===================================================================

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-KSB





(mark one)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the year ended December 31, 2003



OR



[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to



000-29937

(Commission File No.)



PRIME EQUIPMENT, INC.

(Exact name of small business issuer in its charter)



British Columbia, Canada

(State or other jurisdiction of incorporation or organization)



88-0412653

(I.R.S. Employer Identification No.)





4287B Dawson Street, Burnaby BC, Canada V5C 4B3

(Address of principal executive offices) (Zip Code)



(604) 298-9989

(Issuer's telephone number)



Securities registered under Section 12(b) of the Exchange Act:
None



Securities registered under Section 12(g) of the Exchange Act:
Common stock, no par value



Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
[X] No [ ]



Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not 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 attachment to this form 10-KSB. [ ]



Issuer's revenue during the year ended December 31, 2003: nil



As of April 9, 2004, 9,046,000 common shares 500,000 preferred
were outstanding.





DOCUMENTS INCORPORATED BY REFERENCE:



None



Transitional Small Business Disclosure Format (Check one):

Yes [ ] No [X]







PART I



Item 1. Description of Business.



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. 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
4287B Dawson St, Burnaby BC. Canada V5B-4C3. Although the Company is a
development stage company, it is currently generating revenues and expects that
its revenues will continue and, possibly increase.



On July 10, 2002, Prime Equipment merged with IP Teleservices,
Inc., a British Columbia Canadian corporation ("IPT") with Prime Equipment the
surviving entity. IP Teleservices Inc. (IPT) has subsequently changed its name
to Prime Teleservices Inc. ("PTSI")



Business of Issuer



The Company is engaged in the import and distribution of
telecommunications services. It worked 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. Unfortunately, the inability of DATICO to provide support and
testing has required the Company to terminate its relationship, as of November
19th, 2002.



Prime Teleservices Inc., (PTSI) an incorporated telecom
company in Canada, has developed an application platform that is software based
and is capable to reach a global presence at low cost and short timeframe,
enabling Voice 0ver Internet Protocol (VoIP) over the public internet for Long
Distance telephone service and calling card businesses for the retail; wholesale
and other business models applicable to anywhere in the world.



The objective of PTSI is to develop a global voice services
backbone network on IPT where VoIP Gateways and Call Management Data centers (CMDCs)
will be installed at strategic locations around the world. With the platform in
place, PTSI will be in a position to focus at a "two prong" marketing approach
to develop the business. One area of the marketing activity will be on retail
business where target customer groups/ethnic base will be offered prepaid
calling cards or prepaid residential services at preferential rate to a
particular destination directly through agents or PTSI outlets. Concurrently,
PTSI will also wholesale its products by offering OEM telephone cards for
phone-centers; convenience stores and travel agencies/tour operators to maximize
its network resources at the initial stage of the business operation. The idea
of offering business opportunities to interested partners will be the main
driving force in enabling an expanded IP network reach, in the shortest possible
timeframe. This initiative is the first in turning basic telecom services into
commodity retailing through a business opportunity network on a global scale.



The Company expects the PTSI Global VoIP platform to be
established in stages. Currently, the Company's CMDCs are operating in Vancouver
and Toronto, Canada, Hong Kong, and China. There will be an additional four (4)
CMDCs equipped with software based IP switch and application servers for PTSI's
global VoIP platform. The planned expansion will bring Milan, Italy, Los Angeles
and San Francisco, California, and New York, New York online. These three
regional and one European CMDCs will be co-located and connected to the Internet
upstream carrier/ Internet gateway operators for reliability and security
purposes. The Company is focused on becoming a provider of complete telecom
services.



Each regional CMDC will be managing remote point of presents
(POPs) in cities within the region where business is to be conducted or partner
operation maintains a presence. The POPs will provide the basic connectivity to
the local Public Switched Telephone Network (PSTN) for customer access as well
as traffic termination. The terminating POPs are essential for controlling
costs, where majority of the Company's traffic is terminated. All terminating
POPs will be connected to carriers providing the least cost, or the respective
local PSTN, depending on costs and regulatory issues.



All elements on the PTSI's platform are connected through the
Internet domain, and Internet protocol software switching controls traffic. The
corresponding routing will be accomplished through software controlled LCR and
gateway-to-gateway VoIP logical connections.



With the securing of a leased premises by PTSI for the next
three years, the Company has a suitable office space in Burnaby B.C. to operate
and administrate its business.



Other than development of its website, and the Software based
Application Platform, the Company has no intellectual property rights





Item 2. Description of Property.



The Company's principal executive and administrative offices
are located in Burnaby BC, in which it shares leased premises. The Company
intends to stay at this premise until it out-grows the current office space. The
Company shares office space under a lease agreement. 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.



We are not a party to any material pending legal proceedings
and, to the best of our knowledge, no such action by or against the Company has
been threatened.



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



No matter was submitted during the fourth quarter of the
fiscal year ended December 31, 2002, to a vote of security holders, through the
solicitation of proxies or otherwise.







PART II





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



The Company has voluntarily filed a Form 15c2-11 to obtain
listing on the OTC Bulletin Board, which requires all listed companies to be
registered with the SEC under Section 13 or 15(d) of the Securities Exchange Act
of 1934 and to be current in its required filings once so registered. That
registration statement is pending approval from the SEC.



The Company has no public trading market for its common
stock. Although the Company is seeking a quotation for its common shares on the
Over-the-Counter Bulletin Board, 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
outstanding 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 9,046,000
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 Regulation D, Rule 504. The
Company issued 25,000 shares of restricted common stock to Giovanni Iachelli on
November 1, 2000, for services rendered.On July 10, 2002, the Company
authorized the issuance of 5,000,000 shares of common stock and 500,000 shares
of preferred stock to the shareholders of Net Magic, Ltd, in exchange for all
outstanding shares, software and equipment of IP Teleservices.



Stockholders



There are 63 shareholders of record for the Company's common
stock.



Item 6. Management's Discussion and Analysis or Plan of
Operation.



The following is management's discussion and analysis of
significant factors that have affected our financial position and operations
during the year ended December 31, 2003.



Our financial statements are expressed in United States
Dollars. All figures herein are also expressed in United States dollars, except
where specifically indicated in other currency.



The Company plans to engage in the sale of telecommunications
services and licensing of its telecommunication platform services. Additional
funding through private placement will be necessary to enable the Company to
expand its current business.



Results of Operations



Year Ended December 31, 2003, compared to December 31, 2002.

Sales: During 2003, we
recorded sales of $463,435.48, as compared to $976,406.12 for the same period
2002, resulting in a decline in sales for the year of ($512,970.64) or 52.54% in
comparison to 2002.  The decline in sales is mainly due to the shut down of one
of our major point of presence (POP) in China. Losses are further realized due
to the continued reduction of the wholesale prices for long distance rates to
China and Hong Kong, all attributing to the reduced telecom revenue.

