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 PERIOD ENDED September 30, 2006
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 333-88480
PRIME RESOURCE, INC.
--------------------
(Exact name of registrant as specified in its charter)
Utah 04-3648721
----- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1245 East Brickyard Road, Suite 590
Salt Lake City, Utah 84106
----------------------------
(Address of principal executive officers)
(801) 433-2000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of
the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant has
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [] No
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 126-2 of the Exchange Act). [] Yes [X] No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock: 1,454,090 shares issued and outstanding as of September 30, 2006,
No Par Value. Authorized - 50,000,000 common voting shares. The company also has
1,518,860 treasury shares.
INDEX
Prime Resource, Inc.
For The Quarter Ending September 30, 2006
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet - September 30, 2006 (Unaudited).
Consolidated Statements of Operations (Unaudited) - For the three
and nine months ended September 30, 2006, and for the three and
nine months ended September 30, 2005;
Consolidated Statements of Cash Flows (Unaudited) - For the nine
months ended September 30, 2006, and for the nine months ended
September 30, 2005.
Notes to Condensed Financial Statements (Unaudited) - September
30, 2006
Item 2. Management's Discussion and Analysis o Financial Condition or
Plan of Operation.
Item 3. Risk Factors
Item 4. Controls and Procedures
Part II. Other Information
Item 5. Other Matters
Item 6. Exhibits and Reports on Form 8-K
Signatures
Certifications
2
Part I - Financial Information
Item 1. Financial Statements
Prime Resource, Inc. and Subsidiaries
(A Developmental Stage Company)
Consolidated Balance Sheet (Unaudited)
September 30, 2006
ASSETS
Current assets:
Cash and cash equivalents $ 19,439
Due from related party 15,760
Investments in non-trading securities 372,268
----------------
Total current assets 407,467
----------------
Total assets $ 407,467
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,255
Due to related party 9,060
Dividend payable (Note 5) 372,268
----------------
Total Current Liabilities 386,583
----------------
Commitments and Contingencies -
Common stock, no par value, 50,000,000 shares authorized,
2,972,950 shares issued and 1,454,090 outstanding 964,802
Treasury stock of 1,518,860 common shares at cost (870,492)
Deficit incurred from re-entering the developmental stage (14,116)
Retained deficit (59,310)
----------------
Total Stockholders' Equity 20,884
----------------
Total Liabilities and Stockholders' Equity $ 407,467
================
3
Prime Resource, Inc. and Subsidiaries
(A Developmental Stage Company)
Consolidated Statements of Operations (Unaudited)
For the Nine Months For the Three Months Inception
Ended September 30, Ended September 30, May 1, 2006 to
2006 2005 2006 2005 September 30, 2006
------------ ------------ --------- ----------- --------------------
REVENUES $ - $ - $ - $ - $ -
------------ ------------ --------- ----------- --------------------
EXPENSES
General and administrative 55,094 41,503 9,116 11,400 14,116
------------ ------------ --------- ----------- --------------------
NET LOSS FROM
CONTINUING OPERATIONS (55,094) (41,503) (9,116) (11,400) (14,116)
------------ ------------ --------- ----------- --------------------
DISCONTINUED OPERATIONS
Revenues 2,592,993 5,397,979 - 1,866,414 -
Expenses (2,437,895) (5,229,081) - (1,801,726) -
Gains and losses, net 115,371 (8,447) - (4,347) -
Tax (expense) benefit (101,373) (29,412) - (5,124) -
------------ ------------ --------- ----------- --------------------
NET INCOME FROM DISCONTINUED
OPERATIONS 169,096 131,039 - 55,217 -
------------ ------------ --------- ----------- --------------------
NET INCOME (LOSS) FROM CONTINUING
AND DISCONTINUED OPERATIONS $ 114,002 $ 89,536 $ (9,116) $ 43,817 $ (14,116)
============ ============ ========= =========== ====================
Basic and fully diluted net income
(loss) per share:
Continuing operations $ (0.02) $ (0.01) $ (0.01) $ - $ (0.01)
============ ============ ========= =========== ====================
Discontinued operations $ 0.07 $ 0.04 $ - $ 0.02 $ -
============ ============ ========= =========== ====================
Weighted average shares outstanding 2,288,201 2,945,475 1,454,090 2,937,825 1,454,090
============ ============ ========= =========== ====================
4
Prime Resource, Inc. and Subsidiaries
(A Developmental Stage Company)
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Inception
Ended September 30, May 1, 2006 to
2006 2005 September 30, 2006
------------ ------------ --------------------
