UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C.   20549
 
 FORM
10 - Q
 
 x
                QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For
the quarterly period ended March 31, 2009
 
 o
              TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
the transition period from __________ to ____________
 
 
 Commission
File Number 0-21743
 
 NeoMedia
Technologies, Inc.
 (Exact
Name of Issuer as Specified In Its Charter)
 
 Delaware
              36-3680347(State
      or other jurisdiction of
              (I.R.S.
      Employerincorporation
      or organization)
              Identification
      No.)
 
 Two
Concourse Parkway, Suite 500, Atlanta, GA 30328
 (Address,
including zip code, of principal executive offices)
  678-638-0460
 (Registrants’
telephone number, including area code)
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements for the past 90
days. Yes x   No
o
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files. Yes o   No
o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
accelerated filer o   
Accelerated filer o    
Non-accelerated filer oSmaller Reporting Company x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o    No
x
 
 The
number of outstanding shares of the registrant’s Common Stock on May 7, 2009 was
1,799,867,143.
 
 
 
 NeoMedia
Technologies, Inc.
 Form
10-Q
 For
the Quarterly Period Ended March 31, 2009
 Index
 
 PagePART
      I
                Financial
      Information
                2ITEM
      1.
                Financial
      Statements
                2ITEM
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                18ITEM
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                22ITEM
      4T.
                Controls
      and Procedures
                22PART
      II
                Other
      Information
                23ITEM
      1.
                Legal
      Proceedings
                23ITEM
      1A.
                Risk
      Factors
                23ITEM
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                23ITEM
      3.
                Defaults
      Upon Senior Securities
                23ITEM
      4.
                Submission
      of Matters to A Vote of Security Holders
                23ITEM
      5.
                Other
      Information
                23ITEM
      6.
                Exhibits
                24Signatures
                30
 
   
  FORWARD
LOOKING STATEMENTS
 
 This Form
10-Q contains “forward-looking statements” relating to NeoMedia Technologies,
Inc, a Delaware corporation, which represent our current expectations or beliefs
including, but not limited to, statements concerning our operations,
performance, financial condition and growth. For this purpose, any statements
contained in this Form 10-Q that are not statements of historical fact are
forward-looking statements. Without limiting the generality of the foregoing,
words such as “may”, “anticipate”, “intend”, “could”, “estimate”, or “continue”
or the negative or other comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, such as credit losses, dependence on management and key
personnel, variability of quarterly results, the ability to continue our growth
strategy and competition, certain of which are beyond our control. Should one or
more of these risks or uncertainties materialize or should the underlying
assumptions prove incorrect, actual outcomes and results could differ materially
from those indicated in the forward-looking statements.
 
 Any
forward-looking statement speaks only as of the date on which such statement is
made, and we undertake no obligation to update any forward-looking statement or
statements to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time and it is not possible for us to predict all of
such factors, nor can we assess the impact of each such factor on the business
or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-looking
statements.
       
 1
 PART
I -- FINANCIAL INFORMATION
 ITEM
1.  Financial Statements
  NeoMedia
Technologies, Inc. and Subsidiaries
 Condensed
Consolidated Balance Sheets
 (in
thousands, except share and per share data)
  March
      31,
                                            
                                            
                                            December
      31,2009
                                            
                                            
                                            2008ASSETS
                                            
                                            (Unaudited)Current
      assets:Cash
      and cash equivalents
                                            
                                            $
                                            230
                                            
                                            
                                            $
                                            1,259Trade
      accounts receivable, net of allowance for doubtfulaccounts
      of $0 and $0, respectively
                                            
                                            
                                            153
                                            
                                            
                                            
                                            102Inventories,
      net of allowance for obsolete & slow-movinginventory
      of $61and $80 respectively
                                            
                                            
                                            93
                                            
                                            
                                            
                                            117Prepaid
      expenses and other current assets
                                            
                                            
                                            498
                                            
                                            
                                            
                                            544Total
      current assets
                                            
                                            
                                            974
                                            
                                            
                                            
                                            2,022Property,
      equipment and leasehold improvements, net
                                            
                                            
                                            86
                                            
                                            
                                            
                                            79Goodwill
                                            
                                            
                                            3,418
                                            
                                            
                                            
                                            3,418Proprietary
      software, net
                                            
                                            
                                            2,572
                                            
                                            
                                            
                                            2,738Patents
      and other intangible assets, net
                                            
                                            
                                            2,218
                                            
                                            
                                            
                                            2,293Cash
      surrender value of life insurance policies
                                            
                                            
                                            472
                                            
                                            
                                            
                                            508Other
      long-term assets
                                            
                                            
                                            437
                                            
                                            
                                            
                                            430Total
      assets
                                            
                                            $
                                            10,177
                                            
                                            
                                            $
                                            11,488LIABILITIES
      AND SHAREHOLDERS’ DEFICITCurrent
      liabilities:Accounts
      payable
                                            
                                            $
                                            543
                                            
                                            
                                            $
                                            134Taxes
      payable
                                            
                                            
                                            11
                                            
                                            
                                            
                                            7Accrued
      expenses
                                            
                                            
                                            6,532
                                            
                                            
                                            
                                            5,787Deferred
      revenues and customer prepayments
                                            
                                            
                                            318
                                            
                                            
                                            
                                            403Notes
      payable
                                            
                                            
                                            24
                                            
                                            
                                            
                                            50Accrued
      purchase price guarantee
                                            
                                            
                                            4,614
                                            
                                            
                                            
                                            4,614Deferred
      tax liability
                                            
                                            
                                            706
                                            
                                            
                                            
                                            706Derivative
      financial instruments - warrants
                                            
                                            
                                            34,470
                                            
                                            
                                            
                                            1,189Derivative
      financial instruments - debentures payable
                                            
                                            
                                            72,797
                                            
                                            
                                            
                                            26,256Debentures
      payable - carried at amortized cost
                                            
                                            
                                            11,311
                                            
                                            
                                            
                                            11,227Debentures
      payable - carried at fair value
                                            
                                            
                                            42,924
                                            
                                            
                                            
                                            19,892Total
      current liabilities
                                            
                                            
                                            174,250
                                            
                                            
                                            
                                            70,265Commitments
      and contingencies (Note 7)Series
      C convertible preferred stock, $0.01 par value, 30,000shares
      authorized, 18,736 and 19,144 shares issued and
    outstanding,liquidation
      value of $18,736 and $19,144
                                            
                                            
                                            18,736
                                            
                                            
                                            
                                            19,144Shareholders’
      deficit:Common
      stock, $0.01 par value, 5,000,000,000 shares authorized, 1,711,271,614
      and1,375,056,229
      shares issued and 1,708,120,345 and 1,371,904,960
    outstanding,respectively
                                            
                                            
                                            17,081
                                            
                                            
                                            
                                            13,719Additional
      paid-in capital
                                            
                                            
                                            120,612
                                            
                                            
                                            
                                            120,430Accumulated
      deficit
                                            
                                            
                                            (319,680
                                            )
                                            
                                            
                                            (211,305
                                            )Accumulated
      other comprehensive loss
                                            
                                            
                                            (43
                                            )
                                            
                                            
                                            14Treasury
      stock, at cost, 201,230 shares of common stock
                                            
                                            
                                            (779
                                            )
                                            
                                            
                                            (779
                                            )Total
      shareholders’ deficit
                                            
                                            
                                            (182,809
                                            )
                                            
                                            
                                            (77,921
                                            )Total
      liabilities and shareholders’ deficit
                                            
                                            $
                                            10,177
                                            
                                            
                                            $
                                            11,488
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  2
 NeoMedia
Technologies, Inc. and Subsidiaries
 Condensed
Consolidated Statements of Operations (Unaudited)
 (in
thousands, except share and per share data)
 
 `
                                
                                Three
      Months EndedMarch
      31,
                                
                                
                                March
      31,2009
                                
                                
                                2008Net
      sales
                                
                                $
                                490
                                
                                
                                $
                                264Cost
      of sales
                                
                                
                                527
                                
                                
                                
                                313Gross
      deficit
                                
                                
                                (37
                                )
                                
                                
                                (49
                                )Sales
      and marketing expenses
                                
                                
                                286
                                
                                
                                
                                628General
      and administrative expenses
                                
                                
                                923
                                
                                
                                
                                1,290Research
      and development costs
                                
                                
                                324
                                
                                
                                
                                562Operating
      loss
                                
                                
                                (1,570
                                )
                                
                                
                                (2,529
                                )Gain
      on extinguishment of debt
                                
                                
                                -
                                
                                
                                
                                4Gain
      (loss) from change in fair value of hybrid financial
      instruments
                                
                                
                                (23,031
                                )
                                
                                
                                1,344Gain
      (loss) from change in fair value of warrants
                                
                                
                                (33,281
                                )
                                
                                
                                2,032Gain
      (loss) from change in fair value of debentures
                                
                                
                                (47,654
                                )
                                
                                
                                3,360Other
      interest expense, net
                                
                                
                                (1,063
                                )
                                
                                
                                (173
                                )Income
      (loss) from continuing operations
                                
                                
                                (106,599
                                )
                                
                                
                                4,038Loss
      from discontinued operations
                                
                                
                                -
                                
                                
                                
                                (445
                                )Net
      income (loss)
                                
                                
                                (106,599
                                )
                                
                                
                                3,593Dividends
      on convertible preferred stock
                                
                                
                                (375
                                )
                                
                                
                                (399
                                )Net
      income (loss) attributable to common shareholders
                                
                                
                                (106,974
                                )
                                
                                
                                3,194Comprehensive
      income (loss):Net
      income (loss)
                                
                                
                                (106,599
                                )
                                
                                
                                3,593Other
      comprehensive loss:Foreign
      currency translation adjustment
                                
                                
                                (57
                                )
                                
                                
                                -Comprehensive
      income (loss)
                                
                                $
                                (106,656
                                )
                                
                                $
                                3,593Net
      income (loss) per share, basic:Continuing
      operations
                                
                                $
                                (0.07
                                )
                                
                                $
                                0.00Discontinued
      operations
                                
                                $
                                -
                                
                                
                                $
                                (0.00
                                )Net
      income (loss) per share, basic
                                
                                $
                                (0.07
                                )
                                
                                $
                                0.00Net
      income (loss) per share, fully diluted:Continuing
      operations
                                
                                $
                                (0.07
                                )
                                
                                $
                                0.00Discontinued
      operations
                                
                                $
                                -
                                
                                
                                $
                                (0.00
                                )Net
      income (loss) per share, fully diluted
                                
                                $
                                (0.07
                                )
                                
                                $
                                0.00Weighted
      average number of common shares:Basic
                                
                                
                                1,503,082,652
                                
                                
                                
                                1,028,798,182Fully
      diluted
                                
                                
                                1,503,082,652
                                
                                
                                
                                9,570,919,928
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  3
 
 NeoMedia
Technologies, Inc. and Subsidiaries
 Condensed
Consolidated Statements of Cash Flows (Unaudited)
 (in
thousands)
 
 For
      the three months endedMarch
      31,2009
                                              
                                              
                                              2008Cash
      Flows from Operating Activities:Income
      (loss) from continuing operations
                                              
                                              $
                                              (106,599
                                              )
                                              
                                              $
                                              3,593Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Loss
      from discontinued operations
                                              
                                              
                                              -
                                              
                                              
                                              
                                              445Depreciation
      and amortization
                                              
                                              
                                              261
                                              
                                              
                                              
                                              269Loss
      on sale of assets
                                              
                                              
                                              -
                                              
                                              
                                              
                                              84Gain
      on early extinguishment of debt
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (4
                                              )(Gain)
      loss from change in fair value of hybrid financial
    instruments
                                              
                                              
                                              23,031
                                              
                                              
                                              
                                              (1,344
                                              )(Gain)
      loss from change in fair value of warrants
                                              
                                              
                                              33,281
                                              
                                              
                                              
                                              (2,032
                                              )(Gain)
      loss from change in fair value of debentures
                                              
                                              
                                              47,654
                                              
                                              
                                              
                                              (3,360
                                              )Other
      interest expense, net
                                              
                                              
                                              1,063
                                              
                                              
                                              
                                              187Stock-based
      compensation expense
                                              
                                              
                                              80
                                              
                                              
                                              
                                              359Decrease/
      (increase) in value of life insurance policies
                                              
                                              
                                              36
                                              
                                              
                                              
                                              -Changes
      in operating assets and liabilitiesTrade
      and other accounts receivable
                                              
                                              
                                              (51
                                              )
                                              
                                              
                                              246Inventories
                                              
                                              
                                              24
                                              
                                              
                                              
                                              (22
                                              )Prepaid
      expenses and other assets
                                              
                                              
                                              39
                                              
                                              
                                              
                                              26Accounts
      payable and accrued liabilities
                                              
                                              
                                              172
                                              
                                              
                                              
                                              (127
                                              )Deferred
      revenue and other current liabilities
                                              
                                              
                                              (111
                                              )
                                              
                                              
                                              16Net
      cash used in operating activities
                                              
                                              
                                              (1,120
                                              )
                                              
                                              
                                              (1,664
                                              )Cash
      Flows from Investing Activities:Acquisition
      of property and equipment
                                              
                                              
                                              (24
                                              )
                                              
                                              
                                              (66
                                              )Loans
      repaid from subsidiaries
                                              
                                              
                                              -
                                              
                                              
                                              
                                              289Expenses
      of discontinued operations
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (445
                                              )Proceeds
      from sale of investments
                                              
                                              
                                              -
                                              
                                              
                                              
