Prime Air 10QSB 2002 Q3 Quarterly report (small business)

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 September 30, 2002

[ ] 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 Sheetsas of September 30, 2002 and 2001 (unaudited) and December 31, 2001 (audited)	3
	Consolidated Statements of Incomefor the Three and Six Months Ended September 30, 2002 and 2001 (unaudited), and year ended December 31, 2001
		4
	Consolidated Statements of Cash Flowsfor the Six Months Ended
	September 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)

			September 30		September 30	December 31
			2002		2001	2001
			(Unaudited)		(Unaudited)	(Audited)
		ASSETS
Current Assets
Cash and short-term deposits			$1,667		$5,211	$2,089
Prepaid expenses			4,241		2,501	1,550
GST recoverable			1,234		630	1,148
			7,142		8,342	4,787

Capital Assets (Note 4)			514,017		528,298	523,278

			$521,159		$536,640	$528,065

		LIABILITIES
Current Liabilities
Accounts payable and accruals			$212,418		$221,191	$210,305
Notes and advances payable (Note 5)			31,989		39,017	14,989
			244,407		260,208	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				(1,442,574)	(1,375,758)	(1,415,635)
				276,752	298,242	302,771

				$521,159	$558,450	$528,065


Approved on Behalf of the Board:
"Blaine Haug"		Director

"Wayne Koch"		Director


		PRIME AIR, INC.
		(A Development Stage Company)
		CONSOLIDATED STATEMENTS OF OPERATIONS
		(all figures in US dollars)



	Three Months	Nine Months	Three Months	Nine Months	Year Ended
	Ended September 30	Ended September 30	Ended September 30	Ended September 30	December 31
	2002	2002	2001	2001	2001
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Audited)

Administrative And General Expenses

Audit and accounting	$972	$2,906	-	-	$6,781
Advertising	-	-	-	-	666
Amortization	3,087	9,261	4,449	14,233	19,154
Association membership fees	-	-	-	-	5,768
Commissions and finders' fees	-	-	-	-	3,261
Consulting	-	920	-	-	400
Insurance	790	2,140	(44)	1,393	2,374
Interest and service charges	56	199	58	155	1,289
Legal costs	-	-	34	6,445	-
Office and general	-	-	8,208	9,860	1,249
Repairs and maintenance	-	93	(2)	66	1,420
Rent and property taxes - airport facility	8,336	8,336	9,101	9,101	8,426
Telephone and utilities	(868)	1,087	1,638	3,154	4,754
Transfer agent, listing and filing fees	615	3,251	1,197	4,476	6,405
Travel, promotion and entertainment	-	-	-	-	5,654
	12,988	28,193	24,639	48,883	67,601
Loss (gain) on foreign
exchange conversion	(246)	(1,254)	(2,830)	(4,959)	(5,606)

	(246)	(1,254)	(2,830)	(4,959)	(5,606)

Net Loss For The Period	$12,742	$26,939	$21,809	$43,924	$61,995



Net Loss Per Common Share	(0.0006)	(0.0012)	(0.0010)	(0.0021)	(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)




	Nine Months	Nine Months	Year Ended
	Ended September 30	Ended September 30	December 31
	2002	2001	2001
	(Unaudited)	(Unaudited)	(Audited)



NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES:

OPERATING
Net loss	($26,939)	($43,924)	($61,995)
Non-cash charge - amortization	9,261	14,233	19,154
	(17,678)	(29,691)	(42,841)

Change in non-cash working capital
balances relating to operations	(664)	105	(1,886)
	(18,342)	(29,586)	(44,727)


FINANCING
Notes and advances payable	17,000	9,931	(195)

Issue of capital stock	920	-	44,406

	17,920	9,931	44,211

NET CASH INFLOW (OUTFLOW)	(422)	(19,655)	(516)

CASH, BEGINNING OF YEAR	2,089	2,605	2,605

CASH, END OF PERIOD	1,667	(17,050)	2,089

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 nine months ended
September 30, 2002		-	-	-	-	( 26,939)

Balance, September 30, 2002

22,898,666

$ 22,899

$ 1,696,427

$ -

$ (1,442,574)

PRIME AIR, INC.

(A Development Stage Company)

Notes To Consolidated Financial Statements

September 30, 2002 and 2001

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 September 30, 2002 and 2001 are not necessarily indicative of the results that may be expected for a full year.

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.

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 September 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

September 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

September 30, 2002 and 2001

4. Capital Assets

Capital assets consist of the following at September 30, 2002 and 2001 and December 31, 2001:

September 30, 2002

Accumulated Net Book

Cost

Amortization Value

Air terminal construction costs

$ 641,972

$ 129,373 $ 512,599

Furniture and equipment

5,154

3,736 1,418

$ 647,126 $ 133,109 $ 514,017

September 30, 2001

Accumulated Net Book

Cost

Amortization Value

Air terminal construction costs

$ 641,972 $ 115,569 $ 526,403

Furniture and equipment

5,154 3,260 1,894

$ 647,126 $ 118,829 $ 528,297

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

September 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

September 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, September 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 consult ing 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

September 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). $8,336 was paid during the current operating period of year 2002.

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 September 30, 2002, management continued 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 nine months ended September 30, 2002 show costs at approximately 39% 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 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 September 30, 2002.

(b) Reports on Form 8-K:

The Company did not file any reports on Form 8-K during the quarter ended September 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 19 93.

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 m onies 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 November 14, 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 November 14, 2002

Name	Title	Date

/s/ Wayne Koch	Director	November 14, 2002
Blaine Haug	(Principal Accounting Officer)
	(Principal Financial Officer)

Prime Air Inactive 10QSB2002 Q3 Quarterly report (small business)