Page UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number: 333-28249
PRIME AIR, INC.
(Exact name of Registrant as specified in charter)
NEVADA Applied For
State or other jurisdiction of I.R.S. Employer I.D. No.
incorporation or organization
8598 112 STREET, FT. SASKATCHEWAN, ALBERTA, CANADA T8L 3V8
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (403) 998-3400
Check whether the Issuer (1) has filed all reports required to be
filed by section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such fling
requirements for the past 90 days. (1) Yes [X] No [ ] (2)
Yes [X] No [ ]
State the number of shares outstanding of each of the Issuer's
classes of common equity as of the latest practicable date: At
September 18, 1998, there were 18,013,110 shares of the Registrant's
Common Stock outstanding.
PART I
ITEM 1. FINANCIAL STATEMENTS
The financial statements attached hereto and included herein
have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles nave been condensed or omitted. However, in
the opinion of management, all adjustments (which include only
normal recurring accruals) necessary to present fairly the financial
position and results of operations for the periods presented have
been made. The results for interim periods are not necessarily
indicative of trends or of results to be expected for the full year.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's
annual report on Form 10-KSB for the year ended December 31, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is a development stage company and conducts all
operations through its wholly owned subsidiary, Prime Air (BC). The
Company has had no material revenues in the past. During the year
ended December 31, 1997, the only income received was bank interest
of $4,020.
During the last three years, the operations of the Company
have been funded from equity participation of the owners. Total
cash raised from equity funding from March 1992 to December 31, 1994
was $349,808, $131,755 for 1995 and $756,763 for 1996. No funds
were raised during 1997, but the Company did convert $130,751 of
debt into common stock of the Company.
The Company has realized a cumulative loss of $925,231 since
March 1992, and anticipates similar losses until operations begin,
which is expected in early 1999.
The Company has sufficient working capital to meet its
immediate obligations, but does not have any cash available to allow
operations to commence. The Company requires $1,500,000 million to
commence flight operations. The Company intends to raise a total of
$3,000,000 by way of an equity offering, the net proceeds of which
will facilitate the operational start-up and provide sufficient
working capital to sustain operations for some time. The only
significant capital expenditures anticipated in the next year are
airport and runway lighting improvements which are expected to cost
approximately $350,000.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the shareholders during the
quarter ended June 30, 1998.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are included as
part of this report:
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
2.1 Plan and Agreement of Merger dated
March 10, 1997 *
2.2 Merger Agreement dated June 29, 1994 *
3.1 Articles of Incorporation *
3.2 Articles of Merger dated November 26, 1997 **
3.4 Bylaws of the Company *
4.1 Stock Option Plan ***
10.1 Airport Lease 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 *
* Incorporated by reference from the Company's registration
statement on Form S-4 filed with the Securities and Exchange
Commission, file no. 333-28249.
** Incorporated by reference from the Company's annual report
on Form 10-KSB filed with the Securities and Exchange Commission,
file no. 333-28249.
*** Incorporated by reference from the Company's quarterly
report on Form 10-QSB filed with the Securities and Exchange
Commission, file no. 333-28249.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during
the quarter ended June 30, 1998.
