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, 2001

Commission file number 000-29937

Prime Equipment, Inc.

a Nevada corporation

Suite 200 - 8275 South Eastern Avenue,

Las Vegas, NV 89123

(702) 990 8387

IRS Tax ID #: 88-0412653

Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2001.

Securities Registered Under Section 12(g) of the Exchange Act:

Common

The issuer has 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 has been
subject to filing requirements for the past 90 days.

There is no disclosure of delinquent filers in response to item
405 of Regulation S-B 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.

There have been no revenues for fiscal year ended December 31,
2001.

Aggregate market value of the voting common equity held by
non-affiliates computed by reference to the price at which the common stock was
last sold, as of December 31, 2001, was $4,046,000. The Company's common stock
is not currently traded on any market.

As of December 31, 2001, there were 4,046,000 shares issued and
outstanding of the Company's Common Stock.





PART I.

Item 1. Description of Business.

General

Prime Equipment, Inc. (the "Company") is a Nevada
company formed under the laws of the State of Nevada on December 18, 1998,
originally to engage in the construction equipment and telecommunication
equipment rental & sales business. Since its inception, the company has been
establishing itself in the industry. The Company has sold equity shares to raise
capital, planned and arranged for management, and has commenced corporate
strategic planning regarding potential viable operations. The Company currently
operates out of Suite 200-8275 South Eastern Avenue Las Vegas NV 89123. The
Company is a development stage company, which does not currently have supply
contracts and, therefore, does not have revenues from operations for the last
two fiscal years.



Business of Issuer

The Company is engaged in the import and distribution of
telecommunications equipment. It has signed a contract with DATICO S.P.A. (www.datico.it)
of Italy for the exclusive right to import and distribute their manufactured
telecommunications equipment to Internet Service Providers and end users in the
North America. DATICO has extended the terms of the exclusive agreement to allow
additional time for completion of the tests on the software for the Company's
products. DATICO has provided that the minimum sales requirements will begin as
soon as the software testing is complete, and the modem is approved for sale in
North America.



The first product is a high-speed modem for DSL Internet
connection, which allows the subscriber to surf at a speed of 1.5Mb to 4Mb. The
Company is also looking at equipment for wireless Internet, which would fill a
market need in remote areas were DSL is not available.



With the implementation of broadband (fiber-optics) more and
more services will be available on the Internet. Looking to the future of the
company, it is clear that the market will be the telecommunications equipment,
to be utilized by end-users, carriers, ISP, TV and cable companies. High-speed
ADSL modems will be in greater demand, as the speed will be crucial in
determining future use. The Company will benefit from our association with
DATICO Spa whom, as a distributor for NOKIA products, as well as manufacturing
their own modems, can also use the latest technology from NOKIA to be
implemented into their equipment.



The focus will be to use DATICO's know-how to install into
office buildings, hotels, banks, etc., an integrated private network to provide
broad-band connection to all tenants, with substantial savings over having to
supply them individually (Appendix II).



Another product the Company is considering is Voice Over IP
Telephone Sets that will change the way phones are used in the near future.
Contacts have be made with Circa Telecom (www.circa.ca) for distribution in
Italy of Circa's telephone sets through DATICO. Prime will be the exporter of
this product to Italy.



Management continues to search for new equipment to be added to
its current product list, which we believe will increase yearly.



The Company's products will be marketed over the Internet,
through its web site www.primeequipmentinc.com. Management of the Company
believes that there is a high demand for these types of products due to rapid
increase demand for high-speed Internet service and specifically DSL connection.



The Company leases suitable office space in Las Vegas, Nevada to
sell the products over the Internet. A copy of the lease has been previously
filed with the Company's registration statement on Form 10SB. The lease runs
on a month-to-month basis until cancelled by Prime.



The Company has entered into a letter of intent to aquire one
hundred percent (100%) of the stock of IP Teleservices Inc. (IP). IP is a
Canadian telecom company poised to be the leader in "softswitch" VoIP
implementation on a global scale. IP hopes to generate significant traffic
volume from the retail, wholesale and franchising opportunities around the
world. At the same time, IP hopes to improve its overall margin as its network
grows with its latest integrated software technology.

The objective of IP is to build a Global Voice Services
Backbone Network with connectivity to VoIP Gateways and Call Management Data
Centers (CMDC) around the world. The locations of the three regional CMDCs
expect to be situated in Hong Kong, Vancouver, B.C. and Milan, Italy. Through
Hong Kong's CMDC and its interconnection with other major cities in Asia, IP
hopes to compete on Asia inbound traffic generated from other regions;
especially traffic to be terminated in China. The CMDC in Milan will
interconnect at least ten major cities within Italy and other major cities in
Germany, Britain, Spain and France. The completion of Milan's CMDC will
immediately provide Italy outbound traffic to be terminated in Asia and North
America. It will also reduce IP's termination cost in Europe.



