UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number: 333-28249
PRIME AIR, INC.
(Exact name of Registrant as specified in charter)
NEVADA Applied For
State or other jurisdiction of I.R.S. Employer I.D. No.
incorporation or organization
Suite 601 - 938 Howe Street, Vancouver, British Columbia, CANADA V6Z 1N9
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (604) 684-5700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None N/A
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the Issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such fling requirements for the past 90 days. (1) Yes
[X ] No [ ] (2) Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [N/A]
State issuer's revenues for its most recent fiscal year: -0-
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date
within the past 60 days: The aggregate market value of the voting stock held
by non-affiliates of the Registrant (17,241,220 shares) computed by using the
closing sale price on April 4, 2000, was $1,551,710.
State the number of shares outstanding of each of the Issuer's classes of
common equity as of the latest practicable date: At April 4, 2000, there were
19,647,560 shares of the Registrant's Common Stock outstanding.
Documents Incorporated by Reference: Exhibits from the Registrant's
registration statement on Form S-4 and from prior periodic reports are
incorporated by reference into Item 13 of Part III.
FORWARD-LOOKING STATEMENTS
Some of the information presented in or incorporated by reference into
this report constitutes "forward-looking statements." Although the Company
believes that its expectations are based upon reasonable assumptions within
the bounds of its knowledge of its proposed business and operations, it is
possible that actual results may differ materially from its expectations.
Factors that could cause actual results to differ from expectations include
the inability of the Company to raise the additional capital necessary to
commence its principal operations or the failure to consummate a definitive
agreement with Voyager Airways Limited.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Prime Air, Inc. (the "Company") was incorporated in the State of Nevada
on November 10, 1996, for the purpose of changing the domicile of the Company
from the State of Delaware. The predecessor to the Company was incorporated
in the State of Delaware on April 4, 1995. The change of domicile was
completed on December 15, 1997.
The Company is the parent of a wholly owned subsidiary, Prime Air, Inc.
("Prime Air (BC)"), a company originally incorporated under the laws of the
Province of British Columbia, Canada, on March 10, 1989, under the name "High
Mountain Airlines Inc." for the purpose of establishing air service to serve
the Whistler, British Columbia, Canada, area. Prime Air (BC) has entered
into a lease and operating agreement with the Village of Pemberton, British
Columbia, Canada, to plan, develop, construct, manage, and operate a terminal
facility at the Pemberton Airport. 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.
Prior to incorporation in the State of Delaware, the Company was
originally incorporated pursuant to the laws of the State of Utah on August
30,1993, under the name "Astro Enterprises, Inc." (referred to hereafter as
"the Utah Corporation"). 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), which
agreement was designated as a "Merger Agreement." Pursuant to the terms of
this Agreement 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. At the time of the stock-for-stock exchange between the Utah
Corporation and Prime Air (BC), the Utah Corporation had no assets. The
reorganization was entered into because Prime Air (BC) wanted controlling
interest in a public shell corporation.
On or about April 4, 1995, the Utah Corporation effected a change of
domicile to the State of Delaware by incorporating another corporation in
such state, 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 incorporated in 1993 as set
forth in its articles of incorporation, was to acquire the assets and certain
liabilities of another Utah corporation incorporated in 1985 and previously
dissolved by the State of Utah on May 1, 1990, and also incorporated under
the name "Astro Enterprises, Inc." Current management of the Company, 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 corporation dissolved in
1990 with 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 corporation
dissolved in 1990 and known as Astro Enterprises, Inc.
Commencing February 1998, the Company attempted to offer and sell up to
2,000,000 units (the "Units"), each Unit consisting of one share of common
stock of the Company and one Class A Warrant and one Class B Warrant. The
Units were offered by British West Indies Securities Company Limited as
selling agent for the offering. The offering terminated March 31, 1998, and
no Units were sold. The selling agreement with British West Indies
Securities Company Limited also expired on such date.
