U. S. SECURITIES AND EXCHANGE COMMISSION Washington,
                                   D.C. 20549
                        ---------------------------------

                                  FORM 10 - QSB
                                   (Mark One)
                [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended March 31, 2003

                                       OR

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 0-21743

                           NEOMEDIA TECHNOLOGIES, INC.
        (Exact Name of Small Business Issuer as Specified In Its Charter)

<TABLE>
<CAPTION>

             Delaware                                            36-3680347
<S>                                                          <C>
(State or Other Jurisdiction of                              (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

2201 Second Street, Suite 402, Fort Myers, Florida                  33901
            (Address of Principal Executive Offices)             (Zip Code)

Issuer's Telephone Number (Including Area Code)      239-337-3434
</TABLE>


         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X No


         As of May 6, 2003,  there  were  95,189,168  outstanding  shares of the
issuer's Common Stock .




                                        1


<PAGE>


                         PART I -- FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS

                  NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                        (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                          MARCH 31,
                                                                             2003
                                                                          ---------
<S>                                                                      <C>
ASSETS

Current assets:
      Cash and cash equivalents                                           $      8
      Trade accounts receivable, net of allowance for doubtful accounts
      of $42 Inventories                                                       409
                                                                                21
      Prepaid expenses and other current assets                                760
                                                                          --------
      Total current assets                                                   1,198
      Property and equipment, net                                               75
      Capitalized patents, net                                               2,180
      Capitalized and purchased software costs, net                            115
      Other long-term assets                                                   678
                                                                          --------
           Total assets                                                   $  4,246
                                                                          ========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
      Accounts payable                                                    $  3,473
      Amounts due under financing agreements                                   471
      Liabilities in excess of assets of discontinued business unit          1,361
      Accrued expenses                                                       2,579
      Current portion of long-term debt                                        473
      Notes payable                                                          1,045
      Sales taxes payable                                                      332
      Deferred revenues                                                      1,002
      Other                                                                     39
                                                                          --------
           Total current liabilities                                        10,775

Long-term debt, net of current portion                                         178
                                                                          --------
           Total liabilities                                                10,953
                                                                          --------
Shareholders' deficit:
      Preferred stock, $0.01 par value, 25,000,000 shares authorized,
        none issued and outstanding                                           --
      Additional paid-in capital, preferred stock                             --
      Common stock, $0.01 par value, 200,000,000 shares authorized,
        92,160,790 shares issued and 36,899,341 outstanding                    369
       Additional paid-in capital                                           65,521
      Deferred stock-based compensation
                                                                              (150)
      Accumulated deficit                                                  (71,668)
      Treasury stock, at cost, 201,230 shares of common stock                 (779)
                                                                          --------
      Total shareholders' deficit                                           (6,707)
                                                                          --------
           Total liabilities and shareholders' deficit                    $  4,246
                                                                          ========
</TABLE>




The accompanying notes are an integral part of this consolidated balance sheet.


                                        2

<PAGE>



                  NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>


                                                                     THREE MONTHS ENDED MARCH 31,
                                                                   -----------------------------
                                                                         2003            2002
                                                                   -------------    ------------
<S>                                                                <C>              <C>
NET SALES:
     License fees                                                   $        109    $        112
     Resale of software and technology equipment and service fees            765           1,284
                                                                    ------------    ------------
     Total net sales                                                         874           1,396
                                                                    ------------    ------------
COST OF SALES:
     License fees                                                             76             348
     Resale of software and technology equipment and service fees            702             966
                                                                    ------------    ------------
     Total cost of sales                                                     778           1,314
                                                                    ------------    ------------
GROSS PROFIT
                                                                              96              82
     Sales and marketing expenses                                            139             232
     General and administrative expenses                                     719             985
     Research and development costs                                           89             216
                                                                    ------------    ------------
     Loss from operations                                                   (851)         (1,351)
     Interest expense                                                         52              31
                                                                    ------------    ------------
NET LOSS                                                            $       (903)   $     (1,382)
                                                                    ============    ============
NET LOSS PER SHARE--BASIC AND DILUTED                               $      (0.03)   $      (0.05)
                                                                    ============    ============
Weighted average number of common shares--basic and diluted           31,519,083      29,114,298
                                                                    ============    ============

</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                        3

<PAGE>


                  NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>

                                                                                      THREE MONTHS
                                                                                    ENDED MARCH 31,
                                                                                   2003         2002
                                                                                  -------    --------
<S>                                                                               <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                      ($  903)   ($1,382)
    Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization                                                     126        409
    Expense associated with warrant repricing                                          --         38
    Fair value of expense portion of stock based
             compensation granted for professional services                           278         54
    Interest expense allocated to convertible debt                                     37
    (Increase)/decrease in value of life insurance policies                            16          5
    Changes in operating assets and liabilities
     Trade accounts receivable, net                                                   (82)     1,498
     Inventory, prepaid expenses and other current assets                             (40)       (50)
     Accounts payable, amounts due under financing agreements,
       liabilities in excess of assets of discontinued business unit,
       accrued expenses and stock  liability                                          190     (1,093)
     Deferred revenue other current liabilities                                       125        175
                                                                                  -------    -------
     Net cash used in operating activities                                           (253)      (346)
                                                                                  -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Capitalization of software development and purchased intangible assets            (5)        (6)
                                                                                  -------    -------
     Net cash used in investing activities                                             (5)        (6)
                                                                                  -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Net proceeds from issuance of common stock, net of issuance costs of $16           81        198
    Net proceeds from exercise of stock warrants                                     --           27
    Borrowings under notes payable and long-term debt                                 262         10
    Repayments on notes payable and long-term debt                                   (147)      --
                                                                                  -------    -------
     Net cash provided by financing activities                                        196        235
                                                                                  -------    -------
NET DECREASE IN CASH AND CASH EQUIVALENTS
                                                                                      (62)      (117)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                                                                                       70        134
                                                                                  -------    -------
CASH AND CASH EQUIVALENTS-END OF PERIOD                                           $     8    $    17
                                                                                  =======    =======
SUPPLEMENTAL CASH FLOW INFORMATION:
    Interest paid/(received) during the year                                      $     1    $  --
    Non-cash investing and financing activities:
     Stock issuance in exchange for limited recourse promissory note                 --        3,040
     Warrants granted for service classified as prepaid assets                       --          427
     Fair value of common stock and options issued to settle debt                      60        272
     Cancellation of common stock issued in 2001 to offset stock
        subscription receivable                                                      --         (240)

     Interest expense related to convertible promissory notes                          37       --

</TABLE>



              The      accompanying   notes  are  an  integral   part  of  these
                       consolidated financial statements.


                                        4


<PAGE>


                  NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
         UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS

BASIS OF PRESENTATION

     The  condensed  consolidated  financial  statements  include the  financial
statements of NeoMedia Technologies, Inc. and its wholly-owned subsidiaries. The
accompanying  unaudited condensed  consolidated  financial  statements have been
prepared in accordance  with the  instructions to Form 10-QSB and do not include
all of the information and footnotes required by accounting principles generally
accepted in the United  States of America for  complete  consolidated  financial
statements.  These condensed consolidated financial statements and related notes
should be read in  conjunction  with the Company's Form 10-K for the fiscal year
ended  December  31,  2002.  In  the  opinion  of  management,  these  condensed
consolidated  financial statements reflect all adjustments which are of a normal
recurring  nature and which are  necessary  to present  fairly the  consolidated
financial  position  of  NeoMedia  as of March  31,  2003,  and the  results  of
operations and cashflows for the three months ended March 31, 2003 and 2002. The
results  of  operations  for the  three  months  ended  March  31,  2003 are not
necessarily  indicative  of the  results  which may be  expected  for the entire
fiscal year. All significant  intercompany  accounts and transactions  have been
eliminated in preparation of the condensed consolidated financial statements.


