U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
AMENDMENT NO. 1 TO FORM 8-K/A CURRENT
REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 10, 2004
NEOMEDIA TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-21743 36-3680347
(State or Other (Commission File Number) (IRS Employer
Jurisdiction Identification No.)
Incorporation)
2201 SECOND STREET, SUITE 402, FORT MYERS, FLORIDA 33901
(Address of Principal Executive Offices) (Zip Code)
(239) - 337-3434
(Registrant's Telephone Number, including Area Code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 2, 2003, NeoMedia Technologies, Inc. ("NeoMedia") signed a
non-binding letter of intent to acquire and merge with CSI International, Inc.
("CSI"), of Calgary, Alberta, Canada, a private technology products company in
the micro paint repair industry. On February 6, 2004, NeoMedia and CSI signed a
definitive merger document (see Exhibit 3.1). NeoMedia paid $2,500,000 cash,
plus 7,000,000 shares of NeoMedia common stock in exchange for all of the
outstanding shares of CSI. The two companies will centralize administrative and
management functions at NeoMedia's headquarters in Fort Myers, Florida. Sales
and operations will be based out of Calgary, Alberta.
This Form 8-K/A is being filed as Amendment No. 1 to the Form 8-K of
NeoMedia Technologies, Inc. filed with the Securities and Exchange Commission on
February 10, 2004, to provide the financial statements required by Items 7(a)
and (b) of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired - CSI International, Inc.
Independent Auditors' Report
Balance sheets as of August 31, 2003 and 2002
Statements of income and comprehensive income for the years ended August
31, 2003 and 2002
Statements of changes in stockholders' equity for the years ended August
31, 2003 and 2002
Statements of cash flows for the years ended August 31, 2003 and 2002
Notes to financial statements as of August 31, 2003 and 2002
Interim balance sheet as of November 30, 2003 (unaudited)
Interim statements of income and comprehensive income for the
three-month periods ended November 30, 2003 and 2002 (unaudited)
Interim statements of cash flows for the three-month periods ended
November 30, 2003 and 2002 (unaudited)
Notes to interim financial statements as of November 30, 2003
(unaudited)
(b) Pro Forma Financial Information
Pro Forma Condensed Combined Financial Statements (unaudited) as of
December 31, 2003 and for the twelve months ended December 31, 2003
Pro forma combined balance sheet as of December 31, 2003 (unaudited)
Pro forma combined statement of operations for the twelve months ended
December 31, 2003 (unaudited)
(c) Exhibits
23.1 Consent of Eisner LLP, Independent Certified Public Accountants
2
INDEPENDENT AUDITORS' REPORT
Board of Directors
CSI International Inc.
Calgary, Alberta Canada
We have audited the accompanying balance sheets of CSI International Inc. as of
August 31, 2003 and 2002, and the related statements of income and comprehensive
income, changes in stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in all
respects, the financial position of CSI International Inc. as of August 31, 2003
and 2002, and the results of its operations and its cash flows for the years
then ended, in conformity with accounting principles generally accepted in the
United States of America.
/s/ Eisner LLP
New York, New York
January 23, 2004
CSI INTERNATIONAL INC.