                                              750Payment
      of purchase price guarantee obligations
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (14
                                              )Net
      cash used in investing activities
                                              
                                              
                                              (24
                                              )
                                              
                                              
                                              514Cash
      Flows from Financing Activities:Repayment
      of notes payable
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (29
                                              )Net
      proceeds from exercise of stock options
                                              
                                              
                                              116
                                              
                                              
                                              
                                              -Net
      cash provided by (used in) financing activities
                                              
                                              
                                              116
                                              
                                              
                                              
                                              (29
                                              )Effect
      of exchange rate changes on cash for continuing operations
                                              
                                              
                                              (1
                                              )
                                              
                                              
                                              (16
                                              )Net
      Increase (Decrease) in cash and cash equivalents from continuing
      operations
                                              
                                              
                                              (1,029
                                              )
                                              
                                              
                                              (1,195
                                              )Cash
      and cash equivalents, beginning of period
                                              
                                              
                                              1,259
                                              
                                              
                                              
                                              1,415Cash
      and cash equivalents, end of period
                                              
                                              $
                                              230
                                              
                                              
                                              $
                                              220Supplemental
      cash flow information:Interest
      paid during the period
                                              
                                              $
                                              1
                                              
                                              
                                              $
                                              14Accretion
      of dividends on Series C Convertible Preferred Stock
                                              
                                              
                                              375
                                              
                                              
                                              
                                              399Series
      C Convertible Preferred Stock converted to common stock
                                              
                                              
                                              408
                                              
                                              
                                              
                                              225Deemed
      dividend on preferred stock conversions
                                              
                                              
                                              1,776
                                              
                                              
                                              
                                              21Derivative
      liability settled by preferred stock conversions
                                              
                                              
                                              1,113
                                              
                                              
                                              
                                              60
  The
accompanying notes are an integral part of the consolidated financial
statements.
  4
 NeoMedia
Technologies, Inc. and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Unaudited)
  Note 1 - General
 
 Business –
NeoMedia utilizes the mobile phone by leveraging barcodes (printed symbols) as a
seamless mechanism to link brands, advertisers, carriers, retailers and
consumers using the power of the mobile internet.
 
 With our
barcode ecosystem technology, NeoMedia transforms mobile phones with cameras
into barcode scanners which provide instant access to mobile web content
whenever a barcode is scanned. A barcode makes any medium immediately
interactive – the code links consumers to the multimedia capability of the
mobile Web. Combining this technology with analytics and reporting capabilities
improves the way advertisers market to mobile consumers.
 
 NeoMedia
provides the infrastructure to facilitate mobile barcode scanning and its
associated commerce worldwide. Our mobile barcode ecosystem software reads and
transmits data from 1D and 2D barcodes to its intended destination. Our code
management and clearinghouse platforms create, connect, record, and transmit the
transactions embedded in the barcodes, like web-URLs, text messages (SMS), and
telephone calls, ubiquitously and reliably.
 
 In order
to provide complete mobile marketing solutions, NeoMedia also offers barcode
scanning hardware that reads barcodes displayed on mobile phone screens.
NeoMedia provides infrastructure solutions to enable mobile ticketing and
couponing programs – including scanner hardware and system support software for
seamless implementation.
 
 This
technology is supported by our patents. In addition, NeoMedia has an open
standards philosophy designed to make integration and use of the technology easy
for handset manufacturers, mobile operators and advertisers; and the consumer’s
experience safe, reliable and interoperable.
  Going
Concern – We have historically incurred net losses and losses from
operations and we expect that we will continue to have negative cash flows as we
implement our business plan.  There can be no assurance that our
continuing efforts to execute our business plan will be successful and that we
will be able to continue as a going concern. The accompanying consolidated
financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America (“US GAAP”), which
contemplate our continuation as a going concern.  Net income (loss)
from continuing operations for the three months ended March 31, 2009 and 2008
was ($106.6) million and $4.0 million, respectively.  Net cash used
for operations during the same periods was $1.1 million and $1.7 million,
respectively. We also have an accumulated deficit of $319.2 million and a
working capital deficit of $173.3 million as of March 31, 2009, of which $107.3
million relates to the fair value of hybrid and derivative financial
instruments, and $54.2 million relates to the carrying value of debentures, much
of which is related to the derivative value of our financing
instruments.
 
 The items
discussed above raise substantial doubts about our ability to continue as a
going concern.
 
 We
currently do not have sufficient cash to sustain us for the next twelve
months.  We will require additional financing in order to execute our
operating plan and continue as a going concern.  Our management’s plan
is to attempt to secure adequate funding to bridge the commercialization of our
barcode ecosystem business. We cannot predict whether this additional financing
will be in the form of equity, debt, or another form and we may not be able to
obtain the necessary additional capital on a timely basis, on acceptable terms,
or at all.  We believe that we can obtain additional financing, but in
the event that these financing sources do not materialize, or that we are
unsuccessful in increasing our revenues and profits, we may be unable to
implement our current plans for expansion, repay our debt obligations as they
become due or continue as a going concern, any of which circumstances would have
a material adverse effect on our business, prospects, financial condition and
results of operations. In 2009 we have received $1.0 million in financing
from YA Global Investments, L.P (“YA Global”). Should YA Global
choose not to provide us with capital financing, as they have in the
past, or if we do not find alternative sources of financing to fund our
operations, or if we are unable to generate significant product revenues, we
only have sufficient funds to sustain our current operations through
May 31, 2009.
  The
financial statements do not include any adjustments relating to the
recoverability and reclassification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary, should we be unable to
continue as a going concern.
  5
  Note 2 - Summary of Significant Accounting
Policies
 
 Basis of
Presentation––The accompanying condensed balance sheet as of December 31, 2008,
which was derived from audited consolidated financial statements, and the
unaudited condensed consolidated financial statements as of and for the periods
ended March 31, 2009 and 2008, have been prepared in accordance with US GAAP for
interim financial information and with the instructions to Form 10-Q and
Article 8 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by US GAAP for complete financial
statements. In our opinion, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. Our
operations consist of one reportable segment. For further information, refer to
the consolidated financial statements and footnotes thereto included in our
Annual Report on Form 10-K for the year ended December 31,
2008.  The net effect of discontinued operations is reported
separately from the results of our continuing operations.  Operating
results for the three month periods ended March 31, 2009 and 2008 are not
necessarily indicative of the results that may be expected for the full fiscal
year.
  Use of
Estimates – The preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and assumptions that affect
amounts reported therein. Due to the inherent uncertainty involved in making
estimates, actual results reported in future periods may differ from those
estimates.
 
 Basic and Diluted
Income (Loss) Per Share – Basic net income (loss) per share is computed
by dividing net income (loss) by the weighted average number of shares of common
stock outstanding during the period. During the three months ended March 31,
2009, we reported a net loss per share, and as such basic and diluted loss per
share were equivalent. We have excluded all outstanding stock options, warrants,
convertible debt and convertible preferred stock from the calculation of diluted
net loss per share because these securities are anti-dilutive. During the three
months ended March 31, 2008, we reported net income per share and included all
convertible shares in the fully diluted net income per share calculation. The
shares included and excluded from the calculation of net income (loss) per share
for the three months ended March 31, 2009 and 2008 are detailed in the table
below:
 
 As
      of March 31,2009
                                  
                                  
                                  2008Outstanding
      stock options
                                  
                                  
                                  103,136,856
                                  
                                  
                                  
                                  116,096,867Outstanding
      warrants
                                  
                                  
                                  1,010,370,834
                                  
                                  
                                  
                                  504,775,000Convertibile
      debt
                                  
                                  
                                  2,170,996,000
                                  
                                  
                                  
                                  4,429,763,074Convertible
      preferred stock
                                  
                                  
                                  1,173,701,000
                                  
                                  
                                  
                                  3,491,486,8054,458,204,690
                                  
                                  
                                  
                                  8,542,121,746
  In
addition to net income (loss) per share, we have also reported per share amounts
on the separate income statement components required by APB 30, “Reporting the
Results of Operations – Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions,” as the disposal activities of our discontinued operations were
initiated prior to our adoption of FAS 144.
 
 Inventories
- Inventories, consisting of material, material overhead, labor and
processing costs, are stated at the lower of cost (first-in, first-out) or
market.
  Note
3 – Discontinued Operations
  MicroPaint
Repair, 12Snap & Telecom Services – During 2006, we acquired and in
2007 we subsequently disposed of our Micro Paint Repair (MPR), 12Snap, Mobot and
Sponge business units. During the three months ended March 31, 2008, we incurred
wind-down expenses related to these discontinued businesses, as shown below (in
thousands). There is no tax expense or benefit to report as a result of our net
operating loss carry forward tax position.
  `
                          
                          Micro
      Paint
                            Repair
                          
                          
                          12Snap
                          
                          
                          Other
                          
                          
                          TotalLoss
      from discontinued operations
                          
                          $
                          (324
                          )
                          
                          $
                          (92
                          )
                          
                          $
                          (29
                          )
                          
                          $
                          (445
                          )


6


Note
4 – Financing
 
 On
February 17, 2006, the Company issued Series C convertible preferred stock to YA
Global, an accredited investor,  and between August 24, 2006 and
October 28, 2008, has entered into ten secured convertible debentures with YA
Global. In addition, in connection with these debentures and preferred stock,
the Company also issued common stock warrants to YA Global. The significant
terms of the Series C convertible preferred stock, the convertible debentures
and the warrants are set out in Note 5 to our December 31, 2008 consolidated
financial statements, included in our Annual Report on Form 10-K for the year
ended December 31, 2008, and are summarized below.
 
 Series C
Convertible Preferred Stock-On February 17, 2006, we
issued 22,000 shares of $1,000 Series C 8% convertible preferred stock, with a
face value of $22,000,000, to YA Global. The Series C convertible preferred
stock is convertible into our common stock at the lower of $0.02 per share, or
97% of the lowest closing bid price of the common stock for the 30 trading days
immediately preceding the conversion date.
 
 As of
March 31, 2009, YA Global has converted 3,264.1 shares of the original 22,000
shares of Series C preferred stock, leaving 18,735.9 shares, with a face value
of $18,735,900, outstanding, as follows:
 
 Series C SharesConversion
                                              Date
                                            
                                            Converted
                                            
                                            
                                            Common
                                              Shares
      Issued(in
      thousands)Prior
      Years
                                            
                                            
                                            2,856.1
                                            
                                            
                                            
                                            448,2281/13/2009
                                            
                                            
                                            33.0
                                            
                                            
                                            
                                            30,0002/5/2009
                                            
                                            
                                            22.0
                                            
                                            
                                            
                                            20,0002/11/2009
                                            
                                            
                                            22.0
                                            
                                            
                                            
                                            20,0002/19/2009
                                            
                                            
                                            156.0
                                            
                                            
                                            
                                            120,0003/4/2009
                                            
                                            
                                            91.0
                                            
                                            
                                            
                                            70,0003/25/2009
                                            
                                            
                                            84.0
                                            
                                            
                                            
                                            64,6153,264.1
                                            
                                            
                                            
                                            772,843
  On April
1, 2009 and April 23, 2009, a further 150 shares and 162 shares,
respectively, of our Series C preferred stock were converted into 38.5
million and 36.8 million shares, respectively of common stock.
  Secured
Convertible Debentures-The
underlying agreements for each of the debentures issued to YA Global are
essentially the same, except in regard to the interest rate, varying conversion
prices per share, and the number of warrants that were issued in conjunction
with each of the debentures. The debentures are convertible into our common
stock at the lower of a fixed conversion price per share or a percentage of the
lowest volume-weighted average price (“VWAP”) for a specified number of trading
days prior to conversion. All of the convertible debentures are secured
according to the terms of a Security Pledge Agreement dated August 23, 2006,
which was entered into in connection with the first convertible debenture with
YA Global and which provides YA Global with a security interest in substantially
all of our assets.
 
