-----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, II4DiMIr+vfGLsSb70MK5MdKbSgb6dFHn8Rtt8WNIlcuYYbzIvm0K1FHQSa+N89D LTghhUTFStO1ek7T1AYJEg== 0001144204-05-041426.txt : 20060831 0001144204-05-041426.hdr.sgml : 20060831 20051229140102 ACCESSION NUMBER: 0001144204-05-041426 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 20051229 DATE AS OF CHANGE: 20060209 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: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-125239 FILM NUMBER: 051290869 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 S-3/A 1 v031665_s-3a.txt As filed with the Securities and Exchange Commission on December 29, 2005 SEC Registration No. 333-125239 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 4 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 600 2201 Second Street, Suite 600 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 Registrant's (Primary Standard Industrial (Name, address, and telephone number 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 Price Fee(2) - --------------------------------------------------- ----------------- ----------------- ------------------- ---------------- Shares underlying warrants to purchase Common 54,000,000 $0.535 $28,890,000 $3,400.35 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 $0.535 per share as reported in the Over-the-Counter Bulletin Board on May 20, 2005. (2) Registration fee was paid previously. 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 December 5, 2005 was $0.321 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 December 5, 2005, based on 32,560,897 shares of BSD common stock outstanding, a volume-weighted 5-day average closing price of NeoMedia stock of $0.321, and the share exchange rate outlined in the merger agreement, we would issue an estimated 7,079,957 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................................................20 EXPERTS.............................................................21 WHERE YOU CAN FIND MORE INFORMATION.................................22 INFORMATION WE INCORPORATE BY REFERENCE.............................23 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-4 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. 1 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 $5,469,000 and $5,493,000 in the nine month periods ended September 30, 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 $88,846,000 and $83,377,000 as of September 30, 2005 and December 31, 2004, respectively. As of September 30, 2005 and December 31, 2004 and 2003, we had a working capital (deficit) of approximately ($3,839,000), ($2,597,000) and ($6,526,000), respectively. We had stockholders' equity (deficit) of $5,494,000, $4,392,000 and ($3,203,000) at September 30, 2005, and December 31, 2004 and 2003, respectively. We generated revenues of $1,721,000, $1,269,000, $1,700,000 and $2,400,000 for the nine month periods ended September 30, 2005 and 2004, and the years ended December 31, 2004 and 2003, respectively. In addition, during the nine month periods ended September 30, 2005 and 2004, and the years ended December 31, 2004 and 2003, we recorded negative cash flows from operations of $5,951,000, $2,500,000, $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; 2 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. 3 A Large Percentage Of Our Assets Are Intangible Assets, Which Will Have Little Or No Value If Our Operations Are Unsuccessful At September 30, 2005, and December 31, 2004 and 2003, approximately 41%, 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 4 technology and other intellectual property rights. In addition, we 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 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 5 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. 6 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 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 8 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 December 5, 2005, we had 466,111,091 shares of common stock outstanding, and options and warrants to purchase up to an aggregate 151,079,221 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 67,635,393 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 32,560,897 outstanding shares of BSD common stock and 462,068,880 outstanding shares of NeoMedia common stock as of December 5, 2005, and assuming a NeoMedia stock price of $0.321 (the volume-weighted average stock price for the five days preceding December 5, 2005), we would issue 7,079,957 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 December 5, 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 December 5, 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 December 5, 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 December 5, 2005, we had outstanding stock options and warrants to purchase 151,079,221 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 and at a price that we deem appropriate. Following the 11 pending acquisition of BSD (assuming a NeoMedia stock price at the effective time of the merger of $0.321, which was the volume-weighted average closing price for the five days preceding December 5, 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 691,905,662 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 466,111,091 shares of common stock outstanding as of December 5, 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 advisement and evaluation services relating to mergers, acquisitions and financing opportunities 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 50,000,000 (2) 9.7% 50,000,000 0% Thornhill Capital LLC 17,000,000 (3) 3.5% 4,000,000 2.7% ---------- ----- ---------- ---- TOTAL 67,000,000 13.2% 54,000,000 2.7% ========== ===== ========== ====
- --------------------------- (1) Applicable percentage of ownership is based on 466,111,091 shares of common stock outstanding as of December 5, 2005, together with securities exercisable or convertible into shares of common stock within 60 days of December 5, 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 December 5, 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) Cornell Capital Partners LP holds a warrant to purchase up to 50,000,000 shares of NeoMedia common stock at an exercise price of $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 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 Standby Equity Distribution Agreement (the "2003 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 commitment fee for Cornell to enter into the 2003 SEDA, 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 registered 200 million shares under the 2003 SEDA. In April 2004, we registered 40 million shares of common stock underlying warrants granted to Cornell in connection with a promissory note issued by us to Cornell (see "Notes Payable to Cornell" below). 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 nine months ended September 30, 2005, we sold 19,337,119 shares of our common stock to Cornell under the 2003 SEDA. The following table summarizes funding received from Cornell during the three and nine month periods ended September 30, 2005 and 2004:
2005 ------------------------------------------------------------ Nine Months First Second Third Ended Quarter Quarter Quarter Sept. 30 ------------ ------------ ------------ ------------ Number of shares sold to Cornell 6,998,931 7,258,094 5,080,094 19,337,119 Gross Proceeds from sale of shares $ 1,709,000 $ 3,219,000 $ 2,130,000 $ 7,058,000 Less: discounts and fees* (204,000) (489,000) (170,000) (863,000) ------------ ------------ ------------ ------------ Net Proceeds from sale of shares $ 1,505,000 $ 2,730,000 $ 1,960,000 $ 6,195,000 ------------ ------------ ------------ ------------
2004 ------------------------------------------------------------ Nine Months First Second Third Ended Quarter Quarter Quarter Sept. 30 ------------ ------------ ------------ ------------ Number of shares sold to Cornell 21,282,203 29,819,873 36,685,664 87,787,740 Gross Proceeds from sale of shares $ 2,332,000 $ 2,308,000 $ 2,734,000 $ 7,374,000 Less: discounts and fees* (500,000) (465,000) (483,000) (1,448,000) ------------ ------------ ------------ ------------ Net Proceeds from sale of shares $ 1,832,000 $ 1,843,000 $ 2,251,000 $ 5,926,000 ------------ ------------ ------------ ------------
* Pursuant to the terms of the 2003 SEDA , 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 Standby Equity Distribution Agreement (the "2005 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 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. Concurrent with the SEDA, we entered into an escrow agreement with Cornell and an escrow agent, under which 16 the escrow agent holds in an escrow account shares of our common stock, and the cash paid by Cornell for such shares, issued pursuant to an advance under the SEDA. The shares and funds can only be released upon receipt by the escrow agent of a joint disbursement instruction signed by NeoMedia and Cornell. The escrow agent is David Gonzalez, Esq., who is also employed by Cornell. As a commitment fee for Cornell to enter into the 2005 SEDA, 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. If shares of NeoMedia's common stock underlying the warrant are covered by an effective registration statement and if the closing bid price of NeoMedia's common stock is above $0.30 for five consecutive business days, NeoMedia may force conversion of the warrant. We also issued 4 million warrants with an exercise price of $0.227 to a consultant as a fee for negotiating and structuring the 2005 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 2005 SEDA, will amortize this amount to additional paid-in capital straight-line over the two-year life of the 2005 SEDA. We expect to file a registration statement with the SEC during 2005 to register the shares underlying the 2005 SEDA. The 2005 SEDA would become available 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 per month, 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 restricted stock as security for the note. As of December 5, 2005, we had made payments of $6,580,000 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 17 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. 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, we 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 100 F Street, N.E., 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 600 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 Quarterly Report on Form 10-QSB for the three and six months ended June 30, 2005 o Quarterly Report on Form 10-QSB for the three and nine months ended September 30, 2005 o Current Reports on Form 8-K filed on December 15, 2005, October 6, 2005, September 29, 2005, August 31, 2005, August 1, 2005, 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. Beginning on page F-1 hereto, we have provided audited financial statements for the years ended December 31, 2005 and 2004, and unaudited interim financial sstatements for the nine months ended September 30, 2005, for Mobot, Inc., a material probable acquisition that is subject to a non-binding letter of intent. 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 600, Ft. Myers, FL, 33901, Telephone: (239) 337-3434. 22 Report of Independent Registered Public Accounting Firm To the Board of Directors of Mobot, Inc. Lexington, Massachusetts We have audited the accompanying balance sheet of Mobot, Inc. (a development stage company) as of December 31, 2004, and the related statements of operations and stockholders' deficit and cash flows for the year then ended and for the period from September 8, 2003 (inception) to December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mobot, Inc. as of December 31, 2004, and the results of its operations and its cash flows for the year then ended and for the period from September 8, 2003 (inception) to December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company's significant operating losses and working capital deficit raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Stonefield Josephson, Inc. CERTIFIED PUBLIC ACCOUNTANTS Irvine, California October 11, 2005 F-1 Mobot, Inc. (A Development Stage Company) Balance Sheet - -------------------------------------------------------------------------------- December 31, 2004 --------- Assets Current assets: Cash $ 290,000 Prepaid expenses 2,937 --------- Total current assets 292,937 --------- Property and equipment, net 4,055 Intangible assets, net 4,668 Security deposit 7,303 --------- Total assets $ 308,963 ========= Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 16,071 Accrued expenses 4,613 Accrued interest 5,945 --------- Total current liabilities 26,629 --------- Convertible debentures 500,000 Stockholders' deficit: Common stock, $0.01 par value, 10,000 shares authorized, 1,659 shares outstanding 17 Additional paid-in capital 652 Deficit accumulated in the development stage (218,335) --------- Total stockholders' deficit (217,666) --------- Total liabilities and stockholders' deficit $ 308,963 ========= The accompanying notes form an integral part of these consolidated financial statements. F-2 Mobot, Inc. (A Development Stage Company) Statement of Operations - --------------------------------------------------------------------------------
From Inception of Development Stage (September 8, Year Ended 2003 to December 31, December 31, 2004 2004) --------- --------- Net sales $ -- $ -- Cost of goods sold -- -- --------- --------- Gross profit -- -- Operating, general and administrative expenses: Selling and marketing expenses 22,448 22,448 General and administrative expenses 190,245 190,245 --------- --------- Total operating expenses 212,693 212,693 --------- --------- Operating loss (212,693) (212,693) Interest expense (5,642) (5,642) --------- --------- Net loss $(218,335) $(218,335) ========= =========
The accompanying notes form an integral part of these consolidated financial statements. F-3 Mobot, Inc. (A Development Stage Company) Statement of Stockholders' Deficit - -------------------------------------------------------------------------------- From Inception of Development Stage (September 8, 2003 to December 31, 2004)
Deficit Accumulated Common Stock Additional in the ------------------------ Paid In Development Shares Amount Capital Stage Totals --------- --------- --------- --------- --------- Balance at September 8, 2003 (inception), stock issued at $0.01 per share 1,000 $ 10 $ -- $ -- $ 10 --------- --------- --------- --------- --------- Balance, December 31, 2003 1,000 $ 10 $ -- $ -- $ 10 Restricted stock issued on September 24, 2004 for sale at $1.00 per share 70 1 69 -- 70 Restricted stock issued on September 24, 2004 and November 29, 2004 for sale at $1.00 per share with a forfeiture clause 560 6 554 -- 560 Restricted stock issued on November 29, 2004 for sale at $1.00 per share 29 -- 29 -- 29 Net loss -- -- -- (218,335) (218,335) --------- --------- --------- --------- --------- Balance, December 31, 2004 1,659 $ 17 $ 652 $(218,335) $(217,666) ========= ========= ========= ========= =========
The accompanying notes form an integral part of these consolidated financial statements. F-4 Mobot, Inc. (A Development Stage Company) Statement of Cash Flows Increase (Decrease) in Cash - --------------------------------------------------------------------------------
From Inception Of Development Stage (September 8, Year Ended 2003 to December 31, December 31, 2004 2004) --------- --------- Cash flows from operating activities: Net loss $(218,335) $(218,335) Adjustments to reconcile net loss to net cash Provided by operating activities: Depreciation and amortization 555 555 Changes in operating assets and liabilities: Prepaid expenses (2,937) (2,937) Security deposit (7,303) (7,303) Accounts payable 16,071 16,071 Accrued expenses 4,613 4,613 Accrued interest 5,945 5,945 --------- --------- Net cash used for operating activities (201,391) (201,391) Cash flows used for investing activities: Purchase of property and equipment (4,278) (4,278) Purchase of intangible asset (5,000) (5,000) --------- --------- Net cash used for investing activities (9,278) (9,278) Cash flows provided by financing activities: Convertible debenture 500,000 500,000 Proceeds from issuance of stock 659 669 --------- --------- Net cash provide by financing activities 500,659 500,669 Net increase in cash 289,990 290,000 Cash, beginning of period 10 -- --------- --------- Cash, end of period $ 290,000 $ 290,000 ========= =========
