UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES ACT OF
1934 For the quarterly period ended June 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES ACT OF
1934 For the transition period from ___________to
Commission File Number: 000-30477
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PRIME HOLDINGS AND INVESTMENTS, INC.
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(Exact name of registrant as specified in its charter)
Nevada 88-0421215
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
521 Fifth Avenue, Suite 1700, New York, NY
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(Address, including zip code, of principal executive offices)
(212)292-4258
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(Registrant's telephone number, including area code)
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(Former name of Registrant)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ] __
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common stock, par value $0.0001: 8,351,300 shares outstanding as of August 19,
2004.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
1
PRIME HOLDINGS AND INVESTMENTS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets - June 30, 2004 and December 31,
2003.
Unaudited Consolidated Statement of Stockholders' Equity - June 30,
2004.
Unaudited Consolidated Statements of Earnings - Three Months Ended
June 30, 2004 and 2003 and Six Months Ended June 30, 2004 and 2003.
Unaudited Consolidated Statements of Cash Flow - six Months Ended June
30, 2004 and 2003.
Notes to Unaudited Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
ITEM 1. FINANCIAL INFORMATION
Prime Holdings and Investments, Inc.
(Successor to S.I.T.I., S.P.A. Societa Italiana Telecommunicazioni Integrate)
Unaudited Consolidated Balance Sheets
(U.S. Dollars in thousands)
June 30, December 31,
2004 2003
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Assets
Current:
Cash and Cash Equivalents $ 18 $ 8
Accounts Receivable, net of Allowance for Doubtful Accounts 93 73
Inventory 1,232 1,265
Prepaid Expenses 340 290
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1,683 1,636
Property, Plant and Equipment 329 355
Investments 361 361
Goodwill 106 106
Other intangible Assets 22 31
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818 853
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$2,501 $2,489
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Liabilities and Stockholders' Equity
Current:
Due to affiliated party $1,175 $ 816
Accounts Payable and Accruals 765 783
Corporate Taxes Payable 4 12
Customer deposits 122 125
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2,066 1,736
Reserve for Employee Termination Indemnities 1 2
Minority Interest 162 166
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2,229 1,904
Contingent Liabilities/Commitments
Stockholders' Equity
Capital Stock and Additional Paid-In Capital 5,839 5,837
Other Comprehensive Income 689 685
Deficit (6,256) (5,937)
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272 585
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$2,501 $2,489
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The accompanying notes are an integral part of these financial statements.
3
Prime Holdings and Investments, Inc.
(Successor to S.I.T.I. S.p.A. Societa Italiana Telecommunicazioni Integrate)
Consolidated Statements of Stockholders' Equity
(U.S. Dollars in Thousands)
Common Stock
and
Common Additional Other
Stock Paid-In Accumulated Comprehensive
Shares Capital Deficit Income Total
------ ------- ------- ------ ------
Balance, December 31, 2001 53,527 $5,584 $(1,338) $ 9 $4,255
Issuance of Common Shares for
Services Rendered @$0.125
per share 755 95 95
Increase in Paid-In Capital 143 143
Net Loss for the Period (2,273) 531 (1,742)
Reverse Stock Split, 1 for
every 6.5 Shares on March
28, 2003 (45,931)
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Balance December 31, 2002 8,351 5,822 (3,611) 540 2,751
Issuance of Common Shares
for Services Rendered
@ $0.03 462 15 15
Net Loss for the Year (2,326) 145 (2,181)
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Balance, December 31,2003 8,813 5,837 (5,937) 685 585
Adjustment of Common Shares
Issued for Services Rendered
@ $0.03 74 2 2
Net Loss for the Six Months
Ended June 30, 2004 (319) 4 (315)
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Balance, June 30, 2004 (Unaudited) 8,887 $5,839 $(6,256) $ 689 $ 272
======= ====== ======= ====== ======
The accompanying notes are an integral part of these financial statements.
4
Prime Holdings and Investments, Inc.