Cash Flows From Operating Activities:
Net loss from continuing operations $ (55,094) $ (41,503) $ (14,116)
Adjustments to reconcile net loss to net cash
used by operating activities:
Changes in assets and liabilities:
Increase in due from related party (15,760) - (15,760)
Increase in accounts payable 5,255 - 5,255
Increase in due to related party 9,060 - 9,060
------------ ------------ --------------------
Net Cash Used In Operating Activities
From Continuing Operations (56,539) (41,503) (15,561)
------------ ------------ --------------------
Cash Flows From Investing Activities
From Continuing Operations
Notes receivable - (350,000) -
------------ ------------ --------------------
Net Cash Used in Investing Activities
From Continuing Operations - (350,000) -
------------ ------------ --------------------
Cash Flows From Financing Activities
From Continuing Operations - - -
------------ ------------ --------------------
Net Cash Provided by (Used) In Discontinued
Operations (510,169) 134,894 -
------------ ------------ --------------------
Net Increase (Decrease) In Cash
And Cash Equivalents (566,708) (256,609) (15,561)
Cash And Cash Equivalents At Beginning
Of Period 586,147 827,404 35,000
------------ ------------ --------------------
Cash And Cash Equivalents At End Of Period $ 19,439 $ 570,795 $ 19,439
============ ============ ====================
Supplemental Cash Flow Information:
Cash paid for interest $ 1,100 $ 3,120 $ -
Cash paid for taxes $ - $ 35,500 $ -
Non-cash investing and financing activities:
Conversion of note receivable and accrued
interest to common shares $ 372,268 $ - $ -
Dividend payable $ 372,268 $ - $ -
Distribution of non-trading securities $ 116,285 $ - $ -
5
Prime Resource, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (Unaudited)
September 30, 2006
1. Presentation
The financial statements as of September 30, 2006 and for the three and nine
months ended September 30, 2006 and 2005, were prepared by the Company without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission(SEC). Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management,
all necessary adjustments, which consist primarily of normal recurring
adjustments, to the financial statements have been made to present fairly the
financial position and results of operations and cash flows. The results of
operations for the respective periods presented are not necessarily indicative
of the results for the respective complete years. The Company has previously
filed with the SEC an annual report on Form 10-KSB which included audited
financial statements for the year ended December 31, 2005. It is suggested that
the financial statements contained in this filing be read in conjunction with
the statements and notes thereto contained in the Company's 10-KSB filing.
The financial statements are presented as a consolidation of Prime Resource,
Inc. and its Subsidiaries. The Company redeemed shares from principle
shareholders in exchange for the majority of its assets and liabilities. The
transactions of the reorganized entity have been presented in the consolidated
financial statements from inception on May 1, 2006 through September 30, 2006.
The operations of the distributed subsidiaries have been presented as
discontinued operations in the consolidated financial statements (See Note 5).
2. Net income per common share
Net income per common share is computed based on the weighted-average number of
common shares and, as appropriate, dilutive common stock equivalents outstanding
during the period. Stock options and warrants are considered to be common stock
equivalents.
Basic net income per common share is the amount of net income for the period
available to each share of common stock outstanding during the reporting period.
Diluted net income per common share is the amount of net income for the period
available to each share of common stock outstanding during the reporting period
and to each share that would have been outstanding assuming the issuance of
common shares for all dilutive potential common shares outstanding during the
period.
No changes in the computation of diluted earnings per share amounts are
presented since no potentially dilutive securities have been granted or issued.
6
Prime Resource, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (Unaudited)
September 30, 2006
3. Income Taxes
Included in the Company's assets, liabilities and operations divested on April
30, 2006 (see Note 5) were all deferred tax assets and liabilities existent at
the time of the divestiture. Accordingly, at September 30, 2006 no deferred tax
asset or liability has been recorded. Deferred tax assets related to net
operating loss carryforwards have been offset completely by a valuation
allowance due to the uncertainty of their realization.
