SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB


                            (Filed on April 12, 2001)




(  X  )  ANNUAL  REPORT  UNDER  SECTION  13  OR 15(d) OF THE SECURITIES EXCHANGE
         ACT  OF  1934

         FOR  THE  FISCAL   YEAR  ENDED   DECEMBER   31,  2000

                           Commission File No. 0-22919

                              PRIME COMPANIES, INC.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

         Delaware                                                 52-2031531
         --------                                                 ----------
(State  or  other  jurisdiction  of                           (I.R.S.  Employer
incorporation  or  organization)                            Identification  No.)


  409  Center  Street,  Yuba  City,  CA.                            95991
----------------------------------------------                   -----------
(Address  of  principal  executive  offices)                     (Zip  Code)


Issuer's  telephone  number:   (530)  755-3580
                               ---------------


Securities  Registered  Pursuant  to  Section  12(b)  of  the  Act:

  None

Securities  Registered  Pursuant  to  Section  12(g)  of  the  Act:


                                                       NAME  OF  EACH  EXCHANGE
TITLE  OF  EACH  CLASS                                   ON  WHICH  REGISTERED
----------------------                                   ---------------------
Common  Stock,  $.0001                                           NASD
                                                          OTC  Bulletin  Board

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 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  amendment to
this Form 10-KSB Yes No X


State  issuer's revenues  for  the  most  recent  fiscal  year. . .. . .$492,035



As of March 28, 2001 there were 26,717,296  shares of the Company's Common Stock
outstanding.  The aggregate market value of voting stock held by  non-affiliates
of the registrant on March 28, 2001 was $3,947,933.



Documents  incorporated  by  reference:

None


<PAGE>
                                     PART I

ITEM  1.   DESCRIPTION  OF  BUSINESS

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
--------------------------------------------------------------------------------

Certain  statements  made herein or  elsewhere  by, or on behalf of, the Company
that are not  historical  facts are  intended to be  forward-looking  statements
within the  meaning of the safe  harbor  provisions  of the  Private  Securities
Litigation  Reform  Act  of  1995.   Forward-looking  statements  are  based  on
assumptions about future events and are therefore inherently uncertain.

The Company cautions readers that the following important factors, among others,
could affect the Company's consolidated results:

1     Whether  acquired  businesses  perform at levels used by management in the
      valuation process and whether,  and the rate at which,  management is able
      to increase the profitability of acquired businesses.

2.    The ability of the  Company to manage its growth in terms of  implementing
      internal  controls and  information  gathering  systems,  and retaining or
      attracting key personnel, among other things.

3.    The  amount  and  rate  of  growth in the Company's corporate general and
      administrative  expenses.

4.    Changes  in interest rates, which can increase or decrease the amount the
      Company  pays  on  borrowings.

5.    Changes  in  government  regulation,  including tax rates and structures.

6.    Changes  in  accounting  policies  and  practices  adopted voluntarily or
      required  to  be  adopted  by  generally accepted  accounting  principles.

The Company cautions readers that it assumes no obligation to update or publicly
release any  revisions to  forward-looking  statements  made herein or any other
forward-looking statements made by, or on behalf of, the Company.

                        BUSINESS HISTORY, AND DEVELOPMENT

                                   BACKGROUND
                                   ----------

Prior to February 1999,  Prime's business was operated as a sole  proprietorship
owned by Norbert J. Lima, the Company's CEO. The business'  operations  began in
the early 1980's as a business telephone interconnect company.  Worldnet Tel.com
Inc.  was formed in  Delaware  in January  1999 when four  founders  and another
individual  funded  Worldnet.  In February 1999 management  formed WNTC Holdings
Inc. in Delaware as a wholly  owned  subsidiary  of Worldnet.  In February  1999
management also formed  NACC-Tel Corp. in Delaware as a wholly owned  subsidiary
of WNTC. At that time the sole proprietorship  business operated by Mr. Lima was
contributed  to  NACC-Tel.  Worldnet  was  merged  into  Prime  through a merger
effective August 11, 1999. This gave us immediate access to the capital markets,
to facilitate the initial and second stage funding of the build out of the local
multipoint distribution service  infrastructure.  Prior to the merger, Prime had
6,507,742  shares of  common  stock  outstanding  held by  various  individuals.
WorldNet was issued  14,500,000 shares of Prime common stock, and as a result of
the stock  exchange,  the former  shareholders  of WorldNet then held 69% of the
outstanding  shares  of  common  stock of Prime.  On the  effective  date of the
merger, the officers and directors of WorldNet became the officers and directors
of Prime.

LMDS Communications Inc. (LMDS), a Delaware corporation,  was formed in February
1999 as a wholly owned subsidiary of WNTC. LMDS is a telecommunications  company
with interests in the fixed broadband wireless sector.  LMDS Communications Inc.
obtained  local  multipoint  distribution  service  licenses at the 1999 Federal
Communications  Commission auction and is now deploying broadband fixed wireless
services.  In 2000  LMDS  Communications  obtained  competitive  local  exchange
carrier status in the States of Pennsylvania and New York. The competitive local
exchange  carrier  status  enables  LMDS  Communications  Inc. to connect to the
public switched  telephone network and negotiate  wholesale rates with incumbent
local exchange  carriers.  LMDS  participated in an auction conducted by the FCC
between  April 27, 1999 and May 12, 1999 for 161 local  multipoint  distribution
service  licenses.  Prime  secured  8 basic  trading  areas at the  auction  for
$591,800  (a 45%  discount  from the gross price of  $1,076,010).  The price per
population averages out to approximately $0.56. This compares to a high of $5.53
per  population  and an average  net bid of $1.35 per  population  for the 121 A
Block  licenses  auctioned in 1999.  LMDS had no substantial  operations  during
1999.

Prepaid Tel.com Inc. (Prepaid),  a Delaware corporation,  was formed in February
1999 as a wholly  owned  subsidiary  of WNTC.  Prepaid  is a  Competitive  Local
Exchange Carrier ("CLEC") certified by the California Public Utility Commission.
Prepaid had no substantial operations during 1999.

Zenith  Technologies,  Inc.  (Zenith),  a  Delaware  Corporation,  was formed in
December 1998 as a wholly owned subsidiary of Prime Companies,  Inc. To date, it
has no operations.

In September 1999, Prime acquired Olive Tree Image  Engineers,  a small internet
service  provider  located in  Sacramento,  California.  In October 1999,  Prime
completed the acquisition of Marathon Telecommunications, a commercial telephone
interconnect  business  based in  Sacramento,  California.  Prime  is  currently
reviewing several telecommunications acquisition opportunities that have come to
its attention.

Both Marathon and Olivetree operate under fictitious business names of NACC-Tel;
for legal and accounting purposes they have been fully integrated into NACC-Tel.

In April 2000 the Company  acquired the internet domain name  NTCOMM.com,  which
had been  operating  as a buyer and  seller of used  telephony  equipment.  This
business is now part of NACC-Tel.

Prior to December 30, 1998 Prime operated as a long-haul  temperature-controlled
truckload  carrier through its wholly-owned  subsidiary,  Mid-Cal Express,  Inc.
Prime also provided logistics  operations  through its wholly-owned  subsidiary,
Mid-Cal Express  Logistics,  Inc.  Effective December 30, 1998, Prime terminated
the operations of these  subsidiaries  through the sale of substantially  all of
the operating assets of Mid-Cal Express,  Inc. to Gulf Northern Transport,  Inc.
for 400,000  shares of US Trucking,  Inc.,  the parent company of Gulf Northern.
The  transaction  closed on April 14,  1999,  and on April 30,  1999 the Company
entered  into an  agreement  with the Credit  Managers  Association  of Southern
California  for  the  orderly   liquidation   and  payment  of  the  outstanding
liabilities  of Mid-Cal  Express Inc. These  liabilities  were to be paid by the
collection of Mid-Cal Express, Inc.'s accounts receivable and by the liquidation
of up to 400,000  shares of US Trucking  (previously  traded on the OTC Bulletin
Board symbol USTK), which were placed in escrow for the benefit of the creditors
of Mid-Cal Express,  until the stock is sold on the open market. US Trucking has
filed  bankruptcy  and its stock price has declined so the value of these shares
on March 29, 2001 was less than $10,000. On March 29, 2001 Mid-Cal Express, Inc.
filed for  protection  and  liquidation  under  Chapter 7 of the  United  States
Bankruptcy Act.


                               Organization Chart

                                [OBJECT OMITTED]

Prime Companies, Inc.
---------------------
WNTC Holdings Inc
     LMDS Communications Inc.
     Prepaid Tel.com Inc.
     NACC-Tel Corp.
Zenith Technologies Inc.
Mid-Cal Express Inc.




In  December  2000 the Company  entered  into an  Agreement  to acquire New Wave
Networks  LLC, a company  holding 5 local  multipoint  distribution  service FCC
Licenses in Missouri.  The  consummation of the Agreement is contingent upon the
Company  receiving part of the contemplated  financing from a $30 million equity
line of credit from Swartz Private Equity, LLC.



                                  THE BUSINESS
                                  ------------

Prime's   mission  is  to   provide  a  single   source  for  a  wide  range  of
telecommunications  services to both the consumer and commercial markets.  Prime
will  derive the  majority of its  revenues  from sales  generated  by its three
specialized  subsidiary  corporations.  Prime operates as a holding  company and
conducts all of its operations through its wholly owned subsidiaries.

Prime's principals comprise an experienced management team with over 50 years of
experience in the telecommunications  industry. It is this unusually broad scope
of skills and  experience  which will enable  Prime to  establish a balanced and
efficient  organization,  and to forge strong supplier  relationships with major
industry manufacturers,  such as Alcatel, Ericsson, Pacific Telephone,  Samsung,
and Texas Instruments,  as well as established distributors who intend to market
Prime's services.  Thus, Prime is well positioned to offer its clients the depth
of knowledge and experience  necessary to reach their personal and/or  corporate
needs and to execute each transaction efficiently and successfully.


LMDS  COMMUNICATIONS,   INC.  This  subsidiary  has  the  FCC  local  multipoint
distribution  service  licenses.  The  licenses  encompass  an area  of  western
Pennsylvania  and  southwestern  New York  State,  and include a  population  of
approximately  1,050,000  persons and 39,000  businesses.  This  subsidiary  was
incorporated  in Delaware in 1999 and is licensed and regulated by the states of
Pennsylvania and New York as a competitive local exchange  carrier.  The Federal
Communications  Commission,  an agency of the  United  States  government,  also
regulates this  subsidiary.  LMDS  Communications,  Inc. is funded by its parent
company,  Prime Companies,  Inc. This subsidiary's financial results in 1999 and
2000 were not material to the overall operation of Prime. There were no revenues
during  1999,  and revenues for the year 2000 were  minimal.  We have,  however,
accepted  presubscriptions  from a number of customers  in  locations  that were
launched  at  the  end  of  2000.   LMDS  is  expected  to  generate  more  than
insignificant  revenues in 2001.We  expect this  segment of our business to grow
dramatically,  as our local multipoint  distribution systems are constructed and
our service offerings are launched within all of our licensed territories.

Prime  intends to  capitalize on the  broadband  fixed  wireless  communications
revolution by providing local multipoint distribution system services to various
markets in which it has purchased  exclusive  spectrum licenses from the Federal
Communications   Commission.   Local  multipoint  distribution  service  is  the
broadband wireless technology used to deliver voice, data,  Internet,  and video
services.  Each license  permits us to use  multiple  radio  frequency  channels
ranging  from 27.5 GHz to 31.225 GHz.  We intend to use these radio  channels to
build,  install, and implement the  telecommunication  systems and offer some or
all of the following one and two-way broadband services:


   -      High-speed  Internet  access
   -      Video  teleconferencing
   -      Wireless  local  loop  telephony
   -      Alternative  cable  television  service
   -      High-speed  data  transmission

The flexibility  offered by a local multi-point  distribution  system will allow
Prime to offer a turnkey  package  of  services,  including  internet  and video
teleconferencing, which is what US customers desire: one-stop shopping for their
telecommunications needs.

A local  multi-point  distribution  system is capable of offering  subscribers a
variety  of one  and  two-way  broadband  services,  such as  video  programming
distribution;  video  teleconferencing;   wireless  local  loop  telephony;  and
high-speed data transmission, i.e. internet access. Because of its multi-purpose
applications,  local  multi-point  distribution  systems  have the  potential to
become major competitors to local exchange and cable television services.

Local  multi-point  distribution  service  systems may consist of multiple  cell
systems with return-path  capability  within the assigned  spectrum.  Generally,
each cell will contain a centrally located transmitter (hub), multiple receivers
or transceivers  and  point-to-point  links connecting the cell with the central
processing  center  and/or other cells.  Licenses are issued for a ten-year term
from  the  initial  license  grant  date.  At the  end of the  ten-year  period,
licensees  are  required  to  submit  an  acceptable   showing  to  the  Federal
Communications  Commission  demonstrating  that they are  providing  substantial
service to their service area.  Licensees  failing to demonstrate  that they are
providing substantial service will be subject to forfeiture of their licenses.

Our customers  pay a fixed monthly  charge for the unlimited use of our service.
We can customize the service for each customer.  We have a rate schedule and the
monthly charge is based upon the data transmission  speed each customer signs up
for.  We do not  currently  charge any fees based upon the  customers'  specific
usage of the service.  As we are the licensed carrier  providing  service to the
end  users,  our cost of  revenues  is  primarily  depreciation  on our  capital
infrastructure  equipment,  and utility connection costs that we have to pay for
access to the public switched telephone network, and our bandwidth providers who
enable us to connect to the internet.

Advantages to the use of LMDS services is that the licensed markets have limited
access  to  high  speed  connectivity  (broadband  services).  LMDS  provides  a
quick-to-market  availability.  This allows the underserved  communities to have
equal  access  to the  internet.  Today  the  disadvantage  would  be  that  the
infrastructure  required to deploy to an individual  business  customer is still
somewhat  expensive.  As volume  purchases  take place and  alternate  equipment
vendors come to the market we expect  infrastructure  costs to reduce and in the
long term eliminate the disadvantages

LMDS Communications,  Inc. has received  certificates from both Pennsylvania and
New York State to operate  as a  facilities  based  competitive  local  exchange
carrier.

Field  trials of local  multipoint  distribution  service  technology  have been
successfully  conducted and the service has been deployed in New Castle, PA. The
second system became  operational on December 20, 2000 and the first customer in
Oil City, PA went online on December 21, 2000. Additionally,  on March 30, 2001,
we began testing a new system  configuration in our third  Pennsylvania  market,
Meadville,  Pennsylvania; if the equipment performs as anticipated, we expect to
offer  commercial  service there in April 2001.  The Company has partnered  with
Alcatel  for local  multipoint  distribution  service  equipment  through  2001.
Alcatel  has more  than 100  broadband  wireless  customers  and over  2500 base
station sectors with the same type of service deployed worldwide. Alcatel builds
next  generation  networks  delivering  integrated  end-to-end  voice  and  data
solutions to carriers,  as well as enterprises and consumers worldwide.  Alcatel
has 120,000  employees  and sales of EURO 23 billion,  and operates in more than
130  countries.  Prime is  currently  the largest  customer of Alcatel for their
local multipoint  distribution  service equipment in the United States. The cost
to build and install an LMDS system is dependent upon the specific configuration
ordered for a specific  location;  the range for the cost of a single  system is
from  approximately  $130,000 to  approximately  $300,000.  These systems may be
funded  from up to  $6,000,000  of the  proceeds  from the sale of the shares to
Swartz,  and the  exercise  of warrants by Swartz,  if the Swartz  financing  is
completed.  Alternatively,  for some of the systems, Prime may utilize equipment
lease  financing to fund the cost of some of the capital  equipment.  In January
2001 we entered into a supply agreement with Adaptive Broadband  Corporation for
the supply of wireless broadband system equipment.  This agreement enables,  but
does not obligate, us to purchase up to $2.3 million of equipment during 2001.



NACC-TEL CORP.  NACC-Tel markets,  installs,  and maintains  business  telephone
communications  systems  Additionally,  NACC-Tel  provides  paging and voicemail
services.  NACC-Tel also maintains  these systems under service  agreements with
its commercial and municipal  customers.  This  subsidiary was  incorporated  in
Delaware in 1999 and is the successor to a  proprietorship  previously  owned by
Norbert Lima, CEO of Prime.  The business is based in Yuba City,  California and
also  operates  from a  branch  office  in New  Castle,  Pennsylvania.  The core
services  of this  subsidiary  will be  offered  to the  customers  of the  LMDS
Communications,  Inc.  subsidiary.  Prime's personnel who sell and service local
multipoint  distribution  services will also offer the NACC-Tel core services to
our customers.  The NACC-Tel operation generates sufficient cash flow to sustain
its core business. NACC-Tel also offers wireless digital subscriber line service
in Yuba City,  California  using  unlicensed  spectrum.  It plans to expand this
offering to other communities in California,  Pennsylvania,  and New York, which
are unable to obtain  high-speed  access to the internet  through the  incumbent
local  exchange  carrier.  Funding  for the build out of these  systems  and the
marketing  of  these  services  may  come  from the  parent  corporation,  Prime
Companies,  Inc. NACC-Tel does not require a license to offer these services, as
it uses unlicensed spectrum. The Federal Communications  Commission issues rules
and regulations for the use and operation of equipment on these frequencies.

