Forgive Me.
Fort Myers software company switches gears into paint business
NeoMedia officials say this new venture will help raise the money needed to market a new Internet product which links physical objects to the Internet
By LAURA LAYDEN, lllayden@naplesnews.com
August 12, 2004
NeoMedia Technologies Inc. had a one-track mind.
But not anymore.
The Fort Myers-based software development company has dipped its feet into the paint business.
While it may seem like a stretch for NeoMedia, company officials say this new venture will help raise the money needed to market its original product called "PaperClick," which links physical objects to the Internet. Using the technology, a bar code on a can of soda can be scanned with a special pen and then used to pull up the beverage maker's Web site, for example.
NeoMedia has worked to perfect and market the Internet technology since the company was founded in 1989.
But bringing the technology to market has been slow going.
"We have the patents," said Charles Jensen, the company's president, chief operating officer and acting chief executive officer. "We have the software. We are not penetrating the market."
That means it's tough to make money to pay for operations.
Enter the paint business.
On Feb. 6, NeoMedia acquired 13-year-old CSI International Inc. in Calgary, Alberta, Canada. CSI developed its own Micro Paint Repair System for fixing small scratches and chips on automobiles finishes.
NeoMedia hopes to take the "pioneering" technology nationwide. The company's proprietary system is billed as a quicker and less expensive way to make paint repairs.
When the acquisition of CSI was completed earlier this year, Jensen called it "a great day and the beginning of an exciting chapter for NeoMedia and our shareholders."
In the deal, NeoMedia, a publicly traded company, exchanged 7 million shares of its stock and $2.5 million cash for all of the outstanding shares in CSI, a private company.
NeoMedia's investment has already begun to reap rewards.
— On June 1, NeoMedia announced that it had signed a distribution agreement with Micro Paint Systems (Australasia) Limited of New Zealand. The agreement is for exclusive distribution rights to NeoMedia's paint repair products in Australia and New Zealand, contingent on a minimum purchase of 500 systems over five years, which would generate approximately $23 million in revenue to NeoMedia.
— On Aug. 2, NeoMedia announced that it had signed an agreement with MDA Co-Auto Ltd., a large buying consortium for new car franchised dealers in Western Canada, that could generate more than $2 million for NeoMedia. MDA wants to sell the micro paint products and system to its member dealers, who could then make quick repairs on new cars damaged in transport.
NeoMedia is marketing the repair products and system to many types of businesses, including body and repair shops, auto glass specialists and auto parts stores. Company officials say they can see entrepreneurs building businesses around the system because it's so effective and innovative.
Repairs can be made in less than an hour, using a chemical adhesion that makes the repairs permanent, Jensen said. This is a technology "that no one else in the world has," he said.
The repair system does not use isocyanates that are harmful to the environment, Jensen said. That means repairs don't have to be done in paint booths with huge exhaust fans and workers applying the product don't have to wear special breathing equipment. "That's why it's awesome — and it's so fast," he said.
Jensen said the base paint for the product comes from DuPont. He said a color-coded system is used to match the paint on vehicles exactly. But he'll say little else.
"It's a secret formula," he said. "It's like Coca-Cola has a secret formula. We have it locked in a safe in a lawyer's office in Calgary and only two people know what it is."
NeoMedia has created a new company to market the repair system. It's called NeoMedia Micro Paint Repair Inc. and it operates as a subsidiary of its parent company in Calgary. Stanton Hill, CSI's former CEO, is in charge of the day-to-day operations in Canada.
In Fort Myers, Art Gilfus serves as vice president of global sales for NeoMedia's new micro paint company. He joined the company about a month ago after seeing how the repair technology worked for himself.
"I went and saw it and I said, 'Wow this is cool. We can sell this I'm sure,'" Gilfus said.
He said he scratched initials on the side of a car with screwdriver and then watched in amazement as it was repaired in about 35 minutes. He said the repair was flawless and that using traditional ways to repair it would have taken several hours.
"Repairs can be done at a lower total cost because they don't take as long," Gilfus said. "We have the potential to change the landscape of how vehicles with paint damage are repaired and that is really not an understatement."
NeoMedia plans to open a corporate-owned micro paint retail center in Fort Myers. It will serve as a base for U.S. sales and training. Demonstrations will be conducted at the center, and it will eventually serve local customers in need of repairs.
A similar center is located in Canada.
NeoMedia hopes to sign licensing agreements with business owners across the country. They would be buying the rights to use the products, the training and all the product ingredients, Gilfus explained.
If all goes as planned, Jensen said NeoMedia should come out a much stronger company. He hopes to see the company's PaperClick technology take off soon.
With the introduction of cell phones that can take pictures, he thinks NeoMedia will finally get the break it needs for PaperClick.
The company is hoping to reach agreements with telecommunications giants, such as Verizon and Sprint, to incorporate the technology in camera phones. With the technology, customers could take a picture of a bar code on a product and then be linked directly to a Web site with more information, for example.
Earlier this year, NeoMedia entered into an agreement with London-based iCoupon Ltd. to develop a state-of-the-art electronic coupon program for consumers in Europe. Once a coupon is delivered electronically to the camera phone's screen, the consumer will be able to bring the phone to a retailer, where it can be scanned through a bar code reader.
Jensen said the mobile phone companies are excited about NeoMedia's technology. But it can take anywhere from 12 to 18 months for them to introduce a new product.
Also, NeoMedia has to sell its PaperClick technology to what Jensen calls "brand managers," those companies that control the name for such products as Coca-Cola and Pepsi. He said the ones he's talked to are excited about the prospects.
"They are ready to do it now," he said. "They love it."
NeoMedia trades on the Over-the-Counter Bulletin Board under the symbol NEOM. It's shares closed down slightly Wednesday at 7 cents a share
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