UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Prime Resource, Inc.
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(Name of small business issuer in its charter)
(Previously Prime Resource, LLC)
Utah 6411 04-3648721
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(State of jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
22 East First South, Fourth Floor, Salt Lake City, Utah 84111 (801) 521-8636
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(Address and telephone number of principal executive offices)
22 East First South, Fourth Floor, Salt Lake City, Utah 84111 (801) 521-8636
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(Address of principal place of business or intended principal place of business)
Mr. Julian D. Jensen, Attorney at Law, 311 S. State
Suite 380,Salt Lake City, Utah 84111
(801) 531-6600
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as possible after the
effective date of this Registration.
If this Form is filed to register additional securities for an offering pursuant
to rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ] Not currently applicable.
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If this Form is a post-effective amendment filed pursuant to Rule 4629(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] Not currently applicable.
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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] Not currently applicable.
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If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box [ ] Not currently applicable.
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1
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Title of each class of Dollar amount to be Proposed maximum Proposed maximum Amount of
securities to be registered offering price per aggregate offering. (1) registration fee
registered to maximum share (Rounded)
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Common voting stock, Max: $750,000 $5.00/share $750,000 $198.00
150,000 (1) to be
registered, no par
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(1) Determined pursuant to Rule 457(c) under the Securities Act of 1933,
as amended, on the basis of no market price, but upon the basis of the current
Offering price ($5.00/share), for the maximum number of shares to be sold for
cash.
SUBJECT TO COMPLETION. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
AN AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES
ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
2
PROSPECTUS
PRIME RESOURCE, INC.
A UTAH CORPORATION
22 EAST FIRST SOUTH, FOURTH FLOOR
SALT LAKE CITY, UTAH 84111
(801) 521-8636
150,000 SHARES OF COMMON STOCK OFFERED
50,000,000 AUTHORIZED
2,800,000 CURRENTLY ISSUED
Prime is registering for public sale a maximum of 150,000 common shares at
$5.00/share ($750,000) or a minimum of 100,000 shares ($500,000), fifty million
shares authorized, no par. No shares of the existing shareholders (2,800,000
shares) are being registered. The offering will remain open for up to six months
from the effective date of the prospectus, being the date appearing below.
Proceeds will be placed in a segregated offering account until the minimum
offering is sold or the offering is terminated. See Terms of Offering.
Our common stock is not currently listed on any national securities exchange or
by the NASDAQ over-the-counter stock market.
INVESTORS IN THE COMMON STOCK SHOULD HAVE THE ABILITY TO LOSE THEIR ENTIRE
INVESTMENT SINCE AN INVESTMENT IN THE COMMON STOCK IS SPECULATIVE AND SUBJECT TO
MANY RISKS. SEE "RISK FACTORS," Page 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Date of this Prospectus: May ___, 2002
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TABLE OF CONTENTS
ITEM PAGE
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Part I - Prospectus Information
1. Front Cover Page of Prospectus........................................................................3
2. Inside Front and Outside Back Cover Pages of Prospectus...............................................2
3. Summary Information and Risk Factors..................................................................5
4. Use of Proceeds......................................................................................12
5. Determination of Offering Price......................................................................15
6. Dilution.............................................................................................15
7. Selling Security Holders.............................................................................16
8. Plan of Distribution.................................................................................16
9. Legal Proceedings....................................................................................18
10. Directors, Executive Officers, Promoters, and Control Persons........................................19
11. Security Ownership of Certain Beneficial Owners and Management.......................................22
12. Description of Securities............................................................................23
13. Interest of Experts and Counsel......................................................................24
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.....................................................................24
15. Organization Within Last Five Years..................................................................25
16. Description of Business..............................................................................25
17. Management's Discussion and Analysis.................................................................30
18. Description of Property..............................................................................35
19. Certain Relationships and Related Transactions.......................................................35
20. Market for Common Equity and Related Stockholder Matters.............................................36
21. Executive Compensation...............................................................................37
22. Financial Statements.................................................................................37
23. Changes In and Disagreement With Accountants.........................................................38
Part II - Information Not Required in Prospectus
24. Indemnification of Directors and Officers............................................................38
25. Other Expenses of Issuance and Distribution..........................................................38
26. Recent Sales of Unregistered Securities..............................................................38
27. Exhibit List.........................................................................................39
28. Undertakings.........................................................................................39
29. Signatures...........................................................................................41
(Part II Table will not appear in Prospectus only copy; and page
numbering will be modified)
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SUMMARY OF THE OFFERING
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The Company: Prime Resource, Inc. was incorporated in Utah on March
29, 2002. Prime Resource, Inc. is a successor entity to
a Utah limited liability known as Prime Resource, LLC,
("Prime LLC"). The principals of Prime remain
essentially the same as those in Prime LLC. Prime LLC
was organized in October, 1998 and has acted since
inception as a parent company for its two operating
subsidiaries, Belsen Getty, LLC and Fringe Benefits
Analysts, LLC. These subsidiaries, in turn, are both
Utah limited liability companies. Belsen Getty since
1985 has been engaged in corporate and personal
financial consulting, business planning and related
business and investment advisory services. Fringe
Benefits Analysts since 1985 has been primarily a
benefits consultant and a broker of group insurance
products. The nature of these types of businesses and
entities are further explained in the following
paragraph. Prime, at the conclusion of this offering,
would intend to operate the same type of business as
presently engaged in through Belsen Getty and Fringe
Benefits Analysts as a public entity. The purposes of
this offering will be to sell up to 150,000 common
shares to raise additional capital to expand and,
hopefully, increase the revenues and profitability of
the existing business operations as more particularly
described in this offering. In the event of the maximum
offering, the public shareholders purchasing in this
offering would acquire approximately 5% of the to be
issued and outstanding shares, or approximately 3.5% in
the event of the minimum offering. In either event, the
public shareholders acquiring through this offering
will be substantial minority shareholders and will most
likely never be in a position to exert any influence
over the direction or control of Prime. Prime is
presently a small operating company through its two
subsidiaries, whose business and functions are
described in more detail below and under the "Business
Section" of this offering. We anticipate maintaining
our principal operations in Salt Lake City, Utah and
will primarily provide our services in the
Intermountain area of the United States.
Nature and As briefly noted above, Prime Resource, Inc., which is
Operation of the successor to Prime Resource, LLC, will not directly
Subsidiaries: engage in any business activities, but will act as a
parent corporation to its two operating subsidiaries,
Belsen Getty, LLC and Fringe Benefits Analysts, LLC.
The "LLC" designation stands for Limited Liability
Company. You should understand, as a prospective
investor in this offering, that an LLC is a relatively
new form of business entity created by statute in Utah
and other jurisdictions whereby the company operates
very much in the nature of a partnership with decisions
being collectively made by its members (owners) and
with day-to-day operations usually handled by a
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manager. There is limited liability to the members and
the manager arising out of legitimate business
activities. The earnings, if any, for this type of
entity are not charged or taxed at the LLC level, but
pass through to the owners known as members. In this
case, the only owner is Prime, which will receive all
net profits, if any, generated by Belsen Getty and
Fringe Benefits Analysts. It should also be noted that
limited liability companies, unlike the parent
corporation, are not perpetual entities but have a
fixed term. In this case, the existence of the
operating entities, Belsen Getty and Fringe Benefits,
will terminate not later than December 31, 2021. If
Prime is still successfully operating at the time of
the expiration date of these entities, it would be
intended that the assets and operations of such
entities would be rolled over into a new LLC or other
form of business entity. This contingency should not
have a significant impact on the economic welfare of
Prime. You should also understand, however, that you
are not acquiring a direct interest in the operating
subsidiaries but only in the parent company. Prime will
direct and control the ownership and operation of the
subsidiaries for and on behalf of the shareholders as
the sole owner. By way of brief description, Belsen
Getty is a business consulting and financial management
company which provides investment management, financial
planning and pension and retirement planning for
various individual and business clients. In these
capacities, it often provides investment advice. Belsen
Getty has been in operation since 1985. Its revenues
are primarily fee based. Since 1985 Fringe Benefits
Analysts has been primarily a business insurance
provider of health, life, dental and disability
insurance coverages. Both entities concentrate their
business activities in the state of Utah, though they
have various clients throughout the western United
States. The managers for the entities are Mr. Terry
Deru for Belsen Getty and Mr. Scott Deru for Fringe
Benefits. These entities, their relationship and their
management are more fully described under the
"Description of Business" section.
The Offering: Prime is attempting to sell a very limited number of
its shares to the public as a self underwriting,
without commissions. Up to 5% of the to be issued and
outstanding shares in the company may be sold at an
offering price of $5.00/share. The maximum offering
would be $750,000 from the sale of 150,000 shares and
the minimum offering would be the sale of 100,000
shares at $5.00/share for $500,000. We, Prime
Management, will place the offering proceeds into a
segregated subscription account for a period up to 180
days from the effective date of the offering (the date
appearing on the prospectus cover). If the minimum
offering is not fully subscribed by the end of that
offering period, investors will be returned their
subscription without deduction or interest. Prime may
elect to close the offering at any time after the
minimum is sold within the offering term up to the
maximum offering. There is no assurance or warranty
that the company will be successful in the sale of its
public shares. See "Terms of the Offering".
6
Trading Market To date Prime has not obtained any trading symbol, nor
have its shares been Symbol qualified or registered for
trading by the National Association of Securities
Dealers (NASDAQ) in the over-the-counter markets. It is
intended that we, concurrently with this registration,
will apply to one or more broker/ dealers for listing
on the NASDAQ Electronic Bulletin Board, but can give
no assurance or warranty that the shares will be
qualified for trading on any over-the-counter market.
In all events, there may be a very limited or
non-existent public trading market for Prime's shares.
See "Risk Factors".
Summary The following summary financial data should be read in
Financial Data: conjunction with, and is subject to, the complete
Financial Statements, and notes, included elsewhere in
this Prospectus. The operating data and the balance
sheet data was derived from Prime's predecessor entity,
Prime LLC's Financial Statements, included elsewhere in
this Prospectus. These results do not necessarily
indicate the results to be expected for any future
period.
