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 PERIOD ENDED June 30, 2006
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 333-88480
PRIME RESOURCE, INC.
(Exact name of registrant as specified in its charter)
Utah 04-3648721
----- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1245 East Brickyard Road, Suite 590
Salt Lake City, Utah 84106
(Address of principal executive officers)
(801) 433-2000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of
the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant has
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [] No
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 126-2 of the Exchange Act). [] Yes [X] No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock: 1,454,090 shares issued and outstanding as of June 30, 2006, No
Par Value. Authorized 50,000,000 common voting shares.
INDEX
Prime Resource, Inc.
For The Quarter Ending June 30, 2006
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet - June 30, 2006 (Unaudited).
Consolidated Statements of Operations (Unaudited) - For the three and six
months ended June 30, 2006, and for the three and six months ended June 30,
2005;
Consolidated Statements of Shareholders' Equity as of June 30, 2006.
Consolidated Statements of Cash Flows (Unaudited) - For the six months
ended June 30, 2006, and for the six months ended June 30, 2005.
Condensed Notes to Consolidated Financial Statements (Unaudited) - June 30,
2006
Item 2. Management's Discussion and Analysis o Financial Condition or Plan of
Operation.
Controls and Procedures
Part II. Other Information
Item 5. Other Matters
Item 6. Exhibits and Reports on Form 8-K
Signatures
Certifications
2
Part I - Financial Information
Item 1. Financial Statements
Prime Resource, Inc. and Subsidiaries
(A Developmental Stage Company)
Consolidated Balance Sheet (Unaudited)
June 30, 2006
ASSETS
Current assets:
Cash and cash equivalents $ 21,464
Due from related party 15,760
---------------------
Total current assets 37,224
---------------------
Investments in non-trading securities 372,268
---------------------
Total assets $ 409,492
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 5,000
Due to related party 2,224
---------------------
Total Current Liabilities 7,224
---------------------
Commitments and Contingencies -
Common stock, no par value, 50,000,000 shares
authorized, 2,972,950 shares issued
and 1,463,623 outstanding 964,802
Treasury stock of 1,509,327 common shares at cost (870,492)
Retained earnings 312,958
Deficit incurred from re-entering the development stage (5,000)
---------------------
Stockholders' Equity 402,268
---------------------
Total Liabilities and Stockholders' Equity $ 409,492
=====================
The accompanying notes are an integral part of these financial statements
3
Prime Resource, Inc. and Subsidiaries
(A Developmental Stage Company)
Consolidated Statements of Operations (Unaudited)
For the Six Months For the Three Months Inception
Ended June 30, Ended June 30, May 1, 2006 to
2006 2005 2006 2005 June 30, 2006
------------- -------------- ------------ ----------- -----------------
REVENUES $ - $ - $ - $ - $ -
------------- -------------- ------------ ----------- -----------------
EXPENSES
General and administrative 45,978 22,500 26,716 6,493 5,000
------------- -------------- ------------ ----------- -----------------
NET LOSS FROM
CONTINUING OPERATIONS (45,978) (22,500) (26,716) (6,493) (5,000)
------------- -------------- ------------ ----------- -----------------
DISCONTINUED OPERATIONS
Revenues 2,592,993 3,531,565 695,711 1,926,489 -
Expenses (2,437,895) (3,435,009) (642,613) (1,863,098) -
Gains and losses, net 115,371 (4,100) 116,383 (2,016) -
Income tax (expense) benefit (101,373) (24,288) (63,913) (19,966) -
------------- -------------- ------------ ----------- -----------------
NET INCOME FROM DISCONTINUED
OPERATIONS 169,096 68,168 105,568 41,409 -
------------- -------------- ------------ ----------- -----------------
NET INCOME FROM CONTINUING
AND DISCONTIUING OPERATIONS $ 123,118 $ 45,668 $ 78,852 $ 34,916 $ (5,000)
============= ============== ============ =========== =================
Basic and fully diluted net income
(loss) per share:
Continuing operations $ (0.02) $ (0.01) $ (0.01) $ - $ -
============= ============== ============ =========== =================
Discontinued operations $ 0.06 $ 0.02 $ 0.04 $ 0.01 $ -
============= ============== ============ =========== =================
Weighted average shares outstanding 2,706,846 2,933,906 2,458,201 2,934,511 1,463,623