4. Related Party
The Company has paid expenses for pre-transaction (see Note 5) business
activities which are due to be received from the former subsidiaries (related
parties), as such liabilities were previously accrued for and transferred to
said related party in the exchange of net assets for shares (see Note 5).
5. Exchange of Shares for Transfer of Net Assets
On April 27, 2006, the Company adopted a proposed plan of reorganization,
whereby the majority of its existing business assets, liabilities and
operations, as presently described, were transferred to its principal
shareholders to be operated by them in a separate private entity. In return, the
Company redeemed 55%, or approximately 1,501,400, of the principal shareholders'
issued and outstanding shares in the Company as treasury shares. Pursuant to the
terms of the reorganization, the principal shareholders will continue to hold
approximately 83%, or 1,209,533 shares, of the issued and outstanding shares at
May 1, 2006, totaling 1,454,090.
The reorganization also provided for the pro rata distribution of restricted
shares of a separate entity, owned by the Company at the time of the
reorganization, to the Company's non-principal and non-employee shareholders
(principal shareholders being defined as those holding 10% or more or serving as
officers and directors of the Company, and being the three individual principal
owners). Accordingly, 179,200 shares were distributed to approximately 105
public shareholders.
Finally, the reorganization provided that all common shareholders of the Company
(both principal and public) would receive, pro rata, an additional distribution
of restricted common shares in a non-related entity upon conversion of an
existing promissory note receivable to the promisor's common shares. As of
September 30, 2006, the Company had converted the promissory note to equity
units (representing common stock and warrants), accordingly, this investment has
been recorded as an investment in non-trading securities, and totals $372,268.
The distribution of these restricted
7
Prime Resource, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (Unaudited)
September 30, 2006
5. Exchange of Shares for Transfer of Net Assets (Continued)
equity units has not occurred to date, and it is anticipated these will be
distributed in the future as an effective registration is present or an
exemption to distribute them though no warranty or promise of this fact can be
made. Accordingly, at September 30, 2006, the Company has recorded a dividend
payable, reflecting its obligation to distribute the shares in the future.
The foregoing proposals and Plan were noticed and presented before a special
shareholders meeting held April 27, 2006 and approved by a majority shareholder
vote. Because the distribution of the Company's assets in exchange for stock was
not reached through an arms- length bargaining procedure, but was essentially
formulated by the principal shareholders of the Company, the management of the
Company deemed that the proposal would only be accepted if approved by a
majority vote of the disinterested or public shareholders. As these proposals
for reorganization and distribution of the assets were approved by a majority of
the disinterested shareholders, the principal shareholders then voted their
shares in favor of this position creating an absolute majority vote.
In essential terms, the shareholder meeting held on April 27, 2006, constituted
a reorganization of the Company as a public company with limited assets and no
operating business, but without liabilities or obligations. Present management
will continue in its positions, but with a lesser commitment of time and effort
due to a lack of any ongoing business activity within the Company. Management
has, however, made a commitment to continue to actively search for merger or
acquisition candidates and believes, but cannot warrant, that such acquisitions
may be more readily attainable based upon their prior experience without the
former assets and business in the Company. Moreover, it was the judgment of
management that the Company's assets had come to a point where they were
essentially creating a break-even business endeavor without the realistic
prospects of growth and enhancement to the Company.
The revenues, expenses, gains and losses and tax expense and benefit of the
discontinued operations are reported on the statements of operations. Assets and
liabilities of the Company's former segments -- Fringe Benefit Analysts and
Belsen Getty -- were exchanged on April 30, 2006. The asset value at the time of
the exchange for Fringe Benefit Analysts, Belsen Getty and Prime Resource were
approximately $525,305, $414,895 and $924,332, respectively. The liabilities at
the time of the exchange for Fringe Benefit Analysts, Belsen Getty and Prime
Resource were approximately $435,275, $96,248 and $79,761, respectively.
The decision to enter into the reorganization and to divest the company of its
prior operating subsidiaries, Belsen Getty, LLC and Fringe Benefits Analyst,
LLC, which were engaged in the insurance, retirement fund planning and
investment services were based upon the following decisions and criteria by
management:
8
Prime Resource, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (Unaudited)
September 30, 2006
5. Exchange of Shares for Transfer of Net Assets (Continued)
1. The nature of the business and structure of the operating
subsidiaries did not appear to management to lend itself significantly
to growth as a public company, and the company was unsuccessful in its
earlier efforts to grow and expand the insurance subsidiary through use
of offering proceeds.