CONSOLIDATED BALANCE SHEET
DATA: (Predecessor Entity, March 31, 2002
Prime, LLC.) December 31st (Audited) (Unaudited)
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2001 2000
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Assets $ 580,128 $ 660,615 $ 437,628
Liabilities $ 360,805 $ 162,416 $ 245,431
Members' Equity $ 220,338 $ 498,199 $ 193,604
Accumulated Other Comprehensive Loss $ (1,015) -- $ (1,407)
Total Liabilities, Members' Equity,
and Accumulated Other Comprehensive Loss $ 580,128 $ 660,615 $ 437,628
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STATEMENT OF CONSOLIDATED OPERATIONS DATA:
(Predecessor Entity--Prime LLC)
Three Months
Years Ended December 31st Ended March 31st
(Audited) (Unaudited)
2001 2000 2002 2001
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Revenues:
Commissions $1,557,246 $1,498,016 $ 434,852 $418,578
Investment Advisory Fees 449,031 707,537 89,988 156,197
Interest and Dividends 15,204 7,716 3,278 1,731
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2,021,481 2,213,269 528,118 576,506
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Expenses:
Operating 2,057,452 1,957,107 667,677 496,089
Interest 674 662 175 169
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2,058,126 1,957,769 667,852 496,258
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Net Income (loss) (36,645) 255,500 (139,734) 80,248
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Comprehensive Income
(Loss) ($37,660) $255,500 $(140,126) $80,248
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RISK FACTORS
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The following constitutes what we believe to be the most significant
risk factors in this offering. No particular significance should be attached to
the order in which the risk factors are listed:
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Certain forward-looking statements are based on our current
expectations and are susceptible to a number of risks, uncertainties and other
factors, and our actual results performance and achievements may different
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include the factors
discussed in this section entitled "Risk Factors", as well as the following:
development and operating costs, changing trends in customer tastes and
demographic patterns, changes in business strategy or development plans, general
economic, business and political conditions in the countries and territories in
which we may operate, changes in, or failure to comply with, government
regulations, including accounting standards, environmental laws and taxation
requirements, costs and other effects of legal and administrative proceedings,
impact of general economic conditions on consumer spending, and other risks and
uncertainties referred to in this prospectus and in our other current and
periodic filings with the Securities and Exchange Commission, all of which are
difficult or impossible to predict accurately and many of which are beyond our
control.
1. CONTROL BY EXISTING SHAREHOLDERS. There is a particular risk of
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investment in this offering because even if the maximum offering is sold to the
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public, the present shareholders will continue to own approximately 95% of the
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shares. We have determined that Prime can adequately go forward with expanding
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its business by only offering a limited number of securities to the public. The
offering range which has been prescribed by management is between 100,000 shares
at $5.00/share, for a minimum offering of $500,000 to 150,000 shares for a
maximum offering of $750,000. If the company is successful in selling all shares
in the maximum offering, the public would only own approximately 5% of the
issued and outstanding shares and 3.5% in the event only the minimum offering is
sold. As a result, it is not likely that investors in this offering will ever
exercise any significant influence or control over the direction or operation of
the company as shareholders.
2. MARKET IMPACT-MAJORITY SHARE TRANSACTIONS. Because the existing
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shareholders have and will continue to own the vast majority of the outstanding
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shares, any market transaction by them may have a significant adverse impact on
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the market price of your shares. The majority shareholders will continue, for
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the foreseeable future, to own almost all of the issued and outstanding shares,
whether or not such shares are currently registered for sale. Each investor in
this offering should understand that the majority shareholders, either pursuant
to registration or the probable application of an exemption from registration in
the future, will eventually be in a position to sell their shares if a public
market is developed for the shares. In the event of such public market and
subsequent transaction by the majority shareholders, the majority may
significantly influence the price of the stock by selling even a small portion
of their shares. This ability to affect future stock prices by a small group of
initial shareholders creates a significant market risk to anyone investing in
this offering.
3. LACK OF DIRECT CONTROL. There is a special risk factor in this
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offering in that the business operations and potential revenue generating
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functions of the company are accomplished through subsidiaries which are not
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directly owned by the investors in this offering. Each prospective investor in
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this offering should understand that the operations of Prime are conducted only
through the business operations of the two operating subsidiaries for Prime.
These subsidiaries are held in turn by the public company, but have separate
management structure as explained below in the Business Section. As a result,
9
the investors in this offering will not have any direct influence or control
over the operation of the subsidiary entities which are wholly owned by Prime,
but which have an independent management structure.
4. LIMITED CAPITAL. There remains a question of whether there is
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sufficient capital being raised in this offering to significantly finance the
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activities intended by Prime. Prime believes that the limited amount of capital
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being raised by this offering, $500,000 to $750,000 in gross proceeds, will help
it expand the marketing and implementation of its current business activities
through its two subsidiary entities. However, each prospective investor must
understand that $500,000 to $750,000 in gross proceeds is a relatively limited
amount of capital to make any significant expansion or affect the subsidiaries'
activities and the expected or anticipated results by management. This risk
factor is more thoroughly discussed under the Use of Proceeds and Business
Sections, but no assurance or warranty can be given that such business
objectives can be met.
5. NO PUBLIC MARKET. At the present time there is no public market for
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our shares and there is no assurance that any public market will be developed
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for these shares. The company does not have any trading markets for its shares
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and the mere completion or sale of this Registration Statement will not insure
that a public market will or can be developed for the trading of the company's
shares. If we are not able to develop obtain an Electronic Bulletin Board
Listing and develop resulting public trading market for our shares, there may be
limited liquidity of the shares, investors may be forced to hold such shares for
an indefinite period of time and rely upon the uncertain prospects of private
sales of their securities in order to have some type of exit strategy or
liquidity. Even if a public market develops, there is no reasonable projection
that can be made at what price the shares may trade.
6. DILUTION. Dilution is a concept which attempts to measure the
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difference between what a prospective shareholder will pay for the Prime shares
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as contrasted to the value of those shares measured by the net worth of the
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company immediately after the close of the offering. Substantial dilution is
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anticipated to purchasers of Prime shares. This probable dilution means that the
actual value of your shares, based upon the net worth of the company, will
likely be substantially lower than any arbitrary price which you may pay for
acquiring these shares at the time of purchase. See Dilution Section.
7. MANAGEMENT AFFILIATION. There is a substantial risk to Prime and its
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shareholders if present management does not continue their affiliation. You
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should understand that because the intended products and services are very
9
unique and keyed to a relatively narrow market group, there are few individuals
with interests, contacts or expertise who can take over and operate the present
activities of the Prime subsidiaries. Should any member of management decide not
to continue his affiliation, Prime and its shareholders may be substantially and
immediately adversely affected. Further, there is only a three year employment
contract with each member of management.
8. POTENTIAL TO BE DEEMED A PENNY STOCK. While not believed to be
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currently classified as a penny stock, our stock, if a trading market is
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established, may trade below $5.00/share and become a penny stock and become
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subject to certain additional regulations in trading. The stock of Prime if it
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10
successfully trades should not initially be defined as a "penny stock", but
could become such if traded below $5.00/share. As a result, the shares of Prime
may be subject to special regulations by the SEC known as "penny stock rules"
which require additional screening and limitations on trading by individuals
buying or selling certain defined speculative low price shares through a
broker/dealer.
9. LACK OF MANAGEMENT EXPERIENCE. Your management will have very little
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experience in the operation of a public company. The current management of Prime
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has limited experience in the management of a public company. You will be
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relying upon us to be able to manage a public company, complete the complex
reporting requirements and to learn and discharge other responsibilities
incident to the operation of a publicly held reporting company if this Offering
is successfully closed. Your management believes that such limited inexperience
should be considered as a potential risk factor.
10. LIMITED REVENUE GROWTH AND NET LOSS. There is an inherent risk
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factor in this offering to the extent that Prime has only had very limited
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revenue growth from the time of its initial business conception in 1985 to the
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present and experienced a net loss in 2001. Each prospective investor in this
--------------------------------------------
offering should understand that one of the anticipated objectives of
participating in a public company is to participate in a company which has
significant future potential for revenue growth and resulting net earnings. In
this particular offering, the historical record has shown a very modest amount
of revenue growth by Prime from its inception and even less significant growth
in net profits, with a loss in 2001. There remains a question of whether
investment return can be maximized to investors in this offering unless the
limited amount of proceeds being raised by this offering significantly
contribute to an increase in revenues and net income which assumption must
remain an open question until actual revenues are expended and operating results
are computed.
11. GOVERNMENT REGULATION AND POLICIES: There is particular risk in
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this offering in that each of the areas of financial services in which Prime
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participates is subject to significant governmental regulation and policy
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control. Each investor in this offering should be aware that the areas of
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financial and business planning, health and business insurance and other facets
of the services in which Prime participates through its two operating
subsidiaries are significantly controlled by government regulation and policy.
For instance, the sale of insurance is regulated by an insurance commission or
other governmental agency on the state level. Additionally, the providing of
investment advice and services is regulated on the federal and state level as
investment advisory services. The change or modification of government
regulation and policy in any of these or other related areas in which the
company operates may have a significant adverse impact on its future earnings or
earnings potential.
12. NATURE OF BUSINESS AS POTENTIAL LIMITING FACTOR: There is a special
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risk factor in this offering in that the nature of business provided by Prime,
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through its operating subsidiaries, has historically been associated with
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personal contacts and relationships which may limit potential future growth of
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the company. Each investor in this offering should understand that much of the
------------
limited success of Prime to date revolves around and has arisen out of the
personal expertise and contacts of its principal management personnel in meeting
11
with and personally providing the services which the company extends to other
business entities and individuals. There is no certainty that even with
additional capital raised with this or any funding activities, Prime will be
able to create significant growth in this type of industry due to the
requirement of the personal nature of such contacts and efforts to increase
business activities. This consideration should remain as a significant risk
factor to prospective investors.
13. FUTURE CAPITAL NEEDS. There is a particular risk factor in this
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offering in that Prime may need future capital to maintain or increase business
--------------------------------------------------------------------------------
activities in the future and no assurance can be given that such future capital
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can be obtained.
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10
You will be subject to a risk in this offering in that the company may, in the
future, require substantial additional capital either to maintain its existing
operations or to attempt to further grow and expand operations to reach a level
of significant profitability. In such event, there is no assurance that Prime
will be able to raise significant future capital either through borrowing,
private placement sales or a subsequent public offering.
14. LARGE INSTITUTIONAL COMPETITORS. There is a particular risk factor
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in this offering that the company may come under price and marketing pressure
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from large institutional service providers providing essentially the same or
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related types of services or financial products at a lower cost due to economies
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of scale. There appears to be a growing trend in financial and insurance
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services where large institutional companies such as national CPA firms,
insurance companies and brokerage firms provide various forms of financial
planning and insurance services. There appears to be a significant risk factor
in this offering to you that Prime, in the future, may not be able to compete
effectively with such large institutional service companies who may provide
financial and business planning and other related business planning or insurance
on a lower cost basis than the company can afford to provide due to economies of
scale and worldwide marketing abilities.
USE OF PROCEEDS
---------------
In this offering, Prime will receive gross offering proceeds, if the
offering is closed, either of $500,000 in the event of the minimum offering, or
a maximum of $750,000. The company reserves the right to close the offering
during the offering term at any point between the minimum offering and the
maximum offering. As a result, the following use of proceeds between the minimum
and maximum offering constitute a range as to how proceeds will be used in the
assumed event of either the minimum or the maximum with the offering proceeds
also being employed at some pro rated amount between the minimum and maximum
offerings in the event the offering is closed at more than the minimum but less
than the maximum. From the gross proceeds, the company will also deduct the
estimated offering cost of approximately $45,000 which are estimated to be
allocated between audit and accounting work, legal services and for printing,
filing fees & miscellaneous costs of the offering.
From the anticipated net offering proceeds, Prime would employ the
proceeds in three specific applications. First, in the event of the maximum
offering, approximately $380,000 would be used by Prime directly for additional
management personnel, general administrative costs and working capital and
acquisition reserves with the balance of the proceeds being allocated
approximately $220,000 to Fringe Benefit Analysts and $115,000 to Belsen Getty
to be specifically applied as set-out in the following estimated net proceeds
chart.
