UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended SEPTEMBER 30, 2006
-----------------------------------------
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission File Number: 000-25385
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PURCHASE POINT MEDIA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
MINNESOTA 41-1853993
- --------------------------------------- -------------------------------------
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1100 MELVILLE STREET, SUITE 320 VANCOUVER, BC CANADA V6E 4A6
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(604) 926-7859
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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. [X] Yes [ ] No
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practical date:
At November 13, 2006 there were 22,378,940 shares of Common Stock, no par value,
outstanding.
Transitional Small Business Disclosure Format (Check one): [ ] Yes [X] No
SEC 2334 (09-05) Persons who are to respond to the collection of information
contained in this form are not required to respond unless the
form displays a currently valid OMB control number.
PURCHASE POINT MEDIA CORPORATION
INDEX
Page
----
Part I. Financial Information 1
Item 1. Financial Statements
Balance Sheets as of September 30,
2006 (unaudited) and June 30, 2006 2
Statements of Operations for the
Three Months Ended September 30,
2006 and 2005 (unaudited) and
the Period June 28, 1996 (Date of
Formation) through September, 2006 3
Statements of Stockholders' Deficiency
for the Period June 28, 1996 (Date of Formation)
through September 30, 2006 4 - 6
Statements of Cash Flows for the Three
Months Ended September 30, 2006 and
2005 (unaudited) and the Period June
28, 1996 (Date of Formation) through
September 30, 2006 7
Notes to Financial Statements (unaudited) 8 - 10
Item 2. Management's Discussion and Analysis
or Plan of Operations 11 - 15
Item 3. Quantitative and Qualitative Disclosures about
Market risk fair value of financial instruments 15
Item 4. Controls and Procedures 16
Part II. Other Information
Item 1. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
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, 2006.
The results of operations for the three months ended September 30,
2006, 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 SHEET
ASSETS
September 30, June 30,
2006 2006
Current Assets
Cash $ -- $ --
----------- -----------
Total Current Assets -- --
----------- -----------
Equipment-net 1,984 740
Other Assets:
Other intangibles - net 9,464 9,804
----------- -----------
TOTAL ASSETS $ 11,448 $ 10,544
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Note payable to related party $ 857,399 $ 848,650
Accrued interest payable - related parties 416,856 398,474
Accounts payable - related parties 234,000 216,000
Accounts payable 170,456 166,955
----------- -----------
Total Current Liabilities 1,678,711 1,630,079
----------- -----------
Stockholders' Deficiency:
Preferred stock; no par value -
authorized 50,000,000 shares;
outstanding 2,000 shares, at
redemption value 170 170
Common stock, no par value -
authorized 100,000,000 shares;
outstanding 22,378,940 1,815,983 1,815,983
Additional paid-in capital 134,878 133,528
Deficit accumulated during
development stage (3,618,294) (3,569,216)
----------- -----------
Total Stockholders' Deficiency (1,667,263) (1,619,535)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 11,448 $ 10,544
=========== ===========
-2-
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the Three Months
Ended September 30, June 28, 1996
------------------------ to September 30,
2006 2005 2006
------------ ------------ -------------
Costs and Expenses:
General and administrative
expenses $ 30,249 $ 58,010 $ 2,583,614
Depreciation and amortization 448 414 30,071
------------ ------------ -------------
Net loss from operations (30,697) (58,424) (2,613,685)
Other expenses:
Loss from theft -- -- (354,477)
Interest (18,381) (17,307) (650,132)
------------ ------------ -------------
Net loss $ (49,078) $ (75,731) $(3,618,294)
============ ============ =============
Loss per common share - basic
and diluted $ -- $ -- $ --
============ ============ =============
Average oustanding shares
(stated in '000)
Basic 22,378 22,374 --
============ ============ =============
Diluted 22,878 22,874 --
============ ============ =============
-3-
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
JUNE 28, 1996 THROUGH SEPTEMBER 30, 2006
Common Stock
-------------------------
Additional Retained
Preferred Par Stated Paid-In Earnings
Stock Value Shares Value Capital (Deficit) Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, June 28,
1996 (Date of
Formation) -- $ -- -- $ -- $ -- $ -- $ --
Sale of common
stock (at $.009 per
