Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

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.

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.

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. Our net income for the nine months ended September 30, 2014 was $2.5 million as compared to net income of $34.8 million for the same period in 2013. The operating results for the nine months ended September 30, 2014 included $2.6 million of net gains related to financing instruments, and the operating results for the same period in 2013 included $34.1 million of net gains related to financing instruments.

Net cash used in operations during the nine months ended September 30, 2014 was $333,000 as compared to net cash used in operations of $.5 million during the nine months ended September 30, 2013. As of September 30, 2014, we have an accumulated deficit of $234.4 million. We also have a working capital deficit of $37.9 million, including $35.8 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 the first nine months of 2014, there were 2,486,141 thousand 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.

Revisions to 2013 Interim Reporting [Policy Text Block]

Restatement to 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 are restating the September 30, 2013 three month and nine 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, as filed on our Form 10-K/A on September 19, 2014, we also restated 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 (in thousands):

	December 31, 2013 (as previously reported)		Adjustments		December 31, 2013 (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 tables below reflect the changes in restating the derivative liabilities for the three months and nine months ended September 30, 2013:

Derivative Liability Restatement for the 3 months ended September 30, 2013 (in thousands):

	3 Mos. September 30, 2013 (as previously reported)		Adjustments		3 Mos. September 30, 2013 (as Restated)

Gain (loss) from change in fair value of hybrid financial instruments	$	(24,165)	$	28,660	$	4,495

Gain (loss) from change in fair value of derivative liability – warrants	$	92	$	(2)	$	90

Gain (loss) from change in fair value of derivative liability – Series C & D	$	(2,620)	$	2,651	$	31

Net income (loss)	$	(26,200)	$	31,309	$	5,109

Net income (loss) available to shareholders	$	(26,245)	$	31,309	$	5,064

Comprehensive income (loss)	$	(26,200)	$	31,309	$	5,109

Derivative Liability Restatement for the 9 months ended September 30, 2013 (in thousands):

	9 Mos. September 30, 2013 (as previously reported)		Adjustments		9 Mos. September 30, 2013 (as Restated)

Gain (loss) from change in fair value of hybrid financial instruments	$	(46,959)	$	75,508	$	28,549

Gain (loss) from change in fair value of derivative liability – warrants	$	3,503	$	11	$	3,514

Gain (loss) from change in fair value of derivative liability – Series C & D	$	(4,769)	$	6,798	$	2,029

Net income (loss)	$	(47,534)	$	82,317	$	34,783

Net income available to shareholders	$	(48,276)	$	82,317	$	34,041

Comprehensive income (loss)	$	(47,667)	$	82,583	$	34,916

Statement of Cash Flows for the 9 months ended September 30, 2013 (in thousands):

	9 Mos. September 30, 2013 (as previously reported)		Adjustments		9 Mos. September 30, 2013 (as Restated)

Net income (loss)	$	(47,534)	$	82,317	$	34,783

Gain (loss) from change in fair value of hybrid financial instruments	$	(46,959)	$	75,508	$	28,549

Gain (loss) from change in fair value of derivative liability – warrants	$	3,503	$	11	$	3,514

Gain (loss) from change in fair value of derivative liability – Series C & D	$	(4,769)	$	6,798	$	2,029

Net cash used in operating activities	$	(536)	$	-	$	(536)

In addition to the 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 second quarter 2013 reporting, we identified certain errors associated with our second 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 nine months ended September 30, 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 nine months ended September 30, 2013 included a clerical error resulting in an understatement of general and administrative expenses of approximately $51,000. The reporting herein has been revised 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 and nine months ended September 30, 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.

The condensed consolidated statements of cash flows for the nine months ended September 30, 2013 overstated net cash used in operating activities and effect of exchange rate changes on cash by approximately $334,000. The reporting herein has been revised to reflect the proper amounts.

Merger [Policy Text Block]

Merger and Reverse Stock Split – On May 11, 2014, the Company completed an Agreement and Plan of Merger (the “Merger Agreement”) with Qode Services Corporation (“Qode”), a wholly owned subsidiary of the Company. Under the terms of the Merger Agreement, Qode was merged into the Company and ceased to exist upon completion of the merger. The Company continued as the surviving corporation. Under the terms of the Merger Agreement, the Company’s charter was amended to provide for an increase in the amount of common stock authorized shares, and each share of the Company’s common stock issued and outstanding immediately prior to the merger continued to remain outstanding and remain unchanged, except that (i) the par value changed from $0.001 per share to no par value per share, and (ii) each fifteen shares of common stock issued and outstanding were combined and converted into 1 share of common stock (the “Reverse-Split”). The amount of authorized shares of common stock was also increased from 5 billion to 7.5 billion shares. Prior period amounts have been retroactively adjusted for the Reverse-Split in order to be comparable and conform to the current period presentation.

