NeoMedia Technologies, Inc (NEOM)

[jonesieatl]

alwayswright , some additional info

"Do these warrants come from the total number of outstanding shares or are they somehow addtional and represent some additional dilution?"

Conversion of warrants requires issuance of additional shares and thus does represent some additional dilution.

"When a company issues warrants, is this somehow a statement that they believe the share price is going to exceed the pps of the warrant?"

Not necessarily. There have been many previous warrants included in financings with Yorkville and typically they have had prices higher than the PPS at the time of the financing.

However , often in subsequent financings , NEOM has had to reduce the prices of those prior warrants as an inducement for Yorkville to loan fresh money.

"In the case of a R/S, do the warrants get split also?"

As YJ said , yes , nearly 'everything' gets split-adjusted.

One item which does not 'have' to be split-adjusted is the Authorized Share count. Many companies , including other clients of Yorkville , have done a R/S which effectively lowered the outstanding share count and lowered the Fully Diluted number , but the Authorized Share count was left intact. This gives the owner of various convertible instruments a lot of new 'headroom' for converting warrants , Preferred Shares , etc without exceeding the Authorized limit.

For example , back on 3/31/08 NEOM's Fully Diluted share count was around 9.6 BILLION although the Authorized is only 5 Billion.

Obviously in this situation Yorkville can't convert all of their financial instruments into shares , nor even exercise the voting privileges accruing to all of those shares , since the Authorized doesn't allow it.

(That 9.6 Billion was at a PPS of .008 and with approx. 1 Billion shares outstanding , so let's just assume that at yesterday's closing PPS of .007x the Fully Diluted would be a similar number. Hey , with the PPS going up recently the situation certainly got better than a theoretical Fully Diluted number in excess of 20 Billion shares we had at a PPS of .002)

The balance of roughly 8.6 Billion shares in that Fully Diluted number represented the shares Yorkville could convert all of their Preferred Shares , warrants and convertible debentures into. (That doesn't include the additional shares Yorkville now has rights to , due to financings which have taken place since 3/31 , including this most recent one.

If NEOM effects a 10:1 R/S at a time when the PPS is in the neighborhood of .008 , that Fully Diluted number drops to something close to 1 Billion. Leaving the Authorized Share count at 5 Billion provides plenty of 'headroom' for further dilution from either future financings or a drop in the share price.

I and others have long speculated that:

-- since Yorkville is in the driver's seat and

-- Yorkville would in fact like to have every share that it is owed to be within the Authorized Share count

that we would eventually see a Reverse Split.

This latest filing simply confirms that , as it has now become a contract item ... in spite of statements by previous execs and/or BOD members that a R/S was not in the cards.

One additional comment ... in YJ's reply to you he said "The company also receives cash if and when warrants are exercised."

Well yeah , they can in fact receive cash , except that there have been default clauses in these financings which say if NEOM is in default of various contract provisions warrants can be exercised in a "cashless exercise" in which NEOM would receive no money.

So it's entirely possible for Yorkville to get 100's of millions of shares for free depending on the surrounding circumstances.

Just FWIW and FYI

jonesie