FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _________________
Commission File Number 000-25385
PURCHASE POINT MEDIA CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1853993
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 MELVILLE STREET, SUITE 320, VANCOUVER, BC CANADA V6E 4A6
(604) 926-7859
(Address and telephone number, including area code, of
registrant's principal executive office)
141 FIFTH AVENUE, NEW YORK, NEW YORK 10010
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES |X| NO |_|
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
At January 21, 2005 there were 21,678,940 shares of Common Stock, no par
value, outstanding.
PURCHASE POINT MEDIA CORPORATION
INDEX
Page
----
Part I. Financial Information 1
Item 1. Financial Statements
Balance Sheets as of December 31,
2004 (unaudited) an June 30, 2004 2
Statements of Operations for the Six and Three Months Ended
December 31, 2004 and 2003 (unaudited) and the Period June
28, 1996 (Date of
Formation) through December 31, 2004 3
Statements of Stockholders' Deficiency
for the Period June 28, 1996 (Date of Formation)
through December 31, 2004 4 - 5
Statements of Cash Flows for the Six
Months Ended December 31, 2004 and
2003 (unaudited) and the Period June
28, 1996 (Date of Formation) through
December 31, 2004 6 - 7
Notes to Financial Statements (unaudited) 8 - 11
Item 2. Management's Discussion and Analysis
or Plan of Operations 12 - 19
Item 3. Quantitative and Qualitative Disclosures about
Market risk fair value of financial instruments 20
Item 4. Controls and Procedures 20
Part II. Other Information
Item 1. Legal Proceedings 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5 Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Certain information and footnote disclosures required under accounting
principles generally accepted in the United States of America have been
condensed or omitted from the following financial statements pursuant to the
rules and regulations of the Securities and Exchange Commission. It is suggested
that the following financial statements be read in conjunction with the year-end
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the year ended June 30, 2004.
The results of operations for the three and six months ended December 31,
2004, are not necessarily indicative of the results to be expected for the
entire fiscal year or for any other period.
-1-
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31, 2004 and June 30, 2004
ASSETS
December 31, June 30,
2004 2004
----------- -----------
CURRENT ASSETS:
Cash $ 10,621 $ 26,859
----------- -----------
Total Current Assets 10,621 26,859
----------- -----------
PROPERTY AND EQUIPMENT
- net of depreciation 1,329 1,623
OTHER ASSETS:
Patents - net of amortization 16,246 17,158
Other assets 600 600
----------- -----------
Total Other Assets 16,846 17,758
----------- -----------
TOTAL ASSETS $ 28,796 $ 46,240
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Note payable related party $ 827,118 $ 815,708
Accrued interest payable - related parties 293,485 261,932
Accounts payable - related parties 72,000 72,000
Accounts payable 107,355 126,985
----------- -----------
Total Current Liabilities 1,299,958 1,276,625
----------- -----------
STOCKHOLDERS' DEFICIENCY:
Preferred stock
50,000,000 shares authorized at no par value;
2,000 shares issued and oustanding at
redemtpion value 170 170
Common stock
100,000,000 shares authorized at no par value;
21,678,940 and 19,678,940 shares issued
and outstanding on December 31, 2004
and June 30, 2004, respectively 1,762,985 1,262,983
Additional paid-in capital 128,128 128,128
Deficit accumulated during the
development stage (3,162,445) (2,621,666)
----------- -----------
Total Stockholders' Deficiency (1,271,162) (1,230,385)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 28,796 $ 46,240
=========== ===========
The accompanying notes are an integral part of these financial statements.