2. Experience in discussing merger and acquisition possibilities with
various third party candidates indicated to management of Prime that
the Company would be more successful in consummating this type of
merger or acquisition absent the operating entities previously existing
in Prime.
3. The prior insurance services and consulting were not generating
significant revenues or income enhancing the value of the company's
shares and management believed shareholder value might be more
substantially increased by decreasing the number of outstanding shares
held by management by 55%, distributing other publicly traded
restricted stock now and in the future, as described above, and
searching for a suitable merger or acquisition candidate to enhance the
value of the company as a public entity.
The reorganization has been accounted for pursuant to FAS 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," as amended, and APB 29,
"Accounting for Nonmonetary Transactions," as amended. Accordingly, the Company
has recorded the results of operations prior to the reorganization as
discontinued operations for the nine months ended September 30, 2006. In
addition, the transfer of nonmonetary assets pursuant to the reorganization was
considered a nonreciprocal transfer and, accordingly, assets were measured at
fair value at the time of transfer, resulting in a realized gain, totaling
$116,285, which amount has been included in gains and losses, net, totaling
$115,371 for the nine months ended September 30, 2006.
Item 2. Management's Discussion and Analysis of Financial Condition or Plan of
Operation
Forward-Looking Information
Certain statements in this Section and elsewhere in this report are
forward-looking in nature and relate to trends and events that may affect the
Company's future financial position and operating results. Forward Looking
Statements are defined within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. The terms
"expect," "anticipate," "intend," and "project" and similar words or expressions
are intended to identify forward-looking statements. These statements speak only
as of the date of this report. The statements are based on current expectations,
are inherently uncertain, are subject to risks, and should be viewed with
caution. Actual results from experience may differ materially from
9
the forward-looking statements as a result of many factors, including changes in
economic conditions in the markets served by the Company, increasing
competition, fluctuations in prices and demand, and other unanticipated events
and conditions. It is not possible to foresee or identify all such factors. The
Company makes no commitment to update any forward-looking statement or to
disclose any facts, events, or circumstances after the date hereof that may
affect the accuracy of any forward-looking statement.
Plan of Operation
Prime Resource, Inc. ("Prime") is a Utah Corporation which was organized and
filed of record on March 29, 2002 as a successor entity to Prime, LLC, (a Utah
limited liability Company). Prime was an integrated business entity primarily
engaged in insurance and pension planning that previously conducted all of its
business activities through its wholly owned subsidiaries: Belsen Getty, LLC
("Belsen Getty") and Fringe Benefit Analysts, LLC ("FBA").
Prime completed a public offering of its shares in July, 2002. It raised
$709,664 in net proceeds, all of which were expended, as previously reported, by
September 2005.
AS OF APRIL 30, 2006, ALL ASSETS, LIABILITIES AND BUSINESS INTEREST OF PRIME
WERE TRANSFERRED TO A PRIVATE BUSINESS ENTITY CONTROLLED BY THE PRIME PRINCIPAL
SHAREHOLDERS FOR A REDUCTION OF THEIR PRIME SHARES BY 55% AND OTHER
CONSIDERATION PURSUANT TO A MAJORITY SHAREHOLDER VOTE. THIS DISCLOSURE IS MORE
PARTICULARLY DISCUSSED BELOW. APPROXIMATELY $19,000 CASH REMAINS IN THE COMPANY
FOR ONGOING REPORTING FEES AND OPERATING EXPENSES. PRIME ALSO HOLDS LIGHTSPACE
SHARES AND WARRANTS HAVING AN ESTIMATED CURRENT VALUE OF $372,268.
