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    NeoMedia boss says future still bright

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    “Inconceivable” that investor will withdraw just as market accelerates

    2D barcode company NeoMedia is currently only funded until the end of April, with no guarantee of future funds, but it faces a bright future as the 2D barcode market is set for major growth, according to CEO Iain McCready.

    McCready said that investor Yorkville Advisors (YA) has until now provided funding on a “month by month” basis, but further funding has not yet materialised. So far YA has invested $50 million in NeoMedia since 2006. Earlier this year YA was given a 52% voting share in the company, as part of a deal which saw it provide a further $2.5 million in funds to the company.

    NeoMedia struck license deals in 2009 with Mobile Tag, BEMS, Scanbuy and NeuStar, and in 2010 with Mobiento and MORE Mobile Relations, two Swedish companies. It also has an agreement to load NeoMedia’s reader in Sony Ericsson phones.

    Yet despite these developments, a recent filing by NeoMedia to the SEC warned about the company’s ability to continue as a going concern.

    The March 10k filing said:
    The items discussed above raise substantial doubts about our ability to continue as a going concern.
    We do not have any commitments to receive capital, and we need to raise additional funds in order to continue our operations.
    We currently do not have sufficient cash to sustain us for the next twelve months.
    Should YA Global choose not to provide us with continued capital financing, as they have in the past, or if we do not find alternative sources of financing to fund our operations, or if we are unable to generate significant product revenues, we only have sufficient funds to sustain our current operations through approximately April 30, 2010.

    Not much, apart from the announcement of the Swedish deal, appears to have changed since then, despite evidence of the general market moving towards greater usage of 2D barcodes.

    But McCready insisted that it would be “inconceivable” that after its $50 million investment to date, Yorkville would cease to invest just as NeoMedia sees “tremendous acceleration in the marketplace” and “as it stands so close to its goals“.

    “Like so many Investors Yorkville had to face the challenges of the last years’ financial melt-down, but they have weathered that storm and continued to support NeoMedia,” McCready said. “If you look at any of our filings for the last few years you will see exactly the same language, including the going concern statements.”

    McCready added that although the company lost $67.4 million in 2009, and $8.0 million in 2008, “the vast majority of the losses are non-cash charges resulting from ultra-complex and volatile derivative accounting issues”.

    The SEC filing made on 26 March 2010 said that the company had an accumulated deficit of $277.0 million and a working capital deficit of $124.6 million as of December 31, 2009. It valued its assets at just under $9.5 million and its liabilities at $125.5 million.

    In a briefing with Mobile Europe, McCready said that he believed that the market was looking positive. The licensing deals and the handset deal with Sony Ericsson are evidence that there is movement in the mobile 2D bardcode space, he said. The BEMS deal means the reader will be on all Telefonica phones in 13 Latin American countries. And Sony Ericsson has committed to pre-installing the application on some of its phones. App stores also offer a further opportunity – for example, NeoMedia is a top five download on Sony Ericsson’s application store, McCready said.

    One major frustration for McCready has been with mobile operators. In November 2008 McCready held out great hope for the mobile operator market, telling Mobile Europe that operators had 2D barcode implementation high up their “to-do lists”. McCready agreed that two years ago mobile operators were a key target for NeoMedia, but “not any more.” Even though NeoMedia has offered operators a free platform, he said, with a revenue share deal for any earnings, they still haven’t had any takers. “I just don’t think they get it,” he said. “They are in major danger of Facebook, Google and GS1 eating their lunch.”

    There is a possibility that may change through NeoMedia’s licensing deal with NeuStar, under which NeuStar aims to sublicense NeoMedia’s technology to operators and other partners. NeuStar launched a mobile barcode clearing house concept at Mobile World Congress this year.

    Other companies too have said that the market is picking up. “In recent months, Panorama, la Repubblica and Wired have run 2D barcode campaigns in Italy and we have been seeing, through the i-nigma platform, thousands of daily scans from these campaigns already,” Ofer Lev, VP Products and Marketing, 3GVision, said.

    3G Vision recently signed a deal with partnership with Vidiemme Consulting, a digital web marketing company in Italy.