NATURE OF BUSINESS OPERATIONS


     The Company is  structured  and  evaluated  by its Board of  Directors  and
Management as two distinct business units:

     NeoMedia  Internet  Switching  Services  (NISS)  (formerly  named  NeoMedia
Application Services), and

     NeoMedia  Consulting  and  Integration   Services  (NCIS)  (formerly  named
NeoMedia SI)

     NISS (physical world-to-Internet  offerings) is the Company's core business
and is based in the United States, with development and operating  facilities in
Fort Myers,  Florida. NISS develops and supports the Company's physical world to
Internet core  technology,  including our linking  "switch" and our  application
platforms.  NISS also  manages  the  Company's  valuable  intellectual  property
portfolio, including the identification and execution of licensing opportunities
surrounding the patents.

     NCIS (systems  integration service offerings) is the original business line
upon which the Company was organized.  This unit resells client-server equipment
and related software,  and general and specialized  consulting services targeted
at software  driven print  applications,  especially  at process  automation  of
production print facilities  through its integrated  document factory  solution.
Systems integration  services also identifies  prospects for custom applications
based on our  products  and  services.  This unit  recently  moved its  business
offerings to a much higher  Value-Add  called Storage Area Networks  (SAN).  The
operations are based in Lisle, Illinois.

RECLASSIFICATIONS

Certain  amounts in the 2002 condensed  consolidated  financial  statements have
been reclassified to conform to the 2003 presentation.

RECENT ACCOUNTING PRONOUNCEMENTS

     In April 2002,  the FASB issued  Statement  No.  145,  "Rescission  of FASB
Statements No. 4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement rescinds FASB Statement No. 4, "Reporting Gains and
Losses from  Extinguishment  of Debt," and an amendment of that Statement,  FASB
Statement  No.  64,  "Extinguishments  of  Debt  Made  to  Satisfy  Sinking-Fund
Requirements"  and FASB Statement No. 44,  "Accounting for Intangible  Assets of
Motor  Carriers." This Statement  amends FASB Statement No. 13,  "Accounting for
Leases," to  eliminate an  inconsistency  between the  required

                                       5
<PAGE>

accounting  for  sale-leaseback  transactions  and the required  accounting  for
certain  lease  modifications  that have  economic  effects  that are similar to
sale-leaseback transactions.  NeoMedia has implemented the provision of SFAS No.
145 and has concluded  that the adoption does not have a material  impact on the
Company's financial statements.

     In July 2002, the FASB issued SFAS No. 146 "Accounting for Exit or Disposal
Activities."  The  provisions  of this  statement  are  effective  for  disposal
activities initiated after December 31, 2002, with early application encouraged.
NeoMedia has  implemented  the provision of SFAS No. 146 and has concluded  that
the  adoption  does  not  have a  material  impact  on the  Company's  financial
statements.

     In October  2002,  the FASB  issued  Statement  No. 147,  "Acquisitions  of
Certain  Financial  Institutions-an  amendment of FASB Statements No. 72 and 144
and  FASB  Interpretation  No.  9",  which  removes  acquisitions  of  financial
institutions  from  the  scope of both  Statement  72 and  Interpretation  9 and
requires that those  transactions be accounted for in accordance with Statements
No. 141,  Business  Combinations,  and No. 142,  Goodwill  and Other  Intangible
Assets.  In addition,  this  Statement  amends SFAS No. 144,  Accounting for the
Impairment or Disposal of Long-Lived  Assets,  to include in its scope long-term
customer-relationship  intangible  assets  of  financial  institutions  such  as
depositor- and  borrower-relationship  intangible  assets and credit  cardholder
intangible  assets.  The  requirements  relating to  acquisitions  of  financial
institutions is effective for  acquisitions for which the date of acquisition is
on or after  October 1, 2002.  The  provisions  related  to  accounting  for the
impairment  or disposal of certain  long-term  customer-relationship  intangible
assets are effective on October 1, 2002.  The adoption of this Statement did not
have a  material  impact to the  Company's  financial  position  or  results  of
operations as the Company has not engaged in either of these activities.

     In December  2002,  the FASB issued  Statement  No.  148,  "Accounting  for
Stock-Based Compensation-Transition and Disclosure", which amends FASB Statement
No. 123, Accounting for Stock-Based Compensation, to provide alternative methods
of  transition  for a  voluntary  change  to the  fair  value  based  method  of
accounting for stock-based employee  compensation.  In addition,  this Statement
amends  the  disclosure  requirements  of  Statement  123 to  require  prominent
disclosures in both annual and interim financial  statements about the method of
accounting for stock-based  employee  compensation  and the effect of the method
used  on  reported  results.  The  transition  guidance  and  annual  disclosure
provisions of Statement 148 are effective for fiscal years ending after December
15, 2002,  with earlier  application  permitted  in certain  circumstances.  The
interim  disclosure  provisions are effective for financial  reports  containing
financial  statements for interim periods beginning after December 15, 2002. The
adoption  of this  statement  did not have a  material  impact on the  Company's
financial  position or results of  operations  as the Company has not elected to
change to the fair value based method of  accounting  for  stock-based  employee
compensation.

     In January 2003, the FASB issued  Interpretation No. 46,  "Consolidation of
Variable Interest Entities." Interpretation 46 changes the criteria by which one
company  includes  another  entity  in its  consolidated  financial  statements.
Previously,   the  criteria  was  based  on  control  through  voting  interest.
Interpretation  46 requires a variable  interest  entity to be consolidated by a
company if that  company  is subject to a majority  of the risk of loss from the
variable interest  entity's  activities or entitled to receive a majority of the
entity's  residual  returns  or both.  A company  that  consolidates  a variable
interest  entity  is  called  the  primary   beneficiary  of  that  entity.  The
consolidation  requirements of  Interpretation  46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation requirements
apply to older  entities in the first  fiscal year or interim  period  beginning
after  June  15,  2003.  Certain  of the  disclosure  requirements  apply in all
financial  statements  issued  after  January 31, 2003,  regardless  of when the
variable  interest  entity  was  established.  The  Company  does not expect the
adoption  to have a  material  impact to the  Company's  financial  position  or
results of operations.

PROPOSED ACQUISITION AND MERGER WITH LOCH ENERGY, INC. ("LOCH")

     On March 13, 2003,  the Company  announced that it has reached an agreement
in  principal to acquire and merge with Loch,  an oil and gas provider  based in
Humble,  Texas. Loch currently owns mineral and lease rights to five properties,
totaling approximately 130 acres, near Houston, Texas. Per the terms outlined in
the Memorandum of Terms,  the merger would provide for one share of common stock
of the Company to be exchanged  for every four shares of Loch common stock on an
adjusted  basis,  and  additional  "earn  out"  shares  to  be  issued  to  Loch
shareholders  based on actual oil  production  in the first year after  closing.
Total shares to be issued to Loch  shareholders  will not exceed 50% of NeoMedia
outstanding  shares.  The  merger  is  subject  to  negotiations  of  definitive
contracts,  corporate  filing  requirements,  completion  of due  diligence  and
approval by

                                       6

<PAGE>


the Boards of Directors and shareholders of each company. It is anticipated that
closing would occur approximately 30 days after such conditions are satisfied.

