FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
MARK ONE
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006
or
[] TRANSITION REPORT pursuant to section 13 or 15(d) of the securities
exchange act of 1934
FOR THE TRANSITION PERIOD FROM N/A TO N/A
COMMISSION FILE NUMBER: 333-88480
PRIME RESOURCE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
UTAH 84106
(STATE OF INCORPORATION) ZIP CODE
1245 E. Brickyard Road, Suite 590
Salt Lake City, Utah
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES
(801) 433-2000 04-3648721
-------------------------------------------------- ---------------------
Registrant's telephone number, including area code I.R.S. Employer
Identification Number
Securities registered pursuant to Section 12(b) or 12(g) of the Act:
0 Shares
Name of each exchange on
Title of each class which registered
Common - No Par Value None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registration (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 was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X YES NO
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X] As of March 1, 2007, the aggregate
market value of the common voting stock held by non-affiliates of the
Registrant, would be approximately $366,835. The company has a very limited
trading market on the OTCBB.
State issuer's revenues for continuing operations and discontinued operations
for its most recent fiscal year: $0 and $2,641,240.
As of March 1, 2007, the Registrant had outstanding 1,454,090 shares of common
stock (No par value); 50,000,000 common shares authorized.
TABLE OF CONTENTS
PART I
Page
ITEM 1 DESCRIPTION OF BUSINESS..........................................3
ITEM 2 DESCRIPTION OF PROPERTY.........................................12
ITEM 3 LEGAL PROCEEDINGS...............................................12
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............13
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS............................13
ITEM 6 PLAN OF OPERATION ..............................................13
ITEM 7 FINANCIAL STATEMENTS............................................16
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES................33
ITEM 8A CONTROLS & PROCEDURES...........................................33
ITEM 8B OTHER INFORMATION...............................................34
PART III
ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT..................35
ITEM 10 EXECUTIVE COMPENSATION..........................................37
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.........................................38
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................39
ITEM 13 PRINCIPAL ACCOUNTANT FEES & SERVICES............................40
ITEM 14 EXHIBITS....................................................... 41
SIGNATURES.............................................42
2
PART I
Item 1. DESCRIPTION OF BUSINESS
Our discussion and analysis of the Business and subsequent discussion
of Financial Conditions may contain forward-looking statements that involve
risks and uncertainties. Some of the statements contained in this Report are not
purely historical; but are forward-looking statements including, without
limitations, statements regarding Prime Resource, Inc. ("Prime's") expectations,
beliefs, estimates, intentions, anticipations and strategies about its future
and future financial performance and those of its subsidiaries. Words such as,
"anticipates," "expects," "intends," "plans," "believes, "seeks," "estimates,"
or variations of such words and similar expressions, are intended to identify
such forward-looking statements, but their absence does not mean the statement
is not forward-looking. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties, and assumptions
that are difficult to predict; therefore, actual results may differ materially
from those expressed or forecasted in any such forward-looking statements as a
result of various factors. Specifically, and not in limitation of these factors,
Prime may alter its plans, strategies, objectives or business. This disclaimer
is made in reliance upon the safe harbor provisions of the Private Securities
Reform act of 1995.
General And Historical
Prime Resource, Inc. ("Prime"), as a corporate entity, was
incorporated in Utah on March 29, 2002; however, essentially the same business
purposes were engaged in by its predecessor entity, Prime Resource, LLC, a Utah
limited liability company, as organized in 1996, but which was not active until
the 1998 acquisition of its present subsidiaries: Belsen Getty, LLC ("Belsen
Getty") and Fringe Benefit Analysts, LLC ("Fringe Benefit"). Mr. Scott Deru
acted as the manager for Prime LLC. From 1990 to 1998, Belsen Getty and Fringe
Benefit collaborated as independent corporations. In 1998 Prime LLC became the
parent and coordinating entity and the two operating companies changed their
business forms from corporations to limited liability companies and became
wholly owned subsidiaries of Prime, LLC. Prime Retirement Services, LLC ("Prime
Ret.") was formed on July 3, 2003 after the initial public offering by Prime,
which offering became effective on June 16, 2003. Prime Retirement was formed
with expectation to provide daily valuation services to qualified retirement
plans and related software but was closed during 2005 due to inactivity.
As part of the 1998 reorganization of Prime, LLC, Mr. Scott Deru and
Mr. Terry Deru each contributed their 50% ownership interest in Fringe Benefit
to Prime. Mr. Terry Deru and Mr. William Campbell each contributed their 50%
ownership interest in Belsen Getty to Prime and Mr. Don Deru, the father of
Scott and Terry Deru, contributed limited capital. The resulting ownership
percentages in Prime, LLC. were Scott and Terry Deru at 36 1/2% each; Mr.
William Campbell at 23% and Mr. Don Deru 4%. Prime, LLC was dissolved in April,
2002 after transferring all assets to Prime, Inc. in anticipation of a public
offering of its shares.
Fringe Benefit was incorporated and licensed in November, 1984 in Utah
as a general insurance agency. The company initially was formed and operated as
a Utah corporation with Mr. Scott Deru as its president. It was jointly owned by
Scott Deru and Terry Deru from inception. It was converted to a Limited
3
Liability Corporation in 1988. Fringe Benefit concentrated upon developing
employee benefits and writing insurance for business related purposes, such as
key man life policies, group health plans and related insurance. Mr. Scott Deru
and Mr. Terry Deru remained joint owners from 1984 to 1998 when their ownership
interests were acquired by Prime, LLC.
From 1998 forward, Fringe Benefit started collaborating closely with
Belsen Getty LLC, which was also formed in 1998 to primarily engage in
investment advisory services, business consulting and financial planning. Belsen
Getty was initially formed in 1990 as a corporation and was changed to a limited
liability company in 1998. Belsen Getty, which was and is engaged as an
investment advisor to individuals and firms and pension and related plans,
frequently referred clients to Fringe Benefit when insurance funding was
required. In like manner, Fringe Benefit would frequently refer insurance
clients needing business planning and investment advisory services to Belsen
Getty. However, neither firm operates on an exclusive basis as to these
referrals.
Belsen Getty, Inc. was incorporated on November 9, 1990 by Mr. William
Campbell and Mr. Terry Deru as a Utah successor to a Nevada corporation. Mr.
Terry Deru joined the firm in the summer of 1985 and purchased a 50% interest in
Belsen Getty, Inc. from Mr. Campbell. All interest in Belsen Getty, Inc. was
transferred to Belsen Getty LLC in 1998 which was then exclusively owned by
Prime LLC. Mr. Terry Deru received a 36 1/2% interest in Prime and Mr. Campbell
a 23% interest in Prime.
The foregoing 1998 reorganization was effected in order to take
advantage of some economies of scale and to work more cohesively in
cross-selling to the respective client bases of Belsen Getty, Inc. and Fringe
Benefit. Prime Resource, LLC (an LLC organized on June 27, 1996, but having no
operating business activity at that time) was used as a holding company for the
newly formed Belsen Getty, LLC and Fringe Benefit, LLC. These subsidiary
entities were formed on October 2, 1998 and became the successor firms for
Belsen Getty, Inc. and Fringe Benefit, respectively, each being wholly owned by
Prime Resource, LLC.
Mr. William Campbell became associated with Prime Resource LLC in 1998.
He exchanged a minimal cash contribution and his fifty per cent interest in
Belsen Getty for a 23% interest in Prime LLC.
In January, 2002 Prime LLC purchased all of Mr. Campbell's interest in
Prime for $100,000. The prior Campbell interest was assigned to Andrew Limpert
on January 10, 2002 in consideration for the acknowledgment of Limpert's
advisory and organizational services which were valued at $113,000. The
twenty-six percent (26%) membership share of the Company issued to Mr. Limpert
was accounted for as compensation expense and is included in "compensation and
benefits" in the statement of operations for the quarter ended March 31, 2002.
The value of the share of the Company issued to Mr. Limpert was based on what
the Company was required to pay a former member, Mr. William Campbell, for his
23% share of the Company, in connection with the Company's termination and
buy-out of Mr. Campbell effective January 1, 2002. Mr. Don Deru, the father of
4
Scott and Terry Deru, held a 4% interest in Prime LLC since inception and
exchanged his interest in Prime LLC for a 1.8% interest in Prime, Inc.
In March, 2002, Prime LLC reincorporated in Utah in anticipation of its
initial public offering and issued in April, 2002 issued 750,000 shares of its
common stock, (26% of the issued and outstanding) to Mr. Limpert for his prior
and continuing consulting services for and to Prime. As of March 2002 the other
stockholders were Mr. Terry Deru, 1,000,000 shares; Mr. Scott Deru, 1,000,000
shares; and Mr. Don Deru, 50,000 shares. Fringe Benefit and Belsen Getty
continued under their existing LLC structure as wholly owned subsidiaries of
Prime, Inc. with Mr. Terry Deru continuing as the manager of Belsen Getty and
Mr. Scott Deru for Fringe Benefit.
As limited liability companies, the historical revenues of Belsen
Getty, LLC and Fringe Benefit, LLC have flowed through to its member and sole
owner, Prime Resource, LLC. Within Prime the revenues, after payment of all
operating costs and wages and allowance for working capital reserves, were
allocated between Mr. Scott Deru, Mr. Terry Deru and Mr. William Campbell, in
accordance with their limited liability ownership percentage, through December
31, 2001.
After Prime Resource, Inc's incorporation in 2002, management
determined that the form of compensation and revenue transfer described in the
prior paragraph would no longer be feasible. Going forward, the corporation
would need to report its income, if any, after salaries, overhead and other
expenses as retained earnings. The corporation then began to pay management a
fixed salary as reported below (see Section 10, " Executive Compensation", page
39).
