SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: December 31, 2002
PRIME HOLDINGS AND INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 000-30477 88-0421215
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
521 FIFTH AVENUE, SUITE 1700, NEW YORK, NY
(Address of principal executive offices)
Registrant's Telephone Number: (212)292-4258
MYTRAVELGUIDE.COM, INC.
(Former name of Registrant)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For fiscal year ended December 31, 2002
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from _____ to _____
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.0001 per share
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 filing requirements for the past 90 days. X Yes No
--- ---
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB [X]
Issuer's revenues for the fiscal year ended December 31, 2002 were approximately
$369,000.
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of February
4, 2003 was $503,280.
As of December 31, 2002 the issuer had 8,351,077 shares of its common stock
issued and outstanding after giving effect to a 1 for 6.5 reverse split which
took effect as of the close of trading on March 28, 2003.
Transitional Small Business disclosure Format [ ] Yes [X] No
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
We were incorporated under the laws of the State of Nevada, on December
3, 1998, as Diligencia Technologies, Inc. On February 25, 2000, our name was
changed to MyTravelGuide.com, Inc. On August 15, 2001, in contemplation of
acquiring Societa Italiana Telecommunicazioni Integrate, SpA, (S.I.T.I.), our
name was changed to Prime Holdings and Investments, Inc.
On September 13, 2001, we entered a Share Purchase Agreement with
S.I.T.I. Under the terms of this agreement, we purchased all of the issued and
outstanding shares of S.I.T.I. in exchange for 45,000,000 shares of our common
stock. In addition to the purchase price, 5,000,000 shares of our common stock
were issued to finders and consultants.
BUSINESS OF ISSUER
We are a holding company conducting our business through our wholly
owned subsidiary, S.I.T.I., an Italian corporation principally engaged in
merchant banking activities. From January 2000 to December 31, 2001, S.I.T.I.
completed equity investments in eight Italian-based companies operating in three
sectors: construction, telecommunications and special situations. These include
the following companies: Sardegna '97 SpA; Artel SrL; Datico SpA; Datico's
subsidiaries, Impresa Mondelli SrL and Datico Services SpA; and KELTI SrL. Our
consolidated financial statements include the operating results of each of these
companies from the beginning of the fiscal year ended December 31, 2002. During
the year, however, Datico SpA entered bankruptcy proceedings in Italy. Prior to
commencement of the bankruptcy proceedings, Datico sold its interests in Impresa
Mondelli SrL and Datico Services SpA. S.I.T.I. is a party to an arbitration
against the other shareholder of KELTI Srl, and a trustee has been appointed to
protect the rights of the shareholders during the pendency of the arbitration.
The accompanying consolidated financial statements include the accounts
of Prime and companies that for accounting purposes have been designated as
either subsidiaries or associated companies. The financial statements of our
subsidiaries are consolidated as well. These include the accounts of S.I.T.I.
and its subsidiaries described above. Investments in subsidiary companies are
accounted for using the purchase method. Entities which are not controlled, and
over which Prime does not exercise significant influence (referred to as
associated companies), are accounted for using the cost method, including the
accounts of Consorzio Tecnos.
Our functional currency is the U.S. dollar. All amounts appearing in
this report are in U.S. dollars. For our subsidiary and associated companies,
whose functional currencies are other than U. S. dollars, amounts have been
translated from such currency to U.S. dollars at exchange rates set forth in the
Financial Statements included herein (see Note 2 to Financial Statements).
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As of December 31, 2002, Prime and its remaining subsidiaries had
approximately $3,722,000 of assets on a consolidated basis.
See Management's Discussion and Analysis of Results of Operations, for
the net revenues and pre-tax earnings of each of our subsidiaries. See Notes to
Consolidated Financial Statements included herein for our net revenues and
pre-tax earnings in each principal areas in which we conduct business.
At the closing of the acquisition of S.I.T.I. on September 13, 2001,
S.I.T.I. had equity interests in the following six companies: Datico SpA, Datico
Services SpA, Impresa Mondelli SrL, SCA SrL, KELTI Srl, and Consorzio Tecnos.
From September 13, 2001, to December 31, 2001, S.I.T.I completed two additional
equity investments, Artel SrL, and Sardegna '97 SpA; and divested itself of SCA
SrL. The following table sets forth certain information as of December 31, 2002,
regarding the remaining subsidiaries in which Prime has an equity investment:
COMPANY SHAREHOLDER PERCENT HELD DATE ACQUIRED PRINCIPAL ACTIVITY
------- ----------- ------------ ------------- ------------------
S.I.T.I SPA PHII 100% SEPTEMBER 2001 HOLDING COMPANY
ARTEL SRL S.I.T.I SPA 51% SEPTEMBER 2001 ART BROKERAGE
SARDEGNA 97 SPA S.I.T.I SPA 100% OCTOBER 2001 CONSTRUCTION
DATICO SPA* S.I.T.I SPA 51% JANUARY 2000 TELECOMMUNICATIONS
KELTI SRL* S.I.T.I SPA 51% NOVEMBER 2000 TELECOM. SYSTEMS
*Datico SpA is currently in bankruptcy proceedings in Italy. S.I.T.I. is a party
to an arbitration against the other shareholder of KELTI Srl, and a trustee has
been appointed to protect the rights of the shareholders during the pendency of
the arbitration.
BUSINESS STRATEGY
Management believes that because of the proliferation of leveraged
buy-outs in the 1980's, the economic recession of the early 1990's and the
record levels of high-yield debt issuances during the past several years, there
are a large number of companies that have undergone, are undergoing or will
undergo financial difficulties over the next several years. In order to remain
viable, these companies typically undertake restructuring because of their high
levels of debt. Our business strategy is, through our wholly owned subsidiary
S.I.T.I., to operate and then acquire, privately owned, financially distressed
companies with viable businesses and valuable assets, initially in Italy and
thereafter, in Western Europe and the United States. As we are only dealing with
private companies, it is not uncommon for the principals of these companies to
personally guarantee all of such debt. Based upon the experience of our
management and assuming we have the requisite financial resources, management
believes that it will be able to identity investment opportunities, renegotiate
and provide the necessary funds to pay off existing debt and other contractual
obligations that these principals have personably guaranteed.
We would provide the financing to enable financially distressed private
companies to operate on an interim basis with a view towards selling off the
businesses and assets in whole or in part. We would work with the principals of
those companies to negotiate settlements with company creditors
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whose businesses and/or assets are to be acquired and who have personally
guaranteed loans made to their companies and pledged personal assets to secure
those loans.
Prior to our involvement with a particular target company, we would
form a new entity which would enter into an operating agreement with the target
company. We would have complete operating autonomy with respect to the day to
day operations of those companies. In consideration for giving up such autonomy
to us, we would, either alone, or with joint venture partners, agree to provide
the necessary capital, usually in the form of loans, to settle, on terms
negotiated by us, with company creditors. We would also be paid a management fee
from the operating revenues of the company. As part of the negotiations, we will
negotiate the release of the principals of the target companies from their
personal guarantees and free up their collateral. At such time as the creditors
are paid off and the principals are released from their personal guarantees, we
would become the owner of the target company and be in a position to sell off
those businesses and assets.
In order to achieve the foregoing, we will heavily rely on the
experience of John Visendi, our Chief Operating Officer, who will identify,
negotiate, manage and liquidate these investments. Mr. Visendi has substantial
experience in identifying and working with financially distressed companies.
Our primary investment objective will be to achieve short term capital
appreciation by contracting to acquire financially distressed companies,
operating those companies in the near term and selling off the businesses and
assets of those companies at a profit. We believe that there are existing
business opportunities in businesses that are generating substantial revenues in
established markets, but which have undergone, or are in the process of
undergoing, or are likely to undergo a financial restructuring pursuant to
bankruptcy or reorganization proceedings. It is our intention ultimately to
acquire the businesses and assets of those companies, at a discount to market
value for comparable companies, that are not financially troubled. We may make
these acquisitions either on our own or jointly with joint venture partners,
none of whom, other than Pergarex SA, a principal of shareholder of Prime, have
been identified.