On April 23, 1998, the shareholders approved a forward split of the
outstanding shares of common stock of the Company at the rate of two shares
for each one share outstanding. The forward stock split was effective on May
15, 1998. In addition, the shareholders approved a stock option plan on
April 23, 1998, known as the 1998 Stock Option and Stock Appreciation Right
Plan (the "Plan"). The Plan provides for the issuance of options to acquire
up to 1,000,000 shares of common stock of the Company. No options have been
granted pursuant to the Plan.
Commencing June 1998, the Company attempted to offer and sell up to
8,000,000 common shares. This offering terminated August 31, 1998. No shares
were sold.
Commencing October 1998, the Company engaged the Investment Banking firm
of Chanen, Painter & Company Ltd. for the purpose of providing equity
financing to enable start up of air services. That engagement was not
completed and all associations thereto expired and were terminated in February
2000.
The Company entered into a "Memorandum of Proposed Agreement" with
519222 Ontario Limited, a corporate entity associated with Voyageur Airways
Limited, which, subject to the final approval of Voyageur and the Company,
will allow a merger which combines 25% of the assets of Voyageur with 70% of
the assets of the Company.
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 1,900,000 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 provided 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 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 portion 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 $644,511 ($592,720 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 the Company's
stock. During calendar year 1996, the Company sold 1,510,558 shares of its
common stock at $0.50 per share for total proceeds of $755,279. The limited
offering was conducted pursuant to Rule 504 of Regulation D promulgated by the
Securities and Exchange Commission. The offering was conducted for the
purpose of raising funds for the completion of construction of the airport
terminal facility at Pemberton. At the time of such offering the Company was
not subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, and was not an investment
company. The aggregate offering price of all securities sold within the
twelve months preceding the start of and during the offering did not exceed
$1,000,000. 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
property taxes imposed by municipal authorities plus 5% of the gross receipts
derived from the operation of the terminal facility for each year thereafter.
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. Prime Air (BC) has
submitted a request under the Airport Agreement for a five year extension
beginning October 31, 1999. The Airport Agreement provides for two additional
ten year extensions of the lease following the five year extension.
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 commence a marketing program and hire market
personnel as soon as sufficient funds are available. Advertising and
promotion would focus both on the Whistler area as the destination, and on
creating an image of convenience, quality and reliability for the air
service. Final approval of all advertising and promotion would remain with
Prime Air (BC). The corporate name and logo would be used throughout the
companies advertising materials in order to develop consumer and travel
agency familiarity.
Prime Air (BC) plans to prepare promotional materials that would
introduce the new air service, first to travel agents and tour wholesalers,
and then to the consumer. Promotion would constitute a major portion of
Prime Air (BC)'s overall marketing strategy. Familiarization flights would be
offered to select travel agencies, tour operators, and others, potentially in
conjunction with the ski areas, hotels, Whistler's Trade and Convention
Center, and the Whistler Resort Association. The objective would be for the
industry to become familiar enough with the service so that when a customer
books travel to Whistler, the travel agent would suggest that the customer
make airline reservations all the way to the Whistler area by using Prime Air
(BC)'s services.
Prime Air (BC) also plans to contact travel industry journals to
introduce and promote the service.
Prime Air (BC) also plans to focus much of its advertising on
accessibility to Whistler. Advertising would include direct mail to the
travel industry and specific potential corporate clients, brochures,
schedules, and various forms of media advertising, including magazines and
newspapers. Whenever possible, Prime Air (BC) would participate in
cooperative advertising in order to develop and reinforce the consumer's
associating Prime Air (BC) with easy access to Whistler.
Prime Air (BC) intends also to provide hotels at Whistler and the
Whistler Resort Association with schedule support materials to generate
airline ticket sales in conjunction with hotel bookings.
Prime Air (BC) plans to begin marketing and sales of its services in
advance of operating its first flight. The objective would be to generate
sales on all flights from the very beginning of flight operations. Prime Air
(BC) also plans to focus initially on creating awareness of the service
within the travel industry. Specifically, marketing staff would contact tour
wholesalers, travel agencies, convention and meeting planners and other
groups that currently book clients to Whistler.