BALANCE SHEETS
(in U.S. dollars)
AUGUST 31,
-----------------------
2003 2002
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 136,000 $ 126,000
Accounts receivable, net of allowance
for doubtful accounts of $13,000 for
2003 and $9,000 for 2002 60,000 38,000
Inventories 13,000 10,000
Other current assets 1,000 1,000
--------- ---------
Total current assets 210,000 175,000
Investments 51,000
Property and equipment, net 7,000 2,000
--------- ---------
$ 268,000 $ 177,000
========= =========
LIABILITIES
Current liabilities:
Accounts payable $ 22,000 $ 17,000
Accrued expenses 36,000 12,000
Income taxes payable 12,000 8,000
Due to stockholder 14,000
--------- ---------
Total current liabilities 70,000 51,000
--------- ---------
Commitments (Note F)
STOCKHOLDERS' EQUITY
Common stock - no par value: 20,000 shares
authorized; 100 shares issued and outstanding
in 2003 and 2002, respectively
Accumulated other comprehensive income (loss) -
currency translation adjustment 7,000 (7,000)
Retained earnings 191,000 133,000
--------- ---------
198,000 126,000
--------- ---------
$ 268,000 $ 177,000
========= =========
See notes to financial statements 2
CSI INTERNATIONAL INC.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in U.S. dollars)
YEAR ENDED AUGUST 31,
-----------------------
2003 2002
--------- ---------
Revenue $ 544,000 $ 438,000
Direct cost of revenue 338,000 283,000
--------- ---------
Gross profit 206,000 155,000
--------- ---------
Operating costs and expenses:
Selling, general and administrative 148,000 122,000
Depreciation and amortization 2,000 1,000
--------- ---------
150,000 123,000
--------- ---------
Income from operations 56,000 32,000
Gain on equity securities received in connection
with advances (net) 13,000
Interest expense (4,000)
Loss on sale of assets (19,000)
--------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 69,000 9,000
Provision for income taxes (11,000) (6,000)
--------- ---------
NET INCOME 58,000 3,000
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment 14,000 6,000
--------- ---------
COMPREHENSIVE INCOME $ 72,000 $ 9,000
========= =========
See notes to financial statements 3
CSI INTERNATIONAL INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in U.S. dollars)
ACCUMULATED
COMMON STOCK OTHER
-------------------- COMPREHENSIVE
NUMBER OF RETAINED (LOSS) STOCKHOLDERS'
SHARES AMOUNT EARNINGS INCOME EQUITY
--------- -------- -------- -------- --------
BALANCE - SEPTEMBER 1, 2001 100 $ -- $130,000 $(13,000) $117,000
Net income -- 3,000 3,000
Translation adjustment -- 6,000 6,000
-------- -------- -------- -------- --------
BALANCE - AUGUST 31, 2002 100 -- 133,000 (7,000) 126,000
Net income -- 58,000 58,000
Translation adjustment -- 14,000 14,000
-------- -------- -------- -------- --------
BALANCE - AUGUST 31, 2003 100 $ -- $191,000 $ 7,000 $198,000
======== ======== ======== ======== ========
See notes to financial statements 4
CSI INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(in U.S. dollars)
YEAR ENDED AUGUST 31,
-----------------------
2003 2002
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 58,000 $ 3,000
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 2,000 1,000
Loss on disposal of assets 19,000
Gain on equity securities received
in connection with advances (13,000)
Changes in:
Accounts receivable (22,000) 11,000
Inventories (3,000) 2,000
Other current assets (1,000)
Accounts payable and accrued expenses 29,000 12,000
Income taxes payable 4,000 8,000
--------- ---------
Net cash provided by operating
activities 55,000 55,000
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (7,000)
Investment in equity securities (6,000)
Proceeds from disposal of property 120,000
Advances to third party (45,000)
Repayments from third party 13,000
--------- ---------
Net cash (used in) provided by
investing activities (45,000) 120,000
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgage payable (82,000)
Repayments of amounts due to stockholder (14,000) (72,000)
--------- ---------
Net cash used in financing activities (14,000) (154,000)
--------- ---------
Effect of exchange rate changes on cash 14,000 31,000
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 10,000 52,000
Cash and cash equivalents, beginning of year 126,000 74,000
--------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 136,000 $ 126,000
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Income taxes $ 7,000
Interest $ 4,000
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
INFORMATION:
Reduction in due to stockholder in lieu of
payment from sale of building $ 41,000
See notes to financial statements 5
CSI INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) COMPANY:
CSI International Inc. (the "Company") was incorporated in Calgary,
Alberta Canada in 1992 under the name Chip Repair Systems of Canada, Inc.
In 1993, the Company changed its name to Chip Repair Systems International
Inc. and in 1996, the Company changed its name to CSI International Inc.
The Company licenses a technology developed by its founder and significant
stockholder. The technology provides for a more efficient and economical
method to repair paint related damage to vehicles.
The Company conducts its business primarily in the province of Alberta.
(2) FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS:
The financial position and results of operations of the Company are
determined using local currency as the functional currency (Canadian
dollar). Assets and liabilities are translated at the prevailing exchange
rate in effect at each year end. Investments, property and equipment, due
to stockholder and contributed capital accounts are translated using the
historical rates of exchange when the transaction is completed. Income
statement amounts are translated at the average exchange rate during the
year. Translation adjustments arising from the use of different exchange
rates from period to period are included in the cumulative translation
adjustment account in stockholders equity under comprehensive income.
