Form 10-QSB

U.S. Securities andExchange Commission

Washington, D.C. 20549

 

(Mark One)

[X]    **Quarterlyreport pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**
       for the period ended March 31, 2002

[ ]    **Transition report pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**
       for the transition period from _____ to _____

 

Commission FileNO:    000-30477

 
**PRIME HOLDINGS ANDINVESTMENTS, INC.**
(Exact name of smallbusiness issuer as specified in its charter)

 
**Nevada**88-0421215
(State or other      jurisdiction of incorporation or organization)
(I.R.S.      Identification No.)
 

8275 South EasternAvenue

Las Vegas, Nevada89123

(Address of principalexecutive offices)

 

(702) 990-8800

(Issuer's telephonenumber)

 

Check whether theissuer:

(1)   filed all reports required to be filed by Section 13 or 15(d) of the ExchangeAct during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and

(2)   has been subject to such filing requirements for the past 90days.        Yes   X     No _____

 

Applicable only tocorporate issuers:

State the number ofshares outstanding of each of the issuer's classes of common equity, as of thelatest practicable date:    6,474,000 shares common stock issuedand outstanding as of March 31, 2002.

 

Transitional SmallBusiness Disclosure Format (check one)    Yes_____    No   X  
 
**PART I - FINANCIALINFORMATION**
 

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PRIME  HOLDINGS AND INVESTMENTS INC.

(SUCCESSOR  TO S.I.T.I. S.P.A. SOCIETA ITALIANA

TELECOMMUNICAZIONI  INTEGRATE)

Consolidated  Financial Statements

(Unaudited)

March  31, 2002

(U.S.  Dollars in thousand)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

** **

**PRIME HOLDINGS AND INVESTMENTS INC.  CONTENTS**

**(SUCCESSOR TO  S.I.T.I. S.P.A. SOCIETA ITALIANA  TELECOMMUNICAZIONI INTEGRATE)**

**CONSOLIDATED  FINANCIAL STATEMENTS**

**March 31, 2002**

**(U.S. Dollars in thousand)**

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  INDEPENDENT ACCOUNTANTS' REPORT

   

   

  CONSOLIDATED BALANCE SHEET  STATEMENT 1

   

  CONSOLIDATED STATEMENT OF EARNINGS   STATEMENT 2

   

   

  CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY       STATEMENT 3

   

   

  CONSOLIDATED STATEMENT OF CASH FLOWS                               STATEMENT 4

   

   

                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

 

   

   

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**EVANCIC  PERRAULT ROBERTSON**

CERTIFIED  GENERAL ACCOUNTANTS  

* *

                                                                            

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**INDEPENDENT ACCOUNTANTS'  REPORT**

   

   

   

   

To  the Shareholders

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)

   

We  have reviewed 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 at March 31, 2002 and the  consolidated statements of earnings, stockholders' equity and cash  flows for the three months ended March  31, 2002. These consolidated financial statements are the  responsibility of Prime Holdings and Investments, Inc.'s management.

   

We  conducted our review in accordance with standards established by the American  Institute of Certified Public Accountants.    A review of consolidated financial statements consists principally of  applying analytical procedures to financial data and making inquiries of  persons responsible for financial and accounting matters.   It is substantially less in scope than an audit conducted in accordance  with generally accepted auditing standards, the objective of which is the  expression of an opinion regarding the financial statements taken as a whole.   Accordingly, no such opinion is expressed.

   

Based  on our review, we are not aware of any material modifications that should be  made to the accompanying consolidated financial statements for them to be in  conformity with generally accepted accounting principles established by the  American Institute of Certified Public Accountants.

   

   

   

   

   

   

**CERTIFIED  GENERAL ACCOUNTANTS**

   

   

North  Vancouver, B.C.