A major component of Prime Air (BC)'s sales strategy would include the
integration of the flight schedules and fares into all of the major worldwide,
computerized reservations systems. Such networks allow travel agencies to book
their clients directly through the computerized system. To do this properly,
Prime Air (BC) would engage Voyageur management to provide the appropriate
expertise in the development of flight schedules and fares, which would
include assisting Prime Air (BC) in making the final selection of a
computerized reservation system to join.
In order to generate sales in the local Seattle and Vancouver markets,
Prime Air (BC) intends to plan several types of promotional programs. These
would likely include ticket packages (purchasing tickets for ten flights for
the price of nine), special introductory fares, and/or joint promotions with
other advertisers in the area.
Prime Air (BC) intends to maximize the use of the Internet as a tool to
reach the consumer with specific marketing and sales related information about
the service. As more and more airlines and computerized reservations systems
make their flight schedules and fares available on the Internet, management
believes the general public will become more adept at using the Internet as a
ready source of up-to-date marketing and sales related information about the
product. The target market group for this air service would be frequent users
of computers and the Internet. Prime Air (BC) intends to seek the services of
a marketing firm to exploit this new area of marketing potential.
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 Prime Air
(BC) 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).
Employees
The Company, including Prime Air BC, had one employee as of December 31,
1998, consisting of Mr. Haug, who was employed part-time.
ITEM 2. DESCRIPTION OF PROPERTY
In addition to the Pemberton Airport facility described above, the
Company maintains its principal executive offices at facilities shared with
the business of the President of the Company, which facilities are furnished
at no cost to the Company.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its properties is a party to any material
pending legal proceedings or government actions, including any material
bankruptcy, receivership, or similar proceedings. Management of the Company
does not believe that there are any material proceedings to which any
director, officer or affiliate of the Company, or its subsidiary, any owner of
record of beneficially of more than 5 percent of the Common Stock of the
Company, or any associate of any such director, officer, affiliate of the
Company, or its subsidiary, or security holder is a party adverse to the
Company, or it subsidiary, or has a material interest adverse to the Company,
or it subsidiary.
In December 1994 the U.S. Securities and Exchange Commission filed a
complaint in the United States District Court for the District of Columbia
(Case Number 1:94CV02633) against an entity known as "Astro Enterprises,
Inc.," and against Ernst Hiestand, Thomas Hiestand, Elizabeth Kuriger, Henry
Strubin, Peter Thaler, and Leonard Gotshalk, all of whom were allegedly
affiliated with such entity. The basis for such complaint was the
dissemination to the public from approximately March 1989 through May 1990, of
false and misleading information concerning the business of such entity. The
entity referenced in such action was incorporated in the State of Utah on May
23, 1985, and was involuntarily dissolved on May 1, 1990, for failure to file
an annual report with the State of Utah. In 1995 Mr. Paul Parshall executed
a consent and settlement of the foregoing action, ostensibly as the president,
director, and authorized agent of the entity named in such action. Management
does not believe such action in any way involved the Utah Corporation which
was subsequently incorporated under the same name on August 30, 1993, and
which subsequently changed its name to Prime Air, Inc. and changed its
domicile to the State of Delaware. Management does not believe there is or
was any legal relationship between the "Astro Enterprises, Inc." incorporated
on May 23, 1985, and the "Astro Enterprises, Inc." which was incorporated in
1993 and was the predecessor to the Company. In addition, management does not
believe that Mr. Parshall was authorized to execute such consent on behalf of
either entity. Management is unaware whether Mr. Parshall ostensibly executed
such consent on behalf of the original Astro Enterprises, Inc. or the
predecessor to the Company by the same name. However, the allegations
contained in such action reference events all of which occurred prior to the
incorporation of the predecessor to the Company in 1993.