Given the amount of our capital resources, including that which may
become available from a joint venture partner, including Pergarex, we estimate
that we will be able to enter into agreements with up to two privately held,
financially distressed companies in the fiscal year ending December 31, 2003.
IDENTIFICATION AND ANALYSIS OF TARGET COMPANIES Our management and
principals are individuals and companies that either have been or continue to be
involved in the funding and business development of emerging, small and middle
capitalization companies throughout Western Europe. Our management, primarily
through Mr. Visendi, has broad abilities to perform traditional merchant banking
functions such as deal selection and origination, due diligence, valuation and
deal structuring. Our management and principals are exposed to a number of
investment and acquisition opportunities each year; and have strong
relationships with investment bankers, venture capitalists and other influential
persons and entities in the financial services sector.
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We have also focused on a small collection of valuable fine art held by
Artel and a real estate development held by Sardegna.
COMPETITION Prime operates in a highly competitive environment with
numerous well-established Italian, regional and foreign companies, and many
smaller companies. Specifically, we compete with both domestic and international
specialty and commercial finance companies, commercial banks, private mezzanine
and private equity funds, venture capital companies, investment banks and other
equity and non-equity based investment funds. We also compete with regional and
national financial institutions and finance subsidiaries of large industrial
corporations seeking to acquire new or complimentary business units.
SUBSIDIARY OPERATIONS
Prime's current subsidiaries are engaged in a broad range of activities
including merchant banking, construction, real estate development,
telecommunications and special situations. No material part of our revenues,
taken as a whole, are derived from a single customer or group of customers.
ARTEL SRL- On September 25, 2001, our subsidiary S.I.T.I., acquired 51% of the
share capital of Artel S.r.L (Artel) the purchase price was US $6,827. Artel's
principal offices are located at Viale Mentana 14/a 43100 Parma, Italy, and its
telephone number is 39-02-7631-7701.
Artel is a development stage company engaged in the purchase, resale
and brokerage of fine art, antiques and collectables. As of December 31, 2002,
Artel's assets consisted principally of art inventory including 12 paintings by
19th-century European artists. These paintings were acquired between September
2, 1999 and December 31, 2001. Two of these paintings are particularly valuable
having been appraised at 30,000,000,000 Italian lire (approximately $15,000,000)
in November 2001. However this valuation could change due to changes in the fine
art market or, in terms of US dollars, due to currency fluctuation. Moreover,
this valuation does not necessarily reflect actual proceeds which Artel would
receive upon sale of these paintings which would be net of royalities,
commissions and other costs of the sale. These paintings are reflected on our
balance sheet at cost, which was approximately $813,000. Artel's collection of
fine art is insured by Riunione Adriatica di Sicurta, of Milan, Italy.
Artel's business is still in its development stage, and it has not
generated any revenues to date. Artel plans to generate revenue through the
purchase, resale and exhibition of fine art, as well as providing brokerage and
related intermediary services to others wishing to purchase and sell fine art,
antiques and collectibles.
Artel specializes in 19th century fine art, as the company believes
that investment opportunities in fine art originating in this period have not
been fully exploited, representing significant unrealized potential. Artel's
collection of fine art will be featured in rotating exhibitions of original
artworks in museum and major galleries throughout Europe. Several of Artel's
paintings
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have been reserved for exhibition by local museums and art galleries, and
revenue from exhibitor rental is expected during 2003.
In addition, Artel intends to function as a broker or intermediary,
accepting property on consignment from selling clients. Artel will bill the
buyer for property purchased, receive payment from the buyer and remit to the
consignor, the consignor's portions of the buyer's payment after deducting
Artel's commissions, expenses and applicable taxes.
Artel has reserved the website address www.arteartel.it and expects to
have the site completed by the third quarter of 2003. The website is one of
several professional marketing techniques that Artel plans to deploy to
stimulate purchaser interest, and match buyers and sellers. The website is
intended for presale marketing and promotion only with all transactions being
completed off-line.
SARDEGNA '97 SPA- On October 18, 2001, S.I.T.I., our subidiary, acquired all of
the issued and outstanding shares of Sardegna '97 SpA (Sardegna). The purchase
price was $112,472. Sardegna's principal offices are located at Via Lodi 47,
20135, Milan, Italy, and its telephone number is 39-02-7631-7701.
Sardegna is a planned multi-villa luxury real estate resort development
project in Sardinia, Italy. The project is in Phase I, with approximately 20% of
the project completed, consisting of roads, electrical infrastructure, levelling
of the land and landscaping. Initial sales were originally expected during the
second quarter of 2002. However, this date has been extended because we are
awaiting a possible zoning change which would allow us to increase in the number
of villas allowed in the development. Impresa Mondelli SpA, a former subsidiary
of S.I.T.I. was originally retained to build Sardegna, but because Datico sold
its interest in Impresa Mondelli and it is no longer an affiliate of Prime, we
are seeking an alternate construction company to complete the project once the
zoning issues are resolved.
During the fiscal year ended December 31, 2002, Datico SpA, S.I.T.I.'s
51%-owned subsidiary, filed for bankruptcy in Italy. The bankruptcy proceeding
is pending, and a receiver has been appointed to oversee the fulfillment of
certain outstanding orders. Prior to filing for bankruptcy, Datico sold its
interests in Datico Services SpA, Impresa Mondelli Srl to third parties.
S.I.T.I. is in arbitration proceedings regarding the disposition of the
assets of its remaining subsidiary, Kelti, and a trustee has been appointed to
protect the rights of the shareholders during the pendency of the arbitration.
5
GOVERNMENT REGULATION
We are not subject to any significant governmental regulations that
materially affects our operations.
EMPLOYEES
As of December 31, 2002, Prime and its subsidiaries had 15 full time
employees. Of these, three are performing executive and administrative functions
and eight are performing accounting, financial and office functions.
ITEM 2. DESCRIPTION OF PROPERTY
Prime's administrative office in the US is located at 521 Fifth Avenue,
Suite 1700, New York, NY. We have entered into an agreement for use of that
space for $175.00 per month. The agreement is terminable by either party on the
first day of any month upon 60 days' prior notice.
Prior to March 2003, our administrative office was located at 8275
South Eastern Avenue, Suite 200, Las Vegas, Nevada 89123, where we shared leased
space under a month-to-month agreement in an executive office center. Under that
arrangement, we paid $150 per month.
S.I.T.I.'s principal executive and administrative offices are located
in Italy, at Via Della Spiga, 22, Milan, 20121, which is leased pursuant to a
year-to-year agreement. S.I.T.I. is obligated to pay $66,000 per year for its
210 square meter office space. We consider these administrative and executive
offices to be adequate and suitable for S.I.T.I.'s current operations.
Sardegna, prime's indirect, wholly-owned subsidiary, owns land in
Sardinia, Italy on which it intends to build its planned development described
above.
There are no limitations on the percentage of assets which may be
invested in real estate or interests in real estate, real estate mortgages, or
securities of or interests in persons primarily engaged in real estate
activities. Such policy may be changed without a vote of security holders.
ITEM 3. LEGAL PROCEEDINGS
Prime is not a party to any material legal proceedings and, to the best
of our knowledge, no such action by or against it has been threatened.
S.I.T.I, our wholly-owned subsidiary, is involved in an arbitration
proceeding against the minority shareholder of Kelti Srl. The dispute involves
the allocation and distribution of Kelti's profits, losses, assets and
liabilities. A trustee has been appointed to ensure that no action is taken to
prejudice either of the parties during the pendency of the arbitration.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for a vote of our security holders during the
fourth quarter of the fiscal year ended December 31, 2002.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our shares are listed on the OTC Bulletin Board, which requires all
listed companies to be registered with the SEC under Section 13 or 15(d) of the
Securities Exchange Act of 1934 and to be current in their required filings once
so registered. Our common stock commenced trading in the fourth quarter of 2000,
and its current trading symbol is PHIV.OB. The following table sets forth the
high and low bid information for our common stock for each quarter, since the
fourth quarter of 2000. Subsequent to August 2001, this information was obtained
from Yahoo Finance!TM as provided by Commodity Systems, Inc. As these are
over-the-counter market quotations, they reflect inter-dealer prices, without
retail markup, markdown, or commissions, and may not represent actual
transactions. All prices are adjusted to give effect to the 1 for 6.5 reverse
split of our common stock which took effect at the close of trading on March 28,
2003.