Prime hopes to complete the acquisition sometime in April 2002.



Marketing

The Company intends to rely on the Internet, trade shows to
implement the Company's marketing objectives. The company also intends to
utilize traditional distribution channels in each State, direct e-mail and
Internet Service Providers to expand its contacts and client base. The Company
has established a website at www.primeequipmentinc.com.



The Company does not anticipate being dependent on one or a few
major customers. The Company intends to supply DSL and telecom equipment through
the use of a web site. Also, management of the Company expects that the posting
of the web page on various search engines on the Internet will attract end user
customers. However, there is no guarantee that the Company's web site will
promote the growth of the Company. As of the date of this submission, the
Company's President, Piero Dante Guglielmi works part-time for the Company, with
the support of the secretary and director Alex Martyiank.



Other than development of its website, the Company has no
intellectual property rights.



Item 2. Description of Property.

The Company's principal executive and administrative offices are
located in Nevada at Suite 200-8275 South Eastern Avenue, Las Vegas, Nevada,
89123, in which it shares leased premises under a month-to-month agreement with
an executive office center. The Company intends to stay at this premise until it
gets economically viable or until the Company has made other plans or found
suitable space. The Company rents on a per month basis a shared office for
economic reasons until the Company has adequate financing to develop its
business. A copy of the lease is attached as an Exhibit. The Company considers
its executive and administrative offices to be adequate and suitable for its
current needs. The Company does not own or lease any other real estate.

Item 3. Legal Proceedings.

The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by or against the
Company has been threatened. The Company's officers and directors are not
adverse parties to the Company nor do they have any material interests adverse
to the Company.

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

No matters were submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

Market Information



The Company has no public trading market for its common stock.
Although the Company intends to seek a quotation for its common shares on the
Over-the-Counter Bulletin Board in the future, there is no assurance the Company
will do so, nor is there any assurance that should the Company succeed in
obtaining a listing for its securities on the OTC Bulletin Board or on some
other exchange that a trading market for the Company's stock will develop. There
are no options, warrants to purchase, or securities convertible into common
equity of the Company outstanding. The Company has not agreed to register any
shares of its common stock for any shareholder. There are presently 4,021,000
shares of common stock that were issued as follows: 100,000 shares of common
stock for cash subject to Rule 144 in December 1998; 100,000 issued pursuant to
Regulation D, Rule 504 on March 1999. On October 22, 1999, all of the existing
shareholders surrendered their stock and the Company issued 4,000,000 shares of
common stock to those shareholders, pursuant to a 20 for 1 forward split. No
additional stock was sold at that time. On November 14, 1999, 1,000 shares of
restricted common stock was issued, and in December 17, 1999 20,000 shares on
restricted common stock was issued, both pursuant to a Rule 504 private
placements. The Company issued 25,000 shares of restricted common stock to
Giovanni Iachelli on November 1, 2000, for services rendered.



Stockholders



There are 51 shareholders of record for the Company's common
stock.



Item 6. Plan of Operation.

PLAN OF OPERATION

The Company plans to engage in the sale of telecommunications
equipment. Additional funding through private placement will be necessary to
enable the Company to lease a suitable office warehouse facility in Las Vegas
and to enable the Company to complete its Web Page and to secure contracts with
suppliers and users.



The Company plans on development of its web site sales by
marketing through the use of mailers to potential customers, inviting them to
visit the web site, learn about the Company's products, and purchase its
products. The Company expects to contract with independent sales persons to
assist in its marketing and sales efforts.



Because the Company's products involve adapting the modems to
meet the needs of individual customers, by switching chips in the modems that
will be compatible with each customer's business, it expects to receive advance
payments for larger orders. The suppliers of the Company can produce between 250
and 2,500 modems per week, depending on the modem ordered. The Company expects
to be able to deliver specialized modems to customers within 10-15 days of the
order placed and the deposit received. Because of this arrangement, the Company
does not need to make large capital outlays for inventory to supply orders. The
software that powers the Company's modems has been under testing for the past
several months. The results of the tests have allowed for the Company to
undertake further licensing necessary to sell their equipment.



