PRIME COMPANIES INC, SB-2, 2000-11-17

PRIME COMPANIES INC
SB-2, 2000-11-17
RADIOTELEPHONE COMMUNICATIONS

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As filed with the Securities and Exchange Commission on November 17, 2000
Registration No.

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM SB-2
REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

PRIME COMPANIES, INC.
(Name of Small Business Issuer in Its Charter)

Delaware 4812 52-2031531
---------------------------- --------------------------- ------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification
Number)

409 Center Street
Yuba City, California 95991
(530) 755-3580
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)

Norbert J. Lima, Chief Executive Officer
Prime Companies, Inc.
409 Center Street
Yuba City, California 95991
(530) 755-3580
(Name, Address and Telephone Number of Agent for Service)

Copies to:

Irving Pfeffer, Esq.
Pfeffer & Williams, PC
155 Montgomery Street, Suite 609
San Francisco, CA 94104
(415) 296-7272
(415) 296-8780 - Facsimile

Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this registration statement.

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_| _______________

If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. |x|

If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |_| ___________

If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|

CALCULATION OF REGISTRATION FEE

Proposed
Maximum Proposed
Offering Maximum
Title of Each Class of Amount to be Price Per Aggregate Amount of
Securities to be Registered Registered Unit Offering Price Registration Fee
---------------------------- ------------ --------- -------------- ----------

<S> <C> <C> <C> <C>
Common stock 23,903,982 $0.375(1) $ 8,963,993(1) $ 2,492
Common stock(2) 1,521,000 $0.531(2) $ 807,651 $ 225
---------- --------- -------------- ----------
Total Registration Fee 25,424,982 $ 9,771,644 $ 2,717
========== ==========

<FN>

(1) Based upon the closing price of Prime Companies, Inc. common stock as
reported on the OTC Bulletin Board on November 14, 2000, pursuant to Rule
457(c) of the Securities Act of 1933.

(2) Issuable upon the exercise of the Commitment Warrant issued to Swartz on
September 8, 2000. The initial exercise price of the warrants is $0.531 per
share.
</FN>

</TABLE>

The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

<PAGE>

PROSPECTUS

Prime Companies, Inc. Common Stock

------------------------------------

This prospectus relates to the resale by the selling stockholders of up to
8,903,982 shares of common stock. The selling stockholders may sell the stock
from time to time in the over-the-counter market at the prevailing market price
or in negotiated transactions. Of the shares offered,

o 7,403,982 shares are presently outstanding,
o 1,500,000 shares are pending issuance per an Agreement to acquire New Wave
Networks LLC
o 1,521,000 shares under a Commitment Warrant issued to Swartz on September
8, 2000, as the consideration to enter into the Investment Agreement dated
October 3, 2000. We will receive the proceeds from the sale of the shares
to Swartz
o up to 15,000,000 shares under the Investment Agreement entered into with
Swartz on October 3, 2000. We will receive the proceeds from the sale of
the shares to Swartz.

We will receive no proceeds from the sale of the shares by the selling
stockholders.

Our common stock is quoted on the OTC Bulletin Board under the symbol PRMC.
On October 31, 2000, the closing price of the common stock on the Over the
Counter Bulletin Board was $0.3125 per share.

Investing in the common stock involves a high degree of risk. You should
invest in the common stock only if you can afford to lose your entire
investment. See "Risk Factors" beginning on page 9 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The date of this prospectus is November 17, 2000

Please read this prospectus carefully. It describes our company, finances,
products and services. Federal and state securities laws require that we include
in this prospectus all the important information that you will need to make an
investment decision.

You should rely only on the information contained or incorporated by
reference in this prospectus to make your investment decision. We have not
authorized anyone to provide you with different information. The selling
stockholders are not offering these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front page of this
prospectus.

<PAGE>

The following table of contents has been designed to help you find
important information contained in this prospectus. We encourage you to read the
entire prospectus.

Table of Contents

Page Page
---- ----

Prospectus Summary................. 4 Management....................... 20
Summary Financial Data............. 8 Executive Compensation........... 51
Risk Factors....................... 9 Principal Stockholders........... 23
Dividend Policy.................... 14 Investment Agreement............. 5
Management's Discussion Legal Matters.................... 19
and Analysis of Experts.......................... 24
Financial Condition and Where You Can Find
Results of Operations........... 43 More Information................ 25
Business........................... 27 Index to Financial Statements.... F-1
Selling Stockholders............... 14
Plan of Distribution............... 19
------------------------------------

In this prospectus, we refer to Prime Companies, Inc. as we or Prime. We
refer to our subsidiary LMDS Communications Inc. as LMDS, Mid-Cal Express, Inc.
as Mid-Cal, Mid-Cal Express Logistics, Inc. as Mid-Cal Logistics, NACC-Tel Corp.
as NACC, Prepaid Tel.com Inc. as Prepaid, WNTC Holdings Inc. as WNTC, WorldNet
Tel.Com Inc. as WorldNet, Zenith Technology, Inc. as Zenith, and Swartz Private
Equity, LLC as Swartz.

Our principal executive offices are located at 409 Center Street, Yuba
City, CA 95991 and our telephone number is (530) 755-3580.

Some of the statements contained in this prospectus, including statements
under "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," are
forward-looking and may involve a number of risks and uncertainties. Actual
results and future events may differ significantly based upon a number of
factors, including:

o our significant historical losses and the expectation of
continuing losses;

o rapid technological change in the telecommunications industry;

o our reliance on key strategic relationships and accounts;

o the impact of competitive products and services and pricing; and

o uncertain protection of our intellectual property.

3
<PAGE>
Prospectus Summary

This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before investing in the common stock. You should read the entire
prospectus carefully, including the "Risk Factors" section.

Our Business

We operate our company as Prime Companies, Inc. with three operating
subsidiaries organized under one holding company. An interconnect telephone and
paging business owned by one of the Company's founders served as the basis for
entry into the telecommunications industry. LMDS service is the Company's
primary focus and will serve as our core business. (LMDS stands for Local
Multipoint Distribution Service, which is a new type of stationary broadband
technology, designed for a mass subscriber marketplace and is based on
millimeter microwave frequencies of 28 GHz to 31 GHz.)

LMDS Communications, Inc. is the operating subsidiary company to conduct the
business of the Company that is regulated by the federal government. LMDS
Communications, Inc. was formed in 1999 to participate in the Federal
Communications Commission re-auction of LMDS spectrum. A total of 8 BTA
(Business Trading Areas) contiguous corridor licenses covering northwestern
Pennsylvania and southwestern New York State were purchased at the auction.

Field trials of LMDS technology have been successfully conducted and the product
has been deployed in New Castle, PA. The Company has partnered with Alcatel for
the LMDS equipment over the next 15 months. 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. The Company is
currently the largest customer of Alcatel for their LMDS equipment in the United
States.

The Company currently provides telecommunications services to both commercial
and consumer customers throughout the US, with a significant presence in the
California market. Current revenue generating services offered include: Prepaid
Telecommunications Services; Interconnect Service; Wireless DSL; Paging and
Voicemail services.
4
<PAGE>

The ability for the Company to provide Wireless DSL is a result of our
partnering with RC Networks, Inc. The partnering allows us to deploy DSL access
concentrators in conjunction with wireless DSL and LMDS. The DSL application
will be deployed by NACC-Tel Corp and the LMDS 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 DSL-driven, high-speed Internet
access products for the multi-tenant unit (MTU) and hospitality markets.

The Company operates as a CLEC (Competitive Local Exchange Carrier) in
California, Pennsylvania and New York State. Operating as a CLEC allows the
Company to take advantage of the provisions of the Telecommunications Act of
1996, where the RBOC's (Regional Bell Operating Companies) were ordered to allow
CLECs access to their networks at "wholesale" prices.

INVESTMENT AGREEMENT
--------------------

OVERVIEW. On October 3, 2000, we entered into an investment agreement with
Swartz Private Equity, LLC. The Swartz investment agreement entitles us to issue
and sell up to $30 million of our common stock to Swartz, subject to a formula
based on average stock price and average trading volume, from time to time over
a three year period following the effective date of this registration statement.
We refer to each election by us to sell stock to Swartz as a "put." Swartz will
either sell our stock in the open market, sell our stock to other investors
through negotiated transactions or hold our stock in its own portfolio.

In addition, on September 8, 2000, we issued to Swartz a Commitment Warrant to
purchase 1,521,000 shares of our common stock, exercisable for a period of five
years from September 8, 2000, with an initial exercise price equal to $.531,
which was the lowest closing bid price for the five trading days before October
3, 2000. The warrants will have semi-annual reset provisions. The Commitment
Warrant is exercisable as to 1,014,000 shares as of October 3, 2000. The
Commitment Warrant is exercisable as to the remaining 507,000 shares on the
earlier of March 8, 2001, or the date the Registration Statement is declared
effective by the Securities and Exchange Commission.

We may issue additional warrants under the terms of the Swartz investment
agreement, as described below.

PUT RIGHT. In order to invoke a put right, we must have an effective
registration statement on file with the SEC registering the resale of the common
shares which may be issued as a consequence of the invocation of that put right.
Additionally, we must give at least ten but not more than twenty business days'
advance notice to Swartz of the date on which we intend to exercise a particular
put right, and we must indicate the number of shares of common stock we intend
to sell to Swartz. At our option, we may also designate a maximum dollar amount
of common stock (not to exceed $2 million) which we will sell to Swartz during
the put and/or a minimum purchase price per common share at which Swartz may
purchase shares during the put. The number of common shares sold to Swartz may
not exceed 15% of the aggregate daily reported trading volume, excluding block
trades of 20,000 or more shares of common stock, during a period which begins on
the business day immediately following the day we invoked the put right and ends
on and includes the day which is twenty business days after the date we invoked
the put right, and may not exceed 15% of the aggregate daily reported trading
volume, excluding block trades of 20,000 or more shares of common stock, for the
20 business days immediately preceding the day we invoked the put right.
5
<PAGE>

Swartz will pay us 91% of the market price for each share of common stock under
the put. Market price is defined as the lowest closing bid price for the common
stock during the pricing period for the applicable put, which consists of the
twenty business-day period following the date notice of the put which was
provided to Swartz. However, the market price may not be less than the
designated minimum per share price, if any, that we indicated in our notice.

WARRANTS. Within five business days after the end of each pricing period, we are
required to issue and deliver to Swartz a warrant to purchase a number of shares
of common stock equal to 10% of the common shares issued to Swartz in the
applicable put. Each warrant will be exercisable at a price which will initially
equal the market price for the applicable put. The warrants will have
semi-annual reset provisions. Each warrant will be immediately exercisable and
have a term beginning on the date of issuance and ending five years thereafter.

LIMITATIONS AND CONDITIONS PRECEDENT TO OUR PUT RIGHTS. Swartz is not required
to acquire and pay for any common shares with respect to any particular put for
which:

o we have announced or implemented a stock split or combination of our
common stock;

o we have paid a common stock dividend or set a record date for the
payment of a dividend;

o we have made a distribution of our common stock or of all or any
portion of our assets between the put notice date and the date the
particular put closes; or

o we have announced or consummated a major transaction (including a
transaction which constitutes a change of control) between the advance
put notice date and the end of the pricing period for that put.

SHORT SALES. Swartz and its affiliates are prohibited from engaging in short
sales of our common stock unless they have received a put notice and the amount
of shares involved in a short sale does not exceed the number of shares
specified in the put notice.

CANCELLATION OF PUTS. We must cancel a particular put if, between the date of
the advance put notice and the last day of the pricing period:

o we discover an undisclosed material fact relevant to Swartz's
investment decision;

o the registration statement registering resales of the common shares
becomes ineffective; or

o shares are delisted from the then primary exchange.

However, the put will remain in effect for the number of shares specified in the
put notice for the shortened pricing period which will end on the day prior to
the date of delivery of the put cancellation notice.

SHAREHOLDER APPROVAL. We may currently issue more than 20% of our outstanding
shares. If we become listed on the Nasdaq Small Cap Market or Nasdaq National
Market, then we must get shareholder approval to issue more than 20% of our
outstanding shares. Since we are currently a bulletin board company, we do not
need shareholder approval.
6
<PAGE>

TERMINATION OF INVESTMENT AGREEMENT. We may also terminate our right to initiate
further puts or terminate the Investment Agreement by providing Swartz with
notice of such intention to terminate; however, any such termination will not
affect any other rights or obligations we have concerning the Investment
Agreement or any related agreement.

RESTRICTIVE COVENANTS. During the term of the Investment Agreement and for a
period of 60 days thereafter, we are prohibited from certain transactions. These
include the issuance of any debt or equity securities in a private transaction
which are convertible or exercisable into shares of common stock and the
issuance of certain other equity securities. We are also prohibited from
entering into any private equity line type agreements similar to the Investment
Agreement without obtaining Swartz's prior written approval.

RIGHT OF FIRST REFUSAL. Swartz has a right of first refusal to purchase any
equity securities or convertible debt securities offered by us in any private
transaction which closes on or prior to 60 days after the termination of the
investment agreement.

SWARTZ'S RIGHT OF INDEMNIFICATION. We are obligated to indemnify Swartz
(including their shareholders, officers, directors, employees and agents) from
all liability and losses resulting from any misrepresentations or breaches we
made in connection with the Investment Agreement, our registration rights
agreement, other related agreements, or the registration statement.

Additional Shares We Are Registering

In 2000, through a Regulation D offering, we sold an aggregate of 6,569,444
shares of common stock to certain private investors. The resale of the common
stock by these private investors is covered by this prospectus.

In 2000 we issued 273,427 shares of common stock to certain private
investors in connection with the above Regulation D offering. The resale of the
common stock by these private investors is covered by this prospectus.

In 2000 the Company entered into a Letter of Intent to acquire New Wave
Networks LLC, another LMDS license holder, in exchange for $600,000 cash and
1,500,000 shares of common stock, which are covered by this prospectus. The
transaction is anticipated to close prior to April 20, 2001. The transaction is
contingent upon a definitive agreement, and the Company having access to funds
from the above described Investment Agreement.

7
<PAGE>

Key Facts

Total shares outstanding prior to the
offerings 26,717,296(1) as of September 30, 2000

Shares being offered for resale to
the public 25,424,982(2)

Total shares outstanding after the
offering 43,217,296(3)

Price per share to the public Market price at time of resale.

Total proceeds raised by offering None; however, we have received
proceeds from the sale of shares
that are presently outstanding, we
may receive up to $30 million from
the sale of shares to Swartz, and
we may receive up to $807,651
from the sale to Swartz of shares
issuable upon the exercise of a
Commitment Warrant issued to Swartz
pursuant to the Investment Agreement,
and we may receive additional amounts
upon the sale of shares through the
exercise of Purchase Warrants to be
periodically issued to Swartz
pursuant to the Investment Agreement.