The accompanying notes form an integral part of these consolidated financial statements. F-5 Mobot, Inc. (A Development Stage Company) Notes to Financial Statements Year Ended December 31, 2004 - -------------------------------------------------------------------------------- (1) Basis of Presentation and Summary of Operations: Basis of Presentation Mobot, Inc., a Massachusetts corporation referred to as "Mobot" or the "Company," was originally incorporated under the laws of Delaware under the name Ilumena Corporation on September 8, 2003 (inception) and had no activity during the year ended December 31, 2003. On September 16, 2004 the Board of Directors approved to have the Company's name officially changed to Mobot, Inc. Mobot is in the business of connecting consumers using any camera phone on any wireless carrier to brands, mobile content and commerce. No complex codes, navigation or changes to cross-media campaigns are required. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has reported net losses of $218,335 for the year ended December 31, 2004, and has retained deficit of $218,335 as of December 31, 2004. In addition, the Company has a cash balance of $290,000 and working capital of $266,308 as of December 31, 2004. Going Concern The Company cannot be certain that anticipated revenues from operations will be sufficient to satisfy its ongoing capital requirements. Management's belief is based on the Company's operating plan, which in turn is based on assumptions that may prove to be incorrect. If the Company's financial resources are insufficient the Company may require additional financing in order to execute its operating plan and continue as a going concern. The Company cannot predict whether this additional financing will be in the form of equity, debt, or another form. The Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, the Company may be unable to implement its current plans for expansion, repay its debt obligations as they become due or respond to competitive pressures, any of which circumstances would have a material adverse effect on its business, prospects, financial condition and results of operations. (2) Summary of Significant Accounting Policies: Development Stage Company The Company has not generated any significant revenue since inception. The accompanying financial statements have been prepared using the accounting formats prescribed for development stage companies. F-6 Mobot, Inc. (A Development Stage Company) Notes to Financial Statements Year Ended December 31, 2004 - -------------------------------------------------------------------------------- (2) Summary of Significant Accounting Policies (Continued): Use of Estimates The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires the Company's management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, intangibles, valuation allowances for deferred income tax assets, accounts receivable, accruals and other factors. Actual results could differ from those estimates. Cash For the purposes of the balance sheet and statement of cash flows, all highly liquid investments with original maturities of three months or less are considered cash equivalents. The Company maintains bank accounts with balances which, at times, that may exceed federally insured limits. The Company has not experienced any losses on such accounts. The Company believes it is not exposed to any significant risk on bank deposit accounts. The Company had a cash balance of $290,000 as of December 31, 2004, which exceeded federally insured limit. Property and Equipment Property and equipment consists primarily of computer equipment having a useful life of 3 years and are carried at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. Repairs and maintenance are charged to expense as incurred. Upon retirement or sale, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statement of operations. Material expenditures, which increase the life of an asset, are capitalized and depreciated over the estimated remaining life of the asset. Intangible Asset Intangible asset consists of a domain name and is carried at cost, net of accumulated amortization. Amortization is calculated using the straight-line method over estimated useful life of 5 years. Upon retirement or sale, cost and accumulated amortization are removed from the accounts and any gain or loss is reflected in the statement of operations. F-7 Mobot, Inc. (A Development Stage Company) Notes to Financial Statements Year Ended December 31, 2004 - -------------------------------------------------------------------------------- (2) Summary of Significant Accounting Policies (Continued): Income Taxes In accordance with SFAS No. 109, "Accounting for Income Taxes", income taxes are accounted for using the assets and liabilities approach. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be recognized. The Company has recorded a 100% valuation allowance as of December 31, 2004. Advertising Costs The Company expenses the cost of advertising and promoting its services as incurred. There were no advertising expenses incurred for the year ended December 31, 2004. Fair Value of Financial Instruments For certain of the Company's financial instruments, including cash, short-term bank borrowings, accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their short-term maturities. The fair value of long-term obligations approximates its carrying value as the existing contract interest rates are comparable to market rates currently offered to the Company for similar debt instruments with similar maturities. (3) Recently Issued Accounting Pronouncements: In May 2005, the FASB issued FASB Statement No. 154, Accounting Changes and Error Corrections. This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and represents another step in the FASB's goal to converge its standards with those issued by the IASB. Among other changes, Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a "restatement." The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. F-8 Mobot, Inc. (A Development Stage Company) Notes to Financial Statements Year Ended December 31, 2004 - -------------------------------------------------------------------------------- (3) Recently Issued Accounting Pronouncements (Continued): Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations" ("FIN 47"). FIN 47 provides guidance relating to the identification of and financial reporting for legal obligations to perform an asset retirement activity. The Interpretation requires recognition of a liability for the fair value of a conditional asset retirement obligation when incurred if the liability's fair value can be reasonably estimated. FIN 47 also defines when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. The provision is effective no later than the end of fiscal years ending after December 15, 2005. The Company will adopt FIN 47 beginning the first quarter of fiscal year 2006 and does not believe the adoption will have a material impact on its consolidated financial position or results of operations or cash flows. In March 2005, the SEC released Staff Accounting Bulletin No. 107, "Share-Based Payment" ("SAB 107"), which provides interpretive guidance related to the interaction between SFAS 123(R) and certain SEC rules and regulations. It also provides the SEC staff's views regarding valuation of share-based payment arrangements. In April 2005, the SEC amended the compliance dates for SFAS 123(R), to allow companies to implement the standard at the beginning of their next fiscal year, instead of the next reporting period beginning after June 15, 2005. Management is currently evaluating the impact SAB 107 will have on our consolidated financial statements. In December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions." The amendments made by Statement 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. Previously, Opinion 29 required that the accounting for an exchange of a productive asset for a similar productive asset or an equivalent interest in the same or similar productive asset should be based on the recorded amount of the asset relinquished. Opinion 29 provided an exception to its basic measurement principle (fair value) for exchanges of similar productive assets. The Board believes that exception required that some nonmonetary exchanges, although commercially substantive, be recorded on a carryover basis. By focusing the exception on exchanges that lack commercial substance, the Board believes that SFAS 153 produces financial reporting that more faithfully represents the economics of the transactions. SFAS 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods F-9 Mobot, Inc. (A Development Stage Company) Notes to Financial Statements Year Ended December 31, 2004 - -------------------------------------------------------------------------------- (3) Recently Issued Accounting Pronouncements (Continued): beginning after the date of issuance. The provisions of this Statement shall be applied prospectively. The Company has evaluated the impact of the adoption of SFAS 153, and does not believe the impact will be significant to the Company's overall results of operations or financial position. In December 2004, the FASB issued SFAS No.123 "Share-Based Payment". SFAS 123(R) will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS 123(R) replaces FASB Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Public entities (other than those filing as small business issuers) will be required to apply Statement 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. The adoption of this standard will not have any impact on the Company's results of operations or financial position as the Company does not participate in the related activities. In December 2004 the Financial Accounting Standards Board issued two FASB Staff Positions - FSP FAS 109-1, Application of FASB Statement 109 "Accounting for Income Taxes" to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004, and FSP FAS 109-2 Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. Neither of these affected the Company as it does not participate in the related activities. In November 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 151, "Inventory Costs" an amendment of Accounting Research Bulletin ("ARB") No. 43, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This SFAS requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal". In addition, this SFAS requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. Companies are required to adopt the provisions of this Statement for fiscal years beginning after June 15, 2005. The adoption of this standard will not have any impact on the Company's results of operations or financial position. F-10 Mobot, Inc. (A Development Stage Company) Notes to Financial Statements Year Ended December 31, 2004 - -------------------------------------------------------------------------------- (4) Property and Equipment: December 31, 2004 ------------------ Computer equipment $ 4,278 Less accumulated depreciation 223 ------------------ Computer equipment, net $ 4,055 ================== Depreciation expense was $223 for the year ended December 31, 2004. (5) Intangible Asset: December 31, 2004 ------------------ Domain name $ 5,000 Less accumulated amortization 332 ------------------ Domain name, net $ 4,668 ================== Amortization expense was $332 for the year ended December 31, 2004. (6) Income Taxes: The Company had net operating loss carry forwards of approximately $193,400. The loss expires in 2024. The Company believes it is more likely than not that it will not realize the future tax benefits of its operating loss carry forwards and has provided a full valuation allowance as of December 31, 2004. The components of current and deferred income tax expense (benefit) are as follows: December 31, 2004 ------------------ Current: State $ -- Federal -- Deferred: State -- Federal -- ------------------ Net income tax expense $ -- ================== F-11 Mobot, Inc. (A Development Stage Company) Notes to Financial Statements Year Ended December 31, 2004 - -------------------------------------------------------------------------------- (6) Income Taxes (Continued): A reconciliation of income taxes between the statutory and effective tax rates on income before income taxes is as follows: December 31, 2004 --------------- Computed statutory income tax expense (benefit) $ (74,234) State income tax, net of federal (20,742) Meals and entertainment 720 Depreciation (179) Accrual to cash 10,306 Change in valuation allowance (84,129) --------------- $ -- =============== The components of deferred income taxes are as follows: December 31, 2004 --------------- Deferred tax assets: Net operating loss carry forward $ (84,129) Deferred tax liabilities: Accelerated depreciation on property & equipment (179) Accrual to cash 10,306 --------------- Net deferred tax assets (74,002) Valuation allowance 74,002 --------------- $ -- =============== (7) Equity: Common Stock Each of the eight holders of our common stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders. Holders of common stock have no preemptive rights and have no rights to convert their common stock into any other securities. The outstanding common stock is duly authorized and validly issued, fully-paid, and non-assessable. F-12 Mobot, Inc. (A Development Stage Company) Notes to Financial Statements Year Ended December 31, 2004 - -------------------------------------------------------------------------------- (7) Equity: Forfeiture Clause During the year, the Company issued 560 shares to key employees. If employment with the Company terminates before four years from the date of issuance, the employee will be required to forfeit a certain number of shares, based upon a predetermined schedule. The Company retains the right to purchasing back these forfeited shares at the original purchase price. Equity Incentive Plan On September 16, 2004, the Company adopted an incentive plan called the "2004 Equity Incentive Plan" providing for the issuance of up to 900 shares of the Company's common stock pursuant to grants of restricted stock or stock options under the plan. (8) Commitments and Contingencies: The Company leases its office facility under an operating lease with an expiration date of April 30, 2006. For the year ended December 31, 2004, Mobot incurred rent expense of $5,817. The following is a schedule of the future minimum payments under the non-cancelable operating lease in effect as of December 31, 2004: Operating Leases -------------- Year Ended December 31, 2005 $ 46,788 2006 17,577 -------------- Total minimum payments $ 64,365 ============== In the normal course of business the Company is subject to various claims and litigation. The Company does not currently have any pending or threatening litigation. F-13 Mobot, Inc. (A Development Stage Company) Notes to Financial Statements Year Ended December 31, 2004 - -------------------------------------------------------------------------------- (9) Convertible Debentures: In August and October of 2004, the Company entered into two five-year $250,000 convertible debenture financing agreements. These agreements accrue interest at 4% per annum and can be paid after twelve months with no prepayment penalties. As of December 31, 2004, the Company recognized accrued interest on the debentures in the amount of $5,945. Neither agreement has a repayment schedule and are payable in full, including accrued interest, at August and October of 2009. The debentures have conversion rights that allows for the debentures to be converted into 333 shares of the Company's common stock only as follows: (1) from and after the date that is twelve months following the closing if the Company has not completed a major equity financing producing proceeds to the Company of at least $3 million prior to such date, (2) in the event of an initial public offering, (3) in the event of a sale of the Company. In the event of an initial public offering a sale of the Company, the Company will notify the debenture holders they have the right to convert the debentures within ten days of such notice at a conversion rate of $1,500 per share. The debentures do not have a beneficial conversion feature. The debentures also have stock warrants that are issuable upon conversion or exchange of the debentures at 50% of the number of shares converted to common shares. (10) Subsequent Events: On July 27, 2005, Mobot signed a non-binding Letter of Intent to be purchased by NeoMedia Technologies, Inc. ("NeoMedia"), of Fort Myers, Florida. NeoMedia has three distinct business units, NeoMedia Internet Software Service that offers technologies if linking the physical world to the internet, NeoMedia Consulting and Intergration Services that offers resale of computer hardware and software and NeoMedia Micro Paint Repair that offers technologies in the micro paint industry. The Letter of Intent calls for NeoMedia to acquire all of the outstanding shares of Mobot in exchange for $3,500,000 cash and $6,500,000 in shares of NeoMedia common stock. The LOI is subject to due diligence by both parties. F-14 Mobot, Inc. (A Development Stage Company) Notes to Financial Statements Year Ended December 31, 2004 - -------------------------------------------------------------------------------- (10) Subsequent Events (Continued): On July 28, 2005, Mobot borrowed from NeoMedia the principal amount of $600,000 in the form of an unsecured promissory note. The Note accrues interest at a rate of 6% per annum. The Note will be forgiven upon signing of a definitive purchase agreement for the acquisition of all of the outstanding shares of Mobot by NeoMedia, as contemplated by the Letter of Intent. In the event the acquisition is not consummated, the Note will become due 90 days after written notice of cancellation of the Letter of Intent. In the event the Letter of Intent is terminated and the Note is not repaid within 90 days of such cancellation, the note will convert into shares of Mobot common stock with a value equal to the unpaid principal and accrued interest on the Note. In the event a definitive purchase agreement is not executed by the parties, or the Letter of Intent is not terminated by September 26, 2005, Mobot has the right to demand an additional $200,000 loan from NeoMedia. On September 26, 2005, Mobot exercised its right and received the additional $200,000 loan. Further, in the event a definitive purchase agreement is not executed by the parties or the Letter of Intent is not terminated by October 26, 2005, Mobot has the right to demand an additional $200,000 loan from NeoMedia. On October 26, 2005, Mobot exercised its right and received the additional $200,000 loan. Both of the additional loans are in the form of unsecured promissory notes subject to the same terms as the original $600,000 note. F-15 SUPPLEMENTARY FINANCIAL INFORMATION The following information presents Mobot, Inc.'s unaudited quarterly operating results for the nine months ended September 30, 2005 and 2004. The data has been prepared by Mobot, Inc. on a basis consistent with the Consolidated Financial Statements included elsewhere in this registration statement, and includes all adjustments, consisting of normal recurring accruals, that we consider necessary for a fair presentation thereof. These operating results are not necessarily indicative of our future performance. Mobot, Inc. Balance Sheet - unaudited September 30, 2005 - -------------------------------------------------------------------------------- Assets Current assets: Cash $ 440,793 Accounts receivable 1,250 Prepaid expenses 5,636 ----------- Total current assets 447,679 ----------- Property and equipment, net 10,915 Intangible assets, net 9,031 Security deposit 7,303 ----------- $ 474,928 =========== Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 47,634 Accrued interest 20,945 Deferred revenue 52,639 Accrued salaries 188,917 Note payable 800,000 ----------- Total current liabilities 1,110,135 ----------- Convertible debentures 500,000 ----------- Stockholders' deficit: Common stock, $0.01 par value, 10,000 shares authorized, 1,834 shares issued and outstanding 18 Additional paid-in capital 855 Accumulated deficit (1,136,080) ----------- Total stockholders' deficit (1,135,207) ----------- $ 474,928 =========== The accompanying notes form an integral part of these financial statements. F-16