share) -- -- 1,175,000 10,000 -- -- 10,000
Four-for-one stock split -- -- 3,525,000 -- -- -- --
Issuance of preferred
stock for consulting
services (valued at $.09 per
share) 2,000 170 -- -- -- -- 170
Net loss for the
period ended
June 30, 1996 -- -- -- -- -- (338,760) (338,760)
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
JUNE 28, 1996 THROUGH SEPTEMBER 30, 2006 (Continued)
Common Stock
-------------------------
Additional Retained
Preferred Par Stated Paid-In Earnings
Stock Value Shares Value Capital (Deficit) Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
Recapitalization for
effect of reverse
acquisition -- -- 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
(at $7.00 per share) -- -- 34,571 241,997 -- -- 241,997
Issuance of warrants
for loan financing
(issued at $.67
per share) -- -- -- -- 23,104 -- 23,104
Net loss for the year ended
June 30, 1999 -- -- -- -- -- (458,843) (458,843)
-4-
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
JUNE 28, 1996 THROUGH SEPTEMBER 30, 2006 (Continued)
Common Stock
-------------------------
Additional Retained
Preferred Par Stated Paid-In Earnings
Stock Value Shares Value Capital (Deficit) Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
Issuance of warrants
for loan financing
(issued at $ .08
per share) -- -- -- -- 83,738 -- 83,738
Sale of common stock
(at $1.00 per share) -- -- 117,665 117,665 -- -- 117,665
Sale of common stock
(at $.50 per share) -- -- 336,076 168,038 -- -- 168,038
Net loss for the year ended
June 30, 2000 -- -- -- -- -- (483,493) (483,493)
Issuance of warrants for
loan financing (issued
at $.08 per share) -- -- -- -- 21,286 -- 21,286
Sale of common stock
(at $1.00 per share, net
of issuance costs) -- -- 97,138 97,138 -- -- 97,138
Net loss for the year ended
June 30, 2001 -- -- -- -- -- (282,592) (282,592)
Sale of common stock
(at $.05 per share) -- -- 1,613,490 80,674 -- -- 80,674
Settlement of debt -- -- 3,500,000 402,021 -- -- 402,021
Net loss for the year ended
June 30, 2002 -- -- -- -- -- (500,234) (500,234)
Sale of common stock
(at $.05 to $.10 per share) -- -- 650,000 39,000 -- -- 39,000
Net loss for the year ended
June 30, 2003 -- -- -- -- -- (92,158) (92,158)
Sale of common stock
(at $.05 per share) -- -- 1,360,000 68,000 -- -- 68,000
Issuance of common stock
for services
(at $.05 to $.10 per share) -- -- 595,000 29,950 -- -- 29,950
Net loss for the year ended
June 30, 2004 -- -- -- -- -- (223,517) (223,517)
-5-
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
JUNE 28, 1996 THROUGH SEPTEMBER 30, 2006 (Continued)
Common Stock
-------------------------
Additional Retained
Preferred Par Stated Paid-In Earnings
Stock Value Shares Value Capital (Deficit) Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
Issuance of common stock
for costs of stock offering -- -- 1,000,000 -- -- -- --
Issuance of common stock
for services at $.50 per share -- -- 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 at $.08 per share -- -- 250,000 20,000 -- -- 20,000
Issuance of common stock
for services at $.50 per share -- -- 410,000 205,000 -- -- 205,000
Net loss for the year ended
June 30, 2005 -- -- -- -- -- (710,702) (710,702)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 2005 2,000 170 21,928,940 1,782,983 128,128 (3,332,368) (1,421,087)
Issuance of common stock for
expenses at $.06 per share -- -- 250,000 15,000 -- -- 15,000
Sale of common stock for
cash at $.09 per share -- -- 200,000 18,000 -- -- 18,000
Valuation of common stock
options for expenses -- -- -- -- 5,400 -- 5,400
Net loss for the year ended
June 30, 2006 -- -- -- -- -- (236,848) (236,848)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 2006 2,000 170 22,378,940 1,815,983 133,528 (3,569,216) (1,619,535)
Valuation of common stock
options for expenses -- -- -- -- 1,350 -- 1,350
Net loss for the three months
ended September 30, 2006 -- -- -- -- -- (49,078) (49,078)
Balance at September 30, 2006 2,000 $ 170 22,378,940 $ 1,815,983 $ 134,878 $(3,618,294) $(1,667,263)
=========== =========== =========== =========== =========== =========== ===========
-6-
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
June 28,
For the Three Months Ended 1996 to
September 30, September 30,
2006 2005 2006
----------- ----------- -----------
CASH FLOW FROM
OPERATING ACTIVITIES:
Net loss $ (49,078) $ (75,731) $(3,618,294)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization 448 415 30,072
Write-off of patent -- -- 4,767
Issuance of common and
preferred stock for expenses -- 15,000 478,620
Issurance of warrants for
financing -- -- 128,128
Valuation of options for
financing 1,350 -- 6,750
Changes in operating assets
and liabilities:
Increase in accounts payable 39,883 42,666 1,329,608
----------- ------------ -----------
Net change in cash
from operations (7,397) (17,650) (1,640,349)
