-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NE4aBa/307wTEzVZ5Ze7+FFhWVDOi+pZe4INBmftjYOPYatw5FjEwuGPypuNjGJr d6Qqj+FRRJh8SnXqWMNUMw== 0000804152-05-000001.txt : 20050204 0000804152-05-000001.hdr.sgml : 20050204 20050204113637 ACCESSION NUMBER: 0000804152-05-000001 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20050204 DATE AS OF CHANGE: 20050204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: E PRIME AEROSPACE CORP CENTRAL INDEX KEY: 0000804152 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, NONSCHEDULED [4522] IRS NUMBER: 592802081 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-09472-D FILM NUMBER: 05575729 BUSINESS ADDRESS: STREET 1: 2500 S. WASHINGTON AVE., UNIT 34 CITY: TITUSVILLE STATE: FL ZIP: 32796 BUSINESS PHONE: 3212690900 MAIL ADDRESS: STREET 1: 2500 S. WASHINGTON AVE., UNIT 34 CITY: TITUSVILLE STATE: FL ZIP: 32796 FORMER COMPANY: FORMER CONFORMED NAME: BANGOR INVESTMENTS INC DATE OF NAME CHANGE: 19871119 10KSB 1 r10ksb-04.txt 10KSB 9/30/04 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: September 30, 2004 Commission File No.: 33-9472-D E'PRIME AEROSPACE CORPORATION (Exact name of registrant as specified in its charter) Colorado 59-2802081 (State of Incorporation) IRS Employer Identification No. 2500 S. Washington Ave., Unit 34, Titusville, FL 32796 (Address of principal executive offices) 321-269-0900 (Registrant's telephone number, including area code) Securities to be registered pursuant to Section 12(b) of the ACT: None Securities to be registered pursuant to Section 12(g) of the ACT: Common Stock - - No Par Value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing for the past 90 days. Yes_X_No__ The aggregate market value of the registrant's voting stock held by non-affiliates of the registrant as of September 30, 2004 (based on the average of the high and low bid quotations on that date) was $7,848,856. As of September 30, 2004, the registrant has outstanding 826,195,392 shares of common stock and 12,471,800 "B" Stock Purchase Warrants. Documents incorporated by reference: None 2 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) This annual report on form 10KSB for the year ending September 30, 2004 has not been reviewed and the financial statements have not been audited by the Company's Certified Public Accountant. A reviewed 10KSB with audited financial statements will be filed upon completion. Index to Annual Report on Form 10KSB Page Part I ---- Item 1 - Business 3 Item 2 - Properties 4 Item 3 - Legal Proceedings 4 Item 4 - Submission of Matters to a Vote of Security Holders 4 Part II Item 5 - Market for the Registrant's Common Equity and Related Stockholder Matters 5 Item 6 - Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Item 7 - Financial Statements and Supplementary Data 6 Item 8 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 6 Part III Item 9 - Directors and Executive Officers 7 Item 10 - Executive Compensation 8 Item 11 - Security Ownership of Certain Beneficial Owners and Management 9 Item 12 - Certain Relationships and Related Transactions 9 Part IV Item 13 - Exhibits, Financial Statements, Schedules and Reports on Form 8-K 10 Certifications 12 Index to Financial Statements 15 3 PART I Item 1. Business E'Prime Aerospace Corporation and Subsidiaries (EPAC or the Company) was established in February, 1987, to capitalize on the worldwide demand for commercial satellite launching services. In October, 1987, an agreement was signed with the United States Air Force (USAF) which provided EPAC the use of technology based on the Peacekeeper solid fuel missile system. As a result of this agreement, EPAC began the development of the Eagle Series of launch vehicles. Eagle launch vehicles are based on a modular design of solid propellant booster stages and a bi-propellant liquid upper stage. In early 1990, the Peacekeeper first stage motor was included in the Strategic Arms Reduction Treaty (START) which was signed by both the governments of the United States and the former Soviet Union. Accordingly, pursuant to the execution of this treaty, the Company was severely restricted in producing EPAC's first stage motor. For nine years, EPAC's development concentrated towards the preservation of the technology developed during the Peacekeeper program. In 1998, using Peacekeeper baseline technology, EPAC's improved design changes, and development of its ESM-9 first stage motor in a 100% commercial environment, eliminated the ESM-9 from the START Treaty. EPAC is marketing a range of launch vehicles with payload capabilities from small communications satellites up to large multipurpose satellites of 20,000 pounds into a geosynchronous earth orbit. Light to medium lift single core vehicles will be launched from a launch tube which propels the rocket some 200 feet into the air before the first stage is ignited. This "cold launch" method increases the payload capability by approximately 10% and prevents costly refurbishment to the launch facility. Flight hardware