-2-
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS - UNAUDITED
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 AND 2003, AND THE
THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003
AND THE PERIOD JUNE 28, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 2004
FOR THE SIX MONTHS ENDED FOR THE THREE MONTHS ENDED JUNE 28, 1996
DECEMBER 31, DECEMBER 31, to
------------------------------ ------------------------------ DECEMBER 31,
2004 2003 2004 2003 2004
----------- ----------- ----------- ----------- -----------
REVENUES $ -- $ -- $ -- $ -- $ --
EXPENSES:
Administrative 506,901 64,712 17,085 55,514 2,254,004
Depreciation and amortization 1,207 1,468 604 734 26,761
----------- ----------- ----------- ----------- -----------
NET LOSS - before other expenses (508,108) (66,180) (17,689) (56,248) (2,280,765)
OTHER EXPENSES
Loss from theft - net -- -- -- -- (354,477)
Interest (32,671) 28,874 (16,335) 14,438 (527,203)
----------- ----------- ----------- ----------- -----------
NET LOSS $ (540,779) $ (95,054) $ (34,024) $ (70,686) $(3,162,445)
=========== =========== =========== =========== ===========
LOSS PER COMMON SHARE -
Basic and diluted $ (0.03) $ (0.01) $ -- $ --
=========== =========== =========== ===========
AVERAGE OUTSTANDING SHARES
(stated in 1,000's)
Basic 21,412 17,239 21,556 17,670
=========== =========== =========== ===========
Diluted 21,412 17,239 21,556 17,670
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
-3-
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
PERIOD JUNE 28, 1996 (DATE OF FORMATION) THROUGH DECEMBER 31, 2004
(Unaudited)
PREFERRED STOCK COMMON STOCK ADDITIONAL RETAINED
----------------------- ----------------------- PAID-IN EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
--------- --------- --------- --------- --------- --------- ---------
Balance, June 28,
1996 (Date of
Formation) -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common
stock for cash at $.009 -- -- 1,175,000 10,000 -- -- 10,000
Common stock split -- -- 3,525,000 -- -- -- --
Issuance of preferred
stock for services at $.09 2,000 170 -- -- -- -- 170
Net loss for the period
ended June 30, 1996 -- -- -- -- -- (338,760) (338,760)
Recapitalization from
reverse merger -- -- 6,675,000 8,500 -- -- 8,500
Net loss for the year ended
June 30, 1997 -- -- -- -- -- (99,350) (99,350)
Net loss for the year ended
June 30, 1998 -- -- -- -- -- (142,719) (142,719)
Sale of common stock
for cash at $7.00 -- -- 34,571 241,997 -- -- 241,997
Issuance of warrants
for financing at $.67 -- -- -- -- 23,104 -- 23,104
Net loss for the year ended
June 30, 1999 -- -- -- -- -- (458,843) (458,843)
The accompanying notes are an integral part of these financial statements.
-4-
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
PERIOD JUNE 28, 1996 (DATE OF FORMATION)
THROUGH DECEMBER 31, 2004 (Continued)
(Unaudited)
Common Stock
------------------------ Additional Retained
Preferred Par Stated Paid-In Earnings
Stock Value Shares Value Capital (Deficit) Total
---------- ---------- ---------- ---------- ---------- ---------- ----------
Issuance of warrants
for financing at $.08 -- -- -- -- 83,738 -- 83,738
Sale of common stock
(at $1.00 per share) -- -- 117,665 117,665 -- -- 117,665
Sale of common stock
for cash at $.50 -- -- 336,076 168,038 -- -- 168,038
Net loss for the year ended
June 30, 2000 -- -- -- -- -- (483,493) (483,493)
Issuance of warrants for
financing at $.08 -- -- -- -- 21,286 -- 21,286
Issuance of common stock
for cash at $1.00 , net of costs -- -- 97,138 97,138 -- -- 97,138
Net loss for the year ended
June 30, 2001 -- -- -- -- -- (282,592) (282,592)
Issuance of common stock
for cash at $.05 -- -- 1,613,490 80,674 -- -- 80,674
Issuance of common stock
for debt -- -- 3,500,000 402,021 -- -- 402,021
Net loss for the year ended
June 30, 2002 -- -- -- -- -- (500,234) (500,234)
Issuance of common stock
for cash at $.05 to $.10 -- -- 650,000 39,000 -- -- 39,000
Net loss for the year ended
June 30, 2003 -- -- -- -- -- (92,158) (92,158)
Issuance of common stock
at $.05 -- -- 1,360,000 68,000 -- -- 68,000
Issuance of common stock
for services
at $.05 to $.10 -- -- 595,000 29,950 -- -- 29,950
Net loss for the year ended
June 30, 2004 -- -- -- -- -- (223,517) (223,517)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 2004 2,000 170 19,678,940 1,262,983 128,128 (2,621,666) (1,230,385)
Issuance of common stock
for costs of stock offering -- -- 1,000,000 -- -- -- --
Issuance of common stock
for services at $.50 -- -- 400,000 200,000 -- -- 200,000
Issuance of common stock
for payment of debt at
$.50 per share -- -- 190,000 95,000 -- -- 95,000
Issuance of common stock
for costs of stock offering -- -- 410,000 205,000 -- -- 205,000