Mr. Terry Deru, in addition to acting for Prime as its President and
Chief Executive Officer, also acted as the Manager and principal operator of
Belsen Getty until the divestment in 2006 discussed below (see ,"Divestment of
Assets and Business", page 6 ). Mr. Scott Deru also devoted substantial time to
the business affairs of Fringe Benefit and such other time as necessary as a
corporate officer of Prime through the divestment. Mr. Terry Deru also assumed
most of the day-to-day management responsibilities for Prime until divestment.
Mr. Limpert has continued to coordinate most governmental filings and reporting
duties for Prime, as well as continuing with Belsen Getty as a consultant.
Over the past four years through April, 2006 when operations terminated
and all assets were divested, Belsen Getty has contributed approximately 9% of
the present revenues to Prime and Fringe Benefit contributed the remaining 91%
of revenue to Prime. As noted above, Prime, LLC was dissolved in April, 2002
upon the transfer of assets to Prime, Inc. Prime, Inc., like its predecessor,
Prime LLC, is not anticipated to generate any independent sources of revenue or
income. All salaries and benefits in Belsen Getty and Fringe Benefit were paid
directly by Prime until divestment in 2006.
Initial Public Offering (IPO):
Prime completed its initial, and only public offering to date, in July,
2003 pursuant to a registration statement on Form SB-2 filed with the securities
and exchange commission in which Prime raised $750,000 in gross proceeds and
5
$709,664 in net proceeds. Prime had expended all such proceeds as of September,
2005. A more detailed description of how Prime used the offering proceeds is
described in prior disclosures of Management's Plan of Operations made pursuant
to SEC Rule 463.
Divestment of Assets and Business:
In April of 2006, the Prime board of directors proposed to the
shareholders a plan to exchange all of the assets, liabilities and business
operations of Prime to certain private entities wholly owned by the three
principal shareholders (Mr. Terry Deru, Mr. Scott Deru and Mr. Andrew Limpert)
in exchange for an approximate 55% reduction of the principals' position in
Prime shares and the spin-off of Bioaccelerate shares primarily to public
shareholders. The Bioaccelerate shares were a holding of Prime received for
consulting services rendered by Mr. Limpert.
The board of directors determined that the ongoing insurance writing
and related business and retirement consulting services of Prime, through its
subsidiaries was not creating any shareholder value and Prime's shares were not
actively traded. Income to Prime had also stabilized at a relatively modest
level without significant growth potential. As a result, management felt that a
divestment of Prime's operating assets and liabilities to the principal
shareholders could enhance the potential merger and acquisition alternatives for
Prime.
Because of substantial ownership of the shares of Prime by the
principal shareholders, the board conducted a special election process to submit
the divestment proposal first only to public shareholders. If a majority of
disinterested public shareholders voted to approve the divestment plan, then the
principal shareholders would vote with that majority which would create an
absolute majority which is required to approve the divestment under Utah law.
As of April 28, 2006, the divestment was approved by a majority vote of
the public shareholders and then ratified by the principals resulting in an
overall majority of 96.1% of the total issued and outstanding shares voting in
favor with 9,533 votes dissenting, 0 votes abstaining, and 0 votes opposed. In
the ratification and proxy process, all shareholders received notice of
applicable dissenters' rights whereby they were given the opportunity
opportunity to receive a cash payment from Prime in lieu of remaining a
shareholder and one shareholder availed himself of these dissenting shareholders
rights and had the company acquire his shares at the price of $23,832 for the
9,533 dissenting shares.
The following numbered paragraphs summarize the key consequences of the
divestment to the company and its shareholders;
1. The divestment of substantially all of the company's operating
assets, liabilities to the principal shareholders (for them to continue on the
business as a private company) for a reduction by the principals of 1,491,867
shares, thereby reducing their percentage ownership of issued and outstanding
Prime shares from 94% to 83%.
6
2. Distribution of the Bioaccelerate shares, primarily to the public
shareholders, with a resulting allocation of 54.7% to the public shareholders
and 45.3% to the principal shareholders.
3. There was approximately $35,000 left in the company in cash or cash
equivalent to pay for ongoing expenses as a inactive public company, including
such matters as filing, accounting and legal fees necessary to maintain the
company's trading on the Electronic Bulletin Board and continue it as a
reporting company under the Securities and Exchange Act of 1934.
4. Mr. Andrew Limpert was further charged with the primary
responsibility of continuing to look for and obtain possible merger and
acquisition candidates and proposals for the company. The results of these
activities are more fully set-out in the "Subsequent Event Section" of this
10-KSB report page 10.
A more detailed description of the actual transaction as voted upon by
shareholders in April, 2006 was provided as part of the Proxy Statement
solicited from shareholders and a copy of which may be obtained from Prime by
any interested party without further charge or cost upon request.
After April, 30, 2006, the company continued on without any further
business activities other than evaluating and negotiating possible merger or
similar transactions. Through the end of calendar year 2006, wages were paid to
employees of the various prior subsidiaries using the Prime tax ID number and
payroll system, but those monies were directly derived and contributed by the
operating subsidiaries as then privately held. Prime engaged in no other
business activities and continues on solely as an inactive public corporation
seeking various merger and acquisition possibilities as subsequently reported.
Mr. Andrew Limpert was initially to be paid a fee for his continuing maintenance
services and for seeking and evaluating acquisition or merger candidates, but
the company and Mr. Limpert subsequently agreed that the fee would be waived.
Of the initial $35,000 allocated for maintenance cost as of the date of
December 31, 2006 approximately $15,000 remained.
As a result of the foregoing all sector reports, management's
discussion and analysis of financial affairs of the company apply only to the
period ending April 30, 2006 after which no significant economic activities have
occurred in the company.
Continuation of Company as Inactive Public Entity:
Prime, as reported under the following section on Significant
Subsequent Events, anticipates the closing of a pending merger no later than
March 31, 2007 which would create within the reorganized company an active
business purpose.
If Prime is not able to close the pending merger, it will attempt to
continue on for so long as possible as an inactive public company seeking
various merger, acquisition or other reorganization possibilities. Prime can
give no future assurance that it would be successful in such efforts or that its
limited retained maintenance funds (approximately $15,000 as of December 31,
2006) will be adequate to continue the company past the first quarter of 2007 as
7
an inactive public company, nor will there be any assurance of any additional
funding being available to the company.
Current Ownership of Shares by Affiliates:
The principal owners of Prime (10% or greater shareholders) as of
December 31, 2006 were:
Number of Shares Number of Shares Percent of Current
Name of Shareholder Prior to April 30, 2006 (1) After April 30, 2006 Outstanding
---------------------- --------------------------- -------------------- ------------------
1. Mr. Terry Deru 984,000 440,632 30%
2. Mr. Scott Deru 999,500 447,406 31%
3. Mr. Andrew Limpert 717,900 321,495 22%
4. All Directors 2,701,400 1,209,533 83%
(1) There are no outstanding shareholder options, warrants or other stock
rights as of the date of this Report. Share listed for individuals may
include spouse and grantor trusts.
Description Prior Products and Markets
AS INDICATED PREVIOUSLY, ALL DESCRIPTION OF PRIME PRODUCTS AND MARKETS
ARE MADE ONLY FOR THE FIRST FOUR MONTHS OF CALENDAR YEAR 2006, WHEN ALL ASSETS,
LIABILITIES AND BUSINESS ACTIVITIES WERE TRANSFERRED TO ENTITIES OWNED BY THE
PRINCIPAL SHAREHOLDERS. PRIME'S FINANCIAL STATEMENTS, DISCUSSED BELOW, ARE ALSO
PREMISED UPON THE FACT THAT IT HAD NO REVENUE OR INCOME AFTER APRIL, 2006 AND
ONLY LIMITED ACCRUING EXPENSES AND LIABILITIES AFTER THAT DATE.
I. Prime Resource, Inc.
As the parent management entity for its subsidiaries, Prime does not
have any significant independent income and derived its income from its
subsidiary operations as defined and described previously and below. Prime did
not independently market any service or product, but acted solely and
exclusively through its prior operating subsidiaries as more specifically
described under the following paragraphs. Prime was generally responsible for
the payment from subsidiary income of all general operating expenses of the
consolidated companies; such as payroll.
II. Belsen Getty, LLC
Belsen Getty is a Utah financial advisory company offering investment
advice, financial planning as well as pension and retirement planning and
general business consulting. Belsen Getty acts both for individuals and firms
who may participate to the extent they deem appropriate in any of these
financial products and services.
8
For the calendar year 2006 , Belsen Getty estimates that approximately
$264,124 or 10% of Prime's revenues were derived from Belsen Getty activities.
Approximately 16% of the business services performed by Belsen Getty were a
direct result of referrals by the other Prime subsidiary, Fringe Benefit
Analysts.
III. Fringe Benefit Analysts, LLC
Fringe Benefit Analysts became the primary insurance arm for the Prime
companies and the principal revenue producer. It has a synergistic relationship
with Belsen Getty in that it provides insurance coverage to various pension and
retirement plans developed by Belsen Getty.
Fringe Benefit estimates that for calendar year 2006 contribution to
the revenues of Prime were approximately $ 2,377,116 or 90%. Approximately 10%
of the services performed by Fringe Benefit Analysts were a direct result of
referrals by Belsen Getty.
Absence of Traditional Discussion of Financial Affairs and Status:
Because Prime has divested all assets and active business purposes as
of the April 30, 2006 date, management does not believe it would be appropriate
to continue with a traditional analysis of forward looking financial condition
and analysis of financial statements as normally contained on form 10-KSB
report. Such matters are typically forward looking discussions of specific
business plans or projections, capitalization needs and prospects, future
competitive factors, number of persons employed, environmental compliance and
related subjects and topics, including equity and financing plans. Prime will
discuss such matters below only in their historical context, and primarily in
the light of the April, 2006 divestment and anticipated significant subsequent
events.
There is included in this section a discussion captioned as SIGNIFICANT
SUBSEQUENT EVENTS, in which management attempts to explain significant
subsequent events to the December 31, 2006 date of this report which will bear
upon the potential future of the company as a to be re-organized and merged
entity.
