UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

(Mark One)



[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to __________

Commission File Number: 333-28249

PRIME AIR, INC.

(Exact name of Registrant as specified in charter)

|NEVADA                                  Applied For
State or other jurisdiction of               I.R.S. Employer I.D. No.
incorporation or organization

Suite 601 - 938 Howe Street, Vancouver, British Columbia,
CANADA                                     V6Z 1N9
(Address of principal executive offices)  (Zip Code)

Issuer's telephone number, including area code:  (604) 684-5700
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                           

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered

None N/A

Securities registered pursuant to Section 12(g) of the Act: None

Check whether the Issuer (1) has filed all reports required to be filed by section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such fling requirements for the past 90 days. (1) Yes [X ] No [ ] (2) Yes [X] No [ ]

Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-QSB or any amendment to this Form 10-QSB. [N/A]

#





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Table of Contents

PRIME AIR, INC.



Index





|           |  |                                                                                                                                               |  | Page No.
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|Part I     |  | Financial Information                                                                                                                         |  |         
|           |  |                                                                                                                                               |  |         
|Item 1.    |  | Financial Statements                                                                                                                          |  |         
|           |  | Consolidated Balance Sheetsas of September 30, 2002 and 2001 (unaudited) and
December 31, 2001 (audited)                                      |  | 3       
|           |  | Consolidated Statements of Incomefor the Three and Six Months Ended September 30, 2002 and 2001 (unaudited), and year ended December 31, 2001 |  |         
|           |  |                                                                                                                                               |  | 4       
|           |  | Consolidated Statements of Cash Flowsfor the Six Months Ended                                                                                 |  |         
|           |  | September 30, 2002 and 2001 (unaudited)                                                                                                       |  | 5       
|           |  | Notes to the Consolidated Financial Statements                                                                                                |  | 6       
|           |  |                                                                                                                                               |  |         
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                         |  | 16      
|           |  |                                                                                                                                               |  |         
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                                                                                    |  | 16      
|           |  |                                                                                                                                               |  |         
|Part II    |  | Other Information                                                                                                                             |  |         
|           |  |                                                                                                                                               |  |         
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                                                           |  | 17      
|           |  |                                                                                                                                               |  |         
|Item 5.    |  | Other Information                                                                                                                             |  | 17      
|           |  |                                                                                                                                               |  |         
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                                                              |  | 17      
|           |  |                                                                                                                                               |  |         
|Signatures |  |                                                                                                                                               |  | 18      





The financial statements attached hereto and included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.





However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made.  The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year.  These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-KSB for the year ended December 31, 2001.





#





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|PART I                                         |  |                    |                      |                             |              |              |            
|---------------------------------------------- |  | ------------------ | -------------------- | --------------------------- | ------------ | ------------ | -----------
|ITEM 1.  FINANCIAL STATEMENTS                  |  |                    |                      |                            
|                                               |  |                    |                      | PRIME AIR, INC.             |              |             
|                                               |  |                    |                      |                             |              |              |            
|                                               |  |                    |                      | CONSOLIDATED BALANCE SHEETS
|                                               |  |                    |                      | (all figures in US dollars) |             
|                                               |  |                    |                      |                             |              |              |            
|                                               |  |                    |                      |                             | September 30 | September 30 | December 31
|                                               |  |                    |                      |                             | 2002         | 2001         | 2001       
|                                               |  |                    |                      |                             | (Unaudited)  | (Unaudited)  | (Audited)  
|                                               |  |                    |                      | ASSETS                      |              |              |            
|Current Assets                                 |  |                    |                      |                             |              |             
|Cash and short-term deposits                   |  |                    | $1,667               | $5,211                      | $2,089      
|Prepaid expenses                               |  |                    |                      | 4,241                       | 2,501        | 1,550       
|GST recoverable                                |  |                    |                      | 1,234                       | 630          | 1,148       
|                                               |  |                    |                      |                             | 7,142        | 8,342        | 4,787      
|                                               |  |                    |                      |                             |              |              |            
|Capital Assets (Note 4)                        |  |                    | 514,017              | 528,298                     | 523,278     
|                                               |  |                    |                      |                             |              |              |            
|                                               |  |                    |                      |                             | $521,159     | $536,640     | $528,065   
|                                               |  |                    |                      |                             |              |              |            
|                                               |  |                    |                      | LIABILITIES                 |              |             
|Current Liabilities                            |  |                    |                      |                             |              |             
|Accounts payable and accruals                  |  |                    | $212,418             | $221,191                    | $210,305    
|Notes and advances payable  (Note 5)           |  | 31,989             | 39,017               | 14,989                     
|                                               |  |                    |                      |                             | 244,407      | 260,208      | 225,294    
|                                               |  |                    |                      |                             |              |              |            
|                                               |  |                    | SHAREHOLDERS' EQUITY |                             |             
|Capital Stock  (Note 6)                        |  |                    |                      |                             |             
|Authorized:                                    |  |                    |                      |                             |              |             
|50,000,000 common shares with a                |  |                    |                      |                            
|stated par value of $ .001/share               |  |                    |                      |                            
|3,000,000 preferred cumulative convertible     |  |                    |                     
|shares with a stated par value of $ .001/share |  |                    |                     
|Issued:                                        |  |                    |                      |                             |              |              |            
|22,898,666 common shares                       |  | (2001: 21,022,666) | 22,899               | 21,023                      | 21,979      
|                                               |  |                    |                      |                             |              |              |            
|Capital in excess of par value                 |  |                    | 1,696,427            | 1,652,977                   | 1,696,427   
|                                               |  |                    |                      |                             | 1,719,326    | 1,674,000    | 1,718,406  
|Accumulated Deficit During                     |  |                    |                      |                             |             
|Development Stage                              |  |                    |                      | (1,442,574)                 | (1,375,758)  | (1,415,635) 
|                                               |  |                    |                      |                             | 276,752      | 298,242      | 302,771    
|                                               |  |                    |                      |                             |              |              |            
|                                               |  |                    |                      |                             | $521,159     | $558,450     | $528,065   
|                                               |  |                    |                      |                             |              |              |            
|                                               |  |                    |                      |                             |              |              |            
|Approved on Behalf of the Board:               |  |                    |                      |                             |             
|"Blaine Haug"                                  |  |                    | Director             |                             |              |             
|                                               |  |                    |                      |                             |              |              |            
|"Wayne Koch"                                   |  |                    | Director             |                             |              |             