Use of proceeds from the sale of We plan to use the proceeds
the shares to Swartz for working capital and general
corporate purposes.

OTC NASDAQ Bulletin Board Symbol PRMC

(1) Balance outstanding as of September 30, 2000.

(2) Includes

(i) 7,403,982 shares that are presently outstanding,

(ii) up to 13,636,364 shares that may be issued to Swartz pursuant to the
Investment Agreement,

(iii)up to 1,521,000 shares underlying warrants issued to Swartz in
connection with the Investment Agreement,

(iv) up to 1,363,636 shares underlying warrants that we may issue to Swartz
in the future pursuant to the Investment Agreement, and

(v) 1,500,000 shares which may be issued per a Letter of Intent to acquire
New Wave Networks LLC.

(3) Includes up to 15,000,000 shares that may be issued to Swartz pursuant to
the Investment Agreement, and 1,500,000 shares which may be issued per an
Agreement to acquire New Wave Networks LLC.

Summary Consolidated Financial Data

The information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this
prospectus.
8
<PAGE>
<TABLE>
<CAPTION>

Year Ended December 31, Nine Months Ended September 30,
------------------------------------- -------------------------------
1998 1999 1999 2000
---- ---- ---- ----

<S> <C> <C> <C> <C>
Revenue ......................... $ 209,823 $ 441,663 $ 199,860 373,563
Operating Expenses .............. 264,168 1,191,218 271,085 1,529,684
Net loss from operations ........ (54,345) (749,555) (71,225) (1,156,121)
Net Loss ........................ (69,141) (953,944) (103,083) (4,200,197)
Net (loss) per common share ..... $ (.02) $ (.06) (.01) (.14)
Weighted average number of common

shares outstanding ......... 4,500,000 16,680,764 14,500,000 29,112,248

</TABLE>
<TABLE>
<CAPTION>

At December 31, At September 30,
-------------------------------------- --------------------------------

1998 1999 1999 2000
---- ---- ---- ----
Balance Sheet Data:

<S> <C> <C> <C> <C>
Working capital........................... $ (7,542) $ (61,836) $ (196,870) $ 358,341
Total assets ............................. 93,532 1,661,429 4,464,553 1,880,223
Total long term debt ..................... 25,500 1,240,216 932,194 -0-
Shareholders' equity.(deficit) .......... 33,042 $ (613,683) 25,624 1,051,234

</TABLE>

RISK FACTORS

The Shares offered hereby are speculative, involve a high degree of risk and
should not be purchased by investors who cannot afford the loss of their entire
investment. In making an investment decision, each prospective investor should
carefully consider the following risk factors inherent in and affecting the
business of the Company and this Offering in addition to the other information
contained elsewhere in this Prospectus. When used in this Memorandum the words
or phrases "will likely result," "are expected to," "will continue, "is
anticipated," "estimate," "project," "believe" or similar expression are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Reform Act of 1993. Offerees should be aware that all
forward-looking statements are necessarily speculative and not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. Various risks and uncertainties, including, without limitation, regional
and national economic conditions, changes in levels of market interest rates,
credit risks of lending activities, and competitive and regulatory factors,
could affect the Company's financial performance and could cause the Company's
actual results for future periods to differ materially from those anticipated or
projected. The risks highlighted herein should not be assumed to be the only
things that could affect future performance of the Company.

9
<PAGE>

Offering Risk Factors

Limited Operating History. The Corporation was formed in March of 1997 under the
name Corcoran Technology Inc. On December 31, 1997 Prime Management Inc., a
California corporation, was merged into Corcoran and the corporate name was
changed to Prime Companies, Inc. The Company was in the long haul trucking
business through its subsidiary Mid-Cal Express Inc. On December 30, 1998, the
Company entered into an Agreement to sell the trucking business to US Trucking
Inc., and that transaction closed on April 14, 1999. On August 4, 1999 the
Company acquired Worldnet Tel.com, Inc., a Delaware corporation formed in
January 1999 for the purpose of entering into and competing in three sectors of
the telecommunications industry. Accordingly, the Corporation has a limited
operating history. The Company's NACC-Tel Corp. subsidiary has an 18 year
history in the telephone interconnect business; in November 1999 the Company's
Prepaid Tel.com Inc. subsidiary launched its prepaid residential telephone
service in California. The Company's LMDS Communications Inc. subsidiary
participated in an auction for Local Multipoint Distribution Service licenses
conducted by the Federal Communications Commission in April and May of 1999. The
Company was the high bidder and purchased 8 "A" block LMDS licenses, each
providing exclusive rights to 1,150 Megahertz of spectrum in these 8 markets.
The Corporation expects to initially derive the majority of its revenues from
the sale of prepaid telecommunications services, business telephone systems,
paging and voicemail services, and wireless broadband services, such as high
speed internet access, video teleconferencing, and high speed data transmission
services, to selected local markets. The ultimate success of the Corporation
will, among other things, depend on its ability to build, install and implement
the telecommunication systems necessary to provide such services. The likelihood
of the success of the Corporation 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, and the
competitive environment in which the Corporation operates.

Contingent Revenues. The Corporation's revenues will be derived primarily from
customer fees that are contingent upon certain transactions (i.e. financings,
system build-outs, acquisitions, etc.) being successfully consummated by the
Corporation, and there can be no assurance that all or the majority of the
Corporation's proposals will result in successful transactions.

Competition. The telecommunications industry is highly competitive. There are a
number of corporations offering competing technologies and services in the
Corporation's target areas. Accordingly, the Corporation competes with several
entities for a share of the market, some of which have more financial resources
and experience than the Corporation which enable them to better withstand the
impact of risks associated with a highly competitive industry and there is no
assurance that the Corporation's services will compete successfully with the
services of such competitors.

Limited Working Capital. Even if all of the shares being offered are sold, the
Corporation may seek additional financing in the future from outside sources,
either through additional sales of equity in the Corporation or by borrowing.
There can be no assurance that such financing will be available or available on
attractive terms. Moreover, the Corporation 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.

Market and Financial Forecasts. The Corporation has prepared certain forecasts
based upon the revenue and expense figures developed by the Corporation. There
can be no assurance that conclusions contained in the forecast will be attained
in the actual operation of the Corporation. Actual results of operations may
differ significantly based on certain assumptions concerning facts and events
over which the Corporation may have no control, including the ability through
marketing and management to obtain the projected revenue levels. Therefore, no
assurance can be given that the operating results forecast will be achieved or
that the assumptions on which the forecasts are based will be realized.
10
<PAGE>

Dependence on Key Personnel. The company's success is highly dependent upon the
skills of a limited number of key management personnel. To reach its business
objectives, the company will need to hire and retain qualified personnel in the
areas of installation and maintenance of telecommunications systems and
marketing. There can be no assurance that the company will be able to hire or
retain such personnel, as the company must compete with other companies and
government entities. The loss of any of the company's key personnel or the
failure to attract and retain necessary new employees could have an adverse
effect on the company's business operations.

History of Losses and Limited Operating History. The company has generated a
cumulative net loss of $5,334,909 for the period from its inception through
September 30, 2000. In order to establish profitable operations, the Company
must successfully market its systems and keep its expenditures in line with
moderate revenues. The company 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 important licenses. Accordingly, there
can be no assurance of the company's future success.

Potential Volatility of Stock Price. The stock market has experienced
significant price and volume fluctuations unrelated to the operating performance
of particular companies. In addition, the market price of the company's common
stock has been highly volatile and is likely to continue to be so. Factors such
as the company's ability to increase revenues, variations in the company's
financial results, and its ability to obtain needed financing, announcements of
technological innovations or new products by the company or its competition,
comments by securities analysts, adverse regulatory actions or decisions, any
loss of key management, results of the company's operations or those of its
competition, and changing governmental regulations may have a significant impact
on the market price of the company's common stock.

Arbitrary Pricing of the Shares. The offering price for the Shares was
arbitrarily determined by the Corporation and bears no relationship to the
Corporation's assets, earnings, book value, or any other generally accepted
criteria of value. Investors who purchase Shares will incur an immediate
dilution of their investment insofar as it relates to their Shares relative to
the resulting book value of the Corporation after the Offering.

Dilution of Ownership. The Company'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 the Company. Accordingly, in the event the
Company engages in an aggressive acquisition strategy involving a significant
number of companies, the investors in this Offering will experience significant
dilution of their ownership interest in the Company. In addition, in the event
that the Company elects to issue additional shares of Common Stock or other
securities in connection with any future financings, investors in this Offering
could experience dilution of their ownership interest in the Company.

Broad Discretion in Use of Proceeds. The Company will have broad discretion in
the application of the proceeds of this Offering. See "Use of Proceeds."

No Dividends. The Board does not intend to declare any cash dividends in the
foreseeable future, but instead intends to retain all earnings, if any, for use
in the Company's business operations.
11
<PAGE>

Industry Risk Factors

Dependence On Network Infrastructure; Establishment and Maintenance of Peering
Relationships; Capacity; Risk of System Failure. The Company's success will
depend upon its ability to implement and to 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 the Company'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." No assurance can be given that any or
all of the requisite agreements can be obtained on satisfactory terms and.
conditions.

The expansion and adaptation of the Company's network infrastructure will also
require substantial financial operational and managerial resources. There can be
no assurance that the Company will 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, or that the Company will be able
to deploy successfully any expanded and adapted network infrastructure. Failure
to maintain peering relationships or establish new ones, if necessary, would
cause the Company to incur additional operating expenditures which would have a
material adverse effect on the Company's business, financial condition and
results of operations.

Dependence On Telecommunications Carriers And Other Suppliers. The Company's
suppliers and telecommunications carriers also sell or lease services and
products to the Company's competitors, and some of these carriers are, and in
the future others may become, competitors of the Company. There can be no
assurance that the Company's suppliers and telecommunications carriers will not
enter into exclusive arrangements with the Company's competitors or otherwise
stop selling or leasing their services or products to the Company, which events
could have a material adverse effect on the Company. The Company is currently
the largest customer of Alcatel for their LMDS equipment in the United States.

Rapid Technological Change. The market for the Company's services is
characterized by rapidly changing technology, evolving industry standards,
changes in customer needs and frequent new service and product introductions.
The Company'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. Any failure on the part of the Company 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 the Company.

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

Lack of Management Control by Shareholders. The Shareholders will have a
minority equity and voting interest in the Corporation. The Shareholders will
not take part in the management or control of the Corporation's business, which
will be the sole responsibility of the Corporation's Officers and Directors.

Possible Conflicts of Interest. The transactions that are described in this
Prospectus involve potential conflicts of interest. SEE "MANAGEMENT
RELATIONSHIPS AND TRANSACTIONS."
12
<PAGE>

Use of Proceeds

We will not receive any proceeds from the sale of the shares by the selling
securityholders. However, we have received proceeds from the sale of shares that
are presently outstanding, we will receive up to $30 million from Swartz upon
Swartz's purchase of the shares from us and we may receive additional proceeds
from the sale to Swartz of shares issuable upon the exercise of warrants issued
or to be issued to Swartz pursuant to the Investment Agreement.

We intend to use the proceeds from the sale of the shares presently
outstanding and the sale of the shares to Swartz and the exercise of warrants by
Swartz for working capital.

The Company has entered into purchase agreements with Alcatel USA for a
supply of LMDS equipment to be installed at the various locations for which
licenses have been received.

To the extent that we deem appropriate, we may acquire fully developed
products or businesses that, in our opinion, facilitate our growth and/or
enhance the market penetration or reputation of our products and services. To
the extent that we identify any such opportunities, an acquisition may involve
the expenditure of significant cash and/or the issuance of our capital stock.

Determination of Offering Price

The common shares of Prime Companies, Inc. are traded on the NASDAQ OTC
Bulletin Board but the trading volume has been too light to be relied upon as a
fair measure of the value of the shares.

Price Range of Common Stock

The following table sets forth the high and low bid prices of our common
stock for each quarter for the year 1999 and the first three quarters of 2000
through September 30, 2000. As of October 24, 2000, there were 1,285 holders of
record of our common stock, excluding a number of shareholders who are Objecting
Beneficial Owners.

The quotations set forth below reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
13
<PAGE>

Common stock:

Year High Bid Low Bid
---- -------- -------
1999
First Quarter 2.50 0.125
Second Quarter 0.56 0.125
Third Quarter 0.50 0.22
Fourth Quarter 0.50 0.25

2000
First Quarter 4.3125 0.30
Second Quarter 2.625 1.00
Third Quarter 1.25 0.3125

Dividend Policy

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. 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.

Dilution

The net tangible book value per share before the sale of shares to Swartz
is $0.0393, and after the sale of shares to Swartz upon the exercise of the
Commitment Warrant will be $0.0658.

The amount of the increase in such net tangible book value per share
attributable to the cash payments made by purchasers of the shares being offered
is $0.0265.

The amount of the immediate dilution from the public offering price which
will be absorbed by such purchasers is $0.4652 per share.