Net loss for the six months
ended December 31, 2004 -- -- -- -- -- (540,779) (540,779)
Balance at
---------- ---------- ---------- ---------- ---------- ---------- ----------
December 31, 2004 2,000 170 21,678,940 1,762,983 128,128 (3,162,445) (1,271,164)
========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
-5-
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS - UNAUDITED
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 AND 2003 AND FOR THE
PERIOD JUNE 28, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 2004
JUNE 28,
1996
FOR THE SIX MONTHS ENDED TO
DECEMBER 31, DECEMBER 31,
CASH FLOWS FROM OPERATING 2004 2003 2004
----------- ----------- -----------
ACTIVITIES:
Net loss $ (540,779) $ (95,054) $(3,162,445)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization 1,206 1,468 26,760
Changes in accounts payable 118,335 68,829 981,274
Issuance of common and
preferred stock for expenses 405,000 -- 443,620
Issuance of warrants for
financing -- -- 128,128
Net Change in Cash from
Operations (16,238) (24,757) (1,582,663)
----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Security deposit -- -- (600)
Acquisition of patents -- -- (31,542)
Purchase of equipment -- -- (12,793)
----------- ----------- -----------
Net Change from investing
Activities -- -- (44,935)
----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net proceeds from notes
payable - related parties -- -- 815,708
Proceeds from sale of
common stock -- 53,000 822,511
----------- ----------- -----------
Net Cash Provided by
Financing Activities -- 53,000 1,638,219
----------- ----------- -----------
The accompanying notes are an integral part of these financial statements.
-6-
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS - UNAUDITED
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 AND 2003 AND FOR THE
PERIOD JUNE 28, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 2004
JUNE 28,
FOR THE SIX MONTHS 1996
ENDED TO
DECEMBER 31, DECEMBER 31,
2004 2003 2004
-------- -------- --------
Net (Decrease) Increase in Cash (16,238) 28,243 10,621
Cash - Beginning of Period 26,859 -- --
-------- -------- --------
Cash - End of Period $ 10,621 $ 28,243 $ 10,621
======== ======== ========
The accompanying notes are an integral part of these financial statements.
-7-
PURCHASE POINT MEDIA CORPORATION
(DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
1. ORGANIZATION
The Company was incorporated under the laws of the state of Minnesota on June
28, 1996 with the name "Leghorn Inc." with authorized common stock of
100,000,000 shares with no par value and 50,000,000 preferred shares with no par
value. The terms of the preferred stock included rights to convert to common
stock which has expired. No new terms have been established by the board of
directors. During July 1997 the Company changed its name to "Purchase Point
Media Corporation" as part of a reverse merger.
The Company is in the business of the development and marketing of advertising
space to national advertisers on a patented grocery cart display devise. On the
report date operations had not started and the Company is considered to be in
the development stage.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING METHODS
The Company recognizes income and expenses based on the accrual method of
accounting.
DIVIDEND POLICY
The Company has not yet adopted a policy regarding payment of dividends.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes. Under
the liability method deferred tax assets and liabilities are determined based on
the differences between financial reporting and the tax bases of the assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect, when the differences are expected to reverse. An allowance against
deferred tax assets is recognized, when it is more likely that not, that such
tax benefits will not be realized.
On December 31, 2004, the Company had a net operating loss carry forward of
$3,162,445, however, any tax benefit from the carryforward would be
substantially limited because of major ownership changes in the outstanding
common stock of the Company and therefore any benefit has been fully offset by a
valuation reserve. The net operating loss will expire starting in 2012 through
2024.
-8-
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share amounts are computed based on the weighted
average number of shares actually outstanding. Diluted net income (loss) per
share amounts are computed using the weighted average number of common shares
and common equivalent shares outstanding as if shares had been issued on the
exercise of any common or preferred share rights unless the exercise becomes
antidilutive and then only the basic per share amounts are shown in the report.
