This case is based on actual financial projections developed
and provided by a publicly traded firm, Purchase Point Media
Corporation (PPMC). Carefully examine the PPMC projections,
which are presented in a sequence and format suitable for
break-even calculation and analysis. After you calculate the
break-even point, use additional, publicly available information to come to a decision with respect to market potential.
The increase in the price per share of PPMC stock suggests
that, over time, the market may have reacted to their results
and analyses, using a comparable methodology.
When you complete this case, you’ll be able to
• Identify discernable errors, irregularities, and improprieties in style and format within publicly reported data
• Meet financial statement presentation requirements for a
specific “real world” example
• Determine whether financial information provided follows
generally accepted accounting principles (GAAP) or is
presented in “good form”
• Distinguish between the substance and form of
• Estimate variable and fixed costs for a publicly
• Assess publicly disseminated information from publicly
traded companies to determine the feasibility of market
potential and market penetration
• Exercise enhanced critical-thinking skills
Purchase Point Media Corporation (Pink Sheets: PPMC) is
what some refer to as a thinly traded “corporate shell.” The
firm held patents in the United States, Canada, United
Kingdom, and Germany for a shopping-cart display device,
but was a nonreporting and nonoperating entity.
On March 18, 2002, PPMC reported its intention to sell these
patents and related trademarks. The initial estimates suggested a stock price of nearly $2.50 per share, before related
per-share deductions for sale-related broker’s commissions
and legal fees. At the time of the news release, the firm’s
stock was trading at $0.04 per share. In less than 60 days
the stock was trading at more than $0.60 per share (Cataldo
2003, 55–60), for a 1,400 percent increase in price per share.
(Note that investors and speculators alike would view this as
a very risky investment, and the price per share for PPMC
stock would be expected to fall short of or sell at a significant
discount to the “anticipated” selling price for the firm’s intangible assets. See Arbel and Strebel 1982 and 1983; Arbel,
Carvell and Strebel 1983; and Arbel 1985 for guidance on
thinly traded or “neglected” firms.)
While this initial news release attracted speculators, causing
the stock price to rise, after months without any additional
news releases, the stock price drifted down again. On August
20, 2003, PPMC again announced its intention to sell the
firm’s intangible assets (Business Wire 2003).
In the second announcement, PPMC management referred
interested investors to their corporate Web site. Among the
data provided, PPMC included a financial projection and
other items they felt might be of interest to potential purchasers of the firm’s intangible assets (see Exhibit 1,
Purchase Point Media Corp. statement, which follows).
To begin this case, review and comment on the “form” of
the public disclosure circulated by PPMC. Then use the
“substance” of this information to develop per-unit, salesbased contribution margins and break-even points for the
first year of operations. Last, gather other publicly available
information to determine the market feasibility of achieving
its break-even point.