12
EACH PROSPECTIVE INVESTOR SHOULD UNDERSTAND THAT THE FOLLOWING TABLE
CONSTITUTES OUR BEST PRESENT ESTIMATE OF THE USE OF PROCEEDS, BUT THAT WE MAY
VARY FROM THIS OUTLINE IN BOTH TYPE AND AMOUNT OF EXPENDITURE IN THE EXERCISE OF
SOUND BUSINESS JUDGMENT. MOREOVER, FUNDS HELD FOR ACQUISITION MAY BE USED IN
DIFFERENT AREAS IF SUITABLE ACQUISITION OPPORTUNITIES ARE NOT FOUND WITHIN A
REASONABLE PERIOD OF TIME.
MAXIMUM OFFERING: $750,000
General Description of Intended Expenditure Dollar Amount Percentage of
Offering (Rounded)
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1. Estimated offering cost $ 45,000 6%
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2. Estimated allocation to Prime Resource $ 370,000
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a. Salaries and management fees $ 50,000 6.7%
b. General and administrative costs $ 50,000 6.7%
c. Working capital reserves1 $ 270,000 36%
3. Fringe Benefits Analysts $220,000
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a. Advertising $ 25,000 3.3%
b. Recruiting new agents $ 75,000 10.0%
c. Trade show related expenses $ 10,000 1.3%
d. Marketing FBA Advantage program(TM)2 $ 50,000 6.6%
e. Additional sales materials $ 10,000 1.3%
f. New service personnel $ 50,000 6.7%
4. Belsen Getty $ 115,000
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a. Marketing budget $ 50,000 6.7%
b. Relocation budget $ 10,000 1.3%
c. New equipment and software $ 10,000 1.3%
d. New service personnel $ 30,000 4.0%
e. Consulting service personnel (part-time) $ 15,000 2.0%
TOTAL $ 750,000 100%
(1) Prime is maintaining a large working/acquisition capital reserve in the
maximum offering in anticipation that Fringe Benefits Analysts will request to
draw upon this reserve to continue its efforts to acquire other insurance
brokerage companies or their book of business.
13
(2) The "FBA Advantage program" is generally defined as a unique proprietary
fee discount program whereby a Fringe Benefits Analysts client purchases
multiple benefit insurance lines such as retirement plans, cafeteria plan
programs, cobra coverage and related programs and is able to eliminate all
ongoing administrative fees to the client.
MINIUMUM OFFERING: $500,000
General Description of Intended Expenditure Dollar Amount Percentage of
Offering
(Rounded)
1. Estimated offering cost $ 45,000 9%
--------
2. Estimated allocation to Prime Resource $120,000
--------
a. Salaries and management fees 50,000 10%
b. General and administrative costs 50,000 10%
c. Working capital reserves 20,000 4%
3. Fringe Benefits Analysts $220,000
--------
a.. Advertising 25,000 5%
b. Recruiting new agents 75,000 15%
c. Trade show related expenses 10,000 2%
d. Marketing FBA advantage program 50,000 10%
e. Additional sales materials 10,000 2%
f. New service personnel 50,000 10%
4. Belsen Getty $115,000
--------
a. Marketing budget 50,000 10%
b. Moving office budget 10,000 2%
c. New equipment and software 10,000 2%
d. New service personnel 30,000 6%
e. Consulting service personnel (part-time) 15,000 3%
TOTAL $ 500,000 100%
See also "Plan of Operations" under Description of Business for a more
detailed description of intended business activities and expenditures over the
next year.
14
DETERMINATION OF OFFERING PRICE
-------------------------------
The price at which the shares are to be sold in this offering have been
arbitrarily set by the Board of Directors of Prime and do not attempt to reflect
any valuation or evaluation of the company's net worth or future trading price,
if any.
DILUTION
--------
Dilution is a term which normally defines the reduction in value per
share which occurs to the investor in certain offerings compared to the purchase
price of those shares. By way of specific illustration, an investor in this
offering is paying $5.00 per share. It is estimated that the net worth per share
after the completion of the maximum offering will only be approximately $0.30
per share. Therefore, each investor in this offering will suffer an immediate
estimated dilution to his investment of $ 4.70 per share or 94 % in the maximum
offering; and $ 4.78 per share or 96 % in the minimum offering. Dilution would
generally be pro rated between the minimum and maximum offering if closed
between those extremes. These dilution ranges are illustrated in the following
graphical representations:
[GRAPHIC OMMITTED]
Minimum offering Maximum Offering
Value Subscription Value share after Value Subscription Value share
$5.00/share offering $5.00/share after offering
100% $0.30/share 100% $ 0.22/share
(Rounded) (Rounded)
Dilution 96%
Dilution 94% $4.78/Share
$4.70/Share
In this offering dilution primarily arises because the original
founders, who organized the corporation and the predecessor limited liability
company, received shares or other ownership interests for intangible
contributions to Prime which are difficult to value. As a result, there will not
be a significant net worth per share prior to this offering and your cash
subscription will, as a result, be "diluted" in value.
15
SELLING SECURITY HOLDERS
------------------------
In this offering none of the existing security holders are registering
their shares, nor do any intend to sell shares pursuant to this registration
statement. The current principal shareholders of the company hold 2,800,000
shares. If this offering is fully subscribed there will be an additional 150,000
registered shares issued. At some future date, one or more of the initial
security holders may elect to attempt to sell their shares pursuant to a
subsequent registration or a claimed exemption from registration. At present,
the company has no plans to engage in any further registration beyond this
current registration. Further, the existing shareholders holding unregistered
securities would have to avail themselves of an exemption from registration to
sell in the future, which exemption would, in most cases, not be available
unless this registration is completed and a trading market is established for
the shares so that the current principal shareholders could avail themselves of
Rule 144, or similar exemption provisions, to engage in a future sale of their
shares after a required holding period. See Risk Factors and Plan of
Distribution as to the implications of potential future sales by affiliates.
PLAN OF DISTRIBUTION
--------------------
Prime does not intend to employ the services of any underwriter or
other broker/dealer to place or sell its securities. Prime believes it can place
the limited amount of securities being offered by this registration through the
efforts of a member of its own management group who will not be paid any
consideration, commission or other compensation for his selling and placement
efforts. Consequently, no provisions for commissions have been provided for in
this prospectus. Should management determine, at any time, that it is necessary
to sell this offering through the use of commissions to an underwriter,
management will reserve the right to amend this registration and prospectus to
reflect any such commission arrangements and to continue with the offering in
accordance with all other terms and provisions.
It is anticipated that Mr. Limpert will be primarily responsible for
the efforts to sell the Prime shares in this offering to various business
contacts and acquaintances through delivery of this prospectus. We cannot
promise the offering will be sold, as management will only engage in these
efforts as they deem necessary. Obviously, there is an indirect benefit to
management, as principal shareholders, if the shares are sold in this offering
as the management shareholders would most likely realize an increase in the
value of their shares after this offering and potentially an active market for
their shares.
Mr. Limpert has been licensed on one prior occasion in Utah to act as
an issuer/agent and will seek such designation in this offering.
Each officer, director or affiliated persons may purchase shares in
this offering for cash at the offering price without restriction. There is no
limitation on the number of securities which may be purchased by these
affiliated persons. In like manner, there is no obligation or commitment by any
officer, director or affiliate to purchase any shares in this offering. All
16
securities purchased by any officer, director, or person able to direct or
influence the company as a control person will not be freely tradeable, but will
be subject to restrictions on resales, and must be purchased for investment
purposes requiring, in most instances, a holding period.
The costs of this offering are estimated at $45,000, and include legal,
accounting, filing or permit fees, printing and related distribution costs.
These amounts are estimates but are believed reasonably accurate for the
intended size of this offering. Funds paid for offering costs will limit the
amount of net proceeds available for actual business purposes.
Proceeds of the offering, up to the minimum amount, will be placed in a
segregated subscription account under control of Prime and will not be employed
for any business purposes of the company until or unless the minimum offering is
sold within the offering term of 180 days from the date appearing on the face of
this prospectus. If the minimum offering is not fully sold and collected within
such offering period, then the offering will be terminated and all proceeds will
be returned without deduction for costs or addition of any interest. Prime will
obtain an address from each subscriber and will return all proceeds within ten
days of the termination of the offering to that address. Any interest earned on
the subscription account will be employed by Prime to pay for anticipated
offering costs and return of subscription proceeds to investors.
In the event of the close of the minimum offering, Prime will employ
any additional proceeds of this offering upon receipt without further utilizing
the subscription account.
Prime reserves the right to close the offering at any time within the
offering term of 180 days whenever the minimum offering proceeds have been
received in the subscription account, even if less than the maximum offering has
been sold. Factors which may influence Prime's decision to close the offering
would be the effort required to continue sales and the rate at which
subscriptions were obtained up to the minimum offering. In all events, the
company will not sell more than the maximum offering and will close the offering
at any time that the maximum amount has been sold. The Use of Proceeds Section
reflects Prime's best present estimate of the use of proceeds in the event of
either the minimum or maximum offering amount being received. The offering most
likely will be closed at some point between the minimum and maximum and the use
of proceeds will be adjusted accordingly, though no assurance is given or
represented that such adjustment will be exactly pro rata to the percentage
difference between the minimum and maximum offering.
We intend this offering will be sold primarily to citizens of the
State of Utah, based upon a coordination filing in that jurisdiction. Should
Prime deem it appropriate, it may attempt to place its securities in one or more
additional jurisdictions where the offered shares may be qualified or registered
by coordination or similar rule or process. That is, Prime will be deemed to be
qualified as a registered offering in those jurisdictions upon clearance of this
registration with the SEC and a notice type filing in the appropriate state. If
the offering is offered or sold in other jurisdictions, the offering must be
registered or qualified under the applicable state law of that jurisdiction.
Prime does not intend to register or qualify this offering in any other
jurisdiction for sale unless such registration can primarily be achieved by
coordination without the necessity of merit review or substantial additional
disclosure requirements. However, should Prime elect to sell in any jurisdiction
that imposes any additional disclosure requirements, they will be included in
this offering as a supplemental disclosure.
17
Prime has not secured a commitment to list or trade the securities
being registered through any broker/dealer and there is no present assurance
that a public market will exist for the securities, even in the event of a
successful completion of this offering. Each prospective investor should
consider the potential lack of a public market developing as a significant risk
factor. Management will work to obtain the listing of the securities after or
concurrently with this offering by one or more broker/dealers, but can give no
warranty or assurance that they will be successful in such efforts.
No shares of current management or original shareholders are being
registered pursuant to this offering and no intent or obligation exists by Prime
to currently register existing issued shares in any manner.
LEGAL PROCEEDINGS
-----------------
We are not aware of any pending or threatened legal proceedings or
claims in which we are involved.
18
DIRECTORS, EXECUTIVE OFFICERS, OR CONTROL PERSONS
-------------------------------------------------
---------------------------------------- ------------------------------------- -------------------------------------
NAME POSITION CURRENT TERM OF OFFICE
---------------------------------------- ------------------------------------- -------------------------------------
Mr. Terry Deru* Director, CEO/ President/ Appointed Director in
Organizational Minutes-April, 2002.
Will serve as a Director until
first annual meeting, not yet set.