Gross Profit:The Company has recorded a gross
profit of $203,395 for the year ended December 31, 2003, in comparison to
$261,439.  The decrease in gross profit mainly due to a decrease in pricing for
long distance rates to China and Hong Kong.  However, the gross margin
percentage increased due to PIN charges generated by the Company VOIP network
and the equipment sales generated a 57% gross margin for the year.

Traffic income:The Company's major customer, AIC
Global Communications Inc., has developed its own calling card platform. 
Therefore, AIC no longer requires the services from our subsidiary, Prime
Teleservices Inc.  As a result, the sales for the last quarter have dropped
significantly as compared to the last quarter in 2002.

Bad Debts:Bad debts in the previous year are
mainly due to two insolvent customers, OMC Trading and San Yu Trading.  The
Company wrote off the remaining OMC balance in the first quarter of 2003.

Consulting:The Company recorded $60,136 in
consulting costs for the year ended December 31, 2003 as compared to $50,628 in
the prior year.  The Company is looking for business development opportunities
in the China long-distance telephone market.  In addition, the Company is
looking for other potential development projects.

Professional fees:The Company recorded $51,997 in
professional fees for the year ended December 31, 2003 as compared to $28,799 in
2002.   These are mainly the accounting and legal fees relating to the filing
requirements for the Securities Exchange Commission.  Since the Company only
begin filing with the SEC in the third quarter of 2002, the comparative amount
is substantially lower than the current year.

Other income/expenses:The Company recorded a gain
on foreign currency of $17,802.  This gain resulted primarily from the Canadian
subsidiary company's US currency debt.



Net
income (loss):
The Company has recorded a loss of $27,812 for the year-ended December 31,
2003.  The decrease in net income is due to competitive pricing in the
long-distance telephone market, which resulted in a substantial decline in
telecom sales in the last quarter of 2003.

Cash flows:Cash flows from operation have declined
from $201,646 in 2002 to (99,057) in 2003.  This decline resulted from the
decline in sales activity in 2003 and the payment of current liabilities carried
over from the prior year.  The 2002 cash flows from operation also benefited
from the prepayment of some expenses in 2001.

Revenue

The Company did not receive revenues from operations
during the two‐year period preceding the merger with IP Teleservices.  The
Company has achieved revenue from operations after the date of the merger.



Liquidity and Capital Resources



- The Company has been generating revenues from sales of its products.
  Although it operated at a loss for the year ended 2003, the Company produced
  net income for the nine months ending September 30, 2002.



It will have to raise additional capital in the next twelve
months in order to continue its business plan.



The current market for raising capital through one or more
private placements is difficult. The number of public and private companies
seeking such financing means the competition to secure investors is great. It
may be that the Company will not be able to secure any equity financing through
a private placement, and may have to seek financing from other, less
traditional, more costly venues. In any such event, the Company would have to
alter and revise its business plan to provide for significantly less expansion
and growth.



Assuming that the Company is successful in raising its equity
financing, the projected investment needs for the Company and categories of
expenditures for the next twelve months are as follows:



|Network Expansion                                                                                               | USD      
|--------------------------------------------------------------------------------------------------------------- | ---------
|Set-up and acquisition costs of Network Equipment and VoIP
    Gateways for 8 China cities and 2 Italian cities | 600,000  
|                                                                                                                |          
|                                                                                                                |          
|Business Expansion                                                                                              |          
|                                                                                                                |          
|Complete New Corporate Office in Burnaby                                                                        | 100,000  
|                                                                                                                |          
|Establish Regional Offices in Hong Kong and Italy                                                               | 150,000  
|                                                                                                                |          
|Additional consulting services from Software and Networks
    consultants/ professionals                        | 280,000  
|                                                                                                                |          
|Marketing costs for Business Opportunity Model/ Road shows                                                      | 120,000  
|                                                                                                                |          
|Administrative expenses                                                                                         | 250,000  
|                                                                                                                |          
|Total                                                                                                           | 1,500,000



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
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 expand its current business. An overall budget of $1,500,000 for
acquisitions, employment, marketing and procurement of equipment for the
upcoming year should achieve the Company's goals. The intent is to acquire
strategically located IPS companies, hire employees for expansion of the
software network, execute additional contracts with telecom service providers,
as well as aggressively market and promote business opportunities.



If the Company is unable to secure financing through the sale
of common stock, it may have to adjust its business plan and reduce its future
goals.





Potential Uncertainties



As the Company expects eventually to obtain sales from
overseas businesses 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. In
addition, if the Company is unable to raise cash through the sale of stock, it
may not have sufficient resources to continue, and may fail.





NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS



Except for historical information contained herein, this Form
10-QSB contains express or implied forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange
Act. We intend that such forward-looking statements be subject to the safe
harbors created thereby. We may make written or oral forward-looking statements
from

time to time in filings with the SEC, in press releases,
quarterly conference calls or otherwise. The words "believes," "expects,"
"anticipates," "intends," "forecasts," "project," "plans," "estimates" and
similar expressions identify forward-looking statements. Such statements reflect
our current views with respect to future events and financial performance or
operations and speak only as of the date the statements are made.



Forward-looking statements involve risks and uncertainties
and readers are cautioned not to place undue reliance on forward-looking
statements. Our actual results may differ materially from such statements.
Factors that cause or contribute to such differences include, but are not
limited to, those discussed elsewhere in this Form 10-QSB.



Although we believe that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate with the result that there can be no assurance the results
contemplated in such forward-looking statements will be realized. The inclusion
of such forward-looking information should not be regarded, as a representation
that the

future events, plans, or expectations contemplated will be
achieved. We undertake no obligation to publicly update, review, or revise any
forward-looking statements to reflect any change in our expectations or any
change in events, conditions, or circumstances on which any such statements
based. Our filings with the SEC may be accessed at the SEC's Web site,
www.sec.gov.



Item 7. Financial Statements.















































PRIME EQUIPMENT INC.

(Successor to Prime
Teleservices Inc., which was formerly IP Teleservices Inc.)



Consolidated Financial
Statements



December 31, 2003 and
2002

(U.S. Dollars)



---



PRIME EQUIPMENT INC. CONTENTS
  (Successor to Prime
  Teleservices Inc., which was formerly IP Teleservices Inc.)
  December 31, 2003 and
  2002
  (U.S. Dollars)


















| | INDEPENDENT
    ACCOUNTANTS' REPORT                  |  |            
| | ---------------------------------------------------- |  | -----------
| |                                                      |  |            
| | CONSOLIDATED BALANCE
    SHEETS                      |  | STATEMENT 1
| |                                                      |  |            
| | CONSOLIDATED
    STATEMENTS OF EARNINGS              |  | STATEMENT 2
| |                                                      |  |            
| | CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS' DEFICIT |  | STATEMENT 3
| |                                                      |  |            
| | CONSOLIDATED
    STATEMENTS OF CASH FLOWS            |  | STATEMENT 4
| |                                                      |  |            
| | NOTES TO THE
    CONSOLIDATED FINANCIAL STATEMENTS   |  |            











---























EVANCIC PERRAULT
ROBERTSON

CERTIFIED GENERAL ACCOUNTANTS









INDEPENDENT ACCOUNTANTS'
REPORT







To the Board of
Directors and Stockholders

Prime Equipment Inc.





