U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                        ---------------------------------

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997

                                       OR

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

                         COMMISSION FILE NUMBER 0-21743

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

               DELAWARE                                  36-3680347
     ------------------------------                 -------------------
    (State or Other Jurisdiction of                  (I.R.S. Employer
      Incorporation or Organization)                Identification No.)

    2201 SECOND STREET, SUITE 600, FORT MYERS, FLORIDA           33901
    --------------------------------------------------         ----------
    (Address of Principal Executive Offices)                   (Zip Code)

    Issuer's Telephone Number (Including Area Code) 941-337-3434

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

    As of April 30, 1997, there were outstanding 5,375,192 shares of the
issuer's Common Stock and 3,130,938 warrants.


<PAGE>
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<CAPTION>

          PART I -- FINANCIAL INFORMATION    ITEM 1. FINANCIAL STATEMENTS

                  NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
                      UNAUDITED CONSOLIDATED BALANCE SHEETS

                                                                      MARCH 31,  DECEMBER
ASSETS                                                                  1997     31, 1996
                                                                    -----------  --------
                                                                        (In thousands)
<S>                                                                 <C>          <C> 
Current assets:
     Cash and cash equivalents .................................    $  3,740     $  4,159
     Trade accounts receivable, net of allowance for doubtful
         accounts of $149 and $216 .............................       4,784        4,983
     Amounts due from related parties ..........................          19          496
     Inventories ...............................................          67          105
     Prepaid expenses and other ................................         610          588
                                                                    --------     --------
         Total current assets ..................................       9,220       10,331
                                                                    --------     --------
Property and equipment, net of accumulated depreciation ........         321          278
Capitalized software costs, net of accumulated amortization ....         805          657
                                                                    --------     --------
     Total assets ..............................................    $ 10,346     $ 11,266
                                                                    ========     ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable ..........................................    $  2,640     $  3,800
     Accrued expenses ..........................................       1,339        1,043
     Current portion of long-term debt .........................         257          262
     Other .....................................................         415          245
                                                                    --------     --------
         Total current liabilities .............................       4,651        5,350
                                                                    --------     --------
Long-term debt, net of current portion .........................       1,055        1,589
                                                                    --------     --------
         Total liabilities .....................................       5,706        6,939
                                                                    --------     --------
Shareholders' equity:
     Common stock, $.01 par value, 15,000,000 shares authorized,
         5,375,192 and 5,114,316 shares outstanding ............          54           51
     Additional paid-in capital ................................      10,118        8,801
     Accumulated deficit .......................................      (5,532)      (4,525)
                                                                    --------     --------
         Total shareholders' equity ............................       4,640        4,327
                                                                    --------     --------
     Total liabilities and shareholders' equity ................    $ 10,346     $ 11,266
                                                                    ========     ========
</TABLE>

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

                                        1

<PAGE>

                  NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                            THREE MONTHS
                                                           ENDED MARCH 31,
                                                    -------------------------
                                                        1997          1996
                                                    -----------    ----------
                                                       (Dollars in thousands,
                                                        except per share data)

NET SALES:
     License fees ...............................   $       218    $       159
     Software product resales ...................            64          1,290
     Technology equipment resales ...............         3,695          2,900
     Service fees ...............................           578            747
                                                    -----------    -----------
         Total net sales ........................         4,555          5,096
                                                    -----------    -----------
COST OF SALES:
     License fees ...............................            62             48
     Software product resales ...................            49            847
     Technology equipment resales ...............         3,214          2,553
     Service fees ...............................           393            464
     Amortization of capitalized software costs .           144            139
                                                    -----------    -----------
         Total cost of sales ....................         3,862          4,051
                                                    -----------    -----------
GROSS PROFIT ....................................           693          1,045

General and administrative expenses .............           756            384
Sales and marketing expenses ....................           801            469
Research and development costs ..................           177             64
                                                    -----------    -----------
Income (Loss) from operations ...................        (1,041)           128

Interest expense, net ...........................            11            104
                                                    -----------    -----------
INCOME (LOSS) BEFORE INCOME TAXES ...............        (1,052)            24