May  17, 2002                           

   

   

   

#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

 

 

 

 

**PRIME HOLDINGS AND INVESTMENTS INC.**     **STATEMENT**

**(SUCCESSOR  TO S.I.T.I. S.P.A. SOCIETA ITALIANA****TELECOMMUNICAZIONI  INTEGRATE)**

**CONSOLIDATED  BALANCE SHEET**

March 31,  2002

(U.S.  Dollars in thousand)
March        31, 2002  March        31, 2001**ASSETS**Current:Cash and cash equivalents$435$216Accounts receivable, net of allowance for        doubtful accounts(2002 - $108) (2001 - $96)5,5352,112Inventory - note 32,0771,195Prepaid        expenses633178,6803,540Long-term accounts receivable
-1Property, plant and equipment -        note 4789572Investments - note 5714608Other investments          - note 531140Goodwill - note 61,8541,656Other        intangible assets - note 710545**$****12,173****$****6,562****LIABILITIES AND        STOCKHOLDERS' EQUITY**Current:Demand loan - note 8$ 2,427$1,286Accounts payable and accruals  4,1841,215Customer deposits28813Taxes payable33733Current        portion of long term debt - note 1012216 7,3582,563Due to affiliated parties        -  note 9101
-Long-term debt - note 105871Due to minority interest        shareholders105;72Reserve for employee        termination indemnities19964Minority        interest5224628,3433,232Contingent liabilities /        commitments - note 14Stockholders' equityCapital Stock - note 11 3,5903,556Additional paid-in capital2,0041,067Other comprehensive income(112)(107)Deficit(1,652)(1,186)3,8303,330**$****12,173****$****6,562**
****On  behalf of the Board   

________________________________Director  ___________________________ Director

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**PRIME HOLDINGS AND INVESTMENTS INC.  STATEMENT 2**

**(SUCCESSOR TO  S.I.T.I. S.P.A. SOCIETA ITALIANA  TELECOMMUNICAZIONI INTEGRATE)**

**CONSOLIDATED  STATEMENT OF EARNINGS**

For the three  months ended March 31, 2002

(U.S. Dollars in thousand)

Three Months Ended
Three Months Ended
March 31, 2002
 March 31,        2001**Revenue**
$
418
$
 430**Operating expenses**Amortization29126Bank charges and interest167Other operating expenses11256Other provisions6019Outside services48499Purchases41237Rent9896 840640(422)(210)**Other income (expense)**Miscellaneous1127**Loss before minority interest and income        taxes**(310)(203)**Income        taxes**25**Loss before minority interest**(312)(208)**Minority        Interest**26**Net        loss for the period****$****(314)****$****(214)****Weighted        average common shares outstanding****53,527****53,527****Earnings        (loss) per share****$****(0.006)****$****(0.004)**
 

 

 

 

 

 

 

 

**PRIME HOLDINGS AND INVESTMENTS INC.****STATEMENT 3**

**(SUCCESSOR  TO S.I.T.I. S.P.A. SOCIETA ITALIANA  TELECOMMUNICAZIONI INTEGRATE)**

**CONSOLIDATED  STATEMENT OF STOCKHOLDERS' EQUITY                          **

For the three  months ended March 31, 2002

(U.S.  Dollars in thousand)

**Additional**
**Common Shares**
**Paid-in**
**Accumulated****Number**
**Amount**
**Capital**
**Deficit**
**Total         **
**(000)**Balance, December 31, 20007403,5561,067(972)3,651Net        loss for the period
-
-
-(214)(214)Balance, March 31, 20017403,5561,067(1,186)3,437Increase in paid-in capital in SITIS.p.A. before reverseacquisition
-
-
937
-937Reverse AcquisitionPre-acquisition shares of PrimeHoldings and Investment Inc.,(Note 2)3,52734
-
-34Issuance of common shares forreverse acquisition of SITI onSeptember 13, 200150,000
-
-
-
-Less exchange of SITI S.p.A.shares(740)
-
-
-
-Balance after reverse acquisition53,5273,5902,004(1,186)4,408Net        loss for the period
-
-
-
(152)
(152)Balance, December 31, 200153,5273,5902,004(1,338)4,256Net        loss for the period
-

-
-(314)(314)**Balance,        March 31, 2002****53,527****$**** 3,590****$****2,004****$**** (1,652)****$****3,942**
   

 

**PRIME HOLDINGS AND INVESTMENTS INC.** **STATEMENT 4**

**(SUCCESSOR  TO S.I.T.I. S.P.A. SOCIETA ITALIANA  TELECOMMUNICAZIONI INTEGRATE)**

**CONSOLIDATED  STATEMENT OF CASH FLOWS**

For the three  months ended March 31, 2002

(U.S.  Dollars in thousand)