We have audited the
consolidated balance sheet of Prime Equipment Inc. as of December 31, 2003 and
2002 and the consolidated statements of earnings, stockholders' deficit and cash
flows for the year then ended . These financial statements are the
responsibility of Company's management.  Our responsibility is to express
an opinion on these financial statements basedon on our audits.



We conducted our
audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that
our audits provide a reasonable basis for our opinion.



In our opinion, the
financial statements referred to above present fairly, in all material respects,
the financial position of Prime Equipment, Inc. as of December 31, 2003 and 2002
and the results of its operations and its cash flows for the year then ended in
conformity with accounting generally principals accepted in the United States of
America.









CERTIFIED GENERAL
ACCOUNTANTS

Coquitlam, B.C.

April 9, 2004





2nd Floor, 566
Lougheed Highway, Coquitlam, BC V3S 3S3

Telephone (604)
936-4377  Fax (604) 936-8376

Website:  http//epr.ca 
Email:  eprs@eprcoq.ca

office Accross Canada

Affiliates Around the
World

---





PRIME EQUIPMENT INC.

(Successor to Prime
Teleservices Inc., which was formerly IP Teleservices Inc.)

CONSOLIDATED BALANCE
SHEETS

December 31, 2003 and
2002

(U.S. Dollars)



|                                               |                                                                           |                                            |           | 2003   |           | 2002   
|---------------------------------------------- | ------------------------------------------------------------------------- | ------------------------------------------ | --------- | ------ | --------- | -------
|                                               |                                                                           |                                            |           |        |           |        
|ASSETS                                         |                                                                           |                                            |           |       
|Current                                        |                                                                           |                                            |           |       
|                                               | Cash                                                                      | $                                          | 128,031   | $      | 211,249  
|                                               | Accounts and notes receivable, net of allowance for doubtful
    accounts |                                            |           |        |          
|                                               |                                                                           | (2003 - $5,511) (2002 ‐ $75,000)           |           |        |           |        
|                                               |                                                                           | (Billed:  2003 - $20,866, 2002 - $219,942) |           |        |           |        
|                                               |                                                                           | (Unbilled:  2003 - 2,922, 2002 - $5,231)   |           | 18,277 |           | 150,173
|                                               | Government agencies receivable                                            |                                            | 1,205     |        | -        
|                                               | Inventory                                                                 |                                            | 15,179    |        | 88,602   
|                                               | Prepaid expenses                                                          |                                            | 1,604     |        | 1,319    
|                                               |                                                                           |                                            |           |        |          
|                                               |                                                                           |                                            | 164,296   |        | 451,343  
|                                               |                                                                           |                                            |           |        |          
|Property, plant and equipment - note 4         |                                                                           | 49,664                                     |           | 93,132
|Deferred tax assets                            |                                                                           | 27,524                                     |           | 8,684 
|                                               |                                                                           |                                            |           |        |          
|                                               |                                                                           | $                                          | 241,484   | $      | 553,159  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |                                                                           |                                            |           |       
|Liabilities                                    |                                                                           |                                            |           |       
|Current                                        |                                                                           |                                            |           |       
|                                               | Note payable - note 5                                                     | $                                          | 25,000    | $      | 25,000   
|                                               | Notes payable to stockholders - note 6                                    |                                            | 83,907    |        | 77,143   
|                                               | Accrued interest                                                          |                                            | 19,789    |        | 13,569   
|                                               | Accounts payable and accruals                                             |                                            | 181,019   |        | 413,930  
|                                               | Customer deposits                                                         |                                            | -         |        | 57,000   
|                                               | Government agencies payable                                               |                                            | -         |        | 10,194   
|                                               |                                                                           |                                            |           |        |          
|                                               |                                                                           |                                            | 309,715   |        | 596,836  
|                                               |                                                                           |                                            |           |        |          
|Deferred income taxes liabilities              |                                                                           | 4,391                                      |           | -     
|Loans payable - note 7                         |                                                                           | 31,908                                     |           | 31,176
|Due to stockholders - note 8                   |                                                                           | 82,265                                     |           | 81,436
|Preferred stock - note 9                       |                                                                           | 500                                        |           | 500   
|                                               |                                                                           |                                            |           |        |          
|                                               |                                                                           |                                            | 428,779   |        | 709,948  
|                                               |                                                                           |                                            |           |        |          
|Stockholders' equity (deficit)                 |                                                                           |                                            |           |       
|                                               | Common stock  - note 9                                                    |                                            | 2         |        | 2        
|                                               | Other comprehensive income                                                |                                            | (2,817)   |        | (123)    
|                                               | Deficit                                                                   |                                            | (184,480) |        | (156,668)
|                                               |                                                                           |                                            |           |        |          
|                                               |                                                                           |                                            | (187,295) |        | (156,789)
|                                               |                                                                           |                                            |           |        |          
|                                               |                                                                           | $                                          | 241,484   | $      | 553,159  



Going concern - note 2



On behalf of the Board:
__________________________Director ________________________ Director



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

EVANCIC PERRAULT
ROBERTSON

---





PRIME
EQUIPMENT INC.                                                                                                                                 
STATEMENT 2

(Successor to Prime Teleservices Inc., which was formerly IP Teleservices, Inc.)

CONSOLIDATED STATEMENT OF EARNINGS

Year
ended December 31, 2003 and 2002

(U.S.
Dollars)



