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Although I am presently concerned about the liquidity situation and falling pps, I still do believe the pps will increase significantly within 6 to 12 months from now.
My liquidity concerns: http://www.investorshub.com/boards/read_msg.asp?message_id=12608034 As I believe the owners / management of the acquisition companies understand that they are in this together with Neomedia, I do truly believe that they will find a way to agree on new financing terms that will be in the best interest of the company, and because much of their payoff is in stock, I am hopeful that the new financing terms will be less toxic since it is in their vested interest to do so.
Although the 2Q financial results are less than I predicted ( see http://www.investorshub.com/boards/read_msg.asp?message_id=12493591 ), I still believe and endorse most everything that I reported after the shareholder meeting - http://www.investorshub.com/boards/read_msg.asp?message_id=11808482. In particular, I stand by my final comments in that post which I have copied and pasted below:
22) Final thoughts: I believe we will see a lot of interesting and positive developments during the 2nd half of 2006. Launch of Qode is imminent - Neom has got or will soon have “all their ducks in a row” for a successful launch campaign. The overseas market is ready. This is clearly what we have been all waiting for. The level of outstanding shares is going to no doubt increase as Neomedia fulfills their goal of becoming the Global Leader in Mobile Marketing Solutions. Significant revenue growth is clearly possible over the next 12 months, and must happen in order to offset the increased dilution. I think if you have a relatively long time horizon for this investment, you will do just fine. However, if your investment time horizon is relatively short (say less than 6 months), the risk of pps decline or stagnation for the near-term is potentially an issue as we wait for increased revenues in the face of further dilution. Neom has a great vision, an excellent business plan; they just need to execute well what they have outlined. We should hold Management accountable to launch Qode by the end of this year such that it will substantially build revenues going forward. If they do that - and I personally believe they will - their credibility will remain high with this investor. Overall, I found this to be a very rewarding and worthwhile experience…I would recommend that anyone on this board that hasn’t attended a SHM to consider doing so in the future.
Overall, the acquisition companies have improving financial results, and I believe they are well positioned to take full advantage of what the mobile marketing industry is looking for right now. See my post: http://www.investorshub.com/boards/read_msg.asp?message_id=12562701 .
In addition, don't underestimate Chuck Jensen's words in yesterday's NapleNews article: http://www.investorshub.com/boards/read_msg.asp?message_id=12569593
"What is awesome is 12Snap and Sponge and Gavitec have all had excellent news transactions with a large breadth of companies and that is continuing to help our revenues," Jensen said.
This includes deals with many national and international companies that they aren't allowed to name, he said, like "big soft drink companies or big cell phone manufacturing companies."
And, don't forget about the Mobot / Elle promotion from October through December of this year: http://www.investorshub.com/boards/read_msg.asp?Message_id=11759114&txt2find=elle
I also believe this statement in the 10Q may be a very important development in the near term: http://www.investorshub.com/boards/read_msg.asp?message_id=12549031 and http://www.investorshub.com/boards/replies.asp?msg=12549031
"In June, Sponge also reached agreement to supply marketing solutions to Vodafone for their customers."
Some possible qode launch dates include:
CTIA - September 12 -14 http://www.investorshub.com/boards/read_msg.asp?Message_id=11932648&txt2find=ctia
.mobi registration - September 21
http://www.investorshub.com/boards/read_msg.asp?Message_id=12506507&txt2find=ctia
Mobile Broadband Americas Conference - October 18-20
http://www.investorshub.com/boards/read_msg.asp?message_id=12512177
The great thing about the acquisition companies is that they are developing relationships with some big names which Neomedia can leverage when they launch qode. So if, for example, Neomedia can line up News Corp as a brand partner, Nokia as the phone OEM, and Vodafone as the service provider when they launch qode, I predict we will see a pps of greater than $0.40 again and I am hopeful that such a launch with these or similar big gorilla companies will occur within 12 months.
SS9173
The issue is liquidity. Per the 10Q, on June 30, 2006, Neom had $2.5MM in cash. Excluding stock based compensation expense, Neom is averaging $2.3MM per month for SG&A and R&D expenses. Gross profit only averaged $696K per month for Q2. So the net cash burn (again excluding stock based compensation)is approximately $1.6MM per month.
Per the 10Q, Neom needed $25MM to complete the financing of the acquisition companies (and that was at a pps of .165). Every .01 drop in pps is going to make it more difficult to strike a palatable deal with the acquisition companies. The owners / management of the acquisition companies are now committed to Neomedia whether they like it or not. They will "sink or swim" together IMO. They need to strike an agreement whereby the Company will continue to survive until mobile marketing becomes more mainstream in the marketplace.
NMPR is not generating the cash to fund the Neomedia Mobile business unit as originally planned. While I was impressed with their operation and people in Ft. Myers during the SHM, the bottom line is it is taking too long for this business unit to generate positive cash flow. I have no doubt that this will eventually be a profitable business unit, but I am concerned that the reason Neom invested in NMPR is not materializing as fast as it should. And, I have always been concerned that it distracts or dilutes Management's focus from the Mobile Marketing core competency.
As I view Neom's liquidity issues at a crisis stage, perhaps Neomedia should quickly sell NMPR to DuPont or PPG to raise cash that could fund the acquisitions.
IMO, Neom should be working fast to strike a deal with a News Corp, Microsoft, Nokia or P&G type company to get some significant cash infused into the business...even if it means giving up some control of running the business.
The bottom line is we shareholders need to see a plan for how the company is going to fund the acquisitions and sustain business operations without massive undesirable dilution by Cornell.
All JMHO.
SS9173
YJ, Agreed. There are huge concerns with liquidity. Shareholders are tired of the raping by Cornell. We want quick answers as to how Neom is going to fund the acquisitions and sustain business operations. We need confidence that Management will follow-through with not only the release of qode the second half of this year, but that there will be a business model for significant revenue generation. The only thing that will propel this stock at this point is the "Sirius effect" IMO.
If Neom is holding back on a trump card or big gorilla announcement, now is the time to get agreement from them to publicly release this information. Otherwise, the pps will continue to fall and each .01 drop will make it increasingly difficult to recover from.
SS9173
Boldini, don't know why they chose to use the word "code" instead of "qode" for the Naplenews.com article. It could be a mistake by the newspaper, or perhaps they thought code would be better understood by John Q. Public. Personally, I think that if Neom is trying to establish a new brand name, they had better make sure everyone is using it and supply an explanation to what it is for those that aren't familiar with the term.
SS9173
DD Naple News Article Out this Morning
http://www.naplesnews.com/news/2006/aug/10/neomedia_technologies_reports_secondquarter_revenu/?busin....
naplesnews.com
NeoMedia Technologies reports second-quarter revenue growth
The company's changing balance sheet was reflected in its net income of $5.13 million compared to a net loss of $2.3 million last year.
By Riddhi Trivedi-St. Clair
Thursday, August 10, 2006
With the revenue from all its acquisitions now reflected in the bottom line, Southwest Florida-based NeoMedia Technologies showed a significant revenue growth for the second quarter.
The company reported a 222 percent increase in revenues for the second quarter to $6.6 million, up from $2.05 million from last quarter. It was also a more than 1,000 percent increase over the same period last year.
NeoMedia is a provider of technology and mobile marketing solutions.
So far this year, the company's revenues are $8.66 million, 574 percent higher than $1.285 million last year.
"I am very happy about the numbers," said Chuck Jensen, president and CEO. "We are extremely pleased with the result of all our acquisitions. They are all moving down the road as we anticipated. NeoMedia is making great strides."
The companies recognizing revenue for the second quarter include Mobot Inc. of Lexington, Mass.; Sponge of London, U.K.; Gavitec AG of Wurselen, Germany, 12snap of Munich, Germany; and BSD Software Inc. of Calgary, Canada.
"What is awesome is 12Snap and Sponge and Gavitec have all had excellent news transactions with a large breadth of companies and that is continuing to help our revenues," Jensen said.
This includes deals with many national and international companies that they aren't allowed to name, he said, like "big soft drink companies or big cell phone manufacturing companies."
The company's changing balance sheet was reflected in its net income of $5.13 million compared to a net loss of $2.3 million last year.
The loss from operations, however, not only continued but grew from $2.16 million to $5.91 million. For the entire first half of the year, net income was $3.815 million and loss from operations almost tripled to $10.04 million from $3.54 million last year.
The growing loss from operations is because of its continued investment in "code" and efforts to capture as great a segment as possible of a growing market, Jensen said.
"Remember we are launching code (this year) so that's an investment," he said. "And it requires infrastructure to make it profitable."
© 2006 Naples Daily News and NDN Productions. Published in Naples, Florida, USA by the E.W. Scripps Co.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SS9173
OT Success, Thanks. I think all the major points from the 10Q are posted now. I am going to give it a rest...will check back with the board later tonight or tomorrow morning.
SS9173
YJ, Sponge has had a working relationship with Vodafone for quite some time.
See this Sponge PR from 2003 - http://www.spongegroup.com/news/article.html?articleID=34&years=2003
However, this statement that "Sponge has reached an agreement to supply marketing solutions to Vodafone for their customers" appears to be new and exciting! I searched both Google and Ihub as well as the Spongegroup website, and could find no reference of this agreement.
Great find!
SS9173
Exercise of options and warrants - page 54
Attached to the Series C convertible preferred stock were 75 million warrants to purchase shares of NeoMedia common stock at exercises prices ranging from $0.35 - $0.50. NeoMedia can force conversion of the warrants if its stock price is more than $0.10 higher than the exercise price of the warrants once the shares underlying the warrants are registered. If all of these warrants were exercised, NeoMedia would receive $30.5 million proceeds. In addition, NeoMedia can force conversion of certain other warrants if the closing bid price of NeoMedia stock is greater than $0.30 for five consecutive days, at which point NeoMedia would receive an additional $2 million proceeds. At current prices, NeoMedia would not realize any proceeds from these warrants.
Now think about this statement in relation to my post #83213
http://www.investorshub.com/boards/read_msg.asp?message_id=12563193
Doesn't this imply that they don't plan to register the $100M SEDA until the stock price is 10 cents above $0.35 to $0.50?
SS9173
12snap silent partners - from page 55
During the six months ended June 30, 2006, NeoMedia made cash payments totaling $2.1 million to silent partners of 12Snap, as partial payment under silent partner agreements put in place prior to the acquisition of 12Snap by NeoMedia. The agreements call for additional cash payments of $2.1million on or before December 31, 2006.
SS9173
Breacher, maybe...perhaps YJ can comment. EOM
Scanbuy update - page 58 - nothing "officially" new here
Scanbuy, Inc.