Mobot, Inc. Statements of Operations - unaudited - -------------------------------------------------------------------------------------- Nine Months Nine Months Ended Ended September 30 September 30 2005 2004 ----------- ----------- Net sales $ 143,961 $ -- Cost of goods sold -- -- ----------- ----------- Gross profit 143,961 -- ----------- ----------- Operating expenses: Selling and marketing expenses 115,581 19,519 General and administrative expenses 930,829 57,019 ----------- ----------- Total operating expenses 1,046,410 76,538 ----------- ----------- Operating loss (902,449) (76,538) Interest expense (15,296) 74 ----------- ----------- Net loss $ (917,745) $ (76,464) =========== ===========
The accompanying notes form an integral part of these financial statements. F-17
Mobot, Inc. Statements of Cash Flows - unaudited Increase (Decrease) in Cash - ------------------------------------------------------------------------------------------------- Nine Months Nine Months Ended Ended September 30, September 30, 2005 2004 ----------------- ----------------- Cash flows from operating activities: Net loss $ (917,745) $ (76,464) Adjustments to reconcile net loss to net cash Provided by operating activities: Depreciation and amortization 2,154 - Changes in operating assets and liabilities: Accounts receivable (1,250) - Prepaid expenses (2,699) - Security deposit - - Accounts payable 31,563 25,596 Accrued interest 15,000 - Deferred revenue 52,639 - Deferred salaries 184,304 - ----------------- ----------------- Net cash used for operating activities (636,034) (50,868) ----------------- ----------------- Cash flows used for investing activities: Investment in patents (9,031) - Purchase of property and equipment (4,346) - Purchase of intangible asset - - ----------------- ----------------- Net cash used for investing activities (13,377) - ----------------- ----------------- Cash flows provided by financing activities: Proceeds from convertible debenture - 250,000 Loan 800,000 - Proceeds from note payable 100,000 - Repayment of note payable (100,000) - Proceeds from issuance of stock 204 - ----------------- ----------------- Net cash provided by financing activities 800,204 250,000 ----------------- ----------------- Net increase in cash 150,793 199,132 Cash, beginning of period 290,000 10 ----------------- ----------------- Cash, end of period $ 440,793 $ 199,142 ================= =================
The accompanying notes form an integral part of these financial statements. F-18 Mobot, Inc. Notes to Financial Statements - unaudited Nine Months Ended September 30, 2005 and 2004 (1) Basis of Presentation and Summary of Operations: Basis of Presentation Mobot, Inc., a Delaware corporation referred to as "Mobot" or the "Company," was originally incorporated under the laws of Delaware under the name Ilumena Corporation on September 8, 2003 (inception) and had no activity during the year ended December 31, 2003. On September 16, 2004 the Board of Directors approved to have the Company's name officially changed to Mobot, Inc. Mobot is in the business of connecting consumers using any camera phone on any wireless carrier to brands, mobile content and commerce. No complex codes, navigation or changes to cross-media campaigns are required. On July 27, 2005, Mobot signed a non-binding Letter of Intent ("Letter of Intent") to be purchased by NeoMedia Technologies, Inc. ("NeoMedia"), of Fort Myers, Florida. NeoMedia has three distinct business units, NeoMedia Internet Software Service that offers technologies if linking the physical world to the internet, NeoMedia Consulting and Integration Services that offers resale of computer hardware and software and NeoMedia Micro Paint Repair that offers technologies in the micro paint industry. The Letter of Intent calls for NeoMedia to acquire all of the outstanding shares of Mobot in exchange for $3,500,000 cash and $6,500,000 in shares of NeoMedia common stock. The LOI is subject to due diligence by both parties. Going Concern The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has reported net losses of $917,745 and $76,464 for the periods ended September 30, 2005 and 2004, respectively, and has retained deficits of $1,136,080 and $76,464 as of September 30, 2005 and 2004, respectively. In addition, the Company has cash balances of $440,793 as of September 30, 2005. The Company cannot be certain that anticipated revenues from operations will be sufficient to satisfy its ongoing capital requirements. Management's belief is based on the Company's operating plan, which in turn is based on assumptions that may prove to be incorrect. If the Company's financial resources are insufficient the Company may require additional financing in order to execute its operating plan and continue as a going concern. The Company cannot predict whether this additional financing will be in the form of equity, debt, or another form. The Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, the Company may be unable to implement its current plans for expansion, repay its debt obligations as they become due or respond to competitive pressures, any of which circumstances would have a material adverse effect on its business, prospects, financial condition and results of operations. F-19 (2) Summary of Significant Accounting Policies: Revenue Recognition The Company records revenue in accordance with SEC Staff Accounting Bulletin No. 104 ("SAB 104") Revenue Recognition in Financial Statements SAB No. 104 requires that sales be recognized when a persuasive evidence of an arrangement exists, the price to the customer is fixed and determinable price, delivery of the service has occurred and collectibility is reasonably assured. The Company records sales over the life of the contracts as certain key services are performed in accordance with contract terms, which state fixed prices and terms, and collection is reasonably assured. F-20 F-21 (3) Recently Issued Accounting Pronouncements: In May 2005, the FASB issued FASB Statement No. 154, Accounting Changes and Error Corrections. This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and represents another step in the FASB's goal to converge its standards with those issued by the IASB. Among other changes, Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a "restatement." The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations" ("FIN 47"). FIN 47 provides guidance relating to the identification of and financial reporting for legal obligations to perform an asset retirement activity. The Interpretation requires recognition of a liability for the fair value of a conditional asset retirement obligation when incurred if the liability's fair value can be reasonably estimated. FIN 47 also defines when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. The provision is effective no later than the end of fiscal years ending after December 15, 2005. The Company will adopt FIN 47 beginning the first quarter of fiscal year 2006 and does not believe the adoption will have a material impact on its consolidated financial position or results of operations or cash flows. In March 2005, the SEC released Staff Accounting Bulletin No. 107, "Share-Based Payment" ("SAB 107"), which provides interpretive guidance related to the interaction between SFAS 123(R) and certain SEC rules and regulations. It also provides the SEC staff's views regarding valuation of share-based payment arrangements. In April 2005, the SEC amended the compliance dates for SFAS 123(R), to allow companies to implement the standard at the beginning of their next fiscal year, instead of the next reporting period beginning after June 15, 2005. Management is currently evaluating the impact SAB 107 will have on our consolidated financial statements. In December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions." The amendments made by Statement 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. Previously, Opinion 29 required that the F-22 (3) Recently Issued Accounting Pronouncements (Continued): accounting for an exchange of a productive asset for a similar productive asset or an equivalent interest in the same or similar productive asset should be based on the recorded amount of the asset relinquished. Opinion 29 provided an exception to its basic measurement principle (fair value) for exchanges of similar productive assets. The Board believes that exception required that some nonmonetary exchanges, although commercially substantive, be recorded on a carryover basis. By focusing the exception on exchanges that lack commercial substance, the Board believes that SFAS 153 produces financial reporting that more faithfully represents the economics of the transactions. SFAS 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date of issuance. The provisions of this Statement shall be applied prospectively. The Company has evaluated the impact of the adoption of SFAS 153, and does not believe the impact will be significant to the Company's overall results of operations or financial position. In December 2004, the FASB issued SFAS No.123 "Share-Based Payment". SFAS 123(R) will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS 123(R) replaces FASB Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Public entities (other than those filing as small business issuers) will be required to apply Statement 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. The adoption of this standard will not have any impact on the Company's results of operations or financial position as the Company does not participate in the related activities. In December 2004 the Financial Accounting Standards Board issued two FASB Staff Positions - FSP FAS 109-1, Application of FASB Statement 109 "Accounting for Income Taxes" to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004, and FSP FAS 109-2 Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. Neither of these affected the Company as it does not participate in the related activities. In November 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 151, "Inventory Costs" an amendment of Accounting Research Bulletin ("ARB") No. 43, to clarify the accounting for abnormal amounts F-23 (3) Recently Issued Accounting Pronouncements (Continued): of idle facility expense, freight, handling costs, and wasted material (spoilage). This SFAS requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal". In addition, this SFAS requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. Companies are required to adopt the provisions of this Statement for fiscal years beginning after June 15, 2005. The adoption of this standard will not have any impact on the Company's results of operations or financial position. (4) NOTE PAYABLE: On July 28, 2005, Mobot borrowed the principal amount of $600,000 in the form of an unsecured promissory note. The Note accrues interest at a rate of 6% per annum. The Note will be forgiven upon signing of a definitive purchase agreement for the acquisition of all of the outstanding shares of Mobot by NeoMedia, as contemplated by the Letter of Intent. In the event the acquisition is not consummated, the Note will become due 90 days after written notice of cancellation of the Letter of Intent. In the event the Letter of Intent is terminated and the Note is not repaid within 90 days of such cancellation, the note will convert into shares of Mobot common stock with a value equal to the unpaid principal and accrued interest on the Note. On September 26, 2005, NeoMedia loaned Mobot an additional $200,000 under the same terms as noted above. (5) Convertible Debentures: In August and October of 2004, the Company entered into two five-year $250,000 convertible debenture financing agreements. These agreements accrue interest at 4% per annum and can be paid after twelve months with no prepayment penalties. As of September 30, 2005, the Company recorded accrued interest on the debentures in the amount of $20,945. Neither agreement has a repayment schedule and are payable in full, including accrued interest, at August and October of 2009. The debentures have conversion rights that allows for the debentures to be converted into 333 shares of the Company's common stock only as follows: (1) from and after the date that is twelve months following the closing if the Company has not completed a major equity financing, resulting in proceeds to the Company of at least $3 million prior to such date, (2) in the event of an initial public offering, (3) in the event of a sale of the Company. In the event of an initial public offering or sale of the Company, the Company will notify the debenture holders they have the right to convert the debentures within ten days of such notice at a conversion rate of $1,500 per share. The debentures do not have a beneficial conversion feature. The debentures also have stock warrants that are issuable upon conversion or exchange of the debentures at 50% of the number of shares converted to common shares. The fair value of the warrants has been determined to be nominal and has not been recorded by the Company. (6) Subsequent Events: On October 26, 2005, NeoMedia loaned Mobot an additional $200,000 under the same terms as discussed in notes payable. On December 15, 2005, NeoMedia advanced Mobot an additional $500,000. This advance will be forgiven upon the earlier of signing of a definitive purchase agreement for the acquisition of all of the outstanding shares of Mobot by NeoMedia, or February 15, 2006. F-24 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 $ 5,000 Accounting Fees and Expenses 25,000 Legal Fees and Expenses 25,000 Miscellaneous 5,000 ------------ TOTAL $ 60,000 ============ 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 Consulting Agreement between NeoMedia and Thornhill Provided Herewith Capital, dated December 5, 2001 10.2 First Agreement and Amendment to Consulting Agreement Provided Herewith between NeoMedia and Thornhill Capital, dated January 29, 2004 10.3 Second Agreement and Amendment to Consulting Agreement Provided Herewith between NeoMedia and Thornhill Capital, dated July 22, 2005 10.4 Standby Equity Distribution Agreement, dated October Incorporated by reference to Exhibit 10.91 to 27, 2003, between NeoMedia and Cornell Capital the Registrant's Form SB-2/A as filed on Partners December 19, 2003 10.5 Form of Registration Rights Agreement, dated October Incorporated by reference to Exhibit 10.93 to 27, 2003, between NeoMedia and Cornell Capital the Registrant's Form SB-2/A as filed on Partners December 19, 2003 10.6 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 10.7 $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 10.8 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 10.9 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 10.10 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 10.11 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 10.12 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 10.13 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
II-2
Exhibit No. Description Location - ----------- ----------------------------------------------------- ----------------------------------------------- 10.14 Warrant dated March 30, 2005, granted by NeoMedia to Incorporated by reference to Exhibit 10. 12 to Thornhill Capital LLC the Registrant's Amendment No. 1 to Form S-3 as filed on July 18, 2005 10.15 Warrant dated March 30, 2005, granted by NeoMedia to Incorporated by reference to Exhibit 10. 13 to Cornell Capital Partners LP the Registrant's Amendment No. 1 to Form S-3 as filed on July 18, 2005 10.16 Promissory Note, dated March 13, 2003, between Provided Herewith NeoMedia and Cornell 10.17 Promissory Note, dated May 27, 2003, between NeoMedia Provided Herewith and Cornell 10.18 Promissory Note, dated June 24, 2003, between NeoMedia Provided Herewith and Cornell 10.19 Promissory Note, dated July 21, 2003, between NeoMedia Provided Herewith and Cornell 10.20 Promissory Note, dated August 1, 2003, between Provided Herewith NeoMedia and Cornell 10.21 Promissory Note, dated September 2, 2003, between Provided Herewith NeoMedia and Cornell 10.22 Promissory Note, dated September 11, 2003, between Provided Herewith NeoMedia and Cornell 10.23 Promissory Note, dated April 8, 2004, between NeoMedia Provided Herewith and Cornell 10.24 Promissory Note, dated July 2, 2004, between NeoMedia Provided Herewith and Cornell 10.25 Promissory Note, dated August 6, 2004, between Provided Herewith NeoMedia and Cornell 10.26 Promissory Note, dated October 18, 2004, between Provided Herewith NeoMedia and Cornell 23.1 Consent of Stonefield Josephson, Inc., independent Provided herewith Registered Public Accounting Firm of NeoMedia Technologies, Inc. 23.2 Consent of Stonefield Josephson, Inc., independent Provided herewith Registered Public Accounting Firm of Mobot, Inc.