for the Eagle Series launch vehicles will be produced by many of the same companies that were responsible for the manufacture and supply of materials for the Peacekeeper. By utilizing the experience of these suppliers, the track record of reliability experienced during the Peacekeeper missile system program will be carried forward into a commercial application. EPAC has succeeded in evolving the technology of the Peacekeeper ICBM into a commercial launch vehicle. Based on developments completed through November, 2004, EPAC is now proceeding with finance and contract negotiations. While substantial additional capital is needed for the construction of commercial launch facilities, management is confident in achieving this financial objective. Although EPAC has met its vehicle objective, a time-frame for the Company to establish profitable operations cannot be determined at this time. Over the past several years, other companies have developed a range of launch vehicles corresponding to the demand for commercial launch services. The Company currently considers its principal competitors to be Arianespace (Ariane), Lockheed Martin (Atlas, LLV), Boeing (Delta), Orbital Science (Taurus), China (Longmarch) and several Russian programs. As of September 30, 2004, the company had 2 full time employees and 3 consultants. 4 Item 2. Properties The Company leases its corporate office of approximately 3,000 square feet in Titusville, FL and occupies approximately 12,000 square feet of warehouse space in Memphis, TN. Substantially all of the development of the Company's launch technology as well as management of overall operations is based in the corporate offices. The space in Memphis is used primarily to warehouse EPAC launch hardware and support equipment and will provide support during testing of the Company's launch vehicle. During the year ended September 30, 1993, the Company purchased certain launch and support equipment from an agency of the United States government. As a result of this purchase, a substantial amount of additional and related equipment was transferred to EPAC. These acquisitions represent savings of millions of dollars of non-recurring start-up costs. Most of the equipment received, which is located at various facilities in the United States, consists of the following: Missile system hardware Support equipment including computer hardware, electronic consoles and launch vehicle transportation and handling equipment Specialized tooling associated with missile system hardware Most of the equipment acquired was primarily associated with the United States' government Peacekeeper missile system. EPAC has incorporated the Peacekeeper technology into the research and development of its launch systems as more fully discussed in Item 1 of this filing. Item 3. Legal Proceedings The Company has been subject to legal proceedings and claims which have arisen in the ordinary course of business. These claims have not and are not expected to have a material effect on the financial position of the Company. Item 4. Submission of Matters to a Vote of Security Holders None 5 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The Company's common stock is traded on the over-the-counter market. Market makers and other dealers provided bid and ask quotations of the Company's stock and listed such quotations in the National Quotation Bureau, Inc.'s "Pink Sheets". The table below presents the range of high and low bid quotations of the Company's securities. The quotations represent prices between dealers and do not include retail markup, markdown, or commissions; hence, they do not represent actual transactions. Quarter Ended ------------------------------------------------------------ March 31 June 30 September 30 December 31 ------------ ------------ ------------ ------------ Year High Low High Low High Low High Low ---- ----- ----- ----- ----- ----- ----- ----- ----- 2003 .0220 .0190 .0300 .0220 .0180 .0150 .0150 .0120 2004 .0120 .0110 .0160 .0150 .0095 .0095 The number of shareholders of the Company's common stock as of September 30, 2004, was 2,797. 6 Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and capital resources As indicated herein, the Company has expended substantial funds in the development of its business over the past several years. Sources of capital during this time have included stock sales and advances from shareholders. As of September 30, 2004, the Company has a working capital deficit of $8,536,679. In order to complete its development and reach full operational capability and, in order to satisfy existing liabilities, the Company will need to obtain substantial additional capital. Management is currently engaged in negotiations to secure the necessary funds to complete implementation of its launch technology, repay existing liabilities and fund facility construction. In addition, the Company is concluding the development of its marketing strategy (www.eprimeaerospace.com) and establishing a launching schedule. Results