Replies to post #284790 on NeoMedia Technologies, Inc (NEOM)

[RisknReturn]

You got it right Bud, warrants at $.0001.

The gory details are in Item 4 of Exhibit 10.1 to the 8-K. NEOM gave YA "in the money warrants" with a fair value of $750,000.

Seems criminal and just maybe what NEOM did was illegal under corporate law:

The par value of a share of stock is the value stated in the corporate charter below which shares of that class cannot be sold upon initial offering; the issuing company promises not to issue further shares below par value, so investors can be confident that no one else will receive a more favorable issue price. Thus, par value is the nominal value of a security which is determined by the issuing company to be its minimum price.

In reviewing the 8-K it looks like they opted to skip the legal review. Huitt had been signing 10-Q's and 8-K's since he came on board but it looks like he may have wanted to disassociate from this gem.

[Poptech]

bigfoot: Yes, the warrants have an exercise price of $.0001 and are now the most valuable NeoMedia asset YA owns. Warrants do split and they expire in 5 years. Warrants are increasingly more common even in private equity. However, the pricing of these warrants is like nothing I have ever seen. I will see our securities attorney this week and have a few questions about this transaction.

Before everyone gets all excited about par value versus exercise value, shares can be exercised below par value. Par value is a random number chosen usually with little thought and carries about as much weight. The bad part is that if public companies are like private companies, the shareholders eat the difference between the conversion price and par value. Practically, the exercise transaction occurs at par with some type of an offset for investor payment. The result is the reduction in warrants cost shareholders $450,000. As appalling as that might sound, remember investors needed this deal. I am just not sure how a public company would account for the transaction. In a private company, the owners would literally write checks to cover the difference.