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| |                                            |          |            |                    |                                       |                    |                                                |             | 
| | ------------------------------------------ | -------- | ---------- | ------------------ | ------------------------------------- | ------------------ | ---------------------------------------------- | ----------- | 
| |                                            |          |            |                    | PRIME AIR, INC.                       |                    |                                                |            
| |                                            |          |            |                    | (A Development Stage Company)         |                    |                                               
| |                                            |          |            |                    | CONSOLIDATED STATEMENTS OF OPERATIONS
| |                                            |          |            |                    | (all figures in US dollars)           |                    |                                               
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| |                                            |          |            | Three Months       | Nine Months                           | Three Months       | Nine Months                                    | Year Ended  | 
| |                                            |          |            | Ended September 30 | Ended September 30                    | Ended September 30 | Ended September 30                             | December 31
| |                                            |          |            | 2002               | 2002                                  | 2001               | 2001                                           | 2001        | 
| |                                            |          |            | (Unaudited)        | (Unaudited)                           | (Unaudited)        | (Unaudited)                                    | (Audited)   | 
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| | Administrative And General Expenses        |          |            |                    |                                       |                   
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| | Audit and accounting                       | $972     | $2,906     | -                  | -                                     | $6,781             |                                               
| | Advertising                                |          | -          | -                  | -                                     | -                  | 666                                            |            
| | Amortization                               |          | 3,087      | 9,261              | 4,449                                 | 14,233             | 19,154                                         |            
| | Association membership fees                | -        | -          | -                  | -                                     | 5,768              |                                               
| | Commissions and finders' fees              | -        | -          | -                  | -                                     | 3,261              |                                               
| | Consulting                                 |          | -          | 920                | -                                     | -                  | 400                                            |            
| | Insurance                                  |          |            | 790                | 2,140                                 | (44)               | 1,393                                          | 2,374       | 
| | Interest and service charges               | 56       | 199        | 58                 | 155                                   | 1,289              |                                               
| | Legal costs                                |          | -          | -                  | 34                                    | 6,445              | -                                              |            
| | Office and general                         |          | -          | -                  | 8,208                                 | 9,860              | 1,249                                          |            
| | Repairs and maintenance                    | -        | 93         | (2)                | 66                                    | 1,420              |                                               
| | Rent and property taxes - airport facility | 8,336    | 8,336      | 9,101              | 9,101                                 | 8,426              |                                               
| | Telephone and utilities                    | (868)    | 1,087      | 1,638              | 3,154                                 | 4,754              |                                               
| | Transfer agent, listing and filing fees    | 615      | 3,251      | 1,197              | 4,476                                 | 6,405              |                                               
| | Travel, promotion and entertainment        | -        | -          | -                  | -                                     | 5,654              |                                               
| |                                            |          |            | 12,988             | 28,193                                | 24,639             | 48,883                                         | 67,601      | 
| | Loss (gain) on foreign                     |          |            |                    |                                       |                    |                                               
| | exchange conversion                        | (246)    | (1,254)    | (2,830)            | (4,959)                               | (5,606)            |                                               
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| |                                            |          |            | (246)              | (1,254)                               | (2,830)            | (4,959)                                        | (5,606)     | 
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| | Net Loss For The Period                    | $12,742  | $26,939    | $21,809            | $43,924                               | $61,995            |                                               
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| | Net Loss Per Common Share                  | (0.0006) | (0.0012)   | (0.0010)           | (0.0021)                              | (0.0029)           |                                               
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| | Weighted Average Common                    |          |            |                    |                                       |                    |                                               
| | Shares Outstanding                         |          | 22,898,666 | 22,898,666         | 21,022,666                            | 21,022,666         | 21,586,358                                     |            
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| |                                            |          |            |                    |                                       |                    |                                                |             | 
| |                                            |          |            |                    |                                       |                    | See Accompanying Notes To Financial Statements