Benefit for income taxes ........................           (45)           (17)
                                                    -----------    -----------
NET INCOME (LOSS) ...............................   $    (1,007)   $        41
                                                    ===========    ===========
PER SHARE DATA:
     Net income (loss) per share ................   $     (0.16)   $       .01
                                                    ===========    ===========
     Weighted average number of common and common
          equivalent shares outstanding .........     6,255,305      4,071,373
                                                    ===========    ===========

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

                                        2

<PAGE>
<TABLE>
<CAPTION>
                  NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                          THREE MONTHS
                                                                         ENDED MARCH 31,
                                                                      ------------------
                                                                         1997      1996
                                                                      -------    -------
                                                                        (In thousands)
<S>                                                                   <C>        <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................................   $(1,007)   $    41
Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
     Provision for doubtful accounts ..............................        30       --
     Depreciation and amortization ................................       168        170
     Changes in operating assets and liabilities:
         Trade accounts receivable ................................       169       (829)
         Other current assets .....................................        21         43
         Accounts payable and accrued expenses ....................    (1,160)      (443)
         Other current liabilities ................................       466      1,129
                                                                      -------    -------
         Net cash provided by (used in) operating activities ......    (1,313)       111
                                                                      -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalization of software development costs and purchased software      (299)       (75)
Acquisition of property and equipment .............................       (60)       (67)
                                                                      -------    -------
         Net cash used in investing activities ....................      (359)      (142)
                                                                      -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of units ...............................     1,315       --
Exercise of stock options .........................................         5       --
Repayment of advance to shareholder ...............................       472       --
Proceeds from advance to shareholder ..............................      --         (472)
Borrowings under notes payable and long-term debt .................      --          250
Repayments on notes payable and long-term debt ....................       (67)      (101)
Borrowings from shareholders and related parties ..................      --          550
Repayments to shareholders and related parties ....................      (472)      --
                                                                      -------    -------
         Net cash provided by financing activities ................     1,253        227
                                                                      -------    -------
NET INCREASE (DECREASE) IN CASH ...................................      (419)       196
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....................     4,159         11
                                                                      -------    -------
CASH AND CASH EQUIVALENTS, END OF PERIOD ..........................   $ 3,740    $   207
                                                                      =======    =======
SUPPLEMENTAL CASH FLOW INFORMATION:
     Interest paid ................................................   $    42    $    48
     Income taxes paid ............................................       --          65
</TABLE>
 
    The accompanying unaudited notes are an integral part of these unaudited
                       consolidated financial statements.

                                        3

<PAGE>
<TABLE>
<CAPTION>
                  NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
            UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                                        ADDITIONAL     ACCUMU-       NUMBER
                                              COMMON      PAID-IN-     LATED           OF
                                              STOCK       CAPITAL      DEFICIT       SHARES
                                            ---------   ----------    ---------     ---------
                                                          (Dollars in thousands)
<S>                                         <C>          <C>          <C>           <C> 
Balance, December 31, 1996 .............    $      51    $   8,801    $  (4,525)    5,114,316

Exercise of stock options ..............         --              5         --           5,876

Proceeds from issuance of 255,000 units,
     net of $215 of issuance costs .....            3        1,312         --         255,000

Net loss ...............................         --           --         (1,007)         --
                                            ---------    ---------    ---------     ---------
Balance, March 31, 1997 ................    $      54    $  10,118    $  (5,532)    5,375,192
                                            =========    =========    =========     =========
</TABLE>


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

                                        4

<PAGE>

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

1.   BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS

BASIS OF PRESENTATION

     NeoMedia Technologies, Inc. ("Technologies") was incorporated under the
laws of the state of Delaware in July 1996 to acquire by merger Dev-Tech
Associates, Inc. ("Dev-Tech"), an Illinois corporation, which was incorporated
in December 1989. On August 5, 1996, Technologies acquired all of the shares of
Dev-Tech in exchange for the issuance of shares of Technologies' common stock to
the shareholders of Dev-Tech. Dev-Tech Migration, Inc. ("DTM") was incorporated
in June 1994 in Illinois. On November 20, 1996, DTM was merged into NeoMedia
Migration, Inc. ("Migration"), a Delaware corporation and a wholly owned
subsidiary of Technologies (the "Migration Merger"). Technologies and Migration
(collectively, "NeoMedia" or the "Company"), since Migration's inception, have
shared certain management and were controlled by common shareholders. These
transactions have been accounted for in a manner similar to the pooling of
interests method of accounting using historical book values rather than fair
market value as all entities involved were under common control. Distribuidora
Vallarta, S.P.A. is a wholly-owned subsidiary of Migration and was incorporated
in Guatemala in August, 1996, to employ computer software developers and system
integrators. As these transactions were completed as of December 31, 1996, the
financial statements of NeoMedia have been presented on a consolidated basis for
all periods presented. The financial position and results of NeoMedia as of and
for the periods prior to these mergers have been combined in a manner consistent
with NeoMedia's consolidation principles as of December 31, 1996. All
significant intercompany accounts and transactions have been eliminated in
preparation of the consolidated financial statements.