EQUITY LINE OF CREDIT WITH CORNELL CAPITAL PARTNERS, LP ("CORNELL")

     On February 11, 2003, NeoMedia and Cornell terminated the November 12, 2002
Equity Line of Credit  Agreement  and  entered  into a new Equity Line of Credit
Agreement  with  Cornell  under  which  Cornell  agreed to  purchase up to $10.0
million of NeoMedia's  common stock over the next two years, with the timing and
amount of the purchase at the Company's  discretion.  The maximum amount of each
purchase is $150,000 with a minimum of seven days between purchases.  The shares
are valued at 98% of the lowest  closing bid price  during the  five-day  period
following the delivery of a notice of purchase by NeoMedia.  The Company pays 5%
of the gross proceeds of each purchase to Cornell. On February 14, 2003, the SEC
declared effective the S-1 registration  statement containing 100 million shares
underlying the Equity Line of Credit.  During the three-month period ended March
31, 2003,  the Company  issued  3,452,373  shares of stock to Cornell  under the
Equity Line of Credit Agreement.  Cornell also sold an additional 537,969 shares
during the last week of March 2003 that were  issued by the Company in the first
week of April 2003. Total proceeds from the sale of shares under the Equity Line
of Credit Agreement were approximately $85,000.

     On March 13, 2003,  Cornell lent the Company $262,000 under a note payable,
with the  principal  of the note to be  repaid  over a period  of 10 weeks  from
issuance.  As of March 31,  2003,  the Company had paid down the  principal to a
balance of approximately  $210,000.  This note payable is a non-interest bearing
note,  and  Cornell  charged a 5% fee.  Due to the short  maturity  of the note,
imputed interest expense at market rate is minimal.


OTHER EVENTS

     On March 13, 2003, the Company repaid the remaining balance of $85,000 on a
note due to Michael  Kesselbrenner,  a private  investor.  The original note had
been issued in the amount of  $165,000  on December 2, 2002,  with a term of 150
days. In connection with the default  provision of the note, the Company entered
into a Pledge Agreement,  dated December 2, 2002, under which the Company issued
53,620,020  shares of common stock to an unrelated third party as collateral for
the note.  The note balance of $85,000 was paid off on March 13,  2003,  and the
53,620,020 shares were returned to the Company on April 4, 2003 and retired.

PRO-FORMA INFORMATION REQUIRED BY SFAS 123 AND SFAS 148

     Pro forma  information  regarding  the effect on  operations is required by
SFAS 123 and SFAS 148, and has been  determined  as if the Company had accounted
for its employee  stock options  under the fair value method of that  statement.
Pro forma information is calculated using the  Black-Scholes  method at the date
of grant and is based on the following assumptions:

                  Expected life             3-5 Years
                  Risk-free interest rate   4.5-6.0%
                  Dividend yield              --
                  Volatility                80-220%

     This  option   valuation   model  requires   input  of  highly   subjective
assumptions.  Because the Company's employee stock options have  characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's opinion, the existing model does not necessarily provide a reliable
single measure of fair value of its employee stock options.

     For purposes of SFAS 123 pro-forma disclosures, the estimated fair value of
the options is  amortized  to expense  over the  option's  vesting  period.  The
Company's proforma information is as follows:

Net Loss, as reported                                   ($903)
Compensation recognized under APB 25                       ---
Compensation recognized under SFAS 123                    $118
                                                  -------------
 Pro-forma net loss                                   ($1,021)
                                                  =============
                                       7
<PAGE>


SUBSEQUENT EVENTS

      On April 2,  2003,  the  Company  was  issued  its  sixth US  Patent.  The
technology  covered  by  the  patent  allows  for  a  connection  from  human-or
machine-readable  input to  generate  a  tailored  response  that can  utilize a
profile of the person making the link between the code-carrying  physical object
and the desired electronic information. The patent allowed 58 claims.

      On April 17,  2003,  the Board of  Directors  of the Company  approved the
payment in full of approximately  $154,000 of liabilities owed by the Company to
Charles W. Fritz, the Company's  Founder and Chairman of the Board of Directors,
through the issuance of 15,445,967 shares of common stock. The shares granted as
payment  of the  liability  have not been  registered  for  re-sale  with the US
Securities and Exchange Commission.

      On April 21, 2003, the Company sold 25,000,000 shares of its common stock,
par value  $0.01,  in a private  placement  at a price of $0.01  per  share.  In
connection  with the sale,  the Company  also granted the  purchaser  25,000,000
warrants to purchase  shares of the Company's  common stock at an exercise price
of $0.01  per  share.  The  purchaser  was  William  E.  Fritz,  a member of the
Company's  Board of  Directors.  Proceeds to the Company from sale of the shares
were  $250,000.  Neither  the  purchased  shares nor the shares  underlying  the
warrants granted in the private  placement have been registered for re-sale with
the US Securities and Exchange Commission.

      During April 2003, the Company repriced approximately 1.9 million warrants
held by  Thornhill  Capital  LLC  ("Thornhill"),  an outside  consultant  to the
Company. Of the 1.9 million warrants, 1.5 million had an exercise price of $0.05
per share,  and  approximately  0.4 million  had an exercise  price of $2.09 per
share.  All 1.9 million  warrants were repriced to $0.00 per share.  The Company
will recognize an expense related to this transaction  during the second quarter
of 2003.


2.    LIQUIDITY AND CAPITAL RESOURCES

     The accompanying unaudited financial statements have been prepared assuming
the  Company  will  continue  as a going  concern.  Accordingly,  the  financial
statements do not include any  adjustments  that might result from the Company's
inability  to  continue as a going  concern.  The Company may obtain up to $10.0
million over the next two years through its Equity Line of Credit agreement with
Cornell  Capital  Partners LP. As of May 6, 2003,  the Company had obtained $0.4
million under such agreement. Management believes that this additional financing
will be sufficient to sustain operations through June 30, 2003,  however,  there
can be no assurances  that the market for the  Company's  stock will support the
sale of  sufficient  shares  NeoMedia's  stock to raise  sufficient  capital  to
sustain  operations  for such a period.  If necessary  funds are not  available,
NeoMedia's business and operations would be materially adversely affected and in
such event, NeoMedia would attempt to reduce costs and adjust its business plan.

     Net cash used in operating  activities was  approximately  $0.3 million for
each of the three-month  periods ended March 31, 2003 and 2002. During the three
months ended March 31, 2003,  trade  accounts  receivable  inclusive of costs in
excess of billings increased $0.1 million,  while accounts payable,  amounts due
under financing  arrangements,  accrued expenses, and deferred revenue increased
$0.3  million.  During the three  months ended March 31,  2002,  trade  accounts
receivable  decreased $1.5 million,  while accounts  payable,  amounts due under
financing  arrangements,  accrued expenses,  and deferred revenue decreased $0.9
million.  NeoMedia's  net cash flow used in investing  activities  for the three
months ended March 31, 2003 and 2002, was $5,000 and $6,000,  respectively.  Net
cash provided by financing  activities for the three months ended March 31, 2003
and 2002, was $0.2 million and $0.2 million, respectively.

     During the three  months  ended March 31, 2003 and 2002 the  Company's  net
loss totaled  approximately $0.9 million and $1.4 million,  respectively.  As of
March  31,  2003  the  Company  had   accumulated   losses  from  operations  of
approximately $71.7 million, had a working capital deficit of approximately $9.6
million, and approximately $8,000 in cash balances.


