UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number: 333-28249
PRIME AIR, INC.
(Exact name of Registrant as specified in charter)
NEVADA Applied For
State or other
jurisdiction of I.R.S. Employer I.D. No.
incorporation or
organization
Suite 601 - 938 Howe Street, Vancouver, British Columbia,
CANADA V6Z 1N9
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (604) 684-5700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None N/A
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the Issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act of 1934 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 fling requirements for the past 90
days. (1) Yes [X ] No [ ] (2) Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will 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-QSB or any amendment to
this Form 10-QSB. [N/A]
State issuer's revenues for its most recent fiscal year: -0-
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date
within the past 60 days: The aggregate market value of the voting stock held
by non-affiliates of the Registrant (22,898,666 shares) computed by using the
closing sale price on April 9, 2002, was $1,831,893.
State the number of shares outstanding of each of the Issuer's classes of
common equity as of the latest practicable date: At February 13, 2002, there
were 22,898,666 shares of the Registrant's Common Stock outstanding.
PART I
ITEM 1. FINANCIAL STATEMENTS
The financial statements attached hereto and included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted.
However, in the opinion of management, all adjustments (which include only
normal recurring accruals) necessary to present fairly the financial position
and results of operations for the periods presented have been made. The
results for interim periods are not necessarily indicative of trends or of
results to be expected for the full year. These financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Company's annual report on Form 10-KSB for the year ended
December 31, 2001.
Consolidated Financial Statements
March 31, 2002 and 2001
(Unaudited - Prepared by Management)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity and Deficit
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(all figures in US dollars)
March 31 March 31 December 31
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
ASSETS
Current Assets
Cash and short-term deposits $ 677 $ 2,690 $ 2,089
Prepaid expenses 1,330 697 1,550
GST recoverable 1,165 1,446 1,148
3,172 4,833 4,787
Capital Assets (Note 4) 520,191 537,564 523,278
$ 523,363 $ 542,397 $ 528,065
LIABILITIES
Current Liabilities
Accounts payable and accruals $ 196,156 $ 201,247 $ 210,305
Notes and advances payable (Note 5) 28,989 25,017 14,989
225,145 226,264 225,294
SHAREHOLDERS' EQUITY
Capital Stock (Note 6)
Authorized:
50,000,000 common shares with a
stated par value of $ .001/share
3,000,000 preferred cumulative convertible
shares with a stated par value of $ .001/share
Issued:
22,898,666 common shares (2001: 21,022,666) 22,899 21,023 21,979
Capital in excess of par value 1,696,427 1,652,977 1,696,427
1,719,326 1,674,000 1,718,406
Accumulated Deficit During
Development Stage (1,421,108) (1,357,867) (1,415,635)
298,218 316,133 302,771
$ 523,363 $ 542,397 $ 528,065
Approved on Behalf of the
Board:
"Blaine Haug" Director
"Wayne Koch" Director
See Accompanying Notes To Financial Statements
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(all figures in US dollars)
Three Months Three Months Year Ended
Ended March 31 Ended March 31 December 31
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
Administrative And General Expenses
Audit and accounting $ - $ - $ 6,781
Advertising - - 666
Amortization 3,087 4,868 19,154
Association membership fees - - 5,768
Commissions and finders' fees - - 3,261
Consulting (Note 7) 920 - 400
Insurance 226 715 2,374
Interest and service charges 76 58 1,289
Legal costs - 365 -
Office and general - 330 1,249
Repairs and maintenance 93 68 1,420
Rent and property taxes - airport facility (Note 8) - - 8,426
Telephone and utilities (recovered) (86) 438 4,754
Transfer agent, listing and filing fees 1,156 2,292 6,405
Travel, promotion and entertainment
(recovered) - - 5,654
5,472 9,134 67,601
Loss (gain) on foreign exchange conversion 1 (4,910) (5,606)
1 (4,910) (5,606)
Net Loss For The Period $ 5,473 $ 4,224 $ 61,995
Net Loss Per Common Share $ (0.0002) $ (0.0002) $ (0.0029)
Weighted Average Common Shares Outstanding 22,898,666 21,022,666 21,586,358
See Accompanying Notes To Financial Statements
PRIME AIR, INC.
( A Development Stage Company)
Consolidated Statements of Shareholders' Equity and Deficit
( all figures in US dollars )
Capital in Accumulated
Excess of Share Deficit During
Common Shares (Less than) Subscriptions Development
Shares Amount Par Value Receivable Stage
Balance at Inception on
March 10, 1989 - $ - $ - $ - $ -
Issue of common shares for cash
at $.001/share 630,237 630 - - -
Net loss for the year ended
March 31, 1990 - - - - (17,956)
Balance, March 31, 1990 630,237 630 - - (17,956)
Issue of common shares for cash
at $.001/share 157,559 158 - - -
Net loss for the year ended
March 31, 1991 - - - - (49,419)
Balance, March 31, 1991 787,796 788 - - (67,375)
Net loss for the year ended
March 31, 1992 - - - - (10,990)
Balance, March 31, 1992 787,796 788 - - (78,365)
Issue of common shares for cash
at $.277/share 132,088 132 36,499 - -
at $.214/share 17,069 17 3,628 - -
Net loss for the year ended
March 31, 1993 - - - - (38,426)
Balance, March 31, 1993 936,953 937 40,127 - (116,791)
Issue of common shares for services
at nominal value 92,173 92 (92) - -
Issue of common shares for cash
at $.001/share 300,000 300 - - -
at $.109/share 3,340 3 361 - -
at $.154/share 23,634 24 3,619 - -
at $.280/share 19,401 19 5,400 - -
at $.330/share 23,161 23 7,624 - -
at $.463/share 87,445 88 40,330 - -
at $.694/share 15,756 16 10,907 - -
at $.925/share 7,878 8 7,274 - -
Net loss for the year ended
March 31, 1994 - - - - (36,272)
Balance, March 31, 1994 1,509,741 $ 1,510 $ 115,550 $ - $ (153,063)
See Accompanying Notes To Financial Statements
PRIME AIR, INC.
