NeoMedia gets $8.65 million; Aeolus announces $5 million; LightPath only sells $2.93 million

By Devika Patel

Knoxville, Tenn., Aug. 4 - NeoMedia Technologies, Inc. has committed to raise $8.65 million to fund a go-to-market plan implemented by the company's new chief executive, a move shareholders rallied to support, as the company's stock (OTCBB: NEOM) ballooned 77.5%, or $0.0031, to close at $0.0071 on Monday.

Meanwhile, Aeolus Pharmaceuticals, Inc. settled a tranche of a planned $5 million private placement of convertibles after the close on Friday, raising $500,000 to help advance development of the pharmaceutical company's drug, AEOL 10150.

LightPath Technologies, Inc. said it took in $2.93 million from a private placement of its convertibles through agent First Montauk Securities Corp.

The deal is a clear disappointment for the company, since it had hoped to raise at least $5 million, which would have funded the company's planned opening of a joint venture business focused on high-volume, low-cost products with LightPath's Chinese partner, CDGM Optical Glass Co., China's largest glass manufacturer.

Shareholders shared in the disappointment as well, as the company's stock plummeted 12.64% Monday.

NeoMedia arranges funds

NeoMedia, a Fort Myers, Fla.-based technology company, announced it has arranged a deal selling convertible debentures to investor YA Global Investments, LP, a private investment firm that specializes in structured finance and direct investments.

The deal, which is contingent upon the company achieving agreed upon milestones over the next six months, could raise as much as $8.65 million, which the company will use to fund new chief executive officer Iain McCready's go-to-market plans.

"We have great confidence in Iain and believe he will be a successful steward of our investment by leveraging NeoMedia's expertise and technology to bring barcode scanning technology into the mainstream," Yorkville Advisors, the investment manager of YA Global Investments, partner Jerry Eicke said in a press release. "Iain understands the importance of interoperability and standardization in enabling a global ecosystem.

"More importantly, he understands the path to revenue realization is predicated on disciplined product strategy and operational precision," Eicke continued.

The company settled a $2.33 million tranche at closing.

The two-year debentures mature July 29, 2010. Interest accrues at 14% per annum and is payable at maturity.

YA may elect to convert the debentures at any time at a conversion price equal to the lesser of $0.02 and 95% of the lowest volume weighted average price of the company's common stock during the 10 trading days immediately preceding each conversion date.

The company may redeem the notes at a 10% premium to par.

YA also received a warrant for 100 million common shares, exercisable at $0.02, another warrant for 100 million shares, exercisable at $0.04, a third warrant for 125 million shares, exercisable at $0.05, and a fourth warrant for 125 million shares, exercisable at $0.075. All warrants expire on July 29, 2015.

The funds will accelerate implementation of NeoMedia's aggressive go-to-market plans. These plans will focus on providing mobile barcode scanning infrastructure to carriers, NeoReader scanning software to handset manufacturers and code implementation products to the advertising community.

"Obviously, we are pleased by Yorkville's continued investment in our business," McCready said in the release. "They have been supportive partners in NeoMedia's efforts to establish a business system the world can embrace.

"The time is now for NeoMedia to leverage our strong intellectual property, technology solutions and industry expertise to mobilize this mobile barcode ecosystem," McCready said of the company's plans. "It's taken a lot of time and effort to get the vision and relationships in place. Now we are well-positioned to execute our product roadmap and provide best-in-class experiences for our customers, partners and consumers."

Aeolus plans $5 million

Aeolus said after the close on Friday that it will raise $5 million from a private placement of 7% convertibles. The company also said it took in $500,000 in the first tranche Friday.

The notes were sold in $1,000 units consisting of $1,000 in notes and warrants for 2,000 shares. The company sold 500 units in this tranche.

The investors have agreed, upon the satisfaction of certain conditions by the company, to purchase an additional 125 units for $125,000 in each tranche settling on Sept. 2, Oct. 1, Nov. 3 and Dec. 1.

