As filed with the Securities and Exchange Commission on June 26, 2002
File No. ____________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-8
Registration Statement
Under the Securities Act of 1933
NEOMEDIA TECHNOLOGIES, INC.
(Name of Registrant in its charter)
DELAWARE 36-3680347
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2201 SECOND STREET, SUITE 600
FORT MYERS, FLORIDA 33901
941-337-3434
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
NEOMEDIA TECHNOLOGIES, INC.
2002 STOCK OPTION PLAN
(Full Title of the Plan)
CHARLES W. FRITZ
2201 SECOND STREET, SUITE 600
FORT MYERS, FLORIDA 33901
941-337-3434
941-337-3668 - FAX
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
Clay Parker Charles W. Fritz
Kirkpatrick & Lockhart LLP Charles T. Jensen
Suite 200 NeoMedia Technologies, Inc.
201 South Biscayne Blvd. 2201 Second Street, Suite 600
Miami, FL 33131 Fort Myers, Florida 33901
(305) 539-3300 (239) 337-3434
(305) 358-7095 Fax (239) 337-3668 Fax
CALCULATION OF REGISTRATION FEE
-------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED SHARE (2) PRICE FEE
-------------------------------------------------------------------------------------------------------
Common Stock from Option Exercise (1) 3,000,000 $0.0100 30,000 $2.76
-------------------------------------------------------------------------------------------------------
Common Stock from Option Exercise (1) 3,040,000 $0.0500 152,000 $13.98
-------------------------------------------------------------------------------------------------------
Common Stock from Option Exercise (3) 3,400,000 $0.0900 340,000 $28.15
-------------------------------------------------------------------------------------------------------
TOTAL REGISTRATION FEE 9,440,000 522,000 $44.89
-------------------------------------------------------------------------------------------------------
(1) Represents shares of common stock issued directly to consultants and employees of the Company
under the NeoMedia 2002 Stock Option Plan, which would result from the exercise of the option
rights granted to each of the individual shareholders.
(2) Pursuant to Rule 457(h), registration fee is computed upon the basis of the price at which the
options may be exercised.
(3) These shares being registered under this Registration Statement are subject to issuance at prices
that are currently undeterminable; consequently, $28.15 of the total registration fee being paid
hereunder has been estimated/determined pursuant to Rule 457(h), and is based on the closing price
of the Company's Common Stock on the OTCBB market on June 25, 2002.
2
PART I
Pursuant to the Note to Part I of Form S-8, information required under Items 1
and 2 of Form S-8 is omitted as a part of this Registration Statement.
PART II
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
------------------------------------------------
The following documents filed with the Securities and Exchange Commission are
hereby incorporated by reference:
(a) The Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 2001.
(b) Form 10-Q for the three-month period ending March 31, 2002.
(c) Form 10-Q/A for the three- and nine-month periods ending September 30,
2001.
(d) Form 10-Q for the three- and six-month periods ending June 30, 2001.
(e) Form 10-Q/A for the three-month period ending March 31, 2001.
(f) Form 8-K/A dated November 5, 2001, disclosing change in independent
accountants.
(g) Form 8-K/A dated June 6, 2001, disclosing material purchase of assets from
Qode.com, Inc., except for the December 31, 2000 financial statements and
audit opinion thereon dated May 4, 2001 and the financial statements of
Qode.Com, Inc. (A Development Stage Enterprise) at December 31, 1999 and
for the period from March 29, 1999 (inception) through December 31, 1999
and the audit opinion dated July 21, 2000. Such financial statements are
included in this registration statement.
(h) The description of the Company's Common Stock, par value $.01 per share
(the "Common Stock"), which is contained in the Company's Registration
Statement on Form 8-A filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") on November 18, 1996, including any amendment
or report filed with the Commission for the purpose of updating such
description of Common Stock.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934 prior to the filing
of a post-effective amendment which indicates that all securities offered have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference in this Registration Statement and to be
a part hereof from the date of filing such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
---------------------------------
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
-----------------------------------------------
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
--------------------------------------------------
As permitted by Delaware General Corporation Law ("DGCL"), the Company has
included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, except for liability (i) for any
breach of director's duty of loyalty to the Company or its stockholders, (ii)
for acts or omissions not in good faith or which involved intentional misconduct
or a knowing violation of law, (iii) in respect of certain unlawful dividend
payments or stock redemptions or repurchases, as provided in Section 174 of the
DGCL, or (iv) for any transaction from which the director derived an improper
personal benefit. The effect of this provision in the Company's Certificate of
Incorporation is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care as
3
a director except in the situations described in (i) through (iv) above. This
provision does not limit nor eliminate the rights of the Company or any
stockholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care. These provisions will not
alter the liability of directors under federal securities laws.
The Certificate of Incorporation and the by-laws of the Company provide that the
Company is required and permitted to indemnify its officers and directors,
employees and agents under certain circumstances. In addition, if permitted by
law, the Company is required to advance expenses to its officers and directors
as incurred in connection with proceedings against them in their capacity as a
director or officers for which they may be indemnified upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to
indemnification. At present, the Company is not aware of any pending or
threatened litigation or proceeding involving a director, officer, employee or
agent of the Company in which indemnification would be required or permitted.
The Company has obtained directors and officers liability insurance. The Company
believes that its charter provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors and officers of the Company pursuant to the foregoing
provisions or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission ("Commission"), such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
--------------------------------------------
Not Applicable
4
INDEX OF FINANCIAL STATEMENTS
Qode.com, Inc. financial statements for the year ended December 31, 2000.....F-2
Qode.com, Inc. (A Development Stage Enterprise) financial statements for Period
from March 29, 1999 (inception) to December 31, 1999.......................F-21
F-1
FINANCIAL INFORMATION
Report of Independent Certified Public Accountants
To Qode.com, Inc.:
We have audited the accompanying balance sheet of Qode.com, Inc. (a Florida
corporation in the development stage) as of December 31, 2000, and the related
statements of operations, changes in redeemable preferred stock and
stockholders' deficit, and cash flows for the year then ended and the related
statements of operations and cash flows for the period from inception (March 29,
1999) to December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the financial
statements of Qode.com, Inc. for the period from inception to December 31, 1999.
Such statements are included in the cumulative inception to December 31, 2000,
totals of the statements of operations and cash flows and reflect total revenues
and net loss of zero percent and 13 percent, respectively, of the related
cumulative totals. Those statements were audited by other auditors, whose report
has been furnished to us, and our opinion, insofar as it relates to amounts for
the period from inception to December 31, 1999, included in the cumulative
totals, is based solely upon the report of the other auditors.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit and the report of the other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Qode.com, Inc. as of December 31, 2000, and the
results of its operations and its cash flows for the year then ended and for the
period from inception to December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses from operations and the
current cash position of the Company raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ ARTHUR ANDERSEN LLP
Tampa, Florida,
May 4, 2001 (except with respect to the matter discussed in Note 13, as to which
the date is June 30, 2001)
F-2
QODE.COM, INC.
(A Development Stage Enterprise)
BALANCE SHEET - DECEMBER 31, 2000
ASSETS Amount
------
CURRENT ASSETS:
Cash and cash equivalents $18,686
Accounts receivable 6,041
Inventory 218,690
Other current assets 13,499
---------
Total current assets 256,916
PROPERTY AND EQUIPMENT, net 875,263
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, net 2,359,932
DEPOSITS 39,539
---------
Total assets $3,531,650
==========
F-3
QODE.COM, INC.