( A Development Stage Company)
Consolidated Statements of Shareholders' Equity and Deficit
( all figures in US dollars )
Capital in Accumulated
Excess of Share Deficit During
Common Shares (Less than) Subscriptions Development
Shares Amount Par Value Receivable Stage
Balance Forward 1,509,741 $ 1,510 $ 115,550 $ - $ (153,063)
Issue of common shares for
services
at nominal value 937,478 937 (937) - -
Issue of common shares for cash
at $.374/share 248,692 249 92,697 - -
at $.463/share 304,089 304 140,286 - -
Net loss for the year ended
June 28, 1994 - - - - (40,947)
Balance, June 28, 1994 3,000,000 3,000 347,596 - (194,010)
Share subscription at $.367/share - - (7,313) (20) -
Net loss for the year ended
December 31, 1994 - - - - (135,530)
Balance, December 31, 1994 3,000,000 3,000 340,283 (20) (329,540)
Issue of common shares for cash
and/or services at an average
of $.234/share 562,550 563 131,192 - -
Net loss for the year ended
December 31, 1995 - - - - (71,266)
Balance, December 31, 1995 3,562,550 3,563 471,475 (20) (400,806)
Issue of common shares for cash
at $.50/share 1,510,558 1,511 753,769 - -
Issue of common shares for services
at nominal value 1,483,673 1,483 - - -
Net loss for the year ended
December 31, 1996 - - - - (238,416)
Balance, December 31, 1996 6,556,781 $ 6,557 $ 1,225,244 $ (20) $ (639,222)
See Accompanying Notes To Financial Statements
PRIME AIR, INC.
( A Development Stage Company)
Consolidated Statements of Shareholders' Equity and Deficit
( all figures in US dollars )
Capital in Accumulated
Excess of Share Deficit During
Common Shares (Less than) Subscriptions Development
Shares Amount Par Value Receivable Stage
Balance Forward 6,556,781 $ 6,557 $ 1,225,244 $ (20) $ (639,222)
Issue of common shares for
services
at nominal value 328,000 328 - - -
Issue of common shares for
debt settlements:
at $.500/share 124,252 124 62,001 - -
at $.504/share 36,380 36 18,303 - -
at $.530/share 94,800 95 50,192 - -
Net loss for the year ended
December 31, 1997 - - - - (189,697)
Balance, December 31, 1997 7,140,213 7,140 1,355,740 (20) (828,919)
Issue of common shares for
debt settlements:
at $.3935/share 10,000 10 3,863 - -
at $.4006/share 18,215 18 7,279 - -
Issue of common shares for
services
at nominal value 1,663,727 1,664 - - -
8,832,155 8,832 1,366,882 (20) (828,919)
Two for one stock split, May 18, 1998 8,832,155 8,832 (8,832) - -
17,664,310 17,664 1,358,050 (20) (828,919)
Issue of common shares for
debt settlements:
at $.25/share 64,800 65 16,135 - -
Issue of common shares for
services
at nominal value 290,000 290 - - -
Transfer Agent adjustment (6,000) (6) - - -
Write off of uncollectable share
subscription receivable - - 7,313 20 -
Net loss for the year ended
December 31, 1998 - - - - (151,268)
Balance, December 31, 1998 18,013,110 $ 18,013 $ 1,381,498 $ - $ (980,187)
See Accompanying Notes To Financial Statements
PRIME AIR, INC.
( A Development Stage Company)
Consolidated Statements of Shareholders' Equity and Deficit
( all figures in US dollars )
Capital in Accumulated
Excess of Share Deficit During
Common Shares (Less than) Subscriptions Development
Shares Amount Par Value Receivable Stage
Balance Forward 18,013,110 $ 18,013 $ 1,381,498 $ - $ (980,187)
Issue of common shares for
debt settlements:
at $.20/share 201,250 202 40,048 - -
at $.25/share 423,200 423 105,377 - -
Issue of common shares for
services
at nominal value 1,010,000 1,010 - - -
Net loss for the year ended
December 31, 1999 - - - - (277,117)
Balance, December 31, 1999 19,647,560 19,648 1,526,923 - (1,257,304)
Issue of common shares for cash
at $.08/share 500,000 500 39,500 - -
Issue of common shares for
debt settlements:
at $.08/share 4,100 4 324 - -
at $.10/share 871,006 871 86,230 - -
Net loss for the year ended
December 31, 2000 - - - - (96,336)
Balance, December 31, 2000 21,022,666 21,023 1,652,977 - (1,353,640)
Issue of common shares for cash
at $.08/shre 300,000 300 23,700 - -
Issue of common shares for
debt settlement
at $.08/share 250,000 250 19,750 - -
Issue of common shares for
services
at nominal value 400,000 400 - - -
Transfer Agent adjustment 6,000 6 - - -
Net loss for the year ended
December 31, 2001 - - - - (61,995)
Balance, December 31, 2001 21,978,666 21,979 1,696,427 - (1,415,635)
Issue of common shares for
services
at nominal value 920,000 920 - - -
Net loss for the three months
ended
March 31, 2002 - - - - ( 5,473)
Balance, March 31, 2002 22,898,666 $ 22,899 $ 1,696,427 $ - $ (1,421,108)
PRIME AIR, INC.
