----

----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-K**

**x**
**      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**For      the Fiscal Year Ended December 31, 2006**

**OR**

**      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**For      the transition period ____________ to__________**

**Commission      File Number 0-21743**

**NEOMEDIA      TECHNOLOGIES, INC. **

**(Exact      Name of Issuer 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)**
** **
**239-337-3434**

**Securities      Registered Under Section 12(b) of the Exchange Act:**

|                                              | **Name                  of each exchange**           |
|---------------------------------------------------|------------------------------------------------------|
| **Title                  of Each Class**          | **on                  which registered**             |
| **Common                  Stock, par value $.01** | **Over-the-Counter                  Bulletin Board** |

**Securities      Registered Under Section 12(g) of the Exchange Act: NONE**

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----

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**PART      I **

**CAUTIONARY      NOTE REGARDING FORWARD-LOOKING STATEMENTS**

**ITEM      1.  BUSINESS**

**General**

| ·   | NeoMedia                Mobile (NMM) - encompassing NeoMedia’s physical-world-to-internet and                mobile marketing technologies qode®, Gavitec, 12Snap, Sponge and                Mobot |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                Telecom Services (NTS) - encompassing the billing, clearinghouse                and                information management services of recently-acquired BSD Software,                Inc. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                Micro Paint Repair (NMPR) - encompassing the micro paint and auto                aftermarket accessories manufactured and distributed by                NeoMedia |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Company      History**

**Recent      Developments**

**Agreement      to Sell 12Snap - March 2007**

| ·   | $1,100,000                will be paid in cash at Closing, and $500,000 will be placed into                escrow                and released to NeoMedia 90 days after Closing, assuming no warranty                claims; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Buyer                will forgive purchase price obligation in the amount of $880,000,                such                obligation resulting from the sale and purchase agreement between                NeoMedia                and the former shareholders of                12Snap |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 12Snap                management will waive their purchase price obligations in the amount                of                $880,000, and return to NeoMedia 2,525,818 shares of NeoMedia common                stock                issued previously; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Buyer                will return to NeoMedia 2,525,818 NeoMedia shares issued                previously; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                will retain a 10% ownership of 12Snap, subject to an option agreement                pursuant to which NeoMedia has the right to sell and Buyer has the                right                to acquire the remaining 10% stake held by NeoMedia for a purchase                price                of $750,000 after December 31; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 12snap                and NeoMedia will execute a cooperation agreement pursuant to which                12snap                will remain NeoMedia preferred partner and enjoy most favored prices,                and                12snap will perform certain research and development functions for                NeoMedia; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                transaction is subject to completion of a material definitive                agreement |
|--------------------|-----------------------------------------------------------------------------------------------------------|

----

**$7.5      Million Convertible Debenture - March 2007**

**Agreement      with Certain Former Shareholders of 12Snap - March 2007**

**Agreement      with Former Shareholders of Gavitec**
**      - January 2007**

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**$2.5      Million Convertible Debenture - December 2006**

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**Sale      of Investment in iPoint - December 2006**

**Senior      Management and Board Changes - December 2006**

**Divestiture      of Mobot, Inc. - December 2006**

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| ­ ·  | NeoMedia                transferred 100% of its ownership interest in Mobot to FMS, and in                return                received 16,000 shares (18% ownership) of FMS, which will operate                the                Mobot business; |
|--------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | All                obligations under the original merger agreement, including the purchase                price guarantee obligation, were terminated; |
|--------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | NeoMedia                contributed $67,000 cash to FMS at closing, and an additional $200,000                on                December 27, 2006; |
|--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | NeoMedia                received 16,931 preference shares in FMS that can be redeemed to                reacquire                the 16,931,493 original consideration shares originally issued to                acquire                Mobot. Each preference share can be redeemed for 1,000 shares of                the                NeoMedia common stock at NeoMedia’s discretion within 15 months of the                closing of this transaction, for cash in the amount of 40% of the                then-current market value of the underlying NeoMedia shares. After                15                months, the preference shares can be redeemed upon a liquidation                event of                FMS or NeoMedia, for either 1,000 shares of NeoMedia common stock                each, or                for the current cash equivalent of the shares, at FMS’                discretion; |
|--------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | NeoMedia                entered into a license agreement with Mobot, pursuant to which NeoMedia                received a license to use the Mobot image recognition service for                barcode-related applications. The license is exclusive in the Americas,                Europe and Australia, restricted in Japan, Korea, and Singapore,                and                non-exclusive in other areas of the world. The exclusivity is subject                to                NeoMedia meeting certain minimum transaction volume requirements                or making                minimum cash payments; |
|--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | NeoMedia                entered into a mutual release with each of the former Mobot shareholders                in which the parties released each other from the terms of the original                Mobot merger agreement, and the former Mobot shareholders consented                to the                release of the pending legal action against NeoMedia;                and |
|--------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | NeoMedia                has no involvement in the ongoing operations of FMS, does not have                board                representation of FMS, and pursuant to the sale agreement must vote                its                shares at the direction of the FMS                board |
|--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Divestiture      of Sponge Ltd. - November 2006**

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**$5      Million Convertible Debenture - August 2006**

----

| ·   | The                full fair value of the secured convertible debenture is now callable                in                the amount of $5,000,000; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                warrants can be exercised on a cashless basis as described                above; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                is responsible for liquidated damages; NeoMedia has accrued $393,000                as                the expected fair value of liquidated damages relating to the secured                convertible debenture as of December 31, 2006; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                requirement for the Purchaser to maintain an ownership interest in                NeoMedia of less than 5% is                terminated; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

**HipCricket,      Inc. - August 2006**

----

**Series      C Convertible Preferred Stock**

| ·   | The                full fair value of the Series C convertible preferred stock is now                callable in the amount of                $21,657,000; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                warrants can be exercised on a cashless basis as described                above; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | The                requirement for the Purchasers to maintain an ownership interest                in                NeoMedia of less than 5% is waived; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                is responsible for liquidated damages as described                above. |
|--------------------|--------------------------------------------------------------------------------------------------|

----

**Industry      Overview**

**Strategy**

----

**Products/Services**

| ·   | **Word                Registration and                Activation** |
|--------------------|--------------------------------------------------------------------|

|   |   |
|--------|--------|

| 1.   | Registration                of brand names and taglines in the qode® WordRegistryTM.                The WordRegistry is the official repository for qode®                keywords; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| 2.   | Bidding                for non-trademarked generic keywords (e.g., cola, burger, car);                and |
|----------------|-----------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| 3.   | Activation                of brand names, taglines and non-trademarked keywords by linking                them to                mobile web content using the Link Manager                Software. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·**  ** | **New                Code Activation.**NeoMedia                can create custom smartcodes to print on product packaging or literature,                a subway poster, a direct mailer or other marketing collateral. Consumers                with a camera phone then click on the code to link directly to Web                content                designated by the product’s                manufacturer. |
|------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | **Existing                Code Activation.**As                with new smartcodes, qode® can link already-existing product codes, such                as UPC, EAN, JAN, and ISBN codes, to tailored Web                content. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·**  ** | **Link                Manager Software.**Software                for a PC that allows a product owner to link keywords and codes to                a                specific URL; |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·**  ** | **Handset                Software.**Device                software required for a mobile device customers to read activated                codes                and keywords; and |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | **Enterprise                Reporting.**Allows                product owner of keywords or codes to track the number of consumer“hits”                by code, date and time. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | **Click                Management Services** |
|--------------------|----------------------------------------------|

|   |   |
|--------|--------|

| ·   | **Link                Manager Service.**                Management of the linking of all words and codes on behalf of a product                owner; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·**  ** | **Code                Verification.**Testing                of each code to ensure that it is printed properly and that it links                to                the correct URL. |
|------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·**  ** | **Web                Content Creation Services.**Assistance                in creating Web content for mobile devices in XHTML, WAP and other                mobile                formats. |
|------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·**  ** | **Mobile                Marketing Campaign Services.**Assistance                in creating mobile advertising campaigns using products with                qode®                technology. |
|------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·**  ** | **Customized                Reporting.**                Customized reporting and data mining that allows product owners to                receive                additional data about their marketing                campaigns. |
|------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | **Server                Software.**For                companies managing a large number of codes or keywords, server software                is                available that allows clients to store the links within their                organization’s network. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Strategic      Relationships**

*®,*
** **

----

**Sales      and Marketing**

----

| ·   | **Brand                Marketers and Marketing Services Agencies**.                NeoMedia markets its robust suite of end-to-end (and everything in                between) mobile marketing products and services both to advertising                agencies, who maintain the primary relationships with major brands                while                the NeoMedia business units creates and manages the wireless marketing                campaign portion of the relationship, and directly to brand/product                marketers where there is a higher level of wireless experience or                expertise. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Media**.                NeoMedia works with publishers to “inter-activate” their content. By                placing a barcode directly on print media or even on a television                ad,                media providers can add a new dimension of interactivity and marketing                effectiveness to their media. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Network                Operators/Carriers & Handset Manufacturers**.                There are a range of applications and platforms that are suited directly                for network operators or carriers and the handset manufacturers who                supply                them; many applications are custom developed at the request of these                operators and manufacturers. One of NeoMedia’s primary goals is to have                its qode® handset software embedded on camera phones during the                manufacturing process, bypassing the need for the consumer to download. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Retailers**.                In addition to mobile marketing campaigns carried out on behalf of                major                retailers in a variety of markets by the NeoMedia Wireless companies,                Gavitec’s EXIO and MD20 products represent the next evolution in                point-of-sale equipment offering m-coupons and m-commerce. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Enterprise                Clients, Government & Education**.                The robust and innovative platforms on which many of the products                offered                by NeoMedia run, can be customized to work in numerous other environments                and in many industries including finance, security, tracking and                labeling. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Customers      and Clients**

**Competition**

----

**Product      Liability **

**Government      Regulation**

**Employees**

----

**ITEM      1A. RISK FACTORS**

**Risks      Related to NeoMedia’s Business**

**NeoMedia      Has Historically Lost Money And Losses May Continue**

**NeoMedia’s      Independent Registered Public Accounting Firm Have Added Going Concern Language      To Their Report On NeoMedia’s Consolidated Financial Statements, Which Means      That NeoMedia May Not Be Able To Continue Operations **

**NeoMedia      Will Need to Raise Additional Funds to Continue Its      Operations**

----

**NeoMedia      Has**
**Material      Weaknesses in Its Internal Control over Financial Reporting that May Prevent      The      Company from Being Able to Accurately Report Its Financial Results or Prevent      Fraud, which Could Harm Its Business and Operating Results.**

**       **

**NeoMedia      Has Guaranteed The Value Of Stock Issued In Connection With Recent Mergers      Through The Registration Of The Shares, Which Could Result In A Material Cash      Liability**

----

**All      Of The Company’s Assets Are Pledged To Secure Certain Debt Obligations, Which      The Company Could Fail To Repay **

----

**NeoMedia      Has Contractual Commitments To Pay Silent Partners**

**There      Is Limited Information Upon Which Investors Can Evaluate NeoMedia’s Business      Because The Physical-World-To-Internet Market Has Existed For Only A Short      Period Of Time**

| ·   | maintain                and increase its client base; |
|--------------------|-------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | implement                and successfully execute its business and marketing                strategy; |
|--------------------|-------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | continue                to develop and upgrade its                products; |
|--------------------|-----------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | continually                update and improve service offerings and                features; |
|--------------------|----------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | respond                to industry and competitive developments;                and |
|--------------------|-------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | attract,                retain, and motivate qualified                personnel. |
|--------------------|----------------------------------------------------------------------------------|

**NeoMedia’s      Future Success Depends On The Timely Introduction Of New Products And The      Acceptance Of These New Products In The Marketplace.**

----

**NeoMedia’s      Common Stock Is Deemed To Be “Penny Stock,” Which May Make It More Difficult For      Investors To Sell Their Shares Due To Suitability      Requirements**

| ·   | with                a price of less than $5.00 per                share; |
|--------------------|--------------------------------------------------------------------------|

| ·   | that                are not traded on a “recognized” national exchange; |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | whose                prices are not quoted on the NASDAQ automated quotation system (NASDAQ                listed stock must still have a price of not less than $5.00 per share);                or |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | in                issuers with net tangible assets less than $2 million (if the issuer                has                been in continuous operation for at least three years) or $10 million                (if in continuous operation for less than three years), or with average                revenues of less than $6 million for the last three                years. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Existing      Shareholders Will Experience Significant Dilution When Certain Investors      Convert Their Preferred Stock to Common Stock, Convert Outstanding Convertible      Debentures, Or When the Investors Exercise Their Warrants and Receive Common      Stock Shares Under The Investment Agreement With The      Investors**

**Due      To The Accounting Treatment Of Certain Convertible Preferred Stock And      Convertible Debenture Instruments Issued By NeoMedia, A Fluctuation In      NeoMedia’s Stock Price Could Have A Material **
**Impact      On NeoMedia’s Results Of Operations**

----

**NeoMedia      Is Uncertain Of The Success Of Its NeoMedia Mobile Business Unit And The Failure      Of This Unit Would Negatively Affect The Price Of NeoMedia’s      Stock**

| ·   | its                NeoMedia Mobile business unit will ever achieve                profitability; |
|--------------------|--------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | its                current product offerings will not be adversely affected by the focusing                of its resources on the physical-world-to-Internet space;                or |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | the                products NeoMedia develops will obtain market                acceptance. |
|--------------------|---------------------------------------------------------------------------------------------|

**A      Large Percentage Of NeoMedia’s Assets Are Intangible Assets, Which Will Have      Little Or No Value If NeoMedia’s Operations Are      Unsuccessful**
** **

**Certain      Of NeoMedia’s Emerging Products And Services Have Limited History And May Not      Result In Success**

----

**NeoMedia’s      Internally Developed Systems Are Inefficient And May Put NeoMedia At A      Competitive Disadvantage**

**NeoMedia      Could Fail To Attract Or Retain Key Personnel**

**NeoMedia      Depends Upon Its Senior Management And Their Loss Or Unavailability Could Put      NeoMedia At A Competitive Disadvantage**

**NeoMedia      May Be Unsuccessful In Integrating Its **
**Gavitec      Acquisition With Its Current Business**

----

**NeoMedia      May Be Unable To Protect Its Intellectual Property Rights And May Be Liable      For      Infringing The Intellectual Property Rights Of Others **

**NeoMedia      Is Exposed To Product Liability Claims And An Uninsured Claim Could Have A      Material Adverse Effect On NeoMedia’s Business, Prospects, Financial Condition,      And Results Of Operations, As Well As The Value Of NeoMedia’s      Stock**

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| ·   | NeoMedia                has contractually limited its liability for such claims adequately                or at                all; or |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | NeoMedia                would have sufficient resources to satisfy any liability resulting                from                any such claim. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

**NeoMedia      Will Not Pay Cash Dividends And Investors May Have To Sell Their Shares In      Order      To Realize Their Investment**

**Some      Provisions Of NeoMedia’s Certificate of Incorporation And bylaws May Deter      Takeover Attempts, Which May Limit The Opportunity Of NeoMedia’s Stockholders To      Sell Their Shares At A Premium To The Then-Current Market      Price**

----

----

**Risks      Relating To NeoMedia’s Industry**

**The      Security Of The Internet Poses Risks To The Success Of NeoMedia’s Entire      Business**

**NeoMedia      Will Only Be Able To Execute Its Physical-World-To-Internet Business Plan If      Internet Usage and Electronic Commerce Continue To Grow**

----

**NeoMedia      May Not Be Able To Adapt As The Internet, Physical-World-To-Internet, And      Customer Demands Continue To Evolve**

| ·   | rapid                technological change; |
|--------------------|--------------------------------------------|

|   |   |
|--------|--------|

| ·   | changes                in user and customer requirements and                preferences; |
|--------------------|------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | frequent                new product and service introductions embodying new technologies;                and |
|--------------------|--------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | the                emergence of new industry standards and practices that could render                proprietary technology and hardware and software infrastructure                obsolete. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | enhance                and improve the responsiveness and functionality of its products                and                services; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | license                or develop technologies useful in its business on a timely                basis; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | enhance                its existing services, and develop new services and technologies                that                address the increasingly sophisticated and varied needs of NeoMedia’s                prospective or current customers;                and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | respond                to technological advances and emerging industry standards and practices                on                a cost-effective and timely basis. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**NeoMedia      May Not Be Able To Compete Effectively In Markets Where Its Competitors Have      More Resources**

----

**In      The Future There Could Be Government Regulations And Legal Uncertainties Which      Could Harm NeoMedia’s Business**

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**ITEM      1B. UNRESOLVED STAFF COMMENTS.**

**ITEM      2.**
*** ***
**PROPERTIES**

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**ITEM      3.**
* *
**LEGAL      PROCEEDINGS**

**Scanbuy,      Inc.**

**ITEM      4.   **
**SUBMISSION      OF MATTERS TO A VOTE OF SECURITY HOLDERS**

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**PART      II**

**ITEM      5. **
**MARKET      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES      OF EQUITY SECURITIES**

**Market      Information**

|                          |   | **(U.S.                dollars)** |     |
|-------------------------------|--------|-----------------------------------|----------|
|                          |   |                              |     |   |   |
| **2005**                      |   | **HIGH**                          |     | **LOW** |   |
| First                Quarter  |   | $                                 | 0.29     |   | $ | 0.22 |   |
| Second                Quarter |   | $                                 | 0.72     |   | $ | 0.19 |   |
| Third                Quarter  |   | $                                 | 0.51     |   | $ | 0.32 |   |
| Fourth                Quarter |   | $                                 | 0.45     |   | $ | 0.28 |   |
|                          |   |                              |     |   |   |   |   |
| **2006**                      |   |                              | **HIGH** |   |   | **LOW** |   |
| First                Quarter  |   | $                                 | 0.42     |   | $ | 0.29 |   |
| Second                Quarter |   | $                                 | 0.32     |   | $ | 0.20 |   |
| Third                Quarter  |   | $                                 | 0.23     |   | $ | 0.11 |   |
| Fourth                Quarter |   | $                                 | 0.12     |   | $ | 0.05 |   |

**Holders       **

**Dividends**

----

**Securities      authorized for issuance under equity compensation plans **

|                                                                      |   |                                 |            |                                 |   | **Number                of**            |   |
|---------------------------------------------------------------------------|--------|--------------------------------------|-----------------|--------------------------------------|--------|-----------------------------------------|--------|
|                                                                      |   |                                 |            |                                 |   | **securities**                          |   |
|                                                                      |   | **Number                of**         |            |                                 |   | **remaining                available**  |   |
|                                                                      |   | **securities                to be**  |            |                                 |   | **for                future issuance**  |   |
|                                                                      |   | **issued                upon**       |            | **Weighted-average**                 |   | **under                equity**         |   |
|                                                                      |   | **exercise                of**       |            | **exercise                price of** |   | **compensation                plans**   |   |
|                                                                      |   | **outstanding**                      |            | **outstanding**                      |   | **(excluding**                          |   |
|                                                                      |   | **options,                warrants** |            | **options,                warrants** |   | **securities                reflected** |   |
|                                                                      |   | **and                rights**        |            | **and                rights**        |   | **in                column (a))**       |   |
| **Plan                Category**                                          |   | **(a)**                              |            | **(b)**                              |   | **(c)**                                 |   |
| Equity                compensation plans approved by security holders     |   |                                 | 105,822,455     |                                 | $      | 0.20                                    |   |   | 79,567,544 |   |
|                                                                      |   |                                 |            |                                 |   |                                    |   |   |   |   |
| Equity                compensation plans not approved by security holders |   |                                 | —         |                                 |   | —                                 |   |   | — |   |
|                                                                      |   |                                 |            |                                 |   |                                    |   |   |   |   |
| **Total**                                                                 |   |                                 | **105,822,455** |                                 | **$**  | **0.20**                                |   |   | **79,567,544** |   |

**Performance      Graph**

----

|                                    |   | **As                  of December 31,** |   |
|-----------------------------------------|--------|-----------------------------------------|--------|
|                                    |   | **2001**                                |   | **2002** |   | **2003** |   | **2004** |   | **2005** |   | **2006** |   |
| NeoMedia                                |   | $                                       | 100.00 |   | $ | 7.86 |   | $ | 97.86 |   | $ | 189.29 |   | $ | 217.14 |   | $ | 37.86 |   |
| Russell                  Microcap Index |   | $                                       | 100.00 |   | $ | 83.90 |   | $ | 139.57 |   | $ | 159.31 |   | $ | 163.40 |   | $ | 190.43 |   |
| Axcess                  International   |   | $                                       | 100.00 |   | $ | 11.87 |   | $ | 51.37 |   | $ | 39.50 |   | $ | 18.72 |   | $ | 26.71 |   |
| Critical                  Path Inc.     |   | $                                       | 100.00 |   | $ | 18.61 |   | $ | 12.14 |   | $ | 13.41 |   | $ | 2.46 |   | $ | 1.00 |   |

**Recent      Issuances of Unregistered Securities **

----

----

**ITEM      6. **
**SELECTED      FINANCIAL DATA**

|                                                         |   | **Years                Ended December 31,**      |     |
|--------------------------------------------------------------|--------|--------------------------------------------------|----------|
|                                                         |   | **2006(a)**                                      |     | **2005(b)** |   | **2004(b)** |   | **2003** |   | **2002** |   |
|                                                         |   | (in                thousands, except share data) |     |
|                                                         |   |                                             |     | (Reclassified)*  |   | (Reclassified)*  |   |   |   |   |   |
| Total                net sales                               |   | $                                                | 10,309   |   | $ | 877 |   | $ | 973 |   | $ | 2,400 |   | $ | 9,399 |   |
| Net                loss from continuing operations           |   |                                             | ($52,252 | ) |   | ($7,146 | ) |   | ($6,272 | ) |   | ($5,382 | ) |   | ($7,421 | ) |
| Net                loss per share from continuing operations |   |                                             | ($0.09   | ) |   | ($0.02 | ) |   | ($0.02 | ) |   | ($0.04 | ) |   | ($0.26 | ) |
|                                                         |   |                                             |          |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Total                assets                                  |   | $                                                | 38,125   |   | $ | 12,411 |   | $ | 10,406 |   | $ | 3,876 |   | $ | 4,323 |   |
| Total                liabilities                             |   | $                                                | 92,659   |   | $ | 8,184 |   | $ | 6,014 |   | $ | 7,079 |   | $ | 10,349 |   |

----

----

**ITEM      7.**
*        *
**MANAGEMENT'S      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS**

**Corporate      Structure**

**The      Core Business**

| ·   | qode®                was featured in an interactive textbook published by Prentice Hall,                in                which students can link to mobile online content through the qode® reader                on their mobile phones. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | ONE                water, the ethical water brand, featured codes on 5 million of its                water                bottles that link to the mobile internet via qode® starting in December,                when the first shipments of more than 5 million bottles bearing qode®. The                bottles were sold at more than 4,000 retail outlets throughout the                United                Kingdom. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | NeoMedia                is partnered with News Group Newspapers, and its market-leading Sunday                newspaper, the News                of the World*®*,                to use** **qode**®**                in                the United Kingdom to bring television clips of English Premier League                soccer to its readers via their mobile                phones |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Gavitec                was contracted by AWK Aussenwerbung GmbH, Germany’s second-largest outdoor                advertising company, to develop a mobile order-management and control                system using Gavitec technology; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | Gavitec                partnered                with solution provider TopSolutions to equip Lusomundo, Portugal's                leading                cinema chain, with admission terminals for mobile tickets that allow                movie-goers to obtain tickets through a cash-free Web-based transaction,                and receive an electronic ticket as an SMS on their mobile                phones; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | Gavitec                ran or participated in other campaigns during 2006 with customers                such as                McDonald’s Portugal, Amnesty International, Malaysian Railways,                World Soccer Games 2006, EMT (Empresa Malagueña de Transportes,                a Spanish public transport provider), Ströer, and Bitburger                beer; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Gavitec                signed an exclusive license agreement with mobile marketing specialist                Omniprime, pursuant to which Omniprime will sell mobile couponing                and                ticketing applications in the Philippines using Gavitec’s                technology. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | NeoMedia                contracted with five large Chinese insurance companies to adapt qode® to                enable millions of policy holders in China to use their cell phones                to                link directly to their insurance company's Mobile Internet                site |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | During                January 2007, NeoMedia signed a performance-based agency agreement                with                NexMobil LLC, pursuant to which NexMobil will sell qode® products and                services in the Middle East, India, Korea, and Pakistan. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Accounting      Treatment of Series C Convertible Preferred Stock and Convertible      Debenture**

**Write-off      of Deferred Financing Costs**

**Impairment      of 12Snap Assets**

----

**Related      Party Transaction**

**Critical      Accounting Policies**

*Cautionary      Advice Regarding Disclosure About Critical Accounting Policies*

*Intangible      Asset Valuation. *

----

| ·­   | A                significant decrease in the market price of the                asset |
|--------------------------|---------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | A                significant adverse change in the extent or manner in which the asset                is                being used, or in its physical                condition |
|--------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | A                significant adverse change in legal factors or in the business climate                that could affect the value of the asset, including an adverse action                or                assessment by a regulator |
|--------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | An                accumulation of costs significantly in excess of the amount originally                expected |
|--------------------------|------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | A                current-period operating or cash flow loss combined with a history                of                operating or cash flow losses or a projection or forecast that                demonstrates continuing losses associated with the use of the                asset |
|--------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | A                current expectation that, more likely than not,** **the                asset will be sold or otherwise disposed of significantly before                the end                of its previously estimated useful life. |
|--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Financial      Instruments and Concentrations of Credit Risk. *

----

*Allowance      for Doubtful Accounts. *

*Inventory.*

*Stock-based      Compensation*
*Share-Based      Payment*

*Estimate      of Litigation-based Liability*

*Revenue      Recognition.*

|  | (1) | Technology                  license fees, including Intellectual                  Property licenses, represent revenue from the licensing of NeoMedia’s                  proprietary  software  tools and  applications                  products.  NeoMedia licenses its  development  tools                  and  application  products pursuant to non-exclusive and                   non-transferable  license agreements.  The basis for license fee                  revenue recognition is substantially governed by American                   Institute  of  Certified  Public  Accountants                   ("AICPA")  Statement of Position 97-2 "Software Revenue                   Recognition" ("SOP 97-2"), as amended, and Statement of Position                  98-9,                  Modification of SOP 97-2, “Software Revenue Recognition, With Respect to                  Certain Transactions.”.  License revenue is recognized if                  persuasive  evidence of an agreement  exists,  delivery has                  occurred, pricing is fixed and determinable, and collectibility                  is                  probable.  The Company defers revenue related to license fees for                  which amounts have been collected but for which revenue has not                  been                  recognized in accordance with the above, and recognizes the revenue                  over                  the appropriate period. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

----

| (2)   | Technology                service and product revenue, which includes sales of software and                technology equipment and service fee is recognized  based on                guidance  provided in  SEC Staff  Accounting                 Bulletin  (“SAB”) No. 104,  "Revenue  Recognition  in                Financial Statements,"  as amended (SAB 104).  Software                and technology equipment resale revenue is                recognized when persuasive evidence of an arrangement exists, the                price to the customer is fixed and determinable, delivery of the                service                has occurred and collectibility is reasonably assured.                Service revenues including maintenance fees for                providing system updates for software products, user documentation                and                technical support are recognized over the life of                the contract. The Company’s subsidiaries Mobot (sold during                2006), and Gavitec follow this policy. The Company defers revenue                related                to technology service and product revenue for which amounts have                been                invoiced and or collected but for which the requisite service has                not been                provided. Revenue is then recognized over the matching service period. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Technology                service also includes mobile marketing services to its customers                which                mobile marketing projects are recognized after the completion of                the                project and accepted by the customer.  All response and messaging                based revenues are recognized at the time such responses are received                and                processed and the Company recognizes its premium messaging revenues                on a                net basis based on guidance provided in Emerging Issues Task Force                Issues                No. 99-19 (EITF 99-19), “Reporting Revenue Gross as Principal or Net as an                Agent” and No. 01-09 (EITF 01-09), “Accounting for Consideration Given by                a Vendor to a Customer.”  Consulting and management revenues and                revenues for periodic services are recognized as services are                performed.  NeoMedia uses  stand-alone  pricing to                determine an element's  vendor  specific  objective                 evidence  (“VSOE”) in order to allocate an arrangement  fee                amongst various pieces of a  multi-element  contract.  The                Company’s subsidiaries 12Snap and Sponge (sold during 2006) follow this                policy. Telecom revenues from NeoMedia's subsidiary BSD are recognized                at                the clearing house for billing to customers on a net basis, based                on                guidance in EITF 99-19. The Company defers revenue related to mobile                marketing service fees for which amounts have been invoiced and/or                collected but for which revenue has not been recognized. Revenue                is then                recognized over the matching service                period. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Revenue                for licensing and exclusivity on NeoMedia’s Micro Paint Repair systems is                recognized equally over the term of the contract, which is currently                one                year.  A portion of the initial fee paid by the customer is allocated                to licensing, training costs and initial products sold with the system.                Revenue is recognized upon completion of training and shipment of                the                products, provided there is VSOE in a multiple element arrangement.                 Ongoing product and service revenue is recognized as products are                shipped                and services performed.  The Company defers revenue related to micro                paint repair licensing for which amounts have been invoiced and/or                collected and revenue is then recognized over the estimated contract                period, which is currently one year. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Income      Tax Valuation Allowance.*

*Foreign      Currency Translation.*
** **

**Other      Financial Information**

| Valuation                Allowance Accounts:                    |   |   |   |   |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|
| (thousands)                                                     |   | 2006   |   | 2005   |   |
| Reserve                for bad debts                            |   |   | 146    |   |   | 14 |   |
| Reserve                for inventory shrinkage and obsolescence |   |   | 53     |   |   | 0 |   |
| Total                valuation reserves                         |   |   | 199    |   |   | 14 |   |

----

**Proposed        Dispositions of 12Snap and NeoMedia Telecom Services        (“NTS”)**

|                                                                          |   | **Year                  Ended December 31, 2006** |        |
|-------------------------------------------------------------------------------|--------|---------------------------------------------------|-------------|
|                                                                          |   | **NTS**                                           |        | **12                  Snap** |   | **Total** |   |
| Net                  sales                                                    |   | $                                                 | 1,371       |   | $ | 7,333 |   | $ |  8,704 |   |
| Cost                  of sales                                                |   |                                              | ---         |   |   | 2,054 |   |   | 2,054 |   |
| Gross                  profit                                                 |   |                                              | 1,371       |   |   | 5,279 |   |   | 6,650 |   |
|                                                                          |   |                                              |        |   |   |   |   |   |   |   |
| Sales                  and marketing expenses                                 |   |                                              | 400         |   |   | 4,053 |   |   | 4,453 |   |
| General                  and administrative expenses                          |   |                                              | 1,166       |   |   | 1,692 |   |   | 2,858 |   |
| Research                  and development costs                               |   |                                              | ---         |   |   | 1,258 |   |   | 1,258 |   |
| Amortization                  of intangibles                                  |   |                                              | 806         |   |   | 732 |   |   | 1,538 |   |
| Impairment                  charge                                            |   |                                              | ---         |   |   | 18,327 |   |   | 18,327 |   |
| Income/(Loss)                  from operations of business available for sale |   |                                              | **($1,001** | **)** |   | **($20,783** | **)** |   | **($21,784** | **)** |

|                                                                      |   | **December                  31, 2006** |      |
|---------------------------------------------------------------------------|--------|----------------------------------------|-----------|
|                                                                      |   | **NTS**                                |      | **12                  Snap** |   | **Total** |   |
| **ASSETS**                                                                |   |                                   |      |   |   |   |   |
| Current                  assets:                                          |   |                                   |           |   |   |  |   |   |  |   |
| Cash                  and cash equivalents                                |   | $                                      | 72        |   | $ | 721 |   | $ | 793 |   |
| Trade                  accounts receivable, net                           |   |                                   | 1,577     |   |   | 1,842 |   |   | 3,419 |   |
| Inventories,                  net                                         |   |                                   | ---       |   |   | --- |   |   | --- |   |
| Prepaid                  expenses and other current assets                |   |                                   | 12        |   |   | 407 |   |   | 419 |   |
| Total                  current assets                                     |   |                                   | 1,661     |   |   | 2,970 |   |   | 4,631 |   |
|                                                                      |   |                                   |           |   |   |  |   |   |  |   |
| Leasehold                  improvements & property and equipment, net |   |                                   | 48        |   |   | 200 |   |   | 248 |   |
| Goodwill                                                                  |   |                                   | 4,402     |   |   | --- |   |   | 4,402 |   |
| Other                  intangible assets, net                             |   |                                   | 1,192     |   |   | 5,815 |   |   | 7,007 |   |
| Other                  long-term assets                                   |   |                                   | ---       |   |   | --- |   |   | --- |   |
| **Total                  assets**                                         |   | **$**                                  | **7,303** |   | **$** | **8,985** |   | **$** | **16,288** |   |
|                                                                      |   |                                   |           |   |   |  |   |   |  |   |
| **LIABILITIES**                                                           |   |                                   |      |   |   |   |   |   |   |   |
| Current                  liabilities:                                     |   |                                   |           |   |   |  |   |   |  |   |
| Accounts                  payable                                         |   | $                                      | 1,854     |   | $ | 640 |   | $ | 2,494 |   |
| Taxes                  payable                                            |   |                                   | 1,037     |   |   | --- |   |   | 1,037 |   |
| Accrued                  expenses                                         |   |                                   | 6         |   |   | 384 |   |   | 390 |   |
| Deferred                  revenues and other                              |   |                                   | 73        |   |   | 4,097 |   |   | 4,170 |   |
| **Total                  liabilities**                                    |   | **$**                                  | **2,970** |   | **$** | **5,121** |   | **$** | **8,091** |   |