(A Development Stage Enterprise)
BALANCE SHEET - DECEMBER 31, 2000
(continued)
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT Amount
------
CURRENT LIABILITIES:
Accounts payable $982,610
Dividends payable 94,119
Accrued expenses 425,103
Current portion of notes payable 3,617,323
Current portion of capital lease obligations 368,574
Loans from officers 224,740
---------
Total current liabilities 5,712,469
NOTES PAYABLE, net of current portion 5,857
CAPITAL LEASE OBLIGATIONS, net of current portion 168,176
---------
Total liabilities 5,886,502
---------
COMMITMENTS AND CONTINGENCIES
SERIES A 15% CUMULATIVE CONVERTIBLE REDEEMABLE
PREFERRED STOCK, $.0001 par value; 3,000,000 shares
authorized, 2,044,560 shares issued and outstanding,
liquidation value of $2,502,641 2,480,991
STOCKHOLDERS' DEFICIT:
Common stock, $.0001 par value; 25,000,000 shares
authorized, 8,023,000 shares issued and outstanding 802
Additional paid-in capital - common stock 1,927,313
Series U convertible preferred stock, $.0001
par value; 1,500,000 shares authorized, issued
and outstanding 150
Additional paid-in capital - preferred stock 2,999,850
Accumulated deficit (9,763,958)
-----------
Total stockholders' deficit (4,835,843)
Total liabilities, redeemable
preferred stock and
stockholders' deficit $3,531,650
===========
The accompanying notes are an integral part of this balance sheet.
F-4
QODE.COM, INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD
FROM MARCH 29, 1999 (DATE OF INCEPTION), THROUGH DECEMBER 31, 2000
Cumulative
from Inception
March 29, 1999
Year Ended to
December 31, December 31
2000 2000
---- ----
REVENUE $211,952 $211,952
COST OF GOODS SOLD 213,345 213,345
-------- --------
GROSS MARGIN (1,393) (1,393)
COSTS AND EXPENSES:
Research and development 1,109,686 1,505,928
Sales and marketing 556,541 598,516
General and administrative 5,839,413 6,686,825
Total costs and expenses 7,505,640 8,791,269
NET INTEREST EXPENSE 1,008,938 971,296
--------- ---------
NET LOSS (8,515,971) (9,763,958)
PREFERRED STOCK DIVIDENDS (356,203) (552,200)
ACCRETION OF BENEFICIAL CONVERSION
FEATURE ON PREFERRED STOCK (15,296) (20,010)
--------- ---------
Net LOSS AVAILABLE TO COMMON STOCKHOLDERS $(8,887,470) $(10,336,168)
============ =============
NET LOSS PER SHARE - BASIC AND DILUTED $(1.11) $(1.29)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 8,023,000 8,018,071
============ =============
The accompanying notes are an integral part of these statements.
F-5
QODE.COM, INC.
(A Development Stage Enterprise)
STATEMENT OF CHANGES IN REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 2000
Additional
Series A Paid-in Series U Convertible
Redeemable Capital for Preferred Stock
Preferred Common Stock Common
Stock Shares Amount Stock Shares Amount
------------- --------- ---------- -------------- --------- --------
BALANCE, December 31, 1999 $2,154,711 8,023,000 $802 $(49,557) -- $--
Issuance of 19,560 shares of Series A
preferred stock in exchange for
services 48,900 -- -- -- -- --
Issuance of Series U preferred stock -- -- -- -- 1,500,000 150
Issuance of 372,780 warrants in
exchange for services -- -- -- 1,126,790 -- --
Issuance of 326,666 warrants attached
with notes payable -- -- -- 675,681 -- --
Issuance of employee stock options
with exercise price below market
value -- -- -- 150,216 -- --
Re-pricing of employee stock options -- -- -- 395,682 -- --
Series A preferred stock dividends 262,084 -- -- (262,084) -- --
Series U preferred stock dividends -- -- -- (94,119) -- --
Accretion of beneficial conversion
feature on preferred stock 15,296 -- -- (15,296) -- --
Net loss -- -- -- -- -- --
__ __ __ __ __ __
------------- --------- ---------- -------------- --------- --------
BALANCE, December 31, 2000 $2,480,991 8,023,000 $802 $1,927,313 1,500,000 $150
============= ========== ========== ============== ========= ========
Additional
Paid-in
Capital for Total
Preferred Accumulated Stockholders'
Stock Deficit Deficit
BALANCE, December 31, 1999 -- $(1,247,987) $(1,296,742)
Issuance of 19,560 shares of Series A
preferred stock in exchange for
services -- -- --
Issuance of Series U preferred stock 2,999,850 -- 3,000,000
Issuance of 372,780 warrants in
exchange for services -- -- 1,126,790
Issuance of 326,666 warrants attached
with notes payable -- -- 675,681
Issuance of employee stock options
with exercise price below market -- -- 150,216
value
Re-pricing of employee stock options -- -- 395,682
Series A preferred stock dividends -- -- (262,084)
Series U preferred stock dividends -- -- (94,119)
Accretion of beneficial conversion
feature on preferred stock -- -- (15,296)
Net loss -- (8,515,971) (8,515,971)
---------- ------------ ------------
BALANCE, December 31, 2000 $2,999,850 $(9,763,958) $(4,835,843)
========== ============ ============
The accompanying notes are integral part of this statement.
F-6
QODE.COM, INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD
FROM MARCH 29, 1999 (DATE OF INCEPTION), THROUGH DECEMBER 31, 2000
Cumulative from Inception
Year Ended (March 29, 1999
December 31, to
2000 December 31, 2000)
---- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(8,515,971) $(9,763,958)
Adjustments to reconcile net loss to net cash used in
operating activities-
Depreciation and amortization 417,410 434,932
Series A preferred stock issued for services 48,900 48,900
Warrants issued in exchange for services 1,126,790 1,884,627
Stock options issued with exercise price below market value 150,216 150,216
Expense related to the re-pricing of employee stock options 395,682 395,682
Changes in assets and liabilities-
Accounts receivable (6,041) (6,041)
Inventory (218,690) (218,690)
Other current assets 4,652 (13,499)
Deposits (9,310) (39,539)
Accounts payable 831,022 982,610
Accrued expenses 377,857 425,103
------- -------
Net cash used in operating activities (5,397,483) (5,719,657)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (382,222) (509,013)
Capitalization of software development costs (2,498,752) (2,498,752)
----------- -----------
Net cash used in investing activities (2,880,974) (3,007,765)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable and detachable warrants 4,298,861 3,623,180
Proceeds from loans from officers 151,407 224,740
Principal repayments of capital lease (125,612) (125,612)
Proceeds from the issuance of common stock -- 23,800
Proceeds from the issuance of Series A redeemable preferred stock
net of issuance costs of $25,000 -- 2,000,000
Proceeds from issuance of Series U convertible preferred stock 3,000,000 3,000,000
---------- ---------
Net cash provided by financing activities 7,324,656 8,746,108
---------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (953,801) 18,686
CASH AND CASH EQUIVALENTS, beginning of year 972,487 --
---------- ---------
CASH AND CASH EQUIVALENTS, end of year $18,686 $18,686
========== =======
F-7
QODE.COM, INC.
A Development Stage Enterprise
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
AND THE PERIOD FROM MARCH 29, 1999 (DATE OF INCEPTION),
THROUGH DECEMBER 31, 2000
(continued)
Cumulative from
Inception
(March 29, 1999
Year Ended To
December 31, December 31,
2000 2000)
---- ----
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $180,000 $160,189
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Accretion of redeemable preferred
stock $15,296 20,010
Accrued dividends on Series A
preferred stock $262,084 458,081
Accrued dividends on Series U
preferred stock $94,119 94,119
Property and equipment acquired
under capital lease $662,362 662,362
The accompanying notes are an integral part of these statements.
F-8
QODE.COM, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
1 NATURE OF BUSINESS ORGANIZATION
Qode.com, Inc. (Qode.com or the Company) commenced operations on March 29,
1999, and is incorporated in the State of Florida. Qode.com is a
development stage company, as defined in Statement of Financial Accounting
Standards (SFAS) No. 7, "Accounting and Reporting By Development Stage
Enterprises". The Company intends to provide manufacturers, retailers,
advertisers and users a unique tool for Website navigation through the use
of imbedded standard bar codes and Uniform Product Codes (UPC). It is the
Company's mission to develop, operate, maintain and promote the use of
Qode.com technologies to enable any bar code to interface with their
technology.