On April 11, 2006, the shareholders of Prime Resources, Inc. were mailed an
information packet for a special meeting of shareholders to be held April 27,
2006 indicating the intent of Prime to enter into a plan of reorganization
whereby all of the business and working assets would be transferred to a private
Utah limited liability Company to be known as Prime Advisors, LLC in exchange
for a reduction of the Prime principal shareholders' interest by 55% in the
public Company, the spin-off of certain shares of Bioaccelerate, Inc. to the
shareholders and the agreement to distribute out. Subsequently, Lightspace, Inc.
shares and stock warrants as converted from existing convertible Lightspace
debentures will be distributed pro-rata to all shareholders. The special
shareholder meeting for these purposes required majority approval by the public
non-controlling shareholders. To date, all business and business assets have
been transferred to Prime Advisors, LLC and the Bioaccelerate shares distributed
pro-rata to all shareholders. There has been a conversion of the Lightspace
Debentures to Equity Units. This Lightspace conversion occurred on or about
April 28, 2006. Prime is now advised the Lightspace shares and warrants subject
to the Units have not been registered. Therefore this distribution is subject to
a holding period when an exemption may be used or if and when Lightspace were to
register the units in the future. Upon conversion, these equity units consist of
eight common Lightspace shares and twelve warrants to acquire Lightspace shares
at various
10
prices and will be distributed pro-rata to all Prime shareholders on the
approximate basis of 1 share for each 3 Prime shares held.
Each shareholder of record was entitled to vote on the foregoing reorganization
proposals at a special meeting held April 27, 2006, but a special voting
provision first required a majority vote of the public non-affiliated
shareholders. Each shareholder was further afforded the opportunity to dissent
from the transaction and to exercise separate dissenting shareholder rights
under Utah law as contained in a dissenting shareholder rights package and proxy
material mailed to all shareholders of record.
As of the date of the meeting on April 27, 2006, there were 139,595
disinterested shares voting in favor, none voted in opposition and 250 shares
abstained; with one shareholder not voting and wishing to exercise dissenting
shareholder rights for 9,533 shares. After the public non-affiliated vote was
taken, the affiliated shareholders (Mr. Terry Deru, Mr. Scott Deru and Mr.
Andrew Limpert) then voted in favor of the reorganization insuring an absolute
majority of 2,840,995 shares or 96.1%.
As a result of the reorganization, and after assigning a value of $372,268 to
the Lightspace Units described above, there remains approximately $19,000 in net
cash assets in the public Company which was retained for purposes of paying for
ongoing reporting, accounting and legal costs, as well as funds necessary for
reviewing and completing due diligence on various merger or acquisition
proposals as are anticipated by the Company. There are no other tangible or
intangible assets remaining in the Company after the reorganization.
At the present time, Prime remains what is essentially known as a "shell"
corporation in that it does not have any active business purpose or active
business assets. Management of the Company, on a time available basis and
primarily through Mr. Andrew Limpert, has continued to search for, review and
complete due diligence on various potential merger or acquisition proposals for
which management would deem Prime to be a suitable acquisition candidate. To the
date of this report, no such acquisition or merger proposal has been accepted,
but the Company is actively engaged in current negotiations.
Any definitive merger or acquisition proposal as approved by the Board of
Directors would be announced pursuant to a public 8-K filing; the substance of
which management would intend to disseminate to its public shareholders in such
event. It is also possible that any such subsequent reorganization may require
shareholder vote and approval which would then result in the dissemination of a
proxy, private placement memorandum, or other information statements along with
possible dissenting shareholder rights provisions. However, no warranty or
assurance that all potential forms of reorganization would necessarily require
shareholder vote and approval is made or implied.
The decision to enter into the reorganization and to divest the Company of its
prior operating subsidiaries, Belsen Getty, LCC and Fringe Benefits Analyst,
LLC, which were engaged in the insurance, retirement fund planning and
investment services were based upon the following decisions and criteria by
management:
11
1. The nature of the business and structure of the operating subsidiaries
did not appear to management to lend itself significantly to growth as a public
company, and the Company was unsuccessful in its earlier efforts to grow and
expand the insurance subsidiary through use of offering proceeds.
2. Experience in discussing merger and acquisition possibilities with
various third party candidates indicated to management of Prime that the Company
might be more successful in consummating this type of merger or acquisition
absent the operating entities previously existing in Prime.
3. The prior insurance services and consulting were not generating
significant revenues or income enhancing the value of the Company's shares and
management believed shareholder value might be more substantially increased by
decreasing the number of outstanding shares held by management by 55%, spinning
off other publicly traded restricted stock now and in the future to
shareholders, as described above, and searching for a suitable merger or
acquisition candidate to enhance the value of the Company as a public entity.