of Operations Since its inception, the Company has been in the development stage. Accordingly, the Company has not generated any revenues from operations and has not projected significant revenues until its development stage is completed and financing can be obtained for its operations. Through the year ended September 30, 2004, the Company has incurred an accumulated deficit of $20,532,936. Expenditures related to salaries and wages have been incurred principally in the development of the Company's launch technology systems. Item 7. Financial Statements and Supplementary Data The financial statements are filed as Item 14(a) of this Form 10KSB. Item 8. Changes In and Disagreements With Accountants On Accounting and Financial Disclosure None 7 Part III Item 9. Directors and Executive Officers The directors and executive officers of the Company and certain information regarding them are as follows : Name Age Office - ------------------ --- --------------------------------- B. G. Davis 72 President and Director Betty S. Davis 65 Secretary, Treasurer and Director Richard L. Elrod 70 Director Mr. B. G. Davis, President and Director of the company since its inception, has 37 years research, development, design, test and operations experience including 25 years in aerospace. From 1970 through 1987 he was President of E' Prime Labs (1), a small private product development firm that developed simple devices, complete chemical and biochemical processes, and complete plans for energy conversion and recovery. He has some twenty granted or pending patents. While employed by Boeing Aerospace Corporation, he was a member of the test team on the Minuteman missile, with responsibilities for conducting and supervising assembly, checkout and launch operations. He also had responsibility to coordinate interface problems between research and development and operational systems. He was with the Lunar Orbiter program from 1965-1967, inception to completion. Duties included design, build-up, assembly, test and installation of all ground tracking and reconstruction equipment located at Goldstone (California), Woomera (Australia), Madrid (Spain), and Cape Canaveral Air Force Station (Florida). On the Saturn program, he was design engineering manager from 1967-1972, responsible for systems specifications and configurations on all Saturn V ground support systems. He performed the design liaison for all booster first state engineering hangs from the factory at Michoud (New Orleans) to Kennedy Space Center. Mr. Davis retired from Boeing Aerospace Corporation in 1972. Mr. Davis spends one hundred percent of his time with the Company. E'Prime Labs, although owned by Mr. B. G. Davis, is unrelated to E'Prime Aerospace Corporation. No asset transfers were made between the two entities and no contracts exist between the two or are contemplated. Mr. Davis does not dedicate any of his time currently to the operation of E'Prime Labs. 8 Item 9. Directors and Executive Officers (Continued) Betty Scott Davis is Secretary, Treasurer and Director of the Company, a position she has held since its inception. From 1962 to 1963, Mrs. Davis served in contract administration for Boeing Aerospace Corporation. From 1963 through 1967 she was employed as Technical Editor and Engineering Aid with Brown Engineering, a private aerospace engineering firm from Huntsville, Alabama, and from 1973 through 1977 she served as administrative manager for Watson Engineering and Construction Company, a small private engineering and construction firm located in Cocoa, Florida. From 1977 through 1987 she served as controller and director with E' Prime Labs, a small private product development laboratory in Titusville, Florida. Mrs. Davis spends one hundred percent of her time with the Company.Betty Davis is the wife of B. G. Davis. Richard L. Elrod has been a Director with EPAC since August 1, 1991. Mr. Elrod worked with IBM Corporation for 26 years in a number of administrative, marketing and management positions of which his last 8 years were with the personal computer division. He served as Vice President/Director with Texas American Group, Inc. and Halter Venture Corporation and one year as President/Director with Halter Venture before his resignation when the company was sold. Item 10. Executive Compensation Other Compen- Name Year Salary $ Bonus $ sation - --------------------------- --------- --------- --------- --------- Salary Paid - ----------- B. G. Davis 2004 0 0 0 President 2003 0 0 0 Betty Davis 2004 0 0 0 Secretary, Treasurer 2003 0 0 0 Salary Accrued - -------------- B. G. Davis 2004 300,000 0 0 President 2003 300,000 0 0 Betty Davis 2004 250,000 0 0 Secretary, Treasurer 2003 250,000 0 0 9 Item 11. Security Ownership of Certain Beneficial Owners and Management The following table sets forth information regarding ownership of the Company's common stock as of September 30, 2004: (i) each person who is known by the Company to own beneficially more than five percent (5%) of the Company's