeds from the sales
(other than exercise prices received upon the exercise of currently outstanding
warrants, the underlying shares of which are being registered for sale
hereunder).
Our common stock is traded on the Over-the-Counter Bulletin Board under the
symbol "NEOM". The last reported sale price of our common stock on the
Over-the-Counter Bulletin Board on June 27, 2005 was $0.45 per share.
We currently have an additional offering outstanding in connection with our
prending acqusition of BSD Software, Inc. ("BSD") On April 5, 2005, we filed a
registration statement on Form S-4 (Registration No. 333-123848) to register up
to 20,000,000 shares to be issued to BSD shareholders in exchange for all the
outstanding shares of BSD. Because the number of shares to be issued in
connection with the acquisition of BSD is based on a formula that is dependent
on our stock price at the effective time of the merger, we will not know the
actual number of shares we will issue until the effective date of the merger. As
of June 27, 2005, based on 31,810,897 shares of BSD common stock outstanding, a
volume-weighted 5-day average closing price of NeoMedia stock of $0.409, and the
share exchange rate outlined in the merger agreement, we would issue an
estimated 5,446,449 shares in connection with the acquisition of BSD. This
calculation is given for reference only.
This investment in the common stock involves a high degree of risk. Please pay
careful attention to all of the information in this Prospectus. In particular,
you should carefully consider the discussion in the section entitled "Risk
Factors" beginning on page 2 of this registration statement.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES REGULATOR HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE
DISTRIBUTED UNDER THIS REGISTRATION STATEMENT OR DETERMINED IF THIS REGISTRATION
STATEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The information in this registration statement is not complete and may be
changed. NeoMedia may not distribute these securities until the registration
statement filed with the United States Securities and Exchange Commission is
declared effective. The registration statement is not and shall not constitute
an offer to sell and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
The date of this Prospectus is ________, 2005.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS........................................................1
ABOUT NEOMEDIA TECHNOLOGIES, INC.............................................1
RISK FACTORS.................................................................2
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS..................13
USE OF PROCEEDS.............................................................14
SELLING STOCKHOLDERS........................................................15
PLAN OF DISTRIBUTION........................................................19
EXPERTS.....................................................................20
WHERE YOU CAN FIND MORE INFORMATION.........................................21
INFORMATION WE INCORPORATE BY REFERENCE.....................................22
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS..........................II-1
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION..................II-1
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.....................II-1
ITEM 16. EXHIBITS......................................................II-2
ITEM 17. UNDERTAKINGS..................................................II-3
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ABOUT THIS PROSPECTUS
This Prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission ("SEC") registering for sale
up to an aggregate of 54,000,000 shares of our common stock underlying warrants
previously issued to the selling security holders. You should read both this
Prospectus and any Prospectus Supplement together with the additional
information under the heading "Where You can Find More Information."
You should rely only on the information contained or incorporated by
reference in this Prospectus and any Prospectus Supplement. We have not
authorized anyone to provide you with different information. We are not making
offers to sell or solicitations to buy the securities in any jurisdiction in
which an offer or solicitation is not authorized or in which the person making
that offer or solicitation is not qualified to do so or anyone to whom it is
unlawful to make an offer or solicitation.
You should not assume that the information contained in this
Prospectus, as well as the information we previously filed with the Securities
and Exchange Commission that is incorporated by reference herein, is accurate as
of any date other than its respective date.
The terms "NeoMedia," "we," "our," and "us" refer to NeoMedia
Technologies, Inc. and its subsidiaries unless the context suggests otherwise.
ABOUT NEOMEDIA TECHNOLOGIES, INC.
NeoMedia develops proprietary technologies that link physical
information and objects to the Internet marketed under our PaperClickTM brand
name.
NeoMedia is structured as three business units: NeoMedia Internet
Software Service ("NISS"), NeoMedia Consulting and Integration Services
("NCIS"), and NeoMedia Micro Paint Repair ("NMPR").
NISS is the core business and is based in the United States, with
development and operating facilities in Fort Myers, Florida. NISS develops and
supports our physical world to Internet core technology, including our linking
"switch" and NeoMedia's application platforms. NISS also manages our
intellectual property portfolio, including the identification and execution of
licensing opportunities surrounding the patents.
NCIS is the original business line upon which NeoMedia was organized.
This unit resells client-server equipment and related software, and general and
specialized consulting services. Systems integration services also identifies
prospects for custom applications based on our products and services. These
operations are based in Lisle, Illinois.
NMPR (micro paint repair offerings) is the business unit encompassing
the CSI International chemical line acquired during 2004. NMPR is attempting to
commercialize its unique micro-paint repair solution. We completed the
acquisition of CSI on February 6, 2004.
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RISK FACTORS
In addition to the other information included in this registration
statement, including the matters addressed in "Cautionary Statement Concerning
Forward-Looking Statements," you should carefully consider the following risks
before deciding whether to buy our common stock. If any of these risks actually
occur, our business, financial condition, operating results or cash flows could
be materially adversely affected. This could cause the trading price of our
common stock to decline and you may lose part or all of your investment.
Risks Related to NeoMedia's Business
NeoMedia has Historically Lost Money and Losses May Continue
We have incurred substantial losses since our inception, and anticipate
continuing to incur substantial losses for the foreseeable future. We incurred a
loss of $1,219,000 and $2,222,000 in the three-month periods ended March 31,
2005 and 2004, respectively, and a loss of $7,230,000 in the year ended December
31, 2004 and $5,382,000 in the year ended December 31, 2003. Our accumulated
losses were approximately $84,596,000 and $83,377,000 as of March 31, 2005 and
December 31, 2004, respectively. As of March 31, 2005 and December 31, 2004 and
2003, we had a working capital (deficit) of approximately ($3,295,000),
($2,597,000) and ($6,526,000), respectively. We had stockholders' equity
(deficit) of $3,900,000, $4,392,000 and ($3,203,000) at March 31, 2005, and
December 31, 2004 and 2003, respectively. We generated revenues of $747,000,
$350,000, $1,700,000 and $2,400,000 for the three-month periods ended March 31,
2005 and 2004, and the years ended December 31, 2004 and 2003, respectively. In
addition, during the three-month periods ended March 31, 2005 and 2004, and the
years ended December 31, 2004 and 2003, we recorded negative cash flows from
operations of $1,660,000, $1,130,000, $4,650,000 and $2,979,000, respectively.
To succeed, we must develop new client and customer relationships and
substantially increase our revenue derived from improved products and additional
value-added services. We have expended, and to the extent we have available
financing, we intend to continue to expend, substantial resources to develop and
improve our products, increase our value-added services and to market our
products and services. These development and marketing expenses must be incurred
well in advance of the recognition of revenue. As a result, we may not be able
to achieve or sustain profitability.
Our Independent Registered Public Accounting Firm Have Added Going Concern
Language To Their Report On Our Consolidated Financial Statements, Which Means
That We May Not Be Able To Continue Operations
The report of Stonefield Josephson, Inc., our independent registered
public accounting firm, with respect to our consolidated financial statements
and the related notes for the years ended December 31, 2004 and 2003, indicates
that, at the date of their report, we had suffered significant recurring losses
from operations and our working capital deficit raised substantial doubt about
our ability to continue as a going concern. Our consolidated financial
statements do not include any adjustments that might result from this
uncertainty.
There is Limited Information Upon Which Investors Can Evaluate Our Business
Because The Physical-World-to-Internet Market Has Existed For Only A Short
Period Of Time
The physical-world-to-Internet market in which we operate is a recently
developed market. Further, we have conducted operations in this market only
since March 1996. Consequently, we have a relatively limited operating history
upon which an investor may base an evaluation of our primary business and
determine our prospects for achieving our intended business objectives. To date,
we have realized limited sales of our physical-world-to-Internet products. We
are prone to all of the risks inherent to the establishment of any new business
venture, including unforeseen changes in our business plan. An investor should
consider the likelihood of our future success to be highly speculative in light
of our limited operating history in our primary market, as well as the limited
resources, problems, expenses, risks, and complications frequently encountered
by similarly situated companies in new and rapidly evolving markets, such as the
physical-world-to-Internet space. To address these risks, we must, among other
things:
o maintain and increase our client base;
o implement and successfully execute our business and marketing
strategy;
o continue to develop and upgrade our products;
o continually update and improve service offerings and features;
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o respond to industry and competitive developments; and
o attract, retain, and motivate qualified personnel.
