NeoMedia Technologies, Inc. (PINK:NEOM) Scored Some Staggering Volume
Have you seen those white squares with a number of smaller black squares jumbled inside them? They’re literally everywhere from newspapers and magazines to beer bottles. The idea is, you aim the camera of your smartphone to it and, out of nowhere, an annoying flash animation appears on your screen. This is what NeoMedia Technologies, Inc. (PINK:NEOM) have been developing for the past decade or so.
When we saw that during yesterday’s session more than 200 million NEOM shares changed hands, and that their price surged by about 23%, we were quite perplexed. NEOM have been the subject of newsletter pumpers in the past, but after checking the database we found that there was not a single email covering them this time. Volume like this doesn’t appear for no reason, however, so we continued digging around. Sure enough, NEOM have published a press-release stating that after some heavy negotiations with their primary lender, they managed to postpone the pay-off date for one of their debts which, in turn, would mean that their next quarterly report would look much better. That’s good news, as the latest 10-Q, for the period ending on September 30, 2012, looks mightily depressing.
In there you will find the following financials:
- cash: $1.2 million
- current assets: $2.2 million
- current liabilities: $83 million
- revenue (Jan – Sept): $1.8 million
- net loss (Jan – Sept): $21 million
- accumulated deficit: $267 million
As unlikely as it may seem, these figures are not the biggest problem. NEOM are so deep in debts that the dilution for shareholders is absolutely devastating. They have millions upon millions of convertible debentures and just as many options, warrants and convertible preferred stock. The result of this is that between January and September 2012 alone they were forced to issue a total of 1.1 billion shares of common stock. They also mention that since they don’t have enough money to fund the future operations (who would have thought?), they will probably need to issue additional shares that will further crush shareholders’ investments.
The fact that they currently have no money is due to NEOM‘s inability to fund their operations through anything other than debt financing. Who lent them the money? The same people who postponed the pay-off date – their primary lender, YA Global Investments, LP. After digging around to see who they were and why they had so much trust in NEOM, we found that the Securities and Exchange Commission have filed some incredibly serious fraud allegations against YA’s owners. We have yet to see what the outcome of the case will be, but in this document, which is quite long, we see that YA have invested in small cap companies just like NEOM, and after that, they have made over $1 billion in profit by overpricing the stock and defrauding investors. NEOM is not mentioned in the charge, but you should keep in mind that the matter is far from over and some additional facts might turn up in the course of investigation.
We often say that if a company is to be a viable investment alternative, it needs to show some revenue. Well, NEOM have plenty of it, but is that enough? As we have seen so far in this article, no. And NEOM are not the only company with seven digits under the revenue section that we have covered. IceWEB, Inc. (OTC:IWEB) have been part of numerous promotional campaigns in the past and, as we know, once the hype is over, most of the pumped companies simply crash. IWEB is no exception as seen from the chart of the right.