FINANCIAL AND CONCENTRATINS RISK
The Company has no financial instruments that potentially subject the Company to
significant concentration of credit risk.
PROPERTY AND EQUIPMENT
The Company's property and equipment consists of the following:
Office and other equipment at cost $12,793
Less accumulated depreciation 11,464
-------
$ 1,329
=======
Office equipment is depreciated on the straight line method over five and seven
years.
PATENTS
Patents have been recorded at cost and are being amortized over their useful
lives of 17 years as follows.
Patents at cost $ 31,543
Less accumulated amortization 15,297
--------
$ 16,246
========
Patents are being amortized at the rate of $1,820 each year.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs, including wages, supplies, and depreciation on
equipment used in the research activity, are being expensed as incurred.
REVENUE RECOGNITION
Revenue will be recognized on the sale and delivery of a product or the
completion of a service provided.
-9-
ADVERTISING AND MARKET DEVELOPMENT
The Company will expense advertising and market development costs as incurred.
EVALUATION OF LONG-LIVED ASSETS
The Company periodically reviews its long lived assets, including equipment and
patents, and makes adjustments, if the carrying value exceeds the fair value.
COSTS OF STOCK OFFERINGS
The proceeds of a successful stock offering being planned will be reduced by the
costs of the offering and the costs of an unsuccessful offering will be
expensed.
ESTIMATES AND ASSUMPTIONS
Management uses estimates and assumptions in preparing financial statements in
accordance with accounting principles generally accepted in the United States of
America. Those estimates and assumptions affect the reported amounts of the
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could vary from the estimates
that were assumed in preparing these financial statements.
FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments, including cash and accounts
payable, are considered by management to be their fair values due to their short
term maturities.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company does not expect that the adoption of other recent accounting
pronouncements will have a material impact on its financial statements.
2. ACQUISITION OF PURCHASE POINT MEDIA CORPORATION
During July 1997 the Company acquired all the outstanding common stock of
Purchase Point Media Corporation by issuing 6,675,000 of its common shares, and
as part of the acquisition, changed its name to Purchase Point Media
Corporation. For reporting purposes, the acquisition was treated as a
recapitalization of the Company with Purchase Point Media Corporation as the
acquirer (reverse acquisition). The acquisition was recorded as a purchase with
no good will recognized. The historical financial statements prior to July
1997 are those of Purchase Point Media Corporation.
-10-
3. CAPITAL STOCK
On February 1, 2000, the Company entered into a subscription agreement with
Quadrant Financial Inc. ("Quadrant"). Quadrant subscribed for 500 units of the
Company's common stock, each unit consisting of one thousand shares of common
stock at $1.00 per share (the fair value at the date of the subscription
agreement) and one thousand common stock purchase warrants. The warrants are
exercisable at any time at $1.00 per share with a expiration date of January 31,
2005.
For the six months ended December 31, 2004 the Company issued 590,000 common
shares for the payment of a debt and for services and 1,410,000 common shares
for the costs of a planned stock offering.
4. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
An officer-director and his controlled company owns 31% of the outstanding
common shares of the Company and have demand, 6% notes payable due them of
$827,118 plus accrued interest payable of $293,485 on December 31, 2004. An
officer-director also has accrued consultant fees due him of $72,000.
5. GOING CONCERN
The Company will need additional working capital for its future planned activity
and to service its debt, which raises substantial doubt about its ability to
continue as a going concern. Continuation of the Company as a going concern is
dependent upon obtaining sufficient working capital to be successful in that
effort. The management of the Company has developed a strategy, which it
believes will accomplish this objective, through additional short term loans,
and equity funding, which will enable the Company to operate for the coming
year.
-11-
Item 6. Management's Discussion and Analysis or Plan of Operations
The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and notes thereto
and the other financial information included elsewhere in this report. Certain
statements contained in this report, including, without limitation, statements
containing the words "believes," "anticipates," "expects" and words of similar
import, constitute "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks and uncertainties. Our actual results
may differ materially from those anticipated in these forward-looking statements
as a result of certain factors, including our ability to create, sustain, manage
or forecast our growth; our ability to attract and retain key personnel; changes
in our business strategy or development plans; competition; business
disruptions; adverse publicity; and international, national and local general
economic and market conditions.