----------- ------------ -----------
CASH FLOW FROM
INVESTING ACTIVITIES:
Security deposit -- -- (600)
Acquisition of patents -- -- (31,542)
Purchase of equipment (1,352) -- (14,145)
----------- ------------ -----------
(1,352) -- (46,287)
----------- ------------ -----------
CASH FLOW FROM
FINANCING ACTIVITIES:
Proceeds from notes payable
related party 8,749 -- 846,225
Payment to note payable
related party -- -- (100)
Proceeds from sale of
common stock -- 18,000 840,511
----------- ------------ -----------
8,749 18,000 1,686,636
=========== ============ ===========
June 28,
For the Three Months Ended 1996 to
September 30, September 30,
2006 2005 2006
----------- ----------- -----------
Net (decrease) increase in cash -- 350 --
Cash - beginning of year -- -- --
Cash - end of year $ -- $ 350 $ --
NON CASH FLOWS FROM
OPERATING ACTIVITIES:
Issuance of 2,000 preferred shares
for services - 1996 $ 170
Issuance of 595,000 common
shares for services - 2004 $ 29,950
Issuance of 1,000,000 common
shares for services - 2005 $ 425,000
Issuance of 250,000 common
shares for services - 2006 $ 15,000
-7-
PURCHASE POINT MEDIA CORPORATION
(DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
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 September 30, 2006, the Company had a net operating loss carry forward of
$3,618,294, 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
2026.
FOREIGN CURRENCY TRANSLATION
The functional currency for some foreign operations is the local currency.
Assets and liabilities of foreign operations are translated at balance sheet
date rates of exchange and income, expense and cash flow items are translated at
the average exchange rate for the period. Translation adjustments in future
periods will be recorded in Accumulated Other Comprehensive Income. The
translation gains or losses were not material for the period ended September 30,
2006.
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 CONCENTRATION RISK
The Company has no financial instruments that potentially subject the Company to
significant concentration of credit risk.
-8-
PURCHASE POINT MEDIA CORPORATION
(DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
PROPERTY AND EQUIPMENT
The Company's property and equipment consists of the following:
Office and other equipment at cost $ 4,901
Less accumulated depreciation 2,917
-------
$ 1,984
=======
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 $ 23,743
Less accumulated amortization 14,279
--------
$ 9,464
========
Patents are being amortized at the rate of $1,361 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.
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.
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.
-9-
PURCHASE POINT MEDIA CORPORATION
(DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
2. CAPITAL STOCK
During the year ended June 30, 2006 the Company issued 200,000 common shares for
cash for private placement stock sales, and 250,000 private placement common
shares for services.
During the three months ended September 30, 2006 the Company did not issue any
stock.
3. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Officer-directors own 33% of the outstanding common shares of the Company and
have demand, 6% notes payable due them of $857,399 plus accrued interest payable
of $416,856 on September 30, 2006. An officer-director also has accrued
consultant fees due him of $234,000.
On April 26, 2004, and modified during August 2005, the Company entered into a
stock option agreement with a director, which provides for an option to purchase
500,000 common shares at any time after April 26, 2005, for up to five years
thereafter at $.35 per share, with the condition that he remains a director of
the Company. The agreement also provides for the issuance of the shares as a
consulting fee if the director is able to complete a contract with a designated
major food chain, to install an advertising display on their shopping cars. As
of September 30, 2006, no shares have been issued.
4. STOCK OPTIONS
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants issued for the three months ended September 30,
2006: dividend yield of 0%, expected volatility of 66.67%, exercise price of
$0.25, risk free rate of 3% and expected life of 5 years. The Company recorded
an expense of $1,350 and $6,750 which is included in the statements of
operations for the three months ended September 30, 2006 and for the period June
28, 1996 (Date of Formation) through September 30, 2006.
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.
-10-
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).
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.
-11-
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.
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.