The Company's financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred losses
since its inception and during its development stage as it has devoted
substantially all of its efforts toward building network infrastructure,
internal staffing, developing systems, expanding into new markets,
building a proprietary database and raising capital. The Company has
generated little revenue to date and is subject to a number of risks,
including dependence on key individuals, the ability to demonstrate
technological feasibility, and the need to obtain adequate additional
financing necessary to fund the development and marketing of its products
and services, and customer acceptance. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may results from the
outcome of this uncertainty.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
INVENTORY
Inventory is stated at the lower of cost or market, and at December 31,
2000 was comprised of QoderTM handheld scanning systems. Cost is
determined using the weighted average method.
F-9
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Repairs and maintenance are charged to expense as incurred. Depreciation
is computed using the straight-line method over the estimated useful lives
of the related assets. Computer hardware and purchased software are being
depreciated over a three-year period, and furniture and fixtures are being
depreciated over a five-year period.
Depreciation expense was $278,590 for the year ended December 31, 2000.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
In accordance with the American Institute of Certified Public Accountants
Statement of Position No. 98-1, "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use," all costs related to the
development or purchase of internal use software other than those incurred
during the application development stage are to be expensed as incurred.
Costs incurred during the application development stage are required to be
capitalized and amortized over the useful life of the software. The
Company has expensed $1,109,686 in research and development costs for the
year ended December 31, 2000. The Company has capitalized $2,498,752 in
software development costs for the year ended December 31, 2000.
Amortization expense was $138,820 for the year ended December 31, 2000.
REDEEMABLE PREFERRED STOCK
Redeemable preferred stock is carried at the net consideration to the
Company at time of issuance, increased by accrued and unpaid cumulative
dividends and periodic accretion to redemption value using the interest
method. Accrued and unpaid dividends and redemption accretion are affected
by charges against retained earnings, or, in the absence of retained
earnings, additional paid-in capital.
REVENUE RECOGNITION
Revenue is generated from the sale of Qode's proprietary hand held bar
code scanners. Revenue is recognized when the product is delivered to the
customer.
INCOME TAXES
In accordance with Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes", income taxes are accounted for using
the assets and liabilities approach. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities, and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
recognized. The Company has recorded a 100% valuation allowance as of
December 31, 2000.
F-10
COMPUTATION OF NET LOSS PER SHARE
Basic and diluted net loss per share is computed by dividing net loss by
the weighted average number of shares of common stock outstanding during
the period. The Company has excluded all common stock equivalents from the
calculation of diluted net loss per share because these securities are
anti-dilutive. The shares excluded from the calculation of diluted net
loss per share and reserved for future issuance are detailed in the table
below:
2000
----
Outstanding stock options 1,540,511
Outstanding warrants 1,229,146
Shares issuable on conversion of notes payable 6,800,000
Shares issuable on conversion of Series A
preferred stock 4,049,701
Shares issuable on conversion of notes payable were calculated based on
the terms of the notes as if they were converted on December 31, 2000.
FINANCIAL INSTRUMENTS
The Company believes that the fair value of its financial instruments
approximate carrying value.
CONCENTRATION OF CREDIT RISK
Revenue was generated from the selling of barcode scanners with
approximately 91 percent of those sales to one customer.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
compensation." The provisions of SFAS 123 allow companies to either
expense the estimated fair value of stock options or to continue to follow
the intrinsic value method set forth in Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), but
disclose the pro forma effects on net income or loss as if the fair value
had been expensed. The Company has elected to apply APB 25 in accounting
for its employee stock options and, accordingly recognizes compensation
expense for the difference between the fair value of the underlying common
stock and the grant price of the option at the measurement date.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998 the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended by SFAS No. 137 and SFAS
138. SFAS No. 133, as amended, establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that an entity recognize all derivatives as either assets of
liabilities in the balance sheet and measure those instruments at fair
value. The adoption of these new accounting standards did not have an
impact on the Company's financial position or results of operations.
On December 3, 1999 the Securities and Exchange Commission (SEC) staff
released Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition".
This SAB provides guidance on the recognition, presentation and disclosure
of revenue in financial statements. The Company implemented SAB No. 101
for the quarter ended June 30, 2000. It did not have an impact on the
Company's results of operations.
F-11
COMPREHENSIVE INCOME
For the year ended December 31, 2000, there were no differences between
the balance sheet and income statement and therefore no comprehensive
income.
3 LOANS FROM OFFICERS
Between October and December 2000, several of the Company's officers
elected to defer their salaries due to cash flow difficulties experienced
by the Company. The total amount deferred was $83,154.
On November 28, 2000, the Company issued promissory notes to officers
totaling $135,000, with an interest rate of 6.09 percent. The principal
and interest are payable on February 26, 2001
4 PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31, 2000:
2000
----
Computer hardware and purchased software $1,139,578
Furniture and fixtures 31,797
------
1,171,375
Less- Accumulated depreciation (296,112)
---------
$875,263
=========
5 NOTES PAYABLE
Convertible Notes
On January 18, 2000, the Company entered into a note purchase agreement
with an investor for $3,000,000, with an interest rate of 12 percent. The
principal and interest were due July 17, 2000. The principal and interest
are convertible at the option of the holder upon or after a $10 million
financing. The conversion rate is 85 percent of the price per share in the
financing. In connection with this note, 200,000 warrants were issued with
an exercise price of $4.50 per share for the Company's common stock. These
warrants may be exercised at anytime following the closing of a $10
million financing and expire January 17, 2005. The Company allocated the
proceeds from the issuance of the note between the note and warrants based
on the relative fair value method. The difference between the face amount
of the note and the amount allocated to it was recorded as a discount, and
amortized to interest expense over the life of the note.
On August 1, 2000, the Company extended this note to November 17, 2000. As
additional consideration for the extension of the note, the Company
reduced the exercise price of the 200,000 warrants to $1.00. The
additional expense of $63,180 that resulted from the re-pricing was
charged to interest expense. As of December 31, 2000, the note had not
been repaid.
F-12
During 2000, the Company entered into four separate note purchase
agreements with investors totaling $400,000 with interest rates of 12
percent. The principal and interest on three of the notes were due October
9, 2000 through November 4, 2000, and principal and interest on the other
note is due January 6, 2001. The principal and interest are convertible at
the option of the holder upon or after a $7 million financing. The
conversion rate is 85 percent of the price per share in the financing. In
connection with these notes, 26,666 warrants were issued with an exercise
price of $2.00 per share for the Company's common stock. These warrants
may be exercised at anytime following the closing of a $7 million
financing. The proceeds from the issuance of these notes and warrants were
allocated between the two using the relative fair value method. The
resulting discount on the notes was amortized to interest expense over the
life of the notes.
OTHER NOTE PAYABLE
During March 2000, the Company entered into a note agreement in the amount
of $42,500, bearing interest at a rate of 11 percent per year and expiring
on March 15, 2002, to finance its phone system. The note is secured by
telephone equipment.
On November 28, 2000 and December 14, 2000, the Company signed two
promissory notes in the amounts of $20,000 and $200,000, bearing interest
at a rate of 6.09 percent and 15 percent per year, with principal and
accrued interest payable February 26, 2001 and January 28, 2001,
respectively. In connection with the December 14, 2000 note, 100,000
warrants were issued with an exercise price of $.50 per share for the
Company's common stock. These warrants may be exercised at anytime
following the closing of the Next Financing, as defined in the warrant
agreement. The proceeds from the issuance of this note and warrants were
allocated between the two using the relative fair value method. The
resulting discount on the note is being amortized to interest expense over
the life of the note.