Overview
Purchase Point Media Corporation ("PPMC" or the "Company) owns a patented
grocery cart advertising display device called the last word(TM) that attaches
to supermarket shopping carts. At this time, patents have been granted in the
United States, Canada, France, Germany and the United Kingdom. The last word(TM)
is a registered trademark owned by PPMC. The Company is still in the development
stage and is not an operating company. There can be no assurance that the
selling of advertising space to national advertisers will be developed or that
the Company will achieve a profitable level of operation.
The last word(TM) is a clear plastic, weatherproof, highly durable, state
of the art, point-of-purchase ("POP") display device that encloses a glossy
color photo insert. The panel is 1/4 inch thick, 7 inches high and 16 inches
wide. The last word(TM) insert contains 10 three by three inch advertisement
frames. The last word(TM) attaches to the back of the child's seat section in
grocery carts, so that it is directly in front of the shopper's eyes. Management
believes that the last word(TM) has powerful advantages over competing POP
advertising media.
The development of the last word(TM) began in 1991 when the inventor,
Albert Folsom, applied for patent protection. Subsequent to that, Amtel
Communications Inc. ("Amtel") invested over $1,000,000 in the development of the
last word(TM), which included applying for and receiving the registered
trademark for the last word(TM). In June 1994, a Nevada corporation also called
Purchase Point Media Corporation acquired the patents and the exclusive
marketing rights and trademark. In April 1997, a public Minnesota corporation
acquired the assets of Purchase Point Media Corporation, leaving PPMC
(Minnesota) as the surviving company.
From 1993 to present, PPMC worked on development of the last word(TM),
seeking patent protection in additional countries and setting the stage to
launch a global point of purchase advertisement service company. In November
2003 PPMC contracted with SourceOne in New York City to contract with grocery
chains to lease the baby seat section of grocery carts and handle ad sales. PPMC
has received a proposal from Spar Inc. to install the last word(TM) and handle
the ad changes and maintenance. Spar Inc. has 6,500 people across the United
States that provide services to stores. PPMC will contract with injection
molding companies to manufacture the last word(TM).
-12-
Marketing, Sales and Operations
PPMC will rent the child seat locations on grocery carts from supermarkets
for a rental rate equal to 10% of the gross advertising revenues that the
Company receives. PPMC will sell the advertising for each of the ten positions
on the last word(TM) to manufacturers of leading national brand products sold in
supermarkets. Each position is priced at $2.25 per month per thousand customer
checkouts at the grocery store. Advertising agencies will receive a 15%
commission for all advertisements placed on behalf of their clients. This
advertising will be replaced in quarterly cycles to coincide with the seasons.
Radio and TV
PPMC has entered into a joint participation agreement with CBS Radio and TV
wherein CBS will offer stores free advertising and then sell Radio,TV and the
last word(TM) advertising to product manufactures who sell their products in the
stores.
Shelf talkers, Coupon dispensers
Through an agreement with National Hispanic Retail Networks (NHR). PPMC can
offer Shelf Talkers and Coupon Dispensers to the stores carrying the last
word(TM). NHR who has Shelf Talkers and Coupon Dispensers in 4,400 will also be
able to offer the last word to their clients.
The Point of Purchase (POP) Market
The following discussion of the Point of Purchase (POP) market is based
upon the "Supermarket Buying Habits Survey" published by The Point Of Purchase
Advertising Institute, Inc. (POPAI), based in Washington DC.. Point of purchase
advertising is a $17 billion business.The basis of the growth of POP advertising
is its capacity to influence the buying decisions of shoppers after they enter a
store. POPAI has determined that average shoppers make the decisions for
choosing two thirds of their supermarket purchases after they enter a store.
Other marketing professionals concur with these findings.
POPAI's research has shown that 70 manufacturer displays and 160 signs are
found in an average supermarket. In addition, advertisements are found on
product shelves and on shopping carts. According to research reported in
Marketing Magazine, which covers marketing and sales promotion advertising,
gross sales are 12% higher in stores with advertisements on product shelves than
in stores without shelf advertisements. In addition, advertising panels on the
front of shopping carts increase the average sales of those products by 11.5%.