2003:
QUARTER ENDED: HIGH LOW
------------- ---- ---
March 31 .26 .13
2002:
QUARTER ENDED: HIGH LOW
------------- ---- ---
December 31 .455 .13
September 30 1.755 .325
June 30 2.925 1.495
March 31 3.25 1.495
2001:
QUARTER ENDED: HIGH LOW
------------- ---- ---
December 31 5.655 2.275
September 30 5.85 2.925
June 30 6.5 3.445
March 31 7.111 3.452
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We have no outstanding options, warrants to purchase, or securities
convertible into our common stock. We have not agreed to register any shares of
our common stock for any shareholder. There are presently 8,351,077 shares of
common stock issued and outstanding.
STOCKHOLDERS
There are approximately 47 shareholders of record of our common stock.
DIVIDENDS
Prime has not paid any dividends to date and does not plan to pay
dividends in the foreseeable future.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Prime currently has no securities authorized for issuance under equity
compensation plans. Our management is currently negotiating terms of such
compensation, and such terms have yet to be decided.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD LOOKING STATEMENTS
This Form 10-KSB contains forward-looking statements. Such statements
consist of any statement other than a recitation of historical facts and can be
identified by words such as may, expect, anticipate, estimate, hopes, believes,
continue, intends, seeks, contemplates, suggests, envisions or comparable
language. These forward-looking statements are based largely on our expectations
and are subject to a number of risks and uncertainties, including but not
limited to: those risks associated with our ability to identify and raise
additional capital to complete our acquisition of one or more other companies;
our ability to raise, and our allocation of, resources as necessary to continue
operations; our ability to generate cash flow from revenue or other sources; our
ability to use our capital stock for acquisitions, paying expenses or other
disbursements, attracting personnel or contractors and other business uses. Many
of these factors are beyond our management's control. These uncertainties could
cause our actual results to differ materially from the expectations reflected in
these forward-looking statements. In light of these risks and uncertainties, we
cannot be certain that the forward-looking information contained in this annual
report on Form 10-KSB will, in fact, occur. Potential investors should consider
carefully the previously stated factors, as well as the more detailed
information contained elsewhere in this Form 10-KSB, before making a decision to
invest in our common stock.
8
The following is a discussion of our financial condition and results of
operations as of the date of this Form 10-KSB. This discussion and analysis
should be read in conjunction with the accompanying audited Financial Statements
of Prime and subsidiaries, including the Notes thereto, which are included
elsewhere herein.
GENERAL
This Management's Discussion and Analysis presents a review of our
consolidated operating results and financial condition for the fiscal years
ended December 31, 2002 and 2001. This discussion and analysis is intended to
assist in understanding the financial information of Prime, its subsidiaries and
associated companies presented elsewhere herein. This section should be read in
conjunction with our consolidated financial statements and the related notes.
On September 13, 2001, we entered a Share Purchase Agreement (the
Agreement) with Societa Italiana Telecommunicazioni Integrate, SpA (S.I.T.I.).
Under the terms of the Agreement, Prime purchased all of the issued and
outstanding shares of S.I.T.I. In consideration of the S.I.T.I. in exchange for
45,000,000 shares of its common stock. From January 2000 to December 31, 2001,
S.I.T.I. completed equity investments in certain Italian-based companies
operating in three sectors: construction, telecommunications and special
situations. These companies included Datico SpA; Datico's subsidiaries, Impresa
Mondelli SrL and Datico Services SpA; Sardegna '97 SpA; Artel SrL; and KELTI
SrL. As a result of the worldwide downturn in the telecommunications industry,
Datico, Impresa Mondelli, Datico Services and KELTI, all companies in that
industry, lost significant value. Datico sold its interests in Impresa Mondelli
and Datico Services and then, during fiscal 2002, entered bankruptcy proceedings
in Italy. S.I.T.I. is in arbitration proceedings regarding the allocation and
distribution of the profits, losses, assets and liabilities of KELTI, and a
trustee has been appointed to protect the rights of the shareholders during the
pendency of this arbitration. The two remaining subsidiaries, Artel SpA and
Sardegna SpA are engaged in the fine art and real estate businesses,
respectively.
The consolidated financial statements contained elsewhere herein
include the accounts of Prime and its subsidiaries and associated companies
through December 31, 2002. Investments in subsidiary companies are accounted for
using the purchase method. Entities which are not controlled, and over which
Prime does not exercise significant influence (referred to as associated
companies), are accounted for using the cost method. This includes the accounts
of Consorzio Tecnos.
From the date of incorporation on December 3, 1998, to September 13,
2001, Prime was a development stage company that did not have revenues from
operations. From December 3, 1998 to February 25, 2000, Prime operated under the
name Diligencia Technologies, Inc. and from February 25, 2000 to August 15,
2000, operated under the name MyTravelGuide.com Inc. As of September 13, 2001,
S.I.T.I. held $1,337,000 in cash, a portion of which was used by Prime to
satisfy its cash requirements.
We believe Prime's existing cash balances will be sufficient to meet
anticipated cash requirements for the next twelve months. We may, nonetheless,
seek additional financing to support
9
Prime's activities during the next twelve months or thereafter, including
private and/or public offerings of common stock, or seek out venture patners to
provide with us to finance acquisitions. Such additional capital may not be
available on reasonable terms, if at all, when needed or desired.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RELATED PARTY TRANSACTIONS AND
CONTINGENCIES:
BASIS OF CONSOLIDATION
The financial statements of our subsidiaries, are consolidated.
Entities which are not controlled but over which the Prime has the ability to
exercise significant influence, referred to as associated companies, are
accounted for using the equity method. Investments in entities that we do not
control or over which we do not exercise significant influence are accounted for
using the cost method.
Our acquisition of the shares of SITI S.p.A. on September 13, 2001 was
accounted for as a reverse acquisition whereby SITI S.p.A. is considered the
acquiring company. The comparative figures presented are those of SITI S.p.A.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash and those short-term market
instruments which on acquisition, have a term to maturity of three months or
less.
MARKETABLE SECURITIES
Publicity traded securities deemed available-for-sale by Prime are
measured at fair value. Gains and losses on available-for-sale securities are
presented separately in the stockholders' equity section.
USE OF ESTIMATES
The preparation of our consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financials statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
INVENTORY
Inventory is recorded at the lower of cost and net realizable value.
Cost is established on a LIFO basis. No reserve for obsolete and slow-moving
inventories is deemed necessary.
INVESTMENTS
Investments are shown at the lower of cost or fair market value.
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PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Amortization is
provided annually on a straight-line basis at rates calculated to write off the
assets over their estimated useful lives as follows except in the year of
acquisition when one half of the rate is used.
Buildings 3%
Plant and machinery 15.50%
Other equipment 25%
Other plant and equipment 12-25%
INTANGIBLE ASSETS
Intangible assets are stated at cost, reduced on a straight-line basis
to their net book value through provision for amortization provided at the
following annual rates:
Licences, trade-marks and similar rights 20%
Patents and intellectual property rights 33%
Other intangible assets 20%
Additions during the year are amortized at the above rates.
GOODWILL
Prior to July 2001 goodwill arising on consolidation was not amortized,
whereas the goodwill arising on the acquisition of a business by SITI S.p.A. is
amortized over 10 years.
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141") and statement of Financial Accounting Standards No.142, "Goodwill
and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires all business
combinations to be accounted for using the purchase method of accounting and
that certain intangible assets acquired in a business combination shall be
recognized as assets apart from goodwill. SFAS 142 recognizes that goodwill has
an indefinite useful life and will no longer be subject to periodic
amortization. Goodwill will be tested at least annually for impairment in lieu
of amortization. The SFAS 142 requires that goodwill arising from acquisitions
subsequent to June 30, 2001 should not be amortized.