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and do not include
all of the information and footnotes required by generally accepted accounting
principles for complete consolidated financial statements. In the opinion of
management, the consolidated financial statements reflect all adjustments which
are of a normal recurring nature and which are necessary to present fairly the
consolidated financial position of NeoMedia as of March 31, 1997 and December
31, 1996, and the results of operations for the three months ended March 31,
1997 and 1996, and cash flows for the three months ended March 31, 1997 and
1996. The results of operations for the three months ended March 31, 1997 are
not necessarily indicative of the results which may be expected for the entire
fiscal year.

NATURE OF BUSINESS OPERATIONS

     NeoMedia operates in one business segment which is comprised of three
principal applications markets: (i) Intelligent Document Solutions, (ii)
Document Systems Solutions and (iii) Systems Transition Solutions.

     The INTELLIGENT DOCUMENT SOLUTIONS UNIT was established to assist clients
in linking printed material to electronic media. NeoMedia has developed its own
technology, and has rights to use the technology of others, to generate printed
documents which can be automatically "read" by machines, such as computers
equipped with scanners and appropriate software. These "machine readable"
documents incorporate printed codes which contain thousands of bytes of
information, including computer programs rendering them functionally equivalent
to a computer floppy disk with a limited capacity to hold information. These
codes are referred to in the industry as "high capacity symbologies" and
"multi-dimensional" or "two-dimensional" bar codes. NeoMedia refers to documents
that incorporate high capacity symbologies as "Intelligent Documents," and
currently provides software and services to support the application of this
technology.

     The DOCUMENTS SYSTEMS SOLUTIONS UNIT was established to assist clients in
definition, design, implementation and management of their document system
environments. These services include strategic consulting to define and

                                        5

<PAGE>

optimize enterprise wide documents strategies, as well as systems integration
and development to implement effective document generation, archive and
management systems. NeoMedia specializes in the technical areas of electronic
forms management, document production systems and intelligent document solutions
incorporating multi-dimensional bar code technologies. The document system
process provided by NeoMedia also includes electronic media alternatives such as
Internet and Intranet channels.

     The SYSTEMS TRANSITION SOLUTIONS UNIT was established to enable clients to
migrate applications on closed, proprietary ("legacy") systems to more cost
effective and extendable open systems platforms. NeoMedia has acquired and
developed a line of proprietary products and tools utilized in its migration
services. NeoMedia also provides strategic consulting, systems development,
systems engineering and support services in connection with its systems
transition solutions.

     As part of the services provided in connection with system transition
solutions service engagements, NeoMedia acts as a reseller of purchased hardware
in connection with open systems development and migrations. NeoMedia maintains
relationships with a number of major companies under which NeoMedia sells third
party purchased hardware and software products of those companies. NeoMedia has
established several strategic alliances with third party software and hardware
vendors, leading consulting firms and major system integrators. These alliances
are integral to NeoMedia's business operations.