Other surveys show that a product advertised on a grocery cart would cause a
decrease in sales of the competing product equal to 50% of the increase of the
advertised product.
-13-
In-store POP advertising is effective because there are thousands of
competing products. The average supermarket carries over 15,000 items and larger
stores over 30,000. Each month a thousand new products fight for shelf space and
the customer's attention.
The majority of shoppers are impulse buyers. Every year fewer wives stay
at home and read newspaper ads to plan their grocery shopping. The increase of
two-household earners means considerably less time for planning. Consequently,
more and more people do their grocery shopping without a list and are more
susceptible to in-store advertising.
In 1986, grocery store sales topped $300 billion. By the year 2000,
supermarket customers will spend about half a trillion dollars. These figures
are based on a conservative 6% annual growth rate during the 1990's.
Packaged food companies are now entering over one thousand new products
into the marketplace each month. In 1970, the average supermarket featured 7,800
items. By 1990, that number had reached approximately 15,000 and some carry more
than 30,000 items.
In 1965, the average trip to the grocery store lasted 28 minutes and the
average weekly spending in supermarkets was $28.49. By 1990, shoppers made
slightly more than two trips to the supermarket each week, spending more than
$72.00 per trip. The major shopping trip now lasts nearly 50 minutes as the
hurried shoppers are attempting to wrap up all of their required shopping in one
trip.
The majority of shoppers are working outside of the home and have little
time to plan their shopping trip, making them much more vulnerable to influence
and factors that promote their purchasing decisions while shopping.
Competition
A number of companies compete in the point of purchase grocery cart
advertising industry. The most significant competitors are Actmedia Inc.
("Actmedia") and Floor Graphics.
News Corp. acquired Actmedia Inc. of Darien, Connecticut, which was owned
by Heritage Media Corp. and then changed the name to News America Marketing.
News America Marketing named the grocery cart division, "Smart Source Carts"
(sometimes referred to herein as Actmedia). News America Marketing is a large
company, which competes in several categories of point of purchase supermarket
advertising, including using grocery carts as the location for its advertising
message. Actmedia pioneered grocery cart advertising and has proven that a
single POP advertisement on a grocery cart can be effective and profitable.
Smart Source Carts attaches an 8-inch by 9-inch by 9-inch single
advertisement panel to the front inside and front outside of shopping carts.
According to Actmedia promotional literature, its clients have commissioned the
research company A.C. Nielsen to conduct over 600 independent surveys on
Actmedia's ad program. Nielsen's findings concluded that Actmedia's grocery cart
advertising increases average sales of the advertised products by 12.6%.
-14-
In addition to Actmedia (News America), there are a number of other competitors
in the industry. VideOcart is a shopping cart equipped with a black and white
battery operated video screen, which imparts information as well as
advertisements. Other competitors include shelf and aisle displays as well as a
number of newer hi-tech POP displays. Various electronic in-store displays and
coupon systems exist including: Aisle Vision to straddle the aisle; Market
Vision, an electronic message board crawl screen; POPNET, a computerized
in-store system displaying animated sequences and price promotions; Actmedia's
Instant Coupon Machine, an on-shelf electronic dispensing device; and Shelf
Vision, another electronic display system.
In Store Advertising has a backlit display unit with an LED read out
placed above the aisle in grocery stores. Other displays include
motion-activated units designed to heighten product visibility. Camtalker's
sensory equipment triggers a taped message whenever a customer comes within
range. Soundtron also triggers a message to potential customers as does Voice
Vendor.
The Company believes that since the last word(TM) will be in continuous
communication with each and every shopper in the store, it will be more
effective than the products of its competitors.
Patent
The patent invention is a waterproof advertising display device. Broadly
stated, the patent covers the combination of a telescopingly nestable shopping
cart of the standard type, having a top-hinged rear gate and a rear receptacle,
and an advertising holder mounted facing a user on the front wall of the rear
receptacle, including a rear display plate over the advertising and a watertight
seal such that liquids may not enter the advertising area.
Also protected is the above combination wherein the cover plate is
attached with a quick release hinge. It also includes an optional calculator
assembly supporting the calculator at an upward angle for viewing by the user.
