SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 2
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1999
[ ] 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 (I.R.S. Employer
Incorporation of Organization) or Identification No.)
141 FIFTH AVENUE, NEW YORK, NEW YORK 10010
(212) 539-6104
-----------------------------------------------------------
(Address and telephone number, including area code, of
registrant's principal executive office)
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act: COMMON STOCK,
NO PAR VALUE
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 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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
Aggregate market value of voting stock held by non-affiliates as of
February 15, 2000 was approximately $5,784,797 (based upon the closing sales
price of those shares reported on the National Association of Securities Dealers
Bulletin Board for that day),
Number of shares of Common Stock outstanding as of August 31, 2000:
11,863,312.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
PURCHASE POINT MEDIA CORPORATION
INDEX
Part I Page
----
Item 1. Business 1
Item 2. Properties 4
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to Vote of
Security Holders 5
Part II
Item 5. Market for Registrant's Common Equity
And Related Stockholders Matters 5
Item 6. Management's Discussion and Analysis
Of Financial Condition and Results of
Operations 6
Item 7. Financial Statements 11
Item 8. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 12
Part III
Item 9. Directors and Executive Officers;
Promoters and Control Persons;
Compliance with Section 16 (a)
Of the Exchange Act 12
Item 10. Executive Compensation 17
Item 11. Security Ownership of Certain Beneficial
Owners and Management 17
Item 12. Certain Relationships and
Related Transactions 18
Part IV
Item 13. Exhibits and Reports on Form 8-K 18
Signatures 21
Page F-1 follows Page 11
<PAGE>
Item 1. Description of Business
Purchase Point Media Corporation ("PPMC" or the "Company"), with offices
located at Suite 1100, 141 Fifth Avenue, New York, New York 10010, was organized
under the laws of the State of Minnesota on June 29, 1996. PPMC owns a patented
grocery cart advertising display device called the last word(R) 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(R)
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(R) 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(R) insert contains 10 three by three inch advertisement frames. The
last word(R) 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(R) has powerful advantages over competing POP advertising media.
The development of the last word(R) 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(R),
which included applying for and receiving the registered trademark for the last
word(R). 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 1997, PPMC worked on development of the last word(R), seeking
patent protection in additional countries and setting the stage to launch a
global point of purchase advertisement service company. On the 25th of April
1997 PPMC contracted with Roger Jung, who was doing business as Last Word
Management ("LWM"), to be in charge of ad sales for PPMC. Subsequently, the
contract was amended to make LWM the primary contractor handling operations for
PPMC. LWM's operating responsibilities include as sales, renting space on
shopping carts, purchasing the last word(R), installing the last word(R), ad
changes and maintenance. All references herein to PPMC's operations should be
interpreted as operations handled by PPMC through LWM. Under the contract with
LWM, LWM receives 50% of the gross revenue collected from advertising, to cover
the cost of the last word(R), operating cost and their profit.
This Annual Report on Form 10-KSB contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
("Forward-Looking Statements"). Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected in such forward-looking statements. Certain factors which could
materially affect such results and the future performance of the Company are
described below under "Risk and Uncertainties" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Other Matters."
1
<PAGE>
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(R) 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.
Marketing
PPMC has contracted with Culver Associates Ltd. ("Culver") for its
marketing program. Culver is a New York agency, which specializes in helping
companies achieve rapid growth. In addition to an advertising trade campaign,
Culver will create sales and marketing materials for presentation to grocery
chains, advertisers and their ad agencies. Based upon Culver's past success in
the development of new and innovative media sources, advertisers are expected to
include some of the most recognizable brand names in the world.
Advertisement Sales and Grocery Store Operations
PPMC has contracted with Last Word Management, Inc. ("LWM") to conduct its
sales and operations. For over two decades, LWM personnel have been active in
virtually all facets of the advertising industry. Based on their experience and
relationships, the Company believes that LWM will be able to sell all of the
advertisement space in the last word(R) and contract with the chain stores. In
addition they will be in charge of installing the last word(R) and changing the
advertisement inserts contained in the last word(R).
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 Englewood, New Jersey. Point of
purchase advertising is the fastest growing segment of the advertising industry,
resulting in record sales of $15.7 billion in 1992 and over $17 billion in 1997.
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.
2
<PAGE>
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 two most significant competitors are Actmedia Inc.
("Actmedia") and ADDvantage Media Group, Inc. ("ADDvantage").
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%.
3
<PAGE>
ADDvantage is a company headquartered in Tulsa, Oklahoma. ADDvantage
features a calculator bolted to the handle bar of a shopping cart and having an
adjacent single advertisement display which measures two by 2 and 7/8 inches.
In addition to Actmedia (News America) and ADDvantage, 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(R) 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 holding 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.
Item 2. Description of Property
At present, the Company does not own any real property. The Company leases
office space at $1,000 per month, on a month-to-month basis at 2832 Bellevue,
West Vancouver, British Columbia, Canada. PPMC does not pay for shared office
space with Culver at 141 5th Avenue, New York, NY (This will change when PPMC
becomes operational).
4
<PAGE>
Item 3. Legal Proceedings
Bolton V. Purchase Point Media Corp. et al (San Diego Superior Court case
number 728268). This is a lawsuit filed by an individual who alleges that
pursuant to an agreement with Purchase Point Media Corp. he is owed 50,000
shares of its stock. Said allegation is denied by PPMC and the lawsuit is being
vigorously defended. Although Purchase Point Media Corporation fully expects to
prevail in this matter, a judgement in Mr. Bolton's favor would have an
insignificant financial effect on PPMC. On July 17, 2000 Bolton dismissed this
action.
PPMC is not a party to any other litigation (nor is its property the
subject of) any pending legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's shareholders during
the forth quarter of the year ending June 30, 1999.
Part II
Item 5. Market Price and Dividends on the Registrant's Common Equity and Other
Shareholder Matters
The Company's Common Stock trades on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. ("NASD") under the symbol "PPMC." As of
June 30, 1999, the Company had approximately 110 holders of record of its Common
Stock. These quotations represent prices between dealers, do not include retail
mark ups, mark downs or commissions and do not necessarily represent actual
transactions.
The following table sets forth for each period indicated the high and the
low bid prices per share for the Company's Common Stock. The Common Stock
commenced trading on June 9, 1998.
Price
-----
Fiscal Year 1999
---------------- High Low
---- ---
First Quarter Ended September 30 5.75 1.50
Second Quarter Ended December 31 5.00 1.00
Third Quarter Ended March 31 3.56 1.25
Fourth Quarter Ended June 30 0.60 0.50
Fiscal Year 1998
----------------
Fourth Quarter Ended June 30 5.25 4.50
5
<PAGE>
The Company has never paid a cash dividend on its Common Stock and does not
anticipate paying dividends in the foreseeable future. It is the present policy
of the Company's Board of Directors to retain earnings, if any, to finance the
expansion of the Company's business. The payment of dividends in the future will
depend on the results of operations, financial condition, capital expenditure
plans and other cash obligations of the Company and will be at the sole
discretion of the Board of Directors.