common stock; (ii) each of the Company's directors; and (iii) by all directors and officers of the Company as a group. Amount and Nature of Name and Address of Beneficial Owners Percent of Beneficial Owner (Shares) Class - -------------------------- -------------------- ---------- B. G. Davis 476,400,000 57.66 % President, Director Titusville, Fl 32782 Richard Elrod 950,000 .11 % Director Houston, TX 77269 All Directors and Officers ___________ _______ As a Group 477,350,000 57.77 % =========== ======= Item 12. Certain Relationships and Related Transactions During the six year period ended September 30, 2004, the president and principal stockholder and certain employees have made advances to the Company. The advances are noninterest bearing and were made principally for working capital purposes. These advances are included in due to related parties in the accompanying consolidated balance sheet. Also included in due to related parties were unpaid salaries and wages net of advances made to directors (officers and principal stockholders) of the Company. 10 PART IV Item 13. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) (1) Financial Statements: The financial statements listed in the accompanying Index to Financial Statements are filed as part of this Form 10KSB (2) Financial Schedules: No financial schedules are filed as part of this Form 10KSB (3) Exhibits included herein: Articles of Incorporation* By-Laws* (b) Reports on Form 8-K: No report on form 8-K was filed during the year ended September 30, 2004. *Incorporated by reference to the Exhibits to the Company's Registration Statement No. 33-9472-D, on Form S-18. 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, E' Prime Aerospace Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized: E' PRIME AEROSPACE CORPORATION s/B. G. Davis By: B. G. Davis, President Date: February 4, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Company and in the capacities and on the dates indicated: s/B. G. Davis B. G. Davis, Director Date: February 4, 2005 s/Betty S. Davis Betty S. Davis, Director Date: February 4, 2005 12 Certification Pursuant to Section 302 I, Bob G. Davis, certify that: 1. I have reviewed this annual report on Form 10-KSB of E'Prime Aerospace Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. February 4, 2005 /s/ Bob G. Davis Bob G. Davis President 13 Certification Pursuant to Section 302 I, Betty S. Davis, certify that: 1. I have reviewed this annual report on Form 10-KSB of E'Prime Aerospace Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. February 4, 2005 /s/ Betty S. Davis Betty S. Davis Chief Financial Officer 14 Certification Pursuant to Section 906 In connection with the Annual Report of E'Prime Aerospace Corporation, a Colorado corporation (the "Company"), on form 10-KSB for the year ending September 30, 2004, as filed with the Securities and Exchange Commission (the "Report"), Bob G. Davis, President of the Company and Betty S. Davis, Chief Financial Officer of the Company, respectively, do each hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that to his knowledge: (1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Bob G. Davis Bob G. Davis President /s/ Betty S. Davis Betty S. Davis Chief Financial Officer February 4, 2005 15 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) Index to Financial Statements Page ---- Independent Auditors' Report 16 Financial Statements Consolidated Balance Sheet 17 Consolidated Statements of Operations 18 Consolidated Statements of Stockholders' Deficit 19 Consolidated Statements of Cash Flows 20 Notes to Financial Statements 22 16 Independent Accountant's Report To the Board of Directors E'Prime Aerospace Corporation & Subsidiaries Titusville, Florida Unaudited 17 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) Consolidated Balance Sheet (unaudited) September 30, 2004
Assets Current assets: Cash and cash equivalents $ 142 ----------- Total current assets 142 ----------- Property and equipment Computer equipment and software 34,014 Office furniture and equipment 57,432 Machinery and equipment 233,654 ----------- 325,100 Less accumulated depreciation (91,446) ----------- Property and equipment, net 233,654 ----------- Total assets $ 233,796 =========== Liabilities and Stockholders' Deficit Current liabilities: Notes payable $ 342,425 Due to related parties 4,984,538 Accounts payable 372,077 Accrued salaries, wage and payroll taxes 2,129,417 Accrued consultant fees 123,866 Accrued interest payable 584,498 ------------ Total current liabilities 8,536,821 Stockholders' deficit: Common stock, no par value, 900,000,000 shares authorized: 826,195,392 issued and outstanding 12,017,911 Additional paid-in capital 212,000 Deficit accumulated during the development period (20,532,936) ------------ Total stockholders' deficit (8,303,025) ------------ Total liabilities and stockholders' deficit $ 233,796 ============ The accompanying notes to financial statements are an integral part of this statement.