|                                       |                                               |            | 2003      |            | 2002     
|-------------------------------------- | --------------------------------------------- | ---------- | --------- | ---------- | ---------
|Revenue                                |                                               |            |           |           
|                                       | Voice traffic income                          | $          | 266,054   | $          | 862,263  
|                                       | Equipment sales                               |            | 197,382   |            | 114,143  
|                                       |                                               |            |           |            |          
|                                       |                                               |            | 463.436   |            | 976,406  
|                                       |                                               |            |           |            |          
|Cost of goods sold                     |                                               |            |           |           
|                                       | Voice traffic charges                         |            | 174,325   |            | 575,613  
|                                       | Equipment purchases                           |            | 85,715    |            | 139,354  
|                                       |                                               |            |           |            |          
|                                       |                                               |            | 260,040   |            | 714,967  
|                                       |                                               |            |           |            |          
|Grossprofit                            |                                               | 203,396    |           | 261,439   
|                                       |                                               |            |           |            |          
|Operating expenses                     |                                               |            |           |           
|                                       | Bad debts                                     |            | 51,955    |            | 135,177  
|                                       | Bank charges                                  |            | 3,320     |            | 470      
|                                       | Commissions                                   |            | -         |            | 3,406    
|                                       | Consulting                                    |            | 60,136    |            | 50,628   
|                                       | Depreciation                                  |            | 56,686    |            | 48,854   
|                                       | Promotions and entertainment                  |            | 296       |            | 378      
|                                       | Office                                        |            | 5,604     |            | 4,359    
|                                       | Professional fees                             |            | 51,997    |            | 28,799   
|                                       | Rent                                          |            | 15,409    |            | 2,343    
|                                       | Travel                                        |            | 2,075     |            | 1,856    
|                                       |                                               |            |           |            |          
|                                       |                                               |            | 247,478   |            | 276,270  
|                                       |                                               |            |           |            |          
|                                       |                                               |            | (44,082)  |            | (14,831) 
|Other income (expense)                 |                                               |            |           |           
|                                       | Interest expense                              |            | (13,410)  |            | (6,381)  
|                                       | Gain on foreign exchange                      |            | 15,314    |            | 190      
|                                       | Gain on sale of property, plant and equipment |            | 2,488     |            | 516      
|                                       |                                               |            |           |            |          
|                                       |                                               |            | 4,392     |            | (5,675)  
|                                       |                                               |            |           |            |          
|Loss before provision for income taxes |                                               | (39,690)   |           | (20,506)  
|                                       |                                               |            |           |           
|Deferred tax benefits                  |                                               | (11,878)   |           | (8,724)   
|                                       |                                               |            |           |            |          
|Net loss for the year                  | $                                             | (27,812)   | $         | (11,782)  
|                                       |                                               |            |           |            |          
|Weighted average                       |                                               |            |           |           
|                                       | common shares outstanding                     |            | 9,046,000 |            | 6,840,298
|                                       |                                               |            |           |            |          
|Loss per share                         | $                                             | (0.003075) | $         | (0.001722)

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

EVANCIC PERRAULT
ROBERTSON



---





PRIME EQUIPMENT INC.

(Successor to Prime
Teleservices Inc., which was formerly IP Teleservices Inc.)

CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' DEFICIT

Year ended December 31,
2003 and 2002

(U.S. Dollars)

|                                  |                               | Number of Common Stock       | Common Stock and Additional Paid-in Capital | Retained Earnings (Deficit)   | Other Comprehensive Income | Total    
|--------------------------------- | ----------------------------- | ---------------------------- | ------------------------------------------- | ----------------------------- | -------------------------- | ---------
|                                  |                               |                              |                                             |                               |                            |          
|Balance, December 31, 2001        | 5,000,000                     | 1                            | 71                                          | (2)                           | 70                        
|                                  |                               |                              |                                             |                               |                            |          
|Reverse Acquisition               |                               |                              |                                             |                               |                           
|                                  | Pre-acquisition shares of     |                              |                                             |                               |                            |          
|                                  | Prime Equipment, inc.         |                              |                                             |                               |                            |          
|                                  | (Note 2)                      | 4,046,000                    | -                                           | -                             | -                          | -        
|                                  | Issuance of common shares for |                              |                                             |                               |                            |          
|                                  | reverse acquisition of Prime  |                              |                                             |                               |                            |          
|                                  | Teleservices, Inc.            |                              |                                             |                               |                            |          
|                                  | on July 18, 2002              | 5,000,000                    | 1                                           | -                             | -                          | 1        
|                                  | Net deficit acquired from     |                              |                                             |                               |                            |          
|                                  | subsidiary                    | -                            | -                                           | (144,957)                     | -                          | (144,957)
|                                  | Less exchange of Prime        |                              |                                             |                               |                            |          
|                                  | Teleservices Inc.'s shares    | (5,000,000)                  | -                                           | -                             | -                          | -        
|Balance after reverse acquisition | 9,046,000                     | 2                            | (144,886)                                   | 2                             | (144,886)                 
|Net loss for the year             | -                             | -                            | (11,782)                                    | -                             | (11,782)                  
|Effect of foreign exchange        | -                             | -                            | -                                           | (121)                         | (121)                     
|Balance, December 31, 2002        | 9,04,6000                     | 2                            | (156,668)                                   | (123)                         | (156,789)                 
|Net loss for the year             | -                             | -                            | (27,812)                                    | -                             | (27,812)                  
|Effect of foreign exchange        | -                             | -                            | -                                           | (2,694)                       | (2,694)                   
|Balance, December 31, 2003        | 9,046,000                     | $                     
    2 | $    (184,480)                              | $                
    (2,817) | (187,295)                 





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

EVANCIC PERRAULT
ROBERTSON

---





PRIME EQUIPMENT INC.

(Successor to Prime
Teleservices Inc., which was formerly IP Teleservices Inc.)

CONSOLIDATED STATEMENTS
OF CASH FLOWS

Year ended December 31,
2003 and 2002

(U.S. Dollars)

|                                                |                                                                          |                                                          |          | 2003      |          | 2002    
|----------------------------------------------- | ------------------------------------------------------------------------ | -------------------------------------------------------- | -------- | --------- | -------- | --------
|                                                |                                                                          |                                                          |          |           |          |         
|Cash flows from (for)
    operating activities: |                                                                          |                                                          |          |          
|                                                | Net loss                                                                 | $                                                        | (27,812) | $         | (11,782)
|                                                |                                                                          |                                                          |          |           |          |         
|                                                | Adjustments to reconcile
    net loss to net cash provided by (used for) |                                                          |          |           |         
|                                                |                                                                          | operating activities:                                    |          |           |          |         
|                                                |                                                                          |                                                          |          |           |          |         
|                                                |                                                                          | Depreciation                                             |          | 56,686    |          | 48,854  
|                                                |                                                                          | Issuance of stock for
    services rendered              |          | -         |          | 500     
|                                                |                                                                          | Gain on sale of property,
    plant and equipment        |          | (2,488)   |          | (516)   
|                                                |                                                                          | Deferred income tax                                      |          | (11,878)  |          | (8,724) 
|                                                |                                                                          | Decrease (increase) in
    accounts receivable           |          | 152,024   |          | (8,714) 
|                                                |                                                                          | Decrease (increase) in
    inventory                     |          | 85,631    |          | (89,009)
|                                                |                                                                          | Decrease in prepaid
    expenses                         |          | -         |          | 120,769 
|                                                |                                                                          | Increase in accrued
    interest                         |          | 6,220     |          | 3,126   
|                                                |                                                                          | Increase (decrease) in
    accounts payable and accruals |          | (280,774) |          | 120,494 
|                                                |                                                                          | Increase (decrease) in
    customer deposits             |          | (64,115)  |          | 12,000  
|                                                |                                                                          | Increase (decrease) in
    government agencies payable   |          | (12,581)  |          | 14,648  
|                                                |                                                                          |                                                          |          |           |          |         
|                                                |                                                                          |                                                          |          | (99,057)  |          | 201,646 
|                                                |                                                                          |                                                          |          |           |          |         
|Cash flows from (for)
    investing activities: |                                                                          |                                                          |          |          
|                                                | Purchases of property,
    plant and equipment                           |                                                          | -        |           | (21,526)
|                                                | Proceeds on disposal of
    property, plant and equipment                |                                                          | 4,769    |           | -       
|                                                | Decrease in lease receivable                                             |                                                          | -        |           | 30,138  
|                                                |                                                                          |                                                          |          |           |          |         
|                                                |                                                                          |                                                          |          | 4,769     |          | 8,612   
|                                                |                                                                          |                                                          |          |           |          |         
|Cash flows from (for)
    financing activities: |                                                                          |                                                          |          |          
|                                                | Advances from (repayment
    to) stockholders                            |                                                          | 6,763    |           | (33,868)
|                                                | Advances from (repayment
    to) director                                |                                                          | -        |           | (3,897) 
|                                                | Issuance of common shares                                                |                                                          | -        |           | 1       
|                                                |                                                                          |                                                          |          |           |          |         
|                                                |                                                                          |                                                          |          | 6,763     |          | (37,764)
|                                                |                                                                          |                                                          |          |           |          |         
|Effect of
    exchange rate changes on cash     |                                                                          | 4,307                                                    |          | (15,345) 
|                                                |                                                                          |                                                          |          |           |          |         
|Increase
    (decrease) in cash                 |                                                                          | (83,218)                                                 |          | 157,149  
|                                                |                                                                          |                                                          |          |           |          |         
|Cash,
    beginning of year                     |                                                                          | 211,249                                                  |          | 54,100   
|                                                |                                                                          |                                                          |          |          
|Cash, end of
    year                           | $                                                                        | 128,031                                                  | $        | 211,249  
|                                                |                                                                          |                                                          |          |          
|Supplemental
    Disclosures                    |                                                                          |                                                          |          |          
|Interest paid                                   | $                                                                        | -                                                        | $        | -        
|Income taxes paid                               | $                                                                        | -                                                        | $        | -        