                                       8

<PAGE>



     Management  believes it will need to have access to the Cornell Equity Line
of Credit agreement,  or raise additional  capital from other sources to sustain
the Company's  operations in 2003. The failure of management to accomplish these
initiatives will adversely affect the Company's business,  financial conditions,
and results of operations and its ability to continue as a going concern.

CRITICAL ACCOUNTING POLICIES

         The U.S.  Securities and Exchange  Commission  ("SEC")  recently issued
Financial  Reporting  Release No. 60,  "CAUTIONARY  ADVICE REGARDING  DISCLOSURE
ABOUT CRITICAL  ACCOUNTING  POLICIES" ("FRR 60"),  suggesting  companies provide
additional disclosure and commentary on their most critical accounting policies.
In FRR 60, the SEC defined  the most  critical  accounting  policies as the ones
that are most important to the portrayal of a company's  financial condition and
operating  results,  and  require  management  to make  its most  difficult  and
subjective judgments, often as a result of the need to make estimates of matters
that are  inherently  uncertain.  Based on this  definition,  our most  critical
accounting  policies  include:  inventory  valuation,  which affects our cost of
sales  and gross  margin;  the  valuation  of  intangibles,  which  affects  our
amortization and write-offs of goodwill and other intangibles.  The Company also
has other key accounting policies, such as our policies for revenue recognition,
including  the deferral of a portion of revenues on sales to  distributors,  and
allowance for bad debt. The methods, estimates and judgments the Company uses in
applying these most critical  accounting  policies have a significant  impact on
the results the Company reports in our financial statements.

      INVENTORY  VALUATION.  The Company's policy is to value inventories at the
lower of cost or market on a part-by-part basis. This policy requires management
to make estimates  regarding the market value of our  inventories,  including an
assessment of excess or obsolete inventories.  The Company determines excess and
obsolete  inventories based on an estimate of the future demand for our products
within a specified time horizon,  generally 12 months. The estimates the Company
uses for demand are also used for  near-term  capacity  planning  and  inventory
purchasing and are consistent with revenue  forecasts.  If the Company's  demand
forecast is greater  than its actual  demand the Company may be required to take
additional  excess inventory  charges,  which will decrease gross margin and net
operating  results in the future.  In  addition,  as a result of the downturn in
demand for our products,  the Company has excess  capacity in our  manufacturing
facilities.  Currently,  the Company is not  capitalizing  any  inventory  costs
related  to this  excess  capacity  as the  recoverability  of such costs is not
certain. The application of this policy adversely affects our gross margin.

      INTANGIBLE ASSET VALUATION. The determination of the fair value of certain
acquired  assets and  liabilities is subjective in nature and often involves the
use of significant  estimates and  assumptions.  Determining the fair values and
useful lives of intangible assets especially  requires the exercise of judgment.
While there are a number of different  generally  accepted  valuation methods to
estimate the value of intangible assets acquired, the Company primarily uses the
weighted-average  probability  method outlined in SFAS 144. This method requires
significant management judgment to forecast the future operating results used in
the  analysis.  In addition,  other  significant  estimates are required such as
residual growth rates and discount  factors.  The estimates the Company has used
are consistent  with the plans and estimates that the Company uses to manage its
business,  based on available historical  information and industry averages. The
judgments made in determining the estimated  useful lives assigned to each class
of assets acquired can also significantly affect our net operating results.

      ALLOWANCE  FOR BAD DEBT.  The Company  maintains an allowance for doubtful
accounts for estimated  losses  resulting from the inability of our customers to
make required  payments.  Our  allowance  for doubtful  accounts is based on our
assessment of the  collectibility  of specific customer  accounts,  the aging of
accounts receivable,  our history of bad debts, and the general condition of the
industry.  If  a  major  customer's  credit  worthiness  deteriorates,   or  our
customers' actual defaults exceed our historical experience, our estimates could
change and impact our reported results.

INTANGIBLE ASSETS

         At the end of each  quarter the Company  performs  impairment  tests on
each  of  its  intangible  assets,   which  include  capitalized  patent  costs,
capitalized software development costs, and purchased software. In doing so, the
Company  evaluates the carrying value of each  intangible  asset with respect to
several factors,  including  historical  revenue  generated from each intangible
asset,  application  of the assets in our current  business  plan, and projected
revenue  to be  derived  from the  asset.  Intangible  asset  balances  are then
adjusted  to their  current  net  realizable  value  based on these  criteria if
impaired.  No impairment  charges were taken during the three months ended March
31, 2003.

                                       9


<PAGE>


FINANCING AGREEMENTS

         As of March 31, 2003,  the Company was party to a commercial  financing
agreement with GE Access that provides short-term financing for certain computer
hardware and software purchases.  This arrangement allows the Company to re-sell
high-dollar  technology equipment and software without committing cash resources
to financing  the purchase.  The Company and GE Access are  currently  operating
under an  additional  arrangement  under  which  GE  Access  retains  50% of the
Company's  proceeds from sales financed by GE Access, and applies the portion of
proceeds toward past due balances.  This arrangement temporarily reduces by half
the Company's  cash flow from resales of equipment  and software  financed by GE
Access.  The Company  expects to begin  receiving 100% of the proceeds from such
sales during the second half of 2003.  Termination  of the  Company's  financing
relationship  with GE Access could  materially  adversely  affect the  Company's
financial condition.  Management expects the agreement to remain in place in the
near future.

OTHER DEBTS

     On December 2, 2002, the Company issued to Michael Kesselbrenner, a private
investor,  a  promissory  note in the  principal  amount  of  $165,000,  bearing
interest at a rate of 12% per annum,  with a maturity of 150 days. In connection
with the default  provision of the promissory  note, the Company  entered into a
pledge  agreement,  dated  December  2, 2002,  under  which the  Company  issued
53,620,020  shares of common stock to an unrelated third party as collateral for
the  Promissory  Note.  The investor  only funded to the Company  $84,000 of the
principal  amount of the note.  The Company  repaid this note during March 2003,
and the shares held in escrow were returned  during April 2003.  The Company has
no further obligation under this note agreement.

     During November 2002,  NeoMedia issued Convertible Secured Promissory Notes
with an aggregate face value of $60,000 to 3 separate parties, including Charles
W. Fritz,  Chairman of the Board of Directors of NeoMedia;  William E. Fritz, an
outside  director;  and James J.  Keil,  an  outside  director.  The notes  bear
interest  at a rate of 15% per annum,  and  matured  at the  earlier of i.) four
months, or ii.) the date the shares underlying the Cornell Equity Line of Credit
are  registered  with the SEC. The notes are  convertible,  at the option of the
holder,  into  either  cash or shares of our common  stock at a 30%  discount to
either  market  price upon  closing,  or upon  conversion,  whichever  is lower.
NeoMedia  also  granted to the  holders an  additional  1,355,670  shares of its
common stock and 60,000 warrants to purchase shares of its common stock at $0.03
per share,  with a term of three  years.  The warrants and shares were issued in
January 2003.  In addition,  since this debt is  convertible  into equity at the
option of the note holder at beneficial conversion rates, an embedded beneficial
conversion  feature was  recorded as a debt  discount  and  amortized  using the
effective interest rate over the life of the debt in accordance with EITF 00-27.
Total cost of beneficial conversion feature, fair value of the stock and cost of
warrants  issued  exceed the face value of the notes  payable,  therefore,  only
$60,000,  the face amount of the note, is recognizable as debt discount,  and is
being  amortized  over the  life of the  notes  payable.  Any  unamortized  debt
discount  related to  beneficial  conversion  feature will be charged to expense
upon  conversion,  as interest  expense.  In the event NeoMedia  defaults on the
note, NeoMedia will issue an additional  1,483,318 shares of its common stock to
the note holders. The notes are secured by our intellectual  property,  which is
subject to first lien by AirClic,  Inc. During March 2003, two of the affiliated
parties,  Mr. William Fritz and Mr. Keil, agreed to extend the maturity date due
to the Company's capital constraints. The Company repaid Charles Fritz's note in
full during  March 2003,  and repaid  William  Fritz's  note during  April 2003.
NeoMedia  will  continue to pursue  additional  capital  through the issuance of
Convertible Secured Promissory Notes with the same terms as above.

