SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
AMENDMENT NO. 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PRIME AIR, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 4583 Applied For
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Number) Identification No.)
incorporation or
organization)
8598 112 Street, Ft. Saskatchewan, Alberta, Canada T8L 3V8;
telephone: 403 998-3400
(Address and telephone number of registrant's principal executive offices)
Royle Smith, President, Prime Air, Inc.
8598 112 Street, Ft. Saskatchewan, Alberta, Canada T8L 3V8;
telephone: 403 998-3400
(Name, address and telephone number of agent for service)
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [__]
CALCULATION OF REGISTRATION FEE
Title of Each Proposed
Class of Proposed Maximum
Securities Amount Maximum Aggregate Amount of
to be to be Offering Offering Registration
Registered Registered Price Per Unit (1) Price (1) Fee
Shares of Common
Stock, $.001
par value 7,140,213 $.875 per Share $6,247,686 $1,867(1)
(1)Estimated solely for purpose of calculating the registration
fee pursuant to Rule 457. This amount is based upon the average of the bid and
asked prices ($.875) of the common stock of the Registrant as of May 8, 1997.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
PRIME AIR, INC.
(Cross Reference Sheet Pursuant to Rule 404)
HEADING IN PROXY
ITEM NUMBER AND CAPTION STATEMENT/ PROSPECTUS
Item 1. Forepart of Registration Cover Page
Statement and Outside Front
Cover of Prospectus
Item 2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages
Item 3. Risk Factors, Ratio of Earnings to Prospectus Summary; Risk
Fixed Charges, and Other Information Factors
Item 4. Terms of Transaction Item One--Approval of
Agreement and Plan of Merger
Item 5. Pro Forma Financial Information Not Applicable
Item 6. Material Contracts with Company Item One-Approval of Agreement
Being Acquired and Plan of Merger
Item 7. Additional Information Required For Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters
Item 8. Interests of Named Experts and Counsel Not Applicable
Item 9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
Item 10. Information with Respect to S-3 Not Applicable
Registrants
Item 11. Incorporation of Certain Information Not Applicable
by Reference
Item 12. Information with Respect to S-2 or Not Applicable
S-3 Registrants
Item 13. Incorporation of Certain Information Not Applicable
by Reference
Item 14. Information with Respect to Registrants Item One--Approval of
Other than S-3 or S-2 Registrants Agreement and Plan of
Merger
Item 15. Information with Respect to S-3 Companies Not Applicable
Item 16. Information with Respect to S-2 or S-3 Not Applicable
Companies
Item 17. Information with Respect to Companies Prime Air (Del)
Other than S-2 or S-3 Companies
Item 18. Information if Proxies, Consents or Introduction
Authorizations are to be Solicited
Item 19. Information if Proxies, Consents or Not Applicable
Authorizations are not to be Solicited
or in an Exchange Offer
PRIME AIR, INC.
(A Delaware Corporation)
8598 112 Street
Ft. Saskatchewan, Alberta, Canada T8L 3V8
NOTICE OF SPECIAL MEETING
OF STOCKHOLDERS
TO BE HELD
AUGUST 28, 1997
To the Stockholders of Prime Air, Inc.:
A Special Meeting of Stockholders (the "Special Meeting") of Prime Air,
Inc., a Delaware corporation, ("Prime Air (Del)") will be held on August 28,
1997, at 10:00 A.M. (local time) at 1850 Airport Road, Pemberton, B.C. Canada,
for the following purposes:
a. To consider and vote upon a proposal to approve a Plan and Agreement
of Merger dated March 10, 1997, (the "Merger Agreement") between Prime
Air (Del) and Prime Air, Inc., a Nevada corporation, ("Prime Air
(NV)"), providing for the merger of Prime Air (Del) with and into
Prime Air (NV) (the "Merger"). If the Merger Agreement is approved
and the Merger becomes effective, each outstanding share of common
stock of Prime Air (Del) will be converted into one share of common
stock of Prime Air (NV).
b. To transact such other business as may properly come before the
meeting or any adjournment or adjournments or postponement or
postponements thereof.
Only holders of record of common stock at the close of business on July
14, 1997 are entitled to notice of and to vote at the Special Meeting and any
adjournment or adjournments or postponement or postponements thereof. A list of
shareholders entitled to vote at the Special Meeting will be kept on file at the
offices of Prime Air (Del) at least ten days prior to the Special Meeting and
may be reviewed by any shareholder during regular business hours.
To assure that your vote will be included, please complete, date and sign
the enclosed proxy and return it promptly whether or not you plan to attend the
Special Meeting. Your proxy may be revoked in the manner described in the
accompanying Proxy Statement/Prospectus at any time before it has been voted at
the Special Meeting.
By Order of the Board of Directors
_________, 1997 By
John Eberhard, Secretary
PRIME AIR, INC.
(A Delaware Corporation)
8598 112 Street
Ft. Saskatchewan, Alberta, Canada T8L 3V8
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Royle Smith and Gregory Duffy as
proxies, with the power to appoint their substitutes, and hereby authorizes them
to represent and to vote, as designated below, all the shares of Common Stock of
Prime Air, Inc., a Delaware corporation, ("Prime Air (Del)") held of record by
the undersigned on July 14, 1997, at the Special Meeting of Shareholders to be
held on August 28, 1997, or any adjournment or postponement thereof.
1. Proposal to approve a Plan and Agreement of Merger dated March 10,
1997, between Prime Air (Del) and Prime Air, Inc., a Nevada
corporation, ("Prime Air (NV)"), providing for the merger of Prime Air
(Del) with and into Prime Air (NV).
FOR AGAINST ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
FOR AGAINST ABSTAIN
This proxy, when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR Proposals 1 and 2. Please sign exactly as your name appears upon
the records of the Company. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full corporate
name by president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated: , 1997
Signature Signature (if held jointly)
Please Print Name Please Print Name
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY TO PRIME
AIR (DEL) AT THE ADDRESS SET FORTH ON THIS PROXY.
PROXY STATEMENT/PROSPECTUS
DATED ______, 1997
PRIME AIR, INC.
(A Delaware Corporation)
Special Meeting of Stockholders
To be Held August 28, 1997
7,140,213 Shares of Common Stock, Par Value $.001
This Proxy Statement is also a Prospectus with respect to shares of
Common Stock, par value $.001 per share of Prime Air, Inc., a Nevada corporation
("Prime Air (NV)") to be issued to shareholders of Prime Air, Inc., a Delaware
corporation ("Prime Air (Del)") upon conversion of their shares of Prime Air
(Del) into shares of Common Stock of Prime Air (NV) on the basis of one share of
Prime Air (NV) for each share of Prime Air (Del), pursuant to the Agreement and
Plan of Merger (the "Merger Agreement") described herein, attached as Appendix
"A." Prime Air (NV) has filed a Registration Statement with the U.S. Securities
and Exchange Commission covering 7,140,213 shares of Common Stock of Prime Air
(NV), which shares represent the maximum number of shares issuable upon
consummation of the merger called for by the Merger Agreement (the
"Merger").
THIS OFFERING IS HIGHLY SPECULATIVE AND INVOLVES SPECIAL RISKS
CONCERNING THE COMPANY AND ITS BUSINESS. (SEE PAGE 3, "RISK
FACTORS.")
This Proxy Statement/Prospectus is first being sent to shareholders of
Prime Air (Del) on or about _____, 1997.
The address of both Prime Air (NV) and Prime Air (Del) is 8598 112 Street,
Ft. Saskatchewan, Alberta, Canada T8L 3V8; telephone (403) 998-3400.
No person has been authorized to give any information or make any
representation concerning Prime Air (NV), Prime Air (Del), the capital stock of
either company, or the Merger Agreement, other than as contained in this Proxy
Statement/Prospectus. This Proxy Statement/Prospectus does not constitute an
offer to sell any securities other than the registered securities to which it
relates or an offer to sell the securities covered by this Proxy
Statement/Prospectus in any jurisdiction where, or to any person to whom, it is
unlawful to make such an offer.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is _________, 1997.
ADDITIONAL INFORMATION
Prime Air (Del) has filed with the Securities and Exchange Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, a registration statement under
the Securities Act of 1933, as amended, with respect to the shares of Common
Stock of Prime Air (NV). The Proxy Statement/Prospectus does not contain all
the information set forth in the registration statement and the exhibits and
schedules thereto. For further information with respect to Prime Air (NV) and
the shares to be issued pursuant hereto, reference is hereby made to the
registration statement and the schedules and exhibits filed as a part thereof.
The Proxy Statement/Prospectus describes the material terms of exhibits referred
to in the Proxy Statement/Prospectus. The registration statement, including
exhibits thereto, may be inspected without charge at the Central Regional
Office, 1801 California Street, Suite 4800, Denver, Colorado 80202-2648, and
copies of all or any part thereof may be obtained from the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment
of the fees prescribed by the Commission, or from the Commission's Internet web
site at http://www.sec.gov.
The Company is not a reporting company. However, the Company intends to
deliver an annual report to security-holders which will include audited
financial statements.
TABLE OF CONTENTS
Page
Introduction............................................................1
Proxy Statement/Prospectus Summary......................................2
Risk Factors............................................................3
Security Ownership of Certain Beneficial Owners and Management..........4
Item One--Approval of Agreement and Plan of Merger......................6
Prime Air (Del).........................................................7
Legal Matters..........................................................22
Independent Public Accountants.........................................22
Experts................................................................22
Other Information......................................................22
Index to Financial Statements..........................................23
Financial Statements
Appendix "A" Plan and Agreement of Merger
Appendix "B" Delaware Corporation Law, Section 262, Appraisal Rights
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to holders of Common
Stock, par value $.001 per share (the "Common Stock"), of Prime Air (NV), in
connection with the solicitation of proxies by the Board of Directors of Prime
Air (Del) for use at a Special Meeting of Stockholders of Prime Air (Del) (the
"Special Meeting") to be held at 1850 Airport Road, Pemberton, B.C., Canada, on
August 28, 1997, at 10:00 A.M. (local time), and at any adjournment or
adjournments or postponement or postponements thereof. This Proxy
Statement/Prospectus, the enclosed Notice and the enclosed form of Proxy are
being first mailed to stockholders of Prime Air (Del) on or about
, 1997.
Voting at the Special Meeting
The Board of Directors of Prime Air (Del) has fixed the close of
business on July 14, 1997, as the record date (the "Record Date") for the
determination of stockholders entitled to notice of and to vote at the Special
Meeting. As of the Record Date, there were outstanding 7,140,213 shares of
Common Stock.. Holders of record of Common Stock on the Record Date are
entitled to cast one vote per share, exercisable in person or by properly
executed proxy, with respect to each matter to be considered by them at the
Special Meeting.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Common Stock of Prime Air (Del) entitled
to vote is necessary to constitute a quorum at the Special Meeting.
The approval of at least a majority of the outstanding shares of Common
Stock of Prime Air (Del) will be required to approve the Merger, and the
approval of at least a majority of the shares of Common Stock voted at the
Special Meeting will be required to approve all other items set forth in the
Notice. The executive officers and directors (and their affiliates) of Prime
Air (Del) own approximately 7.66% of the outstanding shares of Prime Air (Del).
Prime Air (NV) has been informed that those executive officers and directors of
Prime Air (Del) presently intend to vote in favor of the Merger. In addition,
shareholders owning approximately 37.07% of the outstanding stock have indicated
to management that they intend to vote for the merger. (See _security ownership
of certain beneficial owners or management_)
THE BOARD OF DIRECTORS OF PRIME AIR (DEL) UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF COMMON STOCK VOTE FOR THE MATTERS TO BE VOTED UPON AT
THE SPECIAL MEETING.
Proxies
All shares represented at the Special Meeting by properly executed proxies
received prior to or at the Special Meeting, unless such proxies previously have
been revoked, will be voted at the Special Meeting in accordance with the
instructions on the proxies. If no instructions are indicated, proxies will be
voted for each item set forth in the Proxy. If any other matters are properly
presented to the Special Meeting for action, the persons named in the enclosed
form or forms of proxy and acting thereunder will have discretion to vote on
such matters in accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the persons
giving it before it is voted. Proxies may be revoked by filing with the
Secretary of Prime Air (Del) written notice of revocation bearing a later date
than the proxy, by duly executing a subsequent proxy relating to the same shares
and delivering it to the Secretary of Prime Air (Del), or by attending the
Special Meeting and voting in person. Any written notice revoking a proxy
should be sent to the offices of the Company.
Prime Air (Del) will bear the cost of preparing and mailing the proxy
material furnished to the shareholders in connection with the Special Meeting.
The return of proxies may be solicited by mail, personal interview, telephone or
telegraph by management of Prime Air (Del).
Abstentions are considered as shares present and entitled to vote but
are not counted as affirmative votes cast on a given matter. A broker or
nominee holding shares registered in its name, or in the name of its nominee,
which are beneficially owned by another person and for which it has not received
instructions as to voting from the beneficial owner, does not have the
discretion to vote the beneficial owner's shares with respect to the proposals.
Any broker or nominee "non-votes" with respect to the proposals will not be
considered as shares entitled to vote on that matter and will not be considered
by the inspector when counting votes on the matters.
With regard to any vote to adjourn the meeting in the event that
management wishes to continue to solicit votes to approve the transaction,
proxies voting against the proposal may not be used by management to vote for
adjournment pursuant to its discretionary authority.
PROXY STATEMENT/PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial statements appearing elsewhere herein:
The Companies
Prime Air (Del) is the parent of a wholly owned subsidiary, Prime Air,
Inc., a company incorporated under the laws of the Province of British Columbia,
Canada ("Prime Air (BC)"). Prime Air (BC) has entered into a lease and
operating agreement with the Village of Pemberton, British Columbia, Canada, to
plan, develop, construct, manage, and operate a terminal facility at the
Pemberton Airport. Prime Air (BC) has constructed the basic terminal building
and proposes to offer regular, scheduled air service to Pemberton Airport to
serve the nearby resort community of Whistler.
Prime Air (NV) was incorporated by Prime Air (Del) for the purpose of
changing the domicile of Prime Air (Del) to the State of Nevada. Prime Air (NV)
is a wholly owned subsidiary of Prime Air (Del) and has had no activities except
in relation to organization of such company and this Merger.
The address of both Prime Air (NV) and Prime Air (Del) is 8598 112
Street, Ft. Saskatchewan, Alberta, Canada T8L 3V8. The telephone number for
each is (403) 998-3400. The surviving entity, Prime Air (NV), will be governed
by Nevada law. (See "Item One--Approval of Agreement and Plan of Merger--
Differences in Rights of Prime Air (Del) Shareholders as a Result of the
Merger.")
Merger Agreement
The Merger Agreement provides for Prime Air (Del) and Prime Air (NV) to
merge (the "Merger"). Prime Air (NV) will be the surviving corporation and will
succeed to all of the assets, liabilities, rights, and obligations of Prime Air
(Del). The Merger Agreement contains certain conditions which must be fulfilled
before the parties will be obligated to consummate the Merger, including the
approval of the Merger Agreement by the holders of a majority of the shares of
Common Stock of Prime Air (Del).
Upon the effectiveness of the Merger, each share of Common Stock of Prime
Air (Del) will be converted into one share of Common Stock of Prime Air (NV).
All outstanding warrants and options to buy the Common Stock of Prime Air (Del)
will be converted into warrants or options to purchase a like number of shares
of Common Stock of Prime Air (NV). Upon the effectiveness of the Merger former
shareholders of Prime Air (Del) will hold the same percentage of the outstanding
shares of Prime Air (NV).
The Merger will not result in any changes in the provisions of the Articles
of Incorporation of Prime Air (NV), and there will be no changes in the bylaws
of Prime Air (NV).
Management and Operations After the Merger
The current management of Prime Air (NV) is identical to the current
management of Prime Air (Del) and will not be affected by the Merger. The
business of Prime Air (Del), as conducted by its wholly owned subsidiary, Prime
Air (BC), will continue to be the business of Prime Air (NV) without any effect
of the Merger.
Federal Income Tax Consequences
The tax advisor to Prime Air (NV) has advised that, for U.S. federal income
tax purposes, the transactions contemplated by the Merger Agreement will
constitute tax-free reorganizations.
Rights of Dissenting Shareholders
The shareholders of Prime Air (Del) have the right to dissent from the
Merger and, subject to certain conditions provided for under Delaware law,
receive payment of the "fair value" of their Common Stock, exclusive of any
element of value arising from the accomplishment or expectation of the Merger.
On May 12, 1997, the last trading day prior to the public announcement of the
execution of the Merger Agreement, the closing sale price of the Common Stock of
Prime Air (Del) was $1.12 per share. Shareholders are advised that the amount
to be paid to dissenters, even after determination by a court, could be more or
less than $1.12 per share. The Merger Agreement conditions the obligation of
Prime Air (Del) to merge on there not being more than 352,010 shares of Common
Stock of Prime Air (Del) (approximately 5%) dissenting from the Merger. (See
Appendix B attached hereto).
Recent Prices of Common Stock
The Common Stock of Prime Air (Del) was traded on the NASDAQ Electronic
Bulletin Board until approximately July 23, 1996, at which time management of
the company requested the market makers in the stock to voluntarily suspend
trading in the stock until adequate information concerning the company could be
furnished to the public. Trading on the NASDAQ Electronic Bulletin Board was
recommenced on March 27, 1997, under the trading symbol "PMAR." On May 12, 1997,
the last trading day prior to the announcement of the approval by the Board of
Directors of the proposed Merger, the closing sale price per share of the Common
Stock of Prime Air (Del) was $1.12. On _______, 1997, the last trading day for
which quotations were available prior to the mailing of this Proxy
Statement/Prospectus, the closing price per share of Common Stock was $______.
Little or no trading has occurred since the date trading was reestablished
on March 27, 1997, and therefore management believes that no established trading
market exists for the shares of Common Stock of Prime Air (Del).
Federal or State Regulatory Requirements
Except with regard to the statutory provisions of the States of
Delaware and Nevada concerning the merger of the two entities, management does
not believe that there are any other federal or state approvals which must be
obtained in connection with the proposed merger.
RISK FACTORS
In evaluating the Merger, Prime Air (Del) shareholders should consider the
following factors and should carefully review the information contained
elsewhere in this Proxy Statement/Prospectus:
a. Additional Capital Requirements. Prime Air (BC) does not have
sufficient funds to commence its principal operations. Management
estimates that the company will require capitalization of
approximately $1,410,000 to commence such operations for the first
year. There is no assurance that Prime Air (Del) will be able to
raise such funds to commence principal operations. (See "Management's
Discussion and Analysis.")
b. Limited Capitalization. Prime Air (Del) has had no income from
operations to date and operations are not scheduled to begin, if at
all, until the fall of 1997. (See AManagement=s Discussion and
Analysis@ and "Financial Statements.")
c. No Operating History. Prime Air (BC), the operating subsidiary
of Prime Air (Del), has no operating history and has yet to produce a
profit. For the three months ended March 31, 1997, and for the years
ended December 31, 1996 and 1995, Prime Air (Del) had net losses of
($20,361), ($238,416), and ($71,266), respectively, and as of March
31, 1997, had an accumulated deficit of ($659,583). There is no
assurance that it will ever be profitable. As a new enterprise, it is
likely to be subject to risks management has not anticipated. Prime
Air (BC) has limited resources and is dependent on funding from Prime
Air (Del) to allow it to conduct operations. However, Prime Air (Del)
has no operations other than raising capital through equity offerings
of its common stock. Therefore, unless Prime Air (Del) is able to
continue to raise funds through such equity financing, the resources
of Prime Air (Del) may not be sufficient for the needs of Prime Air
(BC), and it may have inadequate funds to finance such operations.