============= ============== ============ =========== =================
The accompanying notes are an integral part of these financial statements
4
Prime Resource, Inc. and Subsidiaries
(A Developmental Stage Company)
Consolidated Statement of Stockholders' Equity (Unaudited)
At June 30, 2006
Common Stock Treasury Retained Total
Shares Amount Stock Earnings Equity
------------ --------- ----------- --------- -----------
Balance at December 31, 2004 2,934,000 $ 907,427 $ (77,755) $ 225,263 $ 1,054,935
Common stock issued for compensation 22,950 57,375 - - 57,375
Purchase of treasury stock (1,460) - (8,423) - (8,423)
Net income - - - 75,862 75,862
------------ --------- ----------- --------- -----------
Balance at December 31, 2005 2,955,490 964,802 (86,178) 301,125 1,179,749
Collective redemption of principles' shares (1,491,867) - (784,314) - (784,314)
Dividend to non-principle shareholders - - - (116,285) (116,285)
Net income to April 30, 2006 - - - 128,118 128,118
Deficit incurred from re-entering
development stage - - - (5,000) (5,000)
------------ --------- ----------- --------- -----------
Balance at June 30, 2006 1,463,623 $ 964,802 $ (870,492) $ 307,958 $ 402,268
============ ========= =========== ========= ===========
The accompanying notes are an integral part of these financial statements
5
Prime Resource, Inc. and Subsidiaries
(A Developmental Stage Company)
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Inception
Ended June 30, May 1, 2006 to
2006 2005 June 30, 2006
------------- ----------- ------------------
Cash Flows From Operating Activities:
Net loss from continuing operations $ (45,978) $ (22,500) $ (5,000)
Adjustments to reconcile net loss to net cash
used by operating activities:
Changes in assets and liabilities:
Increase in due from related party (15,760) - (15,760)
Increase in accounts payable 5,000 - 5,000
Increase in due to related party 2,224 - 2,224
------------- ----------- ------------------
Net Cash Used In Operating Activities
From Continuing Operations (54,514) (22,500) (13,536)
------------- ----------- ------------------
Cash Flows From Investing Activities
From Continuing Operations - - -
------------- ----------- ------------------
Cash Flows From Financing Activities
From Continuing Operations - - -
------------- ----------- ------------------
Net Cash Used By Discontinued Operations (510,169) (176,034) -
------------- ----------- ------------------
Net Decrease In Cash
And Cash Equivalents (564,683) (198,534) (13,536)
Cash And Cash Equivalents At Beginning Of
Period 586,147 827,404 35,000
------------- ----------- ------------------
Cash And Cash Equivalents At End Of Period $ 21,464 $ 628,870 $ 21,464
============= =========== ==================
Supplemental Cash Flow Information:
Cash paid for interest $ 1,100 $ 1,913 $ -
Cash paid for taxes $ - $ 24,000 $ -
The accompanying notes are an integral part of these financial statements
6
Prime Resource, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (Unaudited)
June 30, 2006
1. Presentation
The financial statements as of June 30, 2006 and for the three and six months
ended June 30, 2006 and 2005, were prepared by the Company without audit
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to such rules and regulations. In the opinion of management, all necessary
adjustments, which consist primarily of normal recurring adjustments, to the
financial statements have been made to present fairly the financial position and
results of operations and cash flows. The results of operations for the
respective periods presented are not necessarily indicative of the results for
the respective complete years. The Company has previously filed with the SEC an
annual report on Form 10-KSB which included audited financial statements for the
year ended December 31, 2005. It is suggested that the financial statements
contained in this filing be read in conjunction with the statements and notes
thereto contained in the Company's 10-KSB filing.
The financial statements are presented as a consolidation of Prime Resource,
Inc. and its Subsidiaries. The Company redeemed shares from principle
shareholders in exchange for the majority of its assets and liabilities. The
transactions of the reorganized entity have been presented in the consolidated
financial statements from inception on May 1, 2006 through June 30, 2006. The
operations of the distributed subsidiaries have been presented as discontinued
operations in the consolidated financial statements. (See Note 5).
