-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uja08/YKGBiKdVBBnwt0jNdJzV4oNZUUDve8NrP6wglFcl3vdjtZJ+sTokRDSKaG iBV/HxoC4q/R+/RqIYmu0g== 0001016843-00-000392.txt : 20000510 0001016843-00-000392.hdr.sgml : 20000510 ACCESSION NUMBER: 0001016843-00-000392 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEOMEDIA TECHNOLOGIES INC CENTRAL INDEX KEY: 0001022701 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 363680347 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-21743 FILM NUMBER: 622799 BUSINESS ADDRESS: STREET 1: 2201 SECOND ST STE 600 STREET 2: STE 600 CITY: FORT MYERS STATE: FL ZIP: 33901 BUSINESS PHONE: 6303554404 MAIL ADDRESS: STREET 1: 2201 SECOND STREET STREET 2: SUITE 600 CITY: FORT MYERS STATE: FL ZIP: 33901 FORMER COMPANY: FORMER CONFORMED NAME: DEVSYS INC DATE OF NAME CHANGE: 19960911 10QSB 1 U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------------- FORM 10 - QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-21743 NEOMEDIA TECHNOLOGIES, INC. ----------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified In Its Charter) DELAWARE 36-3680347 ------------------------------- ---------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 2201 SECOND STREET, SUITE 600, FORT MYERS, FLORIDA 33901 - -------------------------------------------------- --------- (Address of Principal Executive Offices) (Zip Code) Issuer's Telephone Number (Including Area Code) 941-337-3434 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of May 4, 2000, there were outstanding 14,388,531 shares of the issuer's Common Stock . PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 2000 1999 -------- -------- (Unaudited) (Audited) ASSETS (Dollars in thousands except share data) Current assets: Cash and cash equivalents, including restricted amounts of $944 in 2000 and $944 in 1999 ..................................................................... $ 12,071 $ 3,404 Short-term investments ................................................................... 150 150 Trade accounts receivable, net of allowance for doubtful accounts of $906 in 2000 and $888 in 1999............................................. 1,642 3,419 Costs and Estimated earnings in excess of billings on uncompleted contracts .............. 8 -- Inventories .............................................................................. 69 57 Prepaid expenses and other current assets ................................................ 224 264 -------- -------- Total current assets ................................................................. 14,164 7,294 -------- -------- Property and equipment, net ................................................................... 486 545 Intangible assets, net ........................................................................ 5,370 5,296 Other long-term assets ........................................................................ 522 522 -------- -------- Total assets .................................................................................. $ 20,542 $ 13,657 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ......................................................................... $ 2,638 $ 4,892 Accrued expenses ......................................................................... 954 720 Accrued patent cost ...................................................................... 1,863 1,863 Current portion of long-term debt ........................................................ 128 625 Sales taxes payable ...................................................................... 345 454 Billings in excess of costs and estimated earnings on uncompleted contracts .............. -- 131 Deferred revenues ........................................................................ 308 265 Other .................................................................................... 10 11 -------- -------- Total current liabilities ............................................................ 6,246 8,961 -------- -------- Long-term debt, net of current portion ........................................................ 643 676 -------- -------- Total liabilities .................................................................... 6,889 9,637 -------- -------- Commitments and contingencies Shareholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued or outstanding ........................................................... -- -- Common stock, $.01 par value, 50,000,000 shares authorized, 14,300,763 shares issued in 2000 (13,925,763 outstanding) and 12,398,389 shares issued in 1999 (12,023,389 outstanding) ............................ 139 119 Additional paid-in capital ............................................................... 48,416 36,367 Accumulated deficit ...................................................................... (34,902) (32,466) -------- -------- Total shareholders' equity ........................................................... 13,653 4,020 -------- -------- Total liabilities and shareholders' equity .................................................... $ 20,542 $ 13,657 ======== ========