----

|                                                                                                                    |   |                             |         |    |   |                         |   | **Pro-forma**                    |       |
|-------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------------|---------|--------|------------------------------|--------|----------------------------------|------------|
|                                                                                                                    |   |                             |         |    |   |                         |   | **NeoMedia**                     |       |
|                                                                                                                    |   | **NeoMedia**                     |         |    |   |                         |   | **without                  NTS** |       |
|                                                                                                                    |   | **as                  reported** |         | **NTS** |   | **12                  Snap** |   | **and                  12 Snap** |       |
| Net                  sales                                                                                              |   | $                                | 10,309       |    |   | ($1,371                      | )      |                             | ($7,333    | ) | $ | 1,605 |   |
| Cost                  of sales                                                                                          |   |                             |  3,863  |    |   | ---                          |   |                             | (2,054     | ) |   | 1,809 |   |
| Gross                  profit                                                                                           |   |                             | 6,446        |    |   | (1,371                       | )      |                             | (5,279     | ) |   | (204 | ) |
|                                                                                                                    |   |                             |         |    |   |                         |   |                             |       |   |   |   |   |
| Sales                  and marketing expenses                                                                           |   |                             | 10,239       |    |   | (400                         | )      |                             | (4,053     | ) |   | 5,786 |   |
| General                  and administrative expenses                                                                    |   |                             | 12,125       |    |   | (1,972                       | )      |                             | (2,424     | ) |   | 7,729 |   |
| Research                  and development costs                                                                         |   |                             | 3,522        |    |   | ---                          |   |                             | (1,258     | ) |   | 2,264 |   |
| Impairment                  Charge                                                                                      |   |                             | 18,706       |    |   | ---                          |   |                             | (18,327    | ) |   | 379 |   |
| Loss                  from operations                                                                                   |   |                             | (38,146      | )       |   | 1,001                        |   |                             | 20,783     |   |   | (16,362 | ) |
|                                                                                                                    |   |                             |         |    |   |                         |   |                             |       |   |   |   |   |
| Gain                  (loss) on extinguishment of debt                                                                  |   |                             | (1,879       | )       |   | ---                          |   |                             | ---        |   |   | (1,879 | ) |
| Amortization                  of debt discount                                                                          |   |                             | ---          |    |   | ---                          |   |                             | ---        |   |   | --- |   |
| Interest                  income (expense), net                                                                         |   |                             | (10,182      | )       |   | ---                          |   |                             | ---        |   |   | (10,182 | ) |
| Write-off                  of deferred equity financing costs                                                           |   |                             | (13,256      | )       |   | ---                          |   |                             | ---        |   |   | (13,256 | ) |
| Gain                  on sale of marketable securities                                                                  |   |                             | 1,103        |    |   | ---                          |   |                             | ---        |   |   | 1,103 |   |
| Gain                  on embedded conversion features of derivative financial                  instruments              |   |                             | 13,645       |    |   | ---                          |   |                             | ---        |   |   | 13,645 |   |
| Change                  in fair value from revaluation of warrants in derivative financial                  instruments |   |                             | (3,537       | )       |   | ---                          |   |                             | ---        |   |   | (3,537 | ) |
|                                                                                                                    |   |                             |         |    |   |                         |   |                             |       |   |   |   |   |
| **LOSS                  FROM CONTINUING OPERATIONS**                                                                    |   |                             | (52,252      | )       |   | 1,001                        |   |                             | 20,783     |   |   | (30,468 | ) |
|                                                                                                                    |   |                             |         |    |   |                         |   |                             |       |   |   |   |   |
| **DISCONTINUED                  OPERATIONS (Note 4)**                                                                   |   |                             |              |    |   |                              |   |                             |            |   |   |  |   |
| Net                  loss from discontinued operations                                                                  |   |                             | (5,768       | )       |   | ---                          |   |                             | ---        |   |   | (5,768 | ) |
| Loss                  on disposal of Sponge and Mobot subsidiaries                                                      |   |                             | (9,418       | )       |   | ---                          |   |                             | ---        |   |   | (9,418 | ) |
| **LOSS                  FROM DISCONTINUED OPERATIONS**                                                                  |   |                             | (15,186      | )       |   | ---                          |   |                             | ---        |   |   | (15,186 | ) |
|                                                                                                                    |   |                             |              |    |   |                              |   |                             |            |   |   |  |   |
| **NET                  LOSS**                                                                                           |   |                             | **($67,438** | **)**   | **$**  | **1,001**                    |   | **$**                            | **20,783** |   |   | **($45,654** | **)** |

----

**Stock-Based      Compensation**

----

**Effect      Of Recently Issued Accounting Pronouncements**

|  | a. | Permits                fair value remeasurement for any hybrid financial instrument that                contains                an embedded derivative that otherwise would require                bifurcation |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | b. | Clarifies                which interest-only strips and principal-only strips are not subject                to                the requirements of Statement 133 |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | c. | Establishes                a requirement to evaluate interests in securitized financial assets                to                identify interests that are freestanding derivatives or that are                hybrid                financial instruments that contain an embedded derivative requiring                bifurcation |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | d. | Clarifies                that concentrations of credit risk in the form of subordination are                not                embedded derivatives |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | e. | Amends                Statement 140 to eliminate the prohibition on a qualifying special-purpose                entity from holding a derivative financial instrument that pertains                to a                beneficial interest other than another derivative financial                instrument. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Financial      Statements - Considering the Effects of Prior Year Misstatements when      Quantifying Misstatements in Current Year Financial      Statements.”*
*Financial      Statements - Materiality*

----

**Results      Of Operations For The Year Ended December 31, 2006 As Compared To The Year      Ended      December 31, 2005**

*Net      sales.  *

*Cost      of sales.  *

*Gross      profit.*

*Sales      and marketing.  *

*General      and administrative.  *

*Research      and development.  *

----

*Impairment      Charge. *

*Gain      (loss) on extinguishment of debt.  *
* *

*Interest      income (expense).  *

*Write-off      of deferred equity financing costs*

*Gain      on sale of marketable securities. *

*Gain      on embedded conversion features of derivative financial instruments. *
*.      *

*Warrant      repricing expense.  *

*Loss      from discontinued business units*

----

*Loss      on disposal of Sponge and Mobot subsidiaries. *

*Net      loss*

*Known      trends, demands, commitments, or uncertainties.*

----

**Results      of Operations for the Year Ended December 31, 2005 as Compared to the Year      Ended      December 31, 2004 **

*Net      sales.  *

*Cost      of sales.  *

*Gross      profit.*

*Sales      and marketing.  *

*General      and administrative.  *

*Research      and development.  *

*Stock      based compensation expense*

*Gain      (loss) on extinguishment of debt.  *

*Amortization      of debt discount.*

*Interest      expense. *

----

*Impairment      Charge. *

*Loss      from discontinued business units*

*Net      loss*

----

**Liquidity      and Capital Resources **

**Current      Period Activity**

*Net      cash from operations.*

*Net      cash used in investing.*

*Net      cash provided by financing activities*

*Net      cash used in discontinued operations*

----

**Significant      Liquidity Events**

**Agreement      to Sell 12Snap - March 2007**

| ·   | $1,100,000                will be paid in cash at Closing, and $500,000 will be placed into                escrow                and released to NeoMedia 90 days after Closing, assuming no warranty                claims; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Buyer                will forgive purchase price obligation in the amount of $880,000,                such                obligation resulting from the sale and purchase agreement between                NeoMedia                and the former shareholders of                12Snap |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 12Snap                management will waive their purchase price obligations in the amount                of                $880,000, and return to NeoMedia 2,525,818 shares of NeoMedia common                stock                issued previously; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Buyer                will return to NeoMedia 2,525,818 NeoMedia shares issued                previously; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                will retain a 10% ownership of 12Snap, subject to an option agreement                pursuant to which NeoMedia has the right to sell and Buyer has the                right                to acquire the remaining 10% stake held by NeoMedia for a purchase                price                of $750,000 after December 31; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 12snap                and NeoMedia will execute a cooperation agreement pursuant to which                12snap                will remain NeoMedia preferred partner and enjoy most favored prices,                and                12snap will perform certain research and development functions for                NeoMedia; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                transaction is subject to completion of a material definitive                agreement |
|--------------------|-----------------------------------------------------------------------------------------------------------|

**$7.5      Million Convertible Debenture - March 2007**

----

**12Snap      and Gavitec Purchase Price Obligation**

**Silent      Partners**

----

**China      Order**

**Sources      of Cash and Projected Cash Requirements**

*$7.5      million convertible debenture - March 2007.*

*Sale      of non-core business units. *

*Exercise      of options and warrants.*

----

*$100      Million SEDA.*

| ·   | In                connection with the $7.5 million convertible debenture in March 2007,                NeoMedia issued 125,000,000 warrants to Cornell with an exercise                price of                $0.04 per share. NeoMedia also paid cash fees of $781,000 from the                proceeds. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                connection with the $2.5 million convertible debenture in December                2006,                NeoMedia issued 42,000,000 warrants to Cornell with an exercise price                of                $0.04 per share, and repriced an additional 210,000,000 warrants                held by                Cornell Capital Partners that had been issued in connection with                previous                financings. NeoMedia also paid cash fees of $270,000 from the proceeds. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                connection with the $5 million convertible debenture in August 2006,                NeoMedia issued 175,000,000 warrants to Cornell with exercise prices                between $0.05 and $0.25 (which were subsequently repriced in December                2006), and repriced 85,000,000 warrants that had been issued in connection                with a previous financing (which were subsequently further repriced                in                December 2006). |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | In                connection with the $27 million Series C convertible preferred stock                sale                in February 2006, NeoMedia incurred the following costs: (i) Cornell                held                back a $2,700,000 cash fee from the proceeds of the sale, (ii) NeoMedia                issued 75 million warrants to Cornell with exercise prices between                $0.35                and $0.50, which were subsequently repriced, and (iii) NeoMedia issued                2,000,000 warrants with an exercise price of $0.328 to another party                for                structuring and consulting fees associated with the sale. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                connection with the 2005 SEDA in March 2005, NeoMedia incurred the                following costs: (i) NeoMedia issued 75,000,000 warrants to Cornell                with                an exercise price of $0.20, 10,000,000 of which were subsequently                repriced                to $0.04 in connection with the convertible debenture financings                in August                2006 and December 2006, and (ii) NeoMedia issued 4,000,000 warrants                with                an exercise price of $0.227 to another party for structuring and                consulting fees associated with the 2005 SEDA. The fair value of                these                warrants in the amount of $13,256,000 was written off during the                year                ended December 31, 2006. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Contractual      Obligations**

| ·   | NeoMedia                and its subsidiaries lease office facilities and certain office and                computer equipment under various operating                leases |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | NeoMedia                is party to various payment arrangements with its vendors that call                for                fixed payments on past due                liabilities |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | NeoMedia                is party to various consulting agreements that carry payment obligations                into future years. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | NeoMedia                issued Series C convertible preferred shares with face value of                $22,000,000 and convertible debentures with a face value of $14.5                million                that are subject to conversion at future dates |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | NeoMedia                holds notes payable to certain vendors and silent partners of an                acquired                subsidiary that mature at various dates in the future. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|       |   | (US                dollars in thousands) |      |
|------------|--------|------------------------------------------|-----------|
|       |   |                                     |      |   |   |   |   |   |   |   |   | **Series                C** |   |   |   |
|       |   |                                     |      | **Vendor                &** |   |   |   | **Subsidiary** |   |   |   | **Convertible** |   |   |   |
|       |   | **Operating**                            |      | **Consulting** |   | **Notes** |   | **Acquisition** |   | **Convertible** |   | **Preferred** |   |   |   |
|       |   | **Leases**                               |      | **Agreements** |   | **Payable** |   | **Commitments** |   | **Debentures** |   | **Stock** |   | **Total** |   |
|       |   |                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |
| 2007       |   | $                                        | 693       |   | $ | 1,069 |   | $ | 2,155 |   | $ | 22,367 |   | $ | 7,500 |   |   | 25,514 |   | $ | 59,299 |   |
| 2008       |   |                                     | 399       |   |   | 124 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 522 |   |
| 2009       |   |                                     | 85        |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 85 |   |
| 2010       |   |                                     | 15        |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 15 |   |
| 2011       |   |                                     | —   |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Thereafter |   |                                     | —   |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
| **Total**  |   | **$**                                    | **1,192** |   | **$** | **1,193** |   | **$** | **2,155** |   | **$** | **22,367** |   | **$** | **7,500** |   | **$** | **25,514** |   | **$** | **59,921** |   |

----

**Going      Concern**

----

| ·   | As                of December 31, 2006, NeoMedia had recorded liabilities of $16,233,000                and                $5,194,000 relating to purchase price guarantee obligations associated                with its acquisitions of 12Snap and Gavitec, respectively. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | During                the first quarter of 2007, NeoMedia issued 197,620,948 shares of                its                common stock in satisfaction of $9,427,000 of the 12Snap purchase                price                guarantee amount. The remaining balance on the purchase price obligation                after this payment was $6,806,000. The Company is currently negotiating                payment terms for the balance of the obligation. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Prior                to the acquisition of 12Snap by NeoMedia, 12Snap entered into silent                partnership debt arrangements with principal borrowing amounts totaling                $4.2 million (EUR 3.5 million). The partnership agreements were scheduled                to terminate on December 31, 2008 and 2009. However, due to the                acquisition of all shares of 12Snap by NeoMedia, an early termination                was                agreed on for the silent partnership agreements. Those silent partnerships                terminated as of February 28, 2006 with the acquisition of 12Snap                by                NeoMedia. NeoMedia made payments toward the outstanding principal                of $2.1                million and $0.6 million during March 2006 and December 2006,                respectively. The balance as of December 31, 2006 relating to silent                partners was $2.1 million. NeoMedia made additional payments of $1.0                million during February 2007. The remaining balance of $1.1 million                is due                on or before March 31, 2007, which has not been paid as of the date                of                this filing. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | During                January 2007, NeoMedia and the former Gavitec shareholders agreed                that the                entire purchase price obligation would be satisfied through the payment                by                NeoMedia of (i) $1,800,000 in cash, payable no later than February                28,                2007(subsequently extended to March 31, 2007), and (ii) 61,000,000                shares                of NeoMedia common stock, to be issued no later than February 28,                2007.                NeoMedia also agreed to pay interest accrued on the purchase price                in the                amount of $213,000 and reimburse $100,000 of costs related to the                acquisition to the primary former shareholder of Gavitec no later                than                February 28, 2007 (subsequently extended to March 31, 2007). NeoMedia                made                payments of $2,113,000 during March 2007 in satisfaction of the                obligation. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

**ITEM      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK.**

*Interest      Rate Risk.*

*Investment      Risk.*

*Foreign      Currency Risk.*

----

**ITEM      8.**
* *
**FINANCIAL      STATEMENTS AND SUPPLEMENTARY DATA**

----

 

----

**NeoMedia      Technologies, Inc. and Subsidiaries**

**Consolidated      Balance Sheet**
**s**

**(In      Thousands, Except Share Data)**

|                                                                                                                                               |   | **December                  31,** |     | **December                  31,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|----------|-----------------------------------|--------|
|                                                                                                                                               |   | **2006**                          |     | **2005**                          |   |
| **ASSETS**                                                                                                                                         |   |                              |     |                              |   |
| Current                  assets:                                                                                                                   |   |                              |     |                              |   |   |   |
| Cash                  and cash equivalents                                                                                                         |   | $                                 | 3,606    |                              | $      | 1,704 |   |
| Trade                  accounts receivable, net of allowance for doubtful accounts of                  $146 and                  $14, respectively |   |                              | 3,606    |                              |   | 130 |   |
| Other                  Receivables                                                                                                                 |   |                              | 550      |                              |   | --- |   |
| Inventories,                  net of allowance for obsolete and slow-moving inventory of $53 and $0                  respectively.            |   |                              | 80       |                              |   | 2 |   |
| Investment                  in marketable securities                                                                                               |   |                              | 57       |                              |   | 104 |   |
| Prepaid                  expenses and other current assets                                                                                         |   |                              | 521      |                              |   | 121 |   |
| Assets                  held for sale                                                                                                              |   |                              | 3,072    |                              |   | 4,058 |   |
| Total                  current assets                                                                                                              |   |                              | 11,492   |                              |   | 6,119 |   |
|                                                                                                                                               |   |                              |          |                              |   |  |   |
| Leasehold                  improvements and property and equipment, net                                                                       |   |                              | 439      |                              |   | 110 |   |
| Goodwill                                                                                                                                           |   |                              | 7,882    |                              |   | --- |   |
| Customer                  contracts, net                                                                                                           |   |                              | 1,416    |                              |   | --- |   |
| Proprietary                  software, net                                                                                                         |   |                              | 8,110    |                              |   | --- |   |
| Brand                  name,net                                                                                                                    |   |                              | 1,467    |                              |   | --- |   |
| Copyrighted                  materials,net                                                                                                         |   |                              | 192      |                              |   | --- |   |
| Patents                  and other Intangible assets, net                                                                                          |   |                              | 2,839    |                              |   | 3,274 |   |
| Cash                  surrender value of life insurance policy                                                                                     |   |                              | 863      |                              |   | 769 |   |
| Loan                  to Mobot                                                                                                                     |   |                              | ---      |                              |   | 1,500 |   |
| Other                  long-term assets                                                                                                            |   |                              | 3,425    |                              |   | 639 |   |
| **Total                  assets**                                                                                                                  |   | $                                 | 38,125   |                              | $      | 12,411 |   |
|                                                                                                                                               |   |                              |          |                              |   |  |   |
| **LIABILITIES                  AND SHAREHOLDERS’ EQUITY**                                                                                    |   |                              |     |                              |   |   |   |
| Current                  liabilities:                                                                                                              |   |                              |          |                              |   |  |   |
| Accounts                  payable                                                                                                                  |   | $                                 | 4,936    |                              | $      | 2,275 |   |
| Liabilities                  held for sale                                                                                                         |   |                              | 407      |                              |   | 669 |   |
| Taxes                  payable                                                                                                                     |   |                              | 1,042    |                              |   | 85 |   |
| Accrued                  expenses                                                                                                                  |   |                              | 4,406    |                              |   | 1,833 |   |
| Deferred                  revenues and customer prepayments                                                                                        |   |                              | 2,563    |                              |   | 307 |   |
| Notes                  payable                                                                                                                     |   |                              | 2,196    |                              |   | 3,015 |   |
| Accrued                  purchase price guarantee                                                                                                  |   |                              | 21,427   |                              |   | --- |   |
| Derivative                  financial instruments                                                                                                  |   |                              | 25,819   |                              |   | --- |   |
| Deferred                  tax liability                                                                                                            |   |                              | 706      |                              |   | --- |   |
| Debentures                  payable                                                                                                                |   |                              | 7,500    |                              |   | --- |   |
| Series                  C convertible preferred stock, $0.01 par value, 25,000,000 shares                  authorized,                             |   |                              |     |                              |   |   |   |
| 22,000                  shares issued, 21,622 shares outstanding, liquidation value of                  $21,657.                                   |   |                              | 21,657   |                              |   | --- |   |
| **Total                  liabilities**                                                                                                             |   |                              | 92,659   |                              |   | 8,184 |   |
| Commitments                  and contingencies (Note 13)                                                                                           |   |                              |          |                              |   |  |   |
|                                                                                                                                               |   |                              |     |                              |   |   |   |
| Shareholders’                  equity (deficit):                                                                                             |   |                              |          |                              |   |  |   |
| Common                  stock, $0.01 par value, 5,000,000,000 shares authorized, 639,233,173                  and                                  |   |                              |     |                              |   |   |   |
| 475,387,910                  shares issued and 637,591,747 and 467,601,717 outstanding,                  respectively                              |   |                              | 6,376    |                              |   | 4,676 |   |
| Additional                  paid-in capital                                                                                                        |   |                              | 100,541  |                              |   | 106,287 |   |
| Deferred                  equity financing costs                                                                                                   |   |                              | ---      |                              |   | (13,256 | ) |
| Accumulated                  deficit                                                                                                               |   |                              | (159,962 | )                                 |   | (92,524 | ) |
| Accumulated                  other comprehensive loss                                                                                              |   |                              | (710     | )                                 |   | (177 | ) |
| Treasury                  stock, at cost, 201,230 shares of common stock                                                                           |   |                              | (779     | )                                 |   | (779 | ) |
| Total                  shareholders’ equity (deficit)                                                                                        |   |                              | (54,534  | )                                 |   | 4,227 |   |
| **Total                  liabilities and shareholders’ equity (deficit)**                                                                    |   | $                                 | 38,125   |                              | $      | 12,411 |   |

----

**NeoMedia      Technologies, Inc. and Subsidiaries**

**Consolidated      Statements of Operations**
** **

**and      Comprehensive Loss**

**(In      Thousands, Except Share and per Share Data)**

|                                                                                                                          |   | **Years Ended                December 31,** |            |
|-------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|-----------------|
|                                                                                                                          |   | **2006**                                         |            | **2005** |   | **2004** |   |
|                                                                                                                          |   |                                             |            |   |   |   |   |
| Net                sales                                                                                                      |   | $                                                | 10,309          |   | $ | 877 |   | $ | 973 |   |
| Cost                of sales                                                                                                  |   |                                             |  3,863     |   |   | 583 |   |   | 926 |   |
| Gross                profit                                                                                                   |   |                                             | 6,446           |   |   | 294 |   |   | 47 |   |
|                                                                                                                          |   |                                             |            |   |   |   |   |   |   |   |
| Sales                and marketing expenses                                                                                   |   |                                             | 10,239          |   |   | 2,592 |   |   | 1,170 |   |
| General                and administrative expenses                                                                            |   |                                             | 12,125          |   |   | 3,020 |   |   | 2,137 |   |
| Research                and development costs                                                                                 |   |                                             | 3,522           |   |   | 592 |   |   | 463 |   |
| Impairment                charge                                                                                              |   |                                             | 18,706          |   |   | 1,115 |   |   | — |   |
| Loss                from operations                                                                                           |   |                                             | (38,146         | ) |   | (7,025 | ) |   | (3,723 | ) |
|                                                                                                                          |   |                                             |            |   |   |   |   |   |   |   |
| Gain                (loss) on extinguishment of debt                                                                          |   |                                             | (1,879          | ) |   | 172 |   |   | 140 |   |
| Amortization                of debt discount                                                                                  |   |                                             | —         |   |   | — |   |   | (2,500 | ) |
| Interest                income (expense), net                                                                                 |   |                                             | (10,182         | ) |   | (293 | ) |   | (189 | ) |
| Write-off                of deferred equity financing costs                                                                   |   |                                             | (13,256         | ) |   | — |   |   | — |   |
| Gain                on sale of marketable securities                                                                          |   |                                             | 1,103           |   |   | — |   |   | — |   |
| Gain                from change in fair value of derivative financial                instruments                              |   |                                             | 13,645          |   |   | — |   |   | — |   |
| Repricing                of warrants related to financing transactions                                                        |   |                                             | (3,537          | ) |   | — |   |   | — |   |
|                                                                                                                          |   |                                             |                 |   |   |  |   |   |  |   |
| **LOSS                FROM CONTINUING OPERATIONS**                                                                            |   |                                             | **(52,252**     | **)** |   | **(7,146** | **)** |   | **(6,272** | **)** |
|                                                                                                                          |   |                                             |            |   |   |   |   |   |   |   |
| **DISCONTINUED                OPERATIONS (Note 4)**                                                                           |   |                                             |                 |   |   |  |   |   |  |   |
| Loss                from discontinued operations                                                                              |   |                                             | (5,768          | ) |   | (2,001 | ) |   | (958 | ) |
| Loss                on disposal of Sponge and Mobot subsidiaries                                                              |   |                                             | (9,418          | ) |   | — |   |   | — |   |
| **LOSS                FROM DISCONTINUED OPERATIONS**                                                                          |   |                                             | (15,186         | ) |   | (2,001 | ) |   | (958 | ) |
|                                                                                                                          |   |                                             |                 |   |   |  |   |   |  |   |
| **NET                LOSS**                                                                                                   |   |                                             | **(67,438**     | **)** |   | **(9,147** | **)** |   | **(7,230** | **)** |
|                                                                                                                          |   |                                             |                 |   |   |  |   |   |  |   |
| Accretion                of dividends on convertible preferred stock                                                          |   |                                             | **(20,324**     | **)** |   | — |   |   | — |   |
|                                                                                                                          |   |                                             |                 |   |   |  |   |   |  |   |
| **NET                LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS**                                                               |   |                                             | **(87,762**     | **)** |   | **(9,147** | **)** |   | **(7,230** | **)** |
|                                                                                                                          |   |                                             |                 |   |   |  |   |   |  |   |
| Comprehensive                Loss:                                                                                            |   |                                             |            |   |   |   |   |   |   |   |
| Net                loss                                                                                                       |   |                                             | (67,438         | ) |   | (9,147 | ) |   | (7,230 | ) |
| Other                comprehensive loss:                                                                                      |   |                                             |            |   |   |   |   |   |   |   |
| Unrealized                loss on marketable securities                                                                       |   |                                             | (247            | ) |   | (146 | ) |   | 0 |   |
| Foreign                currency translation adjustment                                                                        |   |                                             | (286            | ) |   | 29 |   |   | (60 | ) |
|                                                                                                                          |   |                                             |                 |   |   |  |   |   |  |   |
| **COMPREHENSIVE                LOSS**                                                                                         |   |                                             | **($67,971**    | **)** |   | **($9,264** | **)** |   | **($7,290** | **)** |
|                                                                                                                          |   |                                             |                 |   |   |  |   |   |  |   |
| **Loss                per share from continuing operations–basic and                diluted**                           |   |                                             | **($0.09**      | **)** |   | **($0.02** | **)** |   | **($0.02** | **)** |
| **Loss                per share from discontinued operations–basic and                diluted**                         |   |                                             | **($0.02**      | **)** |   | **($0.00** | **)** |   | **($0.00** | **)** |
| **Net                loss per share–basic and diluted**                                                                 |   |                                             | **($0.11**      | **)** |   | **($0.02** | **)** |   | **($0.02** | **)** |
| **Loss                per share attributable to common shareholders –                basic and                diluted** |   |                                             | **($0.14**      | **)** |   | **($0.02** | **)** |   | **($0.02** | **)** |
|                                                                                                                          |   |                                             |            |   |   |   |   |   |   |   |
| **Weighted                average number of common shares–basic and diluted**                                           |   |                                             | **613,560,070** |   |   | **451,857,851** |   |   | **329,362,127** |   |