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|                                     |        |          |                    |                                       |            
|------------------------------------ | ------ | -------- | ------------------ | ------------------------------------- | -----------
|                                     |        |          |                    | PRIME AIR, INC.                       |            
|                                     |        |          |                    | (A Development Stage Company)        
|                                     |        |          |                    |                                       |            
|                                     |        |          |                    | CONSOLIDATED STATEMENTS OF CASH FLOWS
|                                     |        |          |                    | (all figures in US dollars)          
|                                     |        |          |                    |                                       |            
|                                     |        |          |                    |                                       |            
|                                     |        |          |                    |                                       |            
|                                     |        |          |                    |                                       |            
|                                     |        |          | Nine Months        | Nine Months                           | Year Ended 
|                                     |        |          | Ended September 30 | Ended September 30                    | December 31
|                                     |        |          | 2002               | 2001                                  | 2001       
|                                     |        |          | (Unaudited)        | (Unaudited)                           | (Audited)  
|                                     |        |          |                    |                                       |            
|                                     |        |          |                    |                                       |            
|                                     |        |          |                    |                                       |            
|NET INFLOW (OUTFLOW) OF CASH RELATED |        |         
|TO THE FOLLOWING ACTIVITIES:         |        |          |                   
|                                     |        |          |                    |                                       |            
|OPERATING                            |        |          |                    |                                      
|Net loss                             |        |          | ($26,939)          | ($43,924)                             | ($61,995)  
|Non-cash charge - amortization       | 9,261  | 14,233   | 19,154            
|                                     |        |          | (17,678)           | (29,691)                              | (42,841)   
|                                     |        |          |                    |                                       |            
|Change in non-cash working capital   |        |         
|balances relating to operations      | (664)  | 105      | (1,886)           
|                                     |        |          | (18,342)           | (29,586)                              | (44,727)   
|                                     |        |          |                    |                                       |            
|                                     |        |          |                    |                                       |            
|FINANCING                            |        |          |                    |                                      
|Notes and advances payable           | 17,000 | 9,931    | (195)             
|                                     |        |          |                    |                                       |            
|Issue of capital stock               |        | 920      | -                  | 44,406                               
|                                     |        |          |                    |                                       |            
|                                     |        |          | 17,920             | 9,931                                 | 44,211     
|                                     |        |          |                    |                                       |            
|NET CASH INFLOW (OUTFLOW)            | (422)  | (19,655) | (516)             
|                                     |        |          |                    |                                       |            
|CASH, BEGINNING OF YEAR              | 2,089  | 2,605    | 2,605             
|                                     |        |          |                    |                                       |            
|CASH, END OF PERIOD                  | 1,667  | (17,050) | 2,089             
|                                     |        |          |                    |                                       |            





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|PRIME AIR, INC.                                            
|-----------------------------------------------------------
|( A Development Stage Company)                             
|Consolidated Statements of Shareholders' Equity and Deficit
|(  all figures in US dollars )                             
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Balance at Inception on                                    
|March 10, 1989                                             
|Issue of common shares for cash                            
|at $.001/share                                             
|Net loss for the year ended                                
|March 31, 1990                                             
|Balance, March 31, 1990                                    
|                                                           
|Issue of common shares for cash                            
|at $.001/share                                             
|Net loss for the year ended                                
|March 31, 1991                                             
|                                                           
|Balance, March 31, 1991                                    
|Net loss for the year ended                                
|March 31, 1992                                             
|                                                           
|Balance, March 31, 1992                                    
|                                                           
|Issue of common shares for cash                            
|at $.277/share                                             
|at $.214/share                                             
|Net loss for the year ended                                
|March 31, 1993                                             
|Balance, March 31, 1993                                    
|                                                           
|Issue of common shares for services                        
|at nominal value                                           
|                                                           
|Issue of common shares for cash                            
|at $.001/share                                             
|at $.109/share                                             
|at $.154/share                                             
|at $.280/share                                             
|at $.330/share                                             
|at $.463/share                                             
|at $.694/share                                             
|at $.925/share                                             
|Net loss for the year ended                                
|March 31, 1994                                             
|Balance, March 31, 1994                                    



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|PRIME AIR, INC.                                            
|-----------------------------------------------------------
|( A Development Stage Company)                             
|                                                           
|Consolidated Statements of Shareholders' Equity and Deficit
|(  all figures in US dollars )                             
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Balance Forward                                            
|Issue of common shares for services                        
|at nominal value                                           
|Issue of common shares for cash                            
|at $.374/share                                             
|at $.463/share                                             
|Net loss for the year ended                                
|June 28, 1994                                              
|                                                           
|Balance, June 28, 1994                                     
|                                                           
|Share subscription at $.367/share                          
|                                                           
|Net loss for the year ended                                
|December 31, 1994                                          
|                                                           
|Balance, December 31, 1994                                 
|                                                           
|Issue of common shares for cash                            
|and/or services at an average                              
|of $.234/share                                             
|                                                           
|Net loss for the year ended                                
|December 31, 1995                                          
|                                                           
|Balance, December 31, 1995                                 
|                                                           
|Issue of common shares for cash                            
|at $.50/share                                              
|                                                           
|Issue of common shares for services                        
|at nominal value                                           
|                                                           
|Net loss for the year ended                                
|December 31, 1996                                          
|                                                           
|Balance, December 31, 1996                                 