We may not be successful in addressing these risks. If we are unable to do
so, its business, prospects, financial condition, and results of operations
would be materially and adversely affected.
Our Future Success Depends On The Timely Introduction Of New Products And The
Acceptance Of These New Products In The Marketplace
Rapid technological change and frequent new product introductions are
typical for the markets we serve. Our future success will depend in large part
on continuous, timely development and introduction of new products that address
evolving market requirements. To the extent that we fail to introduce new and
innovative products, we may lose market share to our competitors, which may be
difficult to regain. Any inability, for technological or other reasons, to
successfully develop and introduce new products could materially and adversely
affect our business.
Our Common Stock Is Deemed To Be "Penny Stock," Which May Make It More Difficult
For Investors To Sell Their Shares Due To Suitability Requirements
Our common stock is deemed to be "penny stock" as that term is defined in
Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended.
These requirements may reduce the potential market for our common stock by
reducing the number of potential investors. This may make it more difficult for
investors in our common stock to sell shares to third parties or to otherwise
dispose of them. This could cause our stock price to decline. Penny stocks are
stock:
o with a price of less than $5.00 per share;
o that are not traded on a "recognized" national exchange;
o whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ listed stock must still have a price of not less than $5.00
per share); or
o in issuers with net tangible assets less than $2 million (if the
issuer has been in continuous operation for at least three years) or
$10 million (if in continuous operation for less than three years),
or with average revenues of less than $6 million for the last three
years.
Broker-dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker-dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor.
We Are Uncertain Of The Success Of Our Internet Switching Software Business Unit
And The Failure Of This Unit Would Negatively Affect The Price Of Our Stock
We provide products and services that provide a link from physical
objects, including printed material, to the Internet. We can provide no
assurance that:
o this Internet Switching Software business unit will ever achieve
profitability;
o our current product offerings will not be adversely affected by the
focusing of its resources on the physical-world-to-Internet space;
or
o the products we develop will obtain market acceptance.
In the event that the Internet Switching Software business unit should
never achieve profitability, that our current product offerings should so
suffer, or that our products fail to obtain market acceptance, our business,
prospects, financial condition, and results of operations would be materially
adversely affected.
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A Large Percentage Of Our Assets Are Intangible Assets, Which Will Have Little
Or No Value If Our Operations Are Unsuccessful
At March 31, 2005, and December 31, 2004 and 2003, approximately 27%, 49%
and 65%, respectively, of our total assets were intangible assets, consisting
primarily of rights related to our patents, other intellectual property, and
chemical formulations, and proprietary process and goodwill related to the
acquisition of CSI International, Inc. (now NeoMedia Micro Paint Repair). If our
operations are unsuccessful, these assets will have little or no value, which
would materially adversely affect the value of our stock and the ability of our
stockholders to recoup their investments in our capital stock.
Our Physical-World-To-Internet Marketing Strategy Has Not Been Tested And May
Not Result In Success
To date, we have conducted limited marketing efforts directly relating to
our NISS business unit. All of our marketing efforts have been largely untested
in the marketplace, and may not result in sales of our products and services. To
penetrate the markets in which it competes, we will have to exert significant
efforts to create awareness of, and demand for, our products and services. With
respect to our marketing efforts conducted directly, we intend to expand our
sales staff upon the receipt of sufficient operating capital. Our failure to
further develop our marketing capabilities and successfully market our products
and services would have a material adverse effect on our business, prospects,
financial condition, and results of operations.
Our Internally Developed Systems Are Inefficient And May Put Us At A Competitive
Disadvantage
We use internally developed technologies for a portion of its systems
integration services, as well as the technologies required to interconnect our
clients' and customers' physical-world-to-Internet systems and hardware with our
own. As we develop these systems in order to integrate disparate systems and
hardware on a case-by-case basis, these systems are inefficient and require a
significant amount of customization. Such client and customer-specific
customization is time consuming and costly and may place us at a competitive
disadvantage when compared to competitors with more efficient systems.
We Could Fail to Attract Or Retain Key Personnel
Our future success will depend in large part on its ability to attract,
train, and retain additional highly skilled executive level management,
creative, technical, and sales personnel. Competition is intense for these types
of personnel from other technology companies and more established organizations,
many of which have significantly larger operations and greater financial,
marketing, human, and other resources than we have. We may not be successful in
attracting and retaining qualified personnel on a timely basis, on competitive
terms, or at all. Our failure to attract and retain qualified personnel could
have a material adverse effect on its business, prospects, financial condition,
and results of operations.
We Depend Upon Our Senior Management And Their Loss Or Unavailability Could Put
Us At A Competitive Disadvantage
Our success depends largely on the skills of certain key management and
technical personnel, including Charles T. Jensen, NeoMedia's President, Chief
Executive Officer and Chief Operating Officer, and Charles W. Fritz, NeoMedia's
founder and Chairman of the Board of Directors. The loss of the services of
Messrs. Jensen or Fritz could materially harm our business because of the cost
and time necessary to replace and train a replacement. Such a loss would also
divert management attention away from operational issues. We do not presently
maintain a key-man life insurance policy on Messrs. Jensen or Mr. Fritz.
We May Be Unsuccessful In Integrating Our Micro Paint Repair Business With Our
Current Business
The success of our Micro Paint Repair business unit could depend on the
ability of our executive management to integrate the business plan with the
business plan of our NCSI and NISS business units. The NMPR business unit
operates in a separate industry from our other two business units.
We May Be Unable To Protect Our Intellectual Property Rights And May Be Liable
For Infringing The Intellectual Property Rights Of Others
Our success in the physical-world-to-Internet and the value-added systems
integration markets is dependent upon our proprietary technology, including
patents and other intellectual property, and on the ability to protect
proprietary technology and other intellectual property rights. In addition, we
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must conduct our operations without infringing on the proprietary rights of
third parties. We also intend to rely upon unpatented trade secrets and the
know-how and expertise of its employees, as well as its patents. To protect our
proprietary technology and other intellectual property, we rely primarily on a
combination of the protections provided by applicable patent, copyright,
trademark, and trade secret laws as well as on confidentiality procedures and
licensing arrangements. We have seven patents for our physical-world-to-Internet
technology, an additional six patents acquired with the purchase of Secure
Source Technologies related to document security, and an additional four patents
relating to mobile search and location-based advertising acquired from
Loyaltypoint, Inc. in 2005. We also have several trademarks relating to our
proprietary products. Although we believe that it has taken appropriate steps to
protect our unpatented proprietary rights, including requiring that our
employees and third parties who are granted access to NeoMedia's proprietary
technology enter into confidentiality agreements, we can provide no assurance
that these measures will be sufficient to protect our rights against third
parties. Others may independently develop or otherwise acquire patented or
unpatented technologies or products similar or superior to ours.
We license from third parties certain software tools that are included in
our services and products. If any of these licenses were terminated, we could be
required to seek licenses for similar software from other third parties or
develop these tools internally. We may not be able to obtain such licenses or
develop such tools in a timely fashion, on acceptable terms, or at all.
Companies participating in the software and Internet technology industries are
frequently involved in disputes relating to intellectual property. We may in the
future be required to defend our intellectual property rights against
infringement, duplication, discovery, and misappropriation by third parties or
to defend against third party claims of infringement. Likewise, disputes may
arise in the future with respect to ownership of technology developed by
employees who were previously employed by other companies. Any such litigation
or disputes could result in substantial costs to, and a diversion of effort by,
us. An adverse determination could subject us to significant liabilities to
third parties, require us to seek licenses from, or pay royalties to, third
parties, or require us to develop appropriate alternative technology. Some or
all of these licenses may not be available to us on acceptable terms or at all,
and we may be unable to develop alternate technology at an acceptable price or
at all. Any of these events could have a material adverse effect on our
business, prospects, financial condition, and results of operations.