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements. 2 NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, ------------------------------- 2000 1999 ------------ ------------ (Dollars in thousands, except per share data) NET SALES: License fees ............................................... $ 208 $ 1,033 Resales of software and technology equipment ............... 3,663 5,405 Service fees ............................................... 223 1,366 ------------ ------------ Total net sales ........................................ 4,094 7,804 ------------ ------------ COST OF SALES: License fees ............................................... 1 234 Resales of software and technology equipment ............... 3,052 4,472 Service fees ............................................... 286 1,249 Amortization of capitalized software costs ................. 215 165 ------------ ------------ Total cost of sales .................................... 3,554 6,120 ------------ ------------ GROSS PROFIT .................................................... 540 1,684 Sales and marketing expenses .................................... 1,264 1,815 General and administrative expenses ............................. 1,396 1,343 Research and development costs .................................. 335 220 ------------ ------------ Loss from operations ............................................ (2,455) (1,694) Interest expense (income), net .................................. (19) 72 ------------ ------------ LOSS BEFORE INCOME TAXES ........................................ (2,436) (1,766) Income tax (benefit) ............................................ -- -- ------------ ------------ NET LOSS ........................................................ $ (2,436) $ (1,766) ============ ============ NET LOSS PER SHARE - BASIC AND DILUTED .......................... $ (0.19) $ (0.20) ============ ============ Weighted average number of common shares - basic and diluted .... 12,752,000 8,848,340 ============ ============
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements. 3 NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
THREE MONTHS ENDED MARCH 31, ---------------------------- 2000 1999 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ...................................................................... $ (2,436) $ (1,766) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ............................................ 391 376 Loss on disposal of property and equipment ............................... 7 -- Provision for doubtful accounts .......................................... 162 90 Fair value of stock based compensation granted for professional services Changes in operating assets and liabilities Trade accounts receivable ............................................ 1,615 (504) Costs and est. earnings in excess of billings on uncompleted contracts (8) -- Other current assets ................................................. 28 (118) Accounts payable and accrued expenses ................................ (2,234) 46 Billings in excess of costs and est. earnings on uncompleted contracts (131) -- Deferred revenue ..................................................... 43 -- Other current liabilities ............................................ (1) 179 -------- -------- Net cash used in operating activities ................................ (2,564) (1,697) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capitalization of software development and purchased intangible assets ........ (386) (341) Acquisition of property and equipment ......................................... (27) (40) -------- -------- Net cash used in investing activities ................................ (413) (381) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock, net of $153 issuance costs ........ 9,154 905 Net proceeds from exercise of stock warrants .................................. 2,786 -- Net proceeds from exercise of stock options ................................... 234 41 Borrowings under notes payable and long-term debt ............................. -- 1,000 Repayments on notes payable and long-term debt ................................ (530) (28) -------- -------- Net cash provided by financing activities ............................ 11,644 1,918 -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .......................... 8,667 (160) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR .................................. 3,404 1,350 -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR ........................................ $ 12,071 $ 1,190 SUPPLEMENTAL CASH FLOW INFORMATION: Restricted cash balances at March 31 ..................................... $ 944 $ 900 Interest paid/(received) ................................................. (35) 78 Non-cash investing and financing activities: Fair value of warrants granted in conjunction with acquisition of patents ......................................................... -- 432 Issuance costs for shares issued through private placements ........ 105 --
The accompanying notes are an integral part of these consolidated financial statements. 4 NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS BASIS OF PRESENTATION The condensed consolidated financial statements include the financial statements of NeoMedia Technologies, Inc. and its wholly-owned subsidiaries. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB and do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. These condensed consolidated financial statements and related notes should be read in conjunction with the Company's Form 10-KSB for the fiscal year ended December 31, 1999. In the opinion of management, these condensed consolidated financial statements reflect all adjustments which are of a normal recurring nature and which are necessary to present fairly the consolidated financial position of NeoMedia as of March 31, 2000 and December 31, 1999, and the results of operations for the three months ended March 31, 2000 and 1999, and cash flows for the three months ended March 31, 2000 and 1999. The results of operations for the three months ended March 31, 2000 are not necessarily indicative of the results which may be expected for the entire fiscal year. All significant intercompany accounts and transactions have been eliminated in preparation of the condensed consolidated financial statements. NATURE OF BUSINESS OPERATIONS Since inception, NeoMedia has been helping customers and partners assimilate new technology without discarding their investment in programs and processes. To help accomplish these objectives, NeoMedia operates as two distinct business units: Application Service Provider (NeoMedia ASP) and Systems Integration Services (NeoMedia SI). NeoMedia ASP provides systems and services that link print and print on products to web-based