Selling Security Holders

Attached is a list of the selling shareholders showing the amount of
securities owned by each security holder before the offering, the amount to be
offered for the security holder's account, and the amount (if one percent or
more) of the percentage of the class to be owned by such security holder after
the offering is complete.
14
<PAGE>

The following table provides certain information with respect to the selling
shareholders' beneficial ownership of our common stock as of September 30, 2000,
and as adjusted to give effect to the sale of all of the shares offered hereby.
Except for William Turley, a director of Prime, and Martin Sokolowski, a
director of Prime, none of the selling shareholders currently is an affiliate of
ours and none of them has had a material relationship with us during the past
three years. Except for Peter Charles Restivo, Cesare J. Iore Jr., Nick
Liantonio Jr., and Peter J. Sinram, none of the selling shareholders are or were
affiliated with registered broker-dealers. See "Plan of Distribution." The
selling shareholders possess sole voting and investment power with respect to
the securities shown.
<TABLE>
<CAPTION>

Number
Number of Shares
of Shares (& % if greater
Last Name, First Name Beneficially Number than 1%)
Or Owned Before of Shares Owned After
Business Name Offering Offered Offering
----------------------- ------------ ------------ -------------
<S> <C> <C> <C>
Abbondanza, Ronald 10,000 10,000
Acosta, Fulvio A. 37,000 37,000
Acosta, Joseph 10,000 10,000
Ahman, Peter 10,000 10,000
Al Mal Islamic Co. 1,000,000 1,000,000 1,000,000 / 4%
Alarakhia, Alnoor 100,000 100,000
Alarakhia, Gulzar 30,000 30,000
Altman, Ed 110,000 110,000
Altman, Jason 20,000 20,000
Angrest, Jacob 150,000 150,000
Aye, Mg San 20,000 20,000
Barnes, Jeffrey M. 50,000 50,000
Berkenbile, Freny 20,000 20,000
Bickta, Elmer F. & Marion J. 14,000 14,000
Brogan, Kevin 10,000 10,000
Bucher, Steven C. 100,000 100,000
Carpio, Cecilla Carbungco 10,000 10,000
Chartier, Shephane 10,000 10,000
Chu, Hua Fang 20,000 20,000
Cousins, Thomas E. 20,000 20,000
Dahlgren, Lennart 100,000 100,000
Daniels, Scott A. 30,000 30,000
Darland, William F. 20,000 20,000
Dhanik, Yogendra S. 10,000 10,000
15
<PAGE>

Dixon, Michael 10,000 10,000
Dress, Marian Patty 25,000 25,000
Dunn, Sherman 100,000 100,000
El-Zoghbi, Ahmed 10,000 10,000
Emerson, Herbert Lee 10,000 10,000
Fesseha, Youm & Saba Tesfaye 10,000 10,000
Flynn, Kevin T. 10,000 10,000
Gephardt, Joseph P. 1,500,000 1,500,000 / 6%
Gelasio, Alfredo I. 10,000 10,000
Generation Capital Associates 250,000 250,000
George, Mark R. 10,000 10,000
Goodman, Adam L. 160,000 160,000
Gredgorio, Salvatore G. 14,000 14,000
Grenn, Kimberley & Carl Martin 25,000 25,000
Gruebel, Gerald W. 10,000 10,000
Gulzar Ventures, Inc. 50,000 50,000
Gupta, Monica 100,000 100,000
H.I.K. Inc. 20,000 20,000
Ha, Thoai Van 20,000 20,000
Hachim, Dean A. 30,000 30,000
Hamilton, Andrew 20,000 20,000
Ho, Tze Kin 50,000 50,000
Hodel, John 20,000 20,000
Honarvar, John B. 100,000 100,000
Howe, Clarin F. 200,000 200,000
Iori, Cesare J. Jr. 91,142 91,142
Ismati, Habib 20,000 20,000
Jenkins, Larry D. 10,000 10,000
Jordan, Chester 10,000 10,000
Kakaraparthi, Sirharikumar 5,000 5,000
Kaldis, Peter 25,000 25,000
Kannan, Chak D. 20,000 20,000
Katsampes, Peter 20,000 20,000
Knapp, Dennis 20,000 20,000
Konstatntinidis, Bill 10,000 10,000
Koons, Darlene 561,111 561,111 561,111 / 2%
Kovelman, Paul H. 10,000 10,000
Kyeremeh, Kofi 10,000 10,000
La Barbera, Josephine 10,000 10,000
Lavemour, Annette D. 20,000 20,000
Lawhon, Rebecca L. 20,000 20,000
Lee, Frank D. 15,000 15,000
Lee, James D. 10,000 10,000
Lee, Johnson Y 40,000 40,000
Lee, Mark J 100,000 100,000
Lei, Isaac 10,000 10,000
Leinwand, Laurie 10,000 10,000
Leung, Nelson 45,000 45,000
Liantonio, Nick Jr. 91,142 91,142
Luo, Bill Han 40,000 40,000
Lwin, Nyunt 20,000 20,000
16
<PAGE>

Macrae, G. Stuart 10,000 10,000
Mandekich, Robert M. 10,000 10,000
Manickam, John G. 10,000 10,000
Mark, Arie 100,000 100,000
Martin, Stephen J. 10,000 10,000
McShane, Christopher P. 10,000 10,000
Meyers, David 10,000 10,000
Meyyappan, Ashok K. 12,500 12,500
Mitchener, Jared 10,000 10,000
Mittelstadt, David 50,000 50,000
Mores, Matt M 22,000 22,000
Morrone, Concetta 40,000 40,000
Nabera Trade, 20,000 20,000
Nayak, Anne-Marie 20,000 20,000
Nelson, Bryan 20,000 20,000
Nguyen, Bang T. 10,000 10,000
Ni, Daw Ni 10,000 10,000
Nolley, Roy Glenn 23,500 23,500
Nuziale, Hugo 40,000 40,000
Nyunt Lwin Retirement Trust 40,000 40,000
O'Shea, Scott 10,000 10,000
Ornato, Joe 10,000 10,000
Papadimos, Steve J. 25,000 25,000
Parikh, Anjan 10,000 10,000
Patel, Nandu V. 10,000 10,000
Pavlik Investment LLC 30,000 30,000
Pedro, John M 10,000 10,000
Peschek, Ryan 30,000 30,000
Petree, Clarence R. 10,000 10,000
Pham, Rosalyn T. 10,000 10,000
Pierle, Tamy 600,000 600,000 600,000 / 2%
Pinisetti, Kamalesh 10,000 10,000
Pola, Chaya 10,000 10,000
Restivo, Peter Charles 91,143 91,143
Rispoli, Caroline 10,000 10,000
Roy, Ankur 10,000 10,000
S & G Associates LLC 10,000 10,000
Salientes, Armel 10,000 10,000
Sambuchino, Kevin R. 10,000 10,000
Scarfone, Frank A. & Iris M. 100,000 100,000
Schmitt, Elwood G. 20,000 20,000
Schmitt, Gerard 20,000 20,000

17
<PAGE>

Schroeder, William H. III 10,000 10,000
Scott, James L 20,000 20,000
Sefen, Ehab M. 11,000 11,000
Setlin, Jeffrey 50,000 50,000
Shakouri, Jessie Lee 15,000 15,000
Sherman, John L. 10,000 10,000
Shetty, Sanjeev D. 10,000 10,000
Shevlin, Daniel M. 10,000 10,000
Shroff, Adi B. 130,000 130,000
Shroff, Vispi 220,000 220,000
Sinram, Peter 40,000 40,000
Sloter, Julian W. 50,000 50,000
Soe, Minn 40,000 40,000
Sokolowski, Martin 85,000 85,000
Spurrell, Arthur L. 80,000 80,000
Stemberger, Victor J. 20,000 20,000
Stolz, Brian 10,000 10,000
Sun Cal Finance Group, Inc. 40,000 40,000
Sun Cal Fin Gr Inc.-Ret trust 40,000 40,000
Swarna, Bhaskar S. 5,000 5,000
Tang, Ron T. 80,000 80,000
Taufer, Dana A. 30,000 30,000
Teng, Shuhsiang 10,000 10,000
Thein, John 15,000 15,000
Thomas, Benjamin A. 20,000 20,000
Tiwari, Sushilkumar 20,000 20,000
Tran, Hoa 10,000 10,000
Tran, San 10,000 10,000
Trang, Scott 10,000 10,000
Trunzo, Christopher 10,000 10,000
Truong, Rot T. 20,000 20,000
Turley, William 110,000 110,000
Ujhazy, John E. 10,000 10,000
Unchalipongse, Teerawee 30,000 30,000
Vellian, Jomy Kurian 10,000 10,000
Wever Associates MMDS2-Wever, Leo 16,000 16,000
White, Raymond E. 22,222 22,222
Williams, Bruce W. & Mina 10,000 10,000
Wong, Mun Chung 10,000 10,000
Wright, Ian 22,222 22,222
Xie, Roger 10,000 10,000
Yeo, Kyee Wan 10,000 10,000
Zahn, David 20,000 20,000
Zappa, Joann M 10,000 10,000
Zappa, Michael J. 10,000 10,000
Zappa, Mike/Leo, Anthony 10,000 10,000
Zhou, Wen 10,000 10,000

Total 8,903,982 8,903,982

</TABLE>

18
<PAGE>

Plan of Distribution

Each selling shareholder is free to offer and sell his or her common shares
at such times, in such manner and at such prices as he or she may determine. The
types of transactions in which the common shares are sold may include
transactions in the over-the-counter market (including block transactions),
negotiated transactions, the settlement of short sales of common shares or a
combination of such methods of sale. The sales will be at market prices
prevailing at the time of sale or at negotiated prices. Such transactions may or
may not involve brokers or dealers. The selling shareholders have advised us
that they have not entered into agreements, understandings or arrangements with
any underwriters or broker- dealers regarding the sale of their shares. The
selling shareholders do not have an underwriter or coordinating broker acting in
connection with the proposed sale of the common shares.

The selling shareholders may sell their shares directly to purchasers or to
or through broker-dealers, which may act as agents or principals. These
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling shareholders. They may also receive compensation
from the purchasers of common shares for whom such broker-dealers may act as
agents or to whom they sell as principal, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). Swartz
is, and each remaining selling shareholder and any broker-dealer that assists in
the sale of the common stock may be deemed to be, an underwriter within the
meaning of Section 2(a)(11) of the Securities Act. Any commissions received by
such broker-dealers and any profit on the resale of the common shares sold by
them while acting as principals might be deemed to be underwriting discounts or
commissions. The selling shareholders may agree to indemnify broker-dealers for
transactions involving sales of the common stock against certain liabilities,
including liabilities arising under the Securities Act.

Because Swartz is and the remaining selling shareholders may be deemed to
be "underwriters" within the meaning of Section 2(a)(11) of the Securities Act,
the selling shareholders will be subject to prospectus delivery requirements.

We have informed the selling shareholders that the anti-manipulation rules
of the SEC, including Regulation M promulgated under the Securities and Exchange
Act, may apply to their sales in the market and will provide the selling
shareholders with a copy of such rules and regulations.

Selling shareholders also may resell all or a portion of the common shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.

We are responsible for all costs, expenses and fees incurred in registering
the shares offered hereby. The selling shareholders are responsible for
brokerage commissions, if any, attributable to the sale of such securities.

Legal Proceedings

The Company, 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 the Company. The Company 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 the Company to receive 5,500,000 common
shares back from the two former officers for cancellation. The Company agreed to
disaggregate three of its LMDS 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.
19
<PAGE>

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
$70,000 owed to it 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.

There are no other current pending lawsuits involving the company.

The Company is exposed to routine litigation incidental to it's operations in
the telecommunications industry. The Company 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. The Company has turned these matters over to its
insurance carrier and management believes these matters will not have a material
adverse effect on the Company's financial position or results of operations.

In January 2000 the Company purchased Directors and Officers Liability Insurance
with coverage that the Company's Board of Directors deems sufficient to attract
and retain talented and experienced personnel.

The legality of the securities offered hereby has been passed upon by Pfeffer &
Williams, PC, 155 Montgomery Street, Suite 609, San Francisco, CA 94104.

Directors, Executive Officers, Directors and Control Persons

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 October 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 54 1999 Chief Executive Officer
Director

Stephen Goodman 56 1999 Chief Financial Officer
Corporate Secretary
Director

Adrian Lima 29 1999 Vice President-Engineering

William Turley 62 2000 Director

Martin Sokolowski 53 2000 Director
20
<PAGE>

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 the Company 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 the companies, and led the
company 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 the company, 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 working for various organizations. Mr. Goodman was President of Contra
Costa Financial Services, Inc. ("CCFS") 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 CCFS, 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.
21
<PAGE>

Adrian Lima has been Vice President of Engineering for the Company since its
merger in 1999. Adrian Lima is the son of Norbert Lima, the Company's CEO and
Chairman of the Board of Directors. Mr. Lima has accumulated over ten years of
technical skills and experience while working for NACC-Tel, installing 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. (CEI), a well
established provider of telecommunications products and services including
turnkey Voice and Data Solutions. 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 Chairman of the Company's Audit Committee.

Martin Sokolowski is Senior Manager of Strategic Planning at Alcatel USA,
Wireless Access Business Unit. Prior to this, Mr. Sokolowski was employed as
Technical Services Manager by Bosch Telecom in their Broadband Wireless Access,
Global Deployment Division. 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.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information about the ownership of the
Company's Common Stock as of September 30, 2000, by (i) those persons known by
the Company 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 the Company 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 the Company 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 the Company.

22
<PAGE>

Name of Amount
Title of Beneficial and
Class Owner Nature of Percentages Address
Interest
-------- --------- --------- --------- -----------------

Common Stock 2975 Treat Blvd #C8
Par Value Concord, CA 94518
$0.0001 Stephen Goodman 4,518,900 17%

Common Stock 409 Center Street
Par Value Yuba City, CA 95991
$0.0001 Adrian Lima 1,072,413 4%

Common Stock 409 Center Street
Par Value Yuba City, CA 95991
$0.0001 Norbert Lima 3,600,000 13%

Common Stock 155 Montgomery Street,#609
Par Value San Francisco, CA 94104
$0.0001 Irving Pfeffer(a) 3,655,895 14%

Common Stock 120 W 45 Street
Par Value New York, NY 10036
$0.0001 David Shaw (b) 2,711,227 10%

Common Stock All Directors
Par Value and
$0.0001 Officers as
a Group 9,436,813 35%
---------- ------------ ----------- ----- ----------------------

a) Includes options to purchase 863,708 common shares, which are currently
exercisable.
b) Includes options to purchase 33,333 common shares, which are currently
exercisable.

Description of Securities

Common Stock

Our certificate of incorporation authorizes us to issue up to 50,000,000
shares of common stock, par value $.0001 per share. Of the 50,000,000 shares of
common stock authorized, 26,717,296 shares are issued and outstanding as of the
date of this prospectus.
23
<PAGE>

Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors from funds legally available for such
dividends. We may not pay any dividends on the common stock until cumulative
dividends on the preferred stock have been paid in full. Upon liquidation,
holders of shares of common stock are entitled to a pro rata share in any
distribution available to holders of common stock. The holders of common stock
have one vote per share on each matter to be voted on by stockholders, but are
not entitled to vote cumulatively. Holders of common stock have no preemptive
rights. All of the outstanding shares of common stock are, and all of the shares
of common stock offered for resale in connection with this prospectus will be,
validly issued, fully paid and non-assessable.

Preferred Stock

There are 10,000,000 shares of authorized preferred stock. None have been
issued.

Warrants

There are outstanding warrants to purchase 1,521,000 shares of our common
stock at a price of $0.531 per share. These warrants were issued to Swartz on
September 8, 2000 in consideration of Swartz's commitment to enter into the
Investment Agreement. The warrants expire on September 7, 2005. The warrants are
exercisable as to 1,014,000 shares as of October 3, 2000. The warrants are
exercisable as to the remaining 507,000 shares covered by the Commitment Warrant
on the earlier of March 8, 2001, or the date the Registration Statement is
declared effective by the Securities and Exchange Commission. The holders of the
warrants have the right to have the common stock issuable upon exercise of the
warrants included on any registration statement we file, other than a
registration statement covering an employee stock plan or a registration
statement filed in connection with a business combination or reclassification of
our securities.

Experts

Pfeffer & Williams, PC has provided an opinion on the validity of the
securities being registered and upon other legal matters concerning the
registration or offering of securities.

The consolidated balance sheet as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years then ended, included in this prospectus, have been
included herein in reliance on the report of Hein + Associates LLP, independent
Certified Public Accountants, given the authority of that firm as experts in
accounting and auditing.