Recent Sales of Unregistered Securities
In July 1996, the Company (then known as Leghorn, Inc.) issued an aggregate
of 4,700,000 shares of Common Stock to 12 individuals for an aggregate
consideration of $10,000. The Company relied upon the exemption from
registration contained in Rule 504 of Regulation D under the Securities Act in
issuing all of the foregoing shares in that the aggregate offering price of the
shares of Common Stock issued did not exceed $1,000,000.
On July 16, 1997, the Company merged with Purchase Point Media Corporation,
a Nevada corporation ("PPMC (Nevada)"). In connection with such merger, the
Company issued 6,675,000 shares of Common Stock to the two stockholders of PPMC
(Nevada), both of whom were accredited investors as defined in Rule 501 of
Regulation D under the Securities Act of 1933, as amended (the "Securities
Act"). The shares issued in connection with such merger were valued at $8,500.
The Company relied upon the exemption contained in Rule 506 of Regulation D
under the Securities Act in issuing such shares in that there were only two
acquirers, both of whom were accredited investors.
On August 12, 1998, the Company entered into an agreement with Dorian
Capital Corp. ("Dorian") pursuant to which Dorian subscribed for 500,000 units,
each consisting of one share of Common Stock and one five-year warrant to
purchase Common Stock at an exercise price of $7.00 per share, for a
subscription price of $7.00 per unit. Dorian had a 90-day period to pay the
subscription price , which period was extended for an additional 90 days. By the
final expiration date, Dorian had purchased 41,143 units for approximately
$288,000. The Company relied upon the exemption contained in Rule 506 of
Regulation D under the Securities Act in issuing the foregoing securities to
Dorian in that there was only one purchaser, which was an accredited investor.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations Overview
PPMC's plan to handle certain operations of PPMC has been and is to
contract with companies that have the infrastructure in place to perform the
required functions or ones that can contract with companies that have the
infrastructure in place to carry out operations for PPMC. To this end PPMC has
contracted with "Last Word Management Inc. (LWM) and International Trade Group,
LLC (ITG) to handle various stages of operations for PPMC. Subsequent to this
the contract with ITG was terminated and the contract with LWM was amended to
include ITG's intended responsibilities. The responsibilities of LWM's amended
contract with PPMC are to rent space on shopping carts from grocery stores, sell
the advertising space in the last word(R), change the ad inserts and the
maintenance of the last word(R).
6
<PAGE>
In order to become an operating company, PPMC will have to be successful in
securing financing of seven and a half million dollars ($7,500,000). There are
two reasons for this, one is that in order to attract national advertisers PPMC
will have to have under contract grocery stores that have combined sales of five
billion dollars or more. The other reason is that chain stores require that PPMC
have sufficient capital to sustain an ongoing operation thus assuring
performance. As of this time PPMC has not secured this financing nor can it be
assured that PPMC will. Even though PPMC has limited capital and resources,
management believes that because of the merits of the last word(R) they will be
able to secure the required financing. Currently PPMC is pursuing two avenues of
financing, one is by pre-selling ad space in the last word(R) and the other is
private equity capital. Discussed below are some of the reasons that lead
management to believe they will be successful.
Over the last decade grocery cart advertising has been losing its appeal as
a method of reaching shoppers at the point of purchase. The reason; the
companies that offer advertising on shopping carts only offer the advertiser a
8.3% coverage on the carts, which cannot compete with other in-store media that
offer 100% coverage. At a lower cost, PPMC is able to offer 100% coverage on
shopping carts. The last word(R) is a friendly type of advertising that reaches
all the shoppers when they are trying to remember or deciding what to buy, that
is when they are open to the power of suggestion.
Two types of brands that benefit most from the last word(R) are; A) The
mature brand with well developed image and reduced media budget and low A to S
ratio (advertising to sales) and B) The old and new brand early in a new
positioning campaign where top of mind/unaided awareness has not yet reached
targeted levels. In either case, the last word(R) is just the right push at the
right instant to convert new image or old brand equity into additional dollars.
PPMC has prepared detailed sales tools for approaching the chain stores to
persuade them to rent space on their shopping carts to PPMC. PPMC has also
completed putting together media kits to promote to the advertisers to purchase,
or commit in advance for, four of the 10 ad spaces in the last word(R) for a
period of one year. To make it more attractive to advertisers to do so, PPMC is
offering the spaces at a substantial discount (50% off PPMC's posted rate of
$2.25 cpm). The sales effort is being conducted by the president of the Company,
and on other salesperson. Sales costs have been kept to a minimum by offering
sales commissions to the salesperson on a successful contract and keeping
traveling costs to a minimum. Should PPMC be successful in this approach, that
is, pre-selling of ads. PPMC will have more than sufficient capital to start
operations. As of July 25, 2000 no spots were sold and there cannot be any
assurance that PPMC will be successful in doing so.
The following "Comparable Rate Analysis" is submitted as support for the
above statement. "At a lower cost, PPMC is able to offer 100% coverage on
shopping carts". Smart Source(R) Carts is PPMC's primary competitor, therefore,
they were used for the purpose of an example.
Comparable Rate Analysis of Smart Source(R) & the last word(R)
News America Marketing-In-Store, Smart Source(R) Cart Rates. Per store
space rates (cost per store including per store production cost) for 1/12th
(8.3%) of advertisers' ads on carts facing the shopper and 1/12th facing away
from the shopper.
7
<PAGE>
Assuming that each store has 200 carts, they will have 17 carts that have
an advertisers' ad facing the shopper and 17 that will be facing away from the
shopper.
Smart Source(R) Cart Rates
Tier I National $47.83
Tier II Full market sales with 50% or more of store base $62.83
Tier III Full market sales with less than 50% of store base $66.83
Tier IV Chain Specific or less than full market $70.83
Last Word Management, the last word(R) Cart Rates
The last word(R) is on 100% of the carts. The Cart Rate start at $2.25
(including production costs) per 1,000 checkouts (CPM) and increases to $3.25.
For the purpose of comparison the CPM rate has been converted to a per store
rate using 60,000 checkouts as the average checkouts per month. The 8.3% percent
column is the last word(R) rate (ad on all the carts) converted to a rate as if
the last word(R) were on 8.3% of the carts (as in Smart Source).
The last word(R), Cart Rates
100% 8.3%
---- ----
Tier I National $135.00 $11.20
Tier II 50% to 100% of National base $165.00 $13.70
Tier III Less than 50% of National base $180.00 $14.94
Tier IV Chain Specific or less than full market $195.00 $16.98
Smart Source(R) Cart Rates (SS), adjusted upwards as if all ads were on all
the carts facing the shoppers as in the last word(R) (TLW):
SS 100% TLW 100%
------- --------
Tier I $573.96 $135.00
Tier II $753.96 $165.00
Tier III $801.96 $180.00
Tier IV $849.96 $195.00
Source: News America & ActMedia, media information.
Average cost per 1,000 projections for TV media 1995-96. 30 second TV ad
spot $12.00 with a high-end cost of over $20.00 for a prime time 30-second spot
on ABC/CBS/NBC affiliates. Source: www.amic.com.