Notes payable consists of the following:
Amount
------
Convertible notes, interest bearing at 12% per annum $3,400,000
Note payable, interest bearing at 11% per annum, due in monthly
installments through March 2002 27,679
Note payable, unsecured interest bearing at 6.09% per annum, due
February 2001 20,000
Note payable, unsecured interest bearing at 15% per annum, due
January 2001 200,000
----------
Total notes payable 3,647,679
Less discount (24,499)
Less- Current portion (3,617,323)
-----------
Notes payable, net of current portion $5,857
======
As of December 31, 2000 there was $197,740 of accrued interest.
6 INCOME TAXES
For the years ended December 31, 2000, the components of income tax expense were
as follows:
2000
----
Current $-
Deferred -
-
----
Income tax expense $-
F-13
The net amounts of deferred tax assets recorded in the balance sheet at December
31, 2000, are as follows:
2000
----
Deferred tax asset:
Depreciation of property and equipment $17,901
Start-up costs 199,566
Net operating loss carryforward 3,443,643
Less- Valuation allowance (3,661,110)
Total deferred tax asset $--
===========
Deferred tax liabilities: $--
-----------
Total net deferred taxes $--
===========
SFAS No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely
than not, that some portion or all of the deferred tax assets will not be
realized. After consideration of all the evidence, both positive and
negative, management has determined that a $3,661,110 valuation allowance
at December 31, 2000 is necessary to reduce the deferred tax assets to the
amount that will more likely than not be realized. The change in the
valuation allowance for the current year is $3,194,880. At December 31,
2000, the Company has available net operating loss carryforwards of
$9,151,323, which expire in the year 2020 and 2019.
A reconciliation of income taxes computed at the U.S. federal statutory
tax rate to income tax expense for the year ended December 31, 2000, is as
follows:
2000
----
Taxes at the U.S. statutory rate $(2,895,430)
State taxes, net of federal benefit (309,129)
Nondeductible items 9,679
Change in valuation allowance 3,194,880
------------
Total income tax expense $-
============
7 COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
The Company is not presently a party to any significant litigation. From
time to time, however, the Company is involved in various legal actions
arising in the normal course of business, which the Company believes will
not materially affect the financial position or results of operations.
EMPLOYMENT CONTRACTS
The Company has employment contracts with William Carpenter, Greg Miller
and Michael Miller beginning November 1, 2000.
Future payments under the above employment contracts are:
F-14
2001 $450,000
2002 450,000
2003 375,000
-------
Total $1,275,000
==========
CAPITAL LEASE OBLIGATIONS
During April 2000, the Company acquired computer equipment for $662,362
under a capital lease, expiring on April 26, 2002. Accumulated
depreciation on this equipment was approximately $166,000 at December
31,2001
Future minimum lease payments on capital lease obligations as of December
31,2000, are as follows:
Year Amount
------
2001 $415,358
2002 173,519
--------
588,877
Less - Amount representing interest on
obligations under capital leases (15%) (52,127)
Current portion of capital lease obligations (368,574)
---------
Capital lease obligations, net of current portion $168,176
========
OPERATING LEASE OBLIGATIONS
The Company leases its office facility under a non-cancelable operating
lease expiring in March 2005. Rental expense, net of sub-lease income, was
$73,036 for the year ended December 31, 2000.
Lease commitments under this non-cancelable operating leases as of
December 31, 2000, are as follows:
Year Ending Amount
------
2001 $391,399
2002 233,876
2003 154,905
2004 117,768
2005 5,103
-----
$903,051
========
8 PREFERRED STOCK
SERIES A 15% CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK
The Board of Directors (the Board) has authorized the issuance of up to
3,000,000 shares of Series A 15 percent $.0001 par value, voting,
cumulative, redeemable, convertible
F-15
preferred stock (the Series A Preferred Stock). Series A Preferred Stock
is convertible at any time at the option of the holder prior to the
closing of a Public Offering, as defined in the agreement, or within 20
days following receipt of a Notice of Redemption, as defined in the
agreement, into the Company's common stock for each share of the Series A
Preferred Stock held plus accrued and unpaid dividends on the Series A
Preferred Shares. The Series A Preferred Stock has a liquidation
preference of $1 per share and is mandatorily redeemable on April 15,
2004.
In June 2000, the Company issued 19,560 shares of the Series A Preferred
Stock at $2.50 per share for services rendered.
Dividends on the Series A Preferred Stock accrue, on a daily basis,
commencing on the date of issuance at an interest rate of 15 percent per
annum and are payable on a semi-annual basis. The Company, at its option,
may pay dividends either in cash or by the issuance of additional shares
of Series A Preferred Stock. Aggregate cumulative dividends in arrears at
December 31, 2000 totaled $458,081, and are included in Series A 15 %
cumulative convertible redeemable preferred stock on the accompanying
balance sheet.
SERIES U CONVERTIBLE PREFERRED STOCK
The Board has authorized the issuance of up to 1,500,000 shares of Series
U, 8 percent $.0001 par value, voting, cumulative, convertible preferred
stock (the Series U Preferred Stock). Series U Preferred Stock is
convertible at any time at the option of the holder prior to the closing
of a Public Offering into the Company's common stock for each share of the
Series U Preferred Stock held plus accrued and unpaid dividends on the
Series U Preferred Shares. Between May and October 2000, the Company
issued 1,500,000 at $2 per share, with proceeds to the Company of
$3,000,000.
Dividends on the Series U Preferred Stock accrue, on a daily basis,
commencing on the date of issuance at an interest rate of 8 percent per
annum and are payable on a semi-annual basis. The Company, at its option,
may pay dividends either in cash or by the issuance of additional shares
of Series U Preferred Stock. Aggregate cumulative dividends in arrears at
December 31, 2000, totaled $94,119.
9 COMMON STOCK
The Company is authorized to issue up to 25,000,000 shares of its $.0001
par value common stock. During 2000, no shares of common stock were
issued. As of December 31, 2000, 8,023,000 shares were issued and
outstanding.
10 STOCK BASED COMPENSATION
STOCK WARRANTS GRANTED IN EXCHANGE FOR SERVICES
During 2000, the Company granted 372,780 warrants, with exercise prices
ranging from $1.00 to $4.50 per share, to consultants for certain advisory
and consulting services. The warrants vest immediately upon issuance and
can be exercised over a five-year period. In August 2000, 250,000 warrants
granted at $4.50 were re-priced to $1.00 per share. In September 2000,
100,000 warrants granted at $1.50 were re-priced to $0.01 per share. The
Company valued these warrants, and their re-pricing, at $1,126,790 in
accordance with SFAS 123, and recognized the entire amount in 2000 as
general and administrative expenses in the accompanying statement of
operations.
STOCK WARRANTS GRANTED ATTACHED TO DEBT AGREEMENTS
During 2000, the Company granted 326,666 warrants, with exercise prices
ranging from $.50 to $4.50, attached to various debt agreements. The
warrants vest immediately upon issuance and can be exercised over a
five-year period. The Company applied APB Opinion No. 14, "Accounting for
Convertible Debt and Debt Issued with Stock Purchase Warrants", and
accounted for the portion of the proceeds of the debt issued with
warrants, which was allocable to the warrants, as additional paid-in
capital based on the relative fair values of the securities at the time of
issuance, and also recognized a discount on the debt as a result.
F-16
In September 2000, 200,000 warrants granted at $4.50 were re-priced to
$1.00 per share in connection with an extension of the term date of the
debt. The Company valued the re-pricing at $63,180, and recognized the
entire amount in 2000 as interest expense in the accompanying statement of
operations.
