Replies to post #73782 on NeoMedia Technologies, Inc (NEOM)

[yellowjacket]

SS9173: See page 54....

"Due To The Accounting Treatment Of Certain Convertible Preferred Stock Instruments Issued By NeoMedia, A Fluctuation In NeoMedia’s Stock Price Could Have A Material Impact On NeoMedia’s Results Of Operations

During the first quarter of 2006, NeoMedia recognized income in the amount of $4,768,000 from adjustments recorded to reflect the change in fair value of derivatives issued in connection with its Series C Convertible Preferred Shares. The income results from a decrease in NeoMedia’s share price from $0.389 per share at the time of issuance of the Series C Convertible Preferred Shares (February 17, 2006) to $0.345 at March 31, 2006. NeoMedia will adjust the carrying value of the derivative instruments to market at each balance sheet date. As a result, NeoMedia could experience significant fluctuations in its net income (loss) in future periods as a result of such charges."

I guess the pps drop was a blessing in disguise...lol.

[success622]

ss9173,
I have this accounting type question as well;
I am wondering if the below effect to THIS quarter's numbers is a one time event, or not (see next sentence and the part in bold)

on page 29 the below info is found; now, is this a "one time effect"? or will it have an effect on future quarters:

8. STOCK BASED COMPENSATION


At March 31, 2006, NeoMedia has four employee stock option plans (the 1996 Stock Option Plan, the 1998 Stock Option Plan, the 2003 Stock Option Plan, and the 2005 Stock Option Plan) and one employee stock compensation plan (the 2003 Stock Incentive Plan) (collectively, the “Plans”). Prior to January 1, 2006, NeoMedia accounted for those plans under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation. No stock-based employee compensation cost was recognized in the statement of operations for the fiscal years or interim periods ended prior to December 31, 2005, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Effective January 1, 2006, NeoMedia adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment, using the modified-prospective-transition method. Under that transition method, compensation cost recognized in the first quarter of 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of Statement 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of Statement 123(R). Results for prior periods have not been restated.

As a result of adopting Statement 123(R) on January 1, 2006, NeoMedia’s net loss for the three months ended March 31, 2006 is $1,477,000 higher than if it had continued to account for share-based compensation under Opinion 25. Basic and diluted income per share for the three months ended March 31, 2006 would have been $0.00 if NeoMedia had not adopted Statement 123(R), compared to reported basic and diluted loss per share of $0.00. Estimated income tax benefits recognized during the three months ended March 31, 2006 were offset by a valuation allowance since realization was not reasonably assured.

Prior to the adoption of Statement 123(R), it was NeoMedia’s policy to present all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in its statement of cash flows, however, due to NeoMedia’s tax loss carryforward, any such benefits were always fully offset by a valuation allowance. Statement 123(R) requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. NeoMedia will use this presentation if and when it has exhausted its tax loss carryforward.

[beam11]

ss9173 - I just got in, and I have not had time to review the financial statement. I have been in the emergency room for 4 hours. Broke a bone in my ankle.

From the best of my memory, NEOM's debt was restructured again in 2006, due to the purchase of the subs. In the 2005 restructured debt NEOM, had a gain on the restructuring of 2005 debt. Each time, in the past when I have stated that NEOM had a gain on restructured debt, I was referring to the only financial statement out at that time, which was the 12/31/2005 financial statement. It appears to me that what you are reading is a netting of three or four items on the cash flow statement.

For 3/31/2006 (I have not reviewed it yet), just reviewing your post, the cash flow statement will reflect a comparision of 12/31/2005, with 3/31/2006, plus 2006 will also include losses on discounted stock (cornell's fees) sold to Cornell in 2006. If there was a gain at 12/31/2005, and NEOM, increased the SEDA, there will be a net difference of a loss, between 12/31/2005 and 3/31/2006, because the fees are higher in borrowing more money to purchase the subs.

I will review the financial statement and get back with you, if you have not figured it out by then. Just remember the cash flow statement is the net change from the end of one period to the end of the next period.

This may help. The normal balance of Assets is a debit - positive no brackets. The normal balance of Liabilities is a credit with brackets. In the cash flow statement you may see normal debit balance account with brackets - credit - such as cash. This means that cash decreased from one period to another. Accounts payable is a credit account. If accounts payable in the cash flow account has a debit, this means that accounts payable decreased, and this is a "use of source of funds" in deceasing accounts payable.

This must be confusing - forget it - I doubt there is a net increase in cash flow anyway. Must be the shot ER gave me, to think I could explain this. Gotta get a cup of coffee.