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|PRIME AIR, INC.                                            
|-----------------------------------------------------------
|( A Development Stage Company)                             
|                                                           
|Consolidated Statements of Shareholders' Equity and Deficit
|(  all figures in US dollars )                             
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Balance Forward                                            
|                                                           
|Issue of common shares for services                        
|at nominal value                                           
|                                                           
|Issue of common shares for                                 
|debt settlements:                                          
|at $.500/share                                             
|at $.504/share                                             
|at $.530/share                                             
|                                                           
|Net loss for the year ended                                
|December 31, 1997                                          
|                                                           
|Balance, December 31, 1997                                 
|                                                           
|Issue of common shares for                                 
|debt settlements:                                          
|at $.3935/share                                            
|at $.4006/share                                            
|                                                           
|Issue of common shares for services                        
|at nominal value                                           
|                                                           
|                                                           
|Two for one stock split, May 18, 1998                      
|                                                           
|Issue of common shares for                                 
|debt settlements:                                          
|at $.25/share                                              
|                                                           
|Issue of common shares for services                        
|at nominal value                                           
|                                                           
|Transfer Agent adjustment                                  
|                                                           
|Write off of uncollectable share                           
|subscription receivable                                    
|Net loss for the year ended                                
|December 31, 1998                                          
|Balance, December 31, 1998                                 



See Accompanying Notes To Financial Statements

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|PRIME AIR, INC.                                            
|-----------------------------------------------------------
|( A Development Stage Company)                             
|Consolidated Statements of Shareholders' Equity and Deficit
|(  all figures in US dollars )                             
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Balance Forward                                            
|Issue of common shares for                                 
|debt settlements:                                          
|at $.20/share                                              
|at $.25/share                                              
|Issue of common shares for services                        
|at nominal value                                           
|Net loss for the year ended                                
|December 31, 1999                                          
|Balance, December 31, 1999                                 
|                                                           
|Issue of common shares for cash                            
|at $.08/share                                              
|Issue of common shares for                                 
|debt settlements:                                          
|at $.08/share                                              
|at $.10/share                                              
|Net loss for the year ended                                
|December 31, 2000                                          
|Balance, December 31, 2000                                 
|                                                           
|Issue of common shares for cash                            
|at $.08/shre                                               
|Issue of common shares for                                 
|debt settlement                                            
|at $.08/share                                              
|Issue of common shares for services                        
|at nominal value                                           
|                                                           
|Transfer Agent adjustment                                  
|Net loss for the year ended                                
|December 31, 2001                                          
|Balance, December 31, 2001                                 
|Issue of common shares for services                        
|at nominal value                                           
|Net loss for the nine months ended                         
|September 30, 2002                                         



|Balance, September 30, 2002 | 22,898,666 |  | $      22,899 |  | $ 1,696,427 |  | $           - |  | $  (1,442,574)
|--------------------------- | ---------- |  | ------------- |  | ----------- |  | ------------- |  | --------------



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PRIME AIR, INC.

(A Development Stage Company)



Notes To Consolidated Financial Statements

September 30, 2002 and 2001





1.

Incorporation, Principles of Consolidation and Accounting Presentation



The Company was incorporated under the laws of the State of Nevada, USA on November 10, 1996, the purpose of which was to change the domicile of the Company from the State of Delaware to the State of Nevada.  This change was approved by the shareholders of both corporations on November 26, 1997 and effected through a plan and agreement of merger with the surviving corporation being Prime Air, Inc. (Nevada).  The articles of merger were filed with the appropriate State authorities on December 15, 1997 which became the effective date of the merger.



The Delaware corporation was incorporated on April 4, 1996 and acquired all of the assets, liabilities and shareholders of a previous Utah corporation of the same name.  The Utah corporation had been reincorporated on August 30, 1993 as Astro Enterprises, Inc. and on June 28, 1994, pursuant to appropriate shareholder agreements, acquired all outstanding shares of Prime Air Inc. (a Canadian corporation) in exchange for shares of its capital stock on a .787796 to 1 basis, thereby providing the shareholders of Prime Air Inc. with 90% of the outstanding capital stock of Astro Enterprises, Inc.  Astro Enterprises, Inc. then changed its name to Prime Air, Inc.  Following incorporation of the Delaware company, the Utah corporation was dissolved on May 15, 1996.



These consolidated financial statements include the accounts of the Company and its wholly-owned operating subsidiary, Prime Air Inc. (the Canadian corporation) and have been prepared in accordance with U.S. GAAP standards.



The accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the Companys consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and six-month periods ended September 30, 2002 and 2001 are not necessarily indicative of the results that may be expected for a full year.



1.