     On March 13, 2003,  Cornell lent the Company $262,000 under a note payable,
with the  principal  of the note to be  repaid  over a period  of 10 weeks  from
issuance.  As of March 31,  2003,  the Company had paid down the  principal to a
balance of approximately  $210,000.  This note payable is a non-interest bearing
note, and Cornell charged a 5% fee.

GOING CONCERN

         The accompanying  condensed consolidated financial statements have been
prepared on a going concern basis,  which contemplates the realization of assets
and the  satisfaction  of liabilities in the normal course of business.  Through
March 31, 2003,  the Company has not been able to generate  sufficient  revenues
from its  operations  to cover its costs and  operating  expenses.  Although the
Company  has been  able to issue  its  common  stock  or other  financing  for a
significant  portion of its expenses,  it is not known whether  NeoMedia will be
able


                                       10
<PAGE>


to continue this practice,  or if its revenue will increase  significantly to be
able to meet its cash  operating  expenses.  This, in turn,  raises  substantial
doubt about the  Company's  ability to continue as a going  concern.  Management
believes that the Company will be able to raise additional funds through its $10
million Equity Line of Credit with Cornell.  However, no assurances can be given
as  to  the  success  of  these  plans.  The  condensed  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
these uncertainties.

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

         Beginning in the second quarter of 2002, the Company's  continued focus
was  aimed  toward  the  intellectual  property  commercialization  unit  of its
Internet Switching Systems (NISS,  formerly NAS) business.  NISS consists of the
patented  PaperClickTM  technology  that enables users to link directly from the
physical  to the  digital  world,  as well as the  patents  surrounding  certain
physical-world-to-web  linking  processes.  NeoMedia's  mission  is  to  invent,
develop,  and commercialize  technologies and products that effectively leverage
the integration of the physical and electronic to provide clear functional value
for the Company's end-users,  competitive  advantage for their business partners
and  return-on-investment  for their  investors.  To this end,  the  Company has
signed four intellectual property licenses since its inception. The Company also
continued its movement  into the Storage Area Network  (SAN) market  through its
NeoMedia Consulting and Integration Services (NCIS) business unit.

         Additionally,  during the first quarter of 2003, the Company  announced
that that it had reached an  agreement  in  principal  to acquire and merge with
Loch,  an oil and gas  provider  based in Humble,  Texas.  Loch  currently  owns
mineral and lease rights to five properties,  totaling  approximately 130 acres,
near  Houston,  Texas.  Loch's  portion  of the  proven  reserves  on  the  five
properties  is estimated at 7,707,247  barrels.  Loch's  portion of the probable
reserves on the five properties is estimated at an additional 5,963,748 barrels.
Per the terms outlined in the Memorandum of Terms,  the merger would provide for
one share of common stock of the Company to be  exchanged  for every four shares
of Loch common stock on an adjusted basis,  and additional  "earn out" shares to
be issued to Loch shareholders  based on actual oil production in the first year
after closing.  Total shares to be issued to Loch  shareholders  will not exceed
50% of NeoMedia  outstanding  shares.  The merger is subject to  negotiations of
definitive contracts, corporate filing requirements, completion of due diligence
and any required  approval by the Boards of Directors and  shareholders  of each
company.  It is anticipated that closing would occur approximately 30 days after
such conditions are satisfied.

         NeoMedia's  quarterly  operating results have been subject to variation
and will continue to be subject to variation,  depending  upon factors,  such as
the  mix of  business  among  NeoMedia's  services  and  products,  the  cost of
material, labor and technology,  particularly in connection with the delivery of
business  services,  the costs  associated  with  initiating new contracts,  the
economic  condition of NeoMedia's target markets,  and the cost of acquiring and
integrating new businesses.

         NeoMedia's  quarterly  operating results have been subject to variation
and will continue to be subject to variation,  depending  upon factors,  such as
the  mix of  business  among  NeoMedia's  services  and  products,  the  cost of
material, labor and technology,  particularly in connection with the delivery of
business  services,  the costs  associated  with  initiating new contracts,  the
economic  condition of NeoMedia's target markets,  and the cost of acquiring and
integrating new businesses.


RESULTS OF  OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2003 AS COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 2002

     Net sales.  Total net sales for the three  months ended March 31, 2003 were
$0.9  million,  which  represented a $0.5  million,  or 36%,  decrease from $1.4
million for the three  months  ended March 31,  2002.  This  decrease  primarily
resulted  from reduced  resales of Sun  Microsystems  equipment due to increased
competition and general economic conditions.  The Company intends to continue to
pursue additional resales of equipment, software and services, and to the extent
that  such  sales can be made,  the  Company  expects  resales  to more  closely
resemble the results for the first three  months of 2002,  rather than the first
three months of 2003.

                                       11

<PAGE>


     LICENSE  FEES.  License  fees were $0.1  million for the three months ended
March 31, 2003,  compared with $0.1 million for the three months ended March 31,
2002. The Company  expects license fees to remain  materially  constant over the
next 12 months.

     RESALES OF SOFTWARE AND TECHNOLOGY  EQUIPMENT AND SERVICE FEES.  Resales of
software and technology equipment and service fees decreased by $0.5 million, or
38%, to $0.8 million for the three  months ended March 31, 2003,  as compared to
$1.3 million for the three months ended March 31, 2002. This decrease  primarily
resulted from increased competition and general economic conditions. The Company
intends to continue to pursue  additional  resales of  equipment,  software  and
services,  and to the extent that such sales can be made,  the  Company  expects
resales to more closely resemble the results for the first three months of 2002,
rather than the first three months of 2003.

     COST OF SALES.  Cost of license  fees was $0.1 million for the three months
ended March 31, 2003, a decrease of $0.2  million,  or 67%,  compared  with $0.3
million for the three months ended March 31, 2002.  The decrease  resulted  from
reduced amortization  expense in 2003 of capitalized  development costs relating
to the PaperClick,  MLM/Affinity, and Qode products that were written off during
2002.  Cost of resales  was $0.7  million for the three  months  ended March 31,
2003, a decrease of $0.3  million,  or 30%,  compared  with $1.0 million for the
three months ended March 31, 2002. The decrease  resulted from decreased resales
in 2003 compared with 2002.  Cost of resales as a percentage of related  resales
was 92% in 2003,  compared to 75% in 2002.  This increase is due to an increased
sales mix of lower-margin  equipment products sold in 2003 compared to 2002. The
Company  expects  costs of resales to fluctuate  with the sales of its equipment
software, and services over the next 12 months.

     GROSS  PROFIT.  Gross  profit was $0.1  million for the three  months ended
March 31, 2003 and 2002.

     SALES AND MARKETING. Sales and marketing expenses were $0.1 million for the
three months ended March 31, 2003, a decrease of $0.1 million,  or 50%, compared
with $0.2  million for the three  months  ended March 31,  2002.  This  decrease
resulted from reduced sales  commissions paid on lower sales in 2003 as compared
with 2002.  The Company  expects sales and marketing  expense to fluctuate  with
sales of it proprietary and resold products over the next 12 months.