The ability for the Company to provide Wireless digital  subscriber line service
is a result of our partnering with RC Networks, Inc. The partnering allows us to
deploy digital subscriber line access concentrators in conjunction with wireless
digital  subscriber  line  service  and  local  multipoint  distribution  system
services.  The digital  subscriber line application will be deployed by NACC-Tel
Corp and the local multipoint  distribution service application will be deployed
by LMDS  Communications,  Inc.  RC  Networks,  Inc.  based in San Diego,  CA was
founded in February  1997 and is a privately  held  company  that  develops  and
markets digital subscriber line driven,  high-speed internet access products for
the multi-tenant unit and hospitality markets.

The  operations  of  NACC-Tel  during  1999  and 2000  were the core of  Prime's
business.   We  anticipate  the  wireless  service  offering  by  NACC-Tel  will
experience  substantial  growth  over the coming  years.  The core  business  of
telephone interconnect, voicemail, and paging services is expected to experience
only moderate growth,  as Prime's local multipoint  distribution  system service
offerings come online in more communities.

The  advantage to a customer  using  NACC-Tel is that we are a  distributor  for
Samsung's business  communication  systems.  One of the requirements  defined by
Samsung  is  that  each  of  their  distributors  must  have  factory  certified
technicians.  This  requirement  provides the customer with a higher  quality of
service  because  only  certified  technicians  will  work on their  product.  A
disadvantage from the customer point of view is that once they have selected the
Samsung product, they would have a limited choice of servicing companies.

NACC-Tel's  cost of revenues are the  traditional  material  costs for the phone
systems it sells, and the labor to install and maintain the systems.

In October 1999, Prime completed the acquisition of Marathon Telecommunications,
a commercial telephone  interconnect  business based in Sacramento,  California.
Marathon operates under the fictitious business name of NACC-Tel;  for legal and
accounting purposes it has been fully integrated into NACC-Tel.



PREPAID TEL.COM INC.  Prepaid  Tel.com Inc.  provides  residential  consumers an
alternative  source for local telephone and long distance  services in the State
of  California,  These  consumers  pay for the  service  prior  to  usage.  When
customers buy our residential  telephone service, they pay us a setup charge and
a monthly charge. These charges are in accord with the tariff we have filed with
the  California  Public  Utility  Commission.  When  customers buy long distance
telephone  service,  or phone  cards,  they pay us in advance of their using the
service.  When the amount they have  prepaid is used up, they are unable to make
any more long  distance  calls  until they prepay for more long  distance  phone
service.  Our customers in general have either not established  credit,  or have
poor credit precluding them from traditional  phone service access.  Most of our
customers pay for our service by cash or money orders.  We do,  however,  accept
checks from our established customers. The disadvantage to the customer who uses
our service is that Prepaid Tel.com  purchases its services from the traditional
telephone  companies,  and this  creates  a higher  cost to the  consumer.  This
subsidiary  was  incorporated  in  Delaware  in  1999  and  is  licensed  by the
California Public Utility Commission as a competitive local exchange carrier.

The customer base for prepaid telecommunications  services is large and diverse,
including:  credit-impaired  customers,  who  generally  cannot meet the initial
deposit requirements for telecommunications services;  individuals who prefer to
pay in cash;  and  individuals  who want to  re-establish  credit.  The  company
employs  a  regional  business   development  manager  to  solicit  and  service
distributors,  who retail Prepaid Tel.com Inc.'s service  offerings.  The parent
corporation,  Prime  Companies,  Inc,  funds this  subsidiary's  operation.  The
operations of this  subsidiary in 1999 and 2000 were not material to the overall
operation  of Prime.  We expect this  subsidiary's  operations  to become a more
important  component and  contributor to our growth as we increase our marketing
effort  to  sign  on more  distributors  and  provide  additional  training  and
education to the distributors about the service.


EMPLOYEES

Prime had nine  full-time  employees and one part-time  employee at December 31,
1999.  On December 31, 2000 Prime had 20 full-time  employees  and one part-time
employee.


ITEM  2.  DESCRIPTION  OF  PROPERTIES

Prime leases and rents the following facilities as general office,  engineering,
and  retail  space per the terms of the leases or on a  month-to-month  basis as
applicable:

Location                          Type                 Size          Annual Rent
--------------------------------------------------------------------------------
Yuba City, Ca*              Office, Engineering,      2,240 sq. ft.    $ 20,160
                                 ISP, NOC,
                             Equipment Refurbishing,
                                  Retail

Concord, California               Office                700 sq. ft.    $  9,180

Sacramento, California            Office              1,200 sq. ft.    $  6,205

Yuba City, California             Storage               200 sq. ft.    $    900

Yuba City, California             Storage               150 sq. ft.    $    660

New Castle, Pennsylvania          Office                950 sq. ft.    $ 12,000

New Castle, Pennsylvania   80 sq. ft & rooftop rights    80 sq. ft.    $  9,000

Oil City, Pennsylvania    100 sq. ft & tower space      100 sq. ft.    $  8,400

Meadville, Pennsylvania   225 sq. ft. & rooftop rights  225 sq. ft.    $  3,600

*An officer and director of Prime is the landlord of this property.


ITEM  3.  LEGAL  PROCEEDINGS

Prime, on September 21, 2000, reached a settlement in two lawsuits with a former
officer and director claiming payment of $32,000 due for advances made on behalf
of Prime. Prime had filed a cross-complaint  seeking to recover 4,500,000 shares
of its common stock held by the  plaintiff,  and to be reimbursed for legal fees
arising  from this  action.  The  settlement  was an  agreement  with the former
officer/director litigant and another former officer/director,  and provided for
Prime to receive  5,500,000  common shares back from the two former officers for
cancellation.  Prime  agreed  to  disaggregate  three  of its  local  multipoint
distribution service licenses and assign one-half of each of the three licenses,
with a total net book value of $125,857 (net of accumulated amortization), to an
entity to be designated by the former officers.

Prime is a defendant in a lawsuit brought by a creditor of Mid-Cal Express Inc.,
a wholly owned  subsidiary of Prime,  seeking payment of  approximately  $70,000
owed to it by Mid-Cal.  During the discovery phase of the lawsuit, the plaintiff
advised us that it would dismiss us from this lawsuit if we could  document that
certain  funds had been paid to US Trucking in 1998. We have been able to comply
with the plaintiff's  request, and a dismissal was filed with the court on March
27, 2001.



We have  received  notice from a creditor of Mid-Cal  Express  that the creditor
intends to pursue a matter  wherein it is alleged that in 1998 Prime  guaranteed
certain  obligations of Mid-Cal,  that were secured by rolling stock assets sold
to US Trucking. The amount in dispute is approximately $227,000. The obligations
were guaranteed by several  individuals and other parties formerly related to US
Trucking. We are investigating the background  surrounding the alleged guaranty,
and have  requested  documentation  from the  creditor  in order to  verify  the
validity of the alleged guaranty.  In the opinion of counsel  representing us in
this matter, we may not be liable for this claim.

There are no other current pending lawsuits involving Prime.

Prime is exposed to  routine  litigation  incidental  to its  operations  in the
telecommunications  industry.  Prime is also  peripherally  exposed  to  routine
litigation  incidental  to its former  trucking  business,  primarily  involving
claims for personal injuries and property damage incurred in the  transportation
of freight.  Prime has turned these  matters over to its  insurance  carrier and
management  believes  these matters will not have a material  adverse  effect on
Prime's financial position or results of operations.

In January 2000 Prime purchased  Directors and Officers Liability Insurance with
coverage that Prime's Board of Directors deems  sufficient to attract and retain
talented and experienced personnel. The policy was renewed in January 2001.

Pfeffer & Williams,  PC, 155 Montgomery  Street,  Suite 609, San  Francisco,  CA
94104 has passed upon the legality of the  securities  offered in a Registration
Statement filed with the Securities and Exchange Commission in November 2000, as
amended by filings in January and February 2001.


ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

In December  2000 the  shareholders  approved an  amendment  to the  Articles of
Incorporation, increasing the number of authorized common shares from 50,000,000
to 100,000,000,  and increasing the number of authorized  preferred  shares from
10,000,000 to 50,000,000.

In December  2000 the  shareholders  also  approved an  amendment to the By-Laws
increasing the number of Directors from five to seven.

In December 2000 the shareholders  approved the appointment of Hein + Associates
LLP as the Company's auditor for the fiscal year ending December 31, 2000.


                                     PART II

ITEM  5.  MARKET  FOR  COMMON  EQUITY  AND  RELATED  STOCKHOLDER MATTERS

                                     MARKET
                                     ------


The Company's Common stock has traded on the NASDAQ OTC Bulletin Board under the
symbol PRMC since May 17, 1998. The following table presents high and low prices
for the Company's common stock published by the National Quotation Service, Inc.
The quotations represent prices in the  over-the-counter-market  between dealers
in securities and do not include retail markup,  markdown or commissions  and do
not necessarily represent actual transactions.


         QUARTER  ENDING         HIGH       LOW
         ----------------------------------------
         June  30,  1998         3.00      3.00
         September  30, 1998     3.25      0.31
         December  31,  1998     3.50      1.00
         March  31,  1999        2.50      0.125
         June  30,  1999         0.56      0.125
         September  30,  1999    0.50      0.22
         December  31,  1999     0.50      0.25
         March  31,  2000        4.31      0.30
         June  30,  2000         2.625     1.00
         September 30, 2000      1.25      0.3125
         December 31, 2000       0.625     0.16



                                  SHAREHOLDERS
                                  ------------


As of March 30,  2001 the  number  of  shareholders  of record of common  stock,
excluding the number of objecting beneficial owners whose securities are held in
street  name,  was  approximately   1,295.  The  number  of  shareholders  whose
securities  were held in their  name was  approximately  280 on that  date.  The
number of non-objecting  beneficial  owners whose securities were held in street
name on that date was approximately 1,015.


                                 DIVIDEND POLICY
                                 ---------------

The Company had not paid  dividends on its common  stock.  The Company  plans to
retain future  earnings,  if any, for use in its business and,  accordingly  the
Company does not anticipate  paying  dividends in the  foreseeable  future.  Any
earnings  are  expected to be reserved for the  operation  and  expansion of the
Company's  business.  Payment  of  dividends  is within  the  discretion  of the
Company's  Board of Directors  and will depend,  among other  factors,  upon the
Company's earnings, financial condition and capital requirements.


ITEM  6.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS  OF  OPERATION

Results  of  Operations
-----------------------


During  the  year  ended  December  31,  2000,  sales  revenue  from  continuing
operations  increased to $492,035 from $441,663 for the corresponding  period of
the prior year. The increase in revenue is attributed to increased  marketing by
the Company.


The gross  margin as a percent of revenues  increased  to 45% for the year ended
December 31, 2000 from 40% in the  corresponding  period of the prior year.  The
improvement in the gross margin is due to additional  volume discounts  provided
to Prime by its telephone vendors.

Prime's selling, general and administrative expenses for the year ended December
31, 2000 increased to $1,868,917 from $496,744 for the  corresponding  period of
the prior year. $1,025,456 of the increase is attributed to additional corporate
costs associated with the management of the public company's  business after the
merger of  Worldnet  into  Prime,  $124,464 of the  increase  is  attributed  to
non-cash  charges for  employee  and outside  director  stock  option  programs,
$157,288 is attributed to expenses related to the launching of our LMDS systems,
and $64,965 is attributed to the expansion of our prepaid residential  telephone
service.


As a result of the  reverse  merger in  August  1999,  the  Company  recorded  a
one-time charge of $428,194 for the cost of the merger, representing Prime's net
liabilities in excess of assets immediately prior to the merger.

Interest  expense for the year ended December 31, 2000 decreased to $79,497 from
$199,089  for the  corresponding  period  of the prior  year.  The  decrease  is
attributed  to the fact that most of our  liabilities  were  settled  during the
first quarter of 2000.

A loss on investment was recorded during the year ended December 31, 2000 in the
amount of  $1,224,000.  This has  reflected  what is  believed to be a permanent
decline in the value of U.S.  Trucking.  No  similar  loss was  recorded  in the
corresponding period of the prior year.


An extraordinary non-cash loss on the extinguishment of debt was recorded during
the year ended December 31, 2000 in the amount of $1,852,595. This is related to
the conversion by creditors holding  $1,240,216  (balance due as of February 28,
2000) of notes  payable,  plus  accrued  interest  of  $66,971,  into  2,904,860
restricted common shares of the Company. The market price of the common stock at
the time of conversion  was $.75, and the exchange ratio of debt to common stock
was $.45 per  share.  In March  2000  another  creditor  converted  $143,720  of
short-term  debt,  plus accrued  interest of $107,884,  into 561,111  restricted
common  shares of the Company.  The market price of the common stock at the time
of conversion was $2.625 and the exchange ratio of debt to common stock was $.45
per share. No similar loss was recorded in the corresponding period of the prior
year.


During the year ended December 31, 2000,  NACC-Tel sales revenue from continuing
operations  increased to $476,416 from $441,126 for the corresponding  period of
the prior year.  The increase in revenue is  attributed  to increased  marketing
efforts.  Continuing into the future,  increased marketing efforts and a greater
geographical  presence  should allow the growth to continue  generating  greater
revenues,  and  ultimately  net  income.  The larger  geographical  presence  is
directly related to the deployment of LMDS services in the  aforementioned  LMDS
markets.

The NACC-Tel gross margin as a percent of revenues increased to 47% for the year
ended December 31, 2000 from 40% in the corresponding  period of the prior year.
The  improvement  in the gross margin is due to additional  discounts for volume
discounts provided to Prime by its telephone vendors.

NACC-Tel's  selling,  general  and  administrative  expenses  for the year ended
December 31, 2000  decreased  to $247,551  from  $351,971 for the  corresponding
period of the prior year.  The decrease is  attributed  to the  reallocation  of
certain corporate administrative functions to Prime from the NACC-Tel subsidiary
in 2000.

During the year ended  December 31, 2000,  sales revenue from Prepaid  Tel.com's
continuing  operations  increased  to  $15,219  from $537 for the  corresponding
period of the prior year.  The increase in revenue is  attributed to the startup
of the business.  Prepaid's  gross margin as a percent of revenues  decreased to
42% for the year ended December 31, 2000 from 100% in the  corresponding  period
of the  prior  year.  The  gross  margin  for 1999 is not  representative  of an
existing business and therefore is not comparable to the gross margin for 2000.

Prepaid's  selling,  general  and  administrative  expenses  for the year  ended
December 31, 2000 increased to $68,028 from $3,063 for the corresponding  period
of the prior year. The increase is attributed to startup marketing  expenses for
this  segment  of our  business,  and the  intercompany  allocation  of  certain
corporate administrative functions that are performed by Prime.

During the year ended December 31, 2000, sales revenue from LMDS Communications'
continuing  operations increased to $400 from $0 for the corresponding period of
the prior  year.  The  increase in revenue is  attributed  to the startup of the
business.  LMDS  Communications,  Inc. had not yet begun  operations in 1999 and
therefore had no revenues in 1999.

LMDS' selling,  general and administrative  expenses for the year ended December
30, 2000 was $157,288. There were no operations in the comparable period in 1999
from this  segment of our  operations.  The  increase is  attributed  to startup
marketing,  administrative,  and technical engineering expenses for this segment
of  our  business,   and  the  intercompany   allocation  of  certain  corporate
administrative functions that are performed by Prime.


Liquidity  and  Capital  Resources
----------------------------------


At December 31, 2000, the Company had cash of $264,093,  plus $400,000 cash in a
savings account restricted for use as the collateral securing a letter of credit
issued for the benefit of an equipment  supplier,  and a working capital deficit
of $414,761. Working capital adjusted for the Chapter VII bankruptcy of Mid-Cal
Express,  Inc. on March 29, 2001 would have been $284,579. At December 31, 1999,
Prime had cash of $237,403 and a working capital deficit of $61,836. The primary
cause of the deficit position resulted from the assumption of net liabilities in
the merger of Worldnet with Prime.



Cash used in  operations  was  $1,741,258  for the year ended  December 31, 2000
compared to $124,970 in 1999 and to $24,986 in 1998. The cash used in operations
during 2000 was primarily  attributed to the net loss offset by noncash  charges
of $116,735 for depreciation, a noncash charge of $1,852,596 for the recognition
of a loss on the  extinguishment  of debt  through the  issuance  of stock,  the
one-time  noncash charge of $1,224,000  related to the loss on the investment in
US Trucking, a noncash charge of $129,614 for the recognition of compensation on
the issuance of stock options,  a noncash charge of $40,625 for the  recognition
of  interest  related  to  the  beneficial   conversion  of  notes  payable  and
convertible debentures, and a non cash charge for services rendered for our LMDS
market studies in the amount of $17,432 that was paid in stock. The cash used in
operations  during  1999 was  primarily  attributed  to the net loss  offset  by
noncash  charges for  depreciation,  the one-time  noncash charge related to the
merger of Worldnet with Prime, and an increase in accrued interest.