We Are Exposed To Product Liability Claims And An Uninsured Claim Could Have A
Material Adverse Effect On Our Business, Prospects, Financial Condition, And
Results Of Operations, As Well As The Value Of Our Stock
Many of our systems integration projects are critical to the operations of
our clients' businesses. Any failure in a client's information system could
result in a claim for substantial damages against us, regardless of our
responsibility for such failure. We could, therefore, be subject to claims in
connection with the products and services that we sell. We currently maintain
product liability insurance. There can be no assurance that:
o we have contractually limited our liability for such claims
adequately or at all; or
o we would have sufficient resources to satisfy any liability
resulting from any such claim.
The successful assertion of one or more large claims against us could have
a material adverse effect on its business, prospects, financial condition, and
results of operations.
We Will Not Pay Cash Dividends and Investors May Have To Sell Their Shares In
Order To Realize Their Investment
We have not paid any cash dividends on our common stock and do not intend
to pay cash dividends in the foreseeable future. We intend to retain future
earnings, if any, for reinvestment in the development and marketing of our
products and services. As a result, investors may have to sell their shares of
common stock to realize their investment.
Some Provisions Of Our Certificate of Incorporation And bylaws May Deter
Takeover Attempts, Which May Limit The Opportunity Of Our Stockholders To Sell
Their Shares At A Premium To The Then-Current Market Price
Some of the provisions of our Certificate of Incorporation and bylaws
could make it more difficult for a third party to acquire us, even if doing so
might be beneficial to our stockholders by providing them with the opportunity
to sell their shares at a premium to the then-current market price. On December
10, 1999, our Board of Directors adopted a stockholders rights plan and declared
a non-taxable dividend of one right to acquire Series A Preferred Stock of
NeoMedia, par value $0.01 per share, on each outstanding share of NeoMedia
common stock to stockholders of record on December 10, 1999 and each share of
common stock issued thereafter until a pre-defined hostile takeover date. The
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stockholder rights plan was adopted as an anti-takeover measure, commonly
referred to as a "poison pill." The stockholder rights plan was designed to
enable all stockholders not engaged in a hostile takeover attempt to receive
fair and equal treatment in any proposed takeover of NeoMedia and to guard
against partial or two-tiered tender offers, open market accumulations, and
other hostile tactics to gain control of NeoMedia. The stockholders rights plan
was not adopted in response to any effort to acquire control of NeoMedia at the
time of adoption. This stockholders rights plan may have the effect of rendering
more difficult, delaying, discouraging, preventing, or rendering more costly an
acquisition of NeoMedia or a change in control of NeoMedia. Certain of our
directors, officers and principal stockholders, Charles W. Fritz, William E.
Fritz and The Fritz Family Limited Partnership and their holdings were exempted
from the triggering provisions of our "poison pill" plan, as a result of the
fact that, as of the plan's adoption, their holdings might have otherwise
triggered the "poison pill".
In addition, our Certificate of Incorporation authorizes the Board of
Directors to designate and issue preferred stock, in one or more series, the
terms of which may be determined at the time of issuance by the Board of
Directors, without further action by stockholders, and may include voting
rights, including the right to vote as a series on particular matters,
preferences as to dividends and liquidation, conversion, redemption rights, and
sinking fund provisions.
We are authorized to issue a total of 25,000,000 shares of Preferred
Stock, par value $0.01 per share. We have no present plans for the issuance of
any preferred stock. However, the issuance of any preferred stock could have a
material adverse effect on the rights of holders of our common stock, and,
therefore, could reduce the value of shares of our common stock. In addition,
specific rights granted to future holders of preferred stock could be used to
restrict our ability to merge with, or sell our assets to, a third party. The
ability of the Board of Directors to issue preferred stock could have the effect
of rendering more difficult, delaying, discouraging, preventing, or rendering
more costly an acquisition of NeoMedia or a change in NeoMedia's control thereby
preserving control by the current stockholders.
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Risks Relating To Our Industry
The Security of the Internet Poses Risks To The Success Of Our Entire Business
Concerns over the security of the Internet and other electronic
transactions, and the privacy of consumers and merchants, may inhibit the growth
of the Internet and other online services generally, especially as a means of
conducting commercial transactions, which may have a material adverse effect on
our physical-world-to-Internet business.
We Will Only Be Able To Execute Our Physical-World-To-Internet Business Plan If
Mobile Internet Usage and Electronic Commerce Continue To Grow
Our future revenues and any future profits are substantially dependent
upon the widespread acceptance and use of the mobile Internet, cellular
telephones, and other online services as an effective medium of information and
commerce. If use of the Internet and other online services does not continue to
grow or grows more slowly than expected, or if the infrastructure for the mobile
Internet and other online services does not effectively support the growth that
may occur, or if the mobile Internet and other online services do not become a
viable commercial marketplace, our physical-world-to-Internet business, and
therefore our business, prospects, financial condition, and results of
operations, could be materially adversely affected. Rapid growth in the use of,
and interest in, the mobile Internet, the World Wide Web (the "Web"), and online
services is a recent phenomenon, and may not continue on a lasting basis. In
addition, customers may not adopt, and continue to use, the Internet, the Web
and other online services as a medium of information retrieval or commerce.
Demand and market acceptance for recently introduced services and products over
the Internet are subject to a high level of uncertainty, and few services and
products have generated profits. For us to be successful, consumers and
businesses must be willing to accept and use novel and cost efficient ways of
conducting business and exchanging information.
In addition, the public in general may not accept the Internet, the Web
and other online services as a viable commercial or information marketplace for
a number of reasons, including potentially inadequate development of the
necessary network infrastructure or delayed development of enabling technologies
and performance improvements. To the extent that the Internet, the Web and other
online networks continue to experience significant growth in the number of
users, their frequency of use, or in their bandwidth requirements, the
infrastructure for the Internet, the Web, and online networks may be unable to
support the demands placed upon them. In addition, the Internet, the Web or
other online networks could lose their viability due to delays in the
development or adoption of new standards and protocols required to handle
increased levels of Internet activity, or due to increased governmental
regulation. Significant issues concerning the commercial and informational use
of the Internet, the Web, and online networks technologies, including security,
reliability, cost, ease of use, and quality of service, remain unresolved and
may inhibit the growth of Internet business solutions that utilize these
technologies. Changes in, or insufficient availability of, telecommunications
services to support the Internet, the Web or other online services also could
result in slower response times and adversely affect usage of the Internet, the
Web and other online networks generally and NeoMedia's
physical-world-to-Internet product and networks in particular.
We May Not Be Able To Adapt As The Internet, Physical-World-To-Internet,
Equipment Resales And Systems Integrations Markets, And Customer Demands
Continue To Evolve
We may not be able to adapt as the Internet, physical-world-to-Internet,
equipment resales and systems integration markets, and consumer demands continue
to evolve. Our failure to respond in a timely manner to changing market
conditions or client requirements would have a material adverse effect on our
business, prospects, financial condition, and results of operations. The
Internet, physical-world-to-Internet, equipment resales, and systems integration
markets are characterized by:
o rapid technological change;
o changes in user and customer requirements and preferences;
o frequent new product and service introductions embodying new
technologies; and
o the emergence of new industry standards and practices that could
render proprietary technology and hardware and software
infrastructure obsolete.
7
Our success will depend, in part, on our ability to:
o enhance and improve the responsiveness and functionality of its
products and services;
o license or develop technologies useful in its business on a timely
basis;
o enhance its existing services, and develop new services and
technologies that address the increasingly sophisticated and varied
needs of our prospective or current customers; and
o respond to technological advances and emerging industry standards
and practices on a cost-effective and timely basis.
Our Competitors In The Micro Paint Repair Industry Could Duplicate Our
Proprietary Processes
Our success in the micro paint repair industry depends upon proprietary
chemical products and processes. There is no guarantee that our competitors will
not duplicate our proprietary processes.