Three Months Ended
Three Months Ended
March 31, 2002
March 31, 2001**Cash flows from operating activities:         **Loss from operating activities  $
(314) $(214)Items not requiring an outlay of fundsAmortization29126Minority        interest(2)(6)(287)(94)Changes in non-cash working capitalAccounts receivable131167Inventory(1)37Prepaid expenses2371Accounts payable and accrued liabilities121(254)Customer deposits(154)
-  Taxes payable(59)(48)Reserve        for employee termination indemnities(60)(15)(72)(206)**Cash flows from financing activities:**Repayment of long-term debt
-(14)Increase in minority interest12029Repayment of demand loans(77)(89)Decrease in due to minority interest        shareholders(1)(23)Advances        from affiliated parties101
-143(97)**Cash flows from investing activities:**Disposals of tangible assets7-Sale (purchase) of long-term investments7(102)Sale of other investments
-1Purchase of tangible assets(2)
-Purchase        of intangible assets(2)
-10(101)**Effect        of exchange rate changes on cash**  (44)66**Increase (decrease) in cash****37**** (338)****Cash,        beginning of period  ****398****554****Cash,        end of period****$****435****$****216****Supplemental Disclosures         **Interest paid$16 $6Income        taxes paid
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**PRIME  HOLDINGS AND INVESTMENTS INC.**                                                                       

**(SUCCESSOR  TO S.I.T.I. S.P.A. SOCIETA ITALIANA  TELECOMMUNICAZIONI INTEGRATE)**

**NOTES TO  THE FINANCIAL STATEMENTS**

March 31,  2002

(U.S.  Dollars in thousand)

   

The  Company was incorporated on December 3, 1998, under the laws of the State of  Nevada.   

 

On  August 8, 2001, the Company changed its name to Prime Holdings and  Investments, Inc. (Prime) and acquired 100% of the shares of SITI S.p.A.  Societa Italiana Telecommunicazioni Integrate (SITI), an Italian corporation.   The Company's principal activities are telecommunications and  construction contracting.

   

**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.  

   

Datico  S.p.A. is established in 1981.  It  is an information technology services company that specializes in the design,  building and maintenance of advanced network systems. It manufactures and markets network components such as  modems, converters, adapters, statistical multiplexers, ethernet hubs and  media converters under the Datico trade name.   In addition,  Datico is a  certified distributor for network component supply companies which includes  Nokia, Cisco and Newbridge. 

   

Datico  Services S.p.A. is a switchless long distance reseller and prepaid phone cards  supplier to ethnic group and call shop centers, focused in southern Italy.   Over the next 3 years, Datico Services S.p.A. will expand operations  and continue its move into international telecommunications transmissions. 

   

Kelti  S.r.L. is a long distance reseller that aims at providing telephone systems to  the banking sector in the eastern part of Italy, including the region of  Abruzzo.

   

Impresa  Mondelli S.r.L. is an engineering and general contracting company,  specializing in the construction of cable and fiber optic networks, bridges,  highways and commercial buildings.  Mondelli  has a notable 120‐year history of partnering with major Italian  construction companies and related consortia to from Temporary Associations of  Enterprises, having completed major works throughout Italy. 

   

Artel  S.r.L. is a company that specialize 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..

   

**        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 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.

   

**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.

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**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.   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:

   

 Licenses,      trade-marks and similar rights               20%    

Patents and intellectual property rights             33%    

 Purchased goodwill                                             10%    

 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 S.I.T.I. 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. 

   

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 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% (36% in 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 labour 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 recorded as a reverse acquisition, the shares  outstanding after the acquisition was used in the EPS calculations for the  2000 year.