Non-cash activities:



In 2002,
500,000 preferred shares were issued for services rendered in connection with
the reverse acquisition.



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

EVANCIC PERRAULT
ROBERTSON

---





PRIME EQUIPMENT INC.

(Successor to Prime
Teleservices Inc., which was formerly IP Teleservices Inc.)

NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003 and
  2002
  (U.S. Dollars)




1. NATURE OF BUSINESS



> The Company was
>   incorporated on December 18, 1998, under the laws of the State of Nevada.
>   On July 18, 2002,
>   the Company acquired 100% of the shares of Prime Teleservices Inc., a Canadian
>   corporation which had changed its name from IP Teleservices Inc. on June 3,
>   2002.
>   
>   The Company's
>   subsidiary, Prime Teleservices Inc., is a telecommunication company in "softswitch"
>   Voice over Internet Protocol (VoIP) implementation on a global scale. It will
>   generate significant traffic volume from retail, wholesale and franchising
>   opportunities world wide.
>   
>   Prime Teleservices
>   Inc. was started by a team of experienced telecom marketers and software
>   developers. Its objective is to build and develop a Global Voice Services
>   Backbone Network that connects to VoIP Gateways and Call Management Data
>   Centres spanning the globe. It has already successfully built a software based
>   VoIP application platform that enables VoIP over the Internet and Intranet for
>   Long distance Telephone services.  The platform can be deployed
>   inexepnsively, quickly and most importantly, globally.

2.      
GOING CONCERN

> Because of the
>   competitive pricing in the long-distance telephone services market, the
>   Company's continuance as a going concern is dependent upon its abiliy to
>   obtain adequate financing to upgrade the equipment to stay competitive in the
>   market.  It is not possible to predict whether financing efforts will be
>   successful or if the Company can stay competitive in the market.

3.      
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 Prime Teleservices Inc. on July 18, 2002 was
>   accounted for as a reverse acquisition whereby Prime Teleservices Inc. is
>   considered the acquiring company. The comparative figures presented are those
>   of Prime Teleservices Inc.
>   
>   Reverse acquisition
>   
>   
>   On July 18, 2002,
>   the Company completed an agreement with the shareholders of Prime Teleservices
>   Inc. whereby the Company issued 5,000,000 common shares in exchange for all
>   the issued and outstanding shares of Prime Teleservices Inc. as well as the
>   rights to the software platform, which was owned by the parent company of
>   Prime Teleservices, Inc. The software platform has been recorded at a cost of
>   $1. The Company also issued 500,000 preferred shares for services rendered in
>   connection with this acquisition. No cash was transacted.
>   
>   
>   The acquisition has
>   been accounted for as a reverse acquisition using the purchase method, and
>   accordingly, for financial statement reporting purposes, the net assets of
>   Prime Teleservices Inc. have been included in the consolidated balance sheet
>   at book values, and the net assets of Prime Equipment Inc. have been recorded
>   at fair market value at the date of acquisition. The consolidated operations
>   of the Company for the period from January 1, 2002 to the date of acquisition,
>   July 18, 2002, are those of Prime Teleservices, Inc. and exclude the results
>   of operations of Prime Equipment, Inc. The results of Prime Equipment, Inc.
>   are included in the consolidated statements of operations from the date of
>   acquisition.

EVANCIC PERRAULT
ROBERTSON



---



PRIME EQUIPMENT INC.

(Successor to Prime
Teleservices Inc., which was formerly IP Teleservices Inc.)

NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003 and
  2002 (U.S. Dollars)




> Reverse acquisition
>   (continued)
>   
>   
>   The cost of the
>   acquisition is the assumption of the net liability position of Prime
>   Equipment, Inc. as at July 18, 2002 and consists of:



|Accounts payable                             | $ | 53,841 
|-------------------------------------------- | - | -------
|Note payable                                 |   | 71,505 
|Interest payable                             |   | 10,443 
|Loan from
    stockholders                   |   | 9,168  
|                                             |   |        
|Total liabilities
    assumed on acquisition | $ | 144,957



> 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.
>   
>   Property, plant and
>   equipment
>   
>   
>   Property, plant and
>   equipment are recorded at cost. Depreciation is provided annually on a
>   straight-line basis over a period of three years to write-off assets over
>   their estimated useful lives.
>   
>   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.
>   
>   Inventory
>   
>   
>   Inventory is recorded
>   at the lower of cost and net realizable value. No reserve for obsolete and
>   slow-moving inventories is deemed necessary.
>   
>   Deferred income taxes
>   
>   
>   Prime Equipment,
>   Inc. accounts for income taxes in accordance with Statement of Financial
>   Accounting Standards No. 109 ("SFAS 109", "Accounting for Income Taxes". Under
>   the asset and liability method of SFAS 109, deferred tax assets and
>   liabilities are recognized for the estimated future tax consequences
>   attributable to differences between the financial statement carrying amounts
>   of existing assets and liabilities and their respective tax bases and
>   operating loss and tax credit carryforwards. Deferred tax assets and
>   liabilities are measured using enacted tax rates expected to apply to taxable
>   income in the year in which those temporary differences are expected to be
>   recovered or settled. Under SFAS 109, the effect on deferred tax assets and
>   liabilities of a change in tax rates is recognized in income in the period
>   that includes the enactment date.
>   
>   Effective corporate
>   tax rates for the Company's Canadian operation are 37.62% and 40% for 2003 and
>   2002 respectively . Effective corporate tax rates for the Company's Untied
>   States operation are 15% for both 2003 and 2002.
>   
>   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. The standard billing terms
>   granted to customers are due upon invoices issued to customers.

