10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.   20549

FORM 10 - Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from __________ to ____________

Commission File Number 0-21743

NeoMedia Technologies, Inc.

(Exact Name of Issuer as Specified In Its Charter)

Delaware	36-3680347
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

Two Concourse Parkway, Suite 500, Atlanta, GA 30328

(Address, including zip code, of principal executive offices)

678-638-0460

(Registrants’ telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes ¨   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨  Accelerated filer ¨   Non-accelerated filer ¨Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨    No x

The number of outstanding shares of the registrant’s Common Stock on August 11, 2009 was 2,048,912,609.

NeoMedia Technologies, Inc.

Form 10-Q

For the Quarterly Period Ended June 30, 2009

Index

		Page
PART I	Financial Information	2
ITEM 1.	Financial Statements	2
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	25
ITEM 4T.	Controls and Procedures	25
PART II	Other Information	27
ITEM 1.	Legal Proceedings	27
ITEM 1A.	Risk Factors	27
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
ITEM 3.	Defaults Upon Senior Securities	27
ITEM 4.	Submission of Matters to A Vote of Security Holders	27
ITEM 5.	Other Information	27
ITEM 6.	Exhibits	28
Signatures		34

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains “forward-looking statements” relating to NeoMedia Technologies, Inc., a Delaware corporation, which represent our current expectations or beliefs including, but not limited to, statements concerning our operations, performance, financial condition and growth. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as “may”, “anticipate”, “intend”, “could”, “estimate”, or “continue” or the negative or other comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, such as credit losses, dependence on management and key personnel, variability of quarterly results, the ability to continue our growth strategy and competition, certain of which are beyond our control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual outcomes and results could differ materially from those indicated in the forward-looking statements.

Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for us to predict all of such factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

1

PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements

NeoMedia Technologies, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

	June 30,			December 31,
	2009			2008
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	303		$	1,259
Trade accounts receivable, net of allowance for doubtful accounts of $0 and $0, respectively		56			102
Inventories, net of allowance for obsolete & slow-moving inventory of $65 and $81 respectively		167			117
Prepaid expenses and other current assets		444			544
Total current assets		970			2,022
Property, equipment and leasehold improvements, net		73			79
Goodwill		3,418			3,418
Proprietary software, net		2,406			2,738
Patents and other intangible assets, net		2,143			2,293
Cash surrender value of life insurance policies		566			508
Other long-term assets		417			430
Total assets	$	9,993		$	11,488
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	217		$	134
Taxes payable		9			7
Accrued expenses		7,206			5,787
Deferred revenues and customer prepayments		314			403
Notes payable		15			50
Accrued purchase price guarantee		4,535			4,614
Deferred tax liability		706			706
Derivative financial instruments - warrants		13,591			1,189
Derivative financial instruments - debentures payable		34,471			26,256
Debentures payable - carried at amortized cost		11,593			11,227
Debentures payable - carried at fair value		19,580			19,892
Total current liabilities		92,237			70,265
Commitments and contingencies (Note 7)
Series C convertible preferred stock, $0.01 par value, 30,000 shares authorized, 18,424 and 19,144 shares issued and outstanding, liquidation value of $18,424 and $19,144		18,424			19,144
Shareholders’ deficit:
Common stock, $0.01 par value, 5,000,000,000 shares authorized, 1,803,018,412 and 1,375,056,229 shares issued and 1,799,867,143 and 1,371,904,960 outstanding, respectively		17,999			13,719
Additional paid-in capital		123,355			120,430
Accumulated deficit		(241,178	)		(211,305	)
Accumulated other comprehensive loss		(65	)		14
Treasury stock, at cost, 201,230 shares of common stock		(779	)		(779	)
Total shareholders’ deficit		(100,668	)		(77,921	)
Total liabilities and shareholders’ deficit	$	9,993		$	11,488

The accompanying notes are an integral part of these consolidated financial statements.

2

NeoMedia Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

 (in thousands, except share and per share data)

	For the three months ended
	June 30,			June 30,
	2009			2008
Net sales	$	136		$	207
Cost of sales		281			292
Gross deficit		(145	)		(85	)
Sales and marketing expenses		178			655
General and administrative expenses		863			1,367
Research and development costs		350			655
Operating loss		(1,536	)		(2,762	)
Gain on extinguishment of debt		-			18
Gain from change in fair value of hybrid financial instruments		23,343			4,052
Gain from change in fair value of derivative liability - warrants		20,879			1,473
Gain (loss) from change in fair value of derivative liability - debentures		37,978			(8,006	)
Other interest expense, net		(2,600	)		(4,126	)
Income (loss) from continuing operations		78,064			(9,351	)
Income from discontinued operations		-			154
Net income (loss)		78,064			(9,197	)
Dividends on convertible preferred stock		(368	)		(399	)
Net income (loss) attributable to common shareholders		77,696			(9,596	)
Comprehensive income (loss):
Net income (loss)		78,064			(9,197	)
Other comprehensive loss:
Foreign currency translation adjustment		(22	)		(14	)
Comprehensive income (loss)	$	78,042		$	(9,211	)
Net income (loss) per share, basic:
Continuing operations	$	0.05		$	(0.01	)
Discontinued operations	$	-		$	-
Net income (loss) per share, basic	$	0.05		$	(0.01	)
Net income (loss) per share, fully diluted:
Continuing operations	$	-		$	(0.01	)
Discontinued operations	$	-		$	-
Net income (loss) per share, fully diluted	$	-		$	(0.01	)
Weighted average number of common shares:
Basic		1,588,281,567			1,076,657,151
Fully diluted		6,792,874,000			1,076,657,151

The accompanying notes are an integral part of these consolidated financial statements.

3

NeoMedia Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

 (in thousands, except share and per share data)

	For the six months ended
	June 30,			June 30,
	2009			2008
Net sales	$	626		$	471
Cost of sales		808			605
Gross deficit		(182	)		(134	)
Sales and marketing expenses		464			1,283
General and administrative expenses		1,787			2,573
Research and development costs		673			1,217
Operating loss		(3,106	)		(5,207	)
Gain on extinguishment of debt		-			22
Gain from change in fair value of hybrid financial instruments		312			2,708
Gain (loss) from change in fair value of derivative liability - warrants		(12,402	)		3,466
Loss from change in fair value of derivative liability - debentures		(9,676	)		(4,646	)
Other interest expense, net		(3,663	)		(1,657	)
Income (loss) from continuing operations		(28,535	)		(5,314	)
Loss from discontinued operations		-			(291	)
Net income (loss)		(28,535	)		(5,605	)
Dividends on convertible preferred stock		(743	)		(798	)
Net income (loss) attributable to common shareholders		(29,278	)		(6,403	)
Comprehensive income (loss):
Net income (loss)		(28,535	)		(5,605	)
Other comprehensive loss:
Foreign currency translation adjustment		(79	)		(14	)
Comprehensive income (loss)	$	(28,614	)	$	(5,619	)
Net income (loss) per share, basic:
Continuing operations	$	(0.02	)	$	(0.01	)
Discontinued operations	$	-		$	-
Net income (loss) per share, basic	$	(0.02	)	$	(0.01	)
Net income (loss) per share, fully diluted:
Continuing operations	$	(0.02	)	$	(0.01	)
Discontinued operations	$	-		$	-
Net income (loss) per share, fully diluted	$	(0.02	)	$	(0.01	)
Weighted average number of common shares:
Basic and fully diluted		1,478,574,562			1,052,767,667

The accompanying notes are an integral part of these consolidated financial statements.

4

NeoMedia Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	For the six months ended June 30,
	2009			2008
Cash Flows from Operating Activities:
Loss from continuing operations	$	(28,535	)	$	(5,605	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Loss from discontinued operations		-			291
Depreciation and amortization		512			539
Loss on sale of assets		-			229
Gain on early extinguishment of debt		-			(22	)
(Gain) loss from change in fair value of hybrid financial instruments		(312	)		2,343
(Gain) loss from change in fair value of warrants		12,402			(2,708	)
Loss from change in fair value of debentures		9,676			-
Other interest expense, net		3,663			-
Stock-based compensation expense		177			987
Decrease/ (increase) in value of life insurance policies		(58	)		-
Changes in operating assets and liabilities
Trade and other accounts receivable		46			213
Inventories		(50	)		(14	)
Prepaid expenses and other assets		113			82
Accounts payable and accrued liabilities		(198	)		599
Deferred revenue and other current liabilities		(124	)		(86	)
Net cash used in operating activities		(2,688	)		(3,152	)
Cash Flows from Investing Activities:
Acquisition of property and equipment		(24	)		(73	)
Expenses of discontinued operations		-			(286	)
Proceeds from sale of investments		-			751
Payment of purchase price guarantee obligations		-			(14	)
Net cash used in investing activities		(24	)		378
Cash Flows from Financing Activities:
Repayments on notes payable		-			(29	)
Net proceeds from exercise of stock options		116			-
Borrowings under convertible debt instruments, net		1,660			1,477
Net cash provided by (used in) financing activities		1,776			1,448
Effect of exchange rate changes on cash for continuing operations		(20	)		(14	)
Net Increase (Decrease) in cash and cash equivalents from continuing operations		(956	)		(1,340	)
Cash and cash equivalents, beginning of period		1,259			1,415
Cash and cash equivalents, end of period	$	303		$	75
Supplemental cash flow information:
Interest paid during the period	$	3		$	14
Accretion of dividends on Series C Convertible Preferred Stock		743			798
Series C Convertible Preferred Stock converted to common stock		720			423
Deemed dividend on preferred stock conversions		1,337			631
Fair value of common shares issued to satisfy purchase price guarantee obligations		445			12,721

The accompanying notes are an integral part of the consolidated financial statements.

5

NeoMedia Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 - General

Business – NeoMedia utilizes the mobile phone by leveraging barcodes (printed symbols) as a seamless mechanism to link brands, advertisers, carriers, retailers and consumers using the power of the mobile internet.

With our barcode ecosystem technology, NeoMedia transforms mobile phones with cameras into barcode scanners which provide instant access to mobile web content whenever a barcode is scanned. A barcode makes any medium immediately interactive – the code links consumers to the multimedia capability of the mobile Web. Combining this technology with analytics and reporting capabilities improves the way advertisers market to mobile consumers.

NeoMedia provides the infrastructure to facilitate mobile barcode scanning and its associated commerce worldwide. Our mobile barcode ecosystem software reads and transmits data from 1D and 2D barcodes to its intended destination. Our code management and clearinghouse platforms create, connect, record, and transmit the transactions embedded in the barcodes, like web-URLs, text messages (SMS), and telephone calls, ubiquitously and reliably.

In order to provide complete mobile marketing solutions, NeoMedia also offers barcode scanning hardware that reads barcodes displayed on mobile phone screens. NeoMedia provides infrastructure solutions to enable mobile ticketing and couponing programs – including scanner hardware and system support software for seamless implementation.

This technology is supported by our patents. In addition, NeoMedia has an open standards philosophy designed to make integration and use of the technology easy for handset manufacturers, mobile operators and advertisers; and the consumer’s experience safe, reliable and interoperable.

Going Concern – We have historically incurred net losses and losses from operations and we expect that we will continue to have negative cash flows as we implement our business plan.  There can be no assurance that our continuing efforts to execute our business plan will be successful and that we will be able to continue as a going concern. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which contemplate our continuation as a going concern.  Net loss from continuing operations for the six months ended June 30, 2009 and 2008 was $28.6 million and $5.3 million, respectively.  Net cash used for operations during the same periods was $2.7 million and $3.2 million, respectively. We also have an accumulated deficit of $241.2 million and a working capital deficit of $91.3 million as of June 30, 2009, much of which is related to the derivative value of our financing instruments including $67.7 million related to the fair value of hybrid and derivative financial instruments, and $11.6 million related to the carrying value of debentures carried at amortized cost.

The items discussed above raise substantial doubt about our ability to continue as a going concern.

We currently do not have sufficient cash to sustain us for the next twelve months.  We will require additional financing in order to execute our operating plan and continue as a going concern.  Our management’s plan is to attempt to secure adequate funding to bridge the commercialization of our barcode ecosystem business. We cannot predict whether this additional financing will be in the form of equity, debt, or another form and we may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all.  We believe that we can obtain additional financing, but in the event that these financing sources do not materialize, or that we are unsuccessful in increasing our revenues and profits, we may be unable to implement our current plans for expansion, repay our debt obligations as they become due or continue as a going concern, any of which circumstances would have a material adverse effect on our business, prospects, financial condition and results of operations.

Including funding received subsequent to June 30, 2009, we have received $2.6 million in financing from YA Global Investments, L.P (“YA Global”) in 2009. While Y.A. Global has informally told us that they intend to continue to fund our operations on a month-to-month basis, should YA Global choose not to provide us with additional capital financing, as they have in the past, or if Y.A. Global does not object and we seek funding from alternative sources but are unsuccessful, or if we are unable to generate significant product revenues, we only have sufficient funds to sustain our current operations through approximately September 15, 2009.

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The financial statements do not include any adjustments relating to the recoverability and reclassification of recorded asset amounts or the amounts and classification of liabilities that might be necessary, should we be unable to continue as a going concern.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation – The accompanying condensed balance sheet as of December 31, 2008, which was derived from audited consolidated financial statements, and the unaudited condensed consolidated financial statements as of and for the periods ended June 30, 2009 and 2008, have been prepared in accordance with US GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Our operations consist of one reportable segment. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008.  The net effect of discontinued operations is reported separately from the results of our continuing operations.  Operating results for the six month periods ended June 30, 2009 and 2008 are not necessarily indicative of the results that may be expected for the full fiscal year.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported therein, including those related to revenue recognition, valuation of accounts receivable, property, plant and equipment, long-lived assets, intangible assets, derivative liabilities and contingencies. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ from those estimates.

Basic and Diluted Income (Loss) Per Share – Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. During the six months ended June 30, 2009 and 2008 and the three months ended June 30, 2008, we reported a net loss per share, and as such basic and diluted loss per share were equivalent. We excluded all outstanding stock options, warrants, convertible debt and convertible preferred stock from the calculation of diluted net loss per share because these securities are anti-dilutive.  During the three months ended June 30, 2009, we reported net income per share and included all dilutive instruments in the fully diluted net income per share calculation.  The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation for this period:

7

	Three months ended
	June 30, 2009
	(in thousands, except per share data)
Numerator:
Net income	$	78,065
Preferred dividends		(368	)
Numerator for basic earnings per share, income available to common shareholders		77,697
Effect of dilutive securities:
Adjustment for change in fair value of embedded conversion feature		(37,978	)
Adjustment for debentures recorded at fair value		(23,344	)
Adjustment for preferred stock dividends		368
		(60,954	)
Numerator for diluted earnings per share, income available for common stockholders after conversion	$	16,743
Denominator:
Weighted average shares used to compute basic EPS		1,588,282
Effect of diluted securities:
Employee stock options		37,041
Derivative warrants		702,575
Convertible debentures		2,482,917
Convertible preferred stock		1,982,059
Dilutive potential common shares		5,204,592
Denominator for diluted earnings per share, adjusted weighted average shares and assumed conversion		6,792,874
Basic earnings per share	$	0.05
Diluted earnings per share	$	-

The above table includes only dilutive instruments and their effects on earnings per common share.