On January 23, 2004, NeoMedia filed suit against Scanbuy, Inc. (“Scanbuy”) in the Northern District of Illinois, claiming that Scanbuy has manufactured, or has 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 NeoMedia’s 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, NeoMedia re-filed its suit against Scanbuy in the Southern District of New York alleging patent infringement. Scanbuy filed its answer on June 2, 2004. NeoMedia filed its answer and affirmative defenses on July 23, 2004. On February 13, 2006, Scanbuy filed an amended answer to the complaint. NeoMedia filed its reply to Scanbuy’s amended answer on March 6, 2006. Discovery is ongoing.
SS9173
Pay special attention to the underlined statement regarding the $100 million SEDA - see page 54 (credit to YJ for pointing this out to me)
$100 Million SEDA. On March 30, 2005, NeoMedia and Cornell Capital Partners entered into a Standby Equity Distribution Agreement under which Cornell Capital Partners agreed to purchase up to $100 million of NeoMedia’s common stock over a two-year period, with the timing and amount of the purchase at NeoMedia’s discretion. The maximum amount of each purchase would be $2,000,000 with a minimum of five business days between advances. NeoMedia expects to file a registration statement with the SEC during 2006 to register the shares underlying the $100 million 2005 SEDA. The 2005 SEDA would become available at the time the SEC declares effective a registration statement containing such shares. NeoMedia expects to file a registration including the shares underlying the SEDA after the Series C convertible preferred shares are converted.
SS9173
Negative cash flow projection - From page 53
NeoMedia expects to continue to generate negative operational cashflow over the next 12 months as it continues to invest in the qode® launch.
SS9173
Thanks to YJ's help by phone, this explains the mechanics behind the gain on derivative financial instruments.
From page 43:
Accounting Treatment of Series C Convertible Preferred Stock
In connection with the accounting treatment of the Series C convertible preferred stock sale, NeoMedia recognized a gain on derivative financial instruments of $11,025,000 and $15,794,000 during the three and six month periods ended June 30, 2006, respectively. The gain is due to the change in fair value of derivative financial instruments resulting from a decrease in NeoMedia’s stock price from $0.389 per share on the date of the Series C convertible preferred stock sale (February 17, 2006) to $0.231 per share on June 30, 2006. The fair value of the derivative financial instruments at each measurement date correlates to NeoMedia’s stock price at the same date. As a result, NeoMedia’s net income varies significantly from its cash flow from operations during the three and isx months ended June 30, 2006. In future periods, NeoMedia’s earnings could fluctuate dramatically from quarter to quarter if its stock price is significantly different from the stock price at the end of the previous measurement period. Because NeoMedia cannot guarantee that it has enough authorized shares to net share settle the Series C convertible preferred stock, the change in fair value of derivative instruments will be recorded to NeoMedia’s statement of operations each reporting period until the Series C convertible preferred stock is fully converted.
SS9173
From page 42 - Sponge had increased activity with News Corp.
SS9173
NMPR deferred revenue / income - from page 38 of the 10Q
During the fourth quarter of 2005 and first quarter of 2006, NeoMedia shipped and invoiced $757,000 of Micro Paint Repair products to Automart that has not yet been recognized in revenue as of June 30, 2006. If and when collectibility is reasonably assured, NeoMedia expects to recognize revenue for these shipments. The amount of $571,000 is included in deferred costs as of June 30, 2006.
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There appears to be 25% profit impact on these deferred sales - $571K costs vs. $757K deferred revenues = $186K deferred income.
SS9173
Net sales for the quarter may actually be higher due to a possible typo error in BSD revenue for 3 month-2005. If this is revised to $2M as I believe it should, we had increased sales revenue this quarter compared to year ago 2Q results. I have an email to Management to confirm this possible error.
SS9173
Operating entity profitability based on 6 month-2006 proforma
Sales Income % Income
Mobot $219 ($619) -283%
Sponge $1,224 ($38) -3%
Gavitec $486 ($290) -60%
12snap $6,231 115 2%
BSD $5,274 247 5%
6 month revenue comparison for each operating entity (correction to my earlier post which I asked to be deleted because of an error...LOL)
Jan - June 30, 2006 Jan - June 30, 2005 % Difference
Neomedia 1069 1285 -17%
Mobot 219 165 33%
Sponge 1224 935 31%
Gavitec 486 392 24%
12snap 6231 3486 79%
BSD 5274 4114 28%
We have to remember that mobile marketing is just now really starting to take off. The acquisition companies are making good progress. Qode launch is coming the second half of 2006. NMPR is making good in-roads with their automotive products and services launch. Scanbuy may be working on a licensing deal with us. Neomedia is working to renegotiate the cash deals with the acquisition companies, and I wouldn't be surprised that they are successful to some degree. Better times are ahead within 6 to 12 months from now. All JMHO.
SS9173
N E O M, Good point! The proforma for the first 6 months net sales vs year ago proforma results are very encouraging!
SS9173
Results of operations - pages 49 to 52 of the 10Q:
Results Of Operations For The Three Months Ended June 30, 2006 As Compared To The Three Months Ended June 30, 2005
Net sales. Total net sales for the three months ended June 30, 2006 were $6,606,000, which represented a $6,068,000, or 1,128%, increase from $538,000 for the three months ended June 30, 2005. This increase primarily resulted from revenues of subsidiaries 12Snap, Sponge, Mobot, Gavitec, and BSD, all of which were acquired during the first quarter of 2006. NeoMedia could realize a material increase in revenue over the next 12 months relative to 2005 due to the acquisitions of Mobot, 12Snap, Sponge, Gavitec, and BSD for the entire quarter. NeoMedia could also realize a material increase in revenue over the next 12 months if the Company is successful in implementing its Qode® go-to-market strategy, if pending court cases involving its intellectual property are resolved in NeoMedia’s favor, or if it is successful in implementing the expansion of the Micro Paint Repair business unit into China and other geographies.
Technology license, service, product and licenses. Technology service, product and license sales increased $5,928,000, or 2,140% to $6,205,000 for the three months ended June 30, 2006 compared to $277,000 for the three months ended June 30, 2005. The increase was primarily the result of sales from subsidiaries 12Snap, Sponge, Mobot, Gavitec, and BSD, all of which were acquired during the first quarter of 2006. NeoMedia could realize an increase in license fees over the next 12 months due to the recent acquisitions of Mobot, 12Snap, Sponge, Gavitec, and BSD, if the Company is successful in implementing its Qode® go-to-market strategy, or if pending court cases involving its intellectual property are resolved in NeoMedia’s favor.
Micro Paint Repair products and services. Sales of Micro Paint Repair products and services were $401,000 for the three months ended June 30, 2006, compared with $261,000 for the three months ended June 30, 2005, an increase of $140,000, or 54%. The increase was primarily due to the growth of the Company’s US operations. In addition, during the fourth quarter of 2005 and first quarter of 2006, NeoMedia shipped and invoiced $757,000 of product to Beijing Sino-US Jinche Yingang Auto Technological Services Limited that has not yet been recognized as revenue as of June 30, 2006. Once collectibility is reasonably assured, NeoMedia expects to recognize revenue for these shipments. NeoMedia could realize a material increase in Micro Paint Repair revenue if the Company is successful in continuing the expansion of the business unit into China and other geographies.
Cost of technology license, service, product and licenses. Cost of technology services, products and licenses fees were $3,948,000 for the three months ended June 30, 2006 compared to $213,000 for the three months ended June 30, 2006, an increase of $3,735,000, or 1,754%. The increase was due primarily to the cost of increased sales from subsidiaries 12Snap, Sponge, Mobot, Gavitec, and BSD, all of which were acquired during the first quarter of 2006.
Cost of Micro Paint Repair products and services. Cost of Micro Paint Repair products and services was $569,000 for the three months ended June 30, 2006, compared with $237,000 for the three months ended June 30, 2005, an increase of $332,000, or 140%. This increase is the result of fixed cost of goods sold associated with NeoMedia’s corporate Micro Paint facility in Ft. Myers, Florida. The facility operated at a gross margin loss during the first half of 2006 as it gained market traction. Cost of micro paint repair products and services as a percentage of related sales was 142% in 2006, compared to 91% in 2005. NeoMedia expects cost of micro paint repair products and services to decrease as the corporate facility increases its customer base and profitability and product sales expand globally.
Gross Profit. Gross profit was $2,089,000 for the three months ended June 30, 2006, an increase of $2,001,000, or 2,274%, compared with gross profit of $88,000 for the three months ended June 30, 2005. This increase was primarily the result of the gross profit of the subsidiaries 12Snap, Sponge, Mobot, Gavitec, and BSD, all of which were acquired during the first quarter of 2006.
Sales and marketing. Sales and marketing expenses were $3,337,000 for the three months ended June 30, 2006, compared to $1,230,000 for the three months ended June 30, 2005, an increase of $2,107,000 or 171%. This increase resulted primarily from the addition of sales force and cost associated with added sales and marketing resources associated with Mobot, 12Snap, Sponge, Gavitec, and BSD. NeoMedia expects sales and marketing expense to increase over the next 12 months with the continued development and expansion of the NeoMedia Mobile, NeoMedia Micro Paint Repair, and NeoMedia Telecom product groups.
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General and administrative. General and administrative expenses increased by $2,253,000, or 5,074%, to $2,697,000 for the three months ended June 30, 2006, compared to $444,000 for the three months ended June 30, 2005. The increase resulted primarily from increased infrastructure expense coupled with the expenses of the subsidiaries 12Snap, Sponge, Mobot, Gavitec, and BSD, all of which were acquired during the first quarter of 2006. NeoMedia expects general and administrative expense to increase over the next 12 months with the continued expansion of the NeoMedia Mobile business.
Stock based compensation expense. Stock based compensation was $1,072,000 for the three months ended June 30, 2006, as compared with $418,000 for the three months ended June 30, 2005, an increase of $654,000, or 156%. The increase was due to the adoption of SFAS 123R (Share Based Payment) on January 1, 2006.
Research and development. During the three months ended June 30, 2006, NeoMedia charged to expense $896,000 of research and development costs, an increase of $736,000 or 460% compared to $160,000 for the three months ended June 30, 2005. The increase is primarily due to the addition of development staff hired and acquired in connection with the ongoing commercialization of the NeoMedia Mobile business unit. NeoMedia expects research and development costs to increase over the next 12 months with the continued development efforts of NeoMedia Mobile business unit products and services worldwide.
Gain (loss) on extinguishment of debt. Gain on extinguishment of debt was $106,000 for the three months ended June 30, 2006, an increase of $73,000, or 221%. The gains resulted from the difference between the cash or market value of stock issued to settle the debt and the carrying value of the debt at the time of settlement.