EVANCIC PERRAULT
ROBERTSON



---



PRIME EQUIPMENT INC.

(Successor to Prime
Teleservices Inc., which was formerly IP Teleservices Inc.)

NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003 and
  2002 (U.S. Dollars)




> Earnings per share
>   (EPS)
>   
>   
>   Basic EPS is
>   determined using net earnings divided by the weighted average shares
>   outstanding during the year. Diluted EPS is computed by dividing net earnings
>   by the weighted average shares outstanding, assuming all dilutive potential
>   common shares were issued.  Since the Company has incurred a loss, the
>   dilutive effects of any potentially issuable common shares has not been
>   reported.
>   
>   
>   As the acquisition
>   has been recorded as a reverse acquisition, in 2002 the weighted average
>   number of shares is calculated using the shares issued in the reverse
>   acquisition as the outstanding shares prior to the acquisition.  The 2002
>   EPS has been adjusted to reflect these weighted average number of shares
>   outstanding.
>   
>   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 year. Where the
>   current rate method is used, the unrealized translation gains will be
>   accumulated in other comprehensive income under the shareholders' equity
>   section.
>   
>   Translation of
>   foreigh currencies - subsidiary
>   
>   Assets bought and
>   sold during the year and trasactions to net income in foreign currencies are
>   translated into Canadian dollars at the rate prevailing at the date of
>   transaction.  Monetary assets and liabilities in foreign currencies at
>   the close of the year are translated into Canadian dollars at the rate
>   prevailinb at the year end.
>   
>   Foreign exchange
>   gains or losses arise from recoridng the difference between foreign currency
>   balances translated at rates prevailing at year-end and balances translated at
>   rates prevailing on transaction dates.  All gains and losses are included
>   in the determination of net income.
>   
>   Financial
>   instruments
>   
>   
>   The estimated fair
>   value of cash and equivalents, 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.



4. PROPERTY, PLANT AND
EQUIPMENT



| |                     |   |         |   |                          |   | 2003           |   | 2002          
| | ------------------- | - | ------- | - | ------------------------ | - | -------------- | - | --------------
| |                     |   |         |   |                          |   |                |   |               
| |                     |   | Cost    |   | Accumulated Depreciation |   | Net Book Value |   | Net Book Value
| |                     |   |         |   |                          |   |                |   |               
| | Computer equipment  | $ | 13,930  | $ | 11,666                   | $ | 2,264          | $ | 5,676         
| | Telephone equipment |   | 167,541 |   | 120,142                  |   | 47,399         |   | 87,456        
| | Software            |   | 1       |   | -                        |   | 1              |   | 1             
| |                     |   |         |   |                          |   |                |   |               
| |                     | $ | 181,472 | $ | 131,808                  | $ | 49,664         | $ | 93,132        



5. NOTE PAYABLE



> The promissory note
>   payable is unsecured, maturing April 30, 2005 with a simple interest rate at
>   10% per annum.

EVANCIC PERRAULT
ROBERTSON



---



PRIME EQUIPMENT INC.

(Successor to Prime
Teleservices Inc., which was formerly IP Teleservices Inc.)

NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003 and
  2002 (U.S. Dollars)




6. NOTES PAYABLE TO
STOCKHOLDERS



> The promissory notes
>   payable are unsecured, due on demand with interest at the rate of 8% per
>   annum, compounded annually. In the event of default by the Company, the
>   interest rate increases to 10%. Interest expense on these notes is $3,720 and
>   the accrued interest payable as at December 31, 2003 is $10,991.

7. LOANS PAYABLE

> 2003            
>   2002

Bove Telecom Services Inc.                                                                            
$     31,908     $   
31,176



> The Company has loans
>   payable which are non-interest bearing and have no specific repayment terms.
>   The lender stated that
>   it will not request payment within the next fiscal year.



8. DUE TO STOCKHOLDERS



> 2003            
>   2002
>   
>   
>   Best Holding Limited                                                                                                
>   $ 20,000         $ 20,239
>   Media Fund Limited                                                                                                    
>   62,265           
>   61,197

Total                                                                                                                      
  $ 82,265         $ 81,436



The Company has loans
  payable to its stockholders which are non-interest bearing and have no
  specific repayment terms. The stockholders stated that they will not request
  repayment within the next fiscal year.



9. CAPITAL STOCK



> Authorized:
>   50,000,000 voting common shares with par value of $0.001 each.
>   24,000,000 preferred shares with par value of $0.001 each. Each preferred
>   share is convertible to 10
>   common shares. Conversion is applicable only upon achieving certain revenue,
>   profit and share price
>   targets to be set by the Board of Directors. These shares have no redemption
>   rights.
>   
>   Issued and
>   outstanding: 9,046,000 common shares
>   500,000 preferred shares

10.    
STOCK SPLIT

> On March 23, 2002,
>   the predecessor company, Prime Teleservices, Inc. split its common shares by a
>   ratio of 5,000,000 to 1.  The consolidated statements of stockholders'
>   deficit were prepared assuming that the split occurred as of January 1, 2002.

EVANCIC PERRAULT
ROBERTSON



---



PRIME EQUIPMENT INC.

(Successor to Prime
Teleservices Inc., which was formerly IP Teleservices Inc.)

NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003 and
  2002 (U.S. Dollars)






11. PROVISION FOR INCOME
TAXES



The provision for income
taxes of the Company consists of the following:

> Income (Loss)
>       Tax Rates
>       
>       2003
>       
>       2002Canadian OperationDeferred tax liabilities
>       $
>       23,345
>       18.81%
>       $
>       4,391
>       $
>       -Deferred tax benefits
>       
>       (27,124)
>       38.00%
>       
>       (10,869)
>       
>       (8,724)$
>       (3,780)
>       
>       
>       (6,478)
>       
>       (8,724)US operationsDeferred taxes benefits
>       
>       (35,910)
>       15%
>       
>       
>       
>       (5,400)$
>       (39,690)
>       
>       $
>       (11,878)
>       $
>       (8,724)
>   As of December 31,
>   2003, the Company has deferred income tax assets of $27, 524 and deferred tax
>   liabilities of $4,391.  The deferred taxes benefits included deferred
>   taxes expense of $4,391 which arise from the unralized foreign exchange gain
>   from the Canadian operation.
>   
>   Deferred income
>   taxes result from significant temporary differences between income for
>   financial reporting purposes and taxable income. This difference arose
>   principally from the use of accelerated tax depreciation.