The following outstanding stock options, warrants, convertible debt and convertible preferred securities for the three and six months ended June 30, 2009 and 2008, are anti-dilutive and therefore have been excluded from diluted earnings per share. The following shares were excluded from the calculation of net income (loss) per share because they were anti-dilutive, and are detailed in the table below:

	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008
Outstanding stock options		73,707,111		117,504,426		90,455,396		117,504,426
Outstanding warrants		6,758,334		566,970,834		1,006,370,834		566,970,834
Convertible debt		-		11,886,202,000		2,482,917,000		11,886,202,000
Convertible preferred stock		-		11,171,184,000		1,982,059,000		11,171,184,000
		80,465,445		23,741,861,260		5,561,802,230		23,741,861,260

As discussed in Note 4, we issued $535,000 of convertible notes on July 15, 2009. The notes are convertible at the then effective conversion price, which varies relative to the our trading stock price, as follows: $0.02 per share, or 95% of the lowest weighted average price of the Company’s common stock during the ten days preceding the conversion date.

On July 21, 2009, July 23, 2009, July 29, 2009 and August 4, 2009, 250 shares, 169 shares, 1,000 shares, and 941 shares respectively, of our Series C preferred stock were converted into 22.1 million, 15.0 million, 90.0 million, and 85.5 million shares, respectively, of common stock.

8

 In addition to net income (loss) per share, we have also reported per share amounts on the separate income statement components required by APB 30, “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” as the disposal activities of our discontinued operations were initiated prior to our adoption of FAS 144.

Inventories - - Inventories, consisting of material, material overhead, labor and processing costs, are stated at the lower of cost (first-in, first-out) or market.

Note 3 – Discontinued Operations

MicroPaint Repair, 12Snap & Telecom Services – During 2006, we acquired and in 2007 we subsequently disposed of our Micro Paint Repair (MPR), 12Snap, Mobot and Sponge business units. During the three and six months ended June 30, 2008, we incurred wind-down expenses related to these discontinued businesses.

Note 4 – Financing

On February 17, 2006, the Company issued Series C convertible preferred stock to YA Global, an accredited investor, and between August 24, 2006 and June 5, 2009, has entered into thirteen secured convertible debentures with YA Global. In addition, in connection with these debentures and preferred stock, the Company also issued common stock warrants to YA Global. The significant terms of the Series C convertible preferred stock, the convertible debentures and the warrants are set out in Note 5 to our December 31, 2008 consolidated financial statements, included in our Annual Report on Form 10-K for the year ended December 31, 2008, and are summarized below.

Series C Convertible Preferred Stock - On February 17, 2006, we issued 22,000 shares of $1,000 Series C 8% convertible preferred stock, with a face value of $22,000,000, to YA Global. The Series C convertible preferred stock is convertible into our common stock at the lower of $0.02 per share, or 97% of the lowest closing bid price of the common stock for the 30 trading days immediately preceding the conversion date.

As of June 30, 2009, YA Global has converted 3,576.1 shares of the original 22,000 shares of Series C preferred stock, leaving 18,423.9 shares, with a face value of $18,423,900, outstanding, as follows:

	Series C Shares
Conversion Date		Converted		Common Shares Issued
				(in thousands)
	Prior Years		2,856.1		448,228
	1/13/2009		33.0		30,000
	2/5/2009		22.0		20,000
	2/11/2009		22.0		20,000
	2/19/2009		156.0		120,000
	3/4/2009		91.0		70,000
	3/25/2009		84.0		64,615
	4/1/2009		150.0		38,461
	4/22/2009		162.0		36,818
			3,576.1		848,122

Secured Convertible Debentures - The underlying agreements for each of the debentures issued to YA Global are essentially the same, except in regard to the interest rate, varying conversion prices per share, and the number of warrants that were issued in conjunction with each of the debentures. The debentures are convertible into our common stock at the lower of a fixed conversion price per share or a percentage of the lowest volume-weighted average price (“VWAP”) for a specified number of trading days prior to conversion. All of the convertible debentures are secured according to the terms of a Security Pledge Agreement dated August 23, 2006, which was entered into in connection with the first convertible debenture with YA Global and which provides YA Global with a security interest in substantially all of our assets.

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The table below summarizes the significant terms of each of the debentures:

							Conversion Price – Lower of Fixed Price or
							Percentage of VWAP for Preceding Period
	Face			Interest			Fixed					Preceding
Debenture Issue Date	Amount		Maturity	Rate			Price		%			Period
August 24, 2006	$	5,000,000	7/29/2010		10	%	$	0.01		90	%	30 Days
December 29, 2006		2,500,000	7/29/2010		10	%	$	0.01		90	%	30 Days
March 27, 2007		7,458,651	7/29/2010		13	%	$	0.01		90	%	30 Days
August 24, 2007		1,775,000	7/29/2010		14	%	$	0.01		80	%	10 Days
April 11, 2008		390,000	4/11/2010		15	%	$	0.01		80	%	10 Days
May 16, 2008		500,000	5/16/2010		15	%	$	0.01		80	%	10 Days
May 29, 2008		790,000	5/30/2010		15	%	$	0.01		80	%	10 Days
July 10, 2008		137,750	7/1/2010		15	%	$	0.01		80	%	10 Days
July 29, 2008		2,325,000	7/29/2010		14	%	$	0.02		95	%	10 Days
October 28, 2008		2,325,000	7/29/2010		14	%	$	0.02		95	%	10 Days
April 6, 2009		550,000	7/29/2010		14	%	$	0.02		95	%	10 Days
May 1, 2009		550,000	7/29/2010		14	%	$	0.02		95	%	10 Days
June 5, 2009		715,000	7/29/2010		14	%	$	0.02		95	%	10 Days

The debentures issued prior to May 29, 2008 were originally issued with higher fixed exercise prices but because those debentures include full-ratchet anti-dilution provisions, their fixed conversion price was reduced to $0.01 as of May 29, 2008.

Effective September 24, 2008, the maturity dates of the August 24, 2006 and December 29, 2006 debentures, which originally matured after two years, were extended to July 29, 2010. On April 6, 2009 (effective March 27, 2009) the maturity date of the March 27, 2007 debenture was extended to July 29, 2010. On August 14, 2009, the maturity date of the August 24, 2007 debenture was extended to July 29, 2010.

On July 29, 2008, we entered into a Securities Purchase Agreement (the “July 29 SPA”) with YA Global in the principal amount of $8,650,000. The July 29 SPA provided for the amount to be drawn through three separate secured convertible debentures in the amounts of $2,325,000, $2,325,000, and $4,000,000 respectively. The first and second debentures were issued on July 29, 2008 and October 28, 2008. Upon the achievement of certain milestones, the remaining debenture was scheduled to be issued no earlier than January 1, 2009. On April 6, 2009, we entered into an Amendment Agreement to the July 29 SPA, whereby the third scheduled debenture was reduced from $4,000,000 to $1,100,000, and was divided into two separate closings of $550,000 each, on April 6, 2009 and May 1, 2009. In connection with these two debentures, YA Global retained fees for each debenture of $50,000, resulting in net proceeds to us of $500,000 for each debenture. Further, on June 5, 2009, we entered into a secured convertible debenture with Y.A. Global in the amount of $715,000. Y.A. Global retained fees of $50,000, and structuring fees of $5,000, resulting in net proceeds to us of $660,000.

Default Events and Waiver - As of August 23, 2008, we were in default on our August 23, 2006 Convertible Debenture due to non-payment of principal and interest in accordance with the terms of the agreement. On September 24, 2008, we entered into a Letter Agreement with YA Global which extended the maturity dates of the August 24, 2006 and the December 29, 2006 debentures to July 29, 2010. The extension was considered a one-time extension for the specific period indicated but was not considered a waiver of existing events of default. However, a waiver was subsequently obtained from YA Global, effective as of December 31, 2008, which waiver is discussed further below.

All the debentures with YA Global contain provisions for acceleration of principal and interest upon default. Certain of the debentures also contain default interest rates and conversion prices, as follows:

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	April 11, 2008			May 16,  2008			May 29,  2008			July 10,  2008			July 29,  2008			October 28,  2008			April 6,  2009			May 1, 2009			June 5, 2009
Default interest rate		24	%		24	%		24	%		24	%		20	%		20	%		20	%		20	%		20	%
Convertible into our common stock at the lower of:
Fixed conversion price per share	$	0.01		$	0.01		$	0.01		$	0.01		$	0.02		$	0.02		$	0.02		$	0.02		$	0.02
or percent of lowest volume weighted average price		75	%		50	%		50	%		50	%		50	%		50	%		50	%		50	%		50	%
for days preceding conversion	30 days			10 days			10 days			10 days			10 days			10 days			10 days			10 days			10 days

We obtained a waiver from YA Global, effective as of December 31, 2008 in which all prior events of default and the related cross default provisions of other financing instruments with YA Global were waived. YA Global waived the right to collect any liquidated damages, penalties or fines which had not previously been paid by us and also acknowledged that as of December 31, 2008, we were not under any obligation to file a registration statement under any of the financing arrangements. YA Global does, however, still have demand rights under certain agreements which would require us to file registration statements in accordance with the terms of the agreements.

Fair Value Considerations -In accordance with FAS 133 we determined that the conversion features of the Series C convertible preferred stock, and the August 2006, December 2006, July 2008, October 2008, April 2009, May 2009 and June 2009 Debentures met the criteria of embedded derivatives and that the conversion features of these instruments needed to be bifurcated and accounted for as derivative instrument liabilities. Changes in the fair value of the derivative liability for the embedded conversion option are charged or credited to income. As permitted by FAS 155, we have elected not to bifurcate the embedded derivatives in the March 2007, August 2007, April 2008 or May 2008 Debentures and accordingly these convertible instruments are being carried in their entirety at their fair values, with the changes in the fair value of the Debentures charged or credited to income each period. 

Derivative financial instruments arising from the issuance of fair value convertible financial instruments are initially recorded, and continuously carried, at fair value. Upon conversion of any derivative financial instrument, the carrying amount of the debt, including any unamortized premium or discount is credited to the capital accounts upon conversion to reflect the stock issued and no gain or loss is recognized.

Embedded Derivative Instruments – Series C Preferred Stock and August 2006, December 2006, July 2008, October 2008, April 2009, May 2009, and June 2009 Convertible Debentures - Embedded derivative financial instruments arising from the convertible instruments consist of multiple individual features that were embedded in each instrument. For each convertible instrument, we evaluated all significant features and, as required under current accounting standards, aggregated the components into one compound derivative financial instrument for financial reporting purposes. For financings recorded in accordance with FAS 133, the compound embedded derivative instruments are valued using the Flexible Monte Carlo methodology because that model embodies certain relevant assumptions (including, but not limited to, interest rate risk, credit risk, and conversion/redemption privileges) that are necessary to value these complex derivatives.

Assumptions used as of June 30, 2009 included exercise estimates/behaviors and the following other significant estimates:

	Series C Convertible Preferred Stock			August 24, 2006 Debenture			December 29,  2006 Debenture			July 10, 2008 Debenture			July 29, 2008 Debenture
Conversion prices	$	0.012		$	0.010		$	0.010		$	0.010		$	0.012
Remaining terms (years)		1.08			1.08			1.08			1.03			1.08
Equivalent volatility		233	%		233	%		233	%		236	%		233	%
Equivalent interest-risk adjusted rate		9.45	%		12.56	%		12.56	%		13.67	%		10.92	%
Equivalent credit-risk adjusted yield rate		15.56	%		15.56	%		15.56	%		15.56	%		15.56	%

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	October 28, 2008 Debenture			April 6, 2009 Debenture			May 1, 2009 Debenture			June 5, 2009 Debenture
Conversion prices	$	0.012		$	0.012		$	0.012		$	0.012
Remaining terms (years)		1.08			1.08			1.08			1.08
Equivalent volatility		233	%		233	%		233	%		233	%
Equivalent interest-risk adjusted rate		10.92	%		10.92	%		10.92	%		10.92	%
Equivalent credit-risk adjusted yield rate		15.56	%		15.56	%		15.56	%		15.56	%

Equivalent amounts reflect the net results of multiple modeling simulations that the Flexible Monte Carlo Simulation methodology applies to underlying assumptions. The assumptions included in the calculation are highly subjective and subject to interpretation.

Due to the variable component of the conversion price, rapid fluctuations in the trading market price may result in significant variations to the calculated conversion price. For each debenture, we analyze the ratio of the conversion price (as calculated based on the percentage of VWAP for the 30 day or 10 day prior period) to the trading market price for a period of time equal to the term of the debenture to determine the average ratio for the term of the note. Each quarter, the ratio in effect on the date of the valuation is compared with the average ratio over the term of the debenture to determine if the calculated conversion price is representative of past trends or if it is considered unrepresentative due to a large fluctuation in the stock price over a short period of time.  If the calculated conversion price results in a ratio which deviates significantly from the average ratio over the term of the agreement, the average ratio of the conversion price to the trading market price is then multiplied by the current trading market price to determine the variable portion of the conversion price for use in the fair value calculations. This variable conversion price is then compared with the fixed conversion price and, as required by the terms of the debentures, the lower of the two amounts is used as the conversion price in the Monte Carlo model used for valuation purposes. On June 30, 2009, the fixed conversion price for each of the debentures was equal to or higher than the calculated variable conversion price. Accordingly, the variable conversion price was used in the Monte Carlo valuation model. This analysis is performed each quarter to determine if the calculated conversion price is reasonable for purposes of determining the fair value of the embedded conversion features (for instruments recorded under FAS133) or the fair value of the hybrid instrument (for instruments recorded under FAS155).

Hybrid Financial Instruments Carried at Fair Value – 2007 and 2008 Convertible Debentures - The March 2007, August 2007, April 11, 2008, May 16, 2008 and May 29, 2008 convertible debentures are recorded in accordance with SFAS 155 and the entire hybrid instrument was initially recorded at fair value, with subsequent changes in fair value recognized in earnings. These financial instruments are valued using the common stock equivalent approach. The common stock equivalent is calculated using the shares indexed to the debentures valued at the market price of our stock and the present value of the coupon.

Current Period Valuations - For the Series C Convertible Preferred Stock and the August 2006 and December 2006 debentures, due to our previous default position with respect to these instruments, the carrying value of each instrument in effect as of December 31, 2006 was written up to its full face value during the fourth quarter of 2006. For these instruments and the July 2008, October 2008, April 2009, May 2009 and June 2009 Debentures, the embedded derivative instrument, primarily the conversion feature, has been separated and accounted for as a derivative instrument liability, as discussed above. This derivative instrument liability is marked to market each reporting period.

The March 2007, August 2007, April 2008 and May 2008 debentures were each initially recorded at their full fair value pursuant to FAS 155. That fair value is marked-to-market each reporting period, with any changes in the fair value charged or credited to income.