     NeoMedia principally markets and distributes its products through
distributors in the United States (although it has distributors in Europe, Asia,
the Middle East, Indonesia and Latin America), and currently has U. S. offices
located in Illinois, California, Minnesota, and Florida.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

COMPUTATION OF EARNINGS PER SHARE

     The computation of earnings per share is based on the weighted average
number of common and common equivalent shares outstanding during the period.
Common stock equivalents consist of outstanding stock options which, pursuant to
Staff Accounting Bulletin No. 83 of the Securities and Exchange Commission, are
included in the weighted average shares as if they were outstanding for the
entire period to the extent granted within the twelve months preceding the
contemplated public offering date, using the treasury stock method until such
time as shares are issued. For the three months ended March 31, 1997 and 1996,
the computation of the weighted average number of common shares and common share
equivalents outstanding was as follows:

                                                        1997            1996
                                                     ---------       ---------

Common stock ...............................         5,327,785       3,133,378
Effect of  stock options ...................           927,520         937,995
                                                     ---------       ---------
Total ......................................         6,255,305       4,071,373
                                                     =========       =========

     For the three months ended March 31, 1997 and 1996, information regarding
earnings per share computed on a historical basis under the provisions of
Accounting Principles Board Opinion No. 15, "Earnings per Share," was as
follows:

                                                        1997           1996
                                                    ----------      ----------

Net income (loss) per share ..................      $    (0.19)     $    0.01
                                                    ==========      ==========
Weighted average common shares outstanding ....      5,327,785       3,133,378
                                                    ==========      ==========

                                        6

<PAGE>

     In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS
128"), which becomes effective for NeoMedia for the year ended December 31,
1997. FAS 128 replaces the presentation of primary earnings per share with a
presentation of basic earnings per share which excludes dilution and is computed
by dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that would occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. Diluted earnings per share is computed similarly to fully diluted
earnings per share pursuant to Accounting Principles Board Opinion No. 15,
"Earnings Per Share." FAS 128 also requires dual presentation of basic and
diluted earnings per share on the face of the income statement for all entities
with complex capital structure and requires a reconciliation of the numerator
and denominator of the basic earnings per share computation to the numerator and
denominator of the diluted earnings per share computation. For the three months
ended March 31, 1997, basic and diluted earnings per share would have been
$(.19).

CONCENTRATIONS OF CREDIT RISK

     Financial instruments that potentially subject NeoMedia to concentrations
of credit risk consist primarily of trade accounts receivable with customers.
Credit risk is generally minimized as a result of the large number and diverse
nature of NeoMedia's customers which are located throughout the United States.
NeoMedia extends credit to its customers as determined on an individual basis
and has included an allowance for doubtful accounts of $149,000 and $216,000 in
its March 31, 1997 and December 31, 1996 consolidated balance sheets,
respectively. NeoMedia had net sales to one major customer in the
telecommunications industry of $2,058,000 and $828,000 during the three months
ended March 31, 1997 and 1996, respectively, resulting in trade accounts
receivable of $2,385,000 and $2,507,000 as of March 31, 1997 and December 31,
1996, respectively. Revenue generated from the remarketing of computer equipment
has accounted for a significant percentage of NeoMedia's revenue. Such sales
accounted for 81.1% and 56.9% of NeoMedia's revenue for the three months ended
March 31, 1997 and 1996, respectively.

3.   FINANCING AGREEMENTS

     Technologies entered into an agreement with a commercial finance company
that provides short-term financing for certain computer hardware and software
purchases. Under the agreement, there are generally no financing charges for
amounts paid within 30 or 45 days, depending on the vendor used to source the
product. Borrowings are collateralized by accounts receivable generated from the
sales of merchandise to NeoMedia's customers and are personally guaranteed by
certain shareholders of NeoMedia. As of March 31, 1997 and December 31, 1996,
amounts due under this financing agreement included in accounts payable were
$1,829,000 and $2,275,000, respectively.

4.   BENEFIT FOR INCOME TAXES

     The benefits for income taxes recorded during the three months ended March
31, 1997 and 1996 represented the recovery of income taxes paid in prior years
from the carryback of operating losses.

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

OVERVIEW

     Dev-Tech Associates, Inc., NeoMedia's predecessor, was organized in
December, 1989, and through March 31, 1997, a substantial part of NeoMedia's
revenue was derived from software resales and equipment resales. NeoMedia
couples its proprietary software products with independent vendor products it
resells, enabling it to provide a complete "turn-key" service for its customers.
Currently, NeoMedia's revenue consists of software license fees, resales of

                                        7

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software developed by independent vendors ("software resales"), resales of
computer equipment manufactured by independent vendors ("equipment resales"),
and fees for services, including consulting, education and postcontract software
support. In addition, NeoMedia recently formed its Intelligent Document
Solutions Unit to develop enabling technology and applications for printed
materials containing high-capacity symbologies, which NeoMedia believes to be an
expanding area in the emerging world of electronic commerce.