Prime evaluates the carrying value of goodwill and long-lived assets to
be held and used. The carrying value of an asset is considered impaired when the
anticipated undiscounted cash flow form such assets is less than its carrying
value. In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair market value. Fair market value is determined
using the anticipated cash flows discounted at a rate commensurate with the risk
involved. Losses
11
on long-lived assets to be disposed of are determined in a similar manner,
except that fair market values are reduced by the cost of disposition of such
assets.
REVENUE RECOGNITION
TELECOMMUNICATION PRODUCTS AND SERVICES
Revenue is recorded net of trade discounts and allowances upon shipment
of products or rendering of services and when all significant contractual
obligations have been satisfied and collection is reasonably assured.
CONSTRUCTION ACTIVITIES
Construction contracts range up to 8 years in length and revenues are
recognized using the percentage-of-completion method. Percentage of completion
is calculated using the cost-to-cost method.
INCOME TAXES
National corporate taxes (IRPEG) in Italy are levied on book income
adjusted for disallowable expenses at the rate of 36%.
In addition, a regional tax on value produced (IRAP) is levied at the
rate of 4.25%. In accordance with principles established by the Italian
accounting profession, this tax is classified with income taxes, even though
certain significant costs and expenses (e.g. personnel costs and interest
expense) are not deductible in the determination of the related IRAP tax
liability.
RESERVE FOR EMPLOYEE TERMINATION INDEMNITIES
Provision has been made, under Italian law and labor regulations, for
termination indemnities to employees upon termination of employment.
EARNINGS (LOSS) PER SHARE
Basic EPS is determined using net income divided by the weighted
average shares outstanding during the period. Diluted EPS is computed by
dividing net income by the weighted average shares outstanding, assuming all
dilutive potential common shares were issued. Since the Company has no common
shares that are potentially issuable, such as stock options, convertible
securities or warrants, basic and diluted EPS are the same.
As the acquisition has been reported as a reserve acquisition, the
shares outstanding after the acquisition was used in the EPS calculations for
the 2001 year.
12
TRANSLATION OF FOREIGN CURRENCIES
Our functional currency is the U.S. dollar. The financial statements of
Prime's operations whose functional currency is other than the U. S. dollar are
translated from such functional currency to U.S. dollars using the current rate
method. Under the current rate method, assets and liabilities are translated at
the exchange rates in effect at the balance sheet date. Revenues and expenses,
including gains and losses on foreign exchange transactions, are translated at
average rates for the period. Where the current rate method is used, the
unrealized translation gains will be accumulated in other comprehensive income
under the shareholders' equity section.
FINANCIAL INSTRUMENTS
The estimated fair value of cash and equivalents, short-term
investments, accounts receivable, loans receivable, and accounts payable and
accrued liabilities approximate their carrying amounts in the financial
statements. Unless otherwise noted, it is management's opinion that Prime is not
exposed to significant interest, currency, or credit risks arising from these
financial statements.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 31, 2002 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
2001
Total revenues for the year ended December 31, 2002 were approximately
$369,000, an increase of $330,000, or 846.2%, as compared to revenues of
approximately $39,000 for the year ended December 31, 2001. All the of these
revenues were generated by subsidiary companies operating in Italy. During
fiscal 2002, revenues were primarily generated by Kelti SpA for
telecommunications services and by consulting fees generated directly by
S.I.T.I.
Operating expenses for the year ended December 31, 2002 were
approximately $897,000, an increase of $368,000 or 69.6%, from approximately
$529,000 for fiscal 2001. This increase in operating expenses was primarily due
to legal and other professional fees and travel expenses.
During the year ended December 31, 2002, Prime reported a loss from
discontinued operations of approximately $830,000 and a loss from the sale of
subsidiaries of $1,116,000. This resulted from the sale and/or discontinuation
of activities of its subsidiaries in the telecommunications industry.
Amortization was approximately $47,000 for the year ended December 31,
2002, representing a decrease of approximately $17,000, or 26.6%, from $64,000
for fiscal 2001.
Miscellaneous income of approximately $469,000 for the year ended
December 31, 2002 consisted of invoices reimbursed from former S.I.T.I.
shareholders for expenses associated with the reverse acquisition, including
legal, accounting, travel and consulting.
As a consequence of the foregoing, Prime's net loss increased for the
year ended December 31, 2002 to approximately $2,274,000 compared with
approximately $366,000.
13
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2002, Prime had working capital of approximately
$1,382,000. Approximately $983,000 of our current assets consist of accounts
receivable primarily from customers of Kelti net of allowances for doubtful
accounts. Going forward, we expect our primary sources of working capital to be
debt and/or equity financing.
Prime and its subsidiaries used approximately $172,000 in cash from
operating activities, after taking account of losses from operations, sale and
discontinuation of subsidiaries, amortization and minority interest. During the
year ended December 31, 2002, cash flows from financing activities were
approximately $37,000 and from investing activities were approximately $6,000.
We issued no new shares of stock during 2002, nor did we otherwise
attempt to raise capital. We have issued shares of common stock from time to
time in the past to satisfy certain obligations and expect in the future to
continue to acquire certain services, satisfy indebtedness and/or make
acquisitions utilizing authorized shares of our capital stock. If operations and
cash flow can be improved through these efforts, we believe that our liquidity
problems will be resolved and that we can continue to operate. However, no
assurance can be given that management's actions will result in profitable
operations.
ITEM 7. FINANCIAL STATEMENTS
Following are the audited financial statements of Prime and its subsidiaries for
the year ended December 31, 2002. Please note that all of the figures stated in
the financial statements are rounded to the nearest thousand U.S. Dollars.
14
PRIME HOLDINGS AND INVESTMENTS INC.
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA
TELECOMMUNICAZIONI INTEGRATE)
Consolidated Financial Statements
December 31, 2002 and 2001
(U.S. Dollars in thousands)
15
PRIME HOLDINGS AND INVESTMENTS INC. CONTENTS
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(U.S. DOLLARS IN THOUSAND)
================================================================================
INDEPENDENT AUDITORS' REPORT
CONSOLIDATED BALANCE SHEETS STATEMENT 1
CONSOLIDATED STATEMENTS OF EARNINGS STATEMENT 2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY STATEMENT 3
CONSOLIDATED STATEMENTS OF CASH FLOWS STATEMENT 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16
[GRAPHIC OMITTED]
EVANCIC PERRAULT ROBERTSON
CERTIFIED GENERAL ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Prime Holdings and Investments Inc.
(Successor to S.I.T.I. S.p.A. Societa Italiana Telecommunicazioni Integrate)
(Formerly MytravelGuide.com, Inc. which was formerly Diligencia Technologies,
Inc.)
We have audited the accompanying consolidated balance sheet of Prime Holdings
and Investments Inc. (Successor to S.I.T.I. S.p.A. Societa Italiana
Telecommunicazioni Integrate) as of December 31, 2002 and 2001 and the related
consolidated statements of earnings, stockholders' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Prime Holdings
and Investments Inc. as of December 31, 2002 and 2001 and the results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
EVANCIC PERRAULT ROBERTSON
CERTIFIED GENERAL ACCOUNTANTS
North Vancouver, B.C.