(A Development Stage
Company)
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(all figures in US
dollars)
Three Months Three Months Year Ended
Ended March 31 Ended March 31 December 31
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
NET INFLOW (OUTFLOW) OF CASH
RELATED TO THE FOLLOWING
ACTIVITIES:
OPERATING
Net loss $ (5,473) $ (4,224) $ (61,995)
Non-cash charge - amortization 3,087 4,868 19,154
(2,386) 644 (42,841)
Change in non-cash working capital
balances relating to operations (13,946) (10,392) (1,886)
(16,332) (9,748) (44,727)
FINANCING
Notes and advances payable 14,000 9,833 (195)
Issue of capital stock 920 - 44,406
14,920 9,833 44,211
NET CASH INFLOW (OUTFLOW) (1,412) 85 (516)
CASH, BEGINNING OF YEAR 2,089 2,605 2,605
CASH, END OF PERIOD $ 677 $ 2,690 $ 2,089
See Accompanying Notes To Financial Statements
PRIME AIR, INC.
(A Development Stage Company)
Notes To Consolidated Financial Statements
March 31, 2002 and 2001
1. Incorporation, Principles of Consolidation and Accounting Presentation
The Company was incorporated under the laws of the State of Nevada, USA on
November 10, 1996, the purpose of which was to change the domicile of the
Company from the State of Delaware to the State of Nevada. This change was
approved by the shareholders of both corporations on November 26, 1997 and
effected through a "plan and agreement of merger" with the surviving
corporation being Prime Air, Inc. (Nevada). The articles of merger were filed
with the appropriate State authorities on December 15, 1997 which became the
effective date of the merger.
The Delaware corporation was incorporated on April 4, 1996 and acquired all of
the assets, liabilities and shareholders of a previous Utah corporation of the
same name. The Utah corporation had been reincorporated on August 30, 1993 as
Astro Enterprises, Inc. and on June 28, 1994, pursuant to appropriate
shareholder agreements, acquired all outstanding shares of Prime Air Inc. (a
Canadian corporation) in exchange for shares of its capital stock on a .787796
to 1 basis, thereby providing the shareholders of Prime Air Inc. with 90% of
the outstanding capital stock of Astro Enterprises, Inc. Astro Enterprises,
Inc. then changed its name to Prime Air, Inc. Following incorporation of the
Delaware company, the Utah corporation was dissolved on May 15, 1996.
These consolidated financial statements include the accounts of the Company
and its wholly-owned operating subsidiary, Prime Air Inc. (the Canadian
corporation) and have been prepared in accordance with U.S. GAAP standards.
2. Nature of Operations / Going Concern Considerations
The Company is presently in its developmental stage and currently has minimal
sources of revenue to provide incoming cash flows to sustain future
operations. The Company's present activities relate to the completion and
ultimate exclusive operation of an international passenger and cargo air
terminal facility in the Village of Pemberton, British Columbia and the
operation of scheduled flight services between that facility and certain major
centers in Canada and the United States in conjunction with Voyageur Airways
Limited. Terminal building construction was substantially completed in May,
1996. The future successful operation of the Company is dependent upon its
ability to obtain the financing required to complete and operationalize the
terminal facility and to commence operation thereof on an economically viable
basis.
These consolidated financial statements have been prepared on a "going
concern" basis which assumes the Company will be able to realize its assets,
obtain financing as required and discharge its liabilities and commitments in
the normal course of business.
PRIME AIR, INC.
(A Development Stage Company)
Notes To Consolidated Financial Statements
March 31, 2002 and 2001
3. Significant Accounting Policies
Reporting Currency
All amounts in these consolidated financial statements are reported in U.S.
funds. Monetary assets and liabilities have been converted from Canadian
funds where applicable utilizing the year-end closing exchange rate of $
1.5906 CDN/$1.00 U.S. Transactions recorded throughout the year in the
accounts of the Canadian subsidiary have been converted to their U.S.
equivalent at actual amounts where available or by utilizing the average
annual rate as posted by the Internal Revenue Service of the United States as
follows: $ 1.5484 CDN/$1.00 U.S. (2000: $1.4852 CDN/ $1.00 U.S.). Exchange
rates at March 31, 2002 had not materially changed from the December 31, 2001
stated rate.
Fair Value of Financial Instruments
In accordance with the requirements of Statement of Financial Accounting
Standards No. 107, "Disclosure About Fair Value Of Financial Instruments", the
carrying amounts reported on the balance sheets for cash and cash equivalents,
namely, "cash and short-term deposits", "prepaid expenses", "GST recoverable",
"accounts payable and accrued liabilities" and "notes and advances payable"
approximate their fair market value.
Receivables and Prepaid Expenses
All amounts reported as receivables or prepaid expenses have been recorded at
their original values. There have been no amounts written off as bad debts or
provided for as an allowance against the recovery of these assets.
Capital Assets
Air Terminal Construction Costs: Expenditures relating directly to the
construction of the air terminal facility and related engineering and design
have been recorded in the accounts of the Company at cost, net of amortization
which is provided on a straight-line basis over the 30-year term of the
property lease.
Furniture and Equipment: Furniture and equipment is stated at cost, net of
amortization which is provided for at the rate of 20% per annum on the
declining balance basis.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
In these financial statements, assets, liabilities and results of operations
involve significant reliance on management estimates. Actual results could
differ from the use of those estimates.
PRIME AIR, INC.
(A Development Stage Company)
Notes To Consolidated Financial Statements
March 31, 2002 and 2001
3. Significant Accounting Policies (continued)
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting For Income Taxes", during the fiscal year ended December 31, 1998
and applied the provisions of that statement on a retroactive basis to the
previous fiscal years, which resulted in no significant adjustments.
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", requires an asset and liability approach for financial accounting and
reporting for income tax purposes. This statement recognizes (a) the amount
of taxes payable or refundable for the current year and (b) deferred tax
liabilities and assets for future tax consequences of events that have been
recognized in the financial statements or tax returns.