The Company intends to raise funds from interested local parties
to provide adequate working capital of up to $2,250,000 for the next 12 months.
This will be used to develop Internet business, pay professionals and for
advertising in the Yellow Pages and media and purchase the telecommunications
equipment. No further product research or development is considered necessary;
no plant is required, but the Company expects to add employees over the next 12
months as additional orders increase. The Company expects to begin the process
of raising adequate funding as soon as its potential customers and consultants
complete the testing of the software for its modems.



If the Company determines that the software it is testing for
equipment (modems) that it intends to sell cannot be modified for the North
American market, Prime intends to seek out other similar equipment for possible
distribution. There is no assurance that other similar equipment can be located
to substitute for the DATICO modem, but the Company believes that with its
background in testing and developing markets for modems, it will be able to
market such other equipment, even if such equipment is not equal or superior to
the DATICO modem.



The Company has entered into a letter of intent to aquire one
hundred percent (100%) of the stock of IP Teleservices Inc. (IP). IP is a
telecom company in Canada poised to be the leader in "softswitch" VoIP
implementation on a global scale. IP hopes to generate significant traffic
volume from the retail, wholesale and franchising opportunities around the
world. At the same time, IP hopes to improve its overall margin as its network
grows with its latest integrated software technology.



IP was started by a team of experienced telecom marketers and
software developers. Their objective is to build and develop a Global Voice
Services Backbone Network that connects to VoIP Gateways and Call Management
Data Centers spanning the globe. It has already successfully built a software
based VoIP application platform that enables VoIP over the Internet and/or
Intranet for Long Distance Telephone service and Calling Card businesses. This
platform can be deployed inexpensively, quickly and most importantly, globally.



IP Teleservices Inc. has been making acquisitions and
establishing partnerships with strategic local telecom companies. Through these
acquisitions, IPT has placed itself in a position to provide a global VoIP
Network that will link their presence in North America to Asia as well as
Europe. This in turn opens many doors for the company to develop more lucrative
business opportunities in the retail, wholesale and franchising sectors.



Management is in the final stages of negotiation of the terms of
the acquisition. While it is possible that the business combination will not be
finalized, Prime expects to complete the acquisition by the end of April 2002.
IP financial information is not included in this filing.



Revenue

The Company has not received revenues from operations during the
two-year period preceding the filing of this form. The Company has not yet
achieved any revenue from operations to date. Since the Company is still in the
development stage, its expenses were nominal.



Liquidity

The Company will have to raise additional capital in the next
twelve months. As of December 31, 2001, the Company had nominal working capital
and results. In order to satisfy the liquidity needs of the Company for the
following twelve months, the Company will be primarily dependent upon loans from
management, proceeds from the sale of the Company's common and/or preferred
stock through one or more private placements and future cash flow from
operations. Since the Company is in its development stage and has not entered
into any contracts or otherwise engaged in any activity that would generate
revenue at this time, the Company does not currently have the revenue necessary
to fund future operations of the Company. The Company has received a letter of
intent to purchase the Company's products in the near future. That potential
customer has completed its testing of the product and its software, and has
indicated its willingness to purchase the Company's product. A copy of the
customer's letter has been previously filed as an Exhibit to the Company's
registration statement on Form 10SB. The Company has received a line of credit
from its former President Giovanni Iachelli for $100,000, and from an outside
investor, as detailed in the Company's financial statements included herewith,
for $100,000 to assist the Company if cash flow from sales is insufficient to
meet costs. Copies of the agreements providing for the lines of credit was
attached as an Exhibit to the Company's previously filed registration
statement on Form 10SB. If the Company is unable to obtain adequate funds from
loans, the sale of its stock in public offerings, private placements, or
alternative financing arrangements, it may be necessary to postpone the planned
business of the Company or the Company's ability to obtain Letters of Credit.
The Company, under such circumstances, would resort to using cash flow for
internal growth.



The Company has issued shares of its Common Stock from time to
time in the past to satisfy certain obligations and expects in the future to
also acquire certain services and satisfy indebtedness utilizing authorized
shares of the capital stock of the Company. If operations and cash flow can be
improved through these efforts, management believes that the Company's liquidity
problems will be resolved and that the Company can continue to operate. However,
no assurance can be given that management's actions will result in profitable
operations.



The plan of the Company is to raise more financing through loans
and the sale of the Company's common and preferred stock to enable the Company
to purchase equipment, hire employees and execute additional contracts with
equipment manufacturers. An overall budget of $2,250,000 for the first year
should achieve the Company's goals.