(See "Prime Air (Del)," "Management's Discussion and Analysis" and
"Financial Statements.")
d. "Going Concern" Limitation. Prime Air (Del) is presently in its
development 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 the terminal construction
and commence operation thereof on an economically viable basis. The
consolidated financial statements of Prime Air (Del) have been
prepared on a "going concern" basis which assumes the entity will be
able to realize its assets, obtain the required financing, and
discharge its liabilities and commitments in the normal course of
business, of which there is no assurance. (See "Prime Air (Del),"
"Management's Discussion and Analysis," and Financial
Statements.")
e. Start-up Business. Prime Air (BC) is in a start-up phase
(development stage) and has not engaged in any operations to date.
There is no certainty that Prime Air (BC) will be successful in
overcoming the risks of development in order to advance beyond the
start-up phase (development stage). Such start-up risks include, but
are not limited to, the following: (i) no marketing professionals
have been hired to implement Prime Air (BC)'s skeletal marketing plan;
(ii) no definitive agreement has been entered into with regard to the
aircraft and aircraft services needed to implement the company's
business, and (iii) Prime Air (BC) has not yet obtained the necessary
licenses and operating certificates. (See "Prime Air (Del),"
"Management's Discussion and Analysis," and "Financial
Statements.")
f. Competition. Prime Air (BC) proposes to engage in a market
which is highly competitive. The company will be competing with other
forms of transportation to the Whistler ski resort, such as bus and
other ground shuttle services, many of which services are owned by
more established companies having much greater financial resources,
experience, and personnel resources than Prime Air (BC). Prime Air
(BC) has not performed any marketing studies that would indicate
unsatisfied demand for its services. (See "Prime Air (Del).")
g. Government Regulations. The air transportation industry in
Canada is heavily regulated. It will be necessary that Prime Air
(BC), or any company engaged by Prime Air (BC) to conduct the air
transportation operations, obtain and maintain all necessary licenses
and operating certificates. Prime Air (BC) has entered into a
Memorandum of Agreement with Voyageur Airways Limited to conduct such
air transportation operations. Voyageur has represented to management
that it has the necessary licenses and operating certificates to
conduct such operations for Prime Air (BC). However, the parties have
not entered into a definitive agreement, and Prime Air (BC) has not
sought its own licenses and operating certificates. Should the
parties fail to reach a definitive agreement, Prime Air (BC) may
experience substantial delays in finding another operating company or
in obtaining its own licenses and certificates. (See "Prime Air
(Del).")
h. No Established Public Market for Stock. At present, no
established market exists for the Common Stock of Prime Air (Del).
The Common Stock of Prime Air (Del) is currently traded on the NASDAQ
Electronic Bulletin Board. However, the number of shares traded is
extremely limited. (See "Market Information.")
i. Applicability of Penny Stock Risk Disclosure Requirements. The
Common Stock of Prime Air (Del) is and will be considered a "penny
stock" as that term is defined in rules promulgated under the
Securities Exchange Act of 1934, as amended. Under these rules,
broker-dealers participating in transactions in penny stocks must
first deliver a Schedule 15G risk disclosure document which describes
the risks associated with penny stocks, the broker-dealer's duties,
the customer's rights and remedies, and certain market and other
information, and make a suitability determination approving the
customer for penny stock transactions based on the customer's
financial situation, investment experience and objectives. Broker-
dealers must also disclose these restrictions in writing to the
customer and obtain specific written consent of the customer, and
provide monthly account statements to the customer. With all these
restrictions, the likely effect of the designation as a penny stock
will be to decrease the willingness of broker-dealers to make a market
for the stock, to decrease the liquidity of the stock, and to increase
the transaction cost of sales and purchases of penny stocks compared
to other securities.
j. Dividend Policy. Prime Air (Del) has never paid a cash dividend on
its common stock and does not anticipate paying cash dividends on its
Common Stock in the foreseeable future. (See "Dividend Policy.")
k. Market Overhang. Prime Air (Del) currently has 4,494,530 shares of
its Common Stock which have not been registered with the Securities
and Exchange Commission or any state securities agency and which are
currently restricted pursuant to Rule 144 promulgated by the
Securities and Exchange Commission under the Securities Act of 1933,
as amended. All of these shares are restricted from public resale for
a period of one year from the date of issuance. The sale of some or
all of the restricted shares of Common Stock after such two year
holding period could have a material negative impact upon the market
price of the Common Stock. Of the total restricted shares,
approximately 3,072,478 were believed to have satisfied the one-year
holding requirement and to be available for sale pursuant to said Rule
as of May 1, 1997. (See "Security Ownership of Certain Beneficial
Owners and Management" and "Description of Securities.")
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
As of July 23, 1997, management of Prime Air (Del) believes that the
following persons beneficially owned in excess of 5% of the Common Stock of the
company:
Name and Address of Amount and Nature Percent of
Title of Class Beneficial Owner of Beneficial Ownership Class
Common Stock Phillip Johnston 2,124,4701 29.75%
(Par Value $.001) PMB7 Hibiscus Square Pond St.
Grand Turk
Turks and Caicos Island, BWI
Patricia Jarvis 522,705 7.32%
P.O. Box 1056
Renton, WA 98057
Mr. Johnston and Ms. Jarvis have indicated to management of Prime Air
(Del) their intention to vote in favor of the Merger.
1 Of these shares, 1,504,470 are held directly of record by
Confederation Capital Corporation Ltd., and 620,000 are held directly of record
by Dolphin Trading Ltd.
The following table sets forth certain information with respect to the
ownership of the common stock of Prime Air (Del) by each director and by its
officers and directors as a group, as of the date of July 23, 1997:
Name of Nature of
Beneficial Position with Beneficial Amount and
Title of Class Owner Prime Air (Del) Ownership2 Percent of
Class
Common Blaine Haug Chairman Direct 60,000
Stock (Par 0.84%
Value $.001)
Royle Smith President Direct and
Indirect3 225,000
3.15%
John Eberhard Secretary and Direct and
Director Indirect4 107,670
1.51%
Gregory Duffy Treasurer Direct and
Indirect5 154,000
2.16%
Officers and Directors
as a Group (4 persons) 546,670
7.66%
2Unless otherwise indicated, this column reflects amounts as to which the
beneficial owner has sole voting power and sole investment power.
3The shares beneficially owned by Mr. Smith are held directly and of record
by Welcome Ford Sales Ltd., a company controlled by Mr. Smith.
4Of theses shares, 5,000 are beneficially owned directly and of record by
Mr. Eberhard's wife, and 88,000 are held in a brokerage account controlled by
Mr. Eberhard.
5Of the shares beneficially owned by Mr. Duffy, 10,000 are held directly
and of record by his wife.
ITEM ONE--APPROVAL OF
AGREEMENT AND PLAN OF MERGER
This section of the Proxy Statement/Prospectus provides all material
terms of the Merger but does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement which is set forth as Appendix "A"
attached hereto and incorporated herein.
ALL SHAREHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY.
General Description
The Merger Agreement provides that on the effective date of the merger (the
"Effective Date"), Prime Air (Del) will be merged with and into Prime Air (NV).
Prime Air (NV) will be the surviving corporation. Prime Air (Del), which will
not survive the Merger, will be merged into Prime Air (NV) and all of Prime Air
(Del)'s assets, liabilities and property will become the assets, liabilities ,
and property of Prime Air (NV). The Articles of Incorporation of Prime Air (NV)
will be unchanged and there will be no change to its bylaws. Also, the Merger
Agreement provides that on the Effective Date, the current management of Prime
Air (NV), which consists of the same individuals as management of Prime Air
(Del), will remain the management of the surviving entity. (See "Differences in
Rights of Prime Air (Del) Shareholders as a Result of the Merger.")
Effective Date
The effective Date is the date when the Certificate of Merger has been
filed with the Delaware Secretary of State and with the Nevada Secretary of
State, which will occur promptly after approval of the Merger Agreement by
shareholders of both entities.
Conversion Ratio
On the Effective Date, each share of outstanding common stock of Prime Air
(Del) will be converted into one share of Prime Air (NV).
Conditions to the Merger
The merger agreement must be approved by holders of a majority of the
outstanding shares of Prime Air (Del)
The Merger Agreement provides that the effectiveness of the Merger is
subject to the condition that shareholders of Prime Air (Del) owning not more
than 5% of total outstanding shares of common stock shall exercise their rights
as dissenting shareholders to the proposed merger. If shareholders owning in
excess of 5% shall exercise such dissenting rights, the proposes merger will be
abandoned and the Merger Agreement will not be filed either in the State of
Nevada or the State of Delaware.
If, at any time prior to the effective date of the Merger, events or
circumstances occur which in the opinion of a majority of the board of directors
of either constituent corporation renders it inadvisable to consummate the
Merger, the Agreement of Merger will not become effective even though previously
adopted by the shareholders of the corporations.
These conditions are not waivable.
Effect of the Merger
Consummation of the Merger and conversion of the Prime Air (Del) common
stock into shares of Prime Air (NV) common stock will result in the current
shareholders of Prime Air (Del) owning an equal number of shares and the same
percentage ownership of Prime Air (NV).
The Merger will not result in any changes to Prime Air (NV)'s Articles of
Incorporation or bylaws concerning the rights of holders of Prime Air (Del)
common stock. Outstanding options and warrants to purchase shares of Prime Air
(Del) common stock will also be converted upon the Effective Date of he Merger
into options or warrants to purchase Prime Air (NV) common stock. See "ITEM
ONE--APPROVAL OF AGREEMENT AND PLAN OF MERGER--Conversion of Options and
Warrants."
Shareholder Approval
The affirmative vote of the holders of a majority of the outstanding shares
of Prime Air (Del) common stock is required for approval and adoption of the
Merger Agreement. Prime Air (NV) is a wholly owned subsidiary of Prime Air
(Del) which has agreed to consent to the approval and adoption of the Merger
Agreement immediately upon such approval and adoption by the shareholders of
Prime Air (Del).
THE BOARDS OF DIRECTORS OF BOTH PRIME AIR (DEL) AND PRIME AIR
(NV) UNANIMOUSLY RECOMMEND A VOTE FOR THE APPROVAL OF THE MERGER
AGREEMENT.
Basis and Reasons for the Merger; Recommendations
Current management is unaware of the specific reasons why Mr. Parshall,
a former officer and director of Prime Air (Del), recommended and transacted the
change of domicile of the company from the State of Utah to the State of
Delaware. Management does not feel that the added costs of maintaining the
company in the State of Delaware as opposed to the lesser costs of maintaining
the company in the State of Delaware justify continuing to maintain the domicile
in the State of Delaware. While management has not conducted a full analysis of
the cost savings in the State of Nevada, management believes that the change of
domicile to the State of Nevada would reduce such costs and would be beneficial
to the shareholders of the company. Therefore, the Board of Directors
recommends that the shareholders vote in favor of the change of domicile.
Interests of Certain Persons in the Merger
Each of the officers and directors of Prime Air (Del) will also be an
officer and/or director of Prime Air (NV) following the Merger. Each of the
current shareholders of Prime Air (Del), unless such shareholder should dissent
from the Merger, will be a shareholder of Prime Air (NV) owning the same number
of shares of Prime Air (NV) as he, she, or it held in Prime Air (Del).
The Merger will not constitute a change of control of Prime Air (Del).
Also, there are no amounts payable to insiders as a result of the Merger.
Conversion of Warrants and Options
On the Effective Date of the Merger, all warrants and options, if any,
under which Prime Air (Del) has agreed to issue Prime Air (Del) common stock
shall remain in force and effect as warrants or options to purchase Prime Air
(NV) common stock on the same terms and conditions. At May 1, 1997, there were
no outstanding options or warrants to purchase shares of Prime Air (Del). On
the Effective Date, any options will be converted into options to purchase a
like number of shares of Prime Air (NV) common stock at the same exercise prices
per share.
Prime Air (NV) has no outstanding options or warrants to purchase shares of
common stock of Prime Air (NV).
No Prime Air (Del) and no Prime Air (NV) options will be issued prior to
the consummation of the Merger.
Management of Prime Air (NV)
The officers and directors of Prime Air (Del) are as follows:
Name Age Positions Director Since
Blaine Haug 49 Chairman 1994
Royle Smith 47 President --
John Eberhard 52 Secretary and Director 1995
Gregory Duffy 38 Treasurer --
The officers and directors of the subsidiary, Prime Air (BC), are as
follows:
Name Age Positions Director Since
Blaine Haug 49 President and Director 1989
Richard T. Shrieves 42 Secretary and Director 1992
Set forth below is the business experience and biographical information on
each of the executive officers and directors of Prime Air (Del) and Prime Air
(BC):
BLAINE HAUG has been employed as the general manager of Prime Air (Del)
since 1989. Mr. Haug currently holds an airline transport pilot license first
issued in 1978 by Canada.
ROYLE SMITH has been the president of Welcome Ford Sales Ltd., a Ford
dealership located in Edmonton, Alberta, Canada, since 1981.
JOHN EBERHARD has operated his own law practice in London, Ontario, Canada,
since 1973, and is a member of the Canadian Bar Association. He is also a
member of the Law Association of Upper Canada, Middlesex Law Association,
Association of Transportation Practitioners (U.S.A.), Lawyer-Pilot Bar
Association (U.S.A.-Canada). Mr. Eberhard graduated in 1966 with a bachelor of
arts degree and in 1969 with a law degree from the University of Western
Ontario.
GREGORY DUFFY has been employed as general manager of Welcome Ford Sales
Ltd. since 1991.
RICHARD T. SHRIEVES has practiced law since 1980.
There are no known arrangements or understandings between any of the
foregoing individuals and any other person pursuant to which he or she was
elected as a director.
No remuneration was paid to the incumbent directors by the Company during
1996, except for reimbursement of out-of-pocket expenses incurred by such
individuals on behalf of the Company.
There are no arrangements known to management the effect of which would
result in a change of control of Prime Air (Del), nor has such a change of
control occurred during 1996.
Indemnification
Nevada law expressly authorizes a Nevada corporation to indemnify its
directors, officers, employees, and agents against liabilities arising out of
such persons' conduct as directors, officers, employees, or agents if they acted
in good faith, in a manner they reasonably believed to be in or not opposed to
the best interests of the company, and, in the case of criminal proceedings, if
they had no reasonable cause to believe their conduct was unlawful. Generally,
indemnification for such persons is mandatory if such person was successful, on
the merits or otherwise, in the defense of any such proceeding, or in the
defense of any claim, issue, or matter in the proceeding. In addition, as
provided in the articles of incorporation, bylaws, or an agreement, the
corporation may pay for or reimburse the reasonable expenses incurred by such a
person who is a party to a proceeding in advance of final disposition if such
person furnishes to the corporation an undertaking to repay such expenses if it
is ultimately determined that he did not meet the requirements. In order to
provide indemnification, unless ordered by a court, the corporation must
determine that the person meets the requirements for indemnification. Such
determination must be made by a majority of disinterested directors; by
independent legal counsel; or by a majority of the shareholders.
Article VI of the Bylaws of Prime Air (NV) provides that the corporation
shall indemnify its directors, officers, agents and other persons to the full
extent permitted by the laws of the State of Nevada. Insofar as indemnification
for liabilities arising under the Securities Acto of 1933 (the "Act") may be
permitted to directors, officers, controlling persons of Prime Air (NV) pursuant
to the foregoing provisions, or otherwise, Prime Air (NV) has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.
The Employment Agreements between Prime Air (Del) and Mr. Smith and
Mr. Haug also contain indemnification provisions. (See "Executive
Compensation.")
Executive Compensation
There has been no compensation awarded to, earned by, or paid to any of the
executive officers of the Prime Air (NV) during the year ended December 31,
1996. Prime Air (NV) has no written employment contract with any of its
officers.
The following table sets forth the aggregate executive compensation
earned by or paid to the named executive officers by any person for all services
rendered in all capacities to Prime Air (Del) for the fiscal years ended
December 31, 1994, 1995, and 1996:
1These shares were issued to Mr. Haug as remuneration for management fees
for 1996. For purposes of this table only, the valuation of the 200,000 shares
of restricted stock is based upon the market value of the stock which was
approximately $0.3125 on March 18, 1996, the date of the award. The value of
these shares is based solely upon the closing bid price of the shares on such
date. No dividends have been paid on these shares. Notwithstanding the
valuation of the shares for purposes of this table, the Board of Directors
valued the shares at a significant discount of the market value at the time of
award based upon the limited trading volume of market shares, the relatively
short operating history of the Company and the risks associated therewith, the
limited cash resources of the Company, and as an incentive to retain the
continued services of this party.
2Of these shares, 100,000 were issued to Mr. Smith on January 9, 1996, for
accepting the office of Executive Vice-President; 300,000 were issued to him on
January 9, 1996, for consulting fees regarding the completion of the Pemberton
Airport terminal facility; 200,000 were issued to him on March 18, 1996, as
remuneration for management fees for 1996; and 25,000 were issued to Welcome
Ford Sales Ltd., a company controlled by him, on March 29, 1996, for
administration fees rendered regarding the completion of the Pemberton Airport
terminal facility. The valuation of 100,000 and the 300,000 shares of the
restricted shares is based upon the market value of the stock which was
approximately $0.25 on January 9, 1996, the date of the award; the valuation of
200,000 shares of the restricted shares is based upon the market value of the
stock which was approximately $0.3125 on March 18, 1996, the date of the award;
and the valuation of 25,000 shares of the restricted shares is based upon the
market value of the stock which was approximately $0.4375 on March 29, 1996, the
date of the award. The aggregate value of these shares is based solely upon the
closing bid price of the shares on such dates. No dividends have been paid on
these shares. Notwithstanding the valuation of the shares for purposes of this
table, the Board of Directors valued the shares at a significant discount of the
market value at the time of award based upon the limited trading volume of
market shares, the relatively short operating history of the Company and the
risks associated therewith, the limited cash resources of the Company, and as an
incentive to retain the continued services of this party.
Blaine Haug has a written employment agreement with Prime Air (Del) to
act as assistant general manager of the company and which covers any and all
services performed by him for Prime Air (Del) or any of its wholly or majority
owned subsidiaries. Mr. Haug will devote all of his time to the affairs of
Prime Air (Del) and its subsidiary under this agreement. The agreement provides
that Prime Air (Del) will pay him $100,000 US per annum, payable in cash or in
common stock of the company at a price of $0.50 per share for the year ended
December 31, 1996, and for future years at a price mutually agreed by the
parties. The agreement expressly states that Mr. Haug will exercise the share
option payment for 1996. Therefore, Prime Air (Del) issued 200,000 shares of
Common Stock to Mr. Haug in lieu of any cash compensation for 1996. Mr. Haug is
also to receive reimbursement for all out-of-pocket expenses incurred in
connection with his duties; to receive all reasonable travel expenses incurred
in the course of his duties as assistant general manager; and to be permitted to
participate in any profit sharing, deferred compensation, stock appreciation
rights, stock option and other plans and programs adopted by the company. If
Mr. Haug is unable to perform his duties because of illness or mental or
physical disability, he will receive compensation and benefits for one year.