The notes will mature in 30 months. They are convertible into common stock at an initial conversion price equal to $0.35 per share for the first $1 million in notes and a weighted average closing price for the remaining $4 million in notes. The conversion price must be between $0.20 per share and $0.75 per share.

Interest is payable semiannually.

The warrants are exercisable for up to 10 million shares total at $0.50 for five years.

Proceeds will be used to advance the development of drug AEOL 10150 and for general administrative expenses and working capital.

"We are pleased with this private placement and are excited that this financing will enable us to continue our drug development program," Aeolus president and chief executive officer John L. McManus said in a release. "We appreciate the confidence the investors continue to show in the company and the prospects of its drug development program."

The Laguna Niguel, Calif., company's shares (OTCBB: AOLS) rose 2.94%, or 1 cent, to close at $0.35 on Monday. Its shares closed at $0.34 Friday.

LightPath not too lucky

LightPath only managed to raise $2.93 million in a deal that was aiming for $5 million to help finance a joint venture with the company's Chinese partner, CDGM Optical Glass.

The company had announced that venture in a May 15 news release, saying it had reached an agreement with CDGM to open a joint venture business focused on high-volume, low-cost products.

The company's shares (Nasdaq: LPTH) reacted badly to the smaller proceeds, falling 12.64%, or 22 cents, to close at $1.52 on Monday.

Since the company's original plans have fallen through, LightPath will instead use the proceeds raised by selling 8% convertible debentures and warrants to make a modest investment in the imaging consumer market for cell phones and digital cameras. The investment will be for an optical design team, sales staff and manufacturing equipment. The personnel and equipment will all be deployed in China to continue to expand in this large emerging market opportunity in China.

The debentures are immediately convertible into 1,901,948 common shares.

Investors also received warrants to purchase up to 950,974 common shares. The warrants are exercisable for five years, with 65% of the warrants exercisable at $1.68 per share and 35% of the warrants exercisable at $1.89.

The Orlando, Fla., producer of optical networking items for the telecommunications industry will pay interest on the debentures quarterly beginning on Oct. 1. The Oct. 1 interest payment was prepaid by the company on Aug. 1 by issuing common shares. The remaining interest payments may be paid in cash or in common stock.

First Montauk Securities Corp. was the placement agent.

"We are pleased that in this difficult financial environment we were able to complete our offering," LightPath president and chief executive officer Jim Gaynor said in a news release. "The proceeds will help us continue to fuel our marketing efforts and increase our growth in China.

"We will be announcing our interim financial results for the fourth quarter in August and final results are planned for the second half of September. We anticipate that those results will reflect continued progress on our expanding revenue base and sustained reductions in our fixed overhead structure as well as our variable costs."

"With the completion of this financing, we believe that the company is positioned for strong profitable growth. As a result, we will retain Alliance Advisors, LLC to initiate a proactive and targeted investor relations campaign and ensure that our shareholders and members of the investment community are properly informed of our strategy and competitive advantages as we move forward," Gaynor concluded.

Bob Ripp, chairman of LightPath, pointed out in a press release that insiders of the company supported the financing.

"As a sign of confidence five directors of the board as well as two of LightPath's senior executives have invested in this financing," he said. "This represented 12% of the total amount raised."

"LightPath has the cost structure in place to pursue its new business model, and with the continued cooperation of CDGM as well as the growth in relationships with other Chinese suppliers and customers, LightPath believes it will continue to improve its market share position and operational financial performance. We also remain confident that in the future we will have the opportunity to further leverage our technology and manufacturing expertise in China with a Chinese partner," Ripp added.

"While we were not able to secure all of the $5 million financing necessary to fund our investment in the proposed joint venture with CDGM, I thank our partner CDGM for their patience and flexibility and for continuing discussions about working toward penetrating the consumer imaging market together," Ripp said.

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