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, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number: 333-28249
PRIME AIR, INC.
(Exact name of Registrant as specified in charter)
Nevada Not Applicable
------ -----------------------
State or other jurisdiction of I.R.S. Employer I.D. No.
incorporation or organization
Suite 601 - 938 Howe Street, Vancouver, British Columbia, V6Z 1N9
---------------------------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(604) 684-5700
----------------------
Issuer's telephone number,
including area code:
Check whether the Issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act of 1934 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.
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 June 30, 2004, there were
30,822,000 shares of the Registrant's Common Stock outstanding.
PART 1
ITEM 1. FINANCIAL STATEMENTS
Prime Air, Inc.
(A Development Stage Company)
June 30, 2004
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
2
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in US dollars)
June 30, December 31,
2004 2003
(unaudited) (audited)
------------ --------------
ASSETS
Current Assets
Cash $ 53,040 $ 2,691
Prepaid expenses and deposits 4,455 5,382
Other receivables 1,818 1,292
------------ --------------
Total Current Assets 59,313 9,365
Property and Equipment (Note 3) 477,982 508,158
------------ --------------
Total Assets $ 537,295 $ 517,523
============ ==============
LIABILITIES
Current Liabilities
Accounts payable $ 52,452 $ 78,436
Accrued liabilities 7,500 10,500
Due to related parties (Note 5) 72,989 39,248
Notes and advances payable (Note 4) 744 22,408
------------ --------------
Total Liabilities 133,685 150,592
------------ --------------
Contingencies and Commitments (Notes 1 and 7)
STOCKHOLDERS' EQUITY
Preferred Stock, 5,000,000 cumulative and convertible preferred shares authorized with a
par value of $0.001, none issued - -
Common Stock, 150,000,000 common shares authorized with a par value of $0.001,
30,822,000 and 27,084,000 issued and outstanding, respectively 30,822 27,084
Additional Paid In Capital 4,598,382 4,412,694
Accumulated other comprehensive income 42,778 58,586
Deficit accumulated during the development stage (4,268,372) (4,131,433)
------------ --------------
Total Stockholders' Equity 403,610 366,931
------------ --------------
Total Liabilities and Stockholders' Equity $ 537,295 $ 517,523
============ ==============
(The accompanying notes are an integral part of these consolidated financial
statements)
3
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in US dollars)
(unaudited)
* * * * From inception
* * * * March 10,
Three months Three months Six months Six months 1989
ended June 30 ended June 30 ended June 30 ended June 30 to June 30
2004 2003 2004 2003 2004
--------------- --------------- --------------- ------------ ----------------
Revenue
Rental income $ 1,089 $ - $ 3,222 $ - $ 5,586
Expenses
Flight operations $ - $ - $ - $ - $ 114,720
Advertising and promotion 1,099 - 1,481 - 41,942
Amortization 5,554 5,347 11,286 10,289 175,819
Consulting 2,714 5,000 2,714 14,000 42,448
Consulting to related parties 30,000 15,000 52,500 30,000 2,852,196
General and administrative 23,385 5,578 31,760 9,817 801,567
Professional fees 39,031 1,075 51,670 2,068 356,330
--------------- --------------- --------------- ------------ ----------------
101,783 32,000 151,411 66,174 4,385,022
--------------- --------------- --------------- ------------ ----------------
Loss from Operations (100,694) (32,000) (148,189) (66,174) (4,379,436)
Gain on Settlement of Debt 11,250 - 11,250 - 111,064
--------------- --------------- --------------- ------------ ----------------
Net Loss for the Period $ (89,444) $ (32,000) $ (136,939) $ (66,174) $ (4,268,372)
Other Comprehensive Income
Foreign currency translation adjustments (11,287) 29,275 (15,808) 51,069 42,778
--------------- --------------- --------------- ------------ ----------------
Comprehensive Loss $ (100,731) $ (2,725) $ (152,747) $ (15,105) $ (4,225,594)
=============== =============== =============== ============ ================
Net Loss Per Common Share - Basic and diluted (0.00) (0.00) (0.00) (0.00)
=============== =============== =============== ============
Weighted Average Common Shares Outstanding 28,676,000 23,319,000 27,902,000 23,319,000
=============== =============== =============== ============
(The accompanying notes are an integral part of these consolidated financial
statements)
4
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in US dollars)
(unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
2004 2003
------------ ------------
CASH FLOWS TO OPERATING ACTIVITIES
Net loss for the period $ (136,939) $ (66,174)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on settlement of debt (11,250) -
Amortization 11,286 10,289
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (577) 1,916
Decrease in deposits and prepaid expenses 730 -
Increase in due to related parties 58,752 30,000
Increase in accounts payable and accrued liabilities 65,624 22,641
------------ ------------