     NeoMedia's strategy is to increase sales of its proprietary software
transition tools and applications as a percentage of total sales. License fees
for the three months ended March 31, 1997 increased 36.8% from the three months
ended March 31, 1996, and, as a percentage of total sales, increased to 4.8% of
total sales during the three months ended March 31, 1997 from 3.1% during the
three months ended March 31, 1996. NeoMedia has built and intends to continue to
build an infrastructure that assumes this strategy will succeed. Therefore, the
failure to achieve this strategy could have a material adverse effect on
NeoMedia's business, financial condition and results of operations.

     A substantial portion of NeoMedia's operating expense is related to
personnel, facilities and amortization. Such operating expenses cannot be
adjusted quickly and are therefore fixed in the short term. NeoMedia's expense
levels for these items are based, in significant part, on NeoMedia's
expectations of future sales. If actual sales levels are below management's
expectations, results of operations are likely to be adversely affected by a
similar amount because a relatively small amount of NeoMedia's expense varies
with its sales in the short term.

     In general, NeoMedia's sales are difficult to forecast as the market for
client/server equipment and software is rapidly evolving and NeoMedia's sales
cycle, from the initial proposal to the customer through the purchase of product
and related services, varies substantially from customer to customer and from
product to product. Also, NeoMedia's operating results may fluctuate
significantly from period to period as a result of a variety of factors,
including changes in the composition of NeoMedia's revenue, the timing of new
product introductions and NeoMedia's expenditures on research and development
and promotional programs, as well as the general state of the national and
global economies. Demand for the products sold by NeoMedia may increase or
decrease as a result of a number of factors, such as client preferences and
product announcements by competitors.

     In the past, NeoMedia has realized a substantial portion of its sales in
the last quarter of the year. It is not uncommon for equipment resellers and
software companies to experience strong fourth quarters followed by weak first
quarters. Such seasonality arises from many factors, such as the timing of
product introductions and business cycles of NeoMedia's customers, and could be
material to NeoMedia's interim results. Such cycles vary from customer to
customer, and the overall impact on NeoMedia's results of operations cannot be
predicted. There can be no assurances that NeoMedia will not display this
pattern in future years. In addition, its business and results of operations
could be affected by the overall seasonality of the industry.

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

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AS COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 1996

     GENERAL. Net loss for the three months ended March 31, 1997 was $1.0
million as compared to net income of $41,000 during the three months ended March
31, 1996. During the first quarter of 1996, NeoMedia decided to invest in the
infra-structure needed to manage current and expected future growth. During the
three months ended September 30, 1996 and December 31, 1996, net losses were
$1.6 million and $1.2 million, respectively. These losses during each of the
past three quarters resulted primarily from increased general, administration,
sales and

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marketing expenses associated with NeoMedia investing in expanding its
infra-structure by hiring management, sales and other personnel to develop,
market and sell new products. Using a portion of the proceeds from the Initial
Public Offering ("IPO"), NeoMedia intends to continue to expand its development,
sales and marketing positions to increase revenue in each of its three business
units: Document Systems Solutions Unit, Systems Transition Solutions Unit and
Intelligent Document Solutions Unit. In addition, gross margin decreased
$352,000 primarily due to NeoMedia no longer reselling PRS software which
generated $295,000 of gross margin during 1996.

     LICENSE FEES. NeoMedia's license fees are derived from licensing NeoMedia's
internally developed and purchased software tools. During 1994, NeoMedia
purchased the intellectual property rights to certain software tools which
support migrations from proprietary computer environments to multiple varieties
of UNIX systems. Additionally, NeoMedia developed its own proprietary software
products for high speed printing and migration services. License fees for the
three months ended March 31, 1997 were $218,000 compared to $159,000 for the
three months ended March 31, 1996, an increase of $59,000 or 36.8%. This
increase resulted primarily from the increase in sales of existing software
transition tools. Cost of sales for license fees consisted primarily of fees
paid to an independent software developer. Cost of sales as a percentage of
related sales was 28.4% during 1997 compared to 30.2% during 1996.