 7
  The table
below summarizes the significant terms of each of the debentures:
  Conversion
      Price – Lower of Fixed Price or
                                        Percentage
      of VWAP for Preceding PeriodFace
                                      
                                      
                                      
                                      Interest
                                      
                                      
                                      Fixed
                                      
                                      
                                      
                                      
                                      PrecedingDebenture
      Issue Date
                                      
                                      Amount
                                      
                                      Maturity
                                      
                                      Rate
                                      
                                      
                                      Price
                                      
                                      
                                      %
                                      
                                      PeriodAugust
      24, 2006
                                      
                                      $
                                      5,000,000
                                      
                                      7/29/2010
                                      
                                      10%
                                      
                                      
                                      $
                                      0.01
                                      
                                      
                                      90%
                                      
                                      30
      DaysDecember
      29, 2006
                                      
                                      
                                      2,500,000
                                      
                                      7/29/2010
                                      
                                      10%
                                      
                                      
                                      $
                                      0.01
                                      
                                      
                                      90%
                                      
                                      30
      DaysMarch
      27, 2007
                                      
                                      
                                      7,458,651
                                      
                                      7/29/2010
                                      
                                      13%
                                      
                                      
                                      $
                                      0.01
                                      
                                      
                                      90%
                                      
                                      30
      DaysAugust
      24, 2007
                                      
                                      
                                      1,775,000
                                      
                                      8/24/2009
                                      
                                      14%
                                      
                                      
                                      $
                                      0.01
                                      
                                      
                                      80%
                                      
                                      10
      DaysApril
      11, 2008
                                      
                                      
                                      390,000
                                      
                                      4/11/2010
                                      
                                      15%
                                      
                                      
                                      $
                                      0.01
                                      
                                      
                                      80%
                                      
                                      10
      DaysMay
      16, 2008
                                      
                                      
                                      500,000
                                      
                                      5/16/2010
                                      
                                      15%
                                      
                                      
                                      $
                                      0.01
                                      
                                      
                                      80%
                                      
                                      10
      DaysMay
      29, 2008
                                      
                                      
                                      790,000
                                      
                                      5/30/2010
                                      
                                      15%
                                      
                                      
                                      $
                                      0.01
                                      
                                      
                                      80%
                                      
                                      10
      DaysJuly
      10, 2008
                                      
                                      
                                      137,750
                                      
                                      7/1/2010
                                      
                                      15%
                                      
                                      
                                      $
                                      0.01
                                      
                                      
                                      80%
                                      
                                      10
      DaysJuly
      29, 2008
                                      
                                      
                                      2,325,000
                                      
                                      7/29/2010
                                      
                                      14%
                                      
                                      
                                      $
                                      0.02
                                      
                                      
                                      95%
                                      
                                      10
      DaysOctober
      28, 2008
                                      
                                      
                                      2,325,000
                                      
                                      7/29/2010
                                      
                                      14%
                                      
                                      
                                      $
                                      0.02
                                      
                                      
                                      95%
                                      
                                      10
      DaysApril
      6, 2009
                                      
                                      
                                      550,000
                                      
                                      7/29/2010
                                      
                                      14%
                                      
                                      
                                      $
                                      0.02
                                      
                                      
                                      95%
                                      
                                      10
      DaysMay
      1, 2009
                                      
                                      
                                      550,000
                                      
                                      7/29/2010
                                      
                                      14%
                                      
                                      
                                      $
                                      0.02
                                      
                                      
                                      95%
                                      
                                      10
      Days
  The
debentures issued prior to May 29, 2008 were originally issued with higher fixed
exercise prices but because those debentures include full-ratchet anti-dilution
provisions, their fixed conversion price was reduced to $0.01 as of May 29,
2008.
 
 Effective
September 24, 2008, the maturity dates of the August 24, 2006 and December 29,
2006 debentures, which originally matured after two years, were extended to July
29, 2010. On April 6, 2009 (effective March 27, 2009) the maturity date of the
March 27, 2007 debenture was extended to July 29, 2010.
 
 On July
29, 2008, we entered into a Securities Purchase Agreement (the “July 29 SPA”)
with YA Global in the principal amount of $8,650,000.  The July 29 SPA
provided for the amount to be drawn through three separate secured convertible
debentures in the amounts of $2,325,000, $2,325,000, and $4,000,000
respectively. The first and second debentures were issued on July 29, 2008 and
October 28, 2008. Upon the achievement of certain milestones, the remaining
debenture was scheduled to be issued no earlier than January 1,
2009.  On April 6, 2009, we entered into an Amendment Agreement to the
July 29 SPA, whereby the third scheduled debenture was reduced from $4,000,000
to $1,100,000, and was divided into two separate closings of $550,000 each, on
April 6, 2009 and May 1, 2009.  In connection with these two
debentures, YA Global retained fees for each debenture of $50,000, resulting in
net proceeds to us of $500,000 for each debenture.
 
 Default Events
and Waiver -As of August 23, 2008, we were in default on our August 23,
2006 Convertible Debenture due to non-payment of principal and interest in
accordance with the terms of the agreement. On September 24, 2008, we entered
into a Letter Agreement with YA Global which extended the maturity dates of the
August 24, 2006 and the December 29, 2006 debentures to July 29, 2010. The
extension was considered a one-time extension for the specific period indicated
but was not considered a waiver of existing events of
default.  However, a waiver was subsequently obtained from YA Global,
effective as of December 31, 2008, which waiver is discussed further
below.
 
 
 8
  All the
debentures with YA Global contain provisions for acceleration of principal and
interest upon default.  Certain of the debentures also contain default
interest rates and conversion prices, as follows:
 
 April
      11,
                                  2008
                                
                                May
      16,
                                  2008
                                
                                
                                May
      29,
                                  2008
                                
                                
                                July
      10,
                                  2008
                                
                                
                                July
      29,
                                  2008
                                
                                
                                October
      28,
                                  2008Default
      interest rate
                                
                                
                                24%
                                
                                
                                24%
                                
                                
                                
                                24%
                                
                                
                                
                                24%
                                
                                
                                
                                20%
                                
                                
                                
                                20%Convertible
      into our common stockat
      the
                                  lower
      of:Fixed
      conversion price
                                
                                $
                                0.01
                                
                                $
                                0.01
                                
                                
                                $
                                0.01
                                
                                
                                $
                                0.01
                                
                                
                                $
                                0.02
                                
                                
                                $
                                0.02or
      percentage of VWAP
                                
                                
                                80%
                                
                                
                                80%
                                
                                
                                
                                50%
                                
                                
                                
                                50%
                                
                                
                                
                                50%
                                
                                
                                
                                50%for
      days preceding conversion
                                
                                10 days
                                
                                10
      days
                                
                                
                                10
      days
                                
                                
                                10
      days
                                
                                
                                10
      days
                                
                                
                                10
      days
  We
obtained a waiver from YA Global, effective as of December 31, 2008 in
which all prior events of default and the related cross default provisions of
other financing instruments with YA Global were waived.  YA Global
waived the right to collect any liquidated damages, penalties or fines which had
not previously been paid by us and also acknowledged that as of December 31,
2008, we were not under any obligation to file a registration statement under
any of the financing arrangements. YA Global does, however, still have demand
rights under certain agreements which would require us to file registration
statements in accordance with the terms of the agreements.
 
 Fair Value
Considerations -In accordance with
FAS 133 we determined that the conversion features of the Series C
convertible preferred stock, and the August 2006, December 2006, July 2008 and
October 2008 Debentures met the criteria of embedded derivatives and that the
conversion features of these instruments needed to be bifurcated and accounted
for as derivative instrument liabilities. Changes in the fair value of the
derivative liability for the embedded conversion option are charged or credited
to income.  As permitted by FAS 155, we have elected not to bifurcate
the embedded derivatives in the March 2007, August 2007, April 2008 or May 2008
Debentures and accordingly these convertible instruments are being carried in
their entirety at their fair values, with the changes in the fair value of the
Debentures charged or credited to income each period.
  Derivative
financial instruments arising from the issuance of convertible financial
instruments are initially recorded, and continuously carried, at fair value.
Upon conversion of any derivative financial instrument, the carrying amount of
the debt, including any unamortized premium or discount is credited to the
capital accounts upon conversion to reflect the stock issued and no gain or loss
is recognized.
 
 Embedded
Derivative Instruments – Series C Preferred Stock and August 2006 and December
2006, July 2008 and October 2008 Convertible Debentures-Embedded derivative financial instruments arising from the convertible
instruments consist of multiple individual features that were embedded in each
instrument. For each convertible instrument, we evaluated all significant
features and, as required under current accounting standards, aggregated the
components into one compound derivative financial instrument for financial
reporting purposes. For financings recorded in accordance with FAS 133, the
compound embedded derivative instruments are valued using the Flexible Monte
Carlo methodology because that model embodies certain relevant assumptions
(including, but not limited to, interest rate risk, credit risk, and
conversion/redemption privileges) that are necessary to value these complex
derivatives.
 
  9
 
 Assumptions
used as of March 31, 2009 included exercise estimates/behaviors and the
following other significant estimates:
 
 Series
      C
                        Convertible
                        Preferred
                        Stock
                      
                      
                      August
      24,
                        2006
                        Debenture
                      
                      
                      December
      29,
                        2006
                        Debenture
                      
                      
                      July
      10, 2
                        008
                        Debenture
                      
                      
                      July
      29,
                        2008
                        Debenture
                      
                      
                      October
      28,
                        2008
                        DebentureConversion
      prices
                      
                      $
                      0.020
                      
                      
                      $
                      0.010
                      
                      
                      $
                      0.010
                      
                      
                      $
                      0.010
                      
                      
                      $
                      0.020
                      
                      
                      $
                      0.020Remaining
      terms (years)
                      
                      
                      1.33
                      
                      
                      
                      1.33
                      
                      
                      
                      1.33
                      
                      
                      
                      1.28
                      
                      
                      
                      1.33
                      
                      
                      
                      1.33Equivalent
      volatility
                      
                      
                      248%
                      
                      
                      
                      248%
                      
                      
                      
                      248%
                      
                      
                      
                      238%
                      
                      
                      
                      248%
                      
                      
                      
                      248%Equivalent
      interest-risk adjusted rate
                      
                      
                      11.00%
                      
                      
                      
                      14.35%
                      
                      
                      
                      14.41%
                      
                      
                      
                      11.15%
                      
                      
                      
                      10.47%
                      
                      
                      
                      10.99%Equivalent
      credit-risk adjusted yield rate
                      
                      
                      16.32%
                      
                      
                      
                      16.95%
                      
                      
                      
                      16.95%
                      
                      
                      
                      16.95%
                      
                      
                      
                      16.95%
                      
                      
                      
                      16.95%
 
 Equivalent
amounts reflect the net results of multiple modeling simulations that the
Flexible Monte Carlo Simulation methodology applies to underlying assumptions.
The assumptions included in the calculation are highly subjective and subject to
interpretation.
 
 Due to
the variable component of the conversion price, rapid fluctuations in the
trading market price may result in significant variations to the calculated
conversion price. For each debenture, we analyze the ratio of the conversion
price (as calculated based on the percentage of VWAP for the 30 day or 10 day
prior period) to the trading market price for a period of time equal to the term
of the debenture to determine the average ratio for the term of the note. Each
quarter, the ratio in effect on the date of the valuation is compared with the
average ratio over the term of the debenture to determine if the calculated
conversion price is representative of past trends or if it is considered
unrepresentative due to a large fluctuation in the stock price over a short
period of time.  If the calculated conversion price results in a ratio
which deviates significantly from the average ratio over the term of the
agreement, the average ratio of the conversion price to the trading market price
is then multiplied by the current trading market price to determine the variable
portion of the conversion price for use in the fair value calculations. This
variable conversion price is then compared with the fixed conversion price and,
as required by the terms of the debentures, the lower of the two amounts is used
as the conversion price in the Monte Carlo model used for valuation
purposes.  On March 31, 2009, the fixed conversion price for each of
the debentures was lower than the calculated variable conversion
price.  Accordingly, the fixed conversion price was used in the Monte
Carlo valuation model.  This analysis is performed each quarter
to determine if the calculated conversion price is reasonable for purposes of
determining the fair value of the embedded conversion features (for instruments
recorded under FAS133) or the fair value of the hybrid instrument (for
instruments recorded under FAS155).
 
 Hybrid Financial
Instruments Carried at Fair Value – 2007 and 2008 Convertible Debentures -The March 2007, August 2007, April 11, 2008, May 16, 2008 and May 29,
2008 convertible debentures are recorded in accordance with SFAS 155 and the
entire hybrid instrument was initially recorded at fair value, with subsequent
changes in fair value recognized in earnings. These financial instruments are
valued using the common stock equivalent approach. The common stock
equivalent is calculated using the shares indexed to the debentures valued at
the market price of our stock and the present value of the coupon.
 
 Current Period
Valuations -For the Series C Convertible Preferred Stock and the August
2006 and December 2006 debentures, due to our previous default position with
respect to these instruments, the carrying value of each instrument in effect as
of December 31, 2006 was written up to its full face value during the fourth
quarter of 2006. For these instruments and the July 2008 and October 2008
debentures, the embedded derivative instrument, primarily the conversion
feature, has been separated and accounted for as a derivative instrument
liability, as discussed above. This derivative instrument liability is marked to
market each reporting period.
 