2. Net income per common share
Net income per common share is computed based on the weighted-average number of
common shares and, as appropriate, dilutive common stock equivalents outstanding
during the period. Stock options and warrants are considered to be common stock
equivalents.
Basic net income per common share is the amount of net income for the period
available to each share of common stock outstanding during the reporting period.
Diluted net income per common share is the amount of net income for the period
available to each share of common stock outstanding during the reporting period
and to each share that would have been outstanding assuming the issuance of
common shares for all dilutive potential common shares outstanding during the
period.
No changes in the computation of diluted earnings per share amounts are
presented since no potentially dilutive securities have been granted or issued.
7
Prime Resource, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (Unaudited)
June 30, 2006
3. Income Taxes
Included in the Company's assets, liabilities and operations divested on April
30, 2006 (see Note 5) were all deferred tax assets and liabilities existent at
the time of the divestiture. Accordingly, at June 30, 2006 no deferred tax asset
or liability has been recorded.
4. Related Party
The Company has paid expenses for pre-transaction (see Note 5) business
activities which are due to be received from the former subsidiaries (related
parties), as such liabilities were previously accrued for and transferred to
said related party in the exchange of net assets for shares (see Note 5).
5. Exchange of Shares for Transfer of Net Assets
On April 27, 2006, the Company adopted a proposed plan of reorganization,
whereby the majority of its existing business assets, liabilities and
operations, as presently described, were transferred to its principal
shareholders to be operated by them in a separate private entity. In return, the
Company redeemed 55%, or approximately 1,491,867, of the principal shareholders
issued and outstanding shares in the Company as treasury shares. Pursuant to the
terms of the reorganization, the principal shareholders will continue to hold
approximately 83%, or 1,209,533 shares, of the issued and outstanding shares at
May 1, 2006, totaling 1,463,623.
The reorganization also provided for the pro rata distribution of restricted
shares of a separate entity, owned by the Company at the time of the
reorganization, to the Company's non-principal and non-employee shareholders
(principal shareholders being defined as those holding 10% or more or serving as
officers and directors of the Company, and being the three individual principal
owners). Accordingly, 179,200 shares were distributed to approximately 105
public shareholders and resulted in a realized gain, totaling $116,285, for the
three months ended June 30, 2006.
Finally, the reorganization provided that all common shareholders of the Company
(both principal and public) would receive, pro rata, an additional distribution
of restricted common shares in a non-related entity upon conversion of an
existing promissory note receivable to the promisor's common shares. As of June
30, 2006, the Company had converted the promissory note to common shares and,
accordingly, this investment has been recorded as an investment in non-trading
securities, and totals $372,268. The distribution of these restricted shares has
not occurred to date, and it is anticipated these shares will be distributed
later in 2006, though no warranty or promise of this fact can be made.
The foregoing proposals and Plan were noticed and presented before a special
shareholders meeting held April 27, 2006 and approved by a majority shareholder
vote. Because the distribution of the Company's assets in exchange for stock was
not reached through an arms-length bargaining procedure, but was essentially
formulated by the principal shareholders of the Company, the management of the
Company deemed that the
8
Prime Resource, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (Unaudited)
June 30, 2006
5. Exchange of Shares for Transfer of Net Assets (continued
proposal would only be accepted if approved by a majority vote of the
disinterested or public shareholders. As these proposals for reorganization and
distribution of the assets were approved by a majority of the disinterested
shareholders, the principal shareholders then voted their shares in favor of
this position creating an absolute majority vote.
In essential terms, the shareholder meeting held on April 27, 2006, constituted
a reorganization of the Company as a public company without any operating assets
or business, but without liabilities or obligations. Present management will
continue in its positions, but with a lesser commitment of time and effort due
to a lack of any ongoing business activity within the Company. Management has,
however, made a commitment to continue to actively search for merger or
acquisition candidates and believes, but cannot warrant, that such acquisitions
may be more readily attainable based upon their prior experience without the
former assets and business in the Company. Moreover, it was the judgment of
management that the Company's assets had come to a point where they were
essentially creating a break-even business endeavor without the realistic
prospects of growth and enhancement to the Company.