Gains and losses resulting from foreign currency transactions are included
in operations. There were no gains or losses from foreign currency
transactions in 2003 or 2002.
(3) REVENUE RECOGNITION:
Revenue related to product sales is recognized when the products are
shipped to customers and collection is reasonably assured. Revenue related
to service repairs is recognized upon customer acceptance.
(4) CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
(5) INVENTORIES:
Inventories are valued at the lower of cost or market. Cost is determined
on a first-in, first-out method.
(6) PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, which range from 3 to 7 years.
Leasehold improvements are amortized on a straight-line basis over the
useful lives or the term of the related lease, whichever is shorter.
6
CSI INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(7) LONG-LIVED ASSETS:
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
the Company records impairment losses on long-lived assets used in
operations or expected to be disposed of when indicators of impairment
exist and the cash flows expected to be derived from those assets are less
than carrying amounts of those assets. No such indicators existed and the
Company did not record any impairment charge for the years ended August
31, 2003 and 2002.
(8) INCOME TAXES:
Deferred income taxes are determined based upon enacted tax laws in Canada
and rates applied to the differences between the financial statements and
tax basis of assets and liabilities.
(9) USE OF ESTIMATES:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. The Company
reviews all significant estimates affecting the financial statements on a
recurring basis and records the effect of any adjustments when necessary.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts of cash, accounts receivable, investments, accounts
payable and accrued expenses approximate fair value due to the short-term
nature of those instruments.
(11) ADVERTISING COSTS:
Advertising costs incurred during the years ended August 31, 2003 and 2002
were $5,000 and $3,000, respectively
NOTE B - INVESTMENTS
In fiscal 2003, the Company invested $6,000 in exchange for 4,257 shares
of common stock of Triton Global Business Services, Inc. ("Triton"), an
unrelated third party. These shares are restricted and are recorded at
cost as of August 31, 2003. The Company's ownership percentage in Triton
is de minimis.
During fiscal 2003, the Company advanced $45,000 to Triton, a subsidiary
of BSD Software, Inc. ("BSDS"), a public company. The general terms of the
advances included repayment within 30 days with interest at a rate of 8%
per annum. In connection with theser advances, the Company recieved 61,
684 restriced common shares of BSDS. In addition, the Company received an
additional 48,160 shares of BSDS as consideration for extending the notes.
As of the advance dates, the Company ascribed no value to the notes. The
Company accredited the value of the nores as interest income over the
repayment period (30 days). The Company received payment of $13,000 during
fiscal 2003 and wrote the remaining balance ($32,000) off as
noncollectible.
7
CSI INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002
NOTE B - INVESTMENTS (CONTINUED)
The Company ascribed a value of $45,000 in connection with the advances based
upon the share price at the date of each advance limited to the amounts advanced
to the third party. In addition, the Company ascribed a value of $53,000 and a
corresponding increase to interest income for the additional shares recieved as
consideration for extending the repayment date of the advances. As of August 31,
2003, the Company determined that a decline in the market value of such shares
was other than temporary and recorded a loss of $53,000 to reduce the recorded
value to its then market value.
NOTE C - PROPERTY AND EQUIPMENT
Major classes of property and equipment are as follows:
AUGUST 31,
---------------------
2003 2002
-------- --------
Computers $ 8,000 $ 8,000
Equipment 33,000 33,000
Leasehold improvements 7,000
-------- --------
48,000 41,000
Less accumulated depreciation and amortization 41,000 39,000
$ 7,000 $ 2,000
======== ========
Depreciation and amortization expense for the years ended August 31, 2003 and
2002 was $2,000 and $1,000, respectively.
NOTE D - RELATED PARTY
A stockholder and a founder had advanced funds to the Company prior to fiscal
2002 for working capital purposes. The advances were noninterest bearing and due
on demand. The amount due to stockholder was repaid in fiscal 2003.
The Company leases its facility from a stockholder and founder (see Note G).
NOTE E - INCOME TAXES
Provision for income taxes for the years ended August 31, 2003 and 2002 consists
of the following:
YEAR ENDED AUGUST 31,
---------------------
2003 2002
-------- --------
Current $ 11,000 $ 6,000
======== ========
8
CSI INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002
NOTE F - COMMITMENTS
The Company leases premises under a long-term operating lease (as extended in
September 2003) from a rleated party (see Note D) expiring August 31, 2008.