Will serve as an officer pursuant
Chairman of the Board to leave of the Board of Directors.
---------------------------------------- ------------------------------------- -------------------------------------
Mr. Scott Deru* Director/V.P. Operations Appointed Director in
Organizational Minutes - April,
2002. Will serve as Director until
first annual meeting, not yet set.
Will service as an officer pursuant
to leave of the Board of Directors.
---------------------------------------- ------------------------------------- -------------------------------------
Mr. Andrew Limpert* Director/Treasurer/Secretary/ CFO Appointed Director in
Organizational Minutes - April,
2002. Will serve as Director until
first annual meeting, not yet set.
Will service as an officer pursuant
to leave of the Board of Directors.
---------------------------------------- ------------------------------------- -------------------------------------
* 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.
MR. TERRY DERU - DIRECTOR , CEO/PRESIDENT, CHAIRMAN OF THE BOARD
Age:47
Mr. Deru is currently an owner and consultant with Belsen Getty LLC. He
also served in its predecessor form of operation as a corporation. Belsen Getty
is a Salt Lake City, Utah based financial and retirement planning firm. The
firm, or its predecessor, has been a licensed investment advisory firm with the
SEC and Utah since 1984. Mr. Deru is a Certified Financial Planner and a
Registered Financial Consultant. Mr. Deru has been with Belsen Getty since 1985.
Mr. Deru will continue on a part-time affiliation with Belsen Getty while acting
as the part-time officer of the Company. Mr. Deru also acts as a part-time CEO
for Kinship Systems, Inc., a small public company which is not presently active.
19
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: 41
Mr. Deru has been employed full-time since 1982 as the Manager and
principal officer of Fringe Benefits Analysts, LLC, 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, LLC, to now be known as Prime, Inc. In addition to
his full-time services to Fringe Benefits Analysts, LLC he worked as a director
of insurance for Care of Utah, Inc., developing insurance programs, primarily
for the health care industry. 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 within the state of Utah.
MR. ANDREW LIMPERT - DIRECTOR/SECRETARY/TREASURER/CFO
Age: 32
Mr. Limpert has been a financial and retirement planner associated with
the Salt Lake based firm of Belsen Getty, LLC since 1998, but he is not a
certified financial planner. In this capacity, Mr. Limpert has completed
licensing requirements and testing prescribed by the State of Utah to be an
investment advisor. Mr. Limpert plans to continue his full-time employment with
Belsen Getty. Prior to that position, he worked with Pro Source 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. 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.
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.
Officers
--------
Historically, the present officers in Prime, except for Mr. Limpert,
acted as working members of Prime, LLC from inception. Mr. Limpert became a
member in January, 2002. Prime LLC also had associated as a member Mr. William
20
Campbell, whose interest in Prime LLC was bought out by Prime LLC and
transferred to Andrew Limpert prior to the organization of Prime, Inc., as more
particularly described under "Description of Business". As previously indicated,
Prime, LLC has as its wholly owned subsidiaries Belsen Getty, LLC and Fringe
Benefits Analysts, LLC. These subsidiaries, in turn, pass through, as limited
liability companies, all of their net earnings or losses to Prime, LLC, which
then distributes or attributes earnings or losses pro rata to the ownership
interest.
Under the present organization of the company, it will not be possible
for Prime corporation to simply pass through earnings derived from its operating
subsidiaries. Alternatively, each of the principal officers, named above, will
agree to serve the company for the following annual base salary: Mr. Terry Deru
$240,000, Mr. Scott Deru $240,000 and Mr. Andrew Limpert $120,000, but
increasing incrementally to $210,000 on October 1, 2002. The terms of this
compensation are more fully set- out in a set of Board Minutes and concurrently
executed three year employment agreements. Mr. Terry Deru and Mr. Scott Deru
will also primarily serve Prime by continuing to act as a manager of the
subsidiaries. Mr. Andrew Limpert will devote most of his time commitment to
executive responsibilities of Prime. It is anticipated Mr. Scott Deru and Mr.
Terry Deru will serve full-time in their responsibilities with the subsidiaries
and discharge responsibilities to Prime on an as-needed basis.
21
Shares Held By Management and Certain Security Holders
------------------------------------------------------
The following tables set forth the ownership, as of April 5, 2002, the
corporate organizational date, 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 have sole voting and investment
power with respect to such shares, except as otherwise may be noted.
-----------------------------------------------------------------------------------------------------------
Tile of Class Name and Address of Owner Amount owned Percent of Total Common in
4/5/2002 the event Max. Off. Sold
(Organization Date) (Rounded)
-----------------------------------------------------------------------------------------------------------
Common Terry Deru
Stock 1,000,000 34%
-----------------------------------------------------------------------------------------------------------
Common Scott Deru
Stock 1,000,000 34%
-----------------------------------------------------------------------------------------------------------
Common Andrew Limpert
Stock 750,000 26%
-----------------------------------------------------------------------------------------------------------
Common Officers and Directors as
Stock a Group1 2,750,000 94%
-----------------------------------------------------------------------------------------------------------
(1) Mr. Don Deru, the natural father of Terry and Scott Deru, owns
50,000 shares, or about 1.8% of the currently outstanding shares. There are no
shareholders prior to this offering other than as listed above and Mr. Don Deru.
There are currently no arrangements which would result in a change in
our control. Prime has no warrants, options or other stock rights presently
authorized.
22
DESCRIPTION OF SECURITIES
-------------------------
The following description is a summary and is qualified in its
entirety by the provisions of our Articles of Incorporation and Bylaws, copies
of which have been filed as exhibits to the registration statement of which this
prospectus is a part.
General
-------
We are authorized to issue 50,000,000 shares of common stock with no
par value per share. As of April 5, 2002, there were 2,800,000 restricted shares
issued and outstanding. The company has only one class of shares, being its
common shares. All shares of common stock outstanding are validly issued, fully
paid and non-assessable. All currently issued shares of Prime were issued
pursuant to an Organizational Meeting on April 5, 2002.
Voting Rights
-------------
Each share of common stock entitles the holder to one vote, either in
person or by proxy, at meetings of the shareholders. The holders are not
permitted to vote their shares cumulatively. Accordingly, the holders of common
stock holding, in the aggregate, more than fifty percent of the total voting
rights can elect all of our directors and, in such event, the holders of the
remaining minority shares will not be able to elect any of such directors. The
vote of the holders of a majority of the issued and outstanding shares of common
stock entitled to vote thereon is sufficient to authorize, affirm, ratify or
consent to any corporate act or action, except as otherwise provided by law.
Dividend Policy
---------------
All shares of common stock will participate proportionally in
dividends if our Board of Directors declares them out of the funds legally
available. These dividends may be paid in cash, property or additional shares of
common stock. We have not paid any dividends since our inception and presently
anticipate that all earnings, if any, will be retained for development of our
business. Any future dividends will be at the discretion of our Board of
Directors and will depend upon, among other things, our future earnings,
operating and financial condition, capital requirements, and other factors.
There can be no assurance that any dividends on the common stock will be paid in
the future.
Miscellaneous Rights and Provisions
-----------------------------------
Holders of common stock have no preemptive or other subscription
rights, conversion rights, redemption or sinking fund provisions. In the event
of our dissolution, whether voluntary or involuntary, each share of common stock
is entitled to share proportionally in any assets available for distribution to
holders of our equity after satisfaction of all liabilities and payment of the
applicable liquidation preference and preference of any outstanding shares of
preferred stock as may be created.
23
Shares Eligible For Future Sale
-----------------------------------
The 150,000 maximum shares of common stock to be registered by this
offering will be freely tradable without restrictions under the Securities Act
of 1933, except for any shares held by our "affiliates", which may be limited by
the resale provisions of Rule 144 under the Securities Act of 1933.
In general under Rule 144, as currently in effect, any of our
affiliates or other restricted shareholders may be entitled to sell in the open
market within any three-month period a number of shares of common stock that
does not exceed the greater of (i) 1% of the then outstanding shares of our
common stock, or (ii) the average weekly trading volume in the common stock
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also affected by limitations on manner of sale, notice requirements, and
availability of current public information about us.
Nonaffiliates who have held their restricted shares for one year may be
able to sell under the foregoing conditions. Nonaffiliates who have held their
restricted shares for two years may be entitled to sell their shares under Rule
144 without regard to any of the above limitations, provided they have not been
affiliates for the three months preceding such sale.
........
Further, Rule 144A as currently in effect, in general, permits
unlimited resales of restricted securities of any issuer provided that the
purchaser is an institution that owns and invests on a discretionary basis at
least $100 million in securities or is a registered broker-dealer that owns and
invests $10 million in securities. Rule 144A would allow our existing
stockholders to sell their shares of common stock to such institutions and
registered broker-dealers without regard to any volume or other restrictions.
Unlike under Rule 144, restricted securities sold under Rule 144A to
non-affiliates do not lose their status as restricted securities. It is not
anticipated Rule 144A will have any application to this offering.
INTEREST OF EXPERTS AND COUNSEL
-------------------------------
Our counsel, Julian D. Jensen, PC, has passed upon the legal status of
the company and our capacity to engage in this Registration. The firm has no
interest in Prime. Our auditors, Carver, Hovey & Co. of Layton, Utah have
prepared and opined upon the attached and incorporated audited financial
statements. This firm has no interest in Prime and there are no material
conflicts with the auditors.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT VIOLATIONS
---------------------------------------------
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons,
we have been advised that in the opinion of the SEC, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities, other than the payment by us of expenses incurred or paid by
24
our directors, officers or controlling persons in the successful defense of any
action, suit or proceedings, is asserted by such director, officer, or
controlling person in connection with any securities being registered, we may,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by us is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issues.
ORGANIZATION OF COMPANY IN LAST FIVE YEARS
------------------------------------------
As previously noted, Prime Resource, LLC has existed since 1998 to
March 29, 2002 as a Utah limited liability company and operated exclusively
through its two wholly owned subsidiary limited liability companies, Belsen
Getty, LLC and Fringe Benefits Analysts, LLC. Prime converted to a corporate
form of business on March 29th of 2002 largely in anticipation of the present
public offering. Also, in 1998 Belsen Getty and Fringe Benefit Analysts
converted from a corporate form to their present LLC form. As otherwise
discussed in this Prospectus, the management of Prime Resource, Inc. will remain
the same as its predecessor, Prime Resource, LLC, though differently designated.
The two operating subsidiaries will continue with their existing business
activities and management as described in this Prospectus.
DESCRIPTION OF BUSINESS
-----------------------
General
-------
Prime Resource, as a corporate entity, was filed in Utah on March 29,
2002; however, essentially the same business purpose were engaged in by its
predecessor entity, Prime Resource, LLC, a Utah limited liability company,
organized in 1998. From 1985 to 1998, Belsen Getty and Fringe Benefits Analysts
collaborated as independent corporations. In 1998 Prime LLC was organized as a
parent and coordinating entity and the two operating companies also became
wholly owned Limited Liability Companies of Prime, LLC and changed their
business structure from corporations to limited liability companies owned by
Prime LLC.