Potential Uncertainties

As the Company expects eventually to obtain equipment from
overseas manufacturers and such expenditures are generated in foreign
currencies, fluctuations in the value of currencies relative to the United
States dollar could adversely affect the Company's profitability. Royalty
payments, if any, paid by the Company relating to foreign licensing arrangements
would be converted to U.S. dollars based on the exchange rate at the time of
payment.



Item 7. Financial Statements.

Following are the audited financial statements of the Company
for the year ended December 31, 2001.































PRIME EQUIPMENT, INC.



(A DEVELOPMENT STAGE COMPANY)



FINANCIAL STATEMENTS



DECEMBER 31, 2001 AND DECEMBER 31, 2000





TABLE OF CONTENTS



Page Number



INDEPENDENT ACCOUNTANT'S
REPORT                                                                    
1



FINANCIAL STATEMENT



Balance
Sheets                                                                                                            
2



Statements of Operations and Deficit

Accumulated During the Development
Stage                                                        
3



> Statement of Changes in Stockholders'
>   Equity                                                            
>   4



Statements of Cash
Flows                                                                                            
5



Notes to the Financial
Statements                                                                                
6-7





|David E. Coffey             | 3651 Lindell Road, Suite I, Las Vegas, Nevada 89103
|--------------------------- | ---------------------------------------------------
|Certified Public Accountant |                                                    







INDEPENDENT ACCOUNTANT'S REPORT





To the Board of Directors and Stockholders

Of Prime Equipment, Inc.

Las Vegas, Nevada





I have audited the accompanying balance sheets of Prime
Equipment, Inc. (a development stage company) as of December 31, 2001, and
December 31, 2000, and the related statements of operations, cash flows, and
changes in stockholders' equity for the years then ended, as well as the
cumulative period from December 18, 1998 (date of inception) to December 31,
2001. These statements are the responsibility of Prime Equipment, Inc.'s
management. My responsibility is to express an opinion on these financial
statements based on my audit.



I conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit included 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. I believe that my audit provides a reasonable basis for my
opinion.



In my opinion, the accompanying financial statements present
fairly, in all material respects, the financial position of Prime Equipment,
Inc. as of December 31, 2001, and December 31, 2000, and the results of
operations, cash flows, and changes in stockholders' equity for the years then
ended, as well as the cumulative period from December 18, 1998 in conformity
with generally accepted accounting principles.





David E. Coffey, C.P.A.

Las Vegas, Nevada

February 4, 2002



PRIME EQUIPMENT, INC.

(A DEVELOPMENT STAGE
COMPANY)

BALANCE SHEETS



|                                                                                                                                                                                              |           | December 31,
      2001 |           | December 31,
      2000
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ----------------------- | --------- | -----------------------
|ASSETS                                                                                                                                                                                        |           |                         |           |                        
|                                                                                                                                                                                              |           |                         |           |                        
|Cash                                                                                                                                                                                          | $         | 4,115                   | $         | 3,604                  
|Notes Receivable                                                                                                                                                                              |           | 0                       |           | 10,000                 
|Interest
      receivable                                                                                                                                                                     |           | 0                       |           | 1,406                  
|Deposits                                                                                                                                                                                      |           | 150                     |           | 0                      
|                                                                                                                                                                                              |           |                         |           |                        
|Total Assets                                                                                                                                                                                  | $         | 4265                   | $         | 15020                 
|                                                                                                                                                                                              |           |                         |           |                        
|LIABILITIES &
      STOCKHOLDERS' EQUITY                                                                                                                                                      |           |                         |          
|                                                                                                                                                                                              |           |                         |           |                        
|Accounts Payable                                                                                                                                                                              | $         | 43278                  | $         | 27554                 
|Note payable                                                                                                                                                                                  |           | 25000                  |           | 25000                 
|Interest payable                                                                                                                                                                              |           | 3798                   |           | 1298                  
|Notes payable to
      stockholders                                                                                                                                                           |           | 46505                  |           | 0                      
|Interest payable
      to stockholders                                                                                                                                                        |           | 3411                   |           | 0                      
|Loans from
      stockholders                                                                                                                                                                 |           | 5288                   |           | 11437                 
|                                                                                                                                                                                              |           |                         |           |                        
|Total Liabilities                                                                                                                                                                             |           | 127280                 |           | 65289                 
|                                                                                                                                                                                              |           |                         |           |                        
|Stockholders'
      Equity                                                                                                                                                                    |           |                         |           |                        
|Common stock, authorized 50,000,000shares at $.001 par value, issued and
      outstanding 4,046,000 shares, after
      giving effect to a 20:1 stock split effective
      October 22, 1999 | 4046     |                         | 4046    
|Preferred stock, authorized 24,000,000Shares at $.001 par value, none issued
      or outstanding                                                                                             | 0         |                         | 0        
|Additional
        paid-in capital                                                                                                                                                            | 46304    |                         | 46304   
|Deficit
        accumulated during the                                                                                                                                                        |           |                         |          
|Development
        stage                                                                                                                                                                     | (173365) |                         | (100619)
|                                                                                                                                                                                              |           |                         |          
|Total Stockholders' Equity                                                                                                                                                                    | (123015) |                         | (50269) 
|Total Liabilities and Stockholders' Equity                                                                                                                                                    | $         | 4265                   | $         | 15020                 





The accompanying notes
are an integral part of

these financial
statements.