The revenues, expenses, gains and losses and tax expense and benefit of the
discontinued operations are reported on the statements of operations. Assets and
liabilities of the Company's former segments -- Fringe Benefit Analysts and
Belsen Getty were exchanged on April 30, 2006. The asset value at the time of
the exchange for Fringe Benefit Analysts, Belsen Getty and Prime Resource were
approximately $525,305, $414,895 and $924,332, respectively. The liabilities at
the time of the exchange for Fringe Benefit Analysts , Belsen Getty and Prime
Resource were approximately $435,275, $96,248 and $79,761, respectively.
The decision to enter into the reorganization and to divest the company of its
prior operating subsidiaries, Belsen Getty, LCC and Fringe Benefits Analyst,
LLC, which were engaged in the insurance, retirement fund planning and
investment services were based upon the following decisions and criteria by
management:
1. The nature of the business and structure of the
operating subsidiaries did not appear to management to
lend itself significantly to growth as a public company, and the
company was unsuccessful in its earlier efforts to grow and expand the
insurance subsidiary through use of offering proceeds.
2. Experience in discussing merger and acquisition
possibilities with various third party candidates
indicated to management of Prime that the company would be more
successful in consummating this type of merger or acquisition absent
the operating entities previously existing in Prime.
3. The prior insurance services and consulting wer
not generating significant revenues or income
enhancing the value of the company's shares and management believed
shareholder value might be more substantially increased by decreasing
the number of outstanding shares held by management by 55%,
distributing other publicly traded restricted stock now and in the
future, as described above, and searching for a suitable merger or
acquisition candidate to enhance the value of the company as a public
entity.
9
Item 2. Management's Discussion and Analysis of Financial Condition or Plan of
Operation Forward-Looking Information
Certain statements in this Section and elsewhere in this report are
forward-looking in nature and relate to trends and events that may affect the
Company's future financial position and operating results. Forward Looking
Statements are defined within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. The terms
"expect," "anticipate," "intend," and "project" and similar words or expressions
are intended to identify forward-looking statements. These statements speak only
as of the date of this report. The statements are based on current expectations,
are inherently uncertain, are subject to risks, and should be viewed with
caution. Actual results from experience may differ materially from the
forward-looking statements as a result of many factors, including changes in
economic conditions in the markets served by the Company, increasing
competition, fluctuations in prices and demand, and other unanticipated events
and conditions. It is not possible to foresee or identify all such factors. The
Company makes no commitment to update any forward-looking statement or to
disclose any facts, events, or circumstances after the date hereof that may
affect the accuracy of any forward-looking statement.
Plan of Operation
Prime Resource, Inc. ("Prime") is a Utah Corporation which was organized and
filed of record on March 29, 2002 as a successor entity to Prime, LLC, (a Utah
limited liability company). Prime was an integrated business entity primarily
engaged in group insurance brokerage as well as investment and pension
consulting. It previously conducted all of its business activities through its
wholly owned subsidiaries: Belsen Getty, LLC ("Belsen Getty") and Fringe Benefit
Analysts, LLC ("FBA").
Prime completed a public offering of its shares in July 2002. It raised $709,664
in net proceeds, all of which were expended, as previously reported, by
September 2005.
AS OF APRIL 30, 2006, ALL ASSETS (OTHER THAN APPROXIMATELY $35,000 OF CASH OR
LIQUID ASSETS FOR ONGOING REPORTING FEES AND OPERATING EXPENSES AND LIGHTSPACE
STOCK IN THE AMOUNT OF $372,268), LIABILITIES AND BUSINESS INTEREST OF PRIME
WERE TRANSFERRED TO A PRIVATE BUSINESS ENTITY CONTROLLED BY THE PRIME PRINCIPAL
SHAREHOLDERS FOR A REDUCTION OF THEIR PRIME SHARES BY 55% AND OTHER
CONSIDERATION PURSUANT TO A MAJORITY SHAREHOLDER VOTE. THIS DISCLOSURE IS MORE
PARTICULARLY DISCUSSED BELOW.