March 28, 2003
#102 - 1975 Lonsdale Avenue, North Vancouver, BC V7M 2K3
Telephone (604) 987-8101 Fax (604) 987-7194
Website: http//epr.ca Email: eprnv@istar.ca
Office Across Canada
Affiliates Around the World
17
PRIME HOLDINGS AND INVESTMENTS INC. STATEMENT 1
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
CONSOLIDATED BALANCE SHEETS
December 31, 2002 and 2001
(U.S. Dollars in thousands)
================================================================================
2002 2001
--------------------------------------------------------------------------------------
ASSETS
Current:
Cash and cash equivalents $ 108 $ 398
Accounts receivable, net of allowance for doubtful accounts
(2002 - $18) (2001 - $108) 983 5,673
Advances receivables -- 87
Inventory 1,142 2,078
Prepaid expenses 6 871
--------------------------------------------------------------------------------------
Total current assets 2,239 9,107
Property, plant and equipment 600 816
Investments at cost 608 510
Other investments 100 155
Goodwill 100 1,856
Other intangible assets 75 110
--------------------------------------------------------------------------------------
TOTAL ASSETS $ 3,722 $ 12,554
======================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Demand loan $ -- $ 2,504
Accounts payable and accruals 736 4,004
Customer deposits -- 442
Payroll and benefit-related liabilities 5 387
Corporate taxes payable 18 10
Current portion of long term debt 98 122
--------------------------------------------------------------------------------------
Total current liabilities 857 7,469
Due to directors 22 --
Long-term debt -- 58
Due to minority stockholders -- 106
Reserve for employee termination indemnities 2 259
Minority interest 80 397
Preferred stocks 10 10
--------------------------------------------------------------------------------------
Total liabilities 971 8,299
--------------------------------------------------------------------------------------
Stockholders' equity
Capital stock and additional paid-in capital - note 11 5,822 5,584
Deficit (3,611) (1,337)
Other comprehensive income 540 8
--------------------------------------------------------------------------------------
Total stockholders' equity 2,751 4,255
--------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,722 $ 12,554
======================================================================================
18
PRIME HOLDINGS AND INVESTMENTS INC. STATEMENT 2
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
CONSOLIDATED STATEMENTS OF EARNINGS
Year ended December 31, 2002 and 2001
(U.S. Dollars in thousands except loss per share)
--------------------------------------------------------------------------------
2002 2001
--------------------------------------------------------------------------------------
REVENUE
Consulting fees $ 63 $ --
Installation services 306 39
--------------------------------------------------------------------------------------
369 39
COST OF SALES 255 2
--------------------------------------------------------------------------------------
GROSS MARGIN 114 37
--------------------------------------------------------------------------------------
OPERATING EXPENSES
Administrative expenses 88 35
Depreciation 47 64
Bank charges and interest -- 1
Other operating expenses 306 44
Other provisions -- 1
Outside services 322 301
Rent 111 83
Salaries and benefits 23 --
--------------------------------------------------------------------------------------
897 529
--------------------------------------------------------------------------------------
OPERATING LOSS (783) (492)
--------------------------------------------------------------------------------------
OTHER INCOME
Interest income 7 7
Miscellaneous - note 4 469 249
--------------------------------------------------------------------------------------
476 256
--------------------------------------------------------------------------------------
(307) (236)
DISCONTINUED OPERATIONS
Loss from discontinued operations
(including a $1,116 loss on disposal,
net of income taxes - nil) 1,946 236
--------------------------------------------------------------------------------------
1,946 236
--------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (2,253) (472)
INCOME TAXES 7 10
--------------------------------------------------------------------------------------
LOSS BEFORE MINORITY INTEREST (2,260) (482)
MINORITY INTEREST 14 (116)
--------------------------------------------------------------------------------------
NET LOSS FOR THE YEAR $(2,274) $ (366)
======================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,351 8,351
======================================================================================
LOSS PER SHARE $(0.272) $(0.044)
======================================================================================
19
PRIME HOLDINGS AND INVESTMENTS INC. STATEMENT 3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Year ended December 31, 2002 and 2001
(U.S. Dollars in thousands)
================================================================================
COMMON STOCK
COMMON STOCK AND OTHER
NUMBER ADDITIONAL ACCUMULATED COMPREHENSIVE
(000) PAID-IN CAPITAL DEFICIT INCOME TOTAL
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 740 4,623 (971) (1) 3,651
------------------------------------------------------------------------------------------------------------------------------------
Increase in paid-in capital in SITI
S.p.A. before reverse
acquisition -- 937 -- -- 937
Reverse Acquisition
Pre-acquisition shares of Prime
Holdings and Investment Inc., 3,527 34 -- -- 34
Issuance of common shares for
reverse acquisition of SITI on
September 13, 2001 50,000 -- -- -- --
Allocation to issuance of
preferred shares -- (10) -- -- --
Less exchange of SITI S.p.A
shares (740) -- -- -- --
Net loss for the year -- -- (366) 9 (357)
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 53,527 5,584 (1,337) 8 4,255
Net loss for the year -- -- (2,274) 532 (1,742)
Issuance of shares for services rendered 755 95 -- -- 95
Increase in paid in capital -- 143 -- -- 143
Reverse stock split 1 for every
6.5 shares on March 28, 2003 (45,931) -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002 8,351 5,822 (3,611) 540 2,751
====================================================================================================================================
The accompanying notes are an integral part of these financial statements.
EVANCIC PERRAULT ROBERTSON
20
PRIME HOLDINGS AND INVESTMENTS INC. STATEMENT 4
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, 2002 and 2001
(U.S. Dollars in thousands)
--------------------------------------------------------------------------------
2002 2001
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(2,179) $ (366)
Non-cash items included in net loss Issuance of stock for services rendered 95 --
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation 47 130
Minority interest 14 (109)
Loss from discontinued operations 1,946 --
Decrease (increase) in accounts receivable (349) 1,285
Increase in inventory (226) (781)
Increase in prepaid expenses (5) (847)
Increase in accounts payable 334 729
Increase in customer deposits -- 185
Increase in payroll and benefit-related liabilities 3 --
Increase (decrease) in corporate taxes payable 8 (13)
Decrease in reserve for employee termination indemnities (2) (1,790)
------------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (409) (1,577)
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of long-term investments (253) --
Proceeds received from long-term investments -- 185
Sale (purchase) of other investments 56 (7)
Proceeds received from sale of subsidiaries 314 --
Purchase of property, plant and equipment (46) (119)
Purchase of intangible assets (5) (90)
Net cash acquired on acquisition of business -- 738
Cash reduction due to closure of business (60) --
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 6 707
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayment) from long-term debt (22) 88
Increase in minority interest -- 79
Increase in paid-in capital 143 870
Increase in due to directors 22 --
Repayments of demand loans -- (334)
Increase (decrease) in due to minority interest stockholders (106) 11
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 37 714
------------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 76 --
------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN CASH (290) (156)
CASH, BEGINNING OF YEAR 398 554
------------------------------------------------------------------------------------------------------------------------------------
CASH, END OF YEAR $ 108 $ 398
====================================================================================================================================
SUPPLEMENTAL DISCLOSURES
Interest paid $ 282 $ 173
Income taxes paid -- --
====================================================================================================================================
The accompanying notes are an integral part of these financial statements.
EVANCIC PERRAULT ROBERTSON
*Supplemental Disclosures of additions to common stock and paid in capital for
non-cash transactions:
Common stock issued for services rendered
21
PRIME HOLDINGS AND INVESTMENTS INC.
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2002 and 2001
(U.S. Dollars in thousands)
--------------------------------------------------------------------------------
1. NATURE OF BUSINESS
S.I.T.I. S.p.A. owns majority interest in a group of companies
specializing in the engineering and construction of transportation
infrastructure and fiber optics networks; resort construction; manufacture
and sale of telecommunications hardware and related network systems; and
asset management and brokerage services for works of art.
Kelti S.r.L. is a long distance reseller that aims at providing
installation of telephone systems to the banking sector in the eastern
part of Italy, including the region of Abruzzo.
Artel S.r.L. is a company that specializes in the purchase, sale and
brokerage of works of art, painting, furniture, watches, rugs, prints,
antique drawings, antiques and contemporary works of art.
Sardegna 97 S.p.A. is developing an 80-Villa resort project in Sardinia.
The project is in Phase I and is approximately 20% completed.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The financial statements of entities, which are controlled by the Company,
referred to as subsidiaries, are consolidated. Entities which are not
controlled but over which the Company has the ability to exercise
significant influence, referred to as associated companies, are accounted
for using the equity method. Investments in entities that the Company does
not control or over which it does not exercise significant influence are
accounted for using the cost method.
The acquisition by the Company of the shares of SITI S.p.A. on September
13, 2001 was accounted for as a reverse acquisition whereby SITI S.p.A. is
considered the acquiring company. The comparative figures presented are
those of SITI S.p.A.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash and those short-term market
instruments which, on acquisition, have a term to maturity of three months
or less.
MARKETABLE SECURITIES
Publicly traded securities deemed available-for-sale by the Company are
measured at fair value. Gains and losses on available-for-sale securities
are presented separately in the stockholders' equity section.