The term of the agreement is from January 1, 1996, through December 31, 2000,
renewable by mutual consent for successive five year periods. The agreement
also allows Mr. Haug to provide management services to any other person, firm,
or corporation during the term of the agreement. Prime Air (Del) may terminate
the employment agreement upon 90 days' written notice, but would be obligated to
pay compensation through the remaining term of the agreement. Mr. Haug may
terminate the agreement upon 90 days' written notice but would only receive
compensation through the date of termination. Upon Mr. Haug's death, his widow
or estate would receive compensation for six months from the date of death. If
the employment agreement is terminated by the company because of illness or
mental or physical disability, Mr. Haug would receive compensation and benefits
for six months from such date. Also, the employer may not amalgamate, merge, or
consolidate with another person or corporation unless such other person or
corporation either expressly assumes the agreement for a term of five years from
the closing date or pays Mr. Haug his full compensation for a term of five years
or $500,000. (This provision has been waived by Mr. Haug for purposes of the
Merger.) The employment contract is deemed to provide personal services by Mr.
Haug and therefore, the duties and obligations of Mr. Haug are not assignable by
him, although he is permitted to assign all or a portion of his compensation.
The agreement contains an indemnity provision which requires Prime Air (Del) to
indemnify and save harmless Mr. Haug, his heirs, successors and legal
representatives, from expenses and costs associated with any action to which he
is a party by reason of being or having been an assistant general manager of the
company, if he acted honestly and in good faith with a view to the best
interests of the company, and otherwise in accordance with the bylaws of the
company. The employment agreement is to be governed by and construed in
accordance with the laws of the Province of British Columbia, and any
controversy or claim relating to the agreement is to be settled by arbitration
in accordance with the provisions of the Arbitration Act of British Columbia.
The Merger Agreement provides that Prime Air (NV) shall assume the obligations
of such agreement.
Royle Smith has a written employment agreement with Prime Air (Del) to
act as general manager of the company and which covers any and all services
performed by him for Prime Air (Del) or any of its wholly or majority owned
subsidiaries. Mr. Smith will devote approximately 75% of his time to the
affairs of Prime Air (Del) and its subsidiary under this agreement. The
agreement provides that Prime Air (Del) will pay him $100,000 US per annum,
payable in cash or in common stock of the company at a price of $0.50 per share
for the year ended December 31, 1996, and for future years at a price mutually
agreed by the parties. The agreement expressly states that Mr. Smith will
exercise the share option payment for 1996. Therefore, Prime Air (Del) issued
200,000 shares of Common Stock to Mr. Smith in lieu of any cash compensation for
1996. Mr. Smith is also to receive reimbursement for all out-of-pocket expenses
incurred in connection with his duties; to receive all reasonable travel
expenses incurred in the course of his duties as assistant general manager; and
to be permitted to participate in any profit sharing, deferred compensation,
stock appreciation rights, stock option and other plans and programs adopted by
the company. If Mr. Smith is unable to perform his duties because of illness or
mental or physical disability, he will receive compensation and benefits for one
year. The term of the agreement is from January 1, 1996, through December 31,
2000, renewable by mutual consent for successive five year periods. The
agreement also allows Mr. Smith to provide management services to any other
person, firm, or corporation during the term of the agreement. Prime Air (Del)
may terminate the employment agreement upon 90 days' written notice, but would
be obligated to pay compensation through the remaining term of the agreement.
Mr. Smith may terminate the agreement upon 90 days' written notice but would
only receive compensation through the date of termination. Upon Mr. Smith's
death, his widow or estate would receive compensation for six months from the
date of death. If the employment agreement is terminated by the company because
of illness or mental or physical disability, Mr. Smith would receive
compensation and benefits for six months from such date. Also, the employer may
not amalgamate, merge, or consolidate with another person or corporation unless
such other person or corporation either expressly assumes the agreement for a
term of five years from the closing date or pays Mr. Smith his full compensation
for a term of five years. (This provision has been waived by Mr. Smith for
purposes of the Merger.) The employment contract is deemed to provide personal
services by Mr. Smith and therefore, the duties and obligations of Mr. Smith are
not assignable by him, although he is permitted to assign all or a portion of
his compensation. The agreement contains an indemnity provision which requires
Prime Air (Del) to indemnify and save harmless Mr. Smith, his heirs, successors
and legal representatives, from expenses and costs associated with any action to
which he is a party by reason of being or having been an assistant general
manager of the company, if he acted honestly and in good faith with a view to
the best interests of the company, and otherwise in accordance with the bylaws
of the company. The employment agreement is to be governed by and construed in
accordance with the laws of the Province of British Columbia, and any
controversy or claim relating to the agreement is to be settled by arbitration
in accordance with the provisions of the Arbitration Act of British Columbia.
The Merger Agreement provides that Prime Air (NV) shall assume the obligations
of such agreement.
Certain Transactions
Pursuant to the terms of the employment agreement between Prime Air (Del)
and Blaine Haug, an officer and a director of such entity, Prime Air (Del)
issued 200,000 shares of common stock of the company to Mr. Haug for services
rendered during the year ended December 31, 1996. (See "Executive
Compensation.")
Pursuant to the terms of the employment agreement between Prime Air (Del)
and Royle Smith, an officer and a director of such entity, Prime Air (Del)
issued 200,000 shares of common stock of the company to Mr. Smith for services
rendered during the year ended December 31, 1996. In addition, Mr. Smith was
issued 100,000 shares on January 9, 1996, for accepting the office of Executive
Vice-President, and 300,000 shares were issued to him on January 9, 1996, for
consulting services. Also, 25,000 shares were issued to Welcome Ford Sales
Ltd., a company controlled by Mr. Smith for administration fees. (See
"Executive Compensation.")
On or about January 3, 1996, Prime Air (Del) issued 370,336 shares of
common stock to Confederation Capital Corporation Ltd., a company controlled by
Mr. Phillip Johnston, a shareholder owning in excess of 5% of the outstanding
stock, for previous money loaned to the company. In addition, Prime Air (Del)
issued 94,800 shares to such entity on April 3, 1997, for repayment of advances
of $25,583 made by such entity to Prime Air (Del). (See "Security Ownership of
Certain Beneficial Owners and Management.")
Information with Respect to Prime Air (NV)
Prime Air (NV) was incorporated in the State of Nevada on November 10,
1996, solely for the purpose of changing the domicile of Prime Air (Del) from
the State of Delaware to the State of Nevada. Prime Air (NV) has conducted no
business operations and owns no property. All of the outstanding common stock
of Prime Air (NV) is owned by Prime Air (Del). The management of Prime Air (NV)
is identical to the management of Prime Air (Del).
Prime Air (NV) is not a party to any material pending legal proceedings or
government actions, including any material bankruptcy, receivership, or similar
proceedings. Management of the Prime Air (NV) does not believe that there are
any material proceedings to which any director, officer or affiliate of the
company, any owner of record of beneficially of more than five percent of the
common stock of Prime Air (NV), or any associate of any such director, officer,
affiliate of the company, or security holder is a party adverse to Prime Air
(NV) or has a material interest adverse to the company.
There currently exists no public trading market for the common stock of
Prime Air (NV). None of the currently outstanding shares of common stock is
subject to outstanding options or warrants to purchase, or securities
convertible into, common equity of Prime Air (NV). None of the outstanding
shares of common stock could presently be sold pursuant to Rule 144 promulgated
by the Securities and Exchange Commission, nor has Prime Air (NV) agreed to
register any such shares. Also, none of the outstanding shares of common stock
is being, or has been proposed to be, publicly offered by the company. Upon
completion of the Merger, all of the currently outstanding shares of common
stock of Prime Air (NV) will be canceled. There is currently only one
shareholder of Prime Air (NV), namely Prime Air (Del), which paid nominal
consideration for such shares.
No cash dividends have been declared or paid as yet on the common stock of
Prime Air (NV) and the Board of Directors of the company has not yet decided on
a dividend policy. Whether dividends will be paid will be determined by the
Board of Directors of Prime Air (NV) and will necessarily depend on the
company's earnings, financial condition, capital requirements and other factors.
The Board of Directors has no current plans to declare any dividends in the
foreseeable future.
Prime Air (NV) has authorized two classes of stock, namely 50,000,000
shares of common stock (par value $.001) and 5,000,000 preferred stock (par
value $.001). The holders of the common stock have equal ratable rights to
dividends from funds legally available therefor, when, as, and if declared by
the Board of Directors of the company and are entitled to share ratably in all
of the assets of the company available for distribution to holders of common
stock upon liquidation, dissolution, or winding up of the affairs of Prime Air
(NV). Holders of the common stock are entitled to one vote per share on all
matters on which shareholders may vote at all meetings of shareholders. There
are no conversion rights, subscription rights, preemptive rights, cumulative
voting rights, or redemptive rights with respect to the common stock.
Concerning the preferred stock, none of which shares is outstanding, the board
of directors has the authority, by resolution or resolutions, to divide the
preferred stock into series, to establish and fix the distinguishing designation
of each such series and the number of shares thereof (which number, by like
action of the board of directors from time to time thereafter, may be increased
except when otherwise provided by the board of directors in creating such
series, or may be decreased but not below the number of shares thereof then
outstanding) and, within the limitations of applicable law of the State of
Nevada, to fix and determine the relative rights and preferences of the shares
of each series so established prior to the issuance thereof.
Prime Air (NV) is acting as its own transfer agent. However, management
intends to engage the transfer agent currently used by Prime Air (Del), namely
Illinois Stock Transfer Company, 223 West Jackson Blvd., Suite 1210, Chicago, IL
60606.
Management and Operations After the Merger
The board of directors and officers of the surviving corporation after the
Merger will be comprised of the same individuals as currently comprise Prime Air
(Del). The principal business of the Prime Air (NV) will be the current
business of Prime Air (Del), which is conducted through Prime Air (BC).
Procedure for Converting Outstanding Shares
The conversion of the Prime Air (Del) common stock into Prime Air (NV)
common stock will occur automatically upon the Effective Date of the Merger.
Promptly thereafter, a transmittal letter will be furnished to the shareholders
of Prime Air (Del) by the transfer agent for Prime Air (Del), which transfer
agent will continue to act as the transfer agent for Prime Air (NV). The
transmittal letter will contain certain instructions with respect to the
surrender of Prime Air (Del) stock certificates for new Prime Air (NV) stock
certificates. Until the exchange is complete, each certificate which
represented outstanding shares of Prime Air (Del) before the Merger will be
deemed to evidence ownership of a like number of shares of common stock of Prime
Air (NV) as of the Effective Date. Stock certificates for Prime Air (Del)
should not be forwarded to the Prime Air (Del) or the transfer agent until after
receipt of a transmittal letter and should not be returned with the enclosed
proxy.
Differences in Rights of Prime Air (Del) Shareholders as a Result of the Merger
If the Merger is approved and becomes effective, the shareholders of Prime
Air (Del) will receive a like number of shares of common stock of Prime Air (NV)
in place of each share of common stock of Prime Air (Del). Prime Air (Del) is a
Delaware corporation and Prime Air (NV) is a Nevada corporation. Differences
between the corporation laws of he States of Delaware and Nevada, as well as
differences in the charter and bylaws of the two companies will result in
differences in the rights of Prime Air (Del) shareholders. The material
differences as set forth in the Delaware Corporation Law ("DCL") and the Nevada
Revised Statutes ("NRS") are as follows:
Shareholders' Meetings
Notice. Pursuant to Section 78.370 of the NRS, special or annual meetings
of the shareholders require that written notice must be provided to the
shareholders stating the purpose or purposes for which the meeting is called.
Section 222 of the DCL provides that only for special meetings must the purposes
or purposes of the meeting be stated in the notice.
Proxies. Section 78.355 of the NRS provides that no proxy shall be valid
after the expiration of six months, or, if coupled with an interest, for more
than seven years from the date of its execution. Section 215 of the DCL
provides that no proxy shall be valid after three years, unless the proxy
provides for a longer period.
Action Without a Meeting. Generally, under Section 78.320 of the NRS, any
action by a majority of the voting power of the corporation is sufficient to
take such action without a meeting. Under Section 228 of the DCL, any action
required to be taken at an annual or special meeting of the shareholders may be
taken by written consents of the shareholders if such consents set forth the
action to be taken and are signed by the holders of the outstanding stock having
not less than the minimum number of votes necessary to authorize or take such
action at a meeting.
Court-Ordered Meetings. Section 211 of the DCL provides that the Court of
Chancery may require the holding of an annual meeting of the shareholders if no
such meeting has been held within thirty days following the date designated
therefor or, if no date has been designated, if no such meeting has been held
within thirteen months after the last annual meeting. Section 78.345 of the NRS
provides that a majority of the voting power may demand that an annual meeting
be called if the corporation shall fail to hold an annual meeting within six
months after the time designated therefor.
Election and Removal of Directors
In both Delaware and Nevada, election of directors by the shareholders is
substantially similar. Cumulative voting is generally allowed in both states.
In both Delaware and Nevada the articles of incorporation or an amendment
thereto must specifically provide for cumulative voting. Also, shareholders of
Nevada corporations registered under the Securities Act of 1933 must give notice
to the corporation in advance that a shareholder wishes to cumulate votes (NRS
Section 78.360). Removal of directors in both states is also similar. In
Delaware shareholders may remove one or more directors by majority vote with or
without cause unless the articles of incorporation provide that directors may
only be removed for cause, or in the case of a corporation with cumulative
voting, if less than all the directors are removed, no director may be removed
without cause if the votes cast against his removal would be sufficient to elect
him (DCL Section 141). In Nevada, however, shareholders representing two-thirds
or more of the voting stock are generally required to remove a director from
office (NRS Section 78.335).
Shareholders' Rights to Inspect Financial Records
Delaware corporate law provides that every shareholder has a right to
inspect the corporation's stock ledger, a list of its stockholders, and its
other books and records during reasonable business hours upon written demand
under oath stating the purpose thereof (DCL Section 220). In Nevada,
shareholders of at least fifteen percent of the issued and outstanding shares
may inspect the financial records of the company upon providing five days'
written notice to the corporation (NRS Section 78.257).
Preemptive Rights
Under Nevada corporate law, except to the extent limited or denied by the
articles of incorporation, shareholders have certain preemptive rights to
purchase a corporation's unissued shares (NRS Section 78.265267). In Delaware,
shareholders do not have preemptive rights unless the articles of incorporation
specifically state such rights (DCL Section 102).
Dissenters' Rights
Both Delaware and Nevada provide certain dissenters' rights to protect
minority shareholders. In general, these dissenters' rights give shareholders
the right to receive fair compensation from the corporation for their shares in
the event that the corporation does certain acts with which the shareholders do
not agree. In Delaware shareholders generally have appraisal rights when the
corporation is involved in a merger or consolidation (DCL Section 262).
Likewise, in Nevada shareholders generally have dissenters' rights to receive
payment for the fair value of their shares when the corporation merges into or
consolidates with another corporation (NRS Section 78.505).
Differences in Rights of Prime Air (NV) Shareholders as a Result of the Merger
If the Merger is approved and becomes effective, the par value, rights and
privileges of the common stock issued upon the Merger will be identical in all
respects to the common stock currently outstanding. All currently issued and
outstanding shares of common stock of Prime Air (NV) are held by Prime Air (Del)
and, upon the Effective Date, will be canceled and returned to the authorized
and unissued shares of common stock of Prime Air (NV).
Accounting Treatment
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. Under such accounting treatment,
Prime Air (Del) shareholders will be deemed to have combined their existing
voting common stock interests with the voting common stock interests of the
shareholders of Prime Air (NV) common stock. Accordingly, the historical
accounting values of the assets of Prime Air (Del) and the liabilities and
shareholders' equity of each, as reported on their respective balance sheets,
will be consolidated and no goodwill, if any, will be recorded as a result of
the Merger. Under the pooling of interests method, Prime Air (Del)'s historical
financial statements will be restated to combine the assets, liabilities,
accumulated deficits and results of operations of both companies as reflected in
their respective historical financial statements, subject to appropriate
adjustment, if any, to conform the accounting principles of the two companies.
Resale of Prime Air (Del) Shares
The Shares of common stock of Prime Air (NV) issuable to the shareholders
of Prime Air (Del) in connection with the Merger will be freely transferable
except by shareholders who are deemed to be "affiliates" of Prime Air (NV) on
the Effective Date as such term is used in either Rule 144 or Rule 145 under the
Securities Act of 1933, as amended. All of the affiliates of Prime Air (Del)
will become affiliates of Prime Air (NV).
Federal Income Tax Consequences
The explanation set forth below discusses the material federal income
tax consequences to the shareholders of Prime Air (Del) in the Merger. Kevin
Orton, Certified Public Accountant, has delivered an opinion to Prime Air (Del)
affirming its federal income tax opinion contained herein. Each shareholder of
Prime Air (Del) should consult his own tax advisor as to the specific tax
consequences of the Merger, including application and possible effect of
foreign, state, and local tax laws.
The following is only a general discussion of the federal income tax
consequences of the Merger without regard to the facts and circumstances of any
particular shareholder's situation. Prime Air (Del) has been advised that the
federal income tax consequences of the Merger is consummated in accordance with
the terms of the Merger Agreement will be as follows: (i) no gain or loss will
be recognized by Prime Air (Del) shareholders upon the exchange of all of their
shares of Prime Air (Del) for shares of Prime Air (NV) common stock; (ii) the
holding period of Prime Air (Del) common stock received by each exchanging
shareholder who does not dissent will include the period during which that
shareholder held Prime Air (Del) common stock exchanged therefor, provided that
the Prime Air (Del) common stock was held by such shareholder as a capital asset
on the date of exchange; (iii) no gain or loss will be recognized in connection
with the receipt of a Prime Air (NV) stock option issued in connection with the
performance of services; (iv) subject to certain exceptions, gain or loss will
be recognized by Prime Air (Del) shareholders who exercise dissenters' appraisal
rights with respect to their Prime Air (Del) common stock.
Kevin Orton, Certified Public Accountant, has rendered an opinion to Prime
Air (Del) confirming the above tax consequences in reliance upon representations
of certain officers of Prime Air (Del). This opinion is for the sole use of
shareholders (including dissenting shareholders), option holders, and management
of Prime Air (Del) and may not be relied upon by any other individual or entity.
Rights of Prime Air (Del) Dissenting Shareholders
All of the Prime Air (Del) common stock held by shareholders who have
properly preserved and protected dissenters' appraisal rights pursuant to
Section 262 of the Delaware General Corporation Law will not be converted into
shares of Prime Air (NV) common stock and such holders will have their shares
appraised and purchased in accordance with those provisions.
An owner of Prime Air (Del) who objects to the terms of the Merger may seek
appraisal under Section 262 of the Delaware Corporation Law for a determination
of the fair value of his shares, by complying with the requirements of such
section. A copy of Section 262 is attached as Appendix "B" and is incorporated
herein by this reference. Failure to take any necessary steps will result in a
termination or waiver of the appraisal rights of the shareholders. The
following is a summary of the principal provisions of that Section and does not
purport to be a complete description and is qualified in its entirety, and
reference is hereby made to Section 262 of the Delaware General Corporation Law,
a copy of which is attached as Appendix "B."