Warrant activity for the year ended December 31, 2000, is as follows:
Balance December 31, 1999 529,700
Issued 699,446
Exercised -
Expired -
Balance December 31, 2000 1,229,146
=========
The following table summarizes information about warrants outstanding at
December 31, 2000, all of which are exercisable:
Weighted Average
Number of Remaining
Range of Exercise Outstanding Contractual Life Weighted Average
Prices Warrants (Years) Exercise Price
$0.01 to $0.50 200,000 3.3 $0.26
$1.00 527,780 4.2 $1.00
$1.50 429,700 3.8 $1.50
$2.00 26,666 4.3 $2.00
$2.50 45,000 4.2 $2.50
------ --- -----
1,229,146 3.9 $1.13
========= === =====
STOCK OPTIONS
The Board approves all issuances of stock options. All stock options
expire five years from the grant date. In general, options vest and become
exercisable one third on the one year anniversary of the date of grant,
and the remainder vest evenly over the two years subsequent to that date.
The following table summarizes stock option activity for the year ended
December 31, 2000:
F-17
2000
Wtd Avg
Options Exercise
(in 000's) Price
---------- --------
Outstanding at Beginning of Year 881 $1.36
Granted 1,000 1.10
Exercised -- 0.00
Forfeited (340) 1.63
------ -----
Outstanding at end of year 1,541 $1.15
------ -----
Vested Options 846 $0.56
Remaining Options available for
Grant 3,459
In June 2000, the Company reduced the exercise price on all its outstanding
stock options. As a result, the Company recognized $395,682 in compensation
expense in 2000 for the vested portion of these options, and will recognize
$933,568 in subsequent periods as these options vest.
The Company accounts for issuances to employees under APB 25, and accordingly,
$545,898 of compensation expense, including the amount discussed above, has been
recognized for the year ended December 31, 2000.
SFAS 123 requires pro forma information regarding net income as if the Company
has accounted for its employee stock options under the fair value method of that
statement. The fair value for these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following assumptions: (i)
risk-free interest rate of 6 percent, which approximates the four-year U.S.
Treasury Bill rate at the date of grant, (ii) dividend yield of 0 percent (iii)
expected volatility of 80 percent (iv) and an average expected life of the
option of four years.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information is as follows:
Year Ended
December 31,
2000
----
Net loss:
As reported $(8,515,971)
SFAS 123 pro forma $(8,902,427)
The following table summarizes the weighted average fair value of options
granted to employees during the year ended December 31, 2000:
F-18
2000
----
Stock Price Greater than Exercise Price
Weighted Average Fair Value $2.98
Stock Price Equal to Exercise Price
Weighted Average Fair Value $0.84
Stock Price Less than Exercise Price
Weighted Average Fair Value $0.82
The following table summarizes information about Company's stock options
outstanding as of December 31, 2000:
Options Outstanding Options Exercisable
Shares Wtd. Avg Wtd. Avg Options Wtd. Avg.
Range of Exercise Outstanding Remaining Exercise Exercisable Exercise
Prices (in 000's) Life Price (in 000's) Price
----------------- ------------ --------- -------- ------------ ---------
$.25 350 3.5 $0.25 239 $0.25
$.50 371 4.3 $0.50 341 $0.50
$.75 375 4.2 $0.75 185 $0.75
$1.00 to $1.50 445 4.4 $1.05 81 $1.26
--- --- ----- --- -----
1,541 846 $0.56
===== === =====
11 RELATED PARTIES
The Company's primary legal counsel holds 3,200,000 shares of the Company's
common stock in trust for the law firm's partners. During 2000, the Company
recorded expenses of approximately $123,000 related to services performed by its
primary legal counsel. The Company owed its primary legal counsel approximately
$61,000 at December 31, 2000.
F-19
During 2000, Q Productions, Inc., whose owners also own 4,800,000 shares of the
Company, provided various information technology services to the Company. The
Company recorded approximately $930,364 in expenses related to services
performed by Q Productions, Inc. for the year ended December 31, 2000. The
Company owed Q Productions, Inc. approximately $171,000 at December 31, 2000. Q
Productions, Inc. rented space from Qode.com in 2000 for $43,167 in total.
During 2000, the Company granted 20,000 warrants with an exercise price of $1.00
per share to Q Productions, Inc.
The Company has issued several promissory notes to officers (see Note 3).
12 SUBSEQUENT EVENTS
On January 11, 2001, the Company entered into a note purchase agreement with an
investor for $300,000, with an interest rate of 18 percent. The principal and
interest are due March 1, 2001.
In January 2001, the Company entered into a short-term loan agreement with
NeoMedia Technologies, Inc. ("NeoMedia") for the amount of $440,000. The note
was forgiven in March 2001 upon the acquisition of substantially all of the
Company's assets by NeoMedia.
On March 1, 2001, NeoMedia purchased all of the assets of the Company other than
cash including but not limited to, contracts, customer lists, licenses and
intellectual property. In consideration for these assets, the Company received
1,676,500 shares of NeoMedia's Common Stock. In addition, NeoMedia issued
274,699 of its Common Stock to certain creditors of the Company, for the
repayment of $1,561,037 of debt, forgave the $440,000 short-term note due from
the Company (see above paragraph), and assumed approximately $1,407,000 of the
Company's liabilities. The 1,676,500 shares paid to the Company are to be held
in escrow for one year, and are subject to downward adjustment, based upon the
achievement of certain performance targets over the period of March 1, 2001 to
February 28, 2002.
Notes payable as of December 31, 2000 that were not acquired as part of the
March 1, 2001 sale totaled 3,000,000 as of December 31, 2000.
13 SUBSEQUENT EVENTS
On May 31, 2001, three creditors of Qode.com, Inc, filed in the U.S. Bankruptcy
Court an involuntary bankruptcy petition for Qode.com, Inc. Qode.com, Inc. has
consulted with legal counsel and will be opposing the Chapter 7 proceeding and
plans to proceed under Chapter 11, U.S. Code to reorganize its debts.
F-20
Report of Independent Certified Public Accountants
The Stockholders and Board of Directors Qode.com, Inc.
We have audited the accompanying balance sheet of Qode.com, Inc. (the Company)
(a development stage enterprise) as of December 31, 1999 and the related
statement of operations, and statement of changes in redeemable preferred stock
and stockholders' deficit, and statement of cash flows for the period from March
29, 1999 (inception) through December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Qode.com, Inc. at December 31,
1999, and the results of its operations and its cash flows for the period March
29, 1999 (inception) through December 31, 1999, in conformity with accounting
standards generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As more fully described in Note 1, the
Company, which is in the developmental stages has incurred a net operating loss,
experienced negative cash flow from operations and has a net capital deficit.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regards to these matters are also
described in Note 1. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
/s/ ERNST & YOUNG LLP
West Palm Beach, Florida
July 21, 2000,
except for the seventh paragraph of Note 8,
as to which the date is June 30, 2001
F-21
QODE.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
DECEMBER 31, 1999
Assets
Current assets:
Cash and cash equivalents $972,487
Other current assets 18,151
-------
Total current assets 990,638
Property and equipment, net 109,269
Deposits 30,229
-------
Total assets $1,130,136
==========
Liabilities, redeemable preferred stock and stockholders' deficit
Current liabilities:
Accounts payable $151,588
Accrued expenses 47,246
Due to officers 73,333
--------
Total current liabilities 272,167
15% cumulative convertible redeemable preferred stock,
$.0001 par value, 3,000,000 shares authorized,
2,025,000 shares issued and outstanding, liquidation
value of $2,221,000 2,154,711
Commitments
Stockholders' deficit:
Common stock, $.0001 par value, 25,000,000 shares
authorized, 8,023,000 shares issued and outstanding 802
Capital deficiency (49,557)
Deficit accumulated during the development stage (1,247,987)
-----------
Total stockholders' deficit (1,296,742)
-----------
Total liabilities, redeemable preferred stock and
stockholders' deficit $1,130,136
===========
SEE ACCOMPANYING NOTES.