     SOFTWARE RESALES. NeoMedia's software resales are derived from NeoMedia's
strategic alliances with independent manufacturers of client/server computer
equipment and independent developers of software applications and tools.
Software resales decreased by $1.2 million, or 95.0%, from $1.3 million for the
three months ended March 31, 1996 to $64,000 for the three months ended March
31, 1997. During 1996, there were $591,000 of PRS software sales which NeoMedia
is no longer reselling and $582,000 of resales of software for micro-mainframe
computers, while there were no resales of this product in 1997. Cost of sales as
a percentage of related sales was 76.7% during 1997 compared to 65.7% during
1996.

     EQUIPMENT RESALES. NeoMedia's equipment resales are also derived from
NeoMedia's strategic alliances with independent manufacturers of client/server
computer equipment, including IBM Corporation and Sun Microsystems Computer
Company. These alliances provide marketing support and sales leads in the
client/server marketplace. Equipment resales increased by $795,000, or 27.4%, to
$3.7 million for the three months ended March 31, 1997, as compared to $2.9
million for the three months ended March 31, 1996 primarily as the result of
increased sales to NeoMedia's largest customer. See Note 2 of Unaudited Notes to
Consolidated Financial Statements--Concentrations of Credit Risk. For the three
months ended March 31, 1997 as compared to the same period in the prior year,
equipment resales related to Sun Microsystems workstations and servers increased
$2.1 million. These increases were partially offset with no sales in 1997 of
hardware for micro-mainframe computers which totaled $729,000 in 1996. In
addition, there was a $500,000 one-time shipment of desktop printers to a major
customer in 1996. Cost of sales as a percentage of related sales was 87.0%
during 1997, compared to 88.0% during 1996.

     SERVICE FEES. NeoMedia's service fees consisting of sales from consulting,
education and postcontract support services decreased by $169,000, or 22.7%, to
$578,000 for the three months ended March 31, 1997, compared to $747,000 for the
three months ended March 31, 1996. During 1996, there were $161,000 of sales of
PACEport services and none during 1997. Cost of services as a percentage of
related sales increased to 68.0% during 1997 from 62.1% during 1996 primarily
due to an increase in compensation expenses.

     AMORTIZATION OF SOFTWARE. Amortization of software for the three months
ended March 31, 1997, as compared to the three months ended March 31, 1996,
increased $5,000 as a result of the amortization of software costs capitalized
during 1996, and, as a percentage of total net sales, increased to 3.2% during
1997 from 2.7% during 1996 due to the decrease in net sales.

     GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$372,000, or 96.8%, to $756,000 for the three months ended March 31, 1997, from
$384,000 for the three months ended March 31, 1996. This

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<PAGE>

increase was due mainly to an increase in the rent expenses, professional fees
and compensation as NeoMedia builds an administration infra-structure to manage
current and expected future growth.

     SALES AND MARKETING. A portion of the compensation to the sales and
marketing staff constitutes salary and is fixed in nature, while the rest of
this compensation is directly related to sales volume. Sales and marketing
expenses have increased $332,000, or 70.8%, to $801,000 for the three months
ended March 31, 1997 from $469,000 for the three months ended March 31, 1996, as
a result primarily of hiring managers to direct current and expected future
growth. NeoMedia anticipates that sales and marketing costs will increase as
NeoMedia grows.

     RESEARCH AND DEVELOPMENT. During the three months ended March 31, 1997,
NeoMedia charged to expense 3.9% of total net sales in research and development
expenses as compared to 1.3% during the three months ended March 31, 1996. This
percentage increase was due to an increase in the number of software developers
employed by NeoMedia. NeoMedia currently intends to continue to make significant
investments in research and development.

     INTEREST EXPENSE, NET. Interest expense consists primarily of interest paid
to creditors as part of financed purchases, capitalized leases and NeoMedia's
asset-based collateralized line of credit. Interest expense decreased by
$93,000, or 88.9%, to $11,000 for the three months ended March 31, 1997 from
$104,000 for the three months ended March 31, 1996, due to the repayment of debt
in 1996's fourth quarter and interest income earned on the proceeds from the
IPO.