Cash used in  investing  activities,  consisting  of  purchases  of property and
equipment, was $208,442 for the period ended December 31, 2000. Cash provided by
investing activities, consisting primarily of proceeds from the sale of property
held for sale, was $1,060,211 for the year ended December 31, 1999. Cash used in
investing  activities,  consisting of purchases of property and  equipment,  was
$7,635 for the period ended December 31, 1998.



Cash provided by financing activities was $1,976,390 for the year ended December
31, 2000.  The cash  provided  resulted  from the  completion  of the  Company's
Private  Placement  Offering of common stock during the first quarter of 2000 in
the amount of  $2,409,390,  offset by payments on notes payable in the amount of
$433,000.  Cash used in  financing  activities  was  $701,317 for the year ended
December 31, 1999 and  consisted  of $740,565  paid on notes  payable  (with the
proceeds from the sale of property held for sale) offset by $39,248 of proceeds
from notes  payable (used for  operating  expenses).  Cash provided by financing
activities was $36,100 for 1998 and consisted of capital contributions.



In March 2000, the Company sold 6,569,444  shares of its common stock in private
placement  offerings,  raising  $2.4  million.  Additionally,  in February  2000
creditors  holding  $1,240,216  (balance  due as of February  28, 2000) of notes
payable,  plus accrued interest of $66,971,  converted their debt into 2,904,860
restricted common shares of the Company. The market price of the common stock at
the time of conversion  was $.75, and the exchange ratio of debt to common stock
was $.45 per  share.  In March  2000  another  creditor  converted  $143,720  of
short-term  debt,  plus accrued  interest of $107,884,  into 561,111  restricted
common  shares of the Company.  The market price of the common stock at the time
of conversion was $2.625 and the exchange ratio of debt to common stock was $.45
per share.  Each dollar of debt was converted into 2.22222 common shares.  These
notes  were  converted  into  common  shares at the same  price  offered  to the
investors who purchased common shares through the private  placement that closed
March 31,  2000.  The  offering  price was below the  market  price at the time,
causing a non-cash  loss on  extinguishment  of debt in the amount of $1,852,595
during the three  months ended March 31,  2000.  In  September  2000, a creditor
converted  $100,000 of short-term  debt, plus accrued  interest of $9,778,  into
312,500 restricted common shares of the Company.  The market price of the common
stock at the time of  conversion  was  $.719 and the  exchange  ratio of debt to
common  stock,  per the terms of the note,  was $.32 per  share  based  upon the
$100,000 principal only. The conversion ratio was each dollar of debt, including
accrued interest, was converted into 2.84655 common shares.


On  January  31,  2001 a letter of credit for the  benefit of an LMDS  equipment
supplier  expired,  and  $170,772.15  of cash  restricted  for use as collateral
securing the letter of credit was released to us in February 2001.

In February 2001 we received an approval  from a leasing  company for a lease in
the amount of $33,612 for equipment to be used in the  development  of the fixed
broadband wireless business. This lease is for 36 months and was funded in March
2001.

In March 2001 we received an approval from another  leasing  company for a lease
in the amount of $33,167  for  equipment  to be used in the  development  of the
fixed broadband wireless business. This lease is for 60 months and was funded in
March 2001.


In February and March 2001 we entered into agreements  with investment  advisors
for the placement of between $600,000 and $1 million of senior subordinated debt
with a term of one  year.  As of April 9,  2001 we have not  received  offers of
financing that are acceptable to us.

In March 2001 we entered into an agreement  with an  investment  banking firm to
raise  up to $4  million  net  of  brokerage  commissions  through  the  private
placement of our Series `A' Convertible  Callable  Preferred  Non-Voting Shares.
The  shares  are  convertible  after  one  year  from the  purchase  date by the
investor(s)  into our common  shares at a 25% discount off the closing  price on
the date of  conversion.  The shares are callable by us beginning 13 months from
the date of  purchase  by the  investor(s).  As of April 9, 2001 the  investment
banking firm has not placed any of the shares.

On March 15, 2001 we entered into an amended and restated  agreement with Swartz
wherein  we  granted  Swartz  an  additional  152,100  commitment  warrants  and
eliminated  the  requirement  to issue  Swartz any  additional  warrants  in the
future; the agreement  previously  provided for us to issue Swartz 1 warrant for
every 10 common  shares we sell them in the future.  We cannot obtain funds from
this agreement until a registration  statement covering the shares to be sold is
declared effective by the Securities and Exchange Commission.


On March 29, 2001 our wholly owned  Mid-Cal  Express,  Inc.  subsidiary  filed a
Chapter VII  bankruptcy  petition to liquidate the company.  This is the company
that previously was in the trucking  business,  and whose operating  assets were
sold at the end of 1998.  This event  will  create a  non-recurring  gain in the
approximate amount of $700,000 for Prime's consolidated statements of operations
for the  quarter  ending  March 31,  2001.  Approximately  $700,000  of  Mid-Cal
liabilities  will be eliminated  from our  consolidated  balance sheet,  and our
working  capital and  stockholders'  equity will be increased  by  approximately
$700,000.

Management believes the actions taken to lease equipment,  secure long term debt
financing,  raise  additional  cash  through the private  placement of preferred
shares,  and the  consummation of the $30 million equity line will be sufficient
to sustain operations for at least the next twelve months.



Risk Factors Associated with Owning our Securities
--------------------------------------------------


Our independent  auditor has issued an opinion raising  substantial  doubt about
our ability to continue as a going concern.  Reference is made to their footnote
number 3  discussing  the  losses  sustained  by the  Company  in 1999 and 2000.
Management  believes the steps taken to develop revenue paying  customers on the
fixed broadband wireless systems, to raise additional operating capital, and the
liquidation of the former trucking  business  mitigate this risk; and management
believes the Company will survive.


Prime has a Limited  Operating  History.  If Prime does not successfully  build,
install,  and implement its  telecommunication  systems, it will incur continued
losses,  and may not be able to  remain  in  business.  Prime  has  generated  a
cumulative  net loss of  $5,790,778  for the period from its  inception  through
December  31,  2000.  The ultimate  success of Prime will,  among other  things,
depend on its ability to build,  install  and  implement  the  telecommunication
systems  necessary  to  provide  high  speed  telecommunications  services.  The
likelihood  of the success of Prime must be considered in light of the problems,
expenses,  difficulties,  complications  and delays  frequently  encountered  in
connection  with the development of a new business  enterprise,  the competitive
environment in which Prime operates,  and the frequently  encountered  delays in
the delivery of infrastructure equipment by telecom equipment manufacturers.  In
2000,  Prime   experienced  late  delivery  of  ordered   equipment,   and  also
non-delivery of key components due to the lack of coordinated  customer  service
and support by a vendor. If any required key component is not received by Prime,
a telecommunications system cannot be commercially launched.

Prime's  revenues  will  be  derived  primarily  from  customer  fees  that  are
contingent upon certain transactions (i.e. financings, system build-outs, sales,
acquisitions, etc.) being successfully consummated by Prime.

The  Telecommunications  Industry is Highly  Competitive.  Prime  competes  with
several  entities for a share of the market,  some of which have more  financial
resources and  experience  than Prime which enable them to better  withstand the
impact  of  risks   associated   with  a  highly   competitive   industry.   The
telecommunications  industry  is  highly  competitive.  There  are a  number  of
corporations  offering  competing  technologies  and services in Prime's  target
areas.

Prime has Limited Working  Capital.  Prime may seek additional  financing in the
future from outside sources, either through additional equity offerings in Prime
or by borrowing.  There is no assurance that such financing will be available to
Prime in the future,  and if available,  that it will be at terms  acceptable to
Prime.  Such  financing  may be sought to  complete  the  build-out  of  Prime's
telecommunications  systems,  expand upon the newly built and operating systems,
or for the  marketing  of the  telecommunications  services  provided by Prime's
systems.  Moreover,  Prime  may have to  forfeit  some  interest  in its  future
revenues or dilute the equity  interest of its  shareholders  in order to obtain
any such additional financing.  If such additional financing is required but not
available,  Prime may lose its market share of customers in the  territories  in
which it has built  its  systems.  The  ability  of Prime to  obtain  additional
financing  may be dependent on factors over which Prime has no control,  such as
the general condition of the financial markets,  and the financial  condition of
the  larger  telecommunications  companies  at the time that Prime may seek such
additional   financing.   In  2000,   Prime  sought  lease   financing  for  its
telecommunications  infrastructure  equipment from various leasing companies and
leasing  brokers.  Due to Prime's lack of profitable  operating  history and the
lack of positive operating cash flow, it was unable to obtain lease financing.

Prime is Dependent on Key Personnel. The loss of any of Prime's key personnel or
the failure to attract and retain  necessary new employees could have an adverse
effect on Prime's business operations.  Prime's success is highly dependent upon
the  skills  of a  limited  number  of key  management  personnel.  To reach its
business  objectives,  Prime will need to hire and retain qualified personnel in
the areas of  installation  and  maintenance of  telecommunications  systems and
marketing.  Prime  may not be able to hire or  retain  such  personnel.  Another
factor is that the secondary and tertiary markets in which Prime is building its
telecommunications  systems are  generally,  in the  opinion of the  technically
educated  and  experienced  pool  of  potential  employees,   not  as  desirable
communities in which to reside as the primary markets and the high tech areas of
the United States.

Prime is  dependent  on its  vendors to  deliver  infrastructure  equipment  and
services   at  agreed  upon   delivery   dates.   Telecommunications   equipment
manufacturers   sometimes  announce  the  availability  of  commercially  tested
equipment, even though the equipment may not have been actually field-tested. It
is reasonably  foreseeable that a vendor may deliver  equipment to Prime that is
not sufficiently  reliable for Prime to permit its customers to use the services
anticipated  to be  provided  by the  equipment.  If a vendor  does not  deliver
commercially  proven equipment to Prime after accepting Prime's purchase orders,
Prime  cannot  construct  its  telecommunications   systems  and  meet  its  new
customers'  expected  activation  dates.  This in  turn  would  create  negative
feelings toward Prime within the local  community.  Prime is also subject to the
risk that a larger  and/or  better-financed  purchaser  may exert  pressure on a
vendor to give its  equipment  orders a higher  priority for delivery  than that
afforded to Prime.  If this should happen,  Prime's  rollout  schedule for fixed
wireless broadband services will be delayed.

Prime has a History of Losses and a Limited Operating History. If Prime does not
successfully  build its  telecommunication  systems  and market its  services to
customers,  it will  incur  continued  losses,  and may not be able to remain in
business. Prime has generated a cumulative net loss of $5,790,778 for the period
from its inception  through December 31, 2000. In order to establish  profitable
operations, Prime must successfully market its systems and keep its expenditures
in line with moderate revenues.  Prime is subject to a number of risks including
its ability to  successfully  market,  distribute and sell its product,  intense
competition,  and  its  reliance  on a set of  FCC  licenses  authorizing  local
multipoint distribution services within licensed service areas.

The market price of Prime's common stock has been highly  volatile and is likely
to continue to be so. The stock  market has  experienced  significant  price and
volume  fluctuations  unrelated  to  the  operating  performance  of  particular
companies  Prime's float  (shares  available for trading by the public) has been
very thin,  and the lack of  substantial  trading  volume  tends to increase the
volatility of Prime's stock price.  Factors such as Prime's  ability to increase
revenues,  variations in Prime's  financial  results,  and its ability to obtain
needed financing,  announcements of technological innovations or new products by
Prime or its competition,  comments by securities  analysts,  adverse regulatory
actions or decisions, any loss of key management,  results of Prime's operations
or those of its competition,  and changing  governmental  regulations may have a
significant impact on the market price of Prime's common stock.

Limited Public Market for Prime Shares.  Investors should be aware that there is
a limited  market for our common  shares.  Accordingly,  it may be  difficult to
resell the shares.

In the event that Prime  elects to issue  additional  shares of common  stock or
other  securities  in connection  with any future  financings,  investors  could
experience dilution of their ownership interest in Prime.  Prime's expansion and
growth strategy may involve acquisitions of companies whereby some or all of the
consideration  may  be  Common  Stock  or  other  equity  securities  of  Prime.
Accordingly,  in the event Prime engages in an aggressive  acquisition  strategy
involving  a  significant   number  of  companies,   investors  will  experience
significant dilution of their ownership interest in Prime.


Dividend Policy
---------------
Prime does Not Intend to Declare  Dividends.  The payment of future dividends on
the common stock and the rate of such  dividends,  if any, will be determined by
our Board of Directors in light of our earnings,  financial  condition,  capital
requirements  and other  factors.  Investors  risk not receiving any current nor
future return on their investment.  We have not paid any dividends on our common
stock  during the past two years.  We expect to continue to retain all  earnings
generated by our operations for the development and growth of our business,  and
do  not  anticipate  paying  any  cash  dividends  to  our  shareholders  in the
foreseeable future.



Penny Stock Rules
-----------------
Our Stock is  Subject  to the Penny  Stock  Rules.  Investors  in our stock risk
having  less  liquidity  than they may have in a stock not  subject to the Penny
Stock Rules.  "Pursuant to the  Securities  and Exchange Act of 1934, the Common
Stock of Prime is classified as a penny stock, which means that it is subject to
restrictions  with  respect to its  marketability.  SEC rule  15G-9  establishes
certain sales practice requirements for such stock and, in particular,  prior to
a transaction:

         The  broker  or dealer  must have  approved  a  prospective  customer's
account for  transactions in penny stocks in accordance with the procedure under
the SEC rules and the broker or dealer must have  received  from the  customer a
written agreement to the transaction  setting forth the identity and quantity of
the designated security to be purchased.  In order to approve a person's account
for  transactions  in penny  stocks,  the broker or dealer  must obtain from the
person  information  concerning  the person's  financial  situation,  investment
experience,  and  investment  objectives.  The broker or dealer must  reasonably
determine that transactions in designated securities are suitable for the person
and that the person or the person's  independent  advisor in these  transactions
has  sufficient  knowledge  and  experience  in financial  matters such that the
person or the person's independent advisor in theses transactions reasonably may
be expected to be capable of evaluating the risks of  transactions in designated
securities.

         The broker or dealer  must  deliver  to the person a written  statement
setting  forth the basis on which the  broker or dealer  made the  determination
required by the rules  stating in a  highlighted  format that it is unlawful for
the broker or dealer to effect a transaction in a designated security unless the
broker or dealer has received, prior to the transaction,  a written agreement to
a transaction  from the person and stating in a highlighted  format  immediately
preceding  the  customer's  signature  line  that:  (a) the  broker or dealer is
required by this section to provide the person with a written statement; and (b)
the person  should not sign and return the  written  statement  to the broker or
dealer if it does not  accurately  reflect  the  person's  financial  situation,
investment experience,  or investment  objectives;  and obtain from the person a
manually signed and dated copy of the written statement required by the rules.

         As a practical  matter,  the only customers  eligible to purchase penny
stocks are persons  for whom the broker or dealer  carries an account and who in
such account have effected a securities  transaction  or made a deposit of funds
or securities  more than one year  previously;  or have made three  purchases of
penny stocks that occurred on separate days and involved different issuers.


Industry Risk Factors
---------------------
Dependence  On  Network   Infrastructure;   Establishment   and  Maintenance  of
Relationships; Capacity; Risk of System Failure; Requisite Agreements may not be
able to be Obtained on Satisfactory  Terms and Conditions.  Prime's success will
depend  upon its  ability to  implement  and  subsequently  continue to expand a
network  infrastructure  and  support  services  in order to  supply  sufficient
geographic reach, capacity,  reliability and security at an acceptable cost. The
development  and  expansion  of Prime's  network will require that it enter into
agreements,  on acceptable terms and conditions,  with the various  providers of
infrastructure  capacity and equipment and support services.  These are referred
to as peering relationships.

The expansion and adaptation of Prime's network infrastructure will also require
substantial  financial  operational and managerial  resources.  Prime may not be
able to expand or adapt the network infrastructure it intends to develop to meet
the industry's evolving standards or its customers' growing demands and changing
requirements  on a timely basis, at a commercially  reasonable  cost, or at all.
Prime may not be able to deploy  successfully  any expanded and adapted  network
infrastructure. Failure to maintain peering relationships or establish new ones,
if necessary, would cause Prime to incur additional operating expenditures which
would have a material adverse effect on Prime's  business,  financial  condition
and results of operations.

Prime is Dependent on Telecommunications  Carriers and Other Suppliers.  Prime's
suppliers  and  telecommunications  carriers  also  sell or lease  services  and
products to Prime's  competitors,  and some of these  carriers  are,  and in the
future  others  may  become,   competitors  of  Prime.   Prime's  suppliers  and
telecommunications  carriers may enter into exclusive  arrangements with Prime's
competitors  or otherwise  stop selling or leasing their services or products to
Prime,  which could have a material adverse effect on Prime.  Prime is currently
the largest customer of Alcatel for their local multipoint  distribution service
equipment in the United  States.  In January  2001,  Prime entered into a supply
agreement   with  Adaptive   Broadband   Corporation   for  wireless   broadband
infrastructure equipment for the year 2001.