-12-
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%.
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
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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.
Quarterly Financial Statements:
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The Note 4 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.
-13-
Three Months September 30, 2006
Versus Three Months Ended September 30, 2005
- -----------------------------------------------
The net loss decreased from approximately $75,750 for the three months
ended September 30, 2005 to approximately $49,100 for the three months ended
September 30, 2006. The items of significant decrease for the three months ended
September, 2006 over the comparable period of the prior year was an decrease in
general and administrative expense from approximately $58,400 in 2005 to
approximately $30,700 for the three months ended September 30, 2006 due to a
decrease in filing fee expense of $15,400 in 2005 to approximately $110 and a
decrease in accounting from $11,360 to approximately $3,500 for the three months
ended September 30, 2006, respectively.
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
September 30, 2006 we had a working deficit of approximately $1,678,711. 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.
As of May 3, 2006, Atlas E.D.C. has not advanced the funds into escrow.
Currently CCMI is working on having other parties replace Atlas E.D.C. There is
no assurances that this will take place.
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 September 2006, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Post
Retirement Plans", that requires companies that sponsor post retirement benefit
plans to fully recognize as an asset or liability the over funded or under
funded status of its benefit plans in its 2006 year end balance sheet. The FASB
requires prospective application. The Company believes they are currently in
compliance with the provisions of SFAS No. 158.
-14-
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements",
which enhances existing guidance for measuring assets and liabilities using fair
value. The new Statement provides a single definition of fair value, together
with a framework for measuring it, and requires additional disclosure about the
use of fair value to measure assets and liabilities. Statement 157 also
emphasizes that fair value is a market-based measurement, not an entity-specific
measurement, and sets out a fair value hierarchy with the highest priority being
quoted prices in active markets. Under the Statement, fair value measurements
are disclosed by level within that hierarchy. While the Statement does not add
any new fair value measurements, it does change current practice. The Statement
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Company
does not believe that FASB 157 will have a material impact on its financial
statements.
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes". ("FIN 48")
The interpretation requires a two step approach for recognizing and measuring
tax benefits based on a recognition threshold of "more likely than not". The
FASB also requires explicit disclosures about uncertainties in tax positions
including a detailed rollforward of tax benefits that do not qualify for
financial statement recognition. The adoption of FIN 48 is effective for fiscal
years beginning after December 15, 2006. The implementation of FIN 48 could have
a material effect on the consolidated balance sheet and results of operations
but the effect of such implementation is not determinable at this time.
In December 2004, FASB issued SFAS No. 123(R), "Share-Based Payment", that
requires compensation costs related to stock-based payment transactions to be
recognized in the financial statements. With limited exceptions, the amount of
compensation cost is measured based on the grant-date fair value of the equity
or liability instruments issued. In addition, liability awards are to be
remeasured each reporting period. Compensation cost will be recognized over the
period that an employee provides service in exchange for the reward. SFAS No.
123(R) is effective as to the Company as of the beginning of the Company's 2006
fiscal year. The Company accounted for the stock-based compensation costs using
the modified prospective method at the time of adoption. The adoption of SFAS
123(R) resulted in incremental stock-based compensation expense of $-0-
(pre-tax) during the nine months ended September 30, 2006. The adoption of SFAS
123(R) did not have a material effect on the balance sheet as of September 30,
2006 or the statement of cash flows for the nine months ended September 30,
2006.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets", an amendment of APB Opinion No. 29. SFAS No. 153 amends APB Opinion No.
29 by eliminating the exception under APB No. 29 for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. A nonmonetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. SFAS No. 153 is
effective for periods beginning after June 15, 2005. The adoption of SFAS No.
153 did not have a material effect on the Company's consolidated financial
position or results of operations.
In November 2004 the FASB issued SFAS No. 151, "Inventory Costs", an
amendment to Accounting Research Bulletin No. 43 chapter 4. SFAS No. 151
requires that abnormal costs of idle facility expenses, freight, handling costs
and wasted material (spoilage) be recognized as current-period charges. SFAS No.
151 is effective for fiscal years beginning after June 15, 2005. Adoption of
SFAS No. 151 did not have a material impact on the Company's results of
operations or financial position.
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.
-15-
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.
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
Not applicable
-16-
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, Chief Executive
Officer, Chief Financial Officer and Director
Dated: November 13, 2006
-17-
EXHIBIT INDEX
Exhibit 31 Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32 Certification of the Director pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.