II-3 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-4 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 December 14, 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 December 14, 2005 /s/ Charles W. Fritz Chairman of the Board - ------------------------------------ Charles W. Fritz December 14, 2005 /s/ David A. Dodge - ------------------------------------ Vice-President, Chief Financial Officer, David A. Dodge and principal accounting officer December 14, 2005 /s/ William E. Fritz Director - ------------------------------------ William E. Fritz December 14, 2005 /s/ Hayes Barclay Director - ------------------------------------ Hayes Barclay December 14, 2005 /s/ James J. Keil Director - ------------------------------------ James J. Keil December 14, 2005
EX-5.1 2 v031665_ex5-1.txt Exhibit 5.1 Kirkpatrick & Lockhart Nicholson Graham LLP Miami Center-20th Floor 201 S. Biscayne Boulevard Miami, Florida 33131-2399 (305) 539-3300 December 13, 2005 NeoMedia Technologies, Inc. 2201 Second Street, Suite 402 Fort Myers, Florida 33901 Re: Registration Statement on Form S-3 Ladies and Gentlemen: We have acted as counsel to NeoMedia Technologies, Inc., a Delaware corporation (the "Company"), in connection with its Registration Statement on Form S-3 (the "Registration Statement") filed with the United States Securities and Exchange Commission under the Securities Act of 1933, as amended (the "1933 Act"). The Registration Statement relates to the issuance by the Company of 54,000,000 shares of its common stock, par value $0.01 per share (the "Shares"), underlying previously issued warrants by the Company. You have requested our opinion as to the matters set forth below in connection with the Registration Statement. For purposes of rendering that opinion, we have examined the Registration Statement, the Company's Certificate of Incorporation (as amended) and bylaws, and we have made such other investigation as we have deemed appropriate. We have examined and relied upon certificates of public officials and, as to certain matters of fact that are material to our opinion, we have also relied on a certificate of an officer of the Company. Our opinion set forth below is limited to the Delaware General Corporation Law, including the applicable provisions of the Delaware Constitution and reported judicial decisions interpreting those laws. Based upon and subject to the foregoing, it is our opinion that the Shares are duly authorized for issuance by the Company and, when issued and paid for as described in the Prospectus included in the Registration Statement, will be validly issued, fully paid, and nonassessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm in the related Prospectus under the caption "Legal Matters". In giving our consent we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the 1933 Act or the rules and regulations thereunder. Very truly yours, /s/ Kirkpatrick & Lockhart Nicholson Graham LLP KIRKPATRICK & LOCKHART NICHOLSON GRAHAM LLP EX-10.1 3 v031665_ex10-1.txt Exhibit 10.1 CONSULTING AGREEMENT THIS CONSULTING AGREEMENT ("Agreement") is made and entered into as of the 5th day of December, 2001 (the "Effective Date") by and between NeoMedia Technologies, a Delaware corporation with offices at 2201 Second Street, Ft. Myers, FL 33901 (the "Company") and Thornhill Capital ("Consultant"). WHEREAS, the Company desires to engage Consultant to perform certain services and, in certain instances, to create certain work product for the Company, pursuant to the terms and conditions of this Agreement; and WHEREAS, Consultant desires to accept such engagement; NOW, THEREFORE, in consideration of the foregoing premises and of the terms, covenants and conditions hereinafter recited, the parties hereto agree as follows: 1. CONSULTANT'S DUTIES AND COMPENSATION. 1.1 Engagement and Services. The Company hereby engages Consultant as an independent contractor for a period of one year from the effective date of this Agreement ("Initial Term") and not as an employee. The Company recognizes that Consultant may render consulting services to other companies which may or may not conduct activities similar to those of the Company. During the Initial Term or any renewal term of this Agreement, Consultant shall be free to render such advice and other services to other companies, provided that such companies are not competitors of the Company. Consultant shall be required to devote any time it feels is appropriate per month and attention to the performance of their duties hereunder. Upon the expiration of the Initial Term or any renewal term of Consultant's engagement hereunder, the term of such engagement automatically shall be renewed for an additional term of one year unless Consultant or the Company shall give notice of the termination of Consultant's engagement and this Agreement by written notice to the other no less than 30 days prior to the date of expiration of the Initial Term or any renewal term. Under no circumstances shall Consultant be entitled to any benefits or compensation of any kind or nature whatsoever from the Company (including, but not by way of an limitation thereof, paid vacation time off, other time off, participation in any relocation allowance plan of the Company, medical, dental or other group health plans, accident benefits, life insurance benefits, pension or profit sharing plans or incentive plans for management), except as is set forth herein. Consultant hereby accepts such engagement. Consultant shall perform such services in a diligent, lawful and reasonable manner consistent with professional standards in the field. At no time and under no circumstances shall Consultant be deemed to be an employee of the Company. 1.2 Compensation. In consideration of his service rendered hereunder, Consultant shall be paid the sum of $10,000 per month during the Initial Term or any renewal term. 1 1.3 No Subcontracting. Consultant shall not subcontract any portion of Consultant's duties under this Agreement without the prior written consent of the Company. 1.4 Independent Contractor Status. The Company and Consultant acknowledge and agree their relationship is not one of employer and employee, and Consultant shall have no right or authority to enter into any contract or agreement or to make any warranty or representation on behalf of the Company. Additionally, Thornhill Capital and its employees shall be indemnified from liabilities it may incur as a result of its consulting relationship with NeoMedia Technologies. This will include, but not be limited to, the providing of independent legal counsel at NeoMedia's expense and other indemnifications so the Thornhill Capital or its employees will not suffer any economic harm as a result of its relationship with NeoMedia Technologies. 1.5 Reimbursed Expenses. During the term hereof, the Company shall reimburse Consultant for all reasonable and necessary expenses incurred by Consultant in the performance of his duties hereunder, including without limitation, travel, meals, lodging, office supplies or equipment subject to such reasonable limitations, restrictions and reporting standards as the Company may from time to time establish. Consultant shall provide to the Company, after incurring any such expenses, with such documentation as the Company shall from time to time require and as shall be sufficient to support the deductibility of all such expenses by the Company for federal income tax purposes. Expenses will be reimbursed promptly, but no later than 30 days after submission. 1.6 Tax Reporting. The Company shall report all compensation earned by the Consultant without regard to withholding and shall provide Consultant on an annual basis with such tax reporting information as is commensurate with an independent contractor's status. 1.7 Compliance. Consultant shall comply with all laws, rules and regulation of the State of Florida, the United States and all other applicable jurisdictions, agencies and courts. If Consultant provides services on the Company's premises, Consultant shall comply with all applicable rules, regulations and policies of the Company. 2. TERMINATION 2.1 Termination. Notwithstanding any of the foregoing provisions to the contrary, this Agreement and Consultant's engagement with the Company as an independent contractor shall not be cancelable by the Company during the term of the engagement. The Consultant may, however, cancel if payment of its retainer and / or expenses is more than 20 business days past due. 2 2.2 Effect Of Termination. In the event of termination of this Agreement and Consultant's engagement pursuant to Paragraph 2.1 hereof, all rights and obligations of the Company and Consultant hereunder shall terminate on the date of such termination, subject to the following: (a) Consultant shall be entitled to receive (subject to any rights of setoff or counterclaim by the Company) all commissions which shall have accrued prior to the date of such termination, and the obligation of the Company for the payment of commissions shall terminate as of the date of such termination; and (b) All rights of the Company or Consultant which shall have accrued hereunder prior to the date of such termination, and all provisions of this Agreement which are to survive termination of employment of Consultant hereunder, shall survive such termination, and the Company and Consultant shall continue to be bound by such provisions in accordance with the terms thereof. 3. REPRESENTATIONS AND WARRANTIES Consultant represents and warrants that: (i) Consultant has the full power and authority necessary to enter into this Agreement; (ii) Consultant will not breach or violate any other agreement to which Consultant is a party by entering into this Agreement; and (iii) to the best of Consultant's knowledge, none of the Intellectual Property will infringe, misappropriate or otherwise conflict with the proprietary rights of any third party. 4. GENERAL 4.1 Relationship of Parties. Except as specifically provided herein, neither party shall act or represent or hold itself out as having authority to act as an agent or partner of the other party, or in any way bind or commit the other party to any obligations. Any such act will create a separate liability in the party so acting to any and all third parties affected thereby. The rights, duties, obligations and liabilities of the parties shall be several and not joint or collective, and nothing contained in this Agreement shall be construed as creating a partnership, joint venture, agency, trust or other association of any kind, each party being individually responsible only for its obligations as set forth in this Agreement. 4.2 Assignment; Benefit. Consultant shall not assign, transfer or encumber this Agreement or any of its rights, duties or obligations hereunder, by operation of law or otherwise, without the prior written consent of the Company. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. 3 4.3 Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be deemed given, delivered and received (a) when delivered, if delivered personally, (b) four days after mailing, when sent by registered or certified mail, return receipt requested and postage prepaid, (c) the next business day after delivery to a private courier service, when delivered to a private courier service providing documented overnight service, and (d) on the date of delivery, if delivered by telecopy, receipt confirmed, provided that a confirmation copy is sent on the next business day by registered or certified mail, return receipt requested and postage prepaid, in each case addressed as follows: If to the Company: Board of Directors NeoMedia Technologies 2201 Second Street, Suite 600 Fort Myers, FL 33901 If to the Consultant: Thornhill Capital 3709 Fielding Drive Springfield, IL 62707 4.4 Waiver. The failure of either party to exercise any power or right hereunder shall not be construed to be either a waiver of such power or right, or a waiver of any other power or right hereunder. 4.5 Severability. If any provision of this Agreement or any part hereof or application hereof to any person or circumstance shall be finally determined by a court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the remainder of such provision or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, shall not be affected thereby and each provision of this Agreement shall remain in full force and effect to the fullest extent permitted by law. The parties also agree that, if any portion of this Agreement, or any part hereof or application hereof, to any person or circumstance shall be finally determined by a court of competent jurisdiction to be invalid or unenforceable to any extent, any court may so modify the objectionable provision so as to make it valid, reasonable and enforceable. 4.6 Survival. Paragraphs 2,3,4 and 5 shall survive any expiration or termination of this Agreement. 4.7 Entire Agreement. This Agreement and all Exhibits attached hereto and incorporated herein by this reference contain the entire agreement between the parties hereto with respect to the subject matter hereof and supersede any previous understandings or agreements, whether written or oral, in respect of such subject matter. The language used in this Agreement shall be deemed to express the mutual intent of the parties. This Agreement may only be amended by the parties by a subsequent written agreement executed by their duly authorized representatives. 4 4.8 Counterparts. This Agreement may be signed in counterparts, each one containing the signature of only one party, but taken together constituting one and same instrument. 4.9 Interpretation. The parties hereto acknowledge and agree that (a) no rule of strict construction shall be applied to the interpretation of any provision hereunder, including, but not limited to, the rule of construction to the effect that any ambiguities are resolved against the drafting party, and (b) the terms and provisions of this Agreement shall be construed fairly as to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Agreement. 4.10 Headings and Captions. The headings and captions of the various subdivisions of this Agreement are for convenience of reference only and shall in no way modify, or affect, or be considered in construing or interpreting the meaning or construction of any of the terms or provisions hereof. Any Exhibit referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if set forth verbatim herein. 4.11 Acknowledgment. Consultant acknowledges and agrees that Consultant has fully read and understood this Agreement, has had the opportunity to discuss this Agreement with Consultant's attorney, has had any questions regarding its effect or the meaning of its terms answered to Consultant's satisfaction, and, intending to be legally bound hereby, has freely and voluntarily executed this Agreement. 4.12 Governing Law. For purposes of construction, interpretation and enforcement, this Agreement shall be deemed to have been entered into under the laws of the State of Florida, without regard to its conflicts of laws rules or principles, and its validity, effect, performance, interpretation, construction and enforcement shall be governed by and be subject to the laws of the Sate of Florida. 4.13 Jurisdiction and Venue. Any and all suits for any and every breach of this Agreement shall only be instituted and maintained in any court of competent jurisdiction in the State of Florida and the parties hereto consent to the jurisdiction and venue in such court. The parties hereby waive the right to bring any action in any other jurisdiction. Consultant waives any claim Consultant may have that (a) Consultant is not personally subject to the jurisdiction of any state or federal court located in the State of Florida, (b) Consultant is immune from any legal process (whether through service or notice, attachment prior to judgment, attachment made in execution of judgment, execution or otherwise) with respect to Consultant or Consultant's property, (c) and such suit, action or proceeding is brought in an inconvenient forum, (d) the venue of any such suit, action or proceeding is improper, or (e) the provision of this paragraph may not be enforced in or by such court. 4.14 Assistance in Pending or Threatened Actions. Both before and after termination of his engagement, Consultant shall provide the Company with assistance in any proceeding or threatened proceeding in which the Company, or any 5 affiliate, is or may be a party; provided, however, that Consultant shall only be required to give assistance with respect to matters of which he has knowledge or experience. After termination of the instant consulting relationship, Consultant shall receive reasonable compensation for providing such assistance. 4.15 Certain Terminology. Except where the context otherwise requires, references to "this Section" or words of similar import shall be deemed to refer to the entire section and not a particular subsection and references to "hereunder", "herein", "hereof" or words of similar import shall be deemed to refer to the entire Agreement and not the particular section or subsection. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date. COMPANY: By: /s/ Charles T. Jensen ------------------------------- CONSULTANT: /s/ Alan Refkin ------------------------------------ 6 EX-10.2 4 v031665_ex10-2.txt Exhibit 10.2 FIRST AGREEMENT AND AMENDMENT TO CONSULTING AGREEMENT THIS FIRST AGREEMENT AND AMENDMENT TO CONSULTING AGREEMENT (the "Amendment") is entered into as of the 29th day of January, 2004, by and between NEOMEDIA TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and THORNHILL CAPITAL LLC. ("Consultant"). Recitals WHEREAS, the Company and Consultant entered into a consulting agreement dated December 5, 2001 (the "Consulting Agreement"). WHEREAS, the Company and Consultant continue to operate under the terms of the Consulting Agreement. WHEREAS, the Company and Consultant wish to amend certain terms of the Consulting Agreement through execution of this Amendment. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties mutually covenant and agree as follows: 1. Section 1.1 is hereby amended to provide that the Initial Term, as defined in the Consulting Agreement, shall now be defined as two (2) years from the effective date of this Amendment. 2. Section 1.2 is hereby amended to provide that monthly compensation paid by the Company to Consultant shall be $15,000.00. 3. Section 1.5 is hereby amended to provide that the Company shall not reimburse Consultant for any expenses. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written. NEOMEDIA TECHNOLOGIES, INC. THORNHILL CAPITAL LLC By:/s/ Charles T. Jensen By: /s/ Martha Refkin EX-10.3 5 v031665_ex10-3.txt Exhibit 10.3 SECOND AGREEMENT AND AMENDMENT TO CONSULTING AGREEMENT THIS SECOND AGREEMENT AND AMENDMENT TO CONSULTING AGREEMENT (the "Amendment") is entered into as of the 22nd day of July, 2005, by and between NEOMEDIA TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and THORNHILL CAPITAL LLC. ("Consultant"). Recitals WHEREAS, the Company and Consultant entered into a consulting agreement dated December 5, 2001 (the "Consulting Agreement"). WHEREAS, the Company and Consultant continue to operate under the terms of the Consulting Agreement. WHEREAS, the Company and Consultant wish to amend certain terms of the Consulting Agreement through execution of this Amendment. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties mutually covenant and agree as follows: 1. Section 1.1 is hereby amended to provide that the Initial Term, as defined in the Consulting Agreement, shall now be defined as two (2) years from the effective date of this Amendment. 