UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A1
(Amendment No. 1)
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE PERIOD ENDED June 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 June 30, 2006, No
Par Value. Authorized 50,000,000 common voting shares.
INDEX
Prime Resource, Inc.
For The Quarter Ending June 30, 2006
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet - June 30, 2006 (Unaudited).
Consolidated Statements of Operations (Unaudited) - For the three
and six months ended June 30, 2006, and for the three and six
months ended June 30, 2005;
Consolidated Statements of Cash Flows (Unaudited) - For the six
months ended June 30, 2006, and for the six months ended June 30,
2005.
Condensed Notes to Consolidated Financial Statements (Unaudited)
- June 30, 2006
Item 2. Management's Discussion and Analysis o Financial Condition or Plan
of Operation.
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
(Restated - Note 6)
Item 1. Financial Statements
Prime Resource, Inc. and Subsidiaries
(A Developmental Stage Company)
Consolidated Balance Sheet (Unaudited)
June 30, 2006
ASSETS
Current assets:
Cash and cash equivalents $ 21,464
Due from related party 15,760
Investments in non-trading securities 372,268
---------------------
Total current assets 409,492
---------------------
Total assets $ 409,492
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 5,000
Due to related party 2,224
Dividend payable 372,268
---------------------
Total Current Liabilities 379,492
---------------------
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)
Retained deficit (59,310)
Deficit incurred from re-entering the development stage (5,000)
---------------------
Stockholders' Equity 30,000
---------------------
Total Liabilities and Stockholders' Equity $ 409,492
=====================
The accompanying notes are an integral part of these financial statements
3
Prime Resource, Inc. and Subsidiaries
(A Developmental Stage Company)
Consolidated Statements of Operations (Unaudited)
For the Six Months For the Three Months Inception
Ended June 30, Ended June 30, May 1, 2006 to
2006 2005 2006 2005 June 30, 2006
------------- ------------- ------------ ------------ --------------
(Restated - (Restated -
Note 6) Note 6)
REVENUES $ - $ - $ - $ - $ -
------------- ------------- ------------ ------------ --------------
EXPENSES
General and administrative 45,978 22,500 26,716 6,493 5,000
------------- ------------- ------------ ------------ --------------
NET LOSS FROM
CONTINUING OPERATIONS (45,978) (22,500) (26,716) (6,493) (5,000)
------------- ------------- ------------ ------------ --------------
DISCONTINUED OPERATIONS
Revenues 2,592,993 3,531,565 695,711 1,926,489 -
Expenses (2,437,895) (3,435,009) (642,613) (1,863,098) -
Gains and losses, net 115,371 (4,100) 116,383 (2,016) -
Income tax (expense) benefit (101,373) (24,288) (63,913) (19,966) -
------------- ------------- ------------ ------------ --------------
NET INCOME FROM DISCONTINUED
OPERATIONS 169,096 68,168 105,568 41,409 -
------------- ------------- ------------ ------------ --------------
NET INCOME FROM CONTINUING
AND DISCONTIUING OPERATIONS $ 123,118 $ 45,668 $ 78,852 $ 34,916 $ (5,000)
============= ============= ============ ============ ==============
The accompanying notes are an integral part of these financial statements
4
Prime Resource, Inc. and Subsidiaries
(A Developmental Stage Company)
Consolidated Statements of Operations (Unaudited) (Continued)
For the Six Months For the Three Months Inception
Ended June 30, Ended June 30, May 1, 2006 to
2006 2005 2006 2005 June 30, 2006
-------------- ----------- ----------- ---------- ---------------
Basic and fully diluted net income (loss) per share:
Continuing operations $ (0.02) $ (0.01) $ (0.01) $ - $ -
Discontinued operations $ 0.06 $ 0.02 $ 0.04 $ 0.01 $ -
-------------- ----------- ----------- ---------- ---------------
Weighted average shares outstanding 2,705,257 2,933,906 2,455,023 2,934,511 1,454,090
============== =========== =========== ========== ===============
The accompanying notes are an integral part of these financial statements
5
Prime Resource, Inc. and Subsidiaries
(A Developmental Stage Company)
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Inception
Ended June 30, May 1, 2006 to
2006 2005 June 30, 2006
-------------------- ------------------- ------------------------
(Restated - (Restated -
Cash Flows From Operating Activities: Note 6) Note 6)
Net loss from continuing operations $ (45,978) $ (22,500) $ (5,000)
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 5,000 - 5,000
Increase in due to related party 2,224 - 2,224
-------------------- ------------------- ------------------------
Net Cash Used In Operating Activities
From Continuing Operations (54,514) (22,500) (13,536)
-------------------- ------------------- ------------------------
Cash Flows From Investing Activities
From Continuing Operations - - -
-------------------- ------------------- ------------------------
Cash Flows From Financing Activities
From Continuing Operations - - -