(1) A shareholder electing to exercise appraisal rights must (a) deliver
to Prime Air (Del) before the taking of the vote on the Merger agreement a
written demand made by or on behalf of the person who is the holder of record of
the Prime Air (Del) shares for which appraisal is demanded, and (b) not vote in
favor of the adoption of the Merger Agreement. The demand should be delivered
to Prime Air (Del) at 8598 112 Street, Ft. Saskatchewan, Alberta, Canada T8L
3V8; attention: Secretary. A proxy or vote against adoption of the Merger
Agreement does not constitute such a demand for appraisal rights. A shareholder
electing to seek appraisal must do so by a separate written demand that
reasonably informs Prime Air (Del) of the identity of the shareholder of record
and of such shareholder's intention thereby to demand appraisal of his Prime Air
(Del) shares. Because a proxy left blank will, unless revoked, be voted FOR
adoption of the Merger Agreement, a shareholder electing to exercise appraisal
rights who votes by proxy must not leave the proxy blank but must vote against
adoption of the Merger Agreement or abstain from voting for or against adoption
of the Merger Agreement.
(2) Only the holder of record of Prime Air (Del) shares is entitled to
assert appraisal rights for the Prime Air (Del) shares registered in that
holder's name. The demand should be executed by or for the holder of record,
fully and correctly, as the holder's name appears on the holder's stock
certificates. If the Prime Air (Del) common stock is owned of record in a
fiduciary capacity, such as by a trustee, guardian, or custodian, execution of
the demand should be made in that capacity, and if the Prime Air (Del) common
stock is owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand must be executed by or for all owners. An
authorized agent, including one or two or more joint owners, may execute the
demand for appraisal for a holder of record; however, the agent must identify
the record owner or owners and expressly disclose the fact that, in executing
the demand, the agent is acting as agent for the record owner or owners.
A record holder, such as a broker, who holds Prime Air (Del) shares as
nominee for the beneficial owners may exercise a holder's right of appraisal
with respect to the Prime Air (Del) shares held for all or less than all of such
beneficial owners. In such case, the written demand should set forth the number
of Prime Air (Del) shares covered by it. Where no number of Prime Air (Del)
shares is expressly mentioned, the demand will be presumed to cover all Prime
Air (Del) Shares standing in the name of the record owner.
(3) Within 10 days after the Effective Date, Prime Air (Del) is required
to send notice as to the effectiveness of the Merger to each person who prior to
the Effective Date satisfied the foregoing conditions.
(4) Within 120 days after the Effective Date, Prime Air (Del) or any
shareholder who has satisfied the foregoing conditions may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
the Prime Air (Del) shares. Shareholders seeking to exercise appraisal rights
should not assume that Prime Air (Del) will file a petition with respect to the
appraisal of the value of their shares or that Prime Air (Del) will initiate any
negotiations with respect to the "fair value" of such shares. Accordingly,
Prime Air (Del) shareholders should regard it as their obligation to initiate
all necessary action with respect to the perfection of their appraisal rights
within the time periods prescribed in Section 262.
(5) Within 120 days after the Effective Date, any shareholder who has
complied with the requirements for exercise of appraisal rights is entitled upon
written request to receive from Prime Air (Del) a statement setting froth the
aggregate number of Prime Air (Del) shares not voted in favor of the Merger and
with respect to which demands for appraisal have been made, and the aggregate
number of holders of such Prime Air (Del) shares. Prime Air (Del) is required
to mail such statement within 10 days after it receives a written request
therefor.
(6) If a petition for an appraisal is timely filed after a hearing on such
petition, the Delaware Court of Chancery will determine the shareholders
entitled to appraisal rights and will appraise the Prime Air (Del) shares owned
by such shareholders, determining their "fair value" exclusive of any element of
value arising from the accomplishment or expectation of the Merger and will
determine the amount of interest, if any, to be paid upon the value of the Prime
Air (Del) shares of the shareholders entitled thereto. Any such judicial
determination of the "fair value" of the Prime Air (Del) shares could be based
upon considerations other than or in addition to the price paid in the Merger
and the market value of the shares, including asset values, the investment value
and the Prime Air (Del) shares and any other valuation considerations generally
accepted in the investment community. The value so determined for Prime Air
(Del) shares could be more or less than the consideration paid pursuant to the
Merger. The Court may also order that all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorneys' fees and fees and expenses of experts
utilized in the appraisal proceeding, be charged pro rata against the value of
all the Prime Air (Del) shares entitled to appraisal.
(7) Any shareholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Date, be entitled to vote the Prime
Air (Del) shares subject to such demand for any purpose or be entitled to the
payment of dividends or to distributions on those Prime Air (Del) shares (other
than those payable or deemed to be payable to shareholders of record as of a
date prior to the Effective Date).
(8) A shareholder will fail to perfect, or will effectively lose, his
right to appraisal if no petition for appraisal is filed within 120 days after
the Effective Date, or if the shareholder delivers to Prime Air (Del) a written
withdrawal of such shareholder's demand for an appraisal and an acceptance of
the Merger, except that any such attempt to withdraw made more than 60 days
after the Effective Date requires the written approval of Prime Air (Del). In
the event of the failure to perfect appraisal rights or the valid withdrawal of
a demand for appraisal rights, a shareholder will be entitled to receive the
consideration otherwise payable pursuant to the Merger Agreement.
(9) In the event an appraisal proceeding is timely instituted, such
proceeding may not be dismissed as to any shareholder who has perfected his
right of appraisal without the approval of the Delaware Court of Chancery.
PRIME AIR (DEL)
General
Prime Air (Del) was incorporated in the State of Delaware on April 4, 1995.
Prime Air (Del) is the parent of a wholly owned subsidiary, Prime Air (BC), a
company originally incorporated under the laws of the Province of British
Columbia, Canada, on March 10, 1989, under the name "High Mountain Airlines
Inc." for the purpose of establishing air service to serve the Whistler, British
Columbia, Canada, area. Prime Air (BC) has entered into a lease and operating
agreement with the Village of Pemberton, British Columbia, Canada, to plan,
develop, construct, manage, and operate a terminal facility at the Pemberton
Airport. Prime Air (BC) has constructed the basic terminal building and
proposes to facilitate regular, scheduled air service to Pemberton Airport to
serve the nearby resort community of Whistler.
Prime Air (Del) was originally incorporated pursuant to the laws of the
State of Utah on August 30,1993, under the name "Astro Enterprises, Inc." The
Utah corporation changed its name to "Prime Air, Inc." on June 28, 1994.
In June 1994 the Utah corporation originally incorporated as Astro
Enterprises, Inc. entered into an agreement with Prime Air (BC) designated as a
"Merger Agreement" in which the shareholders of Prime Air (BC) exchanged all of
the outstanding shares of Prime Air (BC) for a controlling number of shares of
the Utah corporation, such that upon completion of the exchange, the
shareholders of Prime Air (BC) owned approximately 90% of the outstanding shares
of the Utah corporation and Prime Air (BC) became a wholly owned subsidiary of
the Utah corporation. The transaction was not a statutory merger. Management
believes that the closing of such agreement was effected on June 28, 1994. In
connection with the exchange of shares, the Utah corporation effected a one-for-
one hundred reverse split of its outstanding shares effective June 28, 1994,
immediately prior to such closing. As a result of the stock-for-stock exchange,
the former shareholders of Prime Air (BC) received 2,700,000 post-reverse spit
shares, the 170 existing shareholders of the Utah corporation retained 120,000
post-reverse split shares, and the Worthington Company, an entity controlled by
Mr. Paul Parshall, retained 180,000 post-reverse split shares. In addition, the
Worthington Company received consulting fees totaling $70,000 US from Prime Air
(BC) for services performed in connection with the reorganization. Also, as a
part of the reorganization, Mr. Parshall resigned as the sole director of the
Utah corporation and appointed Mr. Blaine Haug as the sole director. Also in
connection with the reorganization, the name of the Utah corporation was changed
to Prime Air, Inc. and the number of authorized shares of Common Stock of the
Utah corporation was changed to 25,000,000 shares, par value $0.001.
On or about April 4, 1995, the Utah corporation effected a change of
domicile to the State of Delaware by incorporating Prime Air (Del), acquiring
all of the assets and liabilities of the Utah corporation, and issuing shares of
the Delaware corporation to the shareholders of the Utah corporation on a one-
for-one basis. The Utah corporation was voluntarily dissolved by the State of
Utah on May 18, 1995. The change of domicile was initiated and completed based
upon the recommendations of Mr. Paul Parshall, an officer and director of the
Utah corporation at such time.
The original purpose of the Utah corporation, as set forth in its articles
of incorporation, was to acquire the assets and certain liabilities of another
Utah corporation previously dissolved by the State of Utah on June 1, 1993, and
also incorporated under the name "Astro Enterprises, Inc." Current management
of Prime Air (Del), none of whom were affiliated with the Utah corporation prior
to the share exchange in June 1994, believe that the former management of the
Utah corporation at the time of its incorporation issued approximately 120,000
shares of the company's common stock to the shareholders of the dissolved Utah
corporation of the same name thus creating approximately 170 shareholders of the
Utah corporation. Management does not believe that any other relationship
existed between the two entities or with former management of the dissolved Utah
corporation.
Legal Proceedings
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 Prime Air (Del).
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 Prime Air (Del). However, the
allegations contained in such action reference events all of which occurred
prior to the incorporation of the predecessor to Prime Air (Del) in 1993.
In May 1996 Prime Air (Del) entered into a settlement agreement and
undertaking with the Alberta Securities Commission (file number 100164) in which
Prime Air (Del) agreed to be more diligent in complying with the requirements of
the Alberta Securities Act and the rules made thereunder. In addition, Prime
Air (Del) paid $2,000 to the commission toward the costs of the investigation
conducted by the Commission. In February 1996 Prime Air (Del) announced an
offering of its common shares in Alberta newspapers. Between February 1 and
March 1, 1996, Prime Air (Del) 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, Prime
Air (Del) placed all investment monies in trust pending the disposition of the
matter. Thereafter Prime Air (Del) 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.
Airport Lease and Operating Agreement
On October 29, 1993, Prime Air (BC) entered into a Lease and Operating
Agreement (the "Airport Agreement") with the Corporation of the Village of
Pemberton, British Columbia, Canada (hereinafter the "Village of Pemberton"), in
which Prime Air (BC) agreed to undertake the planning, development,
construction, management, and operation of a terminal facility at the Pemberton
Airport. In return the Village of Pemberton granted to Prime Air (BC) an
exclusive lease involving certain lands located at the Pemberton Airport to
enable Prime Air (BC) to undertake the planning, development, construction,
management, and operation of a terminal facility.
The Pemberton Airport is approximately 20 miles north of Whistler Resort on
Highway 99. Whistler Resort is a ski resort located at the base of Whistler
Mountain and Blackcomb Mountain approximately 75 miles north of Vancouver,
British Columbia, Canada. The resort has approximately 6,800 permanent
residents and attracts approximately 1,500,000 visitors annually. Currently
only ground transportation is available to the resort, except for private
flights into Pemberton Airport. The nearest airport facility to Whistler Resort
is Pemberton Airport. There is presently no regular air service into Pemberton
Airport.
The Airport Agreement provides that Prime Air (BC) must construct a
terminal facility on or before October 21, 1994, which date was extended to June
1, 1996, by the Council for the Village of Pemberton. Prior to such extended
date, Prime Air (BC) completed a the terminal facility at the Pemberton Airport.
The terminal constructed by Prime Air (BC) has a total square footage of 11,200
square feet, of which approximately 5.500 of interior space has been finished
and is ready for its intended use as an airport terminal. The finished consists
of an arrival and departure lounge, baggage holding area, office, two public
washrooms with a total of 14 cubicles, reception area, and a utility room.
There is also a water and a waste treatment plant housed in a separate building.
The total construction costs of the facility were $644,740 ($592,949 for the
terminal building, $20,989 for engineering and design, $18,699 for environmental
work; and $12,103 for insurance and permits) and were financed through the sale
of Prime Air (Del)'s stock. There is currently no debt against the terminal
building. The initial term of the Airport Agreement, and the right of Prime Air
(BC) to operate the terminal facility, was two years with provisions allowing
Prime Air (BC) to extend such initial term for addition terms totaling in the
aggregate thirty years, provided that Prime Air (BC) shall continue to fulfill
its obligations under the Airport Agreement, including the payment of rent in
the amount of $100 per year for the first five years, and the payment of $2,500
per year thereafter, plus 5% of the gross receipts derived from the operation of
the terminal facility. The Airport Agreement also grants to Prime Air (BC) the
option to lease and use certain other lands at the Pemberton Airport for fixed
base operations. The Airport Agreement may be terminated by the Village of
Pemberton in the event of a material default by Prime Air (BC) or if Prime Air
shall become bankrupt. The terminal facilities shall become the property of the
Village of Pemberton at the expiration of the Airport Agreement.
Air Service
Prime Air (BC) initially intends to establish scheduled and charter
passenger and cargo air service between Vancouver International Airport and
Pemberton Airport. Thereafter, Prime Air (BC) will seek to establish such
services between Pemberton Airport and other Canadian and United States
destinations. Prime Air (BC) has entered into a Memorandum of Agreement dated
January 5, 1995 (the "Voyageur Agreement"), with Voyageur Airways Limited, an
Ontario corporation ("Voyageur") to provide the initial service by supplying,
operating, and maintaining DeHavilland Dash-7 aircraft to provide scheduled and
charter passenger and cargo service, from Vancouver International Airport, and
thereafter from other Canadian and United States locations, to the Pemberton
Airport. The Voyager Agreement provides that Prime Air (BC) will operate the
terminal facility at Pemberton Airport and the scheduled and charter passenger
and cargo service, and will market the air services. Voyageur will provide the
certifications, authorizations, expertise, facilities, personnel, and resources
necessary to operate, maintain and service the aircraft. The parties intend to
negotiate and enter into a definitive agreement prior to commencing operations.
Government Regulation and Licensing
Any corporation conducting commercial air service operations in Canada must
possess a valid Operating Certificate and other licenses, permits,
accreditations and certificates that are issued and administered by Transport
Canada. Qualification for the required Operating Certificate requires that:
1. the operator (being the entity actually providing the air service
operations) must have at least one aircraft registered under its Operating
Certificate. This aircraft may either be owned directly or dry leased by
the operator;
2. the aircraft utilized by the operator must be approved and
certified in Canada;
3. in respect of a domestic Canadian air service, the operator must
satisfy the statutory Canadian ownership criteria which essentially
requires that 75% of the voting interest in the operator is controlled by
Canadian citizens or permanent residents of Canada:
4. the management of the operator must include a chief pilot who
holds appropriate Canadian certification;
5. all of the operator's pilots must meet proficiency standards and
hold sufficient ratings to operate the type of aircraft being utilized;
6. the operator must demonstrate and certify that it will be able to
carry out maintenance of its aircraft according to regulated standards.
Such maintenance can either be conducted directly by the operator or
subcontracted to a qualified maintenance facility; and
7. an operations manual must be prepared for the operator and
approved by Transport Canada.
Voyageur will conduct all in-flight operations as an independent contractor
to Prime Air (BC). Management of Prime Air (BC) believes that Voyageur meets
all of the criteria set forth above.
Voyageur will be responsible for the carriage of full flight and ground
risk insurance including aircraft hull and passenger and third party liability
for the operations conducted by Voyageur. Prime Air (BC) will be responsible
for insuring the terminal building and property at the Pemberton Airport and for
passenger liability at the airport terminal operation.
Voyageur will be responsible for any environmental damage caused by the
operation and maintenance of its aircraft. Prime Air (BC) will be responsible
for any environmental damage caused by the operation and maintenance of its
aircraft.
Marketing
Prime Air (BC) intends to hire two industry professionals to spearhead
its sales drive by making direct sales calls to key tour wholesalers and
operators, attending travel, ski, and golf shows, and calling on connector
airlines and hotel groups. Particular emphasis will be placed on targeting
certain geographic regions which traditionally provide the greatest number of
visitors to Whistler. Management believes also that a major part of the
marketing strategy will involve seeking a major international airline and
negotiating Whistler as a final destination in their ticketing and
reservations.
Competition
Prime Air (BC) will compete with other charter and airline companies based
in the Vancouver and Seattle area which currently service customers whose final
destination is Whistler Resort. To a limited degree the company will compete
with buses chartered or owned by tour operators. Most of these entities are
more established companies having much greater financial resources, experience,
and personnel resources than Prime Air (BC).
Selected and Summary Financial Information
Management's Discussion and Analysis of Financial Condition
Prime Air (Del) is a development stage company and conducts all operations
through its wholly owned subsidiary, Prime Air (BC). Prime Air (Del) has had no
material revenues in the past. During the year ended December 31, 1996, the
only income received was bank interest of $2,329.
During the last three years, the operations of the Company has been funded
from equity participation of the owners. Total cash raised from equity funding
from March 92 to December 31, 1994 was $349,808, $131,755 for 1995 and $756,763
for 1996.
The Company has realized a cumulative loss of $495,209 since March 1992,
and anticipates similar losses until operations begin, which is expected in the
fall of 1997.
The Company has sufficient working capital to meet its' immediate
obligations, but does not have any cash available to allow operations to
commence.
In the event that operations commence during the next twelve months, the
Company's anticipated cash requirements will be approximately $1,400,000.
Prime Air (BC)'s sole fixed obligation is the payment of $CND100 per annum
to the Village of Pemberton under the terms of its Airport Lease and Operating
Agreement. At present the company also expects to pay an additional $50,000 in
the current year to cover legal fees, insurance, and property taxes, regardless
of the date of operations commencement.
The Company intends to begin flight operations in the fall of 1997 when it
is anticipated that flights will start between Vancouver and Pemberton. In the
interim, the company will be implementing its marketing plan as set forth
herein. (See "Prime Air (Del)--Marketing.")
An agreement has been signed with British West Industries Securities
engaging their services is an attempt to raise the sum of $3 million by way of
an equity issue. The surplus of these funds will be available for working
capital purposes, but management believes that operations will generate
sufficient cash flow to cover operating expenses and any further capital
expenditure. No significant purchases of equipment, other than outlined above,
are anticipated in the next year.
Should operations commence during the next twelve months, the Company
expects to hire approximately seven employees to handle terminal operations and
marketing.
Market Information
The Common Stock of Prime Air Delaware was traded in the over-the-counter
market on the OTC Electronic Bulletin Board through approximately July 23, 1996,
and from March 27, 1997 until present. There is currently no established public
trading market for the Common Stock. The table below sets forth for the periods
indicated the high and low bid quotations as reported by the OTC Bulletin Board.
These quotations reflect inter-dealer prices, without retail market-up, mark-
down, or commission and may not necessarily represent actual transactions.
Quarter High Low
FISCAL YEAR ENDED
DECEMBER 31, 1995 First $1.01 $0.25
Second $0.625 $0.375
Third $0.75 $0.3125
Fourth $0.625 $0.25
FISCAL YEAR ENDED
DECEMBER 31, 1996 First $0.50 $0.25
Second $0.9375 $0.4375
Third $0.75 $0.25
Fourth -- --
FISCAL YEAR ENDING
DECEMBER 31, 1997 First $0.25 $0.25
Second $1.125 $0.25
None of the shares of Common Stock is subject to outstanding options or
warrants to purchase, or securities convertible into, the Common Stock of Prime
Air (Del). As of May 1 , 1997, Prime Air (Del) had 4,394,530 shares of its
Common Stock, or approximately 62% of the total outstanding shares, which were
restricted as defined in Rule 144 promulgated by the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. Of these shares,
approximately 3,072,478 were believed to have satisfied the one-year holding
requirement and to be available for sale pursuant to said Rule as of May 1,
1997. None of the shares of Common Stock is being, nor have any shares been
proposed to be, publicly offered by Prime Air (Del).