The  Telecommunications  Industry  Experiences Rapid  Technological  Change. Any
failure on the part of Prime to use new technologies effectively, to develop its
technical expertise and new services or to enhance existing services on a timely
basis, either internally or through arrangements with third parties,  could have
a  material  adverse  effect  on Prime.  The  market  for  Prime's  services  is
characterized  by rapidly  changing  technology,  evolving  industry  standards,
changes in customer  needs and frequent  new service and product  introductions.
Prime's  future  success  will  depend,  in part,  on its ability to use leading
technologies  effectively,  to continue to develop its technical  expertise,  to
enhance its existing  services and to develop new  services  that meet  changing
customer  needs  on  a  timely  and  cost-effective   basis  and  obtain  market
acceptance.

Market and Financial Forecasts.  Prime has prepared certain forecasts for use by
management.  The  conclusions  contained in the forecasts may not be attained in
the  actual  operation  of  Prime.  Actual  results  of  operations  may  differ
significantly  based on certain  assumptions  concerning  facts and events  over
which Prime may have no control,  including  the ability  through  marketing and
management  to obtain the  projected  revenue  levels.  Therefore  the operating
results forecast may not be achieved, and the assumptions on which the forecasts
are based may not be realized.

The risks  highlighted  herein  should not be assumed to be the only things that
could affect future performance of Prime.


Impact of Recently Issued Standards
-----------------------------------

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 133 (FASB133),  "Accounting  for Derivative
Instruments  and Hedging  Activities."  This  statement  requires that an entity
recognize all derivatives as assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement was amended
by FASB 137,  issued in June 1999,  such that it is effective  for the Company's
financial statements for the year ending December 31, 2001. The Company does not
believe  the  adoption  of  FASB133  will  have a  material  impact  on  assets,
liabilities or equity.


In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101,  entitled "Revenue  Recognition in Financial  Statements." SAB
101A  was  issued  by the  SEC  on  March  24,  2000  and  delays  the  required
implementation  date of SAB 101  until  the  second  quarter  of  2000.  SAB 101
provides guidance on the recognition,  presentation and disclosure of revenue in
the financial  statements  of public  companies.  The Company  believes that the
adoption of SAB 101 did not have a material effect on its financial  position or
results of operations.




Seasonality and Inflation
-------------------------

Management does not believe the Company's operations are significantly  affected
by seasonality or inflation.



ITEM  7.  FINANCIAL  STATEMENTS

The  Company's  consolidated  financial  statements  are  attached  as pages F-1
through F-22.


ITEM  8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
          FINANCIAL  DISCLOSURE

None

                                    PART III

ITEM  9.  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS;
          COMPLIANCE  WITH  SECTION  16(A)  OF  THE  EXCHANGE  ACT

Certain information about directors and executive officers of the Company is set
forth below:

                             OFFICERS AND DIRECTORS
                             ----------------------

The following table sets forth the names, ages and positions with the Company as
of December 31, 2000 of all of the officers and directors (the "Named  Executive
Officers")  of the  Company.  Also  set  forth  below is  information  as to the
principal occupation and background for each person in the table.

 a)  Directors  and  Executive  Officers  of  the  Company



NAME             AGE  DIRECTOR SINCE              POSITION
---------------  ---  --------------  ---------------------------------
Norbert Lima      55       1999       Chief Executive Officer, Director


Stephen Goodman   57       1999       Chief Financial Officer,
                                      Corporate Secretary, Director

Adrian Lima       30                  Vice President - Engineering

William Turley    63       2000       Director, Member of Audit Committee


Martin Sokolowski 54       2000       Director

Dennis Hinz       47       2000       Director, Chairman of Audit Committee



The following is a brief description of the business background of the executive
officers and directors of the Company.


Norbert  Lima has been  President  and CEO and  Director  for the Company  since
August 1999.  Mr. Lima has over thirty years of  telecommunications  experience,
and will be  responsible  for  implementing  the Company's  operational  systems
across multiple markets.  Mr. Lima founded and operated  NACC-Tel,  a California
interconnect  company,  from  1984-1994,  where  he  served  as  Sales  Manager,
Technical  Services  Engineer,  and Installation  Manager.  NACC-Tel merged with
Pagers Plus  Cellular in 1994,  whereby  Mr.  Lima served as Vice  President  of
Engineering,  responsible for RF engineering and construction of 220 MHz systems
throughout  the  US.  Under  Mr.  Lima's  direction,  Pagers  Plus  successfully
constructed 150 five-channel 220 MHz systems throughout various states. In early
1998, Mr. Lima re-purchased  NACC-Tel,  along with certain assets of Pagers Plus
Cellular,  which was subsequently  acquired by Prime in 1999, and will remain in
operation as its wholly owned subsidiary.

Mr. Lima worked in various  positions for Pacific  Telephone for nineteen years,
most recently as Engineering  Manager from 1981-1983.  From 1979-1981,  Mr. Lima
was  District  Manager  of  Construction,  where  he was  responsible  for  five
construction  divisions  with  275  subordinates  and  an  operating  budget  of
approximately  US$16,000,000  per annum. Mr. Lima's career has taken him through
multiple  levels of the large telecom  company,  as he also spent eight years as
Outside Plant Engineer,  where he had responsibilities of planning and designing
pole lines,  conduit  structures,  and  underground/building  cables. Mr. Lima's
success  enabled  his  promotion  to  Engineering  Manager,  where  he  became a
supervisor  for several  Outside  Plant  Engineers,  and then Staff Manager from
1978-1979,  where he was  responsible for conducting  Outside Plant  Engineering
Reviews throughout the states of California and Nevada. Mr. Lima received his BS
in Industrial  Technology-Electronics  and his BA in Public  Administration from
Fresno State University in 1970.


Stephen Goodman has been Chief Financial  Officer,  Treasurer,  and Director for
the Company since August 1999. Mr. Goodman has worked in the  telecommunications
industry for over eight years,  serving as President  for both Secure  Cellular,
Inc. and Pagers Plus Cellular, of San Francisco, from 1992-1999. Mr. Goodman had
been responsible for the strategic direction of both of the  companies,  and led
Pagers Plus to be named the 25th fastest-growing  company  in the  San Francisco
Bay area in 1996. Mr. Goodman developed, structured, and negotiated the majority
of the business for  Pagers Plus,  which  provides  prepaid  cellular  telephone
services,  prepaid wireless services, and telephone systems to both consumer and
corporate customers throughout California.


Mr. Goodman is skilled in banking and finance,  having  accumulated  over thirty
years of experience working for various organizations. Mr. Goodman was President
of Contra Costa  Financial  Services,  Inc. from  1989-1992,  where he owned and
managed this commercial and  residential  mortgage  brokerage/banking  firm. Mr.
Goodman was  involved  with the FCC while at Contra  Costa  Financial  Services,
Inc.,  applying to  participate in the lottery for a new spectrum of Specialized
Mobile Radio licenses. From 1985-1989,  Mr. Goodman worked for various savings &
loan  companies,  and from  1977-1985  he served  as  President  of Bay  Capital
Corporation & House of Money.  Mr. Goodman worked in financial  public relations
on Wall Street from 1969-1970 and as a stockbroker  for Loeb,  Rhoades & Company
from  1965-1966.  Mr. Goodman served as Lieutenant  Junior Grade in the US Coast
Guard from  1966-1969.  Mr.  Goodman  received his JD from  William  Howard Taft
University  in 1995,  passing  the  California  Baby Bar in  1992.  Mr.  Goodman
received his BS in Economics from the University of Pennsylvania-Wharton  School
in  1965,  and  received  his MBA  with  distinction  in  Finance  from New York
University in 1969.



Adrian Lima has been Vice President of  Engineering  for the Company since 1999.
Adrian Lima is the son of Norbert  Lima,  the  Company's CEO and Chairman of the
Board of  Directors.  Mr. Lima has  accumulated,  while working for the NACC-Tel
proprietorship during the ten years prior to his employment by Prime,  technical
skills and experience through the installation of hundreds of telecommunications
systems manufactured by several different  companies.  Mr. Lima is adept at each
aspect  of  interconnect  installation,  including  wire  running,  termination,
hardware programming, troubleshooting, and training. Upon NACC-Tel's merger with
Pagers  Plus  Cellular  in  1994,  Mr.  Lima  obtained  experience  in  wireless
technologies, enabling him to spearhead the installation of some 750 channels of
two-way  220  MHz  radio  systems.  Mr.  Lima's  technical  experience  will  be
instrumental in implementing the Company's expansion plans in the future.



William   Turley  is   President   of   Communications   Engineering   Inc.,   a
well-established provider of telecommunications  products and services including
turnkey  voice and data  solutions;  he  founded  the  company  in 1992.  He has
extensive  experience  in  construction,  operations,  and  engineering  in  the
telephone  industry dating from 1952 both in the private and public sectors.  He
holds a Class A & C-7  California  Contractor's  License and is a member in good
standing of the Building Industrial  Consulting Society  International  (BICSI).
Prior to  establishing  his business in 1977,  he was a science  educator at Cal
State  University,  San Diego City  College,  and at  Kirchenpaur  Gymnasium  in
Hamburg,  Germany.  He obtained his M.A. degree in Physical  Science in 1971 and
his B.S.  degree in Physics in 1969,  from  California  State  University in San
Diego. He is a member of Prime's Audit Committee.


Martin  Sokolowski  has been a Senior  Manager of Strategic  Planning at Alcatel
USA,  Wireless  Access  Business  Unit  since  June  1999.  Prior to  this,  Mr.
Sokolowski was employed as Technical  Services Manager by Bosch Telecom in their
Broadband Wireless Access, Global Deployment Division from December 1997 through
June 1999.  From  August 1997 to December  1997 he was  contracted  by MCI Local
Service  Delivery to manage the  provisioning,  engineering,  and E911 emergency
service  operations for new local service  competitive  local  exchange  carrier
customers  of MCI.  From  January  1997 to August 1997 he was employed by Andrew
Corporation as a Manager of RF Systems Engineering and Market Development.  From
December  1993 to January 1997 he was employed by Advanced  Envirotech  Systems,
Inc.  as Vice  President  for  Engineering  and  Customer  Field  Services.  His
engineering   experience  includes  systems  engineering,   design  engineering,
planning and scheduling, prototype and first office applications and new product
deployment and support.  Telecom  experience  includes  overall  network design,
local telco,  wireline  and RF wireless  systems,  LMDS and MMDS  point-to-point
wireless  networks and  telecommunications  infrastructure.  Mr.  Sokolowski has
received a Bachelor of  Engineering  Science  degree from the  University of New
York at Stony  Brook  and a Master of  Engineering  Administration  degree  from
George Washington University.


Dennis  Hinz  is a  shareholder  in  Ten  Haken,  Hinz  and  Carlos  Accountancy
Corporation.  He is a Certified  Public  Accountant  and a  Certified  Valuation
Analyst. He has been employed in the accounting profession since graduation from
California  State  University,  Chico,  in 1976,  where he obtained  his B.S. in
Business Administration with a concentration in accounting.  In 1986 he became a
partner of Marta,  Matli, & Thomas CPA's and its successor  firms  including Ten
Haken,  Hinz &  Carlos  CPA's.  He is a  member  of the  American  Institute  of
Certified  Public  Accountants,  the  California  Society  of  Certified  Public
Accountants,  and the National  Association of Certified Valuation Analysts.  He
serves as  Treasurer  of the  Kiwanis  Club of Yuba City,  and he is Chairman of
Prime's Audit Committee.


On March 29, 2001 our wholly owned  Mid-Cal  Express,  Inc.  subsidiary  filed a
Chapter VII  bankruptcy  petition to liquidate the company.  This is the company
that previously was in the trucking  business,  and whose operating  assets were
sold at the end of 1998.  This event  will  create a  non-recurring  gain in the
approximate amount of $700,000 for Prime's consolidated statements of operations
for the  quarter  ending  March 31,  2001.  Approximately  $700,000  of  Mid-Cal
liabilities  will be eliminated  from our  consolidated  balance sheet,  and our
working  capital and  stockholders'  equity will be increased  by  approximately
$700,000.  Mr.  Norbert Lima is the CEO of Mid-Cal and Mr. Goodman is the CFO of
Mid-Cal.



ITEM  10.  EXECUTIVE  COMPENSATION

The following table sets forth the aggregate cash and options  compensation paid
to all  officers of Prime.  The  officers  received no other  compensation  from
Prime:
<TABLE>
<CAPTION>


----------------- ------------------ ----- -------- ------- -------------- ------------ ----------
      Name            Principal      Year  Salary   Options   Exercise     Exercisable  Expiration
                      Position                                  Price
----------------- ------------------ ----- -------- ------- -------------- ------------ ----------
<S>                <C>               <C>    <C>     <C>      <C>            <C>         <C>
  Norbert Lima           CEO         2000  $95,833  95,833     $.21875      12/31/00    12/31/03
----------------- ------------------ ----- -------- ------- -------------- ------------ ----------
                                     1999  $28,850
----------------- ------------------ ----- -------- ------- -------------- ------------ ----------
Stephen Goodman          CFO         2000  $95,833  95,833     $.21875      12/31/00    12/31/03
----------------- ------------------ ----- -------- ------- -------------- ------------ ----------
                         (a)         1999  $5,500   5,500       $1.00       01/31/00    12/31/02
----------------- ------------------ ----- -------- ------- -------------- ------------ ----------
  Adrian Lima      VP-Engineering    2000  $68,971  68,971     $.21875      12/31/00    12/31/03
----------------- ------------------ ----- -------- ------- -------------- ------------ ----------
                                     1999  $54,347  54,346      $1.00       01/31/00    12/31/02
----------------- ------------------ ----- -------- ------- -------------- ------------ ----------
 (a) Mr. Goodman's compensation in 1999 was from August through December.

</TABLE>


                              EMPLOYMENT AGREEMENTS
                              ---------------------

In accordance  with the  Commission  Rules,  the following are the  Compensatory
Plans and Arrangements of the Company:

Prime  Companies  401(k)


     Prime Companies,  Inc. Incentive Stock Option Plan On January 14, 2000, the
Company approved compensation for its CEO and CFO each at the rate of $8,333 per
month for the year 2000. In April 2000 the Company approved compensation for its
Vice-President  -  Engineering  at the rate of $6,000 per month.  Employment  of
officers may be terminated by the Company at any time.


                                  STOCK OPTIONS
                                  -------------

On January 1, 2001 there were  outstanding  options on 681,813 shares to various
individuals.  Each option  provides  the right to  purchase  one share of common
stock.  165,711 of these options  expire  December 31, 2002 and 516,102 of these
options  expire  December  31, 2003.  Of the 165,711  options  granted,  105,711
options  expiring in 2002 are exercisable at $1.00 per share, and 60,000 options
expiring in 2002 are  exercisable  at $.21875,  the closing  price of the common
stock on the last business day of 2000. All of the options  expiring in 2003 are
exercisable  at  $.21875,  the  closing  price of the  common  stock on the last
business day of 2000.  Mr.  Goodman,  Mr. Adrian Lima, and Mr. Norbert Lima have
rights under the Year 2000 and the Year 1999  Employee  Stock  Option  Programs.
Messrs.  Turley,  Sokolowski,  and Hinz each have 20,000  options under the Year
2000  Outside  Director  Stock  Option  Program.  These  options  are  currently
exercisable and expire December 31, 2002.  There are no other warrants,  rights,
conversion,  privileges,  or other  rights  pursuant to which Mr.  Goodman,  Mr.
Adrian Lima or Mr. Norbert Lima or any other current Officer or Director has the
right to acquire further shares in the Corporation.

There  were no stock  options  granted  in 1999.  Options  under  the Year  1999
Employee Stock Option Program were granted in March 2000.

In March 2000, the Board of Directors  approved an employee stock option program
for all  employees  on staff as of January 31, 2000,  whereby  each  employee is
granted the right to purchase the number of shares equal to 1999 gross  earnings
(at Prime or any of its  subsidiaries)  at $1.00 per  share;  the  options  vest
immediately and expire December 31, 2002. The Company granted 105,711 options to
purchase  common  stock  and  recorded   compensation  expense  of  $109,014  in
connection  with the 1999 Employee  Stock Option  Program during the nine months
ended September 30, 2000.

In March 2000,  the Board of Directors  also  approved an employee  stock option
program for all employees employed by Prime in 2000 and on staff at December 31,
2000,  whereby  each  employee is granted  the right to  purchase  the number of
shares  equal to 2000 gross  earnings (at Prime or any of its  subsidiaries)  at
$1.50 per share;  the options are to expire  December 31, 2003,  and do not vest
until  December 31, 2000.  On December 13, 2000 the Board of Directors  repriced
the exercise  price of these options to the closing price of the common stock on
the last business day of 2000, December 29, 2000, which was $.21875. On December
31, 2000 516,102  options were  automatically  granted and vested under the 2000
Employee Stock Option Program.