The face value and the carrying value or fair value, as appropriate, of each instrument as of June 30, 2009 and December 31, 2008 was:

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	Face		Carrying
June 30, 2009	Value		Value		Fair value		Total
	(in thousands)
Series C Convertible Preferred Stock	$	18,424	$	18,424	$	-	$	18,424
August 24, 2006 debenture	$	5,000	$	5,000	$	-	$	5,000
December 29, 2006 debenture		2,500		2,500		-		2,500
March 27, 2007 debenture		7,459		-		13,588		13,588
August 24, 2007 debenture		1,775		-		3,060		3,060
April 11, 2008 debenture		390		-		687		687
May 16, 2008 debenture		500		-		872		872
May 29, 2008 debenture		790		-		1,373		1,373
July 10, 2008 debenture		137		118		-		118
July 29, 2008 debenture		2,325		1,916		-		1,916
October 28, 2008 debenture		2,325		1,931		-		1,931
April 6, 2009 debenture		550		13		-		13
May 1, 2009 debenture		550		105		-		105
June 5, 2009 debenture		715		10		-		10
Total	$	25,016	$	11,593	$	19,580	$	31,173

	Face		Carrying
December 31, 2008	Value		Value		Fair value		Total
	(in thousands)
Series C Convertible Preferred Stock	$	19,144	$	19,144	$	-	$	19,144
August 24, 2006 debenture	$	5,000	$	5,000	$	-	$	5,000
December 29, 2006 debenture		2,500		2,500		-		2,500
March 27, 2007 debenture		7,459		-		13,478		13,478
August 24, 2007 debenture		1,775		-		3,217		3,217
April 11, 2008 debenture		390		-		736		736
May 16 ,2008 debenture		500		-		955		955
May 29, 2008 debenture		790		-		1,506		1,506
July 10, 2008 debenture		137		109		-		109
July 29, 2008 debenture		2,325		1,785		-		1,785
October 23, 2008 debenture		2,325		1,833		-		1,833
Total	$	23,201	$	11,227	$	19,892	$	31,119

The following table reflects the number of common shares (in thousands) into which the Series C preferred stock and debentures are convertible and the fair values of the embedded conversion features in those debentures that are carried at amortized cost, at June 30, 2009 and December 31, 2008:

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	June 30, 2009				December 31, 2008
	Common		Embedded		Common		Embedded
	Stock		Conversion		Stock		Conversion
	Shares		Feature		Shares		Feature
			(in thousands)
Series C Convertible Preferred Stock		1,982,059	$	19,027		21,456,650	$	10,728
August 24, 2006		500,000		6,641		5,555,556		7,260
December 29, 2006		333,356		3,267		3,703,957		3,556
March 27, 2007		745,865		-		8,287,390		-
August 24, 2007		177,500		-		1,972,222		-
April 11, 2008		39,000		-		433,333		-
May 16, 2008		50,000		-		555,556		-
May 29, 2008		79,000		-		877,778		-
July 10, 2008		13,775		141		153,056		158
July 29, 2008		195,789		1,966		2,325,000		2,327
October 28, 2008		195,789		1,938		2,325,000		2,227
April 6, 2009		46,316		452		-		-
May 1, 2009		46,316		452		-		-
June 5, 2009		60,211		587		-		-
Total		4,464,976	$	34,471		47,645,498	$	26,256

The carrying value of the embedded conversion feature related to the April 6, 2009, May 1, 2009 and June 5, 2009 financings at inception was approximately $531,000, $419,000 and $679,000, respectively.

The terms of the embedded conversion features in the convertible instruments presented above provide for variable conversion rates that are indexed to our trading common stock price. As a result, the number of indexed shares is subject to continuous fluctuation. For presentation purposes, the number of shares of common stock into which the embedded conversion feature of the Series C convertible stock was convertible as of June 30, 2009 was calculated as face value plus assumed dividends (if declared), divided by the lesser of the fixed rate ($.02) or the market price multiplied by the average ratio of market price to conversion price over the term of the note. The number of shares of common stock into which the embedded conversion feature in the convertible debentures was convertible as of June 30, 2009 was calculated as the face value of each instrument divided by the conversion price as of June 30, 2009.

The March 2007, August 2007, April 2008 and May 2008 debentures are carried in their entirety at fair value in accordance with FAS 155 and the value of the embedded conversion feature is effectively embodied in those fair values. 

Changes in the fair value of convertible instruments that are carried at fair value (the March 2007 Debenture, August 2007 Debenture, April 2008 Debenture and May 2008 Debentures) are reported as “Gain (loss) from change in fair value of hybrid financial instruments” in the accompanying consolidated statement of operations. The following represents a reconciliation of the changes in fair value of financial instruments measured at fair value under FAS 155:

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	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009			2008
	(in thousands)				(in thousands)
Debenture Issue Date
March 27, 2007 debenture	$	15,915	$	3,135	$	(110	)	$	2,056
August 24, 2007 debenture		3,797		715		156			450
April 11, 2008 debenture		844		19		49			19
May 16, 2008 debenture		1,081		29		84			29
May 29, 2008 debenture		1,706		154		133			154
Total	$	23,343	$	4,052	$	312		$	2,708

Changes in the fair value of derivative instrument liabilities related to the bifurcated embedded derivative features of convertible instruments not carried at fair value are reported as “Gain (loss) from change in fair value of debentures” in the accompanying consolidated statement of operations. The following represents a reconciliation of the changes in fair value of these derivative financial instruments recorded under FAS 133:

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
	(in thousands)						(in thousands)
Series C Convertible Preferred Stock	$	15,851		$	(5,480	)	$	(11,389	)	$	(4,533	)
Debenture Issue Date
August 24, 2007		12,694			(1,684	)		619			(75	)
December 29, 2006		6,454			(842	)		289			(38	)
July 10, 2008		273			-			17			-
July 29, 2008		1,275			-			361			-
October 28, 2008		1,293			-			289			-
April 6, 2009		79			-			79			-
May 1, 2009		(33	)		-			(33	)		-
June 5, 2009		92			-			92			-
Total	$	37,978		$	(8,006	)	$	(9,676	)	$	(4,646	)

Warrants - YA Global holds warrants to purchase shares of our common stock that were issued in connection with the convertible debentures and the Series C convertible preferred stock. The warrants are exercisable at the lower of a fixed exercise price or a specified percentage of the current market price. From time to time, the fixed exercise prices of the warrants held by YA Global have been reduced as an inducement for YA Global to enter into subsequent financing arrangements. In addition to the warrants issued to YA Global, certain other warrants have been issued to consultants and other service providers.

The warrants issued to YA Global and others do not meet all of the established criteria for equity classification in EITF Issue 00-19 and, accordingly, are recorded as derivative liabilities at fair value. Changes in the fair value of the warrants are charged or credited to income or expense each period.

A summary of the warrants outstanding (in thousands) follows:

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				June 30, 2009				December 31, 2008
				Common				Common
	Exercise		Expiration	Stock		Fair		Stock		Fair
	Price		Date	Warrants		Value		Warrants		Value
						(in thousands)
Series C Convertible Preferred Stock	$	0.0100	2/17/2011		75,000	$	930		75,000	$	23
August 24, 2006 debenture		0.0100	8/24/2011		175,000		2,293		175,000		193
December 29, 2006 debenture		0.0100	12/29/2011		42,000		554		42,000		50
March 27, 2007 debenture		0.0100	3/27/2012		125,000		1,650		125,000		150
August 24, 2007 debenture		0.0100	8/24/2012		75,000		997		75,000		90
May 16, 2008 debenture		0.0100	5/16/2015		7,500		106		7,500		10
May 29, 2008 debenture		0.0100	5/29/2015		50,000		705		50,000		70
July 29, 2008 debenture		0.0184	7/29/2015		450,000		6,300		450,000		602
Other warrants		0.011-.48	Various		6,696		56		8,471		1
Total					1,006,196	$	13,591		1,007,971	$	1,189

The warrants are valued using the Black-Scholes-Merton valuation methodology because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions used in this model as of June 30, 2009 included an expected life equal to the remaining term of the warrants, an expected dividend yield of zero, estimated volatility of 173% to 234%, and risk-free rates of return of 0.56% to 3.19%.

Fair Value Considerations –We adopted the provisions of FAS 157 as of January 1, 2008, with respect to financial instruments. As required by FAS 157, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. Our derivative financial instruments which are required to be measured at fair value on a recurring basis under FAS 155 or FAS 133 and as of June 30, 2009 and December 31, 2008 are all measured at fair value using Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following represents a reconciliation of the changes in fair value of financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2009, in thousands:

Beginning balance: Derivative financial instruments	$	27,445
Total gains (losses)		9,988
Transfers in/out of Level 3		10,629
Ending balance	$	48,062

Subsequent Events

Secured Convertible Debenture - On July 15, 2009 and August 14, 2009, we entered into additional Secured Convertible Debentures with YA Global for principal amounts of $535,000 and $475,000, respectively. The debentures accrue interest at 14% per annum and are payable on the maturity date (July 29, 2010) in cash, or provided that certain equity conditions are satisfied, in shares of common stock.  At any time from the closing date until the maturity date, YA Global has the right to convert the convertible debentures into our common stock  at the then effective conversion price, which varies relative to the our trading stock price, at the lesser of, $0.02 per share, or 95% of the lowest weighted average price of the Company’s common stock during the ten days preceding the conversion date, and adjusts to 50% of the lowest weighted average price of the Company’s common stock during the ten days preceding the conversion date in the event of a default. The conversion is limited such that the holder cannot exceed 4.99% ownership, unless the holders waive their right to such limitation. We have the right to redeem a portion or the entire outstanding note at a 10% premium plus accrued interest. The debentures are secured by certain Pledged Property, as such term is defined in the Security Agreement, dated July 29, 2008, and certain Patent Collateral, as defined in a security agreement (patent), entered into on July 29, 2008.

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Note 5 – Stock-Based Compensation

A total of 22,173,540 stock options were issued to employees and directors during the six months ended June 30, 2009. A total of 32,126,763 stock options were issued to employees during the six months ended June 30, 2008.  The grant date fair values of these options were $157,000 and $170,000, respectively, which amounts are being recognized over the vesting period of the options.  For the three and six months ended June 30, 2009 and 2008, respectively, total stock-based compensation expense recorded in the statement of operations was $98,000 and $631,000 for the three months ended June 30, 2009 and 2008, and $177,000 and $987,000 for the six months ended June 30, 2009 and 2008, respectively.

We used the following assumptions to value the stock options granted during the six months ended June 30, 2009 and 2008:

	Six months ended June 30,
	2009		2008
Volatility		138% - 282%		88% - 120%
Expected dividends		-		-
Expected term (in years)		5.6		3
Risk-free rate		0.50%		4.35%

During the six months ended June 30, 2009 options to purchase 11,600,000 shares of our common stock were exercised. The exercise price of these options was $0.01 per share, providing us with proceeds of $116,000. There were no stock option exercises during the six months ended June 30, 2008.

On April 29, 2009 the Stock Option Committee of the Board of Directors approved a resolution granting 6,548,540 stock options to 14 of our employees and directors to partially compensate them for reductions in salaries and fees related to our cost control measures. The exercise price of these options was $0.02 per share. In addition, the resolution included a change in control provision, under which all options held by these employees and directors would vest upon such change in control of the company.

Note 6 – Accrued Liabilities

Accrued liabilities consist of the following as of June 30, 2009 and December 31, 2008:

	June 30,		December 31,
	2009		2008
	(in thousands)
Accruals for disputed services	$	2,280	$	2,224
Accrued operating expenses		1,475		1,791
Accrued payroll related expenses		117		-
Accrued interest		3,334		1,772
Total	$	7,206	$	5,787

Note 7 – Contingencies

We are involved in various legal actions arising in the normal course of business, both as claimant and defendant. Although it is not possible to determine with certainty the outcome of these matters, it is the opinion of management that the eventual resolution of the following legal actions will not have a material adverse effect on our financial position or operating results. We expense professional fees associated with our legal proceedings as they are incurred according to the terms negotiated between us and the respective professional who represents our interests. We have not accrued a loss contingency in relation to any of our pending litigation.

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Scanbuy, Inc. - On January 23, 2004, we filed suit against Scanbuy, Inc. (“Scanbuy”) in the Northern District of Illinois, claiming that Scanbuy has manufactured, or has had manufactured for it, and has used, or actively induced others to use, technology which allows customers to use a built-in UPC bar code scanner to scan individual items and access information, thereby infringing our patents.  The complaint stated that on information and belief, Scanbuy had actual and constructive notice of the existence of the patents-in-suit, and, despite such notice, failed to cease and desist their acts of infringement and continue to engage in acts of infringement of the patents-in-suit.  On April 15, 2004, the court dismissed the suits against Scanbuy for lack of personal jurisdiction.

On April 20, 2004, we re-filed our suit against Scanbuy in the Southern District of New York alleging patent infringement. Scanbuy filed their answer on June 2, 2004. We filed our answer on July 23, 2004. On February 13, 2006, Scanbuy filed an amended answer to the complaint. We filed our reply to Scanbuy’s amended answer on March 6, 2006. On January 20, 2007, the court dismissed Scanbuy's request for a summary judgment. On February 17, 2009, the USPTO sent NeoMedia a Notice of Intent to Issue Ex Parte Reexamination Certificate, and on June 9, 2009 NeoMedia received a Reexamination Certificate for the ‘048 patent.  NeoMedia requested that the stay be lifted and a joint summary status of the case was provided to the court.  On April 17, 2009 both parties met with the court to discuss the status of the case. On August 3, 2009 the Court issued an order lifting the stay and granting our request to proceed with discovery, which is now in progress.

Ephrian Saguy, iPoint – media, plc. and iPoint – media, Ltd. – On or around March 5, 2008 we received a summons and notice that the plaintiffs had commenced a third party action in the Magistrate Court in Tel-Aviv-Jaffa, Israel seeking damages from us and YA Global for breach of contract and unjust enrichment related to services provided by iPoint and investment by us and YA Global. We have entered into an assignment agreement with YA Global and have retained legal counsel in Israel to represent us. At this time we are unable to determine a probable outcome in this matter.

Rothschild Trust Holdings, LLC – On September 19, 2008, we were served a complaint by Rothschild Trust Holding, LLC alleging we owed royalty payments for the use of certain patents. On February 25, 2009 we filed an answer to the complaint. On July 20, 2009 we entered into non-binding mediation and an interim agreement which requires us to provide documentation for review by Rothschild Trust Holding, LLC. This process is on-going, and we believe the complaint is without merit and we intend to vigorously defend against it.

Scanbuy and Marshall Feature Recognition, LLC – On or around December 19, 2008, we received a complaint filed in the Eastern District of Texas by Scanbuy and Marshall Feature Recognition, LLC (“MFR”) alleging infringement of certain patents. On January 8, 2009, we filed an answer denying infringement and asserting that the patents of Scanbuy and MFR are invalid. On or about May 8, 2009 the parties agreed and the case was transferred to the Southern District of New York due to lack of personal jurisdiction in the Eastern District of Texas. On August 3, 2009 the New York Court assigned the case to the same judge responsible for our suit against Scanbuy, described above. However, because of significant differences between the cases each will be tried separately. The Court’s order also established a timetable for discovery in this case. We believe the complaint is without merit and we intend to vigorously defend against it.

The Hudson Consulting Group, Inc. – On June 30, 2009 we received from the Superior Court of Fulton County, in the State of Georgia a Notice of Filing of Foreign Judgment related to the judgment granted against us but the Superior Court, Judicial District of Middlesex, in the State of Connecticut, granted on August 22, 2008.  The Notice of Filing seeks to collect on the Judgment which was granted in Connecticut. We are seeking to settle this matter.

 Dennis G. Priddy – On July 30, 2009, we and our Chief Executive Officer were served with a Writ of Summons filed in the Northern District Superior Court of Hillsborough County, New Hampshire. The allegations in the Writ included several employment related matters. We believe the complaint is without merit and we intend to vigorously defend against it.

Note 8 – Geographic Reporting

We are structured and evaluated by our Board of Directors and management as one business unit.