Nature of Operations / Going Concern Considerations



The Company is presently in its developmental stage and currently has minimal sources of revenue to provide incoming cash flows to sustain future operations. The future successful operation of the Company is dependent upon its ability to obtain the financing required to complete and operationalize the terminal facility in Pemberton, British Columbia and to commence air service operations to Pemberton, British Columbia and to Mammoth Mountain in California on an economically viable basis.



These consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets, obtain financing as required and discharge its liabilities and commitments in the normal course of business.



1.

Significant Accounting Policies



Reporting Currency



All amounts in these consolidated financial statements are reported in U.S. funds.  Monetary assets and liabilities have been converted from Canadian funds where applicable utilizing the year-end closing exchange rate of $ 1.5906 CDN/$1.00 U.S.  Transactions recorded throughout the year in the accounts of the Canadian subsidiary have been converted to their U.S. equivalent at actual amounts where available or by utilizing the average annual rate as posted by the Internal Revenue Service of the United States as follows: $ 1.5484 CDN/$1.00 U.S. (2000: $1.4852 CDN/ $1.00 U.S.). Exchange rates at September 30, 2002 had not materially changed from the December 31, 2001 stated rate.



---



PRIME AIR, INC.

(A Development Stage Company)



Notes To Consolidated Financial Statements

September 30, 2002 and 2001



Fair Value of Financial Instruments



In accordance with the requirements of Statement of Financial Accounting Standards No. 107, Disclosure About Fair Value Of Financial Instruments, the carrying amounts reported on the balance sheets for cash and cash equivalents, namely, cash and short-term deposits, prepaid expenses, GST recoverable, [GST being an acronym for Goods and Services Tax) , accounts payable and accrued liabilities and notes and advances payable approximate their fair market value.



Receivables and Prepaid Expenses



All amounts reported as receivables or prepaid expenses have been recorded at their original values.  There have been no amounts written off as bad debts or provided for as an allowance against the recovery of these assets.



Capital Assets



Air Terminal Construction Costs: Expenditures relating directly to the construction of the air terminal facility and related engineering and design have been recorded in the accounts of the Company at cost, net of amortization which is provided on a straight-line basis over the 30-year term of the property lease.



Furniture and Equipment: Furniture and equipment is stated at cost, net of amortization which is provided for at the rate of 20% per annum on the declining balance basis.



Use of Estimates in the Preparation of Financial Statements



The preparation of financial statements in conformity with generally accepted accounting principals 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 amounts of revenues and expenses during the reporting periods.  In these financial statements, assets, liabilities and results of operations involve significant reliance on management estimates.  Actual results could differ from the use of those estimates.



Income Taxes



The Company adopted Statement of Financial Accounting Standards No. 109, Accounting For Income Taxes, during the fiscal year ended December 31, 1998 and applied the provisions of that statement on a retroactive basis to the previous fiscal years, which resulted in no significant adjustments.



Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, requires an asset and liability approach for financial accounting and reporting for income tax purposes.  This statement recognizes (a) the amount of taxes payable or refundable for the current year and (b) deferred tax liabilities and assets for future tax consequences of events that have been recognized in the financial statements or tax returns.



Deferred income taxes result from temporary differences in the recognition of accounting transactions for income tax and financial reporting purposes.  There were no temporary differences at December 31, 2001 and earlier years and accordingly, no deferred tax liabilities have been recognized for all years.



The operating subsidiary Company has cumulative net operating loss carry forwards of approximately

$668,000 at December 31, 2001 and $ 790,000 at December 31, 2000.  No effect has been shown in the financial statements for these carry forwards as the likelihood of future tax benefit from such is not presently determinable.  The potential income tax benefits of these net operating loss carry forwards of approximately $ 118,000 at December 31, 2001 and $ 144,000 at December 31, 2000 (based upon current income tax rates) have been offset by valuation reserves of the same amount.  Net operating losses expire after seven (7) years.  Operating losses of the US parent corporation have not been determined.



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PRIME AIR, INC.

(A Development Stage Company)



Notes To Consolidated Financial Statements

September 30, 2002 and 2001





4.    Capital Assets



Capital assets consist of the following at September 30, 2002 and 2001 and December 31, 2001:





September 30, 2002



Accumulated         Net Book



Cost



Amortization            Value



Air terminal construction costs

$ 641,972

$ 129,373           $ 512,599



Furniture and equipment

5,154

3,736           1,418

$ 647,126             $ 133,109          $  514,017







September 30, 2001



Accumulated         Net Book



Cost

Amortization            Value



Air terminal construction costs

$ 641,972            $ 115,569           $ 526,403



Furniture and equipment

5,154              3,260          1,894

$ 647,126            $ 118,829           $  528,297







December 31, 2001



Accumulated         Net Book



Cost

Amortization            Value



Air terminal construction costs

$ 641,972            $ 120,267           $ 521,705



Furniture and equipment

5,154              3,581          1,573

$ 647,126            $ 123,848           $  523,278





5.Notes and Advances Payable



The notes and advances payable are unsecured, non-interest bearing and are without specific terms of repayment.  Included therein is an amount of $11,846 which has been advanced to the Company by a shareholder and/or a corporation controlled by that shareholder who is the beneficial owner of 2,245,226 shares of common stock of the Company, that holding representing  9.80% of the issued and outstanding capital of the Company. $17,000 has been advanced to the Company as a deposit towards shares to be subscribed.

