 The March
2007, August 2007, April 2008 and May 2008 debentures were each initially
recorded at their full fair value pursuant to FAS 155. That fair value is
marked-to-market each reporting period, with any changes in the fair value
charged or credited to income.
  10
 
 
 The face
value and the carrying value or fair value, as appropriate, of each instrument
as of March 31, 2009 and December 31, 2008 was:
 
 Face
                                                
                                                
                                                CarryingMarch
      31, 2009
                                                
                                                Value
                                                
                                                
                                                Value
                                                
                                                
                                                Fair value
                                                
                                                
                                                Total(in
      thousands)Series C Convertible Preferred Stock
                                                
                                                $
                                                18,736
                                                
                                                
                                                $
                                                18,736
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                18,736August 2006 debenture
                                                
                                                $
                                                5,000
                                                
                                                
                                                $
                                                5,000
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                5,000December 2006
      debenture
                                                
                                                
                                                2,500
                                                
                                                
                                                
                                                2,500
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                2,500March
      2007 debenture
                                                
                                                
                                                7,459
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                29,502
                                                
                                                
                                                
                                                29,502August
      2007 debenture
                                                
                                                
                                                1,775
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                6,858
                                                
                                                
                                                
                                                6,858April
      2008 debenture
                                                
                                                
                                                390
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,531
                                                
                                                
                                                
                                                1,531May
      16 ,2008 debenture
                                                
                                                
                                                500
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,952
                                                
                                                
                                                
                                                1,952May
      29, 2008 debenture
                                                
                                                
                                                790
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                3,081
                                                
                                                
                                                
                                                3,081July
      10, 2008 debenture
                                                
                                                
                                                137
                                                
                                                
                                                
                                                113
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                113July
      29, 2008 debenture
                                                
                                                
                                                2,325
                                                
                                                
                                                
                                                1,832
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,832October
      23, 2008 debenture
                                                
                                                
                                                2,325
                                                
                                                
                                                
                                                1,866
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,866Total
                                                
                                                $
                                                23,201
                                                
                                                
                                                $
                                                11,311
                                                
                                                
                                                $
                                                42,924
                                                
                                                
                                                $
                                                54,235
  Face
                                              
                                              
                                              CarryingDecember
      31, 2008
                                              
                                              Value
                                              
                                              
                                              Value
                                              
                                              
                                              Fair value
                                              
                                              
                                              Total(in
      thousands)Series C Convertible Preferred Stock
                                              
                                              $
                                              19,144
                                              
                                              
                                              $
                                              19,144
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              19,144August 2006 debenture
                                              
                                              $
                                              5,000
                                              
                                              
                                              $
                                              5,000
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              5,000December 2006
      debenture
                                              
                                              
                                              2,500
                                              
                                              
                                              
                                              2,500
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2,500March
      2007 debenture
                                              
                                              
                                              7,459
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              13,478
                                              
                                              
                                              
                                              13,478August
      2007 debenture
                                              
                                              
                                              1,775
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              3,217
                                              
                                              
                                              
                                              3,217April
      2008 debenture
                                              
                                              
                                              390
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              736
                                              
                                              
                                              
                                              736May
      16 ,2008 debenture
                                              
                                              
                                              500
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              955
                                              
                                              
                                              
                                              955May
      29, 2008 debenture
                                              
                                              
                                              790
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,506
                                              
                                              
                                              
                                              1,506July
      10, 2008 debenture
                                              
                                              
                                              137
                                              
                                              
                                              
                                              109
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              109July
      29, 2008 debenture
                                              
                                              
                                              2,325
                                              
                                              
                                              
                                              1,785
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,785October
      23, 2008 debenture
                                              
                                              
                                              2,325
                                              
                                              
                                              
                                              1,833
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,833Total
                                              
                                              $
                                              23,201
                                              
                                              
                                              $
                                              11,227
                                              
                                              
                                              $
                                              19,892
                                              
                                              
                                              $
                                              31,119
  11
 
 
 The
following table reflects the number of common shares (in thousands) into which
the Series C preferred stock and debentures are convertible and the fair values
of the embedded conversion features in those debentures that are carried at
amortized cost, at March 31, 2009 and December 31, 2008:
 
 March
      31, 2009
                                          
                                          
                                          December
      31, 2008Common
                                          
                                          
                                          Embedded
                                          
                                          
                                          Common
                                          
                                          
                                          EmbeddedStock
                                          
                                          
                                          Conversion
                                          
                                          
                                          Stock
                                          
                                          
                                          ConversionShares
                                          
                                          
                                          Feature
                                          
                                          
                                          Shares
                                          
                                          
                                          FeatureSeries
      C Convertible Preferred Stock
                                          
                                          
                                          1,173,701
                                          
                                          
                                          $
                                          36,854
                                          
                                          
                                          
                                          21,456,650
                                          
                                          
                                          $
                                          10,728August
      24, 2006 Debenture
                                          
                                          
                                          500,000
                                          
                                          
                                          
                                          19,335
                                          
                                          
                                          
                                          5,555,556
                                          
                                          
                                          
                                          7,260December
      29, 2006 Debenture
                                          
                                          
                                          333,356
                                          
                                          
                                          
                                          9,721
                                          
                                          
                                          
                                          3,703,957
                                          
                                          
                                          
                                          3,556March
      27, 2007 Debenture
                                          
                                          
                                          745,865
                                          
                                          
                                          
                                          n/a
                                          
                                          
                                          
                                          8,287,390
                                          
                                          
                                          
                                          n/aAugust
      24, 2007 Debenture
                                          
                                          
                                          177,500
                                          
                                          
                                          
                                          n/a
                                          
                                          
                                          
                                          1,972,222
                                          
                                          
                                          
                                          n/aApril
      11, 2008 Debenture
                                          
                                          
                                          39,000
                                          
                                          
                                          
                                          n/a
                                          
                                          
                                          
                                          433,333
                                          
                                          
                                          
                                          n/aMay
      16, 2008 Debenture
                                          
                                          
                                          50,000
                                          
                                          
                                          
                                          n/a
                                          
                                          
                                          
                                          555,556
                                          
                                          
                                          
                                          n/aMay
      29, 2008 Debenture
                                          
                                          
                                          79,000
                                          
                                          
                                          
                                          n/a
                                          
                                          
                                          
                                          877,778
                                          
                                          
                                          
                                          n/aJuly
      10, 2008 Debenture
                                          
                                          
                                          13,775
                                          
                                          
                                          
                                          414
                                          
                                          
                                          
                                          153,056
                                          
                                          
                                          
                                          158July
      29, 2008 Debenture
                                          
                                          
                                          116,250
                                          
                                          
                                          
                                          3,242
                                          
                                          
                                          
                                          2,325,000
                                          
                                          
                                          
                                          2,327October
      23, 2008 debenture
                                          
                                          
                                          116,250
                                          
                                          
                                          
                                          3,231
                                          
                                          
                                          
                                          2,325,000
                                          
                                          
                                          
                                          2,2273,344,697
                                          
                                          
                                          $
                                          72,797
                                          
                                          
                                          
                                          47,645,498
                                          
                                          
                                          $
                                          26,256
  The terms
of the embedded conversion features in the convertible instruments presented
above provide for variable conversion rates that are indexed to our trading
common stock price. As a result, the number of indexed shares is subject to
continuous fluctuation. For presentation purposes, the number of shares of
common stock into which the embedded conversion feature of the Series C
convertible stock was convertible as of March 31, 2009 was calculated as face
value plus assumed dividends (if declared), divided by the lesser of the fixed
rate ($.02) or the market price multiplied by the average ratio of market price
to conversion price over the term of the note. The number of shares of common
stock into which the embedded conversion feature in the convertible debentures
was convertible as of March 31, 2009 was calculated as the face value of each
instrument divided by the conversion price as of March 31, 2009.
 
 The March
2007, August 2007, April 2008 and May 2008 debentures are carried in their
entirety at fair value in accordance with FAS 155 and the value of the embedded
conversion feature is effectively embodied in those fair
values.
  12
  Changes
in the fair value of convertible instruments that are carried at fair value (the
March 2007 Debenture, August 2007 Debenture, April 2008 Debenture and May 2008
Debentures) are reported as “Gain (loss) from change in fair value of hybrid
financial instruments” in the accompanying consolidated statement of operations.
The following represents a reconciliation of the changes in fair value of
financial instruments measured at fair value under FAS 155:
 
 Three
      Months Ended March 31,2009
                                  
                                  
                                  2008(in thousands)March
      27, 2007 debenture
                                  
                                  $
                                  (16,025
                                  )
                                  
                                  $
                                  (1,079
                                  )August
      24, 2007 debenture
                                  
                                  
                                  (3,641
                                  )
                                  
                                  
                                  (265
                                  )April
      11, 2008 debenture
                                  
                                  
                                  (795
                                  )
                                  
                                  
                                  -May
      16, 2008 debenture
                                  
                                  
                                  (997
                                  )
                                  
                                  
                                  -May
      29, 2008 debenture
                                  
                                  
                                  (1,573
                                  )
                                  
                                  
                                  -Total
                                  
                                  $
                                  (23,031
                                  )
                                  
                                  $
                                  (1,344
                                  )
  Changes
in the fair value of derivative instrument liabilities related to the bifurcated
embedded derivative features of convertible instruments not carried at fair
value are reported as “Gain (loss) from change in fair value of debentures” in the
accompanying consolidated statement of operations. The following represents a
reconciliation of the changes in fair value of these derivative financial
instruments recorded under FAS 133:
  Three
      Months Ended March 31,2009
                            
                            
                            2008(in thousands)Series
      C Convertible Preferred Stock
                            
                            $
                            (27,240
                            )
                            
                            $
                            947August
      24, 2006 debenture
                            
                            
                            (12,075
                            )
                            
                            
                            1,609December
      29, 2006 debenture
                            
                            
                            (6,165
                            )
                            
                            
                            804July
      10, 2008 debenture
                            
                            
                            (256
                            )
                            
                            
                            -July
      29, 2008 debenture
                            
                            
                            (914
                            )
                            
                            
                            -October
      23, 2008 debenture
                            
                            
                            (1,004
                            )
                            
                            
                            -Total
                            
                            $
                            (47,654
                            )
                            
                            $
                            3,360
  Warrants-YA
Global holds warrants to purchase shares of our common stock that were issued in
connection with the convertible debentures and the Series C convertible
preferred stock. The warrants are exercisable at the lower of a fixed exercise
price or a specified percentage of the current market price. From time to time,
the fixed exercise prices of the warrants held by YA Global have been reduced as
an inducement for YA Global to enter into subsequent financing
arrangements.  In addition to the warrants issued to YA Global, certain
other warrants have been issued to consultants and other service
providers.
 
 The
warrants issued to YA Global and others do not meet all of the established
criteria for equity classification in EITF Issue 00-19 and, accordingly, are
recorded as derivative liabilities at fair value. Changes in the fair value of
the warrants are charged or credited to income or expense each
period.
 
 13
  A summary
of the warrants outstanding (in thousands) follows:
 
 March
      31, 2009
                                                
                                                
                                                December
      31, 2008Common
                                                
                                                
                                                
                                                
                                                
                                                CommonExercise
                                                
                                                Expiration
                                                
                                                Stock
                                                
                                                
                                                Fair
                                                
                                                
                                                Stock
                                                
                                                
                                                FairPrice
                                                
                                                Date
                                                
                                                Warrants
                                                
                                                
                                                Value
                                                
                                                
                                                Warrants
                                                
                                                
                                                ValueSeries
      C Convertible Preferred Stock
                                                
                                                $
                                                0.0200
                                                
                                                2/17/2011
                                                
                                                
                                                75,000
                                                
                                                
                                                $
                                                2,385
                                                
                                                
                                                
                                                75,000
                                                
                                                
                                                $
                                                23August
      24, 2006 debenture
                                                
                                                
                                                0.0200
                                                
                                                8/24/2011
                                                
                                                
                                                175,000
                                                
                                                
                                                
                                                5,863
                                                
                                                
                                                
                                                175,000
                                                
                                                
                                                
                                                193December
      29, 2006 debenture
                                                
                                                
                                                0.0200
                                                
                                                12/29/2011
                                                
                                                
                                                42,000
                                                
                                                
                                                
                                                1,420
                                                
                                                
                                                
                                                42,000
                                                
                                                
                                                
                                                50March
      27, 2007 debenture
                                                
                                                
                                                0.0200
                                                
                                                3/27/2012
                                                
                                                
                                                125,000
                                                
                                                
                                                
                                                4,213
                                                
                                                
                                                
                                                125,000
                                                
                                                
                                                
                                                150August
      24, 2007 debenture
                                                
                                                
                                                0.0200
                                                
                                                8/24/2012
                                                
                                                
                                                75,000
                                                
                                                
                                                
                                                2,535
                                                
                                                
                                                
                                                75,000
                                                
                                                
                                                
                                                90April
      11, 2008 debenture
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -May
      16, 2008 debenture
                                                
                                                
                                                0.0175
                                                
                                                5/16/2015
                                                
                                                
                                                7,500
                                                
                                                
                                                
                                                266
                                                
                                                
                                                
                                                7,500
                                                
                                                
                                                
                                                10May
      29, 2008 debenture
                                                
                                                
                                                0.0100
                                                
                                                5/29/2015
                                                
                                                
                                                50,000
                                                
                                                
                                                
                                                1,775
                                                
                                                
                                                
                                                50,000
                                                
                                                
                                                
                                                70July
      10, 2008 debenture
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -July
      29, 2008 debenture
                                                
                                                
                                                0.0200
                                                
                                                7/29/2015
                                                
                                                
                                                100,000
                                                
                                                
                                                
                                                3,540
                                                
                                                
                                                
                                                100,000
                                                
                                                
                                                
                                                134July
      29, 2008 debenture
                                                
                                                
                                                0.0400
                                                
                                                7/29/2015
                                                
                                                
                                                100,000
                                                
                                                
                                                
                                                3,510
                                                
                                                
                                                
                                                100,000
                                                
                                                
                                                
                                                134July
      29, 2008 debenture
                                                
                                                
                                                0.0500
                                                
                                                7/29/2015
                                                
                                                
                                                125,000
                                                
                                                
                                                
                                                4,375
                                                
                                                
                                                
                                                125,000
                                                
                                                
                                                
                                                167July
      29, 2008 debenture
                                                
                                                
                                                0.0750
                                                
                                                7/29/2015
                                                
                                                
                                                125,000
                                                
                                                
                                                
                                                4,400
                                                
                                                
                                                
                                                125,000
                                                
                                                
                                                
                                                167October
      23, 2008 debenture
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Other
      warrants
                                                
                                                
                                                0.011-3.45
                                                
                                                Various
                                                
                                                
                                                6,871
                                                
                                                
                                                
                                                188
                                                
                                                
                                                
                                                8,471
                                                
                                                
                                                
                                                1Total
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                1,006,371
                                                
                                                
                                                $
                                                34,470
                                                
                                                
                                                
                                                1,007,971
                                                
                                                
                                                $
                                                1,189
  The
warrants are valued using the Black-Scholes-Merton valuation methodology because
that model embodies all of the relevant assumptions that address the features
underlying these instruments.  Significant assumptions used in this
model as of March 31, 2009 included an expected life equal to the remaining term
of the warrants, an expected dividend yield of zero, estimated volatility of
166% to 243%, and risk-free rates of return of 0.57% to 2.28%.
 