----

**NeoMedia      Technologies, Inc. and Subsidiaries**

**Consolidated      Statements of Cash Flows**

**(In      Thousands)**

|                                                                                                                                                                                                                                                       |   | **Years                Ended December 31,** |      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|-----------|
|                                                                                                                                                                                                                                                       |   | **2006**                                    |      | **2005** |   | **2004** |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES:                                                                                                                                                                                                       |   |                                        |      |  |   |  |   |
| Net                loss from continuing operations                                                                                                                                                                                                         |   |                                        | ($52,252  | ) |   | ($7,146 | ) |   | ($6,272 | ) |
| Adjustments                to reconcile net loss to net cash used in operating                activities:                                                                                                                                                  |   |                                        |           |   |   |  |   |   |  |   |
| Amortization                of discount on note payable                                                                                                                                                                                                    |   |                                        | —   |   |   | — |   |   | 2,500 |   |
| Depreciation                and amortization                                                                                                                                                                                                               |   |                                        | 2,338     |   |   | 458 |   |   | 496 |   |
| Impairment                charge                                                                                                                                                                                                                           |   |                                        | 18,706    |   |   | 1,115 |   |   | — |   |
| Loss                on early extinguishment of debt                                                                                                                                                                                                        |   |                                        | 1,858     |   |   | — |   |   | — |   |
| Change                in fair value from revaluation of warrants and embedded conversion                features                                                                                                                                           |   |                                        | (10,108   | ) |   | — |   |   | — |   |
| Write-off                of deferred equity financing costs                                                                                                                                                                                                |   |                                        | 13,526    |   |   | — |   |   | — |   |
| Stock-based                compensation expense                                                                                                                                                                                                            |   |                                        | 7,250     |   |   | 703 |   |   | 700 |   |
| Interest                expense related to convertible debt                                                                                                                                                                                                |   |                                        | 7,558     |   |   | — |   |   | 3 |   |
| Increase                in value of life insurance policies                                                                                                                                                                                                |   |                                        | (94       | ) |   | (42 | ) |   | (1 | ) |
| Gain                on sale of marketable securities                                                                                                                                                                                                       |   |                                        | (1,103    | ) |   | — |   |   | — |   |
|                                                                                                                                                                                                                                                       |   |                                        |      |   |   |   |   |   |   |   |
| Changes                in operating assets and liabilities                                                                                                                                                                                                 |   |                                        | —   |   |   | — |   |   | — |   |
| Trade                accounts receivable                                                                                                                                                                                                                   |   |                                        | 388       |   |   | 28 |   |   | (1 | ) |
| Inventories                                                                                                                                                                                                                                                |   |                                        | 28        |   |   | — |   |   | 1 |   |
| Prepaid                expenses and other current assets                                                                                                                                                                                                   |   |                                        | (104      | ) |   | 197 |   |   | 62 |   |
| Accounts                payable, amounts due under settlement agreements, and accrued                liabilities                                                                                                                                           |   |                                        | 370       |   |   | (125 | ) |   | (1,288 | ) |
| Deferred                revenue and prepaid customer agreements                                                                                                                                                                                            |   |                                        | 1,681     |   |   | (71 | ) |   | (137 | ) |
| Net                cash used in operating activities                                                                                                                                                                                                       |   |                                        | (9,958    | ) |   | (4,883 | ) |   | (3,937 | ) |
|                                                                                                                                                                                                                                                       |   |                                        |      |   |   |   |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES:                                                                                                                                                                                                       |   |                                        |           |   |   |  |   |   |  |   |
| Cash                paid to acquire CSI International, Inc. (2004), Mobot, Inc., Sponge                Ltd.,                Gavitec AG, and 12Snap AG (2006), net of cash acquired at acquisition                and                relinquished upon sale |   |                                        | (12,335   | ) |   | — |   |   | (2,390 | ) |
| Acquisition                of property and equipment                                                                                                                                                                                                       |   |                                        | (318      | ) |   | (75 | ) |   | (109 | ) |
| Acquisition                of patents and other intangible assets                                                                                                                                                                                          |   |                                        | (192      | ) |   | (1,759 | ) |   | (141 | ) |
| Investments                                                                                                                                                                                                                                                |   |                                        | —   |   |   | (500 | ) |   | (1,000 | ) |
| Proceeds                from sale of marketable securities                                                                                                                                                                                                 |   |                                        | 1,574     |   |   | — |   |   | — |   |
| Advances                to discontinued subsidiaries Micro Paint, Sponge, and                Mobot                                                                                                                                                         |   |                                        | (3,162    | ) |   | (2,341 | ) |   | (903 | ) |
| Acquisition                related costs                                                                                                                                                                                                                   |   |                                        | (164      | ) |   | (168 | ) |   | — |   |
| Amounts                issued under notes receivable                                                                                                                                                                                                       |   |                                        | (500      | ) |   | (1,500 | ) |   | — |   |
| Net                cash used in investing activities                                                                                                                                                                                                       |   |                                        | (15,097   | ) |   | (6,343 | ) |   | (4,543 | ) |
|                                                                                                                                                                                                                                                       |   |                                        |           |   |   |  |   |   |  |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES:                                                                                                                                                                                                       |   |                                        |      |   |   |   |   |   |   |   |
| Borrowing                under notes payable and convertible debt instrument, net of fees                of $270                in 2006, $94 in 2005, and $705 in 2004                                                                                     |   |                                        | 7,230     |   |   | 9,932 |   |   | 9,085 |   |
| Repayments                on notes payable and convertible debt instrument                                                                                                                                                                                 |   |                                        | (2,674    | ) |   | (8,121 | ) |   | (8,653 | ) |
| Net                proceeds from issuance of common stock, net of issuance costs of $24 in                2006, $115 in 2005, and $620 in 2004                                                                                                             |   |                                        | 210       |   |   | 8,572 |   |   | 7,906 |   |
| Net                proceeds from issuance of Series C convertible preferred stock, net                of                issuance costs of $2,725 in 2006                                                                                                   |   |                                        | 14,066    |   |   | — |   |   | — |   |
| Net                proceeds from exercise of stock options and warrants                                                                                                                                                                                    |   |                                        | 8,444     |   |   | 923 |   |   | 2,687 |   |
| Cash                commitment fee for $100 million Standby Equity Distribution                Agreement                                                                                                                                                   |   |                                        | —   |   |   | (1,000 | ) |   | — |   |
| Net                cash provided by financing activities                                                                                                                                                                                                   |   |                                        | 27,276    |   |   | 10,306 |   |   | 11,025 |   |
|                                                                                                                                                                                                                                                       |   |                                        |      |   |   |   |   |   |   |   |
| EFFECT                OF EXCHANGE RATE CHANGES ON CASH FOR CONTINUING OPERATIONS                                                                                                                                                                           |   |                                        | (319      | ) |   | 18 |   |   | — |   |
|                                                                                                                                                                                                                                                       |   |                                        |      |   |   |   |   |   |   |   |
| **NET                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM CONTINUING                OPERATIONS**                                                                                                                                          |   |                                        | 1,902     |   |   | (902 | ) |   | 2,545 |   |
|                                                                                                                                                                                                                                                       |   |                                        |      |   |   |   |   |   |   |   |
| CASH                AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                                                                                                                                                              |   |                                        | 1,704     |   |   | 2,606 |   |   | 61 |   |
|                                                                                                                                                                                                                                                       |   |                                        |      |   |   |   |   |   |   |   |
| **CASH                AND CASH EQUIVALENTS, END OF PERIOD**                                                                                                                                                                                                |   | **$**                                       | **3,606** |   | **$** | **1,704** |   | **$** | **2,606** |   |
|                                                                                                                                                                                                                                                       |   |                                        |      |   |   |   |   |   |   |   |
| SUPPLEMENTAL                CASH FLOW INFORMATION:                                                                                                                                                                                                         |   |                                        |      |   |   |   |   |   |   |   |
| Interest                paid during the period                                                                                                                                                                                                             |   | $                                           | 68        |   | $ | 47 |   | $ | 111 |   |
| Non-cash                investing and financing activities:                                                                                                                                                                                                |   |                                        |      |   |   |   |   |   |   |   |
| Unrealized                gain (loss) on marketable securities                                                                                                                                                                                             |   |                                        | (247      | ) |   | — |   |   | — |   |
| Prepaid                acquisition costs applied to purchase price                                                                                                                                                                                         |   |                                        | 168       |   |   | — |   |   | — |   |
| Fair                value of shares and notes receivable from Pickups Plus, Inc. acquired                in                exchange for Series C Convertible Preferred Stock                                                                               |   |                                        | 594       |   |   | — |   |   | — |   |
| Carrying                value of promissory note and accrued interest paid in exchange for                Series                C Convertible Preferred Stock                                                                                              |   |                                        | (3,208    | ) |   | — |   |   | — |   |
| Fair                value of shares issued to acquire CSI International, Inc. (2004),                Mobot,                Inc., Sponge Ltd., Gavitec AG, 12Snap AG, and BSD Software, Inc.                (2006)                                          |   |                                        | 46,965    |   |   | — |   |   | 695 |   |
| Change                in net assets resulting from acquisitions of CSI International, Inc.                (2004), Mobot, Inc., Sponge Ltd., Gavitec AG, 12Snap AG, and BSD                Software,                Inc. (2006)                             |   |                                        | 62,240    |   |   | — |   |   | 3,090 |   |
| Accretion                of dividends on Series C Convertible Preferred Stock                                                                                                                                                                              |   |                                        | 20,324    |   |   | — |   |   | — |   |
| Fair                value of outstanding warrants reclassified to liabilities                                                                                                                                                                              |   |                                        | 13,884    |   |   | — |   |   | — |   |
| Portion                exercise of warrants accounted for as derivatives                                                                                                                                                                                   |   |                                        | 3,790     |   |   | — |   |   | — |   |
| Initial                fair value of Series C Convertible Preferred Stock (host instrument                only)                                                                                                                                            |   |                                        | 4,908     |   |   | — |   |   | — |   |
| Deferred                stock-based financing costs associated with Series C Convertible                Preferred                Stock                                                                                                                     |   |                                        | 3,198     |   |   | — |   |   | — |   |
| Difference                between net proceeds and recorded fair value of Series C Convertible                Preferred Stock                                                                                                                              |   |                                        | 4,041     |   |   | — |   |   | — |   |
| Advance                receivable from Mobot, Inc. forgiven upon acquisition                                                                                                                                                                               |   |                                        | 1,500     |   |   | — |   |   | — |   |
| Series                C Convertible Preferred Stock converted to common stock                                                                                                                                                                              |   |                                        | 507       |   |   | — |   |   | — |   |
| Accrual                of purchase price guarantee provisions associated with acquisitions                of                12Snap, Gavitec, Sponge, and Mobot                                                                                             |   |                                        | 21,427    |   |   | — |   |   | — |   |
| Gain                (loss) on extinguishment of debt paid in common stock                                                                                                                                                                                  |   |                                        | —   |   |   | 172 |   |   | 140 |   |
| Fair                value of stock issued for services and deferred to future                periods                                                                                                                                                       |   |                                        | —   |   |   | 239 |   |   | 653 |   |
| Direct                costs associated with Standby Equity Distribution Agreement and Equity                Line of Credit                                                                                                                                 |   |                                        | —   |   |   | 1,204 |   |   | 2,216 |   |
| Fair                value of warrants issued as fees related to the $100 million Standby                Equity Distribution Agreement                                                                                                                      |   |                                        | —   |   |   | — |   |   | — |   |
| Fair                value of shares issued to satisfy liabilities                                                                                                                                                                                          |   |                                        | —   |   |   | — |   |   | 222 |   |

----

**NeoMedia      Technologies, Inc. and Subsidiaries**

**Consolidated      Statements of Shareholders’ Equity (Deficit)**

**(In      thousands, except share data)**

|                                                                                                                                                                           |   | **Common                  Stock** |            | **Deferred** |   | **Deferred**   |   | **Accumulated** |        |          |   |              |   |            |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------------|--------------|--------|----------------|--------|-----------------|-------------|---------------|--------|-------------------|--------|-----------------|-------------|
|                                                                                                                                                                           |   |                              |            |         |   | **Additional** |   | **Stock**       |        | **Equity**    |   | **Other**         |   |            |        |   |   |   |   | **Total** |   |
|                                                                                                                                                                           |   |                              |            |         |   | **Paid-in**    |   | **Compens-**    |        | **Financing** |   | **Comprehensive** |   | **Accumulated** |        | **Treasury                  Stock** |   | **Stockholders'** |   |
|                                                                                                                                                                           |   | **Shares**                        |            | **Amount**   |   | **Capital**    |   | **ation**       |        | **Costs**     |   | **Loss**          |   | **Deficit**     |        | **Shares** |   | **Amount** |   | **Equity** |   |
| **Balance,                  December 31, 2003**                                                                                                                                |   |                              | **243,991,257** |         | **$**  | **2,440**      |   | **$**           | **71,565**  |          |   | ($282             | )      |            | **—** |   | **$** | **0** |   |   | ($76,147 | ) |   | **201,230** |   |   | ($779 | ) |   | ($3,203 | ) |
| Shares                  issued to Cornell Capital Partners under ELOC and SEDA                                                                                                 |   |                              | 112,743,417     |         |   | 1,127          |   |            | 6,864       |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 7,991 |   |
| Exercise                  of stock options                                                                                                                                     |   |                              | 12,860,616      |         |   | 129            |   |            | 43          |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 172 |   |
| Exercise                  of stock warrants                                                                                                                                    |   |                              | 51,510,000      |         |   | 515            |   |            | 2,000       |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 2,515 |   |
| Fair                  value stock, options, & warrants issued for professional services                  rendered                                                          |   |                              | 2,013,375       |         |   | 20             |   |            | 785         |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 805 |   |
| Stock                  issued to pay past due liabilities                                                                                                                      |   |                              | 2,406,388       |         |   | 24             |   |            | 242         |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 266 |   |
| Stock                  issued in connection with acquisition of CSI International                                                                                              |   |                              | 7,000,000       |         |   | 70             |   |            | 625         |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 695 |   |
| Expense                  associated with option repricing                                                                                                                      |   |                              | —         |         |   | —        |   |            | 104         |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 104 |   |
| Fair                  value of warrants issued with debt                                                                                                                       |   |                              | —         |         |   | —        |   |            | 2,500       |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 2,500 |   |
| Change                  in Deferred Stock Compensation                                                                                                                         |   |                              | —         |         |   | —        |   |            | —     |          |   | (163              | )      |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (163 | ) |
| Comprehensive                  loss - foreign currency translation adjustment                                                                                                  |   |                              | —         |         |   | —        |   |            | —     |          |   | —           |   |            | —     |   |   | (60 | ) |   | — |   |   | — |   |   | — |   |   | (60 | ) |
| Net                  Loss                                                                                                                                                      |   |                              | —         |         |   | —        |   |            | —     |          |   | —           |   |            | —     |   |   | — |   |   | (7,230 | ) |   | — |   |   | — |   |   | (7,230 | ) |
| **Balance,                  December 31, 2004**                                                                                                                                |   |                              | **432,525,053** |         | **$**  | **4,325**      |   | **$**           | **84,728**  |          |   | (445              | )      |            | **—** |   |   | ($60 | ) |   | ($83,377 | ) |   | **201,230** |   |   | ($779 | ) | **$** | **4,392** |   |
| Shares                  issued to Cornell Capital Partners under SEDA                                                                                                          |   |                              | 26,435,512      |         |   | 264            |   |            | 8,177       |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 8,441 |   |
| Deferred                  financing cost associated with $100 million SEDA                                                                                                     |   |                              | 44,723          |         |   | —        |   |            | 12,256      |          |   |              |   |            | (13,256     | ) |   | — |   |   | — |   |   | — |   |   | — |   |   | (1,000 | ) |
| Exercise                  of stock options                                                                                                                                     |   |                              | 7,953,650       |         |   | 80             |   |            | 837         |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 917 |   |
| Exercise                  of stock warrants                                                                                                                                    |   |                              | 50,000          |         |   | 1              |   |            | 5           |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 6 |   |
| Fair                  value stock, options, & warrants issued for professional services                  rendered                                                          |   |                              | 592,779         |         |   | 6              |   |            | 453         |          |   |              |   |            |        |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 459 |   |
| Change                  in Deferred Stock Compensation                                                                                                                         |   |                              | —         |         |   | —        |   |            | —     |          |   | 276               |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 276 |   |
| Comprehensive                  loss - foreign currency translation adjustment                                                                                                  |   |                              | —         |         |   | —        |   |            | —     |          |   | —           |   |            | —     |   |   | 29 |   |   | — |   |   | — |   |   | — |   |   | 29 |   |
| Comprehensive                  loss - unrealized loss on marketable securities                                                                                                 |   |                              | —         |         |   | —        |   |            | —     |          |   | —           |   |            | —     |   |   | (146 | ) |   | — |   |   | — |   |   | — |   |   | (146 | ) |
| Net                  Loss                                                                                                                                                      |   |                              | —         |         |   | —        |   |            | —     |          |   | —           |   |            | —     |   |   | — |   |   | (9,147 | ) |   | — |   |   | — |   |   | (9,147 | ) |
| **Balance,                  December 31, 2005**                                                                                                                                |   |                              | **467,601,717** |         | **$**  | **4,676**      |   | **$**           | **106,456** |          |   | ($169             | )      |            | ($13,256    | ) |   | ($177 | ) |   | ($92,524 | ) |   | **201,230** |   |   | ($779 | ) | **$** | **4,227** |   |
| Shares                  issued to Cornell Capital Partners under SEDA                                                                                                          |   |                              | 751,880         |         |   | 8              |   |            | 201         |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 209 |   |
| Shares                  issued to Cornell Capital Partners upon conversion of Series C                  convertible                  preferred stock                           |   |                              | 6,631,579       |         |   | 66             |   |            | 441         |          |   |              |   |            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 507 |   |
| Exercise                  of stock options                                                                                                                                     |   |                              | 2,930,975       |         |   | 29             |   |            | 325         |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 354 |   |
| Exercise                  of warrants                                                                                                                                          |   |                              | 49,000,000      |         |   | 490            |   |            | 7,600       |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 8,090 |   |
| Issuance                  of shares for services                                                                                                                               |   |                              | 18,431,522      |         |   | 184            |   |            | 6,851       |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 7,035 |   |
| Fair                  value of shares issued to settle liabilities                                                                                                             |   |                              | 5,233,791       |         |   | 53             |   |            | 1,155       |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 1,208 |   |
| Fair                  value of shares issued to acquire Mobot, Inc., Gavitec AG, 12Snap                  AG,                  Sponge Ltd., and BSD Software, Inc. (see note 3) |   |                              | 120,107,418     |         |   | 1,201          |   |            | 45,764      |          |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 46,965 |   |
| Reduction                  of value of original consideration shares for value of make whole                  provision                                                        |   |                              | —         |         |   | —        |   |            | (35,848     | )             |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (35,848 | ) |
| Fair                  value of shares returned to the Company in connection with sale                  of                  Sponge                                              |   |                              | (33,097,135     | )            |   | (331           | )      |            | (1,986      | )             |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (2,317 | ) |
| Fair                  value of outstanding warrants reclassified to liabilities                                                                                                |   |                              | —         |         |   | —        |   |            | (10,094     | )             |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (10,094 | ) |
| Accrual                  of dividends on Series C Convertible Preferred Stock                                                                                                  |   |                              | —         |         |   | —        |   |            | (20,324     | )             |   | —           |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (20,324 | ) |
| Change                  in Deferred Stock Compensation                                                                                                                         |   |                              | —         |         |   | —        |   |            | —     |          |   | 169               |   |            | —     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 169 |   |
| Write                  off of deferred financing cost associated with $100 million                  SEDA                                                                       |   |                              | —         |         |   | —        |   |            | —     |          |   | —           |   |            | 13,256      |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 13,256 |   |
| Comprehensive                  loss - foreign currency translation adjustment                                                                                                  |   |                              | —         |         |   | —        |   |            | —     |          |   | —           |   |            | —     |   |   | (286 | ) |   | — |   |   | — |   |   | — |   |   | (286 | ) |
| Comprehensive                  loss - unrealized loss on marketable securities                                                                                                 |   |                              | —         |         |   | —        |   |            | —     |          |   | —           |   |            | —     |   |   | (247 | ) |   | — |   |   | — |   |   | — |   |   | (247 | ) |
| Net                  Loss                                                                                                                                                      |   |                              | —         |         |   | —        |   |            | —     |          |   | —           |   |            | —     |   |   | — |   |   | (67,438 | ) |   | — |   |   | — |   |   | (67,438 | ) |
| **Balance,                  December 31, 2006**                                                                                                                                |   |                              | **637,591,747** |         | **$**  | **6,376**      |   | **$**           | **100,541** |          | **$**  | **—**       |   | **$**           | **—** |   |   | ($710 | ) |   | ($159,962 | ) |   | **201,230** |   |   | ($779 | ) |   | ($54,534 | ) |

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**NEOMEDIA      TECHNOLOGIES, INC. AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**1.**
**BASIS      OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS**

**Basis      of Presentation**

**Going      Concern**

| ·   | As                of December 31, 2006, NeoMedia had recorded liabilities of $16,233,000                and                $5,194,000 relating to purchase price guarantee obligations associated                with its acquisitions of 12Snap and Gavitec, respectively. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | During                the first quarter of 2007, NeoMedia issued 197,620,948 shares of                its                common stock in satisfaction of $9,427,000 of the 12Snap purchase                price                guarantee amount. The remaining balance on the purchase price obligation                after this payment was $6,806,000. The Company is currently negotiating                payment terms for the balance of the obligation. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Prior                to the acquisition of 12Snap by NeoMedia, 12Snap entered into silent                partnership debt arrangements with principal borrowing amounts totaling                $4.2 million (EUR 3.5 million). The partnership agreements were scheduled                to terminate on December 31, 2008 and 2009. However, due to the                acquisition of all shares of 12Snap by NeoMedia, an early termination                was                agreed on for the silent partnership agreements. Those silent partnerships                terminated as of February 28, 2006 with the acquisition of 12Snap                by                NeoMedia. NeoMedia made payments toward the outstanding principal                of $2.1                million and $0.6 million during March 2006 and December 2006,                respectively. The balance as of December 31, 2006 relating to silent                partners was $2.1 million. NeoMedia made additional payments of $1.0                million during February 2007. The remaining balance of $1.1 million                is due                on or before March 31, 2007, which has not been paid as of the date                of                this filing. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | During                January 2007, NeoMedia and the former Gavitec shareholders agreed                that the                entire purchase price obligation would be satisfied through the payment                by                NeoMedia of (i) $1,800,000 in cash, payable no later than February                28,                2007(subsequently extended to March 31, 2007), and (ii) 61,000,000                shares                of NeoMedia common stock, to be issued no later than February 28,                2007.                NeoMedia also agreed to pay interest accrued on the purchase price                in the                amount of $213,000 and reimburse $100,000 of costs related to the                acquisition to the primary former shareholder of Gavitec no later                than                February 28, 2007 (subsequently extended to March 31, 2007). NeoMedia                made                payments of $2,113,000 during March 2007 in satisfaction of the                obligation. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Nature      of Business Operations**

----

**2.**
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES**

**Estimates**

**Cash      and Cash Equivalents**

**Financial      Instruments**

**Accounts      Receivable**

**Inventories**

----

**Leasehold      Improvements and Property and Equipment**

| Leasehold                improvements | 3                years                    |
|---------------------------------------|-------------------------------------------|
| Furniture                and fixtures | 7                years                    |
| Computer                equipment     | 3                -                5 years |

**Goodwill**

**Other      Intangible Assets**

| Capitalized                patents        | 5                -                17 years |
|-------------------------------------------|--------------------------------------------|
| Customer                contracts         | 5                years                     |
| Copyrighted                materials      | 5                years                     |
| Acquired                software products | 7                years                     |
| Brand                names                | 10                years                    |

**Evaluation      of Long-Lived Assets**

----

| ·­   | A                significant decrease in the market price of the                asset |
|--------------------------|---------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | A                significant adverse change in the extent or manner in which the asset                is                being used, or in its physical                condition |
|--------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | A                significant adverse change in legal factors or in the business climate                that could affect the value of the asset, including an adverse action                or                assessment by a regulator |
|--------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | An                accumulation of costs significantly in excess of the amount originally                expected |
|--------------------------|------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | A                current-period operating or cash flow loss combined with a history                of                operating or cash flow losses or a projection or forecast that                demonstrates continuing losses associated with the use of the                asset |
|--------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·­   | A                current expectation that, more likely than not,** **the                asset will be sold or otherwise disposed of significantly before                the end                of its previously estimated useful life. |
|--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Derivative      Financial Instruments**

**Revenue      Recognition**

| (2)   | Technology                service and product revenue, which includes sales of software and                technology equipment and service fee is recognized  based on                guidance  provided in  SEC Staff  Accounting                 Bulletin  (“SAB”) No. 104,  "Revenue  Recognition  in                Financial Statements,"  as amended (SAB 104).  Software                and technology equipment resale revenue is                recognized when persuasive evidence of an arrangement exists, the                price to the customer is fixed and determinable, delivery of the                service                has occurred and collectibility is reasonably assured.                Service revenues including maintenance fees for                providing system updates for software products, user documentation                and                technical support are recognized over the life of                the contract.  The Company’s recently acquired subsidiaries                Mobot (See Note 4), and Gavitec follow this policy. The Company defers                revenue related to technology service and product revenue for which                amounts have been invoiced and or collected but for which the requisite                service has not been provided. Revenue is then recognized over the                matching service period. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Technology                service also includes mobile marketing services (primarily provided                by                12Snap) to its customers which mobile marketing projects are recognized                after the completion of the project and accepted by the customer.                 All response and messaging based revenues are recognized at the time                such responses are received and processed and the Company recognizes                its                premium messaging revenues on a net basis based on guidance provided                in                Emerging Issues Task Force Issues No. 99-19 (EITF 99-19), “Reporting                Revenue Gross as Principal or Net as an Agent” and No. 01-09 (EITF 01-09),                “Accounting for Consideration Given by a Vendor to a Customer.”                 Consulting and management revenues and revenues for periodic services                are                recognized as services are performed.  NeoMedia uses                 stand-alone  pricing to determine an element's  vendor                 specific  objective  evidence  (“VSOE”) in order to                allocate an arrangement  fee amongst various pieces of a                 multi-element  contract.  The Company’s recently acquired                subsidiaries 12Snap and Sponge (See Note 4) follow this policy. Telecom                revenues from NeoMedia's subsidiary BSD are recognized at the time                that                calls are accepted by the clearing house for billing to customers                on a net                basis, based on guidance in EITF 99-19. The Company defers revenue                related                to mobile marketing service fees for which amounts have been invoiced                and/or collected but for which revenue has not been earned. Revenue                is                then recognized over the service                period. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (4)   | Revenue                is recognized upon completion of training and shipment of products,                provided there is VSOE in a multiple element arrangement.  Ongoing                product and service revenue is recognized as products are shipped                and                services performed.  The Company defers revenue related to Micro                Paint Repair licensing for which amounts have been invoiced and/or                collected and revenue is then recognized over the estimated contract                period, which is currently one year. Revenue for licensing and exclusivity                on Micro Paint Repair systems is recognized equally over the term                of the                contract, which is currently one year.  A portion of the initial fee                paid by the customer is allocated to licensing, training costs and                initial                products sold with the system. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Shipping      and Handling Costs**

**Research      and Development**

**Stock      Based Compensation**

----

**Income        Taxes **

**Translation      of Foreign Currency**

**Computation      of Net Loss Per Share**

|                                     |   | **December                31, 2006** |        | **December                31, 2005** |   | **December                31, 2004** |   |
|------------------------------------------|--------|--------------------------------------|-------------|--------------------------------------|--------|--------------------------------------|--------|
| Outstanding                Stock Options |   |                                 | 105,822,455 |                                 |   | 100,041,721                          |   |   | 52,804,121 |   |
| Outstanding                Warrants      |   |                                 | 316,325,000 |                                 |   | 71,375,000                           |   |   | 18,825,000 |   |

**Reclassifications**

----

**3.      ACQUISITIONS**

**Acquisition      and Sale of Mobot**

|                                                                     |   | (Dollars                in |   |
|--------------------------------------------------------------------------|--------|----------------------------|--------|
|                                                                     |   | Thousands)                 |   |
| Value                of 16,931,493 shares issued at $0.395 per share (1) |   | $                          | 6,688  |   |
| Cash                paid                                                 |   |                       | 3,500  |   |
| Direct                costs of acquisition                               |   |                       | 8      |   |
| Advances                to Mobot forgiven at acquisition                 |   |                       | 1,500  |   |
| Total                Fair Value of Purchase Price                        |   |                       | 11,696 |   |
|                                                                     |   |                       |   |   |
| Assets                Purchased:                                         |   |                       |   |   |
| Cash                and cash equivalents                                 |   | $                          | 328    |   |
| Accounts                receivable                                       |   |                       | 68     |   |
| Other                current assets                                      |   |                       | 49     |   |
| Property,                plant & equipment                           |   |                       | 30     |   |
| Intangible                assets                                         |   |                       | 13     |   |
| Customer                contracts and relationships                      |   |                       | 440    |   |
| Capitalized                software platform                             |   |                       | 4,200  |   |
| Copyrighted                materials                                     |   |                       | 90     |   |
| Goodwill                                                                 |   |                       | 6,778  |   |
| Total                Assets Purchased                                    |   |                       | 11,996 |   |
|                                                                     |   |                       |   |   |
| Less                Liabilities Assumed:                                 |   |                       |   |   |
| Accounts                payable                                          |   | $                          | 51     |   |
| Accrued                liabilities                                       |   |                       | 132    |   |
| Deferred                revenue                                          |   |                       | 117    |   |
| Total                Liabilities Assumed                                 |   |                       | 300    |   |

----

|                                                |   | Estimated                useful |   |
|-----------------------------------------------------|--------|---------------------------------|--------|
| Intangible                asset                     |   | life                (in years)  |   |
| Customer                contracts and relationships |   |                            | 5      |   |
| Copyrighted                materials                |   |                            | 5      |   |
| Capitalized                software platform        |   |                            | 7      |   |

| l | NeoMedia                transferred 100% of its ownership interest in Mobot to FMS, and in                return                received 16,000 shares (18% ownership) of FMS, which will operate                the                Mobot business; |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| l | All                obligations under the original merger agreement, including the purchase                price guarantee obligation, were terminated; |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| l | NeoMedia                contributed $67,000 cash to FMS at closing, and an additional $200,000                on                December 27, 2006; |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------|

----

| l | NeoMedia                received 16,931 preference shares in FMS that can be redeemed to                reacquire                the 16,931,493 original consideration shares originally issued to                acquire                Mobot. Each preference share can be redeemed for 1,000 shares of                the                NeoMedia common stock at NeoMedia’s discretion within 15 months of the                closing of this transaction, for cash in the amount of 40% of the                then-current market value of the underlying NeoMedia shares. After                15                months, the preference shares can be redeemed upon a liquidation                event of                FMS, for either 1,000 shares of NeoMedia common stock each, or for                the                current cash equivalent of the shares, at FMS’                discretion; |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| l | NeoMedia                entered into a license agreement with Mobot, pursuant to which NeoMedia                received a license to use the Mobot image recognition service for                barcode-related applications. The license is exclusive in the Americas,                Europe and Australia, restricted in Japan, Korea, and Singapore,                and                non-exclusive in other areas of the world. The exclusivity is subject to                NeoMedia meeting certain minimum transaction volume requirements                or making                minimum cash payments; and |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| l | NeoMedia                entered into a mutual release with each of the former Mobot shareholders                in which the parties released each other from the terms of the original                Mobot merger agreement, and the former Mobot shareholders consented                to the                release of the pending legal action against NeoMedia. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                        |   | (Dollars                     |      |
|-----------------------------------------------------------------------------|--------|------------------------------|-----------|
|                                                                        |   | in                Thousands) |      |
| Carrying                value of asset group at closing                     |   |                         |      |
| Tangible                assets                                              |   | $                            | 518       |   |
| Intangible                assets                                            |   |                         | 10,971    |   |
| Liabilities                                                                 |   |                         | (324      | ) |
| Purchase                price guarantee liability                           |   |                         | (5,545    | ) |
| Net                carrying value of asset group                            |   |                         | 5,620     |   |
|                                                                        |   |                         |           |   |
| Fair                value of proceeds received                              |   |                         |      |   |
| Cash                paid                                                    |   |                         | (67       | ) |
| Cash                paid subsequent to closing but before December 31, 2006 |   |                         | (200      | ) |
| Investment                in Mobot common stock                             |   |                         | 1,926     |   |
| Investment                in Mobot special preference shares (put option)   |   |                         | (406      | ) |
| Fair                value of proceeds received                              |   |                         | 1,253     |   |
|                                                                        |   |                         |      |   |
| **Loss                on disposal of Mobot**                                |   | **$**                        | **4,367** |   |

----

**Acquisition      and Sale of Sponge**

|                                                                     |   | (Dollars                in |   |
|--------------------------------------------------------------------------|--------|----------------------------|--------|
|                                                                     |   | Thousands)                 |   |
| Value                of 33,097,135 shares issued at $0.395 per share (1) |   | $                          | 13,073 |   |
| Cash                paid                                                 |   |                       | 6,141  |   |
| Direct                costs of acquisition                               |   |                       | 194    |   |
| Total                Fair Value of Purchase Price                        |   |                       | 19,408 |   |
|                                                                     |   |                       |   |   |
| Assets                Purchased:                                         |   |                       |   |   |
| Cash                and cash equivalents                                 |   | $                          | 177    |   |
| Accounts                receivable                                       |   |                       | 617    |   |
| Other                current assets                                      |   |                       | 35     |   |
| Property,                plant & equipment                           |   |                       | 53     |   |
| Customer                contracts and relationships                      |   |                       | 400    |   |
| Capitalized                software platform                             |   |                       | 1,300  |   |
| Brand                name                                                |   |                       | 800    |   |
| Copyrighted                materials                                     |   |                       | 50     |   |
| Goodwill                                                                 |   |                       | 16,692 |   |
| Total                Assets Purchased                                    |   |                       | 20,124 |   |
|                                                                     |   |                       |   |   |
| Less                Liabilities Assumed:                                 |   |                       |   |   |
| Accounts                payable                                          |   | $                          | 190    |   |
| Accrued                liabilities                                       |   |                       | 322    |   |
| Other                current liabilities                                 |   |                       | 204    |   |
| Total                Liabilities Assumed                                 |   |                       | 716    |   |

----

|                                                |   | Estimated                useful |   |
|-----------------------------------------------------|--------|---------------------------------|--------|
| Intangible                asset                     |   | life                (in years)  |   |
| Customer                contracts and relationships |   |                            | 5      |   |
| Copyrighted                materials                |   |                            | 5      |   |
| Capitalized                software platform        |   |                            | 7      |   |
| Brand                name                           |   |                            | 10     |   |

| l | NeoMedia                returned 92.5% of NeoMedia’s ownership interest in Sponge, retaining 7.5%                ownership of Sponge, |
|---|---------------------------------------------------------------------------------------------------------------------------------------------|

| l | NeoMedia                relinquished its Board of Directors positions at Sponge, |
|---|----------------------------------------------------------------------------------|

| l | the                33,097,135 shares of NeoMedia common stock that were issued as                consideration to acquire Sponge were returned to us and retired; |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| l | all                obligations under the original merger agreement, including the purchase                price guarantee obligation, were terminated; and |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| l | Sponge                returned $100,000 cash (net of attorney fees) to NeoMedia at closing                and                $150,000 cash to NeoMedia on March 7,                2007. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                |   | (Dollars                     |      |
|---------------------------------------------------------------------|--------|------------------------------|-----------|
|                                                                |   | in                Thousands) |      |
| Carrying                value of asset group at closing             |   |                         |      |
| Tangible                assets                                      |   | $                            | 2,042     |   |
| Intangible                assets                                    |   |                         | 19,091    |   |
| Liabilities                                                         |   |                         | (2,093    | ) |
| Purchase                price guarantee liability                   |   |                         | (10,088   | ) |
| Net                carrying value of asset group                    |   |                         | 8,952     |   |
|                                                                |   |                         |           |   |
| Fair                value of proceeds received                      |   |                         |      |   |
| Cash                received                                        |   |                         | 35        |   |
| Cash                paid subsequent to December 31, 2006            |   |                         | 150       |   |
| Investment                in Sponge common stock                    |   |                         | 1,399     |   |
| Return                of 33,097,135 shares of NeoMedia common stock |   |                         | 2,317     |   |
| Fair                value of proceeds received                      |   |                         | 3,901     |   |
|                                                                |   |                         |      |   |
| **Loss                on disposal of Sponge**                       |   | **$**                        | **5,051** |   |