Under this lease, the Company has the following obligations for annual rentals:
2004 $ 21,000
2005 $ 21,000
2006 $ 21,000
2007 $ 21,000
2008 $ 21,000
----------
$ 105,000
==========
Rent expense for the years ended August 31, 2003 and 2002 amounted to
approximately $14,000 and $4,000, respectively.
NOTE G - LOSS ON DISPOSAL OF ASSETS
(1) BUILDING:
During fiscal 2002, the Company sold the building it occupied to a
stockholder and founder. The sale price of the building was $161,000. The
sales price consiste dof $120,000 of cash and a reduction of $41,000 in
amount due to stockholder. The net book value of the building at the date
of sale was $139,000 resulting in a gain of $22,000.
(2) MARKETABLE SECURITIES:
During fiscal 2002, the Company recorded a loss on marketable securitie of
$41,000 as such securities expired worthless.
NOTE H - CONCENTRATION OF CREDIT RISK
As of August 31, 2003, two customers accounted for 24% and 12% of total accounts
receivable.
As of August 31, 2003, one vendor accounted for 37% of accounts payable.
NOTE I - SUBSEQUENT EVENTS
(1) LETTER OF INTENT:
The Company has entered into a letter of intent as of November 2, 2003 to
enter into a merger agreement with Neomedia Technologies, Inc.
("Neomedia"), a public company, located in Florida, USA, in which the
Company would become a wholly owned subsidiary of Neomedia. Consideration
for this transaction will consist of $2,500,000 in cash and 7 million
newly issued shares of common stock of Neomedia.
(2) LEASE:
The Company leased a new automobile in December 2003. The lease is for a
term of 4 years with a monthly rental of $1,000
(3) INVESTMENTS:
As of January 23, 2004, the closing price of BSDS of common stock was $.22
per share, resulting in a decrease in market value of such shares of
$21,000.
9
INTERIM FINANCIAL STATEMENTS OF CSI INTERNATIONAL, INC.
CSI INTERNATIONAL, INC.
BALANCE SHEET
(in U.S. dollars)
NOVEMBER 30,
2003
----------
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents $ 155,000
Accounts receivable, net of allowance for doubtful accounts of $13,000 60,000
Loans receivable 14,000
Inventories 48,000
----------
Total current assets 277,000
Investments 32,000
Property and equipment, net 9,000
----------
$ 318,000
==========
LIABILITIES
Current liabilities:
Accounts payable $ 2,000
Accrued expenses 53,000
Income taxes payable 23,000
----------
Total current liabilities 78,000
Commitments --
STOCKHOLDERS' EQUITY
Common stock - no par value: 20,000 shares authorized; 100 shares issued and
outstanding
Accumulated other comprehensive income - currency translation adjustment 6,000
Retained earnings 234,000
240,000
----------
$ 318,000
==========
The accompanying notes are an integral part of these financial statements.
4
CSI INTERNATIONAL, INC.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in U.S. dollars)
THREE MONTHS ENDED
NOVEMBER 30,
----------------------------
2003 2002
--------- ----------
(unaudited)
Revenue $ 185,000 $ 136,000
Direct cost of revenue 86,000 76,000
--------- ---------
Gross profit 99,000 60,000
Operating costs and expenses:
Selling, general and administrative 27,000 24,000
--------- ---------
Income from operations 72,000 36,000
Loss on equity securities received in connection with advances (net) (19,000) --
--------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 53,000 36,000
Provision for income taxes (10,000) (7,000)
--------- ---------
NET INCOME 43,000 29,000
Other comprehensive income:
Foreign currency translation adjustment (1,000) --
--------- ---------
COMPREHENSIVE INCOME $ 42,000 $ 29,000
========= =========
The accompanying notes are an integral part of these financial statements.
5
CSI INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(in U.S. dollars)
THREE MONTHS ENDED
NOVEMBER 30,
----------------------------
2003 2002
--------- ----------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 43,000 $ 29,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,000 --
Loss on equity securities received in connection with advances 19,000 --
Changes in:
Accounts receivable -- (22,000)
Inventories (35,000) --
Other current assets 1,000 1,000
Accounts payable and accrued expenses (3,000) 1,000
Income taxes payable 11,000 (8,000)
--------- ---------
Net cash provided by operating activities 37,000 1,000
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (3,000) --
Advances to third party (14,000) --
--------- ---------
Net cash used in investing activities (17,000) --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITY:
Repayment of mortgage payable -- (14,000)
--------- ---------
Net cash used in financing activity -- (14,000)
--------- ---------
Effect of exchange rates on cash (1,000) (29,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS 19,000 (42,000)
Cash and cash equivalents, beginning of period 136,000 126,000
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 155,000 $ 84,000
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Income taxes $ -- $ --
Interest -- --
The accompanying notes are an integral part of these financial statements.