On April 11, 2006, the shareholders of Prime Resources, Inc. were mailed an
information packet for a special meeting of shareholders to be held April 27,
2006 indicating the intent of Prime to enter into a plan of reorganization
whereby all of the business and working assets would be transferred out to a
private company to be known as Prime Advisors, LLC, Utah limited liability in
exchange for a reduction of the principal shareholders' interest by 55% in the
public company, the distribution of certain restricted shares of Bioaccelerate,
Inc. to the non-principal shareholders and the agreement to distribute out
subsequently, LightSpace, Inc. shares as converted and registered from existing
convertible LightSpace debentures. The special shareholder meeting required
majority approval by the public non-controlling shareholders. To date, the
business and business assets have been transferred to Prime Advisors and the
Bioaccelerate shares distributed to the non-affiliated shareholders. There has
been a conversion of the LightSpace Notes to Equity Units pursuant
10
to the anticipated IPO. This occurred on or about April 28, 2006. Therefore the
notes are no longer accruing interest as of that date. These equity units, upon
an effective registration statement by the LightSpace, will be converted into
common shares and warrants and will be distributed pro-rata to all shareholders.
Each shareholder of record was entitled to vote on the foregoing reorganization
proposals at a special meeting held April 27, 2006, but approval first required
a majority vote of the public non-affiliated shareholders. Each shareholder was
further afforded the opportunity to dissent from the transaction and to exercise
separate dissenting shareholder rights under Utah law as detailed in a
dissenting shareholder rights package and proxy material mailed to all
shareholders of record.
As of the date of the meeting on April 27, 2006, there were 139,595 shares held
by disinterested shareholders voting in favor or 57 %; none voted in opposition
and 250 shares abstained; with one shareholder not voting and wishing to
exercise dissenting shareholder rights for 9,533 shares. After the public
non-affiliated vote was taken, the affiliated shareholders (Mr. Terry Deru, Mr.
Scott Deru and Mr. Andrew Limpert) then voted in favor of the reorganization
ensuring an absolute majority of 2,840,995 shares or 96.1%.
As a result of the reorganization, assigning a value of $372,268 to the
conversion rights of the LightSpace convertible debentures described above,
there remains approximately $402,268 in net assets in the public company. The
cash was retained for purposes of paying for ongoing reporting, accounting and
legal costs, as well as funds necessary for reviewing and completing due
diligence on various merger or acquisition proposals as are anticipated by the
company.
At the present time, Prime remains what is essentially known as a "shell"
corporation in that it does not have any active business purpose or active
business assets. Management of the company, on a time available basis and
primarily through Mr. Andrew Limpert, has continued to search for, review and
complete due diligence on various potential merger or acquisition proposals for
which management would deem that the company would be a suitable acquisition
candidate. To the date of this report, no such acquisition or merger proposal
has been accepted.
Any definitive merger or acquisition proposal as approved by the Board of
Directors would be announced pursuant to a public 8-K filing - the substance of
which management would intend to disseminate to its public shareholders in such
event. It is also possible that any such subsequent reorganization may require
shareholder vote and approval which would then result in the dissemination of a
proxy statement along with further dissenting shareholder rights provisions.
However, no warranty or assurance that all potential forms of reorganization
would necessarily require shareholder vote and approval is made or implied to
public shareholders of Prime.
The decision to enter into the reorganization and to divest the company of its
prior operating subsidiaries, Belsen Getty, LCC and Fringe Benefits Analyst,
LLC, which were engaged in the insurance, retirement fund planning and
investment services were based upon the following decisions and criteria by
management:
1. The nature of the business and structure of the operating subsidiaries did
not appear to management to lend itself significantly to growth as a public
company, and the company was unsuccessful in its earlier efforts to grow
and expand the insurance subsidiary through use of offering proceeds.
11
2. Experience in discussing merger and acquisition possibilities with various
third party candidates indicated to management of Prime that the company
would be more successful in consummating this type of merger or acquisition
absent the operating entities previously existing in Prime.
3. The prior insurance services and consulting wer not generating significant
revenues or income enhancing the value of the company's shares and
management believed shareholder value might be more substantially increased
by decreasing the number of outstanding shares held by management by 55%,
distributing other publicly traded restricted stock now and in the future,
as described above, and searching for a suitable merger or acquisition
candidate to enhance the value of the company as a public entity.