In May 1996 the Company entered into a settlement agreement and
undertaking with the Alberta Securities Commission (file number 100164) in
which the Company agreed to be more diligent in complying with the
requirements of the Alberta Securities Act and the rules made thereunder. In
addition, the Company paid $2,000 to the commission toward the costs of the
investigation conducted by the Commission. In February 1996 the Company
announced an offering of its common shares in Alberta newspapers. Between
February 1 and March 1, 1996, the Company received $93,040 from fifteen
investors in Alberta. The investors received an offering document which did
not conform with the form of an offering memorandum required pursuant to the
Alberta Securities Act and the distribution to the investors did not qualify
for an exemption under such act. Upon being contacted by the staff of the
securities commission, the Company placed all investment monies in trust
pending the disposition of the matter. Thereafter the Company sent an
offering memorandum in the required form and an offer of rescission to all of
the investors. After the return of monies to investors who either did not
qualify for an exemption or who elected rescission, and the filing of a proper
report with the securities commission, no further action was taken by the
securities commission.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of the shareholders during the
quarter ended December 31, 1999.
EDGAR is a federally registered trademark of the U.S. Securities and Exchange
Commision (SEC). EDGAR ONLINE is a product of EDGAR Online, Inc. and is
neither approved by, nor affiliated with the SEC. EDGAR Online, Inc. makes no
claims concerning the validity of the information provided by EDGAR ONLINE and
will not be held liable for any use of this information. The information
("Information") provided herein may be displayed and printed for your
personal, non-commercial use only. You may not reproduce, retransmit,
distribute, disseminate, sell, publish, broadcast or circulate the Information
to anyone, without the express written consent of EDGAR Online, Inc. ©
Copyright 1995-1999 EDGAR Online, Inc. All rights reserved.
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
(A Nevada Corporation)
Consolidated Financial Statements
December 31, 1999 and 1998
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
<PAGE>
Rutherford & Company
Chartered Accountants
________________________________________________
9511 Bates Road, Richmond, B.C.
CANADA V7A 1E3
Telephone (604)272-5454 Fax (604)272-5874
AUDITORS' REPORT
To the Shareholders of
Prime Air, Inc. (A Nevada Corporation)
We have audited the consolidated balance sheets of Prime Air, Inc. (A
Development Stage Company) as at December 31, 1999 and 1998 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, 1999 and
1998 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 results of
operations and cash flows for the period from the date of inception of this
organization as a development stage company on March 10, 1989 to December 31,
1999 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.
"Rutherford & Company"
Richmond, Canada
April 26, 2000 Chartered
Accountants
Rutherford & Company
Chartered Accountants
________________________________________________
9511 Bates Road, Richmond, B.C.
CANADA V7A 1E3
Telephone (604)272-5454 Fax (604)272-5874
<PAGE>
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 April 26, 2000 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.
"Rutherford & Company"
Richmond, Canada
April 26, 2000 Chartered Accountants
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(all figures in US dollars)
December 31 December 31
1999 1998
ASSETS
Current Assets
Cash and short-term deposits $ 472 $ 7,433
GST recoverable 4,462 5,116
Prepaid expenses 1,448 3,091
6,382 15,640
Capital Assets (Note 4) 565,024 592,843
$ 571,406 $ 608,483
LIABILITIES
Current Liabilities
Accounts payable and accruals $ 242,978 $ 79,405
Notes and advances payable (Note 5) 39,161 109,754
282,139 189,159
SHAREHOLDERS' EQUITY
Capital Stock (Note 6)
Authorized:
50,000,000 common shares with
a stated par value of $ .001/share
3,000,000 preferred cumulative convertible
shares with a stated par value of $ .001/share
Issued:
19,647,560 common shares
(1998: 18,013,110) 19,648 18,013
Capital in excess of par value 1,526,923 1,381,498
1,546,571 1,399,511
Accumulated Deficit During
Development Stage (1,257,304) (980,187)
289,267 419,324
$ 571,406 $ 608,483
Approved on Behalf of the Board:
"Blaine Haug" Director
"Greg Duffy" Director
See Accompanying Notes To Financial Statements
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(all figures in US dollars)
Year Ended Year Ended
December 31 December 31
1999 1998
Administrative And General Expenses
Audit and accounting $ 16,955 $ 27,685
Advertising 2,010 3,949
Amortization 20,247 20,673
Bad debts - 1,933
Commissions and finders' fees 19,050 -
Consulting (Note 7) 78,478 9,862
Insurance 4,047 5,043
Interest and service charges 3,076 1,041
Legal costs 111,895 9,840
Office and general 524 8,737
Repairs and maintenance 1,602 5,047
Rent and property taxes -
airport facility (Note 8) 7,356 67
Telephone and utilities 8,001 15,280
Transfer agent, listing and filing fees 6,122 13,825
Travel, promotion and entertainment
(recovered) (7,692) 29,823
271,671 152,805
Other (Income) Expense - -
Loss (gain) on foreign exchange conversion 5,672 (286)
Interest income (226) (1,251)
5,446 (1,537)
Net Loss For The Year $ 277,117 $ 151,268
Net Loss Per Common Share $ (0.0014) $ (0.0089)
Weighted Average Common Shares
Outstanding 19,396,106 16,943,937
See Accompanying Notes To Financial Statements
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
Consolidated Statements of Shareholders' Equity and Deficit
(all figures in US dollars)
Capital in Accumulated
Excess of Share Deficit During
Common Shares (Less than) Subscriptions Development
Shares Amount Par Value Receivable Stage
Balance at
Inception on
March 10, 1989 - $ - $ - $ - $ -
Issue of common
shares for cash
at $ .001/share 630,237 630 - - -
Net loss for
the year ended
March 31, 1990 - - - - (17,956)
Balance, March
31, 1990 630,237 630 - - (17,956)
Issue of common
shares for cash
at $ .001/share 157,559 158 - - -
Net loss for the
year ended
March 31, 1991 - - - - (49,419)
Balance, March
31, 1991 787,796 788 - - (67,375)
Net loss for
the year ended
March 31, 1992 - - - - (10,990)
Balance, March
31, 1992 787,796 788 - - (78,365)
Issue of common
shares for cash
at $ .277/share 132,088 132 36,499 - -
at $ .214/share 17,069 17 3,628 - -
Net loss for the
year ended
March 31, 1993 - - - - (38,426)
Balance, March
31, 1993 936,953 937 40,127 - (116,791)
Issue of common
shares for
services
at nominal value 92,173 92 (92) - -
Issue of common
shares for cash
at $ .001/share 300,000 300 - - -
at $ .109/share 3,340 3 361 - -
at $ .154/share 23,634 24 3,619 - -
at $ .280/share 19,401 19 5,400 - -
at $ .330/share 23,161 23 7,624 - -
at $ .463/share 87,445 88 40,330 - -
at $ .694/share 15,756 16 10,907 - -
at $ .925/share 7,878 8 7,274 - -
Net loss for the
year ended
March 31, 1994 - - - - (36,272)
Balance, March
31, 1994 1,509,741 $ 1,510 $ 115,550 $ - $ (153,063)
See Accompanying Notes To Financial Statements
<PAGE>
PRIME AIR INC.
(A Development Stage Company)
Consolidated Statements of Shareholders' Equity and Deficit
(all figures in US dollars)
Capital in Accumulated
Excess of Share Deficit During
Common Shares (Less than) Subscriptions Development
Shares Amount Par Value Receivable Stage
Balance Forward 1,509,741 $ 1,510 $ 115,550 $ - $ (153,063)
Issue of common
shares for
services
at nominal value 937,478 937 (937) - -
Issue of common
shares for cash
at $ .374/share 248,692 249 92,697 - -
at $ .463/share 304,089 304 140,286 - -
Net loss for the
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
year ended
December 31, 1994 - - - - (135,530)
Balance, December
31, 1994 3,000,000 3,000 340,283 (20) (329,540)
Issue of common
shares for cash
and/or services
at an average
of $ .234/share 562,550 563 131,192 - -
Net loss for the
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)
See Accompanying Notes To Financial Statements
<PAGE>
PRIME AIR INC.