Upon starting operations and to maintain a successful advertisement service
program, seven areas of the business and infrastructure will have to be in
place, they are; (1) manufacturing "the last word(R)", (2) stores willing to
rent space to PPMC, (3) advertisers willing to purchase space in the last
word(R), (4) installers to install the last word(R), (5) printer to print
advertisement inserts, (6) maintenance and changing inserts and (7) competent
administrators.
8
<PAGE>
Tooling and Manufacturing will be handled by Jack Burnett through his
company, Tynex Consulting Ltd. Mr. Burnett has over 32 years of experience in
all facets of injection molding and extrusion processes. His responsibilities
will include, but not be limited to R&D, tooling and subcontracting out the
manufacturing (by injection molding and extrusion processes) on a competitive
bid basis. As of July 25, 2000 PPMC has had one test injection mold made and
manufactured three thousand copies of the last word(R). The final tools for mass
production will be two double sided molds, one for the front face of the last
word(R) and one for the back face (the back face is attached to the baby seat
section of a shopping cart and the front face snaps onto and off of the back
face for ease of changing the advertisement inserts. The last word(R) will be
warehoused at a distribution center where the first ad inserts will be inserted
into the last word(R) prior to being sent to the installers. Again, due to the
high cost of mold manufacturing, actual preparation to manufacture the last
word(R) will be dependent on acquiring satisfactory financing.
Marketing will be handled by Chris Culver of Culver and Associates, an
advertising and marketing company. They had Actmedia's (PPMC's competitor)
account when Actmedia was bought out by News Corp. Culver and Associates'
responsibilities will include putting together media kits (for ad agencies,
packaged foods industry and grocery stores) and advertising PPMC's advantages in
the trade journals that reach the packaged foods industry, ad agencies and
grocery retailers. Culver & Associates was active at the outset of PPMC's
program, but PPMC quickly realized it was premature to commence on that phase of
the program due to costs. This Company will be brought on line actively upon
successfully securing financing.
Advertising sales and chain store operations will be handled by Last Word
Management. John Hall, Dal Brickenden and Clete Thill have over 50 years of
experience in selling and managing advertising and retail operations. LWM's
responsibilities will include selling the ads that go into the last word(R),
installation and maintenance of the last word(R) and the changing of the ad
inserts. Sales costs have been minimized to actual travel expenses and sales
commissions are only payable on the receipt of a deposit from successful sales
contract.
Printing will be handled by established printing companies based on
competitive biding.
Administration will be handled in house by Mrs. E.V. (EV) Arnold, CPA. Mrs.
Arnold has over 20 years of experience in administration in the government,
private and public sectors. In June of 2000 EV Arnold notified PPMC that for
personal reasons she would not be able to carry out this function. Until a
replacement is found these duties will be handled by Roger Jung. Mr. Jung
obtained his Master in Business Administration and has been actively involved in
the business world for over thirty years.
PPMC's primary administrative function will be to monitor, evaluate,
supervise and direct the subcontractors. The last word(R) will be warehoused at
a distribution center where the first ad inserts will be inserted into the last
word(R) prior to being sent to the installers.
9
<PAGE>
On September 15, 1998, PPMC entered into an agreement with ITG, LLC, an
Oregon Limited liability company. The essence of the agreement was that ITG, on
behalf of PPMC, would rent space on shopping carts from grocery stores, install
and maintain the last word(R) and change the ad inserts. Subsequently, ITG
notified PPMC that they were changing their method of operations and that they
had concerns about being able to fulfill their end of the agreement. A condition
in the agreement for it to become effective, was for PPMC to make a first
payment to ITG, PPMC notified ITG that PPMC was not going to make the said first
payment to ITG. The President of ITG was most co-operative and mentioned another
party that he believed could handle their end of the agreement. Representatives
of Last Word Management met with this party, but no agreement was reached. In
March 2000, PPMC amended the contract with Last Word Management wherein the
responsibilities that ITG had undertaken, were taken over by Last Word
Management.
General and administrative expenses increased from $110,389 for the year
ended June 30, 1998 to $416,772 for the year ended June 30, 1999. The Company
attributes the increase primarily to increases in consulting expenses,
professional fees, and sales related expenses including advertising and travel.
The Form 10-KSB, other than the historical financial information, may
consist of forward-looking statements that involve risks and uncertainties,
including, but not limited to, statements contained in "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". Such statements are based on many assumptions and are subject to
risks and uncertainties. Actual results could differ materially from the results
discussed in the forward-looking statements due to a number of factors,
including, but not limited to, those identified in the preceding paragraphs as
well as those set forth under "Business-Risks and Uncertainties" in the Form
10-KSB.
Year 2000
The Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the applicable years. Any of the
Company's programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000, which could result in
miscalculations or system failures.
The Company has conducted a review to identify, evaluate and implement
changes to computer systems and applications necessary to achieve a year 2000
date conversion with no effect on customers or disruption to business
operations. The Company will also be communicating with suppliers, financial
institutions and others with which it conducts business to coordinate year 2000
conversions. The total cost of compliance and its effect on the Company's future
results of operations will be determined as a part of this project. Based on
initial review, the total cost is not expected to have a material effect on the
Company's results of operations or financial statements. However, there can be
no assurance that the systems of other companies on which the Company may rely
will be timely converted or that such failure to convert by another company
would not have an adverse effect on the Company's systems.
10
<PAGE>
Item 7. Financial Statements
Page
1. Financial Documents:
Independent Auditors' Report F-1 - F-2
Balance Sheets, June 30, 1999 and 1998 F-3
Statements of Operations, Years Ended
June 30, 1999, 1998 and 1997 and the
Period June 28, 1996 (Date of Formation)
Through June 30, 1999 F-4
Statements of Stockholders' Equity
(Deficiency) for the Period June 28,
1996 (Date of Formation) through
June 30, 1999 F-5 - F-6
Statements of Cash Flows, Years
Ended June 30, 1999, 1998 and 1997
And the Period June 28, 1996
(Date of Formation) through
June 30, 1999 F-7 - F-8
Notes to Financial Statements F-9 - F-15
11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Purchase Point Media Corporation
We have audited the accompanying balance sheets of Purchase Point Media
Corporation (a development stage company) (the "Company") as of June 30, 1999
and 1998, and the related statements of operations, stockholders' deficiency and
cash flows for each of the three years ended June 30, 1999 and for the period
June 28, 1996 (Date of Formation) through June 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements referred to above present fairly, in
all material respects, the financial position of Purchase Point Media
Corporation at June 30, 1999 and 1998, and the results of their operations and
their cash flows for each of the years ended June 30, 1999, 1998, and 1997 and
for the period June 28, 1996 (Date of Formation) through June 30, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company is a development stage enterprise
engaged to develop and sell advertising space to national advertisers to be
displayed on
F-1
<PAGE>
grocery cart displays. As more fully explained in Note 1 of the financial
statements, the Company needs to obtain additional financing to fulfill its
developmental activities and achieve a level of sales adequate to support its
cost structure. These uncertainties raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans are also described in
Note 1. The accompanying financial statements do not include any adjustments
that might result from the outcome of these uncertainties should the Company be
unable to continue as a going concern.
WIENER, GOODMAN & COMPANY, P.C.