Interest income (expense). Interest income (expense) consists primarily of interest accrued for creditors as part of financed purchases, past due balances, and notes payable, net of interest earned on cash equivalent investments. Interest income (expense) decreased by $84,000, or 49%, to ($85,000) for the three months ended June 30, 2006 from ($169,000) for the three months ended June 30, 2005, due to the pay down of notes payable.
Gain on derivative financial instruments. Gain on derivative financial instruments was $11,026,000 for the three months ended June 30, 2006. The gain is on the derivatives associated with the preferred stock sale on February 17, 2006. Certain derivatives were created at the time of the offering and those derivatives are recorded at fair value on the accompanying balance sheet. The gain for the three months ended June 30, 2006 is the reduction in value of the derivative from March 31, 2006 to June 30, 2006 and is due almost entirely to a reduction in NeoMedia’s stock price from March 31, 2006 to June 30, 2006. There was no such gain or loss on derivative financial instruments for the three months ended June 30, 2005.
Net Income (Loss). The net income (loss) for the three months ended June 30, 2006 was $5,133,000, which represented a $7,433,000, or 323% increase from a ($2,300,000) loss for the three months ended June 30, 2005. The increase in net income is due primarily to the $11,025,000 gain on derivative financial instruments during 2006, partially offset by increased operating expenses from the expanded operations from the acquired subsidiaries.
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Results Of Operations For The Six Months Ended June 30, 2006 As Compared To The Six Months Ended June 30, 2005
Net sales. Total net sales for the six months ended June 30, 2006 were $8,658,000, which represented a $7,373,000, or 574%, increase from $1,285,000 for the six months ended June 30, 2005. This increase primarily resulted from revenues from subsidiaries 12Snap, Sponge, Mobot, Gavitec, and BSD, all of which were acquired during the first quarter of 2006. NeoMedia could realize a material increase in revenue over the next 12 months relative to 2005 due to the acquisitions of Mobot, 12Snap, Sponge, Gavitec, and BSD for the entire quarter. NeoMedia could also realize a material increase in revenue over the next 12 months if the Company is successful in implementing its Qode® go-to-market strategy, if pending court cases involving its intellectual property are resolved in NeoMedia’s favor, or if it is successful in implementing the expansion of the Micro Paint Repair business unit into China and other geographies.
Technology license, service, product and licenses. Technology service, product and license sales increased $7,311,000, or 1,285% to $7,880,000 for the six months ended June 30, 2006 compared to $569,000 for the six months ended June 30, 2005. The increase was primarily the result of sales of subsidiaries 12Snap, Sponge, Mobot, Gavitec, and BSD, all of which were acquired during the first quarter of 2006. NeoMedia could realize an increase in license fees over the next 12 months due to the recent acquisitions of Mobot, 12Snap, Sponge, Gavitec, and BSD, if the Company is successful in implementing its Qode® go-to-market strategy, or if pending court cases involving its intellectual property are resolved in NeoMedia’s favor.
Micro Paint Repair products and services. Sales of Micro Paint Repair products and services were $778,000 for the six months ended June 30, 2006, compared with $716,000 for the six months ended June 30, 2005, an increase of $62,000, or 9%. The increase was primarily due to the growth of the Company’s US operations. In addition, during the fourth quarter of 2005 and first quarter of 2006, NeoMedia shipped and invoiced $757,000 of product to Beijing Sino-US Jinche Yingang Auto Technological Services Limited that has not yet been recognized as revenue as of June 30, 2006. Once collectibility is reasonably assured, NeoMedia expects to recognize revenue for these shipments. NeoMedia could realize a material increase in Micro Paint Repair revenue if the Company is successful in continuing the expansion of the business unit into China and other geographies.
Cost of technology license, service, product and licenses. Cost of technology services, products and licenses fees were $4,775,000 for the six months ended June 30, 2006 compared to $389,000 for the six months ended June 30, 2006, an increase of $4,386,000, or 1,128%. The increase was due primarily to the cost of increased sales from subsidiaries 12Snap, Sponge, Mobot, Gavitec, and BSD, all of which were acquired during the first quarter of 2006.
Cost of Micro Paint Repair products and services. Cost of Micro Paint Repair products and services was $988,000 for the six months ended June 30, 2006, compared with $510,000 for the six months ended June 30, 2005, an increase of $478,000, or 94%. This increase is the result of fixed cost of goods sold associated with NeoMedia’s corporate Micro Paint facility in Ft. Myers, Florida coupled with volume related increased costs of sales. The facility operated at a gross margin loss during the first half of 2006 as it gained market traction. Cost of micro paint repair products and services as a percentage of related sales was 127% in 2006, compared to 71% in 2005. NeoMedia expects cost of micro paint repair products and services to decrease as the corporate facility increases its customer base and profitability and product sales expand globally.
Gross Profit. Gross profit was $2,895,000 for the six months ended June 30, 2006, an increase of $2,509,000, or 650%, compared with gross profit of $386,000 for the six months ended June 30, 2005. This increase was primarily the result of the gross profit of the subsidiaries 12Snap, Sponge, Mobot, Gavitec, and BSD, all of which were acquired during the first quarter of 2006.
Sales and marketing. Sales and marketing expenses were $4,879,000 for the six months ended June 30, 2006, compared to $2,025,000 for the six months ended June 30, 2005, an increase of $2,854,000 or 141%. This increase resulted primarily from the addition of sales force and cost associated with added sales and marketing resources associated with Mobot, 12Snap, Sponge, Gavitec, and BSD. NeoMedia expects sales and marketing expense to increase over the next 12 months with the continued development and expansion of the NeoMedia Mobile, NeoMedia Micro Paint Repair, and NeoMedia Telecom product groups.
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General and administrative. General and administrative expenses increased by $2,976,000, or 284%, to $4,023,000 for the six months ended June 30, 2006, compared to $1,047,000 for the six months ended June 30, 2005. The increase resulted primarily from increased infrastructure expense coupled with the expenses of the subsidiaries 12Snap, Sponge, Mobot, Gavitec, and BSD, all of which were acquired during the first quarter of 2006. NeoMedia expects general and administrative expense to increase over the next 12 months with the continued expansion of the NeoMedia Mobile business.
Stock based compensation expense. Stock based compensation was $2,589,000 for the six months ended June 30, 2006, as compared with $514,000 for the six months ended June 30, 2005, an increase of $2,075,000, or 404%. The increase was due to the adoption of SFAS 123R (Share Based Payment) on January 1, 2006.
Research and development. During the six months ended June 30, 2006, NeoMedia charged to expense $1,446,000 of research and development costs, an increase of $1,102,000 or 320% compared to $344,000 for the six months ended June 30, 2005. The increase is primarily due to the addition of development staff hired and acquired in connection with the ongoing commercialization of the NeoMedia Mobile business unit. NeoMedia expects research and development costs to increase over the next 12 months with the continued development efforts of NeoMedia Mobile business unit products and services worldwide.
Gain (loss) on extinguishment of debt. NeoMedia incurred a loss on extinguishment of debt of $1,858,000 for the six months ended June 30, 2006, primarily resulting from debt retired in connection with the Series C preferred stock issued and sold to Cornell on February 17, 2006. A loss was incurred on the surrender of a certain promissory note to Cornell dated March 30, 2005 in connection with the preferred stock sale. During the six months ended June 30, 2005, NeoMedia recognized a gain on extinguishment of debt of $171,000, resulting from the payment of debt at a discount to its book value.
Interest income (expense). Interest income (expense) consists primarily of interest accrued for creditors as part of financed purchases, past due balances, and notes payable, net of interest earned on cash equivalent investments. Interest income (expense) decreased by $67,000, or 46%, to ($79,000) for the six months ended June 30, 2006 from ($146,000) for the six months ended June 30, 2005, due to the pay down of notes payable.
Gain on derivative financial instruments. Gain on derivative financial instruments was $15,794,000 for the six months ended June 30, 2006. The gain is on the derivatives associated with the preferred stock sale on February 17, 2006. Certain derivatives were created at the time of the offering and those derivatives are recorded at fair value on the accompanying balance sheet. The gain for the six months ended June 30, 2006 is the reduction in value of the derivative from February 17, 2006 to June 30, 2006 and is due almost entirely to a reduction in NeoMedia’s stock price from February 17, 2006 to June 30, 2006. There was no such gain or loss on derivative financial instruments for the six months ended June 30, 2005.
Net Income (Loss). The net income (loss) for the six months ended June 30, 2006 was $3,815,000, which represented a $7,334,000, or 208% increase from a ($3,519,000) loss for the six months ended June 30, 2005. The increase in net income is due primarily to the $15,794,000 gain on derivative financial instruments during 2006, partially offset by increased operating expenses from the expanded operations from the acquired subsidiaries.
SS9173
From page 37 of the 10Q:
In the event that NeoMedia’s stock price at the time the consideration shares issued in connection with the acquisitions of Mobot, Sponge, Gavitec, and 12Snap become saleable is less than the contractual price (between $0.3839 and $0.3956), NeoMedia is obligated to compensate the sellers in cash for the difference between the price at the time the shares become saleable and the relevant contractual price. Assuming a stock price at the time the shares become saleable of $0.165, which was the last sale price on July 21, 2006, NeoMedia would have a cash liability of $25.5 million relating to the guarantees. On June 21, 2006, NeoMedia filed a registration statement on Form S-3 which included the consideration shares issued to acquire Mobot, Sponge, Gavitec, and 12Snap, among others, which was subsequently withdrawn. NeoMedia intends to file a new registration statement on form S-3 to cover these areas. At current stock prices, NeoMedia does not believe that it will be able to generate enough cash to satisfy the purchase price guarantees if and when they become due, which is expected to occur upon effectiveness of the registration statement. As a result, NeoMedia is attempting to negotiate for payment of the purchase price guarantees in another form, including additional shares of common stock. There is no guarantee that NeoMedia will be successful in negotiating such an agreement with any or all of the parties involved.
