8-K 1 loch8k.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): March 7, 2003 NEOMEDIA TECHNOLOGIES, INC. --------------------------- (Exact Name of Registrant as Specified in its Charter) DELAWARE 0-21743 36-3680347 -------------------------------------------------------------------------------- (State or Other (Commission File Number) (IRS Employer Jurisdiction Identification No.) Incorporation) 2201 SECOND STREET, SUITE 402, FORT MYERS, FLORIDA 33901 -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (239) - 337-3434 ---------------------------------------------------- (Registrant's Telephone Number, including Area Code) 1 ITEM 5. OTHER EVENTS. --------------------- On March 7, 2003, NeoMedia Technologies, Inc., a Delaware corporation ("the Company") entered into a Memorandum of Terms to acquire and merge with Loch Energy, Inc. ("Loch"), an oil and gas provider based in Humble, Texas. Loch currently owns mineral and lease rights to five properties, totaling approximately 130 acres, near Houston, Texas. Loch's portion of the proven reserves on the five properties is estimated at 7,707,247 barrels. Loch's portion of the probable reserves on the five properties is estimated at an additional 5,963,748 barrels. The merger would provide for one share of common stock of the Company to be exchanged for every four shares of Loch common stock on an adjusted basis, and additional "earn out" shares to be issued to Loch shareholders based on actual oil production in the first year after closing. Total shares to be issued to Loch shareholders will not exceed 50% of NeoMedia outstanding shares. The merger is subject to negotiations of definitive contracts, corporate filing requirements, completion of due diligence and any required approval by the Boards of Directors and shareholders of each company. It is anticipated that closing would occur approximately 30 days after such conditions are satisfied. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NEOMEDIA TECHNOLOGIES, INC. --------------------------- (Registrant) Date: MARCH 17, 2003 By:/s/ CHARLES T. JENSEN -------------- --------------------- Charles T. Jensen, President, Chief Operating Officer, Acting Chief Executive Officer and Director 3 EXHIBIT INDEX SEQUENTIAL EXHIBIT PAGE NUMBER DOCUMENT ----------- -------- 5 03.1 Memorandum of Terms for proposed transaction between NeoMedia Technologies, Inc., and Loch Energy, Inc. 11 03.2 Press release dated March 13, 2003 4 EXHIBIT 03.1 MEMORANDUM OF TERMS PROPOSED TRANASACTION BETWEEN NEOMEDIA TECHNOLOGIES, INC. AND LOCH ENERGY THE TERMS SET FORTH ON THE MEMORANDUM OF TERMS ARE INTERDEPENDENT, AND NO SINGLE ASPECT OF THE MEMORANDUM OF TERMS SHOULD BE CONSIDERED OR VALUED ON A STAND-ALONE BASIS. Loch Energy and NeoMedia intend to complete a transaction to substantially enhance their respective shareholder values. Loch Energy and NeoMedia seek to: 1. Merge Loch Energy with NeoMedia Technologies in an exchange of common stock. 2. Centralize administrative and management functions. 3. Enhance shareholder value through the increase of cash flow from oilfield operations, patent licensing and value added reseller operations as well as by decreasing expenditures through centralization. To effectuate these goals, NeoMedia and Loch Energy would:
ACTION STEPS NEOMEDIA WOULD LOCH ENERGY WOULD 1. EXCHANGE OF SHARES: Obtain shareholder approvals as required. Obtain the necessary approval from Additionally, NeoMedia would obtain from Loch shareholders in order to effectuate a merger Energy shareholders a legal majority of its shares with NeoMedia Technologies. Additionally, to be exchanged for shares of common stock in convert all outstanding debt, other than NeoMedia Technologies, Inc. NeoMedia will trade payables, and all shares of preferred initially exchange twenty-five of its shares for stocks into shares of common stock of Loch every one hundred shares of Loch Energy with a Energy prior to the merger with NeoMedia potential maximum exchange rate of one share of Technologies. In accomplishing this, Loch NeoMedia technologies common stock for each share Energy will, in conjunction with NeoMedia, of Loch Energy common stock. calculate a ratio of its outstanding shares of common stock to that of NeoMedia so as to form a 1:1 ratio of shares between the two companies ("ratio adjustment"). For