**Acquisition      of Gavitec**

----

|                                                                     |   | (Dollars                in |   |
|--------------------------------------------------------------------------|--------|----------------------------|--------|
|                                                                     |   | Thousands)                 |   |
| Value                of 13,660,511 shares issued at $0.386 per share (1) |   | $                          | 5,273  |   |
| Cash                paid                                                 |   |                       | 1,800  |   |
| Direct                costs of acquisition                               |   |                       | 114    |   |
| Total                Fair Value of Purchase Price                        |   |                       | 7,187  |   |
|                                                                     |   |                       |   |   |
| Assets                Purchased:                                         |   |                       |   |   |
| Cash                and cash equivalents                                 |   | $                          | 74     |   |
| Accounts                receivable                                       |   |                       | 173    |   |
| Inventory                                                                |   |                       | 106    |   |
| Other                current assets                                      |   |                       | 53     |   |
| Property,                plant & equipment                           |   |                       | 15     |   |
| Intangible                assets                                         |   |                       | 3      |   |
| Capitalized                software platform                             |   |                       | 4,600  |   |
| Copyrighted                materials                                     |   |                       | 50     |   |
| Goodwill                                                                 |   |                       | 3,418  |   |
| Total                Assets Purchased                                    |   |                       | 8,492  |   |
|                                                                     |   |                       |   |   |
| Less                Liabilities Assumed:                                 |   |                       |   |   |
| Accounts                payable                                          |   | $                          | 113    |   |
| Accrued                liabilities                                       |   |                       | 24     |   |
| Deferred                revenue                                          |   |                       | 117    |   |
| Deferred                tax liability                               |   |                       | 706    |   |
| Other                current liabilities                                 |   |                       | 345    |   |
| Total                Liabilities Assumed                                 |   |                       | 1,305  |   |

|                                         |   | Estimated                useful |   |
|----------------------------------------------|--------|---------------------------------|--------|
| Intangible                asset              |   | life                (in years)  |   |
| Copyrighted                materials         |   |                            | 5      |   |
| Capitalized                software platform |   |                            | 7      |   |
| Brand                name                    |   |                            | 10     |   |

----

**Acquisition      of 12Snap**

----

|                                                                     |   | (Dollars                in |   |
|--------------------------------------------------------------------------|--------|----------------------------|--------|
|                                                                     |   | Thousands)                 |   |
| Value                of 49,294,581 shares issued at $0.394 per share (1) |   | $                          | 19,422 |   |
| Cash                paid                                                 |   |                       | 2,500  |   |
| Direct                costs of acquisition                               |   |                       | 114    |   |
| Total                Fair Value of Purchase Price                        |   |                       | 22,036 |   |
|                                                                     |   |                       |   |   |
| Assets                Purchased:                                         |   |                       |   |   |
| Cash                and cash equivalents                                 |   | $                          | 465    |   |
| Investment                in marketable securities                       |   |                       | 951    |   |
| Accounts                receivable                                       |   |                       | 2,683  |   |
| Other                current assets                                      |   |                       | 554    |   |
| Property,                plant & equipment                           |   |                       | 224    |   |
| Intangible                assets                                         |   |                       | 93     |   |
| Customer                contracts and relationships                      |   |                       | 400    |   |
| Capitalized                software platform                             |   |                       | 4,400  |   |
| Brand                name                                                |   |                       | 1,600  |   |
| Copyrighted                materials                                     |   |                       | 50     |   |
| Goodwill                                                                 |   |                       | 18,390 |   |
| Total                Assets Purchased                                    |   |                       | 29,810 |   |
|                                                                     |   |                       |   |   |
| Less                Liabilities Assumed:                                 |   |                       |   |   |
| Accounts                payable                                          |   | $                          | 977    |   |
| Accrued                liabilities                                       |   |                       | 989    |   |
| Deferred                revenue                                          |   |                       | 1,434  |   |
| Other                current liabilities                                 |   |                       | 225    |   |
| Notes                payable                                             |   |                       | 4,149  |   |
| Total                Liabilities Assumed                                 |   |                       | 7,774  |   |

|                                                |   | Estimated                useful |   |
|-----------------------------------------------------|--------|---------------------------------|--------|
| Intangible                asset                     |   | life                (in years)  |   |
| Customer                contracts and relationships |   |                            | 5      |   |
| Copyrighted                materials                |   |                            | 5      |   |
| Capitalized                software platform        |   |                            | 7      |   |
| Brand                name                           |   |                            | 10     |   |

----

| ·   | $1,100,000                will be paid in cash at Closing, and $500,000 will be placed into                escrow                and released to NeoMedia 90 days after Closing, assuming no warranty                claims; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Buyer                will forgive purchase price obligation in the amount of $880,000,                such                obligation resulting from the sale and purchase agreement between                NeoMedia                and the former shareholders of                12Snap |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 12Snap                management will waive their purchase price obligations in the amount                of                $880,000, and return to NeoMedia 2,525,818 shares of NeoMedia common                stock                issued previously; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Buyer                will return to NeoMedia 2,525,818 NeoMedia shares issued                previously; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                will retain a 10% ownership of 12Snap, subject to an option agreement                pursuant to which NeoMedia has the right to sell and Buyer has the                right                to acquire the remaining 10% stake held by NeoMedia for a purchase                price                of $750,000 after December 31; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 12snap                and NeoMedia will execute a cooperation agreement pursuant to which                12snap                will remain NeoMedia preferred partner and enjoy most favored prices,                and                12snap will perform certain research and development functions for                NeoMedia; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | The                transaction is subject to completion of a material definitive                agreement |
|--------------------|-----------------------------------------------------------------------------------------------------------|

**Acquisition      of BSD**

|                                                                    |   | (Dollars                in |   |
|-------------------------------------------------------------------------|--------|----------------------------|--------|
|                                                                    |   | Thousands)                 |   |
| Value                of 7,123,698 shares issued at $0.352 per share (1) |   | $                          | 2,508  |   |
| Direct                costs of acquisition                              |   |                       | 7      |   |
| Total                Fair Value of Purchase Price                       |   |                       | 2,515  |   |
|                                                                    |   |                       |   |   |
| Assets                Purchased:                                        |   |                       |   |   |
| Cash                and cash equivalents                                |   | $                          | 55     |   |
| Accounts                receivable                                      |   |                       | 1,733  |   |
| Other                current assets                                     |   |                       | 13     |   |
| Property,                plant & equipment                          |   |                       | 61     |   |
| Customer                contracts and relationships                     |   |                       | 1,300  |   |
| Copyrighted                materials                                    |   |                       | 130    |   |
| Goodwill                                                                |   |                       | 4,402  |   |
| Total                Assets Purchased                                   |   |                       | 7,694  |   |
|                                                                    |   |                       |   |   |
| Less                Liabilities Assumed:                                |   |                       |   |   |
| Accounts                payable                                         |   | $                          | 2,424  |   |
| Accrued                liabilities                                      |   |                       | 1,224  |   |
| Notes                payable                                            |   |                       | 1,531  |   |
| Total                Liabilities Assumed                                |   |                       | 5,179  |   |

----

|                                                |   | Estimated                useful |   |
|-----------------------------------------------------|--------|---------------------------------|--------|
| Intangible                asset                     |   | life                (in years)  |   |
| Customer                contracts and relationships |   |                            | 5      |   |
| Copyrighted                materials                |   |                            | 5      |   |

----

**Pro      Forma Financial Information (Unaudited)**

|                                              |   |      |                     |       |   | **Net**                            |   |            |        |
|---------------------------------------------------|--------|-----------|--------------------------|------------|--------|------------------------------------|--------|-----------------|-------------|
|                                              |   |      |                     |       |   | **Income**                         |   | **Weighted**    |        |
|                                              |   | **(A)**   |                     | **(A)**    |   | **(Loss)                  Per**    |   | **Average**     |        |
|                                              |   | **Total** |                     | **Net**    |   | **Share                  —** |   | **Common**      |        |
|                                              |   | **Net**   |                     | **Income** |   | **Basic                  and**     |   | **Shares**      |        |
|                                              |   | **Sales** |                     | **(Loss)** |   | **Diluted**                        |   | **Outstanding** |        |
| **Year                  ended December 31, 2006** |   |      |                     |       |   |                               |   |            |        |
| NeoMedia                                          |   | $         | 10,309                   |       |   | ($67,438                           | )      |            | ($0.11      | ) |   | 613,560,070 |   |
| Gavitec                                           |   |      | 993                      |       |   | (1,383                             | )      |            |        |   |   |   |   |
| 12Snap                                            |   |      | 9,550                    |       |   | (2,951                             | )      |            |        |   |   |   |   |
| BSD                                               |   |      | 1,723                    |       |   | (275                               | )      |            |        |   |   |   |   |
| Pro                  forma adjustments            |   |      | (                  9,608 | )(B)       |   | 4,768                              | (B)    | $               | **—** | (B)(D) | $ | (8,779,215 | )(D) |
| Pro                  forma combined               |   | $         | 12,967                   |       |   | ($67,279                           | )      |            | ($0.11      | ) |   | 604,780,855 |   |
|                                              |   |      |                     |       |   |                               |   |            |        |   |   |   |   |
| **Year                  ended December 31, 2005** |   |      |                     |       |   |                               |   |            |        |   |   |   |   |
| NeoMedia                                          |   | $         | 877                      |       |   | ($9,147                            | )      |            | ($0.02      | ) |   | 451,857,851 |   |
| Gavitec                                           |   |      | 772                      |       |   | (1,129                             | )      |            |        |   |   |   |   |
| 12Snap                                            |   |      | 7,396                    |       |   | (1,551                             | )      |            |        |   |   |   |   |
| BSD                                               |   |      | 8,437                    |       |   | 130                                |   |            |        |   |   |   |   |
| Pro                  forma adjustments            |   |      | **—**              |       |   | (1,832                             | )(C)   | $               | **—** | (C)(D) | $ | 104,135,106 | (D) |
| Pro                  forma combined               |   | $         | 17,482                   |       |   | ($13,529                           | )      |            | ($0.02      | ) |   | 555,992,957 |   |
|                                              |   |      |                     |       |   |                               |   |            |        |   |   |   |   |
| **Year                  ended December 31, 2004** |   |      |                     |       |   |                               |   |            |        |   |   |   |   |
| NeoMedia                                          |   | $         | 973                      |       |   | ($7,230                            | )      |            | ($0.02      | ) |   | 329,362,127 |   |
| Gavitec                                           |   |      | 328                      |       |   | (599                               | )      |            |        |   |   |   |   |
| 12Snap                                            |   |      | 6,743                    |       |   | (917                               | )      |            |        |   |   |   |   |
| BSD                                               |   |      | 6,078                    |       |   | 132                                |   |            |        |   |   |   |   |
| Pro                  forma adjustments            |   |      | **—**              |       |   | (1,832                             | (C)    | $               | **—** | (C)(D) | $ | 201,327,873 | (D) |
| Pro                  forma combined               |   | $         | 14,122                   |       |   | ($10,446                           | )      |            | ($0.02      | ) |   | 530,690,000 |   |

----

----

|                                                       |   | **Gavitec** |       | **12Snap** |   | **BSD**     |   | **Total** |       |
|------------------------------------------------------------|--------|-------------|------------|------------|--------|-------------|--------|-----------|------------|
| Total                stock consideration                   |   | $           | 5,400,000  |       | $      | 19,500,000  |   | $         | 2,279,263  |   | $ | 27,179,263 |   |
|                                                       |   |        |       |       |   |        |   |      |       |   |   |   |   |
| Stock                price on pro forma acquisition date   |   |        |            |       |   |             |   |      |            |   |   |  |   |
| NeoMedia                stock price around January 1, 2006 |   | $           | 0.290      |       | $      | 0.290       |   | $         | 0.290      |   |   |   |   |
| NeoMedia                stock price around January 1, 2005 |   | $           | 0.261      |       | $      | 0.261       |   | $         | 0.261      |   |   |  |   |
| NeoMedia                stock price around January 1, 2004 |   | $           | 0.135      |       | $      | 0.135       |   | $         | 0.135      |   |   |   |   |
|                                                       |   |        |            |       |   |             |   |      |            |   |   |  |   |
| Pro                forma number of consideration shares    |   |        |       |       |   |        |   |      |       |   |   |   |   |
| As                if acquisition occurred January 1, 2006  |   |        | 18,620,690 |       |   | 67,241,379  |   |      | 7,859,528  |   |   | 93,721,597 |   |
| As                if acquisition occurred January 1, 2005  |   |        | 20,689,655 |       |   | 74,712,644  |   |      | 8,732,808  |   |   | 104,135,107 |   |
| As                if acquisition occurred January 1, 2004  |   |        | 40,000,000 |       |   | 144,444,444 |   |      | 16,883,430 |   |   | 201,327,874 |   |

**Tax      Implications of Acquisitions**

----

**Intangible      Assets and Goodwill**

|                                 |   | (US                dollars in thousands) |      |
|--------------------------------------|--------|------------------------------------------|-----------|
|                                 |   | **12Snap**                               |      | **Gavitec** |   | **BSD** |   | **Other** |   | **Total** |   |
| Customer                Contracts    |   | $                                        | 400       |   | $ | — |   | $ | 1,300 |   | $ | — |   | $ | 1,700 |   |
| Proprietary                Software  |   |                                     | 4,493     |   |   | 4,603 |   |   | — |   |   | 763 |   |   | 9,859 |   |
| Brand                Name            |   |                                     | 1,600     |   |   | — |   |   | — |   |   | — |   |   | 1,600 |   |
| Copyrighted                Materials |   |                                     | 50        |   |   | 50 |   |   | 130 |   |   | — |   |   | 230 |   |
| Patents                              |   |                                     | —   |   |   | — |   |   | — |   |   | 4,888 |   |   | 4,888 |   |
| **Total**                            |   | **$**                                    | **6,543** |   | **$** | **4,653** |   | **$** | **1,430** |   | **$** | **5,651** |   | **$** | **18,277** |   |

|                                 |   | (US                dollars in thousands) |    |
|--------------------------------------|--------|------------------------------------------|---------|
|                                 |   | **12Snap**                               |    | **Gavitec** |   | **BSD** |   | **Other** |   | **Total** |   |
| Customer                Contracts    |   | $                                        | 67      |   | $ | — |   | $ | 217 |   | $ | — |   | $ | 284 |   |
| Proprietary                Software  |   |                                     | 524     |   |   | 557 |   |   | — |   |   | 675 |   |   | 1,756 |   |
| Brand                Name            |   |                                     | 133     |   |   | — |   |   | — |   |   | — |   |   | 133 |   |
| Copyrighted                Materials |   |                                     | 8       |   |   | 8 |   |   | 22 |   |   | — |   |   | 38 |   |
| Patents                              |   |                                     | — |   |   | — |   |   | — |   |   | 2,049 |   |   | 2,049 |   |
| **Total**                            |   | **$**                                    | **732** |   | **$** | **565** |   | **$** | **239** |   | **$** | **2,724** |   | **$** | **4,260** |   |

|                                 |   | (US                dollars in thousands) |      |
|--------------------------------------|--------|------------------------------------------|-----------|
|                                 |   | **12Snap**                               |      | **Gavitec** |   | **BSD** |   | **Other** |   | **Total** |   |
| Customer                Contracts    |   | $                                        | 333       |   | $ | — |   | $ | 1,083 |   | $ | — |   | $ | 1,416 |   |
| Proprietary                Software  |   |                                     | 3,972     |   |   | 4,050 |   |   | — |   |   | 88 |   |   | 8,110 |   |
| Brand                Name            |   |                                     | 1,467     |   |   | — |   |   | — |   |   | — |   |   | 1,467 |   |
| Copyrighted                Materials |   |                                     | 42        |   |   | 42 |   |   | 108 |   |   | — |   |   | 192 |   |
| Patents                              |   |                                     | —   |   |   | — |   |   | — |   |   | 2,839 |   |   | 2,839 |   |
| **Total**                            |   | **$**                                    | **5,814** |   | **$** | **4,092** |   | **$** | **1,191** |   | **$** | **2,927** |   | **$** | **14,024** |   |

|                                |   | (US                dollars in thousands) |      |
|-------------------------------------|--------|------------------------------------------|-----------|
|                                |   |                                     |      | **Accumulated** |   | **Net                Book** |   |
|                                |   | **Cost**                                 |      | **Amortization** |   | **Value** |   |
| Patents                             |   | $                                        | 4,876     |   |   | ($1,743 | ) | $ | 3,133 |   |
| Capitalized                software |   |                                     | 740       |   |   | (599 | ) |   | 141 |   |
| **Total**                           |   | **$**                                    | **5,616** |   |   | **($2,342** | **)** | **$** | **3,274** |   |

----

|       |   | **Customer                Contracts** |      | **Proprietary                Software** |   | **Brand                Name** |   | **Copyrighted                Materials** |      | **Patents** |   | **Total** |   |
|------------|--------|---------------------------------------|-----------|-----------------------------------------|--------|-------------------------------|--------|------------------------------------------|-----------|-------------|--------|-----------|--------|
| 2007       |   | $                                     | 342       |                                    | $      | 1,391                         |   | $                                        | 161       |        | $      | 46        |   | $ | 299 |   | $ | 2,239 |   |
| 2008       |   |                                  | 342       |                                    |   | 1,339                         |   |                                     | 161       |        |   | 46        |   |   | 295 |   |   | 2,183 |   |
| 2009       |   |                                  | 342       |                                    |   | 1,300                         |   |                                     | 161       |        |   | 46        |   |   | 284 |   |   | 2,133 |   |
| 2010       |   |                                  | 342       |                                    |   | 1,289                         |   |                                     | 161       |        |   | 46        |   |   | 264 |   |   | 2,102 |   |
| 2011       |   |                                  | 48        |                                    |   | 1,289                         |   |                                     | 161       |        |   | 8         |   |   | 245 |   |   | 1,751 |   |
| Thereafter |   |                                  | —   |                                    |   | 1,502                         |   |                                     | 662       |        |   | —   |   |   | 1,452 |   |   | 3,616 |   |
| **Total**  |   | **$**                                 | **1,416** |                                    | **$**  | **8,110**                     |   | **$**                                    | **1,467** |        | **$**  | **192**   |   | **$** | **2,839** |   | **$** | **14,024** |   |

**Goodwill**

|                                                      |   | (US                dollars in thousands) |    |
|-----------------------------------------------------------|--------|------------------------------------------|---------|
|                                                      |   | **12Snap**                               |    | **Gavitec** |   | **BSD** |   | **Other** |   | **Total** |   |
| Original                cost                              |   | $                                        | 18,389  |   | $ | 3,418 |   | $ | 4,402 |   | $ | — |   | $ | 26,209 |   |
| Impairment                charges                         |   |                                     | (18,327 | ) |   | — |   |   | — |   |   | — |   |   | (18,327 | ) |
| **Carrying                value as of December 31, 2006** |   | **$**                                    | **62**  |   | **$** | **3,418** |   | **$** | **4,402** |   | **$** | — |   | **$** | **7,882** |   |

**Letter      of Intent to Acquire Hip Cricket**

----

**4.      DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR      SALE**

**Micro      Paint Repair Business Unit**

**Sponge      and Mobot Businesses**

----

|                                                               |   | **Year                Ended December 31,** |    |
|--------------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                               |   | **2006**                                   |    | **2005** |   | **2004** |   |
| **NeoMedia                Micro Paint Repair business unit**       |   |                                       |    |   |   |   |   |
| Net                sales                                           |   | $                                          | 1,547   |   | $ | 1,279 |   | $ | 727 |   |
| Cost                of sales                                       |   |                                       | 1,912   |   |   | 989 |   |   | 543 |   |
| Gross                profit                                        |   |                                       | (365    | ) |   | 290 |   |   | 184 |   |
|                                                               |   |                                       |    |   |   |   |   |   |   |   |
| Sales                and marketing expenses                        |   |                                       | 1,194   |   |   | 1,594 |   |   | 711 |   |
| General                and administrative expenses                 |   |                                       | 1,193   |   |   | 355 |   |   | 243 |   |
| Research                and development costs                      |   |                                       | 245     |   |   | 342 |   |   | 188 |   |
|                                                               |   |                                       |    |   |   |   |   |   |   |   |
| Loss                from operations of business to be discontinued |   |                                       | ($2,997 | ) |   | ($2,001 | ) |   | ($958 | ) |
|                                                               |   |                                       |         |   |   |  |   |   |  |   |
| **Mobot**                                                          |   |                                       |    |   |   |   |   |   |   |   |
| Net                sales                                           |   | $                                          | 436     |   | $ | — |   | $ | — |   |
| Cost                of sales                                       |   |                                       | 591     |   |   | — |   |   | — |   |
| Gross                profit                                        |   |                                       | (155    | ) |   | — |   |   | — |   |
|                                                               |   |                                       |    |   |   |   |   |   |   |   |
| Sales                and marketing expenses                        |   |                                       | 725     |   |   | — |   |   | — |   |
| General                and administrative expenses                 |   |                                       | 198     |   |   | — |   |   | — |   |
| Research                and development costs                      |   |                                       | 564     |   |   | — |   |   | — |   |
|                                                               |   |                                       |    |   |   |   |   |   |   |   |
| Loss                from operations of discontinued business       |   |                                       | ($1,642 | ) | $ | — |   | $ | — |   |
| Loss                on disposal of business                        |   |                                       | ($4,367 | ) | $ | — |   | $ | — |   |
|                                                               |   |                                       |    |   |   |   |   |   |   |   |
| **Sponge**                                                         |   |                                       |         |   |   |  |   |   |  |   |
| Net                sales                                           |   | $                                          | 1,036   |   | $ | — |   | $ | — |   |
| Cost                of sales                                       |   |                                       | 397     |   |   | — |   |   | — |   |
| Gross                profit                                        |   |                                       | 639     |   |   | — |   |   | — |   |
|                                                               |   |                                       |         |   |   |  |   |   |  |   |
| Sales                and marketing expenses                        |   |                                       | 1,028   |   |   | — |   |   | — |   |
| General                and administrative expenses                 |   |                                       | 740     |   |   | — |   |   | — |   |
| Research                and development costs                      |   |                                       | — |   |   | — |   |   | — |   |
|                                                               |   |                                       |    |   |   |   |   |   |   |   |
| Loss                from operations of discontinued business       |   |                                       | ($1,129 | ) | $ | — |   | $ | — |   |
| Loss                on disposal of business                        |   |                                       | ($5,051 | ) | $ | — |   | $ | — |   |
|                                                               |   |                                       |         |   |   |  |   |   |  |   |
| **Total                discontinued operations**                   |   |                                       |    |   |   |   |   |   |   |   |
| Net                sales                                           |   | $                                          | 3,019   |   | $ | 1,279 |   | $ | 727 |   |
| Cost                of sales                                       |   |                                       | 2,900   |   |   | 989 |   |   | 543 |   |
| Gross                profit                                        |   |                                       | 119     |   |   | 290 |   |   | 184 |   |

| Sales                and marketing expenses                      |   |   | 2,947       |   |   | 1,594       |   |   | 711       |   |
|------------------------------------------------------------------|--------|--------|-------------|--------|--------|-------------|--------|--------|-----------|--------|
| General                and administrative expenses               |   |   | 2,131       |   |   | 355         |   |   | 243       |   |
| Research                and development costs                    |   |   | 809         |   |   | 342         |   |   | 188       |   |
|                                                             |   |   |        |   |   |        |   |   |      |   |
| **Loss                from operations of discontinued business** |   |   |             |   |   |             |   |   |           |   |
| **and                business to be discontinued**               |   |   | **($5,768** | **)**  |   | **($2,001** | **)**  |   | **($958** | **)**  |
|                                                             |   |   |             |   |   |             |   |   |           |   |
| Loss                on disposal of businesses                    |   |   | ($9,418     | )      | $      | —     |   | $      | —   |   |
| **Loss                from discontinued operations**             |   |   | ($15,186    | )      |   | ($2,001     | )      |   | ($958     | )      |

----

|                                                                                                       |   | **December                31,** |      |
|------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-----------|
|                                                                                                       |   | **2006**                        |      | **2005** |   |
| **ASSETS**                                                                                                 |   |                            |      |   |   |
| Current                assets:                                                                             |   |                            |      |   |   |
| Cash                and cash equivalents                                                                   |   | $                               | 81        |   | $ | 587 |   |
| Trade                accounts receivable, net                                                              |   |                            | 196       |   |   | 211 |   |
| Inventories,                net of allowance for obsolete & slow-moving inventory of                $0 |   |                            | 154       |   |   | 421 |   |
| Prepaid                expenses and other current assets                                                   |   |                            | 37        |   |   | 30 |   |
| Total                current assets                                                                        |   |                            | 468       |   |   | 1,249 |   |
|                                                                                                       |   |                            |           |   |   |  |   |
| Leasehold                improvements & property and equipment, net                                    |   |                            | 134       |   |   | 126 |   |
| Goodwill                and other intangible assets, net                                                   |   |                            | 2,470     |   |   | 2,655 |   |
| Other                long-term assets                                                                      |   |                            | —   |   |   | 28 |   |
| **Total                assets held for sale**                                                              |   | **$**                           | **3,072** |   | **$** | **4,058** |   |
|                                                                                                       |   |                            |      |   |   |   |   |
| **LIABILITIES**                                                                                            |   |                            |           |   |   |  |   |
| Current                liabilities:                                                                        |   |                            |      |   |   |   |   |
| Accounts                payable                                                                            |   | $                               | 25        |   | $ | 72 |   |
| Taxes                payable                                                                               |   |                            | 8         |   |   | — |   |
| Accrued                expenses                                                                            |   |                            | 22        |   |   | 6 |   |
| Deferred                revenues and other                                                                 |   |                            | 352       |   |   | 591 |   |
| **Total                liabilities held for sale**                                                         |   | **$**                           | **407**   |   | **$** | **669** |   |

|                          |   | December                31, 2006 |    | December                31, 2005 |   |
|-------------------------------|--------|----------------------------------|---------|----------------------------------|--------|
| Raw                materials  |   | $                                | 89      |                             | $      | 33 |   |
| Work-in-process               |   |                             | — |                             |   | — |   |
| Finished                goods |   |                             | 65      |                             |   | 388 |   |
| Total                         |   | $                                | 154     |                             | $      | 421 |   |

----

**Proposed      Dispositions of 12Snap and NeoMedia Telecom Services      (“NTS”)**

|                                                                        |   | **Year                Ended December 31, 2006** |        |
|-----------------------------------------------------------------------------|--------|-------------------------------------------------|-------------|
|                                                                        |   | **NTS**                                         |        | **12                Snap** |   | **Total** |   |
| Net                sales                                                    |   | $                                               | 1,371       |   | $ | 7,333 |   | $ |  8,704 |   |
| Cost                of sales                                                |   |                                            | —     |   |   | 2,054 |   |   | 2,054 |   |
| Gross                profit                                                 |   |                                            | 1,371       |   |   | 5,279 |   |   | 6,650 |   |
|                                                                        |   |                                            |        |   |   |   |   |   |   |   |
| Sales                and marketing expenses                                 |   |                                            | 400         |   |   | 4,053 |   |   | 4,453 |   |
| General                and administrative expenses                          |   |                                            | 1,166       |   |   | 1,692 |   |   | 2,858 |   |
| Research                and development costs                               |   |                                            | —     |   |   | 1,258 |   |   | 1,258 |   |
| Amortization                of intangibles                                  |   |                                            | 806         |   |   | 732 |   |   | 1,538 |   |
| Impairment                charge                                            |   |                                            | —     |   |   | 18,327 |   |   | 18,327 |   |
| Income/(Loss)                from operations of business available for sale |   |                                            | **($1,001** | **)** |   | **($20,783** | **)** |   | **($21,784** | **)** |

|                                                                    |   | **December                31, 2006** |      |
|-------------------------------------------------------------------------|--------|--------------------------------------|-----------|
|                                                                    |   | **NTS**                              |      | **12                Snap** |   | **Total** |   |
| **ASSETS**                                                              |   |                                 |      |   |   |   |   |
| Current                assets:                                          |   |                                 |      |   |   |   |   |
| Cash                and cash equivalents                                |   | $                                    | 72        |   | $ | 721 |   | $ | 793 |   |
| Trade                accounts receivable, net                           |   |                                 | 1,577     |   |   | 1,842 |   |   | 3,419 |   |
| Inventories,                net                                         |   |                                 | —   |   |   | — |   |   | — |   |
| Prepaid                expenses and other current assets                |   |                                 | 12        |   |   | 407 |   |   | 419 |   |
| Total                current assets                                     |   |                                 | 1,661     |   |   | 2,970 |   |   | 4,631 |   |
|                                                                    |   |                                 |           |   |   |  |   |   |  |   |
| Leasehold                improvements & property and equipment, net |   |                                 | 48        |   |   | 200 |   |   | 248 |   |
| Goodwill                                                                |   |                                 | 4,402     |   |   | — |   |   | 4,402 |   |
| Other                intangible assets, net                             |   |                                 | 1,192     |   |   | 5,815 |   |   | 7,007 |   |
| Other                long-term assets                                   |   |                                 | —   |   |   | — |   |   | — |   |
| **Total                assets**                                         |   | **$**                                | **7,303** |   | **$** | **8,985** |   | **$** | **16,288** |   |
|                                                                    |   |                                 |           |   |   |  |   |   |  |   |
| **LIABILITIES**                                                         |   |                                 |      |   |   |   |   |   |   |   |
| Current                liabilities:                                     |   |                                 |           |   |   |  |   |   |  |   |
| Accounts                payable                                         |   | $                                    | 1,854     |   | $ | 640 |   | $ | 2,494 |   |
| Taxes                payable                                            |   |                                 | 1,037     |   |   | — |   |   | 1,037 |   |
| Accrued                expenses                                         |   |                                 | 6         |   |   | 384 |   |   | 390 |   |
| Deferred                revenues and other                              |   |                                 | 73        |   |   | 4,097 |   |   | 4,170 |   |
| **Total                liabilities**                                    |   | **$**                                | **2,970** |   | **$** | **5,121** |   | **$** | **8,091** |   |