SS9173
Net sales are actually lower than a year ago when you consider proforma results:
Pro Forma Financial Information
Pro-forma results of operations as if NeoMedia was combined with Mobot, Sponge, Gavitec, 12Snap and BSD as of January 1, 2006 are as follows:
Three Months Ended June 30, 2006
Pro-forma
Adjust- Pro-forma
NeoMedia Mobot Sponge Gavitec 12Snap BSD ments Combined
Total net sales $ 6,606 $ 134 $ 420 $ 364 $ 2,225 $ 2,422 ($5,565 ) (A) $ 6,606
Net income (loss) $ 5,133 ($236 ) ($156 ) ($138 ) ($428 ) $ 231 $ 727 (A) $ 5,133
Net income (loss) per share
Basic $ 0.01 $ --- $ 0.01
Fully diluted $ 0.01 $ --- $ 0.01
Weighted average common
shares outstanding
Basic 632,402,254 --- 632,402,254
Diluted 799,536,925 --- 799,536,925
Six Months Ended June 30, 2006
Pro-forma
Adjust- Pro-forma
NeoMedia Mobot Sponge Gavitec 12Snap BSD ments Combined
Total net sales $ 8,658 $ 219 $ 1,224 $ 486 $ 6,231 $ 5,274 ($7,589 ) (B) $ 14,503
Net income (loss) $ 3,815 ($619 ) ($38 ) ($290 ) $ 115 $ 247 $ 420 (B) $ 3,650
Net income (loss) per share
Basic $ 0.01 $ --- (C) $ 0.01
Diluted $ 0.01 $ (0.01 ) (C) $ 0.00
Weighted average common
shares outstanding
Basic 580,485,463 71,521,146 (C) 652,006,609
Diluted 757,912,587 71,521,146 (C) 829,433,733
Pro-forma results of operations as if NeoMedia was combined with Mobot, Sponge, Gavitec, 12Snap and BSD as of January 1, 2005 are as follows:
Three Months Ended June 30, 2005
Pro-forma
(B) Adjust- Pro-forma
NeoMedia Mobot Sponge Gavitec 12Snap BSD ments Combined
Total net sales $ 538 $ 66 $ 451 $ 140 $ 2,050 $ 4,114 --- $ 7,359
Net income (loss) ($2,300 ) ($189 ) ($18 ) ($207 ) ($94 ) $ 261 ($724 ) (A) ($3,271 )
Net income (loss) per share-basic and diluted ($0.01 ) $ --- (B) ($0.01 )
Weighted average common shares outstanding 448,777,048 172,717,482 (B) 621,494,530
Six Months Ended June 30, 2005
Pro-forma
(B) Adjust- Pro-forma
NeoMedia Mobot Sponge Gavitec 12Snap BSD ments Combined
Total net sales $ 1,285 $ 165 $ 935 $ 392 $ 3,486 $ 4,114 --- $ 10,377
Net income (loss) ($3,519 ) ($382 ) $ 119 ($255 ) ($676 ) $ 261 ($1,447 ) ($5,899 )
Net income (loss) per share-basic and diluted ($0.01 ) $ --- (B) ($0.01 )
Weighted average common shares outstanding 443,301,430 172,717,482 (B) 616,018,912
(A) - Adjustment for amortization of intangible assets for the periods presented.
(B) - Adjustment for shares that would have been issued in connection with acquisitions if they had occurred on January 1, 2006. Using the stock price around January 1, 2006, the pro forma number of shares that would have been issued was:
Mobot Sponge Gavitec 12Snap BSD Total
Total stock consideration $ 6,500,000 $ 11,400,000 $ 5,400,000 $ 19,500,000 $ 2,279,263 $ 45,079,263
NeoMedia stock price around January 1, 2005 (measurement date) $ 0.261 $ 0.261 $ 0.261 $ 0.261 $ 0.261
Pro forma number of shares of
NeoMedia to be issued as purchase price consideration 24,904,215 43,678,161 20,689,655 74,712,644 8,732,808 172,717,482
Beam11 or YJ, please comment in layman's terms on the huge gain on derivative financial instruments. Some relevant information is copied and pasted below. Without this Neomedia would have had a huge net loss more indicative of the loss on operations reported.
Thanks in advance,
SS9173
Fair Value of Derivatives
The Company generally does not use derivative financial instruments to hedge exposures to cash-flow risks or market-risks that may affect the fair values of its financial instruments. However, certain other financial instruments, such as warrants and embedded conversion features that are indexed to the Company’s common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within the control of the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period.
The caption “Derivative Financial Instruments” consists of (i) the fair values associated with derivative features embedded in the Series C convertible preferred stock, (ii) the fair values of the detachable warrants that were issued in connection with the preferred stock financing arrangement, and (iii) the fair value of detachable warrants that were outstanding prior to the issuance of the Series C Preferred Shares.
Derivative income for the six months ended June 30, 2006 and 2005 associated with adjustments recorded to reflect the aforementioned derivatives at fair value amounted to $15,794,000 and $0, respectively, and is reported as “Gain on Derivative Financial Instruments” in the accompanying condensed consolidated statement of operations.
Fair value considerations for derivative financial instruments:
Freestanding derivative instruments, consisting of warrants that arose from the Cornell financing and those reclassified as described above 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 included in this model as of June 30, 2006 are as follows:
Holder Cornell Capital Partners Other
Instrument Warrants Warrants
Exercise price $0.35 - $0.50 $0.01 - $3.45
Term (years) 5.0 1.0 - 5.0
Volatility 70.80% 52.56% -70.80%
Risk-free rate 3.65% 3.65%
Embedded derivative financial instruments, arising from the Series C convertible preferred stock, consist of multiple individual features that were embedded in the instrument. The Company evaluated all significant features of the hybrid instruments and, where required under current accounting standards, bifurcated features for separate report classification. These features were aggregated into one compound derivative financial instrument for financial reporting purposes. 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 included exercise estimates/behaviors and the following other significant estimates:
Instrument Features
Conversion prices $0.95 - $1.29
Remaining terms (years) 1 - 5
Equivalent volatility 52.56% - 56.47%
Equivalent interest-risk adjusted rate 8.17% - 8.58%
Equivalent credit-risk adjusted yield rate 14.50%
Equivalent amounts reflect the net results of multiple modeling simulations that the Monte Carlo Simulation methodology applies to underlying assumptions. The assumptions included in the Monte Carlo Simulation calculation are highly subjective and subject to interpretation.
Accounting Treatment of Series C Convertible Preferred Stock
In connection with the accounting treatment of the Series C convertible preferred stock sale, NeoMedia recognized a gain on derivative financial instruments of $11,025,000 and $15,794,000 during the three and six month periods ended June 30, 2006, respectively. The gain is due to the change in fair value of derivative financial instruments resulting from a decrease in NeoMedia’s stock price from $0.389 per share on the date of the Series C convertible preferred stock sale (February 17, 2006) to $0.231 per share on June 30, 2006. The fair value of the derivative financial instruments at each measurement date correlates to NeoMedia’s stock price at the same date. As a result, NeoMedia’s net income varies significantly from its cash flow from operations during the three and isx months ended June 30, 2006. In future periods, NeoMedia’s earnings could fluctuate dramatically from quarter to quarter if its stock price is significantly different from the stock price at the end of the previous measurement period. Because NeoMedia cannot guarantee that it has enough authorized shares to net share settle the Series C convertible preferred stock, the change in fair value of derivative instruments will be recorded to NeoMedia’s statement of operations each reporting period until the Series C convertible preferred stock is fully converted.
DD Ad campaigns for your tiny cellphone screen get bigger
Updated 8/9/2006 5:38 AM ET
By Paul Davidson, USA TODAY
http://www.usatoday.com/tech/wireless/2006-08-08-mobile-ads_x.htm?POE=TECISVA
With readers fleeing newspapers and TV viewers zapping past commercials, advertisers are turning to the one device consumers can't seem to escape: their cellphones.
Mobile phones and wireless devices have quietly become the newest, hottest frontier for big brands from Pepsi to Nike, especially those itching to reach the coveted 18- to 34-year-old set.
TV networks are prodding viewers to send text messages to vote for their favorite reality TV character. Wireless websites are lacing sports scores and news digests with banner ads for Lexus (TM), Burger King (BKC) and Sheraton (HOT). A few companies are even customizing 10-second video ads for short, TV-style episodes that are edging their way onto mobile phones.
While the industry is in its infancy, ad campaigns for the tiny screen have increased sharply this year after several years of spotty efforts, and they're likely to take off by early next year, says Tom Burgess, CEO of Third Screen Media, a mobile-ad network.
Driving the surge is the increased use of text messaging, the wireless Web and video in the past 18 months as wireless carriers rolled out bigger, more colorful screens and faster broadband networks. About 30% of the 217 million U.S. cellphone subscribers text message at least once a month, Yankee Group says. Such services are more ingrained in the younger set: At least 55% of 13- to 24-year-olds regularly send text messages. About 10% of cellphone users regularly browse the wireless Web, MMetrics says.
For advertisers, the young audience is just one selling point. Wireless gadgets are always-on, ever-present accessories. The fact that a phone is tethered to an individual means that ads can be targeted. And users can respond instantly to time-sensitive offers.
"The days of doing a TV spot and reaching everybody are dwindling," says Jon Raj, Visa's new-media ad chief. "The mobile phone is very personal, and it's always with you."
Yet it's the intimate, insistent nature of cellphones that has made wireless carriers cautious about embracing mobile marketing, out of fear of turning off subscribers. Pushing tiny buttons to navigate the wireless Web or send a message can be clunky. And because subscribers typically pay for their minutes of data usage, many people don't want to burn them on ads.
"We need to make sure whatever we do is not perceived as intrusive," says Verizon Wireless (VZ) digital media chief John Harrobin.
Today, wireless websites do sport banner ads. But users typically must type in the address to see them. Except for trials, carriers have barred ads on sites accessed from the cellphone's menu of news, sports and other headings, which is the route to the wireless Web most people take. The wireless Web is not the Internet, but rather a similar network, with different addresses and sites streamlined for the small screen.
Carriers, though, are warming to the notion that consumers will welcome useful ads, such as those aimed at subscribers-on-the-go searching for restaurants, gas stations or movies. Or, say, stock prices, sponsored by Fidelity. "It has to be contextually relevant and enhance the customer experience," says Sprint Nextel (S) Vice President Anita Newton.
Relevant ads, please
In fact, she notes, mobile ads could help subsidize data services, possibly shaving current monthly subscription fees of $5 to $20 and drawing more customers. About 42% of mobile customers are open to mobile advertising if it's relevant, if they asked for it or if they'll get coupons or free services, Yankee Group says.
Fielding Fowler of Saginaw, Mich., says he'd welcome coupons "for useful things" such as restaurants or gasoline. But he finds banner ads irritating when he's hunting for sports scores. "You're paying $8.99 (a month), and it's gone from ad-free to bombarding you," says Fowler, 35, a comedian.
Carriers will likely start accepting advertising within eight months, after they resolve battles with content providers over how to split revenue, says Jeff Janer, an executive at Third Screen Media.
U.S. mobile advertising revenue is projected to jump to $150 million this year from $45 million in 2005, Ovum says. That's still the equivalent of a rounding issue compared with this year's estimated $274 billion U.S. ad market. But mobile ad sales could total $2 billion, or nearly 1%, of U.S. ad sales by 2010 and up to 5% by 2015, Yankee Group predicts.