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Consolidated net sales and net loss from continuing operations for the three and six month ended June 30, 2009 and 2008, and the identifiable assets as of June 30, 2009 and December 31, 2008 by geographic area were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
	(in thousands)						(in thousands)
Net Sales:
United States	$	88		$	91		$	155		$	207
Germany		48			116			471			264
Total	$	136		$	207		$	626		$	471
Net income (loss) from continuing operations:
United States		78,524			(8,799	)		(27,752	)		(4,308	)
Germany		(460	)		(552	)		(783	)		(1,006	)
Total	$	78,064		$	(9,351	)	$	(28,535	)	$	(5,314	)

	June 30,		December 31,
	2009		2008
Identifiable assets:
United States	$	9,526	$	10,920
Germany		467		568
Total	$	9,993	$	11,488

Note 9 - Subsequent Events

Asset Purchase and Sale Agreement – On July 17, 2009, the Company entered into an Asset Purchase and Sale Agreement to dispose of certain assets in connection with our legacy Maxicode, PDF 417 and WISP software product lines. Neither the assets sold, nor the revenue to be acquired in connection with the asset sale, are material to the Company.

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ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note About Forward-Looking Statements

Certain statements in Management’s Discussion and Analysis, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially from the forward-looking statements. For a detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward looking statements, please refer to the section titled “Risk Factors” in the Company’s 2008 Form 10-K filed on April 14, 2009 with the SEC.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Overview

NeoMedia provides the infrastructure to make mobile barcode scanning and its associated commerce easy, universal, and reliable – worldwide. Our barcode ecosystem products including mobile barcode reading software, NeoReader, read and transmit data from 1D and 2D barcodes to its intended destination. Our Code Management (NeoSphere) and Code Clearinghouse (NeoRouter) platforms create, connect, record, and transmit the transactions embedded in the barcodes, like web-URLs, text messages (SMS), and telephone calls, ubiquitously and reliably.

In order to provide complete mobile marketing solutions, NeoMedia also offers barcode scanning hardware that reads barcodes displayed on mobile phone screens. NeoMedia provides infrastructure solutions to enable mobile ticketing and couponing programs – including scanner hardware and system support software for seamless implementation.

This technology is supported by our patents. In addition, NeoMedia has an open standards philosophy designed to make integration and use of the technology easy for handset manufacturers, mobile operators and advertisers; and the user experience safe, reliable and interoperable for consumers.

In 2006, we began divesting our non-core businesses in order to focus our efforts on the area that we believe will deliver the most value - our code-reading business and the related intellectual property. In the fourth quarter of 2006, we disposed of two subsidiaries, Mobot and Sponge. During April 2007, we sold the 12Snap business unit and in October 2007, we completed the sale of our Telecom Services business.  In November 2007, we sold our Micro Paint Repair business unit.  As a consequence of these divestitures, we evaluate our continuing business as one consolidated business.  These divestitures were integral to our turnaround plan and the proceeds received from the sale of our non-core business units have been used to continue the development of our code-reading business.  A major goal of ours is to provide the industrial and carrier-grade infrastructure to enable reliable, scalable and billable commerce that is customer-focused and drives revenue growth.

During 2008 and early 2009 we have made significant changes to strengthen our management team. In June 2008, Mr. Iain A. McCready became our Chief Executive Officer and Chairman of our Board of Directors; in September 2008, Mr. Michael W. Zima became our Chief Financial Officer and Secretary; in January 2009, Ms. Laura Marriott became a Member of our Board of Directors; and in March 2009, Mr. Dean Wood became our Vice President - Business Development.

On July 28, 2009, we entered into a non-exclusive patent licensing agreement with Mobile Tag, Inc., for machine readable mobile codes under our patent portfolio. This is the first contract to be announced under our recently launched licensing program. Under the terms of the agreement, we will receive a percentage of revenue generated by Mobile Tag, Inc., through the use and licensing of our patent portfolio.

20

Comparison of the Three and Six Months Ended June 30, 2009 and 2008

Results of Continuing Operations

Beginning in late 2008 and continuing in 2009 we have taken aggressive steps to control our costs. These efforts have resulted in reduced operating losses in the three months ended June 30, 2009 compared to the three months ended June 30, 2008, respectively, of $1.5 million compared to $2.8 million, and reduced operating losses in the six months ended June 30, 2009, compared to the six months ended June 30, 2008, respectively, of $3.1 million compared to $5.2 million. However, our loss from continuing operations was $28.5 million during the six months ended June 30, 2009 compared to $5.3 million during the six months ended June 30, 2008. The overall loss incurred in the six months ended June 30, 2009, was primarily the result of non-cash losses and gains from the change in fair value of our hybrid financial instruments, warrants and debentures, totaling $22 million. For the three months ended March 31, 2009, the non-cash loss totaled $104 million, and non-cash gain for the three months ended June 30, 2009 totaled $82 million.  We incurred these non-cash losses and gains principally as a result of the recent fluctuations in the market value of our common stock during the three and six months ended June 30, 2009. During the six months ended June 30, 2008 we reported non-cash gains on our hybrid financial instruments, warrants and debentures, totaling $1.5 million. These non-cash gains were principally the result of declines in the market value of our common stock.

A summary of our net sales for the three and six months ended June 30, 2009 and 2008 is presented below:

	Three Months Ended June 30,				Increase (decrease)
	2009		2008		$			%
	(in thousands)
Hardware sales		36	$	82		(46	)		-56	%
Lavasphere revenue		8		15		(7	)		-47	%
Neo-Reader revenue		2		-		2			-
Legacy product revenue		88		91		(3	)		-3	%
Other revenue		2		19		(17	)		-89	%
Net Sales	$	136	$	207		(71	)		-34	%

	Six Months Ended June 30,				Increase (decrease)
	2009		2008		$			%
	(in thousands)
Hardware sales		429	$	149		280			188	%
Lavasphere revenue		30		39		(9	)		-23	%
Neo-Reader revenue		6		-		6			-
Legacy product revenue		145		168		(23	)		-14	%
Patent licensing		10		39		(29	)		-75	%
Other revenue		6		76		(70	)		-92	%
Net Sales	$	626	$	471		155			33	%

Net Sales - - Total revenues decreased $71,000, or 34%, to $136,000 for the three months ended June 30, 2009 from $207,000 for the three months ended June 30, 2008. Total revenues increased $155,000, or 33%, to $626,000 for the six months ended June 30, 2009 from $471,000 for the six months ended June 30, 2008. This increase was the result of increased sales of our hardware products. Sales of hardware products decreased to $36,000 from $82,000 for the three months ended June 30, 2009 and 2008, respectively, and increased to $429,000 from $149,000 for the six months ended June 30, 2009 and 2008, respectively, as a result of the introduction of our newest model barcode scanners as well as the sale of remaining quantities of our older models. During the six months ended June 30, 2009, we recorded $6,000 of sales revenue for our barcode ecosystem products. In succeeding quarters we expect these revenues and related licensing revenues to increase as we shift the focus to our new business strategy of developing products and services to support the emerging barcode ecosystem that is being defined by bodies such as the OMA, GSMA and CTIA. We believe this focus will deliver the most value in the future.

21

Cost of Sales - Cost of sales was $281,000 for the three months ended June 30, 2009 compared with $292,000 for the three months ended June 30, 2008, a decrease of $11,000, or 4%. Cost of sales was $808,000 for the six months ended June 30, 2009 compared with $605,000 for the six months ended June 30, 2008, an increase of $203,000, or 34%. Cost of sales for NeoMedia Europe, related to our hardware products, was $45,000 and $49,000 for the three months ended June 30, 2009 and 2008, respectively, and was $334,000 and $115,000 for the six months ended June 30, 2009 and 2008, respectively. Amortization costs related to our patents, and the proprietary software of NeoMedia Europe was $236,000 and $244,000 for the three months ended June 30, 2009 and 2008, respectively, and was $474,000 and $490,000 for the six months ended June 30, 2009 and 2008, respectively.

Sales and Marketing - Sales and marketing expenses were $178,000 and $655,000 for the three months ended June 30, 2009 and 2008, respectively, a decrease of $477,000 or 73%, and $464,000 and $1,283,000 for the six months ended June 30, 2009 and 2008, respectively, a decrease of $819,000 or 64%. The decrease in sales and marketing expenses was the result of strict cost controls implemented in mid-late 2008 and further reductions in 2009 compared with 2008.

General and Administrative - General and administrative expenses were $863,000 and $1,367,000 for the three months ended June 30, 2009 and 2008, respectively, a decrease of $504,000, or 37%, and $1,787,000 and $2,573,000 for the six months ended June 30, 2009 and 2008, respectively, a decrease of $786,000, or 31%. The decrease in general and administrative expenses was the result of reductions in compensation and travel costs, as well as reductions in professional fees implemented in mid-late 2008 and further reductions in 2009 compared with 2008.

Research and Development - Research and development expenses were $350,000 and $655,000 for the three months ended June 30, 2009 and 2008, respectively, a decrease of $305,000, or 47%, and $673,000 and $1,217,000 for the six months ended June 30, 2009 and 2008, respectively, a decrease of $544,000, or 45%. The decrease in research and development expenses was the result of reductions in compensation and costs associated with the development of our hardware products, which were completed and launched in late 2008. We have also implemented further cost controls in 2009 compared with 2008.

Gain (Loss) from Change in Fair Value of Hybrid Financial Instruments - We carry certain of our convertible debentures at fair value, in accordance with FAS 155 and do not separately account for the embedded conversion feature.  The change in the fair value of these liabilities includes changes in the value of the interest due under these instruments, as well as changes in the fair value of the common stock underlying the instruments. Liability related to these hybrid instruments decreased in the three months ended June 30, 2009 and 2008, respectively, resulting in a gain of $23.3 million, and $4.1 million, respectively. Liability related to these hybrid instruments decreased in the six months ended June 30, 2009 and 2008, respectively, resulting in a gain of $0.3 million, and $2.7 million, respectively. These fair value changes were primarily as a result of the fluctuations in the value of our common stock during the period. Because our stock price has been volatile and because many of our hybrid financial instruments include relatively low fixed conversion prices, it is possible that further increases in the market price of our stock could cause the fair value of our hybrid financial instruments to increase significantly in future periods.

Gain (Loss) from Change in Fair Value of Derivative Liabilities - Warrants - - We account for our outstanding common stock warrants that were issued in connection with the preferred stock and our debentures, at fair value. Liability related to warrants decreased in the three months ended June 30, 2009 and 2008, respectively, resulting in a gain of $20.9 million, and $1.5 million, respectively. Liability related to warrants increased in the six months ended June 30, 2009, and decreased in the six months ended June 30, 2008, resulting in a loss of $12.4 million, and a gain of $3.5 million, respectively. These fair value changes were primarily as a result of the fluctuations in the value of our common stock during the period. Because our stock price has been volatile and because many of our warrants include relatively low fixed exercise prices it is possible that further increases in the market price of our stock could cause the fair value of our warrants to increase significantly in future periods.

22

Gain (Loss) from Change in Fair Value of Derivative Liabilities - Debentures - -For our Series C convertible preferred stock, and certain of our convertible debentures, we account for the embedded conversion feature separately as a derivative financial instrument.  We carry these derivative financial instruments at fair value. Liability related to the derivative instruments embedded in these debentures decreased in the three months ended June 30, 2009, and increased in the three months ended June 30, 20008, respectively, resulting in a gain of $38.0 million, and a loss of $8.0 million, respectively. Liability related to these derivative instruments and debentures increased in the six months ended June 30, 2009, and 2008, respectively, resulting in a loss of $9.7 million, and $4.6 million, respectively. These fair value changes were primarily as a result of the fluctuations in the value of our common stock during the period. Because our stock price has been volatile and because many of our derivative financial instruments include relatively low fixed conversion prices, it is possible that further increases in the market price of our stock could cause the fair value of our derivative financial instruments to increase significantly in future periods.

Other Interest Expense, net - Other interest expense was $2.6 million and $4.1 million for the three months ended June 30, 2009 and 2008, respectively, a decrease of $1.5 million or 37%, and $3.7 million and $1.7 million for the six months ended June 30, 2009 and 2008, respectively, an increase of $2.0 million or 118% that results from increased financing activities from the second half of 2008 through June 30, 2009. Other interest expense consists of interest charges related to convertible debentures that are not carried at fair value under FAS 155, interest accrued for creditors as part of financed purchases, past due balances and notes payable, net of interest earned on cash equivalent investments.

Results of Discontinued Operations -In 2007, we discontinued the operations of our Mobot, Sponge, 12Snap, Telecom Services and Micro Paint Repair businesses.  During the six months ended June 30, 2008, we recognized a loss of $291,000, primarily attributable to wind-down expenses associated with Micro Paint Repair, 12Snap, and Telecom Services.

Liquidity and Capital Resources

As of June 30, 2009, we had $0.3 million in cash and cash equivalents; a decrease of $1.0 million, or 77%, compared with a total of $1.3 million as of December 31, 2008.

Cash used in operating activities decreased to $2.7 million for the six months ended June 30, 2009 compared with $3.2 million for the period ended June 30, 2008.  The decrease in cash used in operations is primarily due to the cost control measures implemented in late 2008 and early 2009.

Cash used in investing activities was $24,000 for the six months ended June 30, 2009, representing the purchase of equipment. Net cash provided by investing activities was $0.4 million for the six months ended June 30, 2008.  This was primarily due to the sale of our remaining ownership of 12Snap, wind-down expenses from discontinued operations, a partial settlement of intercompany loans and cash retained by us from the shut-down of Micro Paint Repair-US which resulted in net proceeds to us of $0.8 million.

Cash provided by financing activities was $1.8 million for the six months ended June 30, 2009, which resulted from $1.7 million in convertible debt instruments net of fees from Y.A. Global, and proceeds received upon exercise of stock options by two former employees totaling $0.1 million. Cash provided by and used in financing activities during the six months ended June 30, 2008 was $1.4 million, and was the result of additional borrowing activities through convertible debt instruments, and the repayment of portions of our notes payable.

As of June 30, 2009, we had a working capital deficiency of $91.3 million, of which $67.7 million relates to the fair value of hybrid and derivative financial instruments, and $11.6 million relates to the carrying value of debentures carried at amortized cost. These values are significantly greater than the face amount of our debt that would be otherwise due in cash if the conversion feature of these instruments and the warrants did not exist

Significant Liquidity Events

Going Concern - We have historically incurred net losses and losses from operations and we expect that we will continue to have negative cash flows as we implement our business plan.  There can be no assurance that our continuing efforts to execute our business plan will be successful and that we will be able to continue as a going concern. The accompanying consolidated financial statements have been prepared in conformity with US GAAP, which contemplate our continuation as a going concern.  Net loss for the six months ended June 30, 2009 was $28.6 million while net cash used by operations was $2.7 million.  We also have an accumulated deficit of $241.2 million and a working capital deficit of $91.3 million as of June 30, 2009, much of which is related to the derivative value of our financing instruments. We also have a continuing obligation as of June 30, 2009 of $4.6 million relating to a purchase price guarantee associated with our prior acquisition of 12Snap (which we subsequently sold).

23

The items discussed above raise substantial doubts about our ability to continue as a going concern.

