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 June 30, 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]
Table of Contents
PRIME AIR, INC.
Index
Page No.
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2002 (unaudited) and December 31, 2001 (audited) 3
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2002 and 2001
(unaudited), and year ended December 31, 2001
4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2002 and 2001 (unaudited) 5
Notes to the Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
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.
PART I
ITEM 1. FINANCIAL STATEMENTS
PRIME AIR, INC.
CONSOLIDATED BALANCE SHEETS
(all figures in US dollars)
June 30 June 30 December 31
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
ASSETS
Current Assets
Cash and short-term deposits $ 1,053 $ 310 $ 2,089
Prepaid expenses 236 - 1,550
GST recoverable 1,216 1,534 1,148
2,505 1,844 4,787
Capital Assets (Note 4) 517,104 532,648 523,278
$519,609 $534,492 $528,065
LIABILITIES
Current Liabilities
Accounts payable and accruals $198,129 $211,135 $210,305
Notes and advances payable (Note 5) 31,989 25,115 14,989
230,118 236,250 225,294
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 (1,429,835) (1,375,758) (1,415,635)
289,491 298,242 302,771
$519,609 $534,492 $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 Six Months Three Months Six Months Year Ended
Ended June 30 Ended June 30 Ended June 30 Ended June 30 December 31
2002 2002 2001 2001 2001
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
Administrative And General Expenses
Audit and accounting $ 1,937 $ 1,937 - - $ 6,781
Advertising - - - - 666
Amortization 3,087 6,174 4,916 9,784 19,154
Association membership fees - - - - 5,768
Commissions and finders' fees - - - - 3,261
Consulting - 920 - - 400
Insurance 1,125 1,350 722 1,437 2,374
Interest and service charges 67 143 39 97 1,289
Legal costs - - 6,046 6,411 -
Office and general - - 1,322 1,652 1,249
Repairs and maintenance - 93 - 68 1,420
Rent and property taxes - airport facility - - - - 8,426
Telephone and utilities 2,041 1,955 1,078 1,516 4,754
Transfer agent, listing and filing fees 1,480 2,636 987 3,279 6,405
Travel, promotion and entertainment - - - - 5,654
9,737 15,208 15,110 24,244 67,601
Loss (gain) on foreign exchange
conversion (1,010) (1,008) 2,781 (2,129) (5,606)
(1,010) (1,008) 2,781 (2,129) (5,606)
Net Loss For The Period $8,727 $14,200 $17,891 $22,115 $61,995
Net Loss Per Common Share (0.0004) (0.0006) (0.0009) (0.0011) (0.0029)
Weighted Average Common Shares
Outstanding 22,898,666 22,898,666 21,022,666 21,022,666 21,586,358
See Accompanying Notes To Financial Statements
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(all figures in US dollars)
Three Months Six Months Three Months Six Months Year Ended
Ended June 30 Ended June 30 Ended June 30 Ended June 30 December 31
2002 2002 2001 2001 2001
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES:
OPERATING
Net loss ($8,727) ($14,200) ($17,891) ($22,115) ($61,995)
Non-cash charge - amortization 3,087 6,174 4,916 9,784 19,154
(5,640) (8,026) (12,975) (12,331) (42,841)
Change in non-cash working capital
balances relating to operations (10,930) (10,930) 105 105 (1,886)
(16,570) (18,956) (12,870) (12,226) (44,727)
FINANCING
Notes and advances payable 17,000 17,000 9,931 9,931 (195)
Issue of capital stock 920 920 - - 44,406
17,920 17,920 9,931 9,931 44,211
NET CASH INFLOW (OUTFLOW) 1,350 (1,036) (2,939) (2,295) (516)
CASH, BEGINNING OF YEAR 2,089 2,089 2,605 2,605 2,605
CASH, END OF PERIOD 3,439 1,053 (334) 310 2,089
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)
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)
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 six months ended
June 30, 2002 - - - - ( 14,200)
Balance, June 30, 2002 22,898,666 $ 22,899 $ 1,696,427 $ - $(1,429,835)
PRIME AIR, INC.
(A Development Stage Company)
Notes To Consolidated Financial Statements
June 30, 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.
The accompanying unaudited condensed consolidated financial statements do not include all of the
information and notes required by accounting principles generally accepted in the United States
of America for complete financial statements and should be read in conjunction with the Company's
consolidated financial statements included in the Annual Report on Form 10-K for the year ended
December 31, 2001, filed with the Securities and Exchange Commission. In the opinion of management,
all adjustments considered necessary for a fair presentation have been included. Operating results
for the three and six-month periods ended June 30, 2002 and 2001 are not necessarily indicative of
the results that may be expected for a full year.
