July CEO Letter

This has been added to the CEO letters archive from May:

Letter from the CEO - July 20, 2005

Dear Valued Shareholder,

I am writing this letter to inform you that Primeholdings has once again reached a crossroad which requires our utmost consideration. Over the past fifteen months we achieved revenues in excess of $2.75 million despite being grossly undercapitalized. It’s not hard to imagine what could have been accomplished had the company been properly funded. I never thought we would ever have a problem with "growth funding" through the Pinksheets as long as we had revenues. On a few occasions our annualized revenues were 7-8X that of our market cap which is remarkable. We find ourselves in a situation whereby it is impossible to adequately fund the company solely through the Pinksheets. Even with steady revenue announcements, consistent growth for a year and half, and the proven track record of Target's management, the stock failed to reflect our true value. The Pinksheets are clearly not designed to facilitate growth for companies with our revenue/business model.

We are now contemplating other avenues by which to achieve our objectives. Over the last few months we have been in the process of obtaining funding for debt restructuring through unique means via the banking community. Once completed, this will facilitate the restructuring of our debt load thereby alleviating some of the current financial pressure. Because of the inability to properly fund the company through the Pinksheets, we were forced to cut back on our aggressive revenue drive. This was mainly due to the imbalance between the credit terms extended to us by our foreign partners/providers as compared to those we are required to extend our upper tier customers. The cumulative monthly cash flow deficit this created, together with the modest losses associated with a start-up, makes the situation unmanageable.

The immediate goal is to set up funding arrangements that will facilitate growth to profitability without the dependence on the Pinksheet market. Recently, we have been presented with two very strong and favorable deal sheets from very reputable groups in the investment banking community. One of the firms manages over $400 million in equity investment capital and represents approximately 10% of the “PIPE” (Private Investment in Public Entity) market. The one stipulation required to bring this to fruition is that we must be a full-reporting company. Our immediate reaction to this requirement was that to get the company to a full-reporting status in a short time is a very tall order. After further consideration and subsequent discussions we found that this in fact could be accomplished via an existing full-reporting OTC-Bulletin Board company that has been made available to us by an old friend and valuable ally of Prime.

The process would begin with the acquisition of the full-reporting company. The new entity would then acquire the assets of Target Communications. As payment for those assets, stock in the new entity would then be issued to all shareholders holding common stock in Prime. Implementing this process in such an expeditious manner will allow the investment firms to act much quicker in supporting our capital funding needs. More importantly, this arrangement has no financial limits unlike those imposed in the Pinksheets via 504 exemptions. On a side note, due to our economic prudence, Prime can still raise in excess of $700,000 through its 504 exemption in the current year.

Of special interest to the Primeholdings shareholders is that collectively, they will have majority interest in the new entity, which will then have ownership in Target’s assets. Another exciting aspect of this proposed scenario is that the shareholders of Prime maintain their equity stake in Primeholdings and gain an interest in the new entity positioned to be properly funded because of its public reporting status. Mergers and acquisitions can become a reality and Prime gains credibility leaving the Pinksheets for the OTC Bulletin Board. The opportunities are endless provided we can get this done quickly. Clearly this move puts the Prime shareholders in a much better position to recoup their value while placing Target in much better position to attain its lofty revenue goals.

Henry Ford once said:

Obstacles are those frightful things you see when you take your eyes off your goal.

I have not lost my focus nor desire to make our company prosper. Despite the obstacles we’ve faced in the way of shorters, bashers, and various other negative forces attempting to impact our good intentions, we are determined to succeed. My eyes remain steady on our goal! Thank you to all that have supported me and the rest of our management team and know that we will continue to work diligently to bring value to you all.

Kindest regards,

Tom Aliprandi, CEO