In addition to the two principal owners of Prime LLC, a Mr. William
Campbell owned a 23% interest until January 1, 2002 when Prime LLC purchased his
interest 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 through the completion of this offering
which were valued at $113,000. Mr. Don Deru, the father of Scott and Terry Deru,
held a 4% interest in Prime LLC since inception and exchanged his interest in
Prime LLC for a 1.8% sharehold interest in Prime.
As limited liability companies, historically the revenues of Belsen
Getty, LLC and Fringe Benefits Analysts, LLC have flowed through to its member
and sole owner, Prime Resource, LLC. Within Prime Resource the revenues, after
payment of all operating costs and wages and allowance for working capital
25
reserves, were divided between Mr. Scott Deru, Mr. Terry Deru and Mr. William
Campbell, in accordance with their limited liability ownership percentage,
through December 31, 2001.
It was determined upon incorporation of the Prime Resource, LLC that
this form of compensation and revenue transfer will no longer be feasible and
that the corporation will need to retain and report its income, if any, after
salaries, overhead and other expenses as retained earnings. Further, Prime has
now 0entered into an employment contract with its three principal officers, as
generally described earlier under the outline of compensation and subsequently
described under the Executive Compensation Section. In their respective
capacities, they will be paid a fixed salary. Prime would then retain net
earnings for further business and expansion purposes.
Mr. Terry Deru, in addition to acting for Prime as its President and
Chief Executive Officer, will also continue to act as the Manager and principal
operator of Belsen Getty entity. Mr. Scott Deru will also devote a substantial
majority of his time to the business affairs of Fringe Benefits Analysts and
such other time as necessary as a corporate officer of Prime. It is anticipated
that Mr. Limpert will then assume most of the day-to-day management
responsibilities for Prime, as well as continuing with Belsen Getty as a
consultant.
Historically, over the past three years, Belsen Getty has contributed
approximately 27% of the present revenues to Prime, LLC and Fringe Benefits
Analysts has contributed the remaining 83% of net revenue to Prime, LLC. Prime,
LLC, like the registrant Prime, Inc., is not anticipated to generate any
independent sources of revenue or income other than that derived from its two
operating subsidiaries as described above. All salaries and benefits in Belsen
Getty and Fringe Benefits Analysts are and will be paid directly by Prime, both
historically and prospectively.
Belsen Getty
------------
Belsen Getty is a Utah financial management company offering the
services of investment advisor, financial planning, pension retirement planning
and general business consulting and planning for firms or individuals who may
participate to the extent they deem appropriate in any of these financial
products and services. Belsen Getty manages assets primarily under a fee based
management system. Commission income is less than 5% of total revenues. Belsen
Getty uses sophisticated modeling software to complete its investment advisory
aspects of its services to clients who wish it to manage funds for various
pension and retirement or other offered plans. In this capacity, Belsen Getty
also acts as an investment advisory firm.
Belsen Getty also has expertise in providing consulting services for
retirement planning, pension and general business financing and planning.
It is estimated that of the total revenues derived by Prime Resource in
calendar year 2001 approximately 22 % of those revenues was contributed by the
Belsen Getty entity, with the balance coming from Fringe Benefits Analysts.
26
Belsen Getty offers to individuals retirement accounts, trust accounts,
as well as creating 401(k) plans and other pension plans for corporate clients.
These services may range from simple cash management to complex custom growth
portfolio planning for wealthy individuals or businesses.
Belsen Getty markets through several mediums. First, the firm has a
sophisticated database for tracking services to clients, prospects and business
associates. This tracking assures each client and prospect are contacted monthly
by mail and at least quarterly by phone or in person. Second, prospects that go
into this tracking system are located in several ways, such as referrals from
existing clients, referrals from other business associates and referrals from
Fringe Benefits Analysts, as well as direct mailing and educational seminars. To
a limited extent, the firm currently engages in prospect mailings and may
explore other media type advertising, depending upon the availability of
proceeds from this offering.
In 2001 Belsen Getty received gross revenues of approximately $449,000,
but incurred a net loss of $369,800 which was accrued to Prime Resource.
Belsen Getty is currently managed by Mr. Terry Deru and has seven
full-time and one part-time employees.
Fringe Benefits Analysts
------------------------
Fringe Benefits Analysts is primarily a diversified independent
insurance broker which provides various lines of insurance, such as life,
dental, disability, etc., as needed by its clients to fund various business, as
well as employee related programs and plans. Fringe Benefits Analysts is also
engaged to a more limited extent in rolling up and acquiring existing health
care insurance agencies and/or their book of business.
Fringe Benefits Analysts currently has seven full-time employees, one
part-time employee and over twenty sub-agents who act as independent contractors
in various insurance lines. Part of the proceeds being raised in this offering
will be used to retain and recruit additional agents. Funding for anticipated
future acquisitions will come from the anticipated acquisition reserves to be
held by Prime.
The total revenues in calendar year 2001 for Fringe Benefits Analysts
were approximately $1,557,200 with net earnings of approximately $370,600.
Plan of Operation
-----------------
o Acquisitions. In the event of the maximum offering, a substantial
portion of net proceeds of the offering ( approximately $260,000 or 36%) would
27
be available for acquisition by Fringe Benefits Analysts to acquire other
insurance providers, or their policies and book of business.
At whatever level the offering is closed, the following programs
intended to create revenue and income growth, will be funded and implemented:
o Enhancement of commission revenues. Management, primarily through the
use of the FBA Advantage Program, will attempt to encourage current subagents to
write all their insurance through Fringe Benefits Analysts. Proceeds of the
offering will be used to contact existing agents with relationship to explaining
and demonstrating this program.
o Growth Core Business. Revenues will be expended to advertise and
promote core business activities, including soliciting more agents to employ the
advantages of the FBA Advantage Program whereby management fees for various
programs are waived if multiple programs are purchased through Fringe Benefits
Analysts.
o Agent Recruiting. Management will use anticipated proceeds to recruit
full-time agents and promote various advantages and economies which can be
realized by agents being a full-time participant within a larger organization.
o Complementary Business Practices. Prime will attempt to advertise and
promote the "complete package" approach of comprehensive business and employee
plan planning coupled with affiliated competitive insurance funding by proposing
a one stop approach to such services.
Number of Persons Employed By Prime
-----------------------------------
Prime currently has no full-time employees. Mr. Limpert acts as an
advisor and Mr. Terry Deru as a part-time manager. As noted earlier, Mr. Scott
Deru and Mr. Terry Deru will only devote so much of their time as they deem
necessary and adequate to the discharge of general corporate affairs, but intend
to devote most of their time to the day-to-day operations of the subsidiary
income producing entities. It is intended that Mr. Andrew Limpert will primarily
discharge the day-to-day affairs and reporting requirements required by Prime,
such as maintaining current on filings required under the Securities and
Exchange Act of 1934, tax and other governmental filings, and other management
responsibilities related to the operation of its two subsidiary companies.
Belsen Getty currently has seven full-time employees and one part-time
employee. Approximately four of these employees are engaged in general office
management and supervisory roles while the remainder of the employees are
primarily engaged in marketing, implementation and servicing of the various
financial and business planning services and administration provided for
individuals, corporations, and 401(k) and other pension plans by the company.
Mr. Terry Deru acts as the General Manager for this limited liability company
28
and also is the principal officer in charge of the supervision and operation of
the investment advisory services provided by Belsen Getty.
Fringe Benefits Analysts currently has seven full-time employees and
one part-time employee and twenty sub-agents who act as independent insurance
contractors and agents. Of these individuals, approximately four are primarily
devoted to day-to-day management of the operations of Fringe Benefits Analysts
and the balance of the employees are primarily engaged in providing the actual
placement, supervision and administration of insurance policies and claims. Mr.
Scott Deru acts as the General Manager for the limited liability company and is
primarily in charge of the approval and issuance of policies, coordination with
Belsen Getty and other general administrative services. Mr. Scott Deru acts as
an assistant in these principal executive areas as an Assistant Manager. In the
event of the successful completion of this offering, either as a minimum or
maximum offering, Fringe Benefits Analysts would intent to expand the
administrative staff by approximately one person and would intend to acquire an
undetermined number of additional insurance sales agents.
All salaries and other expenditures in both Belsen Getty and Fringe
Benefits Analysts entities are accrued and paid by Prime.
Environmental Compliance
------------------------
Prime and its operating subsidiaries are not deemed to be engaged in
business endeavors which have significant environmental impacts or implications.
To the extent necessary, Prime and its subsidiaries will comply with any
necessary and required environmental regulations, but are not presently aware of
any environmental regulations which have directly impacted their business or
require direct regulatory compliance.
Special Characteristics and Risk Factors
----------------------------------------
As briefly noted under the Risk Factors Section, Prime will continue in
the event of the close of this offering to be substantially owned by its
existing management group. As a result of this ownership, those purchasing
shares in the offering should not have any reasonable expectation that they will
be in a position to influence the election of directors, direction of the
company or implement policy decisions through their share position and voting
power.
Further, the nature of financial planning and the collateral insurance
services provided has historically been a direct contact business built
substantially upon personal reputation and contacts. As a result, there will
remain a risk that if the present management of the company does not continue
their association with the company, that the company may not be able to continue
to properly engage in its present business activities. Further, there remains a
significant risk that even with the anticipated additional capital from this
offering, this type of business may not be able to be expanded significantly
through the infusion of capital due to the highly personal nature of the
contacts required and the services to be provided.
29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
---------------------
Overview
--------
Prime Resource, LLC, ("Prime" or "the Company") historically operated
as a Utah limited Liability Company and is the hundred percent owner of Belsen
Getty, LLC, (Belsen Getty), and Fringe Benefits Analysts, LLC, (FBA). Belsen
Getty provided investment management, financial planning and pension and
retirement planning for various individual and business clients. FBA primarily
provided a business insurance provider of health, life, dental and disability
insurance coverages. FBA was the principal insurance provider for the Prime
originated plans. Also FBA has been active in effecting acquisitions of other
insurance companies and/or their book of business. Belsen Getty and FBA
concentrate their business activities within the state of Utah, although both
have a limited number of clients throughout the Western United States. During
the two year period ended December 31, 2001, Prime did not engage in any other
direct business activities in addition to those conducted through its two wholly
owned subsidiaries.
On April 5, 2002 the Company was substantially reorganized as a Utah
corporation with each prior member exchanging membership interest in Prime to an
equivalent sharehold interest in the corporation. All of the attached and
referenced accounting predates this reorganization. The subsidiary operating
entities, Belsen Getty and FBA remain as wholly owned limited liability
companies.
Consistent with its historical and ongoing legal structure, the
Company's operating segments have been and will continue to be aligned based on
the nature of the products and services offered through the operating
subsidiaries. These segments include:
* Asset Management - Belsen Getty
* Insurance Products - FBA
* Other - Belsen Getty & FBA
Results of Operations
---------------------
Year ended December 31, 2001 compared to the year ended December 31, 2000
-------------------------------------------------------------------------
30
Revenues
--------
The Company's revenues, by reportable segment were as follows:
Year Ended December 31st:
-------------------------
Segment 2001 2000
------- ---- ----
Asset Management $ 449,031 $ 707,537
Insurance Products $ 1,557,246 $ 1,498,016
Other $ 15,204 $ 7,716
-------------- --------------
$ 2,021,481 $ 2,213,269
Asset management revenues decreased $258,500, or 36.5 percent, compared
to the prior year. The Company's revenues in the Asset Management segment are
earned based on an agreed-upon percentage of the fair market value of
investments under management and are calculated on a monthly basis. The average
fee percentage on assets under management remained relatively consistent between
the two years. Total financial advisory fees dropped in 2001 due to a
substantial decrease in the average fair value of assets under management in the
year 2001 versus 2000, caused by a general downturn in the value of marketable
securities throughout the stock market. In addition, a former member of the
Company and manager in Belsen Getty was terminated near the end of December of
2000. Certain Belsen Getty clients serviced by the former manager followed him
to his new firm resulting in a decrease of fee revenues in 2001 of approximately
$150,000.