Net Cash Provided by (Used In) Operating Activities (12,374) (1,328)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment 434 -
Purchase of property and equipment (362) -
------------ ------------
Net Cash Provided by Investing Activities 72 -
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes and advances payable - 1,379
Proceeds from issuance of common stock 63,000 -
------------ ------------
Net Cash Provided by Financing Activities 63,000 1,379
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (349) 53
------------ ------------
INCREASE IN CASH 50,349 104
CASH, BEGINNING OF PERIOD 2,691 512
------------ ------------
CASH, END OF PERIOD $ 53,040 $ 616
============ ============
NON-CASH FINANCING ACTIVITIES
Common stock issued for debt $ 126,426 $ -
SUPPLEMENTAL DISCLOSURES
Interest paid $ - $ -
Income taxes paid $ - $ -
(The accompanying notes are an integral part of the consolidated financial
statements)
5
PRIME AIR, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
1. Development Stage Company
The Company was incorporated under the laws of the State of Nevada on November
10, 1996, for the purpose of changing 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, 1995, for the purpose of
changing the domicile of the Company from the State of Utah to the State of
Delaware by 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 Utah Corporation was incorporated on August 30, 1993 as Astro Enterprises,
Inc. ("Astro"). On June 28, 1994, pursuant to appropriate shareholder
agreements, the Utah Corporation acquired all outstanding shares of Prime Air
(BC) Inc., a private Canadian corporation ("the Canadian Corporation") in
exchange for shares of its capital stock on a .787796 to 1 basis, thereby
providing the shareholders of the Canadian Corporation with 90% of the
outstanding common shares of Astro. The acquisition was a capital transaction
in substance and therefore was accounted for as a recapitalization of Astro. The
Canadian Corporation was incorporated on March 10, 1989. Astro then changed its
name to Prime Air, Inc., which subsequently was acquired as a wholly owned
subsidiary by the Delaware Corporation, as described above. Prior to the
acquisition, Astro had no principal operations and had nominal net assets.
The Company is a development stage company as defined by Statement of Financial
Accounting Standards ("SFAS") No. 7. In a development stage company, management
devotes most of its activities in developing a market for its products and/or
services. 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 facility and commence
operations on an economically viable basis. The ability of the Company to emerge
from the development stage with respect to any planned principal business
activity is dependent upon its successful efforts to raise additional equity
financing and/or attain profitable operations. Management believes the Company
will be able to generate sufficient funds to meet its obligations for a period
of at least twelve months from the balance sheet date. There is no guarantee
that the Company will be able to raise any equity financing or sell any of its
services at a profit. There is substantial doubt regarding the Company's ability
to continue as a going concern.
2. Summary of Significant Accounting Policies
a) Basis of Presentation
These consolidated financial statements include the accounts of the Company and
its wholly-owned operating subsidiary, Prime Air Inc. (the Canadian
corporation). All intercompany transactions and balances have been eliminated.
b) Year End
The Company's fiscal year end is December 31.
c) Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States 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 periods. Actual results could differ from those estimates.
d) Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three
months or less at the time of issuance to be cash equivalents.
6
PRIME AIR, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)
e) Other Comprehensive Income (Loss)
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," establishes standards for the reporting and display of
comprehensive loss and its components in the financial statements. As at June
30, 2004 and 2003, the Company's only component of comprehensive income (loss)
were foreign currency translation adjustments.
f) Property and Equipment
Property and equipment is carried at cost less accumulated amortization.
Amortization is computed on the following methods over the estimated useful life
of the asset at the following annual rates:
Air terminal - Straight-line over 30-year term of land and airport facilities
lease
Furniture and equipment - 20% Declining-balance
Computer equipment - 30% Declining-balance
g) Long-Lived Assets
In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long Lived Assets", the carrying value of long-lived assets is reviewed on a
regular basis for the existence of facts or circumstances that may suggest
impairment. The Company recognizes impairment when the sum of the expected
undiscounted future cash flows is less than the carrying amount of the asset.