As of May 1, 1997, there were approximately 316 holders of record of the
Common Stock as reported to Prime Air (Del) by its transfer agent.
No cash dividends have been declared or paid as yet on the Common Stock and
the Board of Directors of Prime Air (Del) has not established a dividend policy.
Consulting Contract
Prime Air (Del) entered into a consulting contract (the "Consulting
Agreement") on June 10, 1996, with Siverthorn Investments, Ltd. (the
"Consultant") in which Prime Air (Del) agreed to retain the services of the
Consultant through June 1, 2000, unless earlier terminated as provided in the
Consulting Agreement. Pursuant to the terms of the Consulting Agreement, the
Consultant is required to be available for a minimum of 60 business days per
year to provide consulting and assistance as may be necessary to assist in
facilitating the full operations of Prime Air (Del)'s business. In return,
Prime Air (Del) has agreed to pay the Consultant $100 per hour for such
services. At the option of Prime Air (Del) 75% of the amount due may be paid to
the Consultant in the form of common stock of Prime Air (Del), based upon the
average of the last three months closing bid prices for the common shares. The
Consultant is controlled by Matthew Smith who is also the assistant secretary of
Prime Air (Del). The Merger Agreement provides that Prime Air (NV) shall assume
the obligations of such agreement.
LEGAL MATTERS
The due issuance of the shares of Prime Air (NV) to be issued in connection
with the Merger is being passed upon for Prime Air (NV) by Ronald N. Vance,
Attorney at Law, 57 West 200 South, Suite 310, Salt Lake City, Utah 84101,
counsel for Prime Air (NV).
INDEPENDENT PUBLIC ACCOUNTANTS
Rutherford & Company, Chartered Accountants, Richmond, British Columbia,
Canada, has been the independent public accounting firm of Prime Air (Del) since
the fiscal year 1995. Representatives of Rutherford & Company are not expected
to be present at the Special Meeting.
Orton & Company, Certified Public Accountants, Salt Lake City, Utah, has
been the independent public accounting firm of Prime Air (NV) since its
inception in 1996. Representatives of Orton & Company are not expected to be
present at the Special Meeting.
EXPERTS
The consolidated financial statements of Prime Air (Del) for the years
ended December 31, 1996 and 1995, have been examined by Rutherford & Company,
Chartered Accountants, as set forth in its report attached hereto. The
financial statements referred to above are incorporated herein by reference in
reliance upon such report and upon authority of such firm as experts in auditing
and accounting.
The financial statements of Prime Air (NV) for the year ended December 31,
1996, have been examined by Orton & Company, Certified Public Accountants, as
set forth in its report attached hereto. The financial statements referred to
above are incorporated herein by reference in reliance upon such report and upon
authority of such firm as experts in auditing and accounting.
SHAREHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next annual
meeting of shareholders must be received by the secretary at the offices of
Prime Air (Del) (or Prime Air (NV), if the Merger is approved) no later than
November 1, 1997, in order to be included in the company's proxy statement and
form of proxy relating to that meeting.
OTHER INFORMATION
As of the date of this Proxy Statement/Prospectus, the Board of Directors
knows of no other matters to be presented for action at the Special Meeting. If
other matters are properly presented, the persons named in the proxy intend to
vote in accordance with their best judgment on such matters.
INDEX TO FINANCIAL STATEMENTS
Prime Air (Del)
Auditor's Report.........................................................
Consolidated Balance Sheets at March 31, 1997, and December 31, 1996 and
1995..........................................................................
Consolidated Statements of Loss and Deficit for the period ended March 31,
1997, and the years ..........................................................
ended December 31, 1996 and 1995........................................
Consolidated Statement of Cash Flow for the period ended March 31, 1997,
and the years ended ..........................................................
December 31, 1996 and 1995..............................................
Notes to Financial Statements............................................
Prime Air (NV)
Independent Auditor's Report.............................................
Balance Sheet at March 31, 1997, and December 31, 1996...................
Statement of Operations for the period ended March 31, 1997, and the year
ended December 31, ...........................................................
1996
Statement of Stockholders' Equity from inception to March 31, 1997.......
Statement of Cash Flows for the period ended March 31, 1997..............
Notes to Financial Statements............................................
Proforma Financial Statements
Proforma Consolidated Balance Sheets at December 31, 1996 and 1995.......
Proforma Consolidated Statements of Operations for the years ended December
31, 1996 and .................................................................
1995
Consolidated Statement of Cash Flows for the years ended December 31, 1996
and 1995......................................................................
Notes to Proforma Consolidated Financial Statements......................
PRIME AIR INC.
(A Development Stage Company)
(A Delaware Corporation)
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND DECEMBER 31, 1996 AND 1995
Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity and Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
AUDITORS' REPORT
To the Shareholders of
PRIME AIR INC. (A Delaware Corporation)
We have audited the consolidated balance sheets of PRIME AIR INC. (A
Development Stage Company) as at December 31, 1996 and 1995 and the consolidated
statements of operations, shareholders' equity and deficit and cash flows for
the years then ended. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We have conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1996 and 1995
and the results of its operations and cash flows for the years then ended in
accordance with generally accepted accounting principles.
As reported in Note 1 to these financial statements, the amounts presented
therein as at and for the three-month period ended March 31, 1997 and for the
period from the date of inception of this organization as a development stage
company on March 10, 1989 to March 31, 1997 have been compiled from information
provided by management. We have not audited, reviewed or otherwise attempted to
verify the accuracy or completeness of such information. Readers are cautioned
that these statements may not be appropriate for their purposes.
Richmond, Canada
July 26, 1997 Chartered Accountants
COMMENTS BY AUDITOR FOR U.S. READERS
ON CANADA-U.S. REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition
of an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the company's ability to continue as a going concern, such as those described in
Note 2 to the financial statements. Our report to the shareholders dated July
14, 1997 is expressed in accordance with Canadian reporting standards which do
not permit a reference to such events and conditions in the auditors' report
when these are adequately disclosed in the financial statements.
Richmond, Canada
July 26, 1997 Chartered Accountant
PRIME AIR, INC.
(A Develoment Stage Company)
CONSOLIDATED BALANCE SHEETS
(all figures in US dollars)
<TABLE>
<CAPTION>
March 31, December 31, December 31,
1997 1996 1995
(Unaudited) (Audited) (Audited)
(Note 1)
ASSETS
<S> <C>
Current assets
Cash and short-term deposits $ 111,167 $ 101,314 $ 4,575
Prepaid expenses and deposits 11,301 12,592 1,093
GST recoverable 34,607 51,208 17,012
Capital assets (Note 4) 622,352 620,208 314,370
$ 779,427 $ 785,322 $ 337,050
LIABILITIES
Current liabilities
Accounts payable and accruals $ 91,119 $ 158,174 $ 230,803
Notes and advances payable 35,736 9,067 3,642
(Note 5)
Notes and advances from
related parties (Note 6) 25,583 25,522 28,344
152,438 192,763 262,789
SHAREHOLDERS' EQUITY
Capital Stock (Note 7)
Authorized:
25,000,000 common shares
with a stated par value
of $.001/share
3,000,000 preferred
cumulative convertible
shares with a stated par
vale of $.001/share
Issued:
6,666,363 common shares 6,666 6,557 3,563
(December 31, 1996: 6,556,781;
December 31, 1995: 3,562,550)
Share subscription receivable (20) (20) (20)
Capital in excess of par value 1,279,926 1,225,244 451,524
1,286,572 1,231,781 475,067
Accumulated deficit during
development stage (659,583) (639,222) (400,806)
626,989 592,559 74,261
$ 779,427 $ 785,322 $ 337,050
</TABLE>
Approved on behalf of the board:
Director
Director
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(all figures in US dollars)
<TABLE>
<CAPTION>
Period From
Date of Inception
Three Months Years Ended on March 10, 1989
March 31, December 31, to March 31,
1997 1996 1995 1997
(unaudited) (audited) (audited) (unaudited)
(Note 1) (Note 1)
<S> <C>
Direct costs
Flight operations $ - $ 114,720 $ - $ 114,720
Administrative and general
Audit and accounting - 10,140 11,967 26,373
Advertising 222 9,017 77 9,316
Amortization 5,533 21,809 306 27,648
Automotive - - 4,369 19,164
Consulting fees - 7,156 (426) 69,785
Insurance 1,624 6,342 - 7,966
Interest and service
charges 104 7,547 249 7,900
Legal - 25,610 - 25,610
Management remuneration - - 16,265 77,287
Office and general 3,355 5,728 11,319 78,432
Promotion and
entertainment 753 2,702 7,649 22,046
Rent - 2,399 4,095 34,324
Telephone and utilities 2,000 14,865 7,385 39,522
Transfer agent 1,200 7,149 4,080 12,429
Travel 6,862 11,172 4,495 32,277
21,653 131,636 71,830 495,079
Other income
(expense)
Gain (loss) on foreign
exchange conversion (411) 5,581 564 24,678
Interest income 1,703 2,359 - 4,062
1,292 7,940 564 28,740
Net loss before non-
recurring item (20,361) (238,416) (71,266) (581,059)
Non-recurring expense
Consulting costs to - - - 78,524
set up US corporation
Net loss for period $(20,361) $(238,416) $ (71,266) $ (659,583_
Net loss per common
share $ 0.0031 $ 0.0424 $ 0.0223
Weighted average
common shares
outstanding 6,548,177 5,624,974 3,193,273
</TABLE>
PRIME AIR, INC.
(a Development Stage Company)
Consolidated Statements of Shareholders' Equity and Deficit
(all figures in US dollars)
<TABLE>
<CAPTION>
Capital in Accumulated
Excess of Share Deficit During
Common Shares (Less than) Subscriptions Development
Shares Amount Par Value Receivable Stage
<S> <C>
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
Mach 31, 1991 - - - - (49,419)
Balance, March
31, 1991 787,796 788 - - (67,375)
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 of
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
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
period 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
period 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
period 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 $.500/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
period ended
December 31, 1996 - - - - (238,416)
Balance, December
31, 1996 6,556,781 6,557 1,225,244 (20) (639,222)
Issue of common
shares for debt
settlement at
$.500/share 109,582 109 54,681 - -
Net loss for the
period ended
March 31, 1997 - - - - (20,361)
Balance, March
31, 1997 6,666,363 $ 6,666 $ 1,279,925 $ (20) $ (659,583)
</TABLE>
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(all figures in US dollars)
<TABLE>
<CAPTION>
Period From
Date of Inception
Three Months Years Ended on March 10, 1989
March 31, December 31, to March 31,
1997 1996 1995 1997
(unaudited) (audited) (audited) (unaudited)
(Note 1) (Note 1)
<S> <C>
NET INFLOW (OUTFLOW) OF
CASH RELATED TO THE
FOLLOWING ACTIVITIES
OPERATING
Net loss $ (20,631) $ (238,416) $ (71,266) $ (659,583)
Non-cash charge-
amortization 5,533 21,809 306 27,648
Change in non-cash
working capital
balances relating
to operations (49,163) (118,373) 208,589 37,878
(63,991) (334,980) 137,629 (594,057)
FINANCING
Notes and advances
payable 26,669 5,425 (5) 35,736
Notes and advances
from related
parties 61 (2,822) 28,344 25,583
Issue of capital
stock 54,791 756,763 131,755 1,293,905
81,521 759,366 160,094 1,355,224
INVESTING
Acquisition of
capital assets (7,677) (327,647) (302,017) (650,000)
NET CASH INFLOW
(OUTFLOW) 9,853 96,739 (4,294) 111,167
CASH, BEGINNING
OF PERIOD 101,314 4,575 8,869 -
CASH, END OF 111,167 101,314 4,575 111,167
PERIOD
</TABLE>
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 and December 31, 1996 and 1995
1. INCORPORATION, PRINCIPLES OF CONSOLIDATION AND ACCOUNTING PRRESENTATION
The Company was incorporated under the laws of the State of Delaware, USA on
April 4, 1995 and acquired all of the assets, liabilities and shareholders of a
previous Utah Corporation of the same name. The Utah Corporation was
reincorporated on August 30, 1993 as Astro Enterprises, Inc. On June 28, 1994,
pursuant to appropriate shareholder agreements, Astro Enterprises, Inc. 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. Upon incorporation of the Delaware Company, the Utah Corporation was
dissolved on May 15, 1995.
On November 10, 1996, Prime Air Inc. (a Nevada Corporation) was formed, the
purpose of which is to change the domicile of the Company to the State of
Nevada. Prime Air Inc. (Nevada) is a wholly-owned subsidiary of Prime Air Inc.
(Delaware); however, to July 14, 1997, it has engaged in no activities except in
relation to the organization of that entity.
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.
Financial statements as at and for the three-month period ended March 31, 1997
and for the period from the date of inception of this organization as a
development stage company on March 10, 1989 to March 31, 1997 are presented
herein for information purposes only. These financial statements are unaudited
and accordingly no audit opinion has been expressed thereon.
2. NATURE OF OPERATIONS/GOING CONCERN CONSIDERATIONS
The Company is presently in its developmental stage and currently has minimal
sources of revenue to provide incoming cash flows to sustain future operations.
The Company's present activities relate to the construction and ultimate
exclusive operation of an international passenger and cargo air terminal
facility in the Village of Pemberton, British Columbia and the operation of
scheduled flight services between that facility and certain major centers in
Canada and the United States in conjunction with Voyageur Airways Limited.
Terminal building construction was substantially completed in May 1996. The
future successful operation of the Company is dependent upon its ability to
obtain the financing required to complete the terminal construction and commence
operation thereof on an economically viable basis.
These consolidated financial statements have been prepared on a "going concern"
basis which assumes the company will be able to realize its assets, obtain the
required financing and discharge its liabilities and commitments in the normal
course of business.
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 and December 31, 1996 and 1995
3. SIGNIFICANT ACCOUNTING POLICIES
Reporting Currency
All amounts in these consolidated financial statements are reported in U.S.
funds, being converted from Canadian funds where applicable at the average
annual rate as posted by the Internal Revenue Service of the United States
as follows:
1997: $ 0.7394 U.S. / $ 1. CDN.
1996: $ 0.7334 U.S. / $ 1. CDN.
1995: $ 0.7284 U.S. / $ 1. CDN.
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", approximate their fair
market value.
Receivables and Prepaid Expenses
All amounts reported as receivables or prepaid expenses and deposits 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 thereof which is provided on a straight-line basis over the 30
year term of the property lease.
Furniture and Equipment: Furniture and equipment are 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's estimates. Actual results could differ from the use of those
estimates.
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 and December 31, 1996 and 1995
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting For Income Taxes", in the fiscal year ended December 31, 1996
and has applied the provisions of that statement on a retroactive basis to
the previous fiscal year which resulted in no significant adjustment.
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, 1996 and earlier years
and accordingly, no deferred tax liabilities have been recognized for all
years.
The Company had cumulative net operating loss carryforwards of
approximately $640,000 at December 31, 1996 and $ 400,000 at December 31,
1995. No effect has been shown in the financial statements for these
carryforwards as the likelihood of future tax benefit from such is not
presently determinable. The potential income tax benefits of the net
operating loss carryforwards of approximately $150,000 at December 31, 1996
and $95,000 at December 31, 1995 (based upon current income tax rates) have
been offset by valuation reserves of the same amount. The net operating
losses begin to expire in the year 1997.
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 and December 31, 1996 and 1995
4. CAPITAL ASSETS
Capital assets consist of the following at March 31, 1997, December 31,
1996 and December 31, 1995:
<TABLE>
<CAPTION>
March 31, 1997
Accumulated Net Book
Cost Amortization Value
<S> <C>
Air terminal construction costs $ 644,740 $ 26,572 $ 618,168
Furniture and equipment 5,260 1,076 4,184
$ 650,000 $ 27,648 $ 622,352
December 31, 1996
Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 639,490 $ 21,304 $ 618,186
Furniture and equipment 2,836 814 2,022
$ 642,326 $ 22,118 $ 620,208
December 31, 1995
Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 313,146 $ - $ 313,146
Furniture and equipment 1,530 306 1,224
$ 314,676 $ 306 $ 314,370
</TABLE>
5. NOTES AND ADVANCES PAYABLE
The notes and advances payable are unsecured, non-interest bearing and are
without specific terms of repayment.
6. RELATED PARTY TRANSACTIONS
During the year ended December 31, 1996, the Company paid no remuneration to
any director (year ended December 31, 1995: $16,265).
Directors have advanced funds to the Company in the amount of $ 25,522 to
December 31, 1996 (1995: $28,344). These advances are unsecured, non-interest
bearing and are without specific terms of repayment.
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 and December 31, 1996 and 1995
7. CAPITAL STOCK
Authorized:
25,000,000 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
Common Shares Issued:
<TABLE>
<CAPTION>
Number of Shares Consideration
<S> <C>
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 period ended March 31, 1997
-shares-for-debt
settlement (Note 8) 109,582 54,791
Balance, March 31, 1997 6,666,363 $ 1,293,905
</TABLE>
The directors of the Company have authorized the issue of up to a further
500,000 common shares in the form of a director, officer and employee stock
options at a price to be determined. The granting of these options is subject
to the receipt of regulatory approval.
In July, 1996, management of the Company voluntarily halted trading of its
common shares based upon the conclusion that information concerning the history
of the Company provided by former management may not have been complete.
Adequate information was subsequently provided to the public by management and
trading was recommenced on March 27, 1997. The Company is in the process of
preparing a registration statement in connection with the proposed change of
domicile (referred to in Note 1) to register all of the outstanding common
shares of capital stock in the Company.
8. SHARES-FOR-DEBT SETTLEMENT
The major supplier of flight operations services to the Canadian subsidiary
corporation agreed to settle a portion of its outstanding account through the
receipt of free-trading common shares of capital stock of the Company. The
amount settled of $54,791 represents 109,582 common shares to be issued at a
deemed price of $ 0.50 /share. The shares were issued in March, 1997.
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 and December 31, 1996 and 1995
9. 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:
$100 per annum for the initial six (6) years (1993 through 1998); 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 1999 through 2001 cannot be quantified as the amount of gross
receipts for those years cannot be determined.
PRIME AIR, INC.
(a development stage company)
Financial Statements
March 31, 1997
C O N T E N T S
Accountants' Report .................................................... 3
Balance Sheets ......................................................... 4
Statements of Operations ............................................... 5
Statements of Stockholders' Equity...................................... 6
Statements of Cash Flows ............................................... 7
Notes to the Financial Statements ...................................... 8
ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders
Prime Air, Inc.
We have compiled the accompanying balance sheets of Prime Air, Inc. (a Nevada
corporation) (a development stage company) as of March 31, 1997 and the related
statements of income, stockholders' equity and cash flows for the period then
ended in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited the
accompanying 1997 financial statements and, accordingly, do not express an
opinion or any other form of assurance on them.