In March 2000,  the Board of  Directors  also  approved a stock  option  program
whereby each outside  director was granted  20,000 options for the year 2000, to
expire  December  31, 2002,  at $1.00 per share.  The options vest on January 1,
2001 to each current  outside  director who is still a director on that date. As
of September 30, 2000, Prime incurred  additional  consulting expense of $15,450
for this stock  option  program.  On December  13,  2000 the Board of  Directors
repriced the exercise  price of these options to the closing price of the common
stock on the last business day of 2000, December 29, 2000, which was $.21875. On
December 13, 2000 the Board of  Directors  also amended the plan to include each
current  outside  director  who is still a director on  December  31,  2000.  On
January 1, 2001 60,000 options were  automatically  granted and vested under the
2000 Outside Directors Stock Option Program.

In January 2001 the Board of Directors approved an employee stock option program
for all employees  employed by Prime in 2001,  whereby each employee employed on
the date of adoption of the program is granted  options equal to their year 2000
gross earnings (at Prime or any of its  subsidiaries) at $.328125 per share; the
options are to expire  December 31, 2004,  and vest 50% on December 31, 2001 and
50% on December 31, 2002.  Each employee  employed during 2001 after the date of
adoption of the program will receive options, equal to their prorated annualized
2001 income, with the same terms and rights, but an exercise price equal to 150%
of the closing price of the shares on their first day of employment.


                              DIRECTOR COMPENSATION
                              ---------------------

The  Company's  directors  will be  reimbursed  for any  out-of-pocket  expenses
incurred  by them for  attendance  at  meetings  of the  Board of  Directors  or
committees thereof.  The Company compensates  directors $500 for each meeting of
the  Board  personally  attended  by such  director,  and $250 for each  meeting
attended telephonically.

In August,  2000, the Board of Directors  authorized  compensation to members of
the Audit Committee at the rate of $500.00 per meeting.


ITEM  11.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND MANAGEMENT

The  following  table sets forth  certain  information  about the  ownership  of
Prime's  Common  Stock as of December 31, 2000,  by (i) those  persons  known by
Prime to be the beneficial  owners of more than 5 percent of the total number of
outstanding  shares of any  class  entitled  to vote;  (ii)  each  director  and
officer;  and (iii) all  directors  and officers of Prime as a group.  The table
includes Common Stock issuable upon the exercise of options that are exercisable
within 60 days.  Except as  indicated in the  footnotes to the table,  the named
persons  have sole  voting and  investment  power with  respect to all shares of
Prime common  stock shown as  beneficially  owned by them,  subject to community
property laws where applicable.  The ownership figures in the table are based on
the books and records of Prime.

               Name of         Amount and
Title of       Beneficial      Nature of
Class          Owner           Interest    Percentages      Address
---------------------------------------------------------------------------
Common Stock                                          2975 Treat Blvd #C8
Par Value                                             Concord, CA 94518
$0.0001        Stephen Goodman(a)4,620,233    17%


Common Stock                                          409 Center Street
Par Value                                             Yuba City, CA 95991
$0.0001        Adrian Lima    (b)1,141,384     4%


Common Stock                                          409 Center Street
Par Value                                             Yuba City, CA 95991
$0.0001        Norbert Lima   (c)3,695,833    14%


Common Stock                                         155 Montgomery Street, #609
Par Value                                            San Francisco, CA 94104
$0.0001        Irving Pfeffer    2,792,187    10%


Common Stock                                          120 W 45 Street
Par Value                                             New York, NY 10036
$0.0001        David Shaw        2,677,894    10%


Common Stock                                         300 Colonial Center Parkway
Par Value      Swartz Private                        Roswell, GA 30076
$0.0001          Equity LLC   (d)1,521,000     6%


Common Stock  All Directors
Par Value         and
$0.0001        Officers as
                 a Group      (e)9,762,950    37%
--------------------------------------------------------------------------------

a)   Includes options to purchase 101,333 common shares, which are currently
     exercisable.
b)   Includes options to purchase 68,971 common shares, which are currently
     exercisable.
c)   Includes options to purchase 95,833 common shares, which are currently
     exercisable.

d)   Includes  1,403,212  currently  exercisable  warrants to purchase 1,403,212
     common  shares,  1,014,000 of which were  exercisable at December 31, 2000;
     also includes 117,788 warrants not currently exercisable.

e)   Includes options to purchase 326,137 common shares, which are currently
     exercisable.


ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS


Norbert  Lima, a Director and the  Company's  CEO, owns the real estate in which
the Company's  headquarters is located. The Company paid rent of $20,160 in 2000
and  $11,000  in 1999 on its  headquarters.  A three year  lease  agreement  was
authorized  by the  Board of  Directors  in June 2000 and was  entered  into and
executed that month.

Dennis  Hinz is a Director  of the  Company.  The  accounting  firm that he is a
partner in, Ten, Haken, Hinz, and Carlos,  prepared the Company's 1999 state and
federal  tax  returns.  The  agreed  upon fee to be charged by his firm for this
service was $2,500.  After completion of the tax returns, Mr. Hinz was appointed
by the Board of Directors to be Chairman of the Company's audit  committee,  and
his firm will not longer provide any services to the Company.


ITEM  13.  EXHIBITS,  REPORTS  ON  FORM  8-K  AND  SUPPLEMENTAL INFORMATION

(a)   INDEX  TO  EXHIBITS

4.2*     Summary  of  401(K)  plan
4.3*     Sample  Stock  certificate

*  Previously  filed

(b) No  reports  on Form 8-K were  filed  during  the last  quarter  of the year
covered by this report.

                             SHAREHOLDER INFORMATION
                             -----------------------

Form  10-KSB  Availability:
A copy of the 2000 Form 10-KSB filed with the Securities and Exchange Commission
will be  forwarded  preferably  by  email,  upon  request,  to any  shareholder.
Requests should be directed to:

Norbert  Lima,  CEO
Prime  Companies,  Inc.
409  Center  Street
Yuba  City,  CA  95991

Or  by  email  to  adminpri@primecompanies.com

Transfer  Agent  and  Registrar:

Continental  Stock  Transfer  and  Trust  Company
2  Broadway,  19th  Floor
New  York,  New  York  10004

Independent  Auditors:

Hein  +  Associates  LLP
333  City  Blvd.  West,  Suite  2100
Orange,  CA  92868

Corporate  Offices:  Prime  Companies,  Inc.
Mailing  Address:  409  Center  Street,  Yuba  City,  CA  95991
Telephone:  (530)  755-3580


                                   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.  Dated this 11th day of
April, 2001.



                                        Prime  Companies,  Inc.

                                   By:  /s/  Norbert  J.  Lima
                                        -------------------------------
                                        Norbert  J.  Lima
                                        Chief  Executive  Officer
                                       (Principal  Executive  Officer)
                                        Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed  below by the  following  persons on the above date on behalf of
the registrant and in the capacities indicated.

By:      /s/  Stephen  Goodman
         -----------------------------------
         Stephen  Goodman
         Director,  Chief  Financial  Officer


By:      /s/  William  Turley
         -------------------------------
         William  Turley
         Director

By:      /s/  Martin Sokolowski
         -------------------------------
         Martin Sokolowski
         Director

By:      /s/  Dennis Hinz
         -------------------------------
         Dennis Hinz
         Director



<PAGE>





<TABLE>
<CAPTION>

                                                                                                PAGE

<S>                                                                                            <C>
Independent Auditors' Report.....................................................................F-2

Consolidated Balance Sheet - December 31, 2000...................................................F-3

Consolidated Statements of Operations - For the Years Ended December 31, 2000 and 1999...........F-4

Consolidated Statement of Stockholders' Equity (Deficit) - For the Years Ended
     December 31, 2000 and 1999..................................................................F-5

Consolidated Statements of Cash Flows - For the years ended December 31, 2000 and 1999...........F-6

Notes to Consolidated Financial Statements.......................................................F-7
</TABLE>




<PAGE>







                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Stockholders
Prime Companies, Inc.
Yuba City, California



We have audited the accompanying  consolidated balance sheet of Prime Companies,
Inc. and  subsidiaries  as of December 31,  2000,  and the related  consolidated
statements of operations,  stockholders'  equity  (deficit),  and cash flows for
each of the  years  in the  two-year  period  ended  December  31,  2000.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Prime Companies,
Inc. and  subsidiaries at December 31, 2000, and the results of their operations
and their cash flows for each of the years in the two-year period ended December
31, 2000 in conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
the Company  will  continue as a going  concern.  As  discussed in Note 3 to the
consolidated  financial  statements,   the  Company  has  suffered  losses  from
operations  in each of the past two years and has an  accumulated  deficit as of
December 31, 2000 of $5,790,778, which raise substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these matters are
also  described  in  Note 3.  These  financial  statements  do not  include  any
adjustments  relating to the recoverability and classification of reported asset
amounts or the amounts and classifications of liabilities that might result from
the outcome of this uncertainty.


/s/ HEIN + ASSOCIATES LLP

HEIN + ASSOCIATES LLP
Certified Public Accountants

Orange, California
February 9, 2001, except for Note 15 which is as of April 10, 2001



                                      F-2
<PAGE>


                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2000





                                     ASSETS
                                     ------

CURRENT ASSETS:
     Cash and cash equivalents                                     $   264,093
     Restricted cash                                                   400,000
     Accounts receivable                                                27,863
     Inventory                                                          38,525
     Deposits and other current assets                                   8,153
                                                                   -----------
         Total current assets                                          738,634

PROPERTY AND EQUIPMENT, net                                            483,013

LICENSES, net of accumulated amortization of $70,745                   402,890
OTHER LONG TERM ASSETS                                                  17,748
                                                                   -----------
TOTAL ASSETS                                                       $ 1,642,285
                                                                   ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

CURRENT LIABILITIES:
     Accounts payable                                              $   358,879
     Accrued payroll and other                                          72,318
     Deferred revenues                                                  13,788
     Current portion of capital lease obligations                        9,070
     Liabilities in excess of assets held for sale                     699,340
                                                                   -----------
              Total current liabilities                              1,153,395
                                                                   -----------

COMMITMENTS AND CONTINGENCIES (Notes 3 and 13)                            --

STOCKHOLDERS' EQUITY:
     Preferred stock, $.0001 par value, 50,000,000 shares
         authorized, none issued and outstanding                          --
     Common stock, $.0001 par value, 100,000,000 shares
         authorized, 26,717,296, issued and outstanding                  2,672
     Additional paid-in capital                                      7,133,001
     Deferred offering costs                                          (856,005)
     Accumulated deficit                                            (5,790,778)
                                                                   -----------
              Total stockholders' equity                               488,890
                                                                   -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $ 1,642,285
                                                                   ===========



       See accompanying notes to these consolidated financial statements.

                                      F-3
<PAGE>

<TABLE>
<CAPTION>

                                 PRIME COMPANIES, INC. AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                        FOR THE YEAR ENDED
                                                                           DECEMBER  31,
                                                              ----------------------------------------
                                                                     2000                 1999
                                                              --------------------  ------------------



<S>                                                           <C>                   <C>
SALES REVENUES                                                $       492,035       $        441,663
                                                              ---------------       ----------------

COSTS AND EXPENSES:
     Cost of sales                                                    271,062                266,280
     Selling, general, and administrative expenses                  1,868,917                496,744
     Expense recognized for net liabilities assumed in
       reverse merger                                                   -                    428,194
                                                              ---------------       ----------------
         Total costs and expenses                                   2,139,979              1,191,218
                                                              ---------------       ----------------

LOSS FROM OPERATIONS                                               (1,647,944)              (749,555)
                                                              ----------------      ----------------

OTHER INCOME (EXPENSE):
     Interest income                                                   44,662                 -
     Interest expense                                                 (79,497)              (199,089)
     Other income (expense), net                                       (1,439)                -
     Loss on securities available for sale                         (1,224,000)                -
                                                              ----------------      -----------------
         Net other income (expense)                                (1,260,274)              (199,089)

NET LOSS BEFORE TAXES AND EXTRAORDINARY ITEM                       (2,908,218)              (948,644)
     Provision for taxes                                                6,880                  5,300
                                                              ---------------       ----------------

NET LOSS BEFORE EXTRAORDINARY ITEM                                 (2,915,098)              (953,944)

EXTRAORDINARY LOSS ON EXTINGUISHMENT
     OF DEBT                                                       (1,852,595)                 -
                                                              ----------------      ------------------

NET LOSS                                                      $    (4,767,693)      $       (953,944)
                                                              ================      =================

BASIC & DILUTED PER SHARE INFORMATION:

    Loss before extraordinary item                            $         (0.10)      $          (0.06)
    Extraordinary loss on extinguishment of debt                        (0.07)                 -
                                                              ----------------      -----------------
    Net loss                                                  $         (0.17)      $          (0.06)
                                                              ================      =================

WEIGHTED AVERAGE SHARES OUTSTANDING                                28,265,246             16,680,764
                                                              ===============       ================




                   See accompanying notes to these consolidated financial statements.

                                                  F-4

</TABLE>


<PAGE>
<TABLE>
<CAPTION>



                                 PRIME COMPANIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
                             FOR THE YEARS ENDED DECEMBER 31, 2000 and 1999

                                                                                         UNREALIZED GAIN
                                                                                            (LOSS) ON
                                                      COMMON STOCK           ADDITIONAL     AVAILABLE-
                                              --------------------------      PAID-IN       FOR-SALE
                                                 SHARES         AMOUNT        CAPITAL       SECURITIES
                                              -----------    -----------    -----------    -----------

<S>                                            <C>          <C>            <C>            <C>
BALANCES, January 1, 1999                       4,500,000    $       450    $    35,650    $      --

     Stock issued for services                 10,517,241          1,051        220,341           --
     Stock issued in merger transaction         6,507,742            651           (651)          --
     Stock issued in acquisitions                  57,142              6         26,904           --
     Comprehensive loss:
         Net Loss                                    --             --             --             --
         Unrealized gain on
              available-for-sale securities          --             --             --          125,000

         Total comprehensive loss                    --             --             --             --
                                              -----------    -----------    -----------    -----------
BALANCES, December 31, 1999                    21,582,125    $     2,158    $   282,244        125,000
                                              -----------    -----------    -----------    -----------

     Stock returned per settlement             (5,500,000)   $      (550)   $  (125,307)          --
     Issuance of common stock in connection
       with conversion of debt                  3,778,471            379      3,562,308           --
     Issuance of common stock, net of
       offering costs                           6,842,871            684      2,408,706           --
     Compensation expense recognized upon
       issuance of stock options                     --             --          129,614           --
     Stock issued for purchase of other
       assets                                       1,000           --            2,000           --
     Stock issued for services                     12,829              1         17,431           --
     Warrants issued in connection with
       equity line                                   --             --          856,005           --
     Comprehensive loss:
         Net Loss                                    --             --             --             --
         Reclassification adjustment on
         available for-sale securities               --             --             --         (125,000)

         Total comprehensive loss                    --             --             --             --
                                              -----------    -----------    -----------    -----------
BALANCES, December 31, 2000                    26,717,296    $     2,672    $ 7,133,001           --
                                              ===========    ===========    ===========    ===========





                                                                               TOTAL
                                                DEFERRED                    STOCKHOLDERS'
                                                OFFERING     ACCUMULATED       EQUITY      COMPREHENSIVE
                                                 COSTS        (DEFICIT)       (DEFICIT)        LOSS
                                              -----------    -----------    -----------    -----------
BALANCES, January 1, 1999                           --      $   (69,141)   $   (33,041)

     Stock issued for services                       --             --          221,392
     Stock issued in merger transaction              --             --             --
     Stock issued in acquisitions                    --             --           26,910
     Comprehensive loss:
         Net Loss                                    --         (953,944)      (953,944)   $  (953,944)
         Unrealized gain on
              available-for-sale securities          --             --          125,000        125,000
                                                                                           -----------

         Total comprehensive loss                    --             --             --      $  (828,944)
                                              -----------    -----------    -----------    -----------
BALANCES, December 31, 1999                   $      --      $(1,023,085)   $  (613,683)
                                              -----------    -----------    -----------

     Stock returned per settlement            $      --      $      --      $  (125,857)
     Issuance of common stock in connection
       with conversion of debt                       --             --        3,562,687
     Issuance of common stock, net of
       offering costs                                --             --        2,409,390
     Compensation expense recognized upon
       issuance of stock options                     --             --          129,614
     Stock issued for purchase of other
       assets                                        --             --            2,000
     Stock issued for services                       --             --           17,432
     Warrants issued in connection with
       equity line                               (856,005)          --             --
     Comprehensive loss:
         Net Loss                                    --       (4,767,693)    (4,767,693)   $(4,767,693)
         Reclassification adjustment on
         available for-sale securities               --             --         (125,000)      (125,000)
                                                                                            -----------

         Total comprehensive loss                    --             --             --      $(4,892,693)
                                              -----------    -----------    -----------    -----------
BALANCES, December 31, 2000                   $  (856,005)   $(5,790,778)   $   488,890
                                              ===========    ===========    ===========





                   See accompanying notes to these consolidated financial statements.