(A Development Stage Company)
Consolidated Statements of Shareholders' Equity and Deficit
(all figures in US dollars)
Capital in Accumulated
Excess of Share Deficit During
Common Shares (Less than) Subscriptions Development
Shares Amount Par Value Receivable Stage
Balance Forward 6,556,781 $ 6,557 $ 1,225,244 $ (20) $ (639,222)
Issue of common
shares for
services
at nominal value 328,000 328 - - -
Issue of common
shares for debt
settlements:
at $ .500/share 124,252 124 62,001 - -
at $ .504/share 36,380 36 18,303 - -
at $ .530/share 94,800 95 50,192 - -
Net loss for the
year ended
December 31, 1997 - - - - (189,697)
Balance, December
31, 1997 7,140,213 7,140 1,355,740 (20) (828,919)
Issue of common
shares for debt
settlements:
at $ .3935/share 10,000 10 3,863 - -
at $ .4006/share 18,215 18 7,279 - -
Issue of common
shares for
services
at nominal value 1,663,727 1,664 - - -
8,832,155 8,832 1,366,882 (20) (828,919)
Two for one stock
split, May 18, 1998 8,832,155 8,832 (8,832) - -
17,664,310 17,664 1,358,050 (20) (828,919)
Issue of common
shares for debt
settlement:
at $ .25/share 64,800 65 16,135 - -
Issue of common
shares for
services
at nominal value 290,000 290 - - -
Transfer Agent
adjustment (6,000) (6) - - -
Write off of
uncollectable share
subscription receivable - - 7,313 20 -
Net loss for the
year ended
December 31, 1998 - - - - (151,268)
Balance, December
31, 1998 18,013,110 18,013 1,381,498 - (980,187)
Issue of common
shares for debt
settlements:
at $ .20/share 201,250 202 40,048 - -
at $ .25/share 423,200 423 105,377 - -
Issue of common
shares for
services
at nominal value 1,010,000 1,010 - - -
Net loss for the
year ended
December 31, 1999 - - - - (277,117)
Balance, December
31, 1999 19,647,560 $19,648 $1,526,923 $ - $ (1,257,304)
See Accompanying Notes To Financial Statements
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(all figures in US dollars)
Year ended Year ended
December 31 December 31
1999 1998
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES:
OPERATING
Net loss $ (277,117) $ (151,268)
Non-cash charge - amortization 20,247 20,673
(256,870) (130,595)
Change in non-cash working capital
balances relating to operations 165,870 (10,870)
(91,000) (141,465)
FINANCING
Notes and advances payable (70,593) 106,259
Advances from related parties - (5,400)
Issue of capital stock 147,060 36,651
76,467 137,510
INVESTING
Recovery of terminal facility
construction costs 7,572 -
NET CASH INFLOW (OUTFLOW) (6,961) (3,955)
CASH, BEGINNING OF YEAR 7,433 11,388
CASH, END OF YEAR $ 472 $ 7,433
See Accompanying Notes To Financial Statements
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
1. Incorporation, Principles of Consolidation and Accounting Presentation
The Company was incorporated under the laws of the State of Nevada, USA on
November 10, 1996, the purpose of which was to change the domicile of the
Company from the State of Delaware to the State of Nevada. This change was
approved by the shareholders of both corporations on November 26, 1997 and
effected through a "plan and agreement of merger", with the surviving
corporation being Prime Air, Inc. (Nevada). The articles of merger were filed
with the appropriate State authorities on December 15, 1997, which became the
effective date of the merger.
The Delaware corporation was incorporated on April 4, 1996 and acquired all of
the assets, liabilities and shareholders of a previous Utah corporation of the
same name. The Utah corporation had been reincorporated on August 30, 1993 as
Astro Enterprises, Inc. and on June 28, 1994, pursuant to appropriate
shareholder agreements, acquired all outstanding shares of Prime Air Inc. (a
Canadian corporation) in exchange for shares of its capital stock on a .787796
to 1 basis, thereby providing the shareholders of Prime Air Inc. with 90% of
the outstanding capital stock of Astro Enterprises, Inc. Astro Enterprises,
Inc. then changed its name to Prime Air, Inc. Following incorporation of the
Delaware company, the Utah corporation was dissolved on May 15, 1996.