<PAGE>

Where You Can Find More Information

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, Seven
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for further information about the public reference room.

We have filed with the SEC a registration statement on Form SB-2 under the
Securities Act with respect to the securities offered under this prospectus.
This prospectus, which constitutes a part of the registration statement, does
not contain all of the information set forth in the registration statement,
certain items of which are omitted in accordance with the rules and regulations
of the SEC. Statements contained in this prospectus as to the contents of any
contract or other documents are not necessarily complete and in each instance
reference is made to the copy of such contract or documents filed as an exhibit
to the registration statement, each such statement being qualified in all
respects by such reference and the exhibits and schedules thereto. For further
information regarding Prime and the securities offered under this prospectus, we
refer you to the registration statement and such exhibits and schedules which
may be obtained from the SEC at its principal office in Washington, D.C. upon
payment of the fees prescribed by the SEC.

Disclosure of Commission Position on Indemnification of Securities Act Liability

The Bylaws of the corporation provide for indemnification for Directors,
Officers and controlling persons of the Company against liability under the
Securities Act. This includes provisions for indemnification of the underwriter
or its controlling persons against such liabilities where a Director, Officer or
controlling person of a small business issuer is such an underwriter, or
controlling person, or a member of any firm which is such an underwriter. In
addition, the corporation has procured Directors' and Officers' liability
insurance for acts of the Directors. The SEC has expressed its opinion as
disfavoring the use of indemnification agreements.
25
<PAGE>

Organization Within Last Five Years

Company History and Past Performance

Worldnet Tel.com Inc. was formed in 1999 when four founders and an individual
angel investor funded the Company. Prior to February 1999, the Company'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. In January 1999, management formed WorldNet
Tel.Com Inc. (Worldnet), a Delaware corporation. In February 1999 management
formed WNTC Holdings Inc. (WNTC), a Delaware corporation and a wholly-owned
subsidiary of Worldnet. In February 1999 management also formed NACC-Tel Corp.
(NACC-Tel), a Delaware corporation and a wholly-owned subsidiary of WNTC. At
that time the sole proprietorship business operated by Mr. Lima was contributed
to NACC-Tel.

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.

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 LMDS licenses at the 1999 Federal Communications Commission auction and
is now deploying broadband fixed wireless services. In 2000 LMDS Communications
obtained CLEC Status in the States of Pennsylvania and New York. The CLEC status
enables LMDS Communications Inc. to connect to the Public Switched Telephone
Network (PSTN) and negotiate "wholesale" rates with Incumbent Local Exchange
Carriers (ILEC).

The Company participated in an auction conducted by the FCC between April 27,
1999 (the "Auction") and May 12, 1999 for 161 LMDS licenses. The Company secured
8 Basic Trading Areas (BTA) 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 pop and an average net
bid of $1.35 per pop for the 121 "A Block" licenses auctioned in 1999.

We were originally incorporated in 1999 in Delaware under the name Worldnet
Tel.com Inc. 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. This gave us immediate access to the capital markets, to
facilitate the initial and second stage funding of the build out of the LMDS
infrastructure. Prior to the merger, Prime had 6,507,742 shares of common stock
outstanding held by various individuals. Pursuant to the agreement, WorldNet was
issued 14,500,000 shares of Prime common stock. As a result of the stock
exchange, the former shareholders of WorldNet then held 69% of the outstanding
shares of common stock of Prime. Pursuant to the Agreement, on the effective
date of the merger, the officers and directors of WorldNet became the officers
and directors of Prime.
26
<PAGE>

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 to Gulf Northern Transport, Inc.
The transaction closed on April 14, 1999 and on April 30 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.

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, the Company acquired Olive Tree Image Engineers, a small
Internet Service Provider located in Sacramento, California. In October 1999,
the Company completed the acquisition of Marathon Telecommunications, a
commercial telephone interconnect business based in Sacramento, California.

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.
27
<PAGE>

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, the Company operated as a sole proprietorship operated
by Norbert J. Lima, the Company's CEO. The Company began operations in February
1998 when it acquired certain assets of Pagers Plus Cellular (an entity for
which the Company's current CEO served as an officer) in exchange for assumption
of specified liabilities. In January 1999, management formed WorldNet Tel.com
Inc. (WorldNet), a Delaware corporation. In February 1999, management formed
WNTC Holdings, Inc. (WNTC), a Delaware corporation and a wholly-owned subsidiary
of WorldNet, and NACC-Tel Corp. (NACC-Tel), a Delaware corporation and a
wholly-owned subsidiary of WNTC. At that time the operations of the Company were
contributed to NACC-Tel.

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.

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 had no substantial
operations during 1999.

Pursuant to a Stock Purchase Agreement (the "Agreement") between Prime
Companies, Inc. (Prime), a Delaware Corporation, a non-operating public shell,
and WorldNet, WorldNet was merged into Prime through a merger effective August
11, 1999. Prior to the merger, Prime had 6,507,742 shares of common stock
outstanding held by various individuals. Pursuant to the agreement, WorldNet was
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. Pursuant to the Agreement, on the effective date of
the merger, the officers and directors of WorldNet became the officers and
directors of Prime.

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 Credit Managers Association of Southern
California for the orderly liquidation and payment of the outstanding
liabilities of the subsidiaries. These liabilities are 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 (traded on the OTC Bulletin Board symbol
USTK), which have been placed in escrow for the benefit of the creditors of
Mid-Cal Express, until the stock is sold on the open market.
28
<PAGE>

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

THE BUSINESS

The Corporation's mission is to provide a single source for a wide range of
telecommunications services to both the consumer and commercial markets.

The Corporation'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 the Corporation 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 the Corporation's services. Thus, the
Corporation 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.

The Corporation will derive the majority of its revenues from sales generated by
its three specialized subsidiary corporations.

Prepaid Tel.com Inc. currently operates as a "reseller" of "prepaid" services,
including prepaid wireline (residential local telephone and long distance)
services, in the State of California.

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.

LMDS Communications, Inc. The Corporation intends to capitalize on the broadband
fixed wireless communications revolution by providing LMDS (Local Multipoint
Distribution Systems) services to various markets in which it has purchased
exclusive spectrum licenses from the Federal Communications Commission. LMDS is
the broadband wireless technology used to deliver voice, data, Internet, and
video services in the 28 to 31 GHz spectrum. The Corporation intends to build,
install, and implement the telecommunication systems and offer some or all of
the following one and two-way broadband services:
29
<PAGE>

- High-speed Internet access
- Video teleconferencing
- Wireless local loop telephony
- Alternative cable television service
- High-speed data transmission (i.e. ATM)

The flexibility offered by LMDS will allow the Corporation 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 (LMDS) 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, LMDS has the potential to become a major competitor
to local exchange and cable television services.

LMDS systems may consist of multi-cell configuration distribution 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.

LMDS Communications has received certificates from both Pennsylvania and New
York State to operate as a facilities based Competitive Local Exchange Carrier.

NACC-Tel Corp. The Company sells, installs, and services business Employees POP
Businesses communications systems and provides paging and voicemail services.
The Company also maintains these systems under service agreements with its
commercial and municipal customers.

COMPETITION

Small and medium-sized businesses currently face a limited choice of
alternatives for high-speed Internet access. Over the last few years, digital
subscriber line technologies, cable modems, T-1-based solutions and
fixed-wireless connections have emerged as alternative technologies for
high-speed, always-on service in our country's major metropolitan areas.
However, these technologies have not yet reached the country's secondary and
tertiary markets; this fact reinforces the viability of the company's strategy
to initially target businesses in the markets where we have LMDS licenses.
30
<PAGE>

We believe that our solution will receive wide acceptance by our target
customers because our network will provide:

- consistent speed and quality of signal;
- rapid, relatively uncomplicated provisioning of new customers that is
not dependent on another provider of local connectivity;
- symmetrical broadband capacity that will allow us to offer enhanced
business communication services such as full motion video
conferencing;
- scaleable, competitive pricing schemes which are based on the number
of desktops connected to the network; and
- substantially higher speeds and an easy path to increased bandwidth.

MARKETING AND CUSTOMERS

The growth of the Internet is leading to a global society where every business
must obtain access to the Internet, or World Wide Web, and utilize "online"
functionality in order to fulfill its information needs. The Company will
capitalize on this need by providing these services in its markets.

LMDS now provides vital communications services to regions that heretofore did
not justify wireline services, typically because the inherent costs outweighed
the potential revenues. With the old method, it was difficult to actually lay
the wire and install these systems. With LMDS, the wireless technology enables
easy implementation at any business, requiring installation at the business'
building only.

LMDS offers the ability to provide various, vital telecommunications services
via one, efficient, cost-effective medium. Through the Company's licenses in its
various territories, it will deliver a better "package" for these businesses and
thus provide them with greater value, as opposed to the need to sign up with
several different suppliers. The company's NACC-Tel subsidiary will readily
support and provide business telephone interconnect services, voicemail, and
paging services to our LMDS customers. In some markets we may also provide ISP
services such as Internet web site hosting for our LMDS customers.

EMPLOYEES

The Company had nine full-time employees and one part-time employee at December
31, 1999. On October 31, 2000 the Company had 19 full-time employees and one
part-time employee.

Situation Overview

As highlighted previously, Prime Companies, Inc. conducts its operations under
three main subsidiaries:

1. Prepaid Tel. Com, Inc;
2. NACC-Tel Corp. and
3. LMDS Communications, Inc.
31
<PAGE>

The company operates as a CLEC within three states-- California, Pennsylvania,
and New York. The company has established long-term relationships with two
equipment vendors: Alcatel for the LMDS equipment and RC Networks for the
deployment of DSL access concentrators in conjunction with wireless DSL and
LMDS.

Of the Company's subsidiaries, LMDS Communications, Inc. has required our
largest investment. The acquiring of the LMDS licenses, the equipment and the
personnel to support these services are necessary investments to support the
operations and implementation of LMDS by Prime Companies, Inc.

Market Summary and Target Markets

LMDS Communications, Inc.

We have prepared detailed micro market analyses of each individual BTA including
the BTAs in aggregate, the counties within each BTA, each major economic center
and analysis within a three mile radius of our initial proposed hub sites. These
studies were prepared in order to determine the best possible location for a
"Line of Sight" (LOS) hub location within the densest business centers of each
BTA.

Prime Companies, Inc. has begun to roll out its LMDS services in its licensed
service territories within northwestern Pennsylvania, and southwestern New York
State.
<TABLE>
<CAPTION>

These Service Territories are identified as follows:

BTA Name State POP Businesses Employees
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Castle PA 95,256 3,240 33,133
------------------------------------------------------------------------------------------------------------------------
Sharon, PA PA 122,824 5,295 57,880
------------------------------------------------------------------------------------------------------------------------
Meadville, PA PA 90,277 3,740 37,684
------------------------------------------------------------------------------------------------------------------------
DuBois-Clearfield, PA PA 127,624 4,438 42,776
------------------------------------------------------------------------------------------------------------------------
Oil City - Franklin, PA PA 105,271 3,595 39,188
------------------------------------------------------------------------------------------------------------------------
Jamestown, NY Warren, PA- Dunkirk,
NY NY, PA 181,409 7,196 79,830
------------------------------------------------------------------------------------------------------------------------
Olean, NY-Bradford, PA NY, PA 240,734 8,882 91,036
------------------------------------------------------------------------------------------------------------------------
Indiana, PA PA 88,482 2,999 31,172
------------------------------------------------------------------------------------------------------------------------
TOTAL 1,051,877 39,385 412,699
------------------------------------------------------------------------------------------------------------------------

</TABLE>
32
<PAGE>

The total population of the Prime Companies eight Service Territories is just
over 1 million. There are over 39,000 businesses that employ over 400,000
people. This is our LMDS service territory and the number of customers that we
will obtain is finite, because generally the population and business growth of
these areas will remain constant over the next five to ten years.

The market focus of Prime Companies, Inc. for LMDS Services is all businesses
and, in the future all residents of this geographic region. We have completed
site analyses to determine where the most concentrated areas of population,
businesses and employees are in order to target our marketing efforts.

NACC-Tel Corp.
NACC-Tel's telephone systems will be marketed and sold through word of mouth and
as a cross sell to our LMDS and DSL customers as we get to understand their
needs.

The Company anticipates that our wireless DSL market will grow at the rate of
the national average in the first two years due to our partnership with RC
Networks and our sales force efforts.

Prepaid Tel Com, Inc.
The Company has begun to capitalize on the telecommunications needs of a large
and diverse customer segment, projected to increase by approximately 23% per
year through 2004, including:

o Credit-impaired customers who cannot obtain residential telephone
service. In certain neighborhoods in California there are as many as 4%
of the local residents who cannot obtain a home telephone. Nationally
the statistic is 2%. Additionally, certain people prefer to pay in
cash, such as individuals or ethnic groups who either do not use credit
or do not want to receive a bill for an unexpected or unanticipated
amount.

o The undocumented immigrant who is unable to satisfactorily establish
his identity to the satisfaction of the local RBOC Telephone Company.

o Parents of teenagers, looking to enable their children while
simultaneously maintaining a reasonable, fixed monthly expenditure.
Likewise, university or college students, who typically have little
income, poor or non-existent credit, and sporadic assistance from their
parents, and are striving to live off their own individual income
and/or student loans.

The Company launched its service in October 1999 and wholesales its service
through a network of independent retail Agents.
33
<PAGE>

Market Demographics

Demographic Summary LMDS Communications, Inc.
Prime Companies, Inc. has gathered a significant number of data points in our
LMDS Service Territory to give us a full understanding of our market and our
customers. First, the market is rural and contains small tertiary cities whose
growth and existence was a result of a booming manufacturing economy of the 50's
60's and 70's. Oil, steel mining and manufacturing were significant contributors
to the existence of these areas. It is easy to picture these areas as farming
communities, but they never did, and still do not, depend on farming as a major
contributor to their economies. When the US economy as a whole shifted from
reliance on the manufacturing sector to a service economy, these areas of
employment were hard hit. They have however, recovered, but they may never
return to the times of full employment at union wages.

Twenty to thirty years ago the major employers were, U. S. Steel, Bethlehem
Steel, Standard Oil, General Electric and Talon Zipper. Today the major
employers are hospitals, medical centers, universities, municipalities, and
Wal-Mart. Unemployment on average is low at comparable rates to the rest of the
country.

The LMDS Service Territories
Population and Business
The Olean, NY-Bradford PA BTA ranks highest in population, businesses and
employees. However, detailed in the charts in Section XXX is a summary of our
site analyses which determined the BTA with the highest concentration of
population, businesses and employees as the Jamestown, Chautauqua County, New
York BTA.