For historical and comparative purposes, the Company repeats its prior 10-QSB
income statement that the Company had for the first quarter of 2006 and with
comparable disclosure for the third quarter ending September 30, 2006 and 2005
to illustrate the change of financial condition after divestment of its income
producing assets on April 27, 2006:
Totals: 1st Quarter 2006 3rd Quarter 2006 3rd Quarter 2005
Gross revenues $ 1,897,282 $ - $ 1,866,414
Gains, losses and expenses $ 1,815,556 $ 9,116 $ 1,817,473
Net income before income taxes $ 81,726 $ - $ 48,941
Income taxes $ (37,460) $ - $ (5,124)
Net Income (Loss) $ 44,266 $ (9,116) $ 43,817
As of the end of the current quarter, September 30, 2006, the Prime balance
sheet indicates a minimum net worth of $20,884 due to the divestment. As of this
period, Prime had current liabilities of $14,315 accrued since the divestment,
and an accumulated corporate debt of $0.
Item 2. Management's Discussion and Analysis of Financial Condition or Plan of
Operation
Products and Markets
With the transfer of its active business assets to a private entity, Prime
currently has no active business products or markets. At the present time,
management is engaged on a best-efforts time available basis in searching out
potential merger and acquisition candidates. It is hoped the acquisition of a
proper merger or acquisition candidate will yield additional value to public
12
shareholders in the entity. No warranty or assurance, however, of future results
can be made or is implied by this representation.
The Company will obviously continue to incur ongoing operating losses, which
will hopefully be somewhat limited due to the substantially inactive nature of
the Company's business. However, losses will be incurred in paying ongoing
reporting expenses, including legal and accounting, as necessary to maintain the
Company as a public entity; as well as ongoing costs, in searching for merger
and acquisition candidates. As noted previously, Prime retained post divestment
an initial $35,000 of reserve funds for this purpose with approximately $19,000
remaining. The Company also has no salary commitment.
Liquidity and Sources of Capital
The liquidity of the Company is extremely limited at the present time, as it
only has a $19,000 reserve fund to pay for ongoing reporting and minimal
operating expenses as previously described. There is no exact projection of how
long the Company can remain viable without having to seek additional borrowing
or interim financing to maintain itself as an inactive public company. Further,
at the present time, there are no alternative sources of capital or revenue for
the Company during this interim period.
Prime has no present avenues of financing and no present plans to obtain interim
financing while continuing its search for a suitable merger or acquisition
candidate and arrangement. Should there come a point in time when the Company
has exhausted its reserve funds and must seek additional funding to maintain
itself as a public reporting company engaged in searching for merger and
acquisition opportunities, it may be necessary to seek private capital through
the sale of additional restricted stock or borrowing either from principal
shareholders or private parties. It does not appear probable that Prime would be
able to attain financing from any commercial lending source as it is presently
constituted. No assurance is made or implied that Prime would be successful in
raising any subsequent financing.
As a result of the foregoing, the future liquidity of the Company and funding
sources must be considered as tentative and very limited and pose a substantial
risk factor to the ongoing viability of Prime. In point of fact as an inactive
entity, the independent auditors for Prime will most likely express a
reservation that the Company can continue as a going concern in completing any
audited or review financial statements for Prime. At present, the Company has no
known or fixed means of alternative or subsequent financing.
Relevant Markets
There is no relevant market data for the Company in its present inactive status.
Significant Events
As noted in the Company's annual report filed for the period ending December 31,
2005, Prime adopted in the fourth quarter of 2005 a proposed strategic plan,
subject to approval by the
13
disinterested public shareholders, to distribute out all of its existing
business assets, liabilities and operations, as previously described, to its
principal shareholders to be operated by them in a separate private business. In
return and exchange, the principal shareholders agreed to reduce their Prime
shares by cancellation and returning these shares to the Company as Treasury
Shares. This return of shares, as approved, reduced their holding by 55% or
approximately 1,491,867 total shares. The principal shareholders Mr. Terry Deru,
Mr. Scott Deru and Mr. Andrew Limpert continue to hold approximately 83% of the
issued shares or 1,209,533 shares of the 1,454,090 issued and outstanding shares
as of September 30, 2006.
The plan also provided for the distribution of Bioaccelerate shares to all Prime
shareholders pro- rata in their Prime share holdings. 179,200 Bioaccelerate
shares were distributed to approximately 105 public shareholders.