     GENERAL AND ADMINISTRATIVE.  General and administrative  expenses decreased
by $0.3  million,  or 30%, to $0.7  million for the three months ended March 31,
2003,  compared to $1.0 million for the three  months ended March 31, 2002.  The
decrease  resulted  primarily  from a  smaller  administrative  staff  after the
Company's cost reduction initiative that began in late 2001. The Company expects
general  and  administrative  expense to  decrease  slightly  during 2003 due to
reduced  professional  service  expenses,  lease  restructuring,  and other cost
reduction efforts.

     RESEARCH  AND  DEVELOPMENT.  During the three  months ended March 31, 2003,
NeoMedia  charged to expense $0.1 million of research and  development  costs, a
decrease of $0.1 million or 50% compared to $0.2 million  charged to expense for
the three  months  ended March 31,  2002.  The  decrease is  primarily  due to a
continued  reduction in research and  development  overhead  since first quarter
2002.  The Company  expects  research and  development  costs will not fluctuate
materially over the next 12 months.

     Interest  expense  (income),   net.  Interest   expense/(income)   consists
primarily of interest  paid to creditors  as part of financed  purchases,  notes
payable and NeoMedia's asset-based collateralized line of credit net of interest
earned on cash equivalent investments.  Interest  expense/(income)  increased by
$21,000,  or 68%,  to $52,000  for the three  months  ended  March 31, 2003 from
$31,000 for the three months ended March 31,  2002,  due to interest  expense in
the first three  months of 2003  associated  with  convertible  notes  issued in
November 2002.

     NET LOSS.  The net loss for the three  months ended March 31, 2003 was $0.9
million,  which represented a $0.5 million,  or 36% decrease from a $1.4 million
loss for the three months ended March 31, 2002. The decrease resulted  primarily
from reduced sales and marketing,  general and  administrative,  and development
costs during 2003,  after the Company's cost reduction  initiative that began in
late 2001.


ITEM 3.  CONTROLS AND PROCEDURES


                                       12

<PAGE>

EVALUATION OF DISCLOSURE  CONTROLS AND PROCEDURES . NeoMedia's  chief  executive
officer and chief financial  officer,  after evaluating the effectiveness of the
Company's "disclosure controls and procedures" (as defined in Sections 13a-14(c)
of the Securities Exchange Act of 1934) as of a date (the "Evaluation Date") not
more  than 90 days  before  the  filing  date of  this  quarterly  report,  have
concluded that as of the Evaluation Date, the Company's  disclosure controls and
procedures  were  effective  and  designed to ensure that  material  information
relating to the Company and its  consolidated  subsidiaries  is accumulated  and
would be made known to them by others within those  entities as  appropriate  to
allow timely decisions regarding required disclosures.


CHANGES  IN  INTERNAL  CONTROLS  .  NeoMedia  does not  believe  that  there are
significant  deficiencies  in the design or operation  of its internal  controls
that could adversely affect its ability to record, process, summarize and report
financial  data.  Although  there were no  significant  changes in the Company's
internal  controls or in other  factors  that could  significantly  affect those
controls  subsequent to the Evaluation Date,  NeoMedia's senior  management,  in
conjunction  with its Board of Directors,  continuously  reviews overall company
policies  and  improves  documentation  of  important  financial  reporting  and
internal  control matters.  NeoMedia is committed to continuously  improving the
state of its internal controls, corporate governance and financial reporting.


LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS . NeoMedia's management,  including
the chief executive  officer and chief financial  officer,  does not expect that
its disclosure or internal  controls will prevent all errors or fraud. A control
system, no matter how well conceived and operated,  can provide only reasonable,
not  absolute,  assurance  that the  objectives  of the control  system are met.
Further,  the design of a control  system  must  reflect the fact that there are
resource  constraints,  and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in a cost-effective  control
system, misstatements due to error or fraud may occur and not be detected.



                                       13



<PAGE>


                          PART II -- OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

         The Company is involved in the following  legal actions  arising in the
normal course of business, both as claimant and defendant.

     NEOMEDIA SHAREHOLDERS

     During January 2002,  certain of NeoMedia's  shareholders filed a complaint
with the Securities and Exchange Commission, alleging that the shareholders were
not included in the special  shareholders  meeting of November 25, 2001, to vote
on the  issuance of 19 million  shares of NeoMedia  common  stock.  On March 11,
2002, NeoMedia filed its response claiming that NeoMedia had fully complied with
all of its  obligations  under  the laws  and  regulations  administered  by the
Securities  and  Exchange  Commission,  as  well as with  its  obligation  under
Delaware General Corporation Law.

     AIRCLIC, INC. LITIGATION

     On July 3, 2001,  the Company  entered into a non-binding  letter of intent
with  AirClic,  which  contemplated  an  intellectual  property  cross-licensing
transaction  between the Company and  AirClic.  Under the terms of the letter of
intent,  AirClic was to provide the Company with bridge financing of $2,000,000,
which was to be paid to the Company in installments.  On July 11, 2001,  AirClic
advanced  $500,000 in bridge financing to the Company in return for a promissory
note from the  Company  secured by all of its  assets,  including  its  physical
world-to-Internet  patents. During the negotiation of definitive agreements, the
letter of intent was abandoned on the basis of the Company's  alleged  breach of
certain representations made by the Company in the promissory note.

     On September 6, 2001,  AirClic  filed suit against the Company in the Court
of Common Pleas, Montgomery County,  Pennsylvania,  seeking, among other things,
the  accelerated  repayment of a $500,000  loan it advanced to the Company under
the terms of a letter of intent  entered into  between  AirClic and the Company.
The letter of intent was  subsequently  abandoned on the basis of the  Company's
alleged breach of certain  representations made by the Company in the promissory
note  issued to  AirClic  in respect  of such  advance.  The note  issued by the
Company in respect of AirClic's $500,000 advance is secured by substantially all
of   the   Company's   property,   including   the   Company's   core   physical
world-to-Internet   technologies.   If  the  Company  is  unsuccessful  in  this
litigation,  AirClic,  which  is one of the  Company's  key  competitors,  could
acquire the Company's core intellectual  property and other assets,  which would
have a material adverse effect on the Company's business,  prospects,  financial
condition,  and results of operations.  The Company is vigorously defending this
claim  and has  filed  counterclaims  against  AirClic.  As of the  date of this
filing, pleadings were closed and the parties have engaged in written discovery.
Whether or not AirClic is  successful  in asserting  its claims that the Company
breached certain representations made by it in the note, the note became due and
payable in  accordance  with its terms on January  11,  2002.  Based on the cash
currently  available  to the Company,  payment of the note and related  interest
would have a material adverse effect on the Company's  financial  condition.  If
the Company fails to pay such note,  AirClic could proceed against the Company's
intellectual  property  and other  assets  securing  the note which would have a
material  adverse  effect  on  the  Company's  business,  prospects,   financial
condition, and results of operations. The Company has not accrued any additional
liability  over and above the note  payable and related  accrued  interest.  The
Company and AirClic are currently proceeding with depositions.