USE OF ESTIMATES
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
EVANCIC PERRAULT ROBERTSON
22
PRIME HOLDINGS AND INVESTMENTS INC.
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2002 and 2001
(U.S. dollars in thousands)
--------------------------------------------------------------------------------
INVENTORY
Inventory is recorded at the lower of cost and net realizable value. Cost
is established on a LIFO basis. No reserve for obsolete and slow-moving
inventories is deemed necessary.
INVESTMENTS
Investments are shown at the lower of cost or fair market value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation is
provided annually on a straight-line basis at rates calculated to
write-off the assets over their estimated useful lives as follows except
in the year of acquisition when one half of the rate is used.
Buildings 3%
Plant and machinery 15.50%
Other equipment 25%
Other plant and equipment 12% - 25%
INTANGIBLE ASSETS
Intangible assets are stated at cost, reduced on a straight-line basis to
their net book value through provision for amortization provided at the
following annual rates:
Licenses, trademarks and similar rights 20%
Patents and intellectual property rights 33%
Other intangible assets 20%
Additions during the year are amortized at the above rates.
GOODWILL
Goodwill, which was previously amortized, is no longer being amortized
due to the pronuncement of FASB 142 as described below.
Prior to July 2001, goodwill arising on consolidation was not amortized,
whereas the goodwill arising on the acquisition of a business by S.I.T.I.
S.p.A. is amortized over 10 years.
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business
Combinations" ("SFAS 141") and statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142").
SFAS 141 requires all business combinations to be accounted for using the
purchase method of accounting and that certain intangible assets acquired
in a business combination shall be recognized as assets apart from
goodwill. SFAS 142 recognizes that goodwill has an indefinite useful life
and will no longer be subject to periodic amortization. Goodwill will be
tested at least annually for impairment in lieu of amortization. The SFAS
142 requires that goodwill arising from acquisitions subsequent to June
30, 2001 should not be amortized.
The Company evaluates the carrying value of goodwill and long-lived
assets to be held and used. The carrying value of an asset is considered
impaired when the anticipated undiscounted cash flow form such assets is
less than its carrying value. In that event, a loss is recognized based
on the amount by which the carrying value exceeds the fair market value.
Fair market value is determined using the anticipated cash flows
discounted at a rate commensurate with the risk involved. Losses
EVANCIC PERRAULT ROBERTSON
23
PRIME HOLDINGS AND INVESTMENTS INC.
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2002 and 2001
(U.S. dollars in thousands)
--------------------------------------------------------------------------------
on long-lived assets to be disposed of are determined in a similar
manner, except that fair market values are reduced by the cost of
disposition of such assets.
REVENUE RECOGNITION
Telecommunication products and services:
Revenue is recorded net of trade discounts and allowances upon shipment
of products or rendering of services and when all significant contractual
obligations have been satisfied and collection is reasonably assured.
Construction activities:
Construction contracts range up to 8 years in length and revenues are
recognized using the percentage-of -completion method. Percentage of
completion is calculated using the cost-to-cost method. Under the
cost-to-cost method, the percentage of completion is estimated by
comparing total costs incurred to date to total costs expected for the
entire contract, thus recognizing a percentage of the contract revenue
each year.
INCOME TAXES
National corporate taxes (IRPEG) in Italy are levied on book income
adjusted for disallowable expenses at the rate of 36% in 2002 and 2001
In addition, a regional tax on value produced (IRAP) is levied at the
rate of 4.25%. In accordance with the principles established by the
Italian accounting profession, this tax is classified with income taxes,
even though certain significant costs and expenses (e.g. personnel costs
and interest expense) are not deductible in the determination of the
related IRAP tax liability.
RESERVE FOR EMPLOYEE TERMINATION INDEMNITIES
Provision has been made, under Italian law and labor regulations, for
termination indemnities to employees upon termination of employment.
EARNINGS (LOSS) PER SHARE
Basic EPS is determined using net income divided by the weighted average
shares outstanding during the period. Diluted EPS is computed by dividing
net income by the weighted average shares outstanding, assuming all
dilutive potential common shares were issued. Since the Company has no
common shares that are potentially issuable, such as stock options,
convertible securities or warrants, basic and diluted EPS are the same.
The EPS calculations for the years 2002 and 2001 have taken into
consideration the reverse stock split which occurred subsequent to the
year-end date.
TRANSLATION OF FOREIGN CURRENCIES
The functional currency of the Company is the United States dollar. The
financial statements of the Company's operations whose functional
currency is other than the United States dollar are translated from such
functional currency to United States dollars using the current rate
method. Under the current rate method, assets and liabilities are
translated at the exchange rates in effect at the balance sheet date.
Revenues and expenses, including gains and losses on foreign exchange
transactions, are translated at average rates for the period. Where the
current rate method is used, the unrealized translation gains will be
accumulated in other comprehensive income under the shareholders' equity
section.
EVANCIC PERRAULT ROBERTSON
24
PRIME HOLDINGS AND INVESTMENTS INC.
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2002 and 2001
(U.S. dollars in thousands)
--------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
The estimated fair value of cash and equivalents, short-term investments,
accounts receivable, loans receivables, and accounts payable and accrued
liabilities approximate their carrying amounts in the financial
statements. Unless otherwise noted, it is management's opinion that the
Company is not exposed to significant interest, currency, or credit risks
arising from these financial statements.
RECENT PRONOUNCEMENTS
The Company is currently evaluating the impacts of SFAS No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"), SFAS No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS 143"), SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), SFAS No.
146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS 146") and FASB Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others" ("FIN 45") to determine the effect, if any, they
may have on the consolidated financial position and results of operations.
The Company is required to adopt each of these standards effective with
the fiscal year-end 2002.
On October 1, 2002, the Company adopted SFAS 142, which requires goodwill
to be tested for impairment on an annual basis and more frequently in
certain circumstances, and written down when impaired, rather than
amortized, as previously required. Identifiable intangible assets will
continue to be amortized over their useful lives. The criteria for
recognizing an intangible asset have also been revised. SFAS 142 also
requires that goodwill be tested for impairment initially within one year
of adoption and at least annually thereafter. If an impairment loss exists
as a result of the transitional goodwill impairment test, the
implementation of SFAS 142 could result in a one-time charge to earnings
as a cumulative effect of accounting change. The goodwill impairment test
is a two-step process that requires goodwill to be allocated to reporting
units which are reviewed by the units' segment managers. In the first
step, the fair value of the reporting unit is compared with the carrying
value of the reporting unit. If the fair value of the reporting unit is
less than the carrying value of the reporting unit, goodwill impairment
may exist, and the second step of the test is performed. In the second
step, the implied fair value of the goodwill is compared with the carrying
value of the goodwill, and an impairment loss will be recognized to the
extent that the carrying value of the goodwill exceeds the implied fair
value of the goodwill. As of December 31, 2002, the Company does not have
any goodwill impairment.
In August 2001, the FASB issued SFAS 143, which establishes accounting
standards for recognition and measurement of a liability for the costs of
asset retirement obligations. Under SFAS 143, the future costs of retiring
a tangible long-lived asset will be recorded as a liability at their
present value when the retirement obligation arises and will be amortized
to expense over the life of the asset. Prime is in the process of
identifying assets with retirement obligations, including leased
properties that contractually obligate the Company to remove leasehold
improvements and restore the properties to the original condition. The
adoption of SFAS 143 is not expected to materially affect the consolidated
financial statements.
In October 2001, the FASB issued SFAS 144, which addresses financial
accounting and reporting for the impairment or disposal of long-lived
assets and discontinued operations. SFAS 144 supersedes SFAS 121 and the
accounting and reporting provisions of Accounting Principles Board Opinion
No. 30 ("APB 30") for the disposal of a segment of a business. SFAS 144
retains the basic principles of SFAS 121 for long-lived assets to be
disposed of by sale or held and used and modifies the accounting and
disclosure rules for discontinued operations. The adoption of SFAS 144 is
not expected to materially affect the consolidated financial statements.