Deferred income taxes result from temporary differences in the recognition of
accounting transactions for income tax and financial reporting purposes.
There were no temporary differences at December 31, 2001 and earlier years and
accordingly, no deferred tax liabilities have been recognized for all years.
The operating subsidiary Company has cumulative net operating loss carry
forwards of approximately
$668,000 at December 31, 2001 and $ 790,000 at December 31, 2000. No effect
has been shown in the financial statements for these carry forwards as the
likelihood of future tax benefit from such is not presently determinable. The
potential income tax benefits of these net operating loss carry forwards of
approximately $ 118,000 at December 31, 2001 and $ 144,000 at December 31,
2000 (based upon current income tax rates) have been offset by valuation
reserves of the same amount. Net operating losses expire after seven (7)
years. Operating losses of the US parent corporation have not been
determined.
PRIME AIR, INC.
(A Development Stage Company)
Notes To Consolidated Financial Statements
March 31, 2002 and 2001
4. Capital Assets
Capital assets consist of the following at March 31, 2002 and 2001 and
December 31, 2001:
March 31, 2002
Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 641,972 $ 120,267 $ 521,705
Furniture and equipment 5,154 3,581 1,573
$ 647,126 $ 123,848 $ 523,278
March 31, 2001
Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 641,972 $ 120,267 $ 521,705
Furniture and equipment 5,154 3,581 1,573
$ 647,126 $ 123,848 $ 523,278
December 31, 2001
Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 641,972 $ 120,267 $ 521,705
Furniture and equipment 5,154 3,581 1,573
$ 647,126 $ 123,848 $ 523,278
5. Notes and Advances Payable
The notes and advances payable are unsecured, non-interest bearing and are
without specific terms of repayment. Included therein is an amount of $11,846
which has been advanced to the Company by a shareholder and/or a corporation
controlled by that shareholder who is the beneficial owner of 2,245,226 shares
of common stock of the Company, that holding representing 10.22% of the issued
and outstanding capital of the Company.
PRIME AIR, INC.
(A Development Stage Company)
Notes To Consolidated Financial Statements
March 31, 2002 and 2001
6. Capital Stock
Authorized:
150,000,000 common shares with a stated par value of $.001/share
5,000,000 preferred cumulative convertible shares with a stated par
value of $.001/share
Number of Shares Consideration
Common Shares Issued:
To August 31, 1993
- for cash 300,000 $ 300
Prime Air Inc. share exchange
- June 28, 1994 2,700,000 350,296
During year ended December 31, 1995
- for cash 562,550 131,756
Balance at December 31, 1995 3,562,550 482,352
During year ended December 31, 1996
- for cash 1,510,558 755,279
- for consulting and related services 1,483,673 1,483
2,994,231 756,762
Balance, December 31, 1996 6,556,781 1,239,114
During the year ended December 31, 1997
- shares-for-debt settlements 255,432 130,751
- consulting and related services 328,000 328
583,432 131,079
Balance, December 31, 1997 7,140,213 1,370,193
During the year ended December 31, 1998
- shares-for-debt settlements 93,015 27,370
- consulting and related services 1,953,727 1,954
- Transfer Agent correction (6,000) (6)
2,040,742 29,318
9,180,955 1,399,511
- "Two for One" share split 8,832,155 -
Balance, December 31, 1998 18,013,110 1,399,511
During the year ended December 31, 1999
- shares-for-debt settlements 624,450 146,050
- consulting and related services 1,010,000 1,010
1,634,450 147,060
Balance, December 31, 1999 19,647,560 1,546,571
During the year ended December 31, 2000
- for-cash 500,000 40,000
- shares-for-debt settlements 875,106 87,429
1,375,106 127,429
Balance, December 31, 2000 21,022,666 1,674,000
PRIME AIR, INC.
(A Development Stage Company)
Notes To Consolidated Financial Statements
March 31, 2002 and 2001
6. Capital Stock (continued)
Number of Shares Consideration
Balance, December 31, 2000 21,022,666 1,674,000
During year ended December 31, 2001
- for cash 300,000 24,000
- shares-for-debt settlements 250,000 20,000
- consulting and related services 400,000 400
- Transfer Agent correction 6,000 6
956,000 44,406
Balance, December 31, 2001 21,978,666 1,718,416
- consulting and related services 920,000 920
Balance, March 31, 2002 22,898,666 $ 1,719,326
In July, 1996, management of the Company voluntarily halted trading of its
common shares based upon the conclusion that information concerning the
history of the Company provided by former management may not have been
complete. Adequate information was subsequently provided to the public by
management and trading was recommenced on March 27, 1997. The Company
prepared and filed a registration statement in connection with the change of
domicile (referred to in Note 1) to register all of the outstanding common
shares of capital stock in the Company. This registration has been approved
by the Securities and Exchange Commission and the change of domicile became
effective on December 15, 1997.
7. Related Party Transactions
During the years ended December 31, 2001 and 2000, no cash remuneration was
paid to any director or officer of the Company. The Company has adopted the
policy of issuing "restricted" common shares to certain directors and officers
for services rendered. Specifically billed amounts have been settled by way
of "shares-for-debt" arrangements, the share value thereof being determined by
securities regulations. In addition, further shares have been issued to
certain directors and officers for services provided to the Company of a more
general nature, these shares being attributed a nominal value of $ 0.001 per
share. During the year ended December 31, 2001, an officer and director of
the Company received 250,000 common shares by way of a debt settlement
covering an obligation of $20,000 and another director and officer received
400,000 common shares with an attributed value of $400 for general management
and consulting services. During the year ended December 31, 2000, shares
issued to related parties consisted of debt settlements only, such issuances
being 871,006 common shares covering obligations of $87,100.