-------------------- ------------------- ------------------------
Net Cash Used By Discontinued Operations (510,169) (176,034) -
-------------------- ------------------- ------------------------
Net Decrease In Cash
And Cash Equivalents (564,683) (198,534) (13,536)
Cash And Cash Equivalents At Beginning Of
Period 586,147 827,404 35,000
-------------------- ------------------- ------------------------
Cash And Cash Equivalents At End Of Period $ 21,464 $ 628,870 $ 21,464
==================== =================== ========================
Supplemental Cash Flow Information:
Cash paid for interest $ 1,100 $ 1,913 $ -
Cash paid for taxes $ - $ 24,000 $ -
Conversion of note receivable and
accrued interest to common shares $ 372,268 $ - $ -
Dividend payable $ 372,268 $ - $ -
Distribution of non-trading securities $ 116,285 $ - $ -
The accompanying notes are an integral part of these financial statements
6
Prime Resource, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (Unaudited)
June 30, 2006
1. Presentation
The financial statements as of June 30, 2006 and for the three and six months
ended June 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 June 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.
7
Prime Resource, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (Unaudited)
June 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 June 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 1,491,867, 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 and resulted in a realized gain, totaling $116,285, for the
three months ended June 30, 2006.
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. At June 30,
2006, the Company had converted the promissory note to common shares and,
accordingly, this investment has been recorded as an investment in non-trading
securities, and totals $372,268. The distribution of these restricted shares has
not occurred to date, and it is anticipated these shares will be distributed
later in 2006, though no warranty or promise of this fact can be made.
Accordingly, at June 30, 2006, the Company has recorded a dividend payable,
reflecting its obligation to distribute the shares in the future. As the
extinguishment of the current liability, or dividend payable, will occur in all
likelihood by distributing the common shares within twelve months, the Company
has classified the investment in non-trading securities as current for the six
months ended June 30, 2006.
8
Prime Resource, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (Unaudited)
June 30, 2006
5. Exchange of Shares for Transfer of Net Assets (continued
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 without any operating assets
or 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, 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:
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 wer 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
9
Prime Resource, Inc. and Subsidiaries e
Condensed Notes to Consolidated Financial Statements (Unaudited) e
June 30, 2006 e
5. Exchange of Shares for Transfer of Net Assets (continued)
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 six months ended June
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 six months ended June 30, 2006.
4. Restatement
Subsequent to the issuance of its previous interim financial statements as
of and for the period ended June 30, 2006, the Company reassessed the
accounting treatment of the future distribution of unregistered common
shares, totaling $372,268, to its principal and public shareholders of
record at the time of the reorganization (Note 5). As the distribution of
the common shares had not yet occurred at June 30, 2006, the Company has
recorded a dividend payable, reflecting its obligation to distribute the
common shares that had not been recorded in the original June 30, 2006
financial statements. As a result of the restatement, total current
liabilities increased $372,268, and total stockholders' equity decreased by
the same amount since the obligation to distribute the shares represents a
dividend.
In addition, the Company modified its total shares outstanding at June 30,
2006, to reflect actual amounts, resulting in a decrease of 9,533 shares
outstanding, and an increase in treasury stock by the same amount. Weighted
average computations were also affected, resulting in a decrease of 1,589
and 3,178 weighted average shares for the three and six month periods ended
June 30, 2006, respectively. Also, additional non-cash activities and other
supporting disclosures, as a result of the reorganization, have been
disclosed.
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
10
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 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 group insurance brokerage as well as investment and pension
consulting. It 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 (OTHER THAN APPROXIMATELY $35,000 OF CASH OR
LIQUID ASSETS FOR ONGOING REPORTING FEES AND OPERATING EXPENSES AND LIGHTSPACE
STOCK IN THE AMOUNT OF $372,268), 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.