----

|                                                                                                                |   |                           |         |    |   |                       |   | **Pro-forma**                  |       |
|---------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------------|---------|--------|----------------------------|--------|--------------------------------|------------|
|                                                                                                                |   |                           |         |    |   |                       |   | **NeoMedia**                   |       |
|                                                                                                                |   | **NeoMedia**                   |         |    |   |                       |   | **without                NTS** |       |
|                                                                                                                |   | **as                reported** |         | **NTS** |   | **12                Snap** |   | **and                12 Snap** |       |
| Net                sales                                                                                            |   | $                              | 10,309       |    |   | ($1,371                    | )      |                           | ($7,333    | ) | $ | 1,605 |   |
| Cost                of sales                                                                                        |   |                           |  3,863  |    |   | —                    |   |                           | (2,054     | ) |   | 1,809 |   |
| Gross                profit                                                                                         |   |                           | 6,446        |    |   | (1,371                     | )      |                           | (5,279     | ) |   | (204 | ) |
|                                                                                                                |   |                           |         |    |   |                       |   |                           |       |   |   |   |   |
| Sales                and marketing expenses                                                                         |   |                           | 10,239       |    |   | (400                       | )      |                           | (4,053     | ) |   | 5,786 |   |
| General                and administrative expenses                                                                  |   |                           | 12,125       |    |   | (1,972                     | )      |                           | (2,424     | ) |   | 7,729 |   |
| Research                and development costs                                                                       |   |                           | 3,522        |    |   | —                    |   |                           | (1,258     | ) |   | 2,264 |   |
| Impairment                Charge                                                                                    |   |                           | 18,706       |    |   | —                    |   |                           | (18,327    | ) |   | 379 |   |
| Loss                from operations                                                                                 |   |                           | (38,146      | )       |   | 1,001                      |   |                           | 20,783     |   |   | (16,362 | ) |
|                                                                                                                |   |                           |         |    |   |                       |   |                           |       |   |   |   |   |
| Gain                (loss) on extinguishment of debt                                                                |   |                           | (1,879       | )       |   | —                    |   |                           | —    |   |   | (1,879 | ) |
| Amortization                of debt discount                                                                        |   |                           | —      |    |   | —                    |   |                           | —    |   |   | — |   |
| Interest                income (expense), net                                                                       |   |                           | (10,182      | )       |   | —                    |   |                           | —    |   |   | (10,182 | ) |
| Write-off                of deferred equity financing costs                                                         |   |                           | (13,256      | )       |   | —                    |   |                           | —    |   |   | (13,256 | ) |
| Gain                on sale of marketable securities                                                                |   |                           | 1,103        |    |   | —                    |   |                           | —    |   |   | 1,103 |   |
| Gain                on embedded conversion features of derivative financial                instruments              |   |                           | 13,645       |    |   | —                    |   |                           | —    |   |   | 13,645 |   |
| Change                in fair value from revaluation of warrants in derivative financial                instruments |   |                           | (3,537       | )       |   | —                    |   |                           | —    |   |   | (3,537 | ) |
|                                                                                                                |   |                           |         |    |   |                       |   |                           |       |   |   |   |   |
| **LOSS                FROM CONTINUING OPERATIONS**                                                                  |   |                           | (52,252      | )       |   | 1,001                      |   |                           | 20,783     |   |   | (30,468 | ) |
|                                                                                                                |   |                           |         |    |   |                       |   |                           |       |   |   |   |   |
| **DISCONTINUED                OPERATIONS (Note 4)**                                                                 |   |                           |              |    |   |                            |   |                           |            |   |   |  |   |
| Net                loss from discontinued operations                                                                |   |                           | (5,768       | )       |   | —                    |   |                           | —    |   |   | (5,768 | ) |
| Loss                on disposal of Sponge and Mobot subsidiaries                                                    |   |                           | (9,418       | )       |   | —                    |   |                           | —    |   |   | (9,418 | ) |
| **LOSS                FROM DISCONTINUED OPERATIONS**                                                                |   |                           | (15,186      | )       |   | —                    |   |                           | —    |   |   | (15,186 | ) |
|                                                                                                                |   |                           |              |    |   |                            |   |                           |            |   |   |  |   |
| **NET                LOSS**                                                                                         |   |                           | **($67,438** | **)**   | **$**  | **1,001**                  |   | **$**                          | **20,783** |   |   | **($45,654** | **)** |

----

|                                                                                                                                                                                                                                    |   |                           |       |    |   |                       |   | **Pro-forma**                  |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|------------|---------|--------|----------------------------|--------|--------------------------------|------------|
|                                                                                                                                                                                                                                    |   |                           |       |    |   |                       |   | **NeoMedia**                   |       |
|                                                                                                                                                                                                                                    |   | **NeoMedia**                   |       |    |   |                       |   | **without                NTS** |       |
|                                                                                                                                                                                                                                    |   | **as                reported** |       | **NTS** |   | **12                Snap** |   | **and                12 Snap** |       |
| **ASSETS**                                                                                                                                                                                                                              |   |                           |       |    |   |                       |   |                           |       |
| Current                assets:                                                                                                                                                                                                          |   |                           |       |    |   |                       |   |                           |       |
| Cash                and cash equivalents                                                                                                                                                                                                |   | $                              | 3,606      |    | $      | (72                        | )      | $                              | (721       | ) | $ | 2,813 |   |
| Trade                accounts receivable, net of allowance for doubtful accounts of $69                and                $14, respectively                                                                                             |   |                           | 3,606      |    |   | (1,577                     | )      |                           | (1,842     | ) |   | 187 |   |
| Other                Receivables                                                                                                                                                                                                        |   |                           | 550        |    |   | —                    |   |                           | —    |   |   | 550 |   |
| Inventories,                net of allowance for obsolete & slow-moving inventory of                $53.                                                                                                                            |   |                           | 80         |    |   | —                    |   |                           | —    |   |   | 80 |   |
| Investment                in marketable securities                                                                                                                                                                                      |   |                           | 57         |    |   | —                    |   |                           | —    |   |   | 57 |   |
| Prepaid                expenses and other current assets                                                                                                                                                                                |   |                           | 521        |    |   | (12                        | )      |                           | —    |   |   | 509 |   |
| Assets                held for sale                                                                                                                                                                                                     |   |                           | 3,072      |    |   | —                    |   |                           | (407       | ) |   | 2,665 |   |
| Total                current assets                                                                                                                                                                                                     |   |                           | 11,492     |    |   | (1,661                     | )      |                           | (2,970     | ) |   | 6,861 |   |
|                                                                                                                                                                                                                                    |   |                           |            |    |   |                            |   |                           |            |   |   |  |   |
| Leasehold                improvements & property and equipment, net                                                                                                                                                                 |   |                           | 439        |    |   | (48                        | )      |                           | (200       | ) |   | 191 |   |
| Goodwill                                                                                                                                                                                                                                |   |                           | 7,882      |    |   | (4,402                     | )      |                           | (62        | ) |   | 3,542 |   |
| Other                Intangible assets, net                                                                                                                                                                                             |   |                           | 14,024     |    |   | (1,192                     | )      |                           | (5,753     | ) |   | 7,017 |   |
| Cash                surrender value of life insurance policy                                                                                                                                                                            |   |                           | 863        |    |   | —                    |   |                           | —    |   |   | 863 |   |
| Loan                to Mobot                                                                                                                                                                                                            |   |                           | —    |    |   | —                    |   |                           | —    |   |   | - |   |
| Other                long-term assets                                                                                                                                                                                                   |   |                           | 3,425      |    |   | —                    |   |                           | —    |   |   | 3,425 |   |
| **Total                assets**                                                                                                                                                                                                         |   | **$**                          | **38,125** |    | **$**  | **(7,303**                 | **)**  | **$**                          | **(8,985** | **)** | **$** | **21,837** |   |
|                                                                                                                                                                                                                                    |   |                           |            |    |   |                            |   |                           |            |   |   |  |   |
| **LIABILITIES                AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                           |   |                           |       |    |   |                       |   |                           |       |   |   |   |   |
| Current                liabilities:                                                                                                                                                                                                     |   |                           |            |    |   |                            |   |                           |            |   |   |  |   |
| Accounts                payable                                                                                                                                                                                                         |   | $                              | 4,936      |    | $      | (1,854                     | )      | $                              | (640       | ) | $ | 2,442 |   |
| Liabilities                held for sale                                                                                                                                                                                                |   |                           | 407        |    |   | —                    |   |                           | —    |   |   | 407 |   |
| Taxes                payable                                                                                                                                                                                                            |   |                           | 1,042      |    |   | (1,037                     | )      |                           | —    |   |   | 5 |   |
| Accrued                expenses                                                                                                                                                                                                         |   |                           | 4,406      |    |   | (6                         | )      |                           | (384       | ) |   | 4,016 |   |
| Deferred                revenues and customer prepayments                                                                                                                                                                               |   |                           | 2,563      |    |   | —                    |   |                           | (1,989     | ) |   | 574 |   |
| Notes                payable                                                                                                                                                                                                            |   |                           | 2,196      |    |   | (73                        | )      |                           | (2,108     | ) |   | 15 |   |
| Accrued                purchase price guarantee                                                                                                                                                                                         |   |                           | 21,427     |    |   | —                    |   |                           | —    |   |   | 21,427 |   |
| Derivative                financial instruments                                                                                                                                                                                         |   |                           | 25,819     |    |   | —                    |   |                           | —    |   |   | 25,819 |   |
| Deferred                tax liability                                                                                                                                                                                                   |   |                           | 706        |    |   | —                    |   |                           | —    |   |   | 706 |   |
| Debentures                payable                                                                                                                                                                                                       |   |                           | 7,500      |    |   | —                    |   |                           | —    |   |   | 7,500 |   |
| Preferred                  stock, $0.01 par value, 25,000,000 shares authorized, 22,000 issued,                  21,622 shares outstanding, liquidation value of                  $21,657.                                              |   |                           | 21,657     |    |   | —                    |   |                           | —    |   |   | 21,657 |   |
| **Total                liabilities**                                                                                                                                                                                                    |   |                           | 92,659     |    |   | (2,970                     | )      |                           | (5,121     | ) |   | 84,568 |   |
|                                                                                                                                                                                                                                    |   |                           |       |    |   |                       |   |                           |       |   |   |   |   |
|                                                                                                                                                                                                                                    |   |                           |            |    |   |                            |   |                           |            |   |   |  |   |
| Shareholders’                equity (deficit):                                                                                                                                                                                    |   |                           |       |    |   |                       |   |                           |       |   |   |   |   |
| Common                  stock, $0.01 par value, 5,000,000,000 shares authorized, 639,233,173                  and                  475,387,910 shares issued and 637,591,747 and 467,601,717 outstanding,                  respectively |   |                           | 6,376      |    |   | —                    |   |                           | —    |   |   | 6,376 |   |
| Additional                paid-in capital                                                                                                                                                                                               |   |                           | 100,541    |    |   | —                    |   |                           | —    |   |   | 100,541 |   |
| Deferred                equity financing costs                                                                                                                                                                                          |   |                           | —    |    |   | —                    |   |                           | —    |   |   | - |   |
| Accumulated                deficit                                                                                                                                                                                                      |   |                           | (159,962   | )       |   | (4,333                     | )      |                           | (3,864     | ) |   | (168,159 | ) |
| Accumulated                other comprehensive loss                                                                                                                                                                                     |   |                           | (710       | )       |   | —                    |   |                           | —    |   |   | (710 | ) |
| Treasury                stock, at cost, 201,230 shares of common stock                                                                                                                                                                  |   |                           | (779       | )       |   | —                    |   |                           | —    |   |   | (779 | ) |
| Total                shareholders’ equity (deficit)                                                                                                                                                                               |   |                           | (54,534    | )       |   | (4,333                     | )      |                           | (3,864     | ) |   | (62,731 | ) |
| **Total                liabilities and shareholders’ equity (deficit)**                                                                                                                                                           |   | **$**                          | **38,125** |    | **$**  | **(7,303**                 | **)**  | **$**                          | **(8,985** | **)** | **$** | **21,837** |   |

----

**5.      FINANCING**

**Series      C Convertible Preferred Stock**

----

| ·   | Any                case or action of bankruptcy or insolvency commenced by the Company                or any                subsidiary, against the Company or adjudicated by a court against                the                Company for the benefit of                creditors; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Any                default in its obligations under a mortgage or debt in excess of                $100,000; |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | Any                cessation in the eligibility of the Company’s stock to be quoted on a                trading market; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | Failure                to timely file the registration statement covering the shares related                to                the conversion option, or failure to make the registration statement                effective timely (NeoMedia is in default of this                provision); |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Any                lapse in the effectiveness of the registration statement covering                the                shares related to the conversion option, the warrants as described                and                transacted in the securities purchase agreement and accompanying                documents; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Any                failure to deliver certificates within the specified time;                and |
|--------------------|--------------------------------------------------------------------------------------------------|

| ·   | Any                failure, by the Company, to pay in full the amount of cash due pursuant                to                a buy-in or failure to pay any amounts owed on account on account                of an                event of default within 10 days of the date                due. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                8% cumulative Series C convertible preferred stock is convertible                into                common stock, at the option of the Purchaser, at any time after the                effective date; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Conversions                can be made in increments and from time to                time; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | The                8% cumulative Series C convertible preferred stock has voting rights                on an                “as converted” basis, meaning the Purchaser is entitled to vote the number                of shares of common stock into which the 8% cumulative Series C                convertible preferred stock was convertible as of the record date                for a                meeting of shareholders; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | As                promptly as practicable after any conversion date and subject to                an                effective registration statement or an exemption from registration,                the                Company shall cause its transfer agent to deliver a certificate                representing the converted shares, free of any legends and trading                restrictions for the number of shares                converted; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Company will reserve and keep available authorized and unissued registered                shares available to be issued upon                conversion; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Purchaser                will not be responsible for any transfer taxes relative to issuance                of                shares; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| ·   | If                the Company offers, sells or grants stock at an effective per share                price                less than the then Conversion Price, then the Conversion Price shall                be                reduced to equal the effective conversion, exchange or purchase price                for                such common stock or common stock                equivalents; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                full fair value of the Series C convertible preferred stock is now                callable in the amount of                $21,657,000; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                warrants can be exercised on a cashless basis as described                above; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | The                requirement for the Purchaser to maintain an ownership interest in                NeoMedia of less than 5% is waived; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                is responsible for liquidated damages as described                above. |
|--------------------|--------------------------------------------------------------------------------------------------|

| ·   | Prior                to the default, NeoMedia was accreting dividends on the Series C                convertible preferred stock, using the effective interest method,                through                periodic charges to additional paid in capital. Due to the default                status,                NeoMedia has accreted dividends to the full fair value of the Series                C                convertible preferred stock, resulting in an additional charge of                $18,204,000 to net loss attributable to common                shareholders. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Series C convertible preferred stock is now reported as demand debt                in the                current liabilities section of the balance sheet, pursuant to the                guidance                outlined in SFAS 150. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Instrument:**                                |   |   |       |
|------------------------------------------------|--------|--------|------------|
| Convertible                preferred stock (1) |   | $      | 1,711,000  |   |
| Common                stock warrants (2)       |   |   | 16,172,000 |   |
| Embedded                conversion feature     |   |   | 1,935,000  |   |
| Debt                extinguishment loss (3)    |   |   | (1,964,000 | ) |
| Total                gross proceeds            |   | $      | 17,854,000 |   |

----

| (1)   | The                discount to the face value of the 8% cumulative Series C convertible                preferred stock that resulted from the allocation along with deferred                costs was being accreted through periodic charges to additional paid-in                capital using the effective interest method, prior to the accretion                to                full fair value due to NeoMedia’s being in default of the registration                rights agreement |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (2)   | The                Company issued additional warrants to purchase aggregate 75,000,000                shares                of common stock in connection with the 8% cumulative Series C convertible                preferred stock. The Company also issued 2,000,000 warrants (valued                at                $447,000) as financing fees. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | The                financing arrangement settled face value $3,209,000 of preexisting                indebtedness. The debt extinguishment loss was calculated as the                amount                that the fair value of securities issued (using a relative fair value                basis) exceeded the Company’s carrying                value. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **(Assets)                Liabilities:**   |   | **Dec.                31, 2006** |      |
|--------------------------------------------|--------|----------------------------------|-----------|
| Common                stock warrants       |   | $                                | 3,600,000 |   |
| Embedded                conversion feature |   |                             | 4,770,000 |   |
| Other                warrants (1)          |   |                             | 977,000   |   |
|                                       |   | $                                | 9,347,000 |   |

----

| (1)   | The                fair values of certain other derivative financial instruments (warrants)                that existed at the time of the issuance of Series C convertible                preferred                stock were reclassified from stockholders’ equity to liabilities when, in                connection with the issuance of Series C convertible preferred stock,                the                Company no longer controlled its ability to share-settle these                instruments. These derivative financial instruments had fair values                of                $13,883,000 and $977,000 on February 17, 2006 and December 31, 2006,                respectively. The decrease in fair value of these other derivative                financial instruments resulted from a decrease in NeoMedia’s share price                between February 17, 2006 and December 31, 2006. The change in fair                value                of $9,174,000 is reported as “Gain on embedded conversion features of                derivative financial instruments” in the accompanying consolidated                statement of operations. These warrants will be reclassified to                stockholders’ equity when the Company reacquires the ability to                share-settle the instruments. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                           |   | **Shares                of****common                stock** |        |
|------------------------------------------------|--------|-------------------------------------------------------------|-------------|
| Common                stock warrants           |   |                                                        | 75,000,000  |   |
| Embedded                conversion feature (1) |   |                                                        | 477,021,443 |   |
| Other                warrants                  |   |                                                        | 33,325,000  |   |
|                                           |   |                                                        | 585,346,443 |   |

----

| (1)   | The                terms of the embedded conversion features in the Series C convertible                preferred stock provide for variable conversion rates that are indexed                to                the Company’s 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 was convertible as of December 31, 2006 was calculated                as the face value of $21,622,000 plus assumed dividends of $1,514,000                if                declared, divided by 97% of the lowest closing bid price for the                30                trading days preceding December 31, 2006, which was $0.053 per share. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Holder                        |   | **Cornell                Capital Partners** |   | **Other**                    |
|-------------------------------|--------|---------------------------------------------|--------|------------------------------|
| Instrument                    |   | Warrants                                    |   | Warrants                     |
| Exercise                price |   | $0.04                                       |   | $0.01                - $3.45 |
| Term                (years)   |   | 4.13                                        |   | 0.5                - 4.13    |
| Volatility                    |   | 158.89%-165.86%                             |   | 158.89%-165.86%              |
| Risk-free                rate |   | 3.65%                                       |   | 3.65%                        |

----

| **Instrument**                                            |   | **Features**                 |
|-----------------------------------------------------------|--------|------------------------------|
| Conversion                prices                          |   | $0.05                        |
| Remaining                terms (years)                    |   | 2.13                         |
| Equivalent                volatility                      |   | 143.22%                      |
| Equivalent                interest-risk adjusted rate     |   | 8.17%                - 8.58% |
| Equivalent                credit-risk adjusted yield rate |   | 14.50%                       |

|                                                                          |   | **As                  of December 31,** |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                          |   | **2006**                                |   | **2005** |   |
| Warrants                  and embedded conversion features in preferred stock |   | $                                       | 9,217  |   | $ | — |   |
| Warrants                  and embedded conversion features in debentures      |   |                                    | 15,679 |   |   | — |   |
| Fair                  value of future payment obligation                      |   |                                    | 564    |   |   | — |   |
| Special                  preference stock of Mobot                            |   |                                    | 359    |   |   | — |   |
| Total                  derivative financial instruments                       |   | $                                       | 25,819 |   | $ | — |   |

**$5      Million Secured Convertible Debenture - August 2006**

----

| ·   | Any                case or action of bankruptcy or insolvency commenced by the Company                or any                subsidiary, against the Company or adjudicated by a court against                the                Company for the benefit of                creditors; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Any                default in its obligations under a mortgage or debt in excess of                $100,000; |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | Any                cessation in the eligibility of the Company’s stock to be quoted on a                trading market; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | Failure                to timely file the registration statement covering the shares related                to                the conversion option, or failure to make the registration statement                effective timely (NeoMedia is in default of this                provision); |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Any                lapse in the effectiveness of the registration statement covering                the                shares related to the conversion option, the warrants as described                and                transacted in the securities purchase agreement and accompanying                documents; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Any                failure to deliver certificates within the specified time;                and |
|--------------------|--------------------------------------------------------------------------------------------------|

| ·   | Any                failure, by the Company, to pay in full the amount of cash due pursuant                to                a buy-in or failure to pay any amounts owed on account on account                of an                event of default within 3 days of the date                due. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                convertible debenture is convertible into common stock, at the option                of                the Purchaser, at any time after the effective                date; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | As                promptly as practicable after any conversion date, and subject to                an                effective registration statement or an exemption from registration                the                Company shall cause its transfer agent to deliver a certificate                representing the converted shares, free of any legends and trading                restrictions for the number of shares                converted; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Company will reserve and keep available authorized and unissued registered                shares available to be issued upon                conversion; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Purchaser                will not be responsible for any transfer taxes relative to issuance                of                shares; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| ·   | If                the Company offers, sells or grants stock at an effective per share                price                less than the then Conversion Price, then the Conversion Price shall                be                reduced to equal the effective conversion, exchange or purchase price                for                such common stock or common stock equivalents; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Pursuant                to the terms of the convertible debenture agreement between NeoMedia                and                Cornell signed in connection with the convertible debenture sale,                without                Cornell’s consent NeoMedia cannot |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·­   | issue                or sell any shares of Common Stock or preferred stock without                consideration or for consideration per share less than the closing                bid                price immediately prior to its issuance, |
|--------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·­   | issue                or sell any preferred stock, warrant, option, right, contract, call,                or                other security or instrument granting the holder thereof the right                to                acquire common stock for consideration per share less than the closing                bid                price immediately prior to its issuance, |
|--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·­   | enter                into any security instrument granting the holder a security interest                in                any of its assets of, or |
|--------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·­   | file                any registration statements on Form S-8. |
|--------------------------|--------------------------------------------------------------|

| ·   | Pursuant                to a security agreement between NeoMedia and the Purchaser signed                in                connection with the convertible debenture, the Purchaser has a security                interest in all of NeoMedia’s assets. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                full fair value of the secured convertible debenture is now callable                in                the amount of $5,000,000; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                warrants can be exercised on a cashless basis as described                above; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                is responsible for liquidated damages; NeoMedia has accrued $893,000                as                the expected fair value of liquidated damages relating to the secured                convertible debenture as of December 31, 2006; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                requirement for the Purchaser to maintain an ownership interest in                NeoMedia of less than 5% is                terminated; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Prior                to the default, NeoMedia was accreting the debt discount on the secured                convertible debenture, using the effective interest method, through                periodic charges to interest expense. Due to the default status,                NeoMedia                has accreted debt discount to the full fair value of the secured                convertible debenture, resulting in an additional charge to income                from                continuing operations of                $4,871,000. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                secured convertible debenture is now reported as debt in the current                liabilities section of the balance sheet rather than long                term. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Instrument:                                |   |   |          |
|--------------------------------------------|--------|--------|---------------|
| Convertible                debenture (1)   |   | $      | —       |   |
| Common                stock warrants (2)   |   |   | 18,507,000    |   |
| Embedded                conversion feature |   |   | 970,000       |   |
| Derivative                loss             |   |   | (14,477,000   | ) |
| **Total                gross proceeds**    |   | **$**  | **5,000,000** |   |

----

| (1)   | There                were insufficient proceeds to allocate amounts to the host debentures.                Accordingly, for purposes of application of the effective interest                method,                the company applied the 1% convention which provides for recognition                of 1%                of the future value as amortization. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| (2)   | The                Company issued warrants to purchase aggregate 175,000,000 shares                of common                stock in connection with the convertible debenture, as described                above. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (Assets)                Liabilities:       |   | December                31, 2006 |           |
|--------------------------------------------|--------|----------------------------------|----------------|
| Common                stock warrants       |   | $                                | 8,730,000      |   |
| Embedded                conversion feature |   |                             | 3,211,000      |   |
|                                       |   | **$**                            | **11,941,000** |   |

|                                           |   | Shares                of common                stock |            |
|------------------------------------------------|--------|------------------------------------------------------|-----------------|
| Common                stock warrants           |   |                                                 | 175,000,000     |   |
| Embedded                conversion feature (1) |   |                                                 | 111,111,111     |   |
|                                           |   |                                                 | **286,111,111** |   |

----

| (1)   | The                terms of the embedded conversion features in the convertible debenture                provide for variable conversion rates that are indexed to the Company’s                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                was                convertible as of December 31, 2006 was calculated as the face value                of                $5,000,000, divided by 90% of the lowest closing bid price for the                30                trading days preceding December 31, 2006. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Holder                                |   | Cornell                Capital Partners |
|---------------------------------------|--------|-----------------------------------------|
| Instrument                            |   | Warrants                                |
| Exercise                price         |   | $0.04                - $0.05            |
| Remaining                Term (years) |   | 4.3                                     |
| Volatility                            |   | 158.89%-165.86%                         |
| Risk-free                rate         |   | 4.70%                                   |

----

| Instrument:                                               |   | Features |   |
|-----------------------------------------------------------|--------|----------|--------|
| Conversion                prices                          |   | $        | 0.045  |   |
| Remaining                terms (years)                    |   |     | 1.3    |   |
| Equivalent                volatility                      |   |     | 162.98 | % |
| Equivalent                interest-risk adjusted rate     |   |     | 9.11   | % |
| Equivalent                credit-risk adjusted yield rate |   |     | 15.25  | % |

----

**$2.5      Million Secured Convertible Debenture - December 2006**

----

| ·   | Any                case or action of bankruptcy or insolvency commenced by the Company                or any                subsidiary, against the Company or adjudicated by a court against                the                Company for the benefit of                creditors; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Any                default in its obligations under a mortgage or debt in excess of                $100,000; |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | Any                cessation in the eligibility of the Company’s stock to be quoted on a                trading market; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | Failure                to timely file the registration statement covering the shares related                to                the conversion option, or failure to make the registration statement                effective timely; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Any                lapse in the effectiveness of the registration statement covering                the                shares related to the conversion option, the warrants as described                and                transacted in the securities purchase agreement and accompanying                documents; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Any                failure to deliver certificates within the specified time;                and |
|--------------------|--------------------------------------------------------------------------------------------------|

| ·   | Any                failure, by the Company, to pay in full the amount of cash due pursuant                to                a buy-in or failure to pay any amounts owed on account on account                of an                event of default within 3 days of the date                due. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                convertible debenture is convertible into common stock, at the option                of                the Purchaser, at any time after the effective                date; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | As                promptly as practicable after any conversion date, and subject to                an                effective registration statement or an exemption from registration                the                Company shall cause its transfer agent to deliver a certificate                representing the converted shares, free of any legends and trading                restrictions for the number of shares                converted; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Company will reserve and keep available authorized and unissued registered                shares available to be issued upon                conversion; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Purchaser                will not be responsible for any transfer taxes relative to issuance                of                shares; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| ·   | If                the Company offers, sells or grants stock at an effective per share                price                less than the then Conversion Price, then the Conversion Price shall                be                reduced to equal the effective conversion, exchange or purchase price                for                such common stock or common stock equivalents; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Pursuant                to the terms of the convertible debenture agreement between NeoMedia                and                Cornell signed in connection with the convertible debenture sale,                without                Cornell’s consent NeoMedia cannot |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·­   | issue                or sell any shares of Common Stock or preferred stock without                consideration or for consideration per share less than the closing                bid                price immediately prior to its issuance, |
|--------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·­   | issue                or sell any preferred stock, warrant, option, right, contract, call,                or                other security or instrument granting the holder thereof the right                to                acquire common stock for consideration per share less than the closing                bid                price immediately prior to its issuance, |
|--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·­   | enter                into any security instrument granting the holder a security interest                in                any of its assets of, or |
|--------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·­   | file                any registration statements on Form S-8. |
|--------------------------|--------------------------------------------------------------|

| ·   | In                addition, pursuant to a security agreement between NeoMedia and the                Purchaser signed in connection with the convertible debenture, the                Purchaser has a security interest in all of NeoMedia’s assets. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                full fair value of the secured convertible debenture is now callable                in                the amount of $2,500,000; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                warrants can be exercised on a cashless basis as described                above; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                is responsible for liquidated damages of 2% of the principal up to                a                maximum of $500,000; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                requirement for the Purchaser to maintain an ownership interest in                NeoMedia of less than 5% is                terminated; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                incurred a charge to income from continuing operations on this                secured convertible debenture to recognize the liability of the debenture                at redemption value by fully writing off the debt                discount. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                secured convertible debenture is reported as debt in the current                liabilities section of the balance sheet rather than long term, because                the debenture is callable as demand debt due to the                default. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Instrument:                                |   |   |          |
|--------------------------------------------|--------|--------|---------------|
| Convertible                debenture       |   | $      | 2,500,000     |   |
| Common                stock warrants (1)   |   |   | 2,159,000     |   |
| Embedded                conversion feature |   |   | 1,579,000     |   |
| Derivative                loss             |   |   | (1,238,000    | ) |
| Interest                expense(2)         |   |   | (2,770,000    | ) |
| **Total                gross proceeds**    |   | **$**  | **2,230,000** |   |

----

| (1)   | The                Company issued warrants to purchase aggregate 42,000,000 shares of                common                stock in connection with the convertible debenture, as described                above. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| (2)   | Due                to the default status, the debentures were accreted up to the full                fair                value of $2,500,000 at inception and the financing costs of $270,000                were                expensed to interest expense. As a result of the default, NeoMedia                recorded total charges to income in the amount of $4,008,000, which                is                more than the face value of the debenture of $2,500,000. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                           |   | Shares                ofcommon                stock |           |
|------------------------------------------------|--------|-----------------------------------------------------|----------------|
| Common                stock warrants           |   |                                                | 42,000,000     |   |
| Embedded                conversion feature (1) |   |                                                | 55,555,556     |   |
|                                           |   |                                                | **97,555,556** |   |

| (1)   | The                terms of the embedded conversion features in the convertible debenture                provide for variable conversion rates that are indexed to the Company’s                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                was                convertible as of December 31, 2006 was calculated as the face value                of                $2,500,000, divided by 90% of the lowest closing bid price for the                30                trading days preceding December 31, 2006. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Holder                                |   | Cornell                Capital Partners |
|---------------------------------------|--------|-----------------------------------------|
| Instrument                            |   | Warrants                                |
| Exercise                price         |   | $0.06                                   |
| Remaining                Term (years) |   | 5.0                                     |
| Volatility                            |   | 158.89%-165.86%                         |
| Risk-free                rate         |   | 4.70%                                   |

----

| **Instrument:**                                           |   | **Features** |
|-----------------------------------------------------------|--------|--------------|
| Conversion                prices                          |   | $0.06        |
| Remaining                terms (years)                    |   | 2.0          |
| Equivalent                volatility                      |   | 163.66%      |
| Equivalent                interest-risk adjusted rate     |   | 9.08%        |
| Equivalent                credit-risk adjusted yield rate |   | 15.25%       |

|                                                                        |   | **As                of December 31,** |   |
|-----------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                        |   | **2006**                              |   | **2005** |   |
| Warrants                and embedded conversion features in preferred stock |   | $                                     | 9,217  |   | $ | — |   |
| Warrants                and embedded conversion features in debentures      |   |                                  | 15,679 |   |   | — |   |
| Fair                value of future payment obligation                      |   |                                  | 564    |   |   | — |   |
| Special                preference stock of Mobot                            |   |                                  | 359    |   |   | — |   |
| Total                derivative financial instruments                       |   | $                                     | 25,819 |   | $ | — |   |

----

**Standby      Equity Distribution Agreements with Cornell **

|                                              |   | **Years                ended December 31,** |    |
|---------------------------------------------------|--------|---------------------------------------------|---------|
|                                              |   | **2006**                                    |    | **2005** |   | **2004** |   |
|                                              |   |                                        |    |   |   |   |   |
| Number                of shares sold to Cornell   |   |                                        | 751,880 |   |   | 26,435,512 |   |   | 112,743,417 |   |
|                                              |   |                                        |    |   |   |   |   |   |   |   |
| Gross                Proceeds from sale of shares |   | $                                           | 234,000 |   | $ | 9,527,000 |   | $ | 10,123,000 |   |
| Less:                discounts and fees*          |   |                                        | (24,000 | ) |   | (1,022,000 | ) |   | (1,967,000 | ) |
| Net                Proceeds from sale of shares   |   | $                                           | 210,000 |   | $ | 8,505,000 |   | $ | 8,156,000 |   |

**Promissory      Note Payable to Cornell **

----

----

**6.**
**PROPERTY      AND EQUIPMENT**

|                                                 |   | As                of December 31,        |    |
|------------------------------------------------------|--------|------------------------------------------|---------|
|                                                 |   | **2006**                                 |    | **2005** |   |
|                                                 |   | (US                dollars in thousands) |    |
|                                                 |   |                                     |    |   |   |
| Furniture                and fixtures                |   | $                                        | 426     |   | $ | 264 |   |
| Equipment                                            |   |                                     | 1,110   |   |   | 186 |   |
| Autos                                                |   |                                     | 17      |   |   | 17 |   |
| Leasehold                improvements                |   |                                     | 74      |   |   | 2 |   |
| Total                                                |   |                                     | 1,627   |   |   | 469 |   |
| Less:                Accumulated depreciation        |   |                                     | (1,188  | ) |   | (359 | ) |
| **Total                property and equipment, net** |   | **$**                                    | **439** |   | **$** | **110** |   |

