September 8, 2006
Barbara C. Jacobs
Assistant Director
United States Securities and Exchange Commission
Mail Stop 4-6
Washington, D.C. 20549
RE: NEOMEDIA TECHNOLOGIES, INC.
REGISTRATION STATEMENT ON FORM S-3
FILED JUNE 21, 2006
FILE NO. 333-135175
FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
FORM 10-Q FOR THE FISCAL QUARTER ENDED MARCH 31, 2006
FILE NO. 0-32262
Dear Ms. Jacobs:
This letter has been prepared in response to your request for NeoMedia
Technologies, Inc. to respond to the staff's comments in the letter dated July
13, 2006 with respect to the Registration Statement on Form S-3 filed June 21,
2006 by NeoMedia Technologies, Inc.
FORM S-3
PROSPECTUS SUMMARY, PAGE 1
Comment 1: In your summary, please briefly describe the significant terms of
the Series C Convertible Preferred Stock including a concise
description of the conversion terms. Also, provide a concise
description of the terms of the warrants relating to the 98.15
million shares being registered. Ensure that the body of the
prospectus contains materially complete descriptions of each of
these classes of securities.
Response: We have updated the disclosure as requested.
Comment 2: We note that $5 million of the Series C. Convertible Preferred Stock
purchase price is to be funded upon effectiveness of this
registration statement. However, we also note that Sections 4.3, 4.4
and 4.6 of your Investment Agreement dated February 17, 2006 states
the covenants shall remain in effect so long as the Series C
Preferred Shares are outstanding. Please provide an analysis of why
each of these covenants does not impact the irrevocably binding
nature of the additional $5 million purchase and grant Cornell
additional investment discretion. For example, discuss how a
decision to not object to a proposed acquisition, entry into
additional indebtedness, or issuance of equity securities is not
within Cornell's control. See interpretation 3S of the March 1999
supplement to our publicly available telephone interpretations.
Response: In connection with the $5 million secured convertible debenture
financing between NeoMedia and Cornell Capital Partners completed on
August 24, 2006, effective September 8, 2006, NeoMedia and Cornell
entered into an agreement pursuant to which the parties agreed to
terminate all further obligations of Cornell Capital Partners to
fund an additional $5 million in the form of Series C Convertible
Preferred Stock, as contemplated by the Series C Convertible
Preferred Stock transaction documents dated February 17, 2006.
RISKS SPECIFIC TO THIS OFFERING
Comment 3: We note your discussion of the $100 million equity line with Cornell
Capital Partners in this section. Further, we note that after
entering into the Standby Equity Distribution Agreement you sold to
Cornell Series C Convertible Preferred Stock, which has a conversion
rate that may fluctuate with the market price. We are of the view
that a purported equity line arrangement with a purchaser that holds
securities that are convertible at a market sensitive rate does not
conform with the guidance provided by interpretation 4S of the March
1999 supplement to our publicly available telephone interpretations.
Please modify your references to the "$100 million" equity line
arrangement in the prospectus as well as periodic reports, so the
any reference to the "equity line" is accompanied by text that
prominently informs investors that the arrangement is not a viable
source of financing for NeoMedia. If you believe that the 2005
Standby Equity Distribution Agreement is a viable source of
financing, in the response letter please provide a reasoned
explanation of the basis for this belief.
Response: The Company has been informed by counsel to Cornell Capital Partners
that in a meeting with the Securities and Exchange Commission's
Office of the Chief Counsel, the Commission indicated to Cornell
Capital Partners that as long as an issuer was Form S-3 eligible it
is permissible for such issuer to have an equity line financing
arrangement with a purchaser that holds securities that are
convertible at a marker sensitive rate.
PART II
EXHIBITS, PAGE II-2
Comment 4: We will review the opinion required by Item 601(b)(5) of Regulation
S-B prior to the effectiveness of your filing. Any comments
concerning that opinion will be provided when we have the
opportunity to review the document.
Response: The opinion was included as exhibit 5.1 to the new S-3 filing.