example, if NeoMedia Technologies has 1000 shares of 5 ACTION STEPS NEOMEDIA WOULD LOCH ENERGY WOULD common stock outstanding and Loch Energy has 500 shares of common stock outstanding, the ratio would be 0.5:1. That is to say that a 1:1 ratio would be two shares of NeoMedia Technologies common stock for each share of Loch Energy common stock. The reverse would also be true. If Loch Energy has 1000 shares of common stock outstanding and NeoMedia Technologies has 500 shares of common stock outstanding, the ratio would be 0.5:1. That is to say that a 1:1 ratio would be two shares of Loch Stock for each share of NeoMedia Technologies. The initial exchange rate will be one hundred of Loch Energy shares for each twenty-five shares of NeoMedia Technologies, after application of the adjustment ratio. However, this exchange rate may be increased to a maximum of one share of Loch Energy for each share of NeoMedia Technologies common stock according to the following earn-out schedule, after application of the adjustment ratio. The final calculation of the earn-out will be made 365 days from the signing of this letter of intent. EARN-OUT: 365 days following the signing of this LOI or upon Loch achieving any of the milestones listed below, whichever occurs sooner after the closing the shareholders of Loch will receive shares of NeoMedia Common Stock in accordance with the following: a) if the total first year oil production by Loch Energy (Companies share of total oil production) or the Loch Energy subsidiary of NeoMedia Technologies, is 358,075 barrels or greater, the shareholders of Loch Energy will receive 1 share of NeoMedia Technologies common stock for each share of Loch Energy, after application of the adjustment ratio; 6 ACTION STEPS NEOMEDIA WOULD LOCH ENERGY WOULD b) if the total first year oil production is between 286,460 and 358,074 barrels , the shareholders of Loch Energy will receive .8 shares of NeoMedia Technologies common stock for each share of Loch Energy, after application of the adjustment ratio; c) if the total first year oil production is between 214,845 and 286,459 barrels, the shareholders of Loch Energy will receive .6 shares of NeoMedia Technologies common stock for each share of Loch Energy, after application of the adjustment ratio; d) if the total first year oil production is between 143,230 and 214,844 barrels , the shareholders of Loch Energy will receive .4 shares of NeoMedia Technologies common stock for each share of Loch Energy, after application of the adjustment ratio; e) if the total first year oil production is below 143,230 barrels , the shareholders of Loch Energy will receive .25 shares of NeoMedia Technologies common stock for each share of Loch Energy, after application of the adjustment ratio. In no event will the shareholders of Loch Energy receive less than .25 shares of NeoMedia Technologies common stock for each share of Loch Energy common stock after application of the adjustment ratio. 7 ACTION STEPS NEOMEDIA WOULD LOCH ENERGY WOULD 2. MANAGEMENT AND ADMINISTRATION: NeoMedia will consolidate all senior Loch Energy will turn over all management and administrative functions. management and administrative The accounting, legal, treasury, and Human responsibilities for the combined Resources functions will be combined and entity to NeoMedia Technologies. headquartered at its Ft. Myers, Florida Additionally, the Board of home office. Directors of NeoMedia Technologies will remain the Board of Directors for the combined entity. The oil Drilling and Exploration operations will be managed by Douglas Ashworth and be headquartered in Humble, Texas. 3. LOCK-UP: NeoMedia's officers and directors are Mr. Ashworth will report to C. T. subject to Rule 144 in regards to the sale Jensen. of their shares. Loch Energy shareholders will be subject to Rule 144 in reqards to the sale of their sale of NeoMedia common stock. 