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(all figures in US dollars)
(UNAUDITED - SEE NOTICE TO READER)
June 30 June 30 December 31
1998 1997 1997
(Unaudited) (Unaudited) (Audited)
ASSETS
Current Assets
Cash and short-term deposits $ 36,894 $ 104,268 $ 11,388
Prepaid expenses and deposit - 1,109 -
GST recoverable 1,546 35,235 1,587
38,440 140,612 12,975
Capital Assets (Note 4) 559,428 616,820 613,516
$ 597,868 $ 757,432 $ 626,491
LIABILITIES
Current Liabilities
Accounts payable and
accruals $ 71,527 $ 104,750 $ 83,655
Notes and advances
payable (Note 5) 95,412 3,697 3,495
Notes and advances
from related parties (Note 6) 5,400 - 5,400
172,339 108,447 92,550
SHAREHOLDERS' EQUITY
Capital Stock (Note 7)
Authorized:
50,000,000 common shares
with a stated par value
of $ .001/share
3,000,000 preferred
cumulative convertible
shares with a stated
par value of $ .001/share
Issued:
7,140,213 common shares
(1996: 6,556,781) 8,829 7,140 7,140
Share subscription receivable (20) (20) (20)
Capital in excess of par value 1,341,951 1,355,680 1,355,740
1,350,760 1,362,800 1,362,860
Accumulated Deficit During
Development Stage (925,231) (713,815) (828,919)
425,529 648,985 533,941
$ 597,868 $ 757,432 $ 626,491
Approved on Behalf of the Board:
Director
Director
See Accompanying Notes
0 0 0
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(all figures in US dollars)
(UNAUDITED - SEE NOTICE TO READER) Period from
Date of Inception
Six Months Ended Six Months Ended Year Ended on March 10, 1989
June 30 June 30 December 31 to June 30
1998 1997 1997 1998
(Unaudited) (Audited) (Audited) (Unaudited)
(Note 1)
Direct Costs
Flight
operations $ - $ - $ - $ 114,720
Administrative
and General
Audit and
accounting 1,511 6,699 23,826 50,199
Advertising - 74 - 9,094
Amortization 9,958 11,065 21,603 49,366
Automotive 1,884 - - 19,164
Consulting
fees 6,492 328 24,583 94,368
Insurance 1,858 3,877 9,240 17,559
Interest and
service charges 307 247 1,769 9,565
Legal 5,801 15,469 34,192 63,388
Management
remuneration - - - 77,287
Office and
general 9,343 6,904 10,176 87,831
Promotion and
entertainment 7,268 752 711 22,004
Rent - 296 279 34,603
Telephone and
utilities 11,613 7,299 18,039 61,586
Transfer agent
and filing
fees 13,547 4,863 13,636 28,409
Travel 6,474 15,515 25,464 59,045
76,055 73,388 183,518 683,468
Other Income
(Expense)
Gain (loss) on
foreign
exchange
conversion (20,443) (4,289) (10,199) (54,898)
Interest income 187 3,084 4,020 6,379
(20,256) (1,205) (6,179) (48,519)
Net Loss
Before
Non-recurring
Item (96,311) (74,593) (189,697) (846,707)
Non-recurring
Expense
Consulting
costs to set
up US
corporation - - - (78,524)
Net Loss For
Period $ (96,311) $ (74,593) $ (189,697) $ (925,231)
Net Loss Per
Common Share $ (0.0037) $ (0.0112) $ (0.0275)
Weighted
Average Common
Shares
Outstanding 6,896,225 6,687,092 6,896,225
See Accompanying Notes
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(all figures in US dollars)
(UNAUDITED - SEE NOTICE TO READER)
Period from
Date of Inception
Six Months Ended Six Months Ended Year ended on March 10, 1989
June 30 June 30 December 31 to March 31
1998 1997 1997 1998
(Unaudited) (Unaudited) (Audited) (Unaudited)
(Note 1)
NET INFLOW
(OUTFLOW) OF
CASH RELATED
TO THE
FOLLOWING
ACTIVITIES:
OPERATING
Net loss $ (96,311) ) $ (74,593) ) $ (189,697) $ (828,919)
Non-cash
charge -
amortization 9,958 11,065 21,603 43,721
(86,353) (63,528) (168,094) (785,198)
Change in
non-cash
working
capital
balances
relating to
operations (12,088) (25,968) (12,306) 82,068
(98,441) ) (89,496) (180,400) (703,130)
FINANCING
Notes and
advances
payable 91,917 (5,370) (5,572) 3,495
Notes and
advances
from related
parties (8,732) (25,522) (20,122) 5,400
Issue of
capital stock (3,368) 131,019 131,079 1,362,860
79,817 100,127 105,385 1,371,755
INVESTING
Exchange
variance of
capital
assets 44,130 (7,677) (14,911) (657,237)
NET CASH
INFLOW
(OUTFLOW) 25,506 2,954 (89,926) 11,388
CASH,
BEGINNING OF
PERIOD 11,388 101,314 (85,351) -
CASH, END OF
PERIOD $ 36,894 $ 104,268 $ (175,277) $ 11,388
See Accompanying Notes
PRIME AIR INC.