For historical and comparative purposes, the company repeats its prior 10-QSB
income statement that the company had for the first quarter of 2006 and with
comparable disclosure for the six months ending June 30, 2006 and 2005,
respectively, to illustrate the change of financial condition after divestment
of its income producing assets on April 27, 2006:
Totals: 1st Quarter 2006 1st Six Mo. 2006 1st Six Mo. 2005
Gross revenues $ 1,897,282 $ 2,592,993 $ 3,531,565
Gains, losses and expenses $ 1,815,556 $ 2,373,502 $ 3,461,609
Net income before income taxes $ 81,726 $ 219,491 $ 69,956
Income taxes $ 37,460 $ 36,220 $ 24,288
Net Income $ 44,266 $ 183,271 $ 45,668
As of the end of the current quarter, June 30, 2006, the Prime balance sheet
indicates a minimum net worth of $409,492 due to the divestment. As of this
period, Prime had current liabilities of $7,224, accrued since the divestment,
with no accumulated corporate debt.
Products and Markets
With the transfer of its active business assets to an unrelated private entity,
Prime currently has no active business products or markets. At the present time,
management is engaged on a best-efforts, time available basis, in searching out
potential merger and acquisition candidates. It is hoped the acquisition of a
proper merger or acquisition candidate will yield additional value to public
shareholders in the entity. No warranty or assurance, however, of future results
can be made or is implied by this representation.
The company will obviously continue to incur ongoing operating losses, which
will hopefully be somewhat limited due to the substantially inactive nature of
the company's business. However, losses will be incurred in paying ongoing
reporting expenses, including legal and accounting, as necessary to maintain the
company as a public entity, as well as ongoing costs, while searching for merger
and acquisition candidates. As noted previously, Prime retained post divestment
an initial $35,000 of reserve funds for this purpose. The company also has no
salary commitment.
12
Liquidity and Sources of Capital
The liquidity of the company is extremely limited at the present time, as it
only has approximately $21,000 reserve fund to pay for ongoing reporting and
minimal operating expenses as previously described. There is no exact projection
of how long the company can remain viable without having to seek additional
borrowing or interim financing to maintain itself as an inactive public company.
Further, at the present time, there are no alternative sources of capital or
revenue for the company during this interim period.
Prime has no present avenues of financing and no present plans to obtain interim
financing while continuing its search for a suitable merger or acquisition
candidate and arrangements. Should there come a point in time when the company
has exhausted its reserve funds and must seek additional funding to maintain
itself as a public reporting company engaged in searching for merger and
acquisition opportunities, it may be necessary to seek private capital through
the sale of additional restricted stock or borrowing either from principal
shareholders or private parties. It does not appear probable that Prime would be
able to attain financing from any commercial lending source, as it is presently
constituted.
As a result of the foregoing, the future liquidity of the company and funding
sources must be considered as tentative and very limited and pose a substantial
risk factor to the ongoing viability of Prime. In point of fact as an inactive
entity, the independent auditors for Prime will most likely express a
reservation that the company can continue as a going concern in completing any
audited or review financial statements for Prime. At present, the company has no
known or fixed means of alternative or subsequent financing.
Relevant Markets
There is no relevant market data for the company in its present inactive status.
Significant Events
As noted in the Company's annual report filed for the period ending December 31,
2005, Prime adopted in the fourth quarter of 2005 a proposed strategic plan,
subject to approval by the disinterested public shareholders, to distribute out
all of its existing business assets, liabilities and operations, as presently
described, to its principal shareholders to be operated by them in a separate
private business in return and exchange, the principal shareholders agreed to
reduce their Prime shares by cancellation and returning these shares to the
Company as Treasury Shares. This return, as approved, reduced their holding by
55% or approximately 1,491,867 total shares. The principal shareholders Mr.
Terry Deru, Mr. Scott Deru and Mr. Andrew Limpert continue to hold approximately
83 % of the issued shares or 1,209,533 shares of the total issued and
outstanding 1,463,623 shares as of June 30, 2006.
The plan also provided for the distribution of restricted Bioaccelerate shares
to the non-principal and non employee grant shareholders (principal shareholders
being defined as those holding 10% or more or serving as officers and directors
of the Company and being the three individual principal owners). These 179,200
Bioaccelerate shares were distributed to approximately 105 public shareholders.