Certified Public Accountants
Eatontown, New Jersey
December 7, 1999 (except as to Note 8 which is
as of March 13, 2000)
F-2
<PAGE>
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
ASSETS
June 30,
-----------------------------
1999 1998
----------- -----------
Current Assets:
Cash $ 97 $ --
Prepaid expenses 18,487 11,305
----------- -----------
Total Current Assets 18,584 11,305
Equipment-net 2,810 --
Patents and trademarks-net 27,159 28,439
----------- -----------
TOTAL ASSETS $ 48,553 $ 39,744
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Note payable $ 46,903 $ --
Accounts payable and
accrued expenses 163,014 81,687
Due to officer/shareholder 86,130 79,624
Note payable to related party 508,407 440,592
----------- -----------
Total Current Liabilities 804,454 601,903
----------- -----------
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 11,409,571 and
11,375,000 shares, respectively 260,497 18,500
Additional paid-in capital 23,104 --
Deficit accumulated during
development stage (1,039,672) (580,829)
----------- -----------
Total Stockholders' Deficiency (755,901) (562,159)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 48,553 $ 39,744
=========== ===========
See notes to financial statements.
F-3
<PAGE>
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period
June 28, 1996
(Date of
Formation)
through
June 30,
For the Years Ended June 30, 1999
--------------------------------------------- ------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C> <C>
Costs and Expenses:
General and administrative
expenses $ 416,772 $ 110,389 $ 79,575 $ 939,496
Interest expense 39,879 29,226 19,775 94,880
Depreciation and amortization 2,192 3,104 -- 5,296
----------- ----------- ----------- -----------
Net loss $ 458,843 $ 142,719 $ 99,350 $ 1,039,672
=========== =========== =========== ===========
Loss per common share - basic
and diluted $ .04 $ .01 $ .01 $ --
=========== =========== =========== ===========
Weighted average number of
common shares and equivalents
outstanding - basic and diluted 11,400,563 11,375,000 11,375,000 --
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
PERIOD JUNE 28, 1996 (DATE OF FORMATION) THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
Common Stock
------------------------- Additional Retained
Preferred Par Stated Paid-In Earnings
Stock Value Shares Value Capital (Deficit) Total
--------- ----- ------ ------ ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 28,
1996 (Date of
Formation) -- $ -- -- $ -- $ -- $ -- $ --
Sale of common
stock at June 28,
1996 (at $.009 per
share) -- -- 1,175,000 10,000 -- -- 10,000
Four-for-one stock split -- -- 3,525,000 -- -- -- --
Issuance of preferred
stock at June 30, 1996
for consulting services
(valued at $.09 per
share) 1,000 85 -- -- -- -- 85
Issuance of preferred
stock at June 30, 1996
for transfer agent
services (valued at
$.09 per share) 1,000 85 -- -- -- -- 85
Net loss, from June
28, 1996 (Date of
Formation) through
June 30, 1996 -- -- -- -- -- (338,760) (338,760)
--------- --------- --------- --------- ----- --------- ---------
Balance, June 30,
1996 2,000 170 4,700,000 10,000 -- (338,760) (328,590)
</TABLE>
See notes to financial statements.
F-5
<PAGE>
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
PERIOD JUNE 28, 1996 (DATE OF FORMATION) THROUGH JUNE 30, 1999 (Continued)
<TABLE>
<CAPTION>
Common Stock
------------------------- Additional Retained
Preferred Par Stated Paid-In Earnings
Stock Value Shares Value Capital (Deficit) Total
--------- ----- ------ ------ ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Recapitalization for
effect of reverse
acquisition -- -- 6,675,000 8,500 -- -- 8,500
Net loss year ended
June 30, 1997 -- -- -- -- -- (99,350) (99,350)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30,
1997 2,000 170 11,375,000 18,500 -- (438,110) (419,440)
Net loss, year ended
June 30, 1998 -- -- -- -- -- (142,719) (142,719)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30,
1998 2,000 170 11,375,000 18,500 -- (580,829) (562,159)
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, year ended
June 30, 1999 -- -- -- -- -- (458,843) (458,843)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30,
1999 2,000 $ 170 11,409,571 $ 260,497 $ 23,104 $(1,039,672) $ (755,901)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period
June 28,
1996 (Date
of Formation)
For the Years Ended June 30, through
---------------------------- June 30,
1999 1998 1997 1999
-------- -------- -------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net (loss) $ (458,843) $ (142,719) $ (99,350) $(1,039,672)
Adjustments to reconcile
net (loss) to net cash
(used in) operating
activities:
Depreciation and
amortization 2,192 3,104 -- 5,296
Forgiveness of debt
from related party -- (25,000) -- (25,000)
Non - cash compensation 15,922 13,695 -- 29,787
Changes in operating assets
and liabilities:
(Increase) decrease in
other assets (600) 10,000 (14,900) (5,143)
Increase in accounts
payable and accrued
expenses 81,327 13,071 5,000 163,014
----------- ----------- ----------- -----------
Net Cash (Used in)
Operating Activities (360,002) (127,849) (109,250) (871,718)
----------- ----------- ----------- -----------
Cash flows from investing
activities:
Purchase of equipment (3,122) -- -- (3,122)
----------- ----------- ----------- -----------
Cash flows from financing
activities:
Proceeds from related
party 308,377 126,499 117,170 730,469
Proceeds from borrowings 46,903 -- -- 46,903
Payments to related party (240,562) -- -- (240,562)
Proceeds from officer/
stockholder 44,957 1,210 -- 132,501
Payments to officer/
stockholder (38,451) -- (7,920) (46,371)
Proceeds from sale of
common stock 241,997 -- -- 251,997
----------- ----------- ----------- -----------
Net Cash Provided by
Financing Activities 363,221 127,709 109,250 874,937
----------- ----------- ----------- -----------
</TABLE>
F-7
<PAGE>
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Period
June 28,
1996 (Date
of Formation)
For the Years Ended June 30, through
---------------------------- June 30,
1999 1998 1997 1999
-------- -------- -------- -------------
<S> <C> <C> <C> <C>
Net increase (decrease)
in cash 97 (140) -- 97
Cash - beginning of period -- 140 140 --
------------ ----------- -------- -------
Cash - end of period $ 97 $ -- $ 140 $ 97
============ =========== ======== =======
Supplementary Information:
Cash paid during the year
for:
Interest $ 774 $ 259 $ -- $ 1,033
============ =========== ======== =======
Income taxes $ -- $ -- $ -- $ --
============ =========== ======== =======
Non-cash investing activities:
Acquisition of business:
Fair value of assets
acquired $ -- $ -- $ 8,500 $ 8,500
============ =========== ======== =======
Forgiveness of related
party loan $ -- $ 25,000 $ -- $25,000
============ =========== ======== =======
Issuance of warrants in
connection with sale of
common stock $ 23,104 $ -- $ -- $23,104
============ =========== ======== =======
</TABLE>
F-8
<PAGE>
PURCHASE POINT MEDIA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Purchase Point Media Corporation (the "Company"),
formerly Leghorn, Inc., was incorporated on June 28,1996 in the State
of Minnesota. The Company's primary planned activities are the
development and marketing needed to create, produce and sell
advertising space to national advertisers to be displayed on grocery
cart displays. At June 30, 1999, operations had not yet commenced and
no revenue has been derived; accordingly, the Company is considered a
development stage enterprise. There is 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.