Comment 5: Please advise why the documents associated with the sale of your
Series C Convertible Preferred Stock in February 2006 are not
provided with this filing as material contracts. We are aware that
they have been previously filed with other documents. Examination of
the exhibit list to the Form S-3 should inform investors of the
nature and location of these documents. You may elect to incorporate
the previously filed exhibits in an appropriate fashion.
Response: We have updated the list to incorporate by reference the documents
associated with the sale of Series C Convertible Preferred Stock in
February 2006.
UNDERTAKINGS, PAGE II-6
Comment 6: The undertaking under Item 512 of Regulation S-K relating to Rule
415 offerings have been amended recently. Please revise your
undertakings in conformity with Item 512 of Regulation S-K.
Response: We have updated the disclosure as requested.
FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
FRONT COVER
Comment 7: Your front cover indicates that you have securities registered under
Section 12(b) of the Exchange Act. However, it appears you only have
a class of securities registered under Section 12(g) of the Exchange
Act. Please advise. Further, we note that the "Over-the-Counter
Bulletin Board" is not a "national securities exchange" but is an
over-the-counter market.
Response: We will correct this disclosure in future filings.
FORM 10-Q FOR THE FISCAL QUARTER ENDED MARCH 31, 2006
LIQUIDITY AND CAPITAL RESOURCES, PAGE 48
Comment 8: We note your disclosures surrounding the cash flows from operating,
investing, and financing activities. Tell us how you considered Item
303 of Regulation S-K and Section IV of the "Commission Guidance
Regarding Management's Discussion and Analysis of Financial
Condition and Results of Operations" (Release 34-48960) regarding
your Management's Discussion and Analysis or Plan of Operation
disclosures. In this regard, note that when preparing the discussion
analysis of operating cash flows, you should address material
changes in the underlying drivers rather than merely describe items
identified on the face of the statement of cash flows.
Response: In our 10-Q for the fiscal quarter ended June 30, 2006, we have
updated this disclosure to more specifically address changes in the
underlying drivers of our liquidity and capital resources. We will
continue to update and make the appropriate disclosures in future
filings.
Comment 9: This section should include a reasonably detailed discussion of your
ability or inability to generate sufficient cash to support
operations during the twelve-month period following your interim
financial statements. In this regard you should enhance your
disclosure to describe your estimated liquidity requirements over
the next 12 months including a detailed discussion of the
components. We note that enhanced disclosure similar to the
subheading "Going Concern" with additional quantifications may be an
advantageous starting point.
Response: In our 10-Q for the fiscal quarter ended June 30, 2006, we have
updated this disclosure to more specifically address our estimated
liquidity requirements over the next 12 months. We will continue to
update and make the appropriate disclosures in future filings.
Comment 10: Please advise why you have not discussed your expected reliance upon
or the ramifications of your financing with Cornell Capital Partners
of your liquidity and capital resources. For example consider
revising to discuss:
o The impact on operations and ability to engage in future
financings as a result of provisions contained in your Cornell
Capital financings such as in Section 4 of our Investment
Agreement dated February 17, 2006 and Article 2 of your Security
Agreement dated March 30, 2005;
o The possibilities and impact on your liquidity and capital
resources if, as it appears, the 2005 Standby Equity
Distribution Agreement is not a viable source of funding.
o Recent costs associated with your financing. For example, we
note in addition of offering costs and discounts and dividends
provided in connection with the Series C Convertible Preferred
Shares, Cornell held back 2.7 million in commitment and
structuring fees and you issued 2 million warrants to Thornhill
Capital for financial advisory services
Response: In our 10-Q for the fiscal quarter ended June 30, 2006, we have
updated this disclosure to address both our reliance upon Cornell
Capital Partners, as well as the ramifications of certain terms of
our financing with Cornell Capital Partners. We will continue to
update and make the appropriate disclosures in future filings.
Very truly yours,
/S/ Charles T. Jensen
Charles T. Jensen
President, Chief Executive Officer & Director