Impairment losses, if any, are measured as the excess of the carrying amount of
the asset over its estimated fair value.
h) Foreign Currency Translation
The functional currency of the Company's Canadian subsidiary is the Canadian
dollar. The financial statements of this subsidiary are translated to United
States dollars in accordance with SFAS No. 52 "Foreign Currency Translation"
using period-end rates of exchange for assets and liabilities, and average rates
of exchange for the year for revenues and expenses. Translation gains (losses)
are recorded in accumulated other comprehensive income (loss) as a component of
stockholders' equity. Foreign currency transaction gains and losses are included
in current operations.
i) Revenue Recognition
The Company recognizes revenue in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial
Statements". Revenue is recognized only when the price is fixed or determinable,
persuasive evidence of an arrangement exists, the service is performed, and
collectibility is reasonably assured. The Company receives income from the
rental of the air terminal located in Pemberton, BC, Canada.
j) Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with SFAS No.
128, "Earnings per Share" which requires presentation of both basic and diluted
earnings per share (EPS) on the face of the income statement. Basic EPS is
computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period including stock options, using the treasury
stock method, and convertible preferred stock, using the if-converted method. In
computing Diluted EPS, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti dilutive.
k) Stock-Based Compensation
The Company records stock-based compensation in accordance with SFAS No. 123,
"Accounting for Stock-Based Compensation". Common stock issued by the Company
for services is recognized as compensation expense based on the fair market
value of the stock award or fair market value of the goods and services
received, whichever is more reliably measurable. The Company does not currently
have a stock option plan.
7
PRIME AIR, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)
l) Financial Instruments
The fair values of cash, prepaid expenses, other receivables, notes payable,
advances payable, accounts payable and accrued liabilities were estimated to
approximate their carrying values due to the immediate or short-term maturity of
these financial instruments. The Company's operations are in Canada and
virtually all of its assets and liabilities are giving rise to significant
exposure to market risks from changes in foreign currency rates. The financial
risk is the risk to the Company's operations that arise from fluctuations in
foreign exchange rates and the degree of volatility of these rates. Currently,
the Company does not use derivative instruments to reduce its exposure to
foreign currency risk.
m) Income Taxes
The Company utilizes the liability method of accounting for income taxes as set
forth in SFAS No. 109, "Accounting for Income Taxes". Under the liability
method, deferred taxes are determined based on the temporary differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates. A valuation allowance is recorded when it is more likely than not
that some of the deferred tax assets will not be realized.
n) Recent Accounting Pronouncements
In December 2003, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 104, "Revenue Recognition" (SAB 104), which supersedes SAB 101,
"Revenue Recognition in Financial Statements". The primary purpose of SAB 104 is
to rescind accounting guidance contained in SAB 101 related to multiple element
revenue arrangements, which was superseded as a result of the issuance of EITF
00-21, "Accounting for Revenue Arrangements with Multiple Deliverables". While
the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the
revenue recognition principles of SAB 101 remain largely unchanged by the
issuance of SAB 104. The adoption of SAB 104 did not have a material impact on
the Company's financial statements.
In January 2003 the FASB issued FIN 46, Consolidation of Variable Interest
Entities (FIN 46), which was amended in December 2003. FIN 46 requires an
investor with a majority of the variable interests (primary beneficiary) in a
variable interest entity ("VIE") to consolidate the entity and also requires
majority and significant variable interest investors to provide certain
disclosures. A VIE is an entity in which the voting equity investors do not have
a controlling financial interest or the equity investment at risk is
insufficient to finance the entity's activities without receiving additional
subordinated financial support from the other parties. Development stage
entities that have sufficient equity invested to finance the activities they are
currently engaged in and entities that are businesses, as defined in FIN 46, are
not considered VIE's. The provisions of FIN 46 were effective immediately for
all arrangements entered into with new VIE's created after January 31, 2003. For
arrangements entered into with VIE's created before January 31, 2003, the
provisions of FIN 46 are effective at the end of the first reporting period
ending after March 15, 2004. The Company does not have VIE's.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). The requirements of SFAS No.
150 apply to issuers' classification and measurement of freestanding financial
instruments, including those that comprise more than one option or forward
contract. SFAS No. 150 does not apply to features that are embedded in a
financial instrument that is not a derivative in its entirety. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatory redeemable financial
instruments of non-public entities. It is to be implemented by reporting the
cumulative effect of a change in an accounting principle for financial
instruments created before the issuance date of SFAS No. 150 and still existing
at the beginning of the interim period of adoption. Restatement is not
permitted. The adoption of this standard did not have a material effect on the
Company's results of operations or financial position.
o) Reclassifications
Certain amounts and/or disclosures in the prior year consolidated financial
statements have been reclassified or disclosure revised to conform with the
current year presentation.
