UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: June 30, 2007
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________ to _______
Commission file number: 033-09472-D
E'PRIME AEROSPACE CORPORATION
- --------------------------------------------------------------------------------
(Name of small business issuer in its charter)
Colorado 59-2802081
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7637 Leesburg Pike #200, Falls Church, VA 22043
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (321) 269 - 0900
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock - No
Par Value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [_] No [X]
The issuer had zero ($0.00) revenues for its most recent fiscal year.
As of June 30, 2007, the registrant has outstanding 56,029,831 shares of common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Form 8K filed 8/25/06 and 3/9/2007 to respectively report the change of control
of voting stock, the resignation of Directors, election of a new Chairman and
Directors and Officers and removal and replacement of Directors are incorporated
by reference into Part II of this Quarterly Report on Form 10 QSB.
Transitional Small Business Disclosure Format (Check one): Yes [_] No [X]
E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Index to Quarterly Report on Form 10QSB
Page
PART I FINANCIAL INFORMATION
Item 1. Unaudited Condensed Financial Statements
Balance Sheet as of June 30, 2007 and June 30, 2006 4
Income Statement for the three and nine months ended
June 30, 2007 and June 30, 2006 5
Statement of Cash Flow for the nine months ended
June 30, 2007 and June 30, 2006 6
Notes to unaudited condensed financial statements 7
Item 2. Management discussion and analysis of Financial Condition
and Results of Operations 9
Item 3. Controls and Procedures 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES ` 11
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
The consolidated financial statements of E'Prime Aerospace Corporation and
subsidiaries (collectively, the Company), included herein were prepared, without
audit, pursuant to rules and regulations of the Securities and Exchange
Commission. Because certain information and notes normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America were condensed or omitted pursuant to such rules
and regulations, these financial statements should be read in conjunction with
the financial statements and notes thereto included in the audited financial
statements of the Company as included in the Company's Form 10-KSB for the year
ended September, 30, 2006.
E'PRIME AEROSPACE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED BALANCE SHEET
FOR THE PERIOD ENDED June 30, 2007
Period Period
Ended Ended
6/30/07 6/30/06
---------------- ----------------
ASSETS
Property & Equipment (net) $ 1,000 $ 1,000
---------------- ----------------
Total Assets $ 1,000 $ 1,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable $ 232,000 $ 232,000
Accounts payable 3,715 0
Judgement payable 158,971 157,598
Accrued salaries and payroll taxes 1,987,109 1,965,712
Accrued interest 439,553 410,306
Accrued rent (1,344) 276,000
Accrued officers' salaries 5,128,619 4,981,580
Accrued consulting fees 273,975 0
Due to related parties 1,281,094 1,040,969
---------------- ----------------
Total Current Liabilities $ 9,503,691 $ 9,064,165
Commitments and contingencies
Stockholders' Equity/(Deficit)
Common Stock (900,000,000 shares authorized, no par
value, 56,029,831 and 41,329,770 shares issued
and outstanding as of 06/30/2007 and 06/30/2006) 12,593,362 12,019,911
Additional paid-in capital 212,000 212,000
Deficit accumulated during the development stage (22,308,053) (21,295,076)
---------------- ----------------
Total Stockholders' Deficit $ (9,502,691) $ (9,063,165)
---------------- ----------------
Total Liabilities and Stockholders' Deficit $ 1,000 $ 1,000
================ ================
The accompanying notes are an integral part of these financial statements.