6
CSI INTERNATIONAL, INC.
Notes to Financial Statements November 30,
2003 and 2002 (Unaudited)
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS BASIS OF PRESENTATION
The accompanying unaudited interim financial statements do not include
all of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements.
These financial statements and related notes should be read in conjunction with
the Company's audited financial statements for the fiscal year ended August 31,
2003. In the opinion of management, these condensed financial statements reflect
all adjustments which are of a normal recurring nature and which are necessary
to present fairly the financial position of CSI as of November 30, 2003, and the
results of operations and cashflows for the three-month periods ended November
30, 2003 and 2002. The results of operations for the three-month period ended
November 30, 2003 are not necessarily indicative of the results which may be
expected for the entire fiscal year.
NATURE OF BUSINESS OPERATIONS
CSI International, Inc. ("CSI" or the "Company") was incorporated in
Calgary, Alberta Canada in 1992 under the name Chip Repair Systems of Canada,
Inc. In 1993, the Company changed its name to Chip Repair Systems International,
Inc. and 1996, the Company changed its name to CSI International, Inc.
The Company licenses a technology developed by its founder and
significant stockholder. The technology provides for a more efficient and
economical method to repair paint related damage to vehicles.
The Company conducts its business primarily in the province of Alberta.
RECENT ACCOUNTING PRONOUNCEMENTS
On December 24, 2003, the FASB issued FASB Interpretation No. 46 (Revised
December 2003), "Consolidation of Variable Interest Entities," (FIN-46R)
primarily to clarify the required accounting for interests in variable interest
entities. FIN-46R supercedes FIN-46 that was issued in January 2003. FIN-46R
exempts certain entities from its requirements and provides for special
effective dates for entities that have fully or partially applied FIN-46 as of
December 24, 2003. In certain situations, entities have the option of applying
or continuing to apply FIN-46 for a short period of time before applying
FIN-46R. While FIN-46R modifies or clarifies various provisions of FIN-46, it
also incorporates many FASB Staff Positions previously issued by the FASB.
Management does not believe there will be any material impact to the Company's
financial position, results of operations or liquidity resulting from the
adoption of this interpretation.
INVESTMENT IN TRITON GLOBAL BUSINESS SERVICES, INC.
During the year ended August 31, 2003, the Company invested $6,000 in
exchange for 4,257 shares of common stock of Triton Global Business Services,
Inc. ("Triton"), an unrelated third party. These shares are restricted and are
recorded at cost as of November 30, 2003. The Company's ownership percentage in
Triton is de minimis.
7
CSI INTERNATIONAL, INC.
Notes to Financial Statements November 30,
2003 and 2002 (Unaudited)
During the year ended August 31, 2003, the Company advanced $45,000 to
Triton, a subsidiary of BSD Software, Inc. ("BSDS"), a public company. The
general terms of the advances included repayment within 30 days with interest at
a rate of 8% per annum. In connection with these advances, the Company received
61,684 restricted common shares of BSDS. In addition, the Company received an
additional 48,160 shares of BSDS as consideration for extending the notes. As of
the advance dates, the Company ascribed no value to the notes. The Company
accreted the value of the notes as interest income over the repayment period (30
days). The Company received payment of $13,000 during the year ended August 31,
2003, and wrote the remaining balance ($32,000) off as noncollectible.
The Company ascribed a value of $45,000 in connection with the advances
based upon the share price at the date of each advance limited to the amounts
advanced to BSDS. In addition, the Company ascribed a value of $53,000 and a
corresponding increase to interest income for the additional shares received as
consideration for extending the repayment date of the advances. As of August 31,
2003, the Company determined that a decline in the market value of such shares
was other than temporary and recorded a loss of $53,000 to reduce the value to
its then market value. Likewise, the Company recorded an additional loss of
$19,000 during the three months ended November 30, 2003, to reduce the value to
its market value as of November 30, 2003.