(Successor to S.I.T.I., S.P.A. Societa Italiana Telecommunicazioni Integrate)
Unaudited Consolidated Statements of Earnings
(U.S. Dollars in thousands)
Three Months Ended June 30, Six Months Ended June 30,
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2004 2003 2004 2003
------- ------- ------- -------
Revenue $ 155 $ 229
Operating expenses:
Administrative Expenses $ 191 18 $ 274 437
Depreciation and Amortization 21 194 43 29
Stock Based Compensation 2
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Total Operating Expenses 212 212 319 466
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Operating Loss (57) (237)
Other Income (Expense):
Interest Income 1
Miscellaneous (97) (97)
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Total Other Income (Expense) (97) (96)
Loss Before Minority Interest and
Income Taxes 212 (154) (319) (333)
Income Taxes 1
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Loss Before Minority Interest 212 (154) (319) (334)
Minority Interest (4)
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Net Earnings(Loss) for the Period $ (212) $ (158) $ (319) $ (334)
Weighted Average Common Shares
Outstanding 8,887 8,351 8,887 8,351
Earnings (Loss) Per Share $(0.02) $(0.02) $(0.04) $(0.04)
The accompanying notes are an integral part of these financial statements.
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Prime Holdings and Investments, Inc.
(Successor to S.I.T.I., S.P.A. Societa Italiana Telecommunicazioni Integrate)
Unaudited Consolidated Statements of Cash Flows
Six Months Ended
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(U.S. Dollars in thousand)
June 30, June 30, 2004
2003
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Cash Flows From Operating Activities:
Loss From Operating Activities $(319) $(334)
Items Not Requiring an Outlay of Funds:
Amortization 43 29
Stock based compensation 2
Minority Interest (4) 5
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(278) (300)
Changes in Non-Cash Working Capital:
Accounts Receivable (20) 114
Inventory 33 (70)
Prepaid Expenses (50)
Accounts Payable and Accrued Liabilities (18) 70
Customer Deposits (3)
Corporate Taxes Payable (8) 9
Reserve for Employee Termination Indemnities (21)
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(365) (177)
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Cash Flows From Financing Activities:
Proceeds (Repayment) of Long-Term Debt (98)
Proceeds of Demand Loans 359 301
Decrease in Due to Minority Interest Shareholders (22)
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359 181
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Cash Flows From Investing Activities:
Purchase Marketable Securities 22
Purchases of Capital Assets (8) (19)
Sale(Purchase)of Long-Term Investments (37)
Sale of Other Investments 29
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(8) (5)
Effect of Exchange Rate Changes on Cash 24 (6)
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Increase in Cash 10 (7)
Cash, Beginning of Period 8 108
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Cash, End of Period $ 18 $ 101
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The accompanying notes are an integral part of these financial statements.
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Prime Holdings and Investments, Inc.
(Successor to S.I.T.I., S.P.A. Societa Italiana Telecommunicazioni Integrate)
Notes to Unaudited Consolidated Financial Statements
Condensed Financial Statements
In the opinion of the Company, the accompanying unaudited condensed financial
statements include all adjustments (consisting only of normal recurring
accruals) which are necessary for a fair presentation of the results for the
periods presented. Certain information and footnote disclosure, normally
included in the financial statements prepared in accordance with generally
accepted accounting principles, have been condensed and omitted. The results of
operations for the six months ended June 30, 2004 are not indicative of the
results of operations for the year ended December 31, 2004. The condensed
financial statements should be read in conjunction with the Company's financial
statements included in its annual Form 10 KSB for the year ended December 31,
2003.
Related Party Transactions
During the six months ended June 30, 2004, the principal stockholder advanced
the Company $359,000 for operating expenditures. The total amount due to the
principal stockholder at June 30, 2004 is $1,175,000.
Stockholders' Equity
During the first quarter ending March 31, 2004, an adjustment was recorded for
the issuance in 2003 of 74,000 shares to the Officer and Directors to compensate
for their services. The issuance was valued at $0.03 per share.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
FORWARD LOOKING STATEMENTS
This Form 10-QSB 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-QSB 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-QSB, before making a decision to
invest in our common stock.
The following is a discussion of our financial condition and results of
operations as of the date of this Form 10-QSB. 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.
OVERVIEW
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REGARDING ESTIMATES, RELATED PARTY
TRANSACTIONS AND CONTINGENCIES:
Significant accounting 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
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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.
