United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549


                                    FORM 10-Q

[X]     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934 for the Quarterly Period Ended March 31, 1998

                                                             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               0-23616
                                           ----------------------

               Prime Retail, Inc. (Formerly known as Sky Merger Corp.)
--------------------------------------------------------------------------------
               (Exact name of registrant as specified in its charter)

           Maryland                                    38-2559212
----------------------------------           -----------------------------------
   (State or other jurisdiction of          (I.R.S. Employer Identification No.)
    incorporation or organization)



     5000 Hakes Drive
   Norton Shores, Michigan                              49441
-------------------------------          ---------------------------------------
 (Address of principal executive offices)          (Zip Code)


                              (616) 798-9100
--------------------------------------------------------------------------------
        (Registrants telephone number, including area code)

                           NOT APPLICABLE
--------------------------------------------------------------------------------
(Former name, former address, or former fiscal year, if changed since last
  report)

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  periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes               No  X
   ------            ------

Indicate the number of shares  outstanding  of each of the issuer's  classes of
common  stock,  as of the latest  practical date.

     As of June 23,  1998,  the issuer  had  outstanding 41,915,728 shares of
 Common Stock, $.01 par value per share.

<PAGE>

             Prime Retail, Inc. (Formerly known as Sky Merger Corp.)
                                    Form 10-Q

                                      INDEX





PART I:  FINANCIAL INFORMATION                                             PAGE


Item 1.  Financial Statements (Unaudited)

     Balance Sheets as of March 31, 1998 and
     December 31, 1997                                                         1

     Note to the Balance Sheets                                                2

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                                 3


PART II:  OTHER INFORMATION
Item 1.  Legal Proceedings                                                     3
Item 2.  Changes in Securities                                                 3
Item 3.  Defaults Upon Senior Securities                                       3
Item 4.  Submission of Matters to a Vote of Security Holders                   3
Item 5.  Other Information                                                     3
Item 6.  Exhibits or Reports on Form 8-K                                       3

Signatures                                                                     4
<PAGE>


PART I:  FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)

<TABLE>
             Prime Retail, Inc. (Formerly known as Sky Merger Corp.)
                                 Balance Sheets

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Assets                                                            March 31, 1998         December 31, 1997
<S>                                                                   <C>                        <C>
------------------------------------------------------------------------------------------------------------------------------------
Cash                                                                  $    1,000                 $   1,000
                                                                      ----------                 ---------
      Total assets                                                    $    1,000                 $   1,000
                                                                      ==========                 ==========
Stockholder's Equity

    Common stock, $.01 par value, 50,000,000 shares authorized, 100
       shares issued and outstanding                                  $        1                 $       1
    Additional paid-in capital                                               999                       999
                                                                      ----------                 ----------
    Total shareholder's equity                                        $    1,000                 $   1,000
                                                                      ==========                 ========== 
====================================================================================================================================
See note to balance sheets.

</TABLE>
































                                       -1-
<PAGE>

             Prime Retail, Inc. (Formerly known as Sky Merger Corp.)
                             Note to Balance Sheets

Note 1  Organization

Sky Merger  Corporation  ("New Prime") was organized on November 12, 1997 solely
for purposes of effectuating the Mergers(as defined below). On November 12, 1997
and as amended on February 1, 1998,  New Prime entered into a definitive  merger
agreement  with Prime Retail,  Inc. (File No.  0-23616) and Horizon Group,  Inc.
(File No.  1-12424) which  contemplates  the mergers (the  "Mergers") of each of
Prime  Retail,  Inc.  and  Horizon  Group,  Inc.  with and into New Prime.  Upon
consummation  of the  Mergers,  New Prime will change its name to Prime  Retail,
Inc. and become the sole general partner of Prime Retail,  L.P. which was formed
to acquire  ownership  interests in certain factory outlet centers and community
shopping  centers  and  to  continue  the  related  construction,   development,
acquisition,  leasing  and  management  operations.  Pending  completion  of the
Mergers, New Prime will not conduct any operations. New Prime intends to qualify
as a real estate  investment  trust ("REIT") under the Internal  Revenue Code of
1986, as amended,  for federal income tax purposes  commencing with the tax year
ending  December 31, 1998. If New Prime  qualifies  for taxation as a REIT,  New
Prime  generally  will not be  subject  to  federal  income tax to the extent it
distributes its REIT taxable income to its stockholders. If the Company fails to
qualify as a REIT in any taxable  year,  the Company  will be subject to federal
income tax on its taxable income at regular federal corporate tax rates. Even if
New Prime  qualifies for taxation as a REIT, New Prime may be subject to certain
state and local taxes on its income and property  and federal  income and excise
taxes on its undistributed  income. 
 
Note 2 Subsequent Event

On June 15, 1998,  Prime Retail,  Inc.  ("Old Prime")  completed its merger with
Horizon Group, Inc.  ("Horizon")  pursuant to an Amended and Restated  Agreement
and Plan of Merger, dated as of February 1, 1998 (the "Merger Agreement"), among
Old Prime,  Horizon,  Prime Retail,  L.P. ("Prime  Partnership"),  Horizon Group
Properties,  Inc.  ("HGP"),  Horizon Group  Properties,  L.P., and  Horizon/Glen
Outlet Centers  Limite  Partnership("Horizon  Partnership").  The merger and the
other  transactions  contemplated by the Merger  Agreement (the  "Transactions")
were  consummated  through the mergers of (i) Horizon  Partnership with and into
Prime  Partnership  and  (ii)Horizon  with and into New  Prime,  a wholly  owned
subsidiary of Horizon,  and the subsequent merger of Old Prime with and into New
Prime.  Following the mergers,  New Prime was renamed Prime Retail, Inc. On June
12, 1998, the  Transactions  and certain other related  matters were approved by
shareholders of Old Prime and Horizon at shareholder meetings and by the limited
partners of Prime Partnership and Horizon Partnership.