                                                  F-5

</TABLE>

<PAGE>
<TABLE>
<CAPTION>




                              PRIME COMPANIES, INC. AND SUBSIDIARIES

                              CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                    FOR THE YEARS ENDED
                                                                        DECEMBER 31,
                                                           ---------------------------------------
                                                                 2000                 1999
                                                           ------------------  -------------------
<S>                                                        <C>                 <C>

CASH FLOW FROM OPERATING ACTIVITIES:
     Net loss                                              $      (4,767,693)  $        (953,944)
     Adjustments to reconcile net loss to net cash
       used in operating activities:
     Depreciation and amortization                                   116,735              49,506
     Impairment on investment                                      1,224,000              -
     Interest related to beneficial conversion feature
       of note payable/convertible debenture                          40,625              -
     Compensation recognized upon issuance of stock
       and stock options                                             129,614              -
     Stock issued for services                                        17,432             221,392
     Noncash expense recognized upon reverse merger
                                                                      -                  428,193
     Loss on extinguishments of debt                               1,852,595              -
     Changes in operating assets and liabilities:
     Restricted cash                                                (400,000)             -
     Accounts receivable                                                 542             (17,247)
     Inventory                                                      (24,675)              (7,620)
     Prepaid expenses and other current assets                       23,549              (22,878)
     Deposits                                                       (17,748)              -
     Change in liabilities in excess of assets held
       for sale                                                      12,042               -
     Accounts payable                                                16,785              (10,965)
     Accrued liabilities                                             21,151              188,593
     Deferred revenues                                                13,788              -
                                                           ------------------  -----------------
         Net cash used in operating activities                    (1,741,258)           (124,970)
                                                           ------------------  -----------------

CASH FLOW FROM INVESTING ACTIVITIES:
     Purchases of property and equipment                            (208,442)            (14,744)
     Sale of property held for sale                                   -                1,074,955
                                                           -----------------   -----------------
         Net cash provided by (used in) investing
             activities                                             (208,442)          1,060,211
                                                           ------------------  -----------------

CASH FLOW FROM FINANCING ACTIVITIES:
     Proceeds from sale of stock                                   2,409,390             -
     Proceeds from notes payable                                      -                   39,248
     Principal payments on notes payable and
       long-term debt                                               (433,000)           (740,565)
                                                           ------------------  ------------------
         Net cash provided by (used in) financing
             activities                                            1,976,390            (701,317)
                                                           -----------------   ------------------

INCREASE IN CASH AND CASH EQUIVALENTS                                 26,690             233,924

CASH AND CASH EQUIVALENTS, beginning of year                         237,403              3,479
                                                           -----------------   ----------------

CASH AND CASH EQUIVALENTS, end of year                     $         264,093   $         237,403
                                                           =================   =================

SUPPLEMENTAL CASH FLOW INFORMATION:
     Cash payments for:
         Interest                                          $          38,872   $          31,979
                                                           =================   =================
         Income taxes                                      $           6,880   $           5,300
                                                           =================   =================

SUPPLEMENTAL DISCLOSURE OF NON-CASH
    TRANSACTIONS:
     Notes payable issued to acquire licenses              $       -           $         615,472
                                                           =================   =================
     Note payable issued to acquire property and
         equipment                                         $       -           $          10,076
                                                           =================   =================
     Net assets acquired in exchange for stock             $       -           $          26,910
                                                           =================   =================
     Conversion of note payable and accrued interest
         to common stock                                   $       1,669,466   $       -
                                                           =================   =================
     Issuance of common stock for intangible asset         $           2,000           -
                                                           =================   =================
     Return of 5,500,000 shares of common stock
         per settlement agreement                          $         125,857   $       -
                                                           =================   =================
     Warrants issued in connection with equity
         Agreement                                         $         856,005   $       -
                                                           =================   =================


                See accompanying notes to these consolidated financial statements.

                                                  F-6
</TABLE>


<PAGE>


                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.       ORGANIZATION AND NATURE OF OPERATIONS:
         --------------------------------------

         The  consolidated  financial  statements  include the accounts of Prime
         Companies, Inc. and its wholly owned subsidiaries  (collectively,  "the
         Company").

         On February 20, 1998,  Bert Lima (the Company's  CEO) acquired  certain
         assets of Pagers Plus,  Inc.  (Pagers  Plus),  an entity for which Bert
         Lima had  previously  served as an officer.  Pagers Plus  installed and
         serviced  mobile radio systems for its retail  customers.  The business
         combination  was accounted  for as a purchase with Bert Lima,  the sole
         proprietor  of NACC-Tel,  acquiring  outstanding  accounts  receivable,
         inventory,  and fixed  assets with a fair market value equal to assumed
         liabilities of  approximately  $95,000.  Immediately  subsequent to the
         acquisition  of Pagers  Plus,  Mr. Lima  contributed  the net assets of
         Pagers Plus to NACC-Tel,  a privately held company  operated  solely by
         Mr. Lima. As the fair market value of the assets purchased was equal to
         the   liabilities   assumed,   no  goodwill  was   recognized  in  this
         acquisition. The activities of Pagers Plus are included in the combined
         operations of the Company subsequent to the date of the acquisition

         Immediately  subsequent  to the  acquisition  of Pagers Plus,  Mr. Lima
         exchanged  69%  of  his  ownership  interest  in  NACC-Tel  with  three
         individuals  in exchange  for  services to be provided  for the further
         development of the operations.  NACC-Tel recorded  compensation expense
         of  approximately  $25,000 as fair market value of the interests in the
         year ended December 31, 1999. The fair value of the interests was based
         upon the actual  cash  contributions  made by Mr.  Lima during the year
         ended  December 31, 1998 as NACC-Tel was a privately  held company with
         only minimal revenues and operating losses.

         In January 1999 four founders and another  individual  funded  Worldnet
         Tel.com,  Inc. (Worldnet),  a Delaware  corporation,  to form the legal
         structure for the Company's further development.  In February 1999, the
         four founders of NACC-Tel  contributed  their  respective  interests in
         NACC-Tel,  a privately  held  company,  to  Worldnet  in  exchange  for
         Worldnet common stock. For financial statement purposes, the operations
         of NACC-Tel are  considered  the business of Worldnet and the financial
         statements  reflect the  historical  financial  position and results of
         operations and cash flows of NACC-Tel.

         Pursuant to a Stock Purchase Agreement (the "Agreement")  between Prime
         Companies,  Inc.  ("Prime"),  a Delaware  Corporation,  a  nonoperating
         public shell,  and  Worldnet,  Worldnet was merged into Prime through a
         merger  effective  August 11, 1999. For financial  statement  purposes,
         Worldnet was considered the acquiring company, and Worldnet has treated
         this  transaction  as an  acquisition  of Prime.  For  legal  purposes,
         however, Prime remained the surviving entity.  Therefore,  the combined
         entity retained Prime's capital structure.  Prior to the merger,  Prime
         had  6,507,742  shares  of common  stock  outstanding  held by  various
         individuals.  Pursuant to the  agreement,  Worldnet  stockholders  were
         issued  14,500,000  shares of Prime  common  stock.  As a result of the
         stock  exchange,  the former  shareholders  of Worldnet held 69% of the
         outstanding shares of common stock of Prime. At the time of the merger,
         Prime had liabilities in excess of net assets of $428,193.  This amount
         was  charged to  operations  on the date of the merger as a cost of the
         reorganization.

         The  accompanying  financial  statements  of the  Company  reflect  the
         operations  of  Worldnet  and  its  subsidiaries  and  consolidate  the
         operations of Prime and its subsidiaries  commencing on the date of the
         merger.

                                      F-7
<PAGE>

                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


          The Company's other wholly-owned subsidiaries are described below:

          Prepaid Tel.com Inc. (Prepaid), a Delaware corporation,  was formed in
          February 1999 as a wholly-owned  subsidiary.  Prepaid is a Competitive
          Local Exchange  Carrier  ("CLEC")  certified by the California  Public
          Utility Commission. Prepaid had no substantial operations during 1999.
          During 2000, Prepaid recognized revenues of approximately $15,000 from
          the sale of  prepaid  phone  service,  prepaid  telephone  cards,  and
          related services such as voice mail and long distance.

          LMDS Communications Inc. (LMDS), a Delaware corporation, was formed in
          February   1999   as   a   wholly-owned   subsidiary.    LMDS   is   a
          telecommunications  company  with  interests  in the  fixed  broadband
          wireless  sector.  LMDS had no substantial  operations  during 1999 or
          2000.

          Mid-Cal   Express,   Inc.   and  Mid-Cal   Express   Logistics,   Inc.
          (collectively,   Mid-Cal)  are  wholly-owned  subsidiaries  of  Prime.
          Mid-Cal ceased  operations in December 1998 (prior to the  acquisition
          by  Worldnet)  and is in the  process  of  liquidating  its assets and
          settling outstanding liabilities. (See Note 15).

          Zenith Technologies Inc. (Zenith), a Delaware Corporation,  was formed
          in December 1998 as a wholly-owned subsidiary of Prime Companies, Inc.
          To date, it has had no operations.

          As discussed in Note 4, during the year ended  December 31, 1999,  the
          Company purchased the assets of Olive Tree Image Engineers in exchange
          for  57,142  shares of the  Company's  common  stock and the assets of
          Marathon  Telecom in  exchange  for  517,241  shares of the  Company's
          common stock.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
         -------------------------------------------

         Principles of  Consolidation - The  consolidated  financial  statements
         include the  accounts of Prime  Companies,  Inc.  and its wholly  owned
         subsidiaries    (collectively,    "the   Company").   All   significant
         intercompany   balances  and  transactions   have  been  eliminated  in
         consolidation.

         Cash and Cash  Equivalents  - For  purposes of the  statements  of cash
         flows,  the  Company  considers  all  highly  liquid  debt  instruments
         purchased with an original  maturity of three months or less to be cash
         equivalents.

         Restricted Cash - The Company's  restricted cash balance as of December
         31, 2000 supports a letter of credit for capital equipment purchases.

         Inventory - Inventory  of  installation  equipment  and  materials  are
         stated at the lower of cost (first-in, first-out method) or market.

         Property  and  Equipment - Property and  equipment  are stated at cost.
         Depreciation  and  amortization of property and equipment is calculated
         using the straight-line method over the estimated useful lives (ranging
         from 2 to 7  years)  of the  respective  assets.  The  cost  of  normal
         maintenance  and repairs is charged to operating  expenses as incurred.
         Material   expenditures  which  increase  the  life  of  an  asset  are
         capitalized and depreciated over the estimated remaining useful life of
         the  asset.  The cost of  property  or  equipment  sold,  or  otherwise
         disposed of, and the related  accumulated  depreciation or amortization
         are removed from the accounts, and any gains or losses are reflected in
         current operations.


                                      F-8

<PAGE>


                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         Intangibles  -  Intangibles  include  the  amounts  paid  to the FCC to
         purchase licenses for Local Multipoint Distribution Services in certain
         markets. The licenses are being amortized on a straight-line basis over
         the  initial  term of the  license,  which is ten  years.  The  Company
         recognized  amortization  expense for the years ended December 31, 2000
         and 1999 of $57,951 and $30,775, respectively.

         Impairment  of  Long-Lived  and  Intangible  Assets - In the event that
         facts and circumstances indicate that the cost of long-lived assets may
         be impaired, an evaluation of recoverability would be performed.  If an
         evaluation is required,  the estimated future  undiscounted  cash flows
         associated  with the asset would be  compared  to the asset's  carrying
         amount to determine if a write-down to market value or discounted  cash
         flow value is required.

         Revenue  Recognition - Revenue is generated  from the  installation  of
         phone  systems,  paging  services,  DSL line service,  service calls to
         businesses and individuals,  prepaid local telephone  service,  prepaid
         long distance and LMDS service. Revenue generated from the installation
         of telephone systems and service calls is recognized upon completion.

         Revenue for paging services and prepaid phone services is recognized on
         a monthly basis.  Customers on the various  services the Company offers
         may  obtain  service  on a monthly,  quarterly,  semi-annual  or annual
         basis.  The  Company  records  unearned  revenue  as  a  liability  and
         recognizes the earned portion on a monthly basis.

         Set-up fees received by customers to commence  prepaid  phone  services
         are amortized over the expected service period, generally one year.

         Income  Taxes  - The  Company  accounts  for  income  taxes  under  the
         liability method which requires  recognition of deferred tax assets and
         liabilities  for the expected  future tax  consequences  of events that
         have been  included in the financial  statements or tax returns.  Under
         this method, deferred tax assets and liabilities are determined,  based
         on the  difference  between the financial  statements  and tax basis of
         assets and liabilities,  using enacted tax rates in effect for the year
         in which the differences are expected to reverse.

         Net Assets (Liabilities in excess of assets) Held for Sale - Net assets
         (liabilities  in excess of assets) held for sale include 400,000 shares
         of common stock of US Trucking, Inc., and cash of Mid-Cal Express, Inc.
         (the  Company's  inactive  trucking  subsidiary)  net  of  payables  to
         unsecured  creditors of Mid-Cal  Express Inc. The assets are pledged as
         security  for the  unsecured  creditors  and are  being  held in escrow
         pending final  settlement of the claims.  As of December 31, 2000,  the
         liabilities of Mid-Cal Express,  Inc.  exceeded the assets by $699,340.
         (See Notes 5 and 15).

         Earnings Per Share - Basic earnings per share excludes  dilution and is
         computed by dividing  income  available to common  stockholders  by the
         weighted  average number of common shares  outstanding  for the period.
         Diluted  earnings per share reflects the potential  dilution that could
         occur if  securities  or other  contracts  to issue  common  stock were
         exercised or converted into common stock or resulted in the issuance of
         common  stock that then shared in the  earnings  of the entity.  Common
         stock  equivalents  for the years ended December 31, 2000 and 1999 were
         anti-dilutive  and were therefore  excluded from the earnings per share
         computation.

         Accounting  Estimates - The  preparation  of  financial  statements  in
         conformity  with  generally  accepted  accounting  principles  requires
         management to make  estimates and  assumptions  that affect the amounts
         reported in the financial  statements and the  accompanying  notes. The
         actual results could differ from those estimates.

                                      F-9
<PAGE>

                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         The  Company's  financial   statements  are  based  upon  a  number  of
         significant  estimates  including the allowance for doubtful  accounts,
         the  estimated   lives  of  property  and  equipment,   licenses,   and
         intangibles,  and the realizability of deferred tax assets.  Due to the
         uncertainties  inherent  in  the  estimation  process,  it is at  least
         reasonably possible that these estimates will be further revised in the
         near term and such revisions could be material.

         Investments  -  The  U.S.   Trucking   stock  included  in  net  assets
         (liabilities in excess of assets) held for sale is considered available
         for sale.  These  securities are carried at fair value with  unrealized
         gains or  losses,  net of tax,  reported  as a  separate  component  of
         stockholders'    equity.   The   change   in   unrecognized   gain   on
         available-for-sale  securities  during 2000  includes  reclassification
         adjustments  for $1,224,000 of losses  recognized in operations  from a
         permanent  impairment taken against the investment due to a significant
         decrease in the market value of the shares.

         Deferred  Offering Costs - The amount  represents the fair market value
         of warrants  issued to secure equity  financing  that was in process at
         December  31,  2000.  This amount will be offset  against the  proceeds
         raised  under  the  financing   agreement  or  expensed  to  operations
         immediately if the Company is unable to secure financing.

         Stock-Based Compensation - The Company has elected to follow Accounting
         Principles  Board  Opinion  No.  25,  "Accounting  for Stock  Issued to
         Employees" (APB25) and related interpretations, including the Financial
         Accounting  Standards Board  Interpretation 44, "Accounting for Certain
         Transactions  involving Stock Compensation" which was effective July 1,
         2000, in accounting for its employee stock options.  In accordance with
         FASB  Statement  No.  123  "Accounting  For  Stock-Based  Compensation"
         (FASB123),  the Company  will  disclose the impact of adopting the fair
         value  accounting of employee  stock  options.  Transactions  in equity
         instruments  with   non-employees  for  goods  or  services  have  been
         accounted for using the fair value method prescribed by FASB123.

         Concentrations  of Credit Risk - Credit risk  represents the accounting
         loss that would be recognized at the reporting  date if  counterparties
         failed to perform as contracted. Concentrations of credit risk (whether
         on or off balance  sheet) that arise from financial  instruments  exist
         for  groups of  customers  or groups of  counterparties  when they have
         similar economic characteristics that would cause their ability to meet
         contractual obligations to be similarly effected by changes in economic
         or other  conditions.  In  accordance  with  FASB  Statement  No.  105,
         "Disclosure   of   Information   about   Financial   Instruments   with
         Off-Balance-Sheet Risk and Financial Instruments with Concentrations of
         Credit Risk," financial  instruments that subject the Company to credit
         risk are primarily accounts  receivable.  The credit risk amounts shown
         do not take into account the value of any collateral or security.

         The customers of the Company's primary operations are located primarily
         in California. At December 31, 2000 and 1999, approximately $27,863 and
         $13,800 representing 100% and 48% of trade receivables was due from two
         and four customers, respectively. No other customers accounted for more
         than 10% of the Company's  trade  receivables  at December 31, 2000 and
         1999.
                                      F-10

<PAGE>

                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


          Fair Value of Financial  Instruments - The  estimated  fair values for
          financial instruments under FASB Statement No. 107, "Disclosures about
          Fair Value of  Financial  Instruments,"  are  determined  at  discrete
          points in time based on relevant market  information.  These estimates
          involve  uncertainties  and cannot be determined with  precision.  The
          estimated fair value of cash, cash equivalents, account receivable and
          accounts  payable   approximates   their  carry  value  due  to  their
          short-term   nature.  The  estimated  fair  value  of  long-term  debt
          approximates  its carrying  value  because it carries  interest  rates
          which approximates current market rates.