The financial statements for the year ended December 31, 1996 were audited by us
and we expressed an unqualified opinion on them in our report dated April 23,
1997 but we have not performed any auditing procedures since that date.
Salt Lake City, Utah
June 17, 1997
Prime Air, Inc.
(a development stage company)
Balance Sheets
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1997 1996
<S> <C> (unaudited) (audited)
CURRENT ASSETS
Cash $ 10 $ 10
Total Current Assets 10 10
OTHER ASSETS
Organizational costs (Note 1) 618 652
TOTAL ASSETS $ 628 $ 662
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 525 $ 525
Accrued expenses 500 500
Total Current Liabilities 1,025 1,025
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000 shares
at $.001 par value; 0 shares outstanding - -
Common stock authorized 50,000,000 shares
at $.001 par value, 10 shares issued and
outstanding 1 1
Capital in excess of par value 9 9
Retained earning (accumulated during
the development stage) (407) (373)
Total Stockholders' Equity (397) (363)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 628 $ 662
</TABLE>
Prime Air, Inc.
(a development stage company)
Statement of Operations
For the Periods Ended
<TABLE>
<CAPTION>
For the Period
from Inception
(November 8,
March 31, December 31, 1996) to March
1997 1996 31, 1997
(unaudited) (audited) (unaudited)
<S> <C>
REVENUE
Total Revenue $ - $ - $ -
EXPENSES
General and Administrative
Expense 314 373 407
Total Expenses 314 373 407
Net (loss) before provision
for taxes (314) (373) (407)
Provision for Taxes (Note 1) - - -
Net income (loss) $ (314) $ (373) $ (407)
Loss Per Share (Note 1) $ (3) $ (37) $ (40)
Average shares outstanding 10 10 10
</TABLE>
Prime Air, Inc.
(a development stage company)
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Capital in
Common Stock Excess of Retained
Shares Amount Par (Deficit)
<S> <C>
Balance, November 8, 1996 - - $ - $ -
Issuance of shares for cash
at $1 per share 10 1 9 -
Net (loss) for the year - -
Balance, June 30, 1996 10 1 9 (373)
Net (loss) for the period - - - (34)
Balance, March 31, 1997 10 $ 1 $ 9 $ (407)
</TABLE>
Prime Air, Inc.
(a development stage company)
Statements of Cash Flows
<TABLE>
<CAPTION>
For the Period
from Inception
(November 8,
March 31, December 31, 1996) to March
1997 1996 31, 1997
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (34 ) $ (373 ) $ (407)
Items not requiring cash flow:
Amortization 34 23 57
Increase in accrued expenses
and accounts payable - 1,025 1,025
Net Cash (Used) by
Operating Activities - 675 675
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for:
Organization costs - (675 ) (675)
Net Cash (Used) by
Investing Activities - (675 ) (675)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock - 10 10
Net Cash Provided by
Financing Activities - 10 10
NET INCREASE (DECREASE) IN CASH $ - $ 10 $ 10
CASH AT BEGINNING OF PERIOD 10 - -
CASH AT END OF PERIOD $ 10 $ 10 $ 10
Supplemental Cash Flow Information
Cash paid for:
Interest $ - $ - $ -
Taxes $ - $ - $ -
$ - $ - $ -
</TABLE>
PRIME AIR, INC.
(a development stage company)
Notes to the Consolidated Financial Statements
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated in the State of Nevada on November 8, 1996
as a wholly owned subsidiary of Prime Air, Inc. (Delaware). It is the
intention of management of Prime Air, Inc. (Delaware) to merge with Prime
Air, Inc. (Nevada) to effect a change of domicile to Nevada.
Loss Per Share
The computations of loss per share of common stock are based on the
weighted average number of shares outstanding at the date of the
financial statements.
Provision for Income Taxes
No provision for income taxes has been recorded due to net operating loss
carryforwards totaling approximately $350 as of December 31, 1996 that
will be offset against future taxable income. These NOL carryforwards
begin to expire in the year 2012.
Deferred tax assets and the valuation account is as follows at December
31, 1996:
Deferred tax asset:
NOL carryforward $ 100
Valuation allowance (100)
Total $ -
Cash and Cash Equivalents
For the purposes of the statements of cash flows, cash and cash
equivalents are defined as demand deposits at banks and certificates of
deposits with maturities less than three months.
Organization Costs
Organization costs of the Company are being amortized over 60 months.
Total amortization costs for 1996 were $23. Total amortization for the
three months in 1997 was $34.
Development Stage Company
The Company has yet to fully develop any material income from its stated
primary objective and it is classified as a development stage company.
All income, expenses, cash flows and stock transactions are reported
since inception (November 8, 1996).
NOTE 2 - RELATED PARTY TRANSACTIONS
During the year, the parent corporation has provided loans for operating
cash for the organization of the Company. Total loans made to the
Company during 1996 were $525. The loans are non-interest bearing and
payable on demand.
NOTE 3 - USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting
period. In these financial statements, assets, liabilities and earnings
involve extensive reliance on management's estimates. Actual results
could differ from those estimates.
PRIME AIR, INC.
(a Development Stage Company)
Proforma Financial Statements
March 31, 1997
PRIME AIR, INC.
(A DEVELOPMENT STAGE COMPANY)
PROFORMA CONSOLIDATED BALANCE SHEETS
(ALL FIGURES IN US DOLLARS)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRIME AIR PRIME AIR
NEVADA DELAWARE ADJUSTMENTS TOTAL
<S> <C>
ASSETS
Cash and short term deposits $ 10 $ 101,314 $ 101,324
Share subscriptions receivable 7,333 7,333
Prepaid expenses and deposits 12,592 12,592
GST receivable 51,208 51,208
TOTAL 172,447 172,447
CAPITAL ASSETS 620,208 620,208
OTHER ASSETS
Organizational costs 652 652
TOTAL 662 792,655 793,317
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable and accruals 500 158,174 158,674
Notes and advances payable
(Note 4) 9,067 9,067
Notes and advances from related
parties (Note 6) 525 25,522 26,047
TOTAL 1,025 192,763 193,788
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000 shares
authorized, $.001 par value,
0 shares issued
Common stock, 50,000,000 shares
authorized, $.001 par value,
6,556,791 shares issued and
outstanding 1 6,557 (1) 6,557
Additional paid in capital 9 1,232,557 1 1,232,567
Accumulated deficit during
development stage (373) (639,222) (639,595)
TOTAL 662 792,655 793,317
</TABLE>
PRIME AIR, INC.
(A DEVELOPMENT STAGE COMPANY)
PROFORMA CONSOLIDATED BALANCE SHEETS
(ALL FIGURES IN US DOLLARS)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRIME AIR PRIME AIR
NEVADA DELAWARE ADJUSTMENTS TOTAL
<S> <C>
ASSETS
Cash and short term deposits $ 0 $ 4,575 $ 4,575
Share subscriptions receivable 7,284 7,284
Prepaid expenses and deposit 1,093 1,093
GST receivable 17,012 17,012
TOTAL 29,964 29,964
CAPITAL ASSETS 314,370 314,370
OTHER ASSETS
Organizational costs 0 0
TOTAL 0 344,334 344,334
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable and accruals 0 230,803 230,803
Notes and advances payable
(Note 4) 3,642 3,642
Notes and advances from related
parties (Note 6) 0 28,344 28,344
TOTAL 0 262,789 262,789
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000
shares authorized, $.001 par
value, 0 shares issued
Common stock, 50,000,000
shares authorized, $.001 par
value, 3,562,550 shares issued
and outstanding 0 3,563 3,563
Additional paid in capital 0 478,788 478,788
Accumulated deficit during
development stage 0 (400,806) (400,806)
TOTAL 0 344,334 344,334
</TABLE>
PRIME AIR, INC.
(A DEVELOPMENT STAGE COMPANY)
PROFORMA CONSOLIDATED BALANCE SHEETS
(ALL FIGURES IN US DOLLARS)
MARCH 31, 1997
<TABLE>
<CAPTION>
PRIME AIR PRIME AIR
NEVADA DELAWARE ADJUSTMENTS TOTAL
<S> <C>
ASSETS
Cash and short term deposits $ 10 $ 111,167 $ 111,177
Share subscriptions receivable 7,333 7,333
Prepaid expenses and deposit 11,301 11,301
GST receivable 34,607 34,607
TOTAL 164,408 164,408
CAPITAL ASSETS 622,352 622,352
OTHER ASSETS
Organizational costs 618 618
TOTAL 628 786,760 787,388
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable and accruals 500 91,119 91,619
Notes and advances payable
(Note 4) 35,736 35,736
Notes and advances from related
parties (Note 6) 525 25,583 26,108
TOTAL 1,025 152,438 153,463
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000
shares authorized, $.001 par
value, 0 shares issued
Common stock, 50,000,000
shares authorized, $.001 par
value, 6,666,363 shares issued
and outstanding 1 6,666 (1) 6,666
Additional paid in capital 9 1,287,239 1 1,287,249
Accumulated deficit during
development stage (407) (659,583) (659,990)
TOTAL 628 786,760 787,388
</TABLE>
PRIME AIR, INC.
(A DEVELOPMENT STAGE COMPANY)
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(ALL FIGURES IN US DOLLARS)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRIME AIR PRIME AIR
NEVADA DELAWARE ADJUSTMENTS TOTAL
<S> <C>
DIRECT COSTS
Flight operations
Admininstrative and general
Audit and accounting
Advertising $ 222 $ 222
Amortization $ 34 5,533 5,567
Automotive
Consulting fees
Insurance 1,624 1,624
Interest and service
charges 104 104
Legal 0
Management remuneration 0
Office and general 3,355 3,355
Promotion and
entertainment 753 753
Rent 0
Telephone and utilities 2,000 2,000
Transfer agent 1,200 1,200
Travel 6,862 6,862
TOTAL 34 21,653 21,687
OTHER INCOME (EXPENSE)
Gain (loss) on foreign
exchange conversion (411) (411)
Interest income 1,703 1,703
Net Loss (34) (20,361) (20,395)
Net loss per common
share 3 0 (0)
Weighted average common
shares outstanding 10 6,584,177 6,584,187
</TABLE>
PRIME AIR, INC.
(A DEVELOPMENT STAGE COMPANY)
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(ALL FIGURES IN US DOLLARS)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRIME AIR PRIME AIR
NEVADA DELAWARE ADJUSTMENTS TOTAL
<S> <C>
DIRECT COSTS
Flight operations $ 114,720 $ 114,720
Admininstrative and general 0
Audit and accounting 10,140 10,140
Advertising 9,017 9,017
Amortization $ 373 21,809 22,182
Automotive 0
Consulting fees 7,156 7,156
Insurance 6,342 6,342
Interest and service
charges 7,547 7,547
Legal 25,610 25,610
Management remuneration 0
Office and general 5,728 5,728
Promotion and
entertainment 2,702 2,702
Rent 2,399 2,399
Telephone and utilities 14,865 14,865
Transfer agent 7,149 7,149
Travel 11,172 11,172
TOTAL 373 131,636 132,009
OTHER INCOME (EXPENSE)
Gain (loss) on foreign
exchange conversion 5,581 5,581
Interest income 2,359 2,359
Net Loss (373) (238,416) (238,789)
Net loss per common
share (37) (0) (0)
Weighted average common
shares outstanding 10 5,624,974 5,624,984
</TABLE>
PRIME AIR, INC.
(A DEVELOPMENT STAGE COMPANY)
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(ALL FIGURES IN US DOLLARS)
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRIME AIR PRIME AIR
NEVADA DELAWARE ADJUSTMENTS TOTAL
<S> <C>
DIRECT COSTS
Flight operations
Admininstrative and general
Audit and accounting $ 11,967 $ 11,967
Advertising 9,017 9,017
Amortization 306 306
Automotive 4,369 4,369
Consulting fees (426) (426)
Insurance 0 0
Interest and service
charges 249 249
Legal 0 0
Management remuneration 16,265 16,265
Office and general 11,319 11,319
Promotion and
entertainment 7,649 7,649
Rent 4,095 4,095
Telephone and utilities 7,385 7,385
Transfer agent 4,080 4,080
Travel 4,495 4,495
TOTAL 71,830 71,830
OTHER INCOME (EXPENSE)
Gain (loss) on foreign
exchange conversion 564 564
Interest income 0 0
Net Loss (71,266) (71,266)
Net loss per common
share (0) (0)
Weighted average common
shares outstanding 3,193,273 3,193,273
</TABLE>
PRIME AIR, INC.
(A DEVELOPMENT STAGE COMPANY)
PROFORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL FIGURES IN US DOLLARS)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRIME AIR PRIME AIR
NEVADA DELAWARE ADJUSTMENTS TOTAL
<S> <C>
NET INFLOW (OUTFLOW) OF CASH
RELATED TO THE FOLLOWING
ACTIVITIES
NET LOSS $ (373) $ (238,416)
NON CASH CHARGE-AMORTIZATION 23 21,809 $ 21,832
CHANGE IN NON CASH WORKING
CAPITAL BALANCES RELATING
TO OPERATIONS 1,025 (216,607) (215,582)
TOTAL 675 (334,980) (334,305)
FINANCING ACTIVITIES
NOTES AND ADVANCES PAYABLE 5,425 5,425
NOTES AND ADVANCES FROM
RELATED PARTIES (2,822) (2,822)
ISSUANCE OF CAPITAL STOCK 10 756,763 756,773
TOTAL 10 759,366 759,376
INVESTING ACTIVITIES
ACQUISITION OF FIXED ASSETS (675) (327,647) (328,322)
TOTAL
NET CASH INFLOW (0UTFLOW) 10 96,739 96,749
CASH, BEGINNING OF PERIOD 0 4,575 4,575
CASH, END OF PERIOD 10 101,314 101,324
</TABLE>
PRIME AIR, INC.
(A DEVELOPMENT STAGE COMPANY)
PROFORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL FIGURES IN US DOLLARS)
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRIME AIR PRIME AIR
NEVADA DELAWARE ADJUSTMENTS TOTAL
<S> <C>
NET INFLOW (OUTFLOW) OF CASH
RELATED TO THE FOLLOWING
ACTIVITIES
NET LOSS $ (71,266) $ (71,266)
NON CASH CHARGE-AMORTIZATION 306 306
CHANGE IN NON CASH WORKING
CAPITAL BALANCES RELATING
TO OPERATIONS 208,589 205,589
TOTAL 137,629 137,629
FINANCING ACTIVITIES
NOTES AND ADVANCES PAYABLE (5) (5)
NOTES AND ADVANCES FROM
RELATED PARTIES 28,344 28,344
ISSUANCE OF CAPITAL STOCK 131,755 131,755
TOTAL 160,094 160,094
INVESTING ACTIVITIES
ACQUISITION OF FIXED ASSETS (302,017) (302,017)
TOTAL
NET CASH INFLOW (0UTFLOW) (4,294) (4,294)
CASH, BEGINNING OF PERIOD 8,869 8,869
CASH, END OF PERIOD 4,575 4,575
</TABLE>
PRIME AIR, INC.
(A DEVELOPMENT STAGE COMPANY)
PROFORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL FIGURES IN US DOLLARS)
FOR THE PERIOD ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRIME AIR PRIME AIR
NEVADA DELAWARE ADJUSTMENTS TOTAL
<S> <C>
NET INFLOW (OUTFLOW) OF CASH
RELATED TO THE FOLLOWING
ACTIVITIES
NET LOSS $ (34) $ (20,361) $ (20,395)
NON CASH CHARGE-AMORTIZATION 34 5,533 5,567
CHANGE IN NON CASH WORKING
CAPITAL BALANCES RELATING
TO OPERATIONS (49,163) (49,163)
TOTAL 0 (63,991) (63,991)
FINANCING ACTIVITIES
NOTES AND ADVANCES PAYABLE 26,669 26,669
NOTES AND ADVANCES FROM
RELATED PARTIES 61 61
ISSUANCE OF CAPITAL STOCK 54,791 54,791
TOTAL 0 81,521 81,521
INVESTING ACTIVITIES
ACQUISITION OF FIXED ASSETS (675) (7,677) (8,352)
TOTAL
NET CASH INFLOW (0UTFLOW) 0 9,853 9,853
CASH, BEGINNING OF PERIOD 10 101,314 101,324
CASH, END OF PERIOD 10 111,367 111,177
</TABLE>
PRIME AIR, INC.
(A Development Stage Company)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. Proforma Financial Statements
The proforma financial statements of Prime Air, Inc. (Nevada) are
presented to show the results of a proposed merger between Prime Air,
Inc. (Delaware) and Prime Air, Inc. (Nevada). The proposed merger
between the two companies is presented in the "Plan and Agreement of
Merger" dated March 10, 1997. The merger documents call for a stock
for stock exchange of Prime Air, Inc. (Delaware) for Prime Air, Inc.
(Nevada), the latter being the surviving corporation.
The financial statements are presented as if 100% of the stock were
exchanged.
The financial statements are presented as if the companies were merged
as of March 31, 1997 and December 31, 1996 with comparable figures for
December 31, 1995.
2. Incorporation and Principles of Consolidation
Prime Air, Inc. (Delaware) was incorporated under the laws of the
State of Delaware, USA on April 4, 1995 and acquired all of the
assets, liabilities and shareholders of a previous Utah Corporation of
the same name. The Utah Corporation was Incorporated on August 30,
1993 as Astro Enterprises, Inc. On June 28, 1994, pursuant to
appropriate shareholder agreements, Astro Enterprises, Inc. acquired
all of the 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. Upon
incorporation of the Delaware Company, the Utah Corporation was
dissolved on May 15, 1995.
On November 10, 1995, Prime Air, Inc. (a Nevada corporation) was
formed, the purpose of which will be to change the domicile of the
Company to the State of Nevada. Prime Air, Inc. (Nevada) is a wholly-
owned subsidiary of Prime Air, Inc. (Delaware); however, to December
31, 1996 it has engaged in no activities except in relation to the
organization of that entity.
These consolidated financial statements include the accounts of the
Company and its wholly-owned operating subsidiary, Prime Air, Inc.
(the Canadian Corporation).
3. Nature of Operations/Going Concern Considerations
The Company is presently in its developmental stage and currently has
minimal sources of revenue to provide incoming cash flows to sustain
future operations. The Company's present activities relate to the
construction and ultimate exclusive operation of an international
passenger and cargo air terminal facility in the Village of Pemberton,
British Columbia and the operation of scheduled flight services
between that facility and certain major centers in Canada and the
United States in conjunction with Voyageur Airways Limited. Terminal
building construction was substantially completed in May 1996. The
future successful operation of the Company is dependent upon its
ability to obtain the financing required to complete the terminal
construction and commence operation thereof on an economically viable
basis.
PRIME AIR, INC.
(A Development Stage Company)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
4. Significant Accounting Policies
Capital Assets
Air Terminal Construction Costs: Expenditures relating directly
to the construction of the air terminal facility and relate
engineering and design have been recorded in the accounts of the
Company at cost, net of amortization thereof which is provided on a
straight-line basis over the 30 year term of the property lease.
Furniture and Equipment: Furniture and equipment are stated at cost,
net of amortization which is provided at the rate of 20% per annum on
the declining balance basis.
Reporting Currency All amounts in these consolidated financial
statements are reported in U.S. funds being converted from Canadian
funds were applicable at the average annual rate as posted by the
Internal Revenue Service of the United States as follows:
1996: $0.7334 U.S./ $1. CDN
1995: $0.7284 U.S./ $1. CDN
5. Notes and Advances Payable
The notes and advances payable are unsecured, non-interest bearing and
are without specific terms of repayment.