**7.**
**GOODWILL      AND OTHER INTANGIBLE ASSETS **

**Goodwill**

|                                                          |   | **As                of December 31,**    |      |
|---------------------------------------------------------------|--------|------------------------------------------|-----------|
|                                                          |   | **2006**                                 |      | **2005** |   |
|                                                          |   | (US                dollars in thousands) |      |
|                                                          |   |                                     |      |   |   |
| Goodwill                resulting from acquisition of Gavitec |   | $                                        | 3,418     |   | $ | — |   |
| Goodwill                resulting from acquisition of BSD     |   |                                     | 4,402     |   |   | — |   |
| Goodwill                resulting from acquisition of 12Snap  |   |                                     | 62        |   |   | — |   |
| **Goodwill,                net**                              |   | **$**                                    | **7,882** |   | **$** | **—** |   |

----

|                                                                |   | **As                of December 31,**    |    |
|---------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                |   | **2006**                                 |    | **2005** |   |
|                                                                |   | (US                dollars in thousands) |    |
|                                                                |   |                                     |    |   |   |
| Beginning                Balance                                    |   | $                                        | — |   | $ | — |   |
| Additions                (acquisitions of Gavitec, BSD, and 12Snap) |   |                                     | 26,209  |   |   | — |   |
| Impairment                loss (Note 2)                             |   |                                     | (18,327 | ) |   | — |   |
| Ending                Balance                                       |   | $                                        | 7,882   |   | $ | — |   |

**Other      Intangible Assets**

|                                                     |   | **As                of December 31,**    |       |
|----------------------------------------------------------|--------|------------------------------------------|------------|
|                                                     |   | **2006**                                 |       | **2005** |   |
|                                                     |   | (US                dollars in thousands) |       |
|                                                     |   |                                     |       |   |   |
| Customer                Contracts, net                   |   | $                                        | 1,416      |   | $ | — |   |
| Proprietary                Software, net                 |   |                                     | 8,110      |   |   | 141 |   |
| Patents,                net                              |   |                                     | 2,839      |   |   | 3,133 |   |
| Brand                Name and Copyrighted Materials, net |   |                                     | 1,659      |   |   | — |   |
| **Other                intangible assets, net**          |   | **$**                                    | **14,024** |   | **$** | **3,274** |   |

|                             |   | **As                of December 31,**    |    |
|----------------------------------|--------|------------------------------------------|---------|
|                             |   | **2006**                                 |    | **2005** |   |
|                             |   | (US                dollars in thousands) |    |
|                             |   |                                     |    |   |   |
| Beginning                Balance |   | $                                        | — |   | $ | — |   |
| Additions                        |   |                                     | 1,700   |   |   | — |   |
| Amortization                     |   |                                     | (284    | ) |   | — |   |
| Ending                Balance    |   | $                                        | 1,416   |   | $ | — |   |

----

|                             |   | **As                of December 31,**    |   |
|----------------------------------|--------|------------------------------------------|--------|
|                             |   | **2006**                                 |   | **2005** |   |
|                             |   | (US                dollars in thousands) |   |
|                             |   |                                     |   |   |   |
| Beginning                Balance |   | $                                        | 140    |   | $ | 89 |   |
| Additions                        |   |                                     | 9,128  |   |   | 110 |   |
| Amortization                     |   |                                     | (1,158 | ) |   | (59 | ) |
| Ending                Balance    |   | $                                        | 8,110  |   | $ | 140 |   |

|                             |   | **As                of December 31,**    |    |
|----------------------------------|--------|------------------------------------------|---------|
|                             |   | **2006**                                 |    | **2005** |   |
|                             |   | (US                dollars in thousands) |    |
|                             |   |                                     |    |   |   |
| Beginning                Balance |   | $                                        | 3,133   |   | $ | 2,174 |   |
| Additions                        |   |                                     | 12      |   |   | 1,651 |   |
| Impairment                loss   |   |                                     | — |   |   | (336 | ) |
| Amortization                     |   |                                     | (306    | ) |   | (356 | ) |
| Ending                Balance    |   | $                                        | 2,839   |   | $ | 3,133 |   |

|                             |   | **As                of December 31,**    |    |
|----------------------------------|--------|------------------------------------------|---------|
|                             |   | **2006**                                 |    | **2005** |   |
|                             |   | (US                dollars in thousands) |    |
|                             |   |                                     |    |   |   |
| Beginning                Balance |   | $                                        | — |   | $ | — |   |
| Additions                        |   |                                     | 1,830   |   |   | — |   |
| Amortization                     |   |                                     | (171    | ) |   | — |   |
| Ending                Balance    |   | $                                        | 1,659   |   | $ | — |   |

** **

| 2007 |   | $      | 2,239 |   |
|------|--------|--------|-------|--------|
| 2008 |   |   | 2,183 |   |
| 2009 |   |   | 2,133 |   |
| 2010 |   |   | 2,102 |   |
| 2011 |   |   | 1,752 |   |

----

**8.      **
**INVESTMENTS:      MARKETABLE SECURITIES, AND OTHER LONG TERM ASSETS**

|                        |   | **As                of December 31, 2006** |    |
|-----------------------------|--------|--------------------------------------------|---------|
|                        |   | **Cost**                                   |    | **Unrealized****Holding                Gains (Losses)** |   | **Impairment                Amount Realized** |   | **Fair                Value** |   |
|                        |   |                                       |    |   |   |   |   |   |   |
| Available-for-sale-PUPS     |   | $                                          | 450,000 |   |   | ($393,333 | ) | $ | — |   | $ | 56,667 |   |
| Available-for-sale-Intactis |   |                                       | 250,000 |   |   | — |   |   | (250,000 | ) |   | — |   |

|                                                   |   | **As                of December 31, 2006** |      |
|--------------------------------------------------------|--------|--------------------------------------------|-----------|
|                                                   |   | **Cost**                                   |      | **Unrealized                Holding Gains (Losses)** |   | **Impairment                Amount Realized** |   | **Fair                Value** |   |
| Held                to maturity, notes receivable PUPS |   | $                                          | 379,000   |   | $ | — |   |   | ($379,000 | ) | $ | — |   |
| Investment                in Mobot                     |   |                                       | 1,926,180 |   |   | — |   |   | — |   |   | 1,926,180 |   |
| Investment                in Sponge                    |   |                                       | 1,398,675 |   |   | — |   |   | — |   |   | 1,398,675 |   |

----

**9.      ALLOWANCE FOR DOUBTFUL ACCOUNTS, INVENTORY RESERVE, AND CONCENTRATIONS OF CREDIT      RISK**

|                                               |   | **As                of December 31,**    |   |
|----------------------------------------------------|--------|------------------------------------------|--------|
|                                               |   | **2006**                                 |   | **2005** |   |
|                                               |   | (US                dollars in thousands) |   |
|                                               |   |                                     |   |   |   |
| Beginning                balance                   |   |                                     | ($14   | ) |   | ($16 | ) |
| Bad                debt expense                    |   |                                     | (137   | ) |   | (16 | ) |
| Write-off                of uncollectible accounts |   |                                     | 5      |   |   | 18 |   |
| Ending                balance                      |   |                                     | ($146  | ) |   | ($14 | ) |

**10.      COMPREHENSIVE LOSS**

|                              |   | **Unrealized                gain/(loss) on marketable securities** |      | **Foreign                currency translation adjustment** |   | **Total** |   |
|-----------------------------------|--------|--------------------------------------------------------------------|-----------|------------------------------------------------------------|--------|-----------|--------|
|                              |   | **2006**                                                           |      | **2005**                                                   |   | **2004**  |   | **2006** |   | **2005** |   | **2004** |   | **2006** |   | **2005** |   | **2004** |   |
| Beginning                balance  |   |                                                               | ($146     | )                                                          | $      | —   |   | $ | — |   |   | ($31 | ) |   | ($60 | ) | $ | — |   |   | ($177 | ) |   | ($60 | ) | $ | — |   |
| Annual                activity    |   |                                                               | (247      | )                                                          |   | (146      | )      |   | — |   |   | (286 | ) |   | 29 |   |   | (60 | ) |   | (533 | ) |   | (117 | ) |   | (60 | ) |
| **Ending                balance** |   |                                                               | **($393** | **)**                                                      |   | **($146** | **)**  | **$** | **—** |   |   | **($317** | **)** |   | **($31** | **)** |   | **($60** | **)** |   | **($710** | **)** |   | **($177** | **)** |   | **($60** | **)** |

----

**11.**
**INCOME      TAXES **

|                                            |   | 2006                              |   | 2005   |   |
|-------------------------------------------------|--------|-----------------------------------|--------|--------|--------|
|                                            |   | (in                    thousands) |   |
| Current                                         |   | $                                 | -      |   | $      | - |   |
| Deferred                                        |   |                              | -      |   |   | - |   |
| Foreign                                         |   |                              | -      |   |   | - |   |
| Income                    tax expense.(benefit) |   | $                                 | -      |   | $      | - |   |

|                                                                     |   | 2006                            |    | 2005   |   |
|--------------------------------------------------------------------------|--------|---------------------------------|---------|--------|--------|
|                                                                     |   | (in                  thousands) |    |
| Net                  operating loss carryforwards (NOL)                  |   | $                               | 39,967  |   | $      | 33,157 |   |
| Capital                  loss                                            |   |                            | 3,689   |   |   | - |   |
| Write-off                  of long-lived assets                          |   |                            | 3,012   |   |   | 2,516 |   |
| Stock                  options compensation                              |   |                            | 1,930   |   |   | 140 |   |
| Capitalized                  software development costs and fixed assets |   |                            | 709     |   |   | 881 |   |
| Deferred                  revenue                                        |   |                            | 236     |   |   | - |   |
| Alternative                  minimum tax credit carryforward             |   |                            | 45      |   |   | 45 |   |
| Provisions                  for doubtful accounts                        |   |                            | 38      |   |   | 102 |   |
| Accruals                                                                 |   |                            | -       |   |   | 598 |   |
| State                  taxes                                             |   |                            | -       |   |   | 151 |   |
| Total                  deferred tax assets                               |   |                            | 49,626  |   |   | 37,590 |   |
| Valuation                  allowance                                     |   |                            | (49,626 | )      |   | (37,590 | ) |
| Net                  deferred tax asset                                  |   | $                               | -       |   | $      | - |   |

----

|                                                |   | 2006                            |    | 2005   |   |
|-----------------------------------------------------|--------|---------------------------------|---------|--------|--------|
|                                                |   | (in                  thousands) |    |   |   |
| Benefit                  at federal statutory rate  |   | $                               | (22,929 | )      | $      | (3,150 | ) |
| State                  income taxes, net of federal |   |                            | (2,671  | )      |   | (367 | ) |
| Permanent                  and other, net           |   |                            | 13,358  |   |   | (166 | ) |
| Change                  in valuation allowanance    |   |                            | 12,242  |   |   | 3,683 |   |

| Provision                for income taxes (in thousands) |   |
|----------------------------------------------------------|--------|
|                                                     |   | 2006 |   |
| 12                Snap                                   |   | $ | — |   |
| Gavitec                                                  |   |   | — |   |
| Triton                                                   |   |   | — |   |
| Total                                                    |   | $ | — |   |

----

|                   |   | 2006   |   |
|------------------------|--------|--------|--------|
| 12                Snap |   | $      | 46,857 |   |
| Gavitec                |   |   | 2,277  |   |
| Triton                 |   |   | 2,034  |   |
| Total                  |   | $      | 51,168 |   |

| Estimated                deferred tax asset/(liability) (thousands) |   |
|---------------------------------------------------------------------|--------|
|                                                                |   |
|                                                                |   | 2006 |   |
| Net                operating loss carry forward                     |   | $ | 17,758 |   |
| Property                Plant and equipment                         |   |   | 103 |   |
| Investment                greater than book value                   |   |   | 451 |   |
| Deferred                revenue                                     |   |   | 487 |   |
| Accrued                expenses                                     |   |   | 399 |   |
| Intangible                assets                                    |   |   | (706 | ) |
| Total                                                               |   | $ | 18,492 |   |
|                                                                |   |   |  |   |
| Less                valuation allowance                             |   |   | (18,492 | ) |
|                                                                |   |   |     |   |
| Net                deferred tax asset                               |   | $ | — |   |

----

**12.**
**TRANSACTIONS      WITH RELATED PARTIES**

**13.**
**COMMITMENTS      AND CONTINGENCIES**

|                              |   | For                the years ended December 31, (in                thousands) |   |
|-----------------------------------|--------|-------------------------------------------------------------------------------|--------|
|                                   |   |                                                                          |   |   |   |   |   |
|                              |   | 2006                                                                          |   | 2005 |   | 2004 |   |
| Total                rent expense |   | $                                                                             | 652    |   | $ | 233 |   | $ | 106 |   |

| ·   | NeoMedia                and its subsidiaries lease office facilities and certain office and                computer equipment under various operating                leases; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | NeoMedia                is party to various payment arrangements with its vendors that call                for                fixed payments on past due                liabilities; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | NeoMedia                is party to various consulting agreements that carry payment obligations                into future years; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | NeoMedia                issued Series C convertible preferred shares with face value of                $21,567,000 and convertible debentures with a face value of $7,500,000                that are subject to conversion at future dates, plus liquidated damages                of                $2,093,000 relating to these convertible                instruments; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | NeoMedia                holds notes payable to certain vendors and silent partners of an                acquired                subsidiary that mature at various dates in the future; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | Resulting                from the acquisition of 12 Snap, NeoMedia has a commitment to pay                approximately $1 million of remaining obligations to Silent Partners                of                12Snap that come due by March 31, 2007. The payments have not been                made as                of the date of this filing. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|       |   | (US                dollars in thousands) |      |
|------------|--------|------------------------------------------|-----------|
|       |   |                                     |      |   |   |   |   |   |   |   |   | **Series                C** |   |   |   |
|       |   |                                     |      | **Vendor                &** |   |   |   | **Subsidiary** |   |   |   | **Convertible** |   |   |   |
|       |   | **Operating**                            |      | **Consulting** |   | **Notes** |   | **Acquisition** |   | **Convertible** |   | **Preferred** |   |   |   |
|       |   | **Leases**                               |      | **Agreements** |   | **Payable** |   | **Commitments** |   | **Debentures** |   | **Stock** |   | **Total** |   |
|       |   |                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |
| 2007       |   | $                                        | 693       |   | $ | 1,069 |   | $ | 2,155 |   | $ | 22,367 |   | $ | 7,500 |   |   | 25,514 |   | $ | 59,299 |   |
| 2008       |   |                                     | 399       |   |   | 124 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 522 |   |
| 2009       |   |                                     | 85        |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 85 |   |
| 2010       |   |                                     | 15        |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 15 |   |
| 2011       |   |                                     | —   |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Thereafter |   |                                     | —   |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
| **Total**  |   | **$**                                    | **1,192** |   | **$** | **1,193** |   | **$** | **2,155** |   | **$** | **22,367** |   | **$** | **7,500** |   | **$** | **25,514** |   | **$** | **59,921** |   |

**Legal      Proceedings**

**Scanbuy,      Inc.**

----

**14.**
**DEFINED      CONTRIBUTION SAVINGS PLAN**

----

**15.**
**STOCK      BASED COMPENSATION **

**Equity-based      Compensation Plans**

----

**Stock      Option Plans**

|                                                      |   | **2006**                      |    | **2005**     |   | **2004**                      |   |
|-----------------------------------------------------------|--------|-------------------------------|---------|--------------|--------|-------------------------------|--------|
|                                                      |   |                          |    | **Weighted** |   |                          |   | **Weighted** |   |   |   | **Weighted** |   |
|                                                      |   |                          |    | **Average**  |   |                          |   | **Average** |   |   |   | **Average** |   |
|                                                      |   |                          |    | **Exercise** |   |                          |   | **Exercise** |   |   |   | **Exercise** |   |
|                                                      |   | **Shares**                    |    | **Price**    |   | **Shares**                    |   | **Price** |   | **Shares** |   | **Price** |   |
|                                                      |   | (In                thousands) |    |         |   | (In                thousands) |   |   |   | (In                thousands) |   |   |   |
|                                                      |   |                          |    |         |   |                          |   |   |   |   |   |   |   |
| Outstanding                at beginning of year           |   |                          | 100,041 |         | $      | 0.18                          |   |   | 52,804 |   | $ | 0.06 |   |   | 33,512 |   | $ | 0.23 |   |
| Granted                                                   |   |                          | 28,297  |         | $      | 0.33                          |   |   | 58,510 |   | $ | 0.28 |   |   | 32,752 |   | $ | 0.10 |   |
| Exercised                                                 |   |                          | (2,931  | )            | $      | 0.12                          |   |   | (7,954 | ) | $ | 0.11 |   |   | (12,860 | ) | $ | 0.23 |   |
| Forfeited                                                 |   |                          | (19,585 | )            | $      | 0.29                          |   |   | (3,319 | ) | $ | 0.22 |   |   | (600 | ) | $ | 0.09 |   |
| Outstanding                at end of year                 |   |                          | 105,822 |         | $      | 0.20                          |   |   | 100,041 |   | $ | 0.18 |   |   | 52,804 |   | $ | 0.06 |   |
|                                                      |   |                          |         |         |   |                               |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Options                exercisable at year-end            |   |                          | 77,920  |         |   |                          |   |   | 53,952 |   |   |   |   |   | 34,680 |   |   |   |   |
|                                                      |   |                          |         |         |   |                               |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Weighted-average                fair value                |   |                          |    |         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of                options granted during the year         |   | $                             | 0.10    |         |   |                               |   | $ | 0.28 |   |   |  |   | $ | 0.10 |   |   |  |   |
|                                                      |   |                          |    |         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available                for grant at the end of the year |   |                          | 17,970  |         |   |                               |   |   | 26,682 |   |   |  |   |   | 81,873 |   |   |  |   |

| **Options                Outstanding** |   | **Options                Exercisable** |    |
|----------------------------------------|--------|----------------------------------------|---------|
|                                   |   |                                   |    | **Weighted-** |   | **Weighted-** |   |   |   | **Weighted-** |   |
| **Range**                              |   |                                   |    | **Average** |   | **Average** |   |   |   | **Average** |   |
| **of                Exercise**         |   | **Number**                             |    | **Remaining** |   | **Exercise** |   | **Number** |   | **Exercise** |   |
| **Prices**                             |   | **Outstanding**                        |    | **Contractual                Life** |   | **Price** |   | **Exercisable** |   | **Price** |   |
|                                   |   | (In                thousands)          |    |   |   |   |   |   |   | (In                thousands) |   |   |   |
|                                   |   |                                   |    |   |   |   |   |   |   |   |   |   |   |
| $0.01                to $0.10          |   |                                   | 30,374  |   |   | 5.3 |   |   | years |   | $ | 0.02 |   |   | 29,564 |   | $ | 0.02 |   |
| 0.11                to 0.20            |   |                                   | 13,671  |   |   | 6.6 |   |   | years |   | $ | 0.11 |   |   | 11,049 |   | $ | 0.11 |   |
| 0.21                to 0.30            |   |                                   | 28,485  |   |   | 7.8 |   |   | years |   | $ | 0.25 |   |   | 20,934 |   | $ | 0.25 |   |
| 0.31                to 0.40            |   |                                   | 32,846  |   |   | 9.1 |   |   | years |   | $ | 0.36 |   |   | 15,965 |   | $ | 0.35 |   |
| 0.41                to 7.00            |   |                                   | 446     |   |   | 8.9 |   |   | years |   | $ | 0.73 |   |   | 408 |   | $ | 0.75 |   |
| $0.01                to $7.00          |   |                                   | 105,822 |   |   | 7.3 |   |   | years |   | $ | 0.20 |   |   | 77,920 |   | $ | 0.17 |   |

----

|                                  |   | **2006**                    |                           | **2005**                      |   | **2004**                    |   |
|---------------------------------------|--------|-----------------------------|--------------------------------|-------------------------------|--------|-----------------------------|--------|
|                                  |   | **Range                of** |                           | **Options**                   |   | **Range                of** |   | **Options** |   | **Range                of** |   | **Options** |   |
|                                  |   | **Exercise**                |                           | **Granted**                   |   | **Exercise**                |   | **Granted** |   | **Exercise** |   | **Granted** |   |
| **Recipients**                        |   | **Prices**                  |                           |                          |   | **Prices**                  |   |   |   | **Prices** |   |   |   |
|                                       |   |                             |                           | (In                thousands) |   |                             |   | (In                thousands) |   |  |   | (In                thousands) |   |
| Employees                             |   | $                           | 0.01                to $0.414  |                          |   | 27,672                      |   | $ | 0.227                to $0.516 |   |   | 51,010 |   | $ | 0.062                to $0.128 |   |   | 23,290 |   |
| Non-employee                directors |   |                        | —                        |                          |   | —                     |   | $ | 0.239                to $0.328 |   |   | 6,500 |   | $ | 0.01                to $0.075 |   |   | 3,357 |   |
| Non-employees                         |   | $                           | 0.285                to $0.295 |                          |   | 625                         |   | $ | 0.239 |   |   | 1,000 |   | $ | 0.025                to $0.10 |   |   | 6,105 |   |
| Total                                 |   | $                           | 0.01                to $0.414  |                          |   | 28,297                      |   | $ | 0.227                to $0.516 |   |   | 58,510 |   | $ | 0.01                to $0.128 |   |   | 32,752 |   |

**Adoption      of FASB Statement No. 123**

----

|                                                    |   | **Year                Ended**   |     | **Year                Ended**   |   |
|---------------------------------------------------------|--------|---------------------------------|----------|---------------------------------|--------|
|                                                    |   | **December                31,** |     | **December                31,** |   |
|                                                    |   | **2005**                        |     | **2004**                        |   |
|                                                    |   |                            |     |                            |   |
| Net                Loss, as reported                    |   |                            | ($9,147  | )                               |   | ($7,230 | ) |
|                                                    |   |                            |     |                            |   |   |   |
| Add:                stock-based employee compensation   |   |                            |          |                            |   |  |   |
| expense                included in reported net income, |   |                            |     |                            |   |   |   |
| net                of related tax effects               |   |                            | —  |                            |   | — |   |
|                                                    |   |                            |     |                            |   |   |   |
| Deduct:                Total stock-based employee       |   |                            |          |                            |   |  |   |
| compensation                expense determined under    |   |                            |     |                            |   |   |   |
| fair                value method for all awards, net of |   |                            |          |                            |   |  |   |
| related                tax effects                      |   |                            | (4,124   | )                               |   | (1,445 | ) |
| Pro-forma                net loss                       |   |                            | ($13,271 | )                               |   | ($8,675 | ) |
|                                                    |   |                            |     |                            |   |   |   |
| Net                Loss per share:                      |   |                            |          |                            |   |  |   |
| Basic                and diluted - as reported          |   |                            | ($0.02   | )                               |   | ($0.02 | ) |
| Basic                and diluted - pro-forma            |   |                            | ($0.03   | )                               |   | ($0.03 | ) |

|                                    |   | **Year                ended December 31,** |                    |
|-----------------------------------------|--------|--------------------------------------------|-------------------------|
|                                    |   | **2006**                                   |                    | **2005** |   | **2004** |   |
| Volatility                              |   |                                       | 56                - 117 | % |   | 385                - 434 | % |   | 438                - 451 | % |
| Expected                dividends       |   |                                       | —                 |   |   | — |   |   | — |   |
| Expected                term (in years) |   |                                       | 3                       |   |   | 3 |   |   | 3 |   |
| Risk-free                rate           |   |                                       | 4.35                    | % |   | 4.50 | % |   | 4.50 | % |

----

|                                                           |   |                          |        |         |   | **Weighted**              |   |                          |    |
|----------------------------------------------------------------|--------|-------------------------------|-------------|--------------|--------|---------------------------|--------|-------------------------------|---------|
|                                                           |   |                          |        | **Weighted** |   | **Average**               |   |                          |    |
|                                                           |   |                          |        | **Average**  |   | **Remaining**             |   | **Aggregate**                 |    |
|                                                           |   |                          |        | **Exercise** |   | **Contractual**           |   | **Intrinsic**                 |    |
|                                                           |   | **Shares**                    |        | **Price**    |   | **Term**                  |   | **Value**                     |    |
|                                                           |   | (In                thousands) |        |         |   | (in                years) |   | (In                thousands) |    |
|                                                           |   |                          |        |         |   |                      |   |                          |    |
| Outstanding                at January 1, 2006                  |   |                          | 100,041     |         | $      | 0.18                      |   |                          |         |   |   |  |   |
| Granted                                                        |   |                          | 28,297      |         | $      | 0.33                      |   |                          |    |   |   |   |   |
| Exercised                                                      |   |                          | (2,931      | )            | $      | 0.12                      |   |                          |         |   |   |  |   |
| Forfeited                                                      |   |                          | (19,585     | )            | $      | 0.29                      |   |                          |    |   |   |   |   |
| **Outstanding                at December 31, 2006**            |   |                          | **105,822** |         | **$**  | **0.20**                  |   |                          | **7.3** |   | **$** | **1,125** |   |
|                                                           |   |                          |        |         |   |                      |   |                          |    |   |   |   |   |
| Vested                or expected to vest at December 31, 2006 |   |                          | 77,920      |         | $      | 0.17                      |   |                          | 6.7     |   | $ | 1,125 |   |

|                                          |   |                          |    | **Weighted**                  |   |
|-----------------------------------------------|--------|-------------------------------|---------|-------------------------------|--------|
|                                          |   |                          |    | **Average**                   |   |
|                                          |   |                          |    | **Grant                Date** |   |
| **Nonvested                Shares**           |   | **Shares**                    |    | **Fair                Value** |   |
|                                          |   | (in                thousands) |    |                          |   |
| Nonvested                at January 1, 2006   |   |                          | 44,215  |                          | $      | 0.18 |   |
| Granted                                       |   |                          | 16,680  |                          | $      | 0.11 |   |
| Vested                                        |   |                          | (16,385 | )                             | $      | 0.33 |   |
| Forfeited                                     |   |                          | (16,608 | )                             | $      | 0.23 |   |
| Nonvested                at December 31, 2006 |   |                          | 27,902  |                          | $      | 0.21 |   |

----

**Stock      Incentive Plan**

|                                                            |   | **Year                ended December 31,** |   |
|-----------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                            |   | **2006**                                   |   | **2005** |   | **2004** |   |
|                                                            |   | (in                thousands)              |   |
|                                                            |   |                                       |   |   |   |   |   |
| Shares                issued under 2003 Stock Incentive Plan    |   |                                       | 18,432 |   |   | 593 |   |   | 3,476 |   |
|                                                            |   |                                       |   |   |   |   |   |   |   |   |
| Aggregate                grant date fair value of shares issued |   | $                                          | 2,211  |   | $ | 220 |   | $ | 359 |   |
|                                                            |   |                                       |   |   |   |   |   |   |   |   |
| Expense                recognized (1)                           |   | $                                          | 2,244  |   | $ | 194 |   | $ | 133 |   |

----

**Other      Stock Based Compensation Expense**

----

**Warrants      **

| **Warrants                Outstanding as of December 31, 2003** |   |   | **26,195,000**  |   |
|-----------------------------------------------------------------|--------|--------|-----------------|--------|
| Warrants                issued                                  |   |   | 44,150,000      |   |
| Warrants                exercised                               |   |   | (51,510,000     | )      |
| Warrants                expired                                 |   |   | (10,000         | )      |
|                                                            |   |   |                 |   |
| **Warrants                Outstanding as of December 31, 2004** |   |   | **18,825,000**  |   |
| Warrants                issued                                  |   |   | 54,000,000      |   |
| Warrants                exercised                               |   |   | (50,000         | )      |
| Warrants                expired                                 |   |   | (1,400,000      | )      |
|                                                            |   |   |            |   |
| **Warrants                Outstanding as of December 31, 2005** |   |   | **71,375,000**  |   |
| Warrants                issued (See Note 4)                     |   |   | 294,000,000     |   |
| Warrants                exercised                               |   |   | (49,000,000     | )      |
| Warrants                expired                                 |   |   | (50,000         | )      |
|                                                            |   |   |                 |   |
| **Warrants                Outstanding as of December 31, 2006** |   |   | **316,325,000** |   |

|                               |   |                          |    | **Weighted-**                       |   | **Weighted-** |   |
|------------------------------------|--------|-------------------------------|---------|-------------------------------------|--------|---------------|--------|
|                               |   |                          |    | **Average**                         |   | **Average**   |   |
| **Range                of**        |   | **Warrants**                  |    | **Remaining**                       |   | **Exercise**  |   |
| **Exercise                Prices** |   | **Outstanding**               |    | **Contractual                Life** |   | **Price**     |   |
|                               |   | (In                thousands) |    |                                |   |          |   |   |   |
|                               |   |                          |    |                                |   |          |   |   |   |
| $—                to $0.03   |   |                          | 2,550   |                                |   | 1.5           |   |   | years |   | $ | 0.01 |   |
| 0.04                to 0.06        |   |                          | 303,500 |                                |   | 4.4           |   |   | years |   | $ | 0.04 |   |
| 0.07                to 3.56        |   |                          | 10,275  |                                |   | 3.0           |   |   | years |   | $ | 0.25 |   |
| $—                to $6.00   |   |                          | 316,325 |                                |   | 4.4           |   |   | years |   | $ | 0.05 |   |

----

----

**16.**
**QUARTERLY      FINANCIAL INFORMATION (UNAUDITED)**

|                                                        |   | **2006**    |        |
|-------------------------------------------------------------|--------|-------------|-------------|
|                                                        |   | **First**   |        | **Second** |   | **Third** |   | **Fourth** |   | **Total** |   |
|                                                        |   | **Quarter** |        | **Quarter** |   | **Quarter** |   | **Quarter** |   | **Year** |   |
|                                                        |   |             |        |  |   |  |   |   |   |  |   |
| Revenue                                                     |   | $           | 1,122       |   | $ | 3,229 |   | $ | 3,201 |   | $ | 2,757 |   | $ | 10,309 |   |
| Gross                profit                                 |   |        | 604         |   |   | 1,775 |   |   | 1,881 |   |   | 2,186 |   |   | 6,446 |   |
| Net                Income (loss) from continuing operations |   |        | (778        | ) |   | 6,279 |   |   | (28,482 | ) |   | (29,272 | ) |   | (52,252 | ) |
| Discontinued                operations                      |   |        | (539        | ) |   | (1,147 | ) |   | (2,427 | ) |   | (11,072 | ) |   | (15,186 | ) |
| **Net                Income (loss)**                        |   |        | **($1,317** | **)** | **$** | **5,132** |   |   | **($30,909** | **)** |   | **($40,344** | **)** |   | **($67,438** | **)** |
|                                                        |   |        |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                loss per share - basic and diluted*      |   |        | ($0.00      | ) | $ | 0.01 |   |   | ($0.05 | ) |   | ($0.06 | ) |   | ($0.11 | ) |

|                                                        |   | **2005**    |        |
|-------------------------------------------------------------|--------|-------------|-------------|
|                                                        |   | **First**   |        | **Second** |   | **Third** |   | **Fourth** |   | **Total** |   |
|                                                        |   | **Quarter** |        | **Quarter** |   | **Quarter** |   | **Quarter** |   | **Year** |   |
|                                                        |   |        |        |  |   |  |   |  |   |  |   |
| Revenue                                                     |   | $           | 292         |   | $ | 276 |   | $ | 193 |   | $ | 116 |   | $ | 877 |   |
| Gross                profit                                 |   |        | 118         |   |   | 127 |   |   | 76 |   |   | (27 | ) |   | 294 |   |
| Net                Income (loss) from continuing operations |   |        | (958        | ) |   | (1,635 | ) |   | (1,569 | ) |   | (2,984 | ) |   | (7,146 | ) |
| Discontinued                operations                      |   |        | (261        | ) |   | (665 | ) |   | (381 | ) |   | (694 | ) |   | (2,001 | ) |
| **Net                Income (loss)**                        |   |        | **($1,219** | **)** |   | **($2,300** | **)** |   | **($1,950** | **)** |   | **($3,678** | **)** |   | **($9,147** | **)** |
|                                                        |   |        |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                loss per share - basic and diluted*      |   |        | ($0.00      | ) |   | ($0.01 | ) |   | ($0.00 | ) |   | ($0.01 | ) |   | ($0.02 | ) |

| * | -                The sum of the quarterly net loss per share will not necessarily                equal the                net loss per share for the year due to the effects of rounding  |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**17.**
**SEGMENT      AND GEOGRAPHICAL INFORMATION**

| ·   | NeoMedia                Mobile (NMM) - encompassing NeoMedia’s physical-world-to-internet and                mobile marketing technologies branded under qode®, 12Snap, and Gavitec;                and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                Telecom Services (NTS) - encompassing the billing, clearinghouse                and                information management services of BSD Software, acquired in March                2006. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                           |   | **Year                Ended December 31,** |     |
|----------------------------------------------------------------|--------|--------------------------------------------|----------|
|                                                           |   | **2006**                                   |     | **2005** |   | **2004** |   |
| **Net                Sales**(1)**:**                           |   | (in                thousands)              |     |
| United                States                                   |   | $                                          | 663      |   | $ | 877 |   | $ | 973 |   |
| Germany                                                        |   |                                       | 5,084    |   |   | — |   |   | — |   |
| United                Kingdom                                  |   |                                       | 1,209    |   |   | — |   |   | — |   |
| Canada                                                         |   |                                       | 1,371    |   |   | — |   |   | — |   |
| Italy                                                          |   |                                       | 1,152    |   |   | — |   |   | — |   |
| Other                                                          |   |                                       | 830      |   |   | — |   |   | — |   |
|                                                           |   | $                                          | 10,309   |   | $ | 877 |   | $ | 973 |   |
|                                                           |   |                                       |     |   |   |   |   |   |   |   |
| **Net                Loss from Continuing Operations**(1)**:** |   |                                       |          |   |   |  |   |   |  |   |
| United                States                                   |   |                                       | ($29,158 | ) |   | ($7,146 | ) |   | ($6,272 | ) |
| Germany                                                        |   |                                       | (22,328  | ) |   | — |   |   | — |   |
| United                Kingdom                                  |   |                                       | 194      |   |   | — |   |   | — |   |
| Canada                                                         |   |                                       | (1,001   | )  |   | — |   |   | — |   |
| Italy                                                          |   |                                       | 32       |   |   | — |   |   | — |   |
| Other                                                          |   |                                       | 9        |   |   | — |   |   | — |   |
|                                                           |   |                                       | ($52,252 | ) |   | ($7,146 | ) |   | ($6,272 | ) |
|                                                           |   |                                       |          |   |   |  |   |   |  |   |
| **Identifiable                Assets**(1)                      |   |                                       |     |   |   |   |   |   |   |   |
| United                States                                   |   | $                                          | 9,925    |   | $ | 8,353 |   |   |  |   |
| Germany                                                        |   |                                       | 16,986   |   |   | — |   |   |   |   |
| United                Kingdom                                  |   |                                       | 295      |   |   | — |   |   |  |   |
| Canada                                                         |   |                                       | 7,302    |   |   | — |   |   |   |   |
| Other                                                          |   |                                       | 545      |   |   | — |   |   |  |   |
|                                                           |   | $                                          | 35,053   |   | $ | 8,353 |   |   |   |   |