4. STOCK OPTION PLAN: The post merger NeoMedia Technologies will Former Loch Energy employees who require a new stock option plan, which become NeoMedia Technology will have to be ratified by the Board of employees will be eligible to Directors and by the shareholders. participate in the new employee stock option plan. 5. DUE DILIGENCE: NeoMedia will conduct its due diligence Loch Energy will conduct its due utilizing both internal and outside diligence utilizing both internal professionals, as it requires. It will and outside professionals, as it bear the costs of its own due diligence, requires. It will bear the costs of which will include, but not be limited to, its own due diligence, which will legal and accounting costs. include, but not be limited to, legal and accounting costs. Additionally, Loch Energy will be required to complete, prior to the merger, audited financials for the last two fiscal years. 6. MANAGEMENT CONTRACTS: NeoMedia will have in place a management Loch Energy will terminate any open contract with its CEO of the combined management contracts prior to the entity. merger. 8 ACTION STEPS NEOMEDIA WOULD LOCH ENERGY WOULD 7. ISSUANCE OF SHARES: NeoMedia will issue additional shares of Loch Energy will issue additional its stock as required in the normal course shares of its stock as required in of business. the normal course of business. The exchange rate for shares of Loch Energy with NeoMedia Technologies will be set by the date of signature of this Memorandum of Terms based on NeoMedia's outstanding common stock of 30,746,968 and Lochs outstanding common stock (estimated at 47,000,000-final numbers to be provided by Loch). The final ratio must be the same as the ratio at the date of signature of the Memorandum of Terms.
DEFINITIVE The final agreement will set forth the terms and conditions for AGREEMENT: both NeoMedia and Loch Energy and contain representations and warranties, covenants and indemnities consistent with transactions of this type. APPROVALS: This merger is subject to an affirmative vote from the board of directors of each company and the satisfactory completion of due diligence by both companies. CLOSING: As soon as practicable, but no later than (TO BE MUTUALLY AGREED UPON), subject to extension by written mutual consent or to satisfy any regulatory requirements. Upon completion of due diligence and definitive documentation, each party will be required to close absent unusual circumstances, such as the failure of NeoMedia to obtain any required stockholder approval, failure to deliver required documentation set forth under the definitive agreements, shareholder litigation, regulatory requirements and fraudulent disclosures. 9 Dated: 3-7-03 Dated: 3-6-03 /s/ Charles T. Jensen /s/ Douglas Ashworth ---------------------------------- --------------------------------- CHARLES T. JENSEN DOUGLAS ASHWORTH CEO, NEOMEDIA TECHNOLOGIES CEO, LOCH ENERGY 10 EXHIBIT 03.1 FOR IMMEDIATE RELEASE --------------------- PRESS CONTACTS: Charles T. Jensen David A. Kaminer --------------- NeoMedia Technologies, Inc. The Kaminer Group +(239) 337-3434 +(914) 684-1934 cjensen@neom.com ---------------- dkaminer@kamgrp.com ------------------- NEOMEDIA REACHES AGREEMENT IN PRINCIPAL TO ACQUIRE LOCH ENERGY, INC., HOUSTON-BASED COMPANY WITH $410 MILLION IN PROVEN AND PROBABLE OIL RESERVES FT. MYERS, FL, and HOUSTON, TX, March 13, 2003 -- NeoMedia Technologies, Inc. (OTCBB: NEOM), said today that it has reached an agreement in principal to acquire and merge with Loch Energy, Inc., of Houston, an energy company with $410 million in PROVEN and PROBABLE reserves. The merger would provide for one share of common stock of NeoMedia to be exchanged for every four shares of Loch Energy common stock on an adjusted basis, and additional "earn out" shares to be issued to Loch shareholders based on actual oil production in the first year after closing. Total shares to be issued to Loch shareholders will not exceed 50% of NeoMedia outstanding shares. Loch projects revenue of $800,000 per month in the near term, and forecasts an increase to $3.0 million per month over the next three years. The merger is subject to negotiations of definitive contracts, corporate filing requirements, completion of due diligence and any required approval by the Boards of Directors and shareholders of each company. It is anticipated that closing would occur approximately 30 days after such conditions are satisfied. Fort Myers-based NeoMedia has been an innovator and international leader in print-to-Internet and other technologies which make information faster and easier to access, with specific expertise in homeland security and e-authentication applications. Loch, headquartered in the Houston suburb of Humble, is a low-cost, environmentally-conscientious and safe producer of oil and gas properties with PROVEN and PROBABLE reserves estimated to be worth $410 million at the current average oil price of $30 per barrel. 