6. Related Party Transactions
During the year ended December 31, 1996, the Company paid no
remuneration to any director (period ended December 31, 1995:
$16,265).
A director has advanced funds to the Company in the amount of $18,169
to December 31, 1996. These advances are unsecured, non-interest
bearing and are without specific terms of repayment.
7. Capital Stock
The directors of the Company have authorized the issue of up to
500,000 common shares in the form of a director, officer and employee
stock options at a price to be determined. The granting of these
options is subject to the receipt of regulatory approval.
In July 1996, management of the Company voluntarily halted trading of
its common shares based upon the conclusion that information
concerning the history of the Company provided by former management
may not have been complete. The Company is in the process of
preparing a registration statement in connection with the proposed
change of domicile (referred to in Note 1) to register all of the
outstanding common shares of capital stock of the Company.
PRIME AIR, INC.
(A Development Stage Company)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
8. 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:
- $100 per annum for the initial six (6) years; 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.
9. Interim Financial Statements
The Company has presented financial information for the quarter ended march 31,
1997 as additional supplemental information for comparison to the financial
statements of December 31, 1996 and 1995. Management believes it has made all
necessary adjustments to present an accurate financial statement for the
quarter. Results of this quarter are not indicative of a full year's
operations.
Selected Financial Information is presented for the following companies:
Prime Air, Inc. (Delaware):
December 31,
March 31, 1996 1995 1994 1993 1992
1997
Operating Revenues - - - - - -
Loss from continuing
operations (20,361) (238,416)(71,266)(185,527) (38,426) (49,419)
Loss per common share (0) (.04) (.02) (.06) (.04) (.01)
Total Assets 786,760 792,655 314,370 28,820 344,345 240,858
Long term obligations 0 0 0 0 0 0
Preferred stock 0 0 0 0 0 0
Cash dividends per share 0 0 0 0 0 0
Prime Air, Inc. (Nevada)
December 31,
March 31, 1996 1995 1994 1993 1992
1997
Operating Revenues 0 0 - - - -
Loss from continuing
operations 34 373 - - - -
Loss per common share (3) ( 37) - - - -
Total Assets 628 652 - - - -
Long term obligations 0 0 - - - -
Preferred stock 0 0 - - - -
Cash dividends per share 0 0 - - - -
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nevada law expressly authorizes a Nevada corporation to
indemnify its directors, officers, employees, and agents against
liabilities arising out of such persons' conduct as directors,
officers, employees, or agents if they acted in good faith, in a
manner they reasonably believed to be in or not opposed to the best
interests of the Company, and, in the case of criminal proceedings, if
they had no reasonable cause to believe their conduct was unlawful.
Generally, indemnification for such persons is mandatory if such
person was successful, on the merits or otherwise, in the defense of
any such proceeding, or in the defense of any claim, issue, or matter
in the proceeding. In addition, as provided in the articles of
incorporation, bylaws, or an agreement, the corporation may pay for or
reimburse the reasonable expenses incurred by such a person who is a
party to a proceeding in advance of final disposition if such person
furnishes to the corporation an undertaking to repay such expenses if
it is ultimately determined that he did not meet the requirements. In
order to provide indemnification, unless ordered by a court, the
corporation must determine that the person meets the requirements for
indemnification. Such determination must be made by a majority of
disinterested directors; by independent legal counsel; or by a
majority of the shareholders.
Article VI of the Company's Bylaws provides that the
corporation shall indemnify its directors, officers, agents and other
persons to the full extent permitted by the laws of the State of
Nevada.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits set forth in the following index of exhibits
are filed as a part of this registration statement.
Exhibit No. Description of Exhibit Page
2.1 Plan and Agreement of Merger *
2.2 Merger Agreement dated June 29, 1994
3.1 Articles of Incorporation *
3.2 Bylaws of the Company currently
in effect *
5.1 Opinion on Legality *
8.1 Opinion on Tax Matters, as amended
10.1 Airport Leae and Operating
Agreement, as amended *
10.2 Employment Agreement with
Blaine Haug *
10.3 Employment Agreement with
Royle Smith *
10.4 Consulting Agreement with Siverthorn
Investments, Ltd. *
10.5 Memorandum of Agreement with Voyageur
Airways
10.6 Addendum to Haug Employment Agreement
10.7 Addendum to Smith Employment Agreement
23.1 Consent of Independent Auditors
23.2 Consent of Counsel (contained in
Exhibit 5 above.) --
*Filed with the original registration statement on Form S-4 filed
on June 2, 1997 (Commission file no. 333-28249)
MERGER AGREEMENT
Whereas Prime Air, Inc., a corporation which is registered in the
British Columbia, Canada hereinafter referred to as "PAIR" and Astro
Enterprises, Inc. a Utah corporation, hereinafter referred to as "ASTRO", wish
to effect an asset purchase and reorganization; thereupon the said corporations
agree as follows:
I
ASTRO is a Utah corporation in good standing with the Secretary of
State. It is a public company and is currently trading on the NASD-OTC Bulletin
Board with two market makers. There are no assets or liabilities with regard to
said corporation's financial status, and it is therefore commonly referred to as
a _public shell_. The present capitalization consists of 12,000,000 free
trading shares currently in the ownership among approximately 170 shareholders.
Said current shareholder list will be presented to PAIR upon completion of the
asset purchase herein. In addition, there are 18,000,000 restricted shares
owned by the Worthington Company (DBA by Paul Parshall, wholly owned
proprietorship entity).
II
All of the currently issued and outstanding shares of PAIR shall be
transferred into ownership by ASTRO. Simultaneously, ASTRO shall issue to the
current shareholders of PAIR new and additional shares which shall be
restricted, so as to effect a 90% ownership by the current PAIR shareholders of
the total outstanding shares of ASTRO. Prior to said issuance, the current
total number of ASTRO shares shall be reverse split by a ratio of 100 to 1.
Thereupon, after said split and after said merger completion, the following
resultant number of shares shall be outstanding.
A. Current PAIR corporation shall own a total of 2,700,000 restricted
shares;
B. Worthington Company shall own a total of 180,000 restricted
shares;
C. The 170 public stockholders of ASTRO shall own a total of 120,000
free trading shares.
D. The resulting total outstanding and issued shares shall thereupon
be 3,000,000.
III
In consideration of the transfer of said 90% controlling interest to
PAIR, the cash sum of $U.S.75,000 shall be paid by PAIR to the Worthington
Company, for consulting fees payable $37,500 payable upon completion of asset
purchase agreement, with the remaining balance of $37,500 shall be payable
simultaneously upon the completion of document contained in IV of this
agreement.
IV
The closing of said merger shall consist of both corporations
effecting signed resolutions by the respective Board of Directors, authorizing
said merger, reverse split of shares, and said transfer of shares. Paul
Parshall agrees to travel to a mutually agreed on time and place to carry out
consulting activities to effect said merger. This shall include the necessary
documents to effect any required name changes, obtaining a new CUSIP number,
Standard and Poors application, printing and issuance of stock certificates,
issuing press releases, verifying the minutes, books and records of both
corporations, and such other duties as he deems necessary to effect the said
merger. Upon the consolidation, all current officers and directors of ASTRO
shall resign and the current shareholders of PAIR shall elect new officers and
directors.
In consideration for Paul Parshall offering the above-mentioned
services, which is contemplated to require approximately 3 full days in
Vancouver, B.C. PAIR shall pre-pay Paul Parshall's air fare, travel expenses,
and all out-of-pocket expenses for food & lodging. However, prior to the said
consolidation being effected, PAIR and its current shareholders are requested to
obtain independent legal counsel to advise them as to the consequences and
liability with regard to said consolidation. Any fees in connection with Paul
Parshall's services payable to outside third parties, or regulating agencies,
shall be paid by PAIR.
V
ASTRO, represents to PAIR that it is a Utah corporation, in good
standing with the Secretary of State. There are no assets or liabilities within
said corporation. There is no pending litigation, either civil or criminal or
regulatory against ASTRO, nor are there any current claims that Paul Parshall
has knowledge of that is reasonably expected to lead to such litigation in the
future, due to any past deeds or acts of ASTRO, its past officers of past
directors, or shareholders. upon the completion of the merger, PAIR shall
become a wholly owned subsidiary of ASTRO all of PAIR's current outstanding
shares becoming owned by PAIR. In the event that within six (6) months of the
closing date of this merger, there are any substantial liabilities or claims
against ASTRO which are discovered by PAIR within said sic months time period,
thereupon PAIR shall have the right to rescind this agreement and effect a
transfer of its assets back to its current shareholders. However, said
recission must be done in good faith and only in the event that said claims or
liabilities would have a significant impact upon the continuing operations of
PAIR. By way of an example, if a creditor asserts a claim for $500.00 due to a
past debt, and this is the only liability found, Paul Parshall shall have the
option to reimburse PAIR to avoid the recission.
VI
PAIR assumes all liability and responsibility for any and all
problems, expenses, litigation, regulatory expenses and actions, in connection
with ASTRO continued existence and operation, after the date of said merger.
Paul Parshall shall not be liable or assume any responsibility for any failure
or problems in connection with such matters as stock trading, liquidity, lack of
market makers, lack of regulatory permission to issue new stock for
consideration, which PAIR and ASTRO may or may not be able to complete or comply
with in the future.
VII
This agreement is conditioned upon the financial statement and records
and business plan information of PAIR being physically mailed or presented to
Paul Parshall for his review and approval. Said records shall be presented to
Paul Parshall on or before June 21, 1994, and he shall thereupon have 72 hours
to approve or disapprove of said material. Said approval is being carried out
as part of a _due diligence_ review on behalf of the current shareholders of
ASTRO.
VIII
It is contemplated that the name of ASTRO, shall be changed to Prime
Air, Inc., upon the effective date of said merger, and Paul Parshall shall
assist with said name change.
IX
It is contemplated that the current transfer agent for ASTRO shall be
changed to Transamerica Securities, Ltd., an SEC approved transfer agent. ASTRO
agrees to continue to use said transfer agent for a minimum of (2) years. By
way of full disclosure, Paul Parshall is owner and director of said transfer
agent. The fees to be charged to effect any stock transfer shall be the usual
and customary fees currently being charged by similar transfer agents.
X
In the event that PAIR fails to complete this consolidation agreement,
unless extended by mutual consent, and ASTRO is ready, willing and able to
complete said consolidation by said date, thereupon the aforesaid $37,500
deposit sum shall be retained by Paul Parshall as liquidated damages.
XI
This agreement shall be governed by the laws of Utah, an in the event
of any dispute, the parties agree to binding arbitration, pursuant to the rules
of the American Arbitration Association, with the prevailing party to be awarded
attorney fees and all court costs in the event of any litigation.
Wherefore the parties agree and consent to the above.
Prime Air, Inc. Astro Enterprises, Inc.
Blaine Haug by Paul Parshall
CEO and President Chief Executive Officer
DATED 6/29/94 DATED 6/22/94
c/o Prime Air, Inc. c/o Paul Parshall
1008 Beach Ave. #104 106 Heischman Avenue
Vancouver, BC Canada Worthington ,Ohio 43085
Office (604) 685-7722 (614) 888-6200
FAX (604) 685-7870
Prime Air, Inc. (Delaware)
8598 112 Street
Fort Saskatchewan, Alberta
Canada T8L 3V8
Gentlemen:
You have asked our firm to issue an opinion as to the tax effects of a proposed
merger between Prime Air, Inc. (Delaware) and Prime Air, Inc. (Nevada) as
described in the Plan and Agreement of Merger of Prime Air, Inc. (Delaware) and
Prime Air, Inc. (Nevada) (merger document).
In the merger document, the terms of the merger are stated that the Delaware
corporation shall merge with the Nevada corporation, the Nevada corporation
being the surviving entity. The exchange shall be one share of Delaware given
up for one share of Nevada to be issued; any rights of warrants or options shall
be assumed by the Nevada corporation; and dissenting shareholders of the
Delaware corporation have rights as to liquidation according to Delaware law.
The agreement can be terminated by the Nevada corporation if more than 5% of the
outstanding shares of the Delaware corporation objects to the merger.
The Nevada corporation shall assume all liabilities and assets of the Delaware
corporation as well as having the same officers and directors, bylaws, and other
corporate identities that the Delaware corporation had before its merger into
the Nevada corporation.
In Revenue Ruling 75-561, the Services ruled that a reorganized qualifies under
Section 368 (a)(1)(F) if (1) there is a complete identity of shareholders and
their proprietary interest in the transferor and acquiring corporations, (2) the
transferor and acquiring corporations are engaged in the same business or
integrated activity, and (3) the business enterprise of the two corporations
remains unchanged after the combination.
The merger agreement appears to address all the issues discussed and the merger
will qualify as a tax free reorganization. If any shareholders disagree with
the merger and requests a payout or distribution of their ownership interests,
as defined within the agreement, such distributions will not disrupt the tax
free status of the transaction.
Any distributions to minority shareholders will be a capital gain to the
recipient of the distribution.
Sincerely,
Kevin E. Orton
Orton & Company
Certified Public Accountants
MEMORANDUM OF AGREEMENT
THIS MEMORANDUM OF AGREEMENT made as of the 5th day of January, 1995.
BETWEEN:
PRIME AIR, INC. a British Columbia Company having
it=s registered office at 1724-1055 Dunsmuir Street
Vancouver, British Columbia, V7X 1C4
("Prime Air")
AND:
VOYAGEUR AIRWAYS LIMITED an Ontario corporation
having its head office at North Bay, Ontario, Canada
("Voyageur Airways")
THIS MEMORANDUM sets out the agreements that have been reached between Prime Air
and Voyageur Airways in connection with Vouageur Airways undertaking the supply,
operation and maintenance and servicing of the Dash-7 aircraft engaged and used
by Prime Air in the provision of scheduled and charter passenger and cargo air
service between, initially, the Vancouver International Airport and thereafter
various other Canadian and United States destinations and Prime Air's airport
terminal facility at the airport in Pemberton, British Columbia (the _Pemberton
Airport_).
SECTION 1
GENERAL AGREEMENT
1.1 General Agreement
Prime Air and Voyageur Airways each hereby acknowledge, confirm and
agree that they have reached the general understandings and agreements set out
herein in connection with Prime Air appointing Voyageur Airways to undertake,
and Voyageur Airways agreeing to undertake, the supply, operation, maintenance
and servicing of such DeHavilland Dash-7 aircraft (the _aircraft_) in respect of
the scheduled and charter passenger cargo air service that Prime Air intends to
initiate and operate between the Vancouver International Airport in Vancouver,
British Columbia and the Pemberton Airport. The intentions of the parties are
that Prime Air will construct and operate an airport terminal facility at the
Pemberton Airport (the _terminal_), that Prime Air will operate or will cause to
be operated, a scheduled and charter passenger and cargo air service to and from
the Terminal from Canadian destinations and, with a limited flight schedule,
certain cities in the United States and that Voyageur Airways will provide the
certifications, authorizations, expertise, facilities, personnel and resources
necessary to safely and efficiently operate, maintain and service all Aircraft
that Prime Air engages in such operations. For the purposes hereof the parties
agree that this Memorandum of Agreement shall only constitute their agreement to
enter into further negotiations to complete the transactions set out herein and
that they will each negotiate in good faith and enter into such formal document
or documents as may be necessary or desirable to reflect their mutual intentions
and agreements set out herein.
SECTION 2
APPOINTMENT OF VOYAGEUR AIRWAYS AS OPERATOR
2.1 Appointment of Vouageur Airways as Operator
Prime Air anticipates that it will, prior to December 1, 1995,
initiate scheduled Dash-7 passenger and cargo air service between the Vancouver
International Airport in Vancouver, British Columbia and the Pemberton Airport
and will subsequent to that date, initiate the same service between the
Pemberton Airport and various other Canadian and United States destinations. In
respect to such air services, Prime Air shall appoint and retain Voyageur
Airways as an independent contractor for a term of 5 years to supervise and
carry out the operation of all Aircraft engaged and used by Prime Air in
connection wich such air services. In making such appointment, Prime Air shall
confer on Voyageur Airways the authority to act as Prime Air's operating agent
for the purpose of doing all acts and things as shall be necessary for Voyageur
Airways to safely and efficiently operate, maintain and services such aircraft
and to discharge its responsibilities, duties and obligations to Prime Air.
2.2 Representations and Covenants
Voyageur Airways represents and covenants with Prime Air that it has
and that it will continue to have the certifications, authorizations, expertise,
facilities, personnel and resources necessary to provide to Prime Air the
functions and services required in connection with the operation, maintenance
and servicing of the Aircraft as contemplated herein in a safe, competent and
efficient manner.
2.3 Voyageur Airways to act as Independent Contractor
In the performance of its duties as the operator of the Aircraft as
contemplated herein, Voyageur Airways shall act as an independent contractor on
behalf of Prime Air and not on its own behalf. Nothing contained herein or in
any agreement entered into pursuant hereto shall constitute or be construed to
be or create a partnership or joint venture between Prime Air and Voyageur
Airways.
SECTION 3
DUTIES AND AUTHORITY OF VOYAGEUR AIRWAYS
3.1 Duties and Authority of Voyageur Airways
Voyageur Airways, as operating agent for Prime Air, shall have the
sole and exclusive control, discretion and authority in respect of and be
reasonable for the supply, operation, maintenance and servicing of all Aircraft
engaged and used by Prime Air in respect of its scheduled and charter passenger
and cargo air service from the Terminal. Such control, discretion and authority
shall include, without limitation.
(a)Supervisory Services. Making all day to day decisions in
connection with the operation of the aircraft and the supervision
of the management, operation, maintenance, servicing thereof;
(b)Operating Licenses. Apply for and obtain such approvals, licenses
and certificates and authorizations as may be necessary from such
regulatory authorities having jurisdiction to operate the Aircraft
as herein contemplated.
(c)Maintain and Repair the Aircraft. Maintaining the aircraft and
any property of Prime Air under the control of Voyageur Airways in
a good state of repair and to all standards required by all
regulatory authorities having jurisdiction;
(d)Provision of Personnel. Providing, selecting, employing,
training, terminating, paying, supervising, directing and
assigning the duties and responsibilities of all persons required
by Voyageur Airways to provide its services hereunder in a safe,
competent and efficient manner;
(e)Compliance with Laws. Taking all action as is necessary to ensure
that the operation of the aircraft remains in compliance with all
Federal, Provincial or Municipal statutes, regulations, bylaws,
rules and orders and with the requirements of any regulations or
requirements of the damage or liability insurance companies with
which the aircraft and Prime Air may be ensured;
(f)Provision of Information. Preparing and furnishing to Prime Air
such reports, work programs, budgets, estimates, statements, data
and information relating to the operation of the Aircraft as may
be reasonably required by Prime Air;
(g)Record Keeping. Keeping proper books, records and accounts in
connection with the operation of the aircraft and permitting Prime
Air at any time during normal business hours to inspect all such
books, records and accounts.
(h)Insurance. To maintain insurance, purchasing and maintaining in
full force such insurance as may be reasonably required by Prime
Air to adequately protect Prime Air against loss or damage to the
Aircraft and against claims by a third persons arising from loss
or damage to the property of such third persons or from personal
injury or death; and
(i)General. Generally doing all such acts, matters and things
necessary for the proper operation, maintenance, repair and
servicing of the Aircraft.