Insurance product sales increased $59,200 or 4.0 percent due primarily
to insurance premium increases and the resultant commission increase.
Income in the "Other" segment relates to interest and dividends on
Company-wide investments and is higher in 2001 due to larger amounts invested in
marketable securities and cash equivalents in 2001, as compared to 2000.
Operating Expenses
------------------
Total operating expenses increased $100,400 or 5.1 percent in 2001, compared to
the prior year. The net increase was primarily due to increases in commission
paid and compensation and benefits totaling $57,900 and $50,600, respectively,
offset by an approximate $26,000 decrease in general and administrative expense.
Compensation and benefits increased due to a one-time $100,000 compensation
settlement paid to a former member in the first quarter of 2002, but accrued as
of December 31, 2001. Commissions expense increased in 2001 compared to the
31
prior year due to premium inflation and the resultant commission increases as
well as the addition of new clients.
Three-month period ended March 31, 2002 compared to the three-month period ended
March 31, 2001
Revenues
The Company's sales, by reportable segment were as follows:
Three-months Ended March 31st
---------------------------------
Segment 2002 2001
------- ---- ----
Asset Management $ 89,987 $ 156,197
Insurance Products $ 434,852 $ 418,578
Other $ 394 $ 1,731
Asset management revenues for the three-months ended March 31, 2002
decreased from the comparable prior three-month period due to a one-time
commission earned in the first quarter of 2001 in connection with transferring
management of a large pension account to an outside financial institution.
Insurance product sales for the three-months ended March 31, 2002
increased from the prior comparable period due to higher volumes in 2002.
Operating Expenses
------------------
Total operating expenses for the three-months ended March 31, 2002
increased by $60,200 or 12.1 percent from the comparable prior three-month
period due to higher legal and accounting fees associated with the Company's
reorganization and registration, partially offset by lower management salaries,
resulting from the termination of a former member of the company.
Liquidity and Capital Resources
Historically, the Company's primary source of capital has been cash
provided from operating activities. Net cash provided from operating activities
totaled $146,700 and $239,000 for the years ended December 31, 2001 and 2002,
respectively. Although the Company recognized a net loss in 2001, the net loss
included noncash depreciation charges of $42,744 and other noncash charges
totaling $4,100. Cash flows from operations in 2001 were further enhanced by
changes in other operating assets and liabilities, including receivables
32
collected related to prior year revenues of approximately $47,000, and net
expenditures of $97,300 accrued in 2001, yet paid in a subsequent period. Cash
flows from operations in 2001 were also adjusted downward for noncash interest
income on notes receivable from related parties totaling $8,100.
Cash flows from operations for the year ended December 31, 2000 started
with net income of $255,500 but was increased by noncash depreciation of
$39,600, and decreased by $88,300, primarily due to paying liabilities in fiscal
2000 for expenditures incurred in 1999.
Cash used in financing activities totaled $205,700 and $63,200 for the
years ended December 31, 2001 and 2000, respectively. The increase in 2001,
compared to 2000, related to loans to members totaling $140,000, and investments
in marketable securities totaling $51,100. Cash was used in both 2001 ($18,900)
and 2000 ($46,800) for the purchase of equipment and vehicles.
Cash used in financing activities totaled $134,200 and $199,300 in
fiscal years 2001 and 2000, respectively. Cash used in financing activities was
comprised primarily of member distributions, but also included $17,600 in
payments on a note payable to a member during fiscal year 2000.
Three-month period ended March 31, 2002 compared to the three-month period ended
March 31, 2001
--------------------------------------------------------------------------------
The Company used ($118,000) and generated $34,881 in cash from
operations during the three-month periods ended March 31, 2002 and 2001,
respectively. Cash used in operations in the first quarter of 2002 was
negatively impacted by the settlement of wages paid to a former member in the
amount of $100,000.
Furthermore, during the first quarter of 2002, the Company was paid
$140,000 in amounts due from members as of December 31, 2001 and advanced an
additional $60,000 from those same members. The proceeds were used to satisfy a
$200,000 obligation to a former member, which arose in connection with the
former member's termination and distribution of the former member's equity in
the Company.
The Offering
------------
The Company does not believe it would need to complete this public
offering to continue to meet the liquidity needs of the Company, based on the
historical level of operations of the Company. However, management does not
believe there is sufficient net revenues to fund meaningful growth of the
Company. If successful with the offering of stock in connection with this
registration statement, the Company intends to use the proceeds of the offering
for the expansion of its business facilities and short-term marketing efforts as
outlined n this offering. See Use of Proceeds.
33
It is possible that the anticipated proceeds of this offering will not
be sufficient to support any significant increase in revenues or income to the
Company, in which event, future valuation of shares purchased by investors in
this offering may not be enhanced. Each prospective investor should consider the
possibility that revenues may not be significantly increased by the capital from
this offering. See discussion of Risk Factors and Use of Proceeds.
Market Risks and Management Policies
------------------------------------
Management is not aware of any particular market risk factors related
to the Company's products and services, such as any specific environmental risks
or other governmental regulation. Further, at the present time, the company does
not have any foreign market or currency exposure. Fringe Benefits Analysts is
subject to continuing regulations as an insurance carrier where it operates and
certain principals of Belsen Getty are subject to regulation as investment
advisors and licensed financial planners.
The Company has historically had a policy of lending funds to owners
and employees which may have a future adverse impact on capital or liquidity to
the extent it may lower funds available for working capital, or a loss of
capital in the event of default. To date no related party loan has defaulted and
the company has earned what it believes to be reasonable market interest on all
such loans. See "Related Party Transactions".
New Accounting Pronouncements
-----------------------------
In June, 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 141 (FAS 141), Business Combinations, and Statement No. 142 (FAS
142), Goodwill and Other Intangible Assets.
FAS 141, effective June 30, 2001, required that all business
combinations initiated after June 30, 2001 be accounted for under the purchase
method of accounting; the use of the pooling-of-interests method of accounting
is eliminated. FAS 141 also establishes how the purchase method is applied for
business combinations completed after June 30, 2001. This guidance is similar to
previous generally accepted accounting principles (GAAP); however, FAS 141
establishes additional disclosure requirements for transactions occurring after
the effective date.
FAS 142 eliminates amortization of goodwill associated with business
combinations completed after June 30, 2001. During the transition period from
July 1, 2001 through December 31, 2001, goodwill associated with business
combinations completed prior to July 1, 2001 continued to be amortized through
the income statement. Effective January 1, 2002, goodwill amortization expense
ceased and goodwill will be assessed for impairment at least annually at the
reporting unit level by applying a fair-value-based test. FAS 142 also provides
additional guidance on acquired intangibles that should be separately recognized
and amortized, which could result in the recognition of additional intangible
assets, as compared with previous GAAP.
The Company has no business combinations prior to the issuance of FAS 141 or FAS
142, which resulted in the recognition of goodwill, accordingly, neither of
these statements will have an effect on the current financial statements of the
Company.
34
There are other new accounting standards (such as FAS 143 on Accounting For
Asset Retirement Obligations; and FAS 144 on Account for Impairment or Disposal
of Long Lived Assets) which do not have present applications, but may be
important to the Company's future operations and accounting.
DESCRIPTION OF PROPERTY
-----------------------
Prime and its operating subsidiaries currently lease commercial space
for their operations at 22 East First South, 4th Floor, Salt Lake City, Utah.
Prime leases approximately 2,800 square feet with the remaining term of its
existing lease being six months. The current gross monthly lease payment is
$3,976 per month, which lease contains standard and customary lease escalators
or cost pass throughs with the anticipation that the lease costs should increase
by a factor of approximately 0% per year for the remaining term of the lease. In
these facilities there are approximately five separate offices, a general
utility room, reception area and conference room. These offices provide
minimally adequate facilities to the present staff of Prime and its two
operating subsidiaries. However, as noted above, Prime would anticipate, in the
event of the successful completion of this offering, employing a portion of
proceeds to relocate to larger facilities. It is estimated that ideally Prime,
in the event that the offering is completed, could use facilities of
approximately 3,500-4,000 square feet, being an approximate 25-53% increase over
the existing leasehold area. Prime would anticipate that it could acquire such
office space in the current market for an increased monthly rental expenditure
of approximately $1,500 or 37.5%. Located at its present facilities are other
miscellaneous personal property, primarily telephone communication and computer
related equipment, having an estimated value of approximately $22,000.
Total monthly direct costs of operating the present physical
facilities, including rent and all utilities and other overhead expenses are
approximately $4,050 per month.
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 owners are substantially the same persons.
o The Company has historically made and received loans and advances
from owners and employees without independent Board review. As of December 31,
2001, there was approximately $15,600 owed to owners and employees by Prime; and
approximately $258,800 owing by such owners and employees to Prime.
Approximately $145,000 of the amounts owing to Prime by owners and employees
have been discharged in 2002.
o As noted previously, Mr. Scott Deru and Mr. Terry Deru will be
required to make a reasonable allocation of their services between the present
operating entity Fringe Benefits Analysts and those services which may be
required directly by Prime as the parent company. There may exist some potential
for conflict in the priority and allocation of time Resource between these
entities as to these individuals.
35
o Mr. Terry Deru will act as the Chief Executive Officer for Prime, but
concurrently continue to act as a Manager for Belsen Getty. Again, there may
exist some potential conflicts for the allocation of time Resource by this
individual between the parent and subsidiary.
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 The company is not aware of any further transactions which would
require disclosure under this section by the company and any affiliated party.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Market Information
------------------
Our common stock is not traded on any exchange. We plan to seek a
listing on the NASD sponsored Electronic Bulletin Board, OTCBB, once our
registration statement has cleared comments of the Securities and Exchange
Commission. We cannot guarantee that we will obtain a listing. There is no
trading activity in our securities, and there can be no assurance that a regular
trading market for our common stock will ever be developed.
Current Shareholders
--------------------
As of April 5, 2002, there were four holders of record of our common
stock as described in the management section.
Dividends
---------
We have not declared any cash dividends on our common stock since our
inception and do not anticipate paying such dividends in the foreseeable future.
We plan to retain any future earnings for use in our business. Any decisions as
to future payment of dividends will depend on our earnings and financial
position and such other factors, as the Board of Directors deems relevant.