F-22
QODE.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
PERIOD FROM MARCH 29, 1999 (INCEPTION) TO DECEMBER 31, 1999
Costs and expenses:
Research and development $396,242
Sales and marketing 41,975
General and administrative 847,412
----------
Total costs and expenses 1,285,629
Net interest income (37,642)
----------
Net loss (1,247,987)
Preferred dividends and redemption accretion (200,711)
-----------
Net loss applicable to common stockholders $(1,448,698)
============
See accompanying notes.
F-23
QODE.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
PERIOD FROM MARCH 29, 1999 (INCEPTION) TO DECEMBER 31, 1999
Deficit
Accumulated
Redeemable Common Stock During the Total
Preferred Capital Development Stockholders'
Stock Shares Amount Deficiency Stage Deficit
----------- ------ ------ ---------- ------------ -------------
Issuance of common stock
on March 29, 1999 $-- 8,000,000 $800 $-- $-- $800
(inception)
Issuance of redeemable
preferred stock with
detachable warrants
valued at $46,000, net
of issuance costs of 1,954,000 -- -- 46,000 -- 46,000
$25,000
Issuance of common stock -- 23,000 2 22,998 -- 23,000
Issuance of warrants in
exchange for services -- -- -- 82,156 -- 82,156
Preferred dividends and
redemption accretion 200,711 -- -- (200,711) -- (200,711)
Net loss -- -- -- -- (1,247,987) (1,247,987)
---------- --------- ------ ---------- ------------ ------------
Balance at December 31, 1999 $2,154,711 8,023,000 $802 $(49,557) $(1,247,987) $(1,296,742)
========== ========= ====== ========== ============ ============
SEE ACCOMPANYING NOTES.
F-24
QODE.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 29, 1999 (INCEPTION) TO DECEMBER 31, 1999
Operating activities
Net loss $(1,247,987)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 17,522
Issuance of warrants in exchange for services 82,156
Changes in assets and liabilities:
Other current assets (18,151)
Deposits (30,229)
Accounts payable 151,588
Accrued expenses 47,246
Due to officers 73,333
------------
Net cash used in operating activities (924,522)
------------
Investing activities
Purchases of property and equipment (126,791)
------------
Net cash used in investing activity (126,791)
------------
Financing activities
Proceeds from the issuance of redeemable
preferred stock, net of issuance costs
of $25,000 2,000,000
Proceeds from the issuance of common stock 23,800
------------
Net cash provided by financing activities 2,023,800
------------
Net increase in cash and cash equivalents 972,487
Cash at beginning of period --
------------
Cash at end of period $972,487
============
Supplemental disclosure of cash flow information
Interest paid $171
Noncash financing and investing activities
Accrued dividends on redeemable preferred stock $195,997
Accretion of redeemable preferred stock $4,714
SEE ACCOMPANYING NOTES
F-25
QODE.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM MARCH 29, 1999 (INCEPTION) TO DECEMBER 31, 1999
1. NATURE OF BUSINESS
ORGANIZATION
Qode.com, Inc. (the Company) commenced operations on March 29, 1999 and is
incorporated in the state of Florida. Qode.com is a development stage company,
as defined in Statement of Financial Accounting Standards (SFAS) No. 7,
Accounting and Reporting By Development Stage Enterprises. The Company intends
to provide manufactures, retailers, advertisers, and users a unique tool for Web
site navigation by the use of imbedded standard bar codes and Uniform Product
Codes (UPC). It is the Company's mission to develop, operate, maintain and
promote the use of Qode.com technologies to enable any bar code to interface
with their technology.
The Company has incurred losses since its inception as it has devoted
substantially all of its efforts toward building network infrastructure,
internal staffing, developing systems, expanding into new markets, building a
proprietary database and raising capital. The Company has generated no revenue
to date and is subject to a number of risks similar to those of other
development stage companies, including dependence on key individuals, the
ability to demonstrate technological feasibility, and the need to obtain
adequate additional financing necessary to fund the development and marketing of
its products and services, and customer acceptance.
The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has a limited operating history
and intends to significantly increase its operational expenses in fiscal year
2000 to pursue certain sales and marketing plans. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may results from the outcome of this
uncertainty. In fiscal year 2000, the Company plans to raise additional
financing from private equity financing. The Company entered into a financing
agreement subsequent to year end that will provide the Company with an
additional $3 million, see Note 8.
F-26
Qode.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets.
Computer hardware and software are being depreciated over a three year period
and furniture and fixtures are being depreciated over a five year period.
SOFTWARE DEVELOPMENT COSTS
In accordance with the AICPA SOP No. 98-1, Accounting for Costs of Computer
Software Developed or Obtained for Internal Use, all costs related to the
development or purchase of internal use software other than those incurred
during the application development stage are to be expensed as incurred. Costs
incurred during the application development stage are required to be capitalized
and amortized over the useful life of the software. The Company has incurred
$259,480 in software development costs for the period from March 29, 1999
(inception) through December 31, 1999. All costs have been expensed since the
Company has not entered the application development stage as of December 31,
1999.
F-27
Qode.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes under the liability method, which requires
the establishment of a deferred tax asset or liability for the recognition of
future deductions or taxable amounts, and operating loss and tax credit
carryforwards. Deferred tax expense or benefit is recognized as a result of the
change in the deferred asset or liability during the year. If necessary, the
Company will establish a valuation allowance to reduce any deferred tax asset to
an amount which will, more likely than not, be realized.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a concentration of
credit risk consist principally of cash and cash equivalents. The Company
maintains its cash and cash equivalents with high quality financial institutions
to mitigate this credit risk.
REDEEMABLE PREFERRED STOCK
Redeemable preferred stock is carried at the net consideration to the Company at
time of issuance (fair value), increased by accrued and unpaid cumulative
dividends and periodic accretion to redemption value using the interest method.
Accrued and unpaid dividends and redemption accretion are affected by charges
against retained earnings, or, in the absence of retained earnings, paid-in
capital (capital deficiency).
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
123, Accounting for Stock-Based Compensation. The provisions of SFAS 123 allow
companies to either expense the estimated fair value of stock options or to
continue to follow the intrinsic value method set forth in Accounting Public
Bulletin (APB) Opinion 25, Accounting for Stock Issued to Employees but disclose
the pro forma effects on net income or loss as if the fair value had been
expensed. The Company has elected to apply APB 25 in accounting for its employee
stock options and, accordingly, recognizes compensation expense for the
difference between the fair value of the underlying common stock and the grant
price of the option at the date of grant.
F-28
Qode.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
December 31,
1999
----
Computer hardware and software $120,791
Furniture and fixtures 6,000
--------
126,791
Less accumulated depreciation (17,522)
---------
$109,269
=========
Depreciation and amortization expense was $17,939 for the period from March 29,
1999 (inception) to December 31, 1999.
4. INCOME TAXES
The net amounts of deferred tax assets recorded in the balance sheet at December
31, 1999 are as follows:
1999
----
Deferred tax asset:
Net operating loss carryforward $469,050
Less valuation allowance (466,230)
---------
Total deferred tax asset $2,820
Deferred tax liabilities:
Fixed assets $(2,820)
---------
Total net deferred taxes $-
=========
FASB 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a $466,230 valuation allowance at December 31, 1999 is
F-29
Qode.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
4. INCOME TAXES (CONTINUED)
necessary to reduce the deferred tax assets to the amount that will more likely
than not be realized. The change in the valuation allowance for the current year
is $466,230. At December 31, 1999, the Company has available net operating loss
carryforwards of $1,246,478, which expire in the year 2019.
A reconciliation of income taxes computed at the U.S. federal statutory tax rate
to income tax expense for the year ended December 31, 1999 is as follows:
1999
----
Taxes at the U.S. statutory rate $(424,315)
State taxes, net of federal benefit (44,975)
Nondeductible items 3,060
Change in valuation allowance 466,230
----------
Total income tax expense $-
==========
5. COMMITMENTS
The Company leases its office facility under a non-cancelable operating lease
expiring March 2005. Rental expense was $19,711 for the period from March 29,
1999 (inception) to December 31, 1999.