Finally, the plan provided that all common shareholders of the Company (both
principal and public) would receive, pro rata, a subsequent distribution of the
LightSpace shares when and if received from the conversion
13
of the LightSpace convertible equity units presently held by the Company. It is
anticipated these shares will be registered subject later in 2006, though no
warranty or promise of this fact can be made.
The foregoing proposals and Plan were noticed and presented before a special
shareholders meeting held on April 27, 2006 and approved by a majority
shareholder vote at such meeting. Because the distribution of the Company's
assets in exchange for stock was not reached through an arms-length bargaining
procedure, but was essentially formulated by the principal shareholders of the
Company, the management of the Company deemed that the proposal would only be
accepted if approved by a majority vote of the disinterested or public
shareholders. As these proposals for reorganization and distribution of the
assets were approved by a majority of the disinterested shareholders, the
principal shareholders then voted their shares in favor of this position
creating an absolute majority vote.
In essential terms, the shareholder meeting on April 27th constituted a
reorganization of the Company to a public Company without any assets or
operating business, but without liabilities or obligations. Present management
will continue in their positions, but also with a lesser commitment of time and
effort due to a lack of any ongoing business activity within Prime. Management,
primarily through Mr. Limpert, has, however, made a commitment to continue to
actively search for merger or acquisition candidates and believes, but cannot
warrant, that such acquisitions may be more readily attainable based upon their
prior experience without the former Prime assets and business being in the
Company. Moreover, it was the judgment of management that the Prime assets had
come to a point where they were essentially creating a break-even business
endeavor without the realistic prospects of growth and enhancement to the
Company.
In essential terms, then, the results of the reorganization approved by the
non-affiliated public shareholders of the Company, including various collateral
items, are summarized as follows:
1. The shareholders ratified the proposed plan to transfer all existing
assets (except for $35,000 in working capital) liabilities and business of Prime
to a new separate, private Utah limited liability company to be known as Prime
Advisors, LLC and to be operated and controlled by the existing management of
the Prime public corporation.
2. In exchange for the completion of the reorganization, the Prime
principal shareholders contributed to the Company, as treasury shares, 55% of
their outstanding shares constituting 1,491,867 shares. The principal
shareholders now hold 1,209,533 shares or 83% and the public shareholders, as a
group, hold approximately 244,557 shares or 17%.
3. As part of the proposal, as approved, the public shareholders received a
distribution of a majority of the Bioaccelerate ( now known as Gardant
Pharmaceuticals) shares presently held by the Company which total 339,500
shares. As a result there were distributed 179,200 shares of Bioaccelerate stock
to approximately 105 Prime public shareholders. The balance of the 160,300
Bioaccelerate shares or 47% were retained in the private business.
4. The meeting also authorized the distribution of future LightSpace shares
and warrants which are being held by the Company and will be distributed
accordingly. It is anticipated there will be approximately 465,000 LightSpace
shares distributed to approximately 108 shareholders, which includes the three
principal shareholders.
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5. The current Board of Directors was re-elected to serve for another
annual term at the special meeting. As noted above, the directors and officers
will devote substantially less time to daily operations. As Prime is now a non-
operating Company, the officers will continue to devote only such time as they
deem necessary to finding suitable merger or acquisition candidates for Prime.
6. The shareholders also ratified the appointment of Child, VanWagoner &
Bradshaw, PLLC to act as the independent auditors for the Company for the year
ending December 31, 2006.
Item 3. Risk Factors
Prime has employed this section to discuss what it considers present and actual
risk factors to the ongoing viability of Prime:
1. There is no assurance that the company can continue as an inactive
public reporting entity. Prime may not be able to sustain itself and pay the
required accounting, auditing or other reporting costs necessary to continue as
a public entity for the indefinite future. Further, there is no assurance or
warranty that additional interim funding can be obtained to maintain the company
as a public entity after its reserve funds are exhausted.
2. Future regulations by various state or federal securities agencies, such
as the State of Utah, Division of Securities or the Securities and Exchange
Commission (SEC) could make it difficult or impossible for the company to
continue as an inactive public company through adoption of various
administrative regulations and filing requirements which would make it
impossible or very difficult for the company to continue as a non-operating
public company.