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E'PRIME AEROSPACE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED INCOME STATEMENT
FOR THE THREE/NINE MONTHS ENDED JUNE 30, 2007
Cumulative for
the
period from
Three Months Three Months Nine Months Nine Months February 20, 1986
Ended Ended Ended Ended (inception) to
6/30/07 6/30/06 6/30/07 6/30/06 June 30, 2007
------------- ------------ ----------- ----------- -----------------
Service revenues $ 0 $ 0 $ 0 $ 0 $ 5,000
------------- ------------ ----------- ----------- -----------------
Total revenues $ 0 $ 0 $ 0 $ 0 $ 5,000
Expenses
Officers Salaries 25,000 137,500 64,000 412,500 6,879,725
Depreciation 0 0 0 0 199,807
Interest expense 25,342 10,034 44,973 30,101 1,976,782
General and administrative 506,248 21,198 726,473 66,369 12,319,346
Impairment of fixed assets 0 0 0 0 232,654
Write off of receivable from
affiliate 0 0 0 0 1,495,523
Debt forgiveness 0 0 0 0 (790,785)
------------- ------------ ----------- ----------- -----------------
Total expenses $ 556,589 $ 168,732 $ 835,446 $ 508,970 $ 22,313,052
------------- ------------ ----------- ----------- -----------------
Net loss $ (556,589) $ (168,732) $ (835,446) $ (508,970) $ (22,308,052)
============= ============ =========== =========== =================
Basic & Diluted Loss
per common share (0.010) (0) (0.0150) (0)
Weighted average shares
outstanding 55,289,623 41,329,293 55,289,623 41,329,293
============= ============ =========== ===========
The accompanying notes are an integral part of these financial statements.
5
E'PRIME AEROSPACE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2007
Cumulative for the
period from
Nine Months Nine Months February 20, 1986
Ended Ended (inception) to
6/30/07 6/30/06 June 30, 2007
------------ ----------- -------------------
Operating Activities
Net loss $ (835,446) $ (508,970) $ (22,308,052)
Adjustments to reconcile net loss to net cash
(used) by operating activities:
Depreciation and amortization 0 0 199,807
Loss on disposition of vehicles and equipment 0 0 32,683
Loss on sale of asset held for sale 0 0 14,000
Write-off of amount due from affiliate 0 0 232,654
Write-off of Accrued expenses 0 0 39,021
Impairment of Fixed assests 0 0 (711,333)
Debt Forgiveness 0 0 (825,785)
Shares issued for services rendered 573,451 1,000 3,885,661
Shares issued for interest and finance fee 0 0 1,948,070
Shares issued for settlement of litigation 0 0 1,115,023
Changes in operating assets and liabilities:
Accrued consulting fees 0 0 123,866
Due to related parties 0 0 3,817,481
Accrued salaries-officers 64,000 412,500 2,289,554
Accounts payable 243,726 0 645,142
Accrued salaries, wages and payroll taxes 19,200 8,062 2,083,057
Judgements payable 0 4,072 21,804
Accrued interest payable 19,631 26,028 1,411,213
Accrued expenses 0 0 783,332
Accrued rent (286,344 27,000 (1,344)
------------ ----------- -------------------
Net cash (used) by operating activities $ (201,783) $ (30,308) $ (5,204,147)
Investing Activities
Equipment acquisitions 0 0 (493,908)
Proceeds from disposition of vehicles 0 0 30,307
Proceeds from sale of asset held for sale 0 0 46,000
Increase in asset held for sale 0 0 (60,000)
Advances to affiliate 0 0 (39,021)
Organization costs 0 0 (2,544)
------------ ----------- -------------------
Net cash (used) by investing activities $ 0 $ 0 $ (519,166)
Financing Activities
Proceeds from issuance of notes payable 0 0 2,156,683
Advances from shareholders and others 201,783 30,308 1,548,875
Repayment of notes payable 0 0 (1,206,954)
Proceeds from Exercise of Warrants 0 0 340,765
Additional paid-in capital 0 0 212,000
Proceeds from issuance of common stock 0 0 2,671,944
------------ ----------- -------------------
Net cash provided by financing activities $ 201,783 $ 30,308 $ 5,723,313
(Decrease) in cash 0 0 0
Cash at beginning of period 0 0 0
------------ ----------- -------------------
Cash at end of period $ 0 $ 0 $ 0
The accompanying notes are an integral part of these financial statements.
6
E'PRIME AEROSPACE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND OPERATIONS
E'Prime Aerospace Corporation (the Company or EPAC) has been in the development
stage since its incorporation in Florida on February 20, 1986. The Company is
engaged in seeking to provide a reliable and comprehensive payload and satellite
launching service to industry and government, both domestic and foreign.