Lease commitments under these non-cancelable operating leases as of December 31,
1999 are as follows:
2000 $100,656
2001 104,682
2002 108,876
2003 113,238
2004 117,768
--------
$545,220
========
F-30
Qode.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
6. STOCKHOLDERS' EQUITY
15% CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK SERIES A
The Board of Directors has authorized the issuance of up to 3,000,000 shares of
Series A 15% $.0001 par value, voting, cumulative, redeemable, convertible,
preferred stock (the Preferred Stock) which may be issued in series from time to
time with such designations, rights, preferences and limitations as the Board of
Directors may declare by resolution. In May 1999, the Company issues 2,025,000
shares of Preferred Stock at $1.00 per share, less issuance costs of $25,000.
One detachable warrant was attached to each share of the Preferred Stock. The
Preferred Stock was recorded at $1,954,000, net of the value of the detachable
warrants which was estimated to be $46,000. The detachable warrants were valued
in accordance with SFAS No. 123 at $.23 per share and are convertible into
common stock at $1.50 per share. The Preferred Stock is convertible at any time
at the option of the holder prior to the closing of a Public Offering, as
defined in the agreement, or within 20 days following receipt of a Notice of
Redemption, as defined in the agreement, into the Company's common stock for
each share of the Preferred Stock held plus accrued and unpaid dividends on the
Series A Preferred Shares. The Preferred Stock has a liquidation preference of
$1 per share and is mandatorily redeemable on April 15, 2004. As of December 31,
1999, all 2,025,000 shares of the Preferred Stock and related 202,500 detachable
warrants remain outstanding.
Dividends on the preferred stock accrue on a daily basis commencing on the date
of issuance at an interest rate of 15% per annum and are payable on a
semi-annual basis. The Company, at its option, may pay dividends either in cash
or by the issuance of additional shares of Series A Preferred Stock. Aggregate
cumulative dividends in arrears at December 31, 1999 totaled $195,997.
COMMON STOCK
The Company is authorized to issue up to 20,000,000 shares of its $.0001 par
value common stock. On March 29, 1999 (inception) the Company received $800 by
issuing 8,000,000 shares of its common stock to its founders.
F-31
Qode.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
6. STOCKHOLDERS' EQUITY (CONTINUED)
Additionally, the Company issued 13,000 shares of common stock to a Company
employee in lieu of relocation expense reimbursement of $13,000, and 10,000
shares of common stock to an executive recruiter for a corporate staffing fee of
$10,000. These amounts were expensed.
STOCK OPTIONS AND WARRANTS GRANTED IN EXCHANGE FOR SERVICES
During 1999, the Company granted 327,200 common stock warrants with an exercise
price of $1.50 per share to consultants for certain advisory and consulting
services performed during the Company's start-up phase. The warrants vest
immediately upon issuance and can be exercised over a five year period. The
Company valued the warrants at $82,156 in accordance with SFAS No. 123, and
recognized the entire amount as a general and administrative expense in the
accompanying statement of operations. The Company had 327,200 warrants
outstanding at December 31, 1999.
During 1999, the Company granted 400,000 in common stock options to purchase
shares of common stock at an exercise price of $.10 per share to an investment
advisor in exchange for investment advisory services. The options expired on
June 30, 2000 without being exercised and accordingly no expense has been
recorded.
STOCK OPTIONS
In 1999, the Company's Board of Directors and stockholders approved the 1999
Equity Compensation Plan (the Plan). The Plan provides for the issuance of
incentive stock options, nonqualified stock options and restricted stock to
directors, officers, and key employees of the Company as well as non-employee
directors, advisors, and consultants. The Board administers the Plan. The
Company has reserved 5,000,000 shares of common stock to be issued under the
Plan.
The exercise price (as established by the Board) of the stock options granted is
in excess of fair market value of the Company's Common Stock on the date of the
grant. All stock options expire five years from the grant date in 2004. Options
granted under the Plan are exercisable as determined by the Board.
F-32
Qode.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
6. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes stock option activity for the period from March
29, 1999 (inception) to December 31, 1999:
Weighted
Number of Average
Shares Exercise Price
--------- --------------
Outstanding at March 29, 1999 (inception) - $-
Granted 880,600 1.36
Exercised - -
Forfeited - -
-------- -------
Outstanding at December 31, 1999 880,600 $1.36
======== =======
At December 31, 1999, 142,642 options are exercisable, at a weighted average
exercise price of $1.28 per share. The weighted-average remaining contractual
life of the options is 4.7 years.
During 1999, all of the stock options issued were granted to employees of the
Company. The Company accounts for issuances to employees under APB 25 and
accordingly, no compensation cost has been recognized for the period from March
29, 1999 (inception) to December 31, 1999.
SFAS No. 123 requires pro forma information regarding net income as if the
Company has accounted for its employee stock options under the fair value method
of that Statement. The fair value for these options was estimated at the date of
grant using the Black-Scholes option pricing model with the following
assumptions: risk-free interest rates equal to the three-year U.S. Treasury Bill
rate on the grant date, dividend yield of 0%, expected volatility of 81.1%, and
an average expected life of the option of three years.
F-33
Qode.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
6. STOCKHOLDERS' EQUITY (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. All employee options
granted to date vest over a one to three year period. The Company's pro forma
information is as follows:
Period from March 29, 1999 (inception)
to December 31, 1999
--------------------
Net loss:
As reported $(1,247,987)
SFAS No. 123 pro forma $(1,305,831)
The weighted average fair value of options granted to employees during the
period from March 29, 1999 to December 31, 1999 for which the estimated fair
value of the stock is less than the exercise price is $0.29 per share. The
weighted average fair value of options granted to employees during the period
from March 29, 1999 to December 31, 1999 for which the estimated fair value of
the stock equals the exercise price is $0.47 per share.
SHARES RESERVED FOR FUTURE ISSUANCE
At December 31, 1999, the Company has reserved the following shares of stock for
issuance:
Common stock 11,977,000
Convertible preferred stock 975,000
----------
12,952,000
==========
F-34
Qode.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
7. RELATED PARTIES
The Company's primary legal counsel holds 3,200,000 shares of the Company's
common stock in trust for the firm's partners. During 1999, the Company recorded
expenses of approximately $32,000 related to services performed by its primary
legal counsel. The Company owed its primary legal counsel approximately $3,000
at December 31, 1999.
During 1999, Q Productions, Inc. provided various information technology
services to the Company. Two owners of Q Productions, Inc. also aggregately own
4,800,000 shares of the Company. The Company recorded approximately $129,000 in
expenses related to services performed by Q Productions, Inc. The Company owed Q
Productions, Inc. approximately $97,000 at December 31, 1999.
8. SUBSEQUENT EVENTS
On January 18, 2000, the Company issued a convertible subordinated promissory
note for $3 million with a fixed interest rate of 12% to Novus Holding
Corporation. Principal and accrued interest on the note are payable upon the
earlier of a) the day immediately following the closing of financing or
successive financings which cumulatively aggregate proceeds of $10,000,000 or b)
180 days from the date of the note. The debt is convertible into common stock at
a price equal to 85% of the purchase price per share paid by investors in the
next financing or successive financings of $5,000,000 or more.
On February 11, 2000, the Company entered into a letter of intent with a major
supplier to produce portable bar code scanning devices in exchange for payments
ranging from $32,000,000 to $35,000,000 over a 16 month period commencing April
28, 2000 through August 1, 2001.
On March 15, 2000, the Company entered into a two year term note with a major
lender. The principal amount of the note was $42,500 with a fixed interest rate
of 11%. Principal and interest payments of $1,984 are due monthly through
maturity on March 15, 2002.
On March 24, 2000, the Company obtained a letter of credit for $1,400,000 with
the lender of their term note.