We May Not Be Able To Compete Effectively In Markets Where Its Competitors Have
More Resources
While the market for physical-world-to-Internet technology is relatively
new, it is already highly competitive and characterized by an increasing number
of entrants that have introduced or developed products and services similar to
those offered by us. We believe that competition will intensify and increase in
the future. Our target market is rapidly evolving and is subject to continuous
technological change. As a result, our competitors may be better positioned to
address these developments or may react more favorably to these changes, which
could have a material adverse effect on our business, prospects, financial
condition, and results of operations.
In addition, the equipment resales and systems integration markets are
increasingly competitive. We compete in these industries on the basis of a
number of factors, including the attractiveness of the services offered, the
breadth and quality of these services, creative design and systems engineering
expertise, pricing, technological innovation, and understanding clients' needs.
A number of these factors are beyond our control. Existing or future competitors
may develop or offer products or services that provide significant
technological, creative, performance, price, or other advantages over the
products and services offered by us.
Many of our competitors in the Micro Paint Repair business have access to
more financial resources as well. We may not be able to penetrate markets or
market its products as effectively as our better-funded competitors.
Many of our competitors have longer operating histories, larger customer
bases, longer relationships with clients, and significantly greater financial,
technical, marketing, and public relations resources than us. Based on total
assets and annual revenues, we are significantly smaller than our two largest
competitors in the physical-world-to-Internet industry, the primary focus of our
business. Similarly, we compete against significantly larger and better-financed
companies in the systems integration and equipment resale businesses, including
the manufacturers of the equipment and technologies that we integrate and
resell. If we compete with our primary competitors for the same geographical or
institutional markets, their financial strength could prevent us from capturing
those markets. We may not successfully compete in any market in which we
conducts or may conduct operations. In addition, based on the increasing
consolidation, price competition and participation of equipment manufacturers in
the systems integration and equipment resales markets, we believe that we may no
longer be able to compete effectively in these markets in the future. It is for
this reason that we have increasingly focused its business plan on competing in
the emerging market for physical-world-to-Internet products, as well as our
micro paint repair business unit.
In The Future There Could Be Government Regulations And Legal Uncertainties
Which Could Harm Our Business
We are not currently subject to direct regulation by any government agency
other than laws or regulations applicable generally to electronic commerce. Any
new legislation or regulation, the application of laws and regulations from
jurisdictions whose laws do not currently apply to our business, or the
application of existing laws and regulations to the Internet and other online
services, could have a material adverse effect on our business, prospects,
financial condition, and results of operations. Due to the increasing popularity
8
and use of the Internet, the Web and other online services, federal, state, and
local governments may adopt laws and regulations, or amend existing laws and
regulations, with respect to the Internet or other online services covering
issues such as taxation, user privacy, pricing, content, copyrights,
distribution, and characteristics and quality of products and services. The
growth and development of the market for electronic commerce may prompt calls
for more stringent consumer protection laws to impose additional burdens on
companies conducting business online. The adoption of any additional laws or
regulations may decrease the growth of the Internet, the Web or other online
services, which could, in turn, decrease the demand for our services and
increase our cost of doing business, or otherwise have a material adverse effect
on our business, prospects, financial condition, and results of operations.
Moreover, the relevant governmental authorities have not resolved the
applicability to the Internet, the Web and other online services of existing
laws in various jurisdictions governing issues such as property ownership and
personal privacy and it may take time to resolve these issues definitively.
Certain of our proprietary technology allow for the storage of demographic
data from our users. In 2000, the European Union adopted a directive addressing
data privacy that may limit the collection and use of certain information
regarding Internet users. This directive may limit our ability to collect and
use information collected by our technology in certain European countries. In
addition, the Federal Trade Commission and several state governments have
investigated the use by certain Internet companies of personal information. We
could incur significant additional expenses if new regulations regarding the use
of personal information are introduced or if our privacy practices are
investigated.
In addition, certain of our micro paint solutions could be subject to
environmental regulations.
9
Risks Specific To This Offering
As of June 27, 2005, we had 453,416,209 shares of common stock
outstanding, and options and warrants to purchase up to an aggregate 151,691,721
shares of common stock. We may also issue additional shares of common stock in
connection with our pending acquisition of BSD Software, Inc. ("BSD"), and up to
an additional 78,822,778 previously registered shares of common stock may be
issued under our Standby Equity Distribution Agreement with Cornell Capital
Partners, LP. On March 30, 2005, we and Cornell entered into a new Standby
Equity Distribution Agreement under which Cornell agreed to purchase up to $100
million of our common stock over a two-year period, with the timing and amount
of the purchase at our discretion. No shares underlying the new Standby Equity
Distribution Agreement are registered with the SEC.
Upon Consummation Of The Pending Merger With BSD, Current BSD Stockholders May
Sell Their Shares Of NeoMedia Common Stock To Be Received In the Merger In The
Public Market, Which Sales May Cause Our Stock Price To Decline
BSD's shareholders will receive, for each share of BSD stock owned,
NeoMedia stock equivalent to .07 divided by the volume-weighted average price of
NeoMedia stock for the five days prior to the effective time of the merger.
Based on 31,810,897 outstanding shares of BSD common stock and 453,416,209
outstanding shares of NeoMedia common stock as of June 27, 2005, and assuming a
NeoMedia stock price of $0.409 (the volume-weighted average stock price for the
five days preceding June 27, 2005), we would issue 5,446,449 shares of common
stock to BSD shareholders. However, the actual exchange ratio will vary due to
changes in NeoMedia's stock price and any additional issuances of common stock
by BSD prior to the effective time of the merger, and will not be known until
such effective time of the merger. Such holders may sell the shares of common
stock being registered in this offering in the public market, which may cause
our stock price to decline.
The Market Price Of Our Securities May Be Volatile
As a result of the emerging and evolving nature of the markets in which we
compete, as well as the current nature of the public markets and our current
financial condition, our operating results may fluctuate materially, as a result
of which quarter-to-quarter comparisons of our results of operations may not be
meaningful. If in some future quarters, whether as a result of such a
fluctuation or otherwise, our results of operations fall below the expectations
of securities analysts and investors, the trading price of our common stock
would likely be materially and adversely affected. An investor should not rely
on our results of any interim period as an indication of our future performance.
Additionally, our quarterly results of operations may fluctuate significantly in
the future as a result of a variety of factors, many of which are outside our
control. Factors that may cause our quarterly results to fluctuate include,
among others:
o the ability to retain existing clients and customers;
o the ability to attract new clients and customers at a steady rate;
o the ability to maintain client satisfaction;
o the ability to motivate potential clients and customers to acquire
and implement new technologies;
o the extent to which our products gain market acceptance;
o the timing and size of client and customer purchases;
o introductions of products and services by competitors;
o price competition in the markets in which we compete;
o the pricing of hardware and software that we resell or integrate
into our products;
o the level of use of the mobile Internet and online services, as well
as the rate of market acceptance of physical-world-to-Internet
marketing;
10
o the ability to upgrade and develop our systems and infrastructure in
a timely and effective manner;
o the ability to attract, train, and retain skilled management,
strategic, technical, and creative professionals;
o the amount and timing of operating costs and capital expenditures
relating to the expansion of our business, operations, and
infrastructure;
o unanticipated technical, legal, and regulatory difficulties with
respect to use of the Internet; and
o general economic conditions and economic conditions specific to
Internet technology usage and electronic commerce.
Our common stock has traded as low as $0.01 and as high as $0.722 between
January 1, 2003 and June 27, 2005. Since April 5, 2005, the approximate date
that NeoMedia filed its initial information statement/prospectus relative to its
acquisition of and merger with BSD, NeoMedia's stock has been subject to
dramatic price volatility. Between April 5, 2005 and June 27, 2005, NeoMedia's
stock has traded as low as $0.21 per share and as high as $0.72 per share. From
time to time after this offering, the market price of our common stock may
experience significant volatility. Our quarterly results, failure to meet
analysts' expectations, announcements by us or our competitors regarding
acquisitions or dispositions, loss of existing clients, new procedures or
technology, changes in general conditions in the economy, and general market
conditions could cause the market price of the common stock to fluctuate
substantially. In addition, the stock market has experienced significant price
and volume fluctuations that have particularly affected the trading prices of
equity securities of many technology companies. These price and volume
fluctuations often have been unrelated to the operating performance of the
affected companies.