12.    
LEASE COMMITMENTS



> The Company has
>   entered into a lease agreement expiring September 30, 2005. Minimum annual
>   lease payments for the next two calendar years are as follows:
>   
>   
>   2004                                               
>             $    8,826
>             2005                                                     
>             6,995
>   The Company is also
>   required to pay common area costs monthly in addition to the minimum lease
>   payments.

EVANCIC PERRAULT
ROBERTSON



---



PRIME EQUIPMENT INC.

(Successor to Prime
Teleservices Inc., which was formerly IP Teleservices Inc.)

NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003 and
  2002 (U.S. Dollars)






13.    
PRO FORMA FINANCIAL STATEMENTS



> The following summary,
>   prepared on a pro forma basis, combines the consolidated results of operations
>   of the Company with Prime Teleservices, Inc. for the year ended December 31,
>   2003 and 2002 as if the acquisitions of Prime Teleservices, Inc. took place at
>   the beginning of the years presented.  The pro-forma balance sheet would
>   be the same as the reported balance sheet.
>   
>   Pro-forma Consolidated
>   Balance Sheet
>   2003                
>   2002
>   
>   Revenues      
>                                                                   $      
>   463,436     $     976,406
>   Operating costs and expenses                                                 
>   507,518        1,012,988
>   
>   Operating loss                                                                        
>   (44,082)           (36,582)
>   Other expenses                                                                         
>     4,392             
>     (5,865)
>   
>   Loss before taxes                                                                   
>   (39,690)           
>   (42,447)
>   Income taxes                                                                          
>     11,878               
>     8,724
>   
>   Loss for the year                                                            
>     $       (27,812)     $    
>     (33,723)
>   
>   Weighted average
>     common shares outstanding                      
>     9,046,000         9,046,000
>   
>   Loss per share                                                               
>     $       (0.003)     
>     $      (0.004)

14.    
COMPARATIVE FIGURES



> Certain balances of
>   the preceding period have been reclassified to conform with the current year's
>   financial statement presentation.

15.   
ECONOMIC DEPENDENCE

> The Company derived
>   87% of their revenue from one customer.  Subsequent to year-end, the
>   customer stated that it will no longer require the Company's service.



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



None





Item 8A. Controls and Procedures.



We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our filings
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the periods specified in the rules and forms of the Securities
and Exchange Commission. Such information is accumulated and communicated to our
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure. Our
management, including the Chief Executive Officer and the Chief Financial
Officer, recognize that any set of controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives.



Within 90 days prior to the filing date of this annual report
on Form 10-KSB, we have carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive officer
and our Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on such evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective. No changes were made to
internal disclosure controls from the prior year.





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 | Position(s)         
|---------------------- | --- | --------------------
|Alexander J. Martyniak | 39  | Director            
|Piero Dante Guglielmi  | 38  | President, Secretary



Mr. Piero Dante 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,
as well as, corporate filing for North American Fire Guardian Technology, Inc.
From 1996 until January 2001 Mr. Guglielmi was in charge of technical marketing
and a director of North American Fire Guardian Technology, Inc. In January 2001,
North American Fire Guardian Technology Inc. underwent corporate restructuring,
and the company's name was changed to Rival Technologies Inc. In August 2002,
Mr. Guglielmi was elected President by the shareholders of Rival Technologies In
December 2003 Mr. Guglielmi was re-elected a Director by the shareholders of
Rival Technologies Inc. and voluntarily resigned as President.



Mr. Alexander J. Martyniak received a diploma in
International Business from Langara College, in Vancouver, B.C. From 1992 to
1994, Mr. Martyniak owned and operated Primalex Development, in New Westminster,
B.C. Primalex was an interior finishing and painting contract company. From 1994
to 1996, he was the owner and operator of Pronto Moda Clothing, Vancouver, B.C.,
a clothing importer and distributor. During 1997, Mr. Martyniak was on a Co-op
Work Team for Industry Canada, in Vancouver, B.C. On that team, he marketed
Internet training and trained business owners and managers on the business
applications of the Internet. Since May of 1998, Mr. Martyniak has been the
commercial attache and Business Development Manager for the Italian Chamber of
Commerce of British Columbia. In that position, he assists Italian and Canadian
companies in bilateral trade and investment, organizes trade missions and
business meetings, organizes promotional events, conducts market research and
writes marketing reports; does business and marketing consulting, cultivates
relationships with the Chamber's members, and is responsible for public
relations with the business community and governments.



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.



The Company does not have an audit committee financial expert
serving on its audit committee. The Company's revenue from operations has
declined and as a result its financial accounting issues are being streamlined
and simplified. As the Company acquires new products and technology in the
future, it intends to identify and appoint a financial expert to serve on its
audit committee.



The Company has not adopted a code of ethics applicable to
principal executive officers. The current President has been an executive
officer of the Company for more than five (5) years. As new executive officers
are appointed in the future, the Company intends to adopt a code of ethics and
post the same on its website.



Item 10. Executive Compensation.



Summary Compensation Table



The following table sets forth, for the years ended December 31,
2003 and 2002, the aggregate remuneration paid or payable by us to the person
who acted as Chief Executive Officer during such periods and to the other
executive officers who earned a salary and bonus in excess of $100,000 during
the fiscal year ended December 31, 2003 (collectively, the "Named Executive
Officers").





|Name and Principal Position  | Year | Salary | Long Term Compensation Awards
    Restricted Stock Awards
|---------------------------- | ---- | ------ | ---------------------------------------------------------
|Alex Martyniak
    Director  | 2003 | nil    | nil                                                      
|Piero D. Guglielmi President | 2003 | nil    | nil                                                      
|Alex Martyniak
    Director  | 2002 | nil    | nil                                                      
|Piero D. Guglielmi President | 2002 | nil    | nil                                                      



Any compensation received by our officers, directors, and
management personnel will be determined from time to time by the Board of
Directors. Officers, directors, and management personnel will be reimbursed for
any out-of-pocket expenses incurred on our behalf.



No other compensation has been paid to any officer and/or
director for his services rendered to, nor has any received such compensation in
the past.



No retirement, pension, profit sharing, stock option or
insurance programs or other similar programs have been adopted by us for the
benefit of its employees.



There has been no executive compensation in any form. It is
anticipated that the officers and directors will receive compensation as sales
of equipment and services are achieved, including salaries and stock
compensation. The Company has allotted $250,000 in its Plan of Operation for
"Administrative Expenses." None of the planned administrative expenses include
compensation for any of the officers or directors of the Company.



Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.