In July 1997, Leghorn Inc. merged with Purchase Point Media
Corporation, a company which owns a patented grocery cart advertising
display device that plans to sell the advertising space to national
advertisers. The Company issued 6,675,000 of its common stock in
exchange for all common shares of Purchase Point Media Corporation.
The development activities of the Company are being financed through
advances by a major shareholder. The Company's continued existence is
dependent upon its ability to obtain needed working capital through
additional equity and/or debt financing and the commencement of its
planned principal operations. The Company entered into an agreement on
August 12, 1998 for the private sale of its common stock and the
Company raised $241,997. Management is actively seeking additional
capital to ensure the continuation of its development activities.
However, there is no assurance that additional capital will be
obtained. These uncertainties raise substantial doubt about the ability
of the Company to continue as a going concern.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
In March 1998, the AICPA issued Statement of Position (SOP) 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use". The SOP provides guidance with respect to accounting
for the various types of costs incurred for computer software developed
or obtained for PPMC's use. The Company adopted the SOP during its
current fiscal year and did not have a significant effect on its
results of operation or financial position.
Depreciation - Equipment is stated at cost less accumulated
depreciation. Depreciation is calculated using the straight-line method
over the estimated useful lives.
F-9
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Amortization of Intangibles - Patent and trademark costs are stated at
cost less accumulated amortization and are amortized using the
straight-line method over their 17- and 10-year lives, respectively. If
the patents or trademarks are not obtained, the related costs are
expensed. The carrying value of intangible assets will be periodically
reviewed by the Company to ensure that impairments are recognized when
the future operating cash flows expected to be derived from such
intangible assets are less than carrying value.
Amortization expense was $1,880, $3,104 and -0- for the years ended
June 30, 1999, 1998 and 1997, respectively and $4,984 for the period
June 28, 1996 (Date of Formation) through June 30, 1999
Development Costs - Development costs are expensed as incurred.
Stock-Based Compensation - Effective July 1, 1998 the Company adopted
Statement of Financial Accounting Standards No. 123 (SFAS No. 123),
"Accounting for Stock-Based Compensation." The standard encourages, but
does not require, companies to recognize compensation expense for
grants of stock, stock options and other equity instruments to
employees based on fair value accounting rules. The Company has adopted
the disclosure-only provision of SFAS No. 123.
Earnings Per Common Share - In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 128 "Earnings Per Share," which requires companies to
present basic earnings per share (EPS) and diluted earnings per share,
instead of the primary and fully diluted EPS that was required. The new
standard requires additional informational disclosures and also makes
certain modifications to the currently applicable EPS calculations
defined in Accounting Principles Board No. 15.
Basic loss per common share is computed by dividing net earnings by the
weighted average number of common shares outstanding during the year.
Diluted earnings per common share are computed by dividing net earnings
by the weighted average number of common and potential common shares
outstanding during the year. The number of potential common shares
outstanding were 34,571 and -0- for the years ended June 30, 1999 and
1998, respectively. For each of the years the potential common shares
would be excluded from the loss per share calculation because their
effect would be anti-dilutive.
Fair value of financial instruments - For financial instruments
including cash, accrued expenses and short-term debt, it was assumed
that the carrying amount approximated fair value because of the short
maturities of such instruments.
Reclassifications - Certain reclassifications have been made to prior
year balances in order to conform with the current year's presentation.
F-10
<PAGE>
2. REVERSE ACQUISITION
On July 16, 1997 Leghorn Inc. acquired all the outstanding common stock
of Purchase Point Media Corporation by issuing 6,675,000 shares of its
common stock. For accounting purposes, the acquisition has been treated
as a re-capitalization of Purchase Point Media Corporation with
Purchase Point as the acquirer (reverse acquisition). The historical
financial statements prior to July 16, 1997 are those of Purchase Point
Media Corporation.
3. DEBT
June 30,
----------
1999 1998
------ -----
Short-term debt:
Demand note from Dorian Capital Corp ,
interest at 12% $46,903 $ -
======= =====
4. INCOME TAXES
At June 30, 1999 the Company has a net operating loss ("NOL")
carryforward of approximately $1,040,000 for financial reporting
purposes and zero for tax purposes. The difference between financial
reporting and tax purposes results from temporary differences caused by
capitalization of start-up expenditures for tax purposes as required by
the Internal Revenue Code Section 195. The Company has not reflected
any benefit of such net operating loss carryforward in the accompanying
financial statements in accordance with Financial Accounting Standards
Board Statement No. 109 as the realization of this deferred tax benefit
is not more than likely.
The Tax Reform Act of 1986 provided for a limitation on the use of NOL
carryforwards, following certain ownership changes. As a result of
transactions in the Company's common stock during 1997, a change in
ownership of greater than fifty (50%) percent as defined, may have
occurred. In addition, the Company is contemplating a proposed equity
financing of common stock. Under such circumstances, the potential
benefits from utilization of tax carryforward may be substantially
limited or reduced on an annual basis.
5. PREFERRED STOCK
The authorized number of preferred shares is 50,000,000 of which 2,000
shares are outstanding as of June 30, 1999 and 1998. The preferred
stock was issued on June 14, 1996, convertible into ten shares of
common stock. The conversion right expired on June 14, 1998.
F-11
<PAGE>
6. NOTE PAYABLE TO RELATED PARTY TRANSACTIONS
Note payable to related party comprises advances from Amtel
Communications, Inc. ("Amtel"). Amtel owns 29% of the common stock of
the Company. The Company owed Amtel $508,407 and $440,592 at June 30,
1999 and 1998, respectively. Interest expense on the note was $32,195,
$24,455 and $14,775 for the years ended June 30, 1999, 1998 and 1997,
respectively, and $71,425 for the period June 28, 1996 (Date of
Formation) through June 30, 1999. All interest has been accrued. All
such advances have been made on a demand loan basis. The Company does
not have a formal agreement with Amtel.
The Company entered into an agreement with Albert Folsom ("Folsom"),
the Company's President and Chief Executive Officer, for consulting
services to be performed on behalf of the Company. Folsom received
consulting fees in the amount of $72,000 per year for the years ending
June 30, 1999, 1998 and 1997 and $288,000 for the period June 28, 1996
(Date of Formation) through June 30, 1999, respectively. The Company
owed Folsom $79,966 and $79,624 at June 30, 1999 and 1998,
respectively. Interest expense was $4,424, $5,000 and $5,000 for the
years ended June 30, 1999, 1998 and 1997, respectively, and $21,424 for
the period June 28, 1996 (Date of Formation) through June 30, 1999. All
interest has been accrued.
The Company entered into an agreement with Roger Jung ("Jung") a
shareholder of the Company for consulting services to be performed on
behalf of the Company starting April 1, 1999 for $2,000 per month. The
Company owed Jung $6,164 and $-0- at June 30, 1999 and 1998,
respectively. Interest expense was $65, $-0- and $-0- for the years
ended June 30, 1999, 1998 and 1997, respectively. All interest has been
accrued.