We currently do not have sufficient cash to sustain us for the next twelve months.  We will require additional financing in order to execute our operating plan and continue as a going concern.  Our management’s plan is to attempt to secure adequate funding to bridge the commercialization of our barcode ecosystem business. We cannot predict whether this additional financing will be in the form of equity, debt, or another form and we may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all.  We believe that we can obtain additional financing, but in the event that these financing sources do not materialize, or that we are unsuccessful in increasing our revenues and profits, we may be unable to implement our current plans for expansion, repay our debt obligations as they become due or continue as a going concern, any of which circumstances would have a material adverse effect on our business, prospects, financial condition and results of operations.

Including funding received subsequent to June 30, 2009, we have received $2.6 million in financing from YA Global Investments, L.P (“YA Global”) in 2009. While Y.A. Global has informally told us that they intend to continue to fund our operations on a month-to-month basis, should YA Global choose not to provide us with additional capital financing, as they have in the past, or if Y.A. Global does not object and we seek funding from alternative sources but are also unsuccessful, or if we are unable to generate significant product revenues, we only have sufficient funds to sustain our current operations through approximately September 15, 2009.

The financial statements in this Form 10-Q do not include any adjustments relating to the recoverability and reclassification of recorded asset amounts or the amounts and classification of liabilities that might be necessary, should we be unable to continue as a going concern.

Sources of Cash and Projected Cash Requirements- As of June 30, 2009, our cash balance was $0.3 million. NeoMedia’s reliance on YA Global as our primary financing source has certain ramifications that could affect future liquidity and business operations.  For example, pursuant to the terms of the convertible debenture agreements between us and YA Global, without YA Global’s consent we cannot (i) issue or sell any shares of our common stock or our preferred stock without consideration or for consideration per share less than the closing bid price immediately prior to its issuance, (ii) issue or sell any preferred stock, warrant, option, right, contract, call, or other security or instrument granting the holder thereof the right to acquire our common stock for consideration per share less than the closing bid price immediately prior to its issuance, (iii) enter into any security instrument granting the holder a security interest in any of our assets or (iv) file any registration statements on Form S-8. In addition, pursuant to security agreements between us and YA Global, YA Global has a security interest in all of our assets.  Such covenants could severely harm our ability to raise additional funds from sources other than YA Global, and would likely result in a higher cost of capital in the event we secured funding.

Additionally, pursuant to the terms of the Investment Agreement between us and YA Global in connection with our Series C convertible preferred stock sale, we cannot (i) enter into any debt arrangements in which we are the borrower, (ii) grant any security interest in any of our assets or (iii) grant any security below market price.

Subsequent Events

Secured Convertible Debenture - On July 15, 2009 and August 14, 2009, we entered into additional Secured Convertible Debentures with YA Global for principal amounts of $535,000 and $475,000, respectively. The debentures accrue interest at 14% per annum and are payable on the maturity date (July 29, 2010) in cash, or provided that certain equity conditions are satisfied, in shares of common stock.  At any time from the closing date until the maturity date, YA Global has the right to convert the convertible debentures into our common stock  at the then effective conversion price, which varies relative to the our trading stock price, at the lesser of, $0.02 per share, or 95% of the lowest weighted average price of the Company’s common stock during the ten days preceding the conversion date, and adjusts to 50% of the lowest weighted average price of the Company’s common stock during the ten days preceding the conversion date in the event of a default. The conversion is limited such that the holder cannot exceed 4.99% ownership, unless the holders waive their right to such limitation. We have the right to redeem a portion or the entire outstanding note at a 10% premium plus accrued interest. The debentures are secured by certain Pledged Property, as such term is defined in the Security Agreement, dated July 29, 2008, and certain Patent Collateral, as defined in a security agreement (patent), entered into on July 29, 2008.

24

Asset Purchase and Sale Agreement – On July 17, 2009, the Company entered into an Asset Purchase and Sale Agreement to dispose of certain assets in connection with our legacy Maxicode, PDF 417, and WISP software product lines. Neither the assets sold, nor the revenue to be acquired in connection with the asset sale, are material to the Company.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.

ITEM 4T. Controls and Procedures

Disclosure Controls and Procedures - - Our management, with the participation of our CEO and CFO have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.

These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of June 30, 2009 at a reasonable assurance level, because of the material weaknesses described in Item 9A of our Annual Report on Form 10−K for the fiscal year ended December 31, 2008, which we are still in the process of remediating.  Please see “Management’s Report on Internal Control over Financial Reporting” in Item 9A of the 2008 Form 10−K for a full description of these weaknesses.

Notwithstanding the material weaknesses described in Item 9A of the Form 10−K for the fiscal year ended December 31, 2008, we believe that our consolidated financial statements presented in this Quarterly Report on Form 10−Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.

Inherent Limitations - Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

25

Changes in Internal Control over Financial Reporting - There were no changes in the Company’s internal control over financial reporting during the period ended June 30, 2009, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

26

PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

There have been no material developments relating to certain pending legal proceedings.  For a description of pending legal proceedings, see Note 7 – Contingencies, to the Consolidated Financial Statements set forth in this Form 10-Q.

ITEM 1A.  Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required under this item to provide information.

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds

On July 29, 2008 (the “Closing Date”), NeoMedia Technologies, Inc., a Delaware corporation (the “Company”) entered into a Securities Purchase Agreement (the “SPA”) to issue and sell secured convertible debentures (the “Debentures” and each, a “Debenture”) to YA Global Investments, L.P. (the “Investor”) in the principal amount of up to Eight Million Six Hundred Fifty Thousand Dollars ($8,650,000) pursuant to the terms of the SPA, by and between the Company and the Investor, of which the first secured convertible Debenture in the amount of $2,325,000 was funded on the Closing Date, the second secured convertible debenture in the amount of $2,325,000 was funded on October 28, 2008 and a third debenture in the amount of $4,000,000 was to be funded on or after January 1, 2009 subject to certain conditions set forth in the SPA.

On April 6, 2009, the Company and the Investor entered into an Amendment Agreement (the “Amendment Agreement”) whereby the SPA was amended in order to reduce the amount of the third secured convertible Debenture (as discussed above) from $4,000,000 to $1,100,000, and whereby such Third Closing (as defined in the Amendment Agreement) was broken down into two (2) separate closings, the first to occur on April 6, 2009, pursuant to which the Investor purchased a secured convertible debenture in the principal amount of $550,000 and the second to occur on or after May 1, 2009, pursuant to which the Investor exercised its option and purchased a secured convertible debenture in the principal amount of $550,000.

On June 5, 2009, the Investor and the Company entered into an agreement to issue an additional debenture (the “Additional Agreement”), and the Company issued to the Investor a secured convertible debenture in the principal amount of $715,000. Such transaction was described in the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 5, 2009.

On July 15, 2009, the Investor and the Company entered into an Agreement to issue an additional debenture (the “Second Additional Agreement”), and the Company issued to the Investor a secured convertible debenture in the principal amount of $535,000. Such transaction was described in the Company’s Current Report on Form 8-K filed with the SEC on July 21, 2009.

On August 14, 2009, the Investor and the Company entered into an Agreement to issue an additional debenture (the “Third Additional Agreement”), a copy of which is attached hereto as Exhibit 10.124, whereby the Company issued to the Investor a secured convertible debenture in the principal amount of $475,000, a copy of which is attached hereto as Exhibit 10.125 (the “Fifth Additional Debenture”).  Such debenture shall mature on July 29, 2010 (the “Maturity Date”). The Fifth Additional Debenture shall accrue interest at a rate equal to fourteen percent (14%) per annum and such interest shall be paid on the Maturity Date (or sooner as provided in the Fifth Additional Debenture) in cash or, provided that certain Equity Conditions are satisfied (as such term is defined in the Fifth Additional Debenture), in shares of the Company’s common stock (“Common Stock”) at the applicable Conversion Price (as defined in the Fifth Additional Debenture).  At any time after August 14, 2009, the Investor shall be entitled to convert any portion of the outstanding and unpaid principal and accrued interest thereon into fully paid and non-assessable shares of the Common Stock at a price equal to the lesser of $0.02 and ninety-five percent (95%) of the lowest volume weighted average price of the Common Stock during the ten (10) trading days immediately preceding each conversion date.

The Company shall not affect any conversion, and the Investor shall not have the right to convert any portion of the Fifth Additional Debenture to the extent that after giving effect to such conversion, the Investor (together with the Investor’s affiliates) would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion, except for not less than sixty-five (65) days prior written notice from the Investor.

The Company shall have the right to redeem a portion or all amounts outstanding (subject to certain conditions in the Fifth Additional Debenture) by paying the amount equal to the principal amount being redeemed plus a redemption premium equal to ten percent (10%) of the principal amount being redeemed, and accrued interest.

In connection with the closing of the Third Additional Agreement, the Company placed a $25,000 monitoring fee into escrow, directly from the proceeds of the Fifth Additional Debenture closing on August 14, 2009 (as deposited into escrow, the “Escrow Funds”) which shall be used to compensate Yorkville Advisors LLC (“Investment Manager”) for monitoring and managing the purchase and investment made by the Investor, pursuant to the Investment Manager’s existing advisory obligations to the Investor.  The Company, Investment Manager and the Investor entered into an Escrow Agreement, dated July 29, 2008 (the “Escrow Agreement”) appointing David Gonzalez, Esq. as escrow agent (the “Escrow Agent”) to hold the Escrow Funds and to periodically disburse portions of such Escrow Funds to the Investment Manager from escrow in accordance with the terms of the Escrow Agreement, a copy of which is referenced hereto as Exhibit 10.107 (and the amended Exhibit A thereto is attached as Exhibit 10.111 hereto).

All of the Debentures are secured by (a) certain Pledged Property, as such term is defined in that certain Security Agreement, of even date with the SPA, by and among the Company, each of the Company’s subsidiaries made a party thereto and the Investor and (b) certain Patent Collateral, as such term is defined in that certain Patent Security Agreement, of even date with the SPA, by and among the Company, each of the Company’s subsidiaries made a party thereto and the Investor.  Copies of the Security Agreement and the Patent Security Agreement are referenced hereto as Exhibits 10.101 and 10.102, respectively.

In connection with the SPA, the Company also entered into those certain Irrevocable Transfer Agent Instructions with the Investor, the Escrow Agent and WorldWide Stock Transfer, LLC, the Company’s transfer agent, a copy of which is attached as Exhibit 10.108 hereto.

ITEM 3.  Defaults Upon Senior Securities

None

ITEM 4.  Submission of Matters to A Vote of Security Holders

None

ITEM 5.  Other Information

None

27

ITEM 6.  Exhibits

(a) Exhibits:

Exhibit		Filed			Filing
Number	Description	Herewith	Form	Exhibit	Date
3.1	Articles of Incorporation of Dev-Tech Associates, Inc. and amendment thereto		SB-2	3.1	11/25/96
3.2	Bylaws of DevSys, Inc.		SB-2	3.2	11/25/96
3.3	Restated Certificate of Incorporation of DevSys, Inc.		SB-2	3.3	11/25/96
3.4	By-laws of DevSys, Inc.		SB-2	3.4	11/25/96
3.5	Articles of Merger and Agreement and Plan of Merger of DevSys, Inc and Dev-Tech Associates, Inc.		SB-2	3.5	11/25/96
3.6	Certificate of Merger of Dev-Tech Associates, Inc. into DevSys, Inc.		SB-2	3.6	11/25/96
3.7	Articles of Incorporation of Dev-Tech Migration, Inc. and amendment thereto		SB-2	3.7	11/25/96
3.8	By-laws of Dev-Tech Migration, Inc.		SB-2	3.8	11/25/96
3.9	Restated Certificate of Incorporation of DevSys Migration, Inc.		SB-2	3.90	11/25/96
3.1	Form of By-laws of DevSys Migration, Inc.		SB-2	3.10	11/25/96
3.11	Form of Agreement and Plan of Merger of Dev-Tech Migration, Inc. into DevSys Migration, Inc.		SB-2	3.11	11/25/96
3.12	Form of Certificate of Merger of Dev-Tech Migration, Inc. into DevSys Migration, Inc.		SB-2	3.12	11/25/96
3.13	Certificate of Amendment to Certificate of Incorporation of DevSys, Inc. changing our name to NeoMedia Technologies, Inc.		SB-2	3.13	11/25/96
3.14	Form of Certificate of Amendment to Certificate of Incorporation of NeoMedia Technologies, Inc. authorizing a reverse stock split		SB-2	3.14	11/25/96
3.15	Form of Certificate of Amendment to Restated Certificate of Incorporation of NeoMedia Technologies, Inc. increasing authorized capital and creating preferred stock		SB-2	3.15	11/25/96
10.1	Second Agreement and Amendment to Consulting Agreement between NeoMedia and Thornhill Capital, dated July 22, 2005		S-3/A	10.3	1/30/06
10.2	Standby Equity Distribution Agreement, dated March 30, 2005, between NeoMedia and Cornell Capital Partners		8-K	16.1	4/1/05
10.3	Placement Agent Agreement, dated March 30, 2005, between NeoMedia and Cornell Capital Partners		8-K	16.2	4/1/05
10.4	Escrow Agreement, dated March 30, 2005, between NeoMedia and Cornell Capital Partners		8-K	16.3	4/1/05
10.5	Registration Rights Agreement, dated March 30, 2005, between NeoMedia and Cornell Capital Partners		8-K	16.4	4/1/05
10.6	Promissory Note, dated March 30, 2005, between NeoMedia and Cornell Capital Partners		8-K	16.5	4/1/05
10.7	Security Agreement, dated March 30, 2005, between NeoMedia and Cornell Capital Partners		8-K	16.5	4/1/05
10.8	Warrant dated March 30, 2005, granted by NeoMedia to Thornhill Capital LLC		S-3/A	10.12	7/18/05

28

Exhibit		Filed			Filing
Number	Description	Herewith	Form	Exhibit	Date
10.9	Warrant dated March 30, 2005, granted by NeoMedia to Cornell Capital Partners LP		S-3/A	10.13	7/18/05
10.10	Definitive Merger Agreement between NeoMedia and Mobot		8-K	16.10	2/10/06
10.11	Definitive Sale and Purchase Agreement between NeoMedia and 12Snap		8-K	16.10	2/14/06
10.12	Definitive Sale and Purchase Agreement between NeoMedia and Gavitec		8-K	16.10	2/21/06
10.13	Definitive Sale and Purchase Agreement between NeoMedia and Sponge		8-K	16.10	2/22/06
10.14	Promissory Note, dated October 18, 2004, between NeoMedia and Cornell Capital Partners		S-3/A	10.26	1/30/06
10.15	Investment Agreement, dated February 17, 2006 between NeoMedia and Cornell Capital Partners		8-K	10.1	2/21/06
10.16	Investor Registration Rights Agreement, dated February 17, 2006 between NeoMedia and Cornell Capital Partners		8-K	10.2	2/21/06
10.17	Irrevocable Transfer Agent Instruction, dated February 17, 2006, by and among NeoMedia, Cornell Capital Partners and American Stock Transfer & Trust Co.		8-K	10.3	2/21/06
10.18	Warrant, dated February 17, 2006		8-K	10.4	2/21/06
10.19	Warrant, dated February 17, 2006		8-K	10.5	2/21/06
10.20	Warrant, dated February 17, 2006		8-K	10.6	2/21/06
10.21	Assignment Agreement, dated February 17, 2006 by NeoMedia and Cornell Capital Partners		8-K	10.7	2/21/06
10.22	Assignment of Common Stock, dated February 17, 2006 between NeoMedia and Cornell Capital Partners		8-K	10.8	2/21/06
10.23	Securities Purchase Agreement, dated August 24, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.1	8/30/06
10.24	Investor Registration Rights Agreement, dated August 24, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.2	8/30/06
10.25	Pledge and Security Agreement, dated August 24, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.30	8/30/06
10.26	Secured Convertible Debenture, dated August 24, 2006, issued by the Company to Cornell Capital Partners, LP		8-K	10.40	8/30/06
10.27	Irrevocable Transfer Agent Instructions, dated August 24, 2006, by and among the Company, Cornell Capital Partners, LP and American Stock Transfer & Trust Co.		8-K	10.50	8/30/06
10.28	A Warrant, dated August 24, 2006		8-K	10.60	8/30/06
10.29	B Warrant, dated August 24, 2006		8-K	10.70	8/30/06
10.30	C Warrant, dated August 24, 2006		8-K	10.80	8/30/06
10.31	D Warrant, dated August 24, 2006		8-K	10.9	8/30/06
10.32	Amendment to Warrant No. CCP-002, dated August 24, 2006,  between the Company and Cornell Capital Partners, LP		8-K	10.1	8/30/06
10.33	Amendment to “A” Warrant No. CCP-001,  dated August 24, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.11	8/30/06
10.34	Amendment to “B” Warrant No. CCP-002, dated August 24, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.12	8/30/06
10.35	Amendment to “C” Warrant No. CCP-003,  dated August 24, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.13	8/30/06
10.36	Letter of intent amongst the Company, Global Emerging Markets, and Jose Sada		8-K	16.1	8/31/06
10.37	Termination Agreement between NeoMedia Technologies, Inc, and Cornell Capital Partners, LP		S-3/A	10.53	1/30/07
10.38	Definitive share purchase and settlement agreement between NeoMedia and Sponge, dated November 14, 2006		8-K	16.1	11/20/06
10.39	Agreement between NeoMedia and FMS		8-K	16.1	12/7/06