Among the ads gaining favor:
•Text messages. This kind of advertising lets marketers engage customers interactively, building loyalty. Consumers usually type in a five-digit "short code" to, say, enter a sweepstakes or download a ring tone or screensaver. In other cases, they get alerts about offerings they're interested in.
The strategy is a favorite of TV shows such as NBC's (GE)Deal or No Deal and CBS' (CBS)Big Brother to involve viewers. Customers typically pay a few cents to send such a message, but the networks often charge a premium, splitting the revenue with the carrier.
Last year, Big Brother viewers sent more than 500,000 text messages in two days to vote on which evicted houseguest should return. Viewers paid 49 cents a message, making the initiative marginally profitable, says CBS executive Cyriac Roeding. They also got free wallpaper, and about 30,000 opted to get text alerts on new shows. "It creates tremendous loyalty, and you're in touch with the audience even when they're not watching," Roeding says.
When A&E's Dog the Bounty Hunter invited viewers to dial a short code to receive text messages from the main character, 62% of participants said they would watch the show more.
Other brands are joining in. Dove soap prodded consumers to vote on whether women on a billboard were "wrinkled" or "wonderful."
Anheuser-Busch (BUD) prompted people to send cellphone photos of themselves for a contest promoting Bud Light. "You're trying to integrate into the lifestyle of this (young) generation," says A-B Vice President Tony Ponturo.
To tout the benefits of its Los Angeles credit card, American Express (AXP) last year let members and prospects sign up to receive invitations to limited-seating concerts and movie screenings.
Such missives can cost just 2 cents for the advertiser to send. But the Mobile Marketing Association urges advertisers to require consumers to opt in, then confirm that decision, before sending offers. "We need to be careful ... to protect consumers from spam," says MMA chief Laura Marriott.
•Wireless Web ads. Ads on the wireless Web rose sharply this year. Advertisers are spending $75,000 to $300,000 on typical wireless webcampaigns, vs. $25,000 to $50,000 in 2005, Janer says.
Typically, a mobile Web page has one ad at the top or bottom, so as not to clutter the tiny screens. "It's extremely impactful," says Maria Mandel, who heads digital innovation for ad agency Ogilvy & Mather.
Ads generally cost $35 to $50 per 1,000 views, vs. $10 for online ads, Janer says. And 3% to 5% of mobile Web users click on links to learn more or make a purchase, vs. a 0.2% click rate for Internet ads.
The uptick in advertising should keep afloat many mobile websites that have been saddled with huge costs and little revenue.
"We seriously considered shutting down the mobile Web business in 2003 and 2004," says Louis Gump, vice president of The Weather Channel.
Embassy Suites spent a few hundred thousand dollars on mobile banner ads early this year, encouraging customers to click to make a reservation. The campaign generated 55,000 clicks and $3.2 million in revenue, says John Lee, marketing chief for the hotel chain.
Mobile phones, he says, provide an ideal path to the hotel's target audience. Business travelers changing plans or considering a weekend getaway used to make mental notes until they could follow up. "Now, you can just click and do it."
Burger King ads on news and sports sites nudge users to restaurants with a crisp: "Hungry? Click to find a Burger King."
"It's an opportunity to reach consumers close to making a purchase decision," says Gillian Smith, the chain's senior director of media.
But not all advertisers are enthralled. 1-800-Flowers tested a special Mother's Day offer this year that fizzled. "I don't think people are comfortable searching the mobile Web just yet," says Tania Nemaric, company manager of brand communications. "You want to get in and get out. You're being charged for the time."
•Video ads. Anheuser-Busch, American Express and others have released their standard TV ads on cellphone video services. For the first time this year, short video ads were customized for cellphones. When Fox Entertainment (NWS) this summer released a spinoff of its Prison Break series to Sprint mobile phones, each two-minute episode was preceded by a 10-second ad for the youth-oriented Toyota Yaris.
On cellphones, consumers "are actively looking at something," says Kim McCullough, Toyota manager of marketing communications. "We're hoping that greater attentiveness will help our advertising."
•Ads for free stuff. Games on mobile phones typically cost about $5. This year, some games were offered free but included ads for products such as Zagat's dining guide or Progressive Insurance, says Michael Chang, CEO of Greystripe, a mobile ad network.
Traffix (TRFX), another marketing company, plans to offer free, ad-supported ring tones and movie clips.
The greatest potential lies in searches for local retailers, says Yankee Group analyst Linda Barrabee. Yahoo, Google and Go2 provide local mobile searches today, but they have limited or no advertising. In the future, a search will yield sponsored listings first.
Advertisers would pay about 40 cents if a customer clicks on a search listing and up to $7 if the customer calls the retailer, says Dan Olschwang of search provider JumpTap. Eventually, carriers could use technology to pinpoint a customer's location and offer a relevant coupon to a nearby shop, if the subscriber opts in.
Dunkin' Donuts (AED) tried a less-sophisticated version of that last year, sending a coupon for a 99-cent latte at several stores to interested Boston cellphone users. The campaign increased store traffic 21%.
Ad revenue a sticking point
Rollout of such ads has been delayed partly because two big search engines, Yahoo (YHOO) and Google (GOOG), are unwilling to share more ad revenue with carriers, which would link to them from their home pages. Some carriers are making deals with search upstarts, such as JumpTap, which are offering a more generous split and letting carriers affix their brands to the services.
"It's the battle for the customer," says Kevin Beebe, group vice president for No. 5 carrier Alltel, which is close to a deal with JumpTap.
Yahoo Senior Vice President Steve Boom says the search engine can generate more revenue because of its brand and expertise. "The (revenue split) misses the point," he says.
A similar standoff has stalled the full-scale rollout of banner ads on the wireless Web. Carriers want 40% to 50% of ad sales when users reach sites from their menus; content providers are offering less.
Wireless carriers believe they enjoy greater leverage than phone and cable giants have in online marketing. The ability to easily click to sites from wireless home pages is vital, says Sprint's John Styers, a marketing director. Also, he says, carriers have data about subscribers' surfing habits that could let them serve more relevant ads — but only with the consumer's OK.
"We really have to tread lightly," Sprint's Newton says. "The last thing we want is to have consumers be annoyed by advertising and cancel their subscription."
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SS9173
Thanks Streetsylz for following up with Mobot. It is unfortunate Mobot isn't handling this promotion.
SS9173
DD MMA Releases Mobile Search Findings
By Monica Alleven
August 7, 2006
http://www.wirelessweek.com/article/CA6360156.html
The Mobile Marketing Association (MMA) announced the results of its first-ever mobile search study, which shows 50 percent of cell phone users who have yet to use mobile search expect to try it in the next few months.
The study found that 31 percent of respondents used mobile search for the first time in the past month. Current users conducted an average of nine searches in the past month.
Other findings, according to MMA, include:
• Cell phone owners who aren’t aware of mobile search recognize its benefits after they’re introduced to the technology. Half of non-users were interested in trying mobile search over the next few months, and 48 percent of non-users expect to start using mobile search at least once per week.
• About 41 percent of all respondents indicate that sponsored links would not have an impact on their use of mobile search.
• Current mobile search users represent several attractive market segments for advertisers. Respondents with an annual household income of $50,000-$75,000 conduct an average of almost 16 searches per month, the most of any demographic segment. Consumers ages 45-54, college graduates and people with children at home all reported using search more than 11 times per month.
• Sixty-nine percent of respondents prefer advertisements that are related to local products and services.
• The ability to search by voice was the top-rated feature and 37 percent of current mobile search users would be “a lot more likely” to use mobile search if voice control were added.
Marketing Advocates conducted the research, which surveyed 587 U.S. adults who have a cell phone. The mobile search study was commissioned by the MMA Mobile Search Committee and sponsored by MMA members including AOL, denuo, iCrossing, InfoSpace, JumpTap, MSN Mobile, mTLD Top Level Domain, Openwave Systems, Sprint Nextel, U.S. Cellular Corporation and V-ENABLE.
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SS9173
Enpocket news: McDonald’s Launches New York Mobile Coupon Campaign
August 8th, 2006
--------------------------------------------------------------------------------
http://www.dmnews.com/cms/dm-news/internet-marketing/37784.html
McDonald’s Corp. will offer mobile couponing intended to drive localized retail traffic during traditional slower late evening hours.
The series of weekly mobile coupons for late-night offers is being introduced in the New York metropolitan area and will be featured on McDonald’s Late Night Lounge Web site at www.mcdonaldslatenight.com.
Mobile marketing services provider Enpocket, Boston, is powering the effort for the nation’s leading fast food retailer of burgers.
Campaign support includes advertising banners running across several mobile Internet sites, with consumers targeted by age and location.
The mobile channel aligns well with McDonald’s core consumer demographic, Enpocket said.
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SS9173
Hangdog, I like your bold prediction.
dlethe01, nice work.
:o)
SS9173
I believe the barcode recognition toolkit will be presented at Informatik 2006 (to be held during October) in Dresden, Germany via this workshop:
http://www.hcilab.org/events/meis06/
Workshop @ Informatik 2006:
Mobile and Embedded Interactive Systems (MEIS'06)
Author Login | Reviewer Login | Contact Theme & Topics Dates, Deadlines & Submission Organizers & Committee Program Proceedings
hcilab.org / events / MEIS'06
Theme & Topics
Overview
Interaction with mobile devices and embedded systems has become a part of everyday life. As mobile devices get more sophisticated and embedded systems are increasingly interconnected the creation of usable interactive software poses many new challenges. Issues and opportunities arise from emerging novel paradigms in user interfaces. In particular tangible interaction, device and interfaces ecologies, and implicit interaction create new requirements for user centred design and system development.
Topics of interest
novel tangible user interfaces and interaction metaphors
new interaction techniques for mobile and embedded interactive systems
new interface technologies and concepts
sensing and actuator technologies for mobile and embedded interactive systems
alternative sensory modalities, e.g. auditory and tactile feedback
software models and frameworks
methods, tools, models and design guidelines for emerging user interfaces
validation, evaluation methods and tools for novel user interfaces
experience with complex and compound user interfaces
ad-hoc user interfaces for multiple device orchestration
ad-hoc interaction with embedded systems via handheld devices
prototyping mobile and embedded interactive systems
experience of creating everyday objects that become user interfaces
experience reports on building, using, and deploying mobile and embedded interactive systems
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The reference to Informatik 2006 can be found under the publications link of the Batoo link: http://people.inf.ethz.ch/adelmanr/batoo/index.php?n=Main.Publications
SS9173
Streetstylz, Sure sounded like Mobot's technology...that's why I posted it.
