NeoMedia Technologies, Inc (NEOM)

[RisknReturn]

Here is the reason YA keeps loaning $450,000 to NEOM about every 5 weeks. First, they earn a $25,000 due diligence fee each time they make a loan to NEOM so they really only loan $425,000. But still you may wonder the reason that YA would continue to risk the $425K.

YA earns about $400,000 in interest over a 5 week period on its portfolio of past loans, so I believe YA's strategy is to convert at least that amount to common stock at an average conversion price of $.0065 per share; meaing that YA gets about 62 million shares by converting only the interest they are earning. Then YA sells those 62 million shares at whatever the market will bear- 2 months ago they were selling at $.02 and bringing in $1.2 million. Pretty much a no brainer to keep feeding NEOM $425,000 when they can turn that into $1.2 million, just by keeping NEOM alive. Based on today's close, YA can sell at $.0083 which only brings in $515,000 but still more than they lend to NEOM.

YA will keep playing this game until investors are unwilling to risk any further capital by buying NEOM shares. And if you think NEOM is worried if the price drops to $.005, you need to understand that the conversion price is resets daily by taking the lowest trading price in the last few months and then multiplying that price by anywhere from 80% to 97% to determine the conversion price. The game is seriously rigged and only stops when investors quit buying.