     BENEFIT FOR INCOME TAXES. The benefits for income taxes recorded during the
three months ended March 31, 1997 and 1996 represented the recovery of income
taxes paid in prior years from the carryback of operating losses.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, NeoMedia has financed its operation through shareholder
loans and borrowings from a commercial bank and under a line of credit. In
December, 1995 and in January, 1996, in several series of transactions between
affiliates, funds were loaned and borrowed pursuant to promissory notes bearing
interest at the rate of 8% per annum. In December, 1996 and February, 1997,
NeoMedia repaid in full all of these related party loans. Also, in January,
1996, NeoMedia borrowed $250,000 from a commercial bank bearing interest at the
bank's prime rate plus 0.5%.

     During 1995, NeoMedia had available a line of credit with a commercial bank
that permitted borrowings up to the lesser of $2.0 million or 80% of eligible
accounts receivable, as defined in the financing agreement. The line of credit
had an interest rate equal to the bank's prime rate plus 1.0%. The line of
credit was collateralized by accounts receivable and inventories, and required
NeoMedia to maintain certain financial ratios. NeoMedia used this facility for
funding its operations during 1995 and through the closing of the IPO shortly
after which NeoMedia repaid in full the line of credit with its commercial bank.

     In November, 1996, NeoMedia completed its IPO receiving net proceeds of
$5.7 million. In January, 1997, NeoMedia closed the IPO's over-allotment and
received net proceeds of $1.3 million. As of March 31, 1997, NeoMedia's working
capital was $4.6 million which represented a $412,000 decrease from December 31,
1996. In February, 1997, NeoMedia began discussions with a number of financial
institutions for a line of credit to replace the bank line repaid in November,
1996, and enhance the line of credit with a commercial finance company.

     Net cash provided by (used in) operating activities for the three months
ended March 31, 1997 and 1996, was $(1.3) million and $111,000, respectively.
During 1997, trade accounts receivable decreased $169,000, while accounts
payable and accrued expenses decreased $1.2 million. During 1996, trade accounts
receivables increased $829,000, while trade payables decreased $443,000 and 
other liabilities increased $1.1 million.

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<PAGE>

     NeoMedia's net cash flow used in investing activities for the three months
ended March 31, 1997 and 1996, was $359,000 and $142,000, respectively. Net cash
provided by financing activities for the three months ended March 31, 1997 and
1996, was $1.3 million and $227,000, respectively. During January 1997, NeoMedia
sold the over-allotment of its Initial Public Offering receiving net cash
proceeds of $1.3 million.

PART II -- OTHER INFORMATION

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     The exhibits required by Item 601 of Regulation S-B to be filed herewith
are as follows:

     Articles of Incorporation, By-laws and instruments defining the rights of
holders, including indentures have heretofore been filed with the Securities and
Exchange Commission and are hereby incorporated by reference to NeoMedia's Form
10-KSB for the year ended December 31, 1996.

     All material contracts have heretofore been filed with the Securities and
Exchange Commission and are hereby incorporated by reference to NeoMedia's Form
10-KSB for the year ended December 31, 1996.

10.50    Lease By and Between American National Bank and Trust Company of
         Chicago and NeoMedia Technologies, Inc. Dated February 25, 1997

27       Financial Data Schedule (for SEC use only)
--------------------------------------------
(b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the three months ended March 31,
1997.

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<PAGE>

                                   SIGNATURES

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

                                           NEOMEDIA TECHNOLOGIES, INC.
                                                 Registrant

Date MAY 7, 1997                   By:  /s/  CHARLES W. FRITZ
     -----------                      -------------------------------
                                      Charles W. Fritz, President, Chief 
                                      Executive Officer and Chairman of the 
                                      Board

Date MAY 7, 1997                   By:  /s/ CHARLES T. JENSEN
     -----------                      -----------------------------
                                      Charles T. Jensen, Vice President, Chief
                                      Financial Officer, Treasurer and Director

                                       12

<PAGE>

                                  EXHIBIT INDEX

SEQUENTIAL    EXHIBIT
PAGE NUMBER   NUMBER   DOCUMENT
-----------   ------   --------

14            10.50    Lease By and Between American National Bank Trust
                       Company of Chicago and NeoMedia Technologies, Inc. Dated 
                       February 25, 1997

51            27.1     Article 5 Financial Data Schedule for March 31, 1997


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