18 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) Consolidated Statement of Operations (unaudited)
Cumulative for the period from Year ended Year ended February 20, 1987 September 30, September 30, (inception) to 2004 2003 September 30, 2004 ------------- ------------- ------------------ Revenue: Service revenue $ - - 5,000 ----------- ----------- ------------------ Total revenue - - 5,000 ----------- ----------- ------------------ Expenses: General and administrative 688,327 697,282 20,537,936 ----------- ----------- ------------------ Total expenses 688,327 697,282 20,537,936 ----------- ----------- ------------------ Net loss $ (688,327) (697,282) (20,532,936) =========== =========== ================== Basic EPS: Net loss per common share $ (0.0008) (0.0008) =========== =========== The accompanying notes to financial statements are an integral part of this statement.
19 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Stockholders' Deficit (unaudited)
Common stock - no par ------------------------- Additional Deficit accumulated Number of Common paid-in during development shares stock capital period ------------ ----------- --------- ------------------- Balances at September 30, 2002 788,254,161 $10,504,796 212,000 (19,147,327) Stock issued for services, debt and stock purchases during 2003 $.0127 per share 157,993 2,000 - - $.0140 per share 357,143 5,000 - - $.0170 per share 294,118 5,000 - - $.0190 per share 263,158 5,000 - - $.0200 per share 1,352,250 27,044 - - $.0220 per share 136,364 3,000 - - $.0250 per share 108,000 2,700 - - $.0260 per share 192,308 5,000 - - $.0290 per share 103,449 3,000 - - $.0300 per share 117,734 3,532 - - $.0330 per share 388,114 12,808 - - $.0340 per share 285,525 9,708 - - $.0420 per share 33,985,075 1,426,923 - - Net loss for year ended September 30, 2003 - - - (697,282) ------------ ---------- -------- ------------ Balances at September 30, 2003 825,995,392 $12,015,511 212,000 (19,844,609) Stock issued for services during 2004 $.0120 per share 200,000 2,400 - - Net loss for year ended September 30, 2004 - - - (688,327) ------------ ---------- -------- ------------ Balances at September 30, 2004 826,195,392 $12,017,911 212,000 (20,532,936) ============ ========== ======== ============ See accompanying notes to consolidated financial statements.