SS9173
While the Nokia N93 mobile phone is very significant in that it will have barcode recognition software, from all that I have read it will decode 2D barcodes...not 1D, which are much more prevalent in today's world.
http://theponderingprimate.blogspot.com/2006/05/nokia-connects-physical-world-with-2d.html
SS9173
Upon further discussion with N E O M, we determined that this download link is not an effective barcode reader per the pdf article I posted yesterday. See page 3 at the top of the page.
http://www.vs.inf.ethz.ch/publ/papers/barcodes2006.pdf
As an alternative to costly domain transformation, a much simpler
approach is based on so-called scanlines, which try to detect the bar code along a particular
line through the image4. As such algorithms need much fewer computing resources, they
are specifically relevant for the use on mobile camera phones. Their drawbacks, however,
lie in their often poor recognition rates when dealing with dirty surfaces, reflections or
shadows, or slight misalignments and their need of detecting the bar code in the image
first (in order to properly align the scanline). We improved on this by making extensive
use of multiple scanlines (see figure 1), which will be explained below in section 3.1.
________________________________________________________________________________
N E O M and I believe that the "toolkit" that they subsequently developed is perhaps much more effective for mobile phone barcode recognition. See this link, which is referenced in the above pdf article: http://people.inf.ethz.ch/adelmanr/batoo/
We have thoroughly explored this "Batoo" website and haven't located the download for this barcode recognition toolkit. We have written an email to one of the author's to find out if / when the download link will be available.
SS9173
Bob1948, An educated guess for 2nd quarter sales revenue would be between $7.5M and $9.0M based on the proforma results shown in last quarter's 10Q report.
SS9173
DD Progressive Strategies Enter the Mainstream
August 07, 2006
By Andrew McMains and Brian Morrissey
http://www.adweek.com/aw/national/article_display.jsp?vnu_content_id=1002951081
NEW YORK For big marketers, using a mix of nontraditional communications channels is nothing new, but there is growing evidence that what was once considered experimental consumer outreach is fast becoming mandatory strategy.
From packaged-goods marketers to automotive companies, heavy reliance on TV is being reconsidered, as tactics previously seen as ancillary are becoming a mainstream priority. Recent Adweek interviews with executives associated with a dozen major brands, which collectively spend more than $9 billion annually in major media, revealed that such clients are rethinking not only how they use TV, but are also upping the ante on emerging media, such as viral campaigns, wireless messaging, blogs and podcasts.
This week, for instance, Acura launches its first turbo-charged crossover vehicle, the RDX, with a program that combines elements of viral, Internet and mobile marketing. The effort encourages consumers to take pictures of the car's print ads ("image tagging") and upload them to Acura's Web site, where image-recognition software will enter those participants into contests, send them e-vites to events and offer them ringtones.
Johnson & Johnson, meanwhile, sat out of network TV's upfront market this spring in part to expand a more customized four-year-old programming deal—whereby the client funds production and sponsors certain shows—with Time Warner.
Even mass-media stalwarts, such as McDonald's, Coca-Cola, Procter & Gamble and Chrysler, acknowledge that a consumer conversation must extend beyond the 30-second TV spot: They are steadily spending more on online and wireless efforts, with those budgets expected to grow in 2007.
"The main driver behind our increased interest in this area is the amount of consumer pull," said P&G representative Jeannie Tharrington. "Consumers want more customization and more personal communication from us that is tailored to their specific needs. They are looking for this information via the Web, their mobile phones, and other new technology as well."
Said Christine MacKenzie, vice president of sales and marketing, corporate research and reporting at Chrysler: "It's absolutely more complicated, with niche audiences to respond to." Describing today's array of media options as a "bowl of spaghetti," she added: "Nothing is linear anymore. Used to be a 30-second [spot] on TV, print, and you were done."
For P&G's Folgers brand, the company recently launched a "Tolerate Mornings" initiative in the U.S. that has a Web application, which uses a short film, screen saver and "boss tracker" downloads, as well as a mobile component that sends a wake-up call to consumers' phones.
P&G considers the campaign a success: It has received over 100,000 hits to the Web site, toleratemornings.com, and the film has been viewed several hundred thousand times on other sites like YouTube.com. (Mainstream media like the New York Times, CNN and CNBC have generated publicity through their coverage.)
At Chrysler, the "Ask Dr. Z" campaign represents the company's future of brand integration, said MacKenzie. It uses magazines, dealer promotions, newsprint and TV as well as guerrilla tactics like banners, Dr. Z 'prescription pads' with cute sayings, billboards on roving trucks. Within the first two days of the campaign launch, Chrysler saw a significant spike to brand site traffic: Visits increased 22 percent, and leads rose 31 percent.
However, of these examples, it may be J&J's efforts to strike a new non-network deal that is the most significant arbiter of a more personalized future for mass marketers. "It has gotten to the point where everything is content," said Jan Leth, co-chief creative officer at Ogilvy & Mather. "The only criteria are if it is interesting or relevant to me."
J&J's "Spotlight Presentation" programming effort, which began as a means for the client to produce "family-friendly" movies to run on TNT, will likely expand to include AOL, Time Inc. and the new CW network, said one source. Besides J&J and the four units of Time Warner, the parties involved are said to include Magna Global Entertainment, Universal McCann and Time Warner Global Marketing. The new deal is expected to run three years.
A budget for the effort could not be ascertained, but one source suggested it would be in the tens of millions of dollars and "considerably more" than the estimated $20 million that J&J invested in its original J&J-TNT deal, which was struck in 2002.
It is one example of a big marketer "leaving money back" to invest in a long-term, cross-channel deal, the source said. The new deal is still in the works and is expected to launch in the fourth quarter. Calls placed to J&J global media chief Kim Kadlec were returned by a J&J representative, who declined to comment on "speculation."
TV is far from dead, but it is online budgets that are growing by leaps and bounds.
This year, Coke will spend 80 percent more online than in 2005, when online spending jumped 250 percent, according to company rep Susan McDermott. That number will rise again in 2007, though McDermott wouldn't reveal specifics.
At Coke, the question is, "'How can we marry online with TV, print, outdoor and make them all work together?'" said McDermott. "Television is not a dying medium. It's a matter of how to do it smarter."
McDonald's, which like Coke still considers TV a "main outlet" that is "core" to its marketing plan, is currently experimenting in New York with a couponing program in which a message will arrive via a cell phone for a special deal, said Anje Carroll, director of U.S. media. The message recipient can show the message at a restaurant and get the deal. "The mantra of our media agencies is, 'Stay ahead on the emerging technologies, but don't forget the traditional media,'" Carroll said.
Other large marketers, which are redefining the role of TV in their media use, even as they change the elements in the mix, include:
-- IBM during the past two weeks launched two new podcast series, bringing its total to about a dozen; all were created in the past 12 months. Each series addresses a business topic, such as technology tips on computer security, and disseminates information free to the outside world. IBM also manages some 350 blogs to communicate with customers and potential customers.
Collectively, the blogs and podcasts position IBM as a thought leader in a "self-publishing world," and as such, serve to build the brand, the client said.
In fact, podcast leaders and bloggers must adhere to internal written guidelines. "Every individual who works for IBM has to carry responsibility for the brand and has to promote the brand," said Ben Edwards, IBM's manager of new media communications. "The reality we all face is that communications are increasingly going to be by individuals to individuals rather than some kind of corporate or institutional communication. People prefer that because they trust each other."
-- HP, for which Goodby, Silverstein & Partners created a forthcoming pitch using ad copy and consumer-controlled animation for the Internet, as part of its broader campaign, "The computer is personal again." Consumers are able to make their own HP "spots" by uploading a photo of their face, selecting the ad copy that suits their lifestyle and gestures that match their personalities. Personiva software then animates the consumer's mouth and synchronizes it to the voiceover copy for the illusion of a spot with their endorsement. "It's beyond Clutch Cargo," said Steve Simpson, partner and co-creative director at Goodby. "It's an unusual effect."
-- The American Legacy Foundation is airing a co-branded Fuse series, Warped: Inside & Out, a six-part weekly show on that cable network. Playing off American Legacy's orange "Truth" truck, the client is billing the branded-entertainment vehicle as "an alternative to the 30-second spot." The show, which runs through Aug. 23, chronicles, in documentary fashion, the Vans Warped Tour 2006, an alternative music and extreme sports festival. Each episode integrates Legacy's "Truth" brand by featuring the foundation's signature truck and crew members, who travel with the tour and engage teens first-hand on the dangers of smoking and the marketing tactics that cigarette companies use.
-- Audi, which has won acclaim for reaching beyond the 30-second TV spot with its Web-driven "The Art of the H3ist" pitch for its A3 model, two weeks ago launched a campaign for its new Q7 SUV that features 90-second branded vignettes about sites in the Hamptons, Martha's Vineyard and Nantucket that run on Plum TV, a two-year-old cable channel that reaches those markets. Each vignette shows Travel + Leisure senior editor Nilou Motamed driving the SUV to a site and ends with Audi's logo and Web site address, where the pieces can be downloaded and distributed electronically. A corresponding print execution in Travel + Leisure takes the form of a two-page "advertorial." "It's all part of the media budget and rather than just do this flat national buy, we do this targeted 'acupuncture' approach," said Stephen Berkov, director of brand marketing and innovation at Audi.
-- Foster's online "Crack open a friendly" campaign from Ogilvy seeks to use video in a more cost-effective, interactive way through broadband versus TV. With a smaller budget than many of Foster's competitors, Ogilvy created a series of videos that launch Aug. 16 on Heavy.com. Via "The Massive Mating Game," users can win a date with one of 10 Australian models if they answer a text-message quiz about the videos. Ogilvy also created videos around the campaign's theme that it will seed on Heavy, YouTube and elsewhere online. The effort is designed to reach a younger male target of 21 to 31. It's a more efficient use of video for a brand that spent only $5 million in major measured media last year.
-- T-Mobile's Sidekick, which previously used TV to promote the brand, takes those visuals online in a campaign, via Publicis West in Seattle. The pitch centers on a microsite, sidekick.com, that supports the latest version of the device, the Sidekick 3. Publicis convinced the client to do a completely online advertising effort because "that's where the young and social target market for this product lives," said David Kim, interactive creative director at the agency. The core target is 16-to-28-year-olds.
"Our target audience is a heavy online community. It's almost equal, the time they spend watching TV as surfing on the Internet," said Jenna Beardsley-Smith, senior manager of advertising for T-Mobile.