      DIGITAL:CONVERGENCE LITIGATION

      On June 26,  2001,  the  Company  filed a $3  million  lawsuit in the U.S.
District  Court,   Northern   District  of  Texas,   Dallas  Division,   against
Digital:Convergence  Corporation  for breach of contract  regarding a $3 million
promissory  note due on June 24, 2001 that was not paid.  The Company is seeking
payment of the $3 million note plus interest and attorneys fees. The Company has
not accrued any gain  contingency  related to this  matter.  On March 22,  2002,
Digital:Convergence filed under Chapter 7 of the United States Bankruptcy Code.


                                       14

<PAGE>


      OTHER LITIGATION

      In April 2001,  the former  President  and  director  of NeoMedia  filed a
lawsuit against the Company and several of its directors.  The suit was filed in
the Circuit Court of the Twentieth Judicial Circuit for Sarasota,  Florida.  The
claim alleges the individual was fraudulently  induced into accepting employment
and that  the  Company  breached  the  employment  agreement.  The  individual's
employment with the Company ended in January 2001.  During May 2002, the Company
settled the suit.  The Company was  obligated  to make cash  payments of $90,000
directly to the plaintiff  during the period May 2002 through December 2002, and
cash  payments  to the  plaintiff's  attorney  for legal  fees in the  amount of
$45,000 due in July and August 2002.  In  addition,  the  plaintiff  was granted
360,000 options to purchase shares of NeoMedia common stock at an exercise price
of $0.08.  As of March 31,  2002,  the Company had accrued a $347,000  liability
relating to the suit.  As a result,  the Company  recognized  an increase to net
income of  approximately  $176,000 during the three-month  period ended June 30,
2002 to adjust the liability to the settlement amount. As of March 31, 2003, the
Company  had an accrued  liability  of  approximately  $18,000  relating to this
matter.

      On August 20, 2001,  Ripfire,  Inc.  filed suit against the Company in the
San Francisco County Superior Court seeking payment of $138,000 under a software
license  agreement  entered  into  between  the  Company and Ripfire in May 2001
relating to implementation of the Qode Universal Commerce Solution. On September
6, 2002,  the Company  settled  this suit for $133,000 of the  Company's  common
stock,  to be valued at the time of  registration  of the shares.  The Company's
stock was trading at approximately  $0.05 at that time. The Company included for
registration  2.7 million shares in the name of Ripfire in its form S-1 that was
declared  effective  by the SEC on February 14, 2003.  The  Company's  stock was
trading at approximately $0.02 on February 14, 2003. The actual number of shares
to be  issued  to  Ripfire  per  the  pricing  outlined  in  the  agreement  was
approximately 9.8 million. On March 31, 2003, the Company issued the 2.7 million
shares of common  stock  that had been  registered  in the S-1 to  Ripfire.  The
Company has a remaining accrued liability of $106,000 relating to this matter as
of March 31, 2003.

      On November 30, 2001,  Orsus Solutions USA, Inc.,  filed a summons seeking
payment in full of  approximately  $525,000  relating to a software and services
contract associated with implementation of the Qode Universal Commerce Solution.
The Company is currently  attempting to negotiate settlement of this matter. The
Company has accrued a liability of $525,000 as of March 31, 2003.

      On January 22, 2002,  Rapidigm,  Inc.  sued the Company to collect  unpaid
professional  service  expense  incurred in 2001 in the amount of  approximately
$15,000.  The Company and Rapdigm  reached a settlement in February 2002,  under
which the Company made  payments  totaling  approximately  $7,000.  On April 22,
2003,  Rapidigm  obtained a judgment for the remaining  balance of the liability
plus  court  fees  and  interest.   The  Company  has  accrued  a  liability  of
approximately $10,000 as of March 31, 2003.

      On July 22, 2002, 2150 Western Court, L.L.C., the property manager for the
Company's  Lisle,  IL, office,  filed a summons seeking payment of approximately
$72,000 for all past due rents on the facility. The summons asked for a judgment
for the above amount plus  possession  of the premises.  On August 9, 2002,  the
Company  settled  this  matter.  The  settlement  calls  for past  due  rents of
approximately  $72,000  to be paid over a  15-month  period,  as well as reduced
rents for the period August 2002 through March 2003. As additional consideration
in the settlement, the Company issued 900,000 shares of its common stock to 2150
Western  Court  L.L.C.  The  Company had a liability  of  approximately  $50,000
relating to this matter as of March 31, 2003.

      On July 27, 2002, the Company's  former General Counsel filed suit in U.S.
District  Court,  Ft.  Myers  division,  seeking  payment of the 2000  executive
incentive,  severance and unpaid  vacation  days in the amount of  approximately
$154,000.  In June  2001,  the  Company's  compensation  committee  approved  an
adjustment  to the 2000  executive  incentive  plan that  reduced the  executive
incentive  payout  as a  result  of the  write-off  of  the  Digital:Convergence
intellectual  property  license  contract  in the second  quarter of 2001.  As a
result,  the Company  reduced the  accrual  for such payout by an  aggregate  of
approximately  $1.1  million in the second  quarter of 2002.  The  plaintiff  is
seeking payment of the entire original  incentive  payout. On November 12, 2002,
the Company settled the lawsuit. The settlement calls for cash payments totaling
approximately  $90,000 over a period of ten months,  plus 250,000 vested options
to purchase  shares of the Company's  common stock at an exercise price of $0.01
with a term of five years. The Company had a liability of approximately  $45,000
relating to this matter as of March 31, 2003.


                                       15

<PAGE>


      On August 23,  2002,  Dell  Marketing  LP filed suit  against  the Company
seeking payment of approximately  $5,000 relating to equipment  purchased by the
Company.  The  Company  made  payments  against the  liability  in the amount of
approximately  $4,000 during 2002. The plaintiff has received a default judgment
in the amount of  approximately  $4,000 for the remaining  balance plus interest
and court costs.

      On September 12, 2002,  R. R.  Donnelley & Sons Company filed a summons in
the  Circuit  Court of The  Twentieth  Judicial  Circuit in and for Lee  County,
Florida,  seeking  payment of  approximately  $92,000  in past due  professional
services bills. The Company is attempting to negotiate  settlement of this issue
out of court  prior to the court date.  The  Company  has accrued  approximately
$92,000 relating to this matter as of March 31, 2003.

      On September 13, 2002, Wachovia Bank, N.A., owner of the building in which
the Company's Ft. Myers, Florida  headquarters is located,  filed a complaint in
Circuit Court of The Twentieth Judicial Circuit in and for Lee County,  Florida,
seeking payment of approximately  $225,000 in past due rents. The complaint also
seeks payment of all future rent payments under the lease term, which expires in
January 2004, as well as  possession of the premises.  On October 28, 2002,  the
Company and Wachovia  reached a settlement on this matter.  The settlement calls
for cash payments of past due rents of  approximately  $250,000 over a period of
16 months. The Company will also vacate approximately 70% of the unused space in
its headquarters,  and the rent for the remainder of the lease, which expires in
January 2004, will be reduced  according to square footage used. The Company has
accrued a  liability  of  approximately  $242,000  relating to this matter as of
March 31, 2003.

      On October 21, 2002, International Digital Scientific, Inc. ("IDSI") filed
a demand for  arbitration  relating to past due payments on an  uncollateralized
note  payable  from us to IDSI dated  October  1,  1994.  The note was issued in
exchange for the purchase by us of computer  software from IDSI.  The note calls
for the Company to make  payments  of the  greater  of: (i) 5% of the  collected
gross revenues from sales of software or (ii) $16,000 per month. As of March 31,
2003,  the Company had  recorded a current  portion of long term debt to IDSI of
approximately  $473,000.  The net carrying value of future  obligation under the
note was  approximately  $651,000 as of March 31, 2003.  The Company has filed a
counterclaim  with the  arbitrator  relating  to this  matter.  The  arbitration
hearing has been scheduled for June 25, 2003.