3. Only minimal management, time and expertise is being devoted to the
operation of the company now that it is inactive. Most initial reviews of merger
and acquisition opportunities are being completed through Mr. Andrew Limpert,
who has committed to devote his best efforts to search out and attempt to locate
various merger or acquisition candidates or proposals for the company. There is
no assurance or warranty that Mr. Limpert, or other members of the Board of
Directors, will be successful in ongoing efforts to find a merger or acquisition
candidate or situation.
4. Any completion of a merger or acquisition agreement would be approved by
the existing controlling shareholders who still continue, even after their
recent reduction in shares, to hold a majority position in the company. Further,
it is almost certain that existing shareholders will incur a significant and
extreme dilution to their aggregate shareholder percentage such that they would
most likely hold 5% to 10% of the issued and outstanding shares as a result of
any merger or acquisition transaction.
5. Any completed merger or acquisition would almost certainly result in new
management being appointed to control the company and a new business activity
being selected over which the existing shareholders would essentially have no
control or meaningful voice, other than the potential exercise of dissenting
shareholder rights under Utah law under certain circumstances, but even then not
under all merger or acquisition structures.
6. The company will have no ongoing revenues or income to support it during
this interim period.
7. There is no assurance that Prime's shares will continue to trade, or
trade at historical levels, absent any active business purpose or assets.
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Item 4. Controls and Procedures
(a) Prime has maintained controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
prescribed by the Securities and Exchange Commission. Based upon their
evaluation of those controls and procedures performed within 90 days of the
filing date of this report, the chief executive officer and the principal
financial officer of the Company concluded that the Company's disclosure
controls and procedures were adequate for its present activities. The Company
knows of no fraudulent activities within the Company or any material accounting
irregularities. The Company does not have an independent audit committee and
does not believe it is required to have an audit committee at this time.
(b) Changes in internal controls. The Company made no significant changes
in its internal controls since complying with an SEC request to restate its
financials and revise controls in the third quarter of 2005. The Company as of
the first quarter of 2004 obtained a listing of its stock on the National
Association of Securities Dealers ("NASD") sponsored Electronic Bulletin Board,
but does not view such listing as requiring a change in its accounting or
auditing practices at the present time.
(c) Prime is aware of the general standards and requirements of the recent
Sarbanes-Oxley Act of 2002 and has implemented procedures and rules to comply,
so far as applicable, such as a prohibition on Company loans to management and
affiliates. The Company does not have any audit committee as it does not believe
the act requires a separate committee for companies that are reporting
companies, but not registered under the Securities and Exchange Act of 1934
[15(d) companies] and whose shares trade only on the Electronic Bulletin Board.
Part II - Other Information
Item 5. Other Matters
(1) Auditors. Child, VanWagoner & Bradshaw, LLC of Kaysville, Utah will
continue, subject to Board discretion, as the Company's new independent
auditors. The auditors were appointed in August, 2003 and have been reappointed
to serve through 2006. The Company has no differences of opinion with its prior
or current auditors.
(2) Trading. The Company trades on the Electronic Bulletin Board under
the symbol "PRRO". The Electronic Bulletin Board is essentially an informal
trading mechanism managed by the National Association of Securities Dealers, but
does not constitute a regular NASDAQ exchange or listing. It is, essentially, an
electronic intra-dealer quotation system for small public companies not meeting
the requirements for regular NASDAQ listing. During the second quarter of 2006
the trading range of the Company's stock was as follows:
High Low
------ ---------
$ 1.25 $ 1.25
No assurance is given or implied that the company's stock will continue to trade
in this range absent an active business purpose.
(4) Annual Meeting. The Company held its last annual meeting of
shareholders on April 27, 2006, wherein the above described reorganization was
approved, the nominated directors were re-elected and the choice of independent
auditors was ratified by majority shareholder vote. No additional shareholder
meetings are scheduled in 2006.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31.1 Certification under Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification under Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification under Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. SECTION 1350)
(b) Reports on Form 8-K dated May 2, 2006 outlining
reorganization previously filed.
(c) Other Exhibits - Copy of Proxy Solicitation for Special
Meeting held April 27, 2006 - previously filed
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: August 14, 2006 By:/s/ Terry M. Deru
Mr. Terry M. Deru
President, Director
Date: August 14, 2006 By:/s/ Andrew W. Limpert
Mr. Andrew W. Limpert
Director, Treasurer/CFO
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