20 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Cash Flows (unaudited)
Cumulative for the period from Year ended Year ended February 20, 1987 September 30, September 30, (inception) to 2004 2003 September 30, 2004 ------------- ------------- ------------------ Cash flows from operating activities: Net loss $ (688,327) (697,282) (20,532,936) Adjustments to reconcile net loss to cash (used in) operating activities: Depreciation and amortization 1,052 2,124 199,807 Loss on disposition of vehicles and equipment - - 32,683 Loss on sale of asset held for sale - - 14,000 Write-off of amount due from affiliate - - 39,021 Write off of accrued expenses - - (711,333) Write off of note payable - - (35,000) Shares issued for services rendered 2,400 18,245 3,309,543 Shares issued for interest and finance fee - - 2,028,070 Shares issued for settlement of litigation - - 1,115,023 Cash provided by (used for) changes in: Prepaid expenses - 2,400 - Deposits - - - Due to related parties 631,844 539,224 4,984,540 Accounts payable (19,809) (1,439) 372,077 Accrued salaries, wages and payroll taxes 14,919 13,421 2,129,418 Accrued consultant fees - - 123,866 Accrued interest payable 57,921 57,760 1,367,116 Accrued expenses - - 783,332 ------------- ------------- ------------ Net cash provided by (used in) operating activities - (65,547) (4,780,773) ------------- ------------- ------------ The accompanying notes to financial statements are an integral part of this statement.
21 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Cash Flows (Continued)
Cumulative for the period from Year ended Year ended February 20, 1987 September 30, September 30, (inception) to 2004 2003 September 30, 2004 ------------- ------------- ------------------- Cash flows from investing activities: Equipment acquisitions - - (493,908) Proceeds from disposition of vehicles - - 30,307 Proceeds from sale of asset held for sale - - 46,000 Increase in asset held for sale - - (60,000) Advances to affiliate - - (39,021) ------------- ------------- ------------------ Net cash (used in) operating activities - - (516,622) ------------- ------------- ------------------- Cash flows from financing activities: Proceeds from issuance of notes payable - - 2,156,683 Advances from shareholders and others - - 1,125,644 Repayment of notes payable - - (1,206,954) Organization costs - - (2,544) Proceeds from issuance of common stock - 65,547 3,012,708 Additional paid-in capital - - 212,000 ------------- ------------- ------------------- Net cash provided by financing activities - 65,547 5,297,537 ------------- ------------- ------------------- Net increase (decrease) in cash - - 142 Cash at beginning of period 142 142 - ------------- ------------- ------------- ----- Cash at end of period $ 142 142 142 ============= ============= =================== The accompanying notes to financial statements are an integral part of this statement.
22 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) Notes to Consolidated Financial Statements (unaudited) September 30, 2004 and 2003 Note 1 - Summary of Significant Accounting Policies Corporate Organization The Consolidated financial statements include the accounts of E'Prime Aerospace Corporation and its two inactive Subsidiaries (the Company). The Company has been in the development stage since its incorporation in Florida on February 20, 1987. The Company is engaged in seeking to provide a reliable and comprehensive payload and satellite launching service to industry and government organizations, both domestic and foreign. Because the Company has remained in its development stage since inception, it has expended a substantial amount of funds to date. The Company had a stockholders' deficit of $8,303,025 at September 30, 2004,and $7,617,098 at September 30, 2003. The Company needs substantial additional capital to complete its development and to reach an operating stage. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, and therefore, will recover the reported amount of its assets and satisfy its liabilities on a timely basis in the normal course of its operations. See note 8 to the consolidated financial statements for a discussion of management's plans and intentions. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in demand deposits and time deposits and highly liquid investments with maturities of less than one year. Depreciation Depreciation of property and equipment is computed by the straight-line method over the estimated useful lives of the assets. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets resulting principally from operating losses have not been recognized. 23 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) Notes to Consolidated Financial Statements (unaudited) Loss Per Share Loss per share amounts are based on the weighted average shares outstanding of 826,195,392 for the year ended September 30, 2004, and 821,870,079 for the year ended September 30, 2003. The B warrants described in note 4 have been excluded from the computation because they are not dilutive. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates. Shares Issued for Services or in Payment of Debt Shares issued for services or in payment of debt are recorded at the estimated value of the stock at the date of issuance. Note 2 - Related Party Transactions The president and principal stockholder and certain employees have made advances to the Company. The advances are non-interest bearing and were made principally for working capital purposes. These advances are included in due to related parties in the accompanying consolidated balance sheet. Also included in due to related parties were unpaid salaries and wages, net of advances made to directors (officers and principal stockholders) of the Company. During the year ended September 30, 2004, the amount due to related parties increased by $631,844 for a total of $4,984,538. The increase was from operating expenses paid by an officer/stockholder. 24 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) Notes to Consolidated Financial Statements (unaudited) Note 3 - Notes Payable Notes payable as of September 30, 2004 were as follows: Note payable at 30% interest, collateralized by fixed assets $ 142,500 Unsecured note with no stated interest rate 101,528 Note payable at 15% interest, collateralized by fixed assets 52,500 Other notes payable 45,897 ------------ Total notes payable $ 342,425 ============ All notes payable are considered to be current in the accompanying balance sheet. Note 4 - Common Stock The Company issued 200,000 shares of common stock during fiscal 2004 and 826,917 shares during fiscal 2003, valued at $2,400 and $18,245, for consultant services rendered during such years. As of September 30, 2004 the Company has outstanding Series B warrants that entitle the holder to purchase one share of common stock at $.20 per share on or at anytime before December 31, 2005. The Company has the right to redeem the Series B warrants upon 30 days written notice, at $.0002 per warrant, during the respective periods which the warrants are exercisable. At September 30, 2004, there were 12,471,800 shares reserved for that purpose. 25 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) Notes to Consolidated Financial Statements (unaudited) Note 5 - Property and Equipment The Company has purchased certain launching and support equipment from an agency of the U.S. Government for $233,654. As a result of this purchase, a substantial amount of related property was acquired at no additional cost to the Company. Most of the equipment acquired was primarily associated with the U.S. Government's discontinued "Peacekeeper" missile system and is located at various facilities in the United States. In connection with the receipt of the additional equipment as described herein, the Company has not yet obtained clear evidence of title for all of the equipment nor has it received a full and complete listing of the property transferred. In addition, there is no readily determinable market value associated with the property, most of which was built and delivered for very specialized purposes. Since the equipment is not presently being utilized, the Company has not begun recording depreciation on these assets. Note 6 - General and Administrative Expenses General and administrative expenses included interest expense of $69,759 for the year ended September 30, 2004 and $63,208 for the year ended September 30, 2003. Note 7 - Commitments and Contingencies The Company maintains its principal offices in Titusville, Florida. The lease is subject to seven one-year renewal periods at the discretion of the Company. Currently, the office space is leased on a month-to-month basis. Total rental expense for the years ended September 30, 2004 was $21,102 and $22,295 for the year ended September 30, 2003. Note 8 - Supplemental Cash Flow Information No payments for income taxes or interest expense were made during the years ended September 30, 2004 and September 30, 2003. 26 E'PRIME AEROSPACE CORPORATION AND SUBSIDIARIES (A Development Stage Company) Notes to Consolidated Financial Statements (unaudited) Note 9 - Management Plans and Intentions In 1990, the Company was prohibited by certain agencies of the United States government from using and developing certain technology originally provided by the United States Air Force in connection with management's plans to provide a comprehensive payload and satellite launching service. The Company was informed that the prohibition was associated with provisions of the Strategic Arms Reduction Treaty, (START) as signed by the United States and the former Soviet Union. As a result of the circumstances described above, the Company has encountered difficulties in obtaining the necessary funds to effectively develop its launching service. However, the Company's development of an improved version of the "Peacekeeper" first stage motor in a 100% commercial environment has eliminated it from the START Treaty. During fiscal year 1998, the Company began the licensing process with the Federal Aviation Authority and Kennedy Space Center. Based on development completed through February, 1999, EPAC is proceeding with contract negotiations. Management anticipates, through a combination of additional debt, but primarily equity financing, that the Company will successfully complete the remaining research and development of its launch technology, determine and implement its overall marketing strategy and establish a viable schedule for the testing and ultimate launching of commercial payloads. The success of achieving the objectives discussed above, as well as the ultimate profitability of the Company's operations once the development stage has ended, cannot be determined at this time. 24 -----END PRIVACY-ENHANCED MESSAGE-----