Finally, the plan provided that all common shareholders of the Company (both
principal and public) would receive, pro rata to their Prime shares, a
subsequent distribution of the Lightspace Units consisting of shares and
warrants as previously converted from the Lightspace debentures. The foregoing
proposals and Plan were noticed and presented before a special shareholders
meeting held on April 27, 2006 and approved by a majority shareholder vote at
such meeting. Because the distribution of the Company's assets in exchange for
stock was not reached through an arms-length bargaining procedure, but was
essentially formulated by the principal shareholders of the Company, the
management of the Company deemed that the proposal would only be accepted if
approved by a majority vote of the disinterested public shareholders. As these
proposals for reorganization and distribution of the assets were approved by a
majority of the disinterested shareholders, the principal shareholders then
voted their shares in favor of this position creating an absolute majority vote.
In essential terms, the shareholder meeting on April 27th constituted a
reorganization of the Company to a public Company without any assets or
operating business, but without liabilities or obligations. Present management
will continue in their positions, but also with a lesser commitment of time and
effort due to a lack of any ongoing business activity within Prime. Management,
primarily through Mr. Limpert, has made a commitment to continue to actively
search for merger or acquisition candidates and believes, but cannot warrant,
that such acquisitions may be more readily attainable without the former Prime
assets and business being in the Company. Moreover, it was the judgment of
management that the Prime assets had come to a point where they were essentially
creating a break-even business endeavor without the realistic prospects of
growth and enhancement to the Company.
In essential terms, then, the results of the reorganization approved by the
non-affiliated public shareholders of the Company, including various collateral
items, are summarized as follows:
1. The shareholders ratified the proposed plan to transfer all existing
assets (except for an initial $35,000 in working capital and the Lightspace
convertible debentures) liabilities and business of Prime to a new separate,
private Utah limited liability Company to be known as Prime Advisors, LLC and to
be operated and controlled by the existing management of the Prime public
corporation.
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2. In exchange for the completion of the reorganization, the Prime
principal shareholders contributed to the Company, as treasury shares, 55% of
their outstanding shares constituting 1,491,867 shares. The principal
shareholders now hold 1,209,533 shares or 83% and the public shareholders, as a
group, hold approximately 244,557 shares or 17 %.
3. As part of the proposal, as approved, the public shareholders received a
distribution of a majority of the Bioaccelerate shares presently held by the
Company which total 339,500 shares. There were distributed 179,200 shares of
Bioaccelerate stock to approximately 105 Prime public shareholders and 160,300
shares to affiliated shareholders.
4. The meeting also authorized the distribution of future Lightspace shares
and warrants after conversion from the current equity units. It is anticipated
there will be approximately 465,000 Lightspace shares, and warrants for
1,395,000 shares, distributed pro-rata to 109 shareholders, which includes the
three principal shareholders.
5. The current Board of Directors was re-elected to serve for another
annual term at the special meeting. As noted above, the directors and officers
will devote substantially less time to daily operations. As Prime is now a non-
operating company, the officers will continue to devote only such time as they
deem necessary to finding suitable merger or acquisition candidates for Prime.
6. The shareholders also ratified the appointment of Child, VanWagoner &
Bradshaw, PLLC to act as the independent auditors for the Company for the year
ending December 31, 2006.
Item 3. Risk Factors
Prime has employed this section on Market Risk to discuss what it considers
present and actual risk factors to the ongoing viability of Prime:
1. There is no assurance that the Company can continue as an inactive
public reporting entity. Prime may not be able to sustain itself and pay the
required accounting, auditing or other reporting costs necessary to continue as
a public entity for the indefinite future. Further, there is no assurance or
warranty that additional interim funding can be obtained to maintain the Company
as a public entity after its reserve funds are exhausted.
2. Future regulations by various state or federal securities agencies, such
as the State of Utah, Division of Securities or the Securities and Exchange
Commission (SEC) could make it difficult or impossible for the Company to
continue as an inactive public company through adoption of various
administrative regulations and filing requirements which would make it
impossible or very difficult for the Company to continue as a non-operating
public company.