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PRIME AIR, INC.

(A Development Stage Company)



Notes To Consolidated Financial Statements

September 30, 2002 and 2001



|6. Capital Stock                                                                         |                                         |  |           |            |           |                 
|---------------------------------------------------------------------------------------- | --------------------------------------- |  | --------- | ---------- | --------- | ----------------
|Authorized:                                                                              |                                         |  |           |            |           |                 
|150,000,000 common shares with a stated par value of $.001/share                         |                                        
|5,000,000 preferred cumulative convertible shares with a stated par value of $.001/share
|                                                                                         |                                         |  |           |            |           | Number of Shares
|                                                                                         | Common Shares Issued:                   |  |           |            |           |                 
|                                                                                         | To August 31, 1993                      |  |           |            |           |                 
|                                                                                         | - for cash                              |  |           |            | 300,000   |                 
|                                                                                         | Prime Air Inc. share exchange           |  |           |            |           |                 
|                                                                                         | - June 28, 1994                         |  |           |            | 2,700,000 |                 
|                                                                                         | During year ended December 31, 1995     |  |           |            |          
|                                                                                         | - for cash                              |  |           |            | 562,550   |                 
|                                                                                         | Balance at December 31, 1995            |  |           | 3,562,550  |           | 482,352         
|                                                                                         |                                         |  |           |            |           |                 
|                                                                                         | During year ended December 31, 1996     |  |           |            |          
|                                                                                         | - for cash                              |  |           |            | 1,510,558 |                 
|                                                                                         | - for consulting and related services   |  | 1,483,673 |            | 1,483    
|                                                                                         |                                         |  |           |            |           | 2,994,231       
|                                                                                         | Balance, December 31, 1996              |  |           | 6,556,781  |           | 1,239,114       
|                                                                                         |                                         |  |           |            |           |                 
|                                                                                         | During the year ended December 31, 1997 |  |           |            |          
|                                                                                         | - shares-for-debt settlements           |  | 255,432   |            | 130,751  
|                                                                                         | - consulting and related services       |  | 328,000   |            | 328      
|                                                                                         |                                         |  |           |            |           | 583,432         
|                                                                                         | Balance, December 31, 1997              |  |           | 7,140,213  |           | 1,370,193       
|                                                                                         | During the year ended December 31, 1998 |  |           |            |          
|                                                                                         | - shares-for-debt settlements           |  | 93,015    |            | 27,370   
|                                                                                         | - consulting and related services       |  | 1,953,727 |            | 1,954    
|                                                                                         | - Transfer Agent correction             |  |           | (6,000)    |           | (6)             
|                                                                                         |                                         |  |           |            |           | 2,040,742       
|                                                                                         |                                         |  |           |            |           | 9,180,955       
|                                                                                         | - "Two for One" share split             |  |           | 8,832,155  |           | -               
|                                                                                         | Balance, December 31, 1998              |  |           | 18,013,110 |           | 1,399,511       
|                                                                                         | During the year ended December 31, 1999 |  |           |            |          
|                                                                                         | - shares-for-debt settlements           |  | 624,450   |            | 146,050  
|                                                                                         | - consulting and related services       |  | 1,010,000 |            | 1,010    
|                                                                                         |                                         |  |           |            |           | 1,634,450       
|                                                                                         | Balance, December 31, 1999              |  |           | 19,647,560 |           | 1,546,571       
|                                                                                         | During the year ended December 31, 2000 |  |           |            |          
|                                                                                         | - for-cash                              |  |           |            | 500,000   |                 
|                                                                                         | - shares-for-debt settlements           |  | 875,106   |            | 87,429   
|                                                                                         |                                         |  |           |            |           | 1,375,106       
|                                                                                         | Balance, December 31, 2000              |  |           | 21,022,666 |           | 1,674,000       



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PRIME AIR, INC.

(A Development Stage Company)



Notes To Consolidated Financial Statements

September 30, 2002 and 2001





6.    Capital Stock (continued)



|                                    |  |         |            |         | Number of Shares  |        | Consideration
|----------------------------------- |  | ------- | ---------- | ------- | ----------------- | ------ | -------------
|                                    |  |         |            |         |                   |        |              
|Balance, December 31, 2000          |  |         | 21,022,666 |         | 1,674,000        
|                                    |  |         |            |         |                   |        |              
|During year ended December 31, 2001 |  |         |            |        
|- for cash                          |  |         |            | 300,000 |                   | 24,000
|- shares-for-debt settlements       |  | 250,000 |            | 20,000 
|- consulting and related services   |  | 400,000 |            | 400    
|- Transfer Agent correction         |  |         | 6,000      |         | 6                
|                                    |  |         |            |         | 956,000           |        | 44,406       
|Balance, December 31, 2001          |  |         | 21,978,666 |         | 1,718,416        
|                                    |  |         |            |         |                   |        |              
|- consulting and related services   |  | 920,000 |            | 920    
|Balance, September 30, 2002         |  |         | 22,898,666 |         | $       1,719,326