 Fair Value
Considerations –We adopted the
provisions of FAS 157 as of January 1, 2008, with respect to financial
instruments. As required by FAS 157, assets and liabilities measured at fair
value are classified in their entirety based on the lowest level of input that
is significant to their fair value measurement. Our derivative financial
instruments which are required to be measured at fair value on a recurring basis
under FAS 155 or FAS 133 and as of March 31, 2009 and December 31, 2008 are all
measured at fair value using Level 3 inputs. Level 3 inputs are unobservable
inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
 
 The
following represents a reconciliation of the changes in fair value of financial
instruments measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) during the three months ended March 31, 2009, in
thousands:
 
 Beginning
      balance: Derivative financial instruments
                          
                          $
                          27,445Total
      gains (losses)
                          
                          
                          80,935Transfers
      in/out of Level 3
                          
                          
                          (1,113
                          )Ending
      balance
                          
                          $
                          107,267
   14
  Note 5 – Stock-Based Compensation
  A total
of 15,000,000 stock options were issued to employees and directors during the
three months ended March 31, 2009. A total of 5,851,120 stock options were
issued to employees during the three months ended March 31, 2008.  The
grant date fair values of these options were $93,000 and $31,000, respectively,
which amounts are being recognized over the vesting period of the
options.  For the three months ended March 31, 2009 and 2008, total
stock-based compensation expense recorded in the statement of operations was
$80,000 and $501,000 respectively.
  We used
the following assumptions to value the stock options granted during the three
months ended March 31, 2009 and 2008:
  Three
      months ended March 31,2009
                        
                        2008Volatility
                        
                        140%
      - 234%
                        
                        88.00%Expected
      dividends
                        
                        -
                        
                        -Expected
      term (in years)
                        
                        2.75
                        
                        6.56Risk-free
      rate
                        
                        4.35%
                        
                        4.35%
  During
the three months ended March 31, 2009 options to purchase 11,600,000 shares of
our common stock were exercised. The exercise price of these options was $0.01
per share, providing us with proceeds of $116,000. There were no stock option
exercises during the three months ended March 31, 2008.
  Subsequent Event-  On April 29, 2009 the Stock Option Committee of the Board of
Directors approved a resolution granting 6,649,560 stock options to 15 of our
employees and directors to partially compensate them for reductions in salaries
and fees related to our cost control measures. The exercise price of these
options was $0.02 per share. In addition, the resolution included a change in
control provision, under which all options held by these employees and directors
would vest upon such change in control of the company.
  15
 
 Note
6 – Accrued Liabilities
  Accrued
liabilities consist of the following as of March 31, 2009 and December 31,
2008:
  March
      31,
                              
                              
                              December
      31,2009
                              
                              
                              2008(in
      thousands)Accruals
      for disputed services
                              
                              $
                              2,224
                              
                              
                              $
                              2,224Accrued
      operating expenses
                              
                              
                              1,627
                              
                              
                              
                              1,791Accrued
      interest
                              
                              
                              2,681
                              
                              
                              
                              1,772Total
                              
                              $
                              6,532
                              
                              
                              $
                              5,787
  Note 7 –Contingencies
 
 We are
involved in various legal actions arising in the normal course of business, both
as claimant and defendant. Although it is not possible to determine with
certainty the outcome of these matters, it is the opinion of management that the
eventual resolution of the following legal actions will not have a material
adverse effect on our financial position or operating results. We expense
professional fees associated with our legal proceedings as they are incurred
according to the terms negotiated between us and the respective professional who
represents our interests. We have not accrued a loss contingency in relation to
any of our pending litigation.
  Electronic
Frontier Foundation- In October 2007, we received a communication from the United States
Patent and Trademark Office (USPTO) stating that a request by the Electronic
Frontier Foundation for Ex-Parte Reexamination of U.S. Patent No. 6,199,048
(“the ‘048 patent”) had been granted. The reexamination was terminated in favor
of NeoMedia when the U.S. Patent and Trademark office issued a Notice of Intent
to Issue Ex Parte Reexamination Certificate on February 17, 2009, which
indicated allowability of the pending claims of the '048 patent.
 
 Scanbuy,
Inc. - On January 23, 2004, we filed suit against Scanbuy, Inc.
(“Scanbuy”) in the Northern District of Illinois, claiming that Scanbuy has
manufactured, or has had manufactured for it, and has used, or actively induced
others to use, technology which allows customers to use a built-in UPC bar code
scanner to scan individual items and access information, thereby infringing our
patents.  The complaint stated that on information and belief, Scanbuy had
actual and constructive notice of the existence of the patents-in-suit, and,
despite such notice, failed to cease and desist their acts of infringement and
continue to engage in acts of infringement of the patents-in-suit.  On
April 15, 2004, the court dismissed the suits against Scanbuy for lack of
personal jurisdiction.
  On April
20, 2004, we re-filed our suit against Scanbuy in the Southern District of New
York alleging patent infringement. Scanbuy filed their answer on June 2, 2004.
We filed our answer on July 23, 2004. On February 13, 2006, Scanbuy filed an
amended answer to the complaint. We filed our reply to Scanbuy’s amended answer
on March 6, 2006. On January 20, 2007, the court dismissed Scanbuy's request for
a summary judgment. Currently the case has been stayed due to the reexamination
of the ‘048 patent (see Electronic Frontier Foundation, above). Based on the
USPTO’s, February 17, 2009 Notice of Intent to Issue Ex Parte Reexamination
Certificate, we have requested that the stay be lifted and a joint summary
status of the case has been provided to the court.  On April 17, 2009 both
parties met with the court to discuss the status of the case. We have requested
that the case be set for trial and are currently awaiting the court’s
response.
 
 Rothschild Trust
Holdings, LLC– On
September 19, 2008, we were served a complaint by Rothschild Trust Holding, LLC
alleging we owed royalty payments for the use of certain patents. On February
25, 2009 we filed an answer to the complaint, and no discovery has taken place
to date. We believe the complaint is without merit.
 
 Scanbuy and
Marshall Feature Recognition, LLC – On or around December 19, 2008, we
received a complaint filed in the Eastern District of Texas by Scanbuy and
Marshall Feature Recognition, LLC (“MFR”) alleging infringement of certain
patents. On January 8, 2009, we filed an answer denying infringement and
asserting that the patents of Scanbuy and MFR are invalid. On or about May 8,
2009 the parties agreed and the case was transferred to the Southern District of
New York due to lack of personal jurisdiction in the Eastern District of Texas.
We are waiting for the case to be assigned to a judge.  We believe the
complaint is without merit.
  16
  Ephrian Saguy,
iPoint – media, plc. and iPoint – media, Ltd. – On or around March 5,
2008 we received a summons and notice that the plaintiffs had commenced a third
party action in the Magistrate Court in Tel-Aviv-Jaffa, Israel seeking damages
of approximately $2.2 million from us and YA Global for breach of contract and
unjust enrichment related to services provided by iPoint and investment by us
and YA Global. We have entered into an assignment agreement with YA Global and
have retained legal counsel in Israel to represent us. At this time we are
unable to determine a probable outcome in this matter.
  Subsequent Event-  On April 29, 2009 the Compensation Committee of the Board of
Directors approved a resolution reducing the salary and fee compensation of 15
of our employees and directors. related to our cost control measures. In
addition, the resolution included a change in control provision, under
which  the salaries and fees of these employees and directors would
revert to their former amounts upon a change in control of the
company.
  Note 8 – Geographic Reporting
 
 We are
structured and evaluated by our Board of Directors and management as one
business unit.
  Consolidated
net sales and net loss from continuing operations for the three month ended
March 31, 2009 and 2008, and the identifiable assets as of March 31, 2009 and
December 31, 2008 by geographic area were as follows:
  Three
      Months Ended March 31,2009
                                        
                                        
                                        2008(in
      thousands)Net
      Sales:United
      States
                                        
                                        $
                                        67
                                        
                                        
                                        $
                                        116Germany
                                        
                                        
                                        423
                                        
                                        
                                        
                                        148Total
                                        
                                        $
                                        490
                                        
                                        
                                        $
                                        264Net
      income (loss) from continuing operations:United
      States
                                        
                                        
                                        (106,276
                                        )
                                        
                                        
                                        4,492Germany
                                        
                                        
                                        (323
                                        )
                                        
                                        
                                        (454
                                        )Total
                                        
                                        $
                                        (106,599
                                        )
                                        
                                        $
                                        4,038
 March
      31,
                          
                          
                          December
      31,2009
                          
                          
                          2008Identifiable
      assets:United
      States
                          
                          $
                          9,644
                          
                          
                          $
                          10,920Germany
                          
                          
                          533
                          
                          
                          
                          568Total
                          
                          $
                          10,177
                          
                          
                          $
                          11,488
  17


ITEM
2.Management’s Discussion and Analysis of Financial Condition
and Results of Operations
 
 Special
Note About Forward-Looking Statements
 
 Certain
statements in Management’s Discussion and Analysis, other than purely historical
information, including estimates, projections, statements relating to our
business plans, objectives, and expected operating results, and the assumptions
upon which those statements are based, are “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934 (“the Exchange Act”), as amended. These
forward-looking statements generally are identified by the words “believe,”
“project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,”
“may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely
result,” and similar expressions. Forward-looking statements are based on
current expectations and assumptions that are subject to risks and
uncertainties, which may cause actual results to differ materially from the
forward-looking statements. For a detailed discussion of risks and uncertainties
that could cause actual results and events to differ materially from such
forward looking statements, please refer to the section titled “Risk Factors” in
the Company’s 2008 Form 10-K filed on April 14, 2009 with the SEC.  We
undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
 
 Overview
 
 NeoMedia
provides the infrastructure to make mobile barcode scanning and its associated
commerce easy, universal, and reliable – worldwide. Our barcode ecosystem
products including mobile barcode reading software, NeoReader, read and transmit
data from 1D and 2D barcodes to its intended destination. Our Code Management
(NeoSphere) and Code Clearinghouse (NeoRouter) platforms create, connect,
record, and transmit the transactions embedded in the barcodes, like web-URLs,
text messages (SMS), and telephone calls, ubiquitously and
reliably.
 
 In order
to provide complete mobile marketing solutions, NeoMedia also offers barcode
scanning hardware that reads barcodes displayed on mobile phone screens.
NeoMedia provides infrastructure solutions to enable mobile ticketing and
couponing programs – including scanner hardware and system support software for
seamless implementation.
 
 This technology
is supported by our patents. In addition, NeoMedia has an open standards
philosophy designed to make integration and use of the technology easy for
handset manufacturers, mobile operators and advertisers; and the user experience
safe, reliable and interoperable for consumers.
  In 2006,
we began divesting our non-core businesses in order to focus our efforts on the
area that we believe will deliver the most value - our code-reading business and
the related intellectual property. In the fourth quarter of 2006, we disposed of
two subsidiaries, Mobot and Sponge. During April 2007, we sold the 12Snap
business unit and in October 2007, we completed the sale of our Telecom Services
business.  In November 2007, we sold our Micro Paint Repair business
unit.  As a consequence of these divestitures, we evaluate our
continuing business as one consolidated business.  These divestitures
were integral to our turnaround plan and the proceeds received from the sale of
our non-core business units have been used to continue the development of our
code-reading business.  A major goal of ours is to provide the
industrial and carrier-grade infrastructure to enable reliable, scalable and
billable commerce that is customer-focused and drives revenue
growth.
  During
2008 and early 2009 we have made significant changes to strengthen our
management team. In June 2008, Mr. Iain A. McCready became our Chief Executive
Officer and Chairman of our Board of Directors; in September 2008, Mr. Michael
W. Zima became our Chief Financial Officer and Secretary; in January 2009, Ms.
Laura Marriott became a Member our Board of Directors; and in March 2009, Mr.
Dean Wood became our Vice President - Business Development.
 