LETTER OF INTENT
On November 2, 2003, the Company entered into a letter of intent to be
acquired by, and merge with, NeoMedia, a public company located in Ft. Myers,
Florida, USA. Under the terms of the letter of intent, the Company would become
a wholly-owned subsidiary of NeoMedia, with the sales and operations office
remaining in Calgary. The transaction was completed on February 6, 2004.
8
ITEM 7(B). PRO FORMA FINANCIAL INFORMATION
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
On November 2, 2003, NeoMedia Technologies, Inc. ("NeoMedia") signed a
non-binding letter of intent to acquire and merge with CSI International, Inc.
("CSI"), of Calgary, Alberta, Canada, a private technology products company in
the micro paint repair industry. On February 6, 2004, NeoMedia and CSI signed a
definitive merger document (see Exhibit 3.1). NeoMedia paid $2,500,000 cash,
plus 7,000,000 shares of NeoMedia common stock in exchange for all of the
outstanding shares of CSI. The two companies will centralize administrative and
management functions at NeoMedia's headquarters in Fort Myers, Florida. Sales
and operations will be based out of Calgary. The following unaudited pro forma
condensed combined financial statements give effect to the acquisition by
NeoMedia of CSI.
The pro forma condensed combined balance sheet gives effect to the
acquisition of CSI as if it had occurred on December 31, 2003.
The pro forma condensed combined historical statement of operations
gives effect to the acquisition of CSI International, Inc. as if it had occurred
as of January 1, 2003, combining the historical results of NeoMedia for the year
ended December 31, 2003 with the historical results of the same period for CSI.
The pro forma combined financial statements included in this Form 8-K/A
have been prepared by the managements of NeoMedia and CSI without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, the managements of NeoMedia and
CSI believe that the disclosures are adequate to make the information not
misleading.
The pro forma adjustments are based on currently available information
and upon estimates and assumptions that we believe are reasonable under the
circumstances. A final determination of the allocation of the purchase price to
the assets acquired and liabilities assumed has not been made, and the
allocation reflected in the unaudited pro forma combined financial statements
should be considered preliminary and is subject to the completion of a more
comprehensive valuation of the assets acquired and liabilities assumed. The
final allocation of purchase price could differ materially from the pro forma
allocation included herein. The pro forma financial data do not purport to
represent what NeoMedia's financial position or results of operations would
actually have been if such transactions had occurred on those dates and are not
necessarily representative of NeoMedia's financial position or results of
operations for any future period. The pro forma financial statements should be
read in conjunction with the separate historical financial statements and
footnotes of NeoMedia included in Form 10-KSB for the year ended December 31,
2003, incorporated by reference herein, and CSI.
NEOMEDIA TECHNOLOGIES, INC.
PRO-FORMA COMBINED BALANCE SHEET
DECEMBER 31, 2003
(In thousands of US Dollars)
(Unaudited)
HISTORICAL
------------------------------ (A)
CSI PRO-FORMA PRO-FORMA
ASSETS NEOMEDIA INTERNATIONAL ADJUSTMENTS COMBINED
------------ --------------- ------------
Current assets:
Cash and cash equivalents $ 61 $ 128 $ 189
Trade accounts receivable, net 133 96 229
Inventories, net 3 57 60
Loans receivable -- 16 16
Prepaid expenses and other current assets 356 -- 356
-------------------------------------------- -----------
Total current assets 553 297 -- 850
Property and equipment, net 61 9 70
Capitalized patents, net 2,415 -- 2,415
Capitalized and purchased software costs, net 118 -- 118
Cost in excess of net book value of assets purchased -- -- 2,988 (A) 2,988
Investments -- 29 29
Other long-term assets 729 -- 729
-------------------------------------------- -----------
Total assets $ 3,876 $ 335 $ 2,988 $ 7,199
============================================ -----------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 2,327 $ 2 2,329
Amounts due under financing agreements 196 -- 196
Amounts payable under settlement agreements 772 -- 772
Liabilities in excess of assets of 657 -- 657
discontinued business unit
Income taxes payable -- 14 14
Sales taxes payable 137 -- 137