LightSpace Convertible Note
As part of the company's ongoing efforts to attempt to find a suitable
merger and/or reorganization candidate, Prime loaned various amounts of money in
2005 to a development stage technology company known as LightSpace Corporation
in anticipation of a reorganization with LightSpace which was subsequently
terminated. LightSpace is generally involved in the business of creating unique
proprietary computer controlled patented light panels which are used for
advertising and promotion purposes and are linked to generate visual and sound
advertising, directions or information. The company contemplated and was
substantially involved in negotiations with LightSpace for a reverse
acquisition, but which negotiations with LightSpace were subsequently terminated
when LightSpace elected to pursue independently its own registration of its
stock rather than complete a reverse acquisition with Prime.
Leading up to the termination of the LightSpace acquisition
discussions, Prime had advanced to LightSpace the sum of $350,000 by various
notes. Prime has, as of April 28, 2006, converted these notes to equity units
which Prime intends to distribute ratably to all shareholders of record as of
April 28,2006, without cost to its shareholders and as part of the Merger.
9
Material Subsequent Events
Prime reports, as material subsequent information to this annual
report, that it has entered into and signed a definitive Merger Agreement
through a wholly owned and created acquisition subsidiary known as Prime
Acquisition, Inc. with Broadband Maritime Inc., a privately held technology
company engaged in providing ship-to-shore internet services (hereafter BBM).
BBM will be the surviving entity to the Merger and will be a wholly owned
operating subsidiary of Prime upon the closing of the Merger. A supplemental 8-K
will be filed after the Merger closing setting out, among other things, pro
forma consolidated financials for the merged company and its parent.
The detailed terms of such Merger are more fully described in the
Company's report on Form 8-K filed by Prime on January 18, 2007, to which was
attached a complete copy of the definitive Merger Agreement, together with the
exhibits and schedules to the agreement. The Merger Agreement was amended as of
January 13, 2007 primarily to extend the closing date, in the description of the
post closing capitalization, and make other minor changes.
Further, Prime has mailed to each of its shareholders an Information
Statement further describing the specific terms of the Merger, the business and
management of BBM, the majority shareholder consent voted in favor of such
merger, together with an explanation of dissenting shareholder rights and other
information about the Company and the effect of the Merger. A copy of the
definitive Merger Agreement and accompanying 8-K may also be found online at the
Securities and Exchange Commission (SEC) website under the company name or
number (0001173281) at www.sec.gov. Alternatively a copy of the 8-K filing and
Merger Agreement may be obtained at the company website, without cost or charge
to any shareholder or interested parties. The company website is located at
www.belsengetty.com. Any shareholder, or other interested party, may also obtain
a copy of the Information Statement by requesting the same from Prime at that
address shown on the cover of this report without charge.
Following is a brief summary description of certain essential terms of
the Merger, but which does not purport or intend to be a complete or exhaustive
listing of all detailed terms or provisions:
o The principal transaction being reported involves the merger
acquisition by Prime, through its wholly owned subsidiary, of
a private corporation Broadband Maritime, Inc. which will
become the sole operating entity for, and wholly owned
subsidiary of, Prime (the "Merger").
o Prime, has created an acquisition subsidiary known as Prime
Acquisition, Inc. to merge with BBM.
o This type of transaction is often called a "reverse merger" as
Prime will survive as the ongoing public entity, but it will
change its name to Broadband Holdings, Inc. and its business
purpose will be to own BBM. The Board of Directors of both
Prime and BBM following the merger will consist of three
members of the BBM board prior to the Merger and one member of
the Prime board prior to the Merger. The officers and
management team of both Prime and BBM following the Merger
will be identical to the officers and management team of BBM
prior to the Merger. Further, the prior BBM shareholders will
become the predominate majority shareholders of the surviving
parent entity, BBM Holdings, Inc. f/k/a Prime Resource, Inc.
Management compensation and related matters will be more fully
set-out in the Information Statement to shareholders.
10
o BBM is a privately held Delaware corporation with its
principal place of business in New York, New York. BBM is a
development stage telecommunications engineering and service
company offering turn key, always-on Internet access to
commercial shipping fleets.
o As a result of the Merger, each present shareholder in Prime
will incur a substantial reduction in the percentage of his or
her ownership interest in Prime.
o It is anticipated that after closing of the Merger, the
domicile of the parent company, BBM Holdings, Inc. f/k/a Prime
Resource, Inc., will be changed to be Delaware. It is also
possible that following the Merger the Parent and operating
subsidiary will be merged into a single public Delaware
corporation.
o As a condition of Merger, each shareholder of Prime as of the
April 29, 2006 record date of Prime will receive one series
"A" preferred share for each Prime common share held (total
1,454,090 share) exchangeable for a pro rata share (according
to each shareholder's pre-Merger percentage ownership of
Prime) of the units or other securities of the LightSpace
presently held by Prime.
o The Company will continue to have authorized 50,000,000 no par
common shares with the number of shares outstanding after the
Merger being as subsequently set-out herein; and with a new
class of 10,000,000 no par preferred shares being authorized,
1,454,090 to be issued as of closing as series "A" preferred
shares.
o As a condition to closing, BBM will complete a private
placement of its shares raising gross proceeds of not less
than $4.5 million.
o The closing of the Merger is presently set for not later than
March 31, 2007, but is subject to final due diligence and
compliance, all of which conditions are anticipated to be
satisfied.
Specific Business Plan and Projections
Because of the merger agreement, as generally outlined above, and due
to divestment of all assets and business by Prime in April, 2006, Prime does not
have any present business purpose or objective other than the projected
operations through its intended wholly owned subsidiary, BBM, subsequent to the
closing of such merger. A general description of the BBM business, management,
financing and other appurtenant matters including financial statements is
contained in and will be supplied to shareholders through the Information
Statement and the subsequent 8-K filing setting out pro forma Financial
Statements for the combined entities and other information. At present, the
existing entity, Prime, must be considered only as an inactive public shell
without assets, substantial liabilities or any revenue source and all business
present planning and projections will be depended upon the close of the merger
with BBM.
11
Competitive Factors
Based upon the foregoing disclosures, Prime does not have any basis to
accurately project what competitive factors may exist in the event of the
closing of the merger; and, again, references is made to the financial
statements and discussions contained in the referenced Information Statement and
an 8-K filing to be made after closing as described above for further treatment
of this subject.
Number of Persons Employed
At present, Prime has no employees. However, Mr. Andrew Limpert has
agreed to act without compensation on an as needed basis to continue to manage
the company to ensure its continuation as a inactive public entity and to be the
principal officer in charge of organizing and coordinating the proposed merger
activities.
Environmental Compliance
As previously indicated in prior filings for the Company, Prime does
not operate in areas of business or commerce requiring substantial environmental
compliance, or creating potential liabilities. The Company, as a result, is not
aware of any environmental claims or liabilities and does not believe that the
future business, if the merger is completed, will have substantial environmental
issues.
Governmental Compliance
Prime will continue on as an inactive public company; or, if the merger
is closed, as the public parent company for an active telecommunication
subsidiary company. In all events, Prime will continue to be subject to various
SEC and state securities rules and regulations. Its NASD listing will also be
subject to various rules and regulations by the NASD. If the merger is
completed, it is understood that the BBM operations will be subject to various
rules and regulations by the Federal Communications Commission. The foregoing is
not meant to be exclusive and the company will continue to be subject to various
generic governmental regulations, such as tax filing and reporting requirements,
OSHA compliance etc.
Item 2. DESCRIPTION OF PROPERTY
As of December 31, 2006, Prime has no net tangible or intangible
property other than approximately $15,000 in cash earmarked for maintenance of
its corporate status and public company filings.
Post merger, Prime would have additional assets, primarily of an
intangible nature, which will be more fully set out in subsequent financial
statement filings on Form 8-K by the merged companies pursuant to and in the
event of the completion of the merger.
Item 3. LEGAL PROCEEDINGS
Prime does not have any legal actions or claims in which the company is
presently engaged.
12
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The last shareholder meeting of Prime was in April, 2006 when the
majority of both public shareholders and principal shareholders approved the
disposition and divestment of all assets, liabilities and business of Prime to
various private entitles owned and controlled by its principal shareholders for
reduction of their shares and distribution of LightSpace as previously
described.
Prime anticipates the next meeting of shareholders may occur at
sometime in 2007 in the event of the completion of the merger with BBM which is
being approved by majority shareholder consent in lieu of a meeting.
Shareholders have received notice of the terms of the merger through an
Information Statement, including dissenting shareholder rights. There can be no
assurance or warranty that Prime will hold an annual meeting in 2007 or when the
next annual meeting may be scheduled.
Part II
Item 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
After substantial delay by the NASD, Prime commenced trading on the
over the counter Electronic Bulletin Board (OTCBB) on May 28, 2004. Its trading
symbol is PRRO. Following is a table of the trading ranges for its shares in
calendar year 2006 and 2005:
High Low High Low
---------- -------------- ----------- ------------ ------------ -------------
Q1 2006 1.50 1.15 Q1 2005 $6.15 $4.00
---------- -------------- ----------- ------------ ------------ -------------
Q2 $2.00 1.25 Q2 $6.00 $2.50
---------- -------------- ----------- ------------ ------------ -------------
Q3 $1.25 1.25 Q3 $5.25 $1.10
---------- -------------- ----------- ------------ ------------ -------------
Q4 $1.30 1.25 Q4 $5.25 $1.50
---------- -------------- ----------- ------------ ------------ -------------
Item 6. MANAGEMENTS DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
Liquidity and Continued Operations
At present, Prime has material operating assets, and or liabilities or
business operations. Until or unless the Merger, generally described above, is
completed, Prime will not have any continuing business operations to report. In
the event of the closing of the Merger, which is anticipated for no later than
March, 31 2007, subsequent public information will be made through a
supplemental 8-K or other appropriate filings describing the pro forma
financials, management description of the merged companies which would state any
revenues, operating costs, profits, losses or other related matters. It is the
general understanding of Prime that the BBM entity to be merged presently has
limited revenues, with net operating losses of approximately $ 4,738,484 for
2006 as of its fiscal year ending September 30th, and assets which are primarily
intangible intellectual property rights. BBM is required, however, to complete a
private placement offering of not less than $4.5 million in gross proceeds as a
condition to closing the Merger.