29

Exhibit		Filed			Filing
Number	Description	Herewith	Form	Exhibit	Date
10.40	Escrow agreement amongst NeoMedia, Mobot, FMS, and Kirkpatrick and Lockhart Nicholson Graham LLP		8-K	16.2	12/7/06
10.41	Description of Special Preference Stock		8-K	16.3	12/7/06
10.42	Promissory note payable from NeoMedia to FMS		8-K	16.4	12/7/06
10.43	License agreement between NeoMedia and Mobot		8-K	16.50	12/7/06
10.44	Securities Purchase Agreement, dated December 29, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.10	1/8/07
10.45	Investor Registration Rights Agreement, dated December 29, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.20	1/8/07
10.46	Secured Convertible Debenture, dated December 29, 2006, issued by the Company to Cornell Capital Partners, LP		8-K	10.30	1/8/07
10.47	Irrevocable Transfer Agent Instructions, dated December 29, 2006, by and among the Company, Cornell Capital Partners, LP and American Stock Transfer & Trust Co.		8-K	10.40	1/8/07
10.48	A Warrant, dated December 29, 2006		8-K	10.50	1/8/07
10.49	Amendment to Warrant No. CCP-002, dated December 29, 2006,  between the Company and Cornell Capital Partners, LP		8-K	10.6	1/8/07
10.50	Amendment to “A” Warrant No. CCP-001,  dated December 29, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.7	1/8/07
10.51	Amendment to “B” Warrant No. CCP-002, dated December 29, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.8	1/8/07
10.52	Amendment to “C” Warrant No. CCP-003,  dated December 29, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.9	1/8/07
10.53	Amendment to “A” Warrant No. CCP-001,  dated December 29, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.1	1/8/07
10.54	Amendment to “B” Warrant No. CCP-001,  dated December 29, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.11	1/8/07
10.55	Amendment to “C” Warrant No. CCP-001,  dated December 29, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.12	1/8/07
10.56	Securities Purchase Agreement, dated December 29, 2006, between the Company and Cornell Capital Partners, LP		8-K	10.13	1/8/07
10.57	Amendment Agreement I to the Sale and Purchase Agreement between NeoMedia and certain former shareholders of Gavitec AG, dated January 23, 2007		8-K	10.1	1/29/07
10.58	Consulting Agreement between the Company and SKS Consulting of South Florida Corp.		8-K	10.1	2/6/07
10.59	Amendment Agreement III to Sale and Purchase Agreement between NeoMedia and certain former shareholders of 12Snap AG, dated March 16, 2007		8-K	10.1	3/22/07
10.60	Securities Purchase Agreement between NeoMedia and Cornell Capital Partners LP, dated March 27, 2007		8-K	10.1	3/27/07
10.61	Investor Registration Rights Agreement between NeoMedia and Cornell Capital Partners LP, dated March 27, 2007		8-K	10.2	3/27/07
10.62	Secured Convertible Debenture, issued by NeoMedia to Cornell Capital Partners, LP, dated March 27, 2007		8-K	10.3	3/27/07
10.63	Irrevocable Transfer Agent Instructions, by and among NeoMedia, Cornell Capital Partners, LP and Worldwide Stock Transfer, dated March 27, 2007		8-K	10.4	3/27/07
10.64	Warrant, issued by NeoMedia to Cornell Capital Partners, LP, dated March 27, 2007		8-K	10.5	3/27/07
10.65	Master Amendment Agreement, by and between NeoMedia and Cornell Capital Partners, LP, dated March 27, 2007		8-K	10.6	3/27/07
10.67	Security Agreement, by and between NeoMedia and Cornell Capital Partners, LP, dated on or about August 24, 2006		8-K	10.7	3/27/07
10.68	Security Agreement, by and between NeoMedia and Cornell Capital Partners, LP, dated March 27,2007		8-K	10.8	3/27/07

30

Exhibit		Filed			Filing
Number	Description	Herewith	Form	Exhibit	Date
10.69	Security Agreement (Patent), by and between NeoMedia and Cornell Capital Partners, LP, dated March 27, 2007		8-K	10.9	3/27/07
10.70	Pledge Shares Escrow Agreement, by and between NeoMedia and Cornell Capital Partners, dated March 27, 2007		8-K	10.10	3/27/07
10.71	Sale and Purchase Agreement between NeoMedia and Bernd M. Michael		8-K	10.1	4/6/07
10.72	Completion of Acquisition of Disposition of Assets of BSD Software Inc.		8-K/A	10.1	6/8/07
10.73	Full and Final Settlement Agreement, dated August 14, 2007, by and between NeoMedia, Wayside and Tesscourt		8-K	99.1	8/17/07
10.74	Letter of intent between NeoMedia Technologies, Inc. and Greywolf Entertainment, Inc.		8-K	16.1	8/21/07
10.75	Registration Rights Agreement, by and between NeoMedia and YA Global Investments, L.P., dated August 24, 2007		8-K	10.1	8/30/07
10.76	Secured Convertible Debenture, issued by NeoMedia to YA Global Investments, dated August 24, 2007		8-K	10.2	8/30/07
10.77	Irrevocable Transfer Agent Instructions, by and among NeoMedia, YA Global Investments, L.P. and Worldwide Stock Transfer, LLC, dated August 24, 2007		8-K	10.3	8/30/07
10.78	Warrant issued by NeoMedia to YA Global Investments, L.P., dated August 24, 2007		8-K	10.4	8/30/07
10.79	Repricing Agreement, by and between NeoMedia and YA Global Investments, L.P., dated August 24, 2007		8-K	10.5	8/30/07
10.80	Security Agreement, by and between NeoMedia and YA Global Investments, L.P., dated August 24, 2007		8-K	10.6	8/30/07
10.81	Security Agreement (Patent), by and between NeoMedia and YA Global Investments, L.P., dated August 24, 2007		8-K	10.7	8/30/07
10.82	Sale and Purchase Agreement between NeoMedia and Greywolf Entertainment, Inc., dated October 26, 2007		8-K	10.1	11/5/07
10.83	Definitive purchase agreement between NeoMedia Technologies, Inc. and Micro Paint Holdings Limited, dated November 1, 2007.		8-K	10.1	11/7/07
10.84	Distribution agreement between NeoMedia Technologies, Inc. and Micro Paint Holdings Limited, dated November 1, 2007.		8-K	16.1	11/7/07
10.85	Sale of the Assets of the Micro Paint Repair Business Unit.		8-K	10.1	11/21/07
10.86	Share Purchase and Transfer Agreement, dated January 31, 2008, by and between NeoMedia and Bernd Michael.		8-K	10.1	2/8/08
10.87	Arbitration Agreement, dated January 31, 2008, by and between NeoMedia and Bernd Michael.		8-K	10.1	2/8/08
10.88	Secured Convertible Debenture, dated April 11, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.1	4/17/08
10.89	Secured Convertible Debenture, dated May 16, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.1	5/22/08
10.90	Warrant, dated May 16, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.2	5/22/08
10.91	Secured Convertible Debenture, dated May 30, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.1	6/5/08
10.92	Warrant, dated May 30, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.2	6/5/08

31

Exhibit		Filed			Filing
Number	Description	Herewith	Form	Exhibit	Date
10.93	Settlement Agreement and Release, dated June 3, 2008, by and between the Company and William Hoffman		8-K	10.5	6/5/08
10.94	Resignation Letter, effective May 22, 2008, executed by William Hoffman		8-K	10.6	6/5/08
10.95	Settlement Agreement and Release, dated June 2, 2008, by and between the Company and Frank J. Pazera		8-K	10.7	6/5/08
10.96	Resignation Letter, effective May 22, 2008, executed by Frank J. Pazera		8-K	10.8	6/5/08
10.97	Employment Agreement, dated June 10, 2008, by and between NeoMedia Technologies, Inc. and Iain McCready		8-K	10.1	6/16/08
10.98	Secured Convertible Debenture, dated July 10, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.1	7/16/08
10.99	Securities Purchase Agreement, dated July 29, 2008, by and between the Company and YA Global Investments, L.P.		8-K	10.1	8/4/08
10.100	Secured Convertible Debenture, dated July 29, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.2	8/4/08
10.101	Security Agreement, dated July 29, 2008, by and among the Company, each of the Company’s subsidiaries made a party thereto and YA Global Investments, L.P.		8-K	10.3	8/4/08
10.102	Patent Security Agreement, dated July 29, 2008, by and among the Company, each of the Company’s subsidiaries made a party thereto and YA Global Investments, L.P.		8-K	10.4	8/4/08
10.103	Warrant 9-1A, dated July 29, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.5	8/4/08
10.104	Warrant 9-1B, dated July 29, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.6	8/4/08
10.105	Warrant 9-1C, dated July 29, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.7	8/4/08
10.106	Warrant 9-1D, dated July 29, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.8	8/4/08
10.107	Escrow Agreement, dated July 29, 2008, by and among the Company, YA Global Investments, L.P., Yorkville Advisors, LLC and David Gonzalez, Esq.		8-K	10.9	8/4/08
10.108	Irrevocable Transfer Agent Instructions, dated July 29, 2008, by and among the Company, the Investor, David Gonzalez, Esq. and WorldWide Stock Transfer, LLC		8-K	10.10	8/4/08
10.109	Letter Agreement, dated September 24, 2008, by and among NeoMedia Technologies, Inc. and YA Global Investments, L.P.		8-K	10.1	10/1/08
10.110	Second Secured Convertible Debenture, dated October 28, 2008, issued by the Company to YA Global Investments, L.P.		8-K	10.3	11/3/08
10.111	Revised Exhibit A to Escrow Agreement, dated October 28, 2008		8-K	10.12	11/3/08
10.112	Letter Agreement, dated March 27, 2009, by and between the Company and YA Global Investments, L.P.		8-K	10.13	4/13/09
10.113	Amendment Agreement, dated April 6, 2009, by and between the Company and YA Global Investments, L.P.		8-K	10.14	4/13/09
10.114	Third Secured Convertible Debenture (first closing), dated April 6, 2009, issued by the Company to YA Global Investments, L.P.		8-K	10.15	4/13/09

32

Exhibit Number	Description	Filed Herewith	Form	Exhibit	Filing Date
10.115	Waiver, effective as of December 31, 2008, by and between the Company and YA Global Investments, L.P.		8-K	10.16	4/13/09
10.116	Fourth Secured Convertible Debenture (second amended third closing), dated May 1, 2009, issued by the Company to YA Global Investments, L.P.		8-K	10.15	5/7/09
10.117	Agreement, dated June 5, 2009 (Additional Agreement), by and between the Company and YA Global Investments, L.P.		8-K	10.16	6/5/09
10.118	Fifth Convertible Debenture (Additional Agreement closing), dated June 5, 2009, issued by the Company to YA Global Investments, L.P.		8-K	10.17	6/5/09
10.119	Agreement, dated July 15, 2009 (Second Additional Agreement), by and between the Company and YA Global Investments, L.P.		8-K	10.18	7/21/09
10.120	Sixth Convertible Debenture dated July 15, 2009, (Second Additional Debenture), issued by the Company to YA Global Investments, L.P.		8-K	10.19	7/21/09
10.121	Agreement, dated July 17, 2009, by and between the Company and Silver Bay Software, LLC.		8-K	10.20	7/21/09
10.122	Agreement, dated July 17, 2009, by and between the Company and Mr. Greg Lindholm.		8-K	10.21	7/21/09
10.123	Non-Exclusive License Agreement between the Company and Mobile Tag, Inc. dated July 28, 2009		8-K	10.1	7/30/09
10.124	Agreement dated August 14, 2009 (Third Additional Agreement) by and Between the Company and Y.A. Global Investments, L.P.	X
10.125	Seventh Convertible Debenture dated August 14, 2009 ( Fifth Additional Debenture) issued by the Company to Y.A. Global Investments, L.P.	X
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X

33

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NEOMEDIA TECHNOLOGIES, INC.
	(Registrant)
Dated:     August 14, 2009	/s/ Michael W.  Zima
	Michael W. Zima
	Chief Financial Officer & Principal Accounting Officer

34

EX-10.124

THIS AGREEMENT (this “Agreement”), dated August 14, 2009 is entered into by and between NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the “Company”), and YA GLOBAL INVESTMENTS, L.P. (the “Buyer”).  Reference is made to the Securities Purchase Agreement (the “Securities Purchase Agreement”) dated as of July 29, 2008, as amended on April 6, 2009, between the Company and the Buyer.  All capitalized terms used but not defined herein shall have the meaning ascribed thereto in the Securities Purchase Agreement.

WHEREAS:

A. Pursuant to the Securities Purchase Agreement, the Company has issued and the Buyer has purchased secured convertible debentures as well as additional secured convertible debentures.

B. The Company desires to issue, and the Buyer desires to purchase a another additional convertible debenture in the form attached hereto as Exhibit A (the “Fifth Additional Debenture”).

C. In order to induce the Company to issue and the Buyer to purchase the Fifth Additional Debenture, the parties desire to enter into this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Buyer hereby agree as follows:

1.     Purchase and Sale of Fifth Additional Debenture.  In reliance on the representations and warranties and the terms and conditions set forth in this Agreement, on the date hereof the Buyer shall purchase, and the Company shall issue and sell the Fifth Additional Debenture with a face amount of $475,000 for a purchase price of $475,000.  The Fifth Additional Debenture shall be in the form attached hereto as Exhibit A.  The Fifth Additional Debenture shall be deemed to be included in term “Convertible Debentures” as used in the Securities Purchase Agreement and the other Transaction Documents.  Upon the issuance of the Fifth Additional Debenture the Buyer shall pay the purchase price, minus any fees or expenses to be deducted from the purchase price as set forth below, by wire transfer of immediately available funds in accordance with instructions to be provided by the Company.