NeoMedia common stock has been subject to dramatic price volatility since the
filing of the information statement/prospectus relating to the merger with BSD
Since April 5, 2005, the approximate date that NeoMedia filed its initial
information statement/prospectus relative to its acquisition of and merger with
BSD, NeoMedia's stock has been subject to dramatic price volatility. Between
April 5, 2005 and June 27, 2005, NeoMedia's stock has traded as low as $0.21 per
share and as high as $0.72 per share.
You May Suffer Significant Additional Dilution If Outstanding Options And
Warrants Are Exercised
As of June 27, 2005, we had outstanding stock options and warrants to
purchase 151,691,721 shares of common stock, some of which have exercise prices
at or below the price of our common shares on the public market. To the extent
such options or warrants are exercised, there will be further dilution. In
addition, in the event that any future financing should be in the form of, be
convertible into, or exchangeable for, equity securities, and upon the exercise
of options and warrants, investors may experience additional dilution.
You May Suffer Significant Dilution As A Result Of Our Standby Equity
Distribution Agreement With Cornell Capital Partner, LP
During the years ended December 31, 2004 and 2003, we sold 112,743,417 and
98,933,244 shares, respectively, under our Standby Equity Distribution Agreement
(and the predecessor of the Standby Equity Distribution Agreement called an
Equity Line of Credit) with Cornell Capital Partners, LP. To the extent that
cash generated from operations does not meet our cash needs, we could continue
to sell additional shares under the Standby Equity Distribution Agreement.
On March 30, 2005, we entered into a new Standby Equity Distribution
Agreement with Cornell under which Cornell agreed to purchase up to $100 million
of our common stock over a two-year period, with the timing and amount of the
purchase at our discretion. Also on March 30, 2005, we borrowed from Cornell the
principal amount of $10,000,000 before discounts and fees in the form of a
secured promissory note.
Future Sales Of Common Stock By Our Stockholders Could Adversely Affect Our
Stock Price And Our Ability To Raise Funds In New Stock Offerings
The market price of our common stock could decline as a result of sales of
a large number of shares of our common stock in the market as a result of this
offering, or the perception that these sales could occur. These sales also might
make it more difficult for us to sell equity securities in the future at a time
11
and at a price that we deem appropriate. Following the pending acquisition of
BSD (assuming a NeoMedia stock price at the effective time of the merger of
$0.409, which was the volume-weighted average closing price for the five days
preceding June 27, 2005), if we sold to Cornell Capital Partners, LP the
remainder of the 200,000,000 shares previously registered under its Standby
Equity Distribution Agreement, and if all options and warrants were exercised,
we would have up to 689,377,157 shares outstanding.
Sales of our common stock in the public market following this offering
could lower the market price of our common stock. Sales may also make it more
difficult for us to sell equity securities or equity-related securities in the
future at a time and price that our management deems acceptable or at all. All
453,416,209 shares of common stock outstanding as of June 27, 2005, are, or upon
effectiveness of this registration statement will be, freely tradable without
restriction, unless held by our "affiliates."
12
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This registration statement contains or incorporates by reference certain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that such forward-looking
statements are subject to risks and uncertainties, including those described
under the section of this registration statement entitled "Risk Factors," many
of which are beyond our control. Accordingly, actual results may differ
materially from those expressed or implied in any such forward-looking
statements. Words such as "estimate," "project," "plan," "believe," "expect,"
"anticipate," "intend" and similar expressions may identify forward-looking
statements.
All forward-looking statements are qualified by the risks described under
the section of this registration statement entitled "Risk Factors" which, if
they develop into actual events, could have a material adverse effect on our
business, financial condition or results of operations. In addition, investors
should consider the other information contained in or incorporated by reference
into this registration statement.
These forward-looking statements are subject to numerous assumptions,
risks and uncertainties. Factors that may cause actual results to differ from
those contemplated by the forward-looking statements include, among others, the
following possibilities:
o inability to protect intellectual property or license third party
patents;
o a significant increase in competitive pressures in the industries in
which we compete;
o less favorable than expected general economic or business
conditions, both domestic and foreign, resulting in, among other
things, lower than expected revenues;
o the impact of competitive products and pricing;
o the success of operating initiatives;
o availability of qualified personnel;
o changes in, or the failure to comply with, government regulations;
and
o adverse changes in the securities markets.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by forward-looking
statements. Stockholders are cautioned not to place undue reliance on these
statements, which speak only as of the date of this registration statement or,
in the case of documents incorporated by reference, the date of such documents.
We undertake no obligation and do not intend to make publicly available
any update or other revisions to any of the forward-looking statements contained
in this registration statement to reflect circumstances existing after the date
of this registration statement or to reflect the occurrence of future events
even if experience or future events make it clear that any expected results
expressed or implied by those forward-looking statements will not be realized,
except as may be required by securities law.
13
USE OF PROCEEDS
We will not receive nay proceeds from the sale of shares of common
stock by the selling securityholders. We will, however, receive proceeds from
the exercise of the warrants held by the selling security holders.
14
SELLING STOCKHOLDERS
The following table presents information regarding the selling
stockholders. The table identifies the selling stockholders. None of the selling
stockholders have held a position or office, or had any other material
relationship, with us, except as described below.
Absent registration under the Securities Act, the shares of common stock
offered herein are subject to certain limitations on resale. The Registration
Statement of which this Prospectus forms a part has been filed in satisfaction
of certain registration rights we granted to the entities listed below. The
following table assumes that the entities listed below will sell all of the
common stock offered herein set forth opposite their respective names.
o Cornell Capital Partners, LP is the holder of a warrant to purchase
50,000,000 shares of our common stock. Mark Angelo, the portfolio
manager of Cornell Capital Partners LP, is the natural person who
exercises voting and/or dispositive powers over the shares held by
Cornell Capital Partners LP.
o Thornhill Capital LLC provides strategic advisment and evaluation
services relating to mergers, acquisitions and financing
oopportunities for NeoMedia. The shares of common stock being
registered in the accompanying registration statement were granted
as compensation to Thornhill Capital LLC for the securing of
financing on behalf of NeoMedia. Martha Refkin, the president of
Thornhill Capital LLC, is the natural person who exercises voting
and/or dispositive powers over the shares held by Thornhill Capital
LLC.
The table follows:
Percentage of
Outstanding
Shares Percentage of
Shares Beneficially Shares
Beneficially Owned Shares to be Beneficially
Owned Before Before Sold in the Owned after
Selling Stockholders Offering Offering (1) Offering Offering (1)
-------------------- -------- ------------ -------- ------------
Cornell Capital Partners LP 49,820,427 (2) 9.9% 50,000,000 0%
Thornhill Capital LLC 17,000,000 (3) 3.6% 4,000,000 2.8%
---------- -------- --------- ---------
TOTAL 66,820,427 14.7% 54,000,000 2.8%
========== ======== ========== =========
---------------------------
(1) Applicable percentage of ownership is based on 453,416,209 shares of
common stock outstanding as of June 27, 2005, together with securities
exercisable or convertible into shares of common stock within 60 days of
June 27, 2005, for each stockholder. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of common stock subject to securities exercisable or convertible
into shares of common stock that are currently exercisable or exercisable
within 60 days of June 27, 2005, are deemed to be beneficially owned by
the person holding such securities for the purpose of computing the
percentage of ownership of such person, but are not treated as outstanding
for the purpose of computing the percentage ownership of any other person.
The common stock is the only outstanding class of equity securities of
NeoMedia.
(2) Ownership before the offering consists of 49,820,427 warrants to purchase
shares of our common stock at an exercise price of $0.20 per share.
Cornell Capital Partners LP holds a warrant to purchase up to 50,000,000
shares of NeoMedia common stock at $0.20 per share, however, the warrant
contains a provision that Cornell may not own more than 9.9% of the
outstanding shares of NeoMedia. Beneficial ownership is therefore limited
to 9.9% of NeoMedia's outstanding shares. The address of the referenced
shareholder is 101 Hudson Street, Suite 3606, Jersey City, NJ, 07302.
