codes: It is called accrual accounting and it can make it tough for an investor to understand a quarterly performance report. The eBay revenue will be divided up over 5 years even though the cash generated from the eBay deal is received and was immediately redistributed to YA. So even if we see a 45% increase in revenue ($100,000) over the same quarter last year, that would mean new revenue is declining.
So, it would take 15 deals the size of eBay to technically break even in the quarter. $100,000*(3*5) - $1.5M. However, because of accrual accounting, NeoMedia could still need to borrow cash to sustain operations. Are there 15 eBays?
As NeoMedia transitions more and more to a campaign manager, the affect of accrual accounting will diminish since click-throughs are recognized in the quarter of the click. This is why the change in direction is so important to the financials. If NeoMedia generates $1,500,000 in quarterly click-throughs, they could potentially stop borrowing. Of course, that is a heck of lot of clicks - say 15 million clicks.
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