13
It is reasonably anticipated since Prime has minimal assets, and no
revenues or post closing liabilities that the consolidated pro forma financials
for the post merger Prime and BBM will substantially mirror the pre-merger
financials of BBM which are attached to the aforementioned Disclosure Statement
to shareholders. Actual combined pro forma financials for the merged companies
will be included in the supplemental 8-K filings if the Merger is closed.
Capital Resources
Prime has limited capital resources and if the Merger is not completed
it can make no assurance or warranty that it will be able to obtain additional
capital to continue its existence even as an inactive public company. Prime does
not feel that is has sufficient present information to describe fully the
capitalization of the company in the event the Merger is closed. Any such
information will be publicly filed of record as part of supplemental 8-K filings
and other 34' Act filings as provided by the company pursuant to the Merger.
Results of Operations
Revenues for 2006 were entirely in discontinued operations and totaled
$2,641,240 a decrease of $4,513,926 from calendar year 2005. Net income for 2006
totaled $63,737 compared to $75,862 in 2005. THE DECREASE IN REVENUES AND NET
INCOME WAS DUE PRIMARILY TO THE DIVESTURE OF ITS OPERATING ASSETS IN APRIL,
2006. The individual sector revenue and profit breakdowns for these subsidiaries
are set-out as follows:
Prime
Sector Revenues
For Periods Ending December 31, 2005 & 2006 (1)
CALENDAR YEAR GROSS REVENUES NET PROFITS OR % OF PRIME TOTAL REVENUES
2006 (LOSSES) (2)
------------------------------------------ --------------------- -------------------- ------------------------------
Fringe Benefit Analysts $2,377,109 $238,445 90.00%
------------------------------------------ --------------------- -------------------- ------------------------------
Belsen Getty $264,131 $(34,064) 10.00%
------------------------------------------ --------------------- -------------------- ------------------------------
Prime Resource $0 $(85,003) 0%
------------------------------------------ --------------------- -------------------- ------------------------------
CALENDAR YEAR GROSS REVENUES NET PROFITS OR % OF PRIME TOTAL REVENUES
2005 LOSSES
------------------------------------------ --------------------- -------------------- ------------------------------
Fringe Benefit Analysts $6,441,499 $479,660 90%
------------------------------------------ --------------------- -------------------- ------------------------------
Belsen Getty $668,602 ($121,507) 9%
------------------------------------------ --------------------- -------------------- ------------------------------
Prime Resource $45,065 ($230,151) 1%
------------------------------------------ --------------------- -------------------- ------------------------------
(1) Revenues and most costs accruing as liabilities for Prime
effectively ended April 30, 2006 as a result of the divestment.
(2) Expenses in 2006 for Prime primarily involved executive salaries,
commissions and operation of the business offices, including general salaries
and overhead.
14
Expenses December 31st, 2005 - 2006
2006
Description of Expense (4 Mos. Basis) 2005
-------------------------------------- ------------------ ----------------
Officers' salaries and compensation 409,643 1,461,570
-------------------------------------- ------------------ ----------------
Commissions 1,787,307 4,799,377
-------------------------------------- ------------------ ----------------
General Operating Expenses 233,066 562,567
-------------------------------------- ------------------ ----------------
Occupancy 28,829 133,177
-------------------------------------- ------------------ ----------------
Interest 1,100 4,007
-------------------------------------- ------------------ ----------------
Depreciation 18,711 61,495
-------------------------------------- ------------------ ----------------
TOTALS $ 2,478,656 $ 7,022,193
================= ===============
Recent Accounting Pronouncements
In April, 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 149 is generally effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The adoption of this pronouncement
did not have a present impact on the company's financial condition or results of
operations.
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 measures certain financial
instruments with characteristics of both liabilities and equity and requires
that an issuer classify a financial instrument within its scope as a liability
(or asset in some circumstances). SFAS No. 150 was effective for financial
instruments entered into or modified after May 31, 2003 and otherwise was
effective and adopted by the company on July 1, 2003. As the company has no such
instruments, the adoption of this statement did not have a present impact on the
company's financial condition or results of operations.
Quantitative and Qualitative Disclosures about Market Risk
Historically Prime has not engaged in any foreign markets or
transactions and it was not believed to have risk factors other than general
business risks, particularly including its ability to create a growing revenue
base. Assuming the close of the merger described above, Prime may have future
quantitative risks arising out of foreign transactions or other particular
market risks of its anticipated new business.
15
Item 7. FINANCIAL STATEMENTS
Following are the Financial Statements prepared by Prime and audited by
its independent auditors and passed upon by management of the company. These
financial statements constitute the formal presentation of financial information
by the company, such that all other financial information contained in this
10-KSB report should be read and reviewed in light of the following Financial
Statements and notes thereto. Should there exist any conflict between
information appearing elsewhere in this Report and the following Financial
Statements, the Financial Statements should be given primary definition and
control. The notes attached to the Financial Statements constitute an integral
part of the financial disclosure and should be read and reviewed in connection
with the Financial Statements.
16
Report of Independent Registered Public Accounting Firm
To the Board of Directors,
Prime Resource, Inc., and Subsidiaries:
We have audited the accompanying consolidated balance sheet of Prime Resource,
Inc. and Subsidiaries as of December 31, 2006 and 2005, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended December 31, 2006 and 2005. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Prime Resource, Inc.
and Subsidiaries as of December 31, 2006, and the results of its operations and
its cash flows for the years ended December 31, 2006 and 2005, in conformity
with accounting principles generally accepted in the United States of America.
/s/ Child, Van Wagoner & Bradshaw, PLLC
Child, Van Wagoner & Bradshaw, PLLC
Kaysville, Utah
March 21, 2007
17
Prime Resource, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
December 31, 2006
December 31, December 31,
ASSETS 2006 2005
-------------------- --------------------
Current assets:
Cash and cash equivalents $ 15,079 $ 586,147
Accounts receivable - 462,331
Interest receivable - 37,844
Income taxes receivable - 19,158
Trading securities - 2,497
Total current assets 15,079 1,107,977
-------------------- --------------------
Leasehold improvments and equipment, net
- 144,278
-------------------- --------------------
Notes receivable - 390,000
Investments in non-trading securities 372,268 60,000
Deferred tax assets - 19,189
Other assets - 13,104
-------------------- --------------------
Total assets $ 387,347 $ 1,734,548
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 23,284 $ 42,776
Accrued compensation, commissions and benefits - 445,016
Deferred tax liabilities - 7,245
Dividend payable 372,268 -
Notes payable, current portion - 36,728
-------------------- --------------------
Total current liabilities 395,552 531,765
Long-term Liabilities:
Notes payable, net of current portion - 23,034
-------------------- --------------------
Total Liabilities 395,552 554,799
-------------------- --------------------
Common stock, no par value, 50,000,000 shares
authorized, 2,972,950 shares issued
and 1,454,090 outstanding 964,802 964,802
Treasury stock of 1,518,860 common shares at cost (849,316) (86,178)
Deficit incurred since re-entering the developmental stage (43,206) -
Retained earnings (deficit) (80,485) 301,125
-------------------- --------------------
Stockholders' Equity (8,205) 1,179,749
-------------------- --------------------
Total Liabilities and Stockholders' Equity $ 387,347 $ 1,734,548
==================== ====================
See notes to consolidated financial statements.
18
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statements of Operations
For the Year Ended Inception
December 31, May 1, 2006 to
2006* 2005 December 31, 2006
----------------- ----------------- --------------------
REVENUES $ - $ - $ -
----------------- ----------------- --------------------
EXPENSES
General and administrative 85,003 69,500 43,206
Tax (benefit) expense (24,687) (27,800) -
----------------- ----------------- --------------------
NET LOSS FROM CONTINUING OPERATIONS (60,316) (41,700) (43,206)
----------------- ----------------- --------------------
DISCONTINUED OPERATIONS
Revenues 2,641,240 7,155,166 -
Expenses (2,436,859) (6,952,634) -
Realized gains and losses, net 115,371 (5,030) -
Tax (expense) benefit (195,699) (79,940) -
----------------- ----------------- --------------------
NET INCOME FROM DISCONTINUED OPERATIONS 124,053 117,562 -
----------------- ----------------- --------------------
NET INCOME FROM CONTINUING AND DISCONTINUED OPERATIONS $ 63,737 $ 75,862 $ (43,206)
================= ================= ====================
Basic and fully diluted net income (loss) per share:
Continuing operations $ (0.03) $ (0.01) $ (0.03)
================= ================= ====================
Discontinued operations $ 0.06 $ 0.04 $ -
================= ================= ===================
Weighted average shares outstanding 2,079,673 2,944,529 1,454,090
================= ================= ====================
See notes to consolidated financial statements.