Income

o Within the Service Territory, the median household income is $30,631, which
is 26 percent lower than the U.S. average.

o Income levels of households in their prime earning years are a good
indicator of current spending power. 33 percent of individuals are in the
45 to 64 year old range and approximately four percent of these households
earn $100,000 or more per year.

o Median income levels have increased 27.7 percent since 1990 and are
expected to increase by 15.4 percent over the next five years.

Age and Ethnic Make-up

o The median population age is 36.9 years and 17 percent are 65 years or
older.

o Whites represent approximately 94 percent of the population, Blacks, 4
percent and Asians and Hispanics under one percent. This compares to the
national composition of 79.39 percent White, 12.2 percent Black, 3.64
percent Asian and 11.1 percent Hispanic origin.
34
<PAGE>

Employment and Occupation

o Of the population, 58.6 percent is in the workforce and 2.81 percent is
unemployed. The labor force includes 35 percent blue-collar workers and 65
percent white-collar workers. This is 6.7 percent higher concentration of
blue-collar workers than the U. S.

Housing

o Median home values are generally lower than the U.S. average at
approximately $45,900 and rents on average range from $220 to $400.

o Currently, an estimated 74 percent of dwellings are owned and 26 percent
are rented.

3-Mile Radii
Given the composition of LMDS' service reach, we have done detailed site
analyses to determine the best possible location for a first hub in each of our
Service Territory BTA's. The summary Chart below indicates that a first round of
hub installations will cover approximately 24% of businesses and 32 percent of
employees within the Prime Companies Pennsylvania and New York State Service
Territory.

---------------------------------------------------------------------
City Zip Number of Employees
Businesses
---------------------------------------------------------------------
New Castle 16101 1,666
17,436
---------------------------------------------------------------------
Ellwood City 16117 335 3,197
---------------------------------------------------------------------
Hermitage/Sharon 16148 1,360 17,538
---------------------------------------------------------------------
Meadville 16335 1,188 17,820
---------------------------------------------------------------------
DuBois 15801 791 9,952
---------------------------------------------------------------------
Punxsutawney 15767 565 4,549
---------------------------------------------------------------------
Franklin City 16323 630 8,727
---------------------------------------------------------------------
Oil City 16301 509 4,819
---------------------------------------------------------------------
Jamestown 14701 1,790 34,083
---------------------------------------------------------------------
Olean 14760 958 13,501
---------------------------------------------------------------------
Indiana 15701 1,078 12,651
---------------------------------------------------------------------
---------------------------------------------------------------------
10,870 144,273
---------------------------------------------------------------------
35
<PAGE>

LMDS Market Needs
Prime Companies has developed a customer survey to determine the needs of our
customers within the LMDS Pennsylvania and New York Service Territory. We have
interviewed in the way of lead generation over 200 potential customers in our
New Castle Territory. The results of the survey are summarized below.

Internet Importance

o Almost 50 percent of those surveyed indicate that the internet is very
important to the growth of their business.

o While only 35 percent considered other technologies important to the growth
of their business

Importance of Price

o Almost 50% percent of those surveyed are satisfied with the price of their
telecom services

Current Internet Usage

o 75 percent of those businesses surveyed use the internet and 20% who use
the internet have an intranet

o of those surveyed who do not use the internet 66 percent have an initiative
to get connected

o 35 percent have a website o 95% still use dial-up access to the internet

Choosing an ISP
o almost 60% said that speed is important in choosing an ISP o almost 70% said
that technical support is important o almost 70% said ease of use and
installation are important

Interest in LMDS

o 60 percent of businesses surveyed turned into a sales lead for LMDS
Communications, Inc.

o 80 percent of businesses surveyed said that they would like more
information regarding LMDS Communications, Inc. and its services

Market Trends
The Players

Prime Companies Inc. believes the elements necessary for wide-scale deployment
of fixed-wireless networks finally have come together: commercially available
equipment, operational networks and customers hungry for bandwidth. According to
the Strategis Group global revenues from fixed-wireless technology (such as LMDS
Services) will reach $16.3 billion by 2004 and by 2003, broadband wireless
networks will service almost half of U. S. businesses and more than a third of
U. S. households. Pioneer Consulting projects that U.S. LMDS revenues will reach
$4.5 billion domestically by 2005.

There are currently around five million subscribers using broadband wireless
services, in more than 80 countries. In the US there are only about one million
subscribers.
36
<PAGE>

Prime Companies, Inc. does not view other companies who acquired LMDS licenses
at the FCC auction as competitors bur rather as information agents for spreading
the word about LMDS and fixed wireless technology. As our customers hear about
other geographic regions where LMDS technologies are successful, they will gain
confidence in its abilities and become more open to Prime Companies Inc.
delivering them the product.

Teligent is a 24 GHz ("DEMS") license holder that launched its broadband voice
and data services to 40 U.S. markets, and plans to build out fixed wireless
networks internationally this year. Winstar Communications Inc., which owns
licenses at 38 GHz has fixed-wireless networks running in 45 of the 60 markets
it is targeting. Nextlink Communications Inc., the major LMDS license holder at
28 GHz, intends to have broadband wireless service operational in 25 markets by
year-end. In late 1999 and early 2000 it launched services in Los Angeles and
Dallas. High-Speed.Com LLC has networks running in several western U.S. cities.
Advanced Radio Telecom Corp., which has licenses in the 39 GHz spectrums,
already operates in seven markets. ART will reach over 40 U. S. markets over the
next few years.

Speedy provisioning and competitive pricing are the marketing tactics these
companies employ. Teligent has competed successfully against incumbents by
offering a flat monthly rate based on 30 percent of a customer's typical local
phone and internet costs. Winstar also has pricing at up to 30 percent less than
the territory incumbents.

Demand for Bandwidth

Current internet industry research suggests that by 2002 the majority of users
will find dial-up modem access unacceptable. Growth of high-speed internet
access will accelerate over the next five years. By the end of 2002, there is
projected to be approximately 75 million high-speed internet users. The
migration to high-speed access will redefine what users expect from basic
telecommunications service: always-on connectivity, bandwidth-on-demand, and
mobility will be the criteria.

A number of trends point toward increased need for high-speed access.
Availability of multimedia content, as well as virtual reality, multi-player
games, IP voice and video conferencing, and other applications will drive
internet users to demand high-speed access. Consumer requested dialup video
streams will increase from 171 million in 1999 to 1 billion in 2005, according
to Webcast Track.(1)

-------------------------------
(1) Data from Cyberatlas.com - internet research company
37
<PAGE>
Many new networks being laid run between 96 and 144 fiber pairs per conduit, so
the total bandwidth potential available on a single network is projected to be
sufficient to carry current U.S. traffic at least 20 times over. There is a
tremendous amount of bandwidth as a result of fibers being laid, but also
because of switching and transmission advances in the form of dense wave
division multiplexing (DWDM). This is 160 wavelengths multiplexed onto single
fibers. The bottleneck in the high-speed internet experience is the access
portion of networks - the last mile.

According to Bill Gates "Bandwidth bottlenecks are the biggest obstacle to where
we'd like to take the PC."2 Plentiful bandwidth exists at the core of the
information infrastructure, but users are forced to access the infrastructure
through narrow pipe that is labeled the "last mile." The last mile is the
portion of a network that runs from a user to the nearest point, hub or central
office. Traditionally, that has been the ILEC local loop running from homes and
business to a central switching office. Currently only 4% of offices are
connected to fiber that allow them full advantage of increased bandwidth speed
and efficiency.

Access to Bandwidth

Four years ago only ten percent of people in the U. S. used the internet.
According to Jupiter Communications, today 50% of people in the US3 use the
internet. The increase in the number of Web sites featuring multimedia offerings
and interactive graphics will push consumers to sign up for broadband access
services. Multimedia is expected to spur this growth because of the average file
transfer increase of 15 times4 what it was just a few years ago, rendering
traditional dial-up service increasingly inadequate.
A range of wireline transmission technologies is poised to allow access to the
internet and are summarized in the chart below.

------------------------------ -------------------------
Technology Data Range
------------------------------ -------------------------
Cable Modems 30 Mb/s
------------------------------ -------------------------
XDSL Modems 9 Mb/s
------------------------------ -------------------------
DS2 6.312 Mb/s
------------------------------ -------------------------
T1 1.544 Mb/s
------------------------------ -------------------------
ISDN PRI 1.5 Mb/s
------------------------------ -------------------------
Frame Relay 56 kb/s to 1.536 Mb/s
------------------------------ -------------------------
ISDN BRI 56 to 128 kb/s
------------------------------ -------------------------
Analog modems 56 kb/s
------------------------------ -------------------------

LMDS delivers high-speed internet access as fast as 1.5 gigabits per second
downstream (from cell to end user) and 200 mill bits per second upstream. Even
on a heavily loaded system during peak hours that would yield 7 Mb/s down and
1Mbs up per user.

-------------------------
2 InfoWorld, Sept. 21, 1998
3 Data from Cyberatlas.com
4 Data from Cyberatlas.com
38
<PAGE>

Currently, there are two major technologies competing for subscribers for
consumer high-speed internet access: Cable Modems and XDSL Modems. DS2 and T1
are subscribed to by larger business with multi-year contracts. ISDN is not
available in all areas but when deployed is available to both business and
consumer subscribers. ISDN technology has never gained acceptance in the market
place. There are advantages and disadvantages to each technology and no single
technology has gained universal acceptance by businesses or consumers.

How Businesses Use the Internet
Research by the U. S. Small Business Administration reveals that 60% of all
Small Businesses use the internet and 60% of those businesses have a Website.
The results of our consumer survey indicate that 70% of the Company's market
uses the internet while 35% surveyed have a website.

Within our market 95% of those surveyed use dial-up modems, compared to the
national statistic of 93%, New Castle PA does not have far to go. Nationally,
approximately one-third of the total number of small-business employees are
on-line. Research, document exchange, and downloading software are the most
popular activities. Only a few employees -- 18 percent -- shop online for their
companies.

The industries with the strongest online presence are real estate, retail trade,
manufacturing, and legal services. Real estate agencies lead internet access: an
estimated 82 percent have an internet connection. Forty percent of retail stores
have a website and 15 percent conduct e-commerce.

According to most studies done by internet researchers the demand for high-speed
internet access will have a higher growth rate than internet adoption in
general. This is for both household and business usage. Forward Concepts
estimated that by 2005 the installed based of broadband-enabled consumers will
reach 35 million. Small business penetration will reach 50 percent and
penetration into business with over 100 employees could reach 75 percent
according to current estimates.

Market Sales and Growth

Our LMDS sales and growth is dependent on four major factors -

o our installation schedule
o our penetration rate - acceptance into the market
o our sales staff
o the competitive strategies of the ILECs and Cable Companies in our markets

Basically our demographic market will not grow over the next five years. What
will increase is the demand by more businesses and consumers for internet access
and an increased demand for more internet speed.
39
<PAGE>

Over the past few years there has been rapid accelerated growth of the cable
modem market with the DSL market just beginning to emerge. The installation of
DSLs grew 300 percent in the US for the first half of 1999 beyond analysts'
projections. Cable modem service has been in the marketplace for about two years
and DSL has been in the marketplace for about 18 months.
<TABLE>
<CAPTION>

Market Penetration Rates for Broadband Access

---------------------------------------------------------------------------------------------------------------------------
Year 1998 1999 2000 Growth Rates
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cable Modem Subscribers 450,000 1.2 million 2.3 million* 167% 92%
---------------------------------------------------------------------------------------------------------------------------
XDSL Service Subscribers 189,000 800,000^ 323%
---------------------------------------------------------------------------------------------------------------------------
*as of April 2000
---------------------------------------------------------------------------------------------------------------------------
^as of August 2000
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Source: Paul Budde Communications

The growth of these technologies is dependent upon the demand for high-speed
access, acceptance by consumers, the evolution of the internet infrastructure,
multimedia content and regulation. The goal of LMDS and Broadband wireless
services is not only the high-speed internet but also operating as a CLEC a
portion of the $110 billion a year local telephone business, entertainment
services and e-commerce solutions.

CLEC's are showing that a telecommunications company can be highly successful
focusing on Tier 2 and Tier 3 Service Territories. Examples of this include
McLeod USA, an Iowa CLEC who received $1billion in funding and TDS Metrocom and
Jato Communication Corp who target rural areas have also raised considerable
funding5. Current analysis of the aggregate data on CLEC revenue suggests
significant and sustainable growth in all areas. New Paradigm Resources Group,
Inc., which published "CLEC Report 2000", states that revenues are growing not
from new companies entering the market but as a result of CLEC expansion. When
CLEC's first began to compete with the RBOCs there was a concern that the most
lucrative Tier 1 markets would see new offering and competitive pricing. The
current trend is for CLECs to meet the market demand that has been ignored in
Tier 2 and 3 markets. The chart below gives a snapshot view of the CLEC
industry.

However, given the infrastructure that both of these technologies rely on their
growth potential is finite. Currently there are 22,000 Central Offices in the US
and 3,742 are deployed with DSL equipment.

-------------------------------
5 "Xchange", June 2000; Appraising the CLEC Landscape

40
<PAGE>

----------------------------------------------------------
CLEC 1999 Industry Snapshot
----------------------------------------------------------
Companies identified 190
--------------------------------------
Telecom service revenue $23.65 billion
--------------------------------------
Total Revenue $26.86 billion
--------------------------------------
Network route miles 161,717
--------------------------------------
Buildings Served 387,955
--------------------------------------
Access Lines 10,366,127
-------------------------------------- -------------------
Source: New Paradigm Resources Group, Inc.
CLECS Identified are facilities based

In 1998-1999 there were approximately 160 facilities-based CLECs. By the end of
1999, that number increased 19 percent to 190. In addition, the total revenues
of CLECs rose from $10.64 billion in 1998 to $26.85 billion in 1999 -- a total
of 152 percent. Focusing on this growth the graph below highlights CLEC revenue
growth from 1997 to 2001.

CLEC REVENE GROWTH 1997 TO 2001e

[GRAPHIC OMITTED]

The growth in these revenues indicates that businesses and consumers are
becoming more and more accepting of telecommunications services provided by
CLECs. These strong growth rates experienced in both the broadband access market
and the CLEC market assist the Company in determining appropriate growth rates
for its product lines. Additionally, the Pioneer Groups latest study on
Broadband Wireless Access estimates that worldwide services revenues will reach
$35.6 billion by 2010. With the industry experiencing growth rates of over 100
percent per year.

According to a study by study by Allied Business Intelligence the growth of
cable and DSL services have been slowed by line congestions and slow deployment
of incumbents. As a result the study says consumers are looking at wireless
technologies, specifically LMDS. The study says forecasts more than 9 million6
broadband wireless subscribers by 2005.

---------------------------------
6 CLEC Planet, January 2000 reporting on study titled "LMDS, MMDS and ISM 2000:
Global Markets and Trends for Fixed Wireless Broadband.