          Comprehensive Income - The Company has adopted FSAS No. 130, Reporting
          Comprehensive   Income,   as  of  December  31,  1999.  SFAS  No.  130
          establishes  new rules for the reporting and display of  comprehensive
          income and its components,  however, it has no impact on the company's
          net income or stockholder's equity.

         Impact of  Recently  Issued  Standards  - In June 1998,  the  Financial
         Accounting  Standards  Board issued  Statement of Financial  Accounting
         Standards No. 133 (FASB133), "Accounting for Derivative Instruments and
         Hedging  Activities." This statement  requires that an entity recognize
         all  derivatives as assets or liabilities in the statement of financial
         position and measure those  instruments  at fair value.  This statement
         was amended by FASB 137, issued in June 1999, such that it is effective
         for the Company's financial statements for the year ending December 31,
         2001.  The Company does not believe the adoption of FASB133 will have a
         material impact on assets, liabilities or equity.

         In December 1999, the Securities and Exchange  Commission  issued Staff
         Accounting Bulletin No 101, entitled "Revenue  Recognition in Financial
         Statements."  SAB101A and SAB101B  were issued by the SEC and delay the
         required  implementation  date of SAB101  until the  fourth  quarter of
         2000. SAB 101 provides  guidance on the  recognition,  presentation and
         disclosure of revenue in the financial  statements of public companies.
         The adoption of SAB 101 did not have a material effect on the Company's
         financial position or results of operations.

         Reclassifications  -  Certain  reclassifications  have been made to the
         prior year statements to conform to the presentation as of December 31,
         2000. Such  reclassifications  had no effect on the previously reported
         net loss.

3.       BASIS OF PRESENTATION:
         ---------------------

         As shown in the  accompanying  financial  statements,  the  Company has
         reported  significant  net losses for the years ended December 31, 2000
         and 1999 of  $4,767,693  and  $953,944,  respectively  resulting  in an
         accumulated  deficit of  $5,790,778  as of  December  31,  2000.  These
         factors, among others, raise substantial doubt about the ability of the
         Company to continue as a going concern.

                                      F-11
<PAGE>

                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         During  the  later  part of 2000,  the  Company  took  steps to  obtain
         financing   including   signing  an   agreement   as  amended  with  an
         institutional  investor for up to $30 million in equity  funding.  (See
         Note 9). During 2001, the Company has signed additional agreements with
         financial  advisors  to obtain  funding  (See Note 15).  The  Company's
         ability to  continue  as a going  concern  is  dependent  on  obtaining
         additional  financing  to  fund  current  operations  and,  ultimately,
         generating  sufficient  revenues to obtain  profitable  operations.  No
         assurance  can be given  that the  Company  will be  successful  in its
         financing  efforts.   The  financial  statements  do  not  include  any
         adjustments  relating  to the  recoverability  and  classifications  of
         reported   asset  amounts  or  the  amounts  and   classifications   of
         liabilities that might result from the outcome of this uncertainty.

4.       ACQUISITIONS:
         -------------

         In September 1999, the Company acquired all of the assets of Olive Tree
         Image Engineers (a sole proprietorship)  ("Olive Tree") in exchange for
         57,142 shares of the Company's  common stock.  This stock  issuance was
         valued at the  average of the closing bid and ask prices for three days
         before and after the acquisition was agreed to by the Company and Olive
         Tree. The transaction was accounted for as a purchase and the resulting
         purchase  price of $26,910  was  assigned  to  property  and  equipment
         acquired.  Olive  Tree  had  no  substantial  operations  prior  to the
         acquisition by the Company.

         On March  19,  1999,  Bert  Lima,  as an  individual  and  co-owner  of
         NACC-Tel,  a privately  held  company,  acquired the assets of Marathon
         Telecom  ("Marathon")  from an  unrelated  party  in  exchange  for the
         assumption of certain liabilities  totaling  approximately  $40,000 and
         consideration paid to the seller of $5,500. On April 1, 1999, Bert Lima
         assigned to his son,  Adrian Lima who was an employee of NACC-Tel,  his
         100% ownership of Marathon for no consideration.

         During the period  between  March 19, 1999  through  October 15,  1999,
         Adrian operated Marathon  independently of Bert Lima and NACC-Tel,  and
         generated  revenues of  approximately  $99,000  (unaudited) and had net
         income of approximately $28,000 (unaudited).  Financial information for
         Marathon prior to March 19, 1999 is not available.

         On October 15, 1999,  the Company  acquired the assets of Marathon from
         Adrian Lima, a sole  proprietor,  in exchange for 517,241 shares of the
         Company's  common stock.  This stock issuance was valued at the average
         of the  closing bid and ask prices for three days before and after date
         the  acquisition  was  agreed  to by  the  Company  and  Marathon.  The
         transaction  was accounted for as a  reorganization  of entities  under
         common control due to the family  relationship  between Bert and Adrian
         Lima,  their collective  ownership of approximately  25% of the Company
         and  their   positions  as  officers  and  directors  of  the  Company.
         Accordingly,  the  inclusion  of  the  operations  of  Marathon  in the
         consolidated   operations   commenced  on  the  acquisition  date.  The
         resulting  purchase  price was $196,552  which  consists of $188,602 of
         stock based  compensation for the 517,241 shares of common stock issued
         to Adrian Lima and $7,950 in fixed assets.

         On October 27, 2000 the Company entered into a binding Letter of Intent
         to acquire  New Wave  Networks  LLC  (NWN")  and paid a  non-refundable
         deposit (subject to certain  conditions) of $10,000.  NWN's sole assets
         are five LMDS licenses in Missouri.  A definitive  Agreement was signed
         on December 29,  2000,  and the  transaction  is to close no later than
         April 20, 2001. The  consideration for the purchase is 1,500,000 shares
         of the Company's  common stock to be registered  with the SEC on a form
         SB-2 and  $600,000 in cash.  The  transaction  is  contingent  upon the
         Company  having  access  to funds  from  the  Investment  Agreement  as
         described in the Note 9 and the  completion  of required  audits of the
         financial statements of NWN. (See Note 15).


5.       NET ASSETS (LIABILITIES IN EXCESS OF ASSETS) HELD FOR SALE:
         ----------------------------------------------------------

         Mid-Cal  Express,  Inc.,  ceased  operations  in December  1998 and its
         assets have been  pledged as security for the  settlement  of claims by
         its unsecured  creditors.  The assets were held by the Credit  Managers
         Association   of  Southern   California  who  was  in  the  process  of
         liquidating  the assets and making final  distribution to the creditors
         (See Note 15).  The net assets  (liabilities  in excess of assets) held
         for sale consisted of the following as of December 31, 2000:


               Assets:
                   Cash in escrow                           $          1,199
                   Investments                                        76,000
                                                            ----------------
                        Total Assets                                  77,199
               Unsecured Creditors                                  (776,539)
                                                            -----------------
               Net Assets(Liabilities) of Discontinued
                   Operations                               $       (699,340)
                                                            =================


                                      F-12
<PAGE>

                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6.       PROPERTY AND EQUIPMENT:
         -----------------------

         Property and equipment at December 31, 2000 consisted of the following:
<TABLE>
<CAPTION>

                                                                                ESTIMATED
                                                                               USEFUL LIVES
                                                                       -----------------------------

           <S>                                  <C>                      <C>
           Office furniture and equipment         $         65,325             2 to 5 years
           Vehicles                                         48,360             3 to 4 years
           Paging terminals                                 71,764               7 years
           Site Improvements                                18,651       Lower of 5 years or the
                                                                                lease life
           DSL Equipment                                    20,428               3 years
           LMDS Equipment                                  347,526               7 years
                                                  ----------------
                 Total Property and equipment              572,054
           Less accumulated depreciation and
                amortization                               (89,041)
                                                  -----------------
                                                  $        483,013
</TABLE>

         Depreciation and amortization  expense for the years ended December 31,
         2000 and 1999, was $58,784 and $18,731, respectively.

         In  November  1999,  the  Company  sold a parcel  of land  including  a
         building  previously  owned by Prime  Companies  (formerly  the  public
         shell) for net proceeds of $1,074,955 realizing no gain or loss.


7.       NOTES PAYABLE TO RELATED PARTIES:
         ---------------------------------

         In connection  with the merger between Prime and Worldnet,  the Company
         assumed  $1,395,216  of notes  payable and accrued  interest to related
         parties. All loans were repaid during the year ended December 31, 2000.

         Interest  expense to related  parties  was  $24,546 and $60,954 for the
         years ended December 31, 2000 and 1999, respectively.

         In February 2000,  notes in the principal  amount of  $1,240,216,  plus
         accrued  interest of $66,971  were settled by the issuance of 2,904,860
         shares of the Company's common stock. The debt was converted at a price
         per share less than market  value which  created a  $1,053,012  loss on
         debt extinguishment.

                                      F-13
<PAGE>

                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8.       CONVERTIBLE NOTES PAYABLE:
         --------------------------

         During  1999,  the  Company  issued   unsecured  notes  payable  to  an
         individual  for cash to acquire  LMDS  licenses.  At December 31, 1999,
         principal  of  $496,220  and accrued  interest of $111,280  were due on
         these  notes.  During the year ended  December  31,  2000,  the Company
         settled notes in the principal  amount of $396,220 and accrued interest
         in the amount of $108,781  with cash  payments of $252,500 and issuance
         of 561,111 shares of the Company's common stock. The debt was converted
         at a price per share less than market  value  which  created a $799,583
         loss on debt extinguishment.

         In September 2000, the Company converted the remaining note with a face
         value of $100,000 and accrued interest of $9,778 into 312,500 shares of
         the Company's common stock. The Company recognized  additional interest
         expense  of  $40,625  upon  the  conversion  of  the  note  due  to the
         beneficial conversion feature of the note.

9.       STOCKHOLDERS EQUITY:
         --------------------

         During  the year  ended  December  31,  2000,  the  Board of  Directors
         approved  increasing the authorized  common and preferred  stock to 100
         million  and 50  million,  respectively.  The  increase  in common  and
         approved  stock was approved and ratified at the Annual  Meeting of the
         Shareholders held on December 13, 2000.

         Common Stock - In March 2000, the Company completed a private placement
         offering of its common stock and sold 6,569,444 shares for $2.4 million
         (net of commissions of approximately  $547,000). In connection with the
         private  placement,   the  Company  issued  273,427  common  shares  as
         commission.

         In April 2000, the Company  issued 1,000 shares in connection  with the
         purchase of the domain name, NTCOMM.

         In June 2000, the Company issued 12,829 shares for consulting  services
         at $1.359 per share (the market  closing  price on June  30,2000).  The
         total expense recorded by the Company for this transaction was $17,432.

         Warrants - On October 3, 2000,  the Company  entered into an investment
         agreement  with Swartz  Private  Equity,  LLC (Swartz).  Subject to the
         fulfillment of certain  conditions,  the agreements provide the Company
         with an equity financing facility through which the Company may sell up
         to a total of  $30,000,000  worth of shares of common  stock,  at their
         option,  periodically over a 36 month period.  The Company's ability to
         request a put advance  under the  facility is subject to the  continued
         effectiveness  of  a  resale  registration  statement  filed  with  the
         Securities  and Exchange  Commission  to cover the shares to be issued.
         The number of shares the Company may sell to Swartz varies depending on
         certain factors, including the market price of the common stock and the
         then current ownership  interest of Swartz.  The amount of common stock
         to be sold at each put will not be more than  $2,000,000  or 15,000,000
         million  shares at the  market  price for such put,  minus  $0.075  per
         share,  or  91%  of  the  market  price  for a put  advance  less  than
         $1,000,000 (See Note 15).

         On September 9, 2000, the Company  granted Swartz  warrants to purchase
         1,521,000  shares of common stock with an initial  exercise price equal
         to $.687.  The  warrants  vest in 3 stages:  507,000  at the end of the
         document review period (which occurred on October 3, 2000), the signing
         of the  Investment  Agreement  on  October  3, 2000 and  507,000 on the
         earlier of an effective  registration  statement as declared by the SEC
         or  March  8,  2001.  The  exercise   price  of  the  warrants   resets
         periodically.  The original  exercise  price for the warrants  reset to
         $0.531  (the  lowest  closing  price  for the five days  preceding  the
         signing of the Investment Agreement on October 3, 2000). If the date of
         exercise  by the  Investor  is more  than 6  months  after  the date of
         issuance,  the  exercise  price  will be reset to the lesser of (1) the
         exercise  price in effect at the date of  exercise,  or (2) the  lowest
         reset price  determined on any 6-month  anniversary  date. The warrants
         expire 5 years  from the date of the  Investment  Agreement  in October
         2005. (See Note 15).

                                      F-14
<PAGE>


                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         The Company used the Black  Scholes  valuation  model to determine  the
         fair value of the  warrants,  including  the fair value of the exercise
         price reset feature, at December 31, 2000 using a volatility of 165.5%,
         a three  year  period  of  expiration,  and a risk free  interest  rate
         ranging  from  5.06%  to  5.95%.  The  Company  recorded   $856,005  in
         connection  with the  warrants  which  was  capitalized  as a  deferred
         offering  cost.   The  deferred   offering  cost  is  classified  as  a
         contra-equity  account as this  amount  represents  a  non-cash  equity
         transaction.

10       STOCK OPTIONS PLANS:
         --------------------

         In March 2000, the Company  adopted the 1999 Employee Stock Option Plan
         (the 1999 Plan). Under the 1999 Plan,  employees on the Company payroll
         as of January 31, 2000 are  granted  options to purchase  the number of
         shares of common stock equal to their  respective  1999 gross  earnings
         (at Prime or any of its  subsidiaries)  at an  exercise  price equal to
         $1.00 per share.  The options vest  immediately and expire December 31,
         2002.  On March 16,  2000,  under the 1999 Plan,  the  Company  granted
         105,711 options to purchase  common stock to all employees  employed by
         the  Company  on January  31,  2000.  The  options  were  granted at an
         exercise  price of $1.00  which was less than the  market  value of the
         stock on the  date of grant  and the  Company  recognized  compensation
         expense $109,014 in accordance with APB25 for services provided.

         Also in March 2000, the Company  adopted the 2000 Employee Stock Option
         Plan  (the  2000  Plan).  Under the 2000  Plan,  employees  on staff on
         December  31,  2000 are  entitled to receive  options to  purchase  the
         number of shares  equal to their  respective  2000 gross  earnings  (at
         Prime or any of its  subsidiaries)  at an exercise price equal to $0.22
         per share. On December 29, 2000, the Company issued options to purchase
         516,102  shares of common  stock with an  exercise  price  equal to the
         market  price on the date of grant.  The options vest  immediately  and
         expire December 31, 2003.

         In March 2000, the Company granted 20,000 shares to each of its outside
         Directors for services on the Board of Directors  during the year ended
         December  31, 2000.  The options  were  granted with an exercise  price
         equal to $1.00 which was less than the market value of the stock on the
         date of grant. The Company  recognized as compensation  expense $20,600
         for these  services.  The options vest on January 1, 2001 and expire in
         2002.  In December  2000,  the Board of Directors  reduced the exercise
         price of the options granted to outside  Directors from $1.00 per share
         to $0.22 per share which equaled the market price on December 29, 2000.
         As the  Company  has  adopted  FIN 44,  as  disclosed  in Note 2,  this
         reduction of the exercise price of the stock options granted to outside
         Directors in March 2000,  results in the  accounting for the options as
         variable from the date of the  modification to the date the options are
         exercised,  forfeited, or expire unexercised.  The Company will measure
         compensation  at various  dates until the options have been  exercised,
         forfeited, or expire unexercised.

         In December  2000, the Board of Directors  granted  options to purchase
         20,000 shares of common stock with an exercise  price of $.22 per share
         to each of two  Directors  accepted to the Board.  The options  have an
         exercise price equal to the market price on the date of grant,  vest on
         January 1, 2001 and expire in December 2002.


                                      F-15
<PAGE>

                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The  following  table sets forth the activity  for all options  granted
         during the year ended  December  31,  2000.  No options  were  granted,
         exercised, or canceled during 1999.

                                     NUMBER OF SHARES        AVERAGE EXERCISE
                                                              PRICE PER SHARE
                                     ------------------    --------------------

         Balance, December 31, 1999        2,555,209       $              2.05

         Granted                             721,813                       .33
         Expired                          (2,555,209)                     2.05
         Canceled/Forfeited                  (40,000)                      .22
                                     ----------------      -------------------

         Balance, December 31, 2000          681,813       $               .34
                                     ===============       ===================

         At December  31,  2000,  the  Company  has options to purchase  105,711
         shares of common stock exercisable at the price of $1.00 and options to
         purchase  516,102  shares of common stock  exercisable  at the price of
         $.22. The remaining options become exercisable in 2001.