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.
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 35% in 2003 and 36% in 2002.
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.
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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.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2004 AS COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 2003.
Revenues. There were no revenues for the three months ended March 31, 2004,
a decrease of $155,000 as compared to revenues of approximately $155,000 for the
three months ended Narch 31, 2003.
Operating Expenses. For the three months ended March 31, 2004 operating
expenses were approximately $212,000, which were approximately the same for the
same period in 2003.
Other Income (Expenses). For the three months ended March 31, 2004, Prime
did not recognize any net miscellaneous other expenses, as compared to net
miscellaneous other expense of 97,000 for the three months ended March 31, 2003.
Minority Interest. For the three months ended March 31, 2004, Prime did not
recognize any minority interest as compared to a approximately $4,000 loss for
the three months ended March 31, 2003.
Net Income {Loss). As a consequence of the foregoing, Prime has a net loss
for the three months ended March 31, 2004 of approximately $212,000 compared
with approximately $158,000 net loss for the three months ended March 31, 2003.
For the three months ended March 31, 2004 earnings per share was approximately
(0.02) compared with an earnings of approximately $(0.02)for the three months
ended March 31, 2003.
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RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AS COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 2003.
Revenues. There were no revenues for the six months ended June 30, 2004, a
decrease of $155,000 as compared to revenues of approximately $155,000 for the
six months ended June 30, 2003. All of these revenues were generated by
subsidiary companies operating in Italy. During the six months ended June 30,
2003, 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 six months ended June 30, 2004 operating
expenses were approximately $319,000, a decrease of $147,000 or 31.5%, from
approximately $466,000 for the same period in 2003. This decrease in operating
expenses was primarily due to a reduction adminstrative expenses.
Other Income (Expenses). For the six months ended March 31, 2004, Prime did
not recognize any net miscellaneous other expenses and no interest income, as
compared to net 97,000 miscellaneous expenses and 1,000 interest income for the
six months ended June 30, 2003.
Income Taxes. For the six months ended March 31, 2004, Prime did not
recognize any income taxes, as compared to a approximately $1,000 income taxes
for the six months ended June 30, 2003. Prime is subject to income taxes on an
entity basis on income arising in or derived from the tax jurisdiction in which
each entity is domiciled.
Net Income {Loss). As a consequence of the foregoing, Prime has a net loss
for the six months ended June 30, 2004 of approximately $319,000 compared with
approximately $334,000 net loss for the six months ended June 30, 2003. For the
six months ended June 30, 2004 earnings per share was approximately (0.04)
compared with ($0.04) for the six months ended June 30, 2003.
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ITEM 3. CONTROLS AND PROCEDURES
(A) DISCLOSURE CONTROLS AND PROCEDURES. Within 90 days before filing this
report, the Company evaluated the effectiveness of the design and operation of
its disclosure controls and procedures. The Company's disclosure controls and
procedures are the controls and other procedures that it designed to ensure that
it records, processes, summarizes and reports in a timely manner the information
it must disclose in reports that it files with or submits to the Securities and
Exchange Commission. John Visendi, our Chief Executive Officer and Treasurer
(Principal Accounting Officer) supervised and participated in this evaluation.
Based on this evaluation, Mr. Visendi concluded that, as of the date of his
evaluation, the Company's disclosure controls and procedures were effective.
(B) INTERNAL CONTROLS. Since the date of the evaluation described above,
there have not been any significant changes in the Company's internal accounting
controls or in other factors that could significantly affect those controls.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Prime is not a party to any material legal proceedings.
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.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS BY THE COMPANY UPON ITS SENIOR SECURITIES
None.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
31 Certification of Chief Executive Officer and Treasurer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
32 Certification of Chief Executive Officer and Treasurer Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
b) Reports on Form 8-K
During and subsequent to the three months ended June 30, 2004, the Company
did not file any reports on Form 8-K:
SIGNATURES
In accordance with the requirements 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.
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(Registrant)
Date: August 19, 2004 By: /s/ JOHN VISENDI
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John Visendi
President, Chief Executive Officer
and Chief Financial Officer
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