On January 28, 2002, the Board of Directors authorized the issuance of
800,000 "restricted" common shares to directors and officers of the Company in
recognition of services provided thereto to December 31, 2001, and 120,000
"restricted" common shares in settlement of debts for services. These shares
were issued from Treasury on February 13, 2002. The attributed value of these
shares is $920.
PRIME AIR, INC.
(A Development Stage Company)
Notes To Consolidated Financial Statements
March 31, 2002 and 2001
8. Rent, Property Taxes and Lease Commitment
The Canadian subsidiary corporation has entered into an Airport Lease and
Operating Agreement with The Corporation of The Village of Pemberton in
British Columbia whereby it has been granted an exclusive and irrevocable
lease over the lands and airport facilities associated with the Pemberton
Airport. The term of the Lease and Operating Agreement, including extension opt
ions relating thereto, is for a total of 30 years with terminal rent payable
as follows:
- - $ 67 US ($100 CDN) per annum for the initial six (6) years (1993 through 1999);
and thereafter
- - 5% of gross receipts per annum derived from the operation of the
terminal facilities, excluding amounts received in connection with the sale of
airline tickets and other forms of transportation. The lease commitment
amounts for 2001 through 2005 cannot be quantified as the amount of gross
receipts for those years cannot be determined and active operation of the
terminal facilities has not yet commenced.
No lease payments were made during the years ended December 31, 2001 or 2000
as there were no gross receipts derived from operations in those years. The
Company, however, was obligated to pay property taxes imposed by municipal
authorities, such levies amounting to $8,426. for the year ended December 31,
2001 (2000: $9,294).
FORWARD-LOOKING STATEMENTS
Some of the information presented in or incorporated by reference into this
report constitutes "forward-looking statements." Although the Company believes
that its expectations are based upon reasonable assumptions within the bounds
of its knowledge of its proposed business and operations, it is possible that
actual results may differ materially from its expectations. Factors that could
cause actual results to differ from expectations include the inability of the
Company to raise the additional capital necessary to commence its principal
operations or the failure to consummate a definitive agreement with Voyager
Airways Limited.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Prime Air, Inc. (the "Company") was incorporated in the State of Nevada on
November 10, 1996, for the purpose of changing the domicile of the Company
from the State of Delaware. The predecessor to the Company was incorporated in
the State of Delaware on April 4, 1995. The change of domicile was completed
on December 15, 1997.
The Company is the parent of a wholly owned subsidiary, Prime Air, Inc.
("Prime Air (BC)"), a company originally incorporated under the laws of the
Province of British Columbia, Canada, on March 10, 1989, under the name "High
Mountain Airlines Inc." for the purpose of establishing air service to serve
the Whistler, British Columbia, Canada, area. Prime Air (BC) has entered into
a lease and operating agreement with the Village of Pemberton, British
Columbia, Canada, to plan, develop, construct, manage, and operate a terminal
facility at the Pemberton Airport. Prime Air (BC) has constructed the basic
terminal building and proposes to facilitate regular, scheduled air service to
Pemberton Airport to serve the nearby resort community of Whistler.
Prior to incorporation in the State of Delaware, the Company was originally
incorporated pursuant to the laws of the State of Utah on August 30,1993,
under the name "Astro Enterprises, Inc." (referred to hereafter as "the Utah
Corporation"). The Utah corporation changed its name to "Prime Air, Inc." on
June 28, 1994.
In June 1994 the Utah Corporation originally incorporated as Astro
Enterprises, Inc. entered into an agreement with Prime Air (BC), which
agreement was designated as a "Merger Agreement." Pursuant to the terms of
this Agreement the shareholders of Prime Air (BC) exchanged all of the
outstanding shares of Prime Air (BC) for a controlling number of shares of the
Utah corporation, such that upon completion of the exchange, the shareholders
of Prime Air (BC) owned approximately 90% of the outstanding shares of the
Utah Corporation and Prime Air (BC) became a wholly owned subsidiary of the
Utah Corporation. The transaction was not a statutory merger. Management
believes that the closing of such agreement was effected on June 28, 1994. In co
nnection with the exchange of shares, the Utah Corporation effected a
one-for-one hundred reverse split of its outstanding shares effective June 28,
1994, immediately prior to such closing. As a result of the stock-for-stock
exchange, the former shareholders of Prime Air (BC) received 2,700,000
post-reverse spit shares, the 170 existing shareholders of the Utah
Corporation retained 120,000 post-reverse split shares, and the Worthington
Company, an entity controlled by Mr. Paul Parshall, retained 180,000
post-reverse split shares. In addition, the Worthington Company received
consulting fees totaling $70,000 US from Prime Air (BC) for services performed
in connection with the reorganization. Also, as a part of the reorganization,
Mr. Parshall resigned as the sole director of the Utah Corporation and
appointed Mr. Blaine Haug as the sole director. Also in connection with the
reorganization, the name of the Utah Corporation was changed to Prime Air,
Inc. and the number of authorized shares of Common Stock of the Utah
Corporation was changed to 25,000,000 shares, par value $0.001. At the time of
the stock-for-stock exchange between the Utah Corporation and Prime Air (BC),
the Utah Corporation had no assets. The reorganization was entered into
because Prime Air (BC) wanted controlling interest in a public shell
corporation.
On or about April 4, 1995, the Utah Corporation effected a change of domicile
to the State of Delaware by incorporating another corporation in such state,
acquiring all of the assets and liabilities of the Utah Corporation, and
issuing shares of the Delaware corporation to the shareholders of the Utah
Corporation on a one-for-one basis. The Utah Corporation was voluntarily
dissolved by the State of Utah on May 18, 1995. The change of domicile was
initiated and completed based upon the recommendations of Mr. Paul Parshall,
an officer and director of the Utah Corporation at such time.