41
<PAGE>

Competition
The race for delivering broadband internet access is a highly competitive one,
with much at stake. With the growth of the internet's functionality, and the
booming economy, no one really doubts that there will be enormous demand for a
high-speed always-on connection option. There are three major competing
technologies7 as primary access methods for high-speed internet access -- cable
modems, xDSL and broadband fixed wireless (LMDS and MMDS).

Within LMDS service territories we assess a minimal competitive threat from Bell
Atlantic (Verizon) and Adelphia Cable. With the acquisition of GTE by Bell
Atlantic, the predominant ILEC throughout this service Territory is Verizon with
a presence of Alltel in some localities. Adelphia Cable is headquartered in
Bradford, PA which is within our Olean, NY-Bradford, PA BTA however, are in the
process of relocating their headquarters to Buffalo, New York about 100 miles
north of our Jamestown service territory.

Given this limited competitive threat from major telecommunications companies
within our LMDS Service Territory, the Company believes that we will be the
broadband access provider of choice for these customers. Be it through our LMDS
service, wireless DSL or as an alternative to the ILEC. Verizon has not shown an
aggressive marketing campaign in these areas and we believe this is due to the
lack of incentive for them to redefine their business. DSL competes with their
dedicated access line product line and Verizon is interested in protecting this
existing market. Additionally, the availability of DSL provided by Verizon in
these areas is limited based on the aging infrastructure of their outside plant
and the distance of many business out of range of their central office.

There is also a lack of interest in these Tier 2 and 3 service markets by both
cable and ILEC due to their focus on Tier 1 markets and the share that they have
already lost within these local loops. These companies have concerns with
long-time investors and employees-- people who want to see steady profits and
jobs. They are not in the position to make large investments in rural areas and
appear to be leaving this market up for grabs for CLECs and other providers. By
the time these larger Telcos notice these area the Company will already be there
for these customers who will come to rely on us for their growing telecom needs.
The Company is relying on the incumbent's slow sometimes-troublesome deployment
of wires broadband services, which will lead to opportunities for us to deliver.

Marketing Strategy

LMDS services are positioned to supply highspeed Internet access and data
transfer services to under serviced rural areas that currently require
high-speed broadband access to the Internet. Unlike Bell Atlantic (Verizon),
LMDS will build relationships with its customers and provide superior customer
service. We will mirror this customer service position within our other product
lines. Additionally, we will know our customers so that we may recommend to them
the value added services we offer that will enhance their telecom solutions.

----------------------------------

7 T1 is not considered a competing technology because of its high cost and speed
of delivery. Currently there are approximately 550,000 T1 lines in the US.

42
<PAGE>

Mission

Prime Companies, Inc. through its various product lines offers a diverse
portfolio of alternative telecommunications services to small through mid-sized
businesses and governmental agencies. Prime Companies, Inc. and its subsidiaries
LMDS Communications, Prepaid Tel.com, and NACC-Tel, promises its customers
quality services that enhance their own technologies to assist them with better
operations and business growth. In rural areas where LMDS Communications does
business, we aspire to be the high-speed broadband service provider of choice
for all businesses.

Marketing Objectives

1. Establish Prime Companies, Inc., its subsidiaries and sales staff as
experts.
2. Establish relationships within the communities we do business. Provide
premier customer service to a once under served and ignored market place.
3. Educate the business community on our products.
4. Brand -name reference clients. Our market analysis of each of our LMDS
territories indicates who the major employers are. These employers
generally have the respect of their communities and are considered leaders
by other businesses. By establishing service with these businesses first,
and referencing them by name and contact phone number we will gain
acceptance and additional business.
5. Maintaining a quality technological edge over our competitors.

The following discussion relates to our actual operating results for the periods
noted. The operating results discussed include the operations of acquired
companies from the effective dates of their acquisitions. Given that each year
includes revenues and expenses from new acquisitions, we believe that the
operating results for 1999 are not directly comparable to the operating results
for 1998.

Management's Discussion and Analysis of Financial Condition and Results of
Operation

Results of Operations For the Fiscal Year ended December 31, 1999 Compared to
the Year ended December 31, 1998.
43
<PAGE>

During the year ended December 31, 1999, sales revenue from continuing
operations increased to $441,663 from $209,823 for the corresponding period of
the prior year. The increase in revenue is attributed to increased marketing by
the Company and greater demand as customers continued to upgrade systems to be
Y2K compliant.

The gross margin as a percent of revenues increased to 63% for the year December
31, 1999 from 42% in the corresponding period of the prior year. The improvement
in the gross margin is due to additional discounts for volume purchases provided
to the Company by its telephone vendors.

The Company's selling, general and administrative expenses for the year ended
December 31, 1999 increased to $599,474 from $143,002 for the corresponding
period of the prior year. The increase is attributed to increased marketing
efforts and additional corporate overhead costs associated with the merger with
Prime.

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, 1999 increased to $199,089 from
$14,796 for the corresponding period of the prior year. The increase is
attributed to the increased debt assumed in the merger with Prime.

Results of Operations For the Nine Month Period ended September 30, 2000
Compared to the Nine Month Period ended September 30, 1999.

During the nine month period ended September 30, 2000, sales revenue increased
to $373,563 from $199,860 for the corresponding period of the prior year. The
increase in revenue is attributed to the integration of Marathon Telecom into
Nacc-Tel Corp., increased marketing efforts, and to our being awarded a high
percentage of the contract proposals we had bid on.

The gross margin as a percent of revenues increased to 74% for the nine months
ended September 30, 2000 from 57% in the corresponding period of the prior year.
The increase in the gross margin is due to additional discounts for volume
purchases provided to the Company by its telephone vendors, and a change in the
mix of sales from predominantly service calls in the third quarter of 1999 to
service calls and new installations in the third quarter of 2000.
44
<PAGE>

The Company's selling, general and administrative expenses for the nine month
period ended September 30, 2000 increased to $1,430,762 from $185,726 for the
corresponding period of the prior year. The increase is attributed to increased
marketing efforts, additional corporate overhead costs associated with the
merger with Prime, employee and outside director stock option programs, and
expenses related to the launching of our LMDS systems.

A loss on investment was recorded during the three month period ended September
30, 2000 in the amount of $1,156,000. 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 three month period of the prior year. No similar loss was
recorded in the corresponding nine month period of the prior year.

Interest expense for the nine month period ended September 30, 2000 increased to
$73,091 from $31,858 for the corresponding period of the prior year. The
increase is attributed to the increased debt assumed in the merger with Prime,
and the beneficial conversion feature of notes that were converted to common
stock, offset by the payoff of most of the Company's liabilities during the
first quarter of 2000. Interest expense during the fourth quarter of 2000 should
be minimal, as most of the Company's liabilities were settled during the three
month period ended March 31, 2000.

At September 30, 2000 approximately $22,880 representing 31% of trade
receivables was due from 2 customers. For the nine month period ended September
30, 2000 none of our customers accounted for more than 10% of sales. For the
nine month period ended September 30, 2000 none of our customers accounted for
more than 10% of sales.

Liquidity and Capital Resources For the Fiscal Year ended December 31, 1999
Compared to the Year ended December 31, 1998.

At December 31, 1999, the Company 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 with Prime.

Cash used in operations was $124,970 for the year ended December 31, 1999
compared to $24,986 in 1998. The cash used in operations was primarily
attributed to the net loss offset by noncash charges for depreciation, the
one-time, noncash charge related to the merger, and an increase in accrued
interest.

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.
45
<PAGE>

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.

Liquidity and Capital Resources For the Nine Month Period ended September 30,
2000 Compared to the Nine Month Period ended September 30, 1999.
---------------------------------------------------------------

At September 30, 2000, the Company had cash of $1,073,819 and working capital of
$358,341. The increase during the nine months ended September 30, 2000 was due
primarily to the completion of the Company's Private Placement Offering during
the first quarter of 2000.

Cash used in operations was $936,934 for the nine months ended September 30,
2000 compared to cash provided by operations of $116,788 for the corresponding
period in the prior year. The cash used in operations was primarily attributed
to the overhead costs associated with the merger with Prime and the development
and launching of our LMDS systems.

Cash used in investing activities increased to $203,040 for the nine months
ended September 30, 2000 compared to cash used of $17,324 for the corresponding
period in the prior year. The increase is attributed to the purchase of
equipment associated with the development and launching of our LMDS systems, and
our wireless DSL service.

Cash provided by financing activities was $1,976,390 for the nine months ended
September 30, 2000, compared to cash used of $47,273 for the corresponding
period in the prior year. The cash provided resulted from the completion of the
Company's Private Placement Offering of common stock during the first quarter of
2000, offset by payments on notes payable.

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. 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. 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.

46
<PAGE>

On October 3, 2000 the Company entered into an Investment Agreement with an
institutional investor, enabling the Company to sell up to $30 million of its
common stock, over a 36 month period beginning on the date a registration
statement to be filed with the Securities and Exchange Commission is declared
effective by the SEC. The terms of the Agreement limit the number of shares the
Company may sell each month to the lesser of 1.5 million shares, $2,000,000, or
15% of the volume of its shares traded during the month. The Company is not
obligated to sell any shares to the investor, but the investor's commitment to
purchase shares is irrevocable. The Investment Agreement provides for a
non-usage fee to be paid by the Company to the investor, up to the amount of
$100,000 during each 6 calendar month period, in the event that the Company has
not sold at least $1,000,000 of shares to the investor during the 6 month
period. However, the Company will not be required to pay a non-usage fee for any
six month period during which it has sold to the investor the maximum number of
shares, based upon the above limitations, allowable under the Agreement. In the
event the Company terminates the Agreement, a termination fee of up to $200,000
will be due to the investor. The Company issued the investor a Commitment
Warrant to purchase 1,521,000 shares at $0.531 as consideration for the $30
million Investment Agreement. None of the Warrants were exercisable on or before
September 30, 2000. The warrant is exercisable as to 1,014,000 shares as of
October 3, 2000. The warrant is exercisable as to the remaining 507,000 shares
covered by the Commitment Warrant on the earlier of March 8, 2001, or the date
the Registration Statement is declared effective by the Securities and Exchange
Commission. The Company is subject to various covenants contained in the
agreement.

Management believes the existing cash, and the anticipated proceeds from the $30
million equity line, will be sufficient to sustain its operations for at least
the next 12 months.

The Company's ability to fully develop its Local Multipoint Distribution Service
business is dependent upon its ability to obtain financing for the
infrastructure equipment and working capital to develop the market
opportunities. Management believes the cash on hand plus the anticipated
proceeds from the $30 million equity line will be sufficient to sustain its
operations for at least the next 12 months.

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.
47
<PAGE>

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 does not believe that
the adoption of SAB 101 will 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.

Year 2000 Compliance

The Company has experienced no disruption in its operations that management can
attribute to Year 2000 issues. In addition, the Company has seen no Year
2000-related problems itself or received any reports of such problems from
entities with which it transacts business.

Acquisition of Professional Services Firms

In addition to organic growth, a key component of our overall growth strategy is
the acquisition of, or investment in, complementary businesses, technologies,
services and products. We have acquired two companies since 1999 and intend to
continue to pursue opportunities to acquire similar businesses.

We believe our acquisitions have supported our growth and enhanced the quality
of services we offer our clients. Our acquisitions have allowed us to rapidly
build our base of professionals in the context of a tight labor market for
experienced technical and creative professionals. Our broadening Internet
coverage has allowed us to better meet the needs of our national clients and to
attract new clients who seek integrated services across diverse geographic
areas. We have also been able to expand our service offerings through the
acquisition of companies with complementary products and skill sets.
Additionally, we expect to achieve cost synergies by consolidating management
and back-office operations and sharing technical infrastructure.

We evaluate acquisitions based on numerous quantitative and qualitative factors.
Quantitative factors include historical and projected revenues and
profitability, geographic coverage and backlog of projects under contract.
Qualitative factors include strategic and cultural fit, management skills,
customer relationships and technical proficiency. We used our common stock as
the primary consideration. We anticipate that we will use common stock and cash
as the primary form of consideration for future acquisitions.
48
<PAGE>

We strive to integrate all acquired companies into our operating organization.
This integration includes business development, delivery of services, managerial
and administrative support, benefits, purchasing and all other areas.

All of our acquisitions have been accounted for using the purchase method. Under
the purchase method, the financial data of the acquired entities are
consolidated with our financial results from the effective dates of their
acquisition. For each acquisition, a portion of the purchase price is allocated
to the tangible and identifiable intangible assets acquired and liabilities
assumed based on their respective fair market values on the acquisition date.
The remaining unallocated portion of the purchase price is allocated to
intangible assets, primarily goodwill, and amortized on a straight-line basis
over the estimated period of benefit, which is currently 10 years. We evaluate
the period of benefit on a company-by-company basis. We expect to incur
acquisition-related amortization expenses as a result of our acquisition
program.

We have incurred recurring operating losses and negative cash flows from
operating activities, but have positive working capital. We believe that our
available equity financing arrangement with Swartz will be sufficient to meet
our working capital and capital expenditure requirements for at least the next
12 months. However, there can be no assurance that we will receive financing
from Swartz, that we will not require additional financing within this time
frame or that such additional financing, if needed, will be available on terms
acceptable to us, if at all.

Description of Property

The Company 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, 1,100 sq. ft. $11,058
Retail

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

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

Sacramento, California Storage 200 sq. ft. $ 900

*An officer and director of the Company is the landlord of this property.
49
<PAGE>

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 $11,000 in 1999
and 1998 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.

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. Quarterly market price
information for the Company's shares of common stock is as follows:

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

SHAREHOLDERS

As of October 24, 2000 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 1,285. The number of shareholders whose
securities were held in their name was 270 on that date. The number of
non-objecting beneficial owners whose securities were held in street name on
that date was 1,015.
50
<PAGE>

Executive Compensation

The following table sets forth the aggregate cash compensation paid to all
officers of the Company. The officers received no other compensation from the
Company:

Name and Principal Position Year Salary

Norbert Lima, CEO 1999 $28,850
1998 6,752

Stephen Goodman, CFO. 1999 5,500

Adrian Lima, VP-Engineering 1999 54,347
1998 37,642

EMPLOYMENT AGREEMENTS

In accordance with the Commission Rules, the following is a list of all
Compensatory Plans or 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. Messrs. Lima and Goodman were awarded employment agreements in
September 2000.

STOCK OPTIONS

There are outstanding options on 2,680,920 shares to various individuals. Each
option provides the right to purchase one share of common stock at either $1.00
per share, $3.00 per share or $6.00 per share. 2,555,209 of these options expire
December 31, 2000, and 105,711 of these options expire December 31, 2002 and
20,000 of these options expire December 31, 2003. All of the options expiring in
2003 are exercisable at $1.00 per share. Mr. Goodman, Mr. Adrian Lima, and Mr.
Norbert Lima have rights under the Year 2000 and the Year 1999 Employee Stock
Option Programs. 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, except Mr. Turley who has rights under
the Year 2000 Outside Director Stock Option Program, has the right to acquire
further shares in the Corporation.