----

----

|                                                                                |   | **Year                Ended December 31,** |     |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------|----------|
|                                                                                |   | **2006**                                   |     | **2005** |   | **2004** |   |
|                                                                                |   | (in                thousands)              |     |
| **Net                Sales from Continuing Operations:**(4)                         |   |                                       |     |   |   |   |   |
| NeoMedia                Mobile (1)                                                  |   | $                                          | 8,938    |   | $ | 244 |   | $ | 63 |   |
| NeoMedia                Telecom Services (2)                                        |   |                                       | 1,371    |   |   | — |   |   | — |   |
| NeoMedia                Consulting & Integration Services (3)                   |   |                                       | —  |   |   | 633 |   |   | 910 |   |
|                                                                                |   | $                                          | 10,309   |   | $ | 877 |   | $ | 973 |   |
|                                                                                |   |                                       |     |   |   |   |   |   |   |   |
| **Net                Loss from Continuing Operations:**(4)                          |   |                                       |          |   |   |  |   |   |  |   |
| NeoMedia                Mobile (1)                                                  |   |                                       | (8,975   | ) |   | ($2,020 | ) |   | ($1,312 | ) |
| NeoMedia                Telecom Services (2)                                        |   |                                       | (1,001   | ) |   | — |   |   | — |   |
| NeoMedia                Consulting & Integration Services (3)                   |   |                                       | —  |   |   | (1,548 | ) |   | (343 | ) |
| Corporate                overhead                                                   |   |                                       | (9,651   | ) |   | (2,463 | ) |   | (4,617 | ) |
| Impairment                charge                                                    |   |                                       | (18,706  | ) |   | (1,115 | ) |   | — |   |
| Financing                and other charges not associated with a particular segment |   |                                       | (13,919  | ) |   | — |   |   | — |   |
|                                                                                |   |                                       | ($52,252 | ) |   | ($7,146 | ) |   | ($6,272 | ) |
|                                                                                |   |                                       |          |   |   |  |   |   |  |   |
| **Identifiable                Assets**(4)                                           |   |                                       |     |   |   |   |   |   |   |   |
| NeoMedia                Mobile (1)                                                  |   | $                                          | 25,448   |   | $ | 3,056 |   |   |  |   |
| NeoMedia                Telecom Services (2)                                        |   |                                       | 1,709    |   |   | — |   |   |   |   |
| Corporate                                                                           |   |                                       | 7,896    |   |   | 5,297 |   |   |  |   |
|                                                                                |   | $                                          | 35,053   |   | $ | 8,353 |   |   |   |   |

----

----

**18.**
**COMMON      STOCK**

**19.      PREFERRED STOCK**

***Series      A Preferred Stock.***

| ·   | The                right to receive mandatory cash dividends equal to the greater of                $0.001                per share or 100 times the amount of all dividends (cash or non-cash,                other than dividends of shares of common stock) paid to holders of                the                common stock, which dividend is payable 30 days after the conclusion                of                each calendar quarter and immediately following the declaration of                a                dividend on common stock; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | One                hundred votes per each share of Series A Preferred on each matter                submitted to a vote of the Company’s                stockholders; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                right to elect two directors at any meeting at which directors are                to be                elected, and to fill any vacancy on the Board of Directors previously                filled by a director appointed by the Series A Preferred                holders; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                right to receive an amount, in preference to the holders of common                stock,                equal to the amount per share payable to holders of common stock,                plus all                accrued and unpaid dividends, and following payment of 1/100th of                this                liquidation preference to the holders of each share of common stock,                an                additional amount per share equal to 100 times the per share amount                paid                to the holders of common stock; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                right to exchange each share of Series A Preferred for 100 times                the                consideration received per share of common stock in connection with                any                merger, consolidation, combination or other transaction in which                shares of                common stock are exchanged for or converted into cash, securities                or other                property; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                right to be redeemed in accordance with the Company’s stockholders rights                plan. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------|

***Series      A Convertible Preferred Stock.***

| ·   | Series                A Convertible Preferred is convertible into shares of common stock                at a                one-to-one ratio, subject to proportional adjustments in the event                of                stock splits or combinations, and dividends or distributions of shares                of                common stock, at the option of the holder; shares are subject to                automatic                conversion as determined in each agreement relating to the purchase                of                shares of Series A Convertible                Preferred; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Each                share of Series A Convertible Preferred is entitled to receive a                liquidation preference equal to the original purchase price of such                share                in the event of liquidation, dissolution, or winding                up; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Upon                merger or consolidation, or the sale, lease or other conveyance of                all or                substantially all of the Company’s assets, shares of Series A Convertible                Preferred are automatically convertible into the number of shares                of stock                or other securities or property (including cash) to which the common                stock                into which it is convertible would have been entitled;                and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Shares                of Series A Convertible Preferred are entitled to one vote per share,                and                vote together with holders of common                stock. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Series      B Convertible Redeemable Preferred Stock.***

| ·   | Series                B Preferred shares accrue dividends at a rate of 12% per annum, or                $1.20                per share, between the date of issuance and the first anniversary                of                issuance; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Series                B Preferred is redeemed to the maximum extent permitted by law (based                on                funds legally available for redemption) at a price per share of $15.00,                plus accrued dividends (a total of $16.20 per share) on the first                anniversary of issuance; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Series                B Preferred receive proceeds of $12.00 per share upon the Company’s                liquidation, dissolution or winding                up; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | To                the extent, not redeemed on the first anniversary of issuance, Series                B                Preferred is automatically convertible into then existing general                class of                common stock on the first anniversary of issuance at a price equal                to                $16.20 divided by the greater of $0.20 and the lowest publicly-sold                share                price during the 90 day period preceding the conversion date, but                in no                event more than 19.9% of the Company’s outstanding capital stock as of the                date immediately prior to                conversion. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Upon                merger or consolidation, or the sale, lease or other conveyance of                all or                substantially all of the Company’s assets, shares of Series B Preferred                are automatically convertible into the number of shares of stock                or other                securities or property (including cash) to which the common stock                into                which it is convertible would have been entitled;                and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Shares                of Series B Preferred are entitled to one vote per share and vote                with                common stock, except where the proposed action would adversely affect                the                Series B Preferred or where the non-waivable provisions of applicable                law                mandate that the Series B Preferred vote separately, in which case                Series                B Preferred vote separately as a class, with one vote per                share. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Series      C Convertible Preferred Stock.***

| ·   | Series                  C Convertible Preferred shares accrue dividends at a rate of 8%                  per annum; |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | Series                C Convertible Preferred receive proceeds of $1,000 per share upon                the                Company’s liquidation, dissolution or winding                up; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Each                share of Series C Convertible Preferred shares shall be convertible,                at                the option of the holder, into shares of the Company’s common stock at the                lesser of (i) Fifty Cents ($0.50) or (ii) 97% of the                lowest closing bid price of the Company’s common stock for the                thirty (30) trading days immediately preceding the date of                conversion; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | At                the Option of the Holders, if there are outstanding Series C Convertible                Preferred shares on February 17, 2009, each share of Series C Preferred                stock shall convert into shares of common stock at the Conversion                Price                then in effect on February 17, 2009;                and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Series                C Convertible Preferred shares have voting rights on an as converted                basis                with the common stock. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

**20**
**.**
**RESTATEMENT        OF PREVIOUSLY REPORTED FINANCIAL INFORMATION**

|                                                         |   | **Previously** |   | **Restatement** |   | **Restated** |   |
|--------------------------------------------------------------|--------|----------------|--------|-----------------|--------|--------------|--------|
|                                                         |   | **Reported**   |   | **Adjustment**  |   | **Total**    |   |
| **Three                    months ended March 31, 2006**     |   |           |   |            |   |         |   |
| Net                    sales                                 |   | $              | 232    |            |   | ($205        | )      | $ | 27 |   |
| Cost                    of sales                             |   |           | 205    |            |   | (205         | )      |   | --- |   |
|                                                         |   |           |        |            |   |              |   |   |  |   |
| **Three                    months ended June 30, 2006**      |   |           |   |            |   |         |   |   |   |   |
| Net                    sales                                 |   | $              | 2,937  |            |   | ($2,422      | )      | $ | 515 |   |
| Cost                    of sales                             |   |           | 2,422  |            |   | (2,422       | )      |   | --- |   |
|                                                         |   |           |   |            |   |         |   |   |   |   |
| **Six                    months ended June 30, 2006**        |   |           |        |            |   |              |   |   |  |   |
| Net                    sales                                 |   | $              | 3,169  |            |   | ($2,627      | )      | $ | 542 |   |
| Cost                    of sales                             |   |           | 2,627  |            |   | (2,627       | )      |   | --- |   |
|                                                         |   |           |        |            |   |              |   |   |  |   |
| **Three                    months ended September 30, 2006** |   |           |   |            |   |         |   |   |   |   |
| Net                    sales                                 |   | $              | 3,205  |            |   | ($2,658      | )      | $ | 547 |   |
| Cost                    of sales                             |   |           | 2,658  |            |   | (2,658       | )      |   | --- |   |
|                                                         |   |           |   |            |   |         |   |   |   |   |
| **Nine                    months ended September 30, 2006**  |   |           |        |            |   |              |   |   |  |   |
| Net                    sales                                 |   | $              | 6,374  |            |   | ($5,285      | )      | $ | 1,089 |   |
| Cost                    of sales                             |   |           | 5,285  |            |   | (5,285       | )      |   | --- |   |
|                                                         |   |           |   |            |   |         |   |   |   |   |

----

**21.**
**SUBSEQUENT      EVENTS**

**Agreement      to Sell 12Snap -March 2007**

| ·   | $1,100,000                will be paid in cash at Closing, and $500,000 will be placed into                escrow                and released to NeoMedia 90 days after Closing, assuming no warranty                claims; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Buyer                will forgive purchase price obligation in the amount of $880,000,                such                obligation resulting from the sale and purchase agreement between                NeoMedia                and the former shareholders of                12Snap |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 12Snap                management will waive their purchase price obligations in the amount                of                $880,000, and return to NeoMedia 2,525,818 shares of NeoMedia common                stock                issued previously; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Buyer                will return to NeoMedia 2,525,818 NeoMedia shares issued                previously; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | NeoMedia                will retain a 10% ownership of 12Snap, subject to an option agreement                pursuant to which NeoMedia has the right to sell and Buyer has the                right                to acquire the remaining 10% stake held by NeoMedia for a purchase                price                of $750,000 after December 31; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 12snap                and NeoMedia will execute a cooperation agreement pursuant to which                12snap                will remain NeoMedia preferred partner and enjoy most favored prices,                and                12snap will perform certain research and development functions for                NeoMedia; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                transaction is subject to completion of a material definitive                agreement |
|--------------------|-----------------------------------------------------------------------------------------------------------|

**Financing      - March 2007**

----

**HipCricket,      Inc.**

**Appointment      of George O’Leary to Board of Directors**

**Option      Repricing and Grants**

----

**Pending      Sale of 12Snap and Telecom Services Businesses**

**Agreement      with Former Shareholders of Gavitec **

----

**Agreement      with Certain Former Shareholders of 12Snap**

----

**ITEM        9.**
* *
**CHANGES        IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL        DISCLOSURES**

**Item        9A. Controls and Procedures**

**a)        Evaluation of Disclosure Controls and Procedures**

**b)        Management’s Report on Internal Control over Financial        Reporting**

* *

----

| ·   | Senior                management did not establish and maintain a proper tone as to internal                control over financial reporting. Specifically, senior management                was                unable, due to time and resource constraints, to promptly address                control                weaknesses brought to their attention throughout the                audit; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company does not have a financial expert on the audit committee.                The lack                of a financial expert on the audit committee, combined with the complexity                of certain financial transactions the Company engages in, raises                the risk                of a potential material misstatement to occur and go undetected in                the                financial statements. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain sufficiently qualified accounting personnel                with                an appropriate level of knowledge, experience and training in the                application of GAAP and other financial reporting requirements. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company, through Senior Management, failed to maintain formalized                accounting policies and procedures. Once implemented, the polices                and                procedures should provide guidance to accounting personnel in the                proper                treatment and recording of financial transactions, as well as proper                internal controls over financial                reporting. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                external auditors identified several material accounting adjustments                to                the Company’s financial statements that were a direct result of the                combination of the weaknesses previously cited regarding the lack                of a                financial expert on the audit committee, the inability to maintain                sufficiently qualified accounting personnel, and the failure to maintain                formalized accounting policies and                procedures. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not develop and maintain a company wide risk assessment                program. Failures to develop, communicate, and ensure compliance                with such                program increases the risk of financial statement errors either being                prevented or detected. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain effective controls over the Code of Conduct.                Specifically, management failed to ensure all current employees annually                acknowledge compliance with the code of conduct in                writing. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | The                Company, through Senior Management, did not have effective information                technology policies and procedures in place, which addresses financial                reporting risks associated with the IT function. Additionally, the                policies currently in place were not communicated with the appropriate                personnel. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Senior                management did not maintain sufficient oversight concerning the data                back                up and off site storage process. Specifically, there was insufficient                evidence that the back up tapes were successful and properly reviewed,                and                the back up tapes were not stored in a secure environment when taken                off                site. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Senior                Management did not maintain sufficient controls related to the                establishing, maintaining, and assigning of user access security                levels in                the accounting software package used to initiate, process, record,                and                report financial transactions and financial statements. Specifically,                controls were not designed and in place to ensure that access to                certain                financial applications was adequately restricted to only employees                requiring access to complete their job                functions. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain sufficient controls over Excel spreadsheets                used                to compile and produce financial statements. Four critical spreadsheets                failed to have all the required controls performed in accordance                with                Company policy. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain an effective control environment over corporate                bank accounts, including payment processing and establishing employees                authorized to conduct wire transfers. Specifically, bank signature                cards                still contained former employees, and bank policy allowed for only                one                employee to establish authorized users to the wire transfer                system. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company has failed to develop and maintain a company wide anti-fraud                program over the initiating and processing of financial transactions,                as                well as other company wide procedures which may have an impact on                internal                controls over financial reporting. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain effective controls over the recording of                recurring and non-recurring journal entries. Specifically, controls                over                the supervisory review and approval of journal entries for the recording                of these financial transactions failed. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain effective controls over the issuing and                review of                MicroPaint Repair quotes and invoices. Specifically, controls over                the                supervisory review and approval of these documents                failed. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not design and maintain effective controls over the evidence                of management review of key financial transactions and reports. Sufficient                evidence did not exist that the documents were reviewed for accuracy                and                completeness of information. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain effective controls over the completion and                payment of Travel and Entertainment expense reports. Specifically,                certain                items, although properly reviewed and approved, were paid even though                they                were not specifically allowed per Company                policy. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 5.   | The                Company did not design and maintain effective controls over the income                tax                provision, including deferred tax assets and net operating loss                carry-forwards related to foreign acquisitions completed in 2006.                Controls                were also ineffective in the analysis of certain account balances,                such as                goodwill, which were impacted as a result of the control                failure. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 6.   | The                Company did not maintain adequate controls over the accuracy, presentation                and disclosure in recording revenue. Specifically, controls were                not                designed and in place to ensure that revenue transactions were analyzed                for appropriate presentation and disclosure for recognition of revenue                on                a gross or net basis. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**c)        Remediation **

**d)        Subsequent Changes in Internal Control over Financial        Reporting**

----

**e)        **

**REPORT        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON**

**INTERNAL        CONTROL OVER FINANCIAL REPORTING**

**The        Board of Directors and**
**Shareholders        of NeoMedia Technologies, Inc.**

*Internal        Control — Integrated Framework*

| ·   | Senior                management did not establish and maintain a proper tone as to internal                control over financial reporting. Specifically, senior management                was                unable, due to time and resource constraints, to promptly address                control                weaknesses brought to their attention throughout the                audit; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company does not have a financial expert on the audit committee.                The lack                of a financial expert on the audit committee, combined with the complexity                of certain financial transactions the Company engages in, raises                the risk                of a potential material misstatement to occur and go undetected in                the                financial statements. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | The                Company did not maintain sufficiently qualified accounting personnel                with                an appropriate level of knowledge, experience and training in the                application of GAAP and other financial reporting requirements. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company, through Senior Management, failed to maintain formalized                accounting policies and procedures. Once implemented, the polices                and                procedures should provide guidance to accounting personnel in the                proper                treatment and recording of financial transactions, as well as proper                internal controls over financial                reporting. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                external auditors identified several material accounting adjustments                to                the Company’s financial statements that were a direct result of the                combination of the weaknesses previously cited regarding the lack                of a                financial expert on the audit committee, the inability to maintain                sufficiently qualified accounting personnel, and the failure to maintain                formalized accounting policies and                procedures. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not develop and maintain a company wide risk assessment                program. Failures to develop, communicate, and ensure compliance                with such                program increases the risk of financial statement errors either being                prevented or detected. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain effective controls over the Code of Conduct.                Specifically, management failed to ensure all current employees annually                acknowledge compliance with the code of conduct in                writing. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company, through Senior Management, did not have effective information                technology policies and procedures in place, which addresses financial                reporting risks associated with the IT function. Additionally, the                policies currently in place were not communicated with the appropriate                personnel. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Senior                management did not maintain sufficient oversight concerning the data                back                up and off site storage process. Specifically, there was insufficient                evidence that the back up tapes were successful and properly reviewed,                and                the back up tapes were not stored in a secure environment when taken                off                site. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Senior                Management did not maintain sufficient controls related to the                establishing, maintaining, and assigning of user access security                levels in                the accounting software package used to initiate, process, record,                and                report financial transactions and financial statements. Specifically,                controls were not designed and in place to ensure that access to                certain                financial applications was adequately restricted to only employees                requiring access to complete their job                functions. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain sufficient controls over Excel spreadsheets                used                to compile and produce financial statements. Four critical spreadsheets                failed to have all the required controls performed in accordance                with                Company policy. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | The                Company did not maintain an effective control environment over corporate                bank accounts, including payment processing and establishing employees                authorized to conduct wire transfers. Specifically, bank signature                cards                still contained former employees, and bank policy allowed for only                one                employee to establish authorized users to the wire transfer                system. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company has failed to develop and maintain a company wide anti-fraud                program over the initiating and processing of financial transactions,                as                well as other company wide procedures which may have an impact on                internal                controls over financial reporting. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain effective controls over the recording of                recurring and non-recurring journal entries. Specifically, controls                over                the supervisory review and approval of journal entries for the recording                of these financial transactions failed. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain effective controls over the issuing and                review of                MicroPaint Repair quotes and invoices. Specifically, controls over                the                supervisory review and approval of these documents                failed. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not design and maintain effective controls over the evidence                of management review of key financial transactions and reports. Sufficient                evidence did not exist that the documents were reviewed for accuracy                and                completeness of information. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company did not maintain effective controls over the completion and                payment of Travel and Entertainment expense reports. Specifically,                certain                items, although properly reviewed and approved, were paid even though                they                were not specifically allowed per Company                policy. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 7.   | The                Company did not design and maintain effective controls over the income                tax                provision, including deferred tax assets and net operating loss                carry-forwards related to foreign acquisitions completed in 2006.                Controls                were also ineffective in the analysis of certain account balances,                such as                goodwill, which were impacted as a result of the control                failure. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 8.   | The                Company did not maintain adequate controls over the accuracy, presentation                and disclosure in recording revenue. Specifically, controls were                not                designed and in place to ensure that revenue transactions were analyzed                for appropriate presentation and disclosure for recognition of revenue                on                a gross or net basis. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*in        Internal Control-Integrated Framework*
*in        Internal Control-Integrated Framework*

**ITEM        9B. OTHER INFORMATION**
**.**

----

**PART      III**

**ITEM      10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE      GOVERNANCE**

**Directors      and Executive Officers**

| **Name**                               |   | **Age** |   | **Position**                                                                                         |
|----------------------------------------|--------|---------|--------|------------------------------------------------------------------------------------------------------|
| Charles                W. Fritz        |   | 50      |   | Interim                Chief Executive Officer and Chairman of the Board of                Directors |
| David                A. Dodge          |   | 31      |   | Vice-President                and Chief Financial Officer                                            |
| James                J. Keil           |   | 79      |   | Director                                                                                             |
| A.                Hayes Barclay        |   | 75      |   | Director                                                                                             |
| George                G. O’Leary |   | 44      |   | Director                                                                                             |

***Charles      W. Fritz***

***David      A. Dodge***

***James      J. Keil***

***A.      Hayes Barclay***
* *

----

***George      G. O’Leary***

**Election      Of Directors And Officers**

**Meetings      Of The Board Of Directors**

**Committees      Of The Board Of Directors**

**Audit      Committee.**

**Compensation      Committee.**

----

**Stock      Option Committee.**

**Director      Compensation**

**Code      of Ethics**

----

**Section      16(a) Beneficial Ownership Reporting Compliance**

----

**ITEM      11. EXECUTIVE COMPENSATION**

**Compensation      Discussion and Analysis**

***Objectives      of compensation structure***

***What      the programs are designed to reward***

***Elements      of compensation***

**Base      Salary**

**Stock-based      Compensation**

----

**Bonus**

**Benefits**

***Why***
***NeoMedia***
***chooses      to pay each element***

***How***
***NeoMedia***
***determines      the amount***

----

***How      each element fits into***
***NeoMedia’s***
***overall      compensation objectives***

----

**Executive      Compensation**

|                                   |   |     |   |       |   |      |   |       |    |       |   | **Non-**      |   | **Non-**      |      |                         |   |      |   |
|----------------------------------------|--------|----------|--------|------------|--------|-----------|--------|------------|---------|------------|--------|---------------|--------|---------------|-----------|------------------------------|--------|-----------|--------|
|                                   |   |     |   |       |   |      |   |       |    |       |   | **equity**    |   | **Qualified** |      |                         |   |      |   |
|                                   |   |     |   |       |   |      |   |       |    |       |   | **Incentive** |   | **Deferred**  |      | **(2)**                      |   |      |   |
|                                   |   |     |   |       |   |      |   |       |    | **(1)**    |   | **Plan**      |   | **Compen-**   |      | **All                other** |   |      |   |
|                                   |   |     |   |       |   |      |   | **Stock**  |    | **Option** |   | **Compen-**   |   | **sation**    |      | **Compen-**                  |   |      |   |
| **Name                and**            |   |     |   | **Salary** |   | **Bonus** |   | **Awards** |    | **Awards** |   | **sation**    |   | **Earnings**  |      | **sation**                   |   | **Total** |   |
| **Principal                Position**  |   | **Year** |   | **($)**    |   | **($)**   |   | **($)**    |    | **($)**    |   | **($)**       |   | **($)**       |      | **($)**                      |   | **($)**   |   |
|                                   |   |     |   |       |   |      |   |       |    |       |   |          |   |          |      |                         |   |      |   |
| Charles                W. Fritz (3)    |   |     | 2006   |       | $      | 206,334   |   |       | — |       |   | —       |   | $             | —   |                         |   | —   |   |   | — |   |   | — |   | $ | 206,334 |   |
| Interim                President and   |   |     | 2005   |       |   | 205,278   |   |       | — |       |   | —       |   |          | 1,176,272 |                         |   | —   |   |   | — |   |   | — |   |   | 1,381,550 |   |
| Chief                Executive Officer |   |     | 2004   |       |   | 175,355   |   |       | — |       |   | —       |   |          | 321,171   |                         |   | —   |   |   | — |   |   | 355 |   |   | 496,881 |   |
|                                   |   |     |   |       |   |      |   |       |    |       |   |          |   |          |      |                         |   |      |   |   |   |   |   |   |   |   |   |   |
| Charles                T. Jensen (3)   |   |     | 2006   |       |   | 206,339   |   |       | — |       |   | —       |   |          | 77,159    |                         |   | —   |   |   | — |   |   | — |   |   | 283,498 |   |
| Former                President and    |   |     | 2005   |       |   | 197,500   |   |       | — |       |   | —       |   |          | 1,176,272 |                         |   | —   |   |   | — |   |   | — |   |   | 1,373,772 |   |
| Chief                Executive Officer |   |     | 2004   |       |   | 175,386   |   |       | — |       |   | —       |   |          | 321,171   |                         |   | —   |   |   | — |   |   | 386 |   |   | 496,943 |   |
|                                   |   |     |   |       |   |      |   |       |    |       |   |          |   |          |      |                         |   |      |   |   |   |   |   |   |   |   |   |   |
| David                A. Dodge          |   |     | 2006   |       |   | 159,296   |   |       | — |       |   | —       |   |          | —   |                         |   | —   |   |   | — |   |   | — |   |   | 159,296 |   |
| Vice                President and      |   |     | 2005   |       |   | 141,733   |   |       | — |       |   | —       |   |          | 914,609   |                         |   | —   |   |   | — |   |   | — |   |   | 1,056,342 |   |
| Chief                Financial Officer |   |     | 2004   |       |   | 122,396   |   |       | — |       |   | —       |   |          | 160,585   |                         |   | —   |   |   | — |   |   | — |   |   | 282,981 |   |

----

| (1) | Dollar                    value of option awards is based on grant date fair value computed                    in                    accordance with SFAS 123R; reader should refer to footnote 15                    to the                    accompanying financial statements for detailed description of                    the                    assumptions used to calculate fair                    value. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Includes                    automobile expenses attributable to personal use and the corresponding                    income tax effects. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Charles                    T. Jensen resigned as NeoMedia's President, Chief Executive Officer,                    and a                    member of the board of directors on December 8, 2006. Charles                    W. Fritz,                    the chairman of the board of directors, replaced Mr. Jensen as                    Interim                    Chief Executive Officer on December 8, 2006. Effective in January                    2007,                    Mr. Fritz’s annual salary was reduced to $100,000. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Grants      of Plan-based Awards**

|                                 |   |      |     | **Estimated                  future payouts under****non-equity                  incentive plan awards** |   | **Estimated                  future payouts under****equity                  incentive plan awards** |   | **All                        Other****Stock****Awards:****Number                        of****Shares                        of** |    | **All                        Other****Option                        Awards:****Number                        of****Securities****Underlying** |   | **Exercise                    or****Base                    Price****of                    Option** |   |
|--------------------------------------|--------|-----------|----------|----------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|--------|
|                                 |   | **Grant** |     | **Threshold**                                                                                            |   | **Target**                                                                                           |   | **Maximum**                                                                                                                      |    | **Threshold**                                                                                                                                 |   | **Target**                                                                                          |   | **Maximum** |   | **Stock** |   | **Options** |   | **Awards** |   |
| **Name**                             |   | **Date**  |     | **($)**                                                                                                  |   | **($)**                                                                                              |   | **($)**                                                                                                                          |    | **($)**                                                                                                                                       |   | **($)**                                                                                             |   | **($)** |   | **(#)** |   | **(#)** |   | **($/share)** |   |
|                                 |   |      |     |                                                                                                     |   |                                                                                                 |   |                                                                                                                             |    |                                                                                                                                          |   |                                                                                                |   |   |   |   |   |   |   |   |   |
| Charles                W. Fritz      |   |      | —  |                                                                                                     |   | —                                                                                              |   |                                                                                                                             | — |                                                                                                                                          |   | —                                                                                             |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |      |     |                                                                                                     |   |                                                                                                 |   |                                                                                                                             |    |                                                                                                                                          |   |                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Charles                T. Jensen (1) |   |      | 12/11/06 |                                                                                                     |   | —                                                                                              |   |                                                                                                                             | — |                                                                                                                                          |   | —                                                                                             |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 750,000 |   | $ | 0.01 |   |
|                                 |   |      |     |                                                                                                     |   |                                                                                                 |   |                                                                                                                             |    |                                                                                                                                          |   |                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| David                A. Dodge        |   |      | —  |                                                                                                     |   | —                                                                                              |   |                                                                                                                             | — |                                                                                                                                          |   | —                                                                                             |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |

----

| (1) | Charles                T. Jensen resigned as NeoMedia's President, Chief Executive Officer,                and a                member of the board of directors on December 8, 2006. 2006 award                of                options with an exercise price of $0.01 per share was issued in lieu of                cash severance payments. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Outstanding      Equity Awards at Fiscal Year-end**

| **Option                Awards**     |   | **Stock                Awards**                                                               |       |
|--------------------------------------|--------|-----------------------------------------------------------------------------------------------|------------|
|                                 |   | **Number                  of Securities Underlying Unexercised Options                  (2)** |       |   |   | **Equity                Incentive Plan Awards: Number of Securities****Underlying                  Unexercised Unearned** |   | ** Option                Exercise** |   | **Option** |   | ** Number                of Shares or Units of****Stock                  That Have Not** |   | **Market                Value of Shares or Units of****Stock                  That Have Not** |   | **Equity                Incentive Plan Awards: Number of Unearned Shares,****Units                  or Other Rights That Have Not** |   | **Equity                  Incentive Plan Awards: Market or Payout Value of Unearned                  Shares,****Units                  or Other Rights That Have Not** |   |
|                                 |   | **Exercisable**                                                                               |       | **Unexercisable** |   |   |   | **Options** |   | **Price** |   | **Expiration** |   | **Vested** |   | **Vested** |   | **Vested** |   | **Vested** |   |
| **Name**                             |   | **(#)**                                                                                       |       | **(#)** |   |   |   | **(#)** |   | **($)** |   | **Date** |   | **(#)** |   | **($)** |   | **(#)** |   | **(#)** |   |
|                                 |   |                                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Charles                W. Fritz      |   |                                                                                          | 10,000,000 |   |   | — |   |   |  |   |   | — |   | $ | 0.010 |   |   | 10/19/13 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          | 3,000,000  |   |   | 1,000,000 |   |   | (3) |   |   | — |   | $ | 0.110 |   |   | 03/08/14 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          | 2,000,000  |   |   | 2,000,000 |   |   | (4) |   |   | — |   | $ | 0.239 |   |   | 02/08/15 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          | 1,000,000  |   |   | 1,000,000 |   |   | (5) |   |   | — |   | $ | 0.328 |   |   | 12/16/15 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          |            |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Charles                T. Jensen (1) |   |                                                                                          | 10,000,000 |   |   | — |   |   |   |   |   | — |   | $ | 0.010 |   |   | 12/08/07 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          | 3,000,000  |   |   | — |   |   |  |   |   | — |   | $ | 0.110 |   |   | 12/08/08 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          | 2,000,000  |   |   | — |   |   |   |   |   | — |   | $ | 0.239 |   |   | 12/08/08 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          | 1,000,000  |   |   | — |   |   |  |   |   | — |   | $ | 0.328 |   |   | 12/08/08 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          | 750,000    |   |   | — |   |   |   |   |   | — |   | $ | 0.010 |   |   | 12/08/08 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          |            |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
| David                A. Dodge        |   |                                                                                          | 1,600,000  |   |   | — |   |   |   |   |   | — |   | $ | 0.010 |   |   | 10/19/13 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          | 1,500,000  |   |   | 500,000 |   |   | (6) |   |   | — |   | $ | 0.110 |   |   | 03/08/14 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          | 1,250,000  |   |   | 1,250,000 |   |   | (7) |   |   | — |   | $ | 0.239 |   |   | 02/08/15 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                 |   |                                                                                          | 1,000,000  |   |   | 1,000,000 |   |   | (8) |   |   | — |   | $ | 0.328 |   |   | 12/16/15 |   |   | — |   |   | — |   |   | — |   |   | — |   |

----

| (1) | Charles                T. Jensen resigned as NeoMedia's President, Chief Executive Officer,                and a                member of the board of directors on December 8, 2006. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Effective                February 1, 2007, options held by NeoMedia employees, including Mr.                Fritz                and Mr. Dodge, were repriced as follows: all vested options were                repriced                to $0.045 per share; all unvested options vesting during 2007 were                repriced to $0.075; all unvested options vesting during 2008 were                repriced                to $0.125; and all unvested options vesting during 2009 were repriced                to                $0.175. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | 1,000,000                options vest on March 8, 2007 |
|-----|--------------------------------------------------------|

| (4) | 1,000,000                options vest on February 8, 2007 and 1,000,000 vest on February 8,                2008 |
|-----|-----------------------------------------------------------------------------------------------------------------|

| (5) | 500,000                options vest on December 16, 2007 and 500,000 vest on December 16,                2008 |
|-----|---------------------------------------------------------------------------------------------------------------|

| (6) | 500,000                options vest on March 8, 2007 |
|-----|------------------------------------------------------|

| (7) | 625,000                options vest on February 8, 2007 and 625,000 vest on February 8,                2008 |
|-----|-------------------------------------------------------------------------------------------------------------|

| (8) | 500,000                options vest on December 16, 2007 and 500,000 vest on December 16,                2008. |
|-----|----------------------------------------------------------------------------------------------------------------|

----

**Option      Exercises and Stock Vested**

|                             |   | **Option                Awards** |    | **Stock                Awards** |   |
|----------------------------------|--------|----------------------------------|---------|---------------------------------|--------|
|                             |   | **Number                of**     |    |                            |   | **Number                of** |   |   |   |
|                             |   | **Shares**                       |    | **Value**                       |   | **Shares** |   | **Value** |   |
|                             |   | **Acquired                on**   |    | **Realized                on**  |   | **Acquired                on** |   | **Realized                on** |   |
|                             |   | **Exercise**                     |    | **Exercise**                    |   | **Vesting** |   | **Vesting** |   |
| **Name**                         |   | **(#)**                          |    | **($)**                         |   | **(#)** |   | **($)** |   |
|                             |   |                             |    |                            |   |   |   |   |   |
| Charles                W. Fritz  |   |                             | — |                            |   | — |   |   | — |   |   | — |   |
|                             |   |                             |    |                            |   |   |   |   |   |   |   |   |   |
| Charles                T. Jensen |   |                             | — |                            |   | — |   |   | — |   |   | — |   |
|                             |   |                             |    |                            |   |   |   |   |   |   |   |   |   |
| David                A. Dodge    |   |                             | — |                            |   | — |   |   | — |   |   | — |   |

**Pension      Benefits**

**Change      in control Agreements**

----

**Director      Compensation**

|                                |   |                         |   |       |   |       |   |          |    | **Change                in** |   |                         |   |      |    |
|-------------------------------------|--------|------------------------------|--------|------------|--------|------------|--------|---------------|---------|------------------------------|--------|------------------------------|--------|-----------|---------|
|                                |   |                         |   |       |   |       |   |          |    | **Pension**                  |   |                         |   |      |    |
|                                |   |                         |   |       |   |       |   |          |    | **Value                and** |   |                         |   |      |    |
|                                |   |                         |   |       |   |       |   | **Non-**      |    | **Non-**                     |   |                         |   |      |    |
|                                |   | **(1)**                      |   |       |   |       |   | **equity**    |    | **Qualified**                |   |                         |   |      |    |
|                                |   | **Fees**                     |   |       |   |       |   | **Incentive** |    | **Deferred**                 |   |                         |   |      |    |
|                                |   | **Earned                or** |   |       |   | **(2)**    |   | **Plan**      |    | **Compen-**                  |   | **All                other** |   |      |    |
|                                |   | **Paid                in**   |   | **Stock**  |   | **Option** |   | **Compen-**   |    | **sation**                   |   | **Compen-**                  |   |      |    |
|                                |   | **Cash**                     |   | **Awards** |   | **Awards** |   | **sation**    |    | **Earnings**                 |   | **sation**                   |   | **Total** |    |
| **Name**                            |   | **($)**                      |   | **($)**    |   | **($)**    |   | **($)**       |    | **($)**                      |   | **($)**                      |   | **($)**   |    |
|                                |   |                         |   |       |   |       |   |          |    |                         |   |                         |   |      |    |
| James                J. Keil        |   | $                            | 30,000 |       |   | —    |   |          | — |                         |   | —                      |   |      | — |   |   | — |   | $ | 30,000 |   |
|                                |   |                         |   |       |   |       |   |          |    |                         |   |                         |   |      |    |   |   |   |   |   |   |   |
| A.                Hayes Barclay     |   | $                            | 30,000 |       |   | —    |   |          | — |                         |   | —                      |   |      | — |   |   | — |   | $ | 30,000 |   |
|                                |   |                         |   |       |   |       |   |          |    |                         |   |                         |   |      |    |   |   |   |   |   |   |   |
| William                E. Fritz (3) |   | $                            | 30,000 |       |   | —    |   |          | — |                         |   | —                      |   |      | — |   |   | — |   | $ | 30,000 |   |

----

| (1) | Total                of $30,000 per outside director was earned during 2006, of which                $7,500                per director was paid in cash and the remaining $22,500 per director                was                accrued but not paid as of December 3, 2006. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | As                of December 31, 2006, James J. Keil held 1,500,000 options with an                exercise price of $0.239 and 1,000,000 options with an exercise price                of                $0.328; A. Hayes Barclay held 1,000,000 options with an exercise                price of                $0.075, 1,000,000 options with an exercise price of $0.239, and 750,000                options with an exercise price of $0.328; and William E. Fritz held                1,000,000 options with an exercise price of $0.01, 750,000 options                with an                exercise price of $0.075, 1,000,000 options with an exercise price                of                $0.239, and 750,000 options with an exercise price of $0.328. All                options                held by outside directors are fully vested. Effective February 1,                2007,                options held by then-active directors Mr. Keil and Mr. Barclay were                repriced as follows: all options with an exercise price less than                $0.24                were repriced to $0.045, and all options with an exercise price greater                than $0.24 were repriced to $0.075. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | William                E. Fritz resigned from the Company's board on December 22,                2006. |
|-----|--------------------------------------------------------------------------------------------------------|

**Compensation      Committee Interlocks and Insider Participation**

----

**Compensation      Committee Report**

**Ethical      Behavior**

----

**ITEM      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND      MANAGEMENT**

|                                                      |   |                                                             |   | **Amount                and**    |   |                          |
|-----------------------------------------------------------|--------|------------------------------------------------------------------|--------|----------------------------------|--------|-------------------------------|
|                                                      |   |                                                             |   | **Nature                of**     |   |                          |
|                                                      |   |                                                             |   | **Beneficial**                   |   | **Percent                of** |
| **Class**                                                 |   | **Name                and Address of Beneficial Owner (1)**      |   | **Ownership                (2)** |   | **Class                (2)**  |
|                                                      |   |                                                             |   |                             |   |                          |
| **Directors                and Named Executive Officers** |   |                                                             |   |                             |
| Common                Stock                               |   | Charles                W. Fritz (2)(3)                           |   | 29,150,766                       |   | 4.4%                          |
| Common                Stock                               |   | David                A. Dodge(2)(4)                              |   | 6,475,000                        |   | 1.0%                          |
| Common                Stock                               |   | James                J. Keil(2)(5)                               |   | 4,942,619                        |   | *                             |
| Common                Stock                               |   | A.                Hayes Barclay(2)(6)                            |   | 2,755,000                        |   | *                             |
| Common                Stock                               |   | George                G. O'Leary(2)(7)                           |   | —                          |   | *                             |
|                                                      |   | Officers                and Directors as a Group (5 Persons) (8) |   | 43,323,385                       |   | 6.4%                          |
|                                                      |   |                                                             |   |                             |   |                          |
| **Other                Beneficial Owners**                |   |                                                             |   |                             |
| Common                Stock                               |   | William                Fritz(9)                                  |   | 53,150,944                       |   | 8.3%                          |

----

| * | -                  denotes ownership of less than one percent of issued and outstanding                  shares of NeoMedia’s common                  stock. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (1) | Address                of the referenced individual is c/o NeoMedia Technologies, Inc.,                2201                Second Street, Suite 600, Fort Myers, FL,                33901. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Applicable                percentage of ownership is based on 638,004,340 shares of common stock                outstanding as of February 16, 2007, together with securities exercisable                or convertible into shares of common stock within 60 days of February                16,                2007, for each stockholder. Beneficial ownership is determined in                accordance with the rules of the Securities and Exchange Commission                and                generally includes voting or investment power with respect to securities.                Shares of common stock subject to securities exercisable or convertible                into shares of common stock that are currently exercisable or exercisable                within 60 days of February 16, 2007, are deemed to be beneficially                owned                by the person holding such securities for the purpose of computing                the                percentage of ownership of such person, but are not treated as outstanding                for the purpose of computing the percentage ownership of any other                person.                The common stock is the only outstanding class of equity securities                of                NeoMedia. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Charles                W. Fritz is the Company's founder and the Chairman of the Board of                Directors. Shares beneficially owned include 100 shares owned by                each of                Mr. Fritz’s four children for an aggregate of 400 shares, 18,000,000                shares of common stock issuable upon exercise of stock options held                by Mr.                Fritz, 1,510,000 shares issuable upon exercise of stock warrants,                8,097,397 shares of common stock owned by Mr. Charles W. Fritz directly,                and 1,542,969 shares of common stock held by the CW/LA II Family                Limited                Partnership, a family limited partnership for the benefit of Mr.                Fritz’s                family. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | David                A. Dodge is Vice President, Chief Financial Officer, and Controller.                Beneficial ownership includes 6,475000 shares of common stock issuable                upon exercise of options. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | James                J. Keil is a member of the Board of Directors. Ownership includes                2,500,000 shares of common stock issuable upon exercise of stock                options,                and 2,442,619 shares owned by Mr. Keil directly. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | A.                Hayes Barclay is a member of the Board of Directors. Ownership includes                2,750,000 shares of common stock issuable upon exercise of stock                options,                and 5,000 shares owned by Mr. Barclay directly. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | George                O'Leary is a member of the Board of Directors. No shares were beneficially                owned as of February 16, 2007. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (8) | Includes                an aggregate of 29,725,000 currently exercisable options to purchase                shares of common stock, 1,510,000 currently exercisable warrants                to                purchase shares of common stock, and 12,088,385 shares owned directly                by                NeoMedia's named executive officers and                directors. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | William                E. Fritz, a former member of the Company's board of directors, and                his                wife, Edna Fritz, are the general partners of the Fritz Family Limited                Partnership and therefore each are deemed to be the beneficial owners                of                the 1,511,742 shares held in the Fritz Family Partnership. As trustee                of                each of the Chandler R. Fritz 1994 Trust, Charles W. Fritz 1994 Trust                and                Debra F. Schiafone 1994 Trust, William E. Fritz is deemed to be the                beneficial owner of the 165,467 shares of NeoMedia held in these                trusts.                Additionally, Mr. Fritz is deemed to own: 45,433,735 shares held                directly                by Mr. Fritz or his spouse, 2,540,000 shares to be issued upon the                exercise of warrants held by Mr. Fritz or his spouse, and 3,500,000                shares                to be issued upon the exercise of options held by Mr. Fritz or his                spouse.                Address of the referenced individual is 3134 Dahlia Way, Naples,                FL 34105.                Mr. Fritz beneficially owns greater than 5% of the Company's outstanding                stock. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

**ITEM      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

**Audit      Fees**

**Audit-related      Fees**

**Tax      Fees**

**All      Other Fees**

**Audit      Committee Pre-approval**

----

**ITEM      15.**
**EXHIBITS      AND FINANCIAL STATEMENT SCHEDULES**

|        |   |                                                                                                                                                                                                                            |   |         |   |   | **Incorporated                by Reference** |
|-------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|--------|----------------------------------------------|
| **Exhibit** |   |                                                                                                                                                                                                                            |   | **Filed**    |   |   |                                         |   |   |   | **Filing** |
| **Number**  |   | **Description**                                                                                                                                                                                                                 |   | **Herewith** |   |   | **Form**                                     |   | **Exhibit** |   | **Date** |
| 3.1         |   | Articles                of Incorporation of Dev-Tech Associates, Inc. and amendment                thereto                                                                                                                      |   |         |   |   | SB-2                                         |   | 3.1 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.2         |   | Bylaws                of DevSys, Inc.                                                                                                                                                                                           |   |         |   |   | SB-2                                         |   | 3.2 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.3         |   | Restated                Certificate of Incorporation of DevSys, Inc.                                                                                                                                                            |   |         |   |   | SB-2                                         |   | 3.3 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.4         |   | By-laws                of DevSys, Inc.                                                                                                                                                                                          |   |         |   |   | SB-2                                         |   | 3.4 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.5         |   | Articles                of Merger and Agreement and Plan of Merger of DevSys, Inc and Dev-Tech                Associates, Inc.                                                                                                  |   |         |   |   | SB-2                                         |   | 3.5 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.6         |   | Certificate                of Merger of Dev-Tech Associates, Inc. into DevSys, Inc.                                                                                                                                             |   |         |   |   | SB-2                                         |   | 3.6 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.7         |   | Articles                of Incorporation of Dev-Tech Migration, Inc. and amendment                thereto                                                                                                                       |   |         |   |   | SB-2                                         |   | 3.7 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.8         |   | By-laws                of Dev-Tech Migration, Inc.                                                                                                                                                                              |   |         |   |   | SB-2                                         |   | 3.8 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.9         |   | Restated                Certificate of Incorporation of DevSys Migration, Inc.                                                                                                                                                  |   |         |   |   | SB-2                                         |   | 3.90 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.1         |   | Form                of By-laws of DevSys Migration, Inc.                                                                                                                                                                        |   |         |   |   | SB-2                                         |   | 3.10 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.11        |   | Form                of Agreement and Plan of Merger of Dev-Tech Migration, Inc. into                DevSys                Migration, Inc.                                                                                       |   |         |   |   | SB-2                                         |   | 3.11 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.12        |   | Form                of Certificate of Merger of Dev-Tech Migration, Inc. into DevSys                Migration, Inc.                                                                                                             |   |         |   |   | SB-2                                         |   | 3.12 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.13        |   | Certificate                of Amendment to Certificate of Incorporation of DevSys, Inc. changing                its                name to NeoMedia Technologies, Inc.                                                          |   |         |   |   | SB-2                                         |   | 3.13 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.14        |   | Form                of Certificate of Amendment to Certificate of Incorporation of NeoMedia                Technologies, Inc. authorizing a reverse stock split                                                                 |   |         |   |   | SB-2                                         |   | 3.14 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 3.15        |   | 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 |   | 11/25/96 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 10.1        |   | Second                Agreement and Amendment to Consulting Agreement between NeoMedia                and                Thornhill Capital, dated July 22, 2005                                                                 |   |         |   |   | S-3/A                                        |   | 10.3 |   | 1/30/06 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 10.2        |   | Standby                Equity Distribution Agreement, dated March 30, 2005, between NeoMedia                and                Cornell Capital Partners                                                                         |   |         |   |   | 8-K                                          |   | 16.1 |   | 4/1/05 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 10.3        |   | Placement                Agent Agreement, dated March 30, 2005, between NeoMedia and Cornell                Capital Partners                                                                                                    |   |         |   |   | 8-K                                          |   | 16.2 |   | 4/1/05 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 10.4        |   | Escrow                Agreement, dated March 30, 2005, between NeoMedia and Cornell Capital                Partners                                                                                                             |   |         |   |   | 8-K                                          |   | 16.3 |   | 4/1/05 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 10.5        |   | Registration                Rights Agreement, dated March 30, 2005, between NeoMedia and Cornell                Capital Partners                                                                                                |   |         |   |   | 8-K                                          |   | 16.4 |   | 4/1/05 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 10.6        |   | Promissory                Note, dated March 30, 2005, between NeoMedia and Cornell Capital                Partners                                                                                                              |   |         |   |   | 8-K                                          |   | 16.5 |   | 4/1/05 |
|        |   |                                                                                                                                                                                                                            |   |         |   |   |                                         |   |   |   |   |
| 10.7        |   | Security                Agreement, dated March 30, 2005, between NeoMedia and                Cornell                                                                                                                            |   |         |   |   | 8-K                                          |   | 16.5 |   | 4/1/05 |

----

|        |   |            |   |         |   |   | **Incorporated                by Reference** |
|-------------|--------|-----------------|--------|--------------|--------|--------|----------------------------------------------|
| **Exhibit** |   |            |   | **Filed**    |   |   |                                         |   |   |   | **Filing** |
| **Number**  |   | **Description** |   | **Herewith** |   |   | **Form**                                     |   | **Exhibit** |   | **Date** |

|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|---------|
| 10.8   |   | Warrant                dated March 30, 2005, granted by NeoMedia to Thornhill Capital                LLC                                                                                                                      |   |   |   |   | S-3/A  |   | 10.12  |   | 7/18/05 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.9   |   | Warrant                dated March 30, 2005, granted by NeoMedia to Cornell Capital Partners                LP                                                                                                                |   |   |   |   | S-3/A  |   | 10.13  |   | 7/18/05 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.1   |   | Definitive                Merger Agreement between NeoMedia and Mobot                                                                                                                                                         |   |   |   |   | 8-K    |   | 16.10  |   | 2/10/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.11  |   | Definitive                Sale and Purchase Agreement between NeoMedia and 12Snap                                                                                                                                             |   |   |   |   | 8-K    |   | 16.10  |   | 2/14/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.12  |   | Definitive                Sale and Purchase Agreement between NeoMedia and Gavitec                                                                                                                                            |   |   |   |   | 8-K    |   | 16.10  |   | 2/21/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.13  |   | Definitive                Sale and Purchase Agreement between NeoMedia and Sponge                                                                                                                                             |   |   |   |   | 8-K    |   | 16.10  |   | 2/22/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.14  |   | Promissory                Note, dated October 18, 2004, between NeoMedia and Cornell Capital                Partners                                                                                                          |   |   |   |   | S-3/A  |   | 10.26  |   | 1/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.15  |   | Investment                Agreement, dated February 17, 2006 between NeoMedia and Cornell Capital                Partners                                                                                                     |   |   |   |   | 8-K    |   | 10.1   |   | 2/21/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.16  |   | Investor                Registration Rights Agreement, dated February 17, 2006 between NeoMedia                and Cornell Capital Partners                                                                                   |   |   |   |   | 8-K    |   | 10.2   |   | 2/21/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.17  |   | 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   |   | 2/21/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.18  |   | Warrant,                dated February 17, 2006                                                                                                                                                                               |   |   |   |   | 8-K    |   | 10.4   |   | 2/21/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.19  |   | Warrant,                dated February 17, 2006                                                                                                                                                                               |   |   |   |   | 8-K    |   | 10.5   |   | 2/21/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.2   |   | Warrant,                dated February 17, 2006                                                                                                                                                                               |   |   |   |   | 8-K    |   | 10.6   |   | 2/21/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.21  |   | Assignment                Agreement, dated February 17, 2006 by NeoMedia and Cornell Capital                Partners                                                                                                          |   |   |   |   | 8-K    |   | 10.7   |   | 2/21/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.22  |   | Assignment                of Common Stock, dated February 17, 2006 between NeoMedia and Cornell                Capital Partners                                                                                               |   |   |   |   | 8-K    |   | 10.8   |   | 2/21/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.23  |   | Securities                Purchase Agreement, dated August 24, 2006, between the Company and                Cornell                Capital Partners, LP                                                                       |   |   |   |   | 8-K    |   | 10.1   |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.24  |   | Investor                Registration Rights Agreement, dated August 24, 2006, between the                Company                and Cornell Capital Partners, LP                                                              |   |   |   |   | 8-K    |   | 10.2   |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.25  |   | Pledge                and Security Agreement, dated August 24, 2006, between the Company                and                Cornell Capital Partners, LP                                                                       |   |   |   |   | 8-K    |   | 10.30  |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.26  |   | Secured                Convertible Debenture, dated August 24, 2006, issued by the Company                to                Cornell Capital Partners, LP                                                                      |   |   |   |   | 8-K    |   | 10.40  |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.27  |   | 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  |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.28  |   | A                Warrant, dated August 24, 2006                                                                                                                                                                               |   |   |   |   | 8-K    |   | 10.60  |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.29  |   | B                Warrant, dated August 24, 2006                                                                                                                                                                               |   |   |   |   | 8-K    |   | 10.70  |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.3   |   | C                Warrant, dated August 24, 2006                                                                                                                                                                               |   |   |   |   | 8-K    |   | 10.80  |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.31  |   | D                Warrant, dated August 24, 2006                                                                                                                                                                               |   |   |   |   | 8-K    |   | 10.9   |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.32  |   | Amendment                to Warrant No. CCP-002, dated August 24, 2006, between the Company                and                Cornell Capital Partners, LP                                                                    |   |   |   |   | 8-K    |   | 10.1   |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.33  |   | Amendment                to “A” Warrant No. CCP-001, dated August 24, 2006, between the Company and                Cornell Capital Partners, LP                                                                   |   |   |   |   | 8-K    |   | 10.11  |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.34  |   | Amendment                to “B” Warrant No. CCP-002, dated August 24, 2006, between the Company and                Cornell Capital Partners, LP                                                                   |   |   |   |   | 8-K    |   | 10.12  |   | 8/30/06 |
|   |   |                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |    |
| 10.35  |   | Amendment                to “C” Warrant No. CCP-003, dated August 24, 2006, between the Company and                Cornell Capital Partners, LP                                                                   |   |   |   |   | 8-K    |   | 10.13  |   | 8/30/06 |

----

|        |   |            |   |         |   |   | **Incorporated                by Reference** |
|-------------|--------|-----------------|--------|--------------|--------|--------|----------------------------------------------|
| **Exhibit** |   |            |   | **Filed**    |   |   |                                         |   |   |   | **Filing** |
| **Number**  |   | **Description** |   | **Herewith** |   |   | **Form**                                     |   | **Exhibit** |   | **Date** |

| 10.36  |   | Letter                of intent amongst the Company, Global Emerging Markets, and Jose                Sada                                                                                                                      |   |   |   |   | 8-K    |   | 16.1   |   | 8/31/06  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|----------|
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.37  |   | Termination                Agreement between NeoMedia Technologies, Inc, and Cornell Capital                Partners, LP                                                                                                        |   |   |   |   | S-3/A  |   | 10.53  |   | 1/30/07  |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.38  |   | Definitive                share purchase and settlement agreement between NeoMedia and Sponge,                dated                November 14, 2006                                                                            |   |   |   |   | 8-K    |   | 16.1   |   | 11/20/06 |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.39  |   | Agreement                between NeoMedia and FMS                                                                                                                                                                               |   |   |   |   | 8-K    |   | 16.1   |   | 12/7/06  |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.4   |   | Escrow                agreement amongst NeoMedia, Mobot, FMS, and Kirkpatrick and Lockhart                Nicholson Graham                                                                                                      |   |   |   |   | 8-K    |   | 16.2   |   | 12/7/06  |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.41  |   | Description                of Special Preference Stock                                                                                                                                                                          |   |   |   |   | 8-K    |   | 16.3   |   | 12/7/06  |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.42  |   | Promissory                note payable from NeoMedia to FMS                                                                                                                                                                     |   |   |   |   | 8-K    |   | 16.4   |   | 12/7/06  |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.43  |   | License                agreement between NeoMedia and Mobot                                                                                                                                                                     |   |   |   |   | 8-K    |   | 16.50  |   | 12/7/06  |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.44  |   | Securities                Purchase Agreement, dated December 29, 2006, between the Company                and                Cornell Capital Partners, LP                                                                       |   |   |   |   | 8-K    |   | 10.10  |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.45  |   | Investor                Registration Rights Agreement, dated December 29, 2006, between the                Company and Cornell Capital Partners, LP                                                                             |   |   |   |   | 8-K    |   | 10.20  |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.46  |   | Secured                Convertible Debenture, dated December 29, 2006, issued by the Company                to                Cornell Capital Partners, LP                                                                      |   |   |   |   | 8-K    |   | 10.30  |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.47  |   | 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  |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.48  |   | A                Warrant, dated December 29, 2006                                                                                                                                                                               |   |   |   |   | 8-K    |   | 10.50  |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.49  |   | Amendment                to Warrant No. CCP-002, dated December 29, 2006, between the Company                and                Cornell Capital Partners, LP                                                                    |   |   |   |   | 8-K    |   | 10.6   |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.5   |   | Amendment                to “A” Warrant No. CCP-001, dated December 29, 2006, between the Company                and Cornell Capital Partners, LP                                                                   |   |   |   |   | 8-K    |   | 10.7   |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.51  |   | Amendment                to “B” Warrant No. CCP-002, dated December 29, 2006, between the Company                and Cornell Capital Partners, LP                                                                   |   |   |   |   | 8-K    |   | 10.8   |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.52  |   | Amendment                to “C” Warrant No. CCP-003, dated December 29, 2006, between the Company                and Cornell Capital Partners, LP                                                                   |   |   |   |   | 8-K    |   | 10.9   |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.53  |   | Amendment                to “A” Warrant No. CCP-001, dated December 29, 2006, between the Company                and Cornell Capital Partners, LP                                                                   |   |   |   |   | 8-K    |   | 10.1   |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.54  |   | Amendment                to “B” Warrant No. CCP-001, dated December 29, 2006, between the Company                and Cornell Capital Partners, LP                                                                   |   |   |   |   | 8-K    |   | 10.11  |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.55  |   | Amendment                to “C” Warrant No. CCP-001, dated December 29, 2006, between the Company                and Cornell Capital Partners, LP                                                                   |   |   |   |   | 8-K    |   | 10.12  |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.56  |   | Securities                Purchase Agreement, dated December 29, 2006, between the Company                and                Cornell Capital Partners, LP                                                                       |   |   |   |   | 8-K    |   | 10.13  |   | 1/8/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.57  |   | 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   |   | 1/29/07  |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.58  |   | Consulting                Agreement between the Company and SKS Consulting of South Florida                Corp.                                                                                                                |   |   |   |   | 8-K    |   | 10.1   |   | 2/6/07   |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 10.59  |   | 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   |   | 3/22/07  |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 14     |   | Code                of Ethics                                                                                                                                                                                                   |   | X      |   |   |   |   |   |   |     |
|   |   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |     |
| 21     |   | Subsidiaries                of registrant                                                                                                                                                                                       |   | X      |   |   |   |   |   |   |     |

----

|        |   |            |   |         |   |   | **Incorporated                by Reference** |
|-------------|--------|-----------------|--------|--------------|--------|--------|----------------------------------------------|
| **Exhibit** |   |            |   | **Filed**    |   |   |                                         |   |   |   | **Filing** |
| **Number**  |   | **Description** |   | **Herewith** |   |   | **Form**                                     |   | **Exhibit** |   | **Date** |

|   |   |                                                                                                                                              |   |   |   |   |   |   |   |   |   |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| 23.1   |   | Consent                of Stonefield Josephson, Inc., independent Registered Public Accounting                Firm of NeoMedia Technologies, Inc. |   | X      |   |   |   |   |   |   |   |
|   |   |                                                                                                                                              |   |   |   |   |   |   |   |   |   |
| 31.1   |   | Certification                                                                                                                                     |   | X      |   |   |   |   |   |   |   |
|   |   |                                                                                                                                              |   |   |   |   |   |   |   |   |   |
| 31.2   |   | Certification                                                                                                                                     |   | X      |   |   |   |   |   |   |   |
|   |   |                                                                                                                                              |   |   |   |   |   |   |   |   |   |
| 31.3   |   | Certification                                                                                                                                     |   | X      |   |   |   |   |   |   |   |
|   |   |                                                                                                                                              |   |   |   |   |   |   |   |   |   |
| 31.4   |   | Certification                                                                                                                                     |   | X      |   |   |   |   |   |   |   |

----

**SIGNATURES**

|         |                                                                                                                                        |                                                             |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------|
|         | **NEOMEDIA                TECHNOLOGIES, INC.**                                                                                              |
|    |                                                                                                                                   |                                                        |
|         | By:                                                                                                                               | /s/ *Charles              W. Fritz*     |
|         | Charles                W. Fritz                                                                                                             |
|         | Interim Chief Executive Officer, Chairman of the              Board                of Directors, Principal Executive                Officer |

|   |                                                                                                      |                                   |
|--------|-----------------------------------------------------------------------------------------------------------|----------------------------------------|
|   |                                                                                                      |
|   | By:                                                                                             | /s/ *David              A. Dodge* |
|   | David                A. Dodge                                                                             |
|   | Vice-President,                Chief Financial Officer, and Principal                  Accounting Officer |

| **SIGNATURES**                                                 |   | **TITLE**                                               |   | **DATE**                     |
|----------------------------------------------------------------|--------|---------------------------------------------------------|--------|------------------------------|
|                                                           |   |                                                    |   |                         |
|                                                           |   |                                                    |   |                         |
| */s/                Charles W. Fritz*                |   | Interim                Chief Executive Officer and      |   |                         |
| Charles                W. Fritz                                |   | Chairman                of the Board of Directors       |   | April                2, 2007 |
|                                                           |   |                                                    |   |                         |
|                                                           |   |                                                    |   |                         |
| */s/                David A. Dodge*                  |   | Vice-President,                Chief Financial Officer, |   |                         |
| David                A. Dodge                                  |   | and                Principal Accounting Officer         |   | April                2, 2007 |
|                                                           |   |                                                    |   |                         |
|                                                           |   |                                                    |   |                         |
| */s/                Scott Womble*                    |   | Controller                                              |   |                         |
| Scott                Womble                                    |   |                                                    |   | April                2, 2007 |
|                                                           |   |                                                    |   |                         |
|                                                           |   |                                                    |   |                         |
| */s/                Hayes Barclay*              |   | Director                                                |   |                         |
| Hayes                Barclay                                   |   |                                                    |   | April                2, 2007 |
|                                                           |   |                                                    |   |                         |
|                                                           |   |                                                    |   |                         |
| */s/                James J. Keil*              |   | Director                                                |   |                         |
| James                J. Keil                                   |   |                                                    |   | April                2, 2007 |
|                                                           |   |                                                    |   |                         |
|                                                           |   |                                                    |   |                         |
| */s/                George G. O’Leary*    |   | Director                                                |   |                         |
| James                J. Keil                                   |   |                                                    |   | April                2, 2007 |

----