The original purpose of the Utah Corporation incorporated in 1993 as set forth
in its articles of incorporation, was to acquire the assets and certain
liabilities of another Utah corporation incorporated in 1985 and previously
dissolved by the State of Utah on May 1, 1990, and also incorporated under the
name "Astro Enterprises, Inc." Current management of the Company, none of whom
were affiliated with the Utah Corporation prior to the share exchange in June
1994, believe that the former management of the Utah Corporation at the time
of its incorporation issued approximately 120,000 shares of the company's
common stock to the shareholders of the corporation dissolved in 1990 with the
same name thus creating approximately 170 shareholders of the Utah
Corporation. Management does not believe that any other relationship existed
between the two entities or with former management of the corporation
dissolved in 1990 and known as Astro Enterprises, Inc.
Commencing February 1998, the Company attempted to offer and sell up to
2,000,000 units (the "Units"), each Unit consisting of one share of common
stock of the Company and one Class A Warrant and one Class B Warrant. The
Units were offered by British West Indies Securities Company Limited as
selling agent for the offering. The offering terminated March 31, 1998, and no
Units were sold. The selling agreement with British West Indies Securities
Company Limited also expired on such date.
On April 23, 1998, the shareholders approved a forward split of the
outstanding shares of common stock of the Company at the rate of two shares
for each one share outstanding. The forward stock split was effective on May
15, 1998. In addition, the shareholders approved a stock option plan on April
23, 1998, known as the 1998 Stock Option and Stock Appreciation Right Plan
(the "Plan"). The Plan provides for the issuance of options to acquire up to
1,000,000 shares of common stock of the Company. No options have been granted
pursuant to the Plan.
Commencing June 1998, the Company attempted to offer and sell up to 8,000,000
common shares. This offering terminated August 31, 1998. No shares were sold.
Commencing October 1998, the Company engaged the Investment Banking firm of
Chanen, Painter & Company Ltd. for the purpose of providing equity financing
to enable start up of air services. That engagement was not completed and all
associations thereto expired and were terminated in February 2000.
The Company entered into a "Memorandum of Proposed Agreement" with 519222
Ontario Limited, a corporate entity associated with Voyageur Airways Limited,
which, subject to the final approval of Voyageur and the Company, will allow a
merger which combines 25% of the assets of Voyageur with 70% of the assets of
the Company. That engagement was not completed, however, Voyageur continues
to work with the Company for the purpose of establishing an air service.
Airport Lease and Operating Agreement
On October 29, 1993, Prime Air (BC) entered into a Lease and Operating
Agreement (the "Airport Agreement") with the Corporation of the Village of
Pemberton, British Columbia, Canada (hereinafter the "Village of Pemberton"),
in which Prime Air (BC) agreed to undertake the planning, development,
construction, management, and operation of a terminal facility at the
Pemberton Airport. In return the Village of Pemberton granted to Prime Air
(BC) an exclusive lease involving certain lands located at the Pemberton
Airport to enable Prime Air (BC) to undertake the planning, development,
construction, management, and operation of a terminal facility.
The Pemberton Airport is approximately 20 miles north of Whistler Resort on
Highway 99. Whistler Resort is a ski resort located at the base of Whistler
Mountain and Blackcomb Mountain approximately 75 miles north of Vancouver,
British Columbia, Canada. The resort has approximately 8,000 permanent
residents and attracts approximately 3,000,000 visitors annually. Currently
only ground transportation is available to the resort, except for private
flights into Pemberton Airport. The nearest airport facility to Whistler
Resort is Pemberton Airport. There is presently no regular air service into
Pemberton Airport.
The Airport Agreement provided that Prime Air (BC) must construct a terminal
facility on or before October 21, 1994, which date was extended to June 1,
1996, by the Council for the Village of Pemberton. Prior to such extended
date, Prime Air (BC) completed the terminal facility at the Pemberton Airport.
The terminal constructed by Prime Air (BC) has a total square footage of
11,200 square feet, of which approximately 5,500 of interior space has been
finished and is ready for its intended use as an airport terminal. The
finished portion consists of an arrival and departure lounge, baggage holding
area, office, two public washrooms with a total of 14 cubicles, reception
area, and a utility room. There is also a water and a waste treatment plant
housed in a separate building. The total construction costs of the facility
were $647,126 ($595,335 for the terminal building, $20,989 for engineering and
design, $18,699 for environmental work; and $12,103 for insurance and permits)
and were financed through the sale of the Company's stock. During calendar
year 1996, the Company sold 1,510,558 shares of its common stock at $0.50 per
share for total proceeds of $755,279. The limited offering was conducted
pursuant to Rule 504 of Regulation D promulgated by the Securities and
Exchange Commission. The offering was conducted for the purpose of raising
funds for the completion of construction of the airport terminal facility at
Pemberton. At the time of such offering the Company was not subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, and was not an investment company. The aggregate offering
price of all securities sold within the twelve months preceding the start of
and during the offering did not exceed $1,000,000. There is currently no debt
against the terminal building. The initial term of the Airport Agreement, and
the right of Prime Air (BC) to operate the terminal facility, was two years
with provisions allowing Prime Air (BC) to extend such initial term for
addition terms totaling in the aggregate thirty years, provided that Prime Air
(BC) shall continue to fulfill its obligations under the Airport Agreement,
including the payment of rent in the amount of $100 per year for the first
five years, and the payment of property taxes imposed by municipal authorities
plus 5% of the gross receipts derived from the operation of the terminal
facility for each year thereafter. The Airport Agreement also grants to Prime
Air (BC) the option to lease and use certain other lands at the Pemberton
Airport for fixed base operations. The Airport Agreement may be terminated by
the Village of Pemberton in the event of a material default by Prime Air (BC)
or if Prime Air shall become bankrupt. The terminal facilities shall become
the property of the Village of Pemberton at the expiration of the Airport
Agreement. Prime Air (BC) has submitted a request under the Airport Agreement
for a five year extension beginning October 31, 1999. The Airport Agreement
provides for two additional ten year extensions of the lease following the
five year extension.