7.   Related Party Transactions



During the years ended December 31, 2001 and 2000, no cash remuneration was paid to any director or officer of the Company.  The Company has adopted the policy of issuing restricted common shares to certain directors and officers for services rendered.  Specifically billed amounts have been settled by way of shares-for-debt arrangements, the share value thereof being determined by securities regulations.  In addition, further shares have been issued to certain directors and officers for services provided to the Company of a more general nature, these shares being attributed a nominal value of $ 0.001 per share.  During the year ended December 31, 2001, an officer and director of the Company received 250,000 common shares by way of a debt settlement covering an obligation of $20,000 and another director and officer received 400,000 common shares with an attributed value of $400 for general management and consulting services.  During the year ended December 31, 2000, shares issued to related parties consisted of debt settlements only, such issuances being 871,006 common shares covering obligations of $87,100.



On January 28, 2002, the Board of Directors authorized the issuance of  800,000 restricted common shares to directors and officers of the Company in recognition of services provided thereto to December 31, 2001, and 120,000 restricted common shares in settlement of debts for services.  These shares were issued from Treasury on February 13, 2002.  The attributed value of these shares is $920.  Due to the restricted nature of these shares, the fair market value cannot be determined or reasonably estimated.





















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PRIME AIR, INC.

(A Development Stage Company)



Notes To Consolidated Financial Statements

September 30, 2002 and 2001





8.Rent, Property Taxes and Lease Commitment



The Canadian subsidiary corporation has entered into an Airport Lease and Operating Agreement with The Corporation of The Village of Pemberton in British Columbia whereby it has been granted an exclusive and irrevocable lease over the lands and airport facilities associated with the Pemberton Airport.  The term of the Lease and Operating Agreement, including extension options relating thereto, is for a total of 30 years with terminal rent payable as follows:



*

$ 67 US ($100 CDN) per annum for the initial six (6) years (1993 through 1999);

and thereafter



*

5% of gross receipts per annum derived from the operation of the terminal facilities, excluding amounts received in connection with the sale of airline tickets and other forms of transportation. The lease commitment amounts for 2001 through 2005  cannot be quantified as the amount of gross receipts for those years cannot be determined and active operation of the terminal facilities has not yet commenced.



No lease payments were made during the years ended December 31, 2001 or 2000 as there were no gross receipts derived from operations in those years. The Company, however, was obligated to pay property taxes imposed by municipal authorities, such levies amounting to $8,426. for the year ended December 31, 2001 (2000: $9,294). $8,336 was paid during the current operating period of year 2002.



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PART 1

Item 2

Managements Discussion and Analysis of Financial Condition and Results of Operation

Some of the information presented in or incorporated by reference into this report constitutes "forward-looking statements." Although the Company believes that its expectations are based upon reasonable assumptions within the bounds of its knowledge of its proposed business and operations, it is possible that actual results may differ materially from its expectations. Factors that could cause actual results to differ from expectations include the inability of the Company to raise the additional capital necessary to commence its principal operations or the failure to consummate a definitive agreement with Voyager Airways Limited.

The Company is the parent of a wholly owned subsidiary, Prime Air, Inc. ("Prime Air (BC)"), a company originally incorporated under the laws of the Province of British Columbia, Canada, on March 10, 1989, under the name "High Mountain Airlines Inc." for the purpose of establishing air service to serve the Whistler, British Columbia, Canada, area. Prime Air (BC) has entered into a lease and operating agreement with the Village of Pemberton, British Columbia, Canada, to plan, develop, construct, manage, and operate a terminal facility at the Pemberton Airport.

To the present date, Prime Air (BC) has constructed the basic terminal building and proposes to facilitate regular, scheduled air service to Pemberton Airport to serve the nearby resort community of Whistler.  Sufficient funding has not been secured to provide for costs for completion of certain infrastructure items including landing lights, airside and groundside related equipment, advance marketing and working capital requirements.  Management estimates the requirement for a commitment of approximately $3,000,000 to provide a satisfactory start up of the British Columbia operation.

During the quarter ended September 30, 2002, management continued discussions with principals in the airline industry and with interested parties at the intended destination with respect to providing air service to the Mammoth Mountain resort in the Eastern Sierra area of California. Points of origin considered are Burbank and San Jose California.  The Company has identified the need for scheduled air service to this location and in particular believes the capability of the Dash 7 aircraft would be ideal in terms of safety, reliability and cost effectiveness.  The Company has not completed its business plan with respect to this venture, however, it has received support and encouragement from principals vital to this service.  The Company has engaged established airline consultants and is continuing to develop its business for this purpose.

The results of the operations for the three and nine months ended September 30, 2002 show costs at approximately 39% less than the same period of the previous year, however, because of the development stage nature of the company, those figures may be representative of the continuing nature of the Company on a current basis, but not representative of the company if it is successful at securing funding for either the Whistler, British Columbia or the Mammoth Mountain, California components of its intended operation.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk



The Company is presently in its developmental stage and currently has minimal sources of revenue to provide incoming cash flows to sustain future operations. The future successful operation of the Company is dependent upon its ability to obtain the financing required to complete and operationalize the terminal facility in Pemberton, British Columbia and to commence air service operations to Pemberton, British Columbia and to Mammoth Mountain in California on an economically viable basis.