2. Section 1.2 is hereby amended to provide that, retroactive to, and effective as of July 1, 2005, monthly compensation paid by the Company to Consultant shall be $19,500.00. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written. NEOMEDIA TECHNOLOGIES, INC. THORNHILL CAPITAL LLC By: /s/ David A. Dodge By: /s/ Alan Refkin ----------------------- ----------------------- Its: CFO Its: Managing Director ---------------------- ---------------------- EX-10.16 6 v031665_ex10-16.txt Exhibit 10.16 PROMISSORY NOTE March 13, 2003 Jersey City, New Jersey $262,000.00 FOR VALUE RECEIVED, the undersigned, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the "Holder") at 101 Hudson Street, Suite 3606, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of Two Hundred Sixty Two Thousand (U.S.) Dollars and 00/100 ($262,000.00) and will be payable pursuant to the following terms: 1. Amount of Note. The face amount of this Promissory Note (this "Note") shall be payable out of the net proceeds to be received by the Company under that certain Equity Line of Credit Agreement (the "Equity Line of Credit Agreement") dated as November 12, 2002 between the Company and the Holder, provided that all amounts due under this Note shall be paid in full within ninety (90) calendar days of the date hereof, unless an extension is mutually agreed to by the parties in writing. The Company agrees to escrow ten (10) requests for advances under the Equity Line of Credit Agreement in an amount not less than Twenty Six Thousand Two Hundred Dollars ($26,200), (individually referred to as "Advance Notice" collectively referred to "Advance Notices") as well as twenty six million (26,000,000) of shares of the Company's Common Stock as required under Section 2.2(c) of the Equity Line of Credit Agreement. The Advance Notices and the shares of the Company's Common Stock will be held in escrow by the law firm of Butler Gonzalez LLP, which shall release such requests to the Holder every seven (7) calendar days commencing on March 17, 2003. The Holder may at its sole discretion retain and apply the net proceeds of each advance (after deducting any fees owed to the Holder under the terms of the Equity Line of Credit) to the outstanding balance of this Note as existing from time to time. If this Note is not paid in full when due, the outstanding principal owed hereunder shall be due and payable in full together with interest thereon at the rate of twenty-four percent (24%) per annum or the highest permitted by applicable law, if lower. 2. Additional Financing. In the event that during the term of this Note the closing bid price exceeds four cents ($0.04) for five (5) out of seven (7) trading days the Holder will offer to the Company a second (2nd) promissory note for One Hundred Fifty Dollars ($150,000) or above at the same terms as this Note. 3. Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note. 4. Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys' fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys' fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred. 5. Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Holder, and the Holder shall be entitled to seek and institute any and all remedies available to it. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. An "Event of Default" shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make payment of the outstanding principal balance plus accrued interest pursuant to this Note within the time prescribed herein or the Company fails to satisfy any other obligation or requirement of the Company under this Note; or (ii) any proceedings under any bankruptcy laws of the United States of America or under any insolvency, not disclosed to the Holder, reorganization, receivership, readjustment of debt, dissolution, liquidation or any similar law or statute of any jurisdiction now or hereinafter in effect (whether in law or at equity) is filed by or against the Company or for all or any part of its property. 6. Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder's receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments. 7. Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this 2 Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note. 8. Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 9. Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach. 10. Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns. 11. Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended. 12. No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party. 13. Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note. 14. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: 3 If to Company: Neomedia Technologies Inc. 2201 2nd Floor - Suite 402 Fort Myers, FL33901 Attention: Charles T. Jensen Telephone: (239) 337-3434 Facsimile: (239) 337-3668 With Copy to: Kirkpatrick & Lockhart LLP 201 South Biscayne Blvd. - Suite 2000 Miami, FL 33131-2399 Attention: Clayton E. Parker, Esq. Telephone: (305) 539-3300 Facsimile: (305) 358-7095 If to the Company: Cornell Capital Partners, L.P. 101 Hudson Street, Suite 3606 Jersey City, NJ 07302 Attention: Mark A. Angelo Telephone: (201) 324-1619 Facsimile: (201) 324-1447 or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 15. Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder's remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Holder contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required. 4 16. Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Essex County, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 17. No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note. 18. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note. 19. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 20. Entire Agreement. This Note (including the recitals hereto) and the Equity Line of Credit Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. [Signature to Follow] 5 IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. CORNELL CAPITAL PARTNERS, LP By: Yorkville Advisors, LLC Its: General Partner By: /s/ Mark Angelo --------------- Name: Mark Angelo Its: Portfolio Manager NEOMEDIA TECHNOLOGIES INC. By: /s/ Charles T. Jensen --------------------- Name: Charles T. Jensen Title: President & Chief Executive Officer 6 EX-10.17 7 v031665_ex10-17.txt Exhibit 10.17 PROMISSORY NOTE May 27, 2003 Jersey City, New Jersey $245,000.00 FOR VALUE RECEIVED, the undersigned, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the "Holder") at 101 Hudson Street, Suite 3606, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of Two Hundred Forty Five Thousand (U.S.) Dollars and 00/100 ($245,000.00) and will be payable pursuant to the following terms: 1. Amount of Note. The face amount of this Promissory Note (this "Note") shall be payable out of the net proceeds to be received by the Company under that certain Equity Line of Credit Agreement (the "Equity Line of Credit Agreement") dated as November 12, 2002 between the Company and the Holder, provided that all amounts due under this Note shall be paid in full within thirty one (31) calendar days of the date hereof, unless an extension is mutually agreed to by the parties in writing. The Company agrees to escrow three (3) requests for advances under the Equity Line of Credit Agreement in an amount not less than Fifty Thousand Dollars ($50,000) and one (1) in an amount not less than Ninety Five Thousand Dollars ($95,000), (individually referred to as "Advance Notice" collectively referred to "Advance Notices") as well as an amount of shares of the Company's Common Stock as required under Section 2.2(c) of the Equity Line of Credit Agreement (the "Escrowed Shares"). The Escrowed Shares are only an estimation of the shares of the Company's common stock necessary to repay the principal amount and interest due hereunder. In the event that during the life of this Note the Escrowed Shares are insufficient to repay all amounts due hereunder the Company shall immediately escrow, pursuant to the irrevocable transfer agent instructions dated the date hereof (the "Irrevocable Transfer Agent Instructions") such number of shares of the Company's common stock sufficient to repay all amounts due hereunder. The Advance Notices and the shares of the Company's Common Stock will be held in escrow by the law firm of Butler Gonzalez LLP, which shall release such requests to the Holder every seven (7) calendar days commencing on June 2, 2003. The Holder may at its sole discretion retain and apply the net proceeds of each advance (after deducting any fees owed to the Holder under the terms of the Equity Line of Credit) to the outstanding balance of this Note as existing from time to time. If this Note is not paid in full when due, the outstanding principal owed hereunder shall be due and payable in full together with interest thereon at the rate of twenty-four percent (24%) per annum or the highest permitted by applicable law, if lower. During the term of this Note the Company shall have the option to repay the amounts due hereunder in immediately available funds and withdraw any Advance Notices yet to be effected. At the Holder's option the interest due hereunder shall be paid when due either in Common Stock or cash. 2. Additional Financing. If at any time during the term of this Note the principal amount together with interest is less than Two Hundred Thousand Dollars ($200,000) the Holder may, in its sole discretion, offer to the Company either a promissory note or an Advance pursuant to the Equity Line of Credit Agreement in an amount that will result all amounts, including all amounts due pursuant to this Note, owed to the Holder by the Company equal to Two Hundred Thousand Dollars ($200,000). 3. Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note. 4. Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys' fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys' fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred. 5. Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Holder, and the Holder shall be entitled to seek and institute any and all remedies available to it. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. An "Event of Default" shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make payment of the outstanding principal balance plus accrued interest pursuant to this Note within the time prescribed herein or the Company fails to satisfy any other obligation or requirement of the Company under this Note; or (ii) any proceedings under any bankruptcy laws of the United States of America or under any insolvency, not disclosed to the Holder, reorganization, receivership, readjustment of debt, dissolution, liquidation or any similar law or statute of any jurisdiction now or hereinafter in effect (whether in law or at equity) is filed by or against the Company or for all or any part of its property. 6. Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits 2 imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder's receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments. 7. Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note. 8. Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 9. Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach. 10. Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns. 11. Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended. 12. No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party. 13. Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note. 3 14. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to Company: Neomedia Technologies Inc. 2201 2nd Floor - Suite 402 Fort Myers, FL33901 Attention: Charles T. Jensen Telephone: (239) 337-3434 Facsimile: (239) 337-3668 With Copy to: Kirkpatrick & Lockhart LLP 201 South Biscayne Blvd. - Suite 2000 Miami, FL 33131-2399 Attention: Clayton E. Parker, Esq. Telephone: (305) 539-3300 Facsimile: (305) 358-7095 If to the Company: Cornell Capital Partners, L.P. 101 Hudson Street, Suite 3606 Jersey City, NJ 07302 Attention: Mark A. Angelo Telephone: (201) 324-1619 Facsimile: (201) 324-1447 or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 15. Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder's remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific 4 performance and/or other injunctive relief), no remedy of the Holder contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required. 16. Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Essex County, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 17. No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note. 18. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note. 19. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 5 20. Entire Agreement. This Note (including the recitals hereto) and the Equity Line of Credit Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. [Signature to Follow] IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. CORNELL CAPITAL PARTNERS, LP By: Yorkville Advisors, LLC Its: General Partner By: /s/ Mark Angelo --------------- Name: Mark Angelo Its: Portfolio Manager NEOMEDIA TECHNOLOGIES INC. By: /s/Charles T. Jensen -------------------- Name: Charles T. Jensen Title: President & Chief Executive Officer 6 EX-10.18 8 v031665_ex10-18.txt Exhibit 10.18 PROMISSORY NOTE June 24, 2003 Jersey City, New Jersey $400,000.00 FOR VALUE RECEIVED, the undersigned, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the "Holder") at 101 Hudson Street, Suite 3606, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of Four Hundred Thousand (U.S.) Dollars and 00/100 ($400,000.00) and will be payable pursuant to the following terms: 1. Amount of Note. The face amount of this Promissory Note (this "Note") shall be payable out of the net proceeds to be received by the Company under that certain Equity Line of Credit Agreement (the "Equity Line of Credit Agreement") dated as November 12, 2002 between the Company and the Holder, provided that all amounts due under this Note shall be paid in full within sixty nine (69) calendar days of the date hereof, unless an extension is mutually agreed to by the parties in writing. The Company agrees to escrow eight (8) requests for advances under the Equity Line of Credit Agreement in an amount not less than Fifty Thousand Dollars ($50,000) (individually referred to as "Advance Notice" collectively referred to "Advance Notices") as well as an amount of shares of the Company's Common Stock as required under Section 2.2(c) of the Equity Line of Credit Agreement (the "Escrowed Shares"). The Escrowed Shares are only an estimation of the shares of the Company's common stock necessary to repay the principal amount and interest due hereunder. In the event that during the life of this Note the Escrowed Shares are insufficient to repay all amounts due hereunder the Company shall immediately escrow, pursuant to the irrevocable transfer agent instructions dated the date hereof (the "Irrevocable Transfer Agent Instructions") such number of shares of the Company's common stock sufficient to repay all amounts due hereunder. The Advance Notices and the shares of the Company's Common Stock will be held in escrow by the law firm of Butler Gonzalez LLP, which shall release such requests to the Holder every seven (7) calendar days commencing on July 7, 2003. The Holder may at its sole discretion retain and apply the net proceeds of each advance (after deducting any fees owed to the Holder under the terms of the Equity Line of Credit) to the outstanding balance of this Note as existing from time to time. If this Note is not paid in full when due, the outstanding principal owed hereunder shall be due and payable in full together with interest thereon at the rate of twenty-four percent (24%) per annum or the highest permitted by applicable law, if lower. During the term of this Note the Company shall have the option to repay the amounts due hereunder in immediately available funds and withdraw any Advance Notices yet to be effected. At the Holder's option the interest due hereunder shall be paid when due either in Common Stock or cash. 2. Additional Financing. If at any time during the term of this Note the principal amount together with interest is less than Two Hundred Thousand Dollars ($200,000) the Holder may, in its sole discretion, offer to the Company either a promissory note or an Advance pursuant to the Equity Line of Credit Agreement in an amount that will result all amounts, including all amounts due pursuant to this Note, owed to the Holder by the Company equal to Two Hundred Thousand Dollars ($200,000). 3. Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note. 4. Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys' fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys' fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred. 5. Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Holder, and the Holder shall be entitled to seek and institute any and all remedies available to it. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. An "Event of Default" shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make payment of the outstanding principal balance plus accrued interest pursuant to this Note within the time prescribed herein or the Company fails to satisfy any other obligation or requirement of the Company under this Note; or (ii) any proceedings under any bankruptcy laws of the United States of America or under any insolvency, not disclosed to the Holder, reorganization, receivership, readjustment of debt, dissolution, liquidation or any similar law or statute of any jurisdiction now or hereinafter in effect (whether in law or at equity) is filed by or against the Company or for all or any part of its property. 6. Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the 2 maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder's receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments. 7. Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note. 8. Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 9. Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach. 10. Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns. 11. Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended. 12. No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party. 13. Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note. 3 14. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to Company: Neomedia Technologies Inc. 2201 2nd Floor - Suite 402 Fort Myers, FL33901 Attention: Charles T. Jensen Telephone: (239) 337-3434 Facsimile: With Copy to: Kirkpatrick & Lockhart LLP 201 South Biscayne Blvd. - Suite 2000 Miami, FL 33131-2399 Attention: Clayton E. Parker, Esq. Telephone: (305) 539-3300 Facsimile: (305) 358-7095 If to the Company: Cornell Capital Partners, L.P. 101 Hudson Street, Suite 3606 Jersey City, NJ 07302 Attention: Mark A. Angelo Telephone: (201) 324-1619 Facsimile: (201) 324-1447 or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 15. Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder's remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Holder contained herein 4 shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required. 16. Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Essex County, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 17. No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note. 18. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note. 19. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 5 20. Entire Agreement. This Note (including the recitals hereto) and the Equity Line of Credit Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. [Signature to Follow] IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. CORNELL CAPITAL PARTNERS, LP By: Yorkville Advisors, LLC Its: General Partner By: /s/ Mark Angelo --------------- Name: Mark Angelo Its: Portfolio Manager NEOMEDIA TECHNOLOGIES INC. By: /s/ Charles T. Jensen --------------------- Name: Charles T. Jensen Title: President & Chief Executive Officer 6 EX-10.19 9 v031665_ex10-19.txt Exhibit 10.19 PROMISSORY NOTE July 21, 2003 Jersey City, New Jersey $200,000.00 FOR VALUE RECEIVED, the undersigned, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the "Holder") at 101 Hudson Street, Suite 3606, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of Two Hundred Thousand (U.S.) Dollars and 00/100 ($200,000.00) and will be payable pursuant to the following terms: 1. Amount of Note. The face amount of this Promissory Note (this "Note") shall be payable out of the net proceeds to be received by the Company under that certain Equity Line of Credit Agreement (the "Equity Line of Credit Agreement") dated as November 12, 2002 between the Company and the Holder, provided that all amounts due under this Note shall be paid in full within fifth three (53) calendar days of the date hereof, unless an extension is mutually agreed to by the parties in writing. The Company agrees to escrow three (3) requests for advances under the Equity Line of Credit Agreement, two (2) in an amount not less than Fifty Thousand Dollars ($50,000) and one (1) in an amount not less than One Hundred Thousand Dollars ($100,000) (individually referred to as "Advance Notice" collectively referred to "Advance Notices") as well as an amount of shares of the Company's Common Stock as required under Section 2.2(c) of the Equity Line of Credit Agreement (the "Escrowed Shares"). The Escrowed Shares are only an estimation of the shares of the Company's common stock necessary to repay the principal amount and interest due hereunder. In the event that during the life of this Note the Escrowed Shares are insufficient to repay all amounts due hereunder the Company shall immediately escrow, pursuant to the irrevocable transfer agent instructions dated the date hereof (the "Irrevocable Transfer Agent Instructions") such number of shares of the Company's common stock sufficient to repay all amounts due hereunder. The Advance Notices and the shares of the Company's Common Stock will be held in escrow by the law firm of Butler Gonzalez LLP, which shall release such requests to the Holder every seven (7) calendar days commencing on August 18, 2003. The Holder may at its sole discretion retain and apply the net proceeds of each advance (after deducting any fees owed to the Holder under the terms of the Equity Line of Credit) to the outstanding balance of this Note as existing from time to time. If this Note is not paid in full when due, the outstanding principal owed hereunder shall be due and payable in full together with interest thereon at the rate of twenty-four percent (24%) per annum or the highest permitted by applicable law, if lower. During the term of this Note the Company shall have the option to repay the amounts due hereunder in immediately available funds and withdraw any Advance Notices yet to be effected. At the Holder's option the interest due hereunder shall be paid when due either in Common Stock or cash. 2. Additional Financing. If at any time during the term of this Note the principal amount together with interest is less than Two Hundred Thousand Dollars ($200,000) the Holder may, in its sole discretion, offer to the Company either a promissory note or an Advance pursuant to the Equity Line of Credit Agreement in an amount that will result all amounts, including all amounts due pursuant to this Note, owed to the Holder by the Company equal to Two Hundred Thousand Dollars ($200,000). 3. Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note. 4. Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys' fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys' fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred. 5. Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Holder, and the Holder shall be entitled to seek and institute any and all remedies available to it. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. An "Event of Default" shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make payment of the outstanding principal balance plus accrued interest pursuant to this Note within the time prescribed herein or the Company fails to satisfy any other obligation or requirement of the Company under this Note; or (ii) any proceedings under any bankruptcy laws of the United States of America or under any insolvency, not disclosed to the Holder, reorganization, receivership, readjustment of debt, dissolution, liquidation or any similar law or statute of any jurisdiction now or hereinafter in effect (whether in law or at equity) is filed by or against the Company or for all or any part of its property. 6. Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits 2 imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder's receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments. 7. Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note. 8. Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 9. Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach. 10. Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns. 11. Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended. 12. No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party. 13. Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note. 3 14. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to Company: Neomedia Technologies Inc. 2201 2nd Floor - Suite 402 Fort Myers, FL33901 Attention: Charles T. Jensen Telephone: (239) 337-3434 Facsimile: With Copy to: Kirkpatrick & Lockhart LLP 201 South Biscayne Blvd. - Suite 2000 Miami, FL 33131-2399 Attention: Clayton E. Parker, Esq. Telephone: (305) 539-3300 Facsimile: (305) 358-7095 If to the Company: Cornell Capital Partners, L.P. 101 Hudson Street, Suite 3606 Jersey City, NJ 07302 Attention: Mark A. Angelo Telephone: (201) 324-1619 Facsimile: (201) 324-1447 or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 15. Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder's remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific 4 performance and/or other injunctive relief), no remedy of the Holder contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required. 16. Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Essex County, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 17. No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note. 18. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note. 19. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 5 20. Entire Agreement. This Note (including the recitals hereto) and the Equity Line of Credit Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. [Signature to Follow] IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. CORNELL CAPITAL PARTNERS, LP By: Yorkville Advisors, LLC Its: General Partner By: /s/ Mark Angelo --------------- Name: Mark Angelo Its: Portfolio Manager NEOMEDIA TECHNOLOGIES INC. By: /s/ Charles T. Jensen --------------------- Name: Charles T. Jensen Title: President & Chief Executive Officer 6 EX-10.20 10 v031665_ex10-20.txt Exhibit 10.20 PROMISSORY NOTE August 1, 2003 Jersey City, New Jersey $200,000.00 FOR VALUE RECEIVED, the undersigned, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the "Holder") at 101 Hudson Street, Suite 3606, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of Two Hundred Thousand (U.S.) Dollars and 00/100 ($200,000.00) and will be payable pursuant to the following terms: 1. Amount of Note. The face amount of this Promissory Note (this "Note") shall be payable out of the net proceeds to be received by the Company under that certain Equity Line of Credit Agreement (the "Equity Line of Credit Agreement") dated as November 12, 2002 between the Company and the Holder, provided that all amounts due under this Note shall be paid in full within fifty seven (57) calendar days of the date hereof, unless an extension is mutually agreed to by the parties in writing. The Company agrees to escrow three (3) requests for advances under the Equity Line of Credit Agreement, two (2) in an amount not less than Fifty Thousand Dollars ($50,000) and one (1) in an amount not less than One Hundred Thousand Dollars ($100,000) (individually referred to as "Advance Notice" collectively referred to "Advance Notices") as well as an amount of shares of the Company's Common Stock as required under Section 2.2(c) of the Equity Line of Credit Agreement (the "Escrowed Shares"). The Escrowed Shares are only an estimation of the shares of the Company's common stock necessary to repay the principal amount and interest due hereunder. In the event that during the life of this Note the Escrowed Shares are insufficient to repay all amounts due hereunder the Company shall immediately escrow, pursuant to the irrevocable transfer agent instructions dated the date hereof (the "Irrevocable Transfer Agent Instructions") such number of shares of the Company's common stock sufficient to repay all amounts due hereunder. The Advance Notices and the shares of the Company's Common Stock will be held in escrow by the law firm of Butler Gonzalez LLP, which shall release such requests to the Holder every seven (7) calendar days commencing on September 8, 2003. The Holder may at its sole discretion retain and apply the net proceeds of each advance (after deducting any fees owed to the Holder under the terms of the Equity Line of Credit) to the outstanding balance of this Note as existing from time to time. If this Note is not paid in full when due, the outstanding principal owed hereunder shall be due and payable in full together with interest thereon at the rate of twenty-four percent (24%) per annum or the highest permitted by applicable law, if lower. During the term of this Note the Company shall have the option to repay the amounts due hereunder in immediately available funds and withdraw any Advance Notices yet to be effected. At the Holder's option the interest due hereunder shall be paid when due either in Common Stock or cash. 2. Additional Financing. If at any time during the term of this Note the principal amount together with interest is less than Two Hundred Thousand Dollars ($200,000) the Holder may, in its sole discretion, offer to the Company either a promissory note or an Advance pursuant to the Equity Line of Credit Agreement in an amount that will result all amounts, including all amounts due pursuant to this Note, owed to the Holder by the Company equal to Two Hundred Thousand Dollars ($200,000). 3. Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note. 4. Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys' fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys' fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred. 5. Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Holder, and the Holder shall be entitled to seek and institute any and all remedies available to it. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. An "Event of Default" shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make payment of the outstanding principal balance plus accrued interest pursuant to this Note within the time prescribed herein or the Company fails to satisfy any other obligation or requirement of the Company under this Note; or (ii) any proceedings under any bankruptcy laws of the United States of America or under any insolvency, not disclosed to the Holder, reorganization, receivership, readjustment of debt, dissolution, liquidation or any similar law or statute of any jurisdiction now or hereinafter in effect (whether in law or at equity) is filed by or against the Company or for all or any part of its property. 6. Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits 2 imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder's receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments. 7. Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note. 8. Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 9. Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach. 10. Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns. 11. Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended. 12. No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party. 13. Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note. 3 14. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to Company: Neomedia Technologies Inc. 2201 2nd Floor - Suite 402 Fort Myers, FL33901 Attention: Charles T. Jensen Telephone: (239) 337-3434 Facsimile: With Copy to: Kirkpatrick & Lockhart LLP 201 South Biscayne Blvd. - Suite 2000 Miami, FL 33131-2399 Attention: Clayton E. Parker, Esq. Telephone: (305) 539-3300 Facsimile: (305) 358-7095 If to the Company: Cornell Capital Partners, L.P. 101 Hudson Street, Suite 3606 Jersey City, NJ 07302 Attention: Mark A. Angelo Telephone: (201) 324-1619 Facsimile: (201) 324-1447 or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 15. Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder's remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific 4 performance and/or other injunctive relief), no remedy of the Holder contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required. 16. Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Essex County, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 17. No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note. 18. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note. 19. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 5 20. Entire Agreement. This Note (including the recitals hereto) and the Equity Line of Credit Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. [Signature to Follow] IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. CORNELL CAPITAL PARTNERS, LP By: Yorkville Advisors, LLC Its: General Partner By: /s/ Mark Angelo --------------- Name: Mark Angelo Its: Portfolio Manager NEOMEDIA TECHNOLOGIES INC. By: /s/ Charles T. Jensen --------------------- Name: Charles T. Jensen Title: President & Chief Executive Officer 6 EX-10.21 11 v031665_ex10-21.txt Exhibit 10.21 PROMISSORY NOTE September 2, 2003 Jersey City, New Jersey $200,000.00 FOR VALUE RECEIVED, the undersigned, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the "Holder") at 101 Hudson Street, Suite 3606, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of Two Hundred Thousand (U.S.) Dollars and 00/100 ($200,000.00) and will be payable pursuant to the following terms: 1. Amount of Note. The face amount of this Promissory Note (this "Note") shall be payable out of the net proceeds to be received by the Company under that certain Equity Line of Credit Agreement (the "Equity Line of Credit Agreement") dated as November 12, 2002 between the Company and the Holder, provided that all amounts due under this Note shall be paid in full within fifty eight (58) calendar days of the date hereof, unless an extension is mutually agreed to by the parties in writing. The Company agrees to escrow three (3) requests for advances under the Equity Line of Credit Agreement, two (2) in an amount not less than Fifty Thousand Dollars ($50,000) and one (1) in an amount not less than One Hundred Thousand Dollars ($100,000) (individually referred to as "Advance Notice" collectively referred to "Advance Notices") as well as an amount of shares of the Company's Common Stock as required under Section 2.2(c) of the Equity Line of Credit Agreement (the "Escrowed Shares"). The Escrowed Shares are only an estimation of the shares of the Company's common stock necessary to repay the principal amount and interest due hereunder. In the event that during the life of this Note the Escrowed Shares are insufficient to repay all amounts due hereunder the Company shall immediately escrow, pursuant to the irrevocable transfer agent instructions dated the date hereof (the "Irrevocable Transfer Agent Instructions") such number of shares of the Company's common stock sufficient to repay all amounts due hereunder. The Advance Notices and the shares of the Company's Common Stock will be held in escrow by the law firm of Butler Gonzalez LLP, which shall release such requests to the Holder every seven (7) calendar days commencing on October 13, 2003. The Holder may at its sole discretion retain and apply the net proceeds of each advance (after deducting any fees owed to the Holder under the terms of the Equity Line of Credit) to the outstanding balance of this Note as existing from time to time. If this Note is not paid in full when due, the outstanding principal owed hereunder shall be due and payable in full together with interest thereon at the rate of twenty-four percent (24%) per annum or the highest permitted by applicable law, if lower. During the term of this Note the Company shall have the option to repay the amounts due hereunder in immediately available funds and withdraw any Advance Notices yet to be effected. At the Holder's option the interest due hereunder shall be paid when due either in Common Stock or cash. 2. Additional Financing. If at any time during the term of this Note the principal amount together with interest is less than Two Hundred Thousand Dollars ($200,000) the Holder may, in its sole discretion, offer to the Company either a promissory note or an Advance pursuant to the Equity Line of Credit Agreement in an amount that will result all amounts, including all amounts due pursuant to this Note, owed to the Holder by the Company equal to Two Hundred Thousand Dollars ($200,000). 3. Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note. 4. Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys' fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys' fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred. 5. Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Holder, and the Holder shall be entitled to seek and institute any and all remedies available to it. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. An "Event of Default" shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make payment of the outstanding principal balance plus accrued interest pursuant to this Note within the time prescribed herein or the Company fails to satisfy any other obligation or requirement of the Company under this Note; or (ii) any proceedings under any bankruptcy laws of the United States of America or under any insolvency, not disclosed to the Holder, reorganization, receivership, readjustment of debt, dissolution, liquidation or any similar law or statute of any jurisdiction now or hereinafter in effect (whether in law or at equity) is filed by or against the Company or for all or any part of its property. 6. Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits 2 imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder's receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments. 7. Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note. 8. Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 9. Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach. 10. Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns. 11. Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended. 12. No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party. 13. Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note. 3 14. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to Company: Neomedia Technologies Inc. 2201 2nd Floor - Suite 402 Fort Myers, FL33901 Attention: Charles T. Jensen Telephone: (239) 337-3434 Facsimile: With Copy to: Kirkpatrick & Lockhart LLP 201 South Biscayne Blvd. - Suite 2000 Miami, FL 33131-2399 Attention: Clayton E. Parker, Esq. Telephone: (305) 539-3300 Facsimile: (305) 358-7095 If to the Company: Cornell Capital Partners, L.P. 101 Hudson Street, Suite 3606 Jersey City, NJ 07302 Attention: Mark A. Angelo Telephone: (201) 324-1619 Facsimile: (201) 324-1447 or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 15. Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder's remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific 4 performance and/or other injunctive relief), no remedy of the Holder contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required. 16. Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Essex County, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 17. No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note. 18. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note. 19. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 5 20. Entire Agreement. This Note (including the recitals hereto) and the Equity Line of Credit Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. [Signature to Follow] IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. CORNELL CAPITAL PARTNERS, LP By: Yorkville Advisors, LLC Its: General Partner By: /s/ Mark Angelo --------------- Name: Mark Angelo Its: Portfolio Manager NEOMEDIA TECHNOLOGIES INC. By: /s/ Charles T. Jensen --------------------- Name: Charles T. Jensen Title: President & Chief Executive Officer 6 EX-10.22 12 v031665_ex10-22.txt Exhibit 10.22 PROMISSORY NOTE September 11, 2003 Jersey City, New Jersey $500,000.00 FOR VALUE RECEIVED, the undersigned, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the "Holder") at 101 Hudson Street, Suite 3606, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of Five Hundred Thousand (U.S.) Dollars and 00/100 ($500,000.00) and will be payable pursuant to the following terms: 1. Amount of Note. The face amount of this Promissory Note (this "Note") shall be payable out of the net proceeds to be received by the Company under that certain Equity Line of Credit Agreement (the "Equity Line of Credit Agreement") dated as November 12, 2002 between the Company and the Holder, provided that all amounts due under this Note shall be paid in full within forty-five (45) calendar days of the date hereof, unless an extension is mutually agreed to by the parties in writing. The Company agrees to escrow five (5) requests for advances under the Equity Line of Credit Agreement, each in an amount not less than One Hundred Thousand Dollars ($100,000) (individually referred to as "Advance Notice" collectively referred to "Advance Notices") as well as an amount of shares of the Company's Common Stock as required under Section 2.2(c) of the Equity Line of Credit Agreement (the "Escrowed Shares"). The Escrowed Shares are only an estimation of the shares of the Company's common stock necessary to repay the principal amount and interest due hereunder. In the event that during the life of this Note the Escrowed Shares are insufficient to repay all amounts due hereunder the Company shall immediately escrow, pursuant to the irrevocable transfer agent instructions dated the date hereof (the "Irrevocable Transfer Agent Instructions") such number of shares of the Company's common stock sufficient to repay all amounts due hereunder. The Advance Notices and the shares of the Company's Common Stock will be held in escrow by the law firm of Butler Gonzalez LLP, which shall release such requests to the Holder every seven (7) calendar days commencing on September 22, 2003. The Holder may at its sole discretion retain and apply the net proceeds of each advance (after deducting any fees owed to the Holder under the terms of the Equity Line of Credit) to the outstanding balance of this Note as existing from time to time. If this Note is not paid in full when due, the outstanding principal owed hereunder shall be due and payable in full together with interest thereon at the rate of twenty-four percent (24%) per annum or the highest permitted by applicable law, if lower. During the term of this Note the Company shall have the option to repay the amounts due hereunder in immediately available funds and withdraw any Advance Notices yet to be effected. At the Holder's option the interest due hereunder shall be paid when due either in Common Stock or cash. 2. Additional Financing. If at any time during the term of this Note the principal amount together with interest is less than Two Hundred Thousand Dollars ($200,000) the Holder may, in its sole discretion, offer to the Company either a promissory note or an Advance pursuant to the Equity Line of Credit Agreement in an amount that will result all amounts, including all amounts due pursuant to this Note, owed to the Holder by the Company equal to Two Hundred Thousand Dollars ($200,000). 3. Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note. 4. Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys' fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys' fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred. 5. Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Holder, and the Holder shall be entitled to seek and institute any and all remedies available to it. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. An "Event of Default" shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make payment of the outstanding principal balance plus accrued interest pursuant to this Note within the time prescribed herein or the Company fails to satisfy any other obligation or requirement of the Company under this Note; or (ii) any proceedings under any bankruptcy laws of the United States of America or under any insolvency, not disclosed to the Holder, reorganization, receivership, readjustment of debt, dissolution, liquidation or any similar law or statute of any jurisdiction now or hereinafter in effect (whether in law or at equity) is filed by or against the Company or for all or any part of its property. 6. Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the 2 maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder's receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments. 7. Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note. 8. Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 9. Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach. 10. Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns. 11. Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended. 12. No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party. 13. Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note. 3 14. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to Company: Neomedia Technologies Inc. 2201 2nd Floor - Suite 402 Fort Myers, FL33901 Attention: Charles T. Jensen Telephone: (239) 337-3434 Facsimile: With Copy to: Kirkpatrick & Lockhart LLP 201 South Biscayne Blvd. - Suite 2000 Miami, FL 33131-2399 Attention: Clayton E. Parker, Esq. Telephone: (305) 539-3300 Facsimile: (305) 358-7095 If to the Company: Cornell Capital Partners, L.P. 101 Hudson Street, Suite 3606 Jersey City, NJ 07302 Attention: Mark A. Angelo Telephone: (201) 324-1619 Facsimile: (201) 324-1447 or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 15. Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder's remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Holder contained herein 4 shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required. 16. Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Essex County, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 17. No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note. 18. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note. 19. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 5 20. Entire Agreement. This Note (including the recitals hereto) and the Equity Line of Credit Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. [Signature to Follow] IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. CORNELL CAPITAL PARTNERS, LP By: Yorkville Advisors, LLC Its: General Partner By: /s/ Mark Angelo --------------- Name: Mark Angelo Its: Portfolio Manager NEOMEDIA TECHNOLOGIES INC. By: /s/ Charles T. Jensen --------------------- Name: Charles T. Jensen Title: President & Chief Executive Officer 6 EX-10.23 13 v031665_ex10-23.txt Exhibit 10.23 SECURED PROMISSORY NOTE April 8, 2004 Jersey City, New Jersey $1,000,000.00 FOR VALUE RECEIVED, the undersigned, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the "Holder"), at 101 Hudson Street, Suite 3606, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of One Million Dollars (US$1,000,000.00) and will be payable pursuant to the following terms: 1. Amount of Note. The face amount of this Promissory Note (this "Note") shall be payable one hundred eighty (180) calendar days from the date the Company is in receipt of funds as provided herein., out of the net proceeds to be received by the Company under that certain Equity Line of Credit Agreement (the "Equity Line of Credit Agreement") dated as October 27, 2003 between the Company and the Holder In order to effectuate repayment of this Note the Company hereby agrees (i) to escrow ten (10) requests for advances under the Equity Line of Credit Agreement in an amount not less than One Hundred Thousand Dollars ($100,000) (individually referred to as "Advance Notice" collectively referred to "Advance Notices") and, (ii) to deposit in escrow on the date hereof, twenty million (20,000,000) shares of the Company's Common Stock (the "Escrowed Shares"). The Escrowed Shares are only an estimation of the shares of the Company's common stock which would be necessary to repay the principal amount and interest due hereunder in the event the Company does not pay the note in cash. American Stock Transfer is the Transfer Agent. In the event that during the life of this Note the Escrowed Shares are insufficient to repay all amounts due hereunder, the Company shall immediately escrow such number of shares of the Company's common stock sufficient to repay all amounts due hereunder. The Advance Notices and the Escrowed Shares will be held in escrow by the law firm of Butler Gonzalez LLP, which shall release such Advance Notices to the Holder every seven (7) calendar days commencing on the first Monday after the date the Company is in receipt of funds as provided herein. The Holder may at its sole discretion retain and apply the net proceeds of each advance (after deducting any fees owed to the Holder under the terms of the Equity Line of Credit) to the outstanding balance of this Note as existing from time to time. In the event the principal amount of this Note plus interest is not repaid within the time period provided herein the Holder shall forbear on collection of this Note and to seek any remedies available to it under this Note or at law including, without limitation, proceeding against the Pledged Property as provided for in the Security Agreement (the "Security Agreement") dated January 15, 2004, between the Company and the Holder for a for a period of sixty (60) days. Failure to pay the obligations in full under this Note within said applicable period shall result in an event of default and Holder shall have the right to seek any remedies available to it under this Note or at law including, without limitation, proceeding against the Pledged Property as provided for in the Security Agreement. If this Note is not paid in full when due, the outstanding principal owed hereunder shall be due and payable in full together with interest thereon at the rate of twenty-four percent (24%) per annum or the highest permitted by applicable law, if lower. During the term of this Note the Company shall have the option to repay the amounts due hereunder in immediately available funds and withdraw any Advance Notices yet to be effected. At the Holder's option the interest due hereunder shall be paid when due either in Common Stock or cash. 2. Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note. 3. Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys' fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys' fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred. 4. Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Holder, and the Holder shall be entitled to seek and institute any and all remedies available to it. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. An "Event of Default" shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make payment of the outstanding principal balance plus accrued interest pursuant to this Note within the time prescribed herein or the Company fails to satisfy any other obligation or requirement of the Company under this Note; or (ii) any proceedings under any bankruptcy laws of the United States of America or under any insolvency, not disclosed to the Holder, reorganization, receivership, readjustment of debt, dissolution, liquidation or any similar law or statute of any jurisdiction now or hereinafter in effect (whether in law or at equity) is filed by or against the Company or for all or any part of its property. 5. Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder's receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments. 6. Secured Nature of Note. This Note is secured by all of the assets of the Company as set forth on Exhibit A to the Security Agreement of even date herewith between the Company and the Holder and all of the Intellectual Property of the Company as set forth in the Security Agreement. Without limiting the foregoing, the Company shall make, execute, acknowledge, deliver and file such documents and instruments, including, without limitation, a financing statement on form UCC-1 as may, in the Holder's reasonable judgment, be necessary to effectuate, complete or perfect, the security interest of the Holder in the Pledged Property (as defined in the Security Agreement). 7. Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note. 8. Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 9. Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach. 10. Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns. 11. Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended. 12. No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party. 13. Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note. 14. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to Company: Neomedia Technologies Inc. 2201 2nd Floor - Suite 402 Fort Myers, FL 33901 Attention: Charles T. Jensen Telephone: (239) 337-3434 Facsimile: (239) 337-3668 With Copy to: Kirkpatrick & Lockhart LLP 201 South Biscayne Blvd. - Suite 2000 Miami, FL 33131-2399 Attention: Clayton E. Parker, Esq. Telephone: (305) 539-3300 Facsimile: (305) 358-7095 If to the Holder: Cornell Capital Partners, L.P. 101 Hudson Street, Suite 3606 Jersey City, NJ 07302 Attention: Mark A. Angelo Telephone: (201) 324-1619 Facsimile: (201) 324-1447 or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 15. Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder's remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Holder contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required. 16. Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the Superior Court for the State of New Jersey sitting in Hudson County, New Jersey and the United States Federal District Court for the District of New Jersey sitting in Newark, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 17. No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note. 18. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note. 19. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS NOTE AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 20. Entire Agreement. This Note (including the recitals hereto) sets forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. [Signature to Follow] IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. NEOMEDIA TECHNOLOGIES INC. By: /s/ Charles T. Jensen --------------------- Name: Charles T. Jensen Title: President & Acting Chief Executive Officer EX-10.24 14 v031665_ex10-24.txt Exhibit 10.24 PROMISSORY NOTE July 2, 2004 Jersey City, New Jersey $1,000,000 FOR VALUE RECEIVED, the undersigned, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the "Holder") at 101 Hudson Street, Suite 3700, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of One Million (U.S.) Dollars and 00/100 ($1,000,000) and will be payable pursuant to the following terms: 1. Amount of Note. The face amount of this Promissory Note (this "Note") and interest at the rate of twelve percent (12%) per annum shall be payable, which such interest shall begin to accrue after ninety (90) days from the date hereof, either out of the net proceeds to be received by the Company under that certain Standby Equity Distribution Agreement (the "Standby Equity Distribution Agreement") dated as October 23, 2003 between the Company and the Holder, or the Company shall pay all amounts due under this Note shall be paid in full within eighty-seven (87) calendar days of the date hereof, regardless of the availability of proceeds under the Standby Equity Distribution Agreement unless an extension is mutually agreed to by the parties in writing. The Company agrees to escrow five (5) requests for advances under the Standby Equity Distribution Agreement in an amount not less than Two Hundred Thousand Dollars ($200,000.00), (individually referred to as "Advance Notice" collectively referred to "Advance Notices") as well as an appropriate number of shares of the Company's Common Stock as required under Section 2.2(c) of the Standby Equity Distribution Agreement (the "Escrowed Shares"). The Escrowed Shares are only an estimation of the shares of the Company's common stock necessary to repay the principal amount and interest due hereunder. In the event that during the life of this Note the Escrowed Shares are insufficient to repay all amounts due hereunder the Company shall immediately escrow, pursuant to the irrevocable transfer agent instructions dated the date hereof (the "Irrevocable Transfer Agent Instructions") such number of shares of the Company's common stock sufficient to repay all amounts due hereunder. The Advance Notices and the Escrowed Shares will be held in escrow by the law firm of Butler Gonzalez LLP, which shall release such requests to the Holder every seven (7) calendar days commencing on August 23, 2004. The Holder may at its sole discretion retain and apply the net proceeds of each advance (after deducting any fees owed to the Holder under the terms of the Standby Equity Distribution Agreement) to the outstanding balance of this Note as existing from time to time. Interest shall be payable upon the due date of this Note. If this Note is not paid in full when due, the outstanding principal owed hereunder shall be due and payable in full together with interest thereon at the rate of fourteen percent (14%) per annum or the highest permitted by applicable law, if lower. During the term of this Note the Company shall have the option to repay the amounts due hereunder in immediately available funds and withdraw any Advance Notices yet to be effected. 2. Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note. 3. Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys' fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys' fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred. 4. Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Holder, and the Holder shall be entitled to seek and institute any and all remedies available to it. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. An "Event of Default" shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make payment of the outstanding principal balance plus accrued interest pursuant to this Note within the time prescribed herein or the Company fails to satisfy any other obligation or requirement of the Company under this Note and/or the Irrevocable Transfer Agent Instructions; or (ii) any proceedings under any bankruptcy laws of the United States of America or under any insolvency, not disclosed to the Holder, reorganization, receivership, readjustment of debt, dissolution, liquidation or any similar law or statute of any jurisdiction now or hereinafter in effect (whether in law or at equity) is filed by or against the Company or for all or any part of its property. 5. Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all 2 sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder's receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments. 6. Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note. 7. Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 8. Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach. 9. Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns. 10. Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended. 11. No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party. 12. Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note. 13. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon 3 receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to Company: Neomedia Technologies Inc. 2201 2nd Floor - Suite 402 Fort Myers, FL33901 Attention: Charles T. Jensen Telephone: (239) 337-3434 Facsimile: If to the Company: Cornell Capital Partners, L.P. 101 Hudson Street, Suite 3700 Jersey City, NJ 07302 Attention: Mark A. Angelo Telephone: (201) 324-1619 Facsimile: (201) 324-1447 or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 14. Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder's remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Holder contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required. 4 15. Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the Superior Court of the State of New Jersey sitting in Hudson County, New Jersey and the United States Federal District Court for the District of New Jersey sitting in Newark, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 16. No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note. 17. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note. 18. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 19. Entire Agreement. This Note (including the recitals hereto) and the Irrevocable Transfer Agent Instructions set forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. 5 IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. CORNELL CAPITAL PARTNERS, LP By: Yorkville Advisors, LLC Its: General Partner By: /s/ Mark Angelo --------------- Name: Mark Angelo Its: Portfolio Manager NEOMEDIA TECHNOLOGIES INC. By: /s/ Charles T. Jensen --------------------- Name: Charles T. Jensen Title: President & Chief Executive Officer 6 EX-10.25 15 v031665_ex10-25.txt Exhibit 10.25 PROMISSORY NOTE August 6, 2004 Jersey City, New Jersey $2,000,000 FOR VALUE RECEIVED, the undersigned, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the "Holder") at 101 Hudson Street, Suite 3700, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of Two Million (U.S.) Dollars and 00/100 ($2,000,000) and will be payable pursuant to the following terms: 1. Amount of Note. The face amount of this Promissory Note (this "Note") and interest at the rate of twelve percent (12%) per annum shall be payable either out of the net proceeds to be received by the Company under that certain Standby Equity Distribution Agreement (the "Standby Equity Distribution Agreement ") dated as October 23, 2003 between the Company and the Holder, or the Company shall pay all amounts due under this Note shall be paid in full within one hundred twenty-nine (129) calendar days of the date hereof, regardless of the availability of proceeds under the Standby Equity Distribution Agreement unless an extension is mutually agreed to by the parties in writing. The Company agrees to escrow nine (9) requests for advances under the Standby Equity Distribution Agreement in an amount not less than Two Hundred Thousand Dollars ($200,000), and one (1) request for advance under the Standby Equity Distribution Agreement in an amount not less than Two Hundred Sixty-Four Thousand One Hundred Nine Dollars and Fifty-Nine Cents (264,109.59), (individually referred to as "Advance Notice" collectively referred to "Advance Notices") as well as an appropriate number of shares of the Company's Common Stock as required under Section 2.2(c) of the Standby Equity Distribution Agreement (the "Escrowed Shares"). The Escrowed Shares are only an estimation of the shares of the Company's common stock necessary to repay the principal amount and interest due hereunder. In the event that during the life of this Note the Escrowed Shares are insufficient to repay all amounts due hereunder the Company shall immediately escrow, pursuant to the irrevocable transfer agent instructions dated the date hereof (the "Irrevocable Transfer Agent Instructions") such number of shares of the Company's common stock sufficient to repay all amounts due hereunder. The Advance Notices and the Escrowed Shares will be held in escrow by the law firm of Butler Gonzalez LLP, which shall release such requests to the Holder every seven (7) calendar days commencing on October 8, 2004. The Holder may at its sole discretion retain and apply the net proceeds of each advance (after deducting any fees owed to the Holder under the terms of the Standby Equity Distribution Agreement) to the outstanding balance of this Note as existing from time to time. Interest shall be payable upon the due date of this Note. If this Note is not paid in full when due, the outstanding principal owed hereunder shall be due and payable in full together with interest thereon at the rate of fourteen percent (14%) per annum or the highest permitted by applicable law, if lower. During the term of this Note the Company shall have the option to repay the amounts due hereunder in immediately available funds and withdraw any Advance Notices yet to be effected. 2. Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note. 3. Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys' fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys' fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred. 4. Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Holder, and the Holder shall be entitled to seek and institute any and all remedies available to it. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. An "Event of Default" shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make payment of the outstanding principal balance plus accrued interest pursuant to this Note within the time prescribed herein or the Company fails to satisfy any other obligation or requirement of the Company under this Note and/or the Irrevocable Transfer Agent Instructions; or (ii) any proceedings under any bankruptcy laws of the United States of America or under any insolvency, not disclosed to the Holder, reorganization, receivership, readjustment of debt, dissolution, liquidation or any similar law or statute of any jurisdiction now or hereinafter in effect (whether in law or at equity) is filed by or against the Company or for all or any part of its property. 5. Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all 2 sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder's receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments. 6. Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note. 7. Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 8. Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach. 9. Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns. 10. Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended. 11. No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party. 12. Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note. 13. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon 3 receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to Company: Neomedia Technologies Inc. 2201 2nd Floor - Suite 402 Fort Myers, FL33901 Attention: Charles T. Jensen Telephone: (239) 337-3434 Facsimile: If to the Company: Cornell Capital Partners, L.P. 101 Hudson Street, Suite 3700 Jersey City, NJ 07302 Attention: Mark A. Angelo Telephone: (201) 324-1619 Facsimile: (201) 324-1447 or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 14. Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder's remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Holder contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required. 4 15. Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the Superior Court of the State of New Jersey sitting in Hudson County, New Jersey and the United States Federal District Court for the District of New Jersey sitting in Newark, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 16. No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note. 17. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note. 18. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 19. Entire Agreement. This Note (including the recitals hereto) and the Irrevocable Transfer Agent Instructions set forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. 5 IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. CORNELL CAPITAL PARTNERS, LP By: Yorkville Advisors, LLC Its: General Partner By: /s/ Mark Angelo --------------- Name: Mark Angelo Its: Portfolio Manager NEOMEDIA TECHNOLOGIES INC. By: /s/ Charles T. Jensen --------------------- Name: Charles T. Jensen Title: President & Chief Executive Officer 6 EX-10.26 16 v031665_ex10-26.txt Exhibit 10.26 PROMISSORY NOTE September 13, 2004 Jersey City, New Jersey $1,085,000 FOR VALUE RECEIVED, the undersigned, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the "Holder") at 101 Hudson Street, Suite 3700, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of One Million Eighty Five Thousand (U.S.) Dollars and 00/100 ($1,085,000) and will be payable pursuant to the following terms: 1. Amount of Note. The face amount of this Promissory Note (this "Note") and interest at the rate of twelve percent (12%) per annum shall be payable either out of the net proceeds to be received by the Company under that certain Standby Equity Distribution Agreement (the "Standby Equity Distribution Agreement ") dated as October 23, 2003 between the Company and the Holder, or the Company shall pay all amounts due under this Note shall be paid in full within one hundred twenty-nine (129) calendar days of the date hereof, regardless of the availability of proceeds under the Standby Equity Distribution Agreement unless an extension is mutually agreed to by the parties in writing. The Company agrees to escrow six (6) requests for advances under the Standby Equity Distribution Agreement in an amount not less than $180,833.33 (individually referred to as "Advance Notice" collectively referred to "Advance Notices") as well as an appropriate number of shares of the Company's Common Stock as required under Section 2.2(c) of the Standby Equity Distribution Agreement (the "Escrowed Shares"). The Escrowed Shares are only an estimation of the shares of the Company's common stock necessary to repay the principal amount and interest due hereunder. In the event that during the life of this Note the Escrowed Shares are insufficient to repay all amounts due hereunder the Company shall immediately escrow, pursuant to the irrevocable transfer agent instructions dated the date hereof (the "Irrevocable Transfer Agent Instructions") such number of shares of the Company's common stock sufficient to repay all amounts due hereunder. The Advance Notices and the Escrowed Shares will be held in escrow by the law firm of Butler Gonzalez LLP, which shall release such requests to the Holder every seven (7) calendar days commencing on December 17, 2004. The Holder may at its sole discretion retain and apply the net proceeds of each advance (after deducting any fees owed to the Holder under the terms of the Standby Equity Distribution Agreement) to the outstanding balance of this Note as existing from time to time. Interest shall be payable upon the due date of this Note. If this Note is not paid in full when due, the outstanding principal owed hereunder shall be due and payable in full together with interest thereon at the rate of fourteen percent (14%) per annum or the highest permitted by applicable law, if lower. During the term of this Note the Company shall have the option to repay the amounts due hereunder in immediately available funds and withdraw any Advance Notices yet to be effected. 2. Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note. 3. Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys' fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys' fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred. 4. Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Holder, and the Holder shall be entitled to seek and institute any and all remedies available to it. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. An "Event of Default" shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make payment of the outstanding principal balance plus accrued interest pursuant to this Note within the time prescribed herein or the Company fails to satisfy any other obligation or requirement of the Company under this Note and/or the Irrevocable Transfer Agent Instructions; or (ii) any proceedings under any bankruptcy laws of the United States of America or under any insolvency, not disclosed to the Holder, reorganization, receivership, readjustment of debt, dissolution, liquidation or any similar law or statute of any jurisdiction now or hereinafter in effect (whether in law or at equity) is filed by or against the Company or for all or any part of its property. 5. Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder's receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments. 2 6. Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note. 7. Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 8. Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach. 9. Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns. 10. Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended. 11. No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party. 12. Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note. 13. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: 3 If to Company: Neomedia Technologies Inc. 2201 2nd Floor - Suite 402 Fort Myers, FL33901 Attention: Charles T. Jensen Telephone: (239) 337-3434 Facsimile: If to the Company: Cornell Capital Partners, L.P. 101 Hudson Street, Suite 3700 Jersey City, NJ 07302 Attention: Mark A. Angelo Telephone: (201) 324-1619 Facsimile: (201) 324-1447 or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 14. Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder's remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Holder contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required. 4 15. Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the Superior Court of the State of New Jersey sitting in Hudson County, New Jersey and the United States Federal District Court for the District of New Jersey sitting in Newark, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 16. No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note. 17. Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note. 18. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION. 19. Entire Agreement. This Note (including the recitals hereto) and the Irrevocable Transfer Agent Instructions set forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. 5 IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof. CORNELL CAPITAL PARTNERS, LP By: Yorkville Advisors, LLC Its: General Partner By: /s/ Mark Angelo --------------- Name: Mark Angelo Its: Portfolio Manager NEOMEDIA TECHNOLOGIES INC. By: /s/ Charles T. Jensen --------------------- Name: Charles T. Jensen Title: President & Chief Executive Officer 6 EX-23.1 17 v031665_ex23-1.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCONTING FIRM We consent to the incorporation by reference in this registration statement on Form S-3 Amendment No. 4 for the registration of a total of 54,000,000 warrants issued to Cornell Capital LP and Thornhill Capital, LLP, of our report dated February 11, 2005, on our audits of the consolidated financial statements of NeoMedia Technologies, Inc. as of December 31, 2004 and for the years ended December 31, 2004 and 2003 included in the Form 10-KSB for the year ended December 31, 2004. We also consent to the reference to us as experts in matters of accounting and auditing in this registration statement. /s/ STONEFIELD JOSEPHSON, INC Certified Public Accountants Irvine, California December 27, 2005 EX-23.2 18 v031665_ex23-2.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCONTING FIRM We consent to the incorporation by reference in this registration statement on Form S-3 Amendment No. 4 for the registration of a total of 54,000,000 warrants issued to Cornell Capital LP and Thornhill Capital, LLP, of our report dated October 11, 2005, on our audit of the financial statements of Mobot, Inc. as of December 31, 2004 and for the year ended December 31, 2004, and for the period from September 8, 2003 (inception) to December 31, 2004. We also consent to the reference to us as experts in matters of accounting and auditing in this registration statement. /s/ STONEFIELD JOSEPHSON, INC. Certified Public Accountants Irvine, California December 27, 2005 CORRESP 19 filename19.txt December 19, 2005 Barbara C. Jacobs Assistant Director United States Securities and Exchange Commission Mail Stop 4-6 Washington, D.C. 20549 Re: NeoMedia Technologies, Inc. Amendment No. 3 to Registration Statement on Form S-3 Filed November 7, 2005 File No. 333-125239 Dear Ms. Jacobs: This letter has been prepared in response to your request for NeoMedia Technologies, Inc. (the "Company") to respond to the staff's comments in the letter dated November 21, 2005 with respect to the Registration Statement on Form S-3 Amendment No. 3 filed November 7, 2005 by NeoMedia Technologies, Inc. General COMMENT 1. We refer you to comment 1 of our letter dated June 24, 2005. We note that you still have outstanding comments on your Form S-4, File No. 333-123848. Please be advised that these comments must be resolved before your registration statement on Form S-3 is declared effective. RESPONSE: We respectfully acknowledge that the outstanding comments on the S-4 must be resolved before the S-3 will be declared effective. Where You Can Find More Information, page 21 COMMENT 2. Please revise this section to include the new address of the SEC Headquarters at 100 F Street, N.E. Washington, D.C. 20549. See Note to Item 12(c)(1) of Form S-3. RESPONSE: We have revised the disclosure as requested. United States Securities And Exchange Commission August 17, 2005 Page 2 Information We Incorporate by Reference, page 22 COMMENT 3. We refer you to comment 8 of our letter dated June 24, 2005 and comment 1 of our letter concerning your Form S-4, File No. 333-123848 dated August 5, 2005. Please tell us how you intend to revise your S-3 to include or incorporate by reference, the financial statements of Mobot, Inc. and changes precipitated by our outstanding comments on your Form S-4. See Item 310(c) of Regulation S-B. RESPONSE: We have included the audited financial statements of Mobot, Inc. for the years ended December 31, 2005 and 2004, as well as the unaudited interim financials of Mobot for the nine months ended September 30, 2005 in the new amendment. Very truly yours, /S/ Charles T. Jensen Charles T. Jensen President, Chief Executive Officer & Director -----END PRIVACY-ENHANCED MESSAGE-----