EVANCIC PERRAULT ROBERTSON
25
PRIME HOLDINGS AND INVESTMENTS INC.
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2002 and 2001
(U.S. dollars in thousands)
--------------------------------------------------------------------------------
In July 2002, the FASB issued SFAS 146, which addresses significant issues
regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring
activities that are currently accounted for pursuant to the guidance that
the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (Including Certain Costs Incurred in a
Restructuring)." SFAS 146 revises the accounting for certain lease
termination costs and employee termination benefits, which are generally
recognized in connection with restructuring activities.
3. DISCONTINUED OPERATIONS
On November 19, 2002, the Company's subsidiary, Datico Spa sold its 93%
interest of Impresa Mondelli srl to Penta Trust srl for proceeds of $64.
On November 20, 2002, Datico Spa sold 100% of Datico Services Spa to
Fiduciaria Del Giglio srl for proceeds of $250.
On December 29, 2002, the Tribunal of Milano issued a decree against
Datico Spa and declares the Company bankrupt and the Tribunal of Milano
authorizes the appointed receiver to temporarily continue the activity of
the Company to enable it to fulfill some of the outstanding orders.
The assets and liabilities of the Company's discontinued operations as of
December 31, 2001 on the consolidated balance sheet are as follows:
2001
--------------------------------------------------------------------------------
Assets:
Current assets $7,131
Long-term assets 2,287
--------------------------------------------------------------------------------
9,418
================================================================================
Liabilities and stockholders' equity:
Current liabilities 6,878
Long-term liabilities 399
--------------------------------------------------------------------------------
7,277
Minority interest 15
--------------------------------------------------------------------------------
$7,292
--------------------------------------------------------------------------------
Stockholders' equity 2,126
================================================================================
EVANCIC PERRAULT ROBERTSON
26
PRIME HOLDINGS AND INVESTMENTS INC.
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2002 and 2001
(U.S. dollars in thousands)
--------------------------------------------------------------------------------
4. REVERSE ACQUISITION
On September 13, 2001, the Company completed an agreement with the
shareholders of SITI S.p.A., an Italian company, whereby the Company
issued 50,000,000 common shares to acquire all of the issued and
outstanding shares of SITI S.p.A. No cash was transacted.
The acquisition has been accounted for as a reverse takeover using the
purchase method, and accordingly, for financial statement reporting
purposes, the net assets of SITI have been included in the consolidated
balance at book values, and the net assets of Prime have been recorded at
fair market value at the date of acquisition. The consolidated operations
of the Company for the period from January 1, 2001 to the date of
acquisition, September 13, 2001, are those of SITI and exclude the results
of operations of Prime. The results of operations of Prime are included in
the consolidated statements of operations after the date of acquisition.
The cost of the acquisition is the assumption of the liability position of
Prime Holdings and Investments Inc as at September 13, 2001 and consists
of:
Accounts payable (34)
-------------------------------------------------------------------
Total liabilities assumed on acquisition (34)
===================================================================
This amount has been reflected as increase in capital stock on the
statement of stockholders' equity.
5. INVENTORY
DECEMBER 31
2002 2001
--------------------------------------------------------------------------------
Raw materials $ 249 $ 206
Finished goods 893 1,872
--------------------------------------------------------------------------------
$1,142 $2,078
================================================================================
6. PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31
2002 2001
-------------------------------------------------------------------------------------------------------------
ACCUMULATED NET BOOK NET BOOK
COST DEPRECIATION VALUE VALUE
-------------------------------------------------------------------------------------------------------------
Fixed assets construction in progress $267 $-- $267 $220
Land and buildings -- -- -- 120
Other equipment 1 -- 1 2
Other plant and equipment 142 28 114 134
Plant and machinery 276 58 218 340
-------------------------------------------------------------------------------------------------------------
$686 $ 86 $600 $816
=============================================================================================================
The depreciation expenses for the year ended December 31, 2002 and 2001 are $26
and $45 respectively.
EVANCIC PERRAULT ROBERTSON
27
PRIME HOLDINGS AND INVESTMENTS INC.
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2002 and 2001
(U.S. dollars in thousands)
--------------------------------------------------------------------------------
7. INVESTMENTS AND OTHER INVESTMENTS
DECEMBER 31
2002 2001
--------------------------------------------------------------------------------
Investments at cost
Advances to contractors $ -- $ 87
Consortium Tecnos 608 510
--------------------------------------------------------------------------------
TOTAL $608 $597
================================================================================
Other investments
Other investments are represented by fixed interest securities.
8. GOODWILL
DECEMBER 31
2002 2001
--------------------------------------------------------------------------------
Goodwill $ 112 $ 1,868
Accumulated amortization (12) (12)
--------------------------------------------------------------------------------
TOTAL $ 100 $ 1,856
================================================================================
9. OTHER INTANGIBLE ASSETS
DECEMBER 31
2002
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
--------------------------------------------------------------------------------
Licences, trade-marks and similar rights 65 54 11
Other intangible assets 98 34 64
--------------------------------------------------------------------------------
$163 $ 88 $ 75
================================================================================
DECEMBER 31
2001
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
--------------------------------------------------------------------------------
Licenses, trademarks and similar rights 75 37 38
Other intangible assets 106 41 65
Patents and intellectual property rights 14 9 5
Research and development expenditures 7 5 2
Intangible in progress and advances 18 18 -
--------------------------------------------------------------------------------
$ 220 $ 110 $ 110
================================================================================
Estimated amortization expenses in the next 5 years are $33 annually.
EVANCIC PERRAULT ROBERTSON
28
PRIME HOLDINGS AND INVESTMENTS INC.
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2002 and 2001
(U.S. dollars in thousands)
10. LONG-TERM DEBT
2002 2001
------------------------------------------------------------------------------------------------------------------------------------
Mortgage payable to Credito Fondiario S.p.A., secured by building,
no payment terms $ 98 $107
Mortgage payable to Comit (Banca Commerciale Italiana), secured by
building, requiring semi-annually payments of $4.5, including interest at
5.198%
-- 22
Mortgage payable to Ambrosiano Veneto, secured by building, requiring
semi-annually payments of $4.5, including interest at 4.675% -- 51
------------------------------------------------------------------------------------------------------------------------------------
$ 98 $180
Less current portion 98 122
------------------------------------------------------------------------------------------------------------------------------------
$-- $ 58
====================================================================================================================================
11. CAPITAL STOCK
Authorized: 500,000,000 common shares with par value of $0.0001
100,000,000 preferred shares with par value of $0.001.
Each preferred share is convertible to 4 common shares after
the trading value of Prime common shares
exceeds
$5 per share for a period of at least thirty consecutive days
on the NASD OTC BB exchange.
12. ACQUISITIONS
On November 27, 2000, the Company acquired 51% of the share capital of
Kelti S.r.l.. The Company deals in telephone systems mainly in the region
of Abruzzo exclusively working as a reseller in the banking sector. The
purchase price was $28. The purchase included goodwill of $ 23.
On September 25, 2001, the Company acquired 51% of the share capital of
Artel S.r.l. The Company purchases, sells and brokers works of art,
paintings, furniture, watches, rugs, prints and antique drawings. The
purchase price was $7.
On October 7, 2001, the Company acquired 100% of the share capital of
Sardegna 97 SpA. The Company is developing an 80-Villa resort project in
Sardinia. The project is in Phase I with approximately 20% completed. The
purchase price was $112. The purchase included goodwill of $101.
All of these acquisitions are accounted for under the purchase method. The
consolidated financial statements include the operating results of each of
these businesses from the date of acquisition to the year-end date.
Goodwill has been determined on the basis of the difference between the
purchase price paid and the fair market value of the underlying assets and
liabilities acquired.
EVANCIC PERRAULT ROBERTSON
29
PRIME HOLDINGS AND INVESTMENTS INC.
(SUCCESSOR TO S.I.T.I. S.P.A. SOCIETA ITALIANA TELECOMMUNICAZIONI INTEGRATE)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2002 and 2001
(U.S. dollars in thousands)
13. SEGMENTED INFORMATION
Telecommunications
The telecommunication segment supplies and installs telecommunication
equipment in Italy under contractual agreements with major
telecommunication equipment suppliers.