Debt, Policy [Policy Text Block]

Extinguishment of Debenture Debt - In connection with the completion of the merger, the holder of the secured convertible debentures agreed to enter into amendments to decrease the aggregate face amount of debt by $5.0 million. The forgiveness of debt on the secured convertible debentures exceeded a significance threshold relative to cash flows prescribed by ASC Topic 470-50, Debt Modifications and Extinguishments. Accordingly, the modifications of the amounts due under these arrangements were accounted for as extinguishments, whereby the existing debentures were considered to be retired and new debentures issued. The fair value of the forgiven balance of $4.247 million was determined as of May 11, 2014 and recorded as a gain on extinguishment of debt in the condensed consolidated statements of operations. See Note 4 – Financings for additional discussion.

Earnings Per Share, Policy [Policy Text Block]

Basic and Diluted Net Income (Loss) Per Common Share – The components of basic and diluted income (loss) per share attributable to NeoMedia Technologies, Inc. common stock shareholders were as follows (in thousands, except share and per share data):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
			(restated)				(restated)
Numerator:
Net income (loss) available to common shareholders	$	(1,088)	$	5,064	$	2,500	$	34,041
Effect of dilutive securities
Hybrid financial instruments		-		261		-		24,314
Derivative liability - warrants		-		90		-		3,514
Derivative liability - Series C and D preferred stock and debentures		-		31		-		2,029
Numerator for diluted income (loss) per common share	$	(1,088)	$	5,446	$	2,500	$	63,898

Denominator:
Weighted average shares used to compute basic income (loss) per common share		1,357,349,653		4,984,827,279		810,443,147		3,823,483,604
Effect of dilutive securities:
Hybrid financial instruments		-		32,949,714		32,949,714		32,949,714
Derivative liability - warrants		-		2,083,292		2,083,292		2,083,292
Derivative liability - Series C and D preferred stock and debentures		-		3,398,694		3,398,694		3,398,694
Denominator for diluted income (loss) per common share		1,357,349,653		5,023,258,979		848,874,847		3,861,915,304

Basic income (loss) per common share	$	.00	$	0.00	$	0.00	$	0.00
Diluted income (loss) per common share	$	.00	$	0.00	$	0.00	$	0.00

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 may have an impact on our results of operations and financial position. ASU Update 2014-09 Revenue From Contracts With Customers (Topic 606) issued May 28, 2014 by FASB and IASB converged guidance on recognizing revenue in contracts with customers with an effective date after December 15, 2016 will be evaluated as to impact and implemented accordingly. In addition, ASU Update 2014-15 Presentation of Financial Statements-Going Concern (Sub Topic 205-40) issued August 27, 2014 by FASB defines management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern. The additional disclosure requirement is effective after December 15, 2016 and will be evaluated as to impact and implemented accordingly.

- Definition

Disclosure of accounting policy for completed business combinations (purchase method, acquisition method or combination of entities under common control). This accounting policy may include a general discussion of the purchase method or acquisition method of accounting (including for example, the treatment accorded contingent consideration, the identification of assets and liabilities, the purchase price allocation process, how the fair values of acquired assets and liabilities are determined) and the entity's specific application thereof. An entity that acquires another entity in a leveraged buyout transaction generally discloses the accounting policy followed by the acquiring entity in determining the basis used to value its interest in the acquired entity, and the rationale for that accounting policy.

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- Definition

Disclosure of accounting policy for computing basic and diluted earnings or loss per share for each class of common stock and participating security. Addresses all significant policy factors, including any antidilutive items that have been excluded from the computation and takes into account stock dividends, splits and reverse splits that occur after the balance sheet date of the latest reporting period but before the issuance of the financial statements.

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- Definition

Disclosure of accounting policy for reporting when there is a substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date). Disclose: (a) pertinent conditions and events giving rise to the assessment of substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, (b) the possible effects of such conditions and events, (c) management's evaluation of the significance of those conditions and events and any mitigating factors, (d) possible discontinuance of operations, (e) management's plans (including relevant prospective financial information), and (f) information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities. If management's plans alleviate the substantial doubt about the entity's ability to continue as a going concern, disclosure of the principal conditions and events that initially raised the substantial doubt about the entity's ability to continue as a going concern would be expected to be considered. Disclose whether operations for the current or prior years generated sufficient cash to cover current obligations, whether waivers were obtained from creditors relating to the company's default under the provisions of debt agreements and possible effects of such conditions and events, such as: whether there is a possible need to obtain additional financing (debt or equity) or to liquidate certain holdings to offset future cash flow deficiencies. Disclose appropriate parent company information when parent is dependent upon remittances from subsidiaries to satisfy its obligations.

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