Production and Manufacturing
The early stage manufacturing of the last word(R) has been undertaken by
Lesair, Inc. in San Diego, California. The manufacturer of the final production
runs has not been determined. Competitive bids are being tendered at this time.
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Quarterly Financial Statements:
The Note 6 of the Notes to Unaudited Financial Statements accompanying this
report state that substantial doubt has been raised about our ability to
continue as a going concern. Our present business operations do not generate any
revenue with which to cover our expenses. We will have to raise capital through
the placement of our securities in order to remain viable. We are continuing to
incur management and administrative costs, professional fees and other expenses.
If we are unable to raise capital we will be unable to fund our plan of
operations. Because we will continue to incur net losses, we may have to cease
operations entirely. This factor, among others, raises substantial doubt about
our ability to continue as a going concern. Our ability to continue as a going
concern is dependent upon our ability to obtain funds to meet our obligations on
a timely basis, obtain additional financing or refinancing as may be required,
and ultimately to attain profitability. There are no assurances that we will be
able to obtain any additional financing or, if we are able to obtain additional
financing, that such financing will be on terms favorable to us. The inability
to obtain additional financing when needed would have a material adverse effect
on our operating results.
Six Months Ended December 31, 2004
Versus Six Months Ended December 31, 2003
The net loss increased from approximately $95,054 for the six months ended
December 31, 2003 to approximately $540,779 for the six months ended December
31, 2004. The item of significant increase for the six months ended December 31,
2004 over the comparable period of the prior year was an increase in general and
administrative expense from approximately $6,400 in 2003 to approximately
$506,900 for the six months ended December 31, 2004 due to an increase in
professional services, and an increase in consulting expense from approximately
$2,500 and $-0- in 2003 to approximately $80,250 and $405,000 for the six months
ended December 31, 2004, respectively.
Three Months Ended December 31, 2004
Versus Three Months Ended December 31, 2003
The net loss decreased from approximately $56,248 for the three months ended
December 31, 2003 to approximately $17,689 for the three months ended December
31, 2004. The item of significant increase for the three months ended December
31, 2004 over the comparable period of the prior year was an decrease in general
and administrative expense from approximately $55,500 in 2003 to approximately
$17,100 for the three months ended December 31, 2004 due to a decrease in
marketing services from approximately $ 46,000 in 2003 to approximately $-0- for
the three months ended December 31, 2004, respectively.
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LIQUIDITY
We have no current operations that have generated any revenue. We must rely
entirely on private placements of Company stock to pay operating expenses. At
December 31, 2004 we had a working deficit of approximately $1,289,000 Since we
have no source of revenue, our working capital deficit will continue to increase
as we incur additional operating expenses. Presently, we have no external
sources of cash and we are dependent upon private placements of our stock for
funding.
In August 2004, the Company contract with Charterhouse Capital Markets, Inc.
("CCMI"), to assist the Company in securing financing to conduct a nationwide
rollout program of The Lastword(TM).
On November 4, 2004, CCMI entered into a Memorandum of Understanding ("MOU")
with Atlas E.D.C. under which CCMI and Atlas E.D.C. will issue a $100,000,000
variable rate demand note ("VRDN"). Under the terms of the MOU, Atlas E.D.C.
will advance $5,000,000 into escrow which are the fees required to rate, issue
and place the $100,000,000 VRDN offer.
Through the use of proceeds from the VRDN, CCMI will generate and fund on a
scheduled basis, up to $25,000,000 for the national rollout of the Company's
potential "The LastWord"(TM) advertising display device. The balance of
$75,000,000 in generated funds will be directed to Atlas E.D.C. low income
housing project in the State of Illinois.
CRITICAL ACCOUNTING ISSUES
The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of the financial statements, requires
the Company to make estimates and judgments that effect the reported amount of
assets, liabilities, and expenses, and related disclosures of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to intangible assets, income taxes and contingencies and
litigation. The Company bases its estimates on historical experience and on
various assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.
NEW FINANCIAL ACCOUNTING STANDARDS
In December 2003, the FASB issued SFAS No. 132 (Revised) ("SFAS No. 132-R"),
"Employer's Disclosure about Pensions and Other Postretirement Benefits." SFAS
No. 132-R retains disclosure requirements of the original SFAS No. 132 and
requires additional disclosures relating to assets, obligations, cash flows, and
net periodic benefit cost for defined benefit pension plans and defined benefit
post retirement plans. SFAS No. 132-R is effective for fiscal years ending after
December 15, 2003, except that certain disclosures are effective for fiscal
years ending after June 15, 2004. Interim period disclosures are effective for
interim periods beginning after December 15, 2003.