There were no stock options granted in 1999.

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 are to
expire December 31, 2002, and are immediately exercisable. The Company has
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, 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. The Company
has not incurred additional compensation expenses for the nine months ended
September 30, 2000 in connection with the 2000 Employee Stock Option Program.

51
<PAGE>

In March 2000, the Board of Directors also approved a stock option program
whereby each outside director was granted an option for the year 2000, to expire
December 31, 2002, on 20,000 shares 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, 3000, the Company incurred additional consulting
expense of $15,450 for this stock option program.

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 attended by such director.

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

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

None

EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.

The following documents are filed as part of this report:

1) Financial statements.

2) Financial statement schedules. Schedules have been omitted because the
information required to be set forth therein is not applicable or is shown
in the consolidated financial statements or notes thereto incorporated by
reference herein.
52
<PAGE>

3) Exhibits.

Exhibit Description
------- -----------

3.1 Amended and Restated Certificate of Incorporation of the Company

3.2 Bylaws of the Registrant as Amended

4.1 Specimen - Common Stock Certificate of the Registrant

4.2 Registration Rights as Amended

4.3 Copy of License Agreement Issued By FCC

4.4 Swartz Investment Agreement

4.5 Warrant to Purchase Common Stock issued to Swartz

5.1 Opinion Letter

10.1 Binding Letter of Intent with New Wave Networks LLC
(To be filed by amendment)

10.22 Employment Agreement of Norbert J. Lima

10.23 Employment Agreement of Stephen Goodman

10.24 Lease Agreement made between the Registrant and Norbert J. Lima

21.2 List of Subsidiaries

23.1 Consent of Hein + Associates LLP

4) Reports on Form 8-K

NONE

RECENT SALES OF UNREGISTERED SECURITIES

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.
53
<PAGE>

In March 2000, the Company sold 6,569,444 shares of its common stock in private
placement offerings, under an exemption offered by Regulation D of the
Securities and Exchange Act, raising $2.4 million. Additionally, in March 2000
another creditor converted $143,720 of short term debt, plus accrued interest of
$108,750, into 561,111 restricted common shares of the Company. 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 April 2000, the Company issued 1,000 shares of common stock at a price of
$2.00 per share for an internet domain name.

In June 2000 the Company issued 12,829 shares of common stock, at market value
on the date of issuance, to a consultant for services rendered related to market
research conducted in its LMDS markets.

In June 2000 the Company issued 273,427 shares of common stock, at market value
on the date of issuance, for services rendered related to the private placement
that closed on March 31, 2000.

In September 2000 the creditor of a $100,000 convertible note due October 1,
2000 converted the balance then due of $109,778 (including accrued interest of
$9,778) into 312,500 shares of the Company's common stock, which have been
issued in full satisfaction of the note. The Company incurred additional
interest expense of $40,625 due to a beneficial conversion feature of the note.
In September 2000 the Company entered into an agreement with two former
officers, directors, and shareholders to settle two lawsuits between the
parties. As part of the settlement, the Company will receive 5,500,000 common
shares back from the two former officers for cancellation. The Company will
disaggregate three of its LMDS 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. 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.

Undertakings

(a) The undersigned registrant hereby undertakes that it will:

(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;

54
<PAGE>

(iii) To include any additional or changed material information on the
plan of distribution;

(2) For determining liability under the Securities Act of 1933, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497 (h)
under the Securities Act as part of this registration statement as of the time
the Commission declared it effective.

(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
55
<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned in Yuba City, California
on November 17, 2000.

PRIME COMPANIES, INC.

By: /s/ Norbert J. Lima
----------------------------------------
Norbert J. Lima, Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and as of the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Norbert J. Lima President, Director,
____________________ Chief Executive Officer
Norbert J. Lima (Principal Executive Officer)
November 17, 2000

/s/ Stephen Goodman Chief Financial Officer, Secretary,
____________________ Treasurer, Director
Stephen Goodman (Principal Financial Officer) November 17, 2000

/s/ William Turley, Director
_____________________
William Turley November 17, 2000

/s/ Martin Sokolowski, Director
_____________________ November 15, 2000
Martin Sokolowski

56
<PAGE>

PRIME COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1999 and
For the NINE Months Ended sEPTEMBER 30, 1999 and
2000 (unaudited)

<PAGE>

INDEX TO CONSOLIDATE FINANCIAL STATEMENTS

PAGE

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

Consolidated Balance Sheet - December 31, 1999 and September 30, 2000 (unaudited)..................................F-3

Consolidated Statements of Operations - For the Years Ended December 31, 1998 and 1999, and
For the Nine Months Ended September 30, 1999 and 2000 (unaudited).............................................F-4

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) - FOR THE YEARS ENDED DECEMBER 31,
1998 AND 1999, AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)...................................F-5

Consolidated Statements of Cash Flows - For the years ended December 31, 1998, and 1999, and.......................F-6
For the Nine Months Ended September 30, 1999 and 2000 (unaudited)

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 sheets of Prime Companies,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1999, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the years ended December 31, 1999 and 1998. 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, 1999, and the results of their operations
and their cash flows for the years ended December 31, 1999 and 1998 in
conformity with generally accepted accounting principles.

/s/HEIN + ASSOCIATES LLP

HEIN + ASSOCIATES LLP
Certified Public Accountants

Orange, California
April 20, 2000, except for paragraphs 2 through 4 of Note 4 which are as of
August 31, 2000.

F-2
<PAGE>
<TABLE>
<CAPTION>

PRIME COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, SEPTEMBER 30,
1999 2000
----------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:

Cash and cash equivalents $ 237,403 $ 1,073,819
Accounts receivable 28,405 72,891
Inventory 13,850 37,589
Deposits and other current assets 31,700 3,031
Net assets held for sale 661,702 -
---------------- ----------------
Total current assets 973,060 1,187,330

Property and equipment, net of accumulated
depreciation of $31,308 and $57,104,
at december 31, 1999 and september 30, 2000
(unaudited), respectively 103,671 278,212

Licenses, net of accumulated amortization of $30,774
and $58,954 at december 31, 1999 and
september 30, 2000 (unaudited), respectively 584,698 412,681

Intangible - 2,000
----------------- ----------------

Total assets $ 1,661,429 $ 1,880,223
============== ================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Current portion of notes payable to related parties $ 180,500 $ -
Convertible notes payable 496,220 -
Accounts payable 159,715 84,382
Accrued interest 167,110 -
Other accrued expenses and liabilities 31,351 117,868
Liabilities in excess of assets held for sale - 626,739
----------------- ----------------
Total current liabilities 1,034,896 828,989

NOTES PAYABLE TO RELATED PARTIES, less current portion 1,240,216 -
---------------- ----------------
Total liabilities 2,275,112 828,989
---------------- ----------------

COMMITMENTS AND CONTINGENCIES (Notes 3 and 13) - -

STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.0001 par value, 10,000,000 shares
authorized, none issued and outstanding - -
Common stock, $.0001 par value, 50,000,000 shares
authorized, 21,582,125 and 26,717,296 issued
and outstanding at December 31, 1999 and
September 30, 2000 (unaudited), respectively 2,158 2,672
Additional paid-in capital 282,244 6,383,471
Unrealized gain on available-for-sale securities 125,000 -
Accumulated deficit (1,023,085) (5,334,909)
----------------- -----------------
Total stockholders' equity (deficit) (613,683) 1,051,234
---------------- ----------------
Total liabilities and stockholders' equity (deficit) $ 1,661,429 $ 1,880,223
================ ================

</TABLE>
See accompanying notes to these consolidated financial statement.

F-3
<PAGE>
<TABLE>
<CAPTION>

PRIME COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED
DECEMBER 31, For the nine months ended
SEPTEMBER 30,
---------------------------------------- ------------------------------------
1998 1999 1999 2000
------------------ ------------------- ------------------ ----------------

(unaudited) (unaudited)

<S> <C> <C> <C> <C>
Sales revenues $ 209,823 $ 441,663 $ 199,860 $ 373,563
--------------- ---------------- --------------- ---------------

Costs and expenses:
Cost of sales 121,166 163,550 85,359 98,922
Selling, general, and administrative expenses 143,002 599,474 185,726 1,430,762
Expense recognized for net liabilities assumed
in reverse merger - 428,194 - -
--------------- ---------------- --------------- ---------------
Total costs and expenses 264,168 1,191,218 271,085 1,529,684
--------------- ---------------- --------------- ---------------

Loss From Operations (54,345) (749,555) (71,225) (1,156,121)
--------------- ---------------- ---------------- ----------------

Other income (expense):
Interest income - - - 37,610
Interest expense (14,796) (199,089) (31,858) (73,091)
Loss on securities available for sale - - - (1,156,000)
--------------- ---------------- --------------- ----------------
Net other income/(expense) (14,796) (199,089) (31,858) (1,191,481)

(69,141) (948,644) (103,083) (2,347,602)
Loss before taxes & extraordinary item
Provision for taxes - 5,300 - -
--------------- ---------------- --------------- ----------------

Loss before extraordinary item (69,141) (953,944) (103,083) (2,347,602)

Extraordinary loss on extinguishment
of debt - - - (1,852,595)
--------------- ---------------- --------------- ---------------

NET LOSS $ (69,141) $ (953,944) $ (103,083) $ (4,200,197)
================ ================= ================ ================

Basic & diluted per share information:

Loss before extraordinary item $ (0.02) $ (0.06) $ (0.01) $ (0.08)
Extraordinary loss on extinguishment of debt - - - (0.06)
---------------- ---------------- --------------- ----------------
Net loss $ (0.02) $ (0.06) $ (0.01) $ (0.14)
=============== ================= ================ ================

Weighted average shares outstanding 4,500,000 16,680,764 14,500,000 29,112,248
=============== ================ =============== ===============

See accompanying notes to these consolidated financial statement.

</TABLE>
F-4

<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)

UNREALIZED GAIN
COMMON STOCK (LOSS) ON
-------------------------- ADDITIONAL AVAILABLE-FOR-
PAID-IN SALE
SHARES AMOUNT CAPITAL SECURITIES
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCES, January 1, 1998 -- $ -- $ -- $ --

Capital contributions 4,500,000 450 35,650 --
Net loss -- -- -- --
----------- ----------- ----------- -----------
BALANCE, December 31, 1998 4,500,000 450 35,650 --

Shares issued for services 10,517,241 1,051 220,341 --
Shares 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 -- -- -- --
----------- ----------- ----------- -----------
BALANCE, December 31, 1999 21,582,125 $ 2,158 $ 282,244 $ 125,000
----------- ----------- ----------- -----------

Shares returned per settlement (unaudited) (5,500,000) $ (550) $ (13,680) $ --
Issuance of common stock in connection with
conversion of debt (unaudited) 3,778,471 379 3,562,306 --
Issuance of common stock, net of offering
costs (unaudited) 6,842,871 684 2,408,706 --
Compensation expense recognized upon issuance
of stock options (unaudited) -- -- 124,464 --
Shares issued for purchase of other assets
(unaudited) 1,000 -- 2,000 --
Shares issued for services (unaudited) 12,829 1 17,431 --
Comprehensive loss:
Net Loss (unaudited) -- -- -- --
Reclassification adjustment on available
for-sale securities (unaudited) -- -- -- (125,000)
Total comprehensive loss (unaudited)
----------- ----------- ----------- -----------
BALANCE, September 30,2000 (unaudited) 26,717,296 $ 2,672 $ 6,383,471 $ --
=========== =========== =========== ===========

TOTAL
STOCKHOLDERS'
ACCUMULATED EQUITY
DEFICIT (DEFICIT)
------- ---------
BALANCES, January 1, 1998 $ -- $ --

Capital contributions -- 36,100
Net loss (69,141) (69,141)
----------- -----------
BALANCE, December 31, 1998 (69,141) (33,041)

Shares issued for services -- 221,392
Shares issued in merger transaction -- --
Stock issued in acquisitions -- 26,910
Comprehensive loss:
Net Loss (953,944)
Unrealized gain on available-for-sale
securities --
Total comprehensive loss -- (828,944)
----------- -----------
BALANCE, December 31, 1999 $(1,023,085) $ (613,683)
----------- -----------

Shares returned per settlement (unaudited) $ (111,627) $ (125,857)
Issuance of common stock in connection with
conversion of debt (unaudited) -- 3,562,685
Issuance of common stock, net of offering
costs (unaudited) -- 2,409,390
Compensation expense recognized upon issuance
of stock options (unaudited) -- 124,464
Shares issued for purchase of other assets
(unaudited) -- 2,000
Shares issued for services (unaudited) -- 17,432
Comprehensive loss:
Net Loss (unaudited) (4,200,197) --
Reclassification adjustment on available
for-sale securities (unaudited)
Total comprehensive loss (unaudited) (4,325,197)
----------- -----------
BALANCE, September 30,2000 (unaudited) $(5,334,909) $ 1,051,234
=========== ===========

</TABLE>

See accompanying notes to these consolidated financial statement.
F-5

<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended FOR THE YEARS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------------------- ------------------------------------
1998 1999 1999 2000
--------------- --------------- ----------------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flow from operating activities:

Net loss $ (69,141) $ (953,944) $ (103,083) $ (4,200,197)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Extraordinary loss on extinguishment of debt - - - 1,852,595
Bad debt - - - 6,233
Depreciation and amortization 11,526 49,506 11,222 73,007
Impairment on investment - - - 1,156,000
Interest related to beneficial conversion feature
of note payable/convertible debenture - - - 40,625
Compensation recognized upon issuance of stock and
stock options - - - 124,464
Stock issued for services - 221,392 - 17,432
Noncash expense recognized upon reverse merger - 428,193 219,383 -
Changes in operating assets and liabilities:
Accounts receivable (10,158) (17,247) 1,591 (50,719)
Inventory 12,779 (7,620) (12,320) (23,739)
Prepaid expenses and other current assets (350) (22,878) (3,447) 30,321
Change in liabilities in excess of assets held for
sale - - - 7,441
Accounts payable 30,358 (10,965) 12,225 (75,334)
Accrued liabilities - 188,593 25,000 104,937
Due to/from owner - - (33,783) -
-------------- -------------- -------------- -----------------
Net cash provided by (used in) operating
activities (24,986) (124,970) 116,788 (936,934)
-------------- -------------- --------------- ----------------

CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,635) (14,744) (17,324) (203,040)
Sale of property held for sale - 1,074,955 - -
-------------- -------------- --------------- ----------------
Net cash provided by (used in) investing
activities (7,635) 1,060,211 (17,324) (203,040)
--------------- -------------- ---------------- -----------------

CASH FLOW FROM FINANCING ACTIVITIES:
Capital contributions 36,100 - - -
Proceeds from sale of stock - - - 2,409,390
Principal borrowings on notes payable - - -
Proceeds from notes payable - 39,248 10,000 -
Principal payments on notes payable and
long-term debt - (740,565) (57,273) (433,000)
-------------- --------------- ---------------- -----------------
Net cash provided by (used in) financing
activities 36,100 (701,317) (47,273) 1,976,390
-------------- --------------- ---------------- -----------------

Increase in cash and cash equivalents 3,479 233,924 52,191 836,416

Cash and cash equivalents, beginning of period - 3,479 3,479 237,403
-------------- -------------- --------------- ----------------

CASH AND CASH EQUIVALENTS, end of period $ 3,479 $ 237,403 $ 55,670 $ 1,073,819
============== ============== =============== ================

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for:
Interest $ 14,796 $ 31,979 $ - $ -
============== ============== =============== ================
Income taxes $ - $ - $ - $ -
============== ============== =============== ================
Supplemental disclosure of non-cash
TRANSACTIONS:
Assets acquired for assumption of debt $ 94,573 $ - $ - $ -
============== ============== =============== ================
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 $ - $ -
============== ============== =============== ================
Contributions by stockholder $ - $ - $ 40,091 $
============== ============== =============== ================
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 $ - $ - $ - $ 125,857
============== ============== =============== ================
per settlement agreement

</TABLE>
See accompanying notes to these consolidated financial statement.
F-6

<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

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"). The Company operates in one segment and began operations on
February 20, 1998 as NACC-Tel, a sole proprietorship operated by Bert Lima
(the Company's CEO) when it acquired certain assets of Pagers Plus, Inc.
(an entity for which Bert Lima served as an officer) in exchange for
assumption of specified liabilities. NACC-Tel provides paging services and
installation and servicing of interconnect and business communication
systems.