SECTION 4
OBLIGATIONS OF PRIME AIR
4.1 Obligations of Prime Air
During the term of the Agreement Prime Air shall operate the scheduled
and charter passenger and cargo air service to and from the Terminal as herein
provided and in connection therewith shall:
(a)Marketing. Undertake the planning; preparation, conduct,
coordination, and contracting for all reasonably desirable
marketing, advertising and promotional activities and programs
with respect to its air service operations.
(b)Terminal Facilities. Construct and operate the Terminal Facility
at the Pemberton Airport to an appropriate high standard and to
properly and efficiently service all persons using its air
service: and
(c)Flight Schedule. From time to time establish all flight schedules
in connection with the operation of the air service.
SECTION 5
FEES AND EXPENSES
5.1 Operating Fee
During the term of the Agreement, Prime Air agrees to pay Voyageur
Airways for supply of aircraft and the performance of its operational,
maintenance and servicing services hereunder such fees as the parties shall
negotiate and agree upon within 90 days as of the date of confirmation by Prime
Air of obtaining required financing. In addition, Prime air agrees to provide a
letter of credit based on bank term deposits to secure payments to Voyageur
Airways.
5.2 Expenses
Prime Air shall reimburse Voyageur Airways for all direct out of
pocket expenses incurred by Voyageur Airways in rendering its services to Prime
Air.
SECTION 6
FORMAL AGREEMENTS
6.1 Formal Agreements
Prime Air and Voyageur Airways each acknowledge and agree that they
shall, within the time limit specified in Section 5.1, negotiate in good faith
and execute and deliver such formal documents as may be required to fully
reflect their mutual intentions hereunder. Such documents shall set out the
general intention of the parties set out herein, shall be in such form as are
typical in agreements of such sort and shall, in all respects, be acceptable to
the parties hereto and their respective professional advisors. In the event
such formal documentation has not been concluded, executed and delivered within
the time limit specified in Section 5.1, or such other date as the parties may
agree upon in writing, this Memorandum of Agreement shall be of no further force
and effect and neither party shall any further obligation to the other.
SECTION 7
MISCELLANEOUS
7.1 Agreement to Constitute Framework Only
The parties expressly acknowledge that this Memorandum of Agreement is
intended to provide a framework within which the proposed transaction for the
operation, maintenance and servicing of Prime Air's
Aircraft can be pursued and nothing in this Memorandum of Agreement shall create
any legal obligation on the parties until the execution and delivery of the
definitive documentation contemplated herein.
7.2 Mutual Support
Each of the parties hereto shall cooperate and support all things
necessary to give effect to the intent of this Memorandum of Agreement.
PRIME AIR, INC.
Per: Blaine Haug
VOYAGEUR AIRWAYS LTD.
Per: Max Shapiro
ADDENDUM TO EMPLOYMENT AGREEMENT
THIS ADDENDUM entered into this 8th day of July 1997, is by and
between Prime Air, Inc., a Delaware corporation (the "Company"), and Blaine
Haug, an individual (the "employee").
RECITALS
WHEREAS, the Company and the Employee entered into an employment
agreement dated January 18, 1996, (the "Employment Agreement");
WHEREAS, the Company has entered into a merger agreement which
essentially provides for a change of domicile of the Company from the State of
Delaware to the State of Nevada; and
WHEREAS, the parties to the Employment Agreement desire to clarify the
coverage of such agreement and to waive certain provisions;
NOW THEREFORE, the parties hereto hereby mutually agree as follows:
1. The parties hereby acknowledge that the Employment Agreement is
by and between the Employee and Prime Air, Inc., the Delaware entity and not the
British Columbia entity. The parties further agree that the compensation and
benefits to be paid to the Employee under the terms of the Employment Agreement
shall compensate the Employee for any and all services performed in any capacity
either for the Company or its wholly owned or majority owned subsidiaries, as
such duties may be assigned by the respective board of directors.
2. Pursuant to the terms of Paragraph 7 of the Employment
Agreement, the parties hereby waives the provisions of subparagraph 4.7 of the
Employment Agreement solely in connection with the currently existing Agreement
and Plan of Merger dated March 10, 1997, (the "Merger Agreement") by and between
the Company and Prime Air, Inc., a Nevada corporation ("Prime Air (NV)"). This
waiver shall not apply to any other future action by the Company as contemplated
by said subsection 4.7.
3. The parties acknowledge that the terms, conditions, obligations,
and benefits of the Employment Agreement, as amended or modified hereby, shall
be assumed by Prime Air (NV) upon the closing of the Merger Agreement.
IN WITNESS WHEREOF, the undersigned have executed this document the
day and year first above written.
THE COMPANY: Prime Air, Inc.
By /s/ Royle Smith
Royle Smith, President
THE EMPLOYEE: /s/ Blaine Haug
Blaine Haug, Individually
ADDENDUM TO EMPLOYMENT AGREEMENT
THIS ADDENDUM entered into this 8th day of July 1997, is by and
between Prime Air, Inc., a Delaware corporation (the "company"), and Royle
Smith, an individual (the "employee").
RECITALS
WHEREAS, the Company and the Employee entered into an employment
agreement dated January 18, 1996, (the "Employment Agreement");
WHEREAS, the Company has entered into a merger agreement which
essentially provides for a change of domicile of the Company from the State of
Delaware to the State of Nevada; and
WHEREAS, the parties to the Employment Agreement desire to clarify the
coverage of such agreement and to waive certain provisions;
NOW THEREFORE, the parties hereto hereby mutually agree as follows:
1. The parties hereby acknowledge that the Employment Agreement is by
and between the Employee and Prime Air, Inc., the Delaware entity and not the
British Columbia entity. The parties further agree that the compensation and
benefits to be paid to the Employee under the terms of the Employment Agreement
shall compensate the Employee for any and all services performed in any capacity
either for the Company or its wholly owned or majority owned subsidiaries, as
such duties may be assigned by the respective board of directors.
2. Pursuant to the terms of Paragraph 7 of the Employment Agreement,
the parties hereby waives the provisions of subparagraph 4.7 of the Employment
Agreement solely in connection with the currently existing Agreement and Plan of
Merger dated March 10, 1997, (the "Merger Agreement") by and between the Company
and Prime Air, Inc., a Nevada corporation ("Prime Air (NV)"). This waiver shall
not apply to any other future action by the Company as contemplated by said
subsection 4.7.
3. The parties acknowledge that the terms, conditions, obligations,
and benefits of the Employment Agreement, as amended or modified hereby, shall
be assumed by Prime Air (NV) upon the closing of the Merger Agreement.
IN WITNESS WHEREOF, the undersigned have executed this document the
day and year first above written.
THE COMPANY: Prime Air, Inc.
By /s/ Blaine Haug
Blaine Haug, Chairman
THE EMPLOYEE: /s/ Royle Smith
Royle Smith, Individually
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes that it will:
(1)File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to (i) include any
Prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
reflect in the Prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the Registration Statement;
and (iii) include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2)For the purpose of determining liability under the Securities Act
of 1933, treat each post-effective amendment as a new Registration Statement of
the securities offered, and the offering of the securities at that time shall be
the initial bona fide offering.
(3)File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Pemberton, British Columbia, Canada,
on the ____ day of July 1997.
PRIME AIR, INC.
By:
Royle Smith, President
By:
Blaine Haug, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
By: July ___, 1997
Blaine Haug, Director
By: July ____, 997
John Eberhard, Director
By: July ____, 1997
Greg Duffy, Principal Financial and
Accounting Officer
August 3, 1997
Andrew A. Gerber, Special Counsel
Division of Corporation Finance
US Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Prime Air, Inc.; Registration Statement on Form S-4; File No.
333-28249
Dear Mr. Gerber:
Attached for filing is Amendment No. 1 to the registration statement
of Prime Air, Inc. on Form S-4. Pursuant to the requirements of Rule 310 of
Regulation S-T, all changes to the text of the form have been marked by
inserting the tag before and the tag following each paragraph
containing changed material.
In response to the comments set forth in your letter dated July 2,
1997, I have been authorized to provide you with the following responses which
correspond to your numbered comments:
General
1. The cover page of the registration statement has been amended to
reflect Delaware as the state of incorporation of the Registrant. However, the
Registrant believed that because the stock in the merger would be issued by the
Nevada corporation, that such entity would be the proper registrant.
Cover Page
2. The page number of the risk factor section has been added.
3. In response to your comment concerning the information required
by Item 502(f) of Regulation S-K, management does not believe that the issuer of
the securities is a "foreign private registrant" since the issuer of the
securities in this instance is a US corporation. Also, the issuer in this case
is not "a foreign government, a national of any foreign country or a corporation
or other organization incorporated or organized under the laws of any foreign
country" as defined in Rule 405 of Regulation C. If in this case the staff of
the Commission disagrees with this conclusion, or if the staff believes that
such disclosure would be required under Rule 408 of Regulation C or otherwise,
please so advise the Registrant and such disclosure will be added.
Additional Information
4. The Commission's web site information has been added to this
section.
5. The requested changes have been made to this section.
Voting at the Special Meeting
6. The word "unanimously" has been added.
Proxies
7. The required language has been added.
8. The required language has been added.
Proxy Statement/Prospectus Summary
The Companies
9. The requested changes and cross-reference have been made to the
last paragraph of this section.
Rights of Dissenting Shareholders
10.The cross-reference has been added to this section.
Recent Prices of Common Stock
11.Management believed that the information about the company, which
had been prepared by Mr. Parshall, did not adequately describe the relationship
between the original Utah corporation known as "Astro Enterprises, Inc." and
Prime Air (Del) and that investors may have been confused about the relationship
between the two entities. In addition, management learned that Mr. Parshall had
entered into an injunction with the Commission in relation to another company
and therefore did not wish to have the investing public rely upon any disclosure
documents prepared by Mr. Parshall until a full review of such disclosure could
be accomplished. Management believes that the disclosure information which was
prepared following the termination of Mr. Parshall as an officer or director of
the company was accurate and therefore, that a trading market could recommence.
Federal or State Regulatory Requirements
12.The language of this section has been revised.
Risk Factors
13.Some of the risk factors have been retitled as noted in this
section. Also, management has reviewed the risk factors in light of any
revisions which are also noted in this section.
14.Management disagrees that a risk factor concerning Mr. Orton would
be material. Please see the supplemental letter from Mr. Orton concerning this
matter. If the staff disagrees with this position by the Registrant, please
advise and a risk factor will be included.
15.A new risk factor titled "Additional Capital Requirements" has
been added in response to this comment. For the company to commence its
principal operations, no further construction on the terminal is required.
Limited Operating History
16.This risk factor has been revised pursuant to the comment.
Limited Operating History
17.This risk factor has been retitled to "No Operating History" and
the amounts of accumulated deficit and net losses for the year end and March
31st have been added.
Start-up Business
18.The requested changes have been made to this risk factor.
Competition
19.This risk factor has been revised to state that no marketing
studies have been performed.
Government Regulations
20.Voyageur Airways Limited has represented to the Registrant that it
has the necessary licenses and operating certificates, and language has been
added to the risk factor to clarify this.
Applicability of Penny Stock Risk Disclosure Requirements
21.The requested changes have been made to this risk factor.
Security Ownership of Certain Beneficial Owners
22.Mr. Johnson and Ms. Jarvis have indicated to the Company that they
intend to vote for the merger and this section has been so revised.
Item One-Approval of Agreement and Plan of Merger
23.The requested changes to this section have been made.
Conditions to the Merger
24.Additional conditions have been added to this section and language
has been added stating that the conditions are not waivable.
Basis and Reasons for the Merger; Recommendations
25.The language for this section has been expanded.
Interests of Certain Persons
26.No change of control would occur as a result of the merger and no
payments will be made to insiders as a result of the merger. Such language has
been added to this section.
Conversion of Options
27.No options will be issued and such language has been added to this
section.
Executive Compensation
28.Language has been added to the description of the employment
agreements of Mr. Haug and Mr. Smith disclosing the amount of time each devotes
to the Company. Also, each of the employment agreements has had an addendum
added to it which are attached as exhibits to this filing.
29.The amounts of these salaries were paid in stock as provided in
the employment agreements. The description of the employment agreements has
been expanded to more fully disclose this item.
30.The material terms of the employment agreements have been added
for Mr. Haug and Mr. Smith.
31.The only agreement Mr. Haug has with the Company is his employment
agreement which is disclosed in this section as expanded in this amended filing.
Certain Transactions
32.A new section titled "Certain Transactions" has been added
immediately preceding the section titled "Information with Respect to Prime Air
(NV)."
Information with Respect to Prime Air (NV)
33.The Registrant does not believe the information in the third
paragraph of this section is contradictory, and therefore, no changes have been
made in response to this comment.
Federal Income Tax Consequences
34.Language has been added to this section in response to this
comment.
Prime Air (Del)
35.The first two sentences of the second paragraph remain unchanged
and a new third paragraph has been added which expands the discussion of the
merger between Astro and Prime Air (BC). Also, the merger agreement dated June
1994 has been added as an exhibit.
36.Language has been added to this section which sets forth the
reasons for the change of domicile to the State of Delaware.
Legal Proceedings
37.The names of the persons referred to in the paragraph have been
added.
38.The company named in the SEC order was not a predecessor to the
Registrant. The "Astro Enterprises, Inc." named in the order was incorporated
in the State of Utah on May 23, 1985, and was involuntarily dissolved by the
State of Utah on May 1, 1990. The predecessor company to the Registrant was
also incorporated in the State of Utah under the name of "Astro Enterprises,
Inc." in 1993, three years after the dissolution of the other company. There
was no contractual relationship between the two entities and no relationship
between the management of the old company and the predecessor to the Registrant.
Language has been added to this section to clarify this issue.
39.Set forth in the revised material under this section is the
position of the Registrant as to why it believes that the SEC order did not
apply to the Registrant.
Airport Lease and Operating Agreement
40.Information concerning the construction of the terminal facility
has been added to this section.
Government Regulation and Licensing
41.Information concerning insurance and environmental issues has been
added to this section.
Marketing
42.The reference to the "major international airline" has been
deleted.
Select and Summary Financial Information
43.The information required by Rules 301 and 302 of Regulation S-K
has been added immediately preceding the section on Managements' Discussion and
Analysis.
Management's Discussion and Analysis
44.Language has been added to this section to expand the discussion
in compliance with Item 303 of Regulation S-B.
Shareholder Proposals
45.A new section entitled "Shareholder Proposals" has been added
immediately preceding the section titled "Other Information."
Financial Statements
For responses to comments numbered 46 through 54 and comment number
56, please see the letters of Mr. Orton and Mr. Rutherford included with this
filing.
Item 22 Undertakings
55.The undertakings required by Item 512(a) of Regulation S-K has
been added to this section.
The Registrant has updated the information in the registration
statement.
The Registrant notes that some of the staff's comments make reference
to information required pursuant to Regulation S-B and others to Regulation S-K,
although the Registrant believes it meets the requirements to be designated as a
small business issuer. The Registrant would like clarification under the
designated form of registration statement as to which of the items of S-K would
apply to the required disclosure rather than the items of S-B. The Registrant
notes that paragraph 3 of General Instruction D of the form S-4 refers
registrants to items of Regulation S-B and not S-K. Your guidance would be
appreciated.
Sincerely,
Ronald N. Vance
Encl.
cc: Prime Air (Del)
Kevin Orton, CPA
Bruce Rutherford, Chartered Accountant
July 23, 1997
Securities & Exchange Commission
Division of Corporation Finance
Washington, D.C. 20549
Gentlemen:
Re: Prime Air, Inc.
Per your request, we hereby submit additional information, clarification, and
changes per your comments of your letter of July 2, 1997. This letter from our
office only clarifies or answers those related to accounting related topics
regarding the financial statements and the applicable discussion in the language
of the body of S-4.
Risk Factors
Question 14
SEC: Provide a risk factor that discusses the recent indictment of Kevin Orton.
The allegations against Mr. Orton should be discussed.
Response: The allegations as set forth in the indictment are not of the nature
of that of any financial disclosures as a result of my role as an auditor. The
allegations are centered around activities of management (of which I was not
part of or participated in) in stock transactions and broker activities of which
the defendants are vigorously denying and fighting. Any risk factors related to
these allegations are not of the nature that give any question of credibility as
an auditor or accountant presenting financial information to the public and
should not be included as a risk factor.
Pro Forma Financial Statements
Question 52
SEC: Please provide separate columns for Prime Air, Inc. and Prime Air, Inc.
and a total column for each period presented. Please include an adjustment
column for the Equity Section.
Response: Revised Proforma Financial Statements for all periods presented have
been included to show separate columns for Prime Air Nevada and Delaware with
the appropriate adjustment and total columns.
Question 53
SEC: Update all financial statements and other financial data and information
in the filing - see regulation S-X, rule 3-12.
Response: All financial statements has been updated to include March 31, 1997
information, including the proforma financial statements.
Question 54
A currently dated consent of the independent accountants should be provided in
the amendment that is expected to be declared effective.
Response: An updated consent is being provided for both the audited financial
statement of Prime Air, Inc. (Nevada) and the tax opinion of the merger
agreement.
Question 56
SEC: The opinion states that the merger "should" qualify as a tax free
reorganization. Please clarify to provide a clear and unambiguous opinion. Mr.
Orton should also provide a consent.
Response: Wording in the tax opinion has been changed accordingly to be more
definitive on the qualifications of the tax free reorganization.
Therein concludes our discussion per your request. If you have any further
questions, we will respond accordingly.
Sincerely,
Kevin E. Orton
Orton & Company
Certified Public Accountants
July 26, 1997
United States
Securities and Exchange Commission
Washington, DC
20549
Re: Prime Air Inc.
File No. 333-28249
Dear Sirs:
With respect to comments contained in your correspondence of July 2,
1997 relating to the consolidated financial statements of Prime Air Inc., we
offer the following responses to items 46. Through 51.
46. Paragraph 3 of Note 1 to the consolidated financial statements has been
amended to state that the financial statements "have been prepared in
accordance with U.S. GAAP standards".
47. In compliance with reporting standards of the Canadian Institute of
Chartered Accountants, we have added an addenda to the Auditor's Report,
namely, "Comments by Auditor for U.S. Readers on Canada-U.S. Reporting
Difference", which addresses the "going concern" issue.
48. The consolidated statements of operations and cash flows have been amended
to include the cumulative data of this "Development Stage Company".
49. Paragraph 1 of Note 1 to the consolidated financial statements has been
amended to state that the Utah Corporation (Astro Enterprises, Inc.) was
reincorporated on August 30, 1993. Astro Enterprises, Inc. was a dormant
corporation prior to that date which, as noted, had ceased all required
S.E.C. filings as of September 30, 1990.
50. Note 4 to the consolidated financial statements has been added,
summarizing capitalizable expenditures and provisions for amortization.
51. Footnote disclosures have now been provided as required by SFAS 109 with
respect to "accounting for income taxes".
We trust these comments, together with the revised consolidated financial
statements and auditors' report dated July 26, 1997, will satisfactorily address
the concerns of the "Commission".
Should further comments or explanations be required, please do not hesitate to
contact the writer.
Yours very truly,
Bruce E. Rutherford, C.A.