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 out to a
private company to be known as Prime Advisors, LLC, Utah limited liability in
exchange for a reduction of the principal shareholders' interest by 55% in the
public company, the distribution of certain restricted shares of Bioaccelerate,
Inc. to the non-principal shareholders and the agreement to distribute out
subsequently, Lightspace, Inc. shares as converted and registered from existing
convertible Lightspace debentures. The special shareholder meeting required
majority approval by the public non-controlling shareholders. To date, the
business and business assets have been transferred to Prime Advisors and the
Bioaccelerate shares distributed to the non-affiliated shareholders. There has
been a conversion of the Lightspace Notes to Equity Units pursuant to the
anticipated IPO. This occurred on or about April 28, 2006. Therefore the notes
are no longer accruing interest as of that date. These equity units, upon an
effective registration statement by the Lightspace, will be converted into
common shares and warrants and will be distributed pro-rata to all shareholders.
11
Each shareholder of record was entitled to vote on the foregoing reorganization
proposals at a special meeting held April 27, 2006, but approval 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 detailed 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 shares held
by 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 ensuring an
absolute majority of 2,840,995 shares or 96.1%.
As a result of the reorganization, Lightspacethere remains approximately $30,000
in net assets in Prime at June 30, 2006. The cash 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.
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 that the company would be a suitable acquisition
candidate. To the date of this report, no such acquisition or merger proposal
has been accepted.
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 statement along with further 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 to
public shareholders of Prime.
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:
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 wer 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.
12
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 six months ending June 30, 2006 and 2005,
respectively, to illustrate the change of financial condition after divestment
of its income producing assets on April 27, 2006:
Totals: 1st Quarter 2006 1st Six Mo. 2006 1st Six Mo. 2005
Gross revenues $ 1,897,282 $ 2,592,993 $ 3,531,565
Gains, losses and expenses $ 1,815,556 $ 2,373,502 $ 3,461,609
Net income before income taxes $ 81,726 $ 219,491 $ 69,956
Income taxes $ (37,460) $ 36,220 $ 24,288
Net Income $ 44,266 $ 183,271 $ 45,668
As of the end of the current quarter, June 30, 2006, the Prime balance sheet
indicates a minimum net worth of $30,000 due to the divestment. As of this
period, Prime had current liabilities of $379,492, accrued since the divestment,
with no accumulated corporate debt.
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
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, while searching for merger
and acquisition candidates. As noted previously, Prime retained post divestment
an initial $35,000 of reserve funds for this purpose. The company also has no
salary commitment.
13
Liquidity and Sources of Capital
The liquidity of the company is extremely limited at the present time, as it
only has a $21,000 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 arrangements. 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.
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 disinterested public shareholders, to distribute out
all of its existing business assets, liabilities and operations, as presently
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, 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 total issued and
outstanding 1,454,090 shares as of June 30, 2006.
The plan also provided for the distribution of restricted Bioaccelerate shares
to the non-principal and non employee grant 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). These 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, a subsequent distribution of the
Lightspace shares when and if received from the conversion of
14
the Lightspace convertible equity units presently held by the Company. It is
anticipated these shares will be registered in 2006, though no warranty or
promise of this fact can be made. In the event there is not an effective
registration for these shares Prime will hold the shares until there is an
exemption for distribution under rule 144k after a 2 year holding period.
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 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 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, 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 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 $35,000 in working capital)
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.
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 ( now
known as Gardant Pharmaceuticals) shares presently held by the
Company which total 339,500 shares. As a result there were
distributed 179,200 shares of Bioaccelerate stock to
approximately 105 Prime public shareholders. The balance of the
160,300 Bioaccelerate shares or 47% were retained in the private
business.
4. The meeting also authorized the distribution of future Lightspace
shares and warrants which are being held by the Company and will
be distributed accordingly. It is anticipated there will be
approximately 465,000 Lightspace shares distributed to
approximately 109 shareholders, which includes the three
principal shareholders.
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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 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.
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 shareholder 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.
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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 an 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 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 new 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 managed 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 second quarter of 2006
the trading range of the Company's stock was as follows:
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High Low
------ ---------
$ 1.25 $ 1.25
No assurance is given or implied that the company's stock will continue to trade
in this range 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.
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) Reports on Form 8-K dated May 2, 2006 outlining
reorganization previously filed.
(c) Other Exhibits - Copy of Proxy Solicitation for Special Meeting held April
27, 2006 - previously filed
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 16, 2006 By: /s/ Terry M. Deru
Mr. Terry M. Deru
President, Director
Date: November 16, 2006 By: /s/ Andrew W. Limpert
Mr. Andrew W. Limpert
Director, Treasurer/CFO
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