"The Sidekick allows for great social engagement. That's why the microsite is better than TV. It's an experiential medium." Sources said the client has dedicated $3 million to the online effort, which broke July 10 and runs through mid-September. That's half the amount spent on previous campaigns on the brand. In its first two weeks, the re-launched sidekick.com received more than 1 million unique visitors with each visitor spending an average of 4.5 minutes on the site, as opposed to the average of one minute they spent before, according to Kim.
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DD RPA Intros Acura RDX
August 07, 2006
By Gregory Solman
http://www.adweek.com/aw/national/article_display.jsp?vnu_content_id=1002951084
LOS ANGELES Acura's launch this week of its RDX small CUV (crossover utility vehicle) through independent RPA will quickly become "the most integrated campaign" in the brand's history, according to Susie Rossick, the client's national advertising manager.
The print component was conceived as the first broad domestic use of "image tagging," she said: Prospects will be sent viral messages instructing them to snap camera-phone pictures of magazine executions and upload them to an Acura site. Image recognition software enters readers into contests, and sends them e-vites for parties and technology events, as well as RDX information.
A theatrical spot targeting affluent, urban males breaks today. Fifteen- and 30-second commercials stressing the advanced engineering and other features of the RDX debut on national cable and in spot markets later this week.
Mark Erwin and Pat Mendelson, senior vice presidents and creative directors at Santa Monica, Calif.-based RPA, described the campaign as "techno-charged." Said Erwin, "The strategy is to show the RDX as the ultimate object of high-tech advanced living, like an iPod on wheels."
Rossick said an alliance with ABC and Wired magazine would take the RDX on a six-city "Techno-Charged" tour at locations such as the Viceroy hotel in Santa Monica, the ABC Entertainment Center in New York and ESPN in Washington, D.C., where the RDX will be the featured attraction in a high-tech gadget exposition. A Gen Art sponsorship will take the RDX to movie premieres and fashion shows, Mendelson added.
Directed by music video artist Mark Romanek, TV spots breaking Thursday use a computer-generated version of the RDX constructed by Digital Domain. Art director Brandon Levin, copywriter Daniel Elmslie and producer Shelley Eisner contributed to the effort.
In "TechnoTraction," the RDX defies gravity: The camera tracks impossible spinning and upside-down shots as the RDX traverses a futuristic 360-degree indoor space. "It connects with you—and the road," a voiceover says.
In "TurboTravel," the RDX glows, disappears, then reappears in a different location, as if it is too fast to spot. The acronym SHAWD (Super Handling All Wheel Drive) is introduced.
In "TechnoWorship," laptop computers bow in obeisance to the RDX as a celestial choir sings. "Praised by man and machine," the voiceover says.
"It's all indoors," said Mendelson. "We're talking to urban dwellers who live there and dream of the city. They used to have fantasy of going outdoors. They're not your typical hiker and climber. They love the technology in the vehicle."
Rossick declined to state the launch budget. Honda's Acura division spent $250 million on U.S. ads in 2005, and $110 million through May 2006, according to Nielsen Monitor-Plus.
Acura sales are down 8 percent year-to-date through June, per Car Concepts, Thousand Oaks, Calif., selling 96,000 units.
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JP, nice write-up on Scanbuy. Perhaps the Markman trial was postponed to work out a win-win settlement. I believe the mobile commerce market will eventually be big enough for both of us. As long as Neom gets paid for Scanbuy using the "bridge", I am fine with that as Scanbuy's excellent marketing prowess will eventually help pave the way for market acceptance of the hard launch of qode coming later this year.
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DD Toolkit for Bar Code Recognition and Resolving on Camera Phones – Jump Starting the Internet of Things
http://www.vs.inf.ethz.ch/publ/papers/barcodes2006.pdf
Robert Adelmann, Marc Langheinrich, Christian Flörkemeier
Institute for Pervasive Computing, ETH Zurich
{adelmanr, langhein, floerkem}@inf.ethz.ch
Abstract: Automatic identification technology such as RFID promises to connect
physical objects with virtual representations or even computational capabilities. However,
even though RFID tags are continuously falling in price, their widespread use
on consumer items is still several years away, rendering large-scale experiments with
such an “internet of things” difficult. Much more ubiquitous are printed bar codes, yet
so far their recognition required either specialized scanner equipment, custom-tailored
bar codes or costly commercial licenses – all equally significant deployment hurdles.
We have developed a freely available EAN-13 bar code recognition and information
system that is both lightweight and fast enough for the use on camera-equipped mobile
phones, thus significantly lowering the barrier for large-scale, real-world testing of
novel information and interaction applications based on “connected” physical objects.
We hope that this “low tech” version of bridging the gap will allow the community to
quickly develop and try out more realistic and widespread applications, and thus gain
real-world experiences for better jump-starting the future internet of things, today.
1 Today’s Role of Barcode Recognition
The idea of linking real-world products with virtual information has been around for quite
some time. In 1998, Barrett and Maglio already described a system for attaching information
to real-world objects [BM98], while 1999 Want et al. expanded upon the idea and
linked arbitrary items through the use of RFID tags with both information services and
actions [WFGH99]. Since then, a number of research projects have continued to explore
this concept of “bridging the gap”, i.e., the automatic identification of individually tagged
real-world products in order to quickly look up information or initiate a specific action
[KBM+02]. With the increasing mobility of powerful computing systems, e.g., mobile
phones or handheld PDAs, this bridging can even be done in situ, i.e., right when we need
it, where we need it.
While RFID potentially offers an unprecedented user experience due to its detailed means
for identification (i.e., on a per item basis) and the lack of a line-of-sight requirement for
reading, most industry analysts agree that an item-level rollout (e.g., having an RFID tag
on every single supermarket product) is still several years away [Jue05]. In contrast, the
printed bar codes are practically ubiquitous: Virtually every item sold today carries an internationally
standardized bar code on its packaging, enabling not only checkout registers
to quickly sum up one’s shopping items, but also to identify a product and look up a wealth
of related information. Obviously, using bar codes for linking real-world objects to virtual
information has a number of drawbacks when compared to an RFID-enabled future with
corresponding mobile RFID readers, such as NFC-enabled1 mobile phones. Due to their
sensitivity to soiling, ripping, and lighting conditions, optical bar code recognition can be
difficult. Until recently, reading a conventional (i.e., 1D) bar code inevitably required a
separate laser scanner or a corresponding mobile phone scanner attachment.
The increasing availability of camera phones, i.e., mobile phones with an integrated digital
camera, has begun to simplify this process, however. After 2D bar codes have been successfully
recognized by most consumer-grade camera phones for quite some time [Roh04],
the continuously increasing quality of both the camera resolution and the employed lenses
have finally made it feasible to directly read 1D bar codes with such cameras, without the
need for special attachments or handheld lasers. This significantly changes the attractiveness
of using barcodes for the above physical-to-digital linkage: Instead of waiting several
years for a comprehensive item-level roll out of RFID tags, or forcing people to carry
around specific scanner attachments for their mobile phones, the support of 1D bar code
recognition on any camera phone immediately allows anybody to interact with almost any
commercially available product – all it takes is a small application download.
The main contribution of this paper is a freely available 1D bar code recognition toolkit
that is intended to facilitate the creation of novel applications and services. We believe
that the adequate performance of our recognition software, when compared with existing
commercial implementations, the ease with which external data sources can be integrated,
and the availability of our toolkit under an open source license will help to foster the the
use of camera phones as mobile bar code scanners.
2 Related Work
Prior work on using printed bar codes for linking real-world objects with virtual information
has often used two dimensional bar codes [RA00, PKA05], which do not use bars of
varying widths but instead blocky rectangles that lend themselves much better to low resolutions
or misalignments. There is a wide variety of code symbologies available, such as
Semacodes, Spotcodes, the Japanese QR-System2, or Rohs’ VisualCodes [Roh04]. All of
these systems were specifically designed to simplify camera-based recognition. However,
while they offer both improved detection rates as well as additional services such as range
and alignment detection, none of these codes enjoys widespread use, let alone comes close
to the billions of products carrying EAN-13 bar codes today. Also, none of these codes is
linked to a wealth of EAN-13-indexed information available in online databases today.
A number of algorithms have already been implemented for the visual decoding of 1D bar
codes on desktop computers3. Most of these are based on the transformation of the origi-
1Near Field Communication (NFC) is a new standard for mobile phones that allows them to both act as an
RFID reader and be read by other RFID readers (see www.nfc-forum.org). Many handset manufacturer
have already begun shipping NFC-enabled models.
2See www.semacodes.org, www.op3.com and www.qrcode.com, respectively.
3See for example www.charactell.com/iRead.html or www.axtel.com.
Figure 1: Multiple scanlines: In contrast to existing approaches, we make intense use of multiple
scanlines in our algorithm to both increase robustness and improve accuracy. While the image shows
all of the scanlines oriented in parallel, our system supports any orientation of scanlines.
nal image information into a decoding domain that simplifies bar code identification, like
approaches based on the Fourier transformation or the Hough transformation as proposed
by Muniz et al. [MJO99]. These approaches are often used in professional image recognition
software, as the offer very good recognition rates. However, their requirements in
terms of system resources can be too demanding for typical mobile devices. While both
Ohbuchi et al. [OHH04] and Chai and Hock [CH05] have presented algorithms intended
for mobile devices, these algorithms so far have not been implemented or tested on actual
mobile camera phones. As an alternative to costly domain transformation, a much simpler
approach is based on so-called scanlines, which try to detect the bar code along a particular
line through the image4. As such algorithms need much fewer computing resources, they
are specifically relevant for the use on mobile camera phones. Their drawbacks, however,
lie in their often poor recognition rates when dealing with dirty surfaces, reflections or
shadows, or slight misalignments and their need of detecting the bar code in the image
first (in order to properly align the scanline). We improved on this by making extensive
use of multiple scanlines (see figure 1), which will be explained below in section 3.1.
Note that given the commercial potential of the 1D barcode recognition on mobile phones,
it is not surprising that a number of commercial solutions exist. Scanbuy offers an application
called ScanBuy Decoder5, which is capable of recognizing 1D barcodes. Similar
applications can be bought from PaperClick6, Gavitec7, and MediaStick8, to name but
a few. While informal trials with some freely available beta programs from the above
vendors showed a comparable, sometimes even superior performance of our system, we
explicitly abstained from conducting formal comparisons, as improving the recognition
rate or speed is not our primary goal. Instead, we are trying to create a free, easily usable,
and robust barcode recognition system for mobile phones, together with an open resolving
framework that facilitates rapid prototyping and deployment. The currently available commercial
systems, in contrast, not only restrict source-code access but also typically limit
barcode resolving to vendor applications and/or a fixed set of lookup services.