7. COMMON STOCK WARRANTS
The Company issued common stock warrants in connection with a private
placement debt offering during the year ended June 30, 1999. The
Company has adopted the disclosure-only provision of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation." The Company valued the warrants issued to non-employees
based on the fair value at the grant date consistent with the
provisions of SFAS No. 123. For the year ended June 30, 1999 and the
period June 28, 1996 (Date of Formation) through June 30, 1999, the
Company expensed interest charges to operations in the amount of
$4,617. The balance of $18,487 is included in prepaid expenses at June
30, 1999 and will be expensed over the life of the note. Therefore, the
basic and diluted net loss, per share, for year ended June 30, 1999 is
the same for both reported and proforma amounts.
The fair value of each warrant granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for warrants in 1999: dividend yield
of -0-, expected volatility of 250.7% risk free interest rate of 5.0%
and expected life of two and one-half (2 1/2) years.
F-12
<PAGE>
Information regarding the Company's Warrants for June 30, 1999 is as follows:
Weighted-
Average
Exercise
Shares Price
------ --------
Warrants outstanding
beginning of year -- $ --
Warrants exercised -- --
Warrants granted 34,571 7.00
------- -----
Warrants outstanding
end of year 34,571 $7.00
======= =====
Warrants price range
at end of year $7.00
Warrant price range
for exercised shares $ --
Weighted-average fair
value of warrants
granted during the year $ .67
The following table summarizes information about fixed-price stock
warrants outstanding at June 30, 1999:
<TABLE>
<CAPTION>
Weighted-
Average Weighted Number Weighted
Range of Number Out- Remaining Average Exercisable Average
Exercise standing at Contractual Exercise at Exercise
Price June 30, 1999 Life Price June 30, 1999 Price
----- ------------- ---- ----- ------------- -----
<S> <C> <C> <C> <C> <C>
$7.00 34,571 1.5 years $7.00 34,571 $7.00
====== ======
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Legal Retainer -
On July 1, 1997, (an officer/stockholder of the Company) exchanged
5,000 shares of Purchase Point Media Corporation common stock for legal
service to be provided on behalf of the Company valued at $25,000. If
such shares are sold for less than $25,000, Purchase Point Media
Corporation will pay any difference to the law firm, provided that such
shares are sold through Westminster Securities Corporation. The
officer/stockholder of the Company forgave the liability from the
Company as of June 30, 1998 and the Company recorded the transaction as
forgiveness of debt income in the statement of operations. The Company
recorded legal expense for the year ended June 30, 1999 and 1998 in the
amounts of $11,305 and $13,695, respectively.
F-13
<PAGE>
Sales Agreements -
a.) On September 15, 1998, the Company entered into an agreement with
International Trade Group, LLC ("ITG"), an Oregon limited liability
company. The essence of the agreement was that ITG, on behalf of the
Company, would rent space on shopping carts from grocery stores,
install and maintain the Last Word(R) and change the ad inserts.
Subsequently, ITG notified the Company that they were changing their
method of operations and they had concern about being able to fulfill
their end of the agreement. A condition in the agreement for it to
become effective, was for the Company to make a first payment to ITG.
On March 7, 2000 the Company notified ITG that it was not going to make
said payment to ITG and the contract would be null and void. All other
financial terms of the contract would also be terminated.
b.) On April 29, 1997 the Company contracted with Roger Jung, a
shareholder of the Company, who was doing business as Last Word
Management ("LWM"), to be in charge of ad sales for the Company. In
March 2000, the contract was amended to make LWM the primary contractor
handling operations of the Company after the termination of the
contract with ITG. LWM's operating responsibilities including ad sales,
renting space on shopping carts, purchasing the Last Word(R), ad
changes and maintenance. Under the terms of the contract with LWM, LWM
receives 50% of the gross revenue collected from advertisers, to cover
the cost of the Last Word(R), operating costs and their profit.
In addition the Company will cause certain shareholders of the Company
to grant incentive options up to one million (1,000,000) common shares
of the Company to the contractor. The options are exercisable at $1.00
per share after certain levels of gross advertising sales have been
attained. The options expire five years from the date of issuance. As
of this date no options have been issued as the commencement of
operations has not begun. The Company will recognize compensation
expense for the difference between the exercise price of the option and
the fair market value of the shares on the date of grant.
F-14
<PAGE>
Marketing Agreement
On August 14, 1998, the Company entered into a one-year agreement with
Culver Associates, Ltd. ("Culver"). Culver is to study the Purchase
Point Media business opportunities, provide business plan and place
advertising and related materials needed to execute marketing plans.
Compensation to Culver is a monthly fee of $25,000 for the first three
(3) months. Culver also will receive the standard fifteen (15%) percent
agency commission for purchases of media time and space. The Company
made (2) two $25,000 payments in August and September 1998. The Company
and Culver have agreed that no further payments will be made under the
terms of the agreement until the Company has commenced with the
installation of advertising space and Culver provides additional
services, as defined.
Leases
The Company leases office space on a month-to-month basis in New York
and British Columbia, Canada. Rent expense for the years ended June 30,
1999, 1998 and 1997 and the period June 28, 1996 (Date of Formation)
through June 30, 1999 was $14,981, $-0-, $ -0- and $14,981,
respectively.
F-15
<PAGE>
Item 8. Changes in and Disagreements with Accountants
Not applicable
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
The following sets forth-certain information with respect to the directors
and executive officers of PPMC:
Name Age Position
---- --- --------
Albert P. Folsom 61 President and Director
John W. Hemmer* 72 Director
Jay Walker 77 Director
Ethel V. Arnold** 53 Controller
*Due to health reasons on June 30, 2000 Mr. Jack Hemmer resigned as a
director.
**Due to personal reasons in June, 2000 Mrs. Arnold resigned the
position of Controller.
The Company's directors are elected at the annual meeting of stockholders
and hold office until their successors are elected and qualified. The Company's
officers are appointed annually by the Board of Directors and serve at the
pleasure of the Board. There is no family relationship among any of PPMC's
directors and executive officers.
The following is a brief summary of the business experience of each of the
directors and executive officers of PPMC:
Albert P. Folsom, President & Director
Mr. Folsom has worked full time for PPMC since its inception. His duties
include: raising funds to maintain operations, spearheading patent work, setting
the plan of operations, bringing together people resources for the launching of
operation, negotiating contracts with out-source companies and assisting Last
Word Management, PPMC's primary contractor.
Since 1989 to the present Mr. Folsom has served as a Director of Amtel
Communications Inc. which he was the President of until 1999. Amtel is a private
company that initially financed the last word(R), an advertisement display
device that Mr. Folsom invented. In June of 1994 Mr. Folsom formed and served as
President and Director of Purchase Point Media Corp. a Nevada Corporation that
merged with PPMC Company. In 1983 he amalgamated several companies that become
Aricana Resources. He served as President and Director of Aricana from 1983 to
1988 while directing Aricana's activities in medical research, development and
marketing of medicinal products. While with Aricana he started a publishing
company for medicinal products and founded The American Health Research
Association, a not-for-profit corporation. From 1980 to 1982 he served as
President and Director of Alanda Energy Corp., an oil and gas company. From 1963
to 1980 he served as a Director and Senior Officer of a number of companies
including Computer Parking Systems, Resource Funding and an electrical
contracting company. After serving in the US Navy (1956 to 1960) he was a real
estate salesman in southern California.