These consolidated financial statements include the accounts of the Company
and its wholly-owned operating subsidiary, Prime Air Inc. (the Canadian
corporation) and have been prepared in accordance with U.S. GAAP standards.
The results of operations and cash flows for the period from the date of
inception of this organization as a development stage company on March 10,
1989 to December 31, 1999 are presented herein for information purposes only.
These amounts 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 and operationalize the
terminal facility and to 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 financing as required and discharge its liabilities and commitments in
the normal course of business.
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
3. Significant Accounting Policies
Reporting Currency
All amounts in these consolidated financial statements are reported in U.S.
funds. Monetary assets and liabilities have been converted from Canadian
funds where applicable utilizing the year-end closing exchange rate of $
1.4529 CDN/$1.00 U.S. Transactions recorded throughout the year in the
accounts of the Canadian subsidiary have been converted to their U.S.
equivalent at actual amounts where available or by utilizing the average
annual rate as posted by the Internal Revenue Service of the United States as
follows: $ 1.4858 CDN/$1.00 U.S. (1998: $1.4831 CDN/ $1.00 U.S.).
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 have been recorded at
their original values. There have been no amounts written off as bad debts or
provided for as an allowance against the recovery of these assets.
Capital Assets
Air Terminal Construction Costs: Expenditures relating directly to the
construction of the air terminal facility and related engineering and design
have been recorded in the accounts of the Company at cost, net of amortization
which is provided on a straight-line basis over the 30-year term of the
property lease.
Furniture and Equipment: Furniture and equipment is stated at cost, net of
amortization which is provided for at the rate of 20% per annum on the
declining balance basis.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
In these financial statements, assets, liabilities and results of operations
involve significant reliance on management estimates. Actual results could
differ from the use of those estimates.
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
3. Significant Accounting Policies (continued)
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109, "Accoun
ting For Income Taxes", during the fiscal year ended December 31, 1998 and
applied the provisions of that statement on a retroactive basis to the
previous fiscal years, which resulted in no significant adjustments.
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", requires an asset and liability approach for financial accounting and
reporting for income tax purposes. This statement recognizes (a) the amount
of taxes payable or refundable for the current year and (b) deferred tax
liabilities and assets for future tax consequences of events that have been
recognized in the financial statements or tax returns.
Deferred income taxes result from temporary differences in the recognition of
accounting transactions for income tax and financial reporting purposes.
There were no temporary differences at December 31, 1999 and earlier years and
accordingly, no deferred tax liabilities have been recognized for all years.
The operating subsidiary Company has cumulative net operating loss
carryforwards of approximately $ 781,000 at December 31, 1999 and $ 697,000 at
December 31, 1998. 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 these net
operating loss carryforwards of approximately $ 172,000 at December 31, 1999
and $ 153,000 at December 31, 1998 (based upon current income tax rates) have
been offset by valuation reserves of the same amount. Net operating losses
expire after seven (7) years. Operating losses of the US parent corporation
have not been determined.
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
4. Capital Assets
Capital assets consist of the following at December 31, 1999 and December 31,
1998:
December 31, 1999
Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 644,511 $ 81,800 $ 562,711
Furniture and equipment 5,154 2,841 2,313
$ 649,665 $ 84,641 $ 565,024
December 31, 1998
Accumulated Net Book
Cost Amortization Value
Air terminal construction costs $ 652,083 $ 62,076 $ 590,007
Furniture and equipment 5,154 2,318 2,836
$ 657,237 $ 64,394 $ 592,843
During the year ended December 31, 1999, a recovery of terminal facility
construction costs in the amount of $7,572 was realized.