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In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
clarifies the accounting for certain financial instruments with characteristics
of both liabilities and equity and requires that those instruments be classified
as liabilities in statements of financial position. Previously, many of those
financial instruments were classified as equity. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003.
The adoption of the provisions of SFAS No. 150 did not have a material impact on
the Company's financial position.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities." This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement is effective for contracts
entered into or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. Adoption of this statement did not have a
material impact on the Company's results of operations or financial position.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities. In December 2003, the FASB issued FIN 46 (Revised) ("FIN 46-R") to
address certain FIN 46 implementation issues. This interpretation requires that
the assets, liabilities, and results of activities of a Variable Interest Entity
("VIE") be consolidated into the financial statements of the enterprise that has
a controlling interest in the VIE. FIN 46R also requires additional disclosures
by primary beneficiaries and other significant variable interest holders. For
entities acquired or created before February 1, 2003, this interpretation is
effective no later than the end of the first interim or reporting period ending
after March 15, 2004, except for those VIE's that are considered to be special
purpose entities, for which the effective date is no later than the end of the
first interim or annual reporting period ending after December 15, 2003. For all
entities that were acquired subsequent to January 31, 2003, this interpretation
is effective as of the first interim or annual period ending after December 31,
2003. The adoption of FIN 46 did not have a material impact on the Company's
results of operations or financial position.
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In November 2002, the FASB issued FASB Interpretation No. ("FIN") 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, and interpretation of FASB
Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34. FIN
45 clarifies the requirements of FASB Statement No. 5, Accounting for
Contingencies, relating to the guarantor's accounting for, and disclosure of,
the issuance of certain types of guarantees. This interpretation clarifies that
a guarantor is required to recognize, at the inception of certain types of
guarantees, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and initial measurement
provisions of this Interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantor's fiscal year-end. The disclosure requirements in this interpretation
were effective for financial statements of interim or annual periods ending
after December 15, 2002. The Company adopted FIN 45 on January 1, 2003. The
adoption of FIN 45 did not have a material impact on the Company's results of
operations or financial position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement requires recording costs
associated with exit or disposal activities at their fair values when a
liability has been incurred. Under previous guidance, certain exit costs were
accrued upon management's commitment to an exit plan. The Company adopted SFAS
No. 146 on January 1, 2003. The adoption of SFAS No. 146 did not have a material
impact on the Company's result of operations or financial position.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk Fair Value of
Financial Instruments - The following disclosure of the estimated fair value of
financial instruments is made in accordance with the requirements of Statement
of Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments". The estimated fair values of financial instruments have
been determined by the Company using available market information and
appropriate valuation methodologies. However, considerable judgment is required
in interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The Company has not
entered into, and does not expect to enter into, financial instruments for
trading or hedging purposes. The Company does not currently anticipate entering
into interest rate swaps and/or similar instruments. The Company's carrying
values of cash, marketable securities, accounts receivable, accounts payable and
accrued expenses are a reasonable approximation of their fair value.
Item 4. Controls and Procedures
(a) Disclosure controls and procedures. As of the end of the Company's most
recently completed fiscal quarter (the registrant's fourth fiscal quarter
in the case of an annual report) covered by this report, the Company
carried out an evaluation, with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the Company's disclosure
controls and procedures pursuant to Securities Exchange Act Rule 13a-15.
Based upon that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls
and procedures are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SEC's rules and forms.
(b) Changes in internal controls over financial reporting. There have been no
changes in the Company's internal controls over financial reporting that
occurred during the Company's last fiscal quarter to which this report
relates that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial
reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
Not applicable
-21-
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 thereunto duly authorized.
PURCHASE POINT MEDIA CORPORATION
By: /s/ Albert Folsom
--------------------------------
Albert Folsom, President and
Chief Executive Officer
Dated: February 4, 2005
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EXHIBIT INDEX
Exhibit 31.1 - Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1 - Certification of the Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
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