 18
  Comparison
of the Three Months Ended March 31, 2009 and 2008
 
 Results
of Continuing Operations
 
 Beginning
in late 2008 and continuing in 2009 we have taken aggressive steps to control
our costs. These efforts have resulted in reduced operating losses of $1.6
million in the three months ended March 31, 2009 compared to $2.5
million  in the three months ended March 31, 2008. However our
loss  from continuing operations was $106.6 million during the three
months ended March 31, 2009 compared to income from continuing operations of
$4.0 million during the three months ended March 31, 2008. The loss incurred in
the three months ended March 31, 2009 was the result of non-cash losses from the
change in fair value of our hybrid financial instruments, warrants and
debentures, totaling $104.0 million. We incurred these non-cash losses
principally as a result of the recent increase in the market value of our common
stock. During the three months ended March 31, 2008 we reported non-cash gains
on our hybrid financial instruments, warrants and debentures, totaling $6.7
million. These non-cash gains were principally the result of declines in the
market value of our common stock.
  A summary
of our net sales is presented below:
  Three
      Months Ended March 31,
                                    
                                    
                                    Increase
      (decrease)2009
                                    
                                    
                                    2008
                                    
                                    
                                    $
                                    
                                    
                                    %(in
      thousands)Hardware
      sales
                                    
                                    
                                    397
                                    
                                    
                                    $
                                    67
                                    
                                    
                                    
                                    330
                                    
                                    
                                    
                                    492%Lavasphere
      revenue
                                    
                                    
                                    21
                                    
                                    
                                    
                                    24
                                    
                                    
                                    
                                    (3
                                    )
                                    
                                    
                                    -11%Legacy
      product revenue
                                    
                                    
                                    57
                                    
                                    
                                    
                                    77
                                    
                                    
                                    
                                    (20
                                    )
                                    
                                    
                                    -25%Patent
      licensing
                                    
                                    
                                    10
                                    
                                    
                                    
                                    39
                                    
                                    
                                    
                                    (29
                                    )
                                    
                                    
                                    -75%Other
      revenue
                                    
                                    
                                    5
                                    
                                    
                                    
                                    57
                                    
                                    
                                    
                                    (52
                                    )
                                    
                                    
                                    -92%Net
      Sales
                                    
                                    $
                                    490
                                    
                                    
                                    $
                                    264
                                    
                                    
                                    
                                    226
                                    
                                    
                                    
                                    86%
  Net Sales
- Total revenues increased $226,000, or 86%, to $490,000 for the three
months ended March 31, 2009 from $264,000 for the three months ended March 31,
2008. This increase was the result of increased sales of our hardware products.
Sales of hardware products increased to $397,000 from $67,000 for the three
months ended March 31, 2009 and 2008, respectively, as a result of the
introduction of our newest model barcode scanners as well as the sale of
remaining quantities of our older models. During the three months ended March
31, 2009, we recorded $5,000 of sales revenue for our barcode ecosystem
products. In succeeding quarters we expect these revenues and related licensing
revenues to increase as we shift the focus to our new business strategy of
developing products and services to support the emerging barcode ecosystem that
is being defined by bodies such as the OMA, GSMA and CTIA. We believe this focus
will deliver the most value in the future.
 
 Cost of
Sales - Cost of sales was $527,000 for the three months ended March 31,
2009 compared with $313,000 for the three months ended March 31, 2008,
an increase of $214,000, or 68%. Cost of sales for NeoMedia Europe,
related to our hardware products, was $289,000 and $67,000 for the three
months ended March 31, 2009 and 2008, respectively. Amortization costs related
to our patents, and the proprietary software of NeoMedia Europe were $238,000
and $246,000 for the three months ended March 31, 2009 and 2008,
respectively.
  Sales and
Marketing - Sales and marketing expenses were $286,000 and $628,000 for
the three months ended March 31, 2009 and 2008, respectively, a decrease of
$342,000 or 54%. The decrease in sales and marketing expenses was the result of
strict cost controls implemented in mid-late 2008 and further reductions in 2009
compared with the first quarter of 2008.
  General and
Administrative - General and administrative expenses were $923,000 and
$1,290,000 for the three months ended March 31, 2009 and 2008, respectively, a
decrease of $367,000, or 28%. The decrease in general and administrative
expenses was the result of reductions in compensation and travel costs, as well
as reductions in professional fees implemented in mid-late 2008 and further
reductions in 2009 compared with the first quarter of 2008.
  Research and
Development -Research and development expenses were $324,000 and
$562,000 for the three month periods ended March 31, 2009 and 2008,
respectively, a decrease of $238,000, or 42%. The decrease in research and
development expenses was the result of reductions in compensation and costs
associated with the development of our hardware products, which were completed
and launched in late 2008. We have also implemented further cost controls in
2009 compared with the first quarter of 2008.
  19
 
 Gain (Loss) from
Change in Fair Value of Hybrid Financial Instruments-We carry certain of our
convertible debentures at fair value, in accordance with FAS 155 and do not
separately account for the embedded conversion feature.  The change in
the fair value of these liabilities includes changes in the value of the
interest due under these instruments, as well as changes in the fair value of
the common stock underlying the instruments. In the three months ended
March 31, 2009, our liability related to these hybrid instruments increased,
primarily as a result of the 2,741% increase in the value of our common stock,
and we recognized a loss of $23.0 million.  In the three months ended
March 31, 2008, we recognized a gain of $0.9 million, as the fair value of the
liability decreased due to decreases in the value of our common stock. Because
our stock price has been volatile and because many of our hybrid financial
instruments include relatively low fixed conversion prices it is possible that
further increases in the market price of our stock could cause the fair value of
our hybrid financial instruments to increase significantly in future
periods.
  Gain (Loss) from
Change in Value ofWarrants
- We
account for our outstanding common stock warrants that were issued in connection
with the preferred stock and our debentures, at fair value.   In
the three months ended March 31, 2009, our liability related to
warrants increased, primarily as a result of the 2,741% increase in the
value of our common stock, and we recognized a loss of $33.2
million.  In the three months ended March 31, 2008, we recognized a
gain of $2.0 million, as the fair value of the liability decreased due to
decreases in the value of our common stock. Because our stock price has been
volatile and because many of our warrants include relatively low fixed
conversion prices it is possible that further increases in the market price of
our stock could cause the fair value of our warrants to increase significantly
in future periods.
 
 Gain (Loss) from
Change in Value ofDebentures
-For our
Series C convertible preferred stock, and certain of our convertible debentures,
we account for the embedded conversion feature separately as a derivative
financial instrument.  We carry these derivative financial
instruments, at fair value.   In the three months ended March 31,
2009, our liability related to these derivative instruments increased, primarily
as a result of the 2,741% increase in the value of our common stock, and we
recognized a loss of $47.7 million. This liability is significantly greater than
the face amount of our debt that would be otherwise due in cash.  In
the three months ended March 31, 2008, we recognized a gain of $3.4 million, as
the fair value of the liability decreased due to decreases in the value of our
common stock. Because our stock price has been volatile and because many of our
derivative financial instruments include relatively low fixed conversion prices
it is possible that further increases in the market price of our stock could
cause the fair value of our derivative financial instruments to increase
significantly in future periods.
 
 Other Interest
Expense, net-Other
interest expense was $1.1 million  and $0.2 million during the three
months ended March 31, 2009 and 2008, respectively.Other interest expense
consists of interest charges related to convertible debentures that are not
carried at fair value under FAS 155, interest accrued for creditors as part of
financed purchases, past due balances and notes payable, net of interest earned
on cash equivalent investments.
  Results of
Discontinued Operations -In 2007, we discontinued
the operations of our Mobot, Sponge, 12Snap, Telecom Services and Micro Paint
Repair businesses.  During the three months ended March 31, 2008, we
recognized a loss of $445,000, primarily attributable to wind-down expenses
associated with Micro Paint Repair, 12Snap, and Telecom Services
  Liquidity
and Capital Resources
  As of
March 31, 2009, we had $0.2 million in cash and cash equivalents,a decrease of
$1.0 million, or 82%, compared with a total of $1.3 million as of
December 31, 2008.
  Cash used
in operating activities decreased to $1.1 million for the three months
ended March 31, 2009 compared with $1.7 million for the period ended March
31, 2008.  The decrease in cash used in operations is primarily due to
the cost control measures implemented in late 2008 and early 2009.
  Cash used
in investing activities was $24,000 for the three months ended March 31, 2009,
representing the purchase of equipment. Net cash provided by investing
activities was $0.5 million for the three months ended March 31,
2008.  This was primarily due to the sale of our remaining ownership
of 12Snap, a partial settlement of intercompany loans and cash retained by us
from the shut-down of Micro Paint Repair-US which resulted in net proceeds to us
of $0.8 million.
  Cash
provided by financing activities was $0.1 million for the three months ended
March 31, 2009 which resulted from the proceeds received upon exercise of stock
options by two former employees. Cash used in investing activities during the
three months ended March 31, 2008 was $29,000 and was the result of the
repayment of portions of our notes payable.
  20
 As of
March 31, 2009, we had a working capital deficiency of $173.3 million, of which
$107.3 million relates to the fair value of hybrid and derivative financial
instruments, and $54.2 million relates to the carrying value of debentures.
These values are significantly greater than the face amount of our debt that
would be otherwise due in cash and if the conversion feature of the warrants did
not exist
  Significant
Liquidity Events
 
 Going
Concern - We have historically incurred net losses and losses from
operations and we expect that we will continue to have negative cash flows as we
implement our business plan.  There can be no assurance that our
continuing efforts to execute our business plan will be successful and that we
will be able to continue as a going concern. The accompanying consolidated
financial statements have been prepared in conformity with US GAAP, which
contemplate our continuation as a going concern.  Net loss for the
three months ended March 31, 2009 $106.6 million while net cash used by
operations was $1.1 million.  We also have an accumulated deficit
of $319.2 million and a working capital deficit of $173.3 million as
of March 31, 2009, much of which is related to the derivative value of our
financing instruments. . We also have a continuing obligation as of March 31,
2009 of $4.6 million relating to a purchase price guarantee associated with our
prior acquisition of 12Snap (which we subsequently sold).
  The items
discussed above raise substantial doubts about our ability to continue as a
going concern.
  We
currently do not have sufficient cash to sustain us for the next twelve
months.  We will require additional financing in order to execute our
operating plan and continue as a going concern.  Our management’s plan
is to attempt to secure adequate funding to bridge the commercialization of our
barcode ecosystem business. We cannot predict whether this additional financing
will be in the form of equity, debt, or another form and we may not be able to
obtain the necessary additional capital on a timely basis, on acceptable terms,
or at all.  We believe that we can obtain additional financing, but in
the event that these financing sources do not materialize, or that we are
unsuccessful in increasing our revenues and profits, we may be unable to
implement our current plans for expansion, repay our debt obligations as they
become due or continue as a going concern, any of which circumstances would have
a material adverse effect on our business, prospects, financial condition and
results of operations. In 2009 we have received $1.0 million in financing
from YA Global Investments, L.P (“YA Global”). Should YA Global
choose not to provide us with capital financing, as they have in the past,
or if we do not find alternative sources of financing to fund our operations, or
if we are unable to generate significant product revenues, then we only have
sufficient funds to sustain our current operations through May 31,
2009.
  The
financial statements in this Form 10-Q do not include any adjustments relating
to the recoverability and reclassification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary, should we be
unable to continue as a going concern.
 
 Sources of Cash
and Projected Cash Requirements-As of March
31, 2009, our cash balance was $0.2 million. NeoMedia’s reliance on YA Global as
our primary financing source has certain ramifications that could affect future
liquidity and business operations.  For example, pursuant to the terms
of the convertible debenture agreements between us and YA Global, without YA
Global’s consent we cannot (i) issue or sell any shares of our common stock
or our preferred stock without consideration or for consideration per share less
than the closing bid price immediately prior to its issuance, (ii) issue or
sell any preferred stock, warrant, option, right, contract, call, or other
security or instrument granting the holder thereof the right to acquire our
common stock for consideration per share less than the closing bid price
immediately prior to its issuance, (iii) enter into any security instrument
granting the holder a security interest in any of our assets or (iv) file any
registration statements on Form S-8.  In addition, pursuant to
security agreements between us and YA Global, YA Global has a security interest
in all of our assets.  Such covenants could severely harm our ability
to raise additional funds from sources other than YA Global, and would likely
result in a higher cost of capital in the event we secured funding.
  Additionally,
pursuant to the terms of the Investment Agreement between us and YA Global in
connection with our Series C convertible preferred stock sale, we cannot (i)
enter into any debt arrangements in which we are the borrower, (ii) grant any
security interest in any of our assets or (iii) grant any security below market
price.
  21
 
  Critical
Accounting Policies and Estimates
  There
have been no material changes to our critical accounting policies and estimates
from the information provided in Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” included in our
Annual Report on Form 10-K for the fiscal year ended December 31,
2008.
  ITEM 3. Quantitative and Qualitative
Disclosures About Market Risk
  We are a
“smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and are
not required to provide information under this item.
  ITEM 4T. Controls and
Procedures
  Disclosure
Controls and Procedures-Our management, with the participation of our CEO and CFO have
evaluated the effectiveness of our disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of
the end of the period covered by this report.
  These
controls are designed to ensure that information required to be disclosed in the
reports we file or submit pursuant to the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC, and that such information is accumulated and communicated to our
management, including our CEO and CFO, as appropriate, to allow timely decisions
regarding required disclosure.
  Based on
this evaluation, our CEO and CFO concluded that our disclosure controls and
procedures were not effective as of March 31, 2009 at a reasonable assurance
level, because of the material weaknesses described in Item 9A of our Annual
Report on Form 10−K for the fiscal year ended December 31, 2008, which we are
still in the process of remediating.  Please see “Management’s Report
on Internal Control over Financial Reporting” in Item 9A of the 2008 Form 10−K
for a full description of these weaknesses.
  Notwithstanding
the material weaknesses described in Item 9A of the Form 10−K for the fiscal
year ended December 31, 2008, we believe that our consolidated financial
statements presented in this Quarterly Report on Form 10−Q fairly present, in
all material respects, our financial position, results of operations, and cash
flows for all periods presented herein.
  Inherent
Limitations-Our
management, including our Chief Executive Officer and Chief Financial Officer,
do not expect that our disclosure controls and procedures will prevent all error
and all 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. The design of any system of controls is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. 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 all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within our company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdown
can occur because of simple error or mistake. In particular, many of our current
processes rely upon manual reviews and processes to ensure that neither human
error nor system weakness has resulted in erroneous reporting of financial
data.
  Changes in
Internal Control over Financial Reporting-There were no changes in
the Company’s internal control over financial reporting during the period ended
March 31, 2009, which were identified in conjunction with management’s
evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the
Exchange Act, that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
 
 22
 
 PART
II - OTHER INFORMATION
  ITEM
1.  Legal Proceedings
  There
have been no material developments relating to certain pending legal
proceedings.  For a description of pending legal proceedings, see Note
7 – Contingencies, to the Consolidated Financial Statements set forth in this
Form 10-Q.
 