Air Service
Prime Air (BC) initially intends to establish scheduled and charter passenger
and cargo air service between Vancouver International Airport and Pemberton
Airport. Thereafter, Prime Air (BC) will seek to establish such services
between Pemberton Airport and other Canadian and United States destinations.
Prime Air (BC) has entered into a Memorandum of Agreement dated January 5,
1995 (the "Voyageur Agreement"), with Voyageur Airways Limited, an Ontario
corporation ("Voyageur") to provide the initial service by supplying,
operating, and maintaining DeHavilland Dash-7 aircraft to provide scheduled
and charter passenger and cargo service, from Vancouver International Airport,
and thereafter from other Canadian and United States locations, to the
Pemberton Airport. The Voyager Agreement provides that Prime Air (BC) will
operate the terminal facility at Pemberton Airport and the scheduled and
charter passenger and cargo service, and will market the air services.
Voyageur will provide the certifications, authorizations, expertise,
facilities, personnel, and resources necessary to operate, maintain and
service the aircraft. The parties intend to negotiate and enter into a
definitive agreement prior to commencing operations.
Government Regulation and Licensing
Any corporation conducting commercial air service operations in Canada must
possess a valid Operating Certificate and other licenses, permits,
accreditations and certificates that are issued and administered by Transport
Canada. Qualification for the required Operating Certificate requires that:
1. the operator (being the entity actually providing the air service
operations) must have at least one aircraft registered under its Operating
Certificate. This aircraft may either be owned directly or dry leased by the
operator;
2. the aircraft utilized by the operator must be approved and certified in
Canada;
3. in respect of a domestic Canadian air service, the operator must satisfy
the statutory Canadian ownership criteria which essentially requires that 75%
of the voting interest in the operator is controlled by Canadian citizens or
permanent residents of Canada:
4. the management of the operator must include a chief pilot who holds
appropriate Canadian certification;
5. all of the operator's pilots must meet proficiency standards and hold
sufficient ratings to operate the type of aircraft being utilized;
6. the operator must demonstrate and certify that it will be able to carry out
maintenance of its aircraft according to regulated standards. Such maintenance
can either be conducted directly by the operator or subcontracted to a
qualified maintenance facility; and
7. an operations manual must be prepared for the operator and approved by
Transport Canada.
Voyageur will conduct all in-flight operations as an independent contractor to
Prime Air (BC). Management of Prime Air (BC) believes that Voyageur meets all
of the criteria set forth above.
Voyageur will be responsible for the carriage of full flight and ground risk
insurance including aircraft hull and passenger and third party liability for
the operations conducted by Voyageur. Prime Air (BC) will be responsible for
insuring the terminal building and property at the Pemberton Airport and for
passenger liability at the airport terminal operation.
Voyageur will be responsible for any environmental damage caused by the
operation and maintenance of its aircraft. Prime Air (BC) will be responsible
for any environmental damage caused by the operation and maintenance of its
aircraft.
Marketing
Prime Air (BC) intends to commence a marketing program and hire market
personnel as soon as sufficient funds are available. Advertising and promotion
would focus both on the Whistler area as the destination, and on creating an
image of convenience, quality and reliability for the air service. Final
approval of all advertising and promotion would remain with Prime Air (BC).
The corporate name and logo would be used throughout the companies advertising
materials in order to develop consumer and travel agency familiarity.
Prime Air (BC) plans to prepare promotional materials that would introduce the
new air service, first to travel agents and tour wholesalers, and then to the
consumer. Promotion would constitute a major portion of Prime Air (BC)'s
overall marketing strategy. Familiarization flights would be offered to select
travel agencies, tour operators, and others, potentially in conjunction with
the ski areas, hotels, Whistler's Trade and Convention Center, and the
Whistler Resort Association. The objective would be for the industry to become
familiar enough with the service so that when a customer books travel to
Whistler, the travel agent would suggest that the customer make airline
reservations all the way to the Whistler area by using Prime Air (BC)'s
services.
Prime Air (BC) also plans to contact travel industry journals to introduce and
promote the service.
Prime Air (BC) also plans to focus much of its advertising on accessibility to
Whistler. Advertising would include direct mail to the travel industry and
specific potential corporate clients, brochures, schedules, and various forms
of media advertising, including magazines and newspapers. Whenever possible,
Prime Air (BC) would participate in cooperative advertising in order to
develop and reinforce the consumer's associating Prime Air (BC) with easy
access to Whistler.
Prime Air (BC) intends also to provide hotels at Whistler and the Whistler
Resort Association with schedule support materials to generate airline ticket
sales in conjunction with hotel bookings.
Prime Air (BC) plans to begin marketing and sales of its services in advance
of operating its first flight. The objective would be to generate sales on all
flights from the very beginning of flight operations. Prime Air (BC) also
plans to focus initially on creating awareness of the service within the
travel industry. Specifically, marketing staff would contact tour wholesalers,
travel agencies, convention and meeting planners and other groups that
currently book clients to Whistler.
A major component of Prime Air (BC)'s sales strategy would include the
integration of the flight schedules and fares into all of the major worldwide,
computerized reservations systems. Such networks allow travel agencies to book
their clients directly through the computerized system. To do this properly,
Prime Air (BC) would engage Voyageur management to provide the appropriate
expertise in the development of flight schedules and fares, which would
include assisting Prime Air (BC) in making the final selection of a
computerized reservation system to join.
In order to generate sales in the local Seattle and Vancouver markets, Prime
Air (BC) intends to plan several types of promotional programs. These would
likely include ticket packages (purchasing tickets for ten flights for the
price of nine), special introductory fares, and/or joint promotions with other
advertisers in the area.