8
PRIME AIR, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)
p) Interim Financial Statements
These interim unaudited financial statements have been prepared on the same
basis as the annual financial statements and in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the periods shown. The results of operations for
such periods are not necessarily indicative of the results expected for a full
year or for any future period.
3. Property and Equipment
December 31,
June 30, 2004 2003
---------------------------------- ------------
* Accumulated Net Book Net Book
Cost Amortization Value Value
-------- ------------- --------- ------------
Air terminal $662,005 $ 185,435 $ 476,570 $ 506,489
Computer equipment 1,107 495 612 747
Furniture and equipment 5,344 4,544 800 922
$668,456 $ 190,474 $ 477,982 $ 508,158
4. Notes and Advances Payable
The notes and advances payable are unsecured, non-interest bearing and are
without specific terms of repayment.
5. Related Party Transactions
a) Included in due to related parties is an amount of $19,500 (December 31,
2003 - $12,846) which has been advanced to the Company by a shareholders and/or
a corporation controlled by that shareholder. This shareholder controls 100% of
the related corporation. During the six months ended June 30, 2004, cash
advances of $19,500 were made. This amount is unsecured, non-interest bearing
and has no specific terms of repayment.
b) Included in due to related parties is an amount of $35,050 (December 31,
2003 - $26,402) which represents consulting fees and expenses incurred on behalf
of the Company by directors and officers. These amounts are unsecured,
non-interest bearing and have no specific terms of repayment.
6. Common Shares
a) During the three month period ended June 30, 2004, the Company issued
1,220,000 shares of common stock at $0.05 per share for cash proceeds of
$61,000.
b) During the three month period ended June 30, 2004, the Company issued
20,000 shares of common stock at $0.10 per share for cash proceeds of $2,000.
c) During the three month period ended June 30, 2004, the Company issued
2,408,000 shares of common stock at $0.05 per share for debt settlement of
$131,179 which resulted in debt settlement gain of $11,250.
d) During the three month period ended March 31, 2004, the Company issued
50,000 shares of common stock at $0.05 per share for debt settlement of $2,497,
and issued 40,000 shares of common stock at $0.10 per share for debt settlement
of $4,000.
7. Commitments
The Company's wholly owned Canadian subsidiary ("subsidiary") entered into an
Airport Lease and Operating Agreement ("the "Agreement") with The Corporation of
The Village of Pemberton in British Columbia in 1993 whereby it was granted an
exclusive and irrevocable lease over the lands and airport facilities associated
with the Pemberton Airport. The initial lease term commenced on October 29, 1993
and ended on October 31, 1996. The subsidiary exercised its option for
extensions of the Agreement, which currently expires in 2004, however the
Company has two ten-year options for extension available, which require written
notice within six months prior to the expiry of the Extension Term. The Company
plans to file written notice with the Village of Pemberton to exercise the first
10 year option extension.
9
PRIME AIR, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
7. Commitments (continued)
Rent payable under the Agreement is based on 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 Company paid rent expense of $165 for the year ended
December 31, 2003 (2002: NIL), which represented 5% of gross rental receipts.
The lease commitment amounts for 2003 through 2007 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. The Company paid
property taxes imposed by municipal authorities amounting to $9,383 for the year
ended December 31, 2003 (2002: $9,859). The Village of Pemberton in the event of
a material default or bankruptcy by the Company may terminate the Agreement. The
terminal facilities shall become the property of the Village of Pemberton at the
expiration of the Agreement.
8. Subsequent Events
a) The Company issued 429,200 shares of common stock to settle debt of
$36,460, resulting in a gain on settlement of debt of $15,000.
b) The Company issued 60,000 shares of common stock for consulting services
to be rendered for the three month period ended October 2004, and issued 60,000
shares of common stock for accounting services to be rendered over a one year
term.
c) The Company issued 350,000 shares of common stock to directors for
services to be rendered for the three month period ended September 2004.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
Management's Discussion and Analysis of Financial Condition and Results of
--------------------------------------------------------------------------------
Operation
---------
Some of the information presented in 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 Voyageur Airways Limited.
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.
To the present date, 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. However, sufficient funding
has not been secured to provide for costs for completion of certain
infrastructure items including landing lights, airside and groundside related
equipment, advance marketing and working capital requirements.