 ITEM
1A.  Risk Factors
 
 We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide information under this
item.
 
 ITEM
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
 
 Not
Applicable
 
 ITEM
3.  Defaults Upon Senior Securities
 
 Not
Applicable
 
 ITEM
4.  Submission of Matters to A Vote of Security Holders
 
 Not
Applicable
 
 ITEM
5.  Other Information
 
 Not
Applicable
 
 23
  ITEM 6.  Exhibits
  
 (a)
Exhibits:
  Exhibit
                                                                                                                                                      
                                                                                                                                                      Filed
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      FilingNumber
                                                                                                                                                      Description
                                                                                                                                                      Herewith
                                                                                                                                                      
                                                                                                                                                      Form
                                                                                                                                                      Exhibit
                                                                                                                                                      Date3.1
                                                                                                                                                      Articles
      of Incorporation of Dev-Tech Associates, Inc. and amendment
      thereto
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.1
                                                                                                                                                      11/25/963.2
                                                                                                                                                      Bylaws
      of DevSys, Inc.
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.2
                                                                                                                                                      11/25/963.3
                                                                                                                                                      Restated
      Certificate of Incorporation of DevSys, Inc.
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.3
                                                                                                                                                      11/25/963.4
                                                                                                                                                      By-laws
      of DevSys, Inc.
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.4
                                                                                                                                                      11/25/963.5
                                                                                                                                                      Articles
      of Merger and Agreement and Plan of Merger of DevSys, Inc and Dev-Tech
      Associates, Inc.
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.5
                                                                                                                                                      11/25/963.6
                                                                                                                                                      Certificate
      of Merger of Dev-Tech Associates, Inc. into DevSys, Inc.
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.6
                                                                                                                                                      11/25/963.7
                                                                                                                                                      Articles
      of Incorporation of Dev-Tech Migration, Inc. and amendment
      thereto
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.7
                                                                                                                                                      11/25/963.8
                                                                                                                                                      By-laws
      of Dev-Tech Migration, Inc.
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.8
                                                                                                                                                      11/25/963.9
                                                                                                                                                      Restated
      Certificate of Incorporation of DevSys Migration, Inc.
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.90
                                                                                                                                                      11/25/963.1
                                                                                                                                                      Form
      of By-laws of DevSys Migration, Inc.
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.10
                                                                                                                                                      11/25/963.11
                                                                                                                                                      Form
      of Agreement and Plan of Merger of Dev-Tech Migration, Inc. into DevSys
      Migration, Inc.
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.11
                                                                                                                                                      11/25/963.12
                                                                                                                                                      Form
      of Certificate of Merger of Dev-Tech Migration, Inc. into DevSys
      Migration, Inc.
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.12
                                                                                                                                                      11/25/963.13
                                                                                                                                                      Certificate
      of Amendment to Certificate of Incorporation of DevSys, Inc. changing our
      name to NeoMedia Technologies, Inc.
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.13
                                                                                                                                                      11/25/963.14
                                                                                                                                                      Form
      of Certificate of Amendment to Certificate of Incorporation of NeoMedia
      Technologies, Inc. authorizing a reverse stock split
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.14
                                                                                                                                                      11/25/963.15
                                                                                                                                                      Form
      of Certificate of Amendment to Restated Certificate of Incorporation of
      NeoMedia Technologies, Inc. increasing authorized capital and creating
      preferred stock
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      SB-2
                                                                                                                                                      3.15
                                                                                                                                                      11/25/9610.1
                                                                                                                                                      Second
      Agreement and Amendment to Consulting Agreement between NeoMedia and
      Thornhill Capital, dated July 22, 2005
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      S-3/A
                                                                                                                                                      10.3
                                                                                                                                                      1/30/0610.2
                                                                                                                                                      Standby
      Equity Distribution Agreement, dated March 30, 2005, between NeoMedia and
      Cornell Capital Partners
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      8-K
                                                                                                                                                      16.1
                                                                                                                                                      4/1/0510.3
                                                                                                                                                      Placement
      Agent Agreement, dated March 30, 2005, between NeoMedia and Cornell
      Capital Partners
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      8-K
                                                                                                                                                      16.2
                                                                                                                                                      4/1/0510.4
                                                                                                                                                      Escrow
      Agreement, dated March 30, 2005, between NeoMedia and Cornell Capital
      Partners
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      8-K
                                                                                                                                                      16.3
                                                                                                                                                      4/1/0510.5
                                                                                                                                                      Registration
      Rights Agreement, dated March 30, 2005, between NeoMedia and Cornell
      Capital Partners
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      8-K
                                                                                                                                                      16.4
                                                                                                                                                      4/1/0510.6
                                                                                                                                                      Promissory
      Note, dated March 30, 2005, between NeoMedia and Cornell Capital
      Partners
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      8-K
                                                                                                                                                      16.5
                                                                                                                                                      4/1/0510.7
                                                                                                                                                      Security
      Agreement, dated March 30, 2005, between NeoMedia and Cornell Capital
      Partners
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      8-K
                                                                                                                                                      16.5
                                                                                                                                                      4/1/0510.8
                                                                                                                                                      Warrant
      dated March 30, 2005, granted by NeoMedia to Thornhill Capital
      LLC
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      S-3/A
                                                                                                                                                      10.12
                                                                                                                                                      7/18/05
 
  24
  Exhibit
                                                                                                                                                
                                                                                                                                                Filed
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                FilingNumber
                                                                                                                                                Description
                                                                                                                                                Herewith
                                                                                                                                                
                                                                                                                                                Form
                                                                                                                                                Exhibit
                                                                                                                                                Date10.9
                                                                                                                                                Warrant
      dated March 30, 2005, granted by NeoMedia to Cornell Capital Partners
      LP
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                S-3/A
                                                                                                                                                10.13
                                                                                                                                                7/18/0510.10
                                                                                                                                                Definitive
      Merger Agreement between NeoMedia and Mobot
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                16.10
                                                                                                                                                2/10/0610.11
                                                                                                                                                Definitive
      Sale and Purchase Agreement between NeoMedia and 12Snap
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                16.10
                                                                                                                                                2/14/0610.12
                                                                                                                                                Definitive
      Sale and Purchase Agreement between NeoMedia and Gavitec
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                16.10
                                                                                                                                                2/21/0610.13
                                                                                                                                                Definitive
      Sale and Purchase Agreement between NeoMedia and Sponge
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                16.10
                                                                                                                                                2/22/0610.14
                                                                                                                                                Promissory
      Note, dated October 18, 2004, between NeoMedia and Cornell Capital
      Partners
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                S-3/A
                                                                                                                                                10.26
                                                                                                                                                1/30/0610.15
                                                                                                                                                Investment
      Agreement, dated February 17, 2006 between NeoMedia and Cornell Capital
      Partners
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.1
                                                                                                                                                2/21/0610.16
                                                                                                                                                Investor
      Registration Rights Agreement, dated February 17, 2006 between NeoMedia
      and Cornell Capital Partners
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.2
                                                                                                                                                2/21/0610.17
                                                                                                                                                Irrevocable
      Transfer Agent Instruction, dated February 17, 2006, by and among
      NeoMedia, Cornell Capital Partners and American Stock Transfer & Trust
      Co.
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.3
                                                                                                                                                2/21/0610.18
                                                                                                                                                Warrant,
      dated February 17, 2006
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.4
                                                                                                                                                2/21/0610.19
                                                                                                                                                Warrant,
      dated February 17, 2006
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.5
                                                                                                                                                2/21/0610.20
                                                                                                                                                Warrant,
      dated February 17, 2006
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.6
                                                                                                                                                2/21/0610.21
                                                                                                                                                Assignment
      Agreement, dated February 17, 2006 by NeoMedia and Cornell Capital
      Partners
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.7
                                                                                                                                                2/21/0610.22
                                                                                                                                                Assignment
      of Common Stock, dated February 17, 2006 between NeoMedia and Cornell
      Capital Partners
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.8
                                                                                                                                                2/21/0610.23
                                                                                                                                                Securities
      Purchase Agreement, dated August 24, 2006, between the Company and Cornell
      Capital Partners, LP
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.1
                                                                                                                                                8/30/0610.24
                                                                                                                                                Investor
      Registration Rights Agreement, dated August 24, 2006, between the Company
      and Cornell Capital Partners, LP
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.2
                                                                                                                                                8/30/0610.25
                                                                                                                                                Pledge
      and Security Agreement, dated August 24, 2006, between the Company and
      Cornell Capital Partners, LP
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.30
                                                                                                                                                8/30/0610.26
                                                                                                                                                Secured
      Convertible Debenture, dated August 24, 2006, issued by the Company to
      Cornell Capital Partners, LP
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.40
                                                                                                                                                8/30/0610.27
                                                                                                                                                Irrevocable
      Transfer Agent Instructions, dated August 24, 2006, by and among the
      Company, Cornell Capital Partners, LP and American Stock Transfer &
      Trust Co.
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.50
                                                                                                                                                8/30/0610.28
                                                                                                                                                A
      Warrant, dated August 24, 2006
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.60
                                                                                                                                                8/30/0610.29
                                                                                                                                                B
      Warrant, dated August 24, 2006
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.70
                                                                                                                                                8/30/0610.30
                                                                                                                                                C
      Warrant, dated August 24, 2006
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.80
                                                                                                                                                8/30/0610.31
                                                                                                                                                D
      Warrant, dated August 24, 2006
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.9
                                                                                                                                                8/30/0610.32
                                                                                                                                                Amendment
      to Warrant No. CCP-002, dated August 24, 2006,  between the
      Company and Cornell Capital Partners, LP
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.1
                                                                                                                                                8/30/0610.33
                                                                                                                                                Amendment
      to “A” Warrant No. CCP-001,  dated August 24, 2006, between the
      Company and Cornell Capital Partners, LP
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.11
                                                                                                                                                8/30/0610.34
                                                                                                                                                Amendment
      to “B” Warrant No. CCP-002, dated August 24, 2006, between the Company and
      Cornell Capital Partners, LP
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.12
                                                                                                                                                8/30/0610.35
                                                                                                                                                Amendment
      to “C” Warrant No. CCP-003,  dated August 24, 2006, between the
      Company and Cornell Capital Partners, LP
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                10.13
                                                                                                                                                8/30/0610.36
                                                                                                                                                Letter
      of intent amongst the Company, Global Emerging Markets, and Jose
      Sada
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                16.1
                                                                                                                                                8/31/0610.37
                                                                                                                                                Termination
      Agreement between NeoMedia Technologies, Inc, and Cornell Capital
      Partners, LP
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                S-3/A
                                                                                                                                                10.53
                                                                                                                                                1/30/0710.38
                                                                                                                                                Definitive
      share purchase and settlement agreement between NeoMedia and Sponge, dated
      November 14, 2006
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                16.1
                                                                                                                                                11/20/0610.39
                                                                                                                                                Agreement
      between NeoMedia and FMS
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                8-K
                                                                                                                                                16.1
                                                                                                                                                12/7/06
 
  25
 
  Exhibit
                                                                                                                                    
                                                                                                                                    Filed
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    FilingNumber
                                                                                                                                    Description
                                                                                                                                    Herewith
                                                                                                                                    