19
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
For the year ended December 31, 2006
Deficit Incurred from Retained
Common Stock Treasury Re-entering the Earnings Total
Shares Amount Stock Development Stage (Deficit) Equity
-------------- --------- ----------- --------------------- ------------ -----------
Balance at December 31, 2004 2,934,000 $ 907,427 $ (77,755) $ - $ 225,263 $ 1,054,935
Common stock issued for
compensation 22,950 57,375 - - 57,375
Purchase of treasury stock (1,460) - (8,423) - (8,423)
Net income - - - 75,862 75,862
-------------- --------- ----------- --------------------- ------------ -----------
Balance at December 31, 2005 2,955,490 964,802 (86,178) 301,125 1,179,749
Redemption of shares and
exchange for net assets (1,501,400) - (763,138) - (763,138)
Divdend Shareholders - - - (488,553) (488,553)
Net income from continuing
operations for the four
month period ended
April 30, 2006 - - - (17,110) 106,943
Net income from discontinued
operations for the four month
period ended April 30, 2006 124,053
Net losses and deficit incurred
since re-entering the
development stage - - - (43,206) - (43,206)
-------------- --------- ----------- --------------------- ------------ -----------
Balance at December 31, 2006 1,454,090 $ 964,802 $ (849,316) $ (80,485) $ (43,206) $ (8,205)
============== ========= =========== ===================== ============ ===========
See notes to consolidated financial statements.
20
Prime Resource, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Year Inception
Ended December 31, May 1, 2006 to
2006 2005 December 31, 2006
------------- ----------- ------------------
Cash Flows From Operating Activities:
Net loss from continuing operations $ (60,316) $ (41,700) $ (43,206)
Adjustments to reconcile net loss to net cash
used in operating activities:
Changes in assets and liabilities:
Increase in deferred tax assets - - -
Increase in accounts payable 23,284 - 23,284
------------- ----------- ------------------
Net Cash Used In Operating Activities
From Continuing Operations (37,032) (41,700) (19,922)
------------- ----------- ------------------
Cash Flows From Investing Activities
From Continuing Operations - - -
------------- ----------- ------------------
Cash Flows From Financing Activities
From Continuing Operations - - -
------------- ----------- ------------------
Net Cash Used In Discontinued Operations (534,036) (199,557) -
------------- ----------- ------------------
Net Decrease In Cash And Cash Equivalents (571,068) (241,257) (19,922)
Cash And Cash Equivalents At Beginning Of Period 586,147 827,404 35,001
------------- ----------- ------------------
Cash And Cash Equivalents At End Of Period $ 15,079 $ 586,147 $ 15,079
============= =========== ==================
Supplemental Cash Flow Information:
Cash paid for interest $ 1,100 $ 4,082
Cash paid for taxes $ - $ 49,500
See notes to consolidated financial statements.
21
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2006 and 2005
1. Summary of Significant Accounting Policies
A. Organization and Business Activity
As of April 30, 2006, Prime Resources, Inc. (the "Company"), was a 100
percent owner of Belsen Getty, LLC, ("Belsen Getty"), and Fringe Benefit
Analysts, LLC, ("FBA"), with offices in Salt Lake City and Layton, Utah,
respectively. Belsen Getty is a fee-only financial management firm,
providing investment advice to high-wealth individuals and employee
groups in connection with company retirement plans. FBA sells group and
employee benefit products, primarily health insurance, to employers and
individuals throughout Utah. At April 30, 2006, the Company entered into
an assignment agreement (the "Assignment") whereby it assigned all
assets, liabilities and business interests of the Company to Prime
Advisors, LLC, a privately held Utah limited liability company (see Note
2).
B. Basis of Financial Presentation
The accompanying consolidated financial statements include the accounts
of Prime Resource, Inc., and its wholly owned subsidiaries, Belsen
Getty, LLC and Fringe Benefit Analysts, LLC as of and through December
31, 2006. All significant inter-company balances and transactions as of
that date have been eliminated in consolidation. As a result of the
transfer of net assets and reorganization (see note 2), the operations
of the former wholly-owned subsidiaries from May, 2006 are not included
in these consolidated financial statements.
C. Uses of Estimates
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles of the United States of
America. In preparing the consolidated financial statements, management
is required to make estimates and assumptions that affect the reported
amounts of assets, liabilities and disclosures as of the date of the
balance sheet and revenues and expenses for the period. Actual results
could significantly differ from those estimates. Significant estimates
that may change dramatically in the near term are estimates of
unrealized gains and losses on trading securities and resulting deferred
tax assets and liabilities, as well as the value of shares received for
services. Gains actually realized upon the eventual disposal of these
investments could vary from a loss of $2,500 to a gain of $1.3 million
based on non-discounted share values.
D. Cash and Cash Equivalents
Cash and cash equivalents consist of checking and money market accounts.
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments with original maturities of three months or
less to be cash equivalents. As of December 31, 2006 and 2005 cash and
cash equivalents of $0 and $486,147, respectively, were either not
covered by federal insurance or exceeded those limits.
22
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Notes to the Consolidated Financial Statements (continued)
December 31, 2006 and 2005
1. Summary of Significant Accounting Policies (continued)
E. Investments in Non-Trading Securities
Investments that do not qualify as trading securities or available for
sale securities under Statement of Financial Accounting Standard No.
115, "Accounting for Certain Investments in Debt and Equity," are
included in Investments in non-trading securities on the consolidated
balance sheet and are accounted for under the cost method as they are
non-public companies for which we do not exert significant influence or
public securities for which sale is restricted.
For these investments, management regularly reviews the assumptions
underlying the operating performance and cash flow forecasts based on
information requested from these companies. Generally, this information
may be more limited, may not be as timely as and may be less accurate
than information available from publicly traded companies. Assessing
each investment's carrying value requires significant judgment by
management. If it is determined that there is an other-than-temporary
decline in the fair value of a security, management will write-down the
investment to its fair value and record the related write-down as a loss
on investments in the consolidated statement of income.
At December 31, 2006, and pursuant to the Assignment, the Company had
converted its notes receivable from LightSpace, Inc., together with
accrued interest as of the date of the Assignment, into the promisor's
restricted equity securities. Accordingly, these securities have been
recorded as investments in non-trading securities.
Subsequent to year-end, Lightspace, Inc. became a publicly trading
company. Based upon management's assessment of the relative fair value
of the restricted shares, no impairment in value was recorded upon the
conversion or subsequent to the conversion.
F. Income Taxes
The Company uses the asset and liability method of accounting for income
taxes, in accordance with Statement of Financial Accounting Standard No.
109 "Accounting for
Income Taxes." Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be settled or recovered. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in the period that includes the enactment date.
23
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Notes to the Consolidated Financial Statements (continued)
December 31, 2006 and 2005
1. Summary of Significant Accounting Policies (continued)
G. Revenue Recognition
The Company generated revenues from two primary sources, commissions on
the sale of insurance and fees for providing investment advice.
Fees from the investment advisory services are billed and earned based
on an agreed-upon percentage of the fair value of investment portfolios
under management. Such fees are typically one percent per year, and are
calculated and billed on a monthly basis at one twelfth of one percent
of the fair value of investments under management as of the beginning of
each calendar month, and are recognized as revenue in the month billed.
Revenues, in the form of commissions, are earned on brokered sales of
group and individual health insurance products under agency marketing
agreements with applicable health insurance providers. Commissions are
generally collected on a monthly basis and are recognized as revenue in
the month for which the related insurance premiums apply. Commissions
earned by the Company are split, at management's discretion, between the
Company and its licensed agents, on a case-by-case basis. The Company
recognized the full amount of commissions received under its agency
agreements as commission revenue and the portion paid to its licensed
agents as commission expense.
H. Credit Risks and Concentrations
The Company's primary customers are individuals and small-to-medium
sized businesses that may be affected by changes in economic conditions.
The Company believes that approximately 99% of its customers are
geographically based in Utah. The Company has no client that accounts
for more than 4% of its revenues. The Company's largest insurance
carriers that pay the commissions on insurance sales generate 33%, 29%,
and 12% of its annual insurance commissions revenues. Investment
advisory fees make up approximately 9% of the Company's total revenues
and no one individual or customer accounts for more than approximately
7% of that revenue.
I. Earnings Per Share
Earnings per share (EPS) are computed based on the weighted average
number of shares actually outstanding. Basic earnings per share and
fully diluted earnings per share are the same as there are no dilutive
or anti-dilutive shares as of December 31, 2006 and 2005.
24
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Notes to the Consolidated Financial Statements (continued)
December 31, 2006 and 2005
1. Summary of Significant Accounting Policies (continued)
J. New Accounting Pronouncements
In February, 2006, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 155, Accounting for Certain Hybrid Financial
Instruments. SFAS No. 155 eliminates the temporary exemption of
bifurcation requirements to securitized financial assets, contained in
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. As a result, similar financial instruments are accounted for
similarly regardless of the form of the instruments. In addition, in
instances where a derivative would otherwise have to bifurcated, SFAS
No. 155 allows a preparer on an instrument-by-instrument basis to elect
fair value measurement at acquisition, at issuance, or when a previously
recognized financial instrument is subject to remeasurement. The
adoption of SFAS No. 155 has not materially affected the Company's
reported loss, financial condition or cash flows.
In March, 2006, the FASB issued SFAS No. 156, Accounting for Servicing
of Financial Assets, an amendment of FASB Statement No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities. The pronouncement establishes standards whereby servicing
assets and servicing liabilities are initially measured at fair value,
where applicable. In addition, SFAS No. 156 allows subsequent
measurement of servicing assets and liabilities at fair value, and where
applicable, derivative instruments used to mitigate risks inherent with
servicing assets and liabilities are likewise measured at fair value.
The adoption of SFAS No. 156 has not materially affected the Company's
reported loss, financial condition, or cash flows.
In March, 2006, the FASB issued Interpretation No. 48, ("FIN 48")
Accounting for Uncertainty in Income Taxes, an interpretation of SFAS
No. 109, Accounting for Income
K. New Accounting Pronouncements
Taxes. FIN 48 prescribes criteria for the recognition and measurement of
a tax position taken or expected to be taken in a tax return.
Accordingly, tax positions are analyzed to determine whether it is more
likely than not they will be sustained when examined by the appropriate
tax authority. Positions that meet the more-likely-than-not criteria are
measured to determine the amount of benefit to be recognized, whereas
those positions that do not meet the more-likely-than-not criteria are
derecognized in the financial statements. The adoption of FIN 48 has not
materially affected the Company's reported loss, financial condition, or
cash flows.