Pursuant to the Transactions,  each outstanding share of common stock, par value
$0.01 per share,  of Horizon is entitled  to receive  0.597 of a share of common
stock,  $0.01  par  value  per  share,  of New Prime and 0.20 of a share of 8.5%
Series B Cumulative  Participating  Convertible Preferred Stock, $0.01 par value
per share, of New Prime. In addition, pursuant to the Transactions, each limited
partner of Horizon Partnership is entitled to receive 0.9193 of a common unit of
limited  partnership  interest  in Prime  Partnership  for each unit of  limited
partnership  interest in Horizon  Partnership.  New Prime and Prime  Partnership
have retained  American  Stock  Transfer & Trust Company of New York to serve as
the Exchange Agent in connection with the exchanges.

Concurrent with the closing of the Transactions,  a special cash distribution of
$0.50 per  share/unit is being made to holders of Old Prime's Series C Preferred
Securities, Common Stock and common units of limited partnership interest, and a
special  cash  distribution  of $0.60 per share is being made to holders of Old
Prime Series B Preferred Stock.

Also,  in connection  with the  Transactions,  the common  equity of HGP,  which
initially  will own and operate 15 properties  being spun-off from Old Prime and
Horizon,   will  be  distributed  to  the   convertible   preferred  and  common
shareholders  and  unitholders  of Old Prime and the  shareholders  and  limited
partners of Horizon based on their ownership of New Prime immediately  following
the merger. Pursuant to this distribution, one share of Common Stock of HGP will
be  distributed  for every 20 shares of Common  Stock,  Common Units or Series C
Preferred  Stock of New Prime and  1.196  shares of Common  Stock of HGP will be
distributed for every 20 shares of Series B Preferred Stock held in New Prime.
<PAGE>

In addition in connection  with the  Transactions,  New Prime completed a $292.0
million debt  financing  with Nomura Asset  Capital  Corporation  ("NACC").  The
financing  consists  of (i) a $180.0  million  nonrecourse  permanent  loan (the
"Permanent  Loan") and (ii) a $112.0  million  full  recourse  bridge  loan (the
"Bridge Loan").  The Permanent Loan is (i)  collateralized by first mortgages on
four factory outlet centers,  (ii) bears a fixed rate of interest equal to 6.99%
and (iii)  requires  monthly  principal  and  interest  payments  pursuant to an
approximate 26-year amortization schedule. The Bridge Loan is (i) collateralized
by first mortgages on six factory outlet centers,  (ii) bears a variable rate of
interest  equal to 30-day LIBOR plus 1.35%,  (iii)  matures in three years,  and
(iv) requires monthly interest-only payments.

Following  the  spin-off  of HGP,  New Prime will be a  guarantor  or  otherwise
obligated  with  respect to  approximately  $42  million of HGP's  indebtedness,
including  $12.2 million of obligations  under HGP's $108.2  million  three-year
secured  credit  facility with NACC and $11.8 of mortgage debt that is scheduled
to mature August 14, 1998.  New Prime and HGP are continuing to seek the consent
of certain  parties to the  assumption by HGP or its affiliates of $14.3 million
of indebtedness in connection with the spin-off.

As a result of the  Transactions and pursuant to Rule 12g-3(a) of the Securities
Exchange  Act of  1934,  as  amended  (the  "Exchange  Act"),  New  Prime is the
successor  issuer to each of Horizon and Old Prime and New Prime's Common Stock,
$0.01 par value per share, its 10.5% Series A Senior Cumulative Preferred Stock,
$0.01  par value  per  share,  and its 8.5%  Series B  Cumulative  Participating
Convertible  Preferred Stock,  $0.01 par value per share, are deemed  registered
under Section 12(b) of the Exchange Act.

























                                       -2-

<PAGE>

PART I:  FINANCIAL INFORMATION


Item 2.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations



                        The Company did not conduct any operations during the
three months ended March 31, 1998.

PART II:  OTHER INFORMATION


Item 1.           Legal Proceedings

                  None

Item 2.           Changes in Securities

                  None

Item 3.           Defaults Upon Senior Securities

                  None

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

                  None

Item 5.           Other Information

                  None

Item 6.           Exhibits or Reports on Form 8-K

                  (a)      The following exhibits are included in this Form
                           10-Q:

                           Exhibit 27.1 Financial Data Schedule
                                        (Edgar filing only)

                  (b)      Reports on Form 8-K:

                           None








                                       -3-
<PAGE>

                                   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 Retail, Inc. (Formerly known as Sky Merger Corp.)
                                   Registrant



Date: June 23, 1998                                    /s/ Abraham Rosenthal
-------------------                                   ----------------------
                                                      Abraham Rosenthal
                                                      Chief Executive Officer 

                          
                                                      /s/ Robert P. Mulreaney
                                                     -------------------------
                                                       Robert P. Mulreaney
                                                       Executive Vice President,
                                                       Chief Financial Officer
                                                       and Treasurer




























                                       -4-