Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation – The condensed consolidated financial statements include the accounts of NeoMedia and its wholly-owned subsidiaries. We operate as one reportable segment. All intercompany accounts, transactions and profits have been eliminated in consolidation.  Certain prior period amounts in the condensed consolidated financial statements and notes thereto have been reclassified to conform to the current year's presentation.  

Use of Estimates, Policy [Policy Text Block]

Use of Estimates – The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Changes in facts and circumstances may result in revised estimates, which are recorded in the period in which they become known.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Change in Estimates – For the three month period ended  March 31, 2013 fair value accounting of the derivative financial instruments and debentures payable, we reassessed the valuation techniques used to estimate the liability fair values. Based on the assessment, including discussions with the third-party valuation firm assisting us with the calculation, we determined that the valuation technique should be modified to consider the potentially dilutive impact on the stock price resulting from the issuance of additional shares of  common stock upon the conversion  of the instruments as well as the resulting value in comparison to our market capitalization.

The modification of the valuation technique represents a change in accounting estimate as discussed in Accounting Standards Codification (“ASC”)  Topic 250-10-45-17, Accounting Changes and Error Corrections. The impact from the modification in valuation technique has therefore been reflected in the period of change and will be reflected in future periods. See Note 3 – Financing for additional discussion.

Going Concern [Policy Text Block]

Going Concern – We have historically incurred operating losses, and we may continue to generate 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 condensed consolidated financial statements have been prepared in conformity with US GAAP, which contemplates our continuation as a going concern given fair value accounting related to our debentures. Our net income for the three months ended March 31, 2014 and 2013 was $15,000 as compared to $29.0 million, respectively, including $35,000 and $29.6 million, respectively, of net gains related to our financing instruments.

Net cash provided by operations during the three months ended March 31, 2014 was $27,000 as compared to net cash used in operations of $0.5 million during the three months ended March 31, 2013. As of March 31, 2014, we have an accumulated deficit of $236.9 million. We also have a working capital deficit of $41.3 million, including $39.2 million in current liabilities for our derivative and debenture financing instruments.

We currently do not have sufficient cash or commitments for financing to sustain our operations for the next twelve months if we are unable to generate sufficient cash flows from operations. Our plan is to develop new client and customer relationships and substantially increase our revenue derived from our products/services and IP licensing. If our revenues do not reach the level anticipated in our plan, we may require additional financing in order to execute our operating plan. If additional financing is required, 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. In the event that financing sources are not available, 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 or respond to competitive pressures, any of which would have a material adverse effect on our business, prospects, financial condition and results of operations.

The convertible debentures and preferred stock used to finance the Company, which may be converted into common stock at the sole option of the holders, have a highly dilutive impact when they are converted, greatly increasing the number of shares of common stock outstanding. During 2013, there were 2,879 million shares of common stock issued for these conversions. We cannot predict if or when each holder may or may not elect to convert into shares of common stock.

Our 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.

Restatement to 2014 and 2013 Interim Reporting [Policy Text Block]

Restatement to 2014 and 2013 Interim Reporting – As noted above and disclosed initially in our Periodic Report on Form 8-K on July 29, 2014, during the three month period ended March 31, 2014, for fair value accounting of the derivative financial instruments and debentures payable, we reassessed the valuation techniques used to estimate the liability fair values. Based on the assessment, including discussions with the third-party valuation firm assisting us with the calculation, we determined that the valuation technique should be modified to consider the potentially dilutive impact on the stock price resulting from the issuance of additional shares of common stock upon the conversion of the instruments as well as the resulting value in comparison to our market capitalization.

We agree with the SEC’s assertion that certain modifications in our valuation methodology contained errors with respect to the valuation of convertible debentures issued by us. We are restating the March 31, 2014 and 2013 three month periods to reflect the change in valuation technique and correction of the fair value accounting of the derivative financial instruments and debentures payable. In addition, we are also restating our December 31, 2013 Balance Sheet as it pertains to the Fair Value of our Warrants, Preferred Series C & D and Convertible Debentures to amounts as stated below from how they were reported as of December 31, 2013 in our 10-K: 

	December 31, 2013				December 31, 2013
	(as previously reported)		Adjustments		(Restated)
Derivative Financial Instruments – warrants	$	684	$	(64)	$	620
Derivative Financial Instruments – Series C and D PS and DP	$	23,606	$	(23,310)	$	296
Debentures payable – carried at fair value	$	257,451	$	(219,201)	$	38,250
Total Liabilities	$	284,576	$	(242,575)	$	42,001
Accumulated deficit	$	(479,485)	$	242,575	$	(236,910)
Total shareholders’ deficit	$	(284,435)	$	242,575	$	(41,860)

The table below reflects the changes in restating the derivative liabilities for the three months ended March 31, 2014 (in thousands):

Derivative Liability Restatement for the 3 months ended March 31, 2014:

	3 Months. March 31, 2014				3 Months. March 31, 2014
	(as previously reported)		Adjustments		(Restated)
Gain (loss) from change in fair value of hybrid financial instruments	$	218,656	$	(219,201)	$	(545)
Gain (loss) from change in fair value of derivative liability – warrants	$	437	$	(64)	$	373
Gain (loss) from change in fair value of derivative liability – Series C & D	$	23,447	$	(23,310)	$	137
Net income	$	242,590	$	(242,575)	$	15
Net income available to common shareholders	$	242,590	$	(242,575)	$	15
Comprehensive income	$	242,590	$	(242,575)	$	15

Statement of Cash Flow:

	3 Months. March 31, 2014				3 Months. March 31, 2014
	(as previously reported)		Adjustments		(Restated)
Net income	$	242,590	$	(242,575)	$	15
Gain (loss) from change in fair value of hybrid financial instruments	$	(218,656)	$	219,201	$	545
Gain (loss) from change in fair value of derivative liability – warrants	$	(437)	$	64	$	(373)
Gain (loss) from change in fair value of derivative liability – Series C & D	$	(23,447)	$	23,310	$	(137)
Net cash used in operating activities	$	27	$	-	$	27

The table below reflects the changes in restating the derivative liabilities for the three months ended March 31, 2013 (in thousands):

Derivative Liability Restatement for the 3 months ended March 31, 2013:

	3 Months. March 31, 2013				3 Months. March 31, 2013
	(as previously reported)		Adjustments		(Restated)
Gain (loss) from change in fair value of hybrid financial instruments	$	6,774	$	17,713	$	24,487
Gain (loss) from change in fair value of derivative liability – warrants	$	3,122	$	44	$	3,166
Gain (loss) from change in fair value of derivative liability – Series C & D	$	(299)	$	2,242	$	1,943
Net income	$	9,038	$	19,999	$	29,037
Net income available to common shareholders	$	9,038	$	19,999	$	29,037
Comprehensive income	$	9,149	$	19,999	$	29,148

Statement of Cash Flow:

	3 Months. March 31, 2013				3 Months. March 31, 2013
	(as previously reported)		Adjustments		(Restated)
Net income	$	9,038	$	19,999	$	29,037
Gain (loss) from change in fair value of hybrid financial instruments	$	(6,774)	$	(17,713)	$	(24,487)
Gain (loss) from change in fair value of derivative liability – warrants	$	(3,122)	$	(44)	$	(3,166)
Gain (loss) from change in fair value of derivative liability – Series C & D	$	299	$	(2,242)	$	(1,943)
Net cash used in operating activities	$	(547)	$	-	$	(547)

In addition to the material misstatement related to our change in valuation methodologies described above, and of the December 31, 2013 Balance Sheet, in connection with the completion of our third quarter 2013 and first quarter 2013 reporting, we identified certain errors associated with our first quarter 2013 interim reporting. We assessed the impact of these errors and concluded that the errors did not result in a material misstatement.  To correct the errors, we have restated the three months ended March 31, 2013 reporting as discussed below. Our assessment considered the guidance provided by ASC Topic 250, Accounting Changes and Error Corrections and ASC Topic 250-10-S99-1,  Assessing Materiality. Based on our conclusion that the errors were not material individually or in aggregate to any of the prior reporting periods, we determined amendments to previously filed financial statement reports were not required in accordance with the applicable ASC guidance. We also concluded that the revisions applicable to prior periods should be reflected herein and will be reflected in future filings containing such information.

 

The condensed consolidated statements of operations for the three months ended March 31, 2013 included a clerical error resulting in the foreign currency translation adjustment within comprehensive income (loss) reflecting a $111,000 loss but should have reflected a $111,000 gain. The reporting has been revised herein to reflect the proper amounts.

The condensed consolidated statements of cash flows for the three months ended March 31, 2013 overstated net cash used in operating activities and the effect of exchange rate changes on cash by approximately $113,000.  The revised net cash used in operating activities was approximately $547,000 and the effect of exchange rate changes on cash was negative $2,000. The amounts have been restated herein to reflect the proper amounts.

 

As discussed in Note 4 – Financing, we are limited to issuing shares of common stock in connection with preferred stock and debenture conversions at no less than par value.  The methodology used to determine the number of common stock shares issued for debentures and preferred stock is based upon the market value received for the shares issued, and any short-fall between the par value of the shares issued and the market value of the shares is recorded as a deemed dividend.  During the three months ended March 31, 2013, the conversion of debentures and Series C Preferred Stock resulted in deemed dividends of $681,000 and $16,000, respectively, and the deemed dividend amounts were not reflected in the net loss available to common shareholders.  The reporting herein has been revised to reflect the proper amounts. 

Earnings Per Share, Policy [Policy Text Block]

Basic and Diluted Net Income Per Common Share – The components of basic and diluted income per share attributable to the Company’s common stock shareholders were as follows (in thousands, except share and per share data): 

	Three Months Ended
	March 31,
	2014		2013
		(RESTATED)	(RESTATED)
Numerator:
Net income available to common shareholders	$	15	$	29,037
Effect of dilutive securities:
Hybrid financial instruments		(545)		(24,487)
Derivative liability - warrants		373		3,166
Derivative liability - Series C and D Convertible
Preferred Stock and debentures		137		1,943
Numerator for diluted income per common share	$	(20)	$	9,659
Denominator:
Weighted average shares used to compute basic income per common share		4,984,827,279		2,789,315,439
Effect of dilutive securities:
Hybrid financial instruments		233,957,214,103		32,949,714
Derivative liability - warrants		440,652,725		2,083,292
Derivative liability - Series C and D preferred stock and debentures		26,618,556,701		3,398,694
Denominator for diluted income per common share		266,001,250,808		27,931,664,140
Basic income per common share	$	0.000	$	0.010
Diluted income per common share	$	0.000	$	0.001

We excluded approximately 1,173,000 and 1,883,833,000 dilutive securities from the calculation of diluted income per common share for the three months ended March 31, 2014 and 2013, respectively, because inclusion of these securities would be antidilutive. 

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements  – From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective will not have a material impact on our results of operations and financial position.