In September, 2006, the FASB issued SFAS No. 157, Fair Value
Measurements. The statement defines fair value, determines appropriate
measurement methods, and expands disclosure requirements about those
measurements. The adoption of SFAS No. 157 has not materially affected
the Company's reported loss, financial condition, or cash flows.
25
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Notes to the Consolidated Financial Statements (continued)
December 31, 2006 and 2005
1. Summary of Significant Accounting Policies (continued)
K. New Accounting Pronouncements (continued)
In September, 2006, the FASB issued SFAS No. 158, Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans. This
statement requires an employer to recognize the overfunded or
underfunded status of a defined benefit postretirement plan as an asset
or liability in its statement of financial position and to recognize
changes in that funded status in the year of change through
comprehensive income. In addition, SFAS No. 158 requires an employer to
measure the funded status of a plan as of the date of its year-end
statement of financial position. The adoption of SFAS No. 158 has not
materially affected the Company's reported loss, financial condition, or
cash flows.
2. 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 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.
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 December 31, 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 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 December 31, 2006, the Company
has recorded a dividend payable, reflecting its obligation to distribute
the shares in the future.
26
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Notes to the Consolidated Financial Statements (continued)
December 31, 2006 and 2005
2. 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 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 $573,545,
$531,180 and $838,458, respectively. The liabilities at the time of the
exchange for Fringe Benefit Analysts, Belsen Getty and Prime Resource
were approximately $435,275, $96,761 and $159,456, 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:
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.
27
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2006 and 2005
2. Exchange of Shares for Transfer of Net Assets (continued)
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
3. 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 year
ended December 31, 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
year ended December 31, 2006.
The exchange of the Company's assets, liabilities and operations for
approximately 55 percent of the principal shareholder's issued and
outstanding stock has been treated as a nonmonetary, nonreciprocal
transfer to owners and, accordingly, is based on the recorded amounts of
such assets and liabilities, net of any impairment, per APB 29.
3. Income Tax
Income tax expense for the year ended December 31, 2006 consists of the
following:
Current Deferred Total
----------- --------- ----------
U. S. Federal $ 109,944 $ 53,091 $ 163,035
State 3,671 4,306 7,977
----------- --------- ----------
$ 113,615 $ 57,397 $ 171,012
=========== ========= ==========
28
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2006 and 2005
3. Income Tax (continued)
Income tax expense (benefit) for the year ended December 31, 2005 consists of
the following:
Current Deferred Total
----------- --------- ----------
U. S. Federal $ 27,992 $ 13,945 $ 41,937
State 7,878 2,325 10,203
----------- --------- ----------
$ 35,870 $ 16,270 $ 52,140
=========== ========= ==========
A reconciliation of income tax expense to expected amounts using federal
statutory rates is as follows:
2006 2005
---------- ---------
Federal income tax expense (benefit) at statutory
rate (35%) $ 82,133 $ 44,800
Benefit of graduated rates (14,426) (13,326)
Distribution of appreciated shares 39,365 -
Redetermination of prior year taxes 19,102 9,887
Other non-deductible and non-includable items 840 576
State taxes, net of federal benefit 11,734 10,203
Change in valuation allowance 32,264 -
---------- ---------
$ 171,012 $ 52,140
Income tax expense (benefit) from continuing operations for the year ended
December 31, 2006 consists of the following:
Current Deferred Totals
----------- --------- ----------
U. S. Federal $ (21,602) $ - $ (21,602)
State (3,085) - (3,085)
----------- --------- ----------
$ (24,687) $ - $ (24,687)
=========== ========= ==========
29
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2006 and 2005
3. Income Tax (continued)
A reconciliation of income tax expense (benefit) from continuing operations to
expected amounts using federal statutory rates is as follows:
Federal income tax expense (benefit) at statutory rate (35%) $ (29,751)
State tax, net of federal (4,250)
Change in valuation allowance 9,314
----------
$ (24,687)
Significant components of deferred tax assets and liabilities arise from
differences between financial reporting and tax bases of assets and liabilities,
such as accrual versus cash methods of accounting and accounting for investments
in equity securities distributed to shareholders. At December 31, 2006, any
deferred tax assets and liabilities not distributed in the reorganization (see
note 2) were completely offset by a valuation allowance. The change in valuation
allowance expressed above relates to deferred tax assets of continuing
operations for which realization is deemed unlikely.
4. Segment Information
Information as to the operations of the Company's different business segments is
set forth below. Segments are identified based on the nature of the products and
services offered. The Company's reportable segments are asset management,
insurance products and other. The asset management segment includes investment
portfolio management services provided by Belsen Getty. The insurance products
segment includes employee health insurance brokerage services provided by FBA.
Certain headquarters functions are included in the "other" segment. Income on
Company-wide savings and investments is also included in "other".
The Company's segments use the same policies as those described in the "Summary
of Significant Accounting Policies". The Company has no intersegment revenues or
expenses and the intercompany accounts were eliminated.
30
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Notes to the Consolidated Financial Statements (continued)
December 31, 2006 and 2005
4. Segment Information (continued)
Asset Management Insurance Products
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31,December 31, December 31,
2006 2005 2006 2005
---------------- ----------------- ----------------- ----------------
Revenues $ 264,131 $ 668,602 $ 2,377,109 $ 6,441,499
Expenses 298,195 785,430 2,138,664 5,961,839
---------------- ----------------- ----------------- ----------------
Operating profit (loss) (34,064) (116,828) 238,445 479,660
Other gains (losses),
including realized gains 100,136 (4,679) 15,235 -
---------------- ------------------ ----------------- ----------------
Income (loss) before tax 66,072 (121,507) 253,680 479,660
Income tax expense (benefit) 40,438 (49,494) 155,261 195,383
---------------- ------------------ ----------------- ----------------
Net income (loss) $ 25,634 $ (72,013) $ 98,419 $ 284,277
================ ================== ================= ================
Other Consolidated
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
---------------- ----------------- ----------------- ----------------
Revenues $ - $ 45,065 $ 2,641,240 $ 7,155,166
Expenses 85,003 274,865 2,521,862 7,022,134
---------------- ----------------- ----------------- ----------------
Operating profit (loss) (85,003) (229,800) 119,378 133,032
Other gains (losses),
Including realized gains - (351) 115,371 (5,030)
---------------- ------------------ ----------------- -----------------
Income (loss) before tax (85,003) (230,151) 234,749 128,002
Income tax expense (benefit) (24,687) (93,749) 171,012 52,140
----------------- ------------------ ----------------- ----------------
Net income (loss) $ (60,316) $ (136,402) $ 63,737 $ 75,862
================= ================== ================= ================
Depreciation expense for the year ended December 31, 2006 was $10,879, $7,832,
and $0 at the asset management, insurance products and other segments,
respectively.
Depreciation expense for the year ended December 31, 2005 was $32,104, $28,141,
and $1,250 at the asset management, insurance products and other segments,
respectively.
31
Prime Resource, Inc. and Subsidiaries
(A Development Stage Company)
Notes to the Consolidated Financial Statements (continued)
December 31, 2006 and 2005
4. Segment Information (continued)
Total assets by segment:
2006 2005
---------------- -----------------
Asset Management $ - $ 275,514
Insurance Products - 473,215
Other 387,347 985,819
---------------- -----------------
$ 387,347 $ 1,734,548
================ =================
Expenditures for long-lived assets by segment during the year ended December 31,
2006 were as follows: Asset management $2,950, Insurance products $0 and other
$0.
Expenditures for long-lived assets by segment during the year ended December 31,
2005 were as follows: Asset management $22,710, Insurance products $20,160 and
other $0.
5. Material Subsequent Events
On January 19, 2007, the Company announced that it had entered into a Merger
Agreement ("Merger") through a wholly-owned and newly created acquisition
subsidiary, known as Prime Acquisition, Inc., with a privately held Delaware
corporation, known as Broadband Maritime, Inc., ("BBM"). BBM is a development
stage telecommunications engineering and service company offering turn key,
always-on Internet access to commercial shipping fleets. Under the terms of the
Merger, BBM will become the sole operating entity for, and the wholly owned
subsidiary of, the Company.
In addition, upon finalization of the Merger, the Company will continue as the
public entity, however, it will change its name to Broadband Holdings, Inc.
("BHI"), and its sole business purpose will be to own BBM. The Board of
Directors of BHI, following the merger, will consist of three members of BBM's
board and one member of the Company's board prior to the Merger. The officers
and management team of BHI following the Merger will be identical to the
officers and management team of BBM prior to the Merger.
Furthermore, the prior BBM shareholders will become the majority shareholders of
BHI. Accordingly, as a result of the Merger, each existing shareholder in the
Company will incur a substantial reduction in its respective equity ownership.
However, each Company shareholder as of the April 29, 2006 record date will
receive one series "A" preferred share for each common share held, totaling
1,454,900 shares at December 31, 2006. Each series "A" preferred share will be
exchangeable for a pro rata share, per the respective Company ownership
percentage prior to the Merger, of the LightSpace, Inc. securities presently
held by the Company.
32
Item 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Prime has no disagreements with its prior or current independent
auditors. In May, 2003 Prime changed its independent auditors.
In 2005 based upon SEC notice, the company was required to restate its
annual and quarterly accounting for the period December 31, 2004 to the periods
ending September 30, 2005 and to modify its accounting contacts and procedures
as set-out below.