4See for example sourceforge.net/projects/barcr-reader/.
5See www.scanbuy.com/website/products_decoder.htm.
6See www.paperclick.com/.
7See www.mobiledigit.de.
8See www.mediastick.co.jp.
3 System Design
Figure 2: Architectural Overview: Our EAN-13 recognition and resolution system consists of a
mobile phone application for code recognition, and a server side component for code resolution.
Our EAN-13 bar code recognition and resolution toolkit contains two parts: the barcode
recognition component running entirely on J2ME enabled mobile phones that support the
MMAPI9 (Mobile Media APIextension) extension and the Java based information server
component, which is located on a separate server, to which the detected product code is
transmitted via a GPRS (or for local demonstration a Bluetooth) connection. The provided
client provides functionality to recognize an EAN13 code, communicate with the server
and display the results. The information server uses a plug-in architecture, allowing us
to quickly add various services and online information sources (represented as so called
“service connectors”). Although this process could also be located on the phone itself, performing
them on an external server provides us with greater extendibility, higher flexibility
and better performance.
3.1 Recognition Algorithm
In general, our recognition algorithm is scanline based. In order to improve robustness,
we decided to not only use a single scanline, but a set of multiple, potentially arbitrarily
oriented scanlines (see figure 1). If multiple scanlines cross the bar code, each with a
different sensitivity, we can increase the chances that at least one of them will result in a
properly recognized code. Also, multiple scanlines can be combined in a majority-voting
fashion, were inaccuracies due to dirt or reflections on one line can be compensated by two
or more correct identifications on other lines. By applying slightly different recognition
parameters along each individual scanline (i.e., the binarization threshold that categorizes
pixels into either black or white), the overall recognition accuracy can also be improved.
Last not least, by using a variable amount of scanlines, we have a simple mechanism to
adapt our algorithm to the processing power of the individual phone it is running on: The
more computational capabilities available, the more scanlines and orientations10 we can
9See sun.com/software/communitysource/j2me/mmapi/.
10Initial tests show, however, that most users actually take care to properly align the bar code when using their
camera phones, though right-angled rotations (i.e., 90, 180, and 270 degrees) were more common. Especially
superimposing our scanlines on the mobile phone’s viewfinder would further guide users to a proper alignment.
Figure 3: Successfully recognized codes: The above pictures show that our algorithm can handle
reflections and shadows as well as slightly crumpled paper.
Figure 4: Unrecognized codes: The above three codes are examples of failed recognition attempts.
The leftmost image shows a too crumpled bar code; the middle one is angled just too much (we only
used horizontal scanline in this experiment); the rightmost image is too blurry.
try. Since the algorithm is scanline based, it cannot cope as well with image distortions
as transformation-based algorithms. However, as the analysis below will show, our implementation
is sufficiently robust even for lower image resolutions. Also, it is quite fast, has
very little memory requirements, and can be implemented relatively easy.
3.2 Performance Evaluation
We have analyzed the recognition performance of our algorithm along two axes: focus
and image resolution, as these are currently the two most important parameters influencing
recognition accuracy on a mobile camera phone. The camera focus directly affects
a picture’s sharpness. Results indicate that focus remains a problem, while low camera
resolutions such as 640x480 pixels are not critical.
In order to allow camera phones to scan a bar code from close-up, two options are available.
Increasingly, camera phones are being equipped with auto-focus lenses that have
been developed over the last several years [Tur05, Chu05]. As of spring 2006, most major
handset manufacturer offer auto-focus models (e.g., the Nokia N90, SonyEricsson’s K790
and W810, or Samsungs SCH series). Models that still use fixed focus lenses need to be
adopted to the required short distance with the help of a macro lens, a cheap accessory
that is carried by many mobile phone dealers. Ideally, our system would be deployed on
auto-focus systems, thus eliminating the need for any specific hardware accessory. However,
macro lenses are cheap and unobtrusive enough to make their use in a large-scale
trial seem feasible.
For our evaluation, we took pictures of ten bar codes situated on common retail goods.
From each code we took 16 pictures, starting with a distance of 10 cm between the code
and the camera, and decreasing it in steps of 0.5 cm down to a minimum distance of 2
Figure 5: Focus and resolution influence: The above graph shows the combined influence of both
focus and resolution on the recognition rate. The innermost dark area indicates an acceptable recognition
rate and is situated at about 4–4.5 cm distance between camera and bar code, at a resolution
of at least 640x480 pixels.
cm. We used a Nokia N90 mobile phone (with an attached macro lense) to take all the
pictures with a maximal resolution of 1600x1200 pixels. From each of the 16 images that
were taken at different distances, we created 20 versions in different resolutions (using a
desktop image manipulation program). This resulted in a set of 320 images for each bar
code. Figure 5 visualizes the influence of the image resolution and camera focus on the
recognition success. Results indicate that focus remains a problem, while today’s camera
phone resolutions of about 1 MPixel are clearly sufficient for reliable bar code recognition.
As pointed out above, however, we expect the market soon to adopt auto-focus not only
for high-end devices, but also for common models due to recent technological advances
[Chu05, MDK+06].
4 Prototypical Applications
In order to illustrate the use of potential of out toolkit, we implemented and provide two
prototypical applications. The first prototype represents a simple literature information
system, providing information about scanned books, such as their current price or a list of
related items (see figure 6).
The second prototypical application implements a tool for checking ingredients in nutrition
products that could trigger an allergic reaction. Using a retail goods database such
as GS111 we could gain access to detailed allergen information of individual products,
based on their EAN-13 code. Together with an individual shopper’s allergy profile, the
application is able to warn the user of potential allergic reactions to an item with a single
click.
11See www.gs1.org
Figure 6: Example application: The above screenshots show a literature information system – sample
application implemented using our recognition and resolution system.
Given our toolkit, the implementation effort for these two demos was quite low. Changes
on the provided J2ME client were limited to renaming issues and took about 5 minutes.
Implementing the allergy test application required the implementation of a “service connector”
(cf figure 2), providing access to a (commercial) product database, and the implementation
of the service component that would generate the result according to a previously
defined user profile.
5 Conclusion
Linking the physical world with virtual information is a powerful concept. Even though
RFID promises to provide an easy-to-use, pervasive linkage that could easily be accessed
with the help of small mobile devices (such as NFC-enabled mobile phones), their use on
everyday items such as soda cans or cereal boxes remains unlikely for the next several
years. In contrast, regular 1D-bar codes (EAN-13) are ubiquitous – printed on billions of
products worldwide and already linked to a wealth of both free and commercial databases.
So far, consumer camera phones have in general only be able to recognize specific 2D
bar codes, which – just as RFID tags today – have not yet been widely adopted. With
the increasing availability of high resolution camera phones, as well as the prospect of
cheap auto-focus lenses, using mobile phone to tap into the wealth of EAN-13 product
information becomes feasible. This opens up novel ways of fielding systems that explore
the “internet of things” – not just for toy applications or small, specially equipped user
bases, but for any user with a conventional camera phone, for almost any product, nearly
everywhere. In this paper we present the necessary tools for the easy and fast creation and
prototyping of own services and applications based on EAN-13 recognition and resolution.
They are freely available for download from http://www.batoo.sourceforge.net/. We hope that this “low tech” version of bridging the gap will allow the community
to quickly develop and try out more realistic and widespread applications, and thus gain
real-world experiences for better jump-starting the future “internet of things”, today.
References
[BM98] Rob Barrett and Paul P. Maglio. Informative things: how to attach information to the
real world. In UIST ’98: Proceedings of the 11th annual ACM symposium on User
interface software and technology, pages 81–88, New York, NY, USA, 1998. ACM
Press.
[CH05] Douglas Chai and Florian Hock. Locating and Decoding EAN-13 Barcodes from Images
Captured by Digital Cameras. Addendum to Proceedings ICIS2005, 2005.
[Chu05] Myung-Jin Chung. Development of compact auto focus actuator for camera phone by
applying new electromagnetic configuration. In Kee S. Moon, editor, Proceedings of
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(60480J), Sapporo, Japan, December 5, 2005. Intl. Society for Optical Engineering.
[Jue05] Ari Juels. RFID Privacy: A Tecnical Primer for the Non-Technical Reader. In Katherine
Strandburg and Daniela Stan Raicu, editors, Privacy and Technologies of Identity: A
Cross-Disciplinary Conversation. Springer, 2005.
[KBM+02] Tim Kindberg, John Barton, Jeff Morgan, Gene Becker, Debbie Caswell, Philippe Debaty,
Gita Gopal, Marcos Frid, Venky Krishnan, Howard Morris, John Schettino, Bill
Serra, and Mirjana Spasojevic. People, places, things: web presence for the real world.
Mobile Networks and Applications, 7(5):365–376, 2002.
[MDK+06] Peter M. Moran, Saman Dharmatilleke, Aik Hau Khaw, Kok Wei Tan, Mei Lin Chan,
and Isabel Rodriguez. Fluidic lenses with variable focal length. Applied Physics Letters,
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[MJO99] Ruben Muniz, Luis Junco, and Adolfo Otero. A robust software barcode reader using
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Intelligence and Systems, pages 313–319, 1999.
[OHH04] Eisaku Ohbuchi, Hiroshi Hanaizumi, and Lim Ah Hock. Barcode Readers using the
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[PKA05] Lauri Pohjanheimo, Heikki Keränen, and Heikki Ailisto. Implementing Touchme
Paradigm with a Mobile Phone. In sOc-EUSAI ’05: Proceedings of the 2005 Joint
Conference on Smart Objects and Ambient Intelligence, pages 87–92, New York, NY,
USA, 2005. ACM Press.
[RA00] Jun Rekimoto and Yuji Ayatsuka. CyberCode: designing augmented reality environments
with visual tags. In DARE ’00: Proceedings of DARE 2000 on Designing augmented
reality environments, pages 1–10, New York, NY, USA, 2000. ACM Press.
[Roh04] Michael Rohs. Real-World Interaction with Camera-Phones. In 2nd International Symposium
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November 2004.
[Tur05] Emily Turrettini. Korean Start-Up Develops Auto-Focus in Camera Phone.
Weblog. Available at www.textually.org/picturephoning/archives/
2005/02/007111.htm, February 2005.
[WFGH99] RoyWant, Kenneth P. Fishkin, Anuj Gujar, and Beverly L. Harrison. Bridging physical
and virtual worlds with electronic tags. In CHI ’99: Proceedings of the SIGCHI conference
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1999. ACM Press.
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NeomRocket, Hipcricket is a pending acquisition company in the Neomedia Mobile Business Unit. Hipcricket is not a planned business unit. And, as Banks pointed out, this has been shown on the website for quite some time.
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