         If not previously  exercised,  canceled or forfeited,  the  outstanding
         options will expire as follows:


                                          NUMBER OF SHARES   AVERAGE EXERCISE
            PERIOD ENDED DECEMBER 31,                         PRICE PER SHARE

                                         ----------------    ----------------
            2002                                  165,711    $            .72
            2003                                  516,102                 .22
                                         ----------------    ----------------

         Balance, December 31, 2000               681,813    $            .34
                                         ================    ================


         As  noted  in Note 2,  the  Company  has not  adopted  the  fair  value
         accounting  prescribed by FASB123 for employees.  Had compensation cost
         for stock options issued to employees been determined based on the fair
         value at grant date for  options  awarded in 2000  consistent  with the
         provisions  for FASB123,  the Company's net loss and net loss per share
         would have been adjusted to the proforma amounts indicated below:

                                                             YEAR ENDED
                                                         DECEMBER 31, 2000
                                                         -----------------


         Net Loss                                        $     (4,915,715)
                                                         =================

         Basic and diluted net loss per common share     $          (.17)
                                                         =================

         The fair value of each option was  estimated on the date of grant using
         the Black-Scholes option-pricing model using the following assumptions:
         a risk-free  interest rates ranging from 6.49% to 5.06%,  expected life
         of two to three years, dividend yield of 0%, and expected volatility of
         165.5%. The  weighted-average  fair value of the options granted during
         year ended December 31, 2000 was $0.24.

                                      F-16

<PAGE>

                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



11.      INCOME TAXES:
         -------------

         Income  tax  expense  for the  indicated  periods is  comprised  of the
         following:
                                            For the Years Ended
                                               December 31,
                                         2000                  1999
                                 ---------------------  -------------------

        Current
                  Federal        $        -             $        -
                  State                     6,880                  5,300
                                 ----------------       ----------------
                                 $          6,880       $          5,300
                                 ================       ================

        Deferred
                  Federal                 -                      -
                  State                   -                      -
                                 ----------------       ----------------
                                 $        -             $        -
                                 ================       =================

         The actual  income tax expense  differs  from the  expected tax expense
         (benefit)as  computed by applying the U.S. Federal corporate income tax
         rate of 34% for each period as follows:

        <TABLE>
        <CAPTION>

                                                            For the years ended
                                                               December 31,
                                                         2000                  1999
                                                 ---------------------  -----------------
       <S>                                       <C>                    <C>
       Amount of expected tax benefit            $     (1,618,740)      $       (250,580)
       Non-deductible expenses                            645,928                150,802
       State taxes, net                                     4,541                  3,498
       Change in beginning balance of valuation
          allowance                                       975,151                101,580
                                                 ----------------       ----------------
                                                 $          6,880       $          5,300
                                                 ================       ================
       </TABLE>

          The components of the net deferred tax asset and liability  recognized
          are as follows:

                                                                 DECEMBER 31,
                                                                     2000
                                                              ----------------

       Current deferred tax assets (liabilities)
          Accrued vacation                                              6,542
          APB 25 compensation expense                                  51,431
          Deferred revenue                                              5,471
          Other accrued liabilities                                     4,838
                                                              ---------------
          Total current deferred tax assets (liabilities)              68,282
          Valuation allowance                                         (68,282)
                                                              ---------------
       Net current deferred tax assets (liabilities)                  -
                                                              ===============

       Long-term deferred tax assets (liabilities):
          Unrealized loss on investment                               485,684
          Intangible asset                                             14,066
          Net operating loss carry-forwards                         3,729,005
                                                              ---------------
          Total long-term deferred tax assets (liabilities)         4,228,755
       Valuation allowance                                         (4,228,755)
                                                              ---------------
       Net long-term deferred tax asset (liability)                   -
                                                              ===============

                                      F-17
<PAGE>


                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         The Company will continue to assess the  realizability  of the deferred
         tax assets in future  periods.  The  valuation  allowance  increased by
         $1,004,810  during the year ended  December  31, 2000 and  decreased by
         $21,133 during the year ended December 31, 1999.

         As of  December  31,  2000,  the  Company  has  available  federal  net
         operating  loss carry  forwards for income tax purposes of  $9,217,787,
         which expire  through 2020.  The Company has state net  operating  loss
         carry  forwards of  $6,730,287,  which expire  through 2010. Due to the
         change in control of Prime,  the  benefit of the net  operating  losses
         generated by Prime prior to the acquisition by Worldnet will be limited
         by certain consolidated return filing regulations and limitations under
         Section 382. This limitation  would prevent the use of  pre-acquisition
         net operating  losses  against the activities of Worldnet or any of its
         subsidiaries.

12.      EMPLOYEE DEFINED CONTRIBUTION PLAN:
         -----------------------------------

         Effective  January 1, 1998,  the Company  adopted a 401K Profit Sharing
         Plan (the "Plan") covering all employees. To be eligible to participate
         in the Plan,  employees must be age 21 and must complete at least 83.33
         hours of service per month for at least 6 months.  Contributions to the
         Plan are invested at the direction of the participant. The Company made
         matching  contributions  in the amount of $8,319 to the Plan during the
         year ended  December 31, 2000. No  contributions  were made to the plan
         during the year ended December 31, 1999.

13.      COMMITMENTS AND CONTINGENCIES:
         ------------------------------

         Leases: - The Company leases  operating  facilities and equipment under
         operating  leases which expire at various  dates  through  December 31,
         2005.  Facility  leases  provide  for  payment  of real  estate  taxes,
         insurance,  and maintenance  expenses by the Company. In addition,  the
         Yuba City facility lease is held by Mr. Bert Lima, President and CEO of
         the Company.

                 Year ending December 31,
                          2001                         $         87,060
                          2002                                   87,069
                          2003                                   64,325
                          2004                                   38,298
                          2005                                   28,945
                       After 2005                                 2,206
                                                       ----------------
                                                       $        307,903
                                                       ================

         Employment Contracts
         --------------------

         In September 2000, the Company executed employment agreements with both
         the President/CEO and CFO. The contracts are effective retroactively to
         January 1, 2000 for a period of three  years  with an annual  salary of
         $100,000 for each officer.  The contracts extend on an annual basis and
         may be cancelled by either party with 3 months written  notice.  A nine
         month salary severance  package is included in the contracts should the
         officers be terminated.

         Purchase commitments:
         ---------------------

         In May 2000, the Company  signed an agreement with Alcatel,  a supplier
         for LMDS. As part of the  agreement,  the Company opened a bank account
         supporting  a letter of credit with  Alcatel.  The  agreement  mandates
         terms such as shipping,  payment transfers and vendor support policies.
         There  are no  requirements  for the  Company  obligating  them to make
         future purchases.

                                      F-18
<PAGE>

                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         In January 2001, the Company signed a purchase order letter with a face
         value of $2,301,200.  The order constitutes the Company's commitment to
         purchase  equipment  through  December 31, 2001.  The Company agreed to
         purchases totaling $185,300,  $330,300, $575,250, and $1,210,350 during
         the first,  second,  third and fourth  quarters  of 2001  respectively.
         Under the  purchase  order  letter,  the  vendor  maintains  a security
         interest in the products sold to the Company.  If the Company defaults,
         the  vendor  may  make  pricing   adjustments   and/or  cancel  further
         shipments.

         Litigation and other claims
         ---------------------------

         During  the  year  ended  December  31,  2000,  the  Company   received
         correspondence   from  two  unrelated  parties   concerning   potential
         guarantees  by Prime for leases  entered into by Mid Cal Express,  Inc.
         and Country Wide Truck Service.  The amounts involved are approximately
         $227,873 and $38,000,  respectively.  Attorneys for the Company  expect
         that the resolution of these issues will be favorable to the Company.

         In September  2000,  the Company  reached a settlement  in two lawsuits
         with former  officers and directors  seeking payment of $32,000 due for
         advances  made on  behalf  of the  Company.  The  Company  had  filed a
         cross-complaint  claiming the advances were capital  contributions  and
         was seeking to recover 4,500,000 shares of its common stock held by the
         plaintiff,  and to be  reimbursed  for  legal  fees  arising  from this
         action.  The settlement with the former officers and directors provides
         for the Company to receive  5,500,000  common  shares back from the two
         former   officers   for   cancellation.   In   addition,   the  Company
         disaggregated three of its eight LMDS licenses and assigned one-half of
         three  licenses,  with a total  net  book  value  of  $125,857  (net of
         accumulated amortization),  to an entity to be designated by the former
         officers.  Due to the  related  party  nature of the  transaction,  the
         Company  recorded the settlement  based on its historical  cost because
         recording the  transaction at the fair market value of the shares would
         have resulted in a material gain between related parties.

         The  Company is a  defendant  in a lawsuit  brought  by a  creditor  of
         Mid-Cal Express Inc., a wholly-owned subsidiary of the Company, seeking
         payment of approximately  $100,000,  including legal costs, owed to the
         creditor by Mid-Cal. In the opinion of counsel representing the Company
         in this  matter,  the  Company  is not  liable for any of the causes of
         action set forth in the complaint.

                                      F-19

<PAGE>

                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



14.      SEGMENT REPORTING:
         ------------------

         The Company  has  identified  its  segments  based upon its  geographic
         operations.  These  segments are  represented  by each of the Company's
         individual  legal  entities:  Prime  Companies,   Inc.(Prime),  Prepaid
         Tel.com    Inc.(Prepaid),    Nacc-Tel    Corp.(Nacc-Tel),    and   LMDS
         Communications,  Inc.(LMDS). Segment operations are measured consistent
         with  accounting   policies  used  in  these   consolidated   financial
         statements. Segment information is as follows:
<TABLE>
<CAPTION>

                                                          December 31, 1999

                                  Prime        Prepaid       Nacc-Tel         LMDS        Mid-cal     Elimination        Totals
                              ------------   ------------  ------------   ------------  ------------  ------------   ------------

<S>                           <C>            <C>           <C>            <C>           <C>           <C>            <C>
  Revenues                    $     -        $        537  $    441,126   $     -       $     -       $     -        $    441,663
                              ============   ============  ============   ============  ============  ============   ============

  Intersegment
     Revenues                 $     -        $     -       $     -        $     -       $     -       $     -        $     -
                              ============   ============  ============   ============  ============  ============   ============

  Interest Income             $     -        $     -       $     -        $     -       $     -       $     -        $     -
                              ============   ============  ============   ============  ============  ============   ============

  Interest Expense            $    162,257   $     -       $     36,832   $     -       $     -       $     -        $    199,089
                              ============   ============  ============   ============  ============  ============   ============

  Depreciation
     /Amortization            $     30,774   $     -       $     18,732   $     -       $     -       $     -        $     49,506
                              ============   ============  ============   ============  ============  ============   ============

  Income Tax Expense          $      5,300   $     -       $     -        $     -       $     -       $     -        $      5,300
                              ============   ============  ============   ============  ============  ============   ============

  Net Income (Loss)           $   (737,461)  $     (2,526) $   (213,957)  $     -       $     -       $     -        $   (953,944)
                              ============   ============  ============   ============  ============  ============   ============

  Segment Assets              $  5,266,138   $     (2,526) $    (49,796)  $     -       $    210,354  $(3,762,741)   $  1,661,429
                              ============   ============  ============   ============  ============  ===========    ============

  Expenditures for Segment
     Assets                   $    652,458   $     -       $     14,744   $     -       $     -       $     -        $    667,202
                              ============   ============  ============   ============  ============  ============   ============
</TABLE>

                                                                F-20

<PAGE>
<TABLE>
<CAPTION>

                                               PRIME COMPANIES, INC. AND SUBSIDIARIES

                                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                                          December 31, 2000



                                Prime          Prepaid      Nacc-Tel        LMDS         Mid-cal      Elimination        Totals
                            ------------    ------------  ------------  ------------  ------------   -------------   ------------

<S>                         <C>             <C>           <C>           <C>           <C>             <C>            <C>
 Revenues                   $     -         $     15,219  $    476,416  $        400  $     -         $     -        $    492,035
                            ============    ============  ============  ============  ============    ============   ============

 Intersegment
    Revenues                $     -         $     -       $     -       $     -       $     -         $     -        $     -
                            ============    ============  ============  ============  ============    ============   ============

 Interest Income            $     38,679    $      3,605  $      2,348  $         16  $         14    $     -        $     44,662
                            ============    ============  ============  ============  ============    ============   ============

 Interest Expense           $     73,091    $     -       $      6,406  $     -       $ -   -         $     -        $     79,497
                            ============    ============  ============  ============  ============    ============   ============

 Depreciation
    /Amortization           $     85,032    $     -       $     31,703  $     -       $     -         $     -        $    116,735
                            ============    ============  ============  ============  ============    ============   ============

 Income Tax Expense         $      6,880    $     -       $     -       $     -       $     -         $     -        $      6,880
                            ============    ============  ============  ============  ============    ============   ============

 Net Income (Loss)          $ (3,282,929)   $ (58,095)    $    (30,089) $ (156,872)   $(1,239,708)    $     -        $(4,767,693)
                            ============    ============  ============  ===========   ===========     ============   ===========

  Segment Assets            $ 6,276,840     $  71,100     $    288,374  $     7,444   $    77,199      (5,078,672)   $ 1,642,285
                            ===========     ==========    ============  ============  ============    ============   ===========

 Expenditures for Segment
    Assets                  $    182,629    $     -       $     25,813  $     -       $     -         $     -        $    208,442
                            ============    ============  ============  ============  ============    ============   ============

                                                                F-21
</TABLE>


<PAGE>

                     PRIME COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



15.     SUBSEQUENT EVENTS:
         -----------------

          In February  2001,  the  Company  signed an  agreement  for a 36-month
          equipment lease at $1,369 per month.  Also, in March 2001, the Company
          entered into another lease  agreement for a 60 month  equipment  lease
          with  monthly  lease  payments  of  $1,103  which is to be used in the
          development of the fixed broadband wireless business.

          In February 2001, the Company signed an agreement with Griffin Capital
          to obtain additional  financing.  The agreement calls for a commission
          to be paid on the closing date of any financing  transaction  equal to
          the sum of 10% of the amount of aggregate consideration. The agreement
          also  calls for the  Company to grant  warrants  to  purchase  100,000
          common shares at an exercise price equal to $1.00 per share per $10.00
          of total consideration in the financing transaction. The warrants vest
          on the  effective  date of a  financing  transaction  arranged  by the
          financial  advisor.  The  warrants  expire on the  earlier of: (1) two
          years  after  the date of  termination  or  expiration  of the  letter
          agreement  unless  a  financing  transaction  has  occurred,  (2)  180
          calendar days after a change of control,  (3) the third anniversary of
          the  date  that  the  Company  commences  trading  on a  public  stock
          exchange.

         In February  2001,  the Company  submitted an application to the United
         States  Department of Agriculture  Rural  Utilities  Service for a $1.5
         million  broadband loan. The loan application is currently under review
         by the USDA.

         In March 2001, the Company signed a  non-exclusive  Letter of Agreement
         to obtain financing of approximately $1 million with Goodbody. Upon the
         closing of the  agreement,  the Company is to pay a 9% fee of the total
         financing  arranged,  of which  5% is in cash  and 4% is in  restricted
         shares of common stock with  piggyback  registration  rights.  For each
         $500,000 of financing  arranged by the financing  company,  the Company
         will grant a five year warrant to purchase  50,000  common shares at an
         exercise  price of 1.15  times the lowest  close  price (for the 3 days
         preceding  and  following  the grant of the  warrants).  The  number of
         warrants granted will be prorated for uneven amounts.

         On March 13, 2001, the Company opened a Private Placement Offering with
         a minimum  of 20 units up to a maximum  of 1,000  units  with each unit
         consisting of 5,000 shares of Series A Convertible Callable, Preferred,
         Non-Voting  Stock at a purchase  price of $5,000 per unit.  The Company
         will pay 20% per unit  purchased  as a  commission  for a  maximum  net
         proceeds to the Company of $3,980,000.  The units are  convertible  one
         year from the purchase date into common shares at a 25% discount of the
         closing  market price on the date  converted.  The Company may call the
         conversion  of the shares  thirteen  months after the initial  purchase
         date by the investor.  The Private  Placement  Offering is scheduled to
         close the earlier of the sale of all 1,000 units or on March 31,  2002,
         but may be terminated  earlier or extended an additional thirty days by
         the  Company.  If the minimum sale of 20 units is not sold on or before
         sixty days after the date of the offering,  the offering will terminate
         on that date. The proceeds from the offering will be used for corporate
         capital requirements and other corporate purposes.

         On March 15, 2001, the Company  amended the  investment  agreement with
         Swartz to include an additional  grant of 152,100  warrants to purchase
         common stock, at an initial  exercise price of $0.1875.  The additional
         warrants vest  immediately,  but are not  exercisable if on the date of
         exercise,  Swartz's  equity interest would equal or exceed 4.99% of the
         number of common shares outstanding.

         On March 29, 2001 Mid-Cal filed for  protection and  liquidation  under
         Chapter 7 of the United States Bankruptcy Act.

         In March 2001,  the Company's  attorneys  reached an agreement with the
         plaintiffs  to dismiss  the  lawsuit  brought by a creditor  of Mid-Cal
         Express Inc with no consideration to be paid by the Company.

                                      F-22