Item 8A. CONTROLS AND PROCEDURES
(a) Prime's Board maintains controls and procedures designed to provide
reasonable assurance 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 of the Securities and Exchange Commission. Based upon
their evaluation of those controls and procedures in October, 2005 and after
notice by the SEC that such controls did not appear adequate in conforming with
SEC Item 307 of Regulation S-B, the chief executive officer and the principal
financial officer of the Company concluded that the Company's disclosure
controls and procedures were not effective at a reasonable assurance level for
its present activities under the foregoing rule in consideration of the
restatement of certain financial statements by Prime for the year ending 2004 in
our 10-KSB/A Report and for the first three quarterly reports for the calendar
year 2005. The Company identified the following material weaknesses: 1)the lack
of sufficient knowledge and experience among the internal accounting personnel
regarding the application of US GAAP and SEC requirements; 2) insufficient
written policies and procedures for accounting and financial reporting with
respect to the current requirements and application of US GAAP and SEC
disclosure requirements. The particular enhanced review standards in response to
these insufficiencies are more fully discussed below in subparagraph b. The
Company knows of no fraudulent activities within the Company or any material
accounting irregularities. The Company currently does not have an independent
audit committee. The Company is advised that an independent audit committee is
not required for Electronic Bulletin Board Listings, but may further review the
advisability and feasibility of establishing such a committee in the future.
(b) The Company made no specific or significant changes in its internal
controls during the quarter ended September 30, 2005. In October 2005 Prime was
made aware of certain accounting errors pursuant to an SEC notice and comment
pertaining to its earlier filed periodic reports for the year ending in 2004 and
the first two quarters of 2005. Prime then reported retroactively that the
within report contains requested changes and restates certain financial
information, as well as the included changes in management's discussion and
analysis. In particular, this section pertaining to controls and procedures
describes action taken to ensure more accurate and effective accounting controls
and procedures. In response to the foregoing the company has implemented the
following enhanced financial review standards. (1) The company has provided a
longer review period of time and more rigorous internal review of accounting
data prior to formal review by our independent auditors. (2) During November
2005, the Company has engaged the services of an outside accounting professional
which has significant expertise in the application of US GAAP and SEC reporting
requirements to advise the Company in the preparation of its financial
statements. (3) The Company plans to further implement written policy and
procedures for accounting and financial statement preparation in accordance with
current and future requirements of SEC Item 307 of Regulation SB and SOX 404.
The Company has not currently estimated the cost of implementing these changes
in controls and procedures.
33
(c) The company 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.
Item 8B. OTHER INFORMATION AND SELECTED RISK FACTORS
1. Prime was required by the SEC in 2005 to restate its
financial results and modify its Financial Controls and Procedures. This was
reported in a amended 10-QSB filings for the first three quarters of 2005 and
the 10-KSB filing for December 31, 2004.
2. If Prime is not successful in completing the Merger with
BBM, it will, again, be in a position of not having any assets, revenues or
business purpose. There is no assurance or warranty that Prime would be able to
continue indefinitely in such status without further capitalization. No
assurance or warranty can be given that Prime will be able to obtain any interim
additional financing or capital to continue in this status should the Merger not
close as anticipated.
3. If the Merger is completed in March, 2007, as anticipated,
there will be a substantial reduction in share ownership to all of the current
shareholders of Prime. Essentially the share ownership of all current Prime
shareholders immediately after the close would be approximately 5.62% out of
approximately 25,896,188 shares outstanding. In the event of full dilution (that
is if all options or other stock rights are exercised by persons holding those
rights subsequent to the Merger) the share percentage on a fully diluted basis
would be reduced to 3.42% out of approximately 42,563,409 shares outstanding.
4. There are numerous specific risk factors which would be
relevant to the combined companies in the event of the completion of the Merger
which are beyond the scope of this 10-KSB report. However, most of these risk
factors are set-out in the foregoing referenced Information Statement which will
be sent to all Prime shareholders of record prior to consummation of the Merger,
and which will outline various dissenting shareholder rights in the event that
shareholders are not satisfied with the equity or fairness of the Merger terms.
5. Each present shareholder of Prime, even if the Merger is
completed, should understand that the shareholder will continue in a minority
position and there would not be sufficient shares held by public shareholders to
determine or direct the affairs of the company.
6. No valuation can be given or estimated as to the LightSpace
shares which are being spun-out as part of the Merger transaction.
7. If the Merger is completed, the current shareholders will
own a minority position in a corporation having entirely new business direction
and the company will be operated by a new management group, except for Mr.
Limpert, concerning which the shareholders will not have had an opportunity to
initially vote upon or approved. Further it is not likely in the foreseeable
future that the public shareholders will have sufficient votes to affect or
direct this election of management in any manner. Again, a description of the
proposed post-merger management is beyond the scope of this 10-KSB report, but
is contained in the Information Statement to be sent to all Prime shareholders
of record prior to completion of the Merger.
34
8. In the event of the closing of the anticipated merger, the
acquired company will be a development stage entity without any profits to date.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS OF REGISTRANT
Following this table is a brief biographical description for each of
the management principals with a brief description of their business experience
and present relationship to Prime, together with all required relevant
disclosures for the past five years.
Following the biographical information for the directors and officers
is a remuneration table showing current compensation, and following this table
is a security ownership table showing security ownership of the principal
officers and directors, as well as those holding 5% or more of the issued and
outstanding stock.
NAME POSITION CURRENT TERM OF OFFICE
------------------- ------------------------ -----------------------------
Mr. Terry Deru* Director, CEO/President/ Appointed Director in
Chairman of the Board Organizational Minutes-
April, 2002, elected in 2004.
Will serve as a Director
until next elected, annual
meeting not yet set.
Mr. Scott Deru* Director/V.P. Operations Appointed Director in
Organizational Minutes-April,
2002, elected 2004. Will
serve as Director until
next elected, annual
meeting not yet set.
Mr. Andrew Limpert* Director/Treasurer/ Appointed Director in
Secretary/CFO Organizational Minutes-April,
2002, elected 2004. Will
serve as Director until
next elected, annual
meeting not yet set.
*Mr. Scott Deru and Mr. Terry Deru are brothers. Mr. Limpert was not an owner of
Prime, LLC, but acted as an advisor to Prime, LLC and has become a shareholder
of Prime Resource, Inc., the successor entity to Prime, LLC.
Biographicals
TERRY M. DERU - PRESIDENT
Age: 52
Mr. Deru is currently a consultant and manager with Belsen Getty LLC
and an officer/director in Prime as outlined above. He also served Belsen Getty
as an officer/director when operating as a predecessor corporation. Belsen Getty
is a Salt Lake City, Utah based financial advisory and retirement planning firm.
The firm, or its predecessor, has been a licensed investment advisory firm with
the State of Utah since 1984. Mr. Deru is a Certified Financial Planner and a
Registered Financial Consultant. Mr. Deru has been with Belsen Getty or its
predecessor since 1985. Since affiliation with Belsen Getty, he has served as a
consultant and director from 1985 to 1998 and as a consultant from 1998 to the
35
present. He has been the manager of Belsen Getty since July, 2000. Mr. Deru will
continue his part-time affiliation with Belsen Getty while also acting as the
part-time officer of Prime. The estimated allocation of services to each entity
is set-out in the following table. Mr. Deru also acted as a part-time CEO for
Kinship Systems, Inc., a small public company which is not presently active.
Kinship abandoned its original marketing efforts of attempting to sell licensed
accident reconstruction software in early 2002 and has subsequently acquired a
resort management company as its wholly owned operating subsidiary. Mr. Deru
resigned as an officer and director pursuant to this reorganization on November
14, 2002, and he is no longer affiliated with that company. The company
continues under a new name of Caribbean Club Group, Inc. (CCI). Mr. Deru
obtained a B.A. degree from the University of Utah in Salt Lake City, Utah, in
finance in 1977 and an M.B.A. degree from that institution in 1979.
MR. SCOTT DERU - DIRECTOR, VICE-PRESIDENT OPERATIONS Age: 46
Mr. Scott Deru has been employed full-time since 1982 as a principal
officer of Fringe Benefit Analysts, LLC. Since 1998 he has been the manager and
principal officer of Fringe Benefit, one of the current subsidiary operating
companies of Prime. In this capacity, he has primarily been engaged in creating
and selling life, health and other insurance products for business clients of
Prime. In addition to his full-time services to Fringe Benefit Analysts, he
worked as a director of insurance for Care of Utah, Inc., developing insurance
programs, primarily for the health care industry from October, 1994 to July,
2000. Mr. Deru is a 1984 graduate of the University of Utah with a B.S. degree
in finance from that institution. He is also a Registered Health Underwriter and
a Registered Employee Benefit Consultant. He presently is also a licensed
insurance consultant and agent within the state of Utah, and by reciprocity in
other western states.
MR. ANDREW W. LIMPERT - CHIEF FINANCIAL OFFICER
Age : 37
Mr. Limpert has been a financial and retirement planner associated with
the Salt Lake based firm of Belsen Getty, LLC since 1998. He is licensed as a
Registered Investment Advisor Representative, but he is not a Certified
Financial Planner. As a licensed Investment Advisor, Mr. Limpert has completed
licensing requirements and testing prescribed by the State of Utah. Mr. Limpert
plans to continue his full-time employment with Belsen Getty. He will also serve
as a director, treasurer, CFO and secretary for Prime. Prior to the foregoing
positions, he worked with Prosource Software of Park City, Utah as a software
sales agent from 1993 to 1998. Mr. Limpert is assisting Prime on a limited
as-needed basis. In 1998 Mr. Limpert served briefly as an interim outside
director in a small public company, then known as Mt. Olympus Resources, Inc.
Mr. Limpert resigned as part of a reorganization of Olympus in November, 1998.
Mr. Limpert was also affiliated, on a part-time as-needed basis, with a small
presently inactive company known as Kinship Systems, Inc. as a director and its
treasurer/secretary and CFO/accounting officer. Due to Kinship's change of
control he is no longer affiliated with that firm. Mr. Limpert was appointed to
these positions in February, 2000 as part of the initial organization. As noted
above, Kinship acquired a new operating subsidiary and Mr. Limpert resigned as
an officer and director effective November 14, 2002. He has no continuing
affiliation with Kinship/CCI. Mr. Limpert also acts as a business and financial
consultant to various small public and private companies. Mr. Limpert holds a
B.S. degree in finance from the University of Utah in Salt Lake City, Utah in
1995 and an M.B.A. from Westminster College of Salt Lake City, Utah in 1998.