Construction
The construction segment contracts to build an 80-Villa resort project in
Sardinia.
Below are the sales and operating profit by segment for the year ended
December 31, 2002 and a reconciliation of segment operating profits
(losses) to earnings before income taxes.
CONSTRUCTION TELECOMMUNICATION OTHERS TOTAL
------------------------------------------------------------------------------------------------------------------------------------
Revenues $ -- $ 369 $ -- $ 369
Operating expenses 8 779 1 788
------------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) (8) (410) (1) (419)
Other income (expenses) (1) 476 (1,470) (995)
------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income
taxes and minority interest $ (9) $ 66 $(1,471) $(1,414)
====================================================================================================================================
14. SUBSEQUENT EVENTS
On March 28, 2003, the Company effected a reverse split of 1 common share
issued for every 6.5 common shares outstanding.
EVANCIC PERRAULT ROBERTSON
30
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
We changed accountants in 2002 for the fiscal year 2001 audit. We
provided full disclosure regarding the change in accountants in our report on
Form 8-K, as amended, and included as an exhibit thereto, a letter from our
former accountant consenting to such disclosure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The following are the current Directors and Executive Officers of Prime
and their ages, as of December 31, 2002.
NAME AGE POSITION
Giovanni M. Iachelli 55 President, Secretary and Director
John G. Visendi 39 Chief Executive Officer,
Treasurer and Director
GIOVANNI M. IACHELLI, has served as our President and a director since October
1, 2001 and as Secretary since January 2003. Mr. Iachelli manages the
operational business and strategic direction of Prime and S.I.T.I. Mr. Iachelli
has spent over 15 years in senior positions with North American and United
Kingdom-based telecommunications companies with operations in Italy, China, and
Europe. From 1999 to October 2001, Mr. Iachelli was owner and director of
Iachelli & Associates, a business consulting firm specializing in mergers and
acquisitions in North America and China, on behalf of Telecom Group Italy. From
1998 to 1999, Mr. Iachelli served as Merger and Acquisitions Manager, Italian
Market, for Primus Telecom Corp., United Kingdom.
JOHN G. VISENDI, has served as a director of Prime since October 1, 2001 and as
our Chief Executive Officer and Treasurer since January 2003. Prior to his
appointment, Mr. Visendi spent over 15 years in executive positions with
investment banking groups in Europe and Japan. From May 2000, to June 2001, Mr.
Visendi was President of Pergarex SA, a Switzerland-based investment banking
company and controlling shareholder of Prime. From 1995 to date, Mr. Visendi has
held the position of Chief Executive Officer of Societa Italiana
Telecommunicazioni Integrate, SpA, (S.I.T.I.), a wholly owned subsidiary of
Prime. Since 1998, Mr. Visendi has been General Manager of JHT Lehmann & Co., of
London, England, and is responsible for merchant banking activities in Italy and
Southern Europe. From 1990 to 1997, Mr. Visendi held the position of Central
Director, Southern Europe and the Middle East, for Tushimi Merchant Bank, Tokyo,
Japan. Mr. Visendi is exposed to a number of investment and acquisition
opportunities each year and has broad abilities to perform traditional merchant
banking functions such as deal selection and origination, due diligence,
valuation and deal structuring. SECTION 16(A) COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors and executive officers, and persons who own more than ten
percent of a registered class of our common stock, to file with the SEC initial
reports of ownership and reports of changes in ownership of our common stock.
Officers, directors and greater than ten-percent stockholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. To our knowledge, based solely on review of the copies of such
reports furnished to Prime and written representations that no other reports
were required, during the fiscal year ended December 31, 2002, our officers,
directors and ten percent or greater shareholders filed all forms required to be
filed under Section 16(a).
CODE OF ETHICS
We are in the process of developing a code of ethics which will apply
to our directors and officers, and, when such code of ethics is complete, we
intend to file it with the Securities and Exchange Commission and make it
available to our shareholders or any other person, without charge, upon request.
31
ITEM 10. EXECUTIVE COMPENSATION
The following table summarizes compensation earned in the 2002, 2001
and 2000 fiscal years by all of our executive officers.
===========================================================================================================================
LONG TERM COMPENSATION
--------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------------------------------------------------------------------------------------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY* BONUS COMPENSATION** OPTIONS COMPENSATION
--------------------------------------------------------------------------------------------------------------------------
John G. Visendi, Chief 2002 $180,000
Executive Officer and 2001 15,000
Treasurer 2000 --
--------------------------------------------------------------------------------------------------------------------------
Giovanni Iachelli, President 2002 $144,000
2001 36,000 1 million shares
un-restricted stock
2000 --
*Salaries for both of Messrs. Visendi and Iachelli have accrued but not been
paid for each of the years included in the table
**In addition to the compensation set forth in the table, Messrs Visendi and
Iachelli are to be reimbursed for expenses incurred on behalf of Prime in the
respective amounts of $5,000 and $30,000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of our common stock as of December 31, 2002 by (i) all those known by
our management to be owners of more than five percent of the outstanding shares
of common stock; (ii) each officer and director; and (iii) all officers and
directors as a group. Unless otherwise indicated, each of the shareholders has
sole
32
voting and investment power with respect to the shares owned (subject to
community property laws, where applicable), and is beneficial owner of them.
Share amounts shown give effect to a 1 for 6.5 reverse stock split which took
effect at the close of trading on March 28, 2003.
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
Common Pergarex SA 5,507,693(1) 61.4%
Via Alla Campagna No. 6 6901
Lugano, Switzerland
Common Domenico Sommariva 895,570 10.7%
Corso Plebiscitl 1
Milano, Italy
Common Stonefeld Holding LTD 461,539 5.5%
Atlantic Chambers Romasco Harbour House
Road Town Tortola BVI
Common Giovanni Iachelli* 307,693 3.7%
Common John G. Visendi* 5,661,540(2) 63.1%
Common Directors and Officers as a Group 5,969,233 66.6%
(Consisting of 2 persons)
*Addresses for Officers and directors of Prime are c/o Prime Holdings and
Investments, Inc., 521 Fifth Avenue, Suite 1700, New York, NY.
(1) Includes 615,385 shares of common stock underlying one million shares of
preferred stock held by Pergarex.
(2) Includes 4,892,308 shares of common stock, and 615,385 shares of common
stock underlying one million shares of preferred stock, held in the name of
Pergarex of which Mr. Visendi is a controlling person. Mr. Visendi disclaims
ownership of such shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no material transactions in the past two years or
proposed transactions to which Prime has been or is proposed to be a party in
which any officer, director, nominee for officer or director, or security holder
of more than 5% of Prime's outstanding securities is involved.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS:
EXHIBIT NO. DOCUMENT LOCATION
2 Share Purchase Agreement Incorporated by Referenced to Form 8-K filed 10/1/01
3(i) Articles of Incorporation Incorporated by Reference
3(ii) Bylaws Incorporated by Reference
16 Letter from Prior Auditor Incorporated by Reference to Form 8-K/A filed 3/12/02
REPORTS ON FORM 8-K
We did not file any reports on Form 8-K during the period.
33
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PRIME HOLDINGS AND INVESTMENTS, INC.
/s/ GIOVANNI IACHELLI
Giovanni Iachelli, President
Date: April 15, 2003
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
NAME
/s/ GIOVANNI IACHELLI President, Secretary and Director
---------------------
Giovanni Iachelli
/S/ JOHN G. VISENDI Chief Executive Officer,
--------------------- Treasurer and Director
John G. Visendi
34
CERTIFICATION
I, Giovanni Iachelli, certify that:
1. I have reviewed this annual report on Form 10-KSB of Prime Holdings and
Investments, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c. Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 15, 2003 /s/ GIOVANNI IACHELLI
---------------------
Giovanni Iachelli
President and Secretary
35
CERTIFICATION
I, John Visendi, certify that:
1. I have reviewed this annual report on Form 10-KSB of Prime Holdings and
Investments, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c. Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 15, 2003 /s/ JOHN VISENDI
----------------
John Visendi,
Chief Executive Officer and Treasurer
36