Some of you may be aware by now that Neomedia has sold Sponge back to its founders for US$250k (official press release). The official line is that Neomedia wants to focus on its qode product (which is a QR code technology recently used in the One Water campaign). However, reading between the lines, it seems that Neomedia's share price has plunged leaving them unable to fulfil their contractual (and financial) obligations to complete the Sponge acquisition deal. Neomedia retains a 7.5% stake and Sponge's founder shareholders keep just over US$6m of the original purchase price. Seems to me that they've played a blinder and that the picture of a champagne bottle on their official news page is very telling ;)Alex Meisl, founder and CEO of Sponge says, "Sponge is going from strength to strength - business has doubled since the beginning of the year in both the media and agency space." He continues, "We have also grown the team whilst remaining wedded to our belief of great products and great service." (That's good advice to *any* business IMHO)
The company will continue to be run by the existing management team.
Qcode is not a QR Code at all. It is a proprietory code. Check QR Codes at http://www.qrcode.com
ReplyDeleteI take it you're not a finance and/or accounting major ;)
ReplyDeleteNEOM paid $6,141 in cash and 33,097,135 in stock x .395 = $13,073,368, plus NEOM paid closing cost for a total purchase price of $19,408,000.
NEOM also assumed the liabilities of Sponge, in the $19,214,368, purchase price in the amount of $716,000, of which most all of this was their accounts payable.
During the past 6 months, Sponge HAS NOT SHOWN A PROFIT.
Here is their 1 year break down:
Past 3 months: Income $265,000. Net Income (Loss) (420,000.)
Past 6 months: Income $1,488,000. Net Income (Loss) (458,000.)
3 months 9/30/05 Income $609,000. Net Income $53,000.
9 months 9/30/2005 Income $1,544,000. Net Income $172,000.
Contributing financial losses after a company sold (to a public corporation) their hyped goodwill, and positive financial position, generally would cause me, or other accounting professionals (in my opinion), to have concerns regarding internal controls, and a company's ability to manage revenue and cost pricing controls, although, charitable contributions of a company's services, might be a minor percentage of cost reporting, reflected in their gross profit percentage and net losses.
That being said ... With NeoMedia's financial position, they could not afford to "absorb" Sponge's present losses. If NeoMedia had a warchest of money, then yes maybe. But at this point in time, NeoMedia Management had no other choice but to trim the fat.
Oh and by the way, the $6 Million in cash is long gone from Sponge owners' pockets.
Best to you :)
From a fellow Mobile Marketer
@anonymous 1
ReplyDeleteI realise qode is proprietary but it is a qr-code type technology. And I'm guessing that's why it's called qode...
@anonymous 2
No, I'm not a finance or accounting major, that's why I do marketing;) I merely report what I see or hear or as I understand it in layman's terms. Perception is reality 'n all.
Interesting to see the underlying figures so thank you for sharing. I'd be interested to know more about how those losses occurred... It's not unusual AFAIK, for a company to go down before it goes up again after a merger or acquisition due to the nature of expansion and general company transition whilst the new company beds in with each other (people, processes, whatever).
And clearly Neomedia's share price *has* fallen in the last 9 months so it *would* have to trim the fat.
But how much profit is qode making, or gavitec or the other NeoM divisions? Are they in profit now? If so, that's fantastic progress for recognition technology as it's still such early days for this outside the Far East.
There's clearly more to this story than meets the eye on both sides. I wait for more anonymous (or not) commenters to add their 2p;)
Helen,
ReplyDeleteFelt I had to comment on some of the inaccurate posts by "anonymous" about Sponge on your blog.
Tons of rubbish to debunk. Our revenues are up this year, (Neo chooses NOT to report our revenues, but our gross margin), we are trading profitably now that the past 3 months of hell are behind us, and over the last 6 months we have won major new accounts (watch this space) which will further enhance our profits.
When Neo bought us we were profitable (and without being an accounting major either!), the liabilities on our balance sheet covered the assets.
I guess you and others in the industry know Dan and I ...we have never been profligate with money (ours or anyone else’s)... the war-chest is certainly NOT long gone (being mean as mouse shit has its benefits!!). In fairness to “anonymous”, we might have exaggerated a teensy bit…I have certainly bought 3 new pairs of shoes and Dan has bought a car.
I have run a number of businesses - the largest with revenues in excess of £100m...as a result I am comfortable with my abilities to manage and implement internal controls and manage revenue and cost pricing.
Not planning to comment again - I have a life to lead and a company to grow.
Best
Alex (CEO, Sponge)
Anonymous 2,
ReplyDeletePlease advise if there is anything special about being a finance or accounting major? I am not a finance or accounting major.
If NEOM paid $6,141 in cash, how was the purchase price of $19million plus arrived at?
You wrote, "the $6 Million in cash is long gone from Sponge owners' pockets".
I wonder what happened to the $6 million cash in the Sponge owners' pockets. How would you know the $6 million is gone?
Alex (CEO) Sponge,
If in the last 6 months, Sponge won major new accounts, why do you say the past three months was hell. You claimed that NEOM chose not report sponge's revenues, I wonder how they can do that? You also claimed that Sponge's revenues are up this year, so what actually is the 1Q06, 2Q06 and the 3Q06 revenues for Sponge? Also what actually were the net profit for Sponge in 1Q06, 2Q06 and 3Q06?
I hope that both Anonymous 2 and Alex can clarify to help us understand better the true situation.
Anonymous 3