2.     Representations and Warranties of Buyer.

(a)     The representations and warranties of the Buyer set forth in Section 2 of the Securities Purchase Agreement are hereby incorporated by reference with such changes necessary to relate to this Agreement as if set forth in their entirety herein (the “Buyer Representations and Warranties”).  For the avoidance of doubt, in the Buyer Representations and Warranties references to “Securities” shall be deemed references to the Fifth Additional Debenture and the shares of Common Stock issuable upon conversion thereof, references to “Conversion Shares” shall be deemed to reference the shares of Common Stock issuable upon conversion of the Fifth Additional Debenture, and any reference to “Transaction Documents” shall be deemed to include a reference to this Agreement and to the Fifth Additional Debenture.

(b)     The Buyer hereby represents and warrants that except as may otherwise be disclosed on a disclosure schedule attached hereto, the Buyer Representations and Warranties are true and correct on the date hereof (except for representations and warranties that speak as of a specific date).

3.     Representations, Warranties, and Covenants of Company.

(a)     The representations and warranties of the Company set forth in Section 3 of the Securities Purchase Agreement are hereby incorporated by reference with such changes necessary to relate to this Agreement as if set forth in their entirety herein (the “Company Representations and Warranties”).  For the avoidance of doubt, in the Company Representations and Warranties references to “Securities” shall be deemed references to the Fifth Additional Debenture and the shares of Common Stock issuable upon conversion thereof, references to “Conversion Shares” shall be deemed to reference the shares of Common Stock issuable upon conversion of the Fifth Additional Debenture, references to “Convertible Debenture” shall be deemed to reference the Fifth Additional Debenture, and any reference to “Transaction Documents” shall be deemed to include a reference to this Agreement and to the Fifth Additional Debenture.

(b)     The Company hereby represents and warrants that except as disclosed in the Officer’s Certificates dated April 6, 2009 and May 1, 2009 which are herein incorporated by reference, in their entirety, with the exception of the disclosure schedule attached hereto as Exhibit B or as set forth in the SEC Documents, such Company Representations and Warranties are true and correct on the date hereof (except for Company Representations and Warranties that speak as of a specific date).

4.     Security Interest Granted Pursuant to Security Documents.     The Company agrees and acknowledges (i) that its obligations under the Fifth Additional Debenture shall be secured by all collateral granted by the Company to the Buyer, including, without limitation, the assets of the Company pledged to the Buyer pursuant to (a) that certain Security Agreement dated July 29, 2008 by and between the Company and the Buyer (the “Security Agreement”) and (b) that certain Intellectual Property Security Agreement dated July 29, 2008 by and between the Company and the Buyer (the “IP Security Agreement,” and collectively along with the Security Agreement, the “Security Documents”), and (ii) that the obligations under the Fifth Additional Debenture are hereinafter expressly included as part of the “Obligations” as such term is defined and used in the Security Documents.

5.     Covenants.

(a)     The Company hereby acknowledges and agrees that nothing contained herein, in the Fifth Additional Debenture, or in any of the documents executed in connection with the Fifth Additional Debenture shall operate as or be deemed to constitute a cure or waiver of any default or events of default under any of the Transaction Documents, including, without limitation, any default or events of default whether now existing or hereafter arising.

(b)     The Company hereby acknowledges and agrees that it remains liable to the Buyer for the payment and performance of all amounts due under the Convertible Debentures issued pursuant to the Securities Purchase Agreement and the amendment thereto dated April 6, 2209, as well as the additional debentures issued on June 5, 2009 and July 15, 2009, without offset, defense or counterclaim of any kind, nature or description whatsoever.

2

(c)     The Company hereby ratifies, confirms, and reaffirms, all and singular the representations, warranties, terms, and conditions set forth in the Securities Purchase Agreement, the Convertible Debentures, and each of the other Transaction Documents, and further acknowledges and agrees that all terms and conditions of the Securities Purchase Agreement, the Convertible Debentures, and the other Transaction Documents shall remain in full force and effect.

(d)     Fees and Expenses. The Company shall deposit into escrow $25,000 directly from the proceeds of the closing of the purchase and sale of the Fifth Additional Debenture hereunder (the “Additional Monitoring Fee,” and as deposited into escrow, the “Additional Escrow Funds”) which shall be used to compensate the Investment Manager for monitoring and managing the purchase and investment made by the Buyer hereunder.  The Additional Escrow Funds shall be held by the Escrow Agent in accordance with the Escrow Agreement and disbursed to the Investment Manager periodically in accordance with the Escrow Agreement and the exhibits thereto.

6.     Other Agreements. Except as modified pursuant hereto, no other changes or modifications to the Transaction Documents are intended or implied and in all other respects the Transaction Documents are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof.  To the extent of conflict between the terms of this Agreement and the other Transaction Documents, the terms of this Agreement shall control.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

3

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of date first above written.

COMPANY:

NEOMEDIA TECHNOLOGIES INC.

By:           /s/ Michael W. Zima                        

Name:  Michael W. Zima

Title:                      Chief Financial Officer

BUYER:

YA GLOBAL INVESTMENTS, L.P.

By:  Yorkville Advisors, LLC

         its Investment Manager

By: /s/ Gerald Eicke                                

Name:  Gerald Eicke

Title:    Managing Member

4

Exhibit A

Form of Fifth Additional Debenture

EX-10.125

NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE.  THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

NEOMEDIA TECHNOLOGIES INC.

Secured Convertible Debenture

Issuance Date:  August 14, 2009	Original Principal Amount:                           $475,000
No. NEOM-9-7

FOR VALUE RECEIVED, NEOMEDIA TECHNOLOGIES INC., a Delaware corporation (the "Company"), hereby promises to pay to the order of YA GLOBAL INVESTMENTS, L.P. or registered assigns (the "Holder") the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the "Principal") when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest ("Interest") on any outstanding Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the "Issuance Date") until the same becomes due and payable, whether upon an Interest Date (as defined below) or the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof).  This Secured Convertible Debenture (including all Secured Convertible Debentures issued in exchange, transfer or replacement hereof, this "Debenture") is one of an issue of Secured Convertible Debentures issued pursuant to the Securities Purchase Agreement as amended and supplement, including by the Agreement dated August 14, 2009 (collectively, the "Debentures" and such other Senior Convertible Debentures, the "Other Debentures").  Certain capitalized terms used herein are defined in Section 17.

(1)     GENERAL TERMS

(a)     Payment of Principal.  On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest.  The "Maturity Date" shall be July 29, 2010 as may be extended at the option of the Holder (i) in the event that, and for so long as, an Event of Default (as defined below) shall have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) or any event shall have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) that with the passage of time and the failure to cure would result in an Event of Default.  Other than as specifically permitted by this Debenture, the Company may not prepay or redeem any portion of the outstanding Principal without the prior written consent of the Holder.

(b)     Interest.  Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to fourteen percent (14%) (“Interest Rate”).  Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law.  Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Debenture is registered on the records of the Company regarding registration and transfers of Debentures at the option of the Company in cash, or, provided that the Equity Conditions are then satisfied converted into Common Stock at the applicable Conversion Price.

(c)     Security.  The Debenture is secured by a security interest in all of the assets of the Company and of each of the Company's subsidiaries as evidenced by the security agreement dated July 29, 2008, among others (collectively, the “Security Documents”).

(2)     EVENTS OF DEFAULT.

(a)     An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i)     the Company's failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Debenture (including, without limitation, the Company's failure to pay any redemption payments or amounts hereunder) or any other Transaction Document;

(ii)     The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall state that it is unable to pay its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;

(iii)     The Company or any subsidiary of the Company shall default in any of its obligations under any other debenture or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

(iv)     If the Common Stock is quoted or listed for trading on any of the following and it ceases to be so quoted or listed for trading and shall not again be quoted or listed for trading on any Primary Market within five (5) Trading Days of such delisting: (a) the NYSE Amex, (b) New York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin Board (“OTCBB”) (each, a “Primary Market”);

(v)     The Company or any subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section 6) unless in connection with such Change of Control Transaction this Debenture is retired;

(vi)     the Company's (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within five (5) Business Days after the applicable Conversion Failure or (B) notice, written or oral, to any holder of the Debentures, including by way of public announcement, at any time, of its intention not to comply with a request for conversion of any Debentures into shares of Common Stock that is tendered in accordance with the provisions of the Debentures, other than pursuant to Section 4(c);

(vii)     The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within three (3) Business Days after such payment is due;

(viii)     The Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Debenture (except as may be covered by Section 2(a)(i) through 2(a)(vii) hereof) or any Transaction Document (as defined in Section 17) which is not cured within the time prescribed; or

(ix)     any Event of Default (as defined in the Other Debentures) occurs with respect to any Other Debentures.

(b)     During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full unpaid Principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder's election, immediately due and payable in cash; provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Company.  If an Event of Default occurs and for so long as such Event of Default remains uncured, the Interest Rate on this Debenture shall immediately become twenty percent (20%) per annum and shall remain at such increased interest rate until the applicable Event of Default is cured.  Furthermore, in addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Default Conversion Price.  The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, (other than required notice of conversion) and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

(3)     COMPANY REDEMPTION.

(a)     Company’s Cash Redemption.  The Company at its option shall have the right to redeem (“Optional Redemption”) a portion or all amounts outstanding under this Debenture prior to the Maturity Date provided that as of the date of the Holder’s receipt of a Redemption Notice (as defined herein) (i) the Closing Bid Price is less than the FixedConversion Price and (ii) there is no Equity Conditions Failure.  The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium (“Redemption Premium”) equal to 10% of the Principal amount being redeemed, and accrued Interest, (collectively referred to as the “Company Additional Redemption Amount”).  In order to make a redemption pursuant to this Section, the Company shall first provide written notice to the Holder of its intention to make a redemption (the “Redemption Notice”) setting forth the amount of Principal it desires to redeem.  After receipt of the Redemption Notice the Holder shall have 5 Business Days to elect to convert all or any portion of this Debenture, subject to the limitations set forth in Section 4(c).  On the 6th Business Day after the Redemption Notice, the Company shall deliver to the Holder the Company Additional Redemption Amount with respect to the Principal amount redeemed after giving effect to conversions effected during the 5 Business Day period.

(4)     CONVERSION OF DEBENTURE.     This Debenture shall be convertible into shares of the Company's Common Stock, on the terms and conditions set forth in this Section 4.

(a)     Conversion Right.  Subject to the provisions of Section 4(c), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 4(b), at the Conversion Rate (as defined below).  The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Section 4(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the "Conversion Rate").  The Company shall not issue any fraction of a share of Common Stock upon any conversion.  If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share.  The Company shall pay any and all transfer, stamp and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.

(i)     "Conversion Amount" means the portion of the Principal and accrued Interest to be converted, redeemed or otherwise with respect to which this determination is being made.

(ii)     "Conversion Price" means, as of any Conversion Date (as defined below) or other date of determination the lesser of (a) $0.02 (the “Fixed Conversion Price”), subject to adjustment as provided herein, or (b) ninety five percent (95%) of the lowest Volume Weighted Average Price during the ten (10) Trading Days immediately preceding the Conversion Date (the “Market Conversion Price”).

(b)     Mechanics of Conversion.

(i)     Optional Conversion.  To convert any Conversion Amount into shares of Common Stock on any date (a "Conversion Date"), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the "Conversion Notice") to the Company and (B) if required by Section 4(b)(iv), surrender this Debenture to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking reasonably satisfactory to the Company with respect to this Debenture in the case of its loss, theft or destruction).  On or before the third Business Day following the date of receipt of a Conversion Notice (the "Share Delivery Date"), the Company shall (X) if legends are not required to be placed on certificates of Common Stock pursuant to the Securities Purchase Agreement and provided that the Transfer Agent is participating in the Depository Trust Company's ("DTC") Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant to Section 2(g) of the Securities Purchase Agreement.  If this Debenture is physically surrendered for conversion and the outstanding Principal of this Debenture is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three (3) Business Days after receipt of this Debenture and at its own expense, issue and deliver to the holder a new Debenture representing the outstanding Principal not converted.  The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Debenture shall be treated for all purposes as the record holder or holders of such shares of Common Stock upon the transmission of a Conversion Notice.

(ii)     Company's Failure to Timely Convert.  If within three (3) Trading Days after the Company's receipt of the facsimile copy of a Conversion Notice the Company shall fail to issue and deliver a certificate to the Holder or credit the Holder's balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder's conversion of any Conversion Amount (a "Conversion Failure"), and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a "Buy-In"), then the Company shall, within three (3) Business Days after the Holder's request and in the Holder's discretion, either (i) pay cash to the Holder in an amount equal to the Holder's total purchase price (including brokerage commissions and other out of pocket expenses, if any) for the shares of Common Stock so purchased (the "Buy-In Price"), at which point the Company's obligation to deliver such certificate (and to issue such Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Bid Price on the Conversion Date.

(iii)     Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Debenture in accordance with the terms hereof, the Holder shall not be required to physically surrender this Debenture to the Company unless (A) the full Conversion Amount represented by this Debenture is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Debenture upon physical surrender of this Debenture.  The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Debenture upon conversion.

(c)     Limitations on Conversions.

(i)     Beneficial Ownership.  The Company shall not effect any conversions of this Debenture and the Holder shall not have the right to convert any portion of this Debenture or receive shares of Common Stock as payment of interest hereunder to the extent that after giving effect to such conversion or receipt of such interest payment, the Holder, together with any affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest.    Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Debenture is convertible shall be the responsibility and obligation of the Holder.  If the Holder has delivered a Conversion Notice for a principal amount of this Debenture that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with Section 4(a) and, any principal amount tendered for conversion in excess of the permitted amount hereunder shall remain outstanding under this Debenture. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company. Other Holders shall be unaffected by any such waiver.

(d)     Other Provisions.

(i)     The Company shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Debenture.  In the event that the Company has  less than the full number of such shares of Common Stock reserved and kept available for issuance upon conversion, then only upon the written request of the Holder shall the Company be required to promptly reserve and keep available a sufficient number of shares of Common Stock to comply with such requirement, including, without limitation, calling and holding a meeting of the stockholders of the Company within sixty (60) calendar days of such written request for the sole purpose of increasing the number of authorized shares of Common Stock, and the Board of Directors of the Company shall recommend to the stockholders a vote in favor of such proposal and shall vote all shares held by them, in proxy or otherwise, in favor of the proposal.

(ii)     All calculations under this Section 4 shall be rounded to the nearest $0.0001 or whole share.

(iii)     The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in this Debenture or in the Transaction Documents) be issuable (taking into account the adjustments and restrictions set forth herein) upon the conversion of the outstanding principal amount of this Debenture and payment of interest hereunder. In the event that the Company has  less than the full number of such shares of Common Stock reserved and kept available for issuance upon conversion, then only upon the written request of the Holder shall the Company be required to promptly reserve and keep available a sufficient number of shares of  Common Stock to comply with such requirement, including, without limitation, calling and holding a meeting of the stockholders of the Company within sixty (60) calendar days of such written request for the sole purpose of increasing the number of authorized shares of Common Stock, and the Board of Directors of the Company shall recommend to the stockholders a vote in favor of such proposal and shall vote all shares held by them, in proxy or otherwise, in favor of the proposal.  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and, if the Underlying Shares Registration Statement has been declared effective under the Securities Act, registered for public sale in accordance with such Underlying Shares Registration Statement.