12
<PAGE>
John W. Hemmer, C.F.A., Director
Mr. Hemmer serves as a director of Paradigm Medical Industries, Inc., a
manufacturer and marketer of diagnostic and surgical equipment for the eye care
industry. Until June 1999 he was their Vice President of Finance, Treasurer and
CFO. He was President and Chief Executive Officer of John W. Hemmer, Inc., a
registered broker/dealer from May 1989 to May 1997, which subsequently changed
its name to Westfalia Investments, Inc.. He retained his registered
representative status there until March 1995. Prior thereto, he was Vice
President of Bankers Trust Company in charge of Venture Capital, Vice President
of Corporate Finance at Dempsey Tegler and Company, Inc., a senior securities
analyst at Lazard Freres & Company, Inc., and an investment officer of Chase
Manhattan Bank. He is a director of Sea Pride Industries, Inc., which developed
the first offshore marine production system licensed and permitted for use in
the Gulf of Mexico, and a director of the Gulf Marine Institute of Technology, a
nonprofit institute dedicated to performing mariculture research in the Gulf of
Mexico utilizing former oil and gas platforms. He is also a director and
Secretary of QMSI, Inc., a manufacturer and distributor of patented magnetic
technologies for cooling towers to eliminate scale, algae and bacteria without
using toxic, expensive and polluting chemicals. He received a BA degree in
Economics from Queens College in 1951 and a MS degree in banking and finance
from Columbia University Graduate School of Business in 1952. It is estimated
that he spends one percent of his time on PPMC affairs.
Jay Walker, Director
Since 1995, Mr. Walker has been President and director of US Medical
Research Corp., a medical research organization doing research on degenerative
disease. He has served as an outside director of National Youth Development
Foundation since 1974 and is a volunteer pilot for the Collingwood Foundation,
flying their B17 at air shows. It is estimated that he spends 1% of his time on
PPMC affairs.
Roger Jung, Corporate Secretary
Since 1994 Mr. Jung has assisted Mr. Folsom in the development of PPMC, for
the past two years he has spent an average of 20 hours a week on PPMC or PPMC
related activities. Mr. Jung's company Last Word Management is responsible for
PPMC's operations.
13
<PAGE>
Since 1990, Mr. Jung has served on the Board of Amtel Communications and as
its President since mid 1999. Amtel financed the development of this companies
patented advertisement display device. From 1989 to present he has been actively
involved in real estate sales and management in British Columbia. From 1982 to
present, President of MBA Management Corp. MBA provides financial and management
consulting services to small businesses. From 1980 to present, Chairman and
Director of Fireplace Inns Hotels in Whistler, BC. In 1982 he started a Laser
instrument manufacturing company in Oregon that he sold to a public company in
1988. From 1978 to 1982 served as President and General Manager of Bow Valley
Industries subsidiary company, Mainland-Elworthy, and Industrial electrical
manufacturing company with five divisions. From 1956 to 1978 he worked for
Westinghouse Canada Ltd. Positions there included Manager of Engineering,
Manager of Operations and Supervisor of Engineering. In addition to receiving
his MBA at Simon Fraser University, he has taken numerous professional
development courses such as Xerox sales courses, Harvard Management Games, 3D
Management theory, Sensitivity training, Kepner Tregoe Decision analysis and
others.
Ethel V. Arnold CPA, Comptroller
Since 1988 Mrs. Arnold has maintained her private accounting practice in
Tax, Accounting and financial planning. From 1995 to 1999, half of her time was
devoted to Valve Automation and Control as CFO and head of administration. From
1980 to 1988 she was Vice President and Controller, Travelodge Int. Duties
included responsibility for tax compliance, payroll, accounts payable and
receivable and general ledger. Her last year there included responsibility for
cash management. From 1964 to 1980 she held tax and accounting positions with
AeroJet General, Arthur Young and Company and the County of San Diego. About one
percent of her time over the last five years was spent on PPMC. When PPMC goes
operational, she will be a full time officer of PPMC as controller and head of
administration.
The following is a brief summary of the business experience of the key
personnel of Last Word Management Inc., which provides management services to
PPMC (see "Item 1. Description of Business--Marketing--Operations").
14
<PAGE>
Roger Jung, Chairman and Director
Since 1990, Mr. Jung has served on the Board of Amtel Communications and as
its President since mid 1999. Amtel financed the development of this companies
patented advertisement display device. From 1989 to present he has been actively
involved in real estate sales and management in British Columbia. From 1982 to
present, President of MBA Management Corp. MBA provides financial and management
consulting services to small businesses. From 1980 to present, Chairman and
Director of Fireplace Inns Hotels in Whistler, BC. In 1982 he started a Laser
instrument manufacturing company in Oregon that he sold to a public company in
1988. From 1978 to 1982 served as President and General Manager of Bow Valley
Industries subsidiary company, Mainland-Elworthy, and Industrial electrical
manufacturing company with five divisions. From 1956 to 1978 he worked for
Westinghouse Canada Ltd. Positions there included Manager of Engineering,
Manager of Operations and Supervisor of Engineering. In addition to receiving
his MBA at Simon Fraser University, he has taken numerous professional
development courses such as Xerox sales courses, Harvard Management Games, 3D
Management theory, Sensitivity training, Kepner Tregoe Decision analysis and
others.
John Hall, Director and President
When PPMC starts operations, Mr. Hall's duties will be to sell space in the
last word(R) and bring in additional sales people. He has not worked for PPMC.
Mr. Hall is originally from Indiana, where he attended Purdue University as
a Psychology Major. Immediately thereafter he spent four years of active duty in
the U.S. Army as a front-line Medical Technician. His professional life has
always revolved around the advertising industry in one facet or another. He
started with Columbia Broadcasting (CBS) Retail Division in 1976, having the
position of Vice-President, Director of Marketing. In 1983, he took on the
position of Vice-President/Director of Transit for New York Subways (until taken
over by Gannett Outdoor). Those responsibilities included community relations
and promoting advertiser interest in their various products, from the East Coast
to the West Coast. At Gannett, his responsibilities increased from senior
account executive/major accounts, to national accounts manager and then director
of transit. While there he developed and maintained national and local
advertiser interests for the ultimate purchase of all Gannett products. On a
personal level, he sits on various fund raising committees such as the Orange
County Chapter of the March of Dimes, L.A. County Museum of Art, Huntington
Memorial Hospital, National Child Abuse Prevention and others.
Dal Brickenden, Vice-President, Sales
Since 1993 Dal Brickenden has assisted in the development of the last
word(R) and has been doing part time work for LWM since mid 1999. When PPMC
starts operations, his duties will be to sell space in the last word(R) and
recruit, train and supervise additional sales people.
15
<PAGE>
Mr. Brickenden has devoted twenty-five years to a successful career in
marketing, advertising, new product development and advertising, communications
and qualitative research through his private company Artemis Holdings Limited.