Accrued expenses 1,743 107 1,850
Deferred revenues and other 515 -- 515
Notes payable 732 -- 2,500 (A) 3,232
-------------------------------------------- -----------
Total liabilities 7,079 123 2,500 9,702
-------------------------------------------- -----------
Shareholders' equity (deficit):
Preferred stock -- -- --
Common stock (B) 2,440 -- 70 (A) 2,510
Additional paid-in capital 71,565 -- 630 (A) 72,195
Deferred stock-based compensation (282) -- (282)
Accumulated other comprehensive
income (loss) - currency translation -- 14 (14) (A) --
adjustment
Retained earnings (accumulated deficit) (76,147) 198 (198) (A) (76,147)
Treasury stock (779) -- (779)
-------------------------------------------- -----------
Total shareholders' equity (deficit) (3,203) 212 488 (2,503)
-------------------------------------------- -----------
Total liabilities and shareholders' equity (deficit) $ 3,876 $ 335 $ 2,988 $ 7,199
============================================ -----------
10
PRO-FORMA ADJUSTMENTS
(A) - Adjustment for stock and cash issued in purchase of CSI. NeoMedia paid
$2.5 million cash plus 7,000,000 shares of its common stock valued at $0.10 per
share (stock price at date of exchange) in exchange for all the outstanding
shares of CSI. The combination is being accounted for as a purchase business
combination as defined by Statement of Financial Accounting Standards No. 141,
Business Combinations. The $2.5 million cash was funded from an outside investor
through a note payable. NeoMedia initially ascribed the purchase price in excess
of CSI's net assets to "Cost in excess of net book value of assets purchased."
As described in the "basis of presentation" the purchase price is subject to
final allocation, and will be adjusted accordingly upon determination of the
final purchase price.
(B) - NeoMedia's $0.01 par value common stock consists of 1,000,000,000
authorized shares, 247,041,675 shares historical, 254,041,675 pro forma, issued
and outstanding 243,991,257 historical and 250,991,257 pro forma.
11
NEOMEDIA TECHNOLOGIES, INC.
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2003
(In thousands of US Dollars, except per share
data) (Unaudited)
HISTORICAL
---------------------------------- PRO-FORMA
CSI ADJUST- PRO-FORMA
NEOMEDIA INT'L MENTS COMBINED
----------------------------------------------- ---------------
NET SALES:
License fees $ 414 $ -- $ -- $ 414
Resale of software and technology equipment and service fees 1,986 -- -- 1,986
Micro paint revenue -- 588 -- 588
----------------------------------------------- ---------------
Total net sales 2,400 588 -- 2,988
----------------------------------------------- ---------------
COST OF SALES:
License fees 300 -- -- 300
Resale of software and technology equipment and service fees 1,829 -- -- 1,829
Micro paint direct cost of revenue -- 353 -- 353
----------------------------------------------- ---------------
Total cost of sales 2,129 353 -- 2,482
----------------------------------------------- ---------------
GROSS PROFIT 271 235 -- 506
Selling, general and administrative expenses 4,793 193 -- 4,986
Research and development costs 332 -- -- 332
Income (loss) from operations (4,854) 42 -- (4,812)
Loss on extinguishment of debt, net (152) -- -- (152)
Loss on equity securities
received in connection with advances (net) -- (11) -- (11)
Interest expense, net (376) -- -- (376)
----------------------------------------------- ---------------
INCOME BEFORE PROVISION FOR INCOME TAXES (5,382) 31 -- (5,351)
Provision for income taxes -- 6 -- 6
----------------------------------------------- ---------------
NET INCOME (LOSS) $ (5,382) $ 37 $ -- $ (5,345)
=============================================== ===============
NET LOSS PER SHARE--BASIC AND DILUTED $ (0.04) $ (0.04) (B)
================ ===============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES-BASIC AND DILUTED 125,029,723 7,000,000 (A) 132,029,723
================ ============= ===============
PRO-FORMA ADJUSTMENT
(A) - Adjustment for 7,000,000 shares issued as portion of purchase price of CSI
International, Inc., assuming shares were issued on January 1, 2003.
(B) - Pro forma basic and diluted net loss per share is calculated by dividing
pro forma net loss by the pro forma outstanding common shares.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NeoMedia Technologies, Inc.
(Registrant)
Date: April 12, 2004 By: /s/ Charles T. Jensen
--------------------------------------
Charles T. Jensen, President, Chief
Operating Officer, Acting Chief Executive
Officer and Director