On October 12, 1987, the Company was acquired by E'Prime Aerospace Corporation
(Colorado), formerly known as Bangor Investments, Inc., in a business
combination accounted for as a reverse acquisition. Technically, E'Prime
Aerospace Corporation (Colorado) (E'Prime - Colorado) issued 24,840,000 of its
share for the Company. Prior to the combination, E'Prime - Colorado had
30,200,000 shares outstanding of which 17,700,000 shares had been issued to its
organizer for $14,500 and 12,500,000 shares had been issued in a public
offering. The proceeds of the public offering, net of cost of the offering, were
$202,267. During the period, E'Prime - Colorado was in existence prior to the
reverse acquisition, its only activity was to raise equity capital for the
purpose of acquiring other entities and it had incurred a deficit of $15,631.
Thus, at the date of the reverse acquisition, E'Prime - Colorado had net assets
of $201,136. For accounting purposes, the reverse acquisition is reflected as if
the Company issued its stock (30,200,000 shares) for net assets of E'Prime -
Colorado. The net assets of E'Prime were not adjusted in connection with the
reverse acquisition since they were monetary in nature and principally consisted
of a loan to the Company.
On July 1, 1992, the Company formed E'Prime Aerospace Corporation of Delaware a
non-operating subsidiary.
Going Concern
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has suffered
recurring losses from operations, has incurred significant acquisition and
operating debt, which is in default, and has a net capital deficiency, which
raises substantial doubt about its ability to continue as a going concern.
Management intends to seek equity and/or debt financing in the form of a private
placement or a public offering to provide additional equity capital. Such
additional financing may not be available to the Company, when and if needed, or
on acceptable terms if at all.
The ability of the Company to continue as a going concern is dependent on the
success of these actions. The consolidated financial statements do not include
any adjustments that might be necessary if the company is unable to continue as
a going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financials include the accounts of the Company and its wholly
owned subsidiaries. All significant intercompany transactions and balances have
been eliminated in consolidation.
7
E'PRIME AEROSPACE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued
Income Taxes
The Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statements carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The
deferred tax assets resulting principally from operating losses have not been
recognized.
Loss Per Share
Basic and diluted net loss per common shares has been calculated based upon the
weighted average number of common shares outstanding.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles 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 period.
Accordingly, actual results could differ from those estimates.
Common Stock issued for Services or Payment of Debt
Common stock issued for services or in payment of debt is recorded at the
estimated value of the stock at the dates of issuance based upon reported market
prices or the value of the services.
Recent Accounting Pronouncements
The adoption of recent accounting pronouncements by the Company did not have an
impact on its consolidated results of operations, financial position or cash
flows.
Common Stock
As of September 30, 2005, the Company had outstanding Series B warrants that
entitle the holder to purchase one share of common stock at $0.20 per share on
or at any time before March 31, 2006. In December 2005 the Board of Directors
extended the B warrant expiration date to March 31, 2007. In December 2006 the
Board of Directors voted not to extend the expiration of the B warrants.
In May 2007, the Company issued 4,320,000 shares of Common Stock to Oldham Crane
& Rigging as payment for $216,000 of past due rent expense. In June 2007, the
Company issued an additional 2,600,000 shares of Common stock To Oldham Crane
and Rigging as payment for $99,000 of past due rent expense and $31,000 of past
due note payments. In June 2007, the Company also issued 7,790,000 shares of
common stock to eleven individuals for professional, accounting and legal
services due in the amount of $227,451.
Additional Notes to Consolidated Financial Statements are essentially the same
as those stated in the Company's 10KSB for the year ended September 30, 2006.
8
ITEM 2. Management's Discussion and Analysis.
Liquidity and Capital Resources
Over the past several years, the Company has expended substantial funds in
the development of its business. Sources of capital during this time have
included stock sales, advances from shareholders and short term funding. As of
June 30, 2007, the Company has a working capital deficit of $9,503,691.
In order to complete its development and reach full operational capability
and, in order to satisfy existing liabilities, the Company will need to obtain
substantial additional capital. Management is currently engaged in negotiations
to secure the necessary funds to complete implementation of its launch
technology, repay existing liabilities and fund facility construction.