   

**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.

**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.

   

**3.      INVENTORY**

March 31
March 31
2002
2001Raw materials  $ 206$
-Finished        goods1,8711,195**$**** 2,077****$****1,195**
   

**4.      PROPERTY, PLANT AND EQUIPMENT**
**March 31****March 31**
**2002**
**2001**
**Accumulated****Net Book**
**Net Book**
**Cost**
**Amortization****Value**
**Value**Fixed assets construction in progress$220$
-$220$206Land and buildings254136118126Other equipment444221Other plant and equipment28114913260Plant        and machinery1,3821,065317179**$****2,181****$**** 1,392****$****789****$****572**
   

   

**5.      INVESTMENTS AND OTHER INVESTMENTS**

 

March 31
March 31
2002
  2001Investments in enterprisesAdvances to sub-contractors of Impresa Mondelli Srl
$204$
-  Consortium Tecnos 510511Advances        to Sardegna 97 S.p.A. 
 -97**Total ****$****714 ****$****608**
   ** **

Other  investments

** **

Other  investments are represented by fixed interest securities.

 

**6.      GOODWILL**

                                                
March 31March 3120022001Goodwill$1,866$1,664Accumulated        amortization128**Total****$****1,854****$****1,656**
             

**7.      OTHER INTANGIBLE ASSETS      **

 
**March 31**
**March 31**
**2002****2001****Accumulated****Net Book****Net Book****Cost****Amortization****Value****Value**Intangibles in progress and advances$
 -$
-$
-$11Licenses, trade-marks and similar rights754134 24Others intangible assets10641651Patents and intellectual property rights141048Research        and development expenditures7521**  $****202****$****97****$****105****$**** 45**
     ** **

**8.     DEMAND LOAN**

** **

Group  companies have credit lines available to the extent of US $2.5 million at the  interest rate of 7.25% - 9.75% on March 31, 2002.

   

**9.      DUE TO AFFILIATED PARTIES**

   

        The Company has advances payable to  its majority shareholders which are non-interest bearing and no specific  repayment terms.

      

**10.    LONG-TERM DEBT**
March 31March 3120022001Mortgage payable to Credito Fondiario S.p.A.,        secured by building,no payment terms and non-interest bearing.
Balance$107$
-Mortgage payable to Comit (Banca Commerciale        Italiana),secured by building, requiring semi-annually        payments of $4,including interest at 5.198%.Balance 2225Mortgage payable to Ambrosiano Veneto, secured        by building,
requiring        semi-annually payments of $4, including interest at 4.675%.
Balance5162$ 180$ 87Less        current portion 12216**$****58****$**** 71**
**   **

   

**10.    LONG-TERM DEBT (continue)**

   

 Principal  amounts due within the next three years on mortgages payable are as follows:

    2003                                                                                       $               122

2004                                                                                                      53

2005                                                                                                        5

**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

   

** **

**12.   ACQUISITIONS**

   

On  June 4, 2001, Datico S.p.A. acquired 93% of the share capital of Impresa  Mondelli S.r.l. which is an engineering and general contracting company  specializing in the construction of cable and fiber optic networks, bridges,  highways and commercial buildings.  The  purchase price was $127.  The  purchase included goodwill of $5.

   

On  September 25, 2001, the Company acquired 51% of the share capital of Artel  S.r.l.  The Company   purchases, sells and brokers of 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 on  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 with the amount 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 beginning of the financial year in which the  acquisition took place.

   

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.

   

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 major highway projects in  Italy under long-term contracts ranging up to 8 years in length.  

   

        Below are the sales and operating profit by segment for the three month  period ended March 31, 2002 and a reconciliation of segment operating  profit to earnings before income taxes.  

 
ConstructionTelecommunicationOthersTotalRevenues $
317$101$
-$418 Operating      expenses 4443933840Operating income (loss)(127)(292)(3)(422)Other      income (expenses)16 96
-112Earnings (loss) before incometaxes      and minority interest$(111)$(196) $(3)$(310)
   ** **

**14. COMMITMENTS AND CONTINGENCIES**

 

Groupcompanies have provided guarantees to third parties relating to constructionactivities approximating US $11 million and has received guaranteesapproximating US $4 million.  Theserelate to construction projects substantially completed in prior years and willbe terminated once final completion of the related projects has been authorized.

 

**15.  RELATED PARTY TRANSACTIONS**

 

 Duringthe three month period the Company has received from the former shareholders ofSITI S.p.A. $86 (2001 - nil) for reimbursement of acquisition expenses.