5. Notes and Advances Payable
The notes and advances payable are unsecured, non-interest bearing and are
without specific terms of repayment. Included therein is an amount of $35,720
which has been advanced to the Company by a shareholder and/or a corporation
controlled by that shareholder who is the beneficial owner of 1,834,450 shares
of common stock of the Company, that holding representing 9.34% of the issued
and outstanding capital of the Company.
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
6. Capital Stock
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
Common Shares Issued:
Number of Shares Consideration
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
- consulting and related
services 1,483,673 1,483
2,994,231 756,762
Balance, December 31, 1996 6,556,781 1,239,114
During the year ended December 31, 1997
- shares-for-debt settlements 255,432 130,751
- consulting and related services 328,000 328
583,432 131,079
Balance, December 31, 1997 7,140,213 1,370,193
During the year ended December 31, 1998
- shares-for-debt settlements 93,015 27,370
- consulting and related
services 1,953,727 1,954
- Transfer Agent correction (6,000) (6)
2,040,742 29,318
9,180,955 1,399,511
- "Two for One" share split 8,832,155 ______-___
Balance, December 31, 1998 18,013,110 1,399,511
During the year ended December 31, 1999
- shares-for-debt settlements 624,450 146,050
- consulting and related
services 1,010,000 1,010
1,634,450 147,060
Balance, December 31, 1999 19,647,560 $ 1,546,571
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
6. Capital Stock (continued)
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
prepared and filed a registration statement in connection with the change of
domicile (referred to in Note 1) to register all of the outstanding common
shares of capital stock in the Company. This registration has been approved
by the Securities and Exchange Commission and the change of domicile became
effective on December 15, 1997.
7. Related Party Transactions
During the years ended December 31, 1999 and 1998, no cash remuneration was
paid to any director or officer of the Company. However, 800,000 restricted
common shares of capital stock were issued to directors and officers during
the year ended December 31, 1999 (1998: 2,000,000 shares) for services
rendered. These shares have been attributed a nominal value of $ .001 per
share.
8. Rent, Property Taxes and Lease Commitment
The Canadian subsidiary corporation has entered into an Airport Lease and
Operating Agreement with The Corporation of The Village of Pemberton in
British Columbia whereby it has been granted an exclusive and irrevocable
lease over the lands and airport facilities associated with the Pemberton
Airport. The term of the Lease and Operating Agreement, including extension
options relating thereto, is for a total of 30 years with terminal rent
payable as follows:
$ 67 US ($100 CDN) per annum for the initial six (6) years (1993 through
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 2000 through 2004 cannot be quantified as the amount of gross
receipts for those years cannot be determined and active operation of the
terminal facilities has not yet commenced.
No lease payments were made during the year ended December 31, 1999 as there
were no gross receipts derived from operations. The Company, however, became
obligated to pay property taxes imposed by municipal authorities commencing in
the current year, such levies amounting to $7,356.
<PAGE>
Rutherford & Company
Chartered Accountants
________________________________________________
9511 Bates Road, Richmond, B.C.
CANADA V7A 1E3
Telephone (604)272-5454 Fax (604)272-5874
ACCOUNTANTS' CONSENT
We hereby consent to the use of our audit report of Prime Air, Inc. (Nevada),
dated April 26, 2000, for the years ended December 31, 1999 and 1998 in the
Form 10K SB Statement for Prime Air, Inc. (Nevada).
We also consent to the use of our auditing firm as experts in the 10K SB
Registration Statement for Prime Air, Inc. (Nevada).
"Rutherford & Company"
April 26, 2000
Richmond, Canada CHARTERED ACCOUNTANTS
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 472
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,382
<PP&E> 565,024
<DEPRECIATION> 0
<TOTAL-ASSETS> 571,024
<CURRENT-LIABILITIES> 282,139
<BONDS> 0
0
0
<COMMON> 19,648
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 571,406
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 271,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (226)
<INCOME-PRETAX> (277,117)
<INCOME-TAX> (277,117)
<INCOME-CONTINUING> (277,117)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (277,117)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