      On October 28, 2002, Merrick & Klimek, P.C., filed a complaint against the
Company  seeking payment of  approximately  $170,000 in past due legal services.
The amount in question is subject to an unsecured  promissory  note that matured
unpaid on February 28, 2002.  On May 1, 2003,  the Company  settled the suit for
cash  payments  totaling  $170,000,  to be paid at a rate of $30,000 per quarter
until the  balance is  satisfied.  If the balance is paid within one year of the
settlement,  the Company will not pay interest charges. The Company has recorded
the note  payable  amount of  approximately  $170,000  and  accrued  interest of
approximately $26,000 relating to this matter as of March 31, 2003.

         On November 11, 2002,  Avnet/Hallmark  Computer Marketing Group filed a
complaint  against the Company seeking payment of approximately  $66,000 in past
due amounts  relating to hardware  and software  re-sold by the Company.  During
December  2002,  the Company  made  payment of  approximately  $30,000 to Avnet,
reducing  the  balance  owed to  approximately  $37,000.  On April 1, 2003,  the
plaintiff  received a judgment from the circuit court for the remaining balance.
The Company is attempting  to negotiate a payment plan for the judgment  balance
of approximately $57,000,  including court costs and interest. The Company had a
liability of approximately $57,000 relating to this matter as of March 31, 2003.

      On December 30, 2002,  Brooks  Automation,  Inc. filed a complaint against
the  Company  seeking  payment  of  approximately  $37,000  in past due  amounts
relating to  software  re-sold by the  Company.  The  Company is  attempting  to
negotiate  settlement  of this issue out of court  prior to the court  date.  On
January 16, 2003, the Company and Brooks  Automation  reached a settlement under
which the Company will pay the amount owed to Brooks Automation over a period of
approximately 15 months,  with the payment amount increasing after three months.
The Company had a liability of approximately  $36,000 relating to this matter as
of March 31, 2003.

      On February 6, 2003, Allen Norton & Blue, P.A., filed a complaint  against
the Company seeking payment of approximately $25,000 in past due legal services.
The Company is  attempting  to negotiate  settlement  of this issue out of court
prior to the court date.  The Company had a liability of  approximately  $25,000
relating to this matter as of March 31, 2003.



                                       16

<PAGE>


      On March 10, 2003, IBM Credit  Corporation  filed a complaint  against the
Company seeking payment of approximately  $9,000 in past due amounts relating to
equipment leased by the Company.  On March 25, 2003, the Company received a writ
of replevin  allowing IBM Credit  Corporation  to repossess the  equipment.  The
Company is currently in possession of the equipment and negotiating a settlement
for the remaining payments due.

      On April 18, 2003, a former participant in the Company's 2001 self-insured
health plan sued the Company to recover  approximately  $46,000 in unpaid health
claims from 2001.  The Company is attempting to negotiate a settlement  prior to
the court date.  The Company had accrued the claims  related to this suit in the
amount of approximately $40,000 as of March 31, 2003.


                                       17



<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits
                  (None)

(b)               Reports on Form 8-K

         The Company filed a Form 8-K on March 9, 2003,  disclosing  that it had
         reached  an  agreement  in  principal  to  acquire  and merge with Loch
         Energy,  Inc.,  an oil and gas  provider  based in Humble,  Texas.  The
         merger is subject to  negotiations of definitive  contracts,  corporate
         filing  requirements,  completion  of due  diligence  and any  required
         approval by the Boards of Directors and  shareholders  of each company.
         It is anticipated that closing would occur  approximately 30 days after
         such conditions are satisfied

         The  Company  filed a report on Form 8-K on April 24,  2003,  reporting
         that:  i) the Board of  Directors  had  approved the payment in full of
         approximately $154,000 of liabilities owed by the Company to Charles W.
         Fritz,  the  Company's  Founder and Chairman of the Board of Directors,
         through the issuance of 15,445,967  shares of common stock, and ii) the
         Company  had sold  25,000,000  shares of its  common  stock,  par value
         $0.01, in a private  placement at a price of $0.01 per share to William
         E. Fritz,  an outside  director.  The Company also  granted  25,000,000
         warrants to purchase shares of the Company's  common stock at $0.01 per
         share to William Fritz as part of the purchase.


                                       18



<PAGE>


                                   SIGNATURES

         In accordance with the  requirements of the Securities  Exchange Act of
1934,  the  Registrant  has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                    NEOMEDIA TECHNOLOGIES, INC.
                                           Registrant

Date May 19, 2003           By:  /s/ Charles T. Jensen
     ------------           ---------------------------------------------
                            Charles T. Jensen,  President,  Acting Chief
                            Executive  Officer,  Chief Operating
                            Officer, and Director

Date May 19, 2003           By:  /s/ David A. Dodge
     ------------           ---------------------------------------------
                            David A. Dodge, Vice President,
                            Chief Financial Officer, and Controller


                                       19
<PAGE>


                                  CERTIFICATION

I, Charles T. Jensen, certify that:

1.  I  have  reviewed  this   quarterly   report  on  Form  10-QSB  of  NeoMedia
Technologies, Inc.;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed  such  disclosure  controls and  procedures  to ensure that
         material  information   relating  to  the  registrant,   including  its
         consolidated  subsidiaries,  is made known to us by others within those
         entities, particularly during the period in which this quarterly report
         is being prepared;


         b) evaluated the effectiveness of the registrant's  disclosure controls
         and  procedures as of a date within 90 days prior to the filing date of
         this quarterly report (the "Evaluation Date"); and


         c)  presented  in this  quarterly  report  our  conclusions  about  the
         effectiveness  of the disclosure  controls and procedures  based on our
         evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

         a) all significant  deficiencies in the design or operation of internal
         controls  which  could  adversely  affect the  registrant's  ability to
         record,   process,   summarize  and  report  financial  data  and  have
         identified  for the  registrant's  auditors any material  weaknesses in
         internal controls; and


         b) any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  registrant's
         internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: May 19, 2003                    /s/ Charles T. Jensen
                                     -----------------------------------
                                     President,   Chief  Operating  Officer,
                                     Acting  Chief  Executive
                                     Officer, and Director

                                       20
<PAGE>


                                  CERTIFICATION

I, David A. Dodge, certify that:

1.  I  have  reviewed  this   quarterly   report  on  Form  10-QSB  of  NeoMedia
Technologies, Inc.;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed  such  disclosure  controls and  procedures  to ensure that
         material  information   relating  to  the  registrant,   including  its
         consolidated  subsidiaries,  is made known to us by others within those
         entities, particularly during the period in which this quarterly report
         is being prepared;


         b) evaluated the effectiveness of the registrant's  disclosure controls
         and  procedures as of a date within 90 days prior to the filing date of
         this quarterly report (the "Evaluation Date"); and


         c)  presented  in this  quarterly  report  our  conclusions  about  the
         effectiveness  of the disclosure  controls and procedures  based on our
         evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

         a) all significant  deficiencies in the design or operation of internal
         controls  which  could  adversely  affect the  registrant's  ability to
         record,   process,   summarize  and  report  financial  data  and  have
         identified  for the  registrant's  auditors any material  weaknesses in
         internal controls; and


         b) any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  registrant's
         internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: May 19, 2003                    /s/ David A. Dodge
                                      -----------------------------------
                                      Vice President, Chief Financial
                                      Officer, and Controller

                                       21