 

** **

 

 
**Item 2. Management's Discussion and Analysis**
 

This ManagementDiscussion and Analysis presents a review of the consolidated operating resultsand financial condition of the Company for the quarter ended March 31, 2002.This discussion and analysis is intended to assist in understanding thefinancial condition and results of operation of the Company, its subsidiariesand associated companies. This section should be read in conjunction with theconsolidated financial statements and the related notes appearing elsewhere inthis report.

 

The accompanyingconsolidated financial statements include the accounts of the Company, itssubsidiaries and associated companies. The consolidated financial statementsinclude the operating results of each of these companies from the beginning ofthe quarter ended March 31, 2002. A list of the Company's subsidiaries isfiled as Exhibit 21 to this Form 10-QSB.

 

The financialstatements of entities, which are controlled by the Company (referred to assubsidiaries) are consolidated. These include the accounts of the followingcompanies: S.I.T.I. SpA; Datico SpA; Impresa Mondelli SrL; Datico Services SpA;Sardegna '97 SpA; Artel SrL; and KELTI SrL. Investments in subsidiarycompanies are accounted for using the purchase method. Entities which are notcontrolled, and over which the Company 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 ofincorporation on December 3, 1998, to September 13, 2000, the Company was adevelopment stage company that did not have revenues from operations. FromDecember 3, 1998 to February 25, 2000, the Company operated under the nameDiligencia 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 the Company tosatisfy its cash requirements.

 

The Company believesits existing cash balances will be sufficient to meet anticipated cashrequirements for at least the next twelve months. The Company may, nonetheless,seek additional financing to support its activities during the next twelvemonths or thereafter, including additional public offerings of its common stock.There can be no assurances, however, that additional capital will be availableon reasonable terms, if at all, when needed or desired.

 
*RESULTS OF OPERATIONS*
 

Quarter ended March 31,2002 compared to quarter ended March 31, 2001.

 

Total revenues forthe quarter ended March 31, 2002 were approximately $418,000, a decrease of 3%,as compared to revenues of approximately $430,000 for the quarter ended March31, 2001.

 

The increase inrevenue in 2002 as compared to 2001, is attributable to the Company'sacquisition on September 13, 2002, of S.I.T.I. and its five subsidiaries and oneassociated company, as well as subsequent acquisitions of two subsidiarycompanies by S.I.T.I. from September 13, 2001 to December 31, 2001.
* 

Discussion of SubsidiaryCompanies reporting revenue during fiscal 2001*
 

The Company'ssubsidiary companies that reported revenues during first quarter 2002, areS.I.T.I., Datico, Datico Services, Impresa Mondelli, Kelti and SCA.
** **
All the of theCompany's revenues were generated by subsidiary companies operating in Italy.
** **
Total expensesincreased by $200,000 or 32%, from $640,000 for first quarter 2001, to $840,000for first quarter 2002. All increases in total expenses were a result ofacquisition of the Company's subsidiaries and associated companies onSeptember 13, 2001. 

 

The Company hasissued shares of its Common Stock from time to time in the past to satisfycertain obligations and expects in the future to also acquire certain services,satisfy indebtedness and/or make acquisitions utilizing authorized shares of thecapital stock of the Company. If operations and cash flow can be improvedthrough these efforts, management believes that the Company's liquidity problemswill be resolved and that the Company can continue to operate. However, noassurance can be given that management's actions will result in profitableoperations.

 

 
**PART II - OTHERINFORMATION**
 
**Item 1.  LegalProceedings**
 

None.

 
**Item 2.  Changes inSecurities and Use of Proceeds**
 

None.

 
**Item 3.  DefaultsUpon Senior Securities**
 

Not applicable.

 
**Item 4.  Submissionof Matters to a Vote of Security Holders**
 

Not applicable.

 
**Item 5.  OtherInformation**
 

Not applicable

 
** 

SIGNATURES**
 

In accordance with therequirements of the Exchange Act, the registrant caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

 

PRIME HOLDINGS ANDINVESTMENTS, INC.

 

 

/s/ Giovanni Iachelli

Giovanni Iachelli

President and DulyAuthorized Officer****