Results of Operations
Since its inception, the Company has been in the development stage.
Accordingly, the Company has not generated any revenues from operations and has
not projected significant revenues until its development stage is completed and
financing can be obtained for its operations. Through the quarter ended June 30,
2007, the Company has incurred an accumulated deficit of $22,308,053.
Subsequent events
On March 9, 2007 the Board of Directors removed Bob Davis as a Director.
This action was taken by the Board as a result of an independent review of the
activities of certain Officers and Directors. The investigation showed that
certain Officers and Directors claimed ownership and control of numerous
companies including USTM, Inc., Space Plane Systems, Inc. and E'Prime
Development, Inc. that were in direct competition with E'Prime. The report
further revealed that E'Prime resources and assets were utilized to support
these ventures. These actions were undertaken without disclosure to either the
public or E'Prime's auditors and in violation of SEC regulations governing
actions of related parties. As a result of these findings, the company will be
contesting certain amounts claimed as accrued salary and loans due to Bob and
Betty Davis.
ITEM 3. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer, our
CEO, and Chief Financial Officer, our CFO, evaluated the effectiveness of our
disclosure controls and procedures as defined by Items 307 of Regulation S-B (17
CFR 228.307) and 308 of Regulation S-B (17 CFR 228.308) under the Securities and
Exchange Act as of June 30, 2006. Based on its evaluation, our CEO and CFO
concluded that, as of June 30, 2007, our disclosure controls and procedures were
(1) designed to ensure that material information relating to us is made known to
our CEO and CFO by others within the Company, particularly during the period in
which this report was being prepared and (2) effective, in that they provide
reasonable assurance that information required to be disclosed by us in reports
that we file or submit under the Securities and Exchange Act is recorded,
processed, summarized, and reported with in the time periods specified in the
Securities and Exchange Commission's rules and forms. On August 21, 2006, Doug
9
Oldham was appointed Chairman, President and Chief Executive Officer of E'Prime
Aerospace Corporation while Jean Oldham was appointed as Director and interim
Secretary. Effective August 21, 2006, Bob Davis, then-Chairman , Chief Executive
Officer and President, while remaining as a Director,resigned as Chairman, CEO
and President, Betty Davis resigned as Director, Secretary and Treasurer and
Richard Elrod resigned as Director. As a result, our new Board of Directors
appointed Leslie Shealey as Acting Chief Financial Officer and principal
accounting. On March 9, 2007, Bob Davis was removed as a Director. Mr. Nicklous
Harron was appointed as a Director in his place. In June 2007, June Nichols was
appointed as an additional Director and as Secretary/Treasurer, Leslie Shealy
resigned as Acting CFO and Chief Accounting Officer and Barry McFarland was
appointed as an additional Director and as Chief Financial Officer.
Changes in Internal Controls
No change in our internal controls over financial reporting (as defined in
Items 307 of Regulation S-B (17 CFR 228.307) and 308 of Regulation S-B (17 CFR
228.308) under the Securities and Exchange Act) occurred during the period
covered by this report that materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.
PART II -- OTHER INFORMATION
ITEM 1. Legal Proceedings.
The Company has been subject to legal proceedings and claims that have
arisen in the ordinary course of business. While these claims have not and are
not expected to have a material effect on the financial position of the Company,
several of the claims from vendors have resulted in judgements against the
company. As of June 30, 2007 these judgements total $158,971.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information.
None
10
ITEM 6. Exhibits .
Certificate of Incorporation. Filed in the Company's Registration Statement
on Form S-18 (File No. 33-9472-D) and incorporated herein by reference.
Restated By-laws of the Company. Filed in the Company's Registration
Statement on Form S-18 (File No. 33-9472-D) and incorporated herein by
reference.
(a) Exhibits included herein:
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
32.2 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
E'Prime Aerospace Corporation (Registrant)
By: /s/ James D Oldham III
------------------------------------------
James D Oldham III, CEO
Date: August 20, 2007
11