36
EXECUTIVE COMPENSATION
----------------------
HOURLY COMPENSATION, LONG TERM COMPENSATION
------------------------------ -------- ------------ --------- ---------------- -------------- -------------- --------- -----------
Name and Principal Position Year Salary(1) Bonus2 Other Annual Restricted Securities LTIP Other3
Compensation Stock Underlying Payouts (Loans)
Awards(s) Options
------------------------------ -------- ------------ --------- ---------------- -------------- -------------- --------- -----------
Mr. Terry Deru,
President 2001 $262,000 0 $65,000 0 0 0 $70,000
------------------------------ -------- ------------ --------- ---------------- -------------- -------------- --------- -----------
Mr. Scott Deru,, Secretary 2001 $240,000 0 $65,000 0 0 0 $70,000
------------------------------ -------- ------------ --------- ---------------- -------------- -------------- --------- -----------
Mr. Andrew Limpert,
Treasurer 2001 $118,000 0 0 0 0 0 0
------------------------------ -------- ------------ --------- ---------------- -------------- -------------- --------- -----------
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.
(1) 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, $240,000 for Mr. Terry Deru. Mr. Terry Deru received $262,000 in 2001, but
will receive $240,000 in 2002. Mr. Limpert was paid fees of $118,000 per year,
which will increase to $210,000 this year. The officers have decided under the
new corporate structure of Prime Resource to fix their salaries at these levels
as evidenced by an employment contract. If Prime is successful in completing
this offering, the company may consider executive stock options or other
incentive plans.
(2) In addition to the foregoing salaries, Mr. Scott Deru and Mr. Terry
Deru received a cash bonus distribution of $65,000 each in 2001.
(3) In 2001 Mr. Terry Deru and Mr. Scott Deru each borrowed $70,000
from Prime. This amount was repaid in 2002 and an additional approximate $56,000
loaned to Prime by these individuals.
The company presently does not have any stock option or other warrant or stock
option plan, but would deem it may adopt such a plan subsequent and in the event
of the successful completion of this offering.
FINANCIAL STATEMENTS
--------------------
You should read carefully all the information in this prospectus,
including the financial statements and their explanatory notes as attached.
37
CHANGE IN ACCOUNTANTS AND ANY DISAGREEMENTS
-------------------------------------------
Your management has not changed its independent auditors since
inception. Further, Prime has no conflict or disagreement with its current
auditors concerning any accounting policies.
PART II
-------
INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
Item 24. Indemnification of Officers & Directors. Prime indicates that
it has normal and customary indemnification provisions under its By-laws and
Articles of Incorporation, as well as those generally provided by Nevada law. It
is believed these provisions would indemnify all officers and directors from any
good faith mistake or omission in the performance of his or her duties including
cost of defense. Such indemnity would not extend to intentionally wrongful acts
including fraud, appropriation, self dealing or patent conflicts of interest.
The Articles and By-Laws were being filed as Exhibit items.
Item 25. Other Expenses of Issuance & Distribution. Prime does not know
of any accrued or to be accrued expenses of issuance and distribution other than
as outlined in the foregoing prospectus. The present estimates of offering
expenses are incorporated as costs for registration, including: fees, legal,
accounting, printing and miscellaneous in the aggregate amount of $35,000 as
paid by the company.
Item 26. Recent Sales of Unregistered Securities. Prime believes that
in the body of this prospectus it has described all shares issued from the date
of inception of Prime. In summary of that disclosure, Prime represents the only
shares originally issued were to its founders and principals, Mr. Terry Deru,
Mr.Scott Deru and Mr. Andrew Limpert. Mr. Don Deru, the father of Terry and
Scott Deru, also received a limited number of shares. Subsequently all shares
issued to them are the same shares set forth in the chart showing securities
held by management and are deemed exempted transactions under section 4(2) of
the Securities Act of 1933 as initial capital contributions. The following table
summarized these transactions:
38
---------------------------------- ---------------- -------------------- ---------------- ---------------------------
Name/ Number of Acquisition Date Price per Consideration
Shareholder Shares Share
---------------------------------- ---------------- -------------------- ---------------- ---------------------------
Mr. Terry Deru Interest in Prime LLC,
(Founder) carry over value of LLC
1 M 4/5/2002 $.07* $70,000
---------------------------------- ---------------- -------------------- ---------------- ---------------------------
Mr. Scott Deru Interest in Prime LLC,
(Founder) carry over value of LLC
1 M 4/5/2002 $.07* $70,000
---------------------------------- ---------------- -------------------- ---------------- ---------------------------
Mr. Andrew Limpert Interest in Prime LLC and
(Founder) offering services valued
750 K 4/5/2002 $.15* at $113,000
---------------------------------- ---------------- -------------------- ---------------- ---------------------------
Mr. Don Deru Predecessor LLC interest
50 K 4/5/2002 $.07* valued at $10,125
---------------------------------- ---------------- -------------------- ---------------- ---------------------------
*Shares valued at approximate net worth per share at time of organization based
on March 31, 2002 Financial Statements (Unaudited), except for Mr. Limpert whose
share valuation contains premium for continuing organizational services.
Item 27. Index of Exhibits:
Financial Statements for the year ending December 31, 2001 and 2000 (audited),
and interim period ending March 31,2002 (unaudited).
Exhibit Item 3 - Articles of Incorporation and By-Laws
Exhibit Item 5 - Attorney Letter in re Legality
Exhibit Item 10 - Assignment of LLC Interest to Limpert
Employment Contracts of Principal Employees
Exhibit Item 23A - Consent of Experts - Carver, Hovey & Co. CPA's;
Julian D. Jensen, P.C. Attorney at Law
Item 28. Undertakings. The undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933. This includes:
39
a. For determining liability under the Securities Act,
the issuer will treat each post-effective amendment
as a new registration statement of the securities
offered, and the offering of the securities at that
time to be the initial bona fide offering.
b. The issuer will file a post-effective amendment to
remove from registration any of the securities that
remain unsold at the end of the offering.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(iv) To the extent this issuer requests acceleration of the
effective date of the registration statement under Rule
461 under the Securities Act, it will include the
following in the appropriate portion of the prospectus:
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
40
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Salt
Lake, State of Utah on May 16, 2002.
(Registrant) Prime Resource, Inc.
/s/ Terry Deru
-----------------------------
By: Terry Deru, Its President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
BY: /s/ MR. TERRY DERU
-----------------------------
MR. TERRY DERU
(Title) Director, CEO, President
(Date) May 16, 2002
BY: /s/ MR. SCOTT DERU
----------------------------------------
MR. SCOTT DERU
(Title) Director, Vice-President, Treasurer
(Date) May 16, 2002
BY: /s/ MR.ANDREW LIMPERT
--------------------------------------------
MR.ANDREW LIMPERT
(Title) Director, CFO, Secretary, Vice-President
(Date) May 16, 2002
41
PRIME RESOURCE, LLC AND SUBSIDIARIES
FINANCIAL STATEMENTS
with
INDEPENDENT AUDITORS' REPORT THEREON
Years Ended December 31, 2001 and 2000
CONTENTS
Independent Auditors' Report F - 1
Financial Statements:
Consolidated Balance Sheets F - 2
Consolidated Statements of Operations and Members' Equity F - 3
Consolidated Statements of Operations and Comprehensive Income (Loss) F - 4
Consolidated Statements of Cash Flows F - 5
Notes to Consolidated Financial Statements F-6 - F-11
2
INDEPENDENT AUDITORS' REPORT
To The Members
Prime Resource, LLC and subsidiaries
We have audited the accompanying consolidated balance sheets of Prime Resource,
LLC and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of operations and members' equity, consolidated
operations and comprehensive income (loss), and consolidated cash flows for the
years then ended. 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 auditing standards generally accepted
in the United States of America. 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, LLC
and subsidiaries as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ Carver Hovey & Co.
----------------------
Carver Hovey & Co.
Layton, Utah
March 29, 2002
F-1
PRIME RESOURCE, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
ASSETS December 31, December 31, 2002
2001 2000 (unaudited)
--------- --------- ---------
Current Assets:
Cash and cash equivalents $ 32,102 $ 225,321 $ 48,023
Accounts receivable 99,287 146,570 134,407
Available-for-sale securities 50,125 -- 6,837
Current portion of notes receivable, related parties 3,763 20,000 3,763
--------- --------- ---------
185,277 391,891 193,030
Property and equipment, net of accumulated depreciation
of $112,433, $100,211 and $68,058 at March 31, 2002,
December 31, 2001 and 2000, respectively 131,283 167,216 125,829
Other assets 8,516 8,516 8,516
Advances and notes receivable from related parties,
excluding current portion 255,052 92,992 110,253
--------- --------- ---------
$ 580,128 $ 660,615 $ 437,628
========= ========= =========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Trade accounts payable $ 16,659 $ 5,706 $ 59,878
Accrued compensation, commissions and benefits 228,567 141,806 116,152
Member distribution payable 100,000 -- --
--------- --------- ---------
345,226 147,512 176,030
Notes payable to related parties 15,579 14,905 69,401
--------- --------- ---------
360,805 162,416 245,431
--------- --------- ---------
MEMBERS' EQUITY
Members' equity 220,338 498,199 193,604
Accumulated other comprehensive loss (1,015) -- (1,407)
--------- --------- ---------
219,323 498,199 192,197
--------- --------- ---------
$ 580,128 $ 660,615 $ 437,628
========= ========= =========
See accompanying notes to financial statements
F-2
PRIME RESOURCE, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND MEMBERS' EQUITY
Three months Three months
Ended Ended
Year Ended Year Ended March 31, March 31,
December 31, December 31, 2002 2001
2001 2000 (unaudited) (unaudited)
----------- ----------- ----------- -----------
REVENUES
Commissions $ 1,557,246 $ 1,498,016 $ 434,852 $ 418,578
Investment advisory fees 449,031 707,537 89,988 156,197
Interest and dividends 15,204 7,716 3,278 1,731
----------- ----------- ----------- -----------
2,021,481 2,213,269 528,118 576,506
EXPENSES
Commissions 538,510 480,565 125,192 128,104
Compensation and benefits 1,130,418 1,079,865 383,440 279,584
General and administrative 230,205 256,405 120,913 48,068
Occupancy and equipment 115,575 100,122 25,967 32,222
Interest 674 662 175 169
Depreciation 42,744 40,150 12,165 8,111
----------- ----------- ----------- -----------
2,058,126 1,957,769 667,852 496,258
----------- ----------- ----------- -----------
NET INCOME (LOSS) (36,645) 255,500 (139,734) 80,248
MEMBERS' EQUITY, at beginning of period 498,199 424,465 220,338 498,199
Member contribution -- -- 113,000 --
Member distributions (241,216) (181,766) -- --
----------- ----------- ----------- -----------
MEMBERS' EQUITY, at end of period $ 220,338 $ 498,199 $ 193,604 $ 578,447
=========== =========== =========== ===========
See accompanying notes to financial statements
F-3
PRIME RESOURCE, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Three months Three months
Ended Ended
Year Ended Year Ended March 31, March 31,
December 31, December 31, 2002 2001
2001 2000 (unaudited) (unaudited)
----------- ----------- ----------- -----------
REVENUES
Commissions $ 1,557,246 $ 1,498,016 $ 434,852 $ 418,578
Investment advisory fees 449,031 707,537 89,988 156,197
Interest and dividends 15,204 7,716 3,278 1,731
----------- ----------- ----------- -----------
2,021,481 2,213,269 528,118 576,506
EXPENSES
Commissions 538,510 480,565 125,192 128,104
Compensation and benefits 1,130,418 1,079,865 383,440 279,584
General and administrative 230,205 256,405 120,913 48,068
Occupancy and equipment 115,575 100,122 25,967 32,222
Interest 674 662 175 169
Depreciation 42,744 40,150 12,165 8,111
----------- ----------- ----------- -----------
2,058,126 1,957,769 667,852 496,258
----------- ----------- ----------- -----------