The following is a table detailing the current shareholders of
our stock who own 5% or more of the common stock, and shares owned by our
Directors and Officers:



|Title of Class | Name and Address of Beneficial Owner                                                                                                  | Business Nature of Corporations and Affiliation to Officers
    or Directors of Company                           | Amount and nature of beneficial ownership | Percent of Class
|-------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ----------------
|Common         | Media Fund limited
    Mr. Lau Kwai Shing
    7A, 17/F, Blk A, Hyde Tower, Kung Lok Rd., Kwun Tong, Hong
    Kong                     | Privately held company acting as a holding company for
    various investments
    
    No affiliation            | 900,000                                   | 9.9%            
|Common         | Virgo Enterprises Co.
    Mr. Wong Yu Shun
    Flat A, Supreme Ind'l Bldg, 15-17 Shan Mei St., Fo Tan, N,
    Hong Kong               | Privately held company acting as a holding company for
    various investments
    
    No affiliation            | 720,000                                   | 7.9%            
|Common         | Ms. Kam-Lan Mak
    24/Flat 2, Ka Wo House, Po Nga Court, Taipo, NT, Hong Kong                                                        | Private investor
    
    No affiliation                                                                          | 680,000                                   | 7.5%            
|Common         | Best Holding Limited
    Ms. Tong Ka Wing
    #14, G/F, Third Lane, Siu Lek Yuen Village, Shatin, Hong
    Kong                       | Privately held company acting as a holding company for
    various stock investments
    
    
    No affiliation | 900,000                                   | 9.9%            
|Common         | Best Reliance Limited
    Ms. Jerry Cheung
    Unit 7, 4/f, Block C, 491 Castle Peak Road, Kowloon, Hong
    Kong                     | Privately held company acting as a holding company for
    various investments
    
    
    No affiliation       | 600,000                                   | 6.6%            
|Common         | Ms. Lai-Bing Fung
    Rm 1012, Blk B, Cornhill Garden, Quarry Bay, Hong Kong                                                          | Private investor
    
    No affiliation                                                                          | 800,000                                   | 8.8%            
|Preferred      | Polinvest, LTD
    Ms. Elizebeth Biachi-Roos
    Morgan & Morgan Trust Corporation Ltd. Pasea Estate, Road
    Town, Tortola (B.V.I.) | Privately held company acting as a holding company for
    various stock investments
    
    
    No affiliation | 500,000                                   | 100%            





Item 12. Certain Relationships and Related Transactions.



There have been no material transactions in the past two
years or proposed transactions to which we have been or are proposed to be a
party in which any officer, director, nominee for officer or director, or
security holder of more than 5% of our outstanding securities is involved.



We have no promoters. There have been no transactions that
have benefited or will benefit its officers or directors either directly or
indirectly.





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



(a) 1. The financial statements are listed in the Index to
Financial Statements and are filed as part of this annual report.



2. Not Applicable



3. Exhibits



> Exhibit 31.1 Certification pursuant to Section 906 of the
>   Sarbanes-Oxley Act of 2002 of CEO and CFO.
>   
>   Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350
>   as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of CEO
>   and CFO.





b) Reports on 10KSB. None





Item 14. Principal Accounting Fees and Services.



Audit Fees



For each of the last two fiscal years professional services
rendered by the principal accountant for the audit of the registrants annual
financial statements and review of financial statements 10-QSB (17CFR 249.308b)
or services that are normally provided by the accountant in connection with
statutory or regulatory filings or engagements for those fiscal years:



For the fiscal year ended December 31, 2002 - $24,192

For the fiscal year ended December 31, 2003 - $26,328 to the date
hereof.



Audit Related Fees



The aggregate fees billed in each of the last two fiscal years
for assurance and related service by the principal accountant that are
reasonably related to the performance of the audit or review of the registrant's
financial statements and are not reported under Item 9(e)(1) of Schedule 14A.



For the fiscal year ended December 31, 2002 - $24,192

For the fiscal year ended December 31, 2003 - $26,328 to the
date hereof



Tax Fees



The aggregate fees billed in each of the last two fiscal years
for professional services rendered by the principal accountant for tax
compliance, tax advice and tax planning:



For the fiscal year ended December 31, 2002 - $

For the fiscal year ended December 31, 2003 - $



All Other Fees



The aggregate fees billed in each of the last two fiscal years
for products and services provided by the principal accountant, other than the
services reported in Items 9(e)(1) through Item 9(e)(3) of Schedule 14A.



For the fiscal year ended December 31, 2002 - $

For the fiscal year ended December 31, 2003 - $



Audit Committee Pre-Approval Policies and Procedures



Not Applicable.

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.



Prime Equipment, Inc.



/s/ Perry Guglielmi

By: Perry Guglielmi

President, Chief Financial Officer and Director

Dated: April 14, 2004





Pursuant to the requirements of the Securities Exchange Act of
1934, 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

By: Perry Guglielmi

President, Chief Financial Officer and Director

Dated: April 14, 2004



/s/ Alex Martyniak

By: Alex Martyniak

Director

Dated: April 14, 2004

---







Exhibit 31.1

CERTIFICATIONS



I, Perry Guglielmi, President and Chief Financial Officer of
the Company certify that:



1. I have reviewed this annual report on Form 10-KSB of Prime
Equipment, Inc.;



2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by
this report;



3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Small Business Issuer as of, and for, the periods presented in this report.



4. The Small Business Issuer's other certifying offering
officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Small Business Issuer and have:



a) Designed such disclosure controls and procedures or
  caused such disclosure controls and procedures to be designed under our
  supervision, to ensure that material information relating to the Small
  Business Issuer, including its consolidated subsidiaries, is made known to us
  by others within those entities, particularly during the period in which this
  quarterly report is being prepared;

b) Designed such internal control over financial reporting,
  or caused such internal control over financial reporting to be designed under
  our supervision, to provide reasonable assurance regarding the reliability of
  financial reporting and the preparation of financial statements for external
  purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Small Business
  Issuer's disclosure controls and procedures and presented in this report our
  conclusions about the effectiveness of the disclosure controls and procedures,
  as of the end of the period covered by this report based on such evaluation;
  and

d) Disclosed in this report any change in the Small
  Business Issuer's internal control over financial reporting that occurred
  during the Small Business Issuer's fourth fiscal quarter of the period covered
  by this report that has materially affected, or is reasonably likely to
  materially affect, the Small Business Issuer's internal control over financial
  reporting; and



5. The Small Business Issuer's other certifying officers and
I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Small Business Issuer's auditors and the audit
committee of Small Business Issuer's board of directors (or persons performing
the equivalent function):



a) All significant deficiencies and material weaknesses in
  the design or operation of internal control over financial reporting which are
  reasonably likely to adversely affect the ability to record, process,
  summarize and report financial information; and

b) Any fraud, whether or not material, that involves
  management or other employees who have a significant role in the internal
  control over financial reporting; and



Date: April 14, 2004.



/s/ Perry Guglielmi

By: Perry Guglielmi

President and Chief Financial Officer



---



Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)



In connection with the Annual Report of Prime Equipment, Inc.,
a Nevada corporation (the "Company"), on Form 10-KSB for the year ending
December 31, 2003, as filed with the Securities and Exchange Commission (the
"Report"), I, Perry Guglielmi, President and Chief Financial Officer of the
Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350), that to the best of my knowledge:



(1) The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and result of operations of the
Company.



/s/ Perry Guglielmi

By: Perry Guglielmi

President and Chief Financial Officer