36
Estimated Allocation of Time and Services
The following table attempts to set-out the 2006 estimated allocation
of time devoted by the foregoing officers for Prime and each of the Prime
related entities:
BELSEN FRINGE PRINCIPAL
NAME PRIME GETTY BENEFIT OFFICER OF:
------------------ -------- -------- ------- --------------
Mr. Terry Deru 20% 80% 0% Belsen Getty
Mr. Scott Deru 10% 0% 90% Fringe Benefit
Mr. Andrew Limpert 40% 60% 0% N/A
Remuneration of Directors & Officers
Directors
No director will be provided remuneration for service in that capacity,
but may be paid a stipend for attending meetings as future revenues may permit.
It is anticipated Directors will receive $500 per Board Meeting but have not
received compensation to date for board servie.
Officers
As previously noted, each officer in the corporation has been paid
directly by Prime regardless of whether his services may be allocated among the
various subsidiaries. Accordingly, the following table sets forth all past
compensation received by any officer in connection with these services to Prime,
including any and all of the subsidiaries, to April 30, 2006:
Item 10. EXECUTIVE COMPENSATION
Name and Principal Position Year Salary(2) Bonus Other Annual
Compensation Restricted Securities LTIP Other
Stock Underlying Payouts (Loans
Awards(s) Options Etc.)
------------------------------ --------- ----------- --------- ---------------- ----------- ----------- --------- ----------
Mr. Terry Deru, 2006(1) $63,636
President $190,908 31,897 __ __ __ __
2005 $191,741 __ __ __ __ __
2004 $240,000 __ $98,000 __ __ __ __
2003 __
------------------------------ --------- ----------- --------- ---------------- ----------- ----------- --------- ----------
Mr. Scott Deru,, Secretary 2006 $80,000 $98,000
2005 $192,000 $31,897 __ __ __ __ __
2004 $213,405 $22,000 __ __ __ __ __
2003 $240,000 __ __ __ __ __
------------------------------ --------- ----------- --------- ---------------- ----------- ----------- --------- ----------
37
Mr. Andrew Limpert, 2006 $70,000
Treasurer 2005 $204,280 __ __ __ __ __ __
2004 $204,388 __ __ __ __ __ __
2003 $210,000 __ __ __ __ __ __
------------------------------ --------- ----------- --------- ---------------- ----------- ----------- --------- ----------
(1) All salaries terminated April 30, 2006 and are shown for 2006 only upon a
four month basis.
(2) Historically, the principals of Prime Resource LLC have taken draws equal to
a salary compensation of $240,000 per year in the case of Mr. Scott Deru, and
$240,000 for Mr. Terry Deru. Mr. Terry Deru received a salary of $262,000 in
2001, and received $240,000 in 2002. He also received this salary in 2003. Mr.
Limpert was paid compensation of $118,000 in 2001, $165,000 in 2002 and was paid
$210,000 in 2003. The officers have decided after the restructuring of Prime
Resource to fix their salaries at these levels as evidenced by an employment
contract, earlier discussed under "Remuneration of Officers and Directors". The
most essential term of such contract is that the company may terminate the
employment agreement, without cause, at anytime upon notice. If Prime is
successful in completing this offering, the company may consider executive stock
options or other incentive plans.
To date, directors have not been paid any compensation for attendance at Board
of Directors meetings. It is anticipated that as soon as revenues would justify
such expenditure, Directors will be paid a per diem payment of $500 for
attending each Board of Directors meetings.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Shares Owned by Management and Certain Security Holders
The following tables set forth the ownership, as of the date of this
prospectus, of our common stock by each person known by us to be the beneficial
owner of 5% or more of our outstanding common stock; by each of our directors;
and by all executive officers and our directors as a group. To the best of our
knowledge, all persons named below have sole voting and investment power with
respect to such shares.
38
Current Percentage of
Outstanding
Title of Class Name and Address of Owner Current Shares Owned (Rounded)
------------------------------------------------------------------------------------------------------------
Common Stock Terry Deru, Director, President
99 Cove Lane
Layton, Utah 84040 440,632 30%
------------------------------------------------------------------------------------------------------------
Common Stock Scott Deru, Director, V.P. 447,406 31%
6855 N. Frontier Drive
Mountain Green, Utah 84050
------------------------------------------------------------------------------------------------------------
Common Stock Andrew Limpert, Director, CFO 321,495 22%
8395 S. Parkhurst Circle
Sandy, Utah 84094
------------------------------------------------------------------------------------------------------------
Common Stock Officers and Directors as 1,209,533 83%
a Group(2)
------------------------------------------------------------------------------------------------------------
Changes in Control. There are currently no arrangements which would
result in a change in our control except the pending merger. Prime has no
warrants, options or other stock rights presently authorized, but substantial
stock rights would be created by the Merger.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
o To date none of the management has had any independent determination
of the reasonableness or amounts of compensation or benefits, such as shares
issued to management or salaries, and it is not likely there will be any
independent review of such matters in the future as the management, the Board
and the principal shareholders are substantially the same persons.
o The Company has historically made and received loans and advances
from owners and employees without independent Board review. These historical
loans are now paid. Under the provisions of the Sarbanes-Oxley Act, Prime has
discontinued, any further loans or advances to officers, directors or employees.
39
o Each of the principal officers of Prime have received shares and
interest in Prime based primarily upon the contribution of their prior
intangible business interest in Prime LLC and other intangible assets which are
not capable of exact evaluation. As a result, each of the present principal
owners of Prime may be deemed to hold shares and interest in the company which
were not determined through any arm's length transaction or independent
determination of value.
o Messrs. Terry Deru, Scott Deru and Andrew Limpert would be considered
founders and promoters of the current Prime Resource, Inc. As such, Scott Deru
contributed his interest in the prior Prime LLC for his approximate 36% stock
interest in Prime; Terry Deru has contributed his interest in Prime LLC for an
approximate 36% stock interest; and Mr. Limpert has contributed his interest in
Prime LLC for an approximate 27% stock interest in Prime. None of these
transfers by the promoters can be considered independent or arms-length
transactions.
o The company is not aware of any further transactions which would
require disclosure under this section by the company and any affiliated party.
Interests of Certain Persons
The three principal holders of Prime shares, Mr. Terry Deru, Mr. Scott
Deru and Mr. Andrew Limpert, collectively hold 1,209,533 shares of the 1,454,090
shares outstanding as of December 31, 2006, or 83% of the issued and outstanding
shares of Prime. As a result, they are in a position to currently determine
Prime's direction and to approve various transactions by their majority position
without requiring the support of the remaining shareholders. Because these three
individuals also constitute the Board of Directors of Prime, there does not
exist an independent relationship between the majority shareholder and the Board
as may exist in some public companies. As a practical matter, this means that in
reviewing proposed transactions of Prime, such as the proposed Merger, you
should realize that the Board of Directors and the majority shareholder interest
are exercised by the same people and there is really no separation of interest
or effective separate review of these proposals by directors and shareholders.
Each shareholders should understand that there is no prior business
relationship or connection between the Prime management and the management of
BBM and the specific terms of the Merger and Acquisition as described were
arrived through an arms-length negotiation between such separate entities.
Item 13. PRINCIPAL ACCOUNTANT FEES AND SERVICES
In a board meeting on April 28, 2006, the Board of Directors decided to
affirm the continuance of Child, Sullivan & Company now known as Child, Van
Wagoner and Bradshaw, PLLC of 1284 West Flint Meadow Drive, Suite D, Kaysville,
Utah 84037 as the independent auditors. This action was ratified by majority
shareholder vote on the April, 28 2006.
40
For the calendar year 2006 the accounting firm of Child, Van Wagoner
and Bradshaw, PLLC charged the company a total of $23,162 for independent
accounting and auditing fees. As noted above, the company has no material
disagreements with its auditing firm as to the financial statements contained in
this annual report.
Item 14. EXHIBITS AND REPORTS ON FORM 8-K
Under the following exhibit index are all of the relevant exhibits and
reports required to be filed or referenced by the 10-KSB (12/31/06).
(a) Exhibit Index:
Exhibit No.
(2) Plan and Agreement of Merger previously filed as Exhibit
to 8-K finding on
January 19, 2007 and incorporation by this reference.
(3.1) Articles of Incorporation of Registrant. Earlier filed and
incorporated as part of SB-2 Registration Statement.
(4/2003)
(3.2) By-Laws of Registrant. Earlier filed and incorporated as part
of SB-2 Registration Statement.
(10) Material contracts. Earlier filed and incorporated as part of
SB-2 Registration Statement And 8-K filing of 1/19/2007.
(13) 10-Q Reports for first three quarters of 2006 previously
filed and incorporated by this reference. (3rd quarter sent
to shareholders as part of Information Statement)
(23) Consent of Experts and Counsel. Earlier filed.
(31.1) Certification Section 302 of the Sarbanes-Oxley - Attached
(31.2) Cerftification Section 302 of the Sarbanes-Oxley - Attached
(32.1) Certification Section 906 - Attached
(32.2) Certification Section 906 - Attached
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
behalf by the undersigned, thereunto duly authorized.
REGISTRANT:
PRIME RESOURCE, INC.
Dated: March 22, 2007 By: /s/ Terry Deru
Terry Deru, President
Chief Executive Officer
Dated: March 22, 2007 By: /s/ Andrew Limpert
Andrew Limpert
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
the following persons on behalf of the Registrant and in the capacities and on
the date indicated have signed this report below:
Dated: March 22, 2007 By: /s/ Terry Deru
Terry Deru, Chairman
of the Board
Dated: March 22, 2007 By: /s/ Scott Deru
Scott Deru, Director
Dated: March 22, 2007 By: /s/ Andrew Limpert
Andrew Limpert, Director
42