-2-



PRIME EQUIPMENT, INC.

(A DEVELOPMENT STAGE
COMPANY)

STATEMENTS OF OPERATIONS
AND DEFICIT

ACCUMULATED DURING THE
DEVELOPMENT STAGE

(With Cumulative Figures
From Inception)





|                                                   | Three
      months ended Dec. 31, | Year
      ended December 31, |   | From
      Inception, Dec. 18, 1998, to Dec. 31, 2001
|-------------------------------------------------- | --------------------------------- | ----------------------------- | - | -----------------------------------------------------
|                                                   |                                   | 2001                          |   | 2000                                                 
|Interest earned                                    | $                                 | 0                             | $ | 200                                                  
|                                                   |                                   |                               |   |                                                      
|Expenses                                           |                                   |                               |   |                                                      
|Organizational expense                             |                                   | 0                             |   | 0                                                    
|Consulting                                         |                                   | 0                             |   | 25000                                               
|Rent                                               |                                   | 1350                         |   | 1495                                                
|Office expenses                                    |                                   | 433                           |   | 890                                                  
|Fees                                               |                                   | 150                           |   | 450                                                  
|Professional fees                                  |                                   | 4556                         |   | 12141                                               
|Travel                                             |                                   | 0                             |   | 5397                                                
|Meals and entertainment                            |                                   | 0                             |   | 0                                                    
|Interest expense                                   |                                   | 2370                         |   | 625                                                  
|                                                   |                                   |                               |   |                                                      
|Total expenses                                     |                                   | 8859                         |   | 45998                                               
|                                                   |                                   |                               |   |                                                      
|Net income (loss)                                  |                                   | (8859)                       |   | (45798)                                             
|                                                   |                                   |                               |   |                                                      
|Retained earnings,
      beginning of
      period |                                   | (164506)                     |   | (54821)                                             
|                                                   |                                   |                               |   |                                                      
|Deficit
      accumulated during                   |                                   |                               |   |                                                      
|the development
      stage                        | $                                 | (173365)                     | $ | (100619)                                            
|                                                   |                                   |                               |   |                                                      
|Earnings (loss)
      per share                    |                                   |                               |   |                                                      
|assuming dilution, after giving                    |                                   |                               |   |                                                      
|Effect to a 20 for 1 stock split                   |                                   |                               |   |                                                      
|Effective October 22, 1999                         |                                   |                               |   |                                                      
|Net loss                                           | $                                 | 0.00                          | $ | (0.01)                                               
|Weighted average
      shares outstanding          |                                   | 4046000                     |   | 4037667                                            







The accompanying notes
are an integral part of

these financial
statements.





-3-



PRIME EQUIPMENT, INC.

(A DEVELOPMENT STAGE
COMPANY)

STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY\

FROM DECEMBER 18, 1998,
(Date of Inception) TO DECEMBER 31, 2001



|                                                              | Common Stock |   | Additional
      Paid-in Capital |   | Deficit
      accumul-ated during the development stage |   | Total    
|------------------------------------------------------------- | ------------ | - | -------------------------------- | - | ------------------------------------------------------- | - | ---------
|                                                              | Shares       |   | Amount                          
|Balance, December
      18, 1998                              | ---          | $ | ---                              | $ | ---                                                     | $ | ---      
|                                                              |              |   |                                  |   |                                                         |   |          
|Issuance of common
      stock for cash                       |              |   |                                  |   |                                                         |   |          
|December 31, 1998                                             | 100,000      |   | 100                              |   | 0                                                       |   | 0        
|                                                              |              |   |                                  |   |                                                         |   |          
|Less net loss                                                 | 0            |   | 0                                |   | 0                                                       |   | (400)    
|                                                              |              |   |                                  |   |                                                         |   |          
|Balance, December
      31, 1998                              | 100,000      |   | 100                              |   | 0                                                       |   | (400)    
|                                                              |              |   |                                  |   |                                                         |   |          
|Issuance of common
      stock for cash                       |              |   |                                  |   |                                                         |   |          
|March 25, 1999                                                | 100,000      |   | 100                              |   | 9,900                                                   |   | 0        
|                                                              |              |   |                                  |   |                                                         |   |          
|Stock split 20 for
      1                                    |              |   |                                  |   |                                                         |   |          
|October 22, 1999                                              | 3,800,000    |   | 3,800                            |   | (3,800)                                                 |   | 0        
|                                                              |              |   |                                  |   |                                                         |   |          
|Issuance of common
      stock for cash                       |              |   |                                  |   |                                                         |   |          
|November 15, 19999                                            | 1,000        |   | 1                                |   | 999                                                     |   | 0        
|                                                              |              |   |                                  |   |                                                         |   |          
|Issuance of common
      stock for cash                       |              |   |                                  |   |                                                         |   |          
|December 17, 1999                                             | 20,000       |   | 20                               |   | 19,980                                                  |   | 0        
|                                                              |              |   |                                  |   |                                                         |   |          
|Less offering
      costs                                     | 0            |   | 0                                |   | (5,750)                                                 |   | 0        
|                                                              |              |   |                                  |   |                                                         |   |          
|Less net loss                                                 | 0            |   | 0                                |   | 0                                                       |   | (24,092) 
|                                                              |              |   |                                  |   |                                                         |   |          
|Balance, December
      31, 1999                              | 4,021,000    |   | 4,021                            |   | 21,329                                                  |   | (24,492) 
|                                                              |              |   |                                  |   |                                                         |   |          
|Issuance of common
      stock for services, October 25, 2000 | 25,000       |   | 25                               |   | 24,975                                                  |   | 0        
|                                                              |              |   |                                  |   |                                                         |   |          
|Net income (loss)                                             | 0            |   | 0                                |   | 0                                                       |   | (76,127) 
|                                                              |              |   |                                  |   |                                                         |   |          
|Balance, December
      31, 2000                              | 4,046,000    |   | 4,046                            |   | 46,304                                                  |   | (100,619)
|                                                              |              |   |                                  |   |                                                         |   |          
|Less net loss                                                 | 0            |   | 0                                |   | 0                                                       |   | (76,746) 
|                                                              |              |   |                                  |   |                                                         |   |          
|Balance, December
      31, 2001                              | 4,046,000    |   | $4,046                           | $ | 46,304                                                  | $ | (173,365)







The accompanying notes
are an integral part of these financial statements



-4-



PRIME EQUIPMENT, INC.

(A DEVELOPMENT STAGE
COMPANY)

STATEMENTS OF CASH FLOWS

(With Cumulative Figures
From Inception)





|                                                  |   | Three
    months ended Dec. 31 |   | Year
    ended December 31 |   | From
    Inception, Dec. 18, 1998, to Dec. 31, 2001
|------------------------------------------------- | - | ------------------------------ | - | -------------------------- | - | ---------------------------------------------------
|                                                  |   | 2001                           |   | 2000                       |   | 2001                                               
|CASH FLOWS PROVIDED BY OPERATING
      ACTIVITIES |   |                                |   |                            |   |                                                    
|Net Income or (loss)                              | $ | (8,859)                        | $ | (46,799)                   | $ |                                                    
|                                                  |   |                                |   |                            |   |                                                    
|Non-cash Items included in net
      loss         |   | 0                              |   | 25,000                     |   |                                                    
|Services purchased with stock issue               |   |                                |   |                            |   |                                                    
|Adjustments to reconcile net
      loss to        |   |                                |   |                            |   |                                                    
|cash used by operating activity                   |   |                                |   |                            |   |                                                    
|Note receivable                                   |   | 10,000                         |   | 0                          |   | 10,000                                             
|Interest receivable                               |   | 2,016                          |   | (200)                      |   | 1,416                                              
|Deposits                                          |   | 0                              |   | 0                          |   | (150)                                              
|Accounts payable                                  |   | (5,352)                        |   | 10,437                     |   | 15,725                                             
|Loans from stockholders                           |   | 0                              |   | 9,937                      |   | (6,149)                                            
|                                                  |   |                                |   |                            |   |                                                    
|NET CASH PROVIDED BY
      OPERATING ACTIVITIES   |   | (2,196)                        |   | (625)                      |   | (51,904)                                           
|CASH FLOWS USED BY INVESTING
      ACTIVITIES     |   | 0                              |   | 0                          |   |                                                    
|                                                  |   |                                |   |                            |   |                                                    
|NET CASH USED BY INVESTING
      ACTIVITIES       |   | 0                              |   | 0                          |   | 0                                                  
|                                                  |   |                                |   |                            |   |                                                    
|CASH FLOWS FROM FINANCING
      ACTIVITIES        |   |                                |   |                            |   |                                                    
|Note payable                                      |   | 0                              |   | 0                          |   | 0                                                  
|Interest payable                                  |   | 625                            |   | 625                        |   | 2,500                                              
|Notes payable to stockholders                     |   | 0                              |   | 0                          |   | 46,505                                             
|Interest payable to stockholders                  |   | 930                            |   | 0                          |   | 3,410                                              
|Sale of common stock                              |   | 0                              |   | 0                          |   | 0                                                  
|Paid-in
      capital                             |   | 0                              |   | 0                          |   | 0                                                  
|Less
      offering costs                         |   | 0                              |   | 0                          |   | 0                                                  
|                                                  |   |                                |   |                            |   |                                                    
|NET CASH PROVIDED BY FINANCING
      ACTIVITIES   |   | 1,555                          |   | 625                        |   | 52,415                                             
|                                                  |   |                                |   |                            |   |                                                    
|NET INCREASE IN CASH                              |   | (640)                          |   | 0                          |   | 511                                                
|                                                  |   |                                |   |                            |   |                                                    
|CASH AT
      BEGINNING OF PERIOD                 |   | 4,755                          |   | 3,604                      |   | 3,604                                              
|                                                  |   |                                |   |                            |   |                                                    
|CASH AT END OF PERIOD                             | $ | 4,115                          |   | 3,604                      |   | 4,115                                              