'STRONGER BALANCE SHEETS FOR BOTH COMPANIES' According to Charles T. Jensen, president, COO and acting CEO of NeoMedia, the planned merger "should result in overall stronger balance sheets for both companies. "The new, merged NeoMedia Technologies will enhance shareholder value through the increase of cash flow from oilfield operations, and assist NeoMedia in funding a strong, core patent licensing business" he said. "We also believe 11 additional efficiencies should be achieved by centralized administrative and management functions at NeoMedia's offices in Fort Myers. "While in the past NeoMedia has been a technology-based firm," said Jensen, "we saw this acquisition and merger as a unique opportunity which, we believe, can provide immediate and longer-term benefits to shareholders of both companies." MERGER MAKES LOCH PART OF A PUBLICLY-HELD ENTITY Loch CEO Douglas Ashworth said the acquisition/merger with NeoMedia "allows our shareholders to be part of a growing, publicly-held entity with a rich history in high-tech development and innovation, and which now is equally excited about the marketplace for energy products." Loch recently received what Ashworth called "a substantial private investment, which will help us develop existing well bores and continue our plans for expansion (see "Loch Energy, Inc., to Begin Workovers on 5 Existing Well Bores After Receipt of LOI for $485K Investment from Gen-Oil LLC," Business Wire, March 7, 2003)." Ashworth said that Loch currently owns mineral and lease rights to five properties, totaling approximately 130 acres, near Houston. "Oil specialists have evaluated and estimated Loch's position on these reserves to be extremely promising," he said. "Their studies show our PROVEN reserves to be some 7,707,247 barrels, or $231 million at the current average oil price of $30 per barrel, and our PROBABLE reserves an additional 5,963,748 barrels, or $179 million at $30 per barrel. Quite clearly, everyone involved with Loch is very excited," said Ashworth. Expected GROSS barrels of oil to be produced from Lochs properties are 598,000 in Year 1, 1.4 million in Year 2, and 2.2 million per year thereafter until reserves are depleted. Loch's position is expected to be 358,000 in Year 1, 853,000 in Year 2, and 1.3 million per year thereafter as reserves hold. Ashworth said the expected GROSS revenue from the oil on Loch's properties is $16.5 million in Year 1, $39.2 million in Year 2, and $59.4 million per year thereafter until reserves are depleted. Loch's position is expected to be worth $9.8 million in Year 1, $23.5 million in Year 2, and $35.6 million per year thereafter as reserves hold. Major shareholders in Loch include Dale Cohrs, Peter Wang, the Macha Family, Triway Assets, Eagle Consulting, and Glen Loch, the company's founder. ABOUT NEOMEDIA TECHNOLOGIES NeoMedia Technologies, Inc. (www.neom.com), is an innovator and international leader in print-to-Internet and other technologies which make information faster and easier to access, with expertise in homeland security and e-authentication applications. NeoMedia markets services which link physical information and objects to the Internet under the PaperClick(TM) trademark, and its Systems Integration Group specializes in Open and Storage System solutions and automating print production operations. 12 ABOUT LOCH ENERGY, INC. Loch Energy, Inc., is a low-cost, environmentally-conscientious and safe producer of oil and gas properties, and a strong advocate of creating an environment in which the oil and gas industry, and related businesses, prosper and grow through responsible development of Texas's natural resources. Loch takes pride in its reputation for fostering an environment in which its employees work together as a diverse team, dedicated to continuous improvement, ensuring the future prosperity of the company and its investors. THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. WITH THE EXCEPTION OF HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED IN THIS PRESS RELEASE INVOLVE RISK AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENT PAPERCLICK IS A TRADEMARK OF NEOMEDIA TECHNOLOGIES, INC. ## 13