From 1970 to 1985 he held a number of key positions such as, New Product Manager
at Canada Starch Best Foods in Montreal, Quebec, and international division of
International Multifoods of Minneapolis, Minnesota. He headed up the Colgate
Palmolive account in Canada as Account Supervisor with the ad agency now known
as FCB/Ronalds Reynolds Ltd., Toronto. After moving to Vancouver, BC with a
partner, they build one of Vancouver's top ad agencies.
Clete J. Thill, Vice-President, Store Sales
Mr. Thill started working for Last Word Management in January 2000. His
duties are to rent space on grocery carts from chain stores. Currently he is
spending 50% of his time on LWM's business, this is expected to increase to 100%
by April, 2000.
From 1987 to present Mr. Thill has been actively involved in real estate
and financial services as a self employed businessman in Denver, Colorado. He
holds a Real Estate Brokers, Stock Broker and Insurance License. From 1979 to
1987 he was employed at King Soopers, a Denver Colorado supermarket chain. At
King Soopers (10,500 employees) he was Director of Personal and Labor Relations.
He held the same position at Fairway Foods, Inc. in Northfield, Minnesota from
1975 to 1979. From 1971 to 1975 he was Executive Vice President, Northfield Area
Chamber of Commerce, Northfield, Minnesota. His duties their included, managing
the Chamber of Commerce's Northfield Industrial Corporation and the Citizens
Advisory Council. Mr. Thill received his BS Degree from Augustana Collage in
Sioux Falls, South Dakota.
16
<PAGE>
Item 10. Executive Compensation
The following table sets forth information for the years ended June 30,
1999, 1998 and 1997 concerning the compensation paid or awarded to the Chief
Executive
Officer of PPMC. None of PPMC's executive officers earned more than
$100,000 during the years ended June 30, 1999, 1998 and 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- -------------
Name and Principal Position Year Salary Bonus Other
---------------------------- ---- ------ ----- -----
<S> <C> <C> <C> <C>
Albert P. Folsom 1999 $72,000 0 0
President and Chief Executive Officer 1998 $72,000 0 0
1997 $72,000 0 0
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 1999 by (a) each person
known by the Company to own beneficially more than 5% of the Company's Common
Stock, (b) each director of the Company who beneficially owns Common Stock, (c)
each of the persons named in the Summary Compensation Table who beneficially
owns Common Stock and (d) all officers and directors of the Company as a group.
Each named beneficial owner has sole voting and investment power with respect to
the shares owned.
Common Stock
Name and Address Percentage of ownership Beneficially Owned
---------------- ----------------------- ------------------
John W. Hemmer 0.87% 100,000
Jay Walker 0.44% 50,000
Ethel W. Arnold 1.75% 200,000
Albert P. Folsom 29.28% 3,337,500(1,2)
Amtel Communications Inc. 29.28% 3,337,500(3)
All officers and directors as a group (4 persons) 32.34% 3,687,500(2,4)
(1) Consists of shares held by Folsom Family Holdings. Mr. Folsom has a 10%
interest in such entity. Mr. Folsom's address is c/o the Company.
(2) Does not include 3,337,500 shares owned by Amtel. Mr. Folsom is an officer
of Amtel.
17
<PAGE>
(3) The address of Amtel is c/o Martin and Associates, #2100-1066 West
Hastings Street, Vancouver, British Columbia, Canada V6E 3X2 and the
principal stockholder of Amtel is Rurik Trust, a Grand Cayman Islands
trust formed in 1986.
(4) Includes 3,337,500 shares owned by Folsom Family Holdings. See Footnote 1.
Item 12. Certain Relationships and Related Transactions
The Company has no stated policy towards entering into transactions with
related parties. However, the Company's intention is that any transactions with
related parties in the future will be on terms no less favorable to the Company
than those obtainable from unrelated parties.
The development activities of the Company are being financed through
advances by Amtel, which is a major shareholder. The Company owed Amtel $508,407
and $440,592 at June 30, 1999 and 1998, respectively. Interest expense on these
advances was $32,195, $24,455 and $14,775 for the years ended June 30, 1999,
1998 and 1997, respectively and $71,425 for the period June 28, 1996 (Date of
Formation) through June 30, 1999. All interest has been accrued. All of such
advances have been made on a demand loan basis. The Company does not have a
formal loan agreement with Amtel.
During the past two years, the Company has not entered into, and does not
propose to enter into, any other transaction with a value in excess of $60,000
with a director, executive officer, beneficial owner of 5% or more of the
Company's Common Stock, or members of any of such persons' immediate family.
Item 13. Exhibits and Reports on Form 8-K
(a) The following financial statements and supplementary financial
information are filed as part of this Annual Report on Form 10-KSB:
Page
----
1. Financial Documents:
Independent Auditors' Report F-1 - F-2
Balance Sheets, June 30, 1999 and 1998 F-3
Statements of Operations, Years Ended
June 30, 1999, 1998 and 1997 and the
Period June 28, 1996 (Date of Formation)
Through June 30, 1999 F-4
Statements of Stockholders' Equity
(Deficiency) for the Period June 28,
1996 (Date of Formation) through
June 30, 1999 F-5 - F-6
18
<PAGE>
Statements of Cash Flows, Years
Ended June 30, 1999, 1998 and 1997
And the Period June 28, 1996
(Date of Formation) through
June 30, 1999 F-7 - F-8
Notes to Financial Statements F-9 - F-15
2. Financial Statement Schedules:
All schedules are omitted because they are inapplicable, not required or
the information is included in the financial statements or notes thereto.
(b) Reports on Form 8-K:
There were no current reports on Form 8-K filed by the Registrant during
the quarter ended June 30, 1999
(c) The following Exhibit Index sets forth the applicable exhibits
(numbered in accordance with Item 601 of Regulation 5-3) which are
required to be filed with the Annual Report of Form 10-KSB.
<TABLE>
<CAPTION>
Exhibit Number Title
-------------- -----
<S> <C>
3 (a) Certificate of Incorporation and Bylaws of Registrant.
Incorporated by Preference to Exhibit 3(a) and 3(b) of the
Company's Report on Form 10-SB dated February 11, 1999
10 (a) Agreement dated September 15, 1998 between International
Trade Group, LLC and the Registrant.
Incorporated by Reference to Exhibit 10 (a) of the Company's
Report on Form 10-SB dated February 11, 1999.
10 (b) Agreement dated August 14, 1998 between Culver
Associates, Ltd and the Registrant.
Incorporated by Reference to Exhibit 10 (b) of the
Company's Report on Form 10-SB dated February 11, 1999.
10 (c) Agreement dated August 12, 1998 between Dorian Capital
Corporation and the Registrant.
Incorporated by Reference to Exhibit 10 (c) of the
Company's Report on Form 10-SB dated February 11, 1999.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number Title
-------------- -----
<S> <C>
10 (d) Agreement dated April 25, 1999 between Roger Jung
(assigned to Last Word Management, Inc.) and the
Registrant.
Incorporated by Reference to Exhibit 10 (d) of the
Company's Report on Form 10-SB dated February 11, 1999.
27. Financial Data Schedule
</TABLE>
20
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 30, 2000
PURCHASE POINT MEDIA CORPORATION
By: /s/ Albert P. Folsom
-----------------------------------------
Albert P. Folsom
President and Chief Executive Officer
21