(A Development Stage Company)
(A Nevada Corporation)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997 AND DECEMBER 31, 1997
Notice to Reader
Consolidated Balance Sheets
Consolidated Statements of
Operations
Consolidated Statements of
Shareholders' Equity and Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial
Statements
KOCH & ASSOCIATES
__________________________________________
STE 601 - 938 HOWE STREET, VANCOUVER, B.C.
V6Z 1N9 TELEPHONE (604)684-5700 FAX
(604)684-7211
NOTICE TO READER
I have compiled the consolidated
balance sheet of Prime Air Inc., a Nevada
company, as at June 30, 1998 and
consolidated statements of operations and
cash flows for the six month period then
ended from information provided by
management. I have not audited, reviewed or
otherwise attempted to verify the accuracy
or completeness of such information.
Readers are cautioned these statements may
not be appropriate for their purposes.
August 13, 1998
Certified Management Accountant
Vancouver, B.C.
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998 and 1997 and December 31, 1997
(Unaudited See Notice to Reader)
1. INCORPORATION AND PRINCIPLES OF CONSOLIDATION
On November 10, 1997, Prime Air Inc (a Nevada corporation) was formed, the
purpose of which was to change the domicile of the Company to the State of
Nevada and to acquire all of the assets and liabilities of the predecessor
Delaware company.
The predecessor Deleware company was incorporated under the laws of the
State of Delaware, USA on April 4, 1996 and acquired all of the assets,
liabilities and shareholders of a previous Utah Corporation of the same
name. The Utah Corporation 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, 1996.
These consolidated financial statements include the accounts of the \
Company and its wholly-owned operating subsidiary, Prime Air Inc.
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 1997. 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
June 30, 1998 and 1997 and December 31, 1997
(Unaudited See Notice to Reader)
3. SIGNIFICANT ACCOUNTING POLICIES
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.
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:
1998: $ 0.6810 U.S. / $ 1. CDN
1997: $ 0.7334 U.S. / $ 1. CDN
1996: $ 0.7284 U.S. / $ 1. CDN
4. CAPITAL ASSETS
Capital assets consist of the following at June 30, 1998, December 31,
1997 and December 31, 1996:
June 30, 1998
Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 606,076 $ 47,691 $ 558,385
Furniture and equipment 4,891 3,847 1,044
$ 610,967 $ 51,538 $ 559,428
June 30, 1997
Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 644,922 $ 32,017 612,905
Furniture and equipment 5,262 1,347 3,915
$ 650,184 $ 33,364 $ 616,820
December 31, 1997
Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 652,083 $ 42,058 $ 610,625
Furniture and equipment 5,154 1,663 3,941
$ 657,237 $ 43,721 $ 613,516
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998 and 1997 and December 31, 1997
(Unaudited See Notice to Reader)
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
The notes and advances payable are unsecured, non-interest bearing
and are without specific terms of repayment.
7. 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized.
PRIME AIR, INC.
Date: September 16, 1998 By /s/ Royle Smith, President
Date: September 16, 1998 By /s/ Greg Duffy, Principal
Financial and Accounting Officer
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] JUN-30-1998
[CASH] 36,894
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 38,440
[PP&E] 0
[DEPRECIATION] 0
[TOTAL-ASSETS] 597,868
[CURRENT-LIABILITIES] 172,339
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 8,829
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 597,868
[SALES] 0
[TOTAL-REVENUES] 0
[CGS] 0
[TOTAL-COSTS] 98,441
[OTHER-EXPENSES] 20,256
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] 0
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (20,256)
[EPS-PRIMARY] (.0037)
[EPS-DILUTED] 0
</TABLE>