The financial statements of the Company have been prepared on a going concern basis which assumes the Company will be able to realize its assets, obtain financing as required and discharge its liabilities and commitments in the normal course of business.  Other than a commitment from management to provide funds for minimal operational requirements, there is no present commitment for funds adequate to provide for operational items necessary to complete the start up of air service activities.



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PART II



OTHER INFORMATION



Item 4.     Submission of Matters to a Vote of Security Holders



None



Item 6.     Exhibits and reports on Form 8-K



(a)     Exhibits:



The Company did not file any exhibits during the quarter ended September 30, 2002.



(b)     Reports on Form 8-K:



The Company did not file any reports on Form 8-K during the quarter ended September 30, 2002.



ITEM 7. LEGAL PROCEEDINGS

Neither the Company nor any of its properties is a party to any material pending legal proceedings or government actions, including any material bankruptcy, receivership, or similar proceedings. Management of the Company does not believe that there are any material proceedings to which any director, officer or affiliate of the Company, or its subsidiary, any owner of record of beneficially of more than 5 percent of the Common Stock of the Company, or any associate of any such director, officer, affiliate of the Company, or its subsidiary, or security holder is a party adverse to the Company, or it subsidiary, or has a material interest adverse to the Company, or it subsidiary.

In December 1994 the U.S. Securities and Exchange Commission filed a complaint in the United States District Court for the District of Columbia (Case Number 1:94CV02633) against an entity known as "Astro Enterprises, Inc.," and against Ernst Hiestand, Thomas Hiestand, Elizabeth Kuriger, Henry Strubin, Peter Thaler, and Leonard Gotshalk, all of whom were allegedly affiliated with such entity. The basis for such complaint was the dissemination to the public from approximately March 1989 through May 1990, of false and misleading information concerning the business of such entity. The entity referenced in such action was incorporated in the State of Utah on May 23, 1985, and was involuntarily dissolved on May 1, 1990, for failure to file an annual report with the State of Utah. In 1995 Mr. Paul Parshall executed a consent and settlement of the foregoing action, ostensibly as the president, director, and authorized agent of the entity named in such action. Management does not believe such action in any way involved the Utah Corporation which was subsequently incorporated under the same name on August 30, 1993, and which subsequently changed its name to Prime Air, Inc. and changed its domicile to the State of Delaware. Management does not believe there is or was any legal relationship between the "Astro Enterprises, Inc." incorporated on May 23, 1985, and the "Astro Enterprises, Inc." which was incorporated in 1993 and was the predecessor to the Company. In addition, management does not believe that Mr. Parshall was authorized to execute such consent on behalf of either entity. Management is unaware whether Mr. Parshall ostensibly executed such consent on behalf of the original Astro Enterprises, Inc. or the predecessor to the Company by the same name. However, the allegations contained in such action reference events all of which occurred prior to the incorporation of the predecessor to the Company in 1993.

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In May 1996 the Company entered into a settlement agreement and undertaking with the Alberta Securities Commission (file number 100164) in which the Company agreed to be more diligent in complying with the requirements of the Alberta Securities Act and the rules made thereunder. In addition, the Company paid $2,000 to the commission toward the costs of the investigation conducted by the Commission. In February 1996 the Company announced an offering of its common shares in Alberta newspapers. Between February 1 and March 1, 1996, the Company received $93,040 from fifteen investors in Alberta. The investors received an offering document which did not conform with the form of an offering memorandum required pursuant to the Alberta Securities Act and the distribution to the investors did not qualify for an exemption under such act. Upon being contacted by the staff of the securities commission, the Company placed all investment monies in trust pending the disposition of the matter. Thereafter the Company sent an offering memorandum in the required form and an offer of rescission to all of the investors. After the return of monies to investors who either did not qualify for an exemption or who elected rescission, and the filing of a proper report with the securities commission, no further action was taken by the securities commission.

ITEM 8. REINSTATEMENT OF MARKET MAKER COMPLIANCE

A market maker representing the company has completed and filed a Form 211 and Form 211 Addendum with respect to reinstatement of Market Maker trading status.  As at August 1, 2002, status has not been restored.   The Company received a request from the United States Securities and Exchange Commission on June 30, 2002 consisting of 57 questions with respect to Form 10-K for the year ended December 31, 2001 and Form 10Q for the quarter ended March 31, 2002 with respect to a review process which would assist the Company in its compliance with the applicable disclosure requirements and to enhance the overall disclosure of its filing.  As at November 14, 2002, the Company had not completed its full response to the United States Securities and Exchange Commission in that regard.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PRIME AIR, INC.



By:/s/   Blaine Haug





Name:    Blaine  Haug

Title:     President and CEO,



Dated    November 14, 2002





|Name           | Title                          | Date             
|-------------- | ------------------------------ | -----------------
|               |                                |                  
|/s/ Wayne Koch | Director                       | November 14, 2002
|Blaine Haug    | (Principal Accounting Officer) |                  
|               | (Principal Financial Officer)  |