F-35
Qode.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
8. SUBSEQUENT EVENTS (CONTINUED)
On March 27, 2000, the Company entered into a consulting agreement with a
consultant for a five month period in return for 250,000 common stock options
convertible into the Company's common stock. The options have a term of five
years and an exercise price of $2 per share. 125,000 options vest 45 days from
the commencement of the agreement based on the fulfillment of certain
contractual obligations. The remaining 125,000 options vest 90 days from the
commencement of the agreement based on the fulfillment of certain contractual
obligations. Additionally, the Company will pay the consultants $100,000 over
the period of the contract.
On May 22, 2000, the Board of Directors authorized the issuance of 1,500,000
shares of Series U Convertible Preferred Stock (the Series U Preferred Stock).
Dividends on the preferred stock accrue on a daily basis commencing on the date
of issuance at an interest rate of 8% per annum. The Series U Preferred Stock is
convertible at any time at the option of the holder prior to the closing of a
Public Offering, as defined in the agreement, into one share of the Company's
common stock for each share of the Company's Series U Preferred Stock held plus
accrued and unpaid dividends on the Series U Preferred Shares. In the event of
the closing of the next financing of $4,000,000 or more within 90 days from the
authorization of the Series U Preferred Stock, the holder of the Series U
Preferred Stock shall have the right to convert all Series U Preferred Shares
into a number of shares of stock issued in the next financing which represents
the equivalent amount for the consideration paid for the Series U Preferred
Stock. The Series U Preferred Stock has a liquidation preference of $2.00 per
share. On May 22, 2000, the Company entered into an agreement for the issuance
of 1,500,000 shares of Series U Preferred Stock in exchange for $3,000,000. The
shares will be issued in three separate financings. The initial 500,000 shares
are to be issued on the date of the agreement. The next 500,000 shares are to be
issued upon the Company meeting certain performance goals defined in the
agreement. The remaining 500,000 shares are to be issued, not earlier than
August 1, 2000 nor later than October 15, 2000, upon the Company meeting certain
performance goals defined in the agreement.
On May 31, 2001, three creditors of Qode.com, Inc. filed in the U.S. Bankruptcy
Court an involuntary bankruptcy petition for Qode.com, Inc. Qode.com, Inc. has
consulted with legal counsel and will be opposing the Chapter 7 proceeding and
plans to proceed under Chapter 11, U.S. Code, to reorganize its debts.
F-36
ITEM 8. EXHIBITS.
Exhibit
4 NeoMedia Technologies, Inc. 2002 Stock Option Plan
(incorporated by reference to Appendix A in NeoMedia
Technologies 14A Definitive Proxy Statement as filed
with the SEC on May 7, 2002).
5 Opinion of Kirkpatrick & Lockhart LLP
23.1 Consent of Ernst & Young, LLP, former independent certified
public accountants of Qode.com, Inc.
23.2 Consent of Stonefield Josephson, Inc., current independent auditors
of NeoMedia Technologies, Inc.
23.4 Consent of Kirkpatrick & Lockhart LLP (included in Exhibit
5 opinion letter).
24 Power of Attorney (included on signature page).
25
In accordance with Securities Act Rule 437a, the consent of Arthur
Andersen LLP has not been included as an exhibit herewith. The Company has been
unable to obtain a consent of Arthur Andersen LLP due to the departure of their
engagement team leaders from such firm. Any recovery by investors posed by the
lack of consent is limited by Securities Act Rule 437a.
ITEM 9. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person connected with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Myers, State of Florida, on June 25, 2002.
NEOMEDIA TECHNOLOGIES, INC.
BY: /S/ CHARLES T. JENSEN
------------------------------------
CHARLES T. JENSEN, PRESIDENT AND
CHIEF OPERATING OFFICER
THE PLAN
Pursuant to the requirement of the Securities Act of 1933, the Committee that
administers the 2002 Stock Option Plan has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Myers, State of Florida on June 25, 2002.
PLAN:
NEOMEDIA TECHNOLOGIES, INC.
2002 STOCK OPTION PLAN
BY: /S/ CHARLES T. JENSEN
------------------------------------
CHARLES T. JENSEN, PRESIDENT AND
CHIEF OPERATING OFFICER
POWER OF ATTORNEY
The undersigned officers and directors of NeoMedia Technologies, Inc. hereby
constitute and appoint Charles W. Fritz with power to act one without the other,
our true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for us and in our stead, in any and all capacities to sign
any and all amendments (including post-effective amendments) to this
Registration Statement and all documents relating thereto, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
necessary or advisable to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his or her
substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURES TITLE DATE
---------- ----- ----
/S/ CHARLES W. FRITZ CHIEF EXECUTIVE OFFICER,
--------------------- CHAIRMAN OF THE BOARD AND DIRECTOR JUNE 25, 2002
CHARLES W. FRITZ
/S/ WILLIAM E. FRITZ SECRETARY AND DIRECTOR JUNE 25, 2002
---------------------
WILLIAM E. FRITZ
/S/ CHARLES T. JENSEN PRESIDENT, CHIEF OPERATING OFFICER,
--------------------- AND DIRECTOR JUNE 25, 2002
CHARLES T. JENSEN
/S/ DAVID A. DODGE VICE PRESIDENT, CHIEF FINANCIAL
---------------------- OFFICER, AND CONTROLLER JUNE 25, 2002
DAVID A. DODGE
/S/ A. HAYES BARCLAY DIRECTOR JUNE 25, 2002
----------------------
A. HAYES BARCLAY
/S/ JAMES J. KEIL DIRECTOR JUNE 25, 2002
----------------------
JAMES J. KEIL
EXHIBIT 5.1
June 25, 2002
Neomedia Technologies, Inc.
2201 Second Street, Suite 600
Fort Meyers, Florida 33901
RE: NEOMEDIA TECHNOLOGIES, INC. (THE "CORPORATION")
REGISTRATION STATEMENT ON FORM S-8 (THE "REGISTRATION STATEMENT")
Gentlemen:
We have acted as special counsel to the Corporation in connection with the
preparation of the Registration Statement filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "1933 Act"),
relating to the proposed public offering of up to 9,440,000 shares of the
Corporation's common stock, par value $0.01 per share (the "Common Stock").
We are furnishing this opinion to you in accordance with Item 601(b)(5) of
Regulation S-K promulgated under the 1933 Act for filing as Exhibit 5.1 to the
Registration Statement.
We are familiar with the Registration Statement, and we have examined the
Corporation's Certificate of Incorporation, as amended to date, the
Corporation's Bylaws, as amended to date, and minutes and resolutions of the
Corporation's Board of Directors and shareholders. We have also examined such
other documents, certificates, instruments and corporate records, and such
statutes, decisions and questions of law as we have deemed necessary or
appropriate for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that the shares of Common Stock
to be sold by the Selling Stockholders (as defined in the Registration
Statement) to the public, when issued and sold in the manner described in the
Registration Statement (as amended), will be validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the use of our name in the Prospectus constituting
a part thereof in connection with the matters referred to under the caption
"Legal Matters."
Very truly yours,
/s/ KIRKPATRICK & LOCKHART LLP
------------------------------
KIRKPATRICK & LOCKHART LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated July 21, 2000, except for the seventh
paragraph of Note 8, as to which the date is June 30, 2001, with respect to the
financial statements of Qode.com, Inc. (A Development Stage Enterprise) as of
December 31, 1999 and for the period from March 29, 1999 (inception) through
December 31, 1999 in the Registration Statement (Form S-8) for the Registration
of 9,440,000 shares of Neomedia Technologies, Inc.'s common stock.
/s/ Ernst & Young LLP
West Palm Beach, Florida
June 25, 2002
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-8 of our report dated March 28, 2002, on our audit of the consolidated
financial statements of Neomedia Technologies, Inc. as of December 31, 2001 and
for the year then ended.
/s/ Stonefield Josephson, Inc.
-----------------------------------
Certified Public Accountants
Irvine, California
June 25, 2002