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 future successful operation of
the Company is dependent upon its ability to obtain the financing required to complete and
operationalize the terminal facility in Pemberton, British Columbia and to commence air service
operations to Pemberton, British Columbia and to Mammoth Mountain in California 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.
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 June 30, 2002 had
not materially changed from the December 31, 2001 stated rate.
PRIME AIR, INC.
(A Development Stage Company)
Notes To Consolidated Financial Statements
June 30, 2002 and 2001
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", [GST being an acronym for Goods and Services Tax) , "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.
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
June 30, 2002 and 2001
4. Capital Assets
Capital assets consist of the following at June 30, 2002 and 2001 and December 31, 2001:
June 30, 2002 Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 641,972 $ 126,337 $ 518,522
Furniture and equipment 5,154 3,685 1,418
$ 647,126 $ 130,022 $ 517,104
June 30, 2002 Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 641,972 $ 111,218 $ 530,754
Furniture and equipment 5,154 3,260 1,894
$ 647,126 $ 114,178 $ 532,648
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 9.80% of the issued and outstanding capital of the Company. $17,000
has been advanced to the Company as a deposit towards shares to be subscribed.
PRIME AIR, INC.
(A Development Stage Company)
Notes To Consolidated Financial Statements
June 30, 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
June 30, 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, June 30, 2002 22,898,666 $ 1,719,326
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. Due to the restricted nature of these
shares, the "fair market value" cannot be determined or reasonably estimated.
PRIME AIR, INC.
(A Development Stage Company)
Notes To Consolidated Financial Statements
June 30, 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 options 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).
PART 1
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operation
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.
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.
To the present date, 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. Sufficient funding has
not been secured to provide for costs for completion of certain infrastructure items including landing lights, airside
and groundside related equipment, advance marketing and working capital requirements. Management estimates the
requirement for a commitment of approximately $3,000,000 to provide a satisfactory start up of the British Columbia
operation.
During the quarter ended June 30, 2002, management commenced discussions with principals in the airline industry and
with interested parties at the intended destination with respect to providing air service to the Mammoth Mountain resort
in the Eastern Sierra area of California. Points of origin considered are Burbank and San Jose California. The Company
has identified the need for scheduled air service to this location and in particular believes the capability of the Dash
7 aircraft would be ideal in terms of safety, reliability and cost effectiveness. The Company has not completed its
business plan with respect to this venture, however, it has received support and encouragement from principals
vital to this service. The Company has engaged established airline consultants and is continuing to develop its
business for this purpose.
The results of the operations for the three and six months ended June 30, 2002 show costs at approximately 35%
less than the same period of the previous year, however, because of the "development stage" nature of the company,
those figures may be representative of the continuing nature of the Company on a current basis, but not
representative of the company if it is successful at securing funding for either the Whistler, British Columbia
or the Mammoth Mountain, California components of its intended operation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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 future successful operation of the Company is dependent
upon its ability to obtain the financing required to complete and operationalize the terminal facility in
Pemberton, British Columbia and to commence air service operations to Pemberton, British Columbia and to
Mammoth Mountain in California on an economically viable basis.
The financial statements of the Company 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. Other than a commitment from management to provide
funds for minimal operational requirements, there is no present commitment for funds adequate to provide
for operational items necessary to complete the start up of air service activities.
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
The Company did not file any exhibits during the quarter ended June 30, 2002.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the quarter ended June 30, 2002.
ITEM 7. 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 8. 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 August 1, 2002, status has
not been restored. The Company received a request from the United States Securities and Exchange
Commission on June 30, 2002 consisting of 57 questions with respect to Form 10-K for the year ended
December 31, 2001 and Form 10Q for the quarter ended March 31, 2002 with respect to a review process
which would assist the Company in its compliance with the applicable disclosure requirements and to
enhance the overall disclosure of its filing. As at August 1, 2002, the Company had not completed its
full response to the United States Securities and Exchange Commission in that regard.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PRIME AIR, INC.
By: /s/ Blaine Haug
Name: Blaine Haug
Title: President and CEO,
Dated August 1, 2002
Name Title Date
/s/ Wayne Koch Director(Principal Accounting Officer)
Blaine Haug (Principal Financial Officer) August 1, 2002
18
End of Filing
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