The results of the operations for the quarter ended June 30, 2004 show
substantially greater expenses incurred than the same period of the previous
year. Because the Company is in its "development stage," these figures will not
be representative of the Company's future operations.
Results of Operations
Six months ended June 30, 2004 compared to June 30, 2003.
During the six months ended June 30, 2004, the Company earned revenues of $3,222
from the rental of retail space at its terminal facility. No similar revenues
were earned during the same period of the prior year.
Total expenses for the six months ended June 30, 2004 were $151,411 compared to
$66,174 for the six months ended for June 30, 2003.
During the six months ended June 30, 2004, the Company incurred professional
expenses, consulting fees to related parties, and general expenses of $51,670,
$52,500 and $31,760, respectively, compared to professional expenses, consulting
fees to related parties, and general expenses of $2,068, $30,000 and $9,817,
respectively for the same period of the prior year. During the six months ended
June 30, 2004, professional expenses increased primarily in accounting and legal
fees in an effort to bring the Company in compliance with its SEC filings.
Consulting fees to related parties increased due to the increased activity of
two directors who are providing consulting services to the Company, and general
and administrative expenses increased due to the Company's anticipation of
operations for chartered flights.
11
Liquidity and Capital Resources
As of June 30, 2004, the Company's negative working capital was ($74,372)
compared to a negative working capital of ($141,227) as of December 31, 2003.
The Company currently has limited revenues and will not generate substantial
revenue until it begins its operation at Pemberton. Historically, the Company
has funded its operations through loans from related parties and issuance of its
common stock. No assurance can be given that the Company will be able to
continue to receive such loans for its operations.
ITEM 3. CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation
of our management, including our Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined by Exchange Act Rule 13a-15(e)) as of the end of our
second fiscal quarter pursuant to Exchange Act Rule 13a-15(b). Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective in ensuring that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
There have been no changes in our internal control over financial reporting
identified in connection with our evaluation as of the end of the second fiscal
quarter that occurred during such quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART II
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor any of its properties is a party to any legal
proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended June 30, 2004, the Company sold the following
unregistered shares.
1. On May 4, 2004, the Company issued 100,000 shares of its common stock at
$.05 per share to one subscriber. The issuance of the shares was exempt from
registration pursuant to Section 4(2).
2. On May 4, 2004, the Company issued 20,000 shares of its common stock at
$.10 per share to one subscriber. The issuance of the shares was exempt from
registration pursuant to Section 4(2).
3. On May 4, 2004, the Company issued 2,005,000 shares of common stock at
$0.05 per share to four persons in settlement of $99,851 in debt and for
services rendered. The issuances of the shares were exempt from registration
pursuant to Regulation S and Section 4(2).
12
4. On May 27, 2004, the Company issued 120,000 shares of its common stock at
$.05 per share to one subscriber. The issuance of the shares was exempt from
registration pursuant to Section 4(2).
5. On May 31 2004, the Company issued 178,000 shares of common stock at
$0.05 per share to three persons in settlement of $8,829 for services rendered.
The issuances of the shares were exempt from registration pursuant to Regulation
S.
6. On June 16 2004, the Company issued 225,000 shares of common stock at
$0.05 per share for $11,250 in consulting services to three directors. The
issuances were exempt from registration pursuant to Regulation S and Section
4(2).
7. On June 28, 2004, the Company issued 1,000,000 shares of its common stock
at $.05 per share to one subscriber. The issuance was exempt from registration
pursuant to Regulation S.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
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
June 30, 2004.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
Exhibit No.
------------
31.1 Certification by the Principal Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act
31.2 Certification by the Principal Accounting Officer Pursuant to Section 302
of the Sarbanes-Oxley Act
32 Certification by the Principal Executive and Financial Officers Pursuant to
Section 906 of the Sarbanes-Oxley Act
(B) Reports on Form 8-K.
1. Form 8-K filed June 23, 2004 announcing Dr. Albert Bruno as CEO.
2. Form 8-K filed July 15, 2004 announcing Jan Gossing as a director and CFO
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Form 10-QSB to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
Washington, on the 16th day of August, 2004.
Prime Air, Inc.
By: /s/ Dr. Albert Bruno
----------------------------
Dr. Albert Bruno
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Jan Gossing
----------------------------
Jan Gossing
Chief Financial Officer
(Principal Accountant and Financial Officer)
14