information. NeoMedia SI provides computer technology equipment and systems integration services to customers. NEOMEDIA ASP NeoMedia ASP was launched to commercialize NeoMedia's patented technology for seamlessly linking printed material to the internet. This technology has been developed over the past four years. Management believes this technology has the potential to provide the industry standard for linking the worlds of print and electronic media. The commercialization of products using this technology was begun during 1999. NEOMEDIA SI NeoMedia SI re-markets equipment and software products from third-parties, renders system integration services, provides proprietary software for document management and production systems, migrates programs and databases from closed system to open system platforms, and adds customized applications to an existing system platform. This business unit is establishing itself in the technology industry by working closely with customers and business partners in integrating new technologies while leveraging previous system infrastructure investments. 5 2. SUBSEQUENT EVENTS On April 7, 2000, NeoMedia Technologies, Inc. (the "Company") purchased substantially all of the assets of DayStar Services, L.L.C., a Tennessee limited liability company. The assets consisted of DayStar's rights under a license agreement between DayStar and the Company dated June 30, 1999 for the Company's NeoLink Information Server and DayStar's rights under an Agent Agreement between DayStar and the Company dated June 30, 1999 for NeoLink. The assets purchased also included all of DayStar's software and hardware and source codes used in the operation of the DayStar website and existing customer/vendor relationships. The purchase price for the assets was $4,000,000; $3,520,000 paid through the transfer of 321,829 shares of NeoMedia's Common Stock and $480,000 paid through the forgiveness of a receivable due from DayStar. William Fritz and Charles Fritz, officers, directors and principal shareholders of the Company are also principal equity holders of DayStar. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Through the three months ended March 31, 2000, a substantial part of NeoMedia's revenue was derived from resales of software and technology equipment. NeoMedia couples its proprietary software products with independent vendor products it resells, enabling it to provide a complete "turn-key" service for its customers. Currently, NeoMedia's revenue consists of (i) software license fees, (ii) resales of software and technology equipment from independent vendors and (iii) service fees, including consulting and post contract software support. During the first quarter of 2000, the Company's focus continued to shift from Systems Integration and Migration products toward its Applications Service Provider (ASP) business. During 1999, the Company sold its first license with the internally-developed NeoLink technology, and in December launched its PaperClick.com virtual portal. NeoMedia's strategy is to become the world's leading provider of systems and services that link print and print on products to web based information. The Company discontinued its Y2K product line during the fourth quarter of 1999. NeoMedia's quarterly operating results have been subject to variation and will continue to be subject to variation, depending upon factors, such as the mix of business among NeoMedia's services and products, the cost of material, labor and technology, particularly in connection with the delivery of business services, the costs associated with initiating new contracts, the economic condition of NeoMedia's target markets, and the cost of acquiring and integrating new businesses. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1999 NET SALES. Total net sales for the three months ended March 31, 2000 were $4.1 million, which represented a $3.7 million, or 47.4%, decrease from $7.8 million for the three months ended March 31, 1999. This decrease primarily resulted from reduced resales of Sun and IBM equipment, as well as the discontinuation of the Company's Y2K product line. LICENSE FEES. License fees for the three months ended March 31, 2000 were $0.2 million compared to $1.0 million for the three months ended March 31, 1999, a decrease of $0.8 million or 80.0%. This decrease resulted primarily from the discontinuation of the Company's Y2K product line. There were no costs related to license sales during 2000. Cost of sales as a percentage of related sales was 22.6% during 1999. This decrease in the cost of sales as a percentage of related sales was primarily due to the sale in 1999 of Y2K licenses on which the Company paid royalties. 6 RESALES OF SOFTWARE AND TECHNOLOGY EQUIPMENT. Resales of software and technology equipment decreased by $1.7 million, or 31.5%, to $3.7 million for the three months ended March 31, 2000, as compared to $5.4 million for the three months ended March 31, 1999. This decrease primarily resulted from fewer sales of IBM and Sun Microsystems hardware due to sales in 1999 to customers in preparation for Y2K . Cost of sales as a percentage of related sales was 83.3% during 2000, compared to 82.7 % during 1999. SERVICE FEES. NeoMedia's service fees decreased by $1.2 million or 85.7%, to $0.2 million for the three months ended March 31, 2000, compared to $1.4 million for the three months ended March 31, 1999. This decrease was primarily due to the discontinuation of the Company's Y2K services. Cost of service fees as a percentage of related sales increased to 224.7% during 2000 from 103.5% during 1999 primarily due to the fixed nature of consulting costs coupled with an overall decline in service fee revenue. SALES AND MARKETING. A portion of the compensation to the sales and marketing staff constitutes salary and is fixed in nature and the remainder of this compensation, which is paid as a commission, is directly related to sales volume. Sales and marketing expenses were $1.3 million for the three months ended March 31, 2000, compared to $1.8 million for the three months ended March 31, 1999, a decrease of $0.5 million or 27.8%. This decrease primarily resulted from an overall reduction in the sales staff during the second half of 1999. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased by $0.1 million, or 7.7%, to $1.4 million for the three months ended March 31, 2000, compared to $1.3 million for the three months ended March 31, 1999. RESEARCH AND DEVELOPMENT. During the three months ended March 31, 2000, NeoMedia charged to expense $335,000 of research and development costs, an increase of $115,000 or 52.3% compared to $220,000 charged to expense for the three months ended March 31, 1999. This increase was due to increased resources directed toward the development of the ASP business. INTEREST EXPENSE(INCOME), NET. Interest expense consists primarily of interest paid to creditors as part of financed purchases, capitalized leases, notes payable and NeoMedia's asset-based collateralized line of credit net of interest earned on cash equivalent investments. Interest (income)/expense decreased by $91,000, or 126.4%, to $(19,000) for the three months ended March 31, 2000 from $72,000 for the three months ended March 31, 1999, due to reduced interest expense resulting from the repayment of notes in the first quarter of 2000, as well as interest income from higher cash balances in 2000. NET LOSS. The net loss for the quarter ended March 31, 2000 was $2.5 million, which represented a $0.7 million, or 38.9% increase from a $1.8 million loss for the three months ended March 31, 1999. The increase in net loss primarily resulted from in increased investment by NeoMedia in the ASP business offset by increased profit in the systems integration business as a result of discontinuation of the Y2K business. 7 LIQUIDITY AND CAPITAL RESOURCES During the first quarter of 2000, the Company has successfully obtained approximately $9.2 million of equity financing and $3.0 million from exercises of warrants and employee stock options. The Company also received a commitment from an unrelated third party to invest up to $7.5 million in the Company through the purchase of unissued shares of common stock at a price of $7.50 per share. In connection with the additional financing, 275,000 warrants at an exercise price of $7.50 and 125,000 warrants at an exercise price of $15.00 were issued. Management believes that this additional financing together with revenue from operations, will be sufficient to sustain operations for the remainder of 2000. Net cash used in operating activities for the three months ended March 31, 2000 and 1999, was $2.6 million and $1.7 million, respectively. During 2000, trade accounts receivable inclusive of costs in excess of billings decreased $1.6 million, while accounts payable and accrued expenses and deferred revenue decreased $2.2 million. During 1999, trade accounts receivable increased $504,000, while accounts payable and accrued expenses and other current liabilities increased $225,000. NeoMedia's net cash flow used in investing activities for the three months ended March 31, 2000 and 1999, was $413,000 and $381,000, respectively. Net cash provided by financing activities for the three months ended March 31, 2000 and 1999, was $11.6 million and $1.9 million, respectively. The increase was due to $12.2 million raised during the first quarter of 2000 through the issuance of common stock, as well as the exercise of warrants and stock options. The Company has entered into a migration contract (specifically Year 2000 remediation) with a Colombian customer related to the remediation of certain of the customer's computer systems to be Year 2000 compliant. The total contract is approximately $780,000, of which approximately $759,000 has been recognized as revenue by the Company as of March 31, 2000. As an element to the contract, the Company has guaranteed its work product and resulting Year 2000 compliance of the customer. To this end, during 1999 the Company established bank guarantees in the form of certificates of deposit totaling approximately $150,000 in favor of the customer. The Company believes that it has the ability and intent to complete such remediation in a satisfactory manner and is accounting for this project on a percentage of completion basis. YEAR 2000 ISSUES The Year 2000(Y2K) issue (i.e. the ability of computer systems to recognize a date using "00" as the year rather than 1900) affects all companies and organizations. As a result of the Company's Y2K efforts, no significant internal problems have occurred to date. The Company has not experienced any problems with suppliers, vendors, customers, or financial institutions. There were no significant expenditures related to Y2K compliance, and the Company does not anticipate any further expenses associated with Y2K. 8 PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27.1 Article 5 Financial Data Schedule for March 31, 2000 (b) Reports on Form 8-K On April 24, 2000, the Company filed a Form 8-K Current Report to disclose that it acquired the assets of Daystar Services, L.L.C. 9 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NEOMEDIA TECHNOLOGIES, INC. Registrant Date MAY 3, 2000 By: /s/ CHARLES W. FRITZ ----------- ------------------------------------------------- Charles W. Fritz, President, Chief Executive Officer and Chairman of the Board Date MAY 3, 2000 By: /s/ CHARLES T. JENSEN ----------- ------------------------------------------------- Charles T. Jensen, Vice President, Chief Financial Officer, Treasurer and Director 10 EXHIBIT INDEX EXHIBIT NUMBER DOCUMENT - ------ -------- 27.1 Article 5 Financial Data Schedule for March 31, 2000 EX-27.1 2
5 1,000 3-MOS DEC-31-2000 MAR-31-2000 12,071 0 1,642 906 69 14,164 10,706 (4,850) 20,542 6,246 0 0 0 48,555 (34,902) 20,542 4,094 4,094 3,554 3,554 2,995 162 (19) (2,436) 0 (2,436) 0 0 0 (2,436) (0.19) (0.19)
-----END PRIVACY-ENHANCED MESSAGE-----