(iv)     Nothing herein shall limit a Holder's right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company 's failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

(5)     Adjustments to Conversion Price

(a)     Adjustment of Conversion Price upon Issuance of Common Stock.  If the Company, at any time while this Debenture is outstanding, issues or sells, or in accordance with this Section 5(a) is deemed to have issued or sold, any shares of Common Stock, excluding shares of Common Stock deemed to have been issued or sold by the Company in connection with any Excluded Securities, for a consideration per share (the “New Issuance Price”) less than a price equal to the Conversion Price in effect immediately prior to such issue or sale (such price the "Applicable Price") (the foregoing a "Dilutive Issuance"), then immediately after such Dilutive Issuance the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price.  For purposes of determining the adjusted Conversion Price under this Section 5(a), the following shall be applicable:

(i)     Issuance of Options.  If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share.  For purposes of this Section, the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion or exchange or exercise of any Convertible Security issuable upon exercise of such Option.  No further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange or exercise of such Convertible Securities.

(ii)     Issuance of Convertible Securities.  If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion or exchange or exercise thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share.  For the purposes of this Section, the "lowest price per share for which one share of Common Stock is issuable upon such conversion or exchange or exercise" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion or exchange or exercise of such Convertible Security.  No further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock upon conversion or exchange or exercise of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section, no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

(iii)     Change in Option Price or Rate of Conversion.  If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable or exercisable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold.  For purposes of this Section, if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change.  No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.

(iv)     Calculation of Consideration Received.  In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for the difference of (x) the aggregate fair market value of such Options and other securities issued or sold in such integrated transaction, less (y) the fair market value of the securities other than such Option, issued or sold in such transaction and the other securities issued or sold in such integrated transaction will be deemed to have been issued or sold for the balance of the consideration received by the Company.  If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the gross amount raised by the Company; provided, however, that such gross amount is not greater than 110% of the net amount received by the Company therefor.  If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Bid Price of such securities on the date of receipt.  If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be.  The fair value of any consideration other than cash or securities will be determined jointly by the Company and the Holder.  If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the "Valuation Event"), the fair value of such consideration will be determined within five (5) Business Days after the tenth (10th) day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder.  The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

(v)     Record Date.  If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(b)     Adjustment of Conversion Price upon Subdivision or Combination of Common Stock.  If the Company, at any time while this Debenture is outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(c)     Purchase Rights.  If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "Purchase Rights"), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Debenture (without taking into account any limitations or restrictions on the convertibility of this Debenture) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(d)     Other Events.  If any event occurs of the type contemplated by the provisions of this Section 5 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Debenture; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 5.

(e)     Other Corporate Events.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a "Corporate Event"), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Debenture, at the Holder's option, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Debenture) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Debenture initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate.  Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required Holders.  The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Debenture.

(f)     Whenever the Conversion Price is adjusted pursuant to Section 5 hereof, the Company shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(g)     In case of any (1) merger or consolidation of the Company or any subsidiary of the Company with or into another Person, or (2) sale by the Company or any subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related transactions, a Holder shall have the right to (A) exercise any rights under Section 2(b), (B) convert the aggregate amount of this Debenture then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such aggregate principal amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales would have been entitled, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Debenture with a principal amount equal to the aggregate principal amount of this Debenture then held by such Holder, plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Debenture shall have terms identical (including with respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights and privileges of the Holder of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued. In the case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible Debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive such events.

(6)     REISSUANCE OF THIS DEBENTURE.

(a)     Transfer.  If this Debenture is to be transferred, the Holder shall surrender this Debenture to the Company, whereupon the Company will, subject to the satisfaction of the transfer provisions of the Securities Purchase Agreement, forthwith issue and deliver upon the order of the Holder a new Debenture (in accordance with Section 6(d)), registered in the name of the registered transferee or assignee, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Debenture (in accordance with Section 6(d)) to the Holder representing the outstanding Principal not being transferred.  The Holder and any assignee, by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of Section 4(b)(iii) following conversion or redemption of any portion of this Debenture, the outstanding Principal represented by this Debenture may be less than the Principal stated on the face of this Debenture.

(b)     Lost, Stolen or Mutilated Debenture.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Debenture, the Company shall execute and deliver to the Holder a new Debenture (in accordance with Section 6(d)) representing the outstanding Principal.

(c)     Debenture Exchangeable for Different Denominations.  This Debenture is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Debenture or Debentures (in accordance with Section 6(d)) representing in the aggregate the outstanding Principal of this Debenture, and each such new Debenture will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

(d)     Issuance of New Debentures.  Whenever the Company is required to issue a new Debenture pursuant to the terms of this Debenture, such new Debenture (i) shall be of like tenor with this Debenture, (ii) shall represent, as indicated on the face of such new Debenture, the Principal remaining outstanding (or in the case of a new Debenture being issued pursuant to Section 6(a) or Section 6(c), the Principal designated by the Holder which, when added to the principal represented by the other new Debentures issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Debenture immediately prior to such issuance of new Debentures), (iii) shall have an issuance date, as indicated on the face of such new Debenture, which is the same as the Issuance Date of this Debenture, (iv) shall have the same rights and conditions as this Debenture, and (v) shall represent accrued and unpaid Interest from the Issuance Date.

(7)     NOTICES.     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 the Company, to:	NeoMedia Technologies Inc.
	Two Concourse Parkway, Suite 500
	Atlanta, GA 30328
	Attention:  Chief Executive Officer or Chief Financial Officer
	Telephone:     678-638-0460
	Facsimile:     678-638-0466
With a copy to:	K&L Gates LLP
	200 South Biscayne Boulevard – Suite 3900
	Miami, FL  33131-2399
	Attention:     Clayton E. Parker, Esq.
	Telephone:     (305) 539-3300
	Facsimile:     (305) 358-7095

If to the Holder:	YA Global Investments, LP
	101 Hudson Street, Suite 3700
	Jersey City, NJ  07302
	Attention:     Mark Angelo
	Telephone:     (201) 985-8300
With a copy to:	David Gonzalez, Esq.
	101 Hudson Street – Suite 3700
	Jersey City, NJ 07302
	Telephone:     (201) 985-8300
	Facsimile:     (201) 985-8266

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) Business Days prior to the effectiveness of such change.  Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) 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 (iii) 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.

(8)     Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed.  This Debenture is a direct obligation of the Company. As long as this Debenture is outstanding, the Company shall not and shall cause their subsidiaries not to, without the consent of the Holder, (i) amend its certificate of incorporation, bylaws or other charter documents so as to adversely affect any rights of the Holder (which shall include combining (by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares); (ii) repay, repurchase or offer to repay, repurchase or otherwise acquire shares of its Common Stock or other equity securities other than as to the Underlying Shares to the extent permitted or required under the Transaction Documents; or (iii) enter into any agreement with respect to any of the foregoing.

(9)     This Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

(10)     No indebtedness of the Company is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise.  Without the Holder’s consent, the Company will not and will not permit any of their subsidiaries to, directly or indirectly, enter into, create, incur, assume or suffer to exist any indebtedness of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits there from that is senior in any respect to the obligations of the Company under this Debenture.

(11)     This Debenture shall be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to conflicts of laws thereof.  Each of the parties consents to the jurisdiction of the Superior Courts of the State of New Jersey sitting in Hudson County, New Jersey and the U.S. District Court for the District of New Jersey sitting in Newark, New Jersey in connection with any dispute arising under this Debenture and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.

(12)     If the Company fails to strictly comply with the terms of this Debenture, then the Company shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Debenture, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.

(13)     Any waiver by the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing.

(14)     If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

(15)     Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

(16)     THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

(17)     CERTAIN DEFINITIONS       For purposes of this Debenture, the following terms shall have the following meanings:

(a)     “Approved Stock Plan” means a stock option plan that has been approved by the Board of Directors of the Company, pursuant to which the Company’s securities may be issued only to any employee, officer, or director for services provided to the Company.

(b)     "Bloomberg" means Bloomberg Financial Markets.

(c)     “Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions are authorized or required by law or other government action to close.

(d)     “Change of Control Transaction” means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the voting securities of the Company (except that the acquisition of voting securities by the Holder or any other current holder of convertible securities of the Company shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement at one time or over time of more than one-half of the members of the board of directors of the Company which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of the assets of the Company or any subsidiary of the Company in one or a series of related transactions with or into another entity, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (a), (b) or (c).

(e)     “Closing Bid Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange which the Common Stock is then listed as quoted by Bloomberg.

(f)     “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Stock.

(g)     “Commission” means the Securities and Exchange Commission.

(h)     “Common Stock” means the common stock, par value $.01, of the Company and stock of any other class into which such shares may hereafter be changed or reclassified.

(i)     “Default Conversion Price” means, the lower of (i) the Fixed Conversion Price and (ii) that price which shall be computed as 50% of the lowest daily Volume Weighted Average Price of the Common Stock during the 10 consecutive Trading Days immediately preceding the applicable Conversion Date.  All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction

(j)     "Equity Conditions" means that each of the following conditions is satisfied:  (i) on each day during the period beginning two (2) weeks prior to the applicable date of determination and ending on and including the applicable date of determination (the "Equity Conditions Measuring Period"), either (x) the Underlying Shares Registration Statement filed pursuant to the Registration Rights Agreement shall be effective and available for the resale of all applicable shares of Common Stock to be issued in connection with the event requiring determination or (y) all applicable shares of Common Stock to be issued in connection with the event requiring determination shall be eligible for sale without restriction and without the need for registration under any applicable federal or state securities laws; (ii) on each day during the Equity Conditions Measuring Period, the Common Stock is designated for quotation on the Principal Market and shall not have been suspended from trading on such exchange or market nor shall delisting or suspension by such exchange or market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such exchange or market; (iii) during the Equity Conditions Measuring Period, the Company shall have delivered Conversion Shares upon conversion of the Debentures to the Holder on a timely basis as set forth in Section 4(b)(ii) hereof; (iv) any applicable shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 4(c) hereof and the rules or regulations of the Primary Market; (v) during the Equity Conditions Measuring Period, there shall not have occurred either (A) an Event of Default or (B) an event that with the passage of time or giving of notice would constitute an Event of Default; and (vii) the Company shall have no knowledge of any fact that would cause (x) the Registration Statements required pursuant to the Registration Rights Agreement not to be effective and available for the resale of all applicable shares of Common Stock to be issued in connection with the event requiring determination or (y) any applicable shares of Common Stock to be issued in connection with the event requiring determination not to be eligible for sale without restriction and without the need for registration under any applicable federal or state securities laws.

(k)     "Equity Conditions Failure" means that on any applicable date the Equity Conditions have not been satisfied (or waived in writing by the Holder).

(l)     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(m)     “Excluded Securities” means, (a) shares issued or deemed to have been issued by the Company pursuant to an Approved Stock Plan (b) shares of Common Stock issued or deemed to be issued by the Company upon the conversion, exchange or exercise of any right, option, obligation or security outstanding on the date prior to date of the Securities Purchase Agreement, provided that the terms of such right, option, obligation or security are not amended or otherwise modified on or after the date of the Securities Purchase Agreement, and provided that the conversion price, exchange price, exercise price or other purchase price is not reduced, adjusted or otherwise modified and the number of shares of Common Stock issued or issuable is not increased (whether by operation of, or in accordance with, the relevant governing documents or otherwise) on or after the date of the Securities Purchase Agreement, (c) shares issued in connection with any acquisition by the Company, whether through an acquisition of stock or a merger of any business, assets or technologies, leasing arrangement or any other transaction the primary purpose of which is not to raise equity capital, and (d) the shares of Common Stock issued or deemed to be issued by the Company upon conversion of this Debenture.

(n)     “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

(o)     “Original Issue Date” means the date of the first issuance of this Debenture regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Debenture.

(p)     “Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

(q)      “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

(r)     “Securities Purchase Agreement” means the Securities Purchase Agreement dated July 29, 2008 by and among the Company and the Buyers listed on Schedule I attached thereto, and any amendments and supplements thereto.

(s)     “Trading Day” means a day on which the shares of Common Stock are quoted on the OTCBB or quoted or traded on such Primary Market on which the shares of Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are not listed or quoted, then Trading Day shall mean a Business Day.

(t)     “Transaction Documents” means the Securities Purchase Agreement, all amendments thereto, and the agreement dated August 14, 2009 relating to the Securities Purchase Agreement, and any other agreement delivered in connection with the Securities Purchase Agreement including, without limitation, the Security Documents, the Irrevocable Transfer Agent Instructions, and the Registration Rights Agreement.

(u)     “Underlying Shares” means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance with the terms hereof.

(v)     “Underlying Shares Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement, covering among other things the resale of the Underlying Shares and naming the Holder as a “selling stockholder” thereunder.

(w)     "Volume Weighted Average Price" means, for any security as of any date, the daily dollar volume-weighted average price for such security as reported by Bloomberg through its “Historical Price Table Screen (HP)” with Market: Weighted Ave function selected, or, if no dollar volume-weighted average price is reported for such security by Bloomberg, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by Pink Sheets LLC.

(x)     "Warrants" has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include all warrants issued in exchange therefor or replacement thereof.

[Signature Page Follows]

IN WITNESS WHEREOF, the Company has caused this Secured Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth above.

COMPANY:

NEOMEDIA TECHNOLOGIES INC.

By:        /s/ Michael W. Zima         

Name:  Michael Zima

Title:    Chief Financial Officer

EXHIBIT I

CONVERSION NOTICE

(To be executed by the Holder in order to Convert the Debenture)

TO:

The undersigned hereby irrevocably elects to convert $______________________________ of the principal amount of Debenture No. NEOM 9-7 into Shares of Common Stock of NEOMEDIA TECHNOLOGIES INC., according to the conditions stated therein, as of the Conversion Date written below.

Conversion Date:
Conversion Amount to be converted:	$
Conversion Price:	$
Number of shares of Common Stock to be issued:
Amount of Debenture Unconverted:	$
Please issue the shares of Common Stock in the following name and to the following address:
Issue to:
Authorized Signature:
Name:
Title:
Broker DTC Participant Code:
Account Number:

EX-31.1

EXHIBIT 31.1

CHIEF EXECUTIVE OFFICER’S CERTIFICATE PURSUANT TO SECTION 302

I, Iain A. McCready, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q of NeoMedia Technologies, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.  The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 14, 2009

  /s/   Iain A. McCready

  Iain A. McCready

  Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CHIEF FINANCIAL OFFICER’S CERTIFICATE PURSUANT TO SECTION 302

I, Michael W. Zima, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q of NeoMedia Technologies, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.  The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 14, 2009

  /s/  Michael W. Zima

  Michael W. Zima

  Chief Financial Officer and Principal Accounting Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of NeoMedia Technologies, Inc., a Delaware corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2009 as filed with the Securities and Exchange Commission (the “Report”), Iain A. McCready, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to his knowledge:

1.           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

  /s/   Iain A. McCready

  Iain A. McCready

  Chief Executive Officer

  August 14, 2009

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of NeoMedia Technologies, Inc., a Delaware corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2009 as filed with the Securities and Exchange Commission (the “Report”), Michael W. Zima, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to his knowledge:

1.           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

  /s/   Michael W. Zima

  Michael W. Zima

  Chief Financial Officer

  August 14, 2009