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3. Only minimal management, time and expertise is being devoted to the
operation of the Company now that it is inactive. Most initial reviews of merger
and acquisition opportunities are being completed through Mr. Andrew Limpert who
has committed to devote his best efforts to search out and attempt to locate
various merger or acquisition candidates or proposals for the Company. There is
no assurance or warranty that Mr. Limpert, or other members of the Board of
Directors, will be successful in ongoing efforts to find a merger or acquisition
candidate or situation.
4. Any completion of a merger or acquisition agreement would be approved by
the existing controlling shareholders who still continue, even after their
recent reduction in shares, to hold a majority position in the Company. Further,
it is almost certain that existing shareholders will incur a significant and
extreme dilution to their aggregate sharehold percentage such that they would
most likely hold 5% to 10% of the issued and outstanding shares as a result of
any merger or acquisition transaction.
5. Any completed merger or acquisition would almost certainly result in new
management being appointed to control the Company and a new business activity
being selected over which the existing shareholders would essentially have no
control or meaningful voice, other than the potential exercise of dissenting
shareholder rights under Utah law under certain circumstances, but even then not
under all merger or acquisition structures.
6. The Company will have no ongoing revenues or income to support it during
this interim period.
7. There is no assurance that Prime's shares will continue to trade, or
trade at historical levels, absent any active business purpose or assets.
Item 4. Controls and Procedures
(a) Prime has maintained controls and procedures designed to ensure
that information required to be disclosed in the reports that the Company files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
prescribed by the Securities and Exchange Commission. Based upon their
evaluation of those controls and procedures performed within 90 days of the
filing date of this report, the chief executive officer and the principal
financial officer of the Company concluded that the Company's disclosure
controls and procedures were adequate for its present activities. The Company
knows of no fraudulent activities within the Company or any material accounting
irregularities. The Company does not have an independent audit committee and
does not believe it is required to have any audit committee at this time.
(b) Changes in internal controls. The Company made no significant
changes in its internal controls since complying with an SEC request to restate
its financials and revise controls in the third quarter of 2005. The Company as
of the first quarter of 2004 obtained a listing of its stock on the National
Association of Securities Dealers ("NASD") sponsored Electronic Bulletin
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Board, but does not view such listing as requiring a change in its accounting or
auditing practices at the present time.
(c) Prime is aware of the general standards and requirements of the
recent Sarbanes- Oxley Act of 2002 and has implemented procedures and rules to
comply, so far as applicable, such as a prohibition on Company loans to
management and affiliates. The Company does not have any audit committee as it
does not believe the act requires a separate committee for companies that are
reporting companies, but not registered under the Securities and Exchange Act of
1934 [15(d) companies] and whose shares trade only on the Electronic Bulletin
Board.
Part II - Other Information
Item 5. Other Matters
(1) Auditors. Child, VanWagoner & Bradshaw, LLC of Kaysville, Utah will
continue, subject to Board discretion, as the Company's independent auditors.
The auditors were appointed in August, 2003 and have been reappointed to serve
through 2006. The Company has no differences of opinion with its prior or
current auditors.
(2) Trading. The Company trades on the Electronic Bulletin Board under
the symbol "PRRO". The Electronic Bulletin Board is essentially an informal
trading mechanism sponsored by the National Association of Securities Dealers,
but does not constitute a regular NASDAQ exchange or listing. It is,
essentially, an electronic intra-dealer quotation system for small public
companies not meeting the requirements for regular NASDAQ listing. During the
third quarter of 2006 the trading range of the Company's stock was as follows:
High Low
------ ---------
$ 1.50 $ 1.50
No assurance is given or implied that the Company's stock will continue to trade
in this rate absent an active business purpose.
(4) Annual Meeting. The Company held its last annual meeting of
shareholders on April 27, 2006, wherein the above described reorganization was
approved, the nominated directors were re-elected and the choice of independent
auditors was ratified by majority shareholder vote. No additional shareholder
meetings are scheduled in 2006.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31.1 Certification under Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification under Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification under Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. SECTION 1350)
(b) There were no 8-K Reports filed by the Company during this quarter
(c) There are no other exhibits required to be filed with this Report. All prior
filed exhibits are incorporated by this reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: November 14, 2006 By: /s/ Terry M. Deru
Mr. Terry M. Deru
President, Director
Date: November 14, 2006 By: /s/ Andrew W. Limpert
Mr. Andrew W. Limpert
Director, Treasurer/CFO
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