SUPPLEMENTAL
INFORMATION: Common stock and paid-in capital also include $25 and $25,975,
respectively, for stock issued for services.



The accompanying notes
are an integral part of these financial statements.



-5-



PRIME EQUIPMENT, INC.

(A DEVELOPMENT STAGE
COMPANY)

NOTES TO THE FINANCIAL
STATEMENTS

DECEMBER 31, 2001 AND
DECEMBER 31, 2000



NOTE A    
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES



> The Company
>         was incorporated on December 18, 1998, under the laws of the State of
>         Nevada. The business purpose of the company was then to start a chain of
>         equipment rental services. In October of 2000, the Company modified its
>         business purpose to that of selling telecommunications equipment and
>         services.
>     
>         The Company will
>         adopt accounting policies and procedures based upon the nature of future
>         transactions.

NOTE B ISSUANCE OF
COMMON STOCK



> On December
>         31, 1998 the Company sold 100,000 shares of its common stock at $.001
>         per share for $100 initial working capital.
>     
>         On March 25,
>         1999, the Company completed the sale of 100,000 shares of its common
>         stock at $.10 per share for $10,000, 1,000 shares of its common stock at
>         $1.00 per share for $1,000 on November 15, 1999 and 20,000 shares of its
>         common stock at $1.00 for $20,000 on December 17, 1999. The proceeds
>         were used for working capital and to start a chain of equipment rental
>         services.
>     
>         On October 25,
>         2000 the Company issued 25,000 shares of its common stock at $1.00 per
>         share for consulting services valued at $25,000.
>     
>         All of the above
>         shares were issued pursuant to an exemption from registration
>         requirements under Section 4(2) of the Securities Act.

NOTE C NAME CHANGE AND
INCREASE IN AUTHORIZED CAPITAL



> On October
>         28, 1999, the Company changed its name from "Prime Equipment
>         Corp." to "Prime Equipment, Inc." and increased its
>         authorized capital stock to 74,000,000 shares of $.001 per share par
>         value from 50,000,000 shares of $.001 per share par value. Of the
>         74,000,000 authorized shares, 50,000,000 are common stock and 24,000,000
>         ar preferred stock.
>     
>         On July 20,
>         2000, the Board of Directors approved in increase in the authorized
>         number of common shares from 50,000,000 to 500,000,000 and an increase
>         in the number of preferred shares from 24,000,000 to 100,000,000. The
>         increase did not become effective because proxy materials were not
>         issued and shareholder approval was not obtained.

-6-



PRIME EQUIPMENT, INC.

(A DEVELOPMENT STAGE
COMPANY)

NOTES TO THE FINANCIAL
STATEMENTS

DECEMBER 31, 2001 AND
DECEMBER 31, 2000

(continued)



NOTE D STOCK SPLIT



> On October 22,
>         1999, the Company approved a twenty to one stock split. Prior to the
>         stock split there were 200,000 shares of common stock outstanding and
>         after the stock split there were 4,000,000 shares of common stock
>         outstanding.