In February 1999, Mr. Lima, along with three other principals, formed
Worldnet Tel.com, Inc. (Worldnet), a Delaware corporation, to form the
legal structure for the Company's further development. Bert Lima,
subsequently contributed the operations of NACC-Tel to Worldnet, with
interests in the Company assigned to the other three principals in exchange
for services to be provided for the further development of the Company's
operations. Worldnet contributed the operations of NACC-Tel to NACC-Tel
Corp., a Delaware corporation formed as a wholly-owned subsidiary of WNTC
Holdings, Inc., which was formed as a wholly-owned holding company
subsidiary of Worldnet. 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 an 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 was issued 14,500,000 shares of Prime common stock. As a result of
the stock exchange, the former shareholders of Worldnet hold 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 $428,194. This amount was
been charged to operations on the date of the merger as a cost of the
reorganization.

The accompanying financial statements 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.

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

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.

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 had no substantial operations during 1999.

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.

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.

F-7
<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

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.

Inventories - Inventories 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 of property and equipment is calculated using the
straight-line method over the estimated useful lives (ranging from 5 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 properties 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.

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.

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 installation of business
phone systems recognized as installations are completed.

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.

F-8
<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

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 September 30, 2000, the liabilities of
Mid-Cal Express, Inc. exceeded the liabilities by $626,739 (unaudited).
Refer to Note 5.

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 as
of December 31, 1998 and 1999 and September 30, 1999 and 2000 were
anti-dilutive and 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.

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 $1,156,000 of losses recognized
in income from a permanent impairment taken against the investment due to a
significant decrease in the market value of the shares.

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 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.

F-9
<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

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 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, 1999 and September 30, 2000,
approximately $13,800 and $22,880 representing 48% and 31% of trade
receivables was due from two customers. No other customers accounted for
more than 10% of the Company's trade receivables at December 31, 1999 and
September 30, 2000.

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 following methods and assumptions were used in estimating the indicated
fair values of the Company's financial instruments:

Cash and cash equivalents: The carrying amount approximates fair value
because of the short maturity of those instruments.

Investments: Investments included in net assets held for sale are
considered available-for-sale and are carried at market value based on
quoted market prices.

Long-term and other debt: The fair value of the Company's debt is estimated
based on current rates offered to the Company for debt with similar terms
and maturities and approximates carrying value.

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.

F-10
<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

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 Company
does not believe that the adoption of SAB 101 will have a material effect
on its financial position or results of operations.

Interim Financial Information - The September 30, 1999 and 2000 financial
statements have been prepared by the Company without audit. In the opinion
of management, the accompanying financial statements contain all
adjustments (consisting of only normal recurring accruals) necessary for a
fair presentation of the Company's financial position as of September 30,
2000 and the results of operations and cash flows for the nine months ended
September 30, 1999 and 2000. The results of operations for the nine months
ended September 30, 2000 are not necessarily indicative of those that will
be obtained for the entire fiscal year.

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

The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in
the accompanying consolidated financial statements, the Company has
recorded losses for the year ending December 31, 1999, resulting in an
accumulated deficit of $1,023,085, as of December 31, 1999. Cash used in
operations during the year ended December 31, 1999 was $24,986.

Management expects to achieve profitable operations as its CLEC and
Internet subsidiaries begin operations during 2000. Until profitable
operations can be achieved, management had taken steps to obtain additional
working capital for the Company. Subsequent to December 31, 1999, the
Company converted approximately $1.7 million of debt and accrued interest
to common stock and completed a private placement of an additional
6,842,871 shares of common stock for net proceeds of $2.4 million (see note
9). Management believes, based on its current and planned level of
operations it has sufficient resources to continue as a going concern for
at least the next twelve months.

Accordingly, the financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts
or the amount and classification of liabilities or any other adjustment
that might be necessary should the Company be unable to continue as a going
concern.

F-11
<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

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 sole proprietor of
NACC-Tel, 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 with no
consideration to be paid to Bert Lima. This transaction was in recognition
of Adrian Lima's services provided to NACC-Tel without appropriate
compensation.

During the period between March 19, 1999 through October 15, 1999,
Adrian operated Marathon independently of Bert Lima and NACC-Tel. Marathon
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 the
acquisition was agreed to by the Company and Marathon. The transaction was
accounted for as a purchase and 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 stock based compensation for the 517,241 shares of common stock
issued to Adrian Lima and $7,950 in fixed assets.

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 are held by the Credit Managers Association
of Southern California who is in the process of liquidating the assets and
making final distribution to the creditors. The net assets (liabilities in
excess of assets) held for sale consisted of the following:
<TABLE>
<CAPTION>

DECEMBER 31, SEPTEMBER 30,
1999 2000
-------------------- ---------------------
<S> <C> <C>
Assets:

Cash in escrow $ 83,079 $ 6,892
Investments 1,425,000 144,000
Accounts Receivable - 6,999
---------------- ----------------
Total Assets 1,508,079 157,891
Unsecured Creditors (846,377) (784,630)
----------------- -----------------
Net Assets(Liabilities) of Discontinued
Operations $ 661,702 $ (626,739)
================ =================

</TABLE>
F-12
<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

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

Property and equipment at consisted of the following:
<TABLE>
<CAPTION>

ESTIMATED
DECEMBER 31, 1999 SEPTEMBER 30, 2000 USEFUL LIVES
--------------------- -------------------- ------------------

<S> <C> <C> <C>
Offices furniture and equipment $ 46,745 $ 75,572 3 years
Vehicles 16,470 48,360 3 years
Paging terminals 71,764 71,764 7 years
Lower of 5 years
or the lease life
Site Improvements - 18,212
LMDS Equipment - 121,408 7 years
----------------- ----------------
Total Property and equipment 134,979 335,316
Less accumulated depreciation (31,308) (57,104)
---------------- -----------------
$ 103,671 $ 278,212
================ ================
</TABLE>

Depreciation expense for the years ended December 31, 1998 and 1999 and
nine months ended September 30, 1999 and 2000 was $11,526, $18,731,
$9,868 and $26,847, respectively.

F-13
<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

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

In connection with the merger between Prime and Worldnet, the Company
assumed notes payable to related parties. The Company had the following
notes payable outstanding to related parties:

DECEMBER 31, 1999 SEPTEMBER 30, 2000
--------------------- ------------------

Unsecured notes payable to shareholders; interest at 10% accruing through
January 15, 2000, thereafter interest payments due monthly beginning
January 15, 2000; principal due July 31, 2001
$ 1,240,216 $ -

Unsecured notes payable to a shareholder, former officer and director;
interest at 10%; principal and interest due at various dates
throughout 2000 155,000 -

Note payable to relative of the Chief Executive Officer; non-interest
bearing; due April 15, 2000 25,500 -
---------------- ---------
1,420,716 -
Current Portion (180,500) -
---------------- ---------
Long Term Portion $ 1,240,216 $ -
================ =========
</TABLE>

Interest expense to related parties was $60,954, for the year ended
December 31, 1999 and $199,089 and $24,546 for the nine months ended
September 30, 1999 and 2000, respectively. In addition, accrued interest on
notes payable to related parties was $55,830 at December 31, 1999 and
$199,089 at the nine months ended September 30, 1999.

In February 2000, notes in the principal amount of $1,240,216, plus
accrued interest of $47,197 and interest accrued subsequent to year end of
$19,774 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 $1,852,595 loss on debt extinguishment.

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

During 1999, the Company issued unsecured notes payable to an
individual for cash and licenses. At December 31, 1999, principal of
$496,220 and accrued interest of $111,280 were due on these notes. During
the nine months ended September 30, 2000, the Company settled notes in the
principal amount of $396,220 and accrued interest in the amount of $108,750
with cash payments of $252,500 and issuance of 561,111 shares of the
Company's common stock.

F-14
<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

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. COMMON STOCK:
-------------

The Board of Directors has approved increasing authorized common and
preferred stock to 100 million and 50 million, respectively. The authorized
increases will be submitted to the shareholders at the annual meeting for
their approval.

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.

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 the 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.

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 2000 gross earnings (at Prime or any of its subsidiaries) at an exercise
price equal to $1.50 per share. The options vest December 31, 2000 and
expire December 1, 2003.

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 for services provided.

In March 2000, the Company granted 20,000 shares to each of three Directors
for services provided during the year ended December 31, 2000. The 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 and the Company recognized
compensation expense of $15,450 for the services provided during the nine
months ended September 30, 2000. The options vest on January 1, 2001 and
expire in 2003.

The following table sets for the activity for all options granted during
the nine months ended September 30, 2000. No options were granted,
exercised, or canceled during 1998 or 1999.

F-15
<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

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

Balance, December 31, 1999 2,555,209 $ 2.32

Granted 165,711 1.00
Canceled/Expired/Forfeited (40,000) 1.00
---------------- -------------------

Balance, September 30, 2000 2,680,920 $ 2.00
================ ===================

At September 30, 2000, the Company has options to purchase 1,502,086 shares
exercisable at the price of $1.00, options to purchase 1,038,834 shares
were exercisable at the price of $3.00, and options to purchase 120,000
shares were exercisable at the price of $6.00 per share. The remaining
options become exercisable in 2001.

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

AVERAGE EXERCISE
NUMBER OF SHARES PRICE PER SHARE
PERIOD ENDED SEPTEMBER 30,
------------------- ------------------

2000 2,555,209 $ 2.32
2002 125,711 1.00
---------------- -----------------

Balance, September 30, 2000 2,680,920 $ 2.00
================ =================

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:

SEPTEMBER 30, 2000
-------------------

Net Loss $ (4,264,156)
================

Basic and diluted net loss per common share $ (0.15)
================

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 rate of 6.48%, expected life of three years, dividend
yield of 0%, and expected volatility of 206.2%. The weighted-average fair
value of the options granted during the nine months ended September 30,
2000 was $0.61.

F-16
<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

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

The provision for taxes for 1999 consists of state franchise taxes. The
actual income tax expense differs from the "expected" tax expense computed
by applying the U.S. federal corporate income tax rate of 34% because of
the state taxes and changes in the valuation allowance of deferred tax
assets.

The components of the net deferred tax assets are as follows at
December 31, 1999:

Noncurrent deferred tax assets:

Net operating loss carryforward $ 3,292,227
Valuation allowance (3,292,227)
----------------
Net noncurrent deferred tax assets $ -
================

As of December 31, 1999, the Company has available net operating loss
carryforwards for income tax purposes of $8,551,000 which expire through
2019. The Company has state net operating loss carryforwards of $4,140,000
which expire through 2004. 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 no matching
contributions to the Plan during the years ended December 31, 1999 or 1998
or nine month period ended September 30, 2000.

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

Leases
------

The Company's headquarters is located on property owned by the Company's
CEO. The Company paid rent of $11,000 for each of the years ended December
31, 1998 and 1999 and $8,250 and $17,000 during the nine months ended
September 30, 1999 and 2000 to the Company's CEO for use of this space.

All of the Company's office space was rented on a month-to-month basis.
During 2000, the Company intends to enter into lease agreements for a term
of one or more years with its various landlords.

F-17
<PAGE>

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

In September 2000, the Company signed agreements with both the President
and CFO. The contracts are effective retroactively to January 1, 2000 for a
period of three years and an annual salary of $100,000 for the President
and CFO. The contract extends 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 contract should the President or CFO be
terminated.

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

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 has filed a cross-complaint
claiming the advance were capital contributions and is 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 and
agreement with the former officers and directors and 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 assign 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 $70,000 owed to it 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.

14. SUBSEQUENT EVENTS:
------------------

On October 3, 2000, the Company entered into an Investment Agreement with
an institutional investor, providing the Company with a $30 million put on
its common stock; over a 36-month period beginning on the date a
registration statement to be filed with the Securities and Exchange
Commission is declared effective by the SEC. The terms of the Agreement
limit the number of shares the Company may sell each month to the lesser of
1.5 million shares, $2,000,000, or 15% of the volume of its shares traded
during the month.

In addition, the Company granted the investor a warrant to purchase
1,521,000 shares of common stock with an exercise price equal to $0.531.
The warrants vest in three stages depending on the completion and execution
of the agreement. None of the warrants were exercisable on September 30,
2000 and expire in 2005.

F-18
<PAGE>

PRIME COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1999 is unaudited)

On October 27, 2000 the Company entered into a binding Letter of Intent to
acquire New Wave Networks LLC (NWN"). NWN's sole assets are five LMDS
licenses in Missouri. The letter of intent stipulates a definitive
Agreement will be concluded no later than December 31, 2000, and the
transaction is to close no later than April 20, 2001. The transaction is
contingent upon completion of a definitive agreement and the Company having
access to funds from the above described Investment Agreement.

On November 2, 2000 the Company entered into a Letter of Intent with
License Technologies, Inc. (LTI), wherein LTI will merge with the Company's
wholly owned subsidiary, Zenith Technologies, Inc. This transaction is
continent upon the completion of a definitive agreement. No issuance of
common shares is required to consummate this transaction.

F-20