                                                                                                                                    Form
                                                                                                                                    Exhibit
                                                                                                                                    Date10.40
                                                                                                                                    Escrow
      agreement amongst NeoMedia, Mobot, FMS, and Kirkpatrick and Lockhart
      Nicholson Graham LLP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    16.2
                                                                                                                                    12/7/0610.41
                                                                                                                                    Description
      of Special Preference Stock
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    16.3
                                                                                                                                    12/7/0610.42
                                                                                                                                    Promissory
      note payable from NeoMedia to FMS
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    16.4
                                                                                                                                    12/7/0610.43
                                                                                                                                    License
      agreement between NeoMedia and Mobot
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    16.50
                                                                                                                                    12/7/0610.44
                                                                                                                                    Securities
      Purchase Agreement, dated December 29, 2006, between the Company and
      Cornell Capital Partners, LP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.10
                                                                                                                                    1/8/0710.45
                                                                                                                                    Investor
      Registration Rights Agreement, dated December 29, 2006, between the
      Company and Cornell Capital Partners, LP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.20
                                                                                                                                    1/8/0710.46
                                                                                                                                    Secured
      Convertible Debenture, dated December 29, 2006, issued by the Company to
      Cornell Capital Partners, LP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.30
                                                                                                                                    1/8/0710.47
                                                                                                                                    Irrevocable
      Transfer Agent Instructions, dated December 29, 2006, by and among the
      Company, Cornell Capital Partners, LP and American Stock Transfer &
      Trust Co.
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.40
                                                                                                                                    1/8/0710.48
                                                                                                                                    A
      Warrant, dated December 29, 2006
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.50
                                                                                                                                    1/8/0710.49
                                                                                                                                    Amendment
      to Warrant No. CCP-002, dated December 29, 2006,  between the
      Company and Cornell Capital Partners, LP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.6
                                                                                                                                    1/8/0710.50
                                                                                                                                    Amendment
      to “A” Warrant No. CCP-001,  dated December 29, 2006, between
      the Company and Cornell Capital Partners, LP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.7
                                                                                                                                    1/8/0710.51
                                                                                                                                    Amendment
      to “B” Warrant No. CCP-002, dated December 29, 2006, between the Company
      and Cornell Capital Partners, LP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.8
                                                                                                                                    1/8/0710.52
                                                                                                                                    Amendment
      to “C” Warrant No. CCP-003,  dated December 29, 2006, between
      the Company and Cornell Capital Partners, LP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.9
                                                                                                                                    1/8/0710.53
                                                                                                                                    Amendment
      to “A” Warrant No. CCP-001,  dated December 29, 2006, between
      the Company and Cornell Capital Partners, LP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.1
                                                                                                                                    1/8/0710.54
                                                                                                                                    Amendment
      to “B” Warrant No. CCP-001,  dated December 29, 2006, between
      the Company and Cornell Capital Partners, LP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.11
                                                                                                                                    1/8/0710.55
                                                                                                                                    Amendment
      to “C” Warrant No. CCP-001,  dated December 29, 2006, between
      the Company and Cornell Capital Partners, LP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.12
                                                                                                                                    1/8/0710.56
                                                                                                                                    Securities
      Purchase Agreement, dated December 29, 2006, between the Company and
      Cornell Capital Partners, LP
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.13
                                                                                                                                    1/8/0710.57
                                                                                                                                    Amendment
      Agreement I to the Sale and Purchase Agreement between NeoMedia and
      certain former shareholders of Gavitec AG, dated January 23,
      2007
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.1
                                                                                                                                    1/29/0710.58
                                                                                                                                    Consulting
      Agreement between the Company and SKS Consulting of South Florida
      Corp.
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.1
                                                                                                                                    2/6/0710.59
                                                                                                                                    Amendment
      Agreement III to Sale and Purchase Agreement between NeoMedia and certain
      former shareholders of 12Snap AG, dated March 16, 2007
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.1
                                                                                                                                    3/22/0710.60
                                                                                                                                    Securities
      Purchase Agreement between NeoMedia and Cornell Capital Partners LP, dated
      March 27, 2007
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.1
                                                                                                                                    3/27/0710.61
                                                                                                                                    Investor
      Registration Rights Agreement between NeoMedia and Cornell Capital
      Partners LP, dated March 27, 2007
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.2
                                                                                                                                    3/27/0710.62
                                                                                                                                    Secured
      Convertible Debenture, issued by NeoMedia to Cornell Capital Partners, LP,
      dated March 27, 2007
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.3
                                                                                                                                    3/27/0710.63
                                                                                                                                    Irrevocable
      Transfer Agent Instructions, by and among NeoMedia, Cornell Capital
      Partners, LP and Worldwide Stock Transfer, dated March 27,
      2007
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.4
                                                                                                                                    3/27/0710.64
                                                                                                                                    Warrant,
      issued by NeoMedia to Cornell Capital Partners, LP, dated March 27,
      2007
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.5
                                                                                                                                    3/27/0710.65
                                                                                                                                    Master
      Amendment Agreement, by and between NeoMedia and Cornell Capital Partners,
      LP, dated March 27, 2007
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.6
                                                                                                                                    3/27/0710.67
                                                                                                                                    Security
      Agreement, by and between NeoMedia and Cornell Capital Partners, LP, dated
      on or about August 24, 2006
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.7
                                                                                                                                    3/27/0710.68
                                                                                                                                    Security
      Agreement, by and between NeoMedia and Cornell Capital Partners, LP, dated
      March 27,2007
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    8-K
                                                                                                                                    10.8
                                                                                                                                    3/27/07
 
 26
  Exhibit
                                                                                                                    
                                                                                                                    Filed
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    FilingNumber
                                                                                                                    Description
                                                                                                                    Herewith
                                                                                                                    
                                                                                                                    Form
                                                                                                                    Exhibit
                                                                                                                    Date10.69
                                                                                                                    Security
      Agreement (Patent), by and between NeoMedia and Cornell Capital Partners,
      LP, dated March 27, 2007
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.9
                                                                                                                    3/27/0710.70
                                                                                                                    Pledge
      Shares Escrow Agreement, by and between NeoMedia and Cornell Capital
      Partners, dated March 27, 2007
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.10
                                                                                                                    3/27/0710.71
                                                                                                                    Sale
      and Purchase Agreement between NeoMedia and Bernd M.
    Michael
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.1
                                                                                                                    4/6/0710.72
                                                                                                                    Completion
      of Acquisition of Disposition of Assets of BSD Software
    Inc.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K/A
                                                                                                                    10.1
                                                                                                                    6/8/0710.73
                                                                                                                    Full
      and Final Settlement Agreement, dated August 14, 2007, by and between
      NeoMedia, Wayside and Tesscourt
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    99.1
                                                                                                                    8/17/0710.74
                                                                                                                    Letter
      of intent between NeoMedia Technologies, Inc. and Greywolf Entertainment,
      Inc.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    16.1
                                                                                                                    8/21/0710.75
                                                                                                                    Registration
      Rights Agreement, by and between NeoMedia and YA Global Investments, L.P.,
      dated August 24, 2007
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.1
                                                                                                                    8/30/0710.76
                                                                                                                    Secured
      Convertible Debenture, issued by NeoMedia to YA Global Investments, dated
      August 24, 2007
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.2
                                                                                                                    8/30/0710.77
                                                                                                                    Irrevocable
      Transfer Agent Instructions, by and among NeoMedia, YA Global Investments,
      L.P. and Worldwide Stock Transfer, LLC, dated August 24,
    2007
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.3
                                                                                                                    8/30/0710.78
                                                                                                                    Warrant
      issued by NeoMedia to YA Global Investments, L.P., dated August 24,
      2007
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.4
                                                                                                                    8/30/0710.79
                                                                                                                    Repricing
      Agreement, by and between NeoMedia and YA Global Investments, L.P., dated
      August 24, 2007
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.5
                                                                                                                    8/30/0710.80
                                                                                                                    Security
      Agreement, by and between NeoMedia and YA Global Investments, L.P., dated
      August 24, 2007
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.6
                                                                                                                    8/30/0710.81
                                                                                                                    Security Agreement (Patent),
      by and between NeoMedia and YA Global Investments, L.P., dated August 24,
      2007
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.7
                                                                                                                    8/30/0710.82
                                                                                                                    Sale
      and Purchase Agreement between NeoMedia and Greywolf Entertainment, Inc.,
      dated October 26, 2007
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.1
                                                                                                                    11/5/0710.83
                                                                                                                    Definitive
      purchase agreement between NeoMedia Technologies, Inc. and Micro Paint
      Holdings Limited, dated November 1, 2007.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.1
                                                                                                                    11/7/0710.84
                                                                                                                    Distribution
      agreement between NeoMedia Technologies, Inc. and Micro Paint Holdings
      Limited, dated November 1, 2007.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    16.1
                                                                                                                    11/7/0710.85
                                                                                                                    Sale
      of the Assets of the Micro Paint Repair Business Unit.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.1
                                                                                                                    11/21/0710.86
                                                                                                                    Share
      Purchase and Transfer Agreement, dated January 31, 2008, by and between
      NeoMedia and Bernd Michael.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.1
                                                                                                                    2/8/0810.87
                                                                                                                    Arbitration
      Agreement, dated January 31, 2008, by and between NeoMedia and Bernd
      Michael.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.1
                                                                                                                    2/8/0810.88
                                                                                                                    Secured
      Convertible Debenture, dated April 11, 2008, issued by the Company to YA
      Global Investments, L.P.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.1
                                                                                                                    4/17/0810.89
                                                                                                                    Secured
      Convertible Debenture, dated May 16, 2008, issued by the Company to YA
      Global Investments, L.P.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.1
                                                                                                                    5/22/0810.90
                                                                                                                    Warrant,
      dated May 16, 2008, issued by the Company to YA Global Investments,
      L.P.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.2
                                                                                                                    5/22/0810.91
                                                                                                                    Secured
      Convertible Debenture, dated May 30, 2008, issued by the Company to YA
      Global Investments, L.P.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.1
                                                                                                                    6/5/0810.92
                                                                                                                    Warrant,
      dated May 30, 2008, issued by the Company to YA Global Investments,
      L.P.
                                                                                                                    
                                                                                                                    
                                                                                                                    8-K
                                                                                                                    10.2
                                                                                                                    6/5/08
  27
  Exhibit
                                                                                                                  
                                                                                                                  Filed
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  FilingNumber
                                                                                                                  Description
                                                                                                                  Herewith
                                                                                                                  
                                                                                                                  Form
                                                                                                                  Exhibit
                                                                                                                  Date10.93
                                                                                                                  Settlement
      Agreement and Release, dated June 3, 2008, by and between the Company and
      William Hoffman
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.5
                                                                                                                  6/5/0810.94
                                                                                                                  Resignation
      Letter, effective May 22, 2008, executed by William
Hoffman
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.6
                                                                                                                  6/5/0810.95
                                                                                                                  Settlement
      Agreement and Release, dated June 2, 2008, by and between the Company and
      Frank J. Pazera
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.7
                                                                                                                  6/5/0810.96
                                                                                                                  Resignation
      Letter, effective May 22, 2008, executed by Frank J.
Pazera
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.8
                                                                                                                  6/5/0810.97
                                                                                                                  Employment
      Agreement, dated June 10, 2008, by and between NeoMedia Technologies, Inc.
      and Iain McCready
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.1
                                                                                                                  6/16/0810.98
                                                                                                                  Secured
      Convertible Debenture, dated July 10, 2008, issued by the Company to YA
      Global Investments, L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.1
                                                                                                                  7/16/0810.99
                                                                                                                  Securities
      Purchase Agreement, dated July 29, 2008, by and between the Company and YA
      Global Investments, L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.1
                                                                                                                  8/4/0810.100
                                                                                                                  Secured
      Convertible Debenture, dated July 29, 2008, issued by the Company to YA
      Global Investments, L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.2
                                                                                                                  8/4/0810.101
                                                                                                                  Security
      Agreement, dated July 29, 2008, by and among the Company, each of the
      Company’s subsidiaries made a party thereto and YA Global Investments,
      L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.3
                                                                                                                  8/4/0810.102
                                                                                                                  Patent
      Security Agreement, dated July 29, 2008, by and among the Company, each of
      the Company’s subsidiaries made a party thereto and YA Global Investments,
      L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.4
                                                                                                                  8/4/0810.103
                                                                                                                  Warrant
      9-1A, dated July 29, 2008, issued by the Company to YA Global Investments,
      L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.5
                                                                                                                  8/4/0810.104
                                                                                                                  Warrant
      9-1B, dated July 29, 2008, issued by the Company to YA Global Investments,
      L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.6
                                                                                                                  8/4/0810.105
                                                                                                                  Warrant
      9-1C, dated July 29, 2008, issued by the Company to YA Global Investments,
      L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.7
                                                                                                                  8/4/0810.106
                                                                                                                  Warrant
      9-1D, dated July 29, 2008, issued by the Company to YA Global Investments,
      L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.8
                                                                                                                  8/4/0810.107
                                                                                                                  Escrow
      Agreement, dated July 29, 2008, by and among the Company, YA Global
      Investments, L.P., Yorkville Advisors, LLC and David Gonzalez,
      Esq.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.9
                                                                                                                  8/4/0810.108
                                                                                                                  Irrevocable
      Transfer Agent Instructions, dated July 29, 2008, by and among the
      Company, the Investor, David Gonzalez, Esq. and WorldWide Stock Transfer,
      LLC
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.10
                                                                                                                  8/4/0810.109
                                                                                                                  Letter
      Agreement, dated September 24, 2008, by and among NeoMedia Technologies,
      Inc. and YA Global Investments, L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.1
                                                                                                                  10/1/0810.110
                                                                                                                  Second
      Secured Convertible Debenture, dated October 28, 2008, issued by the
      Company to YA Global Investments, L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.3
                                                                                                                  11/3/0810.111
                                                                                                                  Revised
      Exhibit A to Escrow Agreement, dated October 28, 2008
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.12
                                                                                                                  11/3/0810.112
                                                                                                                  Letter
      Agreement, dated March 27, 2009, by and between the Company and YA Global
      Investments, L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.13
                                                                                                                  4/13/0910.113
                                                                                                                  Amendment
      Agreement, dated April 6, 2009, by and between the Company and YA Global
      Investments, L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.14
                                                                                                                  4/13/0910.114
                                                                                                                  Third
      Secured Convertible Debenture (first closing), dated April 6, 2009, issued
      by the Company to YA Global Investments, L.P.
                                                                                                                  
                                                                                                                  
                                                                                                                  8-K
                                                                                                                  10.15
                                                                                                                  4/13/09
 
  
 28
  Exhibit
                                            
                                            Filed
                                            
                                            
                                            
                                            FilingNumber
                                            Description
                                            Herewith
                                            
                                            Form
                                            Exhibit
                                            Date10.115
                                            Waiver,
      effective as of December 31, 2008, by and between the Company and YA
      Global Investments, L.P.
                                            
                                            
                                            8-K
                                            10.16
                                            4/13/0910.116
                                            Fourth
      Secured Convertible Debenture (second amended third closing), dated May 1,
      2009, issued by the Company to YA Global Investments, L.P.
                                            
                                            
                                            8-K
                                            10.15
                                            5/7/0931.1
                                            Certification
      of Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
                                            X31.2
                                            Certification
      of Chief Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
                                            X32.1
                                            Certification of
      Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002
                                            X32.2
                                            Certification
      of Chief Financial Officer Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
                                            X
 
  
 29
 
 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)Dated:
      May 15,
      2009
                /s/
      Michael W.  ZimaMichael
      W. ZimaChief
      Financial Officer & Principal Accounting Officer
   30