NeoMedia Technologies, Inc (NEOM)

[ASTOCKCOLLAPSE N0W]

Dude that's GROSS...

as in a gross loss, as in the cost of goods sold was greater than the net dollars in sales received.

It's the equivalent of a widget business that buys its widgets for $1 and then turns around and sells it for $0.87. Net result, a gross loss of $0.13.

Gross doesn't factor into operating costs which, at NEOM in 2006, represented 89.7% of all costs excluding one-time items and financing related costs .. just for gavitect and qode.

In 2006 NEOM recorded $15.8 million in costs related to operating activities for qode and gavitec. The unit generated $1.6 million in annual sales at a gross margin of (negative) -13%.

In 2006 the more "qode" NEOM sold the more money it lost. Not a workable model, obviously. Qode should be / needs to be operating at 50%+ gross margins while growing at a 25% quarter over quarter rate not -13% gross margins and 10% annualized growth rates.

Assuming that operating costs remain static at $16 million per year, at a 50% gross margin and 25% QoQ growth rate, NEOM will achieve a profit on a operating basis of $780,000 by Q3 2010.

At a 33% QoQ growth rate and 50% gross margin, operating profitability would be reached by Q4 2009 .. 50% Q1 2009 .. 66% Q4 2008.

As you can see management's stated goal of reaching "break even", which is a nebulous statement in and of itself ( break even on what line gross, operating, net?), by Q1 2008 seems unlikely if not impossible unless the company dramatically slashes operating costs.

You can play around with my spreadsheet here...

http://spreadsheets.google.com/ccc?key=pRaJyugT6zUOmX2JUit6KJw&hl=en