NOTE E 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.

NOTE F NOTES PAYABLE



> On May 23,
>         2000, the company received $25,000 cash and issued its unsecured note
>         maturing April 30, 2001 (now extended to April 30, 2002) with simple
>         interest at the rate of 10% per annum.

NOTE G LINES OF CREDIT
AND NOTES PAYABLE TO STOCKHOLDERS



> As of January
>         10, 2001 two stockholders extended lines of credit of $100,000 each to
>         the company. All credit drawn by the Company is documented by Promissory
>         Notes, unsecured, payable on demand, with interest at the rate of 8% per
>         annum, compounded annuall. In the event of default by the Company the
>         interest rate increases to 10%.
>     
>         Total credit
>         extended under the two $10,000 lines of credit as of December 31, 2001
>         was $26,405 and $20,100, respectively, for a total of $46,505.

NOTE H RELATED PARTY
TRANSACTIONS.



> Stockholders
>         have loaned funds without charges for interest to pay on-going expenses
>         of the Cmpany. The total of such advances was $5,288 as of December 31,
>         2001.

-7-



Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.

None. Not applicable.

PART III

Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act.

The following table sets forth the directors and executive
officers of the Company, their ages, and all positions held with the Company.



|Name                  | Age | Positions             
|--------------------- | --- | ----------------------
|                      |     |                       
|Alex Martyniak        | 37  | Director              
|Piero Dante Guglielmi | 36  | President and Director



Mr. Martyniak attended the University of Mining and Metallurgy
in Kracow, Poland, from 1984 until 1987. He attended the British Columbia
Institute of Technology from 1992 until 1993. He received a diploma in
International Business from Langara College in Vancouver, British Columbia in
1998. Between 1984 and 1990, he was involved in various businesses in Poland and
Italy, including Fiat, Fenici Import Export Company and Stecaro. Between 1990
and the present he has been involved in various businesses in Vancouver, British
Columbia, including Industry Canada and the Italian Chamber of Commerce, acting
for the latter as Commercial Attache.

Mr. Guglielmi received training in international marketing from
Simon Fraser University in Vancouver, British Columbia. Between 1989 and 1996,
he was in charge of research and development corporate filing for North American
Fire Guardian Technology, Inc. From 1996 until the present, he has been in
charge of technical marketing and a director of North American Fire Guardian
Technology, Inc.

Currently there are no agreements or understanding for any
officer or director to resign at the request of another person and that none of
the officers or directors are acting on behalf of or will act at the direction
of any other person.

Item 10. Executive Compensation.

There has been no executive compensation in any form to date
with the exception of the issuance of 25,000 shares to Giovanni Iachelli, the
former President of the Company, for services rendered. It is anticipated that
the officers and directors will receive compensation as sales of equipment are
completed, including salaries and stock compensation.



Item 11. Security Ownership of Certain Beneficial Owners and
Management.



Ss of December 31, 2001, management of the Company is not aware
of any person or group who owns 5% or more of the securities of the Company.
However, it is anticipated that from time to time the Company will issue shares
of stock to management or directors for services rendered, although there are no
specific agreements at this time. As of December 31, 2001, the Company's
former President owned 25,000 shares of stock, constituting less than 1% of the
issued and outstanding shares.



CHANGES IN CONTROL

The Company has no arrangements, which might result in a change
in control of the Company. Company's management is expected to remain in their
respective positions indefinitely. There are no agreements or understandings,
verbal or written, in which any of the Company's management has or will agree to
resign at the request of another person, nor are any of the officers or
directors acting at the direction of another person. However, in the future the
Company may consider strategic alliances with other companies that might provide
additional products that would be sold by the Company.

Item 13. Exhibits and Reports on Form 8-K.

|Exhibit No. | Document                  | Location                                                      
|----------- | ------------------------- | --------------------------------------------------------------
|3(i)        | Articles of Incorporation | Incorporated by reference
      Filed 3/13/200 on Form 10SB12G
|3(ii)       | Bylaws                    | Incorporated by reference
      Filed 3/13/200 on Form 10SB12G



No reports have been filed on Form 8-K during the last quarter
of the year ended December 31, 2001.

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 EQUIPMENT, INC.



/s/ Perry Guglielmi

President, Director

Date: March 29, 2002





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.



/s/ Perry Guglielmi

President, Director

Date: March 29, 2002



/s/ Perry Guglielmi

Principal Financial Officer

Date:  March 29, 2002



/s/ Perry Guglielmi

Director

Date: March 29, 2002