Prime Air (BC) intends to maximize the use of the Internet as a tool to reach
the consumer with specific marketing and sales related information about the
service. As more and more airlines and computerized reservations systems make
their flight schedules and fares available on the Internet, management
believes the general public will become more adept at using the Internet as a
ready source of up-to-date marketing and sales related information about the
product. The target market group for this air service would be frequent users
of computers and the Internet. Prime Air (BC) intends to seek the services of
a marketing firm to exploit this new area of marketing potential.
Competition
Prime Air (BC) will compete with other charter and airline companies based in
the Vancouver and Seattle area which currently service customers whose final
destination is Whistler Resort. To a limited degree Prime Air (BC) will
compete with buses chartered or owned by tour operators. Most of these
entities are more established companies having much greater financial
resources, experience, and personnel resources than Prime Air (BC).
Employees
The Company, including Prime Air BC, had one employee as of March 31, 2002,
consisting of Mr. Haug, who was employed part-time.
ITEM 2. DESCRIPTION OF PROPERTY
In addition to the Pemberton Airport facility described above, the Company
maintains its principal executive offices at facilities shared with the
business of the President of the Company, which facilities are furnished at no
cost to the Company.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its properties is a party to any material
pending legal proceedings or government actions, including any material
bankruptcy, receivership, or similar proceedings. Management of the Company
does not believe that there are any material proceedings to which any
director, officer or affiliate of the Company, or its subsidiary, any owner of
record of beneficially of more than 5 percent of the Common Stock of the
Company, or any associate of any such director, officer, affiliate of the
Company, or its subsidiary, or security holder is a party adverse to the
Company, or it subsidiary, or has a material interest adverse to the Company,
or it subsidiary.
In December 1994 the U.S. Securities and Exchange Commission filed a complaint
in the United States District Court for the District of Columbia (Case Number
1:94CV02633) against an entity known as "Astro Enterprises, Inc.," and against
Ernst Hiestand, Thomas Hiestand, Elizabeth Kuriger, Henry Strubin, Peter
Thaler, and Leonard Gotshalk, all of whom were allegedly affiliated with such
entity. The basis for such complaint was the dissemination to the public from
approximately March 1989 through May 1990, of false and misleading information
concerning the business of such entity. The entity referenced in such action
was incorporated in the State of Utah on May 23, 1985, and was involuntarily
dissolved on May 1, 1990, for failure to file an annual report with the State
of Utah. In 1995 Mr. Paul Parshall executed a consent and settlement of the
foregoing action, ostensibly as the president, director, and authorized agent
of the entity named in such action. Management does not believe such action in
any way involved the Utah Corporation which was subsequently incorporated
under the same name on August 30, 1993, and which subsequently changed its
name to Prime Air, Inc. and changed its domicile to the State of Delaware.
Management does not believe there is or was any legal relationship between the
"Astro Enterprises, Inc." incorporated on May 23, 1985, and the "Astro
Enterprises, Inc." which was incorporated in 1993 and was the predecessor to
the Company. In addition, management does not believe that Mr. Parshall was
authorized to execute such consent on behalf of either entity. Management is
unaware whether Mr. Parshall ostensibly executed such consent on behalf of the
original Astro Enterprises, Inc. or the predecessor to the Company by the same
name. However, the allegations contained in such action reference events all
of which occurred prior to the incorporation of the predecessor to the Company
in 1993.
In May 1996 the Company entered into a settlement agreement and undertaking
with the Alberta Securities Commission (file number 100164) in which the
Company agreed to be more diligent in complying with the requirements of the
Alberta Securities Act and the rules made thereunder. In addition, the Company
paid $2,000 to the commission toward the costs of the investigation conducted
by the Commission. In February 1996 the Company announced an offering of its
common shares in Alberta newspapers. Between February 1 and March 1, 1996, the
Company received $93,040 from fifteen investors in Alberta. The investors
received an offering document which did not conform with the form of an
offering memorandum required pursuant to the Alberta Securities Act and the
distribution to the investors did not qualify for an exemption under such act.
Upon being contacted by the staff of the securities commission, the Company
placed all investment monies in trust pending the disposition of the matter.
Thereafter the Company sent an offering memorandum in the required form and an
offer of rescission to all of the investors. After the return of monies to
investors who either did not qualify for an exemption or who elected
rescission, and the filing of a proper report with the securities commission,
no further action was taken by the securities commission.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of the shareholders during the quarter
ended March 31, 2002.
ITEM 5. REINSTATEMENT OF MARKET MAKER COMPLIANCE
A market maker representing the company has completed and filed a Form 211 and
Form 211 Addendum with respect to reinstatement of Market Maker trading
status. As at April 14, 2002, status has not been restored.
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ARTICLE 6
PERIOD TYPE 3 MOS
FISCAL YEAR END DEC 31 2001
PERIOD END MAR 31 2002
CASH 677
SECURITIES 0
RECEIVABLES 2,495
ALLOWANCES 0
INVENTORY 0
CURRENT ASSETS 3,172
PP&E 520,191
DEPRECIATION 0
TOTAL ASSETS 523,363
CURRENT LIABILITIES 225,145
BONDS 0
PREFERRED MANDATORY 0
PREFERRED 0
COMMON 22,899
OTHER SE 0
TOTAL LIABILITY AND EQUITY 523,363
SALES 0
TOTAL REVENUES 0
CGS 0
TOTAL COSTS 5,473
OTHER EXPENSES 0
LOSS PROVISION 0
INTEREST EXPENSE 0
INCOME PRETAX (5,473)
INCOME TAX (0)
INCOME CONTINUING (5,473)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET INCOME (5,473)
EPS BASIC 0
EPS DILUTED 0
End of Filing