NET INCOME (LOSS) (36,645) 255,500 (139,734) 80,248
OTHER COMPREHENSIVE INCOME -
Net unrealized loss on securities available for sale 1,015 -- 392 --
----------- ----------- ----------- -----------
TOTAL COMPREHENSIVE INCOME (LOSS) $ (37,660) $ 255,500 $ (140,126) $ 80,248
=========== =========== =========== ===========
See accompanying notes to financial statements
F-4
PRIME RESOURCE, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months Three months
Ended Ended
Year Ended Year Ended March 31, March 31,
December 31, December 31, 2002 2001
2001 2000 (unaudited) (unaudited)
--------- --------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (36,645) $ 255,500 $(139,734) $ 80,248
Adjustments to reconcile net income (loss) to
net cash provided by operations:
Depreciation 42,744 39,536 12,165 8,563
Noncash compensation 2,409 -- 113,000 --
Loss on disposal of assets 980 -- -- --
Interest expense on borrowings from member 674 -- -- --
Interest income on loans to related parties (8,113) (759) -- (586)
Changes in operating assets and liabilities:
Trade and other accounts receivable 47,283 25,324 (35,120) 27,698
Accounts payable 10,559 (22,788) 43,162 755
Accrued liabilities 86,762 (57,836) (112,415) (26,987)
--------- --------- --------- ---------
Net cash provided by (used in) operating activities 146,653 238,977 (118,942) 89,691
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (18,865) (46,741) (6,654) (7,273)
Loans to related parties (155,650) (36,427) -- (140,000)
Principal payments from related party notes receivable -- -- 144,799 --
Collections on loans to related parties 20,000 20,000 -- 20,000
Proceeds from securities available for sale -- -- 49,733 --
Investment in securities available for sale (51,141) -- (6,837) --
--------- --------- --------- ---------
Net cash provided by (used in) investing activities (205,656) (63,168) 181,041 (127,273)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on note payable to a member -- (17,567) -- --
Notes payable to members -- -- 53,822 --
Member buy-out -- -- (100,000) --
Distributions to members (134,215) (181,765) -- --
--------- --------- --------- ---------
Net cash used in financing activities (134,215) (199,332) (46,178) --
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH (193,219) (23,523) 15,921 (37,582)
CASH AT BEGINNING OF PERIOD 225,321 248,844 32,102 225,321
--------- --------- --------- ---------
CASH AT END OF PERIOD $ 32,102 $ 225,321 $ 48,023 $ 187,739
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid for interest $ -- $ 1,337 $ -- $ --
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITY
Accrual of distribution payable to a former member $ 100,000 $ -- $ -- $ --
Distribution of a portion of a note receivable from a
related entity to members 7,000 -- -- --
Unrealized loss on securities available for sale 1,015 -- 392 --
See accompanying notes to financial statements
F-5
PRIME RESOURCE, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
Organization and Business Activity
Prime Resource, LLC, (The Company) is a Limited Liability Company and 100
percent owner of Belsen Getty, LLC, (Belson Getty), and Fringe Benefits
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.
Reorganization
Effective December 31, 2001, the Company entered into a settlement agreement
involving the transfer of the membership interest from a former member to
current and remaining members of the Company. The agreement required the Company
to acquire the former owner's membership share in the Company in exchange for
$100,000. The agreement further required the Company to pay compensation to the
former member in 2001, also in the amount of $100,000. Such compensation expense
is reflected in salaries and wages in the accompanying statement of operations
for the year ended December 31, 2001. A total obligation of $200,000 for amounts
payable to the former member in connection with the reorganization is reflected
in the accompanying consolidated balance sheet as of December 31, 2001. The
acquisition of the former member's share had no other effect on the recorded
assets and liabilities of the Company.
Basis of Financial Presentation
The accompanying consolidated financial statements include the accounts of Prime
Resource, LLC, and its wholly owned subsidiaries, Belsen Getty, LLC and Fringe
Benefits Analysts, LLC. All significant intercompany balances and transactions
have been eliminated in consolidation.
Use of Estimates
The consolidated financial statements have been prepared in conformity 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.
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.
F-6
PRIME RESOURCE, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------------------
Available for Sale Securities
Available for sale securities are recorded at fair value. Unrealized holding
gains or losses on available for sale securities are reported as a separate
component of member's equity until realized. A decline in the market value of
the securities below cost that is deemed other than temporary is charged to
earnings resulting in the establishment of a new cost basis for the security.
Reinvested dividends increase the basis of the related investments.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of depreciable assets as
follows:
Years
-----
Automobiles 5
Furniture & equipment 7
Computer software & equipment 3-5
Income taxes
The Company is taxed similar to a partnership. Accordingly, the accompanying
consolidated statements of operations do not reflect provisions for income
taxes, inasmuch as such income tax liability is the responsibility of the
individual members.
Revenue Recognition
Fees from the provision of investment advice are typically billed and earned
based on a percentage of the fair values of the investment portfolios under
management, as of the beginning of each calendar month.
Revenues, in the form of commissions, are recognized in the period for which the
related insurance premiums apply. Commissions from insurance sales, are
generated from both in-house and independent agent sales. Total commissions are
split between the Company and its independent agents, as negotiated on a
case-by-case basis.
F-7
PRIME RESOURCE, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE 2 - SECURITIES AVAILABLE FOR SALE
--------------------------------------
Securities available for sale are comprised of investments in mutual funds. The
amortized cost of securities available for sale and the gross unrealized loss on
such securities at December 31, 2001, totaled $51,140 and $1,015, respectively.
Dividends realized and reinvested in 2001 totaled $1,140. There were no
investments in marketable securities, other than cash equivalents, during the
year ended December 31, 2000.
NOTE 3 - PROPERY AND EQUIPMENT
------------------------------
Property and equipment and related accumulated depreciation at December 31
consists of the following:
2001 2000
---------------- -----------------
Furniture and equipment $ 87,893 $ 77,672
Computer equipment and software 39,290 30,702
Vehicles 104,368 127,353
---------------- -----------------
231,551 235,727
Accumulated Depreciation (100,211) (68,059)
---------------- -----------------
$ 131,340 $ 167,668
================ =================
NOTE 4 - EMPLOYEE BENEFIT PLAN
---------------------------------
The Company has a defined contribution 401(K) plan and profit sharing plan. All
employees who meet certain minimum requirements are eligible to participate in
the plan. Employees may make contributions to the plan limited to the lesser of
15 percent of compensation or $7,000. Company contributions under both the
401(K) and profit sharing provisions of the plan are also discretionary. The
Company's expense from contributions to the plan totaled $23,425 and $19,490,
for 2001 and 2000, respectively.
NOTE 5 - 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 Belson 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".
F-8
PRIME RESOURCE, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE 5 - SEGMENT INFORMATION (CONTINUED)
-----------------------------------------
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.
Asset Management Insurance Products
------------------------------- ------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
------------------------------- ------------------------------
Revenues $ 449,031 $707,537 $ 1,557,246 $ 1,498,016
Expenses 816,310 836,449 1,186,614 1,092,935
------------------------------- ------------------------------
Net Income (Loss) $ (367,279) $(128,912) $ 370,632 $ 405,081
=============================== ==============================
Other Consolidated
------------------------------- ------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
------------------------------- ------------------------------
Revenues $ 12,707 $ 7,716 $ 2,018,984 $ 2,213,269
Expenses 52,705 28,385 2,055,629 1,957,769
------------------------------- ------------------------------
Net Income (Loss) $(39,998) $(20,669) $ (36,645) $ 255,500
=============================== ==============================
The Insurance Products segment had three significant customers, ranging from
approximately 14 to 43 percent of total 2001 commissions revenues, and 17 to 45
percent total commission revenue in 2000.
Expenditures for long-lived assets were $21,777 and $46,740 for the years ended
December 31, 2001 and 2000, respectively. All company assets are held in the
United States of America. Assets held by each segment for the years ended
December 31, 2001 and 2000 as follows:
2001 2000
---------------- ----------------
Asset Management $ 32,026 $ 65,537
Insurance Products 42,553 11,908
Other 159,941 158,281
---------------- ----------------
$ 234,520 $ 235,726
================ ================
F-9
PRIME RESOURCE, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
--------------------------------------------
The carrying amount of certain financial instruments in the accompanying
consolidated financial statements including: cash and cash equivalents, trade
receivables, accounts payable, and accrued liabilities, approximate fair value
due to the short-term nature of the instruments. The carrying value of notes
receivable also approximate fair market value due to the short-term maturity of
the notes or floating interest rates that approximate current market rates.
Securities available for sale at December 31, 2001 and 2000 are set forth in
Note 2.
NOTE 7 - RELATED PARTY TRANSACTIONS
-----------------------------------
Notes receivable
The Company had notes receivable from employees and members totaling $258,815
and $112,992 as of December 31, 2001 and 2000, respectively. The accompanying
consolidated statements of cash flows provide further information regarding
investing activities with related parties.
Amounts due from employees and members were subject to the accrual of interest
income at rates ranging from 4.5 to 4.9 percent. Interest income on amounts due
from related parties totaled $8,113 in 2001 and $759 in 2000.
Note payable
The Company was indebted to a member, under a note payable, in the amounts of
$15,579 and $14,905, as of December 31, 2001 and 2000, respectively. The note
bears interest at 4.5 percent and is due on demand.
NOTE 8 - LEASE COMMITMENTS
--------------------------
The Company leases certain office space under agreements classified as operating
leases. The space is leased from two entities that had certain common owners to
those of the Company. Rent expense, under such leases, totaled $110,935 and
$96,260 for the years ended December 31, 2001 and 2000, respectively.
In connection with the settlement agreement discussed in Note 1, effective
December 31, 2001, the remaining members of the Company divested themselves of
their ownership interest in Brownstone Associates, L.L.C., one of the two
related entities the Company leased office space from during 2001 and 2000.
F-10
PRIME RESOURCE, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE 8 - LEASE COMMITMENTS (CONTINUED)
--------------------------------------
Future minimum payments required under all noncancellable lease agreements as of
December 31, 2001 are as follows:
Year ended
December 31,
2002 $ 102,294
2003 72,765
2004 12,734
-----------
Total $ 187,793
=========
NOTE 9 - SUBSEQUENT EVENT
-------------------------
In January of 2002, the Company and its members granted a 26 percent membership
interest to an employee of the Company valued at $113,000, as an inducement to
remain with the Company and for services to be rendered in connection with a
planned reorganization, registration and offering of company stock.
In March of 2002, the Company was paid approximately $144,000 in amounts due
from members as of December 31, 2001 and advanced an additional $56,000 from
those same members. The proceeds were used to satisfy a $200,000 obligation to a
former member, which arose in connection with such member's termination.
F-11