(3) Ownership before the offering consists of 9,000,000 warrants to purchase
shares of common stock at an exercise price of $0.01 per share, 4,000,000
warrants to purchase shares of common stock at an exercise price of $0.11
per share, and 4,000,000 warrants to purchase shares of common stock at an
exercise price of $0.227 per share. The address of the referenced
holder(s) is c/o Martha Refkin, 10435 Via Balestri Dr., Miromar Lakes, FL
33913.
15
Material Transactions With Selling Stockholders
Standby Equity Distribution Agreement ("SEDA") with Cornell
On February 11, 2003, NeoMedia and Cornell entered into an Equity Line of
Credit Agreement under which Cornell agreed to purchase up to $10 million of our
common stock over a two-year period, with the timing and amount of the purchase
at our discretion. The maximum amount of each purchase was $150,000 with a
minimum of seven days between purchases. The shares were valued at 98% of the
lowest closing bid price during the five-day period following the delivery of a
notice of purchase by NeoMedia. We paid 5% of the gross proceeds of each
purchase to Cornell.
On October 27, 2003, NeoMedia and Cornell entered into a $20 million SEDA.
The terms of the agreement are identical to the terms of the previous Equity
Line of Credit, except that the maximum "draw" under the new agreement is
$280,000 per week, not to exceed $840,000 in any 30-day period, and Cornell will
purchase up to $20 million of our common stock over a two-year period. As a
consideration fee for Cornell to enter into the agreement, we issued 10 million
warrants to Cornell with an exercise price of $0.05 per share, and a term of
five years. Cornell exercised the warrants in January 2004, resulting in
$500,000 cash receipts to us. In November 2003, we filed a Form SB-2 to register
200 million shares under this $20 million SEDA. In January 2004, the Form SB-2
was declared effective by the Securities and Exchange Commission. In April 2004,
we filed a Form SB-2 to register 40 million shares underlying warrants granted
to Cornell in connection with a promissory note issued by us to Cornell (see
"Notes Payable to Cornell" below). In May 2004, the Form SB-2 was declared
effective by the Securities and Exchange Commission.
During the years ended December 31, 2004 and 2003, we sold 112,743,417 and
98,933,244 shares, respectively, of our common stock to Cornell under the
Standby Equity Distribution Agreement and Equity Line of Credit. The following
table summarizes funding received and from, and shares sold to, Cornell during
the years ended December 31, 2004 and 2003:
Year Ended December 31,
--------------------------------
2004 2003
-------------- --------------
Number of shares sold to Cornell 112,743,417 98,933,244
Gross Proceeds from sale of shares to
Cornell 10,123,000 9,565,000
Less: discounts and fees* (1,967,000) (6,772,000)
-------------- --------------
Net Proceeds from sale of shares to
Cornell $8,156,000 $2,793,000
-------------- --------------
* - Per Equity line of Credit Agreement, stock is valued
at 98% of the lowest closing bid price
during the week it is sold
During the three months ended March 31, 2005, we sold 6,998,931 shares
of our common stock to Cornell under the SEDA. The following table summarizes
funding received from Cornell during the three-month periods ended March 31,
2005 and 2004:
Three Three
Months Months
Ended Ended
March 31, March 31,
2005 2004
---- ----
Number of shares sold to Cornell 6,998,931 21,282,203
Gross Proceeds from sale of shares to
Cornell $1,709,000 $2,332,000
Less: discounts and fees* (204,000) (500,000)
------------- -----------
Net Proceeds from sale of shares to
Cornell $1,505,000 $1,832,000
------------- -----------
* - Per Equity line of Credit Agreement, stock is valued at
98% of the lowest closing bid price during the week it is sold
On March 30, 2005, NeoMedia and Cornell entered into a SEDA under which
Cornell agreed to purchase up to $100 million of our common stock over a
two-year period, with the timing and amount of the purchase at our discretion.
The maximum amount of each purchase would be $2,000,000 with a minimum of five
business days between advances. The shares would be valued at 98% of the lowest
16
closing bid price during the five-day period following the delivery of a notice
of purchase by us, and we would pay 5% of the gross proceeds of each purchase to
Cornell. As a commitment fee for Cornell to enter into the agreement, we issued
50 million warrants to Cornell with an exercise price of $0.20 per share, and a
term of three years, and also paid a cash commitment fee of $1 million. We also
issued 4 million warrants with an exercise price of $0.227 to a consultant as a
fee for negotiating and structuring the SEDA. As of March 31, 2005, we recorded
the $12.3 million fair value of the warrants to "Deferred equity financing
costs" and, upon effectiveness of the SEDA, will amortize this amount to
additional paid-in capital straight-line over the two-year life of the SEDA. We
expect to file a registration statement with the US Securities and Exchange
Commission during 2005 to register the shares underlying the $100 million SEDA.
The new SEDA would become active at the time the SEC declares effective a
registration statement containing such shares.
Promissory Notes Payable to Cornell
On March 30, 2005, we borrowed from Cornell the principal amount of
$10,000,000 before discounts and fees in the form of a secured promissory note.
Cornell withheld structuring and escrow fees of $68,000 related to the note. The
note is scheduled to be repaid at a rate of $1,120,000 per month commencing May
1, 2005, which was subsequently changed to $840,000 and continuing until
principal and interest are paid in full. The note accrues interest at a rate of
8% per annum on any unpaid principal. We have the option to prepay any remaining
principal of the note in cash without penalty. In connection with the note, we
and Cornell entered into a security agreement under which the note is secured by
all of our assets other than our patents and patent applications. We also
escrowed 25,000,000 shares of its common stock as security for the note. As of
June 30, 2005, we had made payments of $2,730,000 against the principal.
On October 18, 2004, we borrowed from Cornell the gross amount of
$1,085,000 before discounts and fees. Cornell withheld a retention fee of
$85,000 related to the issuance of stock to pay off the debt in the future. We
paid this note in full during the first quarter of 2005. We invested the
proceeds from the note in iPoint-media pursuant to the investment agreement
between us and I-Point Media Ltd.
On August 6, 2004, we borrowed from Cornell the gross amount of
$2,000,000 before discounts and fees. Cornell withheld a retention fee of
$153,000 related to the issuance of stock to pay off the debt in the future. We
paid this note in full during 2004.
On July 2, 2004, we borrowed from Cornell the gross amount of
$1,000,000 before discounts and fees. Cornell withheld a $76,000 retention fee
related to the issuance of stock to pay off the debt in the future. We paid this
note in full during 2004.
On April 8, 2004, we borrowed from Cornell the gross amount of
$1,000,000 before discounts and fees. Cornell withheld a $76,000 retention fee
related to the issuance of stock to pay off the debt in the future. We paid this
note in full during 2004.
On January 20, 2004, we borrowed from Cornell the gross amount of
$4,000,000 before discounts and fees. Of the $4,000,000 funding, $2,500,000 was
used to fund the acquisition of CSI International, Inc. during February 2004.
Cornell withheld a $315,000 retention fee related to the issuance of stock to
pay off the debt in the future. We paid this note in full during 2004.
We also granted to Cornell 40,000,000 warrants to purchase shares of
our stock with an exercise price of $0.05 per share during January 2004. In
April 2004, we filed a Form SB-2 to register 40 million shares underlying
warrants granted to Cornell (and subsequently transferred by Cornell to Stone
Street Asset Management LLC) in connection with a promissory note issued by the
Company to Cornell. In May 2004, the Form SB-2 was declared effective by the
Securities and Exchange Commission. The fair value of the warrants using the
Black-Scholes pricing model was $5,000,000. In accordance with APB 14,
"Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants",
we have compared the relative fair values of the warrants and the face value of
the notes, and has allocated a value of $2.5 million to the warrants. Of the
$2.5 million, $2 million was allocated to the $4 million note issued in January
2004 and $0.5 million against the $1 million note in April 2004. The $2.5
million was recorded as a discount against the carrying value of the note. The
$2.5 million that was allocated to the notes is considered a discount on the
promissory notes, and therefore was amortized over the life of the notes using
the effective interest method, in accordance with Staff Accounting Bulletin No.
77, Topic 2.A.6, "Debt Issue Costs" of SFAS 141, "Business Combinations".
Accordingly, we recorded an amortization of discount of $2,500,000 related to
the warrants during the year ended December31, 2004. Stone Street Asset
Management LLC exercised the warrants during November 2004, resulting in net
funds to us of $2 million.
17
On September 29, 2003, we borrowed from Cornell the gross amount of
$1,500,000 before discounts and fees. The note was repaid in full during 2003.
On September 11, 2003, we received funding in the form of a promissory
note from Cornell in the gross amount of $500,000 before discounts and fees. The
note was repaid in full during 2003.
On September 2, 2003, we borrowed from Cornell the gross amount of
$200,000 before discounts and fees. The note was repaid in full during 2003.
On August 1, 2003, we borrowed from Cornell the gross amount of
$200,000 before discounts and fees. The note was repaid in full during 2003.
On July 21, 2003, we borrowed from Cornell the gross amount of $200,000
before discounts and fees. The note was repaid in full during 2003.
On June 24, 2003, we borrowed from Cornell the gross amount of $400,000
before discounts and fees. The note was repaid in full during 2003.
On May 27, 2003, the Company borrowed from Cornell the gross amount of
$245,000 before discounts and fees. The note was repaid in full during 2003.
On March 13, 2003, we borrowed from Cornell the gross amount of
$262,000 before discounts and fees. The note was repaid in full during 2003.
Thornhill Capital
On March 30, 2005 we issued 4 million warrants with an exercise price
of $0.227 to Thornhill as a fee for negotiating and structuring the $100 million
SEDA with Cornell.
On January 29, 2004, we entered into a consulting agreement with
Thornhill Capital LLP that pays Thornhill $15,000 per month for assistance in
connection with potential acquisitions transactions, and corporate strategy
planning.
The contract has a term of two years and automatically renews for successive
one-year periods if not cancelled by either party.
18
PLAN OF DISTRIBUTION
The selling stockholders have advised us that the sale or distribution
of our common stock owned by the selling stockholders may be effected directly
to purchasers by the selling stockholders or by pledgees, transferees or other
successors in interest, as principals or through one or more underwriters,
brokers, dealers or agents from time to time in one or more transactions (which
may involve crosses or block transactions) (i) on the OTC Bulletin Board or in
any other market on which the price of our shares of common stock are quoted or
(ii) in transactions otherwise than on the OTC Bulletin Board or in any other
market on which the price of our shares of common stock are quoted. Any of such
transactions may be effected at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at varying prices determined at
the time of sale or at negotiated or fixed prices, in each case as determined by
the selling stockholders or by agreement between the selling stockholders and
underwriters, brokers, dealers or agents, or purchasers. If the selling
stockholders effect such transactions by selling their shares of common stock to
or through underwriters, brokers, dealers or agents, such underwriters, brokers,
dealers or agents may receive compensation in the form of discounts, concessions
or commissions from the selling stockholders or commissions from purchasers of
common stock for whom they may act as agent (which discounts, concessions or
commissions as to particular underwriters, brokers, dealers or agents may be in
excess of those customary in the types of transactions involved). The selling
stockholders and any brokers, dealers or agents that participate in the
distribution of the common stock may be deemed to be underwriters, and any
profit on the sale of common stock by them and any discounts, concessions or
commissions received by any such underwriters, brokers, dealers or agents may be
deemed to be underwriting discounts and commissions under the Securities Act.
Under the securities laws of certain states, the shares of common stock
may be sold in such states only through registered or licensed brokers or
dealers. The selling stockholders are advised to ensure that any underwriters,
brokers, dealers or agents effecting transactions on behalf of the selling
stockholders are registered to sell securities in all fifty states. In addition,
in certain states the shares of common stock may not be sold unless the shares
have been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
We will pay all the expenses incident to the registration, offering and
sale of the shares of common stock to the public hereunder other than
commissions, fees and discounts of underwriters, brokers, dealers and agents. We
estimate that the expenses of the offering to be borne by us will be
approximately $37,500. The offering expenses consist of: printing expenses of
$2,500, accounting fees of $15,000, legal fees of $15,000 and miscellaneous
expenses of $5,000. We will not receive any proceeds from the sale of any of the
shares of common stock by the selling stockholders. We will, however, receive
the exercise price of $0.20 per share upon exercise of 50,000,000 warrants being
registered in the name of Cornell Capital Partners LP, the exercise price of
$0.227 per share upon exercise of 4,000,000 warrants being registered in the
name of Thornhill Capital LLC and the exercise price of $0.01 per share upon
exercise of 9,000,000 warrants being registered in the name of Thornhill Capital
LLC.
The selling stockholders should be aware that the anti-manipulation
provisions of Regulation M under the Exchange Act will apply to purchases and
sales of shares of common stock by the selling stockholders, and that there are
restrictions on market-making activities by persons engaged in the distribution
of the shares. Under Registration M, the selling stockholders or their agents
may not bid for, purchase, or attempt to induce any person to bid for or
purchase, shares of our common stock while such selling stockholders are
distributing shares covered by this prospectus. Accordingly, except as noted
below, the selling stockholders are not permitted to cover short sales by
purchasing shares while the distribution is taking place. The selling
stockholders are advised that if a particular offer of common stock is to be
made on terms constituting a material change from the information set forth
above with respect to the Plan of Distribution, then, to the extent required, a
post-effective amendment to the accompanying registration statement must be
filed with the Securities and Exchange Commission.
19
LEGAL MATTERS
The validity of the shares of common stock offered hereby as to their
being fully paid, legally issued and non-assessable will be passed upon for
NeoMedia by Kirkpatrick & Lockhart Nicholson Graham LLP.
EXPERTS
The audited consolidated financial statements of NeoMedia Technologies,
Inc. and its subsidiaries for the years ended December 31, 2004 and 2003 have
been audited by Stonefield Josephson, Inc., independent registered public
accounting firm, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said report. Reference is made to said report, which includes an explanatory
paragraph with respect to the uncertainty regarding NeoMedia's ability to
continue as a going concern, as discussed in Note 1 to the consolidated
financial statements.
20
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements, and
other documents with the United States Securities and Exchange Commission (the
"SEC"). You may read and copy any document we file at the SEC's public reference
room at Judiciary Plaza Building, 450 Fifth Street, N.W., Washington, D.C.
20549. You should call 1-800-SEC-0330 for more information on the operation of
the Public Reference Room. The SEC maintains a website at www.sec.gov where
certain information regarding issuers, including NeoMedia, may be found. Our
website is www.neom.com.
We have filed with the Commission a registration statement, which
contains this prospectus, on Form S-3 under the Securities Act of 1933. The
registration statement relates to the common stock offered by the selling
stockholders. This prospectus does not contain all of the information set forth
in the registration statement and the exhibits and schedules to the registration
statement. Please refer to the registration statement and its exhibits and
schedules for further information with respect to NeoMedia and the common stock.
Statements contained in this prospectus as to the contents of any contract or
other document are not necessarily complete and, in each instance, we refer you
to the copy of that contract or document filed as an exhibit to the registration
statement. You may read and obtain a copy of the registration statement and its
exhibits and schedules from the SEC, as described in the preceding paragraph.
As allowed by SEC rules, this registration statement does not contain
all the information you can find in the registration statement on Form S-3 filed
by NeoMedia and the exhibits to the registration statement. The SEC allows
NeoMedia to "incorporate by reference" information into this registration
statement, which means that NeoMedia can disclose important information to you
by referring you to other documents filed separately with the SEC. The
information incorporated by reference is deemed to be part of this registration
statement, except for any information superseded by information in this
registration statement. This registration statement incorporates by reference
the documents set forth below that NeoMedia has previously filed with the SEC.
These documents contain important information about the companies and their
financial condition.
This registration statement incorporates important business and
financial information about NeoMedia from documents that are not included in or
delivered with this registration statement. This information is available to you
without charge upon your written or oral request. You can obtain documents
incorporated by reference in this registration statement by requesting them in
writing, by telephone or by e-mail from the Company at the following address:
NeoMedia Technologies, Inc.
2201 Second Street, Suite 402
Ft. Myers, FL 33901
Attention: CFO
Telephone: (239) 337-3434
Telecopier: (239) 337-3668
21
INFORMATION WE INCORPORATE BY REFERENCE
Some of the important business and financial information that you may want
to consider is not included in this prospectus, but rather is "incorporated by
reference" to documents that have been filed by us with the Securities and
Exchange Commission pursuant to the Exchange Act of 1934. The information that
is incorporated by reference consists of:
o Annual Report on Form 10-KSB for the fiscal year ended December 31,
2004;
o Amendment No. 1 to our Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2004
o Quarterly Report on Form 10-QSB for the three months ended March 31,
2005;
o Current Reports on Form 8-K filed on April 22, 2005, April 13, 2005,
April 1, 2005, March 31, 2005, March 24, 2005, and March 1, 2005;
o The description of our common stock contained in our Form 8-A filed
with SEC on November 18, 1996 (File No. 000-21743).
All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act, after the date of the initial registration statement and prior
to the effectiveness of the registration statement and subsequent to the date of
this prospectus and prior to the termination of this offering, shall be deemed
incorporated by reference in this prospectus and made a part hereof from the
date of filing of those documents. Any statement contained in a document
incorporated or deemed incorporated by reference in this prospectus shall be
deemed modified or superseded for purposes of this prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed incorporated by reference herein or in any prospectus
supplement modifies or supersedes that statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
We will provide without charge to each person who is delivered a
prospectus, on written or oral request, a copy of any or all of the documents
incorporated by reference herein (other than exhibits to those documents unless
those exhibits are specifically incorporated by reference into those documents).
Requests for copies should be directed to Investor Relations, NeoMedia
Technologies, Inc., 2201 Second Street, Suite 402, Ft. Myers, FL, 33901,
Telephone: (239) 337-3434.
22
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth estimated expenses expected to be
incurred in connection with the issuance and distribution of the securities
being registered. We will pay all expenses in connection with this offering.
Printing and Engraving Expenses $ 2,500
Accounting Fees and Expenses 15,000
Legal Fees and Expenses 15,000
Miscellaneous 5,000
-------------
TOTAL $ 37,500
=============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Delaware General Corporation Law (the "DGCL"), we have
included in our Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, except for liability (i) for any
breach of the director's duty of loyalty to NeoMedia or its stockholders, (ii)
for acts or omissions not in good faith or which involved intentional misconduct
or a knowing violation of law, (iii) in respect of certain unlawful dividend
payments or stock redemptions or repurchases, as provided in Section 174 of the
DGCL, or (iv) for any transaction from which the director derived an improper
personal benefit. The effect of this provision is to eliminate the rights of
NeoMedia and our stockholders (through stockholders' derivative suits on behalf
of NeoMedia) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director except in the situations described in
clauses (i) through (iv) above. This provision does not limit nor eliminate the
rights of NeoMedia or any stockholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
These provisions will not alter the liability of directors under federal
securities laws.
The Certificate of Incorporation and the bylaws of NeoMedia provide that
it is required and permitted to indemnify our officers and directors, employees
and agents under certain circumstances. In addition, if permitted by law, we are
required to advance expenses to our officers and directors as incurred in
connection with proceedings against them in their capacity as a director or
officer for which they may be indemnified upon receipt of an undertaking by or
on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to indemnification. At
present, we are not aware of any pending or threatened litigation or proceeding
involving a director, officer, employee or agent of NeoMedia in which
indemnification would be required or permitted.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act") may be permitted to directors, officers
or controlling persons of NeoMedia pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the United States
Securities and Exchange Commission such indemnification is against public policy
as expressed in the 1933 Act and is, therefore, unenforceable.
II-1
ITEM 16. EXHIBITS
(a) The following exhibits are filed herewith or incorporated herein by
reference:
Exhibit No. Description Location
----------- ----------- --------
5.1 Opinion re: legality Provided herewith
10.1 Standby Equity Distribution Agreement, dated October Incorporated by reference to Exhibit 10.91 to
27, 2003, between NeoMedia and Cornell Capital Partners the Registrant's Form SB-2/A as filed on
December 19, 2003
10.2 Form of Registration Rights Agreement, dated October Incorporated by reference to Exhibit 10.93 to 27, 2003,
between NeoMedia and Cornell Capital Partners the Registrant's
Form SB-2/A as filed on
December 19, 2003
10.3 Form of Escrow Agreement, dated October 27, 2003, Incorporated by reference to Exhibit 10.94 to
between NeoMedia and Cornell Capital Partners the Registrant's Form SB-2/A as filed on
December 19, 2003
10.4 First Agreement and Amendment to Consulting Agreement Provided herewith
between NeoMedia and Thornhill capital, dated January
29, 2004
10.5 $4 million Promissory note payable to Cornell Capital Incorporated by reference to Exhibit 10.49 to
Partners, dated January 15, 2004 the Registrant's Form 10-KSB as filed on March
9, 2004
10.6 Standby Equity Distribution Agreement, dated March Incorporated by reference to Exhibit 16.1 to
30,2005, between NeoMedia and Cornell the Registrant's Form 8-K as filed on April 1,
2005
10.7 Placement Agent Agreement, dated March 30, 2005, Incorporated by reference to Exhibit 16.2 to
between NeoMedia and Cornell the Registrant's Form 8-K as filed on April 1,
2005
10.8 Escrow Agreement, dated March 30, 2005, between Incorporated by reference to Exhibit 16.3 to
NeoMedia and Cornell the Registrant's Form 8-K as filed on April 1,
2005
10.9 Registration Rights Agreement, dated March 30, 2005, Incorporated by reference to Exhibit 16.4 to
between NeoMedia and Cornell the Registrant's Form 8-K as filed on April 1,
2005
10.10 Promissory Note, dated March 30, 2005, between Incorporated by reference to Exhibit 16.5 to
NeoMedia and Cornell the Registrant's Form 8-K as filed on April 1,
2005
10.11 Security Agreement, dated March 30, 2005, between Incorporated by reference to Exhibit 16.6 to
NeoMedia and Cornell the Registrant's Form 8-K as filed on April 1,
2005
10.12 Warrant dated March 30, 2005, granted by NeoMedia to Provided herewith
Thornhill Capital LLC
10.13 Warrant dated March 30, 2005, granted by NeoMedia to Provided herewith
Cornell Capital Partners LP
23.1 Consent of Stonefield Josephson, Inc., independent Provided herewith
Registered Public Accounting Firm of NeoMedia
Technologies, Inc.
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ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Sections 10(a)(3) of
the Securities Act of 1933 (the "Act");
(ii) Reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
(iii) Include any additional or changed material information
on the plan of distribution;
(2) That, for the purpose of determining any liability under the
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Ft. Myers, State of Florida, on July 13, 2005.
NEOMEDIA TECHNOLOGIES, INC.
By: /s/ Charles T. Jensen
----------------------------------------------
Charles T. Jensen
President, Chief Executive Officer and Director
/s/ David A. Dodge
----------------------------------------------
David A. Dodge
Vice-President, Chief Financial Officer, and
principal accounting officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ Charles T. Jensen President, Chief Executive Officer,
------------------------------------
Charles T. Jensen and Director July 13, 2005
/s/ Charles W. Fritz Chairman of the Board
------------------------------------
Charles W. Fritz July 13, 2005
/s/ David A. Dodge Vice-President, Chief Financial Officer,
------------------------------------
David A. Dodge and principal accounting officer July 13, 2005
/s/ William E. Fritz Director
------------------------------------
William E. Fritz July 13, 2005
/s/ Hayes Barclay Director
Hayes Barclay